CCL Industries Inc.

Morning everybody. Thank you for joining our call, crazy times.

I'd like to just comment a little bit about the situation unfolding in the Ukraine and specifically about our company in Russia where we have 428 people, five factories in the joint venture with $70 million in sales. And I'd just like to say on the call on behalf of all those people we know perfectly well that none of them had anything to do with the situation that's unfolded in the Ukraine, and they have our continuing support.

With that, I'd like to hand the call over to Sean, who will take you through the numbers.

Thank you, Geoff. I'd like to turn everyone's attention to Page 2 of the presentation.

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 2021 annual MD&A which was filed last night.

It's on our website or you can find it on sedar.com. Moving to the next slide, Summary of Results.

For the fourth quarter of 2021, sales increased 10.2%, with organic growth of 12.8%, acquisition-related growth of 1.8%, partially offset by 4.4% negative impact from foreign currency translation resulting in sales of $1.49 billion compared to $1.35 billion in the fourth quarter of 2020. Operating income was $208.8 million for the 2021 fourth quarter, compared to $213.3 million for the fourth quarter of 2020, a 2.5% increase, excluding the impact of foreign currency translation.

Jeff will expand on the segmented operating results of our CCL, Avery, Checkpoint, and Innovia segments. Corporate expenses were up in the quarter, principally due to higher expense for long-term variable compensation versus the prior year quarter.

Consolidated EBITDA for the 2021 fourth quarter, excluding the impact of foreign currency translation, increased 2% compared to the same period in 2020. Net finance expense was $13.9 million for the fourth quarter of 2021, compared to $15.8 million for the 2020 fourth quarter.

The decrease in net finance costs is due to a lower average debt outstanding for the comparative quarterly periods. The overall effective tax rate was 20.1% for the 2021 fourth quarter, up from 19% effective tax rate recorded in the fourth quarter of 2020.

The comparative effective tax rates for the fourth quarter of 2021 and 2020 are lower than the annual effective rates due to reduction in valuation allowance based on the company's ability to utilize previously unrecognized deferred tax assets. The effective tax rate may change in future periods depending on the proportion of taxable income earned in different tax jurisdictions with different rates.

Net earnings for the 2021 fourth quarter was a $145.1 million, largely in line with prior year comparative quarter. But up 4.2% excluding foreign currency translation.

For the 12-month period, sales increased 13.8%, operating income increased 12.8%, and net earnings increased 18.1%, all excluding foreign currency translation for the 12-month periods. 2021 included the results from 18 acquisitions completed since January 1, 2020, delivering acquisition-related sales growth for the period of 2%, organic sales growth of 11.8%, and foreign currency translation headwind of 4.4% to sales.

Moving to the next slide, earnings per share. Basic earnings per Class B share were $0.80 for the fourth quarter of 2021 compared to $0.81 for the fourth quarter of 2020.

Adjusted basic earnings per Class B share were $0.81 for the 2021 fourth quarter, compared to adjusted basic earnings per Class B share of $0.84 for the fourth quarter of 2020. The change in adjusted basic EPS to $0.81 is primarily attributable to $0.04 negative FX impact.

Offset was an increase in operating income of $0.02 with changes in corporate expenses, taxes, and interest mending to $0.01 reduction. For the 2021, 12-month period.

The $0.29 increase in adjusted basic earnings per Class B share was largely due to $0.44 increase in our operating income, $0.05 increase due to taxes, a lower interest expense of $0.02 offset by $0.15 negative foreign currency translation, and $0.07 increase in corporate expenses. This resulted in adjusted basic earnings per share of $3.37 for the 2021 year compared to $3.08 for the 2020 year.

Moving to the next slide, free cash flow from operations. For the fourth quarter of 2021, free cash flow from operations was $197.2 million compared to $255.2 million for the 2020 fourth quarter.

An increase in working capital and net capital expenditures, reduced free cash flow from operations and cash provided by operating activities for the fourth quarter of 2021 compared to the fourth quarter of 2020. For the 12 months ended December 31st 2021, free cash flow from operations decreased $84.5 million compared to the 12 months ended December 31, 2020.

The comparative decline is attributable to an increase in net capital expenditures, and higher cash taxes paid under on higher earnings. Next slide.

Our cash and debt summary. Net debt as at December 31, 2021 was $1.25 billion, a decrease of approximately a $141.7 million compared to December 31, 2020.

The decrease is principally a result of the debt repayments during the year, partially offset by a decrease in cash on hand to December 31st, 2021 compared to December 31st, 2020. The company's balance sheet closed the quarter in a strong position.

Our balance sheet leverage ratio was approximately 1.06 times declining from 1.24 times at the end of December 31, 2020. Liquidity was robust with $602.1 million of cash on hand and almost $1.2 billion of available undrawn credit capacity on the company's revolving credit facility.

The company expects to repay any portion of current debt with its free cash on hand. The company's overall average finance rate was largely unchanged at approximately 2.4% at December 31, 2021, compared to 2.3% at December 31, 2020.

The company -- the company's balance sheet continues to be well-positioned to get through the 2022 year. Geoff, over to you.

Thank you, Sean. And good morning again, everybody.

Then on Slide 7, highlights the capital spending for the year, $307 million, net of disposals, up quite a bit on the last year, which we curtailed in the middle of the crisis around COVID. We're planning to spend $380 million in the year of 2022, some of that catch-up for the COVID era.

Moving forward to Slide 8, highlights of the CCL segment. Regional organic sales growth.

North America are up low single-digit, Europe up mid-single-digit, Latin America, and Asia Pacific up double-digit. The sales growth was 7.2% excluding foreign exchange, we're pretty happy about that.

Operating income, however, was impacted by significant raw materials, energy, and freight inflation, especially in our food and beverage business, that exceeded the price increases that we were able to pass through in the fourth quarter. The chip supply situation and know you will read about what's impacting the automotive industry, a big impact on CCL Design, particularly in the second half of last year, in the fourth quarter in particular.

Moving forward to Slide 9 and our joint ventures very good year. Last year, strong results in both the Middle East and Russia, so as I mentioned, the interest of the call we do have a joint venture in Russia, sales of $70 million, share of the earnings last year amounted to about $3 million after-tax.

Slide 10, highlights for Avery, excellent quarter. Strong recovery continued in all regions and all products.

The one area that's still lagging is our event badge business that remains below normal. It's improved in the United States around the opening of sports events and entertainment.

That's still lagging considerably in Europe. And business meetings and conference’s role so still lagging in globally actually.

Raw material availability, inflation, and elevated freight cost in particular from China for components we source from the held back profