Canadian cheese giant Saputo Inc. says it will pursue additional cost-saving measures in its Canadian operations on top of consolidating its Montreal distribution activities as its overall results increased only marginally in the third quarter.
The Montreal-based company didn’t provide details Wednesday but said efforts to pursue additional efficiencies will be maintained by “a continual review of overall activities.”
The consolidation of distribution activities into one site in a Montreal suburb is expected to be completed in about a year.
Saputo said it will continue to invest in specialty cheeses and flavoured milk products in Canada that offer the greatest growth potential.
The company eked out only slightly higher profit and revenue in its latest quarter, coming in slightly below analyst estimates.
The cheese, dairy and bakery company posted profit of $130-million, or 65 cents per share, a penny short of analyst estimates.
Its revenue was $1.8-billion, about $100-million less than the consensus estimate compiled by Thomson Reuters.
The profit was up $200,000, or 1 cent per share, from a year earlier while revenue was up by just $4.1-million from $1.796-billion.
Saputo attributed profits in the Canadian dairy segment to a more favourable mix of products sold.
However, operations which include Argentina, were weighed down by lower sales volumes and selling prices, mainly in South America’s export market.
The combined segment’s profit decreased nearly 2.8 per cent to $128.1-million despite a 1.5 per cent lift in revenue to almost $1.06-billion.
Saputo said it will continue to seek volume growth in Argentina and is in the process of gradually increase manufacturing capacity over three years.
The company’s U.S.segment earned $81.4-million on $708.9-million of sales, compared to $72.7-million on $722.7-million of revenues a year ago.
A 20 cents (U.S.) per pound increase in the average block price for cheese and favourable market factors offset volume decreases. The strengthening of the Canadian dollar pared revenues by about $30-million (Canadian).
Saputo said it is trying to offset the impact of a temporary increase in California’s milk pricing formula announced last month that will increase some types of milk through the end of May and reduce operating profits by $4-million.
The bakery division earned $3-million on $34.1-million of sales, compared to $2.7-million on $31.6-million of revenues in the prior year.
Saputo said it faces challenges in obtaining milk at competitive prices in several countries where it operates.
Martin Landry of GMP Securities described the results as “somewhat lacklustre.”
“For the second quarter in a row, the EBITDA derived from the Canadian operations were down year over year. The Canadian market remains very competitive while consumer spending in Canada continues to be constrained,” he wrote in a report.
Faced with challenging conditions in Canada and the United States, he said investors will likely focus on Saputo’s acquisition of Morningstar and its integration plan.
“We continue to believe that synergies will be limited given that there will be no merger of manufacturing operations.”
The company is Canada’s largest dairy processor and the 12th-biggest in the world and producer of several brands of snack cakes.
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