Q2 2006 Quebecor Inc. and Quebecor World Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Welcome to the Quebecor Inc. conference call. I would like to introduce your Chairperson, the Director of Communications of Quebecor World, Mr. Tony Ross. Please go ahead.

TONY ROSS, DIR COMMUNICATIONS, QUEBECOR WORLD INC.: Thank you. Good afternoon and welcome to the Quebecor World conference call for the second quarter 2006. My name is Tony Ross and I'm the Director of Corporate Communications for Quebecor World. This call is being webcast and forward-looking statements are subject to Safe Harbor provisions. In terms of logistics, we'll begin with the presentations of the results of Quebecor World, followed by a question and answer session with analysts. This should last approximately 45 to 50 minutes.

For the convenience of those that also follow Quebecor Media and Quebecor, Inc., you can just remain with the same conference call line. Immediately following Quebecor World's conference call is a separate conference call for Quebecor Media and Quebecor, Inc. using the same line. We apologize if we started a bit late, but we've done that because there seems to be a lot of interest in this call this afternoon and some people are still in the queue waiting to get on the line and will be joining us in progress.

Joining us from our office in Montreal today is Wes Lucas, our new President and Chief Executive Officer, joining us for his first conference call as our new President. In addition, we have Jacques Mallette, Executive Vice President and Chief Financial Officer, Jeremy Roberts, Senior Vice President and Treasurer, and Roland Ribotti, Senior Director of Investor Relations. Wes Lucas will now provide us with his views of Quebecor World's business and his plans for the future of our company. Wes?

WES LUCAS, PRES, CEO, QUEBECOR WORLD INC.: Thank you, Tony. Good afternoon, everyone, and thank you for joining us for my first quarterly call as the new CEO of Quebecor World. First I would like to start by especially thanking all our customers for your business, your trust in us, and for being our partner. I'd like to acknowledge our shareholders, who share our commitment and belief in our company, and the equity research analysts who constantly challenge us to improve our financial communications.

On a personal level, I would like to thank our employees for their warm welcome. I greatly value your input, your commitment and dedication to our company's success.

Finally, I want to recognize Pierre Karl Peladeau's support in handing over the reins. I've known him for a long time and greatly valued his partnership and experience during this period, as I take over the leadership of Quebecor World. I look forward to his continued support and help in the future as we work together on the Board of Directors.

In this call, we'll review Quebecor World's transformation plans and our second quarter and year-to-date results.

I am disappointed by our results. Disappointed. They're not up to my level of expectations, nor those of our shareholders. To meet our shareholders' expectations and mine, we must drive the fundamentals. And these fundamentals are strong earnings growth, continuous improvement in productivity, cash flow generation through disciplined management and prudent decisions on capital expenditures, and a healthy balance sheet, which is a source of strength for our company. Simple. Basic. But compelling when executed well.

So how will we make this happen for Quebecor World? Today I've outlined a plan based on five action areas to transform Quebecor World. First is customer value. Second is developing and retaining the best people. Third is building great execution capabilities. Fourth is our retooling initiative, which is the foundation for our value propositions. And fifth is building a strong balance sheet. We will describe these five action areas in much more detail with you in quarterly conference calls in the future, analyst conferences, and our upcoming investor days. We intend to communicate with you extensively to keep the market aware of our progress of this transformation.

In this spirit, I will share with you now just a quick summary. First, as always, starting with customer value. We will build the capability to create the highest value for Quebecor World's customers by providing differentiated superior value products and services to be our customers' complete print solution partner. Simply put, for providing a high-value integrated solution and not just delivering to our customers a print product. This is a transformation from just a printer to our customers' print-solution partner. Do not misunderstand. Quebecor World is already a leader in the industry today in providing solutions. For example, we were the first in the industry to provide an integrated and seamless [statistics] solution based on end-to-end information tracking and data management.

