Saputo Q2 profit slips amid lagging restaurant, food service sales

Saputo Inc.'s net profit slipped 2.3% in the second quarter of its fiscal year, the company reported Thursday, as sales in the food service sector continued to lag behind historical levels amid weak demand from restaurants, cafeterias and hotels.

The Montreal-based dairy processor said while its revenues edged up in the quarter, its net earnings declined to $170.8 million or 42 cents per diluted share compared to $174.9 million or 44 cents per share a year earlier.

Lino Saputo, Jr., Saputo's board chairman and CEO, said the pandemic continues to influence the business.

"Temporary mandated closures in the food service space impacted consumer demand for our products," he said during a call with analysts and investors.

"There's no doubt we're still facing headwinds in the food service segment, which will persist as long as restrictions remain in place."

While Saputo said there were signs of recovery during the quarter with the gradual easing of government-imposed restrictions, he said the company is also "adapting to the new world."

"We've not shied away from taking advantage of the situation," he said. "We're ensuring our innovation and marketing pipeline is well positioned to seize opportunities and drive future growth."

Kai Bockmann, Saputo's president and chief operating officer, said the company's U.S. division was the most impacted by lower sales volumes as a result of shifting consumer demand.

He said the Dairy Foods Division (USA) encountered issues with staffing and declining food service demand.

Yet Bockmann said the company was responding to the changing conditions by retrofitting and adjusting some portions of its network and "shifting elements of our primarily food service product-specific facilities to adapt to retail requirements."

He said the changes would take advantage of available labour and processing capacity and better position the company for another wave of COVID-19.

For the three months ended Sept. 30, adjusted profits dropped 7.2% to $184.1 million, from $198.3 million in the second quarter of 2019.

Revenues were $3.7 billion, up 1% from $3.67 billion amid a continuing shift during the COVID-19 pandemic to retail stores from restaurants.