ANNUAL
R E P O R T
2022
Saputo 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 one of the top ten
dairy processors in the world, a leading cheese manufacturer
and fluid milk and cream processor in Canada, the top dairy
processor in Australia, and the second largest in Argentina.
In the USA, Saputo ranks among the top three cheese
producers and is one of the largest producers of extended
shelf-life and cultured dairy products. In the United Kingdom,
Saputo is the largest manufacturer of branded cheese and
a top manufacturer of 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 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 saputo.com or via Facebook, LinkedIn and Twitter.
All amounts in this Annual Report are in Canadian dollars (CDN), unless otherwise indicated.
II
SAPUTO.COM
2022 ANNUAL REPORT SAPUTO.COM
III
Financial Highlights
Fiscal years ended March 31 (in millions of CDN dollars)
REVENUES
ADJUSTED EBITDA1
2020
2021
2022
$14,944
$14,294
$15,035
2020
2021
2022
$1,155
NET EARNINGS
ADJUSTED NET EARNINGS1
2020
2021
2022
$274
$583
$626
2020
2021
2022
$485
$1,468
$1,471
$724
$715
1 Adjusted EBITDA is a total of segments measure, and adjusted net earnings is a non-GAAP financial measure. These financial measures do not have any standardized meaning under International Financial
Reporting Standards (IFRS). Therefore, they are unlikely to be comparable to similar measures presented by other issuers. Refer to the section entitled “Non-GAAP measures” of our Management’s
Discussion and Analysis for the fiscal year ended March 31, 2022, which is incorporated by reference herein, for more information on these measures, including a reconciliation to net earnings being
the most comparable IFRS financial measure.
IV
SAPUTO.COM
2022 ANNUAL REPORT For the fiscal year ended March 31, 2022
SECTOR
Canada
USA
International
Europe
# OF PLANTS
# OF EMPLOYEES
% OF TOTAL REVENUES
18
29
13
7
5,800
7,300
4,000
1,500
28%
43%
23%
6%
50%
30%
20%
RETAIL
FOODSERVICE
INDUSTRIAL
Sales are made to supermarket chains,
mass-merchandisers, convenience
stores, independent retailers,
warehouse clubs, and specialty cheese
boutiques under Saputo-owned or
customer brand names. Our products
are also sold directly to consumers
through our e-commerce channels.
Sales are made to broadline distributors,
restaurants, hotels, and institutions under
Saputo-owned or customer brand names.
Sales are made to manufacturers who use
our dairy ingredients, cheeses, and other
dairy products for further processing.
Our products are used in the preparation of
food items, nutritional products for all stages
of life, and for various other applications.
Products sold in over
60 countries
67 plants
Approx. 18,600
employees
SAPUTO.COM
V
The Saputo Promise
Food Quality
and Safety
Our Approach
Our People
Business
Ethics
Responsible
Sourcing
Environment
The Saputo Promise is an integral part of our
business and a key component of our growth.
As we seek to create shared value for all our
stakeholders, it provides us with a framework that
ensures we manage the Environmental, Social,
and Governance (ESG) risks and opportunities
successfully across our operations globally.
Governance
Our Board of Directors (the Board) is responsible for the stewardship of Saputo.
As such, it oversees the management of our business to enhance the creation of
long-term shareholder value while considering the interests of our various stakeholders.
To better fulfill its mandate, the Board:
Oversees the ESG factors and risks material
to our business and the deployment of
appropriate measures to manage them.
Oversees our practices, guidelines, and
policies related to the Saputo Promise.
The Board delegates some of its ESG oversight responsibilities to the Audit Committee
and the Corporate Governance and Human Resources Committee. The implementation
of the Saputo Promise is led by a series of specific Management committees. Additional
details on our ESG governance can be found in our 2022 Annual Information Form,
published on June 9, 2022.
Nutrition and
Healthy Living
Strategy
With a clear ESG framework and governance, our focus since FY20 has been the execution
of our first three-year plan for the Saputo Promise (FY20-FY22). Significant progress has
been made across our seven pillars, and we’re proud to have achieved most of our
three-year goals.
Community
VI
SAPUTO.COM
2022 ANNUAL REPORT Selected Highlights (FY20-FY22)
OUR PEOPLE
Stepped up our diversity, equity,
and inclusion (DE&I) initiatives,
including:
Joining Catalyst for Change;
Launching a permanent workplace
flexibility program; and
Rolling out unconscious bias
training globally.
Increased the number of women
in senior management, including
at the C-suite level.
Started seeing our health and safety
(H&S) indicators trending positively
again in FY22 after COVID-related
challenges.
25%
in FY22
% of women
in senior
management
1.37
in FY22
Lost Time
Injury Frequency
Rate (LTIFR)
16% in FY20 | 21% in FY21
1.36 in FY20 | 1.61 in FY21
ENVIRONMENT
Launched our commitment to accelerate progress in our climate, water, and waste performance.
Three-year investment of $50 million
(FY21-FY23) to fund more than
65 projects globally to support
our efforts.
Estimated annual savings of:
58,000 t of CO2
484,000 GJ of energy
From solar energy and water recovery systems to recycled content in our
packaging and more efficient boilers — all these investments are getting us
closer to achieving our targets.
Signed our first renewable power purchase agreement in Australia,
potentially reducing our global CO2 footprint by 5%.
Finalized the installation of a water recovery system in one of our plants
in California which has the potential to reduce our global water footprint
by 2.3%.
1.9 m3 of water
Replaced 33% of virgin plastic with PCR* material across a range of block
cheese packaging in our Dairy Division (UK).
RESPONSIBLE SOURCING
Launched our Supply Chain Pledges
to address sustainability challenges
beyond the scope of our operations.
Joined Pathways to Dairy
Net Zero, an initiative to help
accelerate climate efforts in
the dairy industry.
Committed to sourcing 100%
RSPO*-certified palm oil.
* PCR: Post-consumer recycled | RSPO: Roundtable on Sustainable Palm Oil
Next
Three-Year
Plan
Our FY23-FY25 Saputo Promise plan will build on the success of our first three-year plan.
We carried out a materiality assessment in FY22 to ensure our plan remains focused on
the most pressing ESG issues for our business and that we continue to deploy our efforts
in the areas that matter most. Developed with our Global Strategic Plan in mind, our next
Saputo Promise three-year plan is designed to drive, enable, and sustain our growth.
Our 2022 Saputo Promise Report, including further details on our ESG performance
and new three-year plan , will be published in August 2022.
SAPUTO.COM
VII
20 22 ANNUAL RE PORT
A Message From Our Chair of
the Board, President and CEO
Fellow shareholders,
Fiscal 2022 (FY22) was a year where significant challenges led to
renewed focus for Saputo. We faced unprecedented obstacles that
affected all our divisions to varying degrees as we sought to adapt
and mitigate the impacts, reaping important learnings along the way.
We also kept our sights on the longer-term by embarking on a new
journey to deliver accelerated organic growth with the launch of our
Global Strategic Plan, sharing our roadmap and an Adjusted
EBITDA1 target. Rounding out our three-pronged approach to growth,
we completed four strategic acquisitions, and we remained steadfast
in progressing our Saputo Promise goals. Through it all, our people
continue to be the backbone of our business, helping us navigate
this uncertain environment with agility and resilience. I’m incredibly
grateful to our teams who bring their best to the table each day,
supporting one another and working together to uphold our tradition
of care, quality, and passion through food.
Adjusting our stride
Our performance in FY22 reflected persistent supply chain headwinds
stemming from COVID-19 and its related ongoing impacts, and this
global reality presented one of the most challenging operating
environments to date. Bottlenecks and shortages of everything from
labour to materials to freight impeded supply across the world and
created incremental costs and inefficiencies that were difficult to
anticipate. A particularly tough dynamic was the acceleration
of cost inflation to levels the industry hadn’t seen in a decade.
We worked diligently to counter these effects, and keep doing so,
by implementing and progressing on several mitigating measures,
including responsible pricing initiatives, employee retention
programs and enhanced compensation packages, and productivity
and cost initiatives.
1 This financial measure is a total of segments measure and does not have any standardized meaning under IFRS.
Therefore, it is unlikely to be comparable to similar measures presented by other issuers. Refer to the section entitled
“Non-GAAP measures” of our Management’s Discussion and Analysis for the fiscal year ended March 31, 2022, which is
incorporated by reference herein, for more information on this measure, including a reconciliation to net earnings being
the most comparable IFRS financial measure.
Lino A. Saputo
Chair of the Board,
President and Chief Executive Officer
Saputo Inc.
VIII
SAPUTO.COM
In response to the widespread pressures, our Canadian, Argentinian, and UK businesses
all adapted well, while our Dairy Division (Australia) also had to contend with a declining
milk pool, an ongoing issue the team is tackling head-on and which significantly impacted
productivity and costs in FY22. No doubt, our most challenged platform was our Dairy
Division (USA), where we faced substantial commodity volatility — market factors beyond
our control — but we feel confident about the activities we’re putting in place to respond
to the new market dynamics and ensuing opportunities by increasing our branded retail
offering and diversifying our product mix. In tandem, we’re making headway on the labour
front and finding new ways of working with our supply chain partners.
Despite the adversity, we generated $693 million in operational cash flows in FY22,
a testament to our diversified global platform. Our financial flexibility enabled us to
reinvest in our business, increase our dividend payout, and seize opportunities to
deliver long-term shareholder value.
During the year, our management team underwent some changes and key enhancements.
Leanne Cutts joined us as President and Chief Operating Officer (International and
Europe), while Lyne Castonguay took the lead as President and Chief Operating Officer
in the USA. In light of Kai Bockmann retiring as our global President and Chief Operating
Officer, I’ve been working directly with Leanne and Carl Colizza, President and Chief
Operating Officer (North America). Moving forward with a results-oriented focus, the right
talent, and a streamlined structure, I’m more invigorated than ever about being closer
to our operations.
IX
SAPUTO.COM A roadmap for growth
Unveiling our Global Strategic Plan marked a true milestone for our Company. With one
year under our belt, we remain laser-focused on building on our strengths and capturing
opportunities as we aim to reach $2.125 billion in Adjusted EBITDA by the end of FY25.
As we maintain our philosophy of pursuing profit over volume, we’re deploying our
strategic initiatives under five key pillars.
The cornerstone of our Plan is our Optimize and enhance operations pillar, which
includes investments and consolidation initiatives aimed at increasing efficiency and
productivity, building on the mindset that’s been intrinsic to our success as a high-quality,
low-cost processor. As part of a first phase in the USA, we’re deploying $169 million to
modernize and expand our cheese manufacturing facilities, and we’re consolidating
our cut-and-wrap activities on the West Coast. We also announced plans to trim certain
operations at two of our facilities in Australia. In the UK, we intend to outsource our
Nuneaton facility’s warehouse and distribution activities. We will close our Frome facility
and centralize cheese packing at Nuneaton, creating a centre of excellence and providing
both operational and cost synergies while offering plenty of scope for growth.
Beyond these plans, additional investments and network consolidation initiatives are
currently under evaluation for execution over the next three years.
Our Strengthen core business pillar is all about harnessing the power of our existing
brands and products, while trading up lower-valued categories and rationalizing the
number of SKUs we manufacture across multiple product lines. We’re also accelerating
product innovation by introducing new products and formats. Our successful push into
dairy alternatives is a prime example of how we’re adapting to meet evolving consumer
preferences. The next piece involves increasing the value of our ingredients portfolio to
build internal capacity and move up the value chain in a commoditized space as we’re
doing with nutritionals. Finally, we’re creating enablers to fuel investments, which
also means doing more with less. Temporarily pausing the final phase of the Harmoni
deployment, our Enterprise Resource Planning (ERP) project, which was set to begin in
Canada, has enabled us to reallocate resources towards our “One USA” journey and the
execution of our Global Strategic Plan.
Optimize and enhance
operations
Strengthen core
business
Accelerate product
innovation
Increase the value of
our ingredients portfolio
Create enablers to
fuel investments
X
SAPUTO.COM
2022 ANNUAL REPORT Acquisitions as accelerators
Complementing our organic growth strategy, acquisitions
have been a catalyst for Saputo over the last 25 years.
Our four recent acquisitions reinforce our efforts to
strengthen our core business, drive product innovation,
and increase the value of our ingredients portfolio.
We acquired Scotland’s Bute Island Foods in May, bringing new
dairy alternative capabilities in-house following a successful
partnership to develop our plant-based mozzarella offering.
In parallel, our acquisition of the Reedsburg facility of
Wisconsin Specialty Protein positioned us to move up the value
chain with specialized ingredients, such as goat whey protein
concentrate and organic lactose, which we can leverage in the
USA and internationally. In July, we expanded our portfolio
of British cheeses by adding another leading UK brand to the
roster with the acquisition of the activities of Wensleydale
Dairy Products. Finally, in September, we welcomed the
Carolina Aseptic and Carolina Dairy businesses based in North
Carolina, cultivating key customer relationships by reinforcing
our manufacturing presence in rapidly growing categories,
including aseptic formats, nutritional beverages, and dairy
snacking.
Delivering on our Promise
The Saputo Promise underpins everything we do and serves to drive, enable, and sustain
our growth. We wrapped up our first three-year plan in FY22, and we’re heading into the
next phase with a firm dedication to delivering on our ESG objectives. The execution of
our projects and our performance under the Environment and Our People pillars weren’t
immune to the current operating dynamics, adding a layer of complexity. Nevertheless,
significant progress was made across our seven pillars, and we’re proud to have achieved
most of our three-year goals.
As we move towards achieving our targets around climate, water, and waste by 2025,
we undertook 24 projects in FY22 that are going to bring productive wins, with a
further 32 projects slated for FY23. Among other initiatives, our partner Lightsource bp
completed the construction of a five-megawatt solar project to provide renewable
power for our Davidstow plant in the UK. Our renewable power purchase agreement
in Australia started to deliver benefits, contributing to a potential 5% reduction of our
carbon intensity by 2025. We also worked with Wipak UK to replace 33% of the virgin
plastic in certain cheese packaging with post-consumer recycled (PCR) material,
an innovation we expect to roll out more widely as technology improves and the
quantity of available materials increases.
XI
SAPUTO.COM Proudly standing behind our 2025 commitments, we amended our US$1 billion North American bank credit facility to
introduce a sustainability-linked loan structure with an annual pricing adjustment tied to achieving our climate and
water goals, and starting in FY23, these targets have been integrated into our long-term compensation structure.
Beyond the scope of our operations, we believe we have a key role to play to ensure a sustainable and equitable food
system, working in partnership with our farmers, suppliers, and industry partners. That’s why, in FY22, we launched
and began executing on our Supply Chain Pledges, which include sourcing 100% of our principal ingredients sustainably
and contributing $10 million to fund relevant projects by 2025. In addition, we signed on to Pathways to Dairy Net Zero
alongside several industry players to stimulate climate efforts and drive action to reduce greenhouse gas (GHG) emissions
across the dairy sector as we aim to help the transition to a net zero food system by 2050.
Fostering diversity, equity, and inclusion (DE&I) remains at the forefront of our priorities. Over the past year, we took
the time to understand our internal data to inform our next steps and identify potential opportunities for improvement.
We’re taking a deeper look at our programs and processes to ensure a more inclusive and diverse workforce.
Anchored in the most pressing ESG issues for our business, our next three-year plan (FY23-FY25) builds on the momentum
of the past few years, with execution already underway.
Responsible governance
Looking to the future with confidence
Saputo is fortunate to count on an engaged and
experienced Board of Directors to support our activities.
As Chair, my fellow members and I act as stewards on
behalf of Saputo’s stakeholders to oversee the Company’s
strategic direction and performance in all aspects, a role
we take on with great responsibility. This sound guidance
has been invaluable, particularly in the current economic
context and with the launch and delivery of our Global
Strategic Plan.
Olu Fajemirokun-Beck, who brings over 30 years of
experience in the consumer goods industry internationally,
joined our ranks in FY22. Her successful track record of
transformational growth and her broad leadership acumen
further expand the breadth and depth of our directorship.
Tony Meti, a valued member for the past 14 years, has
chosen not to seek re-election during our upcoming
annual meeting of shareholders — at which time the
Board is expected to be composed once again of two non
independent and eight independent directors. I’d like to
recognize and offer my sincerest thanks to Tony for
his innumerable contributions throughout his tenure.
While the operating environment remains complex,
we’re poised for a strong recovery in FY23. The success of
our USA platform is our top priority, and we’re committed
to improving margins, with progress anticipated this year.
We expect to achieve our financial objectives through
the significant pricing actions we’re taking in most of our
divisions, combined with our ongoing measures to address
labour challenges, inflationary pressures, and efficiencies.
Over the past year, we’ve been laying the groundwork for
the next chapter of sustained growth, and I’m optimistic
about what lies ahead. We remain confident in our
strategic target, and with strong underlying fundamentals,
we’re focused on execution. We’re heading into the
second year of our Plan with renewed determination.
We’ve started leveraging the momentum of our strategic
initiatives, and we’re deploying more of our resources to
harness the full potential of our business.
As we prepare to celebrate the fifth anniversary of the
Saputo Promise later this year, its guiding principle of
creating shared value is more relevant than ever to our
strategy and our stakeholders. We extend our deepest
thanks to our shareholders, employees, customers,
suppliers, business partners, and the communities we
serve for their enduring trust and support.
XI I
SAPUTO.COM
2022 ANNUAL REPORT A Closer Look at Our FY22
Performance and Highlights
by Sector
CANADA
The Dairy Division (Canada) delivered a strong performance. Results were
driven by improved demand in the foodservice market segment in line
with the easing of COVID-19 restrictions, price increases to offset rising
cost inflation, as well as cost containment initiatives. Our operations were
impacted by the devastating floods in British Columbia, and we incurred
incremental logistics costs as we remained committed to serving our
customers throughout. Our Canadian business continues to benefit from
a diversified customer base and product mix, a stable commodity market,
and an effective internal distribution network.
Completed the capacity expansion for retail and industrial mozzarella
production at our Saint-Léonard, QC, plant to accommodate additional
volume and started benefiting from cost savings and synergies from the
closure of our Trenton, ON, facility in FY21.
As our new state-of-the-art fluid milk and dairy alternative beverage
facility in Port Coquitlam, BC, came online, we closed our aging Burnaby
plant nearby. This new plant allows us to capitalize on consumer interest
in dairy alternatives, and we kicked off commercial production of plant-
based beverages for our co-packing and private label partners.
Completed automation projects at two plants to deliver packaging cost
reduction, yield improvement, and employee health and safety benefits.
Enhanced our supply chain activities across our network by implementing
best industry practices, like optimizing our trailer utilization and space
consumption, and reduced the complexity of our infrastructure, which
allowed for product shipment consolidation, saving on transport and
warehousing costs.
Despite the complex market conditions, we continued to earn customer
confidence as we solidified many long-term agreements with new and
existing foodservice and retail partners.
Our Dairyland and Neilson brands maintained their category-leading
positions and were once again featured among Canada’s most trusted
brands*. We expanded our assortment of on-the-go cheese snacks and
introduced a convenient, protein-packed cheese and meat combo
product under our leading Armstrong brand as consumers returned to
school and the office.
Launched Vitalite plant-based mozzarella shred, expanding distribution
in pizzerias and other foodservice accounts from coast to coast, with a full
range of Vitalite products for retail released just recently.
Further invested in our e-commerce capabilities and our direct-to-
consumer offering, now supported by a dedicated business team.
We significantly grew our e-commerce volume and launched Nibbl.,
an innovative B2C platform for specialty cheese, in Ontario and Québec,
with national expansion planned in the next few months.
* Dairyland: #1 Most Trusted by Canadians in 2021 – West – in milk category; Neilson: #1 Most Trusted by Canadians in 2021 – Ontario – in milk category, based on 2021 BrandSpark Canadian Shopper Survey.
SAPUTO.COM
XIII
20 22 ANNUAL RE PORT
USA
Labour, inflation, and supply chain pressures, as well as commodity
volatility, particularly in our legacy cheese business, weighed heavily
on the Dairy Division (USA)’s performance. Our teams responded with
a variety of mitigating measures, including ongoing pricing initiatives,
and, on the labour front, we launched a referral and new hire incentive
program, enhanced compensation packages, and aggressively expanded
recruitment outreach. Production levels have started to recover, and our
fill rates are improving. Consumer and customer demand for our products
remained robust throughout the year while the foodservice segment
showed signs of recovery.
Further established the roadmap for our cheese network optimization
strategy, designed to modernize, expand, and revitalize our cheese
manufacturing footprint, positioning core categories for long-term growth.
We announced our first phase, and an investment of $169 million, to
upgrade facilities in Wisconsin and California and to support our retail
ambitions. In parallel, we plan to consolidate our cut-and-wrap activities
on the West Coast and right-size our footprint by closing our Bardsley St.,
Tulare, CA, facility in FY23.
Made progress on our portfolio simplification journey, reducing
SKUs across multiple product lines as we look to prioritize branded
products that yield the greatest return, maximize capacity,
and generate efficiency gains.
Maintained category-leading positions for our Frigo Cheese Heads,
Montchevre, Salemville, and Frigo retail brands.
Introduced dairy alternative cheese under the Vitalite brand, securing
distribution in the retail and foodservice market segments with a superior
product. We also gained traction in the market as we commercialized
dairy alternative beverages under major private label contracts for large
and strategic retail customers as well as through co-manufacturing
agreements.
Began manufacturing aseptic nutritional products sold in the retail market
under a partner’s well-known brand name. We further expanded our
capabilities in this growing segment when we welcomed Carolina Aseptic
to the fold, while also adding refrigerated yogurt pouches to our dairy
snacking offering through Carolina Dairy.
Completed the acquisition of the Reedsburg facility of Wisconsin Specialty
Protein, expanding our capabilities to process and sell goat and specialty
whey protein and increase the value of our whey solids, where demand
continues to be strong.
Finalized our ERP rollout in all facilities, a major win for transitioning
systems to a single solution, with our energy now squarely focused on
progressing our “One USA” journey to maximize alignment and leverage
economies of scale and resources to support our future growth.
XIV
SAPUTO.COM
INTERNATIONAL
Sales volumes within the International Sector were impacted by significant supply chain constraints due to container and vessel availability issues and
port inefficiencies, a situation that is expected to remain volatile in the coming year. The dairy commodity dynamics started improving with indications
of higher international cheese and dairy ingredient market prices.
DAIRY DIVISION (AUSTRALIA)
Profitability in our Dairy Division (Australia) was hindered by a reduction
in milk intake, compounded by an increase in costs. On the export side,
we needed to fulfill unfavourable contracts secured in FY21 at depressed
commodity prices. Domestically, we successfully engaged with retailers to
manage input cost pressures, with demand for most products remaining
strong, while COVID-19 restrictions continued to affect the foodservice
market segment. We also began implementing continuous improvement
initiatives within our operations to help offset the impact of cost increases.
Announced the streamlining of operations at two of our plants to reduce
complexity and realize savings: we permanently shut down one of two
dryers in one location, and we’re closing our individually wrapped slices
production area in another, with this work moving to an alternative
manufacturing arrangement.
Gained further efficiencies in plant utilization, supporting customers
with private label products, including ultra-high temperature (UHT),
butter, and cheese.
Successfully completed the rebranding of CHEER cheese, launched into
snacking cheese with bars and smaller portions across several brands,
and expanded our fast-growing Liddells lactose-free range by introducing
butter blends and prebiotic chilled milk.
Focused on driving profitable growth by creating the right portfolio
and partnering with key foodservice customers. We’re now selling an
increased range through quick-serve restaurants (QSRs), and we delivered
a consolidated dairy solution for our customers by offering a new 3L
thickened cream product under the Devondale brand.
Completed the ERP rollout in the remainder of the Division, now fully
integrated into a single operating entity with a unified approach to
customers and vendors that simplifies our business.
DAIRY DIVISION (ARGENTINA)
Led by an agile team, the Dairy Division (Argentina) delivered solid results,
driven by price margin improvements, operational efficiencies, and a
higher milk intake compared to FY21. The business is well-positioned
to maximize production for the export market while maintaining the
volumes needed to service the domestic market.
Gained warehousing efficiencies that led to significant cost savings
for dry products.
* Omnibus Kantar February 2020
La Paulina marked its centenary with a campaign aimed at increasing
brand equity and strengthening its leadership positioning — it was
recognized as the most consumed cheese brand in Argentina*.
In FY22, La Paulina also developed new easy-to-open, unique packaging
for its soft cheese portions.
Entered the local dairy alternative beverage category under the Vitalite
brand in a growing market.
XV
SAPUTO.COM 20 22 ANNUAL RE PORT
EUROPE
The Dairy Division (UK) maintained excellent service levels in FY22 despite COVID-19-related disruptions. While milk intake increased during the year,
input cost increases and weaker returns in dairy ingredients, due to low global infant formula demand, pressured profitability. As planned, both the
Bute Island and Wensleydale Dairy Products acquisitions contributed positively. The Sector is focused on leveraging value-added products through
strong consumer brands and specialized dairy ingredients.
Progressed our Davidstow cheese plant expansion, with ongoing
investments to increase capacity. We also benefited from operational
improvements and cost reduction following the transfer of Frylight spray
oil production to another facility.
Undertook plans to outsource the Nuneaton facility’s warehouse and
distribution activities to a long-term partner, creating opportunities for
consolidation within our network. We intend to close our Frome packing
facility and establish Nuneaton as a centre of excellence in cheese packing.
We’ve already installed equipment to deliver a new and unique
block format to the marketplace this summer.
Cathedral City maintained its position as the #1 cheddar brand in the
UK, and we partnered with a major British grocery chain to launch a
branded ready meal range, with initial sales exceeding expectations.
Internationally, we kicked off our long-term exclusive distribution
partnership with Hochland to sell Cathedral City into Germany, a large
and growing cheddar market, and we also expanded the brand’s
presence in the USA and Canada.
Won new private label contracts in cheese and spreads, a testament to
the high quality of our mature cheddar and the innovation driving our
new spread recipes.
Leveraged the extensive opportunities provided by our recent
acquisitions to cross-fertilize products and brands. For example,
we’re working with our Wensleydale team to produce new recipes
for English territorial cheeses to be branded as Cathedral City. On the
dairy alternatives side, we’re increasing our plant-based cheese capacity
at Bute Island, and we’ve initiated development of a Cathedral City
plant-based cheddar, which we intend to position as a category
leader in terms of taste and quality.
Established new demineralized whey supply contracts with global infant
formula manufacturers, broadening our market access, which should
generate opportunities to achieve improved returns. We’ve also started
evolving our recipes and formats for value-added ingredients to better
respond to customer demand.
XVI
SAPUTO.COM
JUN E 9, 202 2
MANAGEMENT’S
DISCUSSION
& ANALYSIS
CONSOLIDATED
FINANCIAL
STATEMENTS
FY2022
TABLE OF CONTENTS
MANAGEMENT’S DISCUSSION AND ANALYSIS
INTRODUCTION .............................................................................................................................................................................. 3
CAUTION REGARDING FORWARD-LOOKING STATEMENTS ..........................................................................................
SELECTED FINANCIAL INFORMATION ...................................................................................................................................
NON-GAAP MEASURES ...............................................................................................................................................................
4
5
6
STATEMENT OF EARNINGS ....................................................................................................................................................... 10
HIGHLIGHTS .................................................................................................................................................................................... 12
OUTLOOK ........................................................................................................................................................................................ 13
CONSOLIDATED RESULTS ........................................................................................................................................................
QUARTERLY FINANCIAL INFORMATION BY SECTOR .......................................................................................................
15
19
CANADA SECTOR ..................................................................................................................................................................... 21
USA SECTOR .............................................................................................................................................................................. 23
INTERNATIONAL SECTOR ...................................................................................................................................................... 26
EUROPE SECTOR ..................................................................................................................................................................... 28
LIQUIDITY, FINANCIAL AND CAPITAL RESOURCES ..........................................................................................................
30
CONTRACTUAL OBLIGATIONS ................................................................................................................................................. 33
FINANCIAL POSITION .................................................................................................................................................................. 34
GUARANTEES ................................................................................................................................................................................ 34
RELATED PARTY TRANSACTIONS .......................................................................................................................................... 34
CRITICAL ACCOUNTING ESTIMATES .....................................................................................................................................
CHANGES IN ACCOUNTING POLICIES ...................................................................................................................................
35
36
RISKS AND UNCERTAINTIES ..................................................................................................................................................... 37
DISCLOSURE CONTROLS AND PROCEDURES ...................................................................................................................
INTERNAL CONTROL OVER FINANCIAL REPORTING .......................................................................................................
SENSITIVITY ANALYSIS OF INTEREST RATE AND US CURRENCY FLUCTUATIONS ..............................................
43
43
43
QUARTERLY FINANCIAL INFORMATION ...............................................................................................................................
CONSOLIDATED ANALYSIS OF EARNINGS FOR THE YEAR ENDED MARCH 31, 2021, COMPARED TO
MARCH 31, 2020 ............................................................................................................................................................................. 46
44
GLOSSARY ...................................................................................................................................................................................... 49
CONSOLIDATED FINANCIAL STATEMENTS .............................................................................................................................. 50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ...........................................................................................
63
MANAGEMENT’S DISCUSSION AND ANALYSIS
INTRODUCTION
The goal of this management's discussion and analysis (''MD&A'') is to analyze the results of, and the financial
position of Saputo Inc. (we, Saputo or the Company), for the year ended March 31, 2022. It should be read while
referring to the audited consolidated financial statements of the Company for the same period and accompanying
notes, which are prepared in accordance with generally accepted accounting principles in Canada ("GAAP") as set
out in the CPA Canada Handbook - Accounting under Part 1, which incorporates International Financial Reporting
Standards ("IFRS"), as issued by the International Accounting Standards Board. All dollar amounts are in Canadian
dollars, unless otherwise indicated. The information in this report is being presented as at March 31, 2022, unless
otherwise specified. In preparing this report, we have taken into account material elements between March 31, 2022,
and June 9, 2022, the date on which this report was approved by the Company’s Board of Directors. Additional
information about the Company, including its Annual Report and Annual Information Form for the year ended March
31, 2022, can be obtained on SEDAR at www.sedar.com.
ANNUAL REPORT 2022
Page 3
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report 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 report may constitute forward-
looking statements within the meaning of applicable securities laws.
By their nature, forward-looking statements are subject to a number of 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 this
MD&A.
Such risks and uncertainties include the following: product liability; the COVID-19 pandemic and related ongoing
impacts; the availability of raw materials (including as a result of climate change, extreme weather, or global or local
supply chain disruptions caused by the COVID-19 pandemic, geopolitical developments, military conflicts and trade
sanctions) and related price variations, along with our ability to transfer those increases, if any, to our customers in
competitive market conditions; supply chain strain and supplier concentration; the price fluctuation of our products in
the countries in which we operate, as well as in international markets, which are based on supply and demand levels
for dairy products; our ability to identify, attract, and retain qualified individuals; cyber threats and other information
technology-related risks relating to business disruptions, confidentiality, data integrity business and email
compromise-related fraud; the increased competitive environment in our industry; consolidation of clientele;
unanticipated business disruption; 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.
