Saputo Inc.

Sandy Vassiadis - Director, Corporate Communications Louis-Philippe Carrière - Chief Financial Officer Lino Saputo - Vice Chairman and CEO

Peter Sklar - BMO Capital Markets Mark Petrie - CIBC Irene Nattel - RBC Capital Markets Michael Van Aelst - TD Securities Martin Landry - GMP Securities Keith Howlett - the Desjardins Securities David Hartley - Credit Suisse

Thank you very much, folks.

Good afternoon, everyone, and thank you for joining us today. A press release detailing our 2015 Fourth Quarter and Year End Results was issued earlier today and is also available, as we speak, on our website at www.saputo.com.

This call is being recorded and will be posted on our website for future reference. I would like to specific that our listeners on the phone and on the Internet, as well as journalists are on a listen-only mode.

Members of the media are invited to ask their questions by phone after this call. Before we proceed, I'll remind you that certain statements that will be made during this call may constitute forward-looking statements within the meaning of securities laws.

Caution should be used in the interpretation of such statements since management has made certain assumptions, including, among others, assumptions regarding projected revenues and expenses; and references to beliefs, expectations, objectives and strategies that are subject to a number of risks and uncertainties, which could cause actual results to differ materially from those presented in such forward-looking statements. For more information on these risks and uncertainties, please refer to the materials filed with the Canadian Securities Regulatory Authorities, including our most recent annual report available on SEDAR.

Any forward-looking statements made during this call is based on management's current reasonable estimates, expectations and assumptions, and we do not undertake to update or revise such forward-looking statements, except as required under securities laws. The speakers today are Mr.

Louis-Philippe Carrière, our Chief Financial Officer; and Mr. Lino A.

Saputo, Jr., our Chief Executive Officer and Vice Chairman of the Board. After a brief presentation, we will conclude the call with your questions.

Louis-Philippe will now begin the conference, followed by Lino, Jr.

Thank you, Sandy, and good afternoon. Before I will comment on our fiscal 2015 results, I will cover our results for the fourth quarter of fiscal 2015 in comparisons to those of the corresponding quarter last fiscal year.

Adjusted net earnings which do not take into account, gain on disposal of a business, acquisition, restructuring and other costs amounted to $127.2 million, a decrease of $25.6 million or 16.8%. Consolidated earnings before interest, income taxes, depreciation, amortization, gain on disposal of a business, acquisition, restructuring and other costs, the adjusted EBITDA totaled $232 million, a decrease of $45.8 million or 16.5%.

The EBITDA of the U.S.A. sector increased by approximately $13 million, increase sales volumes, better efficiencies and lower ingredient costs positively contributed to EBITDA.

During the quarter combined market factors were unfavorable by about $23 million in the fourth quarter, which include an unfavorable inventory realization and unfavorable average block market per pound of cheese, a favorable spread, a favorable commodity price in Dairy Food division. Weakening of the Canadian dollar versus the U.S.

dollar added approximately $16 million in EBITDA. EBITDA for the Canada sector decreased by approximately $27 million, higher production, warehousing and logistical costs and an increasingly competitive market offset increase sales volume and the positive contribution of the Scotsburn acquisition.

The disposal of the Bakery division negatively impacted EBITDA resulting from a five-week contribution in the fourth quarter of fiscal 2015 as compared to fourth quarter last fiscal year. EBITDA was also negatively impacted by approximately $8 million in additional administration expenses related to the analysis of the new ERP system, as well as the timing of certain expenses and certain year-end adjustments.

EBITDA of the International sector decreased by approximately $32 million, primary reason for this decrease was lower prices in export markets, negatively affecting EBITDA of the Dairy Division Argentina, Dairy Division Australia and the Dairy Ingredients Division. Sales volumes decreased in the Dairy Division Argentina negatively impact EBITDA.

Included in the international EBITDA for the quarter is an inventory write-down of $2.7 million. Consolidated revenue for the fourth quarter amounted to $2,514 million, an increase of $28 million or 1.1%.

During the fourth quarter the company had approximately $58 million in property, plant and equipment, issued share for cash consideration of $28.6 million as part of the stock option plan, paid out $50.9 million in dividend and repaid debt for about -- for $272 million. Now I would like to highlight some of our fiscal 2015 results.

