(Montreal) TC Transcontinental exceeded analysts’ expectations, but management says it sees signs of an economic slowdown on the horizon.
These signs were noticeable in October in the printing industry, chairman and chief executive Peter Brues said during a conference call Tuesday after markets closed to discuss fourth-quarter financial results. completed October 30.
The Montreal-based company has raised prices due to rising costs due to inflation, but the move could lead customers to revise their orders.
The manager mentioned that flyers were a promotional tool appreciated by consumers, even more so in an inflationary context and economic uncertainty. “We had good volumes. That being said, October is usually a bit stronger. We’re not at a point where we can extrapolate what that means. »
Rising prices are also putting pressure on newspaper publishers. Mr. Brues gave the example of Postmedia, which dropped the printing of the Monday edition for nine of its publications.
Printing costs could, however, encourage publishers to divest themselves of their printing activities and entrust them to a third party, hopes Mr. Brues, who reiterated that the company’s strategy is to be “the last survivor” in a sector in decline. “We are very close to concluding an agreement which would give us the printing contract of a major publisher. »
In the packaging segment, the economic context could also cause problems. After stocking up on inventory in a supply chain disruption, retailers may want to reduce their inventory.
“We’ve seen it in some segments, but overall in North America it’s going well. »
Transcontinental forecasts an increase in its operating profit in the packaging segment for fiscal 2023. The company, however, expects a decline in operating profit in the printing sector.
The results
Pressure on Transcontinental’s profitability was weaker than analysts’ forecasts, despite an inflationary environment.
In the fourth quarter, the printer and packer announced on Tuesday an increase of 21.2 million in its net profit, which rose from 39.2 million to 60.4 million.
The company said acquisitions and lower restructuring costs helped support profitability, which was offset by the company no longer receiving a wage subsidy in the fourth quarter of 2022.
Adjusted diluted earnings per share were 79 cents, compared to 81 cents for the same period last year. Prior to the earnings release, analysts had expected earnings per share of 70 cents, according to data firm Refinitiv.
If profitability is better than expected, Hamir Patel of CIBC World Markets notes that there are still clouds on the horizon. “Forecasts for next year point to headwinds in the printing segment,” comments the analyst.
Revenues, for their part, increased by 3.4% to 802.2 million. The management mentioned that it was able to pass on the increase in the price of raw materials to its customers.
Transcontinental shares gained 52 cents, or 3.20%, to $16.79 at the end of trading on the Toronto Stock Exchange.