Saputo Inc. (TSX: SAP) (we, Saputo or the Company) reported today
its financial results for the first quarter of fiscal 2024, which
ended on June 30, 2023. All amounts in this news release are in
millions of Canadian dollars (CDN), except per share amounts,
unless otherwise indicated, and are presented according to
International Financial Reporting Standards (IFRS).
“Our business delivered solid results in the
first quarter in the face of significant commodity market headwinds
and lower consumer demand. We had another quarter of adjusted
EBITDA and margin growth with a strong performance in our Canada
Sector, significant operational improvements in our Australia
division, and more operational stability in the USA Sector. Despite
unprecedented market conditions, the underlying health of the
business is strong and some of the current headwinds are expected
to be transitional,” said Lino A. Saputo, Chair of the Board,
President and CEO.
Mr. Saputo added, “We are at an important
inflection point in our business, although it is not yet reflected
in our results. We continue to make progress against our Global
Strategic Plan initiatives, and we are moving forward with several
of our capital investment projects, which are expected to deliver
meaningful returns once fully operational.”
Fiscal 2024 First Quarter Financial
Highlights
- Revenues amounted to $4.207
billion, down $120 million or 2.8%.
- Net earnings totalled $141 million,
up from $139 million. Net earnings per share (EPS) (basic and
diluted) were stable at $0.33.
- Adjusted EBITDA1 amounted to $362
million, up $15 million or 4.3%.
- Adjusted net earnings1 totalled
$154 million, up from $143 million, and adjusted EPS1
(basic and diluted) were $0.37 and $0.36, up from $0.34 and
$0.34.
(unaudited) |
For the three-month periods ended
June 30 |
|
2023 |
2022 |
Revenues |
4,207 |
4,327 |
Adjusted EBITDA1 |
362 |
347 |
Net earnings |
141 |
139 |
Adjusted net earnings1 |
154 |
143 |
EPS |
|
|
Basic |
0.33 |
0.33 |
Diluted |
0.33 |
0.33 |
Adjusted EPS1 |
|
|
Basic |
0.37 |
0.34 |
Diluted |
0.36 |
0.34 |
- Our first quarter performance
reflected:
- The positive carryover effect of
previously implemented pricing initiatives in all our sectors,
- Lower average block market price2
and average butter market price2 in the USA Sector, and
- Softening of the global demand for
dairy products negatively impacting our sales volumes.
- Increased adjusted EBITDA1
reflected a solid performance in the Canada Sector and modest
increases in the USA Sector and the Europe Sector. Results in the
International Sector were slightly lower.
- USA Sector adjusted EBITDA
increased by $6 million, despite a $24 million unfavourable impact
from lower commodity prices.
- Continued execution towards our
long-term strategic priorities through investments in our major
capital projects.
- The Board of Directors reviewed the
dividend policy and increased the quarterly dividend from $0.18 per
share to $0.185 per share, representing a 2.8% increase. The
quarterly dividend will be payable on September 15, 2023, to
shareholders of record on September 5, 2023.
1 This is a total of segments measure, a non-GAAP financial
measure, or a non-GAAP ratio. These measures and ratios do not have
a standardized meaning under IFRS. Therefore, they are unlikely to
be comparable to similar measures presented by other issuers. See
the “Non-GAAP Measures” section of this news release for more
information, including the definition and composition of the
measure or ratio as well as the reconciliation to the most
comparable measure in the primary financial statements, as
applicable. Adjusted net earnings and adjusted EPS for comparative
periods were aligned to meet the current presentation.2 Refer to
the "Glossary" section of the Management's Discussion and
Analysis.
FY24 OUTLOOK
- We expect to benefit from the
carryover impact of price increases, additional capacity and
capabilities, cost containment and efficiency initiatives, new
product innovations, and investments in our brands and
advertising.
- We expect inflation on our overall
input costs to moderate, but to remain at elevated levels. We will
continue to manage the current inflationary environment through our
pricing protocols and cost containment measures.
- A more stabilized workforce, fewer
supply chain constraints, and the acceleration of our productivity
and operational improvement projects are expected to further
enhance our ability to service customers, particularly in the USA
Sector.
- Global demand for dairy products is
expected to remain moderate due to macroeconomic conditions and the
impact of pricing elasticity.
- The outlook for USA Market Factors2
remains mixed. Management believes that the long-term environment
is likely to be relatively supportive for commodity prices but with
continued volatility in the short to medium-term.
- The International Sector is
expected to be negatively impacted by lower cheese and dairy
ingredient prices.
- Capital expenditures are expected
to remain at similar levels versus last fiscal year, driven by
Global Strategic Plan optimization and capacity expansion
initiatives, as well as continued investments in automation.
- We expect strong operating cash
flow to continue to support a balanced capital allocation strategy
and provide the financial flexibility to consider value enhancing
opportunities, with priority given to: (i) organic growth
initiatives through capital expenditures, (ii) shareholder
dividends, and (iii) debt repayments.
2 Refer to the "Glossary" section of the Management's Discussion
and Analysis.
