Transcontinental Inc. (TSX:TCL.A) swung to a profit in the first quarter despite lower revenues as it confirmed it will receive more than US$100 million in net proceeds from the sale of its U.S. direct mail business.
The Montreal-based company earned $27.9 million during the period ended Jan. 31, reversing a year-ago $6.4-million loss after realizing the benefits of a cost-cutting program.
The major publisher and printer said its net earnings amounted to 32 cents per share, versus a loss of eight cents per share in the same period a year before. Adjusted profit, stripping out one-time items, was $25.3 million versus a year-earlier $15.1 million.
"Our first-quarter results show a marked increase in our profitability compared to the first quarter of 2009, and this is the third consecutive quarter in which it has improved," president and CEO Francois Olivier said in a statement.
"I attribute our strong performance to four main factors: continued customer confidence in our products and services, the reorganization and sale of some of our operations, the rationalization plan that we quickly implemented last year, and the concerted efforts by our employees to develop greater efficiency."
Revenues were down 11 per cent to $559.3 million due to the negative effects of a strong loonie, plant sales and closures and paper pricing.
Transcontinental said it will raise its quarterly dividend 12.5 per cent to nine cents per share.
Drew McReynolds of RBC Capital Markets said the results were solid as the company boosted its operating earnings by 41 per cent from last year to $82 million.
He said net proceeds from the sale of Transcontinental's direct marketing business to IWCO Direct of Minnesota was double his estimate of about US$50 million. The deal is expected to close by the end of the second quarter.
While the operating environment has stabilized, Transcontinental was cautious about revenue this year because some niches of its business remain "sensitive to market conditions."
Magazine, book and catalogue printing will likely continue to experience lower page and copy counts. There will also be less demand for specialty products and religious works.
"Our magazine and newspaper publishing operations will still feel the impact of budget cuts by 'national' advertisers," it stated.
The company is Canada's leading publisher of consumer magazines and the second-largest community newspaper publisher. Its digital platform delivers content through more than 120 websites. It has about 12,500 employees in Canada, the United States and Mexico.
Shares in the company were up seven cents at $13.42 in early afternoon trading on the Toronto Stock Exchange.