Saputo: Financial Results for the Second Quarter of Fiscal 2004-Net Earnings Up 38.2%.

Business Editors

MONTREAL--(BUSINESS WIRE)--Nov. 6, 2003

Saputo Inc. released today its financial results for the second quarter of fiscal 2004, which ended September 30, 2003.

-- Net earnings of $58.2 million, or $0.56 (basic) per share, up

38.2% from the same period last year. These results account

for a rationalization expense in our Canadian Dairy Products

Sector and the appreciation of the Canadian dollar over last

year. These two factors created a shortfall in net earnings of

approximately $4.7 million.

-- Revenues of $915.5 million, up 6.2% over the same period last

year. Roughly 43% of this increase is attributable to

increased sales volumes in our Cheese Division (USA), and

approximately 11% stems from the combination of the positive

effect of better average selling prices per pound of cheese on

the US market and the negative effect of the appreciation of

the Canadian dollar. The remaining increase in revenues comes

mainly from our Canadian Dairy Products Sector.

-- EBITDA(1) of $110.9 million, up 26.6% over the $87.6 million

reported last year. This increase resulted primarily from the

performance of our Cheese Division (USA), due to an increase

in sales volumes and the average selling price per pound of

cheese, which is US$0.38 higher this year.

-- EBITDA for the Canadian Dairy Products Sector of $49.9

million, up 4.0% over the corresponding period of the previous

year. This amount takes into account rationalization costs of

$2.2 million.

-- EBITDA for the US Dairy Products Sector of $52.6 million, an

increase of 68.1% compared to the $31.3 million of the same

period last year. Had it not been for the appreciation of the

Canadian dollar, EBITDA would have been $7.2 million higher.

-- EBITDA for the Bakery Division of $8.3 million, remaining the

same as last year.

-- Cash generated before changes in non-cash operating working

capital items of $73.3 million, up $6.0 million from the $67.3

million reported for the same period last year.

-- Repayment of $74.1 million in bank loans and long-term debt.

-- Interest-bearing debt-to-equity ratio of 0.44 as at September

30, 2003, in comparison with 0.53 as at March 31, 2003.

-- Dividend of $0.12 per share, payable on December 5, 2003 to

shareholders of record on November 21, 2003.

(1) Measurement of results not in accordance with generally accepted accounting principles

The Company assesses its financial performance based on its EBITDA, this being earnings before interest, income taxes, depreciation and amortization. EBITDA is not a measurement of performance as defined by generally accepted accounting principles in Canada, and consequently may not be comparable to similar measurements presented by other companies.

For more information on the results of the second quarter of fiscal 2004, we invite you to read the attached interim report for the quarter ended September 30, 2003, which forms an integral part of this press release.

Conference call

A conference call to discuss the second quarter of fiscal 2004 results will be held on Thursday, November 6, 2003 at 4:15 PM, Eastern time. To participate in the conference, dial [phone] or 1 800 273-9672. To ensure your participation, please dial-in approximately five minutes before the call.

To listen to this call on the Web, please enter web1.to.fastvibe.com/CWS/sap/031106sap/staging.htm in your Web browser.

For those unable to participate, an instant replay will be available until midnight, Thursday November 13, 2003. To access the replay, dial [phone] or 1 800 408-3053, passcode 1484718. The conference call will also be archived on the Saputo Web site at www.saputo.com.

About Saputo

Every day, in the Company's 45 plants and its distribution centres, Saputo's 7,000 employees proudly manufacture, market and distribute a wide range of products that find their way daily on store shelves, in restaurants and in prepared meals. Active in the dairy and grocery product sectors, the Company markets its products under such brand names as Saputo, Stella, Frigo, Dragone, Armstrong, Caron, Cayer, Treasure Cave, Dairyland, Baxter, Nutrilait and Vachon. A dynamic world-class company, Saputo Inc. is the largest dairy processor in Canada and one of the leading cheese manufacturers in North America. Saputo Inc. is a public company and its shares are listed on the Toronto Stock Exchange under the symbol SAP. Visit www.saputo.com for further information.

Message to Shareholders

We are pleased to present the results for the second quarter of fiscal 2004, which ended September 30, 2003.

Net earnings totalled $58.2 million, up 38.2% from the same period last year. These results take into account a rationalization expense in our Canadian Dairy Products Sector and the appreciation of the Canadian dollar over last year. These two factors created a shortfall in net earnings of approximately $4.7 million.

