Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Lassonde Industries 2024 second quarter earnings conference call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session open to research analysts only. To join the question queue, you may press Star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing Star then zero. Before turning to management's pre-recorded remarks, please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded today, Friday, August ninth, 2024.
I would now like to turn the call over to Vince Timpano, President and Chief Operating Officer. Please go ahead.
Good morning, ladies and gentlemen. I'm here with Éric Gemme, Chief Financial Officer of Lassonde Industries. Thank you for joining us for this discussion of the financial and operating results for our second quarter ended June 29, 2024. Our press release reporting these results was published yesterday after market close. It can be found on our website at lassonde.com, along with our MD&A and financial statements. These documents are available on SEDAR+ as well. We also posted a presentation supporting this conference call on our website. 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 achieved strong operating results in the second quarter, with further momentum in sales and profit growth.
Sales increased 7.8%, mainly reflecting volume gains in the U.S. for both private labels and brands, and pricing adjustments for our Canadian beverage activities. This solid top-line performance, combined with efficiency gains and favorable timing on ingredient costs for the quarter, produced a 21% improvement in operating profit. Now, let's turn to slide 5 for a review of our divisions. First, in the U.S., we continued to make steady progress during the second quarter with further volume gains. On the volume side, we are pleased with our performance that exceeded expectations. For our branded operations, volume momentum remained driven by the single-serve format, which is a key growth area of focus for us. As for private label volume, we have begun our rebuild phase with initial orders produced to support new customer wins in the latter half of the second quarter.
As we had commented last quarter, we expect volume momentum to accelerate in the second half of the year. In terms of volume, we are getting additional new business confirmation for our build-back plan, and supporting this plan, we will have access to more capacity from our new North Carolina single-serve line. On the efficiency side, we continue to make gains by running our plants more efficiently and reducing waste, and we are also starting to see the benefit of our decision to insource a significant volume of aseptic juice boxes, serving as an additional source of margin improvement. Moving to slide six. I am proud to confirm that we began producing our first cases of our new aseptic single-serve products in North Carolina last week, thus completing the expansion project on time and on budget for what has been Lassonde's largest investment ever outside of an acquisition.
This reinforces once again the strength of our team and their ability to execute key projects. This new capacity will enable us to capture opportunities in the growing single-serve market for both our branded and private label businesses. Following a ramp-up in the second half of 2024, we expect full production to begin in early 2025. Having successfully completed the North Carolina expansion, our teams continue to make progress in evaluating investment scenarios to ensure the competitiveness of our U.S. manufacturing network. This is an important priority, with scenarios that could lead to an additional multi-year CapEx program that would leverage the improvements achieved through Project Eagle. We anticipate being able to share the outcome of our assessment in the coming months. Turning over to our Canadian beverage activities on slide 7, we sustained our efforts to fortify our leading position through innovation, channel expansion, and productivity improvements.
Our focus is to carefully manage price adjustments that reflect higher input costs, especially orange juice and concentrates, which continue to be challenged by low supply, resulting in ongoing cost inflation and which have a more substantial impact on our Canadian activities. As anticipated, price inflation is making consumers more value-conscious with their spending decisions, which impacts their preferences across brands, packages, and shopping channels. In view of this reality, our extensive product portfolio is a key competitive advantage as it allows for diversification across these areas. It also enables us to target investments aimed at driving higher purchase frequency with consumers looking for affordable solutions. Moreover, through innovation, we can develop products that reflect consumer taste and market trends while reducing our commodity exposure.... Several new products were introduced during the second quarter, mainly under the Fruité and Del Monte brands, and early results for both have been positive.
