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 speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to Nick Estrela. You may begin.

Thank you, Audre. Good morning and welcome to our first quarter fiscal 2025 earnings call. Our speakers today will be Lino Saputo, Executive Chair of the Board; Carl Colizza, President and Chief Executive Officer; and Maxime Therrien, Chief Financial Officer and Secretary. Before we begin, I'd like to remind you that this webcast and conference call are being recorded and the webcast will be posted on our website along with the first quarter investor presentation. Please also note that some of the statements provided during this call are forward-looking. Such statements are based on assumptions that are subject to risks and uncertainties. We refer to our cautionary statements regarding forward-looking information in our annual reports, press releases, and filings. Please treat any forward-looking information with caution as our actual results could differ materially. We do not accept any obligation to update this information except as required under securities legislation. I will now hand it over to Lino.

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

Thank you, Lino and good morning, everyone. Let's begin by going over the financial highlights of the quarter. Consolidated revenues were $4.6 billion, while adjusted EBITDA amounted to $383 million. Higher year-over-year adjusted EBITDA was driven by continued solid performance in our Canada sector, meaningful operational improvements driven by our global strategic plan initiatives in the U.S. sector, higher sales volume in all of our sectors, and favorable U.S. dairy commodity markets 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, as well as the cycle through 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% compared to last year. Revenue increased due to higher sales volume, a favorable product mix, and higher selling prices in connection with the higher cost of milk as a 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 related to supply chain optimization and automation initiatives. Our results also include a positive impact from cost reduction initiatives. In our U.S. sector, revenue totaled $2.1 billion and was 11% higher versus last year. Revenue increased due to the combined effect of higher average block, butter, and dairy ingredient market prices and higher sales volume in retail, food service, and industrial market segments. Adjusted EBITDA increased 57% to $162 million. The year-over-year increase was mostly driven by a $26 million benefit derived from operational improvements, including increased capacity utilization and productivity, supply chain initiatives, and cost reduction, and a $15 million positive impact from U.S. market factors. Also of note, last year's adjusted EBITDA had a $10 million inventory write-down due to fluctuations in dairy commodity pricing, which did not occur this year. Q1 adjusted EBITDA included $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, revenue for the first quarter was $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 relationship between international cheese and dairy ingredient market prices and the cost of milk as a raw material, and the effect of currency fluctuations on export sales denominated in U.S. dollars, although positive, was less favorable than in prior quarters. 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. So from a cash standpoint, 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 mill processing facility 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. This concludes my financial review. And with that, I'll turn the call back to Lino

Thank you, Max. In Canada, we had a solid quarter, underpinned by operational efficiencies and cost savings. The Foodservice 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 slice 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 continue to yield results, driving volume improvement. Progress was most notable in our Cheese business with Prego and Stella leading the way with market share gains across the spring cheese and mozzarella categories. Foodservice in the US remained competitive in Q1, especially with foot traffic down year-over-year. However, we're encouraged by the recent increase in promotional activities by QSR chains to drive restaurant traffic. The dairy commodity environment improved during the first quarter, supported by a better balance between milk supply and product demand. While we benefited from better market conditions, our bold actions and focus on the controllables are contributing to our results. The team remains focused on delivering our previously announced business optimization program that will not only enhance our productivity, but also lower overall costs, while maintaining our customer-first approach. We also focused on operational efficiencies, especially now that four of the six plant closures have been completed. Case in point, we delivered $26 million in benefits derived from increased capacity utilization and productivity, supply chain initiatives and cost reductions during the quarter. We're very excited with the start-up of our recent greenfield facility in Franklin, Wisconsin. We continue to take a prudent approach as we ramp-up production capacity at Franklin and ramp-down other legacy facilities. On margins, we saw a significant improvement in the first quarter, reflecting benefits from market dynamics, cost initiatives and portfolio developments. With the inflationary environment beginning to stabilize and benefits from our optimization initiatives rolling through, we feel good about the cadence of our margin improvement. 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 prices in effect. During the quarter, we completed the previously announced sale of our two fresh milk processing facilities to the Kohl's Group, while the strategic review process for King Island is ongoing. 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 to-date, I have transitioned to the role of Executive Chair of the Board, while Carl Colizza officially becomes our new President and CEO. Carl, you have been instrumental in developing and delivering on our strategy. And I have no doubt that under your leadership, Saputo's global business and unique culture will continue to flourish. We 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 relationship developed over the years. And on that note, Carl, I turn it over to you, my friend.

