MONTREAL – Cheesemaker Saputo is eagerly pursuing growth opportunities around the world while again downsizing North American operations by closing four plants — two in Alberta and two in the United States — and shifting production elsewhere in its operations.
The company said about 180 employees will be affected by the latest closures.
The plants are in Wetaskiwin and Glenwood, Alta., New London, Wisc., and Hancock, Md. The shutdowns will begin in May and be completed by December 2015.
“Over the recent years, Saputo has maintained efforts to pursue additional efficiencies and decrease costs while strengthening its market presence,” the company said in a news release.
“The announced measures are part of the company’s continual analysis of its overall activities.”
Saputo said workers will be given severance and outplacement support and some will be offered the possibility of transferring to other Saputo locations.
Saputo said costs connected with the closures will total about $19.8 million after taxes. The moves are expected to save about $4.8 million a year.
The company also said it expects to spend $35 million on new fixed assets in other Saputo plants in connection with the decision, but save the same amount in upgrades that would have been required at the facilities to be closed.
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It described the plants being shut as older, inefficient plants that could not be easily upgraded.
The closures mark the second year in a row that the Saputo has announced a spring downsizing of its Canadian operations.
Last March, its announced plans to close a manufacturing facility as of June 2014 in Warwick, Que., affecting 100 workers. That followed its decision several months earlier to close a facility in Winkler, Man., that was part of its $407-million acquisition of Dairyworld Foods in 2001.
Chief executive Lino Saputo Jr. didn’t mention the plant closures during a presentation Wednesday to a CIBC retail and consumer conference where he described the company’s Canadian operations as “very stable” despite the high cost of milk, generating about 12 per cent EBIT margins.
“Our platform is very good, very solid, generating very good cash flows for us but it’s not a growth platform and it’s not a platform where we can export from,” he said from Toronto.
“Very happy with it but really our growth is coming from outside of Canada.”
He pointed to the United States, where Saputo is the third-largest cheese manufacturer and where its sees great acquisition opportunities in a fragmented market. He also noted that 17 per cent of total production is exported, up from three per cent a decade ago.
Saputo also said the Montreal-based company is considering a number of acquisitions in Brazil, Australia and New Zealand.
With global dairy demand growing by four to five per cent a year, but production increasing by just one to two per cent, he said he’s very bullish about the impact on pricing and opportunities for dairy farmers to further boost production.
In Argentina, Saputo has made investment allowing it to double production and vowed to support similar moves in Australia following its acquisition of Warrnambool Cheese and Butter, the country’s oldest and fourth-largest dairy processor.
“If there are programs that we can implement that would allow them to feel good about being dairy farmers and believe in the industry and hopefully get the next generation believing about dairy production, then I think that we’ll all be winners.”
Saputo is one of the top 10 dairy processors in the world, generating about $9.3 billion of annual sales and employing 13,000 people.
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