Q1 2020 Earnings Call

February 27, 2020

Operator 2: Mesdames et Messieurs, merci d'avoir patienté et bienvenue à la conférence téléphonique concernant les résultats du premier trimestre et de l'année financière 2020 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, 27 February 2020. Welcome to the TC Transcontinental First Quarter 2020 Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session, and instructions will be provided at that time. As a reminder, this conference is being recorded today, 27 February 2020. I would now like to turn the conference over to Yan Lapointe, Director in Investor Relations.

Operator: Mesdames et Messieurs, merci d'avoir patienté et bienvenue à la conférence téléphonique concernant les résultats du premier trimestre et de l'année financière 2020 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, 27 February 2020. Welcome to the TC Transcontinental First Quarter 2020 Results Conference Call. During the presentation, all participants will be in a listen-only mode.

<unk>.

D C topical.

Fanatical about how to do special onetime methodically.

Yeah, because since you brought up because that's how did that exceeds the whole underneath them.

Does the home happy because it's quite healthy stoppages people drink events, such as it used to move.

Welcome to the TC transcontinental first quarter 2020 results conference call.

During the presentation, all participants will be in listen only mode.

Operator: Afterwards, we will conduct a question and answer session, and instructions will be provided at that time. As a reminder, this conference is being recorded today, 27 February 2020. I would now like to turn the conference over to Yan Lapointe, Director in Investor Relations. J'aimerais maintenant céder la parole à Yan Lapointe, Directeur Relations avec les investisseurs. Monsieur Lapointe, please go ahead.

Afterwards, we will conduct a question answer session and instructions will be provided at that time.

As a reminder, this conference is being recorded today February 27 2020.

And I like to turn the conference over to young the point director of Investor Relations.

Operator 2: J'aimerais maintenant céder la parole à Yan Lapointe, Directeur Relations avec les investisseurs. Monsieur Lapointe, please go ahead.

I mean, that's ended up a whole agenda point sector <unk>, sorry, Mr. Doug. Please go ahead.

Thank you Gabriel and good afternoon, everyone welcome to piece, because it's not <unk> first quarter 2020, <unk> results conference call.

Yan Lapointe: Thank you, Gabriel, and good afternoon, everyone. Welcome to TC Transcontinental's First Quarter of 2020 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 Olivier, 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. Please be reminded that some of the financial measures discussed over the course of this conference call are non-IFRS. Please refer to the MD&A for a complete definition and reconciliation of such measures to IFRS financial measures.

Personally and the M.D. and then with complete financial statements unrelated notes were issued earlier today and are available on our website at <unk>.

With us today are keys to call not that president and Chief Executive Officer parts, where do you view and Chief financial officer, So not that can be.

Before I turn the call over to management I would like to specified that this conference call is intended for the financial community.

I mean, you are in listen only mode and should contact not anything senior adviser corporate communications for more information or interview request.

Please be reminded that some of the financial measures. This cost over the course of this conference call or non I apart.

Please refer to be in Vietnam for complete definition and reconciliation such measures twice for its financial measures. In addition, this conference call my contain forward looking statements.

Yan Lapointe: 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, uncertainties, and other factors that could influence actual results are described in the 2019 annual MD&A and in the latest annual information form. I would now like to turn the call over to François Olivier.

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

The risks uncertainties and other factors that could influence actual results are described in the 2019 annual immediately and then the latest annual information form.

I would now like to turn the call over to cost like.

François Olivier: Thank you, Yan, and good afternoon, everyone. Looking at the results, we had a good Q1 with the business generating margin improvement and solid cash flow. In our Packaging Sector, margins improved year over year, and we are confident in our ability to progressively increase them again throughout the year. In our Printing Sector, as we had guided in our last earnings call, the rate of decline in revenues returned to a more normal level, and we increased profitability with the cost initiatives we put in place last year. Let's now review the operations in more details. In the Packaging Sector, revenues were impacted by a volume reduction in our paper business, which we sold to Hood Packaging towards the end of the quarter and by lower resin prices. Excluding these elements, organic decline would have been only 0.7%.

Thank you yeah, and good afternoon, everyone.

Looking at the results we had a good first quarter with the business generating margin improvement and solid cash flow.

Our packaging sector margins improved year over year, and we are confident and our ability to progressively increase them again throughout the year.

And our print things sector as we I'd guide on our last earnings call. The rate of decline in revenues returned to a more normal level and we increased profitability with the cost initiatives would put in place last year.

Let's now review your operations and more details.

And the packaging sector revenues were impacted by a volume reduction in our paper business, which we sold to hood packaging towards the end up the quarter and by lower resin prices.

Excluding these elements organic decline would have been only 0.7%.

This is mainly related to our Latin America segment segment, which is expected to improve and the second half of the year.

François Olivier: This is mainly related to our Latin America segment, which is expected to improve in H2. We continue to expect organic growth in 2020. As mentioned in the past, we have a very strong R&D team and best-in-class innovation processes and capabilities all focused on innovating to ensure we exceed customer expectations. As we saw last year, we expected margin improvement from synergies to flow gradually quarter after quarter. We completed the installation of our new extrusion equipment in Whitby, Ontario, in January, and we expect related savings in the coming quarters. The synergies and efficiency gains will be incremental to higher profitability from the adoption of the IFRS 16 accounting standard. In the printing sector, we are seeing positive impact of the measures we took last year to protect our profitability.

We continue to expect organic growth and 2020.

As mentioned in the past, we have a very strong R&D team and best in class innovation processes and capabilities all focused on innovating to ensure we say exceed customer expectations.

As we saw last year, we expected margin improvement from synergies to flow gradually quarter. After quarter, we completed the installation of our new extrusion acquit equipment and we'd be Ontario in January and we expect related savings in the coming quarters.

Synergies and efficiency gains will be incremental to our profitability from the adoption of the IRS 16 accounting standard.

And the printing sector, we're seeing positive impact of the measures we took last year to protect our profitability.

François Olivier: We completed the closure of our Brampton and PEI facilities during the quarter. We also started to implement new measures to reduce our indirect costs. We remain proactive in managing our cost structure. In our retailer-related services, as we mentioned on our last call, we saw a lower rate of decline in volume compared with last year. I've said it before, I will repeat it again, flyers remain a relevant and effective marketing tool to bring people to the store and to help Canadians save money like no other medium. As for our Publisac, we have established a dialogue with the city of Montreal, and we are hopeful that reasonable solutions can be found. We are seeing strong growth in our book, our pre-media, and our in-store marketing verticals so far in 2020. We are investing both organically and through acquisitions in these verticals to capitalize on this growth.

Completed the closure of a Brampton npis facilities during the quarter. We also started to implement new measures to reduce our indirect costs, we remain proactive in managing our cost structure.

