Saputo Reports Financial Results for the First Quarter of Fiscal 2025 Ended June 30, 2024


MONTRÉAL, Aug. 08, 2024 (GLOBE NEWSWIRE) -- Saputo Inc. (TSX: SAP) (we, Saputo or the Company) reported today its financial results for the first quarter of fiscal 2025, which ended on June 30, 2024. All amounts in this news release are in millions of Canadian dollars (CDN), except per share amounts, unless otherwise indicated, and are presented according to International Financial Reporting Standards (IFRS).

“We delivered a very good first quarter with strong revenue and adjusted EBITDA1 growth and solid cash generation. More importantly, we are clearly seeing the benefits from the bold actions we have taken over the past few years. Capital projects in the US are now up and running, while other expansion and modernization efforts around the globe remain right on track. The dairy commodity environment in the US also began to stabilize during the quarter, providing a more favourable backdrop for our business,” said Lino A. Saputo, Chair of the Board, President and CEO. “We remain optimistic heading into the balance of the year as we make further progress on delivering our strategic plan benefits. Our team is focused on driving savings through our initiatives and on capturing incremental value from our investments. This is already evident in our results and we anticipate these areas of focus to continue to drive momentum throughout the rest of fiscal 2025.”

Fiscal 2025 First Quarter Financial Highlights

  • Revenues amounted to $4.606 billion, up $399 million or 9.5%.
  • Net earnings totalled $142 million, up from $141 million. Net earnings per share (EPS) (basic and diluted) were stable at $0.33.
  • Adjusted EBITDA1 amounted to $383 million, up $21 million or 5.8%.
  • Adjusted net earnings1 totalled $167 million, up from $154 million, and adjusted EPS1 (basic and diluted) were $0.39, up from $0.37 and $0.36 respectively.
     
For the three-month periods
ended June 30

(unaudited)2024
2023
Revenues4,606 4,207 
Adjusted EBITDA1383 362 
Net earnings142 141 
Adjusted net earnings1167 154 
EPS    
Basic and Diluted0.33 0.33 
Adjusted EPS1    
Basic0.39 0.37 
Diluted0.39 0.36 
     
  • Results reflected the following:
    • A continued solid performance in our Canada Sector;
    • Expected benefits derived from meaningful operational improvements in our USA Sector; and
    • Higher sales volumes in all our sectors.
  • Dairy commodity market conditions had a mixed impact on Saputo's results:
    • USA Market Factors2 were favourable compared to the same quarter last fiscal year; and
    • The unfavourable disconnect in the relation between international cheese and dairy ingredient market prices and the cost of milk impacted our International Sector.
  • Solid cash generation from operating activities of $191 million.
  • The Board of Directors reviewed the dividend policy and increased the quarterly dividend from $0.185 per share to $0.19 per share, representing a 2.7% increase. The quarterly dividend will be payable on September 20, 2024, to shareholders of record on September 10, 2024.

1 This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. These measures and ratios do not have a standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other issuers. See the “Non-GAAP Measures” section of this news release for more information, including the definition and composition of the measure or ratio as well as the reconciliation to the most comparable measure in the primary financial statements, as applicable.

2 Refer to the "Glossary" section of the Management's Discussion and Analysis.

FY25 OUTLOOK

  • Inflationary pressures are anticipated to moderate versus the prior fiscal year. However, labour costs may remain elevated in addition to increases in marketing and advertising investments to support new product launches and our brands.
  • We expect USA dairy markets to progressively improve throughout the year, supported by a better balance between milk supply and dairy demand, but with continued volatility in the short to medium-term.
  • Global demand for dairy products is expected to remain moderate, alongside subdued international dairy market prices due to macroeconomic conditions.
  • We expect a gradual ramp-up in contribution from optimization and capacity expansion initiatives, notably in the USA Sector, through the end of FY25 and FY26.
  • The Europe Sector is expected to benefit from the cycle through of high-cost inventory, an improved product mix from higher retail sales volume, as well as a lower cost base following cost-out initiatives and site consolidation.
  • The International Sector should benefit from lower overall milk prices in Australia, while Argentina will be operating under macroeconomic volatility.
  • Cash flow generation should increase, driven by improvements in adjusted EBITDA1 and a reduction in capital expenditures following the completion of the bulk of our Global Strategic Plan investments.
  • Our leverage ratio should progressively come down and is anticipated to be below our target of 2.25 times net debt to adjusted EBITDA1, as adjusted EBITDA1 and cash flow generation improve during FY25.
  • We expect to see steady improvements in FY25 and remain on course to deliver on our long-term goals. Factors impacting our performance in FY25 will be the economic health of consumers, the moderating rate of input cost inflation, the increasing stability of the supply chain environment, and benefits from our Global Strategic Plan.

