Saputo Q1 Earnings Call Highlights

Saputo (TSE:SAP) reported first-quarter fiscal 2027 earnings growth across all four operating sectors, supported by higher volumes in high-protein ingredients, commercial momentum and operational efficiencies from prior capital investments.

Adjusted EBITDA increased nearly 8% from a year earlier, rising by CAD 30 million to CAD 427 million, while the adjusted EBITDA margin expanded to 9.7% from 9.1%. Revenue rose 1.5% to CAD 4.4 billion. Adjusted net earnings increased 13% to CAD 199 million, and adjusted earnings per share rose 17% to CAD 0.49, aided by stronger earnings and share repurchases.

President and Chief Executive Officer Carl Colizza said the results reflected broad-based execution rather than a single market tailwind. He highlighted demand for whey, lactose and high-protein ingredients, where recent investments in capacity and production capabilities are beginning to contribute more meaningfully.

Portfolio moves and capital returns

During the quarter, Saputo completed the sale of an 80% interest in its Dairy Division Argentina to Gloria Foods. Chief Financial Officer and Secretary Maxime Therrien said the company received CAD 710 million of proceeds, or approximately CAD 612 million after tax. Argentina is being reported as a discontinued operation, and prior-period results have been restated accordingly.

The company also announced an agreement to sell its interest in the Danone Saputo Dairy Australia joint venture for approximately CAD 253 million. The transaction remains subject to regulatory approval and is expected to close in the second half of calendar 2026. The related assets were classified as held for sale as of June 30.

Saputo used proceeds from the Argentina transaction to repay CAD 350 million of Series 8 senior unsecured notes. It repurchased 7.2 million common shares for approximately CAD 300 million under its normal course issuer bid and paid CAD 80 million in dividends during the quarter.

The board approved a 5% increase in the quarterly dividend to CAD 0.21 per share from CAD 0.20, effective with the September payment. Subject to Toronto Stock Exchange approval, Saputo intends to increase its share repurchase authorization to about 24 million shares, the maximum 10% of public float allowed under TSX rules.

Net debt to adjusted EBITDA ended the quarter at 1.47 times, below the company’s long-term leverage target of 2.25 times. Therrien said Saputo expects to remain active in share repurchases, while continuing to balance buybacks against organic investment, potential acquisitions and other growth opportunities.

Canada and U.S. results

Canadian revenue rose 6% to CAD 1.4 billion, driven by higher sales volumes in cheese, dairy foods and milk. The company also cited favorable product mix, including stronger sales of value-added beverages and cultured products, along with higher domestic selling prices implemented to help offset inflation and higher raw milk costs.

Canada adjusted EBITDA increased 3% to CAD 175 million, although the segment’s margin declined to 12.5% from 12.9% a year earlier. Manufacturing efficiencies from automation and production investments supported earnings, but labor, logistics and packaging inflation, as well as spending on technology, digital initiatives and brand support, weighed on margins.

Colizza said fuel costs have been a particular pressure for the company’s Canadian direct-store-delivery network. He said Saputo seeks to remove costs and improve demand and production planning before using pricing actions, though pricing has been part of the response in some cases.

In the U.S., revenue declined 1% to CAD 2.1 billion as lower average cheese block and butter prices offset higher dairy ingredient market prices and selling-price actions. Adjusted EBITDA rose 6% to CAD 181 million, and the segment margin expanded to 8.6%.

Management attributed the U.S. earnings increase to higher sales volumes, favorable mix, stronger pricing for high-protein ingredients and benefits from the Waupun facility investment. The company also cited efficiencies from its consolidated Midwest warehousing facility, reduced duplicate plant operating costs and customer-fulfillment execution.

Colizza said Waupun’s production of whey protein concentrate 80 and lactose is operating efficiently and has available capacity. He said the company is also evaluating additional capacity, including a previously announced expansion at its Friendship facility in New York that is expected to increase cottage cheese capability by 30% to 40%.

He said U.S. cheese block market conditions were less favorable than a year earlier because of milk supply, but added that competitive U.S. milk pricing has supported export opportunities. Colizza said Saputo expects “better days ahead” for block prices, while continuing to benefit from the breadth of its cheese and ingredient portfolio.

International and Europe margin gains

Saputo’s International segment, consisting of Dairy Division Australia, reported an 8% increase in revenue to CAD 635 million. Adjusted EBITDA rose 46% to CAD 38 million, with margin reaching 6%.

The company said improved weather in key milk-producing regions increased milk availability, improving plant utilization and fixed-cost absorption. Higher international cheese and dairy ingredient prices also helped offset higher milk costs, while portfolio optimization supported a more favorable product mix.

In Europe, revenue declined 11% to CAD 283 million, reflecting lower bulk cheese volumes as Saputo reduced milk intake to optimize its production mix, as well as lower selling prices tied to milk and cream input costs. Adjusted EBITDA increased 10% to CAD 33 million, and margin expanded to 11.7% from 9.5%.

Management credited Europe’s margin improvement to a more favorable mix, operational efficiencies from consolidating cheese packing at Nuneaton and progress in transitioning the ingredients platform. Colizza said the company is focusing further on branded cheese, led by Cathedral City, while reducing lower-value bulk exposure.

Investment priorities

Saputo maintained its fiscal 2027 capital expenditure outlook of approximately CAD 515 million. Therrien said spending will be weighted toward high-return projects in faster-growing dairy categories, capacity optimization and operational efficiency. First-quarter capital expenditures totaled CAD 57 million.

The company also expects to invest approximately CAD 28 million to CAD 30 million in technology-related initiatives, including IT-platform upgrades, cybersecurity and digital commercial tools. Colizza said commercial investments are intended to improve the use of customer and promotional insights, while supply-chain technology is being deployed in demand and production planning.

Looking ahead, Colizza said Saputo remains focused on protein-rich and value-added dairy products, while recognizing uncertainty related to geopolitical developments, global milk supply and inflation. He said acquisitions could be part of the company’s growth strategy, but emphasized that Saputo is not seeking new milk sheds and remains comfortable with the competitiveness of its U.S. and Australian supply bases.

About Saputo (TSE:SAP)

Saputo, one of the top ten dairy processors in the world, produces, markets, and distributes a wide array of dairy products of the utmost quality, including cheese, fluid milk, extended shelf-life milk and cream products, cultured products, and dairy ingredients. Saputo is a leading cheese manufacturer and fluid milk and cream processor in Canada and a leading dairy processor in Australia. In the USA, Saputo ranks among the top three cheese producers and is one of the top producers of extended shelf-life and cultured dairy products.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].

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