Saputo Inc.

Sandy Vassiadis - IR Lino Saputo - CEO and Vice Chairman Louis-Philippe Carrière - CFO

Patricia Baker - Scotia Bank Mark Petrie - CIBC Peter Sklar - BMO Capital Markets Irene Nattel - RBC Capital Markets Michael Van Aelst - TD Securities David Hartley - Credit Suisse

Thank you very much, José.

Good afternoon, everyone and thank you for joining us today. A press release detailing our 2016 fourth quarter and year-end results was issued earlier today and is also available as we speak on our Web site at www.saputo.com.

This call is being recorded and will be posted on our Web site for future reference. I’d like to specify 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, please be reminded that some of the statements provided during this call are forward-looking.

Such statements are based on assumptions that are subject to risks and uncertainties. Refer to our cautionary statements regarding forward-looking information in our annual report and our quarterly releases and filings.

Please treat any forward-looking information with caution as our actual results could differ materially. We do not accept any obligation to update this information except as required under securities laws.

Mr. Lino Saputo, Jr., our Chief Executive Officer and Vice Chairman of the Board will begin this conference by providing his brief overview of key highlights relating to fiscal 2016.

After which he and Mr. Louis-Philippe Carrière, our Chief Financial Officer, will proceed to answer your questions.

Thank you, Sandy and good afternoon to all. Our fiscal 2016 results are a clear indication of our resilience.

Once again we met industry challenges head on and today we're posting impressive numbers. We continue to apply high standards of execution to existing operations and employ the same culture in our newly acquired businesses.

In fiscal 2016, we completed two acquisitions Woolwich Dairy with platforms in the U.S. and Canada and the Everyday Cheese business in Australia.

Both businesses are now fully integrated into each of their respective divisions. In Canada, though faced with competitive market conditions, we continued to expand our reach and contributed to growing our customers' product lines.

As a result, we increased our sales volumes, while lowering operational, warehousing and logistical costs. As part of our ongoing analysis to further improve efficiency, capacity and quality, we announced three planned closures to take place in 2016 and in 2017.

Production from these facilities will be integrated into some of our other plants. In our U.S.

sector performance remained strong throughout the year. Both divisions generated solid and steady results.

The cheese division gained market share and distribution for premium and value-added products while the Dairy Foods division continues to capitalize on its innovation model growing new product categories. As for our international sector, global cheese and dairy prices put downward pressure on profitability.

Despite the headwinds, we work with our customers in established markets as we strengthen our position, minimize volatility and controlled costs thereby increasing efficiency. Specifically, in Argentina, we expanded our market presence in the retail segment and introduced new products to the food service sector, which translated into volume increases.

And in Australia, consistent with our growth strategy to service both, the domestic market and expand our international presence, we increased milk intake and successfully integrated the newly acquired Everyday Cheese business. Our results this year are mainly attributable to a strong operating performance.

I would take this opportunity to thank our employees for their steadfast dedication and loyalty. As many of you know, Dino Dello Sbarba, our Chief Operating Officer, has announced his retirement effective April 1, 2017 after close to 30 years of success and dedication.

I am delighted Kai Bockmann who has been with us since 2012 has been appointed his successor. This new challenge reflects Kai's impressive work and supports our philosophy of promoting from within.

And it goes without saying; our people are the driving force behind our success. I am confident our disciplined approach will enable us to further expand our scope and scale around the world.

The fragmented global dairy industry still holds many possibilities for us and we are well positioned to take advantage of the opportunities that present themselves. On that note, I thank you for your time, and we will now proceed to answer your questions, José?

Thank you very much. Good afternoon, everyone.

Lino, can you just talk a little bit about, when you look at the, in the Dairy Foods business, and the fact that you have long-term goal there is to get back to the low cost operator and the most efficient operators there. What’s the timeframe for getting back division to where you really wanted to be?

