Transcontinental Inc. Announces Results for the Fourth Quarter and Fiscal Year 2022

Highlights

• Increase in revenues and earnings in the Packaging Sector and the Media Sector.
• Revenues of $802.2 million for the quarter ended October 30, 2022; operating earnings of $85.3 million; and net earnings attributable to shareholders of the Corporation of $60.4 million ($0.70 per share).
• Adjusted operating earnings before depreciation and amortization ⁽¹⁾ of $141.1 million for the quarter ended October 30, 2022; adjusted operating earnings⁽¹⁾ of $99.1 million; and adjusted net earnings attributable to shareholders of the Corporation ⁽¹⁾ of $68.4 million ($0.79 per share).
• Significant contributions from the acquisitions completed during the fiscal year to the earnings of the Corporation.

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

Montréal, December 13, 2022 - Transcontinental Inc. (TSX: TCL.A TCL.B) announces its results for the fourth quarter and fiscal year 2022, which ended October 30, 2022.

"Excluding the impact of the 53rd week and the Canada Emergency Wage Subsidy on prior year's results, we posted solid growth in net earnings in the fourth quarter," said Peter Brues, President and Chief Executive Officer of TC Transcontinental. "In a challenging environment, our coworkers remained focused on making our clients successful and improving our performance.

"Building on the momentum of the previous quarters, our Packaging Sector recorded over 10% growth in adjusted operating earnings before depreciation and amortization on a comparable basis. With our investments in equipment and innovation, we are committed to continuing our profitable growth.

"In our Printing Sector, we are pleased to see continued growth in our in-store marketing, book printing, and premedia activities. However, inflationary pressures and their impact on our volume and cost structure had a negative effect on our results.

"In fiscal 2023, we will remain focused on improving profitability and cash flows from operating activities. Our solid financial position, with no major debt maturities until 2025, gives us the flexibility to pursue our disciplined approach to profitable growth."

Financial Highlights

 

2022 Fourth Quarter Results

Revenues increased by $26.4 million, or 3.4%, from $775.8 million in the fourth quarter of 2021 to $802.2 million in the corresponding period of 2022. This increase is mainly attributable to the recent acquisitions, the impact of the transfer of the rise in raw materials prices and organic growth in the Printing Sector and, to a lesser extent, the favourable exchange rate effect. These factors were partially mitigated by the unfavourable impact of the 53rd week in the prior year.

Operating earnings before depreciation and amortization increased by $9.9 million, or 7.3%, from $135.8 million in the fourth quarter of 2021 to $145.7 million in the fourth quarter of 2022. The increase in operating earnings before depreciation and amortization is mainly attributable to the recent acquisitions, the favourable effect of the change in restructuring costs and, to a lesser extent, the favourable exchange rate effect. These factors were partially mitigated by the impact of the 53rd week in the prior year, the end of the Canada Emergency Wage Subsidy which the Corporation received in the prior year and, to a lesser extent, the impact of inflation on volume and the cost structure.

Adjusted operating earnings before depreciation and amortization decreased by $2.0 million, or 1.4%, from $143.1 million in the fourth quarter of 2021 to $141.1 million in the fourth quarter of 2022. The decrease in adjusted operating earnings before depreciation and amortization is mainly due to the impact of the 53rd week in the prior year, the end of the Canada Emergency Wage Subsidy and, to a lesser extent, the impact of inflation on volume and the cost structure. These factors were partially offset by the recent acquisitions and the favourable exchange rate effect.

Net earnings attributable to shareholders of the Corporation increased by $21.2 million, from $39.2 million in the fourth quarter of 2021 to $60.4 million in the fourth quarter of 2022. This increase is mainly attributable to the previously explained rise in operating earnings before depreciation and amortization, lower financial expenses and lower income taxes. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.45 to $0.70, respectively.

Adjusted net earnings attributable to shareholders of the Corporation decreased by $2.2 million, or 3.1%, from $70.6 million in the fourth quarter of 2021 to $68.4 million in the fourth quarter of 2022. This decrease is due to the previously explained decline in adjusted operating earnings before depreciation and amortization. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $0.81 to $0.79, respectively.

2022 Fiscal Year Results

Revenues increased by $312.7 million, or 11.8%, from $2,643.4 million in fiscal 2021 to $2,956.1 million in the corresponding period of 2022. This increase is mainly explained by the impact of the transfer of the rise in raw materials prices, the recent acquisitions in our three operating sectors as well as well as higher volume in the Packaging Sector and the Printing Sector. These factors were partially mitigated by the unfavourable impact of the 53rd week in the prior year.