For example, our customers can know when their catalog will reach the end-user so they can send them an advanced email alert or a voicemail to reinforce their print marketing campaign. The opportunity here is that we will deliver more of these high value-added services more frequently to more customers and using a consistent and disciplined approach. The opportunity is to expand these pockets of excellence into a true competitive advantage.

Specifically, this is the integration that makes complete solutions with such customer needs, both before the printing process and after the printing process, of areas such as content management, data sourcing, services to streamline our customers' business prophecies, print marketing and advertising optimization, and a comprehensive and innovative logistics services to reduce the overall costs [AUDIO SKIPS] And of course, a high-quality printed product delivered on time and at the highest value to our customers every time. Every time.

We can help our customers and our shareholders by a focus on selling value and not just print. We need to change from selling too much based on price to selling more based on the value of our products and services. Because I believe in the importance of this key initiative of customer value so much, I will take the lead in kicking off this initiative. I've already met with many of our top customers, talking and sharing our ideas in how we can be the most valuable business partner to them.

The second area is developing the best people. Truly great companies are based not on the equipment they deploy or on their products, but on the people and teams that are dedicated each and every day to creating value for their customers and creating cash flow for their shareholders. People make it happen each and every day. We will develop our people to be the best that they can be through a comprehensive People Development Program consisting of training, new processes and tools, to build high performance teams. Our goal is an organization made up of high performance teams working in a safe and respectful environment, where we all can achieve our own personal goals in a company we're all truly proud of. Personally, I am proud to be joining this fine team at Quebecor World.

As part of this People initiative, we will be driving a comprehensive safety improvement program to ensure that everyone is able to go home safely to their families after a hard day's work. One good example is our facility in Leominster, Massachusetts, near Boston, which has been free of lost-time accidents for a full eight years. Great job. You are an example to all of us on how it is our own personal responsibility to keep ourselves and our plant safe.

Another component of this initiative is focusing on high performance teams and implementing people development programs to ensure we are the employer of choice, attracting and retaining the best people. We will implement a comprehensive People Development program comprised of significant training and skill building in these key areas that matter the most to deliver value to our customers and driving earnings growth for our shareholders.

Julie Trenblay, Quebecor World's Head of Leadership and People Development, is leading this important effort for us.

Our third key area of action is focused on great execution. Once we have completed the significant retooling investment, we will move from improvements based on capital to earnings growth driven by continuous improvement. This should result in low capital and high-return projects, marking an end of the current high cycle of high capital spending to a new cycle of high cash-flow generation. For my own personal experiences in leading continuous improvement programs at other companies -- programs such as Six Sigma, Lean Manufacturing and Five S -- the results are truly remarkable. The opportunities for program improvements, productivity improvements from tools such as Six Sigma and Lean, include such high-yield projects as paper waste reduction, supply chain optimization, cycle time reduction, total cost-to-print reduction, and other projects to reduce costs, eliminate waste, and drive time.

The goal is delivering superior execution and speed, producing efficient, dependable, and high quality results.

David Blair, our Senior Vice President for Manufacturing Technology, will lead this important event for the Company.

The fourth action area is our retooling plan. We will complete the Company's retooling program, which involves deploying state-of-the-art technology in fewer but larger facilities by running faster, more efficient next-generation technology with a focus on maximizing the return on capital. This three-year deployment of state-of-the-art press and bindery technology is a key component of our strategy and I intend to ensure it is a success. By investing in the next-generation technology presses, Quebecor World is essentially leapfrogging over one generation of technology and for the most part, many of our competitors. These machines are built for speed, flexibility, and low-cost. The program is capacity-neutral, with one new press replacing two or three old ones, allowing us to produce the same value much more efficiently. The new presses have better print performance, run faster, use less energy, reduce waste, and can be staffed and maintained more efficiently, giving our customers a higher quality product and our shareholders increased returns.

We believe this new equipment will result in a true advantage for Quebecor World. This new press deployment is naturally creating temporary inefficiencies and disruptions in our platform as we decommission presses to …