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Transcontinental Inc — Management Reports 2025
Jun 5, 2025
42516_rns_2025-06-05_d85bcfc1-a8ba-49d8-b5f8-f0cfc210edec.pdf
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TRANSCONTINENTAL
Management's Discussion and Analysis
For the second quarter ended April 27, 2025
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the second quarter ended April 27, 2025
The purpose of this Management's Discussion and Analysis is to help the reader better understand the business, development strategy, and future outlook of Transcontinental Inc., how we manage risk, as well as to analyze the Corporation's results and financial position for the second quarter ended April 27, 2025. It should be read in conjunction with the information in the unaudited condensed interim consolidated financial statements and the accompanying notes. Additional information relating to the Corporation, including its Annual Report and Annual Information Form, may also be obtained on SEDAR+ at www.sedarplus.ca.
In this document, unless otherwise indicated, all financial data are prepared in accordance with International Financial Reporting Accounting Standards ("IFRS") and the term "dollar", as well as the symbol "$" designate Canadian dollars.
In addition, in this Management's Discussion and Analysis, we also use non-IFRS financial measures for which a complete definition is presented below and for which a reconciliation to financial information in accordance with IFRS is presented in Table #2 in the section entitled "Reconciliation of Non-IFRS Financial Measures" and in Note 3 "Segmented Information" to the unaudited condensed interim consolidated financial statements for the second quarter ended April 27, 2025. These measures should be considered as a complement to financial performance measures in accordance with IFRS. They do not substitute and are not superior to them.
| Terms Used | Definitions |
|---|---|
| Adjusted operating earnings before depreciation and amortization | Operating earnings before depreciation and amortization as well as restructuring and other costs (revenues) and impairment of assets. |
| Adjusted operating earnings margin before depreciation and amortization | Adjusted operating earnings before depreciation and amortization divided by revenues. |
| Adjusted operating earnings | Operating earnings before restructuring and other costs (revenues), amortization of intangible assets arising from business combinations and impairment of assets. |
| Adjusted operating earnings margin | Adjusted operating earnings divided by revenues. |
| Adjusted income taxes | Income taxes before income taxes on restructuring and other costs (revenues), amortization of intangible assets arising from business combinations, impairment of assets as well as the recognition of previous years tax assets of an acquired company. |
| Adjusted net earnings attributable to shareholders of the Corporation | Net earnings attributable to shareholders of the Corporation before restructuring and other costs (revenues), amortization of intangible assets arising from business combinations and impairment of assets, net of related income taxes, as well as the recognition of previous years tax assets of an acquired company. |
| Net indebtedness | Total of long-term debt, of current portion of long-term debt, of lease liabilities and of current portion of lease liabilities, less cash. |
| Net indebtedness ratio | Net indebtedness divided by the last 12 months' adjusted operating earnings before depreciation and amortization. |
Finally, to facilitate the reading of this report, the terms "TC Transcontinental", "Transcontinental", "Corporation", "we", "our" and "us" all refer to Transcontinental Inc. together with its subsidiaries and joint ventures.
TC • TRANSCONTINENTAL
Management's Discussion and Analysis - 1
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Our public communications often contain oral or written forward-looking statements which are based on the expectations of Management and inherently subject to a certain number of risks and uncertainties, known and unknown. By their very nature, forward-looking statements are derived from both general and specific assumptions. The Corporation cautions against undue reliance on such statements since actual results or events may differ materially from the expectations expressed or implied in them. Forward-looking statements include, among others, statements with respect to our objectives, our outlook, our strategies to achieve these objectives, as well as statements with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. The words "may", "could", "should", "would", "assumptions", "plan", "strategy", "outlook", "believe", "anticipate", "estimate", "expect", "intend", "objective", the use of the future and conditional tenses, and words and expressions of similar nature are intended to identify forward-looking statements. Such forward-looking statements may also include observations concerning the Corporation's anticipated financial results and business outlooks and the economies in which it operates. The Corporation's future performance may also be affected by a number of factors, many of which are beyond its will or control. The main risks, uncertainties and factors that could influence actual results are described in the Management's Discussion and Analysis for the fiscal year ended October 27, 2024 and in the latest Annual Information Form.
Unless otherwise indicated by the Corporation, forward-looking statements do not take into account the potential impact of non-recurring or other unusual items, nor of disposals, business combinations, mergers or acquisitions which may be announced or concluded after the date of June 4, 2025.
These forward-looking statements are made pursuant to the "safe harbour" provisions of applicable Canadian securities legislation.
The forward-looking statements in this Management's Discussion and Analysis are based on current expectations and information available as at June 4, 2025. Such forward-looking statements may also be found in other documents filed with Canadian securities regulators or in other communications. The Corporation's Management disclaims any intention or obligation to update or revise these statements unless otherwise required by the securities authorities.
PROFILE OF TC TRANSCONTINENTAL
TC Transcontinental is a leader in flexible packaging in North America and in retail services in Canada, and is Canada's largest printer. The Corporation is also the leading Canadian French-language educational publishing group. Since 1976, TC Transcontinental's mission has been to create quality products and services that allow businesses to attract, reach and retain their target customers.
Respect, teamwork, performance and innovation are the strong values held by the Corporation and its employees. TC Transcontinental's commitment to its stakeholders is to pursue its business activities in a responsible manner.
Transcontinental Inc. (TSX: TCL.A TCL.B), known as TC Transcontinental, has approximately 7,400 employees, the majority of which are based in Canada, the United States and Latin America. TC Transcontinental generated revenues of $2.8 billion during the fiscal year ended October 27, 2024. For more information, visit TC Transcontinental's website at www.tc.tc.
