Saputo Inc. ((TSE:SAP)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Saputo Inc. reflected a mixed sentiment among investors and analysts. While the company reported positive growth in adjusted EBITDA and revenue across various regions, significant challenges in the UK and international sectors led to a substantial impairment charge and a net loss. The withdrawal of long-term financial targets further added to market uncertainty. Nonetheless, strong performances in Canada and the US, along with strategic share repurchase plans, suggest a cautiously optimistic outlook for the future.
Strong Financial Performance and Revenue Growth
Saputo Inc. reported an impressive increase in adjusted EBITDA by 13% year-over-year, reaching $417 million, marking its best quarterly performance since Q3 of fiscal 2023. The company’s revenues surged by 17%, totaling $5 billion, fueled by higher sales volumes and favorable international cheese and dairy ingredient prices.
Successful Capital Projects and Cost Savings
The company’s capital projects in the US resulted in $30 million in savings, with expectations for substantial long-term margin opportunities. Operational improvements and cost-saving measures played a significant role in Saputo’s overall performance.
Record Performance in Canada
In Canada, Saputo achieved a 17% increase in adjusted EBITDA, reaching $175 million. This record performance was driven by operational efficiencies, supply chain optimization, and higher sales volumes.
Resilient US Performance
In the US, Saputo saw its revenue increase by 12% to $2.3 billion, with adjusted EBITDA up by 20% despite facing market challenges. The company benefited from capital investments and productivity improvements.
Positive Impact of Share Repurchase Program
Saputo increased the total number of shares that can be repurchased under its NCIB from 2% to 5% of shares outstanding, indicating strong confidence in its financial health and commitment to enhancing shareholder value.
Significant Impairment Charge in the UK
The UK division faced a non-cash goodwill and intangible asset impairment charge of $684 million due to challenging market conditions, including inflation and high interest rates. This resulted in a net loss of $518 million for the quarter.
Challenges in the International Sector
Saputo’s international sector reported a decline in adjusted EBITDA by $34 million year-over-year, with Argentina particularly affected by higher production costs due to inflation and currency devaluation, along with reduced milk availability.
Withdrawal of Long-term EBITDA Aspiration
In response to unstable market conditions, Saputo withdrew its long-term adjusted EBITDA target, underscoring ongoing volatility and uncertainty in the market.
Forward-looking Guidance
Looking ahead, Saputo remains focused on optimizing its operations and capitalizing on growth opportunities despite withdrawing its long-term adjusted EBITDA aspiration due to unstable market conditions. The company demonstrated strong financial performance in the third quarter of fiscal 2025, achieving an adjusted EBITDA of $417 million and consolidated revenues of $5 billion. Saputo also highlighted its robust cash generation capabilities with $735 million in operating cash flow year-to-date.
In summary, the earnings call for Saputo Inc. presented a mixed sentiment with notable achievements and challenges. While the company experienced substantial growth in adjusted EBITDA and revenues, significant hurdles in the UK and international sectors temper the overall outlook. The cautious optimism stems from strong performances in Canada and the US, alongside strategic initiatives like share repurchases, as Saputo navigates the volatile market landscape.
