Saputo Inc. (TSX: SAP) (we, Saputo or the Company) reported today
its financial results for the third quarter of fiscal 2022, which
ended on December 31, 2021. All amounts in this news release are in
Canadian dollars (CDN), unless otherwise indicated, and are
presented according to International Financial Reporting Standards
(IFRS).
“Throughout this past quarter, our teams
demonstrated resiliency by continuously adapting to changing market
conditions, maintaining a laser focus on the health and safety of
our employees, and taking decisive actions in running our
operations and serving our customers,” said Lino A. Saputo, Chair
of the Board, President and Chief Executive Officer, Saputo Inc.
“In this dynamic environment, we will continue to actively monitor
inflation and aggressively drive pricing initiatives while taking
the necessary steps to improve productivity and customer fill
rates.”
Fiscal 2022 Third Quarter Financial
Highlights
- Revenues amounted to $3.901 billion, up $138 million or
3.7%.
- Adjusted EBITDA* amounted to $322 million, down $109 million or
25.3%.
- Net earnings totalled $86 million and EPS** (basic and diluted)
were $0.21, down from $210 million and EPS (basic and diluted) of
$0.51.
- Adjusted net earnings excluding amortization of intangible
assets related to business acquisitions* totalled
$139 million, down from $228 million, and the
corresponding EPS** (basic and diluted) were $0.34 and $0.33, down
from $0.56 and $0.55, respectively.
(in millions of Canadian (CDN) dollars, except per
share amounts)
|
For the three-month periodsended December 31 |
For the nine-month periods ended December 31 |
|
2021 |
2020 |
2021 |
2020 |
Revenues |
3,901 |
3,763 |
11,078 |
10,856 |
Adjusted EBITDA* |
322 |
431 |
895 |
1,168 |
Net earnings |
86 |
210 |
237 |
523 |
Adjusted net earnings excluding amortization of |
|
|
|
|
intangible assets related to business acquisitions* |
139 |
228 |
377 |
591 |
Net earnings per share |
|
|
|
|
Basic |
0.21 |
0.51 |
0.57 |
1.28 |
Diluted |
0.21 |
0.51 |
0.57 |
1.27 |
Adjusted net earnings per share excluding |
|
|
|
|
amortization of intangible assets related to business
acquisitions* |
|
|
|
|
Basic |
0.34 |
0.56 |
0.91 |
1.44 |
Diluted |
0.33 |
0.55 |
0.91 |
1.44 |
* See the “Non-IFRS Financial Measures” section of
the Management’s Discussion and Analysis for the reconciliations to
IFRS measures.* See the “Non-IFRS Financial Measures” section
of the Management’s Discussion and Analysis for the reconciliations
to IFRS measures.** Refer to the ‘‘Glossary’’ section of the
Management’s Discussion and Analysis.
HIGHLIGHTS
- Challenging market conditions,
including labour shortages, supply chain disruptions, and
inflationary pressures, continued to impact our sectors to varying
degrees, with the USA Sector being the most impacted.
- The Canada Sector continued to show
improved results despite challenging market conditions.
- Inflation continued to put upward
pressure on input costs, including an impact on adjusted EBITDA* of
$46 million related to freight and logistical costs, mainly in
North America. USA Market Factors** negatively impacted adjusted
EBITDA by $40 million compared to the same quarter last fiscal
year.
- The fluctuation of the Canadian
dollar versus foreign currencies negatively impacted revenues and
adjusted EBITDA by $67 million and $18 million, respectively.
- As part of the Optimize and Enhance
Operations pillar of the Company’s Global Strategic Plan, Saputo
announced several major capital investments and consolidation
initiatives intended to enhance and streamline its manufacturing
footprint in its USA Sector and International Sector. Costs
connected with the capital investments and consolidation
initiatives will be approximately $46 million after tax, which
include a non-cash fixed assets write-down of approximately $39
million after tax. These costs will be recorded in the fourth
quarter of fiscal 2022.
- As part of the continuous
evaluation of our overall activities and to reallocate resources to
support the growth ambitions of our Global Strategic Plan, we
decided to pause the deployment of our Enterprise Resource Planning
(ERP) project in Canada for a minimum of three years. An impairment
of intangible assets charge of $43 million after tax was recorded
during the quarter. The impairment charge also included the effect
of the application of an agenda decision of the International
Financial Reporting Interpretations Committee (IFRIC) related to
the capitalization of cloud-based software costs.
- The Board of Directors approved a
dividend of $0.18 per share payable on March 18, 2022, to common
shareholders of record on March 8, 2022.
* See the “Non-IFRS Financial Measures”
section of the Management’s Discussion and Analysis for the
reconciliations to IFRS measures. ** Refer to the ‘‘Glossary’’
section of the Management’s Discussion and Analysis.
