Saputo Q4 Earnings Call Highlights

Saputo (TSE:SAP) executives said the dairy processor ended fiscal 2026 with stronger margins, improved cash generation and a more focused portfolio, even as lower U.S. dairy commodity pricing weighed on reported revenue in the fourth quarter.

On the company’s fourth-quarter earnings call, President and Chief Executive Officer Carl Colizza said Saputo is seeing “clear structural demand momentum” in dairy, supported by consumer interest in protein and value-added products. He said the company’s growth is increasingly coming from “higher quality sources,” including better mix, stronger channel positioning and more disciplined pricing.

Chief Financial Officer and Secretary Maxime Therrien said adjusted EBITDA rose 5% year over year to CAD 386 million in the fourth quarter, while adjusted EBITDA margin expanded to 9.2% from 8.3% a year earlier. Revenue was CAD 4.2 billion, down 6%, largely due to lower U.S. dairy commodity market pricing. Net earnings from continuing operations were CAD 157 million, while adjusted net earnings rose 17% to CAD 169 million. Adjusted earnings per share increased 21% to CAD 0.41, which Therrien said benefited from stronger earnings and the company’s share repurchase program.

Argentina Sale Moves Saputo Toward a More Focused Portfolio

Therrien said Saputo’s Dairy Division Argentina is now presented as a discontinued operation after the company signed an agreement in February to sell an 80% stake in the business. The transaction is expected to close in the first half of fiscal 2027, subject to customary conditions and regulatory approvals. After the sale, Saputo will account for its remaining 20% interest using the equity method.

Colizza described the Argentina divestiture as part of a broader effort to simplify the portfolio and reallocate capital toward categories and markets with stronger return potential. “We are simplifying the portfolio and reallocating capital toward the categories and markets where we see the strongest returns,” he said.

Therrien said Saputo generated more than CAD 500 million of operating cash from continuing operations in the fourth quarter, up CAD 170 million from the prior year. Full-year net cash flow from operations was CAD 1.5 billion, up CAD 314 million year over year. The company’s net debt-to-adjusted EBITDA ratio improved to 1.7 times, or 1.37 times on a pro forma basis including estimated proceeds from the Argentina sale.

Saputo returned approximately CAD 1 billion to shareholders in fiscal 2026 through dividends and share repurchases, including the repurchase of 19.2 million shares under its normal course issuer bid.

Canada Delivers Record Year as Volumes Rise

Therrien said Saputo’s Canada sector posted fourth-quarter revenue growth of 4% and full-year growth of 5%, supported by volume growth across retail, foodservice and industrial segments. He cited a favorable mix shift toward butter, value-added categories, high-protein beverages and cultured products, as well as pricing actions to offset inflation and higher milk input costs.

Adjusted EBITDA in Canada rose 1% to CAD 159 million. Therrien said volume growth, favorable mix and manufacturing efficiencies supported profitability, but were partly offset by higher wage-related costs, including stock-based compensation, and brand support initiatives.

Colizza said Canada remains a stable earnings base for Saputo, with continued demand for dairy foods and higher-protein offerings. He pointed to the Armstrong brand in everyday cheese and said the company is investing in in-store execution, media campaigns and packaging upgrades across Saputo shredded cheese and Neilson value-added beverages.

U.S. Business Shows Volume Momentum Despite Commodity Pressure

In the United States, Therrien said revenue fell 13% to CAD 1.9 billion, reflecting lower U.S. dairy commodity prices, particularly for butter and cheese. He said underlying performance remained solid, with volume growth and favorable mix across cheese, dairy foods and value-added dairy ingredients.

Growth in the U.S. was led by mozzarella, string cheese, export cheese and cream cheese categories, as well as value-added dairy ingredients. Therrien said Saputo’s cheese volumes grew ahead of industry benchmarks, reflecting share gains.

Adjusted EBITDA in the U.S. was broadly in line with last year. Benefits from higher volumes, mix, commercial initiatives and operational improvements—including efficiencies from the company’s Midwest consolidated warehouse facility—were offset by higher logistics expenses, transportation and fuel costs, wage increases, stock-based compensation and advertising and promotional spending.

Colizza said the U.S. business is benefiting from the ramp-up of the Waupun facility, which is adding capacity in whey and higher-value dairy ingredients. He also highlighted opportunities for Frigo Cheese Heads beyond lunchbox occasions, including adult and on-the-go snacking, convenience channels and food away from home.

Europe Margins Improve; Australia Benefits From Export Pricing

Saputo’s International sector, which consists mainly of Australia, saw revenue supported by stronger export pricing in international cheese and dairy ingredient markets, as well as growth in value-added ingredients. Therrien said domestic demand remained solid, with higher domestic volumes more than offsetting reduced export volumes. International adjusted EBITDA was stable year over year, as higher prices were largely offset by elevated milk input costs, tighter milk availability, higher labor costs, advertising and promotional investments and stock-based compensation.

In Europe, revenue was slightly above CAD 290 million, down 13% from last year. Therrien said the decline reflected reduced bulk cheese volumes due to lower milk intake and lower dairy ingredient volumes following the company’s ingredient strategy. Adjusted EBITDA rose 54% to CAD 37 million, with margin improving to 13%, driven by favorable mix, consolidation of cheese packing operations and progress on the ingredient strategy.

Colizza said Europe is shifting away from commodity exposure toward branded and higher-value products. He said the Cathedral City brand remains central to that strategy and is gaining share, while also expanding into adjacent categories through licensing.

Capital Spending to Rise in Fiscal 2027

Therrien said full-year capital expenditures were CAD 339 million in fiscal 2026 and are expected to rise to approximately CAD 550 million in fiscal 2027. He said the additional spending will focus on faster-growing dairy segments, capacity improvements and network efficiency, with spending “tightly managed” and linked to execution and returns.

During the question-and-answer portion of the call, Colizza said incremental investments will target categories such as cultured products, cottage cheese, value-added beverages and ingredients. He said Saputo is considering both organic investments and acquisitions, but is not seeking “a new milk shed.” Instead, he said potential acquisitions would need to add capabilities, strengthen routes to market or support growth in protein, better-for-you offerings and tailored nutrition.

Colizza also said the company expects to continue investing in advertising and promotion behind brands including Cathedral City, Devondale, Frigo Cheese Heads, Saputo and Armstrong. Therrien said the company expects incremental brand spending in fiscal 2027, describing it as part of a multiyear effort to support brand awareness and commercial initiatives.

Looking ahead, Colizza said Saputo is entering the next phase of its transformation, with recent investments expected to scale and support further efficiencies. He said the company remains focused on operating as a low-cost manufacturer of high-quality dairy solutions while pursuing growth in protein-rich and value-added dairy categories.

About Saputo (TSE:SAP)

Saputo is a global dairy processor domiciled in Canada (28% of fiscal 2022 sales) with operations in the United States (43%), the U.K. (6%), and other international markets (23%). It sells cheese, cream, fluid milk, and other dairy products. In the retail segment (50% of revenue), its mix of brands include Saputo, Armstrong, Cheer, Cathedral City, and Frylight. Saputo also competes in food service (30% of revenue) and industrials (20% of revenue), which houses its ingredients business.

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