TC · TRANSCONTINENTAL
Management's Discussion and Analysis - 2
HIGHLIGHTS
Table #1:
| (in millions of dollars, except per share amounts) | Q2-2025 | Q2-2024 | Variation in % |
|---|---|---|---|
| Revenues | $684.1 | $683.2 | 0.1 % |
| Operating earnings before depreciation and amortization | 104.5 | 88.7 | 17.8 |
| Adjusted operating earnings before depreciation and amortization (1) | 108.5 | 110.1 | (1.5) |
| Operating earnings | 51.1 | 33.2 | 53.9 |
| Adjusted operating earnings (1) | 70.1 | 72.3 | (3.0) |
| Net earnings attributable to shareholders of the Corporation | 33.8 | 15.9 | 112.6 |
| Net earnings attributable to shareholders of the Corporation per share | 0.40 | 0.18 | 122.2 |
| Adjusted net earnings attributable to shareholders of the Corporation (1) | 48.2 | 45.3 | 6.4 |
| Adjusted net earnings attributable to shareholders of the Corporation per share (1) | 0.58 | 0.52 | 11.5 |
(1) Please refer to Table #2 in the section entitled "Reconciliation of Non-IFRS Financial Measures" in this Management's Discussion and Analysis for adjusted data presented above.
- Revenues of $684.1 million for the quarter ended April 27, 2025; operating earnings of $51.1 million; and net earnings attributable to shareholders of the Corporation of $33.8 million ($0.40 per share).
- Adjusted operating earnings before depreciation and amortization of $108.5 million for the quarter ended April 27, 2025; adjusted operating earnings of $70.1 million; and adjusted net earnings attributable to shareholders of the Corporation of $48.2 million ($0.58 per share).
- Growth in adjusted net earnings attributable to shareholders of the Corporation per share of 11.5%.
- Repayment at maturity of unsecured notes (issued in 2022) amounting to $200.0 million.
- Payment of a special dividend of $1.00 per share on April 23, 2025.
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TRANSCONTINENTAL
Management's Discussion and Analysis - 3
RECONCILIATION OF NON-IFRS FINANCIAL MEASURES
(Unaudited)
The financial information has been prepared in accordance with IFRS. However, financial measures used, namely adjusted operating earnings before depreciation and amortization, adjusted operating earnings margin before depreciation and amortization, adjusted operating earnings, adjusted operating earnings margin, adjusted income taxes, adjusted net earnings attributable to shareholders of the Corporation, adjusted net earnings attributable to shareholders of the Corporation per share, net indebtedness and the net indebtedness ratio, for which a reconciliation is presented in the following table, do not have any standardized meaning under IFRS and could be calculated differently by other companies. We believe that many of our readers analyze the financial performance of the Corporation's activities based on these non-IFRS financial measures as such measures may allow for easier comparisons between periods. These measures should be considered as a complement to financial performance measures in accordance with IFRS. They do not substitute and are not superior to them.
The Corporation also believes that these measures are useful indicators of the performance of its operations and its ability to meet its financial obligations. Furthermore, management also uses some of these non-IFRS financial measures to assess the performance of its activities and managers.
Table #2:
Reconciliation of operating earnings - Second quarter and cumulative
| Three months ended | Six months ended | |||
|---|---|---|---|---|
| (in millions of dollars) | April 27, 2025 | April 28, 2024 | April 27, 2025 | April 28, 2024 |
| Operating earnings | $51.1 | $33.2 | $139.8 | $61.0 |
| Restructuring and other costs (revenues) | 4.0 | 16.0 | (39.9) | 27.3 |
| Amortization of intangible assets arising from business combinations (1) | 15.0 | 17.7 | 29.8 | 35.5 |
| Impairment of assets | — | 5.4 | — | 7.5 |
| Adjusted operating earnings | $70.1 | $72.3 | $129.7 | $131.3 |
| Depreciation and amortization (2) | 38.4 | 37.8 | 76.3 | 74.9 |
| Adjusted operating earnings before depreciation and amortization | $108.5 | $110.1 | $206.0 | $206.2 |
(1) Amortization of intangible assets arising from business combinations include our customer relationships, rights of first refusal and educational book titles.
(2) Depreciation and amortization excludes the amortization of intangible assets arising from business combinations.
Reconciliation of operating earnings - Second quarter and cumulative for the Packaging Sector
| Three months ended | Six months ended | |||
|---|---|---|---|---|
| (in millions of dollars) | April 27, 2025 | April 28, 2024 | April 27, 2025 | April 28, 2024 |
| Operating earnings | $27.4 | $32.3 | $97.1 | $54.7 |
| Restructuring and other costs (revenues) | 3.0 | 3.7 | (42.2) | 7.3 |
| Amortization of intangible assets arising from business combinations (1) | 13.8 | 16.1 | 27.6 | 32.2 |
| Impairment of assets | — | 0.3 | — | 0.6 |
| Adjusted operating earnings | $44.2 | $52.4 | $82.5 | $94.8 |
| Depreciation and amortization (2) | 21.2 | 18.8 | 41.9 | 36.8 |
| Adjusted operating earnings before depreciation and amortization | $65.4 | $71.2 | $124.4 | $131.6 |
(1) Amortization of intangible assets arising from business combinations includes our customer relationships.
(2) Depreciation and amortization excludes the amortization of intangible assets arising from business combinations.
tc
TRANSCONTINENTAL
Management's Discussion and Analysis - 4
Reconciliation of operating earnings - Second quarter and cumulative for the Retail Services and Printing Sector
| Three months ended | Six months ended | |||
|---|---|---|---|---|
| (in millions of dollars) | April 27, 2025 | April 28, 2024 | April 27, 2025 | April 28, 2024 |
| Operating earnings | $42.2 | $16.7 | $69.9 | $34.3 |
| Restructuring and other costs | 1.0 | 11.8 | 4.1 | 17.9 |
| Amortization of intangible assets arising from business combinations (1) | 0.6 | 1.0 | 1.2 | 2.3 |
| Impairment of assets | — | 5.1 | — | 6.9 |
| Adjusted operating earnings | $43.8 | $34.6 | $75.2 | $61.4 |
| Depreciation and amortization (2) | 10.6 | 12.5 | 21.1 | 25.2 |
| Adjusted operating earnings before depreciation and amortization | $54.4 | $47.1 | $96.3 | $86.6 |
(1) Amortization of intangible assets arising from business combinations includes our customer relationships.
(2) Depreciation and amortization excludes the amortization of intangible assets arising from business combinations.
