Q4 2019 Earnings Call
[music].
Good day, ladies and gentlemen, welcome to the premium brands Holdings Corporation fourth quarter 2019 earnings Conference call. As a reminder, this conference is being recorded at this time all purchase a concern to listen only mode and following the presentation will conduct a question answer session at that time participants are asked to press star one.
To register for a question for assistance during the Cold pressed started on your Touchtone phone. It isn't all my pleasure to introduce your host George probably a logo. Please go ahead sir.
Thank you now idea and good morning, everyone I.
I would like to welcome your toward 2019 fourth quarter Conference call.
I won't be turning to presentation over to our CFO will clearbridge for an overview of <unk> financial results for the quarter after which I will make a few piece comments.
Yes. It will then be followed by the two any segment not the presentation well.
Thanks, George and good morning, everyone.
Before discussing our results for the quarter I would like to caution you that to the extent, we make forward looking statements during our presentation.
Our forecasts and assumptions are subject to change and actual results may vary.
We see our 2019 and DNA, which is filed on SEDAR website, www dot Cedar Dot com for details on some of the factors that could cause <unk> actual results to differ from our current expectations.
Turning to our results.
Revenue for the quarter grew by $115.2 million were 13.7% to a record $959.1 million. The majority of the growth was driven by organic sales initiatives, which accounted for $62.2 million and the increase.
Positions accounted for $42.8 million and selling price increases for $11.7 million.
These were partially offset by a decrease of $1.5 million, resulting from currency translation.
Our organic volume growth, which excludes the impact of selling price increases and currency exchange related deflation was 7.4% for the quarter, which was well above our long term targeted range of 4% to 6%.
On a nominal basis by he after selling price inflation and currency exchange deflation, our organic growth rate was 8.6%.
Our strong organic growth for the quarter was driven by a broad range of initiatives with most of our success being in the seafood artisan sandwiches Korean dry cured meats and meat snack product categories.
Our U.S. seafood platform in particular generated strong growth driven by new procurement initiatives and the startup and state of the art art lobster processing facility in cycle, Maine.
We were also very pleased with the growth in our sandwich platform as a number of the new customer and channel initiatives that we've been working on gained significant traction.
Our strong growth for the quarter was not however, without challenges, including continued weakness in the Western Canada full service foodservice market.
And lower than normal promotional activity for certain pork based AD products as a result of commodity cost and supply uncertainties.
She added with the outbreak African swine fever in China.
Our adjusted EBITDA for the quarter increased by $12.4 million for 19.8% to $75.1 million.
Normalizing for the adoption of the IRS 16, accounting standard our adjusted EBITDA grew by $2.7 million for 4.3%.
This was driven primarily by our sales growth.
We should see improvements in a number of our production facilities and lower variable compensation accruals associated with lower year over year growth in our free cash flow and free cash flow per share.
These factors were partially offset by four main items one.
Additional costs associated with investments, we're making in infrastructure to support our current and future growth.
Including additional overhead associated with our new G. P. Eight and Sacco facilities are two expanded Montreal operations, and our new lobster procurement initiatives.
Two pork and beef commodity inflation, which was largely related to the saffo break in China.
Three labor cost inflation, particularly in our U.S. base businesses were laid the where the labor market is extremely tight and for additional outside storage costs, mainly associated with long inventory positions taken to help hedge against rising global pork and beef commodity costs and to prepare for now.
New product launches.
Our adjusted earnings per share for the quarter decreased by three cents to 79 cents per share primarily due to the various adjusted EBIDA challenges I outlined earlier as well as to structural changes, namely one the dilution on effects of our recent private placement as a significant portion of the new capital.
This is not yet been invested.
To the adoption of the IRS 16, accounting standard, which represented approximately two cents at the increase decrease.
With our fourth quarter results. We also release, our sales and adjusted EBITDA guidance for 2020 for sales we are projecting a range of $3.975 billion.
$4.075 billion, representing a growth rate range at 8.9% to 11.7%.
The main driver or some of our growth. This year are expected to be one a full year sales from acquisitions completed in 2019 and earlier this year.
To continued traction in our North American Seafoods, artisan sandwich meat snack and premium dry cured expansion strategies and three leveraging a variety of captive capacity expansion projects. We've completed over the last couple of years.
For adjusted EBITDA, we have provided to ranges for our 220 20 outlook.
One based on a relatively normal protein commodity cost environment and the second based on an inflationary environment similar to what we experienced in 2019.
There were several reasons for doing this including highlighting the significant amount of uncertainty associated with the short to medium term ramifications of the outbreak in China, which has resulted in the loss of approximately 25% of the worlds pork production.
