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November 10, 2020

Saputo “excited” by acquisition opportunities

Canadian dairy major Saputo has outlined its future acquisition strategy in a post-results call with analysts.

By Leonie Barrie

Canadian dairy major Saputo has confirmed its interest in making further acquisitions.

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Speaking to analysts after the release of its second-quarter results, the company’s CEO, Lino Saputo Jr., said: “I’m so excited about the potential that we have from an M&A front.”

Despite much of the group’s recent M&A activity being in Australia, Mr Saputo said the US is a key market for the company when looking for acquisition targets. He said it is looking at a number of opportunities there.

“I would say that we do have some very, very live files going on right now. So the areas (sic) that are of interest to us, of course, is the United States. And in the US there is still potential for consolidation.”

But Mr Saputo said the company is taking a disciplined approach when it comes to acquisition targets.

“You may have seen some deals materialise and we were not the winning bidders on some of those deals. And that’s okay because we’re always going to approach our business with lots of discipline, discipline when we go to market with our strategies and also discipline when we make acquisitions. But when one door closes, I think there are three windows that open up, and I’m delighted about the windows that are open for us right now,” he said.

“[The} United States [is] a very, very important platform for us – a hotbed of potential opportunities that could come somewhere down the road.”

In August, Saputo merged its two US operations to create a more “agile platform”.

Mr Saputo said the company is also keen to build its presence in Australia through further acquisitions.

Saputo confirmed last month it is mulling a move to buy Australia-based Lion Dairy & Drinks from Japan’s Kirin Holdings.

It bought Lion’s speciality cheese business in 2019 and Australian dairy major Murray Goulburn the year before.

Mr Saputo said: “[In] Australia, there are still pockets of areas where we think there might be opportunity for us to further enhance our platforms that we have there.”

He added: “I’m so proud of our team in Australia, and I think they need to be rewarded by more acquisition.”

Saputo, meanwhile, is also looking at Europe, where its last purchase was the UK’s Dairy Crest last year, the company’s CEO said.

“The EU 27, the largest milk pool in the world, is an area that we think we could be further consolidating in,” he said.

In the three months to 30 September, Saputo recorded revenues of CAD3.70bn (US$2.84bn), 1% up on the equivalent period in 2019. However, adjusted EBITDA was down 6.1% at CAD370.5m. Saputo’s second-quarter net earnings were CAD170.8m, compared to CAD174.9m in the corresponding period a year ago.

TD Securities analyst Michael van Aelst pointed to a mixed performance from Saputo across its domestic, US, European and international – which includes Australia – operations. 

“Saputo is executing well within the context of a challenging market created by the Covid-19 pandemic and extremely volatile commodity prices, but that is not enough to prevent earnings from falling year-on-year. On a consolidated basis, the results were roughly in line with our estimates, with segment outperformance in Canada and USA (modest) offsetting underperformance in International and Europe.”

Over the first six months of the year, Saputo generated revenues of CAD7.09bn, versus CAD7.33bn a year earlier. The company’s first-half adjusted EBITDA was CAD737m – versus CAD752.4m a year ago – and its net earnings reached CAD312.7m, against CAD296.5m.

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What’s missing from your IPO industry assessment?

IPO activity all but stopped in 2020, as the investment community grew wary of the effects of COVID-19 on economies. No matter how deserving a business was of flotation, momentum was halted by concerns of when a ‘new normal’ of working patterns and trade would set in. Recently, sentiment has changed. Flotations picked up again during the second half of 2021, and now in 2022 the mood is decidedly optimistic. Business leaders have their eyes on fast rebounding economies, buoyant market indices and the opportunity once again to take their businesses public. As a result, global IPOs are expected to hit back this year. With GlobalData’s new whitepaper, ‘IPOs in Consumer and Retail: 5 must-include elements for your prospectus industry report’, you can explore exactly what is needed in the essential literature. GlobalData’s focus lies in the critical areas to get right:
  • Macroeconomic and demographic environment
  • Consumer context
  • Industry environment
  • Competitive environment
  • Route to market
Interested to learn more about what to include in your IPO Industry Assessment report? Download our free whitepaper.
by GlobalData
Enter your details here to receive your free Report.

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