Thank you for your kind introduction, and hello everyone.

First of all, I’d like to say how honoured I am by your invitation. Every day, in our individual companies, we discuss our ideas about the economic and technological context in which our industry operates. Prestigious forums like this one broaden these exchanges and help us all move forward.

As a Canadian company headquartered in Montreal, it’s also very stimulating to be at an event with the major international players in our industry.

Thank you, once again, for giving me this opportunity to talk to you.

I’ll just mention, however, that having me speak after Brian Mulroney is setting the bar a bit high… but I’m not complaining, at Transcontinental, we like challenges!

-- -- --

The purpose of my presentation today is to explain how we, as a printer, see our industry changing in the years ahead. I’ll also be outlining our game plan. I’d like to stress the “as a printer” part, because with our daily newspaper, magazine and book operations, and their rapid digital development, we also define ourselves as a media company. This is true for a number of the companies here as well.

To give you a brief overview, Transcontinental Media is the fourth largest print media group in Canada, with more than 3000 employees and revenues of close to 600 million dollars in 2006. As a publisher, our strategy is targeted: our newspapers are focused on geographic communities and our magazines on communities of interest. Our periodicals specialize in specific niches, such as women’s magazines, home and gardening, sports and leisure, business, and so forth.

“Targeting,” “niche” and “specialization” are words that will recur often as I talk about our printing operations today.

Obviously, my point of view is that of a Canadian printer that has grown first of all in its own market, but whose main development in the future will be in markets outside of Canada. I’ll be talking to you in straightforward terms, as a man who has spent most of his career in the printing industry in North America and who must, by virtue of his function, guide the company he heads beyond this decade. Although I plan to remain as general as possible, I’ll be illustrating my points with examples from the company I know best, Transcontinental.

Since I’m speaking to a group of entrepreneurs and managers, I’ll be very concrete and will focus on the essentials. Indeed, as I realized when preparing this speech, essential and simple are often synonymous, like the way real life forces us to keep our feet on the ground.

THE MYTH OF AN ENDANGERED INDUSTRY

I’d like to first debunk a myth, the myth that the printing industry is endangered, or even threatened with extinction. This is simply not the case. The reality is that, like every other industry, ours is undergoing a rapid and profound transformation and that there are challenges in abundance.

First, we are seeing the emergence of new consumer behaviours. I’m referring here to the penetration of the Internet and digital technology in general into daily life, especially among young people. But a new technology does not make the previous ones disappear: radio did not eliminate newspapers, television did not eliminate radio and the Internet won’t eliminate all the rest. At Transcontinental, it is within the framework of complementary that we are accentuating the shift to digital in all our activities.

-- -- --

We are also seeing the rise of new values, with the primary one being concern for the environment. It is difficult to measure its precise impact, but we are very aware that it is a major and irreversible trend. Just think about the almost ubiquitous adoption of “sustainable development”: even politicians are using it in their election campaigns. Will this new awareness lead to the disappearance of paper and its replacement by computer screens and accessories like MP3 players and cell phones? I don’t think so. But as responsible companies we must now deal with the heightened concern about the environment.

At Transcontinental, we’ve been doing so our way, that is by mobilizing our business partners and, above all, our people. In the past few weeks we have announced three specific environmental initiatives. One of them — in partnership with Cascades — involves offering 100% post-consumer fibre recycled paper to book publishers; another is our launch of Canada’s first French-language magazine on sustainable development.

I’d just like to mention that electronic paper will be introduced in the West in 2007. Even though it won’t be widely adopted overnight, environmental considerations will promote the rapid growth of e-paper. For my part, I like to see it as another complementary way that our industry can grow.

-- -- --

Another phenomenon is the new face of globalization. I’m talking about the rise of “emerging economies.” This is not a new development. You will recall the Asian dragons of the 1980s, such as South Korea and Taiwan, which have become highly industrialized nations.

What is new, on the other hand, is that emerging economies are creating a strong counterweight to the United States and the European Community. One need only think of BRIC, that is, Brazil, Russia, India and China. This grouping accounts for 42% of the world population.