Our Cheese Division (USA) performed very well in the second quarter, both in terms of revenues and EBITDA(1), with sales volumes also improving over last year. Higher average selling prices per pound of cheese combined with the favourable relationship between the average selling price per pound of cheese and the cost of raw material, milk, contributed to our US division's performance, even in spite of the unfavourable effect of the appreciation of the Canadian dollar.

Our Cheese (Canada) and Milk Divisions showed some improvement, both in revenues and EBITDA, as a result of improved processes.

Our Bakery Division was relatively stable for this second quarter, both in revenues and EBITDA.

Consolidated revenues totalled $915.5 million, up 6.2% over last year.

We are very pleased with the results of the second quarter of fiscal 2004.

(1) Measurement of results not in accordance with generally accepted accounting principles

The Company assesses its financial performance based on its EBITDA, this being earnings before interest, income taxes, depreciation and amortization. EBITDA is not a measurement of performance as defined by generally accepted accounting principles in Canada, and consequently may not be comparable to similar measurements presented by other companies.

Outlook

At the outset of the fiscal year, each of the Company's divisions sets a specific number of growth objectives. These objectives were itemized in the Company's 2003 annual report and are reviewed throughout the fiscal year.

During the second quarter, we closed the Cheese Division (Canada) plant located in Cookstown, Ontario and transferred part of the production of the plant in Saint-Raymond de Portneuf, Quebec, to other Company facilities. These decisions, announced in June 2003 and implemented last August, come in the wake of the Company's reevaluation of its Canadian facilities and the optimization of its production capacities in light of the recent decision by the World Trade Organization (WTO) concerning the Canadian system for supplying milk to be used in products for the export market.

At the Company's last General Annual Meeting, held in August, we announced that we were engaging in a reflection process to ensure that our Bakery Division had the necessary tools and focus to adequately develop and achieve new goals for the benefit of both our employees and shareholders. This analysis will lead us to consider various alternatives for optimizing our Bakery Division's growth, namely i) an expansion of the product lines and the entire Vachon brand name, which could be achieved through targeted acquisitions, or ii) a partial or total disinvestment from our interest in this division. This review process, which was anticipated to last six months, is ongoing.

In mid-September, we announced the closing of two plants in addition to the sale of another plant from our Milk Division. The plants located in Calgary, Alberta and Armstrong, British Columbia will cease operations in January and February 2004, respectively. The Company will also move forward with the sale of its manufacturing operations on Annacis Island, in British Columbia, to Soyaword, a soy-based beverage company from British Columbia. The transaction is expected to close between the end of November and the end of February 2004. These measures are part of the Company's continual analysis of its activities and the implementation of measures aimed at improving its operational efficiency.

On several occasions over the past months, we mentioned that we would be turning our attention to international markets. Our goal of becoming a world-class cheese company remains unchanged, but to achieve it we must be in a market where the raw material is accessible at internationally competitive prices. Our search for acquisitions and partnerships has taken us beyond North America. At the beginning of October 2003, we announced that we had reached a preliminary agreement with Molinos Rio de la Plata S.A., a public company in Argentina, to acquire 100% of Molfino Hermanos S.A. (Molfino), the third largest dairy processor in Argentina. This transaction is subject to the parties reaching an agreement on certain purchase price adjustments before November 30, 2003 as well as other closing conditions. The purchase price would be US$50.8 million and is subject to the final agreement between the parties. Molfino operates two plants and employs 850 people. The company has annual sales of approximately US$90 million. National sales represent approximately 60% of total sales, with the remaining 40% representing exports. The company produces a wide variety of soft, semi-soft, hard and grated cheeses, as well as butter, cream, milk powder, UHT milk and dulce de leche (caramelized milk). Its main brand names are La Paulina, Molfino, Ricrem and Taluhet. Molfino uses a third-party distribution network of over 200 distributors. Export sales, primarily comprised of milk powder and cheeses, are conducted in more than 30 countries and account for approximately 40% of the total sales.

Following the acquisition of Dairyworld in February 2001, our Canadian Dairy Products Sector operated as two divisions, i.e., the Cheese Division (Canada) and Milk Division. This structure enabled us to integrate all of our Canadian cheese operations, thereby improving profitability. During the same period, our Milk Division was able to focus on improving its own operational efficiency and integrating Saputo's systems and values, while introducing new products to the market. Stronger as a result of these accomplishments, we will proceed with merging the Cheese Division (Canada) and the Milk Division into a single unit, namely the Dairy Products Division (Canada). This amalgamation will enable us to adopt a complete, unified approach to our manufacturing and sales operations, marketing activities, logistics and administrative processes, and thus further improve our Canadian Dairy Products Sector as a whole.

