Q4 2019 Earnings Call

December 12, 2019

Operator 3: Mesdames et messieurs, merci d'avoir patienté et bienvenue à la conférence téléphonique concernant les résultats du quatrième trimestre et de l'année financière 2019 de TC Transcontinental. Pendant la conférence, tous les participants seront en mode d'écoute seulement. Une période de questions suivra la présentation et des directives vous seront données à ce moment. Nous désirons vous rappeler que cette conférence est enregistrée aujourd'hui, le 12 décembre 2019. Welcome to the TC Transcontinental fourth quarter and full fiscal year 2019 results conference call. During the presentation, all participants will be in the listen-only mode. Afterwards, we will conduct the question and answer session, and instructions will be provided at that time. As a reminder, this conference is being recorded today, 12 December 2019. I would like to turn the conference over to Yan Lapointe, Director, Investor Relations.

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[Translator]: Welcome to the TC Transcontinental fourth quarter and full fiscal year 2019 results conference call. During the presentation, all participants will be in the listen-only mode. Afterwards, we will conduct the question and answer session, and instructions will be provided at that time. As a reminder, this conference is being recorded today, 12 December 2019. I would like to turn the conference over to Yan Lapointe, Director, Investor Relations.

Welcome to the TC transcontinental fourth quarter and full fiscal year 2019 results conference call.

During the presentation, all participants will be in listen only mode. Afterwards, we will conduct a question and answer session and instructions will be provided to us.

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As a reminder, this conference is being recorded today December 12 2019.

I would like to turn the conference over to young the point director Investor Relations firm I might not cities I got enough point sector for electronic design sorry.

Operator 3: J'aimerais maintenant céder la parole à Yan Lapointe, Directeur, Relations avec les investisseurs. Monsieur Lapointe, please go ahead.

Operator: [Foreign language]

[Translator]: Monsieur Lapointe, please go ahead.

Please go ahead.

Yan Lapointe: Thank you, Gabriel, and good afternoon, everyone. Welcome to TC Transcontinental's 2019 Q4 Results Conference Call. The press release and the MD&A with complete financial statements and related notes were issued earlier today and are available on our website at tc.tc. With us today are TC Transcontinental's President and Chief Executive Officer, François Ollivier, and Chief Financial Officer, Donald Lecavalier. Before I turn the call over to management, I would like to specify that this conference call is intended for the financial community. Media are in listen-only mode and should contact Nathalie St-Jean, Senior Advisor, Corporate Communications, for more information or interview requests. I would also add that you have the financial statement on the website. Please be reminded that some of the financial measures discussed over the course of this conference call are non-IFRS.

I think Gabriel and good afternoon.

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Before I turn the call over to management I would like to find out. This conference call is intended for the financial community.

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That you have the potential statement on the website. Please be reminded that some of the financial measures discussed over the course of this conference call or not I have four please refer to the in Vietnam work completed finishing a reconciliation of such measures play a part of the financial measure. In addition, this conference call My campaign.

Yan Lapointe: Please refer to the MD&A for a complete definition and reconciliation of such measures to IFRS financial measures. In addition, this conference call might contain forward-looking statements. These statements are based on the current expectations of management and information available as of today, and they involve numerous risks and uncertainties, known and unknown. The risks and uncertainties and other factors that could influence actual results are described in the 2019 annual MD&A and latest annual information form that we filed today. I would now like to turn the call over to François Ollivier.

Forward looking statement.

These statements are based on the current expectation of management and information available today and the involved numerous risks and uncertainties known and unknown.

The risks and uncertainties and other factors that influence actually a result are described in the 2009.

Team.

Annual Mdna <unk> annual information form that we filed today I would now like to turn the call over a difficult.

Thank you yen and good afternoon, everyone.

François Ollivier: Thank you, Yan, and good afternoon, everyone. Looking at the results, we finished a year strong in packaging. 2019 was marked by the successful integration of Coveris, a turning point in our transformation. In only 2 years, we grew our revenues by 50% to reach more than CAD 3 billion in 2019, the first in our company's history. We also reported a record adjusted EBITDA of CAD 476 million this year. We executed on our growth strategy and carefully managed risk. I'm very pleased with our company's, its evolution, which position us to create long-term value. In addition to our financial performance, we have done significant progress this year, further aligning corporate social responsibility in our strategic planning. Sustainability is more important than ever before, and our investment in research and development will become a key competitive advantage for years to come.

François Olivier: Thank you, Yan, and good afternoon, everyone. Looking at the results, we finished a year strong in packaging. 2019 was marked by the successful integration of Coveris, a turning point in our transformation. In only 2 years, we grew our revenues by 50% to reach more than CAD 3 billion in 2019, the first in our company's history. We also reported a record adjusted EBITDA of CAD 476 million this year. We executed on our growth strategy and carefully managed risk. I'm very pleased with our company's, its evolution, which position us to create long-term value. In addition to our financial performance, we have done significant progress this year, further aligning corporate social responsibility in our strategic planning. Sustainability is more important than ever before, and our investment in research and development will become a key competitive advantage for years to come.

Looking at the results. We finished the year strong and packaging 2019 was marked by the successful integration of.

Over us turning point in our transformation.

And only two years, we grew our revenues by 50% could reach more than 3 billion in 2019 or first in our company's history.

We also reported a record adjusted EBITDA of 476 million this year.

Executed on our.

Our growth strategy and carefully manage risk.

Very pleased with our company is evolution, which position us to create long term value.

In addition to our financial performance, we haven't done significant progress this year further aligning corporate social responsibility in our strategic planning.

Sustainability is more important than ever before and our investment in research and development will become a key competitive advantage for years to count.

I strongly believe that sustainability required some balance integration of social environmental and economic factors.

François Ollivier: I strongly believe that sustainability requires a balanced integration of social, environmental, and economic factors. This is one of the reasons why we are very disappointed with the recent recommendations made by a commission of the city of Montreal regarding flyer distribution control in Montreal. The commission disregards social and economic factors in their recommendations and did not consider all the relevant facts from an environmental standpoint. We are recognized across our industry for our leadership and corporate social responsibility, and what we have done to improve the environmental footprint of the Publisac is a good example of that. As mentioned in the past, no trees are cut to produce flyers, and 86% of the paper used is recycled. In addition, we want to be a leader in the creation of a circular economy for plastic, and the Publisac is part of the solution.

François Olivier: I strongly believe that sustainability requires a balanced integration of social, environmental, and economic factors. This is one of the reasons why we are very disappointed with the recent recommendations made by a commission of the city of Montreal regarding flyer distribution control in Montreal. The commission disregards social and economic factors in their recommendations and did not consider all the relevant facts from an environmental standpoint. We are recognized across our industry for our leadership and corporate social responsibility, and what we have done to improve the environmental footprint of the Publisac is a good example of that. As mentioned in the past, no trees are cut to produce flyers, and 86% of the paper used is recycled. In addition, we want to be a leader in the creation of a circular economy for plastic, and the Publisac is part of the solution.

This is one of the reasons why we are.

I'm very disappointed with the recent recommendations made by a commission of the city of Montreal regarding Flyer distribution control and Montreal, The commission disregard social and economical factors and their recommendations and did not consider all the relevant facts from an environmental.

Standpoint.

We are recognized across our industry for our leadership and corporate social responsibility.

And what we have done to improve the environmental footprint of the publish Soc is a good example of that as mentioned in the past no trees or talk to produce Flyers and 86% of the pay per use is recycle.

In addition, we want to be a leader in the creation of a circular economy for plastic and the people recycled parts of the solution. Our new published checked bags are made a 100% from recycled plastic and we are decreasing the use of plastic by 30%, namely by reducing their sites for the second is a useful.

François Ollivier: Our new Publisac bags are made 100% from recycled plastic, and we are decreasing the use of plastic by 30%, namely by reducing their size. Publisac is a useful, responsible, and legitimate service that is very appreciated by our customers. The recommendation made by the commission are politically insensitive, illogical, and simply unworkable. We are convinced that the city could not put forward a valid opt-in regulation that would stand in a court of law. This is why no other city has implemented such a ban anywhere else. That being said, we could work with the city of Montreal to improve the current distribution system, and I believe we could find a solution together. Let's be clear, we will stand by our customers and protect our services.

François Olivier: Our new Publisac bags are made 100% from recycled plastic, and we are decreasing the use of plastic by 30%, namely by reducing their size. Publisac is a useful, responsible, and legitimate service that is very appreciated by our customers. The recommendation made by the commission are politically insensitive, illogical, and simply unworkable. We are convinced that the city could not put forward a valid opt-in regulation that would stand in a court of law. This is why no other city has implemented such a ban anywhere else. That being said, we could work with the city of Montreal to improve the current distribution system, and I believe we could find a solution together. Let's be clear, we will stand by our customers and protect our services.

Full responsible and legitimate service that is very appreciated by our customers. The recommendation Mike made by the commission, our politically sensitive illogical and simply on workable.

We are convinced that the city could not look forward to value adopted regulation that would stand in a court of law.

This is why no other city as implements such a bad anywhere else.

Being said, we can work with the city of Montreal to improve the current distribution system and I believe we could find a solution together, but let's be clear, we will stand by our customers and protect our services we are not the litigious.

François Ollivier: We are not a litigious company, but as we are doing with the city of Mirabel, we will defend our rights, and we are very confident about a positive outcome. As I mentioned earlier, our sustainability approach will give us a key competitive advantage. It is important to understand that flexible packaging plays an essential role in protecting products and extended shelf life, which is one of the best solution to reduce food waste globally and therefore improving carbon footprint. To effectively manage plastic packaging and its end of life, we continue to invest in R&D to differentiate our products through technology. An important part of our sustainability strategy is to work in partnership with others to create a circular economy for plastic, as we have done in the past for a circular economy for paper. We intend to be more actively involved in the coming year.

François Olivier: We are not a litigious company, but as we are doing with the city of Mirabel, we will defend our rights, and we are very confident about a positive outcome. As I mentioned earlier, our sustainability approach will give us a key competitive advantage. It is important to understand that flexible packaging plays an essential role in protecting products and extended shelf life, which is one of the best solution to reduce food waste globally and therefore improving carbon footprint. To effectively manage plastic packaging and its end of life, we continue to invest in R&D to differentiate our products through technology. An important part of our sustainability strategy is to work in partnership with others to create a circular economy for plastic, as we have done in the past for a circular economy for paper. We intend to be more actively involved in the coming year.

Anthony but we as we are doing with the city of Mirabel, we will defend our rights and we are very confident about a positive outcome.

As I mentioned earlier, our sustainability approach will give us a key competitive advantage. It is important I understand that flexible packaging plays an essential.

Sure role and protecting products and extended shelf life, which is one of the best solution to reduce food waste globally, and therefore, improving carbon footprint terrific.

Effectively manage plastic packaging and its end of life, we continued to invest in R&D to differentiate our products true.

Yeah.

Net porton part of our sustainability strategy is to work in partnership with others to create a circular economy for plastic as we have done in the past four circular economy for paper, we intend to be more actively involved in the coming year.

