MONTREAL, Feb. 08, 2024 (GLOBE NEWSWIRE) — Saputo Inc. (TSX:SAP) (we, Saputo or the Company) reported today its financial results for the third quarter of fiscal 2024, which ended on December 31, 2023. All amounts in this news release are in millions of Canadian dollars (CDN), except per share amounts, unless otherwise indicated, and are presented according to International Financial Reporting Standards (IFRS).
“In the third quarter, we continued to execute with discipline and advance our long-term strategy in a dynamic macroeconomic environment, characterized by volatile commodity markets and a resilient but cautious consumer. Importantly, our continued focus on managing the factors within our control resulted in strong operating cash flow,” said Lino A. Saputo, Chair of the Board, President, and CEO. “We are making tangible progress with our Global Strategic Plan. I am pleased with how our capital projects are advancing and the impact of many of the actions and initiatives completed to date.”
Fiscal 2024 Third Quarter Financial Highlights
Revenues amounted to $4.267 billion, down $320 million or 7.0%.
Net loss totalled $124 million, compared to net earnings of $179 million. Net loss per share was $0.29, compared to net earnings per share (EPS) of $0.43.
Adjusted EBITDA1 amounted to $370 million, down $75 million or 16.9%.
Adjusted net earnings1 totalled $163 million, down from $221 million, and adjusted EPS1 (basic and diluted) were $0.38, down from $0.53.
Net cash generated from operating activities amounted to $388 million, up from $134 million.
A non-cash goodwill impairment charge of $265 million was recorded in relation to the Dairy Division (Australia).
(unaudited)
For the three-month periods
ended December 31
For the nine-month periods
ended December 31
2023
2022
2023
2022
Revenues
4,267
4,587
12,797
13,375
Adjusted EBITDA1
370
445
1,130
1,161
Net earnings (loss)
(124
)
179
173
463
Adjusted net earnings1
163
221
498
515
Earnings (loss) per share
Basic and Diluted
(0.29
)
0.43
0.41
1.11
Adjusted EPS1
Basic and Diluted
0.38
0.53
1.18
1.34
The macroeconomic environment was not favourable to Saputo’s results. Under volatile market conditions, commodity prices dropped, negatively impacting both the USA Sector and the International Sector. The deep devaluation of the Argentine peso late in the quarter had a non-cash negative impact on the results of the International Sector, due to the application of hyperinflation accounting to the Dairy Division (Argentina) results. Despite these market headwinds, Saputo delivered higher sales volumes and increased cash flows from operations with its continued focus on strategic priorities and progression of major capital projects.
Adjusted EBITDA1 reflected the following:
Solid performance in the Canada Sector;
Continued improvement on operational controllables in the USA Sector, although results were affected by negative USA Market Factors2;
Higher sales volumes in both domestic and export markets;
In the International Sector, lower international cheese and dairy ingredient market prices; and
In the Europe Sector, the selling of inventory produced at higher milk prices.
The Board of Directors approved a dividend of $0.185 per share payable on March 15, 2024, to shareholders of record on March 5, 2024.
DRIP SUSPENSION
Saputo announces that it suspends its Dividend Reinvestment Plan (“DRIP”), effective February 8, 2024. Until further notice, shareholders who were enrolled in the DRIP will automatically receive dividend payments in the form of cash, including the dividend declared today and payable on March 15, 2024. If Saputo elects to reinstate the DRIP in the future, shareholders that were enrolled in the DRIP at suspension and remained enrolled at reinstatement will automatically resume participation in the DRIP.
1 This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. These measures and ratios do not have a standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other issuers. See the “Non-GAAP Measures” section of this news release for more information, including the definition and composition of the measure or ratio as well as the reconciliation to the most comparable measure in the primary financial statements, as applicable. Adjusted net earnings and adjusted EPS for comparative periods were aligned to meet the current presentation.
2 Refer to the “Glossary” section of the Management’s Discussion and Analysis.
FY24 OUTLOOK
We expect to benefit from additional capacity and capabilities, cost containment and efficiency initiatives, new product innovations, and investments in our brands and advertising.
We will continue to manage the current inflationary environment through our pricing protocols and cost containment measures.
A more stabilized workforce and fewer supply chain constraints are expected to further enhance our ability to service customers, particularly in the USA Sector.
