*Significantly improved profitability in the Packaging Sector and strictly controlled costs in the Printing Sector.
*Strengthened our measures to protect employee health and safety during the pandemic and maintained our financial support programs for employees who were temporarily laid off or on reduced work schedules.
*Revenues of $587.4 million; operating earnings of $75.3 million; and net earnings attributable to shareholders of the Corporation of $48.3 million ($0.56 per share).
*Adjusted operating earnings before depreciation and amortization(1) of $139.3 million; adjusted operating earnings(1) of $102.1 million; and adjusted net earnings attributable to shareholders of the Corporation(1) of $68.2 million ($0.78 per share).
*Maintained solid financial health with an improved net indebtedness ratio(1) of 2.0x (1.8x excluding the impact of IFRS 16(2)), liquidities of $197.3 million and access to unused lines of credit of $433.5 million.
*Promising start in our flexible packaging recycling operations to help accelerate the transition to a circular economy for plastic.
Transcontinental Inc. (TSX: TCL.A TCL.B) announces its results for the third quarter of fiscal 2020, which ended July 26, 2020.
“Our solid results continue to demonstrate the relevance of our transformation into flexible packaging. I am very satisfied with our excellent performance for the quarter, which once again highlights our resilience, our agility and our operational efficiency, said François Olivier, President and Chief Executive Officer of TCTranscontinental. With the pandemic continuing to impact our sectors in different ways, I am proud of the exceptional work of our teams.
“In our Packaging Sector, mainly located in the United States, Latin America and Canada, we delivered another excellent quarter by being agile in responding to increased customer demand for food and everyday consumer products packaging. As a result, we recorded solid organic growth while continuing to improve our profitability thanks to our operational efficiency gains and better than expected synergies. In addition, our flexible packaging recycling operations are off a promising start since the acquisition of the assets of Montréal-based Enviroplast Inc., in June 2020. We are thus furthering the development of the circular economy for plastic.
“In our Printing Sector, we quickly reduced our costs from the onset of the pandemic to adjust to the reduction in our activities. We continue to take the measures needed to optimize our platform, which is located in Canada, while meeting our customers’ needs. The gradual recovery in printing volume for the sector enabled us to recall close to 60% of the employees who were temporarily laid off at the end of March. I thank them once again for their patience and understanding.
“To conclude, the measures we implemented to manage the situation were successful. We took great care of the health and safety of our employees while delivering excellent results. Although the economic climate continues to be uncertain, we remain confident in our ability to generate significant cash flows and are strongly positioned to take advantage of future business opportunities and pursue our transformation.”
2020 Third Quarter Results
Revenues decreased by $141.5 million, or 19.4%, from $728.9 million in the third quarter of 2019 to $587.4 million in the corresponding period of 2020. This decrease is largely attributable to lower volume in the Printing Sector, mostly due to the impact of the COVID-19 pandemic, and to the impact of the disposal of our paper packaging operations ($67.4 million), which were sold at the end of the first quarter of 2020. The sale of the specialty media assets and event planning activities also contributed to this decrease. The Packaging Sector, benefiting from a significant increase in volume in several segments supporting the retail supply chain for food and everyday consumer products, and despite the impact on revenues of lower raw material costs, generated solid organic growth of $6.7 million.
Operating earnings increased by $18.7 million, or 33.0%, from $56.6 million in the third quarter of 2019 to $75.3 million in the third quarter of 2020. Adjusted operating earnings increased by $21.2 million, or 26.2%, from $80.9 million to $102.1 million. These increases are attributable to higher volume and the realization of synergies and operational efficiency initiatives in the Packaging Sector, combined with the cost reduction measures taken by the Corporation as well as the Canada Emergency Wage Subsidy, mainly in the Printing Sector. These items were partially offset by lower volume in the Printing Sector, mainly as a result of the COVID-19 pandemic.
In the Packaging Sector, adjusted operating earnings increased by $11.5 million, from $34.1 million in the third quarter of 2019 to $45.6 million in the third quarter of 2020. Excluding the impact of the disposal of the paper packaging operations, this increase would have been $14.5 million. It is attributable to higher volume and the realization of synergies and operational efficiency initiatives in the sector. Unlike the impact on revenues, the decrease in raw material costs had a positive impact on adjusted operating earnings as a result of the lag in price adjustment. The sector’s adjusted operating earnings margin increased from 8.6% in the third quarter of 2019 to 13.1% in the third quarter of 2020.
In the Printing Sector, adjusted operating earnings increased by $7.7 million, or 16.4%, from $46.8 million in the third quarter of 2019 to $54.5 million in the third quarter of 2020. This increase is attributable to the cost reduction measures taken by the Corporation and to the Canada Emergency Wage Subsidy, partially offset by lower volume due to the impact of the COVID-19 pandemic. Excluding the subsidy, the adjusted operating earnings margin remained relatively stable, despite a significant decrease in revenues, mostly as a result of cost reduction initiatives taken by the Corporation.
Net earnings attributable to shareholders of the Corporation increased by $44.9 million, from $3.4 million in the third quarter of 2019 to $48.3 million in the third quarter of 2020. This increase is attributable to operational performance as well as a decrease in income taxes relative to an income tax expense of $30.2 million in 2019 resulting from the retroactive application of a new directive as part of the U.S. tax reform. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.04 to $0.56.
2020 First Nine Months Results
Revenues decreased by $329.6 million, or 14.7%, from $2,247.9 million in the first nine months of 2019 to $1,918.3 million in the corresponding period of 2020. This decrease is largely due to lower volume in the Printing Sector, which has been severely affected by the COVID-19 pandemic. The disposal of our paper packaging operations, sold at the end of the first quarter of 2020, as well as the sale of the specialty media assets and event planning activities in 2019 also contributed to the decrease. As for the organic decline in the Packaging Sector, it is attributable to the decrease in raw material costs and the organic decline in the paper packaging operations before their disposal in January 2020. Excluding these items, the Packaging Sector would have generated positive organic growth for the first nine months of 2020.
Operating earnings increased by $6.9 million, or 4.5%, from $153.3 million in the first nine months of 2019 to $160.2 million in the corresponding period of 2020. This increase is mostly explained by the realization of synergies and operational efficiency initiatives in the Packaging Sector, combined with cost reduction measures taken by the Corporation, in addition to its operational efficiency initiatives and the Canada Emergency Wage Subsidy, mostly in the Printing Sector. These items were partially offset by lower volume in the Printing Sector, mainly as a result of the COVID-19 pandemic. Adjusted operating earnings increased by $1.5 million, or 0.6%, from $241.2 million in the first nine months of 2019 to $242.7 million in the corresponding period of 2020.
Net earnings attributable to shareholders of the Corporation increased by $26.6 million, or 49.4%, from $53.8 million in the first nine months of 2019 to $80.4 million in the corresponding period of 2020. This increase is mainly attributable to the previously explained higher operating earnings as well as the decrease in net financial expenses and income taxes. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.62 to $0.93 due to the previously mentioned items.
details at: https://tctranscontinental.com/en-ca/company-overview/news-room/press-releases/transcontinental-inc-announces-its-results-third-1