Winnipeg | Reuters — Saputo, one of Canada’s largest dairy producers, aims to return Australia’s Murray Goulburn Co-operative to profit by aggressively pursuing more of the country’s milk supply, its CEO said on Thursday.
The Montreal-based company agreed last week to buy the co-operative for C$1.3 billion including debt, and has already planned 15 meetings with Australian dairy farmers in the next two weeks, CEO Lino Saputo Jr. said.
“In the three years we’ve been operating in Australia, we’ve gained a lot of goodwill with dairy farmers,” he said on a conference call with analysts.
Murray Goulburn collects 1.7 billion to 1.9 billion litres of milk annually, far below its peak of 3.5 billion litres.
Saputo, which entered Australia three years ago with its acquisition of Warrnambool Cheese and Butter Factory, hopes to eventually increase volumes to between two billion and 3.5 billion litres annually, Saputo Jr. said, without giving a timeframe.
The co-operative’s plants are modern, but not all run near capacity, leaving room for improvement under a new operator, he said.
Murray Goulburn has potential to generate A$175 million-$180 million of earnings before interest, tax, depreciation and amortization (EBITDA), or core earnings, per year, approaching the A$200 million it recorded in 2014, Saputo Jr. said.
“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,” he said. “We’re very confident about that.”
The deal rescues Murray Goulburn, maker of Devondale milk and cheese, after a disastrous foray into China. In fiscal 2017, the co-operative lost A$371 million (C$367 million).
The deal, expected to close in the first half of 2018, would make Saputo Australia’s top milk producer and expand its access to China, the worlds fourth-largest fluid milk consumer.
Saputo Jr. also told analysts he expects “tweaks” to Canada’s dairy system, in which prices, supplies and imports are tightly controlled, once the North American Free Trade Agreement is renegotiated, but no fundamental changes.
Saputo on Thursday also reported second-quarter net income of C$185.2 million (47 cents a share), down three per cent and falling short of expectations for 52 cents per share, according to Thomson Reuters I/B/E/S.
Revenue during the quarter ending Sept. 30, rose one per cent to C$2.9 billion as expected.
— Rod Nickel is a Reuters correspondent covering the agriculture and mining sectors from Winnipeg.