Saputo Inc.: Financial Results for the First Quarter Of Fiscal 2004-Net Earnings Up 11.6%.

Business Editors

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

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

-- Net earnings of $46.1 million or $0.45 (basic) per share, up

11.6% as compared to the first quarter last fiscal year. These

results take into account rationalization costs incurred in

our Cheese Division (Canada) and the appreciation of the

Canadian dollar as compared to last year. Combined, these two

factors represent a shortfall of approximately $1.6 million in

net earnings.

-- Company's consolidated revenues for the quarter reached $816.8

million, a decrease of close to $57 million as compared to the

same period last year. The appreciation of the Canadian

dollar, the average selling price per pound of cheese on the

US market and a slight decrease in sales volumes in the United

States explain the decrease in revenues.

-- EBITDA(1) amounted to $90.7 million, up $2.2 million. During

the quarter, we spent $1.5 million on previously announced

plant closures. The appreciation of the Canadian dollar

created a shortfall of $3.1 million in EBITDA.

-- EBITDA in the Canadian Dairy Products Sector reached $52.3

million, up $3.4 million as compared to the first quarter last

year. EBITDA margin stands at 10.2% as compared to 9.6% for

the same quarter last year.

-- EBITDA in the US Dairy Products Sector of $29.9 million, down

$0.9 million as compared to the first quarter of fiscal 2003,

mainly due to the appreciation of the Canadian dollar, an

average selling price per pound of cheese US$0.08 lower for

the same period and a slight decrease in sales volumes

compared to last year.

-- EBITDA for the Grocery Products Sector amounted to $8.5

million, compared to $8.8 million for the corresponding

quarter of fiscal 2003. EBITDA margin remains stable at 20.6%.

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

capital items totalled $67.8 million, up 5.6% compared to the

same quarter last year.

-- Repayment of $27.5 million in long term debt. Bank loans

increased by $56.9 million, partially to cover the

disbursements related to business acquisitions made during the

quarter.

-- Quarterly dividend of $0.12 per share, up 20% over last year.

(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 first quarter of fiscal 2004, we invite you to read the attached interim report for the quarter ended June 30, 2003, which forms an integral part of this press release.

Conference call

A conference call to discuss the first quarter of fiscal 2004 results will be held on Wednesday, August 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 http://web1.to.fastvibe.com/CWS/sap/030806sap/staging.htm in your Web browser.

For those unable to participate, an instant replay will be available until midnight, Wednesday August 13, 2003. To access the replay dial [phone] or 1 800 408-3053, passcode 1465142. The conference call will also be archived on the Saputo Web site at www.saputo.com.

About Saputo

Every day, in 46 plants and in our 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.

                              SAPUTO

                            1ST QUARTER

                            FISCAL 2004

Message to Shareholders

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

Our net earnings totalled $46.1 million, up 11.6% from last year. These results take into account a rationalization expense in our Cheese Division (Canada) and the appreciation of the Canadian dollar over last year. The combination of these two factors created nearly a $1.6 million shortfall in net earnings.

Overall, each of our divisions performed relatively well in the first quarter. The Cheese (Canada) and Milk Divisions, recording stable revenues, continued their integration and improvement of processes, which brought their EBITDA(1) margin from 9.6% last year to 10.2% this year. With respect to the Cheese Division (USA), our EBITDA performance was relatively stable. Although down compared to the first quarter last year, the average selling price per pound of cheese improved since the beginning of the fiscal year and the relation between the cost of milk and the price of cheese was favourable. However, the Canadian dollar appreciated and our sales volumes decreased slightly, although the lower volumes were recovered over the first month of the second quarter of the current fiscal year. Our Bakery Division had slight decreases, both in revenues and EBITDA.

Revenues totalled $816.8 million, down almost $57 million compared to the same period last year. The appreciation of the Canadian dollar, the average price per pound of cheese on the US market, and a slight decrease in sales volumes in the United States are the key factors causing this decrease.

We are very pleased with the consolidated results from the first quarter of fiscal 2004.

During the quarter, we acquired 51% interest in Gallo Protein 2003, LLC on May 1, 2003, as well as the business related to the Treasure Cave and Nauvoo blue cheese brands on May 23, 2003. These two acquisitions are recorded at the time of their respective acquisition date and have had a negligible impact on our operations due to their modest size.

