CCL Industries Inc.

Donald Lang - Executive Chairman Geoffrey Martin - President and CEO Sean Washchuk - SVP and CFO

Adam Josephson - KeyBanc Capital Markets Stephen MacLeod - BMO Capital Markets Michael Glen - Macquarie Research Equities Ben Jekic - GMP Securities Elizabeth Johnston - Laurentian Bank Securities Mark Neville - Scotiabank

Well, thank you, operator, and good morning to everybody on the call. The operator mentioned we have -- its well attended.

And hopefully you had a chance to view the press release and the presentation which we would be speaking to which is on our Web site at ccl.ind.com. As you’ve seen it’s a record fourth quarter for us.

And also announced a dividend increase that will be to pay the shareholders on close business on March 17. So very good quarter, very good year.

And with that, I will turn it over to Sean Washchuk.

Thanks, Don. As everyone could turn your attention to Page 2 of the presentation, we have a updated disclaimer regarding 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 2014 or 2015 Management Discussion & Analysis, under the section risks and uncertainties.

Our 2016 MD&A will be filed in the next few days. Our annual and quarterly reports can be found online at the Company's Web site, cclind.com or on sedar.com.

Turning to Page 3. The fourth quarter of 2016 was another strong quarter for CCL and marked our 25th consecutive quarter of year-over-year improvement and quarterly adjusted earnings per class B share.

Sales growth excluding the impact of currency translation was 35% to $1.06 billion compared to $798.8 million in the fourth quarter of 2015. The growth in sales can be attributed to organic growth of 4%, acquisition related growth of 30.6% from the 14 acquisitions completed since the beginning of 2015, partially offset by the negative impact of 2.1% from foreign currency translation.

Operating income increased 34% excluding the impact of currency translation to $160.6 million for the fourth quarter of 2016 compared to $122.6 million for the fourth quarter of 2015. Geoff will expand on the segmented operating results of our Label, Avery, Checkpoint and Container segments momentarily.

The fourth quarter of 2016 included restructuring and other expenses of $6.7 million, of which $7.2 million was primarily for severance costs for the Checkpoint and Worldmark acquisitions, $1.5 million was for various acquisition related costs incurred during the quarter. This was all partially offset by a $2 million reversal of the restructuring reserve for the Avery segment.

The fourth quarter of 2015 included $4.2 million of restructuring and other expenses. Net finance expense was $12.2 million for the fourth quarter of 2016 compared to $6.8 million for 2015.

The increase in net finance cost is primarily related to the increase in outstanding debt to fund the second quarter acquisition of Checkpoint. The overall effective tax rate was 25.7% for the 2016 fourth quarter compared to 28.4% in the 2015 fourth quarter.

This reflected the recognition of previously unrecognized deferred tax assets, partially offset by an increase in taxable income in high tax jurisdictions. The benefit of the previous -- previously unrecognized deferred tax assets was $0.10 to earnings per share.

This tax rate will increase in future periods as a higher portion of taxable income is earned in higher tax jurisdictions. Net earnings for the 2016 fourth quarter increased 37% to $98.3 million from $71.9 million in 2015 fourth quarter.

For the year ended December 31, 2016, sales, operating income -- hello, is everyone there still, operator?

Thank you. Thank you.

Okay. For the year ended December 31, 2016, sales, operating income, and net earnings improved 30%, 20%, and 17%, respectively compared to the 2015.

2016 included results from 14 acquisitions completed since January 1, 2015 delivering acquisition related sales growth of 25.5%, organic sales growth of 4%, foreign currency translation added 1.3% to sales. I will remind everyone the results for 2016 included the non-cash acquisition accounting adjustments to finished goods inventory of $33.9 million and restructuring and other charges of $34.6 million.

Turning to slide number 4, basic earnings per class B share improved 37% to $2.80 for the fourth quarter of 2016 compared to $2.05 for the fourth quarter of 2015. Adjusted basic earnings per class B share was $2.98 for the 2016 fourth quarter compared to adjusted basic earnings per class B share of $2.16 for the fourth quarter of 2015.

