Saputo says Coles deal and 'competitive' milk price will lift profitability

The giant Canadian-based dairy company announced on June 24 the completion of the sale of its factories at Laverton North, Victoria, and Erskine Park, NSW, to Coles for about $105 million.

The sale was part of a global network optimisation strategy, which saw it close a factory at Maffra, Vic, in 2022 and streamline operations at other sites.

The company announced in November it was also reviewing its King Island operation with a view to selling it.

As part of the sale of the factories to Coles, Saputo will continue to have fresh milk products processed at the two sites.

"This sale reinforces our roadmap for long-term success in Australia and demonstrates our agility in further adapting our manufacturing footprint to focus on higher-value growth opportunities," Saputo's chair of the board, president and chief executive officer Lino Saputo said.

Mr Saputo told a 2024 financial results investor briefing on June 7 its Australian results continued to be impacted by "the disconnect between the cost of milk and international pricing".

"However, we announced a competitive opening milk price for the 2024/25 season," Mr Saputo said.

Saputo on May 31 announced a 12-14 per cent drop in its opening milk price for 2024-25.

"The current milk price now better reflects the shift in market dynamics, with global demand for dairy products remaining moderate alongside subdued international prices," Mr Saputo told the briefing.

"As we narrow the gap between farmgate milk prices and global commodity prices, we expect profitability to improve."

Mr Saputo did concede that Saputo had continued to benefit from higher milk intake, "which positively impacts our efficiencies and absorption of fixed costs", in its Australian operation.

Saputo announced reduced earnings for the quarter and for the financial year - in what Mr Saputo described as "a year of resilience".

Saputo president and chief operating officer, international and Europe Leanne Cutts told the investor briefing the new farmgate pricing in Australia would bring the operation closer to historical levels of profitability.

"Commodity pricing we're still seeing in our international markets as being volatile, especially in some of the lower protein ingredient categories," she said.

"Demand is still soft and that also reflects China demand as well.

"That continues to be relatively soft.

"Higher specialised ingredients pricing continues to be stable, although it's lower prices versus last year.

"And, in particular, in Australia, as we have mentioned, there continues to still be a disconnect between the international cheese and dairy ingredient pricing and our local Australia farmgate milk price, although we have seen that gap narrow considerably at the moment with our opening milk price."