GLOBAL STRATEGIC PLAN
HIGHLIGHTS
With numerous initiatives underway aimed at
enhancing our commercial capabilities, improving our cost
structure, and optimizing our network, we remain confident in our
Global Strategic Plan designed to deliver $2.125 billion in
adjusted EBITDA1 annually. We continue to invest at pace across our
asset base to support future growth and further operating
efficiencies.
The timeline to achieve our target relied on
several baseline assumptions including US and global dairy
commodity prices and global demand for dairy products, which have
been subject to recent, unprecedented volatility. Given these
recent, persistent, highly volatile market conditions, we no longer
expect to achieve our adjusted EBITDA1 target by FY25. However,
based on our experience, we do anticipate for dairy markets to
stabilize over time. While it would be premature to predict when
market conditions will stabilize, we are focused on ensuring we
effectively navigate through the current volatility, as the
expected benefits from the initiatives that are under our control
represent meaningful improvement opportunities. With greater cost
efficiency and an ability to capture additional growth
opportunities, we strongly believe that our Global Strategic Plan
will enable us to execute on our strategic ambitions and ensure our
Company's long-term success. Our strategy, and our confidence in
it, remains unchanged.
Capital Projects Update
In the Canada Sector, we reached several
milestones with the continued roll-out of our automation projects
and digital capabilities. This included the completion of several
cheese slicing, shredding, and packing automation projects at our
Saint-Léonard, Québec, Tavistock, Ontario, and Calgary, Alberta,
plants, to take advantage of new business opportunities and to
continue to grow with some of our national retail customers.
In the USA Sector, ongoing investments to add
new capacity and capabilities, accelerating efforts to modernize
operations, repurposing capacity and other expansion, and
efficiency projects are well underway. Investments in our
mozzarella manufacturing facilities will improve operational
efficiencies and support our foodservice growth plan, while our
string cheese expansion plan will support growth and sustain our
leading market position in the category. Planned capital
investments in goat cheese will increase capacity and expand our
position in the growing specialty cheese categories, while our new
$240 million state-of-the-art cut-and-wrap facility in Franklin,
Wisconsin, will support our retail market growth ambitions.
In the International Sector, previously
announced network consolidation activities in Australia, including
the closure of the Maffra site and the streamlining of the Mil-Lel
and the Leongatha facilities, were completed in the fourth quarter
of FY23, and benefits began to be realized in the first quarter of
FY24. The construction and equipment installation for our new
frozen natural cream cheese capabilities is on track and is in the
final stages of commissioning, with the lines due to be up and
running by the second quarter of FY24. In Argentina, we are
installing a new biodigester. The project will be executed over
three phases and will benefit our environmental footprint, will
treat our organic waste streams to generate biogas, and drive cost
savings, notably around energy and gas.
In the Europe Sector, the previously announced
network consolidation initiatives aimed at improving operational
efficiencies are progressing well. The development of the new
Nuneaton packing facilities are nearing completion, with
commissioning of the first new packing lines underway.
1 This is a total of segments measure, a
non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP
Measures” section of this news release for more information,
including the definition and composition of the measure or ratio as
well as the reconciliation to the most comparable measure in the
primary financial statements, as applicable.
THE SAPUTO PROMISE
On August 10, 2023, we issued our 2023 Saputo
Promise Report as part of our commitment to be accountable to our
stakeholders and transparent about our progress in managing key
Environmental, Social, and Governance (ESG) aspects impacting our
business.
Anchored in the most pressing ESG issues for our
business, our current three-year plan (FY23-FY25) builds on the
momentum of the past few years and continues to drive, enable, and
sustain our growth. The report includes in-depth information on the
progress we have made throughout FY23 towards our three-year plan
and highlights our performance across the seven Pillars of our
Saputo Promise: Food Quality & Safety, Our People, Business
Ethics, Responsible Sourcing, Environment, Nutrition, and
Community.
Included in this report is information such
as:
- The sustainability standards we want to achieve in partnership
with our suppliers and farmers;
- Our efforts in advancing gender balance in the workplace;
- Our progress towards our 2025 Environmental Pledges;
- The improvements we have made in our ESG disclosure; and
- The impact we have had on the communities we serve and operate
in.
The 2023 Saputo Promise Report can be obtained
in the “Our Promise” section of the Company’s website, at
www.saputo.com.
Additional Information
For more information, reference is made to the
condensed interim consolidated financial statements, the notes
thereto and to the Management’s Discussion and Analysis for the
first quarter of fiscal 2024. These documents can be obtained on
SEDAR+ under the Company’s profile at www.sedarplus.ca and in the
“Investors” section of the Company’s website, at
www.saputo.com.
Webcast and Conference Call
A webcast and conference call will be held on
Friday, August 11, 2023, at 8:30 a.m. (Eastern Time)
The webcast will begin with a short presentation
followed by a question and answer period. The speakers will be
Lino A. Saputo, Chair of the Board, President and Chief
Executive Officer, and Maxime Therrien, Chief Financial Officer and
Secretary.
