Cost-cutting at home and higher sales volumes in its U.S. and Argentinean operations helped raise Saputo’s profits by $6.5 million in the Quebec dairy giant’s second quarter.
Saputo posted net earnings of $69.03 million on $1.45 billion in revenues in its quarter ending Sept. 30, up from $62.52 million on $1.29 billion in the year-earlier period.
Overall revenue was up $165 million on a $99 million increase from the company’s U.S. dairy products sector, including new revenue from its purchase in April of Alto Dairy Co-operative and “a more favourable relationship between the average block market per pound of cheese and the cost of milk as raw material,” the company said.
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The total increase also included revenues from the combined Canadian, European and Argentinean dairy sector, which rose by about $67 million on higher prices charged due to rising milk costs in Canada and Argentina and increased sales volume in Argentina. Saputo said its Canadian operations also gained on “continued benefits derived from rationalization activities completed in prior years.”
The increased revenues were offset by “less favourable” market conditions for byproducts, as well as by decreased sales and higher costs in the company’s grocery products sector, which by itself took a $1 million drop in revenue.
Looking ahead, Saputo noted its participation with other dairy firms in a court challenge against Canada’s amended federal regulations for manufacturing standards on domestic and imported cheeses. Those regulations are to take effect Dec. 14.
“Regardless of the outcome, we intend to mitigate the impact that these new standards will have on our results, while trying our utmost to minimize the effect on our customers,” the company said.
The company last month also signed an agreement to buy Neilson Dairy, subject to approval from Canada’s Competition Bureau. Neilson, which would expand Saputo’s reach into Ontario’s fresh milk and cream markets, generates annual revenues of about $600 million and earnings before interest, taxes, depreciation and amortization (EBITDA) of about $50 million, Saputo said.
