Transcontinental (TCL-A) Q2 2024 earnings summary

Executive summary

• Achieved record adjusted EBITDA in Packaging Sector and improved overall profitability for Q2 2024, driven by cost reduction initiatives and favorable product mix in both main sectors.

• Cost reduction program on track to deliver CAD 30 million in run rate savings by year-end, nearing the two-year target of CAD 40 million.

• Packaging sector achieved record performance despite ongoing destocking in medical and challenging comparables.

• Retail services and printing sector renamed to reflect broader service offerings and growth potential.

• Announced intention to launch a normal course issuer bid to repurchase up to 5% of shares, pending TSX approval.

Financial highlights

• Q2 2024 revenues were CAD 683.2 million, down 8.6% year-over-year due to lower volumes in both main sectors.

• Consolidated adjusted EBITDA reached CAD 110.1 million, up 1% from Q2 last year, driven by cost reductions and product mix.

• Adjusted EPS was CAD 0.52, a 15.6% increase year-over-year.

• Net debt ratio improved to 2.00x from 2.58x, with $235.3M net debt reduction since Q2 FY2023.

• Generated CAD 73 million in operating cash flow, down from CAD 105 million last year due to prior inventory reduction benefits.

Outlook and guidance

• Improved outlook for fiscal 2024, expecting stable adjusted EBITDA in print and consolidated EBITDA growth for the year.

• Anticipates low single-digit (around 2%) packaging volume growth in H2, excluding continued weakness in medical.

• Confident in achieving CAD 100 million in real estate asset sales by end of fiscal 2025, with some transactions expected in 2024.

• Expects leverage ratio to decrease materially in H2, supporting a share buyback program.

• Retail Services & Printing adjusted EBITDA expected to remain stable as cost reductions and ISM growth offset lower traditional volumes.