Mr. Lino Saputo reports

SAPUTO REPORTS FOURTH QUARTER AND FISCAL 2023 RESULTS

Saputo Inc. has released its financial results for the fourth quarter and fiscal year ended on March 31, 2023. All amounts in this news release are presented according to international financial reporting standards (IFRS).

"We delivered a solid performance in the fourth quarter, notably through pricing initiatives, strong international markets and favourable commodity prices. We also made progress across our supply chain, which allowed us to further improve our ability to supply our customers, notably in our USA sector," said Lino A. Saputo, chair of the board, president and chief executive officer.

Commenting on full-year results, Mr. Saputo added: "During fiscal 2023, we stepped up the quality of our execution by taking decisive action to counter inflation and improving our supply chain performance, while continuing to lay the groundwork to support our long-term strategy. Although the current macro backdrop remains challenging, we expect a year of organic growth in fiscal 2024, with a focus on expanding our adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] margins, maximizing our cash flow and driving operating leverage. Our solid foundation will serve us well as we continue to make progress on unlocking the full earnings potential of our global strategic plan."

Fiscal 2023 fourth quarter financial highlights:

• Revenues amounted to $4.468-billion, up $511-million or 12.9 per cent.
• Net earnings totalled $159-million and EPS (earnings per shares) (basic and diluted) were 38 cents, up from $37-million and nine cents.
• Adjusted EBITDA amounted to $392-million, up $132-million or 50.8 per cent.
• Adjusted net earnings totalled $196-million, up from $108-million, and adjusted EPS (basic and diluted) was 47 cents, up from 26 cents.
• Net cash generated from operations amounted to $421-million, up $237-million or 128.8 per cent.

• Increased revenues reflected pricing initiatives implemented in all company sectors, the favourable combined effect of fluctuations of the average block market price and of the average butter market price in the United States sector, as well as higher international cheese and dairy ingredient market prices.
• Increased adjusted EBITDA was led by significant improvement in the U.S. sector, and solid performances in the Canada sector and international sector, consistent with those of the prior quarters this fiscal year.
• U.S. market factors had a favourable impact of $29-million, mainly driven by the fluctuations of the average butter market price and their impact on pricing protocols for the company's dairy food products.
• Restructuring costs of $21-million after tax, which included non-cash fixed assets write-downs totalling $9-million, negatively impacted net earnings. These costs were incurred in connection with previously announced consolidation initiatives intended to further streamline and enhance Saputo's manufacturing footprint in its U.S. sector as part of the company's global strategic plan.
• On April 2, 2023, Saputo announced that it entered into a definitive agreement to sell two fresh milk processing facilities in Australia in a transaction valued at approximately $95-million.
• The board of directors approved a dividend of 18 cents per share, payable on June 27, 2023, to shareholders of record on June 20, 2023.

FY 2024 outlook:

• Saputo expects the carry over impact of price increases, additional capacity and capabilities, cost containment and efficiency initiatives, new product innovations, investments in the company's brands, and advertising to drive organic growth.
• The company expects inflation on its overall input costs to be moderate, but to remain at elevated levels. Saputo will continue to manage the current inflationary environment through its pricing protocols and cost containment measures.
• Global demand for dairy products is expected to grow, but Saputo foresees the impact of pricing elasticity will continue to increase.
• Competitive market dynamics and softening demand in the U.S. are expected to negatively impact the company's volumes, as well as operational efficiencies and the absorption of fixed costs in the U.S. sector.
• A more stabilized work force, fewer supply chain constraints, and the acceleration of the company's productivity and operational improvement projects are expected to further enhance Saputo's ability to service customers, particularly in the U.S. sector.
• The outlook for U.S. market factors remains mixed. Management believes that the long-term environment is likely to be relatively supportive for commodity prices, but with continued volatility in the short to medium term.
• The company expects the international sector to be negatively impacted by lower cheese and dairy ingredient prices.
• Capital expenditures are expected to remain at similar levels versus last fiscal year, driven by global strategic plan optimization and capacity expansion initiatives, and continued investments in automation.
• The company expects strong operating cash flow to continue to support a balanced capital allocation strategy and provide the financial flexibility to consider value-enhancing opportunities, with priority given to: (i) organic growth initiatives through capital expenditures; (ii) shareholder dividends; and (iii) debt repayments.

