Q1 2025 Premium Brands Holdings Corp Earnings Call - Q&A
Operator: Good afternoon, ladies and gentlemen, and welcome to the Premium Brands Holdings Corporation first quarter 2025 earnings conference call 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 option.
Good afternoon, ladies and gentlemen, and welcome to the premium brands Holdings Corporation first quarter 2025 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.
Operator: This call is being recorded on Wednesday, May 7th, 2021.
This call is being recorded on Wednesday may 7th 2025.
Operator: Our speakers will be George Paleologou, CEO and President of Premium Brands, and Will Kalutycz, CFO of Premium Brands.
Speaker Change: Our speakers will be George Kelly logo.
Speaker Change: Oh and precedent of premium brands and will <unk> CFO of premium brands.
Operator: I would now like to turn the conference over to George Paleologou. Please go ahead. Thank you, Alan.
Speaker Change: I would now like to turn the conference over to George Kelly logo. Please go ahead.
George Kelly: Thank you Alan Good morning, and welcome everyone to our 2025 first quarter conference call.
George Paleologou: Good morning and welcome everyone to our 2025 first quarter conference call. With me here today is our CFO, Will Kalutycz. Hopefully, you've had a chance to listen to a prerecorded call posted on our website this morning.
Speaker Change: With me here today is our CFO will collude itch.
Speaker Change: Awfully, you've had a chance to listen to a prerecorded call posted on our website. This morning.
Operator: We will now take your questions. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 1 and your touch tone. You will hear a prompt that your hand has been raised.
Speaker Change: We will now take your questions.
Speaker Change: Yeah.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Should you have a question. Please press star one on your Touchtone phone.
Speaker Change: You'll hear a prompt that your hand, that's been raised.
Operator: Should you wish to decline from the polling process, please press fart. If you are using a speakerphone, please lift the handset before pressing any button. One moment, please, for your first question. Your first question comes from Martin Landry of Stifel. Your line is already open.
Speaker Change: Should you wish to decline from the polling process. Please press star two.
Speaker Change: If you are using a speaker phone please lift the handset before pressing any keys one moment. Please for your first question.
Speaker Change: Okay.
Speaker Change: Your first question comes from Martin <unk>.
Speaker Change: Laundry of Stifel.
Speaker Change: Your line is already open.
Speaker Change: Yeah.
Martin Landry: Hi. Good morning, George and Will. Good morning, Martin.
Speaker Change: Hi, good morning, George and well.
Speaker Change: Good morning, Mark.
Martin Landry: My first question pertains to the U.S. It's more of a macro question. I'm wondering what you're seeing in terms of end consumer demand in the U.S. There's sign of decreasing consumer confidence. We've seen some QSR reporting slower traffic. I was wondering if you're seeing at Borac Retail and with some of your clients, any sign of weakness more recently?
Speaker Change: My first question is it pertains to the U S.
Speaker Change: It's a more of a macro question.
Speaker Change: I'm wondering.
Speaker Change: What you're seeing in terms of end consumer demand in the U S. There is fine.
Speaker Change: Decreasing consumer confidence we've seen some <unk> are reporting a slower traffic.
Speaker Change: I was wondering if if you're seeing at retail and what are what some of your clients are any sign of weakness.
Speaker Change: More recently.
Speaker Change:
George Paleologou: Again, Martin, I think it's important to look at the food space in terms of categories, right? Because when you look at the entire food space, there's a lot going on there. You know, definitely demand for protein is up. I've looked at some statistics recently and, you know, demand for protein is very strong for the reasons that we've discussed in the past. You know, it's a major, major macro trend as consumers are maybe consuming less carbohydrates and are consuming more protein. So that's still continuing and obviously we're benefiting from that. And then, you know, in terms of consumers overall in North America, there's no question that consumers are looking for more value.
Speaker Change: Again.
Speaker Change: Martin I think it's important to look at the food space.
Speaker Change: In terms of categories right because when you look at the entire food space, There's a lot going on there.
Speaker Change: You know definitely a demand for protein is up.
Speaker Change: I've looked at some statistics recently and <unk>.
Speaker Change: Demand for protein is very strong for.
Speaker Change: The reasons that we've discussed in.
Speaker Change: In the past you know, it's a major major macro trend.
Speaker Change: As consumers are or may be consuming less carbohydrates, and and and and are consuming more protein.
Speaker Change: So that's still continuing in and obviously, we're benefiting from that.
Speaker Change: And then you know in terms of our consumers.
Speaker Change: Consumers overall in North America, and there's no question that consumers are looking for more value.
George Paleologou: They're still eating the same products, but they're changing the channel that they buy from. So in some cases, they'll switch from retail to club, you know, and anyway, so these are trends that we've been observing in Canada for a while. You're seeing a little bit of that in the U.S., not entirely in the U.S., you know, state by state. I'd say it differs, but anyway, I hope I kind of covered your question.
Speaker Change: They're still eating the same products, but theyre changing.
Speaker Change: The channel that they they buy from so in some cases those switch from retail to clap.
Speaker Change: You know and and anyway. So these are trends that we've been observing in Canada for a while you are seeing a little bit of that in the U S.
Speaker Change: Not entirely in the U S.
Speaker Change: State by state I would say that the first spread but anyway I hope I covered your question.
Martin Landry: Okay, so overall, not much weakness to report so far at your end customers.
Speaker Change: Okay. So so overall not much weakness to report so far.
Speaker Change: In at your at your.
At your end customers.
George Paleologou: The only thing I would qualify that on, Martin, is we have seen a little weakness in the C-store channel. Now, it's not a big component of our business in the U.S. at this point, it is an area we're looking to grow, but it is the one area we have seen some softness. Again, we need to be careful, Martin, with generalizations, right? Because different categories are performing differently based on the macro trends, right? The reason we've had a good quarter and reported a good quarter is because we're focusing in the categories that are in demand, right?
Speaker Change: Yes, the only thing I would qualify that on Martinez, we have seen a little weakness in the C store channel now, it's not a big component of our business in the U S. At this point it is an area we're looking to grow.
Speaker Change: It is the one area, we have seen some softness consistent with the industry statistics.
