PREMIUM BRANDS HOLDINGS CORPORATION REPORTS RECORD THIRD QUARTER SALES AND ADJUSTED EBITDA, ANNOUNCES TWO ASSET SALES AND DECLARES FOURTH QUARTER DIVIDEND
VANCOUVER, BC, Nov. 6, 2024 /CNW/ - Premium Brands Holdings Corporation (TSX:PBH), a leading producer, marketer and distributor of branded specialty food products, announced today its results for the third quarter of 2024.
THIRD QUARTER HIGHLIGHTS
Record third quarter revenue of $1.67 billion representing a 1.3%, or $22.0 million, increase as compared to the third quarter of 2023
Solid progress on Specialty Foods' core U.S. growth initiatives in protein and baked goods, which for the quarter generated organic volume growth rates of 7.8% and 25.3%, respectively. Specialty Foods' U.S. growth initiatives in sandwiches were impacted by consumer demand related challenges faced by a major foodservice customer
Record third quarter adjusted EBITDA1 of $159.4 million representing a 0.4%, or $0.6 million, increase as compared to the third quarter of 2023
Third quarter adjusted EPS1 of $1.11 per share representing a 12.6%, or $0.16 per share, decrease as compared to the third quarter of 2023
Declared a dividend of $0.85 per common share for the fourth quarter of 2024
Announced the sale of a redundant vacant property for $26.0 million, which is expected to close in the fourth quarter of 2024
Announced the signing of a non-binding letter of intent to sell and lease back a recently expanded production facility located in the State of Washington for US$68.0 million or approximately CA$92.5 million
1
The Company reports its financial results in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. Adjusted EBITDA and adjusted EPS are non-IFRS financial measures. Reconciliations and explanations for all non-IFRS measures are included in the Non-IFRS Financial Measures section of this press release.
QUESTIONS AND ANSWERS SESSION
The Company will hold a Q&A session on its third quarter 2024 results today at 10:30 a.m. Vancouver time (1:30 p.m. Toronto time). Management's pre-recorded remarks and an investor presentation that will be referenced on the conference call are available here or by navigating through the Company's website at www.premiumbrandsholdings.com.
Access to the Q&A session may be obtained by calling the operator at (289) 514-5100 or (800) 717-1738 (Conference ID: 98593) up to ten minutes prior to the scheduled start time. For those who are unable to participate, a recording of the conference call will be available through to 11:59 p.m. Toronto time on December 6, 2024 at (289) 819-1325 or (888) 660-6264 (passcode: 98593#). Alternatively, a recording of the conference call will be available on the Company's website at www.premiumbrandsholdings.com.
SUMMARY FINANCIAL INFORMATION(In millions of dollars except per share amounts and ratios)
13 weeks
ended
Sep 28,
2024
13 weeks
ended
Sep 30,
2023
39 weeks
ended
Sep 28,
2024
39 weeks
ended
Sep 30,
2023
Revenue
1,666.9
1,644.9
4,831.4
4,706.3
Adjusted EBITDA1
159.4
158.8
445.0
421.9
Earnings
25.4
39.4
84.2
79.2
EPS
0.57
0.89
1.90
1.78
Adjusted earnings1
49.4
56.4
130.3
141.3
Adjusted EPS1
1.11
1.27
2.93
3.18
Trailing Four Quarters Ended
Sep 28,
2024
Dec 30,
2023
Free cash flow1
250.2
253.0
Free cash flow per share
5.64
5.70
Declared dividends
148.1
137.5
Declared dividend per share
3.32
3.08
Payout ratio1
59.2 %
54.3 %
1 Reconciliations for all non-IFRS measures are included in the Non-IFRS Financial Measures section of this press release.
"Despite temporary headwinds faced by our Sandwich group in the quarter, we remain on course and continue to make steady progress towards achieving our short and long-term strategic objectives," said Mr. George Paleologou, President and CEO.
"Our results for the third quarter were generally in line with our expectations except for a material shortfall in sales to a key customer of our Sandwich group. We believe that this challenge is temporary, and sales to this customer will recover and eventually return to their historic growth rates," added Mr. Paleologou.
"Our Specialty Foods segment's other U.S. business development initiatives are progressing well with our Protein and Bakery groups both generating solid organic volume growth rates in the quarter. Correspondingly, our major U.S. sales initiatives in total generated record third quarter sales of just over $600 million and an organic volume growth rate, after normalizing for the impact of the Sandwich group's sales to its major foodservice customer, of over 8%.
"With many of our Sandwich, Protein and Bakery groups' major U.S. capacity expansion projects either complete or nearing completion, and their combined pipelines of actively pursued U.S. sales opportunities now exceeding $1.4 billion, we are well positioned to accelerate our organic volume growth rate and expand our operating margin in the coming quarters," added Mr. Paleologou.
