On September 12, 2024, TC Transcontinental (TSX:TCLa) (TCL.A) reported a modest revenue growth and a notable increase in adjusted EBITDA during its third-quarter earnings call for the fiscal year 2024. The company saw a revenue increase of 0.9% year-over-year, reaching $700 million, with adjusted EBITDA rising by 12.1% to $121 million.
This improvement was primarily due to cost reduction initiatives and a favorable product mix. Despite facing challenges in the medical packaging market and anticipated pricing pressures, TC Transcontinental remains confident in maintaining stable adjusted EBITDA for the fourth quarter of 2024.
Key Takeaways
- TC Transcontinental's Q3 revenue rose to $700 million, a 0.9% increase year-over-year.
- Adjusted EBITDA increased by 12.1% to $121 million, thanks to cost reduction efforts and a favorable product mix.
- The packaging sector revenue grew by 3.5% to $417.3 million, and adjusted EBITDA increased by 20.6% to $64.9 million.
- The Retail Services and Printing sector experienced an 8.7% revenue decline, but adjusted EBITDA rose by 12.4%.
- The company initiated a new BOPE line in South Carolina and expanded the raddar service in British Columbia.
- Management expects to achieve at least $30 million in recurring savings by the fiscal year-end.
- The company's net debt ratio improved to 1.91x, and it closed a $7.1 million building sale, with a goal to divest $100 million in assets over two years.
Company Outlook
- Management is optimistic about the two-year profitability improvement program, targeting $30 million in savings.
- They expect stable adjusted EBITDA for both the packaging and Retail Services and Printing sectors in Q4 2024.
- There is a cautious stance towards providing specific guidance for fiscal 2025 due to market dynamics.
- The company plans to maintain financial flexibility for potential M&A opportunities and NCIB activity.
Bearish Highlights
- The Retail Services and Printing sector saw an 8.7% decline in revenues, partially due to the Publisac impact.
- The company anticipates pricing pressures in the packaging sector, which may impact 2025 performance.
- A softer market for building sales has been noted, but the company is not willing to sell at unfavorable prices.
Bullish Highlights
- Packaging (NYSE:PKG) sector revenue and EBITDA saw significant growth, with a 15.6% EBITDA margin.
- The company has seen improved margins from 18% in Q2 to 20% in Q3, with an expectation of around 21% in Q4.
- Long-term contracts in the packaging sector help mitigate immediate pricing pressure impacts.
Misses
- The Retail Services and Printing sector experienced a revenue drop, with Publisac's closure contributing to the decline.
Q&A highlights
- Donald LeCavalier discussed financial flexibility and the projection of free cash flow for the upcoming year.
- The company is comfortable with its current net debt ratio and is not setting a specific debt-to-EBITDA target.
- While achieving a 16% margin is not the primary goal, improved cost management is expected to positively influence margins.
In conclusion, TC Transcontinental has presented a mixed but stable financial performance in the third quarter of 2024, with strategic initiatives in place to navigate market challenges and pursue growth opportunities. The company's focus on cost efficiency and operational performance, along with its commitment to sustainable packaging solutions, positions it to meet future demands despite the current headwinds.
Full transcript - None (TCLAF) Q3 2024:
Operator: Welcome to the TC Transcontinental Third Quarter of Fiscal Year 2024 Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session, and instructions will be provided at that time. As a reminder, this conference is being recorded today, September 12, 2024. I would like to turn the conference over to Yan Lapointe, Director of Investor Relations and Treasury. Please go ahead.
