Saputo Inc.: Financial Results for Fiscal 2014 Third Quarter Ended
December 31, 2013
Net earnings at $144.1 million, up 10.8% for the quarter
Net earnings at $414.2 million, up 8.6% since the beginning of
the fiscal year
MONTREAL, QUEBEC--(Marketwired - Feb 6, 2014) - Saputo Inc.
(TSX:SAP) (Saputo or the Company) reported today its financial
results for the third quarter of fiscal 2014, which ended on
December 31, 2013. All amounts in this news release are in Canadian
dollars, unless otherwise indicated, and are presented according to
International Financial Reporting Standards (IFRS).
- Net earnings totalled $144.1 million, an increase of $14.1
million or 10.8%.
- Earnings before interest, income taxes, depreciation and
amortization (EBITDA) amounted to $260.0 million, an increase of
$47.5 million or 22.4%.
- Revenues for the quarter amounted to $2.343 billion, an
increase of $542.6 million or 30.1%.
- Basic earnings per share (EPS) was $0.74 and diluted EPS was
$0.73 for the quarter, an increase of 12.0%, as compared to basic
EPS of $0.66 and diluted EPS of $0.65 for the corresponding quarter
last fiscal year.
(in millions of Canadian (CDN) dollars, except
per share amounts) |
(unaudited) |
|
For the three-month periods ended |
|
December 31, 2013 |
December 31, 2012 |
September 30, 2013 |
Revenues |
2,343.2 |
1,800.6 |
2,230.3 |
EBITDA |
260.0 |
212.5 |
240.4 |
Net earnings |
144.1 |
130.0 |
133.3 |
|
|
|
|
EPS |
|
|
|
|
Basic |
0.74 |
0.66 |
0.68 |
|
Diluted |
0.73 |
0.65 |
0.67 |
|
|
|
|
- As at April 1, 2013, the Company realigned its reporting
structure consistent with its operating structure and now reports
under three geographic sectors: the Canada Sector, the USA Sector
and the International Sector. The comparative figures have been
reclassified to reflect this new reporting structure.
- The acquisition of Morningstar Foods, LLC (Morningstar
Acquisition) on January 3, 2013, renamed Saputo Dairy Foods USA,
LLC, contributed to revenues and EBITDA in the USA Sector for the
quarter.
- In the USA Sector, the average block market1 per pound of
cheese decreased by US$0.12 compared to the same period last fiscal
year, decreasing revenues. Market factors in the USA Sector
positively impacted EBITDA.
- The Canada Sector EBITDA decreased mainly due to higher
ingredients and operational costs.
- The International Sector EBITDA increased due to higher prices
in the international market.
- During the quarter, the Company announced a takeover bid to buy
all the shares of Warrnambool Cheese & Butter Factory Company
Holdings Limited (Warrnambool), a dairy processor in Australia. As
at February 4, 2014, the Company held a 78.943% interest in
Warrnambool shares.
- The fluctuation of the Canadian dollar versus the US dollar and
the Argentinean peso during the quarter had a positive impact on
revenues and EBITDA, as compared to the same quarter last fiscal
year.
- The Board of Directors approved a dividend of $0.23 per share
payable on March 14, 2014 to common shareholders of record on March
3, 2014.
|
(in millions of CDN dollars, except per share
amounts) |
(unaudited) |
For the nine-month periods ended |
|
December 31, 2013 |
December 31, 2012 |
Revenues |
6,747.0 |
5,244.4 |
EBITDA |
742.5 |
631.1 |
Net earnings |
414.2 |
381.5 |
EPS |
|
|
|
Basic |
2.12 |
1.93 |
|
Diluted |
2.09 |
1.90 |
1
"Average block market" is the average daily price of a 40 pound
block of cheddar traded on the Chicago Mercantile Exchange (CME),
used as the base price for cheese. |
Additional Information
For more information on the third quarter results of fiscal
2014, reference is made to the condensed interim consolidated
financial statements, the notes thereto and to the Management's
Discussion and Analysis for the third quarter of fiscal 2014. These
documents can be obtained on SEDAR at www.sedar.com and in the
"Investors and Media" section of the Company's web site at
www.saputo.com.
Conference Call
A conference call to discuss the third quarter results of fiscal
2014 will be held on Thursday, February 6, 2014 at 2:30 p.m.
Eastern Time. To participate in the conference call, dial
1-800-732-5617. To ensure your participation, please dial in
approximately five minutes before the call.
To listen to this call on the web, please enter
www.gowebcasting/5183 in your web browser.