Under our relatively normal commodity environment assumption, we're projecting in adjusted EBITDA range of $335 million to $360 million with our year over year growth being driven primarily by sales increases and production efficiency gains, resulting from both continues improvement.
Initiatives and higher production volumes.
Under our bad case scenario, you're projecting in adjusted EBITDA range of $320 million to $345 million, which essentially reflects $15 million and transitory margin impacts, resulting from inflationary pork and beef costs.
Turning to our financial position, we can continue to maintain a conservative balance sheet and strong liquidity.
Our senior debt to adjusted EBITDA ratio was 2.2 to one which is well below our long term targeted range of 2.5 to one to 3.0 to one.
While our total debt to adjusted EBITDA was 3.6 to one which was also below our long term targeted range of 4.0 to one to 4.5 to one.
In terms of liquidity, we had approximately $350 million unutilized credit capacity at the ended the quarter.
During the quarter, we invested $36.5 million dollars in businesses and growth related capital projects.
Our business acquisitions consisted of name coast seafood and main base lobster distributor and multi task and Ontario based cold storage providers. Both of these transactions were made within our existing platforms as part of their value creation strategies.
Our project capital expenditures for the quarter included $2.3 million for the completion of our sea food groups.
Rob stir processing facility in cycle and $1.7 million for the completion of the expansion of our protein groups cooked protein facility in Montreal.
Turning to dividends during the quarter, we declared a dividend of $16 million or 52.5 cents per share, which on an annualized basis works out to $2.10 per share.
Our free cash flow for 2019 was a record $177.8 million as compared to dividends of $76.7 million, resulting in a payout ratio of 43.1%.
Subsequent to the quarter, we increased our dividend rate by 10% to 57.75 cents per share or on an annualized basis $2.31 per share.
I'll now turn the presentation back to George Thanks will 2019 was another successful year for premium brands as we made significant progress towards our objective, we're becoming the leading specialty food company North America.
We're particularly pleased with the progress made for US based value added seefeldt sandwich and protein platforms in executing their growth plans.
All three had record years, driven by excellent commercial execution robust innovation and leveraging PB ecosystem opportunities.
Thanks to their success are you a sales have grown to 1.4 billion and now make up approximately 40% of where total sales.
Over the past year, we also made great progress in expanding our distribution platform in Qubec with a 45000 square foot expansion of our seafood facility in Montreal.
And the acquisition of Qubec City base the index.
Our cubic based distribution platform under the leadership of CSC packing is now very well positioned for top and bottom line growth with new state of the our capacity and the best in class management team.
Looking forward, we remain very confident about our unique business model growth strategies and correspondingly, reaching our 2023 objectives of 6 billion in sales at 600 million EBITDA at 10% dividend increase we announced today, which is our sixth consecutive annual double digit dividend increase reflects this confidence.
We were pleased to see that premium brands was ranked as one of the top 10 best performing stocks in the TSX over the past decade with a total return over a thousand percent.
We're very pleased there are long term shareholders were rewarded handsomely for their support.
During the past decade, we face many challenges we face trade issues softer tight labor markets virus epidemics competitive threats supply chain disruptions capacity constraints in a myriad of weather headwinds.
At times, the forced us to delay or adjust our growth plans, but they never changed our resolve to pursue or core strategy of partnering with passionate talented food into printers and management teams and giving them access to the resources they need to accelerate the growth of their businesses all the while respecting their unique culture and traditions.
Our decentralized business model and unique culture, and passion for making or distributing on trends great tasting food made with wholesome ingredients is the reason that we remain confident that we will continue to execute well and that our shareholders will continue to be rewarded over the long term despite the headwinds.
In terms of acquisitions were pleased to report the recent closings of three transactions inform brokerage variance sausage and less LMS.
All of these businesses bring with them exceptional brands and great people and will play a key role in helping us execute our various specialty food focused strategies.
We expect 2020 to be another very busy year for acquisitions to them by very real fast deal pipeline, both at the PB level and at the business level I.
I will now turn the presentation over to Nadja for the Q and eight part of the presentation Madea.
Thank you if you'd like to ask a question. Please signaled by pressing star one on your telephone seed pod.
Our using a speakerphone. Please make sure the mute function is turned off to a like a signal to reach our equipment again press star one to ask a question.
Well first go with directly sorry from TD Securities. Please go ahead.
Good afternoon everybody.
I was just wondering in the context of the corporate 19 impact.
Particular in Italy, and obviously the investment that you just made there.
How should we be thinking about your ability to either importer access your commodity inputs from there and or your your inventory positions for the next ill call. It three to six months.
Yes, I couple of comments there Derek one is that the food industry in Italy has been deem to be an essential industry effectively so the food industry end to help industry are basically the only industries that are.
Open and operating as we speak.
In the case of lateral in is there has been absolutely no disruption in terms of production and we are.
