Q4 2020 Transcontinental Inc Earnings Call
[music].
And limits your messed up a lot that's not deviate from New York and a compounded if a nicolas and Andy and his towards give him a mess did a because that's just do a mid range a tc class can start that.
And on a GAAP house to deposits. That's a one time a Dick Goodson a have you had to guess you won't see but a lot because that that's you know you did you see value. So so only done he asked them on a day.
And did you own a happy 'cause it only a healthy television <unk> average people gene and it just does sound moving well.
Welcome to the TC transcontinental fourth quarter and fiscal 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 December 10th Twentytwenty.
And now I would like to turn the conference over to you and appoint director Investor Relations.
And how might not so de Dup, a HUD and that you and appoint zonnic dark and that's the only make these and so what you'd have point. Please go ahead.
Thank you a gabriel and good afternoon, everyone.
Welcome to piece, a tox and I'll cover fourth quarter and fiscal year. A 2020 result conference call a press release and the M.D. and they would complete financial statements and related notes were issued earlier today and are available on our website. He sees a PC.
A replay of this conference call well from be available on our website <unk> under our Investor Relations section.
We have with US today are president and Chief Executive Officer, Paul Cloggie, and our Chief Financial Officer, and not as a company.
Before I turn the call over a two management I would like to spend to find a bit.
A conference call isn't a tend to put a financial condition.
Media, our and listen only mode and sort of contact and if anything.
Senior adviser Corp. corporate presentation for more information or if you're a request.
Please be reminded that some of the financial measures discussed over a course of this conference call are non IRS.
You can refer to the and yeah and they for a complete definition and reconciliation of a cuts measures quite apart in addition.
A conference call. My also contain forward looking statements.
These statements are based from the current expectations of management and information available as of today and be involved a numerous risks and uncertainties known and unknown.
There are risks uncertainties and other factors that could influence actual results are described a fiscal 2020 annual and be a net and then the latest annual information form.
With that I would now like to turn the call over to our president and CEO Hot for a pretty good.
Thank you, yeah, and and good afternoon, everyone.
We delivered another excellent quarter and thing or fiscal 2020, we had a strong performance and all of our businesses.
And and now for the year was impacted by cool with 90, and I'm proud to say that with our resilience agility and operational efficiency not only did we pull true, but we are stronger than we were a one year ago.
How did we do that.
First we significantly improved the profitability of our packaging and sector.
Second we demonstrated our ability to control our cost and print whatever it a context.
Third we protected our free cash flow generation and significantly reduced our debt keeping us and a solid solid financial position.
Fourth we launched a strategic plastic recycling business and fit our media sector as a spectacular year it can build zone.
Let me review the highlights for the fourth quarter.
We were very pleased with our packaging results.
We continue to see sustained customer demand for food and consumer products driven in part by stay at home behavior. These.
These products accounts for the majority of our portfolio and enabled us to offset the adverse effects of the pandemic and certain other markets.
In terms of profitability I mentioned last quarter, the expected negative impact of resin pricing dynamics. Despite this impact we recorded.
We recorded a significantly higher profitability on a year over year basis, thanks to our operational efficiencies better and and expected synergies and a favorable mix.
I'm also proud to see that we delivered on our objectives and packaging for the full year, we evolve our portfolio to grow and markets, where we have a strong competitive advantage. We grew our EBITDA by 20 million, a $228 million and Dallas and spiked up selling our paper packaging business 400.
And $80 million Us and January 2020.
Organically, our EBITDA grew by 13% quite an achievement.
Our robust port probe R&D project portfolio continues to be a major focus and we are making significant investment and product development demand is growing for packaging that is recyclable compostable or has a recycled content. This.
This position us well as our customers are increasingly turning to us as their sustainability partner.
On that note, we recently announced a promising agreement with the Coca Cola Company, which is using a newly launched shrink film containing 30% a proposed consumer recycled plastic.
We are proud to support the Coca Cola companies and make progress towards our share sustainability objectives.
We also continue to commercialize our compostable lifted and mother bags with major coffee brands across North America.
Thanks to our recycling group, we continue to make headway and a circular economy for plastics by increasing our capabilities to provide a stable procurement of recycled resins.
We are well positioned to benefit for the trends towards more sustainable products, a key component of our long term growth and packaging.
Our printing sector also had a very solid quarter, showing its resilience and spice up the pandemic.
While we continued to see recovery in demand. We also further optimize our platform by reducing our overall costs.
