Premium Brands (TSE:PBH) said its second-quarter results marked an inflection point as the company began to generate stronger free cash flow from a multiyear capital-spending program designed to expand its manufacturing footprint and U.S. market capacity.
The company reported record sales from continuing operations of C$2.4 billion for the quarter, up C$495 million, or 26.3%, from the second quarter of 2025. Adjusted EBITDA rose 29.5% to C$225 million, while adjusted earnings from continuing operations increased 37.2% to C$79.6 million, or C$1.53 per share.
U.S. Growth and Specialty Foods Expansion
The company said consumer demand for cleaner, healthier and more nutrient-dense food products is creating opportunities in categories including meat sticks, cooked proteins, sandwiches, artisan breads and kettle-cooked meal solutions. Management contrasted that demand with contracting demand for more traditional, highly processed consumer packaged goods.
Specialty Foods’ core U.S. growth initiatives generated organic volume growth of 10.7% during the quarter. Including acquisitions, the group’s U.S. sales increased by C$432.2 million to C$1.2 billion, representing 71.2% of its second-quarter sales, compared with 63.5% a year earlier.
Will Kalutycz, Premium Brands’ CFO, said acquisitions accounted for C$354.5 million of the company’s overall sales increase. Organic volume growth contributed C$74.5 million, while selling-price increases, primarily related to beef-based products, added C$59.9 million.
Within the company’s U.S.-focused operations, the Protein Group recorded 25% organic volume growth, driven by meat snacks and protein products. That performance was partially offset by lower volumes in the Custom Culinary Solutions Group after a customer’s large limited-time sandwich promotion ended in the fourth quarter of 2025. Replacement promotions are not scheduled to begin until early next year, management said.
The company also highlighted its meat-stick business, which grew 83.2% in the second quarter. Premium Brands recently launched its Italia line of shelf-stable, dry-cured meat sticks, produced at its Yorkton, Saskatchewan, facility.
Capital Program Nearing Completion
Management said the recently added capacity was built for emerging food categories rather than legacy products. Premium Brands expects to continue onboarding new business and customers over coming quarters, with the additional volume expected to improve free cash flow, margins and returns on invested capital.
The company said it has C$41.6 million remaining to spend on its C$1.1 billion investment plan, which it said will create more than C$2 billion in new sales capacity. During the second quarter, capital expenditures from continuing operations totaled C$59 million, including C$18.3 million tied to the investment plan, C$21.6 million in other project capital expenditures and C$19.1 million in maintenance capital expenditures.
Premium Brands said startup and restructuring costs have declined materially as most capacity expansion projects reach base operating parameters. Kalutycz said the company expects those costs to continue declining in the second half of 2026.
Over the next 12 months, the company expects to close four older facilities while commissioning two new plants, one in the Greater Toronto Area and another in Auburn, Maine. Management said the plant rationalization is expected to create productivity improvements and scale-related efficiencies.
Cash Flow, Debt Reduction and Outlook
Premium Brands generated C$68 million in net free cash flow during the second quarter, its first positive quarterly net free cash flow after four years of negative results, according to management. The company expects that trend to accelerate during the second half as it further utilizes new production capacity.
The company’s debt-to-EBITDA ratio declined to 3.8-to-1 from 4.3-to-1 at the end of 2025. Management said both its senior debt and total debt ratios are now within its short-term objectives of 3-to-1 or better for senior debt and 4-to-1 or better for total debt. It expects to reach its longer-term total debt-to-EBITDA target of 3-to-1 or better by early to mid-2027.
Net earnings totaled C$70.9 million, up from C$27.9 million a year earlier. The result included a C$73.9 million gain from the sale of Shaw Bakers and a C$30 million fee received from Clearwater related to certain lobster assets and sales. Those items were partly offset by a C$53.1 million loss related to the shutdown of a value-added beef-processing facility in Ontario and the company’s exit from certain unprofitable sales.
Premium Brands revised its 2026 guidance to sales of C$9.1 billion to C$9.3 billion and adjusted EBITDA of C$840 million to C$870 million. Kalutycz cited delays in product launches, a customer’s decision to shift several large promotions from the second half of 2026 to early 2027, the exit from unprofitable beef-related sales, and weakening consumer demand in certain foodservice segments.
Despite the revised outlook, management said it still expects strong growth in the second half of 2026 and remains on track to meet or exceed its five-year targets of C$10 billion in sales and C$1 billion in EBITDA by the end of 2027.
About Premium Brands (TSE:PBH)
Premium Brands Holdings Corp is engaged in specialty food manufacturing, premium food distribution, and wholesale businesses with operations in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nevada, and Washington State. The company’s business segments include Specialty Foods, Premium Food Distribution, and Corporate. The Specialty Foods segment consists of its specialty food manufacturing businesses, which contributes about two-thirds of the group revenue; the Premium Food Distribution segment consists of the company’s distribution and wholesale businesses; the Corporate segment includes the company’s head office activities along with its finance and information systems.