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; the
availability and cost of milk and other raw materials and energy supplies; 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; 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
contribution of recent acquisitions; the anticipated market supply and demand levels for our products; the anticipated
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. 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, as well as the development and performance of
technology, innovation and the future use and deployment of technology and associated expected future results, 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.
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.
All forward-looking statements included herein speak only as of the date hereof or as of the specific date of such
forward-looking statements. 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.
ANNUAL REPORT 2022
Page 4
SELECTED FINANCIAL INFORMATION
Years ended March 31
(in millions of CDN dollars, except per share amounts and ratios)
Revenues
15,035
14,294
14,944
Operating costs excluding depreciation, amortization, inventory
revaluation resulting from a business acquisition, and restructuring costs
13,880
12,823
13,476
2022
2021
2020
Adjusted EBITDA1
Margin1
Net earnings
Margin2
Adjusted net earnings1
Margin1
PER SHARE
Net earnings per share (EPS) basic
EPS diluted
Adjusted EPS basic1
Adjusted EPS diluted1
Dividends
Book value2
FINANCIAL POSITION
Working capital2
Total assets
Long-term debt, including current portion
Net debt2
Total non-current financial liabilities2
Equity
FINANCIAL RATIOS
Net debt / Equity2
Net debt / adjusted EBITDA1
Adjusted return on average equity1
STATEMENT OF CASH FLOWS
Net cash generated from operations
Additions to property, plant and equipment, and intangible assets
Business acquisitions
Payment of dividends (Net of dividends paid through DRIP3 of $87 million in
fiscal 2022 and $80 million in fiscal 2021)
1,155
7.7 %
1,471
10.3 %
1,468
9.8 %
274
1.8 %
485
3.2 %
0.66
0.66
1.17
1.17
0.72
626
4.4 %
715
5.0 %
1.53
1.52
1.74
1.74
0.70
583
3.9 %
724
4.8 %
1.46
1.45
1.81
1.80
0.68
15.61
15.63
16.05
1,515
13,683
3,375
4,080
3,461
6,505
1,802
13,123
3,578
3,806
3,667
6,444
1,576
13,793
3,542
4,166
3,890
6,559
0.63
3.53
6.4 %
0.59
2.59
10.5 %
0.64
2.84
12.3 %
693
498
371
209
1,078
434
—
1,037
576
1,930
205
270
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 MD&A
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 this MD&A.
3 Effective as of the dividend paid on July 9, 2020, a dividend reinvestment plan (DRIP) was implemented.
ANNUAL REPORT 2022
Page 5
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 MD&A also refers to certain non-GAAP and other
financial measures which do not have a standardized meaning under GAAP, including the following.
Term Used
Adjusted EBITDA
Adjusted net earnings1
Definition
Net earnings before income taxes, financial charges, acquisition and restructuring costs,
inventory revaluation resulting from a business acquisition, gain on disposal of assets,
impairment of intangible assets, and depreciation and amortization.
Net earnings before the UK tax rate change, acquisition and restructuring costs, inventory
revaluation resulting from a business acquisition, gain on disposal of assets, impairment of
intangible assets, and amortization of intangible assets related to business acquisitions, net of
applicable income taxes.
Adjusted EBITDA margin
Adjusted EBITDA expressed as a percentage of revenues.
Adjusted net earnings margin
Adjusted net earnings expressed as a percentage of revenues.
Adjusted EPS basic
Adjusted net earnings per basic common share.
Adjusted EPS diluted
Adjusted net earnings per diluted common share.
Adjusted return on average equity Net earnings before the UK tax rate change, acquisition and restructuring costs, inventory
revaluation resulting from a business acquisition, gain on disposal of assets, and impairment
of intangible assets, net of applicable income taxes, divided by average total equity, not
considering the effect of annual fluctuations in foreign currency translation and adjusting items
to net earnings identified above.
Net debt / adjusted EBITDA
Net debt divided by adjusted EBITDA.
1 In previous periods, adjusted net earnings included amortization of intangible assets related to business acquisitions, net of applicable income tax.
Starting in the fourth quarter of fiscal 2022, adjusted net earnings excludes amortization of intangible assets related to business acquisitions, net of
applicable income taxes, to provide a more effective measure to assess performance against the Company's peer group due to the application of
various accounting policies in relation to the amortization of acquired intangible assets. Comparative periods included in this MD&A were aligned to
meet the current presentation.
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 IFRS, 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 not likely 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 MD&A and the classification thereof.
ANNUAL REPORT 2022
Page 6
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 provides 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. 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 of net earnings to adjusted net earnings.
(in millions of CDN dollars, except per share amounts)
Net earnings
UK tax rate change2
Acquisition and restructuring costs1
Gain on disposal of assets1
Impairment of intangible assets1
Amortization of intangible assets related to business
acquisitions1
Adjusted net earnings
Revenues
Margin
(in millions of CDN dollars, except per share amounts)
Q4
37
—
51
—
—
20
108
Q3
86
—
—
(8)
43
18
139
Q2
98
—
(1)
—
—
19
116
Q1
53
50
1
—
—
18
122
Fiscal 2022
274
50
51
(8)
43
75
485
3,957
3,901
3,689
3,488
15,035
2.7 %
3.6 %
3.1 %
3.5 %
3.2 %
Net earnings
Acquisition and restructuring costs1
Inventory revaluation resulting from a business acquisition
Impairment of intangible assets1
Amortization of intangible assets related to business
acquisitions1
Adjusted net earnings
Revenues
Margin
Q4
103
2
—
—
19
124
Q3
210
—
—
—
18
228
Q2
171
(5)
—
—
18
184
Q1
142
—
—
19
18
179
Fiscal
2021
626
(3)
—
19
73
715
Fiscal
2020
583
38
33
—
70
724
3,438
3,763
3,702
3,391
14,294
14,944
3.6 %
6.1 %
5.0 %
5.3 %
5.0 %
4.8 %
1 Net of income taxes.
2 On June 10, 2021, the UK Finance Act 2021 was enacted, increasing the UK tax rate from 19% to 25%, effective April 1, 2023. Refer to Note 15 to
the consolidated financial statements for further information.
ANNUAL REPORT 2022
Page 7
Adjusted EPS basic and adjusted EPS diluted
Adjusted EPS basic and adjusted EPS diluted 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 UK tax rate change, acquisition and restructuring costs, inventory revaluation resulting from a
business acquisition, gain on disposal of assets, impairment of intangible assets, and amortization of intangible
assets related to business acquisitions. 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.
Adjusted return on average equity
Adjusted return on average equity is a component in the determination of long-term incentive compensation for
management. The calculation of adjusted return on average equity uses adjusted net earnings including amortization
of intangible assets related to business acquisitions, net of applicable income taxes, consistent with the composition
of this non-GAAP financial measure prior to the fourth quarter of fiscal 2022. For more details on adjusted return on
average equity, refer to the definition table above in the non-GAAP measures section.
Adjusted net earnings including amortization of intangible assets related to business acquisitions, net of applicable
income taxes, were as follows for the years ended March 31:
Adjusted net earnings
Amortization of intangible assets related to business acquisitions,
485
net of applicable income taxes
Adjusted net earnings including amortization of intangible assets
related to business acquisitions, net of applicable income taxes
(75)
410
2022
2021
715
(73)
642
2020
724
(70)
654
Average total equity, not considering the effect of annual fluctuations in foreign currency translation and adjusting
items to net earnings identified above, were as follows for the years ended March 31:
Equity beginning of year
Foreign currency translation beginning of year
Adjusted net earnings items from prior year
Adjusted equity beginning of year
Equity end of year
Foreign currency translation end year
Adjusted net earnings items of the current year
Adjusted equity end of year
2022
6,444
(210)
16
6,250
6,505
(66)
136
6,575
2021
6,559
(668)
71
5,962
6,444
(210)
16
6,250
2020
5,421
(582)
(132)
4,707
6,559
(668)
71
5,962
Average total equity
6,413
6,106
5,335
Adjusted return on average equity
6.4 %
10.5 %
12.3 %
Net debt to adjusted EBITDA
Net debt to adjusted EBITDA is the primary measure used by the Company to monitor its financial leverage. For more
details on net debt, refer to the "Glossary" section of this MD&A. For more details on adjusted EBITDA, refer to the
discussion above in the adjusted EBITDA and adjusted EBITDA margin section.
ANNUAL REPORT 2022
Page 8
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 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. 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.
(in millions of CDN dollars)
Net earnings
Income taxes
Financial charges
Acquisition and restructuring costs
Gain on disposal of assets
Impairment of intangible assets
Depreciation and amortization
Adjusted EBITDA
Revenues
Margin
(in millions of CDN dollars)
Q4
37
(12)
16
71
—
—
148
260
Q3
86
26
17
—
(9)
58
144
322
Q2
98
31
19
(2)
—
—
137
283
Q1
53
86
18
2
—
—
131
290
Fiscal 2022
274
131
70
71
(9)
58
560
1,155
3,957
3,901
3,689
3,488
15,035
6.6 %
8.3 %
7.7 %
8.3 %
7.7 %
Net earnings
Income taxes
Financial charges
Acquisition and restructuring costs
Inventory revaluation resulting from a business acquisition
Impairment of intangible assets
Depreciation and amortization
Adjusted EBITDA
Revenues
Margin
Q4
103
39
23
3
—
—
135
303
Q3
210
67
26
—
—
—
128
431
Q2
171
57
22
(6)
—
—
126
370
Fiscal
2021
626
218
96
(3)
—
19
Fiscal
2020
583
217
115
46
40
—
515
467
1,471
1,468
Q1
142
55
25
—
—
19
126
367
3,438
3,763
3,702
3,391
14,294
14,944
8.8 %
11.5 %
10.0 %
10.8 %
10.3 %
9.8 %
ANNUAL REPORT 2022
Page 9
STATEMENT OF EARNINGS
(in millions of CDN dollars)
Revenues
Canada
USA
International
Europe
Operating costs excluding depreciation, amortization,
inventory revaluation resulting from a business
acquisition, and restructuring costs
Canada
USA
International
Europe
Adjusted EBITDA
Canada
USA
International
Europe
Total1
Adjusted EBITDA margin1
Depreciation and amortization
Canada
USA
International
Europe
Impairment of intangible assets
Gain on disposal of assets
Acquisition and restructuring costs
Financial charges
Earnings before incomes taxes
Income taxes
Net earnings
Net earnings margin2
For the three-month periods
ended March 31
For the years
ended March 31
2022
2021
2022
2021
1,055
1,743
922
237
3,957
938
1,701
860
198
3,697
117
42
62
39
260
6.6 %
27
57
34
30
148
—
—
71
16
25
(12)
37
0.9 %
1,001
1,399
827
211
3,438
893
1,306
765
171
3,135
108
93
62
40
303
8.8 %
27
51
30
27
135
—
—
3
23
142
39
103
4,281
6,409
3,453
892
4,135
6,122
3,221
816
15,035
14,294
3,806
6,121
3,205
748
3,688
5,555
2,916
664
13,880
12,823
475
288
248
144
447
567
305
152
1,155
7.7 %
1,471
10.3 %
103
210
132
115
560
58
(9)
71
70
405
131
274
99
200
112
104
515
19
—
(3)
96
844
218
626
3.0 %
1.8 %
4.4 %
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 MD&A
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 this MD&A.
ANNUAL REPORT 2022
Page 10
STATEMENT OF EARNINGS (CONT'D)
(in millions of CDN dollars, except per share amounts and ratios)
For the three-month periods
ended March 31
For the years
ended March 31
2022
2021
2022
2021
Adjusted net earnings1
Adjusted net earnings margin1
108
2.7 %
124
3.6 %
485
3.2 %
715
5.0 %
PER SHARE DATA
EPS basic
EPS diluted
Adjusted EPS basic1
Adjusted EPS diluted1
0.09
0.09
0.26
0.26
0.25
0.25
0.30
0.30
0.66
0.66
1.17
1.17
1.53
1.52
1.74
1.74
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 MD&A 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.
Selected factors positively (negatively) affecting financial performance
(in millions of CDN dollars)
For the three-month periods
ended March 31
For the years
ended March 31
2022
2021
2022
2021
USA Market Factors1,2
Foreign currency exchange2,3
1 Refer to the ‘‘Glossary’’ section of this MD&A.
2 Reflects the effect on adjusted EBITDA as compared to same quarter last fiscal year for the three-month periods; as compared to last fiscal year
for the years ended March 31. Adjusted EBITDA is a total of segments measure. See the “Non-GAAP Measures” section of this MD&A for more
information, including the definition and composition of the measure as well as the reconciliation to the most comparable measure in the primary
financial statements, as applicable.
Foreign currency exchange includes the effect of the conversion of US dollars, Australian dollars, British pounds sterling, and Argentine pesos to
Canadian dollars.
(118)
(72)
(19)
(12)
(4)
(2)
(2)
57
3
ANNUAL REPORT 2022
Page 11
HIGHLIGHTS
Fourth quarter of fiscal 2022
• Revenues amounted to $3.957 billion, up $519 million or 15.1%.
• Net earnings totalled $37 million and EPS (basic and diluted) were $0.09, as compared to $103 million of net
earnings and EPS (basic and diluted) of $0.25.
• Adjusted EBITDA1 amounted to $260 million, down $43 million or 14.2%.
• Adjusted net earnings1 totalled $108 million, as compared to $124 million, and adjusted EPS1 (basic and diluted)
were $0.26, as compared to $0.30.
• Net cash generated from operations amounted to $184 million, up $33 million or 21.9%.
• Challenging market conditions, including labour shortages, supply chain disruptions, and inflationary pressures,
continued to impact our sectors to varying degrees, with the USA Sector being the most impacted.
• Input and logistics costs, mainly in North America, continued to be impacted by inflation. Pricing initiatives were not
sufficient to mitigate these cost increases.
• USA Market Factors2 negatively impacted adjusted EBITDA by $19 million, compared to the same quarter last
fiscal year, mainly due to the effect of the negative spread2.
• The Canada Sector continued to show improved results despite challenging market conditions.
• The fluctuation of the Canadian dollar versus foreign currencies negatively impacted revenues and adjusted
EBITDA by $35 million and $12 million, respectively.
• Restructuring costs of $51 million after tax, which included non-cash fixed assets write-downs totalling $43 million,
were incurred in connection with initiatives being undertaken under the Optimize and enhance operations pillar of
our Global Strategic Plan. These initiatives include:
◦ Previously announced capital investments and consolidation initiatives intended to enhance and
streamline our manufacturing footprint in the USA Sector and in the International Sector; and
◦ Plans to outsource warehouse and distribution activities in the Europe Sector, creating opportunities for
network consolidation.
• The Board of Directors approved a dividend of $0.18 per share payable on June 28, 2022, to common
shareholders of record on June 21, 2022.
Fiscal 2022
• Revenues amounted to $15.035 billion, an increase of $741 million or 5.2%.
• Net earnings totalled $274 million and EPS (basic and diluted) were $0.66, as compared to $626 million of net
earnings and EPS (basic and diluted) of $1.53 and $1.52.
• Adjusted EBITDA1 amounted to $1.155 billion, down $316 million or 21.5%.
• Adjusted net earnings1 totalled $485 million, as compared to $715 million, and adjusted EPS1 (basic and diluted)
were $1.17, as compared to $1.74.
• Net cash generated from operations totalled $693 million, down $385 million or 35.7%.
• Challenging market conditions, including labour shortages, supply chain disruptions, and inflationary pressures,
impacted our sectors to varying degrees, with the USA Sector being the most impacted.
• Input and logistics costs, mainly in North America, continued to be impacted by inflation. Pricing initiatives were not
sufficient to mitigate these cost increases.
• USA Market Factors2 negatively impacted adjusted EBITDA by $118 million, compared to the last fiscal year, mainly
due to the effect of the negative spread2.
• The Canada Sector showed favourable results despite challenging market conditions.
• Sales volumes were higher, mainly due to an increase in the foodservice market segment and, to a lesser extent, in
the industrial market segment, partially offset by lower retail market segment sales volumes which returned to
historical levels.
• The fluctuation of the Canadian dollar versus foreign currencies negatively impacted revenues and adjusted
EBITDA by $424 million and $72 million, respectively.
• During the fiscal year, we completed the acquisitions of Bute Island Foods Ltd. (Bute Island Acquisition), the
Reedsburg facility of Wisconsin Specialty Protein, LLC (Reedsburg Facility Acquisition), the business of
Wensleydale Dairy Products Limited (Wensleydale Dairy Products Acquisition), and the Carolina Aseptic and
Carolina Dairy businesses formerly operated by AmeriQual Group Holdings, LLC (Carolina Acquisition),
(collectively, the Recent Acquisitions).
• Saputo incurred restructuring costs totalling $51 million after tax.
• As part of the continuous evaluation of our overall activities and to reallocate resources to support the growth
ambitions of our Global Strategic Plan, we decided to temporarily pause for a minimum of three years the final
phase of the Harmoni deployment, our Enterprise Resource Planning (ERP) project, which was set to begin in
Canada. An impairment of intangible assets charge of $43 million after tax was recorded during the third quarter.
The impairment charge also included the effect of the application of an agenda decision of the International
Financial Reporting Interpretations Committee (IFRIC) related to the capitalization of cloud-based software costs.
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 MD&A 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 this MD&A.
ANNUAL REPORT 2022
Page 12
OUTLOOK
• We anticipate that input and logistics costs such as consumables, packaging, transportation and fuel should
remain at elevated levels, but we expect strong pricing contribution across all sectors following recently
announced price increases.
• We expect further price increases to be implemented over the course of the fiscal year, in line with our pricing
protocols, if cost inflation continues to persist.
•
•
Labour and operational initiatives are expected to improve our ability to supply ongoing demand and return to
historical order fill rate levels, particularly in the USA.
Current consumer trends in key categories remain positive and price elasticity will continue to be closely
monitored as the year progresses.
• We anticipate the retail market segment to remain strong as at-home food spending should remain elevated
versus pre-pandemic levels, while the foodservice market segment is expected to remain competitive, particularly
in the USA.
•
•
•
•
•
Constraints on service and volumes are expected through the first half of fiscal 2023, due to the continuing gap
between supply and demand of trucking capacity and containers.
Supply chain conditions remain challenging, and we expect the disruption from longer lead times for sourced
products to continue.
USA Market Factors2 will remain volatile although we adjust our pricing to reflect commodity prices.
Despite the volatile nature of international cheese and dairy ingredient markets, our outlook on export prices
remains cautiously positive.
Volumes destined for export markets continue to recover; however, the pace and timing of the recovery to pre-
pandemic levels will vary depending on the export market and supply chain improvements.
• While inflation and supply chain disruptions are likely to persist, we expect a meaningful recovery in earnings in
fiscal 2023, driven by the full impact of previously announced price increases, improved productivity and fixed
cost absorption, a return to historical order fill rates, and benefits stemming from our Global Strategic Plan.
2 Refer to the ‘‘Glossary’’ section of this MD&A.
ANNUAL REPORT 2022
Page 13
GLOBAL STRATEGIC PLAN HIGHLIGHTS
We will continue to leverage the momentum of our ongoing Global Strategic Plan initiatives to strengthen our position
as a high-quality, low-cost processor with a relentless focus on productivity and efficiency.
Beyond the previously announced capital investments and consolidation initiatives to enhance and streamline our
manufacturing footprint in the USA Sector and International Sector, our UK business undertook plans to outsource our
Nuneaton facility’s warehouse and distribution activities to a long-term partner. We will close our Frome facility and
centralize cheese packing at Nuneaton over the next two years, creating a centre of excellence and providing both
operational and cost synergies while offering plenty of scope for growth.
The initiatives in the Europe Sector are expected to result in annual savings and benefits gradually, beginning in fiscal
2024, and reaching approximately $6 million after tax by the end of fiscal 2026. Restructuring costs associated with
these initiatives are anticipated to be approximately $13 million after tax, which include a non-cash fixed assets write-
down of approximately $4 million after tax. Restructuring costs of $6 million after tax were recorded in fiscal 2022 and
the balance will be recorded in fiscal 2023. Capital expenditures associated with the initiatives are expected to be
approximately $36 million.
We are poised for a recovery in fiscal 2023, and we are well underway with the full-scale roll-out of our growth, cost,
and productivity initiatives. Together, this should set the stage for accelerated growth in the back half of our Global
Strategic Plan with a clear line of sight to our adjusted EBITDA1 target of $2.125 billion by the end of fiscal 2025.
THE SAPUTO PROMISE
The Saputo Promise, our approach to social, environmental, and economic performance, supports our strategic plans
and allows us to pursue growth and create shared value for all stakeholders, ensuring the long-term sustainability of
our business.
During the fourth quarter of fiscal 2022:
• We completed the capital allocation of our three-year $50 million investment (FY21-FY23) to accelerate our
climate, water, and waste performance, dedicating approximately $20 million to an additional 32
environmental projects.
• We completed the installation of four additional projects, which should deliver savings of 1,200 tonnes of
CO2, 21,000 GJ of energy, and 18,000 m3 of water annually.
• We joined the Sustainable Agriculture Initiative Platform, a non-profit network of over 160 members
worldwide, working together to advance sustainable agricultural practices through pre-competitive
collaboration.
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 MD&A 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.
ANNUAL REPORT 2022
Page 14
CONSOLIDATED RESULTS FOR THE FOURTH QUARTER AND FISCAL YEAR
ENDED MARCH 31, 2022
Revenues
Revenues for the fourth quarter of fiscal 2022 totalled $3.957 billion, up $519 million or 15.1%, as compared to
$3.438 billion for the same quarter last fiscal year.
Revenues increased due to higher domestic selling prices, together with pricing initiatives implemented in all our
sectors to mitigate increasing input costs, as well as higher international cheese and dairy ingredient market prices.
The combined effect of the higher average block market price2 and of the higher average butter market price2 had a
positive impact of $217 million. The effect of the fluctuation of the Argentine peso and the Australian dollar on export
sales denominated in US dollars was favourable.
Sales volumes were stable compared to those of the fourth quarter of fiscal 2021. Retail market segment sales
volumes decreased as they returned to historical levels.
The contributions of the Recent Acquisitions totalled $44 million. Finally, the fluctuation of foreign currencies versus
the Canadian dollar had an unfavourable impact of $35 million.
Revenues in fiscal 2022 totalled $15.035 billion, up $741 million or 5.2%, as compared to $14.294 billion for last
fiscal year.
Revenues increased due to higher domestic selling prices, together with pricing initiatives implemented in all our
sectors to mitigate increasing input costs, as well as higher international cheese and dairy ingredient market prices.
However, during the first six months of fiscal 2022, fulfilling the export sales contracts that had been entered into in
fiscal 2021 at depressed commodity prices in the International Sector had an unfavourable impact.
Sales volumes were higher than those of last fiscal year, mainly due to an increase in the foodservice market
segment and, to a lesser extent, in the industrial market segment. However, sales volumes in the retail market
segment were lower than last fiscal year, mainly due to the surge that occurred in the first quarter of fiscal 2021,
although this surge began to level off starting in the second quarter of fiscal 2021. In the ongoing COVID-19 context,
supply chain challenges, due to container and vessel availability issues and port inefficiencies, negatively impacted
export sales volumes in our International Sector.
The combined effect of the higher average butter market price2 and of the lower average block market price2 had a
positive impact of $61 million. The effect of the fluctuation of the Argentine peso and the Australian dollar on export
sales denominated in US dollars was favourable.
The contributions of the Recent Acquisitions totalled $123 million. Finally, the fluctuation of foreign currencies, most
particularly the US dollar, versus the Canadian dollar had an unfavourable impact of $424 million.
Operating costs excluding depreciation, amortization, and restructuring costs
Operating costs excluding depreciation, amortization, and restructuring costs for the fourth quarter of fiscal 2022
totalled $3.697 billion, up $562 million or 17.9%, as compared to $3.135 billion for the same quarter last fiscal year. In
fiscal 2022, operating costs excluding depreciation, amortization, and restructuring costs totalled $13.880 billion, up
$1.057 billion or 8.2%, as compared to $12.823 billion last fiscal year. These increases were due to higher input costs
in all our divisions caused by inflationary pressures. Higher revenues, dairy commodity market volatility, and higher
input costs contributed to the higher cost of raw materials and consumables used. Employee salary and benefit
expenses increased due to inflation and wage increases.
Net earnings
Net earnings for the fourth quarter of fiscal 2022 totalled $37 million, down $66 million or 64.1%, as compared to
$103 million for the same quarter last fiscal year. This decrease is primarily due to the factors that contributed to lower
adjusted EBITDA1 of $43 million, as described below, restructuring costs of $51 million after tax, and higher
depreciation and amortization, partially offset by a lower income tax expense and lower financial charges.
In fiscal 2022, net earnings totalled $274 million, down $352 million or 56.2%, as compared to $626 million for last
fiscal year. This decrease is primarily due to the factors that contributed to lower adjusted EBITDA1 of $316 million, as
described below, a higher impairment of intangible assets charge of $24 million after tax, restructuring costs of $51
million after tax, a one-time non-cash expense of $50 million to adjust deferred income tax liability balances to reflect
the increase in the corporate income tax rate in the United Kingdom, and higher depreciation and amortization,
partially offset by a lower income tax expense, lower financial charges, and a gain on disposal of assets of $8 million
after tax.
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 MD&A 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 this MD&A.
ANNUAL REPORT 2022
Page 15
Adjusted EBITDA1
Adjusted EBITDA1 for the fourth quarter of fiscal 2022 totalled $260 million, down $43 million or 14.2%, as
compared to $303 million for the same quarter last fiscal year.
We continued to face increasing input and logistics costs such as consumables, packaging, transportation and fuel in
all our sectors due to inflationary pressures. Pricing initiatives undertaken were not sufficient to mitigate the ongoing
impact of inflation on our costs, which included an increase of $41 million related to freight and logistics costs, mainly
in North America.
USA Market Factors2 had a negative effect of $19 million, as compared to the same quarter last fiscal year, mainly
due to the effect of the negative spread2. The relation between international cheese and dairy ingredient market
prices and the cost of milk as raw material in the International Sector had a positive impact.
Labour shortages in some of our facilities, including those due to the outbreak of the Omicron COVID-19 variant, and
supply chain disruptions put pressure on our ability to supply ongoing demand, which negatively impacted efficiencies
and the absorption of fixed costs.
The positive effects of lower administrative costs, such as travel and promotional activities, in the context of the
COVID-19 pandemic, tapered off compared to the same quarter last fiscal year.
The fluctuation of foreign currencies versus the Canadian dollar had an unfavourable impact of $12 million.
Adjusted EBITDA1 in fiscal 2022 totalled $1.155 billion, down $316 million or 21.5%, as compared to $1.471 billion
for last fiscal year.
Input and logistics costs such as consumables, packaging, transportation, and fuel increased in all our divisions due
to inflationary pressures. Pricing initiatives undertaken were not sufficient to mitigate the ongoing impact of inflation
on our costs, which included an increase of $143 million related to freight and logistics costs, mainly in North America.
In a volatile dairy commodity market, USA Market Factors2 had a negative effect of $118 million, as compared to last
fiscal year, mainly due to the effect of the negative spread2. On the other hand, the relation between international
cheese and dairy ingredient market prices and the cost of milk as raw material in the International Sector had a
positive impact. However, in the first six months of fiscal 2022, the effect of fulfilling export sales contracts entered
into last fiscal year at depressed commodity prices was unfavourable.
Labour shortages in some of our facilities and supply chain disruptions put pressure on our ability to supply ongoing
demand, which negatively impacted efficiencies and the absorption of fixed costs.
The contributions of the Recent Acquisitions were positive.
The positive effects of lower administrative costs, such as travel and promotional activities, in the context of the
COVID-19 pandemic, tapered off compared to last fiscal year.
The fluctuation of foreign currencies versus the Canadian dollar had an unfavourable impact of $72 million.
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 MD&A 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 this MD&A.
ANNUAL REPORT 2022
Page 16
Depreciation and amortization
Depreciation and amortization for the fourth quarter of fiscal 2022 totalled $148 million, up $13 million, as compared
to $135 million for the same quarter last fiscal year. In fiscal 2022, depreciation and amortization totalled $560
million, up $45 million, as compared to $515 million for last fiscal year. These increases were mainly attributable to
additional depreciation and amortization related to the Recent Acquisitions, as well as additions to property, plant and
equipment, which increased the depreciable base.
Impairment of intangible assets
In fiscal 2022, a non-cash impairment of intangible assets charge of $58 million ($43 million after tax) was recorded.
The charge includes $50 million ($38 million after tax) related to software assets following the Company’s decision to
pause the ERP implementation within the Dairy Division (Canada) for a minimum of three years and $8 million ($5
million after tax) as a result of the application of an agenda decision of the IFRIC related to the capitalization of cloud-
based software costs.
In fiscal 2021, a non-cash impairment of intangible assets charge of $19 million was incurred in relation to our
decision to retire one of our cheese brand names from our Australian portfolio.
Gain on disposal of assets
In fiscal 2022, the Company recorded a gain on disposal of assets of $9 million ($8 million after tax) resulting mainly
from the sale of a facility in the Canada Sector.
Acquisition and restructuring costs
Acquisition and restructuring costs for the fourth quarter of fiscal 2022 are comprised of restructuring costs of
approximately $71 million ($51 million after tax) related to the announcement of several major capital investments and
consolidation initiatives intended to enhance and streamline our manufacturing footprint in our USA Sector and
International Sector as well as to our plans to outsource the Nuneaton facility's warehouse and distribution activities,
creating opportunities for network consolidation within our Europe Sector. Restructuring costs included a non-cash
impairment charge of property, plant and equipment of $60 million ($43 million after tax) and severance costs of
$8 million ($6 million after tax). During the same quarter last fiscal year, acquisition and restructuring costs amounted
to $3 million, which related to stamp duty taxes from a previous acquisition.
Acquisition and restructuring costs in fiscal 2022 amounted to $71 million, which included restructuring costs of $71
million ($51 million after tax) as described above as well as acquisition costs incurred for the Recent Acquisitions that
were offset by a favourable purchase price adjustment for a prior year acquisition amounting to nil. Last fiscal year,
acquisition and restructuring costs amounted to $3 million, which included a gain on disposal of assets of $6 million
($5 million after tax) related to the sale of a closed facility in the Canada Sector and additional costs related to stamp
duty taxes from a previous acquisition.
Financial charges
In the fourth quarter of fiscal 2022 and in fiscal 2022, financial charges totalled $16 million and $70 million,
respectively, down $7 million and $26 million, respectively, mainly due to an increased gain on hyperinflation derived
from the indexation of non-monetary assets and liabilities in Argentina.
ANNUAL REPORT 2022
Page 17
Income tax expense
Income tax recovery for the fourth quarter of fiscal 2022 totalled $12 million, compared to an income tax expense of
$39 million for the same quarter last fiscal year. The decrease in income tax expense is mainly due to lower taxable
earnings. The income tax recovery in the fourth quarter of fiscal 2022 and the income tax expense in the same
quarter last fiscal year both reflect the tax effect of adjustments in respect of inflation in Argentina and the impact of
the change in the geographic mix of quarterly earnings across the various jurisdictions in which we operate.
