Earnings call transcript: Premium Brands Q2 2025 sees stock surge despite EPS miss

Premium Brands Holdings Corporation (PBH) reported its Q2 2025 earnings, revealing a mixed financial performance. The company missed its earnings per share (EPS) forecast, posting an actual EPS of $1.33 against a projected $1.36, representing a surprise of -2.21%. However, PBH exceeded revenue expectations with $1.91 billion, surpassing the forecast of $1.87 billion, leading to a revenue surprise of 2.14%. Despite the EPS miss, the company’s stock surged by 7.98% in pre-market trading, closing at $92.97, driven by optimistic future guidance and strategic initiatives. According to InvestingPro, the company maintains a GOOD financial health score of 2.95, with particularly strong profitability metrics.

Key Takeaways

• Premium Brands missed its EPS forecast but exceeded revenue expectations.
• Stock surged 7.98% following positive market reaction to strategic outlook.
• The company plans a significant product launch in September 2025.
• Full-year EBITDA guidance remains between $680-$700 million.
• Strong demand in premium protein and coffee channels noted.

Company Performance

Premium Brands demonstrated resilience in Q2 2025, particularly in revenue generation, despite missing EPS expectations. The company’s revenue growth, driven by strong demand for premium protein products and strategic initiatives in the coffee and retail channels, underscores its robust market position. With a gross profit margin of 56.5% and return on equity of 12%, the firm continues to navigate commodity inflation, absorbing $15-$20 million in margin contraction, yet remains confident in margin recovery through price adjustments. InvestingPro analysis reveals that PBH has maintained dividend payments for 21 consecutive years, with 12 years of consecutive increases, demonstrating strong financial discipline.

Financial Highlights

• Revenue: $1.91 billion, up from $1.87 billion forecast
• Earnings per share: $1.33, below the $1.36 forecast
• EBITDA guidance: $680-$700 million for the full year
• CapEx cycle completion with $1.7 billion in new sales capacity

Earnings vs. Forecast

Premium Brands reported an EPS of $1.33, missing the forecast of $1.36 by 2.21%. However, the company outperformed revenue expectations with a 2.14% surprise, generating $1.91 billion compared to the anticipated $1.87 billion. This mixed outcome reflects the company’s ability to leverage its diversified product offerings and strategic market positioning.

Market Reaction

Despite the EPS miss, Premium Brands’ stock experienced a significant increase, rising 7.98% to $92.97. This positive market response is attributed to the company’s robust revenue performance and optimistic future outlook, including a major product launch and strong demand in key market segments. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its intrinsic value, with a P/E ratio of 17.25 and a PEG ratio of 5.9. The stock’s movement aligns with broader market trends favoring companies with strategic growth initiatives. For deeper insights into Premium Brands’ valuation and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Outlook & Guidance

Looking ahead, Premium Brands maintains its full-year EBITDA guidance of $680-$700 million, significantly higher than the current EBITDA of $379.4 million. The company anticipates strong performance in the latter half of the year, driven by a major product launch in September and continued expansion in the coffee and retail channels. While operating with a total debt of $1.04 billion, the company maintains a healthy current ratio of 4.2 and an Altman Z-Score of 9.81, indicating strong financial stability. The firm is targeting $10 billion in sales by 2027 through organic growth and potential acquisitions, with a focus on maintaining a 2.5-3x senior debt to EBITDA ratio.

Executive Commentary

CEO George Palioglu emphasized the company’s commitment to premium, clean-ingredient products, stating, "We manufacture premium products with clean ingredients, and we sell them to customers whose consumers basically are looking for them and are not buying them on price." This focus on quality and strategic market positioning is central to Premium Brands’ growth strategy.

Risks and Challenges

• Commodity inflation impacting margins, though price adjustments are underway.
• Supply chain challenges, particularly tariffs, could affect cost structures.
• Economic downturns may impact consumer spending, though premium segments are less sensitive.

Q&A

During the earnings call, analysts inquired about the impact of tariffs on imports and the company’s capacity expansion strategies. Management provided insights into inventory ramp-up and working capital management, reinforcing confidence in its strategic direction and financial resilience.

Full transcript - Premium Brands Holdings Corporation (PBH) Q2 2025:

Sophie, Conference Call Operator: Good morning and afternoon, ladies and gentlemen, and welcome to the Premium Brands Holdings Corporation Second Quarter twenty twenty five Earnings Conference Call question and answer session. At this time, note that all participants are in a listen only mode. Also note that this call is being recorded on Wednesday, 08/06/2025. Our speakers will be George Palioglu, CEO and President of Premium Brands and Will Kludic, CFO of Premium Brands. And I would like to turn the conference over to George Palioglu.

Please go ahead, sir.

