Transcontinental Inc

TSX:TCL.A

Earnings Call Transcript 2020-Q2

[Operator]

[Foreign Language] Welcome to the TC Transcontinental Second Quarter of 2020 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, June 10, 2020. I would like to turn the conference over to Yan Lapointe, Director, Investor Relations. [Foreign Language] Mr. Lapointe, please go ahead.

[Yan Lapointe, Director of Investor Relations]

Thank you, Simon, and good afternoon, everyone. Welcome to TC Transcontinental Second Quarter 2020 Results Conference Call. The press release and the MD&A with complete financial statements and related notes were issued earlier today and are available on our website at tc.tc. We have with us today our President and Chief Executive Officer, François Olivier; and our Chief Financial Officer, Donald LeCavalier. Before I turn the call over to management, I would like to specify 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 more information or interview requests. Please be reminded that 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 reconciliation of such 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 annual MD&A and updated in the quarterly report released today. And are also available in the latest annual information form. With that, I would now like to turn the call over to François Olivier.

[François Olivier, President, CEO & Director]

Thank you, Yan, and good afternoon, everyone. I hope all of you are safe and healthy during these unusual times. First, I want to express my sincere appreciation for the commitment and dedication of our employees. They have shown courage, resilience and agility as we continue to serve our customers in a united, prudent and responsible manner. Since the onset of the pandemic, we've all learned that the COVID-19 virus moves very fast. Therefore, our own speed has been key. I'm very proud of the leadership and engagement of our teams, their courage and determination. As a company, we acted swiftly to protect our employees and to deliver to our customers.Before we jump into our second quarter results, I'd like to give you some insights on how we navigated the outbreak as a company and the actions we took in response. Very early on at the beginning of the crisis, we set 3 objectives: first, contribute to the global effort to stop the spread of the virus; second, keep everyone safe; and third, keep our operations running to support our customers and delivering essential services for the population. At the beginning of March, we activated our crisis unit and deployed our company-wide crisis management and communication plan. Without waiting for government guidelines, we quickly implemented policies and procedures across the board in order to ensure a safe and secure environment within our facilities around the world and for our office employees. Now 3 months later, I'm very satisfied with our performance on all fronts. In Packaging, we provided packaging for food and other essentials consumer staples. In the Printing Sector, for clients providing essential services, we continue to print newspapers, magazines and books for publishers as well as flyers in in-store marketing products for retailers. Looking now at the results. We had a good quarter in light of the challenging time we are going through. Packaging performed very well during the crisis. In a difficult operating environment, we managed to meet increased demand from customers and market related to food and other essential consumer products, which represents over 80% of our portfolio in this sector. The decline in revenues versus last year was mainly due to the paper packaging business we sold last January. Towards the end of the quarter in April, we experienced strong organic growth in our verticals related to food and other essential consumer products. Looking ahead, we continue to expect modest organic growth in the second half of 2020. We also continue to drive synergies and operational efficiencies, leading to an adjusted EBITDA margin of 16% versus 12.5% last year. In the quarter, as expected, we benefited from the new extrusion equipment in Whitby, Ontario, efficiency gains from various cost reduction initiative, the adoption of the IFRS 16 accounting standard and from the sales of our paper packaging operations. In addition, our margins also benefited from a lower resin prices and a positive mix. As the economy is reopening, we intend