Good morning. My name is Julie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Andrew Peller Limited Third Quarter Fiscal 2024 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press Star, then the number one on your telephone keypad. If you'd like to withdraw your question, please press Star, then the number two. Thank you. I will now turn the call over to Jennifer Smith, Investor Relations. Please go ahead.
Thank you. Good morning. Before we begin, this is a reminder that during this conference call, management may make statements containing forward-looking information. This forward-looking information is based on a number of assumptions and is subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from those disclosed or implied. Please refer to the company's earnings release, MD&A, and other securities filings for additional information about these assumptions, risks, and uncertainties. I'll now turn things over to John Peller, Chief Executive Officer.
Thank you, Jennifer. Good morning, everyone. It's great to be with you. The sun is shining brightly, and things are looking up, I think, for Andrew Peller Limited and for people generally in Canada these days. I'd first like to point out that we had an announcement last week where we identified five new directors for our company, four of whom are independent, as part of our leadership continuity and transition plan. Bruce McDonald, who's a senior executive with more than thirty years' experience in manufacturing, has had extensive experience in the automotive sector, will serve as the chair of our board, and the full bios of the other board members have also been outlined in that press release.
These directors bring great depth and experience in governance, finance, capital markets, logistics, and beverage alcohol to our board, and we're excited to work with all of them. We had our first board meeting yesterday, and as a team, we're all excited about our future. With respect to the CEO succession that we referenced, that process continues to go on. We've been working at it for over a year and a half. We've engaged outside consultants to help us with the search. It's going very well. There are great candidates, and I have no doubt we'll find a great leader to carry on our vision. I think, as importantly, I'd like to acknowledge the high-quality executive management team that we have that has served us so well, taking us through the challenging last three years.
So first of all, I'd just make some quick comments about our performance year to date and how we see the year finishing. I've had a couple calls from people this morning because the third quarter results that were published, you know, are a little confusing. They're showing a decline in gross margin performance, and that's largely because of, I'll call it, noise from having had the WSSP program downloaded in the third quarter last year, as opposed to being spread out over throughout the year. So that when you adjust for that, in fact, the third quarter performance is strong, both from an earnings level and from a revenue perspective. I'll talk to that first. You know, it's best if I refer to three...
Our third quarter year-to-date revenue performance has us coming in at CAD 301 million in revenue versus CAD 304 million last year. But last year's number needs to be adjusted to take out excise tax, which is no longer... In other words, we're paying the excise tax now, so that on an equivalent basis, apples to apples, we're up over last year, even though we're showing a slight decrease to this year. The reality is that the beverage alcohol market in North America is quite soft these days. It would be expected to be soft with the pressures that are put on consumer spending and discretionary spending these days. You know, beer, spirit, wine, volumes in North America are all down in the kind of 3%-5% range from volume. People have taken pricing to try to offset that.
The volumes are kind of still in line with where we were pre-COVID, so that it's not a long-term challenging perspective in my view, and I do expect as we come out of next year and return to more normal economic times, that volume growth will be restored. But that aside, you know, year to date, as I said, we've had a strong revenue performance, better than last year. Our EBITDA for three quarters was CAD 41 million, which is a 5% increase over last year. We've achieved this, as we've highlighted at our AGM, through a four-point focus around cost reduction, cash management, monetizing our assets, and growing our revenue. And from a cost reduction standpoint, you know, we've been able to take almost CAD 25 million out of our costs, mostly freight, bulk wine, transportation, and warehouse and logistics.
You know, we've had at least another 8-10 million taken out of our SG&A savings, which you'll note are down significantly from last year. We've had an 18% headcount reduction at the corporate level, and naturally, our margins have now significantly, significantly been improved by tax reductions, both the excise tax relief through the WSSP program and now a new program that we're receiving in Ontario, which is called the QEP, Quality Enhancement, Margin Improvement. It's effectively a reduction in taxation, and it puts us on par with how we're treated in British Columbia. So these factors all bode very, very well for our short-term results and even better for our long-term results.
As we look headed to finishing, you know, the year in just over a month's time, we'll have revenue consistent with what we've reported this year, which should show a slight increase over last year when we adjust for the excise tax. We've indicated that our target was to hit CAD 45 million in EBITDA, which would be an 18% increase over last year. We will definitely achieve that number, and now we will significantly outperform that number when we get the Margin Enhancement Tax Reduction program implemented in Ontario, which starts in the year that we're in. It will be kind of like the WSSP last year, kind of heavily downloaded in one quarter. We've received those assurances from government in the finance department, and they're just crossing the I's and T's on administration of that.
But this is a critical program for our company and for our industry. It reflects the Ontario government's positive outlooks and confidence in the economic contribution of our industry and the benefits we provide to not just the Niagara region, but Prince Edward County and the growing wine regions of Ontario. You know, we've worked hard to build economic policy that will support increased investment going forward, and we're grateful to the government to support our initiatives so that we have tax policies that are competitive with best-in-class practices in the rest of Canada and around the world. I'd add that things continue to go well in Port Moody in terms of our monetizing the value of our Port Moody asset. You know, our development has been well received by the development community.
We're talking to many senior groups in the Vancouver market, and we're confident that we'll have very positive news within the year on how we plan to monetize that investment. We have had a bit of a weather event in British Columbia. We had some very cold weather in January. It was minus 32 for 3 days, and you know, we expect some significant damage to vines and as a result of those cold temperatures. We do have business continuity plans to mitigate the impact when we have a significant crop loss like we will have there. And you know, we've had those issues come up previously.
The last times were 2006 and 2002 in Ontario, where we had significant cold weather damage, and we were able to manage our way through that, you know, those challenges without any impact to the statements. We are talking already with government and industry to ensure that we get through this impact as well. I'm happy to turn things over to Paul now to provide more context on our financial statements. Over to you, Paul.
Great. Appreciate it, John. So turning to our results. Sales for the third quarter of fiscal 2024 decreased CAD 4.7 million, or 4.5%, to CAD 100.2 million, compared with the prior year. This decrease was partially driven by a CAD 1.8 million negative revenue impact from the repeal of the Federal Excise Exemption program. For the first nine months of fiscal 2024, sales decreased CAD 3.6 million, or 1.2% to CAD 300.8 million. This decrease was driven by a CAD 5.8 million negative revenue impact from the repeal of the Federal Excise Exemption program. Adjusting for this revenue impact, as John mentioned, would result in sales being slightly up year-to-date on a year-over-year basis.
The decrease in sales for the third quarter was driven by timing of shipments and reduced consumer discretionary spending due to tightening economic conditions. We also saw the residual impact of the BC wildfires on our estate wineries. The fires, which occurred in August, resulted in a decrease of travel to the area, which did not rebound to historical levels during the third quarter. Offsetting this decrease, we have seen continued growth across key channels, including provincial liquor boards and restaurant hospitality. Moving to margins. Gross margin in the third quarter landed at CAD 34.7 million, down CAD 7.6 million, or 18% from the prior year. Gross margin as a percentage of sales for the third quarter was 34.7%, a decrease from the prior year at 40.3%....
It should be noted that Q3 last year included a larger one-time catch-up adjustment for the WSSP program of CAD 77.2 million, which was applied as a reduction of cost of goods sold, compared with CAD 3.5 million in Q3 of this fiscal year. Excluding this impact, the decline in gross margin this year would be reduced. For the first nine months of the year, gross margin landed at CAD 115.0 million, down CAD 4.8 million, or 4% to the prior year. Gross margin as a percentage of sales for the first nine months of the year was 38.2%, a slight decrease from the prior year at 39.4%. Gross margin continues to be affected by higher than normal costs of raw materials, particularly glass bottles and packaging, international freight, shipping charges, and fuel surcharges.
We are now seeing many of these cost issues stabilize and slowly begin to improve. Increases to our selling prices are helping mitigate these inflationary pressures, and we continue to implement cost reduction programs, including freight and logistics savings initiatives, and looking at alternative, lower-cost sourcing for our glass bottles and other key components. We expect to realize the full benefit of these cost savings starting late fiscal 2024, after we sell through the balance of inventory produced at higher costs. Looking ahead, we are confident these cost savings measures and production efficiency programs, combined with additional reductions in our cost inputs, are sustainable elements that will positively impact our margins in the long term. Moving into the last quarter of the year, we do anticipate the typical seasonality in our margins that we've experienced historically and see across the industry.