Income tax expense in fiscal 2022 totalled $131 million, reflecting an effective tax rate of 32.3% as compared to
25.8% last fiscal year.
The effective income tax rate for fiscal 2022 included the increase in deferred income tax liability balances to reflect
the enactment in June 2021 of an increase from 19% to 25% of the corporate income tax rate in the United Kingdom,
which will be effective as of April 1, 2023. As a result, we incurred a one-time non-cash income tax expense of $50
million. The effective tax rate also reflected the increase in the Argentine corporate income tax rate from 25% to 35%,
enacted in June 2021, the non-taxable portion of the gain on disposal of assets in Canada, as well as the tax effect of
adjustments in respect of inflation in Argentina. The effective tax rate for fiscal 2022 would have been 26.1%
excluding the effects of these factors.
The effective income tax rate for fiscal 2021 reflected the tax treatment of an impairment of intangible assets charge
of $19 million and the tax effect of adjustments in respect of inflation in Argentina. Excluding the effects of those two
factors, the effective tax rate for fiscal 2021 would have been 26.3%.
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 amount and source of taxable income,
amendments to tax legislations and income tax rates, changes in assumptions, as well as estimates for tax assets
and liabilities we use.
Adjusted net earnings1
Adjusted net earnings1 for the fourth quarter of fiscal 2022 totalled $108 million, down $16 million or 12.9%, as
compared to $124 million for the same quarter last fiscal year. This is mainly due to a decrease in net earnings of $66
million, as described above, excluding higher acquisition and restructuring costs of $49 million after tax.
In fiscal 2022, adjusted net earnings1 totalled $485 million, down $230 million or 32.2%, as compared to $715 million
for last fiscal year. This is mainly due to a decrease in net earnings of $352 million, as described above, excluding a
higher impairment of intangible assets charge of $24 million after tax, a gain on disposal of assets of $8 million after
tax, higher acquisition and restructuring costs of $54 million after tax, and a one-time non-cash expense of $50 million
to adjust deferred income tax liability balances to reflect the increase in the corporate income tax rate in the United
Kingdom.
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 MD&A 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.
ANNUAL REPORT 2022
Page 18
QUARTERLY FINANCIAL INFORMATION BY SECTOR
CANADA SECTOR
(in millions of CDN dollars)
Fiscal years
Revenues
Adjusted EBITDA
Q4
1,055
117
2022
Q3
Q2
Q1
Q4
2021
Q3
Q2
Q1
1,112
121
1,081
124
1,033
113
1,001
108
1,089
118
1,063
117
982
104
Adjusted EBITDA margin
11.1 %
10.9 %
11.5 %
10.9 %
10.8 %
10.8 %
11.0 %
10.6 %
USA SECTOR
(in millions of CDN dollars)
Fiscal years
Revenues
Adjusted EBITDA
Q4
1,743
42
Adjusted EBITDA margin
2.4 %
2022
Q3
Q2
Q1
Q4
2021
Q3
Q2
Q1
1,627
1,533
1,506
83
5.1 %
67
4.4 %
96
6.4 %
1,399
93
1,657
171
1,649
140
1,417
163
6.6 %
10.3 %
8.5 %
11.5 %
Selected factors positively (negatively) affecting financial performance
(in millions of CDN dollars)
Fiscal years
2022
2021
USA Market Factors1,2
US currency exchange2
Q4
(19)
—
Q3
(40)
(6)
Q2
(17)
(8)
Q1
(42)
(18)
Q4
(4)
(5)
Q3
34
(2)
Q2
4
2
Q1
23
5
1 Refer to the ‘‘Glossary’’ section of this MD&A.
2 As compared to same quarter last fiscal year.
Other pertinent information
(in US dollars, except for average exchange rate)
Fiscal years
Q4
2022
Q3
Q2
Q1
Q4
2021
Q3
Q2
Q1
Block market price1
Opening
Closing
Average
Butter market price1
Opening
Closing
Average
Average whey powder
market price1
Spread1
US average exchange rate
to Canadian dollar2
1.980
2.250
2.005
1.873
1.980
1.805
1.553
1.873
1.706
1.738
1.553
1.657
1.650
1.738
1.687
2.573
1.650
2.129
2.640
2.573
2.249
1.330
2.640
1.778
2.453
2.700
2.692
1.760
2.453
1.975
1.740
1.760
1.716
1.818
1.740
1.805
1.420
1.818
1.480
1.510
1.420
1.444
1.765
1.510
1.571
1.335
1.765
1.500
0.759
0.622
0.522
0.626
(0.253)
(0.099)
(0.034)
(0.164)
0.517
0.001
0.388
0.168
0.311
0.141
0.356
0.047
1.266
1.260
1.259
1.231
1.268
1.306
1.333
1.378
1 Refer to the ‘‘Glossary’’ section of this MD&A.
2 Based on Bank of Canada published information.
ANNUAL REPORT 2022
Page 19
INTERNATIONAL SECTOR
(in millions of CDN dollars)
Fiscal years
Revenues
Adjusted EBITDA
Q4
922
62
2022
Q3
Q2
Q1
Q4
2021
Q3
Q2
Q1
919
85
858
56
754
45
827
62
807
105
806
78
781
60
Adjusted EBITDA margin
6.7 %
9.2 %
6.5 %
6.0 %
7.5 %
13.0 %
9.7 %
7.7 %
Selected factors positively (negatively) affecting financial performance
(in millions of CDN dollars)
Fiscal years
2022
2021
Foreign currency exchange1
Q4
(12)
Q3
(13)
Q2
(14)
Q1
(4)
Q4
3
Q3
4
Q2
(1)
Q1
(9)
1 As compared to same quarter last fiscal year.
EUROPE SECTOR
(in millions of CDN dollars)
Fiscal years
Revenues
Adjusted EBITDA
Q4
237
39
2022
Q3
Q2
Q1
Q4
2021
Q3
243
33
217
36
195
36
211
40
210
37
Q2
Q1
184
35
211
40
Adjusted EBITDA margin
16.5 %
13.6 %
16.6 %
18.5 %
19.0 %
17.6 %
19.0 %
19.0 %
ANNUAL REPORT 2022
Page 20
CANADA SECTOR
(in millions of CDN dollars)
Revenues
Adjusted EBITDA
Adjusted EBITDA margin
For the three-month periods
ended March 31
For the years
ended March 31
2022
1,055
117
11.1 %
2021
1,001
108
10.8 %
2022
4,281
475
11.1 %
2021
4,135
447
10.8 %
The Canada Sector consists of the Dairy Division (Canada).
Revenues
Revenues for the fourth quarter of fiscal 2022 totalled $1.055 billion, an increase of $54 million or 5.4%, as
compared to $1.001 billion for the same quarter last fiscal year.
Revenues increased due to higher selling prices in connection with the higher cost of milk as raw material and pricing
initiatives implemented to mitigate increasing input costs caused by inflationary pressures.
Sales volumes were lower in the retail market segment, mainly due to fluid milk sales volumes returning closer to pre-
pandemic levels, partially offset by a rebound in sales volumes in the foodservice market segment. Retail market
segment sales in the comparative quarter of fiscal 2021 had benefited from an uplift in consumer demand related to
the COVID-19 pandemic.
Revenues in fiscal 2022 totalled $4.281 billion, an increase of $146 million or 3.5%, as compared to $4.135 billion
last fiscal year.
Revenues increased due to higher selling prices in connection with the higher cost of milk as raw material and pricing
initiatives implemented to mitigate increasing input costs caused by inflationary pressures.
Sales volumes in the retail and industrial market segments were lower, although partially offset by a rebound in sales
volumes in the foodservice market segment. Retail market segment sales in fiscal 2021 had benefited from an uplift in
consumer demand related to the COVID-19 pandemic, mainly in the fluid milk category.
The retail market segment represented approximately 59% of revenues (63% in fiscal 2021), whereas the foodservice
market segment represented approximately 33% of revenues (29% in fiscal 2021). These fluctuations reflected the
shift in consumer demand related to the COVID-19 pandemic as sales volumes in our market segments returned
closer to pre-pandemic levels. The industrial market segment represented approximately 8% of revenues in both
fiscal 2022 and 2021.
To continue the expansion of our category-leading Armstrong cheese range, we launched several new and innovative
products in high-growth and value-added formats, such as shreds, snacks, and slices. In terms of our other flagship
brands, such as Saputo, Dairyland, and Neilson, we continued to support them through traditional, digital, and social
media advertising as well as various trade activities.
In the dairy alternatives category, our first commercial production of plant-based beverages occurred at our Port
Coquitlam facility. This inaugural production marked the beginning of our co-manufacturing activities for various dairy
alternative beverage companies and retailers in North America.
With our e-commerce channels, we continued to expand the product offering on our direct-to-consumer website, The
Saputo Fridge, and our newest e-commerce platform, Nibbl., which went live during the third quarter of fiscal 2022,
with delivery available in Ontario and Québec. Nibbl. products will be available for delivery in additional Canadian
provinces during fiscal 2023.
ANNUAL REPORT 2022
Page 21
Adjusted EBITDA
Adjusted EBITDA for the fourth quarter of fiscal 2022 totalled $117 million, an increase of $9 million or 8.3%, as
compared to $108 million for the same quarter last fiscal year.
The Canada Sector continued to show improved results despite challenging market conditions. Higher input and
logistics costs caused by inflationary pressures continued to have an unfavourable impact. This included an amount
of $7 million related to freight and logistics costs, which were offset by the positive effect of pricing initiatives.
With fluid milk sales volumes decreasing to pre-pandemic levels, product mix had a favourable impact.
Adjusted EBITDA in fiscal 2022 totalled $475 million, an increase of $28 million or 6.3%, as compared to $447 million
last fiscal year.
Higher input and logistics costs caused by inflationary pressures had an unfavourable impact, including $20 million
related to freight and logistics costs. Pricing initiatives, as described above, contributed positively. With fluid milk sales
volumes decreasing to pre-pandemic levels, the product mix was favourable. Also, the extreme weather event in
British Columbia in November 2021 had a negative impact, mainly due to incremental freight and logistics costs
required to service our customers.
The positive effects of lower administrative costs, such as travel and promotional activities, in the context of the
COVID-19 pandemic, tapered off compared to last fiscal year.
ANNUAL REPORT 2022
Page 22
USA SECTOR
(in millions of CDN dollars)
Revenues
Adjusted EBITDA
Adjusted EBITDA margin
For the three-month periods
ended March 31
For the years
ended March 31
2022
1,743
42
2.4 %
2021
1,399
93
6.6 %
2022
6,409
288
4.5 %
2021
6,122
567
9.3 %
Selected factors positively (negatively) affecting financial performance
(in millions of CDN dollars)
For the three-month periods
ended March 31
For the years
ended March 31
USA Market Factors1,2
US currency exchange2
1 Refer to the ‘‘Glossary’’ section of this MD&A.
2 As compared to same quarter last fiscal year for the three-month periods; as compared to last fiscal year for the years ended March 31.
(118)
(19)
(32)
(4)
(5)
—
2022
2021
2022
2021
57
—
Other pertinent information
(in US dollars, except for average exchange rate)
For the three-month periods
ended March 31
For the years
ended March 31
Block market price1
Opening
Closing
Average
Butter market price1
Opening
Closing
Average
Average whey powder market price1
Spread1
US average exchange rate to Canadian
dollar2
1 Refer to the ‘‘Glossary’’ section of this MD&A.
2 Based on Bank of Canada published information.
The USA Sector consists of the Dairy Division (USA).
2022
2021
2022
1.980
2.250
2.005
2.453
2.700
2.692
0.759
(0.253)
1.650
1.738
1.687
1.420
1.818
1.480
0.517
0.001
1.738
2.250
1.793
1.818
2.700
2.047
0.630
(0.137)
1.266
1.268
1.251
2021
1.330
1.738
1.961
1.335
1.818
1.498
0.393
0.090
1.326
ANNUAL REPORT 2022
Page 23
Revenues
Revenues for the fourth quarter of fiscal 2022 totalled $1.743 billion, an increase of $344 million or 24.6%, as
compared to $1.399 billion for the same quarter last fiscal year.
The combined effect of the higher average block market price2 and of the higher average butter market price2 had a
positive impact of $217 million.
Sales volumes were stable in all our market segments and consumer demand for mozzarella continued to be subject
to competitive market conditions.
Revenues increased due to pricing initiatives implemented to mitigate increasing input costs caused by inflationary
pressures.
The contributions of the Reedsburg Facility Acquisition and the Carolina Acquisition totalled $26 million.
The fluctuation of the US dollar versus the Canadian dollar had a favourable impact of $2 million.
Revenues in fiscal 2022 totalled $6.409 billion, an increase of $287 million or 4.7%, as compared to $6.122 billion
last fiscal year.
The combined effect of the higher average butter market price2 and of the lower average block market price2 had a
positive impact of $61 million.
Higher sales volumes in the foodservice and industrial market segments contributed positively, but were partially
offset by lower retail market segment sales volumes. Consumer demand for mozzarella continued to recover
throughout the fiscal year, although it remained in flux and subject to highly competitive market conditions.
Revenues increased due to pricing initiatives implemented to mitigate increasing input costs caused by inflationary
pressures.
The contributions of the Reedsburg Facility Acquisition and the Carolina Acquisition, for the ten-month and seven-
month periods, respectively, since they were acquired, totalled $58 million.
The fluctuation of the US dollar versus the Canadian dollar had an unfavourable impact of $307 million.
The retail market segment represented approximately 44% of revenues (47% in fiscal 2021), whereas the foodservice
market segment represented approximately 45% of revenues (43% in fiscal 2021). These year-over-year changes in
percentages reflected the gradual return to historical levels, which had been affected by the shift in consumer
demand related to the COVID-19 pandemic in fiscal 2021. The industrial market segment represented approximately
11% of revenues (10% in fiscal 2021).
Our Frigo Cheese Heads and Montchevre retail brands continued to lead and grow in string and goat cheese,
respectively. The UK’s #1 cheddar cheese brand, Cathedral City, which was successfully introduced to the USA
market in fiscal 2021, continued to grow and gain new distribution and trial well with consumers. In the latter part of
fiscal 2022, the Dairy Division (USA) entered into the dairy alternative cheese category with the launch of Vitalite into
the foodservice and retail market segments. We also added new sales volumes in dairy alternative beverages.
2 Refer to the ‘‘Glossary’’ section of this MD&A.
ANNUAL REPORT 2022
Page 24
Adjusted EBITDA
Adjusted EBITDA for the fourth quarter of fiscal 2022 totalled $42 million, a decrease of $51 million or 54.8%, as
compared to $93 million for the same quarter last fiscal year.
We continued to be challenged in the quarter with inflation, commodity market volatility, as well as labour availability
issues.
Higher input and logistics costs, such as consumables, packaging, transportation, and fuel, caused by inflationary
pressures had a negative impact. Pricing initiatives undertaken were not sufficient to mitigate the ongoing impact of
inflation on our costs, which included an increase of $33 million related to freight and logistics costs.
USA Market Factors2 resulted in a negative net impact of $19 million, as compared to the same quarter last fiscal
year.
The following factors and their impact are included in USA Market Factors:
•
•
•
The spread2 (negative impact).
The impact on the realization of inventories and the absorption of fixed costs from the combined effect of the
fluctuation of the average block market price2 and of the average butter market price2 related to dairy food
products (minimal impact).
Higher dairy ingredient market prices (positive impact).
Labour shortages in some of our facilities, including those due to the outbreak of the Omicron COVID-19 variant, and
supply chain disruptions continued to put pressure on our ability to supply ongoing demand, which negatively
impacted efficiencies and the absorption of fixed costs.
The contributions of the Reedsburg Facility Acquisition and the Carolina Acquisition were minimal.
The fluctuation of the US dollar versus the Canadian dollar had a minimal impact.
Adjusted EBITDA in fiscal 2022 totalled $288 million, a decrease of $279 million or 49.2%, as compared to
$567 million last fiscal year.
USA Market Factors resulted in a negative net impact of $118 million, as compared to last fiscal year.
The following factors and their impact are included in USA Market Factors:
•
•
•
The spread (negative impact).
The impact on the realization of inventories and the absorption of fixed costs from the combined effect of the
fluctuation of the average block market price and of the average butter market price related to dairy food
products (negative impact).
Higher dairy ingredient market prices (positive impact).
Pricing initiatives undertaken were not sufficient to mitigate increasing costs caused by inflationary pressures, which
included an increase of $119 million related to freight and logistics costs.
Labour shortages in some of our facilities and supply chain disruptions put pressure on our ability to supply ongoing
demand. These negative effects more than offset the positive effect of increased sales volumes, led by the
foodservice market segment, on efficiencies and the absorption of fixed costs.
The contributions of the Reedsburg Facility Acquisition and the Carolina Acquisition, for the ten-month and seven-
month periods, respectively, since they were acquired, were minimal.
The fluctuation of the US dollar versus the Canadian dollar had an unfavourable impact of $32 million.
2 Refer to the ‘‘Glossary’’ section of this MD&A.
ANNUAL REPORT 2022
Page 25
INTERNATIONAL SECTOR
(in millions of CDN dollars)
Revenues
Adjusted EBITDA
Adjusted EBITDA margin
For the three-month periods
ended March 31
For the years
ended March 31
2022
922
62
6.7 %
2021
827
62
7.5 %
2022
3,453
248
7.2 %
2021
3,221
305
9.5 %
Selected factors positively (negatively) affecting financial performance
(in millions of CDN dollars)
Foreign currency exchange1
For the three-month periods
ended March 31
For the years
ended March 31
2022
(12)
2021
3
2022
(43)
2021
(3)
1 As compared to same quarter last fiscal year for the three-month periods; as compared to last fiscal year for the years ended March 31.
The International Sector consists of the Dairy Division (Australia) and the Dairy Division (Argentina).
Revenues
Revenues for the fourth quarter of fiscal 2022 totalled $922 million, an increase of $95 million or 11.5%, as
compared to $827 million for the same quarter last fiscal year.
Higher international cheese and dairy ingredient market prices and the effect of the fluctuation of the Argentine peso
and the Australian dollar on export sales denominated in US dollars were favourable. Disrupted market conditions
and supply chain challenges, due to container and vessel availability issues and port inefficiencies, negatively
impacted export sales volumes.
Revenues increased due to higher domestic selling prices in our Dairy Division (Argentina), as a result of the
hyperinflationary economy, as well as pricing initiatives implemented in our Dairy Division (Australia), in response to
the higher cost of milk as raw material and increasing input costs caused by inflationary pressures.
The fluctuation of the functional currencies used in the International Sector versus the Canadian dollar had an
unfavourable impact of $31 million.
Revenues in fiscal 2022 totalled $3.453 billion, an increase of $232 million or 7.2%, as compared to $3.221 billion
last fiscal year.
Higher international cheese and dairy ingredient market prices had a positive impact. However, during the first six
months of fiscal 2022, fulfilling the export sales contracts that had been entered into in fiscal 2021 at depressed
commodity prices had an unfavourable impact. The effect of the fluctuation of the Argentine peso and the Australian
dollar on export sales denominated in US dollars was favourable. Supply chain challenges due to container and
vessel availability issues and port inefficiencies negatively impacted export sales volumes.
The effect of higher domestic selling prices in our Dairy Division (Argentina), as a result of the hyperinflationary
economy, continued to be positive. Revenues also increased due to pricing initiatives implemented in our Dairy
Division (Australia) in response to the higher cost of milk and increasing input costs caused by inflationary pressures.
The fluctuation of the functional currencies used in the International Sector versus the Canadian dollar had an
unfavourable impact of $110 million.
The retail market segment represented approximately 41% of total revenues (43% in fiscal 2021). The foodservice
market segment represented approximately 8% of total revenues in fiscal 2022 (7% in fiscal 2021). The industrial
market segment represented approximately 51% of total revenues in fiscal 2022 (50% in fiscal 2021). Industrial
market segment sales were destined mostly for export markets.
We continued to leverage our vast portfolio of brands inherited through acquisitions. The Dairy Division (Australia)
launched its rebranded CHEER cheese, supported by a strong awareness campaign in its first year. The Devondale
relaunch continued to grow brand awareness. Communication and innovation in smaller formats helped retain our
position for the Tasmanian Heritage and Mersey Valley specialty cheese brands. In the Dairy Division (Argentina), La
Paulina continued to be the leading local cheese brand.
ANNUAL REPORT 2022
Page 26
Adjusted EBITDA
Adjusted EBITDA for the fourth quarter of fiscal 2022 totalled $62 million, flat, as compared to $62 million for the
same quarter last fiscal year.
We continued to face higher input and logistics costs caused by inflationary pressures. Pricing initiatives undertaken
in the domestic markets were not sufficient to mitigate increased input costs, notably the increased farmgate milk
prices in Australia.
In our export markets, the relation between international cheese and dairy ingredient market prices and the cost of
milk as raw material had a positive impact.
The fluctuation of the functional currencies used in the International Sector versus the Canadian dollar had an
unfavourable impact of $12 million.
In fiscal 2022, adjusted EBITDA totalled $248 million, a decrease of $57 million or 18.7%, as compared to
$305 million last fiscal year.
Higher input and logistics costs, including higher raw material costs due to the increased farmgate milk prices, and
freight and logistics costs caused by inflationary pressures, had an unfavourable impact. Pricing initiatives undertaken
in the domestic markets were not sufficient to mitigate increased input costs, notably farmgate milk prices in Australia.
Reduced milk availability in our Dairy Division (Australia) from intensified competition for raw material negatively
impacted efficiencies and the absorption of fixed costs.
Lower export sales volumes resulting from supply chain challenges, due to container and vessel availability issues
and port inefficiencies, negatively impacted adjusted EBITDA. In our export markets, the relation between
international cheese and dairy ingredient market prices and the cost of milk as raw material had a positive impact.
Fulfilling the export sales contracts entered into at depressed commodity prices last fiscal year had a negative impact
in the first six months of fiscal 2022.
The fluctuation of the functional currencies used in the International Sector versus the Canadian dollar had an
unfavourable impact of $43 million.
ANNUAL REPORT 2022
Page 27
EUROPE SECTOR
(in millions of CDN dollars)
Revenues
Adjusted EBITDA
Adjusted EBITDA margin
For the three-month periods
ended March 31
For the years
ended March 31
2022
237
39
16.5 %
2021
211
40
19.0 %
2022
892
144
16.1 %
2021
816
152
18.6 %
The Europe Sector consists of the Dairy Division (UK).
Revenues
Revenues for the fourth quarter of fiscal 2022 totalled $237 million, an increase of $26 million or 12.3%, as
compared to $211 million for the same quarter last fiscal year.
Revenues increased due to pricing initiatives implemented to mitigate higher input costs caused by inflationary
pressures and the contributions of the Bute Island Acquisition and the Wensleydale Dairy Products Acquisition, which
totalled $18 million.
Sales volumes were stable as compared to the same quarter last fiscal year, although retail market segment sales
volumes decreased as they returned to historical levels.
The impact of the fluctuation of the British pound sterling versus the Canadian dollar had an unfavourable impact of
$6 million.
Revenues in fiscal 2022 totalled $892 million, an increase of $76 million or 9.3%, as compared to $816 million last
fiscal year.
Revenues increased due to pricing initiatives implemented to mitigate higher input costs caused by inflationary
pressures and the contributions of the Bute Island Acquisition and Wensleydale Dairy Products Acquisition, which
totalled $65 million for the ten-month and eight-month periods, respectively, since they were acquired.
Sales volumes were higher as compared to those of last fiscal year, primarily due to higher industrial market segment
sales volumes, mainly in the cheese and dairy ingredients categories. Although, international dairy ingredient market
prices for our products in the industrial market segment were lower. Retail market segment sales volumes decreased
as they returned to historical levels.
The impact of the fluctuation of the British pound sterling versus the Canadian dollar had an unfavourable impact of
$7 million.
The retail market segment represented approximately 78% of revenues (87% in fiscal 2021), reflecting the effects of
the COVID-19 pandemic in fiscal 2021 as sales volumes returned to historical levels. The foodservice market
segment represented approximately 2% of revenues (1% in fiscal 2021). The industrial market segment represented
20% of revenues (12% in fiscal 2021) following an increase in sales volumes in this market segment.
The Dairy Division (UK) maintained its position as the largest manufacturer of branded cheese in the United Kingdom,
mainly with its category-leading Cathedral City brand, as well as its position as a top manufacturer of dairy spreads
with its category-leading Clover brand. We continued to develop our export business for the Cathedral City brand,
with a new distribution agreement in Europe and retail growth across Canada and the USA through our North
American platforms. Our Wensleydale Dairy Products Acquisition enhanced the breadth of our cheese offering.
Following the Bute Island Acquisition, we now have an established platform from which to develop our dairy
alternative business, building on strong brand and private label market positions.
ANNUAL REPORT 2022
Page 28
Adjusted EBITDA
Adjusted EBITDA for the fourth quarter of fiscal 2022 totalled $39 million, a decrease of $1 million or 2.5%, as
compared to $40 million for the same quarter last fiscal year.
Decreased retail market segment sales volumes had a negative impact, while pricing initiatives were sufficient to
offset higher input costs caused by inflationary pressures and increased commodity prices.
The contributions of the Bute Island Acquisition and the Wensleydale Dairy Products Acquisition had a positive impact
of $2 million.
The impact of the fluctuation of the British pound sterling versus the Canadian dollar was minimal.
Adjusted EBITDA in fiscal 2022 totalled $144 million, a decrease of $8 million or 5.3%, as compared to $152 million
last fiscal year.
Decreased retail market segment sales volumes had a negative impact. On the other hand, increased industrial
market segment sales volumes, mainly in the cheese and dairy ingredients categories, had a positive impact on
efficiencies. Lower international dairy ingredient market prices for our products in this market segment had an
offsetting negative impact.
We faced higher input costs caused by inflationary pressures and increased commodity prices, which had an
unfavourable impact. However, pricing initiatives described above contributed positively to the mitigation of higher
input costs.
The contributions of the Bute Island Acquisition and the Wensleydale Dairy Products Acquisition, for the ten-month
and eight-month periods, respectively, since they were acquired, had a positive impact of $8 million.
The impact of the fluctuation of the British pound sterling versus the Canadian dollar was minimal.
ANNUAL REPORT 2022
Page 29
LIQUIDITY, FINANCIAL AND CAPITAL RESOURCES
The intent of this section is to provide insight into our cash and capital management strategies and how they drive
operational objectives, as well as to provide details on how we manage our liquidity risk to meet Saputo's financial
obligations as they come due.
As we navigate through the lingering disruptions of the COVID-19 pandemic, inflationary pressures, geopolitical
developments, and the related uncertainties, we are focused on our capital allocation priorities to support our Global
Strategic Plan as well as cash flow generation. Our current capital allocation priorities are focused on investing to
support organic growth, strategic acquisitions, and our Saputo Promise.
The Company's cash and cash equivalents totalled $165 million as at March 31, 2022. In addition to these funds, we
have unused credit facilities of $1.743 billion under our bank credit facilities as at March 31, 2022. We believe we are
well positioned to face current market conditions given our flexible balance sheet.
The Company's liquidity needs are funded from cash generated by operations, unsecured bank credit facilities, and
unsecured senior notes. These funds are used principally for capital expenditures, dividends, debt repayments, and
business acquisitions and are expected to be sufficient to meet the Company’s liquidity requirements. We do not
foresee any difficulty in securing financing beyond what is currently available through existing arrangements or public
offerings, when appropriate, to fund possible acquisitions and/or to refinance debt obligations.
Saputo’s cash flows are summarized in the following table:
(in millions of CDN dollars)
Net cash generated from operating activities
Cash used for investing activities
Cash used for financing activities
Decrease in cash and cash equivalents
Operating Activities
For the three-month periods
ended March 31
For the years
ended March 31
2022
184
(161)
(32)
(9)
2021
151
(158)
(190)
(197)
2022
693
(799)
(72)
(178)
2021
1,078
(387)
(705)
(14)
Net cash generated from operating activities for the fourth quarter of fiscal 2022, amounted to $184 million, in
comparison to $151 million for the same quarter last fiscal year. This increase of $33 million was mainly due to a
decrease of $12 million in income taxes paid and an increase related to changes in non-cash operating working
capital items of $68 million, driven by the fluctuations in accounts receivable, inventories, and accounts payable in
line with the fluctuation of market prices as well as the timing of collections of accounts receivable and of payments of
accounts payable. The increase was partially offset by a decrease in adjusted EBITDA1 of $43 million and a decrease
of $10 million in non-cash foreign exchange gain on debt.
In fiscal 2022, net cash generated from operating activities amounted to $693 million, in comparison to $1.078 billion
for last fiscal year. This decrease of $385 million was mainly due to a decrease in adjusted EBITDA1of $316 million
and an increase in non-cash foreign exchange gain on debt of $66 million. The decrease was also due to a decrease
related to changes in non-cash operating working capital items of $19 million, driven by the fluctuations in accounts
receivable, inventories, and accounts payable in line with the fluctuation of market prices as well as the timing of
collections of accounts receivable and of payments of accounts payable. These decreases were partially offset by a
decrease in income taxes paid of $17 million.
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 MD&A 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.
ANNUAL REPORT 2022
Page 30
Investing Activities
Investing activities for the fourth quarter of fiscal 2022 amounted to $161 million, which included $207 million used
for additions to property, plant and equipment, additions to intangible assets totalling $7 million related to the ERP
project, as well as the offsetting effect of proceeds from the disposal of assets in the amount of $51 million.
Investing activities in fiscal 2022 amounted to $799 million, which included $371 million used for the Recent
Acquisitions, $453 million used for additions to property, plant and equipment, additions to intangible assets totalling
$45 million related to the ERP project, as well as the offsetting effect of proceeds from the disposal of assets in the
amount of $70 million. Of these additions, 53% were allocated to base capital expenditures, investments to support
the execution of our Saputo Promise, capex related to the ERP project, and other corporate capital expenditures,
while 47% were allocated to strategic projects within the scope of our Global Strategic Plan.
Financing Activities
Financing activities for the fourth quarter of fiscal 2022 included an increase in bank loans of $21 million. Also, we
paid $18 million and $50 million of lease liabilities and dividends, respectively, net of $25 million settled through the
DRIP. Finally, shares were issued as part of the stock option plan for $16 million.
Financing activities in fiscal 2022 included an increase in bank loans of $356 million, mainly relating to funds drawn
in connection with our Recent Acquisitions. Financing activities also included the issuance, on June 22, 2021, of
Series 9 medium term notes for an aggregate principal amount of $300 million. The net proceeds of the issuance
were used to repay the $300 million aggregate principal amount of the Series 2 medium term notes due June 23,
2021. We repaid $187 million of term loan facilities incurred in connection with prior acquisitions. Also, $80 million of
lease liabilities and $209 million in dividends were paid, net of $87 million settled through the DRIP. Finally, shares
were issued as part of the stock option plan for $42 million.