Thank you, Lino for your kind words. It is a pleasure to speak with you all on today's call, my first as President and CEO. 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 to-date. 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 support was 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. While the majority of our global strategic plan initiatives are behind us, you will continue to see the results of those efforts. Also moving 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 everyday activities and decision-making while also pursuing a set of ambitious multiyear 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. It provides us with even more confidence for the year. I am truly excited about the opportunities that lay ahead. I will set the full weight of my energy behind delivering on the significant potential that exists with our great company for the next phase of our growth. I thank you for your time. I will now turn the call over to Andrea for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] We'll take our first question from Irene Nattel at RBC Capital Markets.

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 -- yes, really. Turning back to the quarter. Obviously, a great turnout from the U.S. and understand the market factors, but if we kind of offset the market factors from the duplicative costs. It seems like a really big step up. Can you talk about what the key building blocks of that are? And then where do we go from here? And how sustainable is the current run rate in the U.S.

Thanks, Irene, for your question and for your kind words as well. I would say that the building blocks for the success of 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 to date. Beyond that, we continue to make improvements along the way with our consolidation of various sites. As a reminder, four of the six sites that we said we would 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 infill 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. Q – Irene Nattel: That's great. Thank you. And given that this is your first official call, Carl, 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 in 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.

Well, Irene, I think -- I reiterate what we have said in some of the more recent discussions. And that is we absolutely believe in the earnings power of the plan that we put in place. 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 US, they are very different conditions. Having said that, it is the investments that we have put forward will continue to serve our business very well and our customers moving forward. So we're excited about what this can deliver. As far as the absolute number you referenced to $2.125 billion, 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. Q – Irene Nattel: Would you care to extrapolate on what those are or extent?

Well -- 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 note scenarios and different milk costs that has put a very different pressure on us. Moving over to the US. Some of those milk dynamics were also quite different back then when it comes to the overall block price and spread. And I think probably the most overarching statement I can make ultimately is the impact of inflation on consumption and our margins has been very significant, very different than what we would have planned at the time of the strapline. Q – Irene Nattel: Understood. Thank you, Carl

We'll take our next question from Chris Li at Desjardins.

Good morning, everyone. Before asking my question, Lino just again, I want to wish you all the best, enjoy some wealth as your time with your family, and you certainly be missed on the call. And Carl, congrats again, and look forward to seeing you soon.

Thank you very much.

If I just start with maybe the question on international. You've been, kind of, a new outlook with respect to -- there's a couple of moving parts. You mentioned lower farm milk 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 still -- do you expect EBITDA grow into the international segment this year despite some of these macro uncertainties that are happening now in Argentina? Thank you.

Okay. So good morning, Chris, Max here. So two dynamics, one related 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 intend, or we believe that with this price of milk, it kind of restore our margin in Australia. So we're hopeful that this milk price will stick for the remains long as we can. And with that, we would be back to historical level of profitability out of Australia. Related 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; 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're looking over the last seven, eight months, the currency devaluation in Argentina hasn't moved a lot. But inflation keeps growing, the regular rates that we've seen over the last couple of years. So what it does is the cost of production, the cost of milk, the cost of our input cost keeps going, but it's not offset by a peso devaluation. Hence, the margin pressure, not so much on the domestic side, but more on to the export market and that's what we've seen in Q1. At this time, when we look into Q2, we don't have signed 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, in Q2 would likely be the same similar effect that we've seen in Q1 for Argentina.

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 2025, just looking into the International division, do you still expect EBITDA growth this year?

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.

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

Yes. So Chris, relative to capital allocation, we've been consistent in our approach and the approach is the same as previously signaled last quarter. Priorities around dividend, we talked about maintain and grow. So we just announced a 2.7% or $0.02, so to get to $0.76 annually. From a CapEx perspective, we are in line with a lower spend than the last couple of years, so that we're targeting, so no change there. From a debt reimbursement, we have a maturity in November of $400 million that we'll face. So we're going to have -- we're going to -- 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 step relative to exiting from a cash flow perspective. And I would say from pure straight time line relative to buyback or 1 quarter closer. I'll leave it at that.

