Transcontinental Inc. Announces Results for the First Quarter of Fiscal 2022
- Revenues of $690.6 million for the quarter ended January 30, 2022; operating earnings of $33.8 million; and net earnings attributable to shareholders of the Corporation of $18.4 million ($0.21 per share).
- Adjusted operating earnings before depreciation and amortization(1) of $89.0 million for the quarter ended January 30, 2022; adjusted operating earnings(1) of $49.3 million; and adjusted net earnings attributable to shareholders of the Corporation(1) of $30.0 million ($0.35 per share).
- Completed, on February 1st, 2022, a private offering of $200 million of 2.667% senior unsecured notes due in February 2025.
- Ranked 16th among the world's most sustainable corporations by Corporate Knights.
(1) Please refer to the section entitled "Non-IFRS Financial Measures" in this press release for a definition of these measures.
Montréal, March 8, 2022 - Transcontinental Inc. (TSX: TCL.A TCL.B) announces its results for the first quarter of fiscal 2022, which ended January 30, 2022.
"While I am proud of the way we worked with our customers to ensure a continuity of supply and of the actions we took to protect our coworkers health and safety, the financial results of the quarter did not meet our expectations," said Peter Brues, President and Chief Executive Officer of TC Transcontinental. "The spread of the Omicron variant caused significant operational disruptions that hampered our ability to efficiently manage our business and, combined with inflationary pressures, had an adverse impact on our profitability.
"In our Packaging Sector, our financial performance was negatively affected by operational inefficiencies caused by Omicron, and by delays in passing through cost increases to our customers. Despite the strong demand for our products and services, our revenue growth was limited by reduced labour availability, leading to a significant increase in backlog.
"Our Printing Sector produced strong organic growth in revenues and solid profitability, despite the challenges of the pandemic. Higher revenues were noteworthy in the Sector’s growth activities, namely in-store marketing, book printing and premedia. The Media Sector contributed another solid quarter with higher revenues and profitability.
"Despite a challenging quarter, our financial performance will improve with the actions we have taken, and with the lessening impact of COVID-19. Through the strength of our development of sustainable packaging, strong customer relationships, ability to generate solid cash flow and strong financial position, we are well placed to take advantage of growth opportunities and achieve our full potential."
2022 First Quarter Results
Revenues increased by $67.9 million, or 10.9%, from $622.7 million in the first quarter of 2021 to $690.6 million in the corresponding period of 2022. This increase is mainly attributable to the impact of the rise in the price of resin and the acquisition of H.S. Crocker Company, Inc. on the results of the Packaging Sector, and to the acquisition of BGI Retail Inc. in the Printing Sector. A slight increase in volume in the three sectors also contributed to the growth in revenues. These items were partially offset by the negative impact of the exchange rate variation.
Operating earnings before depreciation and amortization decreased by $12.6 million, or 12.2%, from $103.3 million in the first quarter of 2021 to $90.7 million in the first quarter of 2022. Adjusted operating earnings before depreciation and amortization decreased by $19.1 million, or 17.7%, from $108.1 million in the first quarter of 2021 to $89.0 million in the first quarter of 2022. The decrease is mainly due to the end of the Canada Emergency Wage Subsidy which the Corporation received in the previous year, as well as to the negative impact of the pandemic on our operations, and the increase in costs due to inflationary pressures. The decline in operating earnings before depreciation and amortization was partially offset by the decrease in restructuring and other costs.
Net earnings attributable to shareholders of the Corporation decreased by $9.3 million, from $27.7 million in the first quarter of 2021 to $18.4 million in the first quarter of 2022. This decline is mainly due to lower operating earnings, partially offset by the decrease in income taxes and financial expenses. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.32 in the first quarter of 2021 to $0.21 for the same period in 2022.
Adjusted net earnings attributable to shareholders of the Corporation decreased by $13.8 million, or 31.5%, from $43.8 million in the first quarter of 2021 to $30.0 million in the first quarter of 2022. This decrease is due to lower adjusted operating earnings. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $0.50 to $0.35.
In the Packaging Sector, as a result of signing new contracts, introducing new products to the market and investing in new production equipment, we expect organic volume growth in fiscal year 2022 compared to fiscal 2021, excluding the impact of the 53rd week on the results for fiscal year 2021. In addition, we continue to expect an increase in adjusted operating earnings before depreciation and amortization for fiscal year 2022 compared to the prior fiscal year.
In the Printing Sector, we expect a continued recovery in printing volume. This anticipated recovery, combined with growth in our in-store marketing activities and other growth activities, gives us confidence in the outlook for revenue growth for fiscal year 2022, excluding the impact of the 53rd week on the results for fiscal year 2021. In addition, excluding amounts related to the Canada Emergency Wage Subsidy and the impact of the 53rd week on the results for fiscal year 2021, we expect an increase in adjusted operating earnings before depreciation and amortization for fiscal year 2022 compared to fiscal year 2021.
Finally, we expect to continue generating significant cash flows from operating activities. These cash flows are expected to enable us to reduce our net indebtedness, while providing us with the flexibility needed to pursue our investments focused on organic growth as well as strategic and targeted acquisitions.
Non-IFRS Financial Measures
In this document, unless otherwise indicated, all financial data are prepared in accordance with International Financial Reporting Standards (IFRS) and the term "dollar", as well as the symbol "$" 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 unaudited interim condensed consolidated financial statements for the first quarter ended January 30, 2022.
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.
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 11, 2022 to shareholders of record at the close of business on March 28, 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 157,800 of its Class A Subordinate Voting Shares at a weighted average price of $18.80 during the quarter ended January 30, 2022.
Upon releasing its 2022 first quarter results, the Corporation will hold a conference call for the financial community on March 8, 2022 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.
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.
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 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 March 8, 2022. 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 March 8, 2022. 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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