to remain extremely prudent and disciplined to ensure we keep our employees safe. We also expect continued higher volume in many of our food-related verticals. In Print, we also have a very solid story despite the impact of the pandemic on our operations. We had a very strong start of the year with adjusted EBITDA ahead of last year after 5 months. We then saw a sudden drop in volume of about [ 45% ] in April. We took swift actions to adapt our cost structure to lower revenues, including 1,600 temporary layoffs and salary reductions mainly to reduce work schedules. Those measures, combined with Canada's wage subsidy program, allowed us to deliver a strong quarter considering the crisis that unfold. While our organic revenues declined by $83 million, we maintain a solid adjusted EBITDA margin of 20%. This performance underlines our proven ability to protect the sector profitability regardless of the challenges. In the past few weeks, we have seen some gradual recovery in our printing volume with the easing of the restrictions and the reopening of the economy. This has allowed us to recall approximately 600 employees from the 1,600 that were temporary laid off in March.Many retail customers who remain open during the crisis continued to use flyers even when they had a hard time predicting in-stock availabilities of items to put in promotion. Because of its wide reach early on, many use the flyers to communicate COVID-related information with consumers, remaining top of mind and helping to build brand loyalty. This crisis has shown that the print flyers remain a relevant and effective marketing tool. It will continue to be very relevant to drive people to stores and help Canadians save money in a challenging economic environment with higher unemployment rate and food price inflation. Volumes for customers who have resumed their flyer programs are already in line with last year. Almost all other retailers have a return schedule, taking into consideration the need to safely accommodate higher in-store traffic as well as product availability. Despite many stores temporary closing during the crisis, our 2 recent acquisitions and in-store marketing, Holland & Crosby and Artisan Complete, have performed very well in the last months. Their teams created innovative pandemic-related products such as signage for physical distancing, plexiglass panels for large Canadian retailers to protect their customers and employees. In addition, we manufactured protective visors for our employees and for local community organization. We remain optimistic about the long-term outlook of this vertical and our ability to grow our market share. A word on sustainability. More than ever, the benefits of flexible packaging are clear. Packaging protects the product it holds to ensure food security for people and extends product shelf life in-store and at home. Despite the crisis, we continued to develop our recycle-ready, compostable PCR product portfolio to help our industry move towards a more circular economy for plastic flexible packaging.Before Donald goes into the details of our financials, I want to leave you with 3 messages. First, our transformation has been key in making TC Transcontinental a stronger company. We are very fortunate to have a Packaging Sector with a diversified and stable portfolio, with over 80% of our revenues generated from packagings of food, beverages, hygiene products and other consumer staple which are very resilient in challenging time. Second, this quarter's performance show our ability to protect the profitability in the Print Sectors regardless of the challenge. And finally, we are in a solid financial position, allowing us to continue to both pay down our debt and explore potential acquisitions, including new post COVID opportunities. We are navigating the crisis with discipline and will emerge from it a stronger company.In conclusion, our company has a long track record of successfully steering through difficult times and adapting to changing environments. I am confident that our dedicated and resilient employees, supported by a strong group of leaders across the organization, our strong operating model, our financial flexibility, the defensive nature of our Packaging business and our ability to generate solid cash in our printing business will continue to position us well for long-term success. With that, I'll turn the call over to Donald.

