Lassonde Industries Inc. announces its Q3-2023 results

ROUGEMONT, QC, Nov. 10, 2023 /CNW/ - Lassonde Industries Inc. (TSX: LAS.A) ("Lassonde" or the "Corporation") today announced its financial results for the third quarter of 2023.

Financial Highlights:

		Third quarters ended
		Sept. 30, 2023	Oct. 1, 2022	∆
(in millions of dollars, unless otherwise indicated)		$	$	$
Sales		583.4	556.4	27.0
Gross profit		146.3	125.4	20.8
Operating profit		35.7	19.9	15.9
Profit		24.3	14.2	10.1
Attributable to:	Corporation's shareholders	24.3	14.5	9.8
	Non-controlling interest	0.0	(0.3)	0.3
EPS (in $)		3.56	2.11	1.45
Weighted average number of shares outstanding (in thousands)		6,822	6,870	(48)
Adjusted EBITDA^1		52.9	38.9	14.0
Adjusted EPS^1 (in $)		3.67	2.54	1.13

Note: These are financial highlights only. Management's Discussion and Analysis, the unaudited interim condensed consolidated financial statements and notes thereto for the quarter ended September 30, 2023 are available on the SEDAR website at www.sedarplus.ca and on the website of Lassonde Industries Inc.

"Lassonde Industries delivered solid third-quarter results, driven by improved execution throughout our operations," said Nathalie Lassonde, Chief Executive Officer and Vice-Chair of the Board of Directors of Lassonde Industries Inc. "During the quarter, we also held our first Investor Day, highlighting the depth and quality of our management team and reinforcing our confidence for the future."

"Reflecting our ability to execute against strategic priorities, all divisions once again improved their profitability in the third quarter when compared to last year. We benefited from ongoing share growth in our Canadian beverage division and from improvements in our U.S. operations, bolstered by the portfolio optimization process and the deployment of new technology, which more than offset lower sales volume," said Vince Timpano, President and COO, Lassonde Industries Inc. "To achieve our long-term objectives, we remain focused on building back U.S. volumes, fortifying our leading position in Canada, and accelerating the growth of our specialty food business through a combination of organic and investment-driven growth." 

Third Quarter Highlights:

• Sales of $583.4 million. Excluding an $8.1 million favourable foreign exchange impact, sales were up $18.9 million (3.4%) from the same quarter last year, mainly due to the favourable impact of selling price adjustments, partly offset by a decrease in sales volume, essentially in the U.S.;
• Gross profit of $146.3 million (25.1% of sales), up $20.8 million from the same quarter in 2022. Excluding a $3.3 million unfavourable foreign exchange impact, gross profit was up $24.1 million from the same quarter last year;
  • Higher gross profit for all of the Corporation's divisions;
  • Favourable impact of selling price adjustments to offset cost increases;
  • Higher cost for certain inputs, especially apple and orange concentrates; and
  • Gross profit loss of $1.5 million in 2022 following a production interruption on the cranberry sauce line at the Corporation's New Jersey plant.
• Operating profit of $35.7 million, up $15.9 million from the same quarter last year;
  • Higher gross profit;
  • $14.3 million increase in performance-related salary expenses; and
  • $11.1 million decrease in transportation costs incurred to deliver products to clients, resulting (i) from decreases in fuel surcharges and in base transportation rates, (ii) from savings related to the use of new processes and the transportation management system in the U.S. and (iii) from a decrease in sales volume.
• Excluding items impacting comparability, adjusted EBITDA¹ was $52.9 million (9.1% of sales), up $14.0 million from the same quarter last year.
• Profit attributable to the Corporation's shareholders of $24.3 million, resulting in basic and diluted earnings per share ("EPS") of $3.56, up $9.8 million and $1.45, respectively, from the same quarter in 2022. Excluding items impacting comparability, adjusted EPS¹ was $3.67 compared to $2.54 in the same quarter last year.
• As at September 30, 2023, long-term debt, including the current portion, stood at $208.5 million, representing a net debt to adjusted EBITDA ratio¹ of 0.98:1. This is down $40.8 million from December 31, 2022.
• Dividend of $0.50 per share, paid on September 15, 2023.

