Lassonde Industries Inc.

Good morning, ladies and gentlemen. I'm here with Eric Gemme, Chief Financial Officer of Lassonde Industries.

Thank you for joining us for this discussion of the financial and operating results for our fourth quarter and fiscal year ended December 31, 2024. Let me remind you that all figures expressed on today's call are in Canadian dollars unless otherwise stated.

Now Let's turn to slide 4. Lassonde delivered solid performance in 2024, generating record financial results with sales of over $2.6 billion and adjusted EBITDA of $276 million.

Importantly, all divisions contributed to these results. Our build-back plan for the U.S.

business is progressing well, with volume rising 10% while demonstrating market share growth relative to a category that saw a slight decline. In Canada, our team executed pricing against record highs in orange juice and concentrates while mitigating its effects with innovation and solid promotion plans.

Our specialty food business also closed the year with solid year-over-year top and bottom-line performance. Additionally, we diligently continued to execute our multi-year strategy aimed at diversifying and growing in the North American food and beverage market.

First, we expanded the scope of our specialty food business by acquiring Summer Garden Food Manufacturing last August, which gave us a broader product portfolio of premium sauces and condiments, including the adjacent sugar free barbecue sauce segment. Second, we commissioned several new production lines, such as a single serve line in North Carolina and 2 high speed juice box lines in Rougemont to add capacity to support growth initiatives and in-source more production.

Third, we laid the foundation for future growth in our U.S. Beverage business by announcing a significant $220 million multi-year investment program.

This includes constructing a new facility in New Jersey to replace the existing one and enhancing North Carolina's role as an important strategic hub for us in the United States. These investments will not only drive efficiency and boost our production capabilities, but will also create job opportunities and support economic growth in both regions.

I want to take this occasion to thank all employees for their hard work and dedication which allowed Lassonde to achieve this outstanding performance. Eric is going to provide financial details on our fourth quarter in a moment but please turn to slide 5 for a closer look at operations.

As noted earlier we are pleased with the volume increases stemming from our Build-Back Plan for U.S. Beverage activities.

We grew business volume with existing customers and with new customers, such as a prominent Northeast-based convenience store chain onboarded earlier in the year. In North Carolina, you may recall we had some disruption from Hurricane Elaine in late September.

This led to a 15-day plant closure, followed by an additional 3 to 4 weeks of recovery before we could return to our usual production pace. With this said, after operations resumed, the ramp up of the single serve line encountered certain mechanical issues that prevented us from meeting our planned schedule on build back initiatives resulting in missed opportunities.

These issues lingered into the first quarter, but they now have been mostly resolved, and the line is nearly back to plan production output for our primary pack formats. Having said this, we have fallen behind schedule to reach full production rates and we are now looking at achieving this target by the end of this first half.

On the efficiency side, the ongoing insourcing of an increasing volume of aseptic juice boxes combined with improved efficiency and higher volume has helped us further reduce conversion costs. Turning to Slide 6 for an update on our strategic investment initiatives.

First, the construction of our new facility in New Jersey is on schedule. At this time, all key equipment has been ordered and we have appointed all principal contractors.

The detailed engineering design work is being completed and as we receive the town's permitting approval earlier in March. As a reminder, we expect to progressively transfer existing production activities beginning in 2026 and to complete this transition in 2027.

In parallel, the relocation of certain production assets from a cold packer to our North Carolina hub also remains on schedule for completion in the second half of 2025. This project will unlock additional volume for U.S.-branded products and allow us to transfer some production currently handled by our Canadian network closer to customers.

Turning to Canadian beverage activities on slide 7, we successfully executed on pricing to offset record levels of orange inflation. We also mitigated inflation through innovation to reduce our exposure to orange and productivity improvements with a new high-speed line.

More recently, we launched a new marketing campaign to take advantage of shifting shopping behaviors across the country. The campaign is aimed at celebrating our Canadian roots by promoting Lassonde's strong national and regional brands as Canadian to the core.

Our flagship Oasis brand is also a vital part of this campaign, where the brand's heritage will be reinforced through a new tagline, there's no taste like home. Moreover, I am very proud to say that BrandSpark is named Oasis as Canada's most trusted brand in the fruit juice category for the third consecutive year.