[Donald LeCavalier, Chief Financial Officer]

Thank you, François, and good afternoon. Before jumping into the numbers, let me provide some context on our position before the start of the COVID-19 impact in late March. In Packaging, we had closed the sale of the paper business in late January and we were progressing well on synergies and efficiency gains. In Print, we were ahead of last year's EBITDA on a year-to-date basis, thanks to the different initiatives we put in place early in the fiscal year.We were also in a strong financial position with a net debt-to-EBITDA ratio at 2x, excluding IFRS 16. At the end of January, we had $425 million in cash and $433 million in credit line availability for close to $860 million available. We were, therefore, able to pay down $366 million of debt in February. So as we entered the crisis in March, we did so from a strong position.Now if we jump to the end of the quarter, taking into account a very different month of April, the second quarter ended with consolidated adjusted EBITDA at a respectable $104.3 million compared with $115.7 million last year. The variance is mainly due to the impact of COVID-19 in the Print Sector and the impact of the sale of the paper business in Packaging.The pandemic impacted each of our sectors differently with overall increased volume in Packaging and decreased volume in Print. This highlights the relevance of our transformation into Packaging. In Packaging, we are very proud of our performance. Our verticals related to the full supply chain and other essential customer staples, which represent the large majority of the sector's activity, safely operated at much higher levels. A few verticals experienced lower volume due to the COVID-19 restrictions or economic slowdown. Revenues in the quarter were down $65 million but that was due to the sale of our paper operations, which generated $71 million in Q2 last year.The strong performance of U.S. dollar generated a tailwind of about $7 million in revenues, which was offset by lower resin prices. Overall, our organic growth was almost flat. In addition to top line performance, packaging generated very strong adjusted EBITDA of $56.8 million or a margin of 16% compared to the 12.5% in the same quarter last year. About half of the improvement is due to IFRS 16 and the sale of our paper operation. The remaining improvement is mostly related to synergies and efficiency gains, good product mix in the quarter. This is a record level for adjusted EBITDA in Packaging. We are very proud of this performance. Turning to Print. The sector performed very well in the context. Following the various restrictions impacting our customer, we saw a significant decrease in volumes. In April alone, one of our busiest months of the year, overall Print revenues were down about 45% year-over-year. This is the major reason our revenues were down $83 million organically in the quarter. As François mentioned, we took swift action to mitigate lower revenues and we delivered adjusted EBITDA of $53.9 million and adjusted EBITDA margin of 20.3% compared to 20.1% last year. We also benefited from the adoption of IFRS 16 and the Canadian Emergency Wage Subsidy program. I'm very encouraged to see the resilience of our Print operations. The swift measure we took to reduce our costs helped to protect our profitability and this work on our cost structure will continue.Our Media business also showed its resilience. Revenues were lower compared to last year following the sale of specialty media assets in line with our strategy, but profitability remained solid. On an organic basis, both revenues and EBITDA saw good growth. We expect a good second half of the year for the back-to-school season, even in the context of COVID-19. Corporate expense for the quarter were lower than last year if we exclude the impact of the stock-based compensation. We had a good quarter in terms of working capital with $20 million related to change in noncash operating items, mainly from receivables. Since the beginning of the crisis, we have kept very close eyes on the receivables metrics and are working closely with our customers. We don't have major concern at this time. We generated $115 million in cash flow from operating activities, $15 million more than in the same quarter last year. This is a strong performance considering the challenging context. At the end of the quarter, our net debt ratio stood at 2.4x. Excluding the effect of IFRS 16, the ratio stood at 2.2x. The increase from last quarter is mainly due to the appreciation of the U.S. dollar, which added about $70 million to our long-term debt. In addition to our cash balance of $105 million, 100% of our credit facilities of $435 million were available at the end of the quarter. The strong financial position and our ability to generate strong cash flow gave us the confidence to maintain the distribution of dividends to shareholders. It will also provide us flexibility in terms of capital allocation in mitigating this crisis. Now for the outlook. We do not know the future impact that COVID-19 will have on our business but with lockdowns being gradually lifted, we are seeing the start of recovery across our Print Sector. During Q2, we demonstrated our resilience throughout the crisis and our ability to take swift actions. As we work through our third quarter, we are seeing early but encouraging signs of recovery. In Packaging, we continue to expect modest organic growth in the second half of the year, excluding the impact of resin prices. EBITDA margin should remain higher than last year as we continue to execute on efficiency gains and synergies. For the other segment, we expect corporate cost at the EBITDA level to be less than $30 million following cost reduction measure at head office. We continue to expect good performance in terms of revenues and profitability for Media in 2020. Following the reduction of our debt levels and interest rates, we expect our financial expense to decrease even after including the impact of IFRS 16 to around $50 million in 2020. Our effective tax rate should be in the mid-20s range. In terms of use of cash for the year, you can assume CapEx at around $90 million due to the delay of certain nonessential investments. As for cash tax for the year, you can assume around $55 million. I am confident that our solid financial position and diversified portfolio will allow us to navigate this crisis and emerge from it as a stronger company.On that note, we will now proceed with the question period.

