Q1 2025 Saputo Inc Earnings Call

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Operator: Good morning and welcome, everyone, to the Saputo Inc. First Quarter 2025 Financial Results Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise.

Speaker Change: Good morning and welcome, everyone, to the Saputo Inc. 1st Quarter 2025 Financial Results Conference Call.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Nick Estrela. Please do so.

Speaker Change: Today's conference is being recorded.

Speaker Change: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again.

Speaker Change: At this time, I would like to turn the conference over to Nick Estrela. Please go ahead.

Nick Estrela: Thank you, Adra. Good morning. Our speakers today will be Lino Saputo, Executive Chair of the Board, Carl Colizza, President and Chief Executive Officer, and Maxime Therrien, Chief Financial Officer and Secretary. Before we begin, I would like to remind you that this webcast and conference call are being recorded, and the webcast will be posted on our website along with the first quarter investor presentation.

Maxime Therrien: Thank you, Adra. Good morning. Welcome to our first quarter fiscal 2025 earnings call. Our speakers today will be Lino Saputo, Executive Chair of the Board, Carl Colizza, President and Chief Executive Officer, and Maxime Therrien, Chief Financial Officer and Secretary.

Speaker Change: Before we begin, I'd like to remind you that this webcast and conference call are being recorded and the webcast will be posted on our website along with the first quarter investor presentation.

Nick Estrela: Please also note that some of the statements provided during this call are forward-looking and are based on assumptions that are subject to risks and uncertainty. We refer to our cautionary statements regarding forward-looking information in our annual reports, press releases, and filings. Please treat any forward-looking information with caution, as our actual results could differ materially. I do not accept any obligation to update this information except as required under securities legislation. I'll now hand it over to Lino.

Speaker Change: Please also note that some of the statements provided during this call are forward-looking. Such statements are based on assumptions that are subject to risks and uncertainties.

Speaker Change: We refer to our cautionary statements regarding forward-looking information in our annual report, press releases, and filings.

Speaker Change: Please treat any forward-looking information with caution as our actual results could differ materially.

Speaker Change: We do not accept any obligation to update this information except as required under securities legislation.

Lino Saputo: Thank you, Nick, and good morning, everyone. The year is off to a good start. We delivered strong revenue and EBITDA growth and solid cash flow generation. But more importantly, we are definitely seeing the benefits from the bold actions we've taken over the past few years. Capital projects in the U.S. are now completed and up and running, while other expansion and modernization efforts around the globe remain right on track.

Speaker Change: I'll now hand it over to Lino.

Lino: Thank you, Nick, and good morning, everyone.

Lino: The year is off to a good start. We delivered strong revenue and EBITDA growth and solid cash flow generation in the first quarter.

Lino: More importantly, we are definitely seeing the benefits from the bold actions we've taken over the past few years.

Lino: Capital projects in the U.S. are now completed and up and running, while other expansion and modernization efforts around the globe remain right on track.

Lino Saputo: Our supply chain teams continue to drive productivity savings, and our commercial teams have secured new business with several key customers and are driving innovation across all channels. Initiatives to further differentiate our portfolio are also gaining traction. This focus is a driver behind the robust volume growth in the quarter. These collective efforts... have been further supported by the optimization of our manufacturing network and streamlining The dairy commodity environment also began to stabilize, providing a more favorable backdrop for our business in Q1. However, we still expect some volatility in the near term, notably with the cheese and milk price spread. From a macro perspective, consumer demand remains stable.

Lino: Our supply chain teams continue to drive productivity savings, and our commercial teams have secured new business with several key customers and driving innovation across all channels.

Lino: Initiatives to further differentiate our portfolio are also gaining traction.

Lino: This focus is a driver behind the robust volume growth in the quarter.

Lino: These collective efforts

Lino: have been further supported by the optimization of our manufacturing network and streamlined processes.

Lino: The dairy commodity environment also began to stabilize, providing a more favorable backdrop for our business in Q1.

Lino: However, we still expect some volatility in the near term, notably with a cheese and milk price spread.

Lino Saputo: Overall, we're staying focused on what we can control with an emphasis on execution, innovation, and close collaboration with our customers. We've made progress on many fronts and saw sequential adjusted EBITDA margin improvement, notably in the U.S. and Canada. In addition, our solid cash flow generation drove further reduction in our net leverage ratio, putting us in a great position to support our growth and return capital to shareholders. As we enter the second quarter, our momentum, coupled with the expected ramp-up of strategic initiative benefits, supports our confidence and our ability to achieve our operational goals and generate long-term value for shareholders. I will now turn the call over to Max for the financial review before providing my concluding remarks. Max?

Lino: From a macro perspective, consumer demand remains stable.

Lino: Overall, we're staying focused on what we can control, with an emphasis on execution, innovation and close collaboration with our customers.

Lino: We've made progress on many fronts and saw sequential adjusted EBITDA margin improvement, notably in the U.S. and Canada.

Lino: In addition, our solid cash flow generation drove further reduction in our net leverage ratio, putting us in a great position to support our growth and return capital to shareholders.

Lino: As we enter the second quarter, our momentum, coupled with the expected ramp-up of strategic initiative benefits,

Lino: Support our confidence in our ability to achieve our operational goals and generate long-term value for shareholders.

Lino: I will now turn the call over to Max for the financial review before providing my concluding remarks. Max?

Maxime Therrien: Thank you, Lino, and good morning, everyone. Let's begin by going over the financial highlights of the quarter. Consolidated revenues were $4.6 billion, while adjusted EBITDA amounted to $383 million. Higher year-over-year adjusted EBITDA was driven by a continued solid performance in our Canada sector. Meaningful operational improvements driven by our global strategic plan initiatives in the US sector, higher sales volume in all of our sectors, and a favorable U.S. dairy commodity market as compared to last year.

Max: Thank you, Lino, and good morning, everyone.

Max: Let's begin by going over the financial highlights of the quarter.

Max: Consolidated revenues were $4.6 billion, while adjusted EBITDA amounted to $383 million.

Max: Higher year-over-year adjusted EBITDA was driven by a continued solid performance in our Canada sector.

Max: A meaningful operational improvement driven by our global strategic plan initiatives in the U.S. sector.

Max: Higher sales volume in all of our sector and a favorable U.S. dairy commodity markets as compared to last year.

Maxime Therrien: These were partially offset by the negative impact of the continued disconnect between international cheese and dairy ingredient market prices and the cost of milk in the international sector and the cycle through of the remaining in excess high cost inventory in our European sector.

Max: These were partially offset by the negative impact from the continued disconnect between international cheese and dairy ingredient market prices and the cost of milk in the international sector, and the cycle through of the remaining in excess high-cost inventory in our Europe sector.

Maxime Therrien: We reported net earnings of $142 million in the first quarter. On an adjusted basis, our net earnings were $167 million, or $0.39 per share. I'll now take you through key highlights by sector, starting with Canada, where revenue for the first quarter totaled $1.3 billion, an increase of 4% when compared to last year. Revenue increased due to higher sales volume and a favorable product mix and higher selling prices in connection with the higher cost of milk as a raw material.

Max: We reported net earnings of $142 million in the first quarter. On an adjusted basis, our net earnings were $167 million, or $0.39 per share.

Max: I'll now take you through key highlights by sector, starting with Canada, where revenue for the first quarter totaled $1.3 billion, an increase of 4% when compared to last year.

Max: Revenue increased due to higher sales volume and a favorable product mix.

Max: and higher selling prices in connection with higher cost of milk as raw material.

Maxime Therrien: Adjusted EBITDA for Canada for the first quarter totaled $153 million, up 6% versus the same quarter last fiscal year. Our improved performance reflected the benefit derived from operational efficiencies, including from our continuous improvement program relative to supply chain optimization and automation initiatives. Our results also include a positive impact from cost reduction.

Max: Adjusted EBITDA for Canada for the first quarter total $153 million, up 6% versus the same quarter last fiscal year.

Max: Our improved performance reflected the benefit derived from operational efficiencies, including from our continuous improvement program relative to supply chain optimization and automation initiatives.

Max: Our results also include positive impact from cost reduction initiatives.

Maxime Therrien: In our US sector, revenue totaled $2.1 billion, and we're 11% higher versus last year. Revenue increased due to the combined effect of the higher average block butter and dairy ingredient market prices and higher sales volume in retail, food service, and industrial market segments. Adjusted dividend increased 57% to $162 million.

Max: In our U.S. sector, revenue total $2.1 billion and we're 11% higher versus last year.

Max: Revenue increased due to the combined effect of the higher average block butter and dairy ingredient market prices and higher sales volume in retail, food service, and industrial market segment.

Max: Adjusted if it does increase 57% to $162 million.

Maxime Therrien: The year-over-year increase was mostly driven by a $26 million benefit derived from operational improvement, including increased capacity utilization and productivity, supply chain initiatives, and cost reduction, and a $15 million positive impact from U.S. market factors. Also of note, last year Adjusted EBITDA had a $10 million inventory write-down due to fluctuations in dairy commodity pricing, which did not occur this year. If you want to adjust it, if it includes $13 million in duplicate operating costs.

Max: The year-over-year increase was mostly driven by $26 million in benefit derived from operational improvement including increased capacity utilization and productivity, supply chain initiative and cost reduction.

Max: And a $15 million positive impact from U.S. market factor.

Max: Also of note, last year Adjusted EBITDA had a $10 million inventory write-down due to fluctuation in dairy commodity pricing, which did not occur this year.

Speaker Change: Q1 adjusted if it does include $13 million of duplicate operating costs.

Maxime Therrien: Given current year-to-date spending and our continued focus on our customer-first approach, we expect duplicate operating costs to be more in line with last year, mostly due to lower capacity utilization during the ramp-up phase, additional training, and labor costs.

Speaker Change: Given current year-to-date spending and our continued focus on our customer-first approach, we expect duplicate operating costs to be more in line with last year.

Speaker Change: Mostly due to lower capacity utilization during the ramp-up phase, additional training and labor costs.

Maxime Therrien: In the international sector, revenue for the first quarter was $1 billion, up 16% versus last year, but adjusted for the total $45 million down. $32 million on a year-over-year basis. The performance of the sector was impacted by the unfavorable relations between international cheese and dairy ingredient market prices and the cost of milk as a raw material and the effect of currency fluctuation on export sales denominated in U.S. dollars, although positive, was less favorable than in prior quarters.

Speaker Change: In the international sector, revenues for the first quarter were $1 billion, up 16 percent versus last year.

Speaker Change: Adjusted EBITDA total $45,000,000.00, downed.

Speaker Change: $32 million on a year-over-year basis.

Speaker Change: The performance of the sector was impacted by the unfavorable relations between international cheese and dairy ingredient market prices and the cost of milk as raw material.

Speaker Change: And the effect of currency fluctuation on export sales denominated in U.S. dollar, although positive, was less favorable than in prior quarters.

Maxime Therrien: In the European sector, revenue was $264 million, while adjusted amounted to $23 million. The decline in adjusted EBITDA was due to the cycle through of the remaining excess high-cost inventory and lower international dairy ingredient market prices. We expect the performance of our Europe sector to continue to improve on a sequential basis as we are now in a much better position from an inventory perspective. So, from a cash standpoint... Net cash generated from operating activities in the first quarter amounted to $191 million, while capital expenditures for the quarter totaled $97 million, in line with our plan.

Speaker Change: In the Europe sector, revenue were $264 million while adjusted amounted to $23 million.

Speaker Change: The decline in adjusted EBITDA was due to the cycle through of the remaining excess high-cost inventory and lower international dairy ingredient market prices.

Speaker Change: We expect the performance of our Europe sector to continue to improve on a sequential basis as we are now in a much better position from an inventory perspective.

Speaker Change: i

Speaker Change: So, from a cash standpoint,

Speaker Change: Net cash generated from operating activities in the first quarter amounted to $191 million, while capex for the quarter totaled $97 million, in line with our plan.

Maxime Therrien: We closed the previously announced sale of our two fresh milk processing facilities located in Australia for a pre-tax amount of approximately $95 million. Finally, our Board of Directors approved an increase of 2.7% to our quarterly dividend yesterday to $0.19 per share, effective with our September payment. This concludes my financial review, and with that, I'll turn the call back to Lino.

Speaker Change: We close the previously announced sale of our two fresh milk processing facility located in Australia for the precede of approximately 95 million dollars.

Speaker Change: Finally, our Board of Directors approved an increase of 2.7% to our quarterly dividend yesterday to $0.19 per share, effective with our September payment.

Speaker Change: This concludes my financial review and with that I'll turn the call back to Lino.

Lino Saputo: In Canada, we had a solid border underpinned by operational efficiencies and costs. The food service market segment performed well despite a softening in market conditions thanks to our customer diversity and efforts to creatively work with our partners to deliver results. Retail sales volumes were higher year over year, with recent customer investments providing strong returns. From an innovation pipeline perspective, the rollout of new Armstrong Shred flavors and Saputo sliced cheeses is underway.

Lino: Thank you, Max.

Lino: In Canada, we had a solid border underpinned by operational efficiencies and cost savings.

Speaker Change: The food service market segment performed well despite a softening in market conditions thanks to our customer diversity and efforts to creatively work with our partners to deliver results.

Speaker Change: Retail sales volumes were higher year over year, with recent customer investments providing strong returns.

Speaker Change: From an innovation pipeline perspective, the rollout of new Armstrong Shred flavors and Saputo sliced cheeses are underway.

Lino Saputo: We are thoughtfully building out these brands, guided by our disciplined approach on the heels of several successful new product launches last year in the US. We had one of our best quarters since fiscal 2021 due to a combination of consistent execution of our strategy and improved market fundamentals. Our investments in our retail brands also continue to yield results, driving volume improvement. Progress was most notable in our cheese business, with Frigo and Stella leading the way, with market share gains across the string cheese and mozzarella categories.

Speaker Change: We are thoughtfully building out these brands, guided by our disciplined approach, on the heels of several successful new product launches last year.

Speaker Change: In the U.S.

Speaker Change: We had one of our best quarters since fiscal 2021 through a combination of consistent execution of our strategy and improved market fundamentals.

Speaker Change: Our investments in our retail brands also continue to yield results, driving volume improvement.

Speaker Change: Progress was most notable in our cheese business, with Frigo and Stella leading the way, with market share gains across the string cheese and mozzarella categories.

