Good morning, ladies and gentlemen. My name is Sergio. I will be your conference operator today. At this time, I would like to welcome everyone to the Andrew Peller Limited Q3 Fiscal 2023 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. Instructions will be given at that time. I would now like to turn the call over to Mr. David Mills. Please go ahead, Mr. Mills.
Thank you, good morning, everyone. Before we begin, let me remind you that during this conference call, we 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 our earnings release, MD&A, and other securities filings for additional information about these assumptions, risks, and uncertainties. I'll turn things over to Mr. John Peller, Chief Executive Officer.
Thanks, David. Good morning, everyone. Good to be with you. Following our board meeting yesterday, we published our results, and we're pleased to be with you this morning. You know, as we highlighted, we were encouraged by our growth and improved profitability through the first nine months of our fiscal year. You know, I've maintained a narrative around COVID being this three-year event in which year one our revenue spiked up a bit because people did a significant amount of pantry loading. In the second year of COVID, our sales dropped 5%. As a result of business closures, our estate wineries and stores were closed. You know, restaurants were closed as well. Our EBITDA dropped as a result of those closures.
This third year, you know, the revenue is returning to its normal level, we are managing the challenges of inflation and supply chain disruption. I can tell you now that we're very confident that the worst of the disruption is behind us. We've hit rock bottom in the last few months, already our gross margins are trending upward. We expect to have a recovery of our EBITDA back to our normalized levels in the low 60s over the next two years. Just to maintain a high-level view of our category wine in both Canada and in North America, you know, if you take the average of the three years, wine has grown at 1%.
Some of the volume has been down in a little bit in some years, but the pricing has been up. Overall net revenue has trended up 1% over the three-year period. I think it's an important comment because, you know, we've always maintained our confidence in the strength of our category's resilience. I don't know of a more recession-proof category than wine. If you look at what happened to most businesses through the last three years, their revenues have been up and down significantly. Similarly, not just hotels and airlines and restaurants, but retail segments as well. Our segment just motors through, which is consistent with what happened in 2008 in the financial recession and the tech bubble and 9/11 issue in the early part of 2001.
We've never gone through one of these events without our category staying strong and demonstrating its resilience. Our sales were up to year-to-date at a 3.2% now that everything is fully open. We were the beneficiary of some price increases. Our sales would've been up 5% if we had been able to fully meet the demand. We had significant supply disruption, particularly in our western ports in terms of receiving bulk wine in. While we were able to expedite and offset some of that supply disruption, we weren't able to manage all of it, and we had some significant out-of-stocks throughout the year. That to the extent that we're up 3.2% it did demonstrate both the strength of our brands and our sales capabilities through this disruptive period.
You know, supply chain issues have will continue, clearly the forecast has changed and things are looking more positive, and we'll talk more about that throughout the call. You know, our gross margins year-to-date are stable to last year, which underlies the fact that there was a lot going on there. We had significant increases in freight, container, and shipping costs. We had significant increases in glass costs. We've been able to offset a great deal of that through price increases and other cost savings programs. There's been an enormous amount of activity in place to offset some of these challenges. You'll have seen that we received our Wine Sector Support Program in the Q3. This is the continuation of support that we have received for, you know, many years, at least 15, 20 years.
We previously received the support in the form of an excise tax exemption. This excise exemption was challenged by the Australians, which on its face was somewhat bizarre because they have and continue to maintain the exact same program in Australia that they felt ours was illegal. Our government decided rather than to fight with them legally, they would change our support into a trade legal program through agriculture. That is what the Wine Sector Support Program is. It's a program that we have always enjoyed and will continue to enjoy going forward. I'm happy to talk about that if you need more details. In any event, you know, we're feeling that the worst is behind us. We're confident that we're gonna continue to grow over the next few years.
I think it's fair to say that the market is a little still soft. I mean, people aren't traveling and spending, you know, at their highest levels because there's still some concern with recession as well. You know, the commentary around the lowering of the inflation rate and the improvement in the economy seems to be accelerating and becoming increasingly positive, and that should provide us some nice tailwind as well. Generally our brands and our trade channels are performing strong. Our balance sheet continues to be very strong, and we have a very confident view of our future. I'll turn things over to Paul now and then provide a few closing words. Thanks, Paul.