To participate:
- Webcast :
https://www.gowebcasting.com/12633Presentation slides will be
included in the webcast and can also be accessed in the “Investors”
section of Saputo's website (www.saputo.com), under “Calendar of
Events”.
- Conference line
(audio only): 1-800-379-4140Please dial-in five minutes prior to
the start time.
Replay of the conference call and
webcast presentationFor those unable to join, the webcast
presentation will be archived on Saputo’s website (www.saputo.com)
in the “Investors” section, under “Calendar of Events”. A replay of
the conference call will also be available until Friday, August 18,
2023, 11:59 p.m. (ET) by dialling 1-800-558-5253 (ID number:
22027517).
About Saputo
Saputo, one of the top ten dairy processors in
the world, 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 a leading cheese manufacturer and
fluid milk and cream processor in Canada, a leading dairy processor
in Australia and the top dairy processor in Argentina. In the USA,
Saputo ranks among the top three cheese producers and is one of the
top producers of extended shelf-life and cultured dairy products.
In the United Kingdom, Saputo is the leading manufacturer of
branded cheese and dairy spreads. In addition to its dairy
portfolio, Saputo produces, markets, and distributes a range of
dairy alternative cheeses and beverages. Saputo products are sold
in several countries under market-leading brands, as well as
private label brands. Saputo Inc. is a publicly traded company and
its shares are listed on the Toronto Stock Exchange under the
symbol “SAP”. Follow Saputo’s activities at www.saputo.com or via
Facebook, Instagram, and LinkedIn.
Investor InquiriesNicholas
EstrelaDirector, Investor Relations1-514-328-3117
Media Inquiries1-514-328-3141 /
1-866-648-5902media@saputo.com
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This news release contains statements which are
forward-looking statements within the meaning of applicable
securities laws. These forward-looking statements include, among
others, statements with respect to our objectives, outlook,
business projects, strategies, beliefs, expectations, targets,
commitments, goals, ambitions and strategic plans including our
ability to achieve these targets, commitments, goals, ambitions and
strategic plans, and statements other than historical facts. The
words “may”, “could”, “should”, “will”, “would”, “believe”, “plan”,
“expect”, “intend”, “anticipate”, “estimate”, “foresee”,
“objective”, “continue”, “propose”, “aim”, “commit”, “assume”,
“forecast”, “predict”, “seek”, “project”, “potential”, “goal”,
“target”, or “pledge”, or the negative of these terms or variations
of them, the use of conditional or future tense or words and
expressions of similar nature, are intended to identify
forward-looking statements. All statements other than statements of
historical fact included in this news release may constitute
forward-looking statements within the meaning of applicable
securities laws.
By their nature, forward-looking statements are
subject to inherent risks and uncertainties. Actual results could
differ materially from those stated, implied, or projected in such
forward-looking statements. As a result, we cannot guarantee that
any forward-looking statements will materialize, and we warn
readers that these forward-looking statements are not statements of
historical fact or guarantees of future performance in any way.
Assumptions, expectations, and estimates made in the preparation of
forward-looking statements and risks and uncertainties that could
cause actual results to differ materially from current expectations
are discussed in our 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
dated June 8, 2023, available on SEDAR+ under Saputo's profile at
www.sedarplus.ca.
Such risks and uncertainties include the
following: product liability; the availability and price variations
of milk and other inputs, our ability to transfer input costs
increases, if any, to our customers in competitive market
conditions; supply chain strain and supplier concentration; the
price fluctuation of dairy products in the countries in which we
operate, as well as in international markets; our ability to
identify, attract, and retain qualified individuals; the increased
competitive environment in our industry; consolidation of
clientele; cyber threats and other information technology-related
risks relating to business disruptions, confidentiality, data
integrity business and email compromise-related fraud;
unanticipated business disruption; continuing economic and
political uncertainties, resulting from actual or perceived changes
in the condition of the economy or economic slowdowns or
recessions; the ongoing military conflict in Ukraine; public health
threats, such as the recent global COVID -19 pandemic, changes in
consumer trends; changes in environmental laws and regulations; the
potential effects of climate change; increased focus on
environmental sustainability matters; the failure to execute our
Global Strategic Plan as expected or to adequately integrate
acquired businesses in a timely and efficient manner; the failure
to complete capital expenditures as planned; changes in interest
rates and access to capital and credit markets. There may be other
risks and uncertainties that we are not aware of at present, or
that we consider to be insignificant, that could still have a
harmful impact on our business, financial state, liquidity,
results, or reputation.
