Q3 2023 Premium Brands Holdings Corp Earnings Call - Q&A
Thanks.
Yes.
Hello, ladies and gentlemen, and welcome to the premium brands Holdings.
Corporation third quarter 2023 earnings conference call a question and answer session.
At this time all lines are in listen only mode.
If at any time during this call you require immediate assistance. Please press star zero for the operator.
This call is being recorded on Tuesday November 14 2023.
I would now like to turn the conference over to Georgia Power logo. Please go ahead.
Welcome everyone to our third quarter conference call.
Hopefully.
You have had a chance to listen to the pre recorded call.
And have looked at the third quarter deck posted on our website. This morning.
With me here today is our CFO will <unk>, we will now move to the Q&A part of the call, let's turn it back to you.
Thank you, ladies and gentlemen, we will now conduct the question and answer session.
If you have a question. Please press star one on your Touchtone phone.
If you wish to cancel your request. Please press star two one moment for your first question.
Your first question comes from Mark.
Dana Landry from Stifel. Your line is now open.
Hi, good morning, guys.
Good morning Martin.
My first question.
With regards to the specialty Foods segment, you mentioned that the organic volume growth.
With seven 6% when we exclude <unk>.
Two nonrecurring factors I was wondering if you can discuss some of your program wins.
<unk>.
Contributing to the growth in the segment this quarter.
Yes again Martin.
There's a lot of positives going on with regards to.
Our specialty foods group.
Yes.
I'd say outside of some challenges with regards to capacity.
This was an exceptional quarter.
From the point of view.
The specialty foods group.
Some of our wins for example, with US having added capacity with regards to US a sandwich group we've secured.
Another very large <unk> assay customer.
The initial launch with that customer went exceptionally well.
In addition.
During the quarter, we have made tremendous traction with regards to our Italian meats.
Yes.
Initiatives, particularly in the U S lots of growth there, even though we have shorted a lot of product due to capacity challenges again, which we're addressing.
And also in the area.
Overall in Q and Cook Skewer, Sam as you know we are by far the leader in North America in this area and we had tremendous growth in those two programs during the quarter. So there is some sort of specific wins with regards to the traction we're making in our.
Our specialty foods group.
Similarly in the U S. I will also wanted to add that.
For the first time.
In a long time, we've gained new listings.
In Asia as well.
Got it.
Listings with certain retailers now in in Asia. So we're shipping.
To that market once again, we see tremendous potential with regards to growing in that market as well, we've probably got about 50 skus.
I think we should be able to list.
In Asian markets, particularly in Japan, South Korea, and China. So there's a lots of lots of traction in our specialty foods group and again in some cases subject to.
Solving some capacity issues and concerns and as we've.
<unk>.
More recently a lot of capacity has come now on stream and will be coming on stream shortly.
The only thing I'd add to that Martin is.
And it was a positive and a negative in the quarter was cooked protein continues to be a category that we are doing extremely well in the U S.
So it was definitely one of the drivers of our growth. However, it was one of the categories that were behind expectations for the quarter because of delays in getting our kings.
King's command capacity expansion online and Thats one of those two factors you referred to it at the beginning of the call, but cooked protein continues to be a really exciting category for us.
Okay, that's super helpful.
And just wanted to talk about your other segment the distribution segment.
Trying to see what the outlook is for that segment for 24.
Could you talk about like are.
What are you operating at full capacity right now would that would that segment or do you have room to add more clients.
To offset the decline in volumes.
The customer trading down just a little bit of visibility on that segment would be super helpful.
Yes.
Really are theres lots of room in that segment to support that 4% to 6% organic volume growth over the next couple of years, we've got a few little projects like our <unk> facility expansion is coming online and put back in we may do a little bit of an expansion in western Canada for us.
Centennial business, but in general terms not a lot of capital expenditure is expected to support that 4% to 6% organic volume growth over the next number of years.
And.
Is there an order of magnitude that you can.
Give us in terms of the capacity utilization for that segment.
