Saputo Aktie

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.

[Foreign Language] I always get emotional on that part. [Foreign Language]

Before we begin, here are a few words on the general proceedings of the meeting. First of all, we have simultaneous interpretation. So here is the procedure to ask questions during the assembly.

So this is -- this was sent beforehand. So register shareholders and duly appointed proxy holders present in the room may ask questions at one of the microphones when invited to do so. You will need to identify yourself and confirm your status as a shareholder, or a proxy holder before asking questions. Participants online need to be connected with their control number to ask questions during the meeting. To ask a question, click the Messaging icon, you can choose to Write Your Question or Enter Your Phone Number in the text box. If you provide your phone number, please indicate, which agenda item your question relates to so that it can be addressed at the appropriate time. If you do not tell, which agenda item, this is about your question will be addressed during the Q&A session at the end of the meeting. In all cases, an operator will call you when the time comes to ask your question.

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So we reserve the right to modify, or reject questions that substantially repeat the content of a prior question. If they are deemed also inappropriate, or unrelated to the meeting, or that relate to nonpublic information concerning Saputo, or that serve the personal or business interest of a shareholder.

Now we may make today statements that contain forward-looking information within the meaning of applicable security laws. These statements are based on assumptions and are subject to significant risks and uncertainties and our actual results could differ materially. So I refer you to the cautionary statement on forward-looking statements, or forecasts contained in our annual report of our website and appearing on screen.

Now I'd like to appoint Ms. Martine Goutie and Ms. Teresa DeLuca, Computershare Investor Services, Inc. as scrutineers for this meeting. These scrutineers have provided an attendance report, and I can confirm that the quorum of shareholders present, or represented by proxy, is reached. The matters to be considered for today's meeting are set forth in the proxy statement dated June 5, 2025.

Now the company used the notice and access regime to make its meeting materials accessible and sent the notice, including all relevant information and documents in regard to all shareholders, on or about June 24, 2025. So this was sent beforehand.

Now the circular, notice of meeting and annual report are available to shareholders on our website. Additional copies are also available today at the registration table. For online participants, you can access them by clicking on the Documents icon on your screen. All of these documents are also available under the company's profile on SEDAR+.

I will therefore omit reading the notice of the meeting. Now our transfer agent, Computershare, has confirmed that the applicable meeting materials documents have been sent to shareholders in accordance with the Canadian Business Corporation Act and the company's bylaws. I therefore declare that this meeting is duly convened and constituted to discuss the affairs of our company.

I move to omit reading the minutes of the annual meeting of August 9, 2024, and to consider them as adopted or carried. The minutes will be kept in the company's books and may be consulted by any shareholder.

We now move on the -- to the voting instructions. Voting will be done by secret ballot for all proposals under consideration today. Each shareholder of the company is entitled to one vote for each share held. First were the participants in this room registered shareholders and duly appointed proxy holders who have not already submitted a proxy, or who have revoked their proxy have been given ballots at the entrance. Computershare representatives will collect the ballots after the final proposal.

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As Chair of the assembly, I will propose all motions and none will need to be seconded. Once the discussion of all agenda items has concluded, a short Q&A session will be held. Preliminary results will be announced before the end of the meeting.

Now the first item on the agenda -- on this agenda is the presentation of the financial statements. A copy of the financial statements for this year ended March 31, 2025, which is available on the website, and on SEDAR+.

Now I'd like to invite Max. He will be talking about the 2025 year, and of the first quarter of 2026. Then there's going to be a presentation of our achievements and also our strategic priorities. Max, you have the floor.

Hello, everybody and thank you for joining us today. The 2025 financial year tested the resilience of many businesses. At Saputo this rather highlighted the solidity of our business model.

Today, I would like to introduce you the key elements of our performance, namely our results per division but also the operational work that supports them, and the measures who have been taken -- which have been taken rather to promote long-term value creation.

Now financially speaking, consolidated revenues of the 2025 financial year increased by almost 10% compared to previous year, with an increase in each in our sectors. This revenue growth reflects higher sales volumes and increased selling prices in domestic markets, offsetting the impact of inflation on our costs. The increase on international prices for cheese and dairy ingredients in export markets also had a positive effect.

The adjusted EBITDA for fiscal year 2025 increased across all divisions with the exception of Argentina, reaching a total of $1.565 billion. We received a net loss of $176 million, or $0.41 per share. This loss is due to a noncash goodwill and intangible asset impairment charge of $674 million after tax related to the dairy division U.K. of our European sector.

Adjusted EPS was $1.46, compared to $1.54 for the prior year. Of the $1.1 billion generated by operating activities, we have paid $320 million in cash dividends, invested a net amount of $285 million in fixed assets, and we have carried out share buyback for an amount of $149 million. And finally, we paid a debt for an amount of more than $100 million.

Now our team -- our seasoned team in Canada has had another excellent year with growth on both revenue and adjusted EBITDA. Now the results reflect higher sales volumes, favorable product combinations and rigorous management in our operating cost. Retail cheese sales volumes, specifically in the convenience segment outperformed industry trends. Armstrong, Dairyland, Neilson and Saputo Mozzarellissima maintained their status among Canada's most trusted brands. And we have strengthened our position in value-added categories such as protein drinks and cottage cheese.

Now operationally, we have achieved significant efficiency gains thanks to investments in fixed assets in recent years. Several targeted supply chain optimization and packaging automation projects have not only increased efficiency but have also reduced labor intensity for employees. We have also been able to reduce transportation and logistics costs.

The Canada sector remains a model of continuous improvement combining the strength of our brands and of our people, the management of our costs, and strong relationships with our customers, including agility of execution.

Our U.S. sector delivered solid results despite persistent headwinds related to negative spreads between the cost of our raw material, milk and the price of lot of cheese. Our U.S. team excelled both operationally and commercially. We have achieved our target of $100 million in operating profits for fiscal year 2025. Rico's cheese had another record year in string cheese production, while Montchevre maintained its leading position in goat cheese products. The brand Treasure Cave also expanded its product line with the addition of new blue cheese formats targeting a younger customer base.

The optimization of our network continued with marked progress. As planned we closed our 4 facilities, namely those of Belmont, Big Stone, Lancaster, Bardsley, 4 facilities, and we have moved these volumes to higher efficiency facilities, such as those of Tulare, in California, as well as in -- to our new plant in Franklin -- sorry, Wisconsin, Franklin. As previously announced, we also expect to close our Green Bay plant, Wisconsin, facility by the end of the third quarter of fiscal year 2026. Our Franklin cutting and packaging plant is now fully operational and plays a central role in reducing our operational costs.

To support future growth, we completed construction -- the construction of a 300,000 square foot distribution center in Caledonia, Wisconsin. This facility complements the Franklin facility and simplifies our supply chain in the Midwest. Our U.S. business is in excellent position to experience sustained margin improvement over the long term.

Now let's move to the international sector. In Australia, we have benefited from an improvement the relationship between prices in international cheese and dairy ingredient markets, and the cost of milk. The attention was paid to optimizing our network, which has led to concrete results. We have completed the sale of two fresh milk facilities in fiscal 2025, as well as the sale of the King Island dairy manufacturing facility in Australia more recently, which has optimized our manufacturing footprint and freed up capital to drive long-term growth.

Our shift towards higher value-added products such as cheese, green cheese, yogurt and dairy ingredients is also beginning to bear fruit. Now in a very demanding consumer context, our team has been able to draw its pin out of the game by how -- by launching new formats by obtaining various private label contracts. In making progress with the relaunch of our brand, Devondale. With the initiatives and improving market dynamics, our platform is well positioned to grow profitably.

Let's talk about Argentina. In Argentina, we have operated in a really difficult macroeconomic context. Despite this, thanks to our team, we have delivered a solid performance in the domestic Argentinian market. We have maintained our leading position with our brand, La Paulina, and we have recorded volume growth in soft cheeses, in mozzarella and in grated cheeses.

During fiscal year 2025, our results were affected by an unfavorable relationship between inflation and the variation of the Argentina peso, which led to higher milk costs and reduced our competitiveness in export markets. Volatility persists however. However, signs of slowing inflation and stabilization of the currency suggests a more stable and favorable environment for the 2026 fiscal year. In this context, our local presence, our capacity for innovation and ingredients, and the value of our brands in Latin America remain key assets for the 2026 financial year.

In Europe, our margins improved as we completed the disposal of high-cost manufactured inventory and implemented site consolidation initiatives. The work of our dedicated team has enabled Cathedral City to maintain its leading position in the U.K. cheese market with innovations in high protein and plant-based options, which has contributed to growth in volumes and our consumer presence.

We have completed the closure of our [ old ] site and transfer cutting and packaging operations to the Nuneaton facility. Further consolidations are underway, including the planned closure of our Kirkby Malzeard site. We have also announced the end of the manufacture of certain functional ingredients in order to first simplify production and reduce operational complexity. And second, to also generate savings. Now in the long term, these measures are part of our objectives of building a more efficient European company focused on high value-added products.

As far as the managing of our capital, we remain true to our balanced and disciplined approach. The distribution of capital will be focused on capital investment expenditure, on the payment of dividends and on debt reduction, while emphasizing short-term share buybacks. Our new debt to adjusted EBITDA ratio was 2.03 at the end of June, which remains below our long-term target. Our cash flow is strong, and we intend to continue opportunistically repurchasing shares under our normal course issuer bid. Since the beginning of fiscal 2026, we have used more than $170 million in share repurchases. And the best is coming right after.

So yesterday, we have announced our results for the first quarter of fiscal year 2026. Adjusted EBITDA was $426 million, up more than 11% compared to the previous year while adjusted net income amounted to $184 million, an increase of 10%. Adjusted benefit per share was $0.44, up 13%, compared to $0.39 in the previous years. We are pleased to enter fiscal 2026 with a positive momentum.

Our first quarter results were strong, reflecting the strength of our global business. Margin expansion across all our segments, improved performance in the U.S. despite a less favorable commodity market than last year, and significant year-over-year gains in our international and European segments all contributed to an excellent first quarter.

Our revenues and sales volumes were higher on a relative basis, supported by the favorable spread between milk costs and selling prices on international markets and rigorous commercial execution. Our ongoing operational improvement efforts, particularly those related to our capital investments and cost optimization efforts are paying off, supporting both our performance and our long-term competitiveness.

Our strong cash flow from operating activities this quarter demonstrates the resilience of our business. This has allowed us to redistribute the majority of this cash to shareholders in the form of dividends and share repurchases. Now as we enter fiscal 2026, our priority is not just protecting margins but also unlocking the full potential of our investments. The Board of Directors has revised its dividend policy and increased the quarterly dividend to $0.20 per share, an increase of 5.3%. The quarterly dividend will be paid on September 12 to shareholders of record as of September 2, 2025.

Thank you so much for your attention. And now I'd like to give the floor to Carl.

Hello, everybody. Dear shareholders, members of the Board and colleagues. First of all, I would like to say that I'm proud of the progress of last year that we have been able to do, and also of the direction that we have been taking together with your support. This was a very volatile year. There were lots of geopolitical tensions and there was lots of change in consumer behavior.

Saputo remained focused on its objectives. We have achieved positive financial results generated strong cash flows and maintained stable margins. We have -- we invigorated our management team, completed a major cycle capital investments and made concrete progress to transform our operations and remain competitive on the long term.

But the most important message I'd like to convey to you today is as follows. Saputo does not stand still. We are entering a new chapter focused on extracting the full value from our recent investments, accelerating our business strategy and optimizing our execution focused operations to create sustainable value for our shareholders. Over the past 4 years, we have undertaken an ambitious capital investment program in order to modernize our network, to improve our productivity and to build a more resilient company.

In fiscal 2025, a significant milestone, completing this program and beginning to see the returns it was designed to unlock. These investments were not about quick wins. They were made with the long game in mind. Today, they are enabling us to streamline our operations across geographies, expand capacity in value-added product categories, optimize our supply chain, and support the continued growth of our brands by staying true to our customer first commitment.

The benefits are visible in our U.S. operations, where we realized over $100 million in benefits from cost savings and operational improvements in the past year alone. As we move forward, we expect these efficiencies to further reduce costs, improve our margins, and enhance our competitive positioning.

