Premium Brands Holdings, the acquisitive food manufacturer in Canada, has said the pandemic has opened up M&A opportunities as the company allocates more investment funds to meet the production demands posed by Covid-19.
The Vancouver-based business, which has expanded its product offering to meats, meat snacks, sandwiches and seafood largely through M&A, suspended activity on deals in May, before snapping up Global Gourmet Foods and Allseas Fisheries in September.
George Paleologou, Premium Brands’ president and CEO, speaking to analysts last week after the company filed its third-quarter results, said the company’s M&A “pipeline is as robust as ever” for further acquisitions. In May, he said Premium Brands had at least 20 targets in its sights, with five in the “advanced stage” before it completed the deals for Global Gourmet Foods and Allseas Fisheries.
Responding to a question on whether Covid-19 has influenced decision-making on the M&A front, Paleologou said: “I would say that the pandemic scare probably is motivating more people to talk to us rather than less. So right now, we have to pick and choose which acquisitions to prioritise. I think it’s a good position to be in.”
However, he would not be drawn on whether Premium Brands has any further plans to conduct acquisitions outside of North America, as it did in March by taking an almost 17% stake in La Felinese Salumi, a dry-cured meat producer based in the Italian province of Parma.
While he declined to comment on the question, he did offer a response.
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“We did make an investment in Europe, of course, this past year, which has worked out very well. The company in Italy is giving us great support in terms of our Italian dry cured meat initiatives that are growing fabulously well in North America.”
Aside from M&A, Premium Brands is also channelling investment to increase capacity with two forward projects on the slate valued at CAD35m (US$27m). Paleologou said they are expected to start over the next couple of quarters and will be due for completion between the fourth quarter of next year and the final three months of 2022.
The larger of the projects is a CAD20m expansion to the firm’s processed meats factory in the US city of Ferndale, Michigan, and the other a “distribution-related project for western Canada”.
Premium Brands also made CAD16m of investment in its plants during the third quarter, including a 41,000 square-foot expansion at its artisan bakery site in Langley, British Columbia, and the installation of automated equipment at its Phoenix sandwich facility.
The company’s sandwich factory in Reno, Nevada, also received funds to increase tray pack capacity for charcuterie products, while work has started on a 26,000 square-foot expansion of its meat snacks and dry cured product facility in Brantford, Ontario.
For the third quarter to 26 September, Premium Brands generated sales of CAD1.1bn, an increase of 13.7% over the same quarter in 2019. Organic volume growth was 9.1%, and 12.5% excluding the impact of Covid-19.
Adjusted EBITDA climbed 11.2% to CAD93.5m and net earnings rose 29% to CAD34.7m.
Paleologou said the company is investing to improve efficiencies across its plants, and at the same time is reducing the SKU count in some business areas with a general aim to focus on the top ten lines.
“A lot of our companies had to be very innovative in trying to manage their plans in the best way possible in a pandemic, where you’ve got issues with people not showing up to work, people testing positive at times or people at home that tested positive. It’s an unsettled environment out there.”