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New lines offset U.S. cheese prices in Saputo’s Q3

Recent acquisitions by Canada’s largest dairy processor helped offset a dip in U.S. cheese prices in Saputo’s third fiscal quarter.

The Montreal dairy giant on Tuesday posted net earnings of $104.3 million on $1.497 billion in revenues in its third quarter ending Dec. 31, 2009, compared to $57.8 million profit on $1.518 billion in revenues in the year-earlier period.

One of the larger contributions to the improved Q3 ledger came from revenues of Neilson Dairy, which Saputo bought from Weston Foods in December 2008 for $465 million.

Saputo’s acquisition of California cheesemaker F+A Dairy in July 2009 also helped boost its overall Q3 revenues, the company said.

However, in Saputo’s U.S. business, the company took a hit from a US27-cent decline in the average block market per pound of cheese compared to the year-earlier period, putting “downward pressure” on revenues.

(The “average block market,” or the average daily price of a 40-pound block of cheddar traded on the Chicago Mercantile Exchange, is used as the base price for cheese.)

Strength in the Canadian dollar compared to the U.S. dollar also “negatively affected” revenues, the company said.

U.S. dairy product revenue dropped to $498.1 million in Q3 from $621.6 million in the year-earlier period, while Q3 dairy product revenue from Saputo’s “CEA” (Canada, Europe and Argentina) division rose to $960.2 million from $854.1 million.

Saputo’s grocery products division also took a hit in Q3 revenues, dropping to $38.97 million from $41.7 million in the year-earlier period.

The increase in Q3 earnings in 2009 over 2008 was also due to a number of unusual charges in Saputo’s 2008 Q3, such as a $2 million “rationalization” charge for its closure of a fire-damaged cheese plant in Vermont, and substantially higher inventory write-downs in that quarter.

Saputo markets dairy products in over 40 countries including brands such as Armstrong, Baxter, Dairyland, Neilson and Nutrilait.

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