Another key objective of our Canadian beverage business is to grow its reach in the food service channel. Supporting this goal we are investing $10 million in Rougemont to introduce a new bag-in-a-box aseptic packaging line for beverage dispensers to be commissioned in the second half of 2025.

The packaging format offers convenient dispensing, which makes it ideal for a wider range of food service customers, such as microbreweries and large-scale caterers. This investment represents a significant step forward and should allow us to expand our presence and deliver customizable beverage solutions to the food service channel across North America.

Furthermore, this technology enables us to expand our reach to include industrial aseptic juice supply. Now, let's turn to specialty food on Slide 8.

This was the first quarter with a full contribution from Summer Garden, which generated sales of $55.7 million and EBITDA of $12.5 million, representing a solid margin of over 22%. Legacy operations, meanwhile, once again, achieve solid sales growth in retort products, mainly for premium glass jar soups and sauces and strong performance in the broth category.

Since closing the acquisition of Summer Garden, we have focused on onboarding personnel, as well as identifying revenue and cost synergies. We are currently evaluating investments to accelerate growth, including scenarios to enhance production capacity to capitalize on identified opportunities.

This includes the ongoing assessment of the potential for further plant expansion in Ohio that would enable us to continue our strategy of producing close to our customers. Integrations are never easy, but I am very pleased with how the teams have come together.

We've been able to structure a business that embraces the Lassonde operating model while ensuring the preservation of the entire Summer Garden team and leveraging our respective know-how. This gives me great confidence in our ability to strengthen our position as a leader in the North America specialty food industry.

I now turn the call over to Eric for a review of our quarter four results. Eric.

Hey, thank you Vince. Good morning everyone.

Before I begin, please note that most amounts have been rounded to ease the presentation. Also note that I will refer to non-IFRS measures or ratio, mostly to ease comparability between periods.

Reconciliation to IFRS measures are provided in the appendix to our presentation. Fourth quarter results reflect the inclusion of Summer Garden for the entire period, as well as the effects related to the purchase price allocation, which was completed during the quarter.

Details of the allocation can be found in section 5 of the MD&A. Let's turn to slide 9 for our fourth quarter sales, which amounted to $738 million, up 22% versus last year.

Excluding acquired entities and a favorable foreign exchange impact, sales increased 10.7%, reflecting a higher sales volume in the US and pricing adjustments in Canada, mainly for private label products. Moving to slide 10.

Growth profits reach $193 million, representing 26.1% of sales, up from $153 million a year ago, or 25.2% of sales. Excluding acquired entities, gross profits rose 10.6%, driven by a higher volume.

The run rate effect of pricing adjustment, lower conversion costs despite challenges from Hurricane Elaine, and starter costs of our new single-serve line, both impacting our North Carolina facility. The net improvement results from the overall efficiency improvement, including insourcing in Canada of production of aseptic juice boxes for our U.S.-branded business.

These were partially offset by higher input costs, mainly orange juice and concentrate. SG&A expenses were $150 million, up from $120 million last year.

Excluding expenses from acquired entities, SG&A increased by $14 million, or 12%, reflecting higher outbound transportation and finished goods, whereas in cost, mainly for our US operation, driven in part by a volume effect. Higher expenses related to our strategy and its deployment, partly offset by lower selling and marketing expenses, mostly in Canada.

Excluding items that impact comparability, adjusted EBITDA increased 51% to $80 million, or 10.8% of sales from $53 million, or 8.7% of sales last year. Adjusted profit attributable to corporation shareholder came in at $35 million or $5.13 per share compared to $21 million or $3.14 per share last year.

Looking briefly at annual results on slide 11. Sales rose 12.4% to reach $2.6 billion.

Excluding acquired entities and FX, the increase was 7.1%. Pro forma sales, assuming the acquisition of summer gardens had taken place on January 1st, 2024, totaled [$273 billion] (ph).

Adjusted EBITDA amounted to $276 million or 10.6% of sales up from $207 million or 9% of sales in 2023. If the Summer garden acquisition had been completed on January 1, 2024, adjusted EBDA for the year would have been $307 million or 11.2% of sales.

Adjusted profit attributable to the corporation shareholders reached $130 million or $19.05 per share compared to $90 million or $13.18 per share last year. Turning to cash flow on Slide 12.

Operating activities generated $76 million in the fourth quarter of 2024 versus $78 million last year as a lower cash generation from working capital this year versus last. And a higher taxes and interest paid were partly offset by higher EBITDA and a net withdrawal of certain excess amounts invested in our defined benefit pension plans.

For the year, operating activities generated $234 million, up from $220 million in 2023. The days of operating working capital ratio stood at 38 days in Q4 2024.

This is slightly below the historical range mainly due to higher days of payable reflecting certain amounts payable related to certain capital expenditure projects. We expect the ratio to increase throughout 2025 but to remain within historical range.

Capital expenditures total $30 million in Q4 and $160 million for the year, including $13 million related to the construction of the New Jersey facility. This project will accelerate over the next quarters and represent CapEx of approximately $100 million this year.

As a result, we expect CapEx to reach up to 9% of sales in 2025. Turning over to our balance sheet on slide 13.

Lassonde's net debt totaled $449 million at the end of the four quarter versus $456 million three months earlier. The net debt to adjusted EBITDA ratio stood at 1.6 to 1 at the end of Q4 2024 versus 1.8 to 1 3 months earlier.

Considering the US multi-year CapEx program and all things being equal, we anticipate the leverage ratio to range between 2 and 2.5 to 1 from the first half of 2025 until the end of 2026. Ladies and gentlemen, I turn the call back to Vince for the outlook.

Thank you, Eric. Please turn to slide 14.

We are entering 2025 with cautious optimism as we continue executing our strategic plan amid geopolitical uncertainty. For U.S.

Beverage activities, our priorities remain focused on building back our private label volume, ramping up the North Carolina single-serve line, and pursuing capacity expansion initiatives. For Canadian beverage activities, we will continue to fortify our leadership by supporting initiatives that foster growth through innovation, including the launch of our popular Del Monte Nectars into a convenient 200 mil juice box format.

Channel expansion through a new food service initiative. Targeted marketing investments, including our new campaign launched in March.

The campaign will be executed across outdoor print, social platforms, and will be supported through in-store merchandising and now in-pack initiatives and through productivity improvements. In specialty food we will continue onboarding summer gardens activities by leveraging our strengths and expertise across our North American network, capturing synergies and reinvesting to support long-term growth.

We are also pursuing our assessment of expanding the Ohio facility, which would enable Lassonde to grow capacity, reduce costs and capture long-term growth opportunities. Now let's move to slide 15 for our sales outlook.

In 2025, we expect to achieve a sales increase of approximately 10%, excluding currency fluctuations. This growth will reflect a full year contribution from Summer Garden as opposed to less than 5 months in 2024, the run rate effect of existing and planned selling price adjustments, and sequential sales volume improvement related to the pace of our U.S.

Build-Back plan, additional volume available from our new single-serve line, and demand normalization. We will stay vigilant in monitoring cost inflation for certain commodities such as orange and apple concentrates, which we expect to remain volatile through 2025.

There has been a noticeable pullback in orange concentrate costs in the last month. This situation is mostly caused by speculative trading rather than significant changes in fundamentals, much like the pricing spike experienced in 2024.

This being said, if prices remain at these levels, we should benefit from lower costs at the end of our hedging horizon. However, a recent surge in apple juice concentrate costs due to global supply shortages will cause a margin contraction in the first quarter given a lag between sudden rising cost and subsequent pricing adjustments.

Turning to Slide 16. Another important consideration is the threat of a North American trade dispute.

Because of this uncertainty, transportation and warehousing costs have risen and are expected to continue increasing at least for the first half of 2025. Supply chain disruptions may also affect us, as the market adapts to new realities.

To give further context, in 2024, slightly more than 10% of our sales consisted of products made in Canada and sold in the United States, while a nominal level of products are made in the U.S. and sold in Canada.

As for ingredients, approximately 80% of raw materials used in Canada are imported with Brazil as the leading supplier followed by the United States. In the U.S., 40% are imported with Turkey as the largest contributor followed by Brazil.

We will also be assessing our indirect exposures based on the scope of any potential tariffs. Our long-standing strategy of producing close to our customers has strengthened our North American network.

The initiatives put forward this past year reflect this strategy and should further reduce our operating risk and improve supply chain stability. We have prepared mitigation measures to maintain a strong competitive position and an optimal cost structure.

