Saputo Inc.

Thank you very much, Euglene.

Good afternoon, everyone, and thank you for joining us today. A press release detailing our fiscal 2019 third quarter 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. [Operator Instructions] 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 statement regarding forward-looking information in our Annual Report and in 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 A. Saputo, Jr., our Chairman of the Board and Chief Executive Officer, will begin this conference by providing a brief overview of key highlights relating to the third quarter of fiscal 2019, after which he, along with Mr.

Maxime Therrien, our Chief Financial Officer, will proceed to answer your questions.

Thank you, Marlene, and good afternoon to you all. Fiscal 2019 has been a challenging year thus far.

Our adjusted EBITDA for the quarter totaled $321.2 million, an increase of 1%, while adjusted net earnings declined by 4.8%. Conversely higher sales volumes derived from the activities of our recent acquisitions contributed to an increase of 18.4% in consolidated revenues.

Again this quarter, we were met head on with higher warehousing and logistical costs, weak dairy ingredient in cheese markets, working in tandem with an increasingly competitive landscape. As well, we faced the impacts of the federal milk marketing order implementation in California.

As such we continued imitative designed to mitigate the impact of these headwinds. We will continue to monitor dairy markets and make appropriate decisions to minimize their effects on our cost structure.

We’re continually reviewing our strategy with respect to customer pricing. At our newly constructed Almena facility in Wisconsin, we will continue our efforts to achieve blue cheese manufacturing efficiencies within the short-term.

During the quarter our advantageous balance sheet, strong foundation and sound expertise allowed us to complete our most recent acquisition F&A Dairy Products, a manufacturer of natural cheeses bringing us the five acquisitions in the last year and a half. This acquisition will add to and complement the activities of our cheese division in the U.S.

and give us access to a new milk pool in New Mexico. Alongside Montchevre these recent acquisitions continue to help expand our cheese offering in the United States.

Abroad, we continue to demonstrate our long term commitment to fostering loyalty and building trust among Australian dairy farmers. Recently we announced a step up in our farm gate milk price.

Additionally through the new supplier relations and pricing policy committee we created, our Saputo Dairy Australia suppliers now have a forum to evaluate and discuss all matters relating to milk supply with senior management. Our teams have been working intensively aligning our two platforms and ramping up our ERP activities within the MG acquisition now known as Saputo Dairy Australia into fiscal 2020.

With recent acquisitions namely MG, Southeast Milk, Montchevre, Shepherd Gourmet and F&A we’ve increased the scope of our ERP program and duration by two years increasing the expected total investment to approximately $370 million. Furthermore, the expected total investment and duration of the ERP program will vary as a function of the Company's growth through acquisitions.

In Canada the integration of Shepherd Gourmet is complete adding to our product portfolio and specialty cheeses and specialty yogurt. During the quarter we sold our Burnaby plant in British Columbia for $209 million.

This follows the announcement of our capital expenditure plan to build a state-of-the-art facility in British Columbia. Moreover as part of the ongoing analysis of our operations we will close our Courtenay facility.

The decision to close any plant is never one taken lightly. This was a necessary step towards rightsizing the business.

On the regulatory front since the announcement of the allocation of quotas under the CPTPP in November, we’ve not been shy in voicing our support. We commend the Government of Canada for its decision to allocate a significant portion of these dairy import licenses to Canadian dairy stakeholders.

We’re confident this will have a positive outcome for consumers and the dairy industry in Canada. We will continue to use these quotas effectively to import dairy products and complement our current Canadian offerings.

Looking forward, we hope this decision will pave the way for complete evaluation of the allocation and administration of all Canadian dairy quotas CETA and every negotiation included. Throughout all our operations preserving our identity throughout our history has proven to be a competitive advantage.

Our fundamental values, all of which my family imparted on this business over 65 years ago are still a part of who we are today. With these elements intact, we will remain a vibrant player in our industry, optimizing our operations and pursuing our growth strategy with a disciplined and responsible approach.

With that I thank you for joining our call and we’ll now proceed to answer your questions. Euglene?

Thanks and good afternoon everyone. Just in your remarks Lino, you talked about optimizing pricing, you talked about improving efficiencies and then of course, there is a whole sort of oversupply of milk in the marketplace.

As you think about the key elements that are going to help you improve the profitability over the next 12 to 24 months. How would you rank those and what are the steps that you’re taking to achieve that?