And our retailer related services as we mentioned on our last call. We saw a lower rate of decline and volume compared with last year.

Before I will repeat it again.

Wires remain a relevant and effective marketing tool to bring people to the store and to help Canadian save money like no other media.

As for our publicized.

We have established a dialogue with the city of Montreal, and we are hopeful reasonable solutions can be found.

We are seeing strong growth in our book, our pre media and our and store marketing verticals, so far and 2020.

We are investing both organically and through acquisitions and these verticals to capitalize on this growth.

The integration of our two recent acquisition and store marketing all in and Crosby and arches incomplete is progressing very well.

François Olivier: The integration of our two recent acquisition in in-store marketing, Holland & Crosby, and Artisan Complete, is progressing very well. In the last five years, we have built an in-store marketing business which now generate about CAD 140 million in revenue annually in a market with good long-term outlook. Over the last several years, we have de-risked our portfolio by increasing the share of revenues coming from growing markets. Only three years ago, newspaper printing represented more than 20% of our manufacturing revenue in print. This year, it should be only around 10%. This is another reason why we remain confident in our ability to continue to generate strong cash flow from our printing sector for years to come.

In the last five years, we have built an in store marketing business, which now generate about $140 million and revenue annually and the market with good long term outlook.

Over the last several years, we have derisked, our portfolio by increasing their share of revenues coming from growing markets only three years ago newspaper printing represented more than 20% of our manufacturing revenue in Prince.

This year it should be only around 10%. This is another reason why we remain confident in our ability to continue to generate strong cash flow from our printing sector for years to comp.

In addition to our financial performance, we have made significant progress in the last few months and building our sustainability approach, especially as it relates to effectively managing plastic packaging throughout this lifecycle.

François Olivier: In addition to our financial performance, we have made significant progress in the last few months in building our sustainability approach, especially as this relates to effectively managing plastic packaging throughout its life cycle. We announced today the creation of a new recycling group within our packaging sector to vertically integrate the recycling of plastics in our production chain and ultimately ensure a stable supply of recycled plastic. This group will enable us to differentiate ourself by accelerating the development of our eco-responsible packaging products containing recycled plastic. This will help us create a truly circular economy for plastic, will bring further benefits for the environment and for the communities. We also announced earlier this week a partnership with the Canadian government and other leading companies to develop a task force to create a circular economy for plastics in Canada.

We announced to date the creation of a new recycling group within our packaging sector to vertically integrate the recycling of plastics and our production chain and ultimately to ensure a stable supply of recycled plastic.

This group will enable us to differentiate ourselves by accelerating the development of our equal responsible packaging products containing recycled plastic.

This will help us create a truly circular economy for plastic will bring further benefits for our the environment, that's where the communities.

We also announced earlier this week a partnership with the Canadian government and other leading companies to develop a task force to create a circular economy for plastics and Canada.

François Olivier: Sustainability is now more important than ever before, and these investments will become a key competitive advantage for years to come. In conclusion, I'm pleased with the progress in our transformation. We are well-positioned to create long-term value. With that, I'll turn the call over to Donald Lecavalier.

Sustainability is now more important than ever before these investments will become a key competitive advantage for years to come.

In conclusion, I'm pleased with the progress on our transformation, we are well positioned to create long term value and with that I'll turn the call over to dual now.

Thank you first oil and good afternoon.

Donald LeCavalier: Thank you, François, and good afternoon. While our adjusted EBITDA numbers is in line with last year, it does not fully reflect the improvement in profitability in both the printing and packaging sectors and our value creation activities on the M&A front. We have a strong portfolio of business supported by a solid financial position. Looking at our segmented results, revenues for the packaging sector declined by CAD 23.5 million in Q1 2020. This includes the negative impact of CAD 2.9 million for FX and CAD 1.6 million net for acquisition and disposals. The large majority of the organic decline is linked to the lower volume in our paper operations, which were sold towards the end of the quarter, and to lower resin prices.

Our adjusted EBITDA numbers is inline with last year. It does not fully reflect improvement in profitability in both the printing and packaging sectors and our value creation activities on the M&A front.

We have a strong portfolio business supported by a solid financial position.

Looking at our segmented results revenues for the packaging sector declined by 23.5 million in Q1 2020.

This includes the negative impact of 2.9 million for FX, and 1.6 million net for acquisition and disposals.

The large majority of the organic decline is linked to the lower volume in our paper operations, which were sold towards the end of the quarter and to lower resin prices.

The remaining organic decline of less than what percent is mainly due to our Latin American business, which was still impacted by the legislative change when mentioned it last quarter.

Donald LeCavalier: The remaining organic decline of less than 1% is mainly due to our Latin American business, which was still impacted by the legislative change we mentioned last quarter. We continue to expect growth in this business in H2. The adjusted EBITDA margin grew by 110 basis points from 11.7% to 12.8%. Excluding IFRS 16, it would have been an improvement of about 60 basis points compared to Q1 2019. We expect profitability to accelerate in the coming quarters from first, synergies from film and sourcing. We finalized the installation of the new equipment in Whitby, Ontario in January, and we should see the impact starting in Q2. Second, the sale of our paper operation, which had lower margins. Third, organic growth expected in H2.

We continue to expect growth and this business and the second half of the year.

The adjusted EBITDA margin grew by 110 basis points from 11.7% to 12.8%.

Excluding our FRS 16, you will have been an improvement of about 60 basis point compared to Q1 2019.

We expect profitability to accelerate in the coming quarters prop.

First synergies from FIM and sourcing we finalized the installation of the new equipment and wouldn't be Ontario in January and we should see the impact starting in Q2.

Second the sale of paper operation, which at a lower margins.

Third our guided growth expected in the second half of the year.

No for the printing secular revenue declined by 11 million into quarter 326 million.

Donald LeCavalier: Now, for the printing sector, revenue declined by CAD 11 million in the quarter to CAD 326 million. Despite lower revenues, adjusted EBITDA margin grew from 18.7 last year to 20.2%, a 150 basis point improvement, including IFRS 16. This is a direct result of the cost reduction activities we put in place last year that are now bearing fruit and should yield their full impact in 2020. We will continue to work on our cost structure to protect profitability. It's also important to note that the rate of decline in flyer revenues has improved versus last year. Media revenues were lower compared to last year following the sale of certain assets in line with our strategy, but profitability remained solid.

Despite lower revenues adjusted EBITDA margin grew from 18.7 last year to 20.2%.

150 basis point improvement, including our FRS 16.

This is a direct result of the cost reduction activities. We put in place last year that are not fair bearing fruit and should yield their full impact in 2020.

We continue to work on our cost structure to protect profitability.

It's also important to note that the rate of decline in the flyer revenues as improve versus last year.