Thanks, John. Good morning, everyone. Happy to be with you this morning. Turning to our results, we continue to be encouraged by our sales growth so far this year. Sales in the Q3 of fiscal 2023 increased 1.4% to CAD 104.9 million, and in the first nine months of fiscal 2023 increased 3.2% to CAD 304.4 million. The increases were driven by growth across the majority of our trade channels, including restaurant, hospitality, retail, export, and our estate wineries. A number of positive factors supported this growth, including price increases implemented at the start of fiscal 2023 to help offset the ongoing inflation and supply chain pressures, increased sales of our premium higher-margin VQA products through our Ontario retail network at our estate wineries and through our direct-to-consumer wine clubs.
Additionally, our personal winemaking business continues to underperform the prior year when we experienced higher sales during the midst of the pandemic. As John mentioned, sales growth was impacted by ongoing supply chain issues. We continue to closely manage the timely delivery of wines from international producers and the sourcing of glass bottles and other input components from our suppliers. To help us meet this demand, we have had to source liquid and other components from domestic and international suppliers at higher costs.
In terms of our margins, we were pleased to see margins continue to stabilize, landing at CAD 42.3 million, up CAD 6 million or 16.5% to the prior year for the quarter, and at CAD 119.8 million, up CAD 3.9 million or 3.3% to the prior year for the nine months ended December 31st. Margin as a percentage of sales for the first nine months of fiscal 2023 increased to 39.4% compared to 39.3% in the prior year. Margin in the quarter and year to date was supported by the company's recognition of the Wine Sector Support Program benefit as described in our disclosures.
Consistent with the first half of fiscal 2023 and the second half of fiscal 2022, we continue to experience higher than normal costs of raw materials, particularly glass bottles and packaging, and international freight shipping charges and fuel surcharges remained above historical levels. In response to these margin pressures, the company has implemented price increases throughout fiscal 2023 and is focusing on increasing sales of higher-margin VQA products. In addition, the company is executing numerous production efficiency and cost-saving programs aimed at enhancing operating margins, including rationalizing stock keeping units, evaluating alternative sourcing for imported wine and glass bottles, and optimizing our logistics and freight.
As John mentioned in his remarks, we're confident that our cost savings initiatives will drive further recovery of our margin in fiscal 2024, with full recovery back to normal levels within two years, as it will take time for cost reductions to work their way through our system. Sales and admin expenses landed at CAD 26.7 million for the quarter, up CAD 2.5 million or 10.1% to the prior year, and at CAD 80.6 million, up CAD 4.4 million or 5.8% to the prior year for the nine months ending December 31st. Sales and admin expenses have increased this year as the Ontario minimum wage increase took effect and as we return to full operations at our estates post-pandemic.
EBITDA landed at CAD 15.6 million and CAD 39.3 million for the three and nine months ended December 31st, compared to CAD 12.1 million and CAD 39.8 million, respectively, last year. For the Q3 of fiscal 2023, we had net earnings of CAD 3.9 million or CAD 0.09 per Class A share. For the nine months ended December 31st, 2022, net earnings were CAD 6.7 million or CAD 0.16 per share. This compares to earnings of CAD 3.1 million or CAD 0.07 per Class A share in last year's Q3 and CAD 19.5 million or CAD 0.46 per share for the first nine months of fiscal 2022.
In last year's Q2, we recognized a gain of CAD 7.5 million or CAD 0.21 per share on the sale of our Port Coquitlam, BC, property and assets. Turning to our balance sheet, total debt increased to CAD 194.9 million from CAD 192.1 million at the end of fiscal 2022. At quarter end, we had capacity on our revolving credit facility of approximately CAD 138 million, with shareholders' equity standing at CAD 6.16 per Class A share. Thank you for your time this morning. John, I'll pass it back to you.
Thanks, Paul. Just a couple quick comments. You know, in terms of our sales and marketing efforts, you know, we continue to participate in a broad spectrum of segments across a lot of trade channels, and our performance has been strong in all areas. Perhaps some softness in our wine kit business that we expect to bounce back this year. Our premium VQA products have had a very solid year. We gained market share. We were boosted by the significant increase in traffic to our estate wineries and the growth of our wine clubs. You know, our export portfolio, which is focused on our ice wine sales around the world, has come back to almost 50%, 60% of what it was prior to the pandemic.
It was up significantly this year. We're pleased that travel is starting to open up everywhere. You can see the Chinese are planning their return to normal levels of travel. That will help us. You know, our spirit portfolio had a very, very strong year, as did our participation in the ready-to-drink, RTD segment, and our Noble Cider brand also performed very, very well. We feel confident about these efforts continuing to be successful in the short and medium term. That being all said, we are laser-focused as an executive and management team on our cost efforts to restore our margins, including all the management of cash and CapEx and the costs associated with our capital.
