Supremex Inc T.SXP

Q3 2021 Results

[Betteryear2]

MONTREAL, Nov. 12, 2021 /CNW Telbec/ - 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, 2021. The Company will hold a conference call to discuss these results, today at 11:00 a.m. (Eastern Time).

Third Quarter Financial Highlights and Recent Events

• Total revenue increased by 9.9% to $54.8 million, from $49.9 million in the third quarter of 2020.
• Envelope segment revenue was up 8.5% to $37.0 million, from $34.1 million in the third quarter of 2020.
• Packaging and specialty products segment revenue increased by 12.8% to $17.8 million, from $15.8 million in the third quarter of 2020.
• EBITDA1 at $8.7 million, up 8.0%, from $8.1 million in the third quarter of 2020.
• Net Earnings at $3.4 million (or $0.12 per share), up from $2.7 million (or $0.10 per share) in the third quarter of 2020.
• The Company renewed its Normal Course Issuer Bid ("NCIB") over a maximum period of 12 months beginning on August 31, 2021 and ending on August 30, 2022.
• Purchased 292,400 shares for total consideration of $0.7 million as part of the Company's NCIB program.
• The Company entered into series of annuity buy-out transactions in order to reduce the risk profile associated with its defined benefit pension plans.
• Appointed Joe Baglione to the newly created position of President, Envelope, effective November 15, 2021.
• Appointed Leslie Sutherland to the newly created position of Vice President, People & Culture, effective November 1, 2021.

"We are very pleased with our third quarter performance which included strong sales growth in both segments and the seventh consecutive quarter of year-over-year improvement in adjusted EBITDA. We achieved these results in spite of a negative currency conversion, an extremely tight supply chain for all paper grades and rapidly escalating costs across the board. This is a testament to our product and geographic diversification, the resilience of our business model and a commitment to passing through inflation," said Stewart Emerson, President & CEO of Supremex.

"Operationally, the integration of Vista Graphic Communications is on track and the new equipment has arrived and is in the process of commissioning. Once complete, this will provide our e-Commerce team with much needed capacity in local US markets in addition to improved efficiencies. Furthermore, to position ourselves for the future, we strengthened our management bench by creating two new senior executive roles namely, President, Envelope and Vice President, People & Culture. These two important roles will immediately support our growth efforts."

 

 

[divime1]

Solid results but we won't be seeing a dividend for a long time . "  In the second quarter of 2022, the Company will move its folding carton plant in Town Mount Royal, Quebec to an alternative location necessitated by the expropriation of its current facility for the Royalmount project. The Company will incur one-time costs for the move, which will be largely recorded

[shareholders1]

At $2.50 per share: Market cap plus debt /  Annualized Q3 cashflow from operations  is about 4.4 times, implying 22.7% yield. ( $2.50 x 26,714,069 shares  + 51,509,000 ) / (6,694,995 x 4) = 4.4

[screamer99]

They'll also need to continue paying down the debt so I think a substantial dividend is a few years away.  They've used some cash to invest in inventories, repurchased shares and paid down debt and they still have an increasing cash balance quarter over quarter which is impressive. I wonder how much the new rent will be. On solid financial footing.  If they're going to

[HermannHaller]

They have 12 facilities in Canada, and three in the US...and you think they can't pay a dividend for a long time because rent is going to be higher for one location?

[divime1]

The increased rent isn't a big problem . The big expense will be the moving and the loss of production while it's taking place . This isn't like moving a buddy into a new apartment on the weekend . My personal opinion is we will never see a dividend again because I expect SXP will either be taken out or go private . Their buying back shares at the current rate points to management

[bucheroncapital]

Good realistic point i Agree 100%

[Capharnaum]

I think the key line in the news release that explains why we won't see dividends is this one: "In order to achieve its pivot to packaging objective, with 50% of sales generated in the Packaging segment by 2025, Supremex is ramping up its search for strategic acquisitions." Imo, to expand the packaging portion is very important and I'm happy to see them put their money towards

[bucheroncapital]

I Love the wording it's proper allocation of capital !  We will see 3,50$ in 2022 !!!

[Jambalaya54]

Big deal, they were already at $3.50 on March 17th, 2019 while providing a healthy dividend to their shareholders! At that time their financial results were nowhere close to what they have been over the last four or five quarters? Yeah I know, 2 1/2 years later and they still blame it on the pandemic. Underperformer.

[bucheroncapital]

Agreed but at the price I got in it's a hell of a deal 

[screamer99]

Privatization wouldn't be a surprise.  I stay up at night wondering what that price would be.  I'll lose it if they come out with the standard "the offer price represents a 30% premium over the average SP of the last 30 trading days". A bit of an odd scenario though - using the Company's (our) money to repurchase shares for the benefit of a select group?  What

[Capharnaum]

Any privatization would require the votes of shareholders. While there are some weak hands selling at these cheap price, I do believe they would need to make an offer closer to $4 for the acquisition to pass.

[shareholders1]

Scremer wrote: "A bit of an odd scenario though - using the Company's (our) money to repurchase shares for the benefit of a select group?  What can you do?" Perhaps I have misunderstoopd the point. If true value is say 54m higher than current market cap (or say about $2 per share), in theory you want SXP to buy back lots and lots of shares. For every share bought at back at $2

[screamer99]

I agree.  In a privatization scenario though, with the Trust holding a fixed amount of shares, the reduction of the float through repurchases would mean fewer shares (and a fewer % of total) to purchase from parties other than the Trust.  Effectively, what I'm say is that the privatization is somewhat happening now, but with "our" money.

[shareholders1]

Whenever there are buy backs for any company, it is "our money" used to increase "our %". The distinction with SXP is that there is an existing 20% + holder. But there are many situations having buy backs and a large holder. 1. You can consider if the Trust will go for 100%. They are not a strategic buyer, so could not pay top $, but they would pay more than 2.60 presumably

[CougerMilk]

can shareholders hold the private company liable if it turns out the management was in a conflict (eg through a buyback designed to facilitate a buyout below fair value)?

[shareholders1]

Perhaps, but the chances of winning such a fight are extremely low. Plus, shares acquired would be acquired pursuant to rules applicable to both corp buy backs, and rules affecting purchases by 20% holders (15% premuim limit etc). Their defence would be all rules were followed. It the Trust offered say just $3 for the approx 77% (need to check 77%) it does not own,  and sufficient shares