Founded in 1976, Transcontinental is also Canada's largest printer and one of North America's leading suppliers of flexible packaging solutions. With some 7,600 employees, mainly in Canada, the United States and Latin America, Transcontinental has built a solid reputation in the graphics industry, with annual sales for fiscal 2023 of C$2.9 billion.
On September 11, 2024, Transcontinental published its financial results for the third quarter. It's worth looking at the strategy behind these figures. With contrasting but overall positive results, the company was able to capitalize on its strategic initiatives, particularly in the packaging and printing sectors.
Packaging sector: Solid growth despite sectoral challenges
In Packaging, Transcontinental recorded a 20.6% increase in adjusted operating income before amortization. This performance was largely due to the implementation of cost reduction initiatives and a slight increase in volumes. However, the medical packaging sector remains under pressure, which moderates the optimism of these results. Gains are mainly attributable to efforts to streamline operations and offer value-added solutions.
Transcontinental recorded a 12.4% increase in operating income in its Retail and Printing Services sector. A more favorable product mix helped improve margins. In addition, growth in point-of-sale marketing activities contributed to these results.
Cost-cutting initiatives and impact on profitability
Transcontinental continued to roll out its cost reduction program, which began in December 2023. The objective of this program is to generate annual recurring savings of approximately $30 million by the end of fiscal 2024. These measures include optimizing the manufacturing network and streamlining processes, which already appear to be bearing fruit.
This proactive cost management has enabled us to absorb volume declines in the printing sector, while maintaining a more agile cost structure. However, these results are partly based on one-off adjustments, and it will be crucial to observe whether these measures translate into a sustainable improvement in profitability.
Outlook: Sustainable packaging and new challenges in printing
For the remainder of fiscal 2024, Transcontinental expects operating income to stabilize in its two main sectors of activity. In particular, the company is counting on its investments in sustainable packaging solutions to drive future growth.
In the printing sector, the continuing decline in traditional volumes remains a major challenge. Nevertheless, Transcontinental sees opportunities for growth in point-of-sale marketing and in the exploitation of new technologies. Printers can expect constant change, especially with the rise of digital and print-on-demand.
