Despite headwinds, printer and packager Transcontinental managed to improve its profitability thanks to cost reductions.
The Montreal company must face an unfavorable context due to a slowdown in demand in the packaging segment and the structural decline of printing, particularly in the magazine and written press sector.
Transcontinental still improved its profitability in the first quarter ended January 28 thanks to its cost reduction efforts. The company reported higher-than-expected profits, despite lower-than-expected revenues.
“We had a solid first quarter despite still difficult market conditions,” summarizes President and CEO Thomas Morin during a conference call on Wednesday to discuss the quarterly results.
In December, Transcontinental announced an “ambitious” program to find between $20 and $40 million in recurring savings over two years. The company also hopes to raise $100 million from asset sales.
Mr. Morin said the company had started to look at “underperforming” factories, fixed costs and cost of goods sold. “We had a good start. We are on track with our plan. »
The company revealed a net profit of $13.9 million, compared to a profit of $1 million in the same period last year. Adjusted diluted earnings per share were 43 cents.
Revenues, for their part, fell by 3.9% to $680.4 million due to a drop in volumes in the printing sector and “to a lesser extent” in the packaging sector.
Before the results were released, analysts expected revenue of $692 million and adjusted diluted earnings per share of 32 cents, according to financial data firm Refinitiv.
“Profitability was above expectations as the company’s cost-cutting efforts in the packaging segment began to make a notable contribution to earnings growth,” said Scotiabank analyst Maher Yaghi.
The analyst expects 2024 to be “a turnaround year” for the company. “Reducing earnings volatility and improving margins are starting to pay off. »
“We believe the packaging sector has good upside potential. While we do not expect a large acquisition in the near term, we believe that an acquisition could be an avenue for growth starting in 2025.”
Transcontinental shares gained 65 cents, or 4.57%, to $14.88 on the Toronto Stock Exchange in the morning.