Saputo Inc.
TSX : SAP

Saputo Inc.

June 06, 2006 12:16 ET

Saputo Inc.: Financial Results For Fiscal 2006, Ended March 31, 2006

MONTREAL, QUEBEC--(CCNMatthews - June 6, 2006) - Saputo Inc. (TSX:SAP)



Net earnings at $192.1 million, down 17.2%,
Revenues at $4.022 billion, up 3.6%

Saputo Inc. released today its financial results for fiscal 2006,
which ended March 31, 2006.

- Net earnings totalled $192.1 million or $1.83 (basic) per share,
down 17.2% compared to $232.1 million or $2.23 (basic) per share
in fiscal 2005.

- In fiscal 2006, the Company wrote down the value of its portfolio
investment by $10.0 million due to a permanent impairment, which
had an after-tax effect of approximately $8 million.

- Consolidated revenues totalled $4.022 billion, an increase of
$139.1 million or 3.6% compared to $3.883 billion posted in
fiscal 2005.

- Consolidated earnings before interest, income taxes,depreciation,
amortization and devaluation (EBITDA)(1) amounted to $366.0
million, a decrease of $41.8 million compared to $407.8 million
in fiscal 2005.

- EBITDA in the Canadian and Other Dairy Products Sector totalled
$261.6 million, as compared to $244.2 million last fiscal year,
an increase of $17.4 million or 7.1%. The increase is mainly
attributed to the benefits derived from rationalization
activities undertaken in the Canadian operations during prior
years, the acquisition of Fromage Cote, completed on April 18,
2005, and increased sales volumes from the Canadian fluid milk
activities in comparison to last fiscal year. During the fiscal
year, the sector incurred $2 million in rationalization costs
related to plant closures.

- EBITDA in the US Dairy Products Sector amounted to $78.3 million,
a $58.7 million or 42.8% decrease compared to $137.0 million
posted in fiscal 2005. This decrease is due to a lower average
block market(2) per pound of cheese, a less favourable
relationship between the average block market per pound of cheese
and the cost of milk as raw material, all together impacting
EBITDA by approximately $40 million, the appreciation of the
Canadian dollar, a rationalization charge of $3.3 million
incurred for the closure of the plant in Whitehall, Pennsylvania,
additional promotional expenses of approximately $15 million and
the continued increase in energy, packaging, ingredient and
labour costs. These factors offset EBITDA increases resulting
from higher sales volume.

- EBITDA in the Grocery Products Sector amounted to $26.1 million,
a slight decrease as compared to $26.6 million for the previous
fiscal year. The sector incurred additional expenses of
approximately $2 million related to the pension fund and
approximately $5 million of additional marketing expenses.

- Cash generated by operating activities amounted to $299.6 million
for fiscal 2006, an increase of $30.9 million compared to
$268.7 million in fiscal 2005.

- The Company increased the use of its bank loans by $28.1 million,
issued shares for a cash consideration of $13.7 million as part
of the Stock Option Plan, paid out $72.2 million in dividends,
and purchased shares for cancellation for $38 million as part of
the normal course issuer bid.

Summary of Fourth Quarter Results

- Net earnings amounted to $37.7 million for the quarter ended
March 31, 2006, a decrease of $22.0 million compared to the same
quarter last fiscal year.

- During the quarter, the Company wrote down the value of its
portfolio investment by $10.0 million due to a permanent
impairment, which had an after-tax effect of approximately
$8 million.

- Revenues totalled $969.9 million, an increase of $53.1 million or
5.8% compared to the $916.8 million for the same quarter last
fiscal year. The increase is attributed mostly to the Canadian
and Other Dairy Products Sector. Higher selling prices and sales
volumes in all divisions within the sector, as well as the
inclusion of Fromage Cote, acquired on April 18, 2005, were
responsible for the revenue increase. Revenues from the US Dairy
Products Sector decreased by approximately $27 million compared
to the same quarter last year. The combination of a lower average
block market per pound of cheese and the appreciation of the
Canadian dollar reduced revenues by approximately $53 million.
These negative factors offset increased revenues of approximately
$26 million as a result of a 7.5% increase in sales volume
compared to the same quarter last year. Revenues from the Grocery
Products Sector increased by about $5 million compared to the
same quarter last year, due mostly to new business generated by
the Bakery division.

