GuruFocus -
- Total (EPA:TTEF) Revenue: $69.4 million, slightly down from $69.8 million last year.
- Envelope Revenue: $47.5 million, down from $49.3 million last year.
- Packaging and Specialty Products Revenue: $21.9 million, up from $20.5 million last year.
- Adjusted EBITDA: $7.9 million or 11.4% of sales, compared to $11.7 million or 16.8% of sales last year.
- Envelope Segment Adjusted EBITDA: $7.9 million or 16.7% of sales, down from $9.5 million or 19.3% of sales last year.
- Packaging and Specialty Segments Adjusted EBITDA: $2.5 million or 11.3% of sales, up from $1.7 million or 8.4% of sales last year.
- Net Loss: $22 million or $0.92 per share, compared to net earnings of $5 million or $0.19 per share last year.
- Adjusted Net Earnings: $1 million or $0.04 per share, down from $4 million or $0.16 per share last year.
- Net Cash Flows from Operating Activities: $7.6 million, down from $11.5 million last year.
- Free Cash Flow: $7.4 million, with over $38 million generated in the last 12 months.
- Net Debt: $46.2 million as of September 30, 2024, reduced by over $4 million in the last three months.
- Dividend Increase: Quarterly dividend increased by 25% to $0.05 per common share.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Supremex Inc (SUMXF) reported a solid free cash flow generation, enabling further debt reduction and share buybacks.
- The company's envelope volume increased year-over-year for the second consecutive quarter, indicating a recovery in market conditions.
- Supremex Inc (SUMXF) achieved higher sales and profitability in its packaging segment due to improved market conditions and internal efficiencies.
- The company successfully integrated the Forest Envelope acquisition, contributing to volume gains in the US market.
- Supremex Inc (SUMXF) plans a sale-leaseback transaction to unlock significant value from its real estate assets, potentially strengthening its balance sheet.
- Envelope revenue decreased year-over-year due to lower average selling prices, despite volume gains.
- The company faced temporary production disruptions due to facility consolidation in Toronto, impacting potential revenue.
- Adjusted EBITDA margin for the envelope segment decreased compared to the previous year, reflecting pricing pressures in the US market.
- Supremex Inc (SUMXF) recorded an asset impairment charge of $23.3 million, primarily affecting the packaging segment's goodwill.
- Net losses were reported at $22 million, a significant decline from net earnings of $5 million in the previous year.
A: The health and beauty segment has been lagging due to the impact of inflation and interest rates on discretionary spending. However, we are seeing improvements, and our revenue from this segment has increased significantly. The e-commerce growth is primarily from new customer gains rather than existing customer growth.
Q: What is driving the strong volume growth in the US envelope business?
A: The new Director of US Sales has been instrumental in unifying the team and driving sales. Additionally, the market itself is recovering from the artificial highs of 2022 and lows of 2023. Direct mailers are returning to the market, supported by renewed postal service incentives.
Q: Are you comfortable with your operational footprint following recent optimization efforts?
A: Yes and no. While we have optimized our packaging operations following an acquisition, there is still room for further optimization if necessary. On the envelope side, the Toronto consolidation was planned to maximize utilization. Our current footprint is optimized, but we can make further adjustments if needed.
Q: Can you provide more details on the sale-leaseback transaction of your properties?
A: We plan to initiate a sale-leaseback process for two facilities in LaSalle, Quebec, and Etobicoke, Ontario. The net book value is approximately $9 million, with an appraised value of $57 million. This transaction is expected to unlock significant value not fully recognized by the market.
Q: How are you addressing the challenges in the health and beauty segment?
A: We are maintaining steady forecasts from customers and expect improvements as discretionary spending stabilizes. Our strategy includes leveraging new customer gains and expanding our e-commerce capabilities to offset challenges in traditional segments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.