1 This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section of this news release for more information, including the definition and composition of the measure or ratio as well as the reconciliation to the most comparable measure in the primary financial statements, as applicable.

Additional Information

For more information, reference is made to the condensed interim consolidated financial statements, the notes thereto and to the Management’s Discussion and Analysis for the first quarter of fiscal 2025. These documents can be obtained on SEDAR+ under the Company’s profile at www.sedarplus.ca and in the “Investors” section of the Company’s website, at www.saputo.com.

Webcast and Conference Call

A webcast and conference call will be held on Friday, August 9, 2024, 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 Lino A. Saputo, Chair of the Board, President and CEO, Maxime Therrien, Chief Financial Officer and Secretary, and Carl Colizza, President and Chief Operating Officer (North America).

To participate:

  • Webcast : A live webcast of the event can be accessed using this link.
    Presentation slides will be included in the webcast and can also be accessed in the “Investors” section of Saputo's website (www.saputo.com), under “Calendar of Events”.
  • Conference line: 1-888-596-4144 Conference ID: 3462388 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 (www.saputo.com) in the “Investors” section, under “Calendar of Events”.

About Saputo

Saputo, one of the top ten 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 USA, 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 products. Saputo products are sold in several countries under market-leading brands, as well as private label brands. Saputo Inc. is a publicly traded company and its shares are listed on the Toronto Stock Exchange under the symbol “SAP”. Follow Saputo’s activities at www.saputo.com or via Facebook, Instagram, and LinkedIn.

Investor Inquiries
Nicholas Estrela
Senior Director, Investor Relations 1-514-328-3117

Media Inquiries
1-514-328-3141 / 1-866-648-5902
media@saputo.com

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This news release contains statements which are forward-looking statements within the meaning of applicable securities laws. These forward-looking statements include, among others, statements with respect to our objectives, outlook, business projects, strategies, beliefs, expectations, targets, commitments, goals, ambitions and strategic plans including our ability to achieve these targets, commitments, goals, ambitions and strategic plans, and statements other than historical facts. The words “may”, “could”, “should”, “will”, “would”, “believe”, “plan”, “expect”, “intend”, “anticipate”, “estimate”, “foresee”, “objective”, “continue”, “propose”, “aim”, “commit”, “assume”, “forecast”, “predict”, “seek”, “project”, “potential”, “goal”, “target”, or “pledge”, or the negative of these terms or variations of them, the use of conditional or future tense or words and expressions of similar nature, are intended to identify forward- looking statements. All statements other than statements of historical fact included in this news release may constitute forward-looking statements within the meaning of applicable securities laws.

By their nature, forward-looking statements are subject to inherent risks and uncertainties. Actual results could differ materially from those stated, implied, or projected in such forward-looking statements. As a result, we cannot guarantee that any forward-looking statements will materialize, and we warn readers that these forward-looking statements are not statements of historical fact or guarantees of future performance in any way. Assumptions, expectations, and estimates made in the preparation of forward-looking statements and risks and uncertainties that could cause actual results to differ materially from current expectations are discussed in our materials filed with the Canadian securities regulatory authorities from time to time, including the “Risks and Uncertainties” section of the Management's Discussion and Analysis dated June 6, 2024, available on SEDAR+ under the Company's profile at www.sedarplus.ca.