- EBITDA for the fourth quarter totalled $81.8 million, a $21.5
million decrease from the same period last fiscal year.

- The EBITDA of the Canadian and Other Dairy Products Sector
decreased by approximately $5 million in the fourth quarter of
fiscal 2006 compared to the corresponding quarter last year. This
decrease is due to rationalization costs of $1.0 million incurred
in the fourth quarter of fiscal 2006 for the closure of the plant
in Harrowsmith, Ontario, and the negative effects of changes in
the export tax on Argentinean operations. A decrease in our
Canadian cheese production, consistent with the goal of reducing
our inventory levels, also negatively affected our EBITDA in the
fourth quarter of fiscal 2006.

- EBITDA from the US Dairy Products Sector decreased by
approximately $18 million compared to the corresponding period
last fiscal year. The factors behind this decrease were a lower
average block market per pound of cheese, a less favourable
relationship between the average block market per pound of
cheese and the cost of milk as raw material, the continued
increase in energy costs, and rationalization costs of
$2.5 million incurred in the fourth quarter of fiscal 2006 for
the closure of the plant in Whitehall, Pennsylvania.

- The Grocery Products Sector EBITDA increased by approximately
$1 million as a result of better margins achieved on existing
sales, additional EBITDA generated by overall higher sales
volume, and improved efficiencies.


Outlook

As Saputo enters fiscal 2007, its vision and outlook for growth are aligned. The Company is confident that it is very well positioned to pursue its development. Each of its divisions has set precise objectives specific to their own markets and is committed to deploying every effort necessary to reach them.

The Company's main objectives remain to create value and to be a world-class dairy processor. To reach these goals, it will focus on growth by acquisitions, the improvement of operational efficiencies and on innovation.

In the past years, Saputo has made several acquisitions, large and small, all of which had an important impact on its development. During the current fiscal year, two acquisitions were completed, one in Canada and one in the United States. By making an acquisition in Germany in April 2006, the Company established an initial presence outside of the Americas which will enable it to complement its current activities and to pursue its international expansion. Without a doubt, Saputo's growth will be fuelled by further acquisitions. It will continue to be proactive and devote every effort to find the right opportunities.

Aside from acquisitions, the Company believes in increasing net earnings by constantly improving the way it operates. Thus, it will continue to outdo itself by seeking even greater operational efficiency and by pursuing innovation. Organic growth is absolutely essential since it enables the Company to focus on the controllable aspects of the production and thus mitigate the impacts of adverse market conditions.

Saputo's outlook for fiscal 2007 is very positive. Obviously, as is always the case, there are some circumstances over which it has no control and that could have an impact on its results. However, the Company is convinced that it is well positioned to foil adverse market conditions and continue its growth. It is focused on returning to past profitability levels.

The Company's financial position remains excellent and provides considerable flexibility to ensure its future development. The balance sheet is sound with $2.254 billion in assets and an interest bearing debt ratio at 0.17 of shareholder's equity. Current contractual commitments on bank loans and the senior notes would enable Saputo, if new debts were contracted, to add almost $1.5 billion in additional debt for acquisitions.

Financial Statements and Management's Analysis

For more information on the results of fiscal 2006 as well as the fourth quarter of fiscal 2006, 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, 2006. 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 information within the meaning of securities laws. These statements are based on the Company's current assumptions, expectations and estimates, regarding projected revenue and expenses, the Canadian, US, Argentinean and German economic environment, its ability to attract and retain clients and consumers, its operating costs and raw materials and energy supplies which are subject to a number of risks and uncertainties. Actual results could differ materially from the conclusion, forecast or projection stated in such forward-looking information. As a result, the Company 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 the Company's current expectations are discussed throughout the Management's Analysis and, in particular, the section entitled "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. While the Company may elect to, it is under no obligation and do not undertake to update this information at any particular time.

Dividends

The Board of Directors of the Company declared a dividend of $0.18 per share, payable on July 21, 2006, to shareholders of record as of July 10, 2006. This dividend is for the quarter ended March 31, 2006.