Well the thing is a large part of the business is distribution related and so it's really adding trucks, adding distribution to the network.
And in terms of the capacity utilization again, we talked about this in the past Martin it's really hard for us to give a number because.
It's not one business with a set number of plants doing the same thing it's a variety of businesses with a variety of plants doing a variety of different things.
Basically a national distribution network Martin.
It has facilities across the country.
I would say overall.
Depending on where we're at in terms of.
Capacity and and.
And focus in terms of that market is probably 50% to 80% capacity utilization across the network, but it depends really on the regional kind of aspects of.
The market opportunity, but it's very tough to say, but as will said.
Plenty of capacity for us to meet our 4% to 6% growth targets.
Okay and have you.
Have you been able to.
<unk> signed new clients in that segment too to offset.
The general industry volume decline.
We are making a lot of progress in regards to.
To accessing new channels into clients and new clients.
Martin.
We call it our distribution group, it's not just distribution into foodservice. It also does distribution into specialty retail and retail as well again, it's a very good platform for us.
So well positioned in the marketplace. Unfortunately, it does kind of face.
The same economic headwinds that.
The rest of the industry is facing particularly in Canada.
Okay.
Okay. That's it for me thank you.
Thank you Martin.
Your next question comes from Bill is there from TD Cowen. Your line is now open.
Yeah. Thanks, good morning, guys.
You seem like they're pretty good.
Morning.
You guys seem pretty confident that you're.
The initiatives set in part by by your major clients are pretty much gone.
Can you maybe just help us square away I think it is a multiyear project.
So just maybe square away.
How you guys are feeling about it just being sort of one quarter impact versus multi year.
Yes, So derik are you referring to the the challenge we called out on our specialty foods in the Sandwich category.
Exactly yes, yes, okay, yes, it was a very unusual.
As youll situations. The reality is that customer that program is doing incredibly well.
The reality is the program should have shown growth in volume terms of 9% to 10% if not for these factors and I can give you a little more color around those factors.
And we expect that to continue into 2024% forward. That's part of our capital plan for a sandwich group is to support that continued growth Q3 was really an anomaly in and there were three three factors in there one of which is that customer is getting much better at.
Managing their inventory and as a result.
They've gotten it down to where it needs to be and that just impacted us in our fill rate for the quarter into those distribution centers. So really it was sort of it was definitely a one time impact.
Another impact, which will continue over the next couple of quarters is the customer eliminated displaying our products in their cases in there their cafes.
And which makes perfect sense, because the vast majority of the orders now are coming through mobile apps and drive throughs and.
It's a win in the sense that it's a lot less waste in the system, but it is kind of a onetime hit for us because those are sales for us that we're essentially going into the garbage because they were being displayed at the end of the day thrown out. So it makes a lot of sense in the long term, but it did impact us in the short term and like I say that that will continue through for next couple of <unk>.
<unk> and then the third impact was just a one off with we were filling in a distribution center in a market we didn't normally service.
And for freight optimization rates reasons the customer.
Dave that to another supplier as their production came online and we knew that was just a temporary situation in the third quarter of last year, and so that won't be an impact going forward.
Again, Derek I, just wanted to add to that.
For us and our Sandwich group.
We're just having a great year overall by the way.
Any sort of opportunity to leverage more capacity for.
Other customers in other channels is probably a good thing for us long term. So so again.
We're not too concerned at all.
With the change in sort of the ordering pattern. So this customer will have a the fact that they are optimizing their inventory and to the extent that it gives us more capacity to pursue other customers. That's a good thing overall for our platform.
Okay.
That's really good color Joe.
So in essence.
That means you haven't had to adjust the way that you guys operate the sandwich business in any way.
Absolutely not Derrick like I say the core program continues to do extremely well and we see no change to that in sort of that near to midterm future.
Okay. Thanks for that.
Just maybe switching gears to the free cash flow guidance. It looks like you've got a boost while you did get a boost from working capital.
More specifically on your payables and receivables will you did call out.