Yan Lapointe: Thank you, Joel, and good morning, everyone on the call. Welcome to Transcontinental's third quarter of fiscal 2024 earnings call. Before we begin, please note that our quarterly report, including financial statements and related notes as well as the slides supporting management's remarks are all available on our website at www.tc.tc under the Investor Relations section. A replay of this conference call will also be available on our website shortly after the call. Please note that this conference call is intended for the financial community. Media are in listen-only mode and should contact Nathalie St-Jean, Senior Adviser, Corporate Communications, for your information. We have with us today our President and Chief Executive Officer, Thomas Morin and our Executive Vice President and Chief Financial Officer, Donald LeCavalier. As referenced on Slide 2, some of the financial measures discussed over the course of this conference call are non-IFRS. You can refer to the MD&A for a complete definition and a reconciliation of these measures to IFRS. In addition, this conference call might also contain forward-looking statements. These statements are based on the current expectations of management and information available as of today and they involve numerous risks and uncertainties, known and unknown. The risks, uncertainties and other factors that could influence actual results are described in the fiscal 2023 annual MD&A and in the latest annual information form. With that, I would like to turn the call over to our President and CEO, Thomas Morin.
Thomas Morin: Thank you, Yan, and good morning to all today. I'm happy to report a fourth quarter in a row of improved profitability. This strong performance is the result of the hard work from our teams in reducing costs, the optimization of our manufacturing network as well as our focus on higher value-added products. In our packaging sector, even though Q3 last year is an easy comparable, we are pleased with the increase of 20.6% in adjusted EBITDA. While the pressure on our non-food business continued, particularly in the medical market, we did experience a modest volume growth for the first time since 2022. Regarding recyclable packaging and our new BOPE line in Starnberg, South Carolina, we powered up the line for the first time in July, and we are producing test reals for customers' trials. So far, this is a successful start-up and it's on plan. Looking forward, while the demand environment is slowly improving, we are seeing some pricing pressure in the market and remain vigilant in this regard. Regarding medical, which represents about 5% of packaging revenue, we don't expect a recovery before the first quarter of fiscal 2025. In our Retail Services and Printing sector, our actions to improve our cost structure, a more favorable product mix, including the rollout of raddar and growth in volume and profits in our in-store marketing activities are paying off. The sector delivered 12.4% increase in adjusted EBITDA, the first time increase in profitability in a very long time. In July, we expanded our raddar footprint in British Columbia, and we are now reaching 1.2 million homes weekly in the province and nearly 5 million weekly overall. Our entry into Newfoundland has been delayed, taking into account the acquisition of software assets by cost Media. As a consequence of this transaction, though, we will be receiving additional volumes for our Halifax plant starting in the next few weeks. And finally, the implementation of our two-year program to improve our profitability and financial position continues to be on track, in line with the objectives announced last December. I'm very proud of the work done by our team, which continues to focus on our priorities and delivers these encouraging results. On this, I will pass it over to you, Donald.
Donald LeCavalier: Thank you, Thomas, and good morning, everyone. Moving to consolidated numbers on Slide 5 of the earnings call presentation. For the third quarter of 2024, we reported revenues of $700 million at 0.9%. The small decline was caused by lower volume in the Retail Services and Printing sector, partially offset by a positive exchange rate impact in both sectors and by a low single-digit volume growth in the packaging sector. Regarding profitability, we delivered another strong quarter with consolidated adjusted EBITDA of $121 million a 12.1% improvement versus last year. This increase was mainly due to our cost reductions and efficiency initiatives related to the profitability improvement program and also a positive exchange rate impact. Volume growth in our packaging sector and a favorable product mix in the Retail Services and Printing sector also contributed to the strong performance. Financial expense decreased by $0.5 million, mainly due to a lower debt level following strong cash flow generation in the last 12 months, partially offset by exchange rate fluctuations. Adjusted income tax increased by $7 million to $17 million and represented an effective rate of 24.8%. This led to an adjusted earnings per share of $0.60, a $0.09 increase compared to the same quarter last year. Now moving to