Press Releases

Transcontinental Inc. announces its results for the first quarter of fiscal 2021

Highlights

  • Generated significant organic sales growth and improved profitability in the Packaging Sector, and maintained rigorous cost control in the Printing Sector.
  • Revenues of $622.7 million for the quarter ended January 24, 2021; operating earnings of $47.2 million; and net earnings attributable to shareholders of the Corporation of $27.7 million ($0.32 per share). 
  • Adjusted operating earnings before depreciation and amortization(1) of $105.7 million for the quarter ended January 24, 2021; adjusted operating earnings(1) of $68.6 million; and adjusted net earnings attributable to shareholders of the Corporation(1) of $43.8 million ($0.50 per share).
  • Maintained a solid financial position with liquidities of $182.0 million and access to unused lines of credit of $428.5 million, for total available liquidities of $610.5 million.
  • Improved net indebtedness ratio(1) to 1.8x as a result of the decrease in net indebtedness of $45.9 million during the first quarter.
  • Standard & Poor's  rating agency announced a favourable revision of Transcontinental's credit rating, from BBB- / negative outlook to BBB- / stable outlook.
  • Named to Corporate Knights' 2021 Global 100 Most Sustainable Corporations in the World and included among the 50 corporations with the lowest ESG risk by Sustainalytics.

(1) Please refer to the section entitled "Non-IFRS Financial Measures" in this press release for a definition of these measures. 

Montréal, February 25, 2021 - Transcontinental Inc. (TSX: TCL.A TCL.B) announces its results for the first quarter of fiscal 2021, which ended January 24, 2021.

"I am very satisfied with our first quarter performance, which bodes well for fiscal 2021, said François Olivier, President and Chief Executive Officer of TC Transcontinental. Once again, these results attest to the relevance of our strategy, the resilience of our business model, our operational excellence as well as the responsible management of our operations as a whole. 

"Our Packaging Sector, our main engine of growth, posted organic sales growth in the quarter that exceeded our expectations. This growth stems from customer demand, which remains robust, revenues from signed contracts and the introduction of new products on the market in the previous quarters. In addition, efficiency gains contributed to the improvement of the sector's profitability compared to the prior year. To fuel our organic sales growth, we continue to invest in research and development, mainly in sustainable packaging that contributes to the circular economy for plastics. In fact, we are proud that our compostable packaging for Maxwell House Canada's coffee pods has recently been recognized by the Packaging Association of Canada for its best in class sustainable design.

"Our Printing Sector continued to demonstrate its resilience as the operations of several of our customers are still affected by the pandemic. Our cost reduction measures enabled us to continue to generate a solid operating margin as well as significant cash flows. While we remain cautious about the evolution of COVID-19 and the restrictions implemented to control its spread, we believe that we will be able to gradually increase printing volumes in the coming quarters. Finally, our Media Sector continued to deliver excellent results.

"To conclude, our first quarter performance and our solid financial position give us the momentum and the capacity to confidently pursue our investment strategy focused on organic sales growth as well as strategic and targeted acquisitions."
 

Financial Highlights

Financial Highlights

2021 First Quarter Results 

Revenues decreased by $83.1 million, or 11.8%, from $705.8 million in the first quarter of 2020 to $622.7 million in the corresponding period of 2021. This decline is mainly attributable to lower volume in the Printing Sector due to the impact of the COVID-19 pandemic and the sale of the paper packaging operations, which occurred toward the end of the first quarter of the previous year. This decrease was partially mitigated by the solid organic growth in revenues in the Packaging Sector and the revenues generated by the acquisition of Artisan Complete Limited in the Printing Sector.

Operating earnings increased by $6.4 million, or 15.7%, from $40.8 million in the first quarter of 2020 to $47.2 million in the first quarter of 2021. The increase in operating earnings is explained by the organic growth in the Packaging Sector. In addition, in the Printing Sector, initiatives to optimize operational efficiency and the Canada Emergency Wage Subsidy offset a majority of the decrease in volume.

Adjusted operating earnings decreased by $3.5 million, or 4.9%, from $72.1 million in the first quarter of 2020 to $68.6 million in the first quarter of 2021. The decrease is mainly explained by lower adjusted operating earnings in the Printing Sector, partially mitigated by higher adjusted operating earnings in the Packaging Sector.

In the Packaging Sector, adjusted operating earnings increased by $3.1 million, or 11.2%, from $27.6 million in the first quarter of 2020 to $30.7 million in the first quarter of 2021, despite the sale of the paper packaging operations. This increase is mainly attributable to higher demand in most of our segments as well as efficiency gains in the sector, and was partially offset by the temporary negative impact of the significant and rapid increase in the price of resin. 