Momentum continues to build on our food service business, particularly with leading and well-known quick service restaurant chains, as we continue our efforts to expand our channel presence. As for productivity improvements, we deployed our transportation management system, or TMS, in our Canadian beverage business during the second quarter, while continuing to review our logistics processes and management support tools. We have already seen benefits through lower transportation costs for the division during the second quarter. Now, let's turn to our specialty food division on slide 8. Our business had a solid quarter, driven by sales momentum from our prior launch of premium glass jar soup, an adjacent priority for us. Regarding efficiency, we achieved the expected additional productivity and efficiency gains. With the addition of Summer Garden, specialty food will play a more prominent role as a driver of growth, profitability, and portfolio diversification. The acquisition was completed yesterday.
While Eric will shortly discuss the financial details of the closing in greater depth, let me take a few moments to go over certain operating aspects on slide 9. Our main objective is to leverage the respective strengths of Summer Garden and of our existing specialty food activities in Quebec to create a new growth platform at Lassonde Industries. Summer Garden brings capabilities and brand management, having successfully developed the Little Italy in the Bronx and Gia Russa brands in the U.S., premium tomato-based sauce business, a segment that continues to show positive momentum. Its third brand, G Hughes, was an early entrant in the sugar-free barbecue sauce subcategory. It has since become one of the leaders in the category and has successfully expanded into other categories such as dipping sauces, marinades, and dressings.
These strengths nicely complement our existing specialty food activities, which are mainly focused on private label and co-manufacturing, except for the Canton brand. For these reasons, the structure of our specialty food business will be similar to the structure of our U.S. beverage operations. More specifically, as we do in our U.S. beverage operations, we will operate a North America branded division and a distinct North America division focused on private label and third-party brands. As with all other divisions, they will be supported by our North America Centers of Excellence. The North America private label and third-party brand activities will be managed by Vito Monopoli, who currently heads our Lassonde Specialties business, while the North America Brands division will be under the responsibility of Mike Oddi. Mike has been with Summer Garden for over 30 years, most recently serving as Executive Vice President, Sales and Marketing.
Mike has been a key driver of success for the company, where he was instrumental in leading the development of key innovative breakthroughs, including the G. Hughes and Little Italy in the Bronx brands. We believe this structure will foster an operating model, allowing us to enhance our position as a manufacturer of choice for our entire specialty food offerings, including retort-based products, our specialty food core capability. As noted earlier, each of our centers of excellence of manufacturing, supply chain, and innovation will support our specialty food division in executing its growth strategy. Lastly, we are assembling a dedicated team to facilitate the onboarding of Summer Garden into the Lassonde family. This team will concurrently pinpoint potential synergies and develop plans to realize them. We look forward to updating you on the progress of the integration over the next few quarters.
I now turn the call over to Eric for a review of our Quarter Two results. Eric?
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 ratios in my remarks, mostly to ease comparability between periods. Reconciliation to IFRS measures are provided in the appendix to our presentation. Let's turn to the next slide for our second quarter sales, which totaled CAD 625 million, up 7.8% versus last year. Excluding a CAD 3 million contribution from Diamond and a favorable foreign exchange impact, sales increased 6.2%, reflecting selling price adjustment in Canada and higher U.S. sales volume, both branded and private label division. These factors were partially offset by less favorable sales mix in our U.S. private label business and lower sales volume in Canada. Moving on to the following slide.
Gross profit reached $176 million, representing 28.1% of sales, up from $152 million a year ago or 26.3% of sales. Net of Diamond, gross profit rose 14.6%, driven by the run rate effect of price adjustment, certain temporary procurement benefits that partially offset the impact of higher input costs, mainly for orange juice and concentrate, and lower conversion costs resulting from efficiency improvements, including the benefit of insourcing the production of aseptic juice boxes that was previously outsourced in the US. SG&A expenses were $126 million, up from $111 million last year. Excluding expenses from Diamond, SG&As increased by $12 million or 11%, reflecting $7 million in costs related to the Summer Garden acquisition, an increase in certain warehousing, administrative, selling, and marketing expenses.