Sales and admin expenses landed at CAD 21.5 million for the third quarter, down CAD 5.2 million or 19% compared with the prior year, and at CAD 74.0 million, down CAD 6.6 million or 9% for the first nine months of the year. As a percentage of sales, expenses were 24.6% in the first nine months of the year, compared to 26.5% last year. This decrease is driven by labor productivity programs in our retail network and at our estates, and the ongoing benefit of our corporate restructuring from Q4 fiscal 2023, and a reduction in overall discretionary spend in light of the current market conditions. We believe our saving initiatives will drive further improvements in our cost structure going forward.
EBITDA was strong for the quarter, landing at CAD 13.2 million or 13.3% as a percentage of sales, compared to CAD 15.6 million or 14.9% in the prior year. As mentioned earlier, Q3 last year included a larger one-time WSSP grant adjustment, recognizing CAD 7.2 million last year compared with CAD 3.5 million in Q3 of this fiscal year. Excluding this impact, EBITDA would be up to the prior year. In the first nine months of the year, we have seen EBITDA increase to CAD 41.1 million, compared to CAD 39.3 million last year. We are confident that the productivity and labor efficiency work we have undertaken will deliver significant bottom-line results, and we will see this benefit through the fourth quarter and into next year.
Interest expense in the third quarter decreased compared to the prior year, due primarily to lower costs associated with our debt facility. As we discussed last year, we believe our new credit facility and interest rate swaps will continue to reduce interest costs going forward. Turning to our balance sheet, long-term debt was approximately CAD 201 million, down CAD 5 million from the second quarter. At December 30, 2023, we had capacity on our new credit facility of approximately CAD 73.7 million, with shareholders' equity standing at CAD 5.78 per share. Thank you for your time this morning, and I'll now pass it back to John.
Thank you, Paul. And you know, just in summary, I want to highlight that we're extremely excited and confident about our strong results and our positive outlook for next year and beyond. You know, I've pointed out to people, you hear Warren Buffett often speaking, that he likes to invest in businesses that he feels have protective moats around them to support their growth and competitiveness going forward. He's really talking about the factors that allow businesses to have long-term, competitive, sustainable advantages. And our recent performance demonstrates that that's exactly what we have going for us. We have an impressive portfolio of assets that we've built up over the last 50 years that include vineyards and real estate, production facilities, equipment. And as has been commonly reported, you know, those values are significantly...
Just the asset values are significantly in excess of, you know, our current share price. We have a portfolio of brands that we've built over 30 years that are best-in-class in the wine industry and are continuing to grow and serve us very well. We have a distribution profile that is exceptionally difficult to build, replicate, or for competitors to penetrate. You know, we've made significant investments in our digital transformation to ensure that we're faster, smarter, stronger going forward. We have a very sophisticated supply chain capability that's really flexed its muscle and demonstrated that, you know, in the face of not just a Force Ten gale wind, but a hurricane in the last 2 years, that we've been able to restore our profitability in a very short period of time.
Not only improve it, but make it stronger so that as we exit this period, likely in the middle of this next year, as a company, we're going to be stronger and more sustainable and more capable of growing than we ever have been. I want to highlight as well our ability to influence political policy and our government relations efforts. They've been significant in the last few years, and increasingly, governments, both federally and provincially, are recognizing the value our industry brings to provincial and national economies. The support programs that we've received are structurally critical to our foundation and our potential in the future to produce positive investment, growth, and earnings.
We've been able to pay dividends for 44 years, with 8 increases in the past 10 years, and we've grown our revenue and earnings over 62 years now to demonstrate our stability and sustainability. I want to thank everybody in our company for the great work they've done to, to help us through a difficult time, and it's why we're super excited about our future. With that, operator, I'll turn the, effort over to you for questions.
Thank you. Ladies and gentlemen, should you have a question, please press the star followed by the one on your touchtone phone. If you'd like to withdraw your question, please press the star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Nick Corcoran from Acumen Capital. Please go ahead.
Good morning, and thanks for taking my questions. Maybe the first question, a bigger picture for John. Has the leadership transition plan changed or evolved since you first announced in November?