The gradual recovery of orders continue, albeit at a slower rate and we now stand at around 80% to 85% of last year's volumes and in line with the levels. We communicated last quarter that said the crisis resulted in a loss of revenue of more than $270 million for the.
Last fiscal year.
Turning to our flyer business and a quarter, we saw a gradual return to prepare mimic levels from most of our customers.
Despite the recent lock down measures by government to prevent a spread of the virus our volumes as has been resilient so far but remain we remain cautious regarding the potential impact of the second wave.
As I've said before direct promotion and remains at the heart of retailers strategies, we know that the flyer continues to drive both and store and online retail traffic.
Based on two recent surveys Flyers readership remained steady throughout the crisis. This is a clear indication that it's still and effective marketing tool to bring value to retailers, while supporting Canadian and a household cost savings and these difficult times.
And our print segment, a significant portion of our revenues now come from vertical now come from verticals that are growing nicely such as free media book printing and in store marketing.
We invested more than 10 million over the past year, and our book printing platform to increase capacity and to improve manufacturing efficiencies. This.
This investment signals, our confidence and the future of the North American book market, we are well positioned to benefit from this growth.
Overall im very proud of our print sector that has generated strong free cash flow and was able to maintain good margins.
The fact that we now have about 25% of Brent revenues and growing segments is another reason why we remain confident and our ability to continue generating strong cash flow or print sector for many years to come.
Our media sector is another a resilient business, we had an excellent quarter with a strong growth and profitability year over year.
This was not only driven by fourth quarter seasonally low seasonality, but also by innovation and adapting to the pandemic contacts.
We continued to channel our effort and to a growing these assets both organically and through future acquisitions.
In conclusion I want to leave you with a few messages.
First our 2020 results reflect the strength of our diversified business model and each of our sectors combined with a strong execution and agility.
Second and packaging our main engine of growth we have successfully completed the integration of core gross America.
And we are more than delivered on our synergies.
Our foundation is built.
And our foundation to build a larger more profitable packaging company is strong and we are confident about delivering another solid year and fiscal 2021.
Third while it is too early to provide a one off book for print and the ongoing pandemic context, we expect to see an improvement and volumes as specialty and the second half of fiscal 2021, as we cycled past a hardest hit quarters of fiscal 2020 and move towards a new.
Normal.
Fourth we are confident that our print and media sectors will both continue to provide fuel for our growth by generating significant cash flows and the years to come.
Finally, with a strong results, we delivered combined with our solid financial position, we are optimistic about the coming years and remain committed on executing on our growth strategy with that I'll turn it over to Donna.
Thank you cost a lot and good afternoon, I will start by looking as a consolidator numbers as expected revenues and the quarter were down year over year.
Like we saw in the previous quarters. The difference is mainly related to a lower printing activities because of the impact of a 19 and the sale of the paper packaging business in January 2020.
Consolidated adjusted EBITDA for the quarter was up by 5.5 per cent versus last year, mainly from higher margin in the packaging and media sectors.
I'll provide more details on how we drove profitability improvements in the review of each sector.
Interest expense declined as we reimbursed $375 million of debt per year in the year combined with lower interest rate the tax rate was slightly higher than what we have seen in previous quarters due to the nonrecurring items.
Full year tax rate was 25.9% in line with our guidance.
Performance combined with lower interest expense led to adjusted adjusted net earnings of 83 cents per share for the quarter compared to 80 cents last year.
Now looking at the segments.
Once again, our packaging secular led the way with a very strong quarter.
While revenues were lower than last year, mainly because of the sale of the paper packaging operations, we saw strong organic growth and many food related segments. This includes the introduction of a new product from a banana business in Latin America.
This growth was offset by declines in non food markets, but we expect those to recover in fiscal 2021.
For the full year, excluding the impact of that resin prices and the sale of the paper packaging business. The packaging sector generated positive organic revenue growth of about half a percentage.
As we mentioned last quarter, the lag and passing the resin price increases to customers and taxes and margins and the fourth quarter.
Despite this impact we delivered an adjusted EBITDA margin of 16.9% versus 13.8% last year.
The two main drivers of this large increase where and improved mix, especially following the sale of the paper packaging operations.
And the fact that we exceeded targets for synergies and efficiency gains.
In addition, IRS 16 contributed 60 basis points to the improvement.
Our print sector also had a strong quarter, giving them and they make contacts.
Revenues were down organically, mainly as a result of the positive and that's dependent and a with a decline of 20% in line with our outlook.
