(Reuters) - Canada's largest dairy producer, Saputo Inc (SAP.TO), reported higher-than-expected quarterly earnings on Tuesday but warned of a tough year ahead
The company said it expects the dairy market to be challenging for the remainder of its fiscal year 2014, begun April 1.
Saputo shares fell 1.5 percent, or 70 Canadian cents, in early trading in Toronto, to C$46.99.
For the fiscal first quarter, net income rose 12.2 percent to C$136.7 million ($131.4 million), or 69 Canadian cents a share, from C$121.8 million, or 60 Canadian cents, a year earlier.
Revenue increased 28 percent to C$2.174 billion.
Analysts were expecting 73 Canadian cents per share on revenue of C$2.132 billion, according to Thomson Reuters I/B/E/S.
The Montreal-based company raised its quarterly dividend by 9.5 percent, to 23 Canadian cents per share from 21 cents.
Saputo is among the top three cheese producers in the United States and is the second-largest North American dairy company, after acquiring U.S.-based Morningstar Foods in January, 2013.
The addition of Morningstar, renamed Saputo Dairy Foods USA LLC, boosted revenue in the latest quarter and added to earnings before interest, taxes, depreciation and amortization, the company said.
Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Gerald E. McCormick and John Wallace