We have many projects active on reducing glass, corrugate, transportation, freight, and marriage, and we will be, as a senior team, all leaning into all these projects. We're confident in our ability to restore these margins as Paul said over the next two years. You know, I've always tried to reinforce that our company has a very strong balance sheet. You know, we have built our balance sheet over two or three decades now. We're built for the long term. We have a very strong portfolio of assets that reflect our increased investment in the premium wine category. We're up to like nine state wineries and 1,000 acres of property and a recent purchase of the Riverbend Inn. These assets are going to generate great returns for our business going forward.
With that, I'm happy to turn the things back to our moderator for questions if there are any.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you want to ask a question, please press star followed by the number one. If you want to withdraw your question, please press star two. Your questions will be posed in the order they are received. If you are 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. Please go ahead.
Good morning, guys. I have a few questions. The first is, revenue is up 1.4% in the quarter. Can you give any indication what you're seeing in terms of volume versus value?
I think quickly on that, Nick, that if you take kind of average volume fluctuations across Canada, and for that matter, I can say pretty consistently in North America, the volumes are down maybe 3%. That's for all net stuff. One, you know, the volumes were up than previous year, which is why I kind of referenced, you know, Nick, that three-year average of a 1% growth in the category. It's considered a little soft right now, but it's strengthening. The markets are off to a good start this year, so that's the most, you know, clear indications of the strength of the market I can give you.
That's fair. Maybe just thinking about how consumers are being impacted by inflation, are you seeing any trade down in your portfolio?
There's definitely greater movement to value pricing. There's a concern that, you know, clear consumers are reacting to higher interest rates and their concerns for recessionary economy. There's definitely more interest in value these days. You know, there's a little bit of softness in the kind of travel restaurant, you know, premium priced area. It looks transitory at best. Our wine clubs were very strong, and that's all ultra-premium wine. I would definitely say that there's a bit of an adjustment down to value pricing in the retail systems, but still strong indication that the premium segments are going to do well.
Great. You mentioned that ice wine is up, I think 50%-60% of historical levels. What do you think the path is to get back to 100% of historical levels or grow above that?
I think it's just a return to normal travel. I mean, don't forget it went from 100% to 0%. So that it's, you know, land border opened up first. People started traveling again this summer, but there's nowhere near normal travel levels right now. You know, I expect them to be significantly open by the end of this year and I expect travel retail and export retail to grow in the following year, you know, towards its higher levels.
One last question from me. What are your capital allocation priorities over the next, kinda 12 to 18 months?
You know, I think that our balance sheet is strong, and we have a lot of potential with capital. That being said, our real focus is to see ourselves through the challenge of getting the supply chain back into its greatest position of strength and improving on our cash positions. In other words, we didn't wanna make too confident any statements last year because we wanted to make sure that we had seen the bottom, if you will, of all of this, and we're confident that's happened now and we're bouncing up. That I think that we're looking to invest into our brands and our marketing going forward, but we're gonna hold off on CapEx a little and ensure that we deliver on our short-term focus to improve margins before we get more aggressive with our investing.
Thanks. We'll pass along.
Thank you. Your next question comes from John Sartz from Viking Capital. Please go ahead.
Good morning. I'm wondering about your interest expense. It's not quite as high as it was last quarter, but it's quite elevated, and I'm wondering to what extent is that due to rates and what percentage due to interest rates and what percentage due just to larger balance?
Yeah, our loan balance has not increased over the year. It's all the increase in interest rates that have occurred throughout the year. You know, we're confident that those rates will start to work their way back down and we'll measure and focus on that carefully.
Okay, thanks.
Thank you. Ladies and gentlemen, as a reminder, should you have a question, please press star one. There are no further questions at this time. You may proceed.
Thank you everyone. You know, we definitely are anxious to get out and meet with our investors. You know, a lot of people have been calling us recently. We fully are putting all our plans in place to get out and be active in the community, communicating with our... not just our existing investors, but a lot of people who are interested to get in front of us. Please, don't hesitate to reach out to either Paul or I to make sure that we connect with you as soon as we can. We're looking forward to your feedback and a successful year for the remainder of the year. Thanks for all your support and your attention today. Have a great day.
Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.