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Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the High Liner Foods Incorporated Conference Call for Results of the Third Quarter of 2020. [Operator Instructions]. This conference call is being recorded today, Friday, November 6, 2020, at 2:00 p.m. Eastern Time for replay purposes. I would now like to turn the call over to Charlene Milner, Vice President of Finance for High Liner Foods. Ms. Milner, please go ahead.
Good afternoon, everyone. Thank you for joining the High Liner Foods conference call today to discuss our financial results for the third quarter of 2020. On the call from High Liner Foods are Rod Hepponstall, President and Chief Executive Officer; and Paul Jewer, Executive Vice President and Chief Financial Officer. In a moment, I'll pass the call over to Rod for some remarks on our performance in the third quarter and the ongoing impact of COVID-19 on our business before handing over to Paul, who will review the financial performance for the third quarter. Rod will then make some final remarks before opening the call up for questions. I would like to remind listeners that we use certain non-IFRS measures and ratios when discussing our financial results as we believe these are useful in assessing the company's financial performance. These measures are fully described and reconciled to IFRS measures in our MD&A.Listeners are also reminded that certain statements made on today's call may be forward-looking statements that are subject to risks and uncertainties. Management may use forward-looking statements when discussing the company's strategy and business in the future. Actual operating or financial results could differ materially from those anticipated in these forward-looking statements. High Liner Foods includes a thorough discussion of the risk factors that can cause anticipated outcomes to differ from actual outcomes in its publicly available disclosure documents, particularly in its annual report and annual information form. Please note that High Liner Foods is under no obligation to update any forward-looking statements discussed today. Earlier today, High Liner Foods reported its financial results for the third quarter ended September 26, 2020. That news release, along with the company's MD&A and unaudited condensed interim consolidated financial statements for the third quarter of 2020 have been filed on SEDAR and can also be found in the investor section of the High Liner Foods website. If you'd like to receive our news releases in the future, please visit the company's website to register. Lastly, please note that the company reports its financial results in U.S. dollars and therefore, the results to be discussed today are also stated in U.S. dollars, unless otherwise noted. High Liner Foods' common shares trade on the Toronto Stock Exchange and are quoted in Canadian dollars. I will now turn the call over to Rod for his opening remarks.
Thanks, Charlene, and good afternoon, everyone. Thanks for joining us today to discuss our financial results for the third quarter of 2020. I'm pleased to report another quarter of improving performance for High Liner Foods. Financially, we continue to make profitability gains as we shift the mix of our portfolio, expand new product offerings and drive efficiencies from continued improvements across our organization. Operationally, we are fully dedicated to our customers and consistently meeting their evolving needs, supported by our robust and resilient supply chain and relentless focus on health and safety. Our foodservice business continues to recover, and we are supporting our customer needs with our value-added products that are well suited to the new operating environment. On the retail side, we continue to deliver excellent fill rates generate margin improvement and secure new business wins across North America. As North America grapples with an emerging second wave of COVID-19, customer and consumer demand has potential to fluctuate wildly. Never has prudent inventory management been more important. Our success in serving our customers and in generating increased free cash flow can be attributed to how we forecast and manage our inventory. Our improving cash flow is a strong vital sign for our business. It gives us confidence that we can comfortably support the dividend increase announced this morning, while simultaneously investing in our business to fuel growth and continuing to reduce debt. We also remain confident that despite the ongoing challenges and uncertainty presented by COVID-19, we will deliver adjusted EBITDA improvements in 2020 and be able to go-to-market more aggressively in 2021 to generate top line growth from our value added business. I will go back shortly to share more on the opportunity ahead. But first, I will hand the call over to Paul to walk us through our financial performance for the third quarter. Paul, over to you.