This is the Saputo of tomorrow, modern agile and built to perform across all market conditions. At the heart of our strategy is a commercial discipline, a renewed focus on where we win, how we differentiate, and how we serve our customers and consumers better. We are doubling down on our focus brands, recognizing their strength and relevance in consumers' lives. With innovation pipelines tailored to value-conscious consumers, and increased agility in how we go to market, we're reinforcing our presence across both traditional and emerging channels. We are also embracing data-driven decision-making to accelerate growth.

Our adoption of digital technologies from automating workflows to leveraging advanced analytics is enhancing our ability to respond to market dynamics swiftly and operate with greater efficiency. In fiscal year '26 and beyond, we will continue to invest in elevating the consumer experience, strengthening our customer partnerships and expanding our reach in high potential regions and segments. This strategic clarity allows us to focus not just on top line growth but on building a more profitable and sustainable business.

Our confidence is also grounded in the strength of our industry. Dairy remains one of the most versatile and resilient categories globally. From cheese and cultured products to protein beverages and functional ingredients, dairy touches nearly every modern food trend while remaining a staple in daily consumption and shared moments.

Saputo is uniquely positioned to capitalize on this versatility. Our diversified product portfolio is balanced across retail, foodservice and industrial channels. This mix provides both stability and room to grow. We're especially encouraged by growing demand in the protein space and continue to support customers with innovation that adds value to their menus and shelves. As just one example, our Dairyland protein line, and recent QSR partnerships, reflect how our products are meeting modern consumer expectations.

Our ability to navigate economic uncertainty is rooted in our operational discipline. In fiscal year '25, we took bold action to reduce SG&A, optimize our plant footprint, and restructure where needed to align resource with business needs. Our now leaner and more agile organization is better equipped to adapt and to respond. We are seeing the results, improved performance in the early part of fiscal year '26, increased productivity and stronger fill rates across our network. Looking ahead, operational excellence will remain a key pillar of our strategy. We will continue to simplify, consolidate and digitize ensuring that our business is as efficient and competitive as it is resilient.

Another key area of focus is our Saputo Promise. We believe that long-term value creation cannot be achieved without environmental and social responsibility. I'm proud to share that we delivered on our 2025 environmental pledges, achieving our climate targets and making progress towards our energy goals. Our carbon intensity decreased significantly versus our fiscal year '20 baseline, and over $75 million has been invested in more than 100 sustainability projects to date.

As we turn to our new 2030 commitments, we are renewing our ambition. With new science-based climate targets, continued water efficiency efforts, focusing on operations at high water risk regions and streamlined waste and packaging targets.

Just as we invest in assets and brands, we are investing in our people. We were again recognized as one of the world's best companies by Time magazine, and earned gender parity certifications for a second consecutive year. Testaments to the strength and integrity of our team.

We have started 2026 in a very positive way with a clear vision. Our strategic priorities are well defined. So we want to make sure that we will have the full value all across our business, investing in our business strategy and also by reducing the costs by improving our operational efficiency. This is how we will reach higher value. And we have continued our share repurchases during the new financial year, confident of our ability to generate stable cash flows while maintaining the flexibility to invest in our future.

Now that being said, we approach this exercise with lucidity. The consumer landscape remains uncertain. Our answer will be measured. We want to be proactive. We wish to make sure that we will be conservative in terms of debt. We want to limit our expenses of capital, we want to control our costs. So we are ready to adjust quickly while continuing to support the growth of our segments that are the most resilient across all sectors.

So finally, I would like to thank our employees for their excellent work and commitment. To our customers and suppliers, thank you for your trust. And to you, our shareholders, thank you for your continued support.

On behalf of the executive team, I would like to extend a special thank you to Lino, for his support as Executive Chairman of the Board and his unwavering commitment to the success of our organization. Saputo has a proud history built on passion, integrity and entrepreneurial spirit. Today, we continue this legacy with a fresh perspective, and renewed ambition.

The work ahead won't always be easy but we are clear headed, we are ready, and committed to executing with excellence and creating lasting value for all our shareholders. Thank you. Thank you very much.

Thank you, Max. Thank you, Carl. The next item on the agenda is the election of directors. The Board proposes to nominate the current Board members as director candidates. Their bios can be found in the proxy statement in the circular that was sent beforehand.

Now I propose the candidacy of the following 10 persons for election as directors of the company, who will remain in office until the next meeting of shareholders, or until the election of their successors: Olu Beck, Victor Crawford, Anthony Fata, Annalisa King, Karen Kinsley, Diane Nyisztor, Franzisca Ruf, Stanley Ryan, Annette Verschuren and myself, Lino Saputo.

All candidates confirmed that they are eligible to serve as Directors if elected and that they are willing to do so. We will now take your questions on this agenda item. We will first take questions from the floor before moving to online questions.

If you are in this room, and I would like to ask a specific question on this item, please come to the microphone and identify yourself as a shareholder, or a proxy holder, before asking your question. So I don't see any questions right now in this room.

So let's go to the questions online. Are there questions?

No.

Great. Well, thank you, Lydia. So now let's go to the vote.

In order to vote online, please choose select applicable voting options on the voting panel that appears on your screen. Participants in this room who received ballots can also vote.

The next item on the agenda is the appointment of the auditors. I propose that KPMG be appointed as the company's auditors until the next Annual Meeting of Shareholders and that the Board of Directors be authorized to set the firm's renumeration.

Are there any questions from the floor on this point from this room? There are no questions in this room, Lydia? Any questions online?

No.

Very well. So there are no questions. Yes. Okay.

All right. Now, I would like to invite you to vote on this item of the agenda.

[Voting]

Now the next item of the agenda is the adoption of a advisory nonbinding resolution regarding the company's approach to executive compensation. So I propose that -- now I propose that on an advisory basis and without diminishing the role and responsibilities of the Board, shareholders accept the company's approach to executive compensation described in the proxy circulars for the 2025 Annual Meeting of Shareholders.

Any questions in this room about this item? No questions.

So Lydia, any questions online?

I confirm that we do not have received any questions.

All right. Thank you, Lydia. Now I invite you to vote on this item of the agenda. Please vote.

[Voting]

Let's go now to the next item in the agenda, which is the confirmation of bylaw #2 regarding early nomination. I propose that shareholders confirm this by law adopted by the Board on June 5, 2025. The full text of this bylaw can be found in schedule B of the proxy circular on our website and on SEDAR+.

Are there any questions in this room about this item in the agenda? No questions in this room.

All right. Lydia. Any questions online?

No questions online.

Okay. Good. Thank you. I invite you to vote on this item. Online voting will close in a few moments. If you haven't already submitted your online vote, please do so now.

[Voting]

I invite the participants in this room to raise their hands so that the scrutineers can collect the completed ballots. Please raise your hand.

Okay. Thank you. So with that I declare that the vote is now closed.

The scrutineers confirm the following preliminary results. According to the results of the proxy votes received at least 96% of the votes were cast in favor of the 10 Directors proposed in the proxy solicitation circular. Congratulations to everyone.

About 99% of votes are in favor of the appointment of KPMG.

So the advisory resolution on the remuneration of senior executives is approved by 97% of votes cast in this favor.

The confirmation of the administrative regulation relating to early nomination is approved, so that's the bylaw, with about 99% of the votes cast in favor of it.

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

We will now move to the Q&A session. We would be pleased to answer your questions. I would like to remind you that registered shareholders and duly appointed proxy holders who have logged in online using their control number can ask questions by clicking on the Messaging icon. We will answer, first of all, to the questions in this room. Before we answer to the online questions.

We would like to invite participants in this room to go to the microphone, please identify yourself and confirm that you are either a shareholder or a duly appointed proxy holder.

So I see that there are a few questions. Let's go.

Shareholder. My name is [ Johannes Ghotte ]. Congratulations on the first quarter. I hope the trend continues.

So I have a question that has a similar I guess, trend, similar thesis. Two parts. So one is you guys put a zero tolerance policy on the mistreatment of cows. I wanted to see how that was going? If you saw any evolution with that?

And secondly, I wanted to know how the plant-based products section of your array of products is doing? How the profit margins compared to maybe those of dairy. How the trends are going over time?

Perfect. I'll -- as Chairman, I have the authority and the ability to pass on the hard questions to Carl. So I will ask Carl to answer these questions.

Thank you for the question. Maybe to start with animal welfare, because we have a robust animal welfare program in place, as you know. We do have a veterinarian on staff that works with us to ensure that our expectations of our dairy farming community meet our expectations. Every one of our geographies is pretty much in line with our expectations. Certainly, there are some regional differences in how it is they go about with milk farming. But overall, we have a robust plan. And should there be the unfortunate event where we are seeing animal cruelty of any sorts. We have also a protocol in place, that absolutely stops milk procurement, and does not reinstate that milk procurement, unless we have the appropriate conditions that are met. So from that standpoint, we're comfortable with our position.

And with regards to plant-based products. The plant-based sector itself has gone through a downturn. A downturn in both the beverage space, as well as the alternative cheeses or other. Part of the rationale behind that, as we understand it today, is that the nutritional profile of those products aren't what consumers are looking for. Now there are still individuals who are consuming them by virtue of either inability to consume dairy, or other choices. But overall, the entire sector has been in decline, primarily on the basis of it not filling nutritional needs.

And how do the margins compare to, I guess, the dairy -- your dairy products.

So where margins once were more attractive partially the reason why we also entered into that space at a moment in time. And if you recollect, we had talked about the compatibility of the assets, made some investments. Those investments are also interchangeable. So nothing is lost from that standpoint. But the margin structure based on demand has also been eroded.

And because of that, will you continue to pursue those products? Or will you...

Very opportunistically. At this stage today, what we are doing is providing, especially in our food service channels on the beverage side, the components that on the cafe business, if you like, are still in demand. So we do probably prepare those products for that market. We also have the market-leading brand in Cathedral City plant-based cheese in the U.K. We make the best plant-based cheese out there, but the growth curve forward is still somewhat limited.

And we have another question in this room.

[ Michèle Goette ], I am shareholder. So about 10 years ago, you were #10, #10 in the world. Nothing has changed. So to have a great share of the market what should we do?

Yes. Our objective is not to be the biggest company, it's never been the objective of Saputo. The objective is to be the best on the market. And so we have gained markets along the years. Today, we have a very diversified platform across the world, whether across geographies, or due to the products that we provide. We are very confident in our capacity to process the products that are expected by consumers. And taking into account the need of tomorrow.

And today, this is an interesting period of time with dairy products. Dairy products found -- are considered very positively by consumers in terms of proteins and nutrition also in terms of fatty content in the milk. So there's a demand for that for milk, dairy products. So we have a lot of potential in many geographies where we operate. But each of our sectors gives us the possibility not only to be very active, and to gain shares of the domestic market, Canadian market but also it has a role to play in different international markets. So there are many regions where we do not have a presence where we continue to process our products for export.

And I have a second question relative to the performance on capital. So before the pandemic, we had an average of 19%, and now it's under 10%. So what is your objective?

So regarding the performance of invested capital and equity capital. So could you like -- could you please answer?

Of course, now all of the performance regarding equity capital during the pandemic, COVID-19, there was no change. You are right. And this is really the spirit of our organic investment strategy with our investments. Now we see that there are positive signs. We expect our ratios to improve, whether it's return on invested capital, or whether it's equity. So these shares go along the same trend.

So if we can improve our profitability with our strength with our current platform, we believe that we can really make sure that our margins will be going up higher than what we've seen in the last few years, and we will be better positioned. So we have a result which is very positive. Very positive results. We have many options on our table to make sure that we will be growing in the future.

Thank you for asking.

I think there's another question in the room.

[indiscernible] I study in logistics, engineering. So you said before that the digital transformation is a key point for the next year. Could you please talk us more about this digital initiative to reach your objectives?

So yes, it's been a very interesting year I've also beforehand, there is a certain wordings that does not fit both in English and in French, so I might be switching languages.

Now as far as our investments. In terms of technology, or digital technology, today we are focusing on our data link approach to ensure that we are well positioned to make sure that we can do more than in the past with our ERP system. And today, we have been deploying certain new productivity basic tools. And beyond that, we are working with providers to make sure we can improve the way we are doing the assessment of the demand on the market to help us with the production schedule and to prepare our inventory to make sure we are best positioned with our performance and our fill rate.

