Premium Brands has record Q1, but expects COVID-19 to hinder Q2

Premium Brands Holdings Corporation has reported record revenue for the first quarter of 2019, but predicts that the impacts of the ongoing COVID-19 pandemic will have a “significantly negative” impact on its second quarter and its year overall.

The company posted a first-quarter 2020 revenue of USD 935 million (EUR 864 million), a USD 158.4 million (EUR 146.5 million) – or 20.4 percent – increase over the same period of 2019. At the same time, the company saw organic sales volume growth of 14.6 percent, or 13.8 percent if normalized for the impacts associated with the COVID-19 pandemic.

The company also posted an adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of USD 64.3 million (EUR 59.4 million), up from USD 60.3 million (EUR 55.7 million) in 2019.

The company's first quarter was marked by much of the same challenges that many other seafood companies have faced – namely, a sharp decline in foodservice and airline customers and a massive uptick in retail sales, Premium Brands President and CEO George Paleologou said in an earnings report.

"The challenges faced by companies as a result of the COVID-19 pandemic vary immensely.  For us it has meant a significant slowdown in sales to foodservice and airline customers, overwhelming orders from retail customers, increased risks for our employees, disruptions in our supply chains and a variety of additional operating costs resulting from enhanced health and safety protocols,” he said.

Despite those challenges, the company has managed to avoid any COVID-19 plant outbreaks, and has only limited impacts to supply chains and production, Paleologou said.

“This is a testament to our very talented team of dedicated, enterprising and hardworking associates,” he said.

However, the impacts of the pandemic will likely be felt heavily in Q2, as the company approaches what is typically its busiest season.

"Looking forward, with our busy season approaching, we expect the situation to get more challenging as many of our plants begin to ramp up to meet growing summer demand,” Paleologou said. “As mentioned earlier, the health and safety of our employees is our first priority.  Balancing improved processes around physical distancing with rising production demands while facing increasing disruptions in our supply chains is going to be very difficult.  I am, however, confident that if any organization can meet this test it is ours.”

Due to the many uncertainties surrounding the pandemic, the company also withdrew its 2020 revenue and adjusted EBITDA guidance. While the pandemic actually had a slightly positive impact on the company’s sales and adjusted EBITDA in the first quarter, the impact in the second quarter will likely be negative.

“While these disruptions are not expected to be for the long-term, the extent and specific timing of their impact is highly uncertain and cannot be predicted and correspondingly the company is unable, at this time, to forecast with reasonable accuracy its results for the balance of 2020,” Premium Brands wrote in its earnings release. “As a result, the company is withdrawing its revenue and adjusted EBITDA guidance for 2020.”

The company had initially projected 2020 revenue would be between USD 3.975 and 4.075 billion (EUR 3.677 and 3.769 billion), with a projected adjusted EBITDA of between USD 320 and 360 million (EUR 296 and 333 million).

Despite the impacts, Paleologou said he remains optimistic about the future of the company, past COVID-19.

"I have no doubt that as we have done in the past, we will emerge from this crisis a stronger and better company.  Throughout this trying time, our decisions have been based on our core values including always taking a long-term perspective,” Paleologuo said.  “Through this crisis, our businesses have developed new sustainable sales opportunities, strengthened customer and supply chain relationships and built even more resilience into their businesses by finding new ways to leverage our ecosystem.  Once some normalcy returns to our economy, we will be well positioned to continue to execute on both our organic and acquisition growth strategies.”  


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