The adjustment to basic earnings per class B share included $0.18 for restructuring and other charges. The $0.82 improvement in adjusted basic earnings per share to $2.98 is primarily attributed to the improvement in operating income of $0.86, $0.10 for the recognition of deferred tax assets, $0.04 from the reduction of corporate expenses offset by an $0.11 increase in interest expense and $0.08 from currency translation.

For the year, adjusted basic earnings per class B share was $11.41, up $2.80 or 33% compared to $8.61 from year-ago. The adjustment to basic earnings per class B share include $0.79 from restructuring and other charges, as well as $0.72 from non-cash acquisition accounting adjustments to finished goods inventory.

For 2016, the improvement in adjusted basic earnings per share was driven principally by the increase in operating income, which accounted for $2.64. While the impact of currency translation added $0.07, a reduction in corporate expenses added $0.10, all other including interest, equity, earnings, change in tax, reduced EPS by $0.01.

Turning to Slide 5. For the full-year of 2016, free cash flow was $338.6 million, an increase of $17.9 million compared to $320.7 million for 2015.

This reflects the improved operating results offset by an increase in net capital expenditures in 2016 compared to 2015. Net capital expenditures for 2016 increased by approximately $70 million compared to 2015.

Turning to Slide 6, our cash and debt summary. Net debt as at December 31, 2016 was $1.1 billion, an increase of $508.3 million compared to December 31, 2015.

The change in net debt from December 31, 2015 reflects the increased borrowings to fund acquisitions, principally Checkpoint since December 31, 2015. However, this was partially offset by the relative strengthening of the Canadian dollar at December 31, 2016 compared to the rate that was in effect at December 31, 2015.

More importantly, CCL reduced its net debt since the end of the third quarter by almost $80 million. The Company's overall finance rate was 3% at December 31, 2016 compared to 3.1% at December 31, 2015.

This reflects our current mix of syndicated debt senior notes, public bonds compared to a higher portion of senior notes, higher debt costs at December 31, 2015. Despite the acquisitions in 2016 and the associated draw-downs of debt during the year, the Company's leverage ratio of net debt to EBITDA drop to 1.28 times at December 31, 2016, down from 1.6 at the end of the third quarter.

This decline in our net debt ratio will result in a temporary decrease in our interest margin to a 100 basis points on a revolving credit facility. Geoff over to you.

Thank you, Sean. Good morning, everybody.

I’m on slide number 7 of the presentation, just to review the capital spending for the year. Shade on the $235 million, $225 million net of disposals, accounting [ph] to $260 million for 2017 that excludes Innovia compared to D&A of $233 million also excluding Innovia.

Page 8, these are the results for CCL Label, had another strong quarter in the fourth quarter with 7% organic growth rate. We were up mid single digits in North America and Europe.

So some recovery in Asia-Pacific was also quite strong and continuing very good growth in the -- in Latin America. All -- pretty much all businesses on all regions of the world improved despite operating margin declining slightly based on the diluted impact of acquisition.

Page 9, results for CCL Label, a bit of color about the global product lines that we have in the customer segments. Home and personal care, up mid single digits.

Very strong in Latin America and also in the sleeve [ph] business. Labels were flat in Europe, up a little bit in the U.S and also in Asia, and profits overall were up nicely despite end markets being relatively slow.

Health care and specialty low single-digit growth both topline and bottom-line, but it was augmented by the impact of acquisitions and we also had a favorable patent settlement this year about $2 million favorable. Food and beverage continue to be very strong double-digit topline and bottom-line, very good growth in sleeves, very good growth in labels, and that really drive the profit performance and we’ve also put quite a bit of the capital expenditure this year, went into this part of the businesses were simply out of capacity in a number of the operations.

CCL Design, this is our automotive and electronics business. Moderate organic growth.

It did see some signs of the automotive industry plateauing in North America, but it continued very strong in Europe. Had our best quarter in electronics with well -- really solid results there and that drove the strong profit gains.

Page 10, these are the numbers for our joint venture. So the number shaded in pink there they’re the numbers for the actual operations themselves.