George Palioglu, CEO and President, Premium Brands Holdings Corporation: Thank you, Sophie. Good morning, and welcome, everyone, to our two thousand and twenty five second quarter conference call. With me here today is our CFO, Will Kolovich. Hopefully, you’ve had a chance to listen to our prerecorded call posted on our website this morning. We will now take your questions.

Sylvie?

Sophie, Conference Call Operator: Thank you, sir. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touch tone phone. You will then hear a prompt that your hand has been raised. And if you wish to decline from the polling process, please press star followed by 2. If you’re using a speakerphone, we do ask that you please lift the handset before pressing any keys.

Please go ahead and press star one now if you have any questions. And your first question will be from Derek Lessard at TD Cowen. Please go ahead.

George Palioglu, CEO and President, Premium Brands Holdings Corporation: Yeah. Good morning. Good afternoon, gentlemen, and congrats on a great quarter. Good morning, Derek. Thanks, Derek.

I I guess my first question is is how should we be thinking about the cadence of your next two quarters? I guess, just in terms of your revenue and EBITDA guide, is it a do you think it’s an equal split or does the momentum build in Q4 should be a stronger quarter? Yes. It does build, but there’s an offsetting cycle with cyclicality. So it should be pretty you know, our expectation is pretty consistent over the next two quarters, maybe a little bit stronger in q four because of the momentum.

Okay. And and maybe just I was wondering if you guys could maybe just update us on the timing of, you know, some of the new contracts or or launches that are coming through on on that US sales pipeline, I guess, other than than v six. What are the the bigger programs that are coming through? Yeah. Derek, our business development pipeline is is full.

It’s it’s it’s very robust. You know, we’ve onboarded and launched a number of new programs in the first February of the year, which is obviously driven our organic growth. We are in the process of ramping up a number of brand new facilities. Obviously, we want to execute well. We want to execute the launch as well.

It’s not an issue for us in terms of business opportunities. It’s an issue of obviously making sure that the plants are running well. And again, as I mentioned earlier, you know, a lot of the launches are are going to be large and and very lumpy. We don’t have the best visibility today in terms of the exact timing, but I can tell you that we’re very excited at the at the pipeline, at the business development pipeline. Okay.

And and maybe one final one for me before I re queue. Maybe talk about the decision for you guys to introduce ROIC and make it part of the compensation program? And is there a time frame for you guys getting to that 15% target? Yes. So we may we’ve using the concept of RONA, which is a pretax calculation.

And that dates back to when we were an income trust. And we probably should have made the change sooner, but we moved to RONA, our ROIC to better reflect our after tax status. It ties closely with our internal metric or target of a 15% unlevered after tax IRR for all capital allocation decisions. And in terms of meeting that target, it’s gonna take a couple of years, but, you know, 2829 is when we expect to be at or exceeding that 15%. Okay.

Thanks, everybody. Okay. Thanks, Gerard.

Sophie, Conference Call Operator: Next question will be from Martin Landry at Stifel. Please go ahead.

George Palioglu, CEO and President, Premium Brands Holdings Corporation: Hi. Good morning, Will and George. Good morning, I would like to follow-up on on Derek’s question to just just to get a bit of more visibility and color on your adjusted EBITDA guidance of 680 to 700,000,000 for the full year. It does imply a a very strong back half. You know, it looks like by my calculation, your EBITDA will need to increase by at least 18% to meet the low end of your guidance.

So, you know, can you talk a little bit about some of the drivers of EBITDA growth for the back half that we can expect and that could give us a bit more visibility as you’re going to achieve that pretty strong pace of growth? Yes. It’s really growth, Martin. And particularly, you know, q three, we expect to see some continued growth with the the initiatives being launched. They are over the course of q three and and the largest single launch in our pipeline, which will actually be one of our largest launch new product launches in our history is in now early September.

So it is sort of loaded to the back half of the quarter. But that’s really going to drive a much stronger year over year Q4 because Q4 has historically been one of, if not our weakest quarters for seasonality reasons. But a lot of these launches, a lot of this growth is in The U. S. Market.

It’s less seasonal business. And really, that’s going to be the biggest year over year factor driving that growth into our targeted EBITDA range. The other part, Martin, that you need to remember is that even though we reported in line EBITDA for the quarter, you know, we absorbed about fifteen to twenty million in margin contraction because of hyperinflation in chicken and and beef. Plus there were some tariffs there as well. Not that material, but there were some tariffs as well.

So that shows you that the earning capacity of the company on a normalized basis is much higher than what we’ve reported. Right? So you have to account for that in terms of any projections you make. Okay. So so I understood.

