CCL Industries Inc.

Thank you, operator, and good afternoon, everybody. Apologies for the late hour this afternoon, we’re having a full meeting at our Mexican operation, and this will be anywhere we could slot our conference call in and suit the time schedule.

You’ll find our presentation on our website on our Investor Relations page and I’ll now hand straight over to Sean, who’ll take you through the numbers.

Hey, thank you, Geoff. I’ll start, everyone on Page 2 of the presentation, where we have our disclaimer for forward-looking statements.

I’ll remind everyone that our business faces known and unknown risks and opportunities. For further details of these key risks, please take a look at our 2018 Annual Report and MD&A, particularly the section Risks and Uncertainties.

Our annual and quarterly reports can be found online at the company’s website, cclind.com or on sedar.com. Turning to the next slide, adoption of IFRS 16, so reflected in our 2019 quarterly financial results is this new standard for the impact of leases.

The standard added simplest level requires operating leases that prior to January 1st, 2019, that were recorded on an off-balance sheet financing basis, are now reported on the balance sheet as a lease liability with a corresponding right-to-use asset. Therefore, there is no longer a lease or rental expense resulting in an increase in EBITDA, but a depreciation expense for right-of-use assets, resulting in a slight increase in operating income and imputed interest expense related to the amortization of the lease liability resulting in minimal to no impact to the profit before tax.

Next slide on Page 4, our statement of earnings. The third quarter of 2019 was another solid quarter for CCL Industries.

Sales growth, excluding the impact of currency translation was 2.3% to $1.36 billion compared to $1.34 billion in the third quarter of 2018. The growth in sales can be attributed to organic growth of 1.7% and 0.6% acquisition-related growth.

Operating income improved 14%, excluding currency translation to $209.8 million for the third quarter of 2019 compared to $186.2 million for the third quarter of 2018. Geoff will expand on the segmented operating results of our CCL Avery, Checkpoint and Innovia segments momentarily.

In the third quarter of 2019, restructuring and other items was in the expense of $1.7 million, primarily for severance costs associated with the CCL segment operations, Checkpoint European ALS operations and other transaction costs. Restructuring and other items was in the expense of $1.3 million in the 2018 third quarter, principally for the Checkpoint restructuring and other acquisition-related transaction costs.

Net finance expense was $19.5 million for the third quarter of 2019 compared to $21.1 million for the third quarter of 2018. The decrease in net finance costs is attributed to lower average interest rate in the quarter and a reduction in total debt.

The overall effective tax rate was 25.7% for the 2019 third quarter compared to 25.6% rate in the 2018 third quarter. Net earnings increased 13% for the 2019 third quarter to a $127.7 million compared to $112.7 million for the 2018 third quarter.

For the 9-month period, sales, operating income and net earnings improved 6%, 5% and 6%, respectively compared to the same period in 2018. 2019 included results from the 11 acquisitions completed since January 1st, 2018, delivering acquisition-related sales growth for the period of 3.5%, organic sales growth of 2.1% and foreign currency translation having a negligible impact.

Turning to Slide 5, earnings per share. Basic earnings per Class B share were $0.71, up 13% for the third quarter of 2019 compared to $0.63 for the third quarter of 2018.

Adjusted basic earnings per Class B share were $0.72, up 9% for the 2019 third quarter compared to adjusted basic earnings per Class B share of $0.66 for the third quarter of 2018. The adjustment to the 2019 third quarter basic earnings per Class B share included $0.01 from restructuring and other items.

The increase in adjusted basic earnings per share to $0.72 is primarily attributable to an increase in operating income of $0.08, a decrease in interest expense of $0.01, while the net impact of corporate expenses, equity earnings, foreign exchange offset the improvement by $0.03. For the 9-month period, earnings per Class B share were $2.09, up 5% compared to $1.99 for 2018.

The adjustment to basic earnings per Class B share included $0.03 for restructuring and other items. The 2019 9-month improvement in adjusted basic earnings per Class B share was due to an increase in the operating income of $0.09, offset by the net impact of $0.02 related to the change in effective tax rate, foreign exchange, resulting in adjusted basic earnings per share of $2.12 for the 2019 9-month period from $2.05 in the 2018 period.

