Milling & Baking News - March 8, 2022 - 14

TUES | 03 08 202 2
Amid sales growth, Hostess sets
plans to build new baking plant
LENEXA, KAN. - Surging profits in the
company's fourth quarter helped generate
double-digit earnings gains in 2021 at
Hostess Brands, Inc. Offering guidance
for the new year, Hostess is projecting
2022 earnings growth ranging from 6%
to 11%. Additionally, the company will be
building a new baking plant during the
year in Arkansas.
Net income in the year ended Dec. 31,
2021, was $119.3 million, equal to 91¢ per
share on the common stock, up 10% from
$104.68 million, or 84¢ per share, in 2020.
Net revenue for the year was $1.14 billion,
up 12% from $1.02 billion.
In early Nasdaq trading March 1, Hostess
shares climbed to a new 52-week high
fourth quarter, and for the full year, reflect
higher volumes, multiple pricing actions,
increasingly impactful innovation,
omni-channel presence and outstanding
execution. We continue to perform at bestin-class
levels while navigating inflation
and supply chain challenges. "
The strong quarterly sales reflected
growth of the company's Hostess brand
and Voortman business across all of its
sales channels. Despite the higher sales,
gross margins were relatively flat in the
fourth quarter at 37.2%. Higher prices,
volume leverage and productivity initiatives
offset double-digit inflation.
A 14.9% increase in adjusted EBITDA
Hostess plans to
invest between
$120 million
and $140 million
in a new
330,000-squarefoot
plant in Arkadelphia,
Ark.
of $22.72, up about 5% from the Feb. 28
close of $21.54.
The double-digit gain in net income was
enabled by a dramatic improvement in
the company's fourth-quarter financials.
Through the first three quarters of 2021,
Hostess Brands net income was down 22%
from January-September 2020.
In the fourth quarter alone, Hostess
net income was $36.5 million, or 27¢ per
share, versus a loss a year earlier of $1.43
million. Sales were $297.2 million, up 16%
from $256 million a year earlier.
" The Hostess team once again showcased
its resilience and tenacity by delivering
record high quarterly sales and adjusted
EBITDA, well ahead of expectations, "
said Andrew P. Callahan, president and
chief executive officer. " Our double-digit
top-line growth and stable margins in the
14
MILLING & BAKING NEWS
reflected higher gross profit, partially
offset by investments Hostess
said it made in its workforce
and selling expenses
to support double-digit net
revenue growth.
During the quarter, Hostess'
point-of-sale jumped
24%, and the company gained
218 basis points of share in
the sweet goods category.
" The ongoing Hostess
momentum is driven by
the strength of its core
portfolio and greater contributions from
new innovation, including Baby Bundts,
Muff'n Stix and Strawberry Cheesecake
Donettes, " the company said.
Voortman branded point of sales rose
20% in the quarter, more than double the
growth rate of the overall cookie category.
Hostess said the strong performance
reflected " ongoing distribution gains and
strong consumer demand. "
During the quarter, Hostess said it
successfully implemented further price
increases to " maintain its industry-leading
margin structure. "
In 2021, Hostess installed a new cake production
line and, in the first quarter of 2022,
bought a facility in Arkansas for the installation
of a new baking plant to " support
growing consumer demand, " Hostess said.
In a March 1 Investor Day presentation,
Daniel J. O'Leary, chief growth officer
at Hostess, said the company will invest
between $120 million and $140 million in
the 330,000-square-foot plant in Arkadelphia,
Ark., with plans to transform the
plant into a " bakery of the future. "
" It will unlock approximately 20%
capacity across our cake and Donette
platforms, and is expected to support our
growth algorithm through 2028 based on
current demand projections, " Mr. O'Leary
said. " It will also enable continued innovation
across our portfolio and provide
the necessary space to support additional
production lines in the future as we continue
to grow beyond 2028.
" Unburdened by pre-existing constraints,
this facility will leverage all of
the best practices accumulated across our
bakery network to become our most efficient
and flexible operation. We have taken
a sustainability-first design approach to
this project and are committed to making
this the greenest Hostess facility we have,
which supports our ESG agenda. "
He said acquiring an existing plant
for conversion was Hostess' lowest cost
option, as well as most sustainable one.
" Design and construction of the facility
is ongoing, and we expect it to be operational
in the second half of 2023, " he said.
" We could not be more excited about
this investment and our growth. We are
grateful to have made this investment in
conjunction with the support of our state
and local partners in Arkansas. We look
forward to welcoming the new team members
who will join our company when the
bakery is operational in 2023. "
In addition to projecting earnings per
share of 93¢ to 95¢ in 2022, an increase of
6% to 11% from adjusted EPS in 2021, Hostess
said its net revenues would be up 5% to
8% from last year. Adjusted EBITDA was
forecast at $280 million to $290 million, up
4% to 8% from 2021.
Hostess said its capital expenditures
in 2022 would total $120 million to $140
million, including $80 million for the new
baking plant. The rest of the baking plant
expenditures will come in 2023.
" Our strong 2022 financial guidance
reflects our confidence in maintaining
our ongoing profitable growth momentum, "
the company said. MBN
bakingbusiness.com
HOSTESS BRANDS, INC.
http://www.bakingbusiness.com
Milling & Baking News - March 8, 2022

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