Cost Pressures Continue to Hamper Saputo's Profitability in 4Q; Shares Not a Bargain
Narrow-moat Saputo's top line remained healthy in the fourth quarter, with sales up 17.9%, driven by acquisitions, but its profitability remained hampered by weaker international pricing for cheese and dairy ingredients, elevated warehousing and logistics expenses, and unfavorable currency effects, with adjusted EBITDA margin contracting 100 basis points to 8.5%. We don't anticipate a material change to our CAD 33 fair value estimate, as we had largely incorporated these factors into our bottom-...Saputo produces, markets, and distributes an array of dairy products including cheese, fluid milk, extended shelf-life milk and cream products, cultured products and dairy ingredients. Co.'s products are sold in several countries under brand names such as Saputo, Alexis de Portneuf, Armstrong, COON, Cracker Barrel*, Dairyland, DairyStar, Friendship Dairies, Frigo Cheese Heads, La Paulina, Milk2Go/Lait's Go, Neilson, Nutrilait, Scotsburn*, Stella, Sungold, Treasure Cave and Woolwich Dairy. Co. operates its business through three sectors, the Canada Sector, the USA Sector and the International Sector.
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