Q4 2025 Saputo Inc Earnings Call
Operator: Hello and welcome to the Saputo Inc. 4th quarter 2025 financial results call. All lines have been placed on mute to prevent any background noise.
Hello, and welcome to the <unk>, Inc. Fourth quarter 2025 financial results call.
All lines have been placed on mute to prevent any background noise.
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 star 1 on your telephone keypad. If you would like to withdraw your question, again press star 1.
After the Speakers' remarks, there will be a question and answer session.
If you'd like to ask a question. During this time simply press star one on your telephone keypad.
If he would like to withdraw your question again press Star One now I'll turn the conference over to Nick Estrela. Please go ahead.
Nicholas Estrela: Well now I'll turn the conference over to Nick Estrela. Please go ahead. Thank you, Jayle.
Nick Estrela: Thank you Jill good morning, and welcome to our fourth quarter and full year fiscal 2025 earnings call.
Carl Colizza: Good morning and welcome to our fourth quarter and full year fiscal 2025 earnings call.
Operator: Our speakers today will be 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 fourth quarter investor presentation. 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 uncertain We refer to our cautionary statements regarding forward-looking information in our annual report, press releases, and filing. Please treat any forward-looking information with caution, as our actual results could differ materially.
Carl <unk>: Our speakers today will be Carl <unk>, President and Chief Executive Officer, and Mexican telling Yang Chief Financial Officer and Secretary.
Nick Estrela: 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 fourth quarter investor presentation.
Nick Estrela: Please also note that some of the statements provided during this call are forward looking such.
Nick Estrela: Such statements are based on assumptions that are subject to risks and uncertainties.
Nick Estrela: We refer to our cautionary statements regarding forward looking information in our annual report press releases and filings.
Nick Estrela: 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 securities legislation I will now hand, it over to Carl.
Operator: We do not accept any obligation to update this information except as required under securities legislation.
Carl Colizza: I'll now hand it over to Carl. Thank you, Nick, and good morning, everyone. As I approach the end of my first year into my role as president and CEO, I am incredibly proud of what the team has accomplished in fiscal year 25. Over this time, we have reinforced our executive leadership team across the globe, enhanced operational efficiency, refined our capital allocation plan, and executed on a clear strategy to advance our goal of delivering sustainable value to our shareholders. Despite a volatile macroeconomic landscape, we stayed focused and delivered consistent operating and financial performance. The strength of our balance sheet allowed us to accelerate share buybacks with approximately $150 million in shares repurchased under our NCIB program in FY25.
Carl: Thank you Nick and good morning, everyone.
Carl: As I approached the end of my first year into my role as President and CEO I am incredibly proud of what the team has accomplished in fiscal year 'twenty five.
Carl: Over this time, we have reinforced our executive leadership team across the globe enhanced operational efficiency.
Carl: We refined our capital allocation plan and executed on a clear strategy to advance our goal of delivering sustainable value to our shareholders.
Carl: Despite a volatile macroeconomic landscape, we stayed focused and delivered consistent operating and financial performance.
Carl: The strength of our balance sheet allowed us to accelerate share buybacks with approximately $150 million in shares repurchased under our <unk> program in fiscal year 'twenty five.
Carl Colizza: Over the past four years, we have solidified our asset base. anchored in strengthening our foundation and optimizing our diversified portfolio. In fiscal year 25, we continue that momentum through strong contributions from capital investments, progress across strategic initiatives, and disciplined cost control. and there is more we can do. Despite the efforts we have made in stabilizing our performance and improving how we operate the business, we know there are more opportunities ahead. We are confident that these efforts are paving the way for a more sustainable and competitive future.
Carl: Over the past four years, we have solidified our asset base.
Carl: Anchored in strengthening our foundation and optimizing our diversified portfolio.
Carl: Okay.
Carl: Fiscal year 'twenty five we continued that momentum with strong contributions from capital investments progress across strategic initiatives and disciplined cost control.
Carl: And there is more we can do.
Carl: Despite the efforts we have made in stabilizing our performance and improving how we operate the business. We know there are more opportunities ahead.
Carl: We are confident that these efforts are paving the way for a more sustainable and competitive future.
Carl Colizza: In the fourth quarter, we reported an adjusted EBITDA of $365 million on a revenue of nearly $4.8 billion. are Canada, USA, and Europe sectors all generated year-over-year growth. We saw encouraging improvement in Australia.
Carl: In the fourth quarter, we reported adjusted EBITDA of $365 million on revenue of nearly $4 8 billion.
Carl: Our Canada, USA and Europe sectors, all generated year over year growth.
Carl: We saw encouraging improvement in Australia.
Carl Colizza: However, overall performance in the international sector was tempered by the negative impact in Argentina from currency devaluation and hyperinflation. amid persistent commodity volatility. We maintain stable margins as a result of our disciplined cost containment efforts and contributions from our strategic initiatives. Notably, we were happy with the performance of our focus brands in a highly competitive environment. This underscores the enduring strength and relevance of our brands in consumers' everyday lives. Building on that momentum, we're advancing on our key commercial strategies, strengthening our Customer Value Proposition, Enhancing Returns Through Focused Revenue Growth Management, and Accelerating Market Entries in New Priority Regions to Drive Long-Term Growth.
Carl: However, overall performance in the international sector was tempered by the negative impact in Argentina from currency devaluation and hyperinflation.
Carl: Amid persistent commodity volatility.
Carl: We maintained stable margins as a result of our disciplined cost containment efforts and contributions from our strategic initiatives.
Carl: Notably we were happy with the performance of our focus brands in a highly competitive environment. This underscores the enduring strength and relevance of our brands and consumers' everyday lives.
Carl: Building on that momentum, we're advancing on our key commercial strategies strengthening our customer.
Carl: Customer value proposition enhancing returns through focused revenue growth management and accelerating market entries in new priority regions to drive long term growth.
Carl Colizza: As a natural next step, our accelerated commitment to putting the consumer first will be further strengthened by our strategic adoption of digital technology. From automating routine workflows to leveraging data-driven insights for faster, smarter decisions, these initiatives are expected to not only reduce costs, but also position us ahead of the curve in delivering value to our customers and shareholders. These dynamics will support top-line performance. and we remain focused on expanding adjusted EBITDA margins through discipline, operational experience. A notable example of this discipline is our ongoing SG&A optimization program which included a restructuring of several administrative functions in the fourth quarter.
Carl: As a natural next step are accelerated commitment to putting the consumer first will be further strengthened by our.
Carl: Our strategic adoption of digital technologies.
Carl: From automating routine workflows to leveraging data driven insights for faster smarter decisions. These initiatives are expected to not only reduce cost, but also positioning us ahead of the curve and delivering value to our customers and shareholders.
Carl: These dynamics will support topline performance.
Carl: And we remain focused on expanding adjusted EBITDA margins through disciplined operational execution.
Carl: A notable example of this discipline is our ongoing SG&A optimization program, which included a restructuring.
Carl: Several administrative functions in the fourth quarter.
Carl Colizza: Our now leaner and more agile organizational structure better aligns our resources with the needs of the business following our network optimization. This is already positively impacting our first quarter performance and will help us deliver our fiscal 2026 outlook. We continue to generate healthy cash flow from operations. Since the beginning of fiscal year 26, we have continued to opportunistically repurchase shares. Taking Advantage of Attractive Market Conditions. Our capital investment program is also delivering strong and sustainable productivity improvements. For example, in the USA sector, we achieved approximately $27 million in cost savings and benefits during the quarter and reached our $100 million milestone for the year.
Carl: Are now a leaner and more agile organizational structure better aligns our resources with the needs of the business following our network optimization initiatives.
Carl: This is already positively impacting our first quarter performance and will help us deliver our fiscal 2026 outlook.
Carl: We continue to generate healthy cash flow from operations.
Carl: Since the beginning of fiscal year 2006, we have continued to opportunistically repurchase shares.
Carl: Taking advantage of attractive market conditions.
Carl: Our capital investment program is also delivering strong and sustainable productivity improvements.
Carl: For example in the USA sector, we achieved approximately $27 million in cost savings and benefits during the quarter.
Carl: And reached our $100 million milestone for the year.
Carl Colizza: This is a direct result of the infrastructure investments and systems enhancement we have made to optimize our cost base and support long-term competitiveness.
Carl: This is a direct result of the infrastructure investments and systems enhancements, we have made to optimize our cost base and support long term competitiveness.
Carl Colizza: That said, we did observe some softening in the consumer demand, particularly in the food service channel, which was more pronounced during the fourth quarter. In response, we are supporting our customers through value-added initiatives focused on operational efficiency, menu optimization, and profitability. Nevertheless, the Food Service Market Channel has recently shown signs of recovery, and our volumes so far in the first quarter have been solid. We are also investing meaningfully in our brands to deliver compelling consumer value at a time when it is critical. As a result, our innovation pipeline remains robust with a sharpened focus on value conscious consumers across all market segments.
Carl: That said, we did observe some softening into consumer demand, particularly in the foodservice channel, which was more pronounced during the fourth quarter.
Carl: In response, we are supporting our customers through value added initiatives focused on operational efficiency menu optimization and profitability.
Carl: Nevertheless, the foodservice market channel has recently shown signs of recovery and our volumes so far in the first quarter have been solid.
Carl: We're also investing meaningfully in our brands to deliver compelling consumer value at a time when it is critical to consumers.
Carl: As a result, our innovation pipeline remains robust with a sharpened focus.
Carl: On value conscious consumers across all market segments.
Carl Colizza: Even against the challenging macroeconomic backdrop, it is evident that demand for protein-rich products remains strong. We view this as a positive, durable trend that reinforces the relevance of our product offerings, and we are well positioned to capitalize on this demand. On the matter of trade-related tariffs, we continue to anticipate limited and manageable direct impact. Our diversified supply chain. and cross-border operations which span food service and retail continues to support our resilience and ability to pivot as needed. We continue to monitor external developments closely while leveraging our strong balance sheet and healthy cash flows to ensure financial stability and agility.
Carl: Even against the challenging macroeconomic backdrop. It is evident that demand for protein rich products remains strong.
Carl: We view this as a positive durable trend that reinforces the relevance of our product offerings and we are well positioned to capitalize on this demand.
Carl: On the matter of trade related tariffs, we continue to anticipate limited and manageable direct impacts.
Carl: Our diversified supply chain.
Carl: In cross border operations, which span foodservice and retail continues to support our resilience and ability to pivot as needed.
Carl: We continue to monitor external developments closely while leveraging our strong balance sheet and healthy cash flows to ensure financial stability and agility.
Carl Colizza: We are encouraged by our progress and we remain committed to sustained growth in FY26 and beyond.