These were partially offset by lower performance-related compensation expenses. Excluding items that impact comparability, Adjusted EBITDA increased 27% to CAD 75 million, or 11.9% of sales, from CAD 59 million or 10.1% of sales last year. Adjusted profit attributable to the corporation shareholder came in at CAD 39 million, or CAD 5.73 a share, compared to CAD 26 million or CAD 3.89 a share last year. Looking briefly at the first half results on the next slide. Sales rose 6% from last year. Excluding Diamond and the FX impact, the increase was 4.5%, mainly driven by run rate effect of price increases, but also to a lesser extent, higher volume.
Adjusted EBITDA amounted to CAD 127 million or 10.6% of sales, up from CAD 102 million or 9% in the first half last year. Adjusted profit attributable to the corporation shareholder reached CAD 64 million, or CAD 9.41 per share, compared to CAD 43 million or CAD 6.37 a share last year. Turning over to our balance sheet on the following slide. Days of operating working capital reached 45 days in Q2, down sequentially from 48 at the end of Q1, and significantly less than 52 days in Q2 of 2023. The sequential reduction is mainly due to lower days of inventory outstanding, the yellow bar. As the numerator, the value of inventories decreased CAD 14 million during the second quarter, and the denominator, Q2's cost of sales, was higher, reflecting the sales increase.
This was partially offset by a reduction in days of payable outstanding, as we paid during Q2, the advanced purchases of raw materials made in Q1. Our objective remains for days of operating working capital to settle within our pre-COVID range, which in average was 45 days. This considers Diamond in our calculation but exclude punctual events to secure price and/or availability of certain commodities, as we did earlier this year. We may also need to use our working capital to support some network optimization initiatives. Turning to cash flow on the next slide. Operating activities generated CAD 59 million in Q2 of 2024, as opposed to CAD 76 million in Q2 of 2023.
The variation is mainly explained by higher cash flow utilization from working capital this quarter compared to the same period last year, mostly reflecting the decrease in accounts payable and accrued liability mentioned a moment ago. This was partially offset by higher profitability. These factors also explain the operating cash flow movement in the first half. Capital expenditure amounted to CAD 31 million in Q2 of 2024, and after six months, CapEx totaled CAD 57 million in 2024 versus 42 in 2023. For the year, we still expect CapEx to reach up to 5% of sales. On the next slide. Net debt decreased sequentially, reaching CAD 201 million at the end of the second quarter, versus CAD 218 million three months earlier.
The net debt to adjusted EBITDA ratio stood at 0.9 to 1 at the end of the second quarter of 2024, down from 1 to 1 at the end of the first quarter, and significantly down from 1.3 to 1 a year ago. Finally, the board of directors declared a quarterly dividend of CAD 1 per share, payable on September 13, 2024, to shareholders of record as of August 20. Now, please turn to slide 16 for more information about the Summer Garden acquisition. The acquisition was completed yesterday for a cash consideration of $237 million. This amount includes $2 million in preliminary working capital adjustment, subject to further adjustments once the final value is established.
At closing, we paid $241 million for the acquisition and certain related costs. This amount was financed by $224 million from our Canadian revolving operating credit facility, which was amended upon signing the acquisition agreement, raising the authorized amount to CAD 475 million. $6 million from our cash and cash equivalent, and $10.5 million in equity from an entity controlled by the Lassonde family holding, consistent with the ownership structure of our U.S. subsidiaries in place since 2011. With the acquisition, Lassonde's pro forma net debt stands at CAD 510 million at the end of the second quarter.
This represents a pro forma net debt to Adjusted EBITDA ratio of 1.921, considering Summer Garden's Adjusted EBITDA of the past 12 months. All things being equal, we anticipate that the leverage ratio will decrease below 1.5 to 1 by the end of 2025, and back to the current level by 2026. Please turn to page 17. We will perform the customer purchase price allocation during the third quarter, which will determine the fair value of each asset acquired and liability assumed. In turn, this will impact the appropriate depreciation amortization expense to be recognized in future periods, and also the level of inventory step-up to bring the acquired finished good to net realizable value at the acquisition date. This will temporarily affect profitability in the third quarter as we sell the acquired inventory.