And then you see our equity interest there highlighted, so we continue to grow in these regions as you can see by the numbers. It did see some issues in Russia driven by the entrant of a new supplier of materials there that’s called some chaos in the market product wise, but other than that things went there pretty well.

Very strong year in the Middle East and Chile and our new in-mould label plant is still in construction down in Memphis. Page 11, results for Avery.

North America, we did see some declines in the fourth quarter not really unexpected after Staples and Office Depot called off a merger. They -- both of these companies proceeded with pretty significant restructuring, particularly in their retail arms and I don’t say it have some impact on their inventory levels and of course for the year we have the impact of the mass market share loss in binders.

The international business was up, really on in the printable media business and we’ve the benefit of labels. And these mix impacts were favorable both for the quarter and the year, 170 basis points margin expansion.

And I think you can continue to think about this business this way, 2017 low to no growth. Mix change is driving further margin expansion, aided by productivity and as we continue to look for bolt-on acquisitions in this space.

CCL Container, quite a bit to talk about here this quarter. Another very good quarter that rounded up a very good year.

Last year we’ve had in this business solid results in the U.S and Canada. We manage to offset the problem of the peso in Mexico by strong export sales priced in U.S dollars out of Mexico.

So we didn't see any impact from the peso down there. Start up losses continue at our slug plant and they will go on I think for a fair chunk of 2017.

We are not expecting that plant to come into profit until we get production levels off in probably late in the -- later in the year. One comment I would like to make about our plant in Penetang.

One of our largest customer have switched to a leading homecare brand out of the metal packaging into a plastic packaging made from polyester or PET, and that application is about 15% of the total segment sales. So it's also $30 million thereabouts.

It is very low margin, so the profit impact is pretty slim. So we’re proceeding with the closure of the Canadian plant as we speak, 60% of the capacity there is already been shut and we expect the remainder to be shut at some point during the course of the year.

So we will see some impact of that in the next quarter or two until things settle down and we get the expansion up in Mexico and all of the cost taken out of that operations in Canada system-wide and we should see things go back to normal so in the second half of next year or not later. Checkpoint, very good quarter.

We’re very pleased with the results here. Profitability certainly exceeded our expectations.

Really much of it is a result of the of restructuring we’ve taken here. We’ve still got some more to do there, mainly outside of the North America on a slightly longer glide path, a number of international locations.

I would like to remind everybody on the call that Checkpoint is a highly seasonal business, particularly through the second half of the year and in the first quarter of the year, as far as we can see its never made any money. So that’s something we will be thinking about for the coming quarter.

Page 14 is a summary, just fourth quarter running off another excellent year for the Company. And Slide 15, just some comments about the immediate outlook.

I would say we see steady as you go demand levels at our CCL Label, CCL Design, and Avery business. We all have challenging comps in the coming quarter.

Last year was extremely good in Q1, very strong organic growth 30% increase in EBITDA. So the comps are difficult and foreign exchange has moved again, so we will have a moderate headwind this quarter versus the $0.13 tailwind in the first quarter of 2016.

And we also see very early signs of materials cost inflation, particularly in our can business where aluminum has gone up from 1,600s to the mid 1,800s, so that’s kind of poll some pricing challenges in the coming quarter. So just another comment here just about the Canadian plant impact, we will deal with more -- any questions you have about that in the Q&A.

Checkpoint, again another reminder, Q1 is historically loss making, the low retail to the season. Couple of offsetting benefits.

Easter does move out to the next quarter. It was in Q1 last year, it's in Q2, back to its regular place in Q2 this year.

So we'll have an extra work day or two in this quarter, we didn’t have last year. And of course we will Innovia, which looks set to close at the end of this month.

Slide 16, just some comments on our segment reporting, that we will be doing for the first quarter. It's really planning for what will happen when we close the Innovia transaction.

There will be no change to Avery, Checkpoint or CCL Container. We will have a new segment at CCL, we will call Specialty Films, which will include Innovia's films operations and two film extrusion operations which will be moving from CCL Label into the Specialty Films segment.

