Saputo Stock

Good morning, and welcome to all to this shareholders' meeting. My name is Lino Saputo, Executive Chairman of the Board of Directors. In this capacity, I will be presiding over today's meeting. I'm thrilled to welcome our shareholders to our annual meeting, whether you are attending in person or online. Thank you for being with us here today.

I'm joined today by Carl Colizza, President and Chief Executive Officer; Maxime Therrien, Chief Financial Officer and Secretary, who will serve as Secretary for this meeting; and Lydia Pham, Executive Vice President, Legal Affairs, who will serve as our moderator.

Before we begin, just a few words on the general run of the meeting. This meeting will be conducted primarily in French with simultaneous interpretation. The procedure for asking questions during the meeting is described in the proxy statement. Registered shareholders and duly appointed proxies present in the room may ask questions at one of the microphones when invited to do so. You must identify yourselves and confirm your status as a shareholder or proxy holder prior to asking your questions.

Online participants must have logged in using their access number in order to ask questions during the meeting. In order to ask a question, please click on the Questions icon. You can choose to type your question or enter your phone number in the text box. If you provide your phone number, please indicate which agenda item your question refers to so that it may be addressed at the appropriate time.

If you do not specify the agenda item, your question will be addressed during the question-and-answer session at the end of the meeting. In any case, an operator will call on you when it is time to ask your question. If you prefer to submit your question in writing, I encourage you to do so as soon as possible, and we will address it at the appropriate time.

Online participants who have logged in as Guests will not be able to ask questions or vote. In order to ensure fairness with other participants, please be concise when you ask your question. If we are not able to answer questions within the allotted time, we will post answers on the Investors section of our website.

We reserve the right to modify or reject questions that substantially duplicate the content of a question asked by another participant, that are deemed inappropriate or unrelated to the meeting, that concern nonpublic information regarding Saputo, or that serve the personnel or commercial interest of a shareholder.

We may make statements today that contain forward-looking information within the meaning of the applicable securities laws. These statements are based on assumptions and are subject to significant risks and uncertainties, and our actual results could differ materially. I refer you to the cautionary note regarding forward-looking statements contained in our annual report on our website displayed on the screen.

I would now like to appoint Ms. Martine Gauthier and Ms. Teresa DeLuca of Computershare Trust Company of Canada as scrutineers of this meeting. The scrutineers have provided a report on attendance, and I can confirm that shareholder quorum, either present or represented by proxy, is reached. The items on the agenda for today's meeting are set forth in the proxy statement dated June 4, 2026.

The company has used the notice and access system to make all documents available and sent a notice containing all relevant information in this regard to all shareholders on or around June 23, 2026. The proxy statement, notice of meeting and annual report are available to shareholders on our website. Additional copies are also available at the registration desk here today.

For online participants, you can access these documents by clicking on the Documents icon on your screen. All these documents are also available on the company's profile on SEDAR+. I will, therefore, omit the reading of the notice of meeting.

Our transfer agent, Computershare, has confirmed that the applicable meeting documents were duly sent to shareholders in accordance with the Canada Business Corporations Act and the company's bylaws. I therefore declare that this meeting is duly called and constituted to conduct business of the company.

I move to dispense with the reading of the minutes of the annual meeting held on August 8, 2025, and deem them to be adopted -- carried. The minutes will be kept in the company's books and may be inspected or consulted at any time by any shareholder.

We will now proceed with the voting instructions. Voting will take place by secret ballot for all motions under consideration today. Each shareholder of the company is entitled to one vote per share held. For people present in the room, registered shareholders and duly appointed proxy holders who have not already submitted a proxy or who have revoked their proxy were given ballots upon entry. Representatives from Computershare will collect the ballots after the final motion.

For those participating online, registered shareholders and duly appointed proxy holders who have logged in using their access code may vote on all items on the agenda immediately. Shareholders who have already submitted a proxy, it is not required to vote again at this meeting unless you wish to change your vote on a motion. A shareholder or proxy holder authorized in writing who wish to change their vote must immediately revoke their proxy either by visiting the Computershare desk at the entrance if you're in the room or by clicking on the voting icon if you are participating online.

As Chair of the meeting, I move all motions and none will need to be seconded. Once discussion on all agenda items has concluded, a short period of time will be dedicated to voting. Preliminary results will be announced before the end of the meeting. The first item on the agenda is the presentation of financial statements. A copy of the company's financial statements for the fiscal year ended March 31, 2026, is available on our website and on SEDAR+.

I would like to invite Max to make a few comments on our results for the fiscal year 2026 and the first quarter of 2027. Carl will then present our achievements from the past year and provide an overview of our strategic priorities. Max, the floor is yours.

Thank you, Lino, and thank you to all of you for joining us here today. Fiscal year 2026 was marked by solid progress in our results and strong earnings growth. This performance reflects the strength of our business momentum, which supported organic volume growth as well as profit in our investments and operational efficiencies, thereby improving our cash flow generation.

I'd like to present a few key elements of our performance, including our division results, but also operational work that underpins all this and the measures that we took to drive long-term value creation.

For fiscal year 2026, consolidated revenues from continuing operations totaled $17.55 billion, down 1.5% from the previous fiscal year. This decrease primarily reflects lower market prices for dairy products in the U.S. This said, higher sales volumes, particularly in North America and higher selling prices in domestic and international markets for cheese and dairy ingredients had a positive impact on revenues.

Adjusted EBITDA from continuing operations totaled $1.66 billion, up 10.4%. Our adjusted EBITDA margins increased by more than 100 basis points to reach 9.5%, reflecting the quality of our execution and the benefits and the profits resulting from our operational initiatives. Combining adjusted EBITDA from continuing and discontinued operations, the total reached $1.78 billion, up 13.6%.

Adjusted net income from continuing operations came in at $751 million or $1.82 per share, an increase of 18% compared to the prior fiscal year. Net income from continuing operations totaled $690 million. This result compares to a net loss for the prior fiscal year, which included noncash impairments, charges related to goodwill and intangible assets associated with our U.K. Dairy Division.

We also generated net operating cash flows from continuing operations of $1.51 billion, up 26%, driven by rigorous management of our inventories and working capital items.

Now let's turn to results by segment. In Canada, our experienced team once again delivered results that exceeded historical levels. Revenues increased by 5% to reach $5.4 billion. Adjusted EBITDA rose by 7.7% to reach $697 million, while the margin reached 12.9%. This performance reflects volume growth across several categories. It also reflects the returns of our investments in automation and our packaging initiatives, which continue to improve our cost structure. Overall, results in our Canada segment demonstrate the strength of our business, driven by the strength of our brand, sustained demand in our key categories and continued growth in our value-added segments.

On the U.S. side, the U.S. segment, our team made significant progress during fiscal 2026. Adjusted EBITDA came in at $672 million, up more than 9% and margins improved to reach 8.1%. These results reflect growing revenues and profits derived from our network optimization initiatives, particularly in Wisconsin.

Over the course of the year, we completed the closure of our Green Bay facility. We continued to increase production at our Franklin plant and commissioned our Caledonia distribution center. Our investment of $180 million in Waupun also allowed us to increase our high-protein ingredients capacity by approximately 35%. This investment strengthens our position in ingredients with higher margins and supports our growth in value-added segments. Finally, the new federal milk pricing formula, which took effect in June 2025, resulted in cost savings in line with our expectations.

Now with regards to our International segment, which now consists solely of our Dairy Products Division (Australia), adjusted EBITDA reached $162 million, up 20% and the margins improved to reach 6.3%. This performance reflects the favorable impact of higher prices in international cheese and dairy ingredients markets, which was, however, partially offset by higher milk costs. Performance also reflects growth in our high-protein ingredients, lactoferrin, cream cheese, particularly in Asian markets. On the domestic Australian market, growth was driven by gains in private label segments. In spite of reduced milk availability in the country, our strategy of optimization, both in terms of costs and product mixes enabled the division to deliver solid results.

On the European sector side of things, adjusted EBITDA came in at $128 million, up 21% and the margins increased to reach 10.1%. Initiatives implemented over the past fiscal year have begun to yield expected results. Consolidation of our cheese packaging operations in Nuneaton, combined with the strategic discontinuation of certain functional dairy ingredients contributed to generating operational efficiencies starting in the second half of the year. The division also improved its cost structures through active management to optimize inventory levels. These initiatives are in line with our goal of building a more focused platform that is well positioned to support our long-term growth.

Now in terms of capital allocation, we maintained our balanced and disciplined approach. Capital expenditures totaled $339 million. These investments focused on projects designed to support the execution of our operational priorities and strengthen our business. Over the course of the year -- financial year, we also repurchased -- redeemed 19.2 million in shares for approximately $679 million as the normal course issuer bid, which was renewed in November 2025. We also paid $329 million in dividends.

Our balance sheet remains strong. At the end of fiscal of the fiscal year in March 2026, our net debt to adjusted EBITDA ratio was 1.7x. As of today, this ratio, this debt ratio stands at 1.47x, well below our long-term target of 2.25x.

Yesterday, we announced our results for the first quarter of fiscal year 2027. Adjusted EBITDA came in at $427 million, up nearly 8% from the prior fiscal year. Adjusted net income from continuing operations totaled $199 million or $0.49 per share. All of our operating segments reported improvements in profitability compared to the first quarter of the prior fiscal year, contributing to strong earnings growth.

These results reflect the impact of our recent investments aimed at expanding and strengthening our production capacity, combined with strong business momentum and operational efficiency gains, which supported margin expansion in spite of persistent inflationary pressures with revenues up 1.5%, adjusted EBITDA up 8%, adjusted net income up 13% and adjusted earnings per share up 17%. We are entering fiscal year 2027 in a strong position with a solid financial profile, increased margins, low debt and the financial flexibility needed to support our strategic investment priorities.

The operating environment in which we operate is a dynamic one, and we are in a tremendously excellent position to navigate uncertainties that persist due to various geopolitical developments, dairy market conditions, particularly those in cheese as well as the broader inflationary environment. Our enviable financial position gives us the means to achieve our growth ambitions.

Yesterday, our Board of Directors reviewed the dividend policy and increased the quarterly dividend to reach $0.21 per share. This is an increase of 5%. The quarterly dividend will be paid on September 25 to shareholders of record as of September 15, 2026. Subject to TSX approval, we also plan to increase our share redemption program to approximately 24 million shares, the maximum authorized, and continue to actively redeem shares, thanks to the solidity and the strength of our balance sheet.

Before concluding, I would like to thank our teams for their discipline, their diligence, their commitment and all throughout this fiscal year. To our colleagues listening in, your work, your passion, both continue to be reflected not only in our results, but also in our ability to build a more efficient, more agile company that is better positioned for the future.

I would now like to invite Carl to present an overview of our strategic priorities. Thank you for your attention.

Good morning, dear shareholders, members of the Board of Directors and guests. Thank you for joining us here today for our Annual Shareholders' Meeting. Fiscal 2026 was a year of progress. The results that we delivered testify to the character of our team and the strength of our company. Our performance also demonstrated that decisions that we have made are now paying off and that our strategy continues to generate positive momentum.

I'm very proud of what our teams have accomplished over the past year. But what makes me even more enthusiastic is that I foresee -- is what I foresee for Saputo's future. I'd like to take a moment to talk about the opportunities before us and how we are positioning ourselves to capitalize on each of them. Around the world, consumers are rethinking about what is on their plates, and they are focusing on 3 sustainability priorities: nutrition, protein, well-being, and value.

Dairy products naturally meet each of these expectations. And the underlying trends supporting our category show no signs of slowing down. On the contrary, they are in acceleration. Let's think of protein, whether it be milk, cheese, fermented dairy products, snacks or beverages. Protein is transforming consumer habits. It's influencing how restaurant operators are designing their menus and driving innovation among our ingredients customers. I can ensure you that at Saputo, we are not just watching these things evolve. We are contributing to shaping this evolution.

In Canada, Armstrong has become a flagship brand in its category, attracting new consumers and expanding the role of cheese in active, well-focused lifestyles. In the U.S., our snack brands continue to drive growth in on-the-go cheese consumption, a category which virtually didn't exist a generation ago and in which Saputo is now a leader. In the U.K., Cathedral City is further strengthening its leadership by reaching new consumers. The brand continues to expand its presence into additional consumer occasions and opportunities, thanks to licensing partnerships and innovation in refrigerated meals. In Australia, Devondale, a brand built over decades through long-standing partnerships with dairy farmers and consumer loyalty, remains one of our most trusted brands on the store shelves.

These are not just brands. They are platforms strong enough, trusted enough to grow well beyond the traditional categories and into new occasions, new formats and new customers. And the demand picture beyond our retail brands is equally compelling. Foodservice operators are seeking partners who can innovate with them at speed. Ingredient customers are looking for functional, high-protein, high-value solutions. Both are areas where Saputo is structurally advantaged through our scale, our R&D capability and the breadth of our portfolio.

We have made deliberate, disciplined choices about where we will compete and how we will win. We are concentrating our energy, our capital and our talent on a focused set of geographies, each with the scale, the brands and the structural right to lead. We have meaningfully simplified our platform, exited businesses that no longer fitted our long-term growth strategy and reinvested in the platforms that do. A more focused Saputo is a more agile Saputo. And in an industry being reshaped by consumer change, channel evolution and technology, agility is increasingly the difference between leading and following.

Focus also brings clarity to execution. It allows our regional teams to make decisions faster, to allocate resources with confidence and to deepen the customer relationships that drive long-term growth. We are also running the business with a sharper commercial mindset than at any point in our history.

Everything starts with the consumer. Our innovation pipeline reflects that focus with targeted investments in protein, snacking, premium ingredients, foodservice partnerships and value-conscious offerings that meet consumers where they are. We exited fiscal year '26 with some of the strongest customer service levels in our history. That did not happen by chance. It is a result of operational discipline, investments across our network that are delivering results and a culture that treats execution as a true competitive advantage.

At the same time, we are embedding data, automation and artificial intelligence more deeply into the way we forecast, plan and serve our customers. This work I am personally engaged in through our Digital Advisory Committee. And we are already seeing tangible benefits in demand planning, supply chain visibility and commercial decision-making.

Together, these efforts are shaping the modern operating model of Saputo: Customer-led, data-driven and disciplined. It is paired with a renewed focus on talent. We are investing in the next generation of leaders, strengthening our leadership pipeline across every region and creating conditions for our people to do their best work.

Foundational to all of this is our Saputo Promise. This is not a side initiative. It is how we operate. It is fundamental to how do we create long-term value. Fiscal 2026 marked the first year of our current 3-year Promise plan, and we delivered against every commitment we set out to achieve. Our climate trajectory in operations is on track against the science-based targets validated by SBTi. We are continuing to reduce energy intensity, expand renewable energy, electricity sourcing and invest in efficiency projects across our network.

In line with consumers' priorities, more than 80% of our products now meet our nutrient profile modeling criteria, reflecting our strategy and commitment to making nutritious food for households around the world.

We are investing in our communities, supporting the farmers who supply us and continuing to advance an inclusive culture across every region in which we operate. Long-term value creation depends on getting all of this right, and our employees take genuine pride in living our Promise every day.

Now as we look to fiscal '27 and beyond, our priorities are clear, consistent and unchanged. First, we will capture the growth opportunities in dairy through targeted strategic investments and accretive M&A. The heavy capital cycle behind our network modernization is complete, and the returns are now compounding. From here, we'll deploy capital where the growth is structural and the returns are most compelling, prioritizing value-added growth in cultured, protein and functional segments where consumer demand is strongest and where our capabilities give us a clear right to win.

Second, enhance our commercial strategy. We will continue to support our focused brands, deepen innovation partnerships with our key customers and expand the global reach of our portfolio. These are the levers that turn category leadership into sustained, profitable growth and where our commercial discipline will continue to make the greatest difference in the years ahead.

Third, drive operational and administrative efficiency. We will protect and extend our market competitiveness by continuing to invest in technology and automation, simplifying how we work and taking cost out where it does not create value.

Underpinning all 3 is a fourth nonnegotiable commitment: operate with discipline to navigate whatever the environment brings, while staying offensive on the opportunities that matter most. The environment, the market environment will remain dynamic. Trade policy, consumer sentiment, our input cost volatility are realities we will continue to manage with the same operational rigor you have come to expect from this team.

But Saputo was built to perform in good markets and in challenging ones. Our brands are stronger. Our network is more competitive. Our balance sheet gives us flexibility. Our people are aligned around a clear plan, and our strategy is working. That gives me confidence not just in fiscal '27, but in the trajectory of this company for years to come.

To our employees from around the world, thank you for your passion, your expertise, your know-how and your commitment. This is what is transforming this strategy into reality day after day. To our customers, our dairy farmers, our partners, thank you for choosing Saputo, and thank you for growing with us. To our Board of Directors, thank you for your support, your sound advice and your candor.

The greatest chapters in Saputo's history are not behind us. They are being written as we speak. And what we are building today makes us more optimistic than ever when it comes to the future of our company. Thank you.

I will now turn the floor over to Lino.

Well done, Carl. I loved your confidence and optimism. My mom likes it too. Our next item on the agenda is the election of directors. The Board is nominating all current directors with the exception of Annette Verschuren, who will not be standing for reelection this year as well as Carl Colizza, who is running for the position of Director for the first time. Their biographies can be found in the proxy statement.

I therefore nominate the following 11 individuals for election as directors of the company who will serve until the next shareholders' meeting or until their successors are elected: Olu Beck, Carl Colizza, Victor Crawford, Anthony Fata, Annalisa King, Karen Kinsley, Linda Mantia, Diane Nyisztor, Franziska Ruf, Stanley Ryan and myself, Lino Saputo. All candidates have confirmed that they are eligible to serve as directors if elected and that they are willing to do so.

We will now take questions on this agenda item. We'll first answer questions from the floor and follow up with online questions. If you are in the room and you would like to ask a specific question on this item specifically, please come to the microphone and identify yourself as a shareholder or proxy holder before asking your question.

Over to you. I'm not seeing questions in the room. Lydia, do we have any online questions on this item?