Well, I would say that the Dairy Foods and 3.5-years or so that we’ve taken control of that business, I think that they’ve, the management team has done a great job or bringing them in line with Saputo’s levels of efficiency. I think it was in a previous call, maybe two quarters ago, where I was asked question whereabouts we were in terms of the full integration of Dairy Foods.

At the timing we were 80%, I’d say we’re very, very close to 100% efficiency now in terms of the going forward operating levels of Dairy Foods. There are a lot of very good things that I’ve been done in the last three years, Dino Dello Sbarba and myself sitting here, spend quite a bit of time through the integration process there, educating our team on how we look at the business from a raw material aspect right through a processing aspect and into a pricing model with our customers.

I feel very, very comfortable with that platform is now, and I think that the results that we’re seeing are sustainable as we move forward.

Can you talk a little bit about the -- where you’re seeing the gains and sharing gain, gains in distribution? Is that stuff that we’ve used to -- pretty similar to what we saw in the last couple of quarters in the U.S.?

Yes, I would say that we saw gains and shares in just about every platform that we’re operating in. With the exception of course, I would say, with Argentina and I’ll speak to that a little bit specifically because of the milk intake issue there.

But if I look at our Canadian operation, it’s been a very, very competitive environment, so I’d say for the better part of about two years. I think we’ve fought the battles that we wanted to fight and I think we won those battles.

So if I look at our Canadian platform as a whole, even thought the markets declining at a rate of about 1% per year, I think we’ve got 2% or 3% gain in overall volume. And I think that’s a testament to the focus and the dedication that we’re seeing from our folks in our Canadian platform.

On the U.S. side, both dairy-foods and the cheese division gained about 3% or 4% in their overall volume.

And again there too, it’s not that it’s less competitive, it is as competitive. But I think we understand the strength that we bring to the table.

Well, I think, we know how to sell to our customers from a value perspective. It’s not just about pricing any more it’s really about being a full fresh dairy provider.

And I think that that story resonates with our customers. In Australia, we picked up volume.

If you recall, last year, when UDP defaulted and the farmers were left hanging, we picked up that milk, processed it through our facility and so we gain market share that way. In Argentina, unfortunately, most recently specifically with the rain and the floods, overall milk volume is down about 30%.

So our milk intake at our plants is down a little bit. And so we have unfortunately not been able to grow that volume, only because in the milk it-self was not there.

So I think in the areas where we control the controllables, I think we’re doing a pretty good job.

So I just want to come back to the dairy food segment. And wondering if you could just talk a little bit about the pricing structure and the relative resiliency of the margins in that segment versus maybe the cheese and buy product market, which has been pretty volatile?

So if I go back three years in history, they were a number of different pricing protocols that were applied at the Dairy Foods business. What we tried to do is link actually the pricing model relative to the actual cost of raw material.

It wasn’t easy to get through that with our customers. But I think today we’re in a much better position whereby if there is an increase in cost at the raw material level, we’re able to pass that increase over to our customers.

And of course if there is a decrease in due past, that decease as well. So, I think Mark to answer your question, we’re much better aligned with our cost to raw materials and Dairy Foods.

And so when we think about the impact of lower dairy prices across your U.S. segment as well as international, which segments would be most likely to be pressured and which ones do you have a bit more resiliency be it serving a domestic market in Australia or something else?

So if I look at the U.S. model, I would say within a lag of maybe three weeks or four weeks.

Typically, the milk price itself, will balance out with the selling price of good. So not a whole lot of impact when you look at the volatility, other than the overhead absorption issues use in the higher market, we’re able to absorb a little bit better the overhead.

Where we have a little bit more of a lag, would be in the international markets where it's not a direct correlation, international price to milk price.

Then in Canada, obviously, some strong margin expansion there in this quarter. How much of that would be the market sort of normalizing coming out of a period of pretty severe competition?

And how much of that would just be you guys cutting cost and gaining efficiency? I guess probably mostly in the distribution.

