Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lassonde Industries Inc (LSDAF, Financial) reported a 7.8% increase in sales, driven by volume gains in the US and pricing adjustments in Canada.
- Operating profit improved by 21%, supported by efficiency gains and favorable timing on ingredient costs.
- The company successfully completed its North Carolina expansion project on time and on budget, enhancing capacity for single-serve products.
- Lassonde Industries Inc (LSDAF) achieved a 27% increase in adjusted EBITDA, reflecting improved profitability.
- The acquisition of Summer Garden is expected to enhance growth, profitability, and portfolio diversification for Lassonde Industries Inc (LSDAF).
Negative Points
- The company faces ongoing cost inflation, particularly in orange juice and concentrates, impacting Canadian operations.
- Sales volume in Canada declined, partially offsetting gains in the US.
- Higher SG&A expenses were reported, including costs related to the Summer Garden acquisition.
- The company anticipates higher input costs for the remainder of the year, particularly for orange juice and concentrates.
- Operating cash flow decreased compared to the previous year, mainly due to higher cash flow utilization from working capital.
Q & A Highlights
Q: Can you explain the factors behind the revised sales growth outlook to mid-to-high single digits for the year?
A: Vince Timpano, President and COO, explained that the confidence in the revised outlook is driven by the buildback plan in the US, securing new customers, and momentum in private label volumes. While pricing adjustments may be limited due to consumer constraints, the company is seeing stable category performance and share growth in both the US and Canada, supported by innovation and targeted promotional investments.
Q: Will there be an adjusted gross margin to reflect the stepped-up cost for the acquired Summer Garden inventory?
A: Eric Gemme, CFO, stated that while they must report under GAAP, they will consider flagging the impact of the inventory step-up to provide clarity on the underlying profitability. This will help in understanding the real run rate for the business beyond the initial six-week period affected by the inventory adjustment.
Q: Can you provide more details on the potential multi-year CapEx program for US beverage operations?
A: Eric Gemme, CFO, mentioned that they are in the final stages of assessing the program, which aims to optimize existing capabilities and support long-term growth. Vince Timpano added that the focus is on ensuring competitive cost structures and flexibility for innovation, with more details to be shared in the coming months.
Q: How did securing favorable ingredient costs impact operating profit, and can this be replicated in future quarters?
A: Eric Gemme, CFO, noted that they secured a portion of ingredients, particularly orange juice, at favorable prices due to market timing. However, current market realities show higher costs, indicating that the profit boost from this opportunity is likely a one-time benefit.
Q: What are the future capital allocation priorities following the Summer Garden acquisition?
A: Eric Gemme, CFO, stated that the focus will be on internal growth through investments in existing networks rather than acquisitions. However, they remain open to M&A opportunities given their strong balance sheet. Vince Timpano emphasized the importance of integrating Summer Garden effectively into Lassonde's operations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