OUTLOOK
- The global economy recovery remains
uneven. As economies re-open, we are faced with labour challenges,
supply chain bottlenecks, and inflationary pressures.
- Input costs, including overtime
wages, transportation, fuel, consumables, and packaging, are
expected to remain at sustained high levels due to inflationary
pressures. As a mitigating measure, we continue to implement
multiple phases of pricing initiatives across all geographies.
- Overall, the retail market segment
continues to perform well, and we expect our sales to keep pace
with pre- pandemic levels. However, internal labour challenges and
supply chain difficulties are impacting our ability to supply
ongoing demand and maintain historical order fill rate levels,
particularly in the USA.
- We expect the demand for our
products to remain elevated, with continued strength in the retail
and industrial market segments and a steady improvement in the
foodservice market segment.
- The foodservice market segment in
the USA is expected to remain competitive, but the overall
supply-demand dynamics of mozzarella are expected to improve as
inventories revert to historical levels.
- Labour challenges are expected to
continue to impact our third-party transport and logistics partners
in the USA, leading to reduced service levels and higher costs.
- USA Market Factors* will continue
to fluctuate from quarter to quarter, but we expect them to remain
challenging as dairy commodity market prices remain volatile.
Although we adjust our pricing to reflect commodity prices, there
may be a lag which can cause swings in operating income and cash
flow from one quarter to another.
- Despite the volatile nature of
international cheese and dairy ingredient markets, our outlook is
positive with respect to export prices, as we expect them to
continue to stabilize.
- Volumes destined for export markets
continue to recover, however, the pace and timing of the recovery
to pre- pandemic levels will vary depending on the export market
and supply chain improvements.
- With the slower than anticipated
recovery and the difficulties we faced since the beginning of the
fiscal year, our overall performance in fiscal 2022 will be below
that of fiscal 2021.
- In the fourth quarter, we expect
inflationary pressures to be partially mitigated by ongoing pricing
initiatives undertaken in all of our geographies since the
beginning of fiscal 2022. We expect the operating environment to
continue to face labour challenges and supply chain bottlenecks. We
will continue to leverage the momentum of our ongoing Global
Strategic Plan initiatives to strengthen our position as a
high-quality, low-cost processor with a relentless focus on
productivity and efficiency.
* Refer to the ‘‘Glossary’’ section of the
Management’s Discussion and Analysis.
GLOBAL STRATEGIC PLAN
HIGHLIGHTS
As part of the Optimize and Enhance Operations
pillar of the Company’s Global Strategic Plan, the Company
announced, on February 8, 2022, several major capital investments
and consolidation initiatives intended to enhance and streamline
its manufacturing footprint in its USA Sector and International
Sector.
In the USA Sector, as a first phase, the Company
plans to invest approximately $169 million towards the
modernization and expansion of its cheese manufacturing facilities
in Wisconsin and California and to support its growth plan in the
retail market segment. These initiatives will begin in the fourth
quarter of fiscal 2022 and are expected to take approximately 24
months to implement. Complementing this first phase, Saputo plans
to consolidate the cut-and-wrap activities in its West Coast
operations, and right-size its footprint by closing its Bardsley
Street, Tulare, California, facility in fiscal 2023. In the
International Sector, the Company will be streamlining operations
in two of its manufacturing facilities in Australia.
These measures are expected to improve our
product portfolio, modernize processes, enhance capacities, and
enable us to pursue initiatives to deliver against growth
objectives. These planned activities are consistent with the
previously announced Global Strategic Plan designed to create
shared value for all stakeholders.
THE SAPUTO PROMISE
The Saputo Promise, our approach to social,
environmental, and economic performance, supports our strategic
plans and allows us to pursue growth and create shared value for
all stakeholders, ensuring the long-term sustainability of our
business.
During the third quarter, through our
partnership with Lightsource bp, we completed the construction of a
five- megawatt solar project to provide renewable power for our
Davidstow plant in the UK. This project is expected to deliver 10%
of the facility’s annual electricity demand and enable us to save
almost 1,500 tonnes of CO2 a year.
Our Europe Sector partnered with flexible
packaging supplier Wipak UK on a project which resulted in 33% of
virgin plastic being replaced with post-consumer recycled (PCR)
material for some of our block cheese packaging. The PCR packs are
being gradually introduced in Marks and Spencer stores, and we
expect to roll out PCR packaging into a wider range of our products
in the future as technology improves and the quantity of available
materials increases.
Additionally, in December, our Dairy Division
(USA) announced a collaborative partnership with Hyperlight Energy,
the developer of Hylux™, a low cost solar steam technology, which
aims to cost-effectively reduce greenhouse gas (GHG) emissions in
an industrial setting. This innovative renewable thermal energy
system will be implemented at one of our facilities in California,
allowing us to leverage the Hylux™ technology to help reduce the
CO2 intensity of our operations.