So maybe just to follow-up on on the last point on your price increases that you’ve put in place to absorb commodity increases. You know, are are you is q three also impacted a little bit by that? Or were you able to mitigate fully the the commodity cost increases in q three? We put through price increases, but our expectations of our margins normalizing to where they should be over the long term, Martin, is a combination of those price increases, and we do see easing of certain commodities, particularly chicken. And then the third factor is we do expect to see some efficiency gains, which has been consistently part of our EBITDA growth over the last couple of years.

But it’s sort of a combination of those factors that get our margins back to that normalized number. Having said that, Martin, there’s a lot of moving parts now given the tariff noise in The US, not necessarily with Canada, but with obviously trade with Brazil and trading in Zealand and Europe and and Right? So, again, you have to incorporate some element of risk there as well. Okay. And then just lastly, George, you you you talked about, you know, in the previous question in the previous with with the the question with Derek that some of the launches would be large and lumpy.

Are you referring to launches of products this year or this was more a 2026 comment? No. No. This this year, of course, and and next year as well. Like, I’m I was talking generally about the business development pipeline over the next couple of years.

Okay. Perfect. Thank you for the color. Thanks, Martin.

Sophie, Conference Call Operator: Next question will be from Steven McCloud at BMO Capital Markets. Please go ahead.

George Palioglu, CEO and President, Premium Brands Holdings Corporation: Thank you. Good afternoon, guys. Hey, Steve. Just hey, Will. Just wanted to follow-up on on a couple of things.

Just with respect to just the q three commentary, just wanna make sure I fully understand the commodity impact. You know, it sounds like you you you do expect to see margins normalizing, but would you expect to see gross margins in the specialty food business actually improving year over year in in q three? Or or or are you still under pressure just a little bit because of the because of the time it takes to make to pass through those price increases? Yeah. I I I Steve, I don’t know off the top of my head the the actual percentage margin q three over q three projected versus next year.

But the reality is we do expect to see improvement from q two. No, that’s helpful. Okay, great. Maybe just thinking about the sales capacity that you have. You’ve talked about the $1,700,000,000 for, with the new capacity you have in place.

Can you can you talk a little bit about whether, you know, you’ve previously talked about like $700,000,000 being highly likely for 2025. Can you just let us know if that’s still the case? And then how much do you think you’ve realized by the ’2 of that full capacity amount? Our our as much as we continue to recognize the amounts from that pipeline and off the top of my head, I think of that original pipeline we talked about $1,200,000,000 I think it’s about $200,000,000 of that has been realized. The reality is the pipeline hasn’t changed.

As we realize new things, a few projects have dropped off, new projects have come on. We look at our pipeline and today it’s still around that 1,200,000,000.0. In terms of where it falls in terms of likely, highly likely in the quarters, and that’s always moving around, Steve, you’ve seen. This launch I mentioned earlier coming up in September, there’s always little delays. There’s always things that happened originally August.

You know, we had a piece of equipment that was delayed. It’s tough to put it that refined of a bucket, but the key note is the pipeline that continues to be very strong and lots of exciting stuff going on. And a lot of that, Steven, is driven by the three megatrends that I mentioned in my prepared remarks, which, you know, have driven the growth of premium brands since inception and are still driving the growth of premium brands, such as obviously to capacity, which we’re bringing on stream as we speak with the capital investment that we’ve made over the last two or three years. Right that we are invested in the right product, in the right plans, obviously, catering to to the channels that are recognizing that that these megatrends are running and are investing in them. Right.

Okay. That’s that’s helpful. Just to clarify on the sales capacity, I I thought in the prepared remarks you talked about 1,700,000,000.0, But, well, you just you just said 1.2. So I’m just wondering if there are differences in those two numbers that that I’m not aware of. No.

No. The 1.2 is the x those are actual initiatives, Steve, that, you know, target initiatives x product with y customer. The 1.7 is something we’ll grow into over the next, you know, year or two and and and, you know, as as we develop other new opportunities. That’s the available total capacity. Right.

Okay. Okay. That’s great. Thank you. And then maybe just finally, just on the on the investment income, you know, representing the Clearwater investment.

You know, it’s it’s it’s been a bit higher. So the last two quarters have been higher than what we saw through through the quarters in fiscal twenty twenty four. And I’m just curious, that kind of a new a new run rate, is there anything else that’s happening with that line item to move cause it to move higher? If you you saw the equity earnings number, Clearwater has been you know, had a very tough first half of the year. Now that the positive is we are expecting a much better half, second half of the year for Clearwater.

But as a result of that, we’ve been accruing our interest and the interest compounds. So that’s been a driver. And then as we talked about last quarter, we did have to advance them $40,000,000 at the beginning of the year to help with their liquidity as they put a new financing structure in place. And so the combination of that has led to that growth in the interest rate. But lots of good things happening in the business.

