Saputo eyes more acquisitions but announces Wisconsin plant closure

By Mary Ellen Shoup contact

- Last updated on GMT

"...we can’t neglect the fact that consumers are getting away from traditional white milk,” Saputo CEO Lino Saputo said during its Q3 earnings call. ©GettyImages/ronstik
"...we can’t neglect the fact that consumers are getting away from traditional white milk,” Saputo CEO Lino Saputo said during its Q3 earnings call. ©GettyImages/ronstik
Canadian dairy processor Saputo reported a nearly 2% increase in revenues hitting $3bn for Q3 FY18 boosted by acquisitions while keeping an eye out for other deals, CEO Lino Saputo said during the company’s latest earnings call.

However, the company also announced the closure of a cheese plant in Wisconsin with the loss of 120 jobs.

Saputo acquired Montchevre and Southeast Milk Inc. in the US  last year and is in its final talks to take over Murray Goulburn in Australia for US$1bn (C$1.29bn), a deal that is expected to close early this year.

Commenting on its plan to acquire Murray Goulburn, Saputo said, “For the last three years we’ve been operating in Australia, we’ve gained a lot of credibility with supply in the community. We are going to pay leading prices for milk. We are going to invest in the infrastructure to be able to accommodate more milk if milk would come to us. We would promote people from within, the local people from within.”

As global production of dairy is exceeding consumption rates especially in Saputo’s core markets of North America and Australia, Saputo said it would “welcome the challenge.”

“It does present opportunities for potential acquisitions… even after the MG acquisition,”​ he said.

The rise of plant-based dairy alternative products would also be another possible acquisition target but Saputo added he remains wary of the category’s long-term growth.

“I think they are trends that will ultimately plateau, but we can’t neglect the fact that consumers are getting away from traditional white milk,”​ he said.

“If the right opportunity came along with the right brands and the right business model for us to get into plant-based beverages, we would certainly take a look at it, but we're not going to completely discount the value of fluid milk."

US performance

In the US, Saputo has faced some pressure due to challenging market conditions. While a higher average butter market price combined with a lower average block market per pound of cheese and higher sales volumes increased revenues, unfavorable market factors of approximately $19m negatively impacted adjusted EBITDA, as compared to the same quarter last fiscal year.

“The US division, which includes cheese and dairy food, EBITDA was down 23.1%. A lot of that has to do with market conditions,”​ Saputo said.

To ease market challenges and consolidate its operations, Saputo announced that it would close a cheese manufacturing plant in Fond du Lac, Wisconsin, by June 1, 2018 cutting 120 jobs.

“We will have one mega plant producing blue cheese in the United States which, as far as I’m concerned, will be the most effective and most efficient blue cheese plant in North America and perhaps around the world,”​ Saputo said.

“We do have a very, very solid platform both in cheese and dairy foods.”

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