Now regarding financial statements, we also are working right now. So that we will be able to better manage and better answer also our clients with their requests of delivery or other requests. So this is about the go-to-market costs. So there are different aspects involved.

So what's interesting with AI?

With the AI approaches, we can focus on specific projects in several sectors. And all of these blocks will give us back an interesting return. So if we say -- if we summarize saying that in a nutshell, the key will be to make sure that we are going to take the time to create the best resources to have the best return on investments. As you know there are many locations in our business where we could be deploying all kinds of technologies. But the key is to manage change, first of all, and then to ensure that we are investing in the right location. We have so many ideas, but we have to be careful in how we invest to make sure we do the best thing possible.

Thank you very much. Thank you for asking.

Any other questions in this room? No. There are no further questions here.

Have we received questions online?

No questions online.

All right. Thank you everyone for your attendance. Since there is no further item in the agenda, we have reached the end of this assembly. But before we wrap up please let me say a few words.

I'm going to take an instant to reflect not only about our results or about the strategy that was presented to us but also we can talk about the path we have been going through over the years. We know who we are. We know what we're capable of, and we know where we're going. Some have even asked if our best days were behind us. Today, I can say in confidence, in conviction, and in belief, the best is yet to come. We stayed the course and it paid off. We kept forging ahead quarter after quarter, year after year, even as the world shifted beneath our feet.

We battled a global pandemic and geopolitical conflicts that tested every part of our supply chain, our workforce and our operations. We weathered one of the most inflationary environments in recent history. We faced labor shortages and recruitment headwinds in nearly every region in which we operate. And we were exposed to commodity price volatility, few industries experienced to the same degree. Through it all, we kept showing up. We kept producing. We kept delivering and most importantly, we stayed true to who we are.

We said we would remain focused on driving operational excellence. We said we would execute on our capital investment plan. We said we would make tough decisions to improve our cost structure and better align our network, and we delivered. We're not here by chance or by accident. This is what resilience looks like. This is Saputo. We are a company that understands a long game, and as difficult as it was, we've never been distracted by short-term noise. We've never compromised on the values that make us who we are. Discipline, humility, integrity and an unrelenting drive to do better every day.

We spent the past few years strengthening foundations of this business. And I'll tell you, foundations aren't exciting or sexy to talk about. But the strength of your foundation determines whether you stand or whether you fall. And we stood strong because our roots built over generations by thousands of loyal Saputo employees is solid. Make no mistake, our people made this happen. Behind every line of productivity gain, behind every unit of milk processed, every margin improvement, every shipping container delivered, there's a person, a dedicated Saputo employee. Someone who shows up early, stays late and takes pride in doing things right. We're here today because of them, because of their commitment, their resilience, their belief and what this company stands for. This, my friends, is our culture in action.

As Chairman, I'd like to take a moment to express my confidence in the leadership of Carl Colizza. Carl has Saputo DNA running through him. He has grown with this company. He understands our industry. He understands our culture and most importantly, he understands our people. He has led with clarity, courage and consistency during some of the most complex periods in our company's history. He has been instrumental in shaping our strategic direction, and I have no doubt under his leadership, Saputo will not only continue to grow, it will thrive. Just a little pressure for you there, Carl.

But Carl is supported by an exceptional management team, experienced aligned and energized by the opportunities ahead. They are laser-focused on execution. A team of true corporate warriors, unshaken by adversity. They are not complacent. They are not afraid to make bold decisions when the time is right. So we have the right team in place, we have the right strategy. We have the scale, the assets, the brands to continue to build value for all stakeholders.

Let me be clear, our job is not done. We are not satisfied to maintain. We are built to lead. We've proven our ability to navigate headwinds. We've shown that we can adapt. What excites me most is the strength of our position as we move forward. We are in control of our own destiny. And we have a clear vision. We are now playing offense. The global dairy markets remain full of potential. Consumption is growing, demand for nutritious high-quality protein products remain strong. And as global dynamics evolve, Saputo is positioned better than ever to meet those needs with discipline, innovation and volume.

To our shareholders, thank you for your continued trust. Delivering long-term sustainable value remains our priority. To our Board of Directors, thank you for your oversight, your guidance, your stewardship and most importantly, your support. And to our Saputo employees across the world after many years, our success is possible.

Thank you very much. Let's continue moving forward. Let's keep building together, and let's show what's possible when we are preparing to make opportunities.

Thank you very much, everybody. Thank you. Have an excellent day. Thank you very much once again.

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

Hello, and welcome to the Saputo First Quarter 2026 Financial Results Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] I will now turn the conference over to Nick Estrela, Senior Director of Investor Relations. Please go ahead.

Thank you, Jean-Louis. Good morning, and welcome to our First 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 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, and good morning, everyone. We are pleased to begin fiscal 2026 with solid momentum and a record first quarter adjusted EBITDA. Our performance reflects the underlying strength of our business and execution across global operations. We are successfully building on the foundation established over the last years, focused on enhancing operational efficiency, investing in capabilities and delivering on a strategic road map with precision. The macroeconomic environment remains complex and our diversified footprint and resilient business model continue to serve us well.

Our 2 largest operating sectors, Canada and the U.S. delivered meaningful improvements in the quarter, reinforcing the strength of our core operations and our ability to generate value in our key markets. In Canada, we exceeded expectations, driven by strong commercial initiatives. In the U.S., our ability to drive efficiencies and reduce duplicate costs enabled us to improve performance. This is despite commodity market headwinds.

Our international and Europe sectors also delivered year-over-year improvements. Volumes were robust, supported by improving market fundamentals and our commercial performance across all sectors. Our brands are resonating with consumers, and our partnerships in foodservice and QSR are important growth drivers. Our operational improvement efforts, particularly those tied to capital investments, are delivering measurable benefits. This is supporting both our performance and our long-term competitiveness. We are also seeing gains from our SG&A optimization and logistics initiatives. We are improving efficiency and enabling more effective resource allocation.

Our strong operating cash flow this quarter highlights the resilience of our business and the discipline with which we execute. It has enabled us to return a majority of that cash to shareholders through share repurchases and dividends, demonstrating both our commitment to our balanced capital allocation approach and our confidence in the long-term value we are creating.

We have continued to repurchase shares opportunistically under our NCIB program, contributing to growth in earnings per share while maintaining a flexible balance sheet. We take a long-term disciplined and balanced approach to capital allocation. This includes supporting growth, maintaining a strong financial position and delivering consistent returns to our shareholders over the long run. Looking ahead, we remain focused on generating sustainable growth maximizing shareholder value and delivering consistent EPS expansion over time.

Our strategy emphasizes commercial execution, cost discipline and unlocking value from our diversified portfolio. To support scalable growth, we are investing in key capabilities, including innovation, data-driven decision-making and customer engagement. While consumer preferences evolve, demand for high-quality protein-rich dairy products is resilient. Our products are well positioned to meet this demand. We remain vigilant with respect to trade and policy developments, particularly those that may affect cross-border flows. We have an agile supply chain ready and able to adapt to evolving conditions. We had an excellent start to the fiscal year, and we're confident that we can build on this momentum going forward.

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

Thank you, Carl. Good morning, everyone. The financial highlights of the quarter are the following: Consolidated revenues were $4.6 billion, a 1% increase when compared to last year. Revenue increased mainly due to higher selling prices in both domestic and international cheese and dairy ingredient markets as well as higher sales volume excluding the impact of the divestiture in our Dairy Division Australia, while U.S. dairy commodities market pricing was lower.

Adjusted EBITDA amounted to $426 million, which was 11% higher compared to last year. Net earnings for the quarter totaled $165 million, and on an adjusted basis, net earnings totaled $184 million, up $17 million or 10% when compared to the same quarter of last year. Adjusted EPS was $0.44 per share versus the $0.39 last year. The 13% increase in adjusted EPS is primarily attributable to higher net earnings, but also reflects common share repurchase under our NCIB program.

Cash flow from operating activities was robust at $317 million, up 66% year-over-year, reflecting improved EBITDA and lower working capital usage. Capital expenditures totaled $65 million, in line with our plans and we continue to prioritize investments that enhance efficiency and capacity.

As of June 30, 2025, our net debt to adjusted EBITDA ratio improved to 2.03, reflecting a strong balance sheet and liquidity position.

I will now take you through the key highlights by sector, starting with Canada. Revenue for the first quarter totaled $1.3 billion, an increase of 5% when compared to last year, supported by strong sales volume across retail, foodservice and industrial channel. Growth was led by our milk, cheese and dairy foods categories. Adjusted EBITDA for the first quarter totaled $170 million, up 11% with margin at 12.9%. Our improved performance reflected commercial initiatives, driving higher sales volume, favorable product mix and higher pricing implemented to mitigate inflationary pressure and the higher cost of milk as raw material. Performance also reflected benefit from SG&A cost efficiency primarily due to cost optimization measures.

In our U.S. sector, revenue totaled $2.1 billion and were 2% higher versus last year. Revenue increased due to higher sales volume in both retail and foodservice market segment. We benefited from a favorable product mix and by increased sales volume. Adjusted EBITDA was $171 million, which is 6% up when compared to last year. The increase in adjusted EBITDA reflects operational improvement primarily driven by efficiency initiatives stemming from our recent capital investments. These initiatives contributed to a reduction in duplicate operating costs. In addition, disciplined execution on customer fulfillment and proactive cost management supported margin enhancement.

Higher sales volume and favorable product mix driven by our commercial initiatives positively impacted results. Our cost optimization measure also resulted in SG&A cost efficiency. Compared to the same quarter last fiscal year, U.S. dairy commodity market conditions were unfavorable.

On June 1, the new milk pricing formula approved for all Federal Milk Marketing Order in the U.S. became effective. While the impact in Q1 was limited, we expect a positive contribution in future quarters.

In the international sector, revenues for the first quarter were $865 million down 14% versus last year. Our sales volume were lower compared to the same quarter in both domestic and export market. The decrease in domestic sales volume is mainly due to the divestiture in our Dairy Division, Australia. Our export sales volume decrease in line with our strategy to reposition sales volume towards our domestic market.

Adjusted EBITDA totaled $55 million up 22% on a year-over-year basis. The favorable relation between the international cheese and dairy ingredient market prices and the cost of milk as raw material had a positive impact on our first quarter results. In Argentina, milk costs were higher. However, results reflected a more favorable alignment between inflation in the devaluation of the Argentinian peso.

Reduced milk availability in Australia due mostly to ongoing drought conditions in key milk-producing region negatively impacted efficiency and the absorption of our fixed costs. This strategy was -- this impact was mitigated by our product mix optimization strategy. In the Europe sector, revenue were $317 million, while adjusted EBITDA was $30 million, up $7 million or 30% versus last year. The improved performance was mainly driven by the more favorable relation between selling prices and input costs, which supported overall margin recovery.

We remain committed to disciplined capital allocation. During the quarter, we returned $202 million to shareholders through dividend and share repurchases under our NCIB program. We repurchased approximately 4.7 million share for $123 million. Subsequent to quarter end, we repurchased 1.7 million shares for approximately $47 million. The Board of Directors approved an increase to our quarterly dividend from $0.19 to $0.20 per share, a 5.3% increase reflecting our confidence in the business and commitment to shareholder returns.

In closing, our Q1 results demonstrate the strength of our diversified platform and the effectiveness of our strategic initiatives. We remain focused on delivering sustainable value to our shareholders and executing with discipline across all markets.

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

Thank you, Max. In Canada, we delivered a solid quarter with year-over-year growth in adjusted EBITDA. Operationally, logistics and distribution costs improved driven by network efficiencies. From a commercial perspective, volume growth was supported by several factors. First, our retail market segment generated growth across all categories. This was underpinned by the depth of our branded portfolio particularly Armstrong, which, for the first time, became the national leader in the everyday cheese category.

