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Operator
Good morning and welcome everyone to the Saputo, Inc. first quarter 2025 financial results conference call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Nick Estrella. Please go ahead.
Nick Estrella
Thank you, Audra. Good morning. Welcome to our first quarter fiscal 2025 earnings call. Our speakers today will be Lionel Saputo, Executive Chair of the Board, Carl Kalitza, President and Chief Executive Officer, and Maxime Therrien, Chief Financial Officer and Secretary. Before we begin, I'd like to remind you that this webcast and conference call are being recorded, and the webcast will be posted on our website, along with the first quarter investor presentation. Please also note that some of the statements provided during this call are forward-looking. Such statements are based on assumptions that are subject to risks and uncertainties. We refer to our cautionary statements regarding forward-looking information in our annual report, press releases, and filings. Please treat any forward-looking information with caution as our actual results could differ materially. We do not accept any obligation to update this information except as required under securities legislation. I'll now hand it over to Lino.
Carl Kalitza
Thank you, Nick, and good morning, everyone. The year is off to a good start. We delivered strong revenue and EBITDA growth and solid cash flow generation in the first quarter. More importantly, we are definitely seeing the benefits from the bold actions we've taken over the past few years. Capital projects in the U.S. are now completed and up and running, while other expansion and modernization efforts around the globe remain right on track. Our supply chain teams continue to drive productivity savings and our commercial teams have secured new business with several key customers and driving innovation across all channels. Initiatives to further differentiate our portfolio are also gaining traction. This focus is a driver behind the robust volume growth in the quarter. These collective efforts have been further supported by the optimization of our manufacturing network and streamlined processes. The dairy commodity environment also began to stabilize providing a more favorable backdrop for our business in Q1. However, we still expect some volatility in the near term, notably with a cheese and milk price spread. From a macro perspective, consumer demand remains stable. Overall, we're staying focused on what we can control, with an emphasis on execution, innovation, and close collaboration with our customers. We made progress on many fronts and saw sequential adjusted EBITDA margin improvement, notably in the U.S. and Canada. In addition, our solid cash flow generation drove further reduction in our net leverage ratio, putting us in a great position to support our growth and return capital to shareholders. As we enter the second quarter, our momentum, coupled with the expected ramp-up of strategic initiative benefits, support our confidence and our ability to achieve our operational goals and generate long-term value for shareholders. I will now turn the call over to Max for the financial review before providing my concluding remarks. Max?
Max
Thank you, Lino, and good morning, everyone. Let's begin by going over the financial highlights of the quarter. Consolidated revenues were $4.6 billion yesterday, while adjusted EBITDA amounted to $383 million. Higher year-over-year adjusted EBITDA was driven by a continued solid performance in our Canada sector, a meaningful operational improvement driven by our global strategic plan initiatives in the U.S. sector, higher sales volume in all of our sector, and a favorable U.S. dairy commodity markets as compared to last year. These were partially offset by the negative impact from the continued disconnect between international cheese and dairy ingredient market prices and the cost of milk in the international sector, and the cycle through of the remaining excess high-cost inventory in our Europe sector. We reported net earnings of $142 million in the first quarter, On an adjusted basis, our net earnings were $167 million, or $0.39 per share. I'll now take you through key highlights by sector, starting with Canada, where revenue for the first quarter totaled $1.3 billion, an increase of 4% when compared to last year. Revenue increased due to higher sales volume and a favorable product mix, and higher selling prices in connection with higher cost of milk as raw material. Adjusted EBITDA for Canada for the first quarter totaled $153 million, up 6% versus the same quarter last fiscal year. Our improved performance reflected the benefit derived from operational efficiencies, including from our continuous improvement program relative to supply chain optimization and automation initiatives. Our results also include positive impact from cost reduction initiatives. In our U.S. sector, revenue totaled $2.1 billion and were 11% higher versus last year. Revenue increased due to the combined effect of the higher average block butter and dairy ingredient market prices and higher sales volume in retail, food service, and industrial market segment. Adjusted EBITDA increased 57% to $162 million, The year-over-year increase was mostly driven by $26 million in benefit derived from operational improvement, including increased capacity utilization and productivity, supply chain initiative and cost reduction, and a $15 million positive impact from U.S. market factor. Also of note, last year adjusted EBITDA had a $10 million inventory write-down due to fluctuation in dairy commodity pricing, which did not occur this year. Q1 adjusted if it does include $13 million of duplicate operating costs. Given current year-to-date spending and our continued focus on our customer-first approach, we expect duplicate operating costs to be more in line with last year, mostly due to lower capacity utilization during the ramp-up phase additional training and labor costs. In the international sector, revenues for the first quarter were $1 billion, up 16% versus last year. Adjusted EBITDA totaled $45 million, down $32 million on a year-over-year basis. The performance of the sector was impacted by the unfavorable relations between international cheese and dairy ingredient market prices and the cost of milk as raw material, and the effect of currency fluctuation on export sales denominated in U.S.