Reconciliation of operating earnings - Second quarter and cumulative for the Other Sector
| Three months ended | Six months ended | |||
|---|---|---|---|---|
| (in millions of dollars) | April 27, 2025 | April 28, 2024 | April 27, 2025 | April 28, 2024 |
| Operating earnings | $(18.5) | $(15.8) | $(27.2) | $(28.0) |
| Restructuring and other costs (revenues) | — | 0.5 | (1.8) | 2.1 |
| Amortization of intangible assets arising from business combinations (1) | 0.6 | 0.6 | 1.0 | 1.0 |
| Adjusted operating earnings | $(17.9) | $(14.7) | $(28.0) | $(24.9) |
| Depreciation and amortization (2) | 6.6 | 6.5 | 13.3 | 12.9 |
| Adjusted operating earnings before depreciation and amortization | $(11.3) | $(8.2) | $(14.7) | $(12.0) |
(1) Amortization of intangible assets arising from business combinations includes our rights of first refusal and educational book titles.
(2) Depreciation and amortization excludes the amortization of intangible assets arising from business combinations.
Reconciliation of operating earnings - Last eight quarters
| 2025 | 2024 | 2023 | ||||||
|---|---|---|---|---|---|---|---|---|
| (in millions of dollars) | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 |
| Operating earnings | $51.1 | $88.7 | $79.3 | $69.2 | $33.2 | $27.8 | $66.7 | $39.2 |
| Restructuring and other costs (revenues) | 4.0 | (43.9) | 7.1 | (0.5) | 16.0 | 11.3 | (2.9) | 12.6 |
| Amortization of intangible assets arising from business combinations (1) | 15.0 | 14.8 | 15.4 | 15.5 | 17.7 | 17.8 | 18.3 | 18.4 |
| Impairment of assets | — | — | 3.3 | — | 5.4 | 2.1 | 25.2 | — |
| Adjusted operating earnings | $70.1 | $59.6 | $105.1 | $84.2 | $72.3 | $59.0 | $107.3 | $70.2 |
| Depreciation and amortization (2) | 38.4 | 37.9 | 37.1 | 36.8 | 37.8 | 37.1 | 38.2 | 37.7 |
| Adjusted operating earnings before depreciation and amortization | $108.5 | $97.5 | $142.2 | $121.0 | $110.1 | $96.1 | $145.5 | $107.9 |
(1) Amortization of intangible assets arising from business combinations includes our customer relationships, rights of first refusal and educational book titles.
(2) Depreciation and amortization excludes the amortization of intangible assets arising from business combinations.
Tc
TRANSCONTINENTAL
Management's Discussion and Analysis - 5
Reconciliation of net earnings attributable to shareholders of the Corporation - Second quarter and cumulative
| Three months ended | Six months ended | |||
|---|---|---|---|---|
| (in millions of dollars, except per share amounts) | April 27, 2025 | April 28, 2024 | April 27, 2025 | April 28, 2024 |
| Net earnings attributable to shareholders of the Corporation | $33.8 | $15.9 | $89.4 | $29.8 |
| Restructuring and other costs (revenues) | 4.0 | 16.0 | (39.9) | 27.3 |
| Tax on restructuring and other costs (revenues) | (1.0) | (4.0) | 17.7 | (6.8) |
| Amortization of intangible assets arising from business combinations (1) | 15.0 | 17.7 | 29.8 | 35.5 |
| Tax on amortization of intangible assets arising from business combinations | (3.6) | (4.3) | (7.3) | (8.7) |
| Impairment of assets | — | 5.4 | — | 7.5 |
| Tax on impairment of assets | — | (1.4) | — | (1.9) |
| Adjusted net earnings attributable to shareholders of the Corporation | $48.2 | $45.3 | $89.7 | $82.7 |
| Net earnings attributable to shareholders of the Corporation per share | $0.40 | $0.18 | $1.07 | $0.34 |
| Adjusted net earnings attributable to shareholders of the Corporation per share | $0.58 | $0.52 | $1.07 | $0.95 |
| Weighted average number of shares outstanding | 83.6 | 86.6 | 83.9 | 86.6 |
(1) Amortization of intangible assets arising from business combinations includes our customer relationships, rights of first refusal and educational book titles.
Reconciliation of net earnings attributable to shareholders of the Corporation - Last eight quarters
| 2025 | 2024 | 2023 | ||||||
|---|---|---|---|---|---|---|---|---|
| (in millions of dollars, except per share amounts) | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q3 | Q2 |
| Net earnings attributable to shareholders of the Corporation | $33.8 | $55.6 | $47.9 | $43.6 | $15.9 | $13.9 | $41.7 | $20.9 |
| Restructuring and other costs (revenues) | 4.0 | (43.9) | 7.1 | (0.5) | 16.0 | 11.3 | (2.9) | 12.6 |
| Tax on restructuring and other costs (revenues) | (1.0) | 18.7 | (1.8) | — | (4.0) | (2.8) | 0.3 | (3.3) |
| Amortization of intangible assets arising from business combinations (1) | 15.0 | 14.8 | 15.4 | 15.5 | 17.7 | 17.8 | 18.3 | 18.4 |
| Tax on amortization of intangible assets arising from business combinations | (3.6) | (3.7) | (3.8) | (3.8) | (4.3) | (4.4) | (4.3) | (4.6) |
| Impairment of assets | — | — | 3.3 | — | 5.4 | 2.1 | 25.2 | — |
| Tax on impairment of assets | — | — | (0.8) | — | (1.4) | (0.5) | (6.5) | — |
| Recognition of previous years tax assets of an acquired company | — | — | — | (3.4) | — | — | — | — |
| Adjusted net earnings attributable to shareholders of the Corporation | $48.2 | $41.5 | $67.3 | $51.4 | $45.3 | $37.4 | $71.8 | $44.0 |
| Net earnings attributable to shareholders of the Corporation per share | $0.40 | $0.66 | $0.57 | $0.50 | $0.18 | $0.16 | $0.48 | $0.24 |
| Adjusted net earnings attributable to shareholders of the Corporation per share | $0.58 | $0.49 | $0.79 | $0.60 | $0.52 | $0.43 | $0.83 | $0.51 |
| Weighted average number of shares outstanding | 83.6 | 84.2 | 84.8 | 86.4 | 86.6 | 86.6 | 86.6 | 86.6 |
(1) Amortization of intangible assets arising from business combinations includes our customer relationships, rights of first refusal and educational book titles.
