Premium Brands Holdings Corporation (PBH) Earnings Call Transcript & Summary

Good morning, and welcome, everyone, to our 2024 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 prerecorded call posted on our website this morning. We will now take your questions. Ludie?

[Operator Instructions] And ladies and gentlemen, I just wanted to introduce our speakers for today will be George Paleologou, CEO and President of Premium Brands; and Will Kalutycz, CFO of Premium Brands. And with that, our first question comes from the line of Kyle McPhee with Cormark Securities.

First, I want to talk through some of the moving parts feeding your 2025 revenue guidance. Your guidance implies $830 million of revenue gains, more like $500 million if we exclude the contribution of your recent acquisition. So for that organic revenue gain of around $500 million, how much of that is linked to the contributions from your U.S. growth programs versus other things like the clawback of revenue losses in 2024 linked to your large QSR client and maybe the Canadian consumer headwinds clawback? And maybe as part of your answer, you can tell us whether or not timing for those major U.S. growth programs has changed for better or for worse. Since you gave us that slide back in Q3, I think you had up to $1 billion of U.S. growth programs starting to turn on this year.

Yes. So the U.S. component is about probably 60% to 65% of that organic growth, Kyle, and obviously, Canada being the balance. A little bit of exports included in the Canada number to Asia. In terms of the timing, it's similar to what we've talked about last quarter. It is really heavily weighted to the back half of the year. We now have good clarity on a number of the bigger initiatives with planned launch dates, and those launch dates range from sort of late in Q2 to early to Q3, and hence the heavy weighting towards the back half of the year.

Got it. Okay. That's helpful. And then for your 2025 EBITDA guidance, again, if we back out these acquisitions, it seems like you're assuming around 13%, 14% contribution margin to the organic revenue growth this year. That seems a bit low given the sources of your revenue growth led by segment and category. Are you just being conservative with margins? Or has something changed with your assumption for contribution margin like the U.S. growth programs?

No, no. Our contribution margins, while we have been conservative in our outlook around them, should -- when you do the math should be about 27%, 28% blended, again, being conservative given that sort of protein and bakery groups' contribution is much higher. I don't know how much you take into account we do have additional offsetting amounts. We do have continuing wage inflation across many businesses. Some incremental plant overhead with new plants brought up in partway through 2024 and the new plants coming on in 2025, new capacity coming on 2025. And then we've got to help drive that growth, certainly, a lot more S&M, selling and marketing to get things going. So that's offsetting that, and that's probably why you're coming to your lower contribution margin. But a lot of those costs are -- should wash through for 2026.

And your next question comes from the line of Derek Lessard with TD Cowen.

Great to see some momentum from these initiatives coming through. I'd like to maybe just to hit on the -- more on the sandwich organic volume growth. Obviously, you did point it out that it was below your historical growth levels. But curious, you said due to some project -- or product launches taking effect in 2025. Just maybe if you could add some color around those launches and maybe the timing as well.

Yes. So it's -- a lot of it is planned LTOs with specific customers and a couple of listings coming online with a major retail customer, a club retail customer. So we -- again, similar to my comment on the last question, we've got planned launch dates. We've got good visibility, and it's just sort of we're in the lull between when those start kicking in and when some of our previous big launches are now lapping.

The other comment I would make, Derek, is that even with some of the well-known challenges we've had with -- in the foodservice channel in the U.S., we had a record year in sandwiches in 2024. So both in terms of top line as well as EBITDA and EBITDA margin. So the numbers are pretty good.

Yes, absolutely. And maybe just one housekeeping for me in terms of your working capital. It increased about $86 million in Q4, and it looks like it came a lot from receivables and inventory. Just maybe some color around that and what's driving those? And how should we be thinking about working cap in 2025?

