
Post Holdings Inc
NYSE:POST

Post Holdings Inc
Post Holdings Inc., a significant player in the consumer packaged goods sector, was born from a rich legacy of innovation and adaptation in the food industry. Originally part of the larger Ralcorp Holdings, Post Holdings spun off in 2012 and embarked on a journey focusing on a diverse portfolio of trusted brands. It positions itself strongly within the breakfast and snacking markets, leveraging iconic names like Post Consumer Brands, which includes beloved cereals such as Honey Bunches of Oats and Pebbles. The company's strategy has been to capitalize on the perennial demand for breakfast foods while also reshaping its offerings to align with evolving consumer preferences towards more nutritional and convenient options.
Innovation and strategic acquisitions are at the heart of Post's operational blueprint. The company has expanded its revenue streams by acquiring and integrating complementary businesses into its structure, such as Weetabix and Bob Evans Farms. These acquisitions not only broaden its product lineup but also enhance its geographical footprint, particularly in the international arena. Post Holdings makes its money through the widespread distribution of its products across major retailers, harnessing efficient supply chains, and tapping into private label opportunities. By navigating the delicate balance between maintaining its legacy brands and embracing market trends, Post Holdings remains a formidable entity in the competitive landscape of ready-to-eat foods.
Earnings Calls
Post Holdings achieved first-quarter net sales of $2 billion and adjusted EBITDA of $370 million. Although net sales were flat year-over-year, excluding acquisitions, they decreased by 2%. The foodservice segment saw a 9% increase in sales, driven by favorable egg and potato pricing and volume growth. However, pet food sales declined by 13%, primarily due to strategic decisions and lower inventory levels. The company raised its FY '25 adjusted EBITDA guidance to $1.42 billion-$1.46 billion. Looking forward, Post anticipates a Q2 headwind of $30 to $50 million due to avian influenza impacts, but remains confident in recovering costs for the remainder of the year.
Welcome to the Post Holdings First Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions]
I would now like to turn the call over to Daniel O'Rourke, Investor Relations for Post.
Good morning. Thank you for joining us today for Post's First Quarter fiscal 2025 earnings call. I'm joined this morning by Jeff Zadoks, our COO; and Matt Manor, our CFO and Treasurer. 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 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 a reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website.
With that, I will turn the call over to Jeff.
Thanks, Daniel, and good morning, everyone. Before we get to our prepared remarks, I'm sure all of you are wondering why Rob isn't with us. Unfortunately, he caught the flu bug that's been going around the country and won't be with us today. I'm quite sure he's listening, however, and is going to be critiquing our performance. So Matt and I are going to do our best to get through this call and hopefully get a good review from him when we talk to them later. With that, I'll turn back to our prepared remarks.
Fiscal '25 is off to a good start. Our strong Q1 financial results were driven by cost management and benefits we continue to see from our diversified portfolio. These results were delivered as we successfully executed major ERP conversions at PCB Pet and Weetabix during the quarter. Given the potential pitfalls involved with these types of projects, the performance of our teams was commendable, and we are grateful for their efforts.
At PCB, pet and grocery had a strong quarter with improved gross margin in both, driven by cost performance. For grocery, we benefited from improved utilization due to our plant closure completed last September, as well as freight efficiencies. For Pet, we benefited from improved cost and plant performance.
From a volume standpoint, the cereal category declined 3.2%, slightly more than our planned assumptions. PCB's pound share remained flat at 22% with solid performance across the portfolio. Meanwhile, pet category consumption was down approximately 1%, with our portfolio declining 5%, as we continue to lap lost distribution points in Nutrish and experienced price elasticity in [ Gravy Train ].
Our overall share was down slightly. We are now turning our attention to innovation for pet in Q2, led by the relaunch of Nutrish, which is underway now with phasing throughout the balance of the fiscal year. In addition, we are rolling out innovation with new product launches in Nature's Recipe and [ Kibbles and bids ].
