Q2 2019 Earnings Call
At this time I would like to welcome everyone to the premium brands Holdings Corporation second quarter 2019 earnings Conference call.
With us today is George going well see you and will we ditch CFO .
All lines have been placed on mute to prevent any background noise.
After the speakers remarks, there will be a question and answer session.
If youd like to ask a question. During this time simply press Star and then one on your telephone keypad.
If youd like to withdraw your question press the pound Keith. Thank you George Brown, you may begin the conference.
Thanks, Chris and good morning, everyone.
I would like to welcome your toward 2019 second quarter Conference call.
Our results for the quarter are indicative of the progress, we're making in becoming north America's leading specialty foods company.
Despite certain industry challenges in other transitory factors, we continue to execute our values driven agenda and to position our business for long term value creation.
To this end were especially pleased with the progress we're making in positioning our U.S. based platforms for strong sustainable growth.
For product innovation, and new channel penetration in several high growth specialty food categories.
It is no surprise to us that even though we're in the early innings over a game plan, we're already seeing solid results with our U.S. sales growing by 50% to 645 million on a year to date basis.
I will now be turning the presentation over to our CFO will college for an overview of our financial results for the quarter after which I will make a few brief comments. This will then be followed by the culinary segment of the presentation will.
Thanks, George and good morning, everyone.
Before discussing our results for the quarter I would like to caution you that to the extent, we make forward looking statements during our presentation, our forecasts and assumptions are subject to change and actual results may vary. Please see our 2018, M. DNA, which is filed on SEDAR website www Dot SEDAR dot com for details on some of the factors that could cause our actual results results to differ from our current expectations.
Turning to our results.
Our revenue for the quarter grew by $183.9 million or 24.1% to a record $945.4 million.
Acquisitions accounted for 152.1 million of the increase organic volume growth for 23.7 million currency translation for 6.3 million and net selling price inflation for 1.8 million.
Our organic growth for the quarter was impacted by two major challenges. The most significant of these was unusually poor spring weather across our major markets in Ontario, and Quebec.
This resulted in decreased consumer demand for a variety of barbecue and outdoor activity related products, including burgers fresh protein skiers and marinated meats.
The other major sales challenge, we faced related to extreme volatility in certain commodity protein markets caused by a severe outbreak of African swine fever in China.
Our sales were negatively impacted by this as many of our protein businesses reduced the product featuring and promotional activities in response to the cost uncertainties associated with this volatility.
These two challenges were partially offset by the benefits of a late Easter holiday, which puts pushed sales that would normally occur in the first quarter of the year into the second quarter.
Normalizing for the impact of these three factors and not taking into account any growth opportunities lost due to the weather in NSF related challenges, our organic volume growth rate for the quarter is 4.6%, which is within our long term targeted range of 4% to 6%.
Our adjusted EBITDA for the quarter increased by $14.1 million or 19.0% to $88.3 million.
This was driven primarily by our sales growth adoption of the new IRS 16, accounting standard and efficiency improvements in a number of our production facilities. These factors were partially offset by higher commodity protein costs in general and commodity pork costs. In particular that were the result of the asset outbreak in China.
All of our impact all of our businesses impacted by the SF issue raised their selling price to adjust for the higher costs. However, this had only a limited benefit in the quarter as most of the increases took effect towards the end of June or in July .
Normalizing for the estimated impacts of south both on their sales and margins as well as for the poor spring weather and the adoption of IRS 16, our second quarter adjusted EBIDA is $90.2 million at a corresponding adjusted EBITDA margin is 9.5%.
Looking forward, we are maintaining our sales and adjusted EBITDA guidance for 2019 based on one the impact of the challenges we faced during the quarter being within the tolerances built into our current guidance ranges.
Two our bullish outlook for the back half of the year given the significant progress we are making on a variety of our meat snack seafood sandwich deli meats and cooked protein growth initiatives.
And three being in the late stages of negotiations for the acquisitions of several businesses that correspondingly are expected to be completed in the coming months.
Excluding the potential impact of acquisitions, we would have maintained the bottom end of our guidance, but brought down the top end to reflect the challenges of the second quarter.
Our adjusted earnings per share for the quarter decreased by 14 cents per share to $1.10 cents per share primarily due to three causes the dilutive effects of a recent private placement as the associated new capital has not yet been invested the asset the south and weather challenges of the second quarter and finally, the adoption of the new IRS 16 accounting standard.