Lino
dollar, although positive, was less favorable than in prior quarters.
Max
In the Europe sector, revenue were $264 million while adjusted EBITDA amounted to $23 million. The decline in adjusted EBITDA was due to the cycle through of the remaining excess high-cost inventory and lower international dairy ingredient market prices. We expect the performance of our Europe sector to continue to improve on a sequential basis as we are now in a much better position from an inventory perspective.
Lino
So from a cash standpoint,
Max
Net cash generated from operating activities in the first quarter amounted to $191 million, while capex for the quarter totaled $97 million, in line with our plan. We closed the previously announced sale of our two fresh milk processing facilities located in Australia for the proceeds of approximately $95 million. Finally, Our Board of Directors approved an increase of 2.7% to our quarterly dividend yesterday to $0.19 per share, effective with our September payment.
Lino
This concludes my financial review, and with that, I'll turn the call back to Lino.
Carl Kalitza
Thank you, Max. In Canada, we had a solid quarter underpinned by operational efficiencies and cost savings. The food service market segment performed well despite a softening in market conditions, thanks to our customer diversity and efforts to creatively work with our partners to deliver results. Retail sales volumes were higher year over year, with recent customer investments providing strong returns. From an innovation pipeline perspective, the rollout of new Armstrong spread flavors and Saputo sliced cheeses are underway. We are thoughtfully building out these brands guided by our disciplined approach on the heels of several successful new product launches last year. In the US, we had one of our best quarters since fiscal 2021, through a combination of consistent execution of our strategy and improved market fundamentals. Our investments in our retail brands also continued to yield results, driving volume improvement. Progress was most notable in our cheese business, with Frigo and Stella leading the way, with market share gains across the spring cheese and mozzarella categories. Food service in the U.S. remained competitive in Q1, especially with food traffic down the over year. However, we're encouraged by the recent increase in promotional activities by QSR chains to drive restaurant traffic. The dairy commodity environment improved during the first quarter, supported by a better balance between milk supply and product demand. While we benefited from better market conditions, our bold actions and focus on the controllables are contributing to our results. The team remains focused on delivering our previously announced business optimization program that will not only enhance our productivity, but also lower overall costs while maintaining our customer-first approach. We also focused on operational efficiencies, especially now that four of the six planned closures have been completed. Case in point, we delivered $26 million in benefits derived from increased capacity utilization and productivity, supply chain initiatives, and cost reductions during the quarter. We're very excited with the startup of our recent greenfield facility in Franklin, Wisconsin. We continue to take a prudent approach as we ramp up production capacity at Franklin and ramp down other legacy facilities. On margins, we saw a significant improvement in the first quarter reflecting benefits from market dynamics, cost initiatives, and portfolio developments. With the inflationary environment beginning to stabilize and benefits from our optimization initiatives rolling through, we feel good about the cadence of our margin improvement. In the international sector, our performance was largely impacted by the lingering disconnect between milk costs and global commodity prices in Australia. We do anticipate a step up in adjusted EBITDA in Australia starting in Q2, as the new milk season price is in effect. During the quarter, we completed the previously announced sale of our two fresh milk processing facilities to the Coles Group, while the strategic review process for King Island is ongoing. Both these initiatives are important steps in supporting our network optimization strategy in Australia. In Argentina, the macroeconomic volatility led to some margin pressure in our export business and will likely be the case in Q2. Overall, we remain confident we have the right strategy and structure in place to drive growth in our international business and develop our global presence over the long term. In Europe, EBITDA continued to improve sequentially. Cathedral City volumes were higher through increased investments in promotional activities and advertising. With consumer confidence on the rise in the UK, we are seeing early signs consumers are trading up to higher value branded products. We believe with the right promotional activity and innovation and activation plans, we will see further volume improvements. Turning now to our outlook. We remain optimistic for the balance of the year as we make further progress on our strategic initiatives. Our team is focused on driving savings and on capturing incremental value from our investments. This is already showing up in our results and we anticipate these areas of focus to continue to drive momentum in fiscal 2025. As we announced earlier this year, effective today, I have transitioned to the role of executive chair of the board, while Carl Kalica officially becomes our new president and CEO. Carl, you have been instrumental in developing and delivering on our strategy. And I have no doubt that under your leadership, Saputo's global business and unique culture will continue to flourish. We've worked together for closely over the past 25 years and I look forward to many more great years ahead. Congratulations again on this well-deserved appointment. And as this is my last earnings call, I would like to thank you, the analysts and shareholders, for your trust and support. It was a pleasure working with you, and I will continue to value the relationships developed over the years.