This is a big improvement from the 32% we saw in Q3.
In November volumes were around 80 to 80 from 85% of last year, but with a second way we remain cautious regarding the next few months looking at profitability the significant reduction in our cost structure and the amounts received from the government.
Can you do and emergency wage subsidy program contributed to an adjusted EBITDA of $75 million to $79.5 million for the sector.
On a full year basis, excluding a subsidy we delivered an adjusted EBITDA margin of 20%.
I'm very proud of this achievement as it highlights our ability to align our cost structure and the free the sector.
Im also proud that we continue to deliver a strong free cash flow in spite of the pandemic impact.
Our media business as a next seven fourth quarter much beyond beyond the expected seasonality.
Despite the sales of efficiency media assets towards the end of 2019 profitability increased in the quarter.
Looking at the full year R&D day efficient book business from challenge and to business, a 14 piece and not a best performance and over a 10 years.
Turning to cash flow from operating activities, we had a good quarter with $102 million regained a full year, a total to $427 million in line with 29 and team.
These cash flow combined with the proceeds from the sale of the paper packaging operations allowed us to repay a $375 million of debt.
In addition, we invested 98 millions and Capex, mainly income packaging, which will drive our future growth. We also distributed 78 million and dividends.
This reduction in our debt combined with a higher adjusted EBITDA contributed to bringing down our net debt ratio to 1.9 times.
If we were to exclude the impact of IRS 16, the ratio will be at 1.6 times.
This is a very significant achievements since we were at 2.5 times at the end of last year.
Furthermore, at the end of the quarter, we had a total of $674 million of available liquidity.
This strong pirfenidone channel position and our ability to generate stable solid cash flow provide us with flexibility in terms of capital allocation and.
Including capturing growth Fourk and Eightk.
I am encouraged by the strong results and I'm optimistic for a future given the strong foundation, we have built.
Now for a 2021 outlook.
And Brent as volumes continue to recover revenues and the second half of 2021 should be higher than those for the same per year in 2020.
In terms of profitability, excluding the impact of the Canadian wage subsidy program adjusted EBITDA should grow as well for a second half of fiscal 2021.
In fact hedging excluding the impact of the resin price, we should generate organic growth, especially in the first half of a year.
And the EBITDA level the increases in resin prices, we saw in the last several months should have a negative impact and the first quarter of 2021.
But once again and some facts should be more than offset by efficiency gains mix and synergy.
Once the lag effect, a lower higher resin prices will increase revenues with new and no significant negative impact on EBITDA dollar amount, therefore, only impacting margins.
Maybe I should have another solid year in 2021, but not enough to offset corporate costs of around $30 million.
Assuming no change and interest rates, our financial expenses should continue to decline in line with a reduction in our debt levels.
And that's no we reimburse 62.5 million us dollars a from loans a 30 end of Q4.
Our effective tax rate should continue to be in the mid Twentys range.
In terms of the use of cash with a year, you can assume capex coming in and around $100 million.
As for a cash tax you can assume around $50 million on that note. We will not proceed with the question per year.
And and EMS and Mr and genomic number today and if you had the concealing with loans to seven get sales are you happy Sony to shift when suites, our insulin delivery next levy internet and disciplined on sound.
And then but put demo because from a home fees and no.
Only dash and me you get and that was issued he did a cushion and there is a third of a debated infancy visits and did a functional mainly.
And to be 72 ish on a net just pull up let me ask a sale.
Thank you one moment, please ladies and gentlemen, we will now conduct the question and answer session.
I've a question Chris Please press the star followed by a one on your Touchtone phone you will hear a tone acknowledging a request and your questions will be pulled and the order there and received please ensure you lift a handset. If you are using speaker phone before pressing any keys one moment. Please for your first question.
But from the I guess, the only and letting the Adam Shined, a national Bank financial and your first question come from a line of Adam Shine of National Bank Financial. Please go ahead.
Thanks, a lot good afternoon, and so once again for so a good result, as you alluded to maybe a question or to a net packaging to start with can you. If you look ahead to fiscal 2021, you've already talked to some of the outlook, but maybe you can talk to some of the moving pieces pluses or minuses I think previously you've talked about potentially gross.
Maybe in the 2% to 3% sort of organic growth range.
So within that 23% range. If indeed that still holds does that actually include resin, which I think provides you with a bit of a tailwind.
And the call and gets a where pricing is going and.
And then maybe.
While you value Radthree that a leave a quick one for.
