Earnings Call: Q4 2019

Mar 12, 2020

Earnings release

Good day, ladies and gentlemen. Welcome to the Premium Brands Holdings Corporation Fourth Quarter twenty nineteen Earnings Conference Call. As a reminder, this conference is being recorded. At this time, all participants are in a listen only mode. And following the presentation, we will conduct a question and answer session. It is now my pleasure to introduce your host, George Pelliolago. Please go ahead, sir. Thank you, Nadia, and good morning, everyone. I would like to welcome you to our twenty nineteen fourth quarter conference call. I will be turning the presentation over to our CFO, Will Kalugic, for an overview of our financial results for the quarter, after which I will make a few brief comments. This will then be followed by the Q and A segment of the presentation. Will? Thanks, George, and good morning, everyone. Before discussing our results for the quarter, I would like to caution you that to the extent we make forward looking statements during our presentation, our forecasts and assumptions are subject to change and actual results may vary. Please see our 2019 MD and A, which is filed on the SEDAR website, www.sedar.com, for details on some of the factors that could cause our actual results to differ from our current expectations. Turning to our results. Our revenue for the quarter grew by $115,200,000 or 13.7% to a record $959,100,000 The majority of the growth was driven by organic sales initiatives, which accounted for $62,200,000 of the increase. Acquisitions accounted for $42,800,000 and selling price increases for $11,700,000 These were partially offset by a decrease of $1,500,000 resulting from currency translation. Our organic volume growth, which excludes the impact of selling price increases and currency exchange related deflation, was 7.4% for the quarter, which was well above our long term targeted range of 4% to 6%. On a nominal basis, I. E, after selling price inflation and currency exchange deflation, our organic growth rate was 8.6%. Our strong organic growth for the quarter was driven by a broad range of initiatives with most of our success being in the seafood, artisan sandwiches, pre and dry cured meats and meat snack product categories. Our U. S. Seafood platform, in particular, generated strong growth driven by new procurement initiatives and the startup of its state of the art lobster processing facility in Saco, Maine. We were also very pleased with the growth in our sandwich platform as a number of the new customer and channel initiatives that we have been working on gained significant traction. Our strong growth for the quarter was not, however, without challenges, including continued weakness in the Western Canada full service foodservice market and lower than normal promotional activity for certain pork based products as a result of commodity cost and supply uncertainties associated with the outbreak of African swine fever in China. Our adjusted EBITDA for the quarter increased by $12,400,000 or 19.8% to $75,100,000 Normalizing for the adoption of the IFRS 16 accounting standard, our adjusted EBITDA grew by $2,700,000 or 4.3%. This was driven primarily by our sales growth, efficiency improvements in a number of our production facilities and lower variable compensation accruals associated with lower year over year growth in our free cash flow and free cash flow per share. These factors were partially offset by four main items: one, additional costs associated with investments we are making in infrastructure to support our current and future growth, including additional overhead associated with our new GTA and Saco facilities, our two expanded Montreal operations and our new lobster procurement initiatives. Two, pork and beef commodity inflation, which was largely related to the ASF outbreak in China three, labor cost inflation, particularly in our U. S.-based businesses where the labor market is extremely tight and four, additional outside storage costs mainly associated with long inventory positions taken to help hedge against rising global pork and beef commodity costs and to prepare for new product launches. Our adjusted earnings per share for the quarter decreased by $03 to $0.79 per share, primarily due to the various adjusted EBITDA challenges I outlined earlier as well as two structural changes, namely one, the dilution effects of our recent private placement as a significant portion of the new capital raise has not yet been invested and two, the adoption of the IFRS 16 accounting standard, which represented approximately $02 of the decrease. With our fourth quarter results, we also released our sales and adjusted EBITDA guidance for 2020. For sales, we are projecting a range of $3,975,000,000 to $4,075,000,000 representing a growth rate range of 8.9% to 11.7%. The main drivers of our growth this year are expected to be: one, a full year sales from acquisitions completed in 2019 and earlier this year two, continued traction in our North American seafood, artisan sandwich, meat snack and premium dry cured expansion strategies and three, leveraging a variety of capacity expansion projects we've completed over the last couple of years. For adjusted EBITDA, we have provided two ranges for our 2020 outlook: one, based on a relatively normal protein commodity cost environment and the second based on an inflationary environment similar to what we experienced in 2019. There were several reasons for doing this, including highlighting the significant amount of uncertainty associated with the short to medium term ramifications of the ASF outbreak in China, which has resulted in the loss of approximately 25 of the world's pork