Additional Information
For more information, reference is made to the
condensed interim consolidated financial statements, the notes
thereto and to the Management’s Discussion and Analysis for the
third quarter of fiscal 2022. These documents can be obtained on
SEDAR under the Company’s profile at www.sedar.com and in the
“Investors” section of the Company’s website, at
www.saputo.com.
Webcast and Conference Call
A webcast and conference call to discuss the
fiscal 2022 third quarter results will be held on Thursday,
February 10, 2022, at 2:30 p.m. Eastern Time.
To participate:
- Webcast:
https://www.gowebcasting.com/11714 Presentation slides will be
included in the webcast and will also be made available on Saputo’s
website (www.saputo.com) in the “Investors” section, under
“Calendar of Events”.
- Conference line: 1-800-926-4425
For those unable to join, the webcast will be
archived on Saputo’s website (www.saputo.com) in the “Investors”
section, under “Calendar of Events”. A replay of the conference
call will also be available until Thursday, February 17, 2022,
11:59 p.m. (ET) by dialing 1-800-558-5253 (ID number: 22015144)
About Saputo
Saputo produces, markets, and distributes a wide
array of dairy products of the utmost quality, including cheese,
fluid milk, extended shelf-life milk and cream products, cultured
products, and dairy ingredients. Saputo is one of the top ten dairy
processors in the world, a leading cheese manufacturer and fluid
milk and cream processor in Canada, the top dairy processor in
Australia, and the second largest in Argentina. In the USA, Saputo
ranks among the top three cheese producers and is one of the
largest producers of extended shelf-life and cultured dairy
products. In the United Kingdom, Saputo is the largest manufacturer
of branded cheese and a top manufacturer of dairy spreads. Saputo
products are sold in several countries under market-leading brands,
as well as private label brands. Saputo Inc. is a publicly traded
company and its shares are listed on the Toronto Stock Exchange
under the symbol “SAP”. Follow Saputo’s activities at
saputo.com or via Facebook, LinkedIn and Twitter.
Investor Inquiries Nicholas
Estrela Director, Investor Relations 1-514-328-3117
Media Inquiries 1-514-328-3141 /
1-866-648-5902 media@saputo.com
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This news release contains statements which are forward-looking
statements within the meaning of applicable securities laws. These
forward-looking statements include, among others, statements with
respect to our objectives, outlook, business projects, strategies,
beliefs, expectations, targets, commitments, goals, ambitions and
strategic plans including our ability to achieve these targets,
commitments, goals, ambitions and strategic plans, and statements
other than historical facts. The words “may”, “could”, “should”,
“will”, “would”, “believe”, “plan”, “expect”, “intend”,
“anticipate”, “estimate”, “foresee”, “objective”, “continue”,
“propose”, “aim”, “commit”, “assume”, “forecast”, “predict”,
“seek”, “project”, “potential”, “goal”, “target” or “pledge” or the
negative of these terms or variations of them, the use of
conditional or future tense or words and expressions of similar
nature, are intended to identify forward- looking statements. All
statements other than statements of historical fact included in
this news release may constitute forward-looking statements within
the meaning of applicable securities laws.
By their nature, forward-looking statements are
subject to a number of inherent risks and uncertainties. Actual
results could differ materially from those stated, implied or
projected in such forward-looking statements. As a result, we
cannot guarantee that any forward-looking statements will
materialize, and we warn readers that these forward- looking
statements are not statements of historical fact or guarantees of
future performance in any way. Assumptions, expectations and
estimates made in the preparation of forward-looking statements and
risks and uncertainties that could cause actual results to differ
materially from current expectations are discussed in our materials
filed with the Canadian securities regulatory authorities from time
to time, including the "Risks and Uncertainties" section of the
Management’s Discussion and Analysis dated June 3, 2021, available
on SEDAR under Saputo's profile at www.sedar.com.
Such risks and uncertainties include the
following: product liability; the COVID-19 pandemic; the
availability of raw materials (including as a result of climate
change or extreme weather) and related price variations, along with
our ability to transfer those increases, if any, to our customers
in competitive market conditions; the price fluctuation of our
products in the countries in which we operate, as well as in
international markets, which are based on supply and demand levels
for dairy products; cyber threats and other information
technology-related risks relating to business disruptions,
confidentiality, data integrity business and email
compromise-related fraud; the increased competitive environment in
the dairy industry; consolidation of clientele; supplier
concentration; unanticipated business disruption; the economic
environment; changes in environmental laws and regulations; the
potential effects of climate change; increased focus on
environmental sustainability matters; our ability to identify,
attract and retain qualified individuals; the failure to adequately
integrate acquired businesses in a timely and efficient manner; the
failure to execute our global strategic plan as expected; the
failure to complete capital expenditures as planned; changes in
consumer trends; changes in interest rates and access to capital
markets. Our ability to achieve our environmental targets,
commitments and goals is further subject to, among others, our
ability to access and implement all technology necessary to achieve
our targets, commitments and goals, as well as the development and
performance of technology, innovation and the future use and
deployment of technology and associated expected future results,
and environmental regulation. Our ability to achieve our 2025
Supply Chain Pledges is further subject to, among others, our
ability to leverage our supplier relationships.
