Canadian dairy Saputo has confidence despite TPP uncertainty

By Hal Conick contact

- Last updated on GMT

While many companies in the dairy industry are worried about TPP negotiations, Saputo's CEO remains confident.
While many companies in the dairy industry are worried about TPP negotiations, Saputo's CEO remains confident.

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No matter what happens with the Trans-Pacific Partnership (TPP) trade negotiations, Saputo officials say the Canadian dairy is ready.

During the Canadian dairy’s Q2 earnings call on August 4, CEO and vice chairman Lino Saputo said he believes Saputo can be “more efficient”​ no matter the outcome of the TPP negotiations.

I don’t see any change in regulations, or perhaps even let's say things stay the same, that … will have a long term effect on our profitability,”​ Saputo said.

The aim of the TPP talks, which began in 2011, is to simplify trade and drive growth between the 12 participating companies.

However, with change comes uncertainty, and the earnings call showed that many investors wanted to be sure the company, Canada’s largest dairy producer, is moving down the correct path.

A bit of turmoil

Saputo’s confidence doesn’t mean there won’t be turmoil, as the CEO believes his company and the industry will very likely see some difficult times in the short term if there are changes.

Dairy farmers, for one, may experience some rough times, Saputo said.

There may even be some hardships within the company. Even so, he was sure to note that the company has experienced volatile times before and believes they are set up well to handle more if necessary.

“I think we've been pretty entrepreneurial with our approach so if you are thinking about it from a medium or long term perspective, once we understand the rules of the game we'll be [the] right size for the market,”​ he told investors.

Uncertainty still reigns

Saputo told investors it was tough for him to truly comment on what TPP will mean for Canada or the industry as a whole, simply because he isn’t sure what the new rules will be.

However, he feels the company can “navigate through those waters” ​and understand the regulatory environment better than others within the dairy industry.

The company now has assets coast-to-coast in the US and Canada, as well as a platform in Australia - something Saputo said could help the company more readily navigate the new TPP agreement worldwide.

Where are the talks now?

In July, US Congressmen drafted a letter to Canada asking the country to “commit”​ to the dairy market in the TPP talks, adding that dairy was a key issue that needs to be resolved. The Canadian Department of Foreign Affairs, Trade and Development responded by  told DairyReporter that Canada’s Prime Minister Stephen Harper “will only sign an agreement that’s in Canada’s best interests.”

“If there is increased access to Canada, we can service the markets through the US or through Australia, perhaps even through Argentina,”​ he said. “So whichever way it turns, I feel very, very comfortable and very, very confident with our positioning.”

‘We will always have capacity’

When asked if the company will have enough capacity to supply the Canadian market if imports were to increase, Saputo assuredly said: “We will always have capacity.”

“My suspension is that if there is going to be a roll out of TPP, there is going to be an integration period probably I would say three years to five years out,”​ Saputo said.

“Within three years to five years, if we feel we need to build capacity in the US or in Canada … we know that within three years we can roll out additional capacity, so capacity has never been restrainer for us.”

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