PREMIUM BRANDS HOLDINGS CORPORATION REPORTS RECORD FIRST QUARTER RESULTS AND DECLARES SECOND QUARTER DIVIDEND

VANCOUVER, BC, May 6, 2022 /CNW/ - Premium Brands Holdings Corporation (TSX: PBH), a leading producer, marketer and distributor of branded specialty food products, announced today its results for the first quarter of 2022.

FIRST QUARTER HIGHLIGHTS

• Record first quarter revenue of $1.25 billion representing a 23.9%, or $241.4 million, increase as compared to the first quarter of 2021
• Record first quarter adjusted EBITDA1 of $95.8 million representing a 16.1%, or $13.3 million, increase as compared to the first quarter of 2021
• Record first quarter adjusted EPS1 of $0.88 per share representing a 22.2%, or $0.16 per share increase as compared to the first quarter of 2021
• Clearwater Seafoods, which is accounted for using the equity method, continued to generate significantly improved results with its sales and adjusted EBITDA for the quarter increasing by 28.9% and 25.9%, respectively
• The Company declared a dividend $0.70 per share for the second quarter of 2022
• Sales and adjusted EBITDA guidance for 2022 was reaffirmed

CONFERENCE CALL

The Company will hold a conference call to discuss its first quarter 2022 results today at 10:30 a.m. PDT (1:30 p.m. EDT). An investor presentation that will be referenced on the conference call is available here or on the Company's website at www.premiumbrandsholdings.com.

Access to the call may be obtained by calling the operator at (833) 300-9218 / (647) 689-4551 (Conference ID: 3093083) up to ten minutes prior to the scheduled start time. For those who are unable to participate, a recording of the conference call will be available through to 8:59 p.m. PST on May 20, 2022 at (855) 859-2056 / (404) 537-3406 (passcode: 3093083). Alternatively, a recording of the conference call will be available at the Company's website at www.premiumbrandsholdings.com.

SUMMARY FINANCIAL INFORMATION

(In millions of dollars except per share amounts and ratios)

"Despite the current unusually volatile environment, we continue to generate record top and bottom-line results. This is a testament to both the exceptional people that make-up our company as well as the resiliency and strength of our decentralized, entrepreneurial-focused business model," said Mr. George Paleologou, President and CEO.

"Record inflationary cost pressures, the Omicron outbreak that resulted in significant labor disruptions at the start of the year, ongoing global supply chain issues and the general uncertainty caused by recent geopolitical events have created the most challenging and unpredictable business environment we have had to face since the founding of Premium Brands in the early 2000s. Despite this, we continue to make significant progress towards our goal of becoming North America's leading specialty food business, in large part by remaining focused on long term outcomes, leveraging the growing size and diversity of our ecosystem and empowering our talented management teams. Furthermore, we continue to see exceptional capital allocation opportunities, both in terms of acquisitions as well as organic growth initiatives, as the consumer trends we have been investing in continue to strengthen," said Mr. Paleologou. "Looking forward, I have no doubt that we will emerge from these troubling times a bigger, more profitable and diversified company with larger moats around our individual businesses," added Mr. Paleologou.

"While we continue to generate record year over year results, the challenges of the current environment are impacting our growth rates and margins. These impacts are, however, transitory; and as we return to a more normal operating environment, particularly with respect to inflation and global supply channels, we expect to see an even stronger acceleration in our performance. Correspondingly, we remain on track to exceed our five-year targets of $6 billion in sales and $600 million in EBITDA by 2023.

The Company also announced that its Board of Directors approved a cash dividend of $0.70 per share for the second quarter of 2022, which will be payable on July 15, 2022 to shareholders of record at the close of business on June 30, 2022.

Unless indicated otherwise in writing at or before the time the dividend is paid, each dividend paid by the Company in 2022 or a subsequent year is an eligible dividend for the purposes of the Enhanced Dividend Tax Credit System.

Premium Brands Holdings Corporation owns a broad range of leading specialty food manufacturing and differentiated food distribution businesses with operations across Canada and the United States.

www.premiumbrandsholdings.com

The Company reports on two reportable segments, Specialty Foods and Premium Food Distribution, as well as non-segmented investment income and corporate costs (Corporate). The Specialty Foods segment consists of the Company's specialty food manufacturing businesses while the Premium Food Distribution segment consists of the Company's differentiated distribution and wholesale businesses. Investment income includes interest and management fees generated from the Company's businesses that are accounted for using the equity method.