Second, our expanded presence across major national retail banners further strengthened our platform for growth. Lastly, foodservice volumes were resilient, driven by long-standing customer relationships, diversified channel exposure and execution across QSR and FSR channels. Quick service restaurant traffic and dollar growth held steady, and we saw high single-digit growth in QSR pizza traffic, reflecting the strength of convenience-driven dining. Full-service restaurant volumes also showed signs of recovery after a period of flat performance.

Combined with a favorable product mix, featuring a greater share of value-added and branded products, these volume trends supported earnings growth. We remain focused on effectively managing our overall operating cost structure. This quarter's results reflect the benefits of our cost optimization initiatives. These efforts remain a priority as we look to preserve agility and enhance overall efficiency across the organization. During the quarter, we launched Armstrong CheeseGPT! an AI-powered chat bot designed to inspire consumers year-round with meal and snacking ideas. This digital activation provides a recipe inspiration, product information, coupons and more making it a valuable tool for consumers looking to bring more cheese goodness into their everyday lives.

The Canadian team continues to operate as a responsible and reliable supplier to the domestic dairy industry. Our disciplined commercial approach prioritizes long-term customer relationships and reinforces our role as a trusted partner in the Canadian dairy ecosystem.

In our U.S. sector, we delivered a solid performance this quarter, reinforcing the strength of our core business and the resilience of our operations. This performance came despite year-over-year headwind from commodity market price dynamics. Although commodity market conditions were negative on a year-over-year basis, we saw a meaningful stabilization quarter-over-quarter which helped create a more constructive backdrop for operational and margin management.

Performance gains were largely driven by continued improvements in operational efficiency. Our teams made progress streamlining processes, optimizing on-the-ground performance and reducing duplicate costs that had weighed on prior quarters. These gains also reflect the stabilization and maturation of recent investments across the network. Volume growth was encouraging with increased demand from several of our largest customers, highlighting both our strong commercial relationships and the relevance of our offering in their portfolio.

We continue to grow in our core mozzarella capabilities through enhanced commercial execution. This included securing full supply of pizza cheese for a major international foodservice partner reflecting our strong customer relationships, product quality and operational reliability. In the U.S. foodservice market channel, we gained momentum with top-tier customers and expanded volume across focused categories. We also began shipping to a leading meal kit provider and secured new wins with a regional QSR chain and a major foodservice distributor. We are aligned with the right customer base and continue to grow with high-performing partners, a clear validation of our strategic direction and commercial focus.

On the product innovation front, we continue to respond to evolving consumer preferences with a focus on bold flavors and elevated experiences. This quarter, we introduced Saputo's spicy mozzarella, a premium cheese that blends the smooth, creamy texture of traditional mozzarella with the bold heat of habanero jack. Designed to bring a zesty twist to pizzas, flatbreads and sandwiches, this launch taps into the growing demand for spicy offerings.

We also expanded our capabilities in the beverage enhancement space with the launch of a new line of cold forms available in caramel macchiato, sweet cream and vanilla. These products are designed to transform everyday beverages into indulgent cafe-style experiences at home. Finally, building on the strong equity of our Cheese Heads brand, we introduced Cheddarella, a cheddar style strong string cheese that combines a classic peel apart texture of our best-selling string cheese with the added flavor of real cheddar. This innovation was launched just in time for the back-to-school season, further strengthening our position in the snacking category.

This quarter's results signal what our U.S. business can deliver. Our teams remain focused on disciplined execution, and we are pleased with our ability to consistently meet customer demand. Fill rates are at record levels, which speaks to the strength of our supply chain and our commitment to service excellence.

Turning to our international sector. Results improved compared to the same quarter last year, driven by the performance of our Australian division. In Australia, milk intake was lower due to seasonal conditions and prolonged drought in key milk-producing regions. However, we still benefited in Q1 from the favorable impact from the relationship between selling prices and the cost of milk. We've returned to growth in our everyday cheese business driven by strong brand momentum in CHEER and Devondale. The successful Easter promotion also contributed, led by our Tasmanian Heritage brand.

In Argentina, higher milk costs impacted results. However, macroeconomic factors led to a reduced noncash hyperinflation accounting impact. In this context, the team continues to adapt and to manage the business effectively. Looking ahead, the sector will continue focusing on maximizing export returns, optimizing production planning and maintaining cost control in response to evolving global and regional conditions.

Turning to our Europe sector. Performance this quarter came in better than last year and Q4, supported by our enhanced commercial strategy and cost management. Targeted price increases were successfully implemented to offset inflationary pressures, including elevated milk input costs. Higher overall sales volumes particularly in private label and bulk cheese contributed meaningfully to top line growth. Importantly, despite an increase in milk supply during the quarter, we stayed focused on working capital to avoid any buildup in dairy solids inventories.

Our flagship Cathedral City brand recently launched a new national creative campaign called Make It Better. This omnichannel campaign is designed to reinforce cheese as a comforting versatile staple that enhances everyday meals and will be the most significant advertising spend on the U.K.'s largest cheese brand for many years.

In addition, through our licensing partners, we expanded the Cathedral City brand into the chilled prepared meals category with the launch of 4 new products, including Cheesy Mash, Potato Gratins, Cauliflower Cheese and Broccoli Cheese. Introduced at the end of April, this innovation extends our brand into new occasions while reinforcing Cathedral City's comfort food credentials. Overall, the U.K. business demonstrated good momentum and continue to advance key levers in a complex operating environment.

As we look to the balance of fiscal 2026, we are confident in our strategic direction and the disciplined execution of our global teams. The fundamentals of our business are strong, and we are seeing positive returns from our commercial and operational initiatives across our global platform. While we remain attentive to potential headwinds stemming from dairy market dynamics, economic uncertainty and cost pressures in certain markets, we are well positioned to deliver continued earnings and steady cash flow generation and long-term value for our 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.

Congratulations on a great quarter. In listening to your remarks, one of the things that really struck me and in reading the release was the volume growth across channels, across geographies and the repeated use of favorable mix and commercial initiatives. Can you walk us through where you are in that trajectory? And sort of how that will contribute to Saputo as we go forward? Because this is a bit of a different twist than what we've heard historically.

Thank you, Irene, for the question. And I would say that we came out of a period over the last couple of years where our fill rates weren't the greatest for a number of reasons, which we all know. But where we are today, first and foremost, we have the mechanical capabilities to be able to service our customers. Secondly, the relationships that we have with them, the ideation and innovation that we bring to them has allowed us to fundamentally fuel their growth as well.

So as we look to each of our partners, both in the foodservice, industrial and retail space across the globe, our commercial teams are constantly ensuring that, one, the product mix that we manufacture and that we bring to market are relevant to the consumer base. And that might vary, of course, by region, but equally, by some of our business partners. So we tailor our offering to them. We ensure that we are in a good stock position across the board. And this is absolutely -- our fill rates has fundamentally at August to capture the momentum and the opportunities that exist in those markets.

So we're fortunate to have the kind of partnerships that we have. We're fortunate to have the commercial focus at this moment in time. We're also, in many parts of the world right now. As we continue to push through our focus on commercial strategy, we're also unlocking incremental A&P investments on our key focus brands. And that's an important pivot for us, I would say, as well as we look forward. We will certainly be looking at optimizing the portfolio and making sure that the best of our brands, and the most relevant of the brands get the lion's share of the investments and the incremental investments that we plan to put behind advertising and promotions.

That's really helpful. And just focusing on the U.S. for a moment, great to see the progress. How should we be thinking about the evolution of the EBITDA delivery in the U.S. over the next sort of, let's call it, through F '26 and into F '27?

The U.S. team has performed very well over the last several quarters, in fact. And they're consistently improving on a week-to-week basis. Probably the KPI that would be the most telling is our fill rates we're seeing levels that we haven't seen either ever or in several years. So it's a testament to the hard work at ramping up through the various capital initiatives that has been put through that division.

Franklin, in particular, on a week-to-week basis as well is improving its overall supply. As I'm on the topic of Franklin in particular, Franklin today is operating basically at about, call it, 60-ish percent of what it will see volume-wise, once we complete that cycle with the Green Bay facility closure, still on track for December of this year. So all of this is essentially leading us to more efficient operations, continued fulfillment of the demand from the marketplace.

And all of this will continue to spell improved conversion costs. All of that at the time when demand for our products and our sharpened focus on the most relevant aspects of our portfolio are being brought to market. I'll say, very encouraging, very confident about the trajectory in the U.S.

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

I wanted to continue on Irene's questioning around the U.S. You used to see low double-digit margins in the U.S. on a somewhat regular basis, but we certainly haven't seen that in a while. I'm wondering what it would take to get margins back to 10% plus in the U.S. and if that's still a possibility.

Well, I think the answer is yes. And so the U.S. team, as we look at where the product portfolio is at today, the focus that we have in some of our core categories. We look at the solid demand and the balance between supply and demand in the marketplace today, and what's still left in our tank when it comes to the U.S. performance. If you recall, we had talked about overall important returns from our capital investment program.

The lion's share of the remaining returns from that global capital investment program, will come from the U.S. yet or is yet to come yet in the U.S. So all of this to say that the U.S. team, both on the core cheese Dairy Foods, and let's not forget our ingredient sector as well, will continue to improve its output and its overall margin structure. I can see the U.S. if we want to look at it from a relative perspective, position between the margins of Canada and that of the international.

So is that something that you would expect you could achieve over the next couple of years? And are the big buckets, the return on capital investments, you're capturing the remaining of that as well as the milk pricing formula change that kicked in -- that should kick in next quarter?

Yes. What I would say is that we will see the remaining returns from our legacy capital investment program delivered by the end of this fiscal, the run rate of that. So that will improve the overall structure. Again, these are always providing that there isn't some sort of change in the market dynamics. But when we look at the things that we do control and we look at our operational performance, how it is we bring our products to market, everything that we're doing in the background with supply planning, demand planning and growing with our customers and their needs. I feel very confident that we can build off of the base we have today and improve from there.

Okay. And just finally, you talked about solid demand for dairy products, supply-demand balance in that. But some of the U.S. dairy prices are reasonably well below international prices. And I'm wondering what you believe is behind that and if you see it changing?

Yes. It's clear what's driving that, and that is there is an abundance of milk right now in the U.S. and the abundance is coming from twofold. One, the solid output per pound or per liter of milk has improved as well as the net volume. We're also seeing fewer cows being culled and remaining in their herds for milking. So which created an abundance of milk, if you like. But despite that, all of the milk has found a home for processing. And following that, we're seeing a good demand, both domestically and internationally for those products.

So certainly, the pricing and the attractiveness of it is helping the U.S. products find international homes. We've had record export volumes over the last couple of months, and it's creating a relatively stable environment for us in the domestic market as well.

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

I actually have just a couple more questions also on the U.S. You specifically called out better mix. And I'm just hoping you can give a bit more color there. Is that just sort of channel mix? And is that more a result of demand shifts or your work to intentionally reposition the portfolio?

I would say it's a little bit of both. So when we talk about favorable product mix, obviously, we're talking either about products that earn better margins. We're also talking about products that we excel at in our manufacturing platform. And of course, those that are earning a better margin or in the value-added segment, but some of our core offerings, nonetheless, is some of the areas where we are the most efficient as well. And that is aligning well with demand right now.

So in the Q1 space, there's been a good pull on things like mozzarella, which, of course, we excel on the manufacturing side. And on the Dairy Foods, in particular, we've also seen a shift from lower-margin products to higher-margin offerings or demand.

So it's a combination of both, the channels that continue to be resilient and the offering that we have behind it. But I also want to underscore once again that it's our ability to fill that demand that is creating likely or sort of certainly the most of the improvement is our ability to supply the demand that's there.

And actually, just on your Dairy Foods comment specifically the shift to better margin product. Could you just expand on that a little, please?

Well, in the Dairy Food sector, part of our offering also includes things like cottage cheese. And as you can understand, sector of dairy protein is in good favors with consumers, share of stomach is high, Cottage cheese is a strong offering, if you like, in the space of dairy protein.

So we are a large manufacturer in the U.S. of dairy proteins and cottage cheese and our offering in this space is certainly helping our overall performance. Equally, fat is in high demand. And our Dairy Foods portfolio offers a variety of fat rich, if you like, cream-based products that are also being offered and returned on good margin.