Liquidity
(in millions of CDN dollars, except ratio)
Fiscal years
Current assets
Current liabilities
Working capital1
Working capital ratio1
1 Refer to the ‘‘Glossary’’ section of this MD&A.
2022
4,295
2,780
1,515
1.54
2021
3,948
2,146
1,802
1.84
The working capital ratio is an indication of the Company's ability to cover short-term liabilities with short-term assets,
without having excess dormant assets. The decrease in the working capital ratio was mainly due to a higher level of
bank loans, which included funds drawn in connection with our Recent Acquisitions.
ANNUAL REPORT 2022
Page 31
Capital Management
Our capital strategy requires a well-balanced financing structure to maintain the flexibility needed to implement growth
initiatives while allowing us to pursue disciplined capital investments and maximize shareholder value.
We continue to target a long-term leverage of approximately 2.25 times net debt to adjusted EBITDA1. From time to
time, we may deviate from our long-term leverage target to pursue strategic opportunities.
(in millions of CDN dollars, except ratio and number of shares and options)
Fiscal years
Long-term debt
Bank loans
Lease Liabilities
Less: Cash and cash equivalents
Net debt2
Adjusted EBITDA1
Net debt to adjusted EBITDA1
Number of common shares
Number of stock options
2022
3,375
419
451
(165)
4,080
1,155
3.53
2021
3,578
76
461
(309)
3,806
1,471
2.59
416,738,041
412,333,571
22,021,670
23,339,321
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 MD&A 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 this MD&A.
As at March 31, 2022, the Company had $165 million in cash and cash equivalents and available bank credit facilities
of $2.162 billion, of which $419 million were drawn. See Notes 10 and 11 to the consolidated financial statements for
additional information related to bank loans and long-term debt.
Share capital authorized by Saputo is comprised of an unlimited number of common shares. The common shares are
voting and participating. As at May 31, 2022, 416,890,118 common shares and 24,102,879 stock options were
outstanding.
Sustainability-linked loan (SLL) structure
In fiscal 2020, we pledged to accelerate our global climate, water, and waste performance and announced clear
targets and a formal commitment to make significant and sustainable progress by 2025.
On August 5, 2021, we amended our US$1 billion North American bank credit facility to, among other things,
introduce a sustainability-linked loan (SLL) structure. The SLL structure introduces an annual pricing adjustment
based on whether the Company achieves key climate and water targets in line with its 2025 environmental
commitments. On June 1, 2022, the Company extended the maturity date to June 1, 2027. During fiscal 2022,
$354 million (US$ 283 million) were drawn, mainly to finance acquisitions, and $147 million (US$ 118 million) were
repaid. As at March 31, 2022, a total of $207 million (US$ 165 million) was drawn on this bank credit facility.
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 MD&A 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
ANNUAL REPORT 2022
Page 32
CONTRACTUAL OBLIGATIONS
We manage and continually monitor the Company's commitments and contractual obligations to ensure that these
can be met with funding provided by operations and capital structure optimization.
The Company's contractual obligations consist of commitments to repay long-term debt, payments for leased
premises, equipment, and rolling stock, as well as purchase obligations for capital expenditures and service
agreements to which we are committed. Note 11 to the consolidated financial statements describes the Company's
commitment to repay long-term debt and Note 7 and 20 to the consolidated financial statements describes its lease
commitments.
(in millions of CDN dollars)
March 31, 2022
March 31, 2021
Long-term
debt
Leases
Purchase
obligations
& other
300
306
1,035
350
350
1,034
3,375
88
70
84
44
38
280
604
245
37
23
12
9
3
329
Long-term
debt
Leases
Purchase
obligations
& other
300
759
685
400
350
1,084
3,578
98
76
58
73
33
284
622
164
33
12
10
7
8
234
Total
633
413
1,142
406
397
1,317
4,308
Total
562
868
755
483
390
1,376
4,434
Less than 1 year
1–2 years
2–3 years
3–4 years
4–5 years
More than 5 years
Long-term debt
The Company’s long-term debt is described in Note 11 to the consolidated financial statements.
Bank term loans
In connection with the acquisition of the activities of Murray Goulburn Co-Operative Co. Limited (Murray Goulburn
Acquisition) in April 2018, we entered into a credit agreement, providing for a non-revolving term facility comprised of
three tranches. A total of $1.261 billion was drawn, of which $888 million has since been repaid and/or refinanced
through our medium term notes program. The credit facility bears interest at lenders’ prime rates plus a maximum of
1.00%, or bankers’ acceptance rates or the Australian Bank Bill Rate plus a minimum of 0.80% and a maximum of
2.00%, depending on the Company's credit ratings.
In connection with the acquisition of Dairy Crest Group plc (Dairy Crest Acquisition) in April 2019, we entered into a
credit agreement providing for a non-revolving term facility comprised of three tranches. A total of $1.985 billion was
drawn, of which $1.723 billion has since been repaid and/or refinanced through our medium term notes program. The
credit facility bears interest at lenders’ prime rates plus a maximum of 1.00% or LIBOR or SONIA or bankers’
acceptance rates plus a minimum of 0.80% and a maximum of 2.00%, depending on the Company's credit ratings.
On June 1, 2022, the Company extended the maturity dates of these bank term loans to June 1, 2025.
Senior notes
Long-term debt also includes seven series of unsecured senior notes outstanding under our medium term note
program for a total of $2.700 billion, with annual interest rates varying from 1.42% to 3.60% and maturities ranging
from June 2022 to June 2028.
ANNUAL REPORT 2022
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FINANCIAL POSITION
The main financial position items as at March 31, 2022, varied as compared to the balances as at March 31, 2021,
principally due to the inclusion of the Recent Acquisitions completed during this fiscal year. The variation also
reflected the strengthening of the Canadian dollar versus the US dollar, the Australian dollar, the Argentine peso, and
the British pound sterling.
The following table outlines the conversion rates of the respective local operations’ financial position items in foreign
currencies as at March 31, 2022, and March 31, 2021.
US dollar / Canadian dollar1
Australian dollar / Canadian dollar1
Argentine peso / Canadian dollar1
British pound sterling / Canadian dollar1
1 Based on Bank of Canada published information.
As at March 31, 2022
As at March 31, 2021
1.2505
0.9351
0.0112
1.6441
1.2562
0.9545
0.0137
1.7315
The fluctuation of the Canadian dollar versus the US dollar, the Australian dollar, the Argentine peso, and the British
pound sterling resulted in lower values recorded for the financial position items of the foreign operations.
The net cash position (cash and cash equivalents less bank loans) decreased from positive $233 million as at March
31, 2021, to negative $254 million as at March 31, 2022, mainly resulting from the funding of the Recent Acquisitions
and repayments of $187 million of the term loan facility incurred in connection with the Dairy Crest Acquisition. The
change in foreign currency translation adjustments recorded in other comprehensive income (loss) varied mainly due
to the fluctuation of foreign currencies versus the Canadian dollar.
GUARANTEES
From time to time, we enter into agreements in the normal course of business, such as service arrangements and
leases, and in connection with business or asset acquisitions or disposals, which by nature may provide for
indemnification to third parties. These indemnification provisions may be in connection with breach of representations
and warranties and for future claims for certain liabilities. The terms of these indemnification provisions vary in
duration. See Note 20 to the consolidated financial statements that discuss the Company’s guarantees.
RELATED PARTY TRANSACTIONS
In the normal course of business, we receive services from and provide goods and services to companies subject to
control or significant influence through ownership by Saputo's principal shareholder. These transactions are entered
into at fair value, consistent with market values for similar transactions. The services that are received consist mainly
of travel, publicity, lodging, and office space rental. The goods that are provided consist mainly of dairy products. The
services that are provided consist of management services. In fiscal 2022, these goods and services were of an
immaterial amount. Transactions with key management personnel (Management defines key management personnel
as all the executive officers who have responsibility and authority for controlling, overseeing, and planning the
activities, as well as the Company’s directors) are also considered related party transactions and consist of short-term
employee benefits, post-employment benefits, stock-based compensation, and payments under the deferred share
unit plan. Refer to Note 21 to the consolidated financial statements for further information on related party
transactions.
ANNUAL REPORT 2022
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CRITICAL ACCOUNTING ESTIMATES
The preparation of the Company’s financial statements requires Management to make certain judgments and
estimates about transactions and carrying values that are fulfilled at a future date. Judgments and estimates are
subject to fluctuations due to changes in internal and/or external factors and are continuously monitored by
Management. A discussion of the judgments and estimates that could have a material effect on the financial
statements is provided below.
Economic Conditions and Uncertainties
The Company continues to monitor and assess the impact of the lingering pandemic on the significant estimates and
judgments used in the preparation of the consolidated financial statements.
The Company is also continuously monitoring the geopolitical risk related to the evolving military conflict in Ukraine.
This crisis did not have a significant impact on the Company’s consolidated financial statements.
Income Taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the
consolidated provision for income taxes. During the ordinary course of business, there are many transactions and
calculations for which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated
tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these
matters differs from the amounts that were initially recorded, such differences will impact the results for the reporting
period and the respective current income tax and deferred income tax provisions in the reporting period in which such
determination is made.
Deferred income tax assets and liabilities are measured using enacted or substantively enacted income tax rates
expected to apply to taxable income in the years in which temporary differences are expected to be recovered or
settled. As a result, a projection of taxable income is required for those years, as well as an assumption of the
ultimate recovery or settlement period for temporary differences. The projection of future taxable income is based on
Management’s best estimates and may vary from actual taxable income. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Canadian, US, and international tax rules and regulations are subject to interpretation and require judgment on the
part of the Company that may be challenged by taxation authorities. The Company believes that it has adequately
provided for deferred tax obligations that may result from current facts and circumstances. Temporary differences and
income tax rates could change due to fiscal budget changes and/or changes in income tax laws.
Goodwill, Intangible Assets, and Business Combinations
Goodwill, trademarks, and customer relationships have principally arisen as a result of business combinations. The
acquisition method, which also requires significant estimates and judgments, is used to account for these business
combinations. As part of the allocation process in a business combination, estimated fair values are assigned to the
net assets acquired, including trademarks and customer relationships. These estimates are based on forecasts of
future cash flows, estimates of economic fluctuations, and an estimated discount rate. The excess of the purchase
price over the estimated fair value of the net assets acquired is then assigned to goodwill. In the event that actual net
assets fair values are different from estimates, the amounts allocated to the net assets, and specifically to trademarks
and customer relationships, could differ from what is currently reported. This would then have a pervasive impact on
the carrying value of goodwill. Differences in estimated fair values would also have an impact on the amortization of
definite life intangibles.
Impairment of Assets
Significant estimates and judgments are required in testing goodwill, intangible assets, and other long-lived assets,
including right-of-use assets, for impairment. Management uses estimates or exercises judgment in assessing
indicators of impairment, defining a CGU, forecasting future cash flows, and in determining other key assumptions
such as discount rates and earnings multipliers used for assessing fair value (less costs of disposal) or value in use.
Goodwill is tested for impairment annually based on the December 31 balances and whenever there is an indication
of impairment. Other long-lived assets are tested only when indicators of impairment are present.
ANNUAL REPORT 2022
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Employee Future Benefits
The Company is the sponsor to both defined benefit and defined contribution plans, which provide pension and other
post-employment benefits to its employees.
Several estimates and assumptions are required with regards to the determination of the defined benefit expense and
its related obligation, such as the discount rate used in determining the carrying value of the obligation and the
interest income on plan assets, the duration of the obligation, inflation, the expected health care cost trend rate, the
expected mortality rate, expected salary increase, etc. Changes in a number of key assumptions can have a material
impact on the calculation of the obligation. Actual results will normally differ from expectations. These gains or losses
are presented in the consolidated statements of comprehensive income.
CHANGES IN ACCOUNTING POLICIES
New accounting standards, interpretations, and amendments adopted during the year
Please refer to Note 3 to the consolidated financial statements for the fiscal years ended March 31, 2022, and 2021,
for more information regarding the effect of new accounting standards, interpretations, and amendments adopted
during fiscal 2022.
Recent standards, interpretations, and amendments not yet implemented
Please refer to Note 3 to the consolidated financial statements for the fiscal years ended March 31, 2022, and 2021,
for more information regarding the effect of new accounting standards, interpretations, and amendments not yet
implemented.
ANNUAL REPORT 2022
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RISKS AND UNCERTAINTIES
The main risks and uncertainties Saputo is exposed to are presented below. The Board of Directors (the Board)
delegated to the Audit Committee the responsibility to review, evaluate, and discuss with Management and Internal
Audit the risk factors inherent to Saputo, including the applicable environmental, social, and governance (ESG)
aspects of those risks, and ensure that appropriate measures are in place to enable Management to identify and
manage these risks and uncertainties effectively. The Board also delegated to the Corporate Governance and Human
Resources Committee the responsibility to oversee the risk management measures related to human resources risks,
including related ESG aspects such as business ethics, diversity, equity, and inclusion, and health and safety.
Saputo’s enterprise risk management program is overseen by the Audit Committee, and Saputo has also adopted
and implemented policies and procedures relating to risk assessment and management. The Company’s risk
management and related policies and procedures are reviewed regularly and at least annually.
While risk management is part of our transactional, operational, and strategic decisions, and overall management
approach, risk management does not guarantee that events or circumstances, including events or circumstances
related to risks and uncertainties that may not be listed below, will not occur and negatively affect our financial
performance and condition.
Product Liability
Saputo’s operations are subject to certain dangers and risks of liability faced by all food processors, such as the
potential contamination of ingredients or products by bacteria or other external agents that may be introduced into
products or packaging. The occurrence of such a contamination could result in a costly product recall, destruction of
product inventory, lost sales, or litigation. Further, negative publicity, whether or not warranted, concerning food
safety, or allegations of product contamination, even when false or unfounded, may damage our brand image and
corporate reputation and may cause consumers to choose other products. Alleged or actual contaminations could
also result in government scrutiny, investigation, or intervention, resulting in increased costs.
COVID-19 Pandemic and Related Ongoing Impacts
The COVID-19 pandemic and the related actions by governments around the world to attempt to contain the spread
of the virus have disrupted and will likely continue to disrupt our global supply chain, operations, logistics, and routes
to market or those of our suppliers, their suppliers, or our distributors. These disruptions, or our failure to effectively
respond to them, will likely continue to increase production or distribution costs, or cause delays or inability to deliver
products to our customers. The COVID-19 pandemic has also significantly increased economic uncertainty,
negatively impacting our business and financial performance and condition.
While we continue to actively monitor the COVID-19 pandemic, the full extent of the pandemic’s impact on our
business and financial performance and condition will depend on future developments that are highly uncertain and
cannot be predicted, including, among others, new information which may emerge concerning the pandemic, vaccine
adoption rates (including boosters), and the effectiveness of vaccines in limiting or stopping the spread of COVID-19,
either over the long term or against new, emerging variants of COVID-19, and any related actions by governments
worldwide.
In addition, continuing economic and political uncertainties, such as decreases in disposable income, persistent
inflationary pressures, declines in consumer confidence, or economic slowdowns or recessions in any of our major
markets, may slow down or prevent the recovery of the demand for our products or may erode such demand.
We and our suppliers may continue to face supply chain and workforce disruptions in the future, which may increase
supply chain, packaging, and labour costs, or may result in an inability to secure key inputs, which could negatively
impact our fulfillment rates, cause delays in delivering our products to our customers or consumers, and hinder our
ability to achieve our goals and targets under our Global Strategic Plan or the Saputo Promise.
In addition, the COVID-19 pandemic and related ongoing impacts may exacerbate other risks related to our business
described in this section.
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Supply of Raw Materials
Saputo purchases raw materials that can represent up to 85% of the cost of products. We process raw materials into
finished edible products intended for resale to a broad range of customers. Availability of raw materials as well as
variations in the price of foodstuffs and energy, including as a result of climate change, extreme weather, natural
disasters, water availability, fires or explosions, health pandemics, outbreaks affecting humans or livestock,
transportation problems, and global or local supply chain disruptions caused by the COVID-19 pandemic, geopolitical
developments, military conflicts, and trade sanctions, can impact production costs and capacity utilization and
therefore affect our results. The effect of any variation or the volatility of foodstuff prices on our results depends on
our ability to transfer those increases to our customers, and this in the context of a competitive market.
Supply Chain Strain and Supplier Concentration
In fiscal 2022, the cost of inputs such as packaging materials, energy, fuel, transportation, and logistics necessary for
the production and distribution of our products has rapidly increased. We expect the inflationary pressures on input
costs to continue to impact our business in fiscal 2023. We have implemented and may continue to implement
initiatives to offset these cost pressures, such as price increases, but these may not be sufficient to offset higher costs
adequately or in a timely manner. Even if such initiatives are effective, higher product prices may result in decreases
in sales volume or market share.
We purchase goods and services from a limited number of suppliers as a result of consolidation within the industries
in which these suppliers operate. Issues with suppliers regarding pricing or performance of the goods and services
they supply or the inability of suppliers to supply the required volumes of such goods and services in a timely manner,
as a result of labour shortages or otherwise, could impact our financial condition and performance.
Risks related to supply chain may be further exacerbated by geopolitical developments such as the military conflict in
Ukraine, which has and will likely continue to disrupt the global supply chain and contribute to economic uncertainty
and increased prices of inputs and other costs.
USA and International Markets
The price of milk as raw material and the price of our products in the USA, Australia, Argentina, and the United
Kingdom, as well as in international markets, are based on market supply and demand forces. The prices are tied to
numerous factors, such as the health of the economy and supply and demand levels for dairy products in the industry,
and price fluctuations may affect our results. The effect of such fluctuations on our results will depend on our ability to
implement mechanisms to reduce them.
Human Resources
Saputo’s success depends on our ability to identify, attract, and retain qualified and diverse individuals and to execute
appropriate succession planning for Management and key personnel. Inflationary pressures, shortages, and
competitiveness in the labour markets where we operate our facilities, increased employee turnover, and changes in
the availability of our employees, including as a result of COVID-19-related absences, have resulted in, and could
continue to increase labour, pension, and people-related costs, which could have a material adverse effect on our
results or financial condition. In addition, these factors have impacted, and could continue to impact, our ability to
meet consumer demand, which could negatively affect our financial condition, results, or cash flows.
Although we believe we have good relationships with our employees and a significant number of our workforce is
unionized, a lengthy strike or work stoppage could impact our operations and performance. Our operations are also
subject to health and safety risks as well as laws and regulations in this regard. Notwithstanding Saputo’s existing
health and safety systems, serious injury or death of any employee could have a serious impact on Saputo’s
reputation, result in litigation, and require us to incur costs which may be significant.
ANNUAL REPORT 2022
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Cybersecurity and Overall Management of Information Systems
We rely on information technology applications and systems in all areas of our operations. These applications and
systems, some of which are managed by third parties, are subject to an increasing number of sophisticated and
constantly evolving cyber threats. The increase in the number of employees working in a distributed remote
environment has also given rise to new security threats and risks of other cybersecurity attacks. We are mainly
exposed to risks relating to business disruptions, confidentiality, data integrity, and business email compromise-
related fraud. Therefore, any unavailability or failure, due to security incidents or otherwise, may impede or slow down
production, delay or taint certain decisions, and result in financial losses, including as a result of remediation costs. In
addition, any unauthorized or malicious access to information systems containing proprietary, sensitive, or
confidential information could compromise our data integrity or result in disclosure or loss of data which may have
adverse effects on our activities, results, and reputation, including loss of revenues due to a disruption of the
business, diminished competitive advantage, litigation or other legal procedures, or liability for failure to comply with
privacy and information security laws. Although we have measures to reduce the likelihood, duration, and severity of
disruptions to our information technology applications and systems, and maintain ongoing investments to protect,
detect, respond to, and manage cybersecurity incidents, we have in the past been subject to cyber-attacks and
expect that we will be subject to additional cyber-attacks in the future.
Also, we have reprioritized certain ongoing technology initiatives and have taken the decision to temporarily pause
the final phase of the Harmoni deployment, our Enterprise Resource Planning (ERP) implementation project. There is
no guarantee that the implementation of Harmoni, or our decision to postpone the final phase of deployment, will not
disrupt or reduce the efficiency of our operations.
Competition
The food processing industry is extremely competitive. The global dairy industry is highly competitive and Saputo
competes on a national and international basis with national and multinational competitors. Our performance in all
countries where we do business depends on our ability to continue to offer quality products at competitive prices.
Consolidation of Clientele
As the consolidation in the food industry in all the market segments we serve continues, customers tend to grow
larger, which results in a decrease in the number of customers and increase in the relative importance of some
customers. For fiscal 2022, none of our customers represented more than 10% of total consolidated revenues. Our
ability to continue to service our customers in all the markets that we serve will depend on the quality and price of our
products, as well as the value proposition we offer to our customers.
Unanticipated Business Disruption
Major events, such as systems and equipment failure, cyberattacks, health pandemics (including the COVID-19
pandemic), geopolitical events, and natural disasters, or increased frequency or intensity of extreme weather
conditions (including as a result of climate change), could lead to unanticipated business disruptions at any or certain
of our facilities. The effect would be more significant if our larger manufacturing facilities were to be affected. The
failure to mitigate business disruptions in a timely manner could negatively affect our financial performance and
condition.
ANNUAL REPORT 2022
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Consumer Trends
Demand for our products is subject to changes in consumer trends. For example, increased consumer focus on
environmental sustainability matters, including emissions associated with the production of animal milk, and on
health-related concerns, could result in a financial risk if a growing number of consumers turn away from animal-
related products in favour of dairy alternatives, which may lead to lower demand for dairy products. The impact of
these changes will depend on our ability to adapt, innovate, and develop new products. If our product innovation
efforts fail to deliver the expected benefits or if growth in demand for new products does not materialize as we expect,
we may not reach our financial growth targets.
Further, our operations are and could continue to be affected by the economic context should unemployment, interest
rates, or inflation reach levels that influence consumer trends and consequently impact our sales and profitability.
Should the inflationary pressures and global economic uncertainty we have seen in fiscal 2022 persist, consumers
may increasingly purchase lower-priced offerings or may forgo some purchases altogether. To the extent that price
increases are not sufficient to offset higher costs adequately or in a timely manner, and/or if they result in significant
decreases in sales volume, our financial condition or operational performance may be adversely affected.
In addition, technology-based systems, which give consumers the ability to shop through e-commerce websites and
mobile commerce applications, are also significantly altering the retail landscape where we operate. If we are unable
to adjust to developments in these changing landscapes, we may be disadvantaged in key channels and with certain
consumers, which could materially and adversely affect our sales, financial condition, and operating performance.
Environment
Saputo’s business and operations are subject to environmental laws and regulations, including those relating to
permitting requirements, wastewater discharges, air emissions, greenhouse gases, releases of hazardous
substances, and remediation of contaminated sites. We believe that our operations are in compliance, in all material
respects, with such environmental laws and regulations, except as disclosed in the Annual Information Form dated
June 9, 2022, for the fiscal year ended March 31, 2022. Compliance with these laws and regulations requires that we
continue to incur operating and maintenance costs and capital expenditures, including to control potential impacts of
our operations on local communities. Changes in environmental laws and regulations, evolving interpretation thereof,
or more vigorous regulatory enforcement policies (including as a result of increased concern over climate change,
water scarcity, waste management, plastic pollution, wastewater discharges, air emissions, greenhouse gases, or
release of hazardous substances) could impose additional compliance costs, capital expenditures, as well as other
financial obligations, which could have a material adverse effect on our financial position and performance.
The potential effects of climate change could have a material impact on our business and operations, including a
range of operational, financial, and reputational risks. Saputo has set environmental targets and has undertaken or
planned capital expenditures and other projects to increase its energy efficiency, reduce its GHG emissions, reduce
waste, and decrease water usage. There is no assurance that our environmental and sustainability initiatives will be
economically viable, effective or that the anticipated environmental benefits will materialize. Our ability to achieve our
environmental targets, commitments, and goals depends on the development and performance of technology,
innovation, and the future use and deployment of technology. It is possible that the changes necessary to reduce
emissions or waste will not be feasible or that the costs will be material, either of which could have a material adverse
effect on Saputo’s reputation, operations, or financial position.
In addition, there is an increased focus on environmental sustainability matters, including emissions associated with
the production of animal milk. Any failure to achieve our environmental targets or other environment-related goals or a
perception (whether or not valid) of our failure to act responsibly with respect to the evolving environmental issues, or
to effectively respond to new, or changes in, legal or regulatory requirements concerning environmental matters, or
increased operating or manufacturing costs due to increased regulation or environmental causes could adversely
affect our business, our reputation, and our ability to attract capital from financial institutions and investors
incorporating sustainability and ESG considerations as part of their portfolio, and increase the risk of litigation.
Saputo’s reputation could be affected if we or other stakeholders in the dairy industry do not act, or are perceived not
to act, responsibly.
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Growth Strategy
We plan to grow both organically and through acquisitions. Our organic growth strategy, which is outlined in our
Global Strategic Plan, may fail to deliver results and our targeted organic growth may never materialize. Capital
expenditure projects play a key role in Saputo’s organic growth strategy. The outcome and success of these projects
often depend on several factors that are outside of our control, including disruptions caused by pandemics, new
competing operational priorities, timing for completion, regulatory and governmental approvals, availability and cost of
labour, materials, and equipment, contractor non-performance, cost of engineering, construction, and other consulting
services and weather conditions. In the event of unanticipated delays or costs, business operations may be adversely
affected. Other risks related to our business described in this section may impact our ability to grow organically and
meet our strategic growth goals and targets.
We plan to continue to rely on new acquisitions to pursue our growth. We may therefore incur costs and divert
management's time and attention in connection with potential acquisitions that may never be consummated. The
ability to properly evaluate the fair value of the businesses being acquired and to properly devote the time and human
resources required to successfully integrate their activities with those of Saputo constitute inherent risks related to
acquisitions. The inability to adequately integrate an acquired business in a timely and efficient manner may affect our
ability to realize synergies or improvements and to achieve anticipated returns, as well as resulting in higher
integration costs and loss of business opportunities. In connection with acquisitions made by Saputo, there may also
be liabilities and contingencies that we discover after closing, or are unable to quantify in the due diligence conducted
prior to closing, and which could have a negative effect on our business, financial performance, and condition.
Intellectual Property
As we are involved in the production, sale, and distribution of food products, we rely on brand recognition and loyalty
from our clientele in addition to relying on the quality of our products. Also, as innovation forms part of Saputo’s
growth strategy, our research and development teams develop new technologies, products, and process optimization
methods. We, therefore, take measures to protect, maintain, and enforce our intellectual property. Any infringement to
our intellectual property could damage our value and limit our ability to compete. In addition, we may have to engage
in litigation in order to protect our rights, which could result in significant costs.
Financial Risk Exposures
Saputo has financial risk exposure to varying degrees relating to the currencies it uses for its business. Cash flows
from operations in each of the countries where Saputo operates act, in part, as a natural hedge against the currency
exchange risks related to debt denominated in such countries’ currency. The level of the financial risk exposure
related to currency fluctuations will depend on our ability to maintain appropriate protection mechanisms.
Interest Rate and Access to Capital and Credit Markets
A portion of Saputo’s interest-bearing debt is subject to interest rate fluctuations. The impact on our results will
depend on our ability to maintain adequate protection against such interest rate fluctuations. Our growth by
acquisitions is dependent on access to liquidity in the capital and credit markets. Similarly, we may be required to
access liquidity in the capital and credit markets in order to refinance or retire existing indebtedness. The impact of
such financing transactions on our results will depend on our ability to secure liquidity in a timely manner and on
terms and conditions acceptable to us. Changes in the perceived creditworthiness of the Company or the credit rating
of our medium term notes increase our borrowing costs. Uncertain economic conditions resulting from the COVID-19
pandemic and disruption in financial markets could adversely affect our financial performance and the availability and
cost of capital, preventing us from continuing to access preferred sources of liquidity when desired. Further, volatility
in the capital markets has been heightened and such volatility may continue, which may cause fluctuations in the
price of the Company's shares or result in shareholder grievance or activism.
Pension Plans
We operate both defined benefit and defined contribution plans (collectively, the “Plans”). Contributions to fund our
defined benefit Plans are based on actuarial valuations, which themselves are based on assumptions and estimates
about the long-term operations of the Plans, including assumptions on inflation, mortality, and the discount rates used
to determine the liabilities of the Plans. Actual results of actuarial valuations may differ from expectations. We cannot
predict whether changing markets or economic conditions, changes to pension legislation and regulations, or other
factors will increase our pension expenses or liabilities, or funding obligations, diverting funds we would otherwise
apply to other uses. Increases in net pension liabilities or increases in future cash contributions could adversely affect
our business, financial condition, results from operations, and cash flows.
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Credit Risk
We grant credit to our customers in the normal course of business. Credit valuations are performed on a regular basis
and the financial statements take into account an allowance for expected credit loss. We consider that our exposure
to concentration of credit risk with respect to accounts receivable from customers is low due to our large and diverse
customer base operating in three market segments, retail, foodservice, and industrial, and our geographic diversity.
There are no accounts receivable from any individual customer that exceeded 10% of the total balance of accounts
receivable as at March 31, 2022. We regularly review the allowance for expected credit loss and accounts receivable
due. We update our estimate of the allowance for doubtful accounts based on the evaluation of the recoverability of
accounts receivable balances of each customer taking into consideration historic collection trends of past due
accounts.
Legislative, Regulatory, Normative and Political Considerations
We are subject to local, provincial, state, federal, and international laws, regulations, rules, and policies as well as to
social, economic, and political contexts prevailing in places where we conduct our activities. Consequently, the
modification or change of any of these elements may have an unfavourable impact on our results and operations and
may require that important expenses be made in order to adapt or comply. More specifically, the production and
distribution of food products are subject to federal, state, provincial, and local laws, rules, regulations, and policies,
and to international trade agreements, all of which provide a framework for our operations. Moreover, the legislative
and regulatory landscape for privacy and data protection continues to evolve in jurisdictions worldwide, and there has
been an increasing focus on privacy and data protection issues with the potential to affect our business. The impact
of new laws and regulations, stricter enforcement or interpretations or changes to enacted laws and regulations will
depend on our ability to adapt thereto and comply therewith. We are currently in compliance in all material respects
with all applicable laws and regulations and maintain all material permits and licenses in connection with our
operations.
Tariff Protection
Dairy-producing industries in Canada and the USA are still partially protected from imports by tariff-rate quotas which
permit a specific volume of imports at a reduced or zero tariff and impose significant tariffs for greater quantities of
imports. There is no guarantee that political decisions or amendments to international trade agreements will not result
in the removal of tariff protection in the dairy market, resulting in increased competition. Our performance will be
dependent on our ability to continue to offer quality products at competitive prices.
Reputation and Public Opinion
We are committed to making progress on the Saputo Promise, our approach to social, environmental, and economic
performance. Maintaining a positive reputation in the eyes of our customers, consumers, suppliers, communities,
governments, regulatory bodies, and the general public is important to our continued success.
The potential for deterioration of our reputation may arise in many contexts and for many different reasons. For
example, the dairy industry is subject to the activities of animal activists. Activist activities may spread information and
misinformation in a variety of ways, including through protests and attempts to disrupt operations, as well as through
various communication strategies. The growing use of social and digital media increases the speed and extent that
information or misinformation and opinions can be shared.