Randy Williamson, currently President and Chief Operating Officer of the Milk Division, will be at the helm of this new division. Before Saputo acquired Dairyworld Foods in 2001, Mr. Williamson acted as Chief Operating Officer. His 28 years with this company has given him solid experience, both in cheese and milk operations. Dino Dello Sbarba, President and Chief Operating Officer of the Cheese Division (Canada) since 2001, will be appointed President of the Cheese Division (USA). Being with the Company since 1990, he served as Executive Vice President, Sales, Marketing and Logistics between 1998 and 2001, and was responsible for both the Canadian and US markets. Consequently, he has an extensive knowledge of the challenges and the opportunities in the US market. These changes will take effect January 1, 2004. Also, as of this same date, Lino Saputo, Jr. will continue more intensively the transition process announced in August 2003, which will lead to his appointment as President and Chief Executive Officer.

Over the next few months, subject to the closing conditions, we will finalize our acquisition in Argentina, while starting to introduce Saputo's values and systems. We will also pay particularly close attention to the integration of our new Dairy Products Division (Canada). We are still interested in acquiring cheese operations in the United States, and remain open with respect to Canadian investments, both in the cheese segment and in fluid-milk and milk-based beverage segments.

Dividends

The Company's Board of Directors declared a dividend of $0.12 per share, payable on December 5, 2003 to shareholders of record on November 21, 2003. This dividend is in respect of the quarter ended September 30, 2003.

Management's Analysis

The goal of this management report is to analyze the quarter ended September 30, 2003. It should be read alongside the Company's annual report for the fiscal year ended March 31, 2003.

This disclosure document contains management's analysis of forward-looking statements. Caution should be exercised in the interpretation of management's analysis and statements, since management often makes reference to objectives and strategies that contain a certain element of risk and uncertainty. Due to the nature of our business, the risks and uncertainties associated with it could cause the results to differ materially from those stated in such forward-looking statements. We disclaim any intention or obligation to update or revise forward-looking statements based on any new information or event that may occur.

Operating results

The Company's consolidated revenues for the quarter ended September 30, 2003 stood at $915.5 million, an increase of $53.7 million over the same period last year. Roughly 43% of this increase is attributable to increased sales volumes in our Cheese Division (USA), and approximately 11% stems from the combination of the positive effect of better average selling prices per pound of cheese on the US market and the negative effect of the appreciation of the Canadian dollar. The remaining increase in consolidated revenues comes mainly from our Canadian Dairy Products Sector. Since the beginning of the fiscal year, consolidated revenues totalled $1.732 billion, down $3.4 million over last year. Compared with the same period last year, the appreciation of the Canadian dollar has eroded revenues by approximately $77 million since the beginning of the fiscal year, obscuring the effect of improved average selling prices per pound of cheese on the US market as well as increased revenues from our Canadian Dairy Products Sector.

Earnings before interest, income taxes, depreciation and amortization (EBITDA) for the second quarter stood at $110.9 million, up 26.6% over the $87.6 million reported last year. This increase resulted primarily from the performance of our Cheese Division (USA), due to an increase in sales volumes and the average selling price per pound of cheese, which is US$0.38 higher this year. The relation between the cost of the raw material, milk, and the average selling price per pound of cheese was also to our advantage. However, the appreciation of the Canadian dollar created a shortfall of approximately $7.2 million in EBITDA for the quarter as compared with last year. For the six-month period ended September 30, 2003, the EBITDA totalled $201.5 million, an increase of $25.4 million over the same period the previous year. This increase is almost entirely attributable to results from the second quarter of the current fiscal year.

Other consolidated results items

Depreciation expense stood at $16.4 million for the second quarter of 2004, down $1.3 million from $17.7 million for the same period last year. The reduced depreciation expense is explained primarily by the strength of the Canadian dollar in the second quarter compared to the same period last year. Since the beginning of the fiscal year, the depreciation expense has fallen by $2.4 million compared to the previous year, again as a result of the appreciation of the Canadian dollar.

Interest expense decreased $0.9 million during the second quarter of fiscal 2004 compared to the same period a year earlier. This reduction is primarily attributable to the reduction of long-term debt following the repayments made over the last 12 months.

