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Thank you Jean.
It’s my turn to welcome you to this press conference.
I’d also like to welcome everyone listening in via the
Internet thanks to the crew at Pecunia, our partner that specializes
in webcasts and video communication over IP.
I’d like to say a very special hello to
our new American partners, many of whom are following this
press conference on the Internet.
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Today is a great day for Transcontinental,
its employees and its shareholders. We are announcing the
signing of a 15-year contract to print the San Francisco
Chronicle, owned by Hearst Corporation, and its related
products, and to provide postpress services.
Under this contract we will print the San Francisco Chronicle
in an ultramodern plant in the San Francisco Bay Area, as
we are doing for the daily paper La Presse in Montreal,
and printing will start in the spring of 2009. This contract
with the Chronicle, combined with the other products
printed at this plant, will bring in more than a billion dollars
in revenue over 15 years. I’d like to also add that
this is new money.
Furthermore, unlike the contracts signed with the publishers
of Canadian papers, this contract excludes paper. On a comparable
basis, today’s announcement would be worth approximately
two billion dollars U.S.
This deal will make Hearst Corporation and the San Francisco
Chronicle one of our five biggest revenue-generating
customers on an annual basis. This partnership is also a breakthrough
in the annals of North American business, with the publisher
of a major daily U.S. paper entrusting all of its printing
to a specialized company.
Obviously, we are honoured and privileged to count the Hearst
Corporation, a true icon in the global communications industry,
among our business partners.
Luc Desjardins between François
Olivier and Benoît Huard, chief financial officer
I’ll leave it up to François to
give you the details of this historic event and to outline
the next steps. Let me just say that the San Francisco
Chronicle is the top-ranked paper in the San Francisco
Bay area, the fifth most-populous market in the U.S., and
is the 14th ranked daily paper in terms of circulation. Under
this contract, we will print the paper from an ultramodern
printing plant in the San Francisco Bay Area, as we did for
La Presse in Montreal, and printing will start in
the spring of 2009.
For the next few minutes I’d like to put into perspective
the Transcontinental growth strategy that resulted in this
major transaction.
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The United States is Transcontinental’s
primary foreign market. We currently earn 25% of our revenue
in the U.S. market, amounting to about 600 million dollars
Canadian. Half of that is exports from our Canadian printing
plants, mainly books, catalogues and magazines; the other
half is produced in the U.S., and basically consists of direct
marketing products and services.
We consider this geographic diversification both natural,
given the highly integrated nature of our two economies, and,
in the context of the appreciation of the Canadian dollar,
necessary. Today we are adapting well to a Canadian dollar
that’s worth about 90 cents U.S., but we’re aware
that we must increase our presence in the United. States to
continue to grow.
I know the U.S. market well because I worked there for a number
of years. Transcontinental’s advantage is that we have
a niche-based strategy. We’re not trying to become one
of the biggest printers in the United States. Instead, we
aim to be the best in a certain number of niche markets where
we have a unique competitive expertise and advantage.
We’ve already achieved this in direct
marketing. With our facilities in Pennsylvania, California
and Texas, we are one of the leading suppliers of integrated
direct marketing services in the United States and the
leading company for financial institutions, a fast-growing
segment. We firmly intend to pursue our expansion in the years
ahead. We have the business plan and team to do it.
We’ll do the same thing in newspaper printing, a niche
where we have a major competitive edge: our unique business
model. In our Evolution 2010 business project, we
identified newspaper printing as one of our most important
growth segments. As with direct marketing, this growth will
mainly occur in the U.S. market. The fact that we are a major
newspaper publisher makes us sensitive to the aspirations
and new needs in this industry. Transcontinental is the second-largest
community newspaper publisher in Canada, with revenues of
more than 200 million dollars from those activities.
Let me mention that the Evolution 2010 financial
plan calls for capital investments of 120 million dollars
on average per year over the next five years, which does not
include special projects like this one. In 2006 we added 10 million
dollars in strategic spending on organic growth, particularly
to develop digital projects in our Media sector. It also allowed
us to set up a dynamic and experienced team to promote ourselves
in the United States as a newspaper printer.
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When we tell the financial market that our
strategy is to invest in our positioning in the medium and
long term, even if that might affect results for the current
year, you have tangible proof of that today.
In the past 18 months, we have said a number
of times that we were in negotiation with publishers of major
U.S. dailies. In November 2005, at our plant in Toronto, we
started printing The New York Times for the Ontario
and Upstate New York markets. Today, we are making a critical
breakthrough: we will become the designated printer –
in the United States itself and in a plant completely dedicated
to that function – of one of the most prestigious dailies
in the country. By trusting us with their printing, Hearst
Corporation and the San Francisco Chronicle are making
Transcontinental a business partner in every sense of the
word.
One last word on an aspect of today’s announcement that
may be less well understood. The contracts in the newspaper
printing segment are for long periods of time: 15 years for
the San Francisco Chronicle and La Presse,
and 10 years for The Globe and Mail and The New
York Times. These long-term contracts allow Transcontinental
to secure its revenues over extended periods. Currently, 50%
of our printing revenues are tied to medium- and long-term
agreements.
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Rémi Marcoux (left) Transcontinental's
founder, in discussion with a media representative
Before handing things over to François
Olivier, I’d like to mention that François was
the driving force behind the start-up of the plant to print
La Presse in October 2003, plus the long-term agreements
with The Globe and Mail, The New York Times
and, now, the San Francisco Chronicle. So he knows
the North American industry very well. As you can imagine,
the announcement of this agreement is a great day for him.
Thank you for your attention and over to you, François. |