François Ollivier: To that effect, in March, we became the first Canadian-based manufacturer to sign the Ellen MacArthur Foundation New Plastics Economy Global Commitment. We have pledged that 100% of our plastic packaging will be reusable, recyclable, or compostable by 2025, and that we will achieve a 10% use of post-consumer recycled content. These targets are included in our new three-year corporate social responsibility plan titled Acting Together, released this summer. In line with these objectives, we launched vieVERTe, our sustainable product portfolio, which includes award-winning proprietary structures that are engineered to provide end-of-life solutions for flexible packaging. This is important as our customers need us to provide sustainable solutions, and we want to be the leader on that front. Let's now review the operations.

François Olivier: To that effect, in March, we became the first Canadian-based manufacturer to sign the Ellen MacArthur Foundation New Plastics Economy Global Commitment. We have pledged that 100% of our plastic packaging will be reusable, recyclable, or compostable by 2025, and that we will achieve a 10% use of post-consumer recycled content. These targets are included in our new three-year corporate social responsibility plan titled Acting Together, released this summer. In line with these objectives, we launched vieVERTe, our sustainable product portfolio, which includes award-winning proprietary structures that are engineered to provide end-of-life solutions for flexible packaging. This is important as our customers need us to provide sustainable solutions, and we want to be the leader on that front. Let's now review the operations.

That is back in March we became the first can.

Median based manufacturer the sign to Ellen Mccarter Foundation, new plastics economy global commitment.

We have pledged to the 100% of our plastic packaging will be re usable recyclable, we're compostable by 2025, and we will achieve at 10% user post consumer recycled content.

These targets are included in our new three year corporate social responsibility plant title acting together released this summer.

In line with these objective we launched the that are sustainable product portfolio, which includes our works winning proprietary structures that are engineer to provide.

End of life solution for flexible packaging. This is important as our customers need us to provide sustainable solutions and we want to be elite either on that front.

Let's now review the operations.

And the packaging sector fourth quarter revenues were higher than expected.

François Ollivier: In the packaging sector, Q4 revenues were higher than expected due to a strong performance from our meat and cheese, and coating segments. As expected, we witnessed a volume reduction in our consumer and pet food, and our Latin America segments, as we have mentioned on our last call. In both cases, these impacts are temporary, and we expect to see growth in 2020. By exceeding our synergies targets in fiscal 2019 and gaining efficiency, we delivered improved margins quarter after quarter from 11.7% in Q1 to 13.8% this quarter and finished the year with an adjusted EBITDA margin of 12.8%. We expect our profitability to continue improving over the next years. In fiscal 2019, the packaging sector accounted for 53% of our consolidated revenues and 42% of our adjusted EBITDA.

François Olivier: In the packaging sector, Q4 revenues were higher than expected due to a strong performance from our meat and cheese, and coating segments. As expected, we witnessed a volume reduction in our consumer and pet food, and our Latin America segments, as we have mentioned on our last call. In both cases, these impacts are temporary, and we expect to see growth in 2020. By exceeding our synergies targets in fiscal 2019 and gaining efficiency, we delivered improved margins quarter after quarter from 11.7% in Q1 to 13.8% this quarter and finished the year with an adjusted EBITDA margin of 12.8%. We expect our profitability to continue improving over the next years. In fiscal 2019, the packaging sector accounted for 53% of our consolidated revenues and 42% of our adjusted EBITDA.

Due to a strong performance from our meat and cheese and coating segments.

As expected, we witness a volume reduction in our consumer and pet food and our Latin America segments. As we mentioned on our last call in both cases, these Bihar temporary and we expect to see growth in 22.

Yeah.

By exceeding or synergies target than fiscal 2019, and gaining efficiency with delivered improved margins quarter after quarter from 11.7% in Q1 to 13.8% this quarter and finished the year with an adjusted EBITDA margin of 12 point.

8%.

We expect our profitability to continue improving or the next years.

In fiscal 2019 to packaging sector accounted for 53% of our consolidated revenues and 42% of our adjusted EBITDA.

François Ollivier: More than five years after our first acquisition in flexible packaging and the beginning of our transformation journey, I am proud of the packaging business we have built. This is only the beginning. Our portfolio will continue to evolve as we continue to grow in markets where we have a strong competitive advantage. Regarding the sales of our paper operations to Hood Packaging, which is expected to close in January, after operating the paper business for a year and a half, we conclude that paper was less core to our packaging sector's growth strategy, and we made the decision to sell the assets. This decision is aligned with our plan to continue building our flexible packaging platform where we see good growth potential. It will give us the flexibility to continue acquiring businesses that are more complementary to our existing flexible packaging portfolio.

François Olivier: More than five years after our first acquisition in flexible packaging and the beginning of our transformation journey, I am proud of the packaging business we have built. This is only the beginning. Our portfolio will continue to evolve as we continue to grow in markets where we have a strong competitive advantage. Regarding the sales of our paper operations to Hood Packaging, which is expected to close in January, after operating the paper business for a year and a half, we conclude that paper was less core to our packaging sector's growth strategy, and we made the decision to sell the assets. This decision is aligned with our plan to continue building our flexible packaging platform where we see good growth potential. It will give us the flexibility to continue acquiring businesses that are more complementary to our existing flexible packaging portfolio.

More than five years after our first acquisition.

Flexible packaging and the beginning of our transformation journey I am proud of the packaging business we have built.

But this is only the beginning our portfolio will continue to evolve as we continue to grow in markets, where we have a strong competitive advantage.

Regarding the sales of our paper or preparations to foot packaging.

Which is expected to close in January .

After operating the paper business for a year and a half we conclude that paper was less quart or packaging sectors growth strategy and we made the decision to sell the assets. This decision is aligned with our plan to continue building our flexible packaging.

For where we see good growth potential.

It will give us the flexibility to continue or acquiring businesses that are more complimentary to our existing flexible packaging portfolio.

François Ollivier: I want to sincerely thank all the talented employees who will transfer to Hood Packaging for their contribution. While acquisition should be an important growth driver in the coming years, we also expect to see organic growth from our existing portfolio of products. We have built a very solid R&D focus team focused on identifying and meeting customer needs. With our talented R&D engineers, our state-of-the-art labs and our extrusion equipment, we have best-in-class innovation processes and capabilities. We will continue to innovate to ensure we remain ahead of the industry. I am very confident about the outlook of our packaging business as a significant engine for future growth. In the printing sector in Q4, we started to see some positive impact of the measures we took to partially offset the effect of lower revenues observed this year.

François Olivier: I want to sincerely thank all the talented employees who will transfer to Hood Packaging for their contribution. While acquisition should be an important growth driver in the coming years, we also expect to see organic growth from our existing portfolio of products. We have built a very solid R&D focus team focused on identifying and meeting customer needs. With our talented R&D engineers, our state-of-the-art labs and our extrusion equipment, we have best-in-class innovation processes and capabilities. We will continue to innovate to ensure we remain ahead of the industry. I am very confident about the outlook of our packaging business as a significant engine for future growth. In the printing sector in Q4, we started to see some positive impact of the measures we took to partially offset the effect of lower revenues observed this year.

On to sincerely. Thank all that data into the employees, who will transferred to put packaging for their contribution and commitment.

While acquisition should be an important growth driver in the coming years. We also expect to see organic growth from our existing portfolio of products. We have built a very solid R&D focus the team focused on identifying and meeting customer needs.

What our talented R&D engineers, our state of the art.

And our extrusion equipment, we are best in class innovation process isn't capabilities.

We will continue to innovate to ensure we remain ahead of the industry I'm very confident about the outlook of our packaging business as we as a significant engine for future growth.

And the printing sector and Q4, we started to see some positive impact of the measures. We took the partially offset the effect of lower revenues observed this year.

François Ollivier: We completed the transfer of two state-of-the-art presses from our former plant in California to Montreal and Toronto. Both presses will be running at full capacity in early 2020. In addition, we will complete the closure of our Brampton facility later this month, and that of our PEI facility by the end of January 2020. We will also implement new measures to streamline our indirect costs as we optimize our footprint. We are committed to remain proactive in managing our cost structure in order to protect our profitability. In our retailer-related services, as we mentioned on our last call, we saw a lower decline in the number of pages printed in Q4 compared with previous quarters. Based on the feedback from retailers and end consumers, I am convinced that flyer remain a relevant and effective marketing tool to bring people to stores and help Canadians save money.

François Olivier: We completed the transfer of two state-of-the-art presses from our former plant in California to Montreal and Toronto. Both presses will be running at full capacity in early 2020. In addition, we will complete the closure of our Brampton facility later this month, and that of our PEI facility by the end of January 2020. We will also implement new measures to streamline our indirect costs as we optimize our footprint. We are committed to remain proactive in managing our cost structure in order to protect our profitability. In our retailer-related services, as we mentioned on our last call, we saw a lower decline in the number of pages printed in Q4 compared with previous quarters. Based on the feedback from retailers and end consumers, I am convinced that flyer remain a relevant and effective marketing tool to bring people to stores and help Canadians save money.

We completed the transfer of two state of the hard presses from our former plant in California to Montreal in Toronto, both presses, we'll be running.

At full capacity in early 2020.

In addition, we will complete the closure of our rental facility later this month and out of our PPI facility by the end of January 2020.

We will also implement new measures to streamline our indirect costs as we optimize our footprint.

We are committed to remain proactive and managing our cost structure in order to protect our profitability.

And our retailer related services as we mentioned on our Lascaux, we saw a lower decline and the number of pages printed in the fourth quarter compared with previous quarters.

Based on the.

Back from retailers and consumers am convinced that flyer remain a relevant and effective marketing to to bring people to stores and help Canadian save money.

François Ollivier: While we expect the market to continue to be affected by the same trends we witnessed in the last quarters, we have seen strong growth in books and in-store marketing in the pre-media vertical in 2019. We expect to capitalize on this growth by investing both organically, and through acquisitions in these markets. The recent acquisition of Holland & Crosby fits perfectly with our strategy, and I'm excited about the combination of our businesses and our long-term outlook for in-store marketing. Now, for our media activities, once again, we are pleased with our results for the quarter. While the Q4 numbers were impacted by the sales of our specialty media assets, our education group drove high revenue growth and delivered strong EBITDA performance in 2019.

François Olivier: While we expect the market to continue to be affected by the same trends we witnessed in the last quarters, we have seen strong growth in books and in-store marketing in the pre-media vertical in 2019. We expect to capitalize on this growth by investing both organically, and through acquisitions in these markets. The recent acquisition of Holland & Crosby fits perfectly with our strategy, and I'm excited about the combination of our businesses and our long-term outlook for in-store marketing. Now, for our media activities, once again, we are pleased with our results for the quarter. While the Q4 numbers were impacted by the sales of our specialty media assets, our education group drove high revenue growth and delivered strong EBITDA performance in 2019.

While we expect the market to continue to be affected by the same trends we witness in the last quarters, we've seen strong growth.

Book and store marketing and the pre media vertical in 2019.

We expect to capitalize on this growth by investing both organically and through acquisitions and these markets. The recent acquisition of all in and Crosby fits perfectly perfectly with our strategy and.

Cited about the combination of our businesses and our long term outlook for in store marketing.