Income taxes totalled $26.8 million, for an effective tax rate of 31.6%, compared to the effective rate of 29.3% for the same period last year. The higher rate is mainly due to the changes in the revenues in relation to the jurisdictions where they are generated.

In the second quarter, net earnings reached $58.2 million, or $0.56 (basic) per share, an increase of 38.2% over the $42.1 million, or $0.41 (basic) per share last year. For the six-month period ended September 30, 2003, our net earnings totalled $104.3 million, an increase of 25.0% over the $83.4 million reported last year. These increases reflect the various factors explained above.

Cash and financial resources

Over the second quarter of fiscal 2004, cash generated before changes in non-cash operating working capital items amounted to $73.3 million, up $6.0 million over the $67.3 million reported for the same period last year. Since the beginning of the fiscal year, there has been a 7.3% increase over the same period last year. Non-cash operating working capital items generated $32.1 million, which is similar to the amount reported for the second quarter of the previous year.

As for investment activities, adjustments of $1.8 million were recorded in relation with the two acquisitions made in the course of the first quarter. During the second quarter, we added $19.9 million of new fixed assets, for which approximately 72.9% was earmarked for innovations and for the expansion of existing sites. The balance relates to the replacement of fixed assets. As a result of rationalizations within our Milk Division announced in September, and for which acquisitions of fixed assets valued at $10 million will be required, our annual forecast of additions of fixed assets will increase from $70 million to $80 million.

Over the quarter ended September 30, 2003, $96.1 million was used for financing activities, namely $74.1 million in repayment of bank loans and long-term debt, and $22.8 million paid in dividends. Since the beginning of the fiscal year, our interest-bearing debt went from $540.0 million as at March 31, 2003 to $475.8 million as at September 30, 2003, a decrease of $64.2 million. During the same period, we completed $40.1 million in business acquisitions. The interest-bearing debt-to-equity ratio went from 0.53 as at March 31, 2003, to 0.44 as at September 30, 2003. With approximately $185 million of unused bank credit facilities at its disposal, the Company can continue its growth objectives through acquisitions and, should the need arise, make additional financing arrangements.

Sensibility of US currency variation

For the period ended September 30, 2003, the average US dollar conversion was based on CND$0.72 for US$1.00. For the same period last year, conversion was based on CND$0.64 for US$1.00. On that basis, each CND$0.01 fluctuation resulted in a variation of approximately $9.7 million in revenues, $1.3 million in EBITDA and $0.5 million in net earnings.

Accounting policies

Changes

In conformity with the recommendation of the Canadian Institute of Chartered Accountants (CICA) to use the fair value-based method of accounting, the Company entered stock based payments on a prospective basis in its results beginning April 1, 2002. The effect of this expense on net earnings for the second quarter is $1.0 million or $0.01 per share, compared to $0.7 million or $0.007 per share for the same period last year. For the six-month period ended September 30, 2003, the effect of this expense on net earnings is $1.3 million or $0.013 per share, compared to $1.4 million or $0.014 per share for the same period last year.

Use of estimates

In preparing financial statements in conformity with generally accepted accounting principles, management must make estimates and assumptions that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses for a given period. Actual results could differ from these estimates.

The Company regularly revises its estimates and assumptions based on available information. Overall, the Company is of the opinion that the estimates used would have no material impact on the financial situation of the Company, except for changes to the assumptions and estimates of a long-term sensitive and prospective nature, such as income tax rates, accounting of pension plans and other employee future benefits, and accounting of stock based compensation, which are based on several prospective assumptions.

Financial instruments, risks and uncertainties

In the second quarter of fiscal 2004, there were no notable changes with respect to financial instruments, risks, and uncertainties. As such, please refer to Management's Analysis contained in pages 26 and 27 of the 2003 annual report.

Information by sector

Canadian Dairy Products Sector

During the quarter ended September 30, 2003, revenues for the Canadian Dairy Products Sector were $525.3 million, up 4.9% over the same period last year.

Our Cheese Division (Canada) posted revenues of $295.4 million, a 4.3% increase over the same quarter last year. Part of this increase is due to the annual increase in cheese prices caused by the increase in the cost of the raw material, milk. Also, despite the drop in export sales volumes, the retail segment showed growth as a result of promotional initiatives and the introduction of new products such as mini bocconcini, certain soft cheeses and other private label products. Since the beginning of the fiscal year, the Cheese Division (Canada) posted revenues of $581.2 million, up 1.3% over the same period last year.