No, we do not have any online questions.

Thank you for that, Lydia. We can now move to the online vote or to the vote. To vote online, please select the applicable voting options on the voting panel appearing on your screen. Participants in the room who have received their ballots may also vote.

The next item on the agenda concerns the appointment of the auditor. I move that KPMG be appointed as the company's auditor until the next Annual Meeting of Shareholders and that the Board of Directors be authorized to set the firm's compensation.

Are there any questions from the room on this item now? No questions from the room. Lydia, do we have any questions online?

No, no online questions.

Thank you, Lydia.

I invite you, therefore, to vote on this item.

[Voting]

The next item on the agenda is the adoption of an advisory and nonbinding resolution regarding the company's approach to executive compensation.

I move that an advisory capacity -- in an advisory capacity and without diminishing the role and responsibilities of the Board, the shareholders approve the company's approach to executive compensation as described in the proxy statement for the 2026 Annual Shareholders' Meeting.

Do we have any questions from the floor on this item? Seeing none. Are there any questions, Lydia, online?

No.

Okay. Thank you. Thank you, Lydia.

I invite you to vote now on this item.

[Voting]

We will now move on to shareholder motions or proposals. We have received 2 from the Movement for Shareholder Education and Advocacy, the MEDAC. We have been told that no MEDAC representative is here today. The MEDAC proposals and the reasons why the Board recommends that shareholders vote against each of those proposals are set forth in the proxy statement.

Are there any questions from the floor on this item? No questions from the room. Lydia, have we received any online questions?

No.

Okay. No questions. All right. Well, this is turning to be quite efficient.

I now would like to invite you to vote on these items. Online voting will close in just a few moments. If you have not yet submitted your online vote, please do so now.

[Voting]

I ask participants in the room to raise their hand so that tellers can collect the completed ballots. Are there any in the room? Okay. Thank you to all. I therefore declare voting closed. Scrutineers confirm the following preliminary results. Based on the results of the proxy votes received, at least 96% of the votes were cast in favor of each of the 11 directors nominated in the proxy statement. Carl, I think you have an in.

Approximately 99% of votes are in favor of appointing KPMG as the auditor. The advisory resolution on executive compensation has been approved with approximately 95% of the votes cast in favor. The shareholder motions submitted by the MEDAC have been rejected. More than 99% of the votes cast were against proposal #1 and approximately 92% of votes were cast against proposal #2.

Shortly after the meeting, we will file a report on SEDAR+ presenting the final voting results for each item put to a vote. In addition, we will report on the election of each director in a press release.

We will now move on to the question-and-answer session. We are very pleased to answer any of your questions. We would like to remind you that registered shareholders and duly appointed proxy holders who have logged in online using their control number may ask -- their access number, may ask questions by clicking on the Question icon. We will first take questions from the room from the floor before moving on to online questions. I'd like to invite participants in the room to come to the microphone. Please identify yourself, confirm that you are indeed a shareholder of the company or a duly appointed proxy holder. You can ask your question.

I've got a couple of questions.

Yes, your name?

[indiscernible]. I am a shareholder. So my first question is, particularly in the U.S. about the U.S. because the dairy price fluctuates more. How are you minimizing the impact of these commodity price fluctuations, particularly like I said in the U.S.? And how are you going to increase your margins when it comes to the sector given fluctuations?

Well, let me remind you of the investments that we have done in the U.S. over the past few years. Those have become quite substantially more effective. So those efforts, those investments are now found in our margins. So yes, it's true that when it comes to what we call the block price, the price of milk compared to previous years, it does indeed have an impact on prices overall.

But all this said, over the past few years, we've experienced many different markets, like I said earlier. Today, our facilities, our brands, our commercial strategies are stronger now than they have ever been. And when we combine all of that with what we're seeing with this protein strategy and trend and specifically in the U.S., it's very strong, not just in production, but in the deployment and sales. And so what we're seeing is a U.S. platform that is extremely robust.

So you're not concerned about the price?

Well, we'll take what comes at us in terms of the block price and the milk price. But we have a platform with many options. Our portfolio is a vast one. We have many options, either for domestic markets, exports, et cetera.

Okay. Another question then. When you talk about M&A, mergers and acquisitions, do you have an ROIC target for acquisition of -- the acquisition of that very specifically?

Well, when we talk about using capital, generally speaking, and on a few opportunities, on a few occasions, we've talked about this, we're very disciplined. We're very focused. The deployment of capital will happen in different ways. First of all, we will continue to support our brands. We've got -- we're investing in organic growth. We have a lot of ambitions when it comes to capital projects as well. So we've got investments that we expect to make in our facilities to grow with consumers.

And when it comes to M&A, so mergers and acquisitions as such, it's not a question of size, okay? That's for sure. Our intentions for acquisitions are to support commercial growth and our portfolio. So often, we find ourselves in situations where we think back and we think, okay, should we build, should we -- do we have a brand? Is it -- should we invest in mechanics? Or are we better off acquiring to deliver on the market, to support clients and consumers more quickly. So it's not a question of size right now.

This said, we are actively thinking about how to deploy our capital in a very disciplined manner.

[indiscernible], shareholder. So kind of in line with what my son was just saying. In Australia, so the International Division is not particularly successful. That's my point of view. You're leaving Argentina a little bit, Australia a little bit, you're selling divisions. What are you learning from all that? Will this ultimately have an influence on future acquisitions?

Well, maybe I can just say something specifically about your comment about it's not going well internationally. That's a point of view. When we talk about Australia, what happened with the sale of the plant, you can't forget that it is one plant among others in Australia on our platform.

I just want to remind you that we acquired Murray Goulburn, and it was a plant which had 0 profits. Profits were weak, to say the least. And the platform, the journey for this plant was not yet well defined. So over the years, where we picked that up, and we were in partnership with another entity, we took on the operational control of the plant. So it took several years to bring it to where it is now, which is a platform -- a plant with a particular category of product that is profitable.

And so we found ourselves in a moment in time with our partner, who is a majority partner. They wanted to go in a different strategic direction compared to us. So we seized that opportunity. We assessed the joint venture, and we made the decision that the best thing that we could do was to sell our share. So in fact, it's worth saying that we're very happy with the outcome because the money associated with the sale will allow us to reinvest in the Australian platform. We believe in it for the quality of milk, for the market proximity with Asia, which is precious for us. And so for us, we see it as fresh air. We have an opportunity today to continue to build and refine our Australian platform.

So when we look at other parts of the world, we are very, very comfortable with the U.S. and Australia. Those are markets from which we will serve international markets. Milk quality, milk price, those are 2 competitive elements, and we're very satisfied with these 2 sectors in our portfolio.

Okay. So even if margins are low and weak at 6.3%...

Well, it's going in the right direction.

Okay. So it's still a good growth platform, right? Is that what you're saying?

Yes, absolutely. Absolutely. It's a sector where we will continue and continue our efficiencies. It is a platform and will remain a strategic platform for us and in Asia, which is crucial to our platform.

Yes, I'd like to add something, Mr. [indiscernible]. Our 90% (sic) [ 80% ] share in Argentina was not connected with the division as subperformance. The division is very efficient with top brands, #1 choices in the country.

And so this said, with growth objectives that we have to bring the division to a different level, the risks associated with additional investments were such that we preferred to leave the business. The business was ramped up throughout 2000, 2001, 2002 -- sorry, 2022 up until 2023. And the performance is -- we've completed our work. And so leaving Argentina gives us opportunities. And therefore, we can invest in the sectors where we see more growth.

Okay. Right. That's what I was going to say in terms of Argentina, absolutely. We've completed the circle. 2003, we were in Argentina. We paid amounts. We -- $750 million were invested. We were in there for 20 years, and we had a tremendous EBITDA. So I think the circuit was a good one, and we've done what we wanted to do. I think they called that a grand slam.

Okay. Great. Are there other questions from the room? Okay. No more questions from the room.

Lydia, do we have questions online?

No, we do not have any questions online.

Okay. Dear friends and dear shareholders, before closing this meeting, I'd just like to take a short moment not to revisit numbers that reflect our growth or all of the places we want to go in our strategy, but rather to think about who we have become together.

A year ago, I stood before you and said we know who we are. We know what we're capable of, and we know where we're going. 12 months later, I can say with even greater conviction, we are exactly where we said we would be. Fiscal 2026 was a year of affirmation. Affirmation that the foundations we spent years building are now bearing fruit. Affirmation that the tough decisions we made on our network, on our portfolio, on our cost structure were the right decisions. And affirmation Saputo is now playing offense.

In fiscal 2026, our adjusted EBITDA grew double digits. Our cash flow strengthened. Our balance sheet is among the most flexible it has been in years. This year alone, we returned over $1 billion to our shareholders. Numbers reflect discipline. Success creates it. It is that discipline more than the numbers themselves that make me proudest. We didn't chase volume for the sake of volume. We didn't pursue growth for the sake of scale. We grew where we win. We invested where we lead, and we exited where we could not create further value.

The announced divestiture of a majority interest in Argentina is a powerful example of that discipline. It wasn't an easy decision. Argentina has been part of the Saputo story for over 2 decades. To our team in Argentina, you have been and will always be part of our family.

Leadership, however, means making the choices that strengthen the whole even when those choices are difficult. We are now a more focused, more agile, more concentrated Saputo with 4 leading platforms: Canada, the U.S., Australia and the United Kingdom, each with the scale, the brands and the right to win. I've been asked more than once, at this stage of your career, what continues to drive you? And the answer is simple. It's legacy, not my legacy, our legacy, the legacy of every Saputo employee past and present, who have worn this name with pride and continue to have an immense attachment to our success.

You see, behind every pound of cheese, every liter of milk, every innovation, there is a person, a Saputo person, someone who believes that doing things right matters more than doing things fast. That is who we are. That has always been who we are. And under Carl Colizza's leadership, that is who we will continue to be. Carl has now completed his second full year as President and CEO, and we are seeing in execution, in commercial discipline, in strategic clarity, what I have seen all along.

Carl is the right leader at the right time. What excites me most is Carl's ambition for this company, his drive to grow, his discipline to build, and his determination to prove, quarter after quarter, Saputo's best days are still ahead of us. Carl is supported by a leadership team that is among the strongest in our industry: experienced, aligned and energized. They are corporate warriors. They are builders, and they're not afraid to play offense. I'm proud Carl is standing for election as Director of this Board for the first time today. He has earned that seat.

To our Board of Directors, thank you for your stewardship, your candor and your unwavering support. In good times, you offered wisdom. In difficult ones, you offered calm. That steadiness through every storm has been invaluable.

And I'd like to take this moment, and I'll try not to get too emotional here, to thank, in particular, Annette. Annette, thank you for being here this morning. It really means a lot. So Annette is not standing for reelection after 13 years of exceptional service on our Board and Audit Committee. Annette, your wisdom, your courage and your judgment have shaped this company. We are deeply grateful for the spirit you brought to every discussion. You're crying now, I'm going to cry.

To Linda Mantia, who joins us this year, welcome, Linda. You arrive at a moment of momentum, and we look forward to your contributions. To our shareholders, thank you for your trust. Long-term sustainable value creation remains the heartbeat of everything we do. To our customers, our partners and our dairy farmer suppliers, thank you for choosing Saputo. You remind us of why character matters. To all our Saputo employees around the world, you are our strength, our pride and our purpose. You are the promise that Saputo brings to its customers in action. From the bottom of my heart, thank you.

Now allow me to close with this. The dairy industry is being reshaped. Consumers want more protein, more nutrition, more functionality, more value. And dairy, our dairy, is uniquely positioned to deliver all of it. The opportunity in front of us is enormous, and we are not just going to participate in it. We are going to lead it.

Thank you to all. Have a great day, and let's keep building.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Hello, and welcome to the Saputo First Quarter 2027 Financial Results Call. [Operator Instructions]

I will now turn the conference over to Nick Estrela, Head of Investor Relations. Please go ahead.

Thank you, Jill. Good morning, and welcome to our first quarter fiscal 2027 earnings call. Our speakers today will be Carl Colizza, President and Chief Executive Officer; and Maxime Therrien, Chief Financial Officer and Secretary. Before we begin, I'd like to remind you that this webcast and conference call are being recorded, and the webcast will be posted on our website along with the first quarter investor presentation.

Please also note that some of the statements provided during this call are forward-looking. Such statements are based on assumptions that are subject to risks and uncertainties. We refer to our cautionary statements regarding forward-looking information in our annual report, press releases and filings. Please treat any forward-looking information with caution as our actual results could differ materially. We do not accept any obligation to update this information, except as required under securities legislation.

I'll now hand it over to Carl.

Thank you, Nick. Good morning, everyone, and thank you for joining us. We started the year with a strong first quarter, one that builds directly on the momentum we exited fiscal 2026 with and reinforces the direction we set out for this business.

All 4 of our operating sectors delivered earnings growth versus the prior year, supported by commercial momentum, higher volumes from expanded ingredients capacity and the operational efficiencies flowing through from our prior capital investment. Importantly, this performance also reflects our ability to mitigate the cost inflation we continue to manage across our network. What is particularly encouraging is that this performance is broad-based. It reflects the quality of the platform we have built, not the benefit of any single tailwind.

On a consolidated basis, adjusted EBITDA grew close to 8%, and our margins expanded. Behind those numbers is a business that is executing with more discipline, converting demand into higher-quality earnings and benefiting from a more focused portfolio. Nowhere is this clearer than in ingredients, where the investments we have made over the past several years to expand capacity and upgrade our production network are now translating into results.

Whey, lactose and high-protein ingredients are performing well. Market conditions are constructive, and our positioning allows us to capture the opportunity while continuing to serve the customer base we have built alongside these platforms. This is precisely why we have invested in assets such as Waupun. Through targeted investments in capacity, capabilities and product quality, we have strengthened our ability to participate in higher-value protein and lactose categories where we see attractive long-term demand. This is a category we believe in and one where we are committed to building a leadership position over time.

More broadly, the consumer backdrop for dairy remains supportive. Protein continues to be a defining theme in how consumers think about food and dairy is uniquely positioned to meet that demand across cheese, ingredients, cultured products and value-added beverages. Beyond its protein content, dairy provides key nutrients, affordability, convenience and versatility, reinforcing its relevance in consumers' day-to-day food choices and eating habits around the world. We remain optimistic about the runway ahead. Protein consumption is not a passing trend. It is a structural shift that plays to the strengths of our portfolio and reinforces the choices we are making in where to invest.

Strategically, our approach is unchanged. We continue to concentrate on the categories, geographies and customers where we can win, and we are prepared to simplify and act where we cannot. That discipline was evident again this quarter with the closing of the sale of a majority stake in our Argentina operations. We are committed to making thoughtful portfolio choices that strengthen our business, sharpen our focus and support disciplined capital allocation.

Our objective is straightforward: concentrate capital and management attention on the areas where we have the clearest path to sustainable growth and value creation. At the same time, we returned meaningful capital to shareholders through our share buyback program and a 5% increase to our quarterly dividend, a clear signal of the confidence in the trajectory of the business and the strength of our cash generation. Taken together, this quarter reflects where we are on our journey, past the heaviest phase of investment, executing with more consistency and increasingly able to translate strategy into results.

I will now turn the call over to Max for the financial review before coming back with some concluding remarks.

Thank you, Carl, and good morning, everyone. Before turning to the results, a brief update on the portfolio changes reflected in our reporting this quarter. On June 18, we closed the sale of an 80% interest in our Dairy Division (Argentina) to Gloria Foods. We received proceeds of $710 million, representing approximately $612 million after tax. Argentina is presented as a discontinued operation and prior period results have been presented accordingly. All figures I will discuss today reflect continuing operations, which exclude the Dairy Division (Argentina) results.

On June 22, we announced an agreement to sell our interest in the Danone Saputo Dairy Australia joint venture for approximately $253 million. The transaction is subject to regulatory approval and is expected to close in the second half of calendar 2026. The related assets have been classified as held for sale as of June 30.

First quarter results reflect earnings growth and margin expansion with all 4 sectors contributing to a higher year-over-year profitability. Adjusted EBITDA increased close to 8% or $30 million to $427 million. Margins expanded to 9.7%, up from 9.1% last year. Revenue came in at $4.4 billion, up 1.5%, driven by volume growth in high protein ingredients, higher domestic selling prices and higher dairy ingredient market prices, partially offset by lower U.S. cheese block and butter market prices.

Net earnings from continuing operations were $183 million. On an adjusted basis, net earnings were up 13% at $199 million, and adjusted EPS increased 17% to $0.49, benefiting from stronger earnings and the impact of our share repurchase program. Net cash from operating activities from continuing operations was $151 million in the quarter and reflects higher working capital usage, driven by the timing of receivables and payables and higher inventory levels to support customer demand.

We feel confident about our cash generation through the balance of the year. Capital expenditure totaled $57 million in the quarter, in line with our phasing plan. For fiscal '27, we continue to expect capital expenditure of approximately $515 million weighted towards high-return projects in our fastest-growing dairy segment, capacity optimization and operational efficiency.

During the quarter, we used proceeds from the Argentina divestiture to repay the $350 million of our Series 8 senior unsecured notes. We returned approximately $380 million to shareholders through the repurchases of 7.2 million common shares for approximately $300 million under our NCIB and dividend payment of $80 million. Subject to TSX approval, we intend to increase our NCIB to approximately 24 million shares, representing the maximum 10% of public float permitted under TSX rule. Supported by our strong balance sheet, we expect to remain active in repurchasing shares. As announced yesterday, the Board also approved a 5% increase in the quarterly dividend from $0.20 to $0.21 per share effective with the September payment.

From a leverage perspective, our net debt to adjusted EBITDA ratio ended the quarter at 1.47x. Our long-term leverage target remains 2.25x, providing meaningful capacity to fund growth initiatives and capital projects. We also remain committed to a balanced approach to capital return.

Revenues in Canada were $1.4 billion, up 6% year-over-year, driven by higher sales volume across cheese, dairy foods and milk. Results also benefited from a favorable product mix, reflecting stronger sales of value-added beverages and cultured products supported by consumer demand for high-protein offerings and supported by targeted A&P investment behind our Armstrong and Saputo brands.