The MD&A.
That you have I think five days less five less days in receivables due to trade Finance program. Just wondering if you can maybe add some color there and then maybe as well on the payable side.
Yes, so the payables were just purely natural fluctuation Derek nothing unusual going on there.
In terms of the receivables yeah, we put in place a trade program with a couple of our larger customers and it's kind of a win win for everyone. The program is based on them, having a great better credit rating than us. So it actually reduced we get our cash upfront and the borrowing cost of that is.
Less than our borrowing cost.
So it's been a great great program very successful and we're looking at ways to possibly expand it but probably nothing material in the next couple of quarters.
Okay and then on the inventories are you still thinking that there is still about.
$70 million opportunity there I think it was like about three $4 million in the quarter. So how should we look at that yes.
I have to say we were a little disappointed in the progress in the quarter on the inventory we had expected.
$70 million was sort of over two quarters, we would expected half of that in this quarter. So we are still pushing for it.
An improvement in the fourth quarter. Our days are still about five six days greater than we feel they should be so we do expect to make some progress in the fourth quarter, hopefully not $50 million range, but we'll see how it plays out.
Okay, and maybe just one final one for me something that stood out.
MBNA as well.
Two guys, who are quite forceful and saying that you promise that any acquisitions will that you make will not stretch the balance sheet.
Could you.
Maybe can you just talk about why you were so forceful in that one line in particular.
Well again I.
I think that as you know Derek over the years, where we've been acquisitive.
I think we've made over 100 acquisitions since we've begun.
His journey back in 2000 2001.
Both will and I are cpas, we understand balance sheets and.
The balance sheet got a little bit stretched mainly because of carve it in some of the implications.
Implications of Covid on our business with regards to <unk>.
<unk> with labor and inflation and.
Obviously the impact of that.
Some of these kind of black Swan events had on our.
Our results right.
We're very aware of that I think I made a comment on the last call that we are starting to look at acquisitions and I've got a lot of questions as to whether we're going to go out and basically blow the balance sheet et cetera, that's not going to happen. We're very cautious we are involved in many discussion for any discussions with regards to <unk>.
Companies, joining premium brands again to the extent that the synergies are there and and.
And the opportunities for growth are there we may do those deals and probably use.
Our shares as a currency again, if it makes sense from a.
Sort of.
An IRR perspective, but again youre not going to see US go out and make a large acquisition in and Overstretched balance sheet, that's never going to happen.
And then our balance sheet overall, we will continue to improve based on some of the initiatives we have in place as we speak yes.
Just to expand on George's last point there Derek.
We're kind of in a unique part of our history and that over the last couple of years. What we've identified is our biggest growth opportunities have been on the organic side versus acquisitions. So we've been investing a lot more particularly in the U S and capacity.
And unlike when we do an acquisition, where we immediately get that EBITDA. Unfortunately, capex it takes a year or two to build the facility.
And Meanwhile, you're spending capital and Youre not seeing incremental EBITDA. The reality is we're now at the peak of that cycle and.
All of these plants, we got five plants coming online over the next three quarters all of that we will start seeing the cash flow in 2024, and really we're just saying, okay. We will be disciplined around the acquisitions, while we generate that cash flow from the capex and as outflows and that's going to give us much more flexibility, yes and.
Ken.
Like the 300 basis point improvement in the EBITDA margin of the prepared foods group is an indication of basically.
Starting to reap the benefits of the investment cycle that that will just talked about more more good things to come there.
Yes, great progress guys. Thanks for taking my questions.
Thanks, Derek Thanks Derek.
Your next question comes from George <unk> from Scotiabank. Your line is now open.
Hey, George.
Good morning, a really strong margins.
Just wondering maybe how sustainable those are or maybe any onetime things to be cognizant of those margins.
Now a very very sustainable George like George says Youre, starting to see the benefits of the investments we've been making but you're also seeing a normalization right like it's been two years of incredibly challenging cost inflation.
As we've talked about in the past, we're always behind the curve in terms of our pricing relative to where our.
