Canadian dairy giant Saputo to sack up to 75 of its Australian workers

Saputo – which makes the cheese formerly known as Coon – will close one of its Australian factories and curtail operations at two others.

Saputo will sack up to 75 workers, close one local factory and curtail operations at two others in the wake of financial losses and as milk supplies evaporates.

The Canadian company – which launched in Australia in 2014 after it took over Warrnambool Cheese and Butter – said on Wednesday it would close its factory at Maffra in Victoria.

It also plans to shut down its bulk powders production facility in Leongatha – about 135km southeast of Melbourne and its cheese packaging facility at Mil-Lel in South Australia. Both of the sites will remain operational, but at a reduced capacity.

Leanne Cutts, Saputo’s chief operating officer for international and European operations, said it was a “very difficult decision” aimed to “maximise the return of every litre of milk”. “(This) continues our journey towards long-term success for our business in Australia by increasing our efficiency and productivity, and making our business more competitive,” Ms Cutts said.

The latest accounts for Saputo’s Australian business – which produces Cracker Barrel, Devondale and King Island Dairy – revealed it sunk to a $54.4m annual loss for the 12 months to March 31 from a $30.6m profit the previous year. Revenue remained steady at $2.76bn.

Since taking over Warrnambool Cheese and Butter, the company has suffered from indigestion after it bought Murray Goulburn for $1.3bn in 2016 and Lion’s specialty cheese business for $280m three years ago.

Suppliers have walked away as the national milk pool shrinks. In the past three years, Saputo’s Australian milk collections have slumped from a forecast 3.1 billion litres to about 2 billion.

The latest closures cement the decline of Murray Goulburn – once Australia’s biggest milk processor and a farmer-owned co-operative, before it collapsed four years ago following an ill-fated listing on the ASX.

Saputo had already closed two milk dryers at its Maffra factory and shut down its individual wrapped cheese slice factory in Cobram on the Murray River.

Ms Cutts said the company aimed to redeploy employees from the factory closures.

“Many of the impacted production and packaging functions at these three facilities will be absorbed or integrated into the company’s other facilities, increasing capacity utilisation and reducing costs,” she said.

“Approximately 75 employees will be impacted.

“Site management will work closely with affected employees at the three impacted sites to discuss redeployment and retraining opportunities. Where alternative roles are not available, these employees will be provided with severance and outplacement support.”

Ms Cutts also expected Saputo’s milk collections to remain intact after the closures.

“(Saputo Dairy Australia) will work closely with its customers to ensure these changes have minimal impact and intends for its loyal consumers to continue enjoying its diverse range of dairy products,” she said.

“SDA also expects no changes to its valued farmer relationships, with suppliers’ milk continuing to be collected and processed across SDA’s network. These changes will take effect in the first three months of 2023.”

In August, Ms Cutts said the company had managed to pass on higher farm gate prices – which have surged to a record $9.40 a kilogram milk solids – to its retail customers, with shoppers paying more for cheese, milk and other dairy products.

“With Australia … as we know, the milk supply is constrained there. It’s a higher milk price than we’ve seen historically. Having said that, the domestic returns for that price being the significant part of the input costs instead is being passed on to consumers and through the brands,” Ms Cutts said.

As prices have been rising, so have private label sales as consumers look to save, with Bega Cheese executive chairman Barry Irvin urging shoppers to stick with branded products to help keep milk processors in business.

Bega’s annual net profit slumped 69 per cent to $24.2m, with pandemic costs and supply chain and flooding disruptions also weighing on the result.

Fonterra has managed to maintain milk collections at 1.4 billion litres, giving it 15.9 per cent market share. This compares with 21.6 per cent market share in 2018.

The group has also shelved a $1.2bn float of its Australian business – which produces brands including Western Star butter, Perfect Italiano and markets Bega under licence – and last week settled a class action, involving more than 1000 farmers, for $25m over its decision to “claw back” milk payments in 2016.