Transcontinental Inc. Announces Results for the Third Quarter of Fiscal 2024
Highlights
Revenues of $700.0 million for the quarter ended July 28, 2024; operating earnings of $69.2 million; and net earnings attributable to shareholders of the Corporation of $43.6 million ($0.50 per share).
Adjusted operating earnings before depreciation and amortization(1) of $121.0 million for the quarter ended July 28, 2024; adjusted operating earnings(1) of $84.2 million; and adjusted net earnings attributable to shareholders of the Corporation(1) of $51.4 million ($0.60 per share).
Growth in adjusted operating earnings before depreciation and amortization(1) of 12.1%, with an increase of 20.6% in the Packaging Sector and of 12.4% in the Retail Services and Printing Sector.
Sale of a building for an amount of $7.1 million.
Repurchase of 1.2 million shares during the quarter ended July 28, 2024, for a total consideration of $17.7 million.
Appointment of Serge Boulanger to the Board of Directors 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, Sept. 11, 2024 (GLOBE NEWSWIRE) -- Transcontinental Inc. (TSX:TCL) announces its results for the third quarter of fiscal 2024, which ended July 28, 2024.
"I am satisfied with the increase in our results in both the Packaging Sector and the Retail Services and Printing Sector," said Thomas Morin, President and Chief Executive Officer of TC Transcontinental. "This fourth consecutive quarter of improvement in our profitability is the results of our cost reduction initiatives, including the optimization of our manufacturing network, as well as our efforts to market higher value-added products.
"In our Packaging Sector, despite the ongoing pressure on our medical market activities, we experienced a modest increase in volume. Our cost reduction initiatives, combined with volume growth, contributed to a solid increase of 20.6% in adjusted operating earnings before depreciation and amortization.
"In our Retail Services and Printing Sector, we posted a 12.4% increase in adjusted operating earnings before depreciation and amortization. As in the previous quarter, the actions taken to improve our cost structure, a more favourable product mix, including the roll-out of raddarTM, as well as growth in our in-store marketing activities, have shown results."
"The implementation of our two-year program aimed at improving our profitability and our financial position is proceeding in accordance with the objectives announced in December 2023," added Donald LeCavalier, Executive Vice President and Chief Financial Officer of TC Transcontinental. We remain on track to generate annual recurring savings of approximately $30 million by the end of fiscal 2024. Our ability to generate significant cash flows enables us to reduce our net indebtedness and improve our balance sheet while allocating capital to our share repurchase program."
Financial Highlights
(in millions of dollars, except per share amounts)
Q3-2024
Q3-2023
Variationin %
Revenues
$700.0
$706.7
(0.9
) %
Operating earnings before depreciation and amortization
121.5
95.3
27.5
Adjusted operating earnings before depreciation and amortization (1)
121.0
107.9
12.1
Operating earnings
69.2
39.2
76.5
Adjusted operating earnings (1)
84.2
70.2
19.9
Net earnings attributable to shareholders of the Corporation
43.6
20.9
108.6
Net earnings attributable to shareholders of the Corporation per share
0.50
0.24
108.3
Adjusted net earnings attributable to shareholders of the Corporation (1)
51.4
44.0
16.8
Adjusted net earnings attributable to shareholders of the Corporation per share (1)
0.60
0.51
17.6
(1) Please refer to the section entitled "Reconciliation of Non-IFRS Financial Measures" in this Press release for adjusted data presented above.
Results for the Third Quarter of Fiscal 2024
Revenues decreased by $6.7 million, or 0.9%, from $706.7 million in the third quarter of 2023 to $700.0 million in the corresponding period of 2024. This decrease is mainly due to lower volume in the Retail Services and Printing Sector, partially mitigated by the favourable effect of exchange rate fluctuations as well as higher volume in the Packaging Sector.
Operating earnings before depreciation and amortization increased by $26.2 million, or 27.5%, from $95.3 million in the third quarter of 2023 to $121.5 million in the third quarter of 2024. This increase in mainly attributable to our cost reduction initiatives, the decrease in restructuring and other costs, a more favourable product mix in the Retail Services and Printing Sector, the favourable effect of exchange rate fluctuations and higher volume in the Packaging Sector, partially offset by lower volume in the Retail Services and Printing Sector.
