Newsroom

Net earnings at $192.1 million, down 17.2%
Revenues at $4.022 billion, up 3.6%

(Montréal, June 6, 2006) – Saputo Inc. released today its financial results for fiscal 2006, which ended March 31, 2006.

- Net earnings totalled $192.1 million or $1.83 (basic) per share, down 17.2% compared to $232.1 million or $2.23 (basic) per share in fiscal 2005.

- In fiscal 2006, the Company wrote down the value of its portfolio investment by $10.0 million due to a permanent impairment, which had an after-tax effect of approximately $8 million.

- Consolidated revenues totalled $4.022 billion, an increase of $139.1 million or 3.6% compared to $3.883 billion posted in fiscal 2005.

- Consolidated earnings before interest, income taxes, depreciation, amortization and devaluation (EBITDA)¹ amounted to $366.0 million, a decrease of $41.8 million compared to $407.8 million in fiscal 2005.

- EBITDA in the Canadian and Other Dairy Products Sector totalled $261.6 million, as compared to $244.2 million last fiscal year, an increase of $17.4 million or 7.1%. The increase is mainly attributed to the benefits derived from rationalization activities undertaken in the Canadian operations during prior years, the acquisition of Fromage Côté, completed on April 18, 2005, and increased sales volumes from the Canadian fluid milk activities in comparison to last fiscal year. During the fiscal year, the sector incurred $2 million in rationalization costs related to plant closures.

- EBITDA in the US Dairy Products Sector amounted to $78.3 million, a $58.7 million or 42.8% decrease compared to $137.0 million posted in fiscal 2005. This decrease is due to a lower average block market² per pound of cheese, a less favourable relationship between the average block market per pound of cheese and the cost of milk as raw material, all together impacting EBITDA by approximately $40 million, the appreciation of the Canadian dollar, a rationalization charge of $3.3 million incurred for the closure of the plant in Whitehall, Pennsylvania, additional promotional expenses of approximately $15 million and the continued increase in energy, packaging, ingredient and labour costs. These factors offset EBITDA increases resulting from higher sales volume.

- EBITDA in the Grocery Products Sector amounted to $26.1 million, a slight decrease as compared to $26.6 million for the previous fiscal year. The sector incurred additional expenses of approximately $2 million related to the pension fund and approximately $5 million of additional marketing expenses. 

- Cash generated by operating activities amounted to $299.6 million for fiscal 2006, an increase of $30.9 million compared to $268.7 million in fiscal 2005.

- The Company increased the use of its bank loans by $28.1 million, issued shares for a cash consideration of $13.7 million as part of the Stock Option Plan, paid out
$72.2 million in dividends, and purchased shares for cancellation for $38 million as part of the normal course issuer bid.

Summary of Fourth Quarter Results

- Net earnings amounted to $37.7 million for the quarter ended March 31, 2006, a decrease of $22.0 million compared to the same quarter last fiscal year.

- During the quarter, the Company wrote down the value of its portfolio investment by $10.0 million due to a permanent impairment, which had an after-tax effect of approximately $8 million.

- Revenues totalled $969.9 million, an increase of $53.1 million or 5.8% compared to the $916.8 million for the same quarter last fiscal year. The increase is attributed mostly to the Canadian and Other Dairy Products Sector. Higher selling prices and sales volumes in all divisions within the sector, as well as the inclusion of Fromage Côté, acquired on April 18, 2005, were responsible for the revenue increase. Revenues from the US Dairy Products Sector decreased by approximately $27 million compared to the same quarter last year. The combination of a lower average block market per pound of cheese and the appreciation of the Canadian dollar reduced revenues by approximately $53 million. These negative factors offset increased revenues of approximately $26 million as a result of a 7.5% increase in sales volume compared to the same quarter last year. Revenues from the Grocery Products Sector increased by about $5 million compared to the same quarter last year, due mostly to new business generated by the Bakery division.

- EBITDA for the fourth quarter totalled $81.8 million, a $21.5 million decrease from the same period last fiscal year. 

- The EBITDA of the Canadian and Other Dairy Products Sector decreased by approximately $5 million in the fourth quarter of fiscal 2006 compared to the corresponding quarter last year. This decrease is due to rationalization costs of $1.0 million incurred in the fourth quarter of fiscal 2006 for the closure of the plant in Harrowsmith, Ontario, and the negative effects of changes in the export tax on Argentinean operations. A decrease in our Canadian cheese production, consistent with the goal of reducing our inventory levels, also negatively affected our EBITDA in the fourth quarter of fiscal 2006.

- EBITDA from the US Dairy Products Sector decreased by approximately $18 million compared to the corresponding period last fiscal year. The factors behind this decrease were a lower average block market per pound of cheese, a less favourable relationship between the average block market per pound of cheese and the cost of milk as raw material, the continued increase in energy costs, and rationalization costs of $2.5 million incurred in the fourth quarter of fiscal 2006 for the closure of the plant in Whitehall, Pennsylvania.


- The Grocery Products Sector EBITDA increased by approximately $1 million as a result of better margins achieved on existing sales, additional EBITDA generated by overall higher sales volume, and improved efficiencies.

Outlook

As Saputo enters fiscal 2007, its vision and outlook for growth are aligned. The Company is confident that it is very well positioned to pursue its development. Each of its divisions has set precise objectives specific to their own markets and is committed to deploying every effort necessary to reach them. 

