Fiscal year 2023 will have been marked by much more volatility and turbulence than anticipated by Premier Tech.
This is now the third consecutive fiscal year, following 2021 and 2022, in which our teams around the world had to face significant challenges and uncertainty. It is important for us to highlight their dedication, acknowledge their commitment and energy, and thank them for the agility and resilience they have shown once again.
In fiscal 2022, we reached the milestone mark of $1 billion in revenue with a year-over-year growth of $113 million on the strength of sustained organic growth and several strategic acquisitions.
Revenue in fiscal 2023 experienced a more moderate growth, up from $1 095 million in fiscal 2022 to $1 118 million, to close out the year with a slight year-over-year growth of $23 million despite the turbulent global economic and socio-political environment.
— It is important for us to highlight their dedication, acknowledge their commitment and energy, and thank them for the agility and resilience they have shown once again. —
This result is relatively stable, in comparison with the growth of recent years. It caps a period during which several external elements that were not anticipated in 2021, when we worked on our strategic plan — VISION 2027—, significantly impacted Premier Tech’s activities
While certain issues such as global supply chain challenges had been foreseen — albeit at a lower level — others only manifested themselves in the last quarter of fiscal 2022 or at the very beginning of fiscal 2023.
Spiking energy and transportation costs due to global political tensions, adverse weather in spring and summer 2022 affecting some of our business sectors, and inflation — which hit much harder and faster than anticipated during the last fiscal year —, had major impacts on our cost structure, on the cost of goods sold of our products as well as on the demand for some of our commercial offers.
The nearly simultaneous combined effects of these events had a significant impact on the financial performance in fiscal 2023, with Premier Tech posting operating EBITDA of $92 million, a decrease of $17 million over fiscal 2022.
— The nearly simultaneous combined effects of these events had a significant impact on the financial performance in fiscal 2023. —
Instability and turbulence
Instability and uncertainty ensuing from the war in Ukraine led to marked increases in oil and fuel prices — and consequently energy and transportation costs. These hikes have directly affected the cost of raw materials throughout the organization, the operating costs for several of our manufacturing processes, and both the upstream and downstream logistics costs of our operations.
At the same time, inflation has risen much more quickly and intensively than anticipated, further contributing to a sharp rise in our operating costs.
Given that some of these issues only emerged at the start of 2023, the timeframe to implement mitigation action plans and develop new strategies was practically non-existent. Therefore, it became rather difficult to make real-time adjustments, in particular for the Growers and Consumers business group, which accounts for a significant percentage of its consumer market sales in the first months of the fiscal year.
Our teams had to be proactive despite the challenging context to put in place the required actions to mitigate the effects of these various events. For several of our market sectors, adjustments could not be made until summer and early fall 2022, leading to a limited impact during fiscal 2023.
— Given that some of these issues only emerged at the start of 2023, the timeframe to implement mitigation action plans and develop new strategies was practically non-existent. —
The sharp increase in energy costs had repercussions for both our manufacturing processes and transportation activities. Rising gas prices, especially in Europe, had a significant impact on production costs for the Water and Environment business group. That being said, the Premier Tech Water and Environment team has been able to pivot quickly and address these rising costs through internal savings and price adjustments to the market, thereby alleviating the effects on the financial performance.
Availability of components
The effects of inflation on the cost of components, as well as their availability, had a significant impact throughout the year, as did the supply chain and logistics instability we are experiencing since 2021. These impacts, which significantly affected Premier Tech Systems and Automation in fiscal 2022, continued in fiscal 2023. However, the mitigation measures implemented by the teams enabled the group to navigate this period with more control than in the previous year and to limit the financial impact to a large extent.
In addition, while market analysis and consumer trend forecasts had all predicted consumer engagement would remain high in 2022, North American weather patterns — with a cold and rainy spring — combined with more flexible measures for international travel had a significant impact on the gardening season, driving consumption down and directly impacting sales volumes. Peat harvesting operations were also affected across Canada by the unfavourable weather and rising fuel costs, resulting in higher production costs and lower production volumes.
The adverse weather also had a significant effect on the first year of Virentia operations in the Life Sciences business group which ended up with a close-to-none alfalfa harvest, delaying the commercial launch of its product. Since then, the team of this business unit has implemented solutions that have almost eliminated the likelihood of such a situation from happening again. Had it not been for delays in the delivery of key equipment, these solutions would have even allowed reasonable volumes to go on the market during this fiscal year.
— The effects of inflation on the cost of components, as well as their availability, had a significant impact throughout the year. —
These various elements will still have an impact in the coming year, despite the efforts the teams have made as well as the strategies and actions they have implemented. Nonetheless, we expect the situation to stabilize, and even improve in some areas.
Our long-term view, though, remains unchanged in regards of our business groups’ potential — and their various market sectors — in light of our trends’ analysis supporting the demand for our commercial offerings.
We operate in diverse and promising industries highlighted by both the strong foundations of our long-standing business groups and the potential generated by our two newest groups: Premier Tech Digital and Premier Tech Life Sciences.
— We operate in diverse and promising industries highlighted by both the strong foundations of our long-standing business groups and the potential generated by our two newest groups. —
A strategic and forward-looking investment program
The portfolio of industries in which Premier Tech operates has always allowed us to face periods of unpredictable turbulence, while staying focused on the long-term.
This is why we were able to balance the short term and the long term throughout fiscal 2023. It also allowed us to continue investing in alignment with the objectives of VISION 2027, while balancing our actions to adapt to changing circumstances.
This led to $111 million in tangible fixed assets of which nearly $75 million were allocated to increase our manufacturing capacity, reduce our production costs and support the launch of new commercial offerings.
These investments became necessary as the organic growth experienced over the past five years — a 31% increase representing some $250 million — had almost entirely consumed the excess capacity of our 48 plants across 16 countries. $20 million have also been allocated to modernize our equipment inventory and to improve health and safety for production team members.
Two major projects in the United States
Premier Tech Systems and Automation completed two major projects in the United States: a significant expansion resulting in the construction of a new manufacturing site in Montgomery, Alabama — its new U.S. headquarters —, as well as the expansion of its manufacturing facility in Salt Lake City, Utah, which was relocated in a building bought and redesigned for its specific needs. These two sites were inaugurated in the spring of 2023, following an investment of $40 million for Montgomery and $15 million for Salt Lake City.
Expansion in New-Brunswick
Last year, Premier Tech Growers and Consumers focused a significant portion of its investments to add a perlite expansion facility in Rexton, New Brunswick. This $8 million investment is a strategic move to support the group’s growing media ambition for the American East Coast market. This investment will allow to optimize operational efficiency, effectively reduce costs and improve delivery timelines for its clients.
Increased capabilities in Europe
Some $9 million have been invested by Premier Tech Water and Environment to generate meaningful short to long-term impacts aiming to modernize and amplify the operational capabilities of several manufacturing facilities across Europe. These actions aligned to support the launch of new products in the marketplace for fiscal 2024.
Optimization of certain production processes
Our most recent addition, Premier Tech Life Sciences, invested $3 million to pivot part of Virentia’s production process from its factory to the harvesting zones. Not only does this increase productivity and brings operational savings, but it also reduces the exposure to varying climatic conditions on operations.
— This led to $111 million in tangible fixed assets of which nearly $75 million were allocated to increase our manufacturing capacity, reduce our production costs and support the launch of new commercial offerings. —
Over the past three fiscal years, more than $250 million have been invested to increase our manufacturing capacity, rejuvenate our property portfolio, improve health and safety, modernize our equipment fleet, and improve the Team Member Experience even further — both in our plants and offices.
This significant program aligns perfectly with our strategic plan VISION 2027, innovation planning, product launches, growth potential, as well as the business strategies we intend to put in place in the future.
Digital transformation of our operations for our future performance
At Premier Tech, digital transformation is at the forefront of how we envision our long-term profitable growth. With this in mind, we maintained our momentum toward our digital transformation by allocating significant resources to it.
The digitalization of many operations and the deployment of seamless, automated information pathways are pivotal to our business processes. These pathways encompass the entire customer journey, from initial contact to order placement, as well as our internal business and manufacturing processes, lifecycle management, and post-delivery customer relationship management.
Our focus is put on integrating these digital advancements throughout our operations, ensuring enhanced efficiency, improving customer experiences, and strengthening relationships from end to end. We invested a fair amount of energy and time to rethink and reorganize our information technology organizational structure in the past year.
We deployed an integrated technology architecture team supported by a global dedicated team for the management delivery of technological solutions aligned with the business needs of our groups and business units. The overarching objective is to expedite our deployment velocity and capitalize on synergistic opportunities, driving our digital transformation initiatives forward.
— The digitalization of many operations and the deployment of seamless, automated information pathways are pivotal to our business processes. —
Another element increasingly at the heart of our digital transformation is access to data. In today’s rapidly changing technological environment, relevant and real-time access to contextual and actionable data will enable Premier Tech to continue bringing innovative solutions and products to the market. It will also amplify and better position the value we bring to our clients.