Such risks and uncertainties include the following: product liability; the availability and price variations of milk and other inputs, our ability to transfer input costs increases, if any, to our customers in competitive market conditions; supply chain strain and supplier concentration; the price fluctuation of dairy products in the countries in which we operate, as well as in international markets; our ability to identify, attract, and retain qualified individuals; the increased competitive environment in our industry; consolidation of clientele; cyber threats and other information technology-related risks relating to business disruptions, confidentiality, data integrity business and email compromise-related fraud; unanticipated business disruption; continuing economic and political uncertainties, resulting from actual or perceived changes in the condition of the economy or economic slowdowns or recessions; public health threats, such as the recent global COVID-19 pandemic, changes in consumer trends; changes in environmental laws and regulations; the potential effects of climate change; increased focus on environmental sustainability matters; the failure to execute our Global Strategic Plan as expected or to adequately integrate acquired businesses in a timely and efficient manner; the failure to complete capital expenditures as planned; changes in interest rates and access to capital and credit markets. There may be other risks and uncertainties that we are not aware of at present, or that we consider to be insignificant, that could still have a harmful impact on our business, financial state, liquidity, results, or reputation.

Forward-looking statements are based on Management’s current estimates, expectations and assumptions regarding, among other things; the projected revenues and expenses; the economic, industry, competitive, and regulatory environments in which we operate or which could affect our activities; our ability to identify, attract, and retain qualified and diverse individuals; our ability to attract and retain customers and consumers; our environmental performance; the results of our sustainability efforts; the effectiveness of our environmental and sustainability initiatives; our operating costs; the pricing of our finished products on the various markets in which we carry on business; the successful execution of our Global Strategic Plan; our ability to deploy capital expenditure projects as planned; reliance on third parties; our ability to gain efficiencies and cost optimization from strategic initiatives; our ability to correctly predict, identify, and interpret changes in consumer preferences and demand, to offer new products to meet those changes, and to respond to competitive innovation; our ability to leverage our brand value; our ability to drive revenue growth in our key product categories or platforms or add products that are in faster-growing and more profitable categories; the successful execution of our M&A strategy; the market supply and demand levels for our products; our warehousing, logistics, and transportation costs; our effective income tax rate; the exchange rate of the Canadian dollar to the currencies of cheese and dairy ingredients. To set our financial performance targets, we have made assumptions regarding, among others: the absence of significant deterioration in macroeconomic conditions; our ability to mitigate inflationary cost pressure; the USA Market Factors2, ingredient markets, commodity prices, foreign exchange; labour market conditions and staffing levels in our facilities; the impact of price elasticity; our ability to increase the production capacity and productivity in our facilities; and the demand growth for our products. Our ability to achieve our environmental targets, commitments, and goals is further subject to, among others: our ability to access and implement all technology necessary to achieve our targets, commitments, and goals; the development and performance of technology, innovation and the future use and deployment of technology and associated expected future results; the accessibility of carbon and renewable energy instruments for which a market is still developing and which are subject to risk of invalidation or reversal; and environmental regulation. Our ability to achieve our 2025 Supply Chain Pledges is further subject to, among others, our ability to leverage our supplier relationships and our sustainability advocacy efforts.

2 Refer to the ‘‘Glossary’’ section of the Management’s Discussion and Analysis.

Management believes that these estimates, expectations, and assumptions are reasonable as of the date hereof, and are inherently subject to significant business, economic, competitive, and other uncertainties and contingencies regarding future events, and are accordingly subject to changes after such date. Forward-looking statements are intended to provide shareholders with information regarding Saputo, including our assessment of future financial plans, and may not be appropriate for other purposes. Undue importance should not be placed on forward-looking statements, and the information contained in such forward-looking statements should not be relied upon as of any other date.

Unless otherwise indicated by Saputo, forward-looking statements in this news release describe our estimates, expectations and assumptions as of the date hereof, and, accordingly, are subject to change after that date. Except as required under applicable securities legislation, Saputo does not undertake to update or revise forward-looking statements, whether written or verbal, that may be made from time to time by itself or on our behalf, whether as a result of new information, future events, or otherwise. All forward-looking statements contained herein are expressly qualified by this cautionary statement.