Ladies and gentlemen, I turn the call back to Vince for the outlook.
Thank you, Eric. Before addressing our outlook, please turn to the next slide for a discussion of several key changes to Lassonde's senior management announced yesterday. First, Mr. Pierre-Paul Lassonde will step down as chairman of the board, effective in early quarter one of 2025, to become vice chairman. After 60 years fully devoted to growing the family business and 50 years at the helm of the corporation. Nathalie Lassonde will act as co-chair as of September first and become executive chair of the board in early quarter one. Effective September first, I will become CEO of Lassonde Industries. I sincerely thank the Lassonde family and our entire board of directors for their confidence and continued support in me and that of the entire management team.
As we steer the corporation through its next phase of growth, that will take it to CAD 3 billion in sales with improved profitability, enabled by a growth-oriented portfolio and through a continued focus on building sustainable performance with an organization that is modern, efficient, and primed to support the ever-evolving needs of our customers and consumers. It's an honor and a sincere privilege to be leading our proud organization and to continue building on its rich heritage that spans more than 100 years, and to further its legacy for generations to come. With Nathalie and with the support of our talented and dedicated employees, I am confident we will achieve our many ambitions for the future. To ensure a smooth transition, Nathalie will also act as Executive Vice President until the end of 2024.
Now, turning to the next slide and looking ahead to the second half of 2024, our focus is: for our U.S. beverage activities, building back private label volume and continuing the ramp-up of our North Carolina single-serve expansion. For Canadian beverage activities, pursuing initiatives to fortify our leadership through innovation, channel expansion, targeted marketing investments, and productivity improvements. For our specialty food division, successfully onboarding Summer Garden and executing our North American growth strategy. Moving to the next slide. We are pleased with our first half performance, and we expect a sequential improvement in sales volume for the second half, driven by the pace of our U.S. build back plan, additional volume available from our new single-serve line and demand normalization.
Adding in the run rate effect of existing selling price adjustments and excluding foreign exchange impacts, as well as Summer Garden, we expect a 2024 sales growth rate in the mid- to high-single-digit range. As we anticipate demand to normalize, our operating expenses will reflect targeted investments to reinforce the innovation pipeline, distribution expansion, and strategic trade spending to support growth. Turning to the following slide, we continue to closely monitor external factors such as commodity prices, mainly orange juice, as well as orange and apple concentrates, as the corporation is expecting higher costs for the remainder of the year when compared to the first six months. We are also keeping an eye on the recent upward trend in ocean freight container shipping rates and on the labor situation within the Canadian rail network.
Finally, we will sustain our efforts to achieve efficiency gains and cost reductions to enhance profit growth. In closing, our momentum supports our positive outlook. We remain focused on executing our strategy to meet our objectives of sales growth, improved profitability, and long-term value creation. This concludes our prepared remarks. We are now pleased to answer your questions.
We will now begin the question-and-answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press * then 2. The first question comes from Luke Hannan with Canaccord Genuity. Please go ahead.
Thanks. Good morning. Congratulations on the results, and, and Vince, congratulations on your, your new and extended role as well. My, my first question here is, before we get to the quarters, it's just on the, the guidance here. So, the top line, you did raise expectations slightly, so now expecting mid to high single digits growth year on year. And it's interesting that you, you guys did that. Clearly, it's, it's indicative of the confidence that you, you have within the business. There is commentary in, in your outlook, though, that there is further selling price adjustments could be a little bit limited. So, I guess my question is, can you just help us unpack what exactly is, is backing up this expanded or, or revised outlook for, for your, for your sales growth here?
