Premium Brands : 2024 Q1 Management's Discussion and Analysis

PREMIUM BRANDS HOLDINGS CORPORATION

Management's Discussion and Analysis

For the 13 Weeks Ended March 30, 2024

The following Management's Discussion and Analysis (MD&A) is a review of the financial performance and position of Premium Brands Holdings Corporation (the Company or Premium Brands) and is current to May 10, 2024. It should be read in conjunction with the Company's unaudited interim condensed consolidated financial statements for the period ended March 30, 2024, and its fiscal 2023 audited consolidated financial statements and the notes thereto, both of which are prepared in accordance with International Financial Reporting Standards (IFRS). These documents, as well as additional information on the Company, are filed electronically through SEDAR+ and are available online at www.sedarplus.ca.

All amounts are expressed in Canadian dollars except as noted otherwise.

BUSINESS OVERVIEW

Premium Brands is an investment platform focused on acquiring and building food businesses in partnership with talented entrepreneurial management teams. Its current holdings consist primarily of:

Specialty food businesses. The Company considers the key characteristic of a specialty food business to be that a consumer's and/or customer's decision to purchase its products is based primarily on factors other than price, such as quality, convenience, health and/or lifestyle. As a result, specialty food businesses generally earn higher and more consistent selling margins relative to food companies that focus on less differentiated products. Furthermore, due to a variety of consumer trends impacting the food industry, these businesses tend to generate higher sales growth rates as compared to general industry growth rates.

Differentiated food distribution and wholesale businesses ("premium food distribution businesses"). The Company considers the key characteristic of a premium food distribution business to be that it offers its customers specialized and/or unique products and services in addition to logistical solutions. This enables it to generate higher and more consistent selling margins relative to the large national and international food distributors that are primarily focused on logistics.

The Company's premium food distribution businesses also enable it to generate and sustain additional margin by using these businesses to provide its specialty food businesses with proprietary access to a broad and diversified customer base that includes regional and specialty grocery retailers, restaurants, hotels and institutions.

RESULTS OF OPERATIONS

The Company reports on two reportable segments, Specialty Foods and Premium Food Distribution, as well as non-segmented investment income and corporate costs (Corporate). The Specialty Foods segment consists of the Company's specialty food manufacturing businesses while the Premium Food Distribution segment consists of the Company's differentiated distribution and wholesale businesses as well as certain seafood processing businesses. Investment income includes interest and management fees generated from the Company's businesses that are accounted for using the equity method.

Revenue

(in millions of dollars except percentages)
		13 weeks	%	13 weeks	%
		ended	(1)	ended	(1)
		Mar 30,		Apr 1,
		2024		2023
Revenue by segment:
Specialty Foods	987.4	67.5%	948.8	66.3%
Premium Food Distribution	474.4	32.5%	481.7	33.7%
Consolidated	1,461.8	100.0%	1,430.5	100.0%

1. Expressed as a percentage of consolidated revenue.

Specialty Foods' (SF) revenue for the quarter increased by $38.6 million or 4.1% primarily due to: (i) organic volume growth of $53.0 million representing an organic volume growth rate (OVGR) of 5.6%; and (ii) a $0.3 million increase in the translated value of sales generated by SF's U.S. based businesses due to a slightly weaker Canadian dollar. These factors were partially offset by: (i) selling price deflation of $13.1 million relating primarily to a cost-plus contract with a major foodservice customer; and (ii) the shutdown of SF's Creekside Custom Foods business as its capacity is transitioned to our rapidly growing Global Gourmet kettle business - this resulted in $1.6 million of lost sales, primarily in the fresh sandwich category.

SF's OVGR was driven by its core U.S. sales growth initiatives in sandwiches, protein and baked goods, which generated an OVGR of 9.7% and total sales of $580.8 million for the quarter. This performance was despite experiencing temporarily lower sandwich sales growth while a customer implements a new merchandising strategy - normalizing for this factor the OVGR for SF's core U.S. sales growth initiatives is 12.2%.

SF's OVGR was negatively impacted by: (i) a below normal OVGR in Canada of 1.1% mainly due to general weakness in consumer spending in the retail and foodservice channels; and (ii) reduced beef jerky product sales due to a combination of factors including consumer price sensitivity and high selling prices resulting from high beef commodity input costs. SF expects (see Forward Looking Statements) these challenges to be transitory and in the meantime is implementing a variety of strategies to counter them including targeted promotion, product development, and developing new markets.

