Andrew Peller Limited

Good morning, ladies and gentlemen. My name is Sergio, and I will be your conference operator today. At this time, I would like to welcome everyone to the Andrew Peller Limited third quarter fiscal 2023 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Instructions will be given at that time. I will now like to turn the call over to Mr. David Mills. Please go ahead, Mr. Mills.

Thank you and good morning, everyone. Before we begin, let me remind you that during this conference call, we may make statements containing forward-looking information. This forward-looking information is based on a number of assumptions and is subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from those disclosed or implied. Please refer to our earnings release, MD&A, and other securities filings for additional information about these assumptions, risks, and uncertainties. And I'll turn things over to Mr. John Peller, Chief Executive Officer.

Thanks, David. Good morning, everyone. Good to be with you following our board meeting yesterday. We published our results and we're pleased to be with you this morning. You know, as we highlighted, we were encouraged by our growth and improved profitability through the first nine months of our fiscal year. You know, I've maintained a narrative around COVID being this three-year event in which year one, our revenue spiked up a bit as people did a significant amount of pantry loading. In the second year of COVID, our sales dropped 5%. And as a result of business closures, our estate wineries and stores were closed. You know, restaurants were closed as well. And our EBITDA dropped as a result of those closures. In this third year, the revenue is returning to its normal level, but we are managing the challenges of inflation and supply chain disruption. I can tell you now that we're very confident that the worst of the disruption is behind us. We've hit rock bottom in the last few months, and already our gross margins are trending upward. And we expect to have a recovery of our EBITDA back to our normalized levels in the low 60s over the next two years. Just to maintain a high-level view of our category, wine, in both Canada and in North America, you know, if you take the average of the three years, wine has grown at 1%. Some of the volume has been down a little bit in some years, but the pricing has been up. Overall net revenue has trended up 1% over the three-year period. And I think it's an important comment because we've always maintained our confidence in the strength of our category's resilience. I don't know of a more recession-proof category than wine. You look at what happens. To most businesses through the last three years, their revenues have been up and down significantly. Similarly, not just hotels and airlines and restaurants, but retail segments as well. Our segment just motors through. This is consistent with what happened in 2008 in the financial recession and And the tech bubble and 9-11 issue in the early part of the 2001, we've never gone through one of these events without our category staying strong and demonstrating its resilience. So our sales were up year to date at 3.2%. Now that everything is fully open, we were the beneficiary of some price increases. Our sales would have been up 5% if we had been able to fully meet the demand, but we had significant supply disruption, particularly in our western ports in terms of receiving bulk wine in. And while we were able to expedite and offset some of that supply disruption, we did not, we weren't able to manage all of it, and we had some significant out of stocks throughout the year. so that to the extent that we're up 3.2%, it did demonstrate both the strength of our brands and our sales capabilities through this disruptive period. You know, supply chain issues will continue, but clearly the forecast has changed and things are looking more positive, and we'll talk more about that throughout the call. Our gross margins year-to-date are stable to last year, which underlies the fact that there was a lot going on there. We had significant increases in freight, container, and shipping costs. We had significant increases in glass costs. We've been able to offset a great deal of that through price increases and other cost savings programs. So there's been an enormous amount of activity in place to offset some of these challenges. You'll have seen that we received our Agricultural Canada Support Program in the third quarter. This is the continuation of support that we have received for many, many years, at least 15, 20 years. We previously received this support in the form of an excise tax exemption. And this excise exemption was challenged by the Australians, which on its face was somewhat bizarre because they have and continue to maintain the exact same program in Australia that they felt ours was illegal. But our government decided rather than to fight with them legally, they would change our support into a trade legal program through agriculture. That is what the wine... Sector Support Program is a program that we have always enjoyed and will continue to enjoy going forward. And I'm happy to talk about that if you need more details. And then in any event, you know, we're feeling that the worst is behind us. We're confident that we're going to continue to grow over the next few years. I think it's fair to say that the market is a little still soft. I mean, people aren't traveling and spending, you know, at their highest levels because there's still some concern with recession as well. But, you know, the commentary around the lowering of the inflation rate and the improvement on the economy seems to be accelerating and becoming increasingly positive. And that should provide us some nice tailwind as well. So generally our brands and our trade channels are performing strong. Our balance sheet continues to be very strong, and we have a very confident view of our future. I'll turn things over to Paul now and then provide a few closing words. Thanks, Paul.