Shifting to Foodservice. Overall, we had a strong quarter driven by continued volume growth, ongoing avian influenza pricing from the May 2024 outbreak and improved supply chain performance. While restaurant foot traffic remained soft, we saw some year-over-year stabilization. Nevertheless, we continue to grow our volumes in both egg and potato products, with our higher value-added eggs leading the way at plus 5%. The quarter ended on a challenging note as two of our third-party contracted farms were hit with avian influenza in December. While this did not have a material impact on Q1, when combined with the significant additional avian influenza outbreaks across the industry, our supply imbalance will cause sourcing and cost challenges, especially in our fiscal Q2.
We have successfully priced through each avian influenza outbreak in the past. And while the magnitude of current market prices and volatility are unprecedented, we are confident in our ability to navigate through the current landscape. We estimate the cost before pricing impact on our fiscal second quarter will be a headwind in the range of $30 million to $50 million, when compared to the fiscal first quarter results. Given the volatility in egg market prices, the actual result could vary, perhaps significantly from this range. Importantly, however, we remain confident in our ability to recover any second quarter cost before pricing impact in the balance of the fiscal year. Please note, this assumes we recover our lost egg supply as planned and see no additional avian influenza outbreaks within our controlled farms.
Turning to Refrigerated Retail. Q1 adjusted EBITDA was down significantly to prior year. Roughly half of this decline was expected as last year benefited from customer sponsor promotion that did not repeat this year. In addition, shelf reset relocations at a major customer created a temporary weakness in our side offerings. Finally, we experienced costs ahead of pricing for both sausage and eggs. Our focus in the balance of the year for this segment is to continue driving growth in our sides business, while we maintain cost discipline.
At Weetabix, business performance was down as expected as we pulled back on promotions while we work through our ERP conversion. From a volume perspective, the cereal category was down 1.6%, with declines in both branded and private label. However, a bright spot was our core Weetabix product, which was up 3.6%. With the ERP conversion behind us, our focus shifts to ramping marketing to support and drive volume growth, while we continue to execute our identified cost-out opportunities.
Before turning the call over to Matt, I want to make a few comments on the macro consumer environment and capital allocation. The macro environment remained challenging with continued pressure on the consumer and, therefore, collective volumes across our sector. Adding to this, the new administration, its potential policies have driven uncertainty across the consumer landscape. We continue to see an active pipeline of potential M&A transactions, both large and small. However, just like with all of our capital allocation decisions, development of these opportunities will come down to valuation.
Since the beginning of the fiscal year, our capital allocation is focused on share repurchase as we bought back over 4% of our shares while keeping our net leverage flat. Given our strong liquidity and cash flow, we continue to be well positioned to take advantage of the opportunities that will naturally result from the macro uncertainty, and we remain disciplined as we evaluate the optimal allocation of your capital.
With that, I'll turn the call over to Matt.
Thanks, Jeff, and good morning, everyone. First quarter consolidated net sales were $2 billion and adjusted EBITDA was $370 million. Including acquisitions, net sales were flat to the prior year. Excluding acquisitions, sales decreased 2% as lower overall volumes in our retail businesses were partially offset by volume growth and elevated AV influenza driven pricing in food service. Excluding the benefit of the Perfection Pet Food acquisition in the current and prior year, Post Consumer Brands net sales decreased 6%, volumes decreased 9%, and average net pricing increased 3%. Cereal volumes decreased 2%, slightly less than the broader category, while pet volumes decreased 13%. Approximately half of this decline is due to profit-enhancing decisions, including the exit of co-man and low-margin items and volume elasticities due to pricing actions in Gravy Train. The remaining half is driven by timing related to changes in customary inventory levels in the current and prior year, plus lower consumption, particularly in Nutrish.
Segment adjusted EBITDA increased 8% versus prior year as we benefited from the incremental contribution of Perfection Pet and strong manufacturing and supply chain cost performance for both grocery and pet. Foodservice net sales increased 9% and volumes increased 3%. Revenue reflects favorable volumes and elevated AV influenza driven pricing. Volumes reflect distribution gains in both egg and potato products. Adjusted EBITDA increased 10% driven by favorable egg and potato volumes and favorable manufacturing and freight costs.
