Lassonde Industries Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Lassonde Industries' 2025 Second Quarter Earnings Conference Call. The corporation's press release reporting its financial results was published yesterday after market close. It can be found on its website at lassonde.com, along with the MD&A and financial statements. These documents are available on CEEDAR Plus as well. A presentation supporting this conference call was also posted on the website. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing in the conference, please press star followed by zero for operator assistance at any time. Before turning to management's pre-recorded remarks, 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. Please refer to the forward-looking section of the MD&A for further information. Also note that all figures expressed on today's call are in Canadian dollars unless otherwise stated and that most amounts have been rounded to ease the presentation. Finally, be advised that the presentation will refer to non-IFRS measures or ratios mostly to ease comparability between periods. Reconciliations to IFRS measures are provided in the appendix to the presentation and in the Corporation's MD&A. I would like to remind everyone that this conference call is being recorded on Friday, August 8th, 2025. I will now turn the conference over to Vince Timpano, Chief Executive Officer.

Good morning, ladies and gentlemen. I'm 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 second quarter ended June 28th, 2025. Now, please turn to slide four. Lassonde delivered another solid performance in the second quarter, driven by sales growth in each business unit. Sales increased by almost 19% to $742 million, with growth reaching slightly above 10% without the foreign exchange impact and the sales from Summer Garden. This achievement continues to reflect the strength of our product portfolio as we sustained market share gains in Canada and in U.S.-branded activities. We also broadened our region food service, while specialty food again delivered solid results with contribution from both our legacy business and Summer Garden. Now let's turn to slide five for a closer look at operations beginning with U.S. beverage activities. Lassonde concluded the first half of 2025 with market share gains, improved capacity, and a 10% increase in production volume over last year. This higher output supports increased distribution from our volume built back initiatives with existing and new customers, as well as the contribution from our single serve line in North Carolina, which achieved its anticipated production level in the quarter. Category performance remains somewhat consistent with overall volume down, low single digits. With this said, we have noticed that the price gap between brands and private labels has reduced to the benefit of brands in the past two quarters, resulting in private label declines greater than the category. We believe these dynamics are driven by a lag in price execution where we led pricing, due in part to Apple inflation and tariffs. We would expect to see branded competitors implement pricing actions in the back half of the year driven by commodity inflation, which we believe should restore normal price gaps and support private label category performance. Now, let me provide you with a brief update on our strategic investment initiatives, which remain on schedule and on budget. First, The relocation of production assets from a U.S. co-packer to our North Carolina hub is on track to be completed by the end of 2025, resulting in our first ever in-house choose box production in the U.S., which should improve liability and reduce costs to serve U.S. customers. Second, while we have reduced our capital expenditure projections for 2025, This adjustment has no material impact on the timeline or overall cost of our new facility in New Jersey. Construction is progressing as planned with the phase transfer of existing production activities from the current facility beginning in late 2026 to be completed in 2027. These combined investments totaling 220 million U.S. dollars represent an important step in our efforts to improve capacity reliability, and competitiveness, while reducing production costs to improve margins in the U.S. Turning to slide six, our Canadian beverage activities had another robust quarter, driven by strong promotional support, innovation, distribution gains in both shelf-stable and chilled categories, and a continued by Canadian sentiment. Despite overall market contraction, we achieved market share gains across both our branded and private label products. Category volume declines remain consistent with prior quarters, with the most notable impact coming from the chilled orange juice category, driven by ongoing price inflation. Yet our performance remained resilient, thanks to pricing, productivity improvement, and innovation efforts. Although we continue to execute on pricing to offset key commodity inflation, our focus on innovation to reduce commodity exposure also brought in positive results, mainly with nectars and drinks. As part of our broader focus on accelerating innovation, we are actively expanding our international flavor portfolio, which is gaining strong momentum as it aligns with a growing consumer trend. Moving on to our food service activities on slide seven, supporting the continued evolution of our operating model, we have created a North America food service team to focus on growth opportunities in this channel. Food service is a significant market, which we estimate represents roughly half of consumer spending on food and beverages, where our split between food service and retail has historically been around 1090. Our food service activities had a solid quarter, with double-digit sales increase over last year. Growth was particularly strong in the U.S., driven by volume gains with broad-line distributors, while in Canada we improved our penetration of national accounts. The second quarter marked the commissioning of our new bag-in-a-box aseptic packaging line. Early positive response validates our view of strong potential in this niche market. as convenient dispensing makes it ideal for quick-serve restaurants and convenience stores, while bulk aseptic packaging will support sales to industrial customers looking for a consistent, ambient, long-shelf-life product offering. Now let's turn to specialty food on slide eight. During the second quarter, we continued the integration of our North American operations, aligning our people, processes, and technologies with improved operational efficiencies, expected going forward. Summer Garden had another solid quarter with sales of $49.9 million and an EBITDA margin of 21%. We continue to focus on integrating activities within the Lausanne Specialty Foods division, which further supports the strong performance of Summer Garden. During the quarter, we also remain focused on optimizing brand positioning and addressing opportunities to build brand distribution. including strengthening our marketing capabilities and deepening integration across commercial functions. We also saw growth from third party brands with our portfolio well positioned to capture momentum in the growing premium and super premium segments. As for legacy operations, we sustained our momentum in retort products as ongoing growth in the premium category drove healthy demand for our premium glass jar soups and sauces. We continue driving growth through our current offering while improving portfolio diversification via innovation and new client opportunities. To support our long-standing strategy of producing closer to our customers, we continue to evaluate targeted investments to improve capacity, capture further growth, and lower costs by enhancing our specialty food production capacity. This includes a potential plant expansion in Ohio and other alternatives to support future growth. I now turn the call over to Eric for a review of quarter two results. Eric.