For the fiscal year ended March 31, 2015, adjusted net earnings as defined previously totaled $582.8 million, a 2.8% increase in comparison to fiscal 2014. And adjusted basic earning per share was $1.48, a 2.1% increase as compared to $1.45 per share of fiscal ’14.

Consolidated earnings before interest, income taxes, depreciation and amortization, gain on disposal of a business, acquisition, restructuring and other costs, adjusted EBITDA amounted to $1,062 million, an increase of 4.1% to last fiscal year. EBITDA for Canada sector decreased by $52.9 million or 11.6%, while the EBITDA of the U.S.A.

sector increased by $65.1 million or 13.9% over last fiscal year. EBITDA of the international sector increased by $29.1 million or 31.2%.

Consolidated revenue reached $10.7 billion, an increase of $1,425 billion or 15.4%, compared to $9.233 billion in 2014. During fiscal 2015, the company generated net cash of $769.8 million from operating activities, disbursed $65 million for business acquisition, generate $114.3 million from the disposal of the Bakery Division, added $186.9 million in property, plant and equipment, made debt repayment of $380.4 million, issued shares for a cash consideration of $54 million as part of the stock option plan, paid $197.7 million in dividend and paid $48.8 million for the repurchase of share capital as part of its normal course issuer bids.

Board of Directors approved a dividend of $0.13 per share payable on July 16, 2015 to common shareholders of record on July 6, 2015. Lino Junior will now proceed with the presentation of our outlook.

Thank you, L.P. and good afternoon to you all.

Allow me to begin by stating that fiscal 2015 proved to be a challenging year for us. Although we grew financially and operationally, results are behind our expectation.

Adjusted net earnings have increased 2.8%. Revenues are up 15.4% and adjusted EBITDA has increased 4.1%.

We believe our business strategies are sound, and we will refocus our efforts and our resources on execution In fiscal 2015, we remain committed to our growth through acquisition. The most recent the everyday cheese business in Australia is in line with our stated strategy.

It will enable Warrnambool to increase its presence in the domestic market through strong retail brands. In each of our divisions, we pursued finding and implanting efficiencies for cost and time savings and made strategic changes to operations for short and long-term gains in production capability, product distribution and export capacity.

In Canada, we faced intensely competitive market conditions and higher ingredient costs. We were unsuccessful in obtaining efficiency targets due to the delay in the completion of certain projects in specific operational initiatives, which resulted in higher warehousing and logistics costs.

The Dairy Division completed the consolidation of its warehousing activities in the Montréal area. Two manufacturing facilities were closed and production was relocated to our other plants.

The Bakery Division, which represented approximately 3% of the Canada sector’s revenues, was sold on February 2, 2015. The results from our USA sector were strong in spite of some unfavorable market factors.

In the Cheese Division, past efforts to reduce costs resulted in improved operational efficiencies. This helped the division minimize the effect of fluctuating cheese and dairy ingredients commodity markets.

The division drove sales growth by securing new customers and expanding sales to our existing customers. New flavor innovations introduced to the market prove to be appealing to consumers.

Within our Dairy Foods Division, we developed innovative value-added products and focused on improving sourcing flexibility and reducing future costs. In our international sector, fiscal 2015 results generally met our expectations in spite of the drop in cheese and ingredient prices on the export market which affected profitability.

In Argentina, two new production lines began operating. Both lines were built with the latest generation equipment to increase capacity in manufacturing and packaging.

We also consolidated our distribution to a new logistic and warehouse center. Our solid foundations, robust operations and ongoing capital investments in our asset base are creating an ideal platform for future growth.

Looking ahead, we feel confident we can improve operations within our control and strengthen our company to more adequately withstand market challenges such as pricing fluctuations and higher levels of competition. We will remain focused on growing organically and through acquisitions, implementing operational efficiencies and producing the nutritious high-quality dairy products we probably offer to consumers in more than 40 countries around the globe.

Our experiences from this fiscal year will provide us further insight as we move forward. I’d like to thank our employees again this year for their outstanding efforts towards achieving many important objectives.

Our culture is our key differentiator and I know we could not experience the same success without appreciating and trusting our employees. In terms of food safety, it remains our top priority.