And last question, just on the milk price formula change, you mentioned it was a limited impact in Q1, but expect more going forward. Is that just a matter of 1 month in this period versus a full quarter of contribution going forward? Or what are the sort of competitive dynamics that you observed following that formula change?

Well, I'll say the following. So yes, very limited impact in Q1 from the changes in the Federal Milk Marketing Order and the impacts to milk pricing fundamentally. As we look into Q2, it's active. It's live now. We pay our milk with the benefit associated to that. And as far as the impact in the commercial space or in the market space, the U.S. market remains competitive. So whether it's related to the capacity that's in the marketplace, whether it's the milk offerings in the marketplace, all of the above, it remains a competitive environment.

So for us, it's business as usual when it comes to focusing on our customer engagement and consumer offering. We're going to see the changes in that milk marketing order translate into our milk price and into our margin structure over time.

But as we said before, that change, which is fundamentally the make allowance is going to manifest itself in our cheese pricing and in our ingredient pricing. It's also a reset because we know that it was not sustainable the way it once was. And part of those returns will be invested in bringing new products to market, keeping our dairy sector innovative and relevant.

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

Maybe first with the question on the U.S., the EBITDA performance during the quarter. Are you able to share with us how much EBITDA benefit you achieve just from your network optimization and lower duplicate cost during the quarter?

Chris, if we refer to the duplicate costs, what we had last year was something around $13 million. These costs were cut in half, for sure, during this quarter. And equally similar amount of overall efficiencies was generated through all the other elements associated with our investments. So I hope that clarifies a little.

Maybe just 1 follow-up on that. I remember last year, I think you achieved around $100 million roughly of cost efficiencies. This year, can you share with us how much you would achieve this year?

Well, as we mentioned, with all the investments we've made over the years, we're chasing something around $200 million. And some of those $200 million were achieved in fiscal '24. The majority was realized last year in our fiscal '25. And as for the residual to get to that $200 million, we said that this fiscal year, would be the year for us to close the loop on that, and we feel very comfortable that we will be able to achieve that run rate of $200 million.

Okay. That's helpful, Max. And Carl, just maybe a follow-up to your answer around the lower milk pricing. I think you mentioned previously with the resets, if that happened last year that would have been an EBITDA benefit of like USD 60 million to USD 70 million. I was wondering, is that a good proxy of what we should expect to realize in terms of EBITDA benefit this year?

Yes. So Chris, that number is generated, of course, on the volume and the mix of the products that were produced at that point of comparison. And the change in the milk pricing formula is -- it's, I'll say, just simple mathematics. It's just an allowance that's provided, an increased allowance that's provided for the manufacturing of cheese. Saputo -- anyway for manufacturing of cheese and the manufacturing of ingredients. And that's a fixed amount. So it gets put through the calculator and then the milk price output will automatically see that benefit.

But then what happens next is all about market dynamics. And as you've heard from Max and I, we're very confident with our offering in the marketplace, the relevance of what we do. The sustainability of the demand and their performance on fill rates. So all of that should translate into those returns coming to Saputo.

Okay. That's helpful. And maybe last question, switching gears to Argentina. The quarter was still impacted by higher milk costs, but obviously, milk production down there continues to be very robust. I was wondering, do you have a view on what would happen to milk cost in the next couple of quarters? .

Like how meaningful would the tailwind be if milk costs start to ease or come down relative to your profitability on Argentina? Because I know it was a big negative impact, obviously, last year. But just wondering how meaningful could that tailwind be once milk costs start to stabilize or even go down with better production?

It's a good assessment, Chris. So yes, the milk has rebounded in Argentina over the last several months versus some of the struggles that our dairy farming partners had last year. So there is an abundance of milk. It is finding its home both in the domestic and in the international markets. The relationship between the currency and the devaluation -- the devaluation of the currency and the inflationary rates is stabilizing, if you like.

So all of that is creating an environment where milk pricing is stable, manageable and abundance of milk. There are a number of other things in the agricultural sector that are also favorable creating an environment where there's a lower cost base for producing milk. All of this is suggesting that, yes, we might see milk prices that are favorable to what we've seen.

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

It looks like you've been successful with pricing increases across many geographies this quarter, in particular in the U.K. So I'm wondering to what extent is this supporting margins in Q1? And more broadly, what's your confidence in your ability to raise pricing looking forward to offset potential cost increases.

When we look at our strategy on pricing, raising price is typically the last tool we use for our customers and our consumers. We certainly do our homework and ensure that we are always looking to find alternative ways to bring the same quality and performance of our products to the market. When all of those options are expired, we will turn to pricing action, typically, if it's related to inflationary, extraordinary inflationary pressures and/or both in the raw material space and/or other elements of cost input.

When it comes to the U.K., so yes, we've been able to -- the U.K. has seen unlike North America, probably a higher percentage of inflation over the last couple of years, stabilizing as we speak today. All this to say that we've been able to have the Cathedral City brand as well as some of our butters and spreads business pass on some of those costs to the customer that we just could not mitigate internally.

But the strength of the U.K. operation performance isn't all about price increase. There are a number of initiatives in the U.K. that are on the go. We have, as we previously announced work that we're doing in the ingredients space. That project is well on track with a cutover expected by the end of this quarter. We have other work being done in cut and wrap space for further consolidation. And in fact, the last days of one of our cutting operations in Kirkby Malzeard was 1.5 weeks ago.

So the U.K. team, by virtue of the work that they're doing on full efficiency, SG&A and cost optimization are in a good place. There's good momentum supported by the market-leading brand at Cathedral City and take price when it is our last alternative.

Okay. I appreciate the details. And on leadership, I'd like to circle back on the appointment of the Chief Commercial Officer. What are some of the learnings that you've had to date? And how is it helping shape your strategy going forward?

There's been a lot of learnings. It's been inspiring to have Leanne Cutts lead our commercial initiatives and to set the boundaries and focus of our commercial strategy. And I think those 2 words, boundaries and focus is a key component of Leanne's mandate and her leadership in this space. We've targeted the things that we are willing to do when it comes to A&P. Secondly, what are the brands that resonate the most with consumers today? What is their license to continue to be invested behind. What is our trajectory. And if you want pace of innovation required to remain relevant. We're talking about a whole host of revenue management approaches and techniques that we had not utilized in the past.

We are also looking at different markets for our product. There are a number of emerging markets that also view dairy as a value-added product, something that can be a good complement to the dietary needs in these areas. Leanne and the team are focused on unlocking all of these potentials and ensuring that we maximize the returns on the dollars that we put in this space. So it's been great to date. We're only beginning to see the benefits of that now, but more to come in the future.

[Operator Instructions] Your next question comes from the line of Vishal Shreedhar of National Bank Financial.

There have been many gyrations globally related to tariffs and other dislocations. And at the same time, Saputo has been engaging in a variety of significant manufacturing optimizations. So I was hoping you could go by major region and just reaffirm what the value of each region is to Saputo's strategy and global intention.

So Australia, is that still what we envisioned it once, to be an exporter to an exporter to the globe and Argentina, do we anticipate that to reconstitute historical margins and Europe as well, is that your U.K. business, where does that stand? I just wanted to get a high-level view on where it all stands.

Thank you, Vishal, for the question. And you already hit some of the responses with each of the sectors. But yes, every one of our divisions in our portfolio has a clear role to play and contributes to our overall business. When we take a look at -- and if I can say before going into each of the details, they are also structured and run quite independently. So one is not a drag, if I can say it that way on the other or to any of the corporate resources. There's a fairly high degree of autonomy in each of these sectors.

And when we look at the role that each play, on the first and foremost, we're constantly evaluating what the role of each of those are, both from the mechanical assets they have, the brands and the capabilities that they have in supplying both the domestic and international markets.

From an Australian perspective, yes, we indicated in the past that we're looking to focus to a greater degree in the domestic market and reducing our offering into the international. Part of that is related to the milk situation. Milk supply in Australia is not growing. And because of that, we're certainly going to look to maximize our offering. And we've already done a lot of that through the platform consolidation that has occurred in Australia. So we feel good about the balance that we have and the ongoing pursuit for incremental domestic volume.

Argentina, by virtue of it being a growing milk shed and its ability to flex between domestic and international. We are looking at optimizing the Argentinian platform for a number of international customers. When we look at the U.K., the U.K. is predominantly a domestic play. We have the market-leading brand, our market-leading brands. When you look at both categories, cheese and spreads, and we're comfortable with the work that the team has done with its footprint.

And then we have Canada and the U.S. We know the Canadian story, very domestic focused in nature. When it comes to the U.S., I would say that the U.S. is in addition to all of what you've heard about its recent performance, the strength of the brands and the offerings that we have. The U.S. is also the platform that we will look to expand exports over time. It has lots of capabilities, a competitive milk price and favorable conditions for trade as well.

So in the end, I would say that each of the locations that we currently operate in have a purpose. We're constantly reviewing and ensuring that they bring the value that was expected. And we're proud to have the offering that we do have for a growing international customer and domestic customer base.

Okay. And with respect to Argentina, do you think that could reconstitute the historical levels of EBITDA that it generated in the past?

Argentina is performing well. So even -- it's actually -- and if I can use the opportunity also for our Argentinian team. When you take a look at the comment I made about autonomy, the Argentinian team is absolutely autonomous. So for every year over the last 2 decades that they've been part of our team. They've always found ways to manage through the volatility and there I say chaos that sometimes ensues in that region for all the reasons we know.

All this to say that they're performing well today. There's an abundance of milk. We still remain first. We are the #1 dairy in Argentina. We still operate the most efficient plants. We are the most efficient on any metric you can measure. And they'll continue to do the best they can with the circumstances and cards they are dealt with.

Vishal, I will just add maybe the question relates more to the economic conditions that are prevailing, the divisions, our operation, our brand, our people, has been performing strongly, is performing strongly and will continue to do so. As it relates to the various mechanic on the peso devaluation or the inflation that remains to be seen in terms of what could be the impact on to our business.

Right now, what we're seeing is a stabilization and a reduction, a reduced gap between those significant metric that allows us to have a more steady and more pre-visibility on to our results. But the stability of our business, the brands that we have, the performance of the plants, there's absolutely no change, and we don't anticipate any change moving forward.

Okay. And with respect to the CapEx, Saputo has gone through a big CapEx cycle and now you're starting to bear the fruits from a variety of those initiatives? How should we think about the longer term? Are there new facility optimization plans in size anticipated? Or should we anticipate this next several years to be more of a harvesting the fruits of past initiatives and working on lighter CapEx initiatives.

Right now, if we look at our investment in CapEx, which is a reduced number from the recent history, you could expect that allocation to maybe expand from just pure inflation perspective. Should any initiatives comes in with ROI that justifies it, we will certainly be looking at it. Organic growth remains one of our key focus still today.

So I'd say if we look at the $360 million that we're planning this year, could be looked at as a low end of our CapEx allocation. But you should not expect us to go back to the level that we've seen in the last 4 years.

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

I wanted to come back to the Class III formula change and just to make sure I've got a good understanding of this. Should we interpret this as the market has for now at least, become more competitive and that given initial reactions you're seeing, that theoretical $60 million to $70 million benefit, all other things equal, is currently lower. And are we right to assume that absent of that or separate from that, you want to reinvest some of the savings that presumably you will see in various internal initiatives.

Well, I think the best way to answer that, John, is the -- again, I come back to the number that we shared was based on product mix that we manufacture both in the ingredients and cheese space and the volumes in which we were selling of each of those at the moment of the calculation about a year ago. When you look at the formula changes and the formulas and the, call it, the benefits, if you like, of the FMMO for a processor comes from the make allowance in the calculation from milk price. That has been activated. It is present. It is present in our -- in parts of our June results and our current results.

Is that translating into a more competitive market environment? What we're seeing is that the U.S. market is as competitive as it was before the FMMO started, and it remains as such today. There are a lot of dynamics that can drive the market conditions, as you know, John. And for us, it's coming at a time when there's also an abundance of milk. The margin structure for milk production at the producer level is also good because of feed costs and a variety of other elements.

So we're seeing an abundance of milk. We're seeing the processing capacity is resilient and available and so are the outlet. So all of this is creating a balance, competitive environment, not much different than what we've seen over the last several, several quarters. Max?