Yes. So our receivables are very clean, The [ agents ] are good. The day sales outstanding ratios in the ratio got distorted a little bit because of the acquisitions at year-end. So you got the receivables on our balance sheet but essentially no sales in the quarter. So obviously, that distorted the ratios. But otherwise, we're happy where receivables are at. When you look at inventory, there's a little more of a story there. Certainly, there was the acquisitions element. When we look at our days purchases and inventory, they came in, in the quarter at about 62 days, way above our expectations of normal levels, which were closer to 54 days. Three of those days was the acquisition impact that I talked about with the receivables. It was -- we had the inventory but not the sales on our income statement. And then this is something that's feeding into our 2025 projections. There were a couple of factors. We had several businesses with some very significant opportunity buys in the beef space. It's been -- the beef commodities market has been incredibly inflationary, incredibly high and there did come an opportunity at year-end, and our business has leaped on it. So that should help us going into 2025 from those all happening in Q4. Also, we started building a little bit of inventory for some promos. We've got some plant projects that we were building some inventory prior to shutting down lines. So -- and also, we had some lobster sales that got pushed into 2025. So there was -- you strip out all that noise and we came in at about 54.5 days purchases in inventory, which is pretty close to where we want to be. So it was higher than we would like, but it was for good reasons.

And your next question comes from the line of Martin Landry with Stifel.

I would like to just dig a little further in your revenue guidance for '25, given consumer confidence in Canada, it looks like it's declining a little bit given the trade tension. So can you tell us what organic revenue growth rate you've assumed for '25 in Canada?

We've been relatively conservative, Martin. The reality is the growth rate we are projecting is a little higher than in our guidance. We have backed it down for our guidance, specifically for the reasons you point. I suspect, ultimately, it's probably in the 2% to 3% range, organic volume growth. But like I say, our internal expectations are actually a little higher than that.

Okay. Okay. And then maybe on your balance sheet, there's discussions about acquisitions. I know that you've paused your dividend increase because of some of the uncertainties on the macro level. I mean why don't you pause acquisitions as well, reduce your leverage and maybe reduce also the risk premium that investors are applying given your risk leverage, given your high leverage?

Yes. I think that's a fair comment, Martin. And it is conceivable that this would happen. As we've stated in the prepared remarks is that we are not going to make any acquisitions that would certainly deteriorate the balance sheet. That's not going to happen. Ultimately, we're trying to grow the business, and we're trying to improve our existing businesses. The 4 acquisitions that we've done will be incredibly accretive ultimately for our businesses, and they didn't deteriorate the balance sheet in any way. So as we find acquisitions like that, of course, that would contribute to our growth and improve our profitability and enhance the competitiveness and the competitive position of our other businesses, we would probably do that, right? So yes, we're not aggressive with regards to acquisitions, and we will be disciplined.

And I would add, Martin, that the reality is we are -- we do expect to see significant growth in our EBITDA over the next year, driven by all the capital investment we've made. And that's going to naturally deleverage the balance sheet. So in the interim, we certainly don't want to miss out on these opportunistic buys that George was mentioning with the fact that it's relatively short in our sights, getting the balance sheet down to our ultimate targets.

Ultimately, Martin, we're managing the business for the long term, and we're assessing all acquisitions in a conservative way. We're not going to be aggressive in terms of valuation. And as I said, if we find acquisitions that help our growth, they're very accretive and improve the profile of our various businesses, we will do them.

Yes. Just to follow up on that. Your leverage is around 5 turns when we include leases right now. And when you say that acquisitions have not deteriorated the balance sheet, do you -- does that mean that you've paid less than 5x EBITDA to acquire the recent acquisitions?

Yes. Well, Martin, we talked about this before. We are very dubious of the calculation with the leases because of how our REIT structure distorts that. We look at it, as we disclosed in our MD&A, based on a pre-IFRS basis. And our target is any acquisitions, the debt associated with it will be less than 3x EBITDA.

The other comment I have, Martin, is that as, again, we've stated in our prepared remarks, is that we spend in excess of $800 million on capital investments. And that debt is on our balance sheet, but the cash flow is not. So you'd have to normalize things if you were to assess our balance sheet.

And your next question comes from the line of Ty Collin with CIBC.

For my first one, I'm just wondering if you could maybe update us on the latest you're hearing from your big foodservice customer and I guess, the potential impact of their SKU rationalization on your program with them. Maybe it would also be helpful to understand exactly what assumptions you've kind of baked into your guidance around that specifically.

Yes. We can't talk specifically about customers. But as I said earlier, obviously, we do a lot of business in the foodservice channel in the U.S. We had some challenges in that channel specifically, as I said earlier, not in sandwiches because we've made a lot of progress in the club channel. We've got 2 more SKUs in that channel, and every one of those SKUs is between $30 million and $50 million. So we've made some really good progress with regards to the club channel, also in the C-store channel and other channels as well. What we're seeing in the foodservice channel today is encouraging. Things are improving. The trends are favorable. So again, we're very optimistic that we will get back to growth in that channel.

