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Press release from Marketwire

Saputo Inc.: Financial Results for Fiscal 2014 First Quarter Ended June 30, 2013

Net earnings at $136.7 million, up 12.2%

Tuesday, August 06, 2013

Saputo Inc.: Financial Results for Fiscal 2014 First Quarter Ended June 30, 2013

09:39 EDT Tuesday, August 06, 2013

MONTREAL, QUEBEC--(Marketwired - Aug. 6, 2013) - Saputo Inc. (TSX:SAP) (Saputo or the Company) reported today its financial results for the first quarter of fiscal 2014, which ended on June 30, 2013. All amounts in this news release are in Canadian dollars, unless otherwise indicated, and are presented according to International Financial Reporting Standards (IFRS).

  • Net earnings totalled $136.7 million, an increase of $14.9 million or 12.2%.
  • Earnings before interest, income taxes, depreciation and amortization (EBITDA) amounted to $242.1 million, an increase of $39.1 million or 19.3%.
  • Revenues for the quarter amounted to $2.174 billion, an increase of $475.2 million or 28.0%.
  • Basic earnings per share (EPS) was $0.70 and diluted EPS was $0.69 for the quarter, an increase of 14.8%, as compared to basic EPS of $0.61 and diluted EPS of $0.60 for the corresponding quarter last fiscal year.
(in millions of Canadian (CDN) dollars, except per share amounts)
(unaudited)
For the three-month periods ended
June 30, 2013 June 30, 2012 March 31, 2013
Revenues 2,173.5 1,698.3 2,053.3
EBITDA 242.1 203.0 229.7
Net earnings 136.7 121.8 100.5
Adjusted net earnings1 136.7 121.8 129.2
EPS
Basic 0.70 0.61 0.51
Diluted 0.69 0.60 0.51
Adjusted EPS1
Basic 0.70 0.61 0.65
Diluted 0.69 0.60 0.65
  • As of April 1, 2013, the Company realigned its reporting structure consistent with its operating structure and now reports under three geographic sectors: the Canada Sector, the USA Sector and the International Sector. The comparative figures have been reclassified to reflect this new reporting structure.
  • The acquisition of Morningstar Foods, LLC (Morningstar Acquisition) on January 3, 2013, renamed Saputo Dairy Foods USA, LLC, contributed to revenues and EBITDA in the USA Sector for the quarter.
  • In the USA Sector, the average block market2 per pound of cheese increased by US$0.24 compared to the same period last fiscal year, increasing revenues. Also in the USA Sector, market factors positively impacted EBITDA.
  • The Canada Sector EBITDA decreased slightly mainly due to a lower contribution from the change in the product mix and higher costs.
  • The International Sector EBITDA remained relatively stable as compared to the same quarter last fiscal year.
  • The fluctuation of the Canadian dollar versus the US dollar and the Argentinean peso during the quarter had a negative impact on revenues as compared to the same quarter last fiscal year.
  • The Board of Directors reviewed the dividend policy and increased the quarterly dividend from $0.21 to $0.23 per share, representing a 9.5% increase. The quarterly dividend will be payable on September 16, 2013 to common shareholders of record on September 5, 2013.
  • A portion of the dividend payable on September 16, 2013, estimated to be $0.0086 per common share, will not qualify for the enhanced dividend tax credit in Canada and accordingly, will not be designated as an eligible dividend. The remaining portion of the dividend, currently estimated to be $0.2214 per common share, will be designated as an eligible dividend for Canadian federal and provincial income tax purposes. The whole dividend of $0.23 per common share will remain a "qualified dividend" for United States tax purposes.
(1) Adjusted net earnings and adjusted earnings per share (basic and diluted) are non-IFRS measures. Refer to the section "Measurement of Results not in Accordance with International Financial Reporting Standards" included on page 7 of the Management's Discussion and Analysis included in the Company's 2013 Annual Report for the definition of these terms.
(2) "Average block market" is the average daily price of a 40 pound block of cheddar traded on the Chicago Mercantile Exchange (CME), used as the base price for cheese.