Refrigerated retail net sales decreased 5% and volumes decreased 4%. Payroll sausage volumes were offset by declines in side dish, egg and cheese products. Segment adjusted EBITDA decreased 22%, driven primarily by lower side dish volumes and increased manufacturing and input costs.
Weetabix net sales decreased 1% versus the prior year. Sales benefited from the Deeside acquisition and a foreign currency tailwind of 300 basis points from a stronger British pound. On a currency and acquisition neutral basis, net sales decreased 7%, and volumes decreased 12%. The strength we saw in yellow box consumption was more than offset by timing impacts of our ERP conversion as well as profit-enhancing decisions around noncore product discontinuations and elasticities related to pricing decisions. Segment adjusted EBITDA decreased 8% versus prior year, led by lower volumes and increased input costs.
Turning to cash flow. We had a strong quarter, generating $310 million from operations and approximately $170 million in free cash flow net of CapEx spend. This partially benefited from working capital timing, which will reverse in Q2. We used our strong cash flow to repurchase 1.6 million shares of common stock at an average price of approximately $114 per share, while remaining leverage neutral in the quarter at 4.3x. In addition, we repurchased 1 million shares so far in Q2, bringing our total since the beginning of the fiscal year to 2.6 million shares.
Last night, we raised the bottom end of our FY '25 adjusted EBITDA guidance by $10 million to the range of $1.42 billion to $1.46 billion. Sequentially from Q1, we expect Q2 to be down in line with the cost of [ heading ] pricing dynamic Jeff discussed in food service.
Thank you for joining us today, and I will now turn the call back over to the operator.
[Operator Instructions] Our first question is coming from Andrew Lazar with Barclays.
Hope Rob feels better quickly, [indiscernible], and I know he's a tough grader, but I'm sure the review will go well, Jeff.
I'll let you know how that goes.
I guess my question is, historically, when valuations in the group get to sort of these sorts of compressed levels, we've generally seen an increase in larger scale M&A deals, with more of an eye towards maybe even synergy capture that become more palatable as opposed to necessarily top line growth. Post is certainly well known for being opportunistic, right, when it comes to M&A. And you've cited an increase of activity on your past several calls.
I guess in this vein, sort of at current valuations, does this increase the likelihood that Post would, or could consider a more transformational deal? You talked about the significant share repurchase of late. And I'm just wondering if this sort of precludes a larger scale transaction or single [indiscernible] acquisition like that is more unlikely at this time?
Yes. So let me try and address that in two parts. First, your comment about whether or not we think there's going to be more activity. I think we agree with that hypothesis. I think we're going to see broad activity, peers looking for carve-outs and the whole company transactions, private equity that have reached their investment horizon. So I do think that there's going to be more activity.
If you specifically look at Post to the last part of your question, as we tried to address in the prepared comments, we think we're -- in spite of the share buybacks that we've done, we think we're well positioned to entertain any opportunity that would come forward, be it large or small, given where we are with our leverage compared to the levels we've had in the past, as well as the cash flow profile that we have.
So even though there's been a bit of a dearth of activity that you see, there's not a slowdown in activity based on the opportunities that we're reviewing. The pipeline continues to be pretty robust. And as we said in our prepared remarks, that's really across the spectrum of the size of deals. So we're looking -- it's going to come down to valuation and fit. I think you used the term less sexy. We really enjoy synergy deals as we've had in the past. So we don't really consider those less sexy. We consider those right in our wheelhouse.
So it's a long way of saying we're still looking and we think the opportunities are going to be out there, and we think we're well positioned to take advantage when the right one comes along.
Great. And then you talked about some of the actions you're taking to stabilize in the Nutrish brand. I'm just wondering how much flexibility Post might have to optimize the supply chain sort of in pet, given all the work that's already been done as part of the integration. Because I know you've talked about the cereal category being in decline, but you've got quite a bit of manufacturing, optimization opportunity work that can still be done there if that business proves to be more in sort of longer-term structural decline. I'm just trying to get a sense of what type of opportunity might still exist in pet?
