Mr. Thomas Morin reports

TRANSCONTINENTAL INC. ANNOUNCES RESULTS FOR THE FOURTH QUARTER AND FISCAL YEAR 2023

Transcontinental Inc. has released its results for the fourth quarter and fiscal year 2023, which ended Oct. 29, 2023. "We successfully increased our adjusted operating earnings before depreciation and amortization in the fourth quarter, despite lower revenues," said Thomas Morin, president and chief executive officer of TC Transcontinental.

"The packaging sector finished the fiscal year on a strong note with solid adjusted operating earnings before depreciation and amortization for the quarter. This concludes a year of growth in the face of headwinds in demand. In spite of an uncertain outlook, we expect to further grow the sector's operating earnings in the new fiscal year by continuing to focus on our priorities aimed at improving our financial performance.

"In our printing sector, the actions implemented since the beginning of the year partially offset the decrease in volume. We continue to face challenges in our book printing activities, and we have taken measures to mitigate their impact in 2024. While continuing to reduce our cost structure to reflect the demand in this sector, we are encouraged by the favourable opportunities in our retailer-related services as well as the rollout of raddar in fiscal 2024. The media sector delivered a solid financial performance in the fourth quarter with a significant growth in adjusted operating earnings before depreciation and amortization.

"We were able to improve the working capital for a third quarter in a row, which substantially reduced net indebtedness. Despite significant investments in new equipment, including those intended to accelerate the commercialization of recyclable flexible packaging, our solid performance with respect to cash flows from operating activities enabled us to reduce our net indebtedness ratio to 2.06 times at the end of fiscal 2023.

"After six months as president and chief executive officer, I am announcing that we have implemented an ambitious program to improve the corporation's earnings per share and balance sheet. This two-year program, which should generate recurring savings from $20-million to $40-million, comprises four main action categories: (1) significant reductions in fixed costs across the organization; (2) decisive actions aimed at less-performing activities, through turnaround or consolidation; (3) a reduction of the cost of goods sold; (4) the sale of certain real estate assets for an expected value of approximately $100-million in a first step. On top of achieving the fiscal 2024 objectives, the management team is mobilized to execute this program, which will support greater profitability growth.

"Several actions have already been undertaken as part of this program, including the closure of the Montreal recycling plant and the Tomah packaging plant, as well as the sale of a building in Quebec City for $12-million."

Results of the fourth quarter of fiscal 2023

Revenues decreased by $22.5-million, or 2.8 per cent, from $802.2-million in the fourth quarter of 2022 to $779.7-million in the corresponding period of 2023. This decrease is mainly due to the organic decline largely caused by lower volume, partially mitigated by the favourable exchange rate effect mainly in the packaging sector.

Operating earnings before depreciation and amortization decreased by $22.5-million, or 15.4 per cent, from $145.7-million in the fourth quarter of 2022 to $123.2-million in the fourth quarter of 2023. Adjusted operating earnings before depreciation and amortization increased by $4.4-million, or 3.1 per cent, from $141.1-million in the fourth quarter of 2022 to $145.5-million in the fourth quarter of 2023. The increase in adjusted operating earnings before depreciation and amortization is mainly attributable to the favourable impact of the change in stock-based compensation expense, the organic growth in the media sector and cost-reduction initiatives, partially offset by the organic decline in the printing sector largely caused by lower volume. Lastly, asset impairment charges had a $25.2-million negative impact on operating earnings before depreciation and amortization, which explains the decrease of this measure.

Net earnings attributable to shareholders of the corporation decreased by $18.7-million, from $60.4-million in the fourth quarter of 2022 to $41.7-million in the fourth quarter of 2023. This decrease is mainly due to asset impairment charges and the increase in financial expenses, partially mitigated by lower depreciation and amortization, and income taxes. On a per-share basis, net earnings attributable to shareholders of the corporation went from 70 cents to 48 cents, respectively.