We ensure the products we make available to our customers and consumers are safe and of the utmost quality. Throughout our operations, we keep a constant focus on the goodness of milk and safe processing methods.

We depend on dairy producers to provide high-quality milk from healthy herds and this begins with high standards in animal care and handling. As such earlier this week, we announced the implementation of our most progressive animal welfare policy to date.

An agreement is concluded with the University of Guelph and the University of Wisconsin-Madison to fund animal care programs and initiatives. We aim to reinforce our commitment to bringing industry leaders and dairy farmers together to improve animal care on all dairy farms.

Social involvement remains extremely important to us. Each year, we invest in various communities where we have operations to promote a healthy lifestyle for people of all ages.

More particularly this year, we funded the improvement of several sports and leisure facilities and invested to help key organizations grow and continued to build awareness, educate and encourage thousands of people to move and eat well. I’d like to commend the organizations that have allowed us to help build stronger communities.

I'm also grateful to our clients, suppliers and partners who entrust us with their business. We remain dedicated to provide the best Saputo has to offer and we look ahead to our next fiscal year with confidence, vigilance and gratitude for our success.

On that note, I thank you for your time and we will now proceed to answer your questions. [Alice] [ph]?

Okay. Thank you.

Lino, on your international segments, if you look over the last number of quarters, the cheese and whey price had been declining for a number of quarters now. But the EBITDA in the division had held up this quarter and Q4 was kind of more of the same trend in terms of the decline in commodity prices but you experienced a pretty significant decline in EBITDA.

So, I’m just wondering what the explanation for that was because division sell a lot on forward contract and then those contracts expired and you were selling in a new pricing environment or what happened?

Yeah. If you recall and I believe it was in the Q2 call or the Q3 call, we did mention that.

Even though the market prices were dropping dramatically at that point, we did have some forward contracts both in our Australian and our Argentinean business. Those contracts have since expired and we are seeing the effect of the lower prices now.

And is there any other explanation for the decline of EBITDA level or is that the principal reason?

That’s pretty much a principal reason. If you look at the way they were set up in Australia, the milk price itself is influenced important by the international pricing.

So there is some reduction at the raw material cost levels. However in Argentina, we don't quite have the same effect.

And so sometimes when foreign exchange is not declining at the same rate as the international selling prices are declining, we feel a double-whammy there.

Right. Well that kind of led to my next question is, how do you feel that the milk price is going to play out because I mean doesn’t the milk price need to react to this new pricing environment?

Generally, in those countries, where you’ve got the dairy farmers that are honed in on international selling prices of daily solids, you will have an adjustment on the milk price, so that would be true for countries like Australia, New Zealand. So our platform in Australia will have a better way of reacting to the decline in milk prices.

And of course when the milk -- when the selling price goes up, so too does our cost of milk, but unfortunately, Argentina does not follow the same system.

Okay. And just switching to Canada, the new DC in the Montreal area, the Montreal DC consolidation that’s late seems to be a drag.

When is that going to start to even out and be a contributor to your results?

So from an operational perspective, the Montreal DC is running well. The hiccups we had if I go back to the second and third quarter of last fiscal year have been resolved with respect to getting our product through the system and to customers.

So we did have some hiccups there in terms of being able to service our customers for a very, very period of time. However, the lingering effect is that we have to store more resources at it.

And we do currently have more resources in the Montreal DC than what we had anticipated when we first designed this project and this warehouse. I would say Peter to be fair going out I don’t think the resolution of the cost structure in Montreal DC is going to be short term.

I think it will be a bit more medium term. And the benefits will still be there as we had defined, but it will take us a longer time to get there because our primary focus is to make sure that we hit our order fill rates that are historic to our company.

And that means we need more resources to make that happen. That’s what we are going to do in the short term.

Ultimately medium, longer-term I think the benefits will be there.

Okay. Thank you.

Good afternoon. Just on the Montreal DC, just following up on that, medium term, does that basically mean kind of the next year?

Medium term for me would be somewhere within two-year timeframe, two or so year timeframe, within one to three years.

Okay. Thanks.

And could you just talk about competitive level in Canada? Obviously this isn’t necessarily a new theme, but it seems like the impact perhaps is accelerated a little bit.

Could you just talk about that and across channels be it retail or food service?

