Stock of the week: Saputo Inc.Stock of the week: Saputo Inc.
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Saputo Inc. (TSX-SAP, $33.51) recently acquired German cheese maker
Spezialitaten-Kaserei De Lucia (SKL), which makes about $28.6 million
worth of Italian cheese (mozzarella, ricotta and mascarpone) each
year.
For the nine months ended Dec. 31, 2005, revenue at the "Canada and
other dairy products" unit rose 8.7 per cent versus a year earlier, to
$2.0 billion, lifting the unit's operating income 11.7 per cent, to
$173.7 million.
Results reflected higher selling prices and volumes and the
acquisition of Fromage Cote in April 2005. At U.S. dairy products, a
7.5 per cent dip in revenue, to $929.7 million, pulled operating
income down 48.2 per cent, to $42.9 million, due to lower market
prices for cheese, a strong loonie, higher energy costs and costs
related to closing a Pennsylvania factory.
At grocery products, sales rose 0.7 per cent, to $123.1 million;
operating income, however, fell 10.3 per cent to $14.7 million
For the nine months ended Dec. 31, 2005, total revenue rose 2.9 per
cent compared to a year earlier, to $3.1 billion.
Cost of sales and selling and administrative expenses grew faster,
rising 4.0 per cent to $2.8 billion. As a result, operating income
fell 9.2 per cent, to $231.2 million.
While lower income taxes (down 2.5 per cent) and interest on debt
(down 18.9 per cent) cushioned the drop in profit, net income fell
10.5 per cent, to $154.4 million or $1.46 a diluted share.
Still, cash flow from operations - down 3.4 per cent to $214.6 million
- easily covered capital expenditures, share buybacks and dividends,
and most of the amount used for acquisitions. Compared to March 31,
2005, net debt (total debt less cash on hand) fell 14.3 per cent, to
$236.6 million.
Saputo will save money by closing three plants (Pennsylvania, Indiana,
Ontario) and is launching new products on both sides of the border.
With a strong balance sheet, it continues to target acquisitions and
buy back shares. Buy.
(Click below for a profile of this week's stock.)
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