Our cost structure is when we're in an inflationary cycle. That's all catching up now youre starting to see that and the fact is if you go back pre this crazy chaotic three years specialty foods EBITDA margins were in the 12% to 13% range. So we actually see the see it is there's still more work to be done there.
Still more upside in their margins.
The only thing I would add George is that.
Can't emphasize enough.
How much focus we've had over the last three or four years in investing in automation and robotics.
Improved efficiencies et cetera, et cetera, and as will said.
We are beginning to normalize our business.
Beginning to.
<unk>.
Plenty of access to labor.
Supply chains are normalizing as we've talked about inflation, obviously is beginning to normalize as well in and you're just basically seeing.
The benefits of the investments we've made in making our plants way more efficient.
As we've talked before we Didnt stop investing even when we've had some dark days and some difficult times, we continue to believe in the in the long term.
Plan and you're just starting to see the benefits of that that investment cycle in.
And George is absolutely right in the quarter George.
<unk> deficiencies from these investments from continuous improvement was about $7 million of the growth in specialty foods cash flow so that that's absolutely sustainable.
That's really helpful and I think we will in the prepared remarks, you mentioned the contribution of 20% to 45%.
Sorry, a contribution margin of 20% to 45% of the new capacities understanding there could be some issues like we saw at kings come on.
Some five plants coming online in the next three quarters, but my question is Jeremy how long does it really take.
Investments to contribute to both those kind of margins in one or two quarters could it be sooner any comments on that.
Well the incremental sales contribute that from day, one each sale right like that that the way we calculate the contribution margin of sales less direct costs right and that's labor materials, any direct marketing et cetera. So.
Contribution margin starts on day, one now in terms of the ramp up cycle with the different businesses will give you more color around our 2024 projections. When we talk about that next quarter, but we're expecting a relatively quick ramp up just because we have such a clear line of sight to a lot of this demand.
We're essentially working with customers that we've had success in regional areas and helping take these initiatives to a national platform in the U S. So so we think it'll be a pretty fast ramp up.
Okay.
The only other comment I have.
George.
<unk>.
I mentioned it in my prepared remarks is that we don't look at growth from the top down that's not premium brands right. So in the prepared remarks.
Last time I spoke about global Gourmet this time I talked about shop and.
We've basically invested in that business, we got it to capacity now we've built a brand new facility, we're pretty well sold out with regards to the new capacity coming on stream.
It is operating as we speak it is producing an and.
It'll double and double again in size in the next two or three years and Thats. The way we view growth right you have to look at it from the bottom up perspective, and that's why I started talking more about our different platforms and that type of growth that we're seeing based on more capacity becoming available.
That's helpful and just one last one if I may if you look at your long term guidance that calls for.
Yes, smedes below 10% organic topline growth per annum. If we look to 2020 for the quarter, particularly when you think you could maybe hit that run rate given all the capacity.
Hey, George will talk more about 2020 for next quarter.
We're just we're just coming out of our budgeting cycle right now.
I would like to have everything.
<unk>.
Nailed down before we start talking specifics about next year.
Okay fair enough offline. Thanks.
Your next question comes from Steepened Muchly Young from BMO capital. Your line is now open.
Thank you good afternoon guys.
Okay.
Just wanted to see if you could give a little bit more color you mentioned George there was our new <unk> Sandwich program that you secured this quarter and I'm just wondering if you.
The ability to give a little bit more color around that.
Yes. So so this is basically a customer that we've been talking to for probably two years.
Steven.
It's a very large <unk>.
<unk> in the U S.
We did.
For the first time, we did a limited promotion with them.
For two wraps.
At chorizo in a chicken wrap.
It was supposed to be a two and a half.
Month promotion.
It did really well at it exceeded expectations so the customer.
Extended it to the end of the year. So I think that we will end up doing about $50 million to $60 million worth of business with this customer this year, which is all new business.
And then we are speaking to them today.
