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 share
- Sales 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 Innovia
- 15.5% operating margin(1), up 160 bps
- Adjusted 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 share
- Sales 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, respectively
- 15.2% operating margin(1), down 10 bps
- Adopted 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 expense
TORONTO, Nov. 12, 2019 (GLOBE NEWSWIRE) -- CCL Industries Inc. (CCL-A.TO) (CCL-B.TO) (“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.
|As reported||IFRS 16 |
|Pro Forma||As reported|
|(millions of CDN $)||2019||2019||2019||2018|
2019 Third Quarter Segment Highlights
- Sales 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 translation
- Regional 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 America
- Operating income(1) $127.2 million, 15.3% operating margin(1), compared to $117.6 million, for 2018 third quarter
- Label joint ventures added $0.01 earnings per Class B share
- Sales increased 4.6% to $207.6 million, with 3.5% organic growth, 1.1% acquisition contribution and negligible impact from currency translation
- Operating income(1) $48.4 million, 23.3% operating margin(1), compared to $40.8 million for 2018 third quarter
- Sales increased 6.9% to $180.5 million, on organic growth of 8.4% and 1.5% negative impact from foreign currency translation
- Operating income(1) $28.0 million, 15.5% operating margin(1), compared to $25.5 million for 2018 third quarter
- 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 quarter
CCL 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: 5085516
Audio 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: 5085516
|For more information on CCL, visit our website - www.cclind.com or contact:|
|Sean Washchuk||Senior Vice President||416-756-8526|
|and Chief Financial Officer|
This 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.
CCL Industries Inc.
Consolidated condensed interim statements of financial position
|In millions of Canadian dollars|
|As at September 30, 2019||As at December 31, 2018|
|Cash and cash equivalents||$||601.3||$||589.1|
|Trade and other receivables||957.5||938.0|
|Income taxes recoverable||19.6||38.7|
|Total current assets||2,146.5||2,125.2|
|Property, plant and equipment||1,814.0||1,797.5|
|Deferred tax assets||32.8||32.5|
|Total non-current assets||4,924.4||4,902.4|
|Trade and other payables||$||1,065.7||$||1,223.4|
|Current portion of long-term debt||1.9||71.8|
|Income taxes payable||46.3||51.2|
|Total current liabilities||1,149.9||1,346.9|
|Deferred tax liabilities||244.0||216.6|
|Provisions and other long-term liabilities||11.6||10.6|
|Total non-current liabilities||3,113.6||3,007.6|
|Accumulated other comprehensive income (loss)||(138.5||)||35.2|
|Total equity attributable to shareholders of the Company||2,807.4||2,673.1|
|Total liabilities and equity||$||7,070.9||$||7,027.6|
|* Upon adoption of IFRS 16 Leases, on January 1, 2019, the Company now recognizes right-of-use assets and lease liabilities within its consolidated condensed interim statements of financial position|
CCL Industries Inc.
Consolidated condensed interim income statements
|Three Months Ended |
|Nine Months Ended |
|In millions of Canadian dollars, |
except per share information
|Cost of sales||967.4||967.2||2,882.4||2,704.8|
|Selling, general and administrative expenses||198.0||198.1||594.8||583.9|
|Restructuring and other items||1.7||1.3||5.2||8.2|
|Earnings in equity-accounted investments||(1.1||)||(1.5||)||(3.4||)||(2.6||)|
|Interest on lease liabilities||1.6||-||4.9||-|
|Net finance cost||19.5||21.1||62.1||60.9|
|Earnings before income tax||171.6||151.0||502.3||473.5|
|Income tax expense||43.9||38.3||129.7||121.0|
|Net earnings for the period||$||127.7||$||112.7||$||372.6||$||352.5|
|Basic earnings per Class B share||$||0.71||$||0.63||$||2.09||$||1.99|
|Diluted earnings per Class B share||$||0.71||$||0.63||$||2.08||$||1.97|
CCL Industries Inc.