Carl: We are encouraged by our progress and we remain committed to sustained growth in fiscal year 'twenty six and beyond.
Maxime Therrien: I will now turn the call over to Max for the financial review before providing concluding remarks. Thank you, Carl, and good morning, everyone.
Max: I will now turn the call over to Max for the financial review before providing concluding remarks.
Max: Thank you Carl and good morning, everyone here are the financial highlights of the fourth quarter.
Maxime Therrien: Here are the financial highlights of the fourth quarter. Consolidated revenues were $4.8 billion, a 5% increase when compared to last year. Revenue increased mainly due to higher domestic selling prices and higher international cheese and dairy ingredient market prices as well as higher sales volume in Canada.
Max: Consolidated revenues were $4 8, billion% to 5% increase when compared to last year.
Max: Revenue increased mainly due to higher domestic selling prices and higher international cheese, and dairy ingredient market prices as well as higher sales volume in Canada.
Maxime Therrien: And just the dividend amounted to $376 million. similar to Q4 of last year.
Max: Adjusted EBITDA amounted to $376 million.
Max: Similar to Q4 of last year.
Maxime Therrien: Net earnings for the fourth quarter total $74 million and on an adjusted basis net earnings total $128 million, down 28 as compared to the same quarter last year. The decrease is primarily attributable to a higher depreciation and amortization expense stemming from our capital expenditure program as well as increased financial charges related to utilization of the Argentina credit line.
Max: Net earnings for the fourth quarter totaled $74 million and on an adjusted basis net earnings totaled $128 million down 28, as compared to the same quarter last year.
Max: The decrease is primarily attributable to higher depreciation and amortization expense stemming from our capital expenditure program.
Max: As well as increased financial charges related to utilization of the Argentina credit lines.
Maxime Therrien: I'll now take you... Key Highlights, Bisector.
Max: I'll now take you through.
Carl: Key highlights by sector.
Maxime Therrien: Starting with Canada. Revenue for the fourth quarter reached nearly $1.3 billion, an increase of 6% when compared to last year. Adjusted EBITDA for the fourth quarter total $157 million, up 14%.
Carl: Starting with Canada.
Carl: Revenue for the fourth quarter reached nearly $1 3 billion, an increase of 6% when compared to last year.
Carl: Adjusted EBITDA for the fourth quarter totaled $157 million up 14%.
Maxime Therrien: Our improved performance reflected the benefit derived from operational efficiencies. including Continuous Improvement Program. Supply Chain Optimization and Automation Initiatives. Improved performance also reflected a favorable product mix and a higher sales volume. and the positive impact of lower general and administrative costs.
Carl: Our improved performance reflected the benefit derived from operational efficiencies, including.
Carl: Including continuous improvement program <unk>.
Carl: Supply chain optimization and automation initiatives.
Carl: Improved performance also reflected a favorable product mix and a higher sales volume.
Carl: And the positive impact of lower general and administrative costs.
Maxime Therrien: In our U.S. sector, revenue total $2.1 billion and we're 11% higher versus last year. Revenue increased mainly due to the combined effect of the higher average cheese block, butter and dairy ingredient market prices. However, volume was slightly lower, quarter over quarter.
Carl: And our U S sector revenue totaled $2 $1 billion.
Carl: 11% higher versus last year.
Carl: Revenue increased mainly due to the combined effect of the higher average cheese block butter and dairy ingredient market prices.
Carl: However, volume was slightly lower quarter over quarter.
Maxime Therrien: from Softening Demand, mainly in the food service market segment. Adjusted EBITDA was $148 million, which was 7% higher when compared to last year. Our results included approximately $27 million in benefits derived from capital investment in our cheese network. Cost reduction and lower SG&A. Our results also include a $20 million unfavorable impact from U.S. market factor mainly due to the negative milk-cheese spread. The negative spread was partially mitigated. to Positivity from Dairy Food Product Pricing Protocol on Butter Market Fluctuation. Duplicate costs incurred to implement previously announced network optimization initiative or approximately $10 million and continue to trend down in the first quarter of the current year.
Carl: From softening demand mainly in the foodservice market segment.
Carl: Adjusted EBITDA was $148 million, which was 7% higher when compared to last year.
Carl: Our results included approximately $27 million in benefit derived from capital investment in our cheese network.
Carl: Cost reduction and lower SG&A.
Carl: Our results also include a $20 million unfavorable impact from U S market factor, mainly due to the negative milk cheese spread.
Carl: The negative spreads was partially mitigated.
Carl: Two positivity from dairy food product pricing protocol on butter market fluctuations.
Carl: Duplicate costs incurred.
Carl: Incurred to implement previously announced network optimization initiative or approximately $10 million.
Carl: And continue to trend down in the first quarter of the current year.
Maxime Therrien: On a full year basis, the USA sector performed well with an adjusted 18% higher versus last year. despite the negative impact from a persistent negative milk cheese spread. a testament to the progress we're making around operational and commercial execution.
Carl: On a full year basis.
Carl: Hey sector performed well with an adjusted EBITDA, 18% higher versus last year.
Carl: Despite the negative impact from a persistent negative milk cheese bread.
Carl: A testament to the progress we're making around operational.
Carl: And commercial execution.
Maxime Therrien: In the international sector, revenue for the fourth quarter were $1 billion, down 10% versus last year. Revenues included at $225 million non-cash. negative impact when compared to last year due to the application of hyperinflation accounting under IFRS to the revenue of the Argentina division. Adjusted Ibn Dha Total $47 million, down $41 million on a year-over-year basis. And this year-over-year decline in adjusted EBITDA was mostly driven by our Argentina division which has resulted impacted by higher production costs due to the effect of inflation and the peso devaluation. Reduced milk availability in Argentina further contributed to higher milk costs.
Carl: In the international sector revenue for the fourth quarter were $1 billion down 10% versus last year.
Carl: Revenues included a 225 million noncash.
Carl: The negative impact when compared to last year due to the application of hyperinflation accounting under Ifr S to their revenue of the Argentina Division.
Carl: Adjusted EBITDA.
Carl: <unk> totaled $47 million down $41 million on a year over year basis.
Carl: And this year over year decline in adjusted EBITDA was mostly driven by our our Argentina Division, which is result impacted by higher production cost due to the effects of inflation and the peso devaluation.
Carl: <unk> milk avail, it'd be availability in Argentina further contributed to higher mill cost.
Maxime Therrien: The less favorable effect of the currency fluctuation on export sales denominated in U.S. dollars. and a non-cash negative impact of $9 million due to the application of hyperinflation accounting to the Argentina results when compared to last year.
Carl: The less favorable effect of the currency fluctuation on export sales denominated in U S dollar.
Carl: And the noncash negative impact of $9 million due to the application of hyperinflation accounting to the Argentina results when compared to last year.
Maxime Therrien: In the Europe sector, revenue were $335 million while adjusted it was $24 million. Adjusted EBITDA margin recovery reflected the positive impact from a higher sales volume in the retail market segment. favorable, adjusted, if at the margin, comparison. was due to the selling off. high inventory costs last year, which had put down pressure on our adjusted EBITDA.
Carl: In the Europe sector.
Carl: Revenue were $335 million, while adjusted EBITDA was $24 million.
Carl: Adjusted EBITDA margin recovery reflected the positive impact from a higher sales volume in the retail market segment.
Carl: The favorable adjusted EBITDA margin comparison.
Carl: It was due to the selling off.
Carl: High inventory costs last year, which had put down pressure on adjusted EBITDA.
Carl: Yeah.
Maxime Therrien: Net cash generated from operating activities for the fourth quarter amounted to $362 million, while capex for the quarter totaled $113 million, in line with our plan.
Carl: Net cash generated from operating activities for the fourth quarter amounted to $362 million, while capex for the quarter total of $113 million in line with our plans.
Maxime Therrien: A healthy balance sheet. And a strong cash flow generation provides us with a foundation for financial stability and flexibility. We have been able to deliver a consistent cash generation as well as reduce our net leverage ratio, positioning ourself to better navigate this uncertain environment. As of March 31, 2025, our net debt-to-adjusted-dividend ratio stood at 2.1 times, reflecting our healthy financial position.
Carl: Our healthy balance sheet balance sheet.
Carl: And the strong cash flow generation provides us with a foundation for financial stability and flexibility.
Carl: We have been able to deliver a consistent cash generation as well as reduced our net leverage ratio positioning ourselves to better navigate this uncertain environment.
Carl: As of March 31, 2025, our net debt to adjusted EBITDA ratio stood at two one times.
Carl: Selecting our healthy financial position.
Maxime Therrien: On capital allocation, as Carl mentioned, our focus remains. Unknown share repurchase. We repurchased approximately 4.8 million share during the quarter for a total purchase price for a total of approximately $120 million. Subsequent to the quarter end, we repurchased an additional 2.5 million share for approximately $63 million.
Cal: On capital allocation as Cal mentioned.
Carl: Our focus remains.
Carl: On share repurchases.
Carl: We repurchased approximately $4 8 million.
Carl: Sure during the quarter for a total purchase price for a total of approximately $120 million.
Carl: Subsequent to the quarter end, we repurchased an additional $2 5 million share for approximately $63 million.
Carl: Okay.
Maxime Therrien: Looking ahead, we are in a good financial position to capture opportunities and continue to operate in a dynamic environment.
Carl: Looking ahead, we are in a good financial position to capture opportunities and continue to operate in a dynamic environment.
Carl Colizza: This concludes my financial review, and with that, I'll turn the call back to Carl. Thank you, Max. In Canada, performance exceeded expectations with a year-over-year improvement in adjusted EBITDA and a nearly 100 basis point increase in margin. From a commercial standpoint, we saw strong momentum. One of Canada's largest pizza chains launched a new stuffed crust product featuring our mozzarella cheese sticks. In the QSR channel, a major customer introduced a protein coffee beverage with our Dairyland Protein drink. This builds on the retail success of our Dairyland Protein line. In the U.S., our results improved year over year, driven by benefits realized from strategic capital investments in our cheese manufacturing network, targeted cost reduction initiatives, and lower SG&E expenses.
Speaker Change: This concludes my financial review and with that I'll turn the call back to call.
Max: Thank you Max.
Speaker Change: In Canada performance exceeded expectations with a year over year improvement in adjusted EBITDA and a nearly 100 basis point increase in margins.
Carl: From a commercial standpoint, we saw strong momentum one of Canada's largest pizza chains launched a new stuffed crust product featuring our mozzarella cheese sticks.
Carl: In the <unk> channel a major customer introduced a protein coffee beverage with our dairyland protein drink. This builds on the retail success of our dairyland protein line.
