Thank you, Gabriel, and good afternoon to all on the lines. I hope you and your family are healthy and continue staying safe.

Welcome to TC Transcontinental’s second quarter 2021 results conference call. Before we begin, I’d like to highlight that we have provided as we have done last quarter a slide presentation to help guide today’s discussion.

The presentation, along with the press release and the MD&A with complete financial statements and related notes were issued earlier today, are all available on our website at tc.tc under Investor Relations section. A replay of this conference call will also be available on our website after the call.

We have with us today, our President and Chief Executive Officer, François Olivier; and our 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.

You can refer to the MD&A for a complete definition and reconciliation of such measures to IFRS. In addition, this conference call might also 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 our actual results are described in the Fiscal 2020 Annual MD&A and in the latest annual information form.

With that, I would now like to turn the call over to our President and CEO, François Olivier.

Thank you, Yan, and good afternoon, everyone. We delivered another strong quarter with a solid performance across our three sectors.

I’m very proud of the resilience, innovation and agility that our team demonstrated again this quarter, as we continue to operate in the challenging contexts of the pandemic. Slide four gives an overview of our performance.

In Packaging, we generated solid EBITDA, despite the negative impact of higher resin prices and a stronger Canadian dollar. In fact, excluding those two headwinds, we would have recorded significant growth and the profitability versus last year.

At the same time, sustainability continues to be a major focus for Transcontinental and the market is recognizing our R&D efforts. We’ll come back to this in a minute.

In Print, one year after the start of the COVID-19 pandemic, we are pleased to return to organic revenue growth. We expect this trend to continue for the coming quarters.

We are pleased with having also significantly increased profitability, despite the pandemic still impacting some of our customers. Excluding the Canadian Wage Subsidy, we recorded and adjusted EBITDA margin of 22.5%, compared to 17.9% last year.

At the consolidated level, we continue to generate strong free cash flow that we use to deleverage our balance sheet. The solid financial position provides us with the flexibility to invest in our growth, either organically or through acquisitions in all of our three sectors.

Moving to slide five. Our focus on employee safety has never been more important than during this pandemic.

It was therefore natural for us to step up and respond to the Québec Government call for business to support its COVID-19 vaccination campaign. Since May 26th, we are offering supervise vaccination to the local population, our employees and their families at one of our Montreal sites.

Moving to sustainability in Packaging, our integrated approach to sustainable package is a competitive advantage that helps to differentiate us from our competitors and supports our growth. This is why we continue to invest in innovation and product development.

We want to ensure that we remain ahead with our recycled ready, compostable and PCR product portfolio. We need to reduce waves and help the flexible Packaging industry move towards a circular economy for plastic.

Our innovation is being recognized by our customers and by the industry. In the last few months, we won several prizes for some of our new products, including a recent recognition for a post consumer recycled shrink film, which we launched for the Coca-Cola Company.

Let me now come back to the performance of each sector for the second quarter. Our Packaging sector had another solid quarter.

In terms of revenues, we said last quarter that we expected full year organic growth, excluding the impact of resin price to be between 2% and 3%. After six months, we are in the middle of that range.

With an expected strong second half of the year, we believe that we could reach a full year number close to 3%. This growth is coming from investments in product R&D and CapEx and from the ramp up of new business won over the last two years.

Our balanced portfolio of products is very resilient and has enabled us to perform well during the pandemic. We expect that this growth will continue as the economy recovers and the trend towards sustainable products continues to gain momentum.

In terms of profitability, the double headwinds of resin price increases and currency variation continue to have a significant impact. Donald will go into more details, but I want to highlight that we achieved very solid results when we exclude these external factors.

Thanks to very strong execution. Our Print sector also had a very solid quarter.

As mentioned earlier, the sector returned to organic growth and continues to demonstrate its resilience in these challenging times. Our cost discipline and excellent execution allowed our Print sector to generate very good margins in the quarter.

With the lifting of some government restrictions impacting our customer, we expect to see substantial organic growth in the second half of the year. We also have very good momentum in our in-store marketing group.

We recently announced that we won an important customer, representing over $20 million in annual revenues. We also announced the acquisition of BGI Retail, which not only brings additional business and capacity, but also adds a very talented team with skills that complement our product offering to retailers and brands.

