New plants, new contracts key to keeping printing business profitable for Transcontinental

TRANSCONTINENTAL INC. (Toronto symbol TCL.A; www.tctranscontinental.com) gets 68% of its revenue from its commercial printing business, which is the largest in Canada. The remaining 32% comes from publishing newspapers and magazines. In its 2013 second quarter, which ended April 30, 2013, Transcontinental’s revenue fell 0.2%, to $521.3 million from $522.4 million a year earlier. Revenue from six recently acquired printing plants in Canada helped offset the loss of a contract to print flyers for the now-closed Zellers retail chain. So far, the company has realized annual savings of $30 million by combining the new plants with its current operations. Even so, earnings fell 2.0% in the latest quarter, to $34.8 million from $35.5 million. Earnings per share were unchanged at $0.44 on fewer shares outstanding. [ofie_ad]

Canadian stocks: New acquisition strengthens Transcontinental in profitable textbook business

Transcontinental has renewed several multi-year printing contracts worth a total of $200 million. The company also recently paid an undisclosed sum for privately held Groupe Modulo, which publishes French language textbooks for schools and universities across Canada. Many traditional book publishers have suffered due to rising competition from cheaper e-books. However, specialized textbooks are still highly profitable, and the purchase looks like a nice fit with Transcontinental’s current textbook business: it will expand the company’s catalogue of French-language titles to 11,000 from 8,000. Moreover, Groupe Modulo’s high-quality titles could be an asset for Transcontinental if it decides to expand its own electronic-textbook business. The annual dividend of $0.58 a share yields 4.8%. In the latest edition of The Successful Investor , we look at whether Transcontinental’s savings from merging its new plants plus its new printing contracts will let the company keep its dividend at the current rate. We conclude with our clear buy-sell-hold advice on the stock. (Note: If you are a current subscriber to The Successful Investor , please click here to view Pat’s recommendation in the latest issue. Be sure to log in first.) COMMENTS PLEASE—Share your investment knowledge and opinions with fellow TSINetwork.ca members Do you read less printed material and read more online or e-books than you did a few years ago? Do you think printing will die out in the next decade or so and be replaced entirely with electronic media, or do you think people will always want books or newspapers in their hands? Let us know what you think.

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