So see, They’re very close to closing on a new financing, which will greatly address their liquidity needs through this sort of tough part of the cycle. As I mentioned, the core business itself is starting to show solid improvement for a much better back half. And strategically, there’s a lot of good things happening that we’ll we’ll probably talk about next quarter. Okay. That’s great.

Thanks, Will. Thanks, George. Appreciate the color. Thanks. Thanks, Steve.

Thanks, Steve.

Sophie, Conference Call Operator: Next question will be from Ty Collins at CIBC World Markets. Please go ahead.

George Palioglu, CEO and President, Premium Brands Holdings Corporation: Hey, good afternoon. Good morning. Thanks for the question, guys. Hi, Ty. Hey.

So maybe my first one, just to follow-up on a previous point. You mentioned that you’re expecting one of your biggest programs or contracts of all time to turn on, I think you said around September and that the EBITDA guide is kind of levered to that. I’m just wondering what your level of visibility is on that timing specifically and whether there’s any risk that, that gets pushed further into Q3 or into Q4? Again, business will be executed by brand new facility, Ty, which we’re currently ramping up. And we feel comfortable at this point that we’ll be able to execute it.

If we don’t execute it in terms of a big bang type of opportunity, we will basically gradually launch it and ramp up the capacity. We’re hoping that we’ll we’ll we’ll ramp it up all at once, but but, plan b is to basically launch it gradually. Okay. Got it. Thanks.

And then I’m wondering if you could kind of provide your updated thoughts on whether there are any parts of your business that you consider noncore and might look at divesting at the right price. There’s obviously been some consolidation going on in the food distribution space down south, and I’m curious if that’s kind of jump started any conversations around premium brands recently. Yeah. I think that as Will said in his prepared remarks, Ty, we’re always looking for ways to improve our liquidity, unlock value, obviously, pay down debt. We’re committed to getting back to three to one debt to EBITDA.

Obviously, growing the EBITDA will be one way of getting there as well. So all I could say is that we’re looking at the number of of of value unlocking transactions that we will able to to use to to bring down the debt as we promised we would. Great. Thanks, George. Appreciate it.

Thanks, guys.

Sophie, Conference Call Operator: Next question will be from Luke Hannon at Canaccord Genuity. Please go ahead.

George Palioglu, CEO and President, Premium Brands Holdings Corporation: Thanks. Good morning and and good afternoon, everyone. Hi, Lou. Hey, guys. I wanted to ask about CapEx.

I know it’s consistent with what you said in the past. CapEx project CapEx gradually has been coming down. I think you mentioned $108,000,000 is what you expect over the course of the next four quarters. I’m curious, though, if we look beyond that, let’s just say, or three years out, should we expecting either on an absolute dollars or a CapEx intensity basis, should we expect relative consistency over the next few years? Or what can you share on that front?

Yes. So we look at CapEx in three buckets. Our maintenance CapEx, which, you know, it it tends to be fairly steady around sixty to sixty five million dollars a year. And then we, you know, there’s generally across our plant network, smaller CapEx projects, adding a line, adding some automation, things like that. And that’s generally about 60,000,000 to $65,000,000 a year as well.

So that’s kind of our baseline CapEx. And then we have these other larger projects that tend to accelerate or increase our organic volume growth rate. And that’s what that $108,000,000 we referred to in the presentation, we’re left to spend on those major projects. And so your question is really, are there going to be future major projects? In terms of hitting our target of $10,000,000,000 in sales by 2027, And the organic growth number in that is about 9,200,000,000.0 to $9,400,000,000 of sales and then a little bit of acquisitions to get us to the $10,000,000,000 We’ll have completed the CapEx cycle of the major projects to get there.

Now I can’t say there won’t be more projects because it’ll depend on the growth profiles of our business. If they exceed expectations of their growth profile, they run out of capacity, well then it will be a very positive story, but we will then be needing to invest more money in their businesses. But based on today and hitting our five year targets in for 2027, we are essentially at the end of that CapEx cycle. Okay. Thanks for that.

I appreciate it. And then on that 9,200,000,000.0 to $9,400,000,000 if there’s a scenario that presents itself where there happens to be more attractive acquisition opportunities out there where perhaps maybe you’d be comfortable you know, giving up some organic growth to go after and and chase those acquisitions. Is that a possible scenario? I guess the question is, are you are you comfortable, you know, potentially acquiring more than than what it is that’s based you know, what’s being implied? Yeah.

Absolutely. And and and just to correct you on something, we wouldn’t give up the organic growth. Right? Those those initiatives in place, our our businesses are executing on them. We we put what we feel is a very conservative acquisitions number into our five year plan.