However, the timing, duration and evolution of tariffs may affect our measures. Given the time required to implement them, we expect any negative impact to be more heavily weighted in the initial months following tariff enactment.

In closing, on Slide 17, despite a more volatile macroeconomic backdrop, we expect our momentum to continue. Although the threat of terrorists may impact consumer demand and the global supply chain, we have prepared measures to mitigate these effects to the extent possible.

Driven by a strong product portfolio and talented teams, Lassonde is well-positioned to sustain growth in 2025 and beyond. This concludes our prepared remarks.

We are now pleased to answer your questions.

Good morning Vince and Eric.

Good morning Martin.

Congratulations on your results. It's great to see the strong EBITDA and EPS growth.

My first question is on your revenue growth assumption in your guidance, you are saying that you expect revenues to increase by 10% year-over-year. I was wondering of that 10% increase, what's the percentage point that comes from organic growth?

And how much pricing is embedded in that assumption?

I don't have the number handy, Martin. So I'll -- give me a few minutes, and I'll be able to get back to you on this one.

But you should assume most likely a CAD125 million is acquisition related, right? If you do a run rate, Summer Garden CAD150 million U.S.

business, we had them with us for 5 months. So if you were to do the 512 -- sorry, [ 8/12 ] of that and then apply some growth, let's say, use the 10% that we're giving, and that would give you the acquisition growth portion and then the rest would be organic growth.

Okay. So for Summer Garden, do you expect revenue growth?

Are your revenue stable since you acquired the company?

No, no, that's what I'm saying should apply. Again, from a guidance perspective, we're saying 10%.

Let's apply the 10% on this one.

It's not clear. So maybe we revisit a little later.

What -- how much pricing is embedded in that 10% increase?

Well, that's --.

Versus volume?

So Martin, let me get back to you on the 10%, how much is acquisition related, how much is volume related and how much is price related, I'll get back to you during your Q&A session or towards the end.

Okay. Maybe just continuing on the revenue guidance.

Like how is this going to evolve over the year? Is it fair to say that the growth rate is going to be a little higher in H1 given Summer Garden and then slow down a little bit in H2?

That would be the right assumption, Martin. Yes, because Summer Garden of course, the first 2 quarter, it was going to be an addition to our revenue.

Then price increases, there's a run rate effect of last year. And then there are some price increases that have been taken already in the first quarter and volume is mainly our single-serve line in the U.S.

again, contributing revenue for the first half, while it was deployed in the back end of last year. So that's a fair assumption that is most likely in the first half.

Okay. And then on your gross margin, there is a lot of moving parts.

Transportation seems to be a bit of a headwind. Orange concentrate have gone down, but you seem to be hedged.

Apple concentrate has gone up, and you don't seem to be hedged there. So -- and you don't give a gross margin guidance per se.

But it is not clear reading your outlook whether you expect gross margin pressure overall or gross margin expansion because Summer Garden should be accretive. So like how should we think about your gross margin in 2025?

So Martin, as you know, we don't give guidance. However, since we are very close to our first quarter end, so we have some visibility in here.

And given the price of apple that really spiked towards the end of last year, 2024 and this is basically the material that we've purchased. So we came in, in the first quarter with higher cost of price -- higher cost of apple, which from a pricing perspective because it was really a spike, an unexpected spike, we were not able to turn around and get the pricing right away.

But we've deployed pricing since then. So in March, we've deployed pricing in the market to cover for this cost of apple.

So -- but we still look at the quarter with a little bit of a pinch having to absorb this higher cost of apple and not having the price increase. So we -- as I said, we don't give guidance, but at the same time, we have enough visibility.

And the last thing we want to do is to surprise you. So that's why we said, okay, let's be mindful of this as you make your assessment of the quarter itself because, again the price increase will cover for those, the higher cost.

So the situation we are in for the first quarter, if you look at 2022, 2023, there was a bit of the team, right? We had cost increase followed by price increase and what's creating a bit of a lag.

Of course, the apple is not as pervasive as the 2022 situation. And again, I don't want to guide, but it's not necessarily from a margin perspective for the first quarter, the run rate that you have observed in 2026 or in the back end of 2026 with Summer Garden -- '24 with Summer Garden.

Maybe it is more somewhere in between. So that's as far as I will go, Martin.