Additional Information

For more information on the first quarter results of fiscal 2014, reference is made to the condensed interim consolidated financial statements, the notes thereto and to the Management's Discussion and Analysis for the first quarter of fiscal 2014. These documents can be obtained on SEDAR at www.sedar.com and in the "Investors and Media" section of the Company's website, at www.saputo.com.

Conference Call

A conference call to discuss the fiscal 2014 first quarter results will be held on Tuesday, August 6, 2013 at 1:00 p.m. Eastern Time. To participate in the conference call, dial 1-800-406-9725. To ensure your participation, please dial in approximately five minutes before the call.

To listen to this call on the Web, please enter www.gowebcasting.com/4476 in your Web browser.

For those unable to participate, a replay of the conference will be available until 11:59 p.m., Tuesday, August 13, 2013. To access the replay, dial 1-800-558-5253, ID number 21668057. A webcast will also be archived on www.saputo.com, in the "Investors and Media" section, under Press Releases.

About Saputo

Saputo 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 one of the top ten dairy processors in the world, the largest in Canada, the third largest in Argentina and among the top three cheese producers in the United States. Our products are sold in more than 40 countries under well-known brand names such as Saputo, Alexis de Portneuf, Armstrong, Baxter, Dairyland, Dragone, DuVillage 1860, Friendship, Frigo Cheese Heads, Great Midwest, King's Choice, Kingsey, La Paulina, Milk2Go, Neilson, Nutrilait, Ricrem, Salemville, Stella and Treasure Cave. Saputo Inc. is a publicly traded company whose shares are listed on the Toronto Stock Exchange under the symbol "SAP".

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements within the meaning of securities laws. These statements are based, among other things, on Saputo's assumptions, expectations, estimates, objectives, plans and intentions as of the date hereof regarding projected revenues and expenses, the economic, industry, competitive and regulatory environments in which the Company operates or which could affect its activities, its ability to attract and retain customers and consumers, as well as the availability and cost of milk and other raw materials and energy supplies, its operating costs and the pricing of its finished products on the various markets in which it carries on business.

These forward-looking statements include, among others, statements with respect to the Company's short and medium term objectives, outlook, business projects and strategies to achieve those objectives, as well as statements with respect to the Company's beliefs, plans, objectives and expectations. The words "may", "should", "will", "would", "believe", "plan", "expect", "intend", "anticipate", "estimate", "foresee", "objective", "continue", "propose" or "target", or the negative of these terms or variations of them, the use of conditional tense or words and expressions of similar nature, are intended to identify forward-looking statements.

By their nature, forward-looking statements are subject to a number of inherent risks and uncertainties. Actual results could differ materially from the conclusion, forecast or projection stated in such forward-looking statements. As a result, the Company cannot guarantee that any forward-looking statements will materialize. Assumptions, expectations and estimates made in the preparation of forward-looking statements and risks that could cause actual results to differ materially from current expectations are discussed in the Company's 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 included in the Company's 2013 Annual Report.

Forward-looking statements are based on Management's current estimates, expectations and assumptions, which Management believes are reasonable as of the date hereof, and, accordingly, are subject to changes after such date. You should not place undue importance on forward-looking statements and should not rely upon this information as of any other date.

Except as required under applicable securities legislation, Saputo does not undertake to update or revise these forward-looking statements, whether written or verbal, that may be made from time to time by itself or on its behalf, whether as a result of new information, future events or otherwise.

OPERATING RESULTS

Consolidated revenues for the quarter ended June 30, 2013 amounted to $2.174 billion, an increase of $475.2 million or 28.0% in comparison to $1.698 billion for the corresponding quarter last fiscal year. This increase was mainly due to the inclusion of the revenues derived from the Morningstar Acquisition. Also, a higher average block market per pound of cheese in the USA Sector, as well as higher selling prices in relation to the higher cost of milk in the Canada and International Sectors contributed to this increase. Lower cheese sales volumes in the USA Sector, as compared to the corresponding quarter last fiscal year, partially offset this increase. The fluctuation of the Canadian dollar versus the US dollar and Argentinean peso decreased revenues by approximately $6 million.