We had a operating income last year of about $2 million, very little external sales, so most of those transaction they’re internal. And then this the old CCL Label segment will be renamed simply as CCL.

It will include both product grouping that I talked about earlier. It includes the Home and Personal Care, Healthcare and Specialty, Food and Beverage and CCL Design businesses, and will also include a business we’re going to call CCL Secure, which will include the Sennett/Banknote security printing operation we bought at CCL in 2015 and then the polymer banknote operations from Innovia we will level complete that.

So, you probably have some questions about that, so I will leave with this at this point, operator, if you would like to open up the call.

Good morning, Geoff -- hi.

Good morning, Adam.

First, a few random ones, was cash flow for the year roughly in line with what you’re expecting?

Yes.

Okay. Label segment performance in the quarter, it sounds like it was about in line with what you are expecting even with the margin compression, the modest margin compression?

Yes, I think we were pleasantly surprised by the organic growth rate. So, that was higher than we thought it was going to be.

And, yes, the acquisitions did well, but they come in at low margin from the core business does, so that’s really drive only margin compression.

Sure. And with regard to the organic growth in label, Geoff, obviously many of your global CPG customers had difficult volume quarters in the fourth quarter.

You guys did better than you were expecting. So can you just help us understand that dynamic?

Yes, well if you look at the comments I made about home and personal care, you will see lot of the growth we have there was actually in tubes. So we gain share in tubes and home and personal care.

And then in Latin America, in line with many of the results of that customers, we saw strong revenue growth there. But we’ve to remember some of that’s inflation related.

So, how real that is, I think …

Right.

… both for our customers and our self, it's just more price driven than its driven by real volume increases per se.

And even with that said, your underlying volume growth was as good or better than you were hoping for?

I would say so. I mean, the business where we’ve seen stronger growth on the volume side has been in food and beverage.

And it's really caused by the premiumization factor. So we’re the supplier of mainstream packaging to food and beverage companies.

We are typically dealing with the brands where they want to premiumize and if you look at any of the results of those companies, that's where they’re getting growth, in the premium segment and that's the only business we have. We don’t do regular me-too-stuff.

Right. And in terms of the runway of this premiumization, obviously you and your label suppliers have been vastly are growing your customers, right, for the last two years or so.

Is this something that you think will continue for years to come or are we perhaps close to the end of this runway?

Well, if you look to the results of Anheuser-Busch, you will see flat beer volume, but you will also see 14% increase in the sales of [indiscernible]. So I think that's really what's going on here.

You’ve got brands that have a premium cachet that in themselves gaining growth and I don’t really see -- that’s how those companies can grow revenue on it. Doesn’t matter either they sell beer or orange juice or yogurt or ….

Right.

… wine or whatever you -- what other category you want to pick, the way they’re getting revenue growth today is in the premium segments and that’s all we do. So we don’t have any underlying underneath that’s a drag.

We just have the stuff that’s growing.

Sure. Well put.

You commented extensively on how difficult the comps would be, Geoff, in the first quarter.

I did.

Do you expect earnings to be up year-on-year, just given all those [technical difficulty]?

Barely.

Barely, okay. That's -- that sounds about right.

And then anything -- you mentioned Innovia briefly, can you share any updated thoughts you have appreciating that you have yet to close the deal?

Well, we can say the deal is due to -- will close at the end of the month and we’ve got some insight into the operations. We obviously visited number of their customers, so we like to look at what we’ve bought and we’re pleased with that.

So, but it's very early day, so we will give you more color on that as time goes by.

Terrific. Thanks, Geoff.

Okay, Adam.

Thank you. Good morning, guys.

Good morning, Stephen.

Good morning. Just on the Label business, I know you’ve talked a little bit about acquisitions coming in below the consolidated business.

And I’m just curious like how -- what sort of timeline do you foresee to get those margins up in line with it?

A lot of the compression is coming in CCL Design business, Adam -- sorry, Stephen. It's got fundamentally lower EBITDA margin, because we don’t invest in it, but we invest in our other businesses.

