Saputo sees higher sales, but lower net in quarter

by Eric Schroeder
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MONTREAL — Saputo Inc., the largest dairy processor in Canada, posted slightly lower profits but higher sales in the second quarter ended Sept. 30, as the company was adversely affected by higher fuel costs and poorer results in its U.S. operations.

Net income in the second quarter was C$55,211,000 ($46,436,000), down narrowly from C$55,868,000 in the same quarter a year ago. Sales in the quarter were C$1,030,785,000 ($866,879,742,000), up 3% from $1,005,109,000.

During the quarter, Saputo announced plans to close two plants — one in Whitehall, Pa., and the other in Harrowsmith, Ont. The two are scheduled to be closed by next June and will result in the loss of about 200 jobs, Saputo said. Costs connected with the Whitehall closing is expected to total $1.6 million, Saputo said.

The company also has been reviewing all of its North American operations in an effort to cut costs as the company deals with various issues, including rising milk prices.

In breaking down second-quarter operations, Saputo said revenues from Canadian and other operations rose C$41.8 million as a result of higher selling prices, rising milk sales volumes and the impact of the acquisition of Fromage Cote.

Revenues from the U.S. dairy products sector fell by C$16.2 million as the rising Canadian dollar and lower cheese prices more than offset a gain in sales volumes. Gross profits were down by about C$9 million because of unfavorable markets.

Revenues from its grocery products division were flat at $43 million.

"The decrease in our Canadian sales volume was offset by higher sales due to co-packing agreements for the manufacturing of products for the U.S. market," Saputo said. "During the quarter, the division experienced a slight decrease in its market share basically due to increased competition in Canada. Nevertheless, we remained active in the back-to-school period with the launch of two new products: brownie bites and a special edition of Crispy Snack."

In another development, the company said it has approved a plan to buy back up to 5,256,369 common shares, or approximately 5% of its 105,127,391 issued and outstanding common shares as of Oct. 28.

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