Lassonde Industries Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Lassonde Industries' 2026 Second Quarter Earnings Conference Call. The corporation's press release reporting its financial results was published yesterday after market closed. It can be found on its website at Lassonde.com along with the MD&A and financial statements. These documents are available on CEDAR 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 difficulties hearing 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 within the meaning of Canadian securities laws. Forward-looking information is based on management's current expectations and assumptions and is subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. For discussion of key assumptions and risk factors, please refer to the forward-looking statements section of the MD&A. 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. This call will also include certain non-IFRS financial measures and ratios that are not standardized under IFRS and may not be comparable to similar measures used by other issuers. Reconciliations to the most directly comparable IFRS measures and related definitions are provided in the appendix to the presentation and in the corporation's MD&A. This conference call is being recorded on Friday, August 7, 2026. I will now turn the conference over to Vince Timpano, Chief Executive Officer.

Good morning, ladies and gentlemen. I'm here with Francis Trudeau, our Chief Financial Officer. We appreciate your time today as we review our results for the second quarter ended June 27, 2026. Please turn to slide four. Lassonde delivered strong gross profit growth of 16% in the second quarter, driven by effective revenue management, improved product mix, moderating input cost, and solid execution of our business strategy. Despite pressure on industry volumes, as macroeconomic uncertainty affected consumer demand, and despite cycling a strong prior year comparison, our diversified portfolio performed well, underscoring its strength and resilience. Now let's turn to slide five for a closer look at our operations, beginning with beverage activities. In the U.S., we delivered a solid performance, growing volumes and gaining share despite category volume declines across measured channels. Despite continued softness in private label market demand, our business outperformed the category as we began regaining some of the distribution that had been temporarily affected by earlier supply constraints. We also maintained a disciplined approach to revenue management, carefully balancing input cost-related pricing actions with targeted promotional activity while remaining mindful of consumer price elasticity. You may recall that in early 2025, our volume build-back plan delivered meaningful gains with new and existing customers. I'm pleased to report that we have since expanded volumes with several of these customers while maintaining our contractual commitments with most others. Meanwhile, our U.S. branded business had a solid quarter, driven by distribution gains for Apple and Eve with national retailers in the U.S. Midwest and West. Leveraging Apple and Eve's strong reputation, we are methodically expanding the brand's reach across the United States in single serve and juice box formats. supported by targeted investments in these platforms at a North Carolina facility. These efforts are driving market share gains across both package formats, reinforcing Apple and Eve's strong momentum and growth potential while aligning with consumer trends favoring convenient on-the-go options. As for our new facility in New Jersey, the pace of construction continues to progress on schedule with equipment installation now underway. We remain on track to gradually begin transferring existing production activities from the current facility by late 2026 and complete this phase in the first half of 2027. Turning to slide six for Canadian beverage activities, despite cycling an exceptionally strong prior year period that benefited from bi-Canadian sentiment and despite mid-single-digit category volume declines, we maintained our category leadership. once again underscoring the strength of our Canadian beverage portfolio. Our national brands continue to outpace the category, driven by solid gains in shelf-stable products and sustained momentum in single-serve formats, while chilled performance was affected by a strong prior year comparison. Meanwhile, private label volumes were softer, primarily reflecting changes in a major customer's go-to-market strategy. as well as our targeted portfolio optimization actions, including the discontinuation of selected product lines. Against this backdrop, and as with U.S. activities, we remained focused in ensuring discipline in managing revenues through price and promotion practices that preserve market competitiveness while remaining responsive to shifts in consumer behavior. Innovation remains an important lever for improving our product mix in both established and emerging beverage segments. New formulations across our Del Monte and Oasis health grade portfolios, along with new single serve formats designed to meet consumer needs throughout the day, are improving our product mix, expanding our presence in attractive growth segments, reducing commodity exposure, and enhancing profitability. Moving on to food service on slide seven. While North American volume growth remained constrained by macroeconomic conditions affecting consumers' away-from-home dining habits, we continued to build meaningful traction with broad-line distributors in the United States, primarily by expanding private label beverage offerings in different pack formats. During the quarter, we began supplying tailored beverages to a prominent Canadian-based QSR chain using our bag-in-a-box aseptic packaging platform. Initial results have exceeded early expectations, and we expect volumes to continue ramping up in the second half of the year. At the same time, we remain actively engaged in negotiations and competitive bidding processes with national and regional partners across North America, and we expect to acquire several additional customers, albeit smaller in scale, over the balance of the year. Now let's turn to specialty food on slide eight. While industry volumes were softer across most of our key product categories, with modest increases in select areas, both our Canadian and U.S. operations delivered solid gains, led primarily by our core premium and super premium pasta sauce category. In the U.S., Summer Garden increased volumes for third-party pasta sauce brands, further demonstrating its execution capabilities, while in the barbecue sauce category, G. Hughes maintained its position as the number one Better For You brand. During the quarter, we completed the G. Hughes brand refresh internally and transitioned all packaging at the manufacturing level. While some legacy packaging remains on shelf as inventory moves through the retail network, we expect the refreshed positioning to increasingly support brand momentum in the second half of the year. You may recall that on our previous call, We announced distribution gains for GQs with a mass merchant in Canada. I am pleased to report that this agreement has since been expanded, and that we have also secured distribution with a national food retailer, an important step that further broadens the brand's reach and supports our growth ambitions in Canada. Finally, our Canadian operations delivered a solid performance, growing third-party brand volume, mainly through distribution gains for pasta sauces, and to a lesser extent, share gains in the ready-to-serve soup category. I now turn the call over to Francis for a review of Q2 results. Francis.