Tc
TRANSCONTINENTAL
Management's Discussion and Analysis - 6
Reconciliation of net indebtedness
| (in millions of dollars, except ratios) | As at April 27, 2025 | As at October 27, 2024 |
|---|---|---|
| Long-term debt | $731.3 | $668.1 |
| Current portion of long-term debt | 2.0 | 201.0 |
| Lease liabilities | 86.4 | 95.8 |
| Current portion of lease liabilities | 23.0 | 24.1 |
| Cash | (43.2) | (185.2) |
| Net indebtedness | $799.5 | $803.8 |
| Adjusted operating earnings before depreciation and amortization (last 12 months) | $469.2 | $469.4 |
| Net indebtedness ratio | 1.70x | 1.71x |
ANALYSIS OF CONSOLIDATED RESULTS - SECOND QUARTER
Revenues
Revenues increased by $0.9 million, or 0.1%, from $683.2 million in the second quarter of 2024 to $684.1 million in the corresponding period of 2025. This increase is attributable to the favourable exchange rate effect and higher volume in the Retail Services and Printing Sector, partially offset by the impact of the sale of the industrial packaging operations and lower volume in the Packaging Sector. A more detailed analysis of revenues is presented in the section "Analysis of Sector Results - Second Quarter".
Operating and Other Expenses
Operating expenses increased by $2.5 million, or 0.4%, in the second quarter of 2025 compared to the corresponding period of 2024. This increase results mainly from the unfavourable exchange rate effect and higher volume in the Retail Services and Printing Sector, partially mitigated by cost reduction initiatives, lower volume in the Packaging Sector and the impact of the sale of the industrial packaging operations.
Restructuring and other costs decreased by $12.0 million, from $16.0 million in the second quarter of 2024 to $4.0 million in the second quarter of 2025. This decrease is mainly attributable to the decline in workforce reduction costs and costs resulting from plant closures in 2024 related to cost reduction initiatives.
Asset impairment charges decreased by $5.4 million, from an expense of $5.4 million in the second quarter of 2024 to no asset impairment charges in the second quarter of 2025. Asset impairment charges in the second quarter of 2024 were due to the revision of estimates for the expected future economic benefits of equipment, mainly in the Retail Services and Printing Sector.
Operating Earnings before Depreciation and Amortization
Operating earnings before depreciation and amortization increased by $15.8 million, or 17.8%, from $88.7 million in the second quarter of 2024 to $104.5 million in the second quarter of 2025. This increase is mainly attributable to the decrease in restructuring and other costs, the decline in asset impairment charges, the favourable impact of cost reduction initiatives, the impact of higher volume in the Retail Services and Printing Sector and the favourable exchange rate effect, offset by the sale of the industrial packaging operations and the impact of lower volume in the Packaging Sector.
Adjusted operating earnings before depreciation and amortization decreased by $1.6 million, or 1.5%, from $110.1 million in the second quarter of 2024 to $108.5 million in the second quarter of 2025. This decrease is mainly due to the sale of the industrial packaging operations and the impact of lower volume in the Packaging Sector, mostly mitigated by the favourable impact of cost reduction initiatives, higher volume in the Retail Services and Printing Sector and the favourable exchange rate effect. A more detailed analysis of adjusted operating earnings is presented in the section "Analysis of Sector Results - Second Quarter".
Depreciation and Amortization
Depreciation and amortization decreased by $2.1 million, from $55.5 million in the second quarter of 2024 to $53.4 million in the second quarter of 2025. This decrease is mostly attributable to the end of the depreciation and amortization period for some items of property, plant and equipment and intangible assets and the impact of the sale of the industrial packaging operations, partially offset by the impact of items of property, plant and equipment brought into use, mainly in the Packaging Sector, and the unfavourable exchange rate effect.
TRANSCONTINENTAL
Management's Discussion and Analysis - 7
Net Financial Expenses
Net financial expenses decreased by $5.4 million, from $14.4 million in the second quarter of 2024 to $9.0 million in the second quarter of 2025. This favourable change is mainly explained by the reduction in net indebtedness and, to a lesser extent, the decrease in interest rates.
Income Taxes
Income taxes increased by $5.3 million, from $2.8 million in the second quarter of 2024 to $8.1 million in the second quarter of 2025. This increase is mainly due to the increase in earnings before income taxes.
Adjusted income taxes remained relatively stable from $12.5 million in the second quarter of 2024, for an effective tax rate of 21.6%, to $12.7 million in the second quarter of 2025, for an effective tax rate of 20.8%. This decrease in the effective tax rate is mainly attributable to the geographic distribution of earnings before income taxes.
Net Earnings Attributable to Shareholders of the Corporation
Net earnings attributable to shareholders of the Corporation increased by $17.9 million, or 112.6%, from $15.9 million in the second quarter of 2024 to $33.8 million in the second quarter of 2025. This increase is mainly attributable to the previously explained increase in operating earnings before depreciation and amortization, lower financial expenses and the decrease in depreciation and amortization, partially offset by higher income taxes. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.18 to $0.40, respectively.
Adjusted net earnings attributable to shareholders of the Corporation increased by $2.9 million, or 6.4%, from $45.3 million in the second quarter of 2024 to $48.2 million in the second quarter of 2025. This increase is mainly attributable to lower financial expenses, partially offset by the previously explained decrease in adjusted operating earnings before depreciation and amortization. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $0.52 to $0.58, respectively.
ANALYSIS OF CONSOLIDATED RESULTS - CUMULATIVE
Revenues
Revenues decreased by $36.5 million, or 2.7%, from $1,363.6 million in the first six months of fiscal year 2024 to $1,327.1 million in the corresponding period of 2025. This decrease is mainly due to lower volume and the impact of the sale of the industrial packaging operations, partially mitigated by the favourable exchange rate effect. A more detailed analysis of revenues is presented in the section "Analysis of Sector Results - Cumulative".