2

Premium Food Distribution's (PFD) revenue for the quarter decreased by $7.3 million or 1.5% due to a sales volume contraction of $25.5 million. This was partially offset by: (i) selling price inflation of $15.8 million relating primarily to lobster-based products; and (ii) business acquisitions, which generated $2.4 million in growth.

The contraction in PFD's sales volume was primarily due to lobster supply shortages caused mainly by a decline in the Maine lobster catch of approximately 20% in the third quarter of 2023 and a poor southwest Nova Scotia fishery in the fourth quarter of 2023. The decreases in both fisheries, which were the result of unusually cold waters and poor weather that prevented vessels from harvesting, are expected (see Forward Looking Statements) to be transitory. Excluding the impacts of the lobster supply issue, PFD's sales were flat as the success of several retail salmon features, driven by large Atlantic salmon harvests on the east coast of Canada, were offset by lower Canadian premium beef and seafood sales caused by weaker consumer spending.

Gross Profit

(in millions of dollars except percentages)
		13 weeks	%	13 weeks	%
		ended	(1)	ended	(1)
		Mar 30,		Apr 1,
		2024		2023
Gross profit by segment:
Specialty Foods	223.0	22.6%	199.3	21.0%
Premium Food Distribution	74.7	15.7%	70.5	14.6%
Consolidated	297.7	20.4%	269.8	18.9%

1. Expressed as a percentage of the corresponding segment's revenue.

SF's gross profit as a percentage of its revenue (gross margin) for the quarter increased by 160 basis points primarily due to: (i) a combination of lower raw material input costs and selling price increases on certain products; (ii) production efficiency improvements resulting from investments in automation, continuous improvement projects and a more stable labor market; and (iii) sales leveraging benefits associated with SF's organic volume growth. These factors were partially offset by: (i) wage inflation; and (ii) investments in additional plant infrastructure to support SF's current and future growth.

PFD's gross margin for the quarter increased by 110 basis points primarily due to higher margins on lobster-based products resulting from: (i) lower than normal margins in the first quarter of 2023; and (ii) a generally improved pricing environment caused by a shortage of supply.

Selling, General and Administrative Expenses (SG&A)

(in millions of dollars except percentages)
		13 weeks	%	13 weeks	%
		ended	(1)	ended	(1)
		Mar 30,		Apr 1,
		2024		2023
SG&A by segment:
Specialty Foods	129.4	13.1%	117.8	12.4%
Premium Food Distribution	50.7	10.7%	48.1	10.0%
Corporate	9.5		8.3
Consolidated	189.6	13.0%	174.2	12.2%

1. Expressed as a percentage of the corresponding segment's revenue.

3

SF's SG&A as a percentage of sales (SG&A ratio) for the quarter increased by 70 basis points primarily due to: (i) wage inflation; and (ii) higher outside storage costs, which were mostly the result of providing a major customer with additional services, the cost of which is recovered through increased selling prices on applicable products. These factors were partially offset by the sales leveraging benefits associated with SF's organic growth.

PFD's SG&A ratio for the quarter increased by 70 basis points primarily due to the impact of sales deleveraging associated with the contraction in its sales volumes.

Adjusted EBITDA

Adjusted EBITDA is not defined under IFRS and, as a result, may not be comparable to similarly titled measures presented by other publicly traded entities, nor should it be construed as an alternative to other earnings measures determined in accordance with IFRS.

The Company believes that adjusted EBITDA is a useful indicator of the amount of normalized income generated by operating businesses controlled by the Company before taking into account its financing strategies, consumption of capital and intangible assets, taxable position and the ownership structure of non-wholly owned businesses. This measure is widely used by investors in the valuation and comparison of companies. In addition, it is used in the calculation of certain financial debt covenants associated with the Company's senior credit facilities (see Liquidity and Capital Resources - Debt Financing Activities).

