Lassonde Industries Inc. announces its Q3-2024 results

Rougemont, QC, November 7, 2024 – Lassonde Industries Inc. (TSX: LAS.A) (“Lassonde” or the “Corporation”) today announced its financial results for the third quarter of 2024.

Financial Highlights:

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 28, 2024 are available on the SEDAR+ website at www.sedarplus.ca and on the website of Lassonde Industries Inc.

“Lassonde delivered healthy sales and earnings growth for yet another quarter, driven by solid performance across all divisions,” said Vince Timpano, Chief Executive Officer of Lassonde Industries Inc. “Volume gains in our U.S. beverage business mainly reflect our demand build-back plan supplemented by initial production from the newly commissioned single-serve line in North Carolina. In Canada, the introduction of several new products enabled us to sustain our momentum in key categories.”

“In terms of short-term priorities, we will continue onboarding personnel from Summer Garden, whose activities contributed approximately seven weeks to our operating results in the third quarter. This pivotal acquisition will fortify our core specialty food offering and provide access to attractive adjacent markets. We are also eagerly preparing for the construction of our new plant in New Jersey during the next few months. These important initiatives will accelerate the execution of our strategic plan and further position Lassonde as a leader in the North American food and beverage industry,” added Mr. Timpano.

Third Quarter Highlights:

• Sales of $668.3 million. Excluding a $5.6 million favourable foreign exchange impact and $31.4 million in sales from the Acquired Entities², the Corporation’s sales were up $47.9 million (8.2%) year over year, mainly due to the favourable impact of selling price adjustments in Canada and an increase in the U.S. sales volume for both private label and branded products, partly offset by an unfavourable change in the sales mix of U.S. private label products.
• Gross profit of $179.8 million (26.9% of sales). Excluding a $0.5 million unfavourable foreign exchange impact and $8.9 million in gross profit from the Acquired Entities², gross profit was up $25.1 million from the same quarter last year. This net increase results mainly from the following items:
  • A decrease in the Corporation’s conversion costs, a portion of which results from operational improvements, including the impact of the ongoing insourcing of manufacturing for certain products sold by the Corporation’s U.S. beverage divisions;
  • A favourable impact of selling price adjustments to offset the higher costs of certain inputs, essentially orange juice and orange concentrates;
  • A favourable impact of an increase in sales volume; and
  • An unfavourable impact of a change in the sales mix.
• Operating profit of $47.2 million. Excluding the $4.0 million unfavourable contribution from the Acquired Entities², operating profit was up $15.5 million from the same quarter last year. This net increase results mainly from the impact of the following items:
  • $6.2 million increase in transportation costs incurred to deliver products to clients and in finished goods warehousing costs, essentially in the U.S.;
  • $2.0 million net increase in other selling and administrative expenses; and
  • $0.4 million in costs related to the Summer Garden acquisition.
• Excluding items impacting comparability but including the Acquired Entities², adjusted EBITDA¹ was $69.3 million (10.4% of sales), up $16.4 million from the same quarter last year.
• Profit attributable to the Corporation’s shareholders totalled $29.7 million, resulting in EPS of $4.35, up $5.4 million and $0.79, respectively, from the same quarter in 2023. Excluding the $2.5 million unfavourable contribution from the Acquired Entities² and the $2.3 million impact of additional financial expenses, net of taxes, related to the Summer Garden acquisition, profit attributable to the Corporation’s shareholders was up $10.2 million year over year.  Excluding items impacting comparability, adjusted EPS¹ was $4.53 compared to $3.67 in the same quarter last year.
• As at September 28, 2024, the Corporation had total assets of $2,095.3 million versus $1,665.7 million as at December 31, 2023, a 25.8% increase arising mainly from the Summer Garden assets of $378.2 million and from an increase in property, plant and equipment.
• As at September 28, 2024, long-term debt, including the current portion, stood at $465.2 million, representing a net debt to adjusted EBITDA¹ ratio of 1.83:1. Excluding $309.4 million in borrowings to finance the Summer Garden acquisition, this is down $54.7 million from December 31, 2023.
• Operating activities generated $87.5 million in cash compared to $76.0 million generated in the same quarter last year. The Acquired Entities² operating activities generated $0.7 million in cash, leaving a difference of $10.8 million on a comparable basis. This increase in cash inflows was mainly due to a higher operating profit and a $2.3 million favourable change in the change in the fair value of financial instruments, partly offset by a $7.6 million increase in net income tax paid.
• Dividend of $1.00 per share, paid on September 13, 2024.