Thank you for that question Irene. As I look out into the next year, calendar year starting from January into December, I’m seeing that the market conditions are getting more favorable.

If I look at what’s going on in EU, milk is growing at a rate of probably less than 1%. The U.S.

milk is growing at a rate of 1.5%, Australia is challenged with no production. New Zealand will have its lips where it can in certain times outpace its production from the year prior.

But then other times will have some challenges with respect to environmental issues as well as climate issues which on a whole will try to get them to about 1% year-over-year. When you think about the impact that those countries will have on dairy trade, I’d say that overall production will be in-line with consumption growth or perhaps just below it.

The inventory stock piles in Europe have now been depleted so that overhang is gone. So, I see that the market conditions are getting better and more favorable as we get out of our fourth quarter here are operating quarter.

There are anomalies in that, fluid milk continues to decline at a rate of maybe 1.5% or 2% per year. But there is growing cheese demand and growing demand for dairy solids around the world.

So the industry definitely is not dying. What we’ve on the horizon that could create some volatility of course could be of potential recession.

The trade wars have not been favorable especially when you think about the U.S. trying to export product into China and into Mexico that has created some difficulty for us.

But the fundamental underlying message here is that consumers are there around the world and they will be fed from a number of different platforms, whether that would be the U.S. or Australia or New Zealand or the EU and perhaps in our case through Argentina as well.

So, we’re optimistic more so now then we’ve ever been before about the future of the dairy industry and the market conditions in that dynamics. I’ll say that that will not make us complacent, definitely we’ve to look at optimizing our platforms, rightsizing our platforms and the case in point would be the announcement that w e made for the closure of Courtenay.

Courtenay is in light of the competitive nature of the landscape here in Canada, reduced the fluid milk production relative to a loss of a contract. But I’m still optimistic that there are opportunities for us to take the right decisions at the right time and try to improve those margins from this point moving forward.

Efficiencies those are things that are in our real houses, in our DNA. Investing money in capital whether that would be equipment, technology or ingredients that’s something that we’ve been very, very good at and we will get back to those things in a more intense fashion as we move forward.

So again, I think that there are some opportunities for us to get back to our historical levels of profitability. I think, the market conditions will help, but there are other controllable that we need to control that we are controlling and that we will continue to control moving forward.

That’s great Lino, thank you. On the last call I think, you alluded to the fact that in light of the change in the California pricing background that you were having conversations with customers, any progress on those?

Yes. So the California impact for us is a three pronged strategy.

Number one, we’ve to discuss milk handling premiums with our suppliers which we’ve done and I would say that we’ve done that effectively. So there is going to be a reduction of the handling charge on our raw material moving forward, so that has been completed and will some of the impact of that into the next quarters.

There is some plans and ideas for internal optimization of our manufacturing footprint including perhaps moving some volumes from California into New Mexico, the newly acquired platform. I think that that acquired platform comes at an ideal time for us and we made it clear to the California dairy farmers that somewhere down the road perhaps that platform will be less and less important to us by moving volume into other milk sheds that are more attractive for us to have less transport costs to get product to market.

And of course the third element is what you bring up our discussions with our customers and those are ongoing and I will tell you that we have been successful in pushing price increases.

Thank you. And one more if I may.

And of course, this is I mean you mentioned New Zealand a few times and we know that there is that market right now there's a lot of activity and you mentioned the EU. Anything you can share with us on the M&A pipeline?

Well, I'm still very optimistic about the pipeline and the opportunities that are presented to us. Now as you can well appreciate not every single one of those files come to fruition.

There have been files that we've been in discussions in the last year and a half that didn't make it to the finish line for one reason or not or another whether that would be price driven or conditions driven sometimes the conditions of a of a deal just don't make sense even though the price is okay. But despite that we made five acquisitions in the last year and a half, we still have a big appetite for acquisitions moving forward.

So yes those geographies that I highlighted in the past are still the geographies that are important to us. So development in New Zealand one day we would like to have a platform there.

We think New Zealand is an ideal location to have an export platform where we can service customers around the world. I would also highlight that there could be some other tuck in businesses in Australia that could make sense for us.

We have a great management team that's in place now. The MG employees and the Warrnambool employees are coming together beautifully under one umbrella Saputo Dairy Australia that is going better than expected and we are ahead of schedule there.