Revenue

Specialty Foods' (SF) revenue for the quarter increased by $133.3 million or 20.3% primarily due to: (i) selling price inflation of $66.5 million, which was driven by increases implemented in reaction to inflationary pressures across a broad range of input costs; (ii) business acquisitions, which accounted for $40.1 million of SF's growth; and (iii) organic volume growth of $28.1 million representing an organic volume growth rate (OVGR) of 4.3%. These factors were partially offset by a $1.4 million reduction in the translated value of sales generated by SF's U.S. based businesses due to a stronger Canadian dollar – approximately 52.5% of SF's revenue for the quarter was generated by these businesses.

SF's OVGR of 4.3%, which was driven primarily by its artisan sandwich and meat snack initiatives in the U.S., was at the bottom end of the Company's long-term targeted range of 4% to 6% due to several temporary headwinds including: (i) less featuring of branded products in the retail channel, which was done to mitigate the margin impact of record increases in input costs while selling price increases were being implemented; (ii) approximately $22.8 million in lost sales opportunities caused by supply chain disruptions and labor shortages that resulted in lower than normal customer order fill rates – adjusting for these, SF's OVGR is 7.7%; and (iii) approximately $3.2 million in delayed sales resulting from a later Easter holiday season relative to the timing of Easter in 2021. Furthermore, SF historically generates a lower organic growth rate in the first quarter of the year due to seasonal factors.

Premium Food Distribution's (PFD) revenue for the quarter increased by $108.1 million or 30.5% due to: (i) selling price inflation of $56.1 million, which was driven by increases implemented in reaction to inflationary pressures across a broad range of input costs; and (ii) business acquisitions, which accounted for $53.0 million of PFD's growth. These factors were partially offset by: (i) a slightly negative OVGR of 0.2%; and (ii) a $0.2 million reduction in the translated value of sales generated by PFD's U.S. based businesses due to a stronger Canadian dollar.

PFD's negative OVGR of 0.2% was primarily due to: (i) the ongoing development of PFD's processed lobster strategies that resulted in additional inventory being created for the busy spring and summer seasons and less trading of lower margin live lobsters in the off season; (ii) approximately $6.0 million in lost sales opportunities caused by a variety of supply chain disruptions that resulted in less protein trading opportunities and lower than normal customer order fill rates; and (iii) sales mix changes associated with a variety of successful new sales initiatives for lower priced protein products being offset in dollar terms by retailers doing less featuring of PFD's premium protein and seafood products – normalizing for this as well as the impact of supply chain disruptions, PFD's OVGR is 3.1%. Furthermore, like SF, PFD historically generates a lower organic growth rate in the first quarter of the year due to seasonal factors.

Gross Profit

SF's gross profit as a percentage of its revenue (gross margin) for the quarter decreased by 90 basis points primarily due to: (i) significantly higher costs for a broad range of inputs including raw materials, freight and labor, which exceeded SF's selling price increases due mainly to delays associated with retailer minimum notice periods – adjusting for a full quarter's impact of price increases implemented during the quarter, SF's normalized gross margin is approximately 22.6%; and (ii) additional outside storage costs associated with building inventory for the busy spring and summer seasons as well as to help mitigate the impact of rising production input costs and industry wide supply chain disruptions. These factors were partially offset by: (i) sales leveraging associated with SF's organic growth; (ii) improved production efficiencies driven by investments in automation and various continuous improvement initiatives; and (iii) the reversal of certain pandemic related costs incurred in the first quarter of 2021.

PFD's gross margin for the quarter decreased by 90 basis points primarily due to: (i) significantly higher costs for a broad range of inputs including procured products, raw materials, freight and wages – PFD was able to offset these increased costs with selling price increases (in general, PFD's businesses have much more dynamic pricing structures relative to SF's businesses) but did not maintain the same margin percentage due to a variety of factors including temporarily providing its customers with time to adapt to the higher price environment and a portion of its business being structured on a cost-plus basis; and (ii) the acquisition of Westmorland, which due to the timing of its annual sales cycle, has a very low gross margin in the first quarter of the year. These factors were partially offset by improved production efficiencies driven by various continuous improvement initiatives.

Selling, General and Administrative Expenses (SG&A)

SF's SG&A for the quarter increased by $15.8 million mainly due to business acquisitions and freight and wage inflation.

PFD's SG&A for the quarter increased by $8.5 million primarily due to business acquisitions.

