Saputo Inc.

Hello, and welcome to the Spudos Third Quarter Fiscal 2026 Financial Results Call. 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 star, followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. I'll now turn the conference over to Nick Estrella, Head of Investor Relations. Please go ahead.

Thank you, JL. Good morning and welcome to our third quarter fiscal 2026 earnings call. Our speakers today will be Carl Kalitsa, President and Chief Executive Officer, and Maxim Teryin, 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 third 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 Carl.

Thank you, Nick, and good morning, everyone. This quarter was a powerful reminder of the impact of disciplined execution and a clear strategy. Across the company, teams stayed focused on what matters most, customer service excellence, strengthening our operations, and advancing the initiatives shaping our future. Commercial momentum was strong as we continued to deepen customer relationships, solidified our presence in key categories, and sharpened innovation and brand building. We are getting more of the right products in the right markets and reinforcing the relevance and reach of our portfolio. At the same time, the operational foundation of our business is also growing stronger. Capital investments made over the past several years are translating into a more efficient and reliable network, one that supports consistent fulfillment as well as flexibility to respond to shifting market dynamics. Coupled with disciplined cost management and resource allocation, these improvements drove meaningful margin progress in the quarter. Our global export markets, we benefited from a favorable relationship between selling prices and milk costs. In domestic markets, we navigated inflationary pressures through ongoing responsible pricing actions while maintaining customer confidence. Finally, I want to highlight our strong cash generation this quarter. Commercial execution, an efficient operating network, and prudent cost management translated into robust cash flow delivery. This reinforces the financial flexibility supporting our long-term strategy. We also continue to repurchase shares, returning capital to shareholders while increasing capacity to invest in our future. I will now turn the call over to Max for the financial review before providing concluding remarks.

Thanks Carl and good morning everyone. I will expand on our financial performance for the quarter. Q3 was another solid quarter for Saputo, marked by strong commercial execution, disciplined cost management, and meaningful operational efficiencies across our network. We delivered higher sales volume in all sectors, supported by strong customer demand and fill rate execution. We benefited from a favorable product mix and pricing action across key domestic categories to offset inflation and higher input costs with our North American platforms benefiting from a richer mix driven by growth in cheese and value-added product categories. Adjusted EBITDA increased 18% for $75 million to reach $492 million, reflecting continued commercial momentum, efficiency gains from recent capital investment, and tight cost control over SG&E. Margin expanded to 10.1%, up from 8.4% last year, reflecting solid operational performance. Revenue came in at 4.9 billion, down 2% from last year, largely due to the effect of lower commodity markets in the U.S. Net earnings were 220 million. On an adjusted basis, net earnings were up 41% at 235 million, and adjusted EPS increased 46% to 57 cents, benefiting from stronger earnings and the impact of our share repurchase program. Net cash from operation remained strong at $401 million, driven by both improved EBITDA and ongoing working capital discipline amid fluctuating market prices and ongoing inflation. These efforts contributed to year-to-date net cash flow from operation of $1.1 billion, significantly higher when compared to last year. debt-to-adjusted EBITDA ratio improved to 1.76 times below our long-term target range, underscoring the health of our balance sheet. Through the first nine months of the year, we returned $646 million to our shareholder via dividend and via the repurchase of 12.6 million shares under NCIB. The Canada sector benefited from solid momentum with revenue up 4% and year-to-date growth of 5%. Strong commercial execution drove higher sales volume and a more profitable mix supported by growth in value-added milk versus core white milk and continued gain in cheese and cultured products. Specifically in cultured, Cottage cheese continued to pose significant gains, with Saputo Cottage Cheese improving share in both the latest 12 and 52 weeks. Pricing also supported the top line, mitigating inflationary pressure