In putting a.
Record number of containers from from the company into North America, and and we're doing well that segment is.
Is growing very nicely for us than we expected to continue to grow.
Okay. So no so as of now Theres been no impact even from a labor standpoint.
Absolutely not.
We've had.
Kind of a temporary disruption in that we had a few containers cut up into the blockades with our railroads factor that's being resolved now but.
In terms of.
The operations of less selling as.
They were operating very well all their five facilities.
I've had absolutely no disruptions and.
Again, it's one of the industries that that obviously has been deemed essential by.
The government, there and any still operating as usual.
Thanks for that George and.
Another one for me.
It seems like you are being.
Present, what you're seeing little impact from from the Corona virus on the supply chain is there anything you can talk to you.
For those businesses that are maybe closer to the immediate hot spots and I'm thinking like Albert I was on the west coast side as from supply or demand perspective.
Yeah, I think in general terms, obviously for everybody their situation is changing daily but.
We've seen extremely robust demand from the retail in club channel I would say in many circumstances were actually having difficulty keeping.
Keeping up with with the demand for obvious reasons I think there is good consensus that there's been some stockpiling et cetera.
Our business, even in Canada that that service.
Retail and cloud that are extremely busy.
And I think in general terms, we're seeing obviously is slow down in certain channels.
Thankfully there not large for US you know that no one would be surprised to hear that the airplane channel for US is is has slowed down or.
Given the part of our business that services.
Chinese restaurants in Toronto in particular.
These are not large.
Segments, where aspect.
Again that give obviously slowdown.
Okay. Thank you.
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Thanks provided some color in the outlook section around taking into account to potential a commodity exposure.
Just wanted going to understanding of what have you baked in I guess from your perspective into your outlook with regards to sort of revenue or you did you sort of have a revenue outlook in moderated based on current hardware just want to understand maybe provide some sense terms and EBITDA from there's some built into a revenue as well.
Yes in terms of our sales outlook.
We took a fairly conservative approach on the impact of coal that on the basis of what we're seeing today. So.
As George mentioned, we've seen some impacts in the airline industry, our Asian restaurant business in southern Ontario, some of our lobster Chinese exports.
All those impacts are sort of known and been incorporated and on the other side. Some of this most recent activity.
Such as the club buying the stockpiling by consumers, we actually haven't incorporate that upside to that.
Based on what we've known today, we've taken a fairly conservative look at our approach has come in 19.
Okay, I know your bookings here, how much or whether it's your PFP business or total just trying to get understanding or what's the exposure to western Canada.
Kind of going for every circling towards.
Hi, sorry in food service.
Yeah, just kind of the food distribution segment, what the split for that business is kind of work towards has been.
Yes, we don't break that out south but in general terms, because our western foodservice business, which is primary centennial has operations across the country.
Our real rough General Bar Park in say three to 400 million.
Okay. That's helpful. And then you indicated that you've been taken some or I guess impact from the corporate 19 into account is that sort of this based on current visibility and is that mostly sort of supply chain related just want to understand what youve.
Great then I think you mentioned some sales into China that GTN pack is there.
More supply chain related or is that more sales or later when you're thinking about it its sales related and it's based on our current visibility.
Okay, and then just one last one for me I guess or a lot of the growth seems to be coming from.
Recently acquired pro forma sandwiches side is a.
Largely sort of program that you already talked about those are progressing as expected is there any sort of new news on.
The San Francisco, Brian as we head into 2020 at all.
Yes, it's it's really what we've been talking about to date and it's it's taken us a little while but we are gaining traction that.
Ms, resulting in the positive sales trends.
Theres Theres that Theres a few.
The team is constantly look working on and developing new initiatives and so there are always new things coming at the forefront but.
The results you're seeing currently is driven by everything we've talked about in the past.
Great. Thank you.
No problem. Thank you. We'll next go with George do you May from Cushing Bank. Please go ahead.
Hi, guys I'm, just a follow up on on obviously on covert given the flu situation, but can you maybe talk a little bit about maybe mitigation plan. So our ability to extend the kind of maybe move production.
From one place another as it relates mainly I guess to the higher growth sandwich.
He needs platform.
Yes, very good question and I again, we've we've.
Spent a lot of time make internally effectively trying to gain the situation with Cavatt 19.
We are in very good position in the sense that premium brands does not operate very large central facilities. You know we have 65 facilities across North America, we have built a lot of redundancy in our system we have.
Seven Sandy's plans effectively in different parts of the country, we have various daily and missed that plants et cetera.
So again, we've we've done a lot of work trying to.
Coordinate the effort and and obviously get the ecosystem to cooperate with each other where we feel that we are one of the very very few companies that that we can go to our customers and offer them.