Negative public opinions or shifts in opinion, negative publicity about Saputo, our brands, our products, or about the
dairy industry could damage our reputation and negatively impact our sales and results. It may also diminish our
ability to hire and retain the best talent, which could have an adverse impact on our overall business. Reputational
risk intersects with many of the Company's other risks and may therefore exacerbate these risks.
Inventory
We are subject to inventory risks that may adversely affect our operating results as a result of variations in market
selling prices for dairy products and ingredients, changes in consumer demand, seasonality, spoilage, limited product
shelf life, changes in consumer tastes with respect to our products, and other factors. Excess or obsolete inventory
which cannot be sold profitably, or increases in levels of inventory shrink could result in an inventory write-down or
otherwise affect our financial performance.
Impairment Charges
We assess our goodwill and other intangible assets and long-lived assets as and when required by IFRS to determine
whether they are impaired and, if they are, we record appropriate impairment charges. We have been required to
record impairment charges in the past and it is possible that we may be required to record significant impairment
charges in the future and, if we do so, our results could be materially adversely affected.
ANNUAL REPORT 2022
Page 42
DISCLOSURE CONTROLS AND PROCEDURES
The Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) are responsible for establishing and
maintaining disclosure controls and procedures. The Company’s disclosure controls and procedures are designed to
provide reasonable assurance that material information relating to the Company is made known to Management in a
timely manner to allow the information required to be disclosed under securities legislation to be recorded, processed,
summarized, and reported within the time periods specified in securities legislation.
The CEO and the CFO, along with Management, after evaluating the effectiveness of the Company’s disclosure
controls and procedures as at March 31, 2022, have concluded that the Company’s disclosure controls and
procedures were effective.
INTERNAL CONTROL OVER FINANCIAL REPORTING
The CEO and the CFO are responsible for establishing and maintaining internal control over financial reporting. The
Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
IFRS.
The CEO and the CFO, along with Management, evaluated the effectiveness of the Company’s internal control over
financial reporting as at March 31, 2022, in accordance with the criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on this evaluation, the CEO and the CFO, along with Management, have concluded that the Company’s
internal control over financial reporting was effective.
Saputo took a phased approach to its migration to a new ERP system, which project is now temporarily paused. In
order to maintain appropriate internal controls over financial reporting in the divisions that have migrated to the new
ERP system, relevant changes have been made. There were no other changes to Saputo’s internal control over
financial reporting that occurred during the period beginning on January 1, 2022, and ended on March 31, 2022, that
have materially affected or are reasonably likely to materially affect the Company’s internal control over financial
reporting.
SENSITIVITY ANALYSIS OF INTEREST RATE AND US CURRENCY
FLUCTUATIONS
The debt subject to interest rate fluctuations was $1,054 million as at March 31, 2022. A 1% change in the interest
rate would lead to a change in net earnings of approximately $7 million. Canadian and US currency fluctuations may
affect net earnings, adjusted EBITDA, and revenues. Appreciation of the Canadian dollar compared to the US dollar
would have a negative impact on net earnings, adjusted EBITDA, and revenues. However, a decrease in the
Canadian dollar compared to the US dollar would have a positive impact on net earnings. During the fiscal year
ended March 31, 2022, the average US dollar conversion was based on US$1.00 for $1.2510. A fluctuation of $0.10
of the Canadian dollar would have resulted in a change of approximately $2 million in net earnings, $23 million in
adjusted EBITDA, and $511 million in revenues.
ANNUAL REPORT 2022
Page 43
QUARTERLY FINANCIAL INFORMATION
2022 quarterly financial information – consolidated income statement
(in millions of CDN dollars, except per share amounts and ratios)
Revenues
3,957
3,901
3,689
3,488
15,035
Operating costs excluding depreciation, amortization, and
Q4
Q3
Q2
Q1 Fiscal 2022
restructuring costs
Adjusted EBITDA1
Adjusted EBITDA margin1
Depreciation and amortization
Impairment of intangible assets
Gain on disposal of assets
Acquisition and restructuring costs
Financial charges
Earnings before income taxes
Income taxes
Net earnings
Net earnings margin
Adjusted net earnings1
Adjusted net earnings margin1
EPS basic
EPS diluted
Adjusted EPS Basic1
Adjusted EPS diluted1
3,697
260
6.6 %
3,579
322
8.3 %
3,406
283
7.7 %
3,198
290
8.3 %
13,880
1,155
7.7 %
148
—
—
71
16
25
(12)
37
144
58
(9)
—
17
112
26
86
137
—
—
(2)
19
129
31
98
131
—
—
2
18
139
86
53
0.9 %
2.2 %
2.7 %
1.5 %
108
139
116
122
2.7 %
3.6 %
3.1 %
3.5 %
0.09
0.09
0.26
0.26
0.21
0.21
0.34
0.33
0.24
0.24
0.28
0.28
0.13
0.13
0.30
0.29
560
58
(9)
71
70
405
131
274
1.8 %
485
3.2 %
0.66
0.66
1.17
1.17
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 MD&A 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.
Quarterly financial information by sector
Revenues
Canada
USA
International
Europe
Total
Net earnings (consolidated)
Adjusted EBITDA
Canada
USA
International
Europe
Total1
Q4
Q3
Q2
Q1 Fiscal 2022
1,055
1,743
922
237
3,957
37
1,112
1,627
919
243
1,081
1,533
858
217
1,033
1,506
754
195
4,281
6,409
3,453
892
3,901
3,689
3,488
15,035
86
98
53
274
Q4
Q3
Q2
Q1 Fiscal 2022
117
42
62
39
260
121
83
85
33
322
124
67
56
36
283
113
96
45
36
475
288
248
144
290
1,155
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 MD&A 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.
ANNUAL REPORT 2022
Page 44
2021 quarterly financial information – consolidated income statement
(in millions of CDN dollars, except per share amounts and ratios)
Q4
Q3
Q2
Q1 Fiscal 2021
Revenues
3,438
3,763
3,702
3,391
14,294
Operating costs excluding depreciation, amortization, and
restructuring costs
Adjusted EBITDA1
Adjusted EBITDA margin1
Depreciation and amortization
Impairment of intangible assets
Acquisition and restructuring costs
Financial charges
Earnings before income taxes
Income taxes
Net earnings
Net earnings margin
Adjusted net earnings1
Adjusted net earnings margin1
EPS basic
EPS diluted
Adjusted EPS basic1
Adjusted EPS diluted1
3,135
303
8.8 %
3,332
431
3,332
370
3,024
367
11.5 %
10.0 %
10.8 %
12,823
1,471
10.3 %
135
—
3
23
142
39
103
128
—
—
26
277
67
210
126
—
(6)
22
228
57
171
126
19
—
25
197
55
142
3.0 %
5.6 %
4.6 %
4.2 %
124
228
184
179
3.6 %
6.1 %
5.0 %
5.3 %
0.25
0.25
0.30
0.30
0.51
0.51
0.56
0.55
0.42
0.42
0.45
0.45
0.35
0.35
0.44
0.44
515
19
(3)
96
844
218
626
4.4 %
715
5.0 %
1.53
1.52
1.74
1.74
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 MD&A 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.
Quarterly financial information by sector
Revenues
Canada
USA
International
Europe
Total
Net earnings (consolidated)
Adjusted EBITDA
Canada
USA
International
Europe
Total1
Q4
Q3
Q2
Q1 Fiscal 2021
1,001
1,399
827
211
3,438
103
1,089
1,657
807
210
3,763
210
1,063
1,649
806
184
3,702
171
982
1,417
781
211
3,391
142
4,135
6,122
3,221
816
14,294
626
Q4
Q3
Q2
Q1 Fiscal 2021
108
93
62
40
303
118
171
105
37
431
117
140
78
35
370
104
163
60
40
367
447
567
305
152
1,471
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 MD&A
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.
ANNUAL REPORT 2022
Page 45
CONSOLIDATED ANALYSIS OF EARNINGS FOR THE YEAR ENDED MARCH 31,
2021, COMPARED TO MARCH 31, 2020
Revenues
Revenues totalled $14.294 billion, a decrease of $650 million or 4.3%, as compared to $14.944 billion in fiscal 2020.
The global shift in consumer demand caused by the COVID-19 pandemic negatively impacted sales volumes in the
foodservice market segment, mostly in the USA Sector, although partially offset by increased sales volumes in the
retail and industrial market segments. Additional sales volumes in our export markets positively impacted revenues
despite varying government-imposed restrictions throughout the fiscal year.
Lower international cheese and dairy ingredient market prices negatively impacted revenues, despite the favourable
net impact of the fluctuation of the Argentine peso and the Australian dollar versus the US dollar in the export
markets. The combined effect of the lower average butter market price2 and the higher average block market price2
also decreased revenues by approximately $114 million. However, higher domestic selling prices in the Canada
Sector and the International Sector, which increased due to the higher cost of milk as raw material, positively
impacted revenues.
The contributions of the acquisition of the specialty cheese business of Lion Dairy & Drinks PTY Ltd. (Specialty
Cheese Business Acquisition) in the International Sector and the Dairy Crest Acquisition in the Europe Sector for the
full fiscal year, as compared to partial contributions in fiscal 2020, positively impacted revenues.
Lastly, the fluctuation of foreign currencies versus the Canadian dollar decreased revenues by approximately
$183 million.
Operating costs excluding depreciation, amortization, and restructuring costs
Operating costs excluding depreciation, amortization, inventory revaluation resulting from a business acquisition, and
restructuring costs totalled $12.823 billion, a decrease of $653 million or 4.8%, as compared to $13.476 billion for
fiscal 2020. The decrease was consistent with lower revenues, as described above, and extreme dairy commodity
market volatility, which, together, contributed to the lower cost of raw materials and consumables used. Employee
salary and benefit expenses increased due to wage increases and the contributions of the Specialty Cheese
Business Acquisition and the Dairy Crest Acquisition for the full fiscal year, as compared to partial contributions in
fiscal 2020.
Net earnings
Net earnings totalled $626 million, an increase of $43 million or 7.3%, as compared to $583 million for fiscal 2020.
These increases were primarily due to the factors that contributed to higher adjusted EBITDA1 of $3 million, as
described below, lower acquisition and restructuring costs of $40 million after tax, a non-recurring inventory
revaluation resulting from a business acquisition related to fiscal 2020 of $33 million after tax, partially offset by higher
depreciation and amortization, an impairment of intangible assets charge of $19 million after tax, and a higher income
tax expense.
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 MD&A 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 this MD&A.
ANNUAL REPORT 2022
Page 46
Adjusted EBITDA1
Adjusted EBITDA1 totalled $1.471 billion, an increase of $3 million or 0.2%, as compared to $1.468 billion in fiscal
2020.
The unfavourable relation between international cheese and dairy ingredient market prices and the cost of milk as
raw material had a negative impact on adjusted EBITDA. In an extremely volatile dairy commodity market, USA
Market Factors2 had a positive impact on adjusted EBITDA of approximately $57 million.
The contributions of the Specialty Cheese Business Acquisition and the Dairy Crest Acquisition for the full fiscal year,
as compared to partial contributions in fiscal 2020, increased adjusted EBITDA.
Lower administrative costs positively impacted adjusted EBITDA, with the continued ban on non-essential business
travel, the reduction of promotional activity and other initiatives in the context of the COVID-19 pandemic, which
mitigated the negative impacts on adjusted EBITDA of higher operational costs, including those related to additional
supplies of personal protective equipment for employees and unproductive labour.
The COVID-19 pandemic negatively affected adjusted EBITDA late in the fourth quarter of fiscal 2020. In fiscal 2021,
overall lower sales volumes negatively impacted efficiencies and the absorption of fixed costs, particularly in the USA
Sector.
The effect of foreign currency fluctuations versus the Canadian dollar had an unfavourable impact on adjusted
EBITDA of approximately $2 million.
Depreciation and amortization
Depreciation and amortization expenses amounted to $515 million, an increase of $48 million, as compared to
$467 million in fiscal 2020. These increases were mainly attributable to additional depreciation and amortization
related to recent acquisitions, as well as additions to property, plant and equipment, which increased the depreciable
base.
Impairment of intangible assets
During the first quarter of fiscal 2021, an impairment of intangible assets charge of $19 million was incurred in relation
to our decision to retire one of our cheese brand names from our Australian portfolio as part of our commitment to
share in the responsibility to eliminate racism in all its forms.
Acquisition and restructuring costs
Acquisition and restructuring costs amounted to a net gain of $3.2 million, including a gain on disposal of assets of
$6 million ($5 million after tax) relating to the sale of a facility in the Canada Sector and additional costs from a
previous acquisition, as compared to $46 million for fiscal 2020, incurred mainly for the Dairy Crest Acquisition and
the Specialty Cheese Business Acquisition.
Financial charges
Financial charges amounted to $96 million, a decrease of $19 million or 16.5%, as compared to $115 million last
fiscal year. This included a decrease in interest expense of $29 million, mainly attributable to a lower debt level, lower
interest rates, and a decreased gain on hyperinflation of $11 million.
Income taxes
Income tax expense totalled $218 million, reflecting an effective tax rate of 25.8% as compared to 27.1% for fiscal
2020. The fiscal 2021 income tax expense reflected the tax treatment of an impairment of intangible assets charge
and an income tax benefit related to a tax inflation adjustment in Argentina. Income taxes during fiscal 2020 included
an income tax expense of $17 million due to the increase in the corporate income tax rate in the United Kingdom. The
effective tax rate for fiscal 2020 also reflected the income tax benefits related to a tax inflation adjustment pursuant to
Argentine tax legislation and the decrease in provincial income taxes in Canada. Excluding the effects of the factors
mentioned above, the effective tax rate for the fiscal years 2021 and 2020 would have been 26.3% and 26.2%,
respectively.
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 amount and source of taxable income,
amendments to tax legislations and income tax rates, changes in assumptions, as well as estimates for tax assets
and liabilities we use.
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 MD&A 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 this MD&A.
ANNUAL REPORT 2022
Page 47
Adjusted net earnings1
Adjusted net earnings totalled $715 million, a decrease of $9 million or 1.2%, as compared to $724 million for last
fiscal year. This decrease was mainly due to higher net earnings of $43 million, excluding lower acquisition and
restructuring costs of $40 million after tax, a non-recurring inventory revaluation resulting from a business acquisition
related to fiscal 2020 of $33 million after tax, an impairment of intangible assets charge of $19 million after tax, and a
higher income tax expense.
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 MD&A 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.
ANNUAL REPORT 2022
Page 48
GLOSSARY
Average whey powder market price means the average daily price for a pound of extra grade dry whey
published on Daily Dairy Report, used as the base price for whey.
Block market price means the price per pound of a spot contract for cheddar cheese in 40-pound blocks
traded on the Chicago Mercantile Exchange (CME) published in the Daily Dairy Report, used as the base
price for cheese.
Book value per share means total equity divided by the number of common shares outstanding.
Butter market price means the price per pound of a spot contract for Grade AA Butter traded on the
CME published in the Daily Dairy Report, used as the base price for dairy food products.
Net Debt means long-term debt, lease liabilities, and bank loans, including the current portion thereof, net
of cash and cash equivalents. Refer to Note 22 to the consolidated financial statements for more
information.
Net Debt / Equity means net debt divided by total equity. Refer to Note 22 to the consolidated financial
statements for more information.
Net earnings margin means net earnings expressed as a percentage of revenues.
Non-current financial liabilities is composed of non-current long-term debt, lease liabilities, and
derivative financial liabilities.
Spread means the difference between the average block market price and the average cost of the
corresponding quantity of Class III milk in the USA market based on the milk prices published by the
United States Department of Agriculture.
USA Market Factors include, for the USA Sector, the average block market price and its effect on the
absorption of fixed costs and on the realization of inventories, the effect of the relation between the
average block market price and the cost of milk as raw material, the market pricing impact related to sales
of dairy ingredients, as well as the impact of the average butter market price related to dairy food
products.
Working capital means current assets minus current liabilities.
Working capital ratio means current assets divided by current liabilities.
ANNUAL REPORT 2022
Page 49
CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT’S STATEMENT OF RESPONSIBILITY FOR FINANCIAL REPORTING
Management is responsible for the preparation and presentation of the consolidated financial statements and the
financial information presented in this annual report. This responsibility includes the selection of accounting policies
and practices and making judgments and estimates necessary to prepare the consolidated financial statements in
accordance with International Financial Reporting Standards.
Management has also prepared the financial information presented elsewhere in this annual report and has ensured
that it is consistent with the consolidated financial statements.
Management maintains systems of internal control designed to provide reasonable assurance that assets are
safeguarded and that relevant and reliable financial information is being produced.
The Board of Directors is responsible for ensuring that Management fulfills its responsibilities for financial reporting
and is responsible for reviewing and approving the consolidated financial statements. The Board of Directors carries
out this responsibility principally through its Audit Committee, which is comprised solely of independent directors. The
Audit Committee meets periodically with Management and the independent auditor to discuss internal controls,
auditing matters and financial reporting issues. It also reviews the annual report, the consolidated financial statements
and the independent auditor’s report. The Audit Committee recommends the independent auditor for appointment by
the shareholders. The independent auditor have unrestricted access to the Audit Committee. The consolidated
financial statements have been audited by the independent auditor KPMG LLP, whose report follows.
(signed) Lino A. Saputo
Lino A. Saputo
Chair of the Board,
President and Chief Executive Officer
(signed) Maxime Therrien
Maxime Therrien, CPA
Chief Financial Officer
and Secretary
June 9, 2022
ANNUAL REPORT 2022
Page 50
KPMG LLP
600 de Maisonneuve Blvd. West
Suite 1500, Tour KPMG
Montréal (Québec) H3A 0A3
Canada
Telephone
Fax
Internet
(514) 840-2100
(514) 840-2187
www.kpmg.ca
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Saputo Inc.
Opinion
We have audited the consolidated financial statements of Saputo Inc. (the "Entity"), which comprise:
•
•
•
•
•
the consolidated statement of financial position as at March 31, 2022;
the consolidated income statement and consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
and notes to the consolidated financial statements, including a summary of significant accounting policies
(Hereinafter referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position
of the Entity as at March 31, 2022, and its consolidated financial performance and its consolidated cash flows for the year then
ended in accordance with International Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those
standards are further described in the "Auditors’ Responsibilities for the Audit of the Financial Statements" section of our
auditors’ report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial
statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements for the year ended March 31, 2022. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be communicated in our auditors’ report.
KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG
Canada provides services to KPMG LLP.
ANNUAL REPORT 2022
Page 51
Assessment of the carrying amount of Goodwill for Dairy Division (Australia) and Dairy
Division (UK) cash generating units (CGUs)
Description for the matter
We draw attention to Notes 3 and 8 of the financial statements. The goodwill balance is $3,188 million, of which $267 million
and $605 million relate to the Dairy Division (Australia) and Dairy Division (UK), respectively. The Entity performs impairment
testing annually for goodwill or more frequently if events or changes in circumstances indicate that it might be impaired. When
testing goodwill for impairment, the carrying values of the CGUs or group of CGUs, including goodwill, are compared with their
respective recoverable amounts and an impairment loss, if any, is recognized for the excess. The recoverable amounts of the
CGUs or group of CGUs are estimated based on the higher of their fair value less costs of disposal using an earnings multiplier
valuation method and value in use using a discounted cash flow model. The determination of the recoverable amount requires
management to make significant estimates and assumptions related to:
•
•
The forecasted cash flows based on earnings before interest, income taxes, depreciation and amortization ("EBITDA"),
terminal growth rates and discount rates, used in the discounted cash flow model
EBITDA multiples used in the earnings multiplier valuation method.
Why this matter is a key audit matter
We identified the assessment of the carrying amount of Goodwill for Dairy Division (Australia) and Dairy Division (UK) CGUs as
a key audit matter. This matter represented an area of significant risk of material misstatement given the sensitivity of the
Entity’s determination of the recoverable amounts of the CGUs to changes to significant assumptions. In addition, significant
auditor judgment and specialized skills and knowledge were required in evaluating the results of our audit procedures.
How the Key Audit Matter Was Addressed in the Audit
The primary procedures we performed to address this key audit matter included the following:
We evaluated the Entity’s ability to accurately forecast EBITDA by comparing actual results to historical EBITDA forecasts.
We involved our valuations professionals with specialized skills and knowledge, who assisted in evaluating the appropriateness
of the:
•
•
•
Terminal growth rates by developing a range of independent terminal growth rates using publicly available industry market
data and expected long term inflation rates and comparing those to the Entity’s terminal growth rate assumptions
Discount rates by comparing inputs into the discount rates to publicly available data for comparable entities
EBITDA multiples by developing an independent range of multiples using available market information from third party
sources and observed in recent comparable transactions, and comparing those to EBITDA multiples selected by
management.
Other Matter - Comparative Information
The financial statements for the year ended March 31, 2021 were audited by another auditor who expressed an unmodified
opinion on those financial statements on June 3, 2021.
ANNUAL REPORT 2022
Page 52
Other Information
Management is responsible for the other information. Other information comprises:
•
•
the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities
Commissions.
the information, other than the financial statements and the auditors’ report thereon, included in a document likely to be
entitled “Annual Report”.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit and remain alert for indications that the other information appears to be materially misstated.
We obtained the information included in Management’s Discussion and Analysis and the Annual Report filed with the relevant
Canadian Securities Commissions as at the date of this auditors’ report. If, based on the work we have performed on this other
information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the
auditors’ report.
We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with
International Financial Reporting Standards (IFRS), and for such internal control as management determines is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity’s financial reporting process.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Canadian generally accepted auditing standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and
maintain professional skepticism throughout the audit.
We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion.
ANNUAL REPORT 2022
Page 53
•
•
•
•
•
•
•
•
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditors’ report. However, future events or conditions may cause the Entity to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, related safeguards.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the group Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
Determine, from the matters communicated with those charged with governance, those matters that were of most
significance in the audit of the financial statements of the current period and are therefore the key audit matters. We
describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditors’ report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
The engagement partner on the audit resulting in this auditors’ report is Toni Dilli.
/s/ KPMG LLP*
Montreal, Canada
June 9, 2022
*CPA auditor, public accountancy permit No. A123145
ANNUAL REPORT 2022
Page 54
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and the Board of Directors of Saputo Inc.
Opinion
We have audited the consolidated financial statements of Saputo Inc. (the "Company"), which comprise the
consolidated statement of financial position as at March 31, 2021, and the consolidated income statement,
consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and
notes to the consolidated financial statements, including a summary of significant accounting policies (collectively
referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of
the Company as at March 31, 2021, and its financial performance and its cash flows for the year then ended in
accordance with International Financial Reporting Standards ("IFRS").
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards ("Canadian GAAS"). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the
Financial Statements section of our report. We are independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matter
A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the
consolidated financial statements for the year ended March 31, 2021. This matter was addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on this matter.
Goodwill —Dairy Division (Australia) and Dairy Division (UK) — Refer to Notes 3 and 8 to the consolidated
financial statements
Key Audit Matter Description
The Company’s evaluation of goodwill for impairment involves the comparison of the carrying values of cash-
generating units (“CGUs”) or group of CGUs, including goodwill, with their respective recoverable amounts. The
recoverable amounts of the Dairy Division (Australia) and Dairy Division (UK) CGUs are estimated based on the
higher of its value in use using a discounted cashflow model or fair value less costs of disposal using a multiple
earnings method. This requires management to make significant estimates and assumptions related to the forecasted
revenues and associated earnings before interest, income taxes, depreciation and amortization (“EBITDA”) margins,
terminal growth rates and discount rates, used in the discounted cashflow model and EBITDA multiples used in the
multiple earnings method. Changes in these assumptions could have a significant impact on the determination of the
recoverable amounts. The recoverable amounts of these CGUs exceeded their carrying values as of the
measurement date, and therefore no impairment was recognized.
While there are several estimates and assumptions that are required to estimate the recoverable amounts of the
Dairy Division (Australia) and Dairy Division (UK) CGUs, the estimates and assumptions with the highest degree of
subjectivity related to the forecasted revenues and associated EBITDA margins, terminal growth rates, discount rates
and EBITDA multiples. Performing audit procedures to evaluate the reasonableness of these estimates and
assumptions required a high degree of auditor judgment and an increased extent of audit effort, including the need to
involve valuation specialists.
ANNUAL REPORT 2022
Page 55
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecasted revenues and associated EBITDA margins, terminal growth rates,
discount rates and EBITDA multiples used by management to estimate the recoverable amount of the Dairy Division
(Australia) and the Dairy Division (UK) CGUs included the following, among others:
•
•
Evaluated management’s ability to accurately forecast revenues and EBITDA margins by comparing actual
results to management’s historical forecasts.
Evaluated the reasonableness of management’s forecasted revenues and EBITDA margins by comparing
the forecasts to:
◦ Historical revenues and EBITDA margins.
◦
Internal communications to senior leadership and to the Board of Directors detailing business
strategies and growth plans.
Forecasted revenue growth rates in analysts and industry reports that are publicly available.
◦
• With the assistance of our valuation specialists evaluated the reasonableness of the:
◦
Terminal growth rates by developing a range of independent estimates using available industry data
and expected long term inflation rates and comparing those to the terminal growth rates selected by
management.
◦ Discount rates by testing the source information underlying the determination of the discount rates
and developing a range of independent estimates and comparing those to the discount rates
selected by management.
EBITDA multiples by developing an independent range of estimates using available market
information from third party sources and recent transactions, if applicable and comparing those to
the EBITDA multiples selected by management.
◦
Other Information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis
•
The information, other than the financial statements and our auditor’s report thereon, in the Annual Report.
Our opinion on the financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management's Discussion and Analysis and the Annual Report prior to the date of this auditor’s report.
If, based on the work we have performed on this other information, we conclude that there is a material misstatement
of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this
regard.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with
IFRS, and for such internal control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
ANNUAL REPORT 2022
Page 56
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
▪
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.
▪ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Company's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
▪
▪ Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures
in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
▪
▪ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Company to express an opinion on the financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Gianmarco Lombardi.
/s/ Deloitte LLP1
Montréal, Québec
June 3, 2021
1 CPA auditor, CA, public accountancy permit No. A125494
ANNUAL REPORT 2022
Page 57
CONSOLIDATED INCOME STATEMENTS
(in millions of CDN dollars, except per share amounts)
Years ended March 31
Revenues (Note 24)
Operating costs excluding depreciation, amortization, and restructuring costs (Note 5)
Earnings before income taxes, financial charges, acquisition and restructuring costs, gain
on disposal of assets, impairment of intangible assets, and depreciation and
amortization
Depreciation and amortization
Impairment of intangible assets (Note 8)
Gain on disposal of assets
Acquisition and restructuring costs (Note 23)
Financial charges (Note 14)
Earnings before income taxes
Income taxes (Note 15)
Net earnings
Net earnings per share (Note 16)
Basic
Diluted
2022
$
15,035 $
13,880
2021
14,294
12,823
1,155
560
1,471
515
58
(9)
71
70
405
131
274 $
19
—
(3)
96
844
218
626
0.66 $
0.66 $
1.53
1.52
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
ANNUAL REPORT 2022
Page 58
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions of CDN dollars)
Years ended March 31
Net earnings
Other comprehensive loss:
Items that may be reclassified to net earnings:
Exchange differences arising from foreign currency translation
Inflation effect arising from the application of hyperinflation
Unrealized gains on cash flow hedges (Note 17)
Reclassification of loss (gains) on cash flow hedges to
net earnings
Income taxes relating to items that may be reclassified to
net earnings
Items that will not be reclassified to net earnings:
Actuarial gain (loss) (Note 19)
Income taxes relating to items that will not be reclassified to
net earnings
Other comprehensive loss
Total comprehensive income
$
The accompanying notes are an integral part of these consolidated financial statements.
2022
2021
$
274 $
626
(142)
(450)
(2)
19
11
(9)
(123)
(8)
62
(7)
(15)
(418)
72
(215)
(11)
61
(62)
212 $
41
(174)
(592)
34
ANNUAL REPORT 2022
Page 59
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions of CDN dollars, except common shares)
For the year ended March 31, 2022
Share capital
Reserves
Common
Shares
Amount
Foreign
Currency
Translation
Cash Flow
Hedges
Stock
Option
Plan
Total
Reserves
Retained
Earnings
Total
Equity
Balance, beginning of year
412,333,571 $
1,807
$
210 $
— $
165 $
375 $
4,262 $
6,444
Net earnings
Other comprehensive loss
Total comprehensive income
Dividends (Note 13)
Shares issued under dividend reinvestment plan
(Note 13)
Stock options
Exercise of stock options (Note 13)
—
—
—
2,783,718
—
1,620,752
—
—
—
87
—
51
—
(144)
—
—
—
—
—
21
—
—
—
—
—
(123)
274
61
274
(62)
212
—
—
15
(296)
(296)
—
—
—
87
15
43
(8)
(8)
Balance, end of year
416,738,041 $
1,945
$
66 $
21 $
172 $
259 $
4,301 $
6,505
For the year ended March 31, 2021
Share capital
Reserves
Common
Shares
Amount
Foreign
Currency
Translation
Cash Flow
Hedges
Stock
Option
Plan
Total
Reserves
Retained
Earnings
Total
Equity
Balance, beginning of year
408,638,373 $
1,686
$
668 $
(40) $
150 $
778 $
4,095 $
6,559
Net earnings
Other comprehensive loss
Total comprehensive income
Dividends (Note 13)
Shares issued under dividend reinvestment plan
(Note 13)
Stock options
Exercise of stock options (Note 13)
—
—
—
2,348,157
—
1,347,041
—
—
—
80
—
41
—
(458)
—
—
—
—
—
40
—
—
—
—
—
626
(418)
(174)
626
(592)
34
—
—
22
(285)
(285)
—
—
—
80
22
34
(7)
(7)
—
—
—
—
15
—
—
—
—
22
Balance, end of year
412,333,571 $
1,807
$
210 $
— $
165 $
375 $
4,262 $
6,444
The accompanying notes are an integral part of these consolidated financial statements.
ANNUAL REPORT 2022
Page 60
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions of CDN dollars)
As at
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories (Note 4)
Income taxes receivable (Note 15)
Prepaid expenses and other assets
Property, plant and equipment (Note 6)
Right-of-use assets (Note 7)
Goodwill (Note 8)
Intangible assets (Note 8)
Other assets (Note 9)
Deferred tax assets (Note 15)
Total assets
LIABILITIES
Current liabilities
Bank loans (Note 10)
Accounts payable and accrued liabilities
Income taxes payable (Note 15)
Current portion of long-term debt (Note 11)
Current portion of lease liabilities (Note 7)
Long-term debt (Note 11)
Lease liabilities (Note 7)
Other liabilities (Note 12)
Deferred tax liabilities (Note 15)
Total liabilities
EQUITY
Share capital (Note 13)
Reserves
Retained earnings
Total equity
Total liabilities and equity
March 31, 2022
March 31, 2021
165 $
1,500
2,503
52
75
4,295
3,962
475
3,188
1,371
362
30
309
1,217
2,294
35
93
3,948
3,777
482
3,066
1,517
319
14
13,683 $
13,123
$
$
$
419 $
1,952
44
300
65
2,780
3,075
386
101
836
$
7,178 $
1,945
259
4,301
6,505 $
13,683 $
$
$
76
1,641
54
300
75
2,146
3,278
386
116
753
6,679
1,807
375
4,262
6,444
13,123
The accompanying notes are an integral part of these consolidated financial statements.
