Saputo has outlined its plan to bring Australia's largest dairy processor Murray Goulburn (MG) back from the brink.
The company's CEO, Lino Saputo, told analysts that an executive team will travel to Australia to bring dairy farmers back into the fold with a view to building MGs milk supply.
Saputo described MG as being in “a distressed situation” with plants running at low capacity and having to focus on delivering on lower-value supply contracts.
A greater milk supply will be needed, Saputo said, in order to ramp up production of higher-margin dairy products.
With this in mind, the company, which has been operating Australia for three years through its acquisition of Warrnambool Cheese & Butter Factory, has already planned 15 meetings with Australian dairy farmers over the next two weeks, according to Reuters.
“In the three years we’ve been operating in Australia, we’ve gained a lot of goodwill with dairy farmers,” Saputo said in a conference call with analysts.
“With the right focus, the right people in the right place, the right decisions at the right time, we believe MG can come back to its historical levels of profitability,” Saputo said. “We’re very confident about that.”
Meanwhile, critics are questioning Murray Goulburn's choice to place the company into foreign hands in favour of stronger potential bids that could have preserved its co-operative status.
The company reportedly turned down a proposal from Fonterra to form a super dairy co-operative, a bid from Chinese giant Yili that was reportedly comparable to Saputo's that would have kept Australian farmers on the board, and a $1.75 billion initial bid from a joint venture between Melbourne-based TasAsia Dairy and Chinese pharmaceutical company Shanghai Pharma, according to The Weekly Times.
Some of these unsuccessful bidders have complained they were denied due diligence on MG’s finances, according to the report.
At it's peak, Murray Goulburn collected 3.5 billion litres of milk, compared to a current 1.7 billion to 1.9 billion litres. If Saputo's takeover is successful, the Canadian company will become Australia’s top milk processor, handling a third of Australia's milk.
Saputo has said the company intends to continue to invest in its Australian platform.