"Both our Specialty Foods segment's Canadian operations and our Premium Food Distribution segment generated solid progress in recovering from the impacts of a weaker consumer environment. Specialty Foods' Canadian operations generated positive organic volume growth after contracting last quarter and Premium Food Distribution generated positive organic growth after five quarters of contraction. We expect this trend to continue as moderating interest and inflation rates help strengthen the consumer backdrop in Canada.
"Our acquisition pipeline remains full and we expect to close several transactions this quarter. The combination of these transactions, our robust sales pipeline and the generally higher growth rates associated with the product categories we are focused on, provides a clear path to achieving our 2027 targets of $10 billion in sales and a minimum adjusted EBITDA margin of 10%," added Mr. Paleologou.
FOURTH QUARTER 2024 DIVIDEND
The Company also announced that its Board of Directors approved a cash dividend of $0.85 per common share for the fourth quarter of 2024, which will be payable on January 15, 2025 to shareholders of record at the close of business on December 31, 2024.
Unless indicated otherwise in writing at or before the time the dividend is paid, each dividend paid by the Company in 2024 or a subsequent year is an eligible dividend for the purposes of the Enhanced Dividend Tax Credit System.
ABOUT PREMIUM BRANDS
Premium Brands owns a broad range of leading specialty food manufacturing and differentiated food distribution businesses with operations across Canada and the United States.
www.premiumbrandsholdings.com
RESULTS OF OPERATIONS
The Company reports on two reportable segments, Specialty Foods and Premium Food Distribution, as well as non-segmented investment income and corporate costs (Corporate). The Specialty Foods segment consists of the Company's specialty food manufacturing businesses while the Premium Food Distribution segment consists of the Company's differentiated distribution and wholesale businesses as well as certain seafood processing businesses. Investment income includes interest and management fees generated from the Company's businesses that are accounted for using the equity method.
Revenue
(in millions of dollars except percentages)
13 weeks ended
Sep 28, 2024
%
(1)
13 weeks ended
Sep 30, 2023
%
(1)
39 weeks ended
Sep 28, 2024
%
(1)
39 weeks ended
Sep 30, 2023
%
(1)
Revenue by segment:
Specialty Foods
1,067.3
64.0 %
1,058.0
64.3 %
3,206.5
66.4 %
3,091.8
65.7 %
Premium Food Distribution
599.6
36.0 %
586.9
35.7 %
1,624.9
33.6 %
1,614.5
34.3 %
Consolidated
1,666.9
100.0 %
1,644.9
100.0 %
4,831.4
100.0 %
4,706.3
100.0 %
(1) Expressed as a percentage of consolidated revenue.
Specialty Foods' (SF) revenue for the quarter increased by $9.3 million or 0.9% primarily due to: (i) selling price increases of $8.4 million, which were put into place to address rising chicken, beef and egg costs; and (ii) a $6.7 million increase in the translated value of sales generated by SF's U.S. based businesses due to a weaker Canadian dollar. These factors were partially offset by: (i) a sales volume contraction of $4.0 million or 0.4%; and (ii) the shutdown of SF's Creekside Custom Foods business as its capacity is transitioned to support the growth of SF's Global Gourmet kettle business, this resulted in $1.8 million of lost sales, primarily in the fresh sandwich category.
The contraction in SF's sales volume was due to a decline in sales to a major foodservice customer resulting from reduced consumer spending in the customer's stores in general, and on food in particular. Excluding the impact of this customer, SF's organic volume growth rate (OVGR) was 2.3%, which was driven by: (i) other core U.S. sales growth initiatives in sandwiches, protein and baked goods, which generated an OVGR of 8.1%; and (ii) the stabilization of its Canadian sales, which grew at an OVGR of 0.6% versus a contraction of 1.4% in the previous quarter. These factors were partially offset by: (i) reduced jerky product sales due to weaker consumer spending, increased selling prices resulting from high beef commodity input costs and a change by a customer in the seasonal rotation of a relatively high volume product; (ii) a temporary pullback in SF's growth rate in the U.S. market due to several new major product launches being delayed to 2025 because of longer than expected customer on-boarding timelines; and (iii) generally weaker consumer spending in the foodservice and convenience store channels.
SF's revenue for the first three quarters of 2024 increased by $114.7 million or 3.7% primarily due to: (i) organic volume growth of $111.4 million representing an organic volume growth rate (OVGR) of 3.6%; and (ii) a $15.4 million increase in the translated value of sales generated by SF's U.S. based businesses due to a weaker Canadian dollar. These factors were partially offset by: (i) selling price deflation of $6.7 million; and (ii) the shutdown of SF's Creekside Custom Foods business that resulted in $5.4 million of lost sales.