Forward-looking statements are based on
Management’s current estimates, expectations and assumptions
regarding, among other things; the projected revenues and expenses;
the economic, industry, competitive and regulatory environments in
which we operate or which could affect our activities; our ability
to attract and retain customers and consumers; our environmental
performance; our sustainability efforts; the effectiveness of our
environmental and sustainability initiatives; the availability and
cost of milk and other raw materials and energy supplies; our
operating costs; the pricing of our finished products on the
various markets in which we carry on business; the effects of the
COVID-19 pandemic; the successful execution of our global strategic
plan; our ability to deploy capital expenditure projects as
planned; our ability to correctly predict, identify, and interpret
changes in consumer preferences and demand, to offer new products
to meet those changes, and to respond to competitive innovation;
our ability to leverage our brand value; our ability to drive
revenue growth in our key product categories or platforms or add
products that are in faster-growing and more profitable categories;
the contribution of recent acquisitions; the anticipated market
supply and demand levels for dairy products; the anticipated
warehousing, logistical and transportation costs; our effective
income tax rate; the exchange rate of the Canadian dollar to the
currencies of cheese and dairy ingredients.
Management believes that these estimates,
expectations and assumptions are reasonable as of the date hereof,
and are inherently subject to significant business, economic,
competitive and other uncertainties and contingencies regarding
future events, including the duration and severity of the COVID-19
pandemic, and are accordingly subject to changes after such date.
Forward-looking statements are intended to provide shareholders
with information regarding Saputo, including our assessment of
future financial plans, and may not be appropriate for other
purposes. Undue importance should not be placed on forward-looking
statements, and the information contained in such forward-looking
statements should not be relied upon as of any other date.
All forward-looking statements included herein
speak only as of the date hereof or as of the specific date of such
forward-looking statements. Except as required under applicable
securities legislation, Saputo does not undertake to update or
revise forward-looking statements, whether written or verbal, that
may be made from time to time by itself or on our behalf, whether
as a result of new information, future events or otherwise. All
forward-looking statements contained herein are expressly qualified
by this cautionary statement.
CONSOLIDATED RESULTS FOR THE THIRD QUARTER
AND FISCAL PERIOD ENDED DECEMBER 31, 2021
We report our business under four sectors:
Canada, USA, International, and Europe. The Canada Sector consists
of the Dairy Division (Canada), the USA Sector consists of the
Dairy Division (USA), the International Sector consists of the
Dairy Division (Australia) and the Dairy Division (Argentina), and
the Europe Sector consists of the Dairy Division (UK). We sell our
products in three different market segments: retail, foodservice,
and industrial.
Revenues
Revenues for the third quarter of fiscal
2022 totalled $3.901 billion, up $138 million or 3.7%, as
compared to $3.763 billion for the same quarter last fiscal
year.
Revenues increased due to higher international
cheese and dairy ingredient market prices and higher domestic
selling prices. Pricing initiatives implemented in all our sectors
to mitigate increasing input costs contributed positively.
Foodservice market segment sales volumes
increased, and retail market segment sales volumes decreased, as
they continued to return closer to their historical levels. Retail
market segment sales volumes in the third quarter of fiscal 2021
had benefited from increased demand levels in connection with the
shift in consumer demand caused by the COVID-19 pandemic. In the
ongoing COVID-19 context, supply chain challenges, due to container
and vessel availability issues and port inefficiencies, continued
to negatively impact export sales volumes in our International
Sector. Sales volumes were stable compared to those of the third
quarter of fiscal 2021.
The combined effect of the lower average block
market price** and of the higher average butter market price** had
a negative impact of $84 million. The effect of the fluctuation of
the Argentine peso and the Australian dollar on export sales
denominated in US dollars was favourable.
The contributions of the acquisitions completed
earlier this fiscal year, Bute Island Foods Ltd. (Bute Island
Acquisition), the Reedsburg facility of Wisconsin Specialty
Protein, LLC (Reedsburg Facility Acquisition), the business of
Wensleydale Dairy Products Limited (Wensleydale Dairy Products
Acquisition) and the Carolina Aseptic and Carolina Dairy businesses
formerly operated by AmeriQual Group Holdings, LLC (Carolina
Acquisition), (collectively, the Recent Acquisitions), totalled $51
million.
