Saputo’s UK operations aid margins but European outlook tempered
Saputo’s rejig of its UK operations is starting to pay dividends on margins in Europe but the dairy giant indicated they will not return to historical levels.
Discussing fourth-quarter and full-year results with analysts last week, president and CEO Carl Colizza suggested the worst of the input-cost inflation pressures felt in the UK are behind the Cathedral City cheese brand owner.
While Canada-headquartered Saputo does not break down the constituent components of its European operations in terms of individual markets, the UK is a key territory for the company following the 2019 acquisition of Dairy Crest. That deal took in the Cathedral City, Clover and Country Life brands, a business that generated revenues of around £457m ($619.6m at today’s rate) in 2018.
Saputo’s European division delivered an adjusted EBITDA margin of 8.9% in the 12 months to 31 March, up from 6.9% in fiscal 2024. Colizza flagged there is some runway to go in the years ahead but with a caveat on the size of the recovery.
“One of the things that we need to keep in mind is historical EBITDA margins were 18-plus percent. What would be more normal for a European sector at this point is going to be more in the low-teens to mid-teens as an ongoing for the business,” Colizza told analysts last week.
“Our European sector, and our team in the UK specifically, have navigated through some pretty important inflationary pressures over the last several years. And the reality is that a lot of those input costs we were not able to recover from the marketplace, so it’s put pressure on margins.”
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataSo-called “optimisation initiatives” are starting to bear fruit in Saputo’s UK operations, the CEO said.
In April, Saputo announced job cuts at its Davidstow Creamery as the company plans to end manufacturing of certain ingredients for infant formula at the facility in Cornwall, south-west England.
And in January, the planned closure of Saputo’s Kirkby Malzeard site, located in Harrogate in North Yorkshire, where the Wensleydale cheese brand is produced, was announced.
Saputo said it was shifting production to its dairy factory in Nuneaton, Warwickshire, where a “major investment” has been undertaken.
Challenges in the UK market also resulted in a Saputo booking an impairment charge in the third quarter of C$674m ($492.7m today). The trading environment in the country meant “a slower-than-expected cadence of margin recovery” for its UK unit, the company explained in February.
Colizza said last week the consolidation of its cut-and-wrap cheese capabilities into the Nuneaton site was “three quarters of the way there” to completion. “We do believe that the margin will continue to recover with all these initiatives in place,” he added in terms of the European EBITDA margin.
He continued with respect to the UK: “We do feel we’re in a good place with both the balance around the branded offering into the marketplace, as well as what we do provide in the private-label sector.
“There’s a greater degree of stability as well in the overall pricing specifically associated to more stabilised inflation.”
Europe contributed C$106m ($77.5m) to Saputo group’s adjusted EBITDA last year, up from C$75m in the previous 12 months. Revenue for the division increased 9% to C$1.19bn.
For Saputo as a whole, adjusted EBITDA rose 3.7% to C$1.57bn. Revenue climbed 9.9% to C$19.06bn.
Sign up for our daily news round-up!
Give your business an edge with our leading industry insights.
Just Food Excellence Awards - Have you nominated?
Nominations are now open for the prestigious Just Food Excellence Awards - one of the industry's most recognised programmes celebrating innovation, leadership, and impact. This is your chance to showcase your achievements, highlight industry advancements, and gain global recognition. Don't miss the opportunity to be honoured among the best - submit your nomination today!
Nominate NowContent Original Link:
" target="_blank">