Premium Food Distribution's (PFD) revenue for the quarter increased by $12.7 million or 2.2% due to: (i) selling price inflation of $21.4 million relating to lobster products and to a lesser extent beef products; (ii) business acquisitions, which generated $7.3 million in growth; and (iii) a $1.1 million increase in the translated value of sales generated by PFD's U.S. based businesses due to a weaker Canadian dollar. These factors were partially offset by a sales volume contraction of $17.1 million.
The contraction in PFD's sales volume was primarily due to lower lobster product sales resulting from: (i) less promotion of live lobsters by retailers caused by a high pricing environment; and (ii) reduced exports of live lobsters to China and processed lobster products to Europe due to weaker consumer spending environments.
PFD's revenue for the first three quarters of 2024 increased by $10.4 million or 0.6% primarily due to (i) selling price inflation of $45.4 million relating primarily to lobster and beef products; (ii) business acquisitions, which generated $17.7 million in growth; and (iii) a $2.0 million increase in the translated value of sales generated by PFD's U.S. based businesses due to a weaker Canadian dollar. These factors were partially offset by a sales volume contraction of $54.7 million.
Gross Profit
(in millions of dollars except percentages)
13 weeks ended
Sep 28, 2024
%
(1)
13 weeks ended
Sep 30, 2023
%
(1)
39 weeks ended
Sep 28, 2024
%
(1)
39 weeks ended
Sep 30, 2023
%
(1)
Gross profit by segment:
Specialty Foods
234.1
21.9 %
235.9
22.3 %
712.2
22.2 %
671.5
21.7 %
Premium Food Distribution
90.5
15.1 %
84.1
14.3 %
259.9
16.0 %
241.7
15.0 %
Consolidated
324.6
19.5 %
320.0
19.5 %
972.1
20.1 %
913.2
19.4 %
(1) Expressed as a percentage of the corresponding segment's revenue.
SF's gross profit as a percentage of its revenue (gross margin) for the quarter decreased by 40 basis points primarily due to: (i) higher chicken and beef raw material costs; and (ii) additional plant overhead costs associated with new production capacity being brought online. These factors were partially offset by production efficiency improvements.
SF's gross margin for the first three quarters of 2024 increased by 50 basis points primarily due to the impact of improved production efficiencies and sales leveraging benefits associated with SF's sales growth more than offsetting: (i) additional plant overhead costs associated with new production capacity being brought online; and (ii) the third quarter impact of higher chicken and beef raw material costs.
PFD's gross margin for the quarter and for the first three quarters of 2024 increased by 80 basis points and 100 basis points, respectively, primarily due to: (i) higher margins on processed lobster, resulting from favorable inventory positions; and (ii) lower warehousing and production overhead costs associated with cost savings initiatives and higher inventory levels.
Selling, General and Administrative Expenses (SG&A)
(in millions of dollars except percentages)
13 weeks ended
Sep 28, 2024
%
(1)
13 weeks ended
Sep 30, 2023
%
(1)
39 weeks ended
Sep 28, 2024
%
(1)
39 weeks ended
Sep 30, 2023
%
(1)
SG&A by segment:
Specialty Foods
122.0
11.4 %
119.9
11.3 %
385.6
12.0 %
364.5
11.8 %
Premium Food Distribution
49.0
8.2 %
48.3
8.2 %
153.6
9.5 %
147.9
9.2 %
Corporate
7.6
8.4
27.3
24.5
Consolidated
178.6
10.7 %
176.6
10.7 %
566.5
11.7 %
536.9
11.4 %
(1) Expressed as a percentage of the corresponding segment's revenue.
SF's SG&A as a percentage of sales (SG&A ratio) for the quarter and for the first three quarters of 2024 was relatively stable as: (i) higher outside storage costs, which were mostly the result of providing a major customer with additional services, the cost of which is recovered through increased selling prices on applicable products; and (ii) wage inflation, which was mostly offset by lower discretionary compensation accruals in the quarter.
PFD's SG&A ratio for the quarter was stable as the impact of lower discretionary compensation accruals was offset by wage and general cost inflation.
PFD's SG&A ratio for the first three quarters of 2024 increased by 30 basis points primarily due to wage inflation and higher freight costs associated with some of PFD's new sales initiatives.
Adjusted EBITDA (1)
(in millions of dollars except percentages)
13 weeks ended
Sep 28, 2024
%
(2)
13 weeks ended
Sep 30, 2023
%
(2)
39 weeksended
Sep 28, 2024
%
(2)
39 weeks ended
Sep 30, 2023
%
(2)
Adjusted EBITDA by segment:
Specialty Foods
112.1
10.5 %
116.0
11.0 %
326.6
10.2 %
307.0
9.9 %
Premium Food Distribution
41.5
6.9 %
35.8
6.1 %
106.3