[Operator]

[Foreign Language] [Operator Instructions] Your first question [Foreign Language] comes from the line of Adam Shine with National Bank Financial.

[Adam Shine, MD, Head of Montreal Research & Research Analyst]

Obviously, a tough quarter, but you guys did a lot better than anyone expected. Maybe François, if we can stick to Packaging and slice and dice it a little bit more. It seems that the sort of momentum in the quarter and the organic gains, particularly from the 80% of the business, really skewed heavily in April. So it wasn't as though the sort of smaller parts, Latin America [ encoding ] were 0 necessarily. But the momentum really skewed to April, I guess, and maybe you can talk to how that momentum has continued early into the Q3. Additionally, as it relates specifically to Latin America and the banana issue, have we reached a point where you've largely resolved that from a regulatory perspective and we move forward a little cleaner in Latin America, at least on that particular issue? And then, I guess, turning to margins, certainly very strong, better than expected, arguably, some operating leverage to be had going forward. Maybe you can just speak to the level of those synergies from Coveris being how much above $20 million. And I think how much of those would have necessarily come in from that extrusion move by the end of the Q2 to really inflate the margins further sustainably going forward.

[François Olivier, President, CEO & Director]

Yes. Thanks. In terms of the organic growth, obviously, the pandemic had a very different impact on our 2 businesses. In Print, it was negative. But in Packaging, it was challenging to operate in a safe environment. And I would say, challenging to cope with the additional demand in a lot of verticals. But you're quite right, the extra demand started in April. So it only affected 1 month in the sense of the quarter. We see this extra demand moving into Q3. So that's why we're positive about the ability to show organic sales growth. That was planned, but now we reiterate that we feel that we will have organic sales growth in Packaging for Q3 and Q4, probably stronger in Q3 than Q4. If you recall, last year, we had a very strong Q4, so the comparables are tougher. But we certainly expect Q3 to show good organic revenue growth as we've seen this momentum continued in May and in June. So -- and then this is also -- will be also positively impacted by the Latin America situation where we developed a new, innovative product that the industry has been waiting for, for a long time. And we are true in mostly all Latin America country with the regulatory approval to deploy that new product in the banana field. So that will start to impact our organic growth and profitability in LatAm in Q3 and more in Q4 as some customer needs to work through some inventory of the old product. But we expect to have a positive impact, maybe more towards July, impacting maybe 1 month of Q3 and the whole of Q4. So that this is also a very positive outcome for us that will help improve organic growth. In terms of the margin, we expect the margin to continue to improve every quarter year-over-year. So compared to the previous quarter, that was a very solid quarter at 16%. But all the elements that enable us to reach 16%, seems to be all there in Q3 as well, which what I mean by that is the increased demand in the food vertical seems to keep being there. And yes, the in-sourcing of our film is done and the machine are running at full capacity. So we expect to have the benefit in Q3 and Q4 as well as other cost-saving measures that we have put in place. We have a few additional expense of operating in the new environment of COVID, but they are minimum. So we expect the margin to remain very solid in Q3 and Q4. And obviously, when you compare them to last year, they will be way above last year.

[Donald LeCavalier, Chief Financial Officer]

And Adam, in terms of the -- your question regarding synergies, now we've been full year following the acquisition and we have mentioned at the beginning that we were targeting a level of more than $20 million and this is -- will be achieved by way more than this number. So obviously, we still have some impact of the synergy coming in the next few quarters, but we'll more work now on procurement side. But we're very proud about the level of synergy that we achieved following the acquisition. We easily beat the...

[Operator]

Your next question [Foreign Language] comes from the line of Mark Neville with Scotiabank.

[Mark Neville, Analyst]

If I can maybe just talk about the Print. You mentioned 45% declines in April. I'm just wondering if you could sort of in round numbers, sort of share with us what May may have looked like and sort of what you're seeing in early June. If you could do that.

