CCL Industries Inc.

Good morning, everyone. This is Sean Washchuk.

Welcome to our first quarter of call. I'd like to draw everyone's attention to Page 2 of our slide deck.

Our 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 2020 Annual MD&A under the sections Risks and Uncertainties. Our annual and quarterly reports can be found online at the company's website cclind.com or on sedar.com.

Geoff, would you like to have some opening remarks?

Thank you, Sean. And good morning, everybody.

Welcome to our call, we've had a strong start to the year of 2021 as you've all seen now, by the numbers. And in the developed world, we're seeing a market recovery based on consumer activity with other vaccines doing their job for making life better for many of the citizens in the developed world.

In the emerging world with the exception of China, it's quite a different story in Latin America, the Indian subcontinent and parts of the ASEAN region. So, it's not clear yet whether 2021 we'll see the end of this pandemic or not, and only time is going to tell.

For sure, we're going to see a much stronger third part for ’21 when we saw the pandemic effective first half of 2020. So, with that, I'm going to hand the call back to Sean who’s going to take you through the numbers.

Thank you, Geoff. If everyone can turn to Page 3 of our slide deck.

The first quarter of 2021, sales increased, including the negative impact of currency translation by 4.1%, aided by organic sales growth of 4.2% and acquisition related sales growth at 2.5%, resulting in sales of $1.35 billion, compared to $1.3 billion in the first quarter of 2020. Operating income is $223.1 million for the 2021 first quarter, compared to $200.3 million for the first quarter of 2020.

A 14.2% increase, excluding the negative impact of foreign currency translation. Geoff will expand on our segment and operating results for the CCL Avery, Checkpoint, and Innovia segments momentarily.

Included in the first quarter results with a $5.4 million increase in corporate expenses due to an increase in short term and long-term variable compensation expenses for the comparative periods. Consolidated EBITDA for the 2021 first quarter, excluding the impact of foreign currency translation, increased 9.5%, compared to the same period in 2020.

Net finance expense was $14.7 million for the first quarter of 2021, compared to $17.1 million in the 2020 first quarter. The decrease in that finance costs is attributable to reduction in total debt for the first three months of 2021 compared to the same period in 2020.

The overall effective income tax rate was 24.2% in the three months period ended March 31, 2021 compared to 26.7% for the same period a year ago. The decrease in the effective tax rate is attributable to a higher portion of taxable income earned in lower tax jurisdictions with some one-off tax items.

The effective tax rate will change in future periods depending on the proportion of our taxable income earned in higher tax jurisdictions. Net earnings for the 2021 first quarter was $147.8 million, up 19.5% excluding foreign currency translation, compared to $126.6 million for the 2020 first quarter.

Moving to Slide 4. Basic earnings per Class B share were $0.82 for the first quarter of 2021 compared to $0.71 for the first quarter of 2020.

Adjusted basic earnings per Class B share were $0.82 for the 2021 first quarter compared to adjusted earnings per Class B share of $0.72 for the first quarter of 2020. The increase in adjusted basic earnings per share to $0.82 is primarily attributable to higher operating income contributing $0.11 to the EPS improvement, with a reduction in net interest expense and tax rate adding a further $0.01 and $0.02 respectively, partially offset by a $0.02 increase in corporate costs and $0.02 from negative foreign currency translation.

Moving to Slide 5. For the first quarter of 2021, free cash flow from operation improved to $87.6 million compared to an outflow of $50 million in the 2020 first quarter.

The improvement can be primarily attributable to an increase in operating income and a positive change in working capital for the company. For the 12 months ended March 31, 2021 free cash flow from operations was $718.9 million, compared to 12 months ended March 31, 2020 at $518.8 million.

This comparative improvement is attributable to improved income for the company, the change in working capital and reduced net capital spending for the comparative years. Moving to Slide 6, our cash and debt summary.

Net debt as at March 31, 2021 was $1.33 billion, a decrease of $61.1 million compared to December 31, 2020. The decrease is principally a result of debt repayments during the first quarter partially offset by a decrease in cash on hand at March 31, 2021 compared to December 31, 2020.

The company's balance sheet closed the quarter in a strong position. Our balance sheet leverage ratio was approximately 1.16 times declining from 1.24 times at the end of December 31, 2020.