Consolidated earnings before interest, income taxes, depreciation and amortization (EBITDA) for the first quarter of fiscal 2014 amounted to $242.1 million, an increase of $39.1 million or 19.3% in comparison to $203.0 million for the same quarter last fiscal year. This increase is mainly explained by EBITDA derived from the Morningstar Acquisition. Also, favourable market factors, which were partially offset by lower cheese sales volumes, in the USA Sector contributed to the EBITDA increase. The fluctuation of the Canadian dollar had an insignificant impact on EBITDA, as compared to the same period last fiscal year.

OTHER CONSOLIDATED RESULTS ITEMS

Depreciation and amortization for the first quarter of fiscal 2014 totalled $34.3 million compared to $27.2 million for the comparative quarter of fiscal 2013, an increase of $7.1 million, essentially related to the Morningstar Acquisition.

Net interest expense for the three-month period ended June 30, 2013 increased by $8.9 million in comparison to the same period last fiscal year. This increase is mainly attributed to a higher level of debt resulting from the Morningstar Acquisition.

Income taxes for the first quarter of fiscal 2014 totalled $55.8 million, reflecting an effective tax rate of 29.0% compared to 28.1% for the same quarter last fiscal year. The income tax rate varies and could increase or decrease based on the amount of taxable income derived and from which source, any amendments to tax laws and income tax rates and changes in assumptions and estimates used for tax assets and liabilities by the Company and its affiliates.

Net earnings totalled $136.7 million for the quarter ended June 30, 2013, compared to $121.8 million for the same quarter last fiscal year. These reflect the various factors analyzed in this news release.

SELECTED QUARTERLY FINANCIAL INFORMATION
(in millions of CDN dollars, except per share amounts)
Fiscal years 2014 2013 2012
Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2
Revenues 2,173.5 2,053.3 1,800.6 1,745.4 1,698.3 1,703.5 1,796.5 1,791.4
EBITDA 242.1 229.7 212.5 215.6 203.0 201.0 207.3 213.1
Net earnings 136.7 100.5 130.0 129.7 121.8 (2.6 ) 129.8 127.1
Adjusted net
earnings
(1)
136.7 129.2 130.0 129.7 121.8 122.4 129.8 127.1
EPS
Basic 0.70 0.51 0.66 0.66 0.61 0.00 0.64 0.63
Diluted 0.69 0.51 0.65 0.65 0.60 0.00 0.64 0.61
Adjusted EPS(1)
Basic 0.70 0.65 0.66 0.66 0.61 0.62 0.64 0.63
Diluted 0.69 0.65 0.65 0.65 0.60 0.61 0.64 0.61
(1) Adjusted net earnings and adjusted earnings per share (basic and diluted) are non-IFRS measures. Refer to the section "Measurement of Results not in Accordance with International Financial Reporting Standards" included on page 7 of the Management's Discussion and Analysis included in the Company's 2013 Annual Report for the definition of these terms.
Consolidated selected factors positively (negatively) affecting EBITDA
(in millions of CDN dollars)
Fiscal years 2014 2013
Q1 Q4 Q3 Q2 Q1
Market factors (1)(2) 12 5 8 10 (14 )
Inventory write-down - - - - (3 )
US currency exchange(1) 1 - (3 ) 2 3
(1) As compared to same quarter of previous fiscal year.
(2) Market factors include the average block market per pound of cheese and its effect on the absorption of fixed costs and on the realization of inventories, the effect of the relationship between the average block market per pound of cheese and the cost of milk as raw material, as well as the market pricing impact related to sales of dairy ingredients.

INFORMATION BY SECTOR

Canada Sector
(in millions of CDN dollars)
Fiscal years 2014 2013
Q1 Q4 Q3 Q2 Q1
Revenues 896.0 856.0 937.9 892.2 891.9
EBITDA 115.7 119.1 123.4 116.5 118.0

The Canada Sector includes the Dairy Division (Canada) and the Bakery Division.