But I just didn't want to surprise anybody in a few weeks with a bit of a contraction in margin.

Yes. No, that's super helpful for Q1.

I'm just a little bit unclear as to how the rest of the year evolves, Eric. Is there anything you can help us?

Any color you can give us for the rest of the year?

Again, no guidance, Martin, but you saw the progression of our margin over the year. You see the effect over the years.

You see the effect of Summer Garden bringing a good margin and there are measures that we've deployed. So I think you have to look at the effort that we are deploying that start to pay off.

And then a bit later during the year, we're going to deploy our two juice box lines in North Carolina that should as well bring some savings. So yes, bearing any other surprises, we are still aiming at growing our EBITDA growing -- through growing our margin.

So we believe that we are, again, bearing any surprises, we are still on track.

Okay. That's helpful.

Thank you very much and best of luck.

So thank you, Martin. I will get back during this call with -- I'm almost done with the breaking down of organic versus acquisition growth.

Thanks and Good morning everyone. I wanted to start with the outlook and more specifically the outlook for commodities, Eric, I know this is probably too bold of an assumption, but just for the sake of argument, if we assume that apple juice and apple concentrate prices hold flat with where they are right now, does the pricing that you took in March, does that fully catch you up as of Q2, we'll say?

In other words, are you going to be happy with your margins as it --.

Luke, it's very difficult to hear you. So can you repeat the question?

Yes. Sorry, I'll repeat that.

So assuming that you guys get -- apple juice and apple concentrate prices, hold flat with where they are right now, will the pricing that you took in March be able to fully catch you up from a product margin perspective? I realize it is probably a bold assumption.

I'm just trying to understand if mechanically, the price increases that you've taken thus far should be enough to offset the higher concentrate and apple juice costs that you've seen thus far.

So now, we understand your question. So the answer is, yes, we feel that we have better visibility now given the contracts.

So in the half -- in the last quarter of 2024, we are at the end of our 2024 contract. Now we have visibility on our 2025 contracts, visibility on our cost of materials.

So we believe that we are at this pricing at the moment, we are at the right place.

Okay. Great.

And then the second question on the commodities is relating to orange juice. So I think you mentioned you should benefit from the orange concentrate orange juice prices coming down over the course of the last couple of months, but you are hedged.

So how should we think about the benefit that you get from that either from a magnitude perspective or a timing perspective or both in 2025?

Okay. So let us start with the back end of 2025, and you have this information in the MD&A, 70% of our orange need is hedged.

And of course, I'm not going to disclose the price of our hedging, but we believe that we have a good position in there. So now the question is for the remaining 30% are we going to be able to secure that at the current market price.

This is where, again, we don't want to speculate. But we are not sure that the price will remain at this level because fundamental will probably take us to a bit higher.

So long story short on this one, at the moment, we have a good visibility on our cost. The pricing that we have in the market, we are okay with it.

And we'll need to see how much the CAD2.50 a pound level stick versus going back to maybe something above the CAD3. But again, from a pricing perspective, we are in the right place with the cost profile that we have and the visibility on cost we have.

Yes. Understood.

Okay. So switching gears to Summer Garden then.

The margin, I think it was a 22% EBITDA margin that you delivered during the quarter. Annually, we know this business is sort of high teens.

So is that just benefits that you've already gotten from integration? Or is that more just seasonality playing out there?

So I think it's a tale of three things. First, the fourth quarter, remember -- remind you that this is a soft business and fourth quarter is a good business for this -- it's a good quarter for this type of business.

So there's a bit of seasonality in there. Second, when we announced the acquisition, we were incurring on 12-months as of May.

And the business has grown a little bit since then. So there's a bit of a push in there.

And yes -- and again, I don't want to say that there is a lot of synergies in there because we want to reinvest those synergies. But yes, there's a bit of an effect of working together part of this margin.

And the last thing, when we've announced the adjusted EBITDA that I've quoted, I wanted to be conservative. So I really had a sharp pencil when I determine what would be the -- what is the adjusted EBITDA quoted in this acquisition.

Okay. I appreciate that.

And last question, and then I'll pass the line here. You mentioned Specialty Foods -- potential Specialty Foods expansion in Ohio and moving around some assets on that.

Can you frame up for us when you might make a definitive decision on when that happens? And then also maybe the magnitude of investment required to expand capacity there?

