Saputo postpones reaching a financial target of its strategic plan while the dairy products industry is too volatile.
The Montreal company reiterates that it aims to generate earnings before interest, taxes, depreciation and amortization (EBITDA) of 2.1 billion, but it no longer commits to do so in fiscal year 2025, ending at the end of March 2025.
“The target of 2.1 billion is still the same,” said President and CEO Lino A. Saputo on Friday during a conference call with financial analysts. We are confident in our plan and in our ability to effectively carry out the projects we have set ourselves. That’s not the issue. »
Mr. Saputo assures that “the most difficult stages” on the operational level are being completed. These initiatives would provide the necessary conditions to generate the desired profitability. “It’s the market’s unpredictability in terms of price and consumer confidence that’s causing us to extend the deadline. »
RBC Capital Markets analyst Irene Nattel isn’t surprised by the news. “The market was already in that mindset. The consensus for FY2025 was 1.89 billion. »
The dairy industry is highly volatile internationally, which makes it difficult for management to make forecasts, according to Saputo. “Six weeks ago, the block price (of cheddar cheese) in the United States was at US$1.30 (per pound on the Commodity Exchange in Chicago), he points out. Today it’s US$1.96. These are very abrupt variations, the kind that we have never observed in the past. »
He also deplored the increase in food speculation activities, influenced by economic news, climatic events and the effect of rising interest rates. “People have access to so much information and it’s creating behaviors that we haven’t seen in the past. […] The commodity market has become as volatile as the stock markets. »
Mr. Saputo mentioned that the Canadian market was particularly resilient while demand remains stable in the United States, but American exports are being held back by weak international demand, particularly in China.
The effect of adverse market conditions on profitability was less than anticipated by analysts in the first quarter of fiscal 2024 ended June 30.
Saputo’s revenue fell 2.8% to $4.2 billion. Net profit totaled 141 million, up from 139 million recorded last year. Adjusted diluted earnings per share were 36 cents.
Prior to the earnings release, analysts had expected earnings per share of 34 cents and revenue of $4.4 billion, according to financial data firm Refinitiv.
Without completely ruling it out, Mr. Saputo reiterated that management has no appetite for acquisitions. “There are businesses that are suffering from the current conditions and our teams are aware of this, but I want to reiterate that our priority is to focus on our strategic plan. The funds must be used to finance its projects and to repay our debt. At this point, it’s not our priority. »
The stock gained 31 cents, or 1.10%, to $28.44 on the Toronto Stock Exchange in the afternoon.