Lino Saputo: Food service in the U.S. remained competitive in Q1, especially with foot traffic down year-over-year. However, we're encouraged by the recent increase in promotional activities by QSR chains to drive restaurant traffic. The dairy commodity environment improved during the first quarter, supported by a better balance between milk supply and product demand.

Speaker Change: Food service in the U.S. remained competitive in Q1, especially with foot traffic down the over year. However, we are encouraged by the recent increase in promotional activities by QSR chains to drive restaurant traffic.

Speaker Change: The dairy commodity environment improved during the first quarter, supported by a better balance between milk supply and product demand.

Lino Saputo: While we benefited from better market conditions, our bold action and focus on control are contributing to our results. The team remains focused on delivering our previously announced business optimization program that will not only enhance our productivity but also lower overall costs while maintaining our customer-first approach. We also focused on operational efficiencies, especially now that four of the six plant closures have been completed.

Speaker Change: While we benefited from better market conditions, our bold actions

Speaker Change: and focus on the controllables are contributing to our results.

Speaker Change: The team remains focused on delivering our previously announced business optimization program that will not only enhance our productivity, but also lower overall costs while maintaining our customer-first approach.

Speaker Change: We also focused on operational efficiencies, especially now that four of the six plant closures have been completed.

Lino Saputo: As a case in point, we delivered $26 million in benefits derived from increased capacity utilization and productivity, supply chain initiatives, and cost reductions during the quarter. We're very excited with the startup of our recent greenfield facility in Franklin, Wisconsin.

Speaker Change: Case in point, we deliver 26 million dollars in benefits derived from increased capacity utilization and productivity.

Speaker Change: supply chain initiatives, and cost reductions during the quarter.

Speaker Change: We're very excited with the startup of our recent greenfield facility in Franklin, Wisconsin.

Lino Saputo: We continue to take a prudent approach as we ramp up production capacity at Franklin and ramp down other legacy facilities. On margins, we saw a significant improvement in the first quarter, reflecting benefits from market dynamics, cost initiatives, and portfolio development. With the inflationary environment beginning to stabilize and benefits from our optimization initiatives rolling through, we feel good about the cadence of our margin improvement in the international sector. However, our performance was largely impacted by the lingering disconnect between no cost and Global Commodity Prices in Australia.

Speaker Change: We continue to take a prudent approach as we ramp up production capacity at Franklin and ramp down other legacy facilities.

Speaker Change: On margins, we saw a significant improvement in the first quarter reflecting benefits from market dynamics, cost initiatives, and portfolio developments.

Speaker Change: With the inflationary environment beginning to stabilize and benefits from our optimization initiatives rolling through, we feel good about the cadence of our margin improvement.

Speaker Change: and the international sector.

Speaker Change: Our performance was largely impacted by the lingering disconnect between milk costs,

Lino Saputo: We do anticipate a step up in adjusted EBITDA in Australia starting in Q2, as the new milk season price is in effect. During the quarter, we completed the previously announced sale of our two fresh milk processing facilities to Coles, while the strategic review process for King Island is ongoing. Both these initiatives are important steps in supporting our network optimization strategy in Australia and Argentina. However, macroeconomic volatility has led to some margin pressure in our export business and will likely be the case in Q2.

Speaker Change: and Global Commodity Prices in Australia.

Speaker Change: We do anticipate a step up in adjusted EBITDA in Australia starting in Q2, as the new milk season price is in effect.

Speaker Change: During the quarter, we completed the previously announced sale of our two fresh milk processing facilities to the Kohl's Group, while the strategic review process for King Island is ongoing.

Speaker Change: Both these initiatives are important steps in supporting our network optimization strategy in Australia.

Speaker Change: In Argentina, the macroeconomic volatility led to some margin pressure in our export business and will likely be the case in Q2.

Lino Saputo: Overall, we remain confident we have the right strategy and structure in place to drive growth in our international business and develop our global presence over the long term. In Europe, EBITDA continued to improve sequentially. Cathedral City volumes were higher through increased investments in promotional activities and advertising.

Speaker Change: Overall, we remain confident we have the right strategy and structure in place to drive growth in our international business and develop our global presence over the long term.

Speaker Change: In Europe , EBITDA continued to improve sequentially.

Speaker Change: Cathedral City volumes were higher through increased investments in promotional activities and advertising.

Lino Saputo: With consumer confidence on the rise in the UK, we are seeing early signs consumers are trading up to higher-value branded products. We believe with the right promotional activity, innovation, and activation. We will see further volume improvement. Turning now to our outside... We remain optimistic for the balance of the year as we make further progress on our strategic plan. Our team is focused on driving savings and on capturing incremental value from our investment. This is already showing up in our results, and we anticipate these areas of focus to continue to drive momentum in fiscal 2025.

Speaker Change: With consumer confidence on the rise in the UK, we are seeing early signs consumers are trading up to higher value branded products.

Unknown Shareholder: Good morning and welcome everyone to the Saputo Inc. First Quarter 2025 Financial Results Conference Call. Today's conference is being recorded.

Speaker Change: We believe with the right promotional activity and innovation and activation plans, we will see further volume improvements.

Unknown Shareholder: All lines have been placed on mute to forget any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again.

Speaker Change: Turning now to our Outlook.

Speaker Change: We remain optimistic for the balance of the year as we make further progress on our strategic initiatives.

Speaker Change: so

Speaker Change: Our team is focused on driving savings and on capturing incremental value from our investments.

Nicholas Estrela: At this time, I would like to turn the conference over to Nick Estrela. Please go ahead. Thank you, Audra.

Speaker Change: This is already showing up in our results and we anticipate these areas of focus to continue to drive momentum in fiscal 2025.

Nicholas Estrela: Good morning. Welcome to our first quarter fiscal 2025 earnings call. Our speakers today will be Lino Saputo, Executive Chair of the Board, Carl Colizza, President and Chief Executive Officer, and Maxime Therrien, Chief Financial Officer and Secretary. Before we begin, I'd like to remind you that this webcast and conference call are being recorded, and the webcast will be posted on our website, along with the first quarter investor presentation. Please also note that some of the statements provided during this call are forward-looking.

Lino Saputo: As we announced earlier this year, effective today, I have transitioned to the role of executive chair of the board, while Carl Colizza officially becomes our new president and CEO. You have been instrumental in developing and delivering on our strategy, and I have no doubt that under your leadership, Saputo's global business and unique culture will continue to flourish.

Speaker Change: As we announced earlier this year, effective today, I have transitioned to the role of Executive Chair of the Board, while Carl Colizza officially becomes our new President and CEO .

Speaker Change: Carl, you have been instrumental in developing and delivering on our strategy.

Speaker Change: And I have no doubt that under your leadership, Saputo's global business and unique culture will continue to flourish.

Nicholas Estrela: Such statements are based on assumptions that are subject to risks and uncertainties. We refer to our cautionary statements regarding forward-looking information in our annual report, press releases and filings. Please treat any forward-looking information with caution as our actual results could differ materially. We do not accept any obligation to update this information except as required under security legislation.

Lino Saputo: We've worked together closely over the past 25 years, and I look forward to many more great years ahead. Congratulations again on this well-deserved appointment. And, as this is my last earnings call, I would like to thank you, the analysts and shareholders, for your trust and support. It was a pleasure working with you, and I will continue to value the relationships developed over the years. And on that note, Carl, I turn it over to you, my friend.

Carl Kalica: We've worked together for closely over the past 25 years.

Carl Kalica: And I look forward to many more great years ahead.

Speaker Change: Congratulations, again, on this well-deserved appointment.

Speaker Change: And as this is my last earnings call, I would like to thank you, the analysts and shareholders, for your trust and support.

Lino Saputo: I'll now hand it over to Lino. Thank you, Nick.

Lino Saputo: And good morning, everyone. The year is off to a good start. We delivered strong revenue and EBITDA growth and solid cash flow generation in the first quarter. More importantly, we are definitely seeing the benefits from the bold actions we've taken over the past few years. Capital projects in the US are now completed and up and running, while other expansion and modernization efforts around the globe remain right on track. Our supply chain teams continue to drive productivity savings and our commercial teams have secured new business with several key customers and driving innovation across all channels.

Speaker Change: It was a pleasure working with you, and I will continue to value the relationships developed over the years.

Speaker Change: And on that note, Carl, I turn it over to you, my friend.

Carl Colizza: Thank you, Lino, for your kind words. It is a pleasure to speak with you all on today's call, my first as President and CEO.

Carl Kalica: Thank you, Lino, for your kind words.

Carl Kalica: It is a pleasure to speak with you all on today's call, my first as President and CEO .

Carl Colizza: I would like to take this opportunity to thank Lino on behalf of the entire Saputo team for your focused leadership, for your integrity, and for your unrelenting commitment to making Saputo the success it is today. Today, I humbly take on the mantle of president and CEO at a very pivotal time for our business. Like all of us at Saputo, I am immensely proud to be part of this organization, and I very much share Lino's enthusiasm for the future.

Carl Kalica: I would like to take this opportunity to thank Lino on behalf of the entire Saputo team for your focused leadership, for your integrity, and your unrelenting commitment to making Saputo the success it is today.

Speaker Change: Today, I humbly take on the mantle as President and CEO at a very pivotal time for our business.

Lino Saputo: In addition to further differentiate our portfolio are also gaining traction. This focus is a driver behind the robust volume growth in the quarter. These collective efforts have been further supported by the optimization of our manufacturing network and streamlined processes. The dairy commodity environment also began to stabilize, providing a more favorable backdrop for our business in Q1. However, we still expect some volatility in the near term notably with a cheese and milk price spread.

Speaker Change: Like all of us at Saputo, I am immensely proud to be part of this organization and I very much share Lino's enthusiasm for the future.

Carl Colizza: We have a strong foundation with a portfolio of exceptional brands and world-class assets. My goal is to improve and build upon Saputo's already solid core and make certain that we move expeditiously and decisively through our next growth cycle. My number one priority is to ensure that we continue our relentless focus on the metrics that drive shareholder value, starting with Operational Synergy.

Speaker Change: We have a strong foundation with a portfolio of exceptional brands and world-class assets.

Speaker Change: My goal is to improve and build upon Saputo's already solid core and make certain that we move expeditiously and decisively through our next growth cycle.

Speaker Change: My number one priority is to ensure that we continue our relentless focus on the metrics that drive shareholder value.

Lino Saputo: From a macro perspective consumer demand remains stable. Overall, we're staying focused on what we can control with an emphasis on execution, innovation and close collaboration with our customers. We've made progress on many fronts and saw sequential adjusted EBITDA margin improvement notably in the US and Canada. In addition, our solid cash flow generation drove further reduction in our net leverage ratio, putting us in a great position to support our growth and return capital to shareholders. As we enter the second quarter, our momentum coupled with the expected ramp up of strategic initiative benefit.

Carl Colizza: Achieving sustainable improvements in our cost structure and capturing high-quality growth opportunities, we continue to build confidence in the next stage of our journey. One in which we will leverage our capabilities and capacity to support earnings and cash flow generation. Around the world, across our categories, we're investing to further enhance our competitive advantage, while the majority of our global strategic plan initiatives are behind us. You will continue to see the results of those efforts. Also, woven throughout our strategic agenda is a commitment to corporate responsibility and being a force for positive change through the Saputo Promise.

Speaker Change: Starting with Operational Synergies.

Lino Saputo: Support our confidence and our ability to achieve our operational goals and generate long-term value for shareholders.

Speaker Change: Achieving sustainable improvements in our cost structure and capturing high quality growth opportunities.

Speaker Change: We continue to build confidence in the next stage of our journey.

Speaker Change: One in which we will leverage our capabilities and capacity to support earnings and cash flow generation.

Speaker Change: Around the world, across our categories, we're investing to further enhance our competitive advantage.

Speaker Change: While the majority of our global strategic plan initiatives are behind us.

Speaker Change: You will continue to see the results of those efforts.

Speaker Change: Also woven throughout our strategic agenda is a commitment to corporate responsibility and being a force for positive change through the Saputo Promise.

Carl Colizza: I'm proud of how our people incorporate this focus into everyday activities and decision-making while also pursuing a set of ambitious multi-year targets. We have more work ahead of us, and we are laser focused on achieving what we set out to do this year. Throughout the balance of fiscal 2025, our focus is set on controlling the controllable, delivering on our remaining major capital projects, and positioning ourselves to maximize the benefits that will materialize following a return to more stable dairy market conditions.

Maxime Therrien: Now, we'll now turn the call over to Max for the financial review before providing my concluding remarks. Max. Thank you, Lino, and good morning, everyone.

Speaker Change: I'm proud of how our people incorporate this focus into everyday activities and decision-making, while also pursuing a set of ambitious multi-year targets.

Maxime Therrien: Let's begin by going over the financial highlights of the quarter. Consolidated revenues were $4.6 billion while adjusted if it the $383 million. Higher year-over-year adjusted if it was driven by a continued solid performance in our Canada sector, a meaningful operational improvements driven by our global strategic plan initiatives in the US sector, higher sales volume in all of our sector, and a favorable US dairy commodity markets as compared to last year. These were partially offset by the negative impact from the continued disconnect between international cheese and dairy ingredient market prices and the cost of milk in the international sector and the cycle through of the remaining in excess high cost inventory in our Europe sector. We reported net earnings of $142 million in the first quarter. On an adjusted basis, our net earnings were $167 million or 39 cents per share.

Speaker Change: We have more work ahead of us, and we are laser-focused on achieving what we set out to do this year.

Speaker Change: Throughout the balance of fiscal 2025, our focus is set on controlling the controllables.

Speaker Change: Delivering on our remaining major capital projects and

Speaker Change: Positioning ourselves to maximize the benefits that will materialize following a return to more stable dairy market conditions.

Carl Colizza: I'm confident in our outlook and continue to see this momentum as a tremendous time for the company to begin its next chapter. That said, I am certainly pleased with our first quarter results and how our teams are performing. It provides us with even more confidence for the year. I am truly excited about the opportunities that lay ahead. I will set the full weight of my energy behind delivering on the significant potential that exists with our great company for the next phase of our growth. I thank you for your time. I will now turn the call over to Audra for questions.

Speaker Change: I am confident in our outlook and continue to see this momentum as a tremendous time for the company to begin its next chapter.

Speaker Change: That said, I am certainly pleased with our first quarter results and how our teams are performing.