Speaker Change: Yeah.
Speaker Change: Sure.
Speaker Change: Yeah, we we need to be careful Martin with generalizations.
Speaker Change: Because different categories are performing differently based on the macro trends.
Speaker Change: The reason, we've had a good quarter and reported a good quarter is because we're focusing into categories.
Speaker Change: They are in demand.
George Paleologou: So it's important to understand that.
Speaker Change: Right. So that it is important to understand that.
Speaker Change: Yeah.
Martin Landry: Okay, and then just a second question. Will, you reiterated your annual guidance. It calls for a revenue growth of 11 to 14 percent this year. I was wondering if you could provide some colour on the cadence you expect in terms of revenue growth throughout the remainder of the year. Yeah, so it is definitely weighted heavily to the back half, Martin. We've got a lot of new initiatives coming on. It's interesting, a couple of quarters ago we shared a pipeline of... In the first quarter, we realized about $132 million of that pipeline, with a lot of that sort of coming on over the course of Q2.
Speaker Change: Okay.
Speaker Change: And then just a second.
Speaker Change: It's a good question.
Speaker Change: Well you reiterated your annual guidance it calls for a revenue growth of 11% to 14% this year.
Speaker Change: I was wondering if you could provide some color on the cadence you expect in terms of revenue growth throughout the remainder of the year.
Speaker Change: Yes, so it is definitely weighted heavily to the back half Martin.
Speaker Change: We've got a lot of new initiatives coming on it's interesting a couple of quarters ago, we shared our pipeline of opportunities in the first quarter, we realized about $132 million of that pipeline with a lot of that sort of coming on over the course of Q2.
William Kalutycz: So yeah, so you should still see some growth in Q2, but really the much stronger growth being in Q3, Q4. Which again, Martin, will also be driven by capacity coming on board as well throughout our ecosystem.
Speaker Change: So yes, you should still see some growth in Q2.
Speaker Change: But really the much stronger growth being increased Q3, Q4, which again Martin will also be driven by capacity coming on board as well.
Speaker Change: Throughout the ecosystem.
Martin Landry: Okay, understood. Thank you and best of luck. Thank you, Martin.
Speaker Change: Okay understood. Thank you and best of luck.
Speaker Change: Thank you Martin.
Speaker Change: Yes.
Derek Lessard: Your next question comes from Derek Lessard of TD Cowan. Your line is already open. Yeah, good morning, George and Will.
Speaker Change: Your next question comes from Derek Lessard of TD Cowen Your line is already open.
Derek Lessard: Yes, good morning, GA in the world and glad to see you guys coming in with some good momentum into the year.
Derek Lessard: I'm glad to see you guys coming in with some good momentum into Thank you, Derek. Thanks.
Speaker Change: Thank you Derek.
William Kalutycz: I just want to maybe take Martin's question one step further and talk about your five-year target. It's going to take some healthy compounded annual growth to get there, so I'm just wondering, I guess, how you guys are thinking about the drivers of that growth, particularly as we kind of look at longer term, and how you're thinking about the cadence of that. Yes, so it really is, it goes back to George's previous comment around capacity. So first you've got to build the capacity before you can start pursuing the opportunities. The opportunities have been there for a while now and we called that out earlier.
Speaker Change: I just want to maybe take a margins question one step further and talk about your five year target.
Speaker Change: It's all it's you know it's going to take some healthy compounded annual growth to get there. So just wondering I guess, how you guys are thinking about the drivers of that growth, particularly as we kind of look out longer term and how youre thinking about that.
Speaker Change: Cadence of that.
Speaker Change: Yeah. So it really is it goes back to George's previous comment around capacity. So first you got to build the capacity before you can start pursuing the opportunities the opportunities have been there for a while now and we called that out earlier.
Speaker Change: Earlier, I think our pipeline at that point was about $1 2 billion of sales opportunities, we are pursuing and has since grown.
William Kalutycz: I think our pipeline at that point was about 1.2 billion of sales opportunities we were pursuing and it's since grown. So it's really the capacity is now in place, we are now sort of working with our customers on launches and specifics around product design and so you really should see that pick up over the course of 25 and then continue to accelerate 26. Once we finish Tennessee, the Tennessee facility which is actually now in commercial production and then when our GTA facility comes on in 2026, from starting from the 2024 sales of about $6.5 billion, that gives us about $1.7 billion of capacity from these new projects, incremental to any other capacity that was in the system.
Speaker Change: So it's really the capacity is now in place we are now sort of.
Speaker Change: Working with our customers on launches and specifics of around.
Speaker Change: Our product design.
Speaker Change: And so you really should see that pick up over the course of 'twenty five and then continue to accelerate in 'twenty six.
Speaker Change: Once we finish Tennessee, Tennessee.
Speaker Change: Tennessee facility, which is actually now in commercial production.
Speaker Change: And then when we are GTA facility comes on in 2026 from starting from the 2024 sales of about $6 5 billion that gives us about $1 7 billion of capacity from these new projects.
Speaker Change: Incremental to any other capacity it was in the system.
George Paleologou: So it's really now leveraging that capacity, accelerating our growth. So you're going to see some good, strong growth in the back half of this year, continue to accelerate 26 and then 27 sort of come down a bit, but our internal organic target of that $10 billion in sales is roughly 9.2 to 9.5 and then we expect some acquisitions to figure it out. So we are nicely on track for that. And Derek, the only thing I would add to that is that, as Will said, obviously we're doing a lot of good things in the U.S. market.
Speaker Change: So its really now leveraging that capacity accelerating our growth so you're going to see some good strong growth in the back half of this year continued to accelerate in 'twenty, six and then 27 sort of come down a bit but.
Speaker Change: Our internal organic target of that $10 billion in sales is roughly nine two to $9 five and then we expect some acquisitions to figure it out. So we are nicely on track for that.
Speaker Change: And Eric the only thing I would add to that is that.
Speaker Change: As will said, obviously, we're getting a lot of good things in the U S market, we still seeing that.
