Saputo revenues up but two plants to close

By Jim Cornall

- Last updated on GMT

The acquisition of Dairy Crest in the UK has a positive effect on Saputo's financial results.
The acquisition of Dairy Crest in the UK has a positive effect on Saputo's financial results.
Canadian dairy company Saputo Inc. has published its financial results for the third quarter of fiscal 2020, which ended on December 31, 2019.

And while revenues rose by 8.8%, and adjusted EBITDA by 29.8%, Saputo employees in Trenton, Ontario, and Saint John, New Brunswick won’t be celebrating, as the company is to close its plants in both communities, with the loss of around 280 jobs.

The closures are scheduled in September 2020 and January 2021, respectively. Saputo said production at both these sites will be integrated into other Saputo facilities across Canada.

It added that affected employees will be provided with severance and outplacement support, and some will be offered the possibility of transferring to other Saputo locations within the Dairy Division (Canada).

Saputo said the measures are aimed at improving operational efficiency and right-sizing its manufacturing footprint and sales force in Canada.

The company also announced it would be stepping in to the plant-based arena.

Financials

Consolidated revenues for the three-month period ended December 31, 2019, totalled C$3.891bn (US$2.927bn), an increase of C$313.6m (US$235.9m) or 8.8%, on the same period in 2018.

For the nine-month period ended December 31, 2019, revenues totalled C$11.225bn (US$8.44bn), an increase of C$959.4m (US$721.6m) or 9.3%.

Revenues increased due to the contribution of recent acquisitions, including C$534.5m (US$402m) from the acquisition of UK company Dairy Crest.

Consolidated adjusted EBITDA for the three-month period ended December 31, 2019, totalled C$417m (US$313.7m), an increase of C$95.8m (US$72.1m) on the same quarter last fiscal year.

2020 plans

In fiscal 2020, Saputo said it will continue to focus on the execution of the Saputo Promise three-year plan, including ramping up its commitment to responsible environmental practices with a key focus on climate, water and waste.

Saputo said it is committed to diversifying its product portfolio by pursuing more plant-based opportunities. The company aims to capitalize on consumer demand, and to leverage a common customer base, technology, manufacturing expertise, assets and supply chain.

Saputo will look to increase its presence in this category through a series of investments in manufacturing, sales and distribution. To lead its plans, the company has appointed a senior vice-president, business development, plant-based food.

For fiscal 2020, Saputo said it expects its business operations to deliver slightly higher adjusted EBITDA when compared to fiscal 2019.

While benefiting from the contribution of other recent acquisitions, the company said it expects to continue facing competitive market conditions in the US, unsettled economic conditions in Argentina, volatility in international selling prices of cheese and dairy ingredients, and reduced availability of raw milk due to extreme weather in Australia.

The Company expects, through increased efficiencies and pricing initiatives, to mitigate the impact of elevated costs in warehousing, logistics and transportation.

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