So you look at on the free cash flow basis, its good as the other businesses, but we invest less in it. And then the EBITDA that comes as a result of -- I think the CapEx we have in some of our other segments, so it obviously drives it down.

So it's not far away from where we wanted it to be. I do think we still have some room to expand margin, but it's not far away from where we want it to be.

But it does have of all those parts [ph] of label, CCL Design does have a fundamentally different financial picture driven by that. So lower CapEx, lower depreciation, lower EBITDA, but very similar free cash flow profile.

Okay. Okay, great.

Thank you. And then you provided D&A and CapEx, excluding Innovia.

Can you give some color as to what you think that number might look like with Innovia in those numbers?

Well, I think Innovia's depreciation is about $30 million of thereabouts. But we don't really know yet what we're going to be planning to do yet, but -- and if I can [indiscernible], so we will be closing the deal within 10 months next year, so probably take $2.5 million a month, so it will be $25 probably next year, something like that.

Yes, okay. And I guess it's too early to say what kind of CapEx plan would [technical difficulty]?

Yes, well it just completed a couple of [indiscernible] projects, so they built a new plant in Great Britain for the polymer notes there and it just completed an expansion to the plant in Wigton. So I don’t think there will be anything terribly major in the year of 2017 for sure.

Yes, yes. Okay.

Okay. And then in terms of the container impact, you talked about the loss of a customer.

I mean, is that sort of hit one-time in Q1 and Q2?

Yes, I would say we made $10 million of there in the first half of last year, first quarter of last year. I think we will do -- I think it will be a $4 million or $5 million bench [ph] in that.

Probably, $2 million or $3 million in the second quarter and then about a time we [indiscernible] all the Canadian cost is out of the system and more importantly we done the expansion in Mexico up and running and in the second half of next year we would expect to be kind of looking like second half of this year that or maybe even a little better. So the business is budgeted to have kind of a flat year.

But there will definitely be some disruption costs, because it's pretty hard to close that thing down overnight and you’ve got customers we have to migrate [indiscernible] and all that kind of stuff. So there is bound to be some one-time disruption in that.

Okay. And then just on -- just to follow back up on the previous question.

You mentioned earnings being flat year-over-year. Was that specifically to or barely year-over-year, was that specific to label business?

No, no, just the whole Company.

Okay.

You have to bear in mind we got Checkpoint. Checkpoint last year in loss $13 million U.S dollars in their first quarter, which is going to be [indiscernible] the company to make.

So we hope -- we’re pretty hopeful we won't lose an amount anything like that, but we’re not going to make a lot of money in the first quarter. So we compare it to Q4 where we have the results you’ve seen, there is not going to be a number or anything approaching that in the first quarter of 2017.

Okay. So the main driver for that is just Checkpoint?

Yes, and then you got the $0.13 tailwind. It's going to become a headwind, so the FX will be -- I don’t know, I’m taking a number out of there, that probably be a $0.20 swing something like that.

Okay. That's great.

Thank you.

Okay.

Hi. Good morning.

Hi, Michael.

I just wanted to maybe dig into the U.S business a little more. You guys obviously have a large manufacturing footprint there.

Is that -- is the majority of that manufacturing -- is that sold into the U.S market itself?

Yes. Yes, everything we make in the U.S we sell in the U.S.

So there is no real export business there to think about?

Correct. Out of the U.S., correct.

Okay. And then are you able to give a sense as to how much you might import into the U.S from other regions?

Label business very little, I mean, we import some raw materials, special -- very special raw materials into the U.S. We -- there is certainly some imported products in the Avery business that are in the United States, but it's -- that's where probably it's more material to them than it would be any of our business-to-business operations.

Okay. So, and then just in terms of the raw materials, would you say the vast majority of what you buy to build the products for the US is sourced in the U.S then?

Correct.

Okay. And have you guys been able to do any sort of internal assessment as to what a potential change in the tax rate in the U.S might mean for your EPS?

Well, we don’t. I mean, when the President finally decides what that’s going to be, we will react to it, but at the moment he hasn’t decided anything.

