Newspaper article The Canadian Press

Transcontinental Q3 Profit Plunges Due to Costs Tied to Acquisition, Divestitures

Newspaper article The Canadian Press

Transcontinental Q3 Profit Plunges Due to Costs Tied to Acquisition, Divestitures

Article excerpt

Transcontinental Q3 profit plunges on acquisition

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MONTREAL - Transcontinental Inc.'s stock price fell by five per cent Thursday after the printing, packaging and media company announced third-quarter earnings that were down from last year and well below analyst estimates.

Costs associated with the C$1.72-billion acquisition of the Coveris Americas packaging business in May and other transactions pushed down Transcontinental's net earnings to $19.3 million, down 60.6 per cent from $49.0 million in last year's third quarter.

Its adjusted net earnings fell to $52.1 million, down 1.5 per cent from $52.9 million last year, after excluding a number of items related to restructuring and a review of asset values.

The profit amounted to 22 cents per share of net income and 59 cents per share of adjusted earnings.

Analysts had estimated 62 cents of net income and 70 cents per share of adjusted earnings, according to Thomson Reuters Eikon.

Transcontinental stock closed at $29.71, down $1.64 from Wednesday and the lowest close in nearly three months.

Chief executive François Olivier told analysts in a conference call after markets closed that he was pleased that Coveris revenue during the quarter was in line with the company's expectations.

However, Olivier said there was room for improvement in terms of both cost-savings and revenue growth as Transcontinental progresses with its integration of Coveris.

"We'll be focusing -- among other things -- on strengthening the sales force in order to re-ignite sales growth. The process has started and will take several quarters to implement, and so we don't expect this to have any meaningful impact in fiscal 2019," Olivier said.

Additionally, the Coveris profit margin was below the target range outlined in the acquisition plan because of a delay in its ability to pass through higher materials costs to some customers because of the terms of their contracts, he said. …

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