Thank you.

Hi, Luke, it's Vince. I'm going to answer that question.

It is to be determined. There's a lot of factors at play.

I mean, we're concluding on the assessment. I'd like to be able to conclude that assessment within the back half of 2025.

Having said that, we have also got a lot of factors that impact decisions, including things like tariffs. And so for us, we are pretty optimistic that we will conclude on the assessment.

We'll probably be talking to you in the back half of 2025 in terms of where we netted out on that assessment. I'm going to take you back as well to the strategy, which is our commitment to produce closer to the customer, and that has been really, really helpful for us as a company.

And when we acquired Summer Garden, we acquired it as our first footprint from a manufacturing perspective in the United States. And we know the market opportunity is there for growth within the United States.

So it stands to reason that expanding capacity allows us to both maximize our assets -- existing assets and to grow beyond that. So I've given you a bit of a long answer there, but my hope is that we're concluded on that assessment in the back half.

And Luke, while we're still on this, let me get back to Martin's question, and I'm sure all of you are interested. So let's go back to the guidance on revenue.

We're calling about 10% out of the $2.6 billion. So let's assume that it's $260 million.

Roughly speaking, about 50% should come from acquisition growth. And then about the rest, let's split that 50-50 between volume growth, mainly our single-serve line in North Carolina and the other 50% is price increase.

And the build-back plan in the United States.

And the build-back plan.

Hi, thanks for taking my questions. Wondering if you could give us context on two seemingly competing factors, the benefit of buy Canada and what you're seeing in your results there and weakening consumer confidence and how your categories respond to that consumer fatigue and uncertainty.

Vishal, let me jump on that. It's Vince.

A couple of things. The buy Canadian sentiment allows Lassonde to go from strength to strength.

I mean as you know, it is our flagship market. We've got strong brands.

We've got a leading share position through our strategy in both brand and private label. What I would say in terms of the buy Canada sentiment is we are seeing it with respect to more recently fourth quarter results from a Nielsen perspective.

Obviously, there is a lot of activity that we've got in play in terms of the innovation that we're putting in the market, the promotion calendar, which is quite strong. But what I will tell you is when you take a look at both the Canadian and the U.S.

business is what I want to touch on here is in a market that has actually been fairly resilient. And what I mean by resilient on that point is that the U.S.

is down about low-single digit, call it, negative 1. past 4 weeks, past 12 weeks, past 52 weeks, we outpaced the market in the United States and grew share.

In Canada, very similar. What you will see, however, and this is in the more recent 4 weeks is the category continues to be soft from a tonnage perspective.

It is down what I would describe as high -- sorry, I would put it probably in that 3% to 5% range, which is pretty consistent with what we've shared in prior quarters. But what you will see is an acceleration of our growth in that last four-week period, where were seeing high single-digit growth in a market that's down 3% to 5%.

So we are growing market share. And there is an element of that in terms of buy Canada sentiment.

What I'm going to say as well, Vishal is this is well before the kick-off of our consumer campaign. And for us, we are going to be very mindful of the opportunity to shift with consumers' sentiments.

We are going to reinforce the fact that we're strong and that we've got a 107-year history. We've got heritage in the Canadian marketplace with facilities across Canada.

Now I say that because we've got facilities in both Canada and the United States and the activities that we put in place are intended to follow consumer sentiment in both markets. I mean that's important for us as a North American company.

But in Canada, currently, we see the sentiment, and we think it will accelerate, and we are reinforcing that through our campaign. And as far as reduced consumer confidence, we see that.

And I think that those are just risks that could potentially play out as the year goes on. But what I would do is turn our attention back to the past few years where we faced risk like this before, which is inflation and the threat of a recession and consumer spend pullback.

And this is where I talk about the power of our portfolio and the fact that we are diversified as an organization across juices and juice drinks, across package formats, across various channels that allow us to actually serve all of that as a hedge, including our representation in both brand and private label. So your point on those two competing factors are well called out.

Clearly, we are watching the consumer sentiment piece of it. But again, what we've got is mitigations in play.

And again, we're going to leverage the strength of our portfolio as a means to offset that.

I just wanted to lean on your historical perspective again. So in this industry, when you have commodity volatility like we are doing -- like we had in orange juice concentrate and the price falls, what does the industry do?

