New Michael Foods plant cuts into Post Holdings’ profit

Post Holdings’ foodservice segment saw its profits drop 10.8% in the first quarter of the 2020 fiscal year, largely due to “unfavorable manufacturing costs including startup costs” at its new Michael Foods precooked egg facility in Norwalk, Iowa.

Roy Graber Headshot
(Michael Foods)
(Michael Foods)

Post Holdings’ foodservice segment saw its profits drop 10.8% in the first quarter of the 2020 fiscal year, largely due to “unfavorable manufacturing costs including startup costs” at its new Michael Foods precooked egg facility in Norwalk, Iowa.

The facility opened in October 2019, and the quarter ended December 31, 2019.

According to a press release from Post Holdings, the foodservice division’s segment profit was $47 million, which was about $5.7 million lower than the profit reported during the first quarter of fiscal year 2019. The foodservice division entails primarily egg and potato products.

That decline came in spite of a 3.1% increase in net sales for the foodservice segment.

During a quarterly earnings call held on February 7, Post Holdings executives were asked to clarify the financial impact of the new Norwalk facility.

Post Holdings Chief Financial Officer Jeff Zadoks offered the following explanation:There's two different buckets. One is just direct costs, which is roughly $3 million. But there's also a ramp-up costs which effectively are inefficiencies that we have not tracked and separately isolated. So, there's the difference between the factory running as fully operational versus the learning curve process to get there is a – I would estimate in the low handful millions of dollars.”

Refrigerated retail segment

Post Holdings’ refrigerated retail segment -- which involves primarily side dishes, and egg, cheese and sausage products – saw net sales decline about 4.5% to $249.9 million.

The company noted that egg product sales decreased 19.3% due to losses in branded egg product volume and lower average net selling prices resulting from lower market-based egg prices.

Post Holdings overall financial figures

For the entire company, Post Holdings reported net earnings of $99.2 million during the first quarter, a year-over-year decrease of 21%. Net sales for the quarter were $1.46 billion, a year-over-year increase of 3.2%.

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