Regards to making the program permanent and adding another SKU. So anyway. It looks very good for next year I don't have any more details on it as we speak but I know the customer is extremely happy I know that every time I have been in the U S and tried to buy this product a lot of times is sold out which is a good thing.
It's kind of a new concept for this customer in defense that is probably one of the first items that they've ever marketed that is not made into store that means that they can have consistent execution across their network.
In terms of the program. So we're.
We're very very pleased with.
This particular opportunity and we think there's lots of upside there as well.
Okay.
That's great.
Just turning to the PFD business.
Is there any way to quantify what the impact was from the.
From the lobster harvesting shortness shortage.
Yes.
In general terms, we estimate the sales impact of about $30 million, a little over $30 million in the quarter Steve.
It was quite dramatic again, 20% decrease in the cash is an enormous number.
Yeah.
And would you expect the shortfall to be similar in Q4, it sounds like.
Yes, it will.
Certainly carry forward into Q4.
We're hoping it won't be as dramatic.
Reality is the harvesting in Q4 is generally disrupted by weather, which was the issue here.
Want to make that very clear.
Biomass the lobster, so very healthy there is lots of them out there and it was just that the weather conditions were unusually poor throughout the quarter now thats normally the case in Q4, but if we get a little better weather or maybe the catches a bit better we can make up for some of that but yes, we do expect.
For a good portion of that to continue into Q4 because of the lack of inventory theyre carrying us forward.
Okay. Okay. That's helpful.
And then just on the small acquisition you did.
Is there any way to give a little bit of color around sort of sales and margins if material.
Yes.
Great business, it was pretty pretty small like we disclosed I think it was about $28 million in sales. It's margins are relatively consistent with the premium food distribution group.
We're quite excited about it.
It was done by our <unk> team and this is their third acquisition and they've been acquiring these very complementary businesses that are in rural parts of Quebec, and they bring all these benefits and synergies to them. So.
The first two have been very successful we're very excited about this third one menu there.
And yes, so we hope to.
<unk> current profile is like I say similar to premium food distribution, but if it goes the way the last two half.
The margins are much higher than the average for the premium food distribution group once we're done.
Okay. Okay. That's good.
And then maybe just maybe just finally.
Thinking about Q4.
And just sort of going through the puts and takes in your guidance.
It will be fair to assume that.
Directionally Q4 would probably look a lot like Q3.
Our Q, yes, Q4, when you look out in terms of from a previous discussions last quarter.
Especially foods like should.
A lot of the challenges there have gone away in the Sandwich group the capacity challenges will continue into Q4, just because the new <unk> facility and the new King's command protein facility cooked protein facility.
We had expected Kinks command to come online in Q3 and hemp layers early in Q4. Both of those are now going to be late Q4. So we are a bit toned down from where we were last quarter on our specialty foods sales because of that.
In terms of the and then in terms of premium specialty our premium food distribution group, we already talked about that.
Right, Okay, great. Thanks, a lot appreciate it thanks a lot.
Thanks, Steve Thanks, Steve.
Your next question comes from John <unk> from CIBC. Your line is now open.
Joining Georgia mill.
Hey, Jordan.
Good morning, I wanted to follow up on an earlier question.
George specifically you referenced the milestone and in Asia.
Just to be clear that that is outside of Clearwater I assume and if it is can you say, what what platform that's under or what some of those leading skus are in.
Or how you think about the materiality of that market or the potential materiality of that market for driving volumes in the next few years.
Yeah. So.
<unk>.
A number of.
Presentations and innovation sessions with.
With customers in that market John.
It's across our different platforms for example, I believe our team from <unk>.
<unk> bakery, sorry in Japan.
This week, presenting a number of products to potential customers as they.
Conversation and new Skus are completely outside of the the Clearwater.
<unk>. So these are kind of new opportunities for <unk>.
Our sandwich group.
Our bakery group and our protein group I think if you go to Japan today, you will find a number of our products already on the shelf and so I've said this is an opportunity I think at this point internally. We are looking at it is it probably $100 million opportunity in.