For those unable to participate, a replay of the conference will
be available until 11:59 PM on February 13, 2014.
To access the replay dial 1-800-558-5253, ID number 21703918. A
webcast will also be archived on www.saputo.com, in the "Investors
and Media" section, under Press Releases.
About Saputo
Saputo produces, markets, and distributes a wide array of dairy
products of the utmost quality, including cheese, fluid milk,
extended shelf-life milk and cream products, cultured products and
dairy ingredients. Saputo is one of the top ten dairy processors in
the world, the largest in Canada, the third largest in Argentina
and among the top three cheese producers in the United States. Our
products are sold in more than 40 countries under well-known brand
names such as Saputo, Alexis de
Portneuf, Armstrong, Baxter,
Dairyland, Dragone, DuVillage 1860,
Friendship, Frigo Cheese Heads, Great
Midwest, King's Choice, Kingsey, La
Paulina, Milk2Go, Neilson,
Nutrilait, Ricrem, Salemville,
Stella and Treasure Cave. Saputo Inc. is
a publicly traded company whose shares are listed on the Toronto
Stock Exchange under the symbol "SAP".
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements within the
meaning of securities laws. These statements are based, among other
things, on Saputo's assumptions, expectations, estimates,
objectives, plans and intentions as of the date hereof regarding
projected revenues and expenses, the economic, industry,
competitive and regulatory environments in which the Company
operates or which could affect its activities, its ability to
attract and retain customers and consumers, as well as the
availability and cost of milk and other raw materials and energy
supplies, its operating costs and the pricing of its finished
products on the various markets in which it carries on
business.
These forward-looking statements include, among others,
statements with respect to the Company's short and medium term
objectives, outlook, business projects and strategies to achieve
those objectives, as well as statements with respect to the
Company's beliefs, plans, objectives and expectations. The words
"may", "should", "will", "would", "believe", "plan", "expect",
"intend", "anticipate", "estimate", "foresee", "objective",
"continue", "propose" or "target", or the negative of these terms
or variations of them, the use of conditional tense or words and
expressions of similar nature, are intended to identify
forward-looking statements.
By their nature, forward-looking statements are subject to a
number of inherent risks and uncertainties. Actual results could
differ materially from the conclusion, forecast or projection
stated in such forward-looking statements. As a result, the Company
cannot guarantee that any forward-looking statements will
materialize. Assumptions, expectations and estimates made in the
preparation of forward-looking statements and risks that could
cause actual results to differ materially from current expectations
are discussed in the Company's materials filed with the Canadian
securities regulatory authorities from time to time, including the
"Risks and Uncertainties" section of the Management's Discussion
and Analysis included in the Company's 2013 Annual Report.
Forward-looking statements are based on Management's current
estimates, expectations and assumptions, which Management believes
are reasonable as of the date hereof, and, accordingly, are subject
to changes after such date. You should not place undue importance
on forward-looking statements and should not rely upon this
information as of any other date.
Except as required under applicable securities legislation,
Saputo does not undertake to update or revise these forward-looking
statements, whether written or verbal, that may be made from time
to time by itself or on its behalf, whether as a result of new
information, future events or otherwise.
OPERATING RESULTS
Consolidated revenues for the quarter ended December 31, 2013
amounted to $2.343 billion, an increase of $542.6 million or 30.1%
in comparison to $1.801 billion for the corresponding quarter last
fiscal year. This increase was mainly due to the inclusion of the
revenues derived from the Morningstar Acquisition. Also, higher
selling prices in relation to the higher cost of milk and higher
sales volumes in both the Canada and International Sectors,
contributed to this increase. Lower cheese sales volumes and the
negative impact of the lower average block market per pound of
cheese in the USA Sector, as compared to the corresponding quarter
last fiscal year, partially offset this increase. The fluctuation
of the Canadian dollar versus the US dollar and Argentinean peso
increased revenues by approximately $21 million.
For the nine-month period ended December 31, 2013, revenues
totalled $6.747 billion, an increase of $1.503 billion or 28.7% in
comparison to $5.244 billion for the corresponding period last
fiscal year. The inclusion of revenues derived from the Morningstar
Acquisition principally contributed to this increase. Increased
sales volumes and higher selling prices in relation to the higher
cost of milk in the Canada and International Sectors also
positively impacted revenues. Also contributing to this increase
was the positive impact of the higher average block market per
pound of cheese in the USA Sector, which was offset by lower cheese
sales volumes in this sector. The fluctuation of the Canadian
dollar increased revenues by approximately $25 million.
