Unable to achieve sufficient critical mass to be profitable, Saputo Inc. has decided to close its two plants in Europe
Montreal – Canada’s largest dairy processor is set to close two of its European plants.
Saputo Inc. is closing its cheese manufacturing plant in Heiden, Germany and is proposing to close its plant in Newcastle Emlyn, Wales.
In keeping with the law in the U.K., a 30-day consultation period is required before the Wales plant can close.
The two plants were acquired in 2006 and 2007, respectively.
The plant in Germany specializes in Italian specialty cheeses for the retail market segment, whereas the plant in Wales mainly produces mozzarella for the foodservice market segment.
Saputo says that since acquiring the two businesses it had aimed to penetrate the European market and get a better understanding of its realities and dynamics. The past few years, it says, have been a learning and challenging experience.
Today, the Saputo European business does not have sufficient critical mass to be profitable and the company says it doesn’t see short to mid-term opportunities to ensure such profitability.
Saputo has decided to close its Germany plant and proposed the closure of its U.K. facility, subject to the consultation period, to further concentrate efforts and resources in its current platforms and other markets.
In all, approximately 140 employees will be affected.
If the proposed closure in Newcastle Emlyn, Wales is confirmed, the cost associated with both plant closures is expected to be approximately Cdn$15 million after taxes, which includes a write down on fixed assets of approximately Cdn$15 million and cash costs of approximately Cdn$7 million being offset by tax recovery of the same amount from the loss on the investment.
If both facilities close, a loss of approximately Cdn$1.5 million in annual earnings before interest, income taxes, depreciation and amortization related to the European business should be avoided.
Saputo is the 12th largest dairy processors in the world, the third largest in Argentina and among the top three cheese producers in the U.S.