Transcontinental Inc. announces its results for the fourth quarter and fiscal year 2021
Highlights
- Increase in revenues and solid profitability in the Packaging and Printing Sectors for the quarter.
- Revenues of $775.8 million for the quarter ended October 31, 2021; operating earnings of $80.5 million; and net earnings attributable to shareholders of the Corporation of $39.2 million ($0.45 per share).
- Adjusted operating earnings before depreciation and amortization(1) of $140.5 million for the quarter ended October 31, 2021; adjusted operating earnings(1) of $104.9 million; and adjusted net earnings attributable to shareholders of the Corporation(1) of $70.6 million ($0.81 per share).
- Made significant investments in research and development laboratories with state-of-the-art equipment in the state of Wisconsin, to drive growth and innovation and optimize the creation of sustainable solutions for customers.
- Acquired H.S. Crocker on November 1, 2021, broadening the packaging solutions portfolio in the food sector as well as expanding pharmaceutical and medical expertise in the advanced coatings product offering.
- Retirement of François Olivier on December 9, 2021 and Peter Brues will assume the position of President and Chief Executive Officer on December 10, 2021.
(1) Please refer to the section entitled "Non-IFRS Financial Measures" in this press release for a definition of these measures.
Montréal, December 9, 2021 - Transcontinental Inc. (TSX: TCL.A TCL.B) announces its results for the fourth quarter and fiscal year 2021, which ended October 31, 2021.
"I'm very satisfied with the results for fiscal year 2021, said François Olivier, President and Chief Executive Officer of TC Transcontinental. Excluding the significant negative impact of the rise in the price of resin, the reduction in the Canada Emergency Wage Subsidy and the exchange rate variation, our three sectors delivered excellent operating performance.
"In our Packaging Sector, our main engine of long-term growth, demand remains strong. Through our operational efficiency initiatives and our price increases resulting from higher raw material costs, we successfully offset inflationary pressures, especially with respect to resin prices. In addition, we continued to invest in our innovation initiatives to meet our customers' sustainability objectives based on the conviction that our sustainable packaging will be a key driver of our long-term growth.
"Our Printing Sector posted another quarter of strong organic growth in revenues and generated solid profitability. Growth in the fourth quarter was especially significant for our in-store marketing and book printing activities. The proportion of our growth activities in the Printing Sector continues to increase, which allowed us to end the fiscal year with higher revenues and in a favourable position for the future. Meanwhile, the Media Sector had an exceptional year in terms of both revenues and profitability.
"To conclude, following the success of our transformation, I am proud to leave behind an international company that is well positioned in its three sectors and has a solid financial position, a proven strategy as well as a seasoned new President and Chief Executive Officer and management team. I am very proud of our accomplishments and confident that TC Transcontinental has a brilliant future ahead."
Financial Highlights
2021 Fourth Quarter Results
Revenues increased by $120.1 million, or 18.3%, from $655.7 million in the fourth quarter of 2020 to $775.8 million in the corresponding period of 2021. This increase is mainly attributable to the impact of the rise in the price of resin and higher volume in the Packaging Sector, organic growth and the recent acquisition of BGI Retail Inc. in the Printing Sector, as well as the 53rd week of the fiscal year. This increase was partially offset by the negative impact of the exchange rate variation.
Operating earnings decreased by $0.7 million, or 0.9%, from $81.2 million in the fourth quarter of 2020 to $80.5 million in the fourth quarter of 2021. Adjusted operating earnings decreased by $5.2 million, or 4.7%, from $110.1 million in the fourth quarter of 2020 to $104.9 million in the fourth quarter of 2021. The decline in operating earnings and adjusted operating earnings is mainly due to the decrease in the Canada Emergency Wage Subsidy compared to the corresponding period of the prior year ($10.8 million), the short-term unfavourable impact of contractual lags in passing through the rise in the price of resin to customers, and the negative impact of the exchange rate ($2.0 million). These items were mostly offset by the favourable impact of the additional week on our activities, higher volume, as well as better operational efficiency in the Packaging and Printing Sectors. The decline in operating earnings was also partially offset by the $5.3 million decrease in restructuring and other costs.
Net earnings attributable to shareholders of the Corporation decreased by $12.1 million, from $51.3 million in the fourth quarter of 2020 to $39.2 million in the fourth quarter of 2021. This decline is mostly due to the increase in income taxes resulting from the tax impact of a reorganization and the increase in net financial expenses. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.59 to $0.45.
Adjusted net earnings attributable to shareholders of the Corporation decreased by $1.8 million, or 2.5%, from $72.4 million in the fourth quarter of 2020 to $70.6 million in the fourth quarter of 2021. This decrease is explained by the above-mentioned decrease in adjusted operating earnings and the increase in financial expenses, partially offset by the decrease in the tax rate. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $0.84 to $0.81.