Media revenues were lower compared to last year following the sale of certain assets inline with our strategy, but profitability remains solid.

With the international booked business accounting for more of the revenues and media, we will see a little more seasonality with peaks in the summer for back to school season.

Donald LeCavalier: With the educational book business accounting for more of the revenues in media, we will see a little more seasonality with peaks in the summer for the back-to-school season. Corporate expense for the quarter were higher than last year, but in line with our plan. CapEx was down CAD 13 million year over year and in line with our annual guidance. Finally, we received the proceeds from the sale of our paper operations to Hood Packaging. We closed the quarter with CAD 425 million of cash, which we used to proactively repay CAD 360 million of long-term debt in February. At the end of the quarter, our net debt ratio stood at 2.3 times. Excluding the impact of IFRS 16, the ratio stood at 2 times. This means that we reached our initial target several months ahead of our schedule.

Corporate expense for the quarter were higher than last year, but in line with our plan.

Capex was down 13 million year over year and inline with our annual guidance. Finally, we received the proceeds from the sale of our paper operations to put packaging.

We closed the quarter with 425 million of cash, which we use it to proactively repaid 360 million of long term debt in February.

At the end of the quarter, our net debt ratio stood at 2.3 times.

Excluding the impact of our FRS 16, the ratio stood at two times.

This means that we reach at our initial target several months ahead of our schedule.

Donald LeCavalier: This strong financial position will provide us with flexibility in terms of capital allocation. Now, looking to 2020, we continue to expect modest organic growth in packaging, excluding our paper operations and the impact of resin prices. EBITDA margins should progressively improve during the year, as I mentioned earlier. In our printing sector, we should see a continuation of the trends seen in Q1. We continue to anticipate growth in our in-store marketing products and book printing verticals. As we saw in Q1, many of the measures we announced in 2019 will contribute to profitability improvement in 2020. For the other segment, we expect corporate costs at EBITDA level to be around CAD 30 million.

This strong financial position, what provide us with flexibility in terms of capital allocation.

Now looking to 2020, we continue to expect modest organic growth and packaging, excluding our paper operations and the and the impact of resin prices.

EBITDA margins should progressively improved during the year as I mentioned earlier.

In our printing sector, we should see a continuation of the trends seen in the first quarter.

We continue to anticipate growth in our in store marketing products and book printing verticals.

As we saw in Q1, many of the measures, we announced that and 20 92019 will contribute to profitability improvement in 2020.

40 other segment, we expect corporate costs at EBITDA level to be around $30 million.

Donald LeCavalier: The impact of variation of the share price on our stock-based compensation expense will be minimal for the remainder of the year, of the fiscal year, due to the implementation of a hedging program. Following the sale of our specialty media assets, we expect good performance in terms of revenue and profitability for media in 2020, but not enough to offset corporate costs. Following the reduction in our debt levels, 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 around CAD 100 million. This exclude potential investments in our recycling group.

The impact of variation of the share price on our stock based compensation expense will be minimal for the reminder of the year of the fiscal year due to the implementation of hedging program.

Following the sale of our specialty maybe assets, we expect good performance in terms of revenue and profitability for media and 2020, but not enough to ups upset corporate cost.

Following the reduction in our debt levels, we expect our financial expense to decrease even a three including the impact of.

16 to around 55 million in 2020.

Our effective tax rate should be in the mid twenties ranch.

In terms of use of cash for the year, you can assume capex coming down to a more normal level around $100 million.

This excludes potential investments and our recycling group.

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

Donald LeCavalier: As for cash tax, for the year you can assume around CAD 60 million. With our solid financial position and our confidence in our ability to continue to generate solid cash flows, the board has authorized a 2.3% increase in the dividend. On that note, we will now proceed with the question period.

What are solid financial position and our confidence in our ability to continue to generate solid cash flows the board as authorizes a 2.3% increase and the dividends.

On that note will not proceed with the question Korea.

Mousy minimums immature genomic and that puts it in your ticket.

So being consumed but yet you still need to it once you get ourselves to definitely have you.

So in any case, if it doesn't sound fulfillment, but put them out.

Operator 2: Thank you. One moment, please. Ladies and gentlemen, we will now conduct the question and answer session. If you have a question, please press the star followed by the one on your touchtone 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. First question will come from Adam Shine of National Bank Financial. Please go ahead.

Operator: Thank you. One moment, please. Ladies and gentlemen, we will now conduct the question-and-answer session. If you have a question, please press the star followed by the one on your touchtone 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. First question will come from Adam Shine of National Bank Financial. Please go ahead.

You can assume so I'm pleased on don't get on D. I should money. So you got an emphasis you. He did the cushy defensive turns if it's about eight to different Nick Sebrell Xenapp form so media event feasibility too.

Hi, my message for enough when you get soon.

Q1 of them, please ladies and gentlemen, we will now conduct a question and answer session.

I have a question. Please press star followed by the one on your Touchtone phone.

We'll hear tone acknowledging a request your questions will be pulled in the order they are received.

Please ensure you lift the handset if you're using a speaker phones before pressing any keys for maam. Please for your first question.

At home and then just show that Miss your Adam Shine.

You have first question will come from Adam kind of National Bank Financial. Please go ahead.

Hi, Good afternoon. Thank you maybe just starting first with packaging you didn't get too much into the specifics of different segments.

Adam Shine: Good afternoon. Thank you. Maybe just starting, François, with packaging. You didn't get too much into the specifics of different segments performing in the period. I guess net-net, they were sort of relatively flattish with obviously, as you suggested, LatAm and the banana issue being the main driver of the -0.7 organic decline ex those items. Any further color that you might wanna share and maybe also looking ahead as to how those segments are tracking into the Q2?

For me in the period I guess net debt they were sort of relatively flattish with obviously as you suggested lots have been debate at issue.

Being the main driver of feed negative 0.7.

Got it declined to ex those items any further color that you might want to share and maybe also looking ahead as to how those segments are tracking into the Q2.

Yeah, well, we think the year is probably going to unfold a little bit like last year, where we did improve quarter after quarter. So that's what we expect.

Donald LeCavalier: Yeah. Well, we think the year is probably gonna unfold a little bit like last year where we did improve quarter after quarter, so that's what we expect. Obviously we start from a higher base compared to last year. You know, this portfolio is relatively new for us, so there maybe there's a little bit of cyclicality after all, because last year, Q1 was our softest quarter, and it seems that could be the case again this year. There might be a little bit of cyclicality. You know, like I always mention in that business, there's a lot of inventory building or you could ship and it could move from quarter to quarter.

