Strong USA Dairy results boost Saputo EBITDA

by Eric Schroeder
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MONTREAL — Stronger earnings and sales in the company’s dairy products business offset declines in the grocery products sector, driving an overall earnings gain of 13% at Saputo in the first quarter of fiscal 2012. Net income in the quarter ended June 30 was C$126,566,000 ($131,836,000), equal to C$0.62 per share on the common stock, up from C$111,718,000, or C$0.54 per share, in the same period of fiscal 2011. Net sales were C$1,638,995,000 ($1,706,804,000), up 14% from C$1,436,148,000.

In the company’s USA Dairy Products sector, EBITDA in the first quarter rose to C$80.8 million ($84.2 million), up 24% from C$65 million in the same period of fiscal 2011. Net sales rose 34% to C$636.5 million ($663.1 million), up from C$474.3 million.

“The inclusion of the DCI acquisition and initiatives undertaken in current and prior fiscal years with regards to operational efficiencies offset increased fuel and other operational costs, thereby increasing EBITDA by approximately $11 million in comparison to the same quarter last fiscal year,” Saputo said.

The company noted the block market per lb of cheese increased steadily during the first quarter, ultimately finishing at $1.736 per lb, up from $1.397 per lb in the same period a year ago.

“A 34c higher average block market per lb of cheese compared to the same quarter last fiscal year created a positive effect on the absorption of fixed costs,” Saputo said. “The relationship between the average block market per lb of cheese and the cost of milk as raw material was less favorable in the quarter in comparison to the same period last fiscal year. Finally, a more favorable dairy ingredients market in comparison to the same quarter last fiscal year also increased EBITDA.”

Within the CEA Dairy Products sector, EBITDA in the first quarter was C$125.3 million ($130.4 million), up from C$122.1 million in the same period of fiscal 2011. Net sales increased 5% to C$970.2 million ($1,009.9 million) from C$927 million.

Saputo attributed the EBITDA gain in part to cost reductions and favorable dairy ingredients market conditions in Canada during the quarter.

EBITDA in the Grocery Products sector fell 19% to C$3.4 million ($3.5 million) from C$4.2 million, while sales eased 7% to C$32.3 million ($33.6 million) from $34.8 million.

Saputo said the EBITDA decline reflected higher ingredients cost and lower sales volumes that more than offset manufacturing efficiencies and cost reductions.

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