Moving to Slide 6, free cash flow from operations, for the third quarter of 2019, free cash flow from operations was $185.3 million compared to $103.5 million for the comparable period in 2018. This reflects the improved operating results, additional proceeds on Equity-settled share-based transactions along with a reduction in tax taxes paid and an improved net non-cash working capital.

For the 9-months ended September 30th, 2019 free cash inflow from operations improved to $201.4 million from $180.8 million for 2018. This comparative year-to-date increase is due to improved operating results, reduction in cash taxes paid offset the working capital change.

Moving to Slide 7, cash and debt summary. Net debt as at September 30th, 2019 was $2 billion, an increase of approximately $52 million compared to December 31st, 2018.

The increase primarily reflects the increase in total debt as a result of $151.7 million of additional lease liabilities, offset by additional cash on hand and debt repayments. Our bank leverage ratio was approximately 1.85 times, reflecting an increase in net debt more than offset by the increase in EBITDA.

Therefore, our bank revolving facility will incur interest rate margins of 112.5 basis points. The company’s overall finance rate was 2.51% at September 30th, 2019, lower than the 3% average finance rate at December 31st, 2018, due to a decrease in interest rate margin on the company’s variable rate drawn debt.

Any absence of significant net acquisitions, management expects to continue de-levering the company’s balance sheet through the fourth quarter of 2019. Geoff, over to you.

Thank you, Sean. On Slide 8, the capital spending highlight for the year, this excludes the right-of-use asset additions and deprecation under IFRS 16 in leases and $6 million in disposals.

So $259 million year-to-date, we expect expenditures for the year to at least stand up at around $350 million and we’re planning for the same in 2020. So highlights on Page 9 is the CCL segment.

We have 2.1%, organic sales growth. 0.7% coming from acquisitions partly offset by a 1% negative currency effect, largely due to weaker European currency.

Regionally, Europe and North America were both up mid-single digit. Asia Pacific was up high-single digit and Latin America declined to low single-digit.

Page 10, a few more highlights for you on the simple color on our business. In Home & Personal Care, there is continuation of the soft market conditions we’ve seen in the NAFTA region for aerosol, and slower Latin American label sales, both continuing to impact results.

In Healthcare & Specialty declined, the US and Canada North America were offset by Europe and the Emerging Markets, but we did have a moderate profit gain in that part of our business. Food & Beverage sales growth rates moderated, except in Sleeves which is continuing to grow strongly.

Profitability overall declined. In CCL Design, we had good organic growth in the core business and acquisitions mainly the one in Vietnam drove solid results overall.

Automotive as you might expect we’ve seen softer demand globally which drove a small profit decline. In CCL Secure, we had a very strong in polymer currency compared to a weak prior year quarter in the same period last year.

Slide 11, results of our joint ventures, not much to say here. Flat quarter in both Russia and the middle east with a bit of a profit decline in Russia, Rheinfelden plant will start ramping, making movement in flux for our container operations this quarter and should be in full production in 2020.

And CCL Korsini, just to remind you, is acquired by us and is now fully owned and operated by the company. Page 12 highlights the Avery, a very good quarter, 3.5% organic sales growth.

Good North American back-to-school season and continuing strong performance in our direct to consumer product lines which continuing to grow at a double-digit pace, those two things really drove a very good quarter on the bottom line for the season. On Slide 13, Checkpoint, another good quarter here.

We have some new business wins that drove exceptional MAS performance in the United States and it was also solid elsewhere in the world. We did see some slowing in apparel label sales in the base business, but RFID continues to grow quite nicely.

Slide 14 highlights for Innovia, we did see reduced European volume and we also saw some pricing decline in the United States really a function of the much lower material costs we had in this quarter for 2019 compared to the spike we saw in the third quarter of 2018. So the path through resin prices contributed about half to the sales decline, the rest is coming from volume in Europe.

