Also note that this call is being recorded on Thursday, March 19, 2026. Our speakers today are George Paleologou, CEO and President of Premium Brands, and Will Kalutycz, CFO of Premium Brands. At this time, I would like to turn the call over to George. Please go ahead.
Thank you, Sylvie. Good morning and welcome everyone to our 2025 fourth quarter and year-end conference call. With me here today is our CFO, Will Kalutycz. Hopefully, you've had a chance to listen to our pre-recorded remarks posted on our website this morning. We will now take your questions. Back to you, Sylvie.
Thank you, sir. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touch-tone phone. You will then hear a prompt that your hand has been raised. Should you wish to withdraw from the Q&A, please press star followed by two. If you're using a speakerphone, we ask that you please lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. First, we will hear from Martin Landry at Stifel. Please go ahead.
Hello, Martin.
Good morning, guys.
Hey, Martin.
I would like to start with your revenue guidance for 2026. You're calling for revenues of CAD 9.4 billion at the midpoint. It represents a revenue growth of around 26% year-over-year. I was wondering if you can talk about what type of cadence do you expect on a quarter basis. Is this revenue growth gonna be evenly distributed or is it gonna be a little bit more front-end loaded?
It'll be again a lot of our growth is ramping up, so you'll have, you know, a sort of ramp up across the year, Martin. Then within that, there's obviously the seasonality, you know, Q1 being the softest quarter of the year and Q4 being the next softest, and then, you know, two and three sort of being our seasonally strong quarters.
Okay. Just to be clear, Will, does that mean that the revenue growth is gonna be higher in Q2 and Q3 when we look at this on a year-over-year basis?
In dollar terms, absolutely.
What does the EBITDA cadence look like? Again, when we look at your EBITDA dollars growing on a year-over-year basis, when do you expect the biggest growth? Is this gonna be back-end loaded given the commodity cost pressure you've had in H2 of 2025?
We're on a product basis, by Q2, we're expecting. And we're talking mainly two groups, our Protein Group and our Lobster Group. I'll separate those and talk about them separately. On the Protein Group, by the end of Q1, we expect their margins on our per product basis to be back to normal levels. All our final price increases will have impacted by the end of the quarter. That noise is kind of not going into Q2. On the specialty food side then, the rest of the margin expansion is primarily driven by volume growth, which will be the major driver. In terms of the Lobster Group, you know, 2025 was an incredibly tough year in that segment, with the main fishery.
It's really gonna be a factor of how the fishery goes. We're a little more optimistic. You know, Q1 will still be tough 'cause we're carrying through the issues of 2025, but we'll be through all of our high cost inventory by that point. Again, on the Premium Food Distribution Group side or in the Lobster Group in particular, you should start seeing normalization margins, and so their margins getting back to more normal levels in Q2 and then being steady for the rest of the year.
What he meant, Martin, is Q1 one will be tough for the lobster group, not Premium Brands.
Premium Brands Food Distributions .
Mm-hmm.
Which is part of that. Yeah.
Okay. In terms of EBITDA cadence, you know, a little of a slow, slower start, but ramping up starting Q2 .
Exactly.
Because of seasonality mainly, Martin, right? That's what we look at.
Seasonality and the beef costs are still gonna be.
And the-
The lobster costs.
Which you've explained. Yeah.
Yeah.
Okay. Perfect. Thank you for all the color, and best of luck.
Thanks, Martin.
Next question will be from Derek Lessard at TD Cowen. Please go ahead.
Yeah, good afternoon, guys, and congrats on the quarter given the volatility that's going on out there. George, I just want to hit on your comments from the call this morning. You talked about a shift or consumer shift to buying lower cost products. Could you maybe talk about that shift and how that impacted you and what product categories were you referring to specifically?
Derek, what specifically are you referring to in my prepared remarks?
No, I was.
You know, I think that the point there is that there is definitely a shift away from purchasing ultra-processed foods. I think you're seeing it in all the stats that's coming out. You know, again, the new U.S. food guide, obviously, and narrative from there talks a lot about it. You know, in the U.S. it is quite significant because a lot of the school lunch programs, the food programs for the military and the SNAP program as well, is changing. A lot of ultra-processed foods do not qualify under those programs. Again, there's definitely a shift towards more wholesome foods with more natural ingredients.
Definitely a shift towards protein, particularly clean protein, which is where we play. We're seeing that with all the requests we're getting from different customers to provide them with innovation sessions around our products, right? Which is what is driving our growth.
