Richmond, British Columbia, Canada-based Premium Brands Holdings Corporation said it will resume its acquisition strategy, which had been put on hold due to uncertainties associated with COVID-19.
Premium Brands, which has a range of holdings across the specialty food manufacturing and distribution industries, has led an effort to consolidate the North American lobster sector, acquiring Maine Coast, Hancock Gourmet Lobster Co., Viandex, and North Delta Seafood within the past year, and it purchased Ready Seafoods in 2018. The company posted record results in Q1 2020.
Despite facing challenges due to the coronavirus, the company “continued to maintain a strong balance sheet and liquidity,” with CAD 379.9 million (USD 283.8 million, EUR 240.8 million) of available credit capacity, it said in its Q2 2020 financial report.
While the company’s gross margin for the first two quarters of 2020 decreased by 2.2 percent compared to the first two quarters of 2019 to 20.9 percent, its Q2 gross margins actually improved year-over-year by 1.1 percent due to “lower salmon and lobster commodity costs, favorable inventory positions relative to inflationary beef and pork commodity costs; and increased procurement by [subsidiary] Premium Food Distributors businesses for the company's other businesses, resulting in additional margin capture. These positives were partially offset by sales mix changes associated with COVID-19 related issues, including lower live seafood margins due to higher inventory costs and lower selling prices, Premium Brands President and CEO George Paleologou said.
"The challenges that our company faced over the past quarter were by far the most difficult in our history and I am very humbled by how our people rose to the occasion,” Paleologou said. "April, in particular, was a very challenging month for us as COVID-19-related issues impacted almost all elements of all our businesses. The month proved to be a defining point as our management teams took exceptional measures to address the unique challenges that were faced by their respective businesses and pursued initiatives that not only dealt with immediate issues but also helped to position them to weather whatever was to come next. Fortunately, April proved to be the eye of the storm and since then we have seen steady and significant improvements across all of our businesses giving us solid momentum as we head into the back half of the year.”
The company’s second quarter revenue of CAD 976.6 million (USD 729.4 million, EUR 619.1 million) represented a 3.3 percent increase compared to Q2 2019. However, its quarterly earnings before interest, taxes, depreciation, and amortization (EBITDA) of CAD 67.1 million (USD 50.1 million, EUR 42.5 million) decreased from CAD 88.3 million (USD 66 million, EUR 56 million) in the second quarter of 2019 due to impacts associated with the COVID-19 pandemic,” including lost sales and CAD 10.9 million (USD 8.1 million, EUR 6.9 million) in net transitory cost impacts, the company said.
The company experienced CAD 46 million (USD 34.4 million, EUR 29.2 million) in net lost sales resulting from the pandemic-related issues, it said, though new sales generated by Ready Seafood’s new lobster processing facility in Saco, Maine, U.S.A., a recently expanded protein and seafood distribution facility in Montreal, and a new distribution and custom cutting operation in Toronto, and a new live lobster listing with a large U.S. based retail grocery group – not specified – helped offset some of the company’s quarterly losses, it said.
However, the company also incurred CAD 3.5 million (USD 2.6 million, EUR 2.2 million) in plant start-up costs and CAD 5.5 million (USD 4.1 million, EUR 3.5 million) in restructuring costs due to its new construction and renovation, as well as “staffing changes in certain businesses which resulted in unusually high severance costs.”
Despite the better-than-expected results, the company said it will continue to suspend its revenue and adjusted EBITDA guidance for 2020 “due to uncertainties associated with COVID-19,” but reaffirmed that it expects to meet or exceed its 2023 targets of CAD 6 billion (USD 4.5 billion, EUR 3.8 billion) in revenue and CAD 600 million (USD 448.1 million, EUR 380.3 million) in adjusted EBITDA.
"In terms of our five-year objectives … we remain on track,” Paleologou said. “While the COVID-19 crisis has impacted the trajectory of how we will get there, the incredible amount of new product innovation being developed across our many businesses combined with an especially robust acquisition pipeline make us more confident than ever that we will meet or exceed them.”
Photo courtesy of Chartered Professional Accountants of British Columbia