I think the majority, upwards of 90%, are efficiencies that we’ve employed over the course of this last year. What we decided to do at the beginning of the fiscal year with Carl and his team was on focus on very few projects, but to complete them at a 100%, including the much all received by the way.

And I can say that today the more we see is running at the level that we expected it to run. We’ve got some efficiencies like we materialize on the operations level with some key manufacturing facilities, over the course of the last fiscal year.

And again, if you will think about the going forward basis, we have to right-size the business for the context of the regulatory environment. And so the three-plant closures that we announced, unfortunately, are a direct reflection of what's going on in the industry.

So I think as we move forward we’ll continue to right size our business to be efficient.

If we could just turn for a moment to M&A opportunities. You noted, I mean reflection that you have the financial capacity, which you clear do.

And certainly one would think that given the global market some interesting opportunities could present themselves. So, can you please remind us; number one, at this point in time, what you would view your balance sheet capacity to be?

And number two, can you talk about what opportunities you are seeing across your key markets?

So, on the balance sheet itself, we did materialize two acquisitions last year Woolwich and Everyday Cheese. And again, with respect to the size of our operations, perhaps not that impactful, so what does kind of leave us quite a bit of leverage on the balance sheet.

I would say anywhere from $3 billion to $3.5 billion, we would feel very, very comfortable with. If we had to go beyond that, if the business was strategic enough we could do goal, maybe little bit beyond the $3.5 billion.

So the limiting factor for us is not so much the leverage on the balance sheet. Delivering factors identifying those opportunities that we believe what have a strategic value for us.

Beyond the price that we were pay for it, first and foremost, the assets that come available for sales have to add value for our business. And if they don’t add value for our business, sometimes at any price are not good acquisitions.

So again, I would say the challenge for us as we move forward is not so much to leverage on the balance sheet, because I think we have got quite a bit of flexibility, it's identifying and finding those opportunities where we feel there are assets that would add value to us. Now I did mentioned in my opening remarks that I believe that the dairy industry, on the global scale, still is fragmented and there still are opportunities for us.

And we are searching for those opportunities hopefully this difficult market environment will presents some opportunities for us. And I am optimistic that somewhere down the road there will be something that we will be proud to be announcing.

But at this stage, we don’t have anything to announce.

Lino, just looking for moment at the market situation in Australia, clearly there is a lot of discussion going on there about pricing to farmers, a lot of very unhappy farmers. Have you been able to outsource or to capitalize on any of that in terms of volume to you?

Yes, well, I am glad you bring it up, Irene. When we went to Australia, it might have been two years ago or so when we were going through this whole process.

We made some commitments to the dairy farmers, we made some commitments to the management, and I think we’ve lived up to every single one of those commitments. We talked about promoting from within, developing the business as much as we can develop it within the confines of the system itself.

We did mention that if there was milk that would be available, we would invest in the infrastructure. And so far when we picked up the farmers of UDP, when they defaulted, we honored our commitment to them, and now we have picked up more milk.

I would say going forward, there perhaps might be others out there that are making promises that they can’t live up to. That’s not the game that we want to play.

Listen, I go to Australia every year in July and I stand in front of those farmers and if I am going to make a promise, I got to make sure I deliver on it. And in fact I’ll be back there in July.

And so we’re very clear and very open and very honest. And sometimes we have to see things that they may not want to hear, but it's a reality of the situation.

And so I think that over the course of the three years we have being in Australia, we have gained good creditability and I think that that will serve us long going forward.

That’s great, thank you. Now among key markets, would you still say that Brazil is a key market that in which you don’t have a presence?

Yes, so we are currently selling into Brazil. Although, the economy is a little bit more challenged today than it was in the past, but Brazil is a platform, dairy platform, that is still very, very fragmented.

We still believe that we could be a consolidator in Brazil. But again there too we have to buy quality assets.

There has been asset available before. We've looked at assets that were available in Brazil and quite frankly we haven't found anything right now that has satisfied us.

We're still searching. We still believe in Brazil.

