Agropur in the big leagues
Thanks to two of the biggest transactions in its history, completed in the last year, the cooperative now finds itself among the top 20 dairy processors in the world.
Agropur has stayed true to its commitments. After having previously signalled its intention to move up amongst the largest organizations in its sector, Agropur indicated at its 76th annual general meeting that the organization had reached its goal. For the last fiscal year, its revenues climbed to $4.7-billion, a 21% jump in just one year as a direct consequence of acquisitions that have multiplied over the last decade. Nearly 45% of its revenues now come from the United States.
The cooperative closed no less than six transactions throughout its last fiscal year, two of which were the biggest in its history – the purchase of Davisco Foods International in the United States and the dairy assets of Sobeys in Western Canada. Agropur returned $92.3-million in dividends to its members, a drop in comparison to the $110.4-million paid out in 2013. Net profit recorded a 26% decline to $38.3-million, as the adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased by $3.1-million to $271-million.
Agropur confirmed that it would continue to explore other possibilities for acquisition in North America and elsewhere, due to the slow decline that is affecting the dairy products sector in Canada. Milk consumption has been declining for a number of years in a market characterized as mature, says Robert Coallier, CEO of Agropur. The cooperative’s management is nonetheless convinced that its sustainability can be ensured through participation in the global consolidation of the milk processing sector, an approach to profitable growth deemed “cautious and strategic”, according to Mr. Coallier.
To accomplish its expansion projects, Agropur increased its credit facilities to $2-billion, half of which has been used as of November 1st, 2014. Robert Coallier reinforced the fact that the financial situation of the cooperative remains healthy but acknowledged that the larger presence of the cooperative in the United States also would be accompanied by a higher level of risk, whether in terms of variations in milk prices or in the Canadian and American currencies. The first trimester of 2015 was thus difficult with a 42% decline in profits in comparison with the year before. This was due to the significant drop in milk prices around the world and also in the price of a block of cheese in the United States.
The Free-Trade Agreement with Europe, signed last September, also raises a lot of uncertainty. The president, Serge Riendeau, confirmed that Agropur would not sit idly by. “We are still waiting for details on the terms for the importation of 17,000 additional tonnes of European cheese,” he stated. “We believe that the import quotas should be attributed to those who developed the Canadian fine cheese market and will therefore be penalized. We hope Agropur gets its fair share of these quotas in a way that will not cannibalize our domestic products,” he concluded.
Two years after its launch, Agropur has focused on its iÖGO yogurt brand, on which it spent more than $100-million to market. Management was discrete about the costs still to come while targeting the goal of a 20% share in the Canadian market.
The cooperative focused on its three key brands: iÖGO, Natrel and Oka. It also dedicated $100-million in investments in the fine cheese market. These actions have paid off with a significant increase in sales being recorded. Robert Coallier indicated that there still remains a lot to do to optimize innovation in dairy products and the cooperative is counting on a significant acceleration in its efforts in this sector during the coming months.