Saputo Inc.

Thank you very much, Tony.

Good afternoon, everyone, and thank you for joining us today. A press release detailing our fiscal 2019 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 specify, that our listeners on the phone, on the Internet, as well as journalist are in 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 statement regarding forward-looking information in our Annual Report and year end 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 legislation.

Lino A. Saputo, Jr., our Chair of the Board and Chief Executive Officer, will begin this conference by providing a brief overview of key highlights relating to the fourth quarter and fiscal 2019, after which he, along with Maxime Therrien, our Chief Financial Officer, and Kai Bockmann, President and Chief Operating Officer of Saputo Inc.

& the International Sector will proceed to answer your questions.

Thank you, Marlene, and good afternoon to you all. Fiscal 2019 was a challenging year to say the least.

We continually faced downward pressures which impacted our profitability. However, our solid footing allowed us to further consolidate and strengthen our position as a leader in the dairy processing industry.

To comment on the fourth quarter specifically, consolidated revenues increased by 17.9% mainly due to the contribution of recent acquisitions. Additionally, adjusted EBITDA grew by 5.1% and adjusted net earnings were down by 7%.

Adverse conditions which started in 2018 seemed to become the new normal. These global scale headwinds include persistently competitive conditions, volatile markets, as well as elevated costs such as those related to our warehousing and logistics.

While the obstacles were numerous, we control the controllables where possible. We engaged in a proactive approach to mitigate adversity by exploring available opportunities to maximize efficiencies and minimize spending.

The challenges in the Canadian division will keep our attention on maintaining profitable sales volumes. This sector will carry on reviewing overall activities to mitigate low growth and combat a competitive environment, especially in the fluid milk space.

In the U.S. we witnessed an imbalance between the supply and demand of dairy products, resulting in a tough domestic commodity market environment.

As such, the sector is focused on achieving objectives at the new Almena facility, further developing its presence in the specialty cheese category, benefiting from the integration of the F&A acquisition and increasing the productivity and efficiency of overall operations. Internationally, we're pleased to have recently celebrated the one year anniversary of our MG acquisition in Australia.

We're currently in the final stage of this integration. We've leveraged top talent from both WCB and MG to form a new leadership team who is both qualified and motivated to drive profitability for our United Saputo Dairy Australia platform.

Despite unfavorable weather and economic conditions at the farm level, we continue to work toward sourcing and processing more milk, maximizing the network at our disposal and aligning the platforms on our ERP system. In Argentina, we've increased the annual milk intake and the production capacity elevating its industry leading rate of leaders process.

Moreover a sharp and continuous devaluation of the Argentinean peso and the low cost of milk have created opportunities in the export markets. The sector continues concentrating efforts on innovation, while optimizing its product mix and customer portfolio both locally and internationally.

Now moving into fiscal 2020. We're thrilled to have introduced an additional sector to our business.

Our new Europe sector consists of Dairy Crest group now operating as a Dairy Division UK and led by Tom Atherton, a strong leader who has been with Dairy Crest since 2005. Thus far we've enjoyed welcoming our new 1100 employees in the UK to the Saputo family.

Building on this platform in the United Kingdom, we intend to elevate operations, share best practices and continue to pursue growth opportunities. This acquisition is perfectly in line with our strategic objectives and will allow for further expansion, while enabling access to a new market and a collection of leading British brands.

Going through acquisitions is a key element of our long-term strategy, reinforced by our financial position and disciplined management approach. Over the last two years alone we've completed six acquisitions totaling $3.6 billion, bringing our tally to 31 since our IPO in 1997 and counting.

In fact, we begin the year with an agreement to acquire the specialty cheese business of Lion-Dairy & Drinks in Australia. The transaction which is expected to close in the second half of calendar 2019 remains subject to foreign investment approval and clearance by the ACCC.

As always, we will strive to maintain a well-balanced capital structure in order to keep pursuing growth opportunities. In all, last fiscal year was unique in many ways and I'm delighted by our many accomplishments.

As we build solid foundations for the future, I wish to acknowledge the exceptional work ethic and dedication of our employees worldwide. We're privileged to have great teams focused on achieving success and working collectively to engage innovation and forge through adversity.