Slide 6 for the sector review. In Packaging, we generated revenue of $417.3 million, a 3.5% increase compared to last year. The increase is mainly due to a positive exchange rate and modest volume growth in the quarter. While we continue to see pressures in the medical market, mostly due to destocking, we have seen some improvement in demand. In terms of profitability, adjusted EBITDA and packaging grew by 20.6% to $64.9 million. This solid performance led to a 15.6% EBITDA margin a 230 basis point improvement versus last year. Cost reduction initiatives and volume growth supported the profitability growth for the quarter. Moving to Retail Services and Printing sector on Slide 7. Revenues decreased by 8.7% to $250 million. This was mainly due to the lower volume in our traditional printing activities, including the end of Publisac in Quebec. Adjusted EBITDA grew by 12.4% to $50.8 million. After stabilizing profitability in the last quarter, we are encouraged to see EBITDA growth this quarter. The improvement came from our cost reduction initiatives. The optimization of our manufacturing network, the favorable effect of the rollout of raddar and growth in in-store marketing. Adjusted EBITDA margins grew 380 basis points to 20.3%, reflecting EBITDA growth and our efforts to improve our product mix towards higher-value products and services. Now turning to cash flow. We generated $98.3 million from operating activities compared to $109.1 million in the previous year following the strong working capital benefit in Q3 last year. Our CapEx at $30.6 million were $13.5 million lower than last year and in line with our full year guidance of around $135 million. Despite the impact of a stronger U.S. dollar at the end of the quarter and $70.7 million of shares buyback, we improved our net debt ratio to 1.91x. We are confident that our leverage ratio will continue to decrease in the fourth quarter, in line with the important cash flow that we expect to generate over the next few months. Looking ahead, following the strong year-to-date performance, we are confident in our full year outlook. We continue to expect our Retail Services and Printing sector to deliver a stable adjusted EBITDA in fiscal 2024 compared to fiscal 2023. In our packaging sector in the consolidated level, we expect to grow the adjusted EBITDA in this fiscal year to reflect the strong performance year-to-date. Looking at Q4 results, we expect adjusted EBITDA in both of our main sectors to be in line with a strong quarter last year. However, we should be impacted by higher stock-based compensation expense due to the share price performance in addition to a strong comparable for the media sector. We are pleased with the traction we are seeing from our profitability and financial position improvement program and we continue to expect to reach a run rate of at least $30 million in recurrent savings by the end of this fiscal year. Finally, we closed a $7.1 million sale of a building in Montreal, which bring us to around $20 million versus our objective of $100 million over two years. And we are cautiously optimistic about closing the sale of another building over the next few months. On that note, we will now proceed with the question period.
Operator: [Operator Instructions] Your first question comes from Adam Shine with National Bank Financial. Please go ahead.
Adam Shine: Thomas, maybe first question to you on the Q4 outlook. You're calling for stable packaging and printing EBITDA. Is this due to mostly margin dynamic? Or is it a function of also a combination of some top line related issues as you referenced, I guess, some of the pricing pressure alluded to in packaging?
Thomas Morin: A few things to say on our Q3 and our Q4. The growth in Q3, 1.7% is actually in line with what we've announced if you take into account the decrease in medical, which has been actually a bit stronger than anticipated. So far, we're comfortable and happy with the performance. When I look towards Q4, two things to say on Q4 last year was seasonal high in Q4. For packaging, we don't expect such a high -- first thing. As far as the price pressure is concerned, it's going to be not a massive impact in Q4 but probably we'll still have a little bit impact. So, I think it's fair to say that anticipating a stable top line for Q4 packaging is the right thing to do at this point in time.
Adam Shine: So, if we go back -- so that's stable revs in packaging, but then when we think about some of the margin improvement, we've seen in the first three quarters of this year and not a huge margin dynamic necessarily in Q4 last year. Can you just help us a little bit -- a bit more color around then there's going to be a margin dynamic for packaging and printing unless, of course, you're just being rather conservative.
Thomas Morin: Well, I don't know. I'll leave the last comment for you, Adam. What I would say is the improvement in costs will continue towards Q4. This is something we've done for the last few quarters, and we will continue to deliver in the fourth quarter. I'm not giving any prediction on margin levels, if you will. But if you add the two together, you can make your own math.