For your colleague in terms of the organic growth ex Reds and for the year and packaging was 0.5 per cent maybe to nail can just tell us.
Yes.
Or what the Q4 number wise, maybe it's the same but just a little clarity on that okay. Thanks share.
And.
Sales of the organic growth, we're we're sticking to what we said that the and our Q3, we expect 2021 to be a two.
3%, a we had a tough comp and Q4 and I'm very pleased.
And with the results of Q4, and low could share them with you but per year.
Having said that last year.
Our Q1 was not that goods, a we expect to.
Have a good start and organic growth in Q1, and a little known mention it and his prepared remark, we expect to be stronger and organic growth and the first six months again last six month of and pretty strong for us a little tougher comps, but when it's all said and done we believe we will be.
Between the two or 3% will be closer to the tree EPS. The industrial businesses is coming back and are like a part of our portfolio that is affected by a negatively by Corbett.
That should help us when it starts to come.
Come back and and the and.
And a nicer way and them, but we believe that the verticals of food.
And our strong are gonna remains strong and these numbers don't include any resin movements. So a they obviously have the resin price go up we will do more than two or 3% resin price goes down we'll do less book.
I believe that will be in a position next year to give you would the organic gross net of the resin.
So it's two 3% we're expecting a.
Net total excluding with resin price movement, and I will lead to and I'll answer. Your other question that coupons, one and Adam for Q4 was a slightly negative if you exclude resin price.
Okay. Thank you and maybe just one other one you touched on the.
The printing trends will be and that 80, 85%, so which was pretty much as you a telegraph back in Q3 can you speak to.
And is pretty clear movements by customers and be notwithstanding or acknowledging frankly.
Some of the restrictive measures that are upon us and may be brewing.
As we work through your Q1.
Are we.
And we still see as you said resilience in terms of the volumes, but are there any particular moves being made.
Plus or minus by any of the customers a key customers.
Okay.
Before I answered a print a I will complete your answer on packaging to wrap up the year like this quarter was negative 0.3% and net of all the resin and all the disposal of assets, but I'm pretty happy that for the overall year. If you if you exit the.
And the paper business and a negative impact it out on us for a couple of months early in a year and you net you exit the resin price movement and we finished a Europe 0.5 positive. So thats. What we had said early on and we were hoping for neutral to plus one this year. So we just that.
Did just that and packaging, so I'm quite pleased about that and.
And printing a very very similar we were hoping to be Frank with you too to having this momentum of moving.
Moving from minus 20 that we were in Q4, and we were at minus 15 and October. So we were hoping to a head towards the minus and and minus eight.
Because there is still an impact from school, but with the second wave and.
In Canada with a number is that we all see every day.
I think we gonna stay and and the zone, where we're at a minus 20 and the virus continue to.
To spread a further or we might go back to minus 25, and all that so from where we are to hope for a Q1 is going to be a little bit less.
Less busy to and what we anticipate there.
The main reason is that you know a lot of our customers and retail for example, there and also for the most part all of our customers are.
Are still using a flyers to communicate with the consumer but a lot of our customer a special.
Especially the non food customer a supply chain issues and are they are not even sure.
How much stuff they will receive from what they have ordered so it's very dangerous for them to put a.
Things and promotion and if they could not full systems.
No the demand so it has an impact on us on and reduce page count because a lot of our customer are afraid to to advertise too much because they're not sure theyre going and get the goods. So these are some of the trends that that I've never had a negative impact on us because of the call that some a provinces.
And when down to more serious lock down that up certainly and impact on retail. So thats why we remain very cautious for the first.
Six month of the year and you have to remember Adam weak on a compare and the first five months with non Corbett months last year and we fully expect November to March this year to be impacted by call. It after that is going to be the other way around them and we believe that things are gonna.
Probably get better and then we are going to compare for the last several months of the year with numbers that were heavily impacted by Covidien and minus 50, and April and minus 32, and and two tree and minus Q 20, and Q4, so we're very a.
We're pretty sure that we are going to do a lot better for the rest of the year, but.
But it's going to be slower than what we had hoped for and the next three to five months a would be my guess great. Yeah. Thanks for a detailed appreciate it.
A question I guess you. Your next question comes from the line of margin level and Scotia Bank. Please go ahead.
Hey, good afternoon guys.
Ill echo those comments a very good quarter.
Okay. That's that's just the first question the agreement with Coca Cola a swag.
So that's why I'm, just curious what territory that covers and.
