Saputo is one of the ten largest milk processors in the world, processing nearly 11 billion liters of milk each year into a variety of cheeses and a wide range of dairy products. The company manufactures, markets and distributes a wide range of dairy products such as cheese, liquid milk, milk and cream products with extended shelf life, cultural products and milk ingredients.
Saputo is the largest cheese manufacturer and the leading milk and cream processor in Canada. The company also has a large international presence, with the US operations being the largest. With 63 manufacturing facilities, Saputo operates in four sectors: United States (42% of Adjusted EBITDA in 2020), Canada (27%), International (21%) and Europe (10%). The company sells its products in over 50 countries and has leading market shares in Australia, the United States and Argentina.
Saputo operates an umbrella organization of leading brands such as Saputo, Armstrong, Dairyland, Devondale, Frigo Cheese Heads, Treasure Cave and Montchevre, etc.
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Sales growth and market exposure
Saputo sells its products to a wide range of customers such as supermarket chains, convenience stores, specialty cheese boutiques, independent retailers, restaurants, food processors, etc. The retail segment accounts for over 50% of its total sales, followed by food service (~ 30%) and industrial (~ 20%). Saputo has diversified its revenue base and, over the past two years, has generated a greater proportion of its revenue from other geographic areas, including Europe.
Saputo is one of the three largest cheese producers in the USA, the best milk processor in Australia and the second largest in Argentina. It is one of the largest manufacturers of extended shelf life and cultured dairy products in the United States and the largest manufacturer of branded cheese and a leading manufacturer of milk spreads in the UK. Saputo has successfully established close relationships with suppliers across the entire value chain.
The company is known for its range of different dairy products known for their quality and taste. Customers trust the Saputo brand because of their six decades of experience in the food industry. To attract and retain new customers, the company also offers a range of organic, low-sodium and low-sugar dairy products for health conscious consumers.
In addition to strengthening its presence in emerging countries, opening up new and expanding existing markets, the company is growing both organically and through acquisitions. The company has a good track record of integrations and has completed 32 acquisitions since 1997. These acquisitions have helped Saputo grow rapidly in Canada, the US, Argentina, Australia and the UK. Revenue has increased more than 8% CAGR over the past decade.
Saputo benefited from higher sales volumes in the retail and industrial market segments, but had lower sales volumes in the food service market segments. The company is well positioned to meet changing consumer demand due to the COVID-19 pandemic. Saputo continues to develop innovative product offerings that adapt to new consumer trends such as: B. Take away for eating at home. For the remainder of the 2021 financial year and at the beginning of the 2022 financial year, lower volatility is expected on the milk raw materials market.
Saputo is a dividend aristocrat and has historically paid more and more dividends, up more than 9% CAGR over the past decade. The stock generates a modest return of 1.8%, but has increased its dividends every year since 1998. It also has a reasonable payout ratio of 47%. Saputo recently increased its dividend by ~ 3%. The company does not intend to buy back shares for the 2021 financial year.
Saputo has a strong balance sheet and enjoys financial flexibility due to high cash flow from operations and low debt. The aim is to return 30% to 35% of net income to shareholders as dividends. EPS has also increased by over 11% over the past decade.
Saputo has successfully strengthened its global business and consolidated its position as one of the leading milk processors in the world. The company expects its bottom line to be in line with operational efficiency and cost reduction. Saputo’s strategy of acquiring similar companies in different regions is also bearing fruit and positions them well for the future.
In the current scenario, the company will only focus on investing in organic growth and strengthening business processes and brands. With a large portfolio of retail brands and a customized product offering, opportunities have been seized from the rise in consumer demand in the retail market segment. Saputo has improved its online direct-to-consumer strategies such as The Saputo Fridge in Canada and has also expanded its home delivery zone.
Saputo continues to invest in building customer loyalty, diversifying its product portfolio and building brand awareness. A large international presence, leading brands, quality products and an intelligent acquisition strategy make the company a leading company in the dairy products sector.
Saputo makes approximately 32% of all Canadian natural cheeses. To maintain its leadership position in the challenging dairy industry, the company has a strong focus on cost management and operational efficiency.
The food industry is extremely competitive and Saputo, along with two other key competitors, is one of Canada’s top players in the dairy industry. Several regional, national and multinational companies compete with Saputo in the US, Argentine and Australian dairy markets.
Saputo is a defensive consumer stock. The company has intelligently diversified across different regions through strategic acquisitions that have had a positive impact on earnings. The company is aiming for accelerated organic growth on all platforms in the coming years. Due to its enormous international presence, its decades of existence and its large product portfolio, the company should maintain its leading position in the industry and continue its dividend growth streak into the future.
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