The reality is we expect to exceed that. And so the answer is absolutely yes, if opportunities arise. And in George’s prepared remarks, our pipeline right now is incredibly robust. There’s lots of increasing our interesting transactions we’re looking at. And I think we increased our active pipeline to, I think it’s about $2,000,000,000 in sales opportunities today.

So yes, there’s significant opportunities there. Now the one thing I will caveat that Will is we are committed to maintaining or getting to within our midterm leverage targets, that 2.5 to three to one senior debt to EBITDA and the 3.5 to one or three, four point five to one total debt to EBITDA. So we’re not going to do anything that prevents us from getting this in those targets. And I should say and make this very clear is our long term target is to get our total debt to EBITDA ratio down to three or less. So those are the, you know, we’re we’re whatever we do, we’re working within those trajectory trajectories as well.

Yeah. Just to talk about history a little bit, Luke. As we started in Canada many years ago and started to do good things in the food space, many, many food entrepreneurs came to us to to join us. And, of course, we grew organically by acquisition in Canada. The the same thing is happening in The US.

We’re doing a lot of amazing things in The US market. We’re launching some of the best selling products in in that market in different channels, and we’re well known. We’re getting to be well known these days. And because of that, we are having a lot of discussions with many, many food entrepreneurs that would like to to join premium brands. Right?

So absolutely, Will is right. We will be doing a lot of acquisitions in The U. S. In the future as we grow our different platforms. That’s great.

Last one here, and then I’ll pass the line. Just on the Cleveland, Tennessee sandwich facility. Roughly speaking, I mean, are the sales that are expected to come out of phase one and potentially future phases, is that concentrated to any one cost any one customer? Is that relatively well diversified amongst your your existing or potentially new customers? Well diversified, Luke.

Again, we have a robust pipeline of large opportunities. And again, we’re very, very certain. I would say that that we will fill that capacity sooner than than what we even budgeted ourselves. And that’s for future phases as well? Absolutely.

Okay. Great. Appreciate it. Thanks. Thanks, Luke.

Thanks, Luke.

Sophie, Conference Call Operator: Next question will be from John Zampero at Scotiabank. Please go ahead.

George Palioglu, CEO and President, Premium Brands Holdings Corporation: Thank you very much. Good morning, George and Will. Hi, Bill. I wanted to ask about the $1,700,000,000 in capacity, just to follow-up on that. The right way to think about that, that’s the capacity you have in place for facilities today?

Or does that include the remaining $108,000,000 in remaining project CapEx over the next twelve months? Yes. No. Let me clarify a couple of things there, John. So the $1,700,000,000 is, yes, after we complete that $100,000,000 of projects.

And in particular, the big project in there is the consolidation of our Concorde businesses plants in the Greater Toronto area. That’s about $100,000,000 of sales capacity. So that’s the 1,700,000,000.0, but I I wanna be clear. That 1,700,000,000.0 is just the incremental capacity from the new projects. So there’s still other capacities in the system.

Not every plant was running at full capacity before we started on this CapEx plan. So there is some slack in the system in addition to that, as well as I mentioned on earlier questions, the three buckets of CapEx. Well, small project CapEx budget, a bucket of about 60,000,000 to $65,000,000 a year, that also provides us with an additional growth capacity. So it’s not limited to the 1,700,000.0 There are other elements to it. Okay.

That’s that’s good color. Thank you. The margins on incremental volumes on on your organic volume growth this quarter, are those still hitting the, call it, the high 20s percent rate? Is it fair to say this quarter you saw that or above that level? Yes.

Yes. In fact, if you look at our U. S. Initiatives, it’s much better because we’ve talked about this in the past. Our sandwich group has our of the three big growth platforms in The U.

S, our sandwich group has the lowest contribution margins there, that 20% to 25% range. Our sandwich are 25, 30%, even over 30% contribution margins depending on the product mix. And then our bakery is 40% plus. So absolutely relative to 20 per 25%, we’re far exceeding that. Okay.

Understood. On tariffs, George, I I think you mentioned that was not a meaningful drag on margins in the quarter, but I wonder what you might expect moving forward now that tariffs are a bit more clear and are elevated for many countries, what you might expect over the back half of this year? Yes. So it’s interesting when we tariffs became part of the topic that the conversation was and the focus was on experts from Canada into The U. S, which we feel we have we’ve got 400 to $500,000,000 of product that crosses the border.

But we’ve got good strategies around that and ways to mitigate any conflicts between The U. S. And Canada. You know, really what’s emerging is the the impact on supply chains into The US for our US businesses. And so, you know, we bring products in from Brazil, we bring products from Europe, we bring products from New Zealand.

And so we’re watching that very closely. We have flexibility to the extent that these are we’re procuring products, so we can move things around and address it. But certainly, that’s what we’re viewing today is the biggest challenge and our management teams are focused on managing that. Ultimately, to the extent that there are unique products that we have to procure from these other markets, just because we can’t procure them from The U. S.

