Primo Brands Margins Rebound as Sales Growth Reaccelerates
Primo Brands posted 3.8% net sales growth in the second quarter, a rebound from just 0.8% in the first quarter that came alongside a return to profit growth after a year of margin compression.
Primo Brands (PRMB) reported net sales of $1.80 billion for the second quarter, up 3.8% from $1.73 billion a year earlier, marking a sharp reacceleration from the 0.8% growth the beverage company posted in the first quarter and a recovery from the deceleration seen through the back half of 2024.
The rebound followed a stretch in which the company, formed from the merger of Primo Water and BlueTriton, worked through integration costs and margin pressure tied to the combination. Gross margin had compressed for two straight quarters, falling to 27.7% in the fourth quarter of 2024 and to 28.6% in the first quarter of 2025. In the second quarter, the year-over-year decline narrowed to 80 basis points, with gross margin at 30.5% versus 31.3% a year earlier.
Adjusted EBITDA rose 5.0% year over year to $385.0 million, reversing a 10.4% decline in the first quarter, when adjusted EBITDA fell to $306.0 million from $341.5 million. Adjusted EBITDA margin climbed to 21.4% in the second quarter from 18.8% in the first, and edged up 20 basis points from a year earlier after having contracted 240 basis points in the prior period. Net income from continuing operations more than doubled to $69.2 million from $30.5 million, a turnaround from the $25.3 million net loss from continuing operations the company posted in the fourth quarter of 2024.
Premium water was the standout among Primo Brands' segments, with sales up 30.5% to $114.2 million from $87.5 million. Regional spring water grew 4.1% and purified water rose 1.9%, while the company's other water offerings declined 9.7%. Its Direct Delivery channel returned to growth earlier than expected in the quarter, a shift from the first quarter, when management described only "continued improvement" in that channel.
Cost discipline contributed to the margin recovery. Selling, general and administrative expenses fell to $345.5 million from $378.6 million, a decline of $33.1 million that reversed modest year-over-year increases in both the first quarter and the fourth quarter of 2024. Acquisition, integration and restructuring expenses tied to the BlueTriton merger continued to wind down, falling 80% to $10.0 million from $49.7 million a year earlier.
Primo Brands raised its full-year organic net sales growth guidance for the second consecutive quarter, to 2%-4% from the 1%-3% range set in the first quarter, which itself had been raised from an initial 0%-1%. The company reaffirmed its full-year adjusted EBITDA guidance of $1.465 billion to $1.515 billion, the same range it had widened in the first quarter. The company also revised its presentation of 2025 comparable net sales to exclude the impact of its exited Eastern Canadian operations and its exited U.S. office coffee services business.
Free cash flow swung to $123.3 million from a $14.3 million deficit in the first quarter, while adjusted free cash flow rose to $200.1 million from $128.6 million. Net leverage improved to 3.42 times at the end of June from 3.52 times three months earlier, giving the company added room as it works through the final stages of its post-merger integration.