Lino
And on that note, Carl, I turn it over to you, my friend. Thank you, Lino, for your kind words.
Lino
It is a pleasure to speak with you all on today's call, my first as President and CEO. I would like to take this opportunity to thank Lino on behalf of the entire Saputo team for your focused leadership, for your integrity, and your unrelenting commitment to making Saputo the success it is today. Today, I humbly take on the mantle as President and CEO at a very pivotal time for our business. Like all of us at Saputo, I am immensely proud to be part of this organization and I very much share Lino's enthusiasm for the future. We have a strong foundation with a portfolio of exceptional brands and world-class assets. My goal is to improve and build upon Saputo's already solid core and make certain that we move expeditiously and decisively through our next growth cycle. My number one priority is to ensure that we continue our relentless focus on the metrics that drive shareholder value, starting with operational synergies, achieving sustainable improvements in our cost structure, and capturing high-quality growth opportunities. We continue to build confidence in the next stage of our journey, one in which we will leverage our capabilities and capacity to support earnings and cash flow generation. Around the world, across our categories, we're investing to further enhance our competitive advantage.
Lino
While the majority of our global strategic plan initiatives are behind us, you will continue to see the results of those efforts.
Lino
Also woven throughout our strategic agenda is a commitment to corporate responsibility and being a force for positive change through the Saputo Promise. I'm proud of how our people incorporate this focus into is focused into everyday activities and decision-making while also pursuing a set of ambitious multi-year targets. We have more work ahead of us and we are laser focused on achieving what we set out to do this year. Throughout the balance of fiscal 2025, our focus is set on controlling the controllables, delivering on our remaining major capital projects, and positioning ourselves to maximize the benefits that will materialize following a return to more stable dairy market conditions. I'm confident in our outlook and continue to see this momentum as a tremendous time for the company to begin its next chapter. That said, I am certainly pleased with our first quarter results and how our teams are performing.
Lino
It provides us with even more confidence for the year.
Lino
I am truly excited about the opportunities that lay ahead. I will set the full weight of my energy behind delivering on the significant potential that exists with our great company for the next phase of our growth.
Lino
I thank you for your time. I will now turn the call over to Audra for questions.
Operator
Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. We'll take our first question from Irene Nuttall at RBC Capital Markets.
Irene Nuttall
Thanks, and good morning everyone. Big, big day today. Welcome Carl officially, and Lino thank you for all the years, and I'm very glad that I know where to find you. Turning back to the quarter, Obviously, a great turnout from the U.S. and, you know, understand the market factors, but, you know, if we kind of offset the market factors from the duplicate of costs, seems like a really big step up. Can you talk about what the key building blocks of that are and then where do we go from here and how sustainable is the current run rate in the U.S.?
Lino
Thanks, Irene, for your question and for your kind words as well. I would say that the building blocks for the success that the U.S. had in Q1 really is about the focus we had on our strategic initiatives. So where we stand today, we have completed our mozzarella modernization initiatives, and the majority, if not all, of that benefit we are seeing today. Beyond that, we continue to make improvements along the way with our consolidation. various sites. As a reminder, four of the six sites that we said we would be closing have now been closed and consolidated. So with that, we're making sequential progress in Franklin as well, but we do remain very focused on maintaining our high fill rates, our on-time and in-full initiatives with our customers, and continuing to supply demand. So from that perspective, the American team has done a great job at delivering on these initiatives.
Irene Nuttall
That's great. Thank you. And, you know, given that this is your first official call, Carl, you know, if we go back to 2021, you guys put that $2.125 billion EBITDA target out there. What is your view given how the world has changed since then and all the moving pieces? Do you think that is attainable? and not going to pin you down, but maybe the question is, what needs to happen in order for you to achieve that if you still believe it's attainable?
