Transcontinental Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Hamir Patel - CIBC Capital Markets - Analyst : Hi, good morning. Thomas you pointed to seeing improvement in some packaging end markets here in the third quarter. Are you able to quantify the volume trends you're seeing there? Maybe which areas are the strongest? And when would you expect to lap the negative comps that you're experiencing in the medical market?

Question: Hamir Patel - CIBC Capital Markets - Analyst : 2%, okay. That's helpful. And you highlighted in terms of the real estate sales expectation to monetize one or two buildings later this year. Are you able to quantify the potential proceeds of what's remaining this at least this year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 06, 2024 / 12:00PM, TCLa.TO - Q2 2024 Transcontinental Inc Earnings Call

Question: Hamir Patel - CIBC Capital Markets - Analyst : Okay. Fair enough. That's all I had for now. I'll get back in the queue. Thanks.

Question: Adam Shine - National Bank Financial (Research) - Analyst : Thanks a lot. Good morning, Thomas. Obviously, a good first year. Couple of questions. Where's some of the traction or faster traction that you're seeing in regards to the profitability improvement, which clearly is moving ahead of expectations, it appears?

Question: Adam Shine - National Bank Financial (Research) - Analyst : Perfect. Thanks for that. And when we go back to the potential volume improvement in Packaging that you're alluding to, I think you talked previously on the last call that you were hoping to see sort of retailers doing a bit more promotional activity to stimulate food demand, is that part of the equation here or there other things afoot to sort of see better volumes in H2?

Question: Adam Shine - National Bank Financial (Research) - Analyst : Okay. Thanks for that. Appreciate it. I'll queue up again.

Question: Maher Yaghi - Scotia Capital Inc - Analyst : Great. Just wanted to ask you just a clarification on your earlier comment regarding packaging growth in the second half. Is that the 2% to 3% that you talked about, is that including medical or excluding medical?

Question: Maher Yaghi - Scotia Capital Inc - Analyst : Okay, great. Thanks for that. So in terms of the printing side, you were facing quite a heavy comp tough comps in the second quarter. It does look like we're still in that 5% to 6%, 7% range in terms of decline year-on-year. Is that what you're looking at in the second half potentially or things have changed?

Question: Maher Yaghi - Scotia Capital Inc - Analyst : Okay, great. Now just turning on the cost side, definitely strong performance in the second. How much additional cost control we could look at or could see on the packaging side still not visible yet on results?

Question: Maher Yaghi - Scotia Capital Inc - Analyst : Great. And Thomas a significant part of your initial objective was to reduce volatility on the margin side, on the profitability side that we saw maybe in the past. Can you tell us how you believe the company has repositioned itself so far when it comes to reducing that volatility? Definitely, we are seeing less volatility on the earnings side than your reported results, but maybe you can tell us a little bit more if that project has run its course and achieved its goal.

Question: Maher Yaghi - Scotia Capital Inc - Analyst : Okay. Thank you. Maybe one last question on the buyback that you discussed earlier. We are seeing leverage come down. What is your overall leverage level that you'd like to maintain just for us to understand how much cash you could deploy on the buyback. You mentioned the 5%, but that's kind of an overall goal. But what is the level of leverage that you think that the business long-term should trend to and we'll make the math work on the other side to see how much extra cash you have for the buyback?

Question: Maher Yaghi - Scotia Capital Inc - Analyst : Great. Thank you very much.

Question: Stephen MacLeod - BMO Capital Markets (Canada) - Analyst : Thank you. Good morning. Good morning, everyone. Lots of great color so far, so thank you. A couple of things. When I looked at the packaging margin in Q2, obviously quite robust at north of 17%. Just curious if you can break down on a year-over-year basis, how much of that improvement was driven by mix and how much of that improvement was driven by the cost reductions that you've identified?

Question: Stephen MacLeod - BMO Capital Markets (Canada) - Analyst : Right. Okay, great. And then just looking forward here, we previously talked about sort of I think like a 16% margin level being a good place to be potentially aspirationally on the packaging business. Just curious like how do you feel about your margins for the balance of the year and is that 16% baseline, all else equal, a higher number now when you think about the long term margin profile of the Packaging business?

Question: Stephen MacLeod - BMO Capital Markets (Canada) - Analyst : Yes. Okay. That makes sense. Thank you. And then maybe just turning to the new retail or newly named retail and printing services retail services and printing, sorry. Can you just remind us sort of where you sit in terms of the revenue breakdown between, I guess what you would consider to be legacy printing or traditional printing and the ISM and sort of retail focused businesses that are providing some offsets, some offsetting growth? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 06, 2024 / 12:00PM, TCLa.TO - Q2 2024 Transcontinental Inc Earnings Call

Question: Stephen MacLeod - BMO Capital Markets (Canada) - Analyst : Okay, that's great. Thanks so much guys. Appreciate that.

Question: David McFadgen - Cormark Securities Inc - Analyst : Okay, great. Couple of questions. Just on the medical vertical, is this vertical just going through a short term impact? Or is this a permanent impairment?

Question: David McFadgen - Cormark Securities Inc - Analyst : So it seems that to me it would seem that the business is going to right size and once it's right size then it probably grows again, no?

Question: David McFadgen - Cormark Securities Inc - Analyst : Okay. And that could maybe be another couple of quarters to get to the right size and then. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 06, 2024 / 12:00PM, TCLa.TO - Q2 2024 Transcontinental Inc Earnings Call

Question: David McFadgen - Cormark Securities Inc - Analyst : Okay. And then I was just looking in the cash flow statement. I believe that you indicated at the beginning of this fiscal year that you thought you would have a working capital inflow similar to what you had last year to recover that big investment that you made a few years ago? I'm just wondering, is that still the expectation?

Question: David McFadgen - Cormark Securities Inc - Analyst : Okay. So if you look back a few years and you accumulated that working capital investment is about $200 million but more than that. Do you expect to eventually get all of that back? Or probably not going to get to that level, but you still expect some inflow?

Question: David McFadgen - Cormark Securities Inc - Analyst : Okay. All right. Okay, thank you.