Multi-Year Strategy

To provide clarity and orientation on the opportunities to pursue and to optimize capital allocation decisions, in early 2022, the Corporation developed a multi-year strategy (the "Strategy"). This Strategy aims to accelerate revenue growth, improve overall profitability, and drive long-term value by focusing on three strategic pillars.

• Building a growth-oriented portfolio;
• Driving sustainable performance; and
• Improving capacity to act.

Associated Incremental Operating Expenses

During the first nine months of 2023, the Corporation has mainly continued its implementation of new cloud-based management systems and made additional investments to optimize its production network. For this purpose, the Corporation reported expenses of $1.2 million and $4.3 million, respectively, in the third quarter and first nine months of 2023.

Associated Capital Expenditures

The Corporation is dedicating capital expenditures aligned with its Strategy to support growth, enhance productivity, and invest in innovation and sustainable development. These investments include (i) three projects to improve production efficiency and capacity in Canada, (ii) further upgrades to the enterprise resource planning ("ERP") software in Canada along with (iii) investments in the U.S. to improve production efficiency and to deploy a new single serve line in the Corporation's plant based in North Carolina.

Project Eagle

Project Eagle is a component of the Strategy aimed at revitalizing underperforming U.S. operations, with the objective to capture growth, improve margins, and drive long-term sustainable performance. In addition to reviewing the products and customers portfolio, Project Eagle also seeks to identify and address key issues impacting performance within the supply chain and manufacturing facilities, including product simplification, process realignment, employee training, and capital deployment.

The Corporation took important steps to reduce its stock keeping units ("SKU") complexity, harmonize packaging formats, consolidate formulas, and rationalize low-margin products and/or customers. The portfolio simplification reduces execution complexity by limiting downtime related to production changeovers, which should increase throughput. The Corporation also completed the implementation of a cloud-based transportation management system, and more recently, implemented a demand planning system and deployed a new supply planning and production scheduling tool. Some of these initiatives will ultimately benefit the rest of the organization; for instance, the transportation management and demand planning systems are first rolled out in the U.S. and then throughout the Corporation.

Benefits from those initiatives began materializing in the performance of the first nine months of 2023 and the Corporation expects further benefits as it gradually builds back volume following the portfolio simplification.

Outlook

The Corporation is making the following forward-looking statements for fiscal 2023:

Sales growth rate 

• During the first nine months of 2023, the Corporation has taken additional pricing action on its branded and private label product offerings, including adjusting contracts with certain private label customers to recover as much as possible the cost increases it incurred. It expects the run rate effects of such pricing action to continue to be felt during the fourth quarter. The Corporation is also taking further pricing action during the fourth quarter mainly due to the higher cost of orange concentrate.
• For 2023, barring any significant external shocks and excluding foreign exchange impacts, Lassonde expects that its sales growth rate should be in the mid-single-digit range, mainly driven by selling price adjustments partly offset by lower volumes. The Corporation keeps monitoring the evolution of consumer food habits and demand elasticity in a context of price increases.

Productivity and service level

• Labour and operational initiatives, together with fewer supply chain constraints, have thus far helped, and should continue to help during the fourth quarter, to improve the Corporation's ability to meet demand and return to historical order fill rate levels, particularly in the U.S.

Key commodity and input costs

• So far in 2023, the Corporation has noticed some stabilization in the inflation trend of most of its input costs and is expecting this trend to continue until the end of the year. However, the Corporation is closely monitoring the price of orange concentrate, a key commodity for the Corporation, which has been trading at historically high levels for the last 12 months, even reaching a new peak of US$4.32/lbs sol. in October 2023. The information currently available indicates that this trend will continue to persist for a foreseeable future. The Corporation is also monitoring the price of cranberries and sweeteners.
• Given that a large portion of the raw material and packaging purchases made by Lassonde's Canadian operations are in U.S. dollars, a strengthening of this currency against the Canadian dollar could result in a higher cost for products sold in the Canadian market. Furthermore, the Corporation is expecting an unfavourable foreign exchange impact for 2023 when considering its hedged positions.

