Container shortages and port inefficiencies have hit the performance of Saputo's Australian business.
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PANDEMIC IMPACT: Saputo CEO Lino Saputo says the company continues to feel the lingering disruptions of the pandemic.

The company said these supply chain challenges led to lower export sales volumes, negatively impacting results in its international division.

It was one of the factors behind a 23 per cent fall in the company’s overall profit for the second quarter compared with the same period last year.

COVID-19 disruptions and labour shortages have also weighed heavily on the company’s US operation.

“After forging through another difficult quarter, it’s clear we’re still facing considerable headwinds,” chair and chief executive officer Lino Saputo said during a conference call with analysts on Thursday, following the release of the second quarter results.

“We continue to feel the lingering disruptions of the pandemic.

“And with economies reopening, we’re particularly challenged with access to labour, supply chain difficulties and inflationary pressures.”

The Australian business was also hurt by lower milk production and lower-priced export contracts.

“The three sectors that were challenged at the outset relative to the pandemic were the US, Australia and the United Kingdom,” Mr Saputo said.

“Australia, initially, challenged with the lack of milk production coming from the country.

“Added to the issue of committing early on in the pandemic to lower market prices on their export volume, which they weren’t able to export.

“And so we were hindered in quarter one and quarter two trying to fill those orders, with the container shortages, at lower prices than what we would normally sell.”

But the company is hopeful the Australian business has now turned the corner.

Mr Saputo said it was now out of the lower contracted prices, the container situation was improving and it had been able to increase prices to customers in the domestic market.

“So I will tell you that Australia is still on our watchlist, but certainly off of intensive care,” he said.

Saputo’s president and chief operating officer Kai Bockmann said the commodity price outlook was positive.

“If you look at the Global Dairy Trade (GDT) tenders and sort of where commodities are going, whether it’s skim milk powder, whole milk powder, all of those are looking good moving forward.

“So that’s obviously going to be quite helpful for our export platform or international platform.”

Pandemic creates US labour shortages

The company is still concerned about its US operation, where the pandemic has led to major labour shortages.

Mr Bockmann said US labour challenges were linked to it operating in rural areas with lower vaccination rates, which led to higher infection rates and higher absenteeism rates.

“This situation should improve with the US government’s vaccine mandate for companies with more than 100 employees coming into effect,” he said.

Highway closures force Okanagan dairy farmers to dump milk as it can’t get to Coast for processing.

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