(Montreal) Saputo has quadrupled its net profit over the winter, but consumers have shown less appetite for dairy products for “five to six weeks”, warns the boss of the Montreal company. The stock loses 10%.
The Montreal-based company reported results that beat analysts’ expectations in the fourth quarter of its 2023 fiscal year, which ended March 31, but conditions have since deteriorated.
“I would highlight two risks: the first is demand which is weaker than anticipated and I would say the same for prices in the United States and internationally,” comments the President and CEO. , Lino A. Saputo on Friday during a conference call with financial analysts.
In the United States, the average block price has seen a “significant” decline, says Saputo. “It was close to US$1.85 when we started the quarter (April) and it’s now US$1.43. »
The situation is improving, however, in relation to the difficulties in recruiting, according to the chief operating officer for North America, Carl Colizza. In February 2022, the company reported that 10% of its positions were unfilled in the United States. “We have improved recruitment and retention. […] We take advantage of this stability that we see in our operations. »
The other side of the coin is that Saputo’s competitors have done the same. “Our competitors have also invested in their businesses,” says Colizza. We are in an environment where they are performing better than before at a time when demand is weakening. »
Despite the headwinds, management is maintaining its financial guidance, but adjusting its strategy to achieve it by the end of its fiscal year 2025 (ended March 31, 2025). It now believes that more of its growth will come from optimizing its network.
He says the company should reap the rewards of some investments. These efficiencies point to “modest” growth in profitability in the first quarter (ending June 30), despite lower demand, he said.
The greater emphasis on business optimization leads analyst Irene Nattel of RBC Capital Markets to believe that the objectives of the 2025 strategic plan are achievable. “The deterioration of the dairy market makes us cautious, but the decision to adjust the main elements of the plan towards what is controllable is timely and shrewd. »
Mr. Saputo also mentioned that now is not the time for acquisitions as the company focuses on executing its 2025 strategic plan in a difficult business environment. “Our plate is full,” he replied.
Management’s comments overshadow results that beat analysts’ expectations for the fourth quarter ended March 31.
Analysts on average had expected adjusted earnings per share of 42 cents, along with revenue of $4.40 billion, according to forecasts compiled by financial data firm Refinitiv.
Mr. Saputo points out that commodity prices and demand from international markets have been favourable. Improvements in the supply chain have also allowed for increased production, “which has allowed us to further improve our ability to supply our customers, particularly in the United States”.
Saputo shares lost $3.76, or 10.88%, to $31.06 around noon on the Toronto Stock Exchange.