In the shorter term, we think there's more opportunity than that given obviously capacity availability.
Okay. That's good color. Thank you for that.
And I wanted to follow up on the.
The <unk> at the large <unk> sandwich customer can you say was that a regional contract and if so could it become national.
Is to become National do you need to finish the Tennessee facility in order to address that or it could be Edmonton facility help address it.
No.
It's definitely national opportunity John This is a national program with this particular customer.
And we have brought on.
New capacity in our Sandwich group over the over the last couple of years, including of course, our Edmonton and and.
<unk>.
In our.
Minnesota.
Operations as well, so so again definitely a national customer an international relationship.
And the opportunity there John is.
Growing the Skus right expanding the program like George said, we've got a new one.
Third SKU coming out shortly.
And hopefully we can continue to expand into both the breakfast and lunch programs.
We think that potentially and I'm talking more in terms of the longer term.
John is a particularly as Tennessee come on stream it could be the size of our biggest customer.
It's a very large opportunity overall.
Got it okay. That's helpful.
And then shifting gears I wanted to ask about your future.
Growth capital projects in the prepared remarks, we will I think you'd said it was around $275 million.
<unk> capex that you've identified over the next seven to eight quarters. So if we annualize that it's about $140 million a year I'm sure.
To reconcile that with the five year guide earlier this year of $800 million in project Capex I think that was over a five year pardon me over a four year span.
So I'm just trying to get a sense of what the right number is over over the terms of your five year guidance.
Yes, so that five year guidance was includes 2020 for our series 2023, and this year, we're probably going to as of the end of the third quarter, we were at $234 million for the year.
And we'll probably spend another $100 million so.
In the fourth quarter, just as we finish these projects and then the balance is the other projects over two years and then some smaller projects that are yet approve that then curious over to get to that that $800 million by year five.
Got it Okay, and then just one more.
You referenced in the.
The press release about some consumers shifting away from conventional grocers towards discount and that having a small impact in your premium seafood and beef sales.
You have a significant amount of volume through grocery I Wonder if you could take a shot at quantifying what the split is between what you would consider discount in conventional.
Okay.
Yes, and we got to be clear here, when we talked at premium seafood and beef.
Products those are products through our distribution networks I E into our premium food distribution group Theyre not the branded initiatives in specialty foods and so they tend to be more price since the premium beef products premium seafood products generally sold in premium banners.
And.
So there is some exposure there.
The reality is it's.
It was an impact on the quarter, John but it wasn't a huge impact.
And we don't it's just one of those things that slowing its growth not putting it into contraction.
And really the issue in the quarter was what happened in the lobster business.
Got it okay. Thank you very much I'll leave it there.
Thank you Chuck.
Your next question comes from Chris Lee from <unk>. Your line is now open.
Hi, good morning, or good afternoon, Georgia mill.
Chris maybe.
I wanted to maybe start with a near term question just in the specialty foods segment, just maybe want to get a bit more granular. So based on everything you've said so far for Q4 for specialty foods.
Mid single digit organic volume growth rate would be.
Annabelle to Pennsylvania.
So for Q4.
Yeah again.
That's that.
Probably in the ballpark Chris the reality is we were expecting close to double digits in the quarter, but like I say the delays in the.
The capacity expansion.
Has really sort of taken that down a bit so thats probably not unfair.
Okay, and maybe a similar question again was.
With respect to EBIT EBITDA margin, you did quite well, 11% in Q3.
So 11% reasonable for Q4.
What do you think there's a natural cycle in our businesses with the seasonality. So I think you've got when you're looking at the quarter you need to take that into account there should continue to be year over year improvement, but then you've got to look at that in the context of the seasonality of the business.
Okay understood.
And then just maybe a question on inflation I think inflation was largely flat in both.
<unk> and PSD and it looks like we could get into a deflationary period next year and I know you wanted to wins from Q4 before talking about 2024 outlook, but just wondering how should we think about.
I guess the impact on EBITDA next year, if we do get into a deflationary period for your business.