Outlook

At the outset of the fiscal year, each of the Company's divisions set certain growth objectives. These objectives were itemized in the Company's 2003 annual report and are reassessed throughout the fiscal year.

During the first quarter, we announced the closing of a plant part of the Cheese Division (Canada) located in Cookstown, Ontario and the transfer of part of the production of the plant in Saint-Raymond de Portneuf, Quebec, to other Company facilities. This comes 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 of the supply of milk to be used in products for the export market.

(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.

Furthermore, our initial objectives are coupled with new issues to ponder.

In July 2001, our Bakery Division transferred its cookie, fine bread and soup operations to Dare Foods in consideration for a 21% investment in that company. This move was important for the growth of this segment within a group whose main focus is in a particular niche. Over the last four years, we achieved considerable growth in our Dairy Products Sector and at the same time worked on improving our Bakery Division's financial and operational performance. This division is now ready for steady growth. We are currently engaged in a reflection process to ensure that our Bakery Division will have the necessary tools and focus to adequately develop and achieve new goals for the benefit of both our employees and shareholders.

This analysis will continue over the coming months and will lead us to consider various alternatives for optimizing our Bakery Division's growth, namely: i) expanding our product line and entire Vachon brand name, an initiative that could be realized through targeted acquisitions, or ii) a partial or total disinvestment from our interest in our Bakery Division.

On several occasions over the past months, we mentioned that we would be turning our attention to the international market. 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 competitive international prices. Our search for acquisitions and partnerships takes us beyond North America. Steps already begun have intensified over the last few weeks.

We remain convinced that our growth is largely a result of our maximized use of our production capacities. We are committed to continue to operate in this manner. The Company's origins are in the manufacture of cheese, and for this reason, our attention has always and still focuses on seeking acquisitions in the cheese industry. The US industry remains relatively fragmented and offers the greatest acquisition potential. With a market share of approximately 20% in fluid milk in Canada, we are open to considering acquisitions in Canada in fluid milk and dairy beverages.

It is in a company's best interest to give considerable thought to succession. Our decision to go public in 1997 had furthermore been motivated by the need to ensure, for a family business like ours, its continuity for generations to come. The Company grew considerably over the last five years while building on a sound organizational structure based on a solid and well-trained succession. The Company has quality staff at all levels of the organization.

Last spring, I expressed to the Board of Directors my intention to progressively reduce my functions within the Company. The Corporate Governance Committee and the Board of Directors then took steps to assess a succession plan for the position of President and Chief Executive Officer. The Committee thus formed proceeded with an evaluation of candidates to be able to make the appropriate recommendations to the Board of Directors. The Committee also made recommendations to the effect that changes would be made after a transition period.

Lino Saputo, Jr., currently President and Chief Operating Officer of the Cheese Division (USA), was designated by the Board of Directors as my successor for the position of President and Chief Executive Officer. With his knowledge of the industry and his talent, he will be able to lead the Company towards new horizons. At the end of the transition period, which could extend over 12 months, and with the support of the Board members, I will remain Chairman of the Board of Directors.

Dividends

The Board of Directors revised its policy upwards with respect to Company dividends. The quarterly dividend will therefore rise from $0.10 per share to $0.12 per share, for a total of $0.48 per share annually, representing a 20% increase. This dividend will become effective for the payment of the dividend on September 5, 2003 to shareholders of record on August 22, 2003.

Management's Analysis

The goal of this management report is to analyze the quarter ended June 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, which 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 June 30, 2003 totalled $816.8 million, a drop of $57.1 million over the same period last year. Decreased revenues are primarily attributable to the Cheese Division (USA), in light of the appreciation of the Canadian dollar, the average selling price per pound of cheese being US$0.08 lower and a slight drop in sales volumes in the US market compared to the same period last year.

Earnings before interest, income taxes, depreciation and amortization (EBITDA) for the first quarter stood at $90.7 million, up $2.2 million compared to $88.5 million last year. These results highlight our ability to effectively manage our operations and benefit from opportunities presented to us. During this quarter, we spent $1.5 million related to plant closings announced during the previous fiscal year. Also, the appreciation of the Canadian dollar created a shortfall of approximately $3.1 million in EBITDA.