George Paleologou: We still think that we're in the early innings in terms of our – although that business has grown a lot for us and historically, the only reason we haven't grown more is access to capacity. And a good example of that is what happened this quarter with our specialty bakery group, right? And basically we've invested in two plants, one in Canada and one in the U.S. Both of them really focused on the U.S. market and they're getting a lot of traction now because they have capacity.
Speaker Change: We're in the early innings in terms of our although that business has grown a lot for us.
Speaker Change: And historically the only reason we haven't grown more is access to capacity and a good example of that is what happened this quarter with our special specialty bakery group base.
Speaker Change: Basically we've invested in two plants one in Canada.
Speaker Change: And one in the U S. Both of them really focused on the U S market and Theyre getting a lot of traction now because they have capacity.
Derek Lessard: Very helpful, and that's great color on that.
Speaker Change: Very helpful.
Speaker Change: That's great color on that just so maybe just two housekeeping.
Derek Lessard: So maybe just two housekeeping questions for me before I recue. Well, more on the corporate cost. It's fluctuated between, I guess, around $4 to $10 million in recent quarters. Just wondering what's the best way to think about the corporate cost, and then maybe on the investment income, it jumped a little bit to $15 million this quarter. Just wondering what the run rate should be. Yeah, so, you know, our corporate costs fluctuate, you know, generally Q4 is a, when we adjust a lot of our bonus accruals, so, you know, given that, you know, last year didn't quite meet our expectations, you saw a larger adjustment in Q4, which brought it down, you know, generally our corporate run rate should be around 10 to, you know, 10, 10 and a half million dollars in a normal situation.
Speaker Change: Questions for me before I re queue.
Speaker Change: More on the corporate cost, it's fluctuated between I guess around $4 billion to $10 billion in recent quarters, just whether what's the best way to think about the corporate cost and then maybe on the investment income it jumped a little bit to 15 million Bucks.
Speaker Change: This quarter, just wondering what the run rate should be.
Speaker Change: Yes.
Speaker Change: Our corporate costs fluctuate generally Q4 is a when we adjust a lot of our bonus accruals. So given that last year didn't quite meet our expectations you saw a larger adjustment in Q4, which brought it down generally our corporate run rate should be around 10.
Speaker Change: 10, 10 $5 million in a normal situation.
William Kalutycz: In terms of the bump in the interest on the interest income, that really came up, you know, we referred to an advance to Clearwater. We did do a temporary advance to them early in the quarter and that drove our interest costs up a little higher.
Speaker Change: In terms of the bump in the interest on.
Speaker Change: The interest income that really came we referred to in advance to Clearwater, We did do it a temporary advance to them.
Speaker Change: Early in the quarter and that drove our interest cost up a little higher.
Speaker Change: Okay. Thank you.
Derek Lessard: Okay, thank you.
Derek Lessard: Thanks, Derek.
Speaker Change: Thanks Derek.
Speaker Change: Yes.
Kyle McPhee: Your next question comes from Kyle McPhee of CORE Marks. Your line is already open. Hi, everyone. Just a little bit more, I guess, just a little bit more on this U.S. organic volume growth that keeps turning on. So we can kind of annualize the U.S. growth that's turned on, get a picture for, you know, what a contribution would look like in 2026 from a full year of all this new stuff. Can you maybe give us a picture for what that annualized run rate of all this new U.S. growth turning on might look like exiting this year?
Speaker Change: Your next question.
Speaker Change: It comes from Kyle Mcphee of core Mark Securities. Your line is already open.
Speaker Change: Hi, everyone.
Speaker Change: Just a little bit more.
Speaker Change: Guys, just a little bit more on the U.
Speaker Change: U S organic volume growth that keeps turning on so we can kind of annualize the.
Speaker Change: U S growth that's turned on and get a picture for what a contribution would look like in 2026 from a full year of all this new stuff can can you maybe give us a picture for what that annualized run rate of all of this new U S growth might look like exiting this year, presumably it's a much bigger number than we're at now.
Kyle McPhee: You know, presumably it's a much bigger number than we're at now.
William Kalutycz: Yeah, we haven't given guidance on 2026 at this point, Kyle.
Speaker Change: We haven't given guidance on 2026 at this point call. So I'm going to hold off speaking to the specifics around that.
William Kalutycz: So I'm going to hold off, you know, speaking to the specifics around that. Okay, well, is it fair to say, like, in that old pipeline slide, you gave $700 million of highly likely revenue turning on. That's still very highly likely to turn on this year? Sorry, say that again, Kyle? You had that pipeline side of U.S. organic volume growth programs turning on. It was $700 million turning on this year, highly likely. So will that all be on by the end of this year? That should all be on by the end of this year.
Speaker Change: Okay.
Speaker Change: Fair to say that old pipeline side, you gave $700 million of highly likely revenue turn it on.
Speaker Change: That's still very highly likely to turn on this year.
Speaker Change: Sorry, say that again costs you.
Speaker Change: You had the pipeline side of U S organic volume growth programs turn it on it was $700 million turn it on this year from highly likely so what at all beyond by the end of this year that should all be gone by the end of this year yes.
William Kalutycz: Yeah. Your Tennessee sandwich plant sounds like it's all tracking as expected, will be ramping up later this year.
Speaker Change: Got it okay.
Speaker Change: And your.
Youre, Tennessee Sandwich plant it sounds like it's all tracking as expected we'll be ramping up later this year can.
William Kalutycz: Can you give us any comments on utilization targets for all that new capacity by the end of this year, end of next year? How visible is that for you? When we build the IRRs on these projects, we generally use a 5-year period for the filling of the capacity, but we expect to be a lot quicker than that for this first phase. First phase is about $280 million in sales capacity. And based on the pipeline of opportunities we're looking at, you know, that could be filled next year. Okay, that's helpful.
Speaker Change: Can you give us any comments on utilization targets for all that new capacity by the end of this year end of next year, how visible is that for you.
Speaker Change: Yes, when we felt the irr's on these projects, we generally use a five year period for the filling of the capacity, but we expect to be a lot quicker than that for this first phase first phases about $280 million in sales capacity.
Speaker Change: And based on the pipeline of opportunities we're looking at.
Speaker Change: That could be felt next year.
Speaker Change: Okay.
Speaker Change: Got it okay. That's helpful.
