ANNUAL REPORT 2024
PASSION & CRAFTMANSHIP
since 1954
Saputo, one of the top ten dairy processors in the world,
produces, markets, and distributes a wide array of
dairy products of the utmost quality, including cheese,
fluid milk, extended shelf-life milk and cream products,
cultured products, and dairy ingredients.
Saputo is a leading cheese manufacturer and fluid
milk and cream processor in Canada, a leading dairy
processor in Australia and the top dairy processor
in Argentina. In the USA, Saputo ranks among the
top three cheese producers and is one of the top
producers of extended shelf-life and cultured dairy
products. In the United Kingdom, Saputo is the
leading manufacturer of branded cheese and dairy
spreads. In addition to its dairy portfolio, Saputo
produces, markets, and distributes a range of dairy
alternative products. Saputo products are sold in
several countries under market-leading brands,
as well as private label brands.
Saputo Inc. is a publicly traded company and its
shares are listed on the Toronto Stock Exchange
under the symbol “SAP”. Follow Saputo’s activities
at saputo.com or via Facebook, Instagram, and
LinkedIn.
All amounts in this Annual Report are in Canadian dollars (CDN), unless otherwise indicated.
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2024 ANNUAL REPORT
Financial Highlights
Fiscal years ended March 31 (in millions of CDN dollars)
REVENUES
ADJUSTED EBITDA1
2024
2024
2022
2022
2023
2023
2024
2024
2022
2022
2023
2023
NET EARNINGS
ADJUSTED NET EARNINGS1
$17,342
$15,035
$17,843
$1,155
$1,553
$1,509
$274
$437
$622
$711
$265
$654
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, 2024, 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.
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50%
33%
17%
RETAIL
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.
FOODSERVICE
Sales are made to broadline
distributors, restaurants, hotels,
and institutions under Saputo-owned
or customer brand names.
For the fiscal year ended March 31, 2024
SECTOR
# OF PLANTS
# OF EMPLOYEES
% OF TOTAL REVENUES
Canada
18
6,000
29%
USA
29
8,100
45%
International
11
4,000
20%
Europe
7
1,500
6%
INDUSTRIAL
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.
Approximately
19,600 employees
Products sold in
over 60 countries
65 plants
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2024 ANNUAL REPORT
A BOOM IN DEMAND
FOR SAPUTO CHEESE
In the 1960s and 1970s, Saputo went through
a significant growth period, becoming Canada’s
most important mozzarella producer.
SAPUTO BECOMES
PUBLICLY TRADED
The Company completed its initial
public offering in Canada in 1997.
SAPUTO TRIPLES IN SIZE
By the end of the 1990s, the Company tripled in size
and took its place among the United States’ leading
natural cheese producers through the acquisition of
Stella Foods.
NEW BEGINNINGS
IN MONTRÉAL, QUÉBEC
In the early 1950s, the Saputo family
left their home town of Montelepre, Sicily,
in order to start a new life in Canada.
A DREAM IS BORN:
THE FOUNDING OF SAPUTO
In 1954, with only $500 for equipment and a bicycle
for deliveries, the Saputo family founded their very
own company bearing their name.
EXPANSION BEYOND
NORTH AMERICA
In 2003, Saputo acquired Molfino Hermanos S.A.,
Argentina’s third-largest milk processor.
SAPUTO ADDS NEW
PLATFORMS IN AUSTRALIA
AND THE UNITED KINGDOM
Since 2014, Saputo has continued to expand its
international presence, growing through acquisitions
in Australia and the United Kingdom.
SAPUTO IS ONE OF THE TOP 10
DAIRY PROCESSORS IN THE WORLD
In 2024, Saputo proudly celebrates 70 years of excellence.
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2024 ANNUAL REPORT
Our Approach
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 a framework that ensures we manage 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 2024 Annual Information Form, dated June 6, 2024.
With a clear ESG framework and governance, our focus is on the execution
of our three-year plan (FY23-FY25). Built with our growth strategy in mind,
our FY23-FY25 plan ensures that our Promise continues to drive, enable,
and sustain our growth.
Our People
Responsible Sourcing
Environment
Nutrition
Food Quality and Safety
Community
Business Ethics
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Looking Ahead
Fiscal 2025 will be the last year of our current three-year plan, as well as the last year
of our FY25 Environmental Pledges. As we remain laser-focused on execution, we
will also lay the foundation of our next plan and the next cycle of our Environmental
Pledges – including science-based emissions reduction targets. Read our 2024 Saputo
Promise Report for further details on our ESG performance.
In fiscal 2024, progress has been made across our seven Pillars,
and we are proud to highlight the following achievements:
RESPONSIBLE SOURCING
Invested in projects in Australia and the United States, through our Supply
Chain Pledges funds, to support the capacity building of dairy farmers
around sustainable farming practices.
COMMUNITY
Reached over 4.4 million people
through our programs, an increase of
258,000 people compared to FY23.
Maintained our level of investments
above our 1% of our pre-tax profit,
at $7.9 million.
Continued our efforts to redistribute food surplus in communities
where we operate, donating more than 2.2 million kilos of products
to food banks across our operations, which represents almost
6 million people fed
Sourced 100%
RSPO*-certified palm oil.
20,000 t of CO2e
258,000 GJ of energy
230,000 m3 of water
ENVIRONMENT
Decreased our carbon intensity by 5% compared to FY23
and 18% compared to our FY20 baseline.
Entered into a 15-year virtual power purchase agreement
that, once operational, will generate 206,300 MWh of
renewable electricity per year for Saputo, reducing our
CO2 emissions by more than 140,000 tonnes – equivalent
to taking more than 30,000 cars off the road.
Completed 19 additional energy-saving and water-saving
projects expected to save an estimated:
OUR PEOPLE
Significantly improved our ability to
retain talent, with our global turnover
down to our pre-pandemic level.
Recognized as one of
Canada’s Top 100
Employers
by Mediacorp Canada
Inc., the country’s largest
publisher of employment
periodicals.
compared to 23% in FY23
19% in FY24
Also named to Forbes
magazine’s list of the
World’s Top
Companies for Women
for a second year in a row.
* RSPO: Roundtable on Sustainable Palm Oil
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2024 ANNUAL REPORT
Fellow shareholders,
Fiscal 2024 (FY24) was a year of continued resilience. Our financial performance reflected our ability
to stay the course even amidst a dynamic macro-economic environment which included commodity
price volatility, a challenged consumer, and ongoing inflationary pressures. We pivoted with agility
in response to ever-changing market conditions. We improved our supply chain performance and
stayed ahead of the curve to counter inflation. By managing the factors within our control, we also
benefited from continued cost containment initiatives and strategic actions.
It was also a year of continued progress. After three years of investing in and optimizing our global
network, we have now completed the bulk of the major capital projects under our Global Strategic
Plan, and we are ramping up commercial production at several of our facilities. This is an exciting
time for us and marks a new phase in our strategic roadmap. I’m looking forward to leveraging the
unique capabilities that we have created which will support improved cash flow generation and
earnings growth. At this point in our journey, I can confidently say that Saputo is a more agile and
collaborative Company with a long runway of opportunities still ahead.
At the heart of everything we do are the passionate, purposeful people who make us who we are.
I want to thank our teams for their hard work, loyalty, and dedication. I am both grateful and proud
that Saputo was named one of Canada’s Top 100 Employers for 2024 by Mediacorp Canada Inc.,
recognizing our commitment to taking care of our people and empowering them to bring their best
to the table each day. With their commitment to excellence in tow, I’m convinced we have the right
infrastructure and talent in place to drive further momentum into fiscal 2025 (FY25).
A Message from our
Chair of the Board,
President and CEO
Lino A. Saputo, C.M.
Chair of the Board,
President and CEO - Saputo Inc.
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Maintaining stable performance in volatile markets
In FY24, our Canada Sector delivered a stand-out
performance with another year of robust growth, reflecting
the team’s relentless focus on operational excellence and a
well-diversified product portfolio.
Our USA Sector made notable progress despite having to
navigate through volatile dairy markets while executing
on several major capital projects. We saw year-over-year
growth in adjusted EBITDA, led by higher domestic sales
volumes and operational improvements from our capital
spending programs. With more operational stability and
sustained improvements in customer fill rates, our plants
were also better positioned to meet customer demand.
Over the past two years, our results in the USA Sector
have been significantly impacted by commodity market
headwinds. These conditions have lasted longer than
anticipated, however, markets are expected to stabilize
over time. Our results have also been impacted by duplicate
operating costs which are expected to abate as we ramp
up capital projects and execute on the announced site
closures. Our underlying business remains strong, our team
remains focused, and our long-term outlook for the US
remains positive.
Our Europe and International Sectors were challenged by
weak global dairy market conditions and the depletion of
high-cost inventory. We believe that these are transitory
headwinds, and the businesses continue to demonstrate
healthy fundamentals. While our results did not fully meet
our expectations, our focus remains on producing the
highest quality products at the lowest cost to continue to
be competitive on a global scale. We expect to see steady
improvements in results in FY25 and stay on course to
deliver on our long-term goals.
Investing in marketing and innovation for growth
With shifting consumer trends, dairy continued to be a very good value
proposition with overall spending holding up well. Feeling cost pressure,
consumers shifted towards discount channels and private label products
in certain markets and categories, but our broad portfolio of value to
premium products enabled us to meet them wherever they shopped. The
strategic initiatives we have deployed as part of our Global Strategic Plan
help us ensure we have the right products in the right channels. As such,
we have full confidence in our ability to supply all market segments at
pace with any shifts in demand that may occur.
Despite the inflationary consumer environment and trade-down in the
broader market, our investments in marketing and innovation across
several key US retail brands, including Frigo Cheese Heads, Montchevre,
and Treasure Cave, drove market share growth. We grew volume in key
private label channels and continued to refocus on the right categories.
To grow the Frigo Cheese Heads brand, we are making meaningful
progress in becoming the snacking category leader with a campaign to
support brand penetration. In addition, we continued to innovate in the
goat cheese space with the launch of several new products.
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2024 ANNUAL REPORT
With plans for further innovation and growth, our Stella brand proudly celebrated its
100th anniversary this year with a nationwide tour showcasing our product with recipes
using Stella cheese. We also continued to invest in key brands to increase household
penetration in Canada by introducing several new products including Armstrong Nibblers,
a range of Saputo lactose-free products, Saputo cheese fries, and Woolwich Dairy cheese
pops, in addition to making several key investments in the fluid milk category.
In Argentina, we broadened our La Paulina portfolio with new cream cheese flavours and
new flavours across the spreadable cheese line. Finally, notwithstanding challenging
market dynamics in the UK, Cathedral City also gained market share through advertising
campaigns and new product innovations.
Building an efficient platform
We are making material progress in advancing key initiatives of our Global Strategic Plan
and continue to build on this momentum in preparation for the next stage of our growth.
With our streamlining and optimization projects coming in largely on time and on budget,
we are very pleased with the pace of completion and confident in their intended impact.
We remain focused on enhancing our network to optimize output, margins, efficiency,
and service levels, all of which are critical as we work to maintain our production with a
streamlined footprint.
Driving future growth in the US is a priority for us and I am delighted to
report that important strides were made with our network optimization
initiatives and better visibility was gained on our savings opportunities
derived from these projects. To meet customer demand, new cheese
shred lines successfully began at our Tulare Paige, California plant and
our new automated cut-and-wrap facility in Franklin, Wisconsin started
delivering benefits. In addition, planned closures of our Big Stone,
South Dakota, Green Bay, Wisconsin, and South Gate, California facilities
should further support the Sector’s cheese network optimization plans.
Benefits from our recently converted Reedsburg, Wisconsin goat cheese
manufacturing plant should also continue to increase once our Lancaster
facility is permanently closed. With these initiatives, this additional
state-of-the-art capacity will enable our team to grow in value-added
categories and better serve growing consumer demand.
In our Europe Sector, our expanded Nuneaton, UK packing facility
should deliver increased efficiency benefits once the closure of
the Frome, UK plant is completed in early FY25. In Australia, we
implemented a series of network optimization initiatives, which will
result in the consolidation of eleven facilities into six, to improve our
operational efficiencies and strengthen our competitiveness. These
targeted investments position us to operate more efficiently, improve
our cost structure, and do more for our customers than ever before.
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Saputo Promise update
Our Saputo Promise drives our actions to nourish, protect,
and support our communities, and keeps us accountable
to all our stakeholders. In FY24, we continued our efforts
across our seven Pillars and, as we enter the last year of
our current three-year plan (FY23-FY25), we can be proud
of our wins and build on our momentum to do more.
We made strides towards our 2025 Environmental Pledges
by completing 19 additional capital projects designed to
reduce our carbon, energy, water, and waste footprint,
bringing total projects completed to 48. As our renewable
electricity initiatives continued to impact our global
network, our carbon intensity decreased by 3% year-over-
year and 16% compared to our fiscal 2020 (FY20) baseline,
progressing towards our FY25 target. Reflecting our
focus on renewable energy, we entered into a long-term
virtual power purchase agreement (VPPA). Subject to final
regulatory approvals and once operational, the portion
of the wind facility contracted by Saputo will generate
206,300 MWh of renewable electricity per year, reducing
our CO2 emissions by more than 140,000 tonnes. With our
capital investments and network optimization efforts,
we expect some of these gains to be better reflected in our
future carbon, energy, and water intensity performance.
In FY24, we furthered our climate commitment by
submitting our intent to set science-based targets as
defined by the Science-Based Target Initiative (SBTi).
We anticipate our post-FY25 climate targets to be
validated by the SBTi. Our teams are deeply dedicated to
implementing our climate roadmap through actions that
build resilience by adapting our business processes to
respond to climate risks and opportunities.
Launched in FY23, our Sustainable Agriculture Policy
outlines our sustainability standards to ensure the
responsible production of dairy ingredients. In FY24,
we continued to engage with our milk producers to
communicate these standards and intend to have them
fully implemented throughout our supply chain by 2025.
We also furthered our commitment to sustainable farming
practices by funding several projects. In partnership with
Dairy Australia, we invested to support Australian farmers
in implementing sustainable plans for their operations.
In the UK and the US, we funded initiatives with our
patron farmers to define their GHG emissions baselines
and identify opportunities to reduce them through more
efficient farming practices. These projects will serve as a
model for similar rollouts in Canada and Argentina.
A key pillar of the Saputo Promise, we continued to make
significant investments in our people. Our relentless focus
on employee retention – evidenced by the improvement
of our onboarding process and achievement recognition
program, as well as our competitive working conditions –
has led to lower turnover and absenteeism in many of our
facilities. When it comes to Diversity, Equity, and Inclusion,
advancing gender balance and building a stronger and
more diverse talent pipeline are also directly linked to
our success. I am proud that Saputo was recognized as
one of the World’s Top Companies for Women by Forbes
magazine for a second consecutive year. Also under the
People Pillar, we continued to focus our global well-being
strategy around four priority areas: work, life, physical,
and mental. As part of these efforts, during the fiscal year,
we completed the deployment of our Mental Health First
Aider Program across all our divisions.
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2024 ANNUAL REPORT
Delivering on our plan
In the near-term, we expect the environment to remain volatile from input costs, evolving
consumer behaviour, and geopolitical dynamics. While we cannot control the macro environment,
we will strive to compete effectively, focusing on what we can control. As we move into the final
phase of our Global Strategic Plan, we are pleased with our execution and fully acknowledge the
work required to realize our business potential. With the major capital projects now behind us, I’m
looking forward to leveraging the highly efficient platform we have built as we focus on ramping-
up production in our manufacturing facilities and optimizing our operations.
I am excited about what the future holds, and our progress has set the stage for continued
momentum in FY25. We have already made significant progress in our evolution to become a
stronger, more balanced, and more agile organization. Reduced capital spending levels, along with
improved profitability, will also support a meaningful increase in cash flow generation. As we look
to FY25 and beyond, our goal is to ensure that we continue to advance and evolve our strategies,
maximize growth opportunities, expand our margins, and enhance our long-term returns.
Guiding our growth
I would like to thank our Board of Directors for steering us through a multi-year capital expansion
plan with sound guidance and vision. Two experienced leaders, Victor Crawford and Stanley Ryan,
were welcomed onto our Board in FY24 as independent members. They bring extensive experience
in major food and beverage companies, as well as valuable insights into logistics, supply chain
management, and consumer retail.
After contributing his expertise and oversight to the Board of Directors since 2012, Henry Demone
is not standing for re-election at the Meeting. On behalf of the Board, I would like to extend my
utmost gratitude to Henry for his guidance, wisdom, and steadfast dedication.
Finally, as part of our structured succession planning, we recently announced that I will transition
to the role of Executive Chair of the Board and that Carl Colizza will succeed me as President
and CEO, effective at our upcoming Annual General Meeting in August. Drawing on his 25 years
of experience at Saputo, Carl has in-depth knowledge of our industry and a deep passion for
our business, and his leadership style exemplifies our culture and values. His collaborative,
strategic approach resonates with and inspires our employees, and I look forward to continuing
to work closely with him and the executive team in my future role. I am immensely grateful for
the opportunity to have led such a remarkable group of people, and remain as wholeheartedly
committed as ever to Saputo’s long-term success.
Building upon our rich 70-year history, and deeply rooted in a powerful entrepreneurial spirit that
dates back to 1954, I believe the road ahead for Saputo holds immense promise. As we celebrate
a milestone anniversary this fiscal year, I am extremely proud of the value we have created for
all our stakeholders. I extend my deepest gratitude to our shareholders, employees, customers,
suppliers, business partners, and communities around the world for their loyalty, trust, and
support throughout the years.
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A Closer Look at
our FY24 Performance
and Highlights by Sector
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2024 ANNUAL REPORT
2001
2008
2018
HISTORICAL MILESTONES IN CANADA
— Maintained leading positions across most of our categories in Canada by
leveraging our diverse portfolio in multiple market segments, brands, and
price points. Our category-leading brands Dairyland, Neilson, and Saputo
Mozzarellissima continued to be recognized as Canada’s most trusted brands
by consumers*.
— Grew market share both in retail and in foodservice market segments and
continued to make inroads in different product categories on the strength of
our brands and value proposition.
— Continued to invest in the Armstrong brand to increase household
penetration. The brand is being very well received by customers and
consumers, supported by marketing efforts to build stronger brand
attachment such as the redeployment of the “Canadians Crave Armstrong”
marketing campaign.
— Fueled innovation pipeline and introduced new products into the market
with the launch of Armstrong NIBBLERS-flavoured snacking curds, Saputo
lactose-free feta cheese, and the upcoming expansion of our Saputo sliced
cheese category.
— Improved capacity and realized numerous automation benefits in facilities
across the country in case packing and palletizing. We also installed new
equipment for a range of production capacities.
— Introduced a flexible labour model in certain facilities to better pivot with
changing volumes and ensure efficiency.
— Continued momentum in delivering supply chain savings derived from our
Global Strategic Plan.
Canada Sector
The Canada Sector delivered another strong year despite a challenged consumer and a competitive market.
Results reflected the carryover effect from pricing initiatives implemented to mitigate inflationary pressures
on input costs, ongoing cost containment measures, and benefits from our Global Strategic Plan investments,
including continuous improvement, supply chain optimization, and automation initiatives. Retail segment
volumes were stable as we observed consumers trading into more value-oriented products while sales volumes
in the foodservice market segment grew. Looking ahead, our Canadian business will maintain its relentless
focus on commercial and operational execution, as well as customer satisfaction, with a diversified portfolio
that offers consumers variety, convenience, and value.
Saputo became one of the largest fluid milk and cream processors in Canada through its
acquisition of Dairyworld Foods.
Saputo acquired the activities of Neilson Dairy, the dairy division of Weston Foods (Canada) Inc.
which manufactured, sold, and distributed primarily fluid milk and cream in Ontario.
Saputo acquired the activities of Shepherd Gourmet Dairy (Ontario) Inc., which enabled the Dairy
Division (Canada) to increase its presence in specialty cheese and expand its yogurt offering in Canada.
* Dairyland: #1 Most Trusted by Canadians in 2023 – West – in milk category; Neilson: #1 Most Trusted by
Canadians in 2023 – Ontario – in milk category; Mozzarellissima: #1 Most Trusted by Canadians in 2023 –
in mozzarella cheese category, based on 2023 BrandSpark Canadian Shopper Survey
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— Reaffirmed leading positions in several product categories.
In the snacking category, we are growing the Frigo Cheese
Heads brand and taking actions to remain the snacking
category leader with a campaign to support brand
penetration. New innovations were introduced within the
Montchevre goat cheese and Treasure Cave blue cheese
categories with the launch of several new products. We also
launched new flavours and formats across all our strategic
categories.
— Celebrated our Stella brand’s 100th anniversary with a
nationwide tour showcasing our product and recipes using
Stella Cheese, with plans to continue to innovate and grow
the brand.
— Drove growth through operational improvements, including
customer fill rates and inventory management.
— Advanced on several key strategic initiatives. New cheese
shred lines have been started up successfully at our Tulare
Paige, California plant and we are meeting customer
demand. The new automated cut-and-wrap facility in
Franklin, Wisconsin is running and began delivering benefits.
The planned closure of our Big Stone, South Dakota, Green
Bay, Wisconsin, and South Gate, California facilities should
further support the Sector’s cheese network optimization
plans.
— Converted our Reedsburg, Wisconsin facility to goat cheese
manufacturing. We expect benefits to increase once
our Lancaster facility is permanently closed. With these
initiatives, we are now set to increase capacity, expand our
position in growing specialty cheese categories, and improve
productivity.
USA Sector
Our USA Sector continued to build momentum in FY24, supported by higher domestic sales volumes coupled with the operational
improvements, as well as lower logistics costs, including the effect of lower fuel prices. Despite volatile dairy commodity markets
and a competitive environment, we were able to service the market well. We made solid progress on our Global Strategic Plan with
advancements on network optimization and automation, gaining better visibility on our savings opportunities. These targeted
investments enabled us to operate more efficiently and better serve our customers. Our USA Sector is well positioned to continue
capitalizing on healthy consumer demand for our products both in private label and branded, and in quick-serve and retail channels.
The Company tripled in size and took its place
among the Unites States’ leading natural cheese
producers through the acquisition of Stella Foods.
Saputo acquired Morningstar Foods LLC,
a subsidiary of Dean Foods Company.
Morningstar produced a variety of dairy
and non-dairy extended shelf-life products
in the United States.
1997
2013
HISTORICAL MILESTONES IN THE UNITED STATES
Saputo acquired the Land O’Lakes West
Coast industrial cheese business. Its
activities included the production, sale,
cutting, and packaging of mozzarella and
provolone cheeses in Tulare, California.
2007
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2024 ANNUAL REPORT
Saputo acquired an interest of 87.92% of
Warrnambool Cheese and Butter Factory
Company Holdings Limited.
