Transcontinental Inc. Class A · TSX:TCL.A
Transcontinental Inc. Class A — TC Transcontinental — Investor Presentation (January 2020)
49 slides from Transcontinental Inc. Class A's investor presentation, January 2020
Slide 1: Moving forward in our transformation
Investor Relations Presentation: Moving forward in our transformation January 2020 www.tc.tc
Slide 2: Note to readers
Note to readers In this document, unless otherwise indicated, all financial data are prepared in accordance with International Financial Reporting Standards (IFRS) and the term ‘’dollars’’ as well as the symbol ‘’$’’ designate Canadian dollars. In this document, we also use non-IFRS financial measur
Slide 3: Forward-looking information
Forward-looking information 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
Slide 4: Overview
Overview TC Transcontinental at a Glance Financial Performance Corporate Social Responsibility Our Business Sectors 2020 Outlook and Conclusion www.tc.tc 4
Slide 5: TC Transcontinental at a glance
TC Transcontinental at a glance For over 40 years, TC Transcontinental's mission has been to create products and services that allow businesses to attract, reach and retain their target customers. A leader in flexible packaging in North America Canada’s largest printer The leading Canadian publishin
Slide 6: Our vision
Our vision To become a market leader in flexible packaging in North America while maintaining our position as Canada’s largest printer and as the leading Canadian French-language educational publishing group 6
Slide 7: Our management team
Our management team François Olivier Sam Bendavid Magali Depras Christine Desaulniers Benoit Guilbault President and Vice President, Chief Strategy Officer Chief Legal Officer and Chief Information Officer Chief Executive Officer Corporate Development Corporate Secretary Donald LeCavalier Lyne Marte
Slide 8: Our transformation journey
Our transformation journey TRANSFORMATION 2010 2014 2016 2018 2019 Transformational 4th Packaging acquisition Successful integration of Strategic investments 1st Packaging acquisition acquisition of Coveris completed Coveris Americas Americas Revenues by Sector1 65% 69% 74% 57% $2,0B $2,0B $2,0B $2,
Slide 9: Overview
Overview TC Transcontinental at a Glance Financial Performance Corporate Social Responsibility Our Business Sectors 2020 Outlook and Conclusion www.tc.tc 9
Slide 10: Performance highlights
Performance highlights Revenues ($M) Adjusted Revenues1 ($M) 3,039 3,027 2,624 2,521 2,002 2,020 2,007 2,002 2,020 2,007 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 EBITDA ($M) Adjusted EBITDA1 ($M) 476 537 459 512 390 397 379 405 360 320 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Recor
Slide 11: Returning capital to shareholders
Returning capital to shareholders 500 600 Cash flows from operating activities and capital allocation ($M) 450 CAPEX (incl. intangibles) 500 400 Dividends Share buybacks 432 350 Cash flows from operating activities 400 300 324 313 289 250 273 300 200 24 76 200 22 150 52 69 100 56 61 100 126 87 50 77
Slide 12: Deleveraging in a disciplined manner
Deleveraging in a disciplined manner Net indebtedness1 (in $M) and net indebtedness ratio1 1,421 3,1x 2.6x 1,169 INVESTMENT GRADE CREDIT 2,5x RATING 903 1.9x 699 1.5x Exceeding 1.3x Target: 1.2x 539 Expect to 471 1.0x 0.9x reach 2.0x by 442 0.8x Q1 20202 321 346 331 0.3x 101 2009 2010 2011 2012 2013
Slide 13: Rewarding our shareholders
Rewarding our shareholders Dividends paid per participating share 87¢ 83¢ 6¢ 1993 2018 2019 Dividends paid in 2019 only represented 17.6% of cash flows from operating activities 13
Slide 14: Overview
Overview TC Transcontinental at a Glance Financial Performance Corporate Social Responsibility Our Business Sectors 2020 Outlook and Conclusion www.tc.tc 14
Slide 15: Our CSR Strategy
Our CSR Strategy Corporate Social Responsibility is embedded into our strategy and sustainability drives innovation Confirm our leadership and impact Embed CSR in all our activities Collaborate across the value chain between all stakeholders Deliver on our 11 goals related to our people, our operati
Slide 16: Pursuing our business activities responsibly
Pursuing our business activities responsibly Among the Best 50 Corporate Citizens in Canada for the 15th time in 2018 Committed to disclosure in the Carbon Disclosure Project (CDP) Included in the Jantzi Social Index® Member of the Sustainable Packaging Coalition® (SPC) Signatory of the Ellen MacArt
Slide 17: Promoting gender diversity
Promoting gender diversity Fostering a culture of diversity and inclusion is important to us at TC Transcontinental. Over the last few years, we have formalized our commitment to gender diversity with: the adoption of two gender diversity policies. The first one relates to the representation o