Treofan prior year did include $4.3 million of acquisition accounting adjustment, so we were really happy about that back to the prior year, but it also had to deduct the foreign exchange gain this business used to report in Mexican peso, we’ve now changed with US dollar functional currency and there was a one-off gain in this prior year quarter this time last year. So net-net, $6.2 million replace $4.3 million, would be a good way to look at it.

And that result despite start up expense on the new line in Mexico, which was the lesser than we thought, so the underlying profitability at the business had improved quarter-on-quarter. Slide 15 is the summary of all of that for everyone’s information, but pretty good quarter, all thing is consistent.

Slide 16, the outlooks for the fourth quarter. CCL Secure had a very strong Q4 last year, we will have a good course of this year, I don’t it will be as good as the one we had last year.

And number of our CCL label units also facing tough comps for the quarter ahead. We do have potential for Avery to have a record year this year.

Checkpoint progress is expected to continue. And the resin environment remains benign at Innovia.

Foreign exchange will expect to be pretty nominal at current exchange rate. So those are our prepared remarks, operator, we’d like to open up the call for questions.

Geoff and Sean, hi and good afternoon.

Hi, Adam.

Hey, Geoff. On the last call you talked about a very weak June and a really strong July and you’re – that just seem taken aback by just the volatility in terms of your monthly sales volume.

Can you talk about the cadence of sales subsequent to July and whether there any surprises to you? And then and for that matter what you saw on October?

Not really, it was pretty stable going through the quarter. So back to school with sort of more July-centric this year versus bit more June-centric last year.

So that’s probably has some impact today we go beyond that. We didn’t see big differences.

Okay, thank you.

So it’s pretty stable with [indiscernible] and has been slow also in October.

Got it, thank you for that. And if – by region, you called out LatAm as being weak in your label’s business.

Europe was fine enough in labels, but obviously weak in your Innovia business and then Asia-Pac was up very significantly and your label business, so can you just kind of do a walk around the world for us and tell us what you’re seeing by regions?

Yeah, sure. Well Latin America, I think a number of our customers that are being disturbed by the situation in Argentina.

So we have a substantial operation in Brazil, but it’s somewhat interconnected with what the economic situation in Argentina, so that’s really the – where we’re really seeing the impact in Latin America. Also in Chile I’m sure you’ve read over that the noise in the newspapers in Chile s that’s been another black spot.

And our Mexican operation is still doing well, but not as well as they were last year. So I think it’s probably that show the most changed part of the world, but for most of our customers in the last couple of years.

Europe is a stable, solid so would be US. Asia-Pacific grew nicely, but a lot of that was a strong quarter in Australia in the currency business.

So that was really what drove the growth. We have pretty good results in China.

Certain countries in the ASEAN region were more softer, but China was pretty solid. But the big driver for the quarter was very strong results in Australia.

I appreciate you’re clarifying that. And then you mentioned Europe was stable in labels, but that was, it seems to be the source of the entire volume decline in your Innovia business, it sounds like it was about a 5% - your European volumes were down about 5% in the quarter.

So can you help – can you help us with what’s going on there versus what you saw on Europe in your label’s business?

Yeah, so the Innovia volume, it was flat in north – in the Americas, Mexico and the US with a flat volume and price decline and a sort of low-to-mid single digit decline in volume in Europe. A couple of that stuff giving up share and categories where we take in a price point of view.

So I wouldn’t say it’s been something that a biggest surprise to us. And when we see the effect on the bottom line, we’re not just leading to that, things are fine out there.

So the quarter on Innovia was about as you are, it was a little bit below what we had. Was it about in line with your expectations?

Yeah, yeah, yeah, sure.

Okay, got it.

Absolutely, probably a bit better in the Americas and then a little bit worse than we expected in Europe.

Got it. Thank you, Geoff.

No problem.

Hey, good afternoon guys. May be just to follow-up – maybe just following on the Innovia conversations.