Not at all. Nope. I mean, you know, we've got a fantastically strengthened and a great board of directors. You know, our executive management team is the best it's ever been and is doing a great job. We've been working on our succession and my succession for over a year and a half, and things are progressing well, and, you know, I'm committed to serve going forward as a director and will continue all the efforts. I'll be the largest shareholder, and I have more at stake and more interest to ensuring that everything we've done continues to grow positively. So I don't see any changes at all.
I guess a related question is, the news last week that both you and Angus are stepping down from the board within the next 12 months. Was that always in the plan, or is that maybe ahead of schedule?
No, I think that that's 12 months after a CEO is put in place, so that may be as much as 2 years. And I also, you know, have a consulting agreement that extends beyond that. So my engagement with the board and the company will continue strong and to work with our company and our industry and support everybody to ensure that all the success we've achieved is gonna continue. I mean, I'm more excited about our potential in the company going forward than I've ever been. So I think that will be clear as we go forward.
That's helpful. And you noted in your prepared remarks that there's been, say, above average winter kill in BC. Can you maybe give an indication how much of the vines have been affected and what steps you can take to mitigate that going forward?
Yes, I mean, the winter kill has been significant. You know, it's definitely gonna be over 50-60% of the crops will not bud this year. So, now we're assessing vine damage as well. I mean, these are not uncommon events. They're happening all over the globe, you know, throughout Europe as well as, you know, in the Southern Hemisphere, in Chile, Argentina, and in Australia as well. You know, we have business contingency policies put in place. You know, I use the metaphor for people that, you know, climate change is obviously providing the industry with increased variable weather, hotter highs and at times, cold, low temperatures.
And, you know, at that point in time, when the damage is excessive, we look to blend wines in and bring grapes and wines in from other areas, so that we have ongoing continuity of supply. I think this will be more relevant to all wine-producing regions in the world. It's no different than the auto industry as it goes forward, adjusting to climate change by switching from fossil fuels into electricity. I think you'll see the fact that the wine industry around the world will maintain its support for local appellation, you know, the hegemony of quality around that, but it will be flexible to allow blending in events where temperatures are extreme, like we've had in BC. So the government will support replanting programs. The government will support replacement products.
We've been through this before, and we've managed through it successfully, and I have no doubt that we will again.
Good. And then, maybe switching gears to the margins, have you been able to cycle through your higher cost inventory as expected?
... We're still in the process of that. You know, the costs that we absorbed in the last two years are now in our inventory, coming out this year and into next year as well. The cost savings that will replace that inventory with lower cost inventory are fully engaged. We have over CAD 10 million cost saving this year, and we have the same expectation for additional cost saving next year. And then our SG&A savings are all on top of that. So I would say that we're through, you know, over half of it is already coming out of our system. It will continue a bit into next year, for the first half of next year. Our inventory levels are starting to come down as well. We've got cash improvement policies, both in lower interest rates and in the reduction of our inventory.
All the things that we have put in play in our four-point plan have been achieved significantly. We have targets to improve on that going forward, and it's why we're confident that, you know, we'll emerge. You know, when the COVID recession ends, hopefully halfway through this year, with a better cost structure and a sustainability position than we've ever had.
Great. Maybe one last question from me, just on the Ontario support program that was announced. I think in your prepared remarks, you said that you might expect that in the fourth quarter of fiscal 2024. Is that correct?
That's correct. I mean, the program takes effect this year, fiscal 2024, and it was announced, you know, in the third quarter, and to be implemented in third and fourth quarter, and that's what's happening now. So we will receive those benefits for this fiscal year and next year. That's what the government has assured us, and they've been very specific about that. They're just finishing the program. It replicates the same program that we have in British Columbia, and it will significantly improve our EBITDA performance over the target of 45, as I said earlier.
Thanks. That's great, Taylor. I'll pass the line.
Thanks.
Ladies and gentlemen, as a reminder, should you have a question, please press the star followed by the one. There are no further questions at this time. I will turn the call back over to Mr. John Peller for closing remarks.
All right. Thank you, operator, and thanks everyone for joining us today. Please don't hesitate to follow up with Paul or myself if you have any questions. We have lots of visits from investors these days coming down to see us and tour the region and engage with us, and we're always happy to accommodate you. So please don't hesitate to call if we can help in any way. Thanks, everyone, and we'll chat with you very soon.
Ladies and gentlemen, this concludes your conference call for today. We thank you for joining, and you may now disconnect your lines. Thank you.