and the higher cost of milk. On profitability, adjusted EBITDA was up 8%, reaching $189 million. That improvement came from two places. higher volume and favorable mix, and the efficiency gains we're capturing from our automation and production investment. These efficiency projects are reducing our costs and strengthening our position as a low-cost producer. Continued SG&E discipline help absorb higher wages and compensation costs. Overall, the sector is running with strong volume, a healthy product mix, and tight cost control. For the U.S., revenue came in at $2.1 billion, down 7% from last year, mainly reflecting lower U.S. dairy commodity prices, especially butter and cheese block prices. That said, our pricing action to offset inflation and higher dairy ingredient market prices helped to mitigate part of the decline. across both the quarter and the year to date, underlying demand strengthened with higher sales volume in retail, food service, and value-added ingredients. Several of our largest customers increased their pull-through, highlighting the strength of our relationship and our ability to support their evolving needs. During the quarter, the team delivered several notable commercial wins. We kicked off a partnership with one of the fastest-growing brands in value-added milk, marking an important step as we look to capture our fair share in this dynamic and growing beverage segment. We also achieved exceptional holiday execution in cream, driving strong results across the category. Heavy cream, in particular, grew 7%, outperforming market consumption supported by strong commercial positioning with winning customers and fill rates. In addition, the mozzarella category delivered solid growth supported by our ability to respond effectively to sustain demand in export markets. Adjusted EBITDA was $185 million, up 16% driven by volume growth, favorable mix, and operational improvement. Our efficiency initiatives and the benefits from the recent capital investments are flowing through, including the consolidation of our Green Bay plant into our Franklin facility. We also continue to scale up our new consolidated Midwest warehouse, where early efficiencies are already helping offset transitional costs. The commodity market impact was a headwind compared to last year, primarily due to negative inventory realization in cheese during the quarter. The new milk pricing formula worked as expected and contributed positively. Labor and compensation costs were higher, as were investment in advertising and promotion. Our SG&E optimization served as an offset. Overall, the US sector delivered stronger volume and continued to capture benefits from our network optimization and cost reduction initiative, driving meaningful margin expansion. For the international sector, Revenues were $994 million, down 3% from last year. Higher sales volume across the sector were supported by improved milk availability in Argentina. In Australia, lower export volume were partially offset by stronger domestic sales, consistent with our mixed optimization strategy. Revenue also benefited from higher international cheese and dairy ingredient prices versus last year. Adjusted EBITDA for the quarter was 82 million, up 61% driven by higher volumes, product mix optimization, and a much more favorable relationship between international prices and milk costs. For the Europe sector, Revenue worth $336 million, up 8% from last year. The growth was driven by higher sales volume supported by increased advertising and promotional activity behind our branded cheese portfolio. Bald cheese sales volume were also up on higher milk intake, though at lower market prices. These gains were partially tempered by softer retail volume in non-cheese categories. Adjusted EBITDA came in at 36 million, up 16%, with margin improving to 11%. The lift was driven primarily by a more favorable balance between selling prices and input costs, which helped restore margin, supported by higher volumes. We benefited from the consolidation of our cheese packing operation in Nuneaton and continued progress on our ingredients strategy, both of which delivered operational efficiencies and cost savings. In summary, our Q3 results demonstrate solid commercial execution, sustained volume growth, discipline in strategically phased A&P investment, that continue to build through the year and tangible operational improvement across the organization. We're strengthening our margin, expanding operational efficiencies, and generating robust cash flow, all while maintaining a very strong balance sheet. We remain confident in our ability to continue navigating macroeconomic volatility and our continued focus on driving sustainable value creation. With that, I'll turn the call back to Carl.