Carl: In the U S. Our results improved year over year, driven by benefits realized through strategic capital investments in our cheese manufacturing network.
Carl: <unk> cost reduction initiatives and lower SG&A expenses.
Carl Colizza: Looking ahead, our strategic focus in the U.S. is building on a best-in-class operation. We have invested significant capital over the past four years to expand production capabilities. These investments are now enabling us to efficiently scale new products nationally and unlock new growth opportunities across customers and channels. We see meaningful opportunity to expand margins over time and our multi-year plan focused on operational optimization, launching winning innovations, and distribution expansion is right on track.
Carl: Looking ahead, our strategic focus in the U S is building on a best in class operation.
Carl: We have invested significant capital over the past four years to expand production capabilities. These investments are now enabling us to efficiently scale, new products nationally and then unlock new growth opportunities across customers and channels.
Carl: We see meaningful opportunity to expand margins over time, and our multiyear plan focused on operational optimization launching winning innovation and distribution expansion is right on track.
Carl Colizza: I'm pleased to share that our Franklin cut and wrap facility is nearing the completion of phase one of the ramp up, a significant milestone that reflects the strong collaboration across our team. As we continue to progress with the ramp-up throughout the year, we expect to see a meaningful reduction in the duplicate operating costs associated with our transition. This progress will also position us to further consolidate production and drive greater efficiency across our network, particularly in preparation for the planned closure of our Green Bay facility at the end of the calendar year.
Carl: I am pleased to share that our Franklin cut Rag facility is nearing the completion of phase one of the ramp up a significant milestone that reflects the strong collaboration across our teams.
Carl: As we continue to progress with the ramp up throughout the year, we expect to see a meaningful reduction in the duplicate operating costs associated with our transition.
Carl: This progress will also position us to further consolidate production and drive greater efficiency across our network, particularly in preparation for the planned closure of our Green Bay facility at the end of the calendar year.
Carl Colizza: Additionally... We made progress optimizing our plant network. and are now beginning the next phase of Logistics and Distribution Infrastructure Improvement. These early-stage efforts are essential to driving long-term efficiency. In support of this work, we recently completed a new 300,000 square foot distribution center in Caledonia, Wisconsin, complementing our nearby Franklin facility. This new site will enhance our service capabilities and simplifies our supply chain. Momentum behind our U.S.-focused sales initiatives is also building, and we are optimistic about what lies ahead. Example of some of these initiatives include securing new volume for a national fast casual chains cheese program supporting their Monterey Jack We were also selected by a major QSR brand for a product relaunch with our chief supply, a strong endorsement of our quality and reliability.
Carl: Additionally.
Carl: We made progress optimizing our network.
Carl: And are now beginning the next phase of logistics and distribution infrastructure improvements.
Carl: These early stage efforts are essential to driving long term efficiencies.
Carl: In support of this work, we recently completed a new 300000 square foot distribution Center in Caledonia, Wisconsin, complementing our nearby Franklin facility.
Carl: This new site, we will enhance our service capabilities and simplifies our supply chain.
Carl: Momentum behind our U S focused sales initiatives is also building and we are optimistic about what lies ahead.
Carl: Example of some of these initiatives include securing new volume foreign National fast casual chain cheese program supporting their Monterey Jack needs.
Carl: We were also selected by a major <unk> brand for a product relaunch with our chief supply a strong endorsement of our quality and reliability.
Carl Colizza: On the retail side, we took a key strategic step with the restructuring of our sales team. We've established a dedicated growth channels team focused on driving our branded business and aggressively pursuing untapped white space in retail. This structure is better aligned with evolving consumer demand and will support accelerated brand presence in high potential areas.
Carl: On the retail side, we took a key strategic step with the restructuring of our sales team. We've established a dedicated growth channels team focused on driving our branded business and aggressively pursuing untapped white space in retail.
Carl: This structure is better aligned with evolving consumer demand and will support accelerated brand presence in high potential areas.
Carl Colizza: In our international sector, we are encouraged by a strong rebound in domestic volumes in Argentina. This is despite the devaluation of the peso, not keeping pace with inflation and leading to higher production costs, particularly for milk. Volumes grew compared to prior year, driven by increased consumer demand for soft-pressed and processed cheese. In Australia, we benefited from a more favorable balance between milk costs and an international cheese and dairy ingredient market price. Domestic volumes in Australia remain stable. However, export volumes saw a meaningful increase, particularly in cheese and butter, as we capitalize on a favorable export market environment.
Carl: In our international sector, we are encouraged by a strong rebound in domestic volumes in Argentina.
Carl: This is despite the devaluation of the peso not keeping pace with inflation and leading to higher production costs, particularly for milk.
Carl: Volumes grew compared to prior year, driven by increased consumer demand for soft pressed and processed cheese.
Carl: In Australia, we benefited from a more favorable balance between low cost and even international cheese and dairy ingredients market prices.
Carl: Domestic volumes in Australia remains stable, however, export volume saw a meaningful increase particularly in cheese and butter as we capitalize on a favorable export market environment.
Carl Colizza: In the UK, the environment remains challenging, but we are managing it with discipline. Volume was higher year over year and margins continued to recover.
Carl: In the U K the environment remains challenging, but we are managing it with discipline.
Carl: Volume was higher year over year and margins continued to recover.
Carl Colizza: As part of our ongoing cost optimization initiatives, we will no longer manufacture functional ingredients. This decision is expected to simplify our production processes, streamline our go-to-market strategy, and deliver meaningful cost savings.
Carl: As part of our ongoing cost optimization initiatives, we will no longer manufacture functional ingredients.
Carl: This decision is expected to simplify our production processes streamline our go to market strategy and deliver meaningful cost savings.
Carl Colizza: Turning to our Outlook. This past year has presented numerous macroeconomic headwinds. which we have proactively managed, namely in Argentina. As we looked at fiscal 2026, we remain confident in our ability to deliver growth despite persistent headwinds. We are well positioned to drive sustainable value creation. Our key drivers include capitalizing on the benefits of our capital projects, the strength in our Commercial Strategy and Growing Demand for Protein-Rich Products. and our sharpened focus on cost reduction and competitive edge. From a financial perspective, we will maintain our strong balance sheet and prudent approach to capital allocation, striking the right balance between capital expenditures, dividends, debt reduction, and share repurchase.
Carl: Turning to our outlook.
Carl: This past year has presented numerous macroeconomic headwinds.
Carl: Which have which we have proactively manage namely in Argentina.
Carl: As we look to fiscal 2026, we remain confident in our ability to deliver growth despite persistent headwinds.
Carl: We are well positioned to drive sustainable value creation.
Carl: Our key drivers include capitalizing on the benefits of our capital projects.
Carl: <unk>.
Carl: In our commercial strategy and growing demand for protein rich products.
Carl: And our sharpened focus on cost reduction and competitive edge.
Carl: From a financial perspective, we will maintain our strong balance sheet and prudent approach to capital allocation striking the right balance between capital expenditures dividends debt reduction and share repurchases.
Carl Colizza: Given the strength of our cash flow generation and balance sheet, we expect to continue to actively buy back shares through our NCID program.
Carl: Given the strength of our cash flow generation and balance sheet, we expect to continue to actively buyback shares through our <unk> program.
Carl Colizza: In closing, I have great conviction in our strategic direction and our ability to deliver sustained value for our shareholders.
Carl: In closing I.
Carl: I have great conviction in our strategic direction, and our ability to deliver sustained value for our shareholders.
Operator: That concludes our formal remarks. I will now turn the call over for questions. Thank you. If you have a question, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, simply press star 1 again. One moment for your first question.
Carl: That concludes our formal remarks, I will now turn the call over for questions.
Carl: Thank you if you have a question. Please press star one on your telephone keypad.
Carl: If you wish to remove yourself from the queue simply press star one again.
Carl: One moment for your first question.
Irene Nattel: Your first question comes from the line of Irene Nattel of RBC Capital Markets. Your line is open. Thanks, and good morning, everyone.
Speaker Change: Your first question comes from the line of Irene <unk> of RBC capital markets. Your line is open.
Irene: Thanks, and good morning, everyone.
Carl Colizza: Carl, listening to you this morning and reading the press release last night, I was really struck by the Outlook section, where the tone seems more confident than I've heard it in several years. Can you comment on that? And can you talk about where you're feeling the most confident, where you see the biggest upside and where you see kind of some potholes that you're going to need to navigate?
Speaker Change: Carl Thank you this morning, and reading the press release last night I was really struck by the outlook section, where the tone seems more confidence than I've heard it in several years.
Speaker Change: Can you comment on that and can you talk about where youre feeling the most confident where are you seeing the biggest upside and where you see kind of some potholes that youre going to need to navigate.
Carl Colizza: Good morning, Irene. Thanks for the question. Yes. certainly intentional and natural. The business is performing well. It's been, I'll say, a long couple of years with regards to the cycle of investments, the efforts that the teams across the globe have put through it, and we all know the backdrop over those couple of years. So all this to say that we do feel strongly about the capabilities that we now have offered ourselves, the position that we've put ourselves in with regards to supply, the diversity of the portfolio, and this is, quite frankly, across every one of our divisions.
Speaker Change: Good morning, everyone and thanks for the question.
Speaker Change: Yes.
Speaker Change: Certainly intentional, but and natural the business is performing well.
Speaker Change: It's been I'll say, a long couple of years with regards to the cycle of investments the efforts that the teams across the globe put through it.
Speaker Change: And we all know the backdrop over those couple of years. So all of this to say that we do feel strongly about.
Speaker Change: The capabilities that we now have offered ourselves the position that we've put ourselves in with regards to supply.
Speaker Change: The diversity of the portfolio and this is quite frankly across every one of our divisions. So we feel that we're in a very good place to be able to capture the ongoing demand for dairy and how Gary is perceived by the consumer that said some of the areas.
Carl Colizza: So we feel that we're in a very good place to be able to capture the ongoing demand for dairy and how dairy is perceived by the consumer. That said, some of the areas where we feel that we'll probably have the greatest upside absolutely is here in North America, specifically in the U.S. It was the largest of our capital investment program, the longest to really come to fruition and to deliver, but we're here now. The team is stable, the team is very motivated, and I know that we'll be able to benefit from the demand in the marketplace, and we're in a good place.
Speaker Change: We are we feel that we will probably.
Speaker Change: Have the greatest upside absolutely is here in North America, specifically in the U S.
Speaker Change: It was the largest of our invest our capital investment program.
Speaker Change: The longest to really come to fruition and to deliver but we're here now the team is stable the team is very motivated.
Speaker Change: And I know that we'll be able to to the benefit from the.
Speaker Change: The demand in the marketplace and we're in a good place so.