Operating and Other Expenses
Operating expenses decreased by $36.3 million in the first six months of fiscal year 2025, or 3.1%, compared to the corresponding period of 2024. This decrease results mainly from lower volume as well as lower costs of materials used and fixed costs and the impact of the sale of the industrial packaging operations, partially offset by the unfavourable exchange rate effect.
Restructuring and other costs (revenues) decreased by $67.2 million, from an expense of $27.3 million in the first six months of fiscal year 2024 to a revenue of $39.9 million in the corresponding period of 2025. This decrease is mainly attributable to the gain on the sale of the industrial packaging operations, the decrease in workforce reduction costs and costs resulting from plant closures in 2024 and the reversal of a purchase price holdback, partially offset by related costs incurred in the first quarter of 2025 in relation with the labour conflict at Canada Post.
Asset impairment charges decreased by $7.5 million, from an expense of $7.5 million in the first six months of fiscal year 2024 to no asset impairment charges in the first six months of fiscal year 2025. Asset impairment charges in the first six months of fiscal year 2024 were due to the revision of estimates for the expected future economic benefits of equipment, mainly in the Retail Services and Printing Sector.
Operating Earnings before Depreciation and Amortization
Operating earnings before depreciation and amortization increased by $74.5 million, or 43.5%, from $171.4 million in the first six months of fiscal year 2024 to $245.9 million in the corresponding period of 2025. This increase is mainly attributable to the decrease in restructuring and other costs (revenues), the decline in asset impairment charges, the favourable impact of cost reduction initiatives and the favourable exchange rate effect, partially offset by the impact of the sale of the industrial packaging operations and the effect of lower volume in the Packaging Sector.
TRANSCONTINENTAL
Management's Discussion and Analysis - 8
Adjusted operating earnings before depreciation and amortization remained relatively stable, from $206.2 million in the first six months of fiscal year 2024 to $206.0 million in the corresponding period of 2025. The impact of the sale of industrial packaging operations was mostly mitigated by the favourable exchange rate effect. A more detailed analysis of adjusted operating earnings is presented in the section "Analysis of Sector Results - Cumulative".
Depreciation and Amortization
Depreciation and amortization decreased by $4.3 million, from $110.4 million in the first six months of fiscal year 2024 to $106.1 million in the corresponding period of 2025. This decrease is mostly attributable to the end of the depreciation and amortization period for some items of property, plant and equipment and intangible assets and the impact of the sale of the industrial packaging operations, partially offset by the impact of items of property, plant and equipment brought into use, mainly in the Packaging Sector, and the unfavourable exchange rate effect.
Net Financial Expenses
Net financial expenses decreased by $10.0 million, from $28.3 million in the first six months of fiscal year 2024 to $18.3 million in the corresponding period of 2025. This favourable change is mainly explained by the reduction in net indebtedness and, to a lesser extent, the decrease in interest rates.
Income Taxes
Income taxes increased by $29.2 million, from $2.6 million in the first six months of fiscal year 2024 to $31.8 million in the corresponding period of 2025. This increase is mainly due to the taxable gain realized on the sale of the industrial packaging operations, which significantly contributed to the increase in earnings.
Adjusted income taxes increased by $1.4 million, from $20.0 million in the first six months of fiscal year 2024, for an effective tax rate of 19.4%, to $21.4 million in the corresponding period of 2025, for an effective tax rate of 19.2%.
Net Earnings Attributable to Shareholders of the Corporation
Net earnings attributable to shareholders of the Corporation increased by $59.6 million, or 200.0%, from $29.8 million in the first six months of fiscal year 2024 to $89.4 million in the corresponding period of 2025. This increase is mainly attributable to the previously explained increase in operating earnings before depreciation and amortization, the decrease in depreciation and amortization and lower financial expenses, partially offset by higher income taxes. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.34 to $1.07, respectively.
Adjusted net earnings attributable to shareholders of the Corporation increased by $7.0 million, or 8.5%, from $82.7 million in the first six months of fiscal year 2024 to $89.7 million in the corresponding period of 2025. This increase is mainly attributable to lower financial expenses, partially offset by higher adjusted income taxes. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $0.95 to $1.07, respectively.
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TRANSCONTINENTAL
Management's Discussion and Analysis - 9
ANALYSIS OF SECTOR RESULTS - SECOND QUARTER
(Unaudited)
Table #3:
| (in millions of dollars) | Packaging | Retail Services and Printing | Other | Consolidated results |
|---|---|---|---|---|
| Revenues - Second quarter of 2024 | $412.4 | $266.3 | $4.5 | $683.2 |
| Business disposal | (16.5) | — | — | (16.5) |
| Exchange rate effect | 20.8 | 1.5 | — | 22.3 |
| Organic growth (decline) | (12.7) | 12.1 | (4.3) | (4.9) |
| Revenues - Second quarter of 2025 | $404.0 | $279.9 | $0.2 | $684.1 |
| Adjusted operating earnings before depreciation and amortization (1) - Second quarter of 2024 | $71.2 | $47.1 | $(8.2) | $110.1 |
| Business disposal | (3.7) | — | — | (3.7) |
| Exchange rate effect | 4.0 | 0.9 | (0.1) | 4.8 |
| Stock-based compensation | — | — | (1.2) | (1.2) |
| Organic growth (decline) | (6.1) | 6.4 | (1.8) | (1.5) |
| Adjusted operating earnings before depreciation and amortization (1) - Second quarter of 2025 | $65.4 | $54.4 | $(11.3) | $108.5 |
(1) Please refer to Table #2 in the section entitled "Reconciliation of Non-IFRS Financial Measures" in this Management's Discussion and Analysis for adjusted data presented above.
Packaging Sector
Packaging Sector revenues decreased by $8.4 million, or 2.0%, from $412.4 million in the second quarter of 2024 to $404.0 million in the second quarter of 2025. This decrease is mainly due to the sale of the industrial packaging operations and lower volume in most of our markets, partially mitigated by the favourable exchange rate effect.