Adjusted operating earnings before depreciation and amortization increased by $13.1 million, or 12.1%, from $107.9 million in the third quarter of 2023 to $121.0 million in the third quarter of 2024. This increase is mainly attributable to our cost reduction initiatives, a more favourable product mix in the Retail Services and Printing Sector, the favourable effect of exchange rate fluctuations and higher volume in the Packaging Sector, partially offset by lower volume in the Retail Services and Printing Sector.
Net earnings attributable to shareholders of the Corporation increased by $22.7 million, or 108.6%, from $20.9 million in the third quarter of 2023 to $43.6 million in the third quarter of 2024. This increase is mainly due to the previously explained increase in operating earnings before depreciation and amortization, the decrease in depreciation and amortization, and lower financial expenses, partially offset by higher income taxes. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.24 to $0.50, respectively.
Adjusted net earnings attributable to shareholders of the Corporation increased by $7.4 million, or 16.8%, from $44.0 million in the third quarter of 2023 to $51.4 million in the third quarter of 2024. This increase is mainly attributable to the previously explained increase in adjusted operating earnings before depreciation and amortization, the decrease in depreciation and amortization, and lower financial expenses, partially offset by higher income taxes. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $0.51 to $0.60, respectively.
Results for the First Nine Months of Fiscal 2024
Revenues decreased by $97.3 million, or 4.5%, from $2,160.9 million in the first nine months of fiscal 2023 to $2,063.6 million in the corresponding period of 2024. This decrease is mainly due to lower volume in the two main operating sectors.
Operating earnings before depreciation and amortization increased by $16.5 million, or 6.0%, from $276.4 million in the first nine months of fiscal 2023 to $292.9 million in the corresponding period of 2024. This increase is mainly attributable to our cost reduction initiatives and a more favourable product mix, partially offset by lower volume and asset impairment charges.
Adjusted operating earnings before depreciation and amortization increased by $26.2 million, or 8.7%, from $301.0 million in the first nine months of fiscal 2023 to $327.2 million in the corresponding period of 2024. This increase is mainly attributable to our cost reduction initiatives and a more favourable product mix, partially offset by lower volume.
Net earnings attributable to shareholders of the Corporation increased by $29.3 million, or 66.4%, from $44.1 million in the first nine months of fiscal 2023 to $73.4 million in the corresponding period of 2024. This increase is mainly attributable to the previously explained increase in operating earnings before depreciation and amortization, the decrease in depreciation and amortization, and lower financial expenses, partially offset by higher income taxes. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.51 to $0.85, respectively.
Adjusted net earnings attributable to shareholders of the Corporation increased by $29.9 million, or 28.7%, from $104.2 million in the first nine months of fiscal 2023 to $134.1 million in the corresponding period of 2024. This increase is mostly attributable to the previously explained increase in adjusted operating earnings before depreciation and amortization, the decrease in depreciation and amortization, and lower financial expenses, partially offset by higher income taxes. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $1.20 to $1.55, respectively.
For more detailed financial information, please see the Management's Discussion and Analysis for the third quarter ended July 28, 2024, as well as the financial statements in the "Investors" section of our website at www.tc.tc.
New Director
The Corporation announces the appointment of Serge Boulanger, CPA and corporate director, to its Board of Directors. Mr. Boulanger has worked for more than 25 years in the retail industry in the fields of food and pharmacies, where he held leadership positions in procurement, food manufacturing and private brand development. He also led all the activities of several major banners and, earlier in his career, the marketing of major brands. In 2023, he was awarded the Lifetime Achievement Award by the Retail Council of Canada.
"I am delighted to welcome Serge Boulanger to our Board of Directors," said Isabelle Marcoux, Executive Chair of the Board of TC Transcontinental. "His vast experience and extensive professional background will be valuable assets for our two main sectors in pursuing their activities and developing products and services for retailers."
Outlook
In the Packaging Sector, our investments, including those related to sustainable packaging solutions, position us well for the future and should be a key driver of our growth. The economic environment however had a negative impact on demand during the fiscal year. In terms of profitability, we expect an increase in adjusted operating earnings before depreciation and amortization for fiscal 2024 compared to fiscal 2023.