Like I guess a little surprise too at sort of the drop sequentially in the EBIT. I know you said it was sort of roughly what you expected, but, again, was there any sort of one-time startup costs in that in this quarter?

No, we had the startup of the – we had the startup of the Mexican plant, so that’s probably $1.5 million, I think we talked about $3 million to $5 million in the second half, so that kind of came in the low end of that range. So sort of a [$3 million, $5 million] [ph] is probably $1.5 million.

Then you got all the depreciation kicked in this quarter of the new line. So that was probably in $1.5 million call it and but that was very unusual in the quarter really.

Okay, so I guess –

It is seasonal, so we do have a summer dip because of the European focusing in a big part of the business, so there’s no surprise for us.

Okay, so like something that you reminded for us is going forward.

Yeah.

Yeah, the CCL segment, Q4 outlook I guess if I’m interpreting it correctly, your – it sounds roughly comparable to Q4 of last year? Is that right?

It’s probably, yeah flat to down I would say in the fourth quarter. It’s a very difficult one to call, because it’s what we don’t know is, what will happen in the month of December.

So a slightly more conservative this year about whether any of our customers will call an early end to the year and stop deliveries in December. So that’s a fact that we’re considering I’ll say that was quite good.

So but just given the current external situation in the world, it’s probably just a call out some apprehension around that as to what may happen in the latter weeks of the quarter.

Okay, and that’s a sale EBIT that’s year-over-year or quarter-over-quarter just be flat down? Just I’m just kidding, I’m sure this maybe year-over-year or quarter-over-quarter or were you?

Flat to down year-over-year.

Yeah, okay. Okay.

Again I appreciate some of that, again, you being conservative and not sure how this summer plays out. But again, so it just I guess a higher level question just sort of, I guess, in this sort of macro environment we’re in like, was your expectations for this business sort of at least near-term be sort of in that 2%-ish growth range that you’ve seen in the last two quarters?

Yeah, yeah absolutely.

Yes.

Yeah, low single digit at the moment. So we don’t get all of an industry’s players in our space of kind of what everyone would see and is always been good.

Okay, maybe if I can just ask one last one, just on Checkpoint. The business wins that you called out.

I’m just curious when they came in and sort of how significant they were?

They were pretty significant. We weren’t expecting 8.5% organic growth in the third quarter.

So we did a few rollouts and it’s principally in the United States, one in Europe which really helped the goal.

And those –

They came in the back half of Q2, early Q3.

And do they continue into Q4?

No, no. well I think it will continue.

I’m not telling you that will continue at that rate. So we do expect to see solid organic growth in the fourth quarter, probably not at that rate.

And the wrap up by year end those rollouts?

Sorry?

Those rollouts wrap up in Q4?

No, no I mean we’ve most of the rollout in Q3.

Okay, okay. I get it.

Yeah, so that we believe we want them and rolled them out, so we some drift in the Q4, but it’s – they weren’t the big as the ones we had in the first half of 2018. But there were notable options, so we were able to get them all done.

Okay. Thanks for that.

I’ll get back in the queue.

Yeah. No problem.

Yeah, thanks very much. Good evening, everyone.

Hi, Walter.

So just on the – going back to kind of the label, the core label division, you talked a lot about pre-minimization in the past and that we’re seeing a kind of a slowdown that you’re guiding us to on the low single-digit run rate for next year. How does that play in?

Are we seeing less customers now electing to go into more premium labeling or is it just –

I don’t think – I think it’s just a macroeconomic view, so our customers are still planning the things they were planning before just more conservatively, so the units’ timing and how aggressively they might do it, but that trend hasn’t gone away, but the color of the economic situation, the macro view of the world is probably and going to be a little more conservative than they otherwise might be.

And your capacity situation of Food & Beverage, is that constrained still? Are we seeing a little bit more or less pressure now because –

I now believe – the new plants are coming online now, so we’re in a much better capacity situation I mean whereas a year ago.

Okay. Thinking about Avery, you mentioned the real improvement here in direct-to-consumer and as that part of the business grows, then it’s going to obviously take more – put more emphasis on your overall organic growth rate.