production. Under our relatively normal commodity environment assumption, we are projecting an adjusted EBITDA range of $335,000,000 to $360,000,000 with our year over year growth being driven primarily by sales increases and production efficiency gains resulting from both continuous improvement initiatives and higher production volumes. Under our bad case scenario, we are projecting an adjusted EBITDA range of $320,000,000 to $345,000,000 which essentially reflects $15,000,000 in transitory margin impacts resulting from inflationary pork and beef costs. Turning to our financial position. We continue to maintain a conservative balance sheet and strong liquidity. Our senior debt to adjusted EBITDA ratio was 2.2:one, which is well below our long term targeted range of 2.5:one to 3.0:one, while our total debt to adjusted EBITDA was 3.6:one, which was also below our long term targeted range of 4.0:one to 4.5:one. In terms of liquidity, we had approximately $350,000,000 of unutilized credit capacity at the end of the quarter. During the quarter, we invested $36,500,000 in businesses and growth related capital projects. Our business acquisitions consisted of Maine Coast Seafood, a Maine based lobster distributor and Multitask, an Ontario based cold storage provider. Both of these transactions were made within our existing platforms as part of their value creation strategies. Our project capital expenditures for the quarter included $2,300,000 for the completion of our Seafood Group's new lobster processing facility in Saco and $1,700,000 for the completion of the expansion of our protein group's cooked protein facility in Montreal. Turning to dividends. During the quarter, we declared a dividend of $16,000,000 or $0.05 $25 per share, which on an annualized basis works out to $2.1 per share. Our free cash flow for 2019 was a record $177,800,000 as compared to dividends of $76,700,000 resulting in a payout ratio of 43.1%. Subsequent to the quarter, we increased our dividend rate by 10% to $0.05 $7.07 $5 per share or on an annualized basis, dollars 2.31 per share. I will now turn the presentation back to George. Thanks, Will. 2019 was another successful year for Premium Brands as we made significant progress towards our objective of becoming the leading specialty food company in North America. We're particularly pleased with the progress made by our U. S.-based value added seafood, sandwich and protein platforms in executing their growth plans. All three had record years driven by excellent commercial execution, robust innovation and leveraging PB ecosystem opportunities. Thanks to their success, our U. S. Sales have grown to $1,400,000,000 and now make up approximately 40% of our total sales. Over the past year, we also made great progress in expanding our distribution platform in Quebec with a 45,000 square foot expansion of our seafood facility in Montreal and the acquisition of Quebec City based Viandex. Our Quebec based distribution platform under the leadership of CSE Packing is now very well positioned for top and bottom line growth with new state of the art capacity and a best in class management team. Looking forward, we remain very confident about our unique business model, growth strategies and correspondingly reaching our twenty twenty three objectives of $6,000,000,000 in sales and $600,000,000 in EBITDA. The 10% dividend increase we announced today, which is our sixth consecutive annual double digit dividend increase, reflects this confidence. We were pleased to see that Premium Brands was ranked as one of the top 10 best performing stocks in the TSX over the past decade with a total return of 1000%. We're very pleased that our long term shareholders were rewarded handsomely for their support. During the past decade, we faced many challenges. We faced trade issues, ultra tight labor markets, virus epidemics, competitive threats, supply chain disruptions, capacity constraints and a myriad of other headwinds. At times, these forced us to delay or adjust our growth plans, but they never changed our resolve to pursue our core strategy of partnering with passionate, talented food entrepreneurs and management teams then giving them access to the resources they need to accelerate the growth of their businesses, all the while respecting their unique cultures and traditions. Our decentralized business model and unique culture and passion for making or distributing on trend great tasting foods made with wholesome ingredients is the reason that we remain confident that we will continue to execute well and that our shareholders will continue to be rewarded over the long term despite the headwinds. In terms of acquisitions, we're pleased to report the recent closings of three transactions: Inform, Brokerage, Bavarian Sausage and La Felinese. All of these businesses bring with them exceptional brands and great people and will play a key role in helping us execute our various specialty food focused strategies. We expect 2020 to be another very busy year for acquisitions, driven by a very robust deal pipeline, both at the PB level and at the business level. I will now turn the presentation over to Nadia for the Q and A part of the presentation. Nadia? Thank We'll first go with Durek Lassard from TD Securities. I was just wondering, in the context of the COVID-nineteen impact, particularly in Italy and obviously the investment that you just made there, how should we be thinking about your ability to either import or access your commodity inputs from there and or your inventory positions over the next, call it, three to six months? Yes. A couple of comments there, Derek. One is that the food industry in Italy has been deemed to be an