Mr. Thomas Morin reports

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

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

"During this quarter, we accelerated the implementation of actions to reduce costs, improve operational efficiency and increase cash flow generation," said Thomas Morin, president and chief executive officer of Transcontinental. "This partially mitigated the effect of pressure on volume in our packaging and printing sectors.

"In our packaging sector, customer destocking continued, and demand softened due to economic conditions. Despite pressure on volume, the sector's adjusted operating earnings before depreciation and amortization for the quarter increased by 3 per cent. This profitability improvement resulted mainly from price increases to offset the impact of inflation, cost reduction initiatives and the favourable exchange rate effect. Meanwhile, we continue our investments to commercialize sustainable packaging solutions that should be a key driver of our long-term growth.

"As for our printing sector, the actions implemented since the beginning of the year are exceeding $20-million on an annualized basis. These recurring initiatives partially offset the lower volume in the sector during the quarter. Lastly, we are pleased with the progress on the deployment of raddar, our reinvented flyer, in Montreal and Vancouver."

"The decrease in working capital for a second consecutive quarter is aligned with our strategic priorities, and our financial position remains solid," added Donald LeCavalier, executive vice-president and chief financial officer of Transcontinental. "We expect to generate significant cash flows in the fourth quarter of fiscal 2023, which will enable us to reduce our net indebtedness."

Results of the third quarter of fiscal 2023

Revenues decreased by $41.1-million, or 5.5 per cent, from $747.8-million in the third quarter of 2022 to $706.7-million in the corresponding period of 2023. This decrease is mainly due to the organic decline largely related to lower volume, partially offset by the favourable exchange rate effect mainly in the packaging sector, and the acquisitions of Editions du renouveau pedagogique Inc. and Banaplast SAS.

Operating earnings before depreciation and amortization decreased by $14.7-million, or 13.4 per cent, from $110-million in the third quarter of 2022 to $95.3-million in the third quarter of 2023. Adjusted operating earnings before depreciation and amortization decreased by $5.1-million, or 4.5 per cent, from $113-million in the third quarter of 2022 to $107.9-million in the third quarter of 2023. These decreases are mainly due to the organic decline largely related to lower volume, partially offset by cost reduction initiatives and, to a lesser extent, the acquisitions and the favourable impact of the change in stock-based compensation expense. Lastly, the $9.6-million increase in restructuring and other costs, mainly due to the increase in work force reduction costs related to senior management changes and actions implemented to adjust the company's cost structure, had a negative effect on operating earnings before depreciation and amortization.

Net earnings attributable to shareholders of the corporation decreased by $13.2-million, from $34.1-million in the third quarter of 2022 to $20.9-million in the third quarter of 2023. This decrease is mainly due to lower operating earnings, largely attributable to the increase in restructuring and other costs, as well as the increase in financial expenses, partially mitigated by lower income taxes. On a per-share basis, net earnings attributable to shareholders of the corporation went from 39 cents to 24 cents, respectively.

Adjusted net earnings attributable to shareholders of the corporation decreased by $5.6-million, or 11.3 per cent, from $49.6-million in the third quarter of 2022 to $44-million in the third quarter of 2023. This decrease is mainly due to the increase in financial expenses and lower adjusted operating earnings before depreciation and amortization, partially offset by lower income taxes. On a per-share basis, adjusted net earnings attributable to shareholders of the corporation went from 57 cents to 51 cents, respectively.

Results of the first nine months of fiscal 2023

Revenues increased by $7-million, or 0.3 per cent, from $2,153.9-million in the first nine months of fiscal 2022 to $2,160.9-million in the corresponding period of 2023. This increase is mainly explained by the favourable exchange rate effect, the net impact of the price increases due to the current inflationary situation and the acquisitions. These factors were partially offset by the organic decline mainly related to lower volume.

Operating earnings before depreciation and amortization decreased by $27.1-million, or 8.9 per cent, from $303.5-million in the first nine months of fiscal 2022 to $276.4-million in the corresponding period of 2023. Adjusted operating earnings before depreciation and amortization decreased by $4.6-million, or 1.5 per cent, from $305.6-million in the first nine months of fiscal 2022 to $301-million in the corresponding period of 2023. These decreases are mainly due to the organic decline largely related to lower volume, partially offset by cost reduction initiatives, the favourable exchange rate effect and the company's acquisitions. Lastly, the $22.5-million 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 $36.7-million, or 45.4 per cent, from $80.8-million in the first nine months of fiscal 2022 to $44.1-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 offset by lower income taxes. On a per-share basis, net earnings attributable to shareholders of the corporation went from 93 cents to 51 cents, respectively.

Adjusted net earnings attributable to shareholders of the corporation decreased by $17.1-million, or 14.1 per cent, from $121.3-million in the first nine months of fiscal 2022 to $104.2-million in the corresponding period of 2023, mostly as a result of the increase in financial expenses and depreciation and amortization, partially offset by lower income taxes. On a per-share basis, adjusted net earnings attributable to shareholders of the corporation went from $1.40 to $1.20, respectively.

For more detailed financial information, please see the management's discussion and analysis for the third quarter of fiscal 2023 ended July 30, 2023, as well as the financial statements in the investors section of Transcontinental's website.

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 pressure on volume, the company 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 price increases due to higher costs should have a negative impact on volume in retail flyer printing and distribution activities. This anticipated volume reduction, combined with the effect of inflationary pressure, 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 cost reduction initiatives and the continued deployment of raddar which allows Transcontinental to secure its retail flyer printing activities.

Finally, the company expects to continue generating significant cash flows from operating activities, which will enable it to reduce its net indebtedness while continuing its strategic investments.

Dividend

The corporation's board of directors declared a quarterly dividend of 22.5 cents per share on Class A subordinate voting shares and Class B shares. This dividend is payable on Oct. 23, 2023, to shareholders of record at the close of business on Oct. 3, 2023.

Normal course issuer bid

On Sept. 29, 2022, 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 Oct. 3, 2022, and Oct. 2, 2023, or at an earlier date if the corporation concludes or cancels the offer, up to one million of its Class A subordinate voting shares and up to 191,343 of its Class B shares. Repurchases are made in the normal course of business at market prices through the Toronto Stock Exchange.

During the first nine months of fiscal 2023, the corporation did not repurchase any of its Class A subordinate voting shares or Class B shares. The corporation was under no obligation to repurchase its Class A subordinate voting shares and Class B shares as at July 30, 2023.

Additional information

Conference call

Upon releasing its 2023 third quarter results, the corporation will hold a conference call for the financial community on Sept. 7, 2023, at 8 a.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 Transcontinental'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.

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, 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.

We seek Safe Harbor.