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Saputo Inc.: Saputo Inc.: Financial Results for Fiscal 2009, Ended March 31, 2009

^{Published on 2009-06-09 09:20:25, Last Modified on 2009-06-09 09:26:54 - Market Wire}
 

MONTREAL, QUEBEC--(Marketwire - June 9, 2009) - Saputo Inc. (TSX:SAP)

Net earnings at $278.9 million, down 3.2%

Revenues at $5.793 billion, up 14.5%

Saputo Inc. released today its financial results for fiscal 2009, which ended March 31, 2009.

- Net earnings totalled $278.9 million or $1.35 (basic) per share, down 3.2% compared to $288.2 million or $1.40 (basic) per share in fiscal 2008.

- Consolidated revenues totalled $5.793 billion, an increase of $734.4 million or 14.5% compared to $5.059 billion posted in fiscal 2008.

- Consolidated earnings before interest, income taxes, depreciation and amortization (EBITDA)(1) amounted to $547.8 million, an increase of $21.8 million or 4.1% compared to $526.0 million in fiscal 2008.

- EBITDA in the Canada, Europe and Argentina (CEA) Dairy Products Sector totalled $378.9 million, as compared to $363.4 million last fiscal year, an increase of $15.5 million. This increase is mainly attributed to the acquisition of the activities of Neilson Dairy, the dairy division of Weston Foods (Canada) Inc., completed on December 1, 2008 (Neilson Dairy Acquisition), in addition to better efficiencies, including cost reduction initiatives in production, warehousing and logistics, and increased sales volumes from our Argentinean operations as compared to last fiscal year. EBITDA was negatively impacted by the unfavourable dairy ingredients(2) market conditions. The EBITDA of our Dairy Products Division (Europe) was negatively affected due to lower selling prices in the market. The Dairy Products Divisions (Europe and Argentina) had an inventory write-down of $8.4 million as a result of negative market conditions.

- EBITDA in the USA Dairy Products Sector amounted to $152.0 million, a $6.5 million increase compared to $145.5 million in fiscal 2008. The inclusion of the activities of Alto Dairy Cooperative, acquired on April 1, 2008 (Alto Acquisition), as well as the initiatives undertaken by the Company in prior and current fiscal years with regards to improved operational efficiencies and increased selling prices benefited the EBITDA. The decision by the United States Department of Agriculture (USDA) in the third quarter of fiscal 2009 to change the milk price formula also had a positive impact on EBITDA. These benefits offset increased ingredients, fuel and other costs during fiscal 2009. Also, the Sector incurred approximately $2 million of rationalization charges in relation to the closure of our facility in Hinesburg, Vermont. A lower average block market(3) per pound of cheese in fiscal 2009 in comparison to fiscal 2008 negatively impacted EBITDA, causing an unfavourable basis of absorption of our fixed costs and having an unfavourable impact on the realization of our inventories in fiscal 2009. In addition, the Sector's EBITDA decreased due to an unfavourable dairy ingredients market as compared to the prior fiscal year. These decreases offset a more favourable relationship between the average block market per pound of cheese and the cost of milk as raw material. Also included in the EBITDA is an inventory write-down of $12.5 million. Finally, the weakening of the Canadian dollar added approximately $11 million to the current fiscal year's EBITDA.

- EBITDA in the Grocery Products Sector amounted to $16.9 million, a slight decrease as compared to $17.2 million for the previous fiscal year. This decrease is mainly due to additional costs in an effort to support our brands, along with a decrease in sales volumes and higher ingredients, packaging, labour and energy costs. These factors offset the benefits from the selling price increase.

- Cash flows generated by operations amounted to $467.3 million for fiscal 2009, an increase of $176.2 million compared to $291.1 million in fiscal 2008.

- The Company increased long-term debt by $340.0 million in relation to the Neilson Dairy Acquisition, repaid bank loans for $81.7 million, issued shares for a cash consideration of $14.9 million as part of the stock option plan, and paid $111.7 million in dividends.


Summary of Fourth Quarter Results

- Net earnings amounted to $69.2 million for the quarter ended March 31, 2009, a decrease of $6.0 million compared to the same quarter last fiscal year.