In the Printing Sector, adjusted operating earnings decreased by $5.5 million, or 10.6%, from $51.8 million in the first quarter of 2020 to $46.3 million in the first quarter of 2021. The decrease is due to lower volume in our main segments caused by the effects of the COVID-19 pandemic. Cost reduction initiatives undertaken by the sector combined with the Canada Emergency Wage Subsidy partially mitigated this decrease.

Net earnings attributable to shareholders of the Corporation increased by $21.3 million, from $6.4 million in the first quarter of 2020 to $27.7 million in the first quarter of 2021. This increase is mostly explained by the income tax expense related to the sale of the paper packaging operations in the first quarter of 2020, higher operating earnings and the decrease in net financial expenses resulting from a reduction in net indebtedness and a lower weighted average interest rate. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.07 to $0.32.

Adjusted net earnings attributable to shareholders of the Corporation increased by $1.0 million, or 2.3%, from $42.8 million in the first quarter of 2020 to $43.8 million in the first quarter of 2021. This variation is mostly explained by the decrease in net financial expenses resulting from a reduction in net indebtedness and a lower weighted average interest rate as well as a decrease in adjusted income taxes. This increase was partially offset by lower adjusted operating earnings. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $0.49 to $0.50.

Outlook

In the Packaging Sector, the vast majority of our operations support the retail supply chain for food and everyday consumer products, which continue to generate strong demand in the context of the COVID-19 pandemic. Despite the uncertainties related to the pandemic, we expect  organic growth in revenues in fiscal 2021 as a result of signing new contracts and introducing new products on the market. The significant and rapid increase in the price of resin seen recently should have a negative impact on the sector's profitability. Excluding the impact of resin and the disposal of the paper packaging operations, we expect to post a slight increase in operating earnings compared to the prior fiscal year, as a result of our operational efficiency initiatives and the anticipated organic growth in revenues. Furthermore, the appreciation of the Canadian dollar against the US dollar in the last year should have a negative impact on revenues and operating earnings in the coming quarters.

In the Printing Sector, the pandemic should continue to negatively affect several of our customers, and this should have an adverse impact on our revenues for the first half of fiscal 2021. Operational efficiency initiatives and the continuation, to a lesser extent, of the Canada Emergency Wage Subsidy should partially mitigate the impact of lower volume on operating earnings. With a gradual recovery in printing volume, we expect organic growth in revenues in the second half of fiscal 2021. Excluding amounts related to the Canada Emergency Wage Subsidy, we expect operating earnings to grow in fiscal 2021 compared to fiscal 2020.

To conclude, despite the impact of the pandemic, we expect to continue generating significant cash flows. This should enable us to reduce our net indebtedness, while providing us with the flexibility needed to pursue our investment strategy focused on organic growth as well as strategic and targeted acquisitions.

Non-IFRS Financial Measures

In this document, unless otherwise indicated, all financial data are prepared in accordance with International Financial Reporting Standards (IFRS) and the term "dollar", as well as the symbol "$" designate Canadian dollars. 

In addition, in this press release, we also use non-IFRS financial measures for which a complete definition is presented below and for which a reconciliation to financial information in accordance with IFRS is presented in the section entitled "Reconciliation of Non-IFRS Financial Measures" and in Note 3, "Segmented Information", to the unaudited condensed interim consolidated financial statements for the first quarter ended January 24, 2021.

Financial Highlights

Reconciliation of Non-IFRS Financial Measures

The financial information has been prepared in accordance with IFRS. However, financial measures used, namely adjusted operating earnings before depreciation and amortization, adjusted operating earnings, adjusted operating earnings margin, adjusted income taxes, adjusted net earnings attributable to shareholders of the Corporation, adjusted net earnings attributable to shareholders of the Corporation per share, net indebtedness and net indebtedness ratio, for which a reconciliation is presented in the following table, do not have any standardized meaning under IFRS and could be calculated differently by other companies. We believe that many of our readers analyze the financial performance of the Corporation’s activities based on these non-IFRS financial measures as such measures may allow for easier comparisons between periods. These measures should be considered as a complement to financial performance measures in accordance with IFRS. They do not substitute and are not superior to them.

The Corporation also believes that these measures are useful indicators of the performance of its operations and its ability to meet its financial obligations. Furthermore, management also uses some of these non-IFRS financial measures to assess the performance of its activities and managers.

Financial Highlights
 

Financial Highlights

Dividend 

The Corporation's Board of Directors declared a quarterly dividend of $0.225 per share on Class A Subordinate Voting Shares and Class B Shares. This dividend is payable on April 6, 2021 to shareholders of record at the close of business on March 22, 2021. 