Lino
Well, Irene, I think I'll reiterate what we had said in some of the more recent discussions, and that is we absolutely believe in the earnings power of the plan that we put in place. Now, albeit that the conditions and the variables in which we operate in today are very different than that of the start of that plan. And by those, simply put, we're talking about the various disconnects in the overall cost of milk versus the selling price, some of the international demand scenarios, even the local dynamics in the U.S. They are very different conditions. Having said that, It is the investments that we have put forward will continue to serve our business very well and our customers moving forward. So we're excited about what this can deliver. You know, as far as the absolute number you referenced to 125, there are a number of other, I'll say, conditions and variables that existed and were true back in 2020 that will need to be true today to make that happen.
Irene
Would you care to extrapolate on what those are or expand?
Lino
Well, for sure, we take a look at the block price and call it spread, if you would like. There's a number of things there. But overall, if you were to take a look at the demand on the international front, so we understand. Let's start with international. So on the international front, certainly the demand from the Chinese side is not what it was before. And there's a number of reasons for that. one of them including their ongoing milk autonomy. So that's certainly one area that is driving very different dynamics on who supplies what parts of the globe. That, as we all understand, has created various situations, such as in Australia as well. Our Australian platform has very different milk scenarios and different milk costs that has put a very different pressure on us. Moving over to the U.S., some of those milk dynamics were also quite different back then when it comes to the overall block price and spread. And I think probably the most overarching statement I can make ultimately is the impact of inflation on consumption and our margins has been very significant, very different than what we would have planned at the time of the strat plan.
Irene
Understood. Thank you, Carl.
Operator
We'll take our next question from Chris Lee at Desjardins.
Chris Lee
Good morning, everyone. Before I ask my question, just again, I want to wish you all the best and hope you'll enjoy some well-deserved time with your family. You'll certainly be missed on the call. And Carl, congrats again.
Lino
I look forward to seeing you soon. Thank you very much.
Chris Lee
If I just start with the question on international, you've inserted kind of a new outlook with respect to, you know, there's a couple of moving parts. You mentioned lower farm gate meal price in Australia, but offset by some macro uncertainty in Argentina. So I guess I have maybe a two-part question. First is, can you please maybe elaborate a little bit more about how each of those two dynamics are going to impact the profitability of international this year? And then the second part of the question is, to take a step back, do you expect EBITDA growth into the international segment this year, despite some of these macro uncertainties that are happening now in Argentina. Thank you.
Max
Good morning, Chris. Max here. Two dynamics, one relative to Australia. Certainly, the new milk season starting in July with the price of milk that we are paying for the last few weeks will be a benefit for us as we move forward. We believe that with this price of milk, it will restore our margin in Australia. We're hopeful that this milk price will stick for as long as we can. With that, we will be back to the historical level of profitability out of Australia. Relative to Argentina, we're seeing disconnect over the last few quarters relative to inflation and the peso devaluation. Understand that 50% of our business in Argentina relates to export. A lower value of peso is beneficial for us on the export market. Lower the peso is more profitable is our export business. So as we were looking over the last seven, eight months, the currency devaluation in Argentina hasn't moved a lot. But inflation keeps growing at the regular rate that we've seen over the last couple of years. What it does is the cost of production, the cost of milk, the cost of our input cost keeps going, but it's not offset by a peso devaluation. Hence, the margin pressure, not so much on the domestic side, but more on to the export market. That's what we've seen in Q1. At this time, when we look into Q2, we don't have sign that there would be a change in this dynamic. We don't see the currency. We have no indication that the currency would appreciate or depreciate or whatnot. So at this time, we say, well, the Q2 would likely be the same similar effect that we've seen in Q1 for Argentina.
Chris Lee
Okay, that's very helpful, Max. Maybe then my other question was just if you take all that into account, when you look at fiscal 25, just looking into the international division, do you still expect EBITDA to grow this year?
Max
Well, we'll see how much we can recover from this Q1. We know we will be recovering in Australia, but to really comment on what's going to be the dynamic on the currency and the level of inflation in Argentina is hard to tell.
Chris Lee
Okay, that's fair. And then maybe my other follow-up question, just switching here to your balance sheet, your free tax, well, obviously they're all trending in the right direction. I just want to ask again, what are some of the guideposts that you are waiting before you act on your share buybacks?
Max
Yeah. So, Chris, relative to capital allocation, we've been consistent in our approach, and the approach is the same as previously signaled in the last quarter. Priorities around dividend, you know, we talked about maintain and grow, so we just announced a 2.7% or 2 cents, so to get to 76 cents annually. From a CapEx perspective, we are in line with a lower spend than the last couple of years that we're targeting, so no change there. From a debt reimbursement, we have a maturity in November of $400 million that we'll face, so we're prepared to deal with that. Nothing is on the radar suggesting that we would change our approach. We like the fact that we are building financial flexibility relative to buyback, It has been part of our growth story in the past. It is on our radar, and it will likely be part of our future. The drip was one of the steps relative to exiting from a cash flow perspective. And I would say from pure straight timeline relative to buyback, we're one quarter closer.