Conference Call

A conference call to discuss the fiscal 2006 results will be held on Tuesday, June 6, 2006 at 14:30, Eastern time. To participate in the conference call dial 1 800 525 6384. 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/060606/index.php in your web browser.

For those unable to participate, an instant replay will be available until midnight, Tuesday, June 13, 2006. To access the replay dial 1 800 374 8183, ID number 9505792. A replay of the conference call will also be available on the Company's web site at www.saputo.com.

About Saputo

Always with an expert hand, Saputo transforms into success the passion and initiative of the 8,400 dedicated men and women who work in its 44 plants around the world. Combining tradition and innovation, the Company produces, commercializes and distributes the highest quality products under such well-known brands as Saputo, Alexis de Portneuf, Armstrong, Baxter, Dairyland, De Lucia, Dragone, DuVillage de Warwick, Frigo, Kingsey, La Paulina, Nutrilait, Princesse, Ricrem, Sir Laurier d'Arthabaska, Stella, Treasure Cave, HOP&GO! and Vachon. As one of the top twenty dairy processors in the world, the largest dairy processor in Canada, amongst the top five cheese producers in the United States, the third largest dairy processor in Argentina and the largest snack-cake manufacturer in Canada, Saputo renews its commitment to excellence and growth every day. Saputo Inc. is a public 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, amortization and devaluation of portfolio
investment. 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) "Average block market" is the average daily price of a 40 pound
block of cheddar cheese traded on the Chicago Mercantile
Exchange (CME), used as the base price for the cheese.


NOTICE
The consolidated financial statements of Saputo Inc. for the
three-month periods ended March 31, 2006 and 2005 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)
2006 2005 2006 2005
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Revenues $969,876 $916,825 $4,022,210 $3,883,069
Cost of sales, selling and
administrative expenses 888,090 813,508 3,656,245 3,475,310
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Earnings before interest,
depreciation income taxes,
and devaluation 81,786 103,317 365,965 407,759
Depreciation of fixed assets 16,386 16,195 69,361 66,065
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Operating income 65,400 87,122 296,604 341,694
Devaluation of
portfolio investment 10,000 - 10,000 -
Interest on long-term debt 6,019 6,313 24,474 28,026
Other interest, net (1,125) 1 (644) 1,064
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Earnings before income taxes 50,506 80,808 262,774 312,604
Income taxes 12,801 21,091 70,672 80,459
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Net earnings $37,705 $59,717 $192,102 $232,145
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Per share
Net earnings
Basic $0.36 $0.57 $1.83 $2.23
Diluted $0.36 $0.57 $1.82 $2.20



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


For the years ended March 31 2006 2005
---------------------------------------------------------------------
Retained earnings, beginning of year $884,054 $711,371
Net earnings 192,102 232,145
Dividends (72,215) (59,462)
Excess of purchase price of share
capital over carrying value (32,810) -
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Retained earnings, end of year $971,131 $884,054
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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, 2006.THESE DOCUMENTS CAN BE OBTAINED ON SEDAR AT WWW.SEDAR.COM


SEGMENTED INFORMATION
(in thousands of dollars)
For the three-month For the years
periods ended March 31 ended March 31
(unaudited) (audited)
2006 2005 2006 2005
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Revenues
Dairy Products
Canada and Other $651,917 $576,499 $2,651,402 $2,415,541
United States 276,897 303,863 1,206,601 1,308,735
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928,814 880,362 3,858,003 3,724,276
Grocery Products 41,062 36,463 164,207 158,793
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$969,876 $916,825 $4,022,210 $3,883,069
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Earnings before interest,
depreciation,income taxes,
and devaluation
Dairy Products
Canada and Other $61,926 $66,424 $261,593 $244,161
United States 12,753 30,536 78,300 137,043
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74,679 96,960 339,893 381,204
Grocery Products 7,107 6,357 26,072 26,555
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$81,786 $103,317 $365,965 $407,759
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Depreciation of fixed assets
Dairy Products
Canada and Other $8,139 $7,441 $34,146 $29,743
United States 7,227 7,478 29,881 31,175
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15,366 14,919 64,027 60,918
Grocery Products 1,020 1,276 5,334 5,147
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$16,386 $16,195 $69,361 $66,065
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Operating income
Dairy Products
Canada and Other $53,787 $58,983 $227,447 $214,418
United States 5,526 23,058 48,419 105,868
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59,313 82,041 275,866 320,286
Grocery Products 6,087 5,081 20,738 21,408
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$65,400 $87,122 $296,604 $341,694
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Devaluation of
portfolio investment 10,000 - 10,000 -