Sorry, George. Maybe I wasn't clear. I think I'm talking more about the challenging consumer backdrop and if there's been any trade down.
You know, again, Derek, as we've said before, from our perspective over the past year or so, we have seen changes in the channels that the consumers are shopping for their food, right? For example, there's been some transition from mainstream retail to club, for example. Again, you're seeing it in some of the reported numbers from some of the publicly traded companies in this space. We're not seeing a lot of changes in regards to the way the consumer eats. The trends that we've been investing in, again, what I mentioned earlier in terms of eating cleaner food, less ultra-processed foods, those are continuing.
I was just at a conference in Washington, D.C., which showed all the statistics from 2025 and all of the trends. Nine out of 10 leading growth categories in all of retail are protein- and meat- related. Nine out of the 10, right? Basically the trends that we've been talking about are continuing.
Derek, I would add, it's interesting because, you know, where we are seeing the most in our business, and that comment, is on the food service side of things. You know, we are seeing a much more price-sensitive consumer. Our food service customers are looking for solutions, price-based solutions. That's historically what we have seen in economically challenged times. Correspondingly, we generally see some pickup or benefit on the retail side as people eat out less. The interesting part, you know, what's driving all our growth, all our capital investment has been around the U.S., and at this point it's primarily a retail strategy. We're not exposed to that food service sensitivity in the U.S.
Okay. Except for maybe products like at the C stores, right? The impulse buys.
Yeah, yeah. Although, you know, our biggest exposure there is jerky and you're not seeing that category too well as we called out in our MD&A. I guess, you know, where we are exposed in the food service side on the sandwich business and QSR, again, that unique part of the channel seems to be pretty economically solid. You know, it's sort of that small luxury concept, and it tends to do fairly well or fine through these more economic times, and that's what we're seeing play out today.
Okay. Maybe one final one for me before I break queue. Good progress on the free cash flow. It feels like it's held back still a little bit by the working capital. Looks like as you built up your programs mostly on inventory, can we be expecting a release of that cash in the coming quarters, and when?
Yeah. You know, it's the first quarter in a long time I can say I'm a little bit happy at the progress we've made on inventory because when you dig into it, you know, we build about CAD 70 million of inventory for three key protein programs. Our Bites Program, our Sticks Program, and our Kebab Program. It was purposely built to support us through the busy summer seasons. We're building inventory going in those seasons 'cause we can't meet demand with our production capacity if we don't build in the off-season. It's a big, very positive story, the inventory build. You strip that CAD 70 million out, our days purchases in inventory is about 57, and that's starting to get pretty good.
You know, we're probably targeting closer to 55, but we're getting very close to targets. In answer to your question, yes, you know, we should see that free cash flow starting in Q2 as we start to liquidate that inventory.
Awesome. Thanks for the commentary, guys, and good luck.
Thanks, Derek.
Thanks, Derek.
Next question will be from Michael Glen at Raymond James. Please go ahead.
Oh, hey.
Hey, Michael.
Hey. Maybe just to start, Will, you made the comment to the earlier question regarding the beef price inflation, but are you comfortable? I'm just trying to assess. If you look at the USDA data recently, it looks like beef has been moving higher. Like, what level of beef price have you embedded into the guidance? And are you comfortable with that level? I'm just trying to get an idea of all of that.
Yeah, we definitely expect beef to be inflationary this year. You know, the demand continues to be very strong corresponding to George's earlier comments on consumer trends. At the same time, you know, supply continues to be very tight in North America. We are expecting it to be inflationary. That is built into our guidance. You know, the issue in the back half of last year, and what shocked us so much was what happened with the tariff situation in the U.S. with Brazil. That really created a tremendous amount of volatility that wasn't factored into. You know, taking out those types of black swan events, we feel very comfortable with the pricing strategies we put in place at this point for 2026.
Okay. In the third quarter, you provided a figure with specialty gross margin excluding the higher beef price. Do you have a similar figure for Q4?
Well, it's interesting because, you know, that figure, what we did in that figure is we looked at our selling price increases in our Protein Group of businesses, and we compared that to the increase in beef prices. We took that nominal difference, and that's what we used in the MD&A. What that does not reflect is the fact that that's just a cost recovery. You're still not recovering your margins. In Q4, we actually made great progress on our pricing. When you do that math, it's actually slightly positive. It's about CAD 2 million+ , i.e. our selling price increases, net of commodity and wage inflation was a CAD +2 million. The issue now is our percentage margins still haven't come back 'cause the price increases weren't fully implemented.