Donald LeCavalier: And if you want more color on the printing side, I think with the mix of products we now have on the retail side, if we say, we're in line with last year, obviously, margin should be up because you see that the impact of the new product raddar, we have on the top line. So, margin should be better if we say we're in line regarding EBITDA.
Adam Shine: And just as a follow-up on the margin last question. When we think about how the margin has stepped up on the back of cost cutting, you were near 18% in Q2 this year, 20% in Q3, as you just alluded to. I think the margin could be closer to 21% in Q4. When we think ahead to next year is it fair to be thinking about a margin that could actually be in a 19% to 20% zone, particularly as the mix evolves and there's further cost-cutting efforts? Or is there something to be considered further?
Donald LeCavalier: Well, the cost-cutting effort, obviously, will be there again next year because it's a run rate. And as we say, we expect to be at least $30 million, then we're still going to have cost-cutting effort next year. Excluding any important movement on the resin price that as you know, can have an important impact on the margin, yes, we should continue to see some improvement. Having said that, when you look at quarter-over-quarter you see in Q3 and for the next few quarters, you will see the impact of the closing of Publisac in Quebec and the closing of Saint-Hyacinthe. But in next year, Q3 and Q4, those will be behind us. So that's something to consider when you look at the improvement in Q3. But cost cutting program will still be there next year.
Operator: Your next question comes from Hamir Patel with CIBC (TSX:CM) Capital Markets. Please go ahead.
Hamir Patel: Thomas, on the printing side, we've seen several newsprint producers out with a price hike in September of sort of $50 per ton. How do you see the timing of that increase flowing through your printing business? And how do you think about the risk there for further demand destruction when you try to pass that on?
Thomas Morin: We don't see this as impacting much demand as we speak. This is not certainly something that came high in the discussions we're having with our newsprint customers.
Donald LeCavalier: And I would add to that. As you know, on the printing side, has the same on the packaging side, we have pass-through mechanisms. Usually, in the past, it did have an impact because obviously, retailers have that budget that they need to respect. So, any spike -- important spike in the price of paper had an effect, but that's raddar using way less paper, obviously, that helps us to mitigate that so we don't expect any important impact regarding that.
Hamir Patel: Okay. Great. That's helpful. And just turning to the packaging side. You mentioned some pricing pressure, which would be more apparent in 2025. How large a percentage decline are you seeing?
Thomas Morin: Well, that's a complex question to answer. I'll try to give you a few insights. First, we have a lot of customers who are under contract. So, this will obviously not impact us in the near term. The second thing is we want to remain competitive and that's why, as Donald mentioned, we will continue in 2025 to be a very cautious and frugal on our costs to remain competitive. Now, the price pressure overall will be a combination of those renewal of contracts as well as, obviously, the level of competitiveness we can deliver. You can look at the industry, see what some of our comparables are doing. They actually already report some price movements which we do not. So, we'll stay very alert and close to what happens on the market and remain -- I think the key message here is to remain competitive and be in a position to fight and maintain our margin levels.
Hamir Patel: Fair enough. And just the last question I had was just sticking with the packaging side. We're seeing financial regulators in the U.S. start to crack down on companies for some of the claims they make about the recyclability of their plastic packaging. Are you seeing any signs yet of that driving customers to want to consider paying up for more of the sustainable offerings that you have?
Thomas Morin: So very, very good points here. And that very much aligns with our investments we made, and I could speak about it, our BOPE recycle-ready, a few manufacturing investments we've made, and we're starting up now. So, all is to say that we've been somewhat ahead of the curve anticipating for such regulation to be very clear. So, it's good to see -- I think it's good news for the industry to see some increased awareness, if you will, and regulation associated with it. I remind you what our investment is about is to produce recycled ready films so to be in line with these new laws and new regulations and to provide customers with the technical solutions. Whether the consumers and consumers will be ready to pay more for it, it's not really for me to say. What matters at this point in time is to come up with technical solutions so that our customers can be ready and can be successful being the first on the marketplace to offer recycle-ready in packaging solutions, which we are. So, we'll see the way the dynamic evolves in terms of readiness to pay to your question, what matters at this point in time is to come up with a technical solution that works and is commercial and our customers' lines.
