Lino Saputo outlines plans to reduce Australian sites to five

The company will cut its number of processing sites to five, the company's chair and chief executive officer Lino Saputo said.

One other plant would be retained as a collection facility for milk, but would not manufacture products.

The 'right sizing' of the Australian operation would be completed by the beginning of next fiscal year, Mr Saputo told the annual CIBC Eastern Institutional Investor Conference in Montréal, Québec, on Thursday, September 28.

Saputo announced the closure of its processing plant at Maffra, Vic, in November.

It also announced it was streamlining activities at its plants in Leongatha in West Gippsland and Mil-Lel, near Mt Gambier, South Australia.

It 2023/24 Supplier Handbook no longer lists Mil-Lel as a processing site.

The company announced in April it planned to sell its Laverton, Vic, and Erskine Park, NSW, sites to Coles.

That sale is being examined by the Australian Competition and Consumer Commission, which on September 14 announced it was delaying that decision to seek more information.

Besides Laverton and Erskine Park, the 2023/24 Supplier Handbook lists another seven processing sites: Allansford, Leongatha, Cobram and Kiewa in Victoria and King Island, Smithton and Burnie in Tasmania.

Mr Saputo said when the company first entered the Australian market, the country's annual milk production was about 11 billion litres, but it was now down to 8 billion litres.

Dairy farmers had exited for several reasons - including climatic issues, input cost increases and labour shortages.

When Saputo bought Murray Goulburn in 2018, it projected it would process 2.6-2.7 billion litres of milk a year.

"We are at 1.8 now, but we are at a stable 1.8," Mr Saputo said.

"So my challenge to the team was right size the network in function of the 1.8 billion litres of milk because milk is not coming back."

Mr Saputo said he wanted the focus on value creation from every single solid of milk.

"Let's get away from commodity, let's get into value add," he said.

"And that's exactly what we are doing.

"So we are currently processing in 11 plants within that network.

"By the time our network optimisation is done, with the sale of the two plants that we have ongoing with Coles to buy the two fluid plants, we will be in a position to process 1.8 billion litres of milk in five manufacturing sites."

Mr Saputo said the company had secured the milk it needed at the start of this season.

"We've got a sweet spot in terms of what we can offer the dairy farmers to have that security," he said.

"We have our sights set on the reduction of the assets to optimise the network so we have the highest utlisation possible."

The Australian operation now had a 60:40 split in supplying the domestic versus international markets.

"We used to be 50:50," he said.

"So that is helpful to the Australian business."

The company had better control of prices it received in the domestic market than in the international market.

Mr Saputo said the acquisition of Murray Goulburn and Dairy Crest in the United Kingdom had not delivered the profits expected.

This was only because of unprecedented circumstances, including COVID-19.

"But they have been an advantage for us," he said.

"And we are going to start to see the value of that as things start to normalise and stabilise, which is what we are seeing now."

A Saputo Dairy Australia said "at this time, beyond the previously announced SDA network optimisation activities, no decisions have been made regarding its manufacturing footprint".

"Saputo Dairy Australia (SDA) is continually working to ensure it has the right manufacturing footprint and product offering to maximise the return on every litre of milk as it pursues more high-value product opportunities in domestic and premium export markets," she spokesperson said.

"SDA has been set the challenge to right size its manufacturing network to further strengthen its market competitiveness as a high-quality, low-cost processor.

"In line with Saputo's Global Strategic Plan and Australia's declining industry milk pool, analysis of SDA's network optimisation opportunities remains ongoing.

"At this time, beyond the previously announced SDA network optimisation activities, no decisions have been made regarding its manufacturing footprint."

Want to read more stories like this?

Sign up below (select Dairy News) to receive our e-newsletter delivered fresh to your email inbox twice a week.