Liquidity was robust $662.7 million of cash on hand and U.S. $1.2 billion of available undrawn credit capacity in our revolving credit facilities.

And it was all likely than any portion of our current debt will be paid from free cash flow over the course of the year. The company’s all overall average finance rate was largely unchanged at approximately 2.3% on March 31, 2021 compared to December 31, 2020.

The company's balance sheet continues to be well positioned as we move through 2021. Geoff?

Thank you, Sean. And on Slide 7 now the highlight of capital spending so far for the year, most parts of the year, which explains some of the free cash flow performance that Sean talked about, only $53 million spend at disposal, excluding the Right of Use asset protection and depreciation.

So, the CapEx will go up for the next three quarters. We're planning to spend around $330 million to $340 million for the year.

Page 8, slides on the CCL segments and how it's performed. Very strong start 5.4% organic sales increase.

Growth was Strong in the Americas at mid-single-digits in both Latin America and North America. Slower in Europe of low single digit, and very strong in the Asia Pacific region, up in the high teens.

Strong results in our Healthcare and Specialty business, Food and Beverage and CCL Design, solid in CCL Secure but down in the Home and Personal Care business with the Sanitize and Cleansing boom came to an end and travel related businesses remained somewhat impaired. Page 9, highlights about our two joint ventures, one in Russia and the Middle East very strong start again to the year somewhat impacted by the Russian currency down 25% against the Canadian dollar quarter on quarter.

Slide 10 results from Avery. This business really had a very strong start in Q1 2020 really unimpeded completely by the pandemic in North America and only slightly in Europe.

So, this year, we had top comps to compare with, especially in the U.S. We were down high teens, mainly in the badges and organization products business affected by office closures and low workplace presence.

Europe and Asia Pacific which is more labor centric resulted high single digits and much easier comps to a softer Q1 2020 also driven by the pandemic. We do expect growth in sales and profitability for all the remaining costs this year and 2021 in total for Avery.

Slide 11, results for Checkpoint. Outstanding quarter here.

But of course, compared to the weak start we had last year when the apparel industry closed down in Asia and China had a pretty rough time is at the beginning of the year with the pandemic unrolling there in Q1 last year. So, this year, we saw very strong comparative growth in our MAS business, gains in all regions, including the U.S.

where we had a big rollout last year. So, even gains in the US, Europe and Asia, especially strongly easier comps.

Record quarter in apparel labels, compared to a weak prior year period. Very strong growth in RFID, price saving businesses in [Indiscernible] recovered.

Innovia, the organic volume was up in North America, down in Europe and Asia Pacific. The sales gains really all came from resin passing pass through and the Polish acquisition.

Profitability increased on continuing strong productivity gains, especially in the Mexican operation. And we're now preparing our Polish farm for the [indiscernible] investment which will incur over the balance of 2021.

Outlook summary, we've as I said earlier on Avery will post strong gains particularly in Q2, and we should make progress in the second half of 2021. In total, we do expect Checkpoint’s recent progress to continue and power fueled by RFID.

And we still have easy key to comps. CCL design will continue to remain the strongest arm in CCL segment with automotive recovery and demand variety peripherals still strong.

Food and Beverage will improve as the on-premise channels open up. But our Healthcare and Specialty business faces the pantry loading, DIY boom period that we had in 2020, which won't repeat in 2021.

In the HPC business, we should see skincare and travel related demand improve as the vacation season opens up and hopefully mobility and travel will improve but the cleansing and sanitizing boom is largely coming to an end. CCL Secure looks very solid in Q2, with our top comps in the second half and the cash from the bank side in 2020, which will repeat in 2021.

Innovia still need to navigate the resin volatility which we’ll still see and manage this way through the echo flow transitioning program and there are no more easy comps in the second half of the year. So, with that operator, we'd like to open up the call for questions.

Geoff and Sean, good morning. Hope you're well.

Morning, Adam.

Thanks.

Geoff, would you mind, in CCL, can you just talk about your expectations by region? Obviously, Asia-Pac was up high teens as China shut down a year ago.

I would think Americas would remain pretty strong, while U.S. and Brazilian economies are going gangbusters with all the stimulus et cetera.