Adjusted EBITDA (1)

The Company's adjusted EBITDA for the quarter of $95.8 million, while being $13.3 million or 16.1% higher as compared to the first quarter of 2021, was significantly below what it would have been in a normal operating environment. The two primary challenges impacting the Company's first quarter adjusted EBITDA were: (i) delays associated with retailer minimum notice periods for putting through selling price increases; and (ii) lost sales opportunities caused by supply chain disruptions and labor shortages.

The Company's adjusted EBITDA margin for the quarter of 7.7% was below its long-term annual target of 10% primarily due to: (i) the factors outline above – adjusting for these the Company's adjusted EBITDA is approximately 9.2%; (ii) the acquisition of Westmorland, which generates nominal EBITDA in the first quarter of the year as a result of the timing of its annual sales cycle; and (iii) the Company's adjusted EBITDA margin in the first quarter generally being lower than its average margin for the year as a result of seasonal factors.

Plant start-up and restructuring costs consist of expenses associated with: (i) the start-up of new production capacity; (ii) the reconfiguration of existing capacity to gain efficiencies and/or additional capacity; and/or (iii) the restructuring of a business to improve its profitability. The Company expects (see Forward Looking Statements) these investments to result in improvements in its future earnings and cash flows.

During the first quarter of 2022, the Company incurred $3.5 million in plant start-up and restructuring costs relating to a variety of projects, including a 42,000 square foot expansion of its artisan bakery in British Columbia, a 26,000 square foot expansion of its meat snack production facility in Ontario, installation of fully automated sandwich production lines in its plants in Arizona and Nevada, and installation of new freezing technology at its lobster processing facility in Maine.

Equity earnings (loss) in investment in associates includes the Company's proportionate share of the earnings and losses of its investments in associates.

Clearwater's sales for the quarter increased by 28.9% or $27.1 million primarily due to the easing of pandemic related restrictions and a corresponding reopening of economies in North America, Europe and Asia, which resulted in stronger demand and higher pricing for most of the species sold by Clearwater. This was partially offset by a stronger Canadian dollar relative to the U.S. dollar and the Euro as a significant portion of Clearwater's sales are denominated in these currencies.

Clearwater's gross margin for the quarter decreased by 150 basis points to 31.7% primarily due to (i) the elimination of pandemic related wage subsidies received in the first quarter of 2021; and (ii) higher harvesting and processing costs for certain species because of catch rate changes and general cost inflation. These factors were partially offset by an overall stronger pricing environment.

Clearwater's SG&A for the quarter increased by $2.0 million primarily due to: (i) increased accruals for incentive-based compensation; and (ii) the elimination of pandemic related wage subsidies received in 2021.

See Forward Looking Statements for a discussion of the risks and assumptions associated with forward looking statements.

2022

The Company is maintaining its sales and adjusted EBITDA guidance for 2022, which is for sales to be between $5.60 billion and $5.85 billion and for adjusted EBITDA to be between $510.0 million and $530.0 million. These estimates are based on a range of assumptions (see Forward Looking Statements) including: (i) economic conditions in Canada and the United States will remain relatively stable with no major changes in consumer buying habits in the short to medium term; (ii) the average cost of the basket of procured products and raw materials purchased by the Company will stabilize and start to moderate in the short to medium term relative to recent increased volatility and inflationary trends; (iii) global supply chains will start to normalize in the short to medium term enabling the Company to access sufficient goods and services for its manufacturing and distribution operations; and (iv) stabilization of the Canadian dollar relative to the U.S. dollar at current levels.

The Company's sales and adjusted EBITDA outlooks for 2022 do not incorporate any amounts for potential future acquisitions.

5 Year Plan

The Company continues to make solid progress on the execution of its growth and value creation strategies and is confident (see Forward Looking Statements) that it will exceed its five-year targets set in 2018 of $6 billion in sales and $600 million in adjusted EBITDA by 2023.

NON-IFRS FINANCIAL MEASURES

The Company uses certain non-IFRS financial measures including adjusted EBITDA, free cash flow, adjusted earnings and adjusted earnings per share, which are not defined under IFRS and, as a result, may not be comparable to similarly titled measures presented by other publicly traded entities, nor should they be construed as an alternative to other earnings measures determined in accordance with IFRS. These non-IFRS measures are calculated as follows:

Adjusted EBITDA

Free Cash Flow

Adjusted Earnings and Adjusted Earnings per Share

FORWARD LOOKING STATEMENTS

This press release contains forward looking statements with respect to the Company, including, without limitation, statements regarding its business operations, strategy and financial performance and condition, cash distributions, proposed acquisitions, budgets, projected costs and plans and objectives of or involving the Company. While management believes that the expectations reflected in such forward looking statements are reasonable and represent the Company's internal expectations and belief as of May 6, 2022, there can be no assurance that such expectations will prove to be correct as such forward looking statements involve unknown risks and uncertainties beyond the Company's control which may cause its actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward looking statements.