SELECTED QUARTERLY FINANCIAL INFORMATION

Fiscal years202520242023
 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 
Revenues4,606 4,545 4,267 4,323 4,207 4,468 4,587 4,461 
Adjusted EBITDA1383 379 370 398 362 392 445 369 
Adjusted EBITDA margin18.3%8.3%8.7%9.2%8.6%8.8%9.7%8.3%
Net earnings (loss)142 92 (124)156 141 159 179 145 
Acquisition and restructuring costs2 15 4   21 27 16 
Goodwill impairment charge  265      
Loss (gain) on hyperinflation10 34 3 9 (2)  (26)
Amortization of intangible assets related to business acquisitions215 15 15 16 15 16 15 16 
Adjusted net earnings1167 156 163 181 154 196 221 151 
Adjusted net earnings margin13.6%3.4%3.8%4.2%3.7%4.4%4.8%3.4%
                 
Earnings (loss) per share (basic and diluted)0.33 0.22 (0.29)0.37 0.33 0.38 0.43 0.35 
                 
Adjusted EPS basic10.39 0.37 0.38 0.43 0.37 0.47 0.53 0.36 
Adjusted EPS diluted10.39 0.37 0.38 0.43 0.36 0.46 0.53 0.36 
                 

Selected factor(s) positively (negatively) impacting Adjusted EBITDA1

Fiscal years2025
20242023
 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 
USA Market Factors3.415 (61)(27)32 (14)29 (6)(27)
Inventory write-down  (14)(7)(10)   
Foreign currency exchange4,5(5)(6)(33)(3)4 (12)(7)(12)

1 This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section of this news release for more information, including the definition and composition of the measure or ratio as well as the reconciliation to the most comparable measure in the primary financial statements, as applicable.
2 Net of applicable income taxes.
3 Refer to the ‘‘Glossary’’ section of the Management's Discussion and Analysis.
4 As compared to the same quarter of the previous fiscal year.
5 Foreign currency exchange includes the effect of conversion of US dollars, Australian dollars, British pounds sterling, and Argentine pesos to Canadian dollars. Amounts presented also include the effects of inflation indexation and hyperinflation accounting for the Dairy Division (Argentina).

CONSOLIDATED RESULTS FOR THE FIRST QUARTER ENDED JUNE 30, 2024

Revenues

Revenues totalled $4.606 billion, up $399 million or 9.5%, as compared to $4.207 billion for the same quarter last fiscal year.

Revenues increased due to higher sales volumes in all our sectors.

The combined effect of the higher average block market price2 and of the higher average butter market price2 in our USA Sector had a positive impact of $34 million. Lower international cheese and dairy ingredient market prices had a negative impact mostly in our International Sector. In addition, the effects of currency fluctuations on export sales denominated in US dollars were less favourable than in the comparative quarter.

The conversion of foreign currencies to the Canadian dollar had a favourable impact of approximately $59 million. This includes the effects of inflation indexation and of the application of hyperinflation accounting to the results of the Dairy Division (Argentina).

Operating costs excluding depreciation, amortization, and restructuring costs

Operating costs excluding depreciation, amortization, and restructuring costs totalled $4.223 billion, up $378 million or 9.8%, as compared to $3.845 billion for the same quarter last fiscal year.

The increase was in line with higher sales volumes and higher commodity market prices and their impacts on the cost of raw materials and consumables used, hyperinflation in Argentina, and higher labour costs, which include the effect of wage increases. We incurred duplicate operational costs to implement previously announced network optimization initiatives. Operating costs also included the favourable impacts from our cost containment measures and from operational efficiencies.

Net earnings

Net earnings totalled $142 million, up $1 million or 0.7%, as compared to $141 million for the same quarter last fiscal year. The increase was due to the factors which have led to a higher adjusted EBITDA1, as described below, a loss on hyperinflation, and higher income tax expense.

Adjusted EBITDA1

Adjusted EBITDA1 totalled $383 million, up $21 million or 5.8%, as compared to $362 million for the same quarter last fiscal year.

Results reflected a continued solid performance in our Canada Sector.

In our USA Sector, results included approximately $26 million in benefits derived from operational improvements including increased capacity utilization and productivity, supply chain initiatives, and cost reductions, in line with our expectations. Duplicate operating costs incurred to implement previously announced network optimization initiatives were approximately $13 million, $7 million higher than in the comparative quarter. USA Market Factors2 were favourable by $15 million, as compared to the same quarter last fiscal year.

The unfavourable disconnect in the relation between international cheese and dairy ingredient market prices and the cost of milk as raw material had a negative impact on the International Sector's results. Also, the effects of currency fluctuations on export sales denominated in US dollars were less favourable than in the comparative quarter.