Speaker Change: It provides us with even more confidence for the year.

Speaker Change: I am truly excited about the opportunities that lay ahead. I will set the full weight of my energy behind delivering on the significant potential that exists with our great company for the next phase of our growth.

Speaker Change: I thank you for your time.

Speaker Change: I will now turn the call over to Audra for questions.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. We'll take our first question from Irene Nattel at RBC Capital Markets.

Audra: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Maxime Therrien: I'll now take you through key highlights by sector, starting with Canada, where revenue for the first quarter total $1.3 billion and increase of 4% when compared to last year. Revenue increased due to higher sales volume and a favorable product mix and higher selling prices in connection with higher cost of milk as raw material. Adjusted if it the for Canada for the first quarter total $153 million, up 6% versus the same quarter last fiscal year, are improved performance reflected the benefit derived from operational efficiencies, including from our continuous sales. This improvement program relative to supply chain optimization and automation initiatives. Our results also include positive impact from cost reduction initiatives.

Irene Nattel: Thanks and good morning everyone. A big, big day today. Welcome Carl officially and Lino, thank you for all the years and I'm very glad that I know where to find you. Turning back, yeah, really, turning back to the quarter, obviously, a great turnout from the U.S. and you know the market factors, but you know if we kind of offset the market factors from the duplicate of costs, seems like a really big step up. Can you talk about what the key building blocks of that are and then where we go from here and how sustainable is the current run rate in the U.S.

Speaker Change: We'll take our first question from Irene Nattel at RBC Capital Markets.

Speaker Change: Thanks and good morning, everyone. Big, big day today. Welcome, Carl, officially, and Lino, thank you for all the years, and I'm very glad that I know where to find you.

Speaker Change: Turning back, yeah, really, turning back to the quarter.

Speaker Change: Obviously, a great turnout from the U.S. and, you know, understand the market factors, but, you know, if we kind of offset the market factors from the duplicate of costs.

Speaker Change: It seems like a really big step up. Can you talk about what the key building blocks of that are and then where do we go from here and how sustainable is the current run rate in the U.S.?

Carl Colizza: Thanks, Irene, for your question and for your kind words as well. I would say that, you know, the building blocks for the success that the US had in Q1 really were the focus we had on our strategic initiative. So, where we stand today, you know, we have completed our mozzarella modernization initiatives, and the majority, if not all, of that benefit, we are seeing today. Beyond that, we continue to make improvements along the way with our consolidation of various sites.

Speaker Change: Thanks, Irene, for your question and for your kind words as well. I would say that the building blocks for the success that the U.S. had in Q1 really is about the focus we had on our strategic initiatives.

Maxime Therrien: In our US sector, revenue total $2.1 billion and we're 11% higher versus last year. Revenue increased due to the combined effect of the higher average block, butter and dairy ingredient market prices and higher sales volume in retail, food service and industrial market segment. Adjusted if it the increase 57% to $162 million, the year-over-year increase was mostly driven by a $26 million in benefit derived from operational improvement, including increased capacity utilization and productivity, supply chain initiative and cost reduction and a $15 million positive impact from US market factor.

Speaker Change: So, where we stand today, you know, we have completed our mozzarella modernization initiatives and the majority, if not all, of that benefit we are seeing today.

Carl Colizza: As a reminder, four of the six sites that we said we would be closing have now been closed and consolidated. So, with that, we're making sequential progress in Franklin as well, but we do remain very focused on maintaining our high fill rates, our on-time and in-full initiatives with our customers, and continuing to supply demand. So, from that perspective, the American team has done a great job delivering on this initiative.

Speaker Change: Beyond that, will we continue to make improvements along the way with our consolidation of various sites? As a reminder, four of the six sites that we said we would

Speaker Change: be closing, have now been closed and consolidated.

Speaker Change: So, with that, we're making...

Speaker Change: sequential progress in Franklin as well. But we do remain very focused on

Speaker Change: maintaining our high fill rates, our on-time and in-full initiatives with our customers and continuing to supply demand. So from that perspective the American team has done a great job at delivering on these initiatives.

Maxime Therrien: Also of note, last year adjusted if it the had a $10 million inventory right down due to fluctuation in dairy commodity pricing, which did not occur this year. If you want to adjust it, if it includes $13 million of duplicate operating costs, given current year-to-date spending and our continued focus on our customer first approach, we expect duplicate operating costs to be more in line with last year, mostly due to lower capacity utilization during the ramp-up phase, additional training and labor costs.

Irene Nattel: That's great. Thank you.

Speaker Change: That's great. Thank you. And, you know, given that this is your first official call, Carl, you know, if we go back to 2021, you guys put that 2.125 billion EBITDA target out there.

Irene Nattel: And, you know, given that this is your first official call, Carl, you know, if we go back to 2021, you guys put that 2.125 billion EBITDA target out there. What is your view, given how the world has changed since then and all the moving pieces? I'm not going to pin you down, but maybe the question is, what needs to happen in order for you to achieve that if you still believe it's attainable?

Speaker Change: What is your view, given how the world has changed since then and all the moving pieces? Do you think that is attainable? And not going to pin you down, but you know, maybe the question is, what needs to happen in order for you to achieve that if you still believe it's attainable?

Maxime Therrien: In the international sector, revenues for the first quarter were $1 billion up 16% versus last year. Adjusted it with the total $45 billion down 32 million on a year-over-year basis. The performance of the sector was impacted by the unfavorable relations between international cheese and their ingredient market prices and the cost of milk as raw material and the effect of currency fluctuation on export sales denominated in US dollar, although positive was less favorable than in prior quarters.

Carl Colizza: Well, Irene, I think I'll reiterate what we said in some of the more recent discussions, and that is, we absolutely believe in the earnings power of the plan that we put in place. Now, albeit that the conditions and the variables in which we operate today are very different than those at the start of that plan, and by those, you know, simply put, we're talking about the various disconnects in the overall cost of milk versus the selling price, some of the international demand scenarios, and even the local dynamics in the U.S. They are very different conditions.

Speaker Change: Well, Irene, I think I'll reiterate what we had said in some of the more recent discussions, and that is we absolutely believe in the earnings power of the plan that we put in place.

Irene Natal: Now, albeit that the conditions

Irene Natal: Thank you.

Speaker Change: Some of the international demand scenarios, even the local dynamics in the U.S.

Maxime Therrien: In the Europe sector, revenue were $264 million while adjusted a bit the amount to $23 million. The decline in adjusted a bit though was due to the cycle true of the remaining excess high-cost inventory and lower international dairy ingredient market prices. We expect the performance of our Europe sector to continue to improve on a sequential basis as we are now in a much better position from an inventory perspective.

Carl Colizza: Having said that, the investments that we have put forward will continue to serve our business very well and our customers moving forward. So we're excited about what this can deliver. You know, as far as the absolute number you referenced, 2125, there are a number of other, I'll say, conditions and variables that existed and were true back in 2020 that will need to be true today to make that happen.

Speaker Change: They are very different conditions.

Speaker Change: Having said that,

Speaker Change: It is the investments that we have put forward will continue to serve our business very well and our customers moving forward.

Speaker Change: So, we're excited about what this can deliver, you know, as far as the absolute number you referenced to 125, there are a number of other, I'll say, conditions and variables that existed and were true back in 2020 that would need to be true today to make that happen.

Irene Nattel: Would you care to extrapolate on what those are?

Maxime Therrien: So, from a cash standpoint, net cash generated from operating activities in the first quarter amounted to $191 million while CapEx put a quarter total $97 million in line with our plan. We closed the previously announced sale of our two fresh meal processing facility located in Australia for the proceed of approximately $95 million.

Speaker Change: i

Speaker Change: Would you care to extrapolate on what those are?

Carl Colizza: Look at the block price and call it spread, if you would like. There are a number of things there. But overall, if you were to take a look at the demand on the international front, so we understand, let's start with international. On the international front, certainly, the demand from the Chinese side is not what it was before. And there are a number of reasons for that, one of them including their ongoing milk autonomy.

Stan: All right, Stan. Well,

Stan: For sure, we take a look at the

Stan: Block price and call it spread if you would like there's a number of things there, but overall if you were to take a look at

Speaker Change: the demand on the international front so we understand let's start with international so on international front

Speaker Change: Certainly, the demand from the Chinese side is not what it was.

Maxime Therrien: Finally, our board of director approved an increase of 2.7% to our quarterly dividend yesterday to 19 cents per share effective with our September payment.

Speaker Change: before. And there's a number of reasons for that, one of them including their ongoing milk autonomy.

Carl Colizza: So that's certainly one area that is driving very different dynamics on who supplies what parts of the globe. That, as we all understand, has created various situations, such as in Australia as well. Our Australian platform has very different milk scenarios and different milk costs that have put very different pressure on us. Moving over to the U.S., some of those milk dynamics were also quite different back then when it comes to the overall block price and spread.

Speaker Change: So that's certainly one area that is driving very different dynamics on who supplies what parts of the globe. That as we all understand has created various situations such as in Australia as well. Our Australian platform has very different milk scenarios.

Lino Saputo: This concludes my financial review and with that I'll turn the call back to Lino. Thank you, Max. In Canada, we had a solid quarter underpinned by operational efficiencies and cost savings. The food service market segment performed well despite a softening in market conditions thanks to our customer diversity and efforts to creatively work with our partners to deliver results. Retail sales volumes were higher year over year with recent customer investments providing strong returns.

Speaker Change: and different milk costs. That has put a very different pressure on us. Moving over to the US, some of those milk dynamics were also quite different back then when it comes to the overall block price and spread. And I think...

Carl Colizza: And I think the most overarching statement I can make ultimately is the impact of inflation on consumption and our margins have been very significant, very different than what we would have planned at the time of the strike.

Speaker Change: Probably the most overarching statement I can make ultimately is the impact of inflation

Lino Saputo: From an innovation pipeline perspective, the rollout of new Armstrong spread flavors and support of sliced cheeses are underway. We are thoughtfully building out these brands guided by our disciplined approach on the heels of several successful new product launches last year. In the U.S., we had one of our best quarters in fiscal 2021 to a combination of consistent execution of our strategy and improved market fundamentals. Our investments in our retail brands also continued to yield results, driving volume improvement.

Speaker Change: On consumption and our margins has been very significant, very different than what we would have planned at the time of the STRAT plan.

Irene Nattel: I understand. Thank you, Carl.

Speaker Change: Understood. Thank you, Carl.

Chris Lee: We'll take our next question from Chris Lee at Desjardins. Oh, good morning, everyone.

Speaker Change: We'll take our next question from Chris Lee at Desjardins.

Chris Lee: Oh, good morning, everyone. Before I ask my question, you know, just again, I want to wish you all the best and hope you enjoy some well-deserved time with your families, and you'll certainly be missed on the call. And Carl, congrats again, and I look forward to seeing you soon. Thank you very much.

Chris Lee: Oh, good morning, everyone. Before I ask my question, you know, just again, I want to wish you all the best and hope you enjoy some well-deserved time with your family. You'll certainly be missed on the call. And Carl, congrats again. Look forward to seeing you soon.

Chris Lee: And if I just start with the question on international, you've given me sort of a new outlook with respect to, you know, there's a couple of moving parts. You mentioned lower farmgate gave me a price in Australia, but it was offset by some macro uncertainty in Argentina. So, I guess I have a, maybe a two-part question. First, can you please maybe elaborate a little bit more about how each of those two dynamics is going to impact the profitability of international this year?

Lino Saputo: Progress was most notable in our cheese business, with Frigo and Stella leading the way, with market share gains across the string cheese and mozzarella categories. Food service in the U.S, remained competitive in T1, especially with food traffic down year over year. However, we're encouraged by the recent increase in promotional activities by QSR Chains, to drive restaurant traffic. The dairy commodity environment improved during the first quarter, supported by a better balance between milk supply and product demand.

Lino: Thank you very much.

Speaker Change: If I just start with the question on international, you've been sort of kind of a new outlook with respect to, you know, there's a couple of moving parts.

Speaker Change: You mentioned Lower Farm gave me a prize in Australia, but offset by some macro uncertainty in Argentina. So, I guess I have maybe a two-part question. The first is, can you please maybe elaborate a little bit more?

Speaker Change: about how each of those two dynamics are going to impact the profitability of international this year.

Chris Lee: And then the second part of the question is to take a step back, do you still expect a bit of growth in the international segment this year, despite some of these macro uncertainties that are happening now in Argentina. Thank you.

Speaker Change: And then the second part of the question is, to take a step back, do you still, do you expect any bit of growth in the international segment this year, despite some of these macro uncertainties that are happening now in Argentina? Thank you.

Lino Saputo: While we benefited from better market conditions, our bold actions and focus on the controllables are contributing to our results. The team remains focused on delivering our previously announced business optimization program, that will not only enhance our productivity, but also lower overall costs while maintaining our customer first approach. We also focused on operational efficiencies, especially now that four of the six plant closures have been completed. Case in point, we delivered $26 million in benefits, derived from increased capacity utilization and productivity, supply chain initiatives, and cost reductions during the quarter.

Maxime Therrien: So good morning, Chris, and Max here. So two dynamic equations, one relative to Australia. Certainly, the new milk season starting in July, with the price of milk that we have been paying for the last few weeks, will be a benefit for us as we move forward. We intend, or we believe that with this price of milk, it will kind of restore our margin in Australia. So we're hopeful that this milk price will stick for as long as we can.

Speaker Change: OK, so good morning, Chris. Max here. So two dynamic, one relative to Australia.

Speaker Change: Certainly the new milk season starting in July with the price of milk that we are paying for the last few weeks will be a benefit for us as we move forward.

Speaker Change: We intend or we believe that with this price of milk, it's kind of restore our margin in Australia.

Lino Saputo: We're very excited with the start-up of our recent Greenfield facility in Franklin, Wisconsin. We continue to take a prudent approach as we ramp up production capacity at Franklin and ramp down other legacy facilities. On margins, we saw a significant improvement in the first quarter, reflecting benefits from market dynamics, cost initiatives, and portfolio developments. With the inflationary environment beginning to stabilize and benefits from our optimization initiatives rolling through, we feel good about the cadence of our margin improvement.

Speaker Change: So we're hopeful that this milk price will stick for as long as we can, and with that we would be back to historical level of profitability out of Australia.