Consolidated earnings before interest, income taxes,
depreciation and amortization (EBITDA) for the third quarter of
fiscal 2014 amounted to $260.0 million, an increase of $47.5
million or 22.4% in comparison to $212.5 million for the same
quarter last fiscal year. This increase is mainly explained by
EBITDA derived from the Morningstar Acquisition. Selling price
increases in the International Sector and favourable market factors
in the USA Sector also contributed to the increase in EBITDA,
partially offset by higher ingredients and operational costs in all
sectors. The fluctuation of the Canadian dollar had a favourable
impact on EBITDA, as compared to the same period last fiscal
year.
For the nine-month period ended December 31, 2013, EBITDA
totalled $742.5 million, an increase of $111.4 million or 17.7% in
comparison to $631.1 million for the corresponding period last
fiscal year. This increase is mainly explained by EBITDA derived
from the Morningstar Acquisition. Higher selling prices in the
International Sector, a favourable product mix in the Canada
Sector, as well as favourable market factors in the USA Sector, all
contributed to this increase. In the USA Sector, the decision
rendered by the California Department of Food & Agriculture
(CDFA) to adopt a temporary price increase for the cost of milk in
California, as well as increased ingredients and operational costs
in all sectors, negatively impacted EBITDA, as compared to the
corresponding period last fiscal year. The fluctuation of the
Canadian dollar increased EBITDA, as compared to the same period
last fiscal year.
OTHER CONSOLIDATED RESULTS ITEMS
Depreciation and amortization for the third quarter of fiscal
2014 totalled $37.2 million, an increase of $10.4 million, as
compared to $26.8 million for the corresponding period last fiscal
year. For the nine-month period ended December 31, 2013,
depreciation and amortization expense amounted to $107.2 million,
an increase of $26.1 million, as compared to $81.1 million for the
corresponding period last fiscal year. This increase in
depreciation and amortization for both the three and nine-month
periods is essentially related to the Morningstar Acquisition and
also reflects fluctuations in foreign exchange rates between the
Canadian and the US dollar.
Net interest expense for the three and nine-month periods ended
December 31, 2013 increased by $11.5 and $30.5 million,
respectively, in comparison to the same period last fiscal year.
This increase is mainly attributed to a higher level of debt
resulting from the Morningstar Acquisition.
Income taxes for the third quarter of fiscal 2014 totalled $60.8
million, reflecting an effective tax rate of 29.7% compared to
27.5% for the same quarter last fiscal year. Income taxes for the
nine-month period ended December 31, 2013 totalled $171.4 million,
reflecting an income tax rate of 29.3% in comparison to 28.1% for
the same period last fiscal year. The income tax rate varies and
could increase or decrease based on the amount of taxable income
derived and from which source, any amendments to tax laws and
income tax rates and changes in assumptions and estimates used for
tax assets and liabilities by the Company and its affiliates.
Net earnings totalled $144.1 million for the quarter ended
December 31, 2013, compared to $130.0 million for the same quarter
last fiscal year. For the nine-month period ended December 31,
2013, net earnings totalled $414.2 million, as compared to $381.5
million for the same period last fiscal year. These reflect the
various factors analyzed in this news release.