Lino
I'll leave it at that. Thanks very much.
Operator
Our next question comes from Michael Van Elst at TD Cowen.
Michael Van Elst
Good morning and welcome, Carl, and congrats to Lino. It's been a pleasure over the years. Max, just on your last comment there, is there a certain trigger that you'd have to hit to start being active on the NCAB, like having your leverage fall below a certain level?
Max
Well, Mike, with the volatility that we saw, we faced, and we're still living, yes, certainly the return ASAP to our target leverage was one of the top priorities. Now, is it prudent to be, is it a problem to run in those volatile times under a target level? Yes, it is prudent. That said, the intent is not to go to a level of one times a bit though or that sort of thing. No, we're in the zone. As I mentioned, we're one quarter closer than where we were. We want to deal with our maturity in November. It's on our radar. It's a short-term thing.
Michael Van Elst
Okay. All right, flipping to the U.S., clearly some good progress there, both from the markets as well as from internal initiatives. But I think you said that duplicate overhead costs are not going to fall this year. The original guidance was for it to be down $15 million. So I'm wondering what's changed in the timing maybe of the plant closures and when should we expect to see, I guess, further progress on those plans? operational improvements.
Lino
Hi, Michael. It's Carl. Maybe just to provide a little bit more clarity. So as I said earlier, from a facilities closure perspective, four of the six are now closed, and the remaining two are on schedule for the first half of the next calendar. But more specifically, some of the duplicate costs that we're incurring come from being laser-focused, honestly, on our customers' demands. So as we are focused on ensuring that we have the highest fill rates possible, we're having to make some difficult but good choices to ensure that our facilities are capable of supplying that demand. So facilities like Green Bay continue to be key in making that happen. And accordingly, we're being very cautious about onboarding, into Franklin, all of the production lines that we had slated for consolidation. I would go a step further and say that when it comes to Franklin, there isn't anything fundamentally wrong with Franklin. The infrastructure, the design of the facility is as we have planned. And what we're dealing with here is ensuring that we're being balanced with our approach in servicing the market. and moving through our consolidation process and reducing our overall duplicate costs. So right now we're in a good place because volume is healthy for us at this point, year-over-year growth in our volume as well. So we're managing prudently, keeping a good balance, and doing the right things for the health of our business, and this is where we're at.
Michael Van Elst
Okay, so it sounds like the rollout or the transition of production into Franklin is going to continue right through to the end of the fiscal 25, I guess, if you're talking about closures of the remaining two facilities in the first half of next calendar year.
Lino
Absolutely. Yep. Okay.
Michael Van Elst
And then just finally on Europe, you talked about the improvements that you expect. Where do you stand with respect to your your high cost inventory right now. Can you give us a better indication of the profile of your product mix? How much is 12 or 14 month age? How much is 24 month age? Where's the bulk of the volumes?
Carl
Good morning, Mike. It's Leanne here. So yes, you're correct. I mean, our excess inventory has been cleared.
Mike
And so we are seeing that continued improvement quarter on quarter, which is good to see. So in terms of our overall profile, we've seen growth in our Cathedral City retail brand, and that's been supported by A&P in the first quarter. And we are taking shares, so we're seeing a sequential quarter-on-quarter volume growth for our core retail portfolio. And we're also shipping significant new private label volume now, and that soaks up the majority of our industrial volume. That's high-quality private label. And so we are significantly less exposed to the issues that we had last year. And therefore, we continue to see that improvement quarter on quarter. So the inventory is rebalanced.
Michael Van Elst
Okay. So, but if you have 24-month or 14-month age product, I guess you're still going to have some higher cost inventory in there as you cycle through that period. I think it was late 2020. to an early 2023 when the costs were high. So what is the breakdown of your aged product roughly?
Max
The biggest piece, Mike, is we're talking about a 12-month type period. There's product that the maturity of our profile of the cheese in Europe goes anywhere from three months to three years and even more than that. So even cheese that we have in inventory that's before the middle cost increase. So at some point, let's focus on the high volume from a cheddar perspective. And within a 12-month period, this is kind of behind us.