Normal Course Issuer Bid

The Corporation was authorized to repurchase, for cancellation on the open market, or subject to the approval of any securities authority by private agreements, between October 1, 2020 and September 30, 2021, or at an earlier date if the Corporation concludes or cancels the offer, up to 1,000,000 of its Class A Subordinate Voting Shares and up to 191,320 of its Class B Shares. Under the current repurchase program, the Corporation has not repurchased any shares to date.

Additional information

Conference Call

Upon releasing its 2021 first quarter results, the Corporation will hold a conference call for the financial community on February 25, 2021 at 4:15 p.m. The dial-in numbers are 1 647 788-4922 or 1 877 223-4471. Media may hear the call in listen-only mode or tune in to the simultaneous audio broadcast on the Corporation’s website, which will then be archived for 30 days. For media requests or interviews, please contact Nathalie St-Jean, Senior Advisor, Corporate Communications of TC Transcontinental, at 514 954-3581.

Profile

TC Transcontinental is a leader in flexible packaging in North America, and Canada’s largest printer. The Corporation is also positioned as the leading Canadian French-language educational publishing group. For over 45 years, TC Transcontinental's mission has been to create quality products and services that allow businesses to attract, reach and retain their target customers. 

Respect, teamwork, performance and innovation are the strong values held by the Corporation and its employees. TC Transcontinental's commitment to its stakeholders is to pursue its business activities in a responsible manner. 

Transcontinental Inc. (TSX: TCL.A TCL.B), known as TC Transcontinental, has about 8,000 employees, the majority of which are based in Canada, the United States and Latin America. TC Transcontinental had revenues of approximately C$2.6 billion for the fiscal year ended October 25, 2020. For more information, visit TC Transcontinental's website at www.tc.tc. 

Forward-looking Statements

Our public communications often contain oral or written forward-looking statements which are based on the expectations of management and inherently subject to a certain number of risks and uncertainties, known and unknown. By their very nature, forward-looking statements are derived from both general and specific assumptions. The Corporation cautions against undue reliance on such statements since actual results or events may differ materially from the expectations expressed or implied in them. Forward-looking statements may include observations concerning the Corporation's objectives, strategy, anticipated financial results and business outlook. The Corporation's future performance may also be affected by a number of factors, many of which are beyond the Corporation's will or control. These factors include, but are not limited to, the economic situation in the world, structural changes in the industries in which the Corporation operates, the impact of digital product development and adoption on the demand for retailer-related services and other printed products, the Corporation's ability to generate organic growth in highly competitive industries, the Corporation's ability to complete acquisitions in the packaging industry and properly integrate them, the inability to maintain or improve operational efficiency and avoid disruptions that could affect its ability to meet deadlines, cybersecurity and data protection, the political and social environment as well as regulatory and legislative changes, in particular with regard to the environment and door-to-door distribution, changes in consumption habits related, in particular, to issues involving sustainable development and the use of certain products or services such as door-to-door distribution, change in consumption habits or loss of a major customer, customer consolidation, the safety and quality of its packaging products used in the food industry, the protection of its intellectual property rights, the exchange rate, availability of capital at a reasonable rate, bad debts from certain customers, import and export controls, raw materials and transportation costs, recruiting and retaining qualified personnel in certain geographic areas and industry sectors, taxation, interest rates and the impact of the COVID-19 pandemic on its operations, facilities and financial results, changes in consumption habits from consumers and changes in the operations and financial position of the Corporation's customers due to the COVID-19 pandemic and the effectiveness of plans and measures implemented in response thereto. The main risks, uncertainties and factors that could influence actual results are described in the Management's Discussion and Analysis for the year ended October 25, 2020 and in the latest Annual Information Form.

Unless otherwise indicated by the Corporation, forward-looking statements do not take into account the potential impact of non-recurring or other unusual items, nor of disposals, business combinations, mergers or acquisitions which may be announced or entered into after the date of February 25, 2021. The forward-looking statements in this press release are made pursuant to the “safe harbour” provisions of applicable Canadian securities legislation. The forward-looking statements in this release are based on current expectations and information available as at February 25, 2021. Such forward-looking information may also be found in other documents filed with Canadian securities regulators or in other communications. The Corporation's management disclaims any intention or obligation to update or revise these statements unless otherwise required by the securities authorities.

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For information: 

Media
Nathalie St-Jean
Senior Advisor, Corporate Communications 
TC Transcontinental
Telephone: 514-954-3581
nathalie.st-jean@tc.tc
www.tc.tc

Financial Community
Yan Lapointe
Director, Investor Relations
TC Transcontinental
Telephone: 514-954-3574
yan.lapointe@tc.tc
www.tc.tc