Finally, the fluctuation of foreign currencies,
most particularly the US dollar, versus the Canadian dollar had an
unfavourable impact of $67 million.
Revenues for the first nine months of
fiscal 2022 totalled $11.078 billion, up $222 million or
2.0%, as compared to $10.856 billion for the same period last
fiscal year.
Revenues increased due to higher international
cheese and dairy ingredient market prices and higher domestic
selling prices. However, during the first six months of fiscal
2022, fulfilling the export sales contracts that had been entered
into in fiscal 2021 at depressed commodity prices in the
International Sector had an unfavourable impact. Pricing
initiatives implemented in all our sectors to mitigate increasing
input costs contributed positively.
Sales volumes were higher than those of the
first nine months of fiscal 2021, mainly due to an increase in the
foodservice market segment and, to a lesser extent, in the
industrial market segment. However, sales volumes decreased in the
retail market segment when compared to the surge that occurred in
the first quarter of fiscal 2021, although this surge began to
level off starting in the second quarter of fiscal 2021. In the
ongoing COVID-19 context, supply chain challenges, due to container
and vessel availability issues and port inefficiencies, negatively
impacted export sales volumes in our International Sector.
The combined effect of the lower average block
market price** and of the higher average butter market price** had
a negative impact of $156 million. The effect of the fluctuation of
the Argentine peso and the Australian dollar on export sales
denominated in US dollars was favourable.
The contributions of the Recent Acquisitions
totalled $79 million.
Finally, the fluctuation of foreign currencies,
most particularly the US dollar, versus the Canadian dollar had an
unfavourable impact of $389 million.
Adjusted EBITDA*
Adjusted EBITDA for the third quarter of
fiscal 2022 totalled $322 million, down $109 million or
25.3%, as compared to $431 million for the same quarter last fiscal
year.
We continued to face rising inflation where
pricing initiatives lagged cost surges. Input costs, such as
transportation, fuel, consumables, and packaging, increased in all
our sectors due to inflationary pressures. This included an
increase of $46 million related to freight and logistical costs,
mainly in North America, which more than offset the positive effect
of pricing initiatives, although the net impact was more favourable
than in previous quarters.
USA Market Factors** had a negative effect of
$40 million, as compared to the same quarter last fiscal year. The
relation between international cheese and dairy ingredient market
prices and the cost of milk as raw material in the International
Sector had a positive impact.
The contributions of the Recent Acquisitions
were positive.
The positive effects of lower administrative
costs, such as travel and promotional activities, in the context of
the COVID-19 pandemic, tapered off compared to the same quarter
last fiscal year.
The fluctuation of foreign currencies versus the
Canadian dollar had an unfavourable impact of $18 million.
Adjusted EBITDA for the first nine
months of fiscal 2022 totalled $895 million, down $273
million or 23.4%, as compared to $1.168 billion for the same period
last fiscal year.
Input costs, such as transportation, fuel,
consumables, and packaging, increased in all our divisions due to
inflationary pressures. This included an increase of $102 million
related to freight and logistical costs, mainly in North America,
which more than offset the positive effect of the pricing
initiatives discussed above.
In a volatile dairy commodity market, USA Market
Factors** had a negative effect of $99 million, as compared to the
same period last fiscal year. On the other hand, the relation
between international cheese and dairy ingredient market prices and
the cost of milk as raw material in the International Sector had a
positive impact. However, in the first six months of fiscal 2022,
the effect of fulfilling export sales contracts entered into last
fiscal year at depressed commodity prices was unfavourable.
The contributions of the Recent Acquisitions
were positive.
The positive effects of lower administrative
costs, such as travel and promotional activities, in the context of
the COVID-19 pandemic, tapered off compared to the same period last
fiscal year.
The fluctuation of foreign currencies versus the
Canadian dollar had an unfavourable impact of $60 million.
Operating costs excluding depreciation,
amortization, and restructuring costs
Operating costs excluding depreciation,
amortization, and restructuring costs for the third quarter
of fiscal 2022 totalled $3.579 billion, up $247 million or
7.4%, as compared to $3.332 billion for the same quarter last
fiscal year. In the first nine months of fiscal
2022, operating costs excluding depreciation,
amortization, and restructuring costs totalled $10.183 billion, up
$495 million or 5.1%, as compared to $9.688 billion for the same
period last fiscal year. These increases were due to higher input
costs in all our divisions caused by inflationary pressures. Higher
revenues, dairy commodity market volatility, and higher input costs
contributed to the higher cost of raw materials and consumables
used. Employee salary and benefit expenses increased due to
inflation and wage increases.
* See the “Non-IFRS Financial Measures”
section of the Management’s Discussion and Analysis for the
reconciliations to IFRS measures.