Outlook

Lassonde continues to expect that the largest factors impacting its performance in fiscal 2024 will be the financial health of consumers and the inflationary environment. As a result, the Corporation is currently using the following assumptions for its fiscal year 2024:

Sales growth rate

• For 2024, barring any significant external shocks and excluding foreign exchange impacts and the sales generated by Summer Garden, Lassonde expects a sales growth rate in the mid-to-high-single-digit range, mainly driven by:
  • the run-rate effect of its existing selling price adjustments; and
  • a sequential improvement in sales volume in the last quarter of the year resulting from the combined impact of the following items: (i) the pace of the U.S. demand build back strategy for the Corporation’s products; (ii) additional volume available following the deployment of its single-serve line in North Carolina; and (iii) the overall stabilization of demand.
• The Corporation is closely monitoring the evolution of consumer food habits and demand elasticity for its products in a context of ongoing inflation in the cost of its key commodities.

Key commodity and input costs

• Lassonde has experienced substantial increases in input costs since 2021, and some commodity costs, mainly orange juice, orange concentrates and apple concentrates, are expected to remain elevated through the end of 2025.
• Given that a large portion of the raw material purchases made by Lassonde’s Canadian operations are in U.S. dollars, a strengthening of this currency against the Canadian dollar results in a higher cost for products sold in the Canadian market. Furthermore, the Corporation is expecting an unfavourable foreign exchange impact for 2024 when considering its hedged positions.

Expenses, including items impacting the comparability between the periods

• As overall demand stabilizes, the Corporation’s operating expenses in the last quarter of 2024 will continue to reflect targeted investments to reinforce the innovation pipeline, distribution expansion, and strategic trade spending to support growth.

• The Corporation’s performance-related compensation expenses are expected to return in 2024 to levels below those observed in 2023.
• During 2024, Lassonde plans to continue deploying its multi-year strategy (the “Strategy”), optimizing its business, and upgrading its key systems and technology infrastructures to improve its efficiency. Planned spending in support of these elements is expected to reach up to $5.5 million in 2024.
• The effect of Summer Garden’s purchase price allocation and the deployment of the single-serve line earlier in the third quarter will have an incremental impact, estimated at US$5.4 million, on the fourth-quarter amortization and depreciation expense.
• Following the Corporation’s decision to invest in the construction on a new plant in New Jersey, certain existing assets related to the current plant will have to be depreciated at an accelerated rate over a period of ten quarters beginning in the fourth quarter of 2024. The additional depreciation charge is estimated at US$1.5 million per quarter.

Effective tax rate

• Effective tax rate of about 26.5% for 2024, excluding the impact on the tax rate of Diamond’s results.

Working capital

• The Corporation’s Days Operating Working Capital¹ remains close to its historical levels and only incremental improvements to this ratio are expected over the course of 2024. However, this outlook might be impacted by: (i) opportunistic decisions to secure inventory cost ahead of potential additional price increases from suppliers, (ii) the objective of ensuring an adequate service level, (iii) decisions to counter new potential supply chain disruptions, or (iv) support provided to the Corporation’s manufacturing network optimization projects.

Capital expenditures

• The Corporation’s overall capital expenditures program for 2024 is estimated to reach up to 5.0% of its sales as it continues to deploy capital in support of its Strategy. This estimate depends on the rate of progress of certain large capital projects and on the evolution of the macroeconomic environment.
• 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 have been prepared using the following key assumptions: currently observed geopolitical situation and macroeconomic trends, particularly in the context of the U.S. (and potentially Canadian) elections and the ensuing implications, including employment, inflation and interest rates; a stable exchange rate between the U.S. dollar and the Canadian dollar; the continuity of recently observed consumer behaviours and market trends for the Corporation’s products; the effectiveness of the Corporation’s selling price adjustment initiatives; the limited impact of the Corporation’s selling price adjustment initiatives on product demand; no material disruption to the Corporation’s operations (including workforce availability) or to its supply chain; 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 operates; 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 also be noted that some of these key assumptions, notably 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 extraordinary events or circumstances beyond its control. The Corporation believes the expectations reflected in these 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 Section 2 – “Forward-Looking Statements” of the Corporation’s MD&A for the third quarter of 2024.

