Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Premium Brands Holdings Corp (PRBZF, Financial) reported record sales of $1.67 billion for the quarter, marking a 1.3% increase compared to the third quarter of 2023.
- The company's specialty food group's organic volume growth for major US initiatives was 8.1%, excluding a temporary decline in sales to a key customer.
- The bakery and protein groups achieved significant growth rates of 25.3% and 7.8%, respectively, leveraging new US-based capacity.
- Premium Brands Holdings Corp (PRBZF) has a robust pipeline of new opportunities and sales initiatives, particularly in the sandwich group, which is expected to return to historical growth levels in 2025.
- The company is in a strong liquidity position with over $700 million of unused credit capacity, providing financial flexibility for future growth initiatives.
Negative Points
- The sandwich group experienced a 5% decline in sales due to a transitory issue with a key customer, impacting overall performance.
- Adjusted earnings and earnings per share for the quarter decreased to $49.4 million and $1.11 per share, respectively, down from $56.3 million and $1.27 per share in the third quarter of 2023.
- Sales volume contractions were noted in both specialty foods and premium food distribution segments, with declines of 0.4% and 2.9%, respectively.
- The company faced challenges with reduced jerky sales and weaker consumer spending in the food service and convenience store channels.
- Debt leverage levels remain above long-term target ranges, with a total debt-to-EBITDA ratio of 4.4 to 1, indicating higher financial risk.
Q & A Highlights
Q: Can you provide more details on the sales shortfall in the sandwich group and your expectations for recovery?
A: George Paleologou, President and CEO, explained that the sales shortfall was due to an unexpected decline in sales to a key customer. However, he believes this decline is temporary and expects sales to recover to historical growth rates. The company is optimistic about leveraging new capacity to return to growth in 2025 and beyond.
Q: What are the main drivers behind the record sales of $1.67 billion for the quarter?
A: Will Kalutycz, CFO, highlighted three main drivers: $29.8 million from selling price increases due to higher costs, $7.8 million from currency translation gains, and $5.5 million from business acquisitions net of shutdowns. These were partially offset by volume contractions in specialty foods and premium food distributions.
Q: How is the company addressing the challenges in the US market for its specialty foods segment?
A: George Paleologou noted that despite challenges, the specialty foods segment achieved an organic volume growth rate of 2.3%, driven by US growth initiatives in sandwiches, protein, and baked goods. The company is confident in its ability to accelerate growth in the coming quarters.
Q: What is the outlook for the company's adjusted EBITDA and earnings per share?
A: Will Kalutycz stated that adjusted EBITDA for the quarter was $159.4 million, a slight increase from the previous year. The company expects significant momentum in improving adjusted EBITDA and earnings per share as it leverages recent capital investments and executes on its $1.5 billion sales opportunity pipeline.
Q: Can you elaborate on the company's capital expenditure plans and recent asset sale transactions?
A: Will Kalutycz mentioned that the company spent $82.1 million on capital expenditures during the quarter, primarily to increase capacities and efficiencies in its US-focused growth initiatives. Additionally, the company entered into two asset sale transactions, expecting to generate approximately $80 million in net proceeds.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.