Other consolidated results items

Depreciation expense totalled $16.5 million for the first quarter of 2004, down $1.1 million from $17.6 million for the same period last year. Decreased depreciation expense is explained primarily by the appreciation of the Canadian dollar for the quarter ended June 30, 2003 compared to the same period last year.

Interest expense decreased $1.8 million over the first quarter of fiscal 2004 compared to the same period a year earlier. This decrease is primarily attributable to the reduction of long-term debt through repayments made over the last 12 months.

Income taxes totalled $18.5 million for an effective tax rate of 28.6%, compared to a rate of 30.5% for the same period last year. Changes in the jurisdictions of our sources of revenues mainly explain the lower rates.

Net earnings totalled $46.1 million, or $0.45 (basic) per share, an increase of 11.6% over the $41.3 million, or $0.40 (basic) per share last year. This increase reflects the various explanatory elements presented above.

Cash and financial resources

Over the first quarter of fiscal 2004, cash generated before changes in non-cash operating working capital items amounted to $67.8 million, up 5.6% compared to the same period last year. Non-cash operating working capital items used, over the first quarter, $24 million primarily related to income tax amounts for fiscal 2003, payable in the first quarter.

As for investment activities, acquisitions made in the United States over the first quarter, namely our 51% interest in Gallo Protein 2003, LLC and the acquisition of commercial activities related to the Treasure Cave and Nauvoo brands, called for a disbursement of $38.3 million.

Over the quarter ended June 30, 2003, we added $26.1 million of new fixed assets, of which approximately 62% was earmarked for new technologies, the expansion of some of our sites and the purchase of a facility in which we were a lessee. The balance is related to the replacement of fixed assets. Although the additions to fixed assets in the first quarter of fiscal 2004 are significant, our forecast remains unchanged for fiscal 2004, with $70 million of additions to fixed assets.

Financing activities for the quarter are essentially made up of the $27.5 million repayment of long-term debt in accordance with commitments made to lending institutions and the increase in bank loans of $56.8 million.

Over the last quarter, our net interest-bearing debt went from $540 million as at March 31, 2003, to $530.7 million as at June 30, 2003, despite investments of close to $38 million in business acquisitions made during the quarter. The net interest-bearing debt-to-equity ratio improved, going from 0.53 as at March 31, 2003, to 0.51 as at June 30, 2003.

Having approximately $160 million of unused bank credit facilities at its disposal, the Company can easily finance its growth objectives through acquisitions and, should the need arise, make additional financing arrangements.

Accounting policies

Changes

In conformity with the recommendation of the Canadian Institute for Chartered Accountants (CICA) to use the fair value based method of accounting, the Company recorded stock based compensation on a prospective basis in its results beginning April 1, 2002. The effect of this expense on net earnings for the first quarter is $0.3 million or $0.003 per share, compared to $0.7 million or $0.007 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 first 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, specifically, pages 26 and 27 of the 2003 annual report.

Information by sector

Canadian Dairy Products Sector

During the quarter ended June 30, 2003, our Canadian Dairy Product Sector's revenues rose to $512.8 million, a $1.1 million increase over the same period last year.

Our Cheese Division (Canada) posted revenues of $285.7 million, a $5 million drop compared to the $290.7 million posted during the first quarter last year.

The impact of the annual increase in cheese prices caused by the increase in the cost of the raw material (milk) was in large part offset by a drop in sales volumes primarily caused by a drop in exports, made difficult since the World Trade Organization's decision last December. The declining by-products market also reduced the effect of the increase in sales in the Canadian retail segment.

We have been considerably active in supporting our leading brands, namely, Saputo in Quebec and Armstrong in Western Canada, by way of intense promotional campaigns. Along with other initiatives, the Saputo brand can now count on a new graphic identity on its retail packaging.

In the first quarter of fiscal 2004, the Milk Division's revenues rose to $227.1 million, a 2.8% increase over the $221 million earned in the first quarter of fiscal 2003.

This 2.8% increase is partly due to higher sales prices resulting from higher raw milk cost. Also, all of the Milk Division's product categories contributed to the increase in revenues, with a noteworthy contribution stemming from innovation-sensitive products and value-added products such as yogurt and flavoured coffee creamer. As for fluid milk, we are firmly holding our Western Canada and Maritime market shares while continuing to build business in Ontario and Quebec.