As we approach the completion of our major capital projects, we expect to increase our operational efficiencies while further improving our cost structure, particularly in the USA Sector.
Global demand for dairy products is expected to remain moderate due to macroeconomic conditions and the impact of pricing elasticity.
The outlook for USA Market Factors2 remains mixed. Management believes that the long-term environment is likely to be relatively supportive for commodity prices but with continued volatility in the short to medium-term.
Cheese and dairy ingredient market prices are expected to remain low.
The Europe Sector is expected to continue to be impacted, although to a lesser extent than in the third quarter of fiscal 2024, by the selling of inventory produced at higher milk prices.
Capital expenditures are expected to remain at similar levels versus last fiscal year, driven by Global Strategic Plan optimization and capacity expansion initiatives, as well as continued investments in automation.
We expect strong operating cash flow to continue to support a balanced capital allocation strategy and provide the financial flexibility to consider value-enhancing opportunities, with priority given to: (i) organic growth initiatives through capital expenditures, (ii) shareholder dividends, and (iii) debt repayments.
GLOBAL STRATEGIC PLAN HIGHLIGHTS
In the Canada Sector, we continued the roll-out of our automation projects, which included the completion of several cheese slicing, shredding, and packing automation projects, to take advantage of new business opportunities and to continue to grow with some of our national retail customers.
In the USA Sector, (i) our new cheese shred lines are in start-up mode at our Tulare Paige, California, plant and are currently meeting customer demand; the planned closure of our Big Stone, South Dakota, Green Bay, Wisconsin, and South Gate, California, facilities by the end of fiscal 2025 should further support network optimization plans, (ii) benefits from the recently converted Reedsburg, Wisconsin, goat cheese manufacturing plant should begin in the first quarter of fiscal 2025 once our Lancaster facility is closed, and (iii) the new automated cut-and-wrap facility in Franklin, Wisconsin, is running with benefits expected to begin by the end of fiscal 2024.
In the Europe Sector, efficiency benefits from the expanded Nuneaton packing facility are expected to accelerate once the closure of the Frome facility is completed in the first quarter of fiscal 2025. Shipments of new private label contracts began in the fourth quarter of fiscal 2024.
In the International Sector, previously announced network optimization activities in Australia will result in eleven plants being consolidated into six. Some of these benefits began to be realized in fiscal 2024. We are in the process of also divesting two fresh milk processing facilities and we commenced a review of strategic alternatives related to our King Island facility in Tasmania.
THE SAPUTO PROMISE
The Saputo Promise is our approach to social, environmental, and economic performance which guides our everyday actions and consists of seven Pillars: Food Quality and Safety, Our People, Business Ethics, Responsible Sourcing, Environment, Nutrition, and Community. It is an integral part of our business and a key component of our growth. As we seek to create shared value for all our stakeholders, it provides a framework that ensures we manage ESG risks and opportunities successfully across our operations globally.
Anchored in the most pressing ESG issues for our business, our three-year plan (FY23-FY25) builds on the momentum of the past few years and continues to drive, enable, and sustain our growth.
In the third quarter of fiscal 2024, we continued our efforts across our seven Pillars to progress on our three-year goals. Additional details will be shared with our Q4 results in June with the release of our annual Promise Report.
Additional Information
For more information, reference is made to the condensed interim consolidated financial statements, the notes thereto and to the Management’s Discussion and Analysis for the third quarter of fiscal 2024. These documents can be obtained on SEDAR+ under the Company’s profile at www.sedarplus.ca and in the “Investors” section of the Company’s website, at www.saputo.com.
Webcast and Conference Call
A webcast and conference call will be held on Friday, February 9, 2024, at 8:30 a.m. (Eastern Time).
The webcast will begin with a short presentation followed by a question and answer period. The speakers will be Lino A. Saputo, Chair of the Board, President and CEO, and Maxime Therrien, Chief Financial Officer and Secretary.
To participate:
Webcast : https://www.gowebcasting.com/13127
Presentation slides will be included in the webcast and can also be accessed in the “Investors” section of Saputo’s website (www.saputo.com), under “Calendar of Events”.
Conference line (audio only): 1-800-945-5981 Please dial-in five minutes prior to the start time.