In terms of our financing activities during the quarter, we raised net proceeds of $250.9 million from the private placement of 3.4 million shares.
Correspondingly our financial position at the end of the quarter was very strong our senior debt to adjusted EBITDA ratio was 2.0 to one which was below our long term targeted range of 2.5 to one to 3.0 to one while our total debt to adjusted EBITDA was 3.3 to one which was also below our long term targeted range of 4.0 to one to 4.5 to one.
Furthermore, we had close to $400 million of Unutilized capacity on our credit facilities.
During the quarter, we invested approximately $30 million $39 million in businesses and growth related capital projects. This consisted of approximately $19 million and project capital expenditures $17.6 million for the purchase of minority interest in one of our subsidiaries.
And $2.6 million for the acquisition of a value added lobster processor.
Turning to dividends during the quarter, we declared a dividend of $19.7 million or 52.5 cents per share, which on an annualized basis works out to $2.10 per share.
Our free cash flow for the trailing four quarters was a record $173.1 million as compared to dividends of $69.5 million, resulting in a payout ratio of 40.2%.
I will now turn the presentation back to George Thanks will.
We're making great progress in leveraging the PB ecosystem to accelerate growth in key strategic markets and product segments.
In seafood through a combination of acquisitions and organic initiatives, including the construction of a new of new capacity in Toronto in Montreal, We have created a strategic and unique national distribution platform that can service retail and foodservice customers coast to coast.
Also in seafood are us based ready seafood business is close to completing and new lobster processing plant in Sacco, Maine and will be one of the most efficient and state of the art facilities of its kind in the world.
Randy has already put into place the procurement strategy is needed to support this operation and is perfectly positioned to cater to growing retail and foodservice demand for value added lost or products.
In meat snacks, we're very pleased with progress being made by Robert as business and positioning itself for substantial long term growth in the us.
The extent over their success was made very clear in June when the celebrated highest sales month in their 100 year history.
With a birders planning for several major new product launches in the second half of 2019, we expect that momentum to continue to build and to be celebrating many more sales records with them in the future.
In general terms, our single greatest growth opportunity is the expansion of our very successful specialty food platforms in the us.
In this regard I have already mentioned the momentum building in our seafood and meat snack initiatives are there areas, where we have a robust pipeline of opportunities include our sandwich platform, which is leveraging its success in the foodservice channel to develop new growth opportunities in the grocery and C store channels and our deli meats initiatives.
I'm, particularly pleased with our recent launch of Atlanta with Dentek, Italian Deli meats into US yes. It is a great example of how our companies can leverage one another strands to bring about category innovation and to develop new growth opportunities.
In terms of the asset crisis in Asia. We're following the situation very closely and are continually reassessing, how things may unfold.
Which is becoming increasingly difficult with the ongoing escalation that trade disputes and other geopolitical tensions.
Not surprisingly this is creating transitory challenges for some of our businesses. However, we remain confident in the long term outlook of our company given our dynamic and then to Panera culture as well as the diversification we have built into our business model.
Turning to acquisitions I am pleased to report that we are in a record number of discussions and expect to be announcing several transactions in the near future.
Our unique strategy of partnering with talented and successful entrepreneurs in the specialty foods space, then helping them to grow their businesses, both through organic initiatives and acquisitions is not only the core to our success, but it is also resulting in an increasing number of specialty food business owners looking to partner with us.
As a final note I would like to comment on recent trends in SSG reported.
We have been a food industry pioneer in producing high quality authentic foods with cleaner ingredients and never taking shortcuts or seeking to maximize short term profits at the expense of long term shareholder value creation.
10 years ago, we developed our mission statement in which we prioritize quality community sustainability and social responsibility.
To this end, we have been putting our money, where a mouth is and have been investing and supporting businesses that focus on products with clean and sustainably produced ingredients local production footprint and an emphasis on given back to their local communities over the coming months, we will be formalizing and reporting on our SG initiatives. However, the reality is that the principles of BSG reporting have long been a core part of our culture and our DNA.
Correspondingly, we fully supported in a plot the recent developments in this area and look forward to sharing with you our progress and leadership on MSG issues.
I will now turn the presentation over to Chris for the Q in a part of our presentation Chris.