Sure. Yes, there are opportunities. But to be fair, our A plan here is to do the things we've been doing up to now. A lot of our volume decline is from actions that we've chosen to take. So pairing back on low-margin opportunities to free up capacity to do our higher-margin products. So we're in the early innings of that activity. And obviously, in the very early innings of the Nutrish activity.
So our A plan would be what we've done so far has freed up the capacity so we can insource everything that we want to in-source and recall that we still have some product through March that's being prepared for us -- manufactured for us by [ Smuckerstill ]. So we still have to in-source capacity within our network that isn't currently there.
Should we look out a year or 2 and our work on Nutrish and other brands to stabilize and then begin them to grow. There are opportunities for further optimization, but that's a longer tail item.
Our next question comes from David Palmer with Evercore ISI.
First one on Foodservice EBITDA drag. Do you think -- you mentioned that you plan to make that up in fiscal '25. I wonder, though, is there any degree that you think that this might represent easy comparisons going into fiscal '26? In other words, that this might be just something you're making out elsewhere that there's still going to be some net impact in fiscal '25?
And then on Foodservice as well. I'm wondering what you're feeling about demand this year. It feels like restaurants have been weak, but we see some notable customers that are getting better like Starbucks. I'm wondering how you think about demand throughout this fiscal year?
Yes. So our commentary really, within a materiality threshold, is that we think the recovery is self-contained within Foodservice. We're not banking on overperformance somewhere else in the portfolio.
Now to be fair, we're talking large numbers and lots of things that are outside of our control. So is it possible that there's some of that lingering effect into '26. Sure that's possible, but that's not our current expectation.
With regards to foot traffic, obviously, we'd like the broader food service industry to be stronger than it currently is. But we've been doing well for a variety of reasons. Recall that our value proposition in both eggs and potatoes, is to take labor out of the system, which is an evergreen benefit to our customers that doesn't change with their foot traffic. So we can continue to get growth from that simply because it improves their margin profile by eliminating labor and simplifying.
Another interesting thing that's happening in the current environment for eggs in particular, or eggs especially, is with shell egg prices, as high as they are, realizing that liquid egg is also very high, but not quite as inflated as shell eggs. It brings to the forefront in our customers, or potential customers' minds, the fact that they could go to liquid at a lower price than shell egg. And those folks that can convert easily are trying to do that.
Now unfortunately, there's not enough supply available to meet all the customer demand that we're seeing for liquid egg. But as our supply comes back, that's something that we could take advantage of in the short term and hopefully in the medium to long term to continue to add to our volumes even if the broader category remains soft.
That's interesting. And just wanted to ask you, just on pet. You mentioned some steps you're taking that are hurting your volume. Presumably, there's some agave rationalization there. But when it comes to demand creation and plans for Nutrish, or whatever brands you have planned, how are you planning on demand the rest of this fiscal year shaping up in pet?
Yes, sure. I can walk you -- that with you. We tried to break it out in our script into 3 buckets really. First bucket around, as you talked about some of these profit enhancing actions that we took, and those are exiting low-margin business, pricing elasticity we're seeing around gravy train. So lower volume on gravy train, but we're making more money.
And the other item is really just freeing up some capacity, so we can bring over Nature's Recipe as it comes off co-man with [ Smuckers ]. These will be -- continue to be a drag as we move through the fiscal year. And in terms of that negative 13%. It's about half the variance. So think of year-over-year continuing down 6% until we lap that as we get into Q3 and Q4.
Second bucket is really customer inventory levels and two components to those that are pretty equal. A year ago, we had a positive in that, we came off allocation for [ 9 lives ]. That's a headwind this year. And then we had a bit of the opposite this year as the ERP conversion caused the [ deloaded ] customers, we'll see some benefit in Q2 as that reverses. But think of that bucket after Q2 is going away. So that's a 4% improvement over the 13%.