It becomes a little more difficult to come up with that number when you're now going from just a cost recovery basis to what the margin should be. That's why we didn't disclose it this quarter.
Just on the Shaw divestment. Does Shaw get netted out of the reported results at the time of sale, so in 60 days, or does it get netted out as a discontinued op from the beginning of the year?
Yeah. Because it's not material, we're gonna argue it's not a discontinued op. It'll just be netted out from the day we sold. There seems to be a little bit of confusion around the Shaw transaction. Yeah, we've excluded Shaw Bakers for the three quarters of the year. That's about CAD 170 million in sales that we've pulled out of the guidance, if you wanna compare it sort of pre-Shaw Bakers to post-Shaw Bakers transaction. On the EBITDA side, for 2026, we're budgeting before restructuring costs about CAD 21 million, most of that being in the last three quarters, about CAD 20 million of it being in the last three quarters. We pulled out that CAD 20 million from our guidance.
you know, if you wanna normalize the guidance for the Shaw numbers, it's CAD 170 million in sales and about CAD 20 million in EBITDA.
All the numbers that Will has mentioned, Michael, are in Canadian dollars. There seem to be some confusion with, in terms of what's U.S. or Canadian in some of the commentary I saw. All the numbers he mentioned are in Canadian dollars.
Okay. Got it. Thank you for those figures. I'll step back.
Okay. Thanks, Michael.
Next question will be from Chris Li at Desjardins. Please go ahead.
Oh, thanks very much. Sorry, my note might have been the source of the confusion. Apologize for that.
Hi, Chris.
Hi there. I just maybe wanna just start with the question on the Stampede acquisition. When the deal was first announced, I think you provided some EBITDA guidance for 2026 of around $90 million. Just wanna check in to see if that's still a reasonable outlook. I'm just asking in the context of your earlier comments around the food service channel being a bit more sensitive. I think Stampede is a bit more leveraged to food service. I know there's some unique advantages, obviously, to that business that maybe make it more resilient. Just wanna check in to see if the outlook for Stampede is still valid.
The actual number, total number, Stampede was CAD 90 million, and then we had CAD 8 million of synergies built into that number. A total contribution of CAD 98 million, and we still feel very good about that. The food service exposure, you're absolutely right, that is a different characteristic of Stampede. You know, that was one of the reasons attracted to us 'cause it further diversified our cash flows. It is very interesting because whereas their customers are seeing some softness in their sales, you know, which is no surprise, but what has been happening is their customers have been coming to them to more product solutions, more LTO-type transactions, which they do incredibly well on in terms of their ability to meet what the customer is trying to do.
Yeah, if you just looked at one SKU within the Stampede business, you might see some softness, but they're more than making it up in these other opportunities around LTOs and new product development.
Yeah. The other comment I have, Chris, is that they're not just food service. They do a lot of business with club and retail. This is the part of the business, their business that's growing and will continue to grow in the future. You know, and again, based on some of the macro trends that I talked about earlier.
Okay, that's very helpful. My second question is just again on your revenue outlook. If I look at your specialty foods excluding Stampede, just last year very strong Organic Volume Growth Rate of almost 10%. When you think about your outlook for this year, are you expecting the OVGR to be similar like almost 9%-10%, or do you expect it to accelerate given you have obviously new programs still coming through the year?
Yeah. For the year, Chris, our Organic Volume Growth Rate in the specialty foods, I believe is about a little over 8.5% for the year.
Mm-hmm.
You know, it accelerated through the year. By the end of the year we're, you know, around that 10%, I believe, for Q4. For 2026, we're expecting an annual rate closer to the Q4 rate, so going from, you know, 8.5% to about 10% for the year.
Got it. Okay. Thanks. I'll just with you. Thanks, sir.
Okay.
Thanks, Chris.
Next question will be from Luke Hannan at Canaccord Genuity. Please go ahead.
Yeah, thanks. Good morning, guys.
Hey, Luke.
I appreciate the added disclosure when it comes to ROIC in the MD&A as well. I just wanted to follow up on it. It's mentioned in there the ramp-up costs that were associated with Shaw. Overall, do you expect that divestiture to be dilutive at all to ROIC in the near term, just given the contribution of margins in bakery and how much higher
No. Well, it's interesting, Luke. If you separate out Shaw, you know, we look at the ROIC on the different groups within the platform, the Specialty Foods Platform. For our Bakery Platform, you know, you look at the ROIC on that business, and it was about 7% this year. But if you strip Shaw out, it's actually 17.5%. Our Artisan Spread Business, which they were the first plant built in our most recent CapEx cycle. They finished their plant in 2022, and that plant's now coming close to capacity or at capacity. They're hitting it out of the park on ROIC.