And Ty, in terms of the projections, yes, we continue to expect some contraction in the first couple of quarters and then a return to growth in the back half of the year.

Okay. Got it. That's helpful. And then I'm wondering within Canada, whether you've noticed any trends towards buying Canadian products. And I guess, given the Canadian roots of many of your brands, is there anything that they're doing or looking to do to maybe seize that opportunity from a promotional perspective or a packaging perspective, anything like that?

Yes. At this point, again, there is certainly that noise. There's been inquiries. I wouldn't say we've noticed anything materially different, but yes, there's a lot of talk about Canadians buying made in Canada products. But again, nothing material that we can talk about.

And your next question comes from the line of Chris Li with Desjardins.

Yes, maybe I'll start a question on tariffs. Can you just maybe share or remind us roughly what percentage of your revenues are cross-border currently? And then how quickly can you reduce that percentage by using some of those manufacturing redundancies that you noted in the press release?

Yes. So Chris, we have 2 key exposures currently. One is in our Specialty Foods group and the other in our Premium Food Distribution group. In our Specialty Foods group, we export -- in general, as we've talked about in the past and as we disclosed in the press release, we try to manufacture -- our strategy is to manufacture in the market we sell. But occasionally, like what's happened with our cooked protein programs, we'll have plants that will have excess capacity so they'll explore new selling opportunities in other markets. And in cooked protein, because there's been such a dearth of capacity in the U.S. and the success of our Canadian-based manufacturing programs, we do have a lot of cooked protein that crosses the border. It's about $300-plus million a year. But we are well positioned through a combination of capital investments we've made over the last year, 1.5 years as well as our recent acquisitions that if we needed to, a lot of that production could be done in the U.S. So we're well positioned to mitigate against that. There'd be a quarter or 2 of noise getting things settled out, and we've already sort of started that process. So we're well positioned to do it when the time comes, if it needs to happen. So on the Specialty Foods side, we feel we're well positioned. We got a little bit of exposure in artisan breads and deli meats, but those are very minor. Like I say, there are generally situations where businesses had a little excess capacity, and so they pursued some opportunities in the U.S. On the Premium Foods Distribution side of our business, we really have one exposure and that's in processed lobster. And there, we feel we're very well positioned to mitigate any impacts of a tariff issue. For one, we are actually one of the largest lobster processors in the U.S. So clearly, our U.S. operations would be well positioned in a tariff battle. And in terms of our Canadian production that goes into the U.S., the reality is lobster, our lobster products are produced from a wild, scarce resource. And it's not like because of a tariff, you can grow more lobsters in the U.S. That's just not how it works. So it is a scarce resource. So we think between pricing the Canadian dollar, maybe a little depreciation there and maybe a little bit of a savings in the supply chain. Again, we feel we're well mitigated to manage that situation as well.

In addition to that, Chris, we also have sandwiches and pastries that are made in the U.S. that come to Canada as well. And for example, in the case of sandwiches, we have redundant capacity in Canada. We've built a brand-new facility in Edmonton recently that can accommodate some production if we needed to. So redundancy on both sides of the border is a big asset for us.

Got it. Okay. Well, that's -- thanks for your very helpful detailed answers. My follow-up question is I'm just wondering with quarter 1 almost over, how are the results trending so far? Are you seeing kind of similar trends that you saw in Q4? And have you noted any notable changes in consumer behavior as a result of the tariffs?

Well, we don't provide quarterly guidance, Chris, so I don't want to comment on the quarter specifically. But in general, consumer behavior has -- in Canada has hung in there. We've seen sort of a continuation of what we saw in Q4 there. So that's been a positive. And similarly in the U.S., at least to the consumer base we are catering to, we really haven't seen any changes in behavior there either.

And your next question comes from the line of Stephen MacLeod with BMO Capital Markets.

Lots of great color so far. But I just wanted to pick up on a couple of things. One is with respect to the 2025 sort of sales pipeline in the U.S. and you talked about some of the delays. And I know, Will, you gave a little bit of color around your visibility. On the last call, you said that you indicated the pipeline was like $1.4 billion with $700 million highly likely in 2025. I'm just curious if that's still kind of the rough magnitude of what you're expecting when you talk about these new launches coming in late Q2, early Q3.

