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Supremex Announces Strong Q1 2021 Results

Supremex

May 13, 2021 - Supremex Inc. (TSX: SXP), a leading North American manufacturer and marketer of envelopes and a provider of paper-based packaging solutions, today announced its results for the first quarter ended March 31, 2021.

First Quarter Financial Highlights and Recent Events

  • Total revenue increased by 2.3% to $53.6 million, from $52.4 million in the first quarter of 2020.
  • Envelope segment revenue was down 2.3% to $38.3 million, from $39.1 million in the first quarter of 2020.
  • Packaging and specialty products segment revenue increased by 15.6% to $15.3 million, from $13.3 million in the first quarter of 2020.
  • EBITDA increased by 22.1% to $9.4 million, up from $7.7 million in the first quarter of 2020 resulting primarily from growing packaging and specialty sales and operational efficiencies.
  • Adjusted EBITDA1 was up by 14.5% to $9.5 million, from $8.3 million in the first quarter of 2020.
  • Net Earnings at $4.1 million (or $0.15 per share), up from $2.6 million (or $0.09 per share) in the first quarter of 2020.
  • Adjusted Net Earnings1 at $4.2 million (or $0.15 per share), up from $3.1 million (or $0.11 per share) in the first quarter of 2020.
  • Recorded $0.6 million of assistance from the Canada Emergency Wage Subsidy ("CEWS") program.
  • Acquired Vista Graphic Communications, LLC, a print and folding carton supplier that brings the Company's manufacturing closer to its American e-commerce packaging customers.
  • Purchased 221,900 shares for total consideration of $473,887 as part of the Company's Normal Course Issuer Bid (''NCIB'') program.

"We continue to experience strong results from an expanded geographic reach and a diversified product offering and customer base. Increased revenues from packaging and specialty products offset the effects of secular decline and a temporary COVID related reduction in non-essential mail in the envelope segment. These revenue gains coupled with stringent cost optimization measures buoyed profitability," said Stewart Emerson, President & CEO.

"We continue to focus on the health and safety of our employees and take a prudent approach to managing cash flow and capital allocation while continuing to push on the revenue side. We are well advanced with the integration of the recent bolt-on acquisition of Vista Graphic Communications in Indianapolis which provides a turn-key platform close to our US customer base and needed capacity for continued growth in the e-commerce packaging business," concluded Stewart Emerson, President & CEO.

Summary of three-month period ended March 31, 2021

Total revenue for the three-month period ended March 31, 2021, was $53.6 million, representing an increase of 2.3% from the equivalent quarter of 2020.

Revenue from the envelope segment was $38.3 million, representing a decrease of 2.3% or $0.8 million, from $39.1 million in the equivalent quarter of 2020.

  • Revenue from the Canadian envelope market remained stable at $26.2 million. Volume increased by 1.3% from the acquisition of Royal Envelope in February 2020, which compensated for the effect of the secular decline on the Company's legacy envelope sales and from the continued effect of the COVID-19 pandemic on non-essential envelope demand. Average selling prices were lower by 1.5% from last year's comparable period primarily resulting from changes in the envelope mix sold. Canada Post's latest published financial results indicated that Transaction Mail volumes were down 10.5% for the year ended December 31, 20202 due to the COVID-19 pandemic.
  • Revenue from the U.S. envelope market was $12.1 million, representing a decrease of 6.5% or $0.8 million from $12.9 million in the first quarter of 2020. The volume of units sold decreased by 1.4% while average selling prices decreased by 5.2% mainly due to a negative foreign exchange translation effect of 6.0%. For comparison, the U.S. Postal Service's last published results indicated that the First-Class Mail volumes were down 7.9% during their second quarter ended March 31, 20213 due to the COVID-19 pandemic.

