Good morning. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the Andrew Peller Limited First 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 would like to ask a question during this time, simply press Star, then one on your telephone keypad. If you would like to withdraw your question, please press Star, then two. Thank you. I would now like to turn the call over to David Mills. Please go ahead, Mr. Mills.
Thank you, and good morning, everyone. 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. Thank you, David. Good morning, everyone. Paul and I are here at our boardroom in Oakville. We're delighted to be with you. You know, obviously, despite the kind of uncertainty that still hangs in the overall economy these days, our business continues to improve overall and strengthen on all levels. We are both very, very pleased with these developments, knowing that the tough times and the worst is behind us. We're very confident about improving our results as we go forward and addressing the very bright future that the company has. You know, our focus has really been twofold, as we indicated the last time we spoke with you. First and foremost, we've been focused on returning our business to its normal profitability. Largely all our issues were supply chain-focused.
We've discussed with you at great length the challenges we've had with freight surcharges, demurrage, you know, exorbitant increases in our glass and, and, and packaging costs, so that, you know, our ambition was to improve our earnings by $20 million over the next two years. We're making great progress against these goals as, as costs are coming down to their normal levels now, at different rates in different places. Overall, they're coming down very, very well, and, and we're pleased with our progress. In addition to that being our principal focus, you know, we renegotiated our, our bank agreement so that we get both more favorable lending terms and, and recognition for the value of the assets that we hold in our company.
We're also reducing our CapEx to low levels, to maintenance levels, until we're sure that we're out of the storm, if you will. We've reduced our SG&A savings significantly. We've restructured our headcount at all levels of the company significantly, so that you'll see a, a focus and a maintaining of lower costs. Then we're doing all of that while still maintaining strong market performance and revenue, and revenue growth. You know, we're up 2.8% in this first quarter. We, we would have been up 4% over last year on an, on an equivalent excise policy, but this year we're now paying excise tax, so that we're recognizing a bit of a reduction in that revenue. We're expecting to maintain a 2%-3% revenue growth going forward.
We anticipate our EBITDA growing around 15% this year. When we look at the market, you know, the majority of our trade channels have performed very well. You know, in particular, provincial liquor boards and the restaurant hospitality businesses. Our export business is growing nicely. We're almost two thirds back to where we were pre-COVID, we're actually doing better across the base business. We're just waiting for the benefit of Chinese travelers to return to the market. We've done very well there. We're also stabilized and showing small growth in our kit business, which is very positive. We're having some slowdown in our estate winery business, which is interesting.
You know, we've had two significant previous years of, of, of growth and, you know, when Canadians were kind of restricted to the home base, we've had super accelerated growth in those trade channels. Now that people are back traveling, that business has come off a little bit, but it's also still at levels significantly above pre-COVID levels. Overall, it's positive, but it's interesting, as I've talked, I don't know anybody in Canada who isn't visiting Italy or Greece this summer, and it's clear there was a pent-up need for people to get out and, and travel. We've increased our prices around 5% this year, to counteract the inflation. As I've said, we have significant cost savings programs and efficiencies that we're delivering on. Our gross margin has remained consistent with Q1 of fiscal 23.
You know, I essentially took a lot of time last call to explain to you that the inventory that's, on our books right now is at an all-time record high cost, and it will take several quarters for it to work its way through our supply chain. Having said that, everything we're buying now is at significantly reduced levels. Freight is almost back to its normal level. We've got some glass savings coming in right away and significant savings coming next year, so that, you know, we're comfortable with our, our targets. It's just a matter of how they time through our supply chain, and it's why we're very confident about getting everything back to normal within, you know, a year's time. I think I've mentioned additionally that we put out a press release on Port Moody.