Depreciation and amortization
Depreciation and amortization for the
third quarter of fiscal 2022 totalled $144
million, up $16 million, as compared to $128 million for the same
quarter last fiscal year. In the first nine months of
fiscal 2022, depreciation and amortization totalled $412
million, up $32 million, as compared to $380 million for the same
period last fiscal year. These increases were mainly attributable
to additional depreciation and amortization related to the Recent
Acquisitions, as well as additions to property, plant and
equipment, which increased the depreciable base.
Gain on disposal of assets
In the third quarter of fiscal
2022, the Company recorded a gain on disposal of assets of
$9 million ($8 million after tax) mainly from the sale of a
facility in the Canada Sector.
Impairment of intangible
assets
In the third quarter and first nine
months of fiscal 2022, an impairment of intangible assets
charge of $58 million ($43 million after tax) was recorded. The
charge includes $50 million ($38 million after tax) related to
software assets following the Company’s decision to pause the ERP
implementation within the Dairy Division (Canada) for a minimum of
three years and $8 million ($5 million after tax) as a result of
the application of an agenda decision of the IFRIC related to the
capitalization of cloud-based software costs.
In fiscal 2021, an impairment of intangible
assets charge of $19 million was incurred in relation to our
decision to retire one of our cheese brand names from our Dairy
Division (Australia) portfolio.
Acquisition and restructuring
costs
Acquisition and restructuring costs for the
first nine months of fiscal 2022 amounted to nil,
representing the net of costs incurred for the Recent Acquisitions
and of a favourable purchase price adjustment for a prior year
acquisition. During the same period last fiscal year, a gain on
disposal of assets of $6 million ($5 million after tax) was
recorded related to the sale of a closed facility in the Canada
Sector.
Financial charges
In the third quarter and first nine
months of fiscal 2022, financial charges totalled $17
million and $54 million, respectively, down $9 million and $19
million, respectively, mainly due to an increased gain on
hyperinflation derived from the indexation of non-monetary assets
and liabilities in Argentina.
Income tax expense
Income tax expense for the third quarter
of fiscal 2022 totalled $26 million, reflecting an
effective tax rate of 23.2% as compared to 24.3% for the same
quarter last fiscal year. For the third quarter of fiscal 2022, we
recorded an income tax benefit related to the non-taxable portion
of the gain on disposal of assets in Canada. Excluding this, the
effective tax rate for the third quarter of fiscal 2022 would have
been 24.4%.
Income tax expense for the first nine
months of fiscal 2022 totalled $143 million, reflecting an
effective tax rate of 37.6% as compared to 25.5% for the same
period last fiscal year. Deferred income tax liability balances
were adjusted to reflect the enactment in June 2021 of an increase
from 19% to 25% of the corporate income tax rate in the United
Kingdom which will be effective as of April 1, 2023. As a result,
we incurred a one-time non-cash income tax expense of $50 million.
The effective tax rate also reflected the increase in the Argentine
corporate income tax rate from 25% to 35%, enacted in June 2021,
and the non-taxable portion of the gain on disposal of assets in
Canada. During the same period last fiscal year, income tax expense
reflected the tax treatment of an impairment of intangible assets
charge of $19 million. Excluding the effects of these factors, the
effective tax rates for the nine- month periods ended December 31,
2021, and 2020, would have been 24.2% and 24.8%, respectively.
The effective tax rate varies and could increase
or decrease based on the geographic mix of quarterly and year-to-
date earnings across the various jurisdictions in which we operate,
the amount and source of taxable income, amendments to tax
legislations and income tax rates, changes in assumptions, as well
as estimates for tax assets and liabilities we use.
Net earnings
Net earnings for the third quarter of
fiscal 2022 totalled $86 million, down $124 million or
59.0%, as compared to $210 million for the same quarter last fiscal
year. In the first nine months of fiscal 2022, net
earnings totalled $237 million, down $286 million or 54.7%, as
compared to $523 million for the same period last fiscal year.
These decreases were mainly due to the aforementioned factors.
Adjusted net earnings excluding
amortization of intangible assets related to business
acquisitions*
Adjusted net earnings excluding amortization of
intangible assets related to business acquisitions for the
third quarter of fiscal 2022 totalled $139
million, down $89 million or 39.0%, as compared to $228 million for
the same quarter last fiscal year. In the first nine months
of fiscal 2022, adjusted net earnings excluding
amortization of intangible assets related to business acquisitions
totalled $377 million, down $214 million or 36.2%, as compared to
$591 million for the same period last fiscal year. These decreases
were due to the aforementioned factors.
* See the “Non-IFRS Financial Measures”
section of the Management’s Discussion and Analysis for the
reconciliations to IFRS measures.
