Transcontinental Inc. Announces Results for the Second Quarter of Fiscal 2022
Highlights
- Revenue growth of 21% for the Packaging Sector and 9% for the Printing Sector.
- Revenues of $715.5 million for the quarter ended May 1, 2022; operating earnings of $46.1 million; and net earnings attributable to shareholders of the Corporation of $28.3 million ($0.33 per share).
- Adjusted operating earnings before depreciation and amortization(1) of $103.6 million for the quarter ended May 1, 2022; adjusted operating earnings(1) of $64.1 million; and adjusted net earnings attributable to shareholders of the Corporation(1) of $41.7 million ($0.48 per share).
- Acquired Scolab Inc., a leader in the development of digital educational products, in March 2022, to enhance digital educational offering.
(1) Please refer to the section entitled "Non-IFRS Financial Measures" in this press release for a definition of these measures.
Montréal, June 8, 2022 - Transcontinental Inc. (TSX: TCL.A TCL.B) announces its results for the second quarter of fiscal 2022, which ended May 1, 2022.
"I am proud of our coworkers and their work to overcome supply chain challenges and inflationary pressures," said Peter Brues, President and Chief Executive Officer of TC Transcontinental. "We are starting to see the benefit of the actions we have taken, and I am encouraged by their impact on our second quarter results.
"In our Packaging Sector, we recorded significant volume growth during the quarter. Focused on supporting customer growth, we continued to prioritize the security of supply and invest to grow our sustainable packaging portfolio. Volume growth and significant work to offset cost increases due to inflation drove the improvement in the sector's adjusted operating earnings before depreciation and amortization.
"Our Printing Sector produced organic growth in revenues for the fifth consecutive quarter. This growth was primarily generated by our in-store marketing and book printing activities, two rapidly growing segments.
"The team continues to take action to improve our performance, the benefits of which will continue to be felt in the second half of our fiscal year."
Financial Highlights
2022 Second Quarter Results
Revenues increased by $92.2 million, or 14.8%, from $623.3 million in the second quarter of 2021 to $715.5 million in the corresponding period of 2022. This increase is mainly attributable to the impact of the contractual transfer of the rise in the price of raw materials and other increases to counter inflationary pressures, the acquisition of H.S. Crocker Company, Inc. and higher volume on the results of the Packaging Sector, as well as the impact of higher volume in our in-store marketing and book printing activities and the acquisition of BGI Retail Inc. on the results of the Printing Sector.
Operating earnings before depreciation and amortization decreased by $6.1 million, or 5.6%, from $108.9 million in the second quarter of 2021 to $102.8 million in the second quarter of 2022. Adjusted operating earnings before depreciation and amortization decreased by $5.8 million, or 5.3%, from $109.4 million in the second quarter of 2021 to $103.6 million in the second quarter of 2022. The decrease in operating earnings before depreciation and amortization and adjusted operating earnings before depreciation and amortization is mainly due to the end of the Canada Emergency Wage Subsidy which the Corporation received in the previous year, lags in passing through cost increases related to the inflationary environment to customers in the Printing Sector and additional costs related to the start-up period for new contracts in our in-store marketing activities. These items were partially offset by higher volume in the two main sectors, the decrease in the stock-based compensation expense related to the share price, acquisitions, as well as the contractual transfer of the rise in the price of raw materials and other increases to counter inflationary pressures in the Packaging Sector.
Net earnings attributable to shareholders of the Corporation decreased by $7.3 million, from $35.6 million in the second quarter of 2021 to $28.3 million in the second quarter of 2022. This decline is mainly due to lower operating earnings, partially offset by the decrease in income taxes. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.41 to $0.33, respectively.
Adjusted net earnings attributable to shareholders of the Corporation decreased by $6.1 million, or 12.8%, from $47.8 million in the second quarter of 2021 to $41.7 million in the second quarter of 2022. This decrease is due to the previously explained lower adjusted operating earnings, partially offset by the decrease in adjusted income taxes. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $0.55 to $0.48, respectively.
