Despite the surge in prices, consumers have not changed their habits by buying fewer dairy products, notes the management of Saputo, which claims to have reached a turning point with its operational difficulties.
“Our decisions [les augmentations de prix] had no effect on market demand,” the company’s North American chief operating officer, Carl Colizza, said Friday during a conference call to discuss the results of the third trimester.
At this time last year, Saputo management had told analysts that it would pull out “heavy artillery” to make up for the delay it had taken in relation to the inflationary wave that had swept over the oil and gas sector. feed. The company had promised to be proactive and follow inflation.
A year later, the inflationary offensive has not spoiled consumers’ appetites, Mr. Colizza noted. He said demand continues to increase “significantly” in the food service division (restaurants, hotels and other establishments).
The manager even indicated that the Montreal company was “struggling” to keep up with the increase in demand for “certain categories” of products. “Overall, our production, both for dairy products and for cheese, has increased and we continue to be on the right track. »
Saputo does not rule out imposing further price increases while inflationary pressures remain, but the “heavy artillery” seems to be put away, at least for now. “We have taken action for all of our products when necessary,” said President and Chief Executive Officer, Lino A. Saputo. I would say we have caught up with inflation at this point. I would like to add that we are doing everything we can to mitigate cost increases as they arise. »
Net profit doubled
As Saputo’s earnings double, its results, released Thursday after markets closed, were well received by investors. For management and analysts, this is a demonstration that the company, which presented its strategic plan in June 2021, is reaching a turning point.
When management was preparing its strategic plan, it did not anticipate the extent of supply chain disruptions and labor shortages, Saputo recalled. “The first year, we weren’t adjusting, we were just putting out fires,” he said. The third quarter results are a sign that we have reached a turning point. We are well advanced in our recovery, we are on a good streak, the [éléments] fundamentals of the plan are intact. »
In the third quarter ended Dec. 31, net profit doubled from $86 million to $179 million. Adjusted earnings per share reached 53 cents, compared to 34 cents last year. Sales, for their part, increased by 17.6% to 4.59 billion.
Prior to the earnings release, analysts had expected earnings per share of 47 cents, but higher revenue, at $4.64 billion, according to forecasts collected by financial data firm Refinitiv.
The results demonstrate the progress made by Saputo, believes TD Securities analyst Michael Van Aelst. “Rising prices are having the desired effect, tight cost management is paying off, and while labor scarcity and supply chain challenges persist, both issues are improving. »
Saputo continues to need hands in a context of labor scarcity. The situation has improved, said chief financial officer Maxime Therrien, adding that about two-thirds of vacancies have found takers. “The US market remains tight as we see the unemployment rate continue to decline. »
After the operational difficulties experienced by the company, the results give hope for a comeback for a company which had the reputation of being managed with a skilful hand, judge Mr. Van Aelst. “It’s good old Saputo, the one that adapts to challenges and emerges in a stronger competitive position. »
Saputo shares gained $1.50, or 4.25%, on Friday around noon, to trade at $36.79 on the Toronto Stock Exchange.
The stock has already recovered the ground lost since November, when Saputo was the target of a short seller. Spruce Point had judged, in a 147-page report, that the business context was difficult for the Montreal cheese maker and that the company lacked transparency with its financial results. Saputo responded that Spruce Point’s findings were “misleading.”