Slide 18: Overview
Overview TC Transcontinental at a Glance Financial Performance Corporate Social Responsibility Our Business Sectors 2020 Outlook and Conclusion www.tc.tc 18
Slide 19: TC Transcontinental Packaging
TC Transcontinental Packaging www.tc.tc 19
Slide 20: Packaging Sector overview
Packaging Sector overview • To become a market leader in flexible Vision packaging in North America Strategy • Grow our Packaging Sector through organic sales growth and acquisitions • 25 production plants worldwide, mainly in Network the United States, Canada and Latin America, as well as one preme
Slide 21: Scaling our packaging platform
Scaling our packaging platform UNITED STATES CANADA 25 PRODUCTION PLANTS UNITED STATES: 15 plants •Transcontinental Capri 1 •Transcontinental Capri 2 •Transcontinental Ultra Flex CANADA: 3 plants and one premedia studio •Transcontinental Flexipak •Transcontinental Flexstar •Transcontinental Whitby 3
Slide 22: Building our flexible packaging platform
Building our flexible packaging platform 2014 2015 2016 2016 Acquisition of Acquisition of Acquisition of Acquisition of Capri Packaging Ultra Flex Packaging Corp. Robbie Manufacturing Flexstar Packaging Inc. Clinton, Missouri Brooklyn, New York Lenexa, Kansas Richmond, British Columbia 2 plants 1 p
Slide 23: Building our flexible packaging platform (cont'd)
Building our flexible packaging platform (cont’d) Packaging Sector Revenues (in $M) and number of plants Revenues # of plants $1618 29 plants 28 plants $977 6 plants 5 plants 3 plants $308 2 plants $220 $113 $49 2014 2015 2016 2017 2018 2019 Significant traction in growing profitability Adjusted EBI
Slide 24: Successful integration of Coveris Americas
Successful integration of Coveris Americas Growing profitability from exceeding FY2019 synergies EBIT and adjusted EBITDA 1 increased from $21.9M to $66.6M and $116.5M to $206.8M respectively in FY2019. Adjusted EBITDA margins1 grew from 11.9% in FY2018 to 12.8%, a 90bps improvement. Scaling opportu
Slide 25: Serving a variety of industries
Serving a variety of industries Core markets among our portfolio of products Agriculture Candy & (Banana) Beverage Confectionery Cheese & Dairy Home & Coffee & Tea Personal Care Pet Food Meat & Poultry Investing in innovative and ecoresponsible products to become the market leader in core markets 25
Slide 26: Flexible packaging serves an important purpose
Flexible packaging serves an important purpose The key function of a package is to contain and protect the product Packaging extend shelf life Rule of thumb: packaging accounts for about 10% of carbon footprint of product1 1/3 of all food produced is disposed of before it is consumed2 Pack
Slide 27: Flexible packaging is lightweight
Flexible packaging is lightweight Source: Dow Presentation; FPA Case Studies, 2009 27
Slide 28: Flexible packaging optimizes transportation
Flexible packaging optimizes transportation One truckload of Often equals between 15-25 flat pouches truckloads of empty rigid containers = 28 Source: AWT Labels and Packaging, 2016
Slide 29: Our circular economy vision
Our circular economy vision Maintain our leadership in paper Live up to our 2025 commitment with plastics Develop industry leadership Accelerate innovation “Our R&D strategy is focused on a deep understanding of our customers’ needs and market trends. Working closely with our supply chain partners,
Slide 30: Making strides towards a circular economy for plastics
Making strides towards a circular economy for plastics We share the Ellen MacArthur Foundation’s common vision of a circular economy for plastic, where plastic never becomes waste TC Transcontinental is the first Canadian-based manufacturer to join the Ellen MacArthur Foundation’s New Plastics E
Slide 31: Packaging Innovation and Sustainability
Packaging Innovation and Sustainability Product • Oxygen, Moisture, Light Protection • Transportation Consumer • On the Shelf Image Engagement • Convenience of Use Total Cost of • Purchase Price Ownership • Processing Speed & Ease • Carbon Footprint Impact Sustainability • End-of-Life Scenario 31
Slide 32: Focusing on sustainable, innovating product development
Focusing on sustainable, innovating product development Award-Winning Compostable Solutions Compostable Films • Custom engineered films • Developed by our R&D teams • Customer collaboration • 100% renewable resources Dedicated R&D Team with focus on ongoing development of innovative 32 sustainable s
Slide 33: Focusing on sustainable, innovating product development (continued)
