Dairy co-op to cull its workforce

SYDNEY - Dairy Farmers - the Australian dairy company widely touted as Fonterra's next takeover target - is to axe nearly a third of its workforce in preparation for listing on the stock exchange.

The Australian newspaper reported yesterday that the co-operative was closing plants and rationalising its supply chain.

If the cost-cutting programme is successful, it could be listed within two years.

Last month, Filipino brewer San Miguel outbid Fonterra - spending A$1.9 billion ($2.01 billion) - for National Foods.

Since then, Fonterra has been investigating "plan B options" in Australia and Dairy Farmers has been tipped as a likely target when it lists on the ASX.

The New South Wales-based co-op - maker of Dairy Farmers milk, Coon and Cracker Barrel cheese and Ski yoghurt - is one of four major dairy players in the Australian market. The others are National Foods, the Italian-owned Parmalat and Bonlac. Bonlac is 50 per cent owned by Fonterra.

The changes - closing three plants and slashing 460 jobs from the payroll in an effort to cut operating costs by A$42 million a year - are being driven by new chief executive Rob Gordon, who was brought in to transform the 104-year-old co-op into a publicly listed entity.

The Sydney Morning Herald reported that Dairy Farmers would close two milk factories - one at Bomaderry near Nowra on the south coast, another at Mt Gambier in South Australia - and a milk intake factory at Deniliquin in NSW.

In addition to cutting manufacturing sites from 14 to 11, operations at two other plants, one in Toowoomba in Queensland and another at Hexham near Newcastle, will be restructured.

The latest job cuts - representing 20 per cent of the company's workforce - will take the total number of job losses to 760, or just under a third of the workforce, by the end of next March.

Gordon said Dairy Farmers was operating under a mandate backed by its shareholder dairy farmers who wanted costs cut before a listing that was designed to increase liquidity for co-op members. In the meantime, the co-op planned to spend about A$24 million on capital works at nine sites.

The sale of the three soon-to-be-closed plants is expected to generate millions of dollars that will be used to offset the expenditure on redundancy payouts. Nine months ago, the co-op was split into two - the milk supply division and the processing division.

Australia's only other listed dairy company is the $162 million Warrnambool Cheese and Butter.

- NZPA