Kyle McPhee: And then last one from me. In recent quarters, you've been carving out the impact of a major food service channel sandwich client. It's been a pocket of drag, a partial offset to otherwise very impressive U.S. organic volume growth.
Speaker Change: And then last one for me.
Speaker Change: Now in recent quarters <unk> been carving out the impact of the major foodservice channel Sandwich client, it's been a pocket of drag.
Speaker Change: A partial offset the otherwise very impressive U S. Organic volume growth can you give us any color on the impact of this client in your year over year trend for the sandwich platform like what was their impact in your U S sandwich organic volume growth of 8% that you posted this quarter.
William Kalutycz: Can you give us any color on the impact of this client in your year-over-year trend for the sandwich platform? Like, what was their impact in your U.S. sandwich organic volume growth of 8% that you posted? Yeah, we had a pretty solid quarter with them. I would comment, though, it was a little off-trend. We had a couple of new product launches that sort of channel fill and those sorts of elements created some additional sales, but the reality is their business is improving and we're sort of seeing our core SKUs improving, but Q1 was a bit off-trend, a bit above-trend.
Speaker Change: Yes.
Speaker Change: We had a pretty solid quarter with them.
Speaker Change: I would comment though it was a little off trend we had a couple of new product launches that sort of channel fill in those sorts of developments.
Created some additional sales.
Speaker Change: The reality is their business is improving and we're sort of seeing our core skus improving.
Speaker Change: But Q1 was a bit off trend a bit above trend.
William Kalutycz: I wouldn't expect to see that strong. Okay, so there's still drag with those clients, but probably diminishing drag. I wouldn't call it a drag, Kyle. I would say stable. Stable to growing. Yeah, stable to growing based on the innovation we have in the pipeline.
Speaker Change: We expect to see that strong for Q2.
Okay. So there is still a drag with those clients.
Speaker Change: But probably diminishing drag.
Speaker Change: Yes.
Speaker Change: I wouldn't call it as a drag.
Speaker Change: I would say stable I would say stable gradually growing.
Speaker Change: Stable to growing based on there the.
Speaker Change: The innovation that we have in the pipeline.
Kyle McPhee: Okay, I'll pass the line. Thanks for the comments.
Scott: Got it Okay I'll pass along thanks for your comments thanks Scott.
Stephen Macleod: Your next question comes from Stephen MacLeod of BMO Capital Markets. Your line is already open. Great. Thank you, guys. Good morning. Good afternoon from the East Coast. Hi. So, lots of great color. And actually, a couple of my questions have already been answered, but I just wanted to confirm one thing with respect to the pipeline of sales growth. When you talk about that $700 million, highly likely, is that still on a pipeline of $1.4 billion? Or did I hear correctly that you said that that's actually expanded from where it was before? No, as I mentioned earlier, about 130 of that 700 is now realized and in play, but most of that incremental stuff is in the likely or 2026 bucket.
Speaker Change: Your next question.
Speaker Change: It comes from Stephen Macleod of BMO capital markets.
Stephen Macleod: Your line is already open great. Thank you guys. Good morning, Good afternoon for me from the East Coast.
Speaker Change: Hi, Good evening Hi.
Speaker Change: Just so lots of great color on actually a couple of my questions have already been answered, but I just wanted to confirm one thing with respect to the pipeline of sales growth. When you talk about that $700 million highly likely is that still on a pipeline of $1 4 billion or did I hear correctly that.
Speaker Change: You said that that's actually expanded from where it was before.
Speaker Change: No the highly likely.
Speaker Change: I mentioned earlier about 130 of that 700 is now realized and in play.
Speaker Change: But most of that incremental status and the likely our 2026 buckets.
William Kalutycz: Okay, and but how would we think about like the total by The pipeline, Stephen, continues to expand all the time because we're working on a lot of projects with a lot of larger customers, right? I've made comments before that, you know, the business will become lumpy as we get bigger and bigger in the U.S. because, again, we're working on a lot of major projects with very large customers. Yeah. Okay.
Speaker Change: Okay.
Speaker Change: But how would we think about like the total pipeline.
Speaker Change: The pipeline is Steven continues to expand all the time, because we're working on a lot of projects with a lot of larger customers right I've made comments before that the.
Speaker Change: The business will become lumpy as we get bigger and bigger in the U S. Because again, we are working on a lot of major projects with very large customers.
Speaker Change: Yeah, Okay. Okay. That's that's great.
William Kalutycz: That's, that's great.
William Kalutycz: And then maybe just turning to the PFD segment, you know, lobster continues to be a drag. You cited kind of higher prices and obviously the tariff or the trade war impact of lower exports to China. Is it fair to assume that most of that drag is from the lower exports? Actually, it's the reverse. Most of it is from the higher price environment. You know, we're finding that demand at certain price levels, both in the food service and retail channel, gets impacted quite dramatically.
Speaker Change: And then maybe just turning to the PFD segment.
Speaker Change: Lobster continues to be a drag you cited kind of higher prices.
Speaker Change: Obviously, the tariff or the trade war impact of lower exports to China is it fair to assume that most of that drag is from the lower exports.
Speaker Change: Actually it's a reverse most of it is from the higher price environment, we are finding that.
Speaker Change: Demand at certain price levels, both in the foodservice or retail channel gets impacted.
Speaker Change: Quite dramatically.
William Kalutycz: But we're cautiously optimistic in that the new fisheries are starting. We're expecting reasonably strong fisheries and that should help address that and reverse that trend through the course of the year. Okay, that's helpful. Okay, thanks. Thanks for the call, guys. Thanks so much.
Speaker Change: But we're cautiously optimistic in that the new fisheries is starting we're expecting and recently strong fisheries and that should help address that and reverse that trend through the course of Q2.
Speaker Change: Okay. Okay. That's that's helpful. Okay. Thanks, Thanks for the color guys. Thanks, so much thanks Steven.
Ty Collin: And don't forget to subscribe to our YouTube channel. Thank you. Your next question comes from Ty Collin of CIP. Your line is already open. Hey, good morning, George and Will. Thanks for taking my question. So, it seems like some of your M&A conversations based on your slide deck have moved from the active category to early stage since last quarter. Can you maybe just provide some more context behind that? Like, was that a deliberate decision given where leverage is at, or is that something to do with the market and the opportunities that are out there?