Yes. So this last fiscal year has been probably the most competitive that I have seen in probably 10 years in Canada.

We’ve seen increased competition on the two sides. We’ve seen increased competition on the fluid side.

And so I guess some of our competitors went out for market share gains. On the positive side, we maintained a lot of our contracts with our customers.

And in fact, in some cases, we’ve extended our contracts with some of the customers and banners that we’ve had, but this came at an expense. I think now with our new fiscal year in place with [indiscernible] in place, there are some great initiatives that we are putting rolling out in our Canadian division.

I think that will mitigate some of the shortfalls of the reduced pricing that we rolled out. So, again very, very competitive fiscal year that we’ve just come through in Canada.

I think the competition will continue, but I think we are much better equipped to handle it today than we were even a year ago.

Okay. Thanks.

And then just lastly in terms of the international segment, I mean it seems like the lower prices are going to have an impact for a while on you and obviously your competitors. Could you just talk about your outlook on M&A?

If you see this landscape eventually kind of playing in your favor as it relates to consolidation and what your outlook is there?

Yes. So maybe if I just give a little bit of perspective of what the economists are seeing in the international markets, the tone of the markets are weakened.

A lot of the economists are saying that it may remain weak through this calendar 2015 and perhaps early 2016. So I don’t see much relief until say January 2016.

Part of the issue here is that you’ve got the milk producing exporters that are slightly up in their production, but you’ve got the import countries like China and Russia. They are down in terms of their imports.

I have seen some numbers as high as 40%. Now there are other countries in the Pacific Rim like Japan and South Korea.

Thailand, Mexico, Malaysia, and Egypt, they are all up in terms of their imports of dairy products, but it certainly is not enough to compensate for the lack of volume in China and Russia. So I would suspect -- so to answer the first half of the question, I would suspect that there would be some weakness in the international markets going through this year calendar year and perhaps into calendar 2016.

That being said, I would agree with your assessment that it may weaken some other companies. We are fortunate that our balance sheet is very, very clean and that we’ve got enough flexibility to be able to navigate through some of these waters even though there might be some short-term pain.

There will be a lot of long-term gain. I would suspect that there would be companies out there that would have to find a solution if their balance sheets are not quite as clean as our balance sheet.

They may have to find some solutions to properly leverage themselves and perhaps maybe one of the solutions would be a sale of their business. So again, we’ve seen companies sold in very good economies.

We’ve seen companies sold in not very good economies. In upswings in the market and in downswings in the market, I think this is going to be perhaps a catalyst for increased activity on the M&A side.

Okay. Thanks very much.

Thank you.

Thanks. And good afternoon, everyone.

If I could just turn back out to the international segments for a moment, we have the WCB numbers. And if we back those out, it does look as though the rest of the business was operating in the red, would that -- first of all, is that a fair calculation?

And second of all, would that really all be as a result of the lower global prices and the impact on Argentina?

Well, I would say that in our Argentinean business, we do sell into the domestic market and we sell into the export market. I would say to be fair with you that the export market is running in the red.

Yes, that is a fair statement. I would also remind you that we do sell beside cheese we sell ingredients as well into those markets, WBC and weight powder.

And that’s has been anywhere from 25% to 45% drop in selling prices there and that has some impact on our Canadian impact. That has some impact on our U.S.

business and has impact as well on the international businesses that do sell value-added byproducts. So we are feeling the effects of the depressed markets just about in all of our sectors.

That being said though, I think the U.S. sectors responded extremely well, both on the cheese side and on the dairy food side to make up some of those losses pretty dramatically.

Absolutely. Presumably, Irene, I mean, clearly with the economics of the byproducts, the reduction in prices has a very significant impact.

But presumably, you are still making money on byproducts with the current level of pricing.

Yes. We are making money on the byproduct side, unfortunately not as much as we were -- we used to make when the prices were little bit healthier.

Yeah. Absolutely.

And then again, sorry, just continuing with the international, as Peter noted, I mean, it was a really significant drop-off as the hedges rolled-off. If all else remained equal, is this kind of the current run rate in the near-term from the segment or should we expect to see improving EBITDA as we go forward?

I think all things being equal. The Australian business has more opportunity to manage their margins based on their cost of milk.