essential industry effectively. So the food industry and the health industry are basically the only industries that are open and operating as we speak. In the case of La Salinas, there's been absolutely no disruption in terms of production. And we are importing record number of containers from the company into North America, and we're doing well. That segment is growing very nicely for us, and we expect it to continue to grow. Okay. So no so as of now, there's been no impact even from a labor standpoint? Absolutely none. We've had some of a temporary disruption in that. We had a few containers caught up in the blockades with our railroads, but that's been resolved now. But in terms of the operations of La Felinese, they're operating very well. All their five facilities have had absolutely no disruptions. And again, it's one of the industries that obviously has been deemed essential by the government there and is still operating as usual. Okay. Thanks for that, George. And another one for me. It seems like you are being or like presently you're seeing little impact from the coronavirus on the supply chain. Is there anything you can talk to for those businesses that are maybe closer to the immediate hotspots? And I'm thinking like Alberto's on the West Coast side from supply or demand perspective? Yes. Think in general terms, obviously, for everybody, their situation is changing daily. But we've seen extremely robust demand from the retail and club channel, I would say. In many circumstances, we're actually having difficulty keeping up with the demand for obvious reasons. I think there is good consensus that there has been some stockpiling, etcetera. Our businesses, even in Canada, service retail and club are extremely busy. And I think in general terms, we're seeing obviously a slowdown in certain channels. Thankfully, they're not large for us. No one would be surprised to hear that the airplane channel for us is has slowed down or even the part of our business that services Chinese restaurants in Toronto, in particular. These are not large segments for us, but again, they've obviously slowed down. Okay. Thank you. Thank We'll go next with Sabahat Khan from RBC Capital Markets. Please go ahead. Thanks. You provided some color in the outlook section around taking into account the potential commodity exposure. Just want to get an understanding of what have you baked in, I guess, from your perspective into your outlook with regards to sort of revenue? Are you did you sort of have a revenue outlook and then moderate it based on current headwinds? Just want to understand, you provided some sense in terms of EBITDA if there's some built into revenue as well. Yes. In terms of our sales outlook, Sala, we took a fairly conservative approach on the impact of COVID on the basis of what we're seeing today. As George mentioned, we've seen some impacts in the airline industry, Asian restaurant business in Southern Ontario, some of our lobster Chinese exports. All those impacts are sort of known and been incorporated. And on the other side, some of this most recent activity, such as the club buying, the stockpiling by consumers, actually haven't incorporated that upside. So we've based on what we've known today, we've taken a fairly conservative look at our approach with COVID-nineteen. Okay. And are you able to share how much, whether it's your PFD business or total? Just trying to get an understanding of what's the exposure to Western Canada kind of going forward, at least for 2020? In sorry, in foodservice? Yes, just kind of the food distribution segment, what the split for that business is kind of west versus east. Yes, we don't break that out, Saba. But in general terms, because our western foodservice business, which is primarily Centennial, has operations across the country. But a real rough general ballpark is 300 to $400,000,000 Okay, great. That's helpful. And then you indicated that you've been taking some, I guess, impact from the COVID-nineteen into account. Is that sort of the station on current visibility? And is that mostly sort of supply chain related? Just want to understand what you've baked in. I think you mentioned some sales into China and the GTA impact. Is there is that more supply chain related? Or is that more sales related when you're thinking about it? It's sales related, and it's based on our current visibility. Okay. Great. And then just one last one for me. I guess a lot of the growth seems to be coming from recently and going forward from the sandwiches side. Is this largely sort of programs that you've already talked about? Those are progressing as expected. Is there any sort of new news on the sandwiches front as we head into 2020 at all? Yes. It's really what we've been talking about to date, and it's taken us a little while, but we are gaining that traction that is resulting in the positive sales trends. There's a few the team is constantly working on and developing new initiatives. And so there are always new things coming to the forefront. But the results you're seeing currently is driven by everything we've talked about in the past. We'll next go with George Doumet from Scotiabank. Yes. Hi, guys. I just have a follow-up on obviously on COVID, given the flu situation. But can you maybe talk a little bit about maybe mitigation plans? So our ability to kind of maybe move production from one place to another as it relates mainly, I guess, to the higher growth sandwich and the deli meats platform? Yes, very good question. And again, we've spent a lot of time internally effectively trying to game the situation with COVID-nineteen. We are in a very good position in the sense that Premium Brands does not operate