Now for our media activities. Once again, we are pleased with our results for the quarter, while the fourth quarter numbers were impacted by the sales of our spirit specialty media assets, Our education group drove high.

Revenue growth and delivered strong EBITDA performance at 2019.

In conclusion, I'm very pleased with what we have accomplished in 2019, especially as it does relate to our overall portfolio of activities. We have acquired trial exit packaging and all in Crosby and printing.

François Ollivier: In conclusion, I'm very pleased with what we have accomplished in 2019, especially as it relates to our overall portfolio of activities. We have acquired Trilex in packaging and Holland & Crosby in printing. While small, these two businesses are aligned with our strategy of developing our growth markets. We also announced the sale of our specialty assets in media, our paper operations in packaging, and the Fremont building in printing. These portfolio-shaping transactions are aligned with our transformation, and I am confident that they will create significant value for the company as they are allowing us to accelerate the deleveraging of our balance sheet and to focus on our growth markets. Despite lower volume in printing, we generated strong cash flows that we used to strengthen our balance sheets.

François Olivier: In conclusion, I'm very pleased with what we have accomplished in 2019, especially as it relates to our overall portfolio of activities. We have acquired Trilex in packaging and Holland & Crosby in printing. While small, these two businesses are aligned with our strategy of developing our growth markets. We also announced the sale of our specialty assets in media, our paper operations in packaging, and the Fremont building in printing. These portfolio-shaping transactions are aligned with our transformation, and I am confident that they will create significant value for the company as they are allowing us to accelerate the deleveraging of our balance sheet and to focus on our growth markets. Despite lower volume in printing, we generated strong cash flows that we used to strengthen our balance sheets.

So small these two businesses are aligned with our strategy of developing our growth markets.

We also announced the sale of our specialty assets and media, our paper operations and packaging and the Fremont building and printing.

These portfolio shaping transactions are aligned with our transformation and.

I am confident that the will create significant value for their companies as they are allowing us to accelerate the deleveraging of our balance sheet and to focus on our growth markets.

Despite lower volume at printing, we generated strong cash flows that we used to strength our balance sheets going forward we expect.

François Ollivier: Going forward, we expect to continue to generate significant cash flow from our operating activity, which will be used to reduce our debt and continue our transformation with targeted acquisitions. In our packaging sector going forward, we expect to see good organic growth next year, and we remain committed to continue improving our adjusted EBITDA margin. On the print side, we will continue to proactively adjust our cost structure to volumes and trends, and we will remain confident that our print sector will remain a strong cash flow-generating business for years to come. With that, I'll turn it over to Donald.

François Olivier: Going forward, we expect to continue to generate significant cash flow from our operating activity, which will be used to reduce our debt and continue our transformation with targeted acquisitions. In our packaging sector going forward, we expect to see good organic growth next year, and we remain committed to continue improving our adjusted EBITDA margin. On the print side, we will continue to proactively adjust our cost structure to volumes and trends, and we will remain confident that our print sector will remain a strong cash flow-generating business for years to come. With that, I'll turn it over to Donald.

Continue generates significant cash flow from operating activities, which will be used to reduce our debt and continue our transformation with targeted acquisitions.

And our packaging sector going forward, we expect to see good organic growth next year and we remain committed to continue improving our adjusted EBITDA.

Yes.

On the print side, we will continue to proactively adjust our cost structure to volumes and trends and we will remain confident that our front sector will remain a strong cash flow generating business for years to come.

With that I'll turn it over to done.

Donald Lecavalier: Thank you, François, and good afternoon. As François mentioned, we generated record revenues and adjusted EBITDA in fiscal 2019. Excluding the CAD 44 million gain made on the sale of our Fremont building and other items, our adjusted EBITDA increased by 3.6% to reach CAD 476 million this year. Looking at our segmented results, revenues for the packaging sector grew by CAD 642 million in 2019, thanks to the acquisition of Coveris. We also benefited from a CAD +22 million impact from exchange rates, offset by 2.4% decline in organic growth, mainly due to our consumer and pet food segment and a legislative change having a temporary impact on our Latin America business.

Donald LeCavalier: Thank you, François, and good afternoon. As François mentioned, we generated record revenues and adjusted EBITDA in fiscal 2019. Excluding the CAD 44 million gain made on the sale of our Fremont building and other items, our adjusted EBITDA increased by 3.6% to reach CAD 476 million this year. Looking at our segmented results, revenues for the packaging sector grew by CAD 642 million in 2019, thanks to the acquisition of Coveris. We also benefited from a CAD +22 million impact from exchange rates, offset by 2.4% decline in organic growth, mainly due to our consumer and pet food segment and a legislative change having a temporary impact on our Latin America business.

Thank you follow Swat and good afternoon.

As far as I mentioned, we generated record revenues and adjusted EBITDA in fiscal 2019.

Excluding the 44 million gain on the sale of our remote building and other items, our adjusted EBITDA increased by 3.6% to reach 476 million this year.

Looking at our segmented results revenue for revenues for the packaging sector grew by 642 million in 2019, thanks to the acquisition of coal reserves.

We also benefited from a 22 million positive impact from exchange rate upset by 2.4% decline in organic growth.

Mainly due to our consumer and pet food segment analysts legislative change, having a temporary impact on our Latin America business.

The adjusted EBITDA margin group every quarter for full year margin of 12.8%.

Donald Lecavalier: The adjusted EBITDA margin grew every quarter for a full year margin of 12.8%, 90 basis point improvement versus last year. As we continue to benefit from efficiency gains and acquisition synergies, profitability was also positively impacted by lower resin prices. 18 months after the acquisition of Coveris, we are ahead of our targets synergies. We are now starting to see early savings from film and plate insourcing, and we are very confident to exceed our total original targets of $20 million of cost savings. Now, for the printing sector, if we exclude CAD 13 million from the transitional service and rent to Urs that positively impact 2018 organic revenues declined by around 5.5% of revenues. This decline is mainly due to the lower revenues from our retail-related service, as we discussed in previous quarters.

Donald LeCavalier: The adjusted EBITDA margin grew every quarter for a full year margin of 12.8%, 90 basis point improvement versus last year. As we continue to benefit from efficiency gains and acquisition synergies, profitability was also positively impacted by lower resin prices. 18 months after the acquisition of Coveris, we are ahead of our targets synergies. We are now starting to see early savings from film and plate insourcing, and we are very confident to exceed our total original targets of $20 million of cost savings. Now, for the printing sector, if we exclude CAD 13 million from the transitional service and rent to Urs that positively impact 2018 organic revenues declined by around 5.5% of revenues. This decline is mainly due to the lower revenues from our retail-related service, as we discussed in previous quarters.

<unk> basis points improvement versus.

Last year as we continue to benefit from efficiency gains in acquisition synergies profitability was also positively impacted by lower resin prices.

18 months of 30 acquisition of co risk. We are ahead of our targets synergies, we're now starting to see.

Early savings from Fib and plate in sourcing and we are very confident to exceed our total original targets of 20 million in us dollars of cost savings.

No for the printing sector, if we exclude $13 million from the transitional service and rent.

Herbs that positively impact 2018 organic revenues declined by Rob 5.5% of revenues.

This decline is mainly due to the lower revenues from our retail related service as we discussed in previous quarters.

Despite the lower volume we.

Donald Lecavalier: Despite the lower volume, we generated an adjusted EBITDA margin of 20.2%. Revenues in media were lower than last year following the sale of assets in line with our strategy, but profitability remains solid. Corporate expense for the full year were higher, mainly due to an increase in costs related to our growth, in addition to some non-recurring positive impacts in 2018. Looking specifically at the corporate expense for Q4, we have a negative variance caused mainly by the impact of the stock-based compensation expense of CAD -13 million due to the share price movements. Now looking at the full year cash flow, despite the challenge in print, we generated CAD 432 million of cash flows from operating activities in fiscal 2019, up 38% from last year. That excluded the CAD 100 million proceeds from the sale of Fremont.

Donald LeCavalier: Despite the lower volume, we generated an adjusted EBITDA margin of 20.2%. Revenues in media were lower than last year following the sale of assets in line with our strategy, but profitability remains solid. Corporate expense for the full year were higher, mainly due to an increase in costs related to our growth, in addition to some non-recurring positive impacts in 2018. Looking specifically at the corporate expense for Q4, we have a negative variance caused mainly by the impact of the stock-based compensation expense of CAD -13 million due to the share price movements. Now looking at the full year cash flow, despite the challenge in print, we generated CAD 432 million of cash flows from operating activities in fiscal 2019, up 38% from last year. That excluded the CAD 100 million proceeds from the sale of Fremont.

It's an adjusted EBITDA margin of 20.2%.

Revenues in media were lower than last year. Following the sale of asset in line with our strategy, but profitability remains solid.

Operating expense for the full year, where are your maybe two to an increasing.

Cost related to our growth in addition to some nonrecurring positive impacts in 2018.

Looking specifically at the corporate expense for the fourth quarter, we have a negative guardians caused mainly by the impact of the stock based compensation expense of.

Minus 13 million due to the share price movements.

Now looking at the full year cash flow. Despite the challenge and print we generated 432 million of cash flows from operating activities in fiscal 2019 up 38%.

From last year.

And that excluded the 100 million proceeds from the sale of freemont.

Donald Lecavalier: Even after investing a higher than normal level of CapEx in 2019, we reduced our net debt by CAD 250 million. In addition, we distributed CAD 76 million in dividends to shareholders, which gave a dividend yield of almost 7% at yesterday's share price. As of 27 October 2019, our net debt ratio stood at 2.5 times. If we factor the proceeds of the sale of our paper operation, this ratio will be around 2 times. This will provide us with flexibility in terms of capital allocation. Before going into our outlook for 2020, let me say a few words about the application of IFRS 16. This change in accounting standard will bring most leases on the balance sheet, therefore increasing assets and liabilities.

Donald LeCavalier: Even after investing a higher than normal level of CapEx in 2019, we reduced our net debt by CAD 250 million. In addition, we distributed CAD 76 million in dividends to shareholders, which gave a dividend yield of almost 7% at yesterday's share price. As of 27 October 2019, our net debt ratio stood at 2.5 times. If we factor the proceeds of the sale of our paper operation, this ratio will be around 2 times. This will provide us with flexibility in terms of capital allocation. Before going into our outlook for 2020, let me say a few words about the application of IFRS 16. This change in accounting standard will bring most leases on the balance sheet, therefore increasing assets and liabilities.

EBITDA for investing here I heard a normal level of Capex in 2019, we reduce our net debt by 250 million.

In addition, we distributed 70.

6 million and dividends to shareholders.

Which gave at Dominion dividend yield of almost 7% yesterday share price.

As of October 27, 2019, our net debt ratio stood at 2.5 times.

We factor the proceeds the sale of our paper operation.

This ratio will be around two times.

This will provide us with flexibility in terms of capital allocation.

Before going into our outlook for 2020, let me see a few words above the application.

As 16.

This change in the context.

Standard.

We'll bring mostly on the balance sheet, therefore, increasing assets and liabilities.