Higher domestic selling prices implemented to mitigate inflationary pressures and higher raw milk costs further support top line growth. Adjusted EBITDA was $175 million, up 3%, driven by higher sales volume and a favorable product mix with margin at 12.5% compared to 12.9% last year. Manufacturing efficiency from our capital investment in automation and production capability continues to support earnings growth. The benefit was tempered by inflationary pressure on labor, logistics and packaging costs as well as continued investment in technology, digital initiatives and brand support, resulting in modest margin dilution during the quarter.

In the U.S., revenues totaled $2.1 billion, down 1% year-over-year. The decrease reflects lower average cheese block and butter prices. Higher dairy ingredient market prices and higher selling prices were implemented to mitigate inflationary pressure.

Adjusted EBITDA was $181 million, up 6% with margin expanding to 8.6%, driven by higher sales volume and a favorable product mix, together with higher market prices for our high protein ingredients. Results also benefited from our recent capital investment at our Waupun facility alongside operational efficiencies from our consolidated Midwest warehousing facility, the elimination of duplicate operating costs across plants and disciplined execution on customer fulfillment. These were partially offset by cheese market dynamics and the similar cost pressure experienced in Canada, including ongoing inflation, higher SG&A and continued investment in brand building and technology.

Turning to International, which consists of our Dairy Division (Australia), revenues were $635 million, up 8%. Adjusted EBITDA was $38 million, up 46% with margin at 6%, supported by a more favorable product mix. Higher international cheese and dairy ingredient market prices helped mitigate the impact of higher milk costs, while increased milk availability favorably impacted efficiencies and the absorption of fixed costs.

Revenues in Europe were $283 million, down 11%. The decline reflects 2 factors: First, bulk cheese volumes were lower as we reduced milk intake to optimize our production mix. Second, selling prices were lower, in line with milk and cream input costs. Adjusted EBITDA was $33 million, up 10% with margin expanding to 11.7% from 9.5% last year. Margin expansion was supported by a favorable product mix, operational efficiencies from the consolidation of our cheese packing operation at Nuneaton and the transition of our ingredients platform.

Both International and Europe sector benefits were partially offset by inflationary pressure on input costs and incremental A&P behind our core brands.

Overall, Q1 reflects a strong start to fiscal '27 with earnings growth across every sector and continued balance sheet strengthening. Our capital structure is in a position of flexibility. Our leverage is well below our long-term target, and our cash generation continued to support disciplined reinvestment and consistent capital returns to shareholders.

With that, I will turn the call back to Carl.

Thank you, Max. In Canada, we delivered another quarter of solid broad-based growth with revenues up nearly 6% and continued momentum across our core categories. This was supported by disciplined execution across retail, foodservice and industrial market segments, where we continue to grow with winning customers under long-term commitments that anchor our volume base.

Our Armstrong and Saputo brands continue to perform, and we saw particularly strong traction in value-added beverages and cultured products, both categories aligned with the growing consumer focus on protein. This is where our portfolio, our brands and consumer trends are converging, and we intend to continue investing behind that opportunity. Margins reflect ongoing inflationary pressure on labor, logistics and packaging, along with continued investment in technology and brand support. But the underlying quality of the earnings and the consistency of the platform remain a clear strength.

Canada continues to be the steady demand-driven anchor of the business, and we like the runway ahead. In the U.S., the story this quarter is about volumes and our investments in higher-value categories delivering results. Adjusted EBITDA increased nearly 6%, reflecting strong volume growth and improved utilization of the capacity we have added to support our high-protein ingredients platform. Higher whey ingredient market prices provided an additional benefit, more than offsetting continued pressure from cheese market dynamics compared to the same quarter last year. More importantly, this is fundamentally a volume growth story. The capacity we have added over the last several years is being absorbed by customer demand, driving increased production of higher-protein ingredients and supporting earnings growth.

In cheese, momentum was driven by mozzarella, full capacity utilization, strong exports and a cost-competitive milk supply positioning us to compete and win globally. That momentum extended into our commercial execution. Within our specialty cheese portfolio, we expanded our business with a key retail partner, further increasing our household access to premium cheese offerings.

We also commercialized new mozzarella items with a major national retailer, broadening our participation beyond pizza-centric occasions and increasing our exposure to the growing at-home cooking segment. We continue to advance our branded growth agenda through innovation, distribution expansion and targeted marketing. We expanded the rollout of our Cheese Heads Cheddarella String Cheese, strengthening our position in the growing cheese snacking segment and driving incremental household penetration, while distribution gains across strategic brands like Montchevre and Frigo created additional runway for future volume growth.

In foodservice, we expanded Saputo Gold -- Saputo Gold's adoption among operators, broadening awareness and usage and deepening our presence in premium cheese. In Ingredients, the momentum continues to build and the market backdrop remains constructive. Our WPC80 ramp-up is a clear example of this in action, extending our position in higher-value global markets, deepening the customer relationships we have built alongside these platforms and giving us the capacity and the product capability to capture demand where the returns are most attractive.

Together, these businesses are delivering what we designed the U.S. platform to deliver: scale, category exposure aligned to where consumers are going and a cost structure that supports sustained margin expansion.

In our International sector, Australia had a strong quarter with adjusted EBITDA up over 45% and margins expanding by over 150 basis points. Better weather in key milk-producing regions boosted milk availability, allowing us to run our network more efficiently. Our portfolio optimization strategy, focused on growing our domestic and export premium categories while reducing exposure to export commodities, continued to drive a more favorable product mix.

International cheese and dairy ingredient pricing were constructive, and we remain deliberate in how we allocated milk, prioritizing value creation over volume and directing production toward the channels and markets offering the best returns.

Against this backdrop, the announced sale of our interest in the DSDA joint venture represents the culmination of years of investment and operational improvements that have significantly enhanced the value of the business. As we considered its next phase of development, we concluded that this transaction offered the best opportunity to realize the value while reinforcing our focus on areas most aligned with our long-term strategy. It allows us to concentrate capital and management attention on the parts of our platform where we see the clearest path to value creation and to support targeted reinvestment across our network, including in Australia.

In our Europe sector, the quarter demonstrated the continued benefits of a more focused branded portfolio. Margins expanded by more than 200 basis points as we lean further into branded cheese and step back from lower-value bulk exposure. Cathedral City remains the engine of that strategy with branded volume growth, reinforcing both category leadership and consumer relevance. This year, we are proudly celebrating 60 years of Cathedral City with an integrated campaign across every branded touch point, delivering scale, consistency and continued brand equity.

Our licensing portfolio also continues to deliver double-digit growth, extending the brand's reach. In parallel, we are making progress in expanding our foodservice presence. We are deepening relationships with key national foodservice partners, including new supply agreements that will grow our business in the year ahead. Taken together, Europe is a more focused brand-led platform with stronger earnings quality, and the results this quarter reflect that transformation.

As we look ahead, our strategy is consistent, and our conviction is unchanged. We will continue to operate as a low-cost manufacturer of high-quality dairy solutions, focused on driving efficiency, strengthening commercial execution and capturing the long-term opportunity in dairy. Our approach is grounded in a disciplined category-led strategy, investing behind the brands and customers where we can compete from a position of strength and simplifying where we cannot. The momentum we are seeing in ingredients and the sustained consumer pull toward protein-rich and value-added dairy reinforce the choices we have made about where to invest. These are structural trends, and we intend to continue building around them.

At the same time, we recognize that the operating environment remains dynamic with continued uncertainty related to geopolitical developments, fluctuations in global milk supply and the broader inflationary backdrop. On capital allocation, we are determined to pursue growth, and we will do so with discipline. We intend to invest where we see attractive returns through organic initiatives, targeted capital projects and strategic M&A, guided by value creation and our long-term ambitions for this business. Our balance sheet is strong. Our cash generation is solid, and we can act decisively when opportunities meet our criteria.

Taken together, Saputo today is more focused, more agile and ready to accelerate its growth, supported by a stronger operating foundation, a clear set of strategic priorities and a growing ability to translate them into consistent, high-quality results. This concludes our formal remarks.

I will now turn the call over for questions.

[Operator Instructions] Your first question comes from the line of Irene Nattel of RBC Capital Markets.

Can we start, please, by focusing on the U.S.? Because listening to you, Carl, it sounds as though we're in a much, much stronger position, yes, of course, from a network perspective, but also more balanced volume and revenue across the segments, new partnerships, et cetera. Can you talk about -- or can you expand on some of the key wins and where we can expect to see the most growth in the U.S. from here, let's say, over the next 2 to 3 years?

Irene, thank you. Yes, the U.S. team has done a great job over the last couple of years, bringing to life the numerous capital projects and platform consolidation that we had put forward. And fundamentally, we're now bearing the fruit of that. And it's anchored in our ability to supply the demand and to grow with our customers. So over the years, we continue to develop our working relationships, continue to focus on innovation with our customer base, both in foodservice and in retail. And we are here today providing those products to the marketplace, growing with those retail champions as well as growing our foodservice brand. And that's what's anchoring fundamentally the volume growth from our U.S. platform.

And you couple that with the growing demand for protein-rich products. And by protein-rich products, yes, we are talking about aspects such as WPC80 that we invested in Waupun, but we're also talking about products such as cottage cheese. And certainly, our 2 assets in the U.S., our 2 facilities and teams are running around the clock, basically producing as much as we can in these areas. And at this moment, we're also looking at expanding those capacities.

So we have announced some interesting capacity additions to our Friendship plant in New York that will see us expand our capabilities and volume offering on cottage cheese, which is centered to consumers' demand right now. So we feel very strong about the overall capacity utilization in a number of sectors, including our base dairy foods. So winning with the right customers, committing to them for growth, committing to them for innovation is fundamentally allowing us to enjoy the moment today despite some difficult moments for consumers as a whole as a backdrop in the U.S.

That's really helpful. And then do you see a way for sort of the profitability on the cheese side to have a better tone to it? Or given the demand for the types of protein that we're seeing, are we kind of likely to be stuck in this environment with higher milk production and sort of some dislocation in terms of the products being made?

It's a great question. And I would say that certainly, as we shared in our remarks, the overall market conditions specific to the block market were not as favorable as last year. Fundamentally, it's not a function of the demand change -- percentage demand change versus last year. It's more about the milk supply and the availability of milk. And there's -- the farming community in the U.S. is very resilient. They are producing lots of milk, lots of components. And accordingly, we have a slight imbalance when it comes to the overall supply of milk versus that of the overall demand of products.

But nonetheless, this is also allowing us to be quite opportunistic with our exports. Milk pricing in the U.S. is very competitive on a world stage. And we've taken the opportunity to bring more of our products to the international markets and benefit from that side. So we do see better days ahead when it comes to the overall price of the block, which would improve our overall returns coming from our cheese category. So we are optimistic about that. But it is what it is now, and we feel comfortable with the breadth of our portfolio, providing us the balance, the hedge and the opportunity to service our customers.

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

Congrats on a nice quarter. I wanted to just first ask a little bit about some of the inflationary pressures that you mentioned. It seems like your team was able to manage through some of those dynamics in the quarter. Just wondering if you can help us understand maybe what kind of inflationary pressures you're seeing? Where you're seeing them? How much is being managed through price increases versus product mix or other efficiencies throughout the network?

Thanks, Scott. So like most industries, we certainly have seen inflationary pressure on our energy and fuel costs. So different percentage of impact depending on the type of service we offer with regards to distribution. So certainly in Canada, it's weighed on us when it comes to our DSD networks or direct store delivery network. And when we think about some of the overall costs associated to energy and the inputs such as packaging. So we've seen an overall increase in our cost of goods associated to a number of those inputs.

From a management perspective, certainly taking a pricing action is always the last option for us. So a number of operational improvements and decision-making on demand planning and production planning have been put forward. And in some instances, yes, pricing and taking pricing action was part of that solution. In some cases, it's a temporary basis, for example, for fuel. So we're not shielded from those realities specific to fuel. And maybe Max has a few comments to add?

Well, it's something that we have to monitor every day. Our conversations, whether it's from a supplier perspective or our customer base, of course, intensify relative to inflation every time we have a touch base, whether it's tariff-related or other elements that brings the cost to get to an elevation.

Yes, pricing is part of the action. But at this time, I mean, it's a battle on the field, and we try to take the cost out, first and foremost, and whatever is we can mitigate, we will. Otherwise, it's acting as a responsible operator for both our supplier and our customer base.

Okay. Understood. Appreciate the thoughts there. And then maybe secondly, if we just think about profitability within Canada. I think despite some of these pressures, you're still putting up pretty good profitability in the region there. So maybe as we look ahead, specifically within Canada, how do you think about the margin opportunity? How do you think about incremental upside? Is a lot of that driven by product mix maybe relative to anything else? Just any thoughts you could share on that?

The Canadian business is very resilient, and the breadth of its portfolio is second to none. So it's what's allowing the Canadian business today to continue to sustain its performance and equally to keep inching forward month after month and year after year. We focus on innovation. We focus on the products that are most meaningful to consumers and our customers and we continue to reinvest to make those things happen. So we feel very strong about Canada's ability to maintain its market share, its growth, and most importantly, being able to service the customers that rely on us and that are growing.

We're making capital investments in a number of areas, more soon to be announced with regards to investments in cultured products that are very much front and center with consumers. So I would say in the very short term, the biggest pressure on Canada will be really associated to some of the inflation associated to fuel. Part of our distinction, part of our offering to the marketplace is our distribution network, our refrigerated distribution network. And today, we're seeing some of that pressure translate into the result. But despite that, we're seeing a strong Canada continuing to move forward.

Your next question comes from the line of Chris Li of Desjardins.

Carl, there's no question that there's a lot of growth potential for high-protein ingredients. Anything that you can provide to help us better understand the size of the opportunity for Saputo will be very helpful.

I won't get into quantifications, but what I can say with confidence is, one, when you think about the investments that we put through our network in the U.S. in particular, and I'll get to some other geographies as well, but in the U.S. over the last couple of years in Waupun. So our asset that is now producing high-quality WPC80 as well as lactose is, they're not full. Those assets are not full. They're running efficiently. They're running with basically all the whey solids available from our cheese make operations, but there's still capacity available.

So I see a runway over time as we continue to do a couple of things. One, grow our cheese business and provide additional whey solids to transform. And then there's a variety of network optimizations north and south, so Canada, U.S. that we're also looking at to be able to unlock more value, more high-value WPC80. But we're also looking at the very same things in other jurisdictions, including Australia, so the runway for us to continue to play in this space will come through a few things. One, our continued focus on the capacity and capabilities, some investments in R&D and innovation and, of course, continuing to innovate with our customer base. But that's on the ingredient side.

And I want to bring it back also to the broader protein movement. It's not just in those -- in the ingredients segment. It is in the ready-to-drink format. It's in the higher-protein, everyday cheese and/or cultured products, very much the same. We announced recently a material investment in our Friendship facility in Upstate New York to expand our cottage cheese operation by 30% to 40% in capacity. And we feel strongly about being able to bring that to market across our branded products as well as our private label offering.

The same thing is being contemplated in Canada. Then you get into the aspects of beverages. So one, we're already the market leader in Canada with our Dairyland and Neilson offering in higher protein multi-serve. We have also our single-serve capabilities. So there's a large runway with the portfolio and the offerings that we have and equally with the innovation that we have in our pipeline.

So I can go on and on, Chris, but I do feel strongly about our ability to capture the opportunity that exists with this protein demand.

That's very helpful. And I was also going to ask how big of a competitive advantage is it for Saputo? The fact that you guys produce a lot of cheese and whey is a byproduct of cheese, you have access to that maybe versus some of your competitors who don't directly have access. How big of an advantage is that for Saputo, do you think?

It's -- we're certainly in a good position versus some of the competition. And by the competition, I'm talking about those who aren't dairy processors necessarily. So out in the marketplace, there are a number of brands, whether you want to call them insurgent brands or newcomers to the marketplace, who fundamentally buy ingredients, some of the ingredients that we produce to formulate their products and they go the last mile out to the consumer. We're in a unique space where we certainly control an important amount of the raw material that goes into our own products that we bring to market.

And we feel strongly about finding the right balance of whether it's cheese make, whether it's overall milk processing in order to maintain our ability to bring the WPC80 or the refined proteins, if I can say it that way. It's not all about WPC80, but bringing those refined proteins to market. So we feel comfortable. It's our area of expertise, manufacturing always has been, and it's an area that we won't shy away from growing in, and we're not because we're comfortable with all aspects of the life cycle associated to the milk that goes into production to make these WPCs.

Your next question comes from the line of Tamy Chen of BMO Capital Markets.

Continuing with the cheese and whey dynamic in the U.S. in particular. So I'm just thinking about how you're talking of the opportunity on the ingredient side, particularly in whey, Carl. Given that there's the higher supply of milk, there's continued cheese production. I understand whey is a shortage in the U.S. right now. So I'm thinking the processing industry will continue to ramp cheese production for that whey byproduct. And is it your view that the potential continued pressures on the block and on the cheese side will be more than offset by the positive from the whey WPC ingredients tailwind?

What I would say is the following. As we stated that in this quarter, in particular, for Saputo, the benefit on the protein side helped offset the -- I'll say, the unfavorable conditions in the block price. But what I would say is, if you recollect, over the last several years, the U.S. dairy industry invested over, I believe, it's close to $8 billion in dairy processing with a lion's share of that going to cheese make. Most of those assets have come online. Most of those assets are ramping up. And most of those assets are accounted for in many respects with regards to our competitive set. So we know that those assets are going to continue -- we always knew that those assets were going to continue to grow with their output.

So I don't foresee there being a flood of cheese investments for the sake of protein. It's an expensive endeavor to get into just for the sake of producing a protein, the inventory cost of carrying, so on and so forth. It absolutely is about demand planning or the overall -- sorry, supply and demand dynamics. And what I would tell you is the overall dairy category more specifically cheese continues to be on the positive side of the ledger as far as growth rates, but not as strong as protein.