Operator: Your next question comes from Maher Yaghi with Scotiabank (TSX:BNS). Your line is now open.
Maher Yaghi: I just wanted to ask you, when you think about the packaging, you talked about the pricing pressure, but if we maybe can we just talk a little bit about the volume side of things, I think you had like 1.7% growth in packaging revenues organically. Can you split that in terms of volume and pricing, please?
Thomas Morin: Sure. It's almost 100% volume.
Maher Yaghi: Okay. So, volumes are positive. And so, your indication on pricing, should we expect pricing in next year to turn negative, like slightly negative? Or are you just implying that pricing will remain -- continue to be a pressure, but within the current environment, which is flat overall?
Thomas Morin: We're expecting a pressure downwards on price. Not so much because of raw material movements, as Donald mention earlier, but because of some activity, I would say, from the market as we speak. So, the answer to that is we remain competitive. And if we need to adjust our pricing, we will take into account our costs so that we can remain positive margin-wise. That's the whole equation we're working on.
Maher Yaghi: Okay. And looking at volumes in general, you've had some sectors that we're seeing volume declines. Can you -- if we look into the future, can you discuss a little bit the inventory situation and which segments you're seeing the most growth and from an overall perspective, how do you see volumes behaving going forward.
Thomas Morin: So the volume -- the inventory related volume impact are primarily in our medical and health care segments, which are small. I think we mentioned 5% overall of our sales and yet significant from dollar volume impact. I think for Q3, it was in the region of $5 million impact -- negative impact for the quarter. So, this shows up. We expect this to recover step by step in the course of next year. We don't have yet a full visibility from our customers. So, we're staying close to them to get some accurate data. But we expect a slight recovery, not a full recovery though. Our assumptions for 2025 are prudent when it comes to medical. It's going to be better than this year, but not yet to the highest weeks in 2024.
Maher Yaghi: And overall, on a company-wide basis, when you think about volumes next year, how do you think the market will look like?
Thomas Morin: We don't have large inventory impact in the other market segments we play in by the nature of those segments, and they can't really increase their inventory that much. Demand so far when we speak to our key customers it's going to be flat at best.
Maher Yaghi: Okay. So, to offset these pressures you mentioned that you're going to stay very frugal, very tight on costs. Where are the items that you could push on to maintain the margins that you had in 2024 going into 2025 with these top line pressures that you're seeing?
Thomas Morin: I think we've demonstrated this year that the priorities we've given are delivering the results we wanted. So, we're not going to change something that delivers as we speak. So, three main areas of cost consciousness or control or reduction, if you will. The number one and the largest remains the cost of goods sold. So basically, our efficiencies, our waste levels the way we buy our materials will be number one focus. The second will remain on the performance of sites and make sure that they raise their expectations. We raised their expectations and they raised their targets. And third will stay very, very close to our fixed costs and SG&A to make sure that we align again with the cost competitivity and competitiveness we need to deliver. So, the three main things, as we've already done, cost of goods sold, performance manufacturing-wise and fixed costs.
Maher Yaghi: And you mentioned in previous quarters that as you finish tough and stabilize and continue to start to grow the packaging EBITDA line, you might look at doing some M&A. Has that thought or through -- do you changed at all going into 2025?
Thomas Morin: So, one of our four priorities is to reduce debt level. And I think he mentioned this morning, we, Donald we are 191 as we speak, and we have a good path to towards lower than that. So meanwhile, as we reach those lower levels, obviously, we're looking -- we continue to look at and create a funnel of opportunities for packaging, but also for some segments of growth in the Retail Services and Printing. So yes, we're having a funnel of opportunities. Whether this will land in 2025, it's too early to say, but this is internally related to our debt ratio, which goes in the right direction as we speak, and we'll manage both accordingly.
Operator: Your next question comes from Drew McReynolds with RBC (TSX:RY). Your line is now open.