Donald Lecavalier: In our Q1 2020, we expect increase in liabilities of about CAD 130 million and in assets of around CAD 110 million, with the net impact recorded in opening retained earnings. In addition, we also expect a positive impact in EBITDA of about +CAD 20 million in 2020. That should be mostly offset by higher amortization of about CAD 15 million and higher interest of about CAD 4 million. Please note that actual results from the initial application of IFRS 16 may differ as we continue to finalize the calculation. Now, looking at 2020, excluding the impact of the sale of our paper operation, we expect revenues in the packaging sector to grow modestly in 2020.

Donald LeCavalier: In our Q1 2020, we expect increase in liabilities of about CAD 130 million and in assets of around CAD 110 million, with the net impact recorded in opening retained earnings. In addition, we also expect a positive impact in EBITDA of about +CAD 20 million in 2020. That should be mostly offset by higher amortization of about CAD 15 million and higher interest of about CAD 4 million. Please note that actual results from the initial application of IFRS 16 may differ as we continue to finalize the calculation. Now, looking at 2020, excluding the impact of the sale of our paper operation, we expect revenues in the packaging sector to grow modestly in 2020.

And our first quarter of 2020, we expect increase in liabilities of about 130 millions and an asset for around 110 million with the net impact.

Recorded in opening retained earnings.

In addition, we also expect positive impact in EBITDA of about $20 million in 2020 that should be mostly offset by higher amortization of about 15 million and higher interest of about 4 million.

Please note that actual results from the initial application of IRS 16 may differ as we continue to finalize the calculation.

Now looking at 2020, excluding the impact of the sale of our paper operation, We expect revenues in the packaging sector to grow.

Lastly in 2020.

Donald Lecavalier: We also expect to see this organic growth more in the H2 as we are still impacted by a legislative change in our Latin America business. We expect our EBITDA margin to continue to improve as we remain focused on synergies and manufacturing efficiency. Since margin in the Q1 could be impacted by higher resin price, we expect the margin improvement to accelerate in the H2 with the recovery of our Latin America business. I'd like to also highlight that the increase in profitability will be on top of the accretion of margins following the sale of our paper operations. In our printing sector, we should see a continuation of current trends in most of our verticals, but to a lesser extent for our re-retailer-related services.

Donald LeCavalier: We also expect to see this organic growth more in the H2 as we are still impacted by a legislative change in our Latin America business. We expect our EBITDA margin to continue to improve as we remain focused on synergies and manufacturing efficiency. Since margin in the Q1 could be impacted by higher resin price, we expect the margin improvement to accelerate in the H2 with the recovery of our Latin America business. I'd like to also highlight that the increase in profitability will be on top of the accretion of margins following the sale of our paper operations. In our printing sector, we should see a continuation of current trends in most of our verticals, but to a lesser extent for our re-retailer-related services.

We also expect to see this organic growth more in the second half of the year as we still as were still impact by a legislative change in our Latin America business.

We expect our EBITDA margin to continue to improve as we remained focus on synergies and.

Manufacturing efficiency.

Since margin in the first quarter could be impact by higher resin price, we expect the margin improvements to accelerate in the second half of the year with the recovery of our Latin America business.

I'd like to also I like that the increase in profitability will be on top of the accretion of.

Margins following the sale of our paper operations.

In our printing sector, we should see a continuation of current trends and most of our verticals, but to a lesser extent for a retailer related services.

Donald Lecavalier: We also continue to anticipate growth in our in-store marketing products and book printing verticals. The sale of the Fremont building also means that we will no longer receive revenues and EBITDA of about CAD 1 million per quarter. Many of the measures we announced in 2019 will help profitability in 2020 in addition to new ones that we will put in place to reduce our costs. For the other segments, we expect corporate costs at the EBITDA level and excluding stock price movement to be around CAD 30 million. For media, excluding the impact of the sale of the specialty assets, we expect continued good performance in terms of revenues and profitability in 2020, but it will not be sufficient to offset corporate costs.

Donald LeCavalier: We also continue to anticipate growth in our in-store marketing products and book printing verticals. The sale of the Fremont building also means that we will no longer receive revenues and EBITDA of about CAD 1 million per quarter. Many of the measures we announced in 2019 will help profitability in 2020 in addition to new ones that we will put in place to reduce our costs. For the other segments, we expect corporate costs at the EBITDA level and excluding stock price movement to be around CAD 30 million. For media, excluding the impact of the sale of the specialty assets, we expect continued good performance in terms of revenues and profitability in 2020, but it will not be sufficient to offset corporate costs.

We also continue to anticipate growth in our in store marketing products.

And book printing verticals.

The sale of the Freeman building also means that we will no longer receive revenues and EBITDA of about 1 million per quarter.

Many of the measures we announced in 2019 will help profitability in 2020 and in addition to a new ones that we will put in place.

To reduce our costs.

40 other segment, we expect corporate costs at the EBITDA level, and excluding stock price movement to be around $30 million.

Or media.

Excluding the back of the sale of the specialty assets, we expect content.

Good good performance in terms of revenues and profitability in 2020, but it will not be sufficient to offset corporate costs.

Donald Lecavalier: Following reduction in our debt, we expect our financial expense to decrease even after including the impact of IFRS 16 to around CAD 55 million in 2020. Our effective tax rate should be in the mid-20s range. In terms of use of cash for the year, you can assume CapEx coming down to a more normal level, slightly below CAD 100 million. As for cash tax, for the year you can assume around CAD 60 million. In terms of capital allocation, we expect to use the significant cash flows from our operating activities to reduce our net debt, distribute a strong dividend, and continue our transformation with targeted acquisitions. To conclude, our financial position is solid and our priority is clear, to continue generating significant cash flows and to deliver profitable long-term growth.

Donald LeCavalier: Following reduction in our debt, we expect our financial expense to decrease even after including the impact of IFRS 16 to around CAD 55 million in 2020. Our effective tax rate should be in the mid-20s range. In terms of use of cash for the year, you can assume CapEx coming down to a more normal level, slightly below CAD 100 million. As for cash tax, for the year you can assume around CAD 60 million. In terms of capital allocation, we expect to use the significant cash flows from our operating activities to reduce our net debt, distribute a strong dividend, and continue our transformation with targeted acquisitions. To conclude, our financial position is solid and our priority is clear, to continue generating significant cash flows and to deliver profitable long-term growth.

Following reduction in our debt, we expect our financial expense decreased given us for including the impact of high FRS 16 to around 55 million.

In 2020.

Our effective tax rate should be in the mid 20 range.

In terms of use of cash for the year, you can assume capex coming down to a more no normal levels slightly below $100 million.

As for cash tax for the year, you can assume around $60 million.

Dollars.

In terms of capital allocation, we expect to use a significant cash flows from our reported operating activities to reduce our net debt distribute at strong dividend and continue our transformation with targeted acquisitions.

To conclude our financial position.

One is solid and our priorities clear to continue generating significant cash flows and to deliver profitable long term growth.

On that note we will not proceed with the question version.

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Operator 3: Thank you. One moment, please. Ladies and gentlemen, we will now conduct a question and answer session. If you have a question, please press star followed by one on your touch-tone phone. You will hear a tone acknowledging your request. Your questions will be polled in the order they are received. Please ensure you lift the handset if you are using a speakerphone before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Adam Shine of National Bank Financial. Please go ahead. Your line's open.

Operator: [Foreign language]

[Translator]: Thank you. One moment, please. Ladies and gentlemen, we will now conduct a question and answer session. If you have a question, please press star followed by one on your touch-tone phone. You will hear a tone acknowledging your request. Your questions will be polled in the order they are received. Please ensure you lift the handset if you are using a speakerphone before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Adam Shine of National Bank Financial. Please go ahead. Your line's open.

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Thank you maam, please ladies and gentlemen, we will now conduct a question answer session few have a question. Please press star followed by one on your Touchtone phone you will hear tone acknowledging your request your questions will be pulled in the orders received.

Please ensure you list the handset if you're using a.

Before pressing any keys one moment. Please for your first question.

Gentlemen, non casino.

Mr., Adam shines National Bank financial.

Yes.

Your first question comes from the line of Adam Shine of National Bank. Please go ahead. Your line is open.

Adam Shine: Okay, thank you. We'll start with packaging and then maybe one or two after on printing. Just starting with packaging, you know, you've been pretty clear that there might be a bit more of a recovery in H2, and that's where maybe more of a margin lift occurs as well. Most of that seems to be focused around agriculture and that whole European regulation dynamic. Maybe first of all, you can speak a bit more specifically to the fact that consumer and pet seems to be seeing a bit of an easing of pressure and some maybe resuscitation in other verticals that perhaps, you know, allows some degree of traction, and how exactly pacing might occur as we get through fiscal 2020.

Okay. Thank you, we'll start with packaging and then maybe one or two after on.

On printing just sorry with packaging.

You've been pretty clear that might be bit more of a recovery in the second half and thats, where maybe more of a margin lift occurs as well, but most of that seems to be focused around.

Culture and that whole European regulation dynamically before so you can speak a bit more specifically to.

The fact, the consumer impact seems to be seeing a bit of an easing of pressure in some.

Maybe resuscitation and other verticals that perhaps allows some degree of traction and how exactly pacing might might occur as we as we get through fiscal 2020.

Yes, I think.

François Ollivier: Yeah. I think the margin improvement in packaging in Q4 is driven by a few factors. First of all, our synergies are gonna be bigger than what we had planned for both this year and next year, so that does help margins. Also, early in the quarter, resin price was down, so we benefited from that for about half or two thirds of the quarter. So resin price decrease did help the margin. We had some verticals that were pretty strong in terms of their performance in Q4. These verticals tend to be the ones that are above average.

François Olivier: Yeah. I think the margin improvement in packaging in Q4 is driven by a few factors. First of all, our synergies are gonna be bigger than what we had planned for both this year and next year, so that does help margins. Also, early in the quarter, resin price was down, so we benefited from that for about half or two thirds of the quarter. So resin price decrease did help the margin. We had some verticals that were pretty strong in terms of their performance in Q4. These verticals tend to be the ones that are above average. For next year, obviously we cannot predict the resin price, so that is a wild card that does tend to have an impact both on organic growth, and in profitability.

The margin improvement in packaging in in Q4 is driven by a few factor.

First of all our synergies.

We're going to be bigger than than what we have planned for both this year in next year's with those.

Margins.

Also early in the quarter resin price was down.

So we benefited from that.

Sure.

I'll have or to sort of the quarters. So resin price decrease did help the margin and we got some verticals were pretty strong.

Most of their performance and.

And in Q4, and these vertical our tend to be done.

That are above average for next year.

François Ollivier: For next year, obviously we cannot predict the resin price, so that is a wild card that does tend to have an impact both on organic growth, and in profitability. I already mentioned in terms of synergy, we think we're gonna have a similar amount of synergies in terms of dollar, and it's gonna be a similar beat, we think last year to our plan. As far as organic growth that we see in the various vertical, you mentioned LatAm. Yes, we feel that we're gonna probably pick up in Q2 a very strong organic growth there as some countries have already started to approve our new product that would fit with the new European legislation.

Obviously, we cannot predict the resin price. So that is a wildcard that does have an impact bolt on organic growth.

And in profitability I already mentioned in terms of synergy we think we going to have.