very large central facilities. We have 65 facilities across North America. We have built a lot of redundancy in our system. We have seven sandwich plants effectively in different parts of the country. We have various deli and meat snack plants, etcetera. So again, we've done a lot of work trying to coordinate the effort and obviously get the ecosystem to cooperate with each other. We feel that we are one of the very, very few companies that we can go to our customers and offer them redundancy with respect to a number of products that we manufacture. So if we do have a problem in one facility, we should be able to continue the majority of our production and goods and services to key customers. I would also like to say that, as I mentioned earlier, in speaking to a lot of our companies, big part of our situation today is actually just keeping up with demand. In a lot of our businesses, we've actually stopped taking new orders from new customers because our focus today is to service our existing customers. Okay. No, that's helpful. And Will, on your guidance, it looks like you guys are expecting about that the midpoint at least $50,000,000 of an impact on ASF this year. I think it looks like we're seeing some signs of deflation out there, I guess, with COVID and everything that's happening. I guess, in the past, we're able to kind of hold on to price that we've taken already. So I'm just kind of wondering maybe some color around that number and what your thoughts are, I guess, for inflation in this environment, at least? Yes, sure. So on your first comment in respect to the $15,000,000 you're right, that's what we have factored into that second range. What again, I can't stress enough though, George, is really an unknown impact. Like for all we know and what's happened over the last couple of months is a great example is when we were going into the fourth quarter when we're in the fourth quarter going into December, we saw a significant amount of inflation in our pork and beef costs, our protein group. And that was driven in part by the opening of trade with Canada opening to China and The U. S. Tariff situation with China easing somewhat. So we started the year with a pretty inflationary trend. That carried through for much of January. And then toward February, we did start seeing some deflation as a result of the COVID situation and what that's been doing to supply channels in China. So it's been incredibly volatile around the commodity costs. And in that environment, it's really tough for our businesses to set their pricing strategies. So that's why we've got this great uncertainty about what the balance of the year looks like. It's that $15,000,000 is not our projection. It's just an indication that it's a really uncertain environment. Now in terms of the current deflationary market, you're absolutely right. We will hold prices, particularly on a more differentiated items as we've talked about in the past. And if that continues, then we should be in that upper scale of our two ranges. If that doesn't, then and inflation kicks in, then we'll go back to our standard strategy of our businesses will put through price increases as needed. But there is always a delay in that process, and that creates some short term margin impact. Okay. That makes sense. And just one last one, if I may. On the leverage, we're sitting in the mid-3s. I guess in the context of maybe expectations out there that there will be some form of economic contraction. Are you guys going to be prudent? Or should we expect kind of the pace of M and A to continue? Again, first point, George, is and I always have this discussion with many of our shareholders is our senior debt to EBITDA ratio, which is our key ratio for managing our balance sheet, especially in the short to medium term, is our senior debt to EBITDA ratio. And that's running at about 2.2:one, well below our banking requirements of four:one. So we've got a tremendous amount of flexibility if something does go wrong. Our convertible debentures, which make up the total debt, that's fully subordinated, no principal payments, no covenants associated with them. And so it's pretty patient debt. So and nothing comes up to do on that until 2023, I think, is our first issuance that comes up. So we've got a lot of flexibility on that side. In terms of our level of activity, always manage our balance sheet prudently and we will continue to do so. And you're right, given this environment, we will probably be a little more prudent than we've been in the past. But it's certainly top of mind and something we will manage very closely. We'll next go with David Newman from Desjardins. Hey, David. Good morning, David. So if you look at the year, it's almost like a tale of two guidances here as I see it, where you've got the front end of the year impacted residually by ASF and then COVID-nineteen kind of kicking in. So if I had to look at it, I would say it's almost going to be your more optimistic guidance for the back end of the year and maybe the lower guidance for the front end the year. But maybe you can just kind of give us a sense of what you're thinking throughout the year in terms of how this how the EBITDA could pace into throughout the year based on what you see. Yes. Again, this goes to my earlier comment, David. It just it's going to depend on so much on how things fall out. So if we walk through COVID-nineteen, the reason why it's having such an impact on commodities, global commodities right now is because it shut down the supply channels in China. And as a result, product is not flowing and it's backing up and product that was destined to be exported from North America is backing up in North