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Saputo sales slip amid pandemic headwinds, lower prices for dairy products

Shifts in consumer behaviour continue to impact the company's results, its chief executive says

Global dairy giant Saputo Inc.'s profit tumbled in its latest quarter as its results were stacked against the surge in retail sales recorded at the outset of the pandemic last year, the Montreal-based company said Wednesday.

The cheese and dairy maker said it also contended with lower international market prices for cheese and dairy products during its fourth quarter, and an ongoing slump in demand from restaurants, cafeterias and other foodservice customers.

"The effects of the pandemic, still present to date, lingered on during our fourth quarter with the ongoing shift in consumer demand continuing to impact all of our sectors to varying degrees," Saputo's chief executive and board chairman Lino Saputo Jr. told analysts during a conference call.

"Overall sales volumes were lower when compared to our fourth quarter last year, which at the time coincided with the onset of the pandemic and the related surge in retail demand," he said. "International market prices were also lower versus the prior year, putting downward pressure on results. Food service activities remained below pre-pandemic levels, with the U.S. sector mostly affected."

Saputo, which ranks among the top three cheese producers in the United States, said market factors south of the border negatively impacted the company's earnings in the quarter ended March 31.

One of the issues was the foodservice industry's slow recovery in the U.S., which "did not come back in full strength," said Carl Colizza, president and chief operating officer of North America for Saputo.

"There are a significant amount--if not over 10%--of the restaurant businesses that did not reopen," he said during the call. "That's a fact that we're going have to deal with moving forward."

Saputo's U.S. division also struggled with a labour shortage, Colizza said.

"We did have challenges and continue to have challenges around labour, less so around the impacts of COVID as far as impacted employees, but rather one of availability," he said. "We're no different than many manufacturers right now in the U.S. that are struggling with ... the access and the availability of labour."

Meanwhile, Saputo's two-hour conference call also highlighted its new strategic plan.

The plan, based on five key pillars, is expected to combine organic growth and strategic acquisitions to strengthen and grow the company over the next four years.

Last month, Saputo completed the acquisition of Bute Island Foods, a manufacturer, marketer and distributor of vegan cheese, and announced a deal to buy the Reedsburg, Wis., facility of Wisconsin Specialty Protein, which makes ingredients like goat whey, organic lactose and other dairy powders.

"We still have a strong appetite to materialize acquisitions in those markets where we think they could complement our plans for organic growth," Saputo said, adding that the company's most recent two acquisitions will help the company be more diverse and resilient.

Saputo reported a profit of $103.1 million in the quarter, up from a profit of $88.7 million in the same quarter last year, as its revenue fell 7.5%. The profit amounted to 25 cents per diluted share, up from 22 cents per diluted share a year ago, the company said.

Revenue for what was the company's fourth quarter totalled $3.44 billion, down from $3.72 billion in the same quarter last year. On an adjusted basis, Saputo said it earned 30 cents per diluted share, up from an adjusted profit of 28 cents per diluted share a year ago.

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