François Olivier: Yeah. Well, we think the year is probably gonna unfold a little bit like last year where we did improve quarter after quarter, so that's what we expect. Obviously we start from a higher base compared to last year. You know, this portfolio is relatively new for us, so there maybe there's a little bit of cyclicality after all, because last year, Q1 was our softest quarter, and it seems that could be the case again this year. There might be a little bit of cyclicality. You know, like I always mention in that business, there's a lot of inventory building or you could ship and it could move from quarter to quarter.

We start.

From a higher base compared to last year.

You know this portfolio is relatively new for us. So there may be theres, a little bit the cyclicality. After all because last year Q1 was our softest quarter, and then and it seems that could be the case again this year, so they might be a little bit of cyclicality and.

Like I always mentioned in that business Theres, a lot of inventory building or you could ship and because we will from quarter to quarter I would say in the mix in Q1 are maybe our most profitable segment ship, a little bit less than or less profitable segments ship, a little bit more and.

Donald LeCavalier: I would say in the mix in Q1, our, maybe, our most profitable segment ship a little bit less and our less profitable segment ship a little bit more, and you will see that reverse in the quarters to come. That's why we think that the year is gonna unfold a little bit similar to last year where we increase our percentage of profitability quarter over quarter for four quarters in a row. We feel that we start from a higher base and that the year is gonna unfold similarly this year.

François Olivier: I would say in the mix in Q1, our, maybe, our most profitable segment ship a little bit less and our less profitable segment ship a little bit more, and you will see that reverse in the quarters to come. That's why we think that the year is gonna unfold a little bit similar to last year where we increase our percentage of profitability quarter over quarter for four quarters in a row. We feel that we start from a higher base and that the year is gonna unfold similarly this year.

You will see that reverse in the quarters to come. So thats why were we think that the year is going to unfold a little bit similar to last year, we increase our percentage of profitability quarter over quarter for fourth quarter in a row.

We feel that we start from a higher base in the years going on the full smoothly this year.

Adam Shine: I think on the last call, the Q4 call, you suggested organic growth in packaging again, you know, skewing to the H2. Growth nonetheless in the year of, you know, in that 1.5% zone. I guess the qualifier is twofold, one being resin, and then also just acknowledging, you know, that incremental, I guess paper contraction, right? As it related to weaker volumes there, correct?

The last call to Q4 call you suggested organic growth in packaging is again skewing to the second half growth Nonetheless into Europe.

One 1.5% showed I guess the qualifier is twofold wouldn't be.

And then also just acknowledging.

That incremental.

Yes paper contraction right has as it related to weaker volumes there correct.

François Olivier: Yes. We still think that we could reach 1.5%. You know, we think that the Q3 and Q4 are probably gonna show higher organic growth than Q1 did. We were -0.7% with the portfolio that we're moving forward with after the disposal of paper. You know, we didn't show growth. We were -0.7% in Q1. What we think, when the year unfold, we believe that we will be positive organically. Remains to be seen, is it gonna be 1% or 1.5% or 0.5%? We think that we'll be in a positive zone if everything that we have lined up and qualified moves to our platform as it's supposed to move.

Yes, we still think that we could reach one 1.5%.

We think that Q3 in Q4 are probably going to show higher organic growth than.

Than Q1 did we were negative 0.7 with the portfolio.

Moving forward with after the disposal of paper so.

We didn't show growth, we were 0.7 negative in Q1, but what we think.

When the year on full we believe that we will be positive organically.

Sounds to be seen as they're going to be one or one an app or.

Five what we think that will be in a positive zone. If everything that we have lineup and qualified move to our platform as it supposed to move.

Adam Shine: Okay. Just in printing, I mean, obviously it's, you know, you've telegraphed that this year is expected to show some, you know, lesser declines on the flyer business compared to last year. You did highlight in the Q1, obviously bigger drops in newspaper and magazines, clearly secularly challenged segments. Did it somehow come as a bit more of a surprise per se? Or, you know, it was to be expected and we should, you know, acknowledge that during the rest of this year?

Okay, and just imprinted, we'd obviously youve telegraph that.

This year is expected to show some lesser declines on the Flyers business compared to last year you did highlight in the Q1, obviously bigger drops in newspapers and magazines clearly.

Secularly challenge segments, it's about did it come as a bit more of a surprise per se or.

It was to be expected, we should gulch that during the rest of this year.

I Didnt come as a surprise as I told you on the last call everybody caught us severely on their flyer usage last year also.

François Olivier: No, it didn't come as a surprise. As I told you on the last call, everybody who cut severely on their flyer usage last year also, you know, suffered severely in their business, and they acknowledged that. Most of them, they're back to a more normal level. For years, everybody who's trying to cut too much is having an impact on their business, which shows how the medium is still resilient. The numbers that we had in Q1 is the number we were expecting. It's hard to predict the volume, but I feel very confident about all the cost measure we put in place for the year. For the most part, they're all put in place.

Suffer severely in their business and the acknowledged that Soma most of them theyre back to a more normal level and.

In four years, everybody was trying to cut too much is having an impact on our business, which.

Which is shows all the medium is still a resilient so the.

Numbers that we had in Q1 is the number we were expecting.

It's hard to predict the volume, but I feel very confident about all the costs measure we put in place for the year.

For the most part they're all all puts in place and we believe the year is done on the fall a little bit like Q1.

François Olivier: We believe the year is gonna unfold a little bit like Q1. Q1, we had less volume, about 5%, and we managed to make more money than last year. I think if the market stays where it is, that's what you should expect as results. Obviously, if people cut more, we will suffer a little bit. If they cut less, then we'll do maybe a little, even a little bit better than Q1. We think Q1 is a good representation of what the year could look like in printing for us in 2020.

So Q1, we are less volume about 5% and we managed to make more money than last year.

I think if the market stays where it is.

Thats, what you should expect as a result, obviously if people cost more we will suffer a little bit and if the cost less than we'll do maybe a little even a little bit better in Q1, but we think we are going to Q1 I think is a good representation of what the year could look in printing for us and 20.

20.

Adam Shine: Maybe just one last question. Curious to hear some of the thought from you and maybe the from the board perspective in regards to the doubling of the buyback. Is that a reflection of the likelihood that maybe, you know, we're not seeing much more M&A in the over the next couple or two, three quarters? Or is it a reflection of the fact that, you know, you truly believe your stock is undervalued and, you know, you're prepared to step in a bit more aggressively than necessarily what we've seen in the past? Well, the recent past, that is.

Just one last question curious to hear some of the.

Thought from you and maybe the from the board perspective in regard to the doubling of the buyback is that is that are idle to read too much into it but is that a reflection of.

The likelihood that maybe we're not seeing much more M&A.

Over the next couple or two three quarters or is it a reflection of the fact that you truly believe your stock is undervalued and.

You are prepared to skip it a bit more aggressively than necessarily.