On behalf of the Board,
(signed) Lino A. Saputo
Lino A. Saputo
Chair of the Board, President
and Chief Executive Officer
(signed) Tony Meti
Tony Meti
Director
ANNUAL REPORT 2022
Page 61
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of CDN dollars)
Years ended March 31
Cash flows related to the following activities:
Operating
Net earnings
Adjustments for:
Stock-based compensation
Financial charges (Note 14)
Income tax expense
Depreciation and amortization
Impairment of intangible assets (Note 8)
Restructuring charges related to optimization initiatives (Note 23)
(Gain) on disposal of property, plant and equipment
Foreign exchange (gain) loss on debt
Share of joint venture earnings, net of dividends received and other
Changes in non-cash operating working capital items
Cash generated from operating activities
Interest and financial charges paid
Income taxes paid
Net cash generated from operating activities
Investing
Business acquisitions, net of cash acquired
Additions to property, plant and equipment
Additions to intangible assets
Proceeds from disposal of property, plant and equipment
Net cash used for investing activities
Financing
Bank loans
Proceeds from issuance of long-term debt
Repayment of long-term debt
Repayment of lease liabilities
Net proceeds from issuance of share capital
Payment of dividends
Net cash used in financing activities
Decrease in cash and cash equivalents
Cash and cash equivalents, beginning of year
Effect of inflation
Effect of exchange rate changes
Cash and cash equivalents, end of year
2022
2021
$
274 $
37
70
131
560
58
68
(12)
(21)
3
(252)
916
(117)
(106)
693 $
(371)
(453)
(45)
70
(799) $
356
306
(487)
(80)
42
(209)
$
$
$
(72) $
(178)
309
39
(5)
165 $
$
626
36
96
218
515
19
—
(7)
45
(2)
(233)
1,313
(112)
(123)
1,078
—
(380)
(54)
47
(387)
(444)
1,084
(1,093)
(80)
33
(205)
(705)
(14)
319
16
(12)
309
The accompanying notes are an integral part of these consolidated financial statements.
ANNUAL REPORT 2022
Page 62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years ended March 31, 2022, and 2021.
(Tabular amounts are in millions of CDN dollars except numbers of options, units, and shares. All dollar amounts are in CDN dollars, unless otherwise
indicated.)
NOTE 1 CORPORATE INFORMATION
Saputo Inc. (the Company) is a publicly traded company incorporated and domiciled in Canada. The Company’s
shares are listed on the Toronto Stock Exchange under the symbol “SAP.” The Company produces, markets, and
distributes a wide array of dairy products from Canada, the United States, Australia, Argentina, and the United
Kingdom. In addition to its dairy portfolio, the Company produces, markets, and distributes a range of dairy alternative
cheeses and beverages. The address of the Company’s head office is 6869 Metropolitain Blvd. East, Montréal,
Québec, Canada, H1P 1X8. The consolidated financial statements of the Company for the fiscal year ended March
31, 2022 (financial statements), comprise the financial results of the Company and its subsidiaries.
The financial statements were authorized for issuance by the Board of Directors on June 9, 2022.
NOTE 2 BASIS OF PRESENTATION
STATEMENT OF COMPLIANCE
The consolidated financial statements of the Company have been prepared in accordance with International Financial
Reporting Standards (IFRS).
BASIS OF MEASUREMENT
The Company’s financial statements have been prepared on a historical cost basis except for defined benefit plan
assets and liabilities as well as certain financial instruments that are measured at fair value as described in Note 3,
Significant accounting policies.
FUNCTIONAL AND PRESENTATION CURRENCY
The Company’s consolidated financial statements are presented in Canadian dollars, which is also the consolidated
entity’s functional currency. All financial information has been rounded to the nearest million unless stated otherwise.
NOTE 3 SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of the Company and entities under its control. Control
exists when an entity is exposed, or has rights, to variable returns from its involvement with investees and has the
ability to affect those returns through its power over them. All intercompany transactions and balances have been
eliminated. Investments over which the Company has effective control are consolidated. The operating results of
acquired businesses, from their respective acquisition dates, are included in the consolidated income statements.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist primarily of cash and short-term investments having an initial maturity of three
months or less at the time of acquisition.
INVENTORIES
Finished goods, raw materials, and work in process are valued at the lower of cost and net realizable value, cost
being determined using the first in, first out method.
ANNUAL REPORT 2022
Page 63
NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses and are
depreciated using the straight-line method over their estimated useful lives as described below:
Buildings
Furniture, machinery and equipment
Rolling stock
5 to 10 years based on estimated kilometers traveled
15 to 40 years
3 to 20 years
Where components of an item of building or furniture, machinery, and equipment are individually significant, they are
accounted for separately within the categories described above.
Assets held for sale are recorded at the lower of their carrying amount or fair value less costs to sell, and no
depreciation is recorded. Assets under construction are not depreciated. Borrowing costs are capitalized to qualifying
property, plant and equipment, if any, where the period of construction of those assets takes a substantial period of
time to get ready for their intended use. Borrowing costs, if incurred, are added to the cost of those assets until such
time as the assets are substantially ready for their intended use.
For the purposes of impairment testing, property, plant and equipment are tested at the cash-generating unit (CGU)
level. Write-downs, if any, are included in “depreciation and amortization” or “restructuring costs” in the consolidated
income statements.
RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
Leases are recognized as a right-of-use asset and a corresponding lease liability at the commencement date. Each
lease payment is allocated between a reduction of the liability and finance cost. The finance cost is recognized in
‘‘Financial charges’’ in the consolidated income statements over the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liability for each period. The lease liability is measured at the present
value of lease payments to be made, discounted using the incremental borrowing rate at the lease commencement
date if the interest rate implicit in the lease is not readily available. The period over which the lease payments are
discounted is the non-cancellable period for which the lessee has the right to use the underlying asset together with
the renewal options that the Company is reasonably certain to exercise. The period needs to also consider
termination options that the Company is reasonably certain not to exercise. Renewal options are included in a
number of leases across the Company. Lease payments include fixed payments less any lease incentives receivable,
variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value
guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be
exercised and payment of penalties for termination of a lease.
Right-of-use assets are measured at cost, which is calculated as the amount of the initial measurement of lease
liability plus any lease payments made at or before the lease commencement date, any initial direct costs, and related
restoration costs. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on
a straight-line basis. If a lease transfers ownership of the underlying asset or if it is reasonably certain at the
commencement of the lease arrangement that the Company will exercise its purchase option, the related right-of-use
asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of
the lease.
Costs associated with short-term leases and leases of low-value assets are included in the consolidated income
statements.
ANNUAL REPORT 2022
Page 64
NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
GOODWILL AND INTANGIBLE ASSETS
Goodwill represents the excess of the consideration transferred in a given acquisition over the fair value of the
identifiable net assets acquired and is initially recorded at that value. Goodwill is subsequently carried at cost less any
impairment.
Intangible assets include trademarks, customer relationships, and software that is not an integral part of the related
hardware. Intangible assets are initially recorded at their transaction fair values. Definite life intangible assets are
subsequently carried at cost less accumulated amortization and less impairment losses, if any. Indefinite life
intangible assets, including goodwill, are not amortized. However, they are tested for impairment annually or more
frequently if events or changes in circumstances indicate that the assets might be impaired.
When testing goodwill for impairment, the carrying values of the CGUs or group of CGUs, including goodwill, are
compared with their respective recoverable amounts (higher of fair value less costs of disposal and value in use) and
an impairment loss, if any, is recognized for the excess.
Trademarks are considered to be definite life intangible assets and are amortized using the straight-line method over
their useful lives which vary from 15 to 25 years and are reviewed for indicators of impairment at each reporting
period. The assessment of the estimated useful life of trademarks is reviewed annually. Customer relationships and
software are considered to be definite life intangible assets and are amortized using the straight-line method over
their useful lives which vary from 3 to 15 years and are reviewed for indicators of impairment at each reporting period.
Refer to “Impairment Testing of Cash-Generating Units” in Note 8 for a discussion of the CGU levels at which goodwill
and intangible assets are tested.
IMPAIRMENT OF OTHER LONG-LIVED ASSETS
Other long-lived assets are subject to an “indicators of impairment” test at each reporting period. In the event of an
indication of impairment, the asset or group of assets (referred to as a CGU), for which identifiable cash flows that are
largely independent of the cash inflows from other assets or group of assets exist, are tested for impairment. An
impairment loss is recorded in “depreciation and amortization” or “restructuring costs” in the consolidated income
statements when the carrying value exceeds the recoverable amount. The recoverable amount is defined as the
greater of fair value less costs of disposal and value in use.
BUSINESS COMBINATIONS
The Company accounts for its business combinations using the acquisition method of accounting. Under this method,
the Company allocates the purchase price to tangible and intangible assets acquired and liabilities assumed based
on estimated fair values at the date of acquisition, with the excess of the purchase price amount allocated to goodwill.
Debt issuance costs directly related to the funding of business acquisitions are included in the carrying value of the
debt and are amortized over the related debt term using the effective interest rate method. Acquisition costs are
expensed as incurred.
EMPLOYEE FUTURE BENEFITS
The cost of defined benefit pension and other post-retirement benefits is actuarially determined annually on March 31
using the projected unit credit method and using Management’s best estimates of rates of compensation increases,
retirement ages of employees, and expected health care costs. Key assumptions made when valuing the defined
benefit obligation include the discount rate, duration of the plan, inflation, and mortality, amongst others. Actuarial
gains or losses, the effect of an adjustment, if any, on the maximum amount recognized as an asset and the impact of
the minimum funding requirements, are recorded in other comprehensive income (loss) and immediately recognized
in retained earnings without subsequent reclassification to the consolidated income statements. Current service costs
and past service costs are included in the consolidated income statements. Past service costs are recognized at the
earlier of the date of the plan amendment or curtailment. Interest on obligations offset by interest income on plan
assets are included in financial charges in the consolidated income statements. The net pension expenditure under
defined contribution pension plans is generally equal to the contributions made by the employer.
ANNUAL REPORT 2022
Page 65
NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
REVENUE RECOGNITION
The Company recognizes revenue when control of the asset is transferred to the customer, the vast majority upon
shipment of products. Revenue is measured at the amount of consideration to which the Company expects to be
entitled to. Sales are net of a provision for variable consideration of estimated allowances and sales incentives
provided to customers, such that it is highly probable that a significant reversal will not occur once the uncertainty
related to the variable consideration is subsequently resolved.
The value of sales incentives provided to customers are estimated using historical trends and are recognized at the
time of sale as a reduction of revenue. Sales incentives include discounts, promotions, advertising allowances, and
other volume-based incentives. In subsequent periods, the Company monitors the performance of customers against
agreed upon obligations related to sales incentive programs and makes any adjustments to both revenue and sales
incentive accruals as required.
FOREIGN CURRENCY TRANSLATION
The Company’s functional currency is the Canadian dollar. Accordingly, the financial position accounts of foreign
operations are translated into Canadian dollars using the exchange rates at the financial position dates and income
statements accounts are translated into Canadian dollars using the average monthly exchange rates in effect during
the periods. The foreign currency translation adjustment (CTA) reserve presented in the consolidated statements of
comprehensive income and the consolidated statements of changes in equity, represents accumulated foreign
currency gains (losses) on the Company’s net investments in companies operating outside Canada. The change in
the unrealized gains (losses) on translation of the financial statements of foreign operations for the periods presented
resulted from the fluctuation in value of the Canadian dollar as compared to the US dollar, the Australian dollar, the
Argentine peso, and the British pound.
Foreign currency accounts of the Company and its subsidiaries are translated using the exchange rates at the
financial position dates for monetary assets and liabilities, and at the prevailing exchange rates at the time of
transactions for income and expenses. Non-monetary items are translated at the historical exchange rates. Gains or
losses resulting from this translation are included in operating costs.
STOCK-BASED COMPENSATION
The Company offers an equity settled stock option plan to certain employees within the organization pursuant to
which options are granted over a five-year vesting period with a ten-year expiration term. The fair value of each
installment of an award is determined separately and recognized over the vesting period. When stock options are
exercised, any consideration paid by employees and the related compensation expense recorded as a stock option
plan reserve are credited to share capital.
The Company allocates deferred share units (DSU) to eligible Directors of the Company which are based on the
market value of the Company’s common shares. DSUs are granted on a quarterly basis, vest upon award and entitle
Directors to receive a cash payment for the value of the DSUs they hold following cessation of functions as a Director
of the Company. The Company recognizes an expense in its consolidated income statements and a liability in its
consolidated statement of financial positions for each grant. The liability is subsequently remeasured at each
reporting period with any change in value recorded in the consolidated income statements.
The Company offers performance share units (PSU) and restricted share units (RSU) to senior management which
are based on the market value of the Company’s common shares. The PSU and RSU plans are non-dilutive and are
settled in cash. These awards are considered cash-settled share-based payment awards. A liability is recognized for
the employment service received and is measured initially, on the grant date, at the fair value of the liability. The
liability is subsequently remeasured at each reporting period with any change in value recorded in the consolidated
income statements. Compensation expense is recognized over the three-year performance cycle for PSUs and over
the three-year restriction period for RSUs.
JOINT VENTURES
Joint ventures are accounted for using the equity method and represent those entities in which the Company
exercises joint control over and for which it is exposed to variable returns from its involvement in the arrangement.
Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about
the relevant activities require the unanimous consent of the parties sharing control.
ANNUAL REPORT 2022
Page 66
NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
INCOME TAXES
Income tax expense represents the sum of current and deferred income tax and is recognized in the consolidated
income statements with the exception of items that are recognized in the consolidated statements of comprehensive
income or directly in equity.
Current income taxes are determined in relation to taxable earnings for the year and incorporate any adjustments to
current taxes payable in respect of previous years.
Deferred income tax assets and liabilities are determined based on temporary differences between the carrying
amount of an asset or liability in the consolidated statement of financial position and its tax basis. They are measured
using the enacted or substantively enacted tax rates that are expected to apply when the asset is realized, or the
liability is settled. A deferred income tax asset is recognized to the extent that it is probable that taxable profit will be
available against which the deductible temporary difference can be used.
FINANCIAL INSTRUMENTS
Financial assets and liabilities are initially measured at fair value. Subsequently, financial instruments classified as
Fair Value through Profit or Loss (FVTPL) and fair value through other comprehensive income, part of a hedging
relationship or not, continue to be measured at fair value on the statement of financial position at each reporting date,
whereas other financial instruments are measured at amortized cost using the effective interest method.
The Company has made the following classifications:
Cash and cash equivalents are classified as amortized cost and are subsequently measured at amortized cost.
Receivables are classified as amortized cost and are subsequently measured at amortized cost.
–
–
– Other assets that meet the definition of a financial asset are classified as amortized cost and are subsequently
measured at amortized cost.
Bank loans, accounts payable and accrued liabilities, other liabilities, and long-term debt are classified as
amortized cost and are measured at amortized cost, with the exception of the liability related to DSUs, PSUs,
and RSUs which is measured at the fair value of common shares on the financial position dates.
–
The Company applies the simplified approach to recognize lifetime expected credit losses under IFRS 9. Certain
derivative instruments are utilized by the Company to manage exposure to variations in interest rate payments and to
manage foreign exchange rate risks, including foreign exchange forward contracts, currency swaps, and interest rate
swaps. Derivatives are initially recognized at fair value at the date the derivative contracts and currency swaps are
entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting
gain or loss is immediately recognized in net earnings unless the derivative is designated as a hedging instrument.
HEDGING
The Company designates certain financial instruments as cash flow hedges. At the inception of the hedging
relationship, the Company designates and formally documents the relationship between the hedging instrument and
the hedged item, the risk management objective, and its strategy for undertaking the hedge.
For derivatives instruments designated as cash flow hedges, the change in fair value related to the effective portion of
the hedge is recognized in other comprehensive income (loss), and the accumulated amount is presented as a
hedging reserve in the consolidated statement of changes in equity. Any ineffective portion is immediately recognized
in net earnings. Gains or losses from cash flow hedges included in other components of equity are reclassified to net
earnings, when the hedging instrument has come due or is settled, as an offset to the losses or gains recognized on
the underlying hedged items.
The Company formally assesses at inception and quarterly thereafter, the effectiveness of the hedging instruments’
ability to offset variations in the cash flow risks associated with the hedged item. Where a hedging relationship is no
longer effective, hedge accounting is discontinued and any subsequent change in the fair value of the hedging
instrument is recognized in net earnings.
ANNUAL REPORT 2022
Page 67
NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
FAIR VALUE HIERARCHY
Assets and liabilities, for which fair value is measured or disclosed in the consolidated financial statements, are
categorized into one of three hierarchy levels, described below, for disclosure purposes. Fair value is defined as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
Each level reflects the inputs used to measure the fair values of assets and liabilities:
Level 1 - Inputs are unadjusted quoted prices of identical instruments in active markets.
Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly or indirectly.
Level 3 - One or more significant inputs used in a valuation technique are not based on observable market data in
determining fair values of the instruments.
Determination of fair value and the resulting hierarchy requires the use of observable market data whenever
available. The classification of a financial instrument in the hierarchy is based upon the lowest level of input that is
significant to the measurement of fair value.
USE OF ESTIMATES AND JUDGMENTS IN THE APPLICATION OF ACCOUNTING POLICIES
The preparation of the Company’s financial statements requires Management to make certain judgments and
estimates about transactions and carrying values that are fulfilled at a future date. Judgments and estimates are
subject to fluctuations due to changes in internal and/or external factors and are continuously monitored by
Management. A discussion of the judgments and estimates that could have a material effect on the financial
statements is provided below.
SIGNIFICANT ESTIMATES AND JUDGMENTS
Economic Conditions and Uncertainties
The Company continues to monitor and assess the impact of the COVID-19 pandemic on the significant estimates
and judgments used in the preparation of the consolidated financial statements.
The Company is also continuously monitoring the geopolitical risk related to the evolving military conflict in Ukraine.
This crisis did not have a significant impact on the Company’s consolidated financial statements.
Income Taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the
consolidated provision for income taxes. During the ordinary course of business, there are many transactions and
calculations for which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated
tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these
matters differs from the amounts that were initially recorded, such differences will impact the results for the reporting
period and the respective current income tax and deferred income tax provisions in the reporting period in which such
determination is made.
Deferred income tax assets and liabilities are measured using enacted or substantively enacted income tax rates
expected to apply to taxable income in the years in which temporary differences are expected to be recovered or
settled. As a result, a projection of taxable income is required for those years, as well as an assumption of the
ultimate recovery or settlement period for temporary differences. The projection of future taxable income is based on
Management’s best estimates and may vary from actual taxable income. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Canadian, US, and international tax rules and regulations are subject to interpretation and require judgment on the
part of the Company that may be challenged by taxation authorities. The Company believes that it has adequately
provided for deferred tax obligations that may result from current facts and circumstances. Temporary differences and
income tax rates could change due to fiscal budget changes and/or changes in income tax laws.
ANNUAL REPORT 2022
Page 68
NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Goodwill, Intangible Assets, and Business Combinations
Goodwill, trademarks, and customer relationships have principally arisen as a result of business combinations. The
acquisition method, which also requires significant estimates and judgments, is used to account for these business
combinations. As part of the allocation process in a business combination, estimated fair values are assigned to the
net assets acquired, including trademarks and customer relationships. These estimates are based on forecasts of
future cash flows, estimates of economic fluctuations, and an estimated discount rate. The excess of the purchase
price over the estimated fair value of the net assets acquired is then assigned to goodwill. In the event that actual net
assets fair values are different from estimates, the amounts allocated to the net assets, and specifically to trademarks
and customer relationships, could differ from what is currently reported. This would then have a pervasive impact on
the carrying value of goodwill. Differences in estimated fair values would also have an impact on the amortization of
definite life intangibles.
Impairment of Assets
Significant estimates and judgments are required in testing goodwill, intangible assets, and other long-lived assets,
including right-of-use assets, for impairment. Management uses estimates or exercises judgment in assessing
indicators of impairment, defining a CGU, forecasting future cash flows, and in determining other key assumptions
such as discount rates and earnings multipliers used for assessing fair value (less costs of disposal) or value in use.
Goodwill is tested for impairment annually based on the December 31 balances and whenever there is an indication
of impairment. Other long-lived assets are tested only when indicators of impairment are present.
Employee Future Benefits
The Company is the sponsor to both defined benefit and defined contribution plans, which provide pension and other
post-employment benefits to its employees.
Several estimates and assumptions are required with regards to the determination of the defined benefit expense and
its related obligation, such as the discount rate used in determining the carrying value of the obligation and the
interest income on plan assets, the duration of the obligation, inflation, the expected health care cost trend rate, the
expected mortality rate, expected salary increase, etc. Changes in a number of key assumptions can have a material
impact on the calculation of the obligation. Actual results will normally differ from expectations. These gains or losses
are presented in the consolidated statements of comprehensive income.
EFFECT OF NEW ACCOUNTING STANDARDS, INTERPRETATIONS, AND AMENDMENTS
ADOPTED DURING THE YEAR
The following standards, amendments to existing standards, and interpretation of standards were adopted by the
Company on or after April 1, 2021:
IAS 38, Configuration or customization costs in a cloud computing arrangement
In April 2021, the IFRIC published a final agenda decision clarifying how to recognize certain configuration and
customization expenditures related to cloud computing.
The publication of this final agenda decision resulted in a change to our accounting policy for costs related to
configuration or customization of application software that is not controlled by the Company in Software as a Service
(SaaS) arrangements and as result $8 million ($5 million after tax) of previously capitalized costs were expensed and
included under Impairment of intangible assets (see Note 8).
ANNUAL REPORT 2022
Page 69
NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
EFFECT OF NEW ACCOUNTING STANDARDS, INTERPRETATIONS, AND AMENDMENTS
NOT YET IMPLEMENTED
The following standards, amendments to standards and interpretations have been issued by the International
Accounting Standards Board (IASB) and are applicable to the Company for its annual periods beginning on and after
April 1, 2022, with an earlier application permitted:
IFRS 3, Business Combinations: Reference to the Conceptual Framework
In May 2020, amendments to IFRS 3, Business Combinations were issued adding a requirement that IAS 37,
Provisions, contingent liabilities and contingent assets, or IFRIC 21, Levies, be applied by an acquirer to identify the
liabilities it has assumed in a business combination. Also, an explicit statement was added requiring an acquirer to not
recognize contingent assets acquired in a business combination.
This amendment is applicable to the Company beginning April 1, 2022. The Company will apply this amendment to
future business combinations.
IAS 16, Property, Plant and Equipment: Proceeds Before Intended Use
In May 2020, the IASB issued Property, Plant and Equipment: Proceeds before Intended Use, Amendments to IAS
16. This amendment prohibits a company from deducting from the cost of property, plant and equipment amounts
received from selling items produced while the company is preparing the asset for its intended use. Instead, a
company will recognize such sales proceeds and related costs in profit or loss.
This amendment is applicable to the Company beginning April 1, 2022, and its adoption will not have a significant
impact on the Company’s financial statements.
IAS 37, Onerous Contracts: Cost of Fulfilling a Contract
In May 2020, the IASB issued Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37), amending
the standard regarding costs a company should include as the cost of fulfilling a contract when assessing whether a
contract is onerous.
This amendment is applicable to the Company beginning April 1, 2022, and its adoption will not have a significant
impact on the Company’s financial statements.
IAS 1, Disclosure of Accounting Policies
In February 2021, the IASB issued amendments to IAS 1 to require entities to disclose its material accounting policies
instead of its significant accounting policies.
This amendment is applicable to the Company beginning April 1, 2023. The adoption of this amendment is not
expected to have a significant impact on the Company’s financial statements.
IAS 8, Definition of Accounting Estimates
In February 2021, the IASB issued amendments to IAS 8 to replace the definition of a change in accounting estimate.
Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to
measurement uncertainty”.
This amendment is applicable to the Company beginning April 1, 2023. The adoption of this amendment is not
expected to have a significant impact on the Company’s financial statements.
IAS 12, Deferred Tax Related to Assets and Liabilities Arising From a Single Transaction
In May 2021, the IASB issued amendments to IAS 12 to require entities to recognize deferred tax on transactions
that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences.
This amendment is applicable to the Company beginning April 1, 2023. The adoption of this amendment is not
expected to have a significant impact on the Company’s financial statements.
ANNUAL REPORT 2022
Page 70
NOTE 4 INVENTORIES
Finished goods
Raw materials, work in progress and supplies
Total
March 31, 2022
March 31, 2021
$
$
1,444 $
1,059
2,503 $
1,268
1,026
2,294
The amount of inventories recognized as an expense in operating costs for the year ended March 31, 2022, is
$11.7 billion ($11.2 billion for the year ended March 31, 2021).
NOTE 5 OPERATING COSTS EXCLUDING DEPRECIATION, AMORTIZATION, AND
RESTRUCTURING COSTS
Changes in inventories of finished goods and work in process
$
Raw materials and consumables used
Foreign exchange loss (gain)
Employee benefits expense
Other selling costs
Other general and administrative costs
For the years ended March 31
2022
(168) $
10,522
11
1,877
803
835
2021
(74)
9,649
(36)
1,842
656
786
$
13,880 $
12,823
NOTE 6 PROPERTY, PLANT AND EQUIPMENT
Cost
As at March 31, 2021
Business acquisitions (Note 18)
Additions
Disposals
Transfers
Foreign currency and hyperinflation adjustments
As at March 31, 2022
Accumulated depreciation
As at March 31, 2021
Depreciation
Disposals
Transfers
Impairment related to restructuring (Note 23)
Foreign currency and hyperinflation adjustments
As at March 31, 2022
Net book value at March 31, 2022
For the year ended March 31, 2022
Furniture,
machinery
and
equipment
Rolling
stock
Total
Land
Buildings
$
207 $
1,428 $
4,254 $
13 $
5,902
2
2
(3)
—
(5)
43
103
(11)
27
(6)
91
348
(73)
(16)
3
—
—
(2)
—
1
136
453
(89)
11
(7)
203 $
1,584 $
4,607 $
12 $
6,406
— $
418 $
1,697 $
10 $
2,125
—
—
—
—
—
68
(8)
—
24
(1)
267
(72)
2
30
9
— $
203 $
501 $
1,083 $
1,933 $
2,674 $
1
(1)
—
—
—
10 $
2 $
336
(81)
2
54
8
2,444
3,962
$
$
$
$
The net book value of property, plant and equipment under construction amounts to $294 million as at March 31,
2022, ($309 million as at March 31, 2021) and consists mainly of machinery and equipment.
NOTE 6 PROPERTY, PLANT AND EQUIPMENT (CONT'D)
Cost
As at March 31, 2020
Additions
Disposals
Transfers
Foreign currency adjustments
As at March 31, 2021
Accumulated depreciation
As at March 31, 2020
Depreciation
Disposals
Foreign currency and hyperinflation adjustments
As at March 31, 2021
Net book value at March 31, 2021
For the year ended March 31, 2021
Furniture,
machinery
and
Land
Buildings
equipment Rolling stock
Total
$
204 $
1,443 $
4,192 $
15 $
5,854
1
(6)
—
8
66
(30)
—
(51)
313
(68)
(4)
(179)
—
(3)
—
1
207 $
1,428 $
4,254 $
13 $
380
(107)
(4)
(221)
5,902
— $
—
—
—
— $
207 $
396 $
1,598 $
10 $
2,004
61
(17)
(22)
256
(58)
(99)
418 $
1,010 $
1,697 $
2,557 $
2
(2)
—
10 $
3 $
319
(77)
(121)
2,125
3,777
$
$
$
$
ANNUAL REPORT 2022
Page 72
NOTE 7 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
The following table presents changes in right-of-use assets during fiscal 2022:
Balance as at April 1, 2021
New leases / leases modifications
Depreciation
Foreign currency
Balance at March 31, 2022
For the year ended March 31, 2022
Real Estate
Equipment
$
$
345 $
23
(41)
(5)
322 $
137 $
58
(38)
(4)
153 $
Total
482
81
(79)
(9)
475
The following table presents changes in right-of-use assets during fiscal 2021:
Balance as at April 1, 2020
New leases / leases modifications
Depreciation
Disposals
Foreign currency
Balance at March 31, 2021
For the year ended March 31, 2021
Real Estate
Equipment
274 $
116
(35)
(14)
4
345 $
144 $
20
(35)
—
8
137 $
$
$
Total
418
136
(70)
(14)
12
482
The following table presents changes in lease liabilities during fiscal 2022 and 2021:
Balance, beginning of year
New leases / lease modifications
Interest expense
Payments
Foreign currency
Current portion
Balance, end of year
March 31, 2022
March 31, 2021
$
461 $
80
15
(95)
(10)
451
(65)
$
386 $
415
120
15
(100)
11
461
(75)
386
The following maturity analysis of the Company’s lease liabilities outstanding at March 31, 2022, is based on the
expected undiscounted contractual cash flows until the contractual maturity date:
Less than 1 year
1-2 years
2-3 years
3-4 years
4-5 years
More than 5 years
$
$
79
64
81
42
37
279
582
Expenses relating to short-term leases and leases of low value were not significant for the fiscal years ended March
31, 2022, and 2021.
ANNUAL REPORT 2022
Page 73
NOTE 8 GOODWILL AND INTANGIBLE ASSETS
For the year ended March 31, 2022
Definite Life
Goodwill
Trademarks
Customer
relationships
Software1
and other
Total
Intangible
Assets
Cost
As at March 31, 2021
$
3,066 $
1,126 $
390 $
416 $
1,932
Business acquisitions (Note 18)
Additions
Transfer
Foreign currency and hyperinflation
adjustments
As at March 31, 2022
Accumulated Amortization
As at March 31, 2021
Amortization
Impairment charges
Transfer
Foreign currency and hyperinflation
adjustments
As at March 31, 2022
Net book value at March 31, 2022
$
$
$
$
170
—
—
(48)
34
—
(7)
(35)
3,188 $
1,118 $
— $
—
—
—
—
— $
3,188 $
130 $
55
—
(5)
(6)
174 $
944 $
19
—
—
(6)
403 $
190 $
36
—
—
(3)
223 $
180 $
—
45
(10)
53
45
(17)
1
452 $
(40)
1,973
95 $
54
58
(3)
1
205 $
247 $
415
145
58
(8)
(8)
602
1,371
During the third quarter of fiscal 2022, the Company recognized an impairment charge of $58 million ($43 million net
of taxes) related to software assets following the Company's decision to temporarily pause the final phase of the
Harmoni deployment, the Company's Enterprise Resource Planning (ERP) project, which was set to begin in Canada.