I think its first sparkling water park for the your chance or a possibility that gross to.
To a water oh, a wider sort of Barclays.
Yeah, we we both decided to go.
Although this brand is was a new brand for a Coca Cola and sparkling water and brand call a while it's.
It's been launched and various parts of the U.S I think mainly the south east.
I don't recall, all the states, where it was the initial launch but this is a new product and.
And.
Our our innovation that we brought to a Coca Cola fit well with that brand and it was a.
A volume is obviously a lot less than if we would do that for a while for the cases of a 24 and 36 back of Coca Cola across the United States. So.
This year, we both see it as a test. This test has been very successful in terms of a.
And on a product doing what it's supposed to do and and running very very well and very very fast on their line. So no issue there, but obviously.
And for Us and Coca Cola, we hope to deploy.
To deploy that product too.
To to bigger other brands and bigger volume, but we'll do it step.
Step by step and and we're innovating and and learning a getter, but it's going very well and we're quite pleased about how things are going at the moment with this product and production.
And for the and the co product other using a recycled a.
Packaging now or is this sort of the first.
First test sales problem, so much and gone and Donna.
And our non we we did a trial.
And the last and all working on this for six to eight months and the product was launched about a month ago. So its commercial it's in a market and this brand has been launch with with a new product and this brought our content.
Contain 30% of a ocean bound resin, which is a plastic that is a.
That is picked up a unit.
Anywhere near and the beaches and near the Ocean and this is though.
This is a product we manufacture for them and and we have other.
Blends or other innovation that we will probably introduce with them and other customers around the shrink markets.
The and I'll just a couple of points a clarification is from a guidance.
So for the print, you're saying sort of X subsea gross so my math for a year around 220 million a sort of the of adjusted EBITDA for fiscal 20, that's sort of the baseline you're referring to and you're talking a little growing next year.
Yes, yes, yes that if you factor out the Canadian which subsidy that's the bases and what we're saying is we are.
Our call is that we're going to do better and that next year. We are we gonna grow in the second half of the year and Thats why we think that both from a sales standpoint, and the EBIT standpoint that we will do better next year.
Okay and.
And I guess and the packaging is really I guess, two two and half months of the paper and then.
A packaging business.
Sure lobbying and a new sort of growth and their expertise and so that's.
Good day.
Exactly and.
And it was like two and a half months and then if you look at our Mdna you will have the sales number and EBITDA contribution a bit.
Yeah.
Okay. Okay, maybe just a last one this just thoughts around M&A, yeah, I guess it was a difficult year to do a proper diligence not being a will travel distance and just sort of curious where you're out your thoughts around.
Thanks.
And arc and say that we even though we can travel we were very active and reviewing a lot of files and.
There's been some transaction on a GAAP.
And all of the space, where we operate.
We are we in a we have the balance sheets to be more active now that were below two times you know.
And all of that 1.6 time, excluding the Rs devices are used to look at it.
We believe that we could be more active and when I mentioned net on that call. We have about 684 million of a liquidity right. Now. So we think that we have a fortunate east to do a tuck in acquisition, both and media and print to continue to.
To changed our portfolio I mean, not a lot of people give a lot of attention to all these small deals.
But they are adding up and they're changing the mix of the print sectors and a lot of people think about transcontinental printing from or what it was 15 years ago. I can tell you is very different and it will be very different a year from now and be very different a.
Two years from now so we you know I mentioned net because when people think about M&A from DC. The only thing packaging, but we have a lot of opportunities to grow our a media portfolio perform.
Perform quite nicely. This year, we have some opportunity to continue to grow.
And our growth sector and print and we also have a fortunate tees and and North America and South America.
A continued to do M&A.
In a way and packaging and needs to be the right fit and the.
Right price, but.
We just brought in a new leader.
To to have the M&A.
And we'll function and we'll be working with me and net.
Yes, it's very March a heart of our strategy to do M&A and.
Months and years to come.
Okay. Thank you.
My question I guess you. Your next question will come from a line of Paul Bill and Keith TD Securities. Please go ahead.
Thank you good afternoon, I hope, you're all keeping well.
And maybe just following on that last question and the quarter of the print business, that's now coming from growth verticals.
What is your a sort of growth expectation on an organic basis for those those parts of the print business moving forward.
Sort of growth trajectory should we expect for those gross verticals and the coming years.
There's a treat their street parts that represent 25% a.
There are still a few Pete.
We are now close to 150 million.