Replay of the conference call and webcast presentation
For those unable to join, the webcast presentation will be archived on Saputo’s website (www.saputo.com) in the “Investors” section, under “Calendar of Events”. A replay of the conference call will also be available until Friday, February 16, 2024, 11:59 p.m. (ET) by dialling 1-800-558-5253 (ID number: 22028964).
About Saputo
Saputo, one of the top ten dairy processors in the world, produces, markets, and distributes a wide array of dairy products of the utmost quality, including cheese, fluid milk, extended shelf-life milk and cream products, cultured products, and dairy ingredients. Saputo is a leading cheese manufacturer and fluid milk and cream processor in Canada, a leading dairy processor in Australia and the top dairy processor in Argentina. In the USA, Saputo ranks among the top three cheese producers and is one of the top producers of extended shelf-life and cultured dairy products. In the United Kingdom, Saputo is the leading manufacturer of branded cheese and dairy spreads. In addition to its dairy portfolio, Saputo produces, markets, and distributes a range of dairy alternative cheeses and beverages. Saputo products are sold in several countries under market-leading brands, as well as private label brands. Saputo Inc. is a publicly traded company and its shares are listed on the Toronto Stock Exchange under the symbol “SAP”. Follow Saputo’s activities at www.saputo.com or via Facebook, Instagram, and LinkedIn.
Investor Inquiries
Nicholas Estrela
Director, Investor Relations 1-514-328-3117
Media Inquiries
1-514-328-3141 / 1-866-648-5902
media@saputo.com
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This news release contains statements which are forward-looking statements within the meaning of applicable securities laws. These forward-looking statements include, among others, statements with respect to our objectives, outlook, business projects, strategies, beliefs, expectations, targets, commitments, goals, ambitions and strategic plans including our ability to achieve these targets, commitments, goals, ambitions and strategic plans, and statements other than historical facts. The words “may”, “could”, “should”, “will”, “would”, “believe”, “plan”, “expect”, “intend”, “anticipate”, “estimate”, “foresee”, “objective”, “continue”, “propose”, “aim”, “commit”, “assume”, “forecast”, “predict”, “seek”, “project”, “potential”, “goal”, “target”, or “pledge”, or the negative of these terms or variations of them, the use of conditional or future tense or words and expressions of similar nature, are intended to identify forward- looking statements. All statements other than statements of historical fact included in this news release may constitute forward-looking statements within the meaning of applicable securities laws.
By their nature, forward-looking statements are subject to inherent risks and uncertainties. Actual results could differ materially from those stated, implied, or projected in such forward-looking statements. As a result, we cannot guarantee that any forward-looking statements will materialize, and we warn readers that these forward-looking statements are not statements of historical fact or guarantees of future performance in any way. Assumptions, expectations, and estimates made in the preparation of forward-looking statements and risks and uncertainties that could cause actual results to differ materially from current expectations are discussed in our materials filed with the Canadian securities regulatory authorities from time to time, including the “Risks and Uncertainties” section of the Management’s Discussion and Analysis dated June 8, 2023, available on SEDAR+ under Saputo’s profile at www.sedarplus.ca.
Such risks and uncertainties include the following: product liability; the availability and price variations of milk and other inputs, our ability to transfer input costs increases, if any, to our customers in competitive market conditions; supply chain strain and supplier concentration; the price fluctuation of dairy products in the countries in which we operate, as well as in international markets; our ability to identify, attract, and retain qualified individuals; the increased competitive environment in our industry; consolidation of clientele; cyber threats and other information technology-related risks relating to business disruptions, confidentiality, data integrity business and email compromise-related fraud; unanticipated business disruption; continuing economic and political uncertainties, resulting from actual or perceived changes in the condition of the economy or economic slowdowns or recessions; the ongoing military conflict in Ukraine; public health threats, such as the recent global COVID-19 pandemic, changes in consumer trends; changes in environmental laws and regulations; the potential effects of climate change; increased focus on environmental sustainability matters; the failure to execute our Global Strategic Plan as expected or to adequately integrate acquired businesses in a timely and efficient manner; the failure to complete capital expenditures as planned; changes in interest rates and access to capital and credit markets. There may be other risks and uncertainties that we are not aware of at present, or that we consider to be insignificant, that could still have a harmful impact on our business, financial state, liquidity, results, or reputation.
