Transcontinental Inc. Class A · TSX:TCL.A
Transcontinental Inc. Class A — TC Transcontinental — Investor Presentation (September 2019)
66 slides from Transcontinental Inc. Class A's investor presentation, Sep 5, 2019
Slide 1: Moving forward in our transformation
Investor Relations Presentation: Moving forward in our transformation September 5, 2019 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 Our Business Sectors Corporate Social Responsibility Appendix 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 A Canadian leader in our speci
Slide 6: Our vision
Our vision To become a top leader in flexible packaging in North America while maintaining our position as Canada’s largest printer and as a leader in our specialty media segments. 6
Slide 7: Our management
Our management François Olivier Donald LeCavalier Brian Reid Thomas Morin President and Chief Executive Officer Chief Financial Officer President, TC Transcontinental President, TC Transcontinental Printing Packaging • 26 years with TC Transcontinental • 13 years with TC Transcontinental • 27 years
Slide 8: Our transformation journey
Our transformation journey TRANSFORMATION 20101 20141 20161 20181 LTM Q3 – 2019 Transformational Transformational 4th Packaging acquisition Strategic investments 1st Packaging acquisition acquisition of Coveris acquisition of Coveris completed Americas Americas 65% 69% 74% 57% Revenues Revenues Reve
Slide 9: Key investment considerations
Key investment considerations Long-term value creation Leader in most of our verticals Sustained growth in adjusted profitability Significant cash flows Investment grade credit rating History of dividend growth Pursuing our business activities in a responsible manner 9
Slide 10: Overview
Overview TC Transcontinental at a Glance Financial Performance Our Business Sectors Corporate Social Responsibility Appendix www.tc.tc 10
Slide 11: Performance highlights
Performance highlights1 Adjusted Revenues ($M) Adjusted EBITDA ($M) 3,077 499 2,521 459 2,002 2,020 2,007 390 397 379 2015 2016 2017 2018 Q3-2019 LTM 2015 2016 2017 2018 Q3-2019 LTM Adjusted EBIT ($M) Adjusted Net Earnings per Share ($) 373 2.91 357 2.76 2.72 311 301 2.53 291 2.39 2015 2016 2017 201
Slide 12: FY-2018 financial performance
FY-2018 financial performance +25.6% Adjusted Revenues1 FY-2018 (M$) (8.4) (28.9) 10.0 541.5 2 540,3 2 511,4 2 511,4 2,521.4 2,007.2 2 007,2 1800 FY-2017 Acquisitions/disposals FX End of recognition of Organic growth FY-2018 and closures deferred revenues* +14.8% Adjusted EBIT1 FY-2018 (M$) 18.9 42.
Slide 13: Q3-2019 financial performance
Q3-2019 financial performance -3.8% Revenues Q3-2019 (M$) (0.5) 9.1 (37.6) 728.9 757.9 Q3-2018 Acquisitions/disposals and FX Organic decline Q3-2019 closures -4.4% Adjusted EBIT Q3-2019 (M$) (11.3) 0.7 1.5 5.4 84.6 80.9 Q3-2018 Acquisitions/disposals and FX Organic decline Stock-based compensation Q
Slide 14: Q3-2019 segmented results
Q3-2019 segmented results PACKAGING PRINTING OTHER CONSOLIDATED Adjusted 1 395.0 310.5 23.4 728.9 Revenues ($M) Δ Q3-2018 ($M) (5.2) (23.7) (0.1) (29.0) Adjusted 1 52.0 58.8 2.1 112.9 EBITDA ($M) Δ Q3-2018 ($M) + 3.1 (12.7) + 6.1 (3.5) Adjusted 1 EBITDA margin 13.2% 18.9% n/a 15.5% 1 Non-IFRS financ
Slide 15: Returning capital to shareholders
Returning capital to shareholders 1200 1500 Cash flows from operating activities1 and capital allocation ($M) 1300 1000 CAPEX (incl. intangibles) Dividends Acquisitions Share buybacks Cash flows from operating activities 1100 800 900 600 700 539 297 396 411 500 400 289 373 344 379 247 311 321 327 30
Slide 16: Deleveraging in a disciplined manner
Deleveraging in a disciplined manner Net indebtedness1 (in $M) and net indebtedness ratio1 1,421 1,352 3,1x 2.6x INVESTMENT 2,7x GRADE CREDIT RATING 903 1.9x Target: Below 2.0x before end 699 1.5x of Fiscal 1.3x 2020 1.2x 539 471 1.0x 0.9x 442 0.8x 321 346 331 0.3x 101 2009* 2010** 2011** 2012** 201
Slide 17: Rewarding our shareholders
Rewarding our shareholders Dividends paid per participating share 88¢ 84¢ +4.8% 6¢ 1993 2018 2019F Annualized 17
Slide 18: Overview
Overview TC Transcontinental at a Glance Financial Performance Our Business Sectors Corporate Social Responsibility Appendix 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 top leader in flexible Vision packaging in North America • Grow our Packaging Sector through Strategy organic sales and acquisitions • 28 production plants worldwide, mainly in Network the United States, Canada and Latin America, as well as one premedia studio
Slide 21: Scaling our packaging platform: from 7 to 28 plants
Scaling our packaging platform: from 7 to 28 plants CANADA 28 PRODUCTION PLANTS CHINA UNITED UNITED STATES KINGDOM ECUADOR GUATEMALA MEXICO NEW ZEALAND 21 TC Transcontinental Packaging (7) Coveris Americas Acquisition (21)