Fiscal Year 2021 Results
Revenues increased by $69.4 million, or 2.7%, from $2,574.0 million in fiscal 2020 to $2,643.4 million in fiscal 2021. This increase is mainly attributable to the impact of the rise in the price of resin and higher volume in the Packaging Sector, the impact of the 53rd week to the calendar of the fiscal year as well as acquisitions and higher volume in the in-store marketing activities in the Printing Sector. The increase in revenues was partially offset by the impact of the unfavourable exchange rate variation on the results of the Packaging Sector and the disposal of the paper packaging operations in January 2020.
Despite the increase in volume and operational efficiency initiatives in our three sectors, operating earnings decreased by $7.6 million, or 3.1%, from $241.4 million in fiscal 2020 to $233.8 million in fiscal 2021. Adjusted operating earnings decreased by $39.3 million, or 11.1%, from $352.8 million in fiscal 2020 to $313.5 million in fiscal 2021. The decline in operating earnings and adjusted operating earnings is mostly due to the short-term unfavourable impact of contractual lags in passing through the rise in the price of resin to customers, the decrease in the Canada Emergency Wage Subsidy ($29.0 million), the unfavourable exchange rate variation ($8.5 million) and higher stock-based compensation expense ($8.3 million). The decline in operating earnings was also partially offset by the $28.7 million decrease in restructuring and other costs. This favourable impact is mainly attributable to the decrease in workforce reduction costs in the Printing Sector and costs incurred in connection with the sale of the paper packaging operations in the first quarter of 2020.
Net earnings attributable to shareholders of the Corporation decreased by $1.1 million, or 0.8%, from $131.7 million in fiscal 2020 to $130.6 million in fiscal 2021. This decline is mainly due to the decrease in operating earnings caused by the above-mentioned factors, partially offset by lower net financial expenses and income taxes. On a per share basis, net earnings attributable to shareholders of the Corporation went from $1.51 to $1.50, respectively, due to the above-mentioned factors.
Adjusted net earnings attributable to shareholders of the Corporation decreased by $20.6 million, or 9.1%, from $227.0 million in fiscal 2020 to $206.4 million in fiscal 2021. This decline is mostly due to the decrease in adjusted operating earnings caused by the above-mentioned factors, partially offset by lower net financial expenses and adjusted income taxes. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $2.61 to $2.37.
For more detailed financial information, please see the Management’s Discussion and Analysis for the fiscal year ended October 31, 2021 as well as the financial statements in the “Investors” section of our website at www.tc.tc.
Outlook
In the Packaging Sector, as a result of investing in new production equipment, signing new contracts and introducing new products on the market, we expect organic volume growth in fiscal year 2022, excluding the positive impact of the 53rd week on the results for fiscal year 2021. Despite the impact of the appreciation of the Canadian dollar against the U.S. dollar, which should continue to have a negative impact on the sector's profitability for the first quarter of fiscal year 2022, we expect to post an increase in operating earnings for fiscal year 2022 compared to the prior fiscal year.
In the Printing Sector, we expect a continued recovery in printing volume. This anticipated recovery, combined with growth in our in-store marketing activities and other growth activities, gives us confidence about the outlook for revenue growth for fiscal year 2022, excluding the positive impact of the 53rd week on the results for fiscal year 2021. In addition, excluding amounts related to the Canada Emergency Wage Subsidy and the impact of the 53rd week on fiscal year 2021, we expect an increase in operating earnings for fiscal year 2022 compared to fiscal year 2021.
Finally, we expect to continue generating significant cash flows from operating activities. These should enable us to reduce our net indebtedness, while providing us with the flexibility needed to pursue our investments focused on organic growth as well as strategic and targeted acquisitions.
Non-IFRS Financial Measures
In this document, unless otherwise indicated, all financial data are prepared in accordance with International Financial Reporting Standards (IFRS) and the term "dollar", as well as the symbol "$" 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 annual consolidated financial statements for the year ended October 31, 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 January 18, 2022 to shareholders of record at the close of business on January 5, 2022.
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, 2021 and September 30, 2022, 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 190,300 of its Class B Shares. Under this repurchase program, the Corporation repurchased and cancelled 200 of its Class A Subordinate Voting Shares at a weighted average price of $18.39 during the year ended October 31, 2021.
Additional information
Conference Call
Upon releasing its 2021 fourth quarter results, the Corporation will hold a conference call for the financial community on December 9, 2021 at 4:15 p.m. The dial-in numbers are 1 438 793-6811 or 1 888 440-2149. 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 approximately 8,000 employees, the majority of which are based in Canada, the United States and Latin America. TC Transcontinental had revenues of more than C$2.6 billion for the fiscal year ended October 31, 2021. 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 cost, bad debts from certain customers, import and export controls, raw materials, transportation and consumed energy costs, availability of raw materials, recruiting and retaining qualified personnel, 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 31, 2021 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 December 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 December 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
