Transcontinental has announced its results for the third quarter of fiscal 2018, which ended 29 July, 2018.
TC Transcontinental president and CEO François Olivier said: “The third quarter represents a significant milestone for us, marking the transformational acquisition of Coveris Americas and its first contribution to our results.
“Coveris Americas generated solid revenues, with more moderate profitability than anticipated. That being said, we are maintaining our previously established targets and we are confident that this acquisition will further contribute to our profitability as of the fourth quarter.
“We launched the rigorous integration of our activities and we are on track to realize the anticipated synergies. Lastly, we are satisfied with the performance of our packaging activities acquired prior to the Coveris Americas acquisition, both in terms of revenue growth and profitability.
“On the printing side, we posted another good quarter excluding the non-cash effect of the end of certain newspaper printing contracts. In addition, the demand for our service offering to retailers remained relatively stable, which reflects the effectiveness of flyers for driving traffic to the store.
“In summary, we are pursuing our business plan with confidence. We expect to continue generating significant cash flows, which will enable us to reduce our net indebtedness.”
Revenues increased by $280.2 million, or 58.7%, from $477.7 million in the third quarter of 2017 to $757.9 million in the corresponding period of 2018.
This increase is mainly attributable to the contribution from the acquisition of Coveris Americas completed on May 1, 2018 and, to a lesser extent, to the acquisitions of Multifilm Packaging and Les Industries Flexipak, the organic growth in our Packaging Sector revenues as well as the favourable effect of the price increase for certain types of papers in the Printing Sector. In the Printing Sector, the end of the printing of the San Francisco Chronicle, La Presse and The Globe and Mail in the Maritimes drove a major portion of the decrease in sales in the quarter.
In addition, revenues from our service offering to Canadian retailers were slightly lower in the third quarter of 2018 compared to a solid quarter in the prior year. In the other Printing Sector verticals, the decline in revenues followed the same trends as in previous quarters.
Operating earnings decreased by $28.6 million, or 41.9%, from $68.2 million in the third quarter of 2017 to $39.6 million in the third quarter of 2018. This decrease in mostly due to the unfavourable impact of items related to the acquisition of Coveris Americas, namely the amortization of intangible assets, acquisition and integration costs and the reversal of the fair value adjustment of inventory sold arising from business combinations.
Adjusted operating earnings increased by $10.5 million, or 14.2%, from $74.2 million in the third quarter of 2017 to $84.7 million in the third quarter of 2018. Excluding the $11.3 million unfavourable impact of the end of the printing of the San Francisco Chronicle, La Presse and The Globe and Mail in the Maritimes, which had no impact on cash, adjusted operating earnings increased by $21.8 million, or 29.4%.
This increase is mostly attributable to the contribution from our acquisitions in the Packaging Sector, the favourable effect of Corporation-wide cost reduction initiatives as well as the impact of the price increase for certain types of paper in the third quarter of 2018, partially offset by the above-mentioned decreases in volume in certain Printing Sector verticals.
With respect to the acquisition of Coveris Americas, profit margins were lower than expected at the time of the acquisition, namely as a result of the impact of a delay in the pass-through of increases in the cost of paper, resin and freight provided for in several customer contracts, which had an unfavourable impact on the quarter’s adjusted operating earnings.
Net earnings decreased by $29.7 million, or 60.6%, from $49.0 million in the third quarter of 2017 to $19.3 million in the third quarter of 2018. This decrease is mostly due to lower operating earnings and higher financial expenses, partially offset by lower income taxes. On a per share basis, net earnings went from $0.64 to $0.22.
Excluding restructuring and other costs (gains), impairment of assets, amortization of intangible assets and the reversal of the fair value adjustment of inventory sold arising from business combinations, net of related income taxes, adjusted net earnings decreased by $0.8 million, or 1.5%, from $52.9 million in the third quarter of 2017 to $52.1 million in the third quarter of 2018. This decrease is mostly due to the lower adjusted operated earnings explained above.
On a per share basis, adjusted net earnings went from $0.68 to $0.59 due to higher financial expenses, as explained above, but also due to the issuance of 10.8 million Class A Subordinate Voting Shares of the Corporation.
TC Transcontinental is a leader in flexible packaging in North America, and Canada’s largest printer. The Corporation is also a Canadian leader in its specialty media segments. For over 40 years, TC Transcontinental’s mission has been to create products and services that allow businesses to attract, reach and retain their target customers.
Respect, teamwork, performance and innovation are strong values held by the Corporation and its employees. TC Transcontinental’s commitment to its stakeholders is to pursue its business activities in a responsible manner.
Source: Company Press Release