Release Date: March 11, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Transcontinental Inc (TCLAF, Financial) reported a strong quarter with consolidated adjusted EBITDA of $97.5 million, showing growth despite challenges.
- The company successfully reduced its net debt ratio to 1.53 times, the lowest since the acquisition of Coveris America in 2018.
- The retail services and printing sector recorded an increase in profit for the third consecutive quarter, driven by increased book printing and specialized solutions activities.
- Cost reduction initiatives and operational efficiencies have helped maintain profitability in the packaging sector despite revenue declines.
- Transcontinental Inc (TCLAF) announced a special dividend of $1 per share, reflecting confidence in its strong financial position and cash flow generation.
Negative Points
- Revenues decreased by 5.5% compared to the same quarter last year, primarily due to lower volume and the sale of industrial packaging activities.
- The packaging sector experienced a 2.2% revenue decrease, impacted by lower volumes in Latin America and the medical market.
- The labor conflict at Canada Post negatively affected the retail services and printing sector, contributing to a 9.2% revenue decline.
- The company faces potential impacts from tariffs, with approximately 10% of its sales exposed to cross-border tariffs.
- Challenges in the Latin American market, including a drought in Mexico and energy shortages in Ecuador, contributed to a decline in packaging volumes.
Q & A Highlights
Q: The 2% organic decline in packaging in Q1, how much of that was price versus volume? And how do you see volumes trending over the balance of the year?
A: The price was about 1%. The reduction was mainly due to temporary issues in Latin America, such as a drought in Mexico, energy shortages in Ecuador, and currency devaluation in Colombia. In the medical sector, we had a low quarter in sales, but we have a strong backlog and pipeline, so we're confident for the rest of the year. - Thomas Morin, President, Chief Executive Officer
Q: On the non-core assets side, what are the expected proceeds from the sale of two buildings this fiscal year?
A: We initially estimated $100 million from the program. So far, we've concluded $20 million, and the two buildings expected to close this year represent a large part of what's remaining, estimated between $60 million and $80 million. - Donald Lecavalier, Chief Financial Officer, Executive Vice President
Q: Are you seeing any changes in customer behavior with flyers due to potential recession concerns?
A: Flyers are a good tool during high inflation or recession. We haven't seen an uptick yet, but we would expect it should recession or high inflation rates materialize. - Thomas Morin, President, Chief Executive Officer
Q: Can you give us a sense of the scale of book exports exempt from tariffs relative to the 10% of sales exposed to tariffs?
A: Approximately 10% of our combined sales are exposed to tariffs, with less than 40% of that impact coming from retail services and printing, a major part of which is book exports that are exempted. - Donald Lecavalier, Chief Financial Officer, Executive Vice President
Q: What is the rationale for choosing a special dividend over faster buybacks?
A: We have a strong balance sheet and have returned about $125 million to investors over the last year. The special dividend follows a good transaction where we cashed more than $130 million. We still have the NCIB in place and look at total returns to investors. - Donald Lecavalier, Chief Financial Officer, Executive Vice President
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
