Over the last 10 years, since our initial public offering, we have grown into a global dairy business.

From the outset and throughout our evolution, we have maintained the culture that has distinguished our Company, placing high value on the fundamentals that helped establish Saputo over 50 years ago. Our commitment to offering quality products remains, while our appreciation towards our employees is ever-present as they are the cornerstone of our success.

Our progression is apparent through our consecutively strong performances. Total revenues reached $5.059 billion for the fiscal year ended March 31, 2008 as compared to a humble, yet very respectable, $817.2 million in fiscal 1998. Over the past decade, our EBITDA has increased by $430.6 million, representing $526.0 million this fiscal year, while net earnings rose by $243 million, totalling $288.2 million for fiscal 2008.

Furthermore, when the shares of our company were first listed on the Toronto Stock Exchange on October 15, 1997, one share was valued at $17, and has since split twice as a result of share dividends. Considering the worth of one Saputo share as at the end of this fiscal year, the value of a $1,000 investment in 1997 would now represent $6,513 excluding returns on dividends.

The continued efforts of our employees, whose expertise is an essential part of our foundation, contributed greatly to these accomplishments. Ranked as the 15th largest dairy processor worldwide, we now employ 9,200 dedicated men and women who, in 5 countries, craft our products that are now distributed in over 40 countries.

A Year of Change

Over the last 12 months, we were able to pursue our expansion, having grown our business considerably in the United States (US) through the acquisitions of the Land O’Lakes West Coast industrial cheese business in April 2007 and, in April 2008, of Alto Dairy Cooperative. Also, our profitability improved in the US, in Canada and in Argentina allowing us to strengthen our base. At the same time, we became more familiar with the European market through our German and United Kingdom (UK) operations. Furthermore, there were many changes in the dairy industry, globally and locally, that affected each of our divisions. Saputo welcomed the challenges and by tradition, our employees worked together to find effective ways to not only face the issues head on but also, find ways to rise above them.

Although the Canadian market conditions in general terms remained stable, certain regulatory changes were introduced with respect to the composition of cheese and labelling of products. Preparing for these amended regulations is an on-going process for our Dairy Products Division (Canada). Consequently, though it may be challenging, we will be compliant with the new Canadian requirements, effective in December 2008, and we intend to alleviate the potential impact they may have on our activities, while trying our best to minimize the effect on our customers.

Some markets, such as that of the US, are more volatile than Canada. Due to different pricing systems, the Dairy Products Division (USA) continues to experience whey price fluctuations and make allowance discrepancies even though some positive changes were made by regulators with respect to price calculation formulas. While most product prices in the US were quite high on average, the dry whey market, which is a determinant in the cost of milk, rose to unprecedented levels. When combined with the inconstant market conditions, the situation remains challenging. Nonetheless, we are committed to and focused on our development, as the US market constitutes a key aspect of our growth strategy.

Argentina is another market that has experienced some difficulties over this past fiscal year. While our capital investments in this division are completed, our plant utilization has not yet reached full capacity due primarily to the floods that occurred at the beginning of fiscal 2008. Also, in an attempt to ensure a domestic supply of dairy products to local markets at competitive prices, the Argentinean government imposed new ceiling prices for the export of dairy products which further challenged our ability to maintain our margins. This export tax was recently positively adjusted and we intend to continue to collaborate with the government to meet the domestic requirements, while maintaining our presence in the export markets.

The floods in Argentina, combined with other climatic incidences such as the drought in Australia and the decreased number of milk producers and production in the European Union, resulted in the rising price of milk on an international level. These conditions caused an imbalance within the global dairy industry, contributing not only to a higher demand than supply, but also putting forth emerging importer markets, such as China, Russia and the Middle East.

Our Bakery Division has also experienced adverse market conditions with regards to higher packaging and ingredients costs and the introduction of private labels among some retailers. The division continues to focus on improving overall efficiencies, specifically in recipes and processes at the manufacturing level, while preserving its market share.

A Company of Strength

Our achievements over the past decade represent a journey filled with challenging circumstances. Essentially, they reflect our qualities as a company and as a team. Since our founding, Saputo employees have been true leaders in the dairy industry, adapting to the different circumstances that arose. Consequently, we have become very flexible in our activities, demonstrating that we are capable of responding positively to obstacles. This flexibility, along with the willingness demonstrated by our team to learn and capitalize from opportunities, allows us to change as the industry evolves. In the course of our evolution, however, the Company’s objective remained unchanged. We intend to offer high-quality products to our consumers and customers. This has always been, and will remain, a reflection of our employees’ dedication.

Over the next year, we will continue to solidify our foundations, which should in turn allow us to further expand our business. We will strive to find ways to be more efficient and effective throughout the different levels of our activities as we analyze our practices and identify ways to better ourselves in all areas within the Company.

With our low debt level and our sound structure, we aim to pursue our growth through acquisitions. As our industry consolidates, our objective is to find assets that will complement Saputo’s activities. Essentially, with our international client base and the rise of global demand, the world has become our market. We will look for opportunities that prove to fit within the Saputo structure and its culture, and continue to find projects that would add value for our stakeholders.

Teaming up to go further represents what Saputo has always stood for. As a team, we remain disciplined in our approach, with a clear focus of how we envision Saputo’s growth. Our passion has brought us thus far and it still motivates us in finding new ways to improve and develop our business on a global scale. The execution of our plans and the realization of our objectives are only possible with the continued involvement of our employees. We will work together as one cohesive unit to achieve the goals that will successfully lead us into the future.

Lino A. Saputo, Jr.
President and Chief Executive Officer
June 5, 2008