The Company’s main objectives remain to create value and to be a world-class dairy processor. To reach these goals, it will focus on growth by acquisitions, the improvement of operational efficiencies and on innovation. 

In the past years, Saputo has made several acquisitions, large and small, all of which had an important impact on its development. During the current fiscal year, two acquisitions were completed, one in Canada and one in the United States. By making an acquisition in Germany in April 2006, the Company established an initial presence outside of the Americas which will enable it to complement its current activities and to pursue its international expansion. Without a doubt, Saputo’s growth will be fuelled by further acquisitions. It will continue to be proactive and devote every effort to find the right opportunities. 

Aside from acquisitions, the Company believes in increasing net earnings by constantly improving the way it operates. Thus, it will continue to outdo itself by seeking even greater operational efficiency and by pursuing innovation. Organic growth is absolutely essential since it enables the Company to focus on the controllable aspects of the production and thus mitigate the impacts of adverse market conditions. 

Saputo’s outlook for fiscal 2007 is very positive. Obviously, as is always the case, there are some circumstances over which it has no control and that could have an impact on its results. However, the Company is convinced that it is well positioned to foil adverse market conditions and continue its growth. It is focused on returning to past profitability levels.

The Company’s financial position remains excellent and provides considerable flexibility to ensure its future development. The balance sheet is sound with $2.254 billion in assets and an interest bearing debt ratio at 0.17 of shareholder’s equity. Current contractual commitments on bank loans and the senior notes would enable Saputo, if new debts were contracted, to add almost $1.5 billion in additional debt for acquisitions.

Financial Statements and Management’s Analysis
For more information on the results of fiscal 2006 as well as the fourth quarter of fiscal 2006, reference is made to the audited consolidated financial statements and the notes thereto and to our Management’s Analysis for the fiscal year ended March 31, 2006. These documents can be obtained on SEDAR at www.sedar.com.

Caution Regarding Forward-Looking Statements
This press release, including the “Outlook” section, contains forward-looking information within the meaning of securities laws. These statements are based on the Company’s current assumptions, expectations and estimates, regarding projected revenue and expenses, the Canadian, US, Argentinean and German economic environment, its ability to attract and retain clients and consumers, its operating costs and raw materials and energy supplies which are subject to a number of risks and uncertainties. Actual results could differ materially from the conclusion, forecast or projection stated in such forward-looking information. As a result, the Company cannot guarantee that any forward-looking statements will materialize. Assumptions, expectations and estimates made in the preparation of forward-looking statements and risks that could cause our actual results to differ materially from the Company’s current expectations are discussed throughout the Management’s Analysis and, in particular, the section entitled “Risks and Uncertainties”. Forward-looking information contained in this press release, including the “Outlook” section, is based on management’s current estimates, expectations and assumptions, which management believes are reasonable as of the current date. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While the Company may elect to, it is under no obligation and do not undertake to update this information at any particular time.

Dividends
The Board of Directors of the Company declared a dividend of $0.18 per share, payable on 
July 21, 2006, to shareholders of record as of July 10, 2006. This dividend is for the quarter ended March 31, 2006.

Conference Call

A conference call to discuss the fiscal 2006 results will be held on Tuesday, June 6, 2006 at 14:30, Eastern time. To participate in the conference call dial 1 800 525 6384. To ensure your participation, please dial in approximately five minutes before the call. 

To listen to this call on the web, please enter http://events.onlinebroadcasting.com/saputo/060606/index.php in your web browser.

For those unable to participate, an instant replay will be available until midnight, Tuesday, June 13, 2006. To access the replay dial 1 800 374 8183, ID number 9505792. A replay of the conference call will also be available on the Company’s web site at www.saputo.com. 

About Saputo
Always with an expert hand, Saputo transforms into success the passion and initiative of the 8,400 dedicated men and women who work in its 44 plants around the world. Combining tradition and innovation, the Company produces, commercializes and distributes the highest quality products under such well-known brands as Saputo, Alexis de Portneuf, Armstrong, Baxter, Dairyland, De Lucia, Dragone, DuVillage de Warwick, Frigo, Kingsey, La Paulina, Nutrilait, Princesse, Ricrem, Sir Laurier d’Arthabaska, Stella, Treasure Cave, HOP&GO! and Vachon. As one of the top twenty dairy processors in the world, the largest dairy processor in Canada, amongst the top five cheese producers in the United States, the third largest dairy processor in Argentina and the largest snack-cake manufacturer in Canada, Saputo renews its commitment to excellence and growth every day. Saputo Inc. is a public company whose shares are listed on the Toronto Stock Exchange under the symbol SAP. Visit our Web site at www.saputo.com.

Measurement of results not in accordance with generally accepted accounting principles
The Company assesses its financial performance based on its EBITDA, this being earnings before interest, income taxes, depreciation, amortization and devaluation of portfolio investment. EBITDA is not a measurement of performance as defined by generally accepted accounting principles in Canada, and consequently may not be comparable to similar measurements presented by other companies. 

² “Average block market” is the average daily price of a 40 pound block of cheddar cheese traded on the Chicago Mercantile Exchange (CME), used as the base price for the cheese.

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Information
Manon Goudreault
Director, Communications
(514) 328-3377

Saputo Group Inc.
 
Camillo Lisio, Executive Vice-President
(514) 328-3314