Roughly where are we there? What percent would you say just generally are we getting into the direct-to-consumer and to what extent will that going into next year lead from what was expected to be zero growth in 2019 to perhaps something a lot more closer to the double-digit you’re seeing in the direct-to-consumer?

Well two things I would say about that. We were hoping we’re going to have our first growth here, organic, this year which we’re pleased to see.

I think it’s fair to say the tariff situation from China has helped us a bit. So, mass market retailers who were free to go on offshore [indiscernible] a year – two years ago are less free to do that today or is still free to do it, but there’s an economic price to pay, so that’s helped a little bit as well.

But I would say that we’re certainly exceeding we’ve hit the bottom of the barrel as it were and the next direction is more likely to be out and we’re hoping next year we’ll have a low single digit organic growth rate overall for the business, we hope, but it’s somewhat dependent on the economy and what situations occur with the tariffs because at that level obviously got – still have some impact that come in suddenly they went away for any reason.

Okay. And looking next year for Innovia given there was a lot of moving parts here in the year for you and Innovia with the startup of the Mexican plant that’s on.

Is there a benchmark or some kind of range that we can look at for revenue growth for next year given that you’re starting off now with a cleaner slate and how would we look at revenue growth going into 2020 for Innovia?

Yeah, well it’s a pass-through business, so I think you have to bear that in mind and move in the direction of residence, it’s down about, so dollar revenue increases are probably slim to none. But we’re really focused on improving the quality of earnings.

So we do expect to make progress again next year. I think the fourth quarter it is a business that has – makes more of its money in the first half than the second half.

So you probably see that again in the second – in the fourth quarter to come and in the next quarter, but we’re definitely planning to further improve on the results that over here next year.

You had dedicated kind of mid-to-high teens as a run rate you’re looking for next year. Any reason why that’s changed?

No.

Okay. All right, that’s all my questions.

Thanks very much.

Okay. No problem.

Hi there. Just wondering if you could update us all on whether you have any changes in your view on the M&A landscape or if you’ve seen any changes in price expectations from sellers given that the label’s segment organic growth has started to come down a bit?

And then secondary question that is, at what sort of debt ratio as you’re waiting for better prices? Do you start considering buybacks or other ways to return capital to shareholders?

Yes, sure. Good question.

So I think we certainly have a good landscape of the M&A activity underway and there is three areas of the company, so CCL Design is the one that it’s most prevalent, where we have the most things going on. Probably the second one is Avery.

So we have a number of things going on in the direct-to-consumer space at Avery. And the third one, we’re beginning to talk about is bolt-on acquisitions with Checkpoint, principally in the area of RFID delivery in the power.

Okay.

And I think on the second part of your question I think our railway tracks haven’t changed. So once leveraged up, getting into the low ones or even at the low one, we’d have to think about other options, but right now M&A is still number one priority for use of excess free cash.

Okay. And so I think on past calls you’ve commented that price has been an issue for you.

I’d like to understand then that there’s been some movement in price to make things a bit more appealing to you?

But I think in the label space, this traditional package label space in Home & Personal, Food & Beverage business valuations in there are still pretty unreasonable. So we don’t have a long list of things – we have a long list of things there, but nothing very actionable driven by problematic valuations.

But in the CCL Design phase, at Avery and also Checkpoint there are definitely things coming along there which look quite interesting.

Okay, thank you very much.

No problem.

Thank you. Good evening, guys.

Hi, Steve.

Hi. I just wanted to follow-up on the Innovia conversation.

I sort of had expected that based on your previous comments that the back half of the year would look a lot like the first half. But I guess with the pas-through pricing that didn’t happen for Q3.

So I just wanted – would you expect Q4 to sort of look a lot like Q3 at this point?

Sure.

Yeah.

Okay. And then when you talked about sort of mid-to-high teens for next year, were you talking about EBIT dollars?

EBITDA.

