Saputo Q2 earnings climb 37%

by Eric Schroeder
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MONTREAL — The 2008 acquisition of Neilson Dairy continued to benefit income at Saputo Inc., as earnings in the second quarter ended Sept. 30 rose 37% to C$94,452,000 ($88,438,000), equal to C$0.46 per share on the common stock, compared with C$69,028,000, or C$0.34 per share, in the second quarter of fiscal 2009.

Sales during the second quarter were C$1,482,693,000 ($1,388,185,000), up narrowly from C$1,453,544,000 in the same period a year ago.

Within Saputo’s CEA Dairy Products division, which includes company interests in Canada, Europe and Argentina, operating income rose 16% to C$99,197,000 ($92,825,000) on a 19% gain in sales to C$963,556,000 ($901,760,000). Saputo said the sales gain primarily reflected revenues from Neilson. Also contributing were higher selling prices in Canada as well as additional volumes in certain categories.

The company’s U.S. dairy group posted operating income of C$45,616,000 ($42,696,000) in the second quarter of fiscal 2010, down sharply from C$19,526,000. U.S. dairy sales also fell, easing 21% to C$477,301,000 ($446,748,000) from C$601,511,000. The decrease primarily was due to a significantly lower average block market per lb of cheese as well as lower sales volumes. These factors combined to reduce sales by about C$166 million during the quarter, according to Saputo. At $1.23 per lb, the average block market price of cheese was 63c per lb lower than the average during the same period a year ago, according to Saputo. Helping prop up revenues by approximately C$18 million during the quarter was the addition of a new facility in Newman, Calif., as well as additional revenues from a more favorable dairy ingredient market.

Operating income in the Grocery Products division, which includes the company’s bakery operations, totaled C$1,846,000 ($1,727,000), down 12% from C$2,088,000 in the same period a year ago. Net sales were C$41,836,000 ($39,160,000), nearly unchanged from C$41,967,000 in the second quarter of fiscal 2009.

Looking ahead, Saputo said its focus for its U.S. dairy business will be on completing the system integration of the Newman facility with a goal of identifying and improving operational efficiencies. In its grocery business, the company is on track to launch a line of products geared toward the frozen bakery category in the third quarter. In addition, Saputo said it is reviewing low volume stock-keeping units in the bakery business, as well as the standardization of packaging and ingredients.

For the six months ended Sept. 30, net earnings totaled C$179,273,000 ($167,802,000), or C$0.87 per share, up 18% from C$151,991,000, or C$0.74 per share, in the first half of fiscal 2009. Net sales were C$2,929,127,000 ($2,742,032,000), up 4% from C$2,815,454,000.

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