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: Among the top 10 flexible packaging converters in North America
Among the top 10 flexible packaging converters in North America Source: Flexible Packaging Magazine Note: Financial figures of TC Transcontinental in fiscal year 2017 translated at an average CAD/USD exchange rate of 1.3142 for the period beginning November 1, 2016 and ending October 29, 2017. 1. Ra
Slide 24: Integrating our transformational acquisition: Coveris Americas
Integrating our transformational acquisition: Coveris Americas Scaling opportunity of film manufacturing Acquisition of a strong expertise in technical films production that enables insourcing of film manufacturing Significant high-end blown extrusion capacity for multi-layer barrier film (up to 11
Slide 25: Serving a variety of industries
Serving a variety of industries Markets Candy & Agriculture Beverage Confectionery Cheese & Dairy Consumer Coffee & Tea Industrial Meat & Poultry Packaged Goods Pet Food Supermarkets Tobacco 25
Slide 26: Our top packaging customers
Our top packaging customers 26
Slide 27: Growing our packaging revenues since 2014
Growing our packaging revenues since 2014 ($M) 1,627 28 plants (full year) 977 28 plants 308 220 113 49 6 plants 5 plants 3 plants 2 plants 2014 2015 2016 2017 2018 LTM Q3-2019 27
Slide 28: Pursuing long-term organic growth
Pursuing long-term organic growth • Recently renewed and extended long-term agreements that represent more than 20% of overall packaging portfolio • Driving revenues through increased focused on sales organization • Consolidated platform has capacity to accommodate additional volume • Committed to g
Slide 29: Increasing our packaging margins
Increasing our packaging margins Targeting + Organic 15% adj. revenue EBITDA + growth margin1 Synergies by 2021 13,2% adj. EBITDA margin1 in Q3-2019 29 1 Non-IFRS financial measure. Please refer to page 2 of this presentation for a complete description of these measures.
Slide 30: Packaging outlook
Packaging outlook • Realize anticipated synergies related to acquisitions to gradually improve margins • Focus on manufacturing efficiency • Generate long-term organic sales growth • Continue to strengthen our packaging portfolio 30
Slide 31: TC Transcontinental Printing
TC Transcontinental Printing www.tc.tc 31
Slide 32: Printing Sector overview
Printing Sector overview • Maintain our position as Canada’s largest Vision printer • Develop our product and service offering Strategy and solidify our printing platform • 16 state-of-the-art printing plants, from Network coast to coast 32
Slide 33: Offering a state-of-the-art national printing network
Offering a state-of-the-art national printing network 16 PRINTING PLANTS 33
Slide 34: Generating more than 60% of printing revenues through retailer-related services
Generating more than 60% of our printing revenues through our retailer-related services 10% 2018 Adjusted Revenues1: $1,443M Retailer-related Services 13% Magazines and Books Newspapers Marketing Products 16% 61% 1 Non-IFRS financial measure. Revenues before the accelerated recognition of deferred r
Slide 35: Optimizing our operations
Optimizing our operations Printing Sector adjusted Revenues and EBITDA (in $M) $1,654 $550 $1,604 $1,565 60 $1,535 $1,501 $1,443 $450 50 $359 $363 $371 $346 $333 $37 $332 $350 $36 $34 40 $12 $26 $8 $323 $329 $334 $321 $320 $324 $250 30 27 plants 26 plants $150 23 plants 20 18 plants 18 plants 18 16
Slide 36: Providing a broad range of printing solutions for many industries
Providing a broad range of printing solutions for many industries Markets Marketing Products Publishing Retail In-Store Marketing 36
Slide 37: Our top printing customers
Our top printing customers 37
Slide 38: Printing outlook
Printing outlook • Monitor volume trends and proactively adjust cost structure to protect profitability • Tap into new growth opportunities in certain regions and verticals • Grow our market share in verticals with significant growth potential like in-store marketing product printing and premedia se
Slide 39: TC Media
>» TC Media tc @ MEDIA www.tc.tc 39
Slide 40: Providing a range of multiplatform specialty products & services
Providing a range of multiplatform specialty products & services Business Media Educational and Trade Book Publishing 40
Slide 41: Growing the Business and Education Group
Growing the Business and Education Group • Completed transformation in Media Sector by continuing to focus on our promising segments • Close to $700 million in revenues in 2010, the Media Sector now represents over $100 million or 5% of our consolidated revenues • Solid adjusted EBITDA margin1 of 18
Slide 42: Overview
Overview TC Transcontinental at a Glance Financial Performance Our Business Sectors Corporate Social Responsibility Appendix www.tc.tc 42
Slide 43: Building on our achievements as part of our 2016-2018 CSR Plan
