Capital Investments, Plant Closures Dot Landscape As Saputo Expands In Key Markets
By Karla Paris
Saputo is staying on its strategic path to fulfill 2014 growth expectations in emerging markets
In late March, Saputo announced its intention to close four plants in North America by the end of next year. Facilities set to close include its Wetaskiwin and Glenwood plants in Alberta, Canada, as well as, two of the company’s U.S. food service division plants. Additionally, the company is exiting the European cheese market as sales have not met expectations. The closures are part of the company’s measure to improve operational efficiency and increase sales volume.
Fast forward to April 14, and Saputo is making news again. This time, the company announced that it has completed its acquisition of the fluid milk activities of Scotsburn Co-Operative Services Limited, which is based in Atlantic Canada. Scotsburn is a Nova Scotia cooperative that will continue its other activities such as its frozen ice cream and frozen novelties business. It is this acquisition that will allow Saputo’s Dairy Products division to achieve coast-to-coast distribution capabilities across Canada and reach its volume growth in the cheese and dairy ingredients categories, despite declining market trends in the fluid milk category.
Throughout the first quarter of this year, efficiencies in both manufacturing and distribution facilities across the United States remain a priority. Saputo has continued to improve its efficiencies by shifting production from inefficient plants to efficient ones. It is adding approximately $35 million in new fixed assets to upgrade efficiencies at effected plants. Saputo’s flexible capital structure and low debt levels allow it to actively evaluate and pursue strategic acquisition opportunities, with the goal of expanding its presence in key markets.
While the company is focused on its U.S. presence, the company is also keenly aware of the importance of its product in the international market. Saputo exports product from Argentina into Brazil, so it’s only natural that adding manufacturing infrastructure in the region will be the next step, given Saputo finds the right partner.
Saputo’s Dairy Products Division in Argentina anticipates that the demand for dairy products in the export market will continue to grow. A three-year project began in early fiscal 2013 to gradually increase manufacturing capacity and face further market growth. The division will also continue to focus on improving manufacturing and distribution efficiencies within the region.