Weak Canadian dollar helps Saputo earnings
Net earnings totalled $126.4m (CAD$175.2m), an increase of $14.9m (CAD$20.6m) or 13.3%. Adjusted net earnings totaled $126.6m (CAD$175.4m), an increase of $15m (CAD$20.8m) or 13.5%.
Earnings before interest, income taxes, depreciation, amortization (EBITDA), gain on disposal of a business, acquisition, restructuring and other costs amounted to $231.3m (CAD$320.4m), an increase of $30.1m (CAD$41.7m) or 15%.
The statements showed that revenues for the quarter amounted to $2.094bn (CAD$2.901bn), an increase of $57.2m (CAD$79.2m) or 2.8%.
Cheese and butter down
In the US sector, the fluctuation of the average block market per pound of cheese and the average butter market price per pound, compared to the same quarter last fiscal year, decreased revenues by approximately $137.9m (CAD$191m).
Saputo said that the Canada Sector EBITDA increased due to lower ingredients costs, as well as lower warehousing and logistical costs. The company noted that the increase was partially offset by lower dairy ingredients sales prices, higher administrative expenses, as well as decreased EBITDA associated with the disposal of the bakery division in fiscal 2015.
The International Sector EBITDA, it added, was negatively impacted by lower selling prices during the quarter without a similar decline in the cost of milk as raw material.
Saputo said that the fluctuation of the Canadian dollar versus foreign currencies during the quarter had a positive impact on revenues and EBITDA of approximately $188.4m (CAD$261m) and $20.9m (CAD$29m), respectively, as compared to the same quarter last fiscal year.
Woolwich acquisition contributes
The companies forming Woolwich Dairy, which have been consolidated since October 5, 2015, contributed to revenues and EBITDA of both the Canada and US sectors.
In Canada, the company said, competitive market factors and the depressed dairy ingredient market continued to place downward pressure on the results of the Division.
It noted that in the USA Sector, depressed selling prices in the international dairy ingredient market are expected to put downward pressure on margins and the Company will continue to focus on controlling costs and increasing efficiencies in order to mitigate their impact on EBITDA.
The statement also said that international dairy ingredient markets have declined since the last half of fiscal 2015 and these prices are anticipated to remain low throughout the first half of fiscal 2017.
Plans to increase efficiency
Saputo said that it will continue to focus on the implementation of its business model within the Dairy Foods Division (US), including its philosophy of being a low-cost processor. They add that the sector intends to capitalize on investments made to its existing network in an effort to provide new capabilities and enable future growth.
The Woolwich acquisition, it noted, enables the company to increase its presence in the specialty cheese category in North America. During the fourth quarter of fiscal 2016, it added, Woolwich operations will be integrated into Saputo’s operating divisions.
According to the statement, the Dairy Division (Australia) has given the International Sector an additional platform, which contributes to the long-term growth of the sector as a dairy player on a global scale.
The company added that it anticipates that the EDC acquisition (everyday cheese business of Lion-Dairy & Drinks Pty Ltd.) will bring new opportunities , and that they will continue to evaluate overall activities in an effort to improve efficiencies.
The statement added that “International cheese and dairy ingredient markets were depressed through the third quarter of fiscal 2016, and these prices are anticipated to remain low throughout the first half of fiscal 2017, and are expected to continue to put downward pressure on the Sector’s margins.
“As such, we will continue to focus on controlling costs and increasing efficiencies in order to mitigate their impact on EBITDA.”