So tuck in business in Australia would make a lot of sense for us. The U.S.

is an important platform for us. We've got a strong dairy food base there with a great management team and we've got a strong cheese base there with a great management team so again other acquisitions tuck in like F&A could make a lot of sense for us as we move forward and we're looking and exploring other avenues there and I will not shy away from Europe.

We had the experience in Europe years ago. I think we've learnt a great deal of what winning conditions in Europe would be for us and we continue to engage in discussions and conversations with potential targets in Europe as well.

As I said before the pipeline is full and I'm very optimistic that something will materialize within this calendar year for us. I'm optimistic.

That's great. Thank you.

Thanks Lino. I'm looking at the outlook section of the MDNA and I think this is the first time you've commented on calendar 2019 before you were talking about fiscal 2019 and what you say in the second last paragraph you expect modest price recovery in cheese and dairy ingredients, but the company does not expect that this price recovery will offset market volatility.

So I wasn't too sure what you meant it sounded like you don't expect to realize the price recovery in dairy commodities?

So let me let me explain a little bit the difference between calendar and fiscal is that the milk year in most geographic geographies operate calendar. We are fiscal year is off calendar and that's why sometimes as the different anomalies about the outlook in terms of what the market conditions might be and how they would relate to us.

I would say that based on what we're seeing in the markets is that there is going to be recovery and we're starting to see the recovery, but it will not be at peak levels that we've seen back in I believe it was 2014 or 2015. I think those peak moments are gone.

Recovery, yes lift from where we have been over the course of the last calendar year. I think that that is favorable, but we need to be cautious about that because there still are some uncertainties like recession and like the trade wars that give us a little bit of a pause for over optimism.

So we are cautiously optimistic despite the fact that the last I guess four or five trading sessions on GDP have been favorable. We know that things can turn rather quickly.

My larger concern is with a discipline in the industry. And once the economics get better that the suppliers around the world don't start to think of this as a never ending trend and start to produce product be on consumption abilities.

So we're cautiously optimistic about this next year, calendar year in the milk world and we're planning for better economics but we're also planning for internal cost control optimization and efficiencies at the same time.

Switching topics to Australia, I understand there's quite a severe drought in Australia and that milk and that's curtailing milk production and it's not clear to me is that overall positive or negative for Saputo. I mean obviously less milk and take.

But on the other hand that should ease some of the milk oversupply globally?

Yes. So you're absolutely right on that.

So for the general market that is favorable because it creates less solids for the world markets but it does create a much more competitive environment in Australia to collect milk and to buy milk so that that's something that that is affecting our platform. Milk production has been down for us a year over year related to just a drop in production.

So we guess we're feeling the effects of that. So it's a double edged sword here.

On the one hand we've got the benefit of less solids on the market. On the other hand we have less solids that we can process through our facility in Australia.

And then just lastly I mean you commented in the write up like the obvious increase in warehousing transportation and logistics is taking quite a bite out of you I think it was $30 million in the quarter. Is this above and beyond the ERP discussion that we had last quarter where you had to take additional warehousing space?

We did the ERP program first say there is a minimal impact for this quarter. The $30 million within the quarter and the 81 on a year to-date basis yes this is over and above what we call the ERP program.

So this is in light of additional costs that we have to absorb on the market. Freight there is a component of transportation in there but it is also some maybe disruption SEP related.

I would say that out of that $81 million of additional spend in that warehousing logistics and transport, the majority of that is kind of a new level of expense. And there's a portion of that we feel the inefficiencies that we need to tackle and get better out of it.

Thanks very much.

Hi. Thanks for taking my question.

Just looking at the balance sheet very strong here and I know you have some acquisitions files that you're looking at. But in addition to the acquisitions is there something else that we would have to deem necessary or some conditions for them to get active on the buyback or rather Saputo?

So it's important for us to make sure that we have the financial flexibility to be able to materialize the acquisitions in the pipeline here. So I would say that perhaps the last use of funds for us will be on the buyback with the pipeline as full as it is we will not be active on the buyback at this stage.

Now again, if some of those acquisitions should fall through then we'll have to use the funds we have most appropriately. But for the time being I would say that given the optimism we have to materialize some of the acquisitions that are in the pipeline is quite high.

We'd like to save our cash for that.

Okay that's helpful. Thank you.

And Michelle maybe Max might want to add something to that.

Just wanted to point it out that as part of our three year CapEx plan whereby we said we would spend about $150 million above our depreciation level of the three year plan. We are into year two right now and we intend to spend the exact or similar amount of our depreciation this year.

