UPDATE 2-Saputo profit up on higher prices, boosts dividend

Tue Aug 3, 2010 3:38pm EDT

* Q1 EPS C$0.53 vs C$0.41 yr ago, analyst forecast C$0.50

* Revenue C$1.44 billion vs C$1.45 billion

* Dividend raised to 16 Canadian cents a share (Adds details, analyst comments, conference call, updates shares)

By Solarina Ho

TORONTO, Aug 3 (Reuters) - Saputo Inc (SAP.TO), Canada's biggest dairy processor, reported a more than 31 percent rise in quarterly profit on Tuesday, helped by higher U.S. cheese prices and despite lower revenues.

"It was a relatively straightforward quarter that played out pretty much like the commodity prices that we saw during the quarter suggested it would," said analyst Candice Williams of Canaccord Genuity.

Saputo said its profit was bolstered by a 21 cent rise in the average block market per pound of cheese, or the average daily price of a 40 pound block of cheddar traded on the Chicago Mercantile Exchange, used as the base price for cheese.

However, revenues took a hit due to the strong Canadian dollar versus the U.S. dollar and the Argentine peso, the company said.

The Montreal-based maker of Stella cheese and Vachon dessert snacks also raised its quarterly dividend by 10.3 percent to 16 Canadian cents a share.

"It just suggests some of the strength that we're seeing isn't all commodity related," said Williams. "There are fundamental, sustainable improvements to back a dividend increase."

Saputo, also among the top cheese producers in the U.S. and top dairy processors in Argentina, reported a first-quarter profit of C$111.4 million ($108.7 million), or 53 Canadian cents a share, for the three months ended June 30. That compared with a profit of C$84.8 million, or 41 Canadian cents, a year earlier.

In addition to higher cheese prices, a more favorable dairy ingredient market and last year's acquisition of F&A Dairy of California also helped offset the impact of the foreign exchange, the company said.

Consolidated earnings before interest, income taxes, depreciation and amortization, or EBITDA, were up 20.4 percent to C$190.8 million on more efficient operations and better market conditions, it said.

Revenue fell 0.7 percent to C$1.44 billion from C$1.45 billion. Foreign exchange translations affected roughly C$75 million in revenues and C$9 million in EBITDA, the company said.

Analysts had forecast earnings of 50 Canadian cents a share on revenue of C$1.5 billion, according to Thomson Reuters I/B/E/S.

"Our hard work during the first quarter of fiscal 2011 allows us to be optimistic for the upcoming quarters," said Chief Executive Lino Saputo during a conference call with analysts.

"Our intention is to make other acquisitions in areas of businesses that are core for us. That will be our first use of cash," he said.

Saputo shares were up 4 Canadian cents, or 0.1 percent, at C$31.45 on the Toronto Stock Exchange on Tuesday afternoon.

($1=$1.02 Canadian) (Reporting by Solarina Ho; editing by Rob Wilson)