This acquisition offers significant cross-selling potential and sourcing opportunities and stronger design and execution capabilities. It also creates timely opportunities, as we help retailers prepare for a post-pandemic environment by reinvesting in the in-store customer experience.

With these recent announcements, our ISM group is expected to generate revenues of close to $200 million on an annualized basis and we expect it to continue to grow. In summary, our capacity to better support retailers and clearly -- is clearly expanding.

Not only do we continue to help retailers attract customers to their store with our flyer business. We also improve the in-store consumer experience with our full service capabilities of in-store marketing.

Our offer now includes interior and exterior signage, displays, fixtures and furnitures made in plastic, wood and metal, quite a change from a traditional printing business. Finally, our Media sector also had an excellent quarter with strong revenue and EBITDA growth.

We continue to grow our share of revenues and vertical with a promising outlook like in-store marketing, books and pre-media, including our Media sector, which also has good momentum. Our growth verticals account now for about a third of our combined Print and Media portfolio.

In conclusion, I want to leave you with a few messages. First, once again, all of our three sectors perform well in the quarter, highlighting our focus on operational excellence and ability to drive efficiency gains.

Second, with the recent product introductions and the new business won in our Packaging sector, and the recovery in our Printing sector, we expect solid organic revenue growth for the second half of this fiscal year. Finally, our healthy balance sheet and our ability to generate strong and predictable cash flows provide us with the flexibility to continue investing to grow organically and through acquisitions in all three sectors.

With that, I will turn it over to Donald.

Thank you, François, and good afternoon. I will start with the consolidated numbers on slide six.

Once again, we had a very strong performance across all three sectors and delivered a solid quarter. At a consolidated level, we reported revenues of $623.3 million in line with last year despite a negative currency impact of $24.2 million.

It’s important to note that we generated organic growth in all three sectors during the quarter. On the profitability front, despite the negative impacts from resin prices and currency variation, adjusted EBITDA increased from $104 million in Q2 of last year to $107 million this year.

This improvement was operational and not due to the Canadian Wage Subsidy, as we received slightly less in the quarter than we did last year. I’ll provide more details on profitability improvement in the sector by sector review.

As we have seen in previous quarters, financial expenses decline as we continue to reduce our debt and benefited from lower interest rates. We recently -- we also recently announced the sign of a new seven-year third loan at an interest rate below 2%.

This will maintain our liquidity position and contribute to lowering our average interest rate. Tax rate in the quarter was at 24.4% in line with our mid ‘20s guidance.

This led to adjusted net earnings of $0.55 per share for the quarter, compared to $0.50 last year, representing a 10% increase. Now moving to slide seven for a sector review.

Our Packaging sector posted another strong quarter. We generated $17.3 million of organic growth, mostly due to the higher price of resins.

This growth was offset by a stronger Canadian dollar, which drove revenues lower than last year. Moving to profitability, as we told you in February, resin prices continue to add in temporary, but significant negative impact in the quarter.

Through efficiency gains and good -- and a good mix, we were able to upset almost all of the resin impact, delivering very good performance. Adjusted EBITDA margin was 14.1% for the quarter, but it will have been north of 16% excluding the lag impact of the resin pass-through.

In dollars, excluding resin and FX, adjusted EBITDA would have been higher than last year. On slide eight, you can see that our Printing sector had an exceptional quarter, given the continue pandemic contexts while our clients especially the retailers are still impacted by COVID-19 reduce warehouse slightly as on the one hand when compared to the two pre-pandemic months of February and March.

But on the other end, we had an easier comp for April. This return to internal growth in Print bodes very well for the coming quarters.

We were very successful in further reducing our fixed costs and operated with very efficiently during the quarter. This led to an impressive 25% increase in profitability from adjusted EBITDA of $53.9 million last year to $67.3 million this quarter.

This was a very strong operating performance by the sector as we delivered an adjusted EBITDA margin of 22.5%, excluding the subsidy, compared to 17.9% last year, a 460 bps improvement. Our Media business also had an excellent quarter with strong revenue and EBITDA growth, building on the momentum gained in the last several quarters.

Corporate expenses were either the last year mainly due to the stock-based compensation and pension cost adjustment. Turning to cash flow from operating activities, we generated $83.3 million.

The variation with last year is mainly due to the higher inventory driven by resin prices. In light with our growth aspirations we continue to invest in CapEx with our total spend of $26 -- $27.6 million in the quarter.