What we've seen in the past well the recent past that is.

Yes, basically the main reason as we we've been active.

François Olivier: Yes. Basically, the main reason is we've been active in the buyback since the beginning of the year or the end of last year, where we were able to for a good part when our stock was trading at CAD 13, 14, 15 dollars. We were not able to be active because we were in the middle of the paper deal. As soon as that got made public, we started to be active. We've used just before Christmas about half of our regular program. We used half of it, so that's why we doubled the amount to 2 million shares because we already bought back half a million.

Hi back.

[music].

Since the beginning of the year or the end of last year, where we were able to.

For a good part when our stock was trading at 13 14 15 dollar we were not able to be active because we were in the middle of the.

Paper deal, but as soon as backup made public we started to be active and.

And we view so just before Christmas about half of our of our regular program.

And we use half of it so thats why we we doubled the.

Demand, we did 2 million share because we already bought back half a million and then we didn't feel that having the ability only to buy.

François Olivier: We didn't feel that having the ability only to buy half a million at today's level was enough for the ability to use that tool, if we feel that the stock is undervalued and that we don't have other opportunity to deploy capital. You know, it's the same old story for us. Number one is to continue to deleverage the company. Number two is to make acquisitions. Then if no acquisitions are in the pipeline, yes, you might see us being more active at the level that the stock is trading at right now.

Hi familiar in.

Today's level was enough for four or.

Our ability to use that too.

If we feel that the stock is under value and.

We don't have other fortunately too.

To deploy capital.

It's the same old story for US number one is to continue to deliver to the company.

Number two is to make acquisitions and and then if if no acquisitions are in the pipeline, yes, you might see us being more active at the levels. The trade. This stock is trading out right now.

Okay, great. Thank you very much.

Adam Shine: Okay, great. Thank you very much.

No push and consume reinventing the pose Blankie. Your next question comes from line of pulp Lucky of TD Securities. Please go ahead.

Operator 2: Your next question will come from the line of Paul Bilenky of TD Securities. Please go ahead.

Operator: Your next question will come from the line of Paul Bilenky of TD Securities. Please go ahead.

Paul Bilenky: Thank you. I was hoping just to get a little bit more color on the formation of the recycling group and your plans there. In your press release, you said that you're looking to buy some equipment. Can you help quantify the anticipated spend there, or any additional sort of color you could provide around that?

Paul Bilenki: Thank you. I was hoping just to get a little bit more color on the formation of the recycling group and your plans there. In your press release, you said that you're looking to buy some equipment. Can you help quantify the anticipated spend there, or any additional sort of color you could provide around that?

Thank you.

I was hoping just to get a little bit more color on the formation of the recycling group and your plans there.

And your press release, you said that you're looking to buy some equipment.

Can you help quantify the the anticipated spend there.

Or any additional sort of color you could provide around that.

Yes, we're already a buyer of recycled resin, we have a group of supplier providing us with this we already have introduce and various verticals flexible packaging that that out recycled plastic and it's been a very successful events.

François Olivier: Yeah. We're already a buyer of recycled resin. We have a group of supplier providing us with this. We already have introduced in various verticals flexible packaging that have recycled plastic, and it's been a very successful venture for us. It's growing very, very fast. A lot of our customer are excited about switching their portfolio from 100% virgin resin packaging to a packaging that will include a various percentage of recycled pellets. We're kind of looking and say, well, we might need 15,000 to 20,000 tons of material more than we thought we would.

Sure for us.

And.

It's growing very very fast.

And a lot of our customer are excited about switching their portfolio from 100%.

Virginia resin packaging to two of packaging that will include.

Various percentage of recycled pellets and.

We were kind of looking and say well we might need.

18 to 20000 ton of material more than we thought we would.

François Olivier: We decided that it would be maybe a good idea to just rely on outside people to supply that to us, that we would have a division that would supply our need internally. Maybe not for all that we need, but we've been working very closely with some of their suppliers to design new products. We feel that owning that part of the process could not only help us secure our supply chain, but also speed up the development of new packaging and introduce that to the market. That's why we decided to step in. We're looking to produce at least 15,000 to 20,000 tons of recycled material. We intend to do that organically.

And we decided that it wouldn't be maybe a good idea to.

Just relying on outside people to supply that to us that we would.

Have a division that would supplier need.

And terminally maybe not for all of that we need.

But.

We've been working very closely with some of their supplier to design a new.

Products, and we feel that owning that part of the process not only help us a secure our supply chain, but also speed up.

The development of new packaging.

And introduced to the market. So that's why we decided to step in so we're looking to to produce at least 15 to 20000 ton of recycled materials and we intend to do that organically as you know when printing we got to own a lot of buildings that are empty. So we can deploy some.

François Olivier: As you know, in printing, we kinda own a lot of buildings that are empty, so we could deploy some recycling equipment in those buildings. Then we'll also be looking for M&A as we already have suppliers that we know of that are supplying us. We intend to be active in both fronts. We created a team of people to manage this division. We think we might deploy about, I would say, in the next 12 months, CAD 25 million to get started in that space.

Recycling equipment and those building.

And then we'll also be looking.

For many us we already have suppliers that we know of that are supplying us. So we intend to be active in unbilled front.

We created a team of people to manage this division and we think we might deploy about.

It's in the next 12 months 25 million dollar to to get started than in that space.

And would that 25 million be included in that 100.

Paul Bilenky: Would that CAD 25 million be included in that CAD 100 million of CapEx guidance for the year?

Paul Bilenki: Would that CAD 25 million be included in that CAD 100 million of CapEx guidance for the year?

Million of Capex guidance for the year.

Yeah.

François Olivier: Yeah. That's part of the CAD 100. Hold on. That could be organic or that could be acquisition. If some of that money could be an acquisition, it could be all organic. You should not assume that it's all, you know, organic and it's all gonna be to buy equipment. It could be a mixture of equipment and M&A. Anything we do on equipment would be on top of the CAD 100.

Donald LeCavalier: Yeah. That's part of the CAD 100.

Part of the 100.

François Olivier: Hold on. That could be organic or that could be acquisition. If some of that money could be an acquisition, it could be all organic. You should not assume that it's all, you know, organic and it's all gonna be to buy equipment. It could be a mixture of equipment and M&A. Anything we do on equipment would be on top of the CAD 100.

That.

That could be organic or that could be acquisitions. Some of that money could be an acquisition could be all organic so you should not assume that it so.

Organic and it's all going to be to buy equipment. It could be a mixture of equipment and M&A. So so but anything we do on equipment would be on top of the 100.

Paul Bilenky: Okay, understood. Thank you. I'll get back in queue.

Paul Bilenki: Okay, understood. Thank you. I'll get back in queue.

Okay understood.

Thank you I'll get back in Q.