Thank you, Luke. It's Vince. So, I would say we've got confidence that's driven by the build back plan in the U.S. So, our ability to secure new customers, as well as the momentum shift that we're seeing to private label with the existing customers, gives us more confidence in what we're seeing on top line performance from a volume perspective. As it relates to pricing, you know, the commentary there is just recognizing that the consumer starts to hit a ceiling in terms of what's possible. Having said that, we continue to see category performance, which is not worsening versus prior quarters. In fact, what we're seeing in the U.S. is a category performance, which is down about 3%, and we continue to demonstrate share growth in that business, largely through targeted promotional investment.
When you look at the Canadian business, there's no doubt it gets more impacted, but we're by what we're seeing in orange juice. Having said that, when you take a look at the category performance, while it is down around 6-6.5%, it's slightly flat versus what we would have seen in prior quarters. Within that, when you look at the category performance, family size shelf stable, which is our core business, is growing, and we're growing our share within that category. Now, that's through innovation that we're bringing to market, plus targeted promotional spend to continue to address what it is that consumers are looking for from a value perspective. The last thing that I'll say in Canada, like the US, is the continued shift that we're seeing with consumers looking for value through channel mix.
And again, we're well positioned to be able to address that. So I know I provided you a lot of information there, but all of that together gives us confidence in terms of increasing the guidance that, that you referenced.
Vince, allow me to, in addition, Luke, of course, we were absolutely confident that our single-serve line in North Carolina was going to be deployed, on time, on budget, as we explained, but we were a little bit gun shy earlier in the year before declaring, "Yeah, that volume will be there." So that's also part of the consideration for us to say: You know what? Let's, let's now put that to, mid- to high-single-digit range. Hope it helps.
Okay. That's, that's very helpful. Yeah, that's very helpful. Thank you very much. The second question, just a very quick clarification question, Eric. You did mention, so there's a stepped-up cost for the acquired Summer Garden inventory, and that sounds like that's gonna be done in Q2, Q3, that's gonna be worked through. Is that gonna be... Like, are we gonna get a separate adjusted gross margin to get a better sense of the underlying profitability of the business as well, or is that just gonna be embedded within your GAAP gross margins?
So, for the purpose of the, I have no choice but to report under GAAP, so you're right. So, if, let's say, I don't have the data yet, but you have to assume maybe a six-week finished good inventory. So, the first six week, the margin that we will be able to take from a reported financial statement perspective is basically the margin of a distributor. Now, to your point, am I gonna flag what the impact as part of our items affecting comparability between periods? I think I will, I'll strongly consider that or find a way for you to appreciate the impact so we can develop a real run rate for this business going forward.
But as we and, and also that's the reason why we kept in our outlook reference to their last 12-month EBITDA. So, we can already start thinking about beyond this 6 weeks-ish period or the third quarter, what would be the margin that you should apply to this business?
Okay, understood. Thank you. And then my, my last question before I, I pass the line here. So, you made reference to this multiyear CapEx program that you, you could undergo within US Beverage to improve on your positioning that you've, that you've built up through Project Eagle. So maybe just a little bit more color. I mean, how, how far into this process are you? And then, look, are you gonna be more focused on just extending on the strength that you, strength that you have? Are you gonna be looking to perhaps build in new capabilities as part of these investment scenarios? Just high level, how far along you are in this process, and, and maybe a bit more detail on what specifically you're looking at.
So, Luke, thank you for your question. As if you look at the last few MD&A, you see a gradation in terms of us talking about this upcoming scenario. So yes, we are now in the final stroke of getting to a clear visibility on what is it that you wanna do and get it, getting this in front of our board very soon, hopefully. And so, to the second part of your question, it's a bit of a consolidation of what we have and make sure that our existing capability are really optimal, and then allowing this base to, we can build on this and then deploying new capabilities. So, it's about, at first efficiency and then growth.
