(Montreal) Ottawa’s pressure on grocers has had echoes at Saputo, but its big boss assures shareholders “that not much has changed” with regard to 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 households, the rise in the price of the grocery basket has been the most painful and persistent element of the recent increase in inflation. In September, the annual rate of food inflation stood at 5.9%, according to Statistics Canada. Food inflation stood at 9.8% for all of 2022, the highest since 1981.
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. »
Price volatility
Food price volatility is not a phenomenon exclusive to Canada. Saputo’s activities in the United Kingdom also suffered from this situation, which resulted in a 41% decrease in its earnings before interest, taxes, depreciation and amortization (EBITDA).
“Last year, in the United Kingdom, the price of inputs reached a peak. […] 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. »
In a volatile environment, management said it continues to focus its strategy “on the elements we can control”, including investing in certain factories to increase their 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 revealed a net profit of 156 million for the second quarter ended September 30, which represents an increase compared to 145 million for the same period last year. Adjusted earnings per share reached 43 cents. Revenues, for their part, fell by 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 Friday around noon.