Lassonde Industries Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Lausanne Industries 2023 Second Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session open to research analysts only. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded today, Thursday, August 10th, 2023, I would now like to turn the call over to Rince Timpano, President and Chief Operating Officer. Please go ahead.

Good afternoon, ladies and gentlemen. I am here with Ed Hjem, Chief Financial Officer of LaSonde Industries. Thank you for joining us for this discussion of the financial and operating results for our second quarter ended July 1st, 2023. Our press release reporting these results was published earlier today. It can also be found on our website along with our MD&A and financial statements. These documents will be available on CDAR as well. We also posted a presentation supporting this conference call on our website. Let me remind you that all figures expressed on today's call are in Canadian dollars unless otherwise stated. Now, let's turn to slide four. I am pleased to report that LaSonde achieved another quarter of improved performance driven by further progress in the execution of our 2023 priorities and our multi-year strategy, resulting in sales growth and profit gains across each of our divisions for the second quarter. Sales increased 9.4%, essentially reflecting pricing adjustments in response to cost inflation, improved private label product mix in the US, along with solid volume in Canada, resulting in market share growth. Meanwhile, in the U.S., benefits from our portfolio optimization plan resulted in improved operating efficiency, while lower logistics costs also contributed to margin and profit growth. Notably, we experienced less disruptions in our U.S. supply chain. With fill rates converging towards historical levels, we can safely say the situation is almost back to normal. Eric will provide additional details on our financial performance in a few minutes, but first let me focus on certain key elements of our three-pillar strategy. In regards to our first pillar, build a growth-oriented portfolio, our share gains in Canada speak highly about the strength of our brands, the diversification of our portfolio, our customer relationships, and last but not least, the strength of our team. While category volume was down approximately 5%, Our greater volume, excluding pricing effect, yielded a $6.8 million sales increase and overall market share growth. In the U.S., the optimization of our product portfolio has reduced execution complexity. Low margin products have been discontinued, and we are forging ahead with harmonizing packaging formats and consolidating formulas. By reducing the number of SKUs sold in the U.S., We have reduced downtime and costly changeovers, which ultimately will improve throughput. And we opened up line hour availability and are seeing improvements in productivity through increased cases per hour produced in New Jersey. Our specialty food division had another solid quarter supported by growing demand. And we continue to assess opportunities to further expand our reach to build on solid momentum in its market niches, and leverage its unique capabilities. As our second pillar drives sustainable performance, we continue to make productivity and efficiency gains by using better decision-making tools and making investments in new equipment. Our new transportation management system, which we'll refer to as TMS, introduced several months ago further reduced our costs and improved the management of our logistics. We are very pleased with the benefits we are seeing from this important investment. During the second quarter, we also began implementing our demand planning system in the U.S. This system should assist in further reducing downtime by improving scheduling and in optimizing customer service through higher fill rates. In regards to equipment, the new filler in New Jersey was installed in July and is up and running. It will further contribute to lowering our costs to improve line speed while waste reduction from lost juice will also improve our environmental footprint. Finally, we have set summer 2024 as the start date for our new single-serve line to be commissioned in North Carolina. This very exciting project constitutes the largest investment ever by LaSonde outside of an acquisition, and we are looking forward to sharing more on this key project in the near future. Moving on to our third pillar, improve our capacity to act, Recall that just over a year ago, as part of our new operating model, we created three new centers of excellence in innovation, manufacturing, and supply chain. Let me call out innovation, which has always been a core value of Lausanne. Our innovation center provides important input to our divisions by identifying market trends and needs, so we can focus on building a long-term pipeline of product and packaging innovation to extend our reach into new segments or new capabilities. With ongoing focus, we will be in a position to speed up time to market and capture emerging trends more rapidly. Innovation remains a key priority for us as we look to further strengthen our portfolio and ensure we are tapping into critical consumer trends. Ladies and gentlemen, Eric will now review our quarter two results.