- Revenues totalled $1.460 billion, $194.2 million or 15.3% higher compared to the $1.266 billion for the same quarter last fiscal year. The increase is attributed mainly to our CEA Dairy Products Sector, whose revenues increased by approximately $158 million in the fourth quarter as compared to last fiscal year. The inclusion of the Neilson Dairy Acquisition, higher selling prices in our Canadian operations in accordance with the increase in the cost of milk as raw material, and higher sales volumes in our Argentinean operations were the main factors. The increase was partially offset by lower export prices in our Argentinean operations. Our USA Dairy Products Sector contributed approximately $35 million to the revenue increase as compared to the corresponding quarter last fiscal year, resulting mainly from the inclusion of the Alto Acquisition. Less favourable dairy ingredients market conditions, lower sales volumes and a lower average block market per pound of cheese in the current quarter compared to the same quarter last fiscal year, partially offset this increase. Revenues from our Grocery Products Sector increased by approximately $1 million in the fourth quarter of fiscal 2009 in comparison to the same quarter last fiscal year.

- EBITDA for the fourth quarter totalled $141.9 million, a $4.4 million increase compared to the same quarter last fiscal year.

- EBITDA from the CEA Dairy Products Sector increased by approximately $4 million in comparison to the same quarter last fiscal year. The inclusion of the Neilson Dairy Acquisition, as well as operational efficiencies, and the weakening of the Canadian dollar as compared to the Argentinean peso were the main reasons for this EBITDA increase. This offset an unfavourable dairy ingredients market in our Canadian operations of $1.0 million as well as an unfavourable export market and an inventory write-down of $1.0 million in our Argentinean operations. The Dairy Products Division (Europe) had lower EBITDA in the fourth quarter.

- The EBITDA of our USA Dairy Products Sector decreased by approximately $1 million in the current quarter compared to the same quarter last fiscal year. A decrease in the average block market per pound of cheese in the current quarter compared to the same quarter last fiscal year had an effect on EBITDA, negatively impacting the basis of absorption of our fixed costs as well as having an unfavourable impact on the realization of our inventories. These decreases were offset by a more favourable relationship between the average block market per pound of cheese and the cost of milk as raw material compared to the same quarter last fiscal year. In addition, the Sector also experienced a less favourable dairy ingredients market. The market factor decreases were offset during the quarter by an increase due to the benefits derived from the initiatives undertaken in prior and current fiscal years with regards to improved operational efficiencies and increased selling prices. The weakening of the Canadian dollar during the quarter added approximately $7 million to this fiscal year's EBITDA.

- The EBITDA of our Grocery Products Sector increased by approximately $1 million for the quarter ended March 31, 2009 in comparison to the same quarter last fiscal year. During the quarter, the Sector incurred lower costs towards brand support which offset additional operating costs related to higher ingredient, packaging, labour, and energy costs.

Outlook

Fiscal 2009 was a good year for the Company despite numerous challenges with regards to volatile market conditions. We enter fiscal 2010 with optimism.

Our Dairy Products Division (Canada) will complete, in fiscal 2010, the integration process of the Neilson Dairy Acquisition. It will also continue to work towards the optimization of its production facilities in an effort to improve efficiencies.

In fiscal 2010, we will complete the capital expenditure programs for our European operations. In addition, we will continue to improve overall efficiencies of these operations in an effort to improve results.

The Dairy Products Division (Argentina) faces challenges from the relatively high local milk prices combined with the current lower cheese selling prices in the international market. Nevertheless, in order to become even more competitive, nationally and internationally, the Division will continue to focus on efficiencies and cost reductions in an effort to improve its overall operations.

In fiscal 2010, the USA Dairy Products Sector will have to cope with many challenges of the current economic context. Since the Division is well represented in all three market segments, it is well positioned to face this situation. In addition, further focus will be on completion of expansion projects in California and in Wisconsin in an effort to improve overall efficiencies.

Our Grocery Products Sector's objective will be to re-evaluate its entire operations. Revamping of the manufacturing process and streamlining of the product offering is the focus of this new fiscal year.

With the current economic crisis, we intend to maintain our sound approach, while closely monitoring our operations to cope with the current context and to also continue to maximize our efficiency. We are in a solid financial position with a sound fundamental structure. This should provide the Company with the basis to pursue growth internally and through acquisitions, and to overcome the challenges that could come our way.

Financial Statements and Management's Analysis

For more information on the results of fiscal 2009 as well as the fourth quarter of fiscal 2009, reference is made to the audited consolidated financial statements and the notes thereto and to our Management's Analysis for the fiscal year ended March 31, 2009. These documents can be obtained on SEDAR at [ www.sedar.com ].

