Saputo ready for a TPP trade deal: ‘We will adapt’
But dairy producer sees turmoil if supply management system altered
Saputo Inc. says it is
LAVAL, QUE. ready to take advantage of any changes to Canada’s dairy supply management, even if the system is eliminated as a result of demands from other signatories to the Trans-Pacific Partnership trade deal.
“If the system stays as it is in Canada, it’s good for us. If the Canadian system changes, we will adapt,” CEO Lino Saputo Jr. said Tuesday following the company’s annual shareholder meeting.
“If the system is going to change, there is going to be turmoil for everyone. I think there could be some benefit for our U.S. operations and I think there could be some benefits for our Canadian operations as well.”
Trade ministers from 12 AsiaPacific countries left a meeting in Hawaii last week without reaching a deal on the TPP, in part because several countries — including the U.S. — are calling on Canada to dismantle the supply-management system that sets prices and restricts international trade.
Saputo said the system has been beneficial for the company because it allowed for less volatility in Canada than any other market where they operate.
Canadian dairy farmers have worried that dramatic changes to the protective supply-management system could devastate the industry when faced with competition from the 11 other countries negotiating the TPP.
Prime Minister Stephen Harper has said Canada would continue negotiating with the other 11 members of the proposed trade region, despite the election call.
“For Canadian dairy farmers, I think the current system is advantageous. But it’s not our domain to get involved in politics,” said Saputo.
He said the disadvantage of supply management is that the company has not seen growth in the Canadian markets as it had elsewhere.
“We decided in the 1980s that if we wanted to view ourselves as a growing global player, we’d have to have platforms in other markets,” he said. “We never got into political games and we never influenced governments. We are not a lobby group, we are processors.”
Saputo said he believes some dairy farmers will also be able to benefit from fewer regulations and more access to a global market.
“There are dairy farmers in Canada that I think are effective, that are efficient and can compete with anybody in the world. Those are the ones I think will thrive in an unregulated system,” he said.
Agropur — Canada’s largest dairy co-operative — recently commissioned a report that found 40 per cent of Canadian milk production would be at risk and 4,500 to 6,000 farms would be unable to cover their cash costs if supply management was simply eliminated.
For Canadian dairy farmers, I think the current system is advantageous. But it’s not our domain to get involved in politics.
Over the past year, Saputo has increased both its operating costs and revenue in its international operations, which include the U.S., Australia, and Argentina.
In 2015, $5.28 billion of the company’s revenue came from the United States, $3.84 billion from Canada and $1.54 billion from other countries.
The TPP negotiations have been criticized as lacking transparency, and Saputo said the company — Canada’s largest dairy producer — was not consulted by the government ahead of negotiation.
“It’s hard to say what the pluses and minuses are without knowing what kind of system the new world is going to look like,” he said.
The cheese and dairy producers also released its financial results for the first quarter of fiscal 2016, reporting a net income of $136.4 million, down $8.9 million or 6.1 per cent from $145.3 million the same time last year.
Saputo’s profit amounted to 34 cents per share, before and after adjustments, down from 36 cents per share a year earlier.
The profit was in line with analyst estimates of 34 cents per share but revenue was about $100 million below the estimate of $2.66 billion, according to Thomson Reuters.