In the second quarter, the Milk Division's revenues rose to $229.9 million, up 5.7% over the same period last year. Practically all product categories contributed to the increased revenues. Part of this increase is directly related to the increase in average selling prices stemming from the increased cost of the raw material, milk. Over the quarter, consumers were introduced to several new products such as a line of premium milks as well as new formats and yogurt flavours. Since the beginning of the fiscal year, the Milk Division's revenues reached $457.0 million, a 4.2% increase over the same period last year.

For this quarter, EBITDA for the Canadian Dairy Products Sector reached $49.9 million, an increase of 4.0% over the corresponding period of the previous year. This amount takes into account rationalization costs of $2.2 million. In the absence of this cost, the EBITDA margin would have been 9.9%, compared to 9.6% for the same period last year, and the EBITDA would have risen 8.5%.

Our improvement initiatives are fully reflected in our results. To continue in the same direction, last September we announced rationalizations to occur over the following months to make better use of our manufacturing capabilities. The after-tax costs of these initiatives will be approximately $5.7 million, including a $1.5 million non-cash effect related to the devaluation of fixed assets, and annual after-tax savings of approximately $6.5 million.

Since the outset of the fiscal year, EBITDA stands at $102.2 million, a 5.5% increase compared to the same period last year.

US Dairy Products Sector

Revenues for the Cheese Division (USA) totalled $348.2 million for the quarter ended September 30, 2003, up 9.1% over the $319.1 million for the same period last year. The largest part of the increased revenues stems from the 7.9% increase in sales volumes with respect to last year, generating approximately $23 million in additional revenues. The latest acquisition, made in May 2003, will certainly have contributed to the increase, but the vast majority of the increase comes from organic growth, particularly in the retail and foodservice segments, due to promotional initiatives and better market penetration. The average selling price per pound of cheese, up US$0.38 over last year, generated approximately $55 million in additional revenues. The appreciation of the Canadian dollar created a shortfall of approximately $49 million. Since the beginning of fiscal 2004, revenues for the Cheese Division (USA) stands at $611.0 million, down $27.9 million compared to the same period last year. Although our sales volumes are up 2.4% and the average selling price per pound of cheese, higher this year, increased our revenues by almost $44 million, the rising Canadian dollar eliminated approximately $77 million in revenues since the beginning of the fiscal year.

For the quarter ended September 30, 2003, EBITDA closed at $52.6 million, an increase of $21.3 million as compared to $31.3 million last year. This represents an increase of 68.1%. Had it not been for the strong Canadian dollar, EBITDA would have been $7.2 million higher. The average selling price per pound of cheese was up US$0.38 this quarter, having a favourable impact on the absorption of our fixed costs and on the realization of inventories, produced at a lower cost, all combined with a favourable relationship between the average selling price per pound of cheese and the cost of the raw material, milk. All of these positive effects represent approximately $16 million in EBITDA. Also, an additional $12.3 million in EBITDA was generated during the quarter as a result of the increase in sales volumes, the improvement in processes and the contribution of our latest acquisitions, made during the first quarter.

Since the beginning of the fiscal year, EBITDA for the Cheese Division (USA) increased by $20.5 million and the appreciation of the Canadian dollar created a shortfall of approximately $10.3 million in EBITDA.

Grocery Products Sector

In the second quarter of 2004, revenues for the Bakery Division stood at $42.0 million, more or less the same amount as last year. Since the beginning of the fiscal year, revenues declined by $1.2 million from the $84.4 million for the same period one year earlier. Revenues were affected by the rationalization project of tart manufacturing operations implemented last year, which resulted in the review of the entire product line.

EBITDA for the Bakery Division attained $8.3 million for the second quarter, remaining the same as last year. For the six-month period ended September 30, 2003, EBITDA was $16.8 million, representing a slight drop from the corresponding period last year. Second quarter results benefited from projects implemented during previous quarters designed to reduce general and administrative expenses. These initiatives enabled the division to offset increased ingredient-sourcing and packaging costs.

