Lower costs will help Saputo adapt

Article Excerpt

Dairy producer Saputo unveiled an ambitious new strategy in 2021 that will cut its operating costs. It also continues to benefit as restaurants re-open on the lifting of COVID-19 lockdowns. However, the company remains vulnerable to increasingly popular alternative dairy products such as plant-based milks. SAPUTO INC. $36 is a hold. The company (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 420.0 million; Market cap: $15.1 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.0%; TSINetwork Rating: Average; www.saputo.com) is Canada’s largest producer of dairy products. It also operates dairies in the U.S., Australia, the U.K. and Argentina. In response to rising input and labour costs, Saputo has increased its selling prices. It has also adjusted its packaging sizes and launched special promotions. As a result, in the company’s fiscal 2023 third quarter, ended December 31, 2022, sales rose 17.6%, to $4.59 billion from $3.90 billion a year earlier. The higher sales lifted Saputo’s earnings before unusual items in the quarter by 59.0%, to $221 million from…