Supremex Announces Results for the Third Quarter of 2024 and Intention to Proceed With a Sale & Leaseback of Two Properties in Addition to Increase Quarterly Dividend by 25%
MONTREAL, Nov. 06, 2024 (GLOBE NEWSWIRE) -- Supremex Inc. ("Supremex" or the "Company") (TSX: SXP), a leading North American manufacturer and marketer of envelopes and a growing provider of paper-based packaging solutions, today announced its results for the third quarter ended September 30, 2024. The Company will hold a conference call to discuss these results tomorrow at 8:30 a.m. (Eastern Time).
Third Quarter Financial Highlights and Recent Events
Total revenue of $69.4 million, in line with to $69.8 million in the third quarter of 2023.
Envelope segment revenue down 3.7% to $47.5 million, from $49.3 million in the prior year.
Packaging and Specialty Products segment revenue of $21.9 million, up 6.7% from $20.5 million last year.
Non-cash asset impairment of $23.3 million, primarily goodwill in Packaging and Specialty Products.
Net loss of $23.0 million, compared to net earnings of $5.0 million last year.
Net loss per share of $0.92, versus net earnings per share of $0.19 a year ago.
Adjusted EBITDA1 of $7.9 million, or 11.4% of revenue, versus $11.7 million, or 16.8% of revenue, a year ago. Of this $3.8M variance, there is $1.5M attributable to DSU/PSU quarterly valuation.
Free cash flow1 of $7.4 million, compared to $11.6 million last year.
The Company announces its intention to proceed with a sale-leaseback transaction of two properties with a book value of $9 million and an appraised value of $57 million.
On November 6, 2024, the Board of Directors declared a quarterly dividend of $0.05, representing a 25% increase over the previous amount, per common share, payable on December 20, 2024, to shareholders of record at the close of business on December 5, 2024.
Financial Highlights (in thousands of dollars, except for per share amounts and margins)
Three-month periods ended September 30
Nine-month periods ended September 30
2024
2023
2024
2023
Statement of Earnings
Revenue
69,355
69,798
211,960
229,886
Operating (loss) earnings
(22,569
)
8,164
(12,901
)
27,006
Adjusted EBITDA(1)
7,933
11,730
27,414
40,133
Adjusted EBITDA margin(1)
11.4%
16.8%
12.9%
17.5%
Net (loss) earnings
(23,038
)
5,001
(17,562
)
16,610
Basic and diluted net (loss) earnings per share
(0.92
)
0.19
(0.70
)
0.64
Adjusted net earnings(1)
1,044
4,049
6,663
16,099
Adjusted net earnings per share(1)
0.04
0.16
0.27
0.62
Cash Flow
Net cash flows related to operating activities
7,568
11,538
22,886
29,085
Free cash flow(1)
7,369
11,646
23,022
24,857
(1)
Non-IFRS financial measures or ratios. Non-IFRS financial measures do not have standardized meanings prescribed by IFRS and therefore may not be comparable to similar measures presented by other entities. Refer to the non-IFRS financial measures section for definitions and reconciliations.
"Supremex' third quarter operating performance was driven by higher envelope volume and improving packaging markets, and although profitability was impacted by approximately $1.9 million of non-operating items, it remains below its true potential," said Stewart Emerson, President and CEO of Supremex. "As anticipated, envelope volumes continue to improve from the lows of 2023, and backlogs are stronger. However, the market continues to give back some of the pricing gains made in 2022 and profitability was also impacted by the temporary effect of our consolidation in the Greater Toronto Area, which is expected to yield important benefits going forward. In packaging, sales for e-commerce fulfillment remained solid and channels subject to discretionary consumer demand have improved, while increased profitability reflected greater efficiency from recent cost reduction and productivity initiatives and the benefits of improved absorption. Additionally, with a new senior leader steering our folding carton activities, we are confident that we will further leverage our high-quality assets, blue-chip customer base and dedicated employees. Based on a gradually improving market, efficiency and productivity gains, and the expectation of a substantial gain on the sale-leaseback transaction, the Board of Directors has decided to increase the dividend."