We made it public that we believe that we have a plan to take it.
As quickly as we can to 250 true organic growth that we're enjoying right now and this organic growth is north of 10%, we're expecting to grow this business.
Double digit every year with a portfolio of products that we now have because we used to have a certain type of fuel PE business, and a and and we acquired companies with other types of a.
Have a products and offerings and a and now we're in a we're offering to our old customers and you.
Products, and we're offering to the new customer ROTC products. So we have a lot more ability to grow organically and we don't really need to look for the customer we just have to look.
And our customer roster and offer a full offering and and it's working and we just picked up a 3 million dollar order with one of our largest.
Customer on and stuff that we can do.
Before we bought our design and all and Crosby. So this part of the portfolio, we expect double digit organic growth and we intend to continue to make M&A, we have a fortune to DC to fulfill that vision. So.
And the years or months to come and we should expect us to grow from 150 to 50, there's and that's a lot of growth a few if you put in the M&A.
And a book segment and a we expect in a low single digit growth.
If you want a number five.
As a percent would be would be the number and a and pre media up 5% to 10% is probably.
Possible and maybe some years and beat up double digits, some years and be closer to 2% to 3% because this business tends to come a.
And bigger chunk, but.
But again, we are offering new services and.
Around creating content for E commerce and for a.
Reported a web.
So this is actually growing quite quite good and with our customers. So this is our expectation. So globally. This 25% a I've not made the calculation, but if you factoring and money and there is.
Going to be double digit growth.
Well, that's very helpful and low.
And you've had a number of plant closures recently and your print business and other one underway here and when a peg and a couple of those facilities.
Company, Oh, and I'm wondering if you have any plans for assets sales for those facilities that you owned or what you plan to do a what those assets.
Yes, it's a it's been a happening and if you look on a much real estate, we sold over the last 10 years I don't have the number but it would be impressive and a goes under the radar screen, but yes.
Yes, we don't we have re purpose some of our building around packaging line.
But in a packaging plant and.
And a lot price building for example, we are doing a lot a synergies moving five you will be building into our former Brampton plant, but for the most part a we are selling those buildings and.
A real estate market is a pretty good and Canada I can tell you that and runoff and blown away a lot.
How much money.
Our plants work and the market.
And then there's a underlying value and when we look at what.
TC printing a sprint and App you just look at the value of the real estate, we own and cities like Vancouver, Calgary, Toronto and and.
Montreal.
And the market value of those assets those buildings are certainly not price.
And our and our multiple so yes, once we get rid of and and we have to shutdown and the plant we will sales like that when in fact plant is on the market.
And there's a few one and the market and then were selling them yes.
Okay, Great maybe one more from me.
You were one of the first signatories of the Ellen Macarthur pledge I'm wondering if you could provide an update on where you currently stand relative to those targets you had set out.
And your confidence in achieving those 2025 targets.
Just a.
The annual and.
Well a Macarthur report has been put out and it looks like there's a lot of work still to be done by most of the industry. So.
Maybe if you could just touch on that a little bit.
Yeah.
We've we've made a a few commitments one of the a imports and one was two main one one is too it was to make all of the flexible packaging that we produce fully recyclable by 2025.
We are making some.
Good progress obviously in order to get that done.
We will need to invest probably and some new technology work with our supplier but.
But we are progressing well a.
And I'm quite encouraged because a.
US and a lot of our competitor and made some good and roads and products that I felt was going to be very difficult for us to move to make recyclable around a.
Hi barrier package that a a multiple layers of plastic, including and there which make it very difficult to recycle them, but.
As an industry I think we came up with a lot a good ideas that are a.
That are going to be implemented in a years to come so I feel pretty good about about our ability to get that done for 2025 and the other a pledge that we made was to Inc. And corporated, 10% of recycled resin and then and there and everything that we do a win.
You mean, creating a market for plastic and waste plastic and doesn't become waste buddies a read we put into the system in order to reap and auto.
Create a circular economy, you need to create a package that will have a use.
Use waste. Good example is a you know like what we talked about earlier at Coca Cola now this packages and made 30% with ways.
And then if we move.
A large chunk of our of our shrink business, we've done a create a huge market for a day.
For for for waste and and we have a lot of a.
Verticals, where we are testing and introducing products at the moment and various verticals our customers and we're testing them to see if the are you know.
Moving to same.
And the ability and there are a line the same a resistance and.
And so far and I'm quite pleased by the progress a.
So I think we will probably surpass this 10% by a by 2025.