Speaker Change: Okay.
Speaker Change: Your next question comes from Thai Colin CIBC.
Speaker Change: Your line is already open.
Colin: Hey, good morning, George and well thanks for taking my question. So.
Colin: Hey, good morning, so it seems like some of your M&A conversations based on your slide deck have moved from the active category to early stage since last quarter can you maybe just provide some more context behind that like was that a deliberate decision given where leverage is that or is that something to do with.
Colin: The market and the opportunities that are out there.
George Paleologou: I think what we've said earlier, Ty, is that you shouldn't pay a lot of attention to that. You should pay attention to the three categories to the left of the page, because a lot of times, again, this is a relatively small industry, and if we report something advanced, then people kind of speculate as to who it is. We're in a lot of robust discussions with regards to our M&A pipeline, as we've indicated in December of last year, and in January, when we want to move on them, we were able to do that, and obviously, we had urgency to move on them, given the tariff situation and us wanting to manage that situation and potentially minimize the impact of any potential tariffs, right?
Speaker Change: I think what we have said earlier is that you shouldn't pay a lot of attention to that you should pay attention to the three categories stood up to the left of the page because a lot of times again. This is a relatively small industry and if we report something advanced.
Speaker Change: Then people kind of speculate speculate as to who it is.
Speaker Change: We're in a lot of robust discussions with regards to our M&A pipeline as we've indicated in in December of last year and in January when we wanted to move on them. We were able to do that then obviously, we had urgency to move on them.
Speaker Change: Given the tariff situation and us wanting to manage that situation and potentially minimize the impact of any potential terrorists right right. So again the bottom line is that when a lot of very very good discussions with regards to M&A.
George Paleologou: So, again, the bottom line is that we're in a lot of very, very good discussions with regards to M&A.
Ty Collin: Okay, got it. Thanks. That's helpful.
Speaker Change: Okay got it. Thanks, that's helpful. And then I just wanted to circle back to clear water and the advance that you made to them can you maybe just provide a little more color around that dynamic in that decision.
William Kalutycz: And then I just wanted to circle back to Clearwater and the advance that you made to them. Can you maybe just provide a little more color around that dynamic and that decision, why you felt that was necessary? And is this kind of a one-time thing or does that business potentially need more funding going forward? Yeah, so Clearwater is, you know, their core Canadian operations, which is, you know, the heart of the business, their most profitable part of their business. They're at the low point in the number of their species of sort of natural commodity cycles, natural cash cycles.
Speaker Change: Why why you felt that was necessary and is this kind of a onetime thing or does that business potentially need more funding going forward.
Yes, So clearwater is their core Canadian operations, which is the heart of the business. The most profitable part of their business. They are at the low point and then in a number of other species sort of natural commodity cycles natural cap cycles.
William Kalutycz: And so, it's been an unusual low in that normally these sort of are offset different species at different times, but it was kind of a worst case scenario where almost all the species were hit at once. So that hit their cash flows pretty hard, hit their, you know, and their available credit is a function of their cash flows, so their availability of credit is impacted by that as well. So this is a temporary advance. We're cautiously optimistic we're not only going to get this back this year, but they'll actually resume interest payments. There's a lot of positives happening in the Clearwater business.
Speaker Change: And so it's been an unusual low in that normally these sort of are offset different species at different times, but it was kind of a worst case scenario, where almost all of the species were hit at once.
Speaker Change: So that that hit their cash flows pretty hard hit there.
Speaker Change: They're available credit is a function of their cash flow. So their availability of credit is impacted by that as well. So this is a temporary advance.
Speaker Change: We're cautiously optimistic we're not only going to get this back this year, but the luxury we assume interest payments, there's a lot of positives happening in the clear water business.
William Kalutycz: We are starting to see catches come back. We've seen some really optimistic signs in the second quarter, and so we're cautiously optimistic about the back half of the year. Also, the management team at Clearwater has done an incredible job identifying some underperforming assets and are looking at some strategic alternatives around those, so lots of good things happening in the business.
Speaker Change: Are starting to see cashes come back.
Speaker Change: Seen some really optimistic signs in the second quarter and so we're cautiously optimistic about the back half of the year.
Speaker Change: Also the management team at Clearwater has done an incredible job identifying some underperforming assets and are looking at some strategic alternatives around those so lots of good things happening in the business. We are to a temporary lull, but we truly do see that as temporary.
William Kalutycz: We are at a temporary low, but we truly do see that as temporary.
Speaker Change: Okay.
William Kalutycz: That's helpful, Cutler. Thanks, Will.
Speaker Change: That's helpful color. Thanks, a lot.
Speaker Change: Yes, no problem.
Speaker Change: Yes.
Michael Glen: Your next question comes from Michael Glen of Raymond James. Your line is already open. Thanks a lot. Will, I just want to pin you down maybe a little bit on how to think about Q2, because Q1 organic volume growth was quite good, and then you have this back half acceleration, so you indicated that you are launching some programs. Q2, so is Q2 somewhere in between something better than Q1, but not quite as strong as the back half of the year? Is that how we think about OVGR in Q2? Yeah, well, and it's a little tricky too, right, Michael?
Speaker Change: Your next question comes from Michael Glen.
Speaker Change: Raymond James.
Speaker Change: Your line is already open.
Speaker Change: Thanks, a lot.
Speaker Change: Well I just want to pin you down maybe a little bit on how to think about Q2, because Q1 organic volume growth was quite good and then you have this back half acceleration. So you indicated that you are launching some programs.
Speaker Change: In Q2, so Q2 somewhere in between.
Speaker Change: Something better than Q1, but not quite as strong as the back half of the year is that how we think about which here in Q2, yes, well and it's a little tricky to right. Michael because Q1 is a seasonally slow quarter. So when youre looking at percentages things can get a little distorted.
