Transcontinental Inc Q3 2024 Earnings Call Transcript

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

Question: Adam Shine - National Bank Financial - Analyst : Thanks a lot. Good morning. Tom, maybe first question to you on the Q4 outlook. You're calling for stable packaging and printing EBITDA. Is this due to mostly margin dynamic? Or is it a function of also a combination of some top line related issues as you referenced, I guess, some of the pricing pressure alluded to in packaging.

Question: Adam Shine - National Bank Financial - Analyst : So if we go back -- so that's stable revs in packaging, but then when we think about some of the margin improvement we've seen in the first three quarters of this year and not a huge margin dynamic necessarily in Q4 last year. Can you just help us a little bit -- a bit more color around then there's going to be a margin dynamic for packaging and printing unless, of course, you're just being rather conservative.

Question: Adam Shine - National Bank Financial - Analyst : And just as a follow-up on the margin last question. When we think about how the margin has stepped up on the back of cost cutting, you were near 18% in Q2 this year, 20% in Q3, as you just alluded to. I think the margin could be closer to 21% in Q4. When we think ahead to next year is it fair to be thinking about a margin that could actually be in a 19% to 20% zone, particularly as the mix evolves and there's further cost-cutting efforts? Or is there something to be considered further?

Question: Adam Shine - National Bank Financial - Analyst : Okay. I'll leave it there and queue up again. Thank you.

Question: Hamir Patel - CIBC Capital Markets - Analyst : Hi, good morning. On the printing side, we've seen several newsprint producers out with a price hike in September of sort of $50 per ton. How do you see the timing of that increase flowing through your printing business? And how do you think about the risk there for further demand destruction when you try to pass that on?

Question: Hamir Patel - CIBC Capital Markets - Analyst : Okay. Great. That's helpful. And just turning to the packaging side. You mentioned some pricing pressure, which would be more apparent in 2025. How large a percentage decline are you seeing?

Question: Hamir Patel - CIBC Capital Markets - Analyst : Fair enough. And just the last question I had was just sticking with the packaging side. We're seeing financial regulators in the US start to crack down on companies for some of the claims they make about the recyclability of their plastic packaging. Are you seeing any signs yet of that driving customers to want to consider paying up for more of the sustainable offerings that you have?

Question: Hamir Patel - CIBC Capital Markets - Analyst : Fair enough. Thanks. That's all I had all. I'll turn it over.

Question: Maher Yaghi - Scotiabank GBM - Analyst : (spoken in foreign language) I just wanted to ask you, when you think about the packaging, you talked about the pricing pressure but if we maybe can we just talk a little bit about the volume side of things, I think you had like 1.7% growth in packaging revenues organically. Can you split that in terms of volume and pricing, please?

Question: Maher Yaghi - Scotiabank GBM - Analyst : Okay. So volumes are positive. And so your indication on pricing, should we expect pricing in next year to turn negative, like slightly negative? Or are you just implying that pricing will remain -- continue to be a pressure, but within the current environment, which is flat overall?

Question: Maher Yaghi - Scotiabank GBM - Analyst : Okay. And looking at volumes in general, you've had some sectors that we're seeing volume declines. If we look into the future, can you discuss a little bit the inventory situation and which segments you're seeing the most growth and from an overall perspective, how do you see volumes behaving going forward. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2024 / 12:00PM, TCLa.TO - Q3 2024 Transcontinental Inc Earnings Call

Question: Maher Yaghi - Scotiabank GBM - Analyst : And overall, on a company-wide basis, when you think about volumes next year, how do you think the market will look like?

Question: Maher Yaghi - Scotiabank GBM - Analyst : Okay. So to offset these pressures you mentioned that you're going to stay very frugal, very tight on costs. Where are the items that you could push on to maintain the margins that you had in 2024 going into 2025. With these top line pressures that you're seeing?

Question: Maher Yaghi - Scotiabank GBM - Analyst : And you mentioned in previous quarters that as you finish tough and stabilize and continue to start to grow the packaging EBITDA line, you might look at doing some M&A. Has that thought or through -- do you changed at all going into 2025?

Question: Maher Yaghi - Scotiabank GBM - Analyst : Okay, great. Thank you very much.

Question: Drew McReynolds - RBC Capital Markets - Analyst : Yes, thanks very much. Good morning too from me. First, on the retail services and printing segment overall, down 9% in Q3. And obviously, there's a Publisac dynamic here. Just wondering kind of with that dynamic and all the moving parts on the top line, how you think that kind of unfolds in Q4 and into fiscal 2025. And then secondly, on the consolidated EBITDA growth that you're seeing again here in fiscal 2024, again, given all the moving parts looking ahead, I know you won't give guidance, but to what extent do you feel or what are the puts and takes to sustaining positive EBITDA growth in fiscal 2025 and maybe beyond? Thank you.

Question: Drew McReynolds - RBC Capital Markets - Analyst : That's great. Thank you.

Question: David McFadgen - Cormark Securities Inc. - Analyst : Okay, thank you. A couple of questions, maybe following on Drew's line of questioning. When do you expect to lap the impact of Publisac?

Question: David McFadgen - Cormark Securities Inc. - Analyst : Okay. So when we look at the organic decline in revenue for the retail services and printing, it was down $24.7 million. Can you give us an idea how much of that was related to Publisac?

Question: David McFadgen - Cormark Securities Inc. - Analyst : So about 1/3 is Publisac. Okay. Just give us an idea of how long it's going to take to run that off. So Okay. That's helpful. And then in the fourth quarter, you indicated, I guess, higher corporate expense. Can you give us an idea how much the magnitude of the higher corporate expense would be?

Question: David McFadgen - Cormark Securities Inc. - Analyst : Okay. So when you say every $1 is $1 million, that's for the quarter or for the year?

Question: David McFadgen - Cormark Securities Inc. - Analyst : For the quarter, okay. All right. And obviously, you guys have extracted a lot of cost savings this year, and you highlighted $30 million. And do you think you're pretty much done? I mean I guess obviously, you guys constantly trying to make the business more efficient, but do you think, for the most part, any big pricing programs are done by the end of this year?

Question: David McFadgen - Cormark Securities Inc. - Analyst : Okay. And then you talk about one of your priorities is to lower your leverage. Can you share with us a leverage target that you want to get to before you start with your M&A?

Question: David McFadgen - Cormark Securities Inc. - Analyst : Okay. But there isn't like a target I say you want to get to 1.5 or 1 before you --?

Question: David McFadgen - Cormark Securities Inc. - Analyst : Okay. Thank you.

Question: Nevan Yochim - BMO Capital Markets - Analyst : Thanks, good morning, guys. Just on the packaging segment. As we think about margins in 2025, we're at the high end of the 15% range this year and then you have some additional cost cutting coming into place, but that's been partially offset by some pricing headwinds. So I guess just directionally, how are you thinking about packaging margins in 2025? And could we see margins back into that 16% range?

Question: Nevan Yochim - BMO Capital Markets - Analyst : Okay. Understood. And just my last question on building sales. Can you provide the detail on the demand that you're seeing maybe in terms of the valuations that you're receiving and then your expectations on when you could achieve the $100 million target you're looking for?

Question: Nevan Yochim - BMO Capital Markets - Analyst : Okay. Understood. Thank you.