Lassonde Industries Q2 2026 Earnings Report

Lassonde Industries EPS Results

• Actual EPS: C$7.45
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Lassonde Industries Revenue Results

• Actual Revenue: $737.69 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Lassonde Industries Announcement Details

• Quarter: Q2 2026
• Date: 8/6/2026
• Time: After Market Closes
• Conference Call Date: Friday, August 7, 2026
• Conference Call Time: 9:00AM ET

Lassonde Industries (TSE:LAS.A) is engaged in the development, manufacturing, and marketing of ready-to-drink fruit and vegetable juices and drinks. It also acts as a producer of store brand shelf-stable fruit juices and drinks in the United States and a major producer of cranberry sauces. The company operates through a single segment being the development, manufacturing, and marketing of a wide range of ready-to-drink juices and drinks; frozen juice concentrates; and specialty food products; and the importation, packaging, and marketing of selected wines from several countries of origin. Lassonde has its presence in Canada and the United States. It earns the majority of the revenue in the United States.

Lassonde Industries Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Adjusted EBITDA rose 19% to CAD 101 million and adjusted earnings per share increased 36% to CAD 7.45, supported by lower orange concentrate costs, pricing actions and a favorable product mix.
• Negative Sentiment: Sales declined 0.5% excluding foreign exchange, reflecting weaker private-label volumes, portfolio pruning and soft consumer demand; management now expects full-year 2026 sales to be slightly below 2025.
• Neutral Sentiment: Lassonde recorded CAD 30 million of impairment charges, including CAD 27 million tied to a U.S. specialty-food customer relationship after the customer reduced volumes, though management said the issue is not indicative of broader weakness in the category.
• Positive Sentiment: Management has already secured replacement contracts covering more than 50% of the expected 2027 specialty-food volume shortfall, with negotiations underway for another 25%, which could diversify the customer base.
• Positive Sentiment: The company plans to launch a normal-course issuer bid for up to 200,000 shares, or approximately 6.5% of Class A subordinate voting shares, citing a strong balance sheet, low leverage and an undervalued stock.

Presentation

[Operator]

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Lassonde Industries 2026 second quarter earnings conference call. The corporation's press release reporting its financial results was published yesterday after market closed. It can be found on its website at lassonde.com, along with the MD&A and financial statements. These documents are available on SEDAR+ as well. A presentation supporting this conference call was also posted on the website. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has difficulties hearing the conference, please press star followed by zero for operator assistance at any time.

[Operator]

Before turning to management's prerecorded remarks, please be advised that this conference call will contain statements that are forward-looking within the meaning of Canadian securities laws. Forward-looking information is based on management's current expectations and assumptions and is subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. For a discussion of key assumptions and risk factors, please refer to the forward-looking statements section of the MD&A. Also note that all figures expressed on today's call are in Canadian dollars unless otherwise stated, and that most amounts have been rounded to ease the presentation. This call will also include certain non-IFRS financial measures and ratios that are not standardized under IFRS and may not be comparable to similar measures used by other issuers.

[Operator]

Reconciliations to the most directly comparable IFRS measures and related definitions are provided in the appendix to the presentation and in the corporation's MD&A. This conference call is being recorded on Friday, August 7th, 2026. I will now turn the conference over to Vince Timpano, Chief Executive Officer.

[Vince Timpano, CEO at Lassonde Industries]

Good morning, ladies and gentlemen. I'm here with Francis Trudeau, our Chief Financial Officer. We appreciate your time today as we review our results for the second quarter ended June 27, 2026. Please turn to slide four. Lassonde delivered strong gross profit growth of 16% in the second quarter, driven by effective revenue management, improved product mix, moderating input cost, and solid execution of our business strategy. Despite pressure on industry volumes as macroeconomic uncertainty affected consumer demand, and despite cycling a strong prior year comparison, our diversified portfolio performed well, underscoring its strength and resilience. Now let's turn to slide five for a closer look at our operations, beginning with beverage activities. In the U.S., we delivered a solid performance, growing volumes and gaining share despite category volume declines across measured channels.