Should we think about in terms of.
Offsetting the lower cost and therefore, the impact on EBITDA should be still be okay.
Get into yes no.
Generally a deflationary period as positive to our EBITDA Chris.
Again similar to how we.
Lack of lagged behind in price increases as in an inflationary environment you see the opposite in a deflationary environment or sorry, the same thing in a deflationary environment with price decreases leg.
But having said that we do have in our more differentiated higher margin categories.
We do generally have a <unk>.
<unk> from these inflationary periods with permanently higher margins now and then the other comment I would make too is quite often what our businesses. We will do is instead of passing on price decreases.
Do a lot more featuring and promotion and so yes. So so now they're featuring in promoting our more historic like margin.
But theyre getting incremental volume out of that so it tends to get drive EBITDA.
So generally deflationary cycles are very positive on our specialty foods businesses.
As to your view that you will get some volume stimulation.
Okay.
Okay. Okay. That's helpful. Maybe just a very long term question I know no. One has a crystal ball on this but obviously a lot of media reports about weight loss drugs and the impact that could have won just a fluid business overall.
Just wondering if you'd be kind of $2 billion in terms of what you think about that impact on your business longer term.
Again, Chris.
Over the years, we've been asked a lot of questions around these type of developments.
I remember, having conversations with investors about plant based meats as you know.
Before that it was about.
Note, how cannabis consumption in all of the.
Promotion around cannabis with impact food consumption.
<unk>.
Before that it was.
Sure.
Sure.
Margarine versus butter, there always seems to be these new ideas that.
Come out in general terms.
Our premium brands one of the models, we use internally that drives a lot of our.
Our innovation is is that the future of food is in the past.
Our basic belief or seeing the fact that.
At some point.
The consumption of ultra processed foods will probably be made illegal because it's so unhealthy for you and people will.
We will begin to return to two eating.
Foods with.
High quality.
Less ingredient less process.
Et cetera et cetera, now in regards to these drugs who knows at this point.
From our perspective, we support any development that will make people healthier.
I don't know enough about the side effects or how these drugs work, but I know that theyre expensive and and I also know that from my perspective based on my own experience I mean.
Im generally a high.
Saturated fat high protein low carb.
Consumer and benefited tremendously from from this type of diet.
<unk> is in great shape.
I think that people ultimately.
We'll make the right decisions with regards to the dice. They followed to get healthier, we think that it keto type of diet, which is kind of drives a lot of what premium brands that is probably a lot cheaper a way to get to good health right. So.
People go for these type of drugs that are more expensive and may be half.
Significant side effects or will they go the natural way adopt a keto diet, which is by the way used by doctors around the world today to get people to lose weight.
And even reverse diabetes, so anyway from my perspective, what would you guys choose would you choose.
A natural way or or <unk>.
These type of drugs right. So anyway, that's my response.
Thanks for thanks for your thoughts George and then maybe my last question is just in terms of your balance sheet other than we.
Working capital improvement and EBITDA growth other things, we're looking at outside.
Outside of that to further reduce that ratio or do you think you're there.
Is in place.
Thank you.
We have a number of initiatives underway at this point, Chris but nothing we can discuss with on this call at this time.
Thanks, guys and all the other.
Best.
Thank you Chris.
Your next question comes from there.
Peter Cohen your line is now open.
Yes, just one follow up for me I was curious if you had it.
What your normalized.
Specialty food margin would've been excluding some of those challenges came in at 11%.
How much higher it could have been.
It's a great question Derrick Yeah, we did a detailed analysis of that and the reality is once you normalize for the sandwich.
Challenges, we talked about.
And the little bit of capacity, we had expected to sell from King's command in the quarter.
We would have come out at about seven 6% organic volume growth, which is right in our expected range for the quarter.
And about a 10, 2% or 11, 2%.
EBITDA margin.
Okay. Thanks for that.
Okay.
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Thank you Lester and thank you everybody for attending today, all the best Bye Bye.
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