Transcontinental states it has improved its Q2 results (see highlights below), bucking the downward trend of the ongoing recession hitting North American printing, are the direct result of a major rationalization plan implemented in the United States in November 2008 and extended to all its other operations in February 2009. This plan included the elimination of 1,500 jobs. To date, the equivalent of 1,400 positions have been cut with more than half of those coming in the United States. The company has also stopped publishing five print titles and four printing plants have been merged or consolidated.
Consolidated revenues for Q2 2008 dropped five percent compared to the year ago quarter, with reduced direct-mail activities in the United States having a significant negative impact, while the company also suffered a net income loss of $144.3 million in 2009 compared to earnings of $36.9 million in 2008.
The Montreal-based printer expects to be in a more sound fiscal position in the second half of this fiscal year, pointing to the beginning of two new contracts for Rogers Communications, new marketing initiatives, and the planned summer start for printing the San Francisco Chronicle. Since February 2009, Transcontinental has secured new financing arrangements totaling $625 million.
“In the current context, excluding unusual items, these are encouraging results that show an improvement over the first quarter,” said François Olivier, President and CEO of Transcontinental. “We reacted quickly and adjusted our production capacity and costs to the demand in each of our markets… After three quarters of adjustment and refocusing, and assuming no further deterioration in the present economic situation and the execution of our rationalization plan, we are confident that our profitability will continue to improve in coming quarters.
“In a more general way,” noted Olivier, “we will continue to benefit from our niche strategy, our diversified and balanced customer base, the start of new contracts and our financial resources. The year 2009 will be one of transition for Transcontinental and we will come out of it stronger and better positioned in each of our markets to take advantage of the economic recovery.”
Transcontinental Q2 financial highlights:
• In the second quarter 2009, Transcontinental recorded consolidated revenues of $563.4 million, down 5% from $595.1 million in the second quarter of 2008. • Signed a total of $625 million in financing agreements since the end of first quarter 2009. • Net funded debt to total capitalization ratio of 49%, in the high end of the target range of 35 to 50 % set by management. • Decreases of 5% in consolidated revenue and 10% in adjusted operating income before amortization compared to second quarter 2008. • Impairment of intangible assets and write-off of goodwill, principally related to commercial printing activities, totaled $169 million during the quarter. • The rationalization plan announced on February 18, 2009, generated a total of $27.5 million in restructuring costs and asset impairment. • Net funded debt to total capitalization ratio of 49%, in the high end of the target range of 35% - 50% set by management. • Dividend kept at $0.08 per share, as Standard & Poor’s lowers Transcontinental’s credit rating from BBB to BBB (-) with a stable outlook.
