August 7, 2013

With expectations of a tough year ahead specifically for the remainder of its fiscal year 2014, which begun April 1, Canada's largest dairy producer, Saputo Inc., reported higher-than-expected quarterly earnings on Tuesday (Jul 30).

For the fiscal first quarter, net income rose 12.2% to CAD136.7 million (US$131.4 million), or CAD0.69 (US$0.66) a share, from CAD121.8 million (US$117.3 million), or CAD0.60 (US$0.58), a year earlier. Revenue increased 28% to CAD2.174 billion (US$2.09 billion).

Saputo is among the top three cheese producers in the US and is the second-largest North American dairy company, after acquiring US-based Morningstar Foods in January 2013.

The addition of Morningstar, renamed Saputo Dairy Foods USA LLC, boosted revenue in the latest quarter and added to earnings before interest, taxes, depreciation and amortisation, the company said.

The company anticipates that the dairy market for the remainder of fiscal 2014 will continue to be challenging. The Dairy Division (Canada) will target volume growth in the cheese and fluid milk categories. The Division continues to focus efforts on opportunities presented in the value-added milk category, which offers growth potential. We will pursue investments in product categories, such as specialty cheeses, with the intention to maximise exposure across Canada, with coast-to-coast distribution capabilities.

The initiative to consolidate the distribution activities of the Greater Montreal area into one distribution centre, which was announced in fiscal 2013, is proceeding as planned and should be completed by the end of fiscal 2014. The property, plant and equipment investments in certain of our Canadian facilities, announced in March 2013 as part of the fiscal 2014 plant consolidation initiative, is progressing as planned.

In addition, we will continue to focus on increasing sales volumes in the snack-cake category, mainly through the development of sales in the US market. The US sector will benefit from the national manufacturing and distribution footprint of the Dairy Foods Division (USA) and will work towards expanding its product offering and its customer base. We will continue to evaluate these operations to seek further improvements, synergies and market opportunities. The sector will continue to pursue volume growth and evaluate opportunities in the specialty cheese category.

Improved efficiencies in both manufacturing and distribution facilities across the US remain a priority in fiscal 2014. Fluctuations in dairy market will continue to be monitored and appropriate measures to mitigate operational impacts will be implemented. The international sector will continue to face challenges relating to the increasing cost of milk as raw material, while remaining competitive with selling prices in the international market. The sector anticipates that the price and demand for dairy products in the international market will continue to increase.

The expansion project to gradually increase manufacturing capacity in the Dairy Division (Argentina) is proceeding as planned. The sector will also continue to focus on improving overall efficiencies.