I'm surrounded by ambassadors who live our values in our culture every single day and together, I'm looking forward to achieving even more. On that note, I thank you for your time and we'll now proceed to answer your questions.

Tommy?

Thanks and good afternoon everyone. Lino, just reading the press release, the tone seems to be decidedly more cautious around the outlook for F ’20.

You're now talking about market volatility going through the fiscal year, talking about competitive intensity in the US. Can you kind of walk us through what's happened in the last few months and sort of where the - I guess the flashpoints are where we could see sort of better or less than better actual performance in F ’20?

Thank you for the question Irene. So yes, we are cautiously moving into this new fiscal year.

And why are we cautious? While we have developed and acquired some really great platforms in different geographies, but there still are some lingering issues.

Number one, competition remains an issue in terms of oversupply of dairy solids in some respective markets. Now on a global scale there's a better balance between supply and demand.

And so we're finding some great opportunity in Australia. We're finding great opportunity in Argentina, but in the U.S.

oversupply still exists. Now understand with the geopolitical issues with the U.S.

fighting with China and fighting with Mexico which is a great trading partner, especially in the dairy industry we find a lot of those solids that are remaining within the country. As those solids remain within the country how, they get processed into finish dairy goods and of course find their way into the market where we are facing a lot of competition.

Now we can defend ourselves extremely well. However, you know, as I mentioned in my opening statements, we're looking at profitable volume and profitable volume growth.

And there's a certain point in time where we have to assess whether the fight is worth continuing and areas where we need to walk away. So I'm still a little shell shocked from the last fiscal year and this is why I am a little cautious about going into this fiscal year.

I'm optimistic about correcting some of the inefficiencies we had last year. I'm optimistic about the platforms that we've acquired and integrated, but I'm still a little cautious about the supply-demand cycle and cautious about the level of competition that may come within the U.S.

and Canada specifically.

That's really helpful Lino. Thank you.

So couple of follow on questions if I may. So one is which sort of areas or product lines are you seeing the greatest competition.

And as far as the inefficiencies go where are you in Almena?

So let me answer Almena, simply, you know, since we've got our maturing sales [ph] running at this temperatures and humidity levels that they should be at in full capacity, we have come full circle in terms of having them run effectively and efficiently. So Almena today is running as effective and as efficient as it was designed.

So no worries on Almena anymore. Areas and product lines where we're seeing competition, I would be very clear, specifically and cheeses, and if I can be more specific on that on mozzarella cheeses where we are seeing quite a bit of competition in the U.S.

In Canada we're seeing a lot of competition still on fluid milk, although we did lose some volume early on, we picked up some additional incremental volume in other areas where our competitors weren't able to service. So there are some bright spots there.

And then of course, another element where we're seeing a lot of competition in product lines is on the by-product side, specifically WPC35 and WPC80. A lot of new manufacturing facilities in the U.S.

have come on line and as an outlet for their way they have built capacities in WPC. So there is an oversupply in the global scale in WPC80 and WPC35.

What we're seeing in the global markets, although [ph] powders and skim milk powders are in good demand and so the market has increased there. But the price by-products still are an issue for us.

That's great. Thank you.

Yes, thank you. So just following up on the competition in Canada, would you say that the worst is over, like Q4 is kind of like the bottom here and then we're going to see it stabilize?

Or is there another shoe to drop in the coming quarters?

I would say from a competition perspective, I would say that things have stabilized. However, we have to now adjust to a new reality in terms of milk volume.

We did lose a large chunk of milk, which by the way we started to feel the effects of that in Q4. As I indicated in my response diary, the competitor that took some of that volume away from us has not been able to deliver in certain segmented areas.

And we were happy to re-service our customer with volume, but under our terms and under our conditions. But again, it's a fraction of what we lost in terms of overall volume.

So I would say that the competition in Canada has subsided, but we’re – we’ve got to right-size our business and function of the volume that we lost, which in my opinion I don't think we're going to recapture a 100% of that. On the U.S.

side, you know, it's unfortunate, but the tariff policies are creating a lot of volatility and it remains to be seen what the outcome of that will be in terms of trade with Mexico. And I'm thinking specifically in the dairy sector and trade with China, specifically with dairy sector, and if that will not create more competition in the U.S.

because those dollars [ph] have to remain locally, that remains to be seen. I know we've gotten very efficient platforms.