International Sector
Performance for the year reflected lower sales volumes in our export markets and lower international cheese
and dairy ingredient market prices, in contrast to our domestic sales performance. The persistent unfavourable
relation between international cheese and dairy ingredient market prices and the cost of milk negatively impacted
our performance. On the other hand, currency fluctuations on export sales denominated in US dollars were
favourable. Our results were also positively impacted by network optimization initiatives aimed at improving our
operational efficiency and strengthening our competitiveness.
Dairy Division (Australia)
Our Australian business continued to demonstrate its resilience. During the year, we benefited from higher milk
intake resulting in better operating efficiencies.
Nonetheless, profitability was affected by the increasing disconnect between international commodity prices and
the cost of milk as a raw material in Australia, which resulted in a non-cash impairment of $265 million on the value
of the goodwill. In addition, global market conditions were unfavourable throughout the year, particularly from lower
demand in China. Going forward, and in light of the shrinking milk pool, we are focused on prioritizing our efforts
towards more value-added categories that will generate stronger returns, improve our operating cost structure, and
provide a solid foundation for success.
— Realized cost reductions from network optimization activities
such as closure of the Maffra facility, reduction of operations
at the Leongatha facility, and warehouse consolidations.
We are in the process of divesting two fresh milk processing
facilities to further streamline our operating model and we
commenced a review of strategic alternatives related to our
King Island facility in Tasmania. These will result in eleven
plants being consolidated into six.
— Drove additional value from increasing lactoferrin production
and other high value ingredient products.
— Launched several new products as part of the CHEER and
Liddells lineups and deployed the new ‘No Lactose, No Limits’
Liddells advertising campaign.
— Introduced product innovations in mozzarella and thickened
cream that resulted in improved product yield output.
Saputo acquired the activities of Murray
Goulburn Co-Operative Co. Ltd.
Saputo acquired the specialty cheese
activities of Lion Dairy & Drinks Pty Ltd.
2014
2018
2019
HISTORICAL MILESTONES IN AUSTRALIA
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Saputo acquired Molfino Hermanos, the
third-largest milk processor in Argentina.
Saputo became the top dairy processor
in Argentina.
2003
2022
HISTORICAL MILESTONES IN ARGENTINA
Dairy Division (Argentina)
Operating in a volatile environment, the Dairy Division (Argentina) continued to deliver
stable results with high levels of efficiency. Robust consumption enabled the domestic
business to remain strong, with higher pricing and volumes, while weakness in export
commodity prices and currency devaluation impacted our results. With their experience
and expertise in navigating local market conditions, our Argentina team will continue to
leverage its flexibility to obtain the best contribution per litre of milk.
— Upgraded several cheese lines, completed robotic
installation for packaging, and executed other network
optimization projects resulting in increased volumes in
strategic cheese product lines, including hard cheese and
mozzarella.
— Strengthened La Paulinaʹs brand positioning as the top
Argentine cheese brand, increasing its brand equity through
a new ad campaign that highlights the brandʹs origin and
passion for cheese. La Paulina maintained the first place
in top of mind and brand awareness for cheese categories,
a coveted recognition from consumers.
— Broadened La Paulina portfolio with new flavours in cream
cheese and spreadable cheese line.
— Developed new local ingredients to replace imported
ingredients, resulting in significant cost savings and
enhanced production processes resulting in more mozzarella
produced per year.
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2024 ANNUAL REPORT
Europe Sector
In the Dairy Division (UK), the selling of inventory produced at higher milk prices proved to be a challenge, as expected.
Despite higher overall sales volumes, revenues were impacted by a negative product mix, mainly due to higher
bulk cheese sales volumes at lower selling prices, and lower international dairy ingredient market prices. We benefited from
the carryover impact of pricing initiatives to mitigate the higher cost of milk as a raw material and other input cost increases.
The Division achieved a solid rate of volume recovery in the retail branded channel and made good progress around
optimization initiatives.
With consumer and business confidence starting to improve in the UK, shoppers are returning to brands from private label
and to major grocers from discounters. As a leading cheese brand, Cathedral City is expected to benefit from these market
dynamics. As we complete the closure of our Frome plant in early FY25, the Dairy Division (UK) is set to focus on driving
packing performance in Nuneaton, continuing to integrate the operations of Bute Island and Wensleydale, and improving
production yields at our Davidstow plant.
— Completed capital investment to consolidate all cheese cutting and
packing operations into one site at Nuneaton with commissioning of
multiple new lines under way, setting the stage for a highly efficient
expanded facility. Efficiency benefits are expected to accelerate once
the closure of the Frome plant is completed in Q1 of FY25. Our Nuneaton
site will be a centre of excellence in the UK in terms of cost efficiency,
capability, and capacity.
— Maintained Cathedral City’s position as the UK’s largest cheddar brand
and one of the country’s top 25 food brands and grew market share.
— Launched Heinz Cheesy Beanz licensing partnership and a new marketing
campaign for Cathedral City, driving customers to envision different usage
options focused on taste.
— Won gold and silver at The Grocer awards in the “New product and
packaging” category for Sheese Bakes and Cathedral City plant-based,
respectively. Wensleydale won silver at the World Cheese awards.
Saputo acquired Dairy Crest Group Plc. This acquisition
enabled Saputo to enter the UK market by acquiring
and investing in a well-established and successful
industry player with a solid asset base and an
experienced management team.
Saputo expanded its branded portfolio in the UK
by acquiring the activities of Wensleydale Dairy
Products Limited.
The Company acquired Bute Island Foods Ltd, an
innovative manufacturer, marketer, and distributor
of a variety of dairy alternative cheese products for
both the retail and foodservice market segments
under the award-winning vegan Sheese brand,
alongside private label brands.
2019
2021
2021
HISTORICAL MILESTONES IN THE UNITED KINGDOM
— Launched variants of Cathedral City and other
products by leveraging capabilities acquired from
our Wensleydale business. We also relaunched
the Sheese plant-based brand and streamlined
the number of SKUs, in line with our Global
Strategic Plan priority of SKU rationalization.
— Transitioned to marketing and selling ourselves
our nutritional ingredients (D90 (demineralized
whey powder) and GOS (galacto-oligosaccharides)
direct to customers, creating the opportunity to
drive increased value through our consistency,
quality, and traceability while deepening customer
relationships.
FY2024
MANAGEMENT’S
DISCUSSION & ANALYSIS
CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 6, 2024
TABLE OF CONTENTS
MANAGEMENT’S DISCUSSION AND ANALYSIS
INTRODUCTION ..............................................................................................................................................................................
2
CAUTION REGARDING FORWARD-LOOKING STATEMENTS ..........................................................................................
3
SELECTED FINANCIAL INFORMATION ...................................................................................................................................
5
STATEMENT OF EARNINGS .......................................................................................................................................................
6
HIGHLIGHTS ....................................................................................................................................................................................
8
FY25 OUTLOOK ..............................................................................................................................................................................
10
CONSOLIDATED RESULTS ........................................................................................................................................................
11
QUARTERLY FINANCIAL INFORMATION BY SECTOR .......................................................................................................
15
CANADA SECTOR .....................................................................................................................................................................
17
USA SECTOR ..............................................................................................................................................................................
18
INTERNATIONAL SECTOR ......................................................................................................................................................
21
EUROPE SECTOR .....................................................................................................................................................................
23
LIQUIDITY, FINANCIAL AND CAPITAL RESOURCES ..........................................................................................................
25
CONTRACTUAL OBLIGATIONS .................................................................................................................................................
27
FINANCIAL POSITION ..................................................................................................................................................................
28
GUARANTEES ................................................................................................................................................................................
28
RELATED PARTY TRANSACTIONS ..........................................................................................................................................
28
CRITICAL ACCOUNTING ESTIMATES .....................................................................................................................................
29
CHANGES IN ACCOUNTING POLICIES ...................................................................................................................................
30
RISKS AND UNCERTAINTIES .....................................................................................................................................................
31
DISCLOSURE CONTROLS AND PROCEDURES ...................................................................................................................
38
INTERNAL CONTROL OVER FINANCIAL REPORTING .......................................................................................................
38
SENSITIVITY ANALYSIS OF INTEREST RATE AND US CURRENCY FLUCTUATIONS ..............................................
38
QUARTERLY FINANCIAL INFORMATION ...............................................................................................................................
39
CONSOLIDATED ANALYSIS OF EARNINGS FOR THE YEAR ENDED MARCH 31, 2023, COMPARED TO
MARCH 31, 2022 .............................................................................................................................................................................
41
NON-GAAP MEASURES ...............................................................................................................................................................
44
GLOSSARY ......................................................................................................................................................................................
47
CONSOLIDATED FINANCIAL STATEMENTS ..............................................................................................................................
48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ...........................................................................................
59
MANAGEMENT’S DISCUSSION AND ANALYSIS
INTRODUCTION
All dollar amounts are in millions of Canadian dollars, unless otherwise indicated.
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, 2024. 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. The information in this report is
presented as at March 31, 2024, unless otherwise specified. In preparing this report, we have taken into account
material elements between March 31, 2024, and June 6, 2024, 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, 2024, can be obtained on SEDAR+ at www.sedarplus.ca.
USE OF 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: adjusted
EBITDA1; adjusted net earnings1; adjusted EBITDA margin1; adjusted net earnings margin1; adjusted EPS basic1;
adjusted EPS diluted1; and net debt to adjusted EBITDA1. These measures have no standardized meaning under
GAAP and are unlikely to be comparable to similar measures presented by other issuers. Refer to 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.
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. These metrics are presented as a
complement to enhance the understanding of operating results but not in substitution of GAAP results. In addition,
non-GAAP financial measures should not be viewed as a substitute for the related financial information prepared in
accordance with GAAP.
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 2024
Page 2
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 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 availability and price variations of milk and
other inputs, our ability to transfer input costs increases, if any, to our customers in competitive market conditions;
supply chain strain and supplier concentration; the price fluctuation of dairy products in the countries in which we
operate, as well as in international markets; our ability to identify, attract, and retain qualified individuals; the
increased competitive environment in our industry; consolidation of clientele; cyber threats and other information
technology-related risks relating to business disruptions, confidentiality, data integrity business and email
compromise-related fraud; unanticipated business disruption; continuing economic and political uncertainties,
resulting from actual or perceived changes in the condition of the economy or economic slowdowns or recessions;
public health threats, such as the recent global COVID-19 pandemic, changes in consumer trends; changes in
environmental laws and regulations; the potential effects of climate change; increased focus on environmental
sustainability matters; the failure to execute our Global Strategic Plan as expected or to adequately integrate acquired
businesses in a timely and efficient manner; the failure to complete capital expenditures as planned; changes in
interest rates and access to capital and credit markets. There may be other risks and uncertainties that we are not
aware of at present, or that we consider to be insignificant, that could still have a harmful impact on our business,
financial state, liquidity, results, or reputation.
Forward-looking statements are based on Management’s current estimates, expectations and assumptions regarding,
among other things; the projected revenues and expenses; the economic, industry, competitive, and regulatory
environments in which we operate or which could affect our activities; our ability to identify, attract, and retain qualified
and diverse individuals; our ability to attract and retain customers and consumers; our environmental performance;
the results of our sustainability efforts; the effectiveness of our environmental and sustainability initiatives; our
operating costs; the pricing of our finished products on the various markets in which we carry on business; the
successful execution of our Global Strategic Plan; our ability to deploy capital expenditure projects as planned;
reliance on third parties; our ability to gain efficiencies and cost optimization from strategic initiatives; our ability to
correctly predict, identify, and interpret changes in consumer preferences and demand, to offer new products to meet
those changes, and to respond to competitive innovation; our ability to leverage our brand value; our ability to drive
revenue growth in our key product categories or platforms or add products that are in faster-growing and more
profitable categories; the successful execution of our M&A strategy; the market supply and demand levels for our
products; our warehousing, logistics, and transportation costs; our effective income tax rate; the exchange rate of the
Canadian dollar to the currencies of cheese and dairy ingredients. To set our financial performance targets, we have
made assumptions regarding, among others: the absence of significant deterioration in macroeconomic conditions;
our ability to mitigate inflationary cost pressure; the USA Market Factors2, ingredient markets, commodity prices,
foreign exchange; labour market conditions and staffing levels in our facilities; the impact of price elasticity; our ability
to increase the production capacity and productivity in our facilities; and the demand growth for our products. Our
ability to achieve our environmental targets, commitments, and goals is further subject to, among others: our ability to
access and implement all technology necessary to achieve our targets, commitments, and goals; the development
and performance of technology, innovation and the future use and deployment of technology and associated
expected future results; the accessibility of carbon and renewable energy instruments for which a market is still
developing and which are subject to risk of invalidation or reversal; and environmental regulation. Our ability to
achieve our 2025 Supply Chain Pledges is further subject to, among others, our ability to leverage our supplier
relationships and our sustainability advocacy efforts.
2 Refer to the ‘‘Glossary’’ section of this MD&A.
ANNUAL REPORT 2024
Page 3
Management believes that these estimates, expectations, and assumptions are reasonable as of the date hereof, and
are inherently subject to significant business, economic, competitive, and other uncertainties and contingencies
regarding future events, and are accordingly subject to changes after such date. Forward-looking statements are
intended to provide shareholders with information regarding Saputo, including our assessment of future financial
plans, and may not be appropriate for other purposes. Undue importance should not be placed on forward-looking
statements, and the information contained in such forward-looking statements should not be relied upon as of any
other date.
Unless otherwise indicated by Saputo, forward-looking statements in this report describe our estimates, expectations,
and assumptions as of June 6, 2024, and, accordingly, are subject to change after that date. Except as required
under applicable securities legislation, Saputo does not undertake to update or revise forward-looking statements,
whether written or verbal, that may be made from time to time by itself or on our behalf, whether as a result of new
information, future events, or otherwise. All forward-looking statements contained herein are expressly qualified by
this cautionary statement.
ANNUAL REPORT 2024
Page 4
SELECTED FINANCIAL INFORMATION
Years ended March 31
(in millions of CDN dollars, except per share amounts and ratios)
2024
2023
2022
Revenues
17,342
17,843
15,035
Adjusted EBITDA1
1,509
1,553
1,155
Margin1
8.7 %
8.7 %
7.7 %
Net earnings
265
622
274
Margin2
1.5 %
3.5 %
1.8 %
Adjusted net earnings1
654
711
437
Margin1
3.8 %
4.0 %
2.9 %
PER SHARE
Net earnings per share (EPS):
Basic
0.63
1.49
0.66
Diluted
0.63
1.48
0.66
Adjusted EPS1:
Basic1
1.54
1.70
1.05
Diluted1
1.54
1.70
1.05
Dividends
0.74
0.72
0.72
FINANCIAL POSITION
Working capital2
1,701
1,849
1,515
Total assets
14,260
14,425
13,683
Long-term debt, including current portion
3,113
3,251
3,375
Net debt2
3,520
3,777
4,080
Total non-current financial liabilities2
3,069
3,286
3,461
Equity
7,050
7,140
6,505
FINANCIAL RATIOS
Net debt2 / Equity
0.50
0.53
0.63
Net debt / adjusted EBITDA1
2.33
2.43
3.53
STATEMENT OF CASH FLOWS
Net cash generated from operations
1,191
1,025
693
Additions to property, plant and equipment, and intangible assets
654
641
498
Business acquisitions
—
—
371
Payment of dividends3
245
199
209
1
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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. Adjusted net earnings and adjusted EPS for comparative periods were aligned to meet
the current presentation.
2
Refer to the ‘‘Glossary’’ section of this MD&A.
3
Net of dividends settled through Dividend Reinvestment Plan (DRIP) of $66 million in fiscal 2024, $102 million in fiscal 2023, and $87 million in
fiscal 2022.
ANNUAL REPORT 2024
Page 5
STATEMENT OF EARNINGS
(in millions of CDN dollars)
For the three-month periods
ended March 31
For the years
ended March 31
2024
2023
2024
2023
Revenues
Canada
1,192
1,156
4,922
4,696
USA
1,928
2,062
7,810
8,339
International
1,135
963
3,518
3,785
Europe
290
287
1,092
1,023
Total
4,545
4,468
17,342
17,843
Operating costs excluding depreciation, amortization and
restructuring costs
Canada
1,054
1,022
4,342
4,145
USA
1,790
1,919
7,289
7,851
International
1,047
879
3,185
3,411
Europe
275
256
1,017
883
Total
4,166
4,076
15,833
16,290
Adjusted EBITDA
Canada
138
134
580
551
USA
138
143
521
488
International
88
84
333
374
Europe
15
31
75
140
Total1
379
392
1,509
1,553
Margin1
8.3 %
8.8 %
8.7 %
8.7 %
Depreciation and amortization
Canada
28
27
107
109
USA
63
56
246
227
International
37
36
134
146
Europe
29
25
108
100
Total
157
144
595
582
Goodwill impairment charge
—
—
265
—
Acquisition and restructuring costs
19
28
25
95
Loss (gain) on hyperinflation
34
—
44
(44)
Financial charges
50
39
176
145
Earnings before incomes taxes
119
181
404
775
Income taxes
27
22
139
153
Net earnings
92
159
265
622
Margin2
2.0 %
3.6 %
1.5 %
3.5 %
1
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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 2024
Page 6
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
2024
2023
2024
2023
Net earnings
92
159
265
622
Acquisition and restructuring costs1
15
21
19
70
Amortization of intangible assets related to business
acquisitions1
15
16
61
63
Goodwill impairment charge
—
—
265
—
Loss (gain) on hyperinflation2
34
—
44
(44)
Adjusted net earnings3
156
196
654
711
Margin3
3.4 %
4.4 %
3.8 %
4.0 %
PER SHARE DATA
EPS:
Basic
0.22
0.38
0.63
1.49
Diluted
0.22
0.38
0.63
1.48
Adjusted EPS3:
Basic3
0.37
0.47
1.54
1.70
Diluted3
0.37
0.46
1.54
1.70
1
Net of applicable income taxes.
2
Starting in fiscal 2024:
•
the loss (gain) on hyperinflation is presented on a separate line on the consolidated income statements; and
•
adjusted net earnings exclude the loss (gain) on hyperinflation to provide investors with more useful information with regards to our ongoing
operations.
Comparative periods included in this MD&A were aligned to meet the current presentation.
3
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 factor(s) positively (negatively) impacting Adjusted EBITDA1
(in millions of CDN dollars)
For the three-month periods
ended March 31
For the years
ended March 31
2024
2023
2024
2023
USA Market Factors2,3
(61)
29
(70)
(11)
Inventory write-down
—
—
(31)
(7)
Foreign currency exchange3,4
(6)
(12)
(38)
(38)
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
Reflects the effect on adjusted EBITDA as compared to the same period last fiscal year. 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.
4
Foreign currency exchange includes the effect of the conversion of US dollars, Australian dollars, British pounds sterling, and Argentine pesos to
Canadian dollars.
ANNUAL REPORT 2024
Page 7
HIGHLIGHTS
Financial performance in fiscal 2024 reflected our ability to deliver even in a dynamic economic environment which
included slow global economic recovery, commodity price volatility, ongoing inflation, and a challenged global
demand. We remained focused on strategic priorities and made significant progress towards the completion of major
capital projects.
Fourth quarter of fiscal 2024
• Strong cash generation from operating activities of $371 million.
• Global dairy market conditions and volatile commodity markets continued to be unfavourable to Saputo’s results.
◦USA Market Factors2 had a negative impact of $61 million; and
◦In the International Sector, the disconnect in the relation between international cheese and dairy ingredient
market prices and the cost of milk continued to be unfavourable.
• Adjusted EBITDA1 also reflected the following:
◦Higher sales volumes in both domestic and export markets;
◦Steady results in the Canada Sector;
◦Continued improvement on operational controllables and higher sales volumes in the USA Sector; and
◦In the Europe Sector, the selling of inventory produced at higher milk prices.
• Restructuring costs of $15 million after tax were incurred in relation to severance costs in the context of cost
efficiency efforts.
• The Board of Directors approved a dividend of $0.185 per share payable on June 26, 2024, to shareholders of
record on June 18, 2024.
1
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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 2024
Page 8
HIGHLIGHTS (CONT'D)
Fiscal 2024
• Net cash generated from operations totalled $1.191 billion.
• A non-cash goodwill impairment charge of $265 million was recorded in relation to the Dairy Division (Australia).
• Adjusted EBITDA1 reflected the following:
◦Unfavourability from global dairy market conditions and volatile commodity markets impacting mainly the
USA and International Sectors;
◦Negative impact of the disconnect in the relation between international cheese and dairy ingredient market
prices and the cost of milk in the International Sector;
◦Lower international cheese and dairy ingredient market prices;
◦Solid performance in the Canada Sector;
◦Improvements on operational controllables in the USA Sector, although results were affected by $70
million of negative USA Market Factors2 ;
◦Higher sales volumes in domestic markets and lower sales volumes in export markets; and
◦In the Europe Sector, the selling of inventory produced at higher milk prices.
• Revenues decreased due to lower average block market price2 and lower average butter market price2 in the USA
Sector and lower international cheese and dairy ingredient market prices. Revenues included some offsetting
positivity from the carryover effect of pricing initiatives implemented to mitigate inflation and from higher domestic
selling prices in line with the higher cost of milk.
• The fluctuation of the Canadian dollar versus foreign currencies negatively impacted revenues and adjusted
EBITDA1 by $293 million and $38 million, respectively.
• After tax restructuring costs of $19 million included severance costs incurred in the context of cost efficiency efforts
and costs relating to the planned closure of our Lancaster, Wisconsin, facility in line with our Global Strategic Plan.
1
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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 2024
Page 9
FY25 OUTLOOK
•
Inflationary pressures are anticipated to moderate versus the prior year, however labour costs may remain
elevated in addition to increases in marketing and advertising investments to support new product launches
and our brands.
•
We expect USA dairy markets to progressively improve throughout the year, supported by a better balance
between milk supply and dairy demand but with continued volatility in the short to medium-term.
•
Global demand for dairy products is expected to remain moderate, alongside subdued international dairy
market prices due to macroeconomic conditions.
•
We expect a reduction in duplicate operating costs in FY25 and a gradual ramp-up in contribution from
optimization and capacity expansion initiatives, notably in our USA Sector, through the end of FY25 and
FY26.
•
The Europe Sector is expected to benefit from the cycle through of high-cost inventory, an improved product
mix from higher retail sales volume, as well as a lower cost base following cost-out initiatives and site
consolidation.
•
Cash flow generation should increase, driven by improvements in adjusted EBITDA1 and a reduction in
capital expenditures following the completion of the bulk of our Global Strategic Plan investments.
•
Our leverage ratio should progressively come down and is anticipated to be below our target of 2.25 times
net debt to adjusted EBITDA1 as adjusted EBITDA1 and cash flow generation improve during FY25.
