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February 9, 2022updated 25 Feb 2022 6:15pm

Saputo production changes to see US factory close

The Canada-based dairy giant is working on efforts to “optimise and enhance” its operations.

By Dean Best

Saputo, the Canada-based dairy major, is to shut a factory in the US as part of efforts to “optimise and enhance” its operations.

The company’s production facility in Tulare in California will close in the group’s 2023 fiscal year, which starts in April.

Saputo said the closure was part of moves to “consolidate the cut-and-wrap activities” on the West Coast of the US.

The company insisted the impact on staff would be “minimal” as “opportunities for employment will be available” in Tulare. Just Food has asked for more details on Saputo’s manufacturing base in the city.

Elsewhere, the group said it is to embark on “streamlining operations” at two plants in Australia. Saputo is closing a dryer at a factory in Maffra in the state of Victoria, with the company looking to make 18 staff redundant. The company is also shutting a part of a plant 300km further north in Cobram. It said it was looking for “redeployment opportunities for the limited number of employees impacted”.

Alongside the closure of one of Saputo’s factories in Tulare, the company plans to invest around CAD169m (US$133.4m) in its cheese plants in Wisconsin and California. The company said it wants to “support its growth plan” in the retail channel. Investment will start in the fourth quarter of Saputo’s current financial year.

The company said the moves are expected to lead to “annual savings and benefits gradually”, reaching approximately CAD112m – or CAD83m after tax – by the end of its 2025 fiscal year. Costs will be around CAD46m after tax.

Lino Saputo, the chair of the board, president and CEO at Saputo, said yesterday (8 February) the initiatives were “the first in a series of investments and consolidation activities that will increase efficiency and productivity, improving our ability to meet the evolving needs of our customers and consumers”.

Last June, the company set out a four-year plan to drive its sales and earnings growth. Under the strategy, Saputo said it would embark on a four-year cycle of capital expenditure that would increase by around CAD550m from historical levels. Around CAD2.3bn was earmarked through the course of the project to “optimise” production included investments in capacity, innovation and automation to address concerns around labour availability.

Saputo’s most recent set of publicly-issued financial results cover the six months to the end of September. Revenues were CAD7.18bn, versus CAD7.09bn a year earlier. Net earnings stood at CAD151m, down from CAD313m in the corresponding period the previous year. Saputo’s adjusted EBITDA was CAD573m, against CAD737m in the firts half of the prior financial year. The company said labour shortages and supply-chain disruptions had “negatively impacted efficiencies and the absorption of fixed costs”.

Just Food analysis, June 2021 – Saputo keen on acquisitions to complement new strategic plan.

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