SELECTED QUARTERLY FINANCIAL
INFORMATION
(in millions of CDN dollars, except per share
amounts)
Fiscal years |
2022 |
2021 |
2020 |
|
|
Q3 |
|
|
Q2 |
|
|
Q1 |
|
|
Q4 |
|
|
Q3 |
|
|
Q2 |
|
|
Q1 |
|
|
Q4 |
|
Revenues |
3,901 |
|
|
3,689 |
|
|
3,488 |
|
|
3,438 |
|
|
3,763 |
|
|
3,702 |
|
|
3,391 |
|
|
3,719 |
|
Adjusted EBITDA* |
322 |
|
|
283 |
|
|
290 |
|
|
303 |
|
|
431 |
|
|
370 |
|
|
367 |
|
|
299 |
|
Adjusted EBITDA margin** |
8.3 |
% |
|
7.7 |
% |
|
8.3 |
% |
|
8.8 |
% |
|
11.5 |
% |
|
10.0 |
% |
|
10.8 |
% |
|
8.0 |
% |
Net earnings |
86 |
|
|
98 |
|
|
53 |
|
|
103 |
|
|
210 |
|
|
171 |
|
|
142 |
|
|
89 |
|
Gain on disposal of assets1 |
(8 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Impairment of intangible assets1 |
43 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
19 |
|
|
— |
|
UK tax rate change2 |
— |
|
|
— |
|
|
50 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and restructuring costs1 |
— |
|
|
(1) |
|
|
1 |
|
|
2 |
|
|
— |
|
|
(5 |
) |
|
— |
|
|
10 |
|
Amortization of intangible assets related to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
business acquisitions1 |
18 |
|
|
19 |
|
|
18 |
|
|
19 |
|
|
18 |
|
|
18 |
|
|
18 |
|
|
18 |
|
Adjusted net earnings excluding amortization of |
139 |
|
|
116 |
|
|
122 |
|
|
124 |
|
|
228 |
|
|
184 |
|
|
179 |
|
|
117 |
|
intangible assets related to business acquisitions* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
0.21 |
|
|
0.24 |
|
|
0.13 |
|
|
0.25 |
|
|
0.51 |
|
|
0.42 |
|
|
0.35 |
|
|
0.22 |
|
Diluted |
0.21 |
|
|
0.24 |
|
|
0.13 |
|
|
0.25 |
|
|
0.51 |
|
|
0.42 |
|
|
0.35 |
|
|
0.22 |
|
Adjusted net earnings per share excluding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
amortization of intangible assets related to business
acquisitions* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
0.34 |
|
|
0.28 |
|
|
0.30 |
|
|
0.30 |
|
|
0.56 |
|
|
0.45 |
|
|
0.44 |
|
|
0.29 |
|
Diluted |
0.33 |
|
|
0.28 |
|
|
0.29 |
|
|
0.30 |
|
|
0.55 |
|
|
0.45 |
|
|
0.44 |
|
|
0.28 |
|
* See the “Non-IFRS Financial Measures”
section of the Management’s Discussion and Analysis for the
reconciliations to IFRS measures. ** Refer to the ‘‘Glossary’’
section of the Management’s Discussion and Analysis. 1 Net of
income taxes. 2 The UK Finance Act 2021 was enacted,
increasing the UK corporate income tax rate from 19% to 25%,
effective April 1, 2023. Refer to Note 10 to the consolidated
financial statements for further information.
Selected factors positively (negatively)
affecting financial performance
(in millions of CDN dollars)
Fiscal years |
2022 |
2021 |
2020 |
|
|
Q3 |
|
Q2 |
|
Q1 |
|
Q4 |
|
Q3 |
Q2 |
Q1 |
|
Q4 |
|
USA Market Factors*,1 |
(40 |
) |
(17 |
) |
(42 |
) |
(4 |
) |
34 |
4 |
23 |
|
(8 |
) |
Foreign currency exchange1,2 |
(18 |
) |
(21 |
) |
(21 |
) |
(2 |
) |
— |
4 |
(4 |
) |
(3 |
) |
* Refer to the ‘‘Glossary’’ section of the
Management’s Discussion and Analysis. 1 As compared to same
quarter last fiscal year. 2 Foreign currency exchange includes
effect on adjusted EBITDA of conversion of US dollars, Australian
dollars, British pounds sterling and Argentine pesos to Canadian
dollars.
INFORMATION BY SECTOR
CANADA SECTOR
(in millions of CDN dollars) |
Fiscal years |
2022 |
|
2021 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Revenues |
1,112 |
|
1,081 |
|
1,033 |
|
1,001 |
|
1,089 |
|
1,063 |
|
982 |
|
Adjusted EBITDA |
121 |
|
124 |
|
113 |
|
108 |
|
118 |
|
117 |
|
104 |
|
Adjusted EBITDA margin |
10.9 |
% |
11.5 |
% |
10.9 |
% |
10.8 |
% |
10.8 |
% |
11.0 |
% |
10.6 |
% |
The Canada Sector consists of the Dairy Division
(Canada).