Redundancy with respect to to a number of products that we manufacture. So if we do have a problem in one facility, we should be able to.
To continue the majority of our.
Production and goods and services to to cut to key customers.
I would also like to say that as I mentioned earlier, I mean speaking to a lot of our companies.
A big part of our.
Situation today, it's actually just keeping up with with demand in the lot of our businesses, we've actually stopped.
Taking orders from new customers, because our focus today's too is to service our existing customers.
Okay. That's helpful and will on your guidance.
It looks like you guys are expecting about that the midpoint at least $50 million have an impact on stuff.
Sure.
I think it looks like we're seeing some signs of deflation on there I guess with corporate and everything that's happening I guess in the past, we're able to kind of hold on to price on that we've taken already so I'm just kind of wondering.
Maybe some color around that number and what your thoughts are I guess for.
Solution in this environment.
Yes sure Bill on your first comment in respect to the $15 million you're right. That's what we have.
Factored into that second range, which again I can't I can't stress enough. So George that that is really an unknown impact like for all we know and what's happened over last couple of months is a great example is when we were going into the fourth quarter. When we're in the fourth quarter going in.
The December we saw a significant amount of inflation in in our pork and beef costs are protein group.
And that was driven in part by the opening of trade with.
Canada opening to China, and the U.S. tariff situation when China easing somewhat.
So we started the year with a pretty inflationary trend that carry through for much of January and then.
Toward mid towards end of February we did start seeing some deflation as the result of the Covance situation and what that's been doing to supply channels in China. So it's been incredibly volatile around the commodity costs in that environment, It's really tough for our businesses to set their pricing strategies.
So so that's why we've got this great uncertainty about what the balance of the year looks like.
It's.
$50 million not our projection is just an indication that it's a really uncertain environment now in terms of the current deflationary market, you're absolutely right, we will hold prices.
Particularly on a more differentiated items as we've talked about in the past.
And if if that continues then we should be in that upper scale of our two two ranges if that doesn't then and inflation kicks in and we'll go back to our standard strategy of our businesses will put through price increases as needed, but there is always a delay.
And that process and that creates some short term margin impact.
Okay.
Makes sense. Thanks, one last one if I may on the leverage.
We're sitting in the mid threes.
I guess in the context that maybe expectations out there that there will be.
From some form of economic contraction.
Are you guys going be prudent or do we should we expect kind of the pace of M&A to continue.
I am a first first point, though Georges.
Please.
I have this discussion with men many any of our shareholders.
Our senior debt EBITDA ratio, which is our key ratio.
For for managing our balance sheet specially in the short to medium term.
As our senior debt to EBITDA ratio and Thats running at about 2.2 to one well below our banking requirements of four to one so we got a tremendous amount of flexibility if something does go wrong.
Our convertible debentures, which make up the total debt that's fully subordinated no principal payments no covenant no covenants associated with them. So it's pretty patient debt. So and nothing comes up to do on that until 2023 I think is our first issuance that comes up so we've got a.
A lot of flexibility on that side in terms of our level of our activity, where we always manage our our balance sheet prudently and we will continue to do so and you're right. Given this environment, we will probably be a little more prudent than we've been in the past.
But.
It's certainly top of mind and something we will manage very closely.
Okay, great. Thanks your answers.
No problem George.
Thank you and Mexico with David Neumann from Dish Feldman. Please go ahead.
Good morning, gentlemen.
Hey, David morning, David.
So if you look at the year, it's almost like a tail acute guidances here as as I see it where you got the front end the year impacted residually by assets and then covert 19 kind of kicking in kicking in so if I had to look at I would say is almost going to be or you're more optimistic guidance for the back end the year I made a low.
Lower guidance for the front end of year, but.
Maybe even just kinda give us a central what you're thinking throughout the year in terms of how this how the ever Todd good pace into throughout the year.
Based on what you see.
Yes again this goes to my earlier comment David edges.
It's going to depend on so much on how things fall out so.
We walk through Covance 19.
The reason why it's having such an impact on commodities global commodities right now is because.
It shut down the supply channels in China, and as a result product is not flowing units backing up and product that was destined to be exported from North America is backing up in North America, and creating downward pressure on prices are cost for us.
You know if coal that.
Team and its impact on the supply chain, our relieved in China and that opens up and you have a lot more north American product flowing into China will that that's going to strengthen prices for commodities in North America, but even even going down that road. The fact is story.
Each facilities in both North America, and China are just chalker block full of protein at this point so yes, okay.
Yes.
Yes, it's another variable that.
Okay. How long is he going to take for that product to flow through the system and really pressures. So I wish I could give you more clarity, but thats. The reason we've taken this approach is there's just so many variables in this and how it plays out creates that uncertainty that.
