Saputo plans to cut Australia processing sites.

That's on the back of Saputo's announcement in Canada last Thursday to halve the number of its Australian processing plants.

The company will cut its number of processing sites to five, according to company chair and chief executive officer Lino Saputo.

The "right sizing" of the Australian operation would be completed by the beginning of next fiscal year, Mr Saputo told the annual CIBC Eastern Institutional Investor Conference in Montréal, Québec, on Thursday, September 28.

Saputo announced the closure of its processing plant at Maffra, Victoria, in November last year.

It also announced it was streamlining activities at its plants in Leongatha in West Gippsland and Mil-Lel, near Mount Gambier, South Australia.

Sources with inside knowledge of the EBA negotiations have told The Standard the company has threatened to close the factory indefinitely if workers strike.

Saputo Dairy Australia said the company was continuing EBA negotiations at Allansford.

"We are committed to continuing negotiations in good faith to reach an agreement for SDA's valued workers at our sites," a spokeswoman said.

"The suggestion put forward by The Standard is completely false and without substance. Saputo Dairy Australia remains committed to Allansford, which is an important part of our manufacturing network."

United Workers Union National Dairy coordinator Neil Smith said the fact workers had found out about Saputo's plans to close dairy facilities in Australia through the media spoke volumes about the lack of respect shown to workers and their communities.

"The decision to close a dairy processing plant has a devastating effect on our regional communities and such threats should not be made lightly," he said.

"Saputo must be upfront with workers about any plans that will lead to site closures.

"United Workers Union will continue to seek further clarity on this issue."

In late July maintenance workers at Allansford's Saputo factory ended their industrial action over wage increases after more than a fortnight.

Australian Manufacturing Workers' Union state organiser Tony Hynds said the workers had reached an agreement with Saputo.

"We're just waiting to get that back from the company to finalise that - then the agreement will be voted on (by the workers)," Mr Hynds said.

"It's a satisfactory outcome in wages for the industry standard."

The workers were being offered a 13 to 14 per cent wage increase over four years, but were asking for 16 per cent.

In April Saputo also announced plans to sell its Laverton, Victoria, and Erskine Park, NSW, sites to Coles.

That sale is being examined by the Australian Competition and Consumer Commission, which on September 14 announced it was delaying that decision to seek more information.

Its 2023-24 supplier handbook no longer lists Mil-Lel as a processing site.

Besides Laverton and Erskine Park, the handbook lists another seven processing sites: Allansford, Leongatha, Cobram and Kiewa in Victoria and King Island, Smithton and Burnie in Tasmania.

The Standard's sister newspaper Farm Weekly reported Mr Saputo said when the company first entered the Australian market, the country's annual milk production was about 11 billion litres, but now it's down to 8 billion litres.

Dairy farmers have exited for several reasons, including cost increases, diversification, labour shortages, farm sales, retirement, climatic issues and water rights.

When Saputo bought Murray Goulburn in 2018, it projected it would process 2.6-2.7 billion litres of milk a year.

"We are at 1.8 now, but we are at a stable 1.8," Mr Saputo said.

"So my challenge to the team was right size the network in function of the 1.8 billion litres of milk because milk is not coming back."

Mr Saputo said he wanted the focus on value creation from every single solid of milk.

"Let's get away from commodity, let's get into value add," he said.

"And that's exactly what we are doing.

"So we are currently processing in 11 plants within that network.

"By the time our network optimisation is done, with the sale of the two plants that we have ongoing with Coles to buy the two fluid plants, we will be in a position to process 1.8 billion litres of milk in five manufacturing sites."

Mr Saputo said the acquisition of Murray Goulburn and Dairy Crest in the United Kingdom had not delivered the profits expected.

This was only because of unprecedented circumstances, including COVID-19.

"But they have been an advantage for us," he said.

"And we are going to start to see the value of that as things start to normalise and stabilise, which is what we are seeing now."

In response to Farm Weekly questions, Saputo Dairy Australia said "at this time, beyond the previously announced SDA network optimisation activities, no decisions have been made regarding its manufacturing footprint".

"Saputo Dairy Australia (SDA) is continually working to ensure it has the right manufacturing footprint and product offering to maximise the return on every litre of milk as it pursues more high-value product opportunities in domestic and premium export markets," the spokesperson said.

"SDA has been set the challenge to right size its manufacturing network to further strengthen its market competitiveness as a high-quality, low-cost processor.

"In line with Saputo's Global Strategic Plan and Australia's declining industry milk pool, analysis of SDA's network optimisation opportunities remains ongoing."

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