John, just to clarify, we did call out that the impact was limited in our Q1 for 2 reasons. First, the new pricing formula started in June, so only for 1 month. But also as we get into the month of June, we still have to sell and our inventory, which is -- which has been built at the higher milk cost, hence, why we don't see a significant impact to that new pricing formula in Q1. But by no means, we were changing the long-term trajectory of the benefit associated with that.

Okay. That's helpful color. And then my second question is on Armstrong. It's encouraging to see that brand continue to take share. Is that a brand that's portable beyond where it's currently offered? Or can you extend it into other products or categories that it's not currently in?

I would say the following. Armstrong has come a long way for sure. From fundamentally location in British Columbia, where we used to manufacture cheese, to a western star to now a national star in nature and a national leader. We've expanded and have innovated in that category for several years now with the support of our Canadian team and the passion that they have for not just the brand but the willingness to develop products, install the capabilities required to bring these products to market.

So Armstrong has lots of brand equity, it is core to dairy and is core to cheese. So I think its runway is still relatively large for innovation. But I think if you asked a question to our brand manager, they would say that Armstrong is a strong everyday cheese brand and has lots of opportunities in that space yet to come.

Your next question is a follow-up from Chris Li of Desjardins.

A quick one, maybe back to Australia. Can you maybe update us on just the latest reduced milk availability situation in Australia? Is that causing more upward pressures on farmgate milk prices. And you mentioned that you're mitigating that impact through your product mix optimization. Can you just elaborate a little bit on what you're doing there to offset the impact?

So yes, Chris, you are correct. It's been a difficult number of months for our Australian dairy farming partners from severe droughts to flooding depending on which parts of the country. It has not been easy. We've been focused on in those times, supporting them through it. Also from a financial perspective, as we look at the dairy year closing and the new dairy year starting, we've been spending time shoring up and securing the milk supply that we require for our annual plan.

So yes, milk supply has been more difficult this year than it was in the year prior. We've been able to secure the necessary solids and milk supply that we require to operate our business for the plan that we have this year. And we are seeing some relief now with the weather hoping that this will provide some of the relief needed to expand milk production or at least get some of the solids up. All of this to say that we're in -- we are in an okay place today with the supply of milk, but it's still tough going, certainly for our farming community.

There are no further questions. I will now turn the call back over to Nick Estrela for some closing remarks.

Thank you, Jean-Louis. Please note that we will release our second quarter fiscal 2026 results on November 7, 2025. We thank you for taking part in this call and webcast. Have a great day.

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

Hello, and welcome to the Saputo Inc. Fourth Quarter 2025 Financial Results Call. [Operator Instructions] I will now turn the conference over to Nick Estrela. Please go ahead.

Thank you, J.L. Good morning, and welcome to our fourth quarter and full year fiscal 2025 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, and good morning, everyone. As I approach the end of my first year to my role as President and CEO, I am incredibly proud of what the team has accomplished in fiscal year '25. Over this time, we have reinforced our executive leadership team across the globe, enhanced operational efficiency, refined our capital allocation plan and executed on a clear strategy to advance our goal of delivering sustainable value to our shareholders. Despite a volatile macroeconomic landscape, we stayed focused and delivered consistent operating and financial performance. The strength of our balance sheet allowed us to accelerate share buybacks with approximately $150 million in shares repurchased under our NCIB program in fiscal year '25.

Over the past 4 years, we have solidified our asset base anchored in strengthening our foundation and optimizing our diversified portfolio. In fiscal year '25, we continued that momentum through strong contributions from capital investments, progress across strategic initiatives and disciplined cost control. And there is more we can do. Despite the efforts we have made in stabilizing our performance and improving how we operate the business, we know there are more opportunities ahead. We are confident that these efforts are paving the way for a more sustainable and competitive future.

In the fourth quarter, we reported adjusted EBITDA of $365 million on revenue of nearly $4.8 billion. Our Canada, U.S.A. and Europe sectors all generated year-over-year growth. We saw encouraging improvement in Australia. However, overall performance in the international sector was tempered by the negative impact in Argentina from currency devaluation and hyperinflation. Amid persistent commodity volatility, we maintained stable margins as a result of our disciplined cost containment efforts and contributions from our strategic initiatives. Notably, we were happy with the performance of our focus brands in a highly competitive environment. This underscores the enduring strength and relevance our brands in consumers' everyday lives.

Building on that momentum, we're advancing on our key commercial strategies, strengthening our customer value proposition, enhancing returns through focused revenue growth management and accelerating market entries in new priority regions to drive long-term growth. As a natural next step, our accelerated commitment to putting the consumer first will be further strengthened by our strategic adoption of digital technologies. From automating routine workflows, deleveraging data-driven insights for faster, smarter decisions, these initiatives are expected to not only reduce costs but also position us ahead of the curve in delivering value to our customers and shareholders.

These dynamics will support top line performance and we remain focused on expanding adjusted EBITDA margins through disciplined operational execution. A notable example of this discipline is our ongoing SG&A optimization program, which included a restructuring of several administrative functions in the fourth quarter. Our now leaner and more agile organizational structure better aligns our resources with the needs of the business following our network optimization initiatives. This is already positively impacting our first quarter performance and will help us deliver our fiscal 2026 outlook. We continue to generate healthy cash flow from operations. Since the beginning of fiscal year '26, we have continued to opportunistically repurchase shares, taking advantage of attractive market conditions.

Our capital investment program is also delivering strong and sustainable productivity improvements. For example, in the U.S.A. sector, we achieved approximately $27 million in cost savings and benefits during the quarter and reached our $100 million milestone for the year. This is a direct result of the infrastructure investments and systems enhancements we have made to optimize our cost base and support long-term competitiveness. That said, we did observe some softening in the consumer demand, particularly in the food service channel, which was more pronounced during the fourth quarter. In response, we are supporting our customers through value-added initiatives focused on operational efficiency, menu optimization and profitability.

Nevertheless, the foodservice market channel has recently shown signs of recovery, and our volumes so far in the first quarter have been solid. We are also investing meaningfully in our brands to deliver compelling consumer value at a time when it is critical to consumers. As a result, our innovation pipeline remains robust with a sharpened focus on value-conscious consumers across all market segments. Even against the challenging macroeconomic backdrop, it is evident that demand for protein-rich products remains strong. We view this as a positive durable trend that reinforces the relevance of our product offerings, and we are well positioned to capitalize on this demand. On the matter of trade-related tariffs, we continue to anticipate limited and manageable direct impacts. Our diversified supply chain and cross-border operations, which span foodservice and retail continues to support our resilience and ability to pivot as needed.

We continue to monitor external developments closely while leveraging our strong balance sheet and healthy cash flows to ensure financial stability and agility. We are encouraged by our progress, and we remain committed to sustain growth in fiscal year 2026 and beyond.

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

Thank you, Carl, and good morning, everyone. Here are the financial highlights of the fourth quarter. Consolidated revenues were $4.8 billion, a 5% increase when compared to last year. Revenue increased mainly due to higher domestic selling prices and higher international cheese and dairy ingredient market prices as well as higher sales volume in Canada. Adjusted EBITDA amounted to $376 million, similar to Q4 of last year. Net earnings for the fourth quarter totaled $74 million, and on an adjusted basis, net earnings totaled $128 million, down $28 million as compared to the same quarter last year.

The decrease is primarily attributable to higher depreciation and amortization expense, stemming from our capital expenditure program as well as increased financial charges related to utilization of the Argentina credit line. I'll now take you to key highlights by sector, starting with Canada. Revenue for the fourth quarter reached nearly $1.3 billion, an increase of 6% when compared to last year. Adjusted EBITDA for the fourth quarter totaled $157 million up 14%. Our improved performance reflected the benefit derived from operational efficiencies, including continuous improvement program, supply chain optimization and automation initiatives. Improved performance also reflected a favorable product mix and a higher sales volume and the positive impact of lower general and administrative costs.

In our U.S. sector, revenue totaled $2.1 billion and were 11% higher versus last year. Revenue increased mainly due to the combined effect of the higher average cheese block butter and dairy ingredient market prices. However, volume were slightly lower quarter-over-quarter from softening demand, mainly in the foodservice market segment. Adjusted EBITDA was $148 million, which was 7% higher when compared to last year. Our results included approximately $27 million in benefit derived from capital investment in our cheese network, cost reduction and lower SG&A. Our results also include a $20 million unfavorable impact from U.S. market factor, mainly due to the negative milk cheese spread. The negative spread was partially mitigated to positivity from dairy food product pricing protocol on butter market fluctuations. Duplicate costs incurred to implement previously announced network optimization initiative were approximately $10 million and continue to trend down in the first quarter of the current year.

On a full year basis, the U.S.A. sector performed well with an adjusted EBITDA 18% higher versus last year despite the negative impact from a persistent negative milk cheese spread, a testament to the progress we're making around operational and commercial execution. In the international sector, revenue for the fourth quarter were $1 billion, down 10% versus last year. Revenues included a $225 million noncash negative impact when compared to last year due to the application of hyperinflation accounting under IFRS to the revenue of the Argentina division. Adjusted EBITDA totaled $47 million, down $41 million on a year-over-year basis. And this year-over-year decline in adjusted EBITDA was mostly driven by our Argentina division, which is a result impacted by higher production costs due to the effect of inflation and the peso devaluation, reduced milk availability in Argentina further contributed to higher milk costs.

The less favorable effect of the currency fluctuation on export sales denominated in U.S. dollar, and a noncash negative impact of $9 million due to the application of hyperinflation accounting to the Argentina results when compared to last year. In the Europe sector, revenue were $335 million, while adjusted EBITDA was $24 million. Adjusted EBITDA margin recovery reflected the positive impact from a higher sales volume in the retail market segment. The favorable adjusted EBITDA margin comparison was due to the selling of high inventory costs last year, which had put down pressure on our adjusted EBITDA. Net cash generated from operating activities for the fourth quarter amounted to $362 million, while CapEx for the quarter totaled $113 million in line with our plans. A healthy balance sheet and a strong cash flow generation provides us with a foundation for financial stability and flexibility. We have been able to deliver a consistent cash generation as well as reduce our net leverage ratio, positioning ourselves to better navigate this uncertain environment.

As of March 31, 2025, our net debt to adjusted EBITDA ratio stood at 2.1x, reflecting our healthy financial position. On capital allocation, as Carl mentioned, our focus remains on share repurchases. We repurchased approximately $4.8 million share during the quarter for a total purchase price -- for a total of approximately $120 million. Subsequent to the quarter end, we repurchased an additional 2.5 million shares for approximately $63 million. Looking ahead, we are in a good financial position to capture opportunities and continue to operate in a dynamic environment. This concludes my financial overview. And with that, I'll turn the call back to Carl.

Thank you, Max. In Canada, performance exceeded expectations with a year-over-year improvement in adjusted EBITDA and a nearly 100 basis point increase in margins. From a commercial standpoint, we saw strong momentum, one of Canada's largest pizza chains launched a new stuffed crust product featuring our mozzarella cheese sticks. In the QSR channel, a major customer introduced a protein coffee beverage with our Dairyland protein drink. This builds on the retail success of our Dairyland protein line. In the U.S., our results improved year-over-year, driven by benefits realized from strategic capital investments in our cheese manufacturing network, targeted cost reduction initiatives and lower SG&A expenses.

Looking ahead, our strategic focus in the U.S. is building on a best-in-class operation. We have invested significant capital over the past 4 years to expand production capabilities. These investments are now enabling us to efficiently scale new products nationally and unlock new growth opportunities across customers and channels. We see meaningful opportunity to expand margins over time and our multiyear plan focused on operational optimization, launching winning innovations and distribution expansion is right on track. I'm pleased to share that our Franklin cut-and-wrap facility is nearing the completion of Phase 1 of the ramp-up, a significant milestone that reflects the strong collaboration across our teams.

As we continue to progress with the ramp-up throughout the year, we expect to see a meaningful reduction in the duplicate operating costs associated with our transition. This progress will also position us to further consolidate production and drive greater efficiency across our network, particularly in preparation for the planned closure of our Green Bay facility at the end of the calendar year. Additionally, we made progress optimizing our plant network and are now beginning the next phase of logistics and distribution infrastructure improvements. These early-stage efforts are essential to driving long-term efficiencies. In support of this work, we recently completed a new 300,000 square-foot distribution center in Caledonia, Wisconsin, complementing our nearby Franklin facility.