Adjusted operating earnings before depreciation and amortization decreased by $5.8 million, or 8.1%, from $71.2 million in the second quarter of 2024 to $65.4 million in the second quarter of 2025. This decrease is mainly due to the sale of the industrial packaging operations, lower volume and prices as well as a less favourable product mix, partially mitigated by cost reduction initiatives and the favourable exchange rate effect. The sector's adjusted operating earnings margin before depreciation and amortization decreased from 17.3% in the second quarter of 2024 to 16.2% in the second quarter of 2025, mainly as a result of the above-mentioned items.
Retail Services and Printing Sector
Retail Services and Printing Sector revenues increased by $13.6 million, or 5.1%, from $266.3 million in the second quarter of 2024 to $279.9 million in the second quarter of 2025. This increase is mostly attributable to higher volume for book printing activities, in particular as a result of more competitive prices due to favourable exchange rates that facilitate securing contracts, as well as higher volume for specialized solutions, in-store marketing and raddar® leaflet distribution activities, partially offset by lower volume for flyer printing activities.
Adjusted operating earnings before depreciation and amortization increased by $7.3 million, or 15.5%, from $47.1 million in the second quarter of 2024 to $54.4 million in the second quarter of 2025. This increase is mainly attributable to the previously explained higher volume, cost reduction initiatives and, to a lesser extent, the favourable exchange rate effect. The sector's adjusted operating earnings margin before depreciation and amortization increased from 17.7% in the second quarter of 2024 to 19.4% in the second quarter of 2025, mainly as a result of the above-mentioned items.
Other
Revenues decreased by $4.3 million, or 95.6%, from $4.5 million in the second quarter of 2024 to $0.2 million in the second quarter of 2025. This decrease is due to lower volume in the Media Sector, which was mainly caused by the end of the contract related to SEAO, Quebec's electronic tendering system, and the increase in inter-sector eliminations.
Adjusted operating earnings before depreciation and amortization decreased by $3.1 million, from $-8.2 million in the second quarter of 2024 to $-11.3 million in the second quarter of 2025. This decrease is mainly due to the end of the contract related to SEAO, Quebec's electronic tendering system, in the Media Sector, and the increase in the stock-based compensation expense.
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Management's Discussion and Analysis - 10
ANALYSIS OF SECTOR RESULTS - CUMULATIVE
(Unaudited)
Table #4 :
| (in millions of dollars) | Packaging | Retail Services and Printing | Other | Consolidated results |
|---|---|---|---|---|
| Revenues - Six months ended April 28, 2024 | $810.6 | $531.4 | $21.6 | $1,363.6 |
| Business disposal | (30.9) | — | — | (30.9) |
| Exchange rate effect | 33.7 | 2.1 | — | 35.8 |
| Organic growth (decline) | (20.0) | (12.9) | (8.5) | (41.4) |
| Revenues - Six months ended April 27, 2025 | $793.4 | $520.6 | $13.1 | $1,327.1 |
| Adjusted operating earnings before depreciation and amortization (1) - Six months ended April 28, 2024 | $131.6 | $86.6 | $(12.0) | $206.2 |
| Business disposal | (6.3) | — | — | (6.3) |
| Exchange rate effect | 6.2 | 0.9 | (0.2) | 6.9 |
| Stock-based compensation | — | — | (0.8) | (0.8) |
| Organic growth (decline) | (7.1) | 8.8 | (1.7) | — |
| Adjusted operating earnings before depreciation and amortization (1) - Six months ended April 27, 2025 | $124.4 | $96.3 | $(14.7) | $206.0 |
(1) Please refer to Table #2 in the section entitled "Reconciliation of Non-IFRS Financial Measures" in this Management's Discussion and Analysis for adjusted data presented above.
Packaging Sector
Packaging Sector revenues decreased by $17.2 million, from $810.6 million in the first six months of fiscal year 2024 to $793.4 million in the corresponding period of 2025. This decrease is mainly due to the sale of the industrial packaging operations and lower volume, partially mitigated by the favourable exchange rate effect.
Adjusted operating earnings before depreciation and amortization decreased by $7.2 million, from $131.6 million in the first six months of fiscal year 2024 to $124.4 million in the corresponding period of 2025. This decrease is mainly due to the sale of the industrial packaging operations, lower volume and prices as well as a less favourable product mix, partially mitigated by cost reduction initiatives and the favourable exchange rate effect. The sector's adjusted operating earnings margin before depreciation and amortization decreased from 16.2% in the first six months of fiscal year 2024 to 15.7% in the corresponding period of 2025, mainly as a result of the above-mentioned items.
Retail Services and Printing Sector
Retail Services and Printing Sector revenues decreased by $10.8 million, from $531.4 million in the first six months of fiscal year 2024 to $520.6 million in the corresponding period of 2025. This decrease is mostly due to lower volume for flyer printing activities, partially mitigated by the raddar® leaflet distribution activities and higher book printing activities, in particular as a result of more competitive prices due to favourable exchange rates that facilitate securing contracts.
Adjusted operating earnings before depreciation and amortization increased by $9.7 million, from $86.6 million in the first six months of fiscal year 2024 to $96.3 million in the corresponding period of 2025. This increase is mainly attributable to the previously explained higher volume for book printing activities as well as cost reduction initiatives and, to a lesser extent, the favourable exchange rate effect. The sector's adjusted operating earnings margin before depreciation and amortization increased from 16.3% in the first six months of fiscal year 2024 to 18.5% in the corresponding period of 2025, mainly as a result of the above-mentioned items.
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Management's Discussion and Analysis - 11
Other
Revenues decreased by $8.5 million, from $21.6 million in the first six months of fiscal year 2024 to $13.1 million in the corresponding period of 2025. This decrease is due to lower volume in the Media Sector, which was mainly caused by the end of the contract related to SEAO, Quebec's electronic tendering system, and the increase in inter-sector eliminations.
Adjusted operating earnings before depreciation and amortization decreased by $2.7 million, from $-12.0 million in the first six months of fiscal year 2024 to $-14.7 million in the corresponding period of 2025. This decrease is mainly due to the end of the contract related to SEAO, Quebec's electronic tendering system, in the Media Sector, and the increase in the stock-based compensation expense, partially mitigated by cost reduction initiatives.