Interest 4,894 6,314 23,830 29,090

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Earnings before income taxes 50,506 80,808 262,774 312,604

Income taxes 12,801 21,091 70,672 80,459
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Net earnings $37,705 $59,717 $192,102 $232,145
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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)
2006 2005 2006 2005
---------------------------------------------------------------------


Cash flows related to the
following activities:
Operating
Net earnings $37,705 $59,717 $192,102 $232,145
Items not affecting cash
Stock based
compensation 2,289 1,517 8,196 4,774
Depreciation of
fixed assets 16,386 16,195 69,361 66,065
Gain on disposal
of fixed assets (1,121) (2,489) (1,676) (2,576)
Devaluation of
portfolio investment 10,000 - 10,000 -
Future income taxes (7,209) 3,155 (2,438) 4,860
Funding of employee plans
in excess of costs (7,215) (1,536) (10,134) (6,155)
---------------------------------------------------------------------
50,835 76,559 265,411 299,113
Changes in non-cash
operating working
capital items 8,706 (5,579) 34,156 (30,437)
---------------------------------------------------------------------
59,541 70,980 299,567 268,676
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Investing
Business acquisitions (2,811) - (86,338) -
Portfolio investment 1,000 - 1,000 -
Additions to fixed assets (34,316) (21,977) (96,152) (81,786)
Proceeds on disposals
of fixed assets 2,484 4,609 3,284 5,441
Other assets (5,585) 5,651 (6,072) 973
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(39,228) (11,717) (184,278) (75,372)
---------------------------------------------------------------------

Financing
Bank loans (1,143) (19,512) 28,081 (68,844)
Repayment of
long-term debt - (12) - (43,965)
Issuance of share capital 1,285 2,704 13,689 13,544
Repurchase of share capital (8,230) - (38,008) -
Dividends (18,737) (15,671) (72,215) (59,462)
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(26,825) (32,491) (68,453) (158,727)
---------------------------------------------------------------------

Increase in cash and
cash equivalents (6,512) 26,772 46,836 34,577
Effect of exchange rate
changes on cash and
cash equivalents 954 644 3,220 (974)
Cash and cash equivalents,
beginning of period 97,091 14,061 41,477 7,874
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Cash and cash equivalents,
end of period $91,533 $41,477 $91,533 $41,477
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Supplemental information

Interest paid $(544) $(179) $24,689 $27,565
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Income taxes paid $55,108 $5,002 $57,460 $37,896
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CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
(audited)
March 31 March 31
2006 2005

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---------------------------------------------------------------------

ASSETS
Current assets
Cash and cash equivalents $91,533 $41,477
Receivables 302,112 299,828
Inventories 453,414 452,814
Income taxes 6,736 14,381
Future income taxes 12,098 10,711
Prepaid expenses and other assets 25,979 16,795
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891,872 836,006
Portfolio investment 42,991 53,991
Fixed assets 674,695 648,584
Goodwill 544,472 507,200
Trademarks 30,589 24,054
Other assets 67,664 53,437
Future income taxes 1,650 9,800
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$2,253,933 $2,133,072
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LIABILITIES
Current liabilities
Bank loans $41,541 $15,083
Accounts payable and accrued liabilities 318,239 291,197
Income taxes 73,087 67,438
Future income taxes 369 9,653
Current portion of long-term debt 35,013 -
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468,249 383,371
Long-term debt 256,833 302,521
Other liabilities 16,623 19,139
Future income taxes 109,685 112,191
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851,390 817,222
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SHAREHOLDERS' EQUITY
Share capital 494,250 483,896
Contributed surplus 14,428 8,095
Retained earnings 971,131 884,054
Foreign currency translation adjustment (77,266) (60,195)
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1,402,543 1,315,850
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$2,253,933 $2,133,072
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Contact Information

  • Saputo Inc.
    Manon Goudreault
    Director, Communications
    (514) 328-3377
    www.saputo.com