OTTAWA (Reuters) - Saputo Inc SAP.TO, reported a 21 percent jump in first-quarter profit on Wednesday, lifted by higher prices for its cheese and dairy products, and bigger sales from acquisitions.
But the deal-hungry company stayed mum on future acquisitions, refusing to comment on speculation that it is one of three bidders for Australia’s Diary Farmers.
“There is consolidation going on in our industry,” Chief Executive Lino Saputo Jr. told analysts on a conference call.
“We believe that there will be some opportunity ... (to) look at dossiers both in the United States and in Australia, as well as other parts of the world, like Europe and possibly New Zealand.”
Saputo, Canada’s largest cheese producer, earned C$83 million ($79 million), or 40 Canadian cents a share, in the quarter ended June 30. That compares with a profit of C$68.4 million, or 33 Canadian cents a share, a year earlier.
Analysts had expected a profit of 40 Canadian cents a share before items, according to Reuters Estimates.
RBC Capital Markets analyst Irene Nattel, who expected earnings of 39 Canadian cents a share, said the results were “a tick better than expected, reflecting strong operating performance and a modest gain on asset sale.”
Montreal-based Saputo also said it would increase its quarterly dividend to 14 Canadian cents a share from 12 Canadian cents.
Revenue rose 11 percent to C$1.36 billion, getting a big boost from the company’s U.S. dairy products sector, which reflected Saputo’s $160 million acquisition of Wisconsin-based Alto Dairy Cooperative in April and higher cheese prices.
The Alto purchase and the 2007 acquisition of industrial cheese maker Land O‘Lakes West Coast for $216 million have doubled the size of Saputo’s U.S. business.
Appreciation of the Canadian dollar took a C$44 million bite out of revenue, Saputo said.
“We expect earnings growth to remain in excess of 25 percent for the remainder of fiscal 2009,” TD Newcrest analyst Michael Van Aelst said in a note preceding the results.
Saputo is poised to benefit from cost savings resulting from its acquisitions and from a growing market share in Canada, he wrote.
Aelst rates Saputo stock a “buy” due to its earnings potential and expectations it will be a primary beneficiary from more merger and acquisition activity in the sector.
Australia’s competition watchdog will make a final decision on Italian food group Parmalat’s PLT.MI bid for Diary Farmers by August 21 and has cleared a bid by Japanese-owned National Foods. Saputo does not need commission approval because it does not have major operations in the country.
Shares in Saputo gained 13 Canadian cents to close at C$27.52 on the Toronto Stock Exchange on Wednesday. So far this year, the stock has dropped about 6 percent.
Reporting by Susan Taylor; editing by Rob Wilson