Revenue from the packaging and specialty products segment was $15.3 million, an increase of 15.6% or $2.0 million, from the corresponding quarter of 2020. The increase was the result of e-commerce packaging new customer growth and organic growth with existing customers, the contribution of our Vista acquisition on March 8, 2021 and higher folding carton sales in the pharmaceutical market. Packaging and specialty products represented 28.6% of the Company's revenue in the quarter, up from 25.3% during the equivalent period of last year.

EBITDA increased by 22.1% to $9.4 million in the first quarter of 2021, up from $7.7 million in the first quarter of 2020. Adjusted EBITDA increased by 14.5% to $9.5 million, up from $8.3 million in the equivalent quarter of last year as a result of higher packaging and specialty products sales, operational efficiencies derived from cost optimizations, improvements in folding carton manufacturing activities, and from the support of the CEWS. Adjusted EBITDA margins increased to 17.8% of revenue compared to 15.9% in the equivalent quarter of 2020. Excluding the contribution of the CEWS, Adjusted EBITDA margins stood at 16.7% of revenue in the first quarter of 2021.

  • Envelope segment Adjusted EBITDA was $7.3 million, up 5.0% or $0.4 million, from $6.9 million in the first quarter of 2020. The operating profitability of the Canadian envelope operations improved with the acquisition of Royal Envelope on February 18, 2020, which, in addition to higher sales volume, provided synergies in production efficiencies and procurement. On a percentage of segmented revenue, Adjusted EBITDA from the envelope segment was 19.1%, up from 17.7% in the equivalent period of 2020.
  • Packaging and specialty products segment Adjusted EBITDA was $2.5 million, up 88.6% or $1.2 million from $1.3 million in the first quarter of 2020 primarily from higher e-commerce sales and efficiency gains in the folding carton division. On a percentage of segmented revenue, Adjusted EBITDA from the packaging and specialty operations was 16.1% compared to 9.9% in the equivalent period of 2020 which is in line with the gradual margin improvement lived throughout 2020 due to operational efficiencies.
  • The balance of the variance is primarily from an unfavorable foreign exchange variance in the first quarter of 2021 compared to the equivalent quarter of 2020, which was partially offset by the contribution of the CEWS.

Net Earnings were $4.1 million (or $0.15 per share) for the three-month period ended March 31, 2021, compared to $2.6 million (or $0.09 per share) for the equivalent period in 2020. Adjusted Net Earnings were $4.2 million (or $0.15 per share) for the three-month period ended March 31, 2021, compared to $3.1 million (or $0.11 per share) for the equivalent period in 2020.

Net cash flows from operating activities were $4.5 million during the three-month period ended March 31, 2021, compared to $8.1 million in the equivalent period of 2020. The variation is attributable to a negative net change in working capital adjustments.

Corporate Update

Robert. B. Young, President of the Supremex Packaging Division, will be leaving the Company on May 28th, 2021. Mr. Young joined the Company in May 2020. Supremex will initiate a process to fill this position.

Focus on Folding Carton and E-Commerce Packaging

On March 8, 2021, the Company acquired substantively all of the assets of Vista Graphic Communications, LLC ("Vista"), for a cash consideration of $2,666,790 ($2,100,000 US). Vista is an Indianapolis, Indiana-based provider of print and folding carton packaging. In addition to the consideration paid, the Company has a contingent consideration payable to the previous owner on the realization of certain financial targets over the first 24 months after the acquisition date in the amount of $774,846 ($625,000 US). The fair value of the contingent consideration payable as at March 31, 2021 is $767,445.

This acquisition brings the Company's manufacturing closer to its growing e-commerce customer base in the U.S. and provides it with much needed print and converting capacity to meet existing and growing demand for its packaging solutions.

Supremex's complete first quarter 2021 report can be found on the company's website: www.supremex.com.

Supremex is a leading North American manufacturer and marketer of envelopes and a growing provider of paper-based packaging solutions. Supremex operates 12 manufacturing facilities across five provinces in Canada and three manufacturing facilities in the United States employing approximately 865 people. To learn more, please visit: www.supremex.com.

SOURCE: SupremeX Inc.

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