François Olivier: I already mentioned in terms of synergy, we think we're gonna have a similar amount of synergies in terms of dollar, and it's gonna be a similar beat, we think last year to our plan. As far as organic growth that we see in the various vertical, you mentioned LatAm. Yes, we feel that we're gonna probably pick up in Q2 a very strong organic growth there as some countries have already started to approve our new product that would fit with the new European legislation. At the end of Q1 and starting in Q2, we should start to ramp up country by country. That should help. We're looking for organic growth, you know, between 1% and 1.5% next year, globally on the portfolio.

Similar amount as.

Orders in.

In terms of dollar and it's going to be a similar beat we think class here to our plan and as far as organic growth that we've seen the various vertical you mentioned Latam, yes, we feel that we go to probably picked up in Q2.

Very strong organic growth there.

Some countries.

These have already started.

Approve our new product.

At.

The new European legislation so.

François Ollivier: At the end of Q1 and starting in Q2, we should start to ramp up country by country. That should help. We're looking for organic growth, you know, between 1% and 1.5% next year, globally on the portfolio.

The end of Q1 and starting in Q2, we should start to ramp up country by country.

So that should help.

But we're looking for a for organic.

Growth between one one and half percent next year.

Well the on on the portfolio.

Adam Shine: I'm sorry, say that again. 1% to 1.5%?

Sorry, I got 1% to 1.5%.

François Ollivier: Yeah.

François Olivier: Yeah.

Yep.

Adam Shine: Okay. Then just turning to printing, you know, obviously, you know, the flyer dynamic was something that was a focal point in fiscal 2019. You know, I just wanna build a little bit on what transpired in the Q4, because in as much as there was a lesser decline in volume versus the Q2, Q3, I thought there was an anticipation that perhaps other customers, albeit smaller, might have explored other measures to reduce some of the revenues. I wanna, you know, extrapolate that into the commentary going into fiscal 2020, where the impression is that it's not as though things necessarily get worse from your perspective. In fact, maybe there's some relative improvement in trend year over year.

Okay.

Just turning to printing.

Obviously.

The Flyer dynamic was was something that was a focal point.

In fiscal 2019 and.

I just wanted to build a little bit on what transpired in the Q4 because in as much as there was a.

Let's call it less or.

Deploying in volume versus the Q2 Q3, I thought there was an anticipation that perhaps other.

Customers, albeit smaller might have explored other measures to to reduce.

Some of the revenues and so I want to extrapolate that into the commentary going into fiscal 2020, where the impression is that.

It's not as though things necessarily get worse from your perspective.

Is in fact, maybe there's some relative to improvement in trend year over year.

Yes.

François Ollivier: Yeah. What I can say about this is this year we were impacted by three, you know, large customer that cut mainly on their page count, and one of them on their circulation. What I can say is the three of them felt that in their business and their sales and their same store sales. I believe I don't believe that any of those guys are gonna go lower than they went this year. I think actually one of them reinstituted flyer every week, so it's actually gonna go up. I believe that they are in a zone that they wanna be, and we don't expect further decrease from these three customers that created the issue this year.

François Olivier: Yeah. What I can say about this is this year we were impacted by three, you know, large customer that cut mainly on their page count, and one of them on their circulation. What I can say is the three of them felt that in their business and their sales and their same store sales. I believe I don't believe that any of those guys are gonna go lower than they went this year. I think actually one of them reinstituted flyer every week, so it's actually gonna go up. I believe that they are in a zone that they wanna be, and we don't expect further decrease from these three customers that created the issue this year.

What I can say about this is.

This year, we were impacted by up by tree.

Large customers.

Got on mainly on their page count in.

One of them on their circulation what I can see is the tree of them felt.

And there and their business and their sales and their same store sales and.

I believe I don't believe that any of those guys are going to goal lowered and the went this year I think actually one of them Agreeance too.

Flyer every week, so is actually going to go up so I believe that they are in the zone.

They want to be we don't expect further.

Decrease from these.

The customer that created the issue this year as far as the other group of customer.

François Ollivier: As far as the other group of customer, you know, we think the medium is still very strong and, those who have played with that in the past have suffered a consequence on their businesses. We feel that going into next year, we have a much easier comparable and we don't see large user of flyers doing the kind of reduction in page count and circulation that the three customers that we suffered from have did in 2019. On top of this, we obviously are gonna enter 2020 with a much lower cost base.

François Olivier: As far as the other group of customer, you know, we think the medium is still very strong and, those who have played with that in the past have suffered a consequence on their businesses. We feel that going into next year, we have a much easier comparable and we don't see large user of flyers doing the kind of reduction in page count and circulation that the three customers that we suffered from have did in 2019. On top of this, we obviously are gonna enter 2020 with a much lower cost base.

We think the medium is.

Still very strong and.

Those who have played with that in the past have suffered a consequence on their businesses.

And.

So we feel that going into next year, we have a much easier comparable and and we don't see.

Large user of suppliers.

Doing that.

Kind of.

Reduction in page Carrington circulation that three customers that we suffered from did and 19 and on top of this we obviously are going to enter 2020 would have much lower cost structure and our insurance sector.

Maybe just as it.

Adam Shine: Maybe just as a nuance there then, François, as a result of what you're saying, does that then preclude what may otherwise have resulted in conversations with flyer customers in regards to, you know, price adjustments based on reduced volume? Or is that maybe a dialogue that needs to occur at a later date?

New ones there then francois.

As a result of what you're saying.

Does that then preclude.

What may otherwise have resulted in conversations with flyer customers in regards to.

Price adjustments based on reduced volume or is that maybe a.

I love that needs to occur at a.

Later date.

Well the each contracts are difference some contract were already protected some we are less protective but obviously these discussion app and when we.

François Ollivier: Well, each contract is different. Some contracts we're already protected, some we are less protected. Obviously, these discussions happen when we renegotiate our contractual agreement. I'm not sure where, Adam, we did a good job I think of spreading out maturity. We have a couple of those discussions every year. Obviously when that happens, we will be looking to make sure that the contract takes into consideration the nature that our business is fixed-cost in nature. If volume starts to go down rapidly, that both TC needs to be protected. Yeah.

François Olivier: Well, each contract is different. Some contracts we're already protected, some we are less protected. Obviously, these discussions happen when we renegotiate our contractual agreement. I'm not sure where, Adam, we did a good job I think of spreading out maturity. We have a couple of those discussions every year. Obviously when that happens, we will be looking to make sure that the contract takes into consideration the nature that our business is fixed-cost in nature. If volume starts to go down rapidly, that both TC needs to be protected. Yeah.

When we renegotiate our contractual agreement and.

As you are I'm not sure were item, we did a good job I think of spreading out maturity. So we have a couple of those discussion every year and obviously when that when that happened.

We will be looking to make sure that the.

The contract takes into consideration as an.

Sure that our business.

Is fixed and costs in nature and volume starts to go down rapidly.

Both Tc needs to be protected.

Adam Shine: Okay, great. I'll leave it there. Thank you.

Okay, Great I'll leave it there thank you.

François Ollivier: Thanks.

François Olivier: Thanks.

Thanks.

A cushion consuming and getting to mechanism scotiabank.

Operator 3: Your next question comes from Mark Neville with Scotiabank. Please go ahead.

Operator: [Foreign language]

[Translator]: Your next question comes from Mark Neville with Scotiabank. Please go ahead.

Yes.

Your next question comes from our Nevertheless, Scotiabank. Please go ahead.

Mark Neville: Hey, good afternoon. Maybe just first in the packaging, again, I appreciate the comments around a stronger H2. Sort of just looking at the margin profile of this business over the last year, I mean, is there any sort of seasonality typically to the margin of this business? Or sort of like the 13.5, you know, 14% where we're at now, sort of a good baseline to grow from sort of going forward?

Hey, good afternoon.

Maybe just first on the packaging.

Appreciate the comments around a stronger second half.

Sort of just looking at the margin profile. This business over the last year is there any.

Sort of seasonality typically to the margin of this business.

This or.

Sort of look to 13 or 14%, where we're at now sort of a good baseline.

To grow from sort of going forward.

I would not college cyclicality like in printing, we know that this spring and fall are usually very strong quarter and you have a clear at them.

François Ollivier: I would not call it cyclicality. Like in printing, we know that the spring and the fall are usually very strong quarter, and you have a clear demarcation between Q4 and the other quarter in print. Packaging is not this way. We're packing food. The variation will happen, and it could happen based on a couple of things, promotion, and the food that the retailer wants to do with the food manufacturer that are our customers, how they manage their supply chain, their inventory. Sometimes the customer makes some mistakes. They order too much or they order not enough. In a quarter, they reorder a lot, or they don't reorder at all because they realize they have too much.

François Olivier: I would not call it cyclicality. Like in printing, we know that the spring and the fall are usually very strong quarter, and you have a clear demarcation between Q4 and the other quarter in print. Packaging is not this way. We're packing food. The variation will happen, and it could happen based on a couple of things, promotion, and the food that the retailer wants to do with the food manufacturer that are our customers, how they manage their supply chain, their inventory. Sometimes the customer makes some mistakes. They order too much or they order not enough. In a quarter, they reorder a lot, or they don't reorder at all because they realize they have too much.

Mark patients between.

Q4, and the other quarter in print and packaging is not this way where packing food.

And.

The variation will happen and it could happen based on a couple of things.

Promotion and the food that the retailer and wants to do.

Manufacturer that our customers.

How they managed our supply chain there at venturi sometime the customer make some mistakes the order too much or the order not enough and then in the quarter, the reorder loss or data on reorder at all because the realize the of too much too. So we are.

François Ollivier: We are living through some cyclicality, but it's not what I'm trying to say. It's not a built-in wherein it's predictable like in print. It's a little bit more unpredictable. When there's large movement of resin that are announced ahead of time, some customers tend to try to order more, and then they go quiet. We are incurring some cyclicality, you know, but it's very hard to predict when that happens.

We are.

We are living through some cyclicality, but but it's not what I'm trying to say, it's not a built in where with its predictable like and print. So it's a little bit more unpredictable. When there is large movement of resin that our announce ahead of time, some customers and to try to.

François Olivier: We are living through some cyclicality, but it's not what I'm trying to say. It's not a built-in wherein it's predictable like in print. It's a little bit more unpredictable. When there's large movement of resin that are announced ahead of time, some customers tend to try to order more, and then they go quiet. We are incurring some cyclicality, you know, but it's very hard to predict when that happens.

Order more and then they go quiet. So we are we are.

Incurring some cyclicality, but it's very hard to predict.

When that happened.

Okay.

Mark Neville: Okay. Maybe just, I guess on the print and the Publisac, can you just maybe just help us sort of frame or put into context the size of that business for yourself? Also maybe just from here, sort of the general timelines or sort of what we can expect, or we just sort of waiting on an announcement from the city at this point? Just sort of, again, just help us understand where we go from here or what happens in between.

Maybe just I guess on the printer in the public SEC.

Just maybe just help us sort of frame.

We are put into context, the size of that business for yourself I also maybe just just from a year sort of general timelines are sort of what we can expect or are we just sort of waiting on the Nelson from the city at this point I'm just sort of I guess, just help us understand where we go from here or what happens in between.

Yes, the distribution business.