And again, the way we look at our business is not short-term it's really medium and long-term. We believe that Brazil will be a strong country in the future.

And if we are able to get in at the ground floor with the right assets, we believe we can be winners in Brazil.

In your outlook statements you made comments on USA and international divisions, talking about the cheese and the ingredient prices showing being weak and putting pressure on margins through the third quarter fiscal ’17. Can you help us understand whether you're saying that's kind of we expect -- are you saying that you expect margins to go down, or do you expect?

Or is that -- should that -- I mean that should be reflected in the quarter that you just released and just expecting more of the same through the next three quarters?

So I would say that what we've experienced in Q4 would be more or less what we're experiencing, I would say, into the second half of this calendar year. I think that the recovery of the international market will only happen towards the second half of the year.

So, essentially what we're seeing right now in the industry is production numbers that are starting to tip-off. And if I look at it, it's not just in one country, but it's in a number of countries.

New Zealand's production is down year-over-year. Australia's production within the different segments of Australia production is down.

Argentina, for other reasons, production is down. The EU now I am starting to see some production numbers that are going down relative to the economies of milk markets.

So that gives us a little bit of hope that there is going to be recovery, more towards the second half of this calendar year. So I’d figure by October, November, December, there might be some recovery which would take us into calendar 2017.

So again the markets have stabilized. I think the markets will start the recovery towards the second half of the year.

But we will see perhaps better pricing in the beginning of 2017 and new calendar year.

And in the past you had -- you've been able to contract out some sales agreements at favorable pricing when -- in advance of the cheese prices and commodity is falling off. And then that eventually caught up to you.

Is any of that helping you now?

It is. There are some key select markets where there are some buyers that want to deal with us exclusively, because of the quality and because of the reputation that we bring to every cumulative product that we sell.

Now, having said that, they're also mindful of where the markets are. So there is a slight premium or getting over what the market is, but we do have to in a sense follow the market itself.

So is that -- but are you, like last time around that happened, you had better margins for a few quarters because you’re selling prices and really reflect the market prices. And then all the sudden those contracts rolled off and we saw your profitability in the international segment, in particular, go down.

Is there -- should we be anticipating something like that again?

No, that was because we have loss in those contracts prior to the tumble of the international market. Our customers honored the contracts and that's where we saw that benefit.

But as they lost in going forward, they lock in at a higher price. They locked in at market value plus a premium.

And in Canada, can you comment a little bit on the situation with respect to diet filtered milk, and whether or not you see that impacting cost going forward?

So I'll answer the question, there is no impact going forward. Of course, there is a lot of discussion between the dairy farmers in Canada and our Dairy Association, which is a DPAC.

Diet filtered milk is not a category of milk by the way. It's some name somebody came up with perhaps a journalist or someone I have no idea where that comes from, but its milk protein that is of the highest quality in the world.

So let's be clear on that. So ultimately this product is coming in from the U.S.

There are discussions between the DPAC and the dairy farmers of Canada to see how we can supplement that product with products here in Canada. But again, whatever resolution there is going to be, it should not be impactful to our results.

Is this bringing that into the cost savings at this point, otherwise you wouldn’t be doing it. So, if that was to be, if they were to shut the door on your ability to import that, would that not drive your costs higher?

Well, look, there are two elements here, Michael, there is the cost savings but it is quality product that makes our product high quality as well. So it's not just the cost element, there is a standardization of solids that helps us manufacture a consistent product day in and day out.

Having said that I will use the example that the dairy farmers of Ontario are using in terms of their proposition; they are saying that they want to create a new class that would be equivalent to the cost of what we’re bringing in from the U.S. that would displace U.S.

products for local product. So, at the end of the day on the economic side, there’ll be no change.

And just finally on the Dairy Foods USA, you talk about entering new categories with innovative products. Can you provide a little bit more clarity on that and color?

So essentially what we do is we are a supplier of, for all intensive purposes, clean to some quick serve restaurants, to make product dessert style products. What we do to our innovative center in Dallas, which is a market research center where we do consumer profiles and such.