Argentina does not have that flexibility. So that’s probably as much guidance as I can provide, Irene.

That’s great. And finally just one other question if I may.

I was wondering if you could just provide us a little bit more color on this project, this ERP system project, which clearly is a very significant project over the next four to five years? And also just wanted to double check on the $20 million, $25 million that is called out in the release as the annual benefit when the “project is completed,” is that five years from now or does the benefit kind of scaling overtime?

Yeah. So I’ll talk about the ERP project itself and then, perhaps, LP, can jump in a little bit with some of the numbers there if you’d like to.

But the ERP for us, we have a current system that is in place. Let say, [Maestro AS400] [ph] system, which served us extremely well up until now and it can service extremely well, perhaps, for another 15 or 20 years.

However, as we see the opportunity for increased acquisitions in the future, the [AS4] [ph] system will not be adequate to support the growth of our business. And so, we definitely have to take a look at where we currently are.

We have to make sure that we’re building the infrastructure and the technologies appropriate for what we expect to be our growth and that unfortunately means that we have to spend money in our IT systems. So we -- it’s been about a year now that we've been evaluating different systems.

We have spent some money as you've seen in our disclosure here in our past fiscal year and we will continue to spend money even before we have a system that is ready to go. So I suspect that the role out of the system is going to be anywhere from a five to six-year plan.

I’ll pass it on to LP to see if he has got any further comments on numbers if you want to talk about that.

Yeah. I will say, at this stage, certainly, it’s a, I would say, filing in progress or something on which as Lino was mentioning, we start essentially year and a half, two years ago, just as preliminary analysis.

Just to see if where our system in term of software is fitting into the business model that we are. More emphases this year and certainly we’re at the junction of which we are going to make a choice in term of the essentially service software provider, so there’s going to be a choice that will be made throughout next year and we intend certainly to spend some money.

As we disclose essentially as the starter it's probably around $47 million of CapEx in light of not only the software but in light of starting essentially the program throughout this fiscal year. The overall project we estimated between $210 million and $250 million of essentially investment over the course of the next five years.

And to answer your question, when the saving, the estimated saving that we are figuring out today are going to come its after completion. So it’s not going to come before essentially, five years.

And we estimate that could be between $20 million and $25 million. We have a range from CapEx spending, as well as from saving spending because certainly throughout that process, it’s not that you're starting and there is no evolution.

There are going to be some evolution in term of even some model that we going to take, that we are going to keep and this and that. So it’s -- that’s why we’re giving a certain sense of where we are going with it and essentially, so each planning will be established in accordance with that.

But essentially that’s the timeframe five years and between $210 million and $250 million.

Thank you. That’s very helpful.

You’re welcome.

Hi. Thank you.

So just starting on the Canadian side, you highlighted in your press release the low levels of capacity utilization in milk and cheese. And I was wondering if there would be an opportunity to boost that capacity utilization in an environment where we still have supply management and you still have there plans in every problems that you take milk in.

So is there much duplication of plans by province, I guess is what we trying to look, what I’m looking for.

Yeah. Under the current system of supply management, unfortunately, there isn't a whole lot of low-hanging fruit.

I mean, a lot of the low-hanging fruit, I think we’ve materialized it. That doesn't mean that there aren't small operational improvements that we can make to drive more efficiencies.

But if you're talking specifically on capacity utilization, we’re pretty much where we need to be in function of the Canadian quota system.

Okay. And on that, TPP is taking a bigger profile in the media lately and seems like that could ramp up over the next few weeks.

And it doesn't sound like if there is a deal, eventually the Canada can afford to not participate. So under the different scenarios, how do you see the impact differing among the different outcomes?

So like in other words, what you think is a worst scenario for -- or a better scenario for producers -- processors, sorry? Is it elimination of the supply management system, or is it an increase in the import quotas?

Well, let me talk about the worst scenario. Worst scenario is the uncertainty that the status quo of not knowing what’s going to happen.

No matter where TPP goes, as long as we have a clear definition of what the future the dairy industry is going to look like, it's very easy for us to plan. In the current limbo, it’s very tough for us to plan a lot of future plans within our Canadian infrastructure.