I know that we can we can produce products much more effectively than most of our competition. But as we've seen in Canada some competition is irrational and we've got to deal with that.

So that's where I see some of the – the risk moving forward into the next fiscal year that there could still be some increased competition to come specifically in the U.S.

Have you seen any changes in the competitive environment since the Mexican tariffs came off?

Yes, we have. So again, you know, some of the solids that we're going into Mexico now with the potential of new duties are finding their way back into the U.S.

So yes, we've gotten calls from some of our customers to rethink pricing because they're being offered product much cheaper than what we're offering them. Again, we can compete well, but there's a certain point where you know, we may have to walk away from volume and this is why again the outlook for us is a bit cautious because we're not quite sure where these tariff policies will end and what impact that might have in certain key areas for us.

Okay. If I switch over to the international side, you're running in like $80 million, $85 million of profits in – of EBITDA in Q2, Q3 timeframe and then we slipped here to 51.

It didn't seem like the Q2, Q3 levels were sustainable, but this is a bigger drop off than I would have anticipated. Can you describe kind of or explain what’s caused that?

Like is it Argentinean costs - cost inflation catching up, given the hyper inflation, is it the lower volumes in Australia, what's the bigger drivers on that?

So I would say specifically in Argentina it's the increased cost of milk, so the foreign exchange factor on us - was not as beneficial in Q4 as it was in Q1 through Q3. So that's starting to catch up to us.

And then there's a second element, especially in the southern hemisphere where we're going - we got into the seasons where the dairy farms are producing less milk because there is some season - seasonality in those - in those production industries. So both in Australia and in New Zealand production was lower.

And so of course, we have less milk that we're processing through our facilities because of that. And then to add insult to injury in Australia, the economics really didn't make sense for some farmers and milk has further declined because of the economic and weather-related issues.

So we're seeing a huge drop beyond the seasonality in terms of milk production out of Australia and that all will impact us in Q4.

So how does that drop in volume or supply in Australia change your outlook for synergies at Murray Goulburn, because we know a lot of it revolved around getting volume - recovering lost volumes there?

Yeah. So I'm going to ask Kai answer this one.

So Michael you're right in that, you know, milk production is falling, but the approach that we've taken is we have a strategy where we're gong to tap into three sources for our milk moving forward. One is our direct relationship with our farmers.

We're continuing to build upon the relationship that we currently have in place. Secondly, we're going to tap into third party milk.

And lastly, we're going to look to co-manufacture for other dairy companies. So taking those three paths together, we still feel confident that we'll be able to achieve the numbers that we originally committed to which is to get to a 3 to 3.1 billion litre of milk over a three year period.

Kai, I'm not sure I really understand that, we can have a follow up offline or maybe like the – and other than the direct relationship with farmers, I don't quite understand the other two.

Well, basically it's just a - it's an opportunity to get milk from other sources, one is through third party milk brokers and the other is just the processed milk that other companies would have secured. They've shuttered facilities.

They're sending their milk to us. We're processing it for a fee, hence we're utilizing our assets more efficiently.

Okay. And the deal with Coles that I saw in the press, is that a net positive for your $1 milk supply or is - it should - is that what we should read into it?

Yes, we - were able to renegotiate the terms and conditions so that we can now bring more milk to our two assets in Australia to make them more efficient. So net-net it's a - it's a good deal for us.

All right. I'll get back in the queue.

Thank you.

Lino, you made some comments where you are concerned about volatility for certain dairy commodity prices, like you were talking about WPC and cheese. But in previous quarters, you’ve talked about overall that your outlook is positive for global dairy commodity prices.

So maybe if you could talk on - like in terms of internationally traded dairy commodity prices. Which ones do you continue to see weakness?

And which ones do you see firming over the coming year?

Yeah, that's a great question. So on the global recovery we see on the cheese side, primary products, recovery in prices.