Last year we spent about $50 million. So we could see that in the 2020 year, we intend to spend an additional $100 million above our depreciation level so that's part of our cash planning.

And just a follow up to that. I mean, your leveraged capability for this company is very high.

So I think and correct me if I'm wrong, you have comfort of going up to 3.5 times debt EBITDA. So is that kind of the size in the scale, the acquisitions we should be thinking about that's causing you to think, maybe we shouldn't execute the buyback now?

Yes. Let me correct that number it's probably closer to 2.9ish or so $2.93 billion of financial flexibility before having to issue equity if we would go that route.

And so yes to answer the second part of your question, we believe the pipeline is full enough that we can potentially use up all of those funds for one or multiple acquisitions.

Okay that's helpful. In the materials I think there were some restatements as well, but you talked about a standard relating to hyper inflation and I think there were some benefits flowing through the P&L related to that.

I think, they’re sizable. Just wondering how investors can forecast that if there's any tips you can give us to forecast that looking forward?

Okay. The hyper inflation accounting basically what it says to me is, first you have to convert the Australian peso into the rate at the closing date.

So that's one of the elements that has taken place with the standard that we're applying, international accounting standards. But also to fight against the inflation we do have to index all of our balance sheet and also the income statement.

So that creates obviously a positive for us. At the time of Q2, we started to apply that hyper inflationary accounting and we had that big catch up whereby we increased our asset by $57 million.

We increased our liability about $14 million and it was a onetime $43 million that hit our retained earnings. As we get into Q3, when you look at the devaluation of the peso from Q2 to Q3 remain pretty much stable from quarter to quarter.

But the inflation remains and continue on. So the effect of the inflation that's creating that positive that's the $19 million that we have in our income statements.

And we do wanted to present that below our EBITDA line so that we have a clear visibility and due to the volatile nature of this element we wanted to flag this as a single item. But, as far as the presentation per say, it’s nothing different than a source of finance charge that we could have grouped it with, but we'd rather wanted to present it separately.

And to answer your questions on the predictability of that I mean it's very, very tough to predict only because of the volatility in the country that we're operating and one specific which is Argentina. Hard to predict where the economies are going and hard to predict where the political climate is going and that is going to have an influence on the valuation of the peso.

So should the peso remain relatively stable within the Q4, inflation it continues to grow, we could expect some favor ability as well in Q4.

Thanks for that color and lean off the top. I think one of your caveats to the market improving statement was, you indicated a potential recession.

I'm wondering if that was just a cautionary statement kind of given or if you're seeing something in your business that led you to make that statement?

So that was cautionary of what I heard at the IDFA from the economists that were there. They said that the fundamentals of the dairy industry are improving, but the risks still that lie in the industry itself would be recession which has an impact on consumption of dairy and a trade war.

So that was a more cautionary based on what the economists in the industry are saying.

Thank you for your color.

Thank you.

Hi. This is actually Christian on from Mark.

During the quarter your international profitability was quite strong. Just wondering if you can walk us through some of the drivers of profitability there in Argentina and Australia?

So when you factor the efficiencies that we've brought to play in the Murray Goulburn platform profitability there is well ahead of our plan. That combined with already an efficient platform in Warrnambool and already efficient platform in Argentina, they’re driving some very good numbers for us especially in light of the fact that in Argentina we're able to collect more milk and have more volume pass through our facilities and lower our overhead expenses and allow us to make more profit.

That we do have low cost milk in Argentina that do help us especially when you factor that into US dollars where we sell into the international markets and the foreign exchange factor of US dollar to peso what's favorable for us, US dollar to Argentinean dollar was favorable for us so selling into the export markets has been beneficial for us. And over the course of this last quarter we shifted some of our production and some of our focus into the international markets because they are getting a lot more attractive for us.

One because the prices are going up and two because of a foreign exchange factor is more favorable.

Thanks. And just on Murray Goulburn, it does look like from your disclosures that MG was a positive contributor to earnings during the quarter and I was just wondering if you'd walk us through the integration there.

Just give us an update on what's going on in Australia?

Yes. So early on in the process in Australia we had frank and clear discussions with our management team.

It was clear that Murray Goulburn was not buying Warrnambool and Warrnambool was not buying Murray Goulburn. This is two separate entities in one country and we are going to be identifying the most valuable talent to lead the integration process with sort of a boots on the ground there.