Now having said that, TPP, yes, you’re right, it is top of mind with the politicians and there’s a lot of debate and a lot of discussion going on. I know it is a priority for the U.S.

government. It’s a priority for the international government, including countries that we would eventually deal with.

It’s going to take some time to negotiate and it's going to take some time to roll out if there is a conclusion on the TPP. Best case scenario is we have access to the world markets from our Canadian platform.

That really, I think would be a very good outcome. And I’ve said these many times before.

We have knowledge of the international markets. We know how the best dairy supplying countries in the world operate.

We know how the U.S. operates.

We know how Canada operates. And if the borders would open up, then I think when we talk about things like capacity utilization, supply of milk, processing and distribution, getting product to consumers, we know how to do all of that.

We just need to know what the rules of the game are going to be. And in the absence of any clarity, especially in Canada, it's tough for us to think about large investment in our infrastructure.

Now like I said, there are some operational efficiencies that we know we still can attain. And quite frankly, I'm disappointed at our level of execution last year in Canada.

I mean, there are certain things I think that we could have done better to mitigate some of the competition we had. Quite frankly, we didn't deliver.

And I'll be very clear and very honest about that. But we know that some of those opportunities do still exists even under the current context of the milk supply manage system.

So again, if I think about the world going forward, if we would have access to more consumers, I think that would be a benefit for a company like Saputo.

All right. Thank you.

Good afternoon. Just want to touch on a little bit the margins in Canada.

I’m just trying to get a sense if you expect further pressure on margins or you think that they are going to stabilize in '16 and perhaps to grow a little bit from fiscal '15?

So why don’t I talk about the issue that affected us in Canada specifically this year. One would be the lack of execution at the Montreal DC, that’s all internal, that I think that we should be managing and managing better.

But like I mentioned before, it's probably the benefits are going to be maybe one to three years out before we recapture the improvements there. The second one was some plant rationalization that we had announced that we had talked about that quite frankly we didn't execute as well as we should have.

That to me in this fiscal year we should be getting those benefits in our operations for this year. And the third item is the competition.

I mean competition we faced it before and perhaps we might face it again. But again thereto with some of the improvement that we can make in operations, I think we can mitigate some of that.

So I would say that we probably had a low point in Canada. Specifically, I would say in the third and fourth quarter of this last fiscal year which I expect we could recapture a lot of that, excluding some of the one-time expenses or some of the expenses we had in the Canadian sector with respect to some of the initiatives that we outlined in the disclosed information.

From an operational perspective, I think we can recapture some of the losses.

Okay. That’s helpful.

And then in the U.S., it seems that you’ve had some volume gains during the quarter. I’m just curious what segments were they -- was that more retail foodservice or industrial?

Yes. So we saw gains in volume in both our sectors in the U.S.

on the cheese side and on the dairy food side, so both of those platforms were growing. The majority of our volume in the dairy foods space is industrial, but we did have some really interesting retail gains on some branded product at the dairy food side.

And in the cheese side, we saw gains both at the foodservice side and at the retailer side. So it's pretty widespread across the entire platform.

Okay. Thank you very much.

Thank you very much.

Yes. Thanks.

Just on the Canadian market, in terms of the price competition, is it in both the foodservice channel and the grocery channel?

Yes, in both channels, but we saw a lot of activity again going back to the third and fourth quarter of this year at the retail level. And then this is where we were able to reengage with some of our key banners and think about a more longer term perspective with them which we were successful at.

In terms of the milk price in Canada at least around Ontario many of the grocers suggest they sell milk at a loss. Are they trying to get you to participate in that or you somewhat insulated from that?

We are somewhat and again this is provisionally. We are somewhat insulated because there are minimum pricings that we cannot -- at minimum pricing thresholds that we cannot go below.

So we are somewhat insulated from that, but that goes on a province to province basis.

And then just in terms of the ERP system. Was there any component of the issues at the consolidation of the Montréal DC that in anyway factored into the idea of new ERP or do that predate the Montréal DC issue?

That’s pre-date the Montreal DC, as well as mentioning, we start [Technical Difficulty] preliminary assessment of our system with the longer-term view to see essentially where we are going if the system would make their road. Or if there would be some change to be made in light of essentially the growth of the company for the future.

So we are building [indiscernible] there is nothing, it has no revolution between distribution in Montreal DC.