So that has started to impact us positively. What we're also seeing and in some cases where we have excess milk in certain countries we do make whole milk powders or skim milk powder.

There is a strong recovery on both whole milk powder and skim milk powder. Where we're not seeing the full benefit of historical high prices is in the protein solids by-products.

So even though there has been some recovery, so I'll give you an example, in the WPC80 in a peak market we were selling WPC80 at around $4 a pound. In our worst quarter, I think it might have been in Q2, we were selling that for just under $2 a pound.

There has been some recovery, so we're somewhat closer to 280, 290 per pound, but to have full recovery to $4 levels I don't think we're going to see that this fiscal year. In fact, I'm not sure it will ever come back to that because of the incremental capacity that has been put on place, specifically in the U.S.

So again, even though generally in the dairy space there has been some recovery which we're very, very optimistic about, in other categories of products that have generated good revenue for us in the past, a little slower out of the gate in terms of getting that recovery materialized.

And on the ASF in China, you know, as the pig [ph] herds are reduced, I understand that you know, whey is a feed in China for the herds. Do you think that's having a negative impact on whey demand?

It is from U.S. source product.

It's being - there are about a million pigs less in China since the beginning of this year, so there has been an impact in terms of their feed requirements, but we have been able to divert those volumes to other markets, like Mexico and other regions.

Okay. Thank you.

Hi. Thanks for taking my questions.

Just on the Canada business. At one time, management was thinking out loud about strategic options related to the food milk business.

Just wondering what's on your mind with that business lately?

Yes. So we are looking at strategic options not just for Canada, but for other platforms as well - as well where we have capacity to process other solids.

You know, we're not opposed to being further processors for other companies, perhaps even in other fields. And so that's part of our mindset as well.

You know, I think the dairy foods division in the U.S. does it extremely well, where they are co-packing products that - where we don't own the brands, we're doing that for third parties.

It's an approach that we're considering for Canada, especially that we do have the infrastructure across Canada to process a fluid product in a bottle. So yes, that's still part of our reflection.

There is some discussion going on as we speak. Nothing that we can speak to right now, but if we can use those assets to process other products to the degree that we don't have any cross contamination issues, its something definitely that we're looking at moving forward.

Okay. And last quarter, my recollection is that management was pretty excited about the acquisition opportunities ahead of it, and certainly the company was very active.

Just wondering given your balance sheet and given the EBITDA trajectory, what your view is on Saputo's readiness for other assets, be it large, small and what the market is like?

Well, we will continue to be entrepreneurial in our approach, especially when it comes to acquisitions. Now understand that you know, our balance sheet is not as flexible as it was before the seven acquisitions.

And so we do have to have a focus of delivering and I think our management team is quite focused on that and we've got some good ideas and some good plans for that. Having said that, if the right opportunity comes along and it is strategic and it is a must we will find a way to get it done.

I will tell you that our focus for this fiscal year is running the business, integrating those acquisitions that we've materialized over the last 18 months, making sure that we get back to historical levels of EBITDA and that's our primary focus right now. So we are not pursuing acquisitions the way that we pursued them in the last 18 to 24 months.

However, if files do come our way and they are too good to pass up we'll find a logical way to get them done.

Okay. And in the past, management highlighted costs related to the ERP implementation and the warehousing and logistics.

So I understand the logistics was problematic again this quarter on a year-over-year basis. But would you see some benefits from lower ERP implementation costs on a year-over-year basis?

Yeah. Well, I'll speak to the two separately.

From warehousing and logistics, yes we did have to face additional cost in the Q4, but not to the extent of the prior quarter. So we faced additional costs for the quarter about $10 million, and on the year-to-date it's about $90 million, $91 million.

So we kind of see a bit more stabilized in nature. That's what we anticipate, continued to face those elevated costs going into next year.

So that's one. Relative to ERP, the costs on a year-over-year basis is pretty much flat.

Now there could be bumps from a quarter-to-quarter. At the end of this fiscal the spend on the – this ERP was much very minimal.

So that's a color I could give you.

Okay. And just last one, Lino, for you.

I know the commodity markets are volatile. But just wondering when you give these outlooks, as you look – as you look at the past, how - given all the market insight that Saputo has, how reliably is - how accurate is Saputo when they give a year ahead forecast?

