Saputo Dairy Australia (SDA) says a review of its King Island Dairy plant in Tasmania will scope options for its future, including its sale. SDA also announced it was allocating $27 million for upgrades at its Victorian and Tasmanian plants as part of Saputo Inc’s Global Strategic Plan.
SDA has enlisted MA Moelis Australia to look at a range of, “strategic, commercial, and financial alternatives, including a potential sale to a third party so the facility can continue to make its award-winning products for the long term”.
Saputo Inc. president and CEO (International and Europe), Leanne Cutts, said, “As King Island Dairy’s historic roots are deeply embedded in the region, we hope to find a buyer for the facility to ensure the continued success of its renowned specialty cheese products.
“We recognise the potential impact any decision may have on the King Island community, especially our employees and dairy farmers, and we are committed to thoughtfully considering all possible scenarios before any decisions are made.”
Sixty-three people work at the facility and have been told about the review. SDA will keep King Island Dairy operations running while it assesses its future.
SDA said this decision comes under the Optimise and Enhance Operations pillar of the company’s Global Strategic Plan, launched in March 2021.
CEO Lino Saputo announced GSP’s goal – to achieve high single-digit adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) core annual growth rate (CAGR) over four years, to reach CAD2.125 billion (AU$2.4 billion) by the end of FY25 – and that it would be achieved through five pillars:
Strengthen core business;
Accelerate product innovation;
Increase the value of ingredients portfolio;
Optimise and enhance operations; and
Create enablers to fuel investments.
“This announcement builds on SDA’s previously confirmed consolidation initiatives that aim to align our manufacturing footprint with our current and future expected milk intake, which is already delivering higher utilisation through our facilities, while increasing efficiency and reducing operating costs,” Cutts said.
In June 2022, the company closed the sliced cheese production component of its Cobram factory, with 18 redundancies.
While in November last year, SDA closed its facility in Maffra, Victoria and shut down parts of its sites in Leongatha, Victoria and the Mil-Lel plant in South Australia.
SDA has plants in Kiewa, Cobram, Leongatha, Maffra, Allansford, and Laverton in Victoria, Mil-Lel in South Australia, and Burnie, Tasmania.
SDA produces, processes, markets, and distributes liquid milk, cultured products, dairy and non-dairy cheeses including brands Cheer, Devondale, King Island Dairy, Liddells, Mersey Valley, MG Ingredients, Mil Lel, South Cape, and Tasmanian Heritage.
The closures saw production and packaging integrated into other facilities to increase capacity utilisation and reduce costs.
SDA also announced it was investing $27 million into new capital projects, including $8 million to improve its climate, water, and waste performance.
“In making these investments and strategic decisions, we remain focused on maximising our return for every litre of milk to further enhance SDA’s position as a high-quality, low-cost processor in Australia.
“Once completed, this strategic review of King Island Dairy will conclude our current challenge to strengthen our competitiveness by proactively adapting our manufacturing footprint to align with the changed dairy industry landscape and deliver on our vision for long-term success in Australia,” Cutts said.
Meanwhile, the ACCC is deliberating on the proposed sale of two SDA automated milk processing facilities to Coles Group.
In its Statement of Issues, the commission said it was concerned about the sale giving Coles the ability to influence the market and less competition at the wholesale level.
