The Canadian company ranked among the three biggest cheesemakers in the U.S. is preparing to consolidate five of its cheese plants in that country down to two.
Montreal-based Saputo announced last Thursday it has construction underway on a new $240 million cut-and-wrap cheese plant in the Milwaukee suburb of Franklin, to be up and running at capacity by the third quarter of 2025 (all figures Cdn$).
When the new plant is ready, Saputo said it expects to transfer other packaging operations there. To that end, the company said it plans to close its plant at Big Stone City, S.D., about 200 km south of Fargo, in the third quarter of next fiscal year, and another Wisconsin plant at Green Bay in its 2025 Q3.
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Also, another Saputo plant at Tulare, California previously slated to be shut down will now get $75 million in renovations to convert to string cheese packaging, to be up and running at capacity by Q3 of 2025.
After that, a Los Angeles-area string cheese packaging plant, at South Gate, will be closed and its work transferred to the converted Tulare site, about 300 km north.
Saputo said the investment at Tulare “will help support the company’s growth ambitions and sustain its leadership position in the string cheese product category.”
In all, Saputo said, while the new Franklin plant alone is expected to take on about 600 people, about 720 positions will be affected in the pending plant closures. Affected workers will be offered opportunities to relocate to other Saputo plants and, if no spots are available, the workers will get “severance and outplacement support.”
The projects announced last Thursday “aim to solidify our ability to meet current and future customer demand and further improve our cost structure,” said Saputo CEO Lino Saputo said in a release.
Improving its capacity to produce goods in its higher-margin value-added categories will “fuel our aspirations to further enhance our value proposition as a high-quality, low-cost processor” in the U.S., he said.
The plant consolidations and investments are expected to improve Saputo’s bottom line by up to $74 million per year ($55 million after taxes) by the end of its fiscal 2027, the company said.
Saputo’s U.S. dairy division makes, sells and distributes a “vast assortment” of cheeses, including mozzarella, American-style and specialty cheeses, among other products. In its fiscal 2022, ending last March 31, U.S. revenue made up 43 per cent of the company’s total.
During that fiscal year, the company said in its annual report, its U.S. dairy division was its “most challenged platform,” up against “substantial commodity volatility” as well as “labour, inflation and supply chain pressures.”
The company’s U.S. arm in fiscal 2022 booked gross revenue of $6.41 billion, up from $6.12 billion the previous year, but the U.S. arm’s EBITDA (earnings before interest, taxes, depreciation and amortization) came in at $288 million for 2022, down from $567 million.
Saputo’s U.S. sector has since booked improved revenue and EBITDA in each of its first and second quarters for fiscal 2023, for combined EBITDA of $199 million on revenue of $4.1 billion, up from $163 million on $3.039 billion in the year-earlier first half. — Glacier FarmMedia Network