So there's going to continue to be tension there for quite some time. And the barrier to incremental protein is going to be cheese make and/or cheese demand, but those are dynamics that we're going to live with for some time. So I still -- I go back to the earlier comments I made. We feel that we have better days ahead with the overall block price and how it's going to support our overall earnings. And we feel very good about our ability to keep navigating that supply and demand dynamic between cheese, milk and whey solids.

Okay. I see. And on the whey side, on WPC, is it true that there is currently a shortage? And are there several other processors, not just you that are going to bring online new capacity starting next year? Like is that the case?

There is. I mean we -- there are -- our dairy industry remains very dynamic, very competitive globally. And we have a number of peers and competitors out there that are investing in the space for sure. But there's -- it's not all about net new whey solids being either created or processed. Some of them are moving up the ladder, if you like, from simple sweet whey powder to higher refinements or fractions of proteins. And that's what you're hearing and seeing from some of the more recent announcements on investments. It's moving up that ladder more so than it is creating incremental whey solids.

Okay. Got it. And I just want to squeeze one more in here for a second. So you're generating very good cash. You've upped your buyback, up your dividend, CapEx number is still the same. What is the way now to think about your capital allocation going forward? Would you move some other buckets, possibly M&A a bit higher?

So what I would share on that is that, first and foremost, our capital allocation plan and strategy remains based basically on discipline, balanced in nature, but we are absolutely looking forward to growth. So in order for us to grow, we're going to need to invest in a variety of initiatives, both, I'll call it, at the organic level grassroots with regards to brand support and innovation. That will absolutely trigger the need for continued capital investments into our assets. So a number of different projects will be unlocked to be able to meet the consumer where they are today.

And M&A will absolutely be part of the choices we will make in order to address the market. We've said it before when it comes to M&A. If we can't build it and the path to being able to grow and to meet our ambitions and our customers' needs passes through M&A, then we won't shy away from that either. And it's not about when it comes to M&A in particular, there isn't a particular size that is of interest or part of our criteria. It's what meets our needs. So having said that, growth is what will drive most of the decisions of our capital allocation.

Your next question comes from the line of Derek Lessard of TD Cowen.

Really nice start to the year. I just want to stick with the protein theme here and maybe ask it in a different way. How do you guys, I guess, think about the durability of these trends to ensure that maybe to keep you guys from overinvesting in the business? And I'm just thinking we're coming at this from the context of the plant-based craze that we saw several years ago.

Yes, it's a great question. And I've seen ourselves do a bit of a double take every now and then and say, is this just a trend? Is it sustainable? But when you take a look at what the fundamentals behind the trend is -- sorry, the demand is, it's not a trend. It's rooted really in health and wellness. It's rooted in nutrition. It's rooted in consumers and citizens being fundamentally more focused on their overall health. And dairy as a whole and its combination of nutrients is a great starting point.

And then from a protein perspective, you got to look at it on a multiple of dynamics. When you think about the options of protein available to you, dairy gives you the biggest bang for the buck. It is absolutely the best option you have versus some of the alternatives from a value, from an affordability perspective and so forth. So it's -- this is a structural change. It's not a trend. And so we feel comfortable about continuing investing our talent's time, our dollars behind the innovation, growing the platforms and growing with our customers in this space.

Awesome. And then I guess we also -- I noticed some subtle changes in your outlook statement compared to the prior quarter. Specifically, you guys called out investments in technology and digital initiatives. Just maybe help us flesh out what these would entail and give us a sense of the cost and what you're looking to generate from the investment?

Max will give you a bit of a sense of the overall cost, and then I might add some color to the direction.

When we -- Derek, when we refer to technology, we refer to a few items. One, relative to our platform -- IT platform, where some upgrades have to be taken care of, and we need to proceed with some changes into the infrastructure of the platform. We also included there cybersecurity investment that is constant year after year, and it's not going away. And as well as digital investment, particularly on the commercial aspect. So when you put all of those elements that we referred to in terms of technology, we could think about $28 million, $30 million investment in that space.

Yes. And maybe just to add a little bit more color on what types of digital technologies are the areas that are primary focus to us. So Max referenced the commercial side, give you examples, a lot of it will be centered around consolidating insights in a manner that's not just digestible, but in a manner that's actionable, and that will help feed a number of other technologies -- digital technologies that we're looking to employ to enhance the efficacy of our promotional activities. And all of this is fundamental to how we improve with the notions of revenue growth management.

So we're looking at the commercial side as one of our priorities. I mean there are other streams that are moving along, and you can certainly expect to see digital technologies and automation being deployed into aspects of our supply chain, especially on the demand planning and production planning side, which we're already seeing and having some traction. So we're going at this with very specific use cases and making sure that it simplifies our operation and allows us to be true to our core operating model, being a low-cost manufacturer of high-quality dairy solutions and being true to our customers and providing the agility to make these things happen.

Your next question comes from the line of Vishal Shreedhar of National Bank.

There are many crosscurrents in the quarter. I was hoping you could help me understand, in particular, in the U.S., what is driving the growth between the protein pricing, the volumes, the efficiencies? Maybe you could give me a sense of where that growth is coming from and the commodity prices on the cheese side as well.

So I'll say this. I'll start at the basis of our operations. Our operations are performing at a higher level of efficiency than the day before. So every -- as we look forward, our operations continue to improve their overall cost structure, whether that's labor efficiency, whether that's the overall cost associated to various overheads. But what -- and that is allowing us to, nonetheless, in the core of our business, sustain our overall margin and grow our margins despite some of the headwinds.

On the protein side, in particular, so our Waupun facility came off the commissioning phase is now running efficiently. And we're able to deliver on the orders, the strong orders for that matter that are coming through in protein. So the demand in the global markets for whey proteins is extremely strong. We're fulfilling and filling all of the orders that are coming our way. But overall pricing based on the limited availability globally is a big driver of the protein profitability for sure, in this quarter. Pricing has improved significantly, but it's also coming at a time when we're actually able to supply based on the prior year's choices that we've made in our network.

Okay. With respect to M&A, maybe you could give us some updated thoughts on how you're thinking and what you're seeing in the market and what investors should expect from Saputo?

I'm going to bring back the answer, Vishal, to our objectives are to continue to grow our brands, our business, our offering at a moment when dairy is in such high regard, and I used this expression before, but in share of stomach with consumers. And so our growth will be led by choices that we make and investments that we make. We recognize that we're going to need to continue to invest in our assets. And they will absolutely include capital investments -- incremental capital investments to grow in categories that we feel strongly about the quality of the returns, the longevity and sustainability of those returns.

And yes, many of them are protein-centric. It's not all about absolute highest quantity of protein, but it has a lot to do with wellness and health as well as everyday affordability. I want to emphasize all of that as well because consumers and customers all have sort of different ambitions or different expectations in their shopping habits. But affordability is also -- and value is also very key in this. So the choices we will make in those investments will be centered around that. And that in itself will also inform the choices that we will make with regards to M&A and either the assets and/or the brands that we feel would be most useful to our portfolio.

And maybe -- sorry, if I could just add one last thing on this to clarify with M&A. One of the things that I want to emphasize is that we're not looking for new milksheds. I've said this before, but I want to emphasize it again. We feel very, very comfortable with -- especially for the export markets, to be producing our products and bringing innovation to market through our U.S. platform as well as our Australian platform. We feel strongly about their -- not only their geographical presence, but most importantly, by the quality of -- and cost competitiveness of the milk supply in these regions.

Your next question comes from the line of George Doumet of Ventum Financial.

You guys have had this 10% to 12% EBITDA long-term margin goalpost for the U.S. I wonder if you think of that any differently perhaps the magnitude or perhaps in terms of timing of how soon we can get there as a result of all the demand we're seeing from ingredients?

It's still our ambition and our target. And certainly, the overall market dynamic for those -- for whey proteins has helped the overall margin structure. Our efficiency and our consolidation plans have also contributed positively to this. There will be more choices that we're going to make with growing volume from the asset base that we have that will further amplify it. And another possible, call it, step change in that reaching our objective will come when we see a better pricing balance or spread with regards to our block price and the price of milk. So it's still our objective to be in double digits in the U.S. We do believe it's achievable, and it's going to come from those 3 specific aspects working in tandem.

Okay. And Carl, it's pretty impressive that you guys were able to grow the mozzarella volumes in an environment where we're seeing pressure from foodservice, especially from the pizza players. Just wondering how you're doing that. And given the additions in the low-cost capacity that we've seen in that space, do you think we can see maybe some irrational behavior from some of your competitors if things don't get better soon?

The market remains -- it's very competitive. And the U.S. market on mozzarella and cheese in general has always been competitive. And we're not seeing anything that is different than that very statement today. What has allowed us to excel here and to fill our assets and be successful has been a combination of things. One, being able to produce day after day, week after week and be the anchor to important customers on supply and being a reliable supplier of that high-quality product.

And yes, some of the backdrop has been a little bit more difficult. You have some winners and some losers when it comes to some of the QSRs. We've been fortunate to be growing and supporting the right banners. And some of those banners are picking up the share, if you want, of others, and we're winning in that space as well. So that's allowing us to grow on the mozzarella side as well as new opportunities and new occasions. It's not all about the QSR/pizzeria space. Our continued push and focus on retail is also allowing us to expand our mozzarella utilization in out-of-home experiences.

If I can just squeeze one last one in. I think it's the second quarter in a row where we're seeing margin compression in Canada. Is that purely the result of fuel? So should we see margin expansions come back maybe later this year? Or should we just think of Canada in general as more of a kind of an EBITDA dollar growth story as opposed to maybe an EBITDA margin expansion story?

Yes. I'm not going to confirm the second quarter in a row. This quarter is. But what I would tell you is that, yes, in Canada, with regards to fuel, in particular, there was a disproportionate amount of inflationary pressure and an inability for us to mitigate all of it. But I would tell you that if you -- on an ongoing basis, Canada will continue to grow its business, certainly in a more confined market. But we have the innovation, the assets, the footprint in Canada to continue to grow at the right categories with the right customers and to see this business continue to move forward. So I'm not concerned with Canada's outlook, if I can say it that way. But yes, there is some short-term pressure that they'll continue to mitigate in numerous ways.

Your next question comes from the line of John Zamparo of Scotiabank.

I wanted to come back to the topic of margin goals, in particular, Australia and Europe. And you've captured lots of the upside from efficiency and capacity. I wonder what upside remains, especially from product mix. And if you keep getting the benefits from product mix that Saputo has benefited from, how much margin expansion remains in those 2 sectors?

Well, let me start with Europe and the U.K. in particular. So certainly, we've been able to grow our branded presence in Cathedral City, very impressive actually in the current market dynamics in the U.K. But what I would tell you is, one, the continued focus on the operational efficiency will continue to deliver incremental margin for that platform. And equally, if you remember one of the choices that we made probably now almost coming on a year ago with regards to exiting the D90 and GOS business on the whey side in our main cheese operation in Davidstow. We still have an opportunity to enhance our overall returns from our whey solids in the U.K. And that will be one of our primary focuses as we move forward.

When I think about Australia, we're still targeting sort of high single digits as far as an overall margin number for that business. It is subject to certain volatility, of course, from the international markets. But how it is we are approaching that, it hasn't changed. We're looking for a better balance for the limited amount of milk, the finite amount of milk that we have in Australia and moving to a larger share of domestic versus that of international.

And it's not just about the volume in international, it's about the mix and the quality of the offering. So said differently, we're not looking to just process milk to put into the markets. We're looking to ensure that the products that we bring to the international space out of the Australian platform. Examples, of course, will include some of our cream cheese offerings, some of our high-quality, high-value cheddar. Those are the things that we will target our limited milk supply to for international markets, improve our overall margin structure as we're seeing now and continue down the path of innovating and being a dominant player in the domestic market.

Okay. And then on capital returns, you took up the maximum buyback amount. I wonder what we should expect in terms of usage of that program this year. You've illustrated your desires for M&A and capital spending sounds like it will have good returns to it, but leverage is already well below your target. You've got the proceeds from the JV sales coming in. So I wonder what we should expect from the buyback this year.

Yes. The NCIB, it's a flexible tool. We intend to use it for excess cash. Of course, valuation will be a key element for decision-making. Cash generation will definitely be the key driver, of course. And the intensity of the buyback will be evaluated against the growth alternatives and opportunity that comes to us, whether it's through M&A or strategic investment. So NCIB remains opportunistic, and it's going to be benchmarked against our growth ambition.

Your next question is a follow-up from Irene Nattel of RBC Capital Markets.

Sorry, I should have put down my hand. In the interest of time, I'll let it go, sorry.

Thank you. With no further questions, this concludes the Q&A session. We thank you for your participation. This concludes today's conference call. You may now disconnect.

Thank you for standing by. My name is Jean-Louis, and I will be your conference operator today. [Operator Instructions] At this time, I would like to welcome everyone to the Saputo Fourth Quarter 2026 Financial Results Call. I would now like to turn the conference over to Nick Estrela, Head of Investor Relations. You may begin.

Thank you. Good morning, and welcome to our fourth quarter and full year fiscal 2026 earnings call. Our speakers today will be Carl Colizza, President and Chief Executive Officer; and Maxime Therrien, Chief Financial Officer and Secretary.

Before we begin, I'd like to remind you that this webcast and conference call are being recorded, and the webcast will be posted on our website along with the fourth quarter investor presentation. Please also note that some of the statements provided during this call are forward-looking. Such statements are based on assumptions that are subject to risks and 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. Good morning, everyone, and thank you for joining us. We delivered a strong close to the year, reflecting continued progress in how we are shaping the business commercially, operationally and strategically. While the environment remains dynamic, we see clear structural demand momentum across the dairy category, driven by growing consumer focus on protein and a renewed trust in dairy, which is supporting innovation and reinforcing demand for higher-value offerings.

Our top line reflects the momentum. Growth is increasingly coming from higher quality sources, better mix, stronger channel positioning and a more deliberate alignment between pricing and value delivered. This reflects a more disciplined and targeted approach to how we are driving the business. On margins, we are making clear progress. Operational improvements and warehouse optimization supported by cost management are driving structurally better profitability even as we navigate ongoing cost pressure. While the quarter includes some nonoperational costs that impacted reported performance, the underlying trajectory of the business is firmly improving.

Over the past several years, we have strengthened our network, improved our cost structure and repositioned the business to operate effectively. Today, those investments are embedded in our results, driving better margins, stronger execution and a greater consistency across the organization. This is translating into a more consistent performance across our key markets and improving profitability in the U.S., normalization in Europe and efficiencies flowing through our broader cost structure.

This progress reflects where we are in our journey, moving beyond the core investment phase and into a stage of growth and capital redeployment. From a strategic standpoint, our direction is clear. We are simplifying the portfolio and reallocating capital to the categories and markets where we see the strongest returns while building a more resilient and competitive business. This is also reflected in our cash generation. Strong cash flow is the result of solid execution and a more efficient operating model, and it provides us with the flexibility to reinvest in the business, pursue targeted growth and return capital to shareholders.

I will now turn the call over to Max for the financial review before coming back with some concluding remarks.

Thank you, Carl, and good morning, everyone. Before turning to the results, a brief portfolio update. In February, we signed an agreement to sell an 80% stake in our Argentinian division. The transaction is expected to close the first half of fiscal '27, subject to customary conditions and regulatory approvals. The Dairy Division Argentina results are now presented as discontinued operations and prior periods have been restated accordingly.

All figures I will discuss today reflects continuing operation, which excludes the Dairy division Argentina results. After the disposal, we will account for its remaining 20% interest as an investment using the equity method. Fourth quarter results underscore the sustained execution momentum we delivered throughout the year across both commercial initiatives and operational delivery. Sales volume increased, supported by targeted commercial initiatives and consistent high-quality service level that supported customer demand. This was complemented by a favorable product mix with growth in value-added and dairy food categories as well as core branded products.

Margin performance improved, underpinned by ongoing operational enhancement and efficiency gains, including tangible progress in warehousing optimization and ongoing cost control initiatives. In domestic markets, our pricing action remained effective in offsetting inflationary pressures across key categories, preserving margin integrity. At the same time, the quarter reflects higher operating costs, including increases in wages and compensation, driven in part by a $33 million increase in stock-based compensation related to share price appreciation.

The quarter also reflects a continued and targeted investment in advertising and promotional activities to support volume momentum. Adjusted EBITDA increased 5% or $19 million to $386 million. Margin expanded to 9.2%, up from 8.3% last year, reflecting solid operational performance. Revenues came in at $4.2 billion, down 6% from last year, largely due to the effect of lower U.S. dairy commodity market pricing. Net earnings from continuing operations were $157 million. On an adjusted basis, net earnings were up 17% at $169 million and adjusted EPS increased 21% to $0.41, benefiting from stronger earnings and the impact of our share repurchase program.

In Q4, we generated over $500 million of operating cash from continuing operations, up $170 million year-over-year. The improvement was driven primarily by $147 million working capital tailwind alongside higher EBITDA generation. This reflects our underlying strong cash conversion and disciplined balance sheet management. Full year net cash flow from operation was $1.5 billion, $314 million higher when compared to last year. Full year CapEx totaled $339 million. We expect capital expenditure to step up in fiscal '27 to approximately $550 million as we lean into disciplined high-return investments. These will be focused on fastest-growing dairy segment, improving capacity and driving efficiency across the network.

Importantly, spend will remain tightly managed with phasing and returns linked to execution. From a leverage perspective, our net debt to adjusted EBITDA ratio improved to 1.7x. Including estimated net proceeds from the sale of 80% of the Dairy division Argentina, our leverage ratio on a pro forma basis reached 1.37x, underscoring the strength and the flexibility of our balance sheet. In fiscal '26, we returned approximately $1 billion to shareholders via dividend and share repurchases, including the repurchase of 19.2 million shares under our NCIB.