And where do you capture, I know it’s a long time out, but when you get the benefits when the systems completed, where do those benefit show up, does it show up in gross margin or SG&A or…?

By how we see gross margin, there is certainly some efficiency even from I will see to get to the market for which we could see some benefit. I would see there's some duplication, don’t forget also that even throughout I would see the recent acquisition.

We’re working on different platform even through the Morningstar acquisition and also to the WCB acquisition in Australia last year. So certainly, there's the duplication of certain software platform for which essentially there's some gain to come from that.

Over and above that there certainly with we will see different system being consolidated. You get some efficiency from essentially your process generally speaking.

And just on the international segment. In terms of the contracts which I guess help delay the impact of global dairy pricing.

Do you change your view on contracts depending on your view on the commodity? In other words, will you still have the same 3, 6, 9 month contracts over the next year or year and half or will you shorten your contracts if you anticipate the dairy prices are going to go the other way?

Yes. Typically, when we see the horizon not as sunny, typically we will have shorter contracts.

Shorter contracts?

Yes. So in the depressed market, we won't go out to nine months.

We will do shorter-term contracts perhaps month-to-month or maybe a one quarter out max.

Thanks. Great.

And then just finally on Argentina, as I understand perhaps there the internal milk price doesn't adjust to the global price very quickly. How does it adjust or what’s the way or does it adjust or how does that work?

Yes. There is no bearing on the international pricing for dairy solids on the selling price of milk in Argentina.

So Argentina is purely domestic focus. It’s based on what it cost the dairy farmer to produce dairy solid.

And so we had the benefit in the last 10 or 15 years that the international markets were strong vis-à-vis the Argentinean peso. There was always a foreign exchange advantage for us and it made it really interesting for us to sell into the international markets.

Not because the pricing of milk itself would be in correlation with the international pricing of the selling solids, but only because of the foreign exchange or what we’re paying for milk in Argentina. What we are seeing in this quarter here there is no devaluing of the peso, but there is lower revenue that we’re generating for those solids and so we are feeling the effects of that now.

Thanks very much.

All right. Thank you very much, Keith.

Thanks. And that just to ask the question on whole M&A question.

If you can just update us on what your current thinking is around opportunity, where are you seeing the best opportunities if the current environment change your view on opportunities in South America that kind of things?

Yeah. The current context and let me be clear about this.

We don't have a short-term perspective on what our strategies are going to be. Our strategies are really forward-looking into a year from now, three years from now, five years from now, 10 years from now and perhaps, even for the next-generation, what kind of platform we want to have.

You look at the consumers of dairy solids of tomorrow are not going to come in those mature markets they are going to come in those emerging markets. And it’s important for us to have those platforms and to have the infrastructure and the ability to service those consumers from dairy producing countries and so we are going through a blip here where the dairy solids pricing is depressed.

We are not overly concerned about that kind of stuff. Doesn't change the fact that there was an opportunity in Europe or in Brazil or perhaps another opportunity in Australia or New Zealand that we wouldn’t look at it, we certainly would look at it.

We are building this business for the long-term. We are building this business to make sure that we will be a dairy provider of solids from a long-term perspective and that we would be geographically diverse.

So it doesn't change our outlook for M&A. Now the files that we have that we look at would include all of those countries, including some of the domestic markets that we are in.

Canada again smaller opportunities but build still some opportunities where we can have a little tuck-in business here and there. In the U.S., I think both on the cheese side and on dairy foods -- in the dairy foods space there will be opportunity for us to consider small, medium and large sized acquisitions that would further complement our domestic presence and perhaps, even give us incremental solids for the international markets.

So by no means we discouraged about the international markets or the potential of the international markets can have for us from a profitability standpoint. I have said these many times before, there are going to be blips on the radar screen that are not going to be favorable for us.

That's okay. That will happen.

But we force ourselves to keep our balance sheet cleaned. Every month that goes by we are paying down debt and if we don’t have an acquisition than our balance sheet get that much stronger.

And so we like to keep the financial flexibility to be able to jump on those opportunities perhaps sometimes when people are suffering and that’s just been in our DNA. And I can recount years perhaps in 2005 and ’06, when it didn’t look like the future was that bright.

