colabor 1st qtrHighlights Sales trends were in line with expectations, with distribution showing resiliency despite a difficult macro environment.
Distribution activities posted a 0.7% yoy sales increase as higher volume, inflation and M&A more than offset macro headwinds impacting the restaurant and retail industries.
In our view, this underscores the benefits of growth initiatives and customer diversification (eg institutional sector).
Meanwhile, the wholesale business (which sells products to small distributors) declined 8.4% yoy, reflecting heavier exposure to the restaurant sector.
Profitability exceeded our expectations. An improved business mix contributed to a 4.6% yoy increase in adjusted EBITDA to C$9.7m (6.0% margin), which was ahead of our forecast of C$8.8m (5.5% margin).
Capex and leverage were both down. Cash flow from operations was C$5.0m and, as expected, capex was very low (C$0.5m) as Colabor is coming off a major investment cycle. This contributed to leverage reduction to 2.1x from 2.3x last quarter.
Encouraging update on pillars that support the expansion into western Qubec. As highlighted in our initiation report, the next step of the strategic plan is to take a bite out of the Greater Montral Area and the rest of western Qubec—a new territory that triples the size of Colabor’s addressable market. Colabor started serving distribution customers from its new Saint-Bruno facility in 2Q24 and is gaining market share. We view the company as well-positioned to seize opportunities related to its territory development initiative.