[Vince Timpano, CEO at Lassonde Industries]

Despite continued softness in private label market demand, our business outperformed the category as we began regaining some of the distribution that had been temporarily affected by earlier supply constraints. We also maintained a disciplined approach to revenue management, carefully balancing input cost-related pricing actions with targeted promotional activity while remaining mindful of consumer price elasticity. You may recall that in early 2025, our volume Build Back plan delivered meaningful gains with new and existing customers. I'm pleased to report that we have since expanded volumes with several of these customers while maintaining our contractual commitments with most others. Our U.S. branded business had a solid quarter, driven by distribution gains for Apple & Eve with national retailers in the U.S. Midwest and West.

[Vince Timpano, CEO at Lassonde Industries]

Leveraging Apple & Eve's strong reputation, we are methodically expanding the brand's reach across the United States in single-serve and juice box formats, supported by targeted investments in these platforms at our North Carolina facility. These efforts are driving market share gains across both package formats, reinforcing Apple & Eve's strong momentum and growth potential while aligning with consumer trends favoring convenient on-the-go options. As for our new facility in New Jersey, the pace of construction continues to progress on schedule with equipment installation now underway. We remain on track to gradually begin transferring existing production activities from the current facility by late 2026 and complete this phase in the first half of 2027. Turning to slide six for Canadian beverage activities.

[Vince Timpano, CEO at Lassonde Industries]

Despite cycling an exceptionally strong prior year period that benefited from Buy Canadian sentiment, and despite mid-single-digit category volume declines, we maintained our category leadership, once again underscoring the strength of our Canadian beverage portfolio. Our national brands continue to outpace the category driven by solid gains in shelf-stable products and sustained momentum in single-serve formats, while chilled performance was affected by a strong prior year comparison. Private label volumes were softer, primarily reflecting changes in a major customer's go-to-market strategy, as well as our targeted portfolio optimization actions, including the discontinuation of selected product lines. Against this backdrop, and as with U.S. activities, we remained focused on ensuring discipline and managing revenues through price and promotion practices that preserve market competitiveness while remaining responsive to shifts in consumer behavior. Innovation remains an important lever for improving our product mix in both established and emerging beverage segments.

[Vince Timpano, CEO at Lassonde Industries]

New formulations across our Del Monte and Oasis Health Break portfolios, along with new single-serve formats designed to meet consumer needs throughout the day, are improving our product mix, expanding our presence in attractive growth segments, reducing commodity exposure, and enhancing profitability. Moving on to Foodservice on slide seven. North American volume growth remained constrained by macroeconomic conditions affecting consumers away-from-home dining habits, we continued to build meaningful traction with broadline distributors in the United States, primarily by expanding private label beverage offerings in different pack formats. During the quarter, we began supplying tailored beverages to a prominent Canadian-based QSR chain using our bag-in-box aseptic packaging platform. Initial results have exceeded early expectations, and we expect volumes to continue ramping up in the second half of the year.

[Vince Timpano, CEO at Lassonde Industries]

At the same time, we remain actively engaged in negotiations and competitive bidding processes with national and regional partners across North America, and we expect to acquire several additional customers, albeit smaller in scale, over the balance of the year. Let's turn to specialty food on slide eight. While industry volumes were softer across most of our key product categories, with modest increases in select areas, both our Canadian and U.S. operations delivered solid gains, led primarily by our core premium and super premium pasta sauce category. In the U.S., Summer Garden increased volumes for third-party pasta sauce brands, further demonstrating its execution capabilities, while in the barbecue sauce category, G Hughes maintained its position as the number one better-for-you brand. During the quarter, we completed the G Hughes brand refresh internally and transitioned all packaging at the manufacturing level.