We were still extremely optimistic about the potential this company had and thereafter made a number of acquisitions that brought us to becoming a leading dairy processor, not just in our domestic markets, but as a global player. And so I am still very, very optimistic about the future, really optimistic about the opportunities we have ahead of us.

So again to answer your question, if there is an opportunity in the international markets that would make strategic sense for us for the long-term we will definitely look at it, but we are also looking in our domestic markets.

That’s great. Thank you.

Thank you, Irene.

Thank you very much. Just want to ask you a little bit about your CapEx, come back to that?

So just unclear $48 million that you referenced for 2016, that’s included in the $210 to $250, correct?

Yeah. That’s included in the $210 and $250 and that’s include also, we have essentially, we are planning for next year 2016 about $218 million of CapEx spending, for which it would include -- it is including the $48 million that’s refer to ERP also.

Okay. That was my next question.

Thanks a lot. And when you think about share repurchases.

I don't think you had any this quarter and limited amounts in the last quarter or so. Is that still something that you're looking to do?

The program is in place as far as essentially renewed last November for which essentially the program is there, so we have, we can certainly act in light of that normal course issuer bid that program and we will make our assessment, if there is any movement on that.

Do you know how much more you can buy into that program currently?

It’s a same pattern essentially in term of the 5% essentially as you can buy on yearly basis with we will see barometer that’s essentially the program is imposing, but essentially it’s well disclosed in the quarter the amount of shares…

Yeah.

… in the last quarter publication in last February the amount of shares that essentially we can purchase all the other businesses.

Okay. And finally, the investments you make in ERP and really in shoring up the Montréal situation and other initiatives, you have to drive synergies and efficiencies, et cetera, does that in any, which way prevents you or slow down any process of looking at acquisitions out there, big or small?

Not at all, no. Zero.

We have our sideline team that’s looking at ERP, headed by our Chief Information Technology person, Richard, who we hired I’d say over a year ago. He's developed a team of internal experts that will have them focused exclusively on ERP, so that everyone else can focus on day-to-day initiatives, including acquisitions and integrations.

And also certainly as was mentioned in that with the preliminary study, just to remind our self where we are going with ERP software, it starts about two years ago and it then prevent us to buy, let’s say Morningstar as well as even to invest and buy Warrnambool in Australia. Even though as was mentioned, they are operating on different software today.

So, no, even if we are entering into with the renewal of our software until the next five years that’s not going to stop us to materialize an acquisitions, not a question of system. If we have to leave it aside and maybe, we are going to be integrating them in let’s say a new software in the year and two years and three years from time to time.

So it could only more, I would say facilitate the integration in knowing essentially where we are going from software standpoint.

Okay. That’s great.

And last question, I was just wondering on some of the initiatives you have there, the DC benefits that are to come and the closing of the two plants, et cetera. I mean could you tell me, or remind me of what those benefits would be in numbers and dollar numbers?

What you are asking me -- I don’t have specific answer for you. I would have look back essentially when we initiated that program was almost a year and a half ago.

But I don’t have specific answer to you.

Okay. Thank you very much.

Thank you very much, David.

Yes. Just had a question on the Argentinean line improvements, is that adding capacity and if so, how much capacity would you be adding?

Yes. So, it is two-fold.

One is incremental capacity. The other one is increased efficiencies.

And I think with our investments that we’ve made in Argentina in the 12 or 13 years that we’ve been operating there, we have become, I would say the most efficient and effective operator there. So if I go back to 2003, we were processing about 400 million liters of milk a year.

We are upwards of about 1 billion liters of milk. So over the course of our 13-year history, we’ve more than doubled our milk intake and we’ve become more efficient.

And then just one question on Warrnambool. I take it, they will still report twice a year, just not in sequence with your fiscal year end, is that right?

Yeah. Essentially, we shored the year-end to March this year end and 2015 and essentially Warrnambool’s report on May 22nd for its whole year and certainly the second half of the year and what is going to be planned essentially is we are still going to continue to report twice a year.

So technically after the six months period ending in September, there is going to be a reporting on the market.

Thank you.

Welcome.

Thank you very much, folks.

We thank you for taking part in this conference call. We hope you'll join us for the presentation of our fiscal 2016 first quarter results on August 4th.

Have a nice day.