But how do you expect the comps, so just remind us how the comp will evolve over the course of the year such that we can have appropriate expectations by region?

Yeah, I think this is the key one trend will probably continue, I think we do expect to see Q2 to be strong, just driven by the prior year situation. So, the business in North America is reasonably robust.

And we've got some waxing and waning. We've got some businesses like Healthcare and Specialty where we had the over-the-counter medicines boom last year, which we rolled out this year.

And we rather expensive the Do-It-Yourself boom will be seen in the U.S. while everyone's been at home, would receive if travel opens up.

So, you've kind of gotten -- you get in one way or the other. So, but overall, I would expect the U.S.

to stay relatively strong. And the situation in Asia with IT peripherals and cell phones, mobile, that's not waning at all.

We've got the chip shortage to deal with. So that's a bit of an unknown factor, which we don't know how much difficulty that will present some of our customers.

We seem to be working our way through it. But it's an ever changing daily situation where I think the models are so – it’s very hard to say much more than that out of reading.

And just on Europe, specifically, Geoff.

Yeah, we'd expect Europe to still be lagging the rest of the world through the summer unless something changes. I mean, I'm in Switzerland as we speak here.

So last week, I went and flew down to visit our operations in Mexico and flew through Dallas airport, which was completely mobbed with people and I landed in Zurich yesterday morning to an empty airport. So, I think until you see those situations changing, it's hard to imagine the use of our product is going to change.

Yeah, no, I understood Geoff. On resin, can you just help us with precisely how much your costs went up through 1Q and to what extent those costs have receded and what your expectations are along those lines and when you expect to have fully caught up?

Well, it's the resin spike is, you know, was pretty extreme in the U.S. So, for North America it was by far worse than it was in Europe.

And it happened very suddenly, so we did manage to get most of our price through, put through but not fast enough to catch it all. We also had the benefit of some inventory in the system with lower costs.

And now we're going to have the reverse situation of that in Q2 where resins fall. So, we've got inventory and higher price resins.

So, I think we’ll have to wait to see till we get through Q2 how successful we'd be. So, I think Q2 might be more of a struggle than Q1.

We thought we'd have a tougher time in Q1 than we did as you probably might imagine, but I think Q2 might be slightly more difficult than Q1 was. So, we’ll have to wait and see how things unfold.

And a lot of times on what happens with the pricing.

Yeah, no understood Geoff, thank you. In Checkpoint, can you just quantify how big RFID is for you right now, and where you're seeing that very strong growth and the extent to which you expect similar that rate of growth to persist for the next few quarters?

Well it’s all in the apparel. So we’re up 25% 30% in apparel, but just for perspective, I mean, apparel labeling is $200 million less than $200 million for us and RFID is a portion of that, I'm not going to get into how big a portion of it is because it's critical to measure.

But it's a portion of it. So, it's not terribly material for us as a company.

But it's growing very nicely. Most of our businesses with European retailers and we were involved in a few good sized rollouts there.

But it definitely underpins the performance in the business in the current quarter. And the – but you do have to remember it was against a very difficult backdrop in 2020.

Yeah, no understood, Geoff. And last one for me on M&A.

Can you just talk about what you're seeing price wise, opportunity wise, and just give us a sense of what label multiples are in the private market these days compared to where you and the others are trading?

Well, it's not really any different from the public markets, frankly, it's private equity. Businesses are chasing some of these things, multiples that reflect our stock price.

So, we're not really participating in things like that. So, we're trying to find value opportunities for the [ph] bold goals.

But it's still a difficult market for larger transactions. And we still have the problem of how do you do due diligence on getting around the world and so difficult.

So haven't really anything new comments throughout the older situation. We have addressed that more in the last several quarters.

Terrific. Thanks, Geoff.

No problem, Adam.

Good morning, Geoff. Good morning, Sean.

Geoff, just curious if you could maybe speak to, in general, your reopening experience. I was thinking, certain geographies that have opened and certain markets or certain businesses that are more impacted such as food and beverage.

Is there typically a lag sort of in the sales recoveries or surge for these inventories are built?

It really varies dramatically on which part of the world we're talking about. So, the region of the world that I would say is still extremely tough is the ASEAN countries in Asia.

So, countries like Malaysia, Singapore, Indonesia, are very difficult to get in and out, move in between these countries yet. So it’s very, very tough out there.