We also distributed $19.6 million in dividends. On slide nine, strong cash flow generation and a stronger Canadian dollar contributed to bringing our net debt ratios to 1.7 times, a very healthy level providing flexibility to execute on our growth strategy.

Excluding the impact of IFRS 16, the ratio will be close to 1.5 times. Following the rating improvement by Standard & Poor’s in February our efforts to deleverage the balance sheet were also recognized by DBRS, which change our outlook from negative to stable and affirmed our investment grade rating.

Furthermore, at the end of the quarter, we had a total of $631 million of available liquidity. The strong financial position and our ability to generate stable solid cash flow provide us with flexibility to capture future growth opportunities through organic growth and acquisitions.

As for our outlook, in Packaging, with risen prices increasing, we will continue to be diligent in managing the pass-through to our customers. However, because of the lag between the increases from our suppliers to the pass-through to our customers, we expect a significant negative impact in the third quarter similar to the one we saw in the second quarter.

We also expect the stronger Canadian dollar to continue to be a headwind. You may recall that the U.S.

dollar was trading at around $1.35 at the same time last year, compared to $1.21 today. The negative impact is mainly on the conversion of our U.S.

results back into Canadian dollars. This is partially offset by the lower financial expenses at the consolidated level as most of our debt is in U.S.

dollars. In terms of revenues, we expect solid organic growth in Packaging for the year, raising our outlook to close to 3% excluding the impact of resin price.

In print, we continue to expect volumes to recover in the second half of 2021, as we face easier comparables. In terms of profitability, excluding the important impact of the Canadian Wage Subsidy program, especially in the third quarter last year, we expect adjusted EBITDA to grow organically for the second half of fiscal 2021.

The recent acquisition of BGI Retail which offers significant synergies, both in terms of revenues and costs should contribute positively going forward. Corporate costs at the EBITDA level should be close to $40 million for the year is due in part to the higher than usual stock-based compensation expense.

In terms of use of cash for the year, in addition to continue looking for potential acquisitions, we are also looking to accelerate our organic growth through CapEx. To that end, depending on the timing of potential key investments, we are likely to exceed our $100 million applying CapEx for 2021.

As for cash taxes, you can continue to assume around $50 million -- $50 million for the year. On that note, we will now proceed with a question period.

Hi. Good afternoon.

Thanks for taking the questions. Maybe just first on resins, just so I understand a similar type of impact in fiscal Q3.

Things start recover in Q4 as you raise price and presumably sometime next year or early next year sort of back to some pre-inflationary type margin, is that sort of the way you think about it?

Yeah.

Yeah. We had some raise in April and May, that we still need to, that we are going to -- that we’re digesting right now as we’re paying more and we got to be able to pass some of that increase in June and July to our customers.

So, yeah, Q3 will be impacted negatively by the raise of April and May. And after that, yeah, in Q4, if there is no further raise, then things should start to ease up and all of our growth of profitability should start to be seen more.

But we still have the headwind of the exchange. But this is just transferring our U.S.

business into Canadian dollar before Canadian corporation. So, but, yeah, and then, obviously, there’s further increase, then we’ll have further hip, but obviously, if there’s some decrease, then we should regain some of that money that we gave away in the last year or so.

So, yeah, that’s -- you got that right. Q3 is the last, if there’s no further raises, the last quarter where we should have negative impact then things should start to turn and stabilize for Q4 and the remaining of the year.

What we’re secretly praying for is for some decrease. Both us and our customers are -- would enjoy seeing some decrease, but this is hard to predict if it’s going to come or not.

And is there any pushback from customers in terms of raising price, presumably not, because it’s industry wide, but I am just curious? And I guess the second part of the question, is there any issue sort of sourcing material?

No. I wouldn’t say push back in a sense, they’re not happy, but I think…

Yeah.

… we all live in a very inflationary world, it’s not only resin that is going up. So like for most of our customer, we have a formula that is pre-agreed in the contractual agreements, so they understand the game.

So I don’t say they would be at that they’re happy. But, no, they’re not pushing back.

And our industry operate at a very high capacity levels. So with -- and some of the vertical we’re in, we are still very busy and are at the edge of the customer on time.

So those who feel that is not unfair, we deliver other people that are willing to acknowledge that the price is going up and we’re just frankly just passing it to. We are not looking to gain from that.