Yes. Yes. There's really been no change in the pipeline, Steve. In fact, if anything, it's grown since we've talked last and particularly in the highly likely. So no, we still feel very good about the pipeline, and there's a lot of opportunities being pursued again, primarily in the U.S. market.

And there's a lot of exciting new initiatives, Stephen, in sandwiches, protein and bakery. These are sort of the 3 areas where we've had a lot of growth and yes, a lot of exciting stuff going on.

Okay. That's great. And then just the overall lobster business, not the cross-border portion, but could you just remind us how big that business is? Because I know it's sort of been -- had some headwinds for the last 2 quarters. I just kind of want to confirm the magnitude of lobster.

Yes. Our lobster business live and processed, Steve, I want to say is about $300 million to $400 million. It's a good-sized business, like we're one of the largest in North America.

And your next question comes from the line of Vishal Shreedhar with National Bank Financial.

There were some facility delays that I have observed. I was just wondering on the cause of the delays and management's confidence that the facilities will come up in accordance to the schedule. So Scranton and Ferndale were pushed back. And also the Montreal facility, I don't know if that's been completed or removed. Just wondering your thoughts on that.

Yes. Nothing significant there, Vishal. They're just sort of minor delays. I think things maybe got pushed out a quarter, various technical reasons, but certainly nothing material to point out.

Okay. And the Montreal 75,000-square-foot facility, do you have any updates on that?

The Montreal facility, I have to go back to the MD&A, Vishal. Is that the cooked protein line?

Yes. Yes. [ It was there one time and that ] was removed.

Yes. I think that is one where we're reassessing the -- it's either one where we're reassessing the project or it is complete now. I'd have to go back to the detail and refresh myself.

Yes. And the -- yes, go ahead, Vishal.

Oh no, no, please continue.

Yes. That project is being reassessed. Again, we're building a very large facility in Toronto, and that particular project you're referring to is being reassessed as we speak.

Yes, I'm not sure if he's talking line 4 or 5, that's why I have to go back.

No, line 4.

Line 4 is complete.

Yes, yes. But that's the expansion of that, right, the addition to the building. Go ahead, Vishal.

Okay. I appreciate that color. And with respect to the dividend, I just wanted to get more perspective there. I mean the dividend increase, at least historically, the ones that you provided, wouldn't have been a substantial cash outlay on a year-over-year basis or even if it was a smaller one. And obviously, the guidance commentary that management seem to provide suggested a confidence and a conservatism, but the dividend statement seem to oppose that a little bit. So wondering if you could just put some color around on how we should seemingly look at those messages, which at face value could be viewed as contradicting?

Well, again, Vishal, I think that as we've always said at the beginning of the year, we sit down with the Board. We talk about acquisition opportunities, capital allocation, capital projects, projected cash flow, free cash flow, all of those things. And we make decisions based on our assessment of the risks and obviously, the opportunities we see in terms of employing capital in the business. And this time around, given some of the noise around tariffs, we just felt that the responsible thing to do is just to hold back. That's all.

Okay. And that gets reassessed quarter-by-quarter?

That gets reassessed quarter-by-quarter, yes.

And your next question comes from the line of John Zamparo with Scotiabank.

I wanted to come back to the trade topic for a couple of questions. And in thinking about reciprocal tariffs or potential for reciprocal tariffs, PBH typically sources at least some of its products globally. And I appreciate the commentary about being able to produce locally. But when it comes to sourcing inputs, how should we think about PBH's ability to source locally as well? What type of opportunities do you have to buy inputs locally? And what are some inputs where that might be more challenging?

Yes. So our overall philosophy around manufacturing, obviously, is to own facilities in the markets that we sell to, and we do. We have a lot of smaller plants in smaller markets. That's part of our strategy. And our point of difference in the marketplace is that we want to be the #1 local or regional brand in a geographic area of Canada and the U.S. That's one of the reasons why we've been successful because we differentiated ourselves this way from the national brands and the national players. Sometimes when you look at this strategy, you might say, well, but you're -- there's some inefficiency to that. But again, we understand that. But at the same time, because we're regional and local, we're able to charge a premium because we get local support and consumers are willing to pay a little premium for regional or local brands. So in general terms, that's our overall strategy. That applies with sourcing as well. To the extent possible, we source locally if we can. The other comment I have is that you have to understand that given our size and given who we are, we source globally as well. Our inputs tend to be global in nature. We source from Europe, from Asia, from Australia and New Zealand, Asia as well. Our -- we have global supply chains in general, right? So we prefer local inputs. If we can find them, then we'll source globally.

