US-based food giant Post Holdings plans to shut down two of its cereal manufacturing plants in North America, citing a “declining” market for ready-to-eat cereals.
In a recent filing with the US Securities and Exchange Commission (SEC) dated April 9, Post Holdings disclosed that the closures in Ontario and Nevada are part of its strategy “to reduce capacity in its cereal production network.”
Currently, the facilities located in Cobourg and Sparks employ approximately 300 workers combined.
This decision comes in the wake of a 2.5% decline in net sales, totaling $963.9 million, within Post Holdings’ Consumer Brands segment for the first quarter of fiscal year 2025.
The Consumer Brands segment mainly includes North American ready-to-eat cereals, pet food, and peanut butter products.
Post Consumer Brands president and CEO Nicolas Catoggio commented: “The ready-to-eat cereal category continues to decline. To respond to this, we are reducing excess manufacturing capacity and optimising our North American plant network to better utilise our production capacity.”
Post Holdings has indicated that production from the affected facilities will be “transferred” to other locations within the company.
The closure process is anticipated to wrap up by the end of December.
The Cobourg facility became part of Post Holdings’ portfolio in 2017 after its acquisition of the UK cereal business Weetabix. Meanwhile, the Sparks plant was integrated in 2021 as a result of acquiring Treehouse Foods’ ready-to-eat cereal division.
Post Holdings expects to incur pre-tax charges ranging from $63.5 million to $67.5 million related to these closures and the operational transfer.
Additionally, the company projects an extra $5 million to $7 million in capital expenditures to facilitate this transition, which is separate from its previously announced capex guidance range of $380 million to $420 million for fiscal year 2025.
As a result of these changes, Post Holdings aims for annual cost savings of approximately $21 million to $23 million, beginning in fiscal year 2026.
In December, Post Holdings agreed to acquire the refrigerated and frozen potato products manufacturer Potato Products of Idaho (PPI), along with a manufacturing facility located in Rigby, Idaho.
Moreover, the company is reportedly exploring the potential acquisition of Lamb Weston Holdings, a leading US supplier of French fries.
For the first quarter of fiscal year 2025, Post Holdings recorded net sales of $1.97 billion, reflecting a slight increase of 0.4% compared to the same period last year.
Gross profit witnessed a 4% rise to $595.3 million, while net earnings surged by 28.6% to $113.3 million.
Diluted earnings per share increased from $1.35 a year ago to $1.78.
Adjusted EBITDA for the quarter reached $369.9 million, a 2.9% growth from the previous year period.
Looking forward, Post Holdings has updated its adjusted EBITDA guidance for fiscal 2025, now expecting a range between $1.42 billion and $1.46 billion, an increase from the earlier forecast of $1.41 billion to $1.46 billion.