Carl Colizza: So there's going to be growth across every one of our sectors, that is our plan, and I can share that same, my team, excuse me, shares the same enthusiasm as you hear from me right now.
Speaker Change: There's going to be growth across every one of our sectors that is our plan.
Speaker Change: And I can I can share that same my team excuse me shares the same enthusiasm as you hear from me right now.
Irene Nattel: That's great, thank you.
Speaker Change: That's great. Thank you and then just asking specifically about Europe obviously.
Irene Nattel: And then just asking specifically about Europe, obviously, it's possibly been the most disappointing region over the last several years. How would you describe where it is today? And what is reasonable for us to expect on a go forward basis in terms of both revenue, but particularly, you know, somehow reconstituting the profitability of the division? The European sector and our team in the UK specifically have navigated through some pretty important inflationary pressures over the last several years and the reality is that a lot of those input costs we were not able to recover from the market.
Speaker Change: Possibly the most disappointing region over the last several years.
Speaker Change: Where how would you describe where it is today and what is reasonable for us to expect on a go forward basis in terms of both revenue, but particularly somehow reconstituting the profitability of the division.
Speaker Change: Yes, they are.
Speaker Change: Our European.
Speaker Change: Sector and our team in the UK, specifically have navigated through some pretty important inflationary pressures over the last several years and the reality is that a lot of those input costs, we were not able to recover from the marketplace. So it's put the pressure on margins, but despite that the team has continued to plough ahead with.
Carl Colizza: So it's put the pressure on margins. But despite that, the team has continued to plow ahead with the various network optimization initiatives. They're still in the middle of a couple of them that will continue to contribute positively to the business's bottom line over the current and future fiscal years. What I would say more specifically, though, is our brand health has been very good with Cathedral City as well as Clover in our bottles, rolls, and spreads business, and we do feel we're in a good place with both the balance around branded offering into the marketplace as well as what we do provide in the private label sector.
Speaker Change: With the various <unk>.
Speaker Change: Network optimization initiatives.
Speaker Change: There is still in the middle of a couple of them that will continue to contribute positively to the business is bottom line or the current and future fiscal years, but what I would say more specifically those are brand health has been very good with cathedral city as well as clover in our <unk> and spreads business.
Speaker Change: And we do feel we're in a good place with both the balance around branded offering into the marketplace as well as what we do provide in the private label sector Theres, a greater degree of stability as well in the overall pricing specifically associated to a more stabilized.
Carl Colizza: There's a greater degree of stability as well in the overall pricing, specifically associated to a more stabilized inflation, and I think one of the things that we need to keep in mind is Historical EBITDA margins were 18 plus percent. What would be more normal for a European sector at this point is going to be more in the low teens to mid teens as an ongoing for the business.
Speaker Change: Inflation and I think one of the things that we need to keep in mind is.
Speaker Change: Historical EBITDA margins were.
Speaker Change: 18%.
Speaker Change: What would be more normal for a.
Speaker Change: European sector at this point is going to be more in the low teens to mid teens.
Speaker Change: As an ongoing for the business.
Irene Nattel: That's really helpful.
Speaker Change: All truly helpful. Thank you.
Irene Nattel: Thank you.
Mark Petrie: Your next question comes from the line of Mark Petrie of CIBC. Your line is open. Yeah, thanks. And good morning.
Speaker Change: Your next question comes from the line of Mark Petrie of CIBC. Your line is open.
Mark Petrie: Yes, Thanks, and good morning, I wanted to follow up on a few of our call our comments and in your prepared remarks, and I guess specifically.
Carl Colizza: I wanted to follow up on a few of the comments in the in your prepared remarks, and I guess specifically, the comment about accelerating investment in priority regions, and I'm hoping you could just expand on that a little bit. Thank you, Mark, for the question. I would tell you a couple of things. One, certainly with the, call it the tariff wars that we have, we've had to accelerate in many ways finding incremental markets to move some of our products to, especially from our US operations who have had a number of different, I'll call them hurdles, in selling to their traditional channels.
Speaker Change: The comment about.
Speaker Change: Accelerating the investment in priority regions.
Speaker Change: And you could just expand on that a little bit.
Speaker Change: Sure.
Speaker Change: Thank you Mark for the question I would tell you a couple of things one certainly with the.
Speaker Change: How is the tariff force that we have.
Speaker Change: We've had to accelerate in many ways.
Speaker Change: Finding incremental markets to move some of our products too, especially from our U S operations, who have had a number of different I will call them hurdles in selling to their traditional channels.
Carl Colizza: Whenever there's an obstacle, it always presents an opportunity, and that has actually allowed us to explore more aggressively and more urgently new markets. And I think we've been successful at bringing into these new territories. And by territories, I'm talking about expanding, with an example, Southeast Asia. We would have had maybe a more limited set of customers beyond what we traditionally sold. Today, we're taking full advantage of that entire region. Furthermore, we're expanding some of our offerings into the Japanese market and also looking to other areas in the Middle East as well. It's a combination of two things.
Speaker Change: Whenever there is there is an optical it always presents an opportunity and that has actually allowed us to explore more aggressively and more urgently new markets and I think we've been successful at bringing into these new territories and by territories.
Speaker Change: I'm talking about expanding within example, southeast Asia.
Speaker Change: We would have maybe a more limited.
Speaker Change: <unk>.
Speaker Change: The set of customers.
Speaker Change: <unk>.
Speaker Change: We traditionally sold today, we're taking full advantage of that entire region.
Speaker Change: Furthermore, we're expanding some of our offerings into the Japanese market and also looking to other areas in the middle East as well so.
Speaker Change: It's a combination of two things one where is the daily demand coming from in various parts of the world and some of that is shifting or accelerating.
Carl Colizza: One, where is the dairy demand coming from in various parts of the world? And some of that is shifting or accelerating with the territories I just described. Others is coming from the fact that The Supply Agreements and Trade Agreements from various countries we operate in. and the relevance and value that come from that have been shifting, forcing us to find those new markets.
Speaker Change: With the territories that just described others is coming from the fact that the.
Speaker Change: The supply agreements.
Speaker Change: And trade agreements from various countries we operate in.
Speaker Change: And the relevance and value that come from that had been shifting forcing us to find those new markets as well.
Carl Colizza: And does all of that work have a meaningful impact on your profitability or how you sort of look at that over the next year? New market entries mark two things. For the first part, it's ensuring that we don't erode our current baseline, and that has not happened. We see it through our first quarter today, and for the most part, we're happy with where we've been able to bring our products to and the margins associated to it. It's what it does in the longer term. Establishing yourself as a relevant supplier, credible supplier in new areas takes time.
Speaker Change: And does all of that work have.
Speaker Change: A meaningful impact on your profitability or how you sort of look at that over the next year.
Speaker Change: New market entries.
Speaker Change: Market two things for the first part.
Speaker Change: It's ensuring that we don't erode our current baseline and that has not happened we see it through our first quarter to date and.
Speaker Change: For the most part we're happy with where we've been able to bring our products to and the margins associated to it. It is what it does it in the longer term, establishing yourself as a relevant supplier credible supplier in new areas. It takes time.
Mark Petrie: We might only be afforded the opportunity to supply one aspect of our portfolio or one SKU. The intent is to continue to develop relationships and build upon them. It's a multi-year process to make meaningful improvements. in these new areas. Yeah, understood. Okay, that's helpful.
Speaker Change: We might only have the we might only be afforded the opportunity to supply one aspect of our portfolio of one skew. The intent is to continue to develop relationships and build upon them. So it's a multiyear process to make meaningful improvements.
Speaker Change: In these new areas.
Speaker Change: Yes understood. Okay. That's helpful. And then Im also hoping you could expand on the work on SG&A up summarization and may be shaped the materiality of that.
Carl Colizza: And then I'm also hoping you could expand on the work on SG&A optimization, and maybe shape the materiality of that with regards to the current cost base and how you look at that playing out in FISCO 2016. So the focus of our efforts was making sure that we... don't take things for granted and specifically the kinds of business processes we operate with. Both those that are driven by the system that we have as well as some of our legacy practices. So we took a fresh look at the way we conduct business on a day-to-day basis and ensured that the limited resources that we do have are focused in the right areas that drive the most value.
Speaker Change: With regards to the current cost base and how you look at that playing out in fiscal 'twenty six.
Speaker Change: So.
Speaker Change: The focus of our efforts.
Speaker Change: Making sure that we.
Speaker Change: Don't take things for granted and specifically the kinds of business processes. We operate with both those that are driven by the system that we have as well as some of our legacy practices. So we took a fresh look at the way we conduct business.
Speaker Change: On the day to day basis, and ensure that the limited resources that we do have our focus in the right areas that drive the most value that led us to reshaping some of the things that we do as well as <unk>.
Carl Colizza: That led us to reshaping some of the things that we do as well as, as I spoke about in my remarks. the, I'll say the, call it the conclusion to accelerate. our need for adopting greater digital technologies and of course AI is part of those technologies and that's going to span a number of areas driven primarily or from a priority standpoint in the supply chain side. There are a number of things that we can do with the adoption of readily available technologies to help with our overall relevance to consumers with data, with fill rates, so on and so forth and all leading to an overall better cost base.
Speaker Change: As I spoke about.
Speaker Change: About in my remarks.
Speaker Change: The I'll say the call at the conclusion to accelerate.
Speaker Change: Our need for adopting greater digital technologies and of course AI as part of those technologies and that is going to span a number of areas driven primarily or.
Speaker Change: From a priority standpoint in the supply chain side, there are a number of things that we can do.
Speaker Change: With the adoption of readily available technologies to help with our overall relevance to consumers with data.
Speaker Change: Fill rates, so on and so forth and all leading to an overall better cost base. So all of this to say that yes, we have in the fourth quarter reshape these business processes. It has led to.
Mark Petrie: So all of this to say that yes we have in the fourth quarter reshaped these business processes. It has led to the reduction in our overall workforce and that of course is a more structural change, a permanent one as we move forward and we'll continue to benefit us both in the cost of that as well as the efficiency that comes with the streamlining. Okay, thanks for all the comments and I'll get back in the queue. All the best.
Speaker Change: The reduction in our overall workforce.
Speaker Change: And that has horses.
Speaker Change: More of a structural change a permanent one as we move forward and we will continue to I'll say.
Speaker Change: Benefit us both in the cost of that as well as the efficiency that comes with the streamlining.
Speaker Change: Okay. Thanks for all the comments and I'll get back in the queue.
Michael Van Aelst: Thanks, Mark. Your next question comes from Michael Van Aelst of TD Securities. Your line is open. Morning. Questions on Argentina. It's been a struggle in the last little while, mostly because of the hyperinflation, but also because of a declining volume. a few milk supply volumes. So the milk supply seems to be improving again. Um, but can you help us understand?