In the Europe Sector, despite the positive effect of increased sales volumes, results were impacted as we were exiting the cycling through of remaining excess high-cost inventory.

The conversion of foreign currencies to the Canadian dollar had an unfavourable impact of approximately $5 million. This includes the effects of inflation indexation and of the application of hyperinflation accounting to the results of the Dairy Division (Argentina).

1 This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section of this news release for more information, including the definition and composition of the measure or ratio as well as the reconciliation to the most comparable measure in the primary financial statements, as applicable.
2 Refer to the "Glossary" section of the Management's Discussion and Analysis.

Depreciation and amortization

Depreciation and amortization totalled $148 million, up $2 million, as compared to $146 million for the same quarter last fiscal year. This increase was mainly attributable to additional depreciation and amortization related to the commissioning of assets in connection with our capital projects under our Global Strategic Plan. This increase was partially offset by a reduction in the International Sector from the ongoing network optimization initiatives in Australia aimed at the consolidation of eleven facilities into six. Depreciation and amortization also include the impacts of the conversion of foreign currencies, as well as inflation indexation and hyperinflation accounting for the Dairy Division (Argentina).

Loss (gain) on hyperinflation

Loss on hyperinflation totalled $10 million, down $12 million from a gain of $2 million for the same quarter last fiscal year. The change in the loss (gain) on hyperinflation is relative to the application of hyperinflation accounting for the Dairy Division (Argentina), and includes the effects of inflation indexation and currency conversion on its balance sheet amounts.

Financial Charges

Financial charges totalled $38 million, down $2 million, as compared to $40 million for the same quarter last fiscal year due to lower outstanding bank loans. Financial charges also include the impacts of the conversion of foreign currencies, as well as inflation indexation and hyperinflation accounting for the Dairy Division (Argentina).

Income tax expense

Income tax expense totalled $45 million, reflecting an effective tax rate of 24%, as compared to 21% for the same quarter last fiscal year.

The effective tax rate varies and could increase or decrease based on the geographic mix of quarterly and year-to- date earnings across the various jurisdictions in which we operate, the tax and accounting treatments of inflation in Argentina, the amount and source of taxable income, amendments to tax legislations and income tax rates, changes in assumptions, as well as estimates we use for tax assets and liabilities.

Adjusted net earnings1

Adjusted net earnings totalled $167 million, up $13 million or 8.4%, as compared to $154 million for the same quarter last fiscal year. This is mainly due to the factors which have led to an increase in net earnings, as described above, excluding the impact of the loss (gain) on hyperinflation.

1 This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section of this news release for more information, including the definition and composition of the measure or ratio as well as the reconciliation to the most comparable measure in the primary financial statements, as applicable.

INFORMATION BY SECTOR

CANADA SECTOR

Fiscal years20252024
 Q1 Q4 Q3 Q2 Q1 
Revenues1,253 1,192 1,271 1,248 1,211 
Adjusted EBITDA153 138 150 148 144 
Adjusted EBITDA margin12.2 %11.6%11.8%11.9%11.9%
           

USA SECTOR

Fiscal years20252024
 Q1 Q4 Q3 Q2 Q1 
Revenues2,085 1,928 2,056 1,950 1,876 
Adjusted EBITDA162 138 133 147 103 
Adjusted EBITDA margin7.8 %7.2%6.5%7.5%5.5%
           

Selected factor(s) positively (negatively) impacting Adjusted EBITDA

Fiscal years20252024
 Q1 Q4 Q3 Q2 Q1 
USA Market Factors1,215 (61)(27)32 (14)
Inventory write-down    (10)
US currency exchange22   3 5 

1 Refer to the ‘‘Glossary’’ section of the Management's Discussion and Analysis.
2 As compared to same quarter last fiscal year.

Other pertinent information
(in US dollars, except for average exchange rate)

Fiscal years20252024
 Q1 Q4 Q3 Q2 Q1 
Block market price1      
Opening1.418 1.470 1.720 1.335 1.850 
Closing1.910 1.418 1.470 1.720 1.335 
Average1.793 1.516 1.620 1.817 1.579 
       
Butter market price1      
Opening2.843 2.665 3.300 2.440 2.398 
Closing3.125 2.843 2.665 3.300 2.440 
Average3.029 2.737 2.898 2.706 2.394 
           
Average whey powder market price10.401 0.436 0.370 0.265 0.358 
Spread1(0.127)(0.125)(0.061)0.075 (0.061)
           
US average exchange rate to Canadian dollar21.368 1.349 1.359 1.344 1.343 

1 Refer to the ‘‘Glossary’’ section of the Management's Discussion and Analysis.
2 Based on Bank of Canada published information.