Thank you, Max. In Canada, we deliver a second consecutive quarter of record profitability. This reflects disciplined execution and the strength of our commercial platform. Automation initiatives also continue to deliver meaningful operational efficiencies. We deepen customer partnerships across retail, food service, and industrial market channels. Progress was anchored in sales-led wins that drove meaningful volume and mix improvements, driven not just by pricing, but by stronger customer uptake, reinforcing the relevance of our portfolio. Our brands also continue to expand household penetration. Dairyland, Nielsen, Milk to Go, Seputo, Armstrong, and Scottsburn each won a BrandSpark Most Trusted Award in their category. Alexis de Parneuf earned silver and bronze medals at the World Cheese Awards, further validating the strength of our offering and customer brand trust. Supported by strong commercial foundations, consumer demand remained robust, with Canadians continuing to prioritize nutritious, high-protein dairy options. This trend was reflected not only in category growth, but also in the success of recent product launches. This includes the Armstrong protein line and our new Dairyland and Nielsen protein beverages, which are gaining meaningful traction. Complementing this, a major national food service partner continued to exceed expectations, driven by strong uptake of its protein beverage platform. Our portfolio is well aligned to consumer shifts, spanning everyday essentials, value-added offerings, specialty cultured products, and premium dairy foods, all supported by a growing range of high-protein innovations. In retail, sales volumes increased year over year, with broad-based category growth. We also grew our presence with major retail banners and smaller independent grocers, enhancing our retail scale and diversity. Despite a generally soft market backdrop in food service, our business remains resilient and we continue to distinguish ourselves. We are outpacing peers through strong channel delivery and increased our presence in select strategic accounts. Overall, we are leveraging our resilient and connected commercial platform, supported by disciplined pricing, cost management, and brand investment. I am proud of our teams for driving this level of performance and positioning the business for long-term sustainable growth. In the U.S. sector, we executed well on the elements within our control and our performance exceeded prior year levels. While market headwinds did have an impact on our overall results, our underlying business remained solid and continued to demonstrate resilience. Strong volumes anchored performance and operational efficiencies partially mitigated the impact of market dynamics. In the U.S. commodities landscape, markets were highly volatile this quarter, and we anticipate this volatility will persist through the remainder of the fiscal year and into the next year. Across the QSR landscape, operators are increasingly leaning into cheese-forward offerings. From value menus to new cheeseburger and mac and cheese innovations, signaling where commodity values have moved and pointing to firmer demand. As these consumer-facing promotions expand and industry demand strengthens, we anticipate a gradual recalibration of markets. Through it all, our focus remains on the elements within our control, and in this regard, we remain firmly on track. Team focus has been on operating with disciplines. supporting our customers, and positioning ourselves to capture momentum as conditions normalize. Customer engagement continued to grow strong across retail, food service, and industrial channels, demonstrating portfolio relevance and partner confidence in our ability to support their growth. We are seeing strong momentum in our ingredient strategy. At our Rupon, Wisconsin facility, Our approximately $180 million investment in upgraded whey protein systems, now producing both WPC80 and WPC34, along with our new state-of-the-art Laxos dryer, is transforming the platform. These advancements are boosting WPC80 output by roughly 35%, elevating product quality and positioning us to lead in the fast-growing high-value protein and lactose solutions categories. In a dynamic global marketplace, we are strengthening commercial flexibility, elevating product quality, and reinforcing our leadership as a trusted partner for high-performance, value-added dairy ingredients. The multiyear work to modernize and optimize our network is paying off. With the permanent closure of our Green Bay, Wisconsin facility and the transfer of production to our Franklin site, this phase of consolidation is now complete. As the Franklin facility integrates additional packaging activity, increased scale and streamlined processes have enabled the plant to boost output by roughly 30%, positioning it to operate more effectively and respond faster to customer needs. These changes are already enhancing cost optimization and the speed at which we can respond to market needs. Across the business, our US team remains proactive and customer-centric, continuing to deliver fill rate performance that ranks amongst the industry's best, supported by strong operational discipline. Our commitment to network optimization and cost management will enable us to compete effectively and deliver sustained progress. We view the newly released Dietary Guidelines for Americans as a constructive development for dairy as they continue to recognize dairy as a nutrient-dense food. The guidelines highlight high-quality protein, calcium, and key vitamins, reinforcing consumer interest in foods that deliver meaningful nutritional value, versatility, and affordability. This environment supports our strategic focus as we invest in high-protein, functional, and value-added dairy categories and leverage our scale and brand strength across retail and food service. Taken together, favorable nutrition guidance, continued innovation, and our diversified portfolio position us well to meet evolving consumer needs. In our international sector, this quarter demonstrated the strength of our teams and the resilience of our platform. In Argentina, We saw some moderation in operating pressures as inflation and currency trends showed periods of better alignment, which eased certain raw material cost pressures. That said, the situation remains dynamic, with macroeconomic volatility in Argentina continuing to be an important element for us to navigate. Australia delivered a solid quarter, supported by strong momentum across domestic retail and food service. Higher export pricing helped balance the increased cost of milk and seasonally stronger milk intake enabled higher cheese production, allowing us to optimize output for every liter of milk to meet growing demand during the quarter. Our teams continue to adapt and rise to the occasion in very different market environments, staying focused on long-term strategy and strengthening our market position. In Europe, We delivered a strong quarter that reflects our commercial capabilities and the progress we are making in repositioning the business. There was renewed energy in our branded cheese portfolio, supported by thoughtful investments in marketing and consumer engagement to strengthen our brand presence. Cathedral City delivered a standout performance, generating strong volume growth with material household penetration gains that reinforced its position as a leading trusted choice for consumers. Operationally, this has been a year of meaningful change. We completed important steps in modernizing our network, including the transition of production capabilities and the relocation of cheese packing operations to Noniten. We maintained service levels and efficiency, even as we navigated through the transition phases. Across all our sectors, progress reflects a common thread. Disciplined execution, stronger brand engagement, and trusted partnerships with customers. Our people are delivering and their efforts are positioning us well as we enter the final stretch of the fiscal year. Together, we are building a modern and future-ready company, one that is aligned with consumer expectations and able to capture growth opportunities with confidence. As we look ahead, the opportunity in dairy remains exceptionally strong. Protein-rich diets and the latest dietary guidelines all underscore the critical role high-quality dairy protein will continue to play. And while global supply and demand are not yet optimally balanced, this does not change our confidence in meeting the needs of a market that is clearly expanding. Consumers, customers and partners want to participate in this growth, and we are well positioned to lead, from optimizing the value of our waste solids to strengthening every link in our value chain. The industry may encounter bumps along the way, driven largely by milk supply dynamics, but the long-term trajectory remains clear, and we are ready to capture the full potential ahead. This 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. If called upon to ask a question, please ensure that your phone is not on mute when asking a question. Your first question comes from the line of Irene Nettel of RBC Capital Markets. Your line is open.