Mark Petrie: Thanks Mark.
Michael: Your next question comes from the line of Michael <unk> of TD Securities. Your line is open.
Michael <unk>: Hi, good morning.
Speaker Change: Question is on Argentina, it's been a struggle.
Speaker Change: Then the last one.
Speaker Change: While mostly because of the hyperinflation, but also because of a declining volumes.
Speaker Change: Milk supply volume so.
Speaker Change: Milk supply seems to be improving again.
Speaker Change: But can you help us understand.
Carl Colizza: The extent to which you could benefit from the relaxation of the currency controls and the slowing of inflation and how much we could see these hyperinflation impacts go away in fiscal 2021. Thanks, Mike, for the questions.
Speaker Change: The extent to which you could benefit from the relaxation of the currency controls and the slowing and inflation and how much.
Speaker Change: We could see these hyper inflation impacts go away in fiscal 'twenty six.
Speaker Change: Yeah. Thanks for the questions I'll, just I'll provide some comments and then I'll also ask Max two to contribute a little bit more in and around the hyperinflation accounting, but you are correct.
Carl Colizza: I'll just provide some comments and then I'll also ask Max to contribute a little bit more in and around the hyperinflation accounting. But you are correct. Milk and milk supply is, has been steadily improving and we've been getting our fair share, if you like, of that recovery and then some. So we're in a good place. for providing volume to our domestic and international customers. So I'll say it's all green lights on that front. We're also seeing, generally speaking, good stability in the overall currency value, which is helping with the overall pricing and our pricing strategies to the various markets.
Speaker Change: And milk supply is has been steadily improving and we've been getting.
Speaker Change: Our fair share if you like of that recovery and then some so we're in a good place.
Speaker Change: For providing volume to our domestic and international.
Speaker Change: Our customers so all I'll say.
Speaker Change: All green lights on that front.
Speaker Change: We're also seeing generally speaking.
Speaker Change: A good stability in the overall.
Speaker Change: Currency value, which is helping with the overall pricing and our pricing strategies to the various markets. So despite the volatility that we saw over the last 18 to 24 months in Argentina. What we are seeing right now is a greater degree of stability both in the <unk>.
Carl Colizza: So despite the volatility that we saw over the last 18-24 months in Argentina, what we are seeing right now is a greater degree of stability both in the input cost, the supply of it, and in the overall commitment to the monetary policy.
Speaker Change: Cost the supply of it.
Speaker Change: And then in the overall commitment to the monetary policy I'll turn it over to Max who could maybe enlighten us a little bit more on how that can translate.
Maxime Therrien: I'll turn it over to Max, who can maybe enlighten us a little bit more on how that can translate.
Maxime Therrien: to our financial results.
Speaker Change: Two of our financial results.
Maxime Therrien: Yeah, well, good morning. So, yeah, so in back in April, from an Argentina government perspective, the country itself ends up having an agreement with the IMF and facing their maturity. And this was viewed and this is still viewed as a big step towards a more stable, autonomous economy and providing some relief around the currency control in various measure in order to reduce inflation, remove the restriction to the currency, to boost activity, to boost employment, investment, that sort of thing. The anticipation is the gap between the devaluation of the currency and the rate of inflation to narrow, to get closer.
Max: Well good morning so.
Speaker Change: Yes, so in back in April from an Argentine.
Speaker Change: Government perspective, the country itself.
Speaker Change: Ends up having an agreement with the IMF.
Speaker Change: Facing their maturity.
Speaker Change: This was viewed in this is still viewed as a big step towards a more stable autonomous economy.
Speaker Change: And providing some some relief around the currency control in various measure in order to.
Speaker Change: Can reduce inflation.
Speaker Change: Remove the restriction to the currency.
Speaker Change: Boost activity to boost employment investment that sort of thing.
Speaker Change: The anticipation is the gap between a devaluation of the currency and the rate of inflation to narrow to get closer so the variability or the volatility that those metric would have on our results is viewed we're looking at it that is going to be less meaningful.
Maxime Therrien: So the variability or the volatility that those metrics would have on our results is viewed, we're looking at it, that it's going to be less meaningful. And what this could mean to us with lower inflation, of course, yeah, lower cost to operate, lower mill costs, and from a currency perspective, being, you know, more profitable from an export perspective from a lower inflation rate. Those would be still valid and this is what we expect that it's going to be over the next future, the next few months and quarter. That's how everything could change, but it looks like the population is behind the current government.
Speaker Change: And what this could mean to us.
Speaker Change: With.
Speaker Change: Lower inflation of course, yes, lower cost to operate lower mill cost.
Speaker Change: From a currency perspective being.
Speaker Change: More profitable from an export perspective.
Speaker Change: A lower inflation rate.
Speaker Change: Those would be.
Speaker Change: Still valid and this is what we expect that it's going to be over the next future. The next few months and quarter.
Speaker Change: That's got everything could could change, but it looks like the population is behind the current government.
Maxime Therrien: The hope to aspire and the aspiration to the stable economy remains there. And right now, despite there's still a gap, even as of today, between the rate of inflation and the devaluation tends to narrow, so we expect to have a bit better visibility, predictability on our results. So we're looking at it very favorably.
Speaker Change: <unk> to aspire and the expiration to the stable economy remains there and right now.
Speaker Change: Despite there is still a gap even as of today between the rate of inflation and devaluation tends to narrow.
Speaker Change: So we expect to have better.
Speaker Change: Better visibility predictability on our results. So we're looking at it very favorably.
Michael Van Aelst: Yeah, so just just to simplify it a bit for me. It seems like you're probably close to breakeven in Argentina this quarter, given all these impacts, but is the is the narrowing of that gap between inflation and and foreign exchange devaluation. Is that enough to turn it positive or is it just? flowing the erosion, the pace of erosion and profitability and make over the next few quarters, like, you take you're expecting profit growth. So I guess where is profit growth going to come from within. Yeah, we're seeing that we're sort of at the bottom from that angle, if you will.
Speaker Change: So just just to simplify it a bit for me.
Speaker Change: It seems like Youre right, Youre, probably close to breakeven in Argentina this quarter.
Speaker Change: Given all of these impacts but.
Speaker Change: Is the is the narrowing of that gap between inflation and.
Speaker Change: And foreign exchange devaluation.
Speaker Change: Is that enough to turn it positive or is it just slowing the erosion the pace of erosion in profitability and making.
Speaker Change: Over the next few quarters.
Speaker Change: That you are expecting profit growth, so I guess where's profit growth going to come from in Argentina, Yes, we are.
Speaker Change: We're seeing that we're sort of at the top.
Speaker Change: Bottom from from combat Ingalls, if you will.
Maxime Therrien: We feel that reduction in the rate of inflation is going to be a positive. On top of that, not only from a mill cost, but also from a financing perspective. So the below EBITDA should be less penalizing, if you will. And don't get me wrong, we're not in a negative position from an Argentinian standpoint, but we're certainly looking at it as a positive catalyst for us in the future.
Speaker Change: We feel that reduction in the rate of inflation is going to be a positive.
Speaker Change: On top of that not only from a mill cost, but also from a financing perspective.
Speaker Change: The below EBITDA.
Speaker Change: Should be.
Speaker Change: Less penalizing, if you will.
Speaker Change: Don't get me wrong, we're not in a negative position from an Argentina standpoint, but we certainly looking at it as a positive catalyst for us in 2006.
Carl Colizza: Michael, just to add one other item, when we talk about the commentary on growth, let's not forget, specifically in Argentina, there's about a 7% gap in the milk supply, as far as volume goes, that we are now recovering, and we see it in our first quarter, so just the recovery in the milk. and the revenue from bringing those products to market is also going to be an important contribution to the Argentinian performance. and you're seeing that 7% already coming through in this quarter. It's tracking to being about a 7% recovery to the milk pool.
Speaker Change: Okay, and then Michael just to add just wanted to add one other item and when we talk about the commentary on growth, let's not forget specifically in Argentina, there is about a 7% GAAP.
Speaker Change: In the milk supply as far as volume goes that we are now recovering and we see it in our first quarter. So just the recovery in the milk.
Speaker Change: And the revenue from bringing those products to market is also going to be an important contribution to the Argentinian performance.
Speaker Change: And youre seeing that 7% already coming through in this quarter.
Speaker Change: It's tracking to trend, yes, it's tracking to being about a 7% recovery.
Speaker Change: So the milk pool.
Michael Van Aelst: Okay, and then just a question on Australia. It looks like for the July 1st new fiscal year in the milk market there, that you've offered about 6% more to the farmers for their milk. I think that's right.
Speaker Change: Okay, and then just a question on Australia.
Speaker Change: And it looks like for the July 1st New year, new fiscal year, and the milk market there that you've.
Speaker Change: Offered about 6% more to the farmers for their milk.
Speaker Change: <unk>.
Speaker Change: I think thats right does that so that seems like it's in line with the increase we're seeing in dairy international dairy prices, but how do you plan on <unk>.
Carl Colizza: So that seems like it's in line with the increase we're seeing in international dairy prices, but how do you plan on managing that domestically? Do you have the power to pass that on fully within the Australian market? Well, first of all, the opening price that we've presented is one that we feel is competitive versus the alternatives that our farming partners have as well. It's a competitive price aligned and balanced between that of what the consumer is willing and capable of paying in the domestic market as well as the same in international, but certainly balanced against the index that exists.
Speaker Change: Managing that domestically do you have the power to pass that on fully within the Australian market.
Speaker Change: While our.
Speaker Change: First of all the opening.
Speaker Change: Rice that we presented is one that we feel is competitive versus.
Speaker Change: The alternatives that are farming partners have as well.
Speaker Change: It's a competitive price aligned and balanced between that of.
Speaker Change: What the consumer is willing and capable of paying and in domestic market as well as the same in international but.
Speaker Change: Certainly.
Speaker Change: Balanced against the index that exists so.
Carl Colizza: So we feel good about the opening price.
Speaker Change: We feel good about the opening price.
Carl Colizza: We feel good about continuing with our model, and our model is we will continue to support our farming community as the commercial activity and the demand in the marketplace and pricing accordingly continues to improve. And we've seen a meaningful improvement over the last 12 months in the GDT as well as the demand. And I would also say for specifically Australian products, part of that stemming from a shortfall in the European supply to various markets. The bit of where the commentary earlier I had made around having to find new markets or new markets pulling from us as various things occur in either trade wars or just basic milk supply.
Speaker Change: We feel good about continuing with our model and our model is we will continue to support our farming community as the.
Speaker Change: Commercial activity.