The following table provides a reconciliation of adjusted EBITDA to earnings before income taxes:

(in millions of dollars)	13 weeks	13 weeks
	ended	ended
	Mar 30,	Apr 1,
	2024	2023
Earnings before income taxes	15.4	8.5
Plant start-up and restructuring costs (1)	10.8	5.8
Depreciation of capital assets (2)	24.4	22.2
Amortization of intangible assets (2)	5.5	4.0
Amortization of right of use assets (2)	16.8	14.8
Accretion of lease obligations (3)	7.4	6.6
Interest and other financing costs (3)	40.4	33.4
Acquisition transaction costs (1)	1.1	1.0
Change in value of puttable interest in subsidiaries (4)	2.6	1.6
Accretion of provisions (3)	3.3	0.5
Equity loss in investments in associates (5)	13.3	12.3
Change in fair value of option liabilities (1) (3)	(20.0)	-
Adjusted EBITDA	121.0	110.7

1. Amount is not part of the Company's normal operating costs and/or gains.
2. Amount relates to the consumption of the Company's capital assets, intangible assets or other assets.
3. Amount relates to the Company's financing strategies.
4. Amount relates to the valuation of provisions or minority shareholders' interest in certain subsidiaries of the Company.
5. Amount relates to businesses that the Company does not consolidate as it does not own a controlling interest.

4

(in millions of dollars except percentages)
		13 weeks	%	13 weeks	%
		ended	(1)	ended	(1)
		Mar 30,		Apr 1,
		2024		2023
Adjusted EBITDA by segment:
Specialty Foods	93.6	9.5%	81.5	8.6%
Premium Food Distribution	24.0	5.1%	22.4	4.7%
Corporate	(9.5)		(8.3)
Interest Income from Investments	12.9		15.1
Consolidated	121.0	8.3%	110.7	7.7%

1. Expressed as a percentage of the corresponding segment's revenue.

Revenue and Adjusted EBITDA Outlook

See Forward Looking Statements for a discussion of the risks and assumptions associated with forward looking statements.

2024 Outlook

(in millions of dollars)	Bottom of Range	Top of Range
Revenue guidance range	6,650	6,850
Adjusted EBITDA guidance range	630	650

The Company's 2024 guidance for sales of $6.65 billion to $6.85 billion and adjusted EBITDA of $630 million to $650 million remains unchanged. These estimates are based on a range of assumptions (see Forward Looking Statements) including: (i) reasonably stable economic environments in Canada and the U.S. with inflation and interest rates moderating over the course of the year; (ii) stable raw material costs; and (iii) a stable Canadian dollar relative to the U.S. dollar.

The Company's sales and adjusted EBITDA outlook for 2024 do not incorporate any provisions for potential future acquisitions, however, it remains active on this front and is pursuing several opportunities (see Forward Looking Statements).

5 Year Plan

	(in millions of dollars)			5-Year Target
			(2027)
	Revenue	10,000
	Adjusted EBITDA	1,000

The Company remains on track (see Forward Looking Statements) to meet or exceed the five-year targets it set at the beginning of 2023.

5

Plant Start-up and Restructuring Costs

Plant start-up and restructuring costs consist of expenses associated with: (i) the start-up of new production capacity; (ii) the reconfiguration of existing capacity to gain efficiencies and/or additional capacity; and/or (iii) the restructuring of a business to improve its profitability. The Company expects (see Forward Looking Statements) these investments to result in improvements in its future earnings and cash flows.

During the first quarter of 2024, the Company incurred $10.8 million in plant start-up and restructuring costs relating primarily to the following projects, all of which are expected to expand its capacity and/or generate improved operating efficiencies (see Forward Looking Statements):

• Start-upof a new cooked protein capacity in Versailles, Ohio
• Reconfiguration of a cooked protein facility in Scranton, Pennsylvania, including the addition of another cooked products production line
• Start-upof a new 91,000 square foot artisan bakery in San Francisco, California
• Reconfiguration of a meat snack facility in Kent, Washington
• Start-upof new capacity associated with a 107,000 square foot expansion and reconfiguration of a meat snack and processed meats facility in Ferndale, Washington
• Start-upof a new 67,000 square foot sandwich production facility in Edmonton, Alberta
• Construction of a new 165,000 square foot distribution center and the related reconfiguration of a sandwich production facility in Columbus, Ohio
• Reconfiguration of a kettle cooking facility in Richmond, British Columbia
• Reconfiguration of a 27,000 square foot production facility from primarily fresh sandwich production to supporting the Company's Global Gourmet kettle business
• Construction of a new 60,000 square foot value-added seafood processing facility in Auburn, Maine