America and creating downward pressure on prices costs for us. If COVID-nineteen and its impacts on the supply chain are relieved in China and that opens up and you have a lot more North American product flowing into China, well, that's going to strengthen prices for commodities in North America. But then even going down that road, the fact is storage facilities in both North America and China are just chocker block full of protein at this point. So that's Another variable that, okay, how long is it going to take for that product to flow through the system and relieve pressures. So I wish I could give you more clarity, but that's the reason we've taken this approach is there's just so many variables in this and how it plays out creates that uncertainty that if it plays out favorable, we'll be in that top end of that guidance. And if it's not, then we'll be in that bottom end. I think, David, it's safe to say that when we put together the budget, were facing for 2020, we were facing a very inflationary environment with respect to protein. It's no longer the case. I mean, there's been demand destruction, obviously, in China and COVID-nineteen in North America will also cause demand destruction. That situation has changed as of today currently. We don't see that changing any time in the near future. So anyway, that's sort of our view today. And if you look at ASF, there was a lot of somewhat manipulation going on into the market with the Chinese ahead of the leader of the year and things like that, which seems to have subsided a little bit. But that certainly must have added to the volatility that's going on in the market on ASF as well. We do not say. Well, yes, it certainly was taking supply out of the system because our read of the situation is a lot of suppliers, a lot of processors were putting away product in anticipation of a strong Chinese New Year. Well, as we all know, that did not happen because of COVID-nineteen. So yes, they got caught and that fed into some of the weakness we're seeing now. Don't also forget, David, that a lot of the proteins exported to China are consumed traditionally in the foodservice segment. And then the foodservice segment in China has been impacted immensely by COVID-nineteen as well. So there's been some demand destruction in the foodservice channel in particular. And if you look at North America, I mean, the restaurants are looking sitting out for sure. At the end of the day, people have to eat. And you kind of alluded to it, George, where you might see a pickup in people staying indoors with your specialty food side, whereas your premium foodservice distribution could be impacted. I mean do you think there's enough balancing and puts and takes that this broadens out to a more insidious situation that you'll still see people going out and obviously buying at the grocery or whatever, right, or club or whatever? Yes. David, first of all, even what we report as distribution business for PB, it's not just to foodservice. There's a that division distributes a lot into specialty retail and retail in general. It's just a distribution type of business rather than branded manufacturing. So as a company, we are much more developed retail in and club segment. We've seen situations where we've got customers in Canada and The U. S. Retail and club customers where our sales to them are up to they're up by 40% even, up to 40%. Again, whatever is not consumed historically in the foodservice channel will be consumed at home and will be purchased in the retail or club service channel. As you say, people have to eat ultimately. And that's what we're seeing. I mean it's early stages, but that's what we're seeing right now. Okay. And last one for you, again? I'd certainly add to that, David. Just we've gone through this for different reasons, the cycle of consumer spending patterns shifting from foodservice to retail. So we've seen this many times in the past. And like George says, that's exactly what happens. And I'll add to it is the thing with retail versus foodservice, our margins are better on the retail side. So we might not capture all of those sales, but we certainly capture the cash flow. Again, if you look at the situation that took place in the last couple of years in Alberta, David, with the oil patch, Yes, our foodservice business did slow down, but our overall business in Alberta, including retail and club have actually grown, right? So we are strong believers that people will eat somehow. It's if they don't eat in foodservice, they will consume food at home. So and that's generally what we're seeing at the early stages of COVID-nineteen. Very good. And last one for me guys. Just on the growth CapEx, you provided maintenance for CapEx guidance. But any thoughts on growth and CapEx and specific projects you have in mind above what's already announced? Yes. We've got quite a few projects in the works right now, but we don't announce them until we've gone through our capital allocation process and they've been approved. As a preliminary guidance, I'd say probably 2020 will be similar to 2019, but we'll see how it plays out as the year goes. We'll next go with Vishal Shweta from National Bank. Hi. Thanks for taking my questions. I just wanted to reference an investor presentation that management put out where they noted margin expansion potential associated with lapping the 2019 challenges, including ASF and the seafood margins. Is it fair to say that this margin normalization is more of a benefit in 2021? Or how should we think about that? Yes. So that would be the margin normalization for our upper the upper end of our guidance range. That's what that reflects is a normal commodities market