INTERNATIONAL SECTOR

Fiscal years20252024
 Q1 Q4 Q3 Q2 Q1 
Revenues1,004 1,135 636 879 868 
Adjusted EBITDA45 88 85 83 77 
Adjusted EBITDA margin4.5%7.8%13.4%9.4%8.9%
           

Selected factor(s) positively (negatively) impacting Adjusted EBITDA

Fiscal years20252024
 Q1 Q4 Q3 Q2 Q1 
Inventory write-down  (14)(7) 
Foreign currency exchange, Argentina inflation, and hyperinflation accounting1(8)(7)(36)(12)(2)

1 As compared to same quarter last fiscal year. Amounts presented also include the effects of inflation indexation and hyperinflation accounting for the Dairy Division (Argentina).

EUROPE SECTOR

Fiscal years20252024
 Q1 Q4 Q3 Q2 Q1 
Revenues264 290 304 246 252 
Adjusted EBITDA23 15 2 20 38 
Adjusted EBITDA margin8.7%5.2%0.7%8.1%15.1%
           

Selected factor(s) positively (negatively) impacting Adjusted EBITDA

Fiscal years2025
2024
 Q1 Q4 Q3 Q2 Q1 
Foreign currency exchange11
 1 3 3 1 

1 As compared to same quarter last fiscal year.

NON-GAAP MEASURES

We report our financial results in accordance with GAAP and generally assess our financial performance using financial measures that are prepared using GAAP. However, this news release also refers to certain non-GAAP and other financial measures which do not have a standardized meaning under GAAP, and are described in this section.

We use non-GAAP measures and ratios to provide investors with supplemental metrics to assess and measure our operating performance and financial position from one period to the next. We believe that those measures are important supplemental metrics because they eliminate items that are less indicative of our core business performance and could potentially distort the analysis of trends in our operating performance and financial position. We also use non-GAAP measures to facilitate operating and financial performance comparisons from period to period, to prepare annual budgets and forecasts, and to determine components of management compensation. We believe these non-GAAP measures, in addition to the financial measures prepared in accordance with GAAP, enable investors to evaluate the Company's operating results, underlying performance, and future prospects in a manner similar to management. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution of GAAP results.

These non-GAAP measures have no standardized meaning under GAAP and are unlikely to be comparable to similar measures presented by other issuers. Our method of calculating these measures may differ from the methods used by others, and, accordingly, our definition of these non-GAAP financial measures may not be comparable to similar measures presented by other issuers. In addition, non-GAAP financial measures should not be viewed as a substitute for the related financial information prepared in accordance with GAAP. This section provides a description of the components of each non-GAAP measure used in this news release and the classification thereof.

NON-GAAP FINANCIAL MEASURES AND RATIOS

A non-GAAP financial measure is a financial measure that depicts the Company's financial performance, financial position, or cash flow and either excludes an amount that is included in or includes an amount that is excluded from the composition of the most directly comparable financial measures disclosed in the Company's financial statements. A non-GAAP ratio is a financial measure disclosed in the form of a ratio, fraction, percentage, or similar representation and that has a non-GAAP financial measure as one or more of its components.

Below are descriptions of the non-GAAP financial measures and ratios that we use as well as reconciliations to the most comparable GAAP financial measures, as applicable.

Adjusted net earnings and adjusted net earnings margin

We believe that adjusted net earnings and adjusted net earnings margin provide useful information to investors because this financial measure and this ratio provide precision with regards to our ongoing operations by eliminating the impact of non-operational or non-cash items. We believe that in the context of highly acquisitive companies, adjusted net earnings provide a more effective measure to assess performance against the Company's peer group, including due to the application of various accounting policies in relation to the amortization of acquired intangible assets.

