CCL Industries Announces Third Quarter Results
Third Quarter Highlights
Adjusted basic earnings per Class B share(3) of $0.72 up 9.1%; basic earnings per Class B share of $0.71 up 12.7%; currency translation negative $0.01 per shareSales increased 1.5% on organic growth of 2.1%, 3.5% and 8.4% for the CCL, Avery and Checkpoint Segments respectively; partly offset by a decline at Innovia15.5% operating margin(1), up 160 bpsNine-Month HighlightsAdjusted basic earnings per Class B share(3) of $2.12 up 3.4%; basic earnings per Class B share of $2.09 up 5.0%; currency translation negative $0.01 per shareSales increased 5.6% on 3.5% acquisition growth; organic growth of 2.9%, 2.9% and 2.2% for the CCL, Avery and Checkpoint Segments, respectively15.2% operating margin(1), down 10 bpsAdopted IFRS 16 lease accounting standard adding $151.7 million in lease liabilities, $33.8 million EBITDA(2), $4.9 million operating income offset by $4.9 million interest expenseTORONTO, Nov. 12, 2019 (GLOBE NEWSWIRE) — CCL Industries Inc. (TSX:CCL.A) (TSX:CCL.B) (“the Company”), a world leader in specialty label, security and packaging solutions for global corporations, government institutions, small businesses and consumers, today reported 2019 third quarter results.Sales for the third quarter of 2019 increased 1.5% to $1,357.1 million, compared to $1,337.2 million for the third quarter of 2018, with 1.7% organic growth and 0.6% acquisition-related growth partially offsetting 0.8% negative impact from foreign currency translation.Operating income(1) for the third quarter of 2019 was $209.8 million compared to $186.2 million for the comparable quarter of 2018. Operating income(1) increased 13.7% excluding currency translation. The 2018 third quarter was impacted by a $4.3 million non-cash acquisition accounting adjustment, related to the acquired inventory from the Treofan acquisition that was expensed in the Company’s cost of sales for that quarter.Restructuring and other items was a $1.7 million expense for the 2019 third quarter, for severance costs associated with the Checkpoint European ALS operations, a number of initiatives in the CCL Segment and other acquisition transaction costs. For the third quarter of 2018, restructuring and other items totalled $1.3 million primarily for 2018 acquisition-related transaction costs. Tax expense for the third quarter of 2019 was $43.9 million compared to $38.3 million in the prior year period. The effective tax rate for the 2019 third quarter was 25.7% compared to 25.6% for the 2018 third quarter.Net earnings were $127.7 million for the 2019 third quarter compared to $112.7 million for the 2018 third quarter. Basic and adjusted basic earnings per Class B share(3) were $0.71 and $0.72 respectively, compared to basic and adjusted basic earnings per Class B share(3) of $0.63 and $0.66, respectively, in the prior year third quarter.For the nine-month period ended September 30, 2019, sales, operating income and net earnings improved 5.6%, 4.6% and 5.7% to $4.0 billion, $613.3 million and $372.6 million, respectively, compared to the same nine-month period in 2018. The 2019 nine-month period included results from eleven acquisitions completed since January 1, 2018, delivering acquisition-related sales growth for the period of 3.5%. Organic sales growth was 2.2% and the impact from foreign currency translation was negligible. For the nine-month period ended September 30, 2019, basic and adjusted basic earnings per Class B share(3) were $2.09 and $2.12, respectively, compared to basic and adjusted basic earnings per Class B share(3) of $1.99 and $2.05, respectively, in the prior year nine-month period. Foreign currency translation had a negligible impact on earnings per share.Geoffrey T. Martin, President and Chief Executive Officer, commented, “We are pleased with third quarter results considering challenging and volatile macro-economic conditions globally. The CCL Segment posted 2.1% organic growth with solid profitability gains. CCL Secure performance improved significantly while good progress at CCL Design contributed with electronics growth more than offsetting slower automotive markets. Home & Personal Care faced soft North American demand for aerosols and turbulent label markets in parts of Latin America where results declined. Food & Beverage growth moderated significantly from rates of recent years although sales remained very strong in Sleeves; profitability overall declined. Healthcare & Specialty profitability improved modestly on international results offsetting lower North American performance, especially in Canada. Avery’s strong back-to-school season, notably direct to consumer label sales, drove a 3.5% organic growth rate and significant profit improvement. Checkpoint sales increased 8.4% organically on new business wins driving strong profit performance in all MAS product lines. Innovia film volume declined on pruning mix in the United States and soft markets in Europe. Pass-through pricing on lower resin cost, compared to the 2018 summer spike in North America, reduced sales. Excluding prior year accounting adjustments for the Treofan acquisition, underlying profitability improved moderately on lower raw material costs despite start-up expense for the new line in Mexico.”Mr. Martin continued, “Foreign currency translation had a $0.01 negative impact on earnings per Class B share for the third quarter and $0.01 for the first nine months of 2019. At today’s Canadian dollar exchange rates, there should be modest impact to the 2019 fourth quarter.”Mr. Martin concluded, “The Company finished the quarter with a strong balance sheet. Good free cash flow(4) for the quarter reduced the Company’s net leverage ratio(5) to 1.84 times EBITDA(2) compared to 1.99 times EBITDA(2) at the end of the second quarter of 2019. Combined $601.3 million cash-on-hand and US$492.7 million undrawn capacity on our syndicated revolving credit facility gives significant capacity to execute growth initiatives globally. The Board of Directors declared a quarterly dividend of $0.17 per Class B non-voting share and $0.1675 per Class A voting share, payable to shareholders of record at the close of business on December 13, 2019, to be paid on December 27, 2019.”2019 Reporting Changes