At this time in order to ask a question. Please press star and then one on your telephone keypad, we'll pause for just a moment to compile the Q and a roster.
And your first question comes from George Do you mean with Scotia Bank. Your line is open.
Hi, Thanks for taking my questions. So well just to clarify just to clarify the 2019 guidance the bottom and so that $331 million is not inclusive of any upcoming acquisitions.
Correct George Okay. Thanks, and I'm, just wondering is there any wiggle room in that maybe that number to account for.
Morning, SF related kind of pressure on the inputs or maybe.
Kind of George pointed our earlier any maybe more trade related headwinds.
We're we're fairly neutral at the bottom end of our guidance on assets.
Our thinking is with the to the extent there is some further challenges that that come our way towards the back half of the year that at the end of the back half of the year.
The acquisitions impact would more than offset that so that's our thinking around right now, but the reality is when you look at what's happening out there there seems to be because of all the global trade disputes some stability in the market and that combined with some inventory buys and other initiatives, we've taken including the selling price increases.
We're reasonably comfortable assets shouldn't be an impact in the back half of the year.
Okay, great on the topic, maybe you called out any of the kind of the magnitude of price increases and just wondering I know, it's early days, but I'm just wondering if you've seen any.
Negative volume response at all and are you seeing any maybe substitution.
Any evidence of substitutional.
So in general terms of price increases for most of our businesses. We're in the 5% to 10% range. There is some variability around that.
But at this point at this point no we haven't seen any volume impacts.
I would add to that George that this will mentioned.
In his comments.
We saw.
Less feature activity with certain pork based products, mainly because of decisions made by our customers.
So so there was a little bit of an impact because of that.
That's helpful. Thanks, and just one last one if I may well on the working capital.
Well I think we're up $66 million year to date.
Big amount historically is there any color you can maybe share on on that and how you kind of expect the trend in the second half of the year.
Yes, so a chunk of that is accurate acquisitions related but a good portion of it also is.
We've been going into Q3, a number of our businesses had been building inventory in anticipation of new product launches and and just preparing for the busy season. So you've got.
In a way sort of a deferred revenue number built into that inventory as well as as I mentioned earlier, we had been building some taking some long inventory positions in pork.
Based on some buying opportunities in the market. So a portion of that certainly we expect to unwind in the third quarter.
Okay. Thanks for your answers I'll pass the line.
Our next question comes from Derrick Lessors with TD Securities. Your line is open yes. Thanks for taking my questions gentlemen, and on your guidance you did say that Q2 sales and EBITDA were below internal expectations. So in a perfect World I'm, just wondering where are those expectations were and what the lower than expected results tied to anything organic or execution or was it all asaph and weather related.
Yes, it was all asaph and weight whether related Derek if you normalize for that we would have exceeded our expectation we would actually have exceeded the tolerance range, we'd said in our guidance for the quarter.
So we that's why we focus so much on those in terms of.
Missing our expectations again, it was within the tolerances, we've built into our guidance, but below our specific expectations for the quarter.
Okay, I guess a follow up to that is did you did you guys think that you could hit I guess, the top end of your guidance range without acquisitions.
In terms of the quarter's performance like I say, if it hadn't been for the weather and Asaph impacts. We certainly would have been on track for the higher end of the range.
Okay. Thank you that's helpful and maybe just how should we we think about your gross margin and the specialty food business going forward, given the price increases and the big incremental contributions you're expecting to get from organic growth from the new initiatives.
Yes, so we should see some continued expansion some normalization in the third quarter as asset.
Gets mitigated with the price increases so you should see some expansion there.
We don't provide any specific numbers for gross margin guidance, but.
Certainly when you go through the third quarter, you can see what the impact of asset was we try to isolate that in the quarter, Okay and maybe just one final one for me just wondering if you could.
If you could quantify to some degree that the more imminent deals that you're close to getting done I'm just trying to tie that back to your guidance range that you provided.
Again, Derek I would say that.
We have a record number of transactions in the in the pipeline.
We backed up a little bit in terms of the pipeline because of the large equity private equity issue that we did private placement that we did.
And.
No we don't.
There is.
Packing and bolt on deals there and there is some other larger transactions in the pipeline it's tough to.
Hi, give you guidance on when things will be done when but I would basically confirmed that this is probably the busiest we've ever been.