Forward-looking statements are based on Management’s current estimates, expectations and assumptions regarding, among other things; the projected revenues and expenses; the economic, industry, competitive, and regulatory environments in which we operate or which could affect our activities; our ability to identify, attract, and retain qualified and diverse individuals; our ability to attract and retain customers and consumers; our environmental performance; the results of our sustainability efforts; the effectiveness of our environmental and sustainability initiatives; our operating costs; the pricing of our finished products on the various markets in which we carry on business; the successful execution of our Global Strategic Plan; our ability to deploy capital expenditure projects as planned; reliance on third parties; our ability to gain efficiencies and cost optimization from strategic initiatives; our ability to correctly predict, identify, and interpret changes in consumer preferences and demand, to offer new products to meet those changes, and to respond to competitive innovation; our ability to leverage our brand value; our ability to drive revenue growth in our key product categories or platforms or add products that are in faster-growing and more profitable categories; the successful execution of our M&A strategy; the market supply and demand levels for our products; our warehousing, logistics, and transportation costs; our effective income tax rate; the exchange rate of the Canadian dollar to the currencies of cheese and dairy ingredients. To set our financial performance targets, we have made assumptions regarding, among others: the absence of significant deterioration in macroeconomic conditions; our ability to mitigate inflationary cost pressure; the USA commodity market conditions; labour market conditions and staffing levels in our facilities; the impact of price elasticity; our ability to increase the production capacity and productivity in our facilities; and the demand growth for our products. Our ability to achieve our environmental targets, commitments, and goals is further subject to, among others: our ability to access and implement all technology necessary to achieve our targets, commitments, and goals; the development and performance of technology, innovation and the future use and deployment of technology and associated expected future results; the accessibility of carbon and renewable energy instruments for which a market is still developing and which are subject to risk of invalidation or reversal; and environmental regulation. Our ability to achieve our 2025 Supply Chain Pledges is further subject to, among others, our ability to leverage our supplier relationships and our sustainability advocacy efforts.
Management believes that these estimates, expectations, and assumptions are reasonable as of the date hereof, and are inherently subject to significant business, economic, competitive, and other uncertainties and contingencies regarding future events, and are accordingly subject to changes after such date. Forward-looking statements are intended to provide shareholders with information regarding Saputo, including our assessment of future financial plans, and may not be appropriate for other purposes. Undue importance should not be placed on forward-looking statements, and the information contained in such forward-looking statements should not be relied upon as of any other date.
Unless otherwise indicated by Saputo, forward-looking statements in this news release describe our estimates, expectations and assumptions as of the date hereof, and, accordingly, are subject to change after that date. Except as required under applicable securities legislation, Saputo does not undertake to update or revise forward-looking statements, whether written or verbal, that may be made from time to time by itself or on our behalf, whether as a result of new information, future events, or otherwise. All forward-looking statements contained herein are expressly qualified by this cautionary statement.
SELECTED QUARTERLY FINANCIAL INFORMATION
Fiscal years
Q3
2024
Q2
Q1
Q4
2023
Q3
Q2
Q1
2022
Q4
Revenues
4,267
4,323
4,207
4,468
4,587
4,461
4,327
3,957
Adjusted EBITDA1
370
398
362
392
445
369
347
260
Adjusted EBITDA margin1
8.7
%
9.2
%
8.6
%
8.8
%
9.7
%
8.3
%
8.0
%
6.6
%
Net earnings (loss)
(124
)
156
141
159
179
145
139
37
Acquisition and restructuring costs2
4
—
—
21
27
16
6
51
Goodwill impairment charge
265
—
—
—
—
—
—
—
Loss (gain) on hyperinflation
3
9
(2
)
—
—
(26
)
(18
)
(15
)
Amortization of intangible assets related to
business acquisitions2
15
16
15
16
15
16
16
20
Adjusted net earnings1
163
181
154
196
221
151
143
93
Adjusted net earnings margin1
3.8
%
4.2
%
3.7
%
4.4
%
4.8
%
3.4
%
3.3
%
2.4
%
Earnings (loss) per share (basic and diluted)
(0.29
)
0.37
0.33
0.38
0.43
0.35
0.33
0.09
Adjusted EPS basic1
0.38
0.43
0.37
0.47
0.53
0.36
0.34
0.22
Adjusted EPS diluted1
0.38
0.43
0.36
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