Drew McReynolds: Two for me. First, on the Retail Services and Printing segment overall, down 9% in Q3. And obviously, there's a Publisac dynamic here. Just wondering kind of with that dynamic and all the moving parts on the top line, how you think that kind of unfolds in Q4 and into fiscal 2025? And then secondly, on the consolidated EBITDA growth that you're seeing again here in fiscal 2024, again, given all the moving parts looking ahead, I know you won't give guidance, but to what extent do you feel or what are the puts and takes to sustaining positive EBITDA growth in fiscal 2025 and maybe beyond?
Thomas Morin: I'll take the first and maybe Donald, you want to take the second part of the question? So, on the flyers and the reinvented flyer raddar, the product brings a lot of benefits, as you can see, one of the benefits, it's more stable because of the nature of the product itself. We have a more predictable and more stable demand and utilization. It's also somewhat limited to the number of pages we have. So, the peaks and valleys, you would have seen in the past with flyers are less so. It's more predictable, more upwards trend, but more predictable less ups and downs. So, when we look at the year-over-year I think, Donald, you mentioned that we can foresee a strong demand, as always, for Q4 in the raddar. But we won't see these highest peaks we could see in the old days as well as we won't see the downs in the lower season. So that's what I can say on raddar, which is the product we now expand as we could discuss across the country. When it comes to consolidated EBITDA guidance or direction for 2025, I think, Donald, I like you to give a bit of a feel for that.
Donald LeCavalier: Well, usually, and we'll do the same this year, we give more guidance to the results of Q4. But as we said in the call -- earlier in the call, we will certainly have pressure on the pricing side for packaging, but will be cautious regarding costs, and we think we have opportunity to be better on that side. So that's something to consider. On the retail and printing service, I'd like to highlight that there was a business that used to go down year-over-year. And this year, we're talking about a stable business. So, the challenge for us is keep that business at that level or even growing the business because ISM is growing, and we think book -- we had a tough year year-over-year in the book -- on the book side, but this kind of stabilizing over the moment. So, we're encouraged to see what the future of this business can be bringing us. So early to give guidance, but we definitely feel that we have the tools to keep growing EBITDA.
Operator: Your next question comes from David McFadgen with Cormark Securities. Your line is now open.
David McFadgen: A couple of questions maybe following on Drew's line of questioning. When do you expect to lap the impact of Publisac?
Donald LeCavalier: Well, this was the first quarter where we had the full pack of having no longer any Publisac in the Quebec, you may recall that we first started with Montreal and with the closure of [indiscernible] and the closure of the entire distribution service in Quebec in this quarter. So that's the first quarter where, as I said, there's no more Publisac. It's the new normal in Q3 2024 actually.
David McFadgen: Okay. So, when we look at the organic decline in revenue for the Retail Services and Printing, it was down $24.7 million. Can you give us an idea how much of that was related to Publisac?
Donald LeCavalier: I will say that part of it was linked to Publisac, but also remember that we have the newspaper business on the retail side that has an impact and the book business had an impact also. So, the exact impact by each, maybe I was a close 1/3 of each, something like that.
David McFadgen: So, about 1/3 is Publisac. Okay. Just give us an idea of how long it's going to take to run that off. So okay. That's helpful. And then in the fourth quarter, you indicated, I guess, higher corporate expense. Can you give us an idea how much the magnitude of the higher corporate expense would be?
Donald LeCavalier: Well, the way to look at it is if you look at the stock price last year, we moved from opening a fourth quarter at $13 and close a little bit north of $10. And this year, well, you'll make the call where the stuff will end at the end of Q4, but it's not the direction it's going. And I will say that every impact of $1 is about $1 million negative. So, you can take -- you can do your own calculation regarding that, regarding where we should finish at the end of Q4. So, this is why we mentioned it that it will be an impact. It had an impact over in Q3 probably north of $2.5 million.
David McFadgen: Okay. So, when you say every $1 is $1 million, that's for the quarter or for the year?