USA Sector
(in millions of CDN dollars)
Fiscal years 2014 2013
Q1 Q4 Q3 Q2 Q1
Revenues 1,053.3 971.3 663.5 632.7 581.5
EBITDA 112.6 103.1 80.8 88.8 70.8
Selected factors positively (negatively) affecting EBITDA
(in millions of CDN dollars)
Fiscal years 2014 2013
Q1 Q4 Q3 Q2 Q1
Market factors(1)(2) 12 5 8 10 (14 )
US currency exchange(1) 1 - (3 ) 2 3
(1) As compared to same quarter of previous fiscal year.
(2) Market factors include the average block market per pound of cheese and its effect on the absorption of fixed costs and on the realization of inventories, the effect of the relationship between the average block market per pound of cheese and the cost of milk as raw material, as well as the market pricing impact related to sales of dairy ingredients.
Other pertinent information
(in US dollars, except for average exchange rate)
Fiscal years 2014 2013
Q1 Q4 Q3 Q2 Q1
Average block market per pound of cheese 1.779 1.668 1.955 1.750 1.539
Closing block price(1) per pound of cheese 1.638 1.693 1.760 2.075 1.650
Average whey market price(2) per pound 0.580 0.580 0.620 0.550 0.500
Spread(3) 0.046 0.017 0.028 0.060 0.072
US average exchange rate to Canadian dollar(4) 1.023 1.009 0.991 0.995 1.010
(1) Closing block price is the price of a 40 pound block of cheddar traded on the Chicago Mercantile Exchange (CME) on the last business day of each quarter.
(2) Average whey powder market price is based on Dairy Market News published information.
(3) Spread is the average block market per pound of cheese less the result of the average cost per hundredweight of Class III and/or Class 4b milk price divided by 10.
(4) Based on Bank of Canada published information.

The USA Sector includes the Cheese Division (USA) and the Dairy Foods Division (USA).

International Sector
(in millions of CDN dollars)
Fiscal years 2014 2013
Q1 Q4 Q3 Q2 Q1
Revenues 224.2 226.0 199.3 220.5 225.0
EBITDA 13.8 7.5 8.3 10.4 14.2
Selected factors positively (negatively) affecting EBITDA
(in millions of CDN dollars)
Fiscal years 2014 2013
Q1 Q4 Q3 Q2 Q1
Inventory write-down - - - - (3 )

The International Sector includes the Dairy Division (Argentina) and the Dairy Ingredients Division. The Dairy Ingredients Division includes national and export ingredients sales, as well as cheese exports from the North American divisions. The Dairy Division (Europe) ceased operations in the first quarter of fiscal 2014, as announced in late fiscal 2013 and its results are included in the comparative figures.

OUTLOOK

The Company anticipates that the dairy market for the remainder of fiscal 2014 will continue to be challenging. The Dairy Division (Canada) will target volume growth in the cheese and fluid milk categories. The Division continues to focus efforts on opportunities presented in the value-added milk category, which offers growth potential. We will pursue investments in product categories, such as specialty cheeses, with the intention to maximize exposure across Canada, with coast-to-coast distribution capabilities. The initiative to consolidate the distribution activities of the Greater Montreal area into one distribution center, which was announced in fiscal 2013, is proceeding as planned and should be completed by the end of fiscal 2014. The property, plant and equipment investments in certain of our Canadian facilities, announced in March 2013 as part of the fiscal 2014 plant consolidation initiative, is progressing as planned. In addition, we will continue to focus on increasing sales volumes in the snack-cake category, mainly through the development of sales in the US market.

The USA Sector will benefit from the national manufacturing and distribution footprint of the Dairy Foods Division (USA) and will work towards expanding its product offering and its customer base. We will continue to evaluate these operations to seek further improvements, synergies and market opportunities. The Sector will continue to pursue volume growth and evaluate opportunities in the specialty cheese category. Improved efficiencies in both manufacturing and distribution facilities across the US remain a priority in fiscal 2014. Fluctuations in dairy market will continue to be monitored and appropriate measures to mitigate operational impacts will be implemented.

The International Sector will continue to face challenges relating to the increasing cost of milk as raw material, while remaining competitive with selling prices in the international market. The Sector anticipates that the price and demand for dairy products in the international market will continue to increase. The expansion project to gradually increase manufacturing capacity in the Dairy Division (Argentina) is proceeding as planned. The Sector will also continue to focus on improving overall efficiencies.

Our goal remains to continue to improve overall efficiencies and pursue growth internally and through acquisitions.

FOR FURTHER INFORMATION PLEASE CONTACT:

Contact Information:
Media and Investor Relations
Sandy Vassiadis
Director, Corporate Communications
514-328-3347

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