Saputo hints at further acquisitions

09 Aug, 2018 04:00 AM
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Saputo says it Warrnambool Cheese and Butter platform is running close to 97-98 per cent capacity utilisation.
We've got to bring more milk into the platform.
Saputo says it Warrnambool Cheese and Butter platform is running close to 97-98 per cent capacity utilisation.

Saputo is looking at further acquisitions in Australia and New Zealand, according to chief executive officer Lino Saputo Jnr.

Mr Saputo, speaking on Tuesday after the release of Saputo's first-quarter results, said the company was also looking at opportunities in other parts of the world, including in the United States, Argentina and Europe.

Mr Saputo said the company was committed to growing its milk intake in Australia in the wake of its acquisition of Murray Goulburn in May.

"We've got to bring more milk into the platform," he said.

"Right now if I look at the WCB (Warrnambool Cheese and Butter) platform, we are running close to 97-98 per cent capacity utilisation.

"On the MG side, we are running somewhere around 58 per cent capacity utilisation.

"So one of the easiest ways to drive synergies and drive profitability is getting more milk through the plants, but, of course, it's got to go into profitable products that we can sell either domestically or internationally."

Mr Saputo said he expected it would take up to three years to fully merge the operations of MG and WCB and to realise the synergies.

"The integration of both the WCB and MG businesses is going extremely well and colleagues are starting to operate under a combined Saputo Dairy Australia umbrella," he said.

He said the company at a corporate level was operating as one entity and since May 1, there had already been a head-count reduction.

Further synergies would include in milk collection and transport and moving some production from WCB to MG or vice versa.

Customers in emerging markets were looking for more product from Saputo Australia.

"So as we ramp up the capability of processing in MG, we will have a home for the finished goods," he said.

Mr Saputo was bullish about the international market.

"Prices on the international market don't seem to be declining as rapidly as they did in the past," he said.

"In fact, if I look at the world dairy production numbers, coming out of New Zealand and coming out of Europe, there are some very encouraging signs there."

NZ production growth did not look like exceeding 1-1.5 per cent per year, due to regulatory and climatic issues.

"That bodes really well for the international market, and with New Zealand accounting for 54 per cent of international trade, already there is a better balance between supply and demand, just by virtue of what is coming off the farm."

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READER COMMENTS

Bernhard
9/08/2018 11:37:23 AM, on Australian Dairyfarmer

If MR Saputo thinks that by having his factories running at 97-98% utilization will help him get more milk into MG he is dreaming and does not understand the dynamics and what has got the Australian dairy industry to this point of collapse. By achieving those levels of factory processing efficiencies, he will have the least profitable farmers in the southern milk pool. They would of created a supply base with the highest on-farm cost profile along with the highest on-farm risk profile. They would need to pay a milk price premium of at least $1.00 kg/ms above the rest of the market. Does Saputo have the product mix that can justify that sort of factory efficiencies? When Saputo's product mix is basically value-add commodity products, not short self-life daily fresh products. Saputo and for that matter all processors need to have more focus on the on-farm cost structures and processes of their suppliers otherwise they will be building their business on some very unstable and weak foundations. It is not just paying the highest milk price with the only objective being your factory efficiency and highest profit when the exact opposite will be true for the farmers that supply milk to you. They may receive the highest price but be the least profitable in the southern milk pool. Running at 70% plant utilization just might grow your milk pool along with the rest of the industry that would better share the risk and profit from that milk. Something to think about.

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