The Canada sector delivered solid results with revenue up 4% and full year growth of 5% Revenue increased driven by solid volume growth across retail, foodservice and industrial segment, supported by a favorable mix shift towards butter value-added category, particularly high-protein beverages and cultured products. Targeted pricing action to offset inflationary pressures and higher milk input costs further supported top line growth. On profitability, adjusted EBITDA was up 1%, reaching $159 million. Adjusted EBITDA increased driven by volume growth and a favorable mix with additional upside from manufacturing efficiencies, but partially offset by higher wages-related costs, including higher stock-based compensation and brand support initiatives.

For the U.S. sector, revenue came in at $1.9 billion, down 13% from last year, reflecting lower U.S. dairy commodity prices, particularly butter and cheese. Underlying top line performance remains solid with continued volume growth and favorable mix across the portfolio. Growth was led by strength across cheese, dairy foods and value-added dairy ingredients, including mozzarella as well as contribution from string cheese, export cheese and cream cheese categories. We also continue to outperform the market with cheese volume growing ahead of industry benchmarks, reflecting ongoing share gains across the category.

Adjusted EBITDA in the U.S. was broadly in line with last year, while underlying business performance continued to improve. Our performance remained solid, supported by higher volume and a favorable product mix alongside continued execution of our commercial initiatives. We also realized benefit from ongoing operational improvement, including efficiencies from our Midwest consolidated warehouse facility. These factors were offset by higher logistics expenses driven by elevated transportation and fuel costs as well as ongoing increases in wages and also higher stock-based compensation.

We also continue to invest in targeted advertising and promotional activity to support our brand. Overall, results reflect a balanced profile of operational progress and disciplined investment, supporting stable earnings in a dynamic cost environment. Turning to our international sector, which consists mainly of the Dairy Division, Australia. Revenue were supported by stronger export pricing with higher international cheese and dairy ingredient markets and also supported by growth in value-added ingredients. Domestic demand remained solid, reinforcing our strategic focus on domestic market opportunities with higher domestic volumes more than offsetting our export volume reduction.

International EBITDA was stable year-over-year. Higher dairy ingredient and cheese prices provided were largely offset by elevated milk input costs. Operationally, tighter milk availability created some pressure on efficiencies and fixed cost absorption, though this was partially mitigated by disciplined product mix optimization. We also absorbed higher labor and strategic A&P investment in the quarter alongside increased stock-based compensation. Despite input cost inflation and operational constraint, the business demonstrated solid margin discipline and cost control.

For the Europe sector, revenue were $290 million, down 13% from last year. This primarily reflecting reduced volume in bulk cheese due to lower milk intake and lower dairy ingredients volume following the continued execution of our ingredient strategy. Retail remained more resilient with strength in branded cheese, partially offsetting softer non-cheese categories. Pricing action helped mitigate inflationary pressure. Adjusted EBITDA came in at $37 million, up 54% with margin improving to 13%. The lift was primarily driven by a more favorable product mix and the consolidation of our cheese packing operation and continued progress on our ingredient strategy, both of which delivered meaningful operational efficiencies and cost savings.

In closing, we delivered a record year in Canada, and we're capturing the benefit of our investment in the U.S. We also made a significant portfolio decision with the divestiture of Argentina, reinforcing our focus on value creation. Throughout the year, we remain disciplined, advancing our commercial initiatives while maintaining strong financial position. This supports a consistent approach to capital allocation, enabling us to invest for growth while continuing to return capital to shareholders. On that note, I'll turn the call back to Carl.

Thank you, Max. In Canada, our performance this quarter continues to reflect the underlying strength and resiliency of our domestic platform. We delivered broad-based volume growth across retail, foodservice and industrial market segments, supported by sustained demand in dairy foods, particularly in value-added and higher protein offerings. This is an area where consumer trends are aligned with our portfolio and where we see runway for value creation. As an example, Armstrong continues to perform as a leading brand within the everyday cheese category, reinforcing our position in core household staples.

Our approach in Canada remains deliberate. We are investing behind our portfolio, strengthening in-store execution and refreshing our offering to stay relevant. This includes a 360-degree media campaign in Quebec and targeted packaging upgrades across Saputo shredded cheese and Neilson value-added beverages to enhance shelf presence and drive conversion. These actions are not one-off. They are part of a scaled, repeatable commercial model that is driving consistent engagement and supporting growth across key categories. At the same time, we are building out our higher protein platform, which represents a clear opportunity to extend our relevance in evolving consumption occasions and capture incremental volume within the category.

From a profitability standpoint, we benefited from operating leverage on higher volumes, improved mix and the ongoing contribution from prior capital investment. Pricing actions have been disciplined and aligned with the input cost realities, ensuring we protect margins while maintaining competitiveness. Overall, Canada reflects what we are focused on delivering across the organization, a stable, demand-driven earnings base supported by strong brands and a portfolio evolution.

In the U.S., our performance this quarter continues to demonstrate the strength of a scaled commercially driven platform with momentum building. We are outpacing the market and gaining market share across our key categories, reflecting strong execution in both cheese and dairy foods as well as the advantage of operating across multiple channels and end markets. What differentiates this business is not just volume growth, but our ability to translate that growth into higher quality earnings through mix and portfolio management. We continue to see strong traction in structural growth areas, particularly in high-protein snacking and value-added ingredients, supported in part by the ramp-up of our Waupun facility.

Additional capacity is driving incremental volumes in whey and high-value dairy ingredients and improving utilization as sustained demand in these categories continues to support scale. At the same time, we are extending that scale into underpenetrated channels while unlocking white space opportunities. Frigo Cheese Heads is expanding beyond lunchbox into adult and on-the-go snacking. We are also increasing our presence in convenience and food away-from-home channels where distribution remains underpenetrated, providing further growth opportunities.

These efforts are supported by targeted investments in commercial capabilities, providing us with the tools and customer activation programs required to scale these emerging platforms sustainably. In parallel, our brand investments are beginning to compound. Increased marketing and promotional activity, including the extension of our Cheese Heads media campaign to reach new snacking audiences beyond its traditional base is driving new consumer acquisition, strengthening engagement and enhancing our digital and e-commerce presence as key enablers of long-term growth.

At the same time, we are extending the Saputo brand, building on its strength as a well-established Canadian brand across the U.S. as a solutions-oriented foodservice platform, deepening customer relationships and expanding our relevance across a broader set of dairy applications. From an operational standpoint, the most recent phase of network optimization and transformation is largely behind us, allowing us to pivot toward the next set of initiatives to further enhance the network.

We are now operating from a more efficient footprint with benefits from our consolidated Midwest warehousing facility in Caledonia, together with ongoing third-party logistics consolidation. These initiatives are improving fill rates, enhancing efficiency and strengthening execution consistency, supporting continued margin expansion. As a result, the U.S. business is entering the next phase from a position of strength. With scale, category exposure aligned to consumer trends and more efficient and a more efficient operating model, we see a clear path to sustained high-quality growth and further margin progression over time.

In our international sector, Australia's performance this quarter reflects both improving market conditions and the strategic value of our footprint. As pricing strengthened across global dairy markets, we were positioned to capture the upside selectively, directing volumes to the markets and channels offering the best returns. This is a key advantage of our model. We are not constrained to a single market dynamic. Demand patterns remained uneven, and we were intentional in how we responded. Rather than pursuing volume for its own sake, we prioritize value creation, optimizing mix, aligning pricing and actively managing where and how we deploy our production capacity.

On profitability, improving market conditions provided a tailwind, but what is more important is how we executed within that environment. Despite constraints on milk availability in certain regions, we continue to optimize our portfolio in real time, ensuring we are consistently allocating milk to higher value opportunities. This reflects a shift to a more flexible, broader platform. It gives us the ability to manage volatility, act on opportunities and create value over time.

In our Europe sector, the quarter underscores the strength of our strategy and our ability to drive structural margin improvement. We are seeing a clear and deliberate shift in the portfolio from commodity exposure to our branded higher-value products. This is not just mix improvement. It reflects how we are repositioning the business to capture more value across the category. Our Cathedral City branded business remains central to that strategy. It continues to outperform its category and gain share, supported by a fully integrated marketing approach that is reinforcing both household penetration and consumer relevance. What is increasingly important is the breadth of that platform.

Cathedral City is no longer limited to core cheese. It is extending into adjacent categories through licensing, where we are seeing strong momentum and incremental growth opportunities beyond the traditional shelf. Operationally, the work we have executed over the past year is translating into tangible structural benefits. Network optimization and strategic shifts in our ingredients approach are simplifying the business, improving efficiency and supporting margin expansion.

Stepping back, Europe is evolving into a more focused platform with stronger earnings quality. As we look ahead, we remain committed to operating as a low-cost manufacturer of high-quality dairy solutions by driving efficiency, strengthening commercial execution and capturing the long-term opportunity in dairy. In a dynamic and at times unpredictable environment, we continue to concentrate on what is within our control, positioning the business to create value across market cycles, not just through them.

Our approach is grounded in a disciplined category-led strategy, being selective in where we participate, prioritizing returns over volume and investing behind the customers, products and brands that strengthen our long-term position. Structural demand drivers, particularly growing consumer interest in protein-rich and value-added dairy continue to reinforce the attractiveness of the category across products, channels and geographies.

Operationally, we are entering the next phase of our transformation. As recent investments scale, we expect to unlock further efficiencies, improve absorption and reinforce our cost position. Capital deployment remains disciplined and unchanged. We will invest where we see attractive returns through organic initiatives and strategic investments, including M&A, focused on value creation and the right opportunities, not the fastest ones. All of this is supported by continued cash generation and a balance sheet strength, ensuring we act decisively where we see value.

Taken together, Saputo is today a more focused and agile business, supported by a stronger operating foundation and a clearer path to consistent high-quality value creation over time. This concludes our formal remarks. I will now turn the call over for questions.

[Operator Instructions] Your first question comes from the line of Irene Nattel of RBC Capital Markets.

Congratulations on a great year in F '26. I want to focus for a second on some shift in tone in this release and in this call, really around capital allocation and targeted investments. Can you give us an idea of where the incremental CapEx is going to go? And when you talk about targeted strategic M&A, can you give us an idea of order of magnitude and what types of geographies and product categories that might be?

So thank you, Irene, for the question. And what I would say to start is that we continue to be focused on growth and of course, growing where consumers are pulling demand from in our dairy category. And hence, we are looking at ensuring that -- we invest for organic growth, and we have some very interesting opportunities that we're unlocking right now, both in -- actually, in fact, in most of our geographies. And they're all really centered around products, and I'm going to give you sort of a general perspective.

Those would be cultured in nature or the likes of cottage cheese or value-added beverages as well as continuing on our investment journey in our ingredients sectors. So these are very exciting categories for us, and we are pleased and excited to be able to invest behind these to keep growing our relevance with consumers. But as we've said in the recent past, we will continue to look at what is the best route to market to making that happen, whether that's an investment in ourselves organically or whether that is through looking at an acquisition of sorts to either bring on a brand, a capability and possibly even a route to market.

These are always put into sort of the balance. But considering where our balance sheet is at today and the strength of it, we feel quite confident that a mix of those 2 is in our horizon, and we will be able to remain that dairy solutions provider for our customers and continue to be relevant with our consumers with a disciplined investment in both segments.

That's great. Really appreciate it. And you did mention the balance sheet and clearly on a pro forma basis at just around 1.3, 1.4x, you have ample capacity. How should we be thinking about potential magnitude of M&A? Is this sort of -- because you've done all ranges historically. So what should we kind of be expecting here? And is anything imminent?

We're very focused in what it is we want to acquire. And -- we're not looking for a new milk shed. So we've also shared that in the recent past. We're very comfortable with where it is we are manufacturing in today and the opportunities that some of those platforms present for us to continue to service our international markets and to capture either emerging markets. So -- and I'll say that those 2 platforms in particular are certainly the U.S. and Australia, which is the engine behind our international supply.

So closing that part up, we're not looking for new milk sheds. But what we are looking for is a real fit. So we're looking for things that will allow us to keep growing in the protein sector, better-for-you offerings, tailored nutrition. And quite frankly, the criteria must meet things like adding capabilities, strengthening our route to markets.

And it's not about the size because there are a number of things that we require that either could be a sort of a tuck-in size in nature or something that is more substantial. But again, we continue to review things that are adjacencies that are core to our strategy and not just what's available in the marketplace.

Your next question comes from the line of Michael Van Aelst of TD Cowen.

So I'm looking at the EBITDA, and if I back out that incremental stock-based comp, it was up 14%, which is pretty impressive. I was hoping that you could unpack the 3 or 4 largest drivers of this growth in the quarter. And then which do you still see having the most juice and boosting profits further in fiscal '27?

Thank you, Mike. And I would say that volume will be #1 on the list. So we continue to fire on all cylinders in all our geographies and volume is certainly continuing to drive absorption costs, returns, all of the above. I would also say that we're -- Q4 is a quarter where we've been able to capture the real full extent, almost the full extent of all of the prior capital investments that we've made in ourselves over the last couple of years. We've also made some significant inroads with regards to our ingredients business and being able to unlock the value that comes with the demand in that market space today.

And all of this is supported by second to none service levels. So our business, in addition to growing with the demand in the marketplace, we've also been able to have excellent service levels and fill rates to make that happen. So I would say that in a nutshell, volume, execution excellence is driving that momentum, supported by some historical investments that we've made, including the investments we made in A&P.

So we began that journey earlier in the year, and we're beginning to see the benefits of that flow through. And that's especially true with maybe 2 specific brands being Cathedral City and Frigo Cheese Heads in the U.S.

Okay. That's helpful. And when you look at these, I understand that most of them seem to be going on all cylinders in Q4. But how much of that ramped up during the year and therefore, has room to continue to drive growth as you cycle through those improvements in fiscal '27?

We feel good about the momentum and the ongoing performance. So without taking anything for granted, we're feeling really good about the business continuing to optimize and through our continuous improvement programs. I do believe that we are going to continue to see improvements in our overall operating costs. We're very disciplined with regards to our inventory management and our overall supply and demand planning process, keeping our working capital as low as possible, yet not sacrificing our service levels.

The A&P investments that we made in fiscal '26, of course, that momentum will carry through. And as we mentioned, we will also be stepping up A&P investments in this fiscal year to support a very targeted sector of growing demand from the consumer space in a handful of our brands. And we are also -- we have continued CapEx programs that are driving incremental efficiencies, and we see that as an ongoing engine for our growth.

We're certainly mindful of inflation. Everyone is subject to some of the geopolitical turmoil that we have today. So we're going to continue to do what we need to do to protect margins. But at the same time, we want to make sure that we remain competitive. And accordingly, we continue to be focused on growth.

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

First thing I wanted to ask about just following up on some of the last comments you made there about inflation. I think you noted that in the quarter, you had some headwinds from fuel and transportation costs. As we look ahead to fiscal '27, could you help us frame kind of how you're thinking about magnitude of impact from those? And if we walk around the world, how we should be thinking about impacts?

Thank you for the question. And I would say that the impact of the inflationary pressures, specifically associated to either energy or fuel is quite even across the globe. There isn't one sector that we feel is necessarily more exposed than another. They've been, I'll use the word, manageable to date. We are certainly looking to mitigate as many as we can through either operational changes, internal logistics, speaking with customers, of course, on any preferences or changes that they would like to see and how it is we service them in order to keep their own pricing intact.

We certainly look to pricing action as one of our last resorts. And at this stage, we feel that the influence of incremental costs in energy and fuel is one where we'll be able to navigate through. And in order to remain competitive -- we will remain competitive, but we'll also look to pricing should things continue to persist throughout the year. But there isn't one region in particular that is necessarily more exposed than another, nor is our operating platform sort of more exposed.

Understood. Appreciate the context there. Second question for me. You've spoken a lot about the shift toward branded toward value-added products, value-added ingredients. Wondering if you could just kind of help us frame bigger picture. As you look at your businesses across the globe, where do you think you are in that journey from shifting from more commoditized products to more of these value-added products? And how should we be thinking about the runway ahead?

So maybe one way to help describe opportunities and where we are in our journey. So let me start overall from an ingredients perspective. The ingredients business is not new to Saputo. We've been in this business for decades. But certainly, it's evolving at a more rapid pace and demand is certainly ramping up very quickly. And we had some foresight a couple of years ago when we decided to invest heavily into our Waupun facility, which added capacity as well as capabilities into higher fractions of whey protein concentrates as well as moving into edible and dry blend lactose.

So we have capabilities not only in the U.S., we have capabilities in Australia. But I also want to provide it by way of example, a choice we made in the U.K. In the U.K., we walked away from a business that we were involved in when it comes to the waste solid, and that was our demineralized and GOS operations because of the demand turndown in those categories. Instead, we decided to move over into some basic whey products, which has improved our margin structure, as you can see from the results.

But it's also an area which is also underdeveloped for us, and we are actively looking at how to bring those solids to life and to value through further refinement, and there are active projects in this space at this moment. So you can see that we have a combination of a mature business in some areas as well as an opportunity to continue to add value to waste solids that we already generate.

And if I look further out, in order to continue to support our ingredients business, specifically on the whey-based side, our current position and growth in the cheese sector will allow us to fuel that whey business as well that ingredients business, which is whey-based, dependent on cheese make as well. So we feel really good about the combination and the vertical integration that we have with these 2 sectors, allowing us to continue to capture that demand.

In addition to that, I would say that we're going to continue to look at moving to a greater share beyond that of being a provider of those ingredients to those who have the last mile and branded offerings and continuing to look at how we can incorporate our ingredients as a raw material into finished goods that we can bring to market as well.

Your next question comes from the line of George Doumet of Ventum Financial.

Carl, earlier, you mentioned a step-up in A&P spending this year. Can you talk maybe order -- maybe for Max, order of magnitude there? And Carl, can you maybe talk a little bit about where you're going to see those spend specifically go to?

George, welcome back. Relative to A&P, I mean, A&P investment for us, we see it as a journey. We did have an incremental spend in fiscal '26, and we do expect incremental spend as well to further support our brand. The focus that the organization is putting around brand awareness and commercial initiative is having great momentum. We intend to pursue it over the next couple of fiscal.

I will not be providing any specific number just for sensitivity, market sensitivity perspective. But from a -- I can give you a flavor from a percentage perspective, likely around 20% of what we've achieved this fiscal will be an incremental next year.