EBITDA dollars in the mid-to-high teens, okay. And then just –

EBITDA margins, I think lot of questions on the last call was about EBITDA margins in the mid-to-high teens and that’s probably the reason for the – because EBITDA margins 9-months year-to-date are 15.7%, we’d expect to make some improvement on that in 2020.

Okay, thanks for clarifying. Okay and then can you just talk a little bit about the CCL segment margin, I mean, we obviously had some very nice growth there on a year-over-year basis.

Can you talk a little bit about the drivers and how you expect that to evolve into 2020 or maybe Q4 and into 2020?

But it was really next mixed driven stage. So we had a – as I said in the prepared remarks, we had a good quarter at CCL Secure.

So that’s really what drove the margin to be very well. So that’s and we had a bad quarter this time last year.

So a lot of the improvements you can see there in operating margins, really a mix effect of CCL Secure that was by far in a way the biggest driver.

Okay, okay. That’s helpful.

And then in terms of the outlook for CCL I just want to make sure I understand it correctly, you sort of talked about flat year-over-year sales in revenue and potentially leading into some low single digit growth into 2020. Is that the way to think about it?

Yeah I think we may have a sort of a flat-flat profitability. I think we may have similar sort of organic growth in the fourth quarter in a low single digit, it’s really hard to say that the problem is the month of December and we’re a bit for the gun shy to what happened in June when some of our customers called early shout that for the July the 4th, holiday and closed plants a little earlier and took some extra vacation.

So, you never know what can happen in the month of December, it’s a bit of a lottery and that’s the thing that’s very difficult for us to predict. So October, I can tell you it looks a lot like Q3, so but in November, we have Thanksgiving and then at December we have the early shutoff for Christmas and most of the regions where we operate.

So that’s why we’re a little nervous about given the current state of the world and that is the macro situation.

Okay, okay. And so just to clarify, when you’re talking about flat profitability do you mean margin profitability or dollar –

Flat operating – flat to down operating income dollars, EBIT.

Okay, okay. Okay –

And I think if we showed any improvement, I think that with regard to that is really good performance. If it was down a little bit that wouldn’t surprise us.

Yeah. Okay.

Okay, that’s very helpful. Thank you.

Yeah, no problem.

Hi. Good evening, gentlemen.

Hey, Scott.

So – all my good questions have been asked so I’ll be a glutton for punishment, going to ask you if there’s any change in the tone of discussions on sustainability?

Sure I mean, it’s an everyday discussion with all of our customers, they’re all under pressure to do something about the world’s waste stream and we have a whole bunch of products that can help them do that. It’s all about helping them recycle their primary packaging which is the bottles and so they put their liquids and pills and whatever else they make it in fact.

And we have a lot of labeling technologies that enable those to be put back into the stream a lot easier than they are today. But it’s a literally everyday compensation, because as you might imagine they’re all under pressure to act.

So been very high and been very active.

Has that resulted in any change in your raw materials’ purchases?

No, but not so far. But I think the main thing is how to make bottles easier to recycle and so I mean the bottle also have recycled content in them and you get recycled resin in those bottles usually by taking the old bottles, taking the label off, excuse me, cleaning and then putting the recycled resin with virgin resin to make a new bottle with the part of recycle resin and that’s later of the month right now.

Okay, that’s great. Thanks very much.

No problem.

Good evening. I have a couple of questions.

I guess first question, Geoff is on the direct-to-consumer growth. We’ve seen over the last quarters, quarter-after-quarter generating double-digit or close to it growth.

And can you maybe give a sort of bigger picture view of why that is happening? What is the trend behind it?

Are you taking share from someone or is it just the fact of being a small base and kind of growing positively?

It’s just the way people are sourcing printed materials. So the industry at Avery was to provide software, provide pre-formatted labels, give them to consumers and consumers and small businesses and departments and big companies, small departments of big companies will print their own labels on an inkjet printer or a laser printer.

And now the world is moving through online imaging and doing that on the internet very easy to do. And that’s just – we’re just riding that way.

So and I think we’re using our brand position and knowledge these factors, labels, tags, badges things where we have unique consumer insights into what they want and then capturing the growth through understanding how that phenomena can help our business.

