Premium Brands Holdings is likely to miss its full-year sales and EBITDA targets due to “challenges faced by a major foodservice customer” in the US.
The bottleneck applies to the category of sandwiches, which falls within the Canada-headquartered bakery, meat and seafood supplier’s Specialty Foods business division, its largest.
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Premium Brands issued the warning in its third-quarter results announcement yesterday (6 November). Group-wide sales revenue rose 1.3% to C$1.67bn ($1.2bn), while adjusted EBITDA nudged up 0.4% to C$159.4m.
“Our results for the third quarter were generally in line with our expectations except for a material shortfall in sales to a key customer of our sandwich group,” president and CEO George Paleologou said.
“We believe that this challenge is temporary and sales to this customer will recover and eventually return to their historic growth rates.”
As it stands, Premium Brands said it “no longer expects its 2024 results to be within its previous revenue and adjusted EBITDA guidance ranges”.
The outlook was set forth in March when the business revealed its fiscal 2023 results. The guidance was kept unchanged at the first- and second-quarter stages in May and August, respectively, but is now at threat.
It called for sales of C$6.65bn to C$6.85bn and an adjusted EBITDA reading of C$630m to C$650m.
Also weighing on the outlook, is a delay in new product launches in the US into next year “due to longer-than-expected customer on-boarding timelines”, Premium Brands said.
However, the company added growth in the two metrics is expected to “accelerate” over the “coming quarters”. It said the assumption is based on “having a significant pipeline of new sales initiatives, many of which are close to being realised”.
Secondly, Premium Brands is “working closely with the major customer referenced earlier to support new initiatives that will help drive short-term and long-term sustainable growth”.
The Specialty Foods business saw volumes drop 0.4% as a result of the loss in sandwich sales to the single customer as consumers reduced spending. Otherwise, they were up 2.3%, with revenue increasing 0.9% to C$1.06bn.
In other areas of the group numbers, net income fell 35% to C$25.4m. Adjusted EPS dropped to 1.11 Canadian dollars from 1.27.
The company has built up its business through regular M&A and Paleologou said the “pipeline remains full” in the final quarter with “several transactions” expected to close.
Premier Brands has also initiated a number of capital investment projects in its factories geared toward expanding capacity, resulting in C$29.5m in start-up and restructuring costs in the third quarter.
They include the expansion of its meat snacks and processed meat facility in Ferndale, Washington, an extension to its bakery factory in San Francisco, and additional capacity at the cooked protein plant in Versailles, Ohio.
Its sandwich production plant in Columbus, Ohio, is also getting a refit, along with the start-up of a new 60,000-square-foot seafood processing facility in Auburn, Maine.
In Canada, Premium Brands said two deli-meats plants in Ontario are being “reconfigured” to increase production of dry-cured meats, while its sandwich factory in Richmond, British Columbia, is being reconfigured to support ready-to-eat foods.