Consolidated condensed interim statements of cash flows
|Three Months Ended |
|Nine Months Ended |
|In millions of Canadian dollars||2019||2018||2019||2018|
|Cash provided by (used for)|
|Property, plant and equipment depreciation||58.3||56.4||174.9||166.7|
|Right-of-use assets depreciation||9.8||-||28.9||-|
|Earnings in equity-accounted investments, net of dividends received||(0.5||)||(1.5||)||(0.1||)||0.6|
|Net finance costs||19.5||21.1||62.1||60.9|
|Current income tax expense||42.0||36.7||107.2||119.2|
|Deferred tax expense||1.9||1.6||22.5||1.8|
|Equity-settled share-based payment transactions||13.5||4.4||27.0||17.6|
|Loss (gain) on sale of property, plant and equipment||(1.4||)||(0.1||)||(2.4||)||0.2|
|Change in inventories||9.5||11.6||(2.8||)||(65.0||)|
|Change in trade and other receivables||11.6||(6.4||)||(17.4||)||(87.2||)|
|Change in prepaid expenses||(1.3||)||(2.5||)||(5.0||)||(4.0||)|
|Change in trade and other payables||(10.3||)||16.6||(168.4||)||44.8|
|Change in income taxes receivable and payable||(1.2||)||(13.4||)||(6.3||)||(15.3||)|
|Change in employee benefits||9.2||(6.1||)||2.1||(9.6||)|
|Change in other assets and liabilities||(10.4||)||(6.4||)||(16.4||)||(11.9||)|
|Net interest paid||(11.4||)||(17.2||)||(49.6||)||(52.3||)|
|Income taxes paid||(22.3||)||(43.5||)||(90.5||)||(115.5||)|
|Cash provided by operating activities||258.2||178.1||480.8||443.5|
|Proceeds on issuance of long-term debt||8.3||172.6||121.7||810.2|
|Repayment of long-term debt||(23.6||)||(324.1||)||(139.6||)||(705.0||)|
|Payment of lease liabilities||(9.4||)||-||(27.3||)||-|
|Proceeds from issuance of shares||1.9||1.0||13.0||18.7|
|Cash provided by (used for) financing activities||(53.1||)||(173.6||)||(123.0||)||54.7|
|Additions to property, plant and equipment||(74.8||)||(75.3||)||(285.8||)||(280.0||)|
|Proceeds on disposal of property, plant and equipment||1.9||0.7||6.4||17.3|
|Business acquisitions and other long-term investments||(0.1||)||(303.4||)||(33.2||)||(351.2||)|
|Cash used for investing activities||(73.0||)||(378.0||)||(312.6||)||(613.9||)|
|Net increase (decrease) in cash and cash equivalents||132.1||(373.5||)||45.2||(115.7||)|
|Cash and cash equivalents at beginning of period||481.5||822.4||589.1||557.5|
|Translation adjustment on cash and cash equivalents||(12.3||)||(10.7||)||(33.0||)||(3.6||)|
|Cash and cash equivalents at end of period||$||601.3||$||438.2||$||601.3||$||438.2|
CCL Industries Inc.
|In millions of Canadian dollars |
Three Months Ended September 30
|Nine Months Ended September 30|
|Sales||Operating Income||Sales||Operating Income|
|Restructuring and other items||(1.7||)||(1.3||)||(5.2||)||(8.2||)|
|Earnings in equity-accounted investments||1.1||1.5||3.4||2.6|
|Interest on lease liabilities||(1.6||)||-||(4.9||)||-|
|Income tax expense||(43.9||)||(38.3||)||(129.7||)||(121.0||)|
|Total Assets||Total Liabilities ||Depreciation and Amortization||Capital Expenditures |
|September 30||December 31||September 30||December 31|| Nine Months Ended |
|Nine Months Ended |
(1) Operating income and operating income margin are non-IFRS financial measures used to assist in understanding the profitability of the Company’s business units. Operating income is defined as earnings before corporate expenses, net finance cost, goodwill impairment loss, earnings in equity-accounted investments, restructuring and other items, and taxes. Operating income margin, also known as return on sales, is defined as operating income over sales.
(2) EBITDA is a non-IFRS financial measure used extensively in the packaging industry and other industries to assist in understanding and measuring operating results. EBITDA is also considered as a proxy for cash flow and a facilitator for business valuations. This non-IFRS financial measure is defined as earnings before net finance cost, taxes, depreciation and amortization, goodwill impairment loss, non-cash acquisition accounting adjustments to inventory, earnings in equity-accounted investments and restructuring and other items. The Company believes that this is an important measure as it allows management to assess the ongoing business without the impact of net finance cost, depreciation and amortization and income tax expenses, as well as non-operating factors and one-time items. As a proxy for cash flow, it is intended to indicate the Company’s ability to incur or service debt and to invest in property, plant and equipment, and it allows management to compare the business to those of the Company’s peers and competitors who may have different capital or organizational structures. EBITDA is tracked by financial analysts and investors to evaluate financial performance and is a key metric in business valuations. EBITDA is considered an important measure by lenders to the Company and is included in the financial covenants included in the senior notes and bank lines of credit.
