Supremex (SXP) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was CAD 69.4M, nearly flat year-over-year, with envelope segment down 3.7% and packaging up 6.7%.

• Adjusted EBITDA was CAD 7.9M (11.4% margin), down from CAD 11.7M (16.8%) last year.

• Net loss was CAD 23.0M due to a CAD 23.3M non-cash asset impairment, compared to net earnings of CAD 5.0M last year.

• Announced intention for a sale-leaseback of two properties (book value CAD 9M, appraised at CAD 57M) and a 25% dividend increase.

• Free cash flow generation remained strong, supporting debt reduction and share buybacks.

Financial highlights

• Q3 2024 revenue: CAD 69.4M vs. CAD 69.8M in Q3 2023; nine-month revenue: CAD 212.0M vs. CAD 229.9M.

• Envelope revenue declined to CAD 47.5M (down 3.7%) due to a 9.7% drop in average selling price, despite a 6.6% volume increase.

• Packaging and specialty products revenue rose to CAD 21.9M (up 6.7%), driven by e-commerce demand.

• Adjusted net earnings were CAD 1.0M (CAD 0.04–0.05 per share), down from CAD 4.0M (CAD 0.16 per share) last year.

• Free cash flow for Q3 was CAD 7.4M, down from CAD 11.6M in Q3 2023.

Outlook and guidance

• Management expects annual cost savings exceeding CAD 2M from Toronto facility consolidation and CAD 1.5M in Packaging.

• Healthy envelope backlog and improved packaging market fundamentals are expected to drive growth.

• Focus remains on optimizing efficiency, capacity utilization, and pursuing strategic acquisitions, mainly in Packaging.

• Financial position and cash flow remain strong, with net debt to Adjusted EBITDA ratio well below 2.0x.

• Market recovery is slower than expected, especially in key industries.