We identify what the next best trends are going to be. And so, we would suggest to our customers at the quick service level what new innovative products they can put on their menus, which helps them drive business but helps us drive volume.

So some of the examples would be ice-cream mixes and milk shakes, different flavors, different profiles, different categories of products that help them create some excitement at their level, which helps create volume at our level.

You mentioned 3% to 4% volume growth in the Cheese and the Dairy Foods business. Last quarter, you talked about 9% growth in cheese in the U.S.

Is that that you’re lapping tougher comps or is that the competition is trying to fight back or what’s happening there?

No, the comps are more difficult to compare to. Having said that too, though, as one we had to drop in the U.S.

block price at the retail level, we had a lot more flexibility to go out and promote, for instance string cheese product, so yes, so essentially the comps are tough to compare against.

Just in Canada, your ERP program is going to cost you $48 million over the coming five years. And I think you booked $11 million this year.

Should we expect that kind of $10 million-ish type number each year, or does it get front end loaded, incur loss in the back-end?

Throughout to say, the $48 million that you’re referring to is essentially what we spend in CapEx in relation to ERP that’s for this 2016 year. Essentially keeping in mind the overall project is essentially in line with about $250 million for which essentially we spend, from a CapEx perspective, $48 million in 2016 and we have spend in 2017 $91 million on that.

And if you’re referring to Canada, essentially there was some realignment in terms of the share expense that we had to do essentially in Q4. And what’s important to specify that not to create any anticipation in light of the profitability that we are posting for the Canadian segment.

And just with regard to following on Michael’s question with regard challenges to margin. And I am getting the impression here in your discussion, you marks here in Canada that you do have some opportunity to mitigate some of those pressures going forward.

You mentioned the plant closures and others. Net-net, is the pressure net of mitigating factors and opportunities going to be similar?

Is it going to be a similar impact in the coming fiscal year relative to this past year? Or how should we think about that?

I’m just trying to really get up the delta there?

So the way you should look at it is that in all of our market, Canada, U.S. and international included we’re competing against some very, very large companies.

Some of whom have a desire to grow the market share. And this is the nature of our business, like it’s a nature of anybody’s business.

Sometimes when we go out when we’re present in the RFP process, we have to give up some margin. What we like to look at internally, it’s a food always, okay, how can we mitigate the margin give up so that we can maintain our levels of EBITDA from a cash perspective and from a percentage perspective.

So there is going to be pressure from the market where we’ll have to lower our price in order to gain some volume or some business. But by the same token, we’re looking for opportunities internally to become more effective and more efficient to mitigate some of those -- some of what we have to give up in margin.

And you talked about the 9% last quarter for Dairy Foods and lapping that. I mean in this quarter it looks like you had about 4% volume growth overall in the U.S., or sales growth in the U.S.

if you take out some of the one timers and so on. How much of that growth came from acquisitions and how much it came from new business?

Can you kind of break down that growth a bit for us? And correct me if I’m wrong on the 4%.

Yes. Well, the thing is that, you look at the sales number, which includes the fluctuation of the block price.

So we don’t like to look at the sales dollar growth or decline. What we like to look at is our volume growth and decline.

I can tell you that we have had net growth, both in Dairy Foods and the cheese business, without the acquisition. So will reach, of course did have an impact on our overall volume in the U.S.

and in Canada but its minimal relative to what we have actually gained on the market through penetration.

Lino, on this issue, the Ontario dairy farmers proposing a new milk class that would essentially displace the importation of milk solids. I thought, isn’t there a problem in Canada where these milk solids that are largely proteins and there is a real shortage of processing capacity in Canada to deal with the milk and do the -- turn it into the proteins and the butter fat?

So essentially what it would work out to be is the equivalent level of protein value. So whether it comes as a whole milk or it comes as ultra filtered milk is irrelevant, it's a level of protein value that we are looking at.

But I thought there was an absence of processing capacity in Canada.