2022 First Six Months Results
Revenues increased by $160.1 million, or 12.8%, from $1,246.0 million in the first six months of fiscal 2021 to $1,406.1 million in the corresponding period of 2022. This increase is mainly attributable to the impact of the contractual transfer of the rise in the price of raw materials, the acquisition of H.S. Crocker Company, Inc., and higher volume on the results of the Packaging Sector, as well as the impact of higher volume in our in-store marketing and book printing activities and the acquisition of BGI Retail Inc. on the results of the Printing Sector. This increase was partially offset by the unfavorable exchange rate variation on results.
Operating earnings before depreciation and amortization decreased by $18.7 million, or 8.8%, from $212.2 million in the first six months of fiscal 2021 to $193.5 million in the corresponding period of 2022. Adjusted operating earnings before depreciation and amortization decreased by $24.9 million, or 11.4%, from $217.5 million in the first six months of fiscal 2021 to $192.6 million in the corresponding period of 2022. The decrease in operating earnings before depreciation and amortization and adjusted operating earnings before depreciation and amortization is mainly due to the end of the Canada Emergency Wage Subsidy which the Corporation received in the previous year, the negative impact of the pandemic on production capacity at several plants, especially in the first quarter of the fiscal year, and lags in passing through cost increases related to the inflationary environment to customers in the Printing Sector. These items were partially offset by higher volume in the two main sectors, acquisitions and the decrease in the stock-based compensation expense related to the share price. The decrease in restructuring costs also had a positive impact of operating earnings before depreciation and amortization.
Net earnings attributable to shareholders of the Corporation decreased by $16.6 million, or 26.2%, from $63.3 million in the first six months of fiscal 2021 to $46.7 million in the corresponding period of 2022. This decline is mainly due to the previously explained lower operating earnings, partially offset by the decrease in income taxes. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.73 to $0.54, respectively.
Adjusted net earnings attributable to shareholders of the Corporation decreased by $19.9 million, or 21.7%, from $91.6 million in the first six months of fiscal 2021 to $71.7 million in the corresponding period of 2022 mostly due to the previously explained lower adjusted operating earnings, partially offset by the decrease in adjusted income taxes. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $1.05 to $0.83, respectively.
For more detailed financial information, please see the Management’s Discussion and Analysis for the second quarter of fiscal 2022 ended May 1, 2022 as well as the financial statements in the “Investors” section of our website at www.tc.tc.
Outlook
In the Packaging Sector, as a result of signing new contracts, introducing new products to the market and investing in new production equipment, we expect organic volume growth in fiscal year 2022 compared to fiscal 2021, excluding the impact of the 53rd week on the results for fiscal year 2021. In addition, we continue to expect an increase in adjusted operating earnings before depreciation and amortization for fiscal year 2022 compared to the prior fiscal year.
In the Printing Sector, with the significant volume in our in-store marketing activities and other growth activities, we expect revenue growth for fiscal year 2022, excluding the impact of the 53rd week on the results for fiscal year 2021. In addition, excluding amounts related to the Canada Emergency Wage Subsidy and the impact of the 53rd week on the results for fiscal year 2021, we expect an increase in adjusted operating earnings before depreciation and amortization for fiscal year 2022 compared to fiscal year 2021.
Finally, we expect to continue generating significant cash flows from operating activities. These cash flows are expected to enable us to reduce our net indebtedness, while providing us with the flexibility needed to pursue our investments focused on organic growth as well as strategic and targeted acquisitions.
Non-IFRS Financial Measures
In this document, unless otherwise indicated, all financial data are prepared in accordance with International Financial Reporting Standards (IFRS) and the term "dollar", as well as the symbol "$" 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 second quarter ended May 1, 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.
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 25, 2022 to shareholders of record at the close of business on July 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.
During the three-month period ended May 1, 2022, the Corporation redeemed and cancelled 180,000 of its Class A Subordinate Voting Shares at a weighted average price of $16.79 per share, for a total cash consideration of $3.0 million. During the six-month period ended May 1, 2022, the Corporation redeemed and cancelled 337,800 of its Class A Subordinate Voting Shares at a weighted average price of $17.73 per share, for a total cash consideration of $6.0 million.
Additional information
Conference Call
Upon releasing its 2022 second quarter results, the Corporation will hold a conference call for the financial community on June 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.
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 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 June 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 June 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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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