Okay. Thanks for that.
Your next question is from several have gone with RBC capital markets. Your line is open.
Thanks, just on some of the specialty foods initiatives that you have in the market can you maybe talk about the feedback was the response that you've seen both to the sandwiches programs and better tools one more so on the lines of the impact that had on demand.
No.
What are the chances some of that demand comes back in the later half of the year or is there potential that.
Because of the pricing you may not get those listings and so forth.
I again.
I think you asked the question in regards to Bordeaux or birders, not a user of pork.
The majority of their products or beef based.
And I think I mentioned in my prepared remarks that we're extremely pleased with.
The momentum that we're seeing June .
As I mentioned in my remarks was by far the best month ever in the history.
In the 100 year history.
And this is before the majority of the launches in the pipeline product launches in the pipeline. So we're extremely pleased with with the momentum we're seeing with our meat snack platform in the us and.
We think we're going to have.
A much stronger.
Latter half of the year.
Again, just just based on the amount of new launches in the pipeline.
With regards to sandwiches.
Again, as we mentioned in the prepared remarks.
We're looking for a stronger.
Second half of the year based on the progress we're making in in terms of penetrating.
New channels, new channels in particular retailing and ceased or.
In the us.
A sub I just want to clarify to the in terms of the impact of CSF Oner sales.
It was in because of price increases impacting volume it was a conscious decision to not participate in certain promotional activities because the business is just weren't certain what their cost structure was going to be in the last thing. They want to go out there is producing or commit to a special and then have their costs go up and their margins be impacted negatively. So so we haven't really in terms of the just the general ongoing organic growth, we haven't seen any negative impacts there.
It was just very specific isolated reasons why the sales were impacted around the promotions.
Okay. That's helpful and I guess, so I guess your initial comments Ron potentially moving the top end of the guidance, where it is down it's because those promotional opportunities past.
Well, it's a combination of that and the weather.
Right and the weather was sort of a onetime hit that that was about a 20 million dollar hit across all of our businesses in the quarter the weather.
So it was a pretty substantial number so the weather would be the bigger impact in that situation on that offline on the on the top end SAP.
Okay, Great and then I guess just on the sandwiches side on your Phoenix facility can you maybe talk about you know do you have sort of line of visibility to when that plant will be fully utilized and I'm just trying to think about the margin improvement trajectory in that business. When you think you'll be out sort of optimal capacity there and do you have line of sight to.
Demand for that.
Capacity as it comes online.
Well, we are very very pleased with.
The the Phoenix.
The progress we've made in the Phoenix facility, we've moved some of our larger skews into that facility.
From some of the other plants and again, we're very pleased.
How we are doing.
Operationally.
We are we have a good handle on on the labor as well in any way. So we're.
As part of the.
Operational improvements that will mentioned in his prepared remarks are coming out of.
Some of the progress we've made in Phoenix.
The.
In terms of the.
Margins overall with respect to our sandwich platform into US we've got a few plants now, especially once we acquired more recently.
That are running well below capacity.
And as we build the volume through these plans then you will see.
Tangible improvements in their in their margins in particular.
So so that's where you're going to see.
Progress in terms of margins and overall profitability.
Okay, Great and then just one last one for me I guess the comment around labor just Directionally speaking what are you seeing on the.
Labor availability front and as well as freight cost front, just as we look to the back half of the an early next year.
Now there's been obviously some challenges in the broader employment situation in the US are you seeing any signs of that getting better as we head into the back half the year.
Yes. This has been one area, where I think we've talked about it in the past.
There is definitely a very tight labor market in the us in general.
We are managing it much better I did catch us by surprise I would say about a year unit half ago.
When we when we were looking at our business, but again were.
Doing a lot better as I mentioned in previous on previous calls we've we've.
Invested in automation, we've invested in.
Enhanced.
Employee.
Welfare and compensation programs.
We've moved production around especially.
In our sandage facilities, we've moved.
Production.
In in.
From markets that we're we're very tight with respect to labor to to markets, where theres a lot more labor availability.
So again, we're quite pleased with the progress we've made in this area and it's part of the reason why we're optimistic with our product product launches and obviously the projected growth of both of our business, particularly in the U.S.
Great. Thank you.
Your next question is from John Zaro with CBC. Your line is open.
Thanks, Good morning, guys.