François Ollivier: Yeah. The distribution business for us in Quebec is about CAD 130 million of revenue.

François Olivier: Yeah. The distribution business for us in Quebec is about CAD 130 million of revenue. That's kind of the size of the business. What the city did is a group of city councilors who made a recommendation at city hall. We're very hopeful that city hall will acknowledge that these recommendations are not too practical. It's pretty much unclear on how much time they could take to answer to these recommendations. Obviously we'll be in contact with the cities to To see, you know, how much time they are planning to take, and more specifically what they intend to do with those recommendations that we feel are not practical. The timeframe is not too clear.

For us in Quebec is about 130 million dollar of revenue.

Mark Neville: Okay.

François Ollivier: That's kind of the size of the business.

And thats kind of the size of.

The business and.

Mark Neville: Okay.

François Ollivier: What the city did is a group of city councilors who made a recommendation at city hall. We're very hopeful that city hall will acknowledge that these recommendations are not too practical. It's pretty much unclear on how much time they could take to answer to these recommendations. Obviously we'll be in contact with the cities to

What the cities is a user group of.

City consular made a recommendation studio we're very hopeful.

Full that CDL will acknowledge that these recommendation and are not to practical it's pretty much.

Unclear anomalous Stein decrease taking too.

To answer to these recommendation.

And so, but obviously will be in contact with the city's too.

Mark Neville: Mm-hmm.

François Ollivier: To see, you know, how much time they are planning to take, and more specifically what they intend to do with those recommendations that we feel are not practical. The timeframe is not too clear.

To see.

How much time, the our planning that take and more specifically what the intend to do with those recommendations.

You are are not practical.

Timeframe is not clear.

Mark Neville: Okay. Maybe just one last one then. Just on the balance sheet, I guess in M&A, the target was I think 2x. You know, by the end of Q1, you should be roughly there. I guess just sort of as we move forward and, you know, you do more M&A, can you just talk about sort of where you sort of anticipate sort of the range of leverage that you can sort of anticipate keeping on the balance sheet?

Maybe just one last one just on the balance sheet I guess in M&A.

It was so the two.

James.

Into Q1 is should be roughly there.

I guess, just sort of as we move forward and you do more M&A.

Can you just talked about sort of where you should anticipate sort of the range of leverage.

Sort of it just keeping on the balance sheet.

Yes.

François Ollivier: Yes. As you know, the print business generates a lot of free cash flow. By the time next year end, we will be more around the 1.6 to 1.7 times. Obviously, we have the room to continue to do M&A. We have a bigger portfolio now, so bigger opportunities, which means, you know, we could look at more verticals. We are more diversified. Obviously, we will have more synergies going forward. Having said that, we have a size now that enable us to be a little bit more selective on the acquisition that we wanna do. Obviously, M&A is a big part of our playbook in packaging in the years to come.

Donald LeCavalier: Yes. As you know, the print business generates a lot of free cash flow. By the time next year end, we will be more around the 1.6 to 1.7 times. Obviously, we have the room to continue to do M&A. We have a bigger portfolio now, so bigger opportunities, which means, you know, we could look at more verticals. We are more diversified. Obviously, we will have more synergies going forward. Having said that, we have a size now that enable us to be a little bit more selective on the acquisition that we wanna do. Obviously, M&A is a big part of our playbook in packaging in the years to come.

As.

You know the print business.

Generate a lot of free cash flow. So by the time next year end, we will be more around the 1.611 0.7 a time.

So obviously, we have the room.

Continued to do M&A, and we have a bigger portfolio analysis.

Also a bigger opportunities.

Which means we can look and more verticals. We are more diversified obviously, we will have more synergies going forward, having said that we have a size now that enable us to be a little bit more selective on the acquisition that we want to do but obviously.

The M&A is a big part of our playbook and packaging and new years to car and I would even add and some vertical and printing you've seen us acquiring.

François Ollivier: I would add in some verticals in printing. You've seen us acquiring, and POP. We are still looking, and we have some verticals in printing creative, because we tend to buy at a good multiple and we tend to have a, you know, very high level of synergies in the print sector. We have identified some sectors POP, book and print, where we feel we could both grow, first of all organically, but maybe even through acquisitions. Yes, the acquisitions are gonna be a part of our playbook, but we wanna be very, you know, rigorous and make sure we buy the right assets. We have no problem being down around 1.7, 1.6 times by the end of the year.

Donald LeCavalier: I would add in some verticals in printing. You've seen us acquiring, and POP. We are still looking, and we have some verticals in printing creative, because we tend to buy at a good multiple and we tend to have a, you know, very high level of synergies in the print sector. We have identified some sectors POP, book and print, where we feel we could both grow, first of all organically, but maybe even through acquisitions. Yes, the acquisitions are gonna be a part of our playbook, but we wanna be very, you know, rigorous and make sure we buy the right assets. We have no problem being down around 1.7, 1.6 times by the end of the year.

And you will be and we're still looking and we have some vertical in print thing that we think could be very.

Very accretive.

Because we tend to buy.

Good multiple and we tend to have.

Very high level of synergies and different sectors. So we have identified some sector PDP book in print, where we feel we can both.

Well first of all organically, but maybe even two acquisitions.

So yes, the acquisition are going to be.

Part of our playbook, but what we want to be very.

Rigorous and make sure we buy their rights assets and we have no problem being down around when 1.71 0.6 signed by the end of the year. So we will do it if it fits our profile.

François Ollivier: We will do it if it fits our profile and if it fits our strategy. If not, we've built enough scale now in packaging to have, you know, our organic growth could mean some profit improvement that are meaningful for the company.

Donald LeCavalier: We will do it if it fits our profile and if it fits our strategy. If not, we've built enough scale now in packaging to have, you know, our organic growth could mean some profit improvement that are meaningful for the company.

And if it fits our strategy.

If not we we've built enough scale knowing packaging too.

Two.

Our organic growth I mean, some some profit improvement that are meaningful for the company.

Understood, Okay ill turn it over someone else. Thanks.

Mark Neville: Understood. Okay. I'll turn it over to someone else. Thanks.

François Ollivier: Thanks.

François Olivier: Thanks.

Thanks.

A question consumer lending division mix can do Cormark Securities. Your next nine will come next question comes from line of David.

Operator 3: David McFadgen of Cormark Securities. Your next question will come from the line of David McFadgen of Cormark Securities. Please go ahead.

Operator: [Foreign language]

[Translator]: Your next question will come from the line of David McFadgen of Cormark Securities. Please go ahead.

Cormark Securities. Please go ahead.

Hi, Thanks, a couple of questions. So.

David McFadgen: Oh, yeah. Hi. Thanks. A couple of questions. First of all, just start off with a clarification. François, you talked about growth for the overall packaging business for 2020, about 1% to 1.5%. If my memory serves me correctly, I think that's probably a little more bullish than you've been in the past, 'cause I think you were a little guarded in year two to maybe get hopefully 1% out of Coveris. To get that, things must be going, I guess, fairly well at Coveris. I was wondering if you could provide a little clarity on that, what's going particularly well to give you that level of optimism?

First of all just started off with a clarification, France when you talked about growth for the overall.

In business for 23 inbound one.

Person.

If my memory serves the correctly I think that's probably a little more bullish then you then in the past because any even though guarded in year today, maybe get hopefully, 1% and akovaz so to get that.

Things must be going.

I guess fairly well or comparisons.

If you could rise a little clarity on that whats going, particularly well give you that.

Level of optimism.

Yes.

François Ollivier: Yeah. I think we finished the year very strong because if you look at the sales that we knew was already gonna hit us in Q4, which is the LATAM situation and the pet food situation, we did better. We think that, like Donal said in his prepared remark, maybe you will see less organic growth in Q1 and in Q2, but we feel that Q3, Q4, I mentioned already that the LATAM should give us a good push towards the backend of the year. We have other sort of some other vertical where we feel we have the ability to win some business. You know, in this business, raw material has a big impact.

François Olivier: Yeah. I think we finished the year very strong because if you look at the sales that we knew was already gonna hit us in Q4, which is the LATAM situation and the pet food situation, we did better. We think that, like Donal said in his prepared remark, maybe you will see less organic growth in Q1 and in Q2, but we feel that Q3, Q4, I mentioned already that the LATAM should give us a good push towards the backend of the year. We have other sort of some other vertical where we feel we have the ability to win some business. You know, in this business, raw material has a big impact.

I think we finished the year very strong because if you look at.

The sales that we knew was already gone a hit us in Q4.

Has the latham situation and a bit foods situation and we did better.

And we think that like doing all that said in his prepared remarks.

Maybe you will see less organic growth in Q1 in Q2, but.

We feel that Q3 Q4.

I mentioned already that Latam should give us a good bush towards the back end of the year and we have others or some other vertical where we feel.

We have the ability to win some business.

And you know and this business.

Raw material as as a big impact so we.

François Ollivier: You know, when we look at the raw organic growth, we will need to tell you what is the impact of the resin, because 1.5% could disappear or become 3% depending on where the resin price is going. When I say 1% to 1.5% is net of the impact of resin, and we think we could accomplish that with the portfolio we have. Remember that we've sold the paper business, and the paper business was not a growth business for us. Now we have something out of our portfolio that we were not positioned like Hood to grow that business in 2020. This business is gonna be out of our portfolio by the end of Q1.

François Olivier: You know, when we look at the raw organic growth, we will need to tell you what is the impact of the resin, because 1.5% could disappear or become 3% depending on where the resin price is going. When I say 1% to 1.5% is net of the impact of resin, and we think we could accomplish that with the portfolio we have. Remember that we've sold the paper business, and the paper business was not a growth business for us. Now we have something out of our portfolio that we were not positioned like Hood to grow that business in 2020. This business is gonna be out of our portfolio by the end of Q1. That should help the organic growth number as well.

When we look at the raw organic growth, we will need to two to tell you what is the backup the resin because 1.5% could disappear or become 3% depending on where the resin prices going so when I say one to one in the App is is net of the impact of resin and we think we could tick.

Accomplished up with the portfolio, we and remember that so the paper business and then the paper business, where it was not pay grow business for us. So now we have something out of our portfolio.

We were not position the likelihood.

To grow that business in 2020 in this.

Business is going to be out of our portfolio by the end of Q1 s with that should help the organic growth number as well.

François Ollivier: That should help the organic growth number as well.

David McFadgen: Okay. Can you tell us, at the end of Q4 2019, what's the annualized run rate of synergies that you've achieved so far with Coveris?

Okay and can you tell us.

In Q4 19, what's the annualized run rate synergies that you've achieved so far with various.

It's above.

François Ollivier: It's about, in US dollars, $12 million.

Donald LeCavalier: It's about, in US dollars, $12 million.

In us dollar incentive bonus about $12 million.

David McFadgen: CAD 12 million, okay. You expect to still exceed the CAD 20 million number, correct?

Okay, and you expect to still exceed the 20 million number very cut for the very.

François Ollivier: Yeah. Very confident.

Donald LeCavalier: Yeah. Very confident.

David McFadgen: Yeah. By what timeframe would you hit that number on an annualized rate?

I went timeframe when do you hit that number on an annualized rate.

