March 17, 2010 / 3:15 PM / 8 years ago

UPDATE 2-Transcontinental returns to profit, ups dividend

* Q1 EPS C$0.32 vs year-earlier C$0.08/shr loss

* Analysts forecast EPS C$0.27 before items

* Revenue down 11 pct at C$555.9 mln

* Quarterly dividend increased by 9.5 pct (Adds background on cost cuts, analyst comment, stock price)

OTTAWA, March 17 (Reuters) - Transcontinental Inc (TCLa.TO), Canada’s biggest commercial printer (TCLb.TO), said on Wednesday it returned to profit in its first quarter, benefiting from efforts made last year to cut costs, reorganize and divest certain operations.

The company also said it is increasing its quarterly dividend by 12.5 percent from the previous quarter to 9 Canadian cents a share.

Last February, the company said it would chop close to 1,500 jobs, or 10 percent of its staff, as customers scaled back spending in a rapidly deteriorating economy.

It also reduced capital spending and introduced a hiring freeze, unpaid leave and reduced work weeks. All told, the measures were seen reducing costs by about C$75 million ($74.3 million) annually.

In its first quarter, operating costs were 15 percent lower, while sales, general and administrative costs were down 19 percent.

“Transcontinental reported fiscal Q1 results that reflect a continuing soft revenue environment, but cost-cutting initiatives drove an earnings result ahead of expectations,” said BMO analyst Tim Casey in a note.

“Conditions should improve modestly throughout fiscal 2010 for most product categories.”

The company reported net income of C$26.2 million, or 32 Canadian cents a share, in the three months to Jan. 31, compared with a loss of C$6.4 million, or 8 Canadian cents a share, a year earlier.

Consolidated revenue fell 11 percent to C$555.9 million due to an unfavorable exchange rate, the divestiture or closing of plants and publications, and paper prices.

Excluding items, Transcontinental, which also publishes consumer magazines, community newspapers and French-language educational resources, said its adjusted net income rose to C$25.3 million, or 31 Canadian cents a share, from C$15.1 million, or 19 Canadian cents a share.

Analysts on average had expected earnings of 27 Canadian cents a share, before special items, and revenue of C$578.5 million, according to Thomson Reuters I/B/E/S.

Class A shares of the company rosed 8 Canadian cents to C$13.43 on the Toronto Stock Exchange on Wednesday, while class B shares were untraded.

The company said it continues work on a C$175 million hybrid newspaper and flyer printing platform that will operate in plants across Canada by late 2010.

Last month, Transcontinental agreed to sell the bulk of its U.S. Direct Mail Group to Minnesota-based IWCO Direct for net proceeds of more than US$100 million. The deal is expected to close in the second quarter.

$1=$1.01 Canadian Reporting by Susan Taylor; editing by Peter Galloway

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