Thanks very much.

Our next question comes from Michael Van Aelst at TD Cowen.

Hi. 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 would -- that you'd have to hit to start being active on the NCIB like having your leverage fall below a certain level?

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 priority. Now, is it prudent to be -- is it a problem to run in those volatile time under a target level? Yes, it is prudent. That said, the intent is not to go to a level of one times EBITDA or that sort of thing. No, we're getting -- we're in the zone. And as I mentioned, we're one quarter closer than where we were. We want to deal with our maturity in November. And yes, we're -- it's on our radar. It's a short-term thing.

Okay. All right. Flipping to the US, clearly, some good progress there, both from the markets, as well as from internal initiatives. But you -- I think you said that 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 the -- what's changed in the timing maybe of the plant closures and when should we expect to see, I guess, further progress on those operational improvements?

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.

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 2025, I guess, if you're talking about closures of the remaining two facilities in the first half of next calendar year?

Absolutely, yes.

Okay. And then just finally on Europe. You talked about the improvements in steady improvements that you expect. Where do you stand with respect to your high cost inventory right now? Like 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 aged? Where is the bulk of the volumes?

Good morning, Mike, it's Leanne here. So yes, you're correct. I mean, our access inventory has been cleared. And so we are seeing that continued improvement quarter-on-quarter, which is good to see. So in terms of our overall profile, we've seen growth in our Cathedral City retail brand, which is that's been supported by ANP in the first quarter. And we are taking share. 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 -- and we continue to see that improvement quarter-on-quarter. So the inventory is rebalanced.

Okay. So -- but if you have 24 months 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 2022 in early 2023 when the costs were high. So what is the breakdown of your Ag product roughly?

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 the even cheese that we have in inventory that's before the mill cost increase. So, at some point, that's focused on the high volume from a cheddar perspective and within a 12-month period, this kind of behind us.

Okay. So the vast majority of that is behind you now.

Correct.

Okay. Perfect. Thank you.

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

Great. Good morning. Thanks for the questions here. On the US, I'm just curious, we're hearing other companies talk about the consumer. It sounds like they're deteriorating or softening more. So, I mean it's a good performance in the US 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 the apparent further deterioration in the consumer in the US in your results?

Thanks Tamy, for the question. I would say the following. Yes, there has been some traffic declines in some specific segments, including some QSRs. However, there are some offsetting channels like retail. On the retail side, we're seeing some continued health, some shifts within different banners going on moving to discount. But when we look at our overall portfolio and our supply to the omnichannels 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 I guess, 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 US, certainly, the block price change has an impact, but overall volumes are also healthy, and we're continuing to track well and stable.

Okay. Got it. And now thinking about the global strapline here the cadence, so just digesting what you just said about what's going on with Franklin. So if you've got the $26 million year-over-year benefit in this quarter, I mean, I think before last quarter, I think you were suggesting we should think about the benefits from the global strap plans 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?

No. We -- 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 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.

Got it. Okay.

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

Hi, thanks for taking my questions. 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? And it's difficult for us -- for at least for me to triangulate because Australia is going to improve and Argentina declining by some undisclosed amount, how do triangulate that pushing forward, particularly since you expect Argentina to remain pressured at least all my interpretation?

Okay, Vishal, this is Max. Just to give a perspective, the performance in Australia, if we look from a sequential basis from Q4 to Q1, Australia performance was stable. It was impacted by the disconnect in the milk price and the international pricing. And there was nothing major pop from Q4 to Q1. When we talk about Argentina, I need to bring you back to the Q3 big devaluation late in the quarter, which by itself creates that -- start 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 evaluate itself. So, from a sequential basis, Argentina performance was impacted. We did not enjoy in the competitivity increase of -- that brings a lower peso valuation. That help?

Okay. No, absolutely. I appreciate the perspective. So, if the peso were flattish, you relative to where we are now, then you would expect that pressure in Argentina to continue throughout the year. Is that a fair comment?

Well, the other variable is the inflation. What will be the impact of inflation. And inflation would diminish and it would be flat, then that would -- no, we would enjoy the margins that we've done in the past. But if inflation keeps coming, well, it does impact the input cost. It impacts the labor cost, it impact the mill costs. So, hence, the pressure on margin.