Thank you, Rod, and good afternoon, everyone. Please note that all comparisons provided during my financial review of the third quarter of 2020 are relative to the third quarter of 2019, unless otherwise noted. Sales volume decreased in the third quarter by 5.5 million pounds to 54.7 million pounds. In our foodservice business, sales volume continued to be lower due to the impact of COVID-19 on our foodservice customers. However, we did see improvement in the volume trend in the third quarter compared to the second quarter. In our retail business, sales volumes continued to be higher due to the increased demand related to COVID-19, partially offset by lost business in the fourth quarter of fiscal 2019 that continued to impact volume year-over-year. The decline in sales volume was partially offset by new business and new product sales. Sales in U.S. dollars decreased in the third quarter by $25.5 million to $194.6 million due to lower volume already discussed as well as changes in sales mix. In addition, the weaker Canadian dollar in the third quarter of 2020 compared to the same quarter in 2019 decreased the value of U.S. dollar sales from our Canadian dollar-denominated operations by approximately $500,000 relative to the conversion impact last year. Gross profit decreased in the third quarter by $3.5 million to $38.9 million. However, gross profit as a percentage of sales increased by 70 basis points to 20% compared to 19.3%. Gross profit reflects the lower sales volume discussed previously, partially offset by favorable changes in product mix. Adjusted EBITDA increased in the third quarter by $2.6 million to $19.1 million, and adjusted EBITDA as a percentage of sales increased by 230 basis points to 9.8% compared to 7.5%. Adjusted EBITDA reflects a decrease in distribution expenses and SG&A expenses, partially offset by the decrease in gross profit. In addition, the weaker Canadian dollar decreased the value of reported adjusted EBITDA in U.S. dollars by approximately $100,000 relative to the conversion impact last year. Reported net income increased in the third quarter by $6.2 million to $3.8 million and diluted earnings per share increased by $0.18 to $0.11. Sorry, increased by $0.18 to $0.11. The increase in net income reflects the increase in adjusted EBITDA discussed previously and decreases in share-based compensation expense, business acquisition, integration and other expenses and finance costs, partially offset by increase in income tax expense. Excluding the impact of certain nonroutine or noncash expenses and share-based compensation, which are explained in our MD&A, adjusted net income in the third quarter of 2020 increased by $2 million or 51.3% to $5.9 million compared to $3.9 million the same period last year, and correspondingly, adjusted diluted earnings per share increased by $0.07 to $0.18.Turning now to cash flows from operations in the balance sheet. Net cash flows provided by operating activities in the third quarter of 2020 increased by $30.8 million to $46.3 million compared to $15.5 million in the same period in 2019, primarily reflecting favorable changes in net noncash working capital and higher cash flows from operations, partially offset by higher interest and higher income taxes paid. The favorable changes in net noncash working capital are the result of favorable changes in accounts receivable, inventories and provisions, partially offset by an unfavorable change in accounts payable. Net debt at September 26, 2020, decreased by $41.7 million to $286 million compared to $327.7 million at June 27, 2020, reflecting a decrease in short-term borrowings, a decrease in lease liabilities and a higher cash on hand balance. Net debt to adjusted EBITDA was 3.3x at September 26, 2020, compared to 3.9x at June 27, 2020, 4.1x at the end of fiscal 2019, and 4x at the end of the third quarter last year. We expect that at the end of fiscal 2020, this ratio will be slightly higher than the ratio as at September 26, 2020, due to increased seasonal working capital requirements in advance of the Lenten period. We remain very confident in our liquidity position as a result of prudent cash management and the early refinancing of our debt in Q4 2019. We do not have any impending debt maturities, and we'll continue to utilize our $150 million working capital facility, if required. Borrowings on this facility, net of cash on hand, are currently nil. The dividend increase of $0.02 per share announced by the Board this morning reflects our improving financial and operating performance and represents a 40% increase. It's certainly good news, and it was a decision made with great care by the Board with due consideration to the ongoing impact of COVID-19 on our business. The increase moves us back closer to our traditional trailing EPS payout ratio. That concludes my financial review, and I will now turn the call back over to Rod for some final remarks before opening up the call to questions.
