The bakery division’s $134-million of annual sales last year represented less than two per cent of the $6.9-billion of revenues dominated by Saputo’s dairy operations in Canada, the United States and Argentina.Christinne Muschi / Reuters
Jos. Louis and May West are giving Quebec snack-cake king Saputo Inc. a sugar headache.
The idiosyncratically named, hyper-sweet treats are an institution in Quebec and have a lock on the market in the province.
But it looks as though Quebeckers – as well as consumers elsewhere in Canada and in the United States – no longer have the sweet tooth they once had.
Montreal-based dairy and cheese giant Saputo said Tuesday it has taken a $125-million writedown, citing "stagnating growth in market-wide snack-cake sales." The non-cash goodwill impairment was a key element in the company's posting a fourth-quarter loss.
The decline in dessert-cake consumption reflects a wider North American trend to healthier eating habits and rising concerns over obesity and growing waistlines.
Earlier this year, Hostess Brands Inc., the maker of Twinkies, sought bankruptcy protection for the second time in less than a decade.
Yet Saputo chief executive officer Lino Saputo Jr. says he's sticking with the gooey confections. The bakery division is not for sale, he said on a conference call Tuesday.
The key is to work at bumping up sales in the U.S., the company said in a news release. "The sector will continue to evaluate overall activities in an effort to improve efficiencies," it said.
Saputo made a splash 13 years ago when it bought Quebec-based Culinar Inc. and its famous Vachon line of iconic Jos. Louis and May West products.
The division accounts for less than 2 per cent of Saputo's $6.9-billion in annual revenue. The Culinar acquisition was Saputo's first diversification away from its core cheese and dairy businesses.
Much work was put into boosting efficiency and cutting costs at the bakery division.
Saputo eliminated all trans fats from its products in 2005. Saputo's dairy and cheese sales are concentrated in Canada, the U.S. and Argentina.
The company said Tuesday that it posted a $2.6-million loss in the fourth quarter as a result of the writedown.
Excluding the one-time item, profit fell to $122.4-million or 61 cents a share in the quarter from $126.6-million a year earlier. Revenue increased to $1.7-billion from $1.6-billion.
Bertrand Marotte