[Vince Timpano, CEO at Lassonde Industries]

While some legacy packaging remains on shelf as inventory moves through the retail network, we expect the refreshed positioning to increasingly support brand momentum in the second half of the year. You may recall that on our previous call, we announced distribution gains for G Hughes with a mass merchant in Canada. I am pleased to report that this agreement has since been expanded and that we have also secured distribution with a national food retailer, an important step that further broadens the brand's reach and supports our growth ambitions in Canada. Our Canadian operations delivered a solid performance, growing third-party brand volume mainly through distribution gains for pasta sauces and, to a lesser extent, share gains in the ready-to-serve soup category. I now turn the call over to Francis for a review of Q2 results. Francis.

[Francis Trudeau, CFO at Lassonde Industries]

Thank you, Vince, and good morning, everyone. Let's turn to slide nine. Second quarter sales totaled CAD 738 million, versus CAD 742 million last year. Excluding an unfavorable foreign exchange effect, sales decreased by 0.5%. This variation reflects lower sales volume, primarily within private label categories in Canada. The decrease also results from intentional portfolio management decisions, including the discontinuation of lower margins or non-strategic product lines within our Canadian beverage business unit. These decisions accounted for approximately CAD 8 million in sales during the quarter. Recall that last year's second quarter was exceptionally strong due to substantial volume growth from the Buy Canadian sentiment and, to a lesser extent, the U.S. Build Back plan. We benefited from higher U.S. private label sales volume, the favorable impact of overall selling price adjustments in the U.S., and from a more favorable mix of private label sales in Canada.

[Francis Trudeau, CFO at Lassonde Industries]

Moving to slide 10. Gross profit amounted to CAD 228 million, up from CAD 196 million a year ago. Excluding a favorable foreign exchange impact, it rose CAD 29 million or 15%. This increase is coming from a decrease in the cost of orange concentrates, the favorable impact of selling price adjustments, and a positive shift in the sales mix. These factors were partly offset by lower sales volume and higher PET resin costs. SG&A expenses were CAD 157 million, up from CAD 141 million last year, due to higher transportation costs to deliver products to clients resulting from recent fuel surcharges, higher performance-related compensation expense, and an increase in certain administrative expenses. During the quarter, we recorded CAD 30 million in impairment charges, including CAD 27 million related to a customer relationship intangible asset in our U.S. specialty food operations.

[Francis Trudeau, CFO at Lassonde Industries]

This charge follows contractual changes in one customer that will result in lower production volume and associated profits. Importantly, the impairment is specific to a customer relationship and does not reflect any deterioration in the goodwill associated with our U.S. specialty food operations. Vince will provide additional color on the backfill plan in the outlook section later. Excluding these charges and other items that impact comparability, please note that adjusted EBITDA increased 19% to CAD 101 million, or 13.7% of sales from CAD 84 million, or 11.4% of sales last year.

[Francis Trudeau, CFO at Lassonde Industries]

Turning to slide 11 for profit. Profit attributable to corporation shareholders was CAD 27 million or CAD 3.95 per share, compared to CAD 34 million or CAD 5.03 per share last year. Excluding items impacting comparability, adjusted profit attributable to the corporation shareholders reached CAD 51 million or CAD 7.45 per share, up 36% from last year. Let's turn to working capital on slide 12.

[Francis Trudeau, CFO at Lassonde Industries]

At the end of Q2, the days of operating working capital ratio stood at 46 days versus 51 days, three months earlier. The sequential improvement was driven primarily by higher DPOs and, to a lesser extent, lower DIOs, while the ratio remained within our normal seasonal range. For the remaining part of 2026, we continue to expect working capital to remain within its historical range. Now on to slide 13 for cash flows. Operating activity generated CAD 78 million in Q2 2026, as opposed to requiring CAD 3 million last year. The improvement is mainly coming from a lower working capital requirement this year compared to last. CapEx totaled CAD 38 million in Q2 2026. As a reminder, CapEx are projected to reach up to 7% of sales in fiscal 2026, including approximately $96 million for the New Jersey project. Turning to our financial position on slide 14.

