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Saputo Reports Loss Due to Australia Dairy Impairment

Australia 14.02.2024
Source: The DairyNews
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Saputo, the Canadian dairy giant, faces a loss in its third quarter, primarily attributed to a C$265 million ($196.8 million) impairment charge linked to its Australian dairy division. Despite ongoing market difficulties, Chairman, President, and CEO Lino Saputo Jr. highlighted positive strides in volume recovery.
Saputo Reports Loss Due to Australia Dairy Impairment
Saputo's Australia dairy division encountered challenges with falling milk supply and a disparity in cheese and ingredient prices, leading to a non-cash impairment charge. Lino Saputo Jr. explained the impact on the cash-generating unit's future discounted cash flow due to the disconnect between international market prices and the farmgate milk price in the context of a declining milk pool in Australia.

While acknowledging near-term market uncertainties, Saputo remains committed to optimizing results in the face of these challenges. The company has streamlined its manufacturing network in Australia, reducing the number of plants from 11 to 6, but the overall strategy remains unchanged, with a focus on the domestic market and key customers in the export market.

Saputo reported a net loss of C$124 million compared to a C$179 million profit the previous year. Adjusted net earnings and EBITDA also experienced declines. Despite a 7% drop in third-quarter revenue to C$4.3 billion, Lino Saputo Jr. expressed confidence in the long-term strategy, emphasizing progress in volume recovery across business segments.

The CEO acknowledged persistent themes of volatile global dairy commodity markets and consumer challenges, but with most challenges addressed, he remains optimistic about the company's future. The company's strategic priorities include operational excellence, executing major capital projects, cost containment, and cash flow generation.

Saputo anticipates a "healthier balance" between price, mix, and volume, expecting markets to stabilize over time. However, the speed of recovery remains uncertain. Looking ahead, the CEO warned of ongoing market volatility, citing challenges from input costs to currencies, consumer behavior, and political dynamics.

In a Q&A session, Lino Saputo Jr. highlighted global challenges in milk production, economic pressures on dairy farmers, and increased scrutiny on environmental, social, and governance (ESG) aspects. The resilience of the consumer market was acknowledged, but uncertainties persist in the international market.
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