This new site will enhance our service capabilities and simplifies our supply chain. Momentum behind our U.S.-focused sales initiatives is also building, and we are optimistic about what lies ahead. Examples of some of these initiatives include securing new volume for a national fast casual chains cheese program supporting their Monterey Jack needs. We were also selected by a major QSR brand for a product relaunch with our chief supply, a strong endorsement of our quality and reliability. On the retail side, we took a key strategic step with the restructuring of our sales team. We've established a dedicated growth channels team focused on driving our branded business and aggressively pursuing untapped white space in retail.

This structure is better aligned with evolving consumer demand and will support accelerated brand presence in high potential areas. In our international sector, we are encouraged by a strong rebound in domestic volumes in Argentina. This is despite the devaluation of the peso, not keeping pace with inflation, and leading to higher production costs, particularly for milk. Volumes grew compared to prior year, driven by increased consumer demand for soft, pressed and processed cheese. In Australia, we benefited from a more favorable balance between milk costs and an international cheese and dairy ingredient market prices.

Domestic volumes in Australia remained stable. However, export volumes saw a meaningful increase, particularly in cheese and butter as we capitalize on a favorable export market environment. In the U.K., the environment remains challenging, but we are managing it with discipline. Volume was higher year-over-year and margins continued to recover. As part of our ongoing cost optimization initiatives, we will no longer manufacture functional ingredients. This decision is expected to simplify our production processes streamline our go-to-market strategy and deliver meaningful cost savings.

Turning to our outlook. This past year has presented numerous macroeconomic headwinds, which we have proactively managed namely in Argentina. As we look to fiscal 2026, we remain confident in our ability to deliver growth despite persistent headwinds. We are well positioned to drive sustainable value creation. Our key drivers include capitalizing on the benefits of our capital projects, the strength in our commercial strategy and growing demand for protein-rich products and our sharpened focus on cost reduction and competitive edge. From a financial perspective, we will maintain our strong balance sheet and prudent approach to capital allocation, striking the right balance between capital expenditures, dividends, debt reduction and share repurchases. Given the strength of our cash flow generation and balance sheet, we expect to continue to actively buy back shares through our NCIB program.

In closing, I have great conviction in our strategic direction and our ability to deliver sustained value for our 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.

Carl, listening to you this morning and reading the press release last night, I was really struck by the outlook section, where the tone seems more confident than I've heard it in several years. Can you comment on that? And can you talk about where you're feeling the most confident where you see the biggest upside and where you see kind of some potholes that you're going to need to navigate.

Thanks for the question. Yes, it's certainly intentional, but and natural. The business is performing well. It's been, I'll say, a long couple of years with regards to the cycle of investments, the efforts that the teams across the globe have put through it, and we all know the backdrop over those couple of years. So all this to say that we do feel strongly about the capabilities that we now have offered ourselves, the position that we put ourselves in with regards to supply, the diversity of the portfolio, and this is quite frankly, across every 1 of our divisions.

So we feel that we're in a very good place to be able to capture the ongoing demand for dairy and how dairy is perceived by the consumer. That said, some of the areas where we feel that we'll probably have the greatest upside, absolutely is here in North America, specifically in the U.S. It was the largest of our capital investment program. The longest to really come to fruition and to deliver, but we're here now. The team is stable. The team is very motivated. And I know that we'll be able to benefit from the demand in the marketplace, and we're in a good place. So there is going to be growth across every 1 of our sectors. That is our plan. And I can share that same -- my team shares the same enthusiasm as you hear from me right now.

That's great. And then just asking specifically about Europe. Obviously, it's possible been the most disappointing region over the last several years. How would you describe where it is today? And what is reasonable for us to expect on a go-forward basis in terms of both revenue, but particularly somehow reconstituting the profitability of the division.

Yes. Our European sector and our team in the U.K. specifically, have navigated through some pretty important inflationary pressures over the last several years. And the reality is that a lot of those input costs, we were not able to recover from the marketplace. So it's put the pressure on margins. But despite that, the team has continued to plow ahead with the various network optimization initiatives, they're still in the middle of a couple of them that will continue to contribute positively to the business's bottom line over the current and future fiscal years. But what I would say more specifically, though, our brand health has been very good with Cathedral City as well as Clover in our butters rolls and spreads business.

And we do feel we're in a good place with both the balance around branded offering into the marketplace as well as what we do provide in the private labels sector. There's a greater degree of stability as well in the overall pricing, specifically associated to a more stabilized inflation. And I think one of the things that we need to keep in mind is historical EBITDA margins were 18-plus percent. What would be more normal for a European sector at this point is going to be more in the low teens to mid-teens as an ongoing for the business.

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

I wanted to follow up on a few of the comments in the -- in your prepared remarks. And I guess specifically, the comment about accelerating investment in priority regions. And I'm hoping you could just expand on that a little bit.

Thank you, Mark, for the question. I would tell you a couple of things. One, certainly with the, call it, the tariff wars that we have, we've had to accelerate in many ways finding incremental markets to move some of our products to, especially from our U.S. operations, who have had a number of different, I'll call them, hurdles in selling to their traditional channels. Whenever there's an obstacle, it always presents an opportunity, and that has actually allowed us to explore more aggressively and more urgently new markets. And I think we've been successful at bringing into these new territories. And by territories, I'm talking about expanding with an example, Southeast Asia.

We would have had maybe a more limited set of customers beyond what we traditionally sold today, we're taking full advantage of that entire region. Furthermore, we're expanding some of our offerings into the Japanese market and also looking to other areas in the Middle East as well. So it's a combination of 2 things. One, where is the dairy demand coming from in various parts of the world and some of that is shifting or accelerating with the territories I just described. Others is coming from the fact that the supply agreements and trade agreements from various countries we operate in, and the relevance and value that come from that have been shifting, forcing us to find those new markets as well.

And does all of that work have a meaningful impact on your profitability? Or how you sort of look at that over the next year?

New market entries, Mark have 2 things. For the first part, it's ensuring that we don't erode our current baseline, and that has not happened. We see it through our first quarter today. And for the most part, we're happy with where we've been able to bring our products to and the margins associated to it. It's what it does in the longer term, establishing yourself as a relevant supplier, credible supplier in new areas takes time. We might only have the -- we might only be afforded the opportunity to supply 1 aspect of our portfolio or 1 SKU the intent is to continue to develop relationships and build upon them. So it's a multiyear process to make meaningful improvements in these new areas.

Yes. Understood. Okay. That's helpful. And then I'm also hoping you could expand on the work on SG&A optimization, and maybe shape the materiality of that with regards to the current cost base and how you look at that playing out in fiscal '26.

So the focus of our efforts was making sure that we don't take things for granted. And specifically, the kinds of business processes we operate with, both those that are driven by the systems that we have as well as some of our legacy practices. So we took a fresh look at the way we conduct business on a day-to-day basis and ensure that the limited resources that we do have are focused in the right areas that drive the most value. That led us to reshaping some of the things that we do as well as, as I spoke about in my remarks, I'll say the -- call it, the conclusion to accelerate our need for adopting greater digital technologies. And of course, AI is part of those technologies.

And that's going to span a number of areas driven primarily or from a priority standpoint in the supply chain side. There are a number of things that we can do with the adoption of readily available technologies to help with our overall relevance to consumers with data with fill rates, so on and so forth and all leading to an overall better cost base. So all of this to say that, yes, we have in the fourth quarter, reshaped these business processes. It has led to the reduction in our overall workforce, and that is, of course, is a more structural change, a permanent one as we move forward, and we'll continue to, I'll say, benefit us, both in the cost of that as well as the efficiency that comes with the streamlining.

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

Questions on Argentina. It has been a struggle in the last little while, mostly because of the hyperinflation, but also because of the declining volumes, milk supply volume. So the milk supply seems to be improving again. But can you help us understand the extent to which you could benefit from the relaxation of the currency controls and the slowing inflation? And how much we could see these hyperinflation impacts go away in fiscal '26.

Yes. Thanks, Michael, for the questions. I'll just -- I'll provide some comments, and then I'll also ask Max to contribute a little bit more in and around the hyperinflation accounting. But you are correct. Milk and milk supply is -- has been steadily improving, and we've been getting our fair share, if you like, of that recovery and then some. So we're in a good place for providing volume to our domestic and international customers.

So all I'll say it's all green lights on that front. We're also seeing, generally speaking, a good stability in the overall currency value, which is helping with the overall pricing and our pricing strategies to the various markets. So despite the volatility that we saw over the last 18, 24 months in Argentina, what we are seeing right now is a greater degree of stability, both in the input cost, the supply of it and in the overall commitment to the monetary policy.

I'll turn it over to Max, who can maybe enlighten us a little bit more on how that can translate to our financial results.

Yes. So in -- back in April from an Argentina government perspective, the country itself ends up having an agreement with the IMF and facing their maturity. And this was viewed and this is still viewed as a big step towards a more stable autonomous economy, and providing some relief around the currency control and various measures in order to reduce inflation, remove the restriction to the currency, to boost activity, to boost employment, investment that sort of thing. The anticipation is the gap between a devaluation of the currency and the rate of inflation to narrow, to get closer.

So the variability or the volatility that those metrics would have on our results is viewed, we're looking at it. That is going to be less meaningful. And what this could mean to us with lower inflation. Of course, yes, lower cost to operate, lower mill cost, and from a currency perspective, being more profitable from an export perspective from a lower inflation rate. Those would be still valid, and this is what we expect that it's going to be over the next future, the next few months and quarter. That said, everything could change. But it looks like the population is behind the current government, the hope to aspire and the aspiration to the stable economy remains there. And right now, despite there's still a gap, even as of today between the rate of inflation, and the devaluation tends to narrow. So we expect to have a bit better visibility, predictability on our results. So we're looking at it very favorably.

Yes. So just to simplify it a bit for me. It seems like you're probably close to breakeven in Argentina this quarter given all these impacts. But is the narrowing of that gap between inflation and foreign exchange devaluation. Is that enough to turn it positive? Or is it just slowing the erosion, the pace of erosion in profitability in making over the next few quarters? Like you did say you're expecting profit growth. So I guess where is profit growth going to come from in Argentina?

Yes, we're seeing that we're sort of the bottom from that angle, if you will. We feel the reduction and the rate of inflation is going to be a positive on top of that, not only from a milk cost, but also from a financing perspective. So the low EBITDA should be less penalizing, if you will. And don't get me wrong, we're not in a negative position from an Argentina standpoint, but we're certainly looking at it as a positive catalyst for us in '26.

Maybe Michael, I just want to add one other item. And when we talk about the commentary on growth, let's not forget specifically in Argentina, there's about a 7% gap in the milk supply as far as volume goes, that we are now recovering, and we see it in our first quarter. So just the recovery in the milk, and the revenue from bringing those products to market is also going to be an important contribution to the Argentinian performance.

And you're seeing that 7% already coming through in this quarter?

It's tracking to trend -- yes, it's tracking to being about a 7% recovery to the milk pool.

Okay. And then just a question on Australia. It looks like for the July 1 new fiscal year in the milk market there that you've been -- you've offered about 6% more to the farmers for their milk. I think that's right. Is that -- so that seems like it's in line with the increase we're seeing in dairy -- international dairy prices, but how do you plan on managing that domestically. Do you have the power to pass that on fully within the Australian market?

Well, our -- first of all, the opening price that we've presented is one that we feel is competitive versus the alternatives that our farming partners have as well. It's a competitive price aligned and balance between that of what the consumer is willing and capable of paying in the domestic market as well as the same in international, but certainly balanced against the index that exists. So we feel good about the opening price, we feel good about continuing with our model. And our model is we will continue to support our farming community as the commercial activity and the demand in the marketplace and pricing accordingly continues to improve.

