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) has a robust business development pipeline with potential annual revenue of $704 million expected to be completed in 2025.
- The company is experiencing strong growth in its bakery group, with organic growth rates of 20-25% in recent quarters.
- There are significant growth opportunities in international markets, particularly in Asia, with plans to ship products to these markets in 2025.
- The company is on track to achieve its five-year plan of reaching a $10 billion sales target, with substantial growth expected from its sandwich group.
- Premium Brands Holdings Corp (PRBZF) is actively managing its balance sheet, with plans to be within its targeted leverage range by the end of 2025.
Negative Points
- The company is facing delays in onboarding new clients, primarily due to lengthy procedures with large customers.
- There is a slowdown in the QSR segment in the US, impacting sales from a large customer.
- The specialty food segment is experiencing weakness, particularly in beef jerky sales and the convenience store sector.
- Operational issues persist at some new US facilities, such as the San Leandro bakery plant, which is still undergoing automation and efficiency improvements.
- The Canadian conventional supermarket segment remains weak, although there are signs of consumer confidence returning.
Q & A Highlights
Q: Can you provide clarity on the delays in onboarding new clients? Are there cancellations or renegotiations involved?
A: George Paleologou, CEO: There have been no cancellations. The onboarding times are longer due to the large size of the customers, but the pipeline remains robust.
Q: Regarding the US pipeline, how much of the $704 million in potential business could impact 2025 revenues?
A: Will Kalutycz, CFO: It's challenging to predict due to timing issues, but initiatives in the "highly likely" column have an 80-100% probability of hitting 2025, with 50% potentially impacting by mid-year.
Q: In the specialty food segment, what is the outlook for beef jerky and convenience store sales?
A: Will Kalutycz, CFO: The Canadian portion is stable and expected to improve. The convenience store sector has been challenging, but we expect stabilization by the end of 2024, with potential growth in 2025.
Q: Is there a permanent impairment with your large QSR client, and if so, can you find other customers to fill that capacity?
A: George Paleologou, CEO: We don't believe the slowdown is permanent. We have growth opportunities in other channels and expect to ship products internationally in 2025.
Q: Can you update on the operational issues at new US facilities like the bakery and cooked protein plants?
A: Will Kalutycz, CFO: The San Leandro bakery plant is still undergoing automation improvements, expected to complete by year-end. The artisan bread facility in BC is performing well.
Q: How is the Canadian conventional business performing, and what are the signs of consumer confidence?
A: George Paleologou, CEO: We see signs of consumer confidence returning, likely due to lower interest rates and inflation, though it's not fully recovered yet.
Q: What is the outlook for the balance sheet given the challenges with the large QSR customer?
A: Will Kalutycz, CFO: We expect to be within our targeted range by the end of 2025, with Q4 seeing asset sales and acquisitions that should stabilize the balance sheet.
Q: How do you plan to manage leverage and refinancing of the convertible debenture next year?
A: Will Kalutycz, CFO: Our long-term target is a total debt-to-EBITDA range of 2.5 to 3. We plan to use senior credit facilities to pay off the convertible debenture due next April.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