Lino
Okay. So the vast majority of that is behind you now. Correct. Okay. Perfect. Thank you.
Irene
We'll go next to Tammy Chen at BMO Capital Markets.
Tammy Chen
Great morning. Thanks for the questions here. On the U.S., I'm just curious. We're hearing other companies talk about the consumer. Sounds like they're deteriorating or softening more. So, I mean, there's a good performance in the U.S. segment revenue-wise year over year. I guess, could you talk about was that much more just the much stronger block price going through the results? Can you talk a bit more about volumes in your two primary end channels and if you're seeing any of this apparent further deterioration in the consumer in the U.S.
spk12
in your results?
Lino
Thanks, Tammy, for the question. I would say the following.
Lino
Yes, there has been some deterioration Traffic declines in some specific segments, including some QSRs. However, there are some offsetting channels, like retail. On the retail side, we're seeing some continued health, some shifts within different banners, moving to discount. But when we look at our overall portfolio and our supply to the Omni channels that we have, as well as our brands and our private labels, we're very well positioned to continue to supply the winning spaces. Beyond that, our own brands are also making some share gains across the board. So whether that is in string cheese, blue cheese, or other sectors, we're continuing to make progress and are improving our overall share. So, yes, there has been some declines in the overall QSR traffic. We're also optimistic, though, that our partners are going to continue to focus on driving value, bringing value back to their chains and driving some traffic. So, overall, if we answer the question around the revenue in the U.S., Certainly the block price change has an impact, but overall volumes are also healthy, and we're continuing to track well and stable.
Irene
Okay, got it.
Tammy Chen
And now thinking about the global strat plan here, the cadence, so just digesting what you just said about what's going on with Franklin, So if you've got the $26 million of your benefit in this quarter, I mean, I think before last quarter, I think you were suggesting we should think about the benefits from the global strat plan to be fairly consistent through the year, some sequential improvement. But with the commentary on Franklin, should we be thinking about now there's some volatility to that original thinking?
Lino
No.
Lino
So I think the number you're referencing is we would have shared an improvement year over year of about $100 million associated to those initiatives. And the number that we've shared of 26 is net of duplicate costs. So the best way to look at it is we will continue to make improvements quarter to quarter. The outlook for Franklin remains that we're focused on improving the overall efficiencies, all the while balancing that against making sure we get the orders out the door. So we're still confident on our $100 million mark by year end.
Irene
Got it. Okay.
Operator
We'll go next to Vishal Sridhar at National Bank Financial.
Michel
Hi, thanks for taking my question. I was hoping to get more perspective on the dynamics in Australia and Argentina. So is there any way you can give us perspective on the declines experienced in both? It's difficult for us or at least for me to triangulate because Australia is going to improve and Argentina is declining by some undisclosed amount, how to triangulate that pushing forward, particularly since you expect Argentinian to remain pressured, or at least that was my interpretation.
Max
Okay, Michel, this is Max. Just to give a perspective, the performance in Australia, if we look from a sequential basis, from Q4 to Q1, Australia performance was stable. It was impacted by the disconnect in the mill price and the international pricing, and there was nothing major that popped from a Q4 to a Q1. When we talk about Argentina, I need to bring you back to the Q3 big devaluation late in the quarter, which by itself started that disconnect between the inflation and the currency valuation. As a result of that, late in the quarter Q3, we did benefit from a lower peso devaluation in Q4. Hence, our margin in Argentina was quite healthy in Q4. But since then, the peso hasn't devaluated itself. So from a sequential basis, Argentina performance was impacted. We did not enjoy in Q1 the impact competitivity increase that brings a lower peso valuation.
Michel
Does that help? Okay. No, absolutely. I appreciate the perspective. So if the peso were flattish relative to where we are now, then we would expect that pressure in Argentina to continue throughout the year. Is that a fair comment?
Max
Well, the other variable is the inflation. What will be the impact of inflation? If inflation would diminish and it would be flat, then no, we would enjoy the margins that we've done in the past. But if inflation keeps coming, well, it does impact the input costs. It impacts the labor costs. It impacts the mill costs. So hence the pressure on margin.
Michel
I see. So Australia will improve, but Argentina, the outlook as of now is looking a bit more challenged. And just to be fair, go on.
Max
From a sequential perspective, more or less the same thing. Not so much of a decline from a sequential perspective.
Michel
Okay, understood. And I just want to get back to the comments off the top about the $2.125 billion. What is management's official position on that? Granted, I know when that target was issued, things have changed dramatically in the world, and that's a fair comment. But management did reiterate that target, albeit take away the timeline. So what is the point of view on that 2.125?