Caution Regarding Forward-Looking Statements

This press release, including the "Outlook" section, contains forward-looking statements within the meaning of securities laws. These statements are based, among others, on our current assumptions, expectations, estimates, objectives, plans and intentions regarding projected revenues and expenses, the economic and industry environments in which we operate or which could affect our activities, our ability to attract and retain clients and consumers as well as our operating costs, raw materials and energy supplies which are subject to a number of risks and uncertainties. Forward-looking statements can generally be identified by the use of the conditional tense, the words "may", "should", "would", "believe", "plan", "expect", "intend", "anticipate", "estimate", "foresee", "objective" or "continue" or the negative of these terms or variations of them or words and expressions of similar nature. Actual results could differ materially from the conclusion, forecast or projection stated in such forward-looking information. As a result, we cannot guarantee that any forward-looking statements will materialize. Assumptions, expectations and estimates made in the preparation of forward-looking statements and risks that could cause our actual results to differ materially from our current expectations are discussed throughout the Annual Report in the Management's Analysis and, in particular, in "Risks and Uncertainties". Forward-looking information contained in this press release, including the "Outlook" section, is based on management's current estimates, expectations and assumptions, which management believes are reasonable as of the current date. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. Except as required under applicable securities legislation, we do not undertake to update these forward-looking statements, whether written or oral, that may be made from time to time by us or on our behalf, whether as a result of new information, future events or otherwise.

Dividends

The Board of Directors of the Company declared a quarterly dividend of $0.14 per share, payable on July 24, 2009 to shareholders of record as of July 13, 2009.

Conference Call

A conference call to discuss the fiscal 2009 results will be held on Tuesday, June 9, 2009 at 3:00 PM, Eastern Time. To participate in the conference call, dial 1 800 786 6705. To ensure your participation, please dial in approximately five minutes before the call.

To listen to this call on the web, please enter [ http://events.onlinebroadcasting.com/saputo/060909/index.php ] in your web browser.

For those unable to participate, an instant replay will be available until midnight, Tuesday, June 16, 2009. To access the replay dial 1 800 558 5253, ID number 2145029. A replay of the conference call will also be available on the Company's web site at [ www.saputo.com ].

About Saputo

Saputo produces, markets and distributes a wide array of products of the utmost quality, including cheese, fluid milk, yogurt, dairy ingredients and snack-cakes. Saputo is the 11th largest dairy processor in the world, the largest in Canada, the third largest in Argentina, among the top 3 cheese producers in the United States and the largest snack-cake manufacturer in Canada. Our products are sold in more than 40 countries under well-known brand names such as Saputo, Alexis de Portneuf, Armstrong, Baxter, Dairyland, Danscorella, De Lucia, Dragone, DuVillage 1860, Frigo Cheese Heads, Kingsey, La Paulina, Neilson, Nutrilait, Ricrem, Stella, Treasure Cave, HOP&GO!, Rondeau and Vachon. Saputo is a publicly traded company whose shares are listed on the Toronto Stock Exchange under the symbol SAP.

1) Measurement of results not in accordance with Generally Accepted 
 Accounting Principles

 The Company assesses its financial performance based on its 
 EBITDA, this being earnings before interest, income taxes, 
 depreciation and amortization. EBITDA is not a measurement of 
 performance as defined by Generally Accepted Accounting Principles
 in Canada, and consequently may not be comparable to similar 
 measurements presented by other companies. Reference is made to 
 section entitled "Measurement of results not in accordance with 
 Generally Accepted Accounting Principles" contained in the 
 Management's Analysis.

2) Also known as by-products.

3) "Average block market" is the average daily price of a 40 pound 
 block of cheddar traded on the Chicago Mercantile Exchange (CME),
 used as the base price for cheese.



NOTICE
The consolidated financial statements of Saputo Inc. for the three-month
periods ended March 31, 2009 and 2008 have not been reviewed by an
external auditor.

CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands of dollars, except per share amounts)


 For the three-month For the years
 periods ended March 31 ended March 31
 (unaudited) (audited)
------------------------------------------------------------------------
------------------------------------------------------------------------
 2009 2008 2009 2008

Revenues $1,460,352 $1,266,146 $5,793,263 $5,058,900
Cost of sales,
 selling and
 administrative
 expenses 1,318,471 1,128,645 5,245,464 4,532,856
------------------------------------------------------------------------
------------------------------------------------------------------------
Earnings before
 interest, depreciation,
 amortization and
 income taxes 141,881 137,501 547,799 526,044
Depreciation
 and amortization 28,837 19,827 108,284 79,434
------------------------------------------------------------------------
------------------------------------------------------------------------
Operating income 113,044 117,674 439,515 446,610
Interest on long-term debt 5,680 4,588 20,684 18,806
Other interest, net 3,805 1,039 11,031 6,538
------------------------------------------------------------------------
Earnings before
 income taxes 103,559 112,047 407,800 421,266
Income taxes 34,361 36,836 128,852 133,066
------------------------------------------------------------------------
Net earnings $69,198 $75,211 $278,948 $288,200
------------------------------------------------------------------------
------------------------------------------------------------------------