|(In millions of Canadian dollars)|
|Three months ended September 30||Nine months ended September 30 |
|Earnings in equity-accounted investments||(1.1||)||(1.5||)||(3.4||)||(2.6||)|
|Finance cost, net||19.5||21.1||62.1||60.9|
|Restructuring and other items||1.7||1.3||5.2||8.2|
|Less: Corporate expense||(18.1||)||(14.3||)||(47.1||)||(46.5||)|
|Add: Depreciation and amortization||82.1||70.5||246.2||206.7|
|Add: Non-cash acquisition accounting adjustment to inventory||-||4.3||-||4.3|
(3) Adjusted basic earnings per Class B share is an important non-IFRS measure to assist in understanding the ongoing earnings performance of the Company excluding items of a one-time or non-recurring nature. It is not considered a substitute for basic net earnings per Class B share but it does provide additional insight into the ongoing financial results of the Company. This non-IFRS financial measure is defined as basic net earnings per Class B share excluding gains on business dispositions, goodwill impairment loss, non-cash acquisition accounting adjustments to inventory, restructuring and other items, and tax adjustments.
|Reconciliation of Basic Earnings per Class B Share to Adjusted Basic Earnings per Class B Share|
|Three months ended September 30||Nine months ended September 30|
|Basic earnings per Class B Share||$||0.71||$||0.63||$||2.09||$||1.99|
|Net loss from restructuring and other items||0.01||0.01||0.03||0.04|
|Non-cash acquisition accounting adjustment related to inventory||-||0.02||-||0.02|
|Adjusted Basic Earnings per Class B Share||$||0.72||$||0.66||$||2.12||$||2.05|
(4) Free Cash Flow from Operations – A measure indicating the relative amount of cash generated by the Company during the year and available to fund dividends, debt repayments and acquisitions. It is calculated as cash flow from operations less capital expenditures, net of proceeds from the sale of property, plant and equipment.
The following table reconciles the measure of free cash flow from operations to IFRS measures reported in the consolidated condensed interim statements of cash flows for the periods ended as indicated.
|Free Cash Flow from Operations||Nine months ended |
September 30, 2019
|Cash provided by operating activities||$||480.8|
|Less: Additions to property, plant and equipment||(285.8||)|
|Add: Proceeds on disposal of property, plant and equipment||6.4|
|Free Cash Flow from Operations||$||201.4|
(5) Leverage ratio is a measure that indicates the Company’s ability to service its existing debt. Leverage ratio is calculated as net debt divided by EBITDA.
|September 30, 2019|
(In millions of Canadian dollars)
|Current portion of long-term debt||$||1.9|
|Current lease liabilities||35.7|
|Long-term lease liabilities||116.0|
|Cash and cash equivalents||(601.3||)|
|Pro forma EBITDA for 12 months ending September 30, 2019 (see below)||1,064.0|
|EBITDA for 12 months ended December 31, 2018||$||995.3|
|less: EBITDA for nine months ended September 30, 2018||(751.0||)|
|add: EBITDA for nine months ended September 30, 2019||812.4|
|add: pro forma lease expense*||7.3|
|Pro forma EBITDA for 12 months ended September 30, 2019||$||1,064.0|
* Pro forma lease expense represents the estimated lease expenses for the three months ended December 31, 2018
Supplemental Financial Information
Sales Change Analysis
Revenue Growth Rates (%)
|Three Months Ended September 30, 2019||Nine Months Ended September 30, 2019|
CCL Industries Inc. employs approximately 22,000 people operating 170 production facilities in 40 countries with corporate offices in Toronto, Canada, and Framingham, Massachusetts. CCL is the world’s largest converter of pressure sensitive and specialty extruded film materials for a wide range of decorative, instructional, functional and security applications for government institutions and large global customers in the consumer packaging, healthcare & chemicals, consumer electronic device and automotive markets. Extruded & laminated plastic tubes, aluminum aerosols & specialty bottles, folded instructional leaflets, precision decorated & die cut components, electronic displays, polymer banknote substrate and other complementary products and services are sold in parallel to specific end-use markets. Avery is the world’s largest supplier of labels, specialty converted media and software solutions for short-run digital printing applications for businesses and consumers available alongside complementary products sold through distributors, mass market stores and e-commerce retailers. Checkpoint is a leading developer of RF and RFID based technology systems for loss prevention and inventory management applications, including labeling and tagging solutions, for the retail and apparel industries worldwide. Innovia is a leading global producer of specialty, high performance, multi-layer, surface engineered films for label, packaging and security applications. The Company is partly backward integrated into materials science with capabilities in polymer extrusion, adhesive development, coating & lamination, surface engineering and metallurgy; deployed as needed across the four business segments.