[François Olivier, President, CEO & Director]

Yes. Obviously, things are improving as many businesses are back to business, they're back advertising, whether it's in our commercial printing or flyer printing or advertising in newspaper and magazine, which are all drivers of volume for us. So obviously, we have recalled 600 employees, which means that our volume is coming back. I would say early May, we were -- we moved from minus 45% to minus 35%. We are now operating at about minus 30% to last year. And I think that soon, if things continue to progress gradually the way they progress, we could reach minus 20%. I don't believe that between now and the fall or early in the fall that we'll get back to 100%. I think if we could reach 80%, that's what I could see. But it's very hard to predict because if the pandemic continue to go the right way, then maybe we could achieve that or do better. But if there's a second wave, maybe we could go back down. So we're very dependable on business staying open and businesses in Canada going back to the most normal level of businesses that they could do. So obviously, when store are closed, we cannot help them advertise, they're closed. So -- but that's what we're seeing. So we came a long way because day 1, when all the restriction on essential services was announced, we were -- 50% of our operation were idle. So now we're back to only 30% and both hope to reach 20% in June and July, but we'll see what happen.

[Mark Neville, Analyst]

Okay. No, that's very helpful. Appreciate that. Maybe on the margin and packaging again, you sort of -- you've already sort of answered, I guess, last question. But when I think about sort of all the things that helped this quarter, for the time being, they sort of feel sustainable. So I guess, in and around 15%, 16% sort of feels like a good baseline number to use from here. Is that sort of fair? Because again, you've seen a material step-up this quarter, but it feels like it's sustainable.

[François Olivier, President, CEO & Director]

I think so. I think we bought this at 12%, and we said we're going to bring 13%, 14%, 15% over a 3-year period. Obviously, for us, selling the paper division was good margin, but below our average is helping us. So it is actually accelerating our ability to deliver. And I think we're going to beat the 14% this year, I think so because we sold the paper, and we're performing very well. And we think that there's still some room for us to improve our costs and to grow the business and to move forward. So we're very systematic. We're not in a rush, but we want to move forward and not move backwards. I'd rather move forward slowly but surely than to do big lift of up and going down. So yes, we think we could operate around the 15% to 16% margin of EBITDA because a lot of our competitors, frankly, are already there at that level. So it's not like the industry is at 10% and we're at 15%. The industry is at 15%, 16% and I think we could be right up there in the average with the others. That's where we are now. And we think there's still some room for us to keep maintaining or even improving that.

[Mark Neville, Analyst]

Okay. If I could ask maybe just one last question, just broader -- just around the balance sheet and capital allocation. Obviously, the balance sheet is in good shape. But I'm just thinking about near-term priorities, dividend, M&A, sort of leverage ratios, where you're comfortable sort of in the current environments. Yes. Just broad comments or thoughts on that.

[François Olivier, President, CEO & Director]

It's going to be a boring answer. It's been the same answer for many years. So we are a company that like to operate with very prudently. So we would like to continue to reduce our level of debt, even though a lot of companies are comfortable around 2x. You should not forget that a big part, still a big part of our EBITDA comes from the Print Sector. So we want to make sure that we're prudent with that. So I would say first use of cash is to continue to deleverage. Having said that, this company growth profile is going to be driven by Packaging and organic growth. It's probably not going to be enough to give us the growth that we are aspiring to. So yes, we will need to do more M&A in packaging. So I would call that the second use of cash. And our balance sheet being very solid, like you mentioned, and our cash flow generation being still very strong despite the COVID and our dividend distribution being in low 20%. At the moment, we believe that we could continue to pay the dividend. So it's basically what we're planning for cash flow. It's the same answer many years and that's the answer.

[Operator]

Your next question [Foreign Language] comes from the line of Paul Bilenki with TD Securities.

[Paul Bilenki, Associate]

You provided some good color on the trends in Printing volumes. Could you do the same for the Packaging business? And what you've seen organic volumes in April versus May versus early here in June?