We achieved a fourth bylaw reading approval two weeks ago. This is a very positive development for Port Moody. It essentially crystallizes the density entitlements that we were awarded, which were considerable, and we've also got a development approvement, a development permit approval for the first phase of that development, which is a 32-story condo tower. There are offices, retail, restaurants, a community art center and theater. There are 11 units in that first phase. I would add that, you know, it's incredible that the Vancouver market for real estate is as strong as you could imagine. Naturally, you know, developers out there have been concerned with high interest rates and the increase in building costs, but business is starting to turn very, very positive again.
Sales are happening, the market is active, the future for real estate development in the area is incredibly strong. You know, in some respects, while COVID was very, very difficult on our supply chain and business in the last 18 months, there's been a silver lining in the delay in the Port Moody value. It's in fact now higher because of the delay and the increase in demand for the products that are in our development plan.
You know, it points to the fact that we already have a very strong balance sheet, and on top of having a strong one, it's about to get a lot stronger, and that's very positive for us. We, we plan to monetize our investment, and we will, you know, use the proceeds to both pay down debt and invest in our growth initiatives, which we expect to be considerable as we exit this recessionary time. With that, I'll turn things over to you, Paul.
Thanks, John. Turning to our results. Sales in the first quarter of fiscal 2023 increased CAD 2.8 million or 2.8% to CAD 100.5 million, from CAD 97.7 million in the prior year. As in the fourth quarter of fiscal 2023, sales were reduced in the first quarter due to the repeal of the federal excise exemption. In Q1 fiscal 2024, the impact CAD 2.2 million. Excluding this impact, sales for the quarter would have been higher. The increases in sales for the quarter were driven by growth across the majority of our trade channels, including provincial liquor boards, restaurant, hospitality, and export.
A number of positive factors supported this growth, including price increases implemented to help offset inflationary pressures, introduction of new domestic and international products to meet consumer demands, ongoing return of international travel, driving increased export traffic, and the stabilization of our personal winemaking business. Growth in our key trade channels was partially offset by lower sales at our estate wineries, as traffic moderated slightly in comparison to the prior year. Sales and performance remains well above pre-pandemic levels. While sales growth in fiscal 2023 was impacted by supply chain issues related to the pandemic, these issues have now stabilized and are improving. Moving to margins. Margin in the first quarter landed at CAD 39.0 million, up CAD 1.0 million or 2.5% to the prior year.
Margin as a percentage of sales for the quarter was 38.8%, consistent with the prior year of 39.0%. Margin in the quarter was supported by the company's recognition and accounting of the Wine Sector Support Program benefit, as described in the MD&A. Margin in the first quarter continues to be affected by higher than normal costs of raw materials, particularly glass bottles and packaging, international freight, shipping charges, and fuel surcharges. As John mentioned, on a positive note, we are now seeing many of these costs stabilizing and improving, and we expect to realize the full benefit of these cost savings starting in late fiscal 2024, after we sell through inventory produced at higher costs.
In response to these margin pressures, the company has implemented price increases and continues to implement a number of cost savings initiatives aimed at enhancing operating margins, including evaluating alternative sourcing for imported wine and glass bottles, optimized logistics and freight, and rationalizing SKUs. Looking ahead, we are confident these cost saving and production efficiency programs, combined with further reductions in our cost inputs, will drive enhanced margins in the quarters ahead. Sales and admin expenses landed at CAD 26.3 million for the quarter, up CAD 0.2 million or 0.9% to the prior year. As a percentage of sales, expenses were 26.2% for the quarter, down from 26.7% in the prior year.
Sales and admin expenses have increased to the prior year as the Ontario minimum wage increase took effect in the third quarter of fiscal 2023. This impact was largely offset by savings realized as a result of the company's restructuring in the fourth quarter of fiscal 2023. EBITDA landed at CAD 12.7 million for the quarter, compared to CAD 12.0 million last year. Interest expense was higher for the higher interest rates compared to last year. As we discussed last quarter, we entered into a new asset-backed loan credit facility in June and believe this arrangement will reduce our interest costs compared to those incurred under our prior credit facility.