In terms of -- is there a problem getting material and some of the area of our global supply chain it’s still very tight. So the fact that we have good suppliers and a good relationship was really tested in the last six months because in some areas of what we buy on the outside, the supply chain is still very tight and we are still in an environment where seems that inflation is still present.

But so far, we’ve been able to manage that properly.

Okay.

And Mark, maybe to…

Yeah.

… just to complete transfers answer on Q4. Yes, you’re right that, if there’s no more increase, it should stabilize.

But for model purpose, if you -- for margin, obviously, will have an impact because we sell at a higher price. We have the profit but it won’t be in the margin when you compare to Q4 of this -- of last year.

Yeah. Yeah.

Okay. And then on the FX impact, is it purely translation or is there any impact on the percentage margin?

It’s purely -- let Donald complete my answer. But for the bulk is just purely translation.

Our flexible business is U.S. We look at all the KPI in the results in U.S.

But because we’re listed in Canada, we need to convert that at the end of the quarter. And then you have a gain or a loss right now.

It’s -- like Donald said, it’s big lost, but it’s purely conversion. So it is what it is.

What practice are we growing in U.S. dollar or no and if you factor out the resin, ourselves and EBITDA is growing and that’s what we’re looking at and that’s what we’re happy about.

It will have -- again to complete, a slight impact, because it’s -- actually what it does without going in details as you decrease your topline because you’re selling in U.S. and your profits decrease at the same time.

So it does play also in the margin. But not that as big as, the resin will play into the margin, but you will have an impact.

And the most important thing is that it’s not cash, because obviously, we generate free cash in U.S. but we have interest and debt in U.S.

On that side we’re protected.

Great. Okay.

If I can ask just one more, I am just curious if you could share the revenue contribution from BGI on annual basis, if you could? Thanks for the time.

I don’t know if we shared that in our disclosure. Donald, have we not sure that?

Well, it’s roughly $40 million to $45 million of additional revenue. That’s why our run rate was 40%.

We get a $20 million customer. We’re growing double-digit besides that and we just took away about $40 million revenue.

So that’s why we say, with the growth, we’re probably past $200 million of revenue in the in-store division, right?

Right. Okay.

Great. Thanks a lot.

Thanks, again.

Thanks.

Thanks a lot. Good afternoon.

Maybe I can push a little bit more on resin just to get a little clarity around the Q2 numbers. So if we just look at the Packaging revenue organic growth, which was just shy of 5%.

I think, you guys highlighted in a few places that -- most of that related to the resin prices and I think your organic ex-resin in Q1 was like 5%. So in the H1, you’re tracking to 2.5% you said, so we -- are we really a bit closer to zero, just organic ex-resin in the Q2, is that a fair place to be?

Yeah. It’s positive, but not a whole lot and we knew that, because like I told you often, Adam, there’s an inventory thing in that business.

Yeah.

… depending what ship. But, obviously, if we think we’re going to be closer to the top of our range at 3%.

We obviously expect Q3 and Q4 to be stronger than 3%, if we’re at 2.5% absolutely.

Okay.

So we’re -- we were expecting that and we give you guidance 2% to 3%. We’re at 2.5% and now we’re saying it’s probably going to be much closer to 3% than 2.5%.

So we expect Q3 and Q4 to be pretty good in terms of organic growth and flexible packaging without resin. Yeah, you’ve got that right.

Okay. And I just want to clarify one more thing on resin and then jumped into one on Printing.

So, on the EBITDA, if we look back at Q1, Q1 I think the -- now you were more specific in regards to $6 million, $7 million impact, 150 bps on margin. Are we looking in this Q2 had an impact that is at or meaningfully above 1$0 million at this point?

Is that something that you can maybe provide a little color on?

Yeah. On the bridge side when your bridge versus last year we are at that level, yeah.

Okay. Around the $10 million mark.

Okay.

North of $10 million.

A lot north, I mean, not to play price is right, but are you closer to $15 million than $10 million?

No. No.

No. You’re okay with other the assumption on that.

Okay. Thank you.

All right. That’s helpful.

And then just in regards to the Printing side, which obviously was the real big surprise in the period and if I reflect back on some of the comments that François might have made back on Q1, this was a business that seemed to be ex-subsidies, maybe you guys thinking of a 19% to 20% level. And all of a sudden, obviously, it’s delivered much above expectations.