Just a couple of follow ups at first the it looks like a 10 and a half a million or so EBITDA impact combined between whether any assaf will based on the comments you made on topline and whether being a $20 million impact does that mean, the EBITDA impact is about equal between those two factors.
Yes, so it's a little higher from the south.
To get to get specific EBITA impact, we estimate from asset to be about 6 million of that 10, and a little over 4 million from from weather.
Okay. That's helpful. Thanks, and a follow up on the working capital question.
I mean, what do you expect is a reasonable annual investment in working capital as you approach that 2023 guidance and do you think adding pork or buying it on opportunistic terms will that have a material impact on the back half of the year.
In terms of the optimistic level that that's a little difficult right now because they are just there's so many dynamics changing through both through acquisitional impacts as well as growth growth initiatives. I know for instance are ready seafood business is is starting to.
Significantly ramp up for the start of Us Theres Sacco facility, new lobster processing facility in the back half of the year.
So I really can't give you a normalized level, but in terms of the the pull down of inventory from the Saf impact yeah that that should help.
To the extent, we do see some spikes were not expecting it but if we do that should help normalize for that.
And provide a little more certainty around our margins.
Okay. Thanks, and then on honoring assess what kind of cost inflation have you seen subsequent to the quarter end on on either fourq or other key commodities and how does that compare to the price increases even active.
I would say John that it has been an extremely volatile environment.
I think that you've probably heard about that ban on Canadian pork.
To China.
So that caused some volatility at the time.
This relates to some of the opportunistic buys that will referred to as well.
But it is a global commodity and eventually things get back to normal.
You know, it's very tough to say because it depends on on each commodity I would say the.
Environment today is stable as as will mentioned.
But.
We are seeing.
Inconsistency is for example.
The Chinese right now are favoring the European market then.
And Europe is a little more expensive right now than traditionally.
There's a disconnect between the European market in the North American market.
And some of our raw materials to come from from Europe . So you know, it's a dynamic environment. We're managing it as will mentioned, we've made some opportunistic buys and.
No. We don't think that anything drastic is going to happen for the remainder of the year.
You know, we were thinking more stable environment and slightly inflationary.
Okay. That's helpful. Thanks, and just one last one for me George in your shareholder letter from last year, you raised the prospect of potentially doing international M&A I'm. Just wondering if that's still on the table in the near term or is that something you're you're looking out in future years.
No that's definitely the case and.
Beginning two weeks ago, we have a permanent.
Managing director based in Europe based in Munich in Germany, and we are looking at a number of possible M&A opportunities in Europe .
Okay. That's great. That's all for me. Thank you very much.
Your next question is from David Newman with disturbance. Your line is open.
Hi, good morning, Jerre Joel.
Hey, Dave Hey, David.
Just wondering on your guidance for the second half and just trying to get the quantum.
The potential lift here inorganic growth on the on the back of some of the initiatives that you have so I think previously you flagged that there is about a 135 million previously one of which $100 million will be backend loaded and I think you're also kicking the tires of seven loving foodstar grocery mass on some of the meat snacks could proteins et cetera, so any sense of what the lift could be either on a dollar sense or from an organic volume growth what should we be thinking about modeling in the back end of this year.
Well weve, given our guidance, David and it's based on a range of assumptions, so unless I get into very specific assumptions I can't give you a specific just broad brush range range is obviously going to be better than the first half. So just kind of broad brush ranges I think you sort of said eight to 10 in the past and specialty food would be what you would annualize that that would be kind of in the ballpark or what do you guys think.
Yes. It certainly are your first statement's, absolutely right, it's going to be a much stronger in the second half than the first half.
Eight to 10.
It is probably a fair number I need to go back and revisit that but on a run rate, though right like Ray will on run rate basis, yes.
Okay and then on.
On the on the pricing that you guys put in for the for the pork side.
Now obviously pork is only.
I think it's mid teens percent of your overall mix are you taking any price increases on the other commodities and what what should be our assumption and on terms of price pricing into the second half.
I would say David.
The rest of the protein complexes.
Behaving more normal I would say within the normal parameters. So no no changes to our strategy is there.
Generally a bit of an inflationary environment I would say in our pricing models are are generally dynamic very dynamic a lot of our business is cost plus.
I, especially our distribution business that sells a lot of a lot of beef in this case for example, or a lot of Lam.