Building on our achievements as part of our 2016- 2018 Corporate Social Responsibility Plan Our three-year plan, entitled Driving Sustainable Results, presented 13 objectives with respect to four key axes: Employees Prosperity Develop talent Grow the packaging division Retain talent Foster innovatio
Slide 44: 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) 44
Slide 45: 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 46: Packaging Sustainability
Packaging Sustainability www.tc.tc 46
Slide 47: Packaging serves a purpose
Packaging serves a purpose The key function of a package is to contain and protect the product, and to prevent it from becoming waste Source: Lars Erlov, Cathrine Lofgren, Anders Soras Report No. 194 ‘Packaging – a Tool for the Prevention of Environmental’ 47
Slide 48: The food waste problem: packaging extends shelf life
The food waste problem: packaging extends 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 Packaging is identified as one of the solutions to reduce food waste3 "Consumer perceptions of food wast
Slide 49: Flexible packaging is lightweight
Flexible packaging is lightweight Source: Dow Presentation; FPA Case Studies, 2009 49
Slide 50: Flexible packaging optimizes transportation
Flexible packaging optimizes transportation One truckload of Often equals between 15-25 flat pouches truckloads of empty rigid containers = 50 Source: AWT Labels and Packaging, 2016
Slide 51: The challenge of flexible packaging: end-of-life management
The challenge of flexible packaging: end-of-life management 51
Slide 52: 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. Uniting organizations worldwide, the Ellen MacArthur Foundation is a global thought leader establishing the circular ec
Slide 53: Committing to specific targets
Committing to specific targets TC Transcontinental is pledging, by 2025, for 100% of its plastic packaging to be reusable, recyclable or compostable and to achieve a 10% use of post-consumer recycled content on average by weight across all plastics in its product basket. The Corporation commits to c
Slide 54: Our circular approach to plastic
Our circular approach to plastic 54
Slide 55: 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 55 sustainable s
Slide 56: 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 57: Overview
Overview TC Transcontinental at a Glance Financial Performance Our Business Sectors Corporate Social Responsibility Appendix www.tc.tc 57
Slide 58: Leveraging our integrated packaging platform
Leveraging our integrated packaging platform with best-in-class capabilities Lamination Design Prepress Printing Converting Extrusion 58
Slide 59: Serving a variety of industries with packaging
Serving a variety of industries with packaging Markets Products Banana tree Agriculture bags & skirts Labels & twine Box liners Mulch films Greenhouse films Beverage Multipack shrink films IntegrititeTM shrink films Integritite SmartpackTM 59
Slide 60: Serving a variety of industries with packaging
Serving a variety of industries with packaging Markets Products Candy & Confectionery Twist wrap Twist close Flow wrap Aluminum foil wrap Stand up pouches HALO® for naturel sliced and ENVIO® Cheese & Dairy Shredded cheese films Peel reseal lidding chunk cheese Forming & non-forming films Dairy whey
Slide 61: Serving a variety of industries with packaging
Serving a variety of industries with packaging Markets Products Brick pack with Coffee & Tea Whole bean compostable options Fractional Single serve Consumer Personal care & Packaged Goods Paper products feminine care Household cleaning Multipacks 61
Slide 62: Serving a variety of industries with packaging
Serving a variety of industries with packaging Markets Products Industrial Paper pasted valve Poly sheeting Bottom seal open mouth (SOS) Poly tubing Nextrus® Boneless vacuum Tufftite® Poultry Clearshield® Envio® Forming Meat & Poultry shrink bags shrink bags & non-forming films Chub film for fresh m
Slide 63: Serving a variety of industries with packaging
Serving a variety of industries with packaging Markets Products WPP: Pet Food Stand up pouches PET laminated bags Flat bottom bags Woven Polypropylene bags Multiwall paper bags Hot N Handy® Oven N Done® Steam N Eat® fresh Fresh N Tasty® Fresh N Tasty® Supermarkets deli pouch vegetable cook-in-bag fr
Slide 64: Providing a broad range of printing solutions for many industries
Providing a broad range of printing solutions for many industries Markets Products Premedia Flyers Door-to-door distribution In-Store Marketing Retail Direct Mail In-store Marketing Marketing Products Catalogues Marketing Publishing Books Comic Books Magazines Newspapers 64
Slide 65: 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 yan.lapointe@tc.tc www.tc.tc
Slide 66: www.tc.tc
t @ TRANSCONTINENTAL www.tc.tc
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