[Francis Trudeau, CFO at Lassonde Industries]

Lassonde's net debt was CAD 451 million at the end of the second quarter, down from CAD 474 million three months earlier. This improvement was driven by solid operating cash flow generation, partly offset by CapEx. During the quarter, we allocated a portion of our cash flow to debt repayment, reducing borrowings by CAD 32 million. As a result, the net debt to adjusted EBITDA ratio was 1.22:1 at the end of the quarter, down from 1.35:1 three months earlier. All things being equal, we expect the leverage ratio to remain well below our internal maximum threshold of 3.25:1. Finally, on slide 15, we have announced our intent to launch a normal course issuer bid to purchase for cancellation up to 200,000 common shares, representing approximately 6.5% of issued and outstanding Class A subordinate voting shares over a 12-month period.

[Francis Trudeau, CFO at Lassonde Industries]

The launch of the normal course issuer bid is subject to TSX approval. I now turn the call back to Vince for the outlook. Vince?

[Vince Timpano, CEO at Lassonde Industries]

Thank you, Francis. Please turn to slide 16. Looking ahead, we will remain focused on executing our strategy by strengthening the competitive position of our brands, accelerating our innovation agenda, and ensuring the readiness of our New Jersey facility. At the same time, we recognize that the macroeconomic and geopolitical environment remains challenging, with potential implications for consumer spending, input costs, and supply dynamics. In this context, we will continue to leverage the strength, depth, and breadth of our portfolio while pursuing a balanced contribution from revenue management initiatives and volume growth. Given the current operating environment and excluding the impact of foreign exchange and any major external disruptions, we now expect 2026 sales to be slightly below last year's level. That said, we will continue to prioritize profitable sales over volume growth for its own sake, consistent with the disciplined approach reflected on our performance so far this year.

[Vince Timpano, CEO at Lassonde Industries]

Moving to slide 17 for our strategic priorities by division. In U.S. Beverage, our focus will be on leveraging our investments in single-serve and juice box capacity to support continued growth in attractive formats, maintaining disciplined revenue management while remaining responsive to evolving consumer behaviors and price sensitivity, and completing our new facility in New Jersey, which will enhance operational efficiency and support our long-term U.S. growth platform. As for our Canadian beverage business, our priority remains fortifying our leadership through advancing innovation-led growth initiatives, maintaining disciplined revenue management, including targeted promotional spending while continuing to invest in our brands, and strengthening execution across our core channels. In Foodservice, our North American team will continue to pursue growth opportunities in this attractive market. Building on the early success of our first major bag-in-box customer, we are encouraged by the momentum we are seeing.

[Vince Timpano, CEO at Lassonde Industries]

Finally, in Specialty Food, we are focused on optimizing the integration of our North American network, refining the positioning of our branded products, and backfilling available capacity following contractual changes with one customer. On the backfill, through multi-year agreements, we have already secured replacement volume representing more than 50% of the expected 2027 shortfall with advanced negotiations underway for an additional 25%. This progress underscores our strong reputation in the marketplace and creates a meaningful opportunity to strengthen Specialty Foods' position by further diversifying its customer base and product portfolio in line with our long-term objectives. Overall, our disciplined execution gives us confidence that we can successfully manage this transition and use it as a catalyst to build a stronger, more diversified Specialty Food platform. Turning to slide 18 for an overview of certain cost components.

[Vince Timpano, CEO at Lassonde Industries]

Based on currently observed spot prices, we expect orange concentrate costs and, to a lesser extent, apple concentrate costs to be lower than last year. At the same time, the situation in the Middle East is adding inflationary pressure to transportation costs as the broader logistics chain adjusts to higher operating costs and evolving market conditions and to PET resin costs. While geopolitical developments and tariffs are beyond our control, we are focused on the levers we can manage, including reducing our commodity exposure through product mix optimization and innovation, maintaining pricing discipline, and executing targeted cost initiatives to protect margins. As for tariffs, our network flexibility helps mitigate the impact by allowing us to optimize production and distribution flows as conditions change. However, we will continue to reassess and adapt our sourcing strategies as tariff rates on globally sourced inputs used in U.S.-based production evolve.