You know, Shaw is still in the early days of their ramp up, you know, a lot of start-up costs, a lot of things to work out in their new San Leandro plant. Their ROIC has been suffering because of that.
Okay. Got it. Thanks. Just for my follow-up here on the thought behind the keeping that minority stake. I mean, it would seem like the intention would probably be at some point in time down the road for you guys to divest that as well. Is that fair?
Oh, no. Let's be clear. That's a great question, Luke. We only own 74% of Shaw. Our partner down in San Francisco owns the other 26%. We will have fully exited our investment in Shaw with this transaction. That $114 million in proceeds we received, that's for 74% of the business.
Yeah. Okay.
You need to divide that by 74% to get, you know, sort of a full value of the business concept.
Sure. Following on that logic, a rough math, let's say you guys got about 10x for that stake?
Yeah. If you take the CAD 21 million in projected EBITDA for 2026, convert that to U.S. dollars, that's about $15 million in EBITDA. You take out some. You know, there's still gonna be some ongoing restructuring costs with the business. Yeah, we're a little over 10x the multiple.
Not only that, Luke, but again, as you know, we're not a financial investor here, we're a strategic investor. We found an excellent buyer for the business. Again, there's tangibles and intangibles to this type of transaction, and we're gonna work together with the buyer for mutual benefit in the future. You know, we will be partners with them in the future in our core business.
Got it. Appreciate it. Thank you very much.
Thanks, Luke.
Next question will be from Ty Collin at CIBC. Please go ahead.
Hey, thanks for taking my question.
Hey, Ty.
Hey, Will. For my first one, I'm just wondering if you could provide a little more color around the gross margin decline in the quarter. I know you guys called out a few factors in the MD&A, but I just wanna understand what the biggest drivers were there since it sounds like commodity headwinds were actually quite a bit lower sequentially, and just how we should think about that into 2026.
Now, Ty, are you looking at consolidated or in the individual segments?
I was referring to consolidated, but,
Because, you know, if you're looking at a consolidated basis, the biggest single factor was in our lobster group. You know, going back to my earlier comment of taking selling prices less commodity impacts and looking at what that number is, for fourth quarter, you take our selling price increases on our lobster products and take out the commodity cost impact, commodity cost inflation on the lobster procurement. That was about a CAD 6.5 million hit in the quarter. That was the single largest impact on our gross margins. If you look at the specialty foods group, it was my comment earlier. Our Protein Group's margins are still below where they should be because we're still in the process of realizing on our beef price increases.
That was a contributing factor, but the single biggest one was the lobster issue.
It's still more of a commodity issue rather than plant startup or any other sort of.
Sorry, sir. That, you know, that's a great point. Yeah. We had about CAD 10 million of incremental overhead costs associated with our Tennessee facility, our various cooked protein lines that have come on, and with one other new plant that came on that's, I'm not recalling right now. So yeah, you're absolutely right. You know, partially offsetting that was, you know, we had incredibly strong Organic Volume Growth in the quarter, right? You know, our U.S. growth initiatives hit 18% Organic Volume Growth. So that's helping to cover some of that plant overhead.
Okay. Got it. Just for my follow-up on the M&A pipeline. I mean, just based on the deck you put out this quarter, it looks like that's emptied out pretty significantly compared to what it was in Q3. Is that because you're seeing fewer quality opportunities out there, or does that reflect more of a deliberate decision to kinda take a breath and focus on some other priorities in the near term?
Yeah. We are in a number of discussions, Ty, with some excellent companies. You know, I think we're cautious. Obviously, you know, there is a war going on and we have some concerns around the impact of high gas prices on consumers and those type of things. Certainly, you know, we're very busy. We're always in discussions with companies that we think will complement our portfolio of food companies.
You know, with regards to that schedule in the deck, you know, we're always very careful because we're a big player now, and a lot of times when we you know, disclose discussions as advanced, people speculate as to what companies they are. We're trying to be a little more cautious. Again, you know, we're obviously very acquisitive and we're still looking at a number of wonderful opportunities.
Understood. Thank you all. Pass the line.
Thanks, Ty.
Next question will be from Nevan Yochim at BMO Capital Markets. Please go ahead.
Hi, Nevan.