•
We expect to see steady improvements in FY25 and remain on course to deliver on our long-term goals.
Factors impacting our performance in FY25 will be the economic health of consumers, the moderating rate
of input cost inflation, the increasing stability of the supply chain environment, and benefits from our Global
Strategic Plan.
GLOBAL STRATEGIC PLAN HIGHLIGHTS
The Company’s Global Strategic Plan is designed to accelerate organic growth. As part of this growth plan, we expect
to continue reaping benefits from our ongoing efforts to optimize our existing footprint, add new capacity, adjust our
product mix by facility, and align our portfolio more closely with customer and consumer needs. Global Strategic Plan
benefits are expected to continue to come to fruition over the course of FY25 and accelerate in FY26.
FY25 priorities include:
USA Sector: Several capital projects focused on supporting our USA growth, including establishing new facilities and
adding capacity to support key product categories, are either fully operational or ramping up and will be fully
operational in the coming months. Near-term priorities in the USA Sector include completing our cheese network
transformation, executing on the planned closures of the Lancaster, Wisconsin; Big Stone, South Dakota; Green Bay,
Wisconsin; and South Gate, California, facilities, and continuing to ramp up our new automated cut-and-wrap facility
in Franklin, Wisconsin. Other priorities include strengthening the Sector’s innovation pipeline, developing new
products, and continuing to grow brands while expanding volume with key customers.
Canada Sector: Focus is on automation and supply chain optimization initiatives, the expansion of our product
portfolio, and maximizing our distribution capabilities to drive growth.
Europe Sector: Near-term priorities include delivering on our cost-out plan, executing on the planned closure of the
facility in Frome, UK, driving retail volume through consumer advertising and innovation, and onboarding new private
label customers.
International Sector: In Australia, priorities include executing our site consolidation roadmap, rebalancing our
business between domestic and export activities, advancing our review of strategic alternatives for the King Island
facility, and completing the sale of two milk processing facilities to Coles Group Limited.
1
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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 2024
Page 10
CONSOLIDATED RESULTS FOR THE FOURTH QUARTER AND FISCAL PERIOD
ENDED MARCH 31, 2024
Revenues
Revenues for the fourth quarter of fiscal 2024 totalled $4.545 billion, up $77 million or 1.7%, as compared to
$4.468 billion for the same quarter last fiscal year.
Higher domestic selling prices in line with the higher cost of milk as raw material continued to positively impact
revenues.
The effects of currency fluctuations on export sales denominated in US dollars were favourable.
Domestic and export sales volumes were both higher, despite continued softening of global demand for dairy
products and ongoing competitive market conditions.
The combined effect of fluctuations of the average block market price2 and of the average butter market price2 in our
USA Sector had a negative impact of $185 million. Lower international cheese and dairy ingredient market prices had
a negative impact in all our sectors.
The conversion of foreign currencies to the Canadian dollar had an unfavourable impact of approximately
$114 million, mainly due to the devaluation of the Argentine peso.
In fiscal 2024, revenues totalled $17.342 billion, down $501 million or 2.8%, as compared to $17.843 billion.
The combined effect of fluctuations of the average block market price2 and of the average butter market price2 in our
USA Sector had a negative impact of $772 million. Lower international cheese and dairy ingredient market prices had
a negative impact in all our sectors.
The carryover effect of pricing initiatives implemented to mitigate inflationary pressures and higher domestic selling
prices in line with the higher cost of milk as raw material had a positive impact. Also, the effects of currency
fluctuations on export sales denominated in US dollars were favourable.
Export sales volumes were lower due to the softening global demand for dairy products, while domestic sales
volumes were stable despite ongoing competitive market conditions.
The conversion of foreign currencies to the Canadian dollar had an unfavourable impact of approximately
$293 million, mainly due to the devaluation of the Argentine peso.
Operating costs excluding depreciation, amortization, and restructuring costs
Operating costs excluding depreciation, amortization, and restructuring costs for the fourth quarter of fiscal 2024
totalled $4.166 billion, up $90 million or 2.2%, as compared to $4.076 billion for the same quarter last fiscal year. In
fiscal 2024, operating costs excluding depreciation, amortization, and restructuring costs totalled $15.833 billion,
down $457 million or 2.8%, as compared to $16.290 billion for last fiscal year.
These variations were in line with lower commodity market prices and their impacts on the cost of raw materials and
consumables used, lower logistics costs, and the favourable impacts from our cost containment measures and from
our Global Strategic Plan initiatives. These favourable impacts were partially offset by ongoing inflation on costs,
including hyperinflation in Argentina, as well as higher employee salary and benefit expenses, which include the effect
of wage increases. Operating costs also included duplicate operational costs incurred to implement previously
announced network optimization initiatives.
Net earnings
Net earnings for the fourth quarter of fiscal 2024 totalled $92 million, down $67 million or 42.1% as compared to
$159 million for the same quarter last fiscal year. The decrease is due to the factors which have led to a lower
adjusted EBITDA1, as described below, a loss on hyperinflation, higher financial charges, and higher income tax
expense, offset by lower acquisition and restructuring costs.
In fiscal 2024, net earnings totalled $265 million, down $357 million or 57.4%, as compared to $622 million for last
fiscal year. The decrease is primarily due to a non-cash goodwill impairment charge of $265 million, the factors which
have led to lower adjusted EBITDA1, as described below, a loss on hyperinflation compared to a gain for the same
period last fiscal year, and higher financial charges, offset by lower acquisition and restructuring costs, and lower
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 2024
Page 11
Adjusted EBITDA1
Adjusted EBITDA1 for the fourth quarter of fiscal 2024 totalled $379 million, down $13 million or 3.3%, as compared
to $392 million for the same quarter last fiscal year.
Under continued volatile commodity market conditions, USA Market Factors2 resulted in a negative impact of $61
million, due to the negative Spread2 and to the unfavourable realization of inventories from the combined effect of
fluctuations of the average block market price2 and of the average butter market price2.
The International Sector also showed lower results due to the continued disconnect in the relation between
international cheese and dairy ingredient market prices and the cost of milk as raw material.
Results also reflected higher sales volumes in both domestic and export markets while lower international cheese and
dairy ingredient market prices had a negative impact.
In the Europe Sector, the selling of inventory produced at higher milk prices continued to have a negative impact,
although to a lesser extent than the previous quarters.
Our ongoing cost containment measures implemented to minimize the effect of inflation, along with lower logistics
costs, mainly in North America, and continued operational improvements in the USA Sector, had a positive impact.
These favourable impacts were partially offset by costs incurred to implement previously announced network
optimization initiatives, including approximately $15 million in the USA Sector.
The conversion of foreign currencies to the Canadian dollar had an unfavourable impact of approximately $6 million,
mainly due to the devaluation of the Argentine peso.
Adjusted EBITDA1 in fiscal 2024 totalled $1.509 billion, down $44 million or 2.8%, as compared to $1.553 billion for
last fiscal year.
In the context of volatile commodity markets, USA Market Factors2 had a negative impact of $70 million, driven by the
combined negative impacts of the fluctuation of the average block market price2 related to our cheese products and of
the lower average butter market price2 related to our dairy food products. The milk-cheese Spread2 was negative
although to a lesser extent as compared to last fiscal year.
The International Sector performance was negatively impacted by the disconnect in the relation between international
cheese and dairy ingredient market prices and the cost of milk.
Export sales volumes were lower due to softening of the global demand for dairy products. Lower international
cheese and dairy ingredient market prices had a negative impact.
Results increased in the Canada Sector and in the USA Sector, where operational improvements had a positive
impact.
The Europe Sector performance was negatively impacted by the selling of inventory produced at higher milk prices.
We benefited from the carryover impact of higher average selling prices, driven by previously announced pricing
initiatives, which were implemented to mitigate higher input costs in line with ongoing inflation and volatile commodity
markets.
Our ongoing cost containment measures implemented to minimize the effect of inflation, along with lower logistics
costs, including lower fuel prices, mainly in North America, had a favourable impact. Benefits derived from our Global
Strategic Plan, including continuous improvement, supply chain optimization, and automation initiatives, also had a
favourable impact. These favourable impacts were partially offset by costs incurred to implement previously
announced network optimization initiatives, including approximately $36 million in the USA Sector.
Results included an inventory write-down of $31 million as a result of the decrease in certain market selling prices.
The conversion of foreign currencies to the Canadian dollar had an unfavourable impact of approximately $38 million,
mainly due to the devaluation of the Argentine peso.
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 2024
Page 12
Depreciation and amortization
Depreciation and amortization for the fourth quarter of fiscal 2024 totalled $157 million, up $13 million, as compared
to $144 million for the same quarter last fiscal year. Depreciation and amortization in fiscal 2024 totalled $595 million,
up $13 million, as compared to $582 million for last fiscal year. These increases were mainly attributable to additional
depreciation and amortization related to the commissioning of assets in connection with our capital projects under our
Global Strategic Plan. These increases were partially offset by a reduction in the International Sector from the
ongoing network optimization initiatives in Australia aimed at the consolidation of eleven facilities into six. Also
contributing to the increases was the effect of hyperinflation accounting for our Dairy Division (Argentina).
Acquisition and restructuring costs
Acquisition and restructuring costs for the fourth quarter of fiscal 2024 totalled $19 million and related to severance
costs incurred in the context of cost efficiency efforts.
Acquisition and restructuring costs for the fourth quarter of fiscal 2023 totalled $28 million and included a non-cash
fixed assets write-down of $12 million, and severance costs of $14 million in connection with consolidation initiatives
in the USA Sector being undertaken as part of our Global Strategic Plan.
Acquisition and restructuring costs in fiscal 2024 totalled $25 million. During the third quarter of fiscal 2024, we
announced the permanent closure of our Lancaster, Wisconsin, facility, in line with our Global Strategic Plan. As a
result, restructuring costs of $6 million, which include non-cash fixed assets write-down of $4 million and severance
costs of $2 million, were recorded. As described above, we also recorded severance costs totalling $19 million.
Acquisition and restructuring costs in fiscal 2023 totalled $95 million related to initiatives undertaken in Australia, the
USA Sector, and the Europe Sector as part of our Global Strategic Plan. These costs included a total non-cash fixed
assets write-down of $62 million, severance costs of $28 million, accelerated depreciation, and other site closure
costs. Restructuring costs also included a $2 million gain on disposal of assets related to the sale of a closed facility
in the Canada Sector.
Goodwill impairment charge
In fiscal 2024, a non-cash goodwill impairment charge of $265 million was recorded.
In performing our annual goodwill impairment testing as at December 31, 2023, our Dairy Division (Australia) Cash
Generating Unit (the Australia CGU) estimates of future discounted cash flows were reduced due to the increasing
disconnect in the relation between international cheese and dairy ingredient prices and farm gate milk prices in a
context of declining milk production in Australia.
As a result, the estimated recoverable value of the Australia CGU was determined to be lower than its carrying value
and a non-cash goodwill impairment charge of $265 million (non tax-deductible) was recorded, representing the total
value of the goodwill for this CGU.
Loss (gain) on hyperinflation
Loss on hyperinflation for the fourth quarter of fiscal 2024 totalled $34 million (minimal gain in fiscal 2023). In fiscal
2024, the loss on hyperinflation totalled $44 million ($44 million gain in fiscal 2023). The loss (gain) on hyperinflation
is relative to the application of hyperinflation accounting for the Dairy Division (Argentina), and includes the effects of
inflation indexation and currency conversion on its balance sheet amounts.
Financial charges
Financial charges for the fourth quarter of fiscal 2024 totalled $50 million, up $11 million compared to the same
quarter last fiscal year. In fiscal 2024, financial charges totalled $176 million, up $31 million compared to the same
period last fiscal year. These increases reflected higher interest rates.
ANNUAL REPORT 2024
Page 13
Income tax expense
Income tax expense for the fourth quarter of fiscal 2024 totalled $27 million ($22 million for the same quarter last
fiscal year) and $139 million for fiscal 2024 ($153 million in fiscal 2023). The effective tax rate for the fourth quarter
of fiscal 2024 was 23%.
For fiscal 2024, the effective tax rate of 34% was higher than the effective tax rate of fiscal 2023 mainly due to the
effect of the non tax-deductible goodwill impairment charge of $265 million recorded in the current year.
The tax and accounting treatments of inflation in Argentina have an impact on the effective tax rate which varies from
quarter to quarter. For the fourth quarter, this impact was negative, resulting in an increase of the effective tax rate
whereas in the comparable quarter of fiscal 2023 the impact was positive resulting in a decrease of the effective tax
rate. For fiscal 2024 and fiscal 2023, this impact was positive, resulting in a decrease of the effective tax rate.
The effective income tax rate varies and could increase or decrease based on the geographic mix of quarterly and
year-to date earnings across the various jurisdictions in which we operate, the tax and accounting treatments of
inflation in Argentina, the amount and source of taxable income, amendments to tax legislations and income tax rates,
changes in assumptions, as well as estimates we use for tax assets and liabilities.
Adjusted net earnings1
Adjusted net earnings for the fourth quarter of fiscal 2024 totalled $156 million, down $40 million or 20.4%, as
compared to $196 million for the same quarter last fiscal year. This is mainly due to the factors which have led to a
decrease in net earnings, as described above, excluding lower acquisition and restructuring costs after tax, as well as
the impact of a loss on hyperinflation.
In fiscal 2024, adjusted net earnings totalled $654 million, down $57 million or 8.0%, as compared to $711 million for
last fiscal year. This is mainly due to the factors which have led to a decrease in net earnings, as described above,
excluding a non-cash goodwill impairment charge, lower acquisition and restructuring costs after tax, as well as the
impact of the loss on hyperinflation compared to a gain that was recognized in the same period last fiscal year.
1
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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 2024
Page 14
QUARTERLY FINANCIAL INFORMATION BY SECTOR
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).
CANADA SECTOR
(in millions of CDN dollars)
Fiscal years
2024
2023
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Revenues
1,192
1,271
1,248
1,211
1,156
1,213
1,185
1,142
Adjusted EBITDA
138
150
148
144
134
149
136
132
Margin
11.6 %
11.8 %
11.9 %
11.9 %
11.6 %
12.3 %
11.5 %
11.6 %
USA SECTOR
(in millions of CDN dollars)
Fiscal years
2024
2023
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Revenues
1,928
2,056
1,950
1,876
2,062
2,172
2,062
2,043
Adjusted EBITDA
138
133
147
103
143
146
102
97
Margin
7.2 %
6.5 %
7.5 %
5.5 %
6.9 %
6.7 %
4.9 %
4.7 %
Selected factor(s) positively (negatively) impacting Adjusted EBITDA
(in millions of CDN dollars)
Fiscal years
2024
2023
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
USA Market Factors1,2
(61)
(27)
32
(14)
29
(6)
(27)
(7)
Inventory write-down
—
—
—
(10)
—
—
—
—
US currency exchange2
—
—
3
5
5
8
3
3
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
2024
2023
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Block market price1
Opening
1.470
1.720
1.335
1.850
2.135
1.968
2.195
2.250
Closing
1.418
1.470
1.720
1.335
1.850
2.135
1.968
2.195
Average
1.516
1.620
1.817
1.579
1.943
2.077
1.927
2.287
Butter market price1
Opening
2.665
3.300
2.440
2.398
2.380
3.145
2.995
2.700
Closing
2.843
2.665
3.300
2.440
2.398
2.380
3.145
2.995
Average
2.737
2.898
2.706
2.394
2.375
2.904
3.035
2.808
Average whey powder
market price1
0.436
0.370
0.265
0.358
0.397
0.432
0.469
0.600
Spread1
(0.125)
(0.061)
0.075
(0.061)
0.040
(0.120)
(0.222)
(0.261)
US average exchange rate
to Canadian dollar2
1.349
1.359
1.344
1.343
1.353
1.357
1.306
1.275
1 Refer to the ‘‘Glossary’’ section of this MD&A.
2 Based on Bank of Canada published information.
ANNUAL REPORT 2024
Page 15
INTERNATIONAL SECTOR
(in millions of CDN dollars)
Fiscal years
2024
2023
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Revenues
1,135
636
879
868
963
917
989
916
Adjusted EBITDA
88
85
83
77
84
111
97
82
Margin
7.8 %
13.4 %
9.4 %
8.9 %
8.7 %
12.1 %
9.8 %
9.0 %
Selected factor(s) positively (negatively) impacting Adjusted EBITDA
(in millions of CDN dollars)
Fiscal years
2024
2023
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Inventory write-down
—
(14)
(7)
—
—
—
—
—
Foreign currency exchange1
(7)
(36)
(12)
(2)
(15)
(13)
(9)
(6)
1
As compared to same quarter last fiscal year.
EUROPE SECTOR
(in millions of CDN dollars)
Fiscal years
2024
2023
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Revenues
290
304
246
252
287
285
225
226
Adjusted EBITDA
15
2
20
38
31
39
34
36
Margin
5.2 %
0.7 %
8.1 %
15.1 %
10.8 %
13.7 %
15.1 %
15.9 %
Selected factor(s) positively (negatively) impacting Adjusted EBITDA
(in millions of CDN dollars)
Fiscal years
2024
2023
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Inventory write-down
—
—
—
—
(7)
—
—
—
Foreign currency exchange1
1
3
3
1
(1)
(2)
(4)
(2)
1
As compared to same quarter last fiscal year.
ANNUAL REPORT 2024
Page 16
CANADA SECTOR
(in millions of CDN dollars)
For the three-month periods
ended March 31
For the years
ended March 31
2024
2023
2024
2023
Revenues
1,192
1,156
4,922
4,696
Adjusted EBITDA
138
134
580
551
Margin
11.6 %
11.6 %
11.8 %
11.7 %
Revenues
Revenues for the fourth quarter of fiscal 2024 totalled $1.192 billion, up $36 million or 3.1%, as compared to
$1.156 billion for the same quarter last fiscal year. In fiscal 2024, revenues totalled $4.922 billion, up $226 million or
4.8%, as compared to $4.696 billion last fiscal year.
Revenues increased due to higher selling prices in connection with the higher cost of milk as raw material and the
carryover impact, mostly in the first half of fiscal 2024, of pricing initiatives implemented to mitigate ongoing
inflationary pressures on our input costs.
Sales volumes were stable in fiscal 2024 as compared to fiscal 2023 in the retail market segment with an uplift in the
fourth quarter of fiscal 2024, as compared to the same quarter last fiscal year.
The retail market segment represented approximately 57% of revenues (56% in fiscal 2023), whereas the foodservice
market segment represented approximately 36% of revenues in both fiscal 2024 and 2023. The industrial market
segment represented approximately 7% of revenues (8% in fiscal 2023).
Adjusted EBITDA
Adjusted EBITDA for the fourth quarter of fiscal 2024 totalled $138 million, up $4 million or 3.0%, as compared to
$134 million for the same quarter last fiscal year.
Our ongoing cost containment measures implemented to minimize the effect of inflation, along with lower logistics
costs, had a favourable impact.
Adjusted EBITDA in fiscal 2024 totalled $580 million, up $29 million or 5.3%, as compared to $551 million last fiscal
year.
We mitigated the effect of inflationary pressures on our input costs with the carryover impact of increased selling
prices.
Our ongoing cost containment measures implemented to minimize the effect of inflation, along with lower logistics
costs, including lower fuel prices, had a favourable impact. Our results reflected the benefits derived from our Global
Strategic Plan, including continuous improvement, supply chain optimization, and automation initiatives which
reached their stable run rate in the second half of fiscal 2024.
ANNUAL REPORT 2024
Page 17
USA SECTOR
(in millions of CDN dollars)
For the three-month periods
ended March 31
For the years
ended March 31
2024
2023
2024
2023
Revenues
1,928
2,062
7,810
8,339
Adjusted EBITDA
138
143
521
488
Margin
7.2 %
6.9 %
6.7 %
5.9 %
Selected factor(s) positively (negatively) impacting Adjusted EBITDA
(in millions of CDN dollars)
For the three-month periods
ended March 31
For the years
ended March 31
2024
2023
2024
2023
USA Market Factors1,2
(61)
29
(70)
(11)
Inventory write-down
—
—
(10)
—
US currency exchange2
—
5
8
19
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.
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
2024
2023
2024
2023
Block market price1
Opening
1.470
2.135
1.850
2.250
Closing
1.418
1.850
1.418
1.850
Average
1.516
1.943
1.633
2.058
Butter market price1
Opening
2.665
2.380
2.398
2.700
Closing
2.843
2.398
2.843
2.398
Average
2.737
2.375
2.684
2.781
Average whey powder market price1
0.436
0.397
0.357
0.473
Spread1
(0.125)
0.040
(0.043)
(0.143)
US average exchange rate to Canadian
dollar2
1.349
1.353
1.349
1.328
1 Refer to the ‘‘Glossary’’ section of this MD&A.
2
Based on Bank of Canada published information.
ANNUAL REPORT 2024
Page 18
Revenues
Revenues for the fourth quarter of fiscal 2024 totalled $1.928 billion, down $134 million or 6.5%, as compared to
$2.062 billion for the same quarter last fiscal year.
The combined effect of fluctuations of the average block market price2 and of the average butter market price2 had a
negative impact of $185 million. Lower dairy ingredient market prices continued to have a negative impact.
Although demand remained soft and competitive market conditions were ongoing, sales volumes were higher driven
by higher export sales volumes.
The fluctuation of the US dollar versus the Canadian dollar had an unfavourable impact of approximately $7 million.
Revenues in fiscal 2024 totalled $7.810 billion, down $529 million or 6.3%, as compared to $8.339 billion last fiscal
year.
The combined effect of the lower average block market price2 and of the lower average butter market price2 had a
negative impact of $772 million. Lower dairy ingredient market prices also had a negative impact.
Sales volumes were stable with higher domestic sales volumes despite ongoing competitive market conditions
whereas export sales volumes were lower due to ongoing softening demand.
The carryover impact of pricing initiatives implemented to mitigate increasing input and logistics costs in line with
ongoing inflation had a favourable impact.
The fluctuation of the US dollar versus the Canadian dollar had a favourable impact of approximately $164 million.
The retail market segment represented approximately 46% of revenues (45% in fiscal 2023), whereas the foodservice
market segment represented approximately 45% of revenues in both fiscal 2024 and 2023. The industrial market
segment represented approximately 9% of revenues (10% in fiscal 2023).
2 Refer to the ‘‘Glossary’’ section of this MD&A.
ANNUAL REPORT 2024
Page 19
Adjusted EBITDA
Adjusted EBITDA for the fourth quarter of fiscal 2024 totalled $138 million, down $5 million or 3.5%, as compared to
$143 million for the same quarter last fiscal year.