[François Olivier, President, CEO & Director]

It's -- we have a lot more verticals in Packaging. I don't want to go into the details. Some are double-digit growth. Some are stable and some are decreasing. So globally, we have seen some organic growth in the month of April. And we believe that we will see -- we have seen that, and we believe it will continue. But it will remain single-digit overall growth because there's still 20% of our portfolio that is more related industries that have been negatively impacted by the COVID. So this is also making the organic growth number a little bit smaller. So it would be a bit too much detail to give you because we operate in many, many verticals. But the verticals that are growing, for the most part, in some area, double-digit is essential food-related or we do a lot of, for example, toilet paper, tissue wrap. And we had a lot of growth there, but it's a small piece of our portfolio. So there would be too many moving parts, but it will be single-digit organic growth that you're looking at when you put all the portfolio together.

[Paul Bilenki, Associate]

Okay. No, that's helpful color. And just staying on the Packaging, apart from sort of the higher overall demand that you've seen, have you seen any other changes in behavior from your customers, either delays in product launches or sort of pause on sustainability discussions? Or any other sort of big trends that you've seen out of your customer base?

[François Olivier, President, CEO & Director]

Again, it depends on the vertical, those who are running at double-digit growth are really focused on working with us and making sure we could ship the increased demand, and they're running the business and not a lot of new product innovation and all that. But a lot of discussion on the other hand, because all of the engineers and R&D people of all of our customers are also like us doing delay working, and they have a lot of time on their hand. So we had a lot of good discussions about making some project move forward. So I would say from a product development standpoint, it's been a very productive period, even though we couldn't meet physically, couldn't visit their plant and test our new product, a lot of very productive discussion around new products, a lot of discussion around new products that are more sustainable around PCR, about compostable, about recycle already are happening. And I don't think it's unique to Transcontinental. I think this is an industry trend. And I could say that this area of the business is still moving full steam ahead, and we have not cut or delayed any resources or capital towards the sustainability aspect of our portfolio. So that's the color I can give you.

[Paul Bilenki, Associate]

Okay. No, that's great. And if I could just ask one more. Could you provide an update on the Publisac in Montreal and where that process stands currently?

[François Olivier, President, CEO & Director]

Yes. Not a lot of change in the sense that we had very good communication and productive discussion with the city of Montreal. And obviously, since mid-March, our focus to switch at TC to making sure that we kept our employees safe and delivered all the essential services that the various government asked us to provide. That's been our focus. And the city of Montreal has been -- focus has been, I think, to deal with the pandemic. As you know, Montreal is probably the epicenter of the pandemic in Canada. So not a lot of discussion since the beginning of the crisis because both organizations were busy dealing with the pandemic, and I think that's quite right. But we still remain hopeful and confident that we could come to a reasonable outcome that would see us introduce some change to our business model, but not jeopardize it. So we think we could come to a reasonable outcome, and that's what we're hoping for.

[Operator]

Your next question [Foreign Language] comes from the line of Drew McReynolds with RBC.

[Drew McReynolds]

Maybe for you, Donald. On the government subsidies in the quarter of $8 million, is that all allocated to the Printing segment?

[Donald LeCavalier, Chief Financial Officer]

By far, most of it is going to the Printing Sector. I would say the large part -- majority goes to Print. There's a little bit in Packaging because we do have operation in Canada. And without going into a lot of details, the way the program works is to legal entities in Canada and those in Canada were able to receive a small amount. And we do also have corporate and employees. So we were able to receive some, although we see a small amount in the other part of the EBITDA. But the large part, by far, is to Print.

[Drew McReynolds]

And would you have a number we could just model in here for Q3?

[Donald LeCavalier, Chief Financial Officer]

It's about [ 6.5 million for Print ]. And obviously we had cost. On the other side, we took this opportunity to give programs in place for the employees. So we were able to give back the cash to employees. So overall, it's part of the print result for the quarter.