And then the final bucket is the smallest and that's around consumption and your question on what we're seeing mainly in Nutrish. And that's a 2% to 3% drag over last year when we think about the quarter. That's where the innovation comes in. And I think we're rational about the innovation. That's not going to turn the corner immediately. This is a phased rollout in particular for Nutrish. And as Jeff mentioned, we've got other innovation in the other products. We think that starts to turn the tide as we end the fiscal year and see a benefit for that as we enter fiscal '26.
So I guess to summarize, down 13% would be to say we expect the balance of [ 25 ] to be down more like [ 7 to 9 ] once we get past that Q2 customer inventory bucket. And then meanwhile, of course, we're benefiting from a more profitable, more efficient portfolio. And then as we get to the end of the year, we will lap those profit-enhancing decisions. So down [ 7 to 9 ] would drop to really down [ 2 to 3 ], which is that consumption piece. And again, we think we'll address that as we move into '26 with the innovation and hopefully show some growth there.
We'll go next to Ken Goldman with JPMorgan.
You took the bottom end of guidance up. It's only $10 million. It's not large, obviously, in the scheme of things. But last quarter, you mentioned that risks related to the ERP conversion might lead your guidance to land closer to the lower end. Did you -- I just wanted to get a little bit of a better sense of where the guidance boost came from? Was it in part to account for the ERP transition going as planned? It sounds like that's in the past? Or were there other factors that we should keep in mind?
Yes. Ken, so the raising of the bottom end is largely a reflection of Q1 performance, which part of that was getting through the ERPs with relatively unscathed. Not to say it wasn't without some bumps in the road, but we got through those better than -- well, we had allowed for some risk there.
The other part of your question, and it dovetails into why we didn't raise the high end of our range. Unfortunately, we've traded ERP risk for other risks. So now we've got avian influenza that again, as we said, we think we can work through. But we've got to at least open the possibility that there's some variability there.
And then there's the aspects of the new administration and tariffs. Are they -- are we going to have them? Are we not going to have them on what countries are we going to have them? At what rates are we going to have them? So given those things and again, the broader softness in volumes, we thought it prudent not to raise the high end of our range because of those variables.
Got it. Okay. And when you think about the main risks on the Foodservice side, the egg side, is it more on your ability to procure egg? Is it more on the price that you might pay or your ability to pass that on? Or is it all of the above? I just want to get a better sense for where those risks are. With the obvious question if we don't really know what's ahead given this is kind of a unique situation here?
So the Q2 risk, for sure, and $20 million is a pretty wide range in what we gave in our commentary. That risk is -- because we don't know where markets are going. So between now and the end of the quarter, we're -- we don't really have levers to pull that quickly that would mitigate what would be an in-quarter effect of those price changes.
For the full year, we -- the variability is going to come from the timing and the amount of pricing obviously, the timing and how successfully our supply comes back online. Whether or not there are other outbreaks in the industry and to what degree. So those are the things that we'd be concerned about and trying to navigate as we get into the second half of the year.
We'll go next to Matt Smith with Stifel.
Jeff, maybe just a follow-up on the avian influenza impact to Post. Trying to understand how Post disruption from avian influenza compares to the rest of industry at this point? I know a few months ago, Post had more disruption relative to the industry. But has that shifted? And are you seeing a pricing benefit for the portion of your business where your supply has not been impacted?
So our best guess right now is that we're about on par with the percentage of our supply affected compared to the broader network. It's somewhere in the neighborhood of 12% to 14%, depending on different sources of information. And unfortunately, some of the information is harder to get now with the change in administration. The [ AFS ] website isn't as up to date as it used to be. But we get information from anecdotal discussions around the industry, et cetera. So that's our best guess.
In terms of pricing benefit, we are continuing to get the pricing benefit from the adders that we had for the May 2024 outbreak and those are going to continue. And we still do have some portion of our business that is a market-based -- market-based pricing. But that -- so we'll generate some revenue benefit but doesn't necessarily create a margin benefit because typically, we're supplying those eggs on a market base.