USA Market Factors2 had an unfavourable impact of $61 million, as compared to the same quarter last fiscal year,
due to the negative Spread2 and to the unfavourable realization of inventories from the combined effect of fluctuations
of the average block market price2 and average butter market prices2. Also, dairy ingredient market prices had a
negative impact.
Operational improvements had a positive impact on our results. Higher sales volumes and lower logistics costs also
had a positive impact. Results included approximately $15 million of additional costs incurred to implement previously
announced network optimization initiatives, which include the commissioning of our new Franklin, Wisconsin, facility.
The fluctuation of the US dollar versus the Canadian dollar had a minimal impact compared to the same quarter last
fiscal year.
Adjusted EBITDA in fiscal 2024 totalled $521 million, up $33 million or 6.8%, as compared to $488 million last fiscal
year.
Results were positively impacted by operational improvements as well as by higher domestic sales volumes and
lower logistics costs, including the effect of lower fuel prices. These positive impacts were offset by negative USA
Market Factors2 discussed below, and lower export sales volumes. Furthermore, additional costs of approximately
$36 million were incurred to implement previously announced network optimization initiatives, which include the
commissioning of our new Franklin, Wisconsin, facility.
USA Market Factors2 resulted in a negative impact of $70 million, as compared to last fiscal year, mainly due to the
unfavourable realization of inventories from the combined effect of fluctuations of the average block market price2 and
average butter market prices2. This negative impact was offset by the less unfavourable effect of the Spread2 as
compared to last fiscal year. In the first quarter, our results included an inventory write-down of $10 million due to the
decrease in certain market selling prices.
The fluctuation of the US dollar versus the Canadian dollar had a favourable impact of $8 million.
2 Refer to the ‘‘Glossary’’ section of this MD&A.
ANNUAL REPORT 2024
Page 20
INTERNATIONAL SECTOR
(in millions of CDN dollars)
For the three-month periods
ended March 31
For the years
ended March 31
2024
2023
2024
2023
Revenues
1,135
963
3,518
3,785
Adjusted EBITDA
88
84
333
374
Margin
7.8 %
8.7 %
9.5 %
9.9 %
Selected factor(s) positively (negatively) impacting Adjusted EBITDA
(in millions of CDN dollars)
For the three-month periods
ended March 31
For the years
ended March 31
2024
2023
2024
2023
Inventory write-down
—
—
(21)
—
Foreign currency exchange1
(7)
(15)
(57)
(43)
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.
Revenues
Revenues for the fourth quarter of fiscal 2024 totalled $1.135 billion, up $172 million or 17.9%, as compared to
$963 million for the same quarter last fiscal year.
Demand in export markets remained soft, however our export sales volumes were higher. The effects of currency
fluctuations on export sales denominated in US dollars were favourable. Revenues continued to be negatively
impacted by lower international cheese and dairy ingredient market prices, putting pressure on our margins.
In our domestic markets, sales volumes were stable and selling prices were higher, mainly due to the
hyperinflationary economy in Argentina, positively impacting revenues.
The conversion of the functional currencies used in the International Sector to the Canadian dollar had an
unfavourable impact of approximately $119 million, mainly due to the devaluation of the Argentine peso.
Revenues in fiscal 2024 totalled $3.518 billion, down $267 million or 7.1%, as compared to $3.785 billion last fiscal
year.
Lower sales volumes due to the softening of demand in our export markets and lower international cheese and dairy
ingredient market prices had a negative impact, while the effects of currency fluctuations on export sales
denominated in US dollars were favourable.
In our domestic markets, selling prices were higher, mainly in connection with the higher cost of milk as raw material,
and due to the hyperinflationary economy in Argentina.
The conversion of the functional currencies used in the International Sector to the Canadian dollar had an
unfavourable impact of approximately $520 million, mainly due to the devaluation of the Argentine peso.
The retail market segment represented approximately 43% of total revenues (40% in fiscal 2023). The foodservice
market segment represented approximately 12% of total revenues (11% in fiscal 2023). The industrial market
segment represented approximately 45% of total revenues (49% in fiscal 2023) and continued to be destined mostly
for export markets.
ANNUAL REPORT 2024
Page 21
Adjusted EBITDA
Adjusted EBITDA for the fourth quarter of fiscal 2024 totalled $88 million, up $4 million or 4.8%, as compared to
$84 million for the same quarter last fiscal year.
The continued disconnect in the relation between the international cheese and dairy ingredient market prices and the
cost of milk as raw material had a negative impact on our results, although this was partially offset by the positive
impact of increased export sales volumes. The effects of currency fluctuations on export sales denominated in US
dollars were favourable.
In Australia, we continued to benefit from higher milk intake, which positively impacted our efficiencies and absorption
of fixed costs, although to a lesser extent than in previous quarters. Our results also continued to be positively
impacted by previously announced network optimization initiatives aimed at improving our operational efficiency and
strengthening our competitiveness in Australia.
The conversion of the functional currencies used in the International Sector to the Canadian dollar had an
unfavourable impact of approximately $7 million mainly due to the devaluation of the Argentine peso.
In fiscal 2024, adjusted EBITDA totalled $333 million, down $41 million or 11.0%, as compared to $374 million last
fiscal year.
Results were negatively impacted by lower export sales volumes and the disconnect in the relation between the
international cheese and dairy ingredient market prices and the cost of milk as raw material. The effects of currency
fluctuations on export sales denominated in US dollars were favourable.
In our domestic markets, we benefited from the carryover effect of pricing actions previously undertaken to mitigate
increasing input costs.
We benefited from higher milk intake in Australia, which positively impacted our efficiencies and absorption of fixed
costs. Our results were also positively impacted by previously announced network optimization initiatives aimed at
improving our operational efficiency and strengthening our competitiveness in Australia.
The conversion of the functional currencies used in the International Sector to the Canadian dollar had an
unfavourable impact of approximately $57 million, mainly due to the devaluation of the Argentine peso.
As a result of a decrease in certain market selling prices, our results included an inventory write-down of $21 million.
ANNUAL REPORT 2024
Page 22
EUROPE SECTOR
(in millions of CDN dollars)
For the three-month periods
ended March 31
For the years
ended March 31
2024
2023
2024
2023
Revenues
290
287
1,092
1,023
Adjusted EBITDA
15
31
75
140
Margin
5.2 %
10.8 %
6.9 %
13.7 %
Selected factor(s) positively (negatively) impacting Adjusted EBITDA
(in millions of CDN dollars)
For the three-month periods
ended March 31
For the years
ended March 31
2024
2023
2024
2023
Inventory write-down
—
(7)
—
(7)
Foreign currency exchange1
1
(1)
8
(9)
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.
Revenues
Revenues for the fourth quarter of fiscal 2024 totalled $290 million, up $3 million or 1.0%, as compared to
$287 million for the same quarter last fiscal year.
Sales volumes increased, mainly in the retail market segment, driven by a rebound in branded cheese sales volumes.
Revenues reflected higher bulk cheese sales volumes at lower selling prices. In addition, lower international dairy
ingredient market prices continued to have a negative impact.
The conversion of the British pound sterling versus the Canadian dollar had a favourable impact of approximately
$12 million.
Revenues in fiscal 2024 totalled $1.092 billion, up $69 million or 6.7%, as compared to $1.023 billion last fiscal year.
Despite higher overall sales volumes, revenues were impacted by a negative product mix, mainly due to higher bulk
cheese sales volumes at lower selling prices. In addition, lower international dairy ingredient market prices had a
negative impact.
The carryover effect of pricing initiatives implemented to mitigate higher cost of milk as raw material and other input
cost increases continued to have a positive impact.
The conversion of the British pound sterling versus the Canadian dollar had a favourable impact of approximately
$63 million.
The retail market segment represented approximately 76% of revenues, up from 71% in fiscal 2023. The foodservice
market segment represented approximately 3% of revenues in both fiscal 2024 and 2023. The industrial market
segment represented 21% of revenues, down from 26% in fiscal 2023.
ANNUAL REPORT 2024
Page 23
Adjusted EBITDA
Adjusted EBITDA for the fourth quarter of fiscal 2024 totalled $15 million, down $16 million or 51.6%, as compared
to $31 million for the same quarter last fiscal year.
Results continued to be negatively impacted by the selling of inventory produced at higher milk prices through bulk
cheese sales volumes.
Lower international dairy ingredient market prices also continued to have a negative impact.
The conversion of the British pound sterling to the Canadian dollar had a favourable impact of approximately
$1 million.
Adjusted EBITDA in fiscal 2024 totalled $75 million, down $65 million or 46.4%, as compared to $140 million last
fiscal year.
Lower results were mainly due to the selling of inventory produced at higher milk prices through bulk cheese sales
volumes.
Lower international dairy ingredient market prices also had a negative impact.
The conversion of the British pound sterling to the Canadian dollar had a favourable impact of approximately
$8 million.
ANNUAL REPORT 2024
Page 24
LIQUIDITY, FINANCIAL AND CAPITAL RESOURCES
This section provides insight into our cash and capital management strategies and how they drive operational
objectives, and also provides details on how we manage our liquidity risk to meet Saputo's financial obligations as
they come due.
As we navigate through the challenging environment, including geopolitical developments, inflationary pressures,
rising interest rates, 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 capital allocation priorities remain capital expenditures,
shareholder dividends, and debt repayments, allowing us to support organic growth, strategic acquisitions, and our
Saputo Promise.
The Company's cash and cash equivalents totalled $466 million as at March 31, 2024. In addition to these funds, we
have unused credit facilities of $1.927 billion under our bank credit facilities as at March 31, 2024. We believe we are
well positioned to face current market conditions given our well-balanced capital structure.
The Company's liquidity needs are funded from cash generated by operations, unsecured bank credit facilities, and
senior unsecured notes. These funds are used principally for capital expenditures, dividends, debt repayments, and
business acquisitions, if any, 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)
For the three-month periods
ended March 31
For the years
ended March 31
2024
2023
2024
2023
Net cash generated from operating activities
371
421
1,191
1,025
Cash used for investing activities
(203)
(311)
(652)
(632)
Cash used for financing activities
(125)
(45)
(343)
(369)
Increase in cash and cash equivalents
43
65
196
24
Operating activities
Net cash generated from operating activities for the fourth quarter of fiscal 2024 amounted to $371 million, as
compared to $421 million for the same quarter last fiscal year. This decrease of $50 million was mainly due to higher
income taxes paid of $24 million and a decrease in adjusted EBITDA1 of $13 million.
In fiscal 2024, net cash generated from operating activities amounted to $1.191 billion, as compared to $1.025 billion
for last fiscal year. This increase of $166 million was mainly due to an increase related to changes in non-cash
operating working capital items of $365 million. This increase was partially offset by higher income taxes paid of
$158 million, a decrease in adjusted EBITDA1 of $44 million, and higher interest paid of $34 million.
Changes in non-cash operating working capital for the fourth quarter of fiscal 2024 and in fiscal 2024 were mainly
driven by the fluctuations in accounts receivable, inventories, and accounts payable in line with the fluctuation of
market prices, foreign exchange rates and ongoing inflation, including the effects of the hyperinflationary economy in
Argentina, the timing of collections of accounts receivable and of payments of accounts payable.
1
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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 2024
Page 25
Investing activities
Investing activities for the fourth quarter of fiscal 2024 and for fiscal 2024 amounted to $203 million and
$652 million, respectively, and were mainly related to net additions to property, plant and equipment, and intangible
assets.
Financing activities
Cash used for financing activities for the fourth quarter of fiscal 2024 and for fiscal 2024 amounted to $125 million
and $343 million, respectively, and were mainly attributable to the payment of dividends to shareholders and the
repayment of outstanding indebtedness.
Liquidity
(in millions of CDN dollars, except ratio)
At March 31,
2024
2023
Current assets
4,834
4,851
Current liabilities
3,133
3,002
Working capital1
1,701
1,849
Working capital ratio1
1.54
1.62
1
Refer to the ‘‘Glossary’’ section of this MD&A.
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.
Capital management
Our capital management strategy requires a well-balanced financing structure to maintain the flexibility needed to
implement growth initiatives, pursue disciplined capital investments, and maximize shareholder value.
We continue to aim for a long-term target leverage of approximately 2.25 times net debt to adjusted EBITDA2. From
time to time, we may deviate from our long-term target leverage to pursue strategic opportunities.
On December 15, 2023, we extended the maturity date of our main revolving credit facility to December 15, 2028.
Refer to Note 10 of the consolidated financial statements for further information.
(in millions of CDN dollars, except ratio and number of shares and options)
At March 31,
2024
2023
Net debt1
3,520
3,777
Adjusted EBITDA2
1,509
1,553
Net debt to adjusted EBITDA2
2.33
2.43
Number of common shares
424,326,415
421,604,856
Number of stock options
20,315,399
19,988,303
1 Refer to the ‘‘Glossary’’ section of this MD&A and Note 23 to the consolidated financial statements.
2
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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.
On November 20, 2023, we issued Series 11 medium term notes for an aggregate principal amount of $550 million
due November 20, 2030, bearing interest at 5.49%. The net proceeds of this offering were used for the repayment of
the $300 million aggregate principal amount of Series 3 medium term notes due November 21, 2023, outstanding
indebtedness and for general corporate purposes. On November 30, 2023, we repaid in full the $267 million (AU$298
million) balance of the remaining Tranche C term loan facility incurred in connection with the acquisition of the
activities of Murray Goulburn Co-Operative Co. Limited (Murray Goulburn Acquisition).
In the fourth quarter of fiscal 2024, we suspended our Dividend Reinvestment Plan (“DRIP”) until further notice.
As at March 31, 2024, the Company had $466 million in cash and cash equivalents and available bank credit facilities
of $2.345 billion, of which $418 million were drawn. See Note 10 and Note 11 to the consolidated financial statements
for additional information related to bank loans and long-term debt.
Authorized share capital is comprised of an unlimited number of common shares. The common shares are voting and
participating. As at May 31, 2024, 424,326,415 common shares and 22,229,723 stock options were outstanding.
ANNUAL REPORT 2024
Page 26
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 Notes 7 and 21 to the consolidated financial statements describe its lease
commitments.
(in millions of CDN dollars)
March 31, 2024
March 31, 2023
Long-term
debt
Leases
Purchase
obligations
& other
Total
Long-term
debt
Leases
Purchase
obligations
& other
Total
Less than 1 year
414
109
209
732
307
115
368
790
1–2 years
465
71
29
565
413
63
105
581
2–3 years
350
63
10
423
847
56
26
929
3–4 years
734
53
3
790
350
49
13
412
4–5 years
300
44
1
345
734
43
4
781
More than 5 years
850
267
—
1,117
600
281
—
881
3,113
607
252
3,972
3,251
607
516
4,374
Long-term debt
The Company’s long-term debt is described in Note 11 to the consolidated financial statements.
Bank term loans
On November 30, 2023, we repaid in full the $267 million (AU$298 million) balance of the remaining Tranche C of the
non-revolving term facility incurred in connection with the Murray Goulburn Acquisition in April 2018.
In connection with the acquisition of Dairy Crest Group plc in April 2019, we entered into a credit agreement providing
for a non-revolving term facility comprised of three tranches. A total of $1.911 billion was drawn, of which $115 million
remains to be repaid as at March 31, 2024. The non-revolving term facility bears interest at lenders’ prime rates plus
a maximum of 1.00% or SOFR or bankers’ acceptance rates plus a minimum of 0.80% and a maximum of 2.00%,
depending on the Company's credit ratings and matures in June 2025. On October 6, 2022, this facility was
converted to a Canadian dollar denominated facility.
Senior notes
Long-term debt also includes seven series of senior unsecured notes outstanding under our medium-term note
program for an aggregate principal amount of $2.950 billion, with annual interest rates varying from 1.42% to 5.49%,
and maturities ranging from November 2024 to November 2030.
ANNUAL REPORT 2024
Page 27
FINANCIAL POSITION
Our financial position amounts as at March 31, 2024, as compared to the March 31, 2023 balances, reflect the net
effect of the weakening of the Canadian dollar versus the US dollar and the British pound sterling, and the
strengthening of the Canadian dollar versus the Australian dollar and the Argentine peso on financial position items of
our foreign operations.
The following table sets forth exchange rates expressed in Canadian dollars per currency of our respective local
operations’ financial position items in foreign currencies as at March 31, 2024, and March 31, 2023.
March 31, 2024
March 31, 2023
US dollar1
1.3540
1.3516
Australian dollar1
0.8830
0.9036
Argentine peso1
0.0016
0.0065
British pound sterling1
1.7096
1.6676
1
Based on Bank of Canada published information.
The change in foreign currency translation adjustments recorded in other comprehensive income 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. Refer to Note 21 to the consolidated financial statements for further information.
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 2024, 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
Company's 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 22 to the consolidated financial statements for further information.
ANNUAL REPORT 2024
Page 28
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.
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 been recognized 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. Remeasurements of
the obligation are presented in the consolidated statements of comprehensive income.
ANNUAL REPORT 2024
Page 29
CHANGES IN ACCOUNTING POLICIES
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, 2024, and 2023,
for more information regarding accounting standards, interpretations, and amendments adopted during fiscal 2024.
Recent Accounting Standards, Interpretations, and Amendments Issued But Not Yet
Effective
Please refer to Note 3 to the consolidated financial statements for the fiscal years ended March 31, 2024, and 2023,
for more information regarding recent accounting standards, interpretations, and amendments issued but not yet
effective.
ANNUAL REPORT 2024
Page 30
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, and evaluate with Management and Internal Audit the
risk factors inherent to Saputo, including risks related to ESG aspects such as environmental matters, including
climate-related risks, food quality and safety, cybersecurity, technology and information security, and modern slavery.
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 (DE&I), and health and safety. Saputo’s enterprise risk management
program is overseen by the Audit Committee, which has the responsibility to ensure that appropriate measures are in
place to enable Management to identify and manage risks and uncertainties effectively. The Company’s risk
management and related 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, product spoilage, undeclared allergens, and mislabeling, any of which could result in a costly
product recall, withdrawal, destruction of product inventory, lost sales, or litigation. There is also a risk that not all of
the products subject to a recall will be properly identified, or that the recall will not be successful or not be enacted in
a timely manner. Third-party manufacturers producing under our brands could be subject to recalls, for the same or
other reasons.
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, may cause consumers to
choose other products or may result in product boycott. The growing use of social and digital media further increases
the speed and extent at which such negative publicity can be shared. Alleged or actual contamination could also
result in government scrutiny, investigation, intervention, fines, or damages resulting in increased costs and in a
negative effect on our business, financial performance, or our ability to achieve our performance targets and,
depending upon the significance of the affected product, that negative effect could be material.
In order to mitigate product liability risks and safeguard our reputation as supplier of products that are safe and of the
upmost quality, we maintain food quality and safety standards in our own operations and throughout our supply chain,
and apply risk-based and prevention-oriented programs to support our standards, as well as internal and external
risk-assessment processes to validate the effectiveness of our standards and programs. A serious breach of these
standards and programs could have a material negative impact on our business, financial condition, or results.
Supply of Milk and Other Inputs
Milk is our principal ingredient, representing up to 85% of the cost of goods sold. We process milk and other dairy
ingredients into finished edible products intended for resale to a broad range of customers. These raw materials and
other inputs, including packaging materials, energy, fuel, transportation, and other supply chain inputs that we use for
the production and distribution of our products are subject to price volatility and fluctuations in availability caused by
various factors. These factors include changes in supply and demand, supplier capacity constraints, labour
shortages, inflation, climate change, extreme weather, natural disasters, water availability, fires or explosions, health
pandemics, outbreaks affecting livestock, such as avian influenza, outbreaks affecting humans, transportation
problems, port congestion or delays, cybersecurity incidents, geopolitical developments, military conflicts, political
uncertainties, terrorist activities, and trade sanctions. Moreover, these factors could impair the Company’s ability to
secure a continuing supply at a competitive price of quality ingredients and goods, which are necessary for the
manufacturing of the Company’s products. The price volatility and fluctuations in availability of raw materials and
other inputs we use for the production and distribution of our products can impact production costs, fulfillment rates,
and capacity utilization and therefore negatively affect our results and our ability to achieve our financial, operational,
and sustainability goals. 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.
In Australia, the availability of milk as a raw material has been declining in recent years due to a national milk
production decline. In this region, we compete with other dairy processors to attract milk to our facilities, and our
performance depends on our ability to adapt our business to the changing availability of milk as a raw material.
Failure to adequately manage these challenging market conditions and to maximize profitability from the milk we
obtain could negatively affect our results.
Since the beginning of fiscal 2022, the cost of the raw materials and other inputs we use for the production and
distribution of our products has significantly increased. 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
and protect our margins adequately or in a timely manner. Even if such initiatives are effective, higher product prices
may result in decreases in sales volumes or market share. Further, a persistent disconnect between the cost of milk
as raw material and the international cheese and dairy ingredient market prices could negatively affect our results.
ANNUAL REPORT 2024
Page 31
Supply Chain Strain and Supplier Concentration
We and our suppliers have experienced and may continue to face supply chain and workforce disruptions in the
future. Such disruptions may result in increased supply chain, packaging, and labour costs, or 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, hinder our ability to continue to offer quality products at competitive price in the different
markets where we operate, or to achieve our goals and targets under our Global Strategic Plan or the Saputo
Promise.
Some of the goods, including raw materials and packaging materials, and services we use in the production of our
products are available from a limited number of third-party suppliers as a result of consolidation within the industries
in which these suppliers operate. We have neither operational nor financial control on these suppliers, which are
essential to our business.
Negative events affecting our suppliers or inadequate, ineffective, or incomplete supplier management strategies,
policies, or procedures, including those relating to ethical sourcing, could harm the Company’s reputation and hinder
our ability to satisfy customers’ needs, control costs, and maintain our highest quality standards, which could harm
the Company’s operations and financial performance. 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 and cost-effective manner, as a result of labour shortages, extreme weather conditions (including
as a result of climate change) or otherwise, could impact our financial condition and performance.
Risks related to supply chain may be further exacerbated by geopolitical developments, military conflicts,
cyberattacks, natural disasters, political instability, civil unrest or health pandemics, which could disrupt the global
supply chain and contribute to economic uncertainty and increased prices of inputs and other costs.
USA and International Markets
In the USA, Australia, Argentina, and the United Kingdom, as well as in international markets, the prices of our
products are influenced by market supply and demand forces, and may vary independently from the price of milk as a
raw material. 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, global economic developments, geopolitical developments, military conflicts,
imbalances between supply and demand, raising levels of inflation, supply chain issues, the effect of climate change
and extreme weather, and commodity market fluctuations, all of which may affect our results. The effect of such
fluctuations on our results will depend on our ability to implement mechanisms to reduce their impact, such as price
initiatives, product portfolio diversity, and product and network optimization. The use of these mechanisms could lead
to reduced sales volumes and margins.