Would be my guess, so yes, we are progressing very well, a STC and I must say as an industry. I mean, we're not a long our competitor also moving and non direction and our customers are want a move in that direction. So I think we're all along and we have similar goals as an industry and I think the industry.
If we are we.
Yes, if we have the time and if we work and partnership with the.
Various government and surgery tortilla and in North America, I think we could create a circular economy for plastic.
A question guys from your next question will come from the line improvement Reynolds RBC. Please go ahead.
Hi, Thanks, very much and good afternoon and.
First a for a small for you a clarification when you were going through the a three drivers and that 25% a printing.
And is growing on a pre media side, what what was your expected growth rate range I I Miss that.
Oh, probably a little bit you know and north of the 5% between five and 10 and I said that it's not like a.
And are you usually win big chunk or big contract packaging.
Customers are moving you there there's a studio work or is there a photo work or their E commerce, where it and you tend to pick up large chunk at a time.
So, yes, it could be more than that and that a year and lower NAV, but globally. I think we could we could grow between five and 10% and that business on a day on the loan book.
Okay Super Thank you for that.
Shifting to packaging may.
Margin initially when a install and a strong core day or in Q4, I thought maybe some of that the resin dynamic that you had communicated last quarter.
Let me have gotten shifted into Q1, but it sounds like you got hit but we're certainly we're able to manage that impact and said that it and better characterization as a as opposed to kind of shifting this timing wise into Q1.
Yeah, Yeah, you're right we were a definitely hit from in Q4 as we a as we.
That is at the end of Q3, a remember we said that we had a strong push and Q3 and we were expected to a.
Actually the reverse in Q4 and a and.
The amount was important and what that shows that as I said in my opening remarks that that all the efficiencies a mix and some of the synergies that were still a capturing at we're a very strong household Q4.
Okay, Great and then as we look for packaging margins and a fiscal 2020 and you said.
That said for a number of quarters now 16, a 17% post and for a 16 is where are you a kind of a wish to land.
Hi.
If you're able to do maybe a little bit better than that is that an opportunity for you to make some kind of reinvestment in the business.
Are you had kind of focused on optimizing margin or or.
Do you have kind of a pipeline of reinvestment a.
A that yet.
You could make and the next couple of years.
Well, a well, let do and I'll answer for the fourth a margin but.
I think I said, it last quarter and.
I don't think it change and we don't want to change that so we basically said to a question and we are normal to 16 and and you know.
Normal a 16 and.
And Thats, what we believe we we are striving to again net of the resin impact from quarter could be less could be more based on the resin, but that's where we feel were up.
Which is a you know a here a year ahead of the target and we had set for ourselves and we bought a co workers and terms of reinvesting in the business and I don't offset it this year, we invested $100 million and capital and most of it went to packaging and next year, we're investing a 100 million and most of it is going to.
Packaging so for sure we.
We are reinvesting in the business. If you look at our sales and Canadian dollar being about 1.3 and that.
Yes, that's that's and.
A high percentage of our revenue being put and new investment and.
And certainly when we said earlier that we will grow revenue to 3% organically next year, which is where a goal a lot of that is supported by investment that we've made this year that are going to come on line next year, new equipment new extrusion.
And Youve presses technology.
Moving products are certainly the backbone of our organic growth story. So yes. We are we've been investing and we will continue to invest we just are not too much about it but it's.
It's already that base for our growth and 2021 and.
And maybe a bit on cost was answers regarding and margins once.
One thing to consider is that obviously, a rhythm will and we hear right now that there might be some more increases so a job. Obviously, we'll have as I said and then back in Q1 on the EBITDA level, but also you don't understand that it plays a role also in a margin even though we do some fast too with clients and we'll have an impact.
Good day to increase top line at the same time and maybe a regarding a even though the objective we are a part of our DNA to always work for a better margin, but also what we have said a defined is that a third year of a flat we'll see a margin extension. My income also with a with organic growth and this is why we were affected with a.
With 3% organic growth that we said earlier.
That might be helpful losses with a margin.
Yes, Okay got it thank you for that and a one last one after me maybe for you don't now on the government subsidies.
In terms of the program's kinda that are left here that could benefit you is there any thing that's still cycling through here and your fiscal <unk>.
Q1, and maybe potentially you know into calendar 2021.
Ah, yes, there will be some in Q1, a definitely less than what we had in Q4 and it's hard for me because theres no. Nothing has been published yet for a January 21 regarding to for a whole lot and not a steady formula and that program has started a change over a month and a and I think has seen a non.