So maybe number one, can you just talk to what might have been incremental in terms of efficiencies and savings that materialized in the Q2 to drive this sort of upside surprise on Printing margin? And then, additionally, just reflecting on prior comments, François, when we think about a margin this year in Printing and I don’t want you to be overly specific about it.

But is it fair to say that an ex-subsidy margin is actually gravitating closer to 22% this year than necessarily 20% that was previously anticipated? Thanks.

Yeah. Well, you’re asking me not to be specific, but you are pretty specific on that.

So I would say that, I mentioned that earlier, when we were forcing the COVID to operate partially or with minimum people. I guess we learn a few things on how we can run our platform, because some plant had to be shutdown and all that.

And I think for the most part of the thing, we are operating right now with a much more leaner organization and then we’ve moved some volume around, relocated some equipment, shutdown some equipment. So we operate with a lot more efficiently.

So whatever volume is thrown at us will generate more margin now than it did pre-COVID and we thought we are pretty good before COVID, so just to say that there’s always room for improvement. So our cost structure and efficiency is much better.

So that’s why mainly the margin are higher. I would say it also that we’re putting ISM group together and we made a press release about moving five building into one building into Brampton.

As this is ramping up and other acquisition are coming in and work and volume is coming in, Adam, you have a huge impact on margin, it’s -- because everything is happening on the same time, lower cost base, more sales and then a better product mix that enable you to win more business. And you put all that together, our target for our ISM business was 15%.

I think now we think that we could maybe reach eventually 20. So which is similar to Print.

You want me not specific. I won’t be specific.

But I can tell you that this year I think our Print margin will start with it too and it’s all said and done.

Okay. I think inevitably it will.

All right. I’ll leave it there and queue up again.

Thank you.

Thank you.

Oh! Yeah.

Hi. A couple of questions.

So, I mean, you have sort of touched on it. But I was just wondering, given the strength of Printing in the quarter in terms of the EBITDA margin, as you see the business pick up -- volume picks up, are these costs that you’ve taken out, are these truly sustainable or are you going to have to add those costs back in just to support a higher revenue.

I know this year, you said that the Printing EBITDA margin probably starts with a 2, but I’m just wondering as volume really picked up, assuming it picks up, is that really sustainable, based on the last -- this quarter’s results? And then, secondly, where are you guys at on acquisitions?

I know, acquisition is always something you’ve done every year and in the past, you indicated that this year you probably exited well and I was just wondering if that’s still the case? Thanks.

Yeah. In terms of the way we operate in Printing and is it sustainable?

I would say, not only sustainable, we could still improve from more we are and I will give you how I feel about that part. And the only thing that excited me about what I call the traditional business of Transcontinental, which is our Printing and Media business.

In my remark, I mentioned that this portfolio is about $1.3 billion, if you include the Media business. What we just said is that a third of that, a third of that is actually growing and I’m not talking about Print is growing because of the COVID.

I’m actually talking about in-store marketing, book printing, pre-media and our Media business. What I just mentioned is a third of our revenue and probably more than a third of our EBITDA and it’s actually growing and a lot of what I did talk, just mentioned, not only growing, it is growing double-digit.

And my view is with market share gain and a little bit of M&A and POP [ph]. We hope that pretty soon half of our revenue in Printing indeed is going to be actually growing.

So this is -- that’s what excite me about the traditional business of Transcontinental. So, yeah, I think, not only sustainable.

I think we could continue to have our portfolio evolving. People think of the Print group like it was 15 years ago.

But it’s a quite different business. And for me, if you have more than your business and the business that is growing, you’re actually a growth business instead of a declining business.

In terms of the acquisition, what excite me is that we have opportunity to acquire. Obviously, the biggest place is flexible packaging and we’re very active and then we’re looking forward to make acquisition, but the right one at the right price.

And this market is very competitive right now. There’s a lot of private equity money around that space.

So that makes it a little bit more complicated for us. But there’s still opportunities.

But what also people overlook is we have an opportunity to acquire in our Media business, which is a business that derives fantastic return on capital employed, actually the best within Transcontinental. And in the Print sector with the growth story that we have in POP, we could also make acquisitions.

So, yes, we are thinking of acquisition in the three sector and we are looking at files in the three sectors, Print, Media and Packaging.

Okay. Thank you.

Well, thank you all for joining us on the call today and I look forward to speaking to you soon. Thank you.