And maybe I can just add one thing on that, George, we continue to be focused on supporting those key brands. We've underscored what those are. They do span all of our geographies. The likes of the Cathedral cities of the world, Devondale, Cheese Heads, Saputo, so -- and of course, Armstrong. But as we do this, we also continuously evaluate the returns from our investments, the overall performance of the brands through a variety of metrics and ensures that it's -- our A&P spend fundamentally remains an important part of our growth algorithm on an ongoing basis.

And one more, if I may, Carl. Can you give us your vision on the ingredients platform? How do you -- where are the margins today -- how do you see that evolving over the next, call it, 3 to 4 years? And what areas can we grow organically there? And what areas do you feel like we need M&A?

The ingredients portfolio is very broad. And although the craze and the demand is squarely focused on protein, protein also comes from a 2 different segments, if you want, in our dairy category, one being whey-based and the other one being milk-based. And we play in both, of course. And so we do feel that there's an opportunity in both sectors to continue to enhance not only our offering, but also our volume to get to the whey-based proteins. I want to reemphasize that it passes through augmented cheese make and cheese sales. And we're very well positioned with the portfolio that we have, both branded, both private label offerings and all the channels we play in to continue to grow our cheese business to be able to fuel that piece.

The remainder of the ingredients portfolio also includes milk-based proteins. And this is an area where it's a smaller share of our portfolio, but we continue to see it as being complementary and part of our growth engine as well as that business also comes with the opportunity to grow our cream offerings and our cream platform, which is key to our dairy foods offerings.

So it is very strategic for us, very much intertwined with our core offerings in dairy foods and cheese, and we will continue to invest both in capital, and we will continue to look for the appropriate fit in elements that might enhance our route to market and/or enhance our last mile, and that would be more of the B2C space. And so we're -- we feel very good about where protein sits and where dairy sits with consumers and ingredients will play an important part of our growth profile over the next couple of years.

Carl, can you comment at all about the margin of what you referred to?

Yes. It being how vast that sector is, there's varying degrees. But overall, the ingredient sector margin is one that is quite strong and on the upper end of our overall average, if not exceeding our average of reported margins.

Your next question comes from the line of Vishal Shreedhar of National Bank.

I was interested to hear about the momentum that you're seeing in your business, and I wanted to get your perspective on consumer malaise and how that plays into your portfolio looking at the past. And just if you anticipate through the year, any shift towards private label away from brand or shift towards retail away from foodservice? And if so, how that might impact the business?

Thank you, Vishal, for the question. And certainly, over the last 3 to 5 years, we've learned a lot about being -- the need to be agile. And we built the platform accordingly, and we do feel very confident about our ability to navigate the channels that will certainly win in various cycles, economic cycles that we have, whether that be the away-from-home or whether that be retail or foodservice, we feel quite confident that we're agile enough today, much better positioned than we were a couple of years ago to be able to move to and from.

I won't speculate on which ones will be winners as it is cyclical in nature, but we'll be able to go through that nonetheless with growth. And when it comes to the aspects of branded versus private label or even toll manufacturing and industrial supply, it's always been core to our business model to play in all sectors. And yes, we certainly see a shift in -- or a growth in private label brands across many geographies. But that does not put us in a position where we feel that our brands are in danger or growth profile associated to them are going to be jeopardized.

In fact, what it's doing is ensuring that we put the focus and the resources behind the right brands and making sure that those brands continue to resonate. We continue to innovate behind the appropriate brands and not sprinkle it across our entire network. So we welcome, if you want, the dynamics that are out there today because quite frankly, I do believe that we're, if not one of, if not the best positioned to be able to capture the rise and the wins and the real opportunities that are going to present themselves with consumer shifts and customer channel shifts.

Okay. And with respect to GLP-1s and the impact to your business and the categories that you're in, I've noticed that some of the North American pizza players are reporting tepid performance, but I think you commented that your mozzarella trends are growing. So I was wondering what your perspective is on these GLP-1s and how it impacts your business and if there's any shifts you need to make?

GLP-1 dynamics is one that is -- continues to evolve rather rapidly, whether that is in the number of users or which parts of the world that we play in are emerging as a growing set of consumers who are participating in that diet or that usage. But our portfolio, first of all, the dairy category is well positioned in order to play a role for those who choose GLP-1 drugs. And that is because of the protein requirements. I think we're all becoming familiar now with the fact that protein is an important part of that journey. That GLP-1 journey also has a variety of caloric requirements along the way. And so people will cycle, if you want, in and out of various dairy products and offerings in that journey.

Some will be very protein-focused, low calorie. And then at another point in that journey, they become in need of a more complete nutrition. And so that means that dairy, whether it's the high-protein products or products like cheese, which are balanced in complete nutrition and protein will continue to play an important role. So I do feel quite comfortable that the ongoing demand and trust in dairy is, in fact, in part supported by the GLP-1 trends.

Your next question comes from the line of John Zamparo of Scotiabank.

I wanted to follow up on the CapEx guidance, in particular, when do you anticipate the revenue benefits to hit? Is that most likely to be felt fully in F '28? Or could some of that slip into F '29? Or could some fall into F '27? Just wondering if you could add some color on the time lines of any key contributors or key projects.

I would say that from the fresh capital that we're -- we've unlocked, the majority of that -- the more meaningful portions will hit more in '28, '29 than it is in '27. But again, these are -- we're looking at investing in categories that we know will have continued long-term growth and support. The CapEx in itself or the timing of delivering the incremental capacity in these categories does not necessarily limit our growth. We're being a lot more intentional and proactive with our investments. So despite the capital taking the time lines that it has and the lead time it has, we feel that we'll nonetheless be able to grow our business in most of our categories over that time frame.

Got it. Okay. And then I wanted to ask about the margins in Europe. I think you had talked about low to mid-teens as the eventual target in that sector. You made a pretty sizable step-up this quarter. I wonder, does that shift how you're thinking about the long-term ceiling of margins in that region? And what are going to be the key drivers? Is it more mix? Or is it efficiency or some other driver that's going to move margins further?

In Europe, so we're very pleased with the performance of our European team and business. And I would say that although there's some seasonality involved in what you see with regards to the margin, -- it is an absolute structural improvement that the business has had through the consolidation efforts, the optimization efforts, management of working capital, ensuring that the cheese that we actually manufacture is cheese that is needed in the marketplace.

So that underlying strength will continue in quarters and years to come. And where I see the ability to continue to keep moving the margin forward beyond the 13-ish where we're sitting at today, I believe, is strongly related to the continued growth of the Cathedral City brand as well as our focus on adding incremental value to a pool of waste solids in that platform that in comparison to the rest of our waste solids usage globally at Saputo is undervalued right now. So it's a great opportunity for that platform.

Your next question comes from the line of Chris Li of Desjardins.

Carl, in your outlook, you mentioned that you expect U.S. dairy volatility to persist. Just directionally speaking, do you expect the level of volatility this year to be similar, higher or lower than last year?

I would say that maybe if I look back, Chris, to the prior years, the volatility is dampening a little bit versus, call it, 2020 to 2024, 2025 era. So -- but it does sit -- many of the market indices are sitting at lower levels. And so all of this to say that part of the reason is fundamentally that we've had a healthy milk season, not only in the U.S. but also globally. And that's -- it's an environment where the dairy farming communities, I'll say, have been fortunate to have a climate that has cooperated with its needs.

The overall cost of feed for most of fiscal '25 was in a favorable position to prior years. So it supported their ongoing growth. Where we see '26 heading calendar '26 and beyond, there'll be inflationary pressures in that community as well. and that we don't see milk growing at the same pace and clip as it did in '25, which depending on the regions was between 2% and 4%. So we see something more subdued, more aligned with the demand of overall dairy products. That in itself will likely help the current market conditions in the U.S. move from its lower base to something higher than what we're seeing today.

And I expect that the volatility will be there, nonetheless, but because of not only the milk dynamics, but certainly aspects of geopolitics. All that said, we stay focused on the things that are in our control, and we'll continue to grow our business in the key categories. And the market dynamics will be what they are. But I feel good about, I'll say, the narrowing between milk supply and the overall demand in the dairy category being better aligned in not only calendar '26, but also at least in the first half of '27.

Great. That's very helpful. Another question I have just on M&A. Is it fair to say that if you do acquire something that we should think about it in terms of synergies should be more skewed towards revenue? Or should there be also some cost synergies from leveraging manufacturing capabilities or increasing capital utilization? Just one thing about what -- if we do think about M&A, what type of synergies should we be thinking about?

It's both. And depending on the categories that we would be exploring. And as we indicated before, we're highly focused on ensuring that we invest in strengthening our growth profile and accelerating our priorities. And keep in mind, I think we've said this before, we are very focused on remaining a low-cost manufacturer of high-quality dairy solutions. So choices that we will make both in CapEx and in M&A spaces are intended to lower our overall operating costs as well as ensuring that we can continue to be that one-stop shop for our customers who are looking for dairy solutions, both innovation, a route to market to assist in their growth as well as ensuring that the portfolio meets what consumers and consumers are demanding. So it will be a combination of both. Some maybe skewing to synergies, others skewing to innovations, brand and/or route to markets.

With no further questions, that concludes our Q&A session. I will now turn the conference back over to Nick Estrela for closing remarks.

Thank you, JL. Please note that we will release our first quarter fiscal 2027 results on August 6, 2026. We thank you for taking part in the call and webcast. Have a great day.

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

Hello, and welcome to the Saputo's Third Quarter Fiscal 2026 Financial Results Call. [Operator Instructions]

I'll now turn the conference over to Nick Estrela, Head of Investor Relations. Please go ahead.

Thank you, [ Jill ]. Good morning, and welcome to our third quarter fiscal 2026 earnings call. Our speakers today will be Carl Colizza, President and Chief Executive Officer; 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 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 continue 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 continued 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% or $75 million to reach $492 million, reflecting continued commercial momentum, efficiency gains from recent capital investment and tight cost control over SG&A. 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 $0.57, benefiting from stronger earnings and the impact of our share repurchase program. Net cash from operations 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 operations of $1.1 billion, significantly higher when compared to last year.

Our net debt-to-adjusted EBITDA ratio improved to 1.76x, below our long-term target range, underscoring the health of our balance sheet. Through the first 9 months of the year, we returned $646 million to our shareholders 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 post 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&A discipline helped 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 actions to offset inflation and higher dairy ingredient market prices helped to mitigate part of the decline. Importantly, across both the quarter and the year-to-date, underlying demand strengthened with higher sales volume in retail, foodservice 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 sustained 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 benefit 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&A 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 the improved milk availability in Argentina. In Australia, lower export volume were partially offset by stronger domestic sales, consistent with our mix 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 were $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. Bulk 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 noncheese 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 help 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, disciplined and 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 delivered a second consecutive quarter of record profitability. This reflects disciplined execution and the strength of our commercial platform. Automation initiatives also continued to deliver meaningful operational efficiencies. We deepened customer partnerships across retail, foodservice 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, Neilson, Milk2Go, Saputo, Armstrong and Scotsburn each won a brand most trusted award in their category. Alexis de Portneuf 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 Neilson protein beverages, which are gaining meaningful traction.

Complementing this, a major national foodservice 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 foodservice, 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 US 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 remains 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 & 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 discipline, supporting our customers and positioning ourselves to capture momentum as conditions normalize. Customer engagement continued to grow strong across retail, foodservice 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 Waupun, 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 lactose 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 U.S. 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 foodservice.

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 foodservice. 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 Nuneaton. 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 whey 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.

[Operator Instructions] Your first question comes from the line of Irene Nattel of RBC Capital Markets.

First of all, congratulations on another great quarter. It's really exciting to see F '26 evolve 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 F '27 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 in a very important role in supplying that protein demand that comes with all of that.

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 what you are referring and what we should be expecting?

For sure. And 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 ingredients sector. And that ingredients 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 runway here for what to invest in and to grow with is abundant.

Your next question comes from the line of Michael Van Aelst of TD Cowen.

And I wanted to 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're able to maintain across the 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 6 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 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 -- they too, 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 our, I'll say, our secret sauce, which fundamentally is about how it is we execute, how it is we service our customers.

All right. And just to follow up. You went through a list of things that is helping to support your margins and expand your margins, but there's one that it kind of stood out for me and I'd like to hear 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 4-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 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 foodservice, 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 a multiyear capital investment strategy.

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

I had two questions, both on 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. And second question, obviously, you guys posted a pretty strong quarter in the U.S. despite some of the unfavorable commodity markets. 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 trying to achieve a double-digit 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 will 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 ingredients space. And 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 there also to 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.

Your next question comes from the line of Vishal Shreedhar of National Bank.

With respect to the outlook, now that Franklin is up and running and the Wisconsin whey facility in Green Bay shut down, can you give us a context of how much remaining -- assuming those are the major projects, how much remaining efficiencies 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 of things. From a whey perspective, because you mentioned two things. There's Franklin and whey. From a whey perspective, we're only just beginning to unlock the incremental capacity that we've added in WPC80, okay? 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 Cheese Heads 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 U.S. And I have yet to mention some of the very interesting aspects on the dairy foods side that we're working with partners on in the growing functional beverage and high-protein beverage space as well.

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

Yes. 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 U.S. 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 the market looks balanced for the years ahead?

Well, I think the pressure is here already. 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. And that's brought in 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. So if you look at 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 all that milk and then some.

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

Just a follow-up on a couple of things. Carl, just with regards to the outlook, 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 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.

Yes. 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 resilient and robust demand. The protein phenomenon and the demand for protein-rich foods is absolutely global. It's not just a North American thing. So 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. I mean, it can go on and on. So 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.

Yes. Okay. And my last question. 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 Cheese Heads 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, 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 road map. But the two brands don't have the same essence necessarily. Armstrong is your everyday cheese brand with a broad portfolio. Cheese Heads is more of snacking and convenience. There are other brands in the U.S. that we will continue to lean on, including some of our specialty cheese brands in Montchevre, Treasure Cave, Frigo, Black Creek.

So 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 and first and foremost, we have a heightened appetite to invest in our brands and our flagship brands, and those also include another 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.

Your next question comes from the line of Chris Li of Desjardins.

Let me start off a question on international. Obviously, it's been very strong this year with the recovery in Argentina and Australia holding its own. What does the outlook look like next year as you start to lap some of the recovery in Argentina and presumably starting to face lower GDT prices. So what are some of the key puts and takes as we look into F '27?

Well, overall, what I would say, and I'll kind of 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 a diminishing volume going to that market, we're moving up the value chain as well in the export markets with more value-added products flowing 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. 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. And if I can just maybe switch to the U.S. Obviously, over the last number of years, you made a lot of investments in cheese and we're certainly seeing the fruits of those investments. Now Dairy Foods is also a very big business and Carl has already alluded to some of the initiatives that you'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, if you execute will, 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, the traditional cartons, aerosol products, ice cream mixes for soft serve, value-added beverages both in aseptic packages and 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 and the U.S. 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 and 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 to 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 perhaps getting from your competitors?

You cut in and out, Chris, 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 uptick.

[Operator Instructions] Your next question comes from the line of John Zamparo of Scotiabank.

Lots of talk both on this call and especially more broadly about high-protein preferences and especially high-protein dairy beverages. I wonder what you can say to frame the size of that opportunity for Saputo, say, over the next year or 2. And can you share what type of point of sales 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 you think of Milk2Go, Dairyland and Neilson and Scotsburn 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 a multichannel in nature. And equally, it's a number of different spots within the retail store so by that, I mean both the refrigerated and nonrefrigerated 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. 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 portfolio 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 uptick 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.

Right. Okay. Fair enough. And then finally a modeling question. I wonder how we should be thinking about CapEx levels for F '27 because F '26 was a very low CapEx intensity year now that Saputo has completed multiple projects over the past few years. So is F '26 likely to be a reasonable baseline for F '27? And are there any material projects or even high-return projects already planned that you can call out?

Yes. John, you could look at F '26 as a low point from a CapEx perspective. Regarding F '27, 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 F '27. So it will be somewhat an increase in capital investment organically.

Your next question comes from the line of Etienne Ricard of BMO Capital Markets.

This is Riad on for Etienne. 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, I would say the following. The trade deals need to go further than just elimination or reduction in tariffs. For anything that 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 exist 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. And 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. So whether or not that trade deal yields anything material will require there to be some clear language around sanitary standards.

Okay. 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 in the U.K., it 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 our 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.

Equally, our flagship brand, Cathedral City, has some renewed investments, A&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 penetration is very good. And I also want to underscore that the U.K. 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 U.K. business, new channels that we are investing time and energy and. That includes foodservice. I've said this before, the foodservice 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 U.K. platform.

There are no further questions at this time. I will now pass it back to Nick for closing remarks.

Thank you, [ Jill ]. Please note that we will release our fourth quarter and full year fiscal 2026 results on June 4, 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.

Hello, and welcome to the Saputo Inc. Second Quarter 2026 Financial Results Call. [Operator Instructions]

I will now turn the conference over to Nick Estrela, Head of Investor Relations. Please go ahead.

Thank you, Jean-Louis. Good morning, and welcome to our second quarter fiscal 2026 earnings call. Our speakers today will be Carl Colizza, President and Chief Executive Officer; and Maxime Therrien, Chief Financial Officer and Secretary.

Before we begin, I'd like to remind you that this webcast and conference call are being recorded, and the webcast will be posted on our website, along with the second 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. Good morning, everyone, and thank you for joining us today. Before we dive into our quarterly [ results ] [Audio Gap] we have stayed focused on the elements within our control. We are executing our strategy with discipline, advancing key initiatives and strengthening our company's foundations. Our results reflect that focus with solid performance across sectors. We delivered stronger commercial execution, improved efficiency and continued cost optimization, driving meaningful margin expansion. We are building on our strengths to becoming increasingly nimble and customer-driven, better positioned to capture opportunities across markets and categories.