William Kalutycz: Because Q1 is a seasonally slow quarter, so when you're looking at percentages, things can get a little distorted, so you shouldn't expect to see the same percentages necessarily, but you should still continue to see some good, strong growth. The other other comment I would make is the fact that the key QSR customer we're talking about earlier, again, we're not expecting to see the same strong sales growth in Q2 that we saw in Q1, so again, some reasonable good growth for the quarter, but much more heavily weighted to Q3 and Q4 as we go to our guidance for 2025 of that 7.2 to 7.4 billion.
Speaker Change: So you Shouldnt expect to see the same percentages necessarily like you should still continue to see some good strong growth.
Speaker Change: And the other comment I would make is the fact that the Q the key <unk> customer we're talking about earlier.
Speaker Change: Again, we're not expecting to see the same strong sales growth in Q2 that we saw in Q1, So I guess a reasonable good growth for the quarter.
Speaker Change: But much more heavily weighted to Q3 and Q4 as we go to our guidance for 2025 of that seven two to $7 4 billion. The only other thing that I would add is that we do expect to launch some major programs with key customers large program.
William Kalutycz: The only other thing that I would add is that we do expect to launch some major programs with key customers, large programs, and the timing of the launch will play a role in terms of what we show for growth in Q2, anyway, just because these programs are very large. Yeah, okay.
Speaker Change: And.
Speaker Change: The timing of the launch.
Speaker Change: We will play a role in terms of what we show for growth into Q2.
Speaker Change: Anyway, just because these programs are very large.
Yeah, Okay and then.
William Kalutycz: And then during the call from this morning, you did provide a three-step plan to reducing leverage. Just on two of those, the inventory levels, are you able to indicate how much you potentially see coming out of inventory? And then number two, can you remind us of the amounts associated with the sale leaseback that you're pursuing? Yeah, so on the inventory, when we tore apart our inventory increase for the set first quarter, Forty million of it was just sort of very temporary related. We had some businesses taking some major positions in beef just to hedge against inflation and protect pricing with their customers.
Speaker Change: The call from this morning, you you did provide a three step plan too.
Speaker Change:
Speaker Change: Reducing leverage just on two of those the inventory levels are you able to indicate how much you potentially see.
Speaker Change: Coming out of inventory and then number two can you remind us of the amounts associated with the sale leaseback that you are pursuing.
Speaker Change: Yes, so on the inventory.
Speaker Change: When we tore apart.
Speaker Change: Our inventory increased for the first quarter.
Speaker Change: $40 million of it was just sort of very temporary related.
We had some business is taking some major positions in beef.
Speaker Change: To hedge against inflation against.
Speaker Change: Protect pricing with their customers and then we also had a couple of product launches. We're building inventory for us. So we expect that to normalize out in Q2.
William Kalutycz: And then we also had a couple of product launches we were building inventory for. So we expect that to normalize out in Q2. Q2 is the big quarter for a lot of these beef programs with summer months. So, $40 million of it is fairly simple, and then there's probably another $40 million of just work to be done to get our day sales or our day's purchases and inventory back to a more normal level. Okay, and on the sale-leaseback amounts? Oh, and the sale-leaseback, we're preliminarily estimating about $230,000-plus million. Again, the plant is just sort of starting commercial production, it just finished, and so we're now starting the process of the sale-only SPAT transaction process.
Speaker Change: Because.
Speaker Change: Q2 is the big quarter for a lot of lots of <unk> launch of these or are these programs with the summer months coming.
So $40 million of it's fairly simple and then there is probably another $40 million.
Speaker Change: Just work to be done to get our days sales are based purchases and inventory back down to more normal level.
Speaker Change: Okay.
Speaker Change: The sale leaseback of Mt.
Speaker Change: The sale leaseback.
Speaker Change: We are preliminarily estimating about 230 plus million.
Speaker Change: <unk> spot.
Speaker Change: I guess ill start with that.
Speaker Change: The plant is just sort of starting commercial production at just finished and so we're now starting the process of.
Speaker Change: The sale and leaseback transaction process.
William Kalutycz: Okay, so that might be back half of the year as well. No, we're pushing to get it done in this quarter, but it could possibly get pushed.
Speaker Change: Okay, so that might be back half of the year as well.
Speaker Change: We're pushing to get it done in this quarter, but it could possibly get pushed to Q3.
Operator: https://www.premiumbrands.com Okay. Thank you so much. Thanks, Michael.
Speaker Change: Depending on timing, but we are pushing to get it done in Q2.
Speaker Change: Okay.
Speaker Change: So much.
Speaker Change: Thanks, Mike.
Ian Bew: Your next question comes from Ian Bew of Scotiabank. Your line is already open. Hi, thanks for taking my question. Good morning, George and Will. So, my first question is the press release called out no material impact from trade developments and tariffs for Q1. I know it's early, but what have you seen quarter to date in Q2? Again, you know, consistent with Q1, Ian, certainly lots of noise. You know, as I've said earlier, our companies have been trying to plan and game and create capacity, find capacity just in case, but really no changes. You know, thankfully, there hasn't been any major tariff-related disruptions in our Thank you.
Speaker Change: Your next question comes from Ian <unk> of Scotiabank.
Speaker Change: Your line is already open.
Ian: Hi, Thanks for taking my questions good morning Julien.
Ian: Yes. So my first question is the press release called out no material impact from the trade developments in tariffs for Q1.
Speaker Change: I know, it's early but what have you seen quarter to date in Q2.
Ian: Okay.
Ian: Okay.
Ian: Again.
Ian: Consistent with Q1, Ian certainly lots of noise.
Ian: As I've said earlier.
Speaker Change: Companies have.
Speaker Change: Been trying to plan in game and create capacity find capacity just in case, but really no changes.
Speaker Change: Thankfully there hasnt been any.
Speaker Change: Tariff related disruptions in our business.
Speaker Change: Okay. Thank you and do you caught out over 30% growth in the U S bakery in the quarter can you stay approximately what percent of capacity Europe Bakery Division operates at.
William Kalutycz: And you caught out over 30% growth in the U.S. bakery in a quarter. Can you say approximately what percent of capacity your bakery division operates at? We still have a lot of capacity that we've added, particularly in our facility in San Leandro, California. The Canadian bakery, based on the business they've lined up, they're no longer looking for new business. They're doing extremely well, getting excellent traction, great margins, and anyway, probably they're out there looking to acquire more capacity as well. Great, thank you. That's all for me. Thanks. Great. Thank you.
