Canada-based food company Premium Brands Holdings Corporation posted another consecutive quarter of record sales and earnings in Q3 2024 but said headwinds in key markets will likely see it missing its full-year targets.
The company posted record Q3 revenue of CAD 1.67 billion (USD 1.2 billion, EUR 1.11 billion), a 1.3 percent, or CAD 22 million (USD 15.8 million, EUR 14.6 million), increase over Q3 2023. While that total was an increase year over year, it is down slightly on the CAD 1.7 billion (USD 1.22 billion, EUR 1.13 billion) in revenue it posted in Q2 2024.
Premium Brands’ Q3 2024 adjusted EBITDA was also a record for the quarter, reaching CAD 159.4 million (USD 114.9 million, EUR 106.3 million), an increase of 0.4 percent – or CAD 600,000 (USD 432,000, EUR 400,000) – compared to Q3 2023.
Premium Brands CEO George Paleologou said that the Q3 2024 results were, for the most part, as expected except for declines in sales in its sandwich group “due to an unanticipated decline in sales to a key customer.”
“We believe that this decline is transitory and that sales to this customer will recover and will eventually return to their historical growth rates,” Paleologou said. “Excluding sales to this customer, our specialty food group’s organic volume growth for its major U.S. initiatives was 8.1 percent.”
Paleologou said that the consumer backdrop for its products has improved, with lower interest rates and lower inflation and that the U.S. market remained strong in Q3 2024 – barring the aforementioned declines in its sandwich group.
“Despite this material but transitory decline, I’m very pleased to report that the new opportunities and sales initiatives pipeline in our sandwich group has never been more robust,” Paleologou said.
While Paleologou said he is optimistic about the company still reaching its target of CAD 10 billion (USD 7.2 billion, EUR 6.6 billion) in sales by 2027, the company said in its 2024 outlook that it no longer expects its results to be within its previous revenue range of CAD 6.65 billion to CAD 6.85 billion (USD 4.79 billion to USD 4.94 billion, EUR 4.43 billion to EUR 4.56 billion). It also expects its adjusted EBITDA to miss its target of between CAD 630 million and CAD 650 million (USD 454 million and USD 468 million, EUR 420 million and EUR 433 million).
Premium Brands said part of the issue is the sales challenges faced by one of its major customers, and several major product launches being delayed in the U.S. due to longer than expected customer on-boarding times.
Premium Brands owns an array of different seafood, sandwich, bakery, and specialty food companies, with its specialty foods division accounting for 64 percent of its revenue – or CAD 1.06 billion (USD 764 million, EUR 707 million) – in Q3 2024 and its premium food distribution division accounting for CAD 600 million (USD 432 million, EUR 400 million). Premium Brands had been on a seafood company acquisition streak, and most recently acquired Rivière-au-Renard, Quebec, Canada-based seafood distributor Menu-Mer, but as of Q3 2024 it has not announced any seafood company acquisitions for the year.
In its Q3 2024 results presentation, the company said it is in active negotiations to acquire two seafood companies with combined sales of CAD 325 million (USD 234 million, EUR 216 million), and in early stage discussions with four other seafood companies with combined sales of CAD 199 million (USD 143 million, EUR 132 million). It also has eight discussions with seafood companies it classifies as “on hold,” with combined sales of CAD 1.27 billion (USD 915 million, EUR 846 million).
“Although we did not close any acquisitions during the quarter, we’re pleased to report that we’re making progress on several transactions and we fully expect to close them prior to the end of the year,” Paleologou said.
The company said it incurred CAD 29.5 million (USD 21.2 million, EUR 19.6 million) in plant start-up and restructuring costs in the first three quarters in 2024, which was partially attributable to the start-up of a new, 60,000-square-foot seafood facility in Auburn, Maine. The new facility will be part of its subsidiary Ready Seafoods, which Premium Brands acquired in 2018.
One of Premium Brands’ largest seafood companies, Clearwater Seafoods, continued to post losses in the quarter. Premium Brands purchased the company along with the Mi’kmaq First Nations in a transaction valued at CAD 1 billion (then USD 768 million, EUR 650 million) in 2020.
Premium Brands results indicate Clearwater Seafoods’ revenue increased to CAD 154.1 million (USD 111.1 million, EUR 102.7 million) in Q3 2024, up from CAD 149.6 million (USD 107.9 million, EUR 99.7 million) in Q3 2023. However, its earnings before payments to shareholders dropped to CAD 2.7 million (USD 1.9 million, EUR 1.8 million) – down from CAD 18.5 million (USD 13.3 million, EUR 12.3 million) in Q3 2023. Its net losses also widened to CAD 19.5 million (USD 14 million, EUR 13 million), putting its total loss for the 39 weeks ending 28 September 2024 at CAD 62.8 million (USD 45.3 million, EUR 41.8 million).
Premium Brands said the revenue increase was largely due to above average harvesting conditions for Argentina scallops, the sale of clam inventories that had been carried over from prior quarters, and improved turbot catch rates thanks to replacing a harvesting vessel and above-average harvesting conditions.
“These factors were partially offset by below average harvesting conditions for Canadian scallops, clams and deep-sea lobsters due to natural variability in the resource and environment,” Premium Brands said.
Those poor harvesting conditions in Canada created inefficiencies that drove down the company’s margins, as the company said those products “generally earn higher than average margins for Clearwater.”
A CAD 4 million (USD 2.8 million, EUR 2.6 million) start-up cost associated with the new turbot harvesting vessel, and a frozen-at-sea shrimp harvesting vessel, also lowered its earnings before payments to shareholders.