results. So if that's how we proceed, we should see it in 2020. But ultimately, if we end up in the bad case scenario, then it would be a 2021. Okay. So in your disclosure here, the company notes that the 2020 guidance is predominantly being driven by sales growth and also some production efficiency gains, the upper end would reflect that normalization and that's more the base case, right? Sorry, say that again, Vishal? Where management notes the EBITDA is predominantly in 2020 being predominantly driven by sales growth, that's more of a base case assumption, and the upper end would include some margin benefit associated with normalization. That's fair characterization? Well, I think what you're going to see is you're going to see the EBITDA growth from the sales volumes and the efficiencies. That's the plan. We don't expect the variance from that. But then under the bad case scenario, it's offset by the impact of the ASF. So you'll still see contribution margin coming from the sales growth. It will just be at a lower rate because of the ASF impact, lower margin to the ASF impact. Okay, understood. Yes. Looking at switching gears here, earlier in the conference call, it was noted that if there is deflation in the commodity backdrop, you would try to hold prices on differentiated products. I was wondering if there's any way for us to estimate what percentage of your products are in fact differentiated? Yes, that's a tough question, Vishal. The best way to understand the potential of that is if you look at the trend in our EBITDA in our Specialty Foods segment in 2014 through 2017. That kind of gives you some sense of the potential. We do not break out our product categories into the level of detail you're looking for. The ones that stick out is the premium differentiated ones would be things such as our dry cured charcuterie products, premium dry cured charcuterie products, our meat snacks. And those are two incidents that come to my mind. And the sales of those two categories, I would, off the top of my head, estimate at about maybe, what, dollars 400,000,000, George? Or 500,000,000 Yes. I think that the better way to look at it is to look at the fact that the majority of our foodservice and QSR business is generally cost plus. And so I would probably say, to answer your question, about 50% probably we would consider differentiated. It's just the level of differentiation that we might need to think about. But I would say fifty-fifty, probably cost plus versus differentiated. Okay. I appreciate it. And I recognize it's a tough question. So I just wanted to get a ballpark sense. Okay. And this is maybe we can take this one offline, but I was trying to figure out what percentage of your business is more of the traditional staples type. And I appreciate there's a switch between distribution and grocery depending on different economic backdrops and whatnot. But the ISR category, what predominantly constitutes that category? Is it predominantly with specialty retailers? It would be yes, for out here, a chain comes to mind would be Choices or, I guess, Farmers what's chain in Ontario? Farm Boy. Farm would be a sample. Things such as convenience stores we include in there as well. It's a whole variety of channels outside of essentially the big five or six names that would come to your mind, Loblaws, Costcos, Walmarts? Yes, it's predominantly retail, butcher shops, tobacco, jellies. It just so happens that this segment has been growing quite a bit. And again, it's one of the segments that's benefiting a lot from what's going on right now with regards to COVID-nineteen. Okay. And maybe I'll just squeeze one last one in here. Just in terms of having to ask this question, but COVID-nineteen, do you anticipate any facility closures looking forward? Well, as I mentioned earlier on the call, we've spent a lot of time with our different teams trying to game the situation, trying to prepare, trying to understand. Again, there might be closures. We are one of the few companies in my view, as I mentioned earlier, that we have a lot of redundancy in our system and we're able to have plants help each other with respect to capacity. We have plants all around North America. It's not likely that all of them are going to close at the same time. So again, we've talked about that. A closure may take place because of a supply chain disruption or because the health authorities deemed or dictated a shutdown for a few days. All of those things are possible. We've obviously looked at what happened in places like Italy, let's say, or Japan or other places where they've been impacted earlier by the virus, I'm happy to say that our partners in Italy have not had any disruptions to this point with respect to any of their plants, even though they've been hit pretty hard. So yes, it's a possibility, but we feel comfortable that we could manage through that. Thank you. Thank you. We'll next go with John Zamparo from CIBC. Please go ahead. Hi, good afternoon. I wanted to follow-up on a further question about the decentralized business model and the advantage of having that. And I guess I'm trying to ask how flexible are your products? Can you easily switch to produce them at different locations? Or is there something unique about individual plants that they're not able to be shifted? And just in your mind, are there any particular plants or platforms you have that are at or near capacity? Well, it depends on seasonality, of course. I would say that in the summer months, there's not a lot of capacity available throughout the system. In that case, we even leverage partner facilities and a number of facilities that we don't necessarily own that are part of our