Post Holdings (POST) Q4 2025 earnings call transcript

Good morning. Thank you for joining us today for POST's fourth quarter fiscal 2025 earnings call. I'm joined this morning by Rob Vitale, our President and CEO, Jeff Zadix, our COO, and Matt Maynard, our CFO and Treasurer. Rob, Jeff, and Matt will make prepared remarks, and afterwards we'll answer your questions. The press release that supports these remarks is posted on both the investors and the SEC filings portions of our website, and is also available on the SEC's website.

As a reminder, this call is being recorded, and an audio replay will be available on our website at postholdings. com. Before we continue, I would like to remind you that this call will contain certain forward-looking statements, which are subject to risks and uncertainties that should be carefully considered by investors, as actual results could differ materially from these statements. These forward-looking statements are current as of the date of this call, and management undertakes no obligation to update these statements. This call will discuss certain non-GAAP measures. For reconciliation I will turn the call over to Rob.

Thanks, Daniel, and good morning, everyone. We had a good FY25, and we ended with a strong quarter. It was an interesting year as we navigated regulatory changes, tariffs, avian flu, and uncertain consumer sentiment. Despite this challenging environment, we have a great opportunity to see the future. We have a great opportunity to see the future. We have a great opportunity to see the future. Despite this challenging environment, our portfolio of businesses displayed resilience and delivered strong results.

We expect that the benefits of our diversification will allow us to navigate an environment of continued uncertainty. We expect a continued volume growth in our food service business, especially in our highest-value products. In retail, we remain disciplined in the face of a very challenging volume landscape, keeping our focus on cost reduction and profitable brand investments. Jeff and Matt will provide detail on our FY26 outlook, but we will focus on what we can control, and from that perspective, I like our positioning. I expect food service to provide volume growth and our retail businesses to generate considerable cash flow to fund both organic and inorganic opportunities. In that vein, the highlight of FY25 was our strong operating cash flow, which allowed us to maintain flat net leverage while making key capital investments, completing two tactical acquisitions, and buying back over 11% of the company.

With a step down in capital spending and the benefits from the new tax law, we expect a meaningful increase in FY26 free cash flow. Coupled with our long-dated debt maturity ladder, we can be opportunistic with our capital allocation decisions. We continue to review M&A opportunities, and we benchmark them against buying back our own shares. I would like to thank all of our employees for another successful year. The strength and diversification of our operating model combines with dedicated employees give me a great deal of confidence in continuing our track record of value creation.

Before I turn the call over to Jeff, I want to make a personal comment. Bill has been a mentor, business partner, and friend for nearly 30 years, and I expect that to continue regardless of titles. Jeff.

Thanks, Rob, and good morning, everyone. We delivered strong, consolidated results in Q4. Our cold chain businesses did a fantastic job in navigating HPAI. In addition, across the entire portfolio, cost reductions and manufacturing execution combine to more than offset the impact of lower retail volumes.

At Post Consumer Brands, our branded and private-labeled serial businesses experience consumption declines resulting from challenging category dynamics. In Pat, our volume consumption was down versus a flat category driven primarily by Nutrish. As a reminder, we are adjusting the value proposition and messaging for this brand with changes to be in market by the end of fiscal Q2. A bright spot in PET was Kibbles and Bits, which had a strong consumption volume versus the prior year.

In spite of the volume challenges, we were successful in growing our consumer brand's EBITDA margin, excluding 8th Avenue, by 100 basis points, driven by improved mix in cereal and strong cost management across the segment. Our upcoming cereal plant closures will further help to alleviate the impact of cereal category declines.

Setting aside HPAI, food service had strong underlying performance driven by growth in both egg and potato volumes. While a portion of Q4 egg volume growth was related to timing from improved egg availability and customer inventory replenishment, we continue to see strong demand, in particular for our higher value-added products. Volumes for these higher-margin egg products grew nearly 9% in the quarter and approximately 6% for the full year.

Our HPAI impacted egg supply came back online as expected in Q4, allowing us to continue gradually winding down pricing adders. As we enter fiscal 26, we are well positioned to continue the normalized growth trend in this business. In refrigerated retail, dinner sides grew volumes in the quarter driven by targeted promotions and new private label offerings that began shipping toward the end of the quarter.

Private label offerings are expected to contribute low single-digit volume growth in FY26. Segment profitability had some continued tailwinds from HPAI pricing adders again this quarter. At Weedabix, our flagship yellow box product consumption performed in line with the improving cereal category, which was down less than 1%. The noticeable improvement in the U. K. cereal category over recent quarters is an encouraging trend.

Meanwhile, we continue to execute against our identified cost-out opportunities as we consolidate our private label production, resulting in a plant closure in mid-fiscal year. Turning to FY26, we have planned for a more normalized environment in our cold chain businesses as we begin the year with egg supply back in balance, allowing us to focus on driving volume growth in both food service and refrigerated retail.

For the balance of our portfolio, we are projecting some improvement in the sewer category as we lap certain FY25 pressures. However, we do not expect a full return to historical trends. To support volumes across the entire company, we will make targeted investments, including innovation, where we see profitable opportunities. However, as Rob mentioned, we remain focused on protecting margins and our strong cash flow.

With that, I'll turn the call over to Matt.

Thanks, Jeff, and good morning, everyone. Fourth quarter consolidated net sales were $2.2 billion and adjusted EBITDA was $425 million. Sales increased 12% driven by our acquisition of 8th Avenue. Excluding the acquisition, net sales declined, driven by lower pet food and cereal volumes, partially offset by avian influenza-driven pricing and egg volume growth.

Turning to our segments, Post Consumer Brands net sales, excluding the contribution from 8th Avenue, decreased 13% driven by lower volumes in both grocery and pet. Serial volumes decreased 8 due to category and competitive dynamics At PET our volumes declined 13 driven by lost private label business we mentioned last quarter We have a lot of questions and especially in SG&A.

Moving to food service, net sales increased 20% on both pricing and an 11% volume increase. Excluding the impact of our PPI acquisitions, volumes increased 9% on higher egg, potato, and shake volumes. The increased volumes and avian influenza-driven pricing drove the revenue increase.

Adjusted Eva Dot increased 50% driven by avian influenza-driven pricing, and the previously mentioned volume growth in our value-added egg and potato products.

Refrigerated retail net sales were flat, and volumes, excluding the impact of PPI, fell 4%. The volume decline was driven by sausage and eggs, which experienced elasticities due to pricing to offset input costs. Segment-adjusted EBITDA increased 44%, benefiting from avian influenza pricing adders and lapping some elevated SG&A costs in the prior year. We Demix net sales increased 4% versus the prior year. Foreign currency represented a tailwind of 360 basis points. Overall, volumes decreased 3% as our core yellow box product volumes declined by 6%, offset by volume growth in UFIT, which was up 41% versus the prior year. Segment adjusted EBITDA increased 1% versus prior year due to currency tailwinds, partially offset by lower volumes and increased inflation-driven costs.

Turning cash flow in the quarter, we generated $301 million from operations. Our free cash flow for the quarter was approximately $150 million as we invested in key projects in both PCB and food service businesses. Free cash flow for the full year was nearly $500 million, driven by strong operating cash flow net of elevated CapEx. In the quarter, we repurchased 2.6 million shares, bringing our fiscal 25 total repurchases to 6.4 million shares. We were active in share repurchase following the end of quarter, buying back approximately 1 million shares.

Net leverage, in accordance with our credit agreement, ended the fiscal year at 4.4 times, relatively flat to how we began the year. Before we get to Q&A, I have a few comments on our fiscal 26 guidance. As stated in our earnings release last night, including two months of POSTA contribution, we expect our FY26 adjusted EBITDA to be in the range of $1.50 billion to $1.54 billion.

This range reflects approximately a 1% to 4% growth rate to a normalized FY25. Relative to FY25 Q4, we expect Q1 adjusted EVA dot to decrease meaningfully, driven by HPAI normalization and seasonality declines in U. S. and U. K. cereal, partially offset by seasonality benefits in refrigerated retail. For the full year, we expect second-half favorability to the first half.

Finally, our CapEx guidance of $350 million to $390 million is down, notably from FY25, as we completed key investments within PCB and food service. FY26 will continue to see elevated spending in food service as we invest behind growth for both pre-cooked and cage-free. Thank you for joining us today, and I will now turn the call over to the operator.

Well, if the ultimate question is, is it structural or cyclical, I think you have to tell us how long the cycle will last.

I think it's different in the following manner. I think the big difference is the cost of capital has changed dramatically. Basically, we've been in a long-term decline, and now we're in what could be an inflection point where we see more increased pressure than decrease. And I think that starts to develop the strategy. And I think in lieu of a reflexive position of we're just going to use M&A to get bigger, It needs to be a little more thoughtful and perhaps a little bit more focused around focus so that we can look at opportunities to be better rather than just bigger.

And that sounds a little bit cliche, but I think it's true. Where we have opportunities to be more focused in some area that I think we should take them, and where there are opportunities to be more efficient in other areas, we should take them. From our perspective, we don't necessarily differentiate between M&A and buybacks. What we try to do is compare them from a potential return perspective and a risk perspective and then compare them.

So, you know, we really don't look at it and say, you know, if we buy back shares, we're going to shrink or look at our multiple difference. We look at that and say, you know, what is the best risk return adjusted way to use our capital?

Certainly there are additional opportunities we can take on cost reduction. But I think the magnitudes start to get smaller as the bigger things like plant closure have occurred. So we are looking at things like line optimization rather than plant optimization. So they continue to be good opportunities, but we've obviously taken the larger ones first. Thank you.

No, I mean, we think 115 is the right number, and that was really a benchmark we put last quarter, and that's how we think about fiscal 25. I think fair to assume that grows in line with ALGO for fiscal 26, so by the end of the year would be, you know, obviously something more like 120.

But again, I think we talked about it last quarter as well. We would like to have a quarter or two of some normalcy so we can get a better read on that. As you pointed out, there's a lot of noise with avian influenza. We definitely had some catch-up this past quarter with customer inventory levels, given some of the challenges with AI, but really do see the base business continue to perform quite well. So I think we'll revisit in another quarter, but how we benchmark normal and normalize run rate was against that 115 and then growing 5% in fiscal 26.

Sure. So we definitely, similar to food service, but on a much smaller scale, we had some pricing benefits that fell away at the end of the quarter. So that was a little bit inflated because of that, but we are seeing better performance and better volume performance around private label, which is improving capacity utilization. I think with that said, in the holiday season for them, we've always had significant seasonality. I think high teens is reasonable, and when you talk about those periods in our slower part of the year, you're going to return to more, you know, call it 16% or so margins. It's not going to be high teens.

You took the words right out of my mouth. It's really price gap dependent. We're starting to see consumers be a little bit more drawn to promotional activity, and it moves inversely to that.

It's the typical type of investment for brand innovation that you have seen historically. We took a pause on some of those during the pandemic, and it's been something that we haven't been quick to renew in the last couple of years. But it's going to be line extensions in really every retail category. So in cereal as an example, we're going to be bringing some protein products. We're going to be bringing some granola products, which are areas of the category that are growing better than the rest of the category.

But you're going to see that sort of thing in our refrigerator retail business as well. And in Pettit, a lot of that is directed towards the Nutrish relaunch, although we'll see some smaller innovations in some of the other brands as well.

So there's a couple of things we would point to. One is really a long history of that business moving customers up the value chain. So starting from lower value-added products, moving them up to higher value-added products, and the value proposition that they see when doing so, it's a function of the labor dynamic in their operations when they move up the value chain. So that's been a multi-year, almost decade-long, maybe multi-decade-long trajectory of the category, which we don't see any slowdown in that happening. The one more perhaps unique situation with avian influenza and the pricing dynamic that has been caused by that in shell eggs has caused some customers to convert to liquid eggs, the ones that are able to convert, because over this period of time liquid eggs have been less expensive than shell eggs.

What we have seen in the past, probably on a smaller scale than what we've seen this last cycle, is that there's some stickiness to people who have converted to liquid eggs initially just for the pure price play, because they find that the efficiency in their operations is such that even if the prices are more competitive with one another between liquid and shell eggs, that they find efficiencies in remaining with liquid eggs. So we have some belief that, given what we've seen over the last 12 to 18 months, that the stickiness of those customers that have converted will continue.

So a year ago we were working our way through fiscal 25 through some profit-enhancing decisions we had made, and we've fully lapped those as we exited 25. So in 26, what we've yet to lap then is, you know, what developed during 25 is we lost some private label business. We continue to pursue opportunities there, but we won't lap that until we get to the midpoint of the fiscal year. So I think as we think about the business and the volume trajectory, first half of the year, see really more down mid to high single digits. And then as we get to the midpoint of the year and nutrition is on shelf and we lack that private label loss, we'd be back to more flats and maybe some slight growth year over year.

They seem to be changing. And, you know, I think it's no more complicated than that. As some of our competitors have been more promotional, the private label offering has been less competitive.

Sure. So no change to the outlook. 45 to 50 is how we think about the contribution in fiscal 26.

It's going to take some time, given all that's going on there. And then in terms of the pasta business in Q4, we called out about $20 million contribution from 8th Avenue, so a little under the rug rate, obviously. About half of that was pasta. So, again, we're expecting just two months of pasta contribution this fiscal year, so two-thirds of $10 million before we close on the transaction in December.

Yeah, so I think what we've factored in is fairly conservative. Again, I think we believe we'll see some category improvement as we lap some challenges in the back half of next year, given some of the fiscal 26, I should say, given some of the challenges we saw with Maha and some other things that happened in the spring. We're not calling for a category getting back to normal in the back half of the year.

So some marginal improvement year over year is really what we have. And I think Q1 and Q2 looking a lot like what we saw in Q3 and Q4, and then seeing some improvement in Q3 and Q4 is what's baked in our guidance.

Thanks, John.

I think I would disagree that the portfolio is built around value. I think the portfolio is built around choice, because if you look at each line we are in, we have an array of price points. And that is true of eggs, cereal, potatoes, so that what we really like to do is appeal to an array of consumers. And I think that the trends that you're raising, rather than dictating the construct of the portfolio in total, really dictate the direction of innovation. And I think in that context, it does suggest if we have the opportunity to do so to innovate more towards higher or middle-income consumers.

So, John, you've got a long history with us. So we went through a period of time when we first acquired the business that it was in private label and branded. So to Rob's comment, we were participating up and down the value of that segment, different price points. Then we went through a period of time when we did not have enough capacity to meet our branded demand. So we exited private label so that we could focus on the brand.

In the meantime, some competitive private brand products got some traction, And we have now gotten to the point where we have our capacity better aligned to the point where we have capacity that can meet both private label and branded demand. And because of that, we're choosing to pick and choose where we go, but to go after attractive private label opportunities in that category, while also maintaining the brand and continuing to invest in the brand.

So the longer-term or medium-term goal in that category would be to do exactly what Rob said, play at the multiple price points, not to be the omnipresent party in private label, but to be the party that wins where private label is most relevant at those retailers.

Thanks, Rob. Thank you.

We tend to be entirely opportunistic on the last part of your question. You know, I think in order to have a successful transaction, we obviously need a counterparty. And I think with the multiples where they are today, we've seen some reluctance to transact. And, again, we don't necessarily look at M&A as an objective in and of itself. We look at it as something, an allocation of capital choice that we can use compared to buying our shares back or paying down debt.

Yeah, so we continue to monitor, Carla. Obviously, we keep a close eye on that and the bond market, but we'll continue to look for the right pocket to do that.