Speaker Change: And the demand in the marketplace and pricing accordingly.
Speaker Change: <unk> continues to improve and we've seen a meaningful improvement over the last 12 months in the GDP as well as the demand and I would also say for specifically Australian products part of that stemming.
Speaker Change: Stemming from.
Speaker Change: A shortfall in the European supply to various markets.
Speaker Change: It's a bit of where the commentary earlier I had made around having to find new markets or new markets pulling from us as various things occur.
Speaker Change: In either trade wars, or just basic milk supply.
Carl Colizza: In the end, I do feel comfortable that where our dairy industry is all in the same place.
Speaker Change: In the end.
Speaker Change: I do feel comfortable that.
Speaker Change: We're our dairy industry is all in the same place we do need to recover the costs that come at us in.
Michael Van Aelst: We do need to recover the costs that come at us in a balanced way and it's our job to continue to bring value to the domestic space. So we do feel that despite an increase in the raw milk price or farm gate price that we're willing to pay, that's not going to be a detriment to our bottom line. Okay. All right.
Speaker Change: In a balanced way and it's our job to continue to bring value to the domestic space.
Speaker Change: So we do feel that this despite an increase in the raw milk price that will be our farm gate price that we're willing to pay.
Speaker Change: That's not going to be.
Speaker Change: A detriment to our bottom line.
Speaker Change: Okay.
Vishal Shreedhar: Thank you. Your next question comes from the line of Vishal Shreedhar of National Bank. Your line is open. Hi, thanks for taking my question. The, um, wondering if you can help us. of Modeling quantify the benefits we should expect. fiscal 26 related to duplicate costs in fiscal 25, it was 42 million. And so how should we expect that to cycle off and what I'd say a couple of things. So we've peaked. The crest of the duplicate cost was in our Q3 fiscal 25. Our Q4 numbers would have been an improvement over that. As we sit here in our first quarter, we're also seeing a continued improvement.
Speaker Change: Alright, thank you.
Speaker Change: Your next question comes from the line of Vishal <unk> of National Bank. Your line is open.
Vishal: Hi, Thanks for taking my questions.
Speaker Change: Yes.
Speaker Change: I'm wondering if you can help us in terms of modeling quantify the benefits we should expect in <unk>.
Speaker Change: In fiscal 'twenty six related to duplicate costs in fiscal 2540 $2 million and so how should we expect that to cycle off in what number should we model.
Speaker Change: Yes.
Speaker Change: I'd say a couple of things.
Speaker Change: So we've peaked.
Speaker Change: The crescent the duplicate costs was in in our Q3 fiscal 'twenty five.
Speaker Change: Our Q4 numbers would have been an improvement over that.
Speaker Change: As we sit here in our first quarter. We're also seeing a continued improvement.
Vishal Shreedhar: So it's going to be meaningful. And I know I've said this before.
Speaker Change: So it's going to be meaningful.
Speaker Change: I know.
Speaker Change: I've said this before.
Vishal Shreedhar: The bulk of, or the most important reduction into duplicate costs will come from the complete closure of the Green Bay manufacturing site. And when those production lines, or specifically the production volume, integrate into Franklin, that's when we're going to see the most meaningful improvement. That's slated at this point for, and we're confident in our timeline, to be no later than the end of the calendar year. So we're going to continue to see, despite that dual operating environment, we will continue to see improvements in the overall Franklin operating costs. performance, output, all of the other key metrics for manufacturing.
Speaker Change: The bulk of the most important reduction into duplicate costs will come from the complete closure of the Green Bay manufacturing site and when when those production lines or specifically the production volume integrate into Franklin that's when we're going to see the most meaningful improvement in that.
Speaker Change: Slated at this point for and we're confident in our timeline to be no later than the end of the calendar year. So we're going to continue to see despite that dual operating environment. We will continue to see improvements in the overall Franklin operating costs.
Speaker Change: Performance output all the all of the other key metrics for manufacturing.
Vishal Shreedhar: The other thing I would say just on the overall U.S. platform, you know, we've been chasing approximately $200 million in operational efficiency and savings. A portion of that was delivered through the late end of fiscal 24, as we stated. million dollars was achieved this fiscal or last fiscal year fiscal 25 and we expect that the the remaining of that will be delivered in most if not all of it in 2022. Okay, okay, so in fiscal 27. Based on your comments, we should expect the duplicated costs to have entirely faded off. Yes, it's absolutely fair to.
Speaker Change: The other thing I would change at all.
Speaker Change: On the overall U S.
Speaker Change: Platform, we've been chasing approximately $200 million.
Speaker Change: Sure.
Speaker Change: <unk> operational efficiency and savings a portion of that.
Speaker Change: <unk> was delivered through the.
Speaker Change: Late in the fiscal 'twenty four.
Speaker Change: We stated.
Speaker Change: Over $100 million was achieved this fiscal year last fiscal year fiscal 'twenty five.
Speaker Change: And we expect that the the remaining of that will be delivered in.
Speaker Change: In 2000, and most of it if not all of it in 'twenty six.
Speaker Change: Okay.
Speaker Change: Okay. So in fiscal 2007.
Speaker Change: Based on your comments, we should expect the duplicate costs of entirely paid it off.
Speaker Change: Yes.
Speaker Change: Absolutely fared too.
Vishal Shreedhar: to plan for that. It is in our in our in our outlook as well as far as how we intend to operate our business and how we intend to bring our products to market. Okay, in prior calls, you provided a hypothetical benefit from the USDA milk pricing formula of 60 to 70 million. given alt volatility. I was wondering if you could baseline that again for us. Give us a perspective on how you expect that to unfold. The numbers is still an accurate calculation. The formulas that were adopted, which are now active as of June 1, they've gone into effect.
Speaker Change: To plan for that it is in our in our in our outlook as well as far as how we intend to operate our business and how we intend to bring our products to market.
Speaker Change: Okay.
Speaker Change: Prior calls who provided a hypothetical benefit from the USDA milk pricing Formula 60 to 70 million USD on fiscal 'twenty four results.
Speaker Change: Given all the volatility I was wondering if you could baseline that again for us.
Speaker Change: Just some perspective on how you expect that to unfold.
Speaker Change: The numbers is still an accurate calculation so.
Speaker Change: Yes.
Speaker Change: The formulas that were adopted which are now active as of June one.
Speaker Change: They've gone into effect.
Vishal Shreedhar: They are as expected. So the estimate we provided of 60 to 70 million dollars U.S. on an annualized basis as a function of the fiscal 24 mix of goods. Is it materially different in our current fiscal 26, I'll say, expectations for products that we're going to bring to market and the product mix? So I would say that there isn't any change in our outlook of what it will deliver to the industry and to Saputo. Okay.
Speaker Change: They are as expected. So the estimate we provided of $60 million to $70 million U S. On an annualized basis as a function of the fiscal 'twenty four mix of goods.
Speaker Change: Is it materially different.
Speaker Change: In our in our current fiscal 2006, and I'll say expectations for products that were going to bring to market and the product mix.
Speaker Change: I would say that there isn't any change in our outlook of what it will deliver to the industry and to <unk>.
Vishal Shreedhar: DNA, over the last several years, it's been growing at an accelerated rate. Obviously, the facility improvements have driven that in part. And just wondering, is it logical to expect that DNA rate and the increase in the actual DNA to start slowing now that we've lapped that investment?
Speaker Change: Okay.
Speaker Change: DNA over the last several years, it's been growing at an accelerated rate obviously.
Speaker Change: The facility improvements have driven that in part and just wondering is it logical to expect that DNA rate and the increase in the actual DNA to to start slowing now that we've lapped that.
Speaker Change: Investment pace.
John Zamparo: Yeah, the the DNA did increase as it relates to the investment that we've made over the last few years So that's one of the element the other element that would point you to would be around FX does just just pure conversion bring, you know other currencies into Canadian that explain a number So we're finishing the year around 620, 630, 628 You know from a modeling perspective this remains a good assumption for fiscal 26 Thank you Your next question comes from the line of John Zamparo of Scotiabank. Your line is open. Thank you very much. Good morning.
Speaker Change: Yes, the DNA it did increase.
Speaker Change: As it relates to the investment that we've made over the last few years.
So that's one of the element the other element I would point you to would be around the FX does just just pure conversion bringing.
Speaker Change: Other currencies into Canadian that explain a number so we're finishing the year around 626 36 28.
Speaker Change: From a modeling perspective this remains a good assumption for fiscal 'twenty six.
Thank you.
Speaker Change: Your next question comes from the line of Jonathan borrow of Scotiabank. Your line is open.
Jonathan borrow: Thank you very much good morning, I wanted to follow up on on the new class III Formula can.
John Zamparo: I wanted to follow up on the new class three formula. Can you say how much of that benefit you expect to fall into this fiscal year and what kind of cadence we might So the mechanics of it, as I mentioned, is that the... the Class 3 milk price. is going to be positively impacted here in June. ProRate that over a 10-month period is essentially what we believe we're going to see with regards to the changes in the FMMO contributions, and you can, based on the product mix being what it is, we certainly take a few quarters maybe for things to shake out, but at the end of the day, as I said, our product mix and what we expect to be marketing is similar to F24, and no real change to our...
Speaker Change: Can you say how much of that benefit you expect to fall into this fiscal year and what kind of cadence we might see.
Speaker Change: So.
Speaker Change: The mechanics of it as I mentioned is that the.
Speaker Change: Sure.
Speaker Change: The class III milk price.
Speaker Change: Is is going to be.
Speaker Change: Positively impacted.
Speaker Change: Here in June so.
Speaker Change: Prorate that over a 10 month period is essentially what we believe we're going to.
Speaker Change: We're going to see with regards to the changes in the ephemeral contributions and you can you can based on the product mix being what it is.
Speaker Change: We.
Speaker Change: Certainly take a few quarters, maybe for things to shake out but at the end of the day as I said, our product mix and what we expect to be marketing.
Speaker Change: As similar to F 'twenty four and.
Speaker Change: No real change to our outlook.
John Zamparo: The only caveat I would put to what Carl was saying is around the inventory, so we still have to flush the inventory, which could take a few weeks to roll out, so when Carl talks about 10 months, yeah, it's true that starting June 1st, we start to pay a lower mill, but by the time you see it in the results, it could be in early Q2 rather than June. Got it. Okay. And then there was a comment on digital technologies and potential savings from that. I wonder if you can expand on those comments. Are there specific examples you can give?
Speaker Change: The only caveat I would put to what <unk>, saying is around inventory. So we still have too.
Speaker Change: Flushing inventory, which could take a few weeks to rollout so.
Speaker Change: When call. It talks about a 10 10 months, yes, its true that starting June one we start to pay a lower milk.