Do they keep the margin gains? Or do they give it all back?

And how should I expect that to unfold?

What I would say to you is as much as you'd like to keep it, the market is very efficient. The reality is we participate in a fairly competitive market.

And so because of that, when you look at it historically, you should assume some efficiencies. Now I hope you always hope that there's discipline in the market to ensure that, that efficiency doesn't result in anything that I would deem as being irresponsible on either side.

But again, I think you should just assume that it's an efficient market and things tend to flow is the way that I would describe it, Vishal.

I appreciate that. And also, I want to get your perspective on tariffs.

Now granted, I understand it's uncertain environment, and it's difficult to say with precision how Lassonde will respond. But nonetheless, the market still has to assign indications of what it believes.

So what I was interested in is, why management said they were constructive on the year ahead, notwithstanding such a significant portion of your inputs exposed from different geographies, which may be subject to tariffs. So maybe you could just help me understand at a high level what drives that confidence?

And when I'm asking this question in the back of my mind, I'm thinking that Lassonde has been taking pricing over the last few years to cover the commodity volatility and pricing as a strategy, again at some point, the consumer may baulk at further pricing. So I was hoping you could put that all together to me and what gives you a constructive view on the year ahead.

So complex question on, but let me unbundle that for you. So -- because you have to look at the U.S.

itself, which is the initiator of those tariffs. In the U.S., we procure about 60% in country, about 40% outside.

And again in MD&A, we're providing new sources of that. The main country for sourcing in the U.S.

is Turkey, which seems not to be affected by tariff so far. And then there are a few other countries.

So on this, it is going to be like any other player in the market. They source from the same regions that we source.

And all of the players will have to face the same cost increase due to tariff. And unfortunately, and as it is been said everywhere, the consumer will have to, at the end of the day, assume a good portion of that cost.

Of course, we will try to do everything we can from a mitigation perspective before getting to price. But at the end of the day, and like any of our competitor, we'll have to pass on price, and that's the unfortunate reality.

Now if you turn around and look at Canada, well, Canada, when we in-source product, now it is mainly from the U.S., yes, we do source product from the U.S., not as much, it's still a significant country in terms of supplier. And yes, that's -- here again, we'll try to mitigate that.

But for Canada, we have to deal as well with a weaker currency. And any tariffs that the Canadian government will impose on the U.S.

And here again, we will try to mitigate through formulation, portfolio optimization, network optimization try to produce as much as possible in Canada for Canada and the U.S. for the U.S.

But at the end of the day, there will be an increased cost. And here again, I'll have to pass it on.

And unfortunately, consumer all of us will have to absorb the cost of these tariffs. And that's it.

And then the last piece, Vishal and again, for a complete disclosure, again, in our MD&A, we are working with an integrated network. And as you heard us over the past few years, right, we are using Canada to help in-source product from the United States.

We are selling from Canada, especially in specialty food to the U.S. market.

So we do have some finished goods that are manufactured in Canada and sold in the U.S. So that's another exposure for us.

That being said, if you look at the action we've been taking recently and that we are -- we have discussed a bit earlier with our lines in North Carolina, then we are going to bring production from Canada to the United States, which will reduce that exposure. Now we are talking about Boardman or Summer Garden, our location in the production facility in Summer Garden.

We are looking at expansion here again to help us close the gap and manufacture locally as much as possible. So manufacture in Canada for Canada, manufacture in the U.S.

for the U.S. So these are the type of actions that we're taking to try to mitigate as much as possible any tariff, if tariff there is on food.

Let me just build on one thing on the expansion point. not all of this is tied to a back half assessment to talk about further expansion of a facility and new lines.

What I can tell you from a synergy perspective is the capabilities that Lassonde has, has been able to work with the Summer Garden team and through improved processes and activities, we found efficiencies, and we've actually improved capacity. So to the extent that we can actually increase capacity and better leverage the existing assets, then it also gives us more flexibility to consider production that's in Canada for the U.S.

and considering the production within the United States to support that. So we don't have to wait for a back half assessment in terms of the things that we are trying to do.

We are already doing things to actually grow capacity so that we've got more flexibility in the downhill.

Thank you. I wanted to maybe first come back on the growth at Summer Garden.