Yeah. Thanks. Hi, guys. Hi, you got Nevan on for Steve today. Just a couple questions from our team. I guess the first is, are you able to provide an update on the major meat stick launch you guys had ramping up in Q4? You know, how did that progress? Are you fully ramped up now? Then if you're able to discuss initial margins relative to your expectations.
Yeah. You know, in terms of the launch, you know, it's gone extremely well. It's exceeded expectations, our expectations and our customer expectations. Very successful. You know, it's using up a lot of capacity, which is a good problem to have, I guess, because we're unable to, in some cases, launch other programs that are in the pipeline. You know, I won't comment about margins because we don't like to do that in terms of specific margins about specific SKUs for competitive reasons. But again, yeah, I think everybody's extremely pleased with the launch.
Yeah. Only thing I'd add, Nevan, is it is a cost-plus structure, so we are on that basis achieving our margins, obviously, because it's cost-plus, that we expected. You know, the challenge in the quarter with the program though, it's such a big program and it's impacting several different plants, including our new Hempler's expansion. You probably noticed in the deck, you know, it was by far our most significant impact on our restructuring costs in the quarter. You know, that was one of the challenges with the program 'cause we made it very clear every product that went into a store had to be 100% the best in quality.
That resulted in, as we were ramping up the program and working through equipment issues and stuff, it resulted in a lot of waste, taking such a strict adherence to our quality standards. You know, the good news is we are now through that, so you're gonna see that restructuring cost for that program drop off dramatically in Q1.
Great. That's good to hear. A follow-up just on the investment income. It looks like you benefited from a one-time CAD 5 million valuation gain in Q4. Excluding this, it looks like investment income has been consistently in the CAD 15 million-CAD 16 million range per quarter. Is that a fair run rate going into 2026?
Yeah. Yeah. Absolutely. You're absolutely right. That was sort of a one-time gain that, you know, we're not expecting that on a regular basis by any means. That CAD 15 million or so is a good run rate.
Okay, great. Thanks for the questions, guys.
Thanks, Nevan.
Next question will be from John Zamparo at Scotiabank. Please go ahead.
Thank you. Good morning, guys.
Hey, John.
I'd like to get a sense of what level of pricing you've taken on beef products that we'll start to notice in Q1. Without sharing the numbers, I wonder, does it reflect the peak inflation that we saw in the middle of last year or the lower level of year-over-year inflation we saw in Q4? Just wondering what the baseline is that you've based your pricing off.
Yeah, it's not the peak, John. We all knew that, you know. Sorry, we didn't know the peak was the peak, but there was a lot of hesitation to price off the peak because it was just so high and, you know, we weren't sure could be sustainable, and in fact, it wasn't. We priced off, you know, below it for most of our business. Now, some of our businesses did price off that. They priced, you know, and they set prices in that chaos. You know, the reality is, you know, their, our customers now see what's happened and, you know, we'll probably, to the extent that the pricing was so high, give some of that back.
You know, overall, we're priced at, you know, a nice point, you know, between sort of where we are today and that peak, leaving us some flexibility for, like I say, the expected cost inflation where we see for 2026 in the beef category.
The interesting thing, John, as I said earlier, is that despite high beef prices, and these are historically high beef prices, particularly with certain cuts, demand for beef, not dollar-wise, but volume-wise, is still going way up, right? This is something that we haven't seen before. Normally, you know, the price of bellies go up substantially, it impacts the demand for bacon, you know, those type of things. Even if beef prices are historically high, demand in terms of volume continues to increase.
Okay. Thank you for that. Thinking about inflation more holistically, the last time we saw a spike in oil at the start of the Ukraine war, beef costs surged shortly afterwards. I think inflation on some other commodities for PBH increased as well. I'm mindful of the comment in the press release of seeing some relief on beef inflation so far, but what's your expectation on commodity inflation for this year, and what are the implications to PBH if we do see a prolonged period of higher natural gas costs leading to higher fertilizer costs leading to higher feed costs?
Well, it's an interesting question, John, because you know, the supply-demand dynamics that drive the cost of the raw materials we buy are, they're indirectly but not directly impacted by the freight that more impacts the packers and the farmers' margins. You know, we're far enough down the channel that it takes a long time till you see any of that kind of impact us. You know, first what has to happen is there's gotta be a cutback in production, cutback in process. You know, our expectations, at least for the near to mid-term, is other supply-demand and supply-demand dynamics are going to be more important than fuel at this point. Generally, where we see most of the cost in fuel is, at least in the short- to mid-term, is more in freight.