India, I'm sure you read about in the newspapers. So, the degree to which we've seen an open up really in Latin America or in the U.S., we've seen some encouraging signs.

China is pretty much as normal, but domestic China so it's kind of like a bubble around. And Europe is still more difficult because the lockdown is not gone yet.

It's better than it was. But it's still restrictions there to be done.

See when you're putting and living and working in North America.

All right. But I guess when they do reopen, as we experienced and that there's been sort of a lag in your sales or an initial surge to the inventories restocking?

Varies by because customers are ready to get the prediction right, so they have to build inventory on the assumption of what might happen. I mean, everyone's assuming, in North America this year, the summer season will be strong.

Therefore, people are making plans to call into that, and probably the reverse of that in some other parts of the world. So I don't think we really know yet.

But we've seen encouraging signs in the beverage space as a bit more normality than there was certainly this time last year. So, we’ll see far away from the end use points to really comment beyond that.

So, we’re – because we’re driven by the behaviors of our customers, not by the consumers.

Right. Again, it seems like the semi shortages, you're managing that while you've obviously managed the resin situation pretty well.

I guess I'm just curious to see, I guess, broader, hear a lot about sort of supply chain issues, logistic issues from other companies and just appreciate your business will more localized but just curious if you're sort of feeling any supply chain challenges or logistical challenges that we should?

We’re local everywhere we operate around the world, that's the big advantage we have. As I can tell you, we just to give you a frame of reference of how the world has changed, we put a new tube line into our plant in Los Angeles last year, that sat on a boat and we’re trying to get into Long Beach pull for eight weeks, trying to get into the pull.

For those sorts of all the challenges we're having, and coast to coast freight from LA to from the West coast to the East coast, we needed to move something in an emergency around $2,000 per 45 foot shipping container price, this year is $8,000. So, we've got a lot of situations like that which we're having to pass along to customers and which we're doing, obviously.

But there's definitely some sizable pockets of inflation out there throughout the work our way through. But so far, we've managed to keep people supplied, normal people down and done our job, but not without a lot of hustling around and moving around.

Sure. Got that.

And I guess the spend -- the lower CapEx spend in Q1. Is it just a timing thing or is it some of these challenges --?

It’s just the hangover from the cutbacks we made last year.

Alright. Alright, Geoff, thanks for the time.

And great quarter, thanks.

Thanks Mark.

Oh, thank you. Sorry about that.

I was on mute. Morning, guys.

Hey Steve.

Just wanted to follow up on the CapEx question there. Can you talk a little bit about what's embedded in your accelerated CapEx plans for this year versus last year was it?

It’s not generated Steve, it’s just around the budget number we had for the year. It's just the timing of it.

Because when you order equipment, a lot of it's on long lead time. So, with the cutbacks we made last year, it created a vacuum and it seemed random, fourth quarter and the first quarter of this year, something of a vacuum.

But it will correct itself in the next three quarters. Because we've got some businesses where we've got pretty significant capacity constraints that remains to fill.

So, the areas that's going into the shrink sleeve business and around the world is in strand CCL Design, Checkpoint I mean, it's broad based across the company, really, but I think the CapEx third vacuum is really driven by what happened in 2020.

Okay, that makes sense. And then maybe just turning to the Avery business, you’ve reminded us that Avery had a strong start to last year before getting impacted heavily by the pandemic, and then you have a positive outlook for the rest of the year given I guess, you're partially driven by easy comps.

Can you talk a little bit about like what made you see the Avery business returning to where it was before? Is that sort of a 2022 timing?

Yeah, well, April sales, I can tell you we're almost doubled last year. So that's one point of information, I can give you.

But we still see challenges in the badge business. So that's really driven by large scale events.

We are beginning to see orders coming in now. But it's dropped off pretty quick and I don't think we'll come back full scale until 2022.

I'm assuming that the world returns to normal in 2022, that remains to be seen whether that happens. So, the two product lines that are really affected are organization products and badges.

So, the label business is in pretty good shape. And those are the two things that need to return so the drivers are returned to offices, and returned to attended events and until those normalized, it's typical for that to get back to where it was in 2019.

But it's been getting better and better, really, every month since June last year. So, each month has been getting it's been improving.

