Supremex Q2 Earnings Call Highlights

Supremex (TSE:SXP) reported higher second-quarter revenue, improved profitability and a return to positive free cash flow, as growth in its packaging operations and improved envelope performance supported results for the period ended June 30, 2026.

Consolidated revenue increased 8.5% year over year to C$71.6 million, while adjusted EBITDA rose nearly 34% to C$7.8 million. Adjusted EBITDA margin expanded to 10.9% from 8.8% a year earlier.

President and CEO Stewart Emerson said the company’s revenue growth and margin expansion reflected improved volume and cost discipline, with operating and selling, general and administrative expenses increasing more slowly than revenue.

Packaging Growth and Acquisitions

Packaging and specialty products revenue rose 19% to C$26.4 million during the quarter. The segment represented 37% of company revenue, compared with about one-third a year earlier. Excluding Supremex’s smaller non-core commercial print business, the rest of the packaging segment, led by folding carton operations, grew 27.6% in the quarter, according to CFO Norm Macaulay.

Management attributed folding carton growth to increased business from multinational consumer packaged goods customers in health and beauty and over-the-counter pharmaceuticals, new customer wins, e-commerce packaging expansion and the contribution from the Trans-Graphique acquisition completed in July 2025.

Supremex completed the acquisition of Goldrich Printpak on June 5. Goldrich, which generates approximately C$30 million in revenue, provides the company with a folding carton manufacturing base in the Greater Toronto Area. The business was acquired on a cash-free, debt-free basis for approximately C$34 million, financed through a new acquisition term loan and the company’s credit facility.

Emerson told analysts that Goldrich was operating at roughly 75% to 80% capacity utilization and that the company had begun pursuing purchasing savings, production shifts and cross-selling opportunities. He said Supremex had already shifted some production previously handled at its Lachine and Indianapolis facilities to Goldrich because of freight advantages.

The company also acquired iFlex Labels, a small Saint-Laurent label manufacturer, during the quarter. Supremex plans to consolidate iFlex and its existing Laval label operation into its Lachine folding carton plant by the end of 2026. Emerson said the consolidation is intended to produce cost synergies and create more opportunities to cross-sell labels and folding cartons.

Packaging adjusted EBITDA was C$3.4 million, or 12.9% of segment revenue, compared with C$2.9 million a year earlier. The margin was essentially unchanged as higher volume was offset by commercial print softness and acquisition-related activity. Macaulay said commercial print revenue declined by about C$500,000 in the quarter, while the unit’s gross margin fell by approximately C$700,000. Excluding commercial print, packaging adjusted EBITDA would have been approximately C$3.7 million, or 16.8% of segment revenue.

Envelope Margins Improve

Envelope segment revenue increased 3.2% to C$45.2 million. Average selling prices rose 2%, while volume increased 1.1%. Management said volume gains were supported by the 2025 acquisitions of Enveloppe Laurentide and Elite Envelope, new customer wins, increased share of wallet in the U.S. market and a modest rebound from the prior year’s Canada Post labor disruptions.

Envelope adjusted EBITDA increased to C$7 million, or 15.6% of revenue, from C$6.2 million, or 14.1% of revenue, in the prior-year quarter. The operating expense ratio improved to 71.7% of segment revenue from 73.8% a year earlier, reflecting U.S. optimization initiatives, greater production volume and acquisition synergies.

Supremex recorded C$1.6 million in restructuring expense during the first half, mainly related to U.S. envelope optimization efforts and the label reorganization. The initiatives remain in progress and are proceeding largely on schedule and within budget, Emerson said.

During the analyst question-and-answer session, Macaulay said approximately one-quarter of the expected C$1.4 million in annual savings from the Indianapolis optimization had been realized in the second quarter, with benefits expected to ramp as certain costs cease.

Cash Flow, Debt and Capital Returns

Adjusted net earnings were C$1.4 million, or C$0.06 per share, compared with C$100,000, or breakeven per share, in the second quarter of 2025. Reported net earnings were C$1 million, or C$0.04 per share, compared with a C$300,000 net loss a year earlier.

Cash flow from operating activities totaled C$4.3 million, up from C$300,000 in the prior-year quarter. Free cash flow was C$3.6 million, compared with essentially nil a year earlier. Macaulay said the result included roughly C$5 million of inventory investment during the first half, most of which occurred in the second quarter.

Net debt stood at C$40.1 million at June 30, with net debt to adjusted EBITDA at 1.22 times. The increase from essentially no net debt at the end of 2025 was attributed to financing the Goldrich and iFlex acquisitions.

The company repurchased approximately 14,000 shares under its normal course issuer bid during the quarter and announced plans to renew the program, subject to TSX approval, to allow repurchases of up to 10% of its public float over the next year. Its board also declared a quarterly dividend of C$0.05 per common share, payable Sept. 11 to shareholders of record on Aug. 27.

Outlook Includes Tariff Uncertainty

Management said it remained cautiously optimistic while acknowledging uncertainty related to economic and trade conditions, postage increases, U.S. Postal Service service reductions and Canada Post’s reputational challenges.

Asked about potential tariffs affecting Canadian-made products sold into the United States, Emerson declined to quantify cross-border revenue for competitive reasons. He said the company was staging finished goods and raw materials across the border ahead of a potential August implementation date, increasing staffing at its Indianapolis packaging facility and using available capacity in Chicago and Douglas envelope operations.

Emerson said Supremex expects tariffs would have an impact if implemented, but said the company would update investors when it could quantify the effect reliably. The company continues to pursue acquisitions, with particular interest in larger packaging targets, while working toward a more balanced revenue mix between its envelope and packaging segments.

About Supremex (TSE:SXP)

Supremex Inc is engaged in manufacturer and marketer of a broad range of custom envelopes and packaging products. The company operates in two business segments that are Manufacturing and Sale of Envelopes, and the manufacturing and sale of paper-based packaging solutions and specialty products. The majority of the revenue is generated from the Envelope segment. Its product portfolio consists of translucent envelopes, custom envelopes, stock envelopes, poly mailers, enviro-Logix flat mailers, board mailers, custom labels, affixing, repositionable notes and others.

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