Labour Availability and Human Resources
The food industry continues to face global labour shortage challenges, which are expected to continue in the short
and medium-term. In addition, the broader labour market has been experiencing a shortage of qualified workers,
which has further increased the competition we face for qualified employees, as well as our labour, pension, and
people-related costs. These factors have impacted, and could continue to impact, our ability to meet consumer
demand, which could have a material adverse effect on our results, or cash flows, and could negatively impact our
ability to achieve our financial, operational, and sustainability goals. Changes in immigration laws and policies could
also make it more difficult for us to attract personnel. The initiatives we have implemented to attract and retain talent
may not be successful. Further, our inability to manage these factors adequately could lead to business interruption in
one or more of our facilities, and sustained labour shortages or high turnover rates could negatively impact the quality
and safety of our products, as well as our health and safety performance.
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, as well as our corporate
reputation. 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.
Saputo’s success depends on our ability to identify, attract, and retain qualified and diverse individuals. Saputo has
set diversity targets and has undertaken or planned initiatives to foster DE&I within our workforce. If we are not
perceived to have robust DE&I programs, our ability to attract, develop, and retain employees could be compromised.
Further, failure to be perceived as able to achieve our DE&I goals and targets or to respect and protect the human
rights of our employees (whether this perception is valid or not) could adversely affect our reputation or financial
performance. Failure to execute appropriate succession planning for Management and key personnel, or to hire the
right individuals to fill new or existing key management positions could adversely affect our business or our financial
performance.
ANNUAL REPORT 2024
Page 32
Competition
The food processing and the global dairy industries are extremely competitive. Saputo competes on a national and
international level with regional, national, and multinational competitors. Our performance in all countries where we do
business depends on our ability to continue to offer and supply demand for quality products at competitive prices.
There is no guarantee that the Company will maintain or grow its market share or that the Company’s new products
will achieve sales expectations. The Company mitigates these risks through various growth strategies, which include
organic growth and strategic acquisitions, as well as continued development and optimization of our global platform,
its growth strategy, investing in customer service, leveraging our brand strength, and expanding brands to new
markets.
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 2024, 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. We manage risks relative to the consolidation of
clientele through the implementation of strategies to diversify our customer mix and our product offering in each of our
market segments, as well as the implementation of value-added customer partnerships. Failure to maintain mutually
beneficial relationships with our key customers or to resolve a significant dispute with any of our key customers, a
change in the business condition (financial or otherwise) of any of our key customers, even if unrelated to us, or the
loss of any of our key customers can adversely affect our business.
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. A number of our employees may work in a distributed remote environment from
time to time, which increases risks of cybersecurity threats and attacks. We are mainly exposed to risks relating to
business disruptions, confidentiality, data integrity, and fraud related to business information compromise. 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.
We have implemented policies, practices, procedures, and controls, including maintenance of protective systems and
technology, monitoring and testing, incident response, disaster recovery and business continuity plans, and employee
training, to protect our IT systems, to prevent unauthorized access to confidential data, and to mitigate the risk of
disruption to our business. We make strategic investments in this area in order to mitigate cyber threats. We also
have security and compliance processes, protocols, and standards that are applicable to our third-party service
providers. Our processes include a due diligence approach that ensures that third-party services, including cloud-
based services, are evaluated using industry standard security assurance approaches to assess the risks. Third-party
providers must comply with security frameworks such as the International Organization for Standardization (ISO) and
International Electrotechnical Commission (IEC) 27001 standard, or equivalent, or provide third-party assurance on
relevant control objectives.
Despite these 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 and other companies in the food industry have in the past been subject to cyber-attacks
and expect that we will be subject to additional cyber-attacks in the future. We and our third party service providers
may be unable to anticipate, timely identify, or appropriately respond to one or more of the rapidly evolving and
increasingly sophisticated means by which hackers, cyber terrorists, and others may attempt to breach our security
measures or our third party service providers’ IT systems. This may be further exacerbated by the challenged labour
market for skilled workers that we want and may require for our future business needs, such as people with an
expertise in cybersecurity, IT cloud-based systems, artificial intelligence and machine learning, and/or digital and
analytics capabilities.
Unanticipated Business Disruption
Major events, such as systems and equipment failure, supply chain disruptions, cyberattacks, geopolitical
developments, military conflicts, and natural disasters, increased frequency or intensity of extreme weather conditions
(including as a result of climate change), political instability, civil unrest, health pandemics, or unfavourable economic
conditions 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, as well as our ability to achieve our
financial, operational, and sustainability goals.
ANNUAL REPORT 2024
Page 33
Economic and Geopolitical Conditions
Continuing economic and political uncertainties, such as decreases in disposable income, persistent inflationary
pressures, declines in consumer confidence, reduced consumer discretionary spending, resulting from actual or
perceived changes in the condition of the economy or economic slowdowns or recessions in any of our major markets
may slow down the demand for our products. The Company’s foodservice market segment is sensitive to this risk
since reduced consumer discretionary spending generally results in a decrease in the frequency and amount spent
for food prepared away from home. The Company mitigates this risk through its diversified customer mix aimed at
reducing concentration exposure.
Ongoing military conflicts continue to result in worldwide geopolitical and macroeconomic uncertainty. The conflicts
have resulted and could continue to result in volatile commodity markets, supply chain disruptions, increased risk of
cyber incidents or other disruptions, and increased costs for transportation, energy, packaging, raw materials, and
other input costs.
The continuing economic uncertainties could also result in financial instability for certain suppliers, customers, or
other business partners, which could limit our capacity to supply demand further exacerbate our competition risks.
Our Dairy Division (Argentina) operates in a hyperinflation economy. Hyperinflation and volatile economic conditions
in Argentina can lead to erosion of purchasing power for our assets denominated in the Argentine peso, as well as for
consumers.
Public Health Threats and COVID-19 Pandemic Post-Recovery
An outbreak of disease, epidemic or pandemic, such as the recent global COVID-19 pandemic, and the related
actions by governments to attempt to contain the outbreak could have a material negative impact on the Company as
it could disrupt our global supply chain, availability of labour, 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, is likely to
increase production or distribution costs, cause delays or inability to deliver products to our customers, or to complete
capital projects.
There is no guarantee that the Company's actions to mitigate the effects of pandemics which may occur in the future,
will be effective.
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 have a negative impact on our financial performance 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. Product boycotts resulting from activism (including activism for animal rights or the environment)
could reduce demand for our products. The impact of such events will depend on our ability to adapt, innovate, and
develop new products which are adapted to these new consumer trends. 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. Also, the increased use or prevalence of certain weight-management drugs that
lower a person’s appetite may impact the demand or consumption patterns for some of our products.
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, margins. and
profitability. Although the inflationary pressures we have seen in fiscal 2023 have moderated in fiscal 2024, the global
economic environment remains uncertain. As a result of this economic uncertainty and persistent inflation, consumers
may increasingly turn to lower-priced offerings, including private label, 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 (including if inflation outpaces pricing elasticity for our products), 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.
ANNUAL REPORT 2024
Page 34
Environment
Saputo’s business and operations are subject to environmental laws and regulations, including those relating to
permitting requirements, wastewater discharges, air emissions, GHG, 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 6, 2024, for
the fiscal year ended March 31, 2024. 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, GHG, 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.
Moreover, compliance with any such changes may require us to make significant changes in our business operations
and strategy, which will likely require us to devote substantial time and attention to these matters and cause us to
incur additional costs.
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 operational and packaging waste, and decrease
water usage. Because of the limitations and uncertainties inherent in climate and sustainability science, climate risk
analysis and reporting, we have relied upon prevailing climate change quantification guidance and made reasonable
and good faith estimates and assumptions in establishing our environmental targets. There are numerous factors,
many of which are beyond the Company’s control, that are the subject of ongoing climate and sustainability science
and that we may not foresee or be able to accurately predict, and which may impact our ability to achieve these
targets, including the availability of comprehensive and high-quality GHG emissions data, the availability of
technology necessary to achieve these targets, the development and performance of technology, innovation and the
future use and deployment of technology and associated expected future results, the accessibility of carbon and
renewable energy instruments for which a market is still developing and which are subject to risk of invalidation or
reversal, and environmental regulation. 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 milk. Any failure to achieve our environmental targets or other environment-related goals, including
goals related to climate change, or a perception (whether or not valid) of failure by the Company or the dairy industry
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.
Climate Change
In fiscal 2022, we undertook a scenario-based climate assessment to help us understand how external climate risks
and opportunities could impact our business operations, and better understand the resilience of our business strategy
to different climate futures and the impacts associated with the transition to a lower-carbon economy. Leveraging the
findings, we have developed a roadmap to embed climate related risks in our risk management program and are
developing strategies and actions to address climate risks as an organization as part of the overall risk mitigations.
There is no guarantee that these risk mitigation efforts will be effective.
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. Climate-related physical risks that may have an impact on
Saputo include reduced milk yield due to heat stress or changing weather patterns, reduced availability of quality crop
for feed, reduced availability of clean water for farming or manufacturing operations, and short interruption to
upstream (milk supply) or downstream (our products) supply chain due to extreme weather events. Some of our milk
suppliers are located in parts of the world which have suffered effects of climate change. Climate-related transition
risks that may have an impact on Saputo include increased energy costs and increased demand for low-carbon
products.
Increasing concern over climate change and its impacts may result in additional laws, regulations, rules, and policies
designed to reduce or mitigate the effects of GHG emissions or the impacts of climate change on the environment.
Increased legal or regulatory requirements may result in increased energy or compliance costs, disruption in the
running of our manufacturing facilities and our business, and increased disclosure obligations.
ANNUAL REPORT 2024
Page 35
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, including strategic projects as well as projects to replace, renew or modernize older equipment,
facilities, and systems, 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 availability
and cost of labour, new competing operational priorities, timing for completion, regulatory and governmental
approvals, pandemics, 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. Failure to execute our organic growth strategy or capital expenditure projects as planned
and in a timely and efficient manner could result in business disruptions or negatively impact our ability to achieve our
strategic growth goals and financial performance. 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. There is no
guarantee that such measures will be effective. 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
We operate internationally and are exposed to varying degrees to foreign exchange risk relating to the currencies we
use for our business. Cash flows from operations in each of the countries where we operate act, in part, as a natural
hedge against the foreign 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.
The current global economic environment could result in financial instability for certain suppliers, customers, or other
business partners, which could have a negative effect on our business, financial performance, financial condition, and
cash flow.
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 MTN increase our borrowing costs. Uncertain economic conditions 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. Such investor
activism, including by short sellers, could further result in adverse volatility in the market price and trading volume of
the Company’s shares.
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.
ANNUAL REPORT 2024
Page 36
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, 2024. 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. Despite these mitigation strategies, our financial performance could be negatively impacted by customers
failing to fulfill their obligations.
Legislative, Regulatory, and Normative Considerations
We are subject to local, provincial, state, federal, and international laws, regulations, rules, and policies 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.
We are subject to evolving privacy and data protection laws and regulations in the jurisdictions where we do
business, 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 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 at
which 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 due to 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 fiscal 2024 and it is possible that we may be required to record significant impairment
charges in the future. Although they do not attract cash outflow, our results and our reputation could be materially
adversely affected by such impairment charges.
ANNUAL REPORT 2024
Page 37
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, 2024, 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, 2024, 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.
There were no changes to Saputo’s internal control over financial reporting that occurred during the period beginning
on January 1, 2024, and ended on March 31, 2024, 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 $533 million as at March 31, 2024. A 1% change in the interest rate
would lead to a change in net earnings of approximately $3 million. Canadian and US currency fluctuations may affect
net earnings, adjusted EBITDA1, and revenues. Appreciation of the Canadian dollar compared to the US dollar would
have a negative impact on net earnings, adjusted EBITDA1, 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, 2024, the average US dollar conversion was based on US$1.00 for $1.3490. A fluctuation of $0.10 of the
Canadian dollar would have resulted in a change of approximately $12 million in net earnings, $40 million in adjusted
EBITDA1, and $579 million in revenues.
1
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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 2024
Page 38
QUARTERLY FINANCIAL INFORMATION
2024 quarterly financial information – consolidated income statement
(in millions of CDN dollars, except per share amounts and ratios)
Q4
Q3
Q2
Q1
Fiscal 2024
Revenues
4,545
4,267
4,323
4,207
17,342
Operating costs excluding depreciation, amortization, and
restructuring costs
4,166
3,897
3,925
3,845
15,833
Adjusted EBITDA1
379
370
398
362
1,509
Margin1
8.3 %
8.7 %
9.2 %
8.6 %
8.7 %
Depreciation and amortization
157
147
145
146
595
Goodwill impairment charge
—
265
—
—
265
Acquisition and restructuring costs
19
6
—
—
25
Loss (gain) on hyperinflation
34
3
9
(2)
44
Financial charges
50
42
44
40
176
Earnings (loss) before income taxes
119
(93)
200
178
404
Income taxes
27
31
44
37
139
Net earnings (loss)
92
(124)
156
141
265
Margin
2.0 %
(2.9) %
3.6 %
3.4 %
1.5 %
Adjusted net earnings1
156
163
181
154
654
Margin1
3.4 %
3.8 %
4.2 %
3.7 %
3.8 %
Earnings (loss) per share:
Basic
0.22
(0.29)
0.37
0.33
0.63
Diluted
0.22
(0.29)
0.37
0.33
0.63
Adjusted EPS1:
Basic1
0.37
0.38
0.43
0.37
1.54
Diluted1
0.37
0.38
0.43
0.36
1.54
1
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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
Q4
Q3
Q2
Q1
Fiscal 2024
Revenues
Canada
1,192
1,271
1,248
1,211
4,922
USA
1,928
2,056
1,950
1,876
7,810
International
1,135
636
879
868
3,518
Europe
290
304
246
252
1,092
Total
4,545
4,267
4,323
4,207
17,342
Net earnings (loss) (consolidated)
92
(124)
156
141
265
Q4
Q3
Q2
Q1
Fiscal 2024
Adjusted EBITDA
Canada
138
150
148
144
580
USA
138
133
147
103
521
International
88
85
83
77
333
Europe
15
2
20
38
75
Total1
379
370
398
362
1,509
1
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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 2024
Page 39
2023 quarterly financial information – consolidated income statement
(in millions of CDN dollars, except per share amounts and ratios)
Q4
Q3
Q2
Q1
Fiscal 2023
Revenues
4,468
4,587
4,461
4,327
17,843
Operating costs excluding depreciation, amortization, and
restructuring costs
4,076
4,142
4,092
3,980
16,290
Adjusted EBITDA1
392
445
369
347
1,553
Margin1
8.8 %
9.7 %
8.3 %
8.0 %
8.7 %
Depreciation and amortization
144
147
146
145
582
Acquisition and restructuring costs
28
38
22
7
95
Loss (gain) on hyperinflation
—
—
(26)
(18)
(44)
Financial charges
39
37
39
30
145
Earnings before income taxes
181
223
188
183
775
Income taxes
22
44
43
44
153
Net earnings
159
179
145
139
622
Margin
3.6 %
3.9 %
3.3 %
3.2 %
3.5 %
Adjusted net earnings1
196
221
151
143
711
Margin1
4.4 %
4.8 %
3.4 %
3.3 %
4.0 %
EPS:
Basic
0.38
0.43
0.35
0.33
1.49
Diluted
0.38
0.43
0.35
0.33
1.48
Adjusted EPS1:
Basic1
0.47
0.53
0.36
0.34
1.70
Diluted1
0.46
0.53
0.36
0.34
1.70
1
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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
Q4
Q3
Q2
Q1
Fiscal 2023
Revenues
Canada
1,156
1,213
1,185
1,142
4,696
USA
2,062
2,172
2,062
2,043
8,339
International
963
917
989
916
3,785
Europe
287
285
225
226
1,023
Total
4,468
4,587
4,461
4,327
17,843
Net earnings (consolidated)
159
179
145
139
622
Q4
Q3
Q2
Q1
Fiscal 2023
Adjusted EBITDA
Canada
134
149
136
132
551
USA
143
146
102
97
488
International
84
111
97
82
374
Europe
31
39
34
36
140
Total1
392
445
369
347
1,553
1
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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 2024
Page 40
CONSOLIDATED ANALYSIS OF EARNINGS FOR THE YEAR ENDED MARCH 31,
2023, COMPARED TO MARCH 31, 2022
Revenues
Revenues in fiscal 2023 totalled $17.843 billion, up $2.808 billion or 18.7%, as compared to $15.035 billion for fiscal
2022.
Revenues increased due to higher domestic selling prices in line with the higher cost of milk as raw material, together
with previously announced pricing initiatives implemented to mitigate increasing input costs.
In the USA Sector, the combined effect of the fluctuations of the average block market price2 and of the average
butter market price2 had a favourable impact of $987 million. Higher international cheese and dairy ingredient market
prices, as well as the effect of the fluctuation of the Argentine peso and the Australian dollar on export sales
denominated in US dollars were favourable.
Overall sales volumes were stable. Sales volumes mainly increased in the USA Sector while export sales volumes
decreased due to reduced milk availability in Australia.
The fluctuation of foreign currencies versus the Canadian dollar had an unfavourable impact of approximately $62
million.
Operating costs excluding depreciation, amortization, and restructuring costs
In fiscal 2023, operating costs excluding depreciation, amortization, and restructuring costs totalled $16.290 billion,
up $2.410 billion or 17.4%, as compared to $13.880 billion for fiscal 2022. This increase was 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
In fiscal 2023, net earnings totalled $622 million, up $348 million or 127.0%, as compared to $274 million for fiscal
2022. The increase is primarily due to the factors that have led to a higher adjusted EBITDA1, as described below, the
impairment of intangible assets and the gain on disposal of assets both recorded in fiscal 2022, partially offset by
higher depreciation and amortization, acquisition and restructuring costs, financial charges, and income tax expense
and a lower gain on hyperinflation.
1
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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 2024
Page 41
Adjusted EBITDA1
Adjusted EBITDA1 in fiscal 2023 totalled $1.553 billion, up $398 million or 34.5%, as compared to $1.155 billion for
fiscal 2022.
Improved results reflected solid performances in the International Sector and Canada Sector and recovery in the USA
Sector.
We benefited from pricing initiatives implemented to mitigate higher input costs, such as consumables, packaging,
transportation, and fuel in line with ongoing inflationary pressures and commodity market volatility.
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. Last fiscal year, fulfilling sales contracted at depressed commodity
prices in our International Sector had an unfavourable impact.
USA Market Factors2 had an unfavourable impact of $11 million, as compared to fiscal 2022, mainly due to the
negative Spread2 more particularly during the first half of the fiscal year. On the other hand, fluctuations of the
average butter market price2 had a favourable impact on pricing protocols for our dairy food products mostly during
the fourth quarter of the fiscal year.
Labour shortages in some of our facilities and supply chain disruptions put pressure on our ability to supply ongoing
demand. However, throughout the fiscal year, we consistently focused on overcoming these challenges and have
been recovering sales volumes and increasing fill rates in our USA Sector. Furthermore, reduced milk availability in
Australia negatively impacted efficiencies and the absorption of fixed costs. We actively managed these challenging
market conditions throughout the fiscal year.
We benefited from our cost containment measures aimed at minimizing the effect of inflation and our efforts to
prioritize efficiency and productivity initiatives.
The fluctuation of foreign currencies versus the Canadian dollar had an unfavourable impact of approximately $38
million.
Depreciation and amortization
In fiscal 2023, depreciation and amortization totalled $582 million, up $22 million, as compared to $560 million for last
fiscal 2022. This increase was mainly attributable to additional depreciation and amortization related to business
acquisitions completed in fiscal 2022, as well as additions to property, plant, and equipment, which increased the
depreciable base.
Acquisition and restructuring costs
In fiscal 2023, acquisition and restructuring costs totalled $95 million related to initiatives undertaken in Australia, the
USA Sector, and the Europe Sector as part of our Global Strategic Plan. These costs included a total non-cash fixed
assets write-down of $62 million, employee-related costs of $28 million, accelerated depreciation, and other site
closure costs. Restructuring costs also included a $2 million gain on disposal of assets related to the sale of a closed
facility in the Canada Sector.
In fiscal 2022, acquisition and restructuring costs totalled $71 million 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 plans to outsource 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 and severance costs of $8 million.
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.
1
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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 2024
Page 42
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 included $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.
Loss (gain) on hyperinflation
Gain on hyperinflation for fiscal 2023 totalled $44 million ($48 million in fiscal 2022). The gain on hyperinflation is
relative to the application of hyperinflation accounting for the Dairy Division (Argentina).
Financial charges
Financial charges in fiscal 2023 totalled $145 million, up $27 million, compared to fiscal 2022. This increase reflected
higher interest rates.
Income tax expense
Income tax expense in fiscal 2023 totaled $153 million, reflecting an effective tax rate of 19.7% as compared to
32.3% fiscal 2022.
The effective income tax rate for fiscal 2022 included a one-time non-cash $50 million income tax expense incurred to
adjust deferred income tax liability balances due to the enactment on June 10, 2021, of an increase from 19% to 25%
of the corporate income tax rate in the United Kingdom, which became effective on April 1, 2023. Excluding the effect
of this one-time non-cash expense, the effective income tax rate for fiscal 2022 would have been 20.0%.
The tax and accounting treatments of inflation in Argentina had a favourable effect of approximately 6% on both the
fiscal 2023 and fiscal 2022 effective income tax rates.
The effective income tax rate varies and could increase or decrease based on the geographic mix of quarterly and
year-to date earnings across the various jurisdictions in which we operate, the tax and accounting treatments of
inflation in Argentina, the amount and source of taxable income, amendments to tax legislations and income tax rates,
changes in assumptions, as well as estimates we use for tax assets and liabilities.
Adjusted net earnings1
In fiscal 2023, adjusted net earnings1 totalled $711 million, up $274 million or 62.7%, as compared to $437 million for
fiscal 2022. This is mainly due to the factors that have led to an increase in net earnings, as described above,
excluding higher acquisition and restructuring costs after tax, the one-time non-cash expense to adjust deferred
income tax liability balances to reflect the increase in the corporate income tax rate in the United Kingdom, the non-
recurring impairment on intangible assets after tax and gain on sale of assets after tax that were recorded last fiscal
year.
1
This is a total of segments measure, a non-GAAP financial measure, or a non-GAAP ratio. See the “Non-GAAP Measures” section below 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 2024
Page 43
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, and are described in this section.
We use non-GAAP measures and ratios to provide investors with supplemental metrics to assess and measure our
operating performance and financial position from one period to the next. We believe that those measures are
important supplemental metrics because they eliminate items that are less indicative of our core business
performance and could potentially distort the analysis of trends in our operating performance and financial position.