Thanks, and good morning, everyone. First of all, congratulations on another great quarter. It's really exciting to see F26 evolve, you know, as the key inflection year that we had all hoped for. But how should we think about the next phases of sort of the evolution from this new base that you're establishing as we look ahead, let's say, through calendar 26 or into F27 and beyond?

Thank you, Irene, for the question. I would say that when we consider where consumers are headed. And when we think about the nutritional value that dairy can bring to the consumer's mindset of consuming nutritiously dense foods, dairy is in a great position. And accordingly, our platform and our portfolio is exceptionally positioned to be able to capture that momentum as well. So the short answer is that we feel great about our future on the basis of the assets, the portfolio, the brands, the talent that we have in the organization, to capture what consumers are growing into with regards to their diets, nutrition, and dairy will play a very important role in supplying that protein demand that comes with all of that.

Thank you, and that leads into my next question. In the first section of your prepared remarks, Carl, you said something about the free cash flow providing increased capacity to invest in our future. Could you elaborate on exactly to what you are referring and what we should be expecting?

For sure. Our strategy is anchored in meeting customer and consumer needs. And it is increasingly clear what our partners are looking for. And accordingly, our business is built for and our objective is to continue to grow. And in order to do that, we will not shy away from investing in ourselves in order to capture the organic growth that is upon us. So, We will continue to look at options for capital investments in order to bolster our capabilities with our existing portfolio to support our growing brands, our flagship brands. We will also continue to invest in opportunities to grow with the ingredient sector. And that ingredient sector is primarily where we will see high demand for proteins. And in order to do that, once again, we won't shy away from looking at capital investments or looking at M&A that could help us get to market quicker. So all of those things are on the table. We continue to take a very balanced approach to capital allocation as a whole. We always have a long-term strategy, but I can assure you that today, the clarity that we have from the consumer and the customer marketplace is very clear. and our our runway here for what to invest in and to grow with is abundant thanks that's that's fatal handing off to someone else to pick at that answer thank you your next question comes from line of michael van elst of kitty cowan your line is open hi thank you and um i wanted to uh

touch on just the overall performance. It was a very strong performance across the markets in terms of your execution. But what I find interesting is the level of price discipline you were able to maintain across your geographies, even in an environment where we're seeing some of the highest milk supply growth that we've seen in a long time, especially in the last six months. So what are you doing and what's allowing you to maintain that price discipline and not feel pressures in your margins?

Thanks, Mike. It's a good question. And generally speaking, milk supply has increased across the globe, certainly in every platform in which we operate in. And it's provided us, first and foremost, the comfort that the raw materials will be there to supply our marketplace. And our marketplace continues to grow. And that growth is happening in a number of different categories. But at the core of why Saputo outpaces and excels versus that of our competition, despite an industry growth, is fundamentally our operational execution. It has everything to do with our fill rates and has everything to do with the partnerships that we have with customers. We are often the first phone call someone makes when they are looking to capture an opportunity. And probably equally and more importantly, we also help our customers make sure that they capture what consumers are looking for with regards to nutrition and ensuring that they understand how dairy can play that role. And being proactive fundamentally and being able to back that with supply is what's keeping us at the forefront of our current momentum with volume, with sales, and with revenue.

Okay, so it sounds like a combination of just, you know, the execution and the partnership with your customers as well as solid demand growth helping to offset that milk supply increase.

You're right, Mike. And I want to underscore that although we do have across the globe very meaningful increases in the supply of milk. I think I've said this in prior calls. Capacity was added in numerous geographies. The farming community showed up, provided the raw materials for these assets to be productive, to be able to capture the market demand, the growing market demand for dairy. So we're in a very good spot when it comes to the supply of raw materials. But we also have underlying demand growth. And at the end of the day, we're actually fortunate to be in that position versus what we also lived through in some of the prior years, which was a shortage of that very same raw material, our milk. So again, Saputo's outpace of the market comes from I'll say our secret sauce, which fundamentally is about how it is we execute, how it is we service our customers.

All right. Thank you. And just to follow up, there was one – well, you went through a list of things that was helping to support your margins and expand your margins. But there's one that kind of stood out for me and I'd like to hear of some more color. And that was you said you have a more resilient operating model. What has changed and can you explain how that's helping you with your margins?