Lino
I guess I'll reiterate what we've shared before.
Lino
The plan that was put in place, the investments that we've made in our business position us well to capture the markets that are available today to meet consumer demands for tomorrow. And we really believe in our earnings power. But as I've shared with Irene in the earlier question, numerous variables are very different today than they were then. So when we will achieve that number is impossible to predict considering the various changes that have occurred in the cost of milk, the supply dynamics around the globe, the enormous amount of year-over-year inflation that has occurred, the impact on consumers. But all of that to say that our assets, our platform, are more efficient than they were when we started this journey, and it continues to position us very well to be able to remain competitive and to offer consumers what they're looking for on an ongoing basis.
Irene
Thank you for that.
Operator
Next, I'll move to Mark Petrie at CIBC.
Mark Petrie
Yeah, thanks. Good morning. And certainly echo all of the comments so far. It's been a pleasure over the years, Lino. I wish you all the best in this next chapter. And of course, big congratulations to you, Carl. I just have two short questions. First, on Europe, just to follow up, can you just talk about the profitability today of the other businesses outside of cheese? Is there any sort of evolution in that profitability level that we should be aware of?
Carl
Morning markets, Leanne. I mean, overall, we have stable margins across all of our businesses.
Mike
And of course, yes, we have a chief business. We've talked a lot about Cathedral City. And we also have a strong leadership position in spreads with our Clover brand. And that continues to be stable as well as our oils business.
Mark Petrie
Okay, so the path to returning to historical margins is really just a matter of selling through this inventory and that's largely or working through the higher price inventory and that's effectively complete. Is that right?
Mike
On the cheese part, absolutely, Mark. You're correct. The other piece I would say is that we also have an ingredients business that we sell that's exported from the UK. And we have seen recovering volumes on our ingredient business. However, pricing is still lower than a year ago. And that does reflect the soft demand in China in infant formula and across the globe. So that's a combination for the UK. So in terms of our outlook, you know, that ingredient business we see for ingredient pricing, it's still going to continue to be stable across the rest of the year, but it's absolutely lower than last year from a pricing perspective, even though we're continuing to get good volume.
Mark Petrie
Yeah. Okay. Fair enough. And then my other question is just on Canada, obviously another strong performance, particularly interested to hear you calling out mix as a positive and just hoping you can expand on specifically what's behind that. Is that just sort of a continued repositioning of the brands towards value add and you're sort of gaining shelf space or do you feel like you're taking share sort of on a sell-through basis? Just if you could expand on those dynamics, that'd be helpful.
Lino
Yes. Thanks, Mark. So the Canadian team has made some, you know, Significant progress over the years at brand development. In particular, Armstrong Cheese continues to grow and take share throughout the market. On the fluid side of our business, we're also improving our share with regards to value-added milks. That is improving the overall mix. And we remain healthy both in the food service space as well as in retail and servicing the channels. that are winning. And yes, discount channels are winning over traditional banners, but we're well positioned with our brands as well as our private label offerings to continue to succeed in Canada.
Lino
Okay. Appreciate the comments and all the best. Thank you.
Operator
We'll go next to Rob Dickerson at Jefferies.
Rob Dickerson
Great. Thanks so much. Just two questions for me, hopefully pretty easy. Just in terms of the quarter, I know you said volumes were up across all segments. Do you ever provide maybe what they were, at least on a total company level?
Max
No, we do not disclose the volume, the quantity, basically. We kind of give an indication in terms of... over or more or less, but we do not provide that type of sensitive info.
Lino
Okay, fair enough. All right, not that sensitive.
Rob Dickerson
Anyway, so I guess the question is, right, you know, kind of consumers have been pressured in the U.S. market, you know, across a lot of different companies. You know, there's been some sequential improvement in demand There have been kind of some green shoots, seeing that maybe things start to settle a little bit. But then we spend most of our time or a lot of the time on the price of block cheese. So I was just trying to gauge the consumer demand aspect of the business, specifically in the U.S., given it's like 50% of revenue. So I guess maybe another way to ask it is just, What would you say very simplistically do you believe would be the driver of that volume improvement in the U.S. within the category? Because it also sounds like maybe you are taking some share, which would be great.