When he does, we will respond. We just don’t know.

So, it's all being postulated, but there is no -- we know it’s the highest tax country we have in the world today, so anything he does about that change, that would be gratefully received. At the moment, as you know, what’s on the table is not exactly very specific.

Okay. And just in terms -- just to go back on the CCL Label organic growth, yes it is very true you’re going to face some difficult comps, but I'm just trying to -- but then this quarter was up against a very difficult comp two and you had a very solid number.

So, I’m just trying to get a sense, is there anything in particular through the front half other than the difficult comp that we should think about?

Well, I think the things to think about container will look very different with what the comments I made on the call. Checkpoint won't have a lot in the coming quarter, but there are no comparators last year, so that’s not comparatively relevant.

But thinking about CCL Label in particular.

CCL Label, I think will be fine. But it's -- I just want to comment, we’ve had this -- if you look at the long-term growth rate of our business at CCL Label, its 3.5%.

And if you look at it over a long rise and its around 3.5%. And for every quarter we have a 7%, we’re going to have a zero so at some point.

So growing this business at 7% quarter-on-quarter, year-over-year is not possible. So at some point the lower of averages prevails.

And in the third quarter it was 4%, so I think that the trend it is anything down versus up.

Okay. And then just in terms of Avery, can you give a sense as to -- can you speak to the online business at your building within a very …

Yes, it's going very well and the acquisitions have also augmented it. So we created a separate direct to consumer division of the Avery now.

It will consists of the things we started from Ground Zero and the acquisitions we've added and we hopefully have more of those to come. And its -- we're very pleased with that.

It's still relatively small, so if you take direct to consumer globally it's 10% of the division sales now something like that, but obviously it's the part, its growing.

And are you able to break apart what the organic growth in that business would look like last year?

No.

Okay. Thanks for taking the questions.

Okay.

Good morning. I have just a couple of questions, simpler ones on the food and beverage.

On the food and beverage side, it seems like that's really, really a gem for you. Is it fair to assume that most of the CapEx in the CCL Label is going towards food and beverage?

I think most might be an exaggeration. As a percentage of capital expenditures in that part of the Company were double depreciation last year, I can tell you that.

So it's only getting more than their fair share, because we’re out of capacity. But there is other parts of the business where we’ve been investing emerging market still an important factor and also in the two business we’ve been putting quite a bit of money and that has also been growing very nicely too.

So -- and then in CCL Design, as you know, we’ve got -- we’ve done quite a bit there in some of these new products we are developing, particularly in the electronic space.

Okay. And then on saying that EPS is going to be barely up in the first quarter compared to last year, does that include that, let's call it a 27th FX swing …

Yes, yes.

… and the portion that Innovia will be added.

I haven't modeled at anything for Innovia. So whatever, it's only a month.

Right.

And you have to remember, [indiscernible] we got all the acquisition accounting to do there, so it will be a lot of unusuals …

Correct.

.. [multiple speakers] finished goods inventory accounting when we bought the business.

Okay. Thank you.

I will go back in the queue.

No, problem.

Good morning.

Good morning, Elizabeth.

Could we talk a bit about materials inflation which you mentioned earlier in the call with respect to aluminum. Can you discuss a bit about your ability to pass along these price increase that you might be seeing in this coming year?

Yes. Well, we have mechanisms to do that.

So every 90 days unless that customer has hedged the aluminum with us, we adjust prices and -- but of course in a rising market you have the problems of lag when aluminum is declining you have the benefits of -- benefit of the lag. So that's really the major challenge.

The pass along is pretty automatic, but there is always a lag.

Okay, great. And just if you could turn to the reinvigoration [ph] of the segment reporting that you mentioned.

Can you give us any insight into the change in EBITDA profile for CCL Label that we can expect?

Yes, it's very small. Its only -- its -- in terms of the year-over-year change that’s comparative it's just these two small film extrusion operations.

So they will lose $2 million of that and they will gain whatever we’re going to make in the security print operations of Innovia, but we don’t know yet, so it's difficult to comment on that.

