Saputo keen to invest in Australian dairy

Saputo chief executive Lino Saputo jnr said the Canadian dairy giant would have no business without paying farmers a competitive price for milk as he moves to address Warrnambool Cheese & Butter suppliers' concerns at a series of meetings this week.

The world's 10th-biggest dairy processor entered the takeover battle for WCB with a $7-a-share bid earlier this month, and increased its bid to $8 a share cash (worth $450 million) last Friday to better Murray Goulburn's $7.50 a share offer.

Between 30 per cent and 40 per cent of the WCB register is in the hands of Warrnambool locals - many of whom are dairy farmers - and Saputo's top brass are attending a series of supplier meetings in Victoria's south-west to answer questions and clarify the company's intentions.

Mr Saputo on Tuesday declined to comment on the share raid on WCB by Japanese-owned beverage and dairy company Lion.

"I can't comment on what others might be doing. We have put forward a compelling offer to all WCB shareholders and made our intentions clear that Saputo wishes to invest in the Australian dairy industry," he said.

Last week Warrnambool dairy farmers told Fairfax Media that a strong Australian farmer-owned co-operative was what the industry needed, rather than another corporation beholden to its shareholders.

Mr Saputo said he faced similar worries when the company acquired Argentina's third-largest dairy processor, Molfino Hermanos, for $US51 million in 2003.

In Argentina, Saputo went to different dairy farms and said: "If you can produce the milk we will be the home for that milk and pay a price that is competitive and allows you to reinvest in the business."

Since Molfino was acquired, Saputo has invested more than $120 million in capital expenditure to double manufacturing capacity at its two facilities, and milk production has increased from 400 million litres to 1 billion litres.

"We are not dairy farmers but we understand dairy farmers need to make a good living. Without dairy production all we have is brick and mortar and stainless steel. We recognise that the dairy farmer has to believe in their business and has to believe there is some value in growing that business and that is what we've done in Argentina.

"We are the middleman between the dairy producer and the end user. Without a strong dairy farmer, we don't have a business."

He said that for a dairy processor, 85 per cent of the cost of manufacturing is in the cost of milk, but cost control comes from technology and innovation rather than trying to squeeze farmers.

Mr Saputo moved to allay concerns about a foreign company entering the Australian market, saying the current situation would remain largely unchanged if Saputo was to acquire WCB. "If Saputo were to own Warrnambool it would almost be a status quo, there would be no consolidation."