Of course, we have oversight from our corporate office and our COO is heavily involved in that integration. But the people who are executing are the people that actually live in Australia and operate that business.

I think we use the model of our ERP setup in terms of tackling the different initiatives that we need to tackle. So we use a template that works effectively in ERP rollout where we've got process managers and leaders of different functions to be held to account to execute on all the matters that are important to us.

One of the great things that we're noticing in Australia is that the team is pretty independent as long as they've got very good, very strong and clear marching orders. They know how to execute quite well.

So pretty autonomous team, once you give them the right directives and give them the right information they can execute quite effectively and efficiently. So we do have blended teams there.

We do have teams and talents coming from either the MG platform or the Warrnambool platform that are working in sync and in harmony with each other. And then of course, we have also transplanted some people from our North American platforms as specific into certain plants and infrastructures where they know that they're there to execute as well in terms of the knowledge and expertise that they have in other geographies and other regions.

And also identify talent to make sure that they can lead the charge once they go back to their respective functions back in their home country either Canada or the United States. I think over time we've developed a really unique way of identifying talent and being able to put plans together, roadmaps together that allow us to have success in a very short time.

In some cases of course when you have to order equipment and install it, it does take a little longer to derive the benefits but some of the low hanging fruit, some other things that are easy decisions to take. It's a question of having all the information and giving the people the tools and the knowledge and the authority to take decisions and that's what's performing extremely well for us in Australia.

Great and one last one if I may. I just wanted to ask about high protein way and any pricing trends you're seeing in that market with particularly in regards to some of the capacity additions that one of your competitors is bringing online later in 2019?

So that's been a real hindrance on our results for our U.S. platform.

If I go back to 2005, 2006 when we first got into WPC whether that would be WPC a 35:65 or 80. We were among very few players in the industry that we're adding value to the way proteins.

Of course fast forward into 2017, 2018 WPC 80% or 65% has become a trend. Other dairy players have seen our success in those categories and of course have built infrastructure in there.

And now all of a sudden there's an overabundance of production. And of course with over abundance of production there's depressed prices.

So historically when we've seen four dollars a pound on WPC 80, I think Q1 or Q2, we've gone as low as a dollar 75 a pound. So a huge impact to our revenues and a huge impact to our profitability.

We have since seeing those prices move up to two dollars and five and two dollars 10 so better than a dollar 75 that we saw in the first two quarters but still far away from the four dollar WPC 80% that we've historically benefited from. Moving forward I think WPC will continue to be challenged specifically for the reason that you brought up that there are competitors that continue to build infrastructure in the WPC market.

Now we need to look at what is the next best innovation in way processing and we have our technicians looking at that now.

Yes. I just wondered on the -- if you could recap how you feel $1.9 billion you've spent in acquisitions between September 2017 and November 2018, how they've gone relative to your expectations?

Yes, well that's a very good question and in fact our board asks us the same question. And Max does a very thorough analysis and presentation to our audit committee.

I’d tell you in all five cases of the five acquisitions we've done they are either contributing to the level that we expected or contributing beyond the level that we had budgeted. So the acquisitions have been a saving grace for us.

All five had materialized, the benefits that we had expected then at the beginning of the process.

Just wondering on the California federal marketing order, I know it was uncertain at the beginning just how it would shake out, how might be positive or negative. Is it substantially more negative than you anticipated and is that $8 million over the two months.

Is that sort of the worst it's going to be or how should we do that?

Yes. So out of the gate of course is going to be a negative because you've got to rollout new plans and have new negotiations.

So of course there's the lag effect of the impact of it. I would say moving forward it should be neutral, not a benefit but it should be neutral.

And how do we get to a neutral point and again it's a little bit what I explained in Irene's question. The first and most important thing is to look at the negotiation of our raw material relative to the new milk marketing order.

All the farmers out there and co-ops need to understand that there has to be a new level of handling charge. They're going to be getting a bigger check because of the new milk marketing order they've got to give up something on their handling charge and we've been very successful at mitigating a portion of that incremental costs through handling charge.

So that is done, we'll see the impact of that perhaps not so much fully seen in Q4, but going into Q1 of next fiscal year. The second element of course was negotiation with our customers, those customers that buy product from California are very much aware of the milk price increase to us.

