Saputo to close factories

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Saputo CEO Lino Saputo: “By the end of our strategic plan, we will have fewer plants in the US network and fewer plants in the Australian network.” Photo by Stephen Cooke

Canadian milk processor Saputo is looking at rationalising its dairy factories in Australia in its implementation of a new, four-year global strategic plan.

No announcement has been made whether any Victorian dairy factories will be affected.

Company CEO Lino Saputo has announced they will be implementing an approach to networking their processing factories to achieve efficiencies, which has already been applied to Canada and the United States, where multiple factories were closed.

Saputo Dairy Australia has been facing a reduction in milk supply, which Mr Saputo confirmed in recent statements.

Earlier this year Saputo closed its cheese slice line at the Cobram factory in northern Victoria.

In recent months the company has announced factory closures in the US and the transfer of one line to another factory.

In an interview broadcast by Scotiabank, a Canadian-based bank, Mr Saputo outlined how the company was implementing an approach already adopted in Canada.

“It’s a model we stole from our Canadian platform,” Mr Saputo said.

“We had to think about all our assets, how much milk we are processing, which are our most effective and efficient plant, which ones should be producing more volume, thereby allocating cap-ex dollars to increase their capacity so we can shutter others in the system.

“It’s very much the same architecture we have asked our other divisions to focus on.

“How much milk do we need to process and what are most effective plants to process it in and what plants need to be shuttered in the system?”

Mr Saputo referred to the process as “network optimisation”.

“Two platforms that have most upside for us are the US and the second one is Australia.

“Australia is very different to the US — it’s not a commodity issue, it’s more a lack of milk production issue in the country.

“Milk production has been declining by maybe four or five per cent per year which means less milk for us to process, which means we need less plant in our system to be able to run our plant more effectively, more efficiently.

“By the end of our strategic plan (final year 2025,) we will have fewer plants in the US network and fewer plants in the Australian network.

“There is still some tweaking we can do in Canada, not so much tweaking in Argentina where we have two plants running super efficiently and a little bit of tweaking in the UK.”

In the address, Mr Saputo also talked about “de-commoditising” the business and moving into plant-based products.

Saputo Dairy Australia has factories at Kiewa, Cobram, Leongatha, Maffra, Allansford, Laverton and Burnie, Tasmania. It still owns a redundant factory at Rochester.

In its financial statements for the three months to the end of June, Saputo reported revenues of $4.327 billion (Canadian dollars), up $839 million or 24.1 per cent.

Net earnings totalled $139 million and EBITDA performance amounted to $347 million.

Saputo Dairy Australia has not responded to requests for more information.