Transcontinental Inc. announces its results for the second quarter of fiscal 2021
Highlights
- Return to growth and significant increase in profitability in the Printing Sector, as well as solid performance in the Packaging and Media Sectors.
- Revenues of $623.3 million for the quarter ended April 25, 2021; operating earnings of $55.9 million; and net earnings attributable to shareholders of the Corporation of $35.6 million ($0.41 per share).
- Adjusted operating earnings before depreciation and amortization(1) of $107.0 million for the quarter ended April 25, 2021; adjusted operating earnings(1) of $72.6 million; and adjusted net earnings attributable to shareholders of the Corporation(1) of $47.8 million ($0.55 per share).
- Maintained a solid financial position with a net indebtedness ratio(1) of 1.7x.
- Favourable credit rating revision by DBRS Morningstar rating agency, from BBB (low) / negative outlook to BBB (low) / stable outlook.
- Acquired BGI Retail Inc. on June 1, 2021 and expanded the in-store marketing solutions offering to retailers.
- Winner of the Flexographic Technical Association (FTA) Innovations in Sustainability Award for the IntegrititeTM post-consumer recycled film.
(1) Please refer to the section entitled "Non-IFRS Financial Measures" in this press release for a definition of these measures.
Montréal, June 9, 2021 - Transcontinental Inc. (TSX: TCL.A TCL.B) announces its results for the second quarter of fiscal 2021, which ended April 25, 2021.
"We continued to generate very good results, with solid performance in our three sectors and a return to growth in our Printing Sector, said François Olivier, President and Chief Executive Officer of TC Transcontinental. I am very grateful to all our employees for their continued efforts and resilience in the face of the challenges brought by the pandemic.
"In our Packaging Sector, our main engine of long-term growth, customer demand remains robust. With the introduction of new products on the market, the recently signed contracts and the momentum of our sustainable packaging products that contribute to the circular economy for plastic, we are confident in our ability to fuel organic growth in revenues in the coming quarters. Excluding the unfavourable effects of the significant and rapid rise in the price of resin and the exchange rate variation, the sector posted an excellent quarter with a significant increase in operating earnings.
"Our Printing Sector had an excellent quarter with positive organic growth, a first since the beginning of the pandemic. In addition to this growth, the sector posted a 25% increase in adjusted operating earnings before depreciation and amortization. The BGI Retail acquisition, which is highly complementary, enables us to further expand our in-store marketing solutions offering to retailers and, combined with the recently announced new revenues, increases the proportion of our growth activities in the sector. While we remain cautious about the evolution of the COVID-19 pandemic, we are encouraged by its slowdown and continue to expect an increase in printing volumes in the coming quarters. Finally, our Media Sector continued to deliver excellent results and significantly increased its revenues and profitability.
"To conclude, our performance and our solid financial position give us the momentum and the capacity to confidently pursue our growth objectives."
Financial Highlights
2021 Second Quarter Results
Revenues decreased by $1.8 million, or 0.3%, from $625.1 million in the second quarter of 2020 to $623.3 million in the corresponding period of 2021. This decline is mainly due to the negative impact of the exchange rate variation on the Packaging Sector, mostly offset by organic growth in the three sectors.
Operating earnings increased by $11.8 million, or 26.8%, from $44.1 million in the second quarter of 2020 to $55.9 million in the second quarter of 2021. The increase in operating earnings is explained by the reduction in restructuring and other costs as well as operational efficiency initiatives.
Adjusted operating earnings increased by $4.1 million, or 6.0%, from $68.5 million in the second quarter of 2020 to $72.6 million in the second quarter of 2021. The increase is mainly explained by higher adjusted operating earnings in the Printing Sector.
In the Packaging Sector, adjusted operating earnings decreased by $7.0 million, from $38.2 million in the second quarter of 2020 to $31.2 million in the second quarter of 2021. This decrease is mainly due to the unfavourable impact of the significant and rapid rise in the price of resin as well as the unfavourable exchange rate effect. Excluding these two negative items, the sector posted strong growth in operating earnings due to the solid performance of segments related to food and everyday consumer goods packaging.
In the Printing Sector, adjusted operating earnings increased by $14.1 million, or 35.8%, from $39.4 million in second quarter of 2020 to $53.5 million in the second quarter of 2021. This increase is mainly attributable to the solid performance by most of the groups and cost reduction initiatives undertaken by the sector. The Canada Emergency Wage Subsidy was similar to last year and did not have a significant effect on the change in the sector's organic growth.