Thank you, Vince. Good afternoon, everyone. Before starting, please note that most amounts have been rounded to ease the presentation. Also note that although I refer to non-IFRS measures or ratios in my remarks mostly due to its comparability between periods, reconciliation are provided in the appendix to our presentation. Let me begin on slide 9 with our top-line review. Sales total $579 million, up 9.4% from $530 million last year, excluding a favorable foreign exchange impact. Sales increased 6.6%, mostly due to selling price adjustments, a better private-level sales mix, and a volume increase in Canada. Conversely, we experienced a volume decline in the U.S., but a meaningful portion of this reduction relates to our portfolio optimization process. Moving on to slide 10. Cost of sales rose 9.3% from last year. Excluding foreign exchange variations, the year-over-year increase was 5.3%, mainly reflecting higher input costs, especially apple and orange concentrates, and an increase in our conversion costs, mainly due to inflation factors and higher maintenance costs. The net result of these increases in sales and in cost of sales is a gross profit of $152 million, or 26.3% of sales. up from $139 million a year ago and flat as a percentage of sales. Net of deferring exchange impact, gross profit increased by nearly $14 million. SG&A expenses were $111 million, down from $116 million last year. The reduction reflects lower transportation costs. which, in addition to benefits from the new TMS and improved logistic execution, is also attributable to decreases in base rates and fuel surcharges, as well as lower U.S. sales volume. This factor was partially offset by higher performance-related compensation expenses, warehousing costs, and administrative expenses, as well as an unfavorable FX impact of $2.2 million. excluding all items that impact comparability. Adjusted DVD increased 46% to $59 million or 10.1% of sales from 40 million or 7.6% of sales last year. Adjusted profit attributable to corporation shareholder came in at $26.5 million or $3.89 per share compared to 16.3 million or $2.36 per share last year. Turning to cash flow on slide 11. Cash flows related to operating activities generated $76 million this quarter, compared to using 6.5 million in the same period last year. The substantial improvement reflects a better profitability and a cash generation from working capital this year, as opposed to a requirement last year. Finally, capital expenditures for PP&E, an intangible asset, amounted to $28.7 million in the second quarter of 2023 compared to $9 million last year. At the halfway mark of the year, CapEx stood at $41.6 million. As a reminder, we estimate CapEx to reach up to 4.5% of sales in 2023 to support our multi-year strategy. Turning over to slide 12 to look at our balance sheet. I am pleased to report some improvement in our working capital situation. This graph that we present each quarter shows the evolution of the main working capital components over time. Between the first and second quarters of 2023, the days of operating working capital, the blue line, has been reduced from 52 to 46. This improvement stems from reduction in days of sales outstanding, the red bar, days of inventory outstanding, the yellow bar, as well as by an increase in days of payable outstanding, the gray bar. In regard to inventory, while satisfied with last quarter directional movement, its sales remain elevated compared to its historical level. With abating supply chain challenges and improvement in customer service and operational efficiency, we expect to progressively reduce inventory levels over the next few quarters. As a result, we remain confident to see days of operating working capital land near the higher end of the pre-COVID range by the end of 2023 and to settle within that range in 2024. On slide 13, we see that our debt level has declined substantially this quarter with long-term debt, including its current portion of $228 million at the end of the second quarter, down from $268 million three months ago, and $247 million at the beginning of the year. The decrease reflects a reimbursement of our revolving credit facilities, mostly stemming from working capital release. Given the improvement in profitability, the lower debt or net debt to adjusted BDA ratio decreased significantly in the last three months, reaching 1.28 times at the end of the second quarter versus 1.67 times at the end of the first quarter. Briefly, slide 14 shows our first half financial performance. Sales reached $1.1 billion in 2023, up 8.5% over last year. Excluding foreign exchange variations, the increase was 5.2%. Adjusted EBITDA amounted to $102 million, up more than 27% from $80 million last year. Finally, profit attributable to shareholders was $42 million, up from $29 million. On an adjusted basis, it was $43 million, or $6.37 per share, up from $33 million, or $4.73 a share. I turn the call back to Vince for the outlook. Vince?