We expect that by mid mid year. This 42000 wishes.

François Ollivier: We expect that by midyear 2020, we should be at this run rate and achieve above this run rate.

Donald LeCavalier: We expect that by midyear 2020, we should be at this run rate and achieve above this run rate.

At this run rate and achieve about this run rate.

David McFadgen: Okay. Can you give us any idea how much above you might achieve it? CAD 5 million? CAD 10 million?

Okay can you give us any idea how much and that's the main managing.

I know well.

François Ollivier: Well, we're above, and if we say above, it's, you know, it's not like, yeah, but we're confident that we will beat the $20 million. Let's put it this way. You know, there's things to consider that will move over the year, but we're very confident to be above the $20 million.

Donald LeCavalier: Well, we're above, and if we say above, it's, you know, it's not like, yeah, but we're confident that we will beat the $20 million. Let's put it this way. You know, there's things to consider that will move over the year, but we're very confident to be above the $20 million.

We are above it and if we see above its.

Yes, but we were confident that.

We will be the 20 million you with.

There's there's things to consider that will move over to Europe , where we're very competitive on the 20 minutes.

David McFadgen: Okay. You know, you talked about CAD 30 million of corporate costs in 2020. Can you tell us what the corporate costs were in 2019?

Okay.

And you talked about 39 of corporate costs in 2020 can you tell us what the corporate cost trends when you 19.

Roughly the same.

François Ollivier: Roughly the same, I would say, going up, but roughly the same. We need to exclude the fact of the share price this year, the movement of the share price. It's not like we have year-over-year increase. Most of the delta will come through the share price. That's the way to look at it.

François Olivier: Roughly the same, I would say, going up, but roughly the same. We need to exclude the fact of the share price this year, the movement of the share price. It's not like we have year-over-year increase. Most of the delta will come through the share price. That's the way to look at it.

With Citi.

Going up but roughly the same but we need to do.

To exclude the fact of the share price this year to open up the share price or stuff like we up year over year increase.

Most of that they'll sell will come to the share price. So.

That's the way to look.

Got it.

Okay, but the corporate costs in 2019 or about 39 correct.

David McFadgen: Okay, the corporate costs in 2019 are about CAD 30 million, correct?

François Ollivier: Yeah.

François Olivier: Yeah.

Yep Yep, no. If you would not want not saying at the corporate cost only increase versus this year other than the fact that the human the were searcher movement.

David McFadgen: Yeah?

François Ollivier: No. What I'm saying is the corporate costs don't increase versus this year other than the fact that, you know, there were share movement.

François Olivier: No. What I'm saying is the corporate costs don't increase versus this year other than the fact that, you know, there were share movement.

David McFadgen: Yeah.

François Ollivier: The corporate costs last year were in 2019 CAD 22 million, sorry.

François Olivier: The corporate costs last year were in 2019 CAD 22 million, sorry.

Last year, where in 2019 was 22 million sorry.

David McFadgen: Oh, they were 22,

There were 22.

François Ollivier: Million.

François Olivier: Million.

Yes.

Okay, and then maybe I'll take that offline.

David McFadgen: Okay. Anyway, maybe I'll take that offline with Ian.

François Ollivier: Okay. Yeah.

François Olivier: Okay. Yeah.

And then the Capex you gave a number of 100 million does that include the spending on intangibles.

David McFadgen: The CapEx, you gave a number of CAD 100 million. Does that include the spending on intangibles?

Yep.

François Ollivier: Yeah.

François Olivier: Yeah.

Okay.

David McFadgen: Okay. Can you tell us what the growth rate is organically of Holland & Crosby? You know, that acquisition you recently announced.

And then can you tell us.

Growth rate is organically of.

On and Crosstie the acquisition you recently.

It's very.

François Ollivier: Well, it's very, you know, it's at CAD 20-something million of revenue.

François Olivier: Well, it's very, you know, it's at CAD 20-something million of revenue. What I can tell you is that, it's a product extension for us. We are more active in the promotional POP printing. They are more active in the permanent signage, business and installation of permanent signage. Obviously we have some cost synergies as we gonna move work around our platform. There's obviously a lot of selling synergies. The customer roster of Transcontinental, which was about CAD 75 million, we didn't sell a lot of permanent signage to these guys. The customer roster of Holland & Crosby was not selling a lot of promotional POP. Now we're very active, visiting both companies customer and offering the complete package. We're looking to, you know, there's three areas in POP.

At 20 something million of revenue, but what I can tell you with that.

David McFadgen: Mm-hmm.

François Ollivier: What I can tell you is that, it's a product extension for us. We are more active in the promotional POP printing. They are more active in the permanent signage, business and installation of permanent signage. Obviously we have some cost synergies as we gonna move work around our platform. There's obviously a lot of selling synergies. The customer roster of Transcontinental, which was about CAD 75 million, we didn't sell a lot of permanent signage to these guys. The customer roster of Holland & Crosby was not selling a lot of promotional POP. Now we're very active, visiting both companies customer and offering the complete package. We're looking to, you know, there's three areas in POP.

It's a product extensions for us we are.

We are.

Our more active and net promotional PLP printing as the or more active in the permanent signage.

Business and install installation of permanent signage. So obviously, we have some cost synergies as we got to move work around our platform.

Theres, obviously a lot of selling.

Synergies so the.

Customer roster of transcontinental, which was about 75 million, we didn't sell a lot of permanent signage disease guides and customer roster of all in Crosby.

I was not selling a lot of promotional people be so now we're very active visiting both companies.

Customer and offering.

The complete package and and we're looking to.

There's three areas in few appeasers promotional printing for point of purchase sprinting theres permanent signage and there's display and decor and we're looking to have the whole portfolio of products.

François Ollivier: There's promotional printing, for point-of-purchase printing, there's permanent signage, and there's display and decor. We're looking to have the whole portfolio of product to cross-sell that to all the customer they have and that we have.

François Olivier: There's promotional printing, for point-of-purchase printing, there's permanent signage, and there's display and decor. We're looking to have the whole portfolio of product to cross-sell that to all the customer they have and that we have.

To to cross sell that all the customer.

And then we have.

David McFadgen: Okay. All right. Thank you.

Okay all right.

Okay all right. Thank you.

Thanks.

François Ollivier: Thanks.

François Olivier: Thanks.

In terms of material Gulf influence seems to be deca seems to be Amanda. So you see a peaceful due to its when.

She was due to see if I'm assuming this.

Operator 3: Ladies and gentlemen, if there are any additional questions at this time, please press star followed by one. As a reminder, if you're using speakerphone, please lift the handset before pressing the keys. Your next question will come from the line of Drew McReynolds of RBC. Please go ahead.

Operator: [Foreign language]

[Translator]: Ladies and gentlemen, if there are any additional questions at this time, please press star followed by one. As a reminder, if you're using speakerphone, please lift the handset before pressing the keys. Your next question will come from the line of Drew McReynolds of RBC. Please go ahead.

You did cushion if its upturn event piece with the two ish.

Ladies and gentlemen, if there any additional questions at this time. Please press star followed by one as a reminder, if you're using speakerphone. Please let's say handsets before pressing the keys.

Next question will come from a line of drew Mcreynolds of RBC. Please go ahead.

Hi, Thanks, very much good afternoon.

Drew McReynolds: Yeah, thanks very much. Good afternoon. First question maybe for you, Donat, on following the divestiture within the Media segment just for modeling purposes. Can you just remind us what the run rate revenue base is roughly and what that margin profile looks like for the residual business?

First question, maybe for you Danelle on.

Following the divestiture within that need.

Segment, just for modeling purposes can you just remind us what too.

Run rate revenue base is roughly and what that margin profile looks like for for the residual business.

I'm sorry.

François Ollivier: I'm sorry, I missed. You mean the paper business?

Donald LeCavalier: I'm sorry, I missed. You mean the paper business?

I Miss following to you mean, the paper business.

Drew McReynolds: Within the media segment, yeah. As you divested recently some of those assets, just, it used to be a CAD 100 million segment with the very kind of 20, 25 percent EBITDA margin. Just wondering what it looks like now.

Within the media segment, yes, as you divested.

Recently, some of those assets just used to be 100 million.

Segments with the kind of 2020, 5% EBITDA margin just wondering what it looks like now.

The business, we now we're about 70 million of run rate remaining in media.

François Ollivier: The business we now are about CAD 70 million of run rate remaining in media. I would say, sorry, that the EBITDA margin of the remaining business was higher than the average business. We

Donald LeCavalier: The business we now are about CAD 70 million of run rate remaining in media. I would say, sorry, that the EBITDA margin of the remaining business was higher than the average business. W You can model higher, you know, margin than what we had with the business that we sold.

And I will.

And I was seats are I thought was saying that the EBITDA margin of the ready made remaining business was higher than the average business. So we.

Drew McReynolds: Okay.

François Ollivier: You can model higher, you know, margin than what we had with the business that we sold.

You can.

Model Europe is higher.

Margin that what we add with the with the business.

Is that we sold.

Drew McReynolds: Okay. Okay, super. On the Coveris synergies, interesting to still see a good chunk of that to come. Also on the printing side, a lot of moving parts with the two presses coming online, as well as broader consolidation printing platform. Where are you in terms of the run rate kinda savings in that whole kinda bucket of efficiency here?

Okay, Okay Super.

On the clearest synergies.

Interesting that we'll see a good chunk of that to come.

Also on the printing side.

Lot of moving parts with the two presses coming online and as well as broader consolidation printing platform, where are you in terms of the run rate kind of savings in that whole kind of bucket of.

Some efficiency here.

All right.

François Ollivier: Well, even in Q4, the first month of the quarter was different than the last month. I would say in the last month, in October, maybe in terms of the things you described, the press, the closure of Brampton, we were maybe, you know, 75% there. By the end of December for those particular activity, we'll be 100% there. We will close the one in PEI at the end of January, so that will hit Q2. We have a big program to adjust our indirect cost structures that will be executed in January. You should have a much lower fixed cost indirect fixed cost structure starting at Q2.

François Olivier: Well, even in Q4, the first month of the quarter was different than the last month. I would say in the last month, in October, maybe in terms of the things you described, the press, the closure of Brampton, we were maybe, you know, 75% there. By the end of December for those particular activity, we'll be 100% there. We will close the one in PEI at the end of January, so that will hit Q2. We have a big program to adjust our indirect cost structures that will be executed in January. You should have a much lower fixed cost indirect fixed cost structure starting at Q2.

Even in Q4, the first month of the quarter was different than the last month I would say in the last month and October maybe in terms of the things you described depress the closure of Brent we were maybe.

75% there by the end of December four dose.

Of particular activity will be 100%. There then we will close to one piece at the end of January So that will hit Q2, and then we have a big program to adjust our indirect cost structures.

That will be.

Executed and.

January so you should see.

Much lower fixed costs.

Direct fixed costs.

Structure, starting at Q2, so so the biggest chunk evolve. This is the closure of Brampton and will be realized that by the end up.

François Ollivier: You know, the biggest chunk of all this is the closure of Brampton, and that will be realized by the end of December this year. After that, some other activities are gonna be added every quarter or so. You could say for the first two quarter of 2020, we will put more and more cost saving in place, and you should be at the true run rate of the new cost structure in Q3 and Q4 in the print sector. That would be my guess.

