Saputo scraps EBITDA target but expects profit lift
Dairy heavyweight Saputo has “withdrawn” a key EBITDA target but suggested a new milk-pricing formula in the US would bring an additional profit benefit.
“Market conditions have not stabilised as we had anticipated, making this a prudent decision as we operate in what remains a dynamic consumer environment,” president and CEO Carl Colizza told analysts last week as he discussed third-quarter results for fiscal 2025.“At the same time, we continue to evaluate all aspects of the business, including our strategic priorities, our cost and resource structure.”
Canada-headquartered Saputo introduced an adjusted EBITDA target for the 2025 financial year of C$2.125bn ($1.48bn) in 2021 under former president and CEO Lino Saputo Jr., who stepped down last year. While Colizza has now abandoned that goal, Mr Saputo expressed doubts in 2023 that the threshold would be met as planned.
The company said: “The cumulative effect of depressed dairy commodity markets, inflationary pressure, and a challenging consumer spending environment has significantly impacted the company’s ability to deliver against its previous expectations.”
Saputo still delivered an EBITDA result of C$1.19bn for the nine months to 31 December, up 5.3% from the corresponding period. But elsewhere, the company posted a net loss of C$518m in the third quarter linked to an impartment charge of C$674m connected to its UK dairy business.
Addressing analysts, Colizza said the new milk-pricing formula announced by the United States Department of Agriculture (USDA) in January, to be implemented in June and December, would provide some compensation.
“The changes, which will come into effect June 1, 2025, will be positive for dairy processors and better reflect the operating cost environment within the dairy industry,” he said, noting the last amendments were made by the US authorities 17 years previously.
“Fundamentally, this is going to help dairy processors bring some balance back to the cost of transformation on a go-forward basis. But it will also help the dairy industry continue to remain competitive in the food space, continue to bring innovation to the marketplace, allow us to fund that, [and] continue to remain relevant at a time when consumers are looking for the highest value.”
Colizza added that had the changes by the USDA been put in place in 2024, Saputo would have registered an additional $60-70m (US dollars) in the group’s adjusted EBITDA for the financial year’s C$1.51bn.
Tariffs, inflation risks
The prospect of US tariffs on Canadian produce was also brought up on the call with analysts – if President Trump should go ahead with taxing imports after giving a one-month reprieve earlier in February.Colizza downplayed the impact during the Q&A session.
“When I take a look at the potential tariff applications that are still lingering, from a direct perspective, there’s not a lot of impact. And that is because of the limited amount of movement we have between Canada and the US and vice versa, or even into Mexico for that matter,” he countered.
“From an indirect perspective, of course, there are some inputs to our business, whether those be packaging materials or chemicals or other things of that nature that could be impacted. But fundamentally, the sum of those two are not material for our business.”
The CEO also stressed that Saputo’s US and Canadian divisions operate on an “autonomous” level, with “very little links between the two on a day-to-day basis”.
In outlook terms, Colizza said Saputo continues to face inflationary pressures, which will be a “key issue” for the final quarter and into the new financial year, and for the UK in particular, such pressures could “actually rise”.
“Milk costs remain high and other costs, including labour, vegetable oils and utilities are increasing. Cost optimisation and efficiency will be of the utmost importance going forward in the context of new and growing cost pressures,” the CEO explained.
“Looking ahead at the fourth quarter, we will continue to keep a careful eye on costs, mix and efficiencies to support volume and savings, despite continued headwinds and anticipated market volatility. Regardless of the external environment, which includes potential tariffs, the foundation and the resilience of our business is strong.”
Source : Dairynews7x7 Feb 11th 2025 Just Food