It plays out favorable we'll we'll be in that top end of that that guidance and if it's not then we'll be in that bottom and I think David it's safe to say that when we put together that budget. We were facing for 2020, we were facing a theory inflationary environment with.
Respect the protein it's no longer the case I mean, there's been demand destruction, obviously in China and covered 19 in North America were also will also caused demand destruction. So.
That situation is changed assets as of today currently.
We don't see that changing.
Any any time in the near future so.
Anyway that sort of our view today.
And if you look at assets there is lot of somewhat manipulation, I'll say going out into the market with the Chinese ahead of them lunar new year, and things like that which seems to have subsided, a little bit, but thats certainly must have added to the volatility. That's that's going on in the market on aircraft as well we do not.
Sorry.
Well, yes, it certainly was taking supply out of the system because.
Our read of the situation is a lot of.
Suppliers a lot of processors, we're putting away product in anticipation of.
Strong Chinese new year, well as we all know that did not happen because of coal that 19.
Yes, they got cotton that fed into some of the weakness we're seeing now don't turn it also forget that David that a lot of the proteins exported to China.
Our consumed traditionally in the foodservice segment ended and the foodservice segment in China has been impacted immensely by causing 19 as well so there's been some demand destruction and in the food service channel in particular.
And if you look at North America, I mean, the restaurants are looking.
Sending out for sure.
At the end the day people have to eat and you kind of alluded to in George where you might see a pick up in people stay indoors with your specialty food side, whereas your.
Premium food foodservice distribution can be impacted I mean, do you think is enough balancing and puts and takes that address this broadens out to a more insidious situation that you'll still see people going out and and obviously buying at the grocery or whatever rate or club or whatever.
Yes, David first of all even what we reported.
Distribution business for PB.
It's not just to foodservice there.
That division distributes a lot into specialty retail in retail in general, it's just a distribution type of business rather than branded manufacturing.
So as a company we are much more developed in the in the.
Retail and club segment.
We've seen situations, where we've got customer as seen in Canada, and the U.S. retail and club customers, where our sales to them are up by up to that they are up by 40% event.
40% again, whatever is not consumed.
Store weekly in the.
In the foodservice foodservice channel will be consumed at home.
And we'll be purchased in the retail and or club service channel as you say people have to lead the ultimately and data and.
That's what we're seeing I mean, it's early stages, but that's what we're seeing right now okay last one I.
That add to that David just we've got we've gone through this for different reasons this cycle of consumer.
Spending patterns shifting from foodservice to retail so we've seen this many times in the past and and Mike George says, that's exactly what happens and and I'll add to it is.
The thing with retail versus foods are our margins are better on the retail side. So we might not capture all of those sales, but we certainly capture the cash flow again, if you look at if you look at the.
Situation that took place in the last couple of years in Alberta, David with oil patch.
Yes, our serve food service business did slow down, but our overall business in Alberta.
Including retail and clap have have actually grown sites. So so we are strong believe or is that people will eat some some somehow.
It's it's if they don't eat in foodservice they will consume.
Food at home, so so and Thats generally what we're seeing at the early stages of covered 19.
Very good last one three guys just on the growth Capex.
Provided maintenance capex guidance, but any thoughts on on growth and Capex and specific projects. They have a mine above what's already announced.
Yes.
We've got all quite a few projects in the works right now.
But we don't announce some until we've gone through our capital allocation process and they've been approved.
I.
The preliminary guidance I'd say, probably 2020 will be similar to 2019, but we'll see how it plays out as the year goes.
Very good thanks Scott.
David. Thank you. We'll next go with Vishal Schmidt from National Bank. Please go ahead.
Hi.
Thanks for taking my questions.
I just wanted to.
I'd reference and Investor presentation that mentioned put out where they noted margin expansion potential associated with a.
Lapping the 2019 challenges including.
Seth and.
This concludes margins.
Fair to say that just marching normalization is margin benefit in 2021.
How should we think about that.
Yes, so that that would be the margin normalization for our upper.
The upper end of our guidance range.
Thats what that reflects as a normal commodities market. It's also if if thats. How we proceed we should see in 2020, but ultimately it if we end up in the bad case scenario than it would be a 2021.
Okay. So in your and your disclosure here one when you one.
The company notes that FY 2020 guidance is predominately driven by Salesforce.
And also some production efficiency gains the upper end, which reflect that normalization and thats, what the base case right.
Sorry, say that again vishal.
Where we're management notes that to be got the EBITDA is predominately in 2020 being predominately driven by sales growth.
Thats more of your base case assumption.
Brand would include some margin benefit associated with normalization Thats, a fair catch on I think.
I think what you're going to see is you're going to see the EBITDA growth from the sales volumes and the efficiencies how that's the plan. We don't expect varies from that but then under the bad case scenario, it's offset by the impact of DSS.