You know, freight, you know, if you go back to, you know, 2022, 2023, we were talking a lot about freight costs as part of the inflation equation. That hasn't been a story for the last couple of years. You know, that's where we do see sort of the more short-term impacts, and it's just not as material to overall margins.
The other thing, John, you know, you're making a little bit of a circular argument there because ultimately the best thing about high prices is high prices, right? Right? There's a point where demand for beef will come down. It hasn't happened yet. Ultimately, if prices for beef continue to go up, there will be a point where demand will go down, and that'll bring prices down, right? That's what I kinda wanted to explain earlier, right? The other part is that demand remains high, but beef comes from either domestic sources or from imports, right? Imports tend to be cheaper, and the U.S. now has opened up to more imports, right? The more supply, that should keep prices lower rather than higher. There's a number of dynamics there that will impact price.
Okay. Thank you for that. If I could squeeze one more in. I know you just sold one business, but I wonder if we can get an update on your plans to divest of other non-core assets. This is something that's been discussed in the past. I don't know if there is anything you can say, but is there anything you can share about those plans or expected timeline for completion?
Yeah, we're in a number of discussions, John, with regards to exiting investments and businesses that we deem non-core. You know, we expect to close some more transactions in 2026. We don't know exactly when, but we're definitely in a number of advanced discussions in that regard.
Okay. I'll leave it there. Thank you very much.
Thank you, John.
Next question will be from Vishal Shreedhar at National Bank. Please go ahead.
Hi. Thanks for taking my questions.
Hi, Vishal.
Good afternoon, Toronto time. Related to the S pecialty foods and the Organic Volume Growth that you posted, my assumption based on discussions through the year was there was an anticipated acceleration through the year, culminating in Q4 as a Meat Stick Program launch. We saw, you know, the growth kinda sequentially slow, albeit still strong, and within the Protein Group in particular. I was hoping if you could comment on that or if there was something that happened mid partway through the quarter that might have changed the trajectory.
No. If you look year- over- year for quarters, sequentially, it did get stronger every quarter, the Organic Volume Growth Rate for the group. On a quarter-over-quarter basis, the only thing, you know, without drilling into it a little bit more is, would be seasonality, Vishal. That would be the only kinda factor maybe to consider.
Yeah. The other factor, Vishal, is the absolute timing of launches, right? These are big launches, and the timing makes a difference in terms of what we report.
I see. Okay. Regarding from Q3 to Q4, the seasonality would have been the impact that we should consider in terms of the change in trajectory.
Yeah. Yeah.
Is that the case?
It's really the acceleration is sort of on a year-over-year quarter comparison.
Right. Q3 would not have had the large Meat Stick launch. It started in Q4 partway through. Is that correct?
Yes, correct.
Correct, Vishal. It was delayed to the fourth quarter.
Okay. In terms of the comments that you provided.
It was partway through the fourth quarter that it launched. It wasn't the full quarter.
was launched in Canada in Q1. It did not launch in Canada until Q1 2026.
Okay. With respect to, Will, the comments that you provided earlier on in this call, and you said you anticipate an acceleration of trends through the year, recognizing seasonality in Q2 and Q3, is the suggestion then that we should anticipate Q1 organic volume growth to slow before reconstituting through Q2 and Q3, Q1 slow sequentially, albeit still growth? Is that possibly the case here?
Yeah. Again, on a year-over-year basis, Vishal, it will accelerate. On a quarter-over-quarter basis, I'd have to go back. I'm not sure what the answer to that would be.
Okay.
I would suspect so because they're both seasonally slow quarters. Like I say, you know, one of the biggest drivers of our growth has been the sticks launch, and that was partway through Q4, so we'll get a full quarter in Q1.
Right. Okay. You commented on the restructuring costs, the CAD 25 million. How should we think about? The restructuring costs were building through the year, and they were, you know, larger than they usually have been for PBH, and those are adjusted out, I understand. In 2026, how should we think about the restructuring costs that are going to be incurred? Do you have a sense in your plan?
Yeah. Yeah. You know, it came in higher than our original plan. You know, we had two major issues that causes the variance. You know, we had about, you know, we've got a slide in the deck that outlines sort of the individual initiatives. Just the labor transition issues at our Shaw facilities in San Francisco, the degree of challenges around that wasn't anticipated, so that was about a CAD 5.7 million variance in the quarter. As you know, Shaw Bakers has been sold, you know, so we're not gonna see, you know, we'll see some in Q1, but we won't see any more after that.
