Lassonde Industries Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Lausanne Industries 2023 Third 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, Friday, November 10, 2023. I would now like to turn the call over to Vince Tempano, President and Chief Operating Officer. Please go ahead.

Good afternoon, ladies and gentlemen. I am here with Eric Jem, Chief Financial Officer of LaSonde Industries. Thank you for joining us for this discussion of the financial and operating results for our third quarter ended September 30th, 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 Plus 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. LaSonde achieved another quarter of solid year-over-year profitability improvement, driven by strong execution against our strategic priorities. Sales increased 4.9%, mainly reflecting pricing adjustments taken in 2022 and earlier in 2023, both in Canada and in the U.S. These pricing actions, along with improved mixed in the U.S., have more than offset volume reduction attributable to the simplification of our U.S. portfolio and to softer consumer demand. In this regard, according to industry data, sales volume measured on a trailing 13-week basis in the U.S. and Canadian fruit juice and drink markets decreased at a rate above the mid-single-digit range during the third quarter of 2023 compared to the same period last year. This rate is slightly higher in this quarter compared to the mid-single-digit rate observed in the first half of the year. Once again, all divisions delivered higher gross profit than in the same period last year. This reflects market share growth in our Canadian beverage division and improvements in our U.S. operations. Now, turning to slide five. Over the past few months, we have worked on all streams of our U.S. turnaround plan. We optimized our portfolio through product rationalization, PAC harmonization, and formula consolidation. We made important investments in our New Jersey facility. We stabilized our labor pool, and we deployed new decision-making tools and technology. On the latter, we finalized the implementation of an integrated supply and demand planning system during the third quarter. This new tool will improve forecast accuracy, drive more efficient inventory management and production scheduling. As a result, this will be a key contributor in continuing to improve plant efficiency, customer fill rates, while at the same time optimizing our inventory levels. Moving to slide six, our turnaround plan is resulting in efficiency improvements, ultimately leading to increased production capacity. As we are restoring capacity, We are also turning our attention to building back demand. Higher demand volume, in addition to bringing higher variable contributions, will drive better cost absorption and together result in further improvement in profitability. Lower freight costs also drove profitability improvement this quarter. We benefited from favorable market conditions with a decrease in fuel surcharges and base transportation rates. and generated savings through the investments we've made in our transportation management system. Now turning to slide seven, we remain on schedule to commission our newest septic single serve line in North Carolina in the summer of 2024. Following a ramp up phase, we expect full production to begin in early 2025. With a total investment estimated at US $53 million, this new line will considerably strengthen our core capabilities and provide additional capacity for both our branded and private label activities while enabling us to expand general presence. Meanwhile, in Rougemont, we will commission two aseptic high-speed juice box lines in 2024. Early in the new year, a first line will enable us to bring back in-house volume currently cold packed in support of our U.S. business and provide flexibility for growth opportunities. In the second half, A second line will allow us to progressively decommission older and smaller lines that have been in service for over 40 years. Now, before turning the call over to Eric, let me briefly discuss key takeaways from our first Investor Day held on September 19th on slide 8. The event allowed Lausanne to expose the depth and quality of its leadership team, which is a key driving force in executing our strategic plans. To base this strategy on tangible goals, we also shared objectives to achieve an annual sales run rate of $3 billion by the end of 2026, while sustaining our efforts to improve profit margins. These objectives will be achieved by a combination of organic and investment-driven growth. Organic growth mainly consists in leveraging existing assets by further increasing and optimizing their utilization. It also incorporates business mix improvements favoring higher margin products with attractive growth profiles. Investment-driven growth regroups all initiatives aimed at widening our physical footprint, either by building or expanding existing facilities, or making strategic investments which may include acquisitions. Let me now turn it over to Eric for a review of our quarter three results. Eric.

Thank you, Vince. Good afternoon, everyone. Before starting, please note that most amounts have been rounded to ease the presentation. Also note that I refer to non-IFRS measure or ratio in my remarks, mostly to ease comparability between periods. Reconciliation are provided in the appendix to our presentation. Let me begin on slide 9, with our sales, which total $583 million, up 4.9% from $556 million last year. Excluding a favorable foreign exchange impact, sales increased 3.4%, essentially due to selling price adjustments coming mainly from Canada, but also from the US. This was partially offset by a volume decline, essentially reflecting lower market demand. Moving on to slide 10, gross profits reached $146 million, representing 25.1% of sales, up significantly from $125 million last year, or 22.5% of sales. Net offering exchange variation, gross profit rose $24 million, reflecting higher sales and a decrease of 1.2% in the cost of sales both expressed in constant currency. The higher gross profit is mainly attributable to the run rate effect of previously deployed price adjustments. SG&A expenses were $111 million, up from $106 million last year. The increase reflects higher performance-related compensation expenses this year compared to last, higher administrative expenses and unfavorable ethics impact of $1.2 million. These factors were partially offset by lower transportation costs, which, in addition to the benefits from the new process and system in the U.S., also reflect a decrease in base rate and fuel surcharges as well as a lower sales volume. Excluding all items that impact comparability, adjusted EBITDA increased 36% to $53 million or 9.1% of sales from 39 million or 7% of sales last year. Adjusted profit attributable to the corporation shareholder came in at $25 million or $3.67 per share compared to 17 million or $2.54 per share last year. Turning over to our balance sheet on slide 11, I am pleased to report further improvement in our operating working capital. You can see on the graph that between the second and the third quarter of 2023, days of operating working capital, the blue line, decreased from 46 to 42. This improvement results from an important reduction in days of inventory outstanding, the yellow bar, which is now getting back to historical range. Regarding inventory, the improvement represented a cash inflow in excess of $58 million in the per quarter loan. We adapted our inventory management strategy to reflect for many of our inputs abating supply chain issues. Our objective remains to conclude 2023 with days of operating working capital near the IRN of its pre-COVID range and to settle within that range in 2024. However, we may continue to use our balance sheet to secure price and or availability of certain commodities. Turning to cash flow on slide 12. Cash related to operating activities generated $76 million this quarter, compared to using 1 million in the same period last year. The significant improvement reflects better profitability, a $24 million cash generation from working capital this year, as opposed to 34 million requirement last year. Capital expenditure for PP&E and intangible assets amounted to $22 million, in the third quarter of 2023, compared to 10 million last year. After nine months, CapEx reached $63 million, and we expect to conclude the year with CapEx representing approximately 4.5% of sales, essentially to support our growth strategy. Slide 13 shows that improved profitability and a working capital release led to further debt reduction. as we concluded the third quarter with net debt of $188 million, down from $228 million three months ago, and $247 million at the beginning of this year. Giving higher profitability and lower debt, our net debt to adjusted to bid-day ratio improved significantly, reaching 0.98 to 1 at the end of the third quarter, versus 1.28 to 1 three months ago, and 1.57 to 1 at the beginning of the year. Briefly, slide 14 shows our nine-month performance. Sales reached $1.7 billion in 2023, up 7.2% over last year. Excluding foreign exchange variation, the increase was 4.5%. Adjusted EBITDA amounted to $155 million, up 30% from $119 million last year. Finally, adjusted profit attributable to shareholders was $68 million or $10.03 a share, up from $50 million or $7.27 a share a year ago. I turn the call back to Vince for the outlook. Vince.