Well, if you recollect, the capital investment program that we embarked on four-ish years ago now included also a lot of rationalization, included a lot of new equipment commissioning. We are certainly at the end of that program and accordingly, our platform is now more resilient by virtue of fewer assets that we're operating, more efficient. And one thing that I want to underscore is that the talent in our plants is also more stable. The learning curve is mostly behind them. And so we are executing and firing on all cylinders at this point. And that's what allows us to have industry-leading fill rates. And when you have that kind of credibility in the marketplace, regardless of the channel, be it food service, retail, or industrial, orders will come. And that's translating into our revenues and translating fundamentally into our bottom line. And then I'll say one last thing around the resilience piece, the definition of that. It also includes first-pass quality. Our resilience isn't just about manufacturing a quantity of goods, but it's ensuring that we have the quality on first pass. And that is also at exceptional levels today. So we're very proud of where the team is at following multi-year capital investment strategy.

Great. Thanks, Carl.

Your next question comes from the line of Scott Marks of Jefferies. Your line is open.

Hey, good morning. Thanks so much for taking our questions. Had two questions both in the USA sector. First, you called out in the prepared remarks some of the changing U.S. dietary guidelines and how that positions some of your products favorably. Wondering, have you actually seen any increases or incremental increases in customer orders or demand relative to what you've already experienced this fiscal year?

Well, the dietary guidelines came at a time when we were already seeing incremental demand for high-protein or dairy-rich products. So I can't necessarily link it to the dietary guidelines, but I can assure you that that momentum in and around the definitions and the guidance that the dietary guideline is presenting was already present. So this is just another point in which I am confident that the benefit will come in the long term as well, and it will help sustain the knowledge of nutrition, nutrient-dense foods, and how dairy and dairy protein specifically plays an important role.

Understood. Thanks for that. And second question, obviously you guys posted a pretty strong quarter in the U.S. despite some of the commodity markets. You know, as we think longer term, obviously given your improved operational position, maybe how should we be thinking about, I don't know, normalized run rate profitability for this business in the future once commodity markets do kind of stabilize?

Well, our objective in the U.S. has always been the same, and that is to be in the high single digits to, you know, trying to achieve a double-digit margin, EBITDA margin for the platform and we're well on our way with the investments that have been put in despite the headwinds that we had in this quarter, our business did deliver and they delivered on the basis of first and foremost having the volume through our plants equally being able to deliver on the orders that have come through and we're not done yet. Keep in mind that What we're seeing now and what we'll lap into next year will be the full benefits of the duplicate costs being removed. We're going to see the full benefits of our warehousing operation consolidation and improvements that we're putting through. And, of course, we're not done yet with our capital investment program. We haven't necessarily underscored all of the things that we're working on, but I can assure you that levels of automation are part of it. and we also have further plans to capitalize on the existing and most recent investments in the ingredient space. And, you know, the name of the game in the U.S. is going to continue to be efficiency and ensuring that we supply the market needs both domestically and on the export. I want to ensure that I'll sort of underscore that the export market from the U.S. platform, based on the milk competitiveness in the U.S., is a very important component of our future growth.

Appreciate it. Pass it on.

Your next question comes from the line of Vishal Sridhar of National Bank. Your line is open.

Hi. Thanks for taking my questions. With respect to the outlook, you know, now that Franklin is up and running and the Wisconsin wave facilities and Green Bay is shut down, can you give us a context of how much Assuming those are the major projects, how much remaining efficiency is set to be captured from the initiatives that you had in place and now are culminating? And how we should look at just early takes at the next fiscal year in terms of what the improvement magnitude will be from some of these initiatives?

Well, what I would say is a couple things. From a WAVE perspective, you mentioned two things. There's Franklin and WAVE. From a WAVE perspective, We're only just beginning to unlock the incremental capacity that we've added in WPC 80. So there's still further upside for sure. When you think about Franklin, the floor plate in Franklin still has much room to grow. And when you think about future capital investments for us, Franklin will be a nucleus whereby we will be looking to add some capabilities for further retail growth and retail offerings in our portfolio. So Franklin will continue to contribute to the U.S.' 's bottom line for many years to come, considering the infrastructure that's in place. So I would say that from that standpoint, there's still a lot of headroom in those two Wisconsin-based facilities. to continue to contribute to the U.S.' 's growth. And I also want to ensure that we appreciate that there are other areas within the country that we've also invested in, and that includes capacity and capabilities for flagship Cheeseheads brand. Incremental capacity has been built, is being added as well, to continue to service the growing demand and the growing market for cheese snacks. So there are a number of angles that we continue to work on in the US. And I have yet to mention some of the very interesting aspects on the dairy food side that we're working with partners on in the growing functional beverage and high protein beverage space as well.