[Drew McReynolds]

Yes. Okay. On the Packaging side, maybe for you, François. The 20% that's not food or essentials or staples, you did allude to the pressure there and probably some different dynamics in a few different verticals. Can you just flush that out for us? As we get back to the economy reopening, do some of these pressured kind of verticals begin to stabilize and resume sooner rather than later? Or are they essentially kind of a write-off for a couple of quarters.

[François Olivier, President, CEO & Director]

No, no, no. They are clearly tied up to the reopening of the economy. Some of the industrial product that we do are raw material that are, let's say, part of the construction industry. So as the construction industry reopen and people start to rebuild houses and building, then this business is going to pick up again. So it's totally linked to the opening -- the economy reopening. That 20% is what we call industrial base. It's on industrial products. So as plants and the construction business is going to reopen, this business is going to restart. So this business has not stopped. But obviously, a lot of the industry that we're servicing there has been slowed down or operate at a reduced rate. So obviously, Packaging is at a reduced rate, but we don't have a lot of customers that have -- that are not in operation right now, but they are working through inventory. A lot of our customer at the beginning were concerned with inventory. So they pass big order to us to be secure. And a lot of our customer now with the reopening of their industry, are working through this inventory and are going to start to reorder soon. So it's clearly linked to the economy reopening. And the less the economy will reopen, the more this business will stay challenged or like below last year. And the more the economy will reopen, the more it will go back to normal.

[Drew McReynolds]

Okay. Great. Last one for me. With respect to the other revenue segment, I think, broadly, you're looking or had previously guided to about $70 million in annual revenues. Is that kind of certainly a modeling number we can still stick with?

[Donald LeCavalier, Chief Financial Officer]

Can you repeat that?

[François Olivier, President, CEO & Director]

Media business being at about $70 million. I think it's maybe a little bit on the high side, but $60 million and $70 million, but still a very good margin of EBITDA, and we're doing better than the plan so far. And we don't anticipate a lot of impact from the COVID in that business. So far, so good. So maybe a little bit shy on the revenue from the number you quote, but probably in line with whatever you have in your model for EBITDA.

[Operator]

Your next question [Foreign Language] comes from the line of David McFadgen with Cormark Securities.

[David John McFadgen, Director of Institutional Equity Research]

Yes. Most of my questions have been asked. But just on the Trilex acquisition, when was that completed? And you disclosed that it was about $5.8 million revenue in the quarter. I'm just wondering, is that a good quarterly run rate for revenue?

[François Olivier, President, CEO & Director]

I missed your question, David. Can you repeat it quickly?

[David John McFadgen, Director of Institutional Equity Research]

Yes. Just on the Trilex acquisition. Yes. I was just wondering, when was that acquisition completed, the effective date? And you disclosed that the revenue in the quarter was about $5.8 million. I was just wondering if that's a good quarterly run rate to use going forward.

[François Olivier, President, CEO & Director]

Yes. The quarterly run rate is a good representation of the business. Having said that, there's a good chance that it is going to go up as we introduce the new product because now -- right now, they are manufacturing the older product for banana. So there's a chance for improvement. But this is a good representation of the size of the business. It could get a little bit better, as I just said. And I think we did that acquisition last fall. So we could take that offline and give you the exact date, but we acquired that last fall. I don't remember the exact day...

[Donald LeCavalier, Chief Financial Officer]

September.

[François Olivier, President, CEO & Director]

But it was in September last year.

[Operator]

[Foreign Language] [Operator Instructions] [Foreign Language] Mr. Lapointe, there are no further questions at this time. Please continue.

[Yan Lapointe, Director of Investor Relations]

Yes, Simon. Thank you, everyone, for joining us on the call today, and we look forward to speaking with you soon. Thank you.

[Operator]

[Foreign Language] Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation. Please disconnect your lines.