Additionally, on June 30th, the company entered into an interest rate swap agreement on CAD 65 million of its long-term debt. Until June 13th, 2027, the interest rate on this portion of the facility is fixed at 4.46%, plus applicable margin. This arrangement will also result in interest rate savings at current market rates. In addition, the amendment to the company's credit facility, was determined to constitute an extinguishment of long-term debt, and as a result, the company recorded a loss on extinguishment of CAD 1.0 million and financing fees of CAD 1.2 million were expensed immediately.
Both of these are one-time impacts related to the setup of the new facility. With higher interest costs and one-time costs related to the new debt facility in the first quarter, we incurred a net loss of CAD 0.9 million or CAD 0.02 per Class A share for the quarter. This compares to earnings of CAD 2.9 million or CAD 0.07 per Class A share in fiscal 2023. Turning to our balance sheet, total debt was approximately CAD 208 million, consistent with the prior year end. At June 30, 2023, we had capacity on our credit facility of approximately CAD 66.7 million, with shareholders' equity standing at CAD 5.87 per Class A share. Appreciate your time this morning. I'll now pass it back to John.
Thanks, Paul. We are pleased with the strong quarter that we've enjoyed. We are still aware that we're contending with economic headwinds, which are facing most companies. You know, as the same time, we're watching inflation decline and interest rates will, at some point, start to decrease. We're gonna be well-positioned to capitalize on our strong portfolio and improve efficiency in our cost structures.
As I've mentioned in past calls, this will be my fourth recession that I've gone through over the last three years, and in each of those recessions, our company emerged stronger and more capable going forward. I'm 100% confident that will happen again. This time, the efforts that we're putting into streamlining and strengthening all our processes and capabilities are gonna produce savings now and even more savings in the future. Thank you for, for joining us, and operator, we're happy to entertain questions if there are any.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch tone phone. You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. Should you wish to withdraw your request, please press the star followed by the two. 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 with Acumen Capital. Please go ahead.
Good morning, guys, and thanks. Take my questions.
Good morning, Nick.
Just two questions from me. Good sales growth in the quarter. Can you maybe give it a little bit more color on how much is price versus volume?
Oof! You know, we're in so many segments, Nick, to give it across the board. You know, probably, I think it's pretty unbalanced the same, wouldn't it? We've taken about 3%, 4%, 5% increase in price. You know, volumes in, in the wine category and the beer category and the spirit category, as we've traditionally known it, the volumes are down right across the board. The big reason is RTD is driving a lot of growth and in kind of encroaching on all categories. What you would see is RTDs have taken the most growth out of beer. Sometimes they record beer with flavored malt beverages in them, sometimes separate, you know. Similarly with spirits, they're showing growth in spirits, but in fact, all the growth in spirits is RTD spirit growth.
Like, in, in other words, the RTD canned products, the, the traditional packaging is down. Wine is down a little, but we've picked it up in pricing. I think in our case, you know, Nick, we've picked up market share across the board as a company this year. We've done particularly well in, in kind of value, value premium wine segment pricing. On the premium side of our wine business, you know, we've had short crops in, in, in BC and Niagara, so that we've given up some of our premium pricing there. We've done well in spirits, and we've done well with our cider and RTD products as well. It's a mixed picture, and if you need more information, Nick, I'd be happy to follow up with you.
That's a good color. Yeah, the next question was on market share. Did you say that you picked up the most market share in value and value premium?
That would be correct. Yeah, there's definitely been trading in the categories, all three categories overall have traded down from premium to what I call value premium. Certainly, that's where we are equally strong as we are in the premium, super premium, ultra-premium categories. It's been good that we've had solid growth where there was solid growth and overall, as a company, we've improved market share.
In the past, you've, you've commented on the impact that imports have had and the competitive pressure. What are you seeing from imports, currently?
Well, you know, the first thing I'd say, Nick, is, you know, I maintain a very close network with the CEOs of large companies in Europe, in the US, and right across Canada, and that every wine industry is going through the exact same, you know, stresses around the, the pressures that have been on their supply chains and challenges.