François Olivier: You know, the biggest chunk of all this is the closure of Brampton, and that will be realized by the end of December this year. After that, some other activities are gonna be added every quarter or so. You could say for the first two quarter of 2020, we will put more and more cost saving in place, and you should be at the true run rate of the new cost structure in Q3 and Q4 in the print sector. That would be my guess.

The December this year, but after that some other activities are going to be added every quarter. So.

You could say for the first two quarter of 2020, we will.

More and more cost saving in place and you should be.

True run rate the new cost structure in Q3 in Q4 in the Prince sector.

I guess.

Drew McReynolds: Okay. Very helpful, François, thanks for that. Two final ones. On the Holland & Crosby, I know there's some disclosure in your financials on acquisition contribution. Just specifically on the Holland & Crosby one, what is the annual revenue amount that we should model?

Very helpful consultant, thanks for that to sign a ones on the whole and across the I know theres. Some disclosure on your financials on acquisition contribution just specifically on the whole and.

Crosby one.

What is the annual revenue meant that we should model.

If I recall directly it's around 21 million dollar that we acquire.

François Ollivier: If I recall correctly, it's around CAD 21 million that we acquire. Obviously, we're gonna try to improve that rapidly. It's, you know, on the revenue side, you need to give us 2, 3 quarters to have a substantial impact on the revenue. Where you would see us having a more immediate impact is on the margin and on the EBITDA, because we're gonna quickly put the right business and the right plant and work to be as efficient as possible working together.

François Olivier: If I recall correctly, it's around CAD 21 million that we acquire. Obviously, we're gonna try to improve that rapidly. It's, you know, on the revenue side, you need to give us 2, 3 quarters to have a substantial impact on the revenue. Where you would see us having a more immediate impact is on the margin and on the EBITDA, because we're gonna quickly put the right business and the right plant and work to be as efficient as possible working together. Holland & Crosby had some capabilities that we didn't have, so we're gonna send volume their way, and usually that tend to convert at a very high rate, and the other way around is true.

Obviously, we going to try to improve that rapidly.

But.

On the revenue side, you need to give us to treat quarters due to have a substantial impact on on the on the revenue.

Where you would see us having a more immediate impact is on the margin and on the EBITDA.

As we gonna quickly put the write business in the right plant.

And and work to.

To to be as efficient as possible working together.

François Ollivier: Holland & Crosby had some capabilities that we didn't have, so we're gonna send volume their way, and usually that tend to convert at a very high rate, and the other way around is true. Move volume to the right companies, and that would have a significant, great impact on the EBITDA. First, we will hit the profitability through efficiency and costs. You know, again, going towards Q3 and Q4, we should start to have additional revenue both at Holland & Crosby and our Aurora facility. Our businesses was already growing at around 14%, 15% organically, so that should improve those numbers by having acquired Holland & Crosby.

All in Crosby out some capabilities that we didnt, so we don't ascend volume their weight and.

And to convert at the very high rate and the other way around this true to there's some stuff that.

We were better equipped to do so we got on volume.

François Olivier: Move volume to the right companies, and that would have a significant, great impact on the EBITDA. First, we will hit the profitability through efficiency and costs. You know, again, going towards Q3 and Q4, we should start to have additional revenue both at Holland & Crosby and our Aurora facility. Our businesses was already growing at around 14%, 15% organically, so that should improve those numbers by having acquired Holland & Crosby.

And our right.

Companies and that would have a signal.

Great Empaque on on the EBIT. So first we will hit the profitability true efficiency and cost and then.

Again going towards Q3 in Q4, we.

Should start to have additional revenue, both Paul and Crosby or facility and our businesses was already growing.

Around 14, 15% organically so that should improve.

Those numbers by having acquired.

And in Crosby.

Donald Lecavalier: Drew, historically, this business was, you know, in terms of margin, lower than the average margin of print. You know, since we're growing in that business, you know, there with the synergies margin, even in our own business right now is growing. We're not at the level of the print sector right now, but we're increasing the margin year over year, so that's very encouraging for us.

And do with Turkey does business was.

Donald LeCavalier: Drew, historically, this business was, you know, in terms of margin, lower than the average margin of print. You know, since we're growing in that business, you know, there with the synergies margin, even in our own business right now is growing. We're not at the level of the print sector right now, but we're increasing the margin year over year, so that's very encouraging for us. We start to have scale. We're CAD 100 million in that space right now, and we feel that we still have a lot of room to grow, probably, for sure organically, but probably still through acquisition, through product diversification to have a stronger portfolio. As we get scale, it's easier to sell and it's easier to lower your costs.

Terms of margin lowered the average.

Margin upfront, but since we are growing in that business.

When the synergies margin even in our all business right now is growing so we're not that the level of the print.

Sector right now, but we are winning increasing that margin year over year, So thats very encouraging for us.

François Ollivier: We start to have scale. We're CAD 100 million in that space right now, and we feel that we still have a lot of room to grow, probably, for sure organically, but probably still through acquisition, through product diversification to have a stronger portfolio. As we get scale, it's easier to sell and it's easier to lower your costs.

And we start to upscale were 100 million dollar in that space right now and we feel that we still.

A lot of.

Room to grow.

Probably for sure organically.

Probably still true acquisition to a product diversification.

A stronger portfolio.

And as we get scale.

It's easier to sale and and it's easier to lower your cost.

Okay very helpful. Last one then for me on the.

Drew McReynolds: Okay. All very helpful. Last one then for me. On the CapEx for fiscal 2020, you talk about a more normal run rate just below CAD 100 million. When you acquired Coveris, I recall that being kind of closer to CAD 85 million. Of course, you had a special project in fiscal 2019. Is the difference here more the R&D and that kind of type of investment that you're kind of assuming is recurring going forward, or am I missing something in my numbers?

Capex for fiscal 2020, you talk about a more normal run rate just below 100 million.

When you acquired co bears.

Recall that being kind of closer to 80 85 million of course, yet special project in fiscal 2019.

The difference here.

For more of the R&D and in that kind of.

Type of investment that you're kind of assuming is recurring going forward or am I missing something you might my numbers, you're exactly right last year, we probably spend an extra 15 or 20 million.

François Ollivier: No, you're exactly right. Last year, we probably spent an extra CAD 15 or 20 million in blown line and in plate and sourcing. That's why we still have significant synergies to come in 2020. It's related to the investment we've made in 2019 in blown line extrusion blown line and in plate and sourcing. That's why our CapEx in 2020 are gonna be lower because we're not doing this. That's why we're gonna enjoy some a second wave of synergies as we have started one of those line in October and one in late November. They will start to generate some synergies for us throughout the year as we bring some of the film that we buy outside internally. That's the reason. You are right, Alan.

François Olivier: No, you're exactly right. Last year, we probably spent an extra CAD 15 or 20 million in blown line and in plate and sourcing. That's why we still have significant synergies to come in 2020. It's related to the investment we've made in 2019 in blown line extrusion blown line and in plate and sourcing. That's why our CapEx in 2020 are gonna be lower because we're not doing this. That's why we're gonna enjoy some a second wave of synergies as we have started one of those line in October and one in late November. They will start to generate some synergies for us throughout the year as we bring some of the film that we buy outside internally. That's the reason. You are right, Alan.

And loan line.

And then plate and sourcing so thats why we still have significant synergies to come in 2020, it's related to the investment we've made in 2019 and blown line.

Extrusion loan line, and then plate and sourcing.

So thats why our.

Next in 2020 are going to be lower because we're not doing this and thats why we going to enjoy some a second wave of synergies as we have started one of those line and October and one in late November so they will start to generate some synergies for us a true out.

At the year as we.

Bring some of the film that we buy outside and internally.

So that's the reason and you are right pilot and terms of R&D and our and our sustainability effort we.

François Ollivier: In terms of R&D and our sustainability effort, we have devoted more money both through CapEx and additional expense that goes to the P&L to make sure that we prepare the product of the future and meet our commitment that we've made towards sustainability and help our customer meet their goals. A little bit more, a little less on equipment, a little bit more CapEx on sustainability. All in all, it's a decrease of about CAD 15 to 20 million to last year.

François Olivier: In terms of R&D and our sustainability effort, we have devoted more money both through CapEx and additional expense that goes to the P&L to make sure that we prepare the product of the future and meet our commitment that we've made towards sustainability and help our customer meet their goals. A little bit more, a little less on equipment, a little bit more CapEx on sustainability. All in all, it's a decrease of about CAD 15 to 20 million to last year.

They've ordered more money.

Both capex and additional expense goes to dip.

To make sure that that we prepared to the product of the future and meet our commitment that we've made towards sustainability and help our customer I mean circles, so little bit more or less.

On on equipment little bit more capex on.

On sustainability, but all in all its a decrease of about 15 20 million to last year.

Donald Lecavalier: And also-

Donald LeCavalier: And also-

And also.

Drew McReynolds: Thank you.

Donald Lecavalier: You know, Drew, in printing last year, one part of the increase was that we had the project, you know, bring the press back from the West Coast and, you know, doing some change for the Brampton. You know, we had to move equipment. Also this year we were closer to normal, but we still see some opportunity on the printing side. François did talk about the in-store marketing. On the booking side, you know, this business has been growing for 2 quarters in a row for us, and we have good forecast on that side. We may have to increase some of the capacity. That's part also of the program this year. We still have room for, you know, new capacity CapEx on the printing side.

Donald LeCavalier: You know, Drew, in printing last year, one part of the increase was that we had the project, you know, bring the press back from the West Coast and, you know, doing some change for the Brampton. You know, we had to move equipment. Also this year we were closer to normal, but we still see some opportunity on the printing side. François did talk about the in-store marketing. On the booking side, you know, this business has been growing for 2 quarters in a row for us, and we have good forecast on that side. We may have to increase some of the capacity. That's part also of the program this year. We still have room for, you know, new capacity CapEx on the printing side.

With printing, thus your and one that part of the increase was that.

The project will depress back from the west goals and.

In some change for the breadth.

Moving equipment, but also this year, we were more to close to normal, but we still see some unfortunately on the printing side plus with into talk about the in store marketing booking site.

This business in growing for few quarters in a role for us and we have good forecasts on that side.

Let me out to increase some other capacity. So thats part also the program this year so.

We still have room for.

UK CD capex on the printing side.

Okay. Thanks, very much for all that Thats helpful.

Drew McReynolds: Okay, thanks very much for all that. That's helpful.

And assumptions of.

Operator 3: There are no further questions at this time. Please continue.

Operator: [Foreign language]

[Translator]: There are no further questions at this time. Please continue.

Thank you Sir.

There are no further questions at this time please continue.

Yan Lapointe: Thank you everyone for joining us on the call, and we look forward to speaking with you shortly.

Thank you everyone for joining us on the call and we look forward to speaking with you shortly.

Hey, Dan misuse of still mean that then COFINA exposure was nothing special we may not be Cushing, ladies and gentlemen. This concludes the conference call for state.

Operator 3: Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.

Operator: Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.

Thank you for participating please disconnect your lines.

No.

Q4 2019 Earnings Call

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