Lino Saputo

Chairman of the Board and Chief Executive Officer

November 6, 2003

CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands of dollars, except per share amounts)
(unaudited)


            For the three-month periods    For the six-month periods
                     ended September 30           ended September 30
                       2003        2002            2003         2002
--------------------------------------------------------------------
Revenues           $915,540    $861,763      $1,732,323   $1,735,705
Cost of sales,
 selling and
 administrative
 expenses           804,658     774,155       1,530,776    1,559,584
Earnings before
 interest,
 depreciation
 and income
 taxes              110,882      87,608         201,547      176,121
Depreciation of
 fixed assets        16,436      17,743          32,978       35,354
--------------------------------------------------------------------
Operating income     94,446      69,865         168,569      140,767
Interest on
 long-term debt       8,971      11,159          18,569       22,620
Other interest          416        (836)            431         (876)
--------------------------------------------------------------------
Earnings before
 income taxes        85,059      59,542         149,569      119,023
Income taxes         26,858      17,433          45,308       35,591
--------------------------------------------------------------------
Net earnings        $58,201     $42,109        $104,261      $83,432
--------------------------------------------------------------------
--------------------------------------------------------------------

Per share (Note 4)
  Net earnings
    Basic             $0.56       $0.41           $1.01        $0.81
    Diluted           $0.56       $0.40           $1.00        $0.80


CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(in thousands of dollars)
(unaudited)

For the six-month periods ended September 30         2003        2002
---------------------------------------------------------------------
Retained earnings, beginning of period           $546,667    $409,648
Net earnings                                      104,261      83,432
Dividends                                         (22,783)    (16,023)
---------------------------------------------------------------------
Retained earnings, end of period                 $628,145    $477,057
---------------------------------------------------------------------
---------------------------------------------------------------------


SEGMENTED INFORMATION
(in thousands of dollars)
(unaudited)

            For the three-month periods    For the six-month periods
                     ended September 30           ended September 30

                       2003        2002            2003         2002
--------------------------------------------------------------------
Revenues
Dairy Products
   Canada          $525,339    $500,725      $1,038,128   $1,012,382
   United States    348,167     319,148         611,037      638,891
--------------------------------------------------------------------
                    873,506     819,873       1,649,165    1,651,273

Grocery Products     42,034      41,890          83,158       84,432
--------------------------------------------------------------------
                   $915,540    $861,763      $1,732,323   $1,735,705
--------------------------------------------------------------------
--------------------------------------------------------------------

Earnings before
 interest,
 depreciation
 and income taxes
  Dairy Products
   Canada           $49,934     $47,966        $102,210      $96,913
   United States     52,630      31,288          82,557       62,079
--------------------------------------------------------------------
                    102,564      79,254         184,767      158,992
Grocery Products      8,318       8,354          16,780       17,129
--------------------------------------------------------------------
                   $110,882     $87,608        $201,547     $176,121
--------------------------------------------------------------------
--------------------------------------------------------------------

Depreciation of
 fixed assets
  Dairy Products
   Canada            $6,965      $7,317         $13,904      $14,631
   United States      8,041       9,066          16,215       17,987
--------------------------------------------------------------------
                     15,006      16,383          30,119       32,618
Grocery Products      1,430       1,360           2,859        2,736
--------------------------------------------------------------------
                    $16,436     $17,743         $32,978      $35,354
--------------------------------------------------------------------
--------------------------------------------------------------------

Operating income
Dairy Products
 Canada             $42,969     $40,649         $88,306      $82,282
 United States       44,589      22,222          66,342       44,092
--------------------------------------------------------------------
                     87,558      62,871         154,648      126,374
Grocery Products      6,888       6,994          13,921       14,393
--------------------------------------------------------------------
                    $94,446     $69,865        $168,569     $140,767
--------------------------------------------------------------------
--------------------------------------------------------------------

Interest              9,387      10,323          19,000       21,744
--------------------------------------------------------------------

Earnings before
 income taxes        85,059      59,542         149,569      119,023

Income taxes         26,858      17,433          45,308       35,591
--------------------------------------------------------------------

Net earnings        $58,201     $42,109        $104,261      $83,432
--------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(unaudited)


            For the three-month periods    For the six-month periods
                     ended September 30           ended September 30
                       2003        2002            2003         2002
--------------------------------------------------------------------

Cash flows
 related to the
 following
 activities:
  Operating
    Net earnings    $58,201     $42,109        $104,261      $83,432
    Items not
     affecting cash
      Stock based
       compensation   1,125         860           1,494        1,720
      Depreciation
       of fixed
       assets        16,436      17,743          32,978       35,354
     (Gain) Loss on
       disposal of
       fixed assets    (156)         33            (151)          37
      Future
       income taxes  (2,349)      6,582           2,483       10,972
--------------------------------------------------------------------
                     73,257      67,327         141,065      131,515
    Changes in non-
     cash operating
     working capital
     items           32,098      29,702           8,119       21,727
--------------------------------------------------------------------
                    105,355      97,029         149,184      153,242
--------------------------------------------------------------------