Okay, thank you for that. And with respect to the acquisitions that you cited are within your framework, Do you anticipate them to be North America focused or are you looking internationally as well?

Yeah, and maybe just take the opportunity to clarify on M&A. M&A is part of our DNA. It's always been part of our history. And considering that our strategy is to grow as a business, M&A will be one of the contributors to how we will achieve incremental market penetration, or expand in some channels whereby the fastest path to capturing the opportunity will be through an acquisition. And yes, a lot of the focus will be here in North America, where we know the domestic markets extremely well, but we also understand where our milk cost base is, and the US milk cost base in particular remains extremely competitive.

Okay, and lastly, what is your perception of the capacity added in dairy over the last several years and the market's response to that capacity addition in dairy? And do you anticipate that to have pressure on margins, or do you think that the market looks balanced for the years ahead?

I think the pressure is here already. We've, you know, the additional... milk supply and the pace at which milk supply has been brought on for a number of reasons. The milk supply is as strong as it is, including the resilience of the farming community, but there's also been a number of factors that have been contributing positively. First, it was a healthy year for feed. Accordingly, there was a very strong or favorable relationship between feed costs and milk production that encouraged milk farming. In addition to that, the components, according to the feed quality, were also very strong. That's brought in, you know, on a world global average, almost 5% increase in the overall milk supply. Thankfully, there are assets there to process it. Demand has grown as well, but hasn't grown at the same pace as milk for now. But this is the now, and we're in it. If you look in the medium to long term, we feel good about the assets that have been put in, the availability of raw milk to meet first and foremost the demand that is present and that continues and the signals are out there that are growing. And we're going to be in a position where we're going to need to, we're going to need all that milk and then some.

Thank you.

Your next question comes from the line of Mark Petrie of CIBC. Your line is open.

Yeah, thanks. Good morning. Just to follow up on a couple things, Carl, just with regards to the outlook, you know, you're now calling for volatility in the U.S. dairy market for a little bit longer than I think you were before. Does that really just relate back to the supply dynamics on milk?

Yes, you're right, Mark. And, I mean, look, I think the word volatility, U.S. volatility has been there for now for quite some time. What we're calling for really and what we're trying to articulate through that messaging is that there's an abundance of milk supply right now. As I said, that growth is outpacing the growth of some of the dairy categories, but we can absolutely see there's a line of sight and it's already beginning. If you take a look at the most recent global dairy trade index. There was a sharp 6% to 7% rise on that index. And you can see that the demand is starting to catch up, if I can say it that way. So yes, our call out is related to the current abundance of milk, readily available amounts of milk. But we're looking way past that. And we're saying we're in a great position to be able to capture demand from the marketplace without having to worry about raw material supply.

Yeah, understood. And just to follow up again on, you called out international, that was sort of one of my other questions, which is, it does seem like maybe the balance is a bit better there. Is that a fair characterization? And I think you sort of said it, but that relates more to demand than supply. Is that fair?

There's a healthy supply of milk in our international sectors as well, as well as the resilient, robust demand. The protein phenomenon and the demand for protein-rich foods is absolutely global. It's not just a North American thing. We're seeing that in Southeast Asia. We're seeing it in China, of course. We're seeing it in Europe. We're seeing it in Oceania. It can go on and on. The phone rings every day and the first thing that comes up outside of cheese is What protein do you have available? What quantities? And what's the supply outlook? So I can tell you that we're in a position whereby that demand and the strength of the demand and the long-term view on it is global. And we feel comfortable with the supply that we have in the operating platforms that we're in. And even in the areas that we don't operate in, we feel good about the overall dynamics that are going to improve here over the coming months and quarters.

Yeah. Okay. Thanks for that. And my last question, you know, when it comes to sort of brand building and kind of the new mindset that you guys have executed on over the last number of years, particularly in Canada. I think you've held up Armstrong as sort of the best example of that. You mentioned Cheeseheads in the U.S. as a platform. Would that be the brand that you would highlight in the U.S. as sort of following a similar playbook? Not the same, you know, just different product and brand, but similar? Is that fair?

Well, what I would say is the discipline, the methodology, and how it is we make choices for investment, absolutely the same. And that's part of our sort of our commercial roadmap. But the two brands don't have the same essence necessarily. Armstrong is your everyday cheese brand with a broad portfolio. Cheeseheads is more of a snacking inconvenience. There are other brands in the US that we will continue to lean on, including some of our specialty cheese brands in Monchev, Treasure Cave, Frigo, Black Creek. So, you know, the playbook in where and how we invest will be the same across our network. We're learning from each other, learning to manage data and dissect and digest insights differently. But certainly, first and foremost, we have a heightened appetite to invest in our brands and our flagship brands. And those also include Northern Geographies, Cathedral City, Devondale, and so forth. And I see the incremental A&P spend that we've put through in this last year paying off and giving us the continued confidence to do so. and narrowing our focus and improving our position here in the U.S., especially when it comes to our retail offering.