Our operations generated strong cash flow, both in the quarter and year-to-date, driven by lower capital spending, working capital management and good cash conversion. We remain focused on generating sustainable growth, maximizing shareholder value and delivering consistent EPS expansion over time. We are closely monitoring the trade environment and potential tariff impacts across our markets. At this time, our direct exposure remains limited, and we have plans in place to mitigate potential cost pressures and protect customer relationships.

Our diversified footprint and strong local supply chains provide flexibility to adapt quickly. Our ongoing collaboration with industry partners helps us manage the impacts of changes in trade policy. We continue to invest in volume growth through brand marketing, product innovation and enhanced revenue management capabilities. These efforts are delivering results with strong consumption trends across key categories as our brands resonate with consumers and capitalize on growing demand for protein-rich foods. We also continue to diversify our customer base, winning new business, gaining market share and expanding partnerships with high-growth innovators and private label customers. This multipronged approach is enabling us to capture opportunities across all market segments while building resilience.

Our strong customer relationships remain a major driver of our success. Saputo received 2 significant recognitions that speak to the strength of these partnerships and the dedication of our teams. At a major North American Supply Summit held in Chicago, we became the first Canadian company to receive a prestigious industry award recognizing suppliers who consistently deliver measurable, high-impact performance. Whether it is enhancing our core product, supporting community events or helping launch a successful national beverage program, these achievements showcase the customer focus across our organization.

At a leading foodservice event in Canada, Saputo was named top supplier nationwide, recognized for outstanding performance in areas such as fill rates, sales growth, regional engagement and innovation. These recent achievements reflect the confidence we have earned and underscore how our teams continue to set Saputo apart as a trusted partner.

I will now turn the call over to Max for the financial review before providing concluding remarks.

Thank you, Carl, and good morning, everyone. The financial highlights of the second quarter are the following: Consolidated revenues were $4.7 billion, which was similar to last year. Revenues includes higher sales volume, particularly in North America. Selling prices across domestic and international cheese and dairy ingredient markets were higher, while U.S. dairy commodity pricing was lower when compared to last year. Adjusted EBITDA amounted to $450 million, which was 16% higher when compared to last year. The increase to adjusted EBITDA was supported by a strong commercial execution, better volume and service levels, operational efficiencies from recent capital investment and proactive cost management.

Export markets benefited from a favorable international cheese and dairy ingredient market pricing relative to milk costs. while domestic markets saw margin preservation through strategic price increases. Net earnings for the second quarter totaled $185 million. On an adjusted basis, net earnings totaled $198 million, up $41 million or 26% when compared to the same quarter last year. Adjusted EPS was $0.48 per share versus $0.37 last year. The 30% increase in adjusted EPS is primarily attributable to higher net earnings and also reflects common share repurchased under our NCIB program.

Cash flow from operating activities was robust at $372 million, up 130% year-over-year, reflecting lower working capital usage and improved adjusted EBITDA. Year-to-date, net cash from operating activities totaled $689 million, a significant improvement when compared to last year. Capital expenditure totaled $84 million in Q2, in line with our plans. As of September 30, our net debt to adjusted EBITDA ratio improved to 1.88. Our balance sheet remains strong with leverage below our long-term target range, providing ample financial flexibility to support strategic priorities and navigate the current environment.

I'll now take you through key highlights by sector, starting with Canada. Revenues for the second quarter totaled $1.4 billion, an increase of 6% when compared to last year, supported by strong sales volume across retail, foodservice and industrial market segments. Growth was led by value-added milk and culture products as well as butter sales. Revenue also increased due to higher selling prices implemented to mitigate inflationary pressure and the higher cost of milk as raw material.

Adjusted EBITDA for the second quarter totaled $179 million, up 11% with margins at 13%. Adjusted EBITDA was driven by 3 main elements: first, strong commercial execution, including higher volume, product mix and pricing. Second, enhanced manufacturing efficiencies from capital investment; and third, SG&A cost savings through ongoing optimization efforts. In our U.S. sector, revenues totaled $2.2 billion and were 3% lower versus last year.

Revenues were negatively impacted by lower U.S. dairy commodity market pricing, namely the average cheese block market price and average butter market price. However, higher selling prices implemented to mitigate inflationary pressure contributed positively to revenue. More importantly, revenues benefited from increased sales volume across both retail and foodservice market segments, driven by strong demand from key customers.

Retail growth was led by dairy foods, while foodservice gain came from core product categories within strategic accounts. Adjusted EBITDA was $167 million, which was up 15% when compared to last year. The increase in adjusted EBITDA reflects higher sales volume and a favorable product mix driven by our commercial initiatives. Adjusted EBITDA also increased due to operational improvement driven by efficiencies initiatives linked to our recent capital investment.

We saw benefits from reduced duplicate operating costs related to network optimization, along with disciplined execution in customer fulfillment and proactive cost management that supported margin expansion. Compared to the same quarter last fiscal year, U.S. dairy commodity market conditions were unfavorable despite reduction in cost of milk stemming from the new federal milk marketing order formula that was implemented in June this year.

During the second quarter, we incurred transitional implementation costs associated with the start-up of our new consolidated warehousing facility in Caledonia, Wisconsin. The project is designed to streamline our supply network and deliver long-term improvement in scale and operational leverage. In the international sector, revenues for the second quarter were $871 million, down 5% versus last year. In Australia, our export sales volume decreased, aligning with our product mix optimization strategy.

In Argentina, improved economic conditions and milk availability have supported the increase in sales volume. Higher international cheese and dairy ingredient market prices for our products in our export markets had a favorable impact. Adjusted EBITDA totaled $79 million, up 46% on a year-over-year basis. Second quarter results were positively impacted by favorable international cheese and dairy ingredient market pricing relative to milk costs. In Argentina, lower milk costs stemming from the reduced inflation and better currency alignment improved our financial performance.

In Australia, our product mix optimization strategy mitigated both higher farmgate milk prices and reduced milk availability, which affected efficiencies and fixed cost absorption. In the Europe sector, revenue were $324 million or 17% higher when compared to last year, while adjusted EBITDA was $25 million, down $3 million. Adjusted EBITDA reflects a favorable relation between selling prices and input costs. Sector performance was temporarily impacted by a major maintenance shutdown and asset transitions tied to our ingredients strategy. We continued our consolidating operational sites and increased investment in advertising and promotion to support commercial initiatives.

Turning to capital allocation. We take a long-term and disciplined approach, always with the goals of creating sustainable value. We plan to continue to actively repurchase shares as part of our effort to return capital and enhance shareholder value. After 6 months, we have returned $376 million to shareholders through dividends and share repurchases. Subsequent to the quarter, we repurchased 1.3 million shares for approximately $44 million.

In closing, our Q2 results demonstrate the strength of our diversified platform and the effectiveness of our strategic initiatives and the benefit of sharp execution. We remain focused on delivering sustainable value to our shareholders and executing with discipline across all market segments.

This concludes my review. And with that, I'll turn the call back to Carl.

Thank you, Max. Across our global network, our team delivered strong focused execution, advancing our strategic priorities and building a more efficient customer-driven business. In the Canada sector, we delivered another solid quarter, supported by disciplined commercial execution and progress on efficiency initiatives. Adjusted EBITDA increased 11% versus last year, driven by the strong volume and mix and cost optimization. Commercially, our portfolio is performing well across key categories. Armstrong is outperforming in the everyday cheese category, growing ahead of market in blocks, treads and snacks.

In Specialty Cheese, our branded portfolio significantly outpaced the industry. This was led by strong results in the Feta, bocconcini, fresh mozzarella and brie categories with Alexis de Portneuf driving momentum in premium segments. We are seeing positive trends in our fluid milk category as value-added segments offset core milk declines. Growth in filtered and lactose-free milk was robust, while our ultrafiltered and protein offerings under Dairyland and Neilson are gaining traction through new product launches and expanded distribution. The cottage cheese category is delivering growth, thanks to broader distribution and increased brand investment.

We are also strengthening our position in high-protein innovation, launching new Armstrong protein cheese SKUs and expanding the Dairyland and Neilson protein beverage lineup, including the recently rolled out 18-gram protein milk across retail and foodservice channels. In the U.S. sector, our teams are executing on driving volume growth, improving operational efficiencies and managing costs. While market headwinds limited upside in the quarter, we made meaningful progress across our strategic pillars, positioning the business for a strong performance in the second half of the fiscal year.

We are making steady progress with our logistics and warehousing operations. With our new cold storage distribution facility in Caledonia ramping up, we expect to unlock further efficiencies and lowering third-party logistics costs, contributing to stronger margins. We are also advancing on other key initiatives. Our new Franklin facility is a great example. Its improved performance is driving better plant efficiencies in Specialty Cheese and helping reduce duplicate costs across our network.

From a commercial standpoint, our performance continues to strengthen. In foodservice, we are building on strong momentum, expanding our presence with leading customers and driving growth through high-performing partnerships. We launched new marketing activations across all core retail brands in the quarter. Specialty brand campaigns are set to scale in the third quarter to capture seasonal demand. Innovation is also driving growth with the introduction of new products such as Treasure Cave Blue Dips, which is rolling out nationally and Frigo Cheese Heads Cheddarella, which has secured broad retail distribution and is expanding into on-the-go channels. Our Frigo Cheese Heads brand is also expanding its reach, tapping into new snacking channels from airports and convenience stores to delivery platforms and corporate offices.

Operationally, our teams are effectively navigating input cost volatility, maintaining strong fill rates and strengthen our ability to consistently meet customer demand, contributing to our performance this quarter. We have made solid progress, but there is still more work to do to grow margins. We know we can go further to drive additional efficiencies, strengthen our commercial performance and unlocking the full potential of our U.S. platform.

In the international sector, our teams are showing agility and resilience, translating into year-over-year improvements despite external challenges. In Argentina, we saw a marked improvement in performance. New product launches and a focused media campaign supported our brands, while private label and exports experienced strong growth. We increased the in-sourcing of milk this quarter, running our operations at optimal levels while maximizing the value of every leader. At the same time, we continue to diversify our customer base to capture growth opportunities.

In Australia, we were able to maintain margins despite the higher cost of milk. Results improved year-over-year, supported by higher international market prices, higher-margin domestic and export sales. On the milk side, we are making deliberate sourcing choices to prioritize higher-margin products and ensure a balanced, sustainable supply base. While milk intake remains lower than last year due mostly to ongoing seasonal and drought-related conditions, we are seeing early signs of recovery and expect a healthier season ahead.

We are also investing in our brands with the new CHEER and Devondale marketing campaigns, expanded product formats and a fresh advertising push launching later this month. We introduced 2 new shredded cheese SKUs under our flagship Devondale brand, further strengthening our presence in the supermarket channel. This launch supports our long-term strategy to grow branded offerings and enhance consumer engagement.

In the Foodservice segment, we continue to expand adoption of our IQF mozzarella. This product offers superior convenience and shelf life, and we are seeing strong conversion momentum among pizza operators seeking operational efficiencies. In Europe, performance reflected good commercial execution and disciplined cost management with higher pricing across our cheese and ingredient portfolio. These benefits were largely offset by planned maintenance expenses to ensure the long-term reliability and efficiency of our operations.

On that note, we have successfully transitioned from D90 to sweet whey powder with the first shipment processed as we move into the third quarter. This shift ensures our product portfolio is aligned with favorable market trends and supports stronger returns from our ingredients platform. Commodity markets remain volatile with fluctuations in milk, cream and bulk cheese prices requiring close daily management of milk inflows, inventory levels and sales mix. Our teams are managing costs and inventory with discipline as we prepare for potential shifts in market dynamics and milk pricing.

On the commercial side, both our private label and branded businesses delivered solid performance. Momentum for our famous Cathedral City cheese brand was supported by a successful omnichannel advertising campaign alongside new SKUs to supplement our ready meals range in both frozen and chilled. Cathedral City is now the third largest chilled ready meals brand in the U.K., underscoring the strength and growth trajectory of this iconic brand. While the maintenance shutdown weighed on short-term results, our priorities are clear: strengthen execution, manage through change and position our European business for long-term profitable growth.

As we wrap up Q2, our confidence in the dairy category has never been stronger. Dairy remains a cornerstone of everyday life, delivering nutrition, versatility and enjoyment to consumers globally. Demand continues to grow across markets, supported by trends in health, convenience and premiumization. These fundamentals reinforce our bullish outlook and commitment to driving innovation, operational excellence and sustainable growth. We believe our strategy positions us to capture long-term value for our shareholders while continuing to meet the evolving needs of customers worldwide.

Looking ahead to the second half of the fiscal year, we are managing well through evolving trade conditions and shifts in consumer demand. Our disciplined approach to pricing, customer partnerships, execution and cost management is directly contributing to our margin recovery efforts. We expect continued benefits from stronger commercial performance, improved operational efficiency and sharp focus on cash generation. Our solid balance sheet and disciplined capital allocation gives us the flexibility to invest while continuing to return capital to shareholders.

That concludes our formal remarks. I will now turn the call over for questions.

[Operator Instructions] Your first question comes from the line of Irene Nattel of RBC Capital Markets.

Great quarter. If we look at Canada and the -- sort of as the North Star in terms of what can happen once the sort of the operational pieces are put into place. As we move through this last -- really now, the very last stages of the global strat plan, how should we be thinking about the evolution of margins in each geography? And can we get to the point where we're delivering these double-digit kinds of margins across regions?

Irene, thanks for the question. And yes, we are equally proud of Canada as well. And I think the best way to answer the question is understanding the construct of the Canadian business. The Canadian business is very well diversified across every commercial channel. And I would say that in addition to that, what the Canadian team has that realistically, none of the other sectors have is a coast-to-coast distribution, refrigerated distribution system. So that is also an important part of the Canadian success story in being able to meet and grow with customer demands. That last mile, if you want, or that last leg of delivering to customers is often well within our control in the Canadian environment. That has come through, as you know, acquisitions over the years in the fluid milk category. So the milk business is an important part of why we also have this distribution system.

Having said that, in the other sectors, it is not our intention to be bolting that on. Despite that, there are many things that we can do and are doing to grow margin structure in each of those sectors. So I think we've articulated in the past where we expect each of our divisions to be. We know that in the U.K., with the continued focus and discipline that they have, we will improve our margin structure. We will get back to those mid-teens in way of margin structure.

Same in the international sector, both Argentina and Australia based on where they sit today, we know that there's percentage points that can be improved with ongoing operational efficiencies. And in the U.S., much of the same. Yes, there is an influence in and around the market conditions and the price we pay for milk in the relationship to selling price of cheese.

But as I said in my remarks, work is not done. We still expect to see the full benefits of our investments come through by the end of this fiscal year. That is to be kicked off with the final segment of line integrations into Franklin from the closure of Green Bay. Beyond that, we also are ramping up our supply chain initiatives as well as one that we don't speak all that much about, but we do have a very important project in our facility in Wisconsin in Waupun, whereby we've augmented the overall capacity and output of WPC80 and other high-value ingredients, which is also in its commissioning stage right now. So short answer to your question, Irene, is there's upside yet, but the Canadian construct is fairly unique.

Understood. And then just following up on -- you said something about cash flow and working capital. As Max pointed out, your leverage is now below 1.9. And the pace of buyback moderated a little bit in Q2. Should we be expecting it to increase again as we move through the back half of the year and into next year?

Irene, thanks for the question. The answer is yes. Following the issuance of our Q1 results, we saw an uptick in our price -- in our stock price, which was welcome. And we wanted to sort of see the market calibrate within itself. We definitely see ongoing value in us buying our own stock. So we have confidence in our stock. We take a long-term view relative to the allocation to buyback, and we do have the cash position in order to respond. So yes, we have been active. We're still active, and we intend to be active over the course of the next few quarters for sure.

Your next question comes from the line of Chris Li of Desjardins.

Carl, in your outlook, you noted that you expect U.S. dairy market volatility to moderate in the second half of the year. I think that's maybe a slightly more constructive tone than before. If that's correct, what is driving that improved outlook?

Chris, the comment was really around the volatility. So what we are expecting is that we saw some of the component pricing and market conditions hit some highs and lows throughout the first 6 months of the year. We expect the back half to be more range bound, probably on the lower end of where we have seen it in the last 6 months, but we do expect it to be steady.

And as we've described in the past, regardless of where that block price is or the value of other components, what we prefer to see is stability and stability drives also better decision-making from our customer base. They have a better understanding of what their input costs will be, how it is they want to go to market with their promotional activities and so forth. And we do expect that, that's what's going to occur in the back half of the year. And that's on the backs of understanding clearly the supply of milk and the quantity of milk that will be readily available as well as the demand that's coming from the processing industry.

I think those variables and those facts are clear to all industry stakeholders, and it's including the buyers. And we believe that based also on the futures, so the futures markets that are traded, that band will narrow in.

Okay. That's very helpful. And then maybe shifting gears to the international market. Obviously, very strong EBITDA performance. I understand a quarter doesn't obviously make a trend and there's seasonality and other factors. But I'm just wondering, the $79 million that you achieved in Q2, do you think that's a sustainable level sort of for the second half of the year?

And I'm asking in the context of, as you noted, Australia, there's still some challenges that they're going through right now. Just I'm wondering if there's good visibility on what the profitability for international should be for the back half of the year.

What I can tell you, Chris, is that we feel really good about the second half of the year in the international sector for a number of reasons. The milk recovery in Argentina has been beneficial. We recovered 7%, 8% of the milk versus last year, which has certainly been welcome in our operations as we run our facilities who are -- that are already quite efficient at those optimal levels. And equally important is that the output has found homes at good margins. And we also feel strong about the forward-looking contracts that we have, both in Argentina and in Australia.

So -- and I would -- before I leave the Argentinian sector for a second, I also feel quite good about the pricing of milk for the Argentinian supply in the second half of the year. There's an abundance of milk. The milk-to-feed ratio costs have been good to the Argentinian dairy farmers. So we feel good that it's going to be very competitive in the second half. And equally, all signals are pointing to continued relative stability with regards to the economic conditions in Argentina.

If I go to Australia, it's still tough with regards to overall milk supply and availability of milk. So I'm not going to trivialize that for our farming partners. But we do, nonetheless, feel good about what we've secured in way of milk supply, the value of the contracts that we have also secured through the end of our fiscal year and also the inroads that we're making in the domestic market versus that of export. So the short answer, once again, is that we feel good about the second half in the international sector.