Thank you, Paul. Overall, our retail business in Q3 continued to trend in the right direction in terms of both new business wins and profitability gains as we increase sales of our higher-margin branded business -- branded value-added business. As I mentioned last quarter, more than 0.5 million new customers entered the frozen seafood category since the onset of the pandemic in March. In addition, frozen seafood is the fastest-growing category in the frozen aisle and consumers continue to make more trips to the grocery store. Nonetheless, frozen seafood remains significantly underconsumed compared to other proteins. Market conditions are right for growth for High Liner Foods. All signs are pointing towards health and wellness trends continuing, a prolonged period of consumers dining at home and turning to the frozen food aisle for more frequently in search of delicious and easy-to-prepare seafood. To capitalize on this opportunity, we're focused on accelerating branded value-added margin growth in particular. Our large unprocessed seafood and shrimp business gives us a significant competitive advantage compared to others in the market. And we have the means and the scale on the side of our business. We have the innovation pipeline ready to go, and we have the supply chain integration and efficiency necessary to support growth. And crucially, we now have the free cash flow available to support increased investments in our business to support us playing offense in the market. We're already driving ahead with increased social, digital, e-commerce and in-store marketing and promotion activities under our Seafood is Better campaign banner. We're pleased with the momentum generated during the quarter. And this is just the beginning of a more comprehensive marketing campaign. On the innovation front, our latest value-added shrimp innovation has strong acceptance from retailers across North America. Our miso cod product is doing extremely well, and our snacking products are helping to show consumers the opportunity to turn seafood for any number of eating occasions. It's important to note that we see opportunity for branded value-added innovation across various price points, maximizing our consumer appeal from premium to value segments as an opportunity to leverage the scale of our unprocessed business to create higher-margin wins for us on shelf. At the premium end, we have recently launched sweet bourbon salmon under our Sea Cuisine label along with a High Liner branded pan-seared parmesan herb sole, and we have a new branded value-added product coming in the new year at lower price points under the Catch of the Day label. Turning now to foodservice side of our business. As you are aware, the industry as a whole remains challenging, and many regions of Canada and the U.S. are once again seeing restrictions or temporary closures of restaurants and casual dining. We remain focused on helping our customers through these challenging times. We are doing all we can to provide support and solutions to their many pain points. Overall, our foodservice business remains well positioned relative to industry thanks to the diversity of our foodservice business, the steady demand from our institutional customers, the strength of our distribution network and the solutions offered by our value-added products. We saw steady improvements in Q3 as a result of all of these factors. We also have been encouraged by the return of industry sales events and conference in a virtual format. We are using these events to showcase our repositioned foodservice offering and target operator solutions. Our solutions driven approach is appreciated by our foodservice customers and has led to a number of sales wins during the quarter. We continue to carefully monitor regional COVID restrictions and adapt our forecasting systems accordingly. This allows us to be very targeted with our sales plans and pivot as necessary to support our customers. As with our retail business, we are gearing up now to support a fast start to 2021 with 3 new product launches, 2 of which -- our Alaska Wild Fries and Buffalo Shrimp -- are successful value-added retail products that we have tailored for foodservice. I see a lot more potential for crossover like this as we grow our value-added offering in 2021, especially for products like these that are well suited for a takeout dining environment. To conclude, this quarter has provided further evidence of the progress we have made and that we are on the right track to deliver adjusted EBITDA improvements. We are ready to seize the growth opportunities in front of us and are moving forward with greater confidence, capabilities and urgency than ever before. Our ability to do so rest on the hard work and dedication of our employees especially those on the front line, and we'd like to thank them for their hard work. Their health and safety remains our #1 priority. I look forward to your questions. Operator, please start the Q&A period.
[Operator Instructions] Your first question today comes from the line of George Doumet with Scotiabank.