Depreciation and Amortization of Intangibles (D&A)

(in millions of dollars)	13 weeks	13 weeks
	ended	ended
	Mar 30,	Apr 1,
	2024	2023
Depreciation and amortization of intangible assets by segment:
Specialty Foods	24.3	21.7
Premium Food Distribution	5.3	4.2
Corporate	0.3	0.3
Consolidated	29.9	26.2

The Company's D&A expense for the first quarter of 2024 as compared to the first quarter of 2023 increased by $3.7 million primarily due to additional depreciation associated with the recent completion of several larger capital projects.

Interest and Other Financing Costs

The Company's interest and other financing costs for the first quarter of 2024 as compared to the first quarter of 2023 increased by $7.0 million primarily due to: (i) higher levels of funded debt (see Liquidity and Capital Resources - Debt Financing Activities); and (ii) increased average interest rates on the Company's revolving senior credit facility resulting from general market rate increases.

6

Change in Value of Puttable Interest in Subsidiaries

Change in value of puttable interest in subsidiaries (put expense) represents an estimate (see Forward Looking Statements) of the change in the value of options (the put options) held by non-controlling shareholders of certain subsidiaries of the Company that entitle such shareholders to require the Company to purchase their interest in the applicable subsidiary (see Liquidity and Capital Resources - Corporate Investments - Puttable Interest in Subsidiaries).

Equity Earnings (Loss) in Investment in Associates

Equity earnings (loss) in investment in associates includes the Company's proportionate share of the earnings and losses of its investments in associates (see Liquidity and Capital Resources - Corporate Investments - Investments in Associates).

(in millions of dollars)	13 weeks	13 weeks
	ended	ended
	Mar 30,	Apr 1,
	2024	2023
Clearwater:
Revenue	123.5	124.5
Loss before payments to shareholders	(6.9)	(3.0)
Net loss	(25.9)	(24.1)
The Company:
Equity loss in Clearwater	(13.0)	(12.0)
Other net equity losses	(0.3)	(0.3)
Equity loss in investment in associates	(13.3)	(12.3)

Clearwater Seafoods Incorporated (Clearwater)

Clearwater's sales for the quarter decreased by $1.0 million primarily due to: (i) the sale of excess snow crab inventories from the prior year in the first quarter of 2023; and (ii) lobster supply shortages (see Results of Operations - Revenue). These factors were partially offset by: (i) increased turbot and frozen- at-sea shrimp sales, which were the result of a new harvesting vessel as well as higher opening inventories; and (ii) higher than normal opening inventories for scallops and clams.

Clearwater's earnings before payments to shareholders for the quarter decreased by $3.9 million primarily due to: (i) lower harvesting and production efficiencies resulting from reduced catch rates, caused by challenging weather conditions, and normal gradings relative to favorable gradings in the first quarter of 2023; (ii) challenging consumer environments in several markets, and in particular Europe, that impacted margins generated on certain premium seafood products; (iii) increased depreciation, primarily related to a new shrimp and turbot harvesting vessel; (iv) restructuring costs associated with several corporate initiatives; and (v) higher interest due mainly to general market rate increases. These factors were partially offset by lower SG&A costs that were the result of the timing of certain expenditures.

7

Income Taxes

The Company's provision for income taxes as a percentage of earnings (tax rate) can be impacted by a variety of factors including: (i) changes in enacted tax laws, in general, and tax rates, in particular, in the tax jurisdictions in which the Company operates; (ii) the proportionate mix of the Company's taxable income by tax jurisdiction; (iii) differences in the treatment of certain income and expense items for income tax and accounting purposes; and (iv) the Company's equity loss or earnings in investments in associates not held in an income flow-through structure as this amount is excluded in the calculation of the Company's tax provision.

Based on current enacted tax rates in the tax jurisdictions the Company operates, the expected mix of its taxable income by tax jurisdiction (see Forward Looking Statements), the Company's general structuring of its tax affairs, there being no unusual revenue and/or expenses that are treated differently for income tax and accounting purposes, and excluding from the calculation equity earnings or loss in investments in associates relating to businesses not held in an income flow-through structure, the expected range for the Company's tax rate is approximately 24% to 26% (see Forward Looking Statements).