Great and zero carbon first it was I think it sounds good amount that for you.

Operator 2: Ladies and gentlemen, if there are any additional questions at this time, please press star followed by one. As a reminder, if you are using a speakerphone, please lift the handset before pressing any keys. David McFegan. Your next question will come from the line of David McFegan of Cormark. Please go ahead.

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

He somebody to hit when our Super Tuesday that folks on main did he did close your data scepter Amanda piece when they do wish ladies and gentlemen, if there any additional questions. At this time. Please press star followed by one as a reminder, if you're using a speakerphone. Please lift the handset before pressing and keys, we push and because the only intending to David mix effect that given your next question.

Income from line of David Mcfadgen of Cormark. Please go ahead.

Hi, Yes couple of questions.

David McFadgen: Oh, hi. Yeah, a couple of questions. So François, just on the packaging outlook, you know, for the organic growth this year. Is that primarily expected to be driven from an improvement in Latin America, or are there other factors that you think will drive that organic growth?

David McFadgen: Oh, hi. Yeah, a couple of questions. François, just on the packaging outlook, you know, for the organic growth this year. Is that primarily expected to be driven from an improvement in Latin America, or are there other factors that you think will drive that organic growth?

So France, why just on the packaging outlook for the organic growth this year.

Is that primarily expected to be driven from an improvement in Latin America or are there. Other factors that you think will drive that at organic growth.

François Olivier: Well, there's another factor. Obviously, South America is one of them. But it's a $120 million business out of a $1.3 billion. So yes, they will contribute, but we expect other group to contribute and to show organic growth towards H2.

Theres other factor.

As you.

South America is one of them.

It's a 120 million dollar business part of a.

The billion trees. So so yes, the will contribute but but we expect other group.

To contribute to show organic growth.

Towards.

The second none of the year.

Okay.

David McFadgen: Okay. Just on Publisac, maybe you could give us an update on what the latest is there, and is there any idea on when this would be resolved, and just, you know, just the timing?

And then just on.

Just on the Leacock, what's maybe you could give us an update on what's the latest is there and is there any IDN when this would be resolved.

Just the timing.

We we don't own the.

François Olivier: Yeah. We don't own the timing on this. The city of Montreal own their process. I think they ran a pretty good process. They have all the information. They've been communicating with us. We have a good communication channel with them. They ask a lot of questions. As far as their timing and what, when are they gonna, you know, come to a conclusion on this, it's hard to predict. We're hopeful that with the information we provided that they will come to the right conclusion. We frankly don't know how long they're gonna take. What we are happy with is that at least we're talking.

The timing on this.

City of Montreal alone on their process I think the around a pretty good process.

You have all the information.

In communicating with US we have a good communication challenge them the ask a lot of questions.

But as far as.

There are timing and.

What.

When are they going to.

And I'll come to conclusion on this is our start to predict but.

Hopeful that with the information we provided that the will come to.

To the right conclusion, but.

We frankly don't know.

Long dig dig in.

We are.

Happy with is that these were talking.

François Olivier: It's for them to decide what they wanna do.

It's for them to decide what they want to do.

Okay, and what's the latest mirabelle.

David McFadgen: Okay, what's the latest with Mirabel?

Mirabelle, we going to go to court with them as as we speak in early April and we are very very confident.

François Olivier: Mirabel, we're gonna go to court with them as we speak in early April. We are very, very confident that our position will prevail and rapidly.

Our position will prevail and rapidly.

Okay.

David McFadgen: Okay. Just on the media business. You know, if I adjust for the businesses that you've sold, it looks like it was down a little bit. I don't know if I've interpreted that correctly. I was wondering if you could provide some color there.

And then just on the media business you know if I adjust for the businesses that you've sold.

It looks like it was down a little Ben and I don't know I'm interpreting that correctly is where if you can add some color there.

No I think it's just a timing issue like the business we sold.

François Olivier: No, I think it's just a timing issue. Like, the business we sold performed very well in November and December historically, and they showed good profit, and we sold that. The business we kept, you know, is really making most of its revenue in Q3 and Q4. You know, not a lot of people are buying school textbook in the middle of December. This business of media that we have now, the profitability now is switching to Q3 and Q4. The school textbook business is really in Q1 and Q2, we're investing, which mean we don't really make money. Even some months we're losing money. When we start to ship the book and in Q3 and Q4, then we have profitability.

Performed very very well in November and December historically on the show good profit and and we sold that and the business we kept.

You know is really making most of his revenue.

In Q3 in Q4, you know not a lot of people are buying school textbook in the middle of December So does this business.

Of media that we have now.

Profitability now is switching to Q3 in Q4, so that school textbook business is really in Q1 in Q2, we're investing which means we don't really make money even some months, we're losing money when we start to ship to book and.

In Q2 in Q4 than that and we we have profitability. So is just like it timing.

François Olivier: It's just like a timing, but you guys are well aligned in terms of the profitability, how profitable that business is. I think now there's more a seasonality where not a lot of profit is made in Q1 and Q2, and the bulk of the total profit is almost done in Q3 and Q4, which was not the case before because the rest of the portfolio we sold had a profile contrary. That was more balancing the media portfolio, you know, quarter to quarter. It was more even. Now it's displaced towards the end of the year.

But you guys are well aligned in terms of the profitability.

Our profitable businesses I think now there is more seasonality, we're not a lot of profit dismayed in Q1 in Q2 and the bulk of them.

Total profit is almost done in Q2 in Q4, which was not the case before because the rest of the portfolio we sold.

Yes.

Out of profile contrary, so that was more balancing the media portfolio quarter to quarter. It was it was.

More even now its displaces words, the end of the year.

Okay all right.

David McFadgen: Okay. All right. Just lastly, are you guys at all impacted by this coronavirus?

And then just last the are you guys at all impacted by this grown a virus.

No not really and our packaging all in all.

François Olivier: Not really. In our packaging all in all, we used to have a couple years ago some of the raw material coming out of China. With, you know, kind of trade war that had between the US and China 2.5 years ago, we moved all of our supply chain out of China to other countries. In our supply chain and packaging, we're not impacted. And then everything we do is basically packaging food that is manufactured in the Americas for the American consumers. No impact for us in flexible packaging. In print, same thing, our supply chain is truly North American. Paper is sent by truck to us, and it's manufactured very close to our print plant.

We used to have a couple of years ago, some of the raw material coming out of China, but.

With the.

Hello.

Trade.

Kind of trade war that between the us in China to two and half years ago, We will move all of our supply chain audit China's other countries, so and our supply chain and packaging were not impacted.

And then everything we do is basically packing food that is manufacturer in the Americas for the American consumers. So.

No no impact for us and flexible packaging.