Focusing on sustainable, innovating product development (continued) Award-Winning 100% Recyclable Solutions 100% recyclable mono-material barrier structure • Similar barrier performance than multi-material • 100% recycle ready for in-store drop off 100% recyclable multilayer film with barrier • One
Slide 34: 2019 Achievements in Packaging
2019 Achievements in Packaging Appointment of Thomas Morin as President, TC Transcontinental Packaging New R&D and innovation team including the appointment of Alex Hayden as Senior Vice President, R&D, Innovation and Sustainability Significant investments in manufacturing capabilities (includ
Slide 35: Packaging outlook
Packaging outlook Realize second wave of synergies (internalization of film and plates) to continue to gradually improve margins Focus on manufacturing efficiency Generate long-term organic sales growth Consolidated platform has capacity to accommodate additional volume Continue to strengt
Slide 36: TC Transcontinental Printing
TC Transcontinental Printing www.tc.tc 36
Slide 37: Printing Sector overview
Printing Sector overview • Maintain our position as Canada’s largest Vision printer Strategy • Optimize our printing platform and capture growth opportunities in promising verticals Network • 16 state-of-the-art printing plants, from coast to coast 37
Slide 38: Offering a state-of-the-art national printing network
Offering a state-of-the-art national printing network 4,400 EMPLOYEES 16PRINTING PLANTS QUÉBEC (7) MANITOBA (1) Beauceville Winnipeg Boucherville Montreal (2) ALBERTA (1) • Transmag Calgary • Ross-Ellis St-Hyacinthe BRITISH COLUMBIA (1) Gatineau Delta Québec City NOVA SCOTIA (1) ONTARIO (5) Halifax
Slide 39: Providing a broad range of printing solutions for many industries
Providing a broad range of printing solutions for many industries Markets Marketing Products Publishing Premedia & Retail Distribution 39
Slide 40: Summary of Publisac Situation
Summary of Publisac Situation New Publisac bag made of 100% recycled plastic was launched on Montreal Island. Report from the City of Montreal’s Commission on Water, Environment, Sustainable Development and Large Parks recommending moving to an “opt-in” model TC Transcontinental will continue
Slide 41: 2019 Achievements in Printing
2019 Achievements in Printing Optimizing our manufacturing platform Announced the closure of Brampton and PEI plants Simplifying overhead structure to reduce indirect costs Proactive defense of the Publisac Acquisition of Holland & Crosby to increase our presence in a growth vertical (In-S
Slide 42: Printing outlook
Printing outlook Monitor volume trends and proactively adjust cost structure to protect profitability Grow our market share in verticals with significant growth potential like in-store marketing product, book printing and premedia services Ensure rigorous management of our long-term contracts
Slide 43: TC Media
TC Media www.tc.tc 43
Slide 44: Segment now focused on Educational Material and Groupe Constructo
Segment now focused on Educational Material and Groupe Constructo Completed the transformation in Media Sector with the sale of the majority of our specialty media assets and event planning activities. With close to $700 million in revenues in 2010, the Media Sector now represents less than $70
Slide 45: Overview
Overview TC Transcontinental at a Glance Financial Performance Corporate Social Responsibility Our Business Sectors 2020 Outlook and Conclusion www.tc.tc 45
Slide 46: Key investment considerations
Key investment considerations Long-term value creation Leader in most of our verticals Ability to generate significant cash flows Solid relationships with our customers Investment grade credit rating History of dividend growth Pursuing our business activities in a responsible manner 46
Slide 47: FY 2020 Outlook
FY 2020 Outlook Modest organic growth Packaging Improvement in operating margins Positive impact from operational efficiency Printing initiatives and acquisitions in growth markets CAPEX $90 - $100 million Interest expenses ~ $55 million Cash taxes $55 - $65 million Tax expense (%) Mid-twenties We e
Slide 48: Conclusion
Conclusion Managing our portfolio of activities in line with our plan Taking actions to optimize cost structure and building sales growth Continuing to generate strong and consistent cash flows allowing us to distribute dividends, deleverage our balance sheet and continue our transformation through
Slide 49: Contact information
Contact information Transcontinental Inc. Yan Lapointe Director, Investor Relations 1 Place Ville Marie, Suite 3240 Montréal (QC) H3B 0G1 Telephone: 514 954-3574 [email protected] www.tc.tc
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