SELECTED QUARTERLY FINANCIAL INFORMATION
|
|
(in millions of CDN dollars, except per share
amounts) |
|
Fiscal years |
2014 |
2013 |
2012 |
|
|
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
|
Revenues |
2,343.2 |
2,230.3 |
2,173.5 |
2,053.3 |
1,800.6 |
1,745.4 |
1,698.3 |
1,703.5 |
|
EBITDA |
260.0 |
240.4 |
242.1 |
229.7 |
212.5 |
215.6 |
203.0 |
201.0 |
|
Net earnings |
144.1 |
133.3 |
136.7 |
100.5 |
130.0 |
129.7 |
121.8 |
(2.6 |
) |
Adjusted net earnings 1 |
144.1 |
133.3 |
136.7 |
129.2 |
130.0 |
129.7 |
121.8 |
122.4 |
|
EPS |
|
|
|
|
|
|
|
|
|
|
Basic |
0.74 |
0.68 |
0.70 |
0.51 |
0.66 |
0.66 |
0.61 |
0.00 |
|
|
Diluted |
0.73 |
0.67 |
0.69 |
0.51 |
0.65 |
0.65 |
0.60 |
0.00 |
|
Adjusted EPS1 |
|
|
|
|
|
|
|
|
|
|
Basic |
0.74 |
0.68 |
0.70 |
0.65 |
0.66 |
0.66 |
0.61 |
0.62 |
|
|
Diluted |
0.73 |
0.67 |
0.69 |
0.65 |
0.65 |
0.65 |
0.60 |
0.61 |
|
1
Adjusted net earnings and adjusted earnings per share (basic and
diluted) are non-IFRS measures. Refer to the section "Measurement
of Results not in Accordance with International Financial Reporting
Standards" included on page 7 of the Management's Discussion and
Analysis included in the Company's 2013 Annual Report for the
definition of these terms. |
|
|
|
Consolidated selected factors positively
(negatively) affecting EBITDA |
|
(in millions of CDN dollars) |
|
Fiscal years |
2014 |
2013 |
|
|
Q3 |
Q2 |
|
Q1 |
Q4 |
Q3 |
|
Q2 |
Q1 |
|
Market factors12 |
9 |
(17 |
) |
12 |
5 |
8 |
|
10 |
(14 |
) |
Inventory write-down |
- |
- |
|
- |
- |
- |
|
- |
(3 |
) |
US currency exchange1 |
5 |
4 |
|
1 |
- |
(3 |
) |
2 |
3 |
|
1 As
compared to same quarter of previous fiscal year. |
|
2
Market factors include the average block market per pound of cheese
and its effect on the absorption of fixed costs and on the
realization of inventories, the effect of the relationship between
the average block market per pound of cheese and the cost of milk
as raw material, as well as the market pricing impact related to
sales of dairy ingredients. |
|
|
|
INFORMATION BY SECTOR
Canada Sector
|
(in millions of CDN dollars) |
Fiscal years |
2014 |
2013 |
|
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Revenues |
955.6 |
920.5 |
896.0 |
856.0 |
937.9 |
892.2 |
891.9 |
EBITDA |
116.1 |
116.7 |
115.7 |
119.1 |
123.2 |
116.2 |
118.0 |
|
|
|
|
|
|
|
|
The Canada Sector includes the Dairy Division (Canada) and the
Bakery Division.
USA Sector
|
(in millions of CDN dollars) |
Fiscal years |
2014 |
2013 |
|
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Revenues |
1,138.0 |
1,078.6 |
1,053.3 |
971.3 |
663.6 |
632.7 |
581.5 |
EBITDA |
121.1 |
107.9 |
112.6 |
103.1 |
81.0 |
89.1 |
70.8 |
|
|
|
|
|
|
|
|
|
|
Selected factors positively (negatively)
affecting EBITDA |
|
(in millions of CDN dollars) |
|
Fiscal years |
2014 |
2013 |
|
|
Q3 |
Q2 |
|
Q1 |
Q4 |
Q3 |
|
Q2 |
Q1 |
|
Market factors12 |
9 |
(17 |
) |
12 |
5 |
8 |
|
10 |
(14 |
) |
US currency exchange1 |
5 |
4 |
|
1 |
- |
(3 |
) |
2 |
3 |
|
1 As
compared to same quarter of previous fiscal year. |
|
2
Market factors include the average block market per pound of cheese
and its effect on the absorption of fixed costs and on the
realization of inventories, the effect of the relationship between
the average block market per pound of cheese and the cost of milk
as raw material, as well as the market pricing impact related to
sales of dairy ingredients. |
|
|
|
|
Other pertinent information |
(in US dollars, except for average exchange
rate) |
Fiscal years |
|
2014 |
|
2013 |
|
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Average block market per pound of cheese |
1.836 |
1.735 |
1.779 |
1.668 |
1.955 |
1.750 |
1.539 |
Closing block price1 per pound of cheese |
2.000 |
1.765 |
1.638 |
1.693 |
1.760 |
2.075 |
1.650 |
Average whey market price2 per pound |
0.570 |
0.580 |
0.580 |
0.580 |
0.620 |
0.550 |
0.500 |
Spread3 |
0.044 |
0.041 |
0.046 |
0.017 |
0.028 |
0.060 |
0.072 |
US average exchange rate to Canadian dollar4 |
1.042 |
1.039 |
1.023 |
1.009 |
0.991 |
0.995 |
1.010 |
1 Closing block price is the price of a 40 pound block
of cheddar traded on the Chicago Mercantile Exchange (CME) on the
last business day of each quarter. |
2 Average whey powder market price is based on Dairy
Market News published information. |
3 Spread is the average block market per pound of
cheese less the result of the average cost per hundredweight of
Class III and/or Class 4b milk price divided by 10. |
4 Based on Bank of Canada published information. |
|
The USA Sector includes the Cheese Division (USA) and the Dairy
Foods Division (USA).