Okay, thank you. And as second question, still sticking with Avery and I’m going to take a swing at asking for some directionality and what you expect in terms of profits.

Last year in the fourth quarter there was a relatively modest in dollar terms drop in EBIT in the fourth quarter in Avery. Is that something you would expect this year or will it be more pronounced or –

That where I get commenting about. I’ll not speculate on what Avery’s profits going to be for the coming quarter, Ben that we’re expecting Avery to have a record year.

Okay, perfect. And then the last question is, just if I can ask you to repeat, you said so for the new – Innovia facility or rather Treofan, there was $1.5 million in startup cost?

Yeah, that’s just the incremental impact on the P&L. So depreciation on the line, graph from the size of extra people, all the things you – extra energy and all the things you go through when you start up a very large piece of equipment.

So I think when we were asked to give guidance on what we told the impact of that might be, we initially set up to $10 million, then we narrowed it to $3 million to $5 million, I think at this point we’d say it’s at the low end of that $3 million to $5 million range impact on the second half.

Okay, wonderful. Thank you very much.

Yeah.

Thanks, Geoff and Sean. Just two quick follow-ups.

Geoff, one more on the piece of equipment in Mexico. So if you’re incurring $3 million-ish of startup costs this year, which obviously won’t repeat next year, plus I would assume you’d get some payback on that investment next year.

So are you thinking about it as the bulk of whatever profit improvement you’re expecting next year and Innovia will come from that line, specifically the absence of startup costs plus whatever benefits you would expect to realize from that?

Yeah that’s been a very, very accurate analysis, Adam. I would say, so the area of improvement for profit next year would largely or a big complement will come from that line starting to lid some contribution to the bottom line through additional sales and additional throughput margin.

So that’s a big chunk of that will come. I think we’ve also got some things to do in Europe, operationally is a big plant in the UK.

So that’s another chunk of it. So I assume that between those two businesses, that’s where the improvement has to come next year.

The other two – the other plants are pretty small to really move the needle.

And so the book on the resin recovery at this point is pretty well close in terms of what you lost and then what you recouped?

Well, I don’t think we recouped everything. So with – so we’re still digging the whole, but world have moved up, resin is benign to down so that’s good.

So we’re not seeing anything to worry about in the resin environment currently or any other raw materials. So that’s also helpful.

We have had some wins this year on currency from the British pound being as low as it’s been. So obviously our export sales for the US have benefited from that.

So that’ll probably go away next year at some point let’s say the complete capitalism from Brexit, but we may well have a better resin environment so things and thereabouts.

Yeah. And just one last one on CCL organic growth, Geoff.

So and years past you were up 5% to 6% consistently and what was a pretty robust global economy. Now you’re in the low 2%s and I don’t know what you characterize into that, but perhaps a dodgy global economy.

So can you give us a sense of kind of what your expectations are best case-worst case scenario for in terms of CCL segment organic growth depending on what the macro is doing?

Yeah, well we’re going to be, I mean, I think it would be foolish to plan for 5% or 6% growth in 2020 that in any companies in our industry that will be seriously contemplating our –

Of course, yeah.

That we are either. So it will be in the flat to low single digit range.

So I’d be kind of surprised that it sort of morphed into an actual decline. And we’ve had some of that businesses that got – will have good easy accounts section, we had a difficult year in our aerosol can business that’s starting to now come back.

So we will be expecting some improvement there next year. So, I think a reasonable planning assumption for us is, low single digit growth.

It was flat or is down a little bit, I wouldn’t be entirely surprised by them. But it just depends on what happens in the world where really what the differences in those two numbers really hence update.

But I do think we have some accounts of things going on and I think we’re going to have a good year next year in currency. I think we will have a much better year in aerosol can so you got a couple of things there.

And then the CCL Design space, our electronics business has also done very well this year as a lot of good things going for it next year. So we see enough things on the horizon that are sort of plus points that give us some confidence, the planning of low single digit growth a reasonable assumption for planning for next year.