Maxime Therrien: And with that, we would be back to the historical level of profitability out of Australia, relative to Argentina. We're seeing disconnect over the last few quarters relative to inflation and the peso devaluation. Understand that 50% of our business in Argentina relates to exports. A lower value of the peso is beneficial for us on the export market. The lower the peso is, the more profitable our export business is. So as we have seen over the last, you know, seven, eight months, the currency devaluation in Argentina hasn't moved a lot, but inflation keeps growing at the regular rate that we've seen over the last couple of years.

Speaker Change: Relative to Argentina...

Speaker Change: We're seeing disconnect over the last few quarters relative to inflation and the peso devaluation.

Speaker Change: Understand that 50% of our business in Argentina relates to export.

Speaker Change: A lower value of peso is beneficial for us on the export market. Lower the peso is, more profitable is our export business.

Lino Saputo: In the international sector, our performance was largely impacted by the lingering disconnect between milk costs and global commodity prices in Australia. We do anticipate a step up and adjusted EBITDA in Australia starting in Q2 as the new milk season prices in effect. During the quarter, we completed the previously announced sale of our two fresh milk processing facilities to the COALS group, while the strategic review process for King Island is ongoing. Both these initiatives are important steps in supporting our network optimization strategy in Australia.

Speaker Change: So, as we were looking over the last...

Speaker Change: You know 7 to 8 months. The currency devaluation in Argentina hasn't moved a lot. But inflation keeps growing at the regular rate that we've seen over the last

Maxime Therrien: So what it does is, you know, the cost of production, the cost of milk, the cost of, you know, our input costs keeps going, but it's not offset by a PESO devaluation. Hence, the margin pressure, not so much on the domestic side but more on the export market. And that's what we saw in Q1. At this time, you know, when we look into Q2, we don't have a sign that there would be a change in this dynamic; we don't see the currency, we have no indication that the currency would appreciate or depreciate or whatnot. So we, at this time, we say, well, the Q2, you know, would likely be the same similar effect then that we've seen in Q1 for Argentina.

Speaker Change: Couple of years.

Speaker Change: So what it does is, you know, the cost of production, the cost of milk, the cost of, you know, our input cost keeps going, but it's not offset by a PESO devaluation, hence the margin pressure, not so much on the domestic side.

Lino Saputo: In Argentina, the macroeconomic volatility led to some margin pressure in our export business and will likely be the case in Q2. Overall, we remained confident. We have the right strategy and structure in place to drive growth in our international business and develop our global presence over the long term. In Europe, EBITDA continued to improve sequentially. Cathedral city volumes were higher through increased investments in promotional activities and advertising. With consumer confidence on the rise in the UK, we are seeing early signs consumers are trading up to higher value branded products. We believe with a right promotional activity and innovation and activation plans, we will see further volume improvements.

Speaker Change: But more on to the export market, and that's what we've seen in Q1.

Speaker Change: At this time, you know, when we look into Q2, we don't have sign that there would be a change in this dynamic, we don't see the currency

Speaker Change: We have no indication that the currency would appreciate or depreciate or whatnot, so we at this time we say, well, the Q2 would likely be the same, similar effect then that we've seen in Q1 for Argentina.

Chris Lee: Okay, that's very helpful, Max. Maybe then my other question was just if you take all that into account when you look at fiscal 25, just looking at the international division. Do you still expect EBITDA growth this year?

Lino Saputo: Turning now to our outlook, we remain optimistic for the balance of the year as we make further progress on our strategic initiatives. Our team is focused on driving savings and on capturing incremental value from our investments. This is already showing up in our results and we anticipate these areas of focus to continue to drive momentum in fiscal 2025.

Speaker Change: Okay, that's very helpful, Max. Maybe then my other question was just if you take all that into account, when you look at Fiscal 25, just looking into international division,

Speaker Change: Do you still expect Ipidaclo this year?

Maxime Therrien: Well, we'll see how much we can recover from this Q1. We know we will be recovering in Australia, but to really comment on what's going to be the dynamic on the currency and the level of inflation in Argentina is hard to tell.

Speaker Change: Well, we'll see how much we can recover from this Q1. We know we will be recovering in Australia, but to really comment on what's going to be the dynamic on the currency and the level of inflation in Argentina is hard to tell.

Lino Saputo: As we announced earlier this year, effective today, I have transitioned to the role of executive chair of the board, while Carl Colizza officially becomes our new president and CEO. Carl, you have been instrumental in developing and delivering on our strategy. And I have no doubt that under your leadership, Saputo's global business and unique culture will continue to flourish. We work together for closely over the past 25 years and I look forward to many more great years ahead.

Chris Lee: Okay, okay, that's fair. And then maybe my other follow-up question is just switching gears to your balance sheet, your free cash flow, obviously, they're all trending in the right direction. I just want to ask again, you know, what are some of the guideposts that you are waiting on before you act on your share buyback? Yeah, so, Chris, relative to capital...

Speaker Change: Okay, okay, that's fair. And then maybe my other follow-up question is just switching gear to your balance sheet, your free cash flow. Obviously, they're all trending in the right direction. I just wanna ask again, what are some of the guideposts that you are waiting before you act on your share buybacks?

Maxime Therrien: So Chris, relative to capital allocations... We've been consistent in our approach, and the approach is the same as previously signaled in last quarter. Priorities around dividend, you know, we talked about maintaining and growing, so we just announced a 2.7% or $0.02 increase, so to get to $0.76 annually. From a CapEx perspective, we are in line with a lower span than the last couple of years that we're targeting, so no change there. From a debt reimbursement perspective, we have a maturity in November of $400 million that we'll face, so we're prepared to deal with that. Nothing is on the radar suggesting that we should change our approach.

Speaker Change: Yeah, so Chris, relative to capital allocation,

Speaker Change: We've been consistent in our approach, and the approach is the same as previously signaled last quarter.

Lino Saputo: Congratulations again on this well-deserved appointment.

Lino Saputo: And as this is my last earnings call, I would like to thank you, the analysts and shareholders for your trust and support. It was a pleasure working with you and I will continue to value the relationship developed over the years.

Speaker Change: Priorities around dividend, you know we talked about maintain and grow so we just announced a 2.7 percent or two cents so to get to 76 cents annually.

Speaker Change: From a CapEx perspective, we are in line with a lower span than the last couple of years so that we're targeting, so no change there.

Carl Colizza: And on that note, Carl, I turn it over to you, my friends. Thank you, Lena, for your kind words. It is a pleasure to speak with you all on today's call.

Speaker Change: From a debt reimbursement, we have a maturity in November of $400 million that we'll face.

Carl Colizza: My first as president and CEO. I would like to take this opportunity to thank Lena on behalf of the entire Saputo team for your focused leadership, for your integrity and your unrelenting commitment to making Saputo the success it is today. Today, I humbly take on the mantle as president and CEO at a very pivotal time for a business. Like all of us at Saputo, I am immensely proud to be part of this organization and I very much share Lena's enthusiasm for the future.

Speaker Change: So we're prepared to deal with that. Nothing is on the radar suggesting that we would change our approach. We like the fact that we are building financial flexibility.

Maxime Therrien: We like the fact that we are building financial flexibility relative to buyback. It has been part of our growth story in the past. It is on our radar, and it will likely be part of our future. The drip was one of the steps relative to exiting from a cash flow perspective, and I would say from a pure straight timeline relative to buyback, we're one quarter closer.

Speaker Change: Relative to buyback.

Speaker Change: It has been part of our growth story in the past, it is on our radar, and it will likely be part of our future.

Speaker Change: The drip was one of the steps relative to exiting from a cash flow perspective, and I would say from a pure straight timeline relative to buyback, we're one quarter closer.

Carl Colizza: We have a strong foundation with the portfolio of exceptional brands and world-class assets. My goal is to improve and build upon support with already solid core and make certain that we move expeditiously and decisively through our next growth cycle. My number one priority is to ensure that we continue our relentless focus on the metrics that drive shareholder value, starting with operational synergies, achieving sustainable improvements in our cost structure and capturing high quality growth opportunities.

Speaker Change: I'll leave it at that.

Michael Van Aelst: Our next question comes from Michael Van Aelst at TD Kellyn.

Speaker Change: Thanks very much.

Speaker Change: Our next question comes from Michael Van Aelst at TD Callen.

Michael Van Aelst: Good morning and welcome Carl and congratulations to Lino. It's been a pleasure over the years. Max, just on... In your last comment there, is there a certain trigger that you would have to hit to start being active on the NCAB, like having your leverage fall below a certain level?

Speaker Change: Good morning and welcome, Carl, and congrats to Lino. It's been a pleasure over the years.

Max: Max, just on...

Speaker Change: On your last comment there, is there a certain trigger that would, you know, would, you know, that you would have to hit to start being active on the NCAB, like having your leverage fall below a certain level?

Carl Colizza: We continue to build confidence in the next stage of our journey, one in which we will leverage our capabilities and capacity to support earnings and cash flow generation. Around the world, across our categories, we are investing to further enhance our competitive advantage. While the majority of our global strategic plan initiatives are behind us, you will continue to see the results of those efforts. Richards. Also woven throughout a strategic agenda is a commitment to corporate responsibility and being a force for positive change through the Seputal promise.

Maxime Therrien: Well, Mike, with the volatility that we saw, we faced, and we're still living with, yes, certainly the return ASAP to our target leverage was one of the top priorities. Now, is it prudent to be, is it a problem to run in those volatile times under a target level? Yes, it is prudent.

Max: Well, Mike, with the volatility that we saw, we faced, and we're still living, yes, certainly the return ASAP to our target leverage was one of the top priorities.

Speaker Change: Now, is it prudent to be, is it a problem to run in those volatile times under a target level? Yes, it is prudent. That said, you know, the intent is not to go to a level of one times a bit or that sort of thing. No, we're getting, we're in the zone.

Maxime Therrien: That said, you know, the intent is not to go to a level of one times a bit, though, or that sort of thing. No, we're getting, we're in the zone. And as I mentioned, we're, you know, one quarter closer to where we were. We want to deal with our maturity in November. And yeah, or, or, or it's on our radar. It's a short-term thing.

Carl Colizza: I'm proud of how our people incorporate this focus into everyday activities and decision making, while also pursuing a set of ambitious multi-year targets. We have more work ahead of us and we are laser focused on achieving what we set out to do this year. Throughout the balance of fiscal 2025, our focus is set on controlling the controllables, delivering on our remaining major capital projects and positioning ourselves to maximize the benefits that will materialize following a return to more stable dairy market conditions.

Speaker Change: And, as I mentioned, we're, you know, one quarter closer than where we were. We want to deal with our maturity in November and, yeah, it's on our radar. It's a short-term thing.

Michael Van Aelst: All right, flipping to the US. Clearly, there is some good progress there, both from the markets as well as from internal initiatives. But I think you said that implicit overhead costs are not going to fall this year. The original guidance was for them to be down $15 million. So I'm wondering what's changed in the timing, maybe of the plant closures, and when should we expect to see, I guess, further progress on those operational improvements.

Speaker Change: Okay.

Speaker Change: All right, flipping to the U.S., clearly some good progress there.

Speaker Change: both from the markets as well as from internal initiatives.

Speaker Change: But yeah, I think you said that implicit overhead costs are not going to fall this year. The original guidance was for it to be down $15 million, so I'm wondering what's changed in the timing, maybe, of the plant closures, and when should we expect?

Carl Colizza: I'm confident in our outlook and continue to see this momentum as a tremendous time for the company to begin its next chapter. That said, I am certainly pleased with our first quarter results and how our teams are performing. It provides us with even more confidence for the year. I am truly excited about the opportunities that lay ahead. I will set the full weight of my energy behind delivering on the significant potential that exists with our great company for the next phase of our growth.

Carl Colizza: I thank you for your time.

Speaker Change: to see, I guess, further progress on those operational improvements.

Carl Colizza: Hi Michael, it's Carl. Maybe just to provide a little bit more clarity. So, as I said earlier, from a facilities culture perspective, four of the six are now closed, and the remaining two are on schedule for the first half of the next calendar. But more specifically, some of the duplicate costs that we're incurring come from being laser focused, honestly, on our customers' demands. So, as we are focused on ensuring that we have the highest fill rates possible, we're having to make some difficult but good choices to ensure that our facilities are capable of meeting that demand.

Speaker Change: i

Speaker Change: Hi, Michael. It's Carl. Maybe just to provide a little bit more clarity.

Speaker Change: So, as I said earlier, from a facilities culture perspective,

Speaker Change: For the six are now closed and the remaining two are on schedule for the first half of the next calendar, but more specifically, some of the duplicate costs that we're incurring come from being laser focused, honestly, on our customers demands.

Audra: I will now turn the call over to Audra for questions. Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.

Speaker Change: So, as we are focused on ensuring that we have the highest fill rates possible, we're having to make some difficult but good choices.

Irene Nattel: We will take our first question from Irene Natal at RBC, capital market. Thanks and good morning, everyone. Big, big day today.

Speaker Change: to ensure that our facilities are capable.

Carl Colizza: So, facilities like Green Bay continue to be key in making that happen. And accordingly, we're being very cautious about onboarding into Franklin all of the production lines that we had slated for consolidation.

Speaker Change: of supplying that demand. So facilities like Green Bay continue to be

Carl Colizza: Welcome, Carl, officially, and Lino, thank you for all the years. I am very glad that I know where to find you. Turning back to the quarter. Obviously, a great turn out from the US and understand the market factors, but if we kind of offset the market factors from the duplicate of costs, it seems like a really big step up. Can you talk about what the key building blocks of that are and then where do we go from here and how sustainable is the current run rate in the US?

Speaker Change: The key in making that happen, and accordingly, we're being very cautious about onboarding into Franklin all of the production lines that we had slated for consolidation. I would go a step further and say that

Carl Colizza: When it comes to Franklin, there isn't anything fundamentally wrong with Franklin. The infrastructure, and the design of the facility are as we have planned. And what we're dealing with here is ensuring that we're being balanced with our approach to servicing the market and moving through our consolidation process and reducing our well-duplicated costs. Right now, we're in a good place because volume is healthy for us at this point, and we're seeing year-over-year growth in our volume as well. So we're managing prudently, keeping a good balance and doing the right things for the health of our business. This is where we are. Okay, so it sounds like this.

Speaker Change: When it comes to Franklin, there isn't anything fundamentally wrong with Franklin. The infrastructure, the design of the facility is as we have planned.