[Vince Timpano, CEO at Lassonde Industries]

In closing, on slide 19, we remain well-positioned to navigate near-term challenges while continuing to advance our long-term strategy. The NCIB reflects our confidence in Lassonde's long-term prospects and our belief that the shares are currently undervalued. With our strong balance sheet and disciplined approach to capital allocation, we view share repurchases as a compelling investment in the business and an effective way to create value for our shareholders. With a diversified portfolio of leading brands, deep customer relationships built in part on our proven ability to help them grow and strengthen their own brands, and disciplined execution by our dedicated teams, we will continue investing in the capabilities that will drive sustainable and profitable growth in the North American food and beverage market. This concludes our prepared remarks. We are now pleased to answer your questions.

[Operator]

We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up the handset first before pressing any keys. To withdraw your question, please press star then two. We have our first question from Martin Landry with Stifel.

[Martin Landry, Analyst at Stifel]

Hi, good morning, Vince and Francis. Congrats on your results. My first question focuses on your gross margin. It expanded by 440 basis points, a huge expansion on a year-over-year basis. I was wondering if you could provide us with a bridge and quantify the main buckets that explain this strong expansion.

[Francis Trudeau, CFO at Lassonde Industries]

Yeah, sure. Hi, Martin. The main story of the quarter is commodity costs. I would say the significant part of the increase is related to commodity. That would be the largest component. The second component would be price. However, what we see on price, that is less of an impact versus the previous quarters where price year-over-year was driving a significant part of the margin improvement. That's been less of a story, but still a positive story in terms of margin. The third one is really mix and what we're doing in terms of the mix with our innovation and working with the clients on better mix. That would be the third main component. That would be the three main components. I would say the bridge from division standpoint, Martin, everyone contributed to the positive impact of year-over-year, quarter-over-quarter.

[Martin Landry, Analyst at Stifel]

Okay, that's helpful. Maybe continuing on the commodity costs, looking at the price of orange juice concentrate, it continues to decline this year. I was wondering, what is the proportion of your needs that are hedged for 2026, and to what extent can you benefit from this continued decline?

[Francis Trudeau, CFO at Lassonde Industries]

We've taken, I would say, aggressive position on hedging, considering what we've seen in the last few months. I don't have the percentage of hedging in front of me, Martin, but we're well protected right now. I would say most of our hedging positions are ending towards the end of this year.

[Martin Landry, Analyst at Stifel]

Okay. I think the broader question is Sorry, I'm all on gross margin today, but it is one of those days. The broader question is that gross margin level, is it sustainable? You feel like there are other pressures that may bring it down sequentially in Q3 and Q4? Just trying to assess a little bit what is the level of sustainability of that gross margin.

[Francis Trudeau, CFO at Lassonde Industries]

Yeah, that's obviously a great question. I just want to, before I answer your question, to basically reiterate our position on margins. We always focus on profit dollars and not profit margin. That has been our approach in the last two years, and that's what we're going to prioritize. This being said, you see our margins, and they are probably on the high side versus what we've shown in the last few quarters and last few years. We're happy with this. We still see improvements in our network, pockets of improvement in terms of cost, and frankly, some of that has been reflected in the current margins. However, as we've disclosed a bit everywhere, it's a very volatile environment right now. We see a lot of pressure right now on freight, transportation, and there's the input cost also situation that we're following carefully.

[Francis Trudeau, CFO at Lassonde Industries]

In terms of sustainability, we don't know. We'll work to keep it for sure, but that's something right now that is very, very volatile. Difficult for me to answer that one.

[Vince Timpano, CEO at Lassonde Industries]

Martin, I'll just add, in terms of the volatility that we continue to see on items outside of orange concentrate, just as an example. We talk about transportation costs. There's a fuel component that's tied to that. In addition, when you consider the Middle East and the impact on fuel and the fact that we buy plastic, PET resin is also impacted. That's sort of the counterbalance. As far as concentrate in orange, which is a portion of our commodities offset by some of the volatility that we continue to see and feel pressure against. We started really feeling quarter two towards the tail end.

[Martin Landry, Analyst at Stifel]

Okay. Thank you for the color. That's helpful and best of luck.

