Supremex (TSE:SXP) reported fourth-quarter results that showed year-over-year revenue growth and a sharp sequential improvement in profitability, while management highlighted progress in U.S. envelope share gains, continued packaging momentum, and a dramatically strengthened balance sheet following a sale-leaseback and debt repayment.
Operational update: envelopes and packaging
President and CEO Stewart Emerson said 2025 was marked by “ups and downs,” including more than 12 months of labor unrest, negative press and multiple delivery disruptions at Canada Post, as well as a “significant volume reduction” from a single large U.S. direct mail customer. Despite those headwinds, Emerson said the company increased envelope volume in a declining market and grew packaging revenue by more than 8% for the year, including 18% growth in the fourth quarter.
Emerson also discussed mix pressure: replacement business carried lower selling prices and lower costs than the higher value-added volume it replaced, which contributed to lower revenue despite higher unit volumes. He added that serving a broader base of customers requires more operating and SG&A effort than dealing with a single large customer, even as the additional volume helped maintain asset utilization.
In packaging, Emerson said performance was driven by strong folding carton demand in health and beauty and over-the-counter pharmaceutical segments, new business wins from current and reactivated customers, and revenue from the Trans-Graphique acquisition (completed in July) to expand the company’s presence in food-grade packaging. He also cited continued growth in e-commerce solutions and specialty packaging. These gains were partially offset by weaker commercial printing activity, which management said relies on Canada Post for delivery of coupons and direct mail components. Emerson said the company expects some commercial print volume to return now that delivery uncertainty has diminished following the signing of new collective agreements in late January.
Acquisitions and footprint actions
Emerson characterized Elite Envelope as a “perfect tuck-in acquisition,” describing it as a business with approximately $5 million in annual volume that has served the New England market for more than two decades. He said Elite’s facility in Randolph, Massachusetts is less than an hour from Supremex’s larger facility in Douglas, Massachusetts, and that production and certain staff were transferred to Douglas immediately after Christmas. Supremex is operating under a three-month transition services agreement, is selling excess equipment, and plans to exit the Randolph facility at the end of February. Emerson said the acquisition is expected to have a rapid payback of less than a year and should improve utilization at the Douglas plant.
The company also announced a decision to shutter its envelope manufacturing capabilities in Indianapolis as part of a rationalization and network optimization initiative. Emerson said the facility became less strategic after the company’s 2022 acquisition of two plants in the Chicagoland area, and noted Indianapolis produced less than 8% of Supremex’s total units sold in 2025. He said the company is confident it can retain the sales by shifting production to other facilities.
During the Q&A session, management said it expects to take a non-recurring provision related to the Indianapolis closure in the first quarter, “somewhere between a million to two million dollars,” and added that anticipated synergies should be “fairly substantial” as 2026 progresses.
Fourth-quarter financial results
CFO Normand Macaulay reported fourth-quarter revenue of CAD 72.9 million, up 5.6% from CAD 69.1 million a year earlier.
- Envelope revenue: CAD 48.9 million versus CAD 48.8 million last year (and CAD 45.1 million in Q3). Macaulay said the year-over-year change reflected a 5.3% volume increase and contributions from Enveloppe Laurentide (full-quarter) and Elite (three weeks), as well as U.S. customer wins that offset lower volume from a large U.S. customer and Canada Post disruptions. Average selling prices fell 4.8%.
- Packaging and specialty products revenue: CAD 24.0 million, up 18.3% from CAD 20.3 million (and CAD 20.6 million in Q3). Macaulay attributed the increase to higher folding carton revenue from gains with large multinational consumer packaged goods customers, expansion in e-commerce packaging, new business wins from existing customers, and the Trans-Graphique contribution.
Adjusted EBITDA totaled CAD 9.1 million, or 12.5% of sales, compared with CAD 12.9 million, or 18.7% of sales, in the prior-year quarter. However, adjusted EBITDA improved sequentially from CAD 6.2 million, or 9.4% of sales, in Q3.
- Envelope adjusted EBITDA: CAD 7.8 million (15.9% margin) versus CAD 9.2 million (18.8%) last year; up from CAD 5.3 million (11.8%) in Q3. Management cited lower selling prices as a key year-over-year factor.
- Packaging and specialty adjusted EBITDA: CAD 3.2 million (13.2%) versus CAD 2.4 million (11.6%) last year; up from CAD 2.2 million (10.5%) in Q3, primarily due to higher folding carton volume.
Macaulay said corporate and unallocated costs were CAD 1.9 million, compared with a CAD 1.4 million recovery in the prior-year quarter, largely due to a foreign exchange loss of CAD 1.3 million on intercompany balances versus a CAD 0.8 million gain a year earlier. He emphasized this was a non-cash item and said the company is evaluating ways to reduce the volatility from intercompany FX movements in reported results.
Net earnings were CAD 1.3 million, or CAD 0.05 per share, versus CAD 5.8 million, or CAD 0.23 per share, a year ago. Adjusted net earnings were CAD 1.5 million, or CAD 0.06 per share, compared with CAD 5.2 million, or CAD 0.20 per share, in the prior-year quarter.
Cash flow, balance sheet, and shareholder returns
Operating cash flow was CAD 14.1 million, up from CAD 9.2 million last year, which Macaulay said reflected improved working capital efficiency partly offset by lower profitability. Free cash flow was CAD 13.4 million in the quarter, up from CAD 8.7 million a year ago. For the full year, free cash flow totaled CAD 73.2 million. Excluding a CAD 53 million inflow from a sale-leaseback completed in July, Macaulay said the company’s trailing 12-month free cash flow yield was approximately 22% based on the recent share price.
Net debt stood at CAD 1.0 million at year-end, down from CAD 8.9 million three months earlier and CAD 41.2 million a year earlier, reflecting CAD 39 million of long-term debt repaid using sale-leaseback proceeds and free cash flow generation. The net debt to adjusted EBITDA ratio was 0.03x, compared with 0.26x in the prior quarter and 1.02x a year earlier.
On capital returns, management said the company repurchased more than 171,000 shares for CAD 0.6 million since starting its normal course issuer bid in August, and an additional 45,000 shares for CAD 0.2 million after year-end. The board declared a quarterly dividend of CAD 0.05 per share, payable April 2, 2026, to shareholders of record March 19, 2026.
Outlook and early 2026 commentary
Emerson said the company is encouraged by improvements late in 2025, pointing to the end of Canada Post disruptions and the expected lapping of the large U.S. customer headwind. In response to an analyst question, he said the first quarter was “off to a good start” and “looks solid,” citing strong U.S. penetration in envelopes and continued strength in packaging, particularly folding carton and e-commerce.
On M&A, Emerson said the strategy remains focused on tuck-in acquisitions that are quickly accretive and close to existing operations, while also exploring more substantive opportunities, which he indicated would be “on the packaging side, preferably in Canada.” He described the company’s pipeline as “fairly robust.”
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.