Okay. So not a lot of change expected then going into 2017 versus 2016?

Talking about organic comparatives, it will be very small.

Okay, great. Those are my questions.

Thank you.

Thank you, Elizabeth.

Hey, good morning, guys.

Hi, Mark.

This is a very strong quarter at Checkpoint. I guess just trying to get a sense as, is the cost savings or the synergies are coming in larger than expected or sooner than expected?

Because you did -- I think in -- you did say at least $40 million of cost savings, I’m not sure if that’s sort of regarding uppers, maybe I’m reading too much into wording?

Yes, I think it's fair to say the savings have come faster than we expected, that’s -- we talked about 20, depending this sort of level of performance by 2018 and certainly come quicker than we expected. And I think it's also fair to say the savings might be larger than we originally anticipated.

What we don’t know is what will be the impact of the topline and margin compression in 2017. So we -- how much of it will translate into the bottom line, yes, it's still not entirely clear.

So I wouldn't -- we wouldn’t be moving out of that $40 million guidance, but if revenue comes in flat or little better than flat and pricing is okay, and there is nothing on the material cost inflation then there might be bit of upside in that in 2017.

Okay. Do you have an estimate as to roughly how much you’ve realized or how much was cost savings have -- you’ve identified or realized [indiscernible] to the P&L?

No, no. It would be difficult to model that into the fourth quarter P&L.

I wouldn’t want to, because so many moving parts then that be able to do that for you, but I think you can see from the numbers it's pretty clear, its going better than we thought.

Yes, yes. Just on the container facility in Mexico, did you say when that will be up and running?

Yes, I didn't, but it’s a good question. I would say the building is being constructed, so it should be up by the middle of the year and then a new line is -arriving at the same time.

So that will increase the capacity in Mexico, but of the new plant we have down there its [technical difficulty] 30% capacity increase. So and we’ve a contract associated with that, which will kick in the same time.

So, probably I think realistically fourth quarter of next year by the time we're seeing any impact of that, because it will take probably the summer to get the plant up and running.

Okay. And then at Avery for the year, I think organic sales were down about 4.5%, if my math is right.

I guess …

Yes.

… understand some of the challenges, but I guess just looking into '17, '18, on what point do you sort of hit a baseline?

Well, we are still pretty optimistic, we will get some margin expansion next year, because this mix impact is when you’re losing this top line from, particularly the mass market binder business, the margins in there are of razor-thin. So the impact on the bottom line is pretty minimal and if you replace even 15% of that volume in some of these other product lines, the margins are so much better.

And we’re already seeing the benefit of that mix impact. So we still see some room for margin expansion of Avery in 2017.

When we get into 2018 and 2019, probably your point is more relevant, but hopefully …

Okay.

… by then we’ve bottomed out on this thing, and it's really all in the binder business that will be above and down and we will be in a better place.

Okay. And give us maybe a sense of magnitude on the margin potential, or is there still couple 100 basis points that [indiscernible] or is that maybe too much?

Yes, I don’t think that’s too much to think about. I mean, we certainly think could this business make 25% of sales operating margin, maybe.

Okay. Just on the segment reporting, I assume that starts Q1 …

Right.

… and the Specialty Films segment its essentially 60% of Innovia roughly?

Yes, correct. Correct.

You got it.

Okay. Just on the tax rate, a little over this quarter, I think Sean mentioned it will go up a bit.

Do you have rough estimate for '17 or sort of just look historically [indiscernible]?

Mark, it's going to be in that 30% neighborhood. What happened in Q4 was a bit of anomaly.

We got profitable [indiscernible] or historically we were profitable and we're able to show a profitable trend, so we have to put the deferred tax assets on, so that was just a one-time event for the fourth quarter.

Okay. All right, guys.

Thanks a lot.

Thanks, Mark.

Thanks, guys. Two quick follow-ups.

Geoff, I know you talked about the fact you’re benefiting from the premiumization trend, particularly in your food and beverage business. That having been said, if you look at your large customers, obviously they’re struggling to grow their volume and they’ve talked about weakness in emerging markets and elsewhere.

