Transcontinental ready for large packaging acquisition to transform company

MONTREAL — Transcontinental Inc. is ready to spend more than $1 billion to purchase packaging companies that would diminish the role of commercial printing that has been the cornerstone of the company since its founding 40 years ago.

“I think in 2018 we will have opportunities to deploy capital in acquisitions, a lot more than in 2017,” CEO Francois Olivier said following the company’s annual meeting.

With no debt, he said Canada’s largest commercial printer has the financial flexibility to make a large transformational deal that would allow flexible packaging revenues to surpass printing for the first time.

It can purchase a company that generates up to $1 billion of annual revenue and $150 million in EBITDA (earnings before interest, taxes, depreciation and amortization,) he said.

“It’s obvious that we have the means to make large acquisitions,” Olivier told reporters.

Transcontinental entered the packaging industry four years ago as part of its efforts to become less reliant on newspapers and magazines that are being hammered by lower advertising revenue as readers move to digital platforms.

Olivier said its targets are mainly located in the United States where the large population provides demand for food and pharmaceuticals that are the biggest users of packaging.

Transcontinental is in the process of selling its remaining regional general newspapers, which could be completed in a couple of months.

That will leave its media business with educational book publishing, business and specialty publications that are not reliant on advertising and are poised for growth.

Media is expected to account for five per cent of Transcontinental revenues in 2018, down 29 per cent in 2014.

Even though it is getting out of the general news business, Olivier criticized the federal government’s budget proposal as “missed opportunity.”

Ottawa plans to provide $50 million over five years to support “local journalism” in under-served communities and explore new models to support “non-profit” journalism.

“What they proposed to me is kind of saying we’re going to wait for you to die and when somebody dies and there’s no paper there then we’ll do something,” Olivier said.

Despite transferring printing of the San Francisco Chronicle at its plant in Freemont, Calif., to Hearst, Calif., Olivier defended Transcontinental’s efforts a number of years ago to build a newspaper printing model in the U.S.

“We had a great business model and a great idea. It’s just that the U.S. newspaper industry shrunk by about 50 per cent and obviously there was less need for printed copy.”

Earlier, Transcontinental beat expectations as its first quarter net earnings grew 36 per cent to $58.2 million despite lower revenues caused by the sale of newspapers in Atlantic Canada and Quebec.

The company said it earned 75 cents per share for the period ended Jan. 28, up from 55 cents per share a year earlier when net profit was $42.7 million.

Excluding restructuring costs, asset impairments and the impact of U.S. tax reform, adjusted earnings were $48.6 million or 63 cents per share.

That’s up 17.7 per cent from $41.3 million or 53 cents per share in the first quarter of 2017.

Net revenues were $501.7 million, down from $503.6 million a year earlier.

Transcontinental was expected to post 56 cents per share in adjusted profits on $476 million of revenues, according to analysts polled by Thomson Reuters.

Excluding the acceleration of deferred revenues related to the Hearst deal, adjusted revenues were $461.9 million. The 8.3 per cent decrease stemmed largely from the sale of Transcontinental’s media assets.

Transcontinental said its quarterly dividend is increasing by five per cent, or one penny to 21 cents per share. It is payable April 11 to shareholders of record on March 26.

Just Posted

WATCH: Hundreds come to Red Deer Rebels Fan Fest

The Red Deer Rebels met with hundreds of fans just a couple… Continue reading

Red Deer GoodLife no longer installing pool

Red Deer GoodLife Fitness members itching to swim will need to find… Continue reading

Hwy 2 detour Friday

Traffic detoured between Gaetz Avenue and Taylor Drive

Red Deer students are fighting subtle discrimination to help build a culture of tolerance

‘Day for Elimination of Racial Discrimination’ marked at local high school

WATCH: Red Deerians can have a say about crime fighting

Municipality will poll citizens about policing priorities

Facebook crisis-management lesson: What not to do

NEW YORK — The crisis-management playbook is pretty simple: Get ahead of… Continue reading

Calgary remains interested in 2026 bid, but awaits word from feds, province

Calgary city council approved a slate of moves towards a possible bid… Continue reading

Online threat to U.S. high school traced to girl, 14, in Canada, police say

American authorities say a 14-year-old girl in Canada has been charged with… Continue reading

Comedian Mike MacDonald remembered for gut-busting mental health advocacy

If laughter is the best medicine, then standup veteran Mike MacDonald was… Continue reading

The Weeknd, Bruno Mars to headline Lollapalooza in Chicago

CHICAGO — The Weeknd, Bruno Mars, Jack White and Arctic Monkeys will… Continue reading

No rest for the retired: Opioid crisis fills empty nests as grandparents step up

ST. JOHN’S, N.L. — She is a Newfoundland woman who worked hard… Continue reading

Duclos defends gender-neutral language amid criticism from opposition

MONTREAL — Families Minister Jean-Yves Duclos defended Service Canada’s decision to ask… Continue reading

Lawyer and negotiator: Thomas Molloy is new Saskatchewan lieutenant-governor

REGINA — Lawyer and negotiator Thomas Molloy has been sworn in as… Continue reading

Most Read

Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month