Okay. Is it fair to say the majority of your inputs are also sourced in the countries that they're produced, whether Canada or the U.S.?

That's a fair comment.

Yes. Certainly, the majority.

The majority. Not all of it, of course, but the majority.

Yes. Okay. I wonder how you're thinking about the expected impact of tariffs on lobster to China. Now this is probably not a significant part of your lobster business but had represented some of the growth. Are there other potential countries you're looking at to export to as a result?

We don't actually export -- in the premium brands, I'll get back to Clearwater in a sec, but we don't consolidate them. But in our consolidated sales and EBITDA numbers, there are no export sales of lobsters from Canada. Our Ready business in the U.S. does export, but obviously, they're not subject to the tariff being impacting Canada. In terms of Clearwater, historically, they have exported some lobster to China, but it's a small part of their business.

Okay. That clears that up. I wonder if you could tell us a bit more about the acquisitions you did to end the year and also the one with the recent convert deal. What specific platforms or maybe products does that help you grow into? And how does that protect you against potential trade barrier concerns?

Well, again, the -- we made 4 acquisitions in -- we did 3 in December and 1 in the first quarter. NSP is generally a cooked protein business with 3 facilities. The main facility is in Tulsa, and it's a very large facility in the cooked chicken space. And it's now part of Concord Meats, which is one of our largest platforms mainly focusing on cooked protein. They do have an Italian meats business as well as a fresh meat business as well. But again, we're currently in that facility adding lines and equipment, and it will help us continue to grow our business in that market. And we've had a lot of growth in the U.S. market in that business. The Vineland facility, which is outside of Philadelphia, it's actually in New Jersey but very close to Philadelphia. It's one of the largest cooked meatball facilities in the U.S. We have a growing cooked meatball business. We make meatballs in other facilities in the U.S., and this gave us the scale that we needed to continue to expand the business. There's plenty of room there to add more lines as well in other parts of the cooked protein space. Again, a very nice facility, great location. Very close to the Northeast of the U.S., which has substantial potential for us. Italia Salami is a smaller Italian meat company based in the Toronto area, again, part of Concord Meats. And Denmark Foods is the largest fresh meats company in the 5th largest metropolitan area in the U.S., in the Phoenix area. We have a very similar company in the Seattle area called Isernio's. We've done very well with that. And anyway, that just gives us the opportunity to expand into a fast-growing market in the U.S. Really excited with that acquisition as well.

All right. That's good color. And then just one last one for me, a modeling question. Are you still expecting around $250 million or $250 million to $300 million in sale leasebacks later this year?

Yes, absolutely. We are planning for -- the plan today is in Q3 to do a sale leaseback around our Tennessee -- new Tennessee sandwich facility when it's complete, and then towards the end of the year for our GTA initiative. The Tennessee facility will be a much larger transaction, obviously, given the size of that project, but absolutely.

And your next question comes from the line of Michael Glen with Raymond James.

Just following up on the Tennessee facility. Can you just give us some sense as to when that opens, like how should we think about the ramp taking place as you fill capacity? Will it contribute much in 2025? Or is it more of a 2026 type scenario?

Yes. So completion of the first phase should be midyear, end of June to the -- maybe June, July. So it's -- the project is going well. And we see basically a 12-month ramp-up in terms of the business we lined up and the business we are lining up for it. It's a very large facility. It will be probably the best, most modern state-of-the-art automated facility of its kind. We'll have some new technology in it. And anyway, yes, we're really excited by it, and things are going well at this point.

Yes. And for our projections, we've sort of a conservative, like George says, late June, early July start-up. We're giving it a quarter of just working out the bugs. This is -- will be our largest sandwich production facility ever. And so really not starting to meaningfully contribute until the fourth quarter.

