Saputo COVID-19 hit but resilient

Saputo COVID-19 hit but resilient

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CONFIDENT: Saputo chair Lino Saputo Jr is confident about the performance of the global dairy giant, including its Australian division.

CONFIDENT: Saputo chair Lino Saputo Jr is confident about the performance of the global dairy giant, including its Australian division.

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Canadian dairy processing giant, Saputo, has been hit hard by COVID-19, with adjusted net earnings down 21.5 per cent in the fourth quarter but its profitability for the year held up and Australia was among its most resilient divisions.

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Canadian dairy processing giant, Saputo, has been hit hard by COVID-19, with adjusted net earnings down 21.5 per cent in the fourth quarter but its profitability for the year held up and Australia was among its most resilient divisions.

It's also on the hunt for distressed dairy processing sector acquisitions.

Adjusted net earnings for Saputo's year overall were CDN$653.7 million, up 4.8pc.

Canada's financial year ends on March 31 and it was the fourth quarter that showed the impact of the coronavirus pandemic, with some of its regions more reliant on the foodservice sector being hit by revenue falls of up to 60pc, Saputo chair Lino Saputo Jr said.

"While COVID-19 had a negative impact on our export sales, domestic demand in Australia and Argentina has remained relatively stable," he said.

The exposure to the foodservice sector in Australia and Argentina was less than 10pc.

"If you look at our international platforms in Argentina or in Australia, the mandate has always been about putting that milk into those products that generate the highest variable rate of return.

"Those platforms offer a lot of different options in terms of market segments whether it's retail or food service but, more importantly, on the export side as well.

"And then you look at the types of products as well, there's a lot more flexibility in those two platforms."

Responding to questions about the threat of Chinese trade barriers to the Australian business, Mr Saputo appeared confident.

"Dairy's considered a strategic food, because they [the Chinese] don't have the the required dairy solids for their domestic requirements so they need to rely on imports," Mr Saputo said.

"We haven't seen any reduction in terms of import requirements from our side and from a Dairy Australia perspective, we've received the same thing news so far."

At the same time, Mr Saputo pointed to headwinds for the local division.

"Australia had a challenging year, no doubt," he said.

"First, the devastating bushfires and now the effects of a global pandemic ... and lower milk production continues to pose its challenges."

"Over the next few quarters, the dairy division Australia will forge ahead, further capturing opportunities derived from combining its operating activities under a single platform.

"Moreover, it will leverage the impressive portfolio of brands it now has in its roster."

That consolidation refers to the integration of the specialty cheese business of Lion Dairy & Drinks Pty Ltd, which Saputo acquired in October last year.

Saputo's financial reports said the acquisition contributed positively to revenues and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA).

In fact, the international division, which includes Saputo's Australian and Argentinian operations, had turnover of CDN$3.08 billion, up 4pc.

Its EBITDA was up, too, by 16pc to CDN$305 million.

On the other hand, Saputo said, lower sales volumes following the decline of raw milk availability in Australia, "negatively affected adjusted EBITDA and operational efficiencies".

It said Saputo Dairy Australia "expects competition in the sourcing of raw milk to persist and to continue to put pressure on margins."

Saputo was also well positioned to make further acquisitions, highlighting the US, Europe and Australia, with Mr Saputo saying it knew thost regions very well, making them "extremely attractive".

It was also interested in buying into New Zealand if the right opportunity arose.

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