The Company's tax rate for the first quarter of 2024 is 26.0% after adjusting its pre-tax earnings for: (i) $13.7 million in equity losses relating to investments in associates not held in an income flow-through structure; and (ii) accretion of provisions and change in value of puttable interest in subsidiaries, neither of which is an eligible deduction for income tax purposes.

SUMMARY OF QUARTERLY RESULTS

The following is a summary of select quarterly consolidated financial information. All amounts, except adjusted EBITDA (see Results of Operations - Adjusted EBITDA), are derived from the Company's unaudited interim condensed consolidated financial statements for each of the eight most recently completed quarters.

(in millions of dollars except per share amounts)
		Q2-22		Q3-22		Q4-22		Q1-23		Q2-23		Q3-23		Q4-23			Q1-24
Revenue	1,519.9	1,623.9	1,634.8	1,430.5	1,630.9	1,644.9	1,554.7		1,461.8
Adjusted EBITDA	130.8	141.2	136.4	110.7	152.4	158.8	137.2		121.0
Earnings	63.3	43.5	30.9	5.9	33.9	39.4	15.0		6.3
Earnings per share - basic	1.42	0.97	0.69	0.13	0.76	0.89	0.34		0.14
Earnings per share - diluted	1.41	0.97	0.69	0.13	0.76	0.88	0.34		0.14

The financial performance of many of the Company's businesses is subject to fluctuations associated with the impact on consumer demand from seasonal changes in weather. As a result, the Company's performance varies with the seasons (see Forward Looking Statements).

In general terms, its results are weakest in the first quarter of the year due to winter weather conditions which result in: (i) less consumer travelling and outdoor activities and, in turn, reduced consumer traffic through many of the Company's convenience oriented customers' stores such as restaurants, convenience stores, gas stations and concessionary venues; and (ii) reduced consumer demand for its outdoor oriented products including barbeque and on-the-go convenience foods. The Company's results then generally peak in the spring and summer months due to favorable weather conditions and decline in the fourth quarter due to a return to poorer weather conditions (see Forward Looking Statements).

In addition to seasonal factors, over the last eight quarters, the trends in the Company's sales, adjusted EBITDA, earnings and earnings per share have been impacted by: (i) business acquisitions and a variety of organic growth initiatives that have generally resulted in year over year increases; and (ii) an extra week of operations in the fourth quarter of 2022.

8

The trends in the Company's earnings and earnings per share were also impacted by: (i) a $19.8 million fair value gain on investments in associates in the second quarter of 2022; (ii) an increasing number of major capacity expansion and production automation projects coming online starting in the middle of 2022 and continuing through to the first quarter of 2024 resulting in rising plant start-up and restructuring costs; and (iii) higher debt levels and rising interest rates over the course of 2022 and into 2024.

LIQUIDITY AND CAPITAL RESOURCES

Net Working Capital Requirements

Net Working Capital

Net working capital is not defined under IFRS, and as a result, may not be comparable to similarly titled measures presented by other publicly traded entities. The Company believes that net working capital is a useful indicator of the cash needed to fund the Company's working capital requirements.

The following table provides the calculation of net working capital:

(in millions of dollars)	As at	As at
	Mar 30, 2024	Apr 1, 2023
Accounts receivable	491.2	538.7
Inventories	801.5	829.7
Prepaid expenses	39.4	30.9
Accounts payable and accrued liabilities	(476.9)	(440.8)
Net working capital	855.2	958.5

The Company's net working capital needs are seasonal in nature and generally peak (see Forward Looking Statements) in the spring and summer months and around festive holiday seasons (e.g. Easter, Thanksgiving and Christmas) as inventories are built up in anticipation of, and accounts receivable grow because of, increased consumer demand (see Summary of Quarterly Results). The cash requirements resulting from seasonal fluctuations in the Company's net working capital are managed primarily through draws and repayments on its revolving senior credit facility. The cash requirements for increases in the Company's net working capital resulting from its growth initiatives are, over the longer term, financed through the associated growth in the Company's free cash flow.