So in the short term, what you're going to see is the benefit of the AI adders. Our expectation would be that there will be an extension of those adders along with new adders on top of that. But that's going to be out into April and beyond.
We'll go next to Michael Lavery with Piper Sandler.
Just wanted to start with a follow-up to Ken's question. Just really trying to understand maybe if you've got the visibility even with some range on the kind of near-term more upfront costs from the flu impact, what are just the key things, I guess, to watch, or that you're watching, in the second half to make sure it comes through on the recovery side?
Is it rebuilding your own supply as the key? Or is it the market pricing? Is it a bit of both? Just kind of want to make sure I understand what the key factors are and where maybe the risk or watch outs are?
Yes, the return of our supply is key. The other key will be the timing and magnitude of the pricing we passed through, compared to how the market changes. So if the market comes down quickly, we will recover more quickly. If the market stays elevated, longer or higher, debt would have a tendency to extend the recovery period. So those are really the key variables. Now there are lots and lots of variables, but those are the key ones.
Okay. Yes, that's helpful. And just curious if you could elaborate a little bit on -- you touched on distribution gains for both eggs and potatoes. Is that new to the quarter? How do we think about the runway there? A little more color there, if you can, would be great.
No. It goes back to what I said earlier, is a number of things, but the general -- and this is true of the -- our ownership period as well as the pre-ownership period for this business. The way we drive growth is a combination of variables.
One is adding new customers who are converting from shell eggs to liquid eggs. We then add by moving them up the value chain. So typically, customers start with more commoditized liquid egg and then we endeavor to move them up the chain to precooked.
And then the labor component. So our value proposition is to attempt to convince our prospective customers that they can drive more efficiency and better performance out of their restaurants by eliminating the manual activities that are involved either in cracking eggs or manually peeling potatoes.
It's really those efforts that are constant regardless of whether we have AI or not. Those are the foundational principles of the business that we expect period-on-period will continue to drive growth in the business. And we obviously endeavor to add new customers all the time. We endeavor to get larger percentages of the volumes of our customers. So those are the things that we're focused on when we're lucky enough not to be dealing with AI.
No, that's helpful. And maybe just lastly on the ready-to-drink shakes. The ramp-up there has taken some time to get where you want. Any -- just update on kind of the run rate expectations there?
Yes. We've seen some modest improvement, but we're still a ways away from where that needs to be. So its contribution is minimal at the moment. We're putting all the resources we can put our hands on towards identifying the problems and fixing the problems. And again, we're making progress, but it's slower than we wish it would be.
[Operator Instructions] We'll go next to John Baumgartner with Mizuho.
Jeff, I wanted to ask about the egg business in light of the macros. When [ Michael ] was acquired, the thesis was it was a strong play on protein even at that time. But as you look at the evolution of the category over the past decade, influenza now seems to be a normalized event with the associated volatility. We've also seen the demand stress tested with pretty favorable elasticity. There's new segments such as [indiscernible], which are seeing very solid demand.
So I'm curious how you think about navigating this evolution? Is there a case to make for larger exposure to retail at this point? Is there a case to make to play more in premium? Or does it go the other way where the volatility hurts valuation makes you less interested in the category? I'm just curious how you could be opportunistic with the model at this point, either organically or inorganically?
Yes. So it's hard for us to say that the current business doesn't have volatility given what we've seen. But I know you've been following us long enough to know that the fundamental thesis of that -- of our existing business is that it's less volatile in normal times because of its pricing model.
We haven't given up hope that AI will go away or become less of an event. But obviously, we need to plan for it being a more frequent visitor. But it doesn't change our view of the shell egg market, which even in normal times is volatile, and that's not really what we're interested in getting into.
Now we obviously have a -- within our Refrigerated Retail have a liquid egg business that we would like to continue to invest behind and improve. But I don't see us endeavoring to get more into shell egg either in Foodservice or retail.