You've done a great job on the margin side and on the free cash flow side in the last few quarters and especially recently in the context of the pandemic. Can you maybe talk to volumes? Can we get to flat volume growth next year at some point? Maybe anything you can talk to there would be appreciated.
Yes. George. Yes, we feel very confident about our ability to bring back top line growth as outlined by our free cash flow to support increased and aggressive marketing activity. The innovation we've brought to market, as we've talked about in previous quarters, our innovation is driving overall net growth for us. So we feel very good about our position as we head into 2021. Certainly, we have a strong first quarter that we're going to overlap. But the year as a whole, we feel very confident about that.
Okay. I think, Paul, you shared with us last quarter that the June foodservice sales were down 20%. Do you have that number for the quarter?
Yes. It is less than 20% in Q3. We continue to see an improvement in foodservice volume as we moved through Q3. The peak of the foodservice decline, as you'll recall from the last call, was actually April.
Okay. So the exit number in the quarter was better than 20%?
It's lower than 20%, correct.
Okay. I just want to get a sense of did it improve throughout the quarter. I guess the answer is yes.
They did improve throughout the quarter. Now obviously, we're watching carefully what impact there may be from increased cases of COVID and some increased shutdowns in that sector. But we did not experience any significant negative impact associated with that in our third quarter.
Okay. Great. Another question for you, Paul. On the free cash flow, obviously, a lot of moving parts, a lot of working capital. But can you maybe talk to working capital as a whole for this year and maybe for next year, can you share with us some targets there?
Nothing specific I would share in terms of targets. Obviously, we're pleased with the work we've done, in particular, on inventory management. And I'm very pleased that receivables are in very good position as well despite the negative impact, obviously, that some of our customers have experienced because of COVID. Obviously, for us, there's some seasonal fluctuation in working capital. I referred to that in terms of as we move into towards the end of the fourth quarter and through the first quarter. But we believe we still have opportunity through some of our supply chain optimization initiatives to continue to improve our inventory management as we look forward. So I think we can certainly sustain and hopefully, ideally continue to improve working capital as we move through 2021.
That's great. And my last one, maybe for Rod. Leverage is coming down quite a bit. I understand that there's working capital requirements that you guys alluded to for Q4. But is it too early to have a discussion on M&A? And if not, what channels or species you guys feel like you'll gain more -- you'd like to gain some scale in?
Yes. I would say it's probably a bit premature to have some conversation on M&A. But let's face it, the opportunity with the reduction in -- provides us with ample opportunity for options, and we'll be certainly reviewing all options that come our way for, and again, continued reinvestment in the business, not only from a CapEx perspective, but from an aggressive marketing perspective to all options that would be available.
Our next question today comes from the line of Kyle McPhee with Cormark.
I just want to dig in a bit on some of the moving parts feeding your revenue trend. Specifically the loss of contract from Q4 of last year. Was that a full quarterly hit from that contract loss last year, such that it's now fully lapped entering Q4 this year? Or is there still going to be some remnant year-over-year hit from that contract that we'll see in your next quarter?
There still will be some impact in Q4. It wasn't a full quarter, but not as significant as we've seen thus far. And I think the good news is what the last couple of quarters for us have shown is we're getting much better at offsetting any of that lost customer business with innovation, new product rollouts and improved sales and marketing execution.
Got it. And on those pockets of growth showing up, specifically the new product launches. In past quarters, as you've said it was tracking at kind of 2% year-over-year growth contribution, was that also the case this quarter? Or has it accelerated, decelerated? Any guidance on that moving part, those new product launches would be helpful.
Yes. No, very similar impact positively in the third quarter as there was in the last quarter. So we are -- continue to be pleased with the progress that we're making there. Still early days for some of those products. Opportunities for us certainly to expand distribution further.