Are you oftentimes surprised by the way the markets react? Or given your market size, you're generally correct about how the year unfolds?

I think we have a good perspective and a good analysis of where the markets are going. And I will compliment that by saying that you know, I think we've got good foundations and a good management team that can react and respond rather efficiently and effectively to whatever is going on in the industry.

What has surprised me I would say in the last the last year and a half has been the irrational behavior from competition and there's nothing that I can do to predict any of that. You know, some of our competitors have too much milk or they have a focus on getting market share as opposed to getting profitability.

There's not much I can do I mean, you know, I can't project any of that, my management team can't project any of that. What we can look at is, we can look at the different markets and we can assess related either to economics or weather conditions.

What regions of the world are going to be producing or expected to produce more milk or less milk. And what impact that will have to pricing, commodity pricing, whether that would be primary product, products derived from milk or product derived from the by-product of milk.

We have a pretty good sense of that. We have a pretty good understanding.

But as you get into the - you know, the fights within markets and the behavior from some of our competitors that is very, very tough to predict. You know, I am always an optimist.

I like to look at the silver lining around every cloud, but it's tough to counter balance behavior that doesn't make any sense when you think about operating a business with good profitability and that's very tough to predict.

Thanks for your comments.

Yes. Just on the U.S.

market, is mozzarella your largest single product category?

It is in many different forms so I would say, so we've got mozzarella for the food service, and we have mozzarella for retail. On the retail side, I would say that we have very good brands, number one leading brands in many categories and in many markets.

So that is less at risk, Perhaps where - where I'm talking about the competition on the mozzarella side would be on the commodity level, mostly food service with the QSRs. You know, when some of our competitors put on production or perhaps can't get their product into markets where they've historically been in like Mexico they need to find other outlets and they take almost a spot approach to getting those products into the marketplace, so that they can pass their volume.

So yes, to answer your question Keith very simply, mozzarella is the largest category of product we manufacture, not the only product we manufacture, though.

And my understanding is competitors has put in a big mozzarella plant in Wisconsin I think, can you serve the whole U.S. from Wisconsin or is that sort of western U.S.

type of…

You can export or export, you can ship product from one state into multiple states. Just to give an example, you know, the largest manufacturing plants in the U.S.

would be in California. California product finds its way all the way to the east coast, so very, very easy to transport a finished product and cheese very, very easily, not an issue there.

Fluid products there are a lot more to - lot more difficult and lot more costly to transport, but finished goods can easily be transported coast to coast.

Then again I had a question on the Canadian business, the press release indicated that you are going to maximize your manufacturing footprint in Canada and I wasn't sure exactly what that meant?

Yeah. So this would go back to, I believe it was Vishal’s question about you know, what the opportunities would be for us, strategic opportunities.

You know, look there's no secret here that that plant based beverages are on the rise. Most of the plant based beverage companies are branded companies that don't have the infrastructure to process their products.

We are good processors of those kinds of products because we do have the infrastructure. So when we're thinking about maximizing the footprint, might be beyond dairy in a way that we can be a third party co-packer for some companies that don't have the capabilities to do it in-house.

All right. And then just…

Keith, its Max. Also talking about maximizing our plant utilization in Canada refers to our CapEx allocation, whereby we tend to increase capacity in certain plants to maximize our productivity and our efficiency.

So there's some connection absolutely with our CapEx that is dedicated to Canada in Canada operation.

And then just a question on Australia, in terms of the seasonality, sort of broadly speaking, when you look at the quarter-over-quarter decline in the EBITDA in Australia, you know, of that roughly $30 million, how much of it is sort of normal seasonality and how much would be the unusual conditions of this particular season?

I think that'd be tough to tell. I mean, the overall seasonality would account perhaps I would say for a 15% reduction in production, now tag onto that another 10% reduction or more even from weather.

So I’d say that. And again these are not scientific numbers that we've calculated, this is top of that kind of numbers.

But I would say maybe 15% percent reduction, and related to seasonality and about 10% reduction related to loss of farms in the industry. Kai, would you agree with that assessment?