We also use non-GAAP measures to facilitate operating and financial performance comparisons from period to
period, to prepare annual budgets and forecasts, and to determine components of management compensation. We
believe these non-GAAP measures, in addition to the financial measures prepared in accordance with GAAP, enable
investors to evaluate the Company's operating results, underlying performance, and future prospects in a manner
similar to management. These metrics are presented as a complement to enhance the understanding of operating
results but not in substitution of GAAP results.
These non-GAAP measures have no standardized meaning under GAAP and are unlikely to be comparable to similar
measures presented by other issuers. Our method of calculating these measures may differ from the methods used
by others, and, accordingly, our definition of these non-GAAP financial measures may not be comparable to similar
measures presented by other issuers. In addition, non-GAAP financial measures should not be viewed as a substitute
for the related financial information prepared in accordance with GAAP. This section provides a description of the
components of each non-GAAP measure used in this MD&A and the classification thereof.
NON-GAAP FINANCIAL MEASURES AND RATIOS
A non-GAAP financial measure is a financial measure that depicts the Company's financial performance, financial
position, or cash flow and either excludes an amount that is included in or includes an amount that is excluded from
the composition of the most directly comparable financial measures disclosed in the Company's financial statements.
A non-GAAP ratio is a financial measure disclosed in the form of a ratio, fraction, percentage, or similar
representation and that has a non-GAAP financial measure as one or more of its components.
Below are descriptions of the non-GAAP financial measures and ratios that we use as well as reconciliations to the
most comparable GAAP financial measures, as applicable.
ANNUAL REPORT 2024
Page 44
Adjusted net earnings and adjusted net earnings margin
We believe that adjusted net earnings and adjusted net earnings margin provide useful information to investors
because this financial measure and this ratio provide precision with regards to our ongoing operations by eliminating
the impact of non-operational or non-cash items. We believe that in the context of highly acquisitive companies,
adjusted net earnings provide a more effective measure to assess performance against the Company's peer group,
including due to the application of various accounting policies in relation to the amortization of acquired intangible
assets.
We also believe adjusted net earnings and adjusted net earnings margin are useful to investors because they help
identify underlying trends in our business that could otherwise be masked by certain write-offs, charges, income, or
recoveries that can vary from period to period, as well as by the effect of tax law changes and rate enactments. We
believe that securities analysts, investors, and other interested parties also use adjusted net earnings to evaluate the
performance of issuers. Excluding these items does not imply they are non-recurring. These measures do not have
any standardized meanings under GAAP and are therefore unlikely to be comparable to similar measures presented
by other companies.
The following table provides a reconciliation of net earnings to adjusted net earnings.
For the three-month periods
ended March 31
For the years
ended March 31
2024
2023
2024
2023
Net earnings
92
159
265
622
Acquisition and restructuring costs1
15
21
19
70
Amortization of intangible assets related to
business acquisitions1
15
16
61
63
Goodwill impairment charge
—
—
265
—
Loss (gain) on hyperinflation2
34
—
44
(44)
Adjusted net earnings
156
196
654
711
Revenues
4,545
4,468
17,342
17,843
Margin (expressed as a percentage of revenues)
3.4 %
4.4 %
3.8 %
4.0 %
1
Net of applicable income taxes.
2
Starting in fiscal 2024:
•
the loss (gain) on hyperinflation is presented on a separate line on the consolidated income statements; and
•
adjusted net earnings exclude the loss (gain) on hyperinflation to provide investors with more useful information with regards to our ongoing
operations.
Comparative periods included in this MD&A were aligned to meet the current presentation.
Adjusted EPS basic and adjusted EPS diluted
Adjusted EPS basic (adjusted net earnings per basic common share) and adjusted EPS diluted (adjusted net
earnings per diluted common share) are non-GAAP ratios and do not have any standardized meaning under GAAP.
Therefore, these measures are unlikely to be comparable to similar measures presented by other issuers. We define
adjusted EPS basic and adjusted EPS diluted as adjusted net earnings divided by the basic and diluted weighted
average number of common shares outstanding for the period. Adjusted net earnings is a non-GAAP financial
measure. For more details on adjusted net earnings, refer to the discussion above in the adjusted net earnings and
adjusted net earnings margin section.
We use adjusted EPS basic and adjusted EPS diluted, and we believe that certain securities analysts, investors, and
other interested parties use these measures, among other ones, to assess the performance of our business without
the effect of the acquisition and restructuring costs, amortization of intangible assets related to business acquisitions,
gain on disposal of assets, impairment of intangible assets, goodwill impairment charge, and loss (gain) on
hyperinflation. We exclude these items because they affect the comparability of our financial results and could
potentially distort the analysis of trends in business performance. Adjusted EPS is also a component in the
determination of long-term incentive compensation for management.
ANNUAL REPORT 2024
Page 45
Net debt to adjusted EBITDA
Net debt to adjusted EBITDA is defined as net debt divided by adjusted EBITDA and 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 and Note 23 to the consolidated financial statements. For more details on adjusted EBITDA, refer to the
discussion below in the adjusted EBITDA and adjusted EBITDA margin section.
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. Adjusted EBITDA margin consists of adjusted EBITDA expressed as a
percentage of revenues. These measures are also key metrics of the Company's operational and financial
performance without the variation caused by the impacts of the elements itemized below and provide an indication of
the Company's ability to seize growth opportunities in a cost-effective manner, finance its ongoing operations, and
service its long-term debt. Adjusted EBITDA is the key measure of profit used by management for the purpose of
assessing the performance of each sector and of the Company as a whole, and to make decisions about the
allocation of resources. We believe that securities analysts, investors, and other interested parties also use adjusted
EBITDA to evaluate the performance of issuers. Adjusted EBITDA is also a component in the determination of short-
term incentive compensation for management.
The following table provides a reconciliation of net earnings to adjusted EBITDA on a consolidated basis.
For the three-month periods
ended March 31
For the years
ended March 31
2024
2023
2024
2023
Net earnings
92
159
265
622
Income taxes
27
22
139
153
Financial charges1
50
39
176
145
Loss (gain) on hyperinflation1
34
—
44
(44)
Acquisition and restructuring costs
19
28
25
95
Goodwill impairment charge
—
—
265
—
Depreciation and amortization
157
144
595
582
Adjusted EBITDA
379
392
1,509
1,553
Revenues
4,545
4,468
17,342
17,843
Adjusted EBITDA margin
8.3 %
8.8 %
8.7 %
8.7 %
1
Starting in fiscal 2024, the loss (gain) on hyperinflation is presented on a separate line on the consolidated income statements.
Comparative periods included in this MD&A were aligned to meet the current presentation.
ANNUAL REPORT 2024
Page 46
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.
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 23 to the consolidated financial statements for further
information.
Net earnings (loss) margin means net earnings (loss) 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 Spread, 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 2024
Page 47
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
(signed) Maxime Therrien
Lino A. Saputo, C.M.
Maxime Therrien, CPA
Chair of the Board,
Chief Financial Officer
President and Chief Executive Officer
and Secretary
June 6, 2024
ANNUAL REPORT 2024
Page 48
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors of Saputo Inc.
Opinion
We have audited the consolidated financial statements of Saputo Inc. (the “Entity”), which comprise:
•
the consolidated statements of financial position as at March 31, 2024 and March 31, 2023;
•
the consolidated income statements for the years then ended
•
the consolidated statements of comprehensive income for the years then ended
•
the consolidated statements of changes in equity for the years then ended
•
the consolidated statements of cash flows for the years then ended
•
and notes to the consolidated financial statements, including a summary of material 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, 2024 and March 31, 2023, and its
consolidated financial performance and its consolidated cash flows for the years then ended in
accordance with IFRS Accounting Standards as issued by the International Accounting Standards
Board.
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 “Auditor’s Responsibilities for the
Audit of the Financial Statements” section of our auditor’s 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, 2024. 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.
KPMG LLP
600 de Maisonneuve Blvd. West
Suite 1500, Tour KPMG
Montréal (Québec) H3A 0A3
Telephone
Fax
Internet
(514) 840-2100
(514) 840-2187
www.kpmg.ca
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 2024
Page 49
Page 2
We have determined the matters described below to be the key audit matters to be communicated in
our auditor’s report.
Assessment of the carrying amount of Goodwill for Dairy Division (UK) and
Dairy Division (Australia) cash generating units (CGUs)
Description for the matter
We draw attention to Notes 3 and 8 of the financial statements. The goodwill balance is $3,098 million,
of which $629 million relates to the Dairy Division (UK) and nil related to the Dairy Division (Australia),
due to a goodwill impairment charge of $265 million recorded as a result of the annual goodwill
impairment test performed at December 31, 2023. 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 (UK) and Dairy
Division (Australia) 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 rates assumptions
•
Discount rates by comparing inputs into the discount rates to publicly available data for
comparable entities
ANNUAL REPORT 2024
Page 50
Page 3
•
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 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 auditor’s 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 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 the 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 Accounting Standards as issued by the International Accounting Standards
Board, 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.
ANNUAL REPORT 2024
Page 51
Page 4
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 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.
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 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 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.
ANNUAL REPORT 2024
Page 52
Page 5
•
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 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 auditor’s 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 auditor’s report is Toni Dilli.
/s/ KPMG LLP*
Montréal, Canada
June 6, 2024
* CPA auditor, public accountancy permit No. A123145
ANNUAL REPORT 2024
Page 53
CONSOLIDATED INCOME STATEMENTS
(in millions of CDN dollars, except per share amounts)
Years ended March 31
2024
20231
Revenues (Note 24)
$
17,342 $
17,843
Operating costs excluding depreciation, amortization, and restructuring costs (Note 5)
15,833
16,290
Earnings before income taxes, financial charges, loss (gain) on hyperinflation, acquisition
and restructuring costs, depreciation and amortization and goodwill impairment
charge
1,509
1,553
Depreciation and amortization
595
582
Goodwill impairment charge (Note 8)
265
—
Acquisition and restructuring costs (Note 14)
25
95
Loss (gain) on hyperinflation
44
(44)
Financial charges (Note 15)
176
145
Earnings before income taxes
404
775
Income taxes (Note 16)
139
153
Net earnings
$
265 $
622
Net earnings per share (Note 18)
Basic
$
0.63 $
1.49
Diluted
$
0.63 $
1.48
1
Comparative figures were reclassified to conform with the current year’s presentation. Refer to Note 25 for more information.
The accompanying notes are an integral part of these consolidated financial statements.
ANNUAL REPORT 2024
Page 54
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions of CDN dollars)
Years ended March 31
2024
2023
Net earnings
$
265 $
622
Other comprehensive income (loss):
Items that may be reclassified to net earnings:
Effects of, exchange differences arising from foreign
currency translation and, application of hyperinflation
(82)
281
Unrealized gains (losses) on cash flow hedges (Note 19)
4
(40)
Reclassification of (gains) losses on cash flow hedges to
net earnings
(6)
23
Income taxes relating to items that may be reclassified to
net earnings
1
5
(83)
269
Items that will not be reclassified to net earnings:
Actuarial loss (Note 20)
(66)
(154)
Income taxes relating to items that will not be reclassified to
net earnings
17
38
(49)
(116)
Other comprehensive income (loss)
(132)
153
Total comprehensive income
$
133 $
775
The accompanying notes are an integral part of these consolidated financial statements.
ANNUAL REPORT 2024
Page 55
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions of CDN dollars, except common shares)
For the year ended March 31, 2024
Share capital
Reserves
Common
Shares
Amount
Foreign
Currency
Translation
and
Hyperinflation
Cash Flow
Hedges
Stock
Option
Plan
Total
Reserves
Retained
Earnings
Total
Equity
Balance, beginning of year
421,604,856
$
2,102
$
347 $
9 $
176 $
532 $
4,506 $
7,140
Net earnings
—
—
—
—
—
—
265
265
Other comprehensive loss
—
—
(82)
(1)
—
(83)
(49)
(132)
Total comprehensive income
133
Dividends (Note 13)
—
—
—
—
—
—
(311)
(311)
Shares issued under dividend reinvestment plan
(Note 13)
2,355,481
66
—
—
—
—
—
66
Stock options (Note 13)
—
—
—
—
12
12
—
12
Exercise of stock options (Note 13)
366,078
12
—
—
(2)
(2)
—
10
Balance, end of year
424,326,415 $
2,180
$
265 $
8 $
186 $
459 $
4,411 $
7,050
For the year ended March 31, 2023
Share capital
Reserves
Common
Shares
Amount
Foreign
Currency
Translation
and
Hyperinflation
Cash Flow
Hedges
Stock
Option
Plan
Total
Reserves
Retained
Earnings
Total
Equity
Balance, beginning of year
416,738,041 $
1,945
$
66 $
21 $
172 $
259 $
4,301 $
6,505
Net earnings
—
—
—
—
—
—
622
622
Other comprehensive income
—
—
281
(12)
—
269
(116)
153
Total comprehensive income
775
Dividends (Note 13)
—
—
—
—
—
—
(301)
(301)
Shares issued under dividend reinvestment plan
(Note 13)
3,182,091
102
—
—
—
—
—
102
Stock options (Note 13)
—
—
—
—
13
13
—
13
Exercise of stock options (Note 13)
1,684,724
55
—
—
(9)
(9)
—
46
Balance, end of year
421,604,856 $
2,102
$
347 $
9 $
176 $
532 $
4,506 $
7,140
The accompanying notes are an integral part of these consolidated financial statements.
ANNUAL REPORT 2024
Page 56
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions of CDN dollars)
As at
March 31, 2024
March 31, 2023
ASSETS
Current assets
Cash and cash equivalents
$
466 $
263
Receivables
1,401
1,621
Inventories (Note 4)
2,860
2,872
Income taxes receivable (Note 16)
32
16
Prepaid expenses and other assets
75
79
4,834
4,851
Property, plant and equipment (Note 6)
4,531
4,286
Right-of-use assets (Note 7)
465
446
Goodwill (Note 8)
3,098
3,338
Intangible assets (Note 8)
1,166
1,283
Other assets (Note 9)
95
158
Deferred tax assets (Note 16)
71
63
Total assets
$
14,260 $
14,425
LIABILITIES
Current liabilities
Bank loans (Note 10)
$
418 $
356
Accounts payable and accrued liabilities
2,193
2,149
Income taxes payable (Note 16)
23
99
Current portion of long-term debt (Note 11)
414
307
Current portion of lease liabilities (Note 7)
85
91
3,133
3,002
Long-term debt (Note 11)
2,699
2,944
Lease liabilities (Note 7)
370
342
Other liabilities (Note 12)
154
137
Deferred tax liabilities (Note 16)
854
860
Total liabilities
$
7,210 $
7,285
EQUITY
Share capital (Note 13)
2,180
2,102
Reserves
459
532
Retained earnings
4,411
4,506
Total equity
$
7,050 $
7,140
Total liabilities and equity
$
14,260 $
14,425
The accompanying notes are an integral part of these consolidated financial statements.
On behalf of the Board,
(signed) Lino A. Saputo
(signed) Annalisa King
Lino A. Saputo, C.M.
Annalisa King
Chair of the Board, President
Director
and Chief Executive Officer
ANNUAL REPORT 2024
Page 57
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of CDN dollars)
Years ended March 31
2024
2023
Cash flows related to the following activities:
Operating
Net earnings
$
265 $
622
Adjustments for:
Stock-based compensation
49
67
Financial charges (Note 15)
176
145
Income tax expense
139
153
Depreciation and amortization
595
582
Goodwill impairment charge (Note 8)
265
—
Restructuring charges related to optimization initiatives (Note 14)
25
95
Gain on disposal of property, plant and equipment
(1)
(4)
Foreign exchange loss (gain) on debt
27
(20)
Loss (gain) on hyperinflation
44
(44)
Share of joint venture earnings, net of dividends received and other
2
(3)
Changes in non-cash operating working capital items (Note 17)
(2)
(367)
Cash generated from operating activities
1,584
1,226
Interest and financial charges paid
(177)
(143)
Income taxes paid
(216)
(58)
Net cash generated from operating activities
$
1,191 $
1,025
Investing
Additions to property, plant and equipment
(641)
(617)
Additions to intangible assets
(13)
(24)
Proceeds from disposal of property, plant and equipment
2
9
Net cash used for investing activities
$
(652) $
(632)
Financing
Bank loans
95
(54)
Proceeds from issuance of long-term debt
550
313
Repayment of long-term debt
(686)
(406)
Repayment of lease liabilities
(68)
(68)
Net proceeds from issuance of share capital
11
45
Payment of dividends
(245)
(199)
Net cash used in financing activities
$
(343) $
(369)
Increase in cash and cash equivalents
196
24
Cash and cash equivalents, beginning of year
263
165
Effect of exchange rate changes and Argentina hyperinflation
7
74
Cash and cash equivalents, end of year
$
466 $
263
The accompanying notes are an integral part of these consolidated financial statements.
ANNUAL REPORT 2024
Page 58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years ended March 31, 2024, and 2023.
(All dollar amounts are in millions of CDN dollars, except per share amounts or 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 1000 de la Gauchetière Street West, Suite
2900, Montréal, Québec, Canada, H3B 4W5. The consolidated financial statements of the Company for the fiscal
year ended March 31, 2024 (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 6, 2024.
NOTE 2 BASIS OF PRESENTATION
STATEMENT OF COMPLIANCE
The consolidated financial statements of the Company were prepared in accordance with International Financial
Reporting Standards (IFRS).
BASIS OF MEASUREMENT
The Company’s financial statements were 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, Material
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.
NOTE 3 MATERIAL 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.
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 2024
Page 59
NOTE 3 MATERIAL 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
15 to 40 years
Furniture, machinery and equipment
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.
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 with 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 resulting in a constant periodic rate
of interest on the remaining balance of the liability. The lease liability is measured at the present value of lease
payments, 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 lease payments are discounted includes renewal
options.
Costs associated with short-term leases and leases of low-value assets are included in “Operating costs excluding
depreciation, amortization, and restructuring costs” in the consolidated income statements.
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. 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.
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 impairment losses, if any. Indefinite life intangible
assets, including goodwill, are not amortized and are tested for impairment annually or more frequently if events or
changes in circumstances indicate that they 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.
The Company's trademarks are considered to be definite life intangible assets and are amortized using the straight-
line method over their respective estimated useful lives which vary from 15 to 25 years. Customer relationships and
software are considered to be definite life intangible assets and are amortized using the straight-line method over
their estimated useful lives which vary from 3 to 15 years. Trademarks, customer relationships and software are
reviewed for indicators of impairment at each reporting period.
ANNUAL REPORT 2024
Page 60
NOTE 3 MATERIAL ACCOUNTING POLICIES (CONT'D)
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.
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 receive. 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 foreign operations.
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.
ANNUAL REPORT 2024
Page 61
NOTE 3 MATERIAL ACCOUNTING POLICIES (CONT'D)
FINANCIAL REPORTING in HYPERINFLATIONARY ECONOMIES
In July 2018, the Argentine Federation of Professional Councils in Economic Sciences (F.A.C.P.C.E.) issued a release
mentioning that, effective July 1, 2018, entities reporting under IFRS are required to apply the inflation adjustment
since the applicable conditions for such application have been satisfied. International Accounting Standard (IAS) no.
29 financial reporting in hyperinflationary economies, requires that the financial statements of an entity whose
functional currency is the currency of a hyperinflationary economy be adjusted based on an appropriate general price
index to express the effects of inflation, and shall be stated in terms of the measuring unit current at the end of the
reporting period. Non-monetary assets and liabilities of the Dairy Division (Argentina) are adjusted by applying the
relevant index and the adjustment is presented as a loss (gain) on hyperinflation in the consolidated income
statements.
STOCK-BASED COMPENSATION
The Company offers an equity settled stock option plan to certain employees 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 the fair value
of common shares 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 the fair value of common shares 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.
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.
ANNUAL REPORT 2024
Page 62
NOTE 3 MATERIAL ACCOUNTING POLICIES (CONT'D)
FINANCIAL INSTRUMENTS
Financial assets and liabilities are initially measured at fair value. Subsequently, financial instruments classified as fair
value through profit or loss 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.
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. When hedging instruments have come due or are settled, the gains or losses included in other
components of equity are reclassified to net earnings offsetting 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.
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.
ANNUAL REPORT 2024
Page 63
NOTE 3 MATERIAL ACCOUNTING POLICIES (CONT'D)
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
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 been recognized 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 2024
Page 64
NOTE 3 MATERIAL ACCOUNTING POLICIES (CONT'D)
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. Remeasurements of
the obligation are presented in the consolidated statements of comprehensive income.
ACCOUNTING STANDARDS, INTERPRETATIONS, AND AMENDMENTS ADOPTED DURING THE
YEAR
The following amendments to existing standards were adopted by the Company on or after April 1, 2023:
IAS 12, International Tax Reform - Pillar Two Model Rules
In May 2023, the International Accounting Standards Board (IASB) issued amendments to IAS 12 to provide a
temporary exception to the requirements regarding deferred tax assets and liabilities related to Pillar Two income
taxes. As required, the Company has applied this temporary exception immediately upon issuance.
The adoption of this amendment did not have a material impact on the Company’s financial statements. See Note 16
for further information.
IAS 1, Presentation of Financial Statements - Non-current liabilities with covenants
In October 2022, the IASB issued an amendment to clarify that restrictive clauses to be complied with after the
reporting date do not impact the classification of debt as current or non-current at the reporting date. This amendment
affects the classification and disclosure of liabilities.
The early adoption of this amendment did not impact the Company’s financial statements.
RECENT ACCOUNTING STANDARDS, INTERPRETATIONS, AND AMENDMENTS ISSUED BUT NOT
YET EFFECTIVE
IFRS 18, Presentation and Disclosure in Financial Statements
In April 2024, the IASB issued IFRS 18 to improve reporting of financial performance. IFRS 18 replaces IAS 1
Presentation of Financial Statements. It carries forward many requirements from IAS 1 unchanged.
IFRS 18 is applicable to the Company beginning on April 1, 2027. The Company is currently evaluating the impact of
the adoption of IFRS 18 on its consolidated financial statements.
NOTE 4 INVENTORIES
March 31, 2024
March 31, 2023
Finished goods
$
1,395 $
1,521
Raw materials, work in progress and supplies
1,465
1,351
Total
$
2,860 $
2,872
The amount of inventories recognized as an expense in operating costs for the year ended March 31, 2024, is
$14.3 billion ($14.5 billion for the year ended March 31, 2023).