Forward-looking statements are based on
Management’s current estimates, expectations and assumptions
regarding, among other things; the projected revenues and expenses;
the economic, industry, competitive, and regulatory environments in
which we operate or which could affect our activities; our ability
to identify, attract, and retain qualified and diverse individuals;
our ability to attract and retain customers and consumers; our
environmental performance; the results of our sustainability
efforts; the effectiveness of our environmental and sustainability
initiatives; our operating costs; the pricing of our finished
products on the various markets in which we carry on business; the
successful execution of our Global Strategic Plan; our ability to
deploy capital expenditure projects as planned; reliance on third
parties; our ability to gain efficiencies and cost optimization
from strategic initiatives; our ability to correctly predict,
identify, and interpret changes in consumer preferences and demand,
to offer new products to meet those changes, and to respond to
competitive innovation; our ability to leverage our brand value;
our ability to drive revenue growth in our key product categories
or platforms or add products that are in faster-growing and more
profitable categories; the successful execution of our M&A
strategy; the market supply and demand levels for our products; our
warehousing, logistics, and transportation costs; our effective
income tax rate; the exchange rate of the Canadian dollar to the
currencies of cheese and dairy ingredients. To set our financial
performance targets, we have made assumptions regarding, among
others: the absence of significant deterioration in macroeconomic
conditions; our ability to mitigate inflationary cost pressure; the
USA commodity market conditions; labour market conditions and
staffing levels in our facilities; the impact of price elasticity;
our ability to increase the production capacity and productivity in
our facilities; and the demand growth for our products. Our ability
to achieve our environmental targets, commitments, and goals is
further subject to, among others: our ability to access and
implement all technology necessary to achieve our targets,
commitments, and goals; the development and performance of
technology, innovation and the future use and deployment of
technology and associated expected future results; the
accessibility of carbon and renewable energy instruments for which
a market is still developing and which are subject to risk of
invalidation or reversal; and environmental regulation. Our ability
to achieve our 2025 Supply Chain Pledges is further subject to,
among others, our ability to leverage our supplier relationships
and our sustainability advocacy efforts.
Management believes that these estimates,
expectations, and assumptions are reasonable as of the date hereof,
and are inherently subject to significant business, economic,
competitive, and other uncertainties and contingencies regarding
future events, and are accordingly subject to changes after such
date. Forward-looking statements are intended to provide
shareholders with information regarding Saputo, including our
assessment of future financial plans, and may not be appropriate
for other purposes. Undue importance should not be placed on
forward-looking statements, and the information contained in such
forward-looking statements should not be relied upon as of any
other date.
Unless otherwise indicated by Saputo,
forward-looking statements in this news release describe our
estimates, expectations and assumptions as of the date hereof, and,
accordingly, are subject to change after that date. Except as
required under applicable securities legislation, Saputo does not
undertake to update or revise forward-looking statements, whether
written or verbal, that may be made from time to time by itself or
on our behalf, whether as a result of new information, future
events, or otherwise. All forward-looking statements contained
herein are expressly qualified by this cautionary statement.
SELECTED QUARTERLY FINANCIAL
INFORMATION
Fiscal years |
2024 |
|
2023 |
2022 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Revenues |
4,207 |
|
4,468 |
|
4,587 |
|
4,461 |
|
4,327 |
|
3,957 |
|
3,901 |
|
3,689 |
|
Adjusted EBITDA1 |
362 |
|
392 |
|
445 |
|
369 |
|
347 |
|
260 |
|
322 |
|
283 |
|
Adjusted EBITDA margin1 |
8.6 |
% |
8.8 |
% |
9.7 |
% |
8.3 |
% |
8.0 |
% |
6.6 |
% |
8.3 |
% |
7.7 |
% |
Net earnings |
141 |
|
159 |
|
179 |
|
145 |
|
139 |
|
37 |
|
86 |
|
98 |
|
Acquisition and restructuring costs2 |
— |
|
21 |
|
27 |
|
16 |
|
6 |
|
51 |
|
— |
|
(1 |
) |
Gain on disposal of assets2 |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(8 |
) |
— |
|
Impairment of intangible assets2 |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
43 |
|
— |
|
Gain on hyperinflation2 |
(2 |
) |
— |
|
— |
|
(26 |
) |
(18 |
) |
(15 |
) |
(14 |
) |
(9 |
) |
Amortization of intangible
assets related to business acquisitions2 |
15 |
|
16 |
|
15 |
|
16 |
|
16 |
|
20 |
|
18 |
|
19 |
|
Adjusted net earnings1 |
154 |
|
196 |
|
221 |
|
151 |
|
143 |
|
93 |
|
125 |
|
107 |
|
Adjusted net earnings margin1 |
3.7 |
% |
4.4 |
% |
4.8 |
% |
3.4 |
% |
3.3 |
% |
2.4 |
% |
3.2 |
% |
2.9 |
% |
|
|
|
|
|
|
|
|
|
EPS basic |
0.33 |
|
0.38 |
|
0.43 |
|
0.35 |
|
0.33 |
|
0.09 |
|
0.21 |
|
0.24 |
|
EPS diluted |
0.33 |
|
0.38 |
|
0.43 |
|
0.35 |
|
0.33 |
|
0.09 |
|
0.21 |
|
0.24 |
|
|
|
|
|
|
|
|
|
|
Adjusted EPS basic1 |
