February 4, 2009 / 6:24 PM / 9 years ago

UPDATE 2-Saputo results hurt by prices, writedowns

* Third-quarter EPS C$0.28 vs C$0.39

* Results include writedowns of C$22.3 mln

* Shares down 4.6 percent

(Adds details and analyst comments. Updates stock price)

TORONTO, Feb 4 (Reuters) - Saputo Inc (SAP.TO), Canada’s largest cheese maker, said on Wednesday its quarterly profit dropped on writedowns related to a plant closing and plunging prices for its products, sending its stock sliding.

The Montreal-based company completed the closure of its Hinesburg, Vermont, cheese plant during the quarter and transferred the operations to other U.S. facilities. The move resulted in a C$7.4 million ($6 million) writedown, but the company sees it bringing annual cost savings of about US$2.2 million, beginning in early 2010.

The results also included a C$12.9 million writedown related to a steep drop in the average price per pound of cheese. Prices have slumped over the past year along with the prices of most of its ingredients, including milk.

“The biggest issue is that lower cheese prices are hurting these guys and lower byproduct prices ...” said Brian Yarbrough, an analyst at Edward Jones, in St. Louis. “Really unfortunately it’s things outside of their control. The things they can control they are doing a pretty good job of.”

Earnings dropped to C$57.8 million ($47.1 million), or 28 Canadian cents a share, in its third quarter, ended Dec. 31, from C$82 million, or 39 Canadian cents, a year earlier.

Revenue rose 18.8 percent to C$1.52 billion from C$1.28 billion, helped by the purchase of U.S.-based Alto Dairy Cooperative.

If the writedowns were not included, the company would have reported earnings per share of about 37 Canadian cents, Yarbrough said.

Analysts had expected average earnings of 35 Canadian cents a share before items, and revenue of C$1.5 billion, according to Reuters Estimates.

The company’s shares were down 4.6 percent at C$18.70 on the Toronto Stock Exchange.

Yarbrough said the price of cheese and low byproduct prices will hurt the quarters for the next several quarters.

“It’s a great long-term story, but for the next one to two quarters it could be pretty tough,” he said. “But as long as prices stay down here, it makes for a tough environment.” ($1=$1.23 Canadian) (Reporting by Scott Anderson; Editing by Frank McGurty)

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