The impairment charge also includes an amount relative to previously capitalized cloud-based software costs
following the application of the agenda decision of the IFRIC (see Note 3).
For the year ended March 31, 2021
Definite Life
Cost
As at March 31, 2020
$
3,219 $
1,156 $
412 $
373 $
1,941
Goodwill
Trademarks
Customer
relationships
Software1
and other
Total Intangible
Assets
Additions
Transfer
Impairment charges
Foreign currency and hyperinflation
adjustments
As at March 31, 2021
Accumulated Amortization
As at March 31, 2020
Amortization
Foreign currency and hyperinflation
adjustments
As at March 31, 2021
Net book value at March 31, 2021
1 None of the software were internally generated.
$
$
$
$
—
—
—
—
—
(19)
(153)
3,066 $
(11)
1,126 $
— $
—
—
— $
3,066 $
75 $
54
1
130 $
996 $
—
—
—
(22)
390 $
165 $
35
(10)
190 $
200 $
54
4
—
(15)
416 $
61 $
37
(3)
95 $
321 $
54
4
(19)
(48)
1,932
301
126
(12)
415
1,517
In fiscal 2021, the Company recognized impairment charges of $19 million related to trademarks. This charge was
related to the Company’s decision to retire a cheese brand name from its Australian portfolio of brands and is part of
a commitment to share in the responsibility to eliminate racism in all its forms.
ANNUAL REPORT 2022
Page 74
NOTE 8 GOODWILL AND INTANGIBLE ASSETS (CONT'D)
IMPAIRMENT TESTING OF CASH-GENERATING UNITS
Goodwill
In determining whether goodwill is impaired, the Company is required to estimate the respective recoverable amounts
of CGUs or groups of CGUs to which goodwill is allocated. Management considers the sectors below to be CGUs or
groups of CGUs for goodwill impairment purposes as they represent the lowest level at which the goodwill is
monitored for internal management purposes.
The Company reports its operations under four geographic sectors. The Canada Sector consists of the Dairy Division
(Canada). The USA Sector consists of the Dairy Division (USA). The International Sector combines the Dairy Division
(Australia) and the Dairy Division (Argentina). Finally, the Europe Sector consists of the Dairy Division (UK).
Goodwill is allocated to each CGU or group of CGUs as follows:
Allocation of goodwill
Canada Sector
Dairy Division (Canada)
USA Sector
Dairy Division (USA)
International Sector
Dairy Division (Australia)
Dairy Division (Argentina)
Europe Sector
Dairy Division (UK)
March 31, 2022
March 31, 2021
$
401 $
401
1,906
1,851
267
9
605
3,188 $
265
10
539
3,066
$
Recoverable amounts for each CGU or group of CGUs were estimated using an earnings multiplier valuation model
(fair value less costs of disposal). The key assumptions used in these models consist mainly of earnings multipliers of
market comparables that are applied to the results of each CGU or group of CGUs tested. The inputs used in this
model are Level 3 inputs in the fair value hierarchy described in Note 3.
Considering the activities of the Dairy Division (Australia) and the Dairy Division (UK) were added to the Company’s
operational footprint in more recent years, we also estimated the recoverable amounts for these divisions using a
discounted cash flow (value in use) model based on the following key assumptions:
• Cash flows: Cash flow forecasts for a given CGU are based on earnings before interest, income taxes,
depreciation and amortization, and are adjusted with growth rates. The cash flow forecast does not exceed a
period of five years with a terminal value calculated as a perpetuity in the final year.
• Terminal growth rate: Management uses a terminal growth rate to adjust its forecasted cash flows based on
expected increases in inflation and revenues for the CGU. The terminal growth rates used were 2.5% for the Dairy
Division (Australia) and 2.2% for the Dairy Division (UK).
• Discount rate: Cash flows are discounted using pre-tax discount rates. The pre-tax discount rates used were 7.1%
for the Dairy Division (Australia) and 6.5% for the Dairy Division (UK).
The Company performed its annual impairment testing of goodwill based on the December 31, 2021 balances, and,
in all cases, the recoverable amounts exceeded their respective carrying values including goodwill; therefore, goodwill
was not considered to be impaired as at March 31, 2022.
ANNUAL REPORT 2022
Page 75
NOTE 8 GOODWILL AND INTANGIBLE ASSETS (CONT'D)
Trademarks
Trademarks are included in the following CGUs or group of CGUs:
Allocation of trademarks by sectors
March 31, 2022
March 31, 2021
Canada
USA
International
Europe
NOTE 9 OTHER ASSETS
Joint ventures
Financial loan
Derivative financial assets
Employee benefits (Note 19)
Other
$
$
$
$
201 $
123
33
586
943 $
213
130
36
617
996
March 31, 2022
March 31, 2021
35 $
—
38
235
54
362 $
41
50
—
178
50
319
The Company holds interests in joint ventures, which are all accounted for using the equity method. The Company
recognized $4 million in net earnings, representing its share of earnings in the joint ventures for the year ended March
31, 2022 ($6 million for the year ended March 31, 2021). Dividends received from the joint ventures amounted to $7
million for the year ended March 31, 2022 ($5 million for the year ended March 31, 2021).
ANNUAL REPORT 2022
Page 76
NOTE 10 BANK LOANS
The Company has available bank credit facilities providing for bank loans as follows:
Available for use
Amount drawn
Credit Facilities
North America-USA
North America-Canada
Australia
Australia
Japan
United Kingdom
Argentina
Canadian
Currency
Equivalent
Maturity
June 20271,6 $
June 20271,6 $
Yearly2,6 $
Yearly2,6 $
Yearly3,6 $
Yearly4 $
Yearly5, 6 $
$
Base Currency
(in millions)
March 31, 2022
March 31, 2021
375
875
257
125
82
123
325
2,162
300 USD
700 USD
275 AUD
100 USD
8,000 JPY
75 GBP
260 USD
$
— $
207
50
56
43
—
63
$
419 $
—
—
—
—
34
—
42
76
1
The US$1 billion North American bank credit facility bears monthly interest at rates ranging from lender’s prime rates plus a maximum of 1.00% or
LIBOR or SONIA or BBSY or banker’s acceptance rate plus a minimum of 0.80% and a maximum of 2.00% depending on the Company credit
ratings, plus an adjustment to the applicable margins based on the Company's achievement of its sustainability targets. As at March 31, 2022,
US$165 million was drawn and its foreign currency risk was offset with a cross currency swap.
Bears monthly interest at LIBOR or Australian Bank Bill Rate plus up to 0.90% and can be drawn in AUD or USD.
2
3 Bears monthly interest at TIBOR plus 0.70% and can be drawn in JPY.
4 Bears monthly interest at rates ranging from base rate plus 0.70% or SONIA plus 0.70% and can be drawn in GBP.
5 Bears monthly interest at local rate and can be drawn in USD or ARS.
6 Subject to interest rate benchmark reform (see Note 17).
Since fiscal 2021, the Company has a trade receivable purchase agreement to sell certain receivables. As at March
31, 2022, receivables totalling $62 million (AU$66 million) ($68 million (AU$72 million) at March 31, 2021) were sold
under this arrangement. The receivables were derecognized upon sale as substantially all risks and rewards
associated with the receivables passed to the purchaser.
On August 5, 2021, the Company amended its US$1 billion North American bank credit facility to, among other things,
introduce a sustainability-linked loan (SLL) structure. The SLL structure introduces an annual pricing adjustment
based on whether the Company achieves key climate and water targets in line with its 2025 environmental
commitments. On June 1, 2022, the Company extended the maturity date to June 1, 2027.
ANNUAL REPORT 2022
Page 77
NOTE 11 LONG-TERM DEBT
Unsecured bank term loan facilities
Obtained April 2018 (AU$600 million) and due in June 20251
Obtained April 2019 (£600 million) and due in June 20252,5
Unsecured senior notes3,4
2.20%, issued in June 2016 and repaid in June 2021 (Series 2)
2.83%, issued in November 2016 and due in November 2023 (Series 3)
1.94%, issued in June 2017 and due in June 2022 (Series 4)
3.60%, issued in August 2018 and due in August 2025 (Series 5)
2.88%, issued in November 2019 and due in November 2024 (Series 6)
2.24%, issued in June 2020 and due in June 2027 (Series 7)
1.42%, issued in November 2020 and due in June 2026 (Series 8)
2.30%, issued in June 2021 and due in June 2028 (Series 9)
Other
Current portion
Principal repayments are as follows:
Less than 1 year
1-2 years
2-3 years
3-4 years
4-5 years
More than 5 years
March 31, 2022
March 31, 2021
$
$
$
$
$
373 $
262
—
300
300
350
400
700
350
300
40
3,375 $
(300)
3,075 $
300 $
306
1,035
350
350
1,034
3,375 $
385
459
300
300
300
350
400
700
350
—
34
3,578
(300)
3,278
300
759
685
400
350
1,084
3,578
1 Bear monthly interest at rates ranging from lender's prime plus a maximum of 1.00%, or banker’s acceptance rates or Australian Bank Bill Rate
plus a minimum of 0.80% and a maximum of 2.00%, depending on the Company’s credit ratings. Interest is paid every one, two, three or six
months, as selected by the Company.
2 Bears monthly interest at lender’s prime rates plus a maximum of 1.00% or LIBOR or SONIA or banker’s acceptance rates plus 0.80% up to a
3
4
maximum of 2.00%, depending on the Company’s credit ratings, and can be drawn in CAD, USD or £.
Interest payments are semi-annual.
In fiscal 2021, the Company renewed its medium term note program by filing a supplement to its base shelf prospectus dated December 9, 2020,
which provides the ability to make offerings of various securities during the 25-month period for which the base shelf prospectus is effective.
5 Subject to interest rate benchmark reform (see Note 17).
On June 1, 2022, the Company amended its bank term loan facilities denominated in British pounds sterling and
Australian dollars to extend their maturity dates to June 1, 2025.
On June 22, 2021, the Company issued Series 9 medium term notes for an aggregate principal amount of $300
million due June 22, 2028, bearing interest at 2.30%. The net proceeds of the issuance were used in the first quarter
of fiscal 2022 to repay the $300 million aggregate principal amount of the Series 2 medium term notes due
June 23, 2021.
On November 19, 2020, the Company issued Series 8 medium term notes for an aggregate principal amount of $350
million due June 19, 2026, bearing interest at 1.42%. The net proceeds of the issuance were used to repay $347
million (GBP 200 million) of the three-year tranche of the term loan facility incurred in connection with the Dairy Crest
Acquisition, and for general corporate purposes.
On June 16, 2020, the Company issued Series 7 medium term notes for an aggregate principal amount of $700
million due June 16, 2027, bearing interest at 2.24%. The net proceeds of the issuance were used during the first
quarter of fiscal 2021 to repay (i) the $426 million two-year tranche of the term loan facility incurred in connection with
the Dairy Crest Acquisition and (ii) $206 million (AU$ 220 million) of revolving loan facilities for the Dairy Division
(Australia), which included funds drawn in connection with the Specialty Cheese Business Acquisition. The remaining
net proceeds were used for general corporate purposes.
ANNUAL REPORT 2022
Page 78
NOTE 12 OTHER LIABILITIES
Employee benefits (Note 19)
Derivative financial liabilities
Stock-based compensation - long-term portion
Other
NOTE 13 SHARE CAPITAL
March 31, 2022
March 31, 2021
$
$
37 $
—
51
13
101 $
43
3
51
19
116
AUTHORIZED
The authorized share capital of the Company consists of an unlimited number of common shares. The common
shares are voting and participating.
STOCK OPTION PLAN
The Company has an equity settled stock option plan to allow for the purchase of common shares by key employees
and officers of the Company. The total number of common shares which may be issued pursuant to this plan cannot
exceed 45,698,394 common shares. As at March 31, 2022, 14,292,522 common shares are available for future
grants under this plan and 22,021,670 common shares are underlying options outstanding. During fiscal 2022, a total
of 1,620,752 common shares were issued following the exercise of options. Options may be exercised at a price not
less than the weighted average market price for the five trading days immediately preceding the date of grant. The
options vest at 20% per year and expire ten years from the grant date.
Options issued and outstanding as at year end are as follows:
Granting period
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Exercise
price
$ 21.61
$ 21.48
$ 25.55
$ 27.74
$ 35.08
$ 41.40
$ 46.29
$ 41.02
$ 45.30
$ 33.35
$ 37.52
March 31, 2022
March 31, 2021
Number of
options
Number of
exercisable options
Number of
options
Number of
exercisable options
104,017
964,504
1,494,384
1,733,541
2,808,213
2,914,637
3,395,873
2,723,052
4,073,214
104,017
964,504
1,494,384
1,733,541
2,808,213
2,360,566
2,075,330
1,127,580
797,840
100,778
812,537
1,243,555
1,734,764
1,873,838
3,057,893
3,211,194
3,791,350
3,017,017
4,496,395
100,778
812,537
1,243,555
1,734,764
1,873,838
2,430,803
1,938,427
1,510,080
607,726
—
1,810,235
22,021,670
—
13,465,975
—
23,339,321
—
12,252,508
Changes in the number of outstanding stock options for the year ended March 31 are as follows:
Balance, beginning of year
Granted
Exercised
Cancelled
Balance, end of year
March 31, 2022
March 31, 2021
Number of
options
Weighted average
exercise price
Number of
options
Weighted average
exercise price
23,339,321 $
1,984,038 $
(1,620,752) $
(1,680,937) $
22,021,670 $
37.81
37.52
25.83
40.74
38.45
20,946,092 $
4,637,830 $
(1,347,041) $
(897,560) $
23,339,321 $
38.05
33.35
24.31
40.70
37.81
The weighted average exercise price of the stock options granted in fiscal 2022 is $37.52, which corresponds to the
weighted average market price for the five trading days immediately preceding the date of the grant ($33.35 in fiscal
2021).
ANNUAL REPORT 2022
Page 79
NOTE 13 SHARE CAPITAL (CONT'D)
The weighted average fair value of stock options granted in fiscal 2022 was estimated at $6.52 per option ($5.04 in
fiscal 2021), using the Black-Scholes option pricing model with the following assumptions:
Weighted average:
Risk-free interest rate
Expected life of options
Volatility1
Dividend rate
March 31, 2022
March 31, 2021
0.88 %
6.4 years
21.92 %
1.91 %
0.53 %
6.3 years
21.17 %
2.08 %
1
The expected volatility is based on the historic share price volatility over a period similar to the life of the options.
A compensation expense of $15 million ($13 million net of taxes) and $22 million ($20 million net of taxes) relating to
stock options was recorded in operating costs in the consolidated income statements for the year ended March 31,
2022, and March 31, 2021, respectively.
Options to purchase 2,600,057 common shares at a price of $29.59 per share were granted on April 1, 2022.
DEFERRED SHARE UNIT PLAN FOR DIRECTORS
In accordance with the DSU plan, all eligible Directors of the Company are allocated an annual retainer payable 50%
in DSUs and 50% in cash or 100% in DSUs, at the election of the Director. Until the ownership threshold is met by the
Director, the Director must receive the entire compensation in DSUs. The number of DSUs granted quarterly to each
Director is determined based on the market value of the Company’s common shares at the date of each grant. When
they cease to be a Director of the Company, a cash payment equal to the market value of the accumulated DSUs will
be disbursed. The liability relating to these units is adjusted by taking the number of units outstanding multiplied by
the market value of common shares at the Company’s year-end. The Company includes the cost of the DSU plan in
operating costs in the consolidated income statements.
Balance, beginning of year
Annual retainer
Dividends reinvested
Variation due to change in stock price
Balance, end of year
2022
Units
467,685 $
61,379
10,763
—
539,827 $
Liability
18
2
—
(4)
16
2021
Units
404,019 $
55,067
8,599
—
467,685 $
Liability
14
2
—
2
18
The Company enters into equity forward contracts in order to mitigate the compensation costs associated with its
DSU plan. As at March 31, 2022, and 2021, the Company had equity forward contracts on 420,000 common shares
with a notional value of $14 million ($15 million as of March 31, 2021). The net compensation expense related to the
DSU plan was $2 million for the year ended March 31, 2022 ($4 million for March 31, 2021), including the effect of the
equity forward contracts.
ANNUAL REPORT 2022
Page 80
NOTE 13 SHARE CAPITAL CONT'D
PERFORMANCE SHARE UNIT PLAN
The Company offers key employees and officers of the Company a performance share unit (PSU) plan to form part of
long-term incentive compensation. The PSU plan is non-dilutive and is settled in cash only. Under the PSU plan, each
performance cycle shall consist of three fiscal years of the Company. At the time of the grant of a PSU, the Company
determines the performance criteria which must be met by the Company. The Corporate Governance and HR
Committee has discretion to award compensation absent the achievement of the vesting criteria established.
Following completion of a three-year performance cycle, the PSUs for which the performance criteria have been
achieved will vest and the value that will be paid out is based on the price of the common shares at such time,
multiplied by the number of PSUs for which the performance criteria have been achieved. The amount potentially
payable to eligible employees is recognized as a payable and is revised at each reporting period. The expense is
included in employee benefits in operating costs in the consolidated income statements.
Balance, beginning of year
Annual grant
Cancelled
Payment
Balance, end of year
2022
Units
1,071,256
682,326
(241,109)
(188,162)
2021
Units
819,656
501,811
(87,350)
(162,861)
1,324,311
1,071,256
As at March 31, 2022, a long-term obligation related to PSUs of $20 million was recorded ($22 million as at
March 31, 2021) in addition to $5 million that was recorded in accrued liabilities ($8 million as at March 31, 2021).
On April 1, 2022, 1,330,950 PSUs were granted at a price of $29.59 per unit ($37.52 in 2021).
RESTRICTED SHARE UNIT PLAN
The Company also offers a restricted share unit (RSU) plan to form part of long-term incentive compensation for key
employees and officers of the Company. The RSU plan is non-dilutive and is settled in cash only. Under the RSU
plan, each restriction period shall consist of three fiscal years of the Company. At the time of the grant of a RSU, the
Company determines the vesting criteria which must be met by the participants. Such criteria may include, without
limitation, continuing employment through all or part of the restriction period. The Corporate Governance and HR
Committee has discretion to award compensation absent the achievement of the vesting criteria established.
Following completion of a three-year restriction period, the RSUs for which the vesting criteria have been achieved
will vest and the value that will be paid out is based on the price of the common shares at such time, multiplied by the
number of RSUs for which the vesting criteria have been achieved. The amount potentially payable to eligible
employees is recognized as a payable and is revised at each reporting period. The expense is included in employee
benefits in operating costs in the consolidated income statements.
Balance, beginning of year
Annual grant
Cancelled
Payment
Balance, end of year
2022
Units
330,469
442,912
(39,598)
(7,654)
726,129
2021
Units
129,778
205,119
(3,007)
(1,421)
330,469
As at March 31, 2022, a long-term obligation related to RSUs of $9 million was recorded in addition to $4 million that
was recorded in accrued liabilities. On April 1, 2022, 612,895 RSUs were granted at a price of $29.59 per unit ($37.52
in 2021).
ANNUAL REPORT 2022
Page 81
NOTE 13 SHARE CAPITAL CONT'D
The Company enters into equity forward contracts in order to mitigate the compensation costs associated with its
PSU and RSU plans. As at March 31, 2022, the Company had equity forward contracts on 2,000,000 common shares
(1,170,000 as of March 31, 2021) with a notional value of $72 million ($40 million as of March 31, 2021). The net
compensation expense related to PSUs was $16 million for the year ended March 31, 2022 ($13 million for the year
ended March 31, 2021), including the effect of the equity forward contracts. The net compensation expense related to
RSUs was $7 million for the year ended March 31, 2022 ($4 million in 2021), including the effect of the equity forward
contracts.
DIVIDENDS AND DIVIDEND REINVESTMENT PLAN
The Company has a dividend reinvestment plan (DRIP), which became effective as of the first quarter of fiscal 2021
and provides eligible shareholders with the opportunity to have all or a portion of their cash dividends automatically
reinvested into additional common shares.
The dividends paid in cash and through the DRIP during the years ended 2022, and 2021, are shown below:
For the year ended March 31, 2022
Payment date
March 18, 2022 $
December 17, 2021
September 17, 2021
June 25, 2021
Total $
Payment date
March 26, 2021 $
January 7, 2021
October 2, 2020
July 9, 2020
Total $
Cash
50 $
53
54
52
209 $
Cash
50 $
52
52
51
205 $
DRIP
25 $
21
21
20
87 $
Total
75
74
75
72
296
For the year ended March 31, 2021
DRIP
22 $
20
20
18
80 $
Total
72
72
72
69
285
On June 9, 2022, the Board of Directors approved a dividend of $0.18 per share payable on June 28, 2022, to
common shareholders of record on June 21, 2022.
NOTE 14 FINANCIAL CHARGES
Interest on long-term debt
Other finance costs, net
Gain on hyperinflation
Interest on lease liabilities
Net interest revenue from defined benefit obligation (Note 19)
For the years ended March 31
2021
2022
$
$
74 $
31
(48)
15
(2)
70 $
79
27
(17)
15
(8)
96
ANNUAL REPORT 2022
Page 82
NOTE 15 INCOME TAXES
Income tax expense comprises the following:
Current tax expense
Deferred tax expense
Income tax expense
For the years ended March 31
2022
91 $
40
131 $
2021
151
67
218
$
$
RECONCILIATION OF THE EFFECTIVE TAX RATE
The effective income tax rate was 32.3% in 2022 (25.8% in 2021). The Company’s income tax expense differs from
the one calculated by applying Canadian statutory rates for the following reasons:
Earnings before tax
Income taxes, calculated using Canadian statutory income tax rates of 25.8% (25.8% in
2021)
Adjustments resulting from the following:
Effect of tax rates for foreign subsidiaries
Changes in tax laws and rates
Stock-based compensation
Benefit arising from investment in subsidiaries
Adjustments in respect of inflation in Argentina
Impairment of goodwill/assets
Adjustments in relation to prior years and other
Income tax expense
$
$
2022
405 $
105 $
12
51
2
(14)
(24)
—
(1)
$
131 $
2021
844
218
4
(1)
3
(12)
(13)
6
13
218
On June 10, 2021, the UK Finance Act 2021 was enacted increasing the UK tax rate from 19% to 25%, effective April
1, 2023. This change resulted in the Company recording, in the first quarter of fiscal 2022, an income tax expense of
approximately $50 million and a corresponding increase to deferred income tax liabilities.
INCOME TAX RECOGNIZED IN OTHER COMPREHENSIVE INCOME
Income tax on items recognized in other comprehensive income in 2022 and 2021 were as follows:
Deferred tax expense (benefit) on actuarial losses on employee benefit obligations
Current tax expense on cash flow hedge
Deferred tax expense on cash flow hedges
Total income tax expense (benefit) recognized in other comprehensive income
INCOME TAX RECOGNIZED IN EQUITY
Income tax on items recognized in equity in 2022 and 2021 were as follows:
Excess tax benefit that results from the excess of the deductible amount over the stock-
based compensation recognized in net earnings
Total income tax benefit recognized in equity
CURRENT TAX ASSETS AND LIABILITIES
Income taxes receivable
Income taxes payable
Income taxes receivable (payable) (net)
$
$
$
$
$
$
2022
11 $
4
5
20 $
2021
(41)
—
15
(26)
2022
2021
(1) $
(1) $
2022
52 $
(44)
8 $
(1)
(1)
2021
35
(54)
(19)
ANNUAL REPORT 2022
Page 83
NOTE 15 INCOME TAXES (CONT'D)
DEFERRED TAX ASSETS AND LIABILITIES
Deferred income taxes are presented as follows on the consolidated statements of financial position, as at March 31:
Deferred tax assets
Deferred tax liabilities
Deferred tax liabilities (net)
$
$
2022
30 $
(836)
(806) $
2021
14
(753)
(739)
The movement of deferred tax assets and liabilities were as follows for the years ended March 31:
Accounts
payable
and
accrued
liabilities
Income tax
losses
Net assets
of pension
plans Inventories
Property,
plant and
equipment
Goodwill,
intangible
assets and
other
Net
deferred
tax
liabilities
For the year ended March 31, 2022
Balance, beginning of the year $
53 $
38 $
(22) $
(5) $
(375) $
(428) $
(739)
Charged/credited to net
earnings
Charged/credited to other
comprehensive income
Acquisitions
Translation and other
7
—
—
(2)
89
(18)
(24)
(60)
(34)
—
—
(7)
(11)
—
3
—
—
2
—
—
—
(5)
(10)
3
(40)
(16)
(10)
(1)
Balance, end of the year
$
58 $
120 $
(48) $
(27) $
(435) $
(474) $
(806)
Accounts
payable and
accrued
liabilities
Income tax
losses
Net assets
of pension
plans
Inventories
For the year ended March 31, 2021
Property,
plant and
equipment
Goodwill,
intangible
assets and
other
Net deferred
tax liabilities
Balance, beginning of the year $
68 $
42 $
(62) $
(5) $
(337) $
(415) $
(709)
Charged/credited to net
earnings
Charged/credited to other
comprehensive income
Acquisitions
Translation and other
Balance, end of the year
$
(19)
(4)
(1)
(1)
(22)
(20)
(67)
—
4
—
53 $
—
—
—
38 $
41
—
—
(22) $
—
—
1
(5) $
—
1
(17)
(375) $
(15)
(3)
25
(428) $
26
2
9
(739)
As at March 31, 2022, the Company had $265 million in capital losses for which no deferred tax assets had been
recognized. These capital losses can be carried forward indefinitely but can only be used against future taxable
capital gains.
Recognized deferred tax assets relating to unused tax losses carried forward are supported by projections of future
profitability of the Company.
ANNUAL REPORT 2022
Page 84
NOTE 16 NET EARNINGS PER SHARE
Net earnings
Weighted average number of common shares outstanding
Dilutive stock options
Weighted average diluted number of common shares outstanding
Basic net earnings per share
Diluted net earnings per share
For the years ended March 31
2022
274 $
2021
626
414,137,462
409,854,735
690,528
1,530,666
414,827,990
411,385,401
0.66 $
0.66 $
1.53
1.52
$
$
$
When calculating diluted net earnings per share for the year ended March 31, 2022, 19,458,765 options were
excluded from the calculation because their exercise price is higher than the average market value of shares during
the same period (14,951,292 options were excluded for the year ended March 31, 2021).
NOTE 17 FINANCIAL INSTRUMENTS
In the normal course of business, the Company uses various financial instruments which by their nature involve risk,
including credit risk, liquidity risk, interest rate risk, foreign exchange risk, and price risk (including commodity price
risk). These financial instruments are subject to normal credit conditions, financial controls, and risk management and
monitoring strategies.
Occasionally, the Company may enter into derivative financial instrument transactions in order to mitigate or hedge
risks in accordance with risk management strategies. The Company does not enter into these arrangements for
speculative purposes.
CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash
equivalents and receivables.
Cash equivalents consist mainly of short-term investments. The Company has deposited these cash and cash
equivalents in reputable financial institutions.
The Company also offers credit to its customers in the normal course of business for trade receivables. Credit
valuations are performed on a regular basis and reported results take into account expected credit losses.
Due to its large and diverse customer base and its geographic diversity, the Company has low exposure to credit risk
concentration with respect to customers' receivables. There are no receivables from any individual customer that
exceeded 10% of the total balance of receivables as at March 31, 2022, and March 31, 2021. No customer
represented more than 10% of total consolidated revenues for the fiscal years ended March 31, 2022, and March 31,
2021.
Allowances for expected credit loss are reviewed by Management at each financial position date and the estimate of
the allowance for expected credit loss is updated based on the evaluation of the recoverability of trade receivables
with each customer base, taking into account historical collection trends of past due accounts and current economic
conditions. The accounts receivable from our export sales benefit from payment terms that are longer than our
standard payment terms applicable to domestic sales. The Company considers a financial asset in default when
contractual payments are considered past due and at risk depending on the various economic and asset-specific
factors, or if it becomes probable that a customer will enter bankruptcy or other insolvency proceedings.
ANNUAL REPORT 2022
Page 85
NOTE 17 FINANCIAL INSTRUMENTS (CONT'D)
The amount of the allowance for expected credit loss is sufficient to cover the carrying amount of receivables
considered past due and at risk. The amount of the loss is recognized in the consolidated income statements within
operating costs. Subsequent recoveries of amounts previously written off are credited against operating costs in the
consolidated income statements. These allowances are not significant for the year ended March 31, 2022.
LIQUIDITY RISK
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The
Company manages liquidity risk through the management of its capital structure and financial leverage, as outlined in
Note 22 relating to capital disclosures. It also manages liquidity risk by continuously monitoring actual and projected
cash flows. The Board of Directors reviews and approves the Company’s operating and capital budgets, as well as
any material transactions out of the normal course of business.
Contractual maturities for the significant financial liabilities as at March 31, 2022, are as follows: accounts payable
and accrued liabilities, bank loans, lease liabilities and long-term debt. All items included in accounts payable and
accrued liabilities are less than one year. For maturities on bank loans, lease liabilities and the long-term debt, please
refer to Note 10, Note 7, and Note 11, respectively.
INTEREST RATE RISK
The Company is exposed to interest rate risks through its financial obligations that bear variable interest rates. Bank
loans and unsecured bank term loan facilities bear interest at fluctuating rates and thereby expose the Company to
interest rate risk on cash flows associated to interest payments. The senior notes bear interest at fixed rates and, as a
result, no interest rate risk exists on these cash flows. As a result of the interest rate benchmark reform, the Company
partially amended the applicable variable interest rates referenced under certain bank credit facilities and long-term
debt (see Notes 10 and 11). The Company has already transitioned the GBP LIBOR which did not have a significant
impact on the Company’s financial statements. Furthermore, the Company is in the process of completing its
transition to the USD LIBOR. The Company is taking all necessary steps to identify, measure, and control all risks to
ensure a smooth transition to the interest rate benchmark reform. As at March 31, 2022, the transition is progressing
according to schedule. The reform is not expected to have a significant impact on the Company’s financial
statements.
For the fiscal year ended March 31, 2022, the interest expense on long-term debt totalled $74 million ($79 million in
fiscal 2021). The interest accrued as at March 31, 2022, was $19 million ($19 million as at March 31, 2021).
As at March 31, 2022, the net amount exposed to short-term rates fluctuations was approximately $889 million.
Based on this exposure, an assumed 1% increase in the interest rate would have an unfavourable impact of
approximately $7 million on net earnings with an equal but opposite effect for an assumed 1% decrease.
FOREIGN EXCHANGE RISK
The Company operates internationally and is exposed to foreign exchange risk resulting from various foreign
currency transactions. Foreign exchange transaction risk arises primarily from future commercial transactions that are
denominated in a currency that is not the functional currency of the Company’s business unit that is party to the
transaction, as well as the unsecured bank term loan facilities that can be drawn in US dollars, Australian dollars,
Argentine Peso, British pounds sterling, and Japanese Yen.
