Bullboard - Stock Discussion Forum Saputo Inc T.SAP

Alternate Symbol(s): SAPIF

Saputo Inc. produces, markets, and distributes an array of dairy products, including cheese, fluid milk, extended shelf-life milk and cream products, cultured products, and dairy ingredients. It has four geographic sectors, including Canada, United States of America (USA), International and Europe. The Canada Sector consists of the Dairy Division (Canada), which produces, markets and... see more

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Saputo Inc > Scotia comments

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Post by incomedreamer11 on Nov 08, 2021 8:07am

Scotia comments

SAP Another Challenged Quarter

OUR TAKE: Negative.

SAP delivered yet another disappointing operating performance in Q2 with adj. EPS of $0.28 falling short of forecast/consensus of $0.31/$0.32. EBITDA came in ~$31M lower than forecast at $283M. The business continued to be challenged by labour shortages, supply chain issues and inflationary cost pressures.
The US business continues to be SAP's most challenged market and to date pricing action has not offset the cost headwinds. Demand remains strong but the labour shortages are impeding SAP's ability to deliver and infill rates remain below historical levels, seriously impacting cost absorption.
SAP points to better conditions in Canada and the UK and some lessening of pressures in Australia. The company is standing firm on its commitment to drive EBITDA to $2.125B by the end of F25. Investors will need to be patient while waiting for the improved operating performance but should they execute against the plan we could see good value creation. We maintain our SO rating but our target price falls to $40 on lower EBITDA estimates.

KEY POINTS SAP Q2 consolidated revenue declined 0.4% to $3,689M (consensus $3,620M), while consolidated EBITDA declined to $283M (consensus $320.3M), -23.5% y/y. Inflation put pressure on input costs in Q2, including a $33M hit to EBITDA from higher freight and logistic costs primarily in NA. US market factors impacted EBITDA by ($17M). FX negatively impacted EBITDA by $21M. Canada: SAP's Canadian business continued to show improved results with revenue of $1,081M (+1.7% y/y), fueled by higher sales volumes as well as higher selling prices related to the cost of milk and higher dairy ingredient market prices.
Pricing implemented in the quarter began to contribute positively as well.
Sales in the retail and industrial segments were lower as they returned to more normal levels, while foodservice revenue rebounded.
EBITDA of $124M rose 6% y/y driving a margin of 11.5%. Dairy ingredient market prices relative to the cist of milk contributed positively. In Q2 the Canada division incurred $5M in incremental freight and logistics costs. Pricing was taken to mitigate the higher costs.

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