The other one was the product launch, the Stick product launch, which, you know, again, to keep our product quality standards at the level we wanted resulted in a tremendous amount of waste. That waste was higher than expected. Those two issues are essentially gone now. Those are the big variances, the big numbers in the quarter. We are expecting for 2026 a much lower number. You know, you got a little bit of carryover on the Sticks. The Tennessee project is now complete. Our Piller's project is making some good progress now, so we expect that's the only one to go out into Q2. After that, it's sort of some miscellaneous projects. It will certainly be a much lower number in 2026 than it was in 2025.
Okay. Thank you very much.
Thanks, Vishal.
Thanks, Vishal.
Next question will be from Chris Li at Desjardins. Please go ahead.
Oh, hello again. Maybe just a question on leverage. I think, pro forma, Stampede, your leverage is around 3.9x , and you're still targeting that to get to the low threes, I think, by end of this year, early 2027. Can you just walk us through kind of what are the key drivers that will get you there, and how much visibility do you have to achieve that target?
In terms of getting to our targeted total debt to EBITDA ratio of three or better, absolutely still targeting end of 2026, early 2027. That has not changed. Again, you know, the key drivers are, first off, leveraging the capacity we've invested in, so growth in our EBITDA. That's gonna be the biggest single driver. There will be some debt paydown 'cause you're gonna see a nice improvement or a significant improvement in our free cash flow. The Shaw transaction takes our turns down about 0.2-0.3 turns. So that's an immediate benefit when we close that transaction. You know, those are probably the big immediate factors driving it.
Some of the other non-core investments.
If there's another transaction, that would only accelerate it. But just based on our modeling and our assumptions and status quo with the transactions that have happened so far, you know, that's the plan, Chris.
Okay. Yeah, that was my other question, is predicated on more divestiture, but it doesn't sound like it.
No, absolutely not. That would only accelerate it.
Okay. Then George, thanks for the update on sort of your thoughts about around non-core assets. That was helpful. I know another group of businesses that you look at is you kind of call it strategic assets. Any sort of update on that in terms of monetizing some of those assets this year?
You know, you know, Chris , I would say that you know, as you could see, we are growing substantially in the U.S.. We still think that we're in the early innings in the U.S.. You know, in some areas now we've added a lot of capacity, and we are looking for more capacity, for example in sticks as we speak. We're always trying to sharpen our focus. You know, we like the opportunities we see in certain parts of the business. You know, we're looking at our overall business a little differently, but I can't say more than that.
Again, really excited by some of the growth opportunities we're seeing organically and by acquisition in the U.S. market.
Okay. Sorry, I was not clear. I was thinking more just in terms of you guys, maybe partnering up with someone, you know, like a supply chain partner where you can allow you to take some of the capital out of some of your assets.
As I said earlier, Chris, that is part of what we view as some monetization of potentially non-core assets, right? That's one of the ways that we're looking at, you know, to basically take some capital from a part of a business where maybe the returns are not as high as the potential returns we could make by employing it in the U.S., in our core businesses there, right? That's part of that process. As I said earlier, we're in a lot of those type of discussions. I don't know at this point timing, but certainly there's a lot on the go in that regard. There's a lot of very good companies that are interested in partnering with us in some of our segments.
Okay, thanks for clarifying that. My last question, Will, just going back to your comment about the free cash flow, you know, improving. Can you just remind us or share with us what is your CapEx projection for this year? Also maybe from a working capital perspective. I know last year there was a usage of about CAD 300 million. What is your expectation for 2026?
On the CapEx, you know, we really talk about three buckets. One is our maintenance CapEx, you know, which we're projecting CAD 70-75 million for the year. The second is our approved major CapEx projects, and we've got a slide that outlines those in the presentation. You know, there's about CAD 67 million left to spend on those projects over the next three quarters, Q1 through Q3 of 2026. We have smaller CapEx projects. Generally, we spend about, you know, CAD 70 million plus on those projects is our expectations going forward with Stampede joining the group. You know, as of today, that's what's committed to or that's the plan. You know, if I mentioned earlier, our Sandwich Group is running into capacity issues, you know.
We may look at other projects in the future, but at this point, that's all that's in the pipeline. In terms of working capital, like I say, you know, we've made good progress on our core inventories. You know, the issue at the end of the year was the build-up to support our growth. You know, going forward, really the driver is just gonna be our growth and buying opportunities. There'll be volatility around that. I can't give you a number on net working capital, other than to say it will increase with the growth of our business.
Okay. No, that's helpful. Thanks, everyone, and best of luck.
Thanks, Chris.