I see. So, Australia will improve, but Argentina, the outlook as of now is looking a bit more challenged. And just to be clear -- go on.

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

Okay. Understood. And I just want to get back to the comments off the top of 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 without the timeline. So what is the point of view on that $125 million?

Vishal, I guess I'll reiterate what we've shared before. 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 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, and the impact on consumers. But all of that to say that our assets and our platform are more efficient than they were when we started this journey. And it continues to position us very well to remain competitive and to offer consumers what they're looking for on an ongoing basis.

Thank you for that.

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

Yeah, thanks. Good morning, and certainly echo all of the comments so far. It's been a pleasure over the years, Lane. I wish you all the best in this next chapter, and of course, congratulations to you, Carl. I just have two small questions, short questions. First, on Europe, just a follow-up, can you 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?

Yeah. Good morning, Mark, it's Leanne. I mean, overall, we have stable margins across all of our business. And of course, yes, we have a cheese business, we've talked a lot about to Star 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.

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-priced inventory, and that's effectively complete. Is that right?

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, which is exported from the U.K. And we have seen recovery in 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 U.K. In terms of our outlook for that ingredient business, we see ingredient pricing continuing to be stable across the rest of the year, but it's absolutely lower than last year from a pricing perspective, even though we continue to get good volume.

Yeah, okay. Fair enough. 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 would be helpful.

Yes. Thanks, Mark. So the Canadian team has made some significant progress over the years a 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 Foodservice space as well as in retail and the servicing the channels that are winning. And yes, discount channels are waiting over traditional manners. But we're well positioned with our brands as well as our private label offerings to continue to succeed in Canada.

Okay. Appreciate the comments and all the best.

Thank you.

We'll go next to Rob Dickerson at Jefferies.

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

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 in total.

Okay. Fair enough. All right. Got that too. Anyway, so the -- I guess the question is, right, kind of consumer has been pressured in the US market across a lot of different companies, and 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. So 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 like the consumer demand aspect of the business, specifically in the US, given it's like 50% of revenue. So I guess maybe another way to ask you is just like what are you -- what would you say very simplistically, do you believe would be the driver of that volume improvement in the US within the category because it also sounds like maybe you are taking some share, which would be great.

Yes. 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 Foodservice 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 and a number of growing categories. So there are some categories such as cottage cheese. They continue to be very healthy, and we'd be an important supplier in that space. And we're being very opportunistic across the network and 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 or 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.

All right, super. I like that. And then I guess, just second question on the spreads block milk. Clearly, we've seen the price to block go up a fair amount over year-over-year, but we've also seen the price of milk go up. So the spread has improved, which is great. But at the same time, we're getting still acceleration within the dairy market. So I'm just curious, like as we think out even just the next quarter or two, is like what's the seal of the marketplace? And again, I mean, speaking to the US, I realize sort of global dairy is a little different. But maybe just kind of any color on kind of some of the core markets because 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 one of them can be very material to the overall business. And I think I heard you say earlier kind of you kind of expect maybe some stabilization kind of ish in those two prices as you think forward through the year? That's all. Thanks so much.

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

All right. Super. Thanks so much.

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

Thank you very much. Just maybe two more questions for me. 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 disclosures, I think it's about $1 billion in terms of revenues. But just in terms of EBITDA, can you give us a sense of how big that business is?

Well, I would say -- I would ring you to Argentina having more margin aligned with the rest of the business rather than the overperformance relative to the valuation of the peso. The devaluation of the peso for our export business gives definitely hedged on margin generation. So if you remove that hedge, we fall more or less the same line as the rest of our business.

Okay. But in the last four months, I guess what you're saying is that it's actually a lot higher because of that benefit of the peso devaluation.

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. Q – Chris Li: Got it. Okay. Thanks for that. And then my other question, maybe this one is for Carl. Just a longer-term question. Just would love to get your thoughts on the potential changes in the federal marketing orders in the US. What is the latest update you're hearing from that? And what is the potential impact on your business if the proposed changes are actually implemented as proposed? Thank you.

Thanks, Chris, for the question, and thanks for leading into it be 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 time line aside for a second, we certainly have found and we're encouraged by what the current draft proposal -- 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 time frame. 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. Q – Chris Li: Great. Thanks very much.

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

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

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