Supremex TSE: SXP reported a 16.1% increase in third-quarter revenue as packaging acquisitions and organic growth helped offset tariff costs, while higher envelope prices and operating efficiencies lifted margins.
Revenue for the quarter ended Sept. 30 rose to CAD 76.2 million from CAD 65.7 million a year earlier. Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, increased 38.5% to CAD 8.6 million, and the adjusted EBITDA margin widened to 11.3% from 9.4%.
President and CEO Stewart Emerson said the company absorbed approximately CAD 1 million in U.S. tariffs during the quarter. Management estimates the annual pretax impact at CAD 10 million to CAD 12 million, after measures already taken to mitigate the costs.
“They are a headwind, period. They slow the pivot, but they do not change it,” Emerson said of tariffs, referring to the company’s strategy of using cash from its envelope business to invest in packaging and acquisitions.
Packaging Growth and Envelope Margins
Packaging revenue climbed 44.4% to CAD 29.7 million, accounting for 38.9% of consolidated revenue, up from 31.3% a year earlier. Goldrich Printpak and iFlex contributed 33.9 percentage points of segment growth, while organic growth contributed 10.5 percentage points, CFO and Corporate Secretary Normand Macaulay said.
Emerson attributed the organic gains to a combination of new customers and a greater share of existing customers’ business, along with continued e-commerce growth. He said Supremex expects organic growth each quarter but cautioned that sustaining the 10.5% rate would be difficult.
Packaging adjusted EBITDA rose 61.4% to CAD 3.5 million, with the margin increasing to 11.8% from 10.5%. Commercial print remained weak, however, with revenue down nearly CAD 500,000 and a CAD 400,000 loss in the quarter, Emerson said. The company announced a reduction in the footprint of its standalone Saint-Laurent commercial print facility in October.
Envelope revenue increased 3.2% to CAD 46.5 million. Average selling prices rose 4.7%, partly offset by a 1.5% decline in unit volume. Adjusted EBITDA for the segment increased 43.5% to CAD 7.7 million, and its margin expanded to 16.5% from 11.8%.
Emerson credited pricing discipline, acquisition synergies and capacity consolidation for the margin improvement. Supremex closed its Indianapolis envelope plant in January and moved production primarily to facilities in the Greater Toronto Area.
Tariff Response and Restructuring
Macaulay said the annual tariff estimate assumes current tariffs remain in place and reflects pricing actions, supply-chain adjustments and initial shifts in production between Canadian and U.S. plants.
A restructuring plan announced Oct. 6 is expected to eliminate approximately 60 positions, consolidate some activities across envelope and folding carton sites and accelerate back-office technology adoption. Supremex expects the plan to generate approximately CAD 5.7 million in annualized savings, offsetting roughly half the estimated tariff impact.
The company expects some benefits in the fourth quarter, with much of that period’s impact realized in December. It anticipates reaching the full savings run rate during the first quarter of 2027 and recording an approximately CAD 1.8 million restructuring charge in the fourth quarter of 2026.
Macaulay said Supremex would continue looking for ways to reduce the remaining estimated CAD 4 million to CAD 6 million gap.
Earnings, Cash Flow and Acquisition Plans
Net earnings fell to CAD 0.5 million, or CAD 0.02 per share, from CAD 9.1 million, or CAD 0.37 per share, a year earlier. Macaulay noted that the prior-year result included a CAD 6.1 million gain from the sale and leaseback of two properties and a CAD 3.1 million tax recovery.
Adjusted net earnings, which exclude the sale-and-leaseback gain, were CAD 0.8 million, or CAD 0.03 per share, compared with CAD 0.19 per share a year earlier. Adjusted free cash flow rose to CAD 5.2 million from CAD 0.1 million.
Net debt stood at CAD 38.6 million at Sept. 30, down CAD 1.5 million from June 30. Net debt to adjusted EBITDA declined to 1.09 times from 1.22 times at the end of the second quarter, and available liquidity was CAD 31.4 million.
Supremex has completed five acquisitions over the past two years. Emerson said packaging is approaching a near-term goal of 50% of revenue, with the timing dependent on the acquisition pipeline.
Asked about Goldrich, acquired in June, Emerson said it was performing within expectations despite some customer overlap. He said the operation has significant available capacity and that Supremex is adding to its sales organization.
About Supremex (TSE:SXP)
Supremex is a growing provider of paper-based packaging solutions and a leading North American manufacturer and marketer of envelopes. Supremex operates nine manufacturing facilities across four provinces in Canada and four manufacturing facilities in three states in the United States employing approximately 1,000 people. Supremex' extensive network allows it to efficiently manufacture and distribute envelope and packaging solutions designed to the specifications of major national and multinational corporations, direct mailers, resellers, government entities, SMEs and solutions providers.
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