Thank you, Vince. Good morning, everyone. Let's turn to slide nine. Second quarter sales totaled $738 million versus $742 million last year. Excluding an unfavorable foreign exchange effect, sales decreased by 0.5%. This variation reflects lower sales volume, primarily within private label categories in Canada. The decrease also results from intentional portfolio management decisions, including the discontinuation of lower margins or non-strategic product lines within our Canadian beverage business units. These decisions accounted for approximately $8 million in sales during the quarter. Recall that last year's second quarter was exceptionally strong due to substantial volume growth from the bi-Canadian sentiment and, to a lesser extent, the U.S. build-back plan. On the other end, we benefited from higher U.S. private label sales volume, the favorable impact of overall selling price adjustments in the U.S., and from a more favorable mix of private label sales in Canada. Moving to slide 10. Growth profit amounted to $228 million, up from $196 million a year ago. Excluding a favorable foreign exchange impact, it rose $29 million, or 15%. This increase is coming from a decrease in the cost of orange concentrates, the favorable impact of selling price adjustments, and a positive shift in the sales mix. These factors were partly offset by lower sales volume and higher PET resin costs. SG&A expense were $157 million, up from $141 million last year, due to higher transportation costs to deliver products to clients resulting from recent fuel surcharges, higher performance-related compensation expense, and an increase in certain administrative expenses. During the quarter, we recorded $30 million in impairment charges, including $27 million related to a customer relationship intangible asset in our U.S. specialty food operations. This charge follows contractual changes in one customer that will result in lower production volume and associated profits. Importantly, the impairment is specific to a customer relationship and does not reflect any deterioration in the goodwill associated with our U.S. specialty food operations. Vince will provide additional color on the backfill plan in the outlook section later. Excluding these charges and other items that impact comparability, please note that adjusted EBITDA increased 19% to 101 million or 13.7% of sales from 84 million or 11.4% of sales last year. Turning to slide 11 for profit. Profit attributable to corporation shoulders was $27 million or $3.95 per share compared to $34 million or $5.03 per share last year. Excluding items impacting comparability, adjusted profit attributable to the corporation shoulders reached $51 million or $7.45 per share up 36% from last year. Let's turn to working capital on slide 12. At the end of Q2, the days of operating working capital ratio stood at 46 days versus 51 days three months earlier. The sequential improvement was driven primarily by higher DPOs and to a lesser extent lower DIOs while the ratio remained within our normal seasonal range. For the remaining part of 2026, we continue to expect working capital to remain within its historical range. Now onto slide 13 for cash flows. Operating activity generated 78 million in Q2 2026, as opposed to requiring 3 million last year. The improvement is mainly coming from a lower working capital requirement this year compared to last. CAPEX total 38 million in Q2 2026. As a reminder, CAPEX are projected to reach up to 7% of sales in fiscal 2026, including approximately 96 million US for the New Jersey project. Turning to our financial position on slide 14. Lassonde's net debt was 451 million at the end of the second quarter, down from 474 million three months earlier. This improvement was driven by solid operating cash flow generation, partly upset by CapEx. During the quarter, we allocated a portion of our cash flow to debt repayment, reducing borrowing by 32 million. As a result, the net debt to adjusted EBITDA ratio was 1.22 to 1 at the end of the quarter, down from 135 to 1 three months earlier. All things being equal, we expect the leverage ratio to remain well below our internal maximum threshold of 3.25 to 1. Finally, on slide 15, we have announced our intent to launch a normal course issuer bid to purchase for cancellation up to 200,000 common shares representing approximately 6.5% of issues and outstanding Class A subordinate voting shares over a 12-month period. The launch of the normal course issuer bid is subject to TSX approval. I now turn the call back to Vince for the output.