Speaker Change: And what we're dealing with here is ensuring that we're being balanced with our approach in servicing the market and moving through our consolidation process and reducing our well-duplicate costs. So.

Carl Colizza: Thanks, Irene, for your question and for your kind words as well. I would say that the building blocks for the success of the US had in Q1 really is about the focus we had on our strategic initiatives. Where we stand today, we have completed our mozzarella modernization initiatives and the majority, if not all, of that benefit we are seeing today. Beyond that, we continue to make improvements along the way with our consolidation of various sites as a reminder for the six sites that we said we would be closing have now been closed and consolidated.

Speaker Change: Right now we're in a good place because volume is healthy for us at this point, year-over-year growth in our volume as well. So we're managing prudently, keeping a good balance and doing the right things for the health of our business and this is where we're at.

Michael Van Aelst: The rollout or the transition of production into Franklin is going to continue right through to the end of the fiscal 25, I guess, if you're talking about the closures of the remaining two facilities in the first half of next calendar year. Absolutely, yes. Okay, and then just finally on Europe. You talked about the improvements, the improvements that you expect. Where do you stand with respect to your high-cost inventory right now? And like, can you give us a better indication of the profile of your product mix? How much is a 12 or 14 month old? How much is a 24 month old age? Where's the bulk of the volume?

Speaker Change: Okay, so it sounds like...

Speaker Change: The rollout or the transition of production into Franklin is going to continue right through to the end of the fiscal 25, I guess, if you're talking about closures of the remaining two facilities in the first half of next calendar year.

Speaker Change: Absolutely, yeah.

Carl Colizza: With that, we are making sequential progress in Franklin as well, but we do remain very focused on maintaining our high fill rates, our on time and in full initiatives with our customers and continuing to supply demand. From that perspective, the American team has done a great job at delivering on this initiative. That's great. Thank you. And you know, given that this is your first official call, Carl, you know, if we go back to 2021, you guys put that 2.125 billion EBITDA target out there.

Speaker Change: Okay, and then just finally on Europe .

Speaker Change: You talked about the improvements, the study improvements that you expect. Where do you stand with respect to your

Speaker Change: Can you give us a better indication of the profile of your product mix? How much is 12- or 14-month age? How much is 24-month age? Where is the bulk of the volumes?

Leanne Cutts: Morning, Mike. It's Leanne here. So, yes, you're correct. I mean, our excess inventory has been cleared, and so we are seeing continued improvement quarter on quarter, which is good to see. So in terms of our overall profile, you know, we've seen growth in our Cathedral City retail brand, which is, that was supported by A&P in the first quarter. And we are taking share. So we're seeing sequential quarter on quarter volume growth for our core retail portfolio.

Speaker Change: Morning Mike, it's Leanne here. So yes, you're correct, I mean our excess infantry has been cleared.

Speaker Change: And so we are seeing that continued improvement quarter on quarter, which is good to see.

Carl Colizza: What is your view given how the world has changed since then and all the moving pieces? Do you think that is attainable and not going to pin you down? But, you know, maybe the question is, what needs to happen in order for you to achieve that? If you still believe it's attainable? Well, Irene, I think it's a reiterate what we have said in some of the more recent discussions. And that is we absolutely believe in the earnings power of the plan that we put in place.

Speaker Change: So, in terms of our overall profile, you know, we've seen growth in our Cathedral City retail brand.

Speaker Change: That's been supported by A&P in the first quarter, and we are taking shares, so we're seeing a sequential quarter-on-quarter volume growth for our core retail portfolio.

Leanne Cutts: And we're also shipping significant new private label volume now, and that soaks up the majority of our industrial volume. That's high quality private label. And so we are significantly less exposed to the issues that we had last year. And therefore, we continue to see that improvement quarter on quarter. So the inventory is balanced.

Speaker Change: We're also shipping significant new private label volume now, and that soaks up the majority of our industrial volume. That's high-quality private label.

Carl Colizza: Now, albeit that the conditions and the variables in which we operate in today are very different than that of the start of that plan. And by those, you know, we simply put, we're talking about the various disconnects in the, in the, in the, the overall cost of milk versus a selling price, some of the international demand scenarios, even the local dynamics in the US, they are very different conditions. Having said that, it is the investments that we have put forward will continue to serve our business very well and our customers moving forward.

Speaker Change: And so we are significantly less exposed to the issues that we had last year, and we continue to see that improvement quarter on quarter, so the inventory is balanced.

Michael Van Aelst: Okay, so, but if you have a 24 month or 14 month age product, I guess you're still going to have some higher-cost inventory in there as you cycle through that period. I think it was late 2020 to early 2023 when the costs were high. So what is the breakdown of your age product, roughly?

Speaker Change: I'm going to take a look at this.

Speaker Change: Okay, so, but if you have 24-month or...

Speaker Change: 14-month-age product.

Speaker Change: I guess you're still going to have some higher cost inventory in there as you cycle through that period. I think it was late 2022 and early 2023 when the costs were high. What is the breakdown of your H product roughly?

Maxime Therrien: The biggest piece, Mike, is we're talking about a 12-month period. There are products where the maturity of our profile cheese in Europe goes anywhere from three months to three years and even more than that. So even the cheese that we have in inventory, that's before the mill cost increase. At some point, we should focus on the high volume from a cheddar perspective, and within a 12-month period, this is kind of behind us. Okay.

Carl Colizza: So we're excited about what this can deliver. You know, as far as the absolute number you reference to 1 to 5, there are a number of other, I'll say, conditions and variables that exist and we're true back in 2020 that we need to be true today to make that happen. Would you care to extrapolate on what those are or expand? Well, for sure, we take a look at the block price and it's called spread, if you would like, there's a number of things there.

Speaker Change: The biggest piece, Mike, is we're talking about a 12-month type period. There's product that the maturity of our profile cheese in Europe goes anywhere from 3 months to 3 years and even more than that. So even cheese that we have in inventory that's...

Mike: Before the mill cost increase. So at some point, let's focus on the high volume from a cheddar perspective, and within a 12-month period, this kind of behind us.

Michael Van Aelst: Okay, so the vast majority of that is beyond. Correct. Okay, perfect. Thank you.

Carl Colizza: But overall, if you were to take a look at the demand on international front, so we understand, let's start with international. So on international front, certainly the demand from the Chinese side is not what it was before. And there's a number of reasons for that. One of them, including their ongoing milk autonomy. So that's certainly one area that is driving very different dynamics on who supplies what parts of the globe. That is, as we all understand, has created various situations, such as an Australia as well.

Mike: Okay, so the vast majority of that is behind you now.

Mike: Correct. Okay, perfect. Thank you.

Tamy Chen: We'll go next to Tamy Chen at BMO Capital Markets.

Speaker Change: We'll go next to Tamy Chen at BMO Capital Markets.

Tamy Chen: Great morning. Thanks for the questions here.

Tammy Chin: Great morning. Thanks for the questions here. On the US, I'm just curious, we're hearing other companies talk about the consumer. It sounds like they're deteriorating or softening more. So, I mean, there's a good performance in the US segment revenue-wide year over year. I guess, could you talk about, was that much more just the much stronger block price going through the results? Can you talk a bit more about volumes in your two primary end channels? And if you're seeing any of this apparent further deterioration in the consumer in the US in your results?

Tamy Chen: On the US, I'm just curious; we're hearing other companies talk about the consumer, and it sounds like they're deteriorating or softening more. So, I mean, there's been a good performance in the US segment revenue-wise over the year. I guess, could you talk a bit more about was that much more just the much stronger block price going through the results? Can you talk a bit more about volumes in your two primary end channels? And if you're seeing any of this apparent further deterioration in the consumer in the US in your results?

Carl Colizza: Our Australian platform has very different milk scenarios and different milk costs that has put a very different pressure on us. Moving over to the US, some of those milk dynamics were also quite different back then when it comes to the overall block price and spread. And I think probably the most overarching statement I can make ultimately is the impact of inflation on consumption and our margins has been very significant, very different than what we would have planned at the time of the straight line. I'm just so thank you, Carl.

Carl Colizza: Thanks, Tamy, for the question. I would say the following.

Tammy Chin: Thanks, Tamy, for the question. I would say the following. Yes, there has been some traffic declines in some cities.

Carl Colizza: Yes, there has been some traffic decline in some segments, including some QSRs. However, there are some offsetting channels, like retail. On the retail side, we're seeing some continued health, some shifts within different banners, moving to discount. But when we look at our overall portfolio and our supply to retail, we're seeing a lot of growth. With the Omni channels that we have, as well as our brands and our private labels, we're very well positioned to continue to supply the winning spaces.

Speaker Change: Specific segments, including some QSRs.

Speaker Change: However, there are some offsetting channels like retail. On the retail side, we're seeing some continued health, some shifts within different banners, you know, moving to discount.

Chris Lee: We'll take our next question from Chris Lee at Desjardins. Good morning everyone. Before I ask my question, you know, just again want to wish you all the best and enjoy some well deserved time with your family.

Speaker Change: But when we look at our overall portfolio and our supply to

Maxime Therrien: You certainly be missed on the call. And Carl, congrats again, look forward to seeing you soon. Thank you very much. If I just start with the question on international, you've been sort of a new outlook with respect to, you know, the moving parts mentioned, lower form gave me a price in Australia, but offset by some macro uncertainty in Argentina. So I guess I have maybe a two-part question. First is, can you please maybe elaborate a little bit more about how each of those two dynamics are going to impact the profitability of international this year?

Speaker Change: The omni-channels that we have, as well as our brands and our private labels, we're very well positioned to continue to supply the winning spaces.

Maxime Therrien: And then the second part of the question is, you take a step back. Do you still, do you expect you bit that growth into the international segment this year despite some of these macro uncertainties that are happening now in Argentina? Thank you. Okay, so good morning, Chris. Max here. So two, two dynamic, one relative to Australia. Certainly the new milk season starting in July with the price of milk that we are paying for the last few weeks will be a benefit for us as we move forward.

Carl Colizza: Beyond that, own brands are also making some share gains across the board. So whether that is in string cheese, blue cheese, or other sectors, we're continuing to make progress and are improving our overall share. So yes, there have been some declines in the overall QSR traffic. But we're also optimistic that our partners are going to continue to focus on driving value, bringing value back to their chains, and driving some traffic. So overall, if we answer the question around revenue in the U.S., certainly, the block price change has an impact, but overall volumes are also healthy, and we're continuing to track well and stable.

Speaker Change: Beyond that...

Speaker Change: Our own brands are also making share gains across the board.

Speaker Change: Whether that is in string cheese, blue cheese, or other sectors,

Speaker Change: We're continuing to make progress and are improving our overall share. So, yes, there has been some declines in the overall QSR traffic. We're also optimistic, though.

Speaker Change: That our partners are going to continue to focus on driving value, bringing value back.

Speaker Change: to their chains and driving some traffic. So, overall,

Speaker Change: If we answer the question around the revenue in the U.S., certainly the block price change has an impact, but overall volumes are also healthy and we're continuing to track well and stable.

Tamy Chen: Okay, got it. And now thinking about the global strategic plan here, the cadence, so just digesting what you just said about what's going on with Franklin. So if you've got the 26 million, you have your benefit in this quarter. I mean, before last quarter, I think you were suggesting we should think about the benefits from the global strategic plan to be fairly consistent through the year, some sequential improvement. But with the commentary on Franklin, should we be thinking about now that there's some volatility to that original thinking? Unknown Speaker No, so I think the number you're referencing is incorrect.

Speaker Change: Okay.

Speaker Change: And

Maxime Therrien: We intend or we believe that with this price of milk, it kind of restore our margin in Australia. So we're hopeful that this milk price will thick for the remain before as long as we can. And with that, we would be back to historical level of profitability out of Australia. Relative to Argentina, we're seeing disconnect over the last few quarters relative to inflation and the peso devaluation. Understand that 50% of our business in Argentina relates to export.

Speaker Change: Now thinking about the Global Strap Plan here, the cadence, so just digesting what you just said about what's going on with Franklin, so if you've got the $26 million of your benefit in this quarter, I mean, I think before last quarter, I think you were suggesting we should think about the benefits from the Global Strap Plan to be fairly consistent through the year, some sequential improvement.

Speaker Change: But with the commentary on Franklin, should we be thinking about now there's some volatility to that original thinking?

Carl Colizza: No, we're so I think the number you're referencing is we would have shared an improvement year over year of about $100 million associated with those initiatives. And the number that we've shared, 26, is net of duplicate costs. So, you know, the best way to look at it is that we will continue to make improvements quarter to quarter. The outlook for Franklin remains, you know, that we're focused on improving overall efficiencies, all the while balancing that against making sure we get the orders out the door. So we're still confident of hitting the $100 million mark by year end.

Speaker Change: No, I think the number you're referencing is we would have shared an improvement year over year of about $100 million associated to those initiatives and the number that we've shared of 26.

Maxime Therrien: Lower value of peso is beneficial for us on the export market. Lower the peso is more profitable is our export business. So as we were looking over the last seven, eight months, the currency devaluation in Argentina hasn't moved a lot. But inflation keeps rolling. The regular rate that we've seen over the last couple of years. So what it does is the cost of production, the cost of milk, the cost of our input cost keeps going, but it's not offset by a peso devaluation.

Speaker Change: is net of duplicate costs. So, you know, the best way to look at it is we will continue to make improvements quarter to quarter. The outlook for Franklin remains.

Speaker Change: So, you know, that we're focused on improving the overall efficiencies, all the while balancing that against making sure we get the orders out the door. So we're still confident on our $100 million mark by year end.

Speaker Change: Got it. Okay.

Vishal Shreedhar: We'll go next to Vishal Shreedhar at National Bank Financial.

Maxime Therrien: Hence the margin pressure, not so much on the domestic side, but more on to the export market. And that's what we've seen in Q1. At this time, when we look into Q2, we don't have a sign that there would be a change in this dynamic. We don't see the currency. We have no indication that the currency would appreciate or depreciate or whatnot. So at this time we say, well, the Q2 would likely be the same similar effect than that we've seen in Q1 for origin.

Speaker Change: i

Speaker Change: We'll go next to Vishal Shreedhar at National Bank Financial.