SUMMARY OF QUARTERLY RESULTS
(Unaudited)
Table #5 summarizes selected consolidated financial information derived from the Corporation's audited annual consolidated financial statements and some non-IFRS financial measures for each of the last eight quarters.
Table #5:
| 2025 | 2024 | 2023 | ||||||
|---|---|---|---|---|---|---|---|---|
| (in millions of dollars, unless otherwise indicated and per share amounts) | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 |
| Revenues | $ 684.1 | $ 643.0 | $ 749.3 | $ 700.0 | $ 683.2 | $ 680.4 | $ 779.7 | $706.7 |
| Operating earnings before depreciation and amortization | 104.5 | 141.4 | 131.8 | 121.5 | 88.7 | 82.7 | 123.2 | 95.3 |
| Adjusted operating earnings before depreciation and amortization (1) | 108.5 | 97.5 | 142.2 | 121.0 | 110.1 | 96.1 | 145.5 | 107.9 |
| Adjusted operating earnings margin before depreciation and amortization (2) | 15.9% | 15.2% | 19.0% | 17.3% | 16.1% | 14.1% | 18.7% | 15.3% |
| Operating earnings | $ 51.1 | $ 88.7 | $ 79.3 | $ 69.2 | $ 33.2 | $ 27.8 | $ 66.7 | $ 39.2 |
| Adjusted operating earnings (1) | 70.1 | 59.6 | 105.1 | 84.2 | 72.3 | 59.0 | 107.3 | 70.2 |
| Adjusted operating earnings margin (1) | 10.2% | 9.3% | 14.0% | 12.0% | 10.6% | 8.7% | 13.8% | 9.9% |
| Net earnings attributable to shareholders of the Corporation | $ 33.8 | $ 55.6 | $ 47.9 | $ 43.6 | $ 15.9 | $ 13.9 | $ 41.7 | $ 20.9 |
| Net earnings attributable to shareholders of the Corporation per share | 0.40 | 0.66 | 0.57 | 0.50 | 0.18 | 0.16 | 0.48 | 0.24 |
| Adjusted net earnings attributable to shareholders of the Corporation (1) | 48.2 | 41.5 | 67.3 | 51.4 | 45.3 | 37.4 | 71.8 | 44.0 |
| Adjusted net earnings attributable to shareholders of the Corporation per share (1) | 0.58 | 0.49 | 0.79 | 0.60 | 0.52 | 0.43 | 0.83 | 0.51 |
| Adjusted net earnings attributable to shareholders of the Corporation as a % of the fiscal year | —% | —% | 34% | 26% | 22% | 18% | 41% | 25% |
(1) Please refer to Table #2 in the section entitled "Reconciliation of Non-IFRS Financial Measures" in this Management's Discussion and Analysis for adjusted data presented above.
(2) Corresponds to adjusted operating earnings before depreciation and amortization divided by revenues.
The variability of financial information for interim periods is influenced by many factors, such as:
- The impact of business acquisitions and disposals;
- The effect of exchange rate fluctuations;
- The effect of interest rate fluctuations;
- The impact of the change in the share price on the stock-based compensation expense;
- The impact of changes in price of raw materials, including resin and paper; and
- The impact of inflation on costs.
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Management's Discussion and Analysis - 12
FINANCIAL POSITION, LIQUIDITY AND CAPITAL STRUCTURE
(Unaudited)
Table #6:
| Three months ended | Six months ended | |||
|---|---|---|---|---|
| (in millions of dollars) | April 27, 2025 | April 28, 2024 | April 27, 2025 | April 28, 2024 |
| Operating activities | ||||
| Cash flows generated by operating activities before changes in non-cash operating items and income taxes paid | $104.8 | $88.6 | $199.5 | $172.1 |
| Changes in non-cash operating items | (10.9) | (0.9) | (70.5) | (20.9) |
| Income taxes paid | (13.6) | (14.7) | (25.1) | (20.8) |
| Cash flows from operating activities | $80.3 | $73.0 | $103.9 | $130.4 |
| Investing activities | ||||
| Business disposal | $— | $— | $132.0 | $— |
| Acquisitions of property, plant and equipment | (15.1) | (22.0) | (29.8) | (52.1) |
| Disposals of property, plant and equipment and other | — | 0.1 | 0.1 | 1.5 |
| Increase in intangible assets | (9.4) | (8.1) | (16.8) | (14.6) |
| Cash flows from investing activities | $(24.5) | $(30.0) | $85.5 | $(65.2) |
| Financing activities | ||||
| Reimbursement of long-term debt | $(200.6) | $(0.8) | $(201.2) | $(2.0) |
| Net increase (decrease) in credit facilities | 65.0 | 1.3 | 65.0 | (74.1) |
| Settlement of cross-currency fixed-to-floating interest rate swaps | (25.9) | — | (25.9) | — |
| Financial expenses paid on long-term debt and credit facilities | (14.8) | (14.2) | (23.0) | (21.6) |
| Repayment of principal on lease liabilities | (6.0) | (5.7) | (12.1) | (11.6) |
| Interest paid on lease liabilities | (1.1) | (0.9) | (2.1) | (1.7) |
| Dividends | (102.4) | (19.5) | (121.3) | (39.0) |
| Shares repurchased | — | — | (16.3) | — |
| Cash flows from financing activities | $(285.8) | $(39.8) | $(336.9) | $(150.0) |
| Effect of exchange rate changes on cash denominated in foreign currencies | $0.1 | $0.4 | $5.5 | $2.9 |
| Net change in cash | $(229.9) | $3.6 | $(142.0) | $(81.9) |
Table #7:
| Financial position | As at April 27, 2025 | As at October 27, 2024 |
|---|---|---|
| Net indebtedness (1) | $799.5 | $803.8 |
| Net indebtedness ratio (1) | 1.70x | 1.71x |
| Credit rating | ||
| DBRS | BBB (low) | BBB (low) |
| Outlook | Stable | Stable |
| Standard and Poor's | BBB- | BBB- |
| Outlook | Stable | Stable |
| Consolidated Statements of Financial Position | As at April 27, 2025 | As at October 27, 2024 |
| Current assets | $921.2 | $1,214.6 |
| Current liabilities | 410.9 | 765.3 |
| Total assets | 3,289.3 | 3,641.3 |
| Total liabilities | 1,418.5 | 1,726.5 |
(1) Please refer to Table #2 in the section entitled "Reconciliation of Non-IFRS Financial Measures" in this Management's Discussion and Analysis for adjusted data presented above.