Yeah, okay. Appreciate that answer, and all the best.

Your next question comes from the line of Chris Lee of Desjardins. Your line is open.

Oh, good morning, everyone. Let me start off the question on international. Obviously, it's been very strong this year with the recovery of Argentina and Australia holding its own. What does the outlook look like next year as you start to lapse some of the recovery in Argentina and presumably starting to face lower GDP prices? So what are some of the key puts and takes as we look into F27? Thank you.

Well, overall, what I would say, and I'll tackle them separately, if I look to Australia in particular, the Australian milk supply, although not growing, is stabilizing. And we continue to execute on our strategy to focus a greater amount of the milk and milk share that we have to the domestic markets, both the retail sector as well as the food service sector. And the team has executed that extremely well. And equally, when we look to the export markets, despite the diminishing volume going to that market, we're moving up the value chain as well in the export markets. with more value-added products going out from the Australian platform. So despite where the GDT was at, we feel good about the relationship between the milk price and the selling prices of the products we bring to the market. And there are very early signs as well when you take the very last of the GDTs with a strong demand and strong pricing recovery that give us optimism for Australia as well to continue with its momentum. Because I can assure you that the platform is at the right size and the platform is very efficient to capture the market needs. And when it comes to Argentina, we also see that the milk supply that rebounded in a very healthy way this year. You know, we captured close to 9% incremental milk this year based on all the reasons I described earlier around the quality of feed, the feed ratio, and of course, climate. Environmental conditions were favorable for milk supply, and we don't see that as of right now changing in the Argentinian supply. And equally, we also see the cost of Argentinian milk remaining competitive so that we can continue to prioritize our export markets.

That's very helpful. Thank you. And if I can just maybe switch to the U.S. Obviously, over the last number of years, we've made a lot of investments in cheese, and we're certainly seeing the fruits of those investments. Dairy food is also a very big business, and probably already alluded to some of the initiatives that we're working on. on the beverages side, et cetera. I was just wondering if you can maybe perhaps elaborate a little bit more on the dairy food business and execute well. How meaningful could that opportunity be, let's say, over the next couple of years?

So maybe just by reminding us a little bit about the portfolio in itself. And the portfolio of dairy foods includes – products that we bring like heavy creams and half and half for coffee creamers, things of that nature in gable top form, if you like your traditional cartons, aerosol products, ice cream mixes for soft serve, value added beverages, both in aseptic packages and in ESL formats as well, yogurts and other cultured products. And of course, one of the products that is in very high demand, both in Canada, the US, and really across the globe, cottage cheese. So when I think about how we'll be able to expand in that sector, our dairy foods platform is well positioned to meet that growing customer demand in cottage cheese, better for you beverages, and We're already investing in some of these areas, and we will continue to amplify our offering in this sector.

Great. And then last question still on the U.S. is just with respect to you guys aligning yourself with customers that are growing, where are you on that journey? Given the stronger execution, what does that pipeline look like in terms of gaining new businesses from large customers? And then as you're doing that, What type of reaction are you getting from your competitors?

You cut in and out first, but I think I understood based on your last segment. But I would say that the U.S. market has always been competitive. I've said this before, and it remains competitive. But beyond that of just general competition, there is also a continued underlying demand And so for us, it's ensuring that we are as often as possible first to market with capturing the growing elements of trends in particular. And I know I've said this several times now, and you'll hear us talk about it with confidence and with enthusiasm, but high protein products are very important to the consumer lineup today with dairy. And there are a number of products that we offer. that meet that, and that includes cottage cheese, it includes everyday cheese, it includes value-added beverages, and of course, ingredients. And so, when I think about competition, I think of it more as competition for the consumer and being first to the consumer's mouth, not so much about the demand uptake.

Perfect. Thank you very much, Carl.

And again, if you have a question, please press star 1 on your telephone keypad to raise your hand and join the queue. Your next question comes from the line of John Zamparo of Scotiabank. Your line is open.

Thank you. Good morning. Lots of talk closed on this call and especially more broadly about high-protein preferences and especially high-protein dairy products. I wonder what you can say to frame the size of that opportunity for Samputo, say, over the next year or two. And can you share what type of point of sale growth you're seeing from that category in North America?