0.37 |
|
0.47 |
|
0.53 |
|
0.36 |
|
0.34 |
|
0.22 |
|
0.30 |
|
0.26 |
|
Adjusted EPS diluted1 |
0.36 |
|
0.47 |
|
0.53 |
|
0.36 |
|
0.34 |
|
0.22 |
|
0.30 |
|
0.26 |
|
Selected factor(s) positively
(negatively) impacting Adjusted
EBITDA1,4
Fiscal years |
2024 |
|
2023 |
2022 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
USA Market Factors3 |
(14 |
) |
29 |
|
(6 |
) |
(27 |
) |
(7 |
) |
(19 |
) |
(40 |
) |
(17 |
) |
USA Sector inventory write-down |
(10 |
) |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Foreign currency exchange5 |
4 |
|
(12 |
) |
(7 |
) |
(12 |
) |
(7 |
) |
(12 |
) |
(18 |
) |
(21 |
) |
1 This is a total of segments measure, a non-GAAP financial
measure, or a non-GAAP ratio. These measures and ratios do not have
a standardized meaning under IFRS. Therefore, they are unlikely to
be comparable to similar measures presented by other issuers. See
the “Non-GAAP Measures” section of this news release for more
information, including the definition and composition of the
measure or ratio as well as the reconciliation to the most
comparable measure in the primary financial statements, as
applicable. Adjusted net earnings and adjusted EPS for comparative
periods were aligned to meet the current presentation.2 Net of
income taxes.3 Refer to the ‘‘Glossary’’ section of the
Management's Discussion and Analysis.4 As compared to
the same quarter of the previous fiscal year.5 Foreign
currency exchange includes the effect of conversion of US dollars,
Australian dollars, British pounds sterling and Argentine pesos to
Canadian dollars.
CONSOLIDATED RESULTS FOR THE FIRST
QUARTER ENDED JUNE 30, 2023
Revenues
Revenues totalled $4.207 billion, down $120
million or 2.8%, as compared to $4.327 billion for the same quarter
last fiscal year.
Higher domestic selling prices in line with the
higher cost of milk as raw material, together with the carryover
impact of pricing initiatives previously implemented in all our
sectors to mitigate increasing input costs had a favourable
impact.
The combined effect of the lower average block
market price2 and of the lower average butter market price2 in our
USA Sector had a negative impact of $207 million.
Sales volumes were lower compared to the same
quarter last fiscal year due to the softening of global demand for
dairy products and competitive market conditions, particularly in
the USA Sector.
The effect of the fluctuation of the Argentine
peso and the Australian dollar on export sales denominated in US
dollars was favourable.
Finally, the fluctuation of foreign currencies
versus the Canadian dollar had a favourable impact of approximately
$106 million.
Operating costs excluding depreciation,
amortization, and restructuring costs
Operating costs excluding depreciation,
amortization, and restructuring costs totalled $3.845 billion, down
$135 million or 3.4%, as compared to $3.980 billion for the same
quarter last fiscal year. The decrease was in line with lower sales
volumes and lower commodity market prices, which decreased the cost
of raw materials and consumables used. Lower logistics costs,
including the effect of lower fuel costs, also contributed to this
decrease. The decrease was partially offset by the negative impacts
of ongoing inflation on costs including employee salary and
benefits.
Net earnings
Net earnings totalled $141 million, up $2
million or 1.4%, as compared to $139 million for the same quarter
last fiscal year. The increase was due to the net effect of higher
adjusted EBITDA1, as described below, lower acquisition and
restructuring costs, and lower income tax expense, offset by a
lower gain on hyperinflation and higher financial charges.
Adjusted
EBITDA1
Adjusted EBITDA1 totalled $362 million, up $15
million or 4.3%, as compared to $347 million for the same quarter
last fiscal year.
Results reflected a solid performance in the
Canada Sector and modest increases in the USA Sector and the Europe
Sector whereas the International Sector's performance was slightly
lower. However, the softening of global demand for dairy products
negatively impacted our volumes and performance.
We benefited from the carryover impact of higher
average selling prices, driven by previously announced pricing
initiatives, which were implemented to mitigate higher input costs
in line with ongoing inflation and volatile commodity markets.
In our USA Sector, despite the positive effect
of the milk-cheese Spread2, results included a $24 million
unfavourable impact relative to, USA Market Factors2 and, an
inventory write-down due to the decrease in certain market selling
prices. Furthermore, lower sales volumes negatively impacted
operational efficiencies and absorption of fixed costs.
Cost containment measures and efficiency and
productivity initiatives aimed at minimizing the effects of
macroeconomic conditions had a favourable impact.
We also benefited from lower logistics costs,
including lower fuel prices, mainly in North America.
The fluctuation of foreign currencies versus the
Canadian dollar had a favourable impact of approximately $4
million.
1 This is a total of segments measure, a
non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP
Measures” section of this news release for more information,
including the definition and composition of the measure or ratio as
well as the reconciliation to the most comparable measure in the
primary financial statements, as applicable.2 Refer to the
"Glossary" section of the Management's Discussion and Analysis.