And I'm pretty confident, I'm very confident we'll see the next three quarters of gains and gain for the year of ’21 over 2020 for sure.

Okay, that's great. And then on Innovia.

Obviously, with the resin pricing issues you gave some color on Q2, which was great. Will those price increases filter into the back half of the year as well?

Or is it too soon to tell what happened to --?

Resin price is now dropping in the U.S. now Steve, so resin went up to over $2500 a ton, is now down over $2100.

So, it's actually been dropping in the U.S. because that really affects the storm phenomenon.

So, we're adjusting prices down now in the U.S. to reflect what's going on with the current level of index.

So, that's what we're worried about in Q2. So, we put prices up.

We had low price inventory to help us compensate for that. In Q2, we got the reserves.

Here, we got prices dropping, and high price inventory. So, that's why we're worried about the impact in Q2.

Right. Okay.

Thanks for clarifying that. And then maybe just finally, are there any areas when you're sort of in this recovery, that's a bit spotty globally, but are there any areas that have recovered faster than expected or slower than expected?

Well, the one that's been very strong all the way through, it's been what's going on in tech. So, demand for computers, printers, service, cell phones, headphones, you name it.

I mean, it just seems to be steamrolling or I'm sure that's not helping the chip situation for the guys in automotive. So, we don't see any slowdown there.

I think it's all driven by the chip supply situation, we seem to be impacted by demand. So that's the area of most notable strength we see today.

For CCL Design in the first quarter was up in the mid-teens. That's pretty strong organically.

Pretty strong number given they weren't that badly affected this time last year.

Okay, that's great. Thanks guys.

Thanks very much, operator. Good morning, Geoff.

Good morning, Sean.

Morning Walter.

So, first question is on pricing, but ex-resin pricing. So, obviously, a robust demand in many of your end markets.

If you exclude the changes in your pricing due to resin, would you say that your kind of same store pricing is up and if resin goes down, is there a way to kind of keep that price a little sticky and keep it higher based on higher demand in some of those higher growth segments?

This is a question about only Innovia. Right?

That's right. Yeah.

Yeah. I think the resin story was there I mean, we've indexed our customers, so you can't have your cake and eat it.

So, if you put the price up based on an index, the price comes down on the other side of the curve.

Okay, fair enough, and then pricing outside of Innovia. Would you say that overall,

This is fairly limited impact from inflation in the rest of the business. In Q2, we'll see more of it.

Because in Q1, we had people raising prices, but in there, they haven't really been implemented, really until Q2 unroll. So, we didn't have much inflation in the other parts of CCL, outside of Innovia, and outside of our aluminum can business where we have inflation from masses going on.

So, in the late [ph] labor business, we didn't see much inflation in Q1.

Got it. Okay.

And moving to your core CCL and CCL Secure in particular. I know, Geoff, you've cautioned us about the emergent impact that the cash hoarding has had on that business and that we should bring it back down.

Is that still the case? Or are you seeing high emerging ex-Secure in other areas of CCL?

Well, we've seen some good new business wins and CCL Secure, but we did have those windfalls last year which we know are not going to repeat. So, still very hard to predict how the second half.

We know the first half is going to be okay. Second half is a big mountain to climb.

And till we get closer further, I couldn't really give you any more color on that.

Got it, got it. Last question here.

Again, on the CCL Core division, I remember before the pandemic, you had been experiencing a little bit of weakness in that division and it accumulated in the fourth quarter of 2019, I guess and with some weakness and some forecast pre pandemic that you had were a bit soft. Has the pandemic -- what investors are asking now is what is the risk we go back to a softened environment, even if we go back to normal?

Or has the pandemic completely reshuffled the deck now and anything that existed before pandemic, those trends are ancient history and we're in a new dynamic here? What's the risk, we go back to kind of a weak or environment in your core division as we emerged from the pandemic?

Well, that's the way you say about that. I mean, getting into calling out what may or may not happen.

Right, yeah.

So, I think the world has changed pretty dramatically. And we're going to have to wait and see how things unfold in the [Indiscernible].

Okay, appreciate the time. Thank you.

Hey, good morning. Geoff, just to start when we look at label sales in Q1 and we look at what might be expected in Q2, is there any real reason to think that the overall level of sales in the segment would change [Indiscernible] into Q2 versus Q1?