The Company adopted IFRS 16 Leases on January 1, 2019, using the modified retrospective approach. Accordingly, the comparative information for 2018 has not been restated. The following table illustrates the impact of the new standard on operating income(1) and EBITDA(2) for the nine-month period ended September 30, 2019.2019 Third Quarter Segment HighlightsCCLSales increased 1.8% to $831.2 million, with 2.1% organic growth, 0.7% acquisition contribution partially offset by 1.0% negative impact from currency translationRegional organic sales growth: high-single digit in Asia Pacific, low-single digit in North America and Europe partially offset by low-single digit decline in Latin AmericaOperating income(1) $127.2 million, 15.3% operating margin(1), compared to $117.6 million, for 2018 third quarterLabel joint ventures added $0.01 earnings per Class B shareAverySales increased 4.6% to $207.6 million, with 3.5% organic growth, 1.1% acquisition contribution and negligible impact from currency translationOperating income(1) $48.4 million, 23.3% operating margin(1), compared to $40.8 million for 2018 third quarterCheckpointSales increased 6.9% to $180.5 million, on organic growth of 8.4% and 1.5% negative impact from foreign currency translationOperating income(1) $28.0 million, 15.5% operating margin(1), compared to $25.5 million for 2018 third quarterInnovia Sales declined 10.4% to $137.8 million, due to a 9.8% organic decline and 0.6% negative impact from foreign currency translation Operating income(1) $6.2 million, 4.5% operating margin(1), compared to $2.3 million for 2018 third quarterCCL will hold a conference call at 5:30 p.m. EST on November 12, 2019, to discuss these results. The analyst presentation will be posted on the Company’s website.To access this call, please dial:1-844-347-1036 – Toll Free
1-209-905-5911 – International Dial-In Number
Optional Conference Passcode: 5085516Audio replay service will be available from November 12, 2019, at 8:30 p.m. EST until November 30, 2019, at 8:30 p.m. EST.To access Conference Replay, please dial:
1-855-859-2056 – Toll Free
1-404-537-3406 – International Dial-In Number
Conference Passcode: 5085516Forward-looking StatementsThis press release contains forward-looking information and forward-looking statements (hereinafter collectively referred to as “forward-looking statements”), as defined under applicable securities laws, that involve a number of risks and uncertainties. Forward-looking statements include all statements that are predictive in nature or depend on future events or conditions. Forward-looking statements are typically identified by the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans” or similar expressions. Statements regarding the operations, business, financial condition, priorities, ongoing objectives, strategies and outlook of the Company, other than statements of historical fact, are forward-looking statements. Specifically, this press release contains forward-looking statements regarding the impact of foreign currency exchange rates for the next quarter; the strength of the Company’s cash flow; income and profitability of the Company’s segments; and the Company’s expectations regarding general business and economic conditions.Forward-looking statements are not guarantees of future performance. They involve known and unknown risks and uncertainties relating to future events and conditions including, but not limited to, the impact of competition; consumer confidence and spending preferences; general economic and geopolitical conditions; currency exchange rates; interest rates and credit availability; technological change; changes in government regulations; risks associated with operating and product hazards; and the Company’s ability to attract and retain qualified employees. Do not unduly rely on forward-looking statements as the Company’s actual results could differ materially from those anticipated in these forward-looking statements. Forward-looking statements are also based on a number of assumptions, which may prove to be incorrect, including, but not limited to, assumptions about the following: global economic environment and higher consumer spending; improved customer demand for the Company’s products; continued historical growth trends, market growth in specific sectors and entering into new sectors; the Company’s ability to provide a wide range of products to multinational customers on a global basis; the benefits of the Company’s focused strategies and operational approach; the achievement of the Company’s plans for improved efficiency and lower costs, including stable aluminum costs; the availability of cash and credit; fluctuations of currency exchange rates; fluctuations in resin prices; the Company’s continued relations with its customers; the Company’s estimated annual cost reductions; and economic conditions. Should one or more risks materialize or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward-looking statements. Further details on key risks can be found in the 2018 Annual Report, Management’s Discussion and Analysis, particularly under Section 4: “Risks and Uncertainties.” CCL Industries Inc.’s annual and quarterly reports can be found online at www.cclind.com and www.sedar.com or are available upon request.Except as otherwise indicated, forward-looking statements do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made may have on the Company’s business. Such statements do not, unless otherwise specified by the Company, reflect the impact of dispositions, sales of assets, monetizations, mergers, acquisitions, other business combinations or transactions, asset write-downs or other charges announced or occurring after forward-looking statements are made. The financial impact of these transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them and therefore cannot be described in a meaningful way in advance of knowing specific facts. The forward-looking statements are provided as of the date of this press release and the Company does not assume any obligation to update or revise the forward-looking statements to reflect new events or circumstances, except as required by law.The financial information presented herein has been prepared on the basis of IFRS for financial statements and is expressed in Canadian dollars unless otherwise stated.Financial InformationCCL Industries Inc.
Consolidated condensed interim statements of financial position
UnauditedCCL Industries Inc.
Consolidated condensed interim income statements