That's great. And then maybe my last question, just also in Australia, Carl. I was wondering, do you have any initial high-level thoughts around the recent consolidation within that sector with Lactalis and Fonterra? How do you think -- how do you expect that transaction to impact the industry and perhaps for Saputo?

It's -- the market hasn't realistically consolidated in this space. And I say that because I think the acquirer of the assets sold by Fonterra and Oceania wasn't in that space before as far as the cheese sector and some of the other dairy products. So in short, I do feel that the market will remain resilient. I feel that the market will continue to do what the dairy industry is poised to continue to do, and that is to bring nutritious products to the table every day. And I think that it's going to continue to bring innovation.

I think that the business that bought those assets certainly has brought innovation to a variety of markets that they have been in. And that's only good for the dairy industry. So I don't see any meaningful impact to milk supply and the dynamics on supply costs nor anything different than the level of competition that we already have today.

Your next question comes from the line of Michael Van Aelst of TD Cowen.

Congrats on the quarter. I'd like to focus a bit more on the volume and the mix of optimization strategy because it does seem like you're improving fill rates back to where it was historically in Canada seem to be driving volumes at a reasonably healthy pace. And I'm wondering like are you gaining market share because you seem to be growing in all categories. And to what degree is this and other factors driving that, both the volume growth, but also the ability to be disciplined on pricing?

Thanks, Mike, for the question. Are you specific to Canada or all your geographies that you're asking for?

Well, I'd like to know about Canada first because it seems like you're ahead in Canada on this front. And then maybe you could kind of give us an idea of what -- how the other geographies are positioned relative to Canada on this -- in terms of these initiatives.

Okay. So if I look at the Canadian marketplace, we are absolutely taking share in a number of areas. And that comment also equally applies to the U.S. when you consider the volume improvements that we have made in that platform. And in both cases, our high percentage fill rates are allowing us to fill the orders that are there. They're allowing us to be opportunistic in moments when other suppliers are not able to fill the demand.

The Canadian marketplace, in particular, was somewhat unique through the, I'll call it, the summer period. Fewer Canadians traveled, and we saw the impact of that through the Q2 period with strong demand from the food service sector and really all around. But the short answer is that the combination of the value that we bring with regards to the service quality, product offerings, price proposition and fundamentally being there when our customers need us for either ideation, innovation and having the product on time and in full is allowing the Canadian team to win the market share that it is.

Demand in the Canadian marketplace has been steady. So it's not -- I'm not going to suggest that demand in the Canadian marketplace is outpacing that of any other sector on dairy. It really is a function of what we bring to the table every day. And the same is true in the U.S. our improved fill rates, and these are at levels that realistically are the best that our U.S. sector has ever seen are allowing us to capture that moment and those opportunities that exist. The U.S. market is still highly fragmented versus that of Canada. And when you think of the retail sector as an example, whereas by comparison only in the Canadian marketplace, you can say we are coast to coast in just about every single banner that is in the market.

We can't say the same of that in the U.S., which is a great opportunity because we're making inroads in a number of regional areas as much as expanding national distribution with our ability to supply. So again, in the U.S. space, demand has been relatively steady. It's not growing at -- outpacing any other type of grocery sector or food sector, but we're picking up share.

So are these still rates and the service quality and I guess also your innovation, are these the reasons that are allowing you to also improve your mix without a substantial amount of pushback from the competition?

It is. It's also -- there -- as you know, Mike, there's a lot of people behind this. We have folks that are very dialed in to our customers and ensuring that we service them and servicing a customer goes well beyond receiving an order and shipping it. It has everything to do to understand what they need to grow and how it is we can participate in that. And our teams do that better than anybody.

And even though you guys cover a number of different entities, you hear things about the QSR sector in some areas, either slowing down or struggling or more importantly, looking to put into place value offerings to drive traffic. Well, we're part of those conversations. We're ensuring to the highest degree possible that dairy and our offerings participate in that. And I have numerous examples across all channels, including HMR.

So home meal replacement is an area that's seeing an upside as folks choose to remain at home instead of dining out. So those takeouts, if you call them that, in the grocery sector, we're also working at innovating the menu to ensure that there is a dairy offering or an increased amount of it through those areas.

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

Maybe just following up on some of the topics you've already discussed. I know [indiscernible] commercial approach to selling. And so [indiscernible] which regions do you think have the most...

Mark, you're cutting in and out a little bit.

We couldn't hear the question. I'm sorry, Mark.

Okay. Is that clearer?

Try again. If not, we'll move on and maybe you can retry again later.

Yes. Okay. So I know we talked about this last quarter, but I want to ask just about the benefits from your more commercial approach to selling. And my question is, when you look across your segments, which regions have the most upside benefit from the commercial office and sort of the benefits that this is building in your business?

Okay. I think I understood because you came up. But at the end of the day, focusing in on the value that our commercial office is now bringing, it's multipronged in nature for sure. Some of it has to do with ensuring that our A&P is dialed in to what the consumers need today. And when you're a brand owner, and you have passionate people behind those brands, you absolutely want to support each one, but not all are created equal and not all have the spotlight and/or the opportunity to excel in certain moments of the market. And part of what our team does is ensure that the spend that we put, the effort, the energy is in the right brands.

As an example, there is an absolute focus and incremental spend being put behind our Frigo Cheese Heads brand in the U.S. that is driving household penetration right now, which will fundamentally increase our share and regular pickup in the future. We continue to invest behind the Armstrong brand and I'll say, tweaking how it is we go to market with our pricing as well as our advertising strategies. In other markets, Devondale and CHEER are also getting a push and then Cathedral City in the U.K. rather than sprinkling it, if you like, across all the brands that we operate.

So in many respects, it's a combination of focus on A&P, doing more with fewer brands, also ensuring that from a pricing perspective and revenue management generation, that best practices are shared amongst our division and applied in the business process. And last and certainly not least, because it pays typically at a later date, but it's our innovation cycle.

Leanne and the team have materially improved what it is we focus in on what's going to be and is relevant to consumers based on the insights and how it is we need to get to market and the speed at which we need to and learning how to fail fast as well. So in a nutshell, I think it answers the question, Mark, that you provided. And if not, please ask again.

Yes. Yes. Sorry about that. Hopefully, this is a little bit better. I guess my follow-up question to that topic specifically is, is there a region that you think the opportunity on this shift in approach is more material or there's sort of bigger upside in that region versus the total business?

Yes, it's clear. It's the U.S. I would say that the U.S. is the area whereby our -- we have strong brands, but in comparison to, say, the U.K. and Canada, they're not anchored in as well or don't have the same level of awareness necessarily as those 2 points of reference. But they do have the characteristics, the portfolio, the fundamentals and the relevance with consumers to win. That's part of the reason why also Leanne is right here in the U.S. Leanne's office is here, and it's all about ensuring that we take our fair share, as she reminds us often of the market that our brands have earned and deserve.

Yes. Okay. And I also wanted to ask about the shift in Europe and your byproduct processing. What's involved in that move? And what would it take to move away from sweet dry whey back to higher-value product if the dynamics supported that?

The short answer is that time and money can do anything. And having said that more specifically, Mark, we're quite good at providing engineering designs to convert our lines to the final product outputs that we want. So in the end, should the market suggest that other value-added ingredients beyond D90. D90 is not a sector in which we believe is considered, to be honest, value-added anymore, okay? Hence, the reason why we moved away from it based on the overall cost of operation.

But if there are other segments whereby the whey solids we generate could be better utilized, better consumed, better margin, we wouldn't hesitate to invest the capital required in those sites. But those cycles are minimum 18 months in nature. But as we sit and look at the dairy ingredients market globally, we have a very, very strong platform in the U.S., Australia and Argentina to be able to service that growing sector and customer needs.

Your next question comes from the line of John Zamparo of Scotiabank.

I wanted to come back to the outlook. It was incrementally maybe a bit more cautious internationally or perhaps specific to export markets. You called out more challenging supply and demand conditions in the second half. But it also sounds based on your prepared remarks that you're generally more optimistic on your international business. So what are you seeing that led you to include that in the outlook? And how should we see that play out in Saputo's results for the back half?

Thanks for the question, John. It's -- what we're seeing right now is in the dairy demand and dairy consumption globally is the demand is quite steady, and it's coming from a very broad sector. But the supply of milk is also quite strong. And we're seeing that strength of milk supply come through in New Zealand, Argentina, the U.S. and a handful of the European common suppliers, both France and Germany. So there's a very healthy milk supply right now in the marketplace with a steady demand for dairy products. But it's still somewhat chaotic when it comes to the trade front.

So as we head into the second half of the year, we expect there to be greater clarity on what the trading relationships and policies are across the globe so that the dairy -- the global dairy supply chain can settle in. That's the first thing. But the milk supply is strong. I mean there's been a -- thankfully, I'll take the U.S. as an example. In the U.S., production capacity was put online by a number of industry players. And thankfully, our dairy farming community showed up. They committed to the supply. They produced the milk. They have the necessary herds to get it done. It's there now.

Is there a need for a global reduction or is demand going to improve? I think that over the next 6 months, we're going to see that happen naturally. So there's a strong outlook in our case for continued -- our industry for continued dairy demand across different sectors where Saputo is going to play and continue to be successful and hence, why we feel good about the second half of our fiscal is in the diversity of our platform. Not all sectors will excel, but many will, and we have enough flexibility in our platform to be able to ride the waves that will come.

Okay. That's helpful. And I wonder if you can quantify the approximate EBITDA impact of the planned maintenance shutdown in Europe and also the transition or implementation costs related to your Caledonia facility?

It was slightly less than $5 million in the U.K. for that shutdown.

And as far as Caledonia, John, Caledonia is also a success story for us right now. So the consolidation of the 3PLs into our site is going better than planned. And this isn't going to be a scenario or time line similar to Franklin by any means. We're currently in the ramp-up about halfway through it, and we expect the efforts behind the consolidation and the duplicate costs that are attached to this or call it/inefficiencies to be tapered off and gone by the end of the fiscal. So that's the plan for Caledonia.

And kind of looking forward and we look at the U.S. and the U.S.'s business and where they're going to continue to drive margin improvements despite, call it, the milk market conditions, the supply chain side also has a lot of upside for us. And what we're seeing in Caledonia is going to provide a blueprint for other parts of the country for us.

Understood. Okay. And then lastly, on the NCIB, you mentioned you plan to renew it. It sounds like this might accelerate. Is it likely to be the same size as your prior program? Or will you consider doing a larger buyback given relatively low leverage at the moment?

I would say, at this time, John, we would be looking to a similar size that what we're having. We feel it served us well, and we do feel that it will serve us well for the foreseeable future.

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

First thing I wanted to ask that you noted, obviously, strong volume growth across a number of markets, including the U.S. and Canada. Just wondering if you can help us understand maybe where you're seeing the most strength and maybe where you might be running up against capacity issues, let's say, because demand might be so great for certain products.

Scott, so maybe I'll start with the U.S. So we're seeing and growing our share, as I mentioned earlier. So in some cases, we're running counter current to where some of the demand is. As an example, our mozzarella is growing as far as overall percentage of our sales and supply. With regards to other areas of the business, we're making inroads with regards to our specialty cheeses. We're investing behind the brands, and we're continuing to take share. So relatively speaking, it's broadly across the portfolio, including, of course, our ingredients sector.

So overall, I would say that it's a very balanced increase within the U.S. sector. If I take a look at the Canadian side, actually, before leaving the U.S., specifically around areas that have capacity constraints, it's no secret in the industry or on the shelves, as you all see. Products like cottage cheese are in very high demand, and we are certainly running at the upper end of our capacity. We are looking at a number of options to expand that because it is a continued category of growth. But that's a good example of a sector that continues to win share of stomach with consumers.

That also expands into Canada. It's no different. Our cottage cheese offering and other cultured product offerings are probably the areas of our operations that are seeing the highest rate of utilization. But beyond that, the same commentary applies to Canada. It's a very broad-based improvement of our offering and of our share across the board.

Appreciate the answer there. Next question for me. Obviously, there's been a lot of talk around the capital allocation, the share buybacks. You're obviously towards the tail end of the GSP. It sounds like you're more involved with organic opportunities and still finding efficiencies in the business. But wondering if you can share any color on how you're thinking about inorganic opportunities moving forward.

Sure. And you're right. We are focused on ensuring that, one, we have strong cash generation so that we have options available to us and our capital allocation program or philosophy hasn't changed. We're certainly focused on ensuring that we have consistent dividends that are out there. We need to ensure that we maintain our operations and invest in our ability to remain efficient because that is at the core of what it is we do, we transform milk and bring the best to the market. So we have to be extremely efficient. So those competencies, expertise and commitment financially to that are core to who we are.

But as we continue to evolve our commercial strategy, we are also recognizing areas that will require either further investments in the mechanical capabilities and/or brand assets that we have. And we regularly look at whether or not it's best to invest in ourselves or to go to market and acquire those capabilities, whether it's a brand, whether it's a set of assets, and in "which geographies." Certainly, we are highly focused on the North American sector with regards to those type of inorganic opportunities.

But we are constantly looking at what is the best return on the investment. Is it traditional CapEx? Or is it that of acquiring through M&A, the capabilities, the adjacencies that we need to stay relevant with consumers and customers.

Appreciate that. And maybe just if I could sneak in one more. There's been a lot of talk here in the U.S. about changes to the SNAP program. So just wondering if you can give us a sense of how exposed you believe your business is to that and whether you've seen any impacts in any parts of the business because of changes.

Well, it's clear based on everything that we've said around dairy, the value proposition of dairy and the kinds of favors it's in with consumers. So it's an important part of the grocery bill for many consumers in the U.S. So certainly, the current SNAP situation is going to impact some of the retailers and some of the choices that consumers make. We still feel good about where dairy will fit into the priority or prioritization of the tough choices consumers are going to have to make.

But it's still a large portion of the everyday Americans grocery list. And there's a -- as we know, a relatively important population that rely on SNAP every day. So there's going to be some exposure there for sure, with regards to our customer base and how that trickles down to us. We expect that with the diversity of our platform and the offerings that we have, we'll be okay.

Your next question comes from the line of Vishal Shreedhar of National Bank Financial.

Earlier in the call, you mentioned that stability is good for decision-making and for the business. I'm just wondering, within the business, maybe looking at the U.S., for example, is there anything that management can do to insulate itself better against the commodity volatility that we see quarter-to-quarter, which oftentimes is unpredictable. I know in the past, management has talked about brands, strong brands being a good insulator for that. So just wondering if the thinking has evolved and what management is doing.

You're right, Vishal. We have mentioned that, and it is still part of our strategy to augment the ratio of products that we bring to the retail side of the business, more specifically branded as the top priority versus that of, call it, industrial channels, which are highly correlated to the markets. Keep in mind that those markets are indices to which pricing protocols are initiated on. The more industrial it is in nature of the supply, the more highly correlated it is on the one end of the spectrum to the other end, which is fully branded on the retail side, which has a greater degree of pricing autonomy or pricing decisions.

So it is also why we are heavily focused on improving the value, the investments behind a select number of brands that we have, great brands in the U.S., and that's what our commercial office is focused in on. And part of the benefit beyond that of driving growth and brand recognition is obviously helping insulate against some of these market conditions.

If I could add, Vishal, aside from the pricing protocol to be optimized and getting into other spaces or more branded or in the retail space, of course, it has to do with operating costs and lowering operating costs give us the edge to, despite market volatility to still post results ahead of the year before or and increase our profitability. So hence, why focus on cost control remains high on our radar, and that's what I wanted to have.

With respect to the cost opportunities, in the past, management used to give us pretty granular quantification of the benefits to come. Could you help us understand from the Wisconsin whey facilities or the closure of Green Bay and the full run rate of Franklin, the materiality of these benefits that we should expect to flow into run rate EBITDA when they're up and running fully?

Well, what I would say, Vishal, is that when you go back to the commentary we provided around the magnitude of the capital investments we put into the U.S. and -- or globally and then the expected returns, we talked about a $200 million overall lift from that capital investment. We have benefited around $50-ish or so a couple of years ago, $100 million last year, and we're chasing sort of the balance of all that this year. And we feel strongly that the totality of those returns will come through by the end of the fiscal year.

For the investment program, the capital investment program that we put in, I think, the last bits and pieces will come from having our way operation in whey operation in Waupun, Wisconsin being fully operationalized and fully out in market come the first half of next fiscal year. But the lion's share of it will come through this year and has been coming through, of course, as evident in our results.

Your next question comes from the line of Etienne Ricard of BMO.

Just to circle back on the innovation pipeline. If we look historically, to what extent have new products supported top line growth prospects? And where I'm getting at is if your pace of new product introductions is accelerating, how should we think about the revenue impact?

We won't get into the specifics, Etienne, just in part for competitive reasons. But I can give you maybe 2 examples. On the one hand, if you take the Armstrong cheese story in Canada, we were starting out at a #4 position when we decided to make the pivot, to having Armstrong be our national brand. And over the period of a couple of years through the focus on the brand, but more importantly, the content and the offering of the portfolio, we're able to get to it being the #1 brand.

And so from an innovation perspective and why I highlight Armstrong is because although it was a multiyear journey, it's also a multipronged approach. It's as much about what the brand and its essence is and how it resonates with consumers. But equally, it's about the offerings in this case here on the SKU front. So from the convenience to the flavors, to the formats and in the various channel offerings.

What I would say is when we look at our investment in our improvement innovation and our innovation cycle, it's really going to be better related and more closely related to what the insights are telling us about consumers' needs of today and tomorrow and ensuring that both the R&D work, the mechanical capacity and/or capabilities that we have will allow us to capture those needs.

So in the end, we do expect it to be a meaningful organic contribution to our revenues as we move forward. Hence, why we have committed incremental dollars to the category of commercial initiatives, which includes innovation.

With no further questions, this concludes our Q&A session. Thank you for your participation. This concludes today's conference call. You may now disconnect.