Okay. And in terms of the capacity coming on there, are you able to provide any indication like how much you have been able to allocate at this point in time?

Yes. No, we don't -- the total capacity of this first phase is about close to $300 million, but it's just we blended that into our general sales outlook.

Okay. And then...

And I should add, Michael, because there will be -- we do this quite often is we'll work with our customer base. Tennessee is strategically located, a new geographical area of the U.S. And so we'll strategically work with our customers to shift production around between the different plants to minimize freight costs for them.

Okay. Okay. And then just in terms of the guidance, I'm just trying to get a better read on what your SG&A expense might look like next year, given you did close the acquisitions. Should we expect SG&A expense to -- on a gross dollar basis, are you able to give any commentary surrounding what level you might be expecting in '25?

Yes. Well, from the earlier question, our contribution margins on our growth, we've built them into our projections that we feel it's a fairly conservative number at -- around 28%, 27%, 28%. And then to get to the expected EBITDA, you're going to have a little bit of plant overhead and then SG&A.

Okay. And any -- just on those acquired businesses, is there any seasonality with those that we should take into consideration as we build them into the model?

Yes, absolutely. There's 2 factors you need to think about, Michael. One is they do have a similar level of seasonality, some less than others like Denmark's in Arizona. So it's a less seasonal business. But certainly, the other acquisitions have a similar seasonality to our other protein businesses, i.e., weak Q1, weak Q4 and strong Q2 and strongest Q3. But also what you have in there is the MSP acquisition, which was really a capacity acquisition for us to a large extent. So a big part of its sales expectations is leveraging that capacity. So on top of the seasonality, you have to sort of build up a ramp-up of the facility over the course of the year. As we move, we figure out how to produce different SKUs in that facility and then launch sales initiatives around those SKUs.

But to a large extent, Michael, that facility will support the expansion of already successful products that are doing well in certain geographic regions to go national, right? That's kind of really the key to longer term.

But there will still be a ramp-up over the year.

Absolutely, absolutely.

And we do have a follow-up question coming from the line of Derek Lessard with TD Cowen.

Yes. Just a couple for me, guys. I was curious on sort of the egg crises in the U.S. on how you guys are dealing with whether it's the sourcing or pricing or what have you?

Sorry, you cut out there.

Egg crisis.

The egg crisis. Yes. So I don't know if you follow the price of eggs, of course. I think that over the -- since 2022, I think they had to euthanize about 47 million layers in the U.S. it's a substantial number. The price of eggs went up substantially, but has come off in the last few weeks. Most of the egg usage we have is in our sandwich division where, basically, our pricing is cost plus, right? So we basically pass it on to the customer. But yes, the price has come off more recently, substantially.

Okay. Okay. And maybe just one final one for me. Maybe if you could just add some color around the Denmark sausage, how it fits in, the quality of the product, et cetera?

Yes. We -- as I mentioned earlier, we love -- we have a business similar to Denmark based in Washington state. The business is called Isernio's, and it's truly a best-in-class iconic brand. It's all fresh meats, fresh sausage, fresh grinds, has a tremendous consumer following, sells at a premium to other similar products. And Denmark has the same brand positioning in the Arizona market. They do well with a couple of retailers. The entrepreneur that built the business into a successful company didn't want to expand any further, although there's more demand for the products. We're already talking to other banners and they're interested in a best-in-class fresh program. So again, we want to build Denmark similarly the way we built Isernio's since we purchased it. I think Isernio's is 4x bigger today than when we bought it a few years ago. And we see similar growth opportunities with Denmark. We love the Phoenix market. We -- obviously, it's a market that's growing immensely. It's one of the fastest-growing demographic regions in the U.S., and we love owning the #1 local brand in that area.

[Operator Instructions] Our next question comes from the line of Chris Li with Desjardins.

You mentioned weaker consumer spending in the convenience store channel. And I'm just wondering, is that still more confined to beef jerky? Or has it expanded to other products as well?

I would say, for us, it only impacts us with regards to demand for food jerky. Our stick sales are doing extremely well in the U.S. market. Again, I don't know if you follow some of the trends. But as we predicted, sticks, I think, is the highest growth category in grocery today and in other channels as well. We've invested in a lot of capacity for sticks in Canada and the U.S. over the last few years. And obviously, we're benefiting from the growth in the demand for premium sticks. So yes, just in terms of jerky, I would say, at this point.

