Saputo Dairy Australia (SDA) said it would conduct an assessment of its King Island Dairy factory in Tasmania, considering the possibility of selling it. As part of Saputo Inc’s Global Strategic Plan, SDA has announced a $27 million investment in renovations at its Victorian and Tasmanian factories.
MA Moelis Australia has been hired by SDA to investigate “strategic, commercial, and financial alternatives, including a potential sale to a third party so the facility can continue to make its award-winning products in the long term.”
“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,” stated Leanne Cutts, president and CEO (International and Europe) of Saputo Inc.
“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.”
The plant employs 63 individuals who have been informed of the review. SDA will continue to operate King Island Dairy while it considers its options.
This decision, according to SDA, falls under the Optimise and Enhance Operations pillar of the company’s Global Strategic Plan, which was released in March 2021.
GSP’s CEO Lino Saputo announced the company’s goal of achieving a high single-digit adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) core annual growth rate (CAGR) over four years, with a target of CAD2.125 billion (AU$2.4 billion) by the end of FY25, and that it would be accomplished through five pillars:
Improve the main business;
Increase the pace of product innovation;
Increase the value of your ingredient portfolio.
Improve and optimize processes; and
Create enablers to accelerate investment.
“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 a press release.
The firm laid off 18 workers when it shuttered the sliced cheese manufacturing component of its Cobram facility in June 2022.
SDA shuttered its Maffra factory in November last year, as well as sections of its Leongatha and Mil-Lel plants in Victoria and South Australia.
SDA has plants in Victoria at Kiewa, Cobram, Leongatha, Maffra, Allansford, and Laverton, South Australia at Mil-Lel, and Tasmania at Burnie.
SDA manufactures, processes, markets, and distributes liquid milk, cultured goods, dairy and nondairy cheeses under the Cheer, Devondale, King Island Dairy, Liddells, Mersey Valley, MG Ingredients, Mil Lel, South Cape, and Tasmanian Heritage brands.
Production and packaging were incorporated into other facilities as part of the closures to boost capacity utilization and minimize costs.
SDA also announced a $27 million investment in new capital projects, including a $8 million investment to enhance its climate, water, and waste performance.
“In making these investments and strategic decisions, we remain focused on maximizing our return on every litre of milk in order to further strengthen SDA’s position in Australia as a high-quality, low-cost processor.”
“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 in a press release.
Meanwhile, the ACCC is debating on the planned sale to Coles Group of two SDA automated milk processing plants.
The commission said in its Statement of Issues that it was worried about the deal providing Coles the potential to influence the market and less competition at the wholesale level.
