February 6, 2008 / 5:59 PM / in 10 years

UPDATE 1-Saputo profit jumps on tax cut, higher sales

(Adds details, analyst comments, stock price)

OTTAWA, Feb 6 (Reuters) - Third-quarter profit rose 28 percent at Saputo Inc (SAP.TO) as its results were buoyed by a big one-time tax recovery and a 25 percent increase in revenue, the dairy-products company said on Wednesday.

One of North America’s biggest cheese makers, Saputo said net earnings rose to C$82 million, or 39 Canadian cents per share, from C$64.1 million, or 31 Canadian cents a share, a year earlier.

Excluding the tax adjustment, earnings rose nearly 18 percent to C$75.5 million, or 36 Canadian cents a share, from C$64.1 million, or 31 Canadian cents.

On average, analysts had expected a profit of 35 Canadian cents a share, before exceptions, according to Reuters Estimates.

Revenue grew to C$1.27 billion from C$1 billion, reflecting big gains in the United States from its $216 million Land O’ Lakes acquisition last year.

A rising Canadian dollar eroded sales by C$56 million compared with the same period last year, Saputo said.

“Results beat our expectations primarily due to higher than anticipated U.S. revenues and better margins in the ‘Canada and Other’ segment,” said Desjardins Securities analyst Jessy Hayem in a note.

Higher sales volumes and efficiency helped drive profit margins at the Canadian unit 80 basis points higher to 12.7 percent, the analyst wrote. Margins fell 7.7 percent in the U.S. division on Land O’ Lakes’ lower margins and bigger promotion costs for its retail segment.

Grocery product margins fell to 10 percent, below the analyst’s 13.5 percent forecast.

Revenue at Saputo’s Canadian unit gained 6 percent to C$755 million on higher prices in Canada and Argentina, bigger milk sales volumes in Canada, and contributions from Welsh-based Dansco. U.S. sector sales jumped 84 percent higher to C$480 million.

Late last month, Saputo said it planned to buy Wisconsin-based Alto Dairy for $160 million. The deal is a “major step” in boosting its presence in the United States, it said.

Shares in the Montreal-based company added about 3 percent, or 79 Canadian cents, to C$27.65 on the Toronto Stock Exchange on Wednesday.

$1=$1.00 Canadian Reporting by Susan Taylor; editing by Rob Wilson

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