So you'll still see contribution margin coming from the sales growth.
It will just be at a lower rate because of the assets impact.
Lower margin to the SF impact.
Okay, and I don't understand that.
Yes.
Looking at.
Switching gears here.
Earlier and earlier in the conference call. It was noted that.
If there is deflation in the commodity backdrop to try to hold prices on differentiated products I was wondering if there's any way for us.
Estimate what percentage of clinics or are in fact differentiated.
Yes, that's a tough question so.
The best way to.
I understand the potential of that is if you look at the trend in our EBITDA in our specialty foods segment in 2014 through 2017 that kind of gives you some sense of the potential.
You know, we do not breakout our product categories for the level that detail, you're you're looking for the ones that stick out as the premium differentiated ones would be things such as our.
Dry cured couturier products premium drag your security products, our meat snacks.
And.
So to answer and that come to my mind in the sales of those two categories.
I would off the top of my head estimate at above.
Oh, maybe what 400 million George.
Or 500 million.
Yes, I think that the better way to look at it is to look at.
The fact that.
The majority of our foodservice and.
QSR businesses generally cost plus.
And.
You know so I would.
I would.
Probably.
Say to answer your question about about.
50%, probably we would consider differentiated it's just the level of differentiation that we might need to think about but but.
I would say 50, 50 property cost plus versus differentiated.
Okay, I appreciate that and I recognize it's it's a tough question. So just wanted to get ballpark sense.
Okay and and.
This is maybe we can take us on offline but.
Trying to figure out what percentage of your business is more traditional staples tight and I. Appreciate there's a there's a switch between distribution and.
Closely depending on different economic backdrop and whatnot, but.
Yes, our category what predominately constitute category.
Is it predominate specialty retailers.
On the obviously, we'll handle it wouldn't be it would be.
Yes for out here I I, achieving comes to mind would be choices or.
I guess farmers, what's the change in Ontario, Ambling font farmboy would be a sample.
Things such as convenient stores, we include in there as well.
It's a whole variety of channels outside of essentially the big five or six names that was out your mind Loblaws Costcos walmarts.
Hey, it's predominantly retail what's your shops, yes.
Hey, Ali's just so happens that this segment has been.
Has been growing quite quite a bit.
And again, it's one of the segments, that's benefiting a lot from.
What's going on right now with regards to covered 19.
Okay, and John you got just squeeze one last one in here.
And.
Just in terms of how to pass. This question that totaled 19, how do you anticipate any facility closures.
Looking forward.
Well as I mentioned earlier on the call that we've we've spent a lot of time with our different teams trying to gain the situation trying to.
Prepare trying to understand.
You know again, guys there might be there might be closures.
We are one of the few companies in my view as I mentioned earlier that we have a lot of redundancy in our system and we're able to have plants help each other with respect to capacity.
You know we have plans are all around North America, it's not likely that all of them are going to close at the same time. So so again, we've talked about that.
Closure may may take place because of a supply chain disruption or.
Because the health authorities theme, the deemed or dictated to shut down for a few days all of those things are possible.
You know we.
We obviously looked at.
What's happened in.
Places like Italy, let's say or or Japan, or other places where they have been impacted earlier by the.
By the by the virus you know I.
Im happy to say that.
That our partners in Italy.
Not had any disruptions to this point with respect to any of their plans, even though they've been hit pretty hard. So yeah. It's a possibility, but we feel comfortable that we could manage through that.
Thank you.
Thank you we'll next go with Johns apart from Sandy seats. Please go ahead.
Hi, good afternoon.
Following accounted for your question about both the decentralized business model and any advantage of having that and I guess I'm trying to ask how flexible are your products can easily switch to produce them at different locations or is there something unique about individual plants that are they are not able to be shifted and and just in your markets are there any.
Particular plants or platform you have that are at or near capacity.
Well it depends on on seasonality of course, I would say that being the summer months.
There's not a lot of capacity available.
Throughout the system in that case, weve and leverage our partner.
Silica sand and.
A number of facilities that we don't necessarily own that that are part of our ecosystem. So back but this time of the year. There is there is capacity in the system. There is some redundancy as I mentioned earlier and in many many key areas of the business, we're able to manufacture products interchangeably.
Between facilities. So so yeah. We you know we think thats not to strengthen some.
Something that we are talking to our customers.
At this time given some of the.
The uncertainty.
Fewer running a business in the food space and you have one facility.
It's it's not a good it's not a good time right now and there's a lot of risks associated with that.
Okay. That's helpful. Thanks, and on labor availability that this has been a challenge for I guess, the past 18 months or so, particularly in the U.S. and in light of coal good in the potential for labor shortages I know, what the small sample size, but over the past couple of weeks have you seen any uptick in if you would call it out.
