As chief executive of Canadian printing giant Transcontinental Inc., Francois Olivier is well aware of what many people think about the sector\’s future.
\”It is not a very popular industry,\” he said. \”Most of the time when individuals write about our industry, it\’s to announce the date of their future death.\”
The many people who share that view may be surprised by Transcontinental\’s recent stock performance. The Montreal-based company\’s shares have rallied 9.3% over the last year, even though the Canadian print industry\’s revenues have shrunk by a couple of.4% a year within the last five years, according to research from IBISWorld.
While others were planning paper industry\’s funeral, Mr. Olivier continues to be selling some assets and purchasing others to adjust to increased competition from digital media. Transcontinental who has sold its national magazines and reduced its reliance on book printing, while buying local Quebec weekly newspapers and diversifying into flexible packaging.
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The print industry has suffered deep cuts and job losses as readership and advertising revenues have declined steadily. However, Mr. Olivier said it\’s important to remember that investing for future growth is equally as important as cutting costs.
\”You need to have the guts to take a position the money,\” Mr. Olivier said. “This is the way we’ve had the opportunity to perform very, perfectly and improve profitability annually for the last 5 years. Even though it is not a very popular industry.”
Transcontinental is the fourth largest printer in North America and commands 14.7% of the Canadian market share, making it the dominant player by far. Because it\’s just too large, IBISWorld analyst Omar Khedr said Transcontinental has been able to take advantage of the industry\’s decline in some ways.
\”The small players who can’t sustain themselves- they’re just going to need to shut down,\” Mr. Khedr said. \”And that revenue is going to go to the bigger players like Transcontinental.\”
Aravinda Galappatthige, an analyst with Canaccord Genuity Corp, said the print industry has certainly declined, but is not wiped out by digital media as many predicted. Additionally, the decline is uneven, with Transcontinental\’s flier and coupon printing business remaining relatively stable, he said.
However, Mr. Galappatthige said the outlook for that industry and the company remains uncertain.
Mr. Galappatthige said investors have rewarded Transcontinental for reducing debt, cutting costs and making smart acquisitions. In particular, Transcontinental\’s acquisition of the U.S. flexible packaging firm Capri last year diversifies the company\’s revenue and adds growth potential, he said.
However, Mr. Galappatthige said the outlook for the industry and also the company remains uncertain.
“I’m not necessarily that optimistic about this going forward,\” Mr. Galappatthige said. \”There are so many things that can crack.”
Mr. Olivier said you can\’t really predict how technological changes will affect business, but may it\’s possible to make an informed guess. For example, he said Transcontinental drastically reduced its book publishing business in response to the rise of e-books and tablets.
Yellow Pages directory owner Yellow Media Ltd. has also seen success in spite of the print industry\’s decline by shifting its focus to digital revenue. Mr. Olivier said Transcontinental has worked to increase digital advertising revenue from the weekly newspapers\’ websites and improve its selection of digital textbooks, but remains centered on the business of putting ink in writing, at least for now.
“Whatever needs to be printed in Canada, we\’ll print that,\” Mr. Olivier said. \”In order to ensure we will be the ones printing that, we need to continue focusing on the same formula – being innovative, investing, bringing efficiencies.”