Well, the unknowns of what happens with the things that are waning, so we know some things are coming back. So, skincare, higher duty sales are improving, travel related sales have improved, sanitizers are a dead duck at the moment.

So, all the customers have got big inventories of finished products. So, the orders are slow to a real trickle anything to do with sanitizers and cleansers.

So that's the thing we're wrestling with, because so many moving parts and pieces, very difficult to predict how things will unfold. But in the month of April, carried on pretty much the trend we saw in Q1.

Okay, so there's typically no real seasonal -- in a normal year, there's really no seasonal variation between Q2 and Q1?

Q1 and Q2 not a big difference. But there's a lot of things going on at the moment.

So, I'll just call those out. We had over-the-counter medicines boom last year, gone.

Sanitizers and cleanses gone. So, now we've got UDK coming back, we've got the on-premise beverage coming back and how that mix will play out is we’ll have to wait and see.

Okay, and then I know it's probably early on this, but any thoughts on how back to school might play out this year? Any thoughts on the inventory levels with your customers?

Well, the retailers are planning to -- planning assuming it's normal. But with some level of caution, because they all got caught last year with inventory.

They didn't, they couldn't sell. We had a very good June last year in back to school.

And then the refurbishment orders which usually come in late July and early August didn't happen. They had some inventory at the end of the cycle when all the mess around school refurbishment unfolded.

So, they're assuming this year back to school will be normal, with some costs in India what happened last year. So, I expect the initial selling will go well, like it did last year.

And then what will actually happen in July and August will depend on what's going on with the pandemic and what's going on with school [Indiscernible]

Okay, and then just maybe a last one on overall, if you can characterize the overall pipeline of customer activity in CCL Secure how's that trending?

Timeline is very good.

Okay, that's it for me.

Yeah. Thank you.

A couple of questions. Maybe just on the resin with Innovia.

It seems like the timing on your ability to pass through price increases and price decreases fairly short. I think on the Q4 call, you had some caution with respect to that.

So, I was wondering if you can comment on the exact timing and also, if you're dealing with higher priced inventory -- higher price resin inventory in Q2 because that really have an impact on the margins.

Well, that's the point I was making. What we don't know yet is the impact that we’ll have so, but as we got price declines going on in the U.S.

at the moment, because resins have dropped, and we've got high price inventory that we bought in the month of March, and still we made in the month of March with resins at a much higher price point and what the impact of that will be, remains to be seen. We had the better coming in Q1, maybe there'll be a drag in Q2.

So, we don't know, we’ll just have to wait and see because it's mix driven. There's lots of other factors that can play it.

So, we'll have to just wait and see how it unfolds. We're just calling out the risk, really.

But it's difficult to quantify.

What's your timing and your ability to pass resin? Seems like it's quite short.

Can you comment on that?

Well, yes. Remember, the spike is very big.

So, the resin hike in the first quarter is the highest recorded in history.

Okay. And then just on badges business with Avery.

Is that really improving much in there summer turned off?

We’re seeing some improvement in the month of March and April, we've seen some slow signs of some events are now being planned, some social events. But it's if I compared it to, if you went back in 2019, and you call that a 100, we've moved from 10 to 15.

We haven't moved from 10 or 15 to 50. So, it's improved, but improved slowly.

And I think we've got baseball stadiums full, sports stadiums full, Vegas conventions back where they were, it's hard to see why event budgets will be half the demand we had in 2019.

Yeah. Okay, thank you.

But it’s little over $100 million of Avery’s business so it’s part of small, sort of small number.

Yeah. Okay, thanks so much.

Good morning. I have a question on Avery then.

If the badges haven't rebounded, that's not just yet, what is the source of the very positive expectations for the remainder of the year in Avery?

Well, everything else is doing well then. So, badges – the badges and binders and dividers, those are three product lines that had difficulty during the pandemic.

And we're seeing some improvements in badges – in binders and indexes badges is still difficult. With the labels, the call label business is still doing pretty well.

And internationally, for the international business which focuses almost exclusively on labels, as we've seen that return to 2019 levels. So, because they don't have anywhere near of that portion of those products in their mix, because they're almost entirely labels driven.