I think all regions have been, you know, under siege, if you will, dealing with their cost structures. You know, there's an enormous amount of pressure for everybody to take prices up. Indeed, a lot of the import prices now are starting to come up in our market. It's not always right across the board, but the trending is for them to catch up on some of their pricing.
It's enabled us to be able to come in and at least take a 5%. I mean, where grocery's been taking 15% price increases, we've been taking 5%-6% price increases. you know, I, I think that the businesses are still overall healthy. The import markets are, are doing still reasonably well, you know, we've picked share up against them this year overall because of our strength in the, in the value price segments.
Good. In the past, you talked about, kind of the, the timing that you expect to get back to historical margins with, costs seem to ease a bit. Can you give an update on, on when you expect to get back to, to historical margins?
Yeah, I mean, I said at the outset, Nick, we need to pick up about CAD 20 million in, in supply chain cost savings. We expect to get half of it this year and the next half in the year after that. You're looking at kind of 18-24 months at the latest, but we're tracking it very closely. You know, we're focused on the, the biggest areas first, but we have cost-saving initiatives right across the company.
You've seen we got our SG&A down. We're managing our labor costs as well. You know, my best guess is it's, you know, 18 months, we should see lower costs coming into our cost of goods sold in the latter part of the third quarter and definitely into the fourth quarter, and then even more significantly into the next year.
That's helpful. Then, in Western Canada, there's been quite a few forest fires and active kind of fire season. What is the impact being on the wire... On the wineries, and how do you expect that to impact your harvest?
We don't expect any impact from fires on our harvest. I mean, we have one fire that crept across the border into Osoyoos. I don't believe it's a factor at all anymore. Most of the fires have not been in our region this year, touch wood. You know, we don't expect any impact, assuming things stay fortunate in that regard.
Is smoke taint, a concern, or are you able to manage it or not?
You know, we've had a lot of experience with smoke taint over the years. In fact, you know, Californians were up to visit us aggressively as they started to have their issues, knowing that the Okanagan had had some major issues in the previous years. You know, for, for there to be smoke taint, the fire has to be right up against the vineyard. In other words, it doesn't, it's not impacted from, you know, fires in other areas that drifts through the region. Then, you know, when it does happen, there are certainly lots of ways we can process to, to minimize or eliminate some of the issues. Fair to say that we're very capable around it, but, but there are definitely none of those issues currently in our radar at this time.
Good to hear. Then one last question from me. Obviously, the approval for Port Moody is positive. Can you maybe give some color on w your plan with that and whether you're looking for a complete sale or whether you'd consider, getting a partner with, that carries your interests?
You know, we're, we're going through a very intense process right now, refining our sales marketing strategy. The lights have definitely gone from red to green, and as I said, the activity's picked up briskly. It's a very large project. You know, there's 726,000 buildable sq ft, and there's considerable interest that's been expressed, and we're working with the best people. You know, our goal is to monetize our investment. You know, we're focused on it. We have a very large, capable team that is responsible with me and a member of our board. It's a priority, and we're very, very grateful for the circumstances that we're in.
Great. That's all great. Thanks for taking my questions.
Thanks, Nick.
Ladies and gentlemen, as a reminder, should you have a question, please press the star followed by the one. At this time, there are no further questions. Please proceed with your closing remarks.
Thank you, operator. Thanks, everyone, for joining us. You know, we're pleased that in September, we're gonna have an in-person AGM at the Trius Winery in Niagara-on-the-Lake. We're hoping many of you will come and visit with us and hope you enjoy the rest of your summer. Don't hesitate to call Paul or I if you have any questions. We have lots of shareholders coming down for visits these days to tour facilities and get a closer look at our business model and our activities, and we're delighted to accommodate those people. If you're interested, give us a shout, and otherwise, we'll hopefully see you in September and talk to you shortly thereafter. All the best. Have a great summer.
This concludes the conference call for today. You may now disconnect your lines. Thank you.