Global strategic plan highlights

Saputo is reaffirming its $2.125-billion adjusted EBITDA target by the end of fiscal 2025 and updating its areas of focus. This represents an increase of $650-million in adjusted EBITDA to the company's fiscal 2021 baseline. Since the announcement of the company's global strategic plan in the fourth quarter of fiscal 2021, Saputo witnessed a changing macroeconomic environment which uncovered additional network optimization opportunities. As a result, the company now anticipates the network optimization initiatives to represent approximately $350-million of the projected adjusted EBITDA growth, strategic initiatives to represent approximately $200-million, and $100-million to come from strengthening its core business:

• Network optimization and capital investments: Streamline and optimize the company's asset footprint, capital and operational investments, enhance manufacturing network to improve output, margin, utilization rates and service levels, leveraging asset flexibility and automation;
• Strategic initiatives: New products and innovation, growth in dairy alternative products, process improvements, enhance value of ingredients through sales growth and cost containment initiatives;
• Strengthen core business: Base business growth, pricing execution, improved reliability and growth of volume, channel and mix management, shift to higher-margin product mix.

On April 1, 2023, Saputo completed the combination of its former cheese division (U.S.) and dairy foods division (U.S.) by aligning the company's business processes, system applications and IT (information technology) infrastructure, and reaching a significant milestone in its One USA project. These initiatives are expected to maximize synergies, support growth and improve the company's customers' experience when conducting business with its dairy division (U.S.).

On April 2, 2023, Saputo announced that it entered into a definitive agreement to sell two fresh milk processing facilities located in Laverton North, Victoria, and Erskine Park, New South Wales, to Coles Group Ltd., an Australian-based supermarket, retail and consumer services chain, in a transaction valued at approximately $95-million ($105-million (Australian)). In line with the company's global strategic plan, this intended divestiture will enable Saputo to further streamline its operating model, adjust its manufacturing network to strengthen market competitiveness, and allow it to reinvest in areas of the business that will result in more value creation opportunities.

The transaction is subject to customary conditions, including the clearance from the Australian Competition and Consumer Commission, and is expected to close in the second half of calendar 2023.

The Saputo promise

The Saputo promise is its approach to social, environmental and economic performance based on seven pillars: food quality and safety, its people, business ethics, responsible sourcing, environment, nutrition, and community. It is an integral part of Saputo's business and a key component of its growth. As the company seeks to create shared value for all its stakeholders, it provides a framework that ensures the company manages environmental, social and governance (ESG) risks and opportunities successfully across its operations globally.

Anchored in the most pressing ESG issues for the company's business, its current three-year plan (FY 2023 to FY 2025) builds on the momentum of the past few years, so the Saputo promise continues to drive, enable and sustain its growth.

During the fourth quarter of fiscal 2023, Saputo:

• Approved an additional 19 projects for FY 2024 with the potential to save an estimated:
  • 12,800 tonnes of CO2e (carbon dioxide equivalent);
  • 226,000 GJ (gigajoules) of energy;
  • 709,000 cubic metres of water.
• Launched the company's advancing gender balance initiative and set its goal to increase the representation of women to 30 per cent by fiscal 2025 globally at the senior levels (vice-president and above).
• Celebrated the 10th anniversary of its Saputo legacy program, which supports its local communities and promotes a healthy lifestyle by investing in the construction or improvement of sports and health facilities. Over 10 years, the company funded 66 projects in five countries, representing a $3-million investment.

Additional information

For more information on the fourth quarter and year-end results for fiscal 2023, reference is made to the audited consolidated financial statements, the notes thereto and to the management's discussion and analysis for the fiscal year ended March 31, 2023. These documents can be obtained on SEDAR and in the investors section of the company's website.

Webcast and conference call

A webcast and conference call will be held on Friday, June 9, 2023, at 8:30 a.m. (ET). The webcast will begin with a short presentation followed by a question-and-answer period. The speakers will be Mr. Saputo, chair of the board, president and chief executive officer, and Maxime Therrien, chief financial officer and secretary.

To participate:

• Webcast: Access on-line. Presentation slides will be included in the webcast and can also be accessed in the investors section of Saputo's website, under calendar of events.
• Conference line (audio only): 1-800-757-7641.

Please dial-in five minutes prior to the start time.

Replay of the conference call and webcast presentation

For those unable to join, the webcast presentation will be archived on Saputo's website in the investors section, under calendar of events. A replay of the conference call will also be available until Friday, June 16, 2023, 11:59 p.m. (ET) by dialling 1-800-558-5253 (ID number: 22027049).

About Saputo Inc.

Saputo, one of the top 10 dairy processors in the world, produces, markets and distributes a wide array of dairy products of the utmost quality, including: cheese, fluid milk, extended-shelf-life milk and cream products, cultured products, and dairy ingredients. Saputo is a leading cheese manufacturer and fluid milk and cream processor in Canada, a leading dairy processor in Australia, and the top dairy processor in Argentina. In the U.S., Saputo ranks among the top three cheese producers, and is one of the top producers of extended shelf-life and cultured dairy products. In the United Kingdom, Saputo is the leading manufacturer of branded cheese and dairy spreads. In addition to its dairy portfolio, Saputo produces, markets and distributes a range of dairy alternative cheeses and beverages. Saputo products are sold in several countries under market-leading brands, as well as private label brands.

We seek Safe Harbor.