  Investing
   Business
    acquisitions
    (Note 6)         (1,764)          -         (40,056)           -
   Additions to
    fixed assets    (19,883)    (17,005)        (46,032)     (32,259)
   Proceeds on
    disposals of
    fixed assets        206         965             590        1,518
   Other assets      (3,019)     (2,223)         (3,438)      (1,706)
--------------------------------------------------------------------
                    (24,460)    (18,263)        (88,936)     (32,447)
--------------------------------------------------------------------

  Financing


   Bank loans       (46,548)     (6,502)         10,328      (26,757)
   Repayment of
    long-term debt  (27,512)    (45,030)        (55,020)     (70,030)
   Issuance of
    share capital       589         749           1,743        3,763
   Employee future
    benefits            200         150             450          450
   Dividends        (22,783)    (16,023)        (22,783)     (16,023)
--------------------------------------------------------------------
                    (96,054)    (66,656)        (65,282)    (108,597)
--------------------------------------------------------------------

Increase (decrease)
 in cash            (15,159)     12,110          (5,034)      12,198
Effect of exchange
 rate changes        (1,791)      1,691          (2,991)       2,471
Cash (bank
 indebtedness),
 beginning of
 period               7,689       5,720          (1,236)       4,852
--------------------------------------------------------------------
Cash (bank
 indebtedness), end
 of period          $(9,261)    $19,521         $(9,261)     $19,521
--------------------------------------------------------------------
--------------------------------------------------------------------


Supplemental
 information

Interest paid        $1,607      $1,891         $17,936      $21,138
--------------------------------------------------------------------
--------------------------------------------------------------------

Income taxes paid    $2,649     $21,457         $34,626      $41,567
--------------------------------------------------------------------


CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)

                                 September 30, 2003   March 31, 2003
                                         (unaudited)        (audited)
--------------------------------------------------------------------

Assets
Current assets
   Receivables                             $263,342         $239,366
   Inventories                              397,999          392,852
   Income taxes                              10,846           24,290
   Future income taxes                       14,297           12,854
    Prepaid expenses and other assets         6,940           18,383
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                                            693,424          687,745
Portfolio investment                         55,991           55,991
Fixed assets                                621,678          627,841
Goodwill                                    559,308          550,630
Other assets (Note 3)                        42,950           39,618
Future income taxes                           5,469            8,861
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                                         $1,978,820       $1,970,686
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Liabilities
Current liabilities
  Bank indebtedness                          $9,261           $1,236
  Bank loans                                 28,729           17,592
  Accounts payable and accrued liabilities  265,978          245,188
  Income taxes                               39,106           44,403
  Current portion of long-term debt          98,919          110,000
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                                            441,993          418,419
Long-term debt                              338,897          411,135
Employee future benefits                     14,387           13,937
Future income taxes                         107,840          110,691
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                                            903,117          954,182
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Shareholders' Equity
Share capital (Note 5)                      466,074          464,331
Contributed Surplus                           2,969            1,475
Retained earnings                           628,145          546,667
Foreign currency translation adjustment     (21,485)           4,031
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                                          1,075,703        1,016,504
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                                         $1,978,820       $1,970,686
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of dollars)

1 - Accounting policies

The unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles used in Canada and applied in the same manner as the most recently audited financial statements. The unaudited consolidated financial statements do not include all the information and notes required according to generally accepted accounting principles for annual financial statements, and should therefore be read with the audited consolidated financial statements and the notes included in the Company's annual report for the year ended March 31, 2003.

2 - Foreign currency translation

The balance sheet accounts of the self-sustaining companies operating in the United States were translated into Canadian dollars using the exchange rates at the balance sheet dates. Statement of earnings accounts were translated in Canadian dollars using the average monthly exchange rates in effect during the periods. The foreign currency translation adjustment account presented in shareholders' equity represents accumulated foreign currency gains or losses on the Company's net investments in self-sustaining companies operating in the United States.

