Primo Brands Corp Q4 FY2024 earnings call

• Past year reflection: A year ago, Primo Water sold a significant portion of international businesses. BlueTriton Brands had strong performance. In June, legacy organizations entered an agreement to combine, and the transaction was completed on November 8th.
• Fourth quarter details: Q4 and full year 2024 results include legacy BlueTriton business for the entire period and legacy Primo Water results from November 8 to December 31. Combined results show robust growth across the portfolio.
• Must-win priorities:
  • Brand leadership: Empower brands to be number one, with iconic portfolio including billion-dollar brands and premium brands expanding.
  • Net organic growth: Grow customer and consumer base through omnichannel offerings.
  • Superior customer service experience: Delight customers through consistent experience at touchpoints.
  • Operational excellence: Enhance efficiency, strategic sourcing, and returns on invested capital.
  • First choice for stakeholders: Earn position through quality associate experience, sustainability, community engagement, etc.

The combined Primo Brands had combined net sales increasing 5.5% to $1.609 billion in the fourth quarter, with combined adjusted EBITDA increasing 3.7% to $301 million and combined adjusted EBITDA margins of 18.7%. For the full year 2024, combined net sales increased 5.4% to $6.810 billion, combined adjusted EBITDA increased 19.5% to $1.353 billion, with combined adjusted EBITDA margins of 19.9%, a 240 basis point increase versus the prior year. The combined net sales growth was driven by volume of 3.4% or $220 million and price/mix of 2.0% or $127 million. Within the combined 5.5% net sales growth in the fourth quarter, approximately 5.1% or approximately $78 million came from organic growth activity with the balance 0.4% or approximately $6 million coming from inorganic or acquired sources.

• 2025 full year guidance: Anticipates comparable organic net sales growth of between 3% and 5%, with net sales reaching $7 billion at the midpoint, balanced between volume and price or mix. Anticipates comparable adjusted EBITDA to be between $1.6 billion and $1.628 billion with an implied adjusted EBITDA margin of approximately 23.1% at the midpoint. Anticipates capture of approximately $200 million cost synergy opportunity within 2025 and raises anticipated total synergy capture to approximately $300 million, with total estimated $300 million cost synergy opportunity to be captured by year-end 2026. Forecasts a run-rate growth and maintenance CapEx budget of approximately 4% of net sales.

Q: Nik Modi with RBC Capital Markets asked about the 3% to 5% guidance for 2025 and the upsize to the synergy target.

A: Robbert Rietbroek said the 2025 guidance is 3% to 5% with strong tailwinds like health and wellness trends, and on synergy, David Hass explained that additional opportunities were found in re-engineering route network and other areas leading to upsizing the synergy target.

Q: Daniel Moore with CJS Securities asked about the $800 million free cash flow guidance and synergy cadence.

A: David Hass explained the contributors to the free cash flow and David Hass also provided context on synergy cadence with Q1 muted and ramping up from Q2 through Q4.

Q: Andrew Strelzik with BMO asked about base margins and synergy cadence.

A: David Hass said base EBITDA margins on an ex-Eastern Canadian business side would be approximately 20% and basis point expansion comes from synergies in 2025, and provided synergy cadence details.

Q: Drew Levine with JPMorgan asked about retail growth and synergy cadence.

A: Robbert Rietbroek and David Hass provided perspectives on retail growth and David Hass discussed synergy cadence and future updates on synergies.

Q: Derek Lessard with TD Cowen asked about M&A and route optimization.

A: Robbert Rietbroek and David Hass talked about M&A plans and route optimization efforts.

Q: Steve Powers with Deutsche Bank asked about service levels and best practices.

A: Robbert Rietbroek discussed service levels, best practices across legacy businesses, and progress in customer service areas