Yeah. So let me just build on what Eric said. You know, we can't get into too many of the specifics. We continue to you know, work through the assessment. But what I can tell you is, obviously, we're looking at ensuring that we've got capacity to support long-term growth that we see in this business. Two, is to ensure that we've got a facility and a network that gives us a competitive advantage when it comes to our cost structure, right? So, I think that's just important that we continue to take a look at cost. And thirdly, always taking a look at making sure that we've got facilities that have the flexibility to deal with new innovation, right? But importantly, is first to fortify our core offering and being able to do that.
As Eric also said, and as I said in my remarks, you know, we hope to conclude the assessment in the next coming months, and then we'll share more details with you at that time.
Yeah. So, and look, the last piece as well, right? As you all, when you look at Lassonde, all pointed out, the build-back of the U.S. is important, and for us, having our key people focusing on delivering the single serve line on time, on budget, took priority over the design of what is it that we're working on. So that's why now, with the confidence that we have, having delivered that, now we can really shift our attention to this project. So, I know you're eager to hear more. We're eager to share more, but we wanna do the right thing and make sure that all of our ducks are aligned before we, we share something with you guys.
Understood. I'll leave it there. Thank you very much.
Thanks.
Welcome.
The next question comes from Frédéric Tremblay with Desjardins. Please go ahead.
Thanks. Good morning.
Good morning.
One of the factors that was pointed out for the improvement in operating profits was securing favorable ingredient costs for the quarter. Just wondering if you can provide a bit more details on that, and I guess if you think that's something that can be replicated in future quarters as well.
So, thank you for your question, Frédéric. You picked up on an important piece here, and as you know, right, a good portion of our cost is commodity, and orange and apple are two of those, and a few other. In the second quarter, or leading into the second quarter, so the inventory that we had to sell in the second quarter, we were very fortunate to secure a portion of that ingredient, which is mainly orange juice, at the right price.
In fact, if you were to look at the FCOJ graph over the last few months, you'll see there was a dip late in the first quarter, early in the second quarter, and chance or luck or good fortune, we were able to secure a lot of our ingredient in that window, really helping us in the second quarter. That being said, today, we still have to face market realities, and the orange juice is back to the atrocious level it is now. So you have to see a portion of the profit generated in the second quarter as a one-time window of opportunity.
Okay, thanks. That's helpful. Maybe switching to Canada, beverage, one of the things that was mentioned as well is your, your efforts in, in food service and trying to gain market share there. Just wondering if you could talk a bit more about that in the, in terms of the initiatives that you're, you're putting in place, and, I guess sort of your views on, on Lassonde's, competitive advantage there against, some of the incumbent players in, in food service.
Frédéric, it's Vince. You know, it's a more difficult one to answer for us. What I can say to you is that we've got a very strong share position in the food service market in Canada. You know, we are a provider to quick service restaurants, healthcare industry, strong relationships with distributors, and what we're starting to see is a continued growth in that segment for us. So, we're deploying a lot of effort, including capital, to ensure we actually have competitive advantage in the market for the future, both in Canada and the United States. We have secured new distribution with key customers that are on a private label basis, which is giving some growth momentum in the Canadian market, and we've started to structure our business to focus on business development across North America.
So, the U.S. team has a food service business, primarily focused on the school channel. What we're starting to do is leverage the strengths that we have in Canada and deploy those capabilities and focus areas in the U.S., as well as putting a concerted effort across North America with larger strategic customers. So, it's a response to say we're securing new customers with new products that are fueling some momentum, but from a strategic perspective, we're starting to make new investments to actually enhance our capabilities, not just in Canada, but in the U.S.
That's helpful. Thanks. Last question for me, realize you just closed the Summer Garden acquisition, so maybe a bit early to speak about, you know, future M&A, but just in terms of future, you know, capital allocation priority, you know, should we think about M&A as a possibility, or are we thinking more about the future CapEx program that you'll be telling in future quarters?
