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Transcontinental acquires U.S. flexible packaging firm, raises dividend

TC Transcontinental president and CEO Francois Olivier speaks to shareholders during the company’s annual general meeting in Montreal, March 11, 2014.

Graham Hughes/THE CANADIAN PRESS

Printing and media giant Transcontinental Inc. is diversifying its business with the acquisition of a U.S. printed flexible packaging manufacturer.

Montreal-based Transcontinental said on Tuesday it has struck a deal to acquire Clinton, Mo.-based Capri Packaging for $133-million (U.S.) from parent Schreiber Foods Inc.

The deal was announced as Transcontinental unveiled first-quarter results showing a 5-per-cent slide in revenue although net earnings were up and the dividend was increased.

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Net earnings in the first quarter rose 9.6 per cent to $17.2-million (Canadian) or 22 cents per share, from $15.7-million or 20 cents in the year-earlier period.

On an adjusted basis, earnings were flat at $26.4-million or 34 cents per share.

The quarterly dividend is to be increased 10 per cent to 16 cents per share; the annual dividend bumps up to 64 cents from 58 cents.

The company's entry into flexible packaging offers excellent growth opportunities, said Transcontinental president and chief executive officer François Olivier.

"This acquisition represents an important strategic move for the Corporation into a new promising growth area. It is part of our strategy to ensure our future growth path through diversification," he said.

Transcontinental said it assessed several different industries over the past year before settling on flexible packaging, a natural fit given how similar the production process is to its own printing operations.

As part of the transaction with Capri, Schreiber Foods has signed a 10-year agreement to buy printed flexible packaging from Transcontinental.

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The deal with Schreiber – a $5-billion (U.S.) employee-owned dairy company based in Green Bay, Wisc. – represents about 75 per cent of Capri's total revenues.

As for the first quarter, Transcontinental said revenue fell to $499.3-million (Canadian) from $525.6-million mostly because of a soft advertising market.

Adjusted operating earnings were flat at $43.5-million.

The volume in marketing products and magazine operations in the printing division decreased, the company said.

In the media unit, soft advertising also hurt local solutions, magazines and interactive marketing solutions, it said.

Still-difficult conditions in local and national advertising markets are likely to continue for an unspecified period, Transcontinental said in its outlook.

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"Despite the soft market conditions in which we operate, we were able to maintain our profitability due to the many cost saving initiatives company-wide," said Mr. Olivier.

The 9.6-per-cent increase in net earnings in the quarter was largely due to "significantly lower financial expenses, partially offset by higher income taxes compared to the first quarter of 2013," the company said.

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About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

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