Earnings per share
 Net earnings
 Basic $0.33 $0.37 $1.35 $1.40
 Diluted $0.33 $0.36 $1.34 $1.38


NOTE : These financial statements should be read in conjuction with our
audited consolidated financial statements and the notes thereto and with
our management's analysis for the fiscal year ended March 31, 2009.



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands of dollars)
(audited)

For the years ended March 31 2009 2008
------------------------------------------------------------------------

Net earnings $278,948 $288,200

Other comprehensive income (loss):

Foreign currency translation adjustment
Net change in unrealized gains (losses) 
on translation of financial statements of 
self-sustaining foreign operations 163,896 (63,750)

Net changes in cash flow hedge
Losses on derivative items designated
as hedges of interest cash flows, net of tax (1,263) -

------------------------------------------------------------------------
Total other comprehensive income (loss) 162,633 (63,750)
------------------------------------------------------------------------
Comprehensive income $441,581 $244,450
------------------------------------------------------------------------
------------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(in thousands of dollars)
(audited)

For the years ended March 31 2009 2008
------------------------------------------------------------------------

Retained earnings, beginning of year $1,206,568 $1,085,081
Net earnings 278,948 288,200
Dividends (111,660) (94,455)
Excess of purchase price of share capital 
 over carrying value - (72,258)
------------------------------------------------------------------------
Retained earnings, end of year $1,373,856 $1,206,568
------------------------------------------------------------------------



SEGMENTED INFORMATION
(in thousands of dollars)

 For the three-month For the years
 periods ended March 31 ended March 31
 (unaudited) (audited)
------------------------------------------------------------------------
------------------------------------------------------------------------
 2009 2008 2009 2008

Revenues
Dairy Products
 CEA(1) $904,339 $746,224 $3,323,541 $2,966,293
 USA 516,968 481,777 2,304,613 1,927,983
------------------------------------------------------------------------
 1,421,307 1,228,001 5,628,154 4,894,276
Grocery Products 39,045 38,145 165,109 164,624
------------------------------------------------------------------------
 $1,460,352 $1,266,146 $5,793,263 $5,058,900
------------------------------------------------------------------------
------------------------------------------------------------------------

Earnings before interest,
 depreciation, 
 amortization and income
 taxes
Dairy Products
 CEA $98,320 $94,167 $378,898 $363,365
 USA 39,105 40,228 152,006 145,478
------------------------------------------------------------------------
 137,425 134,395 530,904 508,843
Grocery Products 4,456 3,106 16,895 17,201
------------------------------------------------------------------------
 $141,881 $137,501 $547,799 $526,044
------------------------------------------------------------------------
------------------------------------------------------------------------

Depreciation and 
 amortization
Dairy Products
 CEA $12,665 $9,405 $41,560 $36,810
 USA 13,898 8,462 58,849 34,780
------------------------------------------------------------------------
 26,563 17,867 100,409 71,590
Grocery Products 2,274 1,960 7,875 7,844
------------------------------------------------------------------------
 $28,837 $19,827 $108,284 $79,434
------------------------------------------------------------------------
------------------------------------------------------------------------

Operating income
Dairy Products
 CEA $85,655 $84,762 $337,338 $326,555
 USA 25,207 31,766 93,157 110,698
------------------------------------------------------------------------
 110,862 116,528 430,495 437,253
Grocery Products 2,182 1,146 9,020 9,357
------------------------------------------------------------------------
 $113,044 $117,674 $439,515 $446,610
------------------------------------------------------------------------
------------------------------------------------------------------------

Interest 9,485 5,627 31,715 25,344
------------------------------------------------------------------------

Earnings before 
 income taxes 103,559 112,047 407,800 421,266

Income taxes 34,361 36,836 128,852 133,066
------------------------------------------------------------------------

Net earnings $69,198 $75,211 $278,948 $288,200
------------------------------------------------------------------------
------------------------------------------------------------------------

1) Canada, Europe and Argentina Dairy Products Sector



CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)

 For the three-month For the years
 periods ended March 31 ended March 31
 (unaudited) (audited)
------------------------------------------------------------------------
------------------------------------------------------------------------
 2009 2008 2009 2008

