Saputo’s financial chief says he hopes lower Australian farmgate milk prices will stick as the company looks to rebuild profitability in its international division.
Saputo, along with other Australian processors, has cut farmgate milk prices by 10-16 per cent this season. Saputo’s average weighted price is $8-$8.15 a kilogram milk solids, down from $9.30/kg MS.
The new milk price would restore margins in the Australian operation, the company’s chief financial officer Maxime Therrien told an investor call on August 8.
“So we’re hopeful that this milk price will stick for … as long as we can,” he said. “And with that, we would be back to historical levels of profitability out of Australia.”
The comments came as Saputo announced an improved performance for the first quarter of its 2024-25 financial year. Outgoing CEO and president Lino Saputo said the company had delivered strong revenue and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) growth and solid cash-flow generation in the first quarter. “The year is off to a good start,” he said.
But the overall result was marred by performance in the international sector, including Australia. Revenue in the sector was up 16pc to $C1 billion but EBITDA was down $C32 million to $C45 million. Mr Therrien pointed to “the negative impact from the continued disconnect between international cheese and dairy ingredient market prices and the cost of milk in the international sector” as a factor.
Mr Saputo said the company expected a step up in EBITDA in Australia due to the lower farmgate milk prices. He also pointed to the sale of the two fresh milk processing facilities to the Coles Group and the strategic review process for King Island as positives in Australia.
“Overall, we remain confident we have the right strategy and structure in place to drive growth in our international business and develop our global presence over the long term,” he said.
New incoming CEO and president Carl Colizza said Saputo faced more challenging conditions than in 2021 when it said it was aiming for $C2.125 billion EBITDA.
“So on the international front, certainly, the demand from the Chinese side is not what it was before,” he said. “And there’s a number of reasons for that, one of them including their ongoing milk autonomy. “So that’s certainly one area that is driving very different dynamics on who supplies what parts of the globe.”
The Australian platform also had “different milk scenarios and different milk costs that has put a very different pressure on us”.
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