And I think you had another part of that question and it slipped my mind. But -- did I cover that question? Or is there something else you want me to try and address?
Yes. I mean I think [ tied ] with that, just looking at sort of the volatility on some of the parts basis and to the extent that it impacts valuation for Post more broadly, to sort of make you less interested in being in the category over time?
Yes. What we try and tell people, and it's true, if you look at the trend line of that business way back to the beginning of this -- 2020 -- or excuse me, the 2000s, if you trend lined it, it grows 3%, 4%, maybe even a little bit more than that over that 20 -- now 25-year period. Unfortunately, there's been some volatility that's been experienced mostly in the last a handful of years with COVID and avian influenza.
But we come out of each of these events and the business is stronger than it was before. So we'd like to convince people to see through the volatility and look at the trend line, and it continues to be a very strong business that delivers growth over the long term. And for that reason, we view it as one of our better businesses, obviously, recognizing that we've had some volatility in the recent past.
Yes. Very fair point there. My follow-up on cereal and I guess, tied in with the protein theme. You're seeing a bifurcation with significant volume growth in dairy products like yogurt, cottage cheese. Higher protein products where cereal is more challenged to compete.
At this point, are you sort of thinking that normalized volume for the cereal category may settle at a weaker point than history, down that 1% or so? And what do you think the category can do from here? Is there an innovation lever that can be hit? Does the category need maybe a broad pricing reset and play more on the relative value equation for [ breakfast ]? Just your high-level thoughts there, I appreciate.
Yes. That's a complicated question, difficult to answer. But we definitely see the benefit forward more nichey cereals gaining share and growing. It's been a challenge for the large manufacturers to succeed in that space, partly because we and our peers are not set up for small run products. So the margins are really difficult to make sense. But the brands maybe have an older population to recognize them, maybe some of the young demographic doesn't resonate with them.
So we're looking at things like the premier brands, which we already have, cereals and perhaps extending upon that. Looking for other benefit forward criteria that would enhance things. And your comment about playing the value chain, that's obviously what we believe because we do, and have, and will continue to play up and down the value chain on cereal, and we think that's the right way to go.
With regard to your comment about the long-term growth rate, I don't think we're yet prepared to declare that the 3% we saw this last quarter is now the new permanent run rate. But we're definitely preparing strategies that would enable us to perform well if that in turn -- if that turns out to be the case, but also planning for strategies that hopefully would help turn around that trajectory.
We'll go next to Marc Torrente with Wells Fargo.
First, I guess it seems as though profit delivery was perhaps a bit better in PCB and Foodservice versus [ plan ], but maybe a bit softer elsewhere. The PCB upside, in particular, sort out and feel sustainable.
First, is that all a fair assessment? And then maybe excluding expected AI impact, has your outlook for contribution or cadence by segment underlying your guidance changed at all?
So the first part, I think that's fair. The -- obviously, PCB had the biggest risk associated with it with regard to the ERP conversion. It was -- it kind of doesn't do it justice to call it an ERP conversion because it involves a lot more things than that. Changing distribution networks, among other things. So it certainly performed better than what we thought in the first quarter. And the margins in that business continue to be strong -- very strong, which is something we expect to continue.
With regard to the second part of your question, absent the AI on Foodservice in Q2 and the subsequent impact in the second half, the rest of our guidance and segment expectation is comparable to what it was at the beginning of the year.
Okay. And then CapEx for the quarter was about 1/3 of the full year spend. How should we think about phasing through the year? Are you tracking ahead? I guess trying to get a sense of project timing and perhaps run rate exiting into '26, understanding some of the current projects underway could likely carry over.
Sure. So obviously, Q1 was a little bit elevated relative to an even run rate for our guidance. That's really just timing around these projects and progress there. So I don't think anything more to read into it. We still think guidance range is appropriate. So I would expect subsequent quarters to be a bit lower.
This concludes today's Post Holdings First Quarter 2025 Earnings Conference Call and Webcast. Please disconnect your line at this time, and have a wonderful day.