Dividend

In accordance with the Corporation’s dividend policy, the Board of Directors declared today a quarterly dividend of $1.00 per share, payable on December 13, 2024 to all registered holders of Class A and Class B shares on November 20, 2024. This dividend is an eligible dividend for Canadian tax purposes.

Conference Call to Discuss Third Quarter 2024 Financial Results

OPEN TO:             Investors, analysts, and all interested parties

DATE:                    Friday, November 8, 2024

TIME:                     8:30 AM ET

CALL:                    647-484-8814 (for overseas participants)

1-844-763-8274 (for other 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/13666. The replay of the webcast will remain available at the same link until midnight, November 15, 2024.

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 periods:

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 of the “depreciation of property, plant and equipment and amortization of intangible assets” item and “(Gains) losses on capital assets” item, as 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.

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.

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.

Days Operating Working Capital

Days operating working capital is a financial measure used by the Corporation to represent the number of days 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 consists of the sum of trade accounts receivable, discounts receivable and inventories, less trade payables and accrued expenses and trade spending, as they are presented in the accompanying notes to the Corporation’s interim consolidated financial statements.

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 Canadian securities law. These forward-looking statements include, but are not limited to, statements on the Corporation’s objectives and goals and 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 volume and sales growth rate, key commodity and input costs, expenses, including items impacting the comparability between the periods, effective tax rate, working capital, and capital expenditures may be considered financial outlooks for the purposes of applicable Canadian securities regulations. 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 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 parties. 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 reflected in the forward-looking statements contained herein include, among other things, risks associated with the following: deterioration of general macroeconomic conditions, including international conflicts, which can lead to negative impacts on the Corporation’s suppliers, customers, and operating costs; the availability of raw materials and packaging and related price variations (including the prices of orange juice and orange concentrates, key commodities for the Corporation, which have continued to trade above historical highs for the past several months and show no sign of favourable change); loss of key suppliers or supplier concentration; 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 leading to business disruptions, confidentiality, data integrity, and business email compromise-related fraud; the successful deployment of the Corporation’s multi-year strategy  (defined in Section 4 – “Multi-Year Strategy” of the Corporation’s MD&A for the third quarter ended September 28, 2024), including the successful execution of its key capital projects along with the materialization of the underlying expected benefits, and the Corporation’s ability to effectively integrate any acquisitions; the Corporation’s ability to maintain strong sourcing and manufacturing platforms and efficient distribution channels; 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 customers in competitive market conditions and considering demand elasticity; climate change and disasters causing higher operating costs and capital expenditures and reduced production output, or impacting the availability, quality or price volatility of key commodities sourced by the Corporation; 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 the 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; disputes with significant suppliers; the increasing concentration of customers in the food industry, providing them with significant bargaining power particularly on the Corporation’s selling prices; the implementation, cost and impact of environmental sustainability initiatives as well as the cost of remediating environmental liabilities; changes made to laws and rules that affect the Corporation’s activities, particularly in matters of tax and customs duties, 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 customers; 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; 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 or 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 sustainability 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, deployment, and performance of technology and environmental regulation. The Corporation’s ability to achieve its environmental, social and governance risk commitments is further subject to, among other factors, its ability to leverage its supplier relationships.

The assumptions, expectations, and estimates involved in preparing 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, 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, 2023. 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 wholly and 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.

² Lassonde acquired control of Diamond Estates Wines & Spirits Inc. (“Diamond”) on November 14, 2023, and completed the acquisition of The Zidian Group, which operates Summer Garden Food Manufacturing and certain of its affiliates (collectively “Summer Garden”) on August 8, 2024 (collectively referred to as the “Acquired Entities”). Consequently, these entities have been consolidated in Lassonde since these dates.