WARRNAMBOOL Cheese and Butter (WCB) needs to better explain its growth incentive scheme to suppliers, Saputo boss Lino Saputo Jnr said during a visit to the Allansford plant this week.
Mr Saputo, whose company acquired an 88 per cent stake in the Allansford processor in January, said many suppliers do not understand the scheme.
“Some don’t understand how it works. It’s not a gift,” he said.
Mr Saputo was speaking after a meeting with suppliers in Warrnambool, where he said he was encouraged by the number of keen young farmers present.
WCB introduced a growth incentive scheme in the lead-up to this season, offering cash incentives to fund expansion, with payments based on a projected growth target agreed by both parties.
Mr Saputo said there were no factory expansion plans in the pipeline.
“We have excess capacity — we can take more milk without need for more factory infrastructure.”
He said the emphasis would be on increasing the percentage of product going into high-value products and credited the lacroferrin plant, commissioned before the takeover, with helping shift the product balance in that direction. Mr Saputo would not be drawn on further Australian acquisitions.
“We will be open to offers from companies interested in talking to us,” he said, hinting that he doesn’t want to get involved in a hostile takeover or one that might precipitate another bidding war.
Saputo paid more than $460 million for its 88 per cent share in the company, which many analysts considered too much.
Mr Saputo said the company was legally constrained from making further acquisitions for six months after completing the WCB takeover. That period is now coming to a close and the market appears to be anticipating a bid for the most obvious target, Bega Cheese.
Bega’s share price has lifted from below $4.90 to $5.35 in the past 10 days for no obvious reason.
Mr Saputo said he would welcome the chance to acquire the 10 per cent of WCB held by Japanese company Lion, but it was not something being actively pursued.
Despite a big lift in profits last year, WCB did not pay a dividend, opting to plough the money back into the company. This will be a considerable disincentive to Lion and the handful of smaller shareholders to retain their holdings.
Lion secured a stake in WCB to secure its cheese supply contracts with the company.
Since taking over, Saputo has slimmed down the management structure by shedding five directors and making way for Mr Saputo and its executive vice-president of finance and administration Louis-Philippe Carrière.
David Lord, who has been WCB chief executive for four years, announced on Wednesday that he will step down next April.
Throughout the takeover process, Mr Saputo said he would not cut factory jobs and he has so far delivered on that promise.
“We know we couldn’t experience the same success without appreciating, trusting and supporting our employees,” he said.