Expenses, including expenses related to the Strategy

• In 2022, the Corporation had experienced a $13.9 million decrease in performance-related salary expenses, whereas in 2023, all other things being equal, these expenses should return to the upper range of the levels seen in the past.
• During 2023, Lassonde plans to continue deploying its Strategy, revitalizing its U.S. operations, and upgrading its technology infrastructures. It also plans to continue implementing new cloud-based demand planning and transportation management systems, the aim being to improve customer service and lower overall distribution costs. It also intends to upgrade its U.S. ERP. Spending in support of its Strategy is expected to reach approximately $7.5 million in 2023.
• The interest expense for the fourth quarter of 2023 will be higher than that of fourth-quarter 2022 given higher rates on floating rate debt.

Effective tax rate

• Effective tax rate should be about 26.5% for fiscal 2023.

Working capital

•  As supply chain challenges appear to be dissipating, the Corporation has revised its inventory accumulation strategy and expects to progressively reduce its inventory levels. As a result, its Days Operating Working Capital¹ should trend towards the upper end of its historical levels (pre-COVID-19) during 2023 and within its historical range by the end of fiscal 2024. However, this strategy might be impacted by (i) opportunistic decisions to secure inventory cost ahead of potential price increases from suppliers, (ii) the objective of ensuring an adequate service level, or (iii) the identification of new potential supply chain disruptions.

Capital expenditures

• The Corporation's overall capital expenditures program for 2023 is estimated to reach up to 4.5% of its sales as it continues to deploy capital in support of its Strategy. This estimate depends on the timing of disbursements for certain large capital projects and on the evolution of the macroeconomic environment. The Corporation expects this ratio to return to a range of 2.0% to 3.0% of its sales (including a maintenance component and a certain growth component) by 2025. The new capital assets will be financed, to the extent possible, using the Corporation's operating cash flows, although the Corporation may also turn to borrowing if interest rates and conditions prove advantageous.

The above forward-looking statements were prepared using the following key assumptions: the currently observed geopolitical situation and macroeconomic trends, including employment, inflation, and interest rates; the strength of the U.S. dollar (compared to the Canadian dollar); the continuity of recently observed consumer behaviours and market trends for the Corporation's products; no material disruption to the Corporation's operations (including workforce availability) or to its supply chain; the effectiveness of the Corporation's selling price adjustment initiatives; the limited impact of the Corporation's selling price adjustment initiatives on product demand; the continuity of observed trends in the competitive environment and the effectiveness of the Corporation's strategy to position itself competitively in the markets in which it competes; limited additional cost increases from suppliers; adequate availability of key inputs; the continuity of recently observed normalized trends in the throughput capacity of key U.S. plants; expected lead time for new manufacturing equipment; and adequate contractor or consultant availability to progress the Corporation's capital expenditures. The Corporation cautions readers that the foregoing list of factors is not exhaustive. It should be noted that some of these key assumptions, including those related to the geopolitical situation and macroeconomic trends, are volatile and rapidly evolving. In preparing its outlook, the Corporation made assumptions that do not consider any other extraordinary events or circumstances beyond its control. The Corporation believes the expectations reflected in the forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. For additional information, refer to the Caution Concerning Forward-Looking Statements section at the end of this press release and to Section 2 – " Forward-Looking Statements" of the Corporation's MD&A for the third quarter of 2023.

Dividend

In accordance with the Corporation's dividend policy, the Board of Directors declared today a quarterly dividend of $0.50 per share, payable on December 15, 2023 to all registered holders of Class A and Class B shares on November 23, 2023. This dividend is an eligible dividend.