No, actually the processing capacity exists. The problem is, is that it might be in the wrong category.

You have got class one to class four. So you might have excess milk going into class four.

The capacity is there. Rather than doing in a class four, why not do it in the product that’s going to generate better value.

That’s essentially the discussion we are having.

One more question on another topic. Can you talk a little bit about the EU and with all the deregulation that’s taking place in the industry, how does that impact your view on potential re-entry of the Saputo into the European market?

In terms of potential for us to make any European acquisition has actually no impact at all. For us, because of the experience that we’ve had in Europe with the UK operation and German operation, we understand what the winning conditions would be.

We need size. We need scope.

We need scale. We need diversity.

We need brands. And if we found a business that represent themselves to us with all of those criteria, with or without a heavy regulated market or not, it would be something that we would entertain.

I was just had a couple of follow up questions. Coming back to the issues of global pricing, Lino when you were talking the timeline that you see, I am assuming that in part that reflects the overhang in China that’s estimated to be somewhere in nine-months to a year.

So I am assuming that’s all part and parcel of the outlook at this point in time?

So there are two elements there, one is the demand, which is obviously China and then the other is supply, which is the top five countries supplying the world markets. So there needs to be two things that happen; an increase in demand and a decrease in supply.

And those are the types of things that we are seeing now.

And just in terms of total CapEx budget for F17, if you could just confirm that please?

Yes absolutely, we are talking about $284 million, which would be essentially built up of about $193 million for a flat property and equipment and as well as relating to the previous question about $91 million for intangible are related to the ERP.

That’s great, and then just one final…

And if you ask again the depreciation for next year, Irene, it's a 181.

Okay, thank you very much for that LP. And just one final question, it's been -- you were talking about warrants and how it's fully integrated.

And certainly from a commentary that we’ve seen in the last couple of quarters, I get the impression that you are quite pleased with what you found and that it confirms your outlook in terms of what’s been potentially a nice value creator for Saputo. So I am just wondering if you could talk a little bit about what you -- it has been a couple of quarters since we have talked about that?

Yes, so Woolwich is a nice platform because we already had a go cheese business in Canada. Woolwich was the number one player in that market.

So now of a sudden we become the number one player in go cheese in Canada very, very important player in the United States as well. So it actually compliments our platform.

As part of the fine closures that we announced, one of the plants is a Woolwich plant and that volume will get transferred over to one of our other facilities that makes that facility that much more efficient, and allows us to avoid some CapEx allocation in a plant that perhaps didn’t have the capacity that we expect -- that we need. So Woolwich is going as good as we expected.

If you will allow me, I would like to say a couple of words on the other acquisition, which is Every Cheese business, which complements our offerings in Australia. Now we have the ability to control the domestic presence with some very strong brand in Australia, so that acquisition as well is living up to our expectation.

So not very big acquisitions, when you think about moving the needle. But very strategic, both of those acquisitions were very, very strategic for us.

Just on -- you mentioned acquisition leverage of $3 billion to $3.5 billion, balance sheet -- debt leverage. Can you give us some idea of what the metric would be on the debt to EBITDA basis?

Do you want to be BBB, and is that like 3-times?

Actually we have some objective essentially to maintain on the long run essentially 2 times the net debt to EBITDA. Certainly in light on acquisition, there is no issue to go up.

Actually you can go to 3, 3.2, 3.3 times with essentially the objective of bringing it back in the reasonable timeframe essentially to the level that we essentially feel that it's good for us about 2 times.

So you're not scared to make a huge acquisition at that level 3 to 3.2 times so with your free cash flow, just to be clear, if you've lot of opportunity to pay that down fairly quickly?

Absolutely…

Yes, and those are the types of things that we do when we get involved in a due diligence process. We understand the ability for us to be able to generate EBITDA levels on a consistent basis, and that gives us the comfort to move forward to be able to pay down debt.

So the next question is, how many assets out there comprising $3 billion to $3.2 billion of value or $3.5 billion value that are readily available?