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Management's Discussion and Analysis - 13
ANALYSIS OF FINANCIAL POSITION - SECOND QUARTER
Cash Flows from Operating Activities
Cash flows from operating activities increased, from $73.0 million in the second quarter of 2024 to $80.3 million in the second quarter of 2025. This increase is mainly explained by higher operating earnings before depreciation and amortization, partially offset by an unfavourable change in working capital, notably caused by an increase in inventories as a result of the uncertainty surrounding protectionist trade measures.
Cash Flows from Investing Activities
Cash flows from investing activities decreased, from a cash outflow of $30.0 million in the second quarter of 2024 to a cash outflow of $24.5 million in the second quarter of 2025. This change is mainly attributable to a decrease in investments in property, plant and equipment.
Cash Flows from Financing Activities
Cash flows from financing activities increased, from a cash outflow of $39.8 million in the second quarter of 2024 to a cash outflow of $285.8 million in the second quarter of 2025. This change is mostly attributable to the repayment of long-term debt and the payment of a special dividend and, to a lesser extent, the settlement of cross-currency fixed-to-floating interest rate swaps, partially mitigated by the increase in borrowings under the credit facilities.
Debt Instruments
On February 3, 2025, the Corporation repaid at maturity the unsecured notes (issued in 2022) amounting to $200.0 million. Concurrently with the repayment of the unsecured notes, the Corporation repaid the cross-currency fixed-to-floating interest rate swaps (CAD fixed/USD floating) amounting to $200.0 million (US$157.1 million).
The Corporation has a credit facility amounting to $400.0 million or the U.S. dollar equivalent, which was maturing in February 2028. On February 18, 2025, the maturity was extended for two additional years, until February 2030, with similar terms. The interest rate on the credit facility is based on the Corporation's credit rating. Based on the current credit rating, the applicable rate is the Canadian Overnight Repo Rate Average ("CORRA") plus 1.970% for one-month periods or plus 1.996% for three-month periods, or the Secured Overnight Financing Rate ("SOFR") plus 1.775%, or the Canadian prime rate or the U.S. prime rate plus 0.675%.
The Corporation has another credit facility with a maximum amount of US$15.0 million ($20.8 million), which was maturing in March 2025. On February 6, 2025, the maturity was extended for an additional year, until March 2026, with similar terms. The applicable interest rate for this credit facility is SOFR plus 1.450%.
As at April 27, 2025, $65.0 million were drawn on the credit facilities and the unused amount under the credit facilities was $355.8 million.
As at April 27, 2025, the floating-rate portion of the Corporation's long-term debt represented approximately 30.6% of total debt.
Net Indebtedness
Net indebtedness remained relatively stable, from $803.8 million as at October 27, 2024 to $799.5 million as at April 27, 2025. The cash flows generated by the sale of the industrial packaging operations were offset by the payment of the special dividend. The net indebtedness ratio also remained relatively stable, from 1.71x as at October 27, 2024 to 1.70x as at April 27, 2025.
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Management's Discussion and Analysis - 14
CAPITAL STRUCTURE
Share Capital
Table #8:
| Shares Issued and Outstanding | As at April 27, 2025 | As at May 30, 2025 |
|---|---|---|
| Class A (Subordinate Voting Shares) | 74,112,647 | 74,112,647 |
| Class B (Multiple Voting Shares) | 9,506,272 | 9,506,272 |
| Total Class A and Class B | 83,618,919 | 83,618,919 |
On June 12, 2024, the Corporation was authorized to repurchase for cancellation, on the open market or subject to the approval of any securities authority by private agreements, between June 17, 2024 and June 16, 2025, or at an earlier date if the Corporation concludes or cancels the offer, up to 3,662,967 of its Class A Subordinate Voting Shares and up to 668,241 of its Class B Shares. The repurchases are made in the normal course of business at market prices through the Toronto Stock Exchange.
During the first six months of fiscal year 2025, the Corporation repurchased and cancelled 934,434 Class A Subordinate Voting Shares at a weighted average price of $17.38 and 3,600 Class B Shares at a weighted average price of $17.27, for a total cash consideration of $16.3 million. The excess of the total consideration over the carrying amount of the shares, amounting to $8.5 million, as well as related income taxes payable amounting to $0.3 million, were applied against retained earnings. As at April 27, 2025, the Corporation was under no obligation to repurchase its Class A Subordinate Voting Shares and Class B Shares.
During the first six months of fiscal year 2024, the Corporation had no share repurchase program in effect.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control. The purpose of internal control over financial reporting ("ICFR") is to provide reasonable assurance regarding the reliability of the Corporation's financial reporting and the preparation of condensed interim consolidated financial statements in accordance with IFRS. Management certifies disclosures in annual and interim filings under Regulation 52-109 using the internal control framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
During the second quarter ended April 27, 2025, no change that has materially affected or is reasonably likely to affect the ICFR was brought to the attention of management, including the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer of the Corporation.
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Management's Discussion and Analysis - 15
OUTLOOK¹
The investments in our growth activities, including flexible packaging and in-store marketing, position us well for the future and should be a key driver of our long-term growth.
In terms of profitability, we expect to generate organic growth in adjusted operating earnings before depreciation and amortization of the Packaging Sector for fiscal 2025 compared to fiscal 2024. In the Retail Services and Printing Sector, we expect adjusted operating earnings before depreciation and amortization for fiscal 2025 to be stable compared to fiscal 2024.
Lastly, we expect to continue generating significant cash flows from operating activities, which will enable us to reduce our net indebtedness while continuing to make strategic investments and return capital to our shareholders.
On behalf of Management,
(s) Donald LeCavalier
Executive Vice President and Chief Financial Officer
June 4, 2025
¹ The following outlook does not take into account the impact of the implementation of protectionist trade measures and a potential labour conflict at Canada Post on our operations and their effects on our results.
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Management's Discussion and Analysis - 16