Depreciation and
amortization
Depreciation and amortization totalled $146
million, up $1 million, as compared to $145 million for the same
quarter last fiscal year.
Acquisition and restructuring
costs
There were no acquisition and restructuring
costs in the first quarter of fiscal 2024.
Acquisition and restructuring costs for the
first quarter of fiscal 2023 totalled $7 million and were comprised
of site closure costs of $9 million relating to the consolidation
activities in the Europe Sector. These costs were offset by a $2
million gain on disposal of assets related to the sale of a closed
facility in the Canada Sector.
Gain on hyperinflation
Gain on hyperinflation totalled $2 million, down
$16 million from $18 million for the same quarter last fiscal year.
The decrease of the gain on hyperinflation is relative to the
application of hyperinflation accounting for the Dairy Division
(Argentina).
Financial Charges
Financial charges totalled $40 million, up $10
million, as compared to $30 million for the same quarter last
fiscal year mainly due to higher interest rates.
Income tax expense
Income tax expense totalled $37 million,
reflecting an effective tax rate of 21%, as compared to 24% for the
same quarter last fiscal year.
The effective income tax rate for both the first
quarter of fiscal 2024 and the first quarter of fiscal 2023
included the favourable effect of approximately 5% and 3%,
respectively, relating to the tax and accounting treatments of
inflation in Argentina.
The effective tax rate varies and could increase
or decrease based on the geographic mix of quarterly and
year-to-date earnings across the various jurisdictions in which we
operate, the tax and accounting treatments of inflation in
Argentina, the amount and source of taxable income, amendments to
tax legislations and income tax rates, changes in assumptions, as
well as estimates we use for tax assets and liabilities.
Adjusted net
earnings1
Adjusted net earnings totalled
$154 million, up $11 million or 7.7%, as compared to $143
million for the same quarter last fiscal year. This is mainly due
to an increase in net earnings, as described above, excluding lower
gain on hyperinflation, and lower acquisition and restructuring
costs after tax.
1 This is a total of segments measure, a
non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP
Measures” section of this news release for more information,
including the definition and composition of the measure or ratio as
well as the reconciliation to the most comparable measure in the
primary financial statements, as applicable. Adjusted net earnings
and adjusted EPS for comparative periods were aligned to meet the
current presentation.
INFORMATION BY SECTOR
CANADA SECTOR |
Fiscal years |
2024 |
|
2023 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Revenues |
1,211 |
|
1,156 |
|
1,213 |
|
1,185 |
|
1,142 |
|
Adjusted EBITDA |
144 |
|
134 |
|
149 |
|
136 |
|
132 |
|
Adjusted EBITDA margin |
11.9 |
% |
11.6 |
% |
12.3 |
% |
11.5 |
% |
11.6 |
% |
USA SECTOR |
Fiscal years |
2024 |
|
2023 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Revenues |
1,876 |
|
2,062 |
|
2,172 |
|
2,062 |
|
2,043 |
|
Adjusted EBITDA |
103 |
|
143 |
|
146 |
|
102 |
|
97 |
|
Adjusted EBITDA margin |
5.5 |
% |
6.9 |
% |
6.7 |
% |
4.9 |
% |
4.7 |
% |
Selected factor(s) positively (negatively) impacting
Adjusted EBITDA |
Fiscal years |
2024 |
|
2023 |
|
Q1 |
|
Q4 |
Q3 |
|
Q2 |
|
Q1 |
|
USA Market Factors1,2 |
(14 |
) |
29 |
(6 |
) |
(27 |
) |
(7 |
) |
Inventory write-down |
(10 |
) |
— |
— |
|
— |
|
— |
|
US currency exchange2 |
5 |
|
5 |
8 |
|
3 |
|
3 |
|
1 Refer to the ‘‘Glossary’’ section of the
Management's Discussion and Analysis.2 As compared to same
quarter last fiscal year.
Other pertinent information |
(in US dollars, except for average exchange rate) |
Fiscal years |
2024 |
|
2023 |
|
Q1 |
|
Q4 |
Q3 |
|
Q2 |
|
Q1 |
|
Block market price1 |
|
|
|
|
|
Opening |
1.850 |
|
2.135 |
1.968 |
|
2.195 |
|
2.250 |
|
Closing |
1.335 |
|
1.850 |
2.135 |
|
1.968 |
|
2.195 |
|
Average |
1.579 |
|
1.943 |
2.077 |
|
1.927 |
|
2.287 |
|
|
|
|
|
|
|
Butter market price1 |
|
|
|
|
|
Opening |
2.398 |
|
2.380 |
3.145 |
|
2.995 |
|
2.700 |
|
Closing |
2.440 |
|
2.398 |
2.380 |
|
3.145 |
|
2.995 |
|
Average |
2.394 |
|
2.375 |
2.904 |
|
3.035 |
|
2.808 |
|
|
|
|
|
|
|
Average whey powder market
price1 |
0.358 |
|
0.397 |
0.432 |
|
0.469 |
|
0.600 |
|
Spread1 |
(0.061 |
) |
0.040 |
(0.120 |
) |
(0.222 |
) |
(0.261 |
) |
US
average exchange rate to Canadian dollar2 |
1.343 |
|
1.353 |
1.357 |
|
1.306 |
|
1.275 |
|
1 Refer to the ‘‘Glossary’’ section of the
Management's Discussion and Analysis.2 Based on Bank of Canada
published information.
