Transcontinental (TCL-A) Q1 2025 earnings summary

Executive summary

• Profitability and financial position improved due to ongoing cost reduction and operational efficiency programs, including turnaround efforts at underperforming plants and solid performance in Retail Services & Printing despite Canada Post labour conflict.

• Profit and balance sheet improvement programs drove 14% growth in adjusted EPS for Q1 FY2025, with net earnings of $55.6M ($0.66/share), up 300% from Q1 2024.

• Net debt ratio reduced to 1.53x, the lowest since 2018, with $16.3M in share buybacks.

• Sale of industrial packaging business contributed to debt reduction and enabled a special dividend of $1/share.

• Acquisition pipeline remains active, with a focus on mitigating tariff impacts and leveraging cross-border operations.

Financial highlights

• Q1 2025 revenues were $643.0M, down 5.5% year-over-year, mainly due to lower volume and the sale of industrial packaging, partially offset by favorable exchange rates.

• Consolidated adjusted EBITDA was $97.5M, up 1.5% year-over-year, despite labor conflict and divestitures.

• Adjusted EPS increased 14% to $0.49, reflecting higher adjusted EBITDA, lower D&A, and lower financial expenses.

• Net financial expenses fell to $9.3M from $13.9M; effective tax rate was 17.3% for the quarter.

• Cash flows from operating activities dropped to $23.6M from $57.4M, mainly due to working capital changes.

Outlook and guidance

• Expect volume and profit growth in packaging for fiscal 2025, weighted toward the second half due to a strong Q2 in the prior year.

• Organic growth in adjusted operating earnings before depreciation and amortization expected for Packaging in FY25; Retail Services and Printing expected to be stable.

• Anticipate recovery in Latin America and medical segments in the second half.

• Ongoing initiatives to mitigate tariff impacts; strong operating cash flows and real estate monetization expected.

• Current outlook does not include potential impacts from new US tariffs on imports from Canada, Mexico, and China.