It was mentioned as a factor in Q4. Just wondering if you could maybe detail on the recent growth and future growth expectations as well.

What's sort of the contribution or effect of new customers or existing customers? Where is the growth coming from largely there?

Is there one that's more impactful than the other so far and sort of your expectations on future gains?

So in the fourth quarter, it was mainly growing -- Summer Garden mainly grew with existing customers. So we have not started to deploy our revenue synergy element in there.

Okay. And any thoughts on when that part of the synergies might be a factor?

So we are finalizing -- Vince, maybe you want to -- finalizing our study in terms of progressing.

Yes. Thanks, Eric.

So Frederic, you've heard me talk in the past about us starting a strategy, a strategic review of the Summer Garden and the Specialty Foods business, our legacy business and determining where to from here. And so we've nearly concluded on that activity.

We just need a little bit more time to sort of solidify that. And as I said, on back-half expansion assessment, we'll come back to you and start talking with some more specificity on the back half in terms of what that project has told us.

What I can tell you though, is that the categories that we've acquired, we see potential for growth. Barbecue sauce is an area that we think we have potential for growth.

When you look at the U.S., I would largely say the U.S. strategy there is to frankly, build distribution and further diversify our business across customers within the United States, and we think there is an opportunity there for us to grow that.

This is before you think about Canada synergy in terms of the role that the barbecue sauce category might play and to what extent G Hughes can extend into Canada. When you take a look at the pasta sauce market, robust growth that you continue to see.

The category all up might be low single-digit growth, but the categories in which we've acquired and we're going to continue to participate and play in the premium to super premium categories and the consumer has not only proven to be resilient. The fact is, is that we are seeing double-digit growth in those segments.

And so that's an opportunity for us also within the U.S. to, frankly, build the brands, build brand awareness and also organically figure out how to expand distribution market.

Again, that is well before we consider opportunities to leverage our synergies and start to build a capability in Canada. So more to follow on that one, Frederic, but the opportunity for growth, we continue to feel quite positive about.

Great. Appreciate the color there.

Maybe more of a modeling question here on your depreciation and amortization. I noticed that the guidance for $115 million in 2025, Eric, do you feel that that's a good run rate for the company as a whole going forward as well in 2026 and beyond?

Or is there any sort of onetime accelerated depreciation in 2025 that we should take into account?

So when we announced our New Jersey plant, we said that for the next 10 quarters, we would have CAD1.5 million worth of accelerated depreciation on our existing plant, right there, $6 million. That being said, if you look at the major investment we've done last year -- sorry, '23 in '24, we will start to amortize those.

So I think it's a good anchor point to grow, but recognizing that there's a bit of a onetime in this year, this CAD115 million that will be substituted, replaced by more amortization or depreciation of existing or new CapEx. And the new plan right in New Jersey by 2027, it's a $200 million that will be amortized between, of course, a component between building, which will be a longer amortization and then equipment based on the nature of the equipment anywhere between 10, 15 to 20 years.

So we'll -- on guidance on these elements will come later by 2026 and 2027.

Okay. Great.

And then just lastly --.

But for your model, I think the CAD115 million is a good anchor point and then think about some growth in there in the future.

Okay. Perfect.

And lastly for me on input costs. I mean, there's been a lot of discussion on orange and apple, rightfully so.

But just wanted to maybe look at the Specialty Foods business and their inputs and main ingredients. Any comments there on supply availability and the cost of these -- their main inputs?

Anything to flag there?

So the main input for that business is when you think about the red sauce, of course tomato. So tomato, nothing special in the last few years, but we're always at the mercy of crop.

A few years ago, California was a challenge, but we source again from California, we source from Canada, we source from Italy. So I don't feel anything special or we don't hear anything special in tomato.

Then when you think about the cream sauce and of course, it's dairy. So dairy are sourced from Canada and from the United States.

So on this one, I think local sourcing in both countries should be sufficient. And then what else do you have in the cream sauce?

You have some starch. Starch is a bit of a commodity.

But again, we don't have concern. There is nothing that tells us that we should be concerned by starch growing.

And then, with the eggs again, eggs, not that much, and it's mainly Canadian.

Perfect. That’s all I had.

Thank you.

Well, thank you for joining us this morning, and we look forward to speaking with you again at our next quarterly call. Have a great day, and have a great weekend.

Thank you.