As I was answering, Luke, our attention will be first on this potential investment in our existing network. Next capital deployment will be for internal growth versus acquisition growth. But again, we see, as you saw, our pro forma debt level is 1.9 now. Still a very strong balance sheet after absorbing this acquisition. So, we should not close the door to any acquisition, but again, you know that we are mindful in pace in terms of management. So now our focus is on securing this next step of growth for our U.S. business through internal investments.
Yeah, and Frédéric, I would simply just build on Eric's point in saying, you know, this acquisition of Summer Garden is an important acquisition for us, and we want to ensure that the integration of all of our activities is executed flawlessly. And we want to ensure that we continue to focus on making sure that we bring that into the Lassonde fold the right way. And so that's really where our attention has to be. And I simply say that on top of what Eric has said, where our focus from an investment perspective is really now on sort of capital deployment to fortify our capabilities now in the short term.
Great, thank you for taking the questions. That's all I have.
Thank you. Next.
Once again, if you have a question, please press *, then 1. The next question comes from Vishal Shreedhar with National Bank Financial. Please go ahead.
Hi, thanks for taking our questions. It's Gabriel on for Vishal. Most of them didn't answer, but just quick, some clarification questions. Firstly, on the North Carolina, building through 2024, full production 2025, just wondering how much of that, the capacity there's already been spoken for, and maybe you can give, some color on the visibility towards, rebuilding all those volumes and the contract wins in the U.S.
Let me start, it's Eric, Gabriel. The 2024 volume is pretty much all sold. Then when we look at 2025, we have a very good visibility on a, what would be a full run rate, volume. Those cases, the market are expecting them. So, without getting into percentages, we know that this line will be very well used in 2025.
Look, I'm not gonna get into the specifics, Gabriel, and I understand the question. What I would say to you, though, is that the pace of the build that we're seeing from a commercial demand perspective is on budget, like it's on expectation, and we believe that we are actually moving forward to have good utilization of the production that's gonna be available through to the end of 2025. So we're pleased with what we're seeing on the build.
Okay, got it. Appreciate it. And then maybe just switching to the Summer Garden. I think last time, you had called out mid to high single digit, now the outlook's calling for high single digit growth, and it sounds like sales synergies aren't being quantified at this time. So just wondering, the, the increase, is that you're feeling more confident about your ability to deliver or maybe some sort of other factor that, that caused that change?
So, since the announcement of the acquisition, where we said mid-single digit, right? Mid to high. We get to know a bit more the organization, and we are confident that it can deliver this high single-digit growth through the book of business they have at the moment.
Okay, got it. Appreciate that. And then this is my last one. I think you've called out sales volume decline in Canada for a few quarters now. Clearly, the U.S. is back on track, momentum. But I'm wondering, now that management has more time to focus on Canada, I am wondering if when we can start to see a volume positivity in Canada?
So let me jump on that one for a second. First of all, it's not a matter of refocusing on Canada. We continue to focus on Canada. It's an important flagship market for us, so that would be the first point. The second thing is that, yes, we talked about volume declines, but what I would tell you is based on the pricing actions that have been taken in the market, the volume declines are actually less than we anticipated.
Third thing, as I mentioned in my remarks earlier, we are very now focused on ensuring that we're investing, in the back half to accelerate distribution of our new innovation products, of our new innovations, and also ensuring that we're doing much more targeted spend from a promotion perspective to really recognize the shift in what we're seeing from a, from a value perspective. So, there's a lot of focus on it and accelerated in quarter three, quarter four, as we look at those, those activities to actually stimulate volume.
Appreciate that. I appreciate the, the correction there, and thanks a lot.
No worries.
This concludes the question and answer session. I would like to turn the conference back over to Vince Timpano for any closing remarks. Please go ahead.
Well, thank you everyone for joining us this morning. We, we look forward to speaking with you again at our next quarterly call. Have a great day, and have a great weekend. Thank you.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.