Transcontinental Inc. Completes Two Acquisitions, Increases Profitability in 2Q 2014

Transcontinental Inc.’s revenues decreased by 3.8% in the second quarter, from $517.8 million to $498.2 million, primarily due to the soft advertising market, which continues to influence our marketing products printing as well as our newspaper and magazine publishing operations. This decrease was partially offset by the sustained performance of the company’s flyer printing operations and by new contracts in both operating sectors.

Adjusted operating earnings rose from $54.2 million to $58.5 million. This performance is due to the company-wide optimization of its cost structure and highly efficient printing platform. Net earnings applicable to participating shares increased from $25.3 million, or $0.32 per share, to $34.7 million, or $0.45 per share. This improvement is due to lower restructuring and other costs, an increase in adjusted operating earnings and lower financial expenses, partially offset by an increase in income taxes. Adjusted net earnings applicable to participating shares grew 12.9%, from $32.6 million, or $0.42 per share, to $36.8 million, or $0.47 per share.

“We are proud to have completed two major transactions that position TC Transcontinental strategically for the future,” said François Olivier, president and CEO. “With the acquisition of the Capri Packaging assets, we have taken a first step into the flexible packaging market, which is a new promising growth area for the Corporation. In addition, the acquisition of the Sun Media weekly newspapers in Quebec strengthens our assets in this market, while ensuring our ability to evolve our local solutions offering in Quebec. Furthermore, our second quarter results were satisfactory. Despite the pressure we are experiencing in the advertising market, the increase in our profitability demonstrates the effectiveness of our strategy, namely strengthening existing assets and developing new revenue sources.

“For coming quarters, our excellent financial position combined with our ability to generate significant cash flows gives us the flexibility we need to integrate our recent acquisitions, continue our transformation and invest in the future of the corporation,” Olivier added.

In the first half of 2014, TC Transcontinental’s revenues decreased 4.4%, from $1,043.4 million to $997.5 million. This decrease stems primarily from the soft advertising market in its two operating sectors. Adjusted operating earnings grew 4.4%, from $97.7 million to $102.0 million, due to the optimization of its cost structure.

Net earnings applicable to participating shares rose from $41.0 million, or $0.52 per share, to $51.9 million, or $0.67 per share. This improvement is due to lower financial expenses, a decrease in restructuring and other costs, as well as an increase in adjusted operating earnings, partially offset by an increase in income taxes.

New agreements to print magazines, newspapers and marketing products signed since the start of the fiscal year will reduce the impact of difficult market conditions in these niches. Transcontinental believes that its printing offering to major retail chains will remain relatively stable and we are continuing to improve our point-of-purchase marketing services.

The Media Sector should continue to benefit from cost-structure optimization initiatives and the new flyer-distribution agreements that will help stabilize the company’s operating margin and reduce the impact of difficult conditions in the advertising market. The company will also continue to invest in the development and commercialization of new digital products.

The corporation completed the transaction to acquire the assets of Capri Packaging in order to start a new growth vector in flexible packaging.