Conference Call to Discuss Third Quarter 2023 Financial Results

OPEN TO:	Investors, analysts, and all interested parties
DATE:	Friday, November 10, 2023
TIME:	1:30 PM ET
CALL:	604-638-5340 (for international participants)
	1-800-319-4610 (for North American participants)

A live audio broadcast of the conference call will be available on the Corporation's website, on the Investors page or here: https://www.gowebcasting.com/12690. A replay of the webcast will remain available at the same link until midnight, November 17, 2023.

Financial Measures Not in Accordance With IFRS

The financial measures or ratios, further described below, do not constitute standardized financial measures or ratios in accordance with the financial reporting framework used to prepare the Corporation's financial statements. These non-IFRS measures should not be considered in isolation or as a substitute for financial measures prepared in accordance with IFRS. Comparing them to similar financial measures or ratios presented by other issuers may not be possible.

Items impacting the comparability between periods

The following table contains a list, description and quantification of items impacting the comparability of the financial performance between the periods:

		Third quarters ended
		Sept. 30, 2023	Oct. 1, 2022
(in millions of dollars)		$	$
Costs related to the Strategy		0.7	1.5
Implementation costs of new cloud-based systems		0.5	1.3
Production interruption of a line in New Jersey		-	1.5
Adjustment related to non-recoverable sales taxes		0.3	-
Sum of items impacting comparability on operating profit and EBITDA:		1.5	4.3
Item impacting comparability on "Other (gains) losses":
Gain related to the preliminary settlement of an insurance claim		(0.5)	-
Tax impact of previous items		(0.3)	(1.1)
Impact on profit		0.7	3.2
Attributable to:	Corporation's shareholders	0.7	2.9
	Non-controlling interest	0.0	0.3

EBITDA and Adjusted EBITDA

EBITDA is a financial measure used by the Corporation and investors to assess the Corporation's capacity to generate future cash flows from operating activities and pay financial expenses. Adjusted EBITDA is a financial measure used by the Corporation to compare EBITDA between periods by excluding items impacting comparability. EBITDA consists of the sum of operating profit and the "depreciation of property, plant and equipment and amortization of intangible assets" item shown in the Consolidated Statement of Cash Flows. Adjusted EBITDA is calculated by adjusting the EBITDA with items considered by management as impacting the comparability between periods.

	Third quarters ended
	Sept. 30, 2023	Oct. 1, 2022
(in millions of dollars)	$	$
Operating profit	35.7	19.9
Depreciation of property, plant and equipment and amortization of intangible assets	15.7	14.7
EBITDA	51.4	34.5
Sum of items impacting comparability	1.5	4.3
Adjusted EBITDA	52.9	38.9

Adjusted Profit Attributable to the Corporation's Shareholders and Adjusted EPS

Adjusted profit attributable to the Corporation's shareholders and adjusted EPS are financial measures used by the Corporation to compare profit attributable to the Corporation's shareholders and EPS between periods by excluding items impacting comparability. They are calculated by adjusting them with items considered by management as impacting the comparability between periods.

	Third quarters ended
	Sept. 30, 2023	Oct. 1, 2022
(in millions of dollars, unless otherwise indicated)	$	$
Profit attributable to the Corporation's shareholders	24.3	14.5
Sum of items impacting comparability	0.7	2.9
Adjusted profit attributable to the Corporation's shareholders	25.0	17.4
Weighted average number of shares outstanding (in thousands)	6,822	6,870
Adjusted EPS (in $)	3.67	2.54

Net Debt to Adjusted EBITDA

Net debt to adjusted EBITDA is a financial measure used by the Corporation to assess its ability to pay off existing debt and define available borrowing capacity. To calculate the net debt to adjusted EBITDA ratio, net debt is divided by the sum of adjusted EBITDA from the last four quarters. Net debt represents long-term debt, including the current portion, less the "Cash and cash equivalents" item, as they are presented in the Corporation's Consolidated Statement of Financial Position.