I think it'd be slightly higher, but I don't have the numbers off the top of my head, but I would add the two to make up probably about 40% rather than the 15% and the 10%, you can be on. So it is quite…

As you see not scientific, it's sort of top of - top of mind assessment, but yeah it's substantial.

And when you have a big volume decline like that is it always accompanied with sort of margin pressure or not always depends?

Usually is especially in an environment where our plants weren't running at full capacity. You know, any incremental volume taken out of the system just makes it that much less efficient.

So yes, when you lose volume like that it does impact the efficiencies at the plant level.

Thank you. Thank you very much, Keith.

Thank you very much. I just want to follow up on the Australia situation.

So Lino, do you have a longer-term view? I mean, you indicated that part of it was seasonality, part of it was economics, part of it was weather.

But what do you think is going to happen over the longer term with milk production in Australia and farms, do you think this is a temporary maybe 12 to 18 months situation or is more permanent?

So, just let me take each one of those individually. Seasonality will always be there because there are some farmers that on the off season will not produce milk because it's too costly for them, specifically in the region that they're in.

So the seasonality will always exist. And that's where it maybe going back to Kai's comment on the third party milk, that's where that might be a benefit.

So we can take in milk in the off season to further compliment the use of our assets. On the weather side, very tough to tell, Patricia, I mean, what's going on not just in Australia but all over the world in the last two years with floods and droughts and hurricanes and storms.

I'm not sure if this weather is the new normal. You know, somewhere along the line you know, it seems like global warming does exist and it is impacting weather.

So I'm not sure if that's a new normal or it's an anomaly. And then of course, the economics I think will ultimately get better.

And why do I say that. Well, because anytime you have production that's removed from the system it only makes the supply and demand balance that much better which is a situation we're going into.

And as there is a better balance between supply and demand well then solids have more value, as solids have more value we can pay more for milk and as we can pay more for milk that's a better revenue stream for the farmer, and of course his economics get better or her economics get better at the farm level. So the economics I think will improve and I think that what we've gone through in the last 18 months with an oversupply especially coming from Europe, I think that has gone away.

Seasonality will always be an issue that we have to contend with in Australia and weather your guess is as good as mine. But maybe Kai might want to add to that.

I just wanted to add a comment that when we look at Australia in terms of future investments we're taking these conditions into consideration in terms of the long-term possible implications. When we look at the Lion [ph] Specialty business that we're looking to acquire that's actually giving us access to the - to a Tasmanian milk pool, which is the fastest growing milk pool in Australia.

So we're not looking to further invest in those areas where we anticipate there to be continued weather challenges. But there are other parts of Victoria as well as in other states that have higher production outlooks that we'll be more comfortable in placing more bets on.

Thank you. That's very helpful.

I just want to follow up on something you said just more than once in your opening remarks and in answers to questions. We know you talked about walking away from certain business.

And you spoke about the overarching strategy to go after profitable volumes. So when you look at the markets where you are seeing the competitive pressure and looking at the business lines what not that you're in, do you and your team have a sense for each product line, you know, the line in the sand where you would walk away from business, the level of the profitability that you wouldn't be able to tolerate?

Absolutely. And again, one of the great things that we do before we walk away is to re-look at our infrastructure and our assets and see if there's any ways that we can be more effective and more efficient and sometimes as competition forces us to think about things that we wouldn't otherwise think about.

So we're very proactive on that - on that side of it. But you know, the volumes that we've walked away recently have been more on the fluid milk side.

When you think about the entire fluid milk space that's in decline where you know they're heavily commoditized, lots of competition, lots of offerings for consumers and other spaces. You know, how much do you want to fight to keep fluid milk, not sure we want to do that day in and day out and not have a positive return or not have a positive outlook for that category of product somewhere down the road.

In other categories of product maybe sometimes we need to take a haircut only to become more effective and more efficient and have opportunity maybe to take on more volume somewhere else down the road. So this kind of analysis, this kind of debate we do this on an ongoing basis.

We don't take our customers lightly, we don't take competition lightly. We look at exactly where we need to be where we are and how much we can improve our infrastructure to be more effective and more efficient before we walk away from volume.