As at June 30, our earnings before interest, income taxes, depreciation and amortization (EBITDA) for the Canadian Dairy Products Sector rose to $52.3 million, a $3.4 million increase over the first quarter last year. EBITDA margin for this sector during the quarter climbed to 10.2% compared to 9.6% during the same quarter last year.

EBITDA for the Canadian Dairy Products Sector was directly affected by the $1.5 million expenses incurred for the closure of plants in the Cheese Division (Canada). The Cheese (Canada) and Milk Divisions continued their integration and improvement initiatives, which translated into a notable increase of EBITDA in the Canadian Dairy Products Sector.

US Dairy Products Sector

The revenues for this quarter were $262.9 million, whereas the revenues for the same period last year were $319.7 million. To account for this near $57 million drop, we point to three factors. First, the appreciation of the Canadian dollar accounts for nearly $29 million in revenue decrease. In addition, the average selling price per pound of cheese was US$0.08 lower than it was during the same period last year, which accounted for nearly $11 million in the decrease in revenues. Furthermore, contrary to the retail and foodservice segments, which experienced some increase in volumes, the industrial segment experienced decreased sales volumes caused by loss of certain customers, a situation that created, for the entire division, an overall decrease in volume of nearly 3.4% during the last quarter. We also lowered our sales of by-products, which became unprofitable due to market prices. It is important to point out that the first quarter drop in sales volumes was entirely recuperated during the first month of the second quarter of fiscal 2004.

During the quarter, the division introduced new products into the retail segment, including cheese mini bars under the brand name Frigo Cheese Heads. The end-of-May acquisition of operations related to the Treasure Cave and Nauvoo blue cheese brands should fuel the growth of revenues in the coming quarters.

EBITDA for this quarter closed at $29.9 million, a $0.9 million decrease compared to the same period last year.

Throughout the period ended June 30, 2003, we were able to take advantage of the favourable relation between the cost of milk and the average selling price per pound of cheese. Also, as a result of the higher average selling price per pound of cheese between March 31 and June 30, 2003, we were able to draw greater profit from the realization of our inventories of March 31, 2003. On the other hand, this favourable relation was not enough to offset a slight drop in EBITDA caused by an average selling price per pound of cheese, which was US$0.08 lower than for the same quarter last year, compounded by a nearly 3.4% decline in sales volume and a shortfall of $3.1 million in earnings caused by the appreciation of the Canadian dollar.

Grocery Products Sector

In the first quarter of fiscal 2004, revenues for the Bakery Division stood at $41.1 million, a $1.4 million decrease compared to the same quarter last year.

The factors for this slight decline include a sales decrease caused by the Easter period, which occurred in the first quarter of this year as opposed to last year, combined with lower tart sales following the rationalization project carried out by the transfer of tart manufacturing from our Aurora, Ontario plant to the plant in Sainte-Marie de Beauce, Quebec. These factors obscure the positive impacts of our Ontario sales force's combined efforts and the initiatives taken to improve client services. In Quebec, we introduced specially designed display racks for convenience stores. In-store promotions combined with televised ad campaigns for Hop & Go! and Passion Flakie were also carried out during the quarter.

We are continuing to steadily develop our activities in the United States. Recently, we have been working with new distributors who seem capable of handling the shelf-life limitations of our products.

The Bakery Division's EBITDA reached $8.5 million for the quarter and was $8.8 million for the same period in 2003. As for the EBITDA margin, it remained the same at 20.6%.

The first quarter of fiscal 2004 benefited from efforts to reduce general expenses that began during preceding quarters, through production line robotization and the reorganization of warehouse and transport activities. To this can be added savings resulting from the closing of the Aurora plant. These initiatives have therefore offset increased costs of certain raw materials.