Okay, okay. Great.

Thank you. And then my second question, just with regards to the CCL Core segment.

Fairly strong operating margin jump, and I'm assuming part of that is CCL Secure, but you're mentioning healthcare specialty, food beverage, and CCL Design…

No, do not jumble. It was not really CCL Secure driven.

It was more driven by the three businesses that really performed were healthcare and specialty food and beverage and CCL Design. They were the three main drivers.

That answers my question. Okay, thank you.

Thanks for taking my follow up Geoff and Sean. Forgive me if I missed this, did you quantify the echo float investment and as obviously sizable enough to have called that out in the slide?

So, I just figured I'd ask.

$35 million.

And that will be over what period Geoff?

Most of the money will be spend in the second half of this year.

Got it. Okay.

Depends on where we’ll get rest but the line of share of it we’ll get into the second half of the year.

And that'll flow through the segment results?

Correct. So the bigger impact more than capital is just a startup cost.

So, when you startup and you spend the line, results in some level of startup costs. So, it's more about that in the capital room.

Okay. And the startup costs will be in the range of?

Can you give us a –

We don't know yet. We're going to give you some more color on that.

But we really -- we see when it's going to be because you got to build the line first, we don't know when the line is going to be finished. And so, when we get near the time and need to be the back end of this year, early bottlenecks will give you some color on that.

Perfect. Okay, one more cap allocation Geoff.

So you raised the dividend by 17% in March. Your leverage is down to almost 1.1 times.

I mean, you mentioned big M&A is probably unlikely in the foreseeable future, just given where prices are and the difficulties and doing due diligence, et cetera. Are you considering anything else?

Are you okay with letting leverage go sub one times and just letting the chips fall where they may?

Well, we don't like leverage below one time.

Right.

For obvious reasons. And so, we'll be having some debates about with our Board over the next quarter or two about what we're going to do.

So, we haven't, I don't want to give the impression with throwing the towel on acquisitions, because we're not. It's still the number one priority for where we want to invest that excess free cash flow.

And you know we've always been a strong dividend player in buying back stock, because we haven't done that for some years yet. But as Sean mentioned earlier on in the call, we're definitely going to pay down the rest of our variables debt this year, in the absence of a large-scale deal.

So, its something's on the agenda as we speak.

Yeah, no understood Geoff. And last one on sustainability.

Are you hearing anything new or different from your customers in terms of substrate preferences, recycled resin availability, pricing, any change in tone whatsoever from your customers, given the targets they've put out? And yeah,

The exterior on the subject is probably the best way to characterize it, not necessarily logical. So, the preferences for substrates today are paper and metal, which of course have the highest carbon footprint substrates, packaging industry uses.

And the lowest the lowest carbon footprint substrate, packaging uses plastic is out of public, consumer perception is the devil incarnate. So, that's the world we're all existing in and our customers and the producing side.

And I think it will take a few years to the reality to unfold. And I do think plastic recycling will be one of the solutions to the problem.

And we're sort of doing a lot of work in that arena. But its -- sustainability is a topic usually among everyone in the consumer products industry today, driven by how the public perceives, what the problem is?

But it's a moving target, so I think you'd have asked this question second half of last year, before the Netflix movie about what's happening in the oceans came out. Everyone said plastics is the problem.

Now everybody says fishing is a problem. So, it's a toss in public purview.

And it's so sensitive. And sometimes that sort of gets in the way of the reality of the science, of the subject.

And we're working our way through that along with everybody else.

And does it seem like your customers are making long term decisions based on current sentiment? And as you said, for public perceptions can and do change pretty quickly.

Yeah.

So how are they dealing with that issue?

They're under pressure. Everyone is in the consumer products industry is under pressure.

So, they're trying to come up with solutions that make sense. Some of the solutions, what appears to make sense, it may actually not do.

But that’s the perception of being better. That's probably a good thing right now, if you're a CPG company, solving the issues of the world today in the longer term there's a lot of work still to be done.

And that's the more serious subject which we have to address, I think a lot more holistically that we're doing right now. So where we along with all of them just doing our best to muddle our way through.

No, understood Geoff. Thanks so much and safe travels.

Thank you.

Well, thank you operator and thank you for everybody attending the call and we look forward to talking to you next quarter.