INTERNATIONAL SECTOR |
Fiscal years |
2024 |
|
2023 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Revenues |
868 |
|
963 |
|
917 |
|
989 |
|
916 |
|
Adjusted EBITDA |
77 |
|
84 |
|
111 |
|
97 |
|
82 |
|
Adjusted EBITDA margin |
8.9 |
% |
8.7 |
% |
12.1 |
% |
9.8 |
% |
9.0 |
% |
Selected factor(s) positively (negatively) impacting
Adjusted EBITDA |
Fiscal years |
2024 |
|
2023 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Foreign currency exchange1 |
(2 |
) |
(15 |
) |
(13 |
) |
(9 |
) |
(6 |
) |
1 As compared to same quarter last fiscal
year.
EUROPE SECTOR |
Fiscal years |
2024 |
|
2023 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Revenues |
252 |
|
287 |
|
285 |
|
225 |
|
226 |
|
Adjusted EBITDA |
38 |
|
31 |
|
39 |
|
34 |
|
36 |
|
Adjusted EBITDA margin |
15.1 |
% |
10.8 |
% |
13.7 |
% |
15.1 |
% |
15.9 |
% |
Selected factor(s) positively (negatively) impacting
Adjusted EBITDA |
Fiscal years |
2024 |
2023 |
|
Q1 |
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Foreign currency exchange1 |
1 |
(1 |
) |
(2 |
) |
(4 |
) |
(2 |
) |
1 As compared to same quarter last fiscal
year.
NON-GAAP MEASURES
We report our financial results in accordance
with GAAP and generally assess our financial performance using
financial measures that are prepared using GAAP. However, this news
release also refers to certain non-GAAP and other financial
measures which do not have a standardized meaning under GAAP, and
are described in this section.
We use non-GAAP measures and ratios to provide
investors with supplemental metrics to assess and measure our
operating performance and financial position from one period to the
next. We believe that those measures are important supplemental
metrics because they eliminate items that are less indicative of
our core business performance and could potentially distort the
analysis of trends in our operating performance and financial
position. We also use non-GAAP measures to facilitate operating and
financial performance comparisons from period to period, to prepare
annual budgets and forecasts, and to determine components of
management compensation. We believe these non-GAAP measures, in
addition to the financial measures prepared in accordance with
IFRS, enable investors to evaluate the Company's operating results,
underlying performance, and future prospects in a manner similar to
management. These metrics are presented as a complement to enhance
the understanding of operating results but not in substitution of
GAAP results.
These non-GAAP measures have no standardized
meaning under GAAP and are unlikely to be comparable to similar
measures presented by other issuers. Our method of calculating
these measures may differ from the methods used by others, and,
accordingly, our definition of these non-GAAP financial measures
may not be comparable to similar measures presented by other
issuers. In addition, non-GAAP financial measures should not be
viewed as a substitute for the related financial information
prepared in accordance with GAAP. This section provides a
description of the components of each non-GAAP measure used in this
news release and the classification thereof.
NON-GAAP FINANCIAL MEASURES AND
RATIOS
A non-GAAP financial measure is a financial
measure that depicts the Company's financial performance, financial
position, or cash flow and either excludes an amount that is
included in or includes an amount that is excluded from the
composition of the most directly comparable financial measures
disclosed in the Company's financial statements. A non-GAAP ratio
is a financial measure disclosed in the form of a ratio, fraction,
percentage, or similar representation and that has a non-GAAP
financial measure as one or more of its components.
Below are descriptions of the non-GAAP financial
measures and ratios that we use as well as reconciliations to the
most comparable GAAP financial measures, as applicable.
Adjusted net earnings and adjusted net
earnings margin
We believe that adjusted net earnings and
adjusted net earnings margin provide useful information to
investors because this financial measure and this ratio provide
precision with regards to our ongoing operations by eliminating the
impact of non-operational or non-cash items. We believe that in the
context of highly acquisitive companies, adjusted net earnings
provides a more effective measure to assess performance against the
Company's peer group, including due to the application of various
accounting policies in relation to the amortization of acquired
intangible assets.
We also believe adjusted net earnings and
adjusted net earnings margin are useful to investors because they
help identify underlying trends in our business that could
otherwise be masked by certain write-offs, charges, income, or
recoveries that can vary from period to period, as well as by the
effect of tax law changes and rate enactments. We believe that
securities analysts, investors, and other interested parties also
use adjusted net earnings to evaluate the performance of issuers.
Excluding these items does not imply they are non-recurring. These
measures do not have any standardized meanings under GAAP and are
therefore unlikely to be comparable to similar measures presented
by other companies.