Thank you, Vince. Good morning, everyone. Let's turn to slide nine. For our second quarter sales, which amounted to $742 million, up 19% versus last year. Excluding Summer Garden and a favorable foreign exchange impact, sales increased 10% reflecting higher sales volume in Canada. the favorable impact of pricing adjustments, and a more favorable sales mix of private label products, both in Canada and in the U.S. Moving to slide 10, gross profit reached $196 million, or 26.4% of sales, up 11% from $176 million a year ago, or 28.1% of sales. Excluding Summer Garden, gross profit dollars were stable year over year for a gross profit margin of 25.4%, reflecting higher costs of certain inputs, mainly oranges, which, as a reminder, benefited from a temporary procurement advantage last year, and, to a lesser extent, pineapples and apples. An increase in certain conversion costs in the U.S., mostly related to the deployment of new assets in North Carolina and the warehousing of raw materials, and also the accelerated depreciation expense of certain U.S. assets. These factors were partly upset by lower PET resin costs. SG&A expenses were $141 million, up from $126 million last year. Excluding expenses from Summer Garden, SG&A decreased by $0.2 million, reflecting last year's cost of $7 million related to the acquisition. lower performance-related compensation expenses versus last year, all this offset by an increase in certain SG&A expenses, higher transportation costs in Canada, mainly due to higher volume, and higher finished good warehousing costs. Excluding items impacting comparability, adjusted EBITDA increased 13% to $84 million, or 11.4% of sales. from 75 million, or 11.9% of sales last year. Reflecting higher depreciation and amortization, as well as higher financial expenses, adjusted profit attributable to the corporation shareholders declined slightly to $37 million, or $5.47 per share, compared to 39 million, or $5.73 per share last year. Turning to working capital on slide 11. The days of operating working capital ratio stood at 59 days, up from 55 days in Q1. This increase was primarily driven by a reduction in days of payables outstanding to 36 days, reflecting the timing of purchases and related settlements with suppliers. This was partially upset by a decrease in days of inventory outstanding, which improved to 84 days, Note that this inventory level is broadly in line with seasonal range for a second quarter. While we recognize that the ratio remains well above historical levels, we are committed to bring it within the target range by the end of 2025. As a reminder, we may continue to strategically leverage our balance sheet to secure certain inventory availability and or lock in costs ahead of anticipated price increases, as we did earlier this year. Now, slide 12. Operating activities used $3 million in Q2 2025 versus generating $59 million last year. This variation is mainly due to more important working capital requirements this year versus last, notably higher accounts receivable, in part due to a new ERP system in Canada, which had a temporary effect on the timing of invoicing for returning to historical range by the end of July. And lower accounts payable reflecting, as previously discussed, the timing of inventory purchases with a significant volume acquired in the first quarter, now fully paid. An $11.6 million increase in interest and income tax paid, and this is partly offset by a higher EBITDA and a $6 million favorable change in the settlement of derivatives. CAPEX totaled $28 million in Q2 2025 and $107 million since the beginning of the year. The pace of CAPEX spending slowed down during the quarter due to the timing of certain expenditures for the construction of the New Jersey facility. We now expect to spend approximately $65 million U.S. in 2025 for this project, with the remainder being incurred in 2026 and early 2027. As a result, we expect CapEx to reach up to 7% of sales in 2025. Turning to our balance sheet on slide 13. LaSonde's net debt totaled $618 million at the end of the second quarter versus $587 million three months earlier. This increase mainly reflects a higher level of working capital. As a result, the net debt-to adjusted VDA ratio remains stable at 2 to 1 at the end of Q2 2025. Had we maintained our days of operating working capital within historical range, the ratio would have been below 1.7 to 1. All things being equal, we anticipate the leverage ratio to range between 2 and 2.5 to 1 until the end of 2026. remaining well within our comfort zone of less than 3.2521. Moving to slide 14. We also completed during the quarter a significant amendment to our U.S. credit facilities. The revised agreement increased the authorized amount of our revolving credit from $160 million U.S. to $250 million and established a new $250 million U.S. term loan. This new term loan was used to repay the outstanding balance of the U.S. revolving credit and a portion of the Canadian revolving operating credit previously drawn to finance the Summer Garden acquisition. The agreement also extends the expiry date to June 2029 with 364 days renewal options thereafter. Before turning the call back to Vince, I want to discuss briefly the upcoming transition in the CFO position. As you might be aware, we announced that I would be leaving the company on July 1st, 2026. I've decided to step away from a full-time executive role for a while to recharge and thoughtfully consider the next chapter of my life. The extended notice period will ensure ample time for a thorough recruitment process and a smooth transition once a successor is identified. Additionally, I will remain available to support the team beyond that date on specific topics as needed. In closing, I am truly grateful for all the years I spent at Lausanne, which gave me the opportunity to work alongside a truly remarkable team. And I'm confident about their ability to continue building on the numerous accomplishments we've achieved together. I now turn the call back to Vince for the answer.