Summary of three-month period ended September 30, 2024
Revenue
Total revenue for the three-month period ended September 30, 2024, was $69.4 million, representing a decrease of $0.4 million, or 0.6%, from the equivalent quarter of 2023.
Envelope Segment
Revenue was $47.5 million, representing a decrease of $1.8 million, or 3.7%, from $49.3 million in the third quarter of 2023. The variation reflects an average selling price decrease of 9.7% from last year's third quarter primarily reflecting a less favourable customer and product mix in U.S. operations. This factor was partially offset by a 6.6% increase in the volume of units sold, reflecting greater penetration of the U.S. market and the contribution from the purchase of the Forest Envelope Group ("Forest Envelope") assets, as well as a favourable currency conversion effect. The Envelope segment represented 68.5% of the Company's revenue in the quarter, compared with 70.6% during the equivalent period of last year.
Packaging & Specialty Products Segment
Revenue was $21.9 million, up 6.7% from $20.5 million for the corresponding quarter of 2023. The increase is attributable to higher demand for e-commerce packaging solutions, while demand from certain sectors more closely correlated to economic conditions has stabilized compared to last year. Packaging & Specialty Products represented 31.5% of the Company's revenue in the quarter, versus 29.4% during the equivalent period of last year.
EBITDA2 and Adjusted EBITDA2
EBITDA was negative $17.5 million, versus $13.0 million in the third quarter of 2023, essentially due to an asset impairment charge. Adjusted EBITDA amounted to $7.9 million, compared to $11.7 million for the same period last year. The decrease reflects higher operating and selling, general and administrative expenses. The Adjusted EBITDA margin was 11.4% of revenue, compared to 16.8% in the equivalent quarter of 2023.
Envelope Segment
Adjusted EBITDA was $7.9 million, compared to $9.5 million in the third quarter of 2023. The decrease mainly reflects lower average selling prices resulting from a less favourable customer and product mix in U.S. operations. As a percentage of segmented revenue, Adjusted EBITDA from the Envelope segment was 16.7%, compared with 19.3% in the equivalent period of 2023.
Packaging & Specialty Products Segment
Adjusted EBITDA was $2.5 million, versus $1.7 million in the third quarter of 2023. This increase is mainly explained by benefits from optimization measures announced in October 2023. As a percentage of segmented revenue, Adjusted EBITDA for Packaging and Specialty Products was 11.3%, compared to 8.4% in the equivalent period of 2023.
Corporate and unallocated costs/recovery
Corporate and unallocated costs amounted to $2.5 million in the third quarter of 2024, as opposed to a recovery of $0.5 million in the third quarter of 2023. The variation is essentially attributable to an unfavourable adjustment related to the DSUs and PSUs during the quarter due to different share price fluctuations this year versus last year.
Net (Loss) Earnings, Adjusted Net Earnings3, Net (Loss) Earnings Per Share and Adjusted Net Earnings Per Share3
Net loss was $23.0 million, or net loss of $0.92 per share, for the three-month period ended September 30, 2024, compared to net earnings of $5.0 million, or net earnings of $0.19 per share, for the equivalent period last year.
Adjusted net earnings were $1.0 million, or $0.04 per share, for the three-month period ended September 30, 2024, compared to $4.0 million, or $0.16 per share, for the equivalent period last year.
Summary of nine-month period ended September 30, 2024
Revenue
Total revenue for the nine-month period ended September 30, 2024, was $212.0 million, representing a decrease of $17.9 million, or 7.8%, from the equivalent period of 2023.
Envelope Segment
Revenue was $150.4 million, representing a decrease of $12.6 million, or 7.7%, from $163.0 million for the same period in 2023. The decrease is attributable to an average selling price decrease of 5.9% from last year primarily reflecting a less favourable customer and product mix in U.S. operations, and to a 1.9% decrease in the volume of units sold. These factors were partially offset by the contribution from the Forest Envelope assets and a favourable currency conversion effect. Envelope represented 70.9% of the Company's revenue for the nine-month periods ended September 30, 2024, and 2023.
