Saputo Shares Retreat on Cautious Outlook

By Robb M. Stewart

Saputo's shares took a hit at the opening bell on Friday as the dairy company expressed a cautious outlook following weaker sales in the recent quarter.

Share Performance

During morning trading, the shares experienced a 6.2% decline, settling at C$27.25. This drop has contributed to an overall year-to-date decrease of 19%.

Global Demand and Pricing Expectations

Saputo projects that global demand for dairy products will moderate due to macroeconomic conditions and the impact of pricing "elasticity." Additionally, while input cost inflation is expected to ease in the near term, it is projected to remain at elevated levels.

Outlook for the U.S. and Europe

The company anticipates a mixed outlook for the U.S., while its international and European operations are likely to be impacted by lower cheese and dairy-ingredient prices. Furthermore, the European segment will be affected by the selling of inventory produced at higher milk prices.

Positive Factors for Saputo

Despite the challenges mentioned above, Saputo expects to benefit from several positive factors this fiscal year. These include the carryover effects of price increases, additional capacity, cost-containment measures, and new products.

Financial Performance

In terms of financial performance, net earnings for the fiscal second quarter rose to 156 million Canadian dollars ($113 million), or C$0.37 a share, compared to C$145 million, or $0.35, in the previous year.

On an adjusted basis, per-share earnings reached C$0.43 for the three months ending September 30, which aligned with analysts' mean forecast as polled by FactSet.

Revenue for the period declined by 3.1% to C$4.32 billion, falling short of analysts' anticipated figure of C$4.47 billion. This was mainly attributed to softer global demand for dairy products and lower international cheese and dairy-ingredient market prices.