ANNUAL REPORT 2024
Page 65
NOTE 5 OPERATING COSTS EXCLUDING DEPRECIATION, AMORTIZATION, AND
RESTRUCTURING COSTS
For the years ended March 31
2024
2023
Changes in inventories of finished goods and work in process
$
(3) $
(269)
Raw materials and consumables used
11,975
12,687
Foreign exchange loss (gain)
(61)
15
Employee benefits expense
2,251
2,108
Selling costs
719
814
General and administrative costs
952
935
$
15,833 $
16,290
NOTE 6 PROPERTY, PLANT AND EQUIPMENT
For the year ended March 31, 2024
Land
Buildings
Furniture,
machinery and
equipment
Total
Cost
As at March 31, 2023
$
212 $
1,771 $
5,213 $
7,196
Additions
—
220
421
641
Disposals
—
(4)
(58)
(62)
Foreign currency and hyperinflation
—
(7)
(11)
(18)
As at March 31, 2024
$
212 $
1,980 $
5,565 $
7,757
Accumulated depreciation
As at March 31, 2023
$
— $
591 $
2,319 $
2,910
Depreciation
—
81
296
377
Disposals
—
(4)
(57)
(61)
Impairment related to restructuring (Note 14)
—
2
2
4
Foreign currency and hyperinflation
—
6
(10)
(4)
As at March 31, 2024
$
— $
676 $
2,550 $
3,226
Net book value at March 31, 2024
$
212 $
1,304 $
3,015 $
4,531
The net book value of property, plant and equipment under construction amounts to $507 million as at March 31,
2024, ($592 million as at March 31, 2023) and consists mainly of machinery and equipment.
On April 2, 2023, the Company entered into a definitive agreement to sell two fresh milk processing facilities located
in Australia and, as a result, the net book value of property, plant and equipment as at March 31, 2024 includes
$21 million ($23 million as at March 31, 2023) of land and building held for sale recorded at the lower of their carrying
value and estimated fair value less costs to sell. Refer to Note 7 for information on amounts of right-of-use assets and
lease liabilities.
The transaction is valued at approximately $93 million (AU$105 million) and will result in a minimal gain or loss on
closing. This intended divestiture is in line with other initiatives undertaken by the Company in the context of its Global
Strategic Plan.
ANNUAL REPORT 2024
Page 66
NOTE 6 PROPERTY, PLANT AND EQUIPMENT (CONT'D)
For the year ended March 31, 2023
Land
Buildings
Furniture,
machinery and
equipment
Total
Cost
As at March 31, 2022
$
203 $
1,584 $
4,619 $
6,406
Additions
9
149
459
617
Disposals
—
(19)
(54)
(73)
Impairment related to restructuring (Note 14)
—
—
(4)
(4)
Foreign currency and hyperinflation
—
57
193
250
As at March 31, 2023
$
212 $
1,771 $
5,213 $
7,196
Accumulated depreciation
As at March 31, 2022
$
— $
501 $
1,943 $
2,444
Depreciation
—
72
291
363
Disposals
—
(17)
(54)
(71)
Impairment related to restructuring (Note 14)
—
19
40
59
Foreign currency and hyperinflation
—
16
99
115
As at March 31, 2023
$
— $
591 $
2,319 $
2,910
Net book value at March 31, 2023
$
212 $
1,180 $
2,894 $
4,286
ANNUAL REPORT 2024
Page 67
NOTE 7 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
The following table presents changes in right-of-use assets during fiscal 2024:
For the year ended March 31, 2024
Real Estate
Equipment
Total
As at March 31, 2023
$
355 $
91 $
446
New leases / leases modifications
72
43
115
Disposals
(13)
(1)
(14)
Depreciation
(41)
(33)
(74)
Foreign currency
(7)
(1)
(8)
As at March 31, 2024
$
366 $
99 $
465
The following table presents changes in right-of-use assets during fiscal 2023:
For the year ended March 31, 2023
Real Estate
Equipment
Total
As at March 31, 2022
$
355 $
120 $
475
New leases / leases modifications
46
9
55
Depreciation
(41)
(37)
(78)
Foreign currency
(5)
(1)
(6)
As at March 31, 2023
$
355 $
91 $
446
The following table presents changes in lease liabilities during fiscal 2024 and 2023:
March 31, 2024
March 31, 2023
As at beginning of year
$
433 $
451
New leases / lease modifications
111
56
Disposals
(14)
—
Interest expense
16
14
Payments
(84)
(82)
Foreign currency
(7)
(6)
455
433
Current portion
(85)
(91)
As at end of year
$
370 $
342
Right-of-use assets as at March 31, 2024 include $58 million ($63 million as at March 31, 2023) of real estate and
equipment to be sold pursuant to the definitive agreement to sell two fresh milk processing facilities located in
Australia described in Note 6. Lease liabilities relating to these assets total $32 million as at March 31, 2024
($36 million as at March 31, 2023) and are included in the current portion of lease liabilities.
The following table presents the maturity of the Company’s lease liabilities outstanding at March 31, 2024:
Less than 1 year
$
100
1-2 years
66
2-3 years
61
3-4 years
52
4-5 years
43
More than 5 years
265
$
587
ANNUAL REPORT 2024
Page 68
NOTE 8 GOODWILL AND INTANGIBLE ASSETS
For the year ended March 31, 2024
Definite Life
Goodwill
Trademarks
Customer
relationships
Software1
and other
Total
Intangible
Assets
Cost
As at March 31, 2023
$
3,338 $
1,138 $
421 $
487 $
2,046
Additions
—
—
—
13
13
Goodwill impairment charge
(265)
—
—
—
—
Foreign currency and hyperinflation
25
16
2
4
22
As at March 31, 2024
$
3,098 $
1,154 $
423 $
504 $
2,081
Accumulated Amortization
As at March 31, 2023
$
— $
234 $
262 $
268 $
764
Amortization
—
54
27
63
144
Foreign currency and hyperinflation
—
2
1
4
7
As at March 31, 2024
$
— $
290 $
290 $
335 $
915
Net book value at March 31, 2024
$
3,098 $
864 $
133 $
169 $
1,166
For the year ended March 31, 2023
Definite Life
Goodwill
Trademarks
Customer
relationships
Software1
and other
Total Intangible
Assets
Cost
As at March 31, 2022
$
3,188 $
1,118 $
403 $
452 $
1,973
Additions
—
—
—
24
24
Foreign currency and hyperinflation
150
20
18
11
49
As at March 31, 2023
$
3,338 $
1,138 $
421 $
487 $
2,046
Accumulated Amortization
As at March 31, 2022
$
— $
174 $
223 $
205 $
602
Amortization
—
54
29
60
143
Foreign currency and hyperinflation
—
5
10
3
18
As at March 31, 2023
$
— $
233 $
262 $
268 $
763
Net book value at March 31, 2023
$
3,338 $
905 $
159 $
219 $
1,283
1
None of the software were internally generated.
ANNUAL REPORT 2024
Page 69
NOTE 8 GOODWILL AND INTANGIBLE ASSETS (CONT'D)
IMPAIRMENT TESTING
Goodwill
Goodwill impairment testing is conducted at the CGU level annually, on December 31, or at an interim date if
indicators of impairment exist.
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 following CGUs or groups of CGUs for goodwill impairment testing purposes as they
represent the lowest level at which the goodwill is monitored for internal management purposes:
Allocation of goodwill
March 31, 2024
March 31, 2023
Canada Sector
Dairy Division (Canada)
$
401 $
401
USA Sector
Dairy Division (USA)
2,059
2,057
International Sector
Dairy Division (Australia)
—
258
Dairy Division (Argentina)
9
9
Europe Sector
Dairy Division (UK)
629
613
$
3,098 $
3,338
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, recoverable amounts for these divisions were also estimated using a
discounted cash flow (value in use) model.
In performing the goodwill impairment testing as at December 31, 2023 for the Dairy Division (Australia) CGU (the
Australia CGU) estimates of future discounted cash flows were reduced due to the increasing disconnect in the
relation between international cheese and dairy ingredient prices and farm gate milk prices in a context of declining
milk production in Australia.
As a result, the estimated recoverable value of the Australia CGU was determined to be lower than its carrying value
and a non-cash goodwill impairment charge of $265 million (non tax-deductible) was recorded, representing the total
value of the goodwill for this CGU, bringing the Australia CGU's carrying value to its estimated recoverable amount.
In performing the goodwill impairment testing as at December 31, 2023 for the Dairy Division (UK) CGU (the UK
CGU), it was determined that the carrying value of the UK CGU approximated its estimated recoverable amount.
The recoverable amounts of both divisions were estimated using a discounted cash flow (value in use) model and an
earnings multiplier valuation model (fair value less costs of disposal) based on the following key assumptions: (i)
discounted cash flow forecasts for the next five years based on earnings before interest, income taxes, depreciation
and amortization adjusted with estimated growth rates, and a terminal value calculated as a perpetuity in the final
year, (ii) pre-tax discount rate of 8.6% for the Dairy Division (Australia) and 9.3% for the Dairy Division (UK), (iii)
terminal growth rate of 2.5% for the Dairy Division (Australia) and 2.8% for the Dairy Division (UK) and (iv) earnings
multipliers of market comparables.
For the remaining CGUs, in performing the annual impairment testing of goodwill, it was determined, based on the
December 31, 2023 balances, that the recoverable amounts exceeded their respective carrying values including
goodwill; therefore, goodwill for these CGUs was not considered to be impaired as at March 31, 2024.
ANNUAL REPORT 2024
Page 70
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, 2024
March 31, 2023
Canada
$
176 $
189
USA
120
126
International
26
29
Europe
542
561
$
864 $
905
NOTE 9 OTHER ASSETS
March 31, 2024
March 31, 2023
Joint ventures
$
34 $
36
Derivative financial assets
—
2
Employee benefits (Note 20)
17
75
Other
44
45
$
95 $
158
The Company holds interests in joint ventures, which are all accounted for using the equity method. The Company
recognized $7 million in net earnings, representing its share of earnings in the joint ventures for the year ended March
31, 2024 ($6 million for the year ended March 31, 2023). Dividends received from the joint ventures amounted to
$8 million for the year ended March 31, 2024 ($2 million for the year ended March 31, 2023).
NOTE 10 BANK LOANS
Available for use
Amount drawn as at
Credit Facilities
Maturity
Canadian
Currency
Equivalent
Base Currency
(in millions)
March 31, 2024
March 31, 2023
North America-USA
December 20281 $
406
300 USD
$
— $
—
North America-Canada
December 20281 $
948
700 USD
71
—
Australia
Yearly2 $
331
375 AUD
181
153
Australia
Yearly2 $
68
50 USD
26
—
Japan
Yearly3 $
72
8,000 JPY
41
58
United Kingdom
Yearly4 $
214
125 GBP
91
120
Argentina
Yearly5 $
306
226 USD
8
25
$
2,345
$
418 $
356
1
Main revolving credit facility. Bears monthly interest at rates ranging from lender’s prime rates plus a maximum of 1.00% or SOFR or SONIA or
BBSY or CORRA 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. On December 15, 2023, the maturity date was extended to
December 15, 2028.
2
Bears monthly interest at SOFR or Australian Bank Bill Rate plus up to 1.85% and can be drawn in AUD or USD.
3
Bears monthly interest at TIBOR plus 0.70%.
4
Bears monthly interest at rates ranging from base rate plus 0.80% or SONIA plus 0.80%.
5
Bears monthly interest at local rate and can be drawn in USD or ARS.
As at March 31, 2024, receivables totalling $308 million ($99 million as at March 31, 2023), were sold under
receivables purchase agreements. These receivables were derecognized upon sale as substantially all risks and
rewards were passed to the purchaser under the terms of the agreements.
ANNUAL REPORT 2024
Page 71
NOTE 11 LONG-TERM DEBT
March 31, 2024
March 31, 2023
Unsecured bank term loan facilities
Obtained April 2018 and repaid in November 20231
$
— $
272
Obtained April 2019 and due in June 20252
115
225
Senior unsecured notes3,4
2.83%, issued in November 2016 and repaid in November 2023 (Series 3)
—
300
3.60%, issued in August 2018 and due in August 2025 (Series 5)
350
350
2.88%, issued in November 2019 and due in November 2024 (Series 6)
400
400
2.24%, issued in June 2020 and due in June 2027 (Series 7)
700
700
1.42%, issued in November 2020 and due in June 2026 (Series 8)
350
350
2.30%, issued in June 2021 and due in June 2028 (Series 9)
300
300
5.25%, issued in November 2022 and due in November 2029 (Series 10)
300
300
5.49%, issued in November 2023 and due in November 2030 (Series 11)
550
—
Other
48
54
$
3,113 $
3,251
Current portion
(414)
(307)
$
2,699 $
2,944
Principal repayments are as follows:
Less than 1 year
$
414 $
307
1-2 years
465
413
2-3 years
350
847
3-4 years
734
350
4-5 years
300
734
More than 5 years
850
600
$
3,113 $
3,251
1
Bore monthly interest at rates ranging from lender's prime rate 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.
2
Bears monthly interest at lender’s prime rates plus a maximum of 1.00% or SOFR or CORRA rates plus 0.80% up to 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. On October 6, 2022,
the remaining tranche of the facility was converted to a Canadian dollar denominated facility and can be drawn in CAD or USD. As at March 31,
2024, US$84 million was drawn.
3
Issued under the Company’s medium term note program. Interest payments are semi-annual.
4
On December 22, 2022, the Company filed an unallocated short form base shelf prospectus providing the flexibility to make offerings of various
securities during the 25-month period that the base shelf prospectus is effective, and renewed its medium term notes (MTN) program by filing a
supplement to the short form base shelf prospectus.
ANNUAL REPORT 2024
Page 72
NOTE 12 OTHER LIABILITIES
March 31, 2024
March 31, 2023
Employee benefits (Note 20)
$
38 $
32
Stock-based compensation - long-term portion
103
91
Other
13
14
$
154 $
137
NOTE 13 SHARE CAPITAL
AUTHORIZED
Authorized share capital of the Company consists of an unlimited number of common shares. 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, 2024, 13,947,991 common shares are available for future
grants under this plan. 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 over 5 years at a rate of 20% per year and
expire ten years from the grant date.
Options issued and outstanding as at year end are as follows:
March 31, 2024
March 31, 2023
Granting period
Exercise
price
Number of
options
Number of
exercisable options
Number of
options
Number of
exercisable options
2014
$
25.55
—
—
35,357
35,357
2015
$
27.74
759,092
759,092
1,021,850
1,021,850
2016
$
35.08
1,245,064
1,245,064
1,350,707
1,350,707
2017
$
41.40
2,023,438
2,023,438
2,212,048
2,212,048
2018
$
46.29
2,179,306
2,179,306
2,349,927
2,349,927
2019
$
41.02
2,681,874
2,681,874
2,899,451
2,319,082
2020
$
45.30
2,195,250
1,774,653
2,398,411
1,450,657
2021
$
33.35
3,296,065
1,971,342
3,608,000
1,386,333
2022
$
37.52
1,531,859
629,910
1,685,392
340,768
2023
$
29.59
2,288,570
472,781
2,427,160
—
2024
$
34.90
2,114,881
—
—
—
20,315,399
13,737,460
19,988,303
12,466,729
Changes in the number of outstanding stock options for the years ended March 31 are as follows:
March 31, 2024
March 31, 2023
Number of
options
Weighted average
exercise price
Number of
options
Weighted average
exercise price
Balance, beginning of year
19,988,303 $
38.02
22,021,670 $
38.45
Granted
2,231,026 $
34.90
2,600,057 $
29.59
Exercised
(366,078) $
28.78
(1,684,724) $
26.71
Cancelled
(1,537,852) $
38.70
(2,948,700) $
40.17
Balance, end of year
20,315,399 $
37.79
19,988,303 $
38.02
ANNUAL REPORT 2024
Page 73
NOTE 13 SHARE CAPITAL (CONT'D)
The weighted average exercise price of $34.90 of the stock options granted in fiscal 2024 corresponds to the
weighted average market price for the five trading days immediately preceding the date of the grant ($29.59 in fiscal
2023).
The weighted average fair value of stock options granted in fiscal 2024 was estimated at $7.83 per option ($5.57 in
fiscal 2023), using the Black-Scholes option pricing model with the following assumptions:
Fiscal 2024 grant
Fiscal 2023 grant
Weighted average:
Risk-free interest rate
3.10 %
2.39 %
Life of options
6.6 years
6.5 years
Volatility1
22.89 %
22.06 %
Dividend rate
2.06 %
2.42 %
1
Expected volatility is based on the historic share price volatility over a period similar to the life of the options.
A compensation expense of $13 million relating to stock options was recorded in operating costs in the consolidated
income statements for the year ended March 31, 2024 ($13 million for the year ended March 31, 2023).
Options to purchase 3,022,337 common shares at a price of $26.16 per share were granted on April 1, 2024 with a
four-year vesting period at a rate of 25% per year.
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.
2024
2023
Units
Liability
Units
Liability
Balance, beginning of year
616,766 $
22
539,827 $
16
Annual retainer
79,392
2
64,269
2
Dividends reinvested
14,042
—
12,670
—
Payment to directors
(151,484)
(5)
—
—
Variation due to change in stock price
—
(4)
—
4
Balance, end of year
558,716 $
15
616,766 $
22
The Company enters into equity forward contracts in order to mitigate the compensation costs associated with its
DSU plan. As at March 31, 2024, the Company had equity forward contracts on 100,000 common shares (420,000 as
of March 31, 2023) with a notional value of $3 million ($16 million as of March 31, 2023). The net compensation
expense related to the DSU plan was $2 million for the year ended March 31, 2024 ($4 million for March 31, 2023),
including the effect of the equity forward contracts.
ANNUAL REPORT 2024
Page 74
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.
2024
Units
2023
Units
Balance, beginning of year
2,233,250
1,324,311
Annual grant
787,536
1,344,257
Cancelled
(260,102)
(286,349)
Payment
(294,969)
(148,969)
Balance, end of year
2,465,715
2,233,250
As at March 31, 2024, the long-term obligation related to PSUs was $61 million ($45 million as at March 31, 2023)
and the short-term portion of $9 million was included in accrued liabilities ($10 million as at March 31, 2023). On April
1, 2024, 1,185,449 PSUs were granted at a grant date value of $26.16 per unit ($34.90 in 2023).
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.
2024
Units
2023
Units
Balance, beginning of year
1,130,528
726,129
Annual grant
532,674
612,895
Cancelled
(45,295)
(53,377)
Payment
(219,154)
(155,119)
Balance, end of year
1,398,753
1,130,528
As at March 31, 2024, the long-term obligation related to RSUs was $18 million ($18 million as at March 31, 2023)
and the short-term potion of $13 million was included in accrued liabilities ($6 million as at March 31, 2023). On April
1, 2024, 1,067,870 RSUs were granted at a grant date value of $26.16 per unit ($34.90 in 2023).
ANNUAL REPORT 2024
Page 75
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, 2024, there were no equity forward contracts outstanding (equity forward
contracts on 2,000,000 common shares with a notional value of $77 million as at March 31, 2023). The net
compensation expenses related to PSUs and RSUs were $34 million and $13 million, respectively, for the year ended
March 31, 2024 ($29 million and $17 million respectively, for the year ended March 31, 2023), including the effect of
the equity forward contracts.
DIVIDENDS AND DIVIDEND REINVESTMENT PLAN
The Company has a dividend reinvestment plan (DRIP), which provides eligible shareholders with the opportunity to
have all or a portion of their cash dividends automatically reinvested into additional common shares.
Dividends paid in cash and settled through the DRIP during the years ended 2024 and 2023 were as follows:
For the years ended March 31
2024
2023
Cash
$
245 $
199
DRIP
66
102
Total
$
311 $
301
On February 8, 2024, Saputo announced that it has suspended its DRIP until further notice and as a result
shareholders who were enrolled in the DRIP received dividend payments in the form of cash, commencing with the
dividend paid on March 15, 2024.
NOTE 14 ACQUISITION AND RESTRUCTURING COSTS
During the third quarter of fiscal 2024, the Company announced the permanent closure of its Lancaster, Wisconsin,
facility, in line with its Global Strategic Plan. As a result, restructuring costs of $6 million ($4 million after tax), which
include non-cash fixed assets write-down of $4 million and severance costs of $2 million, were recorded. The
Company incurred severance costs of $19 million ($15 million after tax) during the fourth quarter of fiscal 2024 in the
context of cost efficiency efforts.
In fiscal 2023, restructuring costs totalling $95 million ($70 million after tax) were incurred in connection with
consolidation initiatives announced by the Company to streamline and enhance its manufacturing footprint as well as
other initiatives undertaken in the context of its Global Strategic Plan. Costs of $51 million were attributable to the
USA Sector, $37 million to the International Sector and $9 million to the Europe Sector. Restructuring costs were
offset by a $2 million gain on disposal of assets related to the sale of a closed facility in the Canada Sector.
Restructuring costs are summarized as follows:
For the years ended March 31
2024
2023
Write down and accelerated depreciation of non-current assets
$
4 $
65
Severance and other costs
21
30
Total
$
25 $
95
ANNUAL REPORT 2024
Page 76
NOTE 15 FINANCIAL CHARGES
For the years ended March 31
2024
2023
Interest on long-term debt
$
104 $
86
Other finance costs, net
58
50
Interest on lease liabilities
16
14
Net interest revenue from defined benefit obligation (Note 20)
(2)
(5)
$
176 $
145
NOTE 16 INCOME TAXES
Income tax expense comprises the following:
For the years ended March 31
2024
2023
Current tax expense
$
144 $
163
Deferred tax (recovery) expense
(5)
(10)
Income tax expense
$
139 $
153
RECONCILIATION OF THE EFFECTIVE TAX RATE
The effective income tax rate was 34.4% in 2024 (19.7% in 2023). The Company’s income tax expense differs from
the one calculated by applying Canadian statutory rates for the following reasons:
2024
2023
Earnings before tax
$
404 $
775
Income taxes, calculated using Canadian statutory income tax rates of 26.0% (25.8% in
2023)
105
200
Adjustments resulting from the following:
Effect of tax rates for foreign subsidiaries
(1)
16
Share of joint venture(s) earnings
(2)
(2)
Effect of tax and accounting treatments of inflation in Argentina
(30)
(46)
Goodwill impairment charge
80
—
Adjustments in relation to prior years and other
(13)
(15)
Income tax expense
$
139 $
153
INCOME TAX RECOGNIZED IN OTHER COMPREHENSIVE INCOME
Income tax on items recognized in other comprehensive income in 2024 and 2023 were as follows:
2024
2023
Deferred tax recovery on actuarial losses on employee benefit obligations
$
(17) $
(38)
Deferred tax recovery on cash flow hedges
(1)
(5)
Total income tax recovery recognized in other comprehensive income
$
(18) $
(43)
ANNUAL REPORT 2024
Page 77
NOTE 16 INCOME TAXES (CONT'D)
CURRENT TAX ASSETS AND LIABILITIES
2024
2023
Income taxes receivable
$
32 $
16
Income taxes payable
(23)
(99)
Income taxes receivable (payable) (net)
$
9 $
(83)
DEFERRED TAX ASSETS AND LIABILITIES
Deferred income taxes are presented as follows on the consolidated statements of financial position, as at March 31:
2024
2023
Deferred tax assets
$
71 $
63
Deferred tax liabilities
(854)
(860)
Deferred tax liabilities (net)
$
(783) $
(797)
The movement of deferred tax assets and liabilities were as follows for the years ended March 31:
For the year ended
March 31, 2024
As at
March 31, 2023
Recognized in
Net Earnings
Recognized in
Other
Comprehensive
Income
Foreign currency
and hyperinflation
As at
March 31, 2024
Inventories
$
(22) $
7 $
— $
— $
(15)
Property, plant and equipment
(412)
(42)
—
3
(451)
Right-of-use assets
(88)
(15)
—
1
(102)
Goodwill, intangibles and other
(515)
1
1
(5)
(518)
Net assets of pensions plans
(9)
(1)
17
—
7
Accounts payable and accrued
liabilities
77
24
—
(7)
94
Lease liabilities
83
18
—
(1)
100
Tax losses carried forward
89
13
—
—
102
Net deferred tax liabilities
$
(797) $
5 $
18 $
(9) $
(783)
For the year ended
March 31, 2023
As at
March 31, 2022
Recognized in
Net Earnings
Recognized in
Other
Comprehensive
Income
Foreign currency
and hyperinflation
As at
March 31, 2023
Inventories
$
(27) $
7 $
— $
(2) $
(22)
Property, plant and equipment
(435)
44
—
(21)
(412)
Right-of-use assets
(98)
9
—
1
(88)
Goodwill, intangibles and other
(466)
(33)
5
(21)
(515)
Net assets of pensions plans
(48)
—
38
1
(9)
Accounts payable and accrued
liabilities
58
24
—
(5)
77
Lease liabilities
90
(6)
—
(1)
83
Tax losses carried forward
120
(35)
—
4
89
Net deferred tax liabilities
$
(806) $
10 $
43 $
(44) $
(797)
As at March 31, 2024, the Company had $273 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 2024
Page 78
NOTE 16 INCOME TAXES (CONT'D)
PILLAR TWO LEGISLATION
During fiscal 2024, Pillar Two legislation was enacted or substantively enacted in certain jurisdictions in which the
Company operates.