[Vince Timpano, CEO at Lassonde Industries]

Thanks.

[Francis Trudeau, CFO at Lassonde Industries]

Thanks.

[Vince Timpano, CEO at Lassonde Industries]

Martin.

[Operator]

We have our next question from Ahmed Abdullah with National Bank of Canada.

[Ahmed Abdullah, Analyst at National Bank of Canada]

Yes, good morning, and thanks for taking my question. I'll follow a little bit differently from Martin's line of questioning, but still on the profits. You've moved your outlook a little bit to slightly below 2025, but your first half profitability from a dollar growth perspective looks like you're up 16% in the first half on adjusted EBITDA versus last year. Do you see that top line eroding all that first half growth and for the full year, you would see your adjusted EBITDA down based on the top-line pressure? Is there buckets of savings that you think would help manage that growth in the back half of the year?

[Francis Trudeau, CFO at Lassonde Industries]

Yeah, that's a tough one, Ahmed, because as I said, we're on a low side on commodity, and the pressure we're facing on external environment is difficult to quantify right now. There's also elements like negotiation of USMCA that in the next two weeks, we'll follow carefully. Right now, we're still protected. For me to answer about what's going to be the impact of the lower sales and the guidance versus historically is very difficult right now.

[Ahmed Abdullah, Analyst at National Bank of Canada]

Excluding tariffs. That's the caveat.

[Francis Trudeau, CFO at Lassonde Industries]

Excluding tariff, that's very difficult to answer. I think, again, when you compare ourselves versus market, I think we're happy with the margins level. As I said, we're on the good side on commodity, and what impact it's going to have should there be some changes on the margin in the later half of the year is difficult to quantify right now.

[Ahmed Abdullah, Analyst at National Bank of Canada]

Okay. That's fair. Then just switching onto the charge related to the customer relationship, can you perhaps give us a bit more color around the revenue EBITDA contribution that came with that, and what caused that kind of contractual change? Is this a trend in the market that's happening, or should we expect this to reoccur at some point with other U.S. specialty food customers?

[Francis Trudeau, CFO at Lassonde Industries]

No. It's definitely not a trend in the market. It does not affect anything in terms of our positivity versus that segment of the market and the food category. Basically, what happened is, when we acquired this Summer Garden, we had a significant concentration with one client, and basically, we knew that this agreement would be at one point rediscussed, and we were kind of exclusivity position. What happened is some additional capacity were added in the market, and basically, the client decided to diversify their risk while continuing our relationship with us. We signed a three-year agreement with that customer, so we still are having a discussion with them. However, the volume has decreased in a significant portion. That materially affected the amount that we had in our books. We had to record an impairment.

[Francis Trudeau, CFO at Lassonde Industries]

Nothing in terms of our level of optimism in that category. As Vince mentioned, it's also going to provide us an opportunity to diversify. Already 50% of the volume has been backfilled. We're working on the rest. The impact will come in the future quarter. We're working on this right now. I think the teams are doing a good job. We see that also as being stronger by being more diversified.

[Ahmed Abdullah, Analyst at National Bank of Canada]

Okay. Just one last follow-up for me. The backfill volumes that you've secured, how do they compare with the lost customer business that you lost there?

[Francis Trudeau, CFO at Lassonde Industries]

We're not talking margins by clients, Ahmed. We're backfilling the volumes and over the next, it's going to depend on all kinds of situation, like in terms of productivity and mix and type of business we're going to backfill, but we're not providing details on that.

[Ahmed Abdullah, Analyst at National Bank of Canada]

Well, thank you. I'll pass the line.

[Operator]

We have our next question from Luke Hannan with Canaccord Genuity.

[Luke Hannan, Analyst at Canaccord Genuity]

Thanks. Good morning, everyone. If we can maybe just get a sense of the bridge between the prior sales guidance that you had and then now what you have in there with it being slightly below 2025 levels. What is the biggest driver of that change? Is it just general category softness? Is it in relation to the specialty foods and the changes with the contract there? Is it more related to the change in the Canadian, I think it was mentioned in the deck, there was a change in a customer's go-to-market strategy. I guess I'm just trying to figure out the bridge and basically what maybe we can expect as it relates to 2027 as well.