	As at Sept. 30, 2023	As at Dec. 31, 2022
(in millions of dollars, except the net debt to adjusted EBITDA ratio)	$	$
Current portion of long-term debt	7.1	100.8
Long-term debt	201.5	148.6
Less: Cash and cash equivalents	(20.2)	(2.7)
Net debt	188.4	246.7
Sum of adjusted EBITDA from the last four quarters	192.8	157.1
Net debt to adjusted EBITDA ratio	0.98:1	1.57:1

Days Operating Working Capital

Days operating working capital is a financial efficiency measure used by the Corporation to represent the amount of sales tied up as operating working capital. To calculate this financial measure, operating working capital is divided by the last quarter's sales, as they are presented in this press release, and multiplied by 91 days. Operating working capital is the sum of accounts receivable and inventories, less accounts payable and accrued liabilities, as they are presented in the Corporation's Consolidated Statement of Financial Position.

About Lassonde

Lassonde Industries Inc. is a leader in the food and beverage industry in North America. The Corporation develops, manufactures, and markets a wide range of private label and national brand products, including ready-to-drink beverages, fruit-based snacks as well as frozen juice concentrates. It is also a leading producer of cranberry sauces and specialty food products such as pasta sauces, soups and fondue broths and sauces. The Corporation also imports and markets selected wines from several countries of origin and produces apple cider and cider-based drinks.

The Corporation operates 16 plants located in Canada and the United States and produces its superior quality products through the expertise of over 2,700 full-time equivalent employees. To learn more, visit www.lassonde.com

The Corporation is active in two market segments:

• Retail sales consist of (i) sales to food retailers and wholesalers such as supermarket chains, independent grocers, superstores, warehouse clubs, major pharmacy chains and (ii) online sales; and
• Food service sales consist of sales to restaurants, hotels, hospitals, schools, and wholesalers serving these institutions.

Caution Concerning Forward-Looking Statements

This document contains "forward-looking information" and the Corporation's oral and written public communications that do not constitute historical fact may be deemed to be "forward-looking information" within the meaning of applicable securities law. These forward-looking statements, which include, but are not limited to, statements on objectives and goals of the Corporation, are based on current expectations, projections, beliefs, judgments, and assumptions based on information available at the time the applicable forward‑looking statement was made and considering the Corporation's experience combined with its perception of historical trends.

Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "could", "would", "believe", "plan", "intend", "design", "target", "objective", "strategy", "likely", "potential", "outlook", "aim", "goal", and similar expressions suggesting future events or future performance in addition to the negative forms of these terms or any variations thereof. All statements other than statements of historical fact included in this document may constitute a forward-looking statement.

In this document, forward-looking statements include, but are not limited to, those set forth in the above "Outlook" section, which also presents some (but not all) of the key assumptions used in determining the forward-looking statements. Some of the forward-looking statements in this document, such as statements concerning sales growth rate, productivity and service level, key commodity and input costs, expenses (including expenses related to the Strategy (defined in the above "Multi-Year Strategy" section)), effective tax rate, working capital, and capital expenditures, may be considered to be financial outlooks for the purposes of applicable securities legislation. These financial outlooks are presented to evaluate potential future earnings and anticipated future uses of cash flows and may not be appropriate for other purposes.

Various factors or assumptions are typically applied by the Corporation in elaborating the forward‑looking statements. These factors and assumptions are based on information currently available to the Corporation, including information obtained by the Corporation from third-party sources. Readers are cautioned that the assumptions considered by the Corporation to support these forward-looking statements may prove to be incorrect in whole or in part.