But but nothing out of the ordinary I would say.
And in the five to 10 that you guys put in would that be kind of the upper limit in other words beyond that you kind of get into maybe perhaps demand destruction at all or on the port side.
I wouldn't say that David a lot of times, we've been surprised you have to remember that we are at the very very high end of the spectrum right quality spectrum and consumers buyer products and.
Not because they are the cheapest, but because they like them because they enjoy them. You know we always discussed this internally you know I will pay an extra dollar or $2 to buy our products and I can tell you that historically, we've always been surprised.
The fact of the matter is that our consumer is there.
It's a very quality driven.
Brand driven consumer they go to the store and they want to buy or products and Thats part of the reason why we're confident with.
With the velocity of our products given our pricing.
Okay and last one from me guys just on the Foodservice channel I mean, obviously you've had this step down on price points away from the white cloth towards you know limited service or quick service.
Is there something strategically that you can do there at all anything obviously, the western Canada is in pretty tough I think right now in terms of the higher end restaurants or is there anything that you guys would do strategically to kind of tackle those lower price points.
Yes, again, I think thats a its a good comment David and again in my prepared remarks, I mentioned about the fact that.
We've built effectively in national.
Distribution platform, which gives us some.
Our competitive advantages and synergies in terms of servicing all segments of the markets, even even segments that we havent traditionally gone after.
Having said that I think we've mentioned in the past as well that.
We are leveraging those assets and that infrastructure.
To go after what we call specialty retail and specialty retail has been a major focus for for our distribution business that business over the last.
Four or five years has grown to be over $100 million.
So yes. We are you know there is a slowdown in western Canada with respect to white table cloth, but we are getting some traction.
In specialty retail some very nice traction.
Unfortunately, the oil patch.
His had its issues and we lost some traction in north South Florida.
Which which disguises the progress we've made with with specialty retail.
Excellent. Thanks, guys. Thank you David.
Your next question is from Stephen Macleod with BMO capital markets. Your line is open.
Thank you good afternoon, guys, Hey, Steven Hi.
I just wanted to circle around just on some of the new listings that you highlighted.
And.
In your press release and also previously.
I believe some of those would have set in late Q3, if I'm not mistaken.
Can you just talk a little bit about how those.
How those new programs have performed I guess cross protein and sandwiches specifically.
To the extent that we've launched some new products, Steven particularly sticks.
Premium type of sticks.
And some innovative type of jerky like Turkey tenders and stake strips. We are extremely pleased with the traction we are getting.
So far.
And how about on the same side.
I again most of the.
Savages had a good quarter, but most of its new growth initiatives will be in the third quarter third and fourth quarter.
Okay. So would they would they be setting sort of now or later into Q3.
Yes. So so they are you know.
Some of the retail initiatives I think we've talked about in the past have launched.
They are out in the stores its really too early to make a call at this point Steve.
Certainly initial orders initial consumer feedback and buyer feedback is all very positive but outside of that it theres not much more we can say.
Okay. Okay. That's fair, it's just it's just too early.
Yeah, I see and.
And just on clear, which would you still expect sort of $90 million to $100 million falling in the back half of the year.
Where do you get that number Steve.
Of the 135 I thought previously you said you would expect 90 to 100 falling in this year, maybe that's an annualized number exiting yet I'd have to go through the math with you I don't have it off the top of my head.
Okay.
Yes, without that 130 from the beginning of the year.
That was a.
Annualized number so yes, a portion of that may happen into 2020, but I can go with through that with you offline. Okay. Okay that would be great.
And then I guess, just finally George in terms of.
You mentioned you mentioned you now have an MD sitting in Germany.
Can you talk a little bit about.
What the focus would look like in potentially international markets or would it be very similar to what you currently do in North America I assume it will but I'm just curious if it would be.
Mostly focused on protein sandwiches seafood.
Yes, I would say.
Initially it would be protein related and effectively we're looking at.
Companies out there that have products that we feel that that.
Could.
Get traction in North America in other words, the idea for us is to leverage our marketing and distribution infrastructure in in North America to grow their their their sales. So so it would be situations, where we like the their products.
We believe that their products meet the attributes that we would like and we think that.
That by leveraging our existing.
Sales marketing and distribution infrastructure, we would be able to get traction we are currently.