He isn't more or just general challenges in finding people to properly staffed plants or is that not an issue at this point.
I'm not an issue at this point.
Okay, and then on assets. So you've built in $50 million is your expected impact granted there's uncertainty there, but can you give a sense of color on the cadence of that impact and can you remind us what the impact was that assets in 2019.
Yes, so the impact in 2018 was roughly 15 million.
And that was for three quarters, but it also in core included a sales impact, which we have not factored in so it's kind of an annualized commodity impact from 2019.
I'm terms or the cadence for twice in terms of the cadence for 2020.
We do know there was some impact early in the first quarter.
We've taken that into our thinking in both ranges, though so it's really.
A lot of the cadence is in if it does play out is second third quarter.
Okay. Thanks, and then last one from me.
Can you get a sense of magnitude as to the the declines that you have seen on the DGCA restaurants, you mentioned into lobster export business.
At this point in terms of the.
Restaurant industry in Southern Alberta, Hi, sorry, Southern Ontario.
It's relatively start small dollars like on an annualized basis, we're talking sort of three $4 million.
And in terms of that Chinese exports that one has a fair degree of visibility to it and again, it's not a huge number we're looking at.
Six $7 million us impact.
And sorry, that's in the quarter or that's like where do you expect I know thats for the year. After the annual hats, that's for the period of our visibility. So it's really kind of the first half of the year.
Okay understood. That's all for me. Thank you very much.
Thank you just to remind everyone if you'd like to ask a question signaled by pressing star one and also if you'd like to remove yourself from the Q. Please press star to we'll next go with season clad from BMO capital markets. Please go ahead.
Thank you good afternoon guys.
Hey, Steve I invite closed the lots of questions have already been answered lots and lots of ground you guys have already covered which was great I just wanted to see if I get some color around.
The acquisitions that you announced with the quarter So I.
I guess in form brokerage bring needs from a full filanesib did you give color around revenue and EBITDA from those acquisitions.
We haven't they are relatively small acquisitions so overall.
Let filanesib will be an equity investment so it doesn't even impact or our sales or EBITDA.
Informed broker and Bavarian.
Inform is roughly at 25 million plus.
Sales business all in Canada Canadian dollars. It will form part of our premium food distribution is group and then Bavarian it's a relatively small brand. It's got about five to 6 million us in sales and it will form part of our specialty division.
Okay.
Helpful. Thank.
Thank you.
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In terms of pass you've talked about this sort of sales pipeline of the new product listings on it was you know previously talked about to be 130 million.
Can you talk about how that run rate has moved whether you've experienced at all how much you expect experience in 2020, and then I guess, if that if that has actually ticked a little bit higher with new contract wins.
Well certainly most of those initiatives are well underway, Steve and they were contributors to our growth this past quarter and into the factored in but obviously.
Based on our outlook for the year, we're we've got a lot more irons in the fire today than we did when we first talked about that 135 million.
Right Okay.
It sounds as though.
Really no change to the topline and demand outlook, it's more just the disruption.
In the.
For 2020 with respect to a F and corporate 19 as other for where to characterize it.
Yeah, and we kind of again.
We've reflected our current visibility around coven 19 in our numbers.
In our local round or sales so it is really.
Assuming there is no major major meltdown in the situation, it's really the asset and the margin impacts that is our greatest uncertainty at this point.
Right.
Okay, but certainly with regards to coveted 19, some channel disruption disruption some channels positive some channels negative.
Yes, okay.
Okay. That's great. Thank you.
We'll next go with.
Directly sard from TD Securities once again.
Yes, thanks, guys and that sorry for beating a dead horse here, but I was just wondering back into Colby 19, if you add just get paid or have any of fee.
Your customers your clients come back to you in terms of delays to the big not a big sandwich and snack you programs you've got going on.
No we have not seeing any delays.
I think that in terms of our.
Efforts to do better in the retail in club channel with regards to sandwiches meat snacks et cetera, right. It's the opposite we've got tremendous demand in those segments because of the reasons that we've discussed today.
Okay. Okay. Thank you.
We'll next go with Jimmy Chicken moment ski from Barrington. Please go ahead.
Hi, So I have a few questions. The first question is.
How much revenue related to new initiative.
And I'm broken in respect of the 135 Khabibulin bullish I was hoping you initiatives related to.
Specialty food segments. So how much will grow revenues were recognized in Q4 90.
We haven't broken out that specifically.
Dimitri again, our growth in the quarter I think what was it 115 million most of that organic anglers roughly 60 to 63 million was organic.
Good portion of that was that one 135 was a good amount of it in our sandwiches in or meat snack components.
And you take that 135 divide that by for.
