Australia helps boost Saputo profit

08 Feb, 2019 11:58 AM
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Lino Saputo Jr: We are optimisitc more so than we have ever been before about the future of the dairy industry.
Milk production has been down for us, year over year ... so we are feeling the effects of that.
Lino Saputo Jr: We are optimisitc more so than we have ever been before about the future of the dairy industry.

Saputo's international division, including its Australian operations, helped lift its profitability in the last quarter.

The company released its third-quarter results on Thursday, reporting revenue up 18.4 per cent to $CAN3.577 billion ($A3.77 billion) and adjusted EBITDA* up 1pc ($CAN3.2 million) to $CAN321 million ($A340 million).

Saputo chairman and chief executive Lino Saputo Jr, speaking after the results release in Canada, said all recent acquisitions, including Murray Goulburn, contributed positively to the adjusted EBITDA.

"When you factor the efficiency that we have brought to play in the Murray Goulburn platform, profitability is well ahead of our plan," he said.

"That combined with an already efficient platform in Warrnambool and an already efficient platform in Argentina, they are driving some very good numbers for us."

Mr Saputo said the integration of the former MG and Warrnambool Cheese and Butter businesses was ahead of schedule, with blended teams formed taking the best talent from both businesses.

"One of the great things we are noticing in Australia is the team is very independent," he said.

"As long as they have very good, very strong and clear marching orders, they know how to execute quite well."

Mr Saputo said Saputo Dairy Australia was continuing "to demonstrate our long-term commitment to fostering loyalty and building trust among Australian dairy farmers", pointing to the recently announced milk price step up.

A new supplier relations and pricing policy committee now gave suppliers "a forum to evaluate and discuss all matters relating to milk supply with senior management".

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  • But Mr Saputo did acknowledge the drought was impacting on the company's milk receivals in Australia.

    "Milk production has been down for us, year over year ... so we are feeling the effects of that," he said.

    But the drop in production in Australia was more favourable for world market prices.

    "It is a double-edged sword," Mr Saputo said.

    "On the one hand, we have the benefit of less solids on the market, on the other hand we have less solids that we can process through our facility in Australia."

    Mr Saputo said he was cautiously optimistic about market conditions.

    "We are optimistic more so than we have ever been before about the future of the dairy industry and the market conditions and the dynamics," he said.

    But he warned there were factors at play that could mitigate the positive outlook, including a potential recession, ongoing trade wars and dairy producers around the world rapidly lifting production in response to higher prices.

    Mr Saputo said the company was still looking at further acquisitions around the world, including in Australia.

    "We still have a big appetite for acquisitions moving forward," he said.

    "There could be some other tuck-in businesses in Australia that could make sense for us."

    Mr Saputo said the company would like to one day have a platform in New Zealand.

    "We think New Zealand is an ideal location to have an export platform where we can service customers around the world," he said.

    *Earnings before interest, income taxes, depreciation, amortization, gain on disposal of assets, acquisition and restructuring costs, and gain on hyperinflation.

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    Carlene Dowie

    Carlene Dowie

    is editor of Australian Dairyfarmer magazine

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