1 Recession-Proof Stock Trading at an Attractive Valuation


Known (TSX: SAP) is one of the top 10 dairy processors in the world, a leading cheese maker and liquid milk and cream processor in Canada, the leading dairy processor in Australia and the second largest dairy processor in Argentina. It is one of the top three cheese manufacturers in the United States (USA) and one of the largest producers of longer-lasting and cultured dairy products. In the United Kingdom (UK) it is the largest manufacturer of branded cheese and a leading manufacturer of milk spreads.

In FY 2021, Saputo operated the company's business in four Sectors, namely Canada, United States, International and Europe, which accounted for 29%, 43%, 23% and 5% of Saputo's total sales, respectively. It currently operates 61 production facilities and processes around 11 billion liters of milk per year. The company employs around 17,300 people and sells Saputo's products in more than 60 countries.

Robust global strategic plan

The company's global strategic plan includes a four-year investment plan that will provide approximately $ 2.3 billion in investment from fiscal 2022, which is similar to Saputo's depreciation and amortization expense.

Since Saputo is involved in the manufacture, sale and distribution of food products, in addition to the quality of Saputo products and focus on certain established brands, it relies on the brand awareness and loyalty of the company's customers. Saputo's brands are recognized by consumers for quality and reliability.

Valuable intellectual property

As innovation is part of Saputo's growth strategy, the company's research and development teams have developed new technologies, products and processes for process optimization in recent years. Protecting these assets may include patenting certain technologies. Therefore, the company takes appropriate measures to protect, preserve and enforce Saputo's intellectual property.

The story goes on

In Canada, the dairy industry operates under a national milk supply management system. The aim of this system is to ensure that the total supply of dairy products in the Canadian market is sufficient to meet consumer demand. This goal is achieved by regulating the domestic milk production used to make dairy products in Canada. Saputo is well positioned to meet consumer milk demand.

Lucrative milk supply contracts

In addition, the company has significant international activities and benefits from several milk supply contracts. Independent processors usually negotiate with local cooperatives or purchase milk directly from individual companies. Processors are charged a price that reflects the milk class price for the current month plus a negotiated processing fee. In Australia, Argentina and the UK, milk prices are negotiated between processors and producers.

Internationally there are no restrictions or restrictions on the amount of milk produced and processed. In addition, processors are not restricted in terms of the amount of milk they can purchase and can negotiate milk supply contracts with any company. Therefore the milk price correlates strongly with the world market price of the traded milk products.

Overall, Saputo benefits from long-term sales growth trends and operates in a recession-proof industry.

The post TFSA Investors: 1 Recession-Proof Stock Trading At Attractive Valuations first appeared on The Motley Fool Canada.

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Fool Nikhil Kumar has no position in any of the stocks mentioned.

2021

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