Speaker Change: But by the time you see it in the results could be in early Q2, rather than or June.
Speaker Change: Got it okay.
Speaker Change: And then there was a comment on digital technologies and potential savings from that I Wonder if you can expand on those comments are there specific examples you can give us.
John Zamparo: And is there a way to quantify the benefits?
Speaker Change: And is there any way to quantify the benefits from that.
John Zamparo: No, we're not at the stage of quantifying, especially that we're in the early stages of identification of the areas that we want to prioritize. As you're likely well aware, it's a vast opportunity, you know, an opportunity to benefit many aspects of our business. And when you consider it. In our case, where we believe we've got, you know, the highest degree of complexity in data and data management, in forecasting and outlooks, it really is in our operations sector and specifically supply chain. And so as it sits today, outside of... targeted, you know, ad hoc initiatives that bring tools such as, you know, your traditional AI tools to the everyday user, which will bring, you know, some some level of contribution to productivity, the bulk of the improvements, the meaningful improvements, to how it translates to the benefit of the consumer to the benefit of our of our business will come with the choices we make on the supply chain side.
Speaker Change: We're not at the stage of quantifying and especially that we are in the early stages of identification.
Speaker Change: The areas that we want to prioritize.
Speaker Change: As you're well aware, it's a vast opportunity.
Speaker Change: And the opportunity to to benefit many aspects of our business and when you consider.
Speaker Change: In our case, where we believe we've got the highest degree of complexity.
Speaker Change: In data and data management in forecasting and outlooks.
Speaker Change: Really is in our operations sector, and specifically supply chain and so as it sits today outside of.
Speaker Change: Targeted ad hoc.
Speaker Change: Initiatives that bring.
Speaker Change: Tools such as <unk>.
Speaker Change: Your traditional AI tools to the everyday user which will bring.
Speaker Change: Some some level of contribution to.
Speaker Change: <unk> productivity the bulk of the improvement the meaningful improvements to how it translates to the benefit of the consumer to the benefit of our of our business will come with the choices, we make on the supply chain side once we have a.
John Zamparo: Once we have a a more defined plan.
Speaker Change: A more defined plan.
John Zamparo: Certainly, our due diligence will bring us to evaluating the returns and we'll be in a better position to share some of those exciting details.
Speaker Change: Our due diligence will bring us to evaluating the returns and we will be in a better position to share some of those exciting details.
John Zamparo: I appreciate the commentary. I'll pass it on.
Speaker Change: Okay I appreciate the commentary I'll pass it on thank you.
Scott Marks: Your next question comes from the line of Scott Marks of Jeffreys. Your line is open. Hey, good morning. Thanks so much for taking questions. First thing I want to ask about is just some of the USA dynamics. I know you spoke to softening food service demand. So just wondering if you can kind of dig into that a little bit in terms of the difference, differences you're seeing between food service and retail, and some of the dynamics at play there. Thanks. Um, so Our business has seen, you know, tailing off from, you know, call it the late Q3 into Q4, the slowdown in foot traffic that we would have all heard and read of in a number of QSRs, and actually across the board, whether it's fast, casual QSRs, and so forth, has certainly slowed the overall demand.
Speaker Change: Your next question comes from the line of Scott Mark <unk> of Jefferies. Your line is open.
Scott Mark: Hey, good morning, Thanks, so much for taking my questions.
Scott Mark: First thing I wanted to ask about is just some of the USA dynamics I know you spoke to softening foodservice demand. So just wondering if you can kind of dig into that a little bit in terms of the difference differences, you're seeing between foodservice and retail and some of the dynamics at play there. Thanks.
Scott Mark: Yeah.
Scott Mark: So.
Speaker Change: Our business.
Speaker Change: <unk> has seen a tail.
Speaker Change: Tailing off from business call it.
Speaker Change: Late Q3 into Q4.
Speaker Change: Slowdown in foot traffic that we would have all heard and read of in a number of <unk> and actually across the board, whether it's fast casual <unk>.
Speaker Change: And so forth has certainly slowed the overall demand now.
Carl Colizza: With that in place and considering the breadth of our portfolio and the number of channels and relationships that we have, we've been able to work closely with a number of our key customers on the food service side specifically to help with the overall offering. And what we are seeing today is that, first and foremost, dairy is core to many of the QSRs and fast casual outlets and in their menu offerings. So when they start to focus on fewer items to promote, focus on bringing value to consumers, dairy tends to be at the center of that.
Speaker Change: With that in place and the considering the breadth of our portfolio and the number of channels and relationships that we have we've been able to work closely with a number of our key customers on the foodservice side specifically to help.
Speaker Change: With the the overall offering and what we are seeing today is that first and foremost dairy is core to many of the.
Speaker Change: <unk> and fast casual outlets and in their menu offerings. So when they start to focus on fewer items to promote <unk>.
Speaker Change: <unk> on bringing value to consumers dairy tends to be at the center of that very few of our products.
Carl Colizza: Very few of our products, I'm going to use the word, don't make the cut. So having said that, we've been able to benefit from the focus that they have had over the last couple of months and we're seeing some of that recovery. On the retail side, of course, the demand has been stronger and this is not new. We've seen a stronger demand in the retail side as a function of people essentially slowing their out-of-home consumption. So overall, both on the consumer dynamics and their shopping habits and our ability to supply those well, we've been able to nonetheless continue to grow our business.
Speaker Change: We don't make the cut so having said that we've been able to benefit from the focus that they have had over the last couple of months, we're seeing some of that recovery on the retail side of course, the demand has been stronger and this is not new we've seen a stronger demand in the retail side.
Speaker Change: As a function of people.
Speaker Change: Essentially.
Speaker Change: Slowing there their out of home consumption.
Speaker Change: So overall.
Speaker Change: On the consumer dynamics and their shopping habits, and our ability to supply those well.
Speaker Change: We've been able to.
Speaker Change: And then the less continue to grow our business.
Speaker Change: Okay.
Scott Marks: Got it. And then just, you know, here in the US, we've heard from a number of companies talk about maybe stepping up some, some brand investments, stepping up some promotional activity. So just wondering if you can kind of speak to the competitive environment in the dairy space right now, here in the US, and what you're seeing on that front. Thanks. Much like those other entities and brands that you heard about, we're doing the same. We're certainly bringing to market a renewed focus on our most important brands and ensuring that the right amount of dollars is applied against the smaller set of our offering that has the greatest degree of impact.
Speaker Change: Got it and then just.
Speaker Change: In the U S. We've heard from a number of companies talk about maybe stepping up some some brand investments stepping up some promotional activity.
Speaker Change: So just wondering if you can kind of speak to the competitive environment in the dairy space right now here in the U S.
Speaker Change: And what youre seeing on that front.
Speaker Change: Thanks.
Speaker Change: Much like.
Speaker Change: Those other entities into our brands that you've heard about we're doing the same we're certainly.
Bringing to market.
Speaker Change: A renewed focus on our most important brands and ensuring that the.
Speaker Change: The right amount of dollars is applied against a smaller set of our offering that has the greatest degree of.
Scott Marks: So we are dialed in like many others and ensuring that we're constantly reading the signs, if you like. But overall, the balance of milk supply and product supply into the marketplace, the basics of supply and demand, are well balanced in the U.S. So the consumer continues to see dairy as good value from an overall nutritional perspective and we're seeing, I'll say a Typical US level of competitiveness in all marketplaces, but nothing unusual. Got it. Thanks so much.
Speaker Change: Impact so we are dialed in like many others and ensuring that we're reading constantly reading the signs if you like.
Speaker Change: But overall the balance of milk supply.
Speaker Change: And product supply into the marketplace the basis of supply and demand are well balanced in the U S. So.
Speaker Change: The consumer continues to see dairy as good value.
Speaker Change: From an overall nutritional perspective and.
Speaker Change: And we're seeing I'll say.
Speaker Change: Typical U S.
Speaker Change: Level of competitiveness in all marketplaces, but nothing unusual.
Speaker Change: Got it thanks, so much I'll pass it off.
Scott Marks: I'll pass on.
Chris Lee: Your next question comes from the line of Chris Lee of Desjardins, your line is open. Good morning, everyone. Hi, Carl. I just want to maybe start with a question on milk cheese spread. While it is still negative, it has improved sequentially so far in Q1. I know it's a hard number to predict, but based on your expectation for EBITDA growth in the U.S. this year, what type of spread are you forecasting for this year, especially when you take into account the benefit from the lower Class III milk price? Thanks.
Speaker Change: Your next question comes from the line of Chris Lee of <unk>. Your line is open.
Chris Lee: Good morning, everyone. Just wanted to maybe start with a question on milk cheese spread.
Speaker Change: It is still negative it has improved sequentially. So far in Q1, I know, it's a hard number to predict but based on your expectation for EBITDA growth in the U S. This year what type of spread are you forecasting for this year, especially when you take into account the <unk>.
Speaker Change: Benefits from the lower class III milk price. Thanks.
Speaker Change: Okay, I guess I would say that it had I had been asked to predict this if we at the start of every other fiscal year over the last three years that would have been wrong. So.
Carl Colizza: I guess I would say that had I had I been asked to predict this every at the start of every other fiscal year over the last three years, I would have been wrong. So and I share that because, you know, the dynamics and the volatility are have been have been present and are certainly still present. However, what I can say is that as we sit here in Q3, sorry, in Q1, we have seen some meaningful improvements in that spread over the the quarter versus the Q4. And there isn't anything in our near term outlook that would suggest a material imbalance between the overall supply of milk and that of some sort of erosion in demand.
Speaker Change: And I share that because.
Speaker Change: The dynamics in the volatility are have been have been present and are certainly still present. However, what I can say is that as we sit here in Q3, sorry in Q1, we have seen some meaningful improvements in that spread.
Speaker Change: Over the quarter versus Q4.
Speaker Change: And there isn't anything in our near term outlook that would suggest a material imbalance between the overall supply of milk and that of some sort of erosion in demand.
Speaker Change: U S.
Carl Colizza: Pricing for Just about all of its portfolio of dairy offerings to the export markets is still at a good value and you could even say at a discount. to the banks. Will be will be consistent over the next you know a couple of months and quarters And I think that will continue to support the kind of pricing we're seeing in The block as well as what we're seeing in the translated into the class and that's despite any changes in FMMO.
Speaker Change: Pricing.
Speaker Change: Four.
Speaker Change: Just about all of its portfolio of dairy offerings to the export market is still at a good value and you could even say added discount to.
Speaker Change: Two European offerings and or offerings from Oceania. So there is still a healthy demand and pull.
Speaker Change: The U S dairy sector to supply, both domestic and international needs and it's that balance that I think will.