Distributing and selling a lot of these type of products in North America and it is conceivable that we would make investments that will enable them to grow capacity or.
Speed up their innovation et cetera, et cetera, So thats generally the the primary.
Focus.
Oh I see okay. Okay. That's helpful. Thank you.
Thanks, Steve.
Your next question is from the Olin So with industrial line Securities. Your line is open.
Yes, hi, guys.
Just following up again on the asset.
With the the pork price increases is it.
Is there any reason to look at trying to position yourselves as substitutes or is it really just a like offering substitutes or is it really just a matter of managing the price increases in the supply chain on the pork.
Can you clarify that Neil.
Well I'm thinking if you do get a lot of price increases on the pork side would you have customers that will start looking for more beef or other products, where you can better position yourself and start looking at.
How you can offer though.
To be more competitive or as people start looking for substitutes if the price of the pork is getting too high.
You know again Neil.
You have to look at.
This space that we're in in terms of premium brands right and.
They would be an impact on demand if you raise prices.
The cheapest product available thats not our core consumer so so we feel comfortable that that.
And we've had these situations in the past in 2014 and 15, we had skyrocketing pork prices because of the PD virus.
And you know, we raise prices and at that time, we didnt see any impact on our on demand.
So again I.
Change or mitigate the seasonality that you have now or are you looking at acquisitions, which will hope smoothed out.
Some of your seasonal patterns.
Yes that is a good question and I think that.
As we've we've mentioned in the past, we've we've taken some seasonality out of our business by virtue of the.
More acquisitions in the U.S, so that will take out some seasonality out of our business.
US based type of acquisitions, we'll do that.
Right.
But the specific transactions Neil there. There you know you are not going to see much of that benefit in the near term.
They are more sort of typical seasonal businesses like the remaining our current portfolio.
Okay.
And since you're talking about international or outside North America.
Can you say if any of these acquisitions in the latter stages of negotiation or per outside North America.
It again.
It's not inconceivable that we would do a transaction in Europe , let's say over the next six months.
Okay fair enough. Thanks.
Your next question is from Dimitri Kaminski with Veritas Your line is open.
Hi, how are you.
Hey, Dimitri.
Thanks, a lot for the question just ask a question how much revenue from the new initiatives was recognized in Q2.
From the new initiatives was net clarify that for me Dimitri were full of course, yes diesel the 19 million $300 million worth of the.
New initiative in sandwiches and meat snacks, including meets the Ics that are supposed to be recognized during the year.
Related to the 135 million annualized amount if you will so.
In Q1, you mentioned that was five out there were 6 million worth of this new initiative recognized in terms of the revenue I was wondering.
What was the amount for Q2.
Yeah, I don't have that specific amount you know in general terms, though it's certainly more than what was in Q1, but I again I am thinking of some of the specific product launches in that that group of products.
Particularly in the Sandwich group a lot of that was.
As I mentioned earlier stuff that was cop kicking in in June and July so.
It would be certainly far more weighted to the back half of the year than the front half.
Right, Okay. Thank you and.
Okay.
Just two.
Go over the guidance again by how much would you have reduced 2019 the revenue guidance.
Absent the New York with additions you did mentioned $20 million and ramping I believe related to weather.
Is there anything else.
Beyond that $20 million by another another $4 million to $5 million from the asset impact. So those are the big impacts on the revenue side and then when you talked about.
That the EBITDA impact, so that $10 million to $11 million range from those issues.
Right I see okay. Thank you gentlemen, I appreciate it thanks Dimitri.
Our last question is from Derek was hard with TD Securities. Your line is open.
Hi, Thanks, just one last one for me actually I was just wondering again on the on the new product listings coming in the second half.
Theres any potential snags that that we should be looking out for it or has everything been greenlighted at this point.
Yes again.
Everything has been greenlight it.
We have a lot on the goal I would say the.
The groups.
Particularly in the us are extremely busy.
Trying to connect the dots in terms of production.
In terms of operations in terms of distribution et cetera, et cetera, but.
Again were very optimistic and.
We're looking forward to.
Very busy lottery latter half of the year.
Okay. That's it for me thanks.
Thanks, Eric.
This concludes the Q and they period I'll now turn it back to George for a little over for any closing remarks, I'd just like to thank everybody for attending.
This concludes today's conference call you may now disconnect.