I won't share necessarily numbers associated to anticipated revenues or things of that nature. But what I can tell you is that – We're still in the very early stages of what I believe will be a continued and sustained growth in that sector for years to come. And in Canada, as an example, I talked about the brand strengths and some of the recognitions that we've had with our brands. And when you think of Milk to Go, Dairyland, and Nielsen, and Scottsboro being our flagship fluid brands, we already have added high-protein, multi-serve options to our lineup. The uptake is very good. Some of the considerations we'll be giving in Canada for our capital expenditure program will absolutely be around the value-added milk category, which includes high-protein beverages. And what's great about this space as well is that it's multi-channel in nature. And equally, it's a number of different spots within the retail store. So by that, I mean both the refrigerated and non-refrigerated spaces. And we've got the capabilities north and south here, Canada and the U.S., to be able to capture those occasions and or the growth that will occur in each of these sectors. So I would say that we're quite bullish both in the U.S. and in Canada about capturing that growing need.

Okay. Thank you for that, Carl. I want to come back to the new dietary guidelines from the HHS and the USDA. And I wonder, do you have any customers who are required to follow those guidelines and now must augment their product portfolios as a result?

Well, I would say there are some who either are part of federally funded programs and things of that nature. But at the end of the day, it's not going to create an uptake because of a decree. or an obligation, it's going to create an uptake because the guidelines, beyond that of the favorable light that it's put dairy in, the guidelines are actually very simple to follow. If you take the time to actually read them, the insights that it provides, the recommendations it provides, even for portions, which by comparison to other dietary guidelines that exist in the countries we operate in, this one is very clear. So I think that on the basis of simply that, the clarity that it brings, we're going to see a favorable uptake continue with dairy.

Okay, fair enough. And then finally, a modeling question. I wonder how we should be thinking about CapEx levels for F27, because F26 was a very low CapEx intensity year now that Saputo's completed multiple projects over the past few years. So is F26 likely to be a reasonable baseline for F27, and are there any material projects or even high-return projects already planned that you can call out?

John, you could look at F26 as a low point from a CapEx perspective regarding F27, whether it's through inflation, whether it's through digital investment, and other projects that Carl referred to, you could expect to be north of $400 million as you're modeling the F27. So it will be, you know, somewhat an increase in capital investment organically.

Okay. That's very helpful. Thanks very much. I'll pass it on.

Your next question comes from the line of D'Atena Fical of BMO Capital Markets. Your line is open.

Hey guys, this is Riyad on for Etienne. Uh, thank you for the question. So my first question is in terms of the potential trade deal between the EU and Mercosur, can you give us some insights on how that could impact your Argentine business?

Well, uh, I would say the following, the trade deals need to go further than just, uh, elimination or, or, or reduction in tariffs, uh, for anything that, that, uh, touches the agricultural sector, there needs to be sanitary certificates or sanitary standards, if you like, that need to be understood and accepted by all sectors. So having said that, that's probably one of the biggest stumbling blocks that exists today within that trade route. So if they can clarify that, then I would tell you that the Argentinian platform's exports would be well positioned on the basis of the cost of its raw material. I don't see the reverse necessarily being something that we would look to benefit from, which would be European products going into Argentina. Just looking at the cost basis of the milk in Europe, we're talking apples and oranges. Whether or not that trade deal yields anything material will require there to be some clear language around sanitary standards.

Okay, thank you. And then moving to the European business, in the past you guys mentioned that you aspire to achieve a mid-teens EBITDA margin there. So how should we be thinking about the expansion of margins in that segment going forward, especially given the strong performance this quarter?

Well, our European platform continues, and the UK here continues to do really well on executing what they set out to. First and foremost, it included some consolidation. It included revamping our waste strategies or byproduct strategy. Those two things for the most part as far as investment and the heavy lifting is behind them. They're refining it and continuing to enjoy the benefits that come with that. Our flagship brand, Cathedral City, has some renewed investments in P strategies behind it. We expect it to continue to perform very well as we saw here in the last quarter. Early signs of the contribution of the investments in way of share gains and or market or household penetrations is very good. and also want to underscore that the UK platform isn't just Cathedral City. There is a very healthy butter, oils, and spreads business behind it as well, and that is currently also being optimized, and we feel good about, lastly, in the UK business, new channels that we are investing time and energy in, and that includes food service. I've said this before. The food service sector was not an area that we had any real eye on, It is now part of our daily calls, if you want to call it that, our daily tasks, and we are making inroads in that sector, so exciting times for our UK platform.

Great. Thank you, and best of luck.

Thank you. There are no further questions at this time. I'll now pass it back to Nick for closing remarks.

Thank you, JL. Please note that we will release our fourth quarter and full year fiscal of 2026 results on June 4th, 2026. Thank you for taking part in the call and webcast and have a great day.

This concludes today's conference call. You may now disconnect.