Donald LeCavalier: For the quarter.
David McFadgen: For the quarter, okay. All right. And obviously, you guys have extracted a lot of cost savings this year, and you highlighted $30 million. And do you think you're pretty much done? I mean I guess obviously, you guys constantly trying to make the business more efficient, but do you think, for the most part, any big pricing programs are done by the end of this year?
Donald LeCavalier: We don't think we're done. As we said, we need to be proactive because we're going to have price pressure, and we still see opportunity over that side and when we first announced this program, we mentioned 40 to 40. We are at a run rate of 30 at least 30 by the end of fiscal year. So, we definitely see opportunity to keep improving this program. and find other opportunities. This is the way Transcontinental has been doing for many years. So that's part of our DNA.
David McFadgen: Okay. And then you talk about one of your priorities is to lower your leverage. Can you share with us a leverage target that you want to get to before you start with your M&A?
Donald LeCavalier: Well, I think Thomas mentioned that being at 191 is definitely where we want it to be. We call that we were at 263 at the end of Q1 2023. So, we're quite happy with the movement in that direction. And what it gives us, it gives us more flexibility, and this is why we were confident both NCIB program and place in late June because we feel that we were more comfortable to be under 2x including following acquisition and Transcontinental will produce a lot of free cash flow next year. So yes, it gives us flexibility to either keep being active on the NCIB or if opportunity comes, and Thomas spoke about it to be on the M&A side.
David McFadgen: Okay but there isn't like a target, I say you want to get to 1.5 or 1 before you...
Donald LeCavalier: We don't have a specific target. Before we did -- we bought Coveris, we were I guess, at 0.30 debt to EBITDA. We were quite happy to be in that position to do post the biggest transaction -- M&A transactions for TC. So, it's not because we're close to one that we will need to do something, but that gives us a lot of comfort regarding the flexibility and look at any opportunities to improve the performance of the Company.
Operator: [Operator Instructions] Your next question comes from Nevan Yochim with BMO (TSX:BMO) Capital Markets. Your line is now open.
Nevan Yochim: Just on the packaging segment. As we think about margins in 2025, we're at the high end of the 15% range this year and then you have some additional cost cutting coming into place, but that's been partially offset by some pricing headwinds. So, I guess just directionally, how are you thinking about packaging margins in 2025? And could we see margins back into that 16% range?
Donald LeCavalier: Well, for us, the most important thing is our first priority is to grow the EBITDA. It's not to grow the margin, but obviously, by both goes in the same direction. So, what we're working on for 2025 is to grow the EBITDA dollars. In terms of margin, it's always excluding raw material movement, if pricing cancel the volume impact, but we do better on costs, yes, margins should be better. But we're comfortable with the increase. We're satisfied with the increase we saw over the last 12 months. And as I said, the most important thing for us is to grow the EBITDA dollars.
Nevan Yochim: Okay. Understood. And just my last question on building sales. Can you provide the detail on the demand that you're seeing maybe in terms of the valuations that you're receiving and then your expectations on when you could achieve the $100 million target you're looking for?
Donald LeCavalier: Well, we see the market being softer than when we launched that program. The good news is that we're working for $100 million over two years, so we still have one year, but being in such a good position right now on the balance sheet, we won't put pressure on us to sell if the price is not at the right level. In the past, we had opportunity, we decided to keep the building and a couple of years after we -- at a much better price. Having said that, we're confident to do one transaction in the coming months, but we won't put pressure if the pricing is not there. And I would say, repeating myself that it's not as -- it's way softer than it was a year ago. So, we'll see the impact of the interest rate going down in the next 12 months, if it creates opportunity. But that's how I see the market right now -- we see the market.
Operator: Mr. Lapointe, there are no further questions at this time.
Yan Lapointe: Thank you, everyone, for joining us on the call today, and we look forward to speaking to you soon.
Operator: Ladies and gentlemen, this concludes the conference call for today. Thank you for participating, and please disconnect your lines.
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