Ralcorp Net Earnings Drop 46.6%, Special Charges Cited

August 9, 2011
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Ralcorp Holdings Tuesday reported net earnings of $28.3 million for the quarter ended June 30, 2011, down 46.6 percent from the $53 million reported in the same period for its previous fiscal year.


Net earnings for the nine months ended June 30 stood at $182.9 million, up from $166.9 million in the same period the previous year.


In explaining the lower quarterly earnings, St. Louis-based Ralcorp said in a statement that “Diluted earnings per share (EPS) this year were negatively affected by impairments of intangible assets, mark-to-market losses on economic hedges, amounts related to plant closures, and minor merger and integration costs.”


The company lost $21.2 million in hedging activities. That basically means it bet wrong on the direction of commodity prices through either exchange-traded futures or options contracts or privately arranged deals to hedge the prices it pays for commodities.


Ralcorp’s net sales for its fiscal third quarter hit roughly $1.2 billion compared with $962.4 million in the same period last year. Net sales for the first nine months of its current fiscal year reached $3.5 billion compared with $2.9 billion in the same period the prior fiscal year.


The company realized the highest profit margin, 22 percent, in its branded cereal business, Post, which it is planning to spin off to shareholders. Its pasta segment had a profit margin of 19 percent in the quarter, followed by frozen bakery products at 11 percent and other cereals at 11 percent, the company reported. Its profit margins for snacks, spreads and

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