Vishal Shreedhar: Hi, thanks for taking my question. I was hoping to get more perspective on the dynamics in Australia and Argentina. Is there any way you can give us perspective on the declines experienced in both and? It's difficult for us, or at least for me, to triangulate because Australia is going to improve and Argentina is declining by some undisclosed amount. How to triangulate that pushing forward, particularly since you expect Argentina to remain pressured, or at least that was my interpretation.

Vishal Sridhar: Hi, thanks for taking my questions.

Vishal Sridhar: I was hoping to get more perspective on the dynamics in Australia and Argentina.

Speaker Change: Is there any way you can give us perspective on the declines experienced in both and

Speaker Change: It's difficult for us, or at least for me, to triangulate, because Australia's going to improve and Argentina's declining by some undisclosed amount, how to triangulate that pushing forward, particularly since you expect Argentina to remain pressured, or at least that was my interpretation.

Maxime Therrien: Okay, Vishal, this is Max. Just to give you a perspective, the performance in Australia, if we look from a sequential basis from Q4 to Q1, Australia's performance was stable. It was impacted by the disconnect between the mill price and the international pricing, and there was nothing major that popped from Q4 to Q1.

Maxime Therrien: Okay, that's very helpful, Max. Maybe then my other question was just if you take all that into your account, when you look at fiscal 25, just looking into international division, do you still expect that group this year? Well, we'll see how much we can recover from, you know, the Q1. We know we will be recovering in Australia, but to do. Really comment on what's going to be the dynamic on the currency and the level of inflation in Argentina is hard to tell.

Speaker Change: Okay, Vishal, this is Max. Just to give a perspective, the performance in Australia, if we look from a sequential basis, from Q4 to Q1, Australia's performance was stable.

Speaker Change: It was impacted by the disconnect in the mill price and the international pricing.

Speaker Change: And there was nothing major that popped from a Q4 to a Q1.

Maxime Therrien: When we talk about Argentina, I need to bring you back to the big devaluation late in the quarter in Q3, which by itself started that disconnect between inflation and the currency valuation. As a result of that, late in the quarter in Q3, we did benefit from a lower peso devaluation in Q4. Hence, our margin in Argentina was quite healthy in Q4. But since then, the PESO hasn't devalued itself. So from a sequential basis, Argentina's performance was impacted. We were we did not enjoy in Q1. The competitiveness increase of that brings a lower peso valuation.

Speaker Change: When we talk about Argentina, I need to bring you back to the Q3 big devaluation late in the quarter.

Maxime Therrien: Okay, okay, that's fair. And then maybe my other thought questions is switching here to your balance sheet of free tax, obviously they're all trending in the right direction. I just want to ask again, you know, what are some of the guy posts that you are waiting before you act on your on your ship, I begs? Yeah, so Chris relative to capital allocation, we've been consistent in our approach, and the approach is the same as previously signal in the last quarter, priorities around dividend, you know, we talked about maintain and grow.

Speaker Change: which by itself started that disconnect between the inflation

Speaker Change: As a result of that, late in the quarter Q3, we did benefit from a lower peso devaluation in Q4. Hence, our margin in Argentina was quite healthy in Q4.

Speaker Change: But since then, the PESO hasn't devalued itself, so from a sequential basis, Argentina's performance was impacted. We did not enjoy in Q1.

Maxime Therrien: So we just announced a 2.7% or 2 cents, so to get to 76 cents annually. From a CapEx perspective, we are in line with a lower span than the last couple of years, so that we're targeting, so no change there. From a debt reimbursement, we have a maturity in November, 400 million that we'll face, so we're going to have, we're prepared to deal with that. Nothing is on the radar, suggesting that we would change our approach.

Speaker Change: The competitivity increase of that brings a lower peso valuation.

Vishal Shreedhar: No, absolutely, I appreciate the perspective. So if the peso were flat-ish relative to where we are now, then we would expect that pressure in Argentina to continue throughout the year. Is that a fair comment?

Speaker Change: Does that help? Okay.

Speaker Change: No, absolutely, I appreciate the perspective. So if the peso were flat-ish relative to where we are now, then we would expect that pressure in Argentina to continue throughout the year, is that a fair comment?

Maxime Therrien: Well, the other variable is inflation. What will be the impact of inflation? If inflation would diminish and it would be flat, then there would be no; we would enjoy the margins that we did in the past.

Speaker Change: Well, the other variable is the inflation. What will be the impact of inflation if inflation would diminish and it would be flat?

Maxime Therrien: We like the fact that we're building financial flexibility relative to buy back. It has been part of our growth story in the past, it is on our radar, and it will likely be part of our future. The drift was one of the steps relative to exiting from a casual perspective, and I would say from, you know, pure straight timeline relative to buy back or one quarter closer. I'll leave it at that. Thanks very much.

Speaker Change: Then there would, no, we would enjoy the margins that we've done in the past, but if inflation keeps coming, well, it does impact the input costs. It impacts the labor costs, it impacts the mill costs, so hence the pressure on margin.

Vishal Shreedhar: But if inflation keeps coming, well, it does impact the input costs. It impacts the labor costs. It impacts the mill costs. So hence the pressure on margins. I see.

Vishal Shreedhar: So Australia will improve, but Argentina, the outlook as of now is looking a bit more challenging. And just from here. All right. All right.

Speaker Change: I see. So Australia will improve, but Argentina, the outlook as of now is looking a bit more challenged. And just be fair. Go on.

Vishal Shreedhar: From a sequential perspective, more or less the same thing. There would be, you know, not so much of a decline from a sequential perspective. Okay.

Speaker Change: From a sequential perspective, more or less the same thing. There would be, you know, not so much of a decline from a sequential perspective.

Vishal Shreedhar: Okay, understood. And I just want to get back to the comments off the top about the 2.125 billion. What is management's official position on that? Granted, I know when that target was issued, you know, things have changed dramatically in the world, and that's a fair comment. But management did reiterate that target, albeit take away the timeline. So what is management's point of view on that 2.125 billion?

Michael Van Elst: Our next question comes from Michael Van Elst at TD Cowan.

Maxime Therrien: Good morning, and welcome girl and congrats to Reno. It's been a pleasure over the years. Max, just on, on your last comment there, is there a certain trigger that would, you know, would, you know, that you'd have to hit to start being active on the end to be like having your leverage fall below a certain level. Well, Mike, we, you know, with the volatility that we, we saw, we face and we're still living.

Speaker Change: Okay, understood. And I just want to get back to the comments off the top about the $2.125 billion. What is management's official position on that? Granted, I know when that target was issued, things have changed dramatically in the world, and that's a fair comment.

Speaker Change: But management did reiterate that target, albeit take away the timeline. So what is the point of view on that 2.125?

Carl Colizza: So I'll, I'll, I guess I'll reiterate what we've shared before and the plan that was put in place, the investments that we've made in our business position as well. Capture the markets that are available today to meet consumer demands for tomorrow, and we really believe in our earnings power. But as I've shared with Irene in the earlier question, numerous variables are very different today than they were then. So when we will achieve that number is impossible to predict, considering the various changes that have occurred in the cost of mills around the globe, the enormous amount of year-over-year inflation that has occurred, and the impact on All of that to say that our assets... Our platform, are more efficient than they were when we started this journey, and it continues to position us very well to be able to remain competitive and to offer consumers what they're looking for on an ongoing basis

Speaker Change: So, I guess I'll reiterate what we've shared before.

Speaker Change: Thank you for joining us.

Speaker Change: The plan that was put in place, the investments that we've made in our business position us well

Maxime Therrien: Yes, certainly the return ASAP to our target leverage was one of the top priority. Now, is it prudent to be, is it a problem to run in those volatile time under a target level? Yes, it is prudent. That said, you know, the intent is not to go to a level of one times a bit though, or that sort of thing. No, we're getting, we're in the zone. And as I mentioned, we're, you know, one quarter closer than where we were. We want to deal with our maturity in November. And yeah, we're, we're, it's on our radar. It's a short turn thing. Okay. All right.

Speaker Change: to capture the markets that are available today to meet consumer demands for tomorrow. And we really believe in our earnings power. But as I've shared with Irene in the earlier question,

Irene Natal: Numerous variables are very different today than they were then. So when we will achieve that number is...

Irene Natal: It's impossible to predict considering the various changes that have occurred in the cost of milk, the supply dynamics around the globe, the enormous amount of year-over-year inflation that has occurred, the impact on consumers.

Carl Colizza: Flipping to the US, clearly some good progress there, both from the markets as well as from internal initiatives. But you, I think you said that it will get overhead costs are not going to fall this year. The original guidance was for to be down 15 million. So I'm wondering what they once changed in the timing maybe of the client closures and one should we expect to see. I guess for their progress on those operational improvements.

Irene Natal: All of that to say that our assets...

Irene Natal: Our platform.

Irene Natal: are more efficient than they were when we started this journey and it continues to position us very well to be able to remain competitive and to offer consumers what they're looking for on an ongoing basis.

Mark Petrie: Next, we'll move to Mark Petrie at CIBC.

Speaker Change: Thank you for that.

Mark Petrie: Yeah, thanks. Good morning. And I certainly echo all the comments so far. It's been a pleasure over the years, Lino. Wish you all the best in this next chapter. And, of course, big congratulations to you, Carl.

Speaker Change: Next we'll move to Mark Petrie at CIBC.

Mark Petrie: Yeah, thanks. Good morning, and certainly echo all the comments so far. It's been a pleasure over the years, Lino. Wish you all the best in this next chapter.

Carl Colizza: Hi, Michael. It's Carl. Maybe just to provide a little bit more clarity. So I said earlier from a facility's closure perspective for the six or now close and the remaining two are on schedule for the first half, the next calendar, but more specifically, some of the duplicate costs that we're incurring. Come from being laser focused, honestly, on our customers demands. So as we are focused on ensuring that we have the highest fill rates possible, we're having to make some difficult but good choices to ensure that our facilities are capable of supplying that demand.

Mark Petrie: And of course, big congratulations to you, Carl.

Mark Petrie: I just have two short questions. First, on Europe , just to follow up, can you just talk about the profitability today of the other businesses outside of cheese? Is there...

Mark Petrie: Is there any sort of evolution in that profitability level that we should be aware of?

Mark Petrie: I just have two small, short questions. First, on Europe. Just to follow up, can you just talk about the profitability today of the other businesses outside of cheese? Is there any sort of evolution in that profitability level that we should be aware of?

Mark Petrie: Morning Mark, it's Leanne. I mean, overall, we have stable margins across all of our business.

Leanne Cutts: Yeah, morning, Mark. It's Leanne. I mean, overall, yeah, we have stable margins across all of our businesses. And, of course, yes, we have a core business, we've talked a lot about Cathedral City, and we also have a strong leadership position in spreads with our Clover brand, and that continues to be stable, as well as our oils business.

Speaker Change #101: And, of course, yes, we have a chief business, we've talked a lot about Cathedral City, and we also have a strong leadership position in spreads with our Clover brand, and that continues to be stable, as well as our oils business.

Carl Colizza: So facilities like Green Bay continue to be key in making that happen. And accordingly, we're being very cautious about onboarding into Franklin, all of the production lines that we had slated for consolidation. I would go step further and say that when it comes to Franklin, there isn't anything fundamentally wrong with Franklin, the infrastructure, the design of the facility is as we have planned. And what we're dealing with here is ensuring that we're being balanced with our approach in servicing the market and moving through our consolidation process and reducing our role to the good costs.

Mark Petrie: Okay, so the so the path to returning to historical margins is really just a matter of selling through this inventory. And, and that's largely or working through the higher-priced inventory. And that's effectively complete, isn't it?

Mark Petrie: Okay, so the path to returning to historical margins is really just a matter of selling through this inventory and that's largely, or working through the higher price inventory and that's effectively complete, is that right?

Leanne Cutts: On the cheese part, absolutely, Mark, you're correct. The other piece I would say is that we also have an ingredients business that we sell that's exported from the UK. And we have seen recovering volumes in our ingredient business; however, pricing is still lower than a year ago, and that does reflect the soft demand in China for infant formula and across the globe. So that's a combination for the UK. So in terms of our outlook, you know, that ingredient business we see for ingredient prices, it's still going to continue to be stable across the rest of the year. But it's absolutely lower than last year from a pricing perspective, even though we're continuing to get good volume.

Speaker Change #102: On the cheese part, absolutely, Mark. You're correct. The other piece I would say is that we also have an ingredients business that we sell that's exported from the UK, and we have seen recovering volumes on our ingredient business. However, pricing is still lower than a year ago.

Speaker Change #103: And that does reflect the soft demand in China in infant formula and across the globe.

Carl Colizza: So right now, we're at a good place because volume is healthy for us at this point, year over year growth in our volume as well. So we're managing prudently keeping a good balance and doing the right things for the health of our business, and this is where we're at.

Speaker Change #103: So, that's a combination for the UK, so in terms of our outlook, that ingredient business, we see for ingredient pricing, it's still going to continue to be stable across the rest of the year, but it's absolutely lower than last year from a pricing perspective, even though we're continuing to get good volume.

Mark Petrie: Yeah, okay, fair enough. And then my other question is just on Canada, obviously another strong performance, particularly interested to hear you calling out mix as a positive and just hoping you can expand on specifically what's behind that is that just sort of a continued repositioning of the brands towards value add and you're sort of gaining shelf space or do you feel like you're taking share sort of on a on a cell through basis, just if you could expand on those dynamics that we hope.

Carl Colizza: Okay, so it sounds like the rollout or the transition of production into Franklin is going to continue right through to the end of the fiscal 25, I guess, if you're talking about closures of the remaining two facilities in the first half of next calendar year. Absolutely. Yep. Okay.

Speaker Change #104: Yeah, okay, fair enough. And then my other question is just on Canada, obviously another strong performance.

Speaker Change #105: Particularly interested to hear you calling out mix as a positive and

Speaker Change #106: Just hoping you can expand on specifically what's behind that. Is that just sort of a continued repositioning of the brands towards value-add and you're sort of gaining shelf space, or do you feel like you're taking share sort of on a sell-through basis? Just if you could expand on those dynamics, that'd be helpful.

Leanne Cutts: And then just finally on your up, you talked about the improvements that you're expecting, where do you stand with respect to your high cost inventory right now? Can you give us a better indication of the profile of your product mix? How much is 12 or 14 month-age? How much is 24 month-age? Where is the bulk of the volumes?