Foreign currency accounts of Canadian companies were translated into Canadian dollars using the exchange rates at the balance sheet date for current assets and liabilities and the prevailing exchange rates at the time of transactions for income and expenses. Gains or losses resulting from this translation are included in the statement of earnings with "Cost of sales, selling and administrative expenses" and is represented by the following amounts:

            For the three-month periods    For the six-month periods
                     ended September 30           ended September 30

                         2003      2002               2003      2002
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Foreign exchange gain    $280      $191               $468       $98
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    3 - Other assets
                                              September 30  March 31
                                                      2003      2003
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Net accrued pension plan asset                     $33,234   $29,553
Other                                                9,716    10,065
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                                                   $42,950   $39,618
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4 - Earnings per share

The weighted average number of common shares outstanding for the three-month period ended September 30, 2003 is 103,566,321 (103,389,462 in 2002). For the six-month period ended September 30, 2003, this number is 103,533,179 (103,335,771 in 2002).

The weighted average number of common shares outstanding, including the potentially dilutive shares that could be issued following the exercise of options granted under the Company's share option plan is 104,676,647 (104,624,321 in 2002).

5 - Share capital

Authorized

The authorized share capital of the Company consists of an unlimited number of common and preferred shares. The common shares are voting and participating. The preferred shares may be issued in one or more series, the terms and privileges of each series to be determined at the time of their creation.

                                            September 30    March 31
                                                    2003        2003
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Issued

103,580,337 common shares
 (103,460,005 as at March 31, 2003)             $466,074    $464,331
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120,332 common shares for an amount of $1,743,611 were issued during the six-month period ended September 30, 2003 pursuant to the share option plan.

Share option plan
                                     Number of      Weighted average
                                       options        exercise price
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Balance, March 31, 2003              3,784,944                $19.99
Options granted                      1,338,396                $22.50
Options exercised                     (120,332)               $14.49
Options cancelled                      (36,937)               $23.54
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Balance, September 30, 2003          4,966,071                $20.78
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Stock based compensation

The Company adopted on a prospective basis the new Canadian Institute of Chartered Accountants accounting recommendations for stock based compensation on April 1, 2002. These recommendations propose the fair value method to record to earnings the stock options granted to employees. The Company therefore used the fair value method of accounting for employee stock based compensation.

The Company recorded a $988,000 ($1,125,000 before income taxes) and a $1,316,000 ($1,494,000 before income taxes) expense related to options granted for the three-month and six-month periods ended September 30, 2003 respectively. The Company recorded a $735,000 ($860,000 before income taxes) and a $1,470,000 ($1,720,000 before income taxes) expense related to options granted for the three-month and six-month periods ended September 30, 2002 respectively.

The effect of the expense on basic earnings per share and fully diluted earnings per share is $0.010 for the three-month period ended September 30, 2003 ($0.007 in 2002) and $0.013 for the six-month period ended on the same date ($0.014 in 2002).

The fair value of share purchase options was estimated using the Black-Scholes option pricing model with the following assumptions:

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Risk-free interest rate:                             5%
Expected life of options:                            7 1/2 years
Volatility:                                         20%
Dividend rate:                                     1.4%
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6 - Business acquisitions

During the six-month period ended September 30, 2003, the Company acquired a 51% ownership of Gallo Protein 2003, LLC and acquired the commercial activities of the Treasure Cave and Nauvoo brands for cash consideration of $40,056,000. The values attributed to the net assets acquired were $28,679,000 to goodwill and trademarks, $5,205,000 to fixed assets, and $6,172,000 to working capital. Gallo Protein 2003, LLC, in which the Company acquired a 51% ownership on May 1, 2003, operates in the United States and manufactures and markets whey protein isolates and related products from whey protein concentrate. The commercial activities of the Treasure Cave and Nauvoo brands acquired on May 23, 2003 are related to the manufacturing and commercialization of blue cheese in the United States.

7 - Commitments and contingencies

The Company carries some of its operations in leased premises and has also entered into lease agreements for equipment and rolling stock.

The Company is defendant to certain claims arising from the normal conduct of its business. The Company believes that the final resolution of these claims will not have a material adverse effect on its earnings or financial position.

The Company from time to time enters into agreements in the normal course of its business, such as a service arrangements and leases, and in connection with business or asset acquisitions or dispositions, which agreements by their nature may provide for indemnifications of counterparties. These indemnification provisions may be in connection with breach of representations and warranties and for future claims for certain liabilities, including liabilities related to tax and environmental matters. The terms of these indemnification provisions vary in duration. Given the nature of such indemnifications, the Company is unable to reasonably estimate its maximum potential liability under these agreements.

8 - Comparative figures

Certain of the prior period's comparative figures have been reclassified to conform to the current period's presentation.