The following table shows certain non-GAAP ratios relating to the Company's accounts receivable and inventory balances:

(in days)	As at	As at
	Mar 30, 2024	Apr 1, 2023
Days sales in accounts receivable (1)	30.6	34.3
Days cost of sales in inventory (2)	62.7	65.0

1. Calculated as accounts receivable divided by sales for the applicable quarter multiplied by the number of days in the quarter.
2. Calculated as inventory divided by cost of sales for the applicable quarter multiplied by the number of days in the quarter.

The Company's days sales in accounts receivable at the end of the first quarter of 2024 as compared to the end of the first quarter of 2023 decreased by 3.7 days primarily due to the expansion of its trade receivable finance program; partially offset by general fluctuations in the timing of sales and accounts receivable collections.

9

The Company's days cost of sales in inventory at the end of the first quarter of 2024 as compared to the end of the first quarter of 2023 decreased by 2.3 days primarily due to: (i) the continued unwinding of conservative inventory positions taken by the Company's businesses in reaction to global supply chain, inflation and certain capacity challenges in the recent past; and (ii) general fluctuations in the timing of sales, production and purchasing of inventory.

Debt Financing Activities

Credit Facilities

As at March 30, 2024, the Company's credit facilities and the unutilized portion of those facilities were as follows:

(in millions of dollars)	Credit	Amount Drawn	Unutilized Credit
	Facilities	on Facility	Capacity
Revolving senior credit facility (1)	2,132.2	1,627.9	504.3
4.65% debentures (2)	169.8	169.8	-
4.20% debentures (3)	153.7	153.7	-
5.40% debentures (4)	142.6	142.6	-
Industrial Development Revenue Bond (5)	8.3	8.3	-
Vendor take-back notes	4.4	4.4	-
Other term loans	0.4	0.4	-
Other revolving credit facilities	114.7	13.8	100.9
Cheques outstanding	-	18.9	(18.9)
Cash and cash equivalents	-	(10.2)	10.2
	2,726.1	2,129.6	596.5

1. Represents the Company's main revolving senior credit facility, consisting of an $1.5 billion Canadian dollar denominated line of credit and a US$475.0 million U.S. dollar denominated line of credit, less approximately $11.5 million in outstanding letters of credit. The facility matures in November 2026, can be used to fund the Company's working capital and general operating needs, capital projects and acquisitions, and has no principal payments prior to its maturity date.
2. Represents the present value of the outstanding portion of the $172.5 million in 4.65% convertible unsecured subordinated debentures issued by the Company in April 2018 plus the value attributed to the cash conversion option associated with the debentures. The outstanding face value of these debentures, which mature on April 30, 2025 and have no principal payments prior to that date, was $172.5 million as at March 30, 2024. The 4.65% debentures trade on the Toronto Stock Exchange under the symbol PBH.DB.G.
3. Represents the present value of the outstanding portion of the $150.0 million in 4.20% convertible unsecured subordinated debentures issued by the Company in July 2020 plus the value attributed to the cash conversion option associated with the debentures. The outstanding face value of these debentures, which mature on September 30, 2027 and have no principal payments prior to that date, was $150.0 million as at March 30, 2024. The 4.20% debentures trade on the Toronto Stock Exchange under the symbol PBH.DB.H.
4. Represents the present value of the outstanding portion of the $150.0 million in 5.40% convertible unsecured subordinated debentures issued by the Company in June 2022 plus the value attributed to the cash conversion option associated with the debentures. The outstanding face value of these debentures, which mature on September 30, 2029 and have no principal payments prior to that date, was $150.0 million as at March 30, 2024. The 5.40% debentures trade on the Toronto Stock Exchange under the symbol PBH.DB.I.
5. The bond, which was issued by one of the Company's U.S. subsidiaries, is denominated in U.S. dollars (US$6.1 million), matures in 2036 and has no principal payments due prior to its maturity date.

Funded Debt

Senior funded debt and total funded debt are not defined under IFRS and, as a result, may not be comparable to similarly titled measures presented by other publicly traded entities. The Company believes that senior funded debt and total funded debt, used in conjunction with its adjusted EBITDA, are useful indicators of its financial strength and ability to access additional debt financing. Senior funded debt is also used in the calculation of certain debt covenants associated with the Company's revolving senior credit facility (see Liquidity and Capital Resources - Debt Financing Activities - Banking Covenants).

10