The following table provides a reconciliation of
net earnings to adjusted net earnings.
|
For the three-month periodsended June
30 |
|
|
2023 |
|
2022 |
|
Net earnings |
141 |
|
139 |
|
Acquisition and restructuring costs1 |
— |
|
6 |
|
Amortization of intangible assets related to business
acquisitions1 |
15 |
|
16 |
|
Gain on hyperinflation1,2 |
(2 |
) |
(18 |
) |
Adjusted net earnings |
154 |
|
143 |
|
Revenues |
4,207 |
|
4,327 |
|
Adjusted net earnings margin (expressed as a percentage of
revenues) |
3.7 |
% |
3.3 |
% |
1 Net of applicable income
taxes.2 Starting in the first quarter of fiscal
2024:
- the gain on
hyperinflation is presented on a separate line on the consolidated
income statements (Refer to Note 14 of the condensed interim
consolidated financial statements for further information);
and
- adjusted net
earnings exclude the gain on hyperinflation to provide investors
with more useful information with regards to our ongoing
operations.Comparative periods included in this news release were
aligned to meet the current presentation.
Adjusted EPS basic and adjusted EPS
diluted
Adjusted EPS basic (adjusted net earnings per
basic common share) and adjusted EPS diluted (adjusted net earnings
per diluted common share) are non-GAAP ratios and do not have any
standardized meaning under GAAP. Therefore, these measures are
unlikely to be comparable to similar measures presented by other
issuers. We define adjusted EPS basic and adjusted EPS diluted as
adjusted net earnings divided by the basic and diluted weighted
average number of common shares outstanding for the period.
Adjusted net earnings is a non-GAAP financial measure. For more
details on adjusted net earnings, refer to the discussion above in
the adjusted net earnings and adjusted net earnings margin
section.
We use adjusted EPS basic and adjusted EPS
diluted, and we believe that certain securities analysts,
investors, and other interested parties use these measures, among
other ones, to assess the performance of our business without the
effect of the acquisition and restructuring costs, amortization of
intangible assets related to business acquisitions, gain on
disposal of assets, impairment of intangible assets, gain on
hyperinflation, and UK tax rate change. We exclude these items
because they affect the comparability of our financial results and
could potentially distort the analysis of trends in business
performance. Adjusted EPS is also a component in the determination
of long-term incentive compensation for management.
TOTAL OF SEGMENTS MEASURES
A total of segments measure is a financial
measure that is a subtotal or total of two or more reportable
segments and is disclosed within the notes to Saputo's condensed
interim consolidated financial statements, but not in its primary
financial statements. Consolidated adjusted EBITDA is a total of
segments measure.
Consolidated adjusted EBITDA is the total of the
adjusted EBITDA of our four geographic sectors. We report our
business under four sectors: Canada, USA, International, and
Europe. The Canada Sector consists of the Dairy Division (Canada),
the USA Sector consists of the Dairy Division (USA), the
International Sector consists of the Dairy Division (Australia) and
the Dairy Division (Argentina), and the Europe Sector consists of
the Dairy Division (UK). We sell our products in three different
market segments: retail, foodservice, and industrial.
Adjusted EBITDA and adjusted EBITDA
margin
We believe that adjusted EBITDA and adjusted
EBITDA margin provide investors with useful information because
they are common industry measures. Adjusted EBITDA margin consists
of adjusted EBITDA expressed as a percentage of revenues. These
measures are also key metrics of the Company's operational and
financial performance without the variation caused by the impacts
of the elements itemized below and provide an indication of the
Company's ability to seize growth opportunities in a cost-effective
manner, finance its ongoing operations, and service its long-term
debt. Adjusted EBITDA is the key measure of profit used by
management for the purpose of assessing the performance of each
sector and of the Company as a whole, and to make decisions about
the allocation of resources. We believe that securities analysts,
investors, and other interested parties also use adjusted EBITDA to
evaluate the performance of issuers. Adjusted EBITDA is also a
component in the determination of short-term incentive compensation
for management.
The following table provides a reconciliation of
net earnings to adjusted EBITDA on a consolidated basis.
|
For the three-month periodsended June
30 |
|
|
2023 |
|
2022 |
|
Net earnings |
141 |
|
139 |
|
Income taxes |
37 |
|
44 |
|
Financial charges1 |
40 |
|
30 |
|
Gain on hyperinflation1 |
(2 |
) |
(18 |
) |
Acquisition and restructuring costs |
— |
|
7 |
|
Depreciation and amortization |
146 |
|
145 |
|
Adjusted EBITDA |
362 |
|
347 |
|
Revenues |
4,207 |
|
4,327 |
|
Adjusted EBITDA margin |
8.6 |
% |
8.0 |
% |
1 Starting in the first quarter of fiscal
2024, the gain on hyperinflation is presented on a separate line on
the consolidated income statements (Refer to Note 14 of the
condensed interim consolidated financial statements for further
information). Comparative periods included in this news release
were aligned to meet the current presentation.
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