The Company enters into forward exchange contracts to sell US dollars and buy Australian dollars in order to mitigate
market fluctuations in the USD/AUD exchange rates on receivables. As at March 31, 2022, the Company had
outstanding forward exchange contracts with a notional value of US$415 million. During the fiscal year, the cash flow
hedges were highly effective and accordingly, the Company recognized an unrealized loss of $3 million (net of tax of
$1 million) in other comprehensive income as a result. A loss of $13 million (net of tax of $5 million) was reclassified
to net earnings during fiscal 2022 related to these forward exchange contracts. These cash flow hedges were also
deemed to be highly effective during fiscal 2021, and an unrealized gain of $46 million (net of tax of $19 million), was
recorded in other comprehensive income. A gain of $25 million (net of tax of $11 million) was reclassified to net
earnings during fiscal 2021 related to these forward exchange contracts.
ANNUAL REPORT 2022
Page 86
NOTE 17 FINANCIAL INSTRUMENTS (CONT'D)
The Company’s largest exposure comes from the US dollar fluctuations. The following table details the Company’s
sensitivity to a $0.10 weakening against the US dollar on net earnings and comprehensive income. For a $0.10
appreciation against the US dollar, there would be an equal and opposite impact on net earnings and comprehensive
income.
Change in net earnings
Change in comprehensive income
$
$
2022
2 $
294 $
2021
15
277
COMMODITY PRICE RISK
In certain instances, the Company enters into futures contracts to hedge against fluctuations in the price of
commodities. The Company applies hedge accounting for certain of these transactions. During the fiscal year, these
hedges (designated as cash flow hedges) were highly effective and accordingly, an unrealized gain of $9 million (net
of tax of $3 million) was recorded in other comprehensive income. A gain of $ $4 million (net of tax of $1 million) was
reclassified to net earnings during fiscal 2022 when the related inventory was ultimately sold. These hedges were
also assessed to be highly effective during fiscal 2021 and accordingly, a non significant unrealized loss was recorded
in other comprehensive income.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company determined that the fair value of certain of its financial assets and financial liabilities with short-term
maturities approximates their carrying value. These financial instruments include cash and cash equivalents,
receivables, bank loans, accounts payable, and accrued liabilities. The table below presents the fair value and the
carrying value of other financial instruments as at March 31, 2022, and March 31, 2021. Since estimates are used to
determine fair value, they must not be interpreted as being realizable in the event of a settlement of the instruments.
Cash flow hedges
Equity forward contracts (Level 2)
$
Commodity derivatives (Level 2)
Foreign exchange derivatives (Level 2)
Derivatives not designated in a formal hedging
relationship
Equity forward contracts (Level 2)
Commodity derivatives (Level 2)
Foreign exchange derivatives (Level 2)
March 31, 2022
March 31, 2021
Fair value
Carrying value
Fair value
Carrying value
(3) $
8
52
(10)
2
1
(3) $
8
52
(10)
2
1
— $
2
(6)
5
1
—
—
2
(6)
5
1
—
Long-term debt (Level 2)
3,231
3,375
3,626
3,578
For the years ended March 31, 2022, and 2021, there were no changes in valuation techniques and in inputs used in
the fair value measurements and there were no transfers between the levels of the fair value hierarchy.
Fair values of other assets, long-term debt and derivative financial instruments are determined using discounted cash
flow models based on market inputs prevailing at the financial position date and are also obtained from financial
institutions. Where applicable, these models use market-based observable inputs including interest-rate-yield curves,
volatility of certain prices or rates and credit spreads. If market based observable inputs are not available, judgment is
used to develop assumptions used to determine fair values. The fair value estimates are significantly affected by
assumptions including the amount and timing of estimated future cash flows and discount rates. The Company’s
derivatives transactions are accounted for on a fair value basis which is based on the amount at which they could be
settled based on estimated current market rates.
ANNUAL REPORT 2022
Page 87
NOTE 18 BUSINESS ACQUISITIONS
USA SECTOR
i) CAROLINA ASEPTIC AND CAROLINA DAIRY
On August 31, 2021, the Company completed the acquisition of the Carolina Aseptic and Carolina Dairy businesses
formerly operated by AmeriQual Group Holdings, LLC (Carolina Aseptic and Carolina Dairy), increasing the
Company's capacity to manufacture and distribute products in its USA Sector. The activities of these two businesses
are conducted at two facilities in North Carolina (USA) and employ a total of approximately 230 people. Carolina
Aseptic develops, manufactures, packages, and distributes aseptic shelf-stable food products and beverages out of a
purpose-built facility in Troy, North Carolina. Nearby, Carolina Dairy manufactures, packages, and distributes
refrigerated yogurt in spouted pouches in Biscoe, North Carolina.
The purchase price of $148 million (US$116 million), on a cash-free and debt-free basis, was paid in cash from
available credit facilities.
Recognized goodwill (tax deductible) reflects the value assigned to expected future growth to be achieved through
increased capacity to manufacture and distribute products in the rapidly growing aseptic beverage and food
categories as well as nutritional snacks.
ii) REEDSBURG FACILITY OF WISCONSIN SPECIALTY PROTEIN, LLC
On May 29, 2021, the Company completed the acquisition of the Reedsburg facility of Wisconsin Specialty Protein,
LLC (the Reedsburg Facility). This facility located in Wisconsin (USA) manufactures value-added ingredients, such as
goat whey, organic lactose, and other dairy powders, and it employs approximately 40 people.
The purchase price of $37 million (US$30 million), on a cash-free and debt-free basis, was paid in cash from cash on
hand.
EUROPE SECTOR
i) WENSLEYDALE DAIRY PRODUCTS
On July 30, 2021, the Company acquired the activities of Wensleydale Dairy Products Ltd (Wensleydale Dairy
Products). The business operates two facilities located in North Yorkshire (UK) and employs approximately 210
people. Wensleydale Dairy Products manufactures, blends, markets, and distributes a variety of specialty and
regional cheeses which complement and expand the Company's existing range of British cheeses.
The purchase price of $38 million (£22 million), on a cash-free and debt-free basis, was paid in cash from cash on
hand.
ii) BUTE ISLAND FOODS LTD
On May 25, 2021, the Company acquired all of the shares of Bute Island Foods Ltd (Bute Island Foods), based in
Scotland (United Kingdom) and employing approximately 180 people. It is a manufacturer, marketer, and distributor of
a variety of dairy alternative cheese products for both the retail and foodservice market segments under the vegan
Sheese brand, alongside private label brands.
The purchase price of $148 million (£87 million), on a cash-free and debt-free basis, was paid in cash from available
credit facilities and cash on hand.
Recognized goodwill (not tax deductible) reflects the value assigned to know-how and expected accelerated growth
of dairy alternative cheese products globally.
ANNUAL REPORT 2022
Page 88
NOTE 18 BUSINESS ACQUISITIONS CONT'D
Had the Company concluded each of the aforementioned acquisitions prior to (or at the beginning of) fiscal 2022, the
pro-forma effect on the Company's total revenues and net earnings would have been minimal for the year ended
March 31, 2022. The allocation of the purchase price for each acquisition to assets acquired and liabilities assumed is
presented below:
Bute Island
Foods
Reedsburg
Facility
Wensleydale
Dairy
Products
Carolina
Aseptic and
Carolina
Dairy
Assets acquired
Net working capital
$
6 $
Property, plant and equipment
Goodwill and intangible assets
Liabilities assumed Deferred income taxes
11
139
(8)
Net assets acquired
$
148 $
1 $
36
—
—
37 $
10 $
17
13
(2)
38 $
5 $
72
71
—
148 $
Total
22
136
223
(10)
371
NOTE 19 EMPLOYEE POST-EMPLOYMENT BENEFIT PLANS
The Company sponsors various post-employment benefit plans. These include both defined contribution and defined
benefit pension plans, and other post-employment benefit plans.
DEFINED CONTRIBUTION PLANS
The Company offers and participates in defined contribution pension plans of which more than 99% of its active
employees are members. The net pension expense under these types of plans is generally equal to the contributions
made by the employer and constitutes an expense for the year in which they are due. For fiscal 2022, the defined
contribution expenses for the Company amounted to $80 million ($77 million in fiscal 2021). The Company expects to
contribute approximately $83 million to its defined contribution plans for fiscal 2023.
DEFINED BENEFIT PLANS
The Company offers and participates in defined benefit pension plans in which the remaining active employees are
members. Under the terms of the defined benefit pension plans, pensions are based on years of service and the
retirement benefits are up to 2% of the average eligible earnings of the last employment years multiplied by years of
credited service.
There are no active employees in the Dairy Division (UK) Defined Benefit Pension Fund, which is a final salary
scheme in the UK that was closed to future service accrual from April 1, 2010, and had been closed to new joiners
from June 30, 2006. The Fund is administered by a corporate trustee which is legally separate from the Company; the
directors of the corporate trustee comprise representatives of both the employer and employees as well as a
professional trustee. The corporate trustee is responsible for the day to day administration of the benefits and the
Investment Policy.
The registered pension plans must comply with statutory funding requirements in the jurisdiction in which they are
registered. Funding valuations are required on an annual or triennial basis, depending on the jurisdiction, and
employer contributions must include amortization payments for any deficit, over a period of five to 15 years.
Contribution holidays are allowed and subject to certain thresholds. Other non-registered pension plans and benefits
other than pension are not subject to any minimum funding requirements.
ANNUAL REPORT 2022
Page 89
NOTE 19 EMPLOYEE POST-EMPLOYMENT BENEFIT PLANS (CONT'D)
The cost of pension benefits earned by employees is actuarially determined using the projected unit credit method
and using a discount rate based on high quality corporate bonds and Management’s assumptions bearing on, among
other things, rates of compensation increase and retirement age of employees. All of these estimates and
assessments are formulated with the help of external consultants. The plan assets and benefit obligations were
valued as at March 31, with the assistance of the Company’s external actuaries. The Company also offers
complementary retirement benefit programs, such as health insurance, life insurance, and dental plans to eligible
employees and retired employees. The Company expects to contribute approximately $4 million to its defined benefit
plans in fiscal 2023.
The principal risks associated with the Company's defined benefit pension plans are as follows:
Investment Risk
The respective present values of the defined benefit plans’ obligations are calculated using a discount rate
determined with reference to high-quality corporate bond yields; if assets underperform this yield, this will create a
deficit.
Changes in Bond Yields
A decrease in the corporate bond yields will increase the value of the defined benefit plans’ liabilities, although this will
be partially offset by an increase in the value of the defined benefit plans’ debt securities holdings.
Inflation Risk
A significant portion of the defined benefit plans’ obligations are linked to inflation, and higher expected future inflation
will lead to higher liabilities. The majority of the assets are either unaffected by or only loosely correlated with inflation,
meaning that an increase in expected future inflation will also increase the deficit.
Longevity Risk
The majority of the defined benefit plans’ obligations are to provide benefits for the life of the member; increases in life
expectancy of plan participants will result in an increase in liabilities.
The Company’s net surplus (liability) for defined benefit plans comprises the following:
March 31, 2022
March 31, 2021
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other Plans
Total
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other Plans
Fair value of assets
$
1,943
Present value of funded
obligations
Present value of net surplus
(obligations) for funded
plans
Present value of unfunded
obligations
Present value of net surplus
(obligations)
Asset ceiling test
Accrued pension/benefit cost $
1,708
235
—
235
—
235
71
68
2,014 $
2,081
1,776
1,903
3
238
178
(36)
(33)
(4)
(37)
(36)
202
(4)
198 $
—
178
—
178
68
73
(5)
(38)
(43)
—
(43)
Total
2,149
1,976
173
(38)
135
—
135
Presented in the statement of financial position as follows:
Other Assets (Note 9)
Other Liabilities (Note 12)
Total net surplus (liability)
March 31, 2022
March 31, 2021
$
$
235 $
(37)
198 $
178
(43)
135
ANNUAL REPORT 2022
Page 90
NOTE 19 EMPLOYEE POST-EMPLOYMENT BENEFIT PLANS (CONT'D)
The changes in the present value of the defined benefit obligations are as follows:
March 31, 2022
March 31, 2021
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other Plans
Total
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other Plans
Total
Defined benefit obligation,
beginning of year
$
1,903
111
2,014 $
1,733
101
1,834
Current service costs
Interest cost
Actuarial (gains) losses due
to change in experience
Actuarial (gains) losses due
to changes in financial
assumptions
Exchange differences
Benefits paid
Defined benefit obligation,
—
39
21
(90)
(93)
(72)
5
3
(2)
(10)
—
(3)
5
42
19
(100)
(93)
(75)
—
38
(17)
236
(13)
(74)
6
4
3
9
(2)
(10)
6
42
(14)
245
(15)
(84)
end of year
$
1,708
104
1,812 $
1,903
111
2,014
The changes in the fair value of plan assets are as follows:
March 31, 2022
March 31, 2021
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other Plans
Total
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other Plans
Total
Fair value of plan assets,
beginning of year
$
2,081
68
2,149 $
2,115
64
2,179
Interest income on plan
assets
Return on plan assets,
excluding interest income
Administration costs
Contributions by employer
Exchange differences
Benefits paid
Fair value of plan assets,
42
(3)
(1)
—
(104)
(72)
2
(2)
—
6
—
(3)
44
(5)
(1)
6
(104)
(75)
47
12
(1)
—
(18)
(74)
3
4
—
8
(1)
(10)
50
16
(1)
8
(19)
(84)
end of year
$
1,943
71
2,014 $
2,081
68
2,149
For fiscal 2022, actual return on plan assets amounted to a gain of $38 million ($65 million in fiscal 2021).
ANNUAL REPORT 2022
Page 91
NOTE 19 EMPLOYEE POST-EMPLOYMENT BENEFIT PLANS (CONT'D)
The fair value of plan assets, which does not include assets of the Company, consist of the following (all assets have
a quoted market value in an active market with the exception of annuity contract and property and other, which is
valued based on the corresponding liability, and cash).
March 31, 2022
March 31, 2021
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other Plans
Total
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other Plans
Bonds, LDI and cash¹
$
1,333
Annuity contract
Property and other
Equity Instruments
Total
375
235
—
$
1,943
48
—
—
23
71
1,381 $
1,388
375
235
23
420
273
—
2,014 $
2,081
51
—
—
17
68
Total
1,439
420
273
17
2,149
1
The Liability Driven Investment ('LDI') portfolio is managed by an external party. The objective is to hedge a proportion of the Fund's liabilities
against changes in interest rates and inflation expectations by investing in assets that are similarly sensitive to changes in interest rates and
inflation expectations. Market yields are monitored against a number of pre-set yield triggers; the level of hedging will be increased as and when
triggers are met.
The Consolidated Income Statements include the following:
March 31, 2022
March 31, 2021
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other Plans
Total
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other Plans
Total
Recognized in “Operating
costs” (Note 5):
Employer current service
cost
$
Administration costs
Recognized in “Financial
charges” (Note 14):
Interest costs
Interest income on plan
assets
Net defined benefits plans
expense
$
—
1
1
39
(42)
(3)
(2)
5
—
5
3
(2)
1
6
5 $
1
6
42
(44)
(2)
4 $
—
1
1
38
(47)
(9)
(8)
6
—
6
4
(3)
1
7
6
1
7
42
(50)
(8)
(1)
ANNUAL REPORT 2022
Page 92
NOTE 19 EMPLOYEE POST-EMPLOYMENT BENEFIT PLANS (CONT'D)
The Company recognizes actuarial gains and losses in the period in which they occur for all its defined benefit plans.
These actuarial gains and losses are recognized in other comprehensive income and are presented below:
March 31, 2022
March 31, 2021
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other
Plans
Dairy Division
(UK) Defined
Benefit
Pension Fund
Total
Other Plans
Total
Return on plan assets
(excluding interest
income)
$
Actuarial gains (losses) due
to change in experience
Actuarial gains (losses) due
to changes in financial
assumptions
Effect of the asset ceiling
test
Amount recognized in other
comprehensive income
$
(3)
(21)
90
—
66
(2)
2
10
(4)
6
(5) $
(19)
12
17
100
(236)
(4)
—
72 $
(207)
4
(3)
(9)
—
(8)
16
14
(245)
—
(215)
Weighted average assumptions used in computing the benefit obligations at the financial position date are as follows:
Discount rate
Duration of the obligation (in years)
Inflation Rate
Future salary increases
Mortality table
March 31, 2022
March 31, 2021
Dairy Division (UK)
Defined Benefit
Pension Fund
2.70 %
18.00
2.90 %
n/a
S2P base tables
with the following
scaling factors:
Pens (M/F):
109%/103% Defs
(M/F): 110%/99%
Other Plans
4.02 %
13.77
2.00 %
Dairy Division (UK)
Defined Benefit
Pension Fund
2.10 %
18.00
2.50 %
3.0 %
2014 Private Sector
Canadian
Pensioners
Mortality Table,
projected
generationally
using Scale
MI-2017
n/a
S2P base tables with
the following scaling
factors:
Pens (M/F):
109%/103%
Defs (M/F):
110%/99%
Other Plans
3.21 %
17.30
2.00 %
3.0 %
2014 Private Sector
Canadian
Pensioners Mortality
Table, projected
generationally using
Scale MI-2017
It has been assumed that the Dairy Division (UK) Defined Benefit Pension Fund members exchange 25% of their
pension for a cash lump sum at retirement, on terms 8% lower than the funding basis. 30% of deferred members are
assumed to take a pension increase exchange option at retirement which is available under the Fund.
SENSITIVITY TO CHANGES IN ASSUMPTIONS
The impact of an increase (decrease) of 0.1% of the discount rate would be a decrease of $31 million of the amount
of the obligation (increase of $32 million). A one-year increase in life expectancy would increase the obligation by
approximately $80 million. Specifically, for the Dairy Division (UK) Defined Benefit Pension Fund, the impact of an
increase of 0.1% of the inflation rate would be an increase of approximately $23 million of the amount of the
obligation. Specifically pertaining to the Other plans, an increase of 0.1% of the percentage of future salary increases
would be an increase below $1 million of the amount of the obligation.
ANNUAL REPORT 2022
Page 93
NOTE 20 COMMITMENTS AND CONTINGENCIES
COMMITMENTS
The table and paragraphs below present the future minimum payments for contractual commitments that are not
recognized as liabilities for the next fiscal years:
Less than 1 year
1-2 years
2-3 years
3-4 years
4-5 years
More than 5 years
$
$
Leases¹
Purchase obligations2
9 $
6
3
2
1
1
22 $
245 $
37
23
12
9
3
329 $
Total
254
43
26
14
10
4
351
1 Commitments related to leases represent short-term and low-value leases that do not meet the definition of a lease under IFRS 16.
2 Purchase obligations are the contractual obligations for capital expenditures and service agreements to which the Company is committed.
CLAIMS
The Company is a defendant to certain claims arising from the normal course of its business. The Company is also a
defendant in certain claims and/or assessments from tax authorities in various jurisdictions. The Company believes
that the final resolution of these claims and/or assessments will not have a material adverse effect on its consolidated
income statements or consolidated statement of financial position.
INDEMNIFICATIONS
The Company from time to time offers indemnifications to third parties in the normal course of its business, in
connection with business or asset acquisitions or disposals. These indemnification provisions may be in connection
with breach of representations and warranties, and for future claims for certain liabilities. The terms of these
indemnification provisions vary in duration. At March 31, 2022, given that the nature and amount of such
indemnifications depend on future events, the Company is unable to reasonably estimate its maximum potential
liability under these agreements. The Company has not made any significant indemnification payments in the past,
and as at March 31, 2022, and March 31, 2021, the Company had not recorded any significant liabilities associated
with these indemnifications.
LETTERS OF CREDIT
As at March 31, 2022, the Company had issued letters of credit in an aggregate amount of $67 million pursuant to a
banking facility authorizing the issuance of letters of credit in an aggregate amount of $110 million (as at March 31,
2021, the Company had issued letters of credit in an aggregate amount of $69 million pursuant to a banking facility
authorizing the issuance of letters of credit in an aggregate amount of $111 million).
NOTE 21 RELATED PARTY TRANSACTIONS
The Company receives services from and provides goods and services to companies subject to control or significant
influence through ownership by its principal shareholder. These transactions, which are not significant to the
Company’s financial position or financial results, are made in the normal course of business and are entered into and
have been recorded at fair value, consistent with market values for similar transactions. The services that are
received consist mainly of travel, publicity, lodging, and office space rental. The goods that are provided consist
mainly of dairy products. The services that are provided consist of management services.
Transactions with key management personnel (short-term employee benefits, post-employment benefits, and stock-
based compensation) are also considered related party transactions. Management defines key management
personnel as all the executive officers who have responsibility and authority for controlling, overseeing, and planning
the activities of the Company, as well as the Company’s directors.
ANNUAL REPORT 2022
Page 94
NOTE 21 RELATED PARTY TRANSACTIONS (CONT'D)
Transactions with related parties are as follows:
Entities subject to control or significant influence through ownership by its principal
shareholder
Key management personnel
Directors
Executive officers
For the years ended March 31
2022
2021
$
$
5 $
3
35
43 $
4
3
37
44
Dairy products provided by the Company were less than $1 million for the years ended March 31, 2022, and
2021.
Outstanding accounts payable and accrued liabilities for the transactions above are the following:
Key management personnel
Directors
Executive officers
Accounts payable and accrued
liabilities
March 31, 2022
March 31, 2021
16
33
49 $
18
47
65
$
The amounts payable to the Directors consist entirely of balances payable under the Company’s DSU plan. Refer to
Note 13 for further details. The amounts payable to executive officers consist of short-term employee incentives,
share-based awards, and post-retirement benefits. Outstanding accounts receivable from related parties were less
than $1 million for the years ended March, 31 2022, and 2021.
KEY MANAGEMENT PERSONNEL COMPENSATION
The compensation expense for transactions with the Company’s key management personnel consists of the
following:
Directors
Cash-settled payments
Stock-based compensation
Executive officers
Short-term employee benefits
Post-employment benefits
Stock-based compensation
Total compensation
2022
2021
1 $
2
3 $
16 $
3
16
35 $
38 $
1
2
3
18
6
13
37
40
$
$
$
$
$
ANNUAL REPORT 2022
Page 95
NOTE 21 RELATED PARTY TRANSACTIONS (CONT'D)
SUBSIDIARIES
All the Company’s subsidiaries are wholly owned. The following information summarizes the Company’s significant
subsidiaries which produce a wide array of dairy products, including cheese, fluid milk, extended shelf-life milk and
cream products, cultured products, and dairy ingredients:
Saputo Dairy Products Canada G.P.
Saputo Cheese USA Inc.
Saputo Dairy Foods USA, LLC
Saputo Dairy Australia Pty Ltd
Warrnambool Cheese and Butter Factory Company Holdings Ltd
The King Island Company Pty Ltd
Molfino Hermanos S.A.
Dairy Crest Ltd
NOTE 22 CAPITAL DISCLOSURES
Percentage Owned
Location
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Canada
USA
USA
Australia
Australia
Australia
Argentina
UK
The Company’s objective in managing capital is to ensure sufficient liquidity to pursue its growth strategies and
undertake selective acquisitions, while at the same time taking a conservative approach towards financial leverage
and management of financial risk. An additional objective includes a target for long-term leverage of 2.25 times net
debt to net earnings before income taxes, financial charges, acquisition and restructuring costs, gain on disposal of
assets, impairment of intangible assets, and depreciation and amortization. From time to time, the Company may
deviate from its long-term leverage target to pursue strategic opportunities. Should such a scenario arise, the
Company expects to deleverage over a reasonable period of time in order to seek to maintain its investment grade
ratings. Also, the Company seeks to provide an adequate return to its shareholders. The Company believes that the
purchases of its own shares may, under appropriate circumstances, be a responsible use of its capital. The
Company’s primary use of capital is to finance acquisitions and other growth initiatives.
The Company’s capital is composed of net debt and equity. Net debt consists of long-term debt, lease liabilities, and
bank loans, net of cash and cash equivalents. The net debt as at March 31, 2022, and March 31, 2021, are as
follows:
Long-term debt, including current portion
Bank loans
Lease liabilities
Less: Cash and cash equivalents
Net debt
$
$
2022
3,375 $
419
451
(165)
4,080 $
2021
3,578
76
461
(309)
3,806
The primary measure used by the Company to monitor its financial leverage is its ratio of net debt to net earnings
before income taxes, financial charges, acquisition and restructuring costs, gain on disposal of assets, impairment of
intangible assets, and depreciation and amortization. The ratio at March 31, 2022, was 3.53 (2.59 at March 31, 2021).
The Company has existing credit facilities which require a quarterly review of financial ratios and the Company is not
in violation of any such ratio covenants as at March 31, 2022.
The Company is not subject to capital requirements imposed by a regulator.
ANNUAL REPORT 2022
Page 96
NOTE 23 ACQUISITION AND RESTRUCTURING COSTS
Acquisition and restructuring costs are summarized as follows:
Restructuring costs
Acquisition costs
Total
2022
2021
$
$
71 $
—
71 $
(6)
3
(3)
RESTRUCTURING COSTS
During the fourth quarter of fiscal 2022, the Company announced several capital investments and consolidation
initiatives intended to enhance and streamline its manufacturing footprint in the USA Sector and International Sector.
In the UK, the Company undertook plans to outsource the Nuneaton facility’s warehouse and distribution activities,
creating opportunities for network consolidation within the Europe Sector.
Restructuring costs of $71 million ($51 million after tax) were recorded during the fourth quarter of fiscal 2022, with
$53 million attributable to the International Sector, $9 million to the USA Sector and $9 million to the Europe Sector.
These restructuring costs included an impairment charge of property, plant and equipment of $60 million ($43 million
after tax) and severance costs of $8 million ($6 million after tax). Liabilities related to severance and other
restructuring costs are included in accounts payable and accrued liabilities on the consolidated statement of financial
position.
In fiscal 2021, restructuring costs included a gain on disposal of assets of $6 million ($5 million after tax) relating to
the sale of a Canada Sector facility.
ACQUISITION COSTS
In connection with the acquisitions completed during fiscal 2022 (see Note 18), the Company incurred acquisition
costs of $6 million. Acquisition costs also include a favourable purchase price adjustment of $6 million for a prior year
acquisition. In fiscal 2021, acquisition costs of $3 million ($2 million after tax) were related to additional costs from a
prior year acquisition.
NOTE 24 SEGMENTED INFORMATION
The Company reports under four geographic sectors. The Canada Sector consists of the Dairy Division (Canada).
The USA Sector consists of the Dairy Division (USA). The International Sector comprises the Dairy Division
(Australia) and the Dairy Division (Argentina). The Europe Sector consists of the Dairy Division (UK).
These reportable sectors are managed separately as each sector represents a strategic business unit that offers
different products and serves different markets.
The President and Chief Executive Officer, Chief Financial Officer, President and Chief Operating Officer (North
America), and President and Chief Operating Officer (International and Europe) are, collectively, our chief operating
decision maker and regularly review our operations and performance by sector. They review adjusted EBITDA as the
key measure of profit for the purpose of assessing performance of each sector and to make decisions about the
allocation of resources. Adjusted EBITDA is defined as net earnings before income taxes, financial charges,
acquisition and restructuring costs, gain on disposal of assets, impairment of intangible assets, and depreciation and
amortization.
The divisions within the International Sector have been combined due to similarities in global market factors and
production processes.
ANNUAL REPORT 2022
Page 97
NOTE 24 SEGMENTED INFORMATION (CONT'D)
INFORMATION ON REPORTABLE SECTORS
Revenues
Canada
USA
International1
Europe
Operating costs excluding depreciation, amortization, and restructuring costs
Canada
USA
International
Europe
Adjusted EBITDA
Canada
USA
International
Europe
Depreciation and amortization
Canada
USA
International
Europe
Impairment of intangible assets (Note 8)
Gain on disposal of assets
Acquisition and restructuring costs (Note 23)
Financial charges
Earnings before income taxes
Income taxes
Net earnings
For the years ended March 31
2022
4,281 $
6,409
3,453
892
2021
4,135
6,122
3,221
816
15,035 $
14,294
3,806 $
6,121
3,205
748
3,688
5,555
2,916
664
13,880 $
12,823
475 $
288
248
144
447
567
305
152
1,155 $
1,471
103 $
210
132
115
560 $
58
(9)
71
70
405
131
274 $
99
200
112
104
515
19
—
(3)
96
844
218
626
$
$
$
$
$
$
$
$
$
1
Australia accounted for $2,528 million and $2,529 million of the International Sector's revenues while Argentina accounted for $925 million and
$692 million for the years ended March 31, 2022, and 2021, respectively.
ANNUAL REPORT 2022
Page 98
NOTE 24 SEGMENTED INFORMATION (CONT'D)
MARKET SEGMENT INFORMATION
The Company sells its products in three different market segments: retail, foodservice, and industrial.
For the years ended March 31
Revenues
Retail
Foodservice
Industrial
Total
Canada
USA
International
Europe
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
$ 7,461 $ 7,571 $ 2,539 $ 2,614 $ 2,811 $ 2,847 $ 1,416 $ 1,399 $
4,579
2,995
4,082
2,641
1,414
328
1,199
322
2,859
739
2,651
624
285
1,752
224
1,598
$ 15,035 $ 14,294 $ 4,281 $ 4,135 $ 6,409 $ 6,122 $ 3,453 $ 3,221 $
695 $
21
176
892 $
711
8
97
816
GEOGRAPHIC INFORMATION
Net book value of property, plant and equipment
Canada
USA
Australia
Argentina
United Kingdom
Net book value of intangible assets
Canada
USA
Australia
Argentina
United Kingdom
March 31, 2022
March 31, 2021
$
$
$
$
874 $
1,676
873
150
389
3,962 $
259 $
345
108
7
652
856
1,480
963
100
378
3,777
320
365
117
8
707
1,371 $
1,517
ANNUAL REPORT 2022
Page 99
COR POR ATE HEAD QUARTERS
Saputo Inc.
6869 Métropolitain Blvd. East
Montréal, QC Canada H1P 1X8
T. 514-328-6662
saputo.com
ANNUAL MEETING
OF SHAR EHOLDERS
Thursday, August 4, 2022, at 10 a.m.
(Eastern Time) - Virtual-only format
web.lumiagm.com/427557186
TR ANSF ER AGENT
Computershare Trust Company of Canada
1500 Robert-Bourassa Blvd., Suite 700
Montréal, QC Canada H3A 3S8
INV ESTOR REL ATI ONS
Nicholas Estrela
T. 514-328-3117
E. nicholas.estrela@saputo.com
STOCK EXC HANGE
Toronto Stock Exchange
Symbol: SAP
EXTERNAL AU DITORS
T. 514-982-7888
KPMG LLP
E. service@computershare.com
Montréal, QC Canada
D IV ID E ND PO LIC Y
Saputo Inc. declares quarterly cash dividends on common shares, currently at $0.18 per
share, representing an annual dividend of $0.72 per share. The Board of Directors reviews
our dividend policy annually, based on factors such as financial condition, financial
performance, and capital requirements.
D IV ID E ND REI NVEST MENT PL AN
Saputo provides eligible shareholders with the opportunity to have all or a portion of the
cash dividends declared on their common shares automatically reinvested into additional
Saputo common shares.
To learn more about the DRIP, please visit: saputo.com/en/investor-toolkit/drip
SAPUTO.COM