Forward looking statements generally can be identified by the use of the words "may", "could", "should", "would", "will", "expect", "intend", "plan", "estimate", "project", "anticipate", "believe" or "continue", or the negative thereof or similar variations. Forward looking statements in this press release include statements with respect to the Company's expectations and/or projections on its: (i) revenue; (ii) adjusted EBITDA; (iii) plant start-up and restructuring costs; (iv) income tax rates; (v) dividends and dividend policy; (vi) capital expenditures and business acquisitions; (vii) convertible debentures; (viii) net working capital; (ix) liquidity outlook; * provisions; (xi) 5 year plan; and (xii) financial leverage ratios.

Some of the factors that could cause actual results to differ materially from the Company's expectations are outlined in the Company's Management Discussion & Analysis for the 13 weeks ended March 26, 2022.

Assumptions used by the Company to develop forward looking statements contained or incorporated by reference in this press release are based on information currently available to it and include those outlined below as well as those outlined elsewhere in this document. Readers are cautioned that this information is not exhaustive.

• Economic conditions in Canada and the United States will remain relatively stable with no major changes in consumer buying habits in the short to medium term.
• The average cost of the basket of procured products and raw materials purchased by the Company will stabilize and start to moderate in the short to medium term relative to recent increased volatility and inflationary trends.
• Global supply chains will start to normalize in the short to medium term enabling the Company to access sufficient goods and services for its manufacturing and distribution operations.
• The conflict between Russia and Ukraine will not: (i) materially impact the cost of raw materials purchased by the Company or its ability to procure them; or (ii) result in other retaliatory actions that adversely impact the Company's operations or the operations of its customers and suppliers.

• Labor availability will continue to improve in Canada and the U.S, enabling the Company to access sufficient skilled and unskilled labor at reasonable wage levels.

• The value of the Canadian dollar relative to the U.S. dollar will continue to fluctuate in line with the levels seen over the last several months.
• The Company's major capital projects, plant start-up and restructuring, and business acquisition initiatives will progress in line with its expectations.
• The Company will be able to achieve its projected operating efficiency improvements.
• There will not be any material changes in the competitive environment of the markets in which the Company's various businesses compete.
• There will not be any material changes in the long-term food trends that have been driving growth in many of the Company's businesses. These include: (i) growing demand for higher quality foods made with simpler more wholesome ingredients and/or with differentiating attributes such as antibiotic free, no added hormones or use of organic ingredients; (ii) increased reliance on convenience oriented foods both for on-the-go snacking as well as easy home meal preparation; (iii) healthier eating including reduced sugar consumption and increased emphasis on protein and seafood; (iv) increased snacking in between and in place of meals; (v) increased interest in understanding the background and stories behind food products being consumed; and (vi) increased social awareness on issues such as sustainability, sourcing products locally, animal welfare and food waste.
• Weather conditions in the Company's core markets will not have a significant impact on any of its businesses.
• There will not be any material changes in the Company's relationships with its larger customers including the loss of a major product listing and/or being forced to give significant product pricing concessions.
• There will not be any material changes in the trade relationship between Canada and the U.S., particularly with respect to certain protein commodities such as beef, pork and chicken.
• The Company will be able to negotiate new collective agreements with no labor disruptions.
• The Company will be able to access reasonably priced debt and equity capital.
• The Company's average interest cost on floating rate debt will remain relatively stable in the near to medium future. Contractual counterparties will continue to fulfill their obligations to the Company.
• There will be no material changes to the tax and other regulatory requirements governing the Company.

Management has set out the above summary of assumptions related to forward looking statements included in this press release to provide a more complete perspective on the Company's future operations. Readers are cautioned that these statements may not be appropriate for other purposes.

Unless otherwise indicated, the forward-looking statements in this press release are made as of May 6, 2022 and, except as required by applicable law, will not be publicly updated or revised. This cautionary statement expressly qualifies the forward-looking statements in this press release.

SOURCE Premium Brands Holdings Corporation

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