Net earnings attributable to shareholders of the Corporation increased by $9.9 million, from $25.7 million in the second quarter of 2020 to $35.6 million in the second quarter of 2021.This increase is mostly explained by higher operating earnings and lower net financial expenses compared to the corresponding period of the prior year 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 $0.30 to $0.41, respectively.
Adjusted net earnings attributable to shareholders of the Corporation increased by $4.2 million, or 9.6%, from $43.6 million in the second quarter of 2020 to $47.8 million in the second quarter of 2021. This increase is mostly explained by higher adjusted operating earnings and lower net financial expenses resulting from a reduction in net indebtedness and a lower weighted average interest rate. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $0.50 to $0.55, respectively.
2021 First Six Months Results
Revenues decreased by $84.9 million, or 6.4%, from $1,330.9 million in the first six months of fiscal 2020 to $1,246.0 million in the corresponding period of fiscal 2021. This decline is mostly explained by the sale of the paper packaging operations, which occurred at the end of the first quarter of 2020, and the decrease in revenues in the Printing Sector, which has been significantly impacted by the COVID-19 pandemic since April 2020. The impact of the unfavourable variation of the exchange rate on the Packaging Sector also contributed to the decrease in revenues. This decrease was partially offset by organic growth of $38.3 million in the Packaging Sector resulting from the rise in the price of resin as well as the increase in volume in several segments that support the retail supply chain for food and everyday consumer products and in the Latin America group.
Operating earnings increased by $18.2 million, or 21.4%, from $84.9 million in the first six months of fiscal 2020 to $103.1 million in the corresponding period of fiscal 2021. The increase in operating earnings is mostly explained by the decrease in restructuring costs and operating expenses compared to the corresponding period of the prior year.
Adjusted operating earnings increased by $0.6 million, or 0.4%, from $140.6 million in the first six months of fiscal 2020 to $141.2 million in the corresponding period of fiscal 2021. This increase is mainly explained by the solid performance of the Printing Sector, partially offset by the unfavourable impact of the rapid rise in the price of resin and the unfavourable exchange rate effect in the Packaging Sector. Excluding the impacts of the resin price and the exchange rate, the Packaging Sector posted strong growth as a result of operational efficiency initiatives and the above-mentioned increase in volume.
Net earnings attributable to shareholders of the Corporation increased by $31.2 million, or 97.2%, from $32.1 million in the first six months of fiscal 2020 to $63.3 million in the corresponding period of fiscal 2021. This increase is mainly explained by higher operating earnings, lower income taxes and lower 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 $0.37 to $0.73, respectively.
Adjusted net earnings attributable to shareholders of the Corporation increased by $5.2 million, or 6.0%, from $86.4 million in the first six months of fiscal 2020 to $91.6 million in the corresponding period in fiscal 2021. This increase is mostly due to lower net financial expenses resulting from a reduction in net indebtedness and a lower weighted average interest rate. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $0.99 to $1.05, respectively.
For more detailed financial information, please see the Management’s Discussion and Analysis for the second quarter ended April 25, 2021 as well as the financial statements in the “Investors” section of our website at www.tc.tc.
Outlook
In the Packaging Sector, as a result of signing new contracts and introducing new products on the market, we expect organic volume growth in in fiscal 2021. The significant and rapid rise in the price of resin and the appreciation of the Canadian dollar against the US dollar should however continue to have a negative impact of the sector's profitability. Excluding the impacts of the resin price and the appreciation of the Canadian dollar, we expect to post an increase in operating earnings compared to the prior fiscal year, as a result of our operational efficiency initiatives and the anticipated organic growth in revenues.
In the Printing Sector, we expect a gradual recovery in printing volume. This anticipated recovery, combined with growth in our in-store marketing activities, gives us confidence about the outlook for revenue growth for the second half of fiscal 2021 and for fiscal 2022. In addition, excluding amounts related to the Canada Emergency Wage Subsidy, we expect operating earnings to grow in fiscal 2021 compared to fiscal 2020.
Finally, we expect to continue generating significant cash flows. This should enable us to reduce our net indebtedness, while providing us with the flexibility needed to pursue our investment strategy focused on organic growth as well as strategic and targeted acquisitions.
Non-IFRS Financial Measures
In this document, unless otherwise indicated, all financial data are prepared in accordance with International Financial Reporting Standards (IFRS) and the term "dollar", as well as the symbol "$" 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 second quarter ended April 25, 2021.
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.
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 July 20, 2021 to shareholders of record at the close of business on July 6, 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 second quarter results, the Corporation will hold a conference call for the financial community on June 9, 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 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 close to 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 June 9, 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 June 9, 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