Got it. Okay. And then on your gross margins, among other things, they have been benefiting from your ongoing shift to more value-added in the mix. I'm also wondering if channel matters for gross margin mix or value-added stuff tends to be higher margin regardless of the channel. And the context for the question is really just me wondering if there's a gross margin mix shift will be impacted when High Liner presumably recovers some foodservice channel business next year.
Yes. It is less about the specific channel. And to your point, it's more about value-added versus commodity business. Obviously, our branded value-added products provide our most favorable margins. And so it would be -- we wouldn't be able to say it's a foodservice versus retail comparison.
Got it. Okay. And then you talked a little bit about the foodservice trend throughout the quarter and by the end of the quarter. Can you give the same information on the retail side, the tailwind, the extent of the tailwind through the quarter?
Yes. So retail remained above the prior year by, I would say, marginally above the prior year from a volume perspective in the third quarter. Certainly not the same kind of impact we saw in the second quarter because of the particular months of April and May, where there were significant increases in the retail business. So we'll continue to monitor that mix between retail and foodservice as we see the ongoing COVID impact, but pleased that we continue to see moderate growth in our retail business. And an improvement in the trend in the foodservice business compared to the prior quarter.
Got it. Okay. And then last quick one for me. Can you offer any CapEx guidance for next year?
Yes. We're still working on finalizing our plans at this stage, but suffice it to say, it will be quite a bit higher than it was in the current year because of the fact that we had to manage CapEx down through COVID for obvious reasons. And our number was low in the year prior to that as we were finalizing our debt refinancing and continuing to focus on reducing leverage. We believe we'll be in a position in 2021 to increase our CapEx up to at least historical levels, which it would be in the neighborhood of $15 million a year. And we will look for opportunities to invest beyond that number, given that we have -- we believe we have the cash flow to support that, the cash flow to continue to support the reduction in our debt and the cash flow to support the dividend. So we'll have more perspective to give on that on our next quarterly call, but would anticipate higher CapEx for 2021.
Our next question comes from the line of Sabahat Khan with RBC Capital Markets.
Just wanted to follow-up on the channel commentary that you just shared, Paul, around maybe retail not growing as much. I guess is it -- should we think of it as almost a negative correlation between your retail trends and foodservice because foodservice opened during Q3 a little bit more retail softened. And maybe are you seeing that reverse in Q4 during the second wave at all? Just some thoughts on the trends that you're seeing.
Yes. I would say that there is some correlation clearly between foodservice and retail, as foodservice -- North Americans only eat so much, right? And so if they're eating more in foodservice occasions, then they're likely buying less at retail. So we did see some of that trend in the third quarter. Premature for me to comment, I think, on the fourth quarter other than to say we're a month in, and we are pleased with what we see thus far.
Was there -- do you think, perhaps, based on the data that you have, some element of some pantry stuffing or freezer stuffing for that matter in Q2 perhaps? Or was it probably more of a channel shift?
No. I think there was -- and Rod will jump in on this as well. I think there was some freezer stuffing initially for sure as there was across all frozen categories. But there definitely was some channel shift, particularly earlier in the second quarter because foodservice -- for some of the foodservice establishments, it really wasn't an option. They just weren't open. I think as we saw more and more restaurants open, we saw some strengthening in that part of the foodservice business. And I'd be remiss if I didn't remind folks that that's only part of our foodservice focus, we have a lot of institutional and other business in foodservice, which doesn't have the same significant change or variation that we saw in areas like casual dining.
Okay. Great. And then just, I guess, on the last comment around the various subsegments of foodservice. Can you maybe share some of the trends that you are seeing there, maybe a bit more granular? I'm assuming the institutional stuff held in there? Maybe some color there, please.
Yes. I would say, it's Rod. You're exactly right. Our institutional business continued to perform very well as did our general broadline distribution business. But one of the other things that helped us immensely is the new sales targeting approach that we put in play roughly 12 to 14 months ago, very, very specific targeting approach for customers. It allows us to pivot much more quickly and secure significant wins with new customers in the latter months here of Q2 and certainly through Q3. So we feel good about not only the current mix of customer base we have, but our ability to acquire new customers and much of it in a virtual environment.