Speaker Change: We'll be we'll be consistent over the next.
Speaker Change: A couple of months and quarters and I think that will continue to support the kind of pricing, we're seeing in the block as well as what we're seeing in the translate into class III.
Speaker Change: And that's despite any changes in MMO.
Carl Colizza: guys, okay, no, that's helpful. And then maybe just to follow up on your comment about operational efficiency savings, as you know, that you guys achieve about 100 million in fiscal 25. How much do you expect to achieve this year? Like I said, it's the remainder of the $200 million. We're not talking about the same value as we had this year. It's something that is, you know, meaningful nonetheless to our bottom line. And at the end, it's not just a question this time around of contribution from simply closing the assets in hand. Now we're talking about how it is we actually improve on the line outputs and as well as bring to market the products that we now have the capabilities for.
Speaker Change: Got it Okay. That's helpful. And then maybe just a follow up on your comment about operational efficiency savings as you can as you know that you guys can achieve about $100 million in fiscal 'twenty five.
Speaker Change: <unk> do you expect to achieve this year.
Speaker Change: Like I said, it's a it's the remainder of the 200 million.
Speaker Change: We're not talking about the same value as we had this year.
Speaker Change: It's something that is.
Speaker Change: Meaningful nonetheless to our bottom line.
Speaker Change: <unk>.
Speaker Change: At the end it is not just a question this time around of.
Speaker Change: The contribution from simply closing.
Speaker Change: The assets.
Speaker Change: Now we're talking about.
Speaker Change: How it is we actually improve on the line outputs and as well as bring to market.
Alex: Alex that we now have the capabilities for.
Carl Colizza: So I'll say that in the end it'll be as per our plan as a way of contribution and we expect it to be nonetheless a meaningful one.
Speaker Change: So I'll say that in the end it'll be.
Speaker Change: As per our plan.
Speaker Change: And we have contribution.
Speaker Change: And we expect it to be nonetheless, a meaningful one.
Chris Lee: Okay, and then my final question is, where does M&A rank in terms of your capital allocation prior?
Speaker Change: Got it Okay and then my final question is.
Speaker Change: Where does M&A rank in terms of your capital allocation priorities.
Carl Colizza: Well, Chris, I think that, you know, by virtue of it being absent in some of our conversation remarks, so on and so forth, it kind of tells the story as to where it is within our current mindset. And the reason for that is we are very dialed in and focused on extracting the full value of the investments we put in. I know I sound like a broken record when I say that, but that is only so much we can tackle, and the team is very encouraged by the efforts and the focus that they've put in over the, call it the home stretch of the investments, and now really want to benefit from the new capabilities and opportunities that this presents.
Speaker Change: Bob.
Speaker Change: Chris I think that.
Speaker Change: By virtue of it being absent in some of our of our conversation remarks, so on and so forth it kind of.
Speaker Change: Tells the story as to where it is within our current mindset and the reason for that is we are very dialed in and focused on extracting the full value of the investments we put in I know I sound like a broken record when I say that but that is only so much we can tackle and the team is.
Speaker Change: Very encouraged by the efforts and the focus that they've put in over the the call. It the the home stretch of the investments and now really want to benefit from.
Speaker Change: From the.
Speaker Change: The new capabilities.
Speaker Change: And the opportunities that this presents so dialed in and focused on that and we're supporting them in that endeavor as well it doesn't mean, we're standing still by any means.
Carl Colizza: So they're dialed in and focused on that, and we're supporting them in that endeavor as well. It doesn't mean we're standing still by any means.
Carl Colizza: We constantly are looking at how it is we can innovate, complement our portfolio as consumer habits, needs, expectations change, and, you know, things that could be complementary to our offering are always in our minds. But I can tell you that right now, the greatest degree of focus for our capital and capital allocation has been completing our capital expenditures, making sure that we are considering the current valuation of our share price, if you like, continuing with our buyback program, and M&A is one of those items that we will consider should there be something that we need.
Speaker Change: We constantly are looking at how it is we can.
Speaker Change: Complement our portfolio as consumer habits needs expectations change.
Speaker Change: Things that could be complementary to our offering are always in our mind, but I can tell you that right now.
Speaker Change: The greatest degree of focus for our capital capital allocation has been completing our capital expenditures.
Speaker Change: Making sure that we are considering the current valuation of our of our share price. If you like continuing with our buyback program and M&A is one of those items that we.
Speaker Change: We will consider should there be something that we need.
Chris Lee: That's very clear.
Speaker Change: Got it that's very clear, thanks, and all the best.
Chris Lee: Thanks and all the best.
Tamy Chen: Next question comes from the line of Tamy Chen of BMO Capital Markets. Your line is open. Hello, good morning, everyone. This is Riyad on for Tamy Chen. So my first question is on Europe, where the margin was down quarter over quarter this quarter.
Speaker Change: Next question comes from the line of Timmy Chen of BMO capital markets. Your line is open.
Speaker Change: Hello. Good morning, everyone. This is <unk> on for Timmy Chen. So my first question is on Europe, where the margin was down quarter over quarter to this quarter. So my question is how should we be thinking about the pace of margin recovery going forward.
Carl Colizza: So my question is, how should we be thinking about the pace of margin recovery going forward? Well, before commenting on the the quarter over quarter, I would say that The European sector is in a better place when it comes to, I'll say, the milk supply, the overall stability in the pricing of the input costs that they're planning to be working with. As I said earlier, the brand health in both Clover, Cathedral City, some of our Wensleydale products as well is in a good place. So we expect that with the overall positioning and the strength of our brands, our offerings, as well as the initiatives that The team has initiated around optimization, and maybe I can just recap briefly what some of those were.
Speaker Change: Okay.
Speaker Change: Well.
Speaker Change: Before commenting on the quarter over quarter, I would say that.
Speaker Change: The.
Speaker Change: European sector is in a better place when it comes to I'll say the milk supply the overall stability in the pricing of the input costs that are that they are planning to be working with as I said earlier, our the brand health and both Clover Cathedral City.
Speaker Change: A R wensleydale products as well as it is in a good place so we expect that with.
Speaker Change: The overall positioning and the strength of our brands our offerings as well as the initiatives that.
Speaker Change: The team has initiated around optimization and then maybe I can just recap briefly with some with some of those were.
Carl Colizza: It's basically consolidating our cut-and-wrap capabilities into our Anitin site, and that is not completed as of yet, it's three-quarters of the way there, so more to come on the overall bottom line benefits and contribution. We've also recently announced changes to the byproducts that we'll be bringing to market, so the ingredients, that once completed, and that will be towards the tail end of Q2, early into Q3, we'll also see a more streamlined cost basis for the European sector. We do believe that the margin will continue to recover with all these initiatives in place. I don't know, Max, do you have any comments on the Q over Q in particular?
Speaker Change: It's basically consolidating our cutting Roth capabilities.
Speaker Change: <unk> capabilities into our in our need to insight and that is not completed as of yet.
Speaker Change: It's three quarters of the way there so more to come on the overall bottom line benefits as contribution we've.
Speaker Change: We've also recently announced changes to the.
Speaker Change: The byproducts that we will be bringing to market to the ingredients.
Speaker Change: That once the.
Speaker Change: Once completed and that will be towards the tail end of Q2 early into Q3, we'll also see more streamlined.
Speaker Change: Cost basis for the.
Speaker Change: European sector.
Speaker Change: We do believe that the margin will continue to recover with all of these initiatives in place and ALM activity and comments on the Q over Q in particular.
Maxime Therrien: No, I think you covered it all in a call, to be fair. Okay, great.
Speaker Change: No I think you covered it all in a call to be fair.
Tamy Chen: Thank you.
Speaker Change: Okay, great. Thank you.
Maxime Therrien: And my second question is, if you would be impacted by Trump's new proposed tax bill, where he's intending to materially increase the withholding tax on dividends repatriated from US subsidiaries of non US parent companies, like do you guys receive dividends from your US subsidiaries at all? Yeah so yeah of course we ultimately could end up being targeted with this one big beautiful bill should the needs to repatriate funds out of the U.S. into Canada. We tend to use our cash that we generate in the U.S. to reinvest within our U.S. business.
Speaker Change: My second question is.
Maxime Therrien: If you would be impacted by Trump's new proposed tax bill, where he's intending to materially increase the withholding tax on dividends repatriated from U S subsidiaries.
Speaker Change: Non U S band companies do you guys receive dividends from your U S subsidiaries at all.
Speaker Change: Okay, Yes, so yes of course.
Speaker Change: We ultimately could end up.
Speaker Change: Being.
Speaker Change: <unk> target is with this one big beautiful Bill should the needs to repatriate funds out of the U S into Canada, we tend to use our cash that we generate in the U S to reinvest within our U S business.
Maxime Therrien: It's not a corporate tax rate per se, it would typically impact us more when we trans-border payment and on cash repatriation so we don't foresee you know a significant impact on the near term in the short term. Long term yeah it could be an impact with increased withholding tax that is taking place but the bill also creates incentive for investment in the U.S. such as R&D, accelerated depreciation, that sort of thing that creates opportunity for us to strengthen our network as well and use the cash that we generate in the U.S.
Speaker Change: It's not a corporate tax rate per se.
Speaker Change: It would typically impact us more when we the trans border payment.
Speaker Change: And on cash repatriation, so we don't foresee a significant impact on the near term in the short term long term.
Speaker Change: It could be an impact with increased.
Speaker Change: Withholding tax that has taken place, but the bill also creates incentive for investment in the U S. Such as R&D accelerated depreciation that sort of thing that creates opportunity for us to strengthen our network as well and use the cash that we generate in the U S.
Maxime Therrien: so not so much of a disturb but still it would be watching out the detail as they become available and yeah this is it.
Speaker Change: So not so much of a disturbed, but so it would be watching out the.
Speaker Change: The detailed.
Speaker Change: As they become available.
Speaker Change: Yes.
Maxime Therrien: Great, thank you.
Speaker Change: Great. Thank you.
Nicholas Estrela: With no further questions, I will now turn the call back over to Nick Estrela. Thank you, JL.
Speaker Change: With no further questions I will now turn the call back over to Nick Estrela.
Speaker Change: Thank you Jr. Please note that we will release, our first quarter fiscal 2026 results on August seven 2025, we thank you for taking part in the call and webcast and have a great day.
Operator: Please note that we will release our first quarter fiscal 2026 results on August 7, 2025. We thank you for taking part in the call and webcast.
Operator: Have a great day.
Operator: This concludes today's conference call.
Speaker Change: This concludes today's conference call you may now disconnect.
Operator: You may now disconnect.
Operator: Please wait, the conference will begin shortly.
Speaker Change: Please wait.
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