Saputo Reports Financial Results for the Third Quarter of Fiscal 2025 Ended December 31, 2024; Carl Colizza Comments

Saputo Inc. reported its financial results for the third quarter of fiscal 2025, which ended on December 31, 2024. All amounts in this news release are in millions of Canadian dollars (CDN), except per share amounts, unless otherwise indicated, and are presented according to International Financial Reporting Standards (IFRS).

“In the third quarter, our strong execution resulted in our highest adjusted EBITDA performance since 2023, with $417 million, reflecting a 13% year-over-year increase,” said Carl Colizza, President and CEO. “We made significant strides in executing our strategic playbook and controlling costs, and benefited from accelerated contributions from our recently completed capital projects. Our solid cash generation also enabled us to return additional cash to shareholders through our share buyback program. We're confident in our ability to continue generating steady cash flows and we intend to focus our capital allocation strategy on share repurchases. As a result, we increased the total number of shares that can be purchased under our NCIB from 2% to 5% of shares outstanding.”

Fiscal 2025 Third Quarter Financial Highlights

• Revenues amounted to $4.994 billion, up $727 million or 17.0%.
• Net loss totalled $518 million.
• A non-cash goodwill impairment charge of $674 million after tax was recorded in relation to the Dairy Division (UK) in our Europe Sector.
• Net loss per share (EPS) (basic and diluted) were $1.22, compared to $0.29.
• Adjusted EBITDA amounted to $417 million, up $47 million or 12.7%.
• Adjusted net earnings totalled $167 million, up from $163 million, and adjusted EPS (basic and diluted) were stable at $0.39.

Results reflected the following:

• Revenue and adjusted EBITDA growth of 17.0% and 12.7%, respectively;
• Revenues were up in all our sectors;
• Our Canada Sector had a strong performance with adjusted EBITDA of $175 million, up 16.7%;
• Our USA Sector continued to deliver benefits from operational improvements, contributing to a 20.3% growth in adjusted EBITDA;
• USA Market Factors² had a negative impact due to the unfavourable milk-cheese Spread². Pricing protocols for our dairy food products mitigated the impact of fluctuations of the average butter market price²;
• In our International Sector, we benefited from lower milk costs in Australia, while in Argentina, the peso devaluation did not keep pace with inflation, which has led to higher costs of production, including higher milk costs;
• In our Europe Sector, adjusted EBITDA increased as our Dairy Division (UK) margins continued to recover from the prior year, when we were selling off high-cost excess inventory. However, a non-cash goodwill and intangible assets impairment charge was recorded due to ongoing challenging market conditions in the United Kingdom leading to a slower-than-expected cadence of margin recovery for our Dairy Division (UK); and
• Solid cash generation from operating activities of $382 million.

Normal course issuer bid (NCIB):

• Saputo increased from 2% to 5% the number of common shares that may be purchased under the NCIB, allowing for the purchase of up to 21,217,922 common shares of its 424,358,459 issued and outstanding common shares as of November 8, 2024.
• During the third quarter of fiscal 2025, the Company purchased approximately 1.2 million common shares for a total purchase price of approximately $32 million.

Dividend:

• The Board of Directors approved a dividend of $0.19 per share payable on March 14, 2025, to shareholders of record on March 4, 2025.

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• FY25 OUTLOOK

  • Factors impacting our performance in FY25 will be the economic health of consumers, the rate of input cost inflation, commodity market and foreign exchange volatility, the supply chain environment, and benefits from our Global Strategic Plan.
  • Inflationary pressures are anticipated to moderate versus the prior fiscal year. However, labour costs may remain elevated in addition to increases in marketing and advertising investments to support new product launches and our brands.
  • We expect USA dairy markets to progressively improve throughout the year, supported by a better balance between milk supply and dairy demand, but with continued volatility in the short to medium-term.
  • Global demand for dairy products is expected to remain moderate, alongside subdued international dairy market prices due to macroeconomic conditions.
  • We expect a gradual ramp-up in contribution from optimization and capacity expansion initiatives, notably in the USA Sector, through the end of FY25 and FY26.
  • We expect to see continued margin recovery in the Europe Sector, although at a slower-than-expected cadence. The sector is also expected to further benefit from its strong brand portfolio but will be impacted by rising input costs and challenging market conditions in the United Kingdom.
  • The International Sector should benefit from lower overall milk prices in Australia, while Argentina will be operating under macroeconomic volatility.
  • Cash flow generation should increase as we harvest the benefits from operational improvements and from a reduction in capital expenditures following the completion of the bulk of our Global Strategic Plan investments.
  • Given the Company's flexible balance sheet and expected cash generation, Saputo intends to focus its capital allocation strategy on share repurchases in the near-term.

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