Mr. Thomas Morin reports

TRANSCONTINENTAL INC. ANNOUNCES RESULTS FOR THE SECOND QUARTER OF FISCAL 2023

Transcontinental Inc. has released its results for the second quarter of fiscal 2023, which ended April 30, 2023.

"Despite lower volume, the second quarter results are solid, with adjusted operating earnings before depreciation and amortization growing by 5.2 per cent," said Thomas Morin, president and chief executive officer of Transcontinental.

"In our packaging sector, we posted the highest quarterly adjusted operating earnings before depreciation and amortization since the corporation entered this business segment in 2014. The profit improvement results mainly from increases in prices to mitigate the impact of inflation, cost reduction initiatives and the favourable exchange rate effect, partially offset by pressures on volume. Our investments in sustainable packaging solutions position us well for the future and should be a key driver of our long-term growth.

"As for our printing sector, necessary measures were taken to adjust our cost structure and prices were increased to mitigate the cost increases due to inflation. The actions allowed us to partially offset the effect of lower volume in the retail flyer printing and distribution activities. In addition, our in-store marketing activities grew in revenues and profits during the quarter. Lastly, we should highlight the launch in Montreal of raddar, our reinvented flyer."

"Our financial position is solid and we expect to generate significant cash flows in the second half of fiscal 2023, which will enable us to reduce our net indebtedness," said Donald LeCavalier, executive vice-president and chief financial officer of Transcontinental.

Results of the second quarter of fiscal 2023

Revenues increased by $31.7-million, or 4.4 per cent, from $715.5-million in the second quarter of 2022 to $747.2-million in the corresponding period of 2023. This increase is mostly attributable to the favourable exchange rate effect, mainly in the packaging sector, and the acquisitions of Editions du renouveau pedagogique Inc. (ERPI), Banaplast SAS and Scolab Inc.

Operating earnings before depreciation and amortization increased by $2.4-million, or 2.3 per cent, from $102.8-million in the second quarter of 2022 to $105.2-million in the second quarter of 2023. Adjusted operating earnings before depreciation and amortization increased by $5.4-million, or 5.2 per cent, from $103.6-million in the second quarter of 2022 to $109-million in the second quarter of 2023. These increases are mainly due to the positive impact of the increase in prices to mitigate the impact of inflation, cost reduction initiatives and the favourable exchange rate effect, partially offset by lower volume and the unfavourable impact of the stock-based compensation expense. Finally, the increase in restructuring and other costs had a negative effect on operating earnings before depreciation and amortization.

Net earnings attributable to shareholders of the corporation decreased by $6.1-million from $28.3-million in the second quarter of 2022 to $22.2-million in the second quarter of 2023. This decrease is mainly due to the increase in financial expenses, depreciation and amortization as well as restructuring and other costs, partially mitigated by lower income taxes. On a per-share basis, net earnings attributable to shareholders of the corporation went from 33 cents to 26 cents, respectively.

Adjusted net earnings attributable to shareholders of the corporation decreased by $2.6-million, or 6.2 per cent, from $41.7-million in the second quarter of 2022 to $39.1-million in the second quarter of 2023. This decrease is due to the increase in financial expenses and depreciation and amortization, partially mitigated by the increase in adjusted operating earnings before depreciation and amortization and lower income taxes. On a per-share basis, adjusted net earnings attributable to shareholders of the corporation went from 48 cents to 45 cents, respectively.

Results of the first six months of fiscal 2023

Revenues increased by $48.1-million, or 3.4 per cent, from $1,406.1-million in the first six months of fiscal 2022 to $1,454.2-million in the corresponding period of 2023. This increase is mainly explained by the favourable exchange rate effect and acquisitions, partially offset by the organic decline chiefly caused by lower volume.

Operating earnings before depreciation and amortization decreased by $12.4-million, or 6.4 per cent, from $193.5-million in the first six months of fiscal 2022 to $181.1-million in the corresponding period of 2023. This decline is mainly explained by the increase in restructuring and other costs.

Adjusted operating earnings before depreciation and amortization increased by $500,000, or 0.3 per cent, from $192.6-million in the first six months of fiscal 2022 to $193.1-million in the corresponding period of 2023. This increase is attributable to the organic growth in adjusted operating income before depreciation and amortization in the packaging sector and the favourable exchange rate effect. These factors were partially offset by the organic decline in adjusted operating income before depreciation and amortization in the printing sector, mostly caused by lower volume, notably in retail flyer printing activities and distribution.

Net earnings attributable to shareholders of the corporation decreased by $23.5-million, or 50.3 per cent, from $46.7-million in the first six months of fiscal 2022 to $23.2-million in the corresponding period of 2023. This decrease is mainly due to the increase in restructuring and other costs, depreciation and amortization and financial expenses, partially mitigated by lower income taxes. On a per-share basis, net earnings attributable to shareholders of the corporation went from 54 cents to 27 cents, respectively.

Adjusted net earnings attributable to shareholders of the corporation decreased by $11.5-million, or 16 per cent, from $71.7-million in the first six months of fiscal 2022 to $60.2-million in the corresponding period of 2023, mostly as a result of the increase in financial expenses and depreciation and amortization, partially mitigated by lower income taxes. On a per-share basis, adjusted net earnings attributable to shareholders of the corporation went from 83 cents to 70 cents, respectively.

Outlook

In the packaging sector, the company's investments in sustainable packaging solutions position it well for the future and should be a key driver of its long-term growth. The economic environment should, however, continue to affect short-term demand. In terms of profitability, despite the pressures on volume, Transcontinental expects an increase in adjusted operating earnings before depreciation and amortization for fiscal year 2023 compared with fiscal year 2022.

In the printing sector, the company expects volume growth in its book printing and in-store marketing activities. The transfer of cost increases should, however, have a negative impact on volume, notably in Transcontinental's retail flyer printing and distribution activities. This anticipated volume reduction, combined with the effect of inflationary pressures, should result in lower adjusted operating earnings before depreciation and amortization for fiscal year 2023 compared with fiscal year 2022. The company expects this decrease to be partially offset by the implementation of the cost reduction initiatives announced in March, 2023.

Finally, Transcontinental expects to continue generating significant cash flows from operating activities, which will enable it to continue its strategic investments while maintaining its dividend and reducing its net indebtedness.

Conference call

Upon releasing its 2023 second quarter results, the corporation will hold a conference call for the financial community on June 7, 2023, at 4:15 p.m. The dial-in numbers are 1-416-764-8658 or 1-888-886-7786. 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 adviser, corporate communications of Transcontinental, at 514-954-3581.

About Transcontinental Inc.

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, 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. Transcontinental's commitment to its stakeholders is to pursue its business activities in a responsible manner.

Transcontinental, known as TC Transcontinental, has over 8,000 employees, the majority of which are based in Canada, the United States and Latin America. Transcontinental generated revenues of $3-billion during the fiscal year ended Oct. 30, 2022.

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