These countries have given birth to powerful multinationals. A study by the Boston Consulting Group identified the top 100 and its ranking was published in Business Week magazine last July. Over the past four years they have grown an average 24% and they are active in almost every sector of the economy.

These multinationals are spearheading the economic expansion of their countries. Their domestic market gives them a solid industrial base, with a cheap labour force, and they benefit from active government support in external markets. They have the financial resources to play a major role in international markets.

Due to its huge population and potential, China ranks number one among these emerging countries. China has grown at an average rate of 10% a year for the past 20 years. The pace of printing plant construction and modernization, among others, is very fast and they are increasingly turning toward exports.

What is to be done?

At Transcontinental, we have studied these developments and a group of senior managers made a trip to China. The situation there varies from company to company. We concluded that only certain types of books are vulnerable to the threat posed by Chinese printers. The good news is that other printing products, which account for 85% of our sales, are at very little or no risk.

The big advantage that Chinese printers have is that their prices are very low. Their raw materials are less expensive and they have a cheap labour force: a Chinese press operator, for example, earns $1000 a year compared to $60,000 here. On the other hand, the biggest barrier Chinese printers are up against is time.

In other words, China competes with us most effectively in the market for books that are labour intensive or that do not have tight delivery deadlines, such as large format art books that sell for high prices and can absorb turnaround times of several weeks.

However, at Transcontinental, we have specialized in short and medium-run books that range from a few thousand to 150,000 copies, and there are few benefits to having such books printed in China. For a number a years we have also quite successfully developed very short-run digital printing, with turnaround times of barely eight days.

Furthermore, our proximity to our customers and our knowledge of their needs has allowed us to develop many value-added services, both in pre- and post-press operations. We are also making massive investments in efficiency improvements. For instance, last year we opened our new ultramodern printing plan in Louiseville. This plant not only reduces our costs, it also cuts our cycle times by half, which means our customers can get to the market that much faster.

Lastly, we have always had a reputation for being in the vanguard of technology. Our goal now is to be world leaders in this area. So it was that last June, at our plant in Beauceville, we finished installing our first Goss autotransfer press line, which allows us to switch from one print job to the next without interruption. This involved an investment of 20 million dollars.

That’s how we’re positioning ourselves in North America in relation to book printing and how we’re countering the competition from China.

-- -- --

I’d like to also say a few words about the consolidation of our industry. Consolidation is an ever-present reality, but it has been almost constant for the past 10 years. So there’s nothing new on that front. For instance, in 2004 there were 32,000 commercial printers in North America, 6000 fewer than in 1998. Indeed, a 2005 study indicated that the 50 biggest printers controlled only about 30% of the market.

So the intense consolidation of the past 10 years will continue. Plus, tougher competition and the consolidation of our own customers is forcing prices down. We should expect more mergers, and often among the biggest players. The most recent example – the acquisition by Donnelley, the number one printer, of Banta, number eight, as well as two other printers – is a sign of where things are going.

Let me note in passing that with printing revenues of 1.5 billion U.S. dollars in 2006, Transcontinental is the sixth-largest printer in North America.

A further manifestation of consolidation is the emphasis on streamlining, in all areas. We’re seeing operational restructuring, closures and sales. Companies are reviewing vulnerable operations or activities where the barriers to entry are too low, and the focus is on continually improving efficiency, reducing costs, and so forth.

For our part, we have completed our major reorganization and restructuring projects. I am very confident about our position and platform for the future.

-- -- --

In short, the printing industry is going through a turbulent period. But is it really, as some observers have said, an “existential crisis”? Again, I don’t think so. I see it simply as a continuation of the fast-paced change of the past ten years.

And that change has been happening in almost every major industry. Bread isn’t made the way it was 20 years ago and even the types of bread have changed: just think of the proliferation of “healthy” or whole-fibre products. Compare the automated and digital services of today’s banks to those of the 1980s. The same goes for the publishing of books, magazines and newspapers. Our industry is no exception.

Transcontinental has met its challenges successfully over the past ten years. I am convinced that we have the people, the corporate culture and the strategy to continue to be a winner.