In those situations, we’ll have to deal with the tariffs through price increases. It’s an interesting scenario, John, because as we try to gain it, let’s say, we know that other companies in the food segment are way more exposed than we are. Very likely, for us, again, there’ll be some impact, but it won’t be material and we have ways to basically deal with it. But there is companies out there that that maybe don’t have the same option. So anyway, it’ll be interesting how it unfolds.

Yeah. And and just to sort of further clarify George’s point, John, our imports into The US are raw materials. You know, we we import very few, if any, finished goods. It’s any manufacturers that have outsourced their manufacturing offshore, those food companies are the ones that are going to have serious issues. But this is pure speculation because we don’t know where we’re gonna end up, John.

Right? Right? Let’s let’s remember that. Yeah. Okay.

Understood. And then one last one, and then I’ll I’ll pass it on. There there was a comment in in your prepared remarks this morning about premium brands growing with customers that are less sensitive to downturns or trying to do so. I wonder if you could share some more color here. Is that referring to a certain channel?

Or is that an income cohort you’re referring to? Just a bit more color there. Yeah. You know, again, John, I overall, as you know, you know, we manufacture premium products with clean ingredients, and we sell them to customers whose consumers basically are looking for them and are not buying them on price. Right?

So so basically, you know, we’ve done well with with customers in North America that have the right type of consumer who is looking for those type of products, differentiated products that are not ultra processed, and they’re willing to pay a premium ultimately. So, you know, in our view, that consumer doesn’t suffer as much in a mild recession, and they don’t change their eating habits in a mild recession. So that’s what we were trying to convey. And and we’ve seen that in the past in in in Canada. Okay.

Understood. Thank you very much. I’ll pass it on. Thank you, John.

Sophie, Conference Call Operator: Next question will be from Michael Glenn at Raymond James. Please go ahead.

George Palioglu, CEO and President, Premium Brands Holdings Corporation: Hey. Good morning. Good morning, Michael. Like to maybe try and pin you guys down a bit more on the specialty foods EBITDA margins in the back half of the year. Like, your EBITDA margins in the front half were down about 60 basis points year over year.

You like, how much do you feel you have enough in place to to grow EBITDA margins or keep them flat in q three on a year over year basis? Yes. We don’t provide quarter to quarter guidance on EBITDA margins, Michael. We’re confident in our guidance for the year, and I think we’ve given the cadence of that guidance over the next two quarters.

Sophie, Conference Call Operator: Okay. And

George Palioglu, CEO and President, Premium Brands Holdings Corporation: in terms of the some of the pricing inflation that you’re up against, like the chicken pricing, you feel it’s largely behind you now? And can you comment on beef prices at all? Yes. The chicken prices have come off, which was is great to see, and that’s sort of in line with our expectations. So as as the quarter is unfolding, that that’s sort of looking according to plan.

Beef is a greater uncertainty. We just we scratch our heads with how high it can go. It just continues to be inflationary. We’ve seen a few signs here and there, but that that’s probably gonna be the biggest challenge in the back half of the year. Plus, Michael, there’s the uncertainty around tariffs because there’s a lot of beef goes into The US from places like Brazil and Australia, New Zealand and Canada, of course, and others.

Right? Right? So there’s some uncertainty with regards to to beef input. What I’ll say, again, just back to Will’s comment is that we’ve been very dynamic and very proactive in terms of passage passing prices through to our to our customers. Okay.

And and a few items. So the the inventory ramp that you saw during this quarter, what would be your can you provide some ideas how we should think about inventories through back half of the year? Yes. It was probably about $50,000,000 of inventory we carried over in the quarter that we most of that was excess relating to these product initiatives. Again, things go according to plan, you should see a much more positive message at the end of Q3 going into Q4 around working capital.

The only other thing I would add, Michael, in in defense of our operating companies is that, as we mentioned earlier with regards to the tariff noise, it’s a very uncertain environment. So when you have an uncertain environment, the bias is always on to be sure. Right? The bias is always to be conservative. So there’s a little bit of that in in our working capital number.

Okay. And then last one for me. On the on the Clearwater advance from 1Q, is there a did you provide a timing for when we might see that come back? We didn’t give specific timings, Michael, but we do expect with the new financing going in place and some of the other strategic initiatives that are working, we do expect to receive that in 2025. Thanks, Michael.

Sophie, Conference Call Operator: Next question will be from Vishal Fida at National Bank. Please go ahead.

George Palioglu, CEO and President, Premium Brands Holdings Corporation: Hi. Thanks for taking my questions. Can you comment on the the Hi. Can you comment on the new capacity not identified in the 1,700,000,000.0? You talked about excess capacity in existing facilities.