And print same thing our supply chain is truly north American paper is ascend by truck to us and Thats manufacture very close to our print plant and then there we might have some some positive impact has in the book business.

François Olivier: In there, we might have some positive impact, as in the book business. Some publisher in the US had moved some of their supply chain to China, and they are coming back rapidly to North America. That's why in the last two quarters, in the last six months, we experienced double-digit growth in our book business. In print, it's a positive impact. The only thing we need to watch for is some of the retailers that sell hard goods that are manufactured in China. If they start to have a supply issue for their business, could that have an impact on the amount of items, the advertising flyer, i.e., our page count?

Some.

Publisher in the U.S. had moved some of their supply chain to China.

And they are coming back rapidly to North America Thats why in the last two quarters in the last six months, we experienced double digit growth.

And our book business so.

Print, it's a positive impact the only thing we need to watch for us.

Some of retailer that sales hard goods that are manufacturer in China.

If they start supply issue for for for their business.

I have an impact on the amount of items.

Advertising flyer.

Page count.

François Olivier: Potentially, but a lot of our big users are fooders and we don't see a big impact for them about this thing. All in all, I would say so far from what we see is neutral for us to positive.

Potentially but a lot of our big users are our food errors and and we don't see a big impact for them.

Above this thing so all in all I would say so far from what we see is neutral for us to positive.

Okay all right. Thank you.

David McFadgen: Okay. All right. Thank you.

A question because the only intending to drew Mcreynolds. Your next question from line of drew Mcreynolds RBC capital markets. Please go ahead.

Operator 2: Drew McReynolds. Your next question comes from the line of Drew McReynolds of RBC Capital Markets. Please go ahead.

Operator: Drew McReynolds. Your next question comes from the line of Drew McReynolds of RBC Capital Markets. Please go ahead.

Yeah, Thanks, very much good afternoon.

Drew McReynolds: Yeah, thanks very much. Good afternoon. Dave actually got my final question, so maybe I'll squeeze a couple in here. François, just remind us on the printing side of the business, you've done a great job keeping on top of plant consolidation to maintain your profitability. To what extent are you close to reaching a limit on the ability to consolidate the printing plant platform? And second question, on the newspaper printing side, are there any kind of contracts here that come up for renewal in the near term? I know I've got a couple in my model that are pretty long duration contracts, but just wanna make sure there's nothing imminently coming up in the next few years. Thank you.

Dave actually.

Got my final question, So maybe I'll squeeze a couple in here for us. So I'll just remind us on the printing side of the business you've done a great job.

Keeping on top of plant consolidation to to maintain your profitability.

To what extend our yet close to reaching a limit on the ability to consolidate or the the printing plant platform and second question on the newspaper printing side.

Our.

Is there are there any kind of contracts here that come up front or for renewal in the near term I know I've got a couple of my model that are pretty long duration contracts, but just a just want to make sure. There's theres nothing eminent way coming up next few years. Thank you.

Yes in terms of the contract renewal.

François Olivier: Yes. In terms of the contract renewal, no change. I mean, we always organized, you know, one or two per year to renew. In retail newspaper, they're all long-term. Magazine, they're all long term. In retail, you know, we have, you know, a lot of clients, and we usually keep two or three per year. When we sign those contracts, we spread the maturity, so they don't all come at term at the same year. There's nothing special there. We have a couple of renewals going very, very well, and we don't anticipate any problem or any change there. In terms of our ability to continue to protect profitability despite some volume decrease, I think I'm very encouraged.

No change I mean, we always organized.

One or two.

Per year to renew.

Retail newspaper Theyre, all long term magazine Theyre all long term.

But in retail we have.

A lot of a lot of clients and we usually keep two or three per year. So when we signed those contract spread the maturities. So.

Outcome.

Term at the same year.

So there's nothing special there.

We.

We have a couple of renewal, it's going very very well and we don't anticipate any any problem or any change there in terms of our ability to continue to.

Profitability. Despite some volume decrease I think I'm very encouraged we have certain segments like pretty media like book.

François Olivier: We have certain segments like pre-media, like book, like in-store marketing that are growing nicely. All of them are growing double digits, so that does tend to help. 5, 6 years ago, our newspaper business was huge. This business in the last couple of years has decreased by more than 50%. Our newspaper are probably the part that are decreasing the most, but now it's less than 10% of our portfolio. We have some growth part in the portfolio, and we're adding plants. You know, with the two acquisition that we made in POP, we added you know, 2, 3 plants and there's a lot of buildings there, so there's ability for us to rationalize and cut costs.

In store marketing that are growing nicely all of them are growing double digits.

Just on to help.

Five six years ago, our newspaper business was huge.

This does business in the last couple of years.

The decrease by more than 50% so are.

The newspaper are probably the part that are decreasing the most but now it's less than 10% of our portfolio. So we have some some growth part and the portfolio and we're adding plant with the two acquisition that we made in fuel be we we added.

You know two three plants and.

As a lot of buildings there. So there is ability for us to rationalize and cut costs.

François Olivier: We could continue to do what we've been doing for forever. I mean, our strategy is very simple, that we're gonna print what Canada needs to be printed and, you know, we're gonna go down right to one plant. As we go down from the 16 we are now, if we end up one day at one plant, we're gonna see the similar type of thing on the cost that we've done moving from thirty or 54 we had, you know, 15 years ago to the 16 we have today. People always think there'll be an end to that, but I think we prove that we can make it happen, and then we will continue to do so.

We continue to do what we've been doing for forever I mean, our strategy is very simple as.

We got to print with Canada needs to be printed.

We got to go down right to one plant and as we go down from the 16. We are now if we end up one day up one plant we.

This another type of.

Thing on the cost that we've done moving from.

From 53 years before we add 15 years ago to this 16, we have to do so.

People always think there'll be an end to that.

I think we approve.

We prove that we could make it happen.

And then we will continue to do so.

Yes, certainly have okay. Thanks restaurant.

Drew McReynolds: Yeah, you certainly have. Okay, thanks, François.

Thank you.

François Olivier: Thank you.

My question I guess you only attending the mechanism next question comes on line of Scotiabank. Please go ahead.

Operator 2: Your next question comes from the line of Mark Neville of Scotiabank. Please go ahead.

Operator: Your next question comes from the line of Mark Neville of Scotiabank. Please go ahead.

Hey, good afternoon, maybe just back to the recycling group.

Mark Neville: Hey, good afternoon. Maybe just back to the recycling group. I'm just curious, would the plan be to use sort of all that recycled plastic internally, or is that something you would look to sell to other vendors?

Im just curious with the plan B.

To use sort of all that recycled plastic interlayers, that's something you would look to cells to two other other vendors.

Obviously, if we go organically.

François Olivier: Obviously, if we go organically, the business model will be designed mainly on selling this resin to us, because that's where the reason why we are going in. We think there will be a lot of demand for recycled pellets in the years to come. Obviously, if we do M&A, and we buy a company that services other customers or other people in other vertical, you know, we will continue to do so. The main reason why we're going in is to feed our own demand. That's the rationale, but we would not be closed to sell to other people.

[music].

The business model will be design, mainly in our on selling this risen to us.

That's where the reason why we are going in we think the will be a lot of demand for for recycled pellets in the years to come.

Obviously, if we do M&A and we buy a company that service other.

Other customers or other people that other vertical.

We will continue to do so.

So.

But the main reason why we're going in.

As to feed our on demand.

And that's that's the this irrational, but we would not be close to sell to other people.

And is there specific product categories are within the business that.

Mark Neville: Is there specific product categories or within the business that, you know, would be more conducive or would use more, potentially more recycled resin, across the packaging?

Would be more conducive or would use more potentially more recycled resin across the packaging.

Yes, I would say than our portfolio, we have two types of flexible packaging.

François Olivier: Yes. I would say that in our portfolio, we have two types of flexible packaging. Some that you would qualify a non-food grade, you know, like the plastic is not touching the food. Then we have plastic that touch the food. It's obviously a lot easier to introduce recycled material in non-food grade, the non-food grade part of our portfolio. That's where we have most of the volume right now.

Some that you would qualify a non non food grade like the plastic is not touching the food.

Mark Neville: Mm-hmm.

François Olivier: Then we have plastic that touch the food. It's obviously a lot easier to introduce recycled material in non-food grade, the non-food grade part of our portfolio. That's where we have most of the volume right now.

And then we have plastic that production to food.

It's obviously a lot easier to introduce recycled material in non food grade.

Non from great part of our portfolio and Thats, where we are most of the volume right now we had been able to introduce a recycled pellets into food grade application.

Mark Neville: Okay.

François Olivier: We've been able to introduce recycled pellets into food-grade application, and we see growth in both areas. It's a lot easier when there's no food contact.

And we see growth in both areas.

So let us a lot easier when there is no contact right and this is something that I think when you are responding to an RFP you're bidding.

Mark Neville: Right. Is this something that, like, when you're responding to an RFP or bidding, you know, a contract, that the customer sort of puts in the spec? Or is it something where you're going in and saying, we have X percent recycled content, and it's helping you win new business? I'm just, I guess, trying to understand if it's push or pull.

You know a contract.

The customer sort of puts in the spec or is it something where you're going in and say, we have X percent recycled content and it's helping you win new business I'm, just going I guess, just trying understand if its push or pull.

So a little bit of vote, but most of our large customer have made the same type of pledge that we have made.

François Olivier: It's a little bit of both, but most of our large customer have made the same type of pledge that we have made. We have made the pledge that 100% of our portfolio will be recyclable by 2025. We've made the pledge that we would use a certain percentage of PCR resin in our whole portfolio. A lot of our customers have made the same pledge. Us and our customer have made pledge to 2025, and it's 2020, so we got to get going.

We have made the pledged.

On a percent of our portfolio will be recyclable by 2025, and we've made that we would use a certain percentage of PCR resin and our whole portfolio and a lot of our customers made the same pledge and us and our customer may have pledged to 2025 and it.

Mark Neville: Mm-hmm.

François Olivier: We've made the pledge that we would use a certain percentage of PCR resin in our whole portfolio. A lot of our customers have made the same pledge. Us and our customer have made pledge to 2025, and it's 2020, so we got to get going.

2020, so we got to get goings sugar.

Mark Neville: Okay.

François Olivier: Sure, they are very interested in listening to ideas or new product that would make them reach the objective that most of them have put out there publicly. Yes, these are a discussion. Sometimes they are in a RFQ, but not a lot of time because you're still at a phase where it's, you know, specific to each customer. It's more, I would say, a strategic discussion than an RFQ discussion.

They are very interested and listening.

Yes.

Or new product that would make them reach the objective that most of them.

They are publicly so yes. These are discussion.

Sometime the are any RF Q, but not not a lot of time, because you're still at the.

Base, where its.

Yes.

Specific to each customer.

And it's more.

I would see strategic discussion than on our Q.

And is this type of product the more the recycled content, presumably you would be a little more costly and your side, maybe maybe not but southern you're also able I guess to charge a little bit more for again because of that what it's doing.

Mark Neville: Is this, again, a type of product, you know, the more the recycled content, presumably it would be a little more costly on your side, maybe not. But is it something you're also able, I guess, to charge a little bit more for, again, because of that, you know, what it's doing, in terms of meeting these pledges?

In terms of meeting these places.

Thank you said a drive maybe maybe not.

François Olivier: I think you said it right. Maybe, maybe not. It depends.

Okay vertical.

Mark Neville: Okay.

François Olivier: Which vertical. It depends on the complexity of the package. It depends if you put 10% recycled content, 30%, 50%, or 100%.

The fans.

The complexity of the package it depends if you put 10% recycled content 30, 50 or 100.

Mark Neville: Yeah.

François Olivier: It depends if it's a 9-layer package or 3-layer package or 1-layer package. It could be more costly, sometimes it's less costly, sometimes it's the same. It's all a balance of what the customers are looking for, you know. Like there's the look, there's the speed, at what speed it's running, and then there's the cost. Sometimes there's a trade-off between the look, the speed, and the cost. Each customer makes their own choices, and we try to design the package around their choices. It could be more or it could be less expensive.

That's a nine layer package, we layer package at one layer package. So.

It could be more costly sometime it's less costly sometime it's the same.

And it's all a balance of what the customer looking for you normally there is to look theres the speed at what speed it's running.

And then there is the costs.

Sometimes theres a.

Theres a tradeoff between the look the speed.

<unk> costs and each customer make their own.

They are on choices and we tried to design the package around their their choices.

Could be more or be less expensive.

Okay understood.

Mark Neville: Okay, understood. I think I'll leave it there, but thanks for taking my questions.

I think I'll leave it there, but thanks for taking my questions.

François Olivier: Thank you.

Thank you.

In some fees of under could you sort of like there are no further questions. At this time. Please continue.

Operator 2: There are no further questions at this time. Please continue.

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

Thank you everyone for joining us on the call and with afford to speaking with you.

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

I mean, I mean, I missed your system in a bit coffeehouse bushels, nothing special female FX issue, ladies and gentlemen. This concludes the conference for today.

Operator 2: Ladies and gentlemen, this concludes the conference for today. Thank you for participating. You may disconnect your lines.

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

Thanks for participating you may disconnect your lines.

[music].

Q1 2020 Earnings Call

Request a DemoDemo

TCL

Transcontinental

Earnings