Mr. Lino Saputo reports

SAPUTO REPORTS FINANCIAL RESULTS FOR THE SECOND QUARTER OF FISCAL 2024 ENDED SEPTEMBER 30, 2023

Saputo Inc. has released its financial results for the second quarter of fiscal 2024, which ended on Sept. 30, 2023. All amounts in this news release are in-millions of dollars, except per-share amounts, unless otherwise indicated, and are presented according to international financial reporting standards.

"In the second quarter, our team successfully navigated an increasingly dynamic and competitive environment with agility, focus and resilience. We improved our financial performance, further executed on our global strategic plan and continued to make progress toward the next inflection point in our strategic journey," said Lino A. Saputo, chair of the board, president and chief executive officer. "As we continue to weather the current landscape, we remain focused on our key priorities, including excellent commercial and operational execution and cost containment, as well as on the factors we can control, such as our consolidation and optimization initiatives, which are all fully on track, both in terms of budget and schedule."

Second quarter fiscal 2024 financial highlights:

• Revenues amounted to $4,323-million, down $138-million or 3.1 per cent.
• Net earnings totalled $156-million, up from $145-million. Net earnings per share (basic and diluted) were 37 cents, up from 35 cents.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) amounted to $398-million, up $29-million or 7.9 per cent.
• Adjusted net earnings totalled $181-million, up from $151-million, and adjusted EPS (basic and diluted) was 43 cents, up from 36 cents.

• Increased adjusted EBITDA reflected a continued solid performance in the Canada sector and a significant improvement in the USA sector, while results in the Europe sector and the international sector were lower.
• Domestic sales volumes were higher, and USA market factors had a positive impact on adjusted EBITDA.
• Export sales volumes were lower due to softening of the global demand for dairy products, and lower international cheese and dairy ingredient market prices negatively impacted revenues and adjusted EBITDA.
• Saputo continued its focus on long-term strategic priorities and progression of major capital projects.
• The board of directors approved a dividend of 18.5 cents per share payable on Dec. 15, 2023, to shareholders of record on Dec. 5, 2023.

Fiscal 2024 outlook:

• Saputo expects to benefit from the carry-over impact of price increases, additional capacity and capabilities, cost containment and efficiency initiatives, new product innovations, and investments in its brands and advertising.
• It expects near-term inflation on its overall input costs to moderate, but to remain at elevated levels. It will continue to manage the current inflationary environment through its pricing protocols and cost containment measures.
• A more stabilized work force, fewer supply chain constraints, and the acceleration of its productivity and operational improvement projects are expected to further enhance its ability to service customers, particularly in the USA sector.
• Global demand for dairy products is expected to remain moderate due to macroeconomic conditions and the impact of pricing elasticity.
• The outlook for USA 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 international sector and the Europe sector are expected to be negatively impacted by lower cheese and dairy ingredient prices.
• The Europe sector is expected to be impacted by the selling of inventory produced at higher milk prices.
• Capital expenditures are expected to remain at similar levels versus last fiscal year, driven by global strategic plan optimization and capacity expansion initiatives, as well as continued investments in automation.
• Saputo 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

Following the start-up of its recently converted state-of-the-art goat cheese manufacturing facility in Reedsburg, Wis., it announced on Nov. 2, 2023, the permanent closure of its Lancaster, Wis., facility. It intends to transition production from its Lancaster facility to Reedsburg, along with that of its facility in Belmont, Wis., the closure of which was previously announced. The Lancaster and Belmont facilities are expected to close in the fourth quarter of fiscal 2024. Costs related to the Lancaster facility closure will be approximately $6-million after taxes, which include a non-cash fixed asset writedown of approximately $4-million after taxes. These costs will start to be recorded in the third quarter of fiscal 2024. Approximately 100 employees will be impacted by the Lancaster facility closure. Impacted employees will be offered the opportunity to relocate to other Saputo facilities, and, if no positions are available, they will be provided with severance and outplacement support.