ecosystem. So but this time of the year, there is capacity in the system. There is some redundancy, as I mentioned earlier. And in many, many key areas of the business, we're able to manufacture products interchangeably between facilities. So yes, we think that's a strength and it's something that we are talking to our customers at this time given some of the uncertainty. If you are running a business in the food space and you have one facility, it's not a good time right now. And there's a lot of risks associated with that. Okay. That's helpful. And then on labor availability, this has been a challenge for, I guess, the past eighteen months or so, particularly in The U. S. And in light of COVID and the potential for labor shortages, I know it's a small sample size, but over the past couple of weeks, have you seen any uptick in, I don't know if you want to call it, absenteeism or just general challenges in finding people to properly staff plants? Or is that not an issue at this point? Not an issue at this point. Okay. And then on ASF, so built in $50,000,000 as your expected impact. Granted there's uncertainty there, but can you give a sense of color on the cadence of that impact? And can you remind us what the impact was at ASF in 2019? Yes. So the impact in 2019 was roughly $15,000,000 and that was for three quarters. But it also included a sales impact, which we have not factored in. So it's kind of an annualized commodity impact from 2019. In terms of the cadence for 2020, we do know there was some impact early in the first quarter. We've taken that into our thinking in both ranges, though. So it's really a lot of the cadence is in if it does play out is second, third quarter. Okay. And then last one for me. Can you give a sense of magnitude as to the declines that you have seen on the GTA restaurants you mentioned in the lobster export business? At this point, in terms of the restaurant industry in Southern Alberta sorry, Southern Ontario, it's relatively small dollars like on an annualized basis, we're talking sort of 3,000,004 million dollars And in terms of the Chinese exports, that one has a fair degree of visibility to it. And again, it's not a huge number. We're looking at 6,000,007 million dollars impact. And sorry, that's in the quarter or that's like what you expect? No, that's for the year. That's for the period of our visibility. So it's really kind of the first half of the year. Okay, understood. That's all for me. Thank you very much. We'll next go with Stephen MacLeod from BMO Capital Markets. Please go ahead. So lots of my questions have already been answered. Lots of ground you guys have already covered, which is great. I just wanted to see if I can get some color around the acquisitions that you announced with the quarter. So I guess, Informed Brokerage, Berean Meats and La Felonese, did you give color around revenue and EBITDA from those acquisitions? We haven't. They're relatively small acquisitions. So overall, La Filonese will be an equity investment, so it doesn't even impact our sales or EBITDA. Inform Broker in Bavarian. Inform is roughly a $25,000,000 plus sales business, all in Canada, Canadian dollars. It will form part of our premium food distribution group. And then Bavarian, it's a relatively small brand. It's got about 5,000,000 to $6,000,000 in sales, and it will form part of our Specialty Foods division. Okay. Okay. That's helpful. In terms of in the past, you've talked about the sort of sales pipeline of the new product listings that was previously talked about to be $130,000,000 Can you talk a bit about how that run rate has moved, whether you've experienced it all, how much you expect to experience in the 2020? And then I guess if that has actually ticked a little bit higher with new contract wins? Well, most of those initiatives are well underway, Steve, and they were contributors to our growth this past quarter. And they're factored in. But obviously, based on our outlook for the year, we're we've got a lot more irons in the fire today than we did when we first talked about that $135,000,000 Right. Okay. So it sounds as though there's really no change to the top line and demand outlook. It's more just the disruption in the outlook for 2020 with respect to ASF and COVID-nineteen. Is that a fair way to characterize it? Yes. And we've kind of again, we've reflected our current visibility around COVID-nineteen in our numbers and in our outlook around our sales. So it is really assuming there is no major meltdown in the situation, it's really the asset and the margin impacts that is our greatest uncertainty at this point. Right. Okay. But certainly, with regards to COVID-nineteen, some channel disruption, some channels positive, some channels negative. Yes. Okay. Okay, that's great. Thank you. We'll next go with Dirk Lasard from TD Securities once again. Yes. Thanks, guys. And sorry for beating a dead horse here. But I was just wondering, back to the COVID-nineteen, if you anticipate or have any of the customers or clients come back to you in terms of delays to the big snack big sandwich and snacking programs you've got going on? No, we have not seen any delays. I think that in terms of our efforts to do better in the retail and club channel with regards to sandwiches, meat snacks, etcetera, it's the opposite. We've got tremendous demand in those segments because of the reasons that we've discussed today. Okay. Thank you. We'll next go with Dmitryk Molnetsky from Veritas. Please go ahead. Hi. So I have a few questions. The first question is how much revenue related to new initiatives and I'm talking in respect of the $135,000,000 worth of new initiatives related to Specialty Foods segment. So