Speaker Change: We still have a lot of capacity that we've added particularly in our facility in.
Speaker Change: San Leandro, California.
Speaker Change: The Canadian bakery.
Based on the business. If they are in line got you know there are no longer looking for new business.
Speaker Change: They're doing extremely well.
Speaker Change: Getting excellent.
Speaker Change: Traction great margins in any way.
Speaker Change: Probably they are out there looking to acquire more capacity as we speak.
Speaker Change: Okay.
Speaker Change: Great. Thank you that's all for me thanks, great. Thank you.
Speaker Change: Yeah.
Anshul: Your next question comes from Vishal Shreedhar of National. Your line is already open. Hi, this is Anshul in for Vishal Shreedhar. We wanted to come back on the discussion on protein in specialty foods. So, PBH previously expected. Stability in beef-jerky demand in 2025 yet the category was reported to be challenged. Should we continue to expect weakness in beef jerky through 2025? Could you give us a sense of how big the category is for PBQP? Yeah, and when we talk about the sensitivity, it's mainly on the U.S. component of our jerky business, and it's being impacted, as we talked about earlier, the C-Store channel softness, and then as well as...
Speaker Change: Your next question comes from Vishal <unk> of National Bank. Your line is already open.
Speaker Change: Hi, this is onshore and for Vishal treat huh.
Speaker Change: We wanted to come back on the discussion on protein.
Speaker Change: Specialty foods.
Speaker Change: So PTH previously expected.
Speaker Change: Yes.
Speaker Change: Stability in beef jerky demand in two and 25.
Speaker Change: The category was reported to be challenged.
Speaker Change: Should we continue to expect weakness in beef jerky through two in 'twenty five and could you give us a sense of how big the category is for PVH.
Speaker Change: Yes, when we talk about the sensitivity is mainly on the U S component of our Cherokee business.
Speaker Change: And it's being impacted as we talked about earlier the C store channel softness and then as well as beef.
William Kalutycz: is at absolute record highs right now, so you put those two together and it is quite challenging. It's about, you know, the impact on the quarter was nominal, it was like, sales are down like two to three million dollars, not very much. The key is it's not a growing category. Overall, the category reps on a quarterly basis is probably about forty to fifty million dollars in sales, so, you know, it's nice but it's not a core part of our growth strategies. Understood. Thank you. Okay.
Is that absolute record highs right now so you put those two together and it is quite challenged and it's about the impact for the quarter was nominal it was like that sales are down like $2 million to $3 million not not very much that the key is it's not a growing category overall category reps on a quarterly basis is probably a Boe.
Speaker Change: 40% to $50 million in sales so.
Speaker Change: It's nice, but it's not a core part of our growth growth strategies.
Speaker Change: Understood. Thank you.
Speaker Change: Okay.
Operator: Ladies and gentlemen, as a reminder, if you have a question, please press star 1.
Speaker Change: Ladies and gentlemen, as a reminder, if you have a question. Please press star one.
Speaker Change: Okay.
Ryland Conrad: Your next question comes from Ryland Conrad of RBC Capital Market. You're live in the morning, guys. Hey, good morning, guys. Thanks for taking my questions. So just to start off, I believe you called out just raw material inflation as being about an 80 basis point headwind to margins in the quarter, and then just some timing lags on mitigating that through price increases. So could you speak a bit to just your expectations around commodity input, cost inflation for the year, and just whether we should see any kind of sequential improvement to that headwind as costs are passed through?
Reiland Conrad: Your next question comes from Reiland Conrad of RBC capital markets.
Reiland Conrad: Your line is good morning, guys.
Speaker Change: Hey, Rob Hey, good morning, guys. Thanks for taking my questions.
Speaker Change: So just to start off I believe you called out just raw material inflation as being about an 80 basis point headwind to margins in the quarter.
Speaker Change: And then just some timing lags on mitigating that through price increases so could you speak a bit to just your expectations around commodity input cost inflation for the year and just whether we should see any kind of sequential improvement to that headwind has costs are a pass through.
William Kalutycz: Yeah, we expect it to continue to be a headwind in Q2. Chicken prices are continuing to rise, beef is continuing to be hit new record highs, but we are expecting some stability in the second half of the year, which by that point then our price increases will start catching up with the commodity and maybe even on the easing of costs. You know, the chicken has really been an avian influenza story, it's really hit the U.S. flocks hard, but you are starting to see some improvement in terms of things come back, so that leads to our expectations around Q3.
Speaker Change: Yes, we expect it to continue to be a headwind in Q2.
Speaker Change: Chicken prices are continuing to rise beef has continued to be hit new record highs.
Speaker Change: But we are expecting some some stability in the second half of the year, which by that point than our price increases will start catching up with the commodity and maybe even on the chicken side see some some ed again, no one knows but the possibility of some easing of costs.
Speaker Change: The chicken has really been.
Speaker Change: Infill avian influenza story it is.
Speaker Change: Really hit the U S blocks hard.
Speaker Change: And but you are starting to starting to see some improvement in terms of things come back. So that's what leads to our expectations around Q3, but so in summary, some continuing headwinds in Q2, but sort of neutral to maybe even slightly positive in Q3 four.
William Kalutycz: So in summary, some continuing headwinds in Q2, but sort of neutral to maybe even slightly positive in Q3-4. Okay, got it. That's helpful.
Speaker Change: Okay.
Speaker Change: Okay got it that's helpful and.
William Kalutycz: And could you just provide an update on the integration of some of the recent acquisitions? I believe some of those were around getting additional capacity to offset some of the tariff exposure. So just how are you progressing with that plan as well? Yeah, a lot of work is going into... We're coordinating the different capital investments we need to make in order to create more capacity for some of our core products. Yeah, it's going well, we're on target, we're really pleased with the progress we're making. You know, obviously we need to introduce some best practices in those companies and we're in the process of doing that and again, we're really excited by having access to that capacity.