It's a it's a reasonably significant portion of that 62.
So just to clarify the sold the growth in specialty foods organizing specialty foods growth was 40 million in Q4.
So essentially saying that.
All of the.
All of this growth in specialty foods in Q4.
Okay, Alright, and grow sold game for all month, seven which is a meat snacks initiatives.
In the specialty foods segment, absolutely mainly.
Mainly.
Okay. So that means that the flip side of that is that organic growth.
The business one of the negative.
In Q4.
I hope sporting goods, Oncologic, 45, new lending be new initiatives going on or like basis right.
No that the base sales were relatively flat and you're right and a lot about was that reduce promotion, resulting from us pulling back from things associated with because of the separate issues.
You're absolutely right that that business was impacted by itself.
Okay, Thanks, and dot the how much was below the knee shipments revenue is embedded in the two hop out in the 2021 guidance so going back 2000.
Thousands 19, as well as Les for part of a Pleasant 19, you were talking about the fact that $135 million was sub the.
Nick and family shot initiatives.
That will secure very early on in 2019. This level to May 2018 that seemed to them much more had been secured.
In the programs so that would suggest they probably a substantially higher numbers I'm 175 PLM.
Multifoods' initiatives.
Sales.
Going into 2020, so I was just wondering what is roughly the mom that we're talking about.
Libya.
I'd have to.
I'd have to go through the math with you on that Dimitri offline.
Okay.
Sure.
The other question Ian.
Based on the guidance it seems that organic revenue growth.
For the 2020 are should come excluding the acquisition the input from the acquisitions should comment about four in the cost per fab.
And I'm wondering how does the death reconcile with yours.
No.
Guidance or no guidance will be not the right word, but you are solidly implied in your life, We think investor day.
Organic revenue growth of about 8% there yes.
Going forward.
Between 2020.
And 2023, so I'm just trying to reconcile flown the hopper sense was 8%.
Yes, I'd have to go through the Masterfuse something's, not adding up in your math Dimitri.
Acquisitions run rate rock acquisitions impacts about $100 million.
And the rest is organic so you know that that would put you in the range that you're expecting so and as we can go through that math offline.
Okay sure. Thank you and then.
Question on to get Starbucks business based on these closures. It seems that started box business grew about would slow down would slow down to about 1% growth.
In 2019.
Yeah I was just wondering how you're thinking not in terms of Starbucks business goals going forward.
Should we expect guys substantial acceleration in that way.
Or any other thoughts would be appreciated.
Listen Demetri, we never comment on.
Business with any particular customer for obvious reasons, but I'd just like to say that over the past the year or so we've made tremendous progress in terms of growing our sandwich platforming in all channels from other QSR customers to two retailers clap as well so again thats.
What are the reason why we.
We've we've grown the specialty business so much and we continue to make good progress in growing those channels.
We've got excellent capacity best in class in the industry.
We made excellent products, they're most food safe high quality sandwiches in the in the business and and we have a lot of demand in all.
In all channels Oh of course, including the two it QSR channel that that that you mentioned.
Okay and that now turning to receive store convenience store channels Chandler related to what mix next.
In terms and so we I recall back to our discussions in 2019 bought one one that we own goals.
Yes.
You mentioned differentiated that when the longer term.
The revenue potential form the convenience store or move connecting sandwiches Lin side is over 100 million dollar. So I was wondering whether you're standing at right now in terms of between between your guidance.
How about today are completely out to 200 deal envelope, we'll know our top but then show were related to convenience stores.
Yeah, We're basically ahead of plan their Dimitri and.
We do own the fastest growing brand in the C store channel in North America in Us in particular, so so the catalents cut.
Brand is the fastest growing brand and C store in the United States as we speak.
And when would you able to would you be able to disclose job.
Bill Little why how much revenue can be low AJ cheese out of this onetime should be around.
Overall, the Pancho inconvenience for.
We will have you disclosed I don't know and again, it's not just meat snacks to right. We've gotten some good traction with sandwiches in that category. So it's got to us at Chad it's come across a couple of different platforms.
Right, Yes on both candidates would you be able to provide possibly some number or not.
We are you Dan do you have.
From the 2020, you already know reconnecting with them when should we be convenient stores.
I don't have that detail in front of me right now can be tree again, our meat snacks segment in the U.S.
Dimitri had had a record year they have to best year into history in the first full year under that could be umbrella. They had the best here in the history. So.
Okay. Thank you. Thank you very much gentleman.
Thank you.
This concludes today's question and answer session I'd like to keep the floor back to Mr.
Well go to conclude the call.
I'd like to thank everybody for attending today. Thank you very much.
This concludes today's call. Thank you know for your participation you May now go ahead and disconnect.
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Hello.
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