Thanks so much, Geoff.

No problem.

Hi – excuse me. Yeah, maybe just a couple quick follow-ups just on the new line of Treofan and I apologize I forget – I’m forgetting this right now, but can you remind us I guess the incremental sales capacity, if any, with the new line or is it more sort of just a margin opportunity –

I think and it’s because we definitely have 20,000 tons or 30,000 tons of capacity to sell. So, but we’re not seriously expecting to do that in one year or even two, frankly.

So from the quality of the incremental volume is more important than the quantity. But it’s pretty significant the amount of capacity we have to sell.

What more I think is more important to us is what price we sell our capacity and our intent is to be pretty disciplined about, but the capacity load is quite significant. So that’s what we now have is in the four of three of that operations we now have, call it, the 80,000 tons of capacity available to sell and that’s quite a bit more than we have certainly in 2019.

So the 80,000 the legacy and you’re adding 20,000 to –

80,000 is what we now have in total capacity to and we have probably 25% of that available as incremental over what we have to sell.

All right, okay that makes sense. And maybe just last one and just on Avery.

Again the business clearly trading much better year-to-date I think the quarter’s sales of 5% year-to-date 4%, is it sort of safe to assume that essentially, again, maybe back to school is better, but essentially all that growth is that direct-to-consumer business?

It’s a big, big chunk of it is direct-to-consumer. We did other good back to school in North America.

So that’s dual sort of factor it’s a combination of the two things.

Okay –

Printable media business was kind of flat.

Right. So again, I guess without getting too specific but next year if this business does grow low single digits and it’s direct-to-consumer driven directionally margins should go higher?

Yeah, that’s a good thing. So that’s where we make good margins in direct-to-consumer possibly what we call the organizational product businesses low margin.

So if we get $1 of sales replaces $1 of sales there obviously we get the margin impact uplift can be seen that this year, you’ve seen that in the third quarter. I think we’ll see a bit of it in 2020.

Okay, and when you’re buying these businesses direct-to-consumer, like what kind of multiples are roughly of these assets selling for or like the –

For the whole public, we probably sold them that all on the website, if you want to have a look, but there we sold them all in the 4 times to 6 times EBITDA range.

Yeah, okay. –

And they have no real capital made first. It’s a knowledge business so the free cash flow profile is more than interesting.

Yeah, all right. Thanks a lot, Geoff.

No problem.

Thanks. Just a quick one on Innovia.

Now you’ve had Treofan for about a year and a half and have got the New Mexican line open. Do you envision any restructuring – any significant restructuring of the sales force or –

Yeah I think – we will take some action at Innovia to restructure the overhead structure of the division in total. And we may – depending on what happens with volume, we may take some downsizing actions in the large – some of our operations around the world, but it’s really dependent on what the volume outlook is, but we’re certainly planning to do some – continuing to make changes first to make the operations run better.

But in terms of material numbers not large numbers of people are not – not big time one-time expense.

Great, thank you.

Okay.

Thank you. Just a quick follow-up question here, Geoff.

Just on the CCL segment, I just wanted to – just talk about like what would be the major year-over-year margin drivers in q4 that would cause profits to be flat, because when I look at last year, it looked like last year was a reasonably well last year –

So we had a – one of the big variances is in the security business, so we had a lousy Q3 last year and the above the Q4 and we haven’t had that divergence this year. So a lot of it’s really around the constant in CCL and CCL Secure.

And I think they’ve been – and I think the rest of it is just some conservatism and what we see in the packaged goods industry and some concerns about what people may do in terms of just been that within the fourth quarter and it’s because we our demand is really driven not by what they sell, but what they’re producing. So if they decide to close down a plant or two, little early then they might otherwise do for the holiday season then that would have hit it back on us in the month of December.

So it’s a combination of those two things.

Right, okay. Okay that’s helpful.

Thank you.

Thank you very much for joining us and we look forward to seeing you at the end of next quarter and telling you about our performance for the year as a whole. Thank you for joining us.