The Company performed an assessment of its potential exposure to Pillar Two income taxes based on the most
recent information available and determined that Pillar Two effective tax rates in most of the jurisdictions in which the
Company operates are above 15%. However, there are a limited number of jurisdictions where the transitional safe
harbour relief does not apply, and the Pillar Two effective tax rate is below 15%. The Company does not expect a
material exposure to Pillar Two income taxes in those jurisdictions.
The Company is monitoring the developments in the various jurisdictions in which it operates to continue to assess
the overall impact, if any, of Pillar Two legislation on the Company’s consolidated financial statements.
NOTE 17 CHANGE IN NON-CASH OPERATING WORKING CAPITAL ITEMS
For the years ended March 31
2024
2023
Receivables
$
(55) $
(205)
Inventories
(195)
(396)
Prepaid expenses and other assets
(3)
(10)
Accounts payable, accrued liabilities and other
251
243
Current income taxes
—
1
Changes in non-cash operating working capital items
$
(2) $
(367)
NOTE 18 NET EARNINGS PER SHARE
For the years ended March 31
2024
2023
Net earnings
$
265 $
622
Weighted average number of common shares outstanding
423,063,832
418,620,009
Dilutive shares
220,845
609,029
Weighted average diluted number of common shares outstanding
423,284,677
419,229,038
Basic net earnings per share
$
0.63 $
1.49
Diluted net earnings per share
$
0.63 $
1.48
When calculating diluted net earnings per share for the year ended March 31, 2024, 19,556,307 stock options were
excluded from the calculation because their exercise price is higher than the average fair value of common shares
(16,503,936 options, were excluded for the year ended March 31, 2023).
ANNUAL REPORT 2024
Page 79
NOTE 19 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, 2024, and March 31, 2023. No customer
represented more than 10% of total consolidated revenues for the fiscal years ended March 31, 2024, and March 31,
2023.
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.
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, 2024.
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 23 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, 2024, are as follows: accounts payable
and accrued liabilities, bank loans, lease liabilities and long-term debt. 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.
ANNUAL REPORT 2024
Page 80
NOTE 19 FINANCIAL INSTRUMENTS (CONT'D)
INTEREST RATE RISK
Bank loans and unsecured bank term loan facilities bear variable interest rates and thereby expose the Company to
interest rate risk on cash flows associated to interest payments. As at March 31, 2024, the amount exposed to
interest rate fluctuations was $533 million and an assumed 1% change in the interest rate would lead to a change in
net earnings of approximately $3 million. 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 past interest rate benchmark reforms, the Company amended the applicable variable interest rates
referenced under relevant credit facilities and long-term debt (see Notes 10 and 11). These amendments did not have
a significant impact on the Company’s financial statements.
On May 16, 2022, Refinitiv Benchmark Services Limited, the administrator of the Canadian Dollar Offered Rate
(CDOR), announced that it would cease the calculation and publication of all tenors of CDOR immediately following a
final publication on Friday, June 28, 2024. The Company is subject to this reform in connection with certain bank
credit facilities and long-term debt (see Notes 10 and 11) as bankers' acceptance funding will also cease as part of
this reform and will be replaced by Term and Daily Compounded Canadian Overnight Repo Rate Average (CORRA).
As a result, the Company amended relevant credit facilities, which is not expected to have a significant impact on the
Company’s financial statements.
For the fiscal year ended March 31, 2024, the interest expense on long-term debt totalled $104 million ($86 million in
fiscal 2023). The interest accrued as at March 31, 2024, was $31 million ($22 million as at March 31, 2023).
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 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, 2024, the Company had
outstanding forward exchange contracts with a notional value of US$240 million. During the fiscal year, the cash flow
hedges were highly effective and accordingly, the Company recognized an unrealized loss of $6 million (net of tax of
$3 million) in other comprehensive income as a result. A loss of $3 million (net of tax of $1 million) was reclassified to
net earnings during fiscal 2024 related to these forward exchange contracts. These cash flow hedges were also
deemed to be highly effective during fiscal 2023, and an unrealized loss of $37 million (net of tax of $16 million), was
recorded in other comprehensive income. A loss of $28 million (net of tax of $12 million) was reclassified to net
earnings during fiscal 2023 related to these forward exchange contracts.
The Company’s largest exposure comes from the US dollar fluctuations from its USA Sector. 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.
2024
2023
Change in net earnings
$
11 $
7
Change in comprehensive income
$
390 $
381
ANNUAL REPORT 2024
Page 81
NOTE 19 FINANCIAL INSTRUMENTS (CONT'D)
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 $5 million (net of tax of $2 million) was
reclassified to net earnings during fiscal 2024 when the related inventory was ultimately sold. These cash flow hedges
were also deemed to be highly effective during fiscal 2023, and an unrealized gain of $5 million (net of tax of $2
million), was recorded in other comprehensive income. A gain of $12 million (net of tax of $4 million) was reclassified
to net earnings during fiscal 2023 related to futures contracts.
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, 2024, and March 31, 2023. 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.
March 31, 2024
March 31, 2023
Fair value
Carrying value
Fair value
Carrying value
Cash flow hedges
Equity forward contracts (Level 2)
$
— $
— $
(1) $
(1)
Commodity derivatives (Level 2)
4
4
(1)
(1)
Foreign exchange derivatives (Level 2)
(2)
(2)
3
3
Derivatives not designated in a formal hedging
relationship
Equity forward contracts (Level 2)
—
—
(5)
(5)
Commodity derivatives (Level 2)
1
1
(1)
(1)
Foreign exchange derivatives (Level 2)
—
—
(1)
(1)
Long-term debt (Level 2)
3,010
3,113
3,081
3,251
For the years ended March 31, 2024, and 2023, 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. 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.
ANNUAL REPORT 2024
Page 82
NOTE 20 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 2024, the defined
contribution expenses for the Company amounted to $96 million ($88 million in fiscal 2023). The Company expects to
contribute approximately $99 million to its defined contribution plans for fiscal 2025.
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 United Kingdom 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.
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 $3 million to its defined benefit
plans in fiscal 2025.
ANNUAL REPORT 2024
Page 83
NOTE 20 EMPLOYEE POST-EMPLOYMENT BENEFIT PLANS (CONT'D)
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, 2024
March 31, 2023
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other Plans
Total
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other Plans
Total
Fair value of assets
$
1,282 $
67 $
1,349 $
1,352 $
67 $
1,419
Present value of funded
obligations
1,267
60
1,327
1,277
61
1,338
Present value of net surplus
(obligations) for funded
plans
15
7
22
75
6
81
Present value of unfunded
obligations
—
(37)
(37)
—
(33)
(33)
Present value of net surplus
(obligations)
15
(30)
(15)
75
(27)
48
Asset ceiling test
—
(6)
(6)
—
(5)
(5)
Accrued pension/benefit cost
$
15 $
(36) $
(21) $
75 $
(32) $
43
Presented in the statement of financial position as follows:
March 31, 2024
March 31, 2023
Other Assets (Note 9)
$
17 $
75
Other Liabilities (Note 12)
(38)
(32)
Total net surplus (liability)
$
(21) $
43
ANNUAL REPORT 2024
Page 84
NOTE 20 EMPLOYEE POST-EMPLOYMENT BENEFIT PLANS (CONT'D)
The changes in the present value of the defined benefit obligations are as follows:
March 31, 2024
March 31, 2023
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
$
1,277 $
94 $
1,371 $
1,708 $
104 $
1,812
Current service costs
—
3
3
—
4
4
Past service costs, including
curtailment gains and
settlements¹
—
—
—
—
1
1
Interest cost
59
4
63
44
4
48
Actuarial (gains) losses due
to change in experience
27
2
29
11
1
12
Actuarial gains due to
changes in financial
assumptions
(27)
(2)
(29)
(426)
(12)
(438)
Actuarial losses due to
changes in demographic
assumptions
(30)
—
(30)
3
—
3
Exchange differences
31
—
31
7
1
8
Benefits paid
(70)
(4)
(74)
(70)
(9)
(79)
Defined benefit obligation,
end of year
$
1,267 $
97 $
1,364 $
1,277 $
94 $
1,371
¹
In January 2023, the Company informed plan participants of two of its defined benefit plans of the intended wind-up of these plans as of
December 31, 2024.
The changes in the fair value of plan assets are as follows:
March 31, 2024
March 31, 2023
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
$
1,352 $
67 $
1,419 $
1,943 $
71 $
2,014
Interest income on plan
assets
63
3
66
50
3
53
Return on plan assets,
excluding interest income
(94)
(2)
(96)
(572)
(5)
(577)
Administration costs
(1)
—
(1)
(1)
—
(1)
Employer contributions
—
3
3
—
7
7
Exchange differences
32
—
32
2
—
2
Benefits paid
(70)
(4)
(74)
(70)
(9)
(79)
Fair value of plan assets,
end of year
$
1,282 $
67 $
1,349 $
1,352 $
67 $
1,419
For fiscal 2024, actual return on plan assets amounted to a loss of $31 million (loss of $525 million in fiscal 2023).
ANNUAL REPORT 2024
Page 85
NOTE 20 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, 2024
March 31, 2023
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other Plans
Total
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other Plans
Total
Bonds, LDI and cash¹
$
832 $
66 $
898 $
824 $
55 $
879
Annuity contract
285
—
285
293
—
293
Property and other
165
—
165
235
—
235
Equity Instruments
—
1
1
—
12
12
Total
$
1,282 $
67 $
1,349 $
1,352 $
67 $
1,419
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, 2024
March 31, 2023
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
$
— $
3 $
3 $
— $
4 $
4
Past service costs, including
curtailment gains and
settlements¹
—
—
—
—
1
1
Administration costs
1
—
1
1
—
1
1
3
4
1
5
6
Recognized in “Financial
charges” (Note 15):
Interest costs
59
4
63
44
4
48
Interest income on plan
assets
(63)
(3)
(66)
(50)
(3)
(53)
(4)
1
(3)
(6)
1
(5)
Net defined benefits plans
expense
$
(3) $
4 $
1 $
(5) $
6 $
1
¹
In January 2023, the Company informed plan participants of two of its defined benefit plans of the intended wind-up of these plans as of
December 31, 2024.
ANNUAL REPORT 2024
Page 86
NOTE 20 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, 2024
March 31, 2023
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other
Plans
Total
Dairy Division
(UK) Defined
Benefit
Pension Fund
Other Plans
Total
Return on plan assets
(excluding interest
income)
$
(94) $
(2) $
(96) $
(572) $
(5) $
(577)
Actuarial gains (losses) due
to change in experience
(27)
(2)
(29)
(11)
(1)
(12)
Actuarial gains (losses) due
to changes in
demographic assumptions
30
—
30
(3)
—
(3)
Actuarial gains due to
changes in financial
assumptions
27
2
29
426
12
438
Amount recognized in other
comprehensive income
$
(64) $
(2) $
(66) $
(160) $
6 $
(154)
Weighted average assumptions used in computing the benefit obligations at the financial position date are as follows:
March 31, 2024
March 31, 2023
Dairy Division (UK)
Defined Benefit
Pension Fund
Other Plans
Dairy Division (UK)
Defined Benefit
Pension Fund
Other Plans
Discount rate
4.80 %
4.91 %
4.70 %
4.76 %
Duration of the obligation (in years)
15.00
11.41
15.00
12.97
Inflation Rate
2.60 %
2.00 %
2.70 %
2.00 %
Future salary increases
n/a
3.0 %
n/a
3.0 %
Mortality table
S3P base tables
with the following
scaling factors:
Non-Insured Pens
(M/F): 113%/106%
Insured Pens (M/F):
106%/108%
Defs (M/F):
116%/106%
2014 Private Sector
Canadian Pens
Mortality Table,
projected
generationally
using Scale
MI-2017 or Scale B
S3P base tables with
the following scaling
factors:
Non-Insured Pens
(M/F): 119%/112%
Insured Pens (M/F):
112%/114%
Defs (M/F):
122%/112%
2014 Private Sector
Canadian Pens
Mortality Table,
projected
generationally using
Scale MI-2017 or
Scale B
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 using the commutation factors in force. 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 approximately $16 million
of the amount of the obligation (increase of approximately $16 million). A one-year increase in life expectancy would
increase the obligation by approximately $38 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 $6 million of the
amount of the obligation. Specifically pertaining to the other plans, an increase of 1% of the percentage of future
salary increases would be an increase of $1 million of the amount of the obligation.
ANNUAL REPORT 2024
Page 87
NOTE 21 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:
Leases¹
Purchase obligations2
Total
Less than 1 year
$
9 $
209 $
218
1-2 years
5
29
34
2-3 years
2
10
12
3-4 years
1
3
4
4-5 years
1
1
2
More than 5 years
2
—
2
$
20 $
252 $
272
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, 2024, 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, 2024, and March 31, 2023, the Company had not recorded any significant liabilities associated
with these indemnifications.
LETTERS OF CREDIT
As at March 31, 2024, the Company had issued letters of credit in an aggregate amount of $66 million pursuant to a
banking facility authorizing the issuance of letters of credit in an aggregate amount of $101 million (as at March 31,
2023, 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 $118 million).
NOTE 22 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 2024
Page 88
NOTE 22 RELATED PARTY TRANSACTIONS (CONT'D)
Transactions with related parties are as follows:
For the years ended March 31
2024
2023
Key management personnel
Directors
$
3 $
3
Executive officers
43
37
Entities subject to control or significant influence through ownership by its principal
shareholder
7
6
$
53 $
46
Dairy products provided by the Company to related parties were less than $1 million for the years ended March 31,
2024, and 2023.
Outstanding accounts payable and accrued liabilities for the transactions above are the following:
Accounts payable and accrued
liabilities
March 31, 2024
March 31, 2023
Key management personnel
Directors
$
15 $
22
Executive officers
39
42
Entities subject to control or significant influence through ownership by its principal
shareholder
—
1
$
54 $
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, 2024, and 2023.
KEY MANAGEMENT PERSONNEL COMPENSATION
The compensation expense for transactions with the Company’s key management personnel consists of the
following:
2024
2023
Directors
Cash-settled payments
$
1 $
1
Stock-based compensation
2
2
$
3 $
3
Executive officers
Short-term employee benefits
$
20 $
21
Post-employment benefits
4
2
Stock-based compensation
19
14
$
43 $
37
Total compensation
$
46 $
40
ANNUAL REPORT 2024
Page 89
NOTE 22 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:
Percentage Owned
Location
Saputo Dairy Products Canada G.P.
100%
Canada
Saputo Cheese USA Inc.
100%
USA
Saputo Dairy Australia Pty Ltd
100%
Australia
Molfino Hermanos S.A.
100%
Argentina
Dairy Crest Ltd
100%
UK
NOTE 23 CAPITAL DISCLOSURES
The Company's capital management strategy requires a well-balanced financing structure to maintain the flexibility
needed to implement growth initiatives, pursue disciplined capital investments and maximize shareholder value. This
includes ensuring that there is sufficient liquidity to enable organic growth, undertake selective acquisitions and
support its Saputo Promise while at the same time taking a conservative approach towards financial leverage and
management of financial risk. Also, the Company aims a long-term target leverage of approximately 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 target leverage 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.
The Company’s capital is composed of net debt and equity. Net debt consists of long-term debt, bank loans, and
lease liabilities, net of cash and cash equivalents. The net debt amounts as at March 31, 2024, and March 31, 2023,
are as follows:
2024
2023
Long-term debt, including current portion
$
3,113 $
3,251
Bank loans
418
356
Lease liabilities
455
433
Less: Cash and cash equivalents
(466)
(263)
Net debt
$
3,520 $
3,777
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, goodwill impairment charge, and
depreciation and amortization. The ratio as at March 31, 2024, was 2.33 (2.43 at March 31, 2023).
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, 2024.
The Company is not subject to capital requirements imposed by a regulator.
ANNUAL REPORT 2024
Page 90
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, the Chief Financial Officer, the President and Chief Operating Officer
(North America), and the President and Chief Operating Officer (International and Europe) are, collectively, the chief
operating decision maker of the Company and regularly review 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 (loss) before income taxes,
financial charges, loss (gain) on hyperinflation, acquisition and restructuring costs, depreciation and amortization and
goodwill impairment charge.
The divisions within the International Sector were combined due to similarities in global market factors and production
processes.
ANNUAL REPORT 2024
Page 91
NOTE 24 SEGMENTED INFORMATION (CONT'D)
INFORMATION ON REPORTABLE SECTORS
For the years ended March 31
2024
20232
Revenues
Canada
$
4,922 $
4,696
USA
7,810
8,339
International1
3,518
3,785
Europe
1,092
1,023
$
17,342 $
17,843
Operating costs excluding depreciation, amortization, and restructuring costs (Note 5)
Canada
$
4,342 $
4,145
USA
7,289
7,851
International
3,185
3,411
Europe
1,017
883
$
15,833 $
16,290
Adjusted EBITDA
Canada
$
580 $
551
USA
521
488
International
333
374
Europe
75
140
$
1,509 $
1,553
Depreciation and amortization
Canada
$
107 $
109
USA
246
227
International
134
146
Europe
108
100
$
595 $
582
Goodwill impairment charge (Note 8)
265
—
Acquisition and restructuring costs (Note 14)
25
95
Loss (gain) on hyperinflation
44
(44)
Financial charges (Note 15)
176
145
Earnings before income taxes
404
775
Income taxes (Note 16)
139
153
Net earnings
$
265 $
622
1
Australia accounted for $2,526 million and $2,684 million of the International Sector's revenues while Argentina accounted for $992 million and
$1,101 million for the years ended March 31, 2024 and 2023, respectively.
2
Comparative figures were reclassified to conform with the current year’s presentation. Refer to Note 25 for more information.
ANNUAL REPORT 2024
Page 92
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
Total
Canada
USA
International
Europe
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
Revenues
Retail
$
8,725 $ 8,638 $
2,791 $ 2,650 $ 3,608 $ 3,735 $ 1,497 $ 1,525 $
829 $
728
Foodservice
5,712
5,831
1,767
1,677
3,491
3,728
421
394
33
32
Industrial
2,905
3,374
364
369
711
876
1,600
1,866
230
263
$ 17,342 $ 17,843 $
4,922 $ 4,696 $ 7,810 $ 8,339 $ 3,518 $ 3,785 $ 1,092 $ 1,023
GEOGRAPHIC INFORMATION
March 31, 2024
March 31, 2023
Net book value of property, plant and equipment
Canada
$
949 $
892
USA
2,184
1,988
Australia
749
792
Argentina
203
194
United Kingdom
446
420
$
4,531 $
4,286
Net book value of intangible assets
Canada
$
207 $
232
USA
281
335
Australia
70
87
Argentina
1
4
United Kingdom
607
625
$
1,166 $
1,283
Net book value of right-of-use assets
Canada
$
130 $
132
USA
62
50
Australia
163
163
Argentina
9
9
United Kingdom
101
92
$
465 $
446
NOTE 25 COMPARATIVE FIGURES
Comparative figures were reclassified to conform with the current year’s presentation. The loss (gain) on
hyperinflation is presented as a separate line on the consolidated income statements. Previously, this amount was
included in financial charges and was disclosed in the notes to the financial statements. Loss (gain) on hyperinflation
is relative to the application of hyperinflation accounting for the Dairy Division (Argentina).
ANNUAL REPORT 2024
Page 93
CORPORATE HEADQUARTERS
Saputo Inc.
1000 de la Gauchetière Street West, Suite 2900
Montréal, QC, Canada H3B 4W5
T. 514-328-6662
saputo.com
DIVIDEND POLICY
Saputo Inc. declares quarterly cash dividends on common shares at $0.185 per
share, representing a yearly dividend of $0.74 per share. The Board of Directors
reviews our dividend policy at least once annually, based on factors such as
financial condition, financial performance, and capital requirements.
EXTERNAL AUDITORS
KPMG LLP
Montréal, QC, Canada
ANNUAL MEETING
OF SHAREHOLDERS
Friday, August 9, 2024, at 10:30 a.m.
(Eastern Time)
Hybrid meeting. In person at Lumi Experience
1250 René-Lévesque Blvd. W., Suite 3610,
Montréal, QC H3B 4W8
and via live webcast at
web.lumiagm.com/#/m/475635640
STOCK EXCHANGE
Toronto Stock Exchange
Symbol: SAP
TRANSFER AGENT
Computershare Trust Company of Canada
1500 Robert-Bourassa Blvd., Suite 700
Montréal, QC, Canada H3A 3S8
T. 514-982-7888
E. service@computershare.com
INVESTOR RELATIONS
Nicholas Estrela
T. 514-328-3117
E. nicholas.estrela@saputo.com
SAPUTO.COM