Okay. And then just a comment, I guess, in the MD&A and the press release around frozen seafood growing faster -- or being the fastest growth category in the frozen food aisle. Have you seen expanded shelf space for frozen seafood, whether for the entire category for yourselves? Or has it been just the velocity that you're benefiting from?
Yes. I would say there's a number of things in there, Sabahat. It is -- I haven't seen any specific repositioning of the frozen aisle from its current makeup. So for us, it is certainly increased penetration with new product offerings, garnering new distribution within our filling distribution voids within our current products, but also, it's about new customer acquisition. And I can give you an example, large 1,000 store chain in the Southeast United States has just taken on our new shrimp product to be launched in the early -- or latter part of the first quarter. So we're seeing, again, new customer acquisition, greater velocity on our products. And then certainly, some channel shift is happening as well, right? I mean, if you think about the historical a 50-50 split, 51% foodservice, 49%, where the dollars are spent for retail, we saw that shift dramatically in April and May and has certainly started to come back a little bit. But we're still going to benefit from additional placements, new products, distribution gap fills.
And I would add, Sabahat, we're very proud of our customer service levels and our fill rates through the last 2 quarters. And being in position in stock for our retail partners, in particular, as they saw increased demand, we believe, certainly was beneficial to our business through that period.
Okay. And then just a couple of quick ones for me, I guess, on that last comment, are you finding -- how are you finding the service levels across the industry? Is this sort of a market share capture opportunity for you given your bigger scale in Canada? Or are you finding fill rates are generally okay?
Well, so maybe I can give you some feedback -- I'm sorry, Paul. Maybe I'd just give you some feedback that we're receiving from our customers, and that is directly related to what they believe are some of the best industry fill rates across the consumer aisle, right? So we're getting that feedback directly from our customers. We believe that, that feedback not only positions us in the short term to take advantages of any poor customer service levels across all proteins, but also certainly positions us for continued future growth as we support our customers during these challenging times.
Okay. And then just last one for me. I guess there's some commentary around capital allocation -- so around CapEx versus M&A, I guess I know it's a discussion for maybe next year when you actually maybe pull a trigger on just heightened CapEx or whatever, but what would you say are your focus areas? Is it more look for internal opportunities before you go external? Like if you had to prioritize, how would you think about it?
Yes. I would say there's no question. We are focused on the opportunities that are directly ahead of us, and that's continued improvement in our base operations. I think we've done a fantastic job over the last couple of years in that. And if you recall, we had 5 critical initiatives that we spoke about. And that all started with One HLF supply chain and allowing us to return to profitable organic growth. So that playbook still has significant runway for us and we're going to take advantage of the operational efficiencies and organizational alignment that we've created to allow us to go on offense.
Our next question comes from the line of Jonathan Lamers with BMO Capital Markets.
Paul, on the shift to value-add products this year, do you have handy, the percent that's value-add year-to-date versus last year?
I don't have the exact number in front of me, Jonathan. It is up again in the third quarter compared to the third quarter in the prior year. Similar to the trend we experienced in Q2. And that's been very beneficial for us because it has allowed us to continue to run our plans at the capacity that we would be looking for. The declines that we have experienced in volume have primarily almost entirely been in the unprocessed commodity business.
Okay. And I believe last call, you spoke to about a 10 percentage point increase in that number year-over-year, year-to-date. I mean this was kind of touched on earlier, but like how much -- like how would you frame how much of that improvement is permanent versus how much is just kind of due to all the hard work you've done this year to shift products around to maximize throughput at the plants.