Carl Colizza: Yes. Thanks, Mark. So the Canadian team has made some significant progress over the years in brand development, and particular Armstrong cheese continues to grow and take share throughout the market. On the fluid side of our business, we're also improving our share with regard to value-added milk, which is improving the overall mix. And we remain healthy both in the food service space, as well as in retail and servicing the channels that are winning. And yes, you know, this is the count channel. And older people are winning. [inaudible] traditional banners, but we're well positioned with our brands as well as our private label offerings to continue to succeed in Canada.

Speaker Change #107: Yes, thanks Mark. So, the Canadian team has made some, you know,

Speaker Change #108: Significant progress over the years at brand development, in particular Armstrong Cheese continues to grow and take share throughout the market.

Leanne Cutts: Morning, Mike. It's Leon here. So yes, you're correct. I mean, our inventory has been cleared. And so we are seeing that continued improvement quarter on quarter, which is good to see. So in terms of our overall profile, we've seen growth in our Cathedral City retail brand, which has been supported by A&T in the first quarter. And we are taking a share. So we're seeing a sequential quarter and quarter volume growth for our core retail portfolio.

Speaker Change #109: On the fluid side of our business, we're also improving our share with regards to value-added milks, that is improving the overall mix.

Speaker Change #109: And we remain healthy both in the food service space as well as in retail and servicing the channels that are winning. And yes, you know, discount channels are winning over...

Speaker Change #109: Traditional banners, but we're well positioned with our brands as well as our private label offerings to continue to succeed in Canada.

Mark Petrie: Okay, I appreciate the comments and wish you all the best.

Leanne Cutts: And we're also shipping significant new private label volume now. That soaks up the majority of our industrial volume. That's high quality private label. And so we are significantly less exposed to the issues that we had last year. And therefore we're, and we continue to see that improvement quarter on quarter. So the inventory is balanced. Okay, so, but if you have 24 months or 14 months age product, I guess you're still going to have some high cost, higher cost inventory in there as you cycle through that period.

Speaker Change #110: Okay. Appreciate the comments and all the best.

Rob Dickerson: We'll go next to Rob Dickerson at Jeffrey's.

Speaker Change #111: Thank you.

Rob Dickerson: Great. Thanks so much. Just two questions for me, hopefully pretty easy. Just in terms of the quarter, I know you said volumes were up across all segments. Do you ever provide kind of, you know, maybe what they were, at least on a total company level?

Speaker Change #112: We'll go next to Rob Dickerson at Jeffries.

Rob Dickerson: Great, thanks so much.

Rob Dickerson: Just two questions for me, hopefully pretty easy. Just in terms of the quarter, I know you said, you know, volumes were up across all segments. Do you ever provide kind of, you know, maybe what they were, at least on a total company level?

Maxime Therrien: No, we do not disclose the, you know, the volume, the quantity; basically, we kind of give an indication in terms of over or more or less, but we do not provide that type of sensitive info.

Leanne Cutts: I think it was late 2022 and early 2023 when the costs were high. So, you know, what is the breakdown of your age product roughly? The biggest space, Mike, is we're talking about a 12-month type period. There's product that the maturity of our profile of the cheese in Europe goes anywhere from three months to three years and even more than that. So, there are even cheese that we have in inventory that's before the middle cost increase.

Speaker Change #114: No, we do not disclose the, you know, the volume, the quantity. Basically, we kind of give an indication in terms of over or more or less, but we do not provide that type of sensitive info.

Rob Dickerson: Okay, fair enough. All right. Not that sensitive.

Speaker Change #115: Okay, fair enough.

Speaker Change #116: All right. Not that sensitive. Anyway, so the...

Rob Dickerson: Anyway, so the, I guess the question is, right, you know, consumers have been pressured in the U.S. market, across a lot of different companies, you know, there's been some sequential improvement in demand, there's been kind of some green shoots, seeing that, you know, maybe things start to settle a little bit. But then we spend most of our time, a lot of time on, you know, the price of Block T. So I was just trying to gauge the consumer demand aspect of the business, specifically in the U.S., given it's like 50 percent of revenue.

Speaker Change #117: I guess the question is, right,

Speaker Change #117: Consumers have been pressured in the U.S. market across a lot of different companies. There's been some sequential improvement in demand.

Leanne Cutts: So, at some point, that's focused on the high volume from a cheddar perspective and within a 12-month period, this kind of behind us. Okay, so the vast majority of that is behind you now. Correct. Okay, perfect, thank you.

Speaker Change #117: There's been kind of some green shoots seeing that, you know, maybe things start to settle a little bit. But then we spend most of our time, a lot of the time on, you know, the price of block keys.

Speaker Change #119: So I was just trying to gauge the consumer demand aspect of the business, specifically in the U.S., given it's like 50% of revenue.

Tamy Chen: We'll go next to Tamy Chen at BMO, capital markets. Great, good morning. Thanks for the questions here. On the US, I just curious, we're hearing other companies talk about the consumer. Sounds like they're deteriorating or softening more. So, I mean, there's a good performance in the US segment revenue-wide deal over here. I guess, could you talk about, was that much more just the much stronger block price going through the results? Can you talk a bit more about volumes in your two primary and channels?

Rob Dickerson: So I guess maybe another way to approach it is just like, what do you, what would you say, very simplistically, would be the driver, right, of that volume improvement in the U.S.? within the category? Because it also sounds like maybe you are taking some share, which will be great.

Speaker Change #120: So I guess maybe another way to task it is just, like, what do you, what would you say very simplistically do you believe would be the driver, right, of that volume improvement in the U.S.?

Speaker Change #121: within the category, because it also sounds like maybe you are taking some share, which would be great.

Carl Colizza: Yeah, so there may be some volatility here in the short term with all of the information that we're seeing and hearing about the pinch on the consumer and some traffic slowdown specifically in the food service sector. But again, you are right, Rob, we are making some gains, some share gains in the retail space. But we're also making some share gains in a number of growing categories. For example, there are some categories, such as cottage cheese, that continue to be very healthy, and we could be an important supplier in that space.

Speaker Change #122: Yeah, so there may be some volatility here in the short term with all of the information that we're seeing and hearing about.

Tamy Chen: And if you're seeing any of this apparent further deterioration in the consumer in the US and in your results? Thanks, Tamy, for the question. I would say the following. Yes, there has been some traffic declines in some specific segments, including some QSRs. However, there are some offsetting channels like retail. On the retail side, we're seeing some continued health, some shifts within different banners. We don't move into discount, but when we look at our overall portfolio and our supply to the omnichandals that we have, as well as our brands and our private labels, we're very own brands are also making some share gains across the board.

Speaker Change #123: the pinch on the consumer and some traffic slowdowns specifically in the food service sector. But again, you are right Rob, we are making some gains, some share gains.

Tamy Chen: So, whether that is in the string cheese, blue cheese, or other sectors, we're continuing to make progress or improving our overall share. So, I guess there has been some declines in the overall QSR traffic. We're also driving value, bringing value back to their chains and driving some traffic. So, overall if we answer the question around the revenue in the US. It's certainly the block price change as an impact, but overall volumes are also healthy and we're continuing to track well and stable.

Carl Colizza: Okay, I got it.

Speaker Change #123: in the retail space. We're also making some share gains in a number of growing categories. There are some categories such as cottage cheese that continue to be very healthy and we'd be an important supplier in that space.

Carl Colizza: And we're being very opportunistic across the network in making sure that we fill the voids that others may be leaving. So overall, despite the consumer being squeezed and making some difficult choices, our outlook is still stable, and we don't foresee that changing with the kind of portfolio and our ability to navigate through multiple different channels.

Speaker Change #123: And we're being very opportunistic across the network in making sure that we fill the voids that others may be leaving. So overall, despite, you know, the consumer being squeezed and making some difficult choices,

Speaker Change #123: From a demand perspective, our outlook is still stable and we don't foresee that changing with the kind of portfolio and our ability to navigate through multiple different channels.

Rob Dickerson: All right, super. I like that. And then I guess the second question on the spread of block milk. You know, clearly, we've seen the price of block milk go up a fair amount year over year, but we've also seen the price of milk go up. So the spread has improved, which is great. But at the same time, you know, we're still getting acceleration within the dairy market. So I'm just curious, like, as we think, you know, out, even just the next quarter or two, you know, it's like, what's the feel of the marketplace?

Speaker Change #124: All right, super.

Speaker Change #125: I like that. And then I guess just second question on the spread, block milk.

Speaker Change #126: Clearly, we've seen the price of milk go up a fair amount year over year, but we've also seen the price of milk go up. So, the spread has improved, which is great.

Speaker Change #127: But at the same time, you know, we're getting still acceleration within the dairy market.

Rob Dickerson: And again, I mean, when I spoke to the US, I realized their global dairy is a little different, but maybe just kind of any color on kind of some of the core markets. Because, you know, it is kind of all about the spread, and we've seen block go up, which is great. But milk is also going up, and a little tweak to either one of them can be very, you know, material to the overall business.

Speaker Change #128: So, I'm just curious, like, as we think, you know, out even just the next quarter or two.

Speaker Change #129: What's the feel of the marketplace, and again, I'm speaking to the U.S. because I realize global dairy is a little different, but maybe just kind of any color on some of the core markets.

Carl Colizza: And now thinking about the global strap line here, the cadence. So just digesting what you just said about what's going on with Franklin. So if you've got the 26 million year of your benefit in this quarter, I mean, I think before last quarter, I think you were suggesting we should think about the benefits from the global strap lines to be fairly consistent through the year, some sequential improvements. But with the commentary on Franklin, we should be thinking about now there's some volatility to that original thinking.

Speaker Change #129: Because, you know,

Speaker Change #130: It is kind of all about the spread, and we've seen block go up, which is great.

Speaker Change #131: But milk is also going up, and like a little tweak to either one of them can be very, you know, material to the overall business. And I think I heard you say earlier, kind of, you kind of expect, you know, maybe some

Rob Dickerson: And I think I heard you say earlier, kind of, you kind of expect, you know, maybe some stabilization kind of ish in those two prices, you know, as you think forward through the year. That's all. Thanks so much.

Speaker Change #131: Stabilization kind of ish in those two prices, you know, as you think forward through the year. That's all. Thanks so much.

Carl Colizza: Now, maybe what I can add, Rob, is what gives us confidence in having some stability or some strength in the commodity markets is really all around the milk supply versus the demand. So we're seeing a fairly stable demand for dairy products in the U.S., as well as demand on the export side for U.S.-based products. And when we take a look at the overall supply of milk in the U.S., it's not growing.

Speaker Change #131: Maybe what I can add, Rob, is what gives us confidence in having

Carl Colizza: No, I think the number you're referencing is we would have shared an improvement year over year, about $100 million associated to those initiatives. And the number that we've shared of 26 is net of duplicate costs. So, you know, the best way to look at it is we will continue to make improvements quarter to quarter. The outlook for Franklin remains, you know, that we're focused on improving the overall efficiencies all the while balancing that against making sure we get the orders out the door. So we're still confident on our $100 million mark by year end.

Rob Dickerson: some stability or

Speaker Change #132: Some strength in the commodity markets is really all around the milk supply versus the demand.

Speaker Change #133: So we're seeing a fairly stable demand for dairy products in the U.S. as well as the demand on the export side for U.S.-based products.

Speaker Change #133: And when we take a look at the overall supply of milk in the U.S., it's not growing.

Carl Colizza: So when we look at those two dynamics, we're comfortable in saying that there's a healthy balance between the two, and this should keep prices healthy. Those dynamics would be what we would anchor to, as we look forward. And the other piece is some of the most recent published information around inventories for cheese in the U.S., as well as some weight solids, which suggest that they're tight. So with all this said, I think that we've got some strong fundamentals in the U.S. Dairy Commodity.

Speaker Change #133: So, when we look at those two dynamics, we're comfortable in saying that there's a healthy balance between the two. This should keep prices healthy. Those dynamics would be what we would anchor to.

Maxime Therrien: We'll go next to Vishal Shraddhar at National Bank Financial. Hi, thanks for taking my questions. I was hoping to get more perspectives on the dynamic in Australia and Argentina. So, is there any way you can give us perspectives on the declines, experience and both and it's difficult for us for at least for me to triangulate because Australia is going to improve an Argentina declining by some undisclosed amount. How to triangulate that pushing forward, particularly since you expect Argentina to remain pressured or at least that was my interpretation.

Speaker Change #133: as we look forward. And the other piece is some of the most recent published information around inventories.

Speaker Change #133: For cheese in the U.S., as well as some weight solids, would suggest that they're tight. So, with all this said, I think that we've got some strong fundamentals in the U.S. dairy commodity space.

Rob Dickerson: Alright, super, thanks so much.

Speaker Change #134: All right. Super. Thanks so much.

Chris Lee: We'll take a follow-up from Chris Lee at Desjardins.

Speaker Change #135: I think that's a good idea.

Chris Lee: Thanks very much. I have just two more questions for you. The first one is just another follow-up on Argentina. Max, I was wondering if you could give us a sense of how big Argentina is in terms of EBITDA. We know from the disclosure that I think it's about a billion dollars in terms of revenues, but just in terms of EBITDA, can you give us a sense of how big that business is?

Speaker Change #135: We'll take a follow-up from Chris Lee at Desjardins.

Chris Lee: Thanks very much. Just maybe two more questions for me. The first one is just another follow-up on Argentina.

Maxime Therrien: Okay, Vishal, this is Max. Just to give a perspective, the performance in Australia, if we look from a sequential basis from Q4 to Q1, Australia performance was stable. It was impacted by the disconnect in the milk price and the international pricing and there was nothing major that popped from Q4 to a Q1. When we talk about Argentina, I need to bring you back to the Q3 big evaluation late in the quarter, which by itself, create that disconnect between the inflation and the currency evaluation.

Chris Lee: Max, I was wondering if you can give us a sense of how big Argentina is in terms of IPADAT. We know from your disclosures, I think it's about a billion dollars.

Chris Lee: in terms of revenues, but just in terms of EBITDA, can you give us a sense of how big that business is?

Maxime Therrien: Well, I would say I would lean you to Argentina having more margin aligned with the rest of the business rather than, you know, maybe over-performance relative to the devaluation of the peso. The devaluation of the peso for our export business gives definitely a hedge on margin generation. So if you remove that hedge, we fall more or less on the same line as the rest of our business.

Max: Well, I would say, I would lean you to Argentina having more margin aligned with the rest of the business rather than, you know, maybe over performance.