As part of the optimization road map in Australia, Saputo will commence a review and evaluation of strategic alternatives related to its King Island facility in Tasmania. It intends to keep the operations running at regular capacity while it assesses possible future scenarios for the facility.

The Saputo promise

The Saputo promise is its approach to social, environmental and economic performance, which guides its everyday actions and consists of seven pillars: food quality and safety, its people, business ethics, responsible sourcing, environment, nutrition, and community. It is an integral part of its business and a key component of its growth. As it seeks to create shared value for all its stakeholders, it provides a framework that ensures it manages ESG risks and opportunities across its operations globally.

Anchored in the most pressing ESG issues for the business, its three-year plan (fiscal 2023 to fiscal 2025) builds on the momentum of the past few years and continues to drive, enable and sustain growth.

Board of directors

On Nov. 9, 2023, Victor Crawford and Stanley Ryan were appointed to the company's board of directors.

"I am pleased to welcome two new independent members to our board of directors, adding to the depth and diversity of skills and experience of our board. Victor has vast experience in the food and beverage industry, logistics, and supply chain management, and brings valuable insights in consumer retail to the board. Stanley has extensive leadership experience across a range of operationally intensive multinational businesses in multiple geographies, particularly in the international commodities markets. Their leadership will be a valuable asset to the board and our entire company as we continue to focus on our global strategic plan and our Saputo promise," said Lino A. Saputo, chair of the board, president and chief executive officer.

Mr. Crawford has held executive positions at several companies in the food and beverage, hospitality, and health care service industries. He was chief executive officer, pharmaceutical segment, of Cardinal Health Inc. from 2018 until 2022, and group president and chief operating officer at Aramark Corp. from 2012 to 2018. Mr. Crawford also held senior management positions at PepsiCo Inc. and Marriott International Inc. between 1990 and 2012. Mr. Crawford began his career with roles at PricewaterhouseCoopers and Federal-Mogul Corp. Mr. Crawford earned his degree in accounting from Boston College in 1983. Mr. Crawford is a director of The Hershey Company, where he also serves as chair of the audit committee and the National Urban League, where he serves as chair of the programs, policy, justice and communication committee.

Mr. Ryan served as president and CEO of Darigold, a United States-based dairy co-operative, from 2016 until 2022. From 1989 until 2014, he served in several executive and general management roles for Cargill Inc. in the U.S., South America, Europe, Australia and China. In 2015, he served as interim chief executive officer of Eagle Bulk Shipping. Mr. Ryan earned his MBA and both a degree and MA in international relations from the University of Chicago in 1989, as well as a degree in economics and computer applications from the University of Notre Dame in 1984. Mr. Ryan is director and chairman of the board of Pacific Basin Shipping Ltd., a company listed on the Hong Kong Stock Exchange.

Mr. Crawford will sit on the company's audit committee while Mr. Ryan will sit on the corporate governance and human resources committee. Both are independent directors.

Additional information

For more information, reference is made to the condensed interim consolidated financial statements, the notes thereto, and management's discussion and analysis for the second quarter of fiscal 2024. These documents can be obtained on SEDAR+ under the company's profile and in the investors section of the company's website.

Webcast and conference call

A webcast and conference call will be held on Friday, Nov. 10, 2023, at 8:30 a.m. Eastern Time.

The webcast will begin with a short presentation followed by a question-and-answer period. The speakers will be Mr. Saputo, and Maxime Therrien, chief financial officer and secretary.

To participate:

• Webcast: Presentation slides will be included in the webcast and can also be viewed in the investors section of Saputo's website under calendar of events.
• Conference line (audio only): 1-800-940-2599; 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, Nov. 17, 2023, at 11:59 p.m. ET, by dialling 1-800-558-5253 (ID No.: 22028268).

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. Saputo is a publicly traded company, and its shares are listed on the Toronto Stock Exchange under the symbol SAP.

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