It is by providing our teams — and those of our clients — with relevant contextual information in real time that we will be able to further deliver value, basing our decisions and actions on facts that foster a direct impact on performance.
Acquisitions and financial discipline
For a second consecutive year, the number of transactions was fairly less substantial compared to past years. This is largely attributable to market conditions, with a significantly lower than expected deal flow and persistently high valuation expectations.
Acquisitions are much more than a simple opportunity to be seized, they become platforms to accelerate our organic growth and increase the value we deliver to our clients. Therefore, every potential deal is considered through the lens of its long-term potential. Our objective is not to transform businesses to maximize a possible resale, but to integrate them into Premier Tech’s ecosystem for the long run.
It is through this methodical approach to execution and integration that we have been able to generate a profitable growth through time and create success stories around the 60 or so acquisitions of the past 25 years.
Each of our acquisitions is based on a rigorous election process and five well-established criteria for success.
Our entry criterion:
1. The integrated company is profitable and well positioned in its markets. Its leadership team also aspires to take it further and to create strong relationships with its clients.
Then we need at least one of the three following strategic criteria:
2. We can integrate or accelerate the development of a new technological platform or add key products and brands with potential to grow internationally.
3. We can integrate or accelerate the development of a new technological platform or add key products and brands with potential to grow internationally.
4. We can consolidate our supply chain, increase our manufacturing footprint or increase our market share.
Our exit criterion:
5. Under no circumstances can the integration slow down Premier Tech’s development and growth. If challenges arise, the situation must be contained and managed while still allowing for the pursuit of opportunities and investments brought forward by our other business groups.
Although fewer transactions than usual have been completed in the last two years, the ones completed were of real strategic importance for Premier Tech’s future.
Arima and its Syncrun™ software
Early in fiscal 2023, we integrated the Syncrun™ software to our digital product and service offering in smart manufacturing. It was made possible through the acquisition by Premier Tech Digital of Québec-based Arima and its powerful optimization engine for scheduling manufacturing operations
Northwoods Organics of Minnesota
At the same period, Premier Tech Growers and Consumers acquired the assets of Northwoods Organics of Minnesota, allowing to increase our U.S. production and bagging capacity while securing strategic peat reserves in North America.
The acquisition of the British firm Envirowise, finalized in May 2022 by Premier Tech Water and Environment, resulted in a heightened presence for the business group in England, facilitating the further deployment of its client solutions offerings across the United Kingdom.
Aligned with our approach to acquisitions, we maintained our focus in regards with valuation, remained patient and applied our usual financial discipline — we only move forward if it is for the long term. Our ambition remains unchanged in this regard: to make strategic acquisitions that generate organic growth, amplify the presence and the reach of our product brands, bring us geographically closer to our clients, and add technological platforms — all at the right time and at the right price.
— We maintained our focus in regards with valuation, remained patient and applied our usual financial discipline — we only move forward if it is for the long term. —
In it for the long run
Our efforts on sustainability continued to progress throughout the year as planned in VISION 2027. While our sustainability initiatives used to be the result of a more intuitive and organic approach, they are now part of an intentional drive that finds its roots in our promise, our Values and our Culture.
Through engaging in open and dynamic conversations with all stakeholders over the past 12 months, we have been able to define and firm-up our position and sustainability strategy for each of the impact areas we have chosen to prioritize.
This year, as Premier Tech celebrates its first century in a period of uncertain times, the sustainability of our actions and decisions brings further meaning. This is not the first time the company has gone through a period of uncertainty, and it will certainly not be the last.
However, the true difference lies within the team members — the team members of every business group around the world who have carried on over the past three turbulent years with tremendous dedication, agility, and resilience.
— This year, as Premier Tech celebrates its first century in a period of uncertain times, the sustainability of our actions and decisions brings further meaning. —
As fiscal 2024 is anticipated to be yet another year that demands focused and disciplined performance, we will continue to position ourselves for the future with confidence and assurance — determined to achieve our short- and long-term goals to deliver lasting impacts.
Until the external environment regains a certain level of stability, we will keep implementing the actions and strategies of VISION 2027 with coherence, balancing the short-term and the long-term in order to meet our strategic goals.
We trust that our teams will continue to deliver on Premier Tech’s promise — to make a difference and to support clients and partners in their successes with all the energy, commitment, and courage to lead they have demonstrated over the past few years.
Resolutely focused on the future and driven by Premier Tech’s rich history, this is how we will move forward in a relevant and sustainable way.
— Leadership Team