Okay. So nothing really has weakened in terms of other products that you sell into the C-store channel so far?

We're only seeing it in jerky demand.

Okay. Okay. And then maybe just a question on CapEx for you, Will. Are you still targeting, I think, total CapEx of roughly $250 million this year? Am I remembering that correctly?

Yes, yes. So we talk about our CapEx in 3 buckets, Chris. One is our maintenance CapEx, which our guidance for '25 is $60 million to $65 million. Then we have our major CapEx projects, all of which -- that have been approved, all of which are outlined in our MD&A. And as we mentioned in the formal presentation, there's about $145 million left to spend on those projects. And then we have our third bucket, which is a range of smaller project CapEx, i.e., things that will generate a 15% or better IRR after tax unlevered, and that can fluctuate quite a bit. And so right now -- and because we approve these projects on an individual basis over the course of the year, the smaller automation and smaller capacity addition projects. And so that can range anywhere from -- last year, I think it was about $60 million, $60 million to $80 million a year. So your number is in the ballpark.

Okay. And then maybe another one, just maybe on switching to free cash flow. If we include sort of total CapEx, not just maintenance in our free cash flow calculation, I think last year was negative. Based on what you said, if CapEx is coming down this year and EBITDA grows the way that you envision, do you expect free cash flow to be maybe slightly positive this year just based on the same calculation? Or is this going to be still in the negative territory for this year?

The way we look at free cash flow, Chris, is free cash is really just financing our maintenance CapEx. So that's all we subtract in calculating our free cash flow. Project CapEx, i.e., things that are going to generate a return of 15% or better are effectively over time, self-funding. . So on that basis, we just look at free cash flow after maintenance CapEx, and we do expect to hit record levels of free cash flow this year, which is a turn from the prior couple of years because of the impacts of both the high interest environment and all the investment we've been making and the costs associated with that investment, interest, additional depreciation, additional lease costs. But yes, we expect to see a significant turnaround in our free cash flow this year.

Your next question comes from the line of Ryland Conrad with RBC Capital Markets.

So just a couple of questions. Firstly, on Premium Food Distribution. Just curious to hear your thoughts around your expectations for organic volume growth for that segment going forward? Should we expect any further improvements there or even perhaps a return to positive growth?

Yes. We are expecting some growth in Premium Food Distribution group in 2025 with the stabilization of Canada. And the big unknown, Ryland, will be what happens in the lobster fisheries, both Canada and the U.S., because that's really been the major tailwind -- or sorry, headwind for that group. So watch the lobster industry closely, how the fishing goes, and that will determine the level of growth in our Premium Foods Distribution group.

Got it. And then just secondly, with the reiteration of your 2027 targets, obviously, it implies a pretty strong growth trajectory over the next few years. So could you maybe just speak a bit about your confidence around achieving those? And as well, maybe any additional color around maybe the organic and inorganic contribution to achieving them?

I think you -- again, if you look at -- by the way, this is, I think, our 25th year of being in business as Premium Brands. And Will and I are co-founders of Premium Brands. And we've gone from very little to $6.5 billion in sales. And I think that the next $6.5 million (sic) [ $6.5 billion ] will come a lot sooner than in the past. So if you look at how our different platforms have grown, it's very easy to make the assumption that if we had capacity or the right capacity, we would continue to grow. For example, our sandwich platform grew from very little to CAD 1.5 billion in sales, Canadian dollars. If we had capacity, we would be bigger. We understand the opportunities, we see the opportunities. Similarly with our protein business, our protein business is world class. It's probably the best protein business in North America in terms of the brands, the quality of the products, the manufacturing expertise, the know-how we have in that business. And because of that, we have a lot of inquiries from customers and channels for our products. So we see that every day. Our bakery group, which is small, is doing extremely well and in the last recent quarter, grew its business in excess of 20% because they have capacity. So again, we look at it at the micro level. We run very good businesses. They're best in class. And because of that, we keep getting more and more opportunities with our customers.

And I'm showing no further questions at this time. I would like to turn it back to George Paleologou for closing remarks.

Yes. Thank you, Ludie. I'd just like to thank everyone for attending today. We hope that common sense will prevail when it comes to tariffs, and all the best to everybody.

Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.