And we've seen a meaningful improvement over the last 12 months in the GDP as well as the demand. And I would also say for specifically Australian products. Part of that stemming from a shortfall in the European supply to various markets. It's a bit of where the commentary earlier I had made around having to find new markets or new markets pulling from us as various things occur in either trade wars or just basic milk supply. In the end, I do feel comfortable that where our dairy industry is all in the same place. We do need to recover the costs that come at us in a balanced way, and it's our job to continue to bring value to the domestic space. So we do feel that despite an increase in the raw milk price that -- or farm gate price that we're willing to pay, that's not going to be a detriment to our bottom line.

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

Wondering if you can help us in terms of modeling, quantify the benefits we should expect in fiscal '26 related to duplicate costs. In fiscal '25, it was $42 million. And so how should we expect that to cycle off and what number should we model?

I'd say a couple of things. And so we've peaked. The crest of the duplicate cost was in our Q3 fiscal '25, our Q4 numbers would have been an improvement over that. As we sit here in our first quarter, we're also seeing a continued improvement. So it's going to be meaningful. And I know I've said this before. The bulk of -- or the most important reduction in the duplicate costs will come from the complete closure of the Green Bay manufacturing site.

And when those production lines or specifically the production volume, integrate into Franklin that's when we're going to see the most meaningful improvement. That's slated at this point for -- and we're confident in our time line to be no later than the end of the calendar year. So we're going to continue to see -- despite that dual operating environment, we will continue to see improvements in the overall Franklin operating cost, performance, output, all of the other key metrics for manufacturing. The other thing I would say just on the overall U.S. platform, we've been chasing approximately $200 million in operational efficiency and savings. A portion of that was delivered through the late end of fiscal '24. As we stated over $100 million was achieved this fiscal -- or last fiscal year, fiscal '25. And we expect that the remaining of that will be delivered in -- most of it, if not all of it, in '26.

Okay. Okay. So in fiscal '27, then based on your comments, we should expect the duplicate costs to have entirely faded off?

Yes. It's absolutely fair to plan for that. It is in our outlook as well as far as how we intend to operate our business and how we intend to bring our products to market.

Okay. In prior calls, you provided a hypothetical benefit from the USDA milk pricing formula of USD 60 million to USD 70 million on fiscal '24 results. Just given all the volatility, I was wondering if you could baseline that again for us or give us a perspective on how you expect that to unfold.

The number is still an accurate calculation. So the formulas that were adopted, which are now active as of June 1, they've gone into effect. They are as expected. So the estimate we provided of USD 60 million to USD 70 million on an annualized basis as a function of the fiscal '24 mix of goods. Is it materially different in our current fiscal '26, I'll say, expectations for products that we're going to bring to market and the product mix. So I would say that there isn't any change in our outlook of what it will deliver to the industry and to Saputo.

Okay. The D&A over the last several years, it's been growing at an accelerated rate. Obviously, the facility improvements have driven that in part. And just wondering, is it logical to expect that D&A rate and the increase in the actual D&A to start slowing now that we've lapped that investment phase.

Yes. The D&A did increase as it relates to the investment that we've made over the last few years. So that's one of the elements. The other element I would point you to would be around FX, that's just pure conversion, bringing other currencies into Canadian. That explain a number. So we're finishing the year around $620 million, $630 million, $628 million -- from a modeling perspective, this remains a good assumption for fiscal '26.

Your next question comes from the line of John Zamparo of Scotia Bank.

I wanted to follow up on the new Class III formula. Can you say how much of that benefit you expect to fall into this fiscal year? And what kind of cadence we might see?

So the mechanics of it, as I mentioned, is that the Class III milk price is going to be also positively impacted here in June. So we don't prorate that over a 10-month period is essentially what we believe we're going to see with regards to the changes in the FMMO contributions. And you can -- based on the product mix being what it is, we certainly take a few quarters, maybe for things to shake out, but at the end of the day, as I said, our product mix and what we expect to be marketing is similar to F '24, and no real change to our outlook.

The only caveat I would put to what Carl was saying is around the inventory. So we still have to flush the inventory, which is -- could take a few weeks to roll out. So when Carl talks about 10 months, yes, it's true that starting June 1, we start to pay a lower milk, but by the time you see it in the results, it could be in early Q2 rather than June.

Got it. Okay. And then there was a comment on digital technologies and potential savings from that. I wonder if you can expand on those comments? Are there specific examples you can give, and is there a way to quantify the benefits from that.

No, we're not at the stage of quantifying, especially that we're in the early stages of identification of the areas that we want to prioritize as you're likely well aware, it's a vast opportunity, an opportunity to benefit many aspects of our business, and when you consider in our case, where we believe we've got the highest degree of complexity in data and data management in forecasting and outlooks, it really is in our operations sector and specifically supply chain.

And so as it sits today, outside of targeted ad hoc initiatives that bring tools such as your traditional AI tools to the everyday user, which will bring some level of contribution to productivity, the bulk of the improvements, the meaningful improvements to how it translates to the benefit of the consumer, to the benefit of our business will come with the choices we make on the supply chain side. Once we have a more defined plan, certainly, our due diligence will bring us to evaluating the returns, and we'll be in a better position to share some of those exciting details.

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

First thing I wanted to ask about is just some of the USA dynamics. I know you spoke to softening foodservice demand. So just wondering if you can kind of dig into that a little bit in terms of the difference -- differences you're seeing between foodservice and retail and some of the dynamics at play there?

Our business has seen tailing off from call it, the late Q3 into Q4, the slowdown in foot traffic that we would have all heard and read of in a number of QSRs and actually across the board, whether it's fast casual QSRs and so forth, has certainly slowed the overall demand. Now with that in place and the -- considering the breadth of our portfolio and the number of channels and relationships that we have, we've been able to work closely with a number of our key customers on the foodservice side, specifically to help with the overall offering. And what we are seeing today is that, first and foremost, dairy is core to many of the QSRs and fast casual outlets and in their menu offerings.

So when they start to focus on fewer items to promote, focus on bringing value to consumers, dairy tends to be at the center of that. Very few of our products, I'm going to use the word don't make the cut. So having said that, we've been able to benefit from the focus that they have had over the last couple of months, and we're seeing some of that recovery. On the retail side, of course, the demand has been stronger, and this is not new we've seen a stronger demand in the retail side as a function of people essentially slowing their out-of-home consumption. So overall, both on the consumer dynamics and their shopping habits and our ability to supply those well, we've been able to nonetheless continue to grow our business.

Got it. And then just here in the U.S., we've heard from a number of companies talk about maybe stepping up some brand investments, stepping up some promotional activity, so just wondering if you can kind of speak to the competitive environment in the dairy space right now here in the U.S. and what you're seeing on that front?

Much like those other entities and/or brands that you've heard about, we're doing the same. We're certainly bringing to market a renewed focus on our most important brands and ensuring that the right amount of dollars is applied against a smaller set of our offering that has the greatest degree of impact. So we are dialed in like many others, and ensuring that we're reading -- constantly reading the signs, if you like. But overall, the balance of milk supply and product supply into the marketplace, the basics of supply and demand are well balanced in the U.S. So the consumer continues to see dairy as good value from an overall nutritional perspective. And we're seeing, I'll say, a typical U.S. level of competitiveness in all marketplaces, but nothing unusual.

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

I just want to maybe start with a question on milk cheese spread. While it is still negative, it has improved sequentially so far in Q1. I know it's a hard number to predict, but based on your expectation for EBITDA growth in the U.S. this year, what type of spread are you forecasting for this year, especially when you take into account the benefit from the lower Class III milk price?

I guess I would say that had I been asked to predict this every -- at the start of every other fiscal year over the last 3 years, I would have been wrong. So -- and I share that because the dynamics and the volatility have been present and are certainly still present. However, what I can say is that as we sit here in Q3 -- sorry, in Q1, we have seen some meaningful improvements in that spread over the quarter versus Q4. And there isn't anything in our near-term outlook that would suggest a material imbalance between the overall supply of milk and that of some sort of erosion in demand.

The U.S. pricing for -- just about all of its portfolio of dairy offerings to the export market is still at a good value and you could even say at a discount to European offerings and/or offerings from Oceania. So there's still a healthy demand and pull on the U.S. dairy sector to supply both domestic and international needs. And it's that balance that I think will be consistent over the next couple of months and quarters, and I think that will continue to support the kind of pricing we're seeing in the block as well as what we're seeing in the translate into Class III. And that despite any changes in FMMO.

Got it. Okay. No, that's helpful. And then maybe just a follow-up on your comment about operational efficiency savings. As you noted, you guys achieved about $100 million in fiscal '25. How much do you expect to achieve this year?

Like I said, it's the remainder of the $200 million. We're not talking about the same value as we had this year. It's something that is meaningful nonetheless to our bottom line. And at the end, it's not just a question this time around of the contribution from simply closing the assets in hand. Now we're talking about how it is we actually improve on the line outputs and as well as bring to market the products that we now have the capabilities for. So I'll say that in the end, it will be as per our plan, a way of contribution and we expect it to be nonetheless a meaningful one.

Got it. Okay. And then my final question is, where does M&A rank in terms of your capital allocation priorities?

Well, Chris, I think that by virtue of it being absent in some of our conversation remarks, so on and so forth, it kind of tells the story as to where it is within our current mindset. And the reason for that is we are very dialed in and focused on extracting the full value of the investments we put in. I know I sound like a broken record when I say that, but that's -- there's only so much we can tackle and the team is very encouraged by the efforts and the focus that they've put in over the call it the home stretch of the investments and now really want to benefit from the new capabilities and opportunities that this presents.

So they're dialed in and focused on that, and we're supporting them in that endeavor as well. It doesn't mean we're standing still by any means. We constantly are looking at how it is we can innovate, complement our portfolio as consumer habits, needs, expectations change. And things that could be complementary to our offering are always in our minds. But I can tell you that right now, the greatest degree of focus for our capital and capital allocation has been completing our capital expenditures, making sure that we -- considering the current valuation of our share price, if you like, continuing with our buyback program. And M&A is one of those items that we will consider should there be something that we need.

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

This is Riad on for Tammy Chen. So my first question is on Europe, where the margin was down quarter-over-quarter this quarter. So my question is, how should we be thinking about the pace of margin recovery going forward?

Well, before commenting on the quarter-over-quarter, I would say that the European sector is in a better place when it comes to, I'll say, the milk supply, the overall stability in the pricing of the input costs that, that they're planning to be working with, as I said earlier, are the brand health in both Clover, Cathedral City, some of our Wensleydale products as well is in a good place. So we expect that with the overall positioning and the strength of our brands, our offerings as well as the initiatives that the team have initiated around optimization.

And then maybe I can just recap briefly what some of those were. It's basically consolidating our cut-and-wrap capabilities into our [ Nanitin ] site, and that is not completed as of yet. It's 3/4 of the way there. So more to come on the overall bottom line benefits and contribution. We've also recently announced changes to the byproducts that we'll be bringing to market to the ingredients that once completed, and that will be towards the tail end of Q2 early into Q3. We'll also see a more streamlined cost basis for the European sector. We do believe that the margin will continue to recover with all these initiatives in place. And Max, do you have any comments on the Q-over-Q in particular.

No, I think you covered it at all there, Carl, to be fair.

Okay. Great. My second question is if you would be impacted by Trump's new proposed tax bill where he's intending to materially increase the withholding tax on dividends repatriated from U.S. subsidiaries of non-U.S. parent companies. Like do you guys receive dividends from your U.S. subsidiaries at all?

Yes. So yes, of course, we ultimately could end up being targeted with this one big beautiful bill should the need to repatriate funds out of the U.S. into Canada. We tend to use our cash that we generate in the U.S. to reinvest within our U.S. business. It's not a corporate tax rate per se. It would typically impact us more when we -- the transborder payment and on cash repatriation. So we don't foresee a significant impact on the near term in the short term.

Long term, yes, it could be an impact but increased withholding tax that is taking place but the bill also creates incentive for investment in the U.S., such as R&D, accelerated depreciation, that sort of thing that creates opportunity for us to strengthen our network as well and use the cash that we generate in the U.S. So not so much of a disturb, but still we'll be watching out the details as they become available. And yes, this is it.

With no further questions, I will now turn the call back over to Nick Estrela.

Thank you, J.L.. Please note that we will release our first quarter fiscal 2026 results on August 7, 2025. 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.