Lino
Yeah, so there may be some volatility here in the short term with all of the information that we're seeing and hearing about the pinch on the consumer and some traffic slowdown specifically in the food service sector. But again, you are right, Rob. We are making some gains, some share gains in the retail space. And we're also making some share gains in a number of growing categories. So there are some categories such as cottage cheese that continue to be very healthy. And we'd be an important partner supplier in that space, and we're being very opportunistic across the network in making sure that we fill the voids that others may be leaving. So overall, despite the consumer being squeezed and making some difficult choices, from a demand perspective, our outlook is still stable, and we don't foresee that changing with the kind of portfolio and our ability to navigate through multiple different channels.
Rob Dickerson
All right, super. I like that. And then I guess the second question on the spread block milk, you know, clearly, you know, we've seen the price of block go up a fair amount over the year, but we've also seen the price of milk go up. So, The spread has improved, which is great. But at the same time, you know, we're getting still acceleration within the dairy market. So I'm just curious, like, as we think, you know, out even just the next quarter or two, you know, like, what's the feel of the marketplace? And again, I mean, I'm speaking to the U.S. because I realize, you know, global dairy is a little different. but maybe just kind of any color on kind of some of the core markets because, you know, it is kind of all about the spread and we've seen block go up, which is great. But milk is also going up and like a little tweak to either one of them can be very, you know, material to the overall business. And I think I heard you say earlier, kind of, you kind of expect, you know, maybe some, stabilization kind of ish in those two prices as you think forward through the year. That's all. Thanks so much.
Lino
Maybe what I can add, Rob, is what gives us confidence in having some stability or some strength in the commodity markets is really all around the milk supply versus the demand So we're seeing a fairly stable demand for dairy products in the U.S., as well as the demand on the export side for U.S.-based products. And when we take a look at the overall supply of milk in the U.S., it's not growing. So when we look at those two dynamics, we're comfortable in saying that there's a healthy balance between the two. This should keep prices healthy. Those dynamics would be what we would anchor to as we look forward. And the other piece is some of the most recent published information around inventories for cheese in the U.S., as well as some waste solids, would suggest that they're tight. So, with all this said, I think that we've got some strong fundamentals in the U.S. dairy commodity space. All right.
Rob Dickerson
Super. Thanks so much.
Operator
We'll take a follow-up from Chris Lee at Desjardins.
Chris Lee
Thanks very much. Just maybe two more questions for me. The first one is just another follow-up on Argentina. Max, I was wondering if you can give us a sense of how big Argentina is in terms of EBITDA. We know from the disclosure that it's about a billion dollars in terms of revenues, but just in terms of EBITDA, can you give us a sense of how big that business is?
Max
Well, I would say I would lean you to Argentina having more margin aligned with the rest of the business rather than, you know, maybe over-performing relative to the devaluation of the peso. The devaluation of the peso for our export business gives definitely a hedge on margin generation. If you remove that hedge, we fall more or less the same line as the rest of our business.
Chris Lee
Okay, but in the last four months, I guess what you're saying is that it's actually a lot higher because of that benefit of the caseload evaluation.
Max
We're running a healthy business out of Argentina with export. Very healthy. We're happy. And it's still healthy and simply not maybe less favorable than it was. But trust me, it's still healthy.
Chris Lee
Okay, thanks for that. And then my other question, maybe this one is for Carl. Just a longer-term question. Just, you know, we'd love to get your thoughts on, you know, the potential changes in the federal milk marketing orders in the U.S. You know, what is the latest update you're hearing from that, and what is the potential impact on your business if the proposed changes are actually implemented as proposed? Thank you.
Lino
Thanks, Chris, for the question, and thanks for leading into it being proposed, because we're not at the finish line yet. But the proposal that has been tabled, that still, of course, is in a period of commentaries. There's still a milk producer vote that needs to happen in the fall, needs to go through legislation. And at the earliest, implementation would be sometime in June or July of next year. So if we put the timeline aside for a second... We certainly applaud and we're encouraged by what the current draft proposal is or the proposal is suggesting. It is addressing make allowances, which as you may know, have not changed over the last 16 years. So certainly this would look favorable to us and it would help offset all the inflationary pressures that we've absorbed over that same timeframe. But again, it's in draft form. We're a long way from this having any type of impact on our results. And if things were to stick to where they are today, yes, it would be favorable for us.
Lino
Great. Thanks very much.
Operator
And that concludes our Q&A session. I will now turn the conference back over to Nick for closing remarks.
Nick Estrella
Thank you, Audra. Please note that we will release our second quarter fiscal 2025 results on November 7th, 2024. We thank you for taking part in the call and webcast. Have a great day.
Operator
And this concludes today's conference call. Thank you for your participation. You may now disconnect.
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