SOME MAJOR TRENDS

How will we keep growing during the next decade? I’m not telling you anything new when I say that the answer is a two-pronged approach: define a realistic strategy for international growth, based on your own competitive edge and ability to execute; and anticipate the major market trends, the ones that reflect the emerging needs of our customers.

-- -- --

Let’s look at the international situation first. All our companies have to position themselves outside their national markets.

Transcontinental is Canada’s biggest printer, with revenues of 1.7 billion Canadian dollars. We lead in almost all of our niches: in flyer, insert, book and newspaper printing, in direct marketing items, and in commercial products such as annual reports, brochures, posters, etc. We are also a strong second in magazine and catalogue printing.

So the conclusion is self-evident: most of our future growth will come from international sales. At the international level our growth is highly targeted, and at the geographic level our priority markets are the United States and Mexico. Currently, about a third of our printing revenue, or about 600 million Canadian dollars, comes from the U.S. market. Half of that, mainly books, catalogues and magazines, is exported from Canada; the other half is produced in the U.S. itself, and is mainly direct marketing products and services.

This geographic diversification is a very natural progression since our two economies are highly integrated.

We also have a targeted strategy in terms of our products and services. In other words, we have a niche-based approach: we’re not trying to become one of the biggest printers in the world, but rather the best in a certain number of fast-growing niches where we have expertise and a competitive edge. In most cases, this expertise was developed first in Canada.

I know the American market well because I worked there for a number of years and I’m certain that we’ve adopted the right strategy.

Let me give you an example: direct marketing. Our facilities in Pennsylvania, California and Texas allow us to cover all of North America. With annual sales of 300 million dollars, we are one of the biggest suppliers of integrated direct marketing services in the United States and the leading supplier to financial institutions. Our customers include American Express, Bank of America and Citibank.

We have been in direct marketing in the United States since 1999. But our major breakthroughs occurred in 2003 and 2005, when we acquired two complementary companies, the first, CC3, which was extremely strong in sales and the second, JDM, which was a master of operational efficiency.

In 2006, we completed the reorganization and modernization of our activities in Pennsylvania, consolidating four plants into a single unit in Warminster and finalizing the JDM integration plan. Today we have the business plan and team to strengthen our position in direct marketing in the U.S., primarily through acquisitions.

-- -- --

That leads me to a major trend that’s changing our industry: one-to-one advertising. Mass marketing won’t disappear, but personalization is a direct response to the needs of advertisers who want to target consumers so they can maximize the return on their advertising dollar.

For Transcontinental, personalization is second nature. I’ve already mentioned that our publications are targeted by geographic community and community of interest. Our service to distribute advertising material door-to-door relies on socio-demographic data, and content can change from one neighbourhood to the next, or even one street to the next. In fact, personalization affects all of our activities. For example, for the San Francisco Chronicle daily paper, which we’ll start printing in 2009, we’ll be producing about 400 different issues: different in terms of content and inserts.

So it was quite natural for us to become one of the major players in the direct marketing industry in the United States. It’s a niche that relies essentially on data management and it will grow quickly in the years ahead.

-- -- --

Another irreversible trend is companies reducing the number of suppliers they deal with. Indeed, this is one of our own concerns when we’re wearing our customer hat and looking at our own suppliers. In return, we demand of the “happy few” that they cover the broadest range of our needs that they can.

Reducing the number of suppliers is now a well-established trend in corporate business practices, across all industries. It’s having a concrete impact on our companies because it means that we must be one of the top two or three suppliers to each of our clients. Otherwise, it’s better to get out.

Happily, Transcontinental was founded on this concept and has integrated it from the very beginning. We were the first in Canada to offer retailers a one-stop shop that provided a complete flyer prepress, printing and distribution service. Our sales approach has been based on this premise for the past several years, particularly in our cross-selling initiatives. The most recent success on this front is the five-year, 350 million dollar contract that we just signed with the Hudson’s Bay Company to print all of its flyers. This includes 75 million dollars in new business based on a number of our other value-added products and service, including data management and loyalty programs.

-- -- --

The ultimate manifestation of efforts to reduce the number of suppliers is outsourcing, when clients entrust you with a complete stage of their production chain.

