(Updates with CEO comments, analyst's comments)
By Rod Nickel
June 1 Saputo Inc, one of Canada's
largest dairy producers, reported lower-than-expected quarterly
profit, driving its shares to a nearly nine-month low on
The earnings miss was due largely to a drop in the volume of
cheese sales in the United States, and follows a weak quarter
for many U.S. food companies, said Brittany Weissman, analyst at
Edward Jones. A delay in U.S. tax refunds is one reason for the
food industry weakness, she said.
Saputo's shares shed as much as 9.5 percent, before
moderating to a loss of 3.8 percent at C$43.37 in Toronto.
Chief Executive Officer Lino Saputo Jr said several factors
hurt the U.S. business, including declining cheese prices that
caused customers to hold off on orders. Conditions have improved
in the current quarter, he said.
On an adjusted basis, Montreal-based Saputo earned C$165
million, or 42 cents per share, in its fourth quarter, missing
expectations for 48 cents, according to Thomson Reuters I/B/E/S.
Revenue in the quarter, which ended March 31, eased 0.5
percent to C$2.7 billion, and missed expectations for C$2.9
The company, whose brands include Dairyland milk and
Armstrong cheese, has made major acquisitions in the United
States and Australia in recent years, and is currently involved
in talks on four to five potential deals, Saputo Jr said on a
"We’re ready, we’re eager, we’re active and we’re hungry,"
In an interview, Saputo Jr said the potential acquisitions
are in the United States, Australia and Argentina, with annual
revenues ranging from C$100 million to C$1 billion.
Saputo's Canadian operations are subject to the country's
supply management system, which restricts dairy production to
match domestic consumption and imposes high tariffs on imports.
The system drew criticism from U.S. President Donald Trump
in April, who said he would "stand up for our dairy farmers"
against Canada's "unfair" practices.
Upcoming trade negotiations are the "elephant in the room,"
but Canadian politicians seem determined to preserve supply
management, Saputo Jr said. With its international platforms,
the company is already well positioned for any change, and would
have greater flexibility in sourcing milk under a less
controlled system, he said.
Including one-time items, net income rose 17 percent to
C$165 million, or 42 Canadian cents a share, from C$141 million,
or 36 Canadian cents, a year earlier, after the company incurred
costs associated with plant closures in the same period a year
(Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by
Bernadette Baum and Lisa Shumaker)