You you know, it’s a large number that seemingly gets us to the 9.2 to 9.4. So where are the major capacity incremental capacity coming from? What facilities will drive that delta from that 6.5 plus the 1.7 plus the debt residual number? Yeah. We we have in our specialty foods network, 50 to 70 facilities, Michelle.

It it’s really spread across them. There’s, you know, there’s no one signal facility I can call out and say, you know, there’s a $150,000,000 of excess capacity. It is really widely dispersed. And the reality is George mentioned earlier the tailwinds driving many of our businesses. And the reality is, we’ve got all of our businesses are benefiting from that in the specialty food side.

And there’s, in addition to these large pipelines of opportunities, these are specific initiatives. This is general market growth from the categories we’re in, and it’s really supporting that general growth. Okay. Thank you for that. So with with respect to that number, do we do we know where we are in that continuum of of capture it?

I guess the 1.7 started in 2024. So I presume some of those capacity initiatives to take up the slack in capacity or add new lines, some of that’s been done and then some of that will be done through the course of the remaining years. Is there a sense or is it also very difficult given the number of facilities to gauge that? Yeah. Definitely.

It’s a combination of the two, Michelle. And and and again, that’s that’s how we are going to get to that 9,200,000,000 to $9,400,000,000 in sales through organic growth. It’s that large pipeline that we’ve built or that large new capacity we’ve built, the 1.7 plus it’s been general expansion and existing capacity throughout the network. So that’s your delta, that’s your difference in the 1.7 from our sales in ’twenty four was were 6,400,000,000.0 You add the 1,700,000,000.0 to that and then that that difference from the one that number to the 9.2, 9.4 is that general capacity through the system, plus the incremental benefit of that $60,000,000 to $65,000,000 a year of spend. Yeah.

And, Michelle, just in terms of the capacity, thinking aloud here, I think over the last few years, we’ve built about six plants, six brand new plants in the network. We’ve expanded a few substantially, and then we’ve added new production lines to existing ones. So those are those are the three different types of capital investments we’ve made to increase our capacity. And I’ll talk to Will and maybe on the future calls, we’ll give you a little more color on that, where we’re at in terms of that. Thank you.

That that would be helpful. With respect to the timing of the large program that will start in September, George, I think you mentioned that if the you’re ramping up a a new facility and if and if it doesn’t ramp according to to plan, maybe you’ll take it a bit slower. At what point will you know first, did I characterize that correctly? And second, what point will you know what speed you can go and and and the the cadence of the ramp out the ramp up? And what outcome is reflecting your guidance?

Is it the slower ramp up outcome that’s reflected in guidance? Yes. No. It is a more rapid ramp up, Michelle. And really what will happen is if it’s a slower ramp up, all you’re going to see is, I don’t think it’s going to change our outlook for the year by much because the initial channel fill as you ramp up is the big portion of the initial sales.

And we’re fully confident that if it’s not fully ramped up by q three, it will be in q four. So it’s really one, some of those sales might get pushed into q four, but it would not change our outlook for 2025. I see. So it’s it’s a month timing issue that you’re referring to. Exactly.

Exactly. Okay. Thank you very much. Thanks, Vishal.

Sophie, Conference Call Operator: Next question will be from Chris Lee at Desjardins. Please go ahead.

George Palioglu, CEO and President, Premium Brands Holdings Corporation: Oh, hi. George and Will, hope you guys both doing well. Hey. Hi, Chris. Just have maybe one follow-up question for me.

Just going back to US sandwich organic growth rate in the quarter. You noted that it was up slightly if you exclude the tough year ago comp. I’m just wondering, to the extent you can, can you provide some colors of how do you how do you think that organic volume growth rate will evolve in the back half of the year as some of the new programs start to come in? And then maybe in the context, if you’re able to share what you’re seeing from your large QSR customer. How are some of the initiatives going on right now?

And then what does that mean for the back half of the year for you guys? Thank you. Yes. So the sandwich group, we do expect to see a much better growth in the back half of the year. Part of that is with our one of our biggest customers, we continue to see steady improvement in their business and our sales to them.

And then just a lot of stuff in the pipeline that’s starting to come to fruition, particularly with the Cleveland plant starting up. So yes, yes, no, no, you should see a nice cadence in the sandwich group over Q3, Q4. Yes. And again, just a couple of more things, Chris. You know, we’re making excellent progress in terms of lining up more business in the overall coffee channel in in in The US, which is growing in the high single digit.

Again, we’re probably the best well positioned company in the food space to take advantage of the growth of that channel. And secondly, we’re making very good progress in terms of doing business in the retail and club channels as well. So so, again, there’s lots going on. I also wanna mention that, you know, the the co co packing channel for us is a is a great opportunity as we leverage the state of the art facility in Cleveland, Tennessee. Okay.

