Investment Research report

Saputo, Inc.

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Research Overview

S&P 500
Consumer Staples
Nov 29, 2022

After conducting a forensic financial and accounting review, Spruce Point believes Saputo, Inc. (TSX: SAP), an S&P/TSX Composite Index member that manufactures dairy and grocery products, is now in the decline and restructuring phase of its growth as it struggles against many negative forces, such as declining dairy consumption, inefficient logistics and operations, key customer loss and high wage costs. Based on our investigation, we estimate 40% to 60% downside risk, or $13.75 – $20.50 per share.

The report highlights several key concerns with the company, including

  • Saputo’s aggressive acquisition spree which shows many subtle signs of growing financial stress have emerged, while disclosures and transparency decrease
  • Evidence shows that the Company obscures Australian regulatory filings in an undisclosed numbered entity and masks what appears to be abnormal margins in Argentina
  • Financials from recent periods show that Saputo has not generated enough excess cash flow to cover its dividend
  • Saputo’s acquisition of Dairy Crest (U.K.) appears to have brought a $724 million “hidden” pension obligation that the market does not properly value
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