Adjusted net earnings attributable to shareholders of the corporation increased by $3.4-million, or 5.0 per cent, from $68.4-million in the fourth quarter of 2022 to $71.8-million in the fourth quarter of 2023. This increase is mainly attributable to the previously explained increase in adjusted operating earnings before depreciation and amortization as well as lower depreciation and amortization, and income taxes, partially offset by the increase in financial expenses. On a per-share basis, adjusted net earnings attributable to shareholders of the corporation went from 79 cents to 83 cents, respectively.

Results of fiscal 2023

Revenues decreased by $15.5-million, or 0.5 per cent, from $2,956.1-million in fiscal 2022 to $2,940.6-million in the corresponding period of 2023. This decrease is mainly explained by the organic decline largely caused by lower volume, partially mitigated by the favourable exchange rate effect, the net impact of price increases due to the current inflationary situation and the acquisitions.

Operating earnings before depreciation and amortization decreased by $49.6-million, or 11.0 per cent, from $449.2-million in fiscal 2022 to $399.6-million in the corresponding period of 2023. The decline is mainly due to asset impairment charges, and the increase in restructuring and other costs.

Adjusted operating earnings before depreciation and amortization remained stable and went from $446.7-million in fiscal 2022 to $446.5-million in the corresponding period of 2023. The organic decline largely caused by lower volume was mostly mitigated by cost-reduction initiatives, and, to a lesser extent, the favourable exchange rate effect and the acquisitions.

Net earnings attributable to shareholders of the corporation decreased by $55.4-million, or 39.2 per cent, from $141.2-million in fiscal 2022 to $85.8-million in the corresponding period of 2023. This decrease is mainly due to asset impairment charges as well as 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 $1.63 to 99 cents, respectively.

Adjusted net earnings attributable to shareholders of the corporation decreased by $13.7-million, or 7.2 per cent, from $189.7-million in fiscal 2022 to $176.0-million in the corresponding period of 2023, mostly as a result of the increase in financial expenses, partially mitigated by lower income taxes. On a per-share basis, adjusted net earnings attributable to shareholders of the corporation went from $2.19 to $2.03, respectively.

For more detailed financial information, please see the management's discussion and analysis for the year ended Oct. 29, 2023, as well as the financial statements in the investors section of the company'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, Transcontinental expects an increase in adjusted operating earnings before depreciation and amortization for fiscal 2024 compared with fiscal 2023.

In the printing Sector, the company expects lower volume in the majority of its activities. This anticipated volume reduction should result in lower adjusted operating earnings before depreciation and amortization for fiscal 2024 compared with fiscal 2023. Transcontinental expects this decrease to be offset by cost-reduction initiatives and the continued deployment of raddar, which allows the company to secure its retail flyer printing activities.

Finally, given the economic environment and the early impact of its profitability improvement program, Transcontinental expects consolidated adjusted operating earnings before depreciation and amortization to remain at least stable for fiscal 2024 compared with fiscal 2023. In addition, 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 Jan. 22, 2024, to shareholders of record at the close of business on Jan. 8, 2024.

Normal course issuer bid

On Sept. 29, 2022, the corporation has been 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. The repurchases are made in the normal course of business at market prices through the Toronto Stock Exchange.

During the year ended Oct. 29, 2023, the corporation did not repurchase any of its Class A subordinate voting shares or Class B shares. As at Oct. 29, 2023, the corporation had no share repurchase program in effect.

Additional information

Conference call

Upon releasing its 2023 fourth quarter and fiscal 2023 results, the corporation will hold a conference call for the financial community on Dec. 13, 2023, at 7:30 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 TC 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 TC Transcontinental, at 514-954-3581.

About Transcontinental Inc.

Transcontinental is a leader in flexible packaging in North America and is 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 approximately 8,000 employees, the majority of which are based in Canada, the United States and Latin America. Transcontinental generated revenues of $2.9-billion during the fiscal year ended Oct. 29, 2023.

We seek Safe Harbor.