International Sector
|
(in millions of CDN dollars) |
Fiscal years |
2014 |
2013 |
|
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Revenues |
249.5 |
231.2 |
224.2 |
226.0 |
199.1 |
220.5 |
225.0 |
EBITDA |
22.8 |
15.8 |
13.8 |
7.5 |
8.3 |
10.3 |
14.2 |
|
|
|
|
|
|
|
|
|
|
Selected factors positively (negatively)
affecting EBITDA |
|
(in millions of CDN dollars) |
|
Fiscal years |
2014 |
2013 |
|
|
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
|
Inventory write-down |
- |
- |
- |
- |
- |
- |
(3 |
) |
The International Sector includes the Dairy Division (Argentina)
and the Dairy Ingredients Division. The Dairy Ingredients Division
includes national and export ingredients sales, as well as cheese
exports from the North American divisions. The Dairy Division
(Europe) ceased operations in the first quarter of fiscal 2014, as
announced in late fiscal 2013, and its results are included in the
comparative figures.
OUTLOOK
The Dairy Division (Canada) continues to seek volume growth in
the cheese and fluid milk categories, including the value-added
milk category, which offers high potential for growth. The division
will pursue investments in product categories, such as specialty
cheeses, with the intention to maximize exposure across Canada
through its coast-to-coast distribution capabilities. The property,
plant and equipment investments in certain of the Canadian
facilities, announced in March 2013 as part of the fiscal 2014
plant consolidation initiative, is moving along as planned. These
investments are part of an overall objective to seek continual
plant and warehousing efficiencies. In addition, the Company will
continue to focus on increasing sales volumes in the snack-cake
category in Canada and to develop sales in the US market.
The USA Sector continues to integrate the Dairy Foods Division
(USA), seeking further improvements, synergies and market
opportunities. The Sector will also pursue volume growth and
evaluate opportunities in the specialty cheese category. Improved
efficiencies in both manufacturing and distribution facilities
across the US remain a priority in fiscal 2014. Fluctuations in the
dairy market will continue to be monitored and appropriate measures
to mitigate operational impacts will be implemented. Mitigating
opportunities from the effect of the higher milk costs resulting
from amendments to the milk pricing formula in California will
continue to be sought. On June 21, 2013, the CDFA enacted another
temporary change to the milk pricing formula for California milk.
This temporary measure was in effect from July 1, 2013 to December
31, 2013. However, on October 22, 2013, the CDFA announced a
decision effectively extending this temporary price increase
through to June 30, 2014. For the three months leading to the end
of the fiscal year, this increase in class 4b milk price is
expected to have a negative impact on EBITDA of approximately
US$1.5 million, which approximates the impact it had in the quarter
ended December 31, 2013.
The International Sector will continue to face challenges
relating to the cost of milk as raw material, while remaining
competitive with selling prices in the international market. The
Sector anticipates that the price and demand for dairy products in
the international market will remain at current levels until the
end of fiscal 2014. The expansion project to gradually increase
manufacturing capacity in the Dairy Division (Argentina) is
proceeding as planned. The Sector will also continue to focus on
improving overall efficiencies.
On October 7, 2013, the Company announced a takeover bid to buy
all the shares of Warrnambool. As at January 21, 2014, the Company
had obtained an interest in Warrnambool shares of greater than 50%,
thus obtaining controlling interest of Warrnambool. As at February
4, 2014, the Company had obtained an interest in Warrnambool shares
of 78.943%. The offer is currently scheduled to close on February
12, 2014. Based on the current issued share capital of Warrnambool,
100% of the shares of Warrnambool would be valued at approximately
$520 million. See Notes 5 and 13 to the condensed interim
consolidated financial statements.
On January 17, 2014, the Company announced that it had entered
into an agreement to acquire the fluid milk activities of Scotsburn
Co-Operative Services Limited based in Atlantic Canada. This
transaction will enable the Dairy Division (Canada) to increase its
presence in Atlantic Canada. The transaction is subject to usual
closing conditions (including approval by the Canadian Competition
Bureau) and is expected to close around March 2014.
Our goal remains to continue to improve overall efficiencies and
pursue growth internally and through acquisitions.
Media and Investor RelationsSandy VassiadisDirector, Corporate
Communications514-328-3347
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