In the Retail Services and Printing Sector, we are encouraged by the roll-out of raddarTM and growth opportunities in our in-store marketing activities. The decrease in volume in our traditional activities should be offset by our cost reduction initiatives, the favourable impact of the roll-out of raddarTM and the growth in our in-store marketing activities. We therefore expect adjusted operating earnings before depreciation and amortization for fiscal 2024 to be stable compared to fiscal 2023.
Given the solid financial performance since the beginning of the fiscal year and the benefits of our profitability and financial position improvement program, we expect an increase in consolidated adjusted operating earnings before depreciation and amortization for fiscal 2024 compared to fiscal 2023.
For the fourth quarter of fiscal 2024, we expect adjusted operating earnings before depreciation and amortization for our two main operating sectors to remain relatively stable compared to the fourth quarter of fiscal 2023. However, as a result of an anticipated increase in the incentive compensation expense, including stock-based compensation, and the solid performance of the Media Sector in the fourth quarter of fiscal 2023, we expect a decrease in consolidated operating earnings before depreciation and amortization for the fourth quarter of fiscal 2024.
Lastly, we expect to continue generating significant cash flows from operating activities, which will enable us to reduce our net indebtedness while continuing to make strategic investments and return capital to our shareholders.
Non-IFRS Financial Measures
In this document, unless otherwise indicated, all financial data are prepared in accordance with International Financial Reporting Accounting 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 condensed interim consolidated financial statements for the third quarter ended July 28, 2024.
Terms Used
Definitions
Adjusted operating earnings before depreciation and amortization
Operating earnings before depreciation and amortization as well as restructuring and other costs (revenues) and impairment of assets.
Adjusted operating earnings
Operating earnings before restructuring and other costs (revenues), amortization of intangible assets arising from business combinations and impairment of assets.
Adjusted income taxes
Income taxes before income taxes on restructuring and other costs (revenues), impairment of assets and amortization of intangible assets arising from business combinations as well as the recognition of previous years tax assets of an acquired company.
Adjusted net earnings attributable to shareholders of the Corporation
Net earnings attributable to shareholders of the Corporation before restructuring and other costs (revenues), amortization of intangible assets arising from business combinations and impairment of assets, net of related income taxes as well as the recognition of previous years tax assets of an acquired company.
Net indebtedness
Total of long-term debt, of current portion of long-term debt, of lease liabilities and of current portion of lease liabilities, less cash.
Net indebtedness ratio
Net indebtedness divided by the last 12 months' adjusted operating earnings before depreciation and amortization.
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.
Reconciliation of operating earnings - Third quarter and cumulative
Three months ended
Nine months ended
(in millions of dollars)
July 28, 2024
July 30, 2023
July 28, 2024
July 30, 2023
Operating earnings
$69.2
$39.2
$130.2
$98.0
Restructuring and other costs (revenues)
(0.5
)
12.6
26.8
24.6
Amortization of intangible assets arising from business combinations (1)
15.5
18.4
51.0
55.6
Impairment of assets
,
—
7.5
—
Adjusted operating earnings
$84.2
$70.2
$215.5
$178.2
Depreciation and amortization (2)
36.8
37.7
111.7
122.8
Adjusted operating earnings before depreciation and amortization
$121.0
$107.9
$327.2
$301.0
(1) Amortization of intangible assets arising from business combinations includes our customer relationships, non-compete agreements, rights of first refusal and educational book titles.(2) Depreciation and amortization excludes the amortization of intangible assets arising from business combinations.
Reconciliation of operating earnings - Third quarter and cumulative for the Packaging Sector
Three months ended
Nine months ended
(in millions of dollars)
July 28, 2024
July 30, 2023
July 28, 2024
July 30, 2023
Operating earnings
$29.4
$17.7
$84.1
$48.4
Restructuring and other costs
2.4
1.5
9.7
7.4
Amortization of intangible assets arising from business combinations (1)
14.3
15.9
46.5
48.0
Impairment of assets
,
—
0.6
—
Adjusted operating earnings
$46.1
$35.1
$140.9
$103.8
Depreciation and amortization (2)
18.8
18.7
55.6
64.0
Adjusted operating earnings before depreciation and amortization
$64.9
$53.8
$196.5
$167.8
(1) Amortization of intangible assets arising from business combinations includes our customer relationships.(2) Depreciation and amortization excludes the amortization of intangible assets arising from business combinations.