Lino Saputo
Chairman of the Board
and Chief Executive Officer
August 6, 2003



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

For the three-month periods ended June 30

                                            2003                2002
---------------------------------------------------------------------

Revenues                                $816,783            $873,942
Cost of sales, selling and
 administrative expenses                 726,118             785,429
---------------------------------------------------------------------
Earnings before interest,
 depreciation and income taxes            90,665              88,513
Depreciation of fixed assets              16,542              17,611
---------------------------------------------------------------------
Operating income                          74,123              70,902
Interest on long-term debt                 9,598              11,461
Other interest                                15                (40)
---------------------------------------------------------------------
Earnings before income taxes              64,510              59,481
Income taxes                              18,450              18,158
---------------------------------------------------------------------
Net earnings                             $46,060             $41,323
---------------------------------------------------------------------
---------------------------------------------------------------------

Per share (note 4)
  Net earnings
    Basic                                  $0.45               $0.40
    Diluted                                $0.44               $0.40



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

For the three-month periods ended June 30

                                            2003                2002
---------------------------------------------------------------------

Retained earnings, beginning of period  $546,667            $409,648
Net earnings                              46,060              41,323
---------------------------------------------------------------------
Retained earnings, end of period        $592,727            $450,971
---------------------------------------------------------------------
---------------------------------------------------------------------



SEGMENTED INFORMATION
(in thousands of dollars)
(unaudited)

For the three-month periods ended June 30

                                            2003                2002
---------------------------------------------------------------------

Revenues
Dairy Products
  Canada                                $512,789            $511,657
  United States                          262,870             319,743
---------------------------------------------------------------------
                                         775,659             831,400
Grocery Products                          41,124              42,542
---------------------------------------------------------------------
                                        $816,783            $873,942
---------------------------------------------------------------------
---------------------------------------------------------------------

Earnings before interest, depreciation
 and income taxes
Dairy Products
  Canada                                 $52,276             $48,947
  United States                           29,927              30,791
---------------------------------------------------------------------
                                          82,203              79,738
Grocery Products                           8,462               8,775
---------------------------------------------------------------------
                                         $90,665             $88,513
---------------------------------------------------------------------
---------------------------------------------------------------------

Depreciation of fixed assets
Dairy Products
  Canada                                  $6,939              $7,314
  United States                            8,174               8,921
---------------------------------------------------------------------
                                          15,113              16,235
Grocery Products                           1,429               1,376
---------------------------------------------------------------------
                                         $16,542             $17,611
---------------------------------------------------------------------
---------------------------------------------------------------------

Operating income
Dairy Products
  Canada                                 $45,337             $41,633
  United States                           21,753              21,870
---------------------------------------------------------------------
                                          67,090              63,503
Grocery Products                           7,033               7,399
---------------------------------------------------------------------
                                         $74,123             $70,902
---------------------------------------------------------------------
---------------------------------------------------------------------

Interest                                   9,613              11,421
---------------------------------------------------------------------

Earnings before income taxes              64,510              59,481

Income taxes                              18,450              18,158
---------------------------------------------------------------------

Net earnings                             $46,060             $41,323
---------------------------------------------------------------------
---------------------------------------------------------------------



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

For the three-month periods ended June 30

                                            2003                 2002
---------------------------------------------------------------------

Cash flows related to the following
 activities:
  Operating
    Net earnings                         $46,060             $41,323
    Items not affecting cash
      Stock based compensation               369                 860
      Depreciation of fixed assets        16,542              17,611
      Gain on disposal of fixed assets         5                   -
      Future income taxes                  4,832               4,390
---------------------------------------------------------------------
                                          67,808              64,184
    Changes in non-cash operating
     working capital items               (23,979)             (7,563)
---------------------------------------------------------------------
                                          43,829              56,621
---------------------------------------------------------------------

  Investing
    Business acquisitions (note 6)       (38,292)                  -
    Additions to fixed assets            (26,149)            (15,165)
    Proceeds on disposals of fixed
     assets                                  384                 468
    Other assets                            (419)                437
---------------------------------------------------------------------
                                         (64,476)            (14,260)
---------------------------------------------------------------------

  Financing
    Bank loans                            56,876             (20,255)
    Repayment of long-term debt          (27,508)            (25,000)
    Issuance of share capital              1,154               3,014
    Employee future benefits                 250                 300
---------------------------------------------------------------------
                                          30,772             (41,941)
---------------------------------------------------------------------

Increase in cash                          10,125                 420
Effect of exchange rate changes           (1,200)                448
(Bank overdraft) cash, beginning
 of period                                (1,236)              4,852
---------------------------------------------------------------------
Cash, end of period                       $7,689              $5,720
---------------------------------------------------------------------
---------------------------------------------------------------------