So we do the full analysis before we pull the trigger.

Okay. Thank you.

Thank you very much, Patricia.

Good afternoon. You've answered most of my questions on commodities and product lines.

But just wanted to ask about the outlook for EBITDA being slightly higher for next year, excluding Dairy Crest. Just want to clarify all other M&A is included.

I assume you also exclude Lion at least until that closes. And then what have you assumed for the impact of IFRS 16?

Good question. Definitely, taking and removing anything with regards to Lion, the transaction hasn't been completed.

So absolutely it's not part of it. Excluding Dairy Crest, what I'm referring to what we're referring to in our outlook is the 1.221, this is the EBITDA, that's the base that we're seeing that's going to be slightly better next year, and what we're seeing it's going to be slightly better.

All the various elements that we've touched on, on this call, whether it's the market competition, whether its the imbalance supply and demand in the US, the volatility and the elevated costs of warehousing and distribution and logistics, we expect to be better on controlling our controllables relative to some operation efficiencies, whether it's Almena, whether its the plant closure that we just completed last week in Dresser [ph] whether it's through pricing action with customer. So that's the base that we're looking at to be slightly better next year when we factored in all of those elements as opposed to the challenge or the headwinds in front of us.

In terms of the IFRS 15 the leases, yeah, we in the past we've mentioned that we had to complete the analysis with regards inclusive of Murray Goulburn [ph] So we're talking about a $60 million increase in our EBITDA line for next year. And when we look at it from a net perspective, inclusive of the depreciation and the additional financing charge its very much as we balance at zero.

So the additional EBITDA will be offset by additional depreciation and financing.

And then of course upside beyond that, there will be the Dairy Crest acquisition.

Dairy Crest acquisition, which is on top.

Okay. And so sorry, then just to clarify, the EBITDA being slightly higher or slightly better, that's including the benefit of the $60 million or excluding that?

The 1.221 today that exclude - exclude the IFRS 16 relative to leases, that excludes obviously Lion and also exclude Dairy Crest. That's the one that we're seeing that's going to be slightly better than next year.

Then on top of that there is the $60 million of the leases, and on top of that there's the Dairy Crest.

So we're really talking apples-to-apples comparable of our closing EBITDA.

Got you. Appreciate it.

Thank you.

Thank you and I appreciate the question and I am happy to have the opportunity to have clarified that.

Yes. I just want to ask about the new plant that you're constructing in British Columbia and I realize that's been in planning I guess for some time.

But is that a fluid milk plant or is that a broad array of products in that plant?

Yes, it's a fluid milk facility which is replacing the Burnaby site that we currently produce our Dairyland fluid and our products at. And we'll also have opportunity to process other products in there.

As I indicated again probably now this is third time with respect to strategic options in terms of other fluid products that we can go back for others. Burnaby will be well set up for something like that.

Is that…

Sorry, just going to say we anticipate that that'll start up in August of 2021.

August of 2021. And is that plant - well that's a long time off, so I guess you've got room there, but it does that plant sort of have less volume than originally contemplated because of the change in contractual arrangements of one of the retailers?

No, it's actually absorbing. It's going to have equal to or greater capacity, as well it's absorbing the volumes that we had in Courtenay will be coming over to Burnaby as well or excuse me, Port Coquitlam.

Yes. And the Courtenay plant is a plant that we announced closure a couple of quarters ago.

I see. Great.

And then just on the co-packing, historically have you done co-packing in any large volume over the years?

Yes, absolutely. The dairy food sector in the U.S.

primarily does co-packing for other companies and we do that quite well. Now, you know, one of the things that Morningstar or the Dairy Foods platform in the U.S.

taught us is that with great innovation we can be a solution provider to some companies that have products in those spaces and make them even better companies, through our knowledge and our expertise. So we want to bring in that kind of mentality and that kind of scope into our Canadian platform, especially since we have the infrastructure and the assets to be able to handle that kind of volume very effectively.

Thank you.

Thank you very much, Tommy.

We thank you for taking part in this conference call. We hope you'll join us for the presentation of our fiscal 2020 first quarter results on August 8th.

Have a nice day.