Reconciliation of operating earnings - Third quarter and cumulative for the Retail Services and Printing Sector
Three months ended
Nine months ended
(in millions of dollars)
July 28, 2024
July 30, 2023
July 28, 2024
July 30, 2023
Operating earnings
$36.8
$27.3
$71.1
$82.8
Restructuring and other costs
1.7
2.7
19.6
7.2
Amortization of intangible assets arising from business combinations (1)
0.7
1.9
3.0
6.0
Impairment of assets
,
—
6.9
—
Adjusted operating earnings
$39.2
$31.9
$100.6
$96.0
Depreciation and amortization (2)
11.6
13.3
36.8
39.8
Adjusted operating earnings before depreciation and amortization
$50.8
$45.2
$137.4
$135.8
(1) Amortization of intangible assets arising from business combinations includes our customer relationships.(2) Depreciation and amortization excludes the amortization of intangible assets arising from business combinations.
Reconciliation of operating earnings - Third quarter and cumulative for the Other Sector
Three months ended
Nine months ended
(in millions of dollars)
July 28, 2024
July 30, 2023
July 28, 2024
July 30, 2023
Operating earnings
$3.0
($5.8
)
($25.0
)
($33.2
)
Restructuring and other costs (revenues)
(4.6
)
8.4
(2.5
)
10.0
Amortization of intangible assets arising from business combinations (1)
0.5
0.6
1.5
1.6
Adjusted operating earnings
($1.1
)
$3.2
($26.0
)
($21.6
)
Depreciation and amortization (2)
6.4
5.7
19.3
19.0
Adjusted operating earnings before depreciation and amortization
$5.3
$8.9
($6.7
)
($2.6
)
(1) Amortization of intangible assets arising from business combinations includes non-compete agreements, rights of first refusal and educational book titles.(2) Depreciation and amortization excludes the amortization of intangible assets arising from business combinations.
Reconciliation of net earnings attributable to shareholders of the Corporation - Third quarter and cumulative
Three months ended
Nine months ended
(in millions of dollars, except per share amounts)
July 28, 2024
July 30, 2023
July 28, 2024
July 30, 2023
Net earnings attributable to shareholders of the Corporation
$43.6
$20.9
$73.4
$44.1
Restructuring and other costs (revenues)
(0.5
)
12.6
26.8
24.6
Tax on restructuring and other costs
,
(3.3
)
(6.8
)
(6.3
)
Amortization of intangible assets arising from business combinations (1)
15.5
18.4
51.0
55.6
Tax on amortization of intangible assets arising from business combinations
(3.8
)
(4.6
)
(12.5
)
(13.8
)
Impairment of assets
,
—
7.5
—
Tax on impairment of assets
,
—
(1.9
)
—
Recognition of previous years tax assets of an acquired company
(3.4
)
—
(3.4
)
—
Adjusted net earnings attributable to shareholders of the Corporation
$51.4
$44.0
$134.1
$104.2
Net earnings attributable to shareholders of the Corporation per share
$0.50
$0.24
$0.85
$0.51
Adjusted net earnings attributable to shareholders of the Corporation per share
$0.60
$0.51
$1.55
$1.20
Weighted average number of shares outstanding
86.4
86.6
86.5
86.6
(1) Amortization of intangible assets arising from business combinations includes our customer relationships, non-compete agreements, rights of first refusal and educational book titles.
Reconciliation of net indebtedness
(in millions of dollars, except ratios)
As at July 28, 2024
As at October 29, 2023
Long-term debt
$667.1
$937.8
Current portion of long-term debt
199.8
2.1
Lease liabilities
93.5
94.6
Current portion of lease liabilities
22.8
23.5
Cash
(79.9
)
(137.0
)
Net indebtedness
$903.3
$921.0
Adjusted operating earnings before depreciation and amortization (last 12 months)
$472.7
