Saputo Inc. (SAP:CA) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate a positive outlook. Strong financial metrics, such as a significant increase in in-force business margins and a well-progressed portfolio repositioning, suggest long-term growth. The positive sentiment is reinforced by a robust new business pipeline, strategic capital deployment, and a clear shareholder return plan. While there are some uncertainties in the Q&A, the overall strategic plan and optimistic guidance outweigh these concerns, suggesting a positive stock price movement.
Key Financial Performance
Adjusted EBITDA Increased 18% or $75 million to reach $492 million, reflecting continued commercial momentum, efficiency gains from recent capital investment, and tight cost control over SG&A.
Margin Expanded to 10.1%, up from 8.4% last year, reflecting solid operational performance.
Revenue Came in at $4.9 billion, down 2% from last year, largely due to the effect of lower commodity markets in the U.S.
Net Earnings Were $220 million. On an adjusted basis, net earnings were up 41% at $235 million, and adjusted EPS increased 46% to $0.57, benefiting from stronger earnings and the impact of the share repurchase program.
Net Cash from Operations Remained strong at $401 million, driven by both improved EBITDA and ongoing working capital discipline amid fluctuating market prices and ongoing inflation. Year-to-date net cash flow from operations was $1.1 billion, significantly higher compared to last year.
Net Debt-to-Adjusted EBITDA Ratio Improved to 1.76x, below the long-term target range, underscoring the health of the balance sheet.
Canada Sector Revenue Up 4% and year-to-date growth of 5%, driven by strong commercial execution, higher sales volume, and a more profitable mix supported by growth in value-added milk versus core white milk and continued gains in cheese and cultured products.
Canada Sector Adjusted EBITDA Up 8%, reaching $189 million, driven by higher volume, favorable mix, and efficiency gains from automation and production investment.
U.S. Sector Revenue Came in at $2.1 billion, down 7% from last year, mainly reflecting lower U.S. dairy commodity prices, especially butter and cheese block prices. Pricing actions to offset inflation and higher dairy ingredient market prices helped mitigate part of the decline.
U.S. Sector Adjusted EBITDA Was $185 million, up 16%, driven by volume growth, favorable mix, and operational improvement. Efficiency initiatives and benefits from recent capital investments contributed positively.
International Sector Revenue Was $994 million, down 3% from last year. Higher sales volume was supported by improved milk availability in Argentina, while lower export volume in Australia was partially offset by stronger domestic sales.
International Sector Adjusted EBITDA Was $82 million, up 61%, driven by higher volumes, product mix optimization, and a much more favorable relationship between international prices and milk costs.
Europe Sector Revenue Was $336 million, up 8% from last year, driven by higher sales volume supported by increased advertising and promotional activity behind the branded cheese portfolio.
Europe Sector Adjusted EBITDA Came in at $36 million, up 16%, with margin improving to 11%, driven by a more favorable balance between selling prices and input costs, supported by higher volumes.
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Operating Highlights
New product launches: The Armstrong protein line and new Dairyland and Neilson protein beverages are gaining meaningful traction. A major national foodservice partner exceeded expectations with its protein beverage platform.
High-protein innovations: Investments in high-protein, functional, and value-added dairy categories are being emphasized, leveraging scale and brand strength across retail and foodservice.
Market expansion in Canada: Sales volumes increased year-over-year with broad-based category growth. Expanded presence with major retail banners and smaller independent grocers.
Global export markets: Favorable relationship between selling prices and milk costs supported growth. Mozzarella category delivered solid growth in export markets.
Europe market: Cathedral City brand achieved strong volume growth and household penetration gains, supported by marketing and consumer engagement.
Operational efficiencies: Automation initiatives in Canada delivered meaningful cost reductions. Consolidation of Green Bay plant into Franklin facility increased output by 30%.
Cost management: Disciplined cost management and SG&A optimization helped mitigate inflationary pressures and higher wages.
Network optimization: Modernization and optimization of facilities, including upgraded whey protein systems and new lactose dryer in Waupun, Wisconsin, improved efficiency and product quality.
Strategic focus on high-protein dairy: Aligned with dietary guidelines emphasizing high-quality protein, calcium, and key vitamins. Investments in high-protein and value-added dairy categories.
Brand building and innovation: Strengthened brand engagement with awards and recognition for brands like Dairyland, Neilson, and Armstrong. Alexis de Portneuf earned medals at the World Cheese Awards.
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Risk or Challenges
Market Volatility: The U.S. commodities landscape experienced high volatility this quarter, particularly in dairy commodity prices such as butter and cheese block prices. This volatility is expected to persist, impacting overall results and creating challenges in market recalibration.
Macroeconomic Volatility in Argentina: Inflation and currency trends in Argentina showed some moderation but remain dynamic, posing ongoing challenges in managing raw material costs and navigating the macroeconomic environment.