Operating earnings before depreciation and amortization decreased by $2.2 million, or 0.5%, from $451.4 million in fiscal 2021 to $449.2 million in the corresponding period of 2022. Adjusted operating earnings before depreciation and amortization decreased by $18.1 million, or 3.9%, from $464.8 million in fiscal 2021 to $446.7 million in the corresponding period of 2022. The decline in operating earnings before depreciation and amortization and adjusted operating earnings before depreciation and amortization is mainly due to the negative impact of the pandemic on production capacity at several plants during the first months of fiscal 2022, due in particular to a labour shortage, the end of the Canada Emergency Wage Subsidy which the Corporation received in the prior year and the impact of the 53rd week in the prior year. These factors were partially offset by the recent acquisitions and, to a lesser extent, the decrease in the stock-based compensation expense related to the share price. Lastly, the decrease in restructuring costs had a favorable impact on operating earnings before depreciation and amortization.

Net earnings attributable to shareholders of the Corporation increased by $10.6 million, or 8.1%, from $130.6 million in fiscal 2021 to $141.2 million in the corresponding period of 2022. This increase is mainly attributable to lower income taxes, partially mitigated by the decline in operating earnings. On a per share basis, net earnings attributable to shareholders of the Corporation went from $1.50 to $1.63, respectively, due to the above-mentioned items.

Adjusted net earnings attributable to shareholders of the Corporation decreased by $16.7 million, or 8.1%, from $206.4 million in fiscal 2021 to $189.7 million in the corresponding period of 2022, mostly as a result of the decline in adjusted operating earnings, partially offset by lower adjusted income taxes. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $2.37 to $2.19, respectively.

For more detailed financial information, please see the Management’s Discussion and Analysis for the fiscal year ended October 30, 2022 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 to the market, we expect organic volume growth. In terms of profitability, we expect an increase in adjusted operating earnings before depreciation and amortization for fiscal year 2023 compared to fiscal year 2022. The economic conditions could however affect short-term demand.

In the Printing Sector, we expect revenue growth for fiscal year 2023 compared to fiscal year 2022 as a result of the growth in volume in our book printing and in-store marketing activities as well as the impact of the transfer of cost increases. This transfer should however have a negative impact on volume in some segments. This anticipated volume decrease, combined to the effect of inflationary pressures, should decrease adjusted operating earnings before depreciation and amortization for fiscal year 2023 compared to fiscal year 2022.

Finally, we expect to continue generating significant cash flows from operating activities, which will enable us to continue our strategic investments while reducing our net indebtedness.

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 certain 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 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 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 23, 2023 to shareholders of record at the close of business on January 9, 2023.

Normal Course Issuer Bid

On September 29, 2021, 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. Repurchases are made in the normal course of business at market prices through the Toronto Stock Exchange.

In that respect, during fiscal 2022, the Corporation repurchased and cancelled 400,800 of its Class A Subordinate Voting Shares at a weighted average price of $17.43 per share, for a total cash consideration of $7.0 million (no share repurchased during the fourth quarter of 2022).

On September 29, 2022, 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 3, 2022 and October 2, 2023, 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 191,343 of its Class B Shares. Repurchases are made in the normal course of business at market prices through the Toronto Stock Exchange. In connection with the current repurchase program, the Corporate has not repurchased any shares to date.

Additional Information

Conference Call

Upon releasing its 2022 fourth quarter results, the Corporation will hold a conference call for the financial community on December 13, 2022 at 4:15 p.m. The dial-in numbers are 1-416-764-8646 or 1-888-396-8049. 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 8,300 employees, the majority of which are based in Canada, the United States and Latin America. TC Transcontinental generated revenues of C$3.0 billion during the fiscal year ended October 30, 2022. 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 impact of digital product development and adoption on the demand for retailer-related services and printed products, the global economic environment, including inflation and recession risks and disruptions in the supply chain, 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, raw materials, transportation and consumed energy costs, availability of raw materials, the impact of a pandemic, an epidemic or an outbreak of an infectious disease on the Corporation's operations, operating results and financial position, cybersecurity and data protection, recruiting and retaining qualified personnel, the political and social environment as well as regulatory and legislative changes, in particular with regard to the environment or door-to-door distribution and use of plastic, 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, loss of a major customer, customer consolidation, structural changes in the industries in which the Corporation operates, the safety and quality of its packaging products used in the food industry, the impact of economic cycles on product demand, data confidentiality, the protection of its intellectual property rights, bad debts from certain customers, import and export controls, exchange rate fluctuations, interest rates and availability of capital at a reasonable cost, litigation and respect of privacy, the impact of major market fluctuations on the solvency of defined benefit pension plans, taxation, including changes in tax legislation that could adversely affect profitability, disputes with tax authorities or amendments to statutory rates in force, and results of impairment tests on the value of assets. 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 30, 2022 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 13, 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 December 13, 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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