Saputo spending continues despite Q2 earnings drop

By Jim Cornall contact

- Last updated on GMT

Saputo continued its acquisitions with the takeover of Wisconsin-based goat cheese company Montchevre.
Saputo continued its acquisitions with the takeover of Wisconsin-based goat cheese company Montchevre.

Related tags: Milk, Generally accepted accounting principles, Butter

In spite of a Q2 net earnings fall of 3.4%, Canadian dairy company Saputo Inc. is continuing its acquisition spree.

After its recent announcement that it was adding to its Australian portfolio with the $1bn takeover of Murray Goulburn, the company has now announced it has entered into an agreement to acquire Betin, Inc., doing business as Montchevre.

Betin has one manufacturing facility in Belmont, Wisconsin, and employs approximately 319 people.

Montchevre products

Montchevre manufactures, markets and distributes goat cheese in the US, mainly under the Montchevre brand. For the 12-month period ended on June 30, 2017, Montchevre generated revenues of approximately $117m.

The transaction, subject to customary conditions and regulatory approval, will enable the Cheese Division (USA) of Saputo to broaden its presence in specialty cheese in the US.

The acquisition is the third in three months: in September the company completed the acquisition of the extended shelf-life dairy product activities of Southeast Milk, Inc.  And in its 2018 fiscal outlook, Saputo signaled acquisitions will likely continue.

Second quarter results

In its second quarter earnings report, Saputo said its EBITDA was C$329.5m (US$256.8m), a decrease of C$11.1m (US$8.6m), or 3.3%.

Revenues rose 1.4% to C$2.88bn (US$2.25bn).

Sector results

In the Canada sector, Saputo said revenues were negatively impacted by lower sales volumes and an unfavourable product mix.

In the USA sector, a higher average butter market price per pound was partially offset by a lower average block market per pound of cheese, as compared to the same quarter last fiscal year, which increased revenues.

Higher sales volumes, as well as higher international selling prices of cheese and dairy ingredients also positively impacted revenues during the quarter.

In the International Sector, revenues and EBITDA increased due to higher international selling prices of cheese and dairy ingredients, as well as higher sales volumes in both the domestic and export markets.

The fluctuation of the Canadian dollar versus foreign currencies during the quarter had a negative impact on revenues of approximately C$78m (US$60.8m), as compared to the same quarter last fiscal year.

Looking ahead – more acquisitions likely

In fiscal 2018, Saputo said it intends to benefit from its global complementary platforms to face challenges in the dairy market environment.

It said it benefits from a strong balance sheet and capital structure, supplemented by a high level of cash generated by operations, and low debt levels.

This financial flexibility allows the company to grow through targeted acquisitions and organically through strategic capital investments.

Related topics: Manufacturers, Cheese

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