Have you seen any of that, have you seen any signs of improvement deterioration of later or neither?

Not really, Adam. [Indiscernible] big customer of us, but if you take Coca-Cola as a customer and you look at their main line, Coke Diet Coke and the main mainstream brands, we would never be involved with a company like that in that product area.

So we would be in the carbonated drink segment, we'd be involved in energy drinks. And the specialty area without having any base business in the -- in that the core of the company and that's really why we’re growing faster than they’re because we’re just not exposed to the commodity 12 ounce beverage can, or anything like that or our stand [indiscernible], that’s just what we do.

Right.

So, if you’re saying how we seen it, no we haven't. Can we see that they’ve seen it, yes we can, because the reason they’re doing this premiumization effort it's the way they grow their topline revenue.

Right or keep it flat, right.

Yes, yes, so if you think of like the scotch whisky industry, you look at how these companies are testing, duty-free store in Russia you can find a bottle of scotch for $5000. You wouldn't have seen anything like that 20 years ago and they have people searching the hills of Scotland from used malt whiskeys and I mean that’s the kind of stuff that’s going on and packaging and representing brands for different uses, so they can charge the consumer more and the consumer has money versus mainstream where its more challenged by private-label and by pricing pressures.

So I think that's what’s going on in the food and beverage industry. If you got brands that have a premium cachet targeted at the consumer that have discretionary money, you’re clearly going to do better than the companies that are doing the reverse of us.

Could you try that $5,000 whiskey by the way?

No, we left [technical difficulty].

Just one other question, there's obviously this ongoing merger waves among the large global CPGs, you saw what happened last Friday. Can you just talk about what that tells about their future strategies and how might that -- how that might affect [indiscernible] interact with them in a month [indiscernible]?

Well, I think it will go on, because if you’re in Europe right now and you’re one of these large consumer companies, you’re going to issue a bond with a 0% coupon. So, while money is almost free, it's not surprising that the businesses that have low growth profiles are resulting to making acquisitions and a number of them do seem to have paid off -- we’ve seen that with a number of our large customers.

So, in some parts of the business, I think they get running up to the challenges of the regulators for some of these markets are so concentrated and now you take home a personal care for us, the top 10 customers in the world seem to control 85%, 90% of all the volumes. So, how many more of them can they really be, but then you look into the drug industry where the largest company in the world doesn’t even have 5%, pretty obvious so there are going to be more and more mergers.

And for us it's -- you just don’t know whether you’re going to be on the good end or the bad end of one of those deals.

Yes.

At some times we’re at the good end and other times we’re at the bad end and as you don’t know what they’re going to be, you just have to deal with what that happens.

Sure. Thanks very much, Geoff.

No, problem.

Hey, thanks for taking the follow-up. Can you just maybe talk about the outlook for CCL Design over the coming year?

Yes, I think we’re still seeing very, very strong demand levels in Germany, particularly the big exporting area in Germany. I would say we’re seeing some signs of plateauing demand in North America and electronic seems to be recovering somewhat.

So, it’s a mix picture, but I would say it's pretty much same as we saw last year overall.

Okay. And just in terms of the Worldmark integration, are you still integrating that business or is that [multiple speakers]?

[Multiple speakers] reaching the tail end of that now. There has been a lot of work, but it's been done very well and in the second half of the year that’s been very good.

Okay. And just in terms of Checkpoint, did you -- are you able to speak to any possible new business wins during the period or potential in the [indiscernible]?

We’ve thousands of customers in that segment. I mean, it's the most least customer concentrated business we have.

So if you look at the top 10 customers in Checkpoint, it's 25%, 30% of their total revenue. So they’ve -- they’re not really exposed to any one customer here or there and a new customer there wouldn’t really have any impact materially on CCL industries [indiscernible].

Perfect. Thanks.

All right. Thank you.

Thank you, operator. I want to thank everybody for their interest, this well attended call, great questions.

And regarding follow-up questions, please feel free to give Sean Washchuk a follow-up call. Otherwise, we look forward to chatting with you next question.

Thank you, operator.