Supremex (SXP) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was CAD 69.3 million, down 3.3% year-over-year, with Envelope revenue up 0.4% to CAD 49.5 million and Packaging revenue down 11.4% to CAD 19.9 million.

• Adjusted EBITDA was CAD 9 million (13.0% margin), compared to CAD 9.6 million (13.3%) last year.

• Net earnings were CAD 2 million (CAD 0.08 per share), nearly flat year-over-year.

• Free cash flow increased to CAD 10.9 million, supporting debt reduction and share repurchases.

• Announced optimization initiatives in Envelope operations expected to yield annual cost savings over CAD 2 million.

Financial highlights

• Total revenues were CAD 69.3 million, down 3.3% year-over-year.

• Envelope revenue rose 0.4% to CAD 49.5 million, with an 8.4%–9.8% volume increase offset by a 7.4%–8.5% drop in average selling price.

• Packaging and specialty products revenue was CAD 19.9 million, down from CAD 22.4 million last year.

• Adjusted EBITDA margin for Envelope was 16.2% (down from 19.6%); Packaging margin improved to 13.7% (from 7.4%).

• Free cash flow for Q2 2024 was CAD 10.9 million, up from CAD 9.8 million in Q2 2023.

Outlook and guidance

• Demand is gradually returning but recovery is slower than anticipated due to high interest rates and inflation.

• Optimization initiatives in Envelope and Packaging segments are expected to deliver annual cost savings of CAD 2 million and CAD 1.5 million, respectively.

• Focus remains on efficiency, productivity, and capturing synergies from acquisitions, with continued pursuit of strategic M&A in Packaging.

• Backlogs are strong for Q3 and Q4, indicating a positive second half.

• Expecting to produce more envelopes in 2025 than 2024, with improved utilization and lower fixed costs.