As you know, it takes trust to select just one or two suppliers or to place an entire phase of your production process into the hands of one partner! The only way to get there is to have business credibility, and that’s an asset that must be earned. There are no shortcuts. Business credibility must be built over time with investors, customers, employees and it involves being socially and environmentally responsible.

Outsourcing is a natural extension of our business model, which is based on being close to our customers. Let me give you a few examples.

For our direct marketing clients in the United States, one of the services we offer is to take charge of their entire campaign, from A to Z. In Canada, major retailers have transferred their premedia services to us; once their content has been digitized by us, they can us it on other platforms. We also offer custom publishing. Once you are part of the customer’s value chain, you become a true partner. What we achieve, in effect, is maximum customer loyalty. That’s the key to it all.

But the area where we stand out in the North American market is in newspaper printing!

Transcontinental is Canada’s largest newspaper printer, with annual revenues of over 250 million dollars. We have a network of plants that extends from St. John’s, Newfoundland to Vancouver, British Columbia. We print some 200 newspapers, including about 20 dailies.

Our Evolution 2010 project identified newspaper printing as one of our key areas of growth, and this growth will occur mainly in the United States. We are going to become in newspaper printing what we already are in direct marketing. That’s our game plan.

The daily paper industry is changing rapidly all over the world. Newspapers account for 30% of advertising budgets. As is usual during periods of accelerated change, there are winners and losers. Our strategy is to work with the innovators who have decided to be on the winning side. Indeed, our outsourcing model is custom-tailored to their needs.

What we do is allow publishers to concentrate on their primary job, which is to promote their brand by creating top-quality content and design, and to focus on innovation.

We also provide them with the latest technology so they can attract new generations of readers and advertisers. I’m thinking here of more colour and better quality colour, and targeted distribution.

Not only is our model highly sophisticated in terms of technology, it is also highly advanced in terms of human resource management. We have an innovative work organization structure that is both flexible and efficient.

This model was developed in Canada in our work with, among others, The Globe and Mail and La Presse. In 2005, we embarked upon an ambitious plan to break into the U.S. market. That same year we started a 10-year contract to print The New York Times for the Ontario and Upstate New York markets. The very high level of satisfaction and prestige of our client won us great credibility with U.S. newspaper publishers.

We took a major step last November when we announced that we had signed a 15-year contract, valued at more than a billion U.S. dollars, with Hearst Corporation, to print the San Francisco Chronicle and its related products. Unlike the contracts signed with Canadian newspaper publishers, this one excludes paper. On a comparable basis it would be worth two billion U.S. dollars.

Let me just mention that the San Francisco Chronicle is the leading paper in the Bay Area, the fifth most-populous market in the United States, and is ranked the 14th daily paper in the U.S., with an average daily circulation of more than 400,000 copies.

Today, we are in various stages of talks with several major players in the United States. I can tell you that our model is being very well received everywhere and the interest is even greater since November 2006. The growth potential for Transcontinental is enormous. We’re very optimistic. But I should point out that the negotiations can be very long. For the San Francisco Chronicle, for example, it took 18 months from the time we made our first presentation to when we signed the contract.

Early this year we set up a division that will be dedicated full time to growing newspaper printing in the United States.

-- -- --

In closing, I’d like to add a word about the most important investment we can make as a company: I’m talking about investing in our people. Now that is a trend that should be permanent, if you will pardon the contradiction! For me, it is my number one business credo. It really is the people who make the difference! The best strategy will go nowhere if we don’t have the people to carry it out… people who are motivated, dedicated, qualified, and who can adapt quickly to new technologies and work as a team. Also, people who are guided by leaders who can motivate, develop the talent around them, communicate the company’s vision and build a climate of trust.

That’s why our Evolution 2010 business project puts such strong emphasis on developing leadership at every level of the company. To date, about 1500 managers have taken the first three modules in the Mission: Leadership program. The training program was introduced in 2004 and will be completed by February 2008.

That, I believe, is one of the most important elements of the “Transcontinental” difference.

Thank you for your attention. We can now move on to the question period, my favourite part.