Sure. Yes. So I think a couple of things. First of all, I do now have the number in front of me. So it's 6% or 600 basis point improvement in the mix, up from the mid-50s to the low 60s in terms of the manufactured business. So very pleased with that mix shift. In terms of sustainability of it, our focus clearly is growing our manufactured branded business. So we are working hard to continue to support that shift. Although, frankly, we would expect that it will settle out a little bit, just based on the fact that some of that unprocessed volume will come back, and we want to be able to deliver on that unprocessed business, while it will certainly be at lower margin percentages than our value-added business, it still delivers gross margin dollars. So you shouldn't expect to see it sustain, as we come out of the COVID period, at the levels that we're at exactly today. But you should expect, over time, for us to continue to focus on growing our value-added business at a disproportionate rate; and, therefore, see that mix certainly be better over the course of that period of time compared to where it was a few years ago.
Got it. And a question for Rod. So the 3 new products you rolled through for retail and the 2 products that have been cross-pollinated from retail to foodservice, could you walk us through the introduction dates for those? Sort of characterize where sales are today and how much potential for volumes that could be over time?
Yes. Jonathan, I don't have the specifics associated with the products that have been launched. I can certainly follow-up with you, but the products that I referenced in the sense of the sweet bourbon, the pan seared product and so on. So those products are getting ready to launch in early '21. So we're in the pre-sell process right now. I'm not able to get into any details as it relates to specifics around that.But given the success we've had around selling in our snacking category, our new shrimp launch has gone very well. We feel very confident that we have generated the competency within the organization to effectively launch and support those products at retail. So I think we can probably have a lot more discussion in subsequent quarters as those products hit shelves.
Okay. That's great. So if you were to -- you alluded earlier to how strong your pipeline of new product innovation is today. I mean, how would you kind of characterize that pipeline versus the plans you had pre COVID?
Well, I would suggest, if you recall, one of the things that we have done over time, roughly 2 years ago, we stated that we were going to take advantage of one of High Liner's many historical strengths, and that is reinvigorate our innovation engine. So that innovation engine not only comes in new product innovation for the entire enterprise, it also comes in innovation from the standpoint of bringing products that have historically been in Canada and bring those to United States or United States and bring those to Canada. An example of that would certainly be our pan seared product. But it specifically relates to what I would call as enterprise-wide new product development. I feel very confident in the pipeline we have. As you recall, we launched a snacking platform quite frankly, for the seafood industry. We've got a stable of products that will be coming to market in the appropriate sequence. That's not only new types of products, but that's expansion of the existing platforms. So one of the benefits about our portfolio is we have an opportunity to innovate, quite frankly, I think the widest level of innovation in the industry, everything from value at -- from a value positioning all the way through to a premium offering in the grocery store shelf or certainly within our foodservice. So that helps us, certainly, when consumers are looking for value, we can continue to support their need for value, not only in our existing portfolio, but with innovation, but also any of those consumers who may buy up and down the spectrum.
Okay. And the last question. You mentioned in response to one of the other analysts' questions, there's still a substantial runway from the supply chain playbook remaining. Can you give us some hints as to what initiatives you're thinking about? And maybe whether these are ones that were shelved from the pre-COVID period or ones that are just you're continuing to develop over recent quarters?
Yes. I don't know if I can give anything specific, but I would tell you this, our mindset is one of continuous improvement. So when I speak of our runway I would suggest that, that is absolutely about how we approach all aspects of our business. So we're going to look to continue to improve all the way from our procurement to delivery to our customer. And so consequently, one of the biggest portions of our business certainly is our manufacturing footprint. We're focused, as we mentioned earlier, around spending the CapEx levels that we haven't been able to get to in the last year or 2 to improve those opportunities. And as Paul mentioned, we are in a position should we find other opportunities to create value, we'll spend additional CapEx where needed.
And there are no further questions in queue at this time. I turn the call back to the presenters for any closing remarks.
Thank you. We appreciate you participating in the call and look forward to speaking with you in February when we release our full year results. Thank you.
And this concludes today's conference call. Thank you for your participation. You may now disconnect.