(Montreal) Ottawa’s pressure on grocers has had echoes at Saputo, but its big boss assures shareholders “that not much has changed” regarding the promotional environment.
“Regarding the government’s recent request on controlling food inflation, we continue to work with our retail partners to bring products with an effective cost structure to the market,” the president responded on Friday and CEO, Lino A. Saputo, during a conference call with financial analysts.
In September, the Trudeau government issued an ultimatum to grocers to find ways to stabilize prices. The federal government has threatened to intervene, notably with tax measures, if the actions taken by grocers do not satisfy it.
For the boss of the Montreal dairy processor, the Canadian market “remains” a competitive market. He reports having observed “a lot of promotional activity in recent months.” “Overall, it’s still competitive, but it’s nothing we haven’t seen. »
The company has also focused on promotions to promote its Armstrong brand in Canada. “We continue to invest to increase our market share. »
Food price volatility is not a phenomenon exclusive to Canada. Saputo’s operations in the United Kingdom suffered from this situation, leading to a 41% decrease in its earnings before interest, taxes, depreciation and amortization (EBITDA).
“Last year in the UK, input prices peaked. […] The types of products we manufacture, we keep them in stock for 12 to 18 months. We therefore sold inventory at high prices at a time when commodity prices reached a low that we have not seen in several years. »
Analyst Michael Van Aelst of TD Securities believes it will take a little longer for the situation to recover. “We believe it could stretch into the current quarter. »
Despite the difficult context, the analyst is optimistic about the company’s stock. “The valuation is a little higher than its 13-year low, capital expenditure is expected to be reduced by the end of the financial year, significant progress has been made on what is controllable and the benefits of the strategic plan have not resurfaced. So we are still optimistic. »
Amid a volatile environment, management said it continues to focus its strategy “on the things we can control,” including investing in some plants to increase efficiency and closing other facilities. “During the next fiscal year, we will have ten fewer factories than we had at the start of this fiscal year,” Mr. Saputo gave as an example.
Saputo reported net profit of 156 million for the second quarter ended September 30, an increase from 145 million in the same period last year. Adjusted earnings per share reached 43 cents. Revenues, for their part, fell 3.1% to 4.3 billion.
Before the results were released, analysts expected adjusted earnings per share of 43 cents and revenue of 4.4 billion, according to financial data firm Refinitiv.
Saputo shares lost $1.78, or 6.13%, to trade at $27.27 on the Toronto Stock Exchange around noon Friday.