Inflationary Pressures: Inflationary pressures continue to affect domestic markets, requiring ongoing pricing actions to mitigate higher input costs and maintain customer confidence.
Labor and Compensation Costs: Higher labor and compensation costs were noted across sectors, adding to operational expenses and requiring offsetting measures such as SG&A optimization.
Supply Chain and Network Optimization: The closure of the Green Bay, Wisconsin facility and the transfer of production to the Franklin site, while improving efficiency, involved transitional costs and operational adjustments.
Export Market Challenges: Lower export volumes in Australia were partially offset by domestic sales, but export market dynamics remain a challenge.
Economic Uncertainty in Europe: Softer retail volumes in non-cheese categories and lower market prices for bulk cheese sales were noted, reflecting economic uncertainties in the region.
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Guidance & Outlook
Revenue Expectations: The company anticipates continued strong consumer demand for high-protein dairy options, supported by favorable nutrition guidelines and evolving consumer preferences. However, U.S. commodity markets are expected to remain volatile through the remainder of the fiscal year and into the next year.
Margin Projections: Operational efficiencies, cost management, and network optimization are expected to drive sustained margin expansion across all sectors. The company is leveraging automation and production investments to reduce costs and strengthen its position as a low-cost producer.
Capital Expenditures: The company has invested approximately $180 million in upgraded whey protein systems and a new lactose dryer at its Waupun, Wisconsin facility, boosting WPC80 output by 35% and enhancing product quality. These investments are expected to position the company as a leader in high-value protein and lactose solutions.
Market Trends: The company expects a gradual recalibration of U.S. commodity markets as consumer-facing promotions expand and industry demand strengthens. Globally, the demand for high-quality dairy protein is expected to grow, supported by favorable dietary guidelines and consumer interest in nutritious, value-added dairy products.
Business Segment Performance: In the U.S., the company is scaling up its consolidated Midwest warehouse and optimizing its Franklin facility, which has boosted output by 30%. In Canada, the company is experiencing record profitability driven by automation initiatives and strong consumer demand. In Europe, branded cheese portfolios are gaining momentum, supported by marketing investments. In Australia, higher export pricing and seasonally stronger milk intake are driving growth.
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Shareholder Return Plan
Dividend Payments: Through the first 9 months of the year, Saputo returned $646 million to shareholders via dividends and share repurchases.
Share Repurchase Program: Saputo repurchased 12.6 million shares under its NCIB (Normal Course Issuer Bid) program, contributing to the $646 million returned to shareholders.
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Key Q&A
Q:How should we think about the next phases of evolution for the company through calendar '26 or into F '27 and beyond?
A:The company feels optimistic about its future due to its assets, portfolio, brands, and talent. They believe dairy will play a significant role in meeting consumer demand for nutritious, protein-rich foods.
Q:Can you elaborate on the free cash flow providing increased capacity to invest in the future?
A:The company plans to invest in capital investments to bolster capabilities, support flagship brands, and grow in the ingredients sector. They are also open to M&A opportunities to accelerate market entry, while maintaining a balanced approach to capital allocation.
Q:How is the company maintaining price discipline despite high milk supply growth?
A:The company attributes its success to operational execution, strong customer partnerships, and proactive efforts to meet consumer demand for nutrition. They emphasize their ability to maintain supply and meet growing market demand.
Q:What has changed in the company's operating model to make it more resilient and help with margins?
A:The company has completed a capital investment program that included rationalization and new equipment commissioning. This has resulted in fewer, more efficient assets, stable talent, and improved first-pass quality, leading to better fill rates and credibility in the marketplace.
Q:Have the changing U.S. dietary guidelines led to increased customer orders or demand?
A:The company has seen incremental demand for high-protein, dairy-rich products, but it cannot directly link this to the dietary guidelines. They believe the guidelines will sustain long-term demand for nutrient-dense foods.
Q:What is the outlook for normalized run rate profitability in the U.S. business once commodity markets stabilize?
A:The company aims for high single-digit to double-digit EBITDA margins. They expect benefits from removing duplicate costs, consolidating warehousing operations, and further capital investments, including automation and ingredients space growth.
Q:What efficiencies remain to be captured from the company's initiatives in the U.S. sector?
A:The company sees further upside in whey protein concentrate capacity and growth potential in the Franklin facility. They also plan to expand retail offerings and invest in flagship brands like Cheese Heads and functional beverages.
Q:Are the company's acquisition plans focused on North America or international markets?
A:The company is primarily focused on North America due to its familiarity with domestic markets and competitive milk cost base, but it remains open to international opportunities.
Q:What is the company's perception of the capacity added in dairy over the last several years and its impact on margins?
A:The company acknowledges current pressure from increased milk supply but believes demand will catch up. They feel well-positioned to meet growing market needs with their assets and raw milk availability.
Q:How does the company view the balance between supply and demand in international markets?