Speaker Change #136: relative to the devaluation of the peso. The devaluation of the peso for our export business gives definitely a hedge on margin generation.

Speaker Change #136: So, if you remove that hedge, we fall more or less the same line as the rest of our business.

Maxime Therrien: As a result of that, late in the quarter Q3, we did benefit from a lower peso evaluation in Q4. Hence, our margin in Argentina was quite healthy in Q4. But since then, the peso hasn't devaluated itself so from a sequential basis, Argentina performance was impacted. We did not enjoy in Q1 the competitive increase of that brings a lower peso evaluation. No, absolutely, I appreciate the perspective. So if the peso were flatish, you're relative to where we are now, then we would expect that pressure in Argentina to continue throughout the years.

Chris Lee: Okay, but in the last four months, I guess what you're saying is that it's actually a lot higher because of the benefit of the caseload evaluation.

Speaker Change #137: Okay, but in the last four months, I guess what you're saying is that it's actually a lot higher because of that benefit of the caseload evaluation.

Maxime Therrien: But we're running a healthy business out of Argentina with exports. [inaudible] Very healthy. We're happy. And it's, it's still healthy. And, simply, not maybe less, favorable than it was, but trust me, it still helps.

Speaker Change #137: We're running a healthy business out of Argentina with exports.

Speaker Change #137: Very healthy. We're happy and it's still healthy and simply not, maybe less favorable than, you know, than it was. But trust me, it's still healthy.

Chris Lee: Okay, thanks for that. And then my other question, maybe this one is for Carl, just a longer-term question, just, you know, we'd love to get your thoughts on, you know, the potential changes in the federal milk marketing orders in the US. What is the latest update you're hearing about that? And what is the potential impact on your business if the proposed changes are actually implemented as proposed? Thank you.

Speaker Change #137: Okay, thanks for that. And then my other question, maybe this one is for Carl, just a longer term question, just, you know, would love to get your thoughts on, you know, the potential changes in the federal milk marking orders in the U.S.

Speaker Change #138: You know, what is the latest update you're hearing from that and what is the potential impact on your business if the proposed changes are actually implemented as proposed? Thank you. Transcribed by https://otter.ai

Maxime Therrien: That is very calm, Matt. Well, the other variable is the inflation. What will be the impact of inflation? Inflation with the diminishing and it would be flat. Then, there would, no, we would enjoy the margins that we've done the past, but inflation keeps coming. Well, it does, in fact, the input costs. It impacts the labor cost. It impacts the mill costs. So hence the pressure on margin. I see. So Australia will improve, but Argentina, the outlook as of now is looking a bit more challenged and just keep there going.

Carl Colizza: Thanks, Chris, for the question. And thanks for leading into it being proposed because we're not at the finish line yet. But the proposal that has been tabled, which is still, of course, in the period of commentaries, there's still a milk producer vote that needs to happen in the fall, needs to go through legislation, and at the earliest, implementation would be sometime in June or July of next year.

Carl Kalica: Thanks Chris for the question and thanks for leading into it being proposed because we're not at the finish line yet.

Carl Kalica: But the the proposal that has been tabled

Carl Kalica: That still, of course, is in the period of commentaries, there's still a milk producer vote that needs to happen in the fall, needs to go through legislation, and at the earliest

Chris Lee: So if we put the timeline aside for a second, we certainly applaud and are encouraged by what the current draft proposes. All in all, the proposal is suggesting it is addressing make allowances, which, as you may know, have not changed over the last 16 years. So certainly, this would look favorable to us. And it would help offset all the inflationary pressures that we've absorbed over the, you know, that same timeframe.

Speaker Change #139: Implementation would be sometime in June or July of next year. So if we put the timeline aside for a second, we certainly applaud and and and we're encouraged by what the current draft

Maxime Therrien: From a sequential perspective, or more or less, the same thing, you know, not so much of a decline from a sequential perspective. Okay, understood. And I just want to get back to the comments off the topic of the 2.125 billion. What is management's official position on that granted? I know when that target was issued, you know, things have changed dramatically in the world, and that's that's a fair comment. But, um, management did, um, did reiterate that target, albeit take away the timeline.

Speaker Change #140: The proposal is suggesting it is addressing make allowances, which as you may know have not changed over the last 16 years, so certainly this would look favorable to us.

Speaker Change #141: It would help offset all the inflationary pressures that we've absorbed over that same time frame. But again, it's in draft form, we're a long way from this having any type of impact on our results.

Chris Lee: But again, this is just a draft form; we're a long way from this having any type of impact on our results. And if things were to stick to where they are today, yes, it would be favorable for us. Great.

Maxime Therrien: So what is the, what is the point of view on that 2.125? So I'll, I guess I'll reiterate what we've shared before. And we plan that was put in place, the investments that we've made in our business position as well to capture the markets that are available today to meet consumer demands for tomorrow. And we really believe in our earnings power, but as I've shared with Irene in the earlier question, um, numerous variables are very different today than they were then.

Speaker Change #141: And if things were to stick to where they are today, yes, it would be favorable for us.

Chris Lee: Great. Thanks very much.

Nick Estrela: And that concludes our Q&A session. I will now turn the conference back over to Nick for his closing remarks.

Speaker Change #142: Thanks very much.

Speaker Change #142: i

Speaker Change #142: And that concludes our Q&A session. I will now turn the conference back over to Nick for closing remarks.

Operator: Thank you, Audra. Please note that we will release our second quarter fiscal 2025 results on November 7th, 2024. We thank you for taking part in the call and webcast. Have a great day.

Nick Estrela: Thank you, Audra. Please note that we will release our second quarter fiscal 2025 results on November 7th, 2024. We thank you for taking part in the call and webcast. Have a great day.

Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change #144: And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Maxime Therrien: So when we will achieve that number is, is impossible to predict considering the various changes that have occurred in the cost of milk, the supply dynamics around the globe, the enormous amount of year over year inflation, it has occurred, the impact on consumers. But all of that to say that our assets, our platform are more efficient than they were when we started this journey and it continues to position us very well to be able to remain competitive and to offer consumers what they're looking for on an ongoing basis. Thank you for that.

Operator: Please wait, the conference will begin shortly.

Mark Petrie: Next one is Denmark Patriot C.I.B.C. Yeah, thanks.

Speaker Change #144: Lino Saputo, Lino Saputo, Lino Lino Saputo, Lino Saputo, Lino Saputo, Lino Saputo, Lino Saputo, Lino [inaudible]

Leanne Cutts: Good morning, and certainly echo all of the comments so far. It's been a pleasure over the years, Lano, wish you all the best in this next chapter. And of course, be congratulations to you, Carl. I just have two, two small questions, short questions. First, on Europe, just to follow up, can you just talk about the profitability today of the other businesses outside of cheese? Is there, is there any sort of evolution in that profitability level that we should be aware of?

Leanne Cutts: Morty, we are Morty Markets, Leanne. I mean, overall, we have a stable margins across all of our business. And of course, yes, we have a chief business. We've talked a lot about Cathedral City. And we also have a strong leadership position in spreads with our Clover brand. And they continue to be stable as well as our oil's business. Okay, so the path to returning to historical margins is really just a matter of selling through this inventory.

Leanne Cutts: And that's largely, or working through the higher post inventory. And that's effectively complete. Is that right? On the chief part, absolutely, Mark, you're correct. The other piece I would say is that we also have an ingredients business that we sell that's exported from the UK. And we have seen recovering volumes on our ingredient business. However, pricing is still lower than year ago. And that does reflect the soft demand in China in infant formula and across the globe.

Leanne Cutts: So that's a combination for the UK. So in terms of our looking at that ingredient business, we see for ingredient pricing, it's still going to continue to be stable across the rest of the year. But it's absolutely lower than last year from a pricing perspective, even though we continue to get good volume. Yeah, okay, fair enough.

Leanne Cutts: And then my other question is just on Canada, obviously, another strong performance, particularly interested to hear you calling out mix as a positive and just hoping you can expand on specifically what's behind that. Is that just sort of a continued repositioning of the brands towards value add and you're sort of gaining shelf space? Or do you feel like you're taking share sort of on a on a sell through basis, just if you could expand on those dynamics that be helpful?

Leanne Cutts: Yes, thanks Mark. So the Canadian team has made some significant progress over the years at brand development in particular Armstrong cheese continues to grow and take share throughout the market. On the fluid side of our business, we're also improving our share with regards to value added milk that is improving the overall mix. And we remain that healthy both in the food service space as well as in retail and servicing the channels that are winning.

Leanne Cutts: And yes, you know, discount channels are are winning over traditional banners, but we're well positioned with our brands as well as our privately law forings to continue to succeed in Canada. Okay, appreciate comments and all of us. Thank you.

Rob Dickerson: We'll go next to Rob Dickerson at Jeffries. Great, thanks so much. Just two questions for me, hopefully pretty easy. Just in terms of the quarter, I know you said, you know, volumes were up across all segments. Do you ever provide kind of, you know, maybe what they were, at least on a total company level? No, we do not disclose the, you know, the volume, the quantity, basically, we kind of give an indication in terms of.

Rob Dickerson: I don't know if it's over or more or less, but we do not provide that type of sensitive info. Okay, fair enough. All right, that's sensitive. Anyway, so the, I guess the question is, right, you know, kind of consumers been pressured in the US market, you know, across a lot of different companies. There's been some sequential improvement in demand. There've been cuts from green shoots seeing that, you know, maybe things start to settle a little bit.

Rob Dickerson: But then we spend most of our time, we're a lot of the time on, you know, the price of block keys. So I was just trying to gauge like the consumer demand aspect of the business, specifically in the US, given it's like 50% of revenue. So I guess maybe another way to pass it is just like what do you, what would you say very simplistically, do you believe would be the driver?

Rob Dickerson: Right, of that volume improvement in the US within the category, because it also sounds like maybe you are taking some share, which will be great. Yeah, so there may be some volatility here in the short term with all of the information that we're seeing and hearing about the pinch on the consumer and some traffic slowdown specifically in the food service sector. But again, you are right, Rob, we are making some gains, some share gains in the retail space.

Rob Dickerson: And we're also making some share gains in a number of growing categories. So there are some categories such as cottage cheese that continue to be very healthy, and we'd be an important supplier in that space. And we're being very opportunistic across the network in making sure that we fill the voids that others may be leaving. So overall, despite the consumer being squeezed and making some difficult choices from a demand perspective, our outlook is still stable.

Rob Dickerson: And we don't foresee that changing with the kind of portfolio and our ability to navigate through multiple different channels. All right, super. I like that. And then I guess the second question on the spread block milk. You know, clearly, you know, we've seen the price of block go up a fair amount over year year, but we've also seen the price of milk go up. So the spread has improved, which is great.

Rob Dickerson: But at the same time, you know, we're getting still acceleration within the dairy market. So I'm just curious like, as we think, you know, out even just the next quarter or two. You know, it's like, what's the seal of the marketplace? And again, I mean, I was thinking to the US because I realized that a global dairy is a little different. But maybe just kind of any color on some of the core markets because, you know, it's kind of all about the spread.

Rob Dickerson: And we've seen block go up, which is great. But milk is also going up in like a little tweak to either one of them can be very, you know, material to the overall business. And I think I heard you say earlier kind of you kind of expect, you know, maybe some stabilization kind of ish in those two prices, you know, as you think forward through the year. That's all. Thanks so much.

Carl Colizza: Maybe what I can add, Rob, is what gives us confidence in having some stability or some strength in the commodity markets is really all around the milk supply versus the demand. So we're seeing a fairly stable demand for dairy products in the US as well as the demand on the export side for US-based products. And when we take a look at the overall supply of milk in the US, it's not growing.

Carl Colizza: So when we look at those two dynamics, we're comfortable in saying that there's a healthy balance between the two. This should keep prices healthy. Those dynamics would be what we would anchor to as we look forward. And the other are pieces of some of the most recent published information around inventories for cheese in the US as well as some weight solids would suggest that they're tight. So with all this said, I think that we've got some strong fundamentals in the US dairy commodity space. All right. Super. Thanks so much.

Maxime Therrien: We'll take a follow-up from Chris Li at Dayshardin. Thanks very much. Just maybe two more questions for me. The first one is just another follow-up on Argentina. Max, I was wondering if you can give us a sense of how big Argentina is in terms of, we know from the disclosure that things are about billion dollar in terms of revenues. But just in terms of if it's how big that business is. Well, I would say I would lean you to Argentina having more margin aligned with the rest of the business rather than you know, maybe overperformed relative to the devaluation of the peso.

Maxime Therrien: So the devaluation of the peso for our export business give definitely hedge on on margin generation. So if you remove that hedge, you fall more or less same, the same line as the rest of our business. Okay. But in the last four months, I guess what you're saying is that it's actually a lot higher because of that benefit of the pace with evaluation. But we're running a healthy business out of Argentina with export. Very healthy. We're happy and it's still healthy and simply not maybe less favorable than, you know, than it was, but trust me, it's still healthy.

Chris Li: Okay, thanks for that. And then may other question maybe this one is for Carl just a longer term question, just you know, we'll have to get your thoughts on, you know, the potential changes in the federal milk marking orders in the US.

Carl Colizza: You know, what is the latest update you're hearing from that and what is the potential impact on your business if the proposed changes are actually implemented as proposed. Thank you. Thanks, Chris, for the question and thanks for leading into it being proposed because we're not at the finish line yet, but the proposal that has been tabled that still of course is in the period of commentaries.

Carl Colizza: There's still a milk producer vote that needs to happen in the fall, needs to go through legislation, and at the earliest implementation would be sometime in June or July of next year. So if we put the timeline aside for a second, we certainly applaud and we're encouraged by what the current draft proposal is suggesting. It is addressing make allowances which as you may know have not changed over the last 16 years, so certainly this would look favorable to us and it would help offset all the inflationary pressures that we've absorbed over that same time frame.

Carl Colizza: But again, it's in draft form, we're a long way from this having any type of impact on our results, and if things were to stick to where they are today, yes, it would be favorable for us.

Chris Li: Thanks very much.

Audra: And that concludes our Q&A session.

Nicholas Estrela: I will now turn the conference back over to Nick for closing remarks. Thank you, Audra. Please note that we will release our second quarter fiscal 2025 results on November 7th, 2024. We thank you for taking part in a call and webcast. Have a great day.

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