ST. LOUIS — First-quarter results for the Michael Foods segment came in about as expected, which dragged down Post Holdings, Inc. overall. The segment reported a $17 million loss for the quarter ended Dec. 31, 2016, as low egg prices and a legal settlement had a negative effect.
“Michael Foods performed as expected this quarter,” said Rob Vitale, president and CEO of St. Louis-based Post Holdings, in a Feb. 3 earnings call. “We continue to expect to lap the impact of avian influenza during the second half of FY ‘17. Market egg supply has returned to pre-AI levels while low shell egg market prices have delayed some customers’ return to value-added egg products.
“As a result, the normalization of our demand has lagged the return to normal supply conditions. This timing difference was baked into our 2017 plan and has developed as we expected.”
The Michael Foods segment’s loss compared to a profit of $80.8 million in the previous year’s first quarter. Net sales in Michael Foods dropped 8 percent to $539.8 million from $586.4 million. First-quarter expenses included a provision for $74.5 million in legal settlements related to agreements to settle egg anti-trust class-action claims.
Egg sales, on a comparable basis, declined 13 percent as a result of reduced pricing related to the rollback of the temporary component of avian influenza pricing and reduced market-based pricing in the ingredient and retail shell egg channels. Egg volumes, on a comparable basis, increased 12 percent. The impact of the avian influenza reduced egg inventory available for sale in the previous year’s first quarter.
Vitale said an avian influenza outbreak in South Korea last November, which led to the United States being allowed to export shell eggs to that country, should have a positive impact on US egg prices.
“What the timing is, and whether it will be impactful in the next couple of quarters or a longer tail than that, is hard to evaluate,” Vitale said.
Jeff Zadoks, CFO for Post, said Michael Foods is more or less back to the supply levels the business was at before last year’s US avian influenza outbreak. Post anticipates egg prices increasing throughout 2017, he said.
“The prices during the first quarter were actually a little bit lower than our plan had anticipated, and therefore there was some headwind in the quarter,” he said in the earnings call.
Post Holdings overall posted net earnings of $97.6 million, or $1.36 per share on the common stock, which was an increase of 283 percent from $25.5 million, or $0.16 per share on the common stock, in the previous year’s first quarter. Net earnings included a gain of $144.5 million primarily related to non-cash, mark-to-market adjustments on interest rate swaps. First-quarter net sales of $1,249.8 million were up 0.1 percent from $1,248.8 million.