A:The company sees robust demand for protein-rich foods globally and feels confident in its supply and operating platforms to meet this demand.
Q:What is the company's approach to brand building in the U.S. compared to Canada?
A:The company uses a consistent methodology for investment decisions across regions. In the U.S., they focus on brands like Cheese Heads and specialty cheese brands, while in Canada, they emphasize brands like Armstrong.
Q:What is the outlook for the international segment, particularly in Argentina and Australia?
A:In Australia, milk supply is stabilizing, and the company is focusing on domestic markets and value-added exports. In Argentina, milk supply has rebounded, and the company prioritizes competitive export markets.
Q:What are the growth opportunities in the U.S. dairy foods business?
A:The company sees growth in cottage cheese, better-for-you beverages, and functional beverages. They are investing in these areas to meet growing customer demand.
Q:What is the company's strategy for aligning with growing customers in the U.S.?
A:The company focuses on capturing trends like high-protein products and being first to market. They emphasize competition for consumer demand rather than market share.
Q:What is the size of the high-protein dairy beverage opportunity for the company?
A:The company sees sustained growth in this sector and is investing in high-protein multi-serve options in Canada and the U.S. They are optimistic about capturing growth in both refrigerated and non-refrigerated spaces.
Q:Do the new U.S. dietary guidelines require customers to augment their product portfolios?
A:Some customers in federally funded programs may need to adjust, but the company believes the guidelines' clarity will drive favorable dairy uptake.
Q:What are the expected CapEx levels for F '27?
A:CapEx for F '27 is expected to be north of $400 million, reflecting inflation, digital investments, and other projects.
Q:How could a potential trade deal between the EU and Mercosur impact the Argentine business?
A:The impact depends on clarifying sanitary standards. If resolved, the Argentine platform could benefit from competitive raw material costs for exports.
Q:What is the outlook for margin expansion in the European business?
A:The company expects continued benefits from consolidation, byproduct strategy improvements, and investments in flagship brands like Cathedral City. They are also exploring new channels like foodservice.
Q:Review of Unclear Management Responses
A:Management avoided providing specific numerical details or direct answers to questions about the size of the high-protein dairy beverage opportunity, the exact impact of dietary guidelines on demand, and the specific revenue expectations for certain growth areas.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
SGA
Saputo
Sector
advertising
capital investment
cash flow
category
commodity market
consolidation
cost control
cottage cheese
cream
customer
dairy ingredient
demand
efficiency
export market
gain
improvement margin
inflation
input
market price
mix optimization
network
pressure
price milk
pricing action
product mix
relationship price
sale volume
value milk
volume mix
RGA Transcript
Saputo Inc. (SAP:CA) Q3 2026 Earnings Call Transcript
Positive2-6
The earnings call summary and Q&A indicate a positive outlook. Strong financial metrics, such as a significant increase in in-force business margins and a well-progressed portfolio repositioning, suggest long-term growth. The positive sentiment is reinforced by a robust new business pipeline, strategic capital deployment, and a clear shareholder return plan. While there are some uncertainties in the Q&A, the overall strategic plan and optimistic guidance outweigh these concerns, suggesting a positive stock price movement.
Reinsurance Group of America, Incorporated (RGA) Q4 2025 Earnings Call Transcript
Positive2-6
The earnings call summary indicates strong financial performance with a 7.4% premium growth, increased book value, and better-than-expected variable investment income. The Q&A highlights strategic moves like exiting the U.S. health care business and focusing on high-return areas, with positive guidance for 2026. Although there are concerns about management's lack of specificity, the overall sentiment is positive due to optimistic EPS growth targets, shareholder returns, and strategic capital deployment. The absence of a market cap suggests a likely moderate stock price reaction, leading to a 'Positive' sentiment rating.
Reinsurance Group of America, Incorporated (RGA) Q3 2025 Earnings Call Transcript
Positive10-31
The earnings call summary highlights strong financial metrics, capital flexibility, and shareholder return plans, which are positive indicators. The Q&A section reveals normal volatility in claims and deployable excess capital. While guidance remains unchanged, the company anticipates future profitability and market expansion, suggesting optimism. The lack of new partnerships or secondary offerings, and the absence of guidance refusal, further supports a positive outlook. Therefore, considering all factors, the stock price is likely to experience a positive movement of 2% to 8% over the next two weeks.
Reinsurance Group of America, Incorporated (RGA) Q2 2025 Earnings Call Transcript
Unknown8-1
The earnings call summary provides a mixed picture: while there are positive elements such as expected margin improvements, potential share repurchases, and a strong pipeline, there are also concerns about higher claims costs and uncertainty in the healthcare line. The Q&A section reveals cautious optimism but also highlights some uncertainties, particularly regarding future guidance and earnings volatility. This balance of positive and negative factors suggests a neutral sentiment.
RGA Slides
RGA Report
Frequently Asked Questions
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