[Francis Trudeau, CFO at Lassonde Industries]

Yeah. In terms of what we could expect for 2027, we're currently working on budgets and next year, and we'll provide that later. It's going to come soon, Luke. In terms of the bridge, what we've seen, I would categorize that in three buckets. First one, a bit of on our side, as we announced, we discontinued some product lines. I would say the baby food, the frozen and glass discontinuation, while was not contributing to profit, was contributing to volume and sales. I would say about a third of the delta is coming from that decision that we've made. The second bucket, I would say, is specific elements that happened in the market with one of our main customer, which changed their go-to-market and promotion strategy.

[Francis Trudeau, CFO at Lassonde Industries]

That combined also with last year during the Buy Canadian, one supplier that had supply chain issue that we benefited from that. Those, I would say specific element being the second category. The third one, I would say, is category related, as well as I would say softness of the Buy Canadian year-over-year. That would be, I would say the three buckets of reasons why the bridge between the CAD 3 billion and the lower amount that we announced.

[Luke Hannan, Analyst at Canaccord Genuity]

Okay.

[Francis Trudeau, CFO at Lassonde Industries]

I don't know, Vince, anything to add there?

[Vince Timpano, CEO at Lassonde Industries]

No. I think it was well said.

[Luke Hannan, Analyst at Canaccord Genuity]

Okay, great. For my follow-up here, and then I'll pass the line. I wanted to ask about capital allocation. You had announced the buyback alongside your results, you can correct me if I'm wrong, but I believe it's the first time within four years that you had done that. If we were to go back four years ago, there was good reason for that as well, for you discontinuing it because you were focusing on Project Eagle and fixing up the U.S. business. The balance sheet seems relatively clean today. You had mentioned that the shares are undervalued. I believe they've been in and around the same valuation, though, for the last few years as well. I guess the main question I'm asking here is what now has changed that's making you go forward with the buyback?

[Luke Hannan, Analyst at Canaccord Genuity]

Is it just purely that there's more float in general out there and it's a little bit easier to execute on that? Maybe secondly on that, how do we think about going forward? Should a buyback be a regular part of returning capital to shareholders? Do you just see particular opportunity in the shares from here?

[Francis Trudeau, CFO at Lassonde Industries]

We see last two years have been very CapEx intensive, and also absorbing the acquisition of Summer Garden. We see now it's a good timing in the next 12 months, like the level of CapEx, the finalization of the New Jersey project. We see it's a good timing and as you've seen, our leverage is very low conservative. We are able to do this buyback as well, it doesn't compromise any ability to also do any other type of projects, M&A or other.

[Luke Hannan, Analyst at Canaccord Genuity]

Okay, to be clear on that last point, you're doing the buyback there's no change on the M&A front. You're still looking potentially for acquisitions.

[Francis Trudeau, CFO at Lassonde Industries]

It's always been part of our historical strategy and if there's some occasion, we would definitely consider.

[Luke Hannan, Analyst at Canaccord Genuity]

Got it. Thanks. I'll pass the line.

[Operator]

We have our next question from Frederic Tremblay with Desjardins Capital Markets.

[Frederic Tremblay, Analyst at Desjardins Capital Markets]

Thanks. Good morning. Wondered if you could comment on the evolution of demand and volumes through Q2 and into July. Any month-over-month trend in demand in beverage worth highlighting as we think about the demand baseline for Q3?

[Vince Timpano, CEO at Lassonde Industries]

That's a good question, Frederic, it's Vince. What we're seeing from a category perspective is still price-led in both Canada and the U.S. The U.S. is still more price-led than you're seeing in Canada. I think dollars were up about 2.5%. Category volume was down about 4.5%-4.7%. The category in Canada was down about 3.5%. All that to say, the dynamics really haven't changed that much quarter-over-quarter. You continue to see a price-led environment, softening on the price portion of it. You continue to see category softness on both sides of the border. That's what we continue to see. I wouldn't say anything significantly has shifted in that regard from a category perspective. As we take a look, we see that holding for a period of time. What you are seeing is from a consumer perspective, this concern about affordability.