There are a few, you’re right. There aren't a million of them.

There aren't a hundred of them. There might be may be 10 or so or less.

But when we talk about $3 billion to $3.5 billion, it could be either one acquisition or a number of acquisitions. And one of the great things about the platform we have now, which we’ve seen over the course of history because of the business units and the focus that each of the presidents have within their respective fields, we can do multiple acquisitions at the same time.

So it's very possible that we can do may be two or three acquisitions, or may be 500 or $1 billion or $1.5 billion going on at the same time. So when you think about that number $3 billion, $3.5 billion, I wouldn't look at it as one acquisition, I'd look at it perhaps in a number of acquisitions that would enhance the value of each of maybe two or three platforms.

So I understand that the centralized nature of your business. But I mean when you're making all these kind of acquisitions, if you maybe couple them, three of them based on your global footprint and your aspiration to have more of a global footprint.

I mean how difficult is that to manage? May be not for your individual teams but for the sea suite there?

Very, very easy, I think we're very, very comfortable with our templates for making acquisitions. Of course, as we go into an acquisition mode, a lot of the acquisition technicalities are managed by the sea suite as you would call it.

But the actual due diligence process and pro-formas and the evaluations of the assets we're going to be buying are actually done by the division themselves. So it's very, very easy for us to be able to entertain two or three acquisitions at anyone given time.

And final question I mean I thought it was a pretty good quarter there, given that you kind of had one hand tighten on your back, given some of the market factors and other issues you are facing. And I just think if we do get into situation where there is recovery as you spoke to the pricing and so on, and opportunity to get better leverage in the business.

Is there any costs against that opportunity that any investments you'll make against that opportunity that would perhaps erode some of the upside to the market turning more in your favor?

I am not sure I understood the question. But I would say this.

We have managed our business with discipline for 61 years. There is no reason to believe that that discipline would evaporate.

So, it's not because we would be sitting on a pile of cash that we would use that cash unwisely. I think at the worst case scenario, we deleverage our balance sheet, perhaps may be buyback some shares.

But again, we have a very long-term outlook for our business. We think we've got very, very solid platforms.

We've managed the business through three generations with a lot of strength and discipline. And I don't see that changing anytime soon.

And just final question, thanks you answered what I was trying to get at. Is there any appetite there at Saputo to become partners with another player?

It means that you can gain substantial presence in the key market somewhere around the world. In other words Jolina and the family would take down their equity stake to accompany another big player to really drive Saputo's footprint forward?

So I can speak for Jolina, because I am one of the big shareholders of Jolina. So I can talk about what our strategy is there.

Our primary focus is to add value to the operating business, which is Saputo. If that means that we have to be a smaller percentage owner of an asset that has more upside an opportunity, we would definitely take a look at that.

That being said, Saputo now has a very distinct corporate culture. And if we are going to join forces with anybody in our industry, we need to make sure that it is a marriage made in heaven.

And based on the culture and the value that we employ on a day-to-day basis, we are a tough partner to dance with. Not because we’re better or worse than anybody else, but perhaps our feet move a little differently than maybe another dance partner.

And so we need to make sure that if we’re going to be dancing, we’re dancing and sync. And so potentially if the opportunity does exists where we find the right dance partner that is going to make us a big better company and that means, Jolina will have to go down from 34%, 35% ownership in an entity, so point where we’re perhaps less than that but we own a bigger entity and that’s something that we would entertain.

Just a clarification LP, I didn’t catch your explanation on that $8 million of shared expenses that got shifted around. Is that a one-time shift just for this quarter or is that something that’s going to be continuing going forward?

No, I would say, only a one-time, because essentially what we’re expecting for 2017 is that those expense will be spend directly by the division itself.

So is this like retroactive adjustment?

I would say yes. Do it's starting to be, yes.

We thank you for taking part in this conference call. We hope you will join us for the presentation of our fiscal 2017 first quarter results on August 19th.

Have a nice day.