Saputo Inc.

Greetings and welcome to the Saputo, Inc. First Quarter Fiscal 2024 Results Conference Call. During the presentation, all participants will be in the listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded on Friday, August 11, 2023. I would now like to turn the conference over to Nick. Please go ahead.

Thank you, Frank. Good morning, and welcome to our first quarter fiscal 2024 earnings call. Our speakers today will be Lino Saputo, Chair of the Board, President and Chief Executive Officer, and Maxime Terrien, Chief Financial Officer and Secretary. For the question and answer session, Lino and Maxime will be supported by Carl Kolitsa, President and Chief Operating Officer, North America, and Leanne Cutts, President and Chief Operating Officer International in Europe. Before we begin, I'd like to remind you that this webcast and conference call are being recorded, and the webcast will be posted on our website along with the first quarter investor presentation. Please also note that some of the statements provided during this call are forward-looking. Such statements are based on assumptions that are subject to risks and uncertainties. We refer to our cautionary statements regarding forward-looking information in our annual reports press releases, and filings. Please treat any forward-looking information with caution as our actual results could differ materially. We do not accept any obligation to update this information except as required under securities legislation. I'll now hand it over to Leo.

Thank you, Nick, and good morning, everyone. Our business delivered strong results in the first quarter despite facing significant market headwinds and lower consumer demand. We reported adjusted EBITDA of $362 million, which was 4% higher versus last year on revenue of $4.21 billion. We had a strong overall performance in the Canadian sector, significant operational improvements in our Australia division, and more operational stability in the US. Notwithstanding this, there is still more work to be done. As mentioned on our recent Q4 call, the first quarter began largely as we had anticipated. We experienced a drop in global demand and significant volatility in the U.S. and the global commodities markets. This recent trend has persisted, which confirms our cautious stance on the macro environment and the consumer, particularly as it relates to customer spending levels and behavior. While it would be premature to predict when market conditions are expected to stabilize, we believe they are transitory. So we will focus on the long-term earnings potential of our business. To that end, we remain confident in our operating model and global strategic plan initiatives designed to deliver $2.125 billion in adjusted EBITDA annually. However, given the current environment, we no longer expect to achieve our adjusted EBITDA by fiscal 25. We do nonetheless anticipate dairy markets to stabilize over time. Despite these headwinds, we've made great progress around labor, operational performance, cost and margin recovery, cost containment measures, and the additional advancements within the framework of our global strategic plan. As a result, We delivered a record year in fiscal 2023, and the underlying health of our business remains intact. As always, we are focusing on the factors we can control, such as our optimization projects, which are fully on track. We will not only continue to assess opportunities to accelerate the plan, but also to broaden it, to build on the strong foundations we have in place. we expect to see meaningful benefits, notably with our optimization initiatives later this year, as expected. At this point, we are progressing extremely well, both in terms of spend and the timing of the various project ramp-ups. As an example, in the US, we're on track with the mozzarella expansion project at our Waupon facility. With the production startup on schedule, we transferred mozzarella production to Waupon from Reedsburg, which will be converted to a state-of-the-art goat cheese manufacturing facility later this year. Our Paige Tulare plant received the equipment to support its mozzarella modernization projects, and we are now in installation mode with the wrap-up scheduled in the second half of this fiscal year. By this fall, the scheduled upgrades in mozzarella will be completed, and we will start benefiting from the related cost efficacy. The construction phase of our new $240 million automated cut and wrap facility in Franklin is progressing well and we expect to begin operations in Q3. From there, we will begin to carefully transfer production from our Big Stone, Belmont and Green Bay manufacturing sites before closing those legacy factories. In the UK, The previously announced network consolidation aimed at improving operational efficiencies are progressing well. The development of the expanded Nuneaton packing facility is nearing completion, with commissioning of the first new lines underway. In the Argentina division, we're installing a new biodigester in Teopuquio. The project will be executed over three phases and will benefit our environmental footprint will treat our organic waste streams to generate biogas and drive cost savings notably around energy and gas. In the Australia Division, the construction and equipment installation for our new frozen natural cream cheese capabilities is in the final stages of commissioning with the lines due to be up and running by the end of Q2. While we are focused on ensuring effectively navigating through the current volatility We expect the benefits to represent meaningful improvement opportunities for us. These investments are significant in terms of their long-term impact on our ability to operate more efficiently as we work to create an even stronger, more resilient organization that can grow and succeed. I will reiterate, our strategy and our confidence in it remains unchanged. I will now turn the call over to Max for the financial review before providing my concluding remarks. Max?