[Vince Timpano, CEO at Lassonde Industries]

When we take a look at the data in terms of what's driving some of the category dynamics, this is true both in Canada and the U.S., units per trip are down. Clearly what consumers are doing are being more mindful of the dollars they have and how do they stretch those dollars out. I would say that's a phenomenon that you're seeing both in Canada and the U.S. The second thing that we're watching a little more closely, and Francis had commented on it, was the dynamic between brand and private label. In most respects, what you would assume in an environment where there's an affordability concern that the category would benefit, our category would benefit from a private label perspective.

[Vince Timpano, CEO at Lassonde Industries]

What you are seeing is some customer dynamics that are influencing pricing, and the price gap between brand and promo has contracted, in particular when brands are promoting. We're continuing to watch that. The last thing that I'm going to say is in particular when you look in the U.S. and you look at the economy, high-end consumers are still buying, and they're buying at a premium level. Who is being impacted is the lower income consumer, where you're seeing them actually buy less units per trip. All of that to say, it's still a little bit uncertain in terms of does the trend just continue, and I believe that'll continue for a period of time through the year. I don't know that anything will change on that front. I don't know that the declines are going to accelerate, but it's something that we're watching closely.

[Frederic Tremblay, Analyst at Desjardins Capital Markets]

That's helpful. Thanks for that color, Vince. For my follow-up, just on the contractual change in U.S. specialty food, just a couple clarifications there. You mentioned diversification. Is the 50% volume replacement that you've secured with one or more customers? What's your level of confidence that you can get to 100% replacement volume in a timely manner?

[Francis Trudeau, CFO at Lassonde Industries]

Yeah, it's through multiple customers. We are very confident to fill that very quickly. In a few months, we've been able to backfill rapidly and we are very confident to get there very quickly.

[Frederic Tremblay, Analyst at Desjardins Capital Markets]

Just to clarify, when does that take effect? Meaning is there a transient volume or revenue and EBITDA headwind in 2026 from this? Or you have some time to get to that full replacement of volumes, let's say by early 2027? What's the timing on all this?

[Francis Trudeau, CFO at Lassonde Industries]

Timing in terms of volume is Q3, Q4 next year. In terms of pricing, we've seen impact this year.

[Vince Timpano, CEO at Lassonde Industries]

Just to clarify, it's Q3, Q4.

[Francis Trudeau, CFO at Lassonde Industries]

I said next year, like at fiscal 2026.

[Frederic Tremblay, Analyst at Desjardins Capital Markets]

Okay. Any way to quantify the net revenue impact from this in the near term? Is this a significant customer?

[Francis Trudeau, CFO at Lassonde Industries]

We-

[Frederic Tremblay, Analyst at Desjardins Capital Markets]

For Summer Garden?

[Francis Trudeau, CFO at Lassonde Industries]

It's not significant for Summer Garden. The backfill work we're doing right now, it's too early to assess. We're very confident that it would not be material impact.

[Frederic Tremblay, Analyst at Desjardins Capital Markets]

Okay, great. Thanks for taking the questions. I'll leave it there.

[Francis Trudeau, CFO at Lassonde Industries]

Thank you.

[Operator]

This concludes the question and answer session. I would now like to turn the conference back to Vince Timpano for closing remarks.

[Vince Timpano, CEO at Lassonde Industries]

Thank you, operator, and thank you for joining us this morning. We look forward to speaking with you again at our next quarterly call. Have a great day. Have a great weekend, everyone.

[Operator]

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day

Participants

Executives

• Vince Timpano, CEO
• Francis Trudeau, CFO

Analysts

• Martin Landry, Analyst at Stifel
• Ahmed Abdullah, Analyst at National Bank of Canada
• Luke Hannan, Analyst at Canaccord Genuity
• Frederic Tremblay, Analyst at Desjardins Capital Markets