Cash flows related to 
 the following activities:
 Operating
 Net earnings $69,198 $75,211 $278,948 $288,200
 Items not affecting 
 cash and cash 
 equivalents
 Stock based 
 compensation 2,032 2,033 7,791 8,279
 Depreciation and 
 amortization 28,837 19,827 108,284 79,434
 (Gain) loss on 
 disposal of fixed
 assets (12) 182 (3,450) (144)
 Future income taxes (5,980) 16,114 2,721 15,838
 Deferred share units (1,048) 1,265 (62) 1,265
 Funding of employee 
 plans in excess 
 of costs (3,288) (1,498) (4,761) (2,019)
------------------------------------------------------------------------
 89,739 113,134 389,471 390,853
 Changes in non-cash 
 operating working
 capital items 119,351 (26,349) 77,817 (99,791)
------------------------------------------------------------------------
 209,090 86,785 467,288 291,062
------------------------------------------------------------------------
------------------------------------------------------------------------

 Investing
 Business acquisitions (1,779) (1,016) (630,353) (254,204)
 Portfolio investment - - - 1,648
 Additions to 
 fixed assets (38,574) (32,471) (121,863) (101,723)
 Proceeds on disposals 
 of fixed assets 1,068 2,909 9,032 5,285
 Other assets (4,359) (2,650) (12,181) (5,443)
------------------------------------------------------------------------
 (43,644) (33,228) (755,365) (354,437)
------------------------------------------------------------------------
------------------------------------------------------------------------

 Financing
 Proceeds from 
 long-term debt - - 340,000 -
 Bank loans (97,360) 128,742 (81,682) 91,413
 Issuance of 
 share capital 2,077 4,565 14,921 28,366
 Repurchase of 
 share capital - - - (81,472)
 Other liabilities - - - -
 Dividends (28,983) (24,710) (111,660) (94,455)
------------------------------------------------------------------------
 (124,266) 108,597 161,579 (56,148)
------------------------------------------------------------------------
------------------------------------------------------------------------

Increase (decrease) in 
 cash and cash equivalents 41,180 162,154 (126,498) (119,523)
Effect of exchange rate 
 changes on cash and cash 
 equivalents 4,515 922 4,672 8,339
(Bank indebtedness) cash 
 and cash equivalents, 
 beginning of period (1,811) 2,634 165,710 276,894
------------------------------------------------------------------------
Cash and cash equivalents,
 end of period $43,884 $165,710 $43,884 $165,710
------------------------------------------------------------------------
------------------------------------------------------------------------


Supplemental information

Interest paid $2,633 $1,717 $29,242 $25,767
------------------------------------------------------------------------
------------------------------------------------------------------------

Income taxes paid $25,746 $20,312 $124,829 $92,235
------------------------------------------------------------------------



CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
(audited)

 March 31, 2009 March 31, 2008
------------------------------------------------------------------------

ASSETS
Current assets
 Cash and cash equivalents $43,884 $165,710
 Receivables 427,227 408,973
 Inventories 583,594 533,686
 Income taxes 9,585 10,252
 Future income taxes 23,881 17,150
 Prepaid expenses and other assets 37,501 43,729
------------------------------------------------------------------------
 1,125,672 1,179,500
Portfolio investment 41,343 41,343
Fixed assets 1,149,662 871,739
Goodwill 760,283 522,546
Trademarks and other intangibles 327,516 38,043
Other assets 88,326 75,257
Future income taxes 6,301 5,048
------------------------------------------------------------------------
 $3,499,103 $2,733,476
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES
Current liabilities
 Bank loans $139,399 $222,584
 Accounts payable and 
 accrued liabilities 484,866 409,323
 Income taxes 113,910 111,511
 Future income taxes 6,348 19,790
 Current portion of long-term debt 214,421 -
------------------------------------------------------------------------
 958,944 763,208
Long-term debt 403,065 225,830
Other liabilities 22,180 13,972
Future income taxes 142,566 111,306
------------------------------------------------------------------------
 1,526,755 1,114,316
------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
Retained earnings 1,373,856 1,206,568
Accumulated other comprehensive 
 income (loss) 16,219 (146,414)
------------------------------------------------------------------------
 1,390,075 1,060,154
Share capital 555,529 536,921
Contributed surplus 26,744 22,085
------------------------------------------------------------------------
 1,972,348 1,619,160
------------------------------------------------------------------------
 $3,499,103 $2,733,476
------------------------------------------------------------------------
------------------------------------------------------------------------