Thanks, Chris.
Ladies and gentlemen, a reminder to please press star one should you have any questions at this time. Next, we will hear from Ryland Conrad at RBC Capital Markets. Please go ahead.
Hey, good morning, guys.
Hi, Ryland.
Just on the revenue guidance for 2026, could you unpack your assumptions there for growth in Canada?
We don't give specific guidance on Canada, Ryland, but in general terms, it's not a big piece of our expectations for the year. You know, at best, it's probably 2%-3% volume growth would be our general expectation on the specialty food side. A little bit higher on the Premium Food Distribution Group, which is primarily on the distribution side of Canadian business. But again, the excitement in our business, the big driver of our volume growth is going to be or is our U.S. initiatives. It'll be interesting to see 2026 because 2025 it was our Protein, Sandwich, and Bakery Groups. We've got a lot of exciting stuff happening in our Culinary Group right now. You know, we built a new facility in Maine.
We've made some investments here on the West Coast in our culinary capacity. It's an exciting category with a lot of opportunities, and we expect them actually to be a nice driver of growth, you know, start registering on our organic growth in 2026. All of that centered around the U.S. and the investments we're making in the U.S..
Great. And then just on the beef jerky sales within specialty foods, could you just remind us when that headwind began to emerge in 2025? How have sales or the year-over-year kind of sales decline trended sequentially? Like, are you seeing incremental pressure there, or is it generally stable?
It kinda is a little volatile. It seems to go up and down a bit. It was a tougher quarter this in Q4 because you know. You know, for the last number of quarters, you've been seeing contraction in our jerky sales, and that reflects what's happening in the market. You know, it's a very high cost product that has been, you know, historically targeted at a young male consumer, and so a much more price sensitive consumer in the C-store channel. Correspondingly, you've seen that whole category come under pressure given the high beef prices. The other factor, though, that accelerated or made it a bit bigger in Q4 versus where it had been trending is we also have some very successful turkey tender programs.
They're like a turkey jerky almost. Turkey prices have just gotten so incredibly high that we've started exiting categories 'cause the price point has just gotten too high. It was a little higher this quarter because of that. Outside of that, you know, if you look at the category in general, that's got kind of where our jerky sales have been trending as well.
Again, if you go back a few years when we partnered with Oberto. Oberto was a jerky company, effectively a national jerky company with very little business in sticks. At the time, we said that the opportunity for Oberto and for us is to leverage the Oberto platform to grow the premium stick business. Today, effectively, you know, it's a much larger company, but it's predominantly one of the leading stick companies in the U.S. today. As Will said, we just haven't been focusing on jerky. You know, jerky's a legacy type of item, but really the big focus in terms of marketing, promotions, capacity expansions has all been in sticks. We were right.
You know, the stick industry, particularly the premium stick industry, has exploded in the U.S.
Okay. I appreciate that color. And then just last for me, a modeling question on corporate costs. I guess, is it safe to assume this kinda CAD 30 million annual run rate is good going forward? I know it's consistently been in this kinda CAD 8 million-CAD 10 million range through the first three quarters and then drops quite a bit in Q4. So just how should we be thinking about that?
Yeah. You know, the big, the volatile factor there is discretionary employee discretionary costs, so bonuses. Clearly, with the challenges in the Protein Group and the Shaw Bakery group and the Lobster Group, discretionary compensation was down significantly. That, you know, that's one of the factors you see driving the decrease in the corporate costs and SG&A in general. You kinda have to normalize that for that. You know, going forward, 2026, assuming we hit our numbers as we expect, you should expect a higher corporate cost because of higher discretionary compensation.
Okay. Perfect. Thank you.
Thanks.
Next question will be from Derek Lessard at TD Cowen. Please go ahead.
Yeah, thanks for the follow-up. By the way, I did see $20+ turkey prices at Logan Airport, so I got that point.
Yes. No, no surprise there, Derek.
Yeah. Will, I just want to clarify the sales guidance of CAD 925 million-CAD 955 million. To be clear, if it was including the Shaw Bakers, those numbers would have been CAD 170 million higher?
Yeah.
Okay.
CAD 170- CAD 180, you know, to reflect sort of the range concept.
Got it.
Canadian.
Okay. The same thing on the EBITDA, correct?
Correct.
Okay. That's it. Thanks, guys.
Okay. Thanks, Derek.
Thank you. At this time, we have no other questions registered, so I would like to turn the call back over to George Paleologou.
Yes. I'd like to thank everyone for attending today. Thank you very much.
Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines.