Despite the avian influenza outbreak, sales of egg products rose 1.8% within the Michael Foods Group, a segment of Post Holdings, Inc., in the third quarter ended June 30. Volume in egg products fell 5%.
“We took an aggressive position on cost management, including a plant furlough and shift reductions,” said Rob Vitale, president and chief executive officer of St. Louis-based Post Holdings, in an Aug. 7 earnings call to discuss third-quarter results. “We suspended production of several product lines to focus remaining eggs on high-velocity items. We took several rounds of price increases in cooperation with our customers.
“As a result of this cost management and close collaboration across Michael Foods, third-party supply chain and customer partners, the impact of A.I. on Q3 financial results was essentially mitigated. We expect flock re-population to be phased in between now and the end of calendar year 2016.”
He characterized the event as unprecedented. The U.S. Department of Agriculture said the avian influenza outbreak killed more than 48 million birds, including chickens and turkeys. The last detection was reported June 17.
“What I cannot accurately characterize is the probability of a near- or intermediate-term recurrence,” Mr. Vitale said. “As a result of this incident, we have reviewed and begun to revise certain practices around bio-security and flock management practices. We will incorporate new learnings into our business model in a way that will seek to mitigate the impact of ongoing costs and potential future events. We believe our ongoing commitments to collaborative customer relationships and safe and reliable supply has resulted in us becoming a better company.”
In the earnings call Mr. Vitale was asked whether smaller egg producers may have trouble coming back financially from the egg crisis.
“Well, in many situations like this the party that goes into the incident the strongest tends to come out stronger, and I wouldn't be surprised if on the other side of this event you do see some of the weaker participants in the market place not return,” he said. “We don't know that yet. We're in the early stages of reviewing the landscape following this. Frankly, we want to be very cautious because we don't know what's going to happen in the fall.”
Post Holdings reported strong third-quarter results behind recently acquired businesses such as Michael Foods and MOM Brands. The company had net earnings of $24 million, or 34c per share, which compared to a loss of $35.1 million in the previous year’s third quarter. Adjusted EBITDA rose to $187.5 million, which compared to $87.8 million in the previous year’s third quarter. Third-quarter net sales rose 91% to $1,211.8 million from $633 million. On a comparable basis, net sales increased 3%.
Michael Foods Group in the third quarter had profit of $48.4 million, which compared to a loss of $9.6 million in the previous year’s third quarter, and net sales of $564.7 million, up from $212.7 million. Adjusted EBITDA was $81.2 million, up from $22.6 million. On a comparable basis, net sales were up 0.9%
Post Holdings changed its fiscal-year adjusted EBITDA guidance range to between $635 million and $650 million. Previously the range was between $585 million and $610 million.