Speaker Change: Could you just provide an update on the integration of some of the recent acquisitions I believe some of those are.
Speaker Change: Round sitting additional capacity to offset some of the tariff exposure. So just how are you progressing with that plan as well.
Speaker Change: Yes, a lot of work is going into.
Speaker Change: Coordinating.
Speaker Change: The different.
Speaker Change: Capital investments, we need to make.
Speaker Change: In order to.
Speaker Change: Create more capacity for some of our core products.
Speaker Change: It's going well we're on target.
Speaker Change: We're really pleased with the progress we're making.
Speaker Change: You know, obviously, we need to.
Speaker Change: Introduce.
Speaker Change: Some best practices in those companies and are in the process of doing that and.
Speaker Change: Again, we're really excited by having access to that capacity.
Ryland Conrad: Great. Thanks, guys. Thank you. Thanks, Ron.
Speaker Change: Great. Thanks, guys.
Speaker Change: Great. Thank you thanks Ron.
Kyle McPhee: Your next question comes from Kyle. Your line is already open. Just a couple of quick follow-ups. I mean, maybe to just wrap up the discussion around leverage, you know, when you include your sale-leaseback proceeds. And these working capital dynamics, can you kind of guide us to what your hopeful total leverage target is? We're pushing to get within our targeted range by the end of the year, but depending on how the EBDOT comes out and how we make out with the inventory levels, that could get pushed out to early 2020. Okay, and presumably you mean kind of landing at the high end of your target range or all the way up?
Speaker Change: Your next question comes from Kyle Mcphee of core Mark Securities. Your line is already open.
Speaker Change: Just a couple of quick follow ups I mean, maybe to just wrap up the discussion around leverage.
Speaker Change: You included your sale leaseback proceeds.
Speaker Change: And he's working capital dynamic can you kind of guide us to what Youre hopeful total leverage targeted at Google machine.
Speaker Change: Excluding dominant.
Speaker Change: Yes.
Speaker Change: We are pushing to get within our targeted range by the end of the year, but that that depending on how the EBITDA comes out and how we make out with the inventory levels that could get pushed out to early to 'twenty early 2026.
Speaker Change: Okay, and presumably you mean kind of landing at the high end of your target range or Oh, yes, yes, yes, okay.
Kyle McPhee: Oh yeah, yeah, yeah, yeah. Okay, and then just quickly, can you kind of quantify the weight of, you know, your, your, your exports into China? I know it's a pretty small amount, but can you quantify it? Well, in terms of our core consolidated businesses, it's nominal, I think. It doesn't move the needle, Kyle. The major exporter to China within our group would be Clearwater, which we do not consolidate. And what would their sales, George, be? I would guess maybe $100 million-ish. Yeah, about that. Got it, okay, so the lobster dynamic in your PFD cycle is largely North American in detail.
Speaker Change: Okay, and then just quickly can you kind of.
Speaker Change: Quantify the way too.
Speaker Change: Your exports into China, and I know, it's a pretty small amount, but can you quantify it.
Speaker Change: Well in terms of our core consolidated businesses, it's nominal.
Speaker Change: It doesn't move the needle Kyle.
Speaker Change: The major exporter to China within our group would be clear water, which we do not consolidate.
Speaker Change: And.
George Kelly: What would their sales George.
Speaker Change: I would guess maybe 100 million.
Speaker Change: Got that.
Speaker Change: Got it okay.
Speaker Change: So the lobster dynamic in your PFD segment, largely North American retail.
Kyle McPhee: Yeah, it is, and particularly over the last couple of years, our Canadian lobster businesses are strictly North American focused. Our U.S. business, Ready, does some exports to China, but with the challenges in the main fishery in recent years and some of the disputes with China, that has really sort of become a much smaller... Okay, thank you.
Speaker Change: Yeah, It is and particularly over the last couple of years.
Speaker Change: Our Canadian lobster businesses are strictly a north American focus our U S business ready does some exports to China, but with the challenges in the main fishery in recent years and some of the disputes with China.
Speaker Change: That is really sort of become a much smaller number.
Speaker Change: Got it okay. Thank you.
Speaker Change: Okay.
Kyle McPhee: Your next question comes from Stephen MacLeod of BMO Capital Marks. Your line is already open. Thank you. Just a quick follow-up question for me. Just, you know, putting together, I guess, reading between the lines on the commodity price discussion, is it fair to assume that you'd expect sort of ongoing margin pressures continuing in Q2, but maybe to a lesser degree? Yeah, no, that's a fair statement. We are, you know, as we talked about in our opening comments, you know, we are putting through selling price increases, but we're always playing catch-up in these inflationary cycles and, you know, ideally what will happen is in Q2 we catch up.
Speaker Change: Your next question comes from Stephen Macleod of BMO capital markets. Your line is already open.
Speaker Change: Thank you.
Speaker Change: A quick follow up question for me just.
Speaker Change: Putting together I guess reading between the lines on the commodity price discussion.
Speaker Change: Would you is it fair to assume that you would expect sort of ongoing margin pressures continuing in Q2, but maybe to a lesser degree.
Speaker Change: Yeah, No that's a fair statement Steve.
Speaker Change: We are.
Speaker Change: As we've talked about in our opening comments, we are putting through selling price increases, but we're always playing catch up in these inflationary cycle.
Speaker Change: Ideally what'll happen is in Q2, we catch up.
William Kalutycz: towards the end of the quarter, and then my earlier comment about seeing some stability or even tailwinds in the third quarter. Okay, that's helpful. Thanks a lot.
Speaker Change: Towards the end of the quarter and then my earlier comment about seeing some stability or even a tailwind in the third quarter.
Speaker Change: Okay. That's helpful. Thanks, a lot.
Speaker Change: Okay.
George Paleologou: There are no further questions at this time. I would hand over the call to George Paleologou for closing remarks. Please go ahead. Thank you, Allen. I'd like to thank everybody for attending today. Thank you.
Speaker Change: There are no further questions at this time I would hand over the call to George <unk> for closing remarks. Please go ahead. Thank you Allen and I would like to thank everybody for attending today. Thank you.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.
Speaker Change: [music].
Speaker Change: Yeah.