They recognize that milk is 85% of our cost of goods. And so there has to be some impact to them with respect to our selling price and we've been successful at those negotiations.

Some of those new prices will be included in our fourth quarter results and the balance of that negotiation will go into the next fiscal year. So I would say we're probably 50% of the way there.

And the other third element, one-third element that we're looking at as a mitigating factor of course are the initiatives that we've got to bring internally. And so that would mean more efficiencies in our California operations in addition to perhaps moving some product categories out of California.

And so the timing of the New Mexico acquisition could not have been better for us. We've got a platform in a new milk shed that is much more favorable than California.

And so we will be moving production out of California into New Mexico. But of course that does take a little bit of time because we've got to order equipment and then we've got install the equipment and then we've got to debug the plant.

But from a medium to long term perspective and for us long term would be one year, medium term would be about six to nine months. We think that we can execute effectively on that plan.

Thank you. And then on the Argentinean market, can you speak there's been a I think a co-op there who shrunk quite a bit.

Can you speak about the competitive dynamics there and where you're placed?

So I would say, I mean, there's no easy platform but I would say that Argentina would be one of the easiest platform to us to operate in only because I think we're one of the most credible dairy players out there. In order for us to increase our production it's a question of convincing dairy farmers to come to us and it's very easy to convince them when they know they're getting their milk checks on a regular basis and those milk checks are being cleared at the bank very easily which is not the same for some of our competitors.

In fact we worked on different terms with them. Historically milk payments were twice a month.

Now we've gone to three times a month because we know that that's a benefit for our suppliers. Our competitors cannot do those kinds of things.

So our milk intake is up about 10% in Argentina. And the only thing that's holding us back is the capacity.

So we've got our engineers looking at capacity utilization and see if there's different ways that we can bring in more milk. Now the beautiful thing about the Argentinean platform is that we understand with volatility in the economic market might create some disposable income issues with consumers domestically.

Well then it's very easy for us to shift some of that production onto the international market. And so, if I look at year-to-date, we were probably selling about 50% into the domestic market and 50% into the export market.

Now we're probably closer to 60:40. So we have some of that flexibility to get the incremental solids into the international markets.

So I think navigating through Argentina for us is probably a little easier than most of our competitors. Number one, financially we're more solid.

And number two, I have to say we have a very good experienced management team in place there. They know how to navigate through choppy waters and I'm very proud of what they've done.

If I could just ask one last question on the fluid milk market in Canada. What's your thought on that product category and whether it can generate attractive economic return or not?

It's really unfortunate case of what's happened in the fluid space here in Canada. When we acquired dairy land back in 2001, I think we brought some discipline to the market and profitability and fluid went from minuscule profitability up to more respectable numbers.

And then of course, I guess with some changes at the head of some of our competitors here in Canada, it seems like a market share was more important in profitability. And so, every time there was an opportunity for an RFP they viewed it as an opportunity to take on more market share.

And somewhere along the line we have to make choices. You can suffer the volume losses but then of course, the flip side of that is that you have the opportunity to right size and bring the margins back or suffer margin losses that will never recover.

And so, we chose not to suffer margin losses that will never recover. We chose to suffer the volume loss and somewhere down the road we'll have an opportunity to bring our margins back into respectable levels even if it means that we have less volume.

That being said fluid milk, traditional food milk is in decline. It's declining not just here in Canada, but in all of the developed markets at a rate of maybe 1.5% or 2% per year.

That's a reality. There's a lot more competition with other sources I guess, protein plant based in some cases and it's a reality of our market.

It's not by taking value out of the category that we're going to make fluid milk better while we're choosing to do is to get into those categories of products that are more value added. Our let go of a value added flavored milk is still a very good category for us with great profitability.

When I think about some of the other value added products like a lactose free, like the sports drinks that we're doing like the protein enhance with our joy product those are all value added products. So perhaps we might have less volume in that entire fluid and milk space.

We're going to pick and choose them that the areas that we want to be in because number one they're growing categories. And number two, they've got better economics than the fluid milk.

It's a shame that Canada has gotten to this level but that's the nature of your competition and we're big boys and big girls and we can deal with it. I prefer to deal with it by taking the right decisions.

After we've lost the volume and trying to give volume and lose the margin that we'll never recover.

Thank you very much.

We thank you for taking part in this conference call. We hope you'll join us for the presentation of our fiscal 2019 fourth quarter and year end results on June 6.

Have a nice day.