The significant factors that could cause actual results to differ materially from the conclusions, forecasts or projections contained in the forward-looking statements contained herein include, among other things, risks associated with the following: the availability of raw materials and related price variations (including the price of orange concentrate, a key commodity for the Corporation, which has continued to trade above historical highs for the past several months and shows no sign of abating); fluctuations in the prices of inbound and outbound freight, the impact of oil prices (and derivatives thereof) on the Corporation's direct and indirect costs along with the Corporation's ability to transfer those increases through higher prices or other means, if any, to its clients in competitive market conditions and considering demand elasticity; the ability to maintain strong sourcing and manufacturing platforms and efficient distribution channels; disruptions in or failures of the Corporation's information technology systems as well as the development and performance of technology; cyber threats and other information-technology-related risks relating to business disruptions, confidentiality, data integrity, and business email compromise-related fraud; the scarcity of labour and the related impact on the hiring, training, developing, retaining and reliance of personnel together with their productivity, employment matters, compliance with employment laws across multiple jurisdictions, and the potential for work stoppages due to non-renewal of collective bargaining agreements or other reasons; the successful deployment of the Corporation's health and safety programs in compliance with applicable laws and regulations; serious injuries or fatalities, which could have a material impact on the Corporation's business continuity and reputation and lead to compliance-related costs; the successful deployment of the Corporation's Strategy, including components such as Project Eagle; climate change and disasters causing higher operating costs and capital expenditures and reduced production output, and impacting the availability, quality or price volatility of key commodities sourced by the Corporation; the increasing concentration of customers in the food industry, providing them with significant bargaining power; the implementation, cost and impact of environmental sustainability initiatives, as well as the cost of remediating environmental liabilities; changes made to laws that affect the Corporation's activities as well as the interpretation thereof, and new positions adopted by relevant authorities; the ability to adapt to changes and developments affecting the Corporation's industry, including customer preferences, tastes, and buying patterns, market conditions and the activities of competitors and clients; failure to maintain the quality and safety of the Corporation's products, which could result in product recalls and product liability claims for misbranded, adulterated, contaminated, or spoiled food products, along with reputational damage; risks related to fluctuations in interest rates, currency exchange rates, liquidity and credit, stock price and pension obligations; deterioration of general macroeconomic conditions, including international conflicts, which can lead to negative impacts on the Corporation's suppliers, customers and operating costs; the incurrence of restructuring, disposal, or other related charges together with the recognition of impairment charges on goodwill or long-lived assets; the sufficiency of insurance coverage; and the implications and outcome of potential legal actions, litigation and regulatory proceedings to which the Corporation may be a party. The Corporation cautions readers that the foregoing list of factors is not exhaustive.

The Corporation's ability to achieve its environmental targets and goals is further subject to, among other factors, its ability to access and implement all technology necessary to achieve them as well as the development and performance of technology, innovation and the future use and deployment of technology and associated expected future results, and environmental regulation. The Corporation's ability to achieve its ESG commitments is further subject to, among other factors, its ability to leverage its supplier relationships.

Assumptions, expectations, and estimates made in the preparation of forward-looking statements and risks and uncertainties that could cause actual results to differ materially from forward-looking statements are discussed in the Corporation's materials filed with the Canadian securities regulatory authorities from time to time, including information about risk factors that can be found in Section 19 - "Uncertainties and Principal Risk Factors" of the Corporation's MD&A for the year ended December 31, 2022. Readers should review this section in detail.

All forward-looking statements included herein speak only as of the date hereof. Unless required by law, the Corporation does not undertake any obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements contained herein are expressly qualified by this cautionary statement.

_______________________________________

¹ This measure does not constitute a standardized financial measure in accordance with the financial reporting framework used to prepare the Corporation's financial statements. Comparing it to a similar financial measure presented by other issuers may not be possible. Refer to Section "Financial Measures Not in Accordance with IFRS" of this press release for more information, including the definition and composition of the measure or ratio as well as the reconciliation to the most comparable measure in the financial statements, as applicable.

SOURCE Lassonde Industries Inc.

Investor contact: Eric Gemme, Chief Financial Officer, Lassonde Industries Inc., 450-469-4926, extension 10456, [email protected]; Media contact: Alexander Roberton, Senior Director, Corporate Communications, Lassonde Industries Inc., 514-716-4075, [email protected]