We also believe adjusted net earnings and adjusted net earnings margin are useful to investors because they help identify underlying trends in our business that could otherwise be masked by certain write-offs, charges, income, or recoveries that can vary from period to period, as well as by the effect of tax law changes and rate enactments. We believe that securities analysts, investors, and other interested parties also use adjusted net earnings to evaluate the performance of issuers. Excluding these items does not imply they are non-recurring. These measures do not have any standardized meanings under GAAP and are therefore unlikely to be comparable to similar measures presented by other companies.

The following table provides a reconciliation, net of applicable income taxes, of net earnings to adjusted net earnings

 
For the three-month periods
ended June 30
 
     2024 2023 
Net earnings142 141 
Acquisition and restructuring costs  
Amortization of intangible assets related to business acquisitions15 15 
Goodwill impairment charge  
Loss (gain) on hyperinflation10 (2)
Adjusted net earnings167 154 
Revenues4,606 4,207 
Margin (expressed as a percentage of revenues)3.6 %3.7 %
     

Adjusted EPS basic and adjusted EPS diluted

Adjusted EPS basic (adjusted net earnings per basic common share) and adjusted EPS diluted (adjusted net earnings per diluted common share) are non-GAAP ratios and do not have any standardized meaning under GAAP. Therefore, these measures are unlikely to be comparable to similar measures presented by other issuers. We define adjusted EPS basic and adjusted EPS diluted as adjusted net earnings divided by the basic and diluted weighted average number of common shares outstanding for the period. Adjusted net earnings is a non-GAAP financial measure. For more details on adjusted net earnings, refer to the discussion above in the adjusted net earnings and adjusted net earnings margin section.

We use adjusted EPS basic and adjusted EPS diluted, and we believe that certain securities analysts, investors, and other interested parties use these measures, among other ones, to assess the performance of our business without the effect of the acquisition and restructuring costs, amortization of intangible assets related to business acquisitions, gain on disposal of assets, impairment of intangible assets, goodwill impairment charge, and loss (gain) on hyperinflation. We exclude these items because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Adjusted EPS is also a component in the determination of long-term incentive compensation for management.

TOTAL OF SEGMENTS MEASURES

A total of segments measure is a financial measure that is a subtotal or total of two or more reportable segments and is disclosed within the notes to Saputo's condensed interim consolidated financial statements, but not in its primary financial statements. Consolidated adjusted EBITDA is a total of segments measure.

Consolidated adjusted EBITDA is the total of the adjusted EBITDA of our four geographic sectors. We report our business under four sectors: Canada, USA, International, and Europe. The Canada Sector consists of the Dairy Division (Canada), the USA Sector consists of the Dairy Division (USA), the International Sector consists of the Dairy Division (Australia) and the Dairy Division (Argentina), and the Europe Sector consists of the Dairy Division (UK). We sell our products in three different market segments: retail, foodservice, and industrial.

Adjusted EBITDA and adjusted EBITDA margin

We believe that adjusted EBITDA and adjusted EBITDA margin provide investors with useful information because they are common industry measures. Adjusted EBITDA margin consists of adjusted EBITDA expressed as a percentage of revenues. These measures are also key metrics of the Company's operational and financial performance without the variation caused by the impacts of the elements itemized below and provide an indication of the Company's ability to seize growth opportunities in a cost-effective manner, finance its ongoing operations, and service its long-term debt. Adjusted EBITDA is the key measure of profit used by management for the purpose of assessing the performance of each sector and of the Company as a whole, and to make decisions about the allocation of resources. We believe that securities analysts, investors, and other interested parties also use adjusted EBITDA to evaluate the performance of issuers. Adjusted EBITDA is also a component in the determination of short- term incentive compensation for management.

The following table provides a reconciliation of net earnings to adjusted EBITDA on a consolidated basis.

 
For the three-month periods
ended June 30
 
 2024  2023 
Net earnings142 141 
Income taxes45 37 
Financial charges38 40 
Loss (gain) on hyperinflation10 (2)
Acquisition and restructuring costs  
Goodwill impairment charge  
Depreciation and amortization148 146 
Adjusted EBITDA383 362 
Revenues4,606 4,207 
Adjusted EBITDA margin8.3 %8.6 %
     


Attachments

SAPUTO REPORTS FINANCIAL RESULTS FOR THE FIRST QUARTER OF FISCAL 2025 ENDED JUNE 30, 2024.pdf