MONTREAL, May 9, 2018 /CNW Telbec/ - Supremex Inc. ("Supremex" or the "Company") (TSX: SXP), a leading North American manufacturer and marketer of envelopes and a growing provider of packaging and specialty products, today announced its results for the first quarter ended March 31, 2018, and declared a regular quarterly dividend.
First Quarter 2018 Highlights and Recent Events
- Acquired Groupe Deux Printing Inc. and its related company Pharmaflex Labels Inc. on April 30, 2018, a leading manufacturer of premium quality folding carton packaging and labels primarily for the pharmaceutical industry. The transaction was concluded for cash consideration of $11.25 million on a cash-free and debt-free basis.
- Revenue increased by 8.4% year-over-year, to $48.9 million from $45.2 million.
- Adjusted EBITDA1 decreased by 3.9% to $6.6 million, compared with $6.9 million.
- Net Earnings decreased by 18.0%, to 3.3 million (or $0.12 per share) compared with $4.1 million(or $0.14 per share).
- Adjusted Net Earnings2 decreased by 11.7%, to $3.6 million (or $0.13 per share) compared with $4.1 million (or $0.14 per share).
- Maintained strong financial flexibility with a net indebtedness to Adjusted EBITDA1 ratio of 1.5 times.
- Approved a quarterly dividend of $0.065 per share, equivalent to the last quarter and up 8.3% year-over-year.
- Appointed Guy Prenevost as Chief Financial Officer and Corporate Secretary.
- Announced the nomination of Nicole Boivin and Steven P. Richardson to the Board of Directors upon their election at Company's upcoming Annual General Meeting to be held on May 9, 2018.
"Revenues increased by 8.4% during the first quarter resulting from our continued diversification into the packaging market. Although the secular decline in the Canadian envelope market continued to weigh on our first quarter results, we expect the additional contribution from our recently announced acquisition of folding carton manufacturer Groupe Deux Printing Inc., to further compensate for the decline in our legacy business, said Stewart Emerson, President & CEO of Supremex. "We are well positioned to further grow in diversified markets. On a pro-forma basis, 30% of our revenues are coming from packaging. We will continue to make ongoing investments in capacity to meet the expected demand".
"Our operations continue to generate strong cash flows, which is providing the opportunity to continue returning value to our shareholders while executing our growth and diversification strategy. And as always, we continue to prudently manage cash flow while maintaining low-leverage." concluded Mr. Emerson.
Summary of the three-month period ended March 31, 2018
Revenue for the three-month period ended March 31, 2018, increased by 8.4% reaching $48.9 millionprimarily from the contribution of Stuart Packaging Inc. ("Stuart Packaging") acquired in July 2017 as part of the Company's strategy to diversify into the packaging market.
Revenue from the Canadian envelope market was at $25.9 million, a decrease of 7.8% attributable to a reduction in volume of 9.6%, which was partially compensated by an increase in average selling prices of 2.1%. The decline in volume primarily results from the industry-wide secular decline (Canada Post Transactional Mail volume was down 5.5% during the year ended December 31, 20173), and from the effects of timing and ebbs and flows on customer movement.
Revenue from the U.S. envelope market was at $10.1 million, a decrease of 7.5% attributable to a reduction in the volume of units sold of 7.8%, combined with an increase in average selling prices of less than 1.0% from the strength of the Canadian dollar during the period. The reduction in volume of sales results from a combination of timing of sales and loss of volume with an existing customer. The U.S. envelope market remains highly competitive and continues to feel the effects of an oversupplied environment. Management remains confident that it is ideally positioned to benefit from these ongoing structural issues in the longer term.
Revenue from packaging products amounted to $12.9 million, an increase of 111.5% or $6.8 millioncompared to the prior year, primarily from the contribution of the acquisition of Stuart Packaging, and continued growth in the Company's e-commerce packaging business.
Adjusted EBITDA was at $6.6 million, compared with $6.9 million in the first quarter of 2017, a decrease of $0.3 million or 3.9%. Although folding carton packaging operations from the acquisition of Stuart Packaging were strong contributors to EBITDA in the quarter, it did not fully compensate the effects of the secular decline in the legacy envelope business and the pressures of inflationary paper prices. An EBITDA loss of $0.1 million attributable to the non-core operations of Printer Gateway was recorded in the first quarter of 2018 compared to $0.3 million in the comparative period of 2017. In the first quarter of 2018, Adjusted EBITDA margins stood at 13.6% of revenues compared with 15.3% in the equivalent quarter of 2017.
Adjusted net earnings were at $3.6 million (or $0.13 per share) for the three-month period ended March 31, 2018, compared with $4.1 million (or $0.14 per share) for the equivalent period in 2017.
Operating activities generated cash of $3.2 million compared with $0.8 million during the same period in 2017.
Declaration of Dividend
On May 8, 2018, the Board of Directors declared a quarterly dividend of $0.065 per common share, payable on July 17, 2018, to the shareholders of record at the close of business on June 29, 2018. This dividend is designated as an "eligible" dividend for the purpose of the Income Tax Act (Canada) and any similar provincial legislation.
Execution of Normal Course Issuer Bid ("NCIB")
On August 1, 2017, the Company announced the renewal of its Normal Course Issuer Bid after its approval by the TSX, to purchase for cancellation, up to 500,000 of its common shares, representing approximately 1.75% of its 28,482,611 issued and outstanding common shares as of July 31, 2017, for a period of twelve months, ending on August 2, 2018. During the first quarter of 2018, the Company did not purchase common shares for cancellation under the NCIB program. Since its renewal on August 1, 2017, the Company purchased a total of 77,142 common shares for cancellation under its existing NCIB program, for a total consideration of $317,032.