Supplemental information

Interest paid                            $16,329             $19,247
---------------------------------------------------------------------
---------------------------------------------------------------------

Income taxes paid                        $31,977             $20,110
---------------------------------------------------------------------
---------------------------------------------------------------------



CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)

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

Assets
Current assets
  Cash                                    $7,689                  $-
  Receivables                            236,986             239,366
  Inventories                            392,936             392,852
  Income taxes                            23,758              24,290
  Future income taxes                     12,950              12,854
  Prepaid expenses and other assets        9,282              18,383
---------------------------------------------------------------------
                                         683,601             687,745
Portfolio investment                      55,991              55,991
Fixed assets                             616,517             627,841
Goodwill                                 556,981             550,630
Other assets (note 3)                     39,939              39,618
Future income taxes                        8,861               8,861
---------------------------------------------------------------------
                                      $1,961,890          $1,970,686
---------------------------------------------------------------------
---------------------------------------------------------------------

Liabilities
Current liabilities
  Bank overdraft                              $-              $1,236
  Bank loans                              74,468              17,592
  Accounts payable and accrued
   liabilities                           233,727             245,188
  Income taxes                            26,338              44,403
  Current portion of long-term debt      110,000             110,000
---------------------------------------------------------------------
                                         444,533             418,419
Long-term debt                           353,906             411,135
Employee future benefits                  14,187              13,937
Future income taxes                      112,078             110,691
---------------------------------------------------------------------
                                         924,704             954,182
---------------------------------------------------------------------

Shareholders' Equity
Share capital (note 5)                   465,485             464,331
Contributed surplus                        1,844               1,475
Retained earnings                        592,727             546,667
Foreign currency
 translation adjustment                  (22,870)              4,031
---------------------------------------------------------------------
                                       1,037,186           1,016,504
---------------------------------------------------------------------
                                      $1,961,890          $1,970,686
---------------------------------------------------------------------
---------------------------------------------------------------------



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
                                                 ended June 30

                                            2003                2002
---------------------------------------------------------------------

Foreign exchange gain (loss)                $188                $(93)

3 - Other assets

                                         June 30            March 31
                                            2003                2003
---------------------------------------------------------------------

Net accrued pension plan asset           $30,862             $29,553
Other                                      9,077              10,065
---------------------------------------------------------------------
                                         $39,939             $39,618
---------------------------------------------------------------------


4 - Earnings per share

The weighted average number of common shares outstanding for the
three-month period ended June 30, 2003 is 103,500,036 (103,282,020 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
104,435,982 (104,254,560 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.

                                         June 30            March 31
                                            2003                2003
---------------------------------------------------------------------
Issued

103,542,569 common shares
 (103,460,005 as at March 31, 2003)     $465,485            $464,331
---------------------------------------------------------------------

82,564 common shares for an amount of $1,185,620 were issued during
the three-month period ended June 30, 2003 pursuant to the share
option plan.

Share option plan
                                       Number of    Weighted average
                                         options      exercise price
---------------------------------------------------------------------

Balance, March 31, 2003                3,784,944              $19.99
Options granted                        1,338,396              $22.50
Options exercised                        (82,564)             $14.36
Options cancelled                        (16,383)             $23.84
------------------------------------------------
Balance, June 30, 2003                 5,024,393              $20.74
------------------------------------------------

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
accounting for employee stock based compensation.

The Company recorded a $328,000 ($369,000 before income taxes)
expense related to options granted for the three-month period ended
June 30, 2003. The Company recorded a $735,000 ($860,000 before
income taxes) expense related to options granted for the three-month
period ended June 30, 2002.

The effect of the expense on basic earnings per share and fully
diluted earnings per share is $0.003 for the three-month period ended
June 30, 2003 ($0.007 in 2002).

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

---------------------------------------------------------------------
Risk-free interest rate:                                5%
Expected life of options:                               71/2 years
Volatility:                                             20%
Dividend rate:                                          1.4%
---------------------------------------------------------------------


6 - Business acquisitions

During the three-month period ended June 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 $38,292,000. The values attributed to the net assets
acquired were $27,866,000 to goodwill and trademarks, $6,455,000 to
fixed assets, and $3,971,000 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

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.