how much of those revenues were recognized in Q4 twenty nineteen? We haven't broken out that specifically, Dmitry. Again, our growth in the quarter, I think, what was in January most of that organic, I think it was roughly $62 $63,000,000 was organic. A good portion of that was that 135,000,000 was a good amount of it in our sandwiches and our meat snack components. And you take that 135,000,000 divide that by 4,000,000 it's a reasonably significant portion of that 62 So just to clarify, the so the growth in specialty foods or rather specialty foods growth was $30,000,000 in Q4. And so essentially, are you saying that all of this growth in Specialty Foods in Q4 all came organic growth, all came from sandwiches and meat snack initiatives? In the Specialty Foods segment, absolutely. Mainly, yes, mainly. Okay. So that means that the flip side of that is that organic growth in the base business would have been negative then in Q4, ex the 135,000,000 and then the new initiatives on an annualized basis, right? No, no. The base sales were relatively flat, and you're right. And a lot of that was that reduced promotion resulting from us pulling back from things associated with because of the asset risk issues. But you're absolutely right, that business was impacted by ASF. Okay. And the how much worth of the new initiatives revenue is embedded in the 2020 guidance? So going back to early twenty nineteen as well as later part of 2019, you were talking about the fact that $135,000,000 worth of the Eat, Snack and Sandwich initiatives that was secured very early on in 2019 as well as year 2018, that since then much more has been secured in new programs. So that would suggest a probably substantially higher number than $135,000,000 in Specialty Foods initiatives in new sales going into 2020. So I was just wondering what is roughly the amount that we're talking about That will be included in your starting frame right now. I'd have to go through the math with you on that, Dmitry, offline. Okay. Sure. The other question based on the guidance, it seems that organic revenue growth for the 2020 should come excluding the acquisition, the impact from the acquisitions should come at about 4.5. And I'm wondering how does that reconcile with your guidance or not guidance, probably not the right word, but you are you strongly implied in your recent Investor Day, organic revenue growth of about 8% per year going forward between 2020 and 2023. So I'm just trying to reconcile 4.5% with 8%. Yes. And I'd have to go through the math with you. Something's not adding up in your math, Dmitry. Acquisitions run rate in RAC acquisitions impacts about $100,000,000 and the rest is organic. So that would put you in the range that you're expecting. And yes, we can go through that math offline. Okay, sure. And then a question on the Starbucks business, based on the disclosures, it seems that Starbucks business grew about it slowed down to about 1% growth in 2019. And I was just wondering how you're thinking in terms of Starbucks business growth going forward. Should we expect substantial acceleration in that way? Or any other thoughts would be appreciated. Listen, Dmitry, we never comment on our business with any particular customer for obvious reasons. But I'd just like to say that over the past year or so, we've made tremendous progress in terms of growing our sandwich platform in all channels from other QSR customers to retail and club as well. So again, that's part of the reason why we've grown the specialty business so much and we continue to make good progress in growing those channels. We've got excellent capacity, best in class in the industry. We make excellent products, the most food safe, high quality sandwiches in the business. And we have a lot of demand in all channels, of course, including the QSR channel that you mentioned. Okay. And now turning to the C store convenience store channel related to e snacks and sandwiches. So I recall back to our discussion in 2019 on one of the earnings calls, you mentioned essentially that on the longer term, the revenue potential from the convenience store on meat snacks and sandwiches is over $100,000,000 So I was wondering where you're standing at right now in terms of your 2020 guidance. How does that compare to $100,000,000 or more potentially related to convenience stores? Yes. We're basically ahead of plan there, Dmitry. And we do own the fastest growing brand in the C store channel in North America, in U. S. In particular. So the Cattlemen's Cut brand is the fastest growing brand in C store in The United States as we speak. And would you be to disclose dollar wise how much revenues have been already achieved out of this 100,000,000 overall potential in convenience stores? Will, have you disclosed that? No, no. And again, it's not just meat snacks too, right? We've gotten some good traction with sandwiches in that category. It's So across a couple of different platforms. Right. Yes, yes, on those both categories. Would you be able to provide us with some number on where you're spending it in terms of 2020 revenue and the meat snacks and sandwiches and the convenience stores? I don't have that detail in front of me right now, Dmitry. Again, meat snacks segment in The U. S, Dmitry, a record year. They had the best year in the history. In the first full year under the PB umbrella, they had the best year in the history. Concludes today's question and answer session. I'd like to give the floor back to Mr. Paliolago to conclude the call. I'd like to thank everybody for attending today. Thank you very much. This concludes today's call. Thank you all for your participation. You may now go ahead and disconnect.