Canadian dairy major Saputo says it is still looking closely at all of its global facilities following last week’s announcement of a plant closure in Australia.
Speaking to analysts on Friday (11 November), after the release of the company’s second-quarter financial results, company CEO Lino Saputo said: “We continue to re-evaluate our Australia network and all our global platforms to make sure that we have the right infrastructure in place for the total milk that we have today and that we anticipate over the next few years.”
Publicly-listed Saputo revealed last week it plans to close its Maffra facility in Victoria. The company is also set to downsize two other factories: one in Leongath, also in Victoria, and another in Mil-Lel, in South Australia. The moves potentially put 75 jobs on the line.
The announcement came almost two months after Mr. Saputo flagged further potential plant closures under the company’s “optimisation” strategy, one of its five pillar EBITDA-boosting initiatives over a four-year cycle.
In February, Saputo also revealed it was shutting part of a plant in Cobram, Victoria. Outside of Australia, other closures have been announced – the Belmont US site in Wisconsin and potentially the plant in Tulare, California.
Speaking to analysts on Friday, Mr. Saputo said the latest closure plan was “intended to enhance our operational efficiency and strengthen our competitive position in Australia”.
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He added: “These right-sizing measures are part of our roadmap to increase capacity utilisation, reduce costs, and drive improved returns on invested capital in Australia.”
Saputo, which supplies dairy products such as Devondale and Cracker Barrel in Australia, has referred to reduced milk availability in the country, which it told analysts “challenged” demand for its product in export markets. The lower availability has been linked to factors including labour shortages, high input costs and adverse weather conditions.
In the three months to 30 September, the company saw its overall revenues increase by 20.9%, year-on-year, to CAD4.46bn (US$3.35bn). Adjusted EBITDA was up by 30.4% to CAD369m.
Mr. Saputo said the results were “driven by our successful efforts to mitigate inflation, our efficiency and productivity initiatives and sustained consumer demand”.
He added: “Consumer demand for dairy has remained relatively steady and price elasticity has held up better than expected in most of our markets, but we are monitoring closely for signs of changing consumer behaviours, with the average cost of the consumer basket continuing to increase.”
He said Saputo is not “not overly concerned at all about price elasticity moving forward” as in “challenging economic environments dairy products have fared extremely well”.
But, adding a cautionary note, CFO Maxime Therrien said: “We still face labour shortages in some of our facilities and supply chain challenges, which put pressure on our ability to supply ongoing demand.”
Saputo has been linked recently as a potential buyer for dairy peer Fonterra’s assets in Chile.
While not commenting on that speculation, Therrien said the company still has a pipeline of M&A prospects.
“If we’re going to make an acquisition that’s going to energise and excite our sales and marketing team with new categories of product, perhaps new branding [and] more diversification that allows them to have leverage when they’re bringing other products to market, then those are types of things that we would consider,” he said.