That’s that’s very helpful. And then maybe another quick one for me. Just, Georgina, your letter to shareholders, there were a few interesting comments. I think the other one, I think, noted with that, and I’m just paraphrasing that if you don’t see any significant improvement in the value chain business, you’ll likely shift from, you know, focus on dividends to share buybacks. Can you elaborate on what you meant by that and and just the timing of it and and just any parameters we can look for would be helpful.

Thank you. Yeah. You know, I think as as Will said, Chris, our our first priority is to basically improve the the balance sheet. As I mentioned earlier, we’re focusing on a number of initiatives to do that. We hope to have more to announce in in the coming months.

We’re making really good progress on on that front, and I think you saw some of the improvement in the in our balance sheet after the the second quarter. You know, ultimately, we think that at certain levels, our our shares are are very undervalued relative to their intrinsic value. And, you know, obviously, we’re gonna be looking at at buying back shares. It’s a more tax efficient way to create value for our shareholders. Okay.

Thanks for your comments and all the best. Thanks, Chris. Thanks, Chris.

Sophie, Conference Call Operator: Next question will be from Ryland Conrad at RBC Capital Markets. Please go ahead.

George Palioglu, CEO and President, Premium Brands Holdings Corporation: Thanks very much. Good morning. Hey, Rob. Just on premium food distribution, a nice kind of positive inflection in organic volume growth there. Can you just unpack the drivers of that performance?

In the release, I think it mentions that opportunistic inventory purchases were a contributor. So just trying to get a sense whether that kind of mid single digit volume growth is sustainable going forward. Yeah. Thanks for asking that question. I you know, again, we were pleasantly surprised, of course, by the performance of of our distribution group given some of the challenges with the economies in Canada and The US, the well known challenges.

Having said that, you know, I can’t emphasize enough the demand we’re seeing for protein, particularly premium protein. And and, you know, again, we’ve talked about this for a long time. We think that there is an inflection point here with regards to consumer demand and consumer taste. Obviously, consumers are favoring premium protein, and and we’re seeing the benefit of that in in our distribution business. We just, you know, it it mainly distributes protein across Canada and some parts of The US.

Okay. Thank you. And then just can you remind us on the the timing of the sale leaseback for the GTA facility? And are there any kind of preliminary estimates on the proceeds from that? Yes.

So so it it won’t be until we complete that project, and the completion now is for q two twenty twenty So so so it’s a ways off. Okay. Got it. Thank you. And then just on Clearwater, I think you kind of alluded to it in some of your responses, but I noticed in the the release that Clearwater actually did some of that kind of land based operation a few weeks ago.

And correct me if I’m wrong, but I believe that was a bit of a drag on the business. So could you maybe just provide some color on on that sale and and any implications for Clearwater? Yeah. So they they entered actually a number of transactions in in in the last few months that unlock value, reduce losses, of course, or eliminate losses in some cases, and also free up our working capital as well. So maybe Will can give you some numbers in terms of the improvement in the capital efficiency of of their business model, which has really been our priority.

Yes. So, you know, certainly that that transaction which happened after the quarter, we view it very positively. The benefits from a cash flow perspective, really, the majority of them will flow through future consideration and like George says, working capital benefit. So certainly, that’s contributing to our expectations to see improved cash flows coming out of Clearwater to premium brands. Awesome.

Thanks very much. Thanks, Rhonda.

Sophie, Conference Call Operator: Again, a reminder to please press star one if you have any questions. Next, we have a follow-up from Derek Lessard at TD Cowen.

George Palioglu, CEO and President, Premium Brands Holdings Corporation: Hey, guys. Just one follow-up for me, guys. I I in in terms of the the buyback versus the dividend, could you just maybe clarify? Do you mean you you’re you’ll you’d be doing the buyback rather than growing the dividend? It depends how our liquidity unlocking initiatives go.

Derek, I don’t think that you are mutually exclusive. Right? It just depends how it goes, but ultimately, it just depends on the where our shares are trading, our view of the intrinsic relative to intrinsic value. And what we said is that ultimately, if the balance sheet allows it, it would be more tax efficient to buy back the shares. Okay.

And and I guess to that to that point, George, like, when do you think you’d be in a position to to be buying back shares or anticipate? If everything goes well, hopefully, sometime in in ’26. Okay. Thanks, everybody. Thanks, sir.

Thank you.

Sophie, Conference Call Operator: And at this time, we have no other questions registered. I would like to pass it back to George for closing remarks.

George Palioglu, CEO and President, Premium Brands Holdings Corporation: I’d like to thank everybody for attending today. See you all in October.

Sophie, Conference Call Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

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