Packaging & Specialty Products Segment
Revenue was $61.6 million, down 7.9%, from $66.9 million in the corresponding period of 2023. The decrease reflects lower demand from certain sectors more closely correlated to economic conditions partially offset by higher demand for e-commerce packaging solutions. Packaging & Specialty Products represented 29.1% of the Company's revenue for the nine-month periods ended September 30, 2024, and 2023.
EBITDA4 and Adjusted EBITDA4
EBITDA was $1.8 million, versus $40.8 million in the first nine months of 2023, in part due to an asset impairment charge. Adjusted EBITDA was $27.4 million, down slightly from $40.1 million for the same period a year ago, reflecting lower revenue and higher selling, general and administrative expenses, partially offset by lower operating expenses. The Adjusted EBITDA margin was 12.9% in the first nine months of 2024, versus 17.5% in the corresponding period of 2023.
Envelope Segment
Adjusted EBITDA was $26.8 million, down from $36.4 million in the first nine months of 2023. This decrease reflects lower revenue due to a decrease in the average selling price and the effect of lower volume on the absorption of fixed costs. As a percentage of segmented revenue, Adjusted EBITDA from the Envelope segment was 17.9%, compared to 22.4% in the equivalent period of 2023.
Packaging & Specialty Products Segment
Adjusted EBITDA was $6.4 million, compared to $7.2 million in the first nine months of 2023. The decrease is due to lower demand from certain sectors more closely correlated to economic conditions in the first half of the year which impacted the absorption of fixed costs, partially offset by benefits from optimization measures announced in October 2023. As a percentage of segmented revenue, Adjusted EBITDA from the Packaging and Specialty Products segment was 10.4%, compared to 10.8% in the equivalent period of 2023.
Corporate and unallocated costs
Corporate and unallocated costs were $5.8 million compared to $3.5 million in the first nine months of 2023. The increase mainly reflects an unfavourable adjustment related to the DSUs and PSUs due to different share price fluctuations this year versus last year.
Net (Loss) Earnings, Adjusted Net Earnings5, Net (Loss) Earnings Per Share and Adjusted Net Earnings Per Share5
The net loss was $17.6 million, or net loss of $0.70 per share, for the nine-month period ended September 30, 2024, compared to net earnings of $16.6 million, or net earnings of $0.64 per share, for the equivalent period last year.
Adjusted net earnings amounted to $6.7 million, or $0.27 per share, for the nine-month period ended September 30, 2024, compared to $16.1 million, or $0.62 per share, for the equivalent period in 2023.
Liquidity and Capital Resources
Cash Flow
Net cash flows from operating activities were $7.6 million for the three-month period ended September 30, 2024, compared to $11.5 million for the same period in 2023. The decrease is attributable to lower profitability this quarter compared to the equivalent period of 2023, partially offset by a higher cash generation from working capital.
For the nine-month period ended September 30, 2024, net cash flows from operating activities reached $22.9 million, compared to $29.1 million in the equivalent period of 2023. The decrease is mainly attributable to lower profitability, partially offset by a cash generation from working capital, as opposed to a cash requirement last year.
Free cash flow6 amounted to $7.4 million in the third quarter of 2024 compared to $11.6 million for the same period last year. The decrease essentially mirrors the variation in cash flows related to operating activities.
Free cash flow amounted to $23.0 million in the nine-month period ended September 30, 2024, compared to $24.9 million for the corresponding period of 2023. The decrease is attributable to lower cash flows from operating activities, partially offset by net disposals of property, plant and equipment this year, as opposed to net additions last year.
Debt and Leverage
Total debt decreased to $49.6 million as at September 30, 2024, compared to $56.8 million as at December ...