USA SECTOR
(in millions of CDN dollars) |
Fiscal years |
2022 |
|
2021 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Revenues |
1,627 |
|
1,533 |
|
1,506 |
|
1,399 |
|
1,657 |
|
1,649 |
|
1,417 |
|
Adjusted EBITDA |
83 |
|
67 |
|
96 |
|
93 |
|
171 |
|
140 |
|
163 |
|
Adjusted EBITDA margin |
5.1 |
% |
4.4 |
% |
6.4 |
% |
6.6 |
% |
10.3 |
% |
8.5 |
% |
11.5 |
% |
Selected factors positively (negatively)
affecting financial performance
(in millions of CDN dollars) |
Fiscal years |
2022 |
|
2021 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
USA Market Factors*,1 |
(40 |
) |
(17 |
) |
(42 |
) |
(4 |
) |
34 |
|
4 |
|
23 |
|
US currency exchange1 |
(6 |
) |
(8 |
) |
(18 |
) |
(5 |
) |
(2 |
) |
2 |
|
5 |
|
* Refer to the ‘‘Glossary’’ section of the
Management’s Discussion and Analysis. 1 As compared to same quarter
last fiscal year.
Other pertinent information(in US
dollars, except for average exchange rate)
Fiscal years |
2022 |
2021 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Q4 |
Q3 |
Q2 |
Q1 |
Block market price* |
|
|
|
|
|
|
|
Opening |
1.873 |
|
1.553 |
|
1.738 |
|
1.650 |
2.573 |
2.640 |
1.330 |
Closing |
1.980 |
|
1.873 |
|
1.553 |
|
1.738 |
1.650 |
2.573 |
2.640 |
Average |
1.805 |
|
1.706 |
|
1.657 |
|
1.687 |
2.129 |
2.249 |
1.778 |
|
|
|
|
|
|
|
|
|
|
|
Butter market price* |
|
|
|
|
|
|
|
Opening |
1.760 |
|
1.740 |
|
1.818 |
|
1.420 |
1.510 |
1.765 |
1.335 |
Closing |
2.453 |
|
1.760 |
|
1.740 |
|
1.818 |
1.420 |
1.510 |
1.765 |
Average |
1.975 |
|
1.716 |
|
1.805 |
|
1.480 |
1.444 |
1.571 |
1.500 |
|
|
|
|
|
|
|
|
|
|
|
Average whey market price* |
0.622 |
|
0.522 |
|
0.626 |
|
0.517 |
0.388 |
0.311 |
0.356 |
Spread* |
(0.099 |
) |
(0.034 |
) |
(0.164 |
) |
0.001 |
0.168 |
0.141 |
0.047 |
US average exchange rate to Canadian |
|
|
|
|
|
|
|
dollar1 |
1.260 |
|
1.259 |
|
1.231 |
|
1.268 |
1.306 |
1.333 |
1.378 |
* Refer to the ‘‘Glossary’’ section of the
Management’s Discussion and Analysis 1 Based on Bank of Canada
published information.
The USA Sector consists of the Dairy Division
(USA).
INTERNATIONAL SECTOR
(in millions of CDN dollars) |
Fiscal years |
2022 |
|
2021 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Revenues |
919 |
|
858 |
|
754 |
|
827 |
|
807 |
|
806 |
|
781 |
|
Adjusted EBITDA |
85 |
|
56 |
|
45 |
|
62 |
|
105 |
|
78 |
|
60 |
|
Adjusted EBITDA margin |
9.2 |
% |
6.5 |
% |
6.0 |
% |
7.5 |
% |
13.0 |
% |
9.7 |
% |
7.7 |
% |
Selected factors positively (negatively)
affecting financial performance
(in millions of CDN dollars) |
Fiscal years |
2022 |
|
2021 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Foreign currency exchange1 |
(13 |
) |
(14 |
) |
(4 |
) |
3 |
|
4 |
|
(1 |
) |
(9 |
) |
1 As compared to same quarter last fiscal year.
The International Sector consists of the Dairy
Division (Australia) and the Dairy Division (Argentina).
EUROPE SECTOR
(in millions of CDN dollars) |
Fiscal years |
2022 |
|
2021 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Revenues |
243 |
|
217 |
|
195 |
|
211 |
|
210 |
|
184 |
|
211 |
|
Adjusted EBITDA |
33 |
|
36 |
|
36 |
|
40 |
|
37 |
|
35 |
|
40 |
|
Adjusted EBITDA margin |
13.6 |
% |
16.6 |
% |
18.5 |
% |
19.0 |
% |
17.6 |
% |
19.0 |
% |
19.0 |
% |
The Europe Sector consists of the Dairy Division
(UK).
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