So far for a for January 2021, but.
But we sell a you know and the last in the first two months of our for a first quarter, we will receive a sub a.
What I would say overall, it's probably.
I will say that the mix might be around 60% of what we had in Q4, So we definitely going up.
Okay and Super and then.
Is it from me and a great a great.
Great performance this quarter.
Thank you drew.
And I'm going is youre, calling for us it was heavy into consumes a if you're not to have a you see that piece only two a share it with our people and see that.
From so many of the to Cushing and Thats, a kind of and a piece on the two ladies and gentlemen, if there any additional questions. At this time. Please press star followed by a one as a reminder, if you are using a speaker phone. Please lift a handset before pressing keys.
A question I guess you and your next question will come from the line of David and effect and Cormack.
Cormark Securities. Please go ahead.
Hi, I'm, just kind of a I.
I guess, a hypothetical question I'm, assuming you know the world Congress, and calling and much of this and be a vaccine and market now.
And you think it's realistic and on the printing side as a business.
You would get back to what you did and 29 team, which is not a 268 million and EBITDA and I'm, just wondering and maybe a mean be higher and given all the class and.
Energy these guys have realized any comment on that.
Yeah, well it's a.
You know, it's very hard for us to predict and if defendant mic and and we all think that will be some a economic boom or and people are not be allowed to to go out and.
And to shop and to go to the store freely and do things. We think that you know we as a country and we will enjoy some a economic recovery like for sure a print will is heavily tied to this.
You know.
Is it possible that we go back to where we were and 19 and it's possible value would need a.
A quick recovery I mean, we if the recovery is a is in a.
And is in a August or September then we will enjoy a recovery for two months you know other than a year. So we can we can go back to two what we add and Tonight 2019, you have to understand that 19 was a year without without any coal bid. So it's pretty hard for me to answer your.
A question and I would not like to answer it because and.
It's hard to predict what's going to be the strength of the economic recovery, what's going to be done you normal for print and it's hard to say.
You know our is everybody got a come back to a two to the level that they were and 19, we know that and some vertical like magazines. We don't believe it will be the case, we think that it will be a.
It will be much.
A much smaller industry.
Fortunately for TC there was not a big part of our business, we think that a newspaper industry will do probably better and a long term that what people think because the they are starting to receive some of the support that's been promise to done by various government a turkey. So they are starting to benefit from.
From some support and I think I'll help that industry remain.
You know and and better shape than most people think and so it's hard to predict and but what we've said and not what I could could see for next years and a last year, we did to 20 and without any.
Wage subsidy impact and we believe that we are in a position to do better and not how much then it depends on a.
And the mic after that.
What's the new normal it's very hard for me to sit here and and try to make a per gnostic above that.
Okay I think the.
Well I was talking on in a base it sounds and things like that kind of things and you get a full year with a.
Back to normal.
In terms of a CEW and I think and the fourth quarter was.
14, and a half now and I don't think you provided a breakdown and then the 18 packaging and can you give us a huh.
The largest part was a printing.
Probably 90% yeah.
90, and went and what it might be 90 per cent for a full year and must be right. If you're talking about a base line, even down to 20, X. CW EPS right.
Yes, we could take that off line and we have all those numbers, but the bulk of the money. We receive is for the free sector yet.
Yeah, Okay, Okay, and just on them in and then.
I was just wondering and you know how are you.
Are you looking at any target now and then you can actually act in line or its and still just too early right now.
Well, we never commented on a on on their menu, where we're a but what I can tell you is like what Ive said before and a tree verticals media footprint and a.
And packaging a we did look at filed and the last couple of months and and their stuff that.
Net where theres always stuff, we're working on if you if you look at transcontinental for the past and years.
In terms of buying and selling company I think our average number of transaction is probably north of six a year or so.
So, yes, we will do a movement and our portfolio and 2021 and Thats for sure remains to be seen on any transaction and the size, but for sure. We'll do M&A and 2021, but this is something and also whether it is very hard to predict.
Okay alright, thank you.
And.
And it sounds reasonable and it gets you see the point there are no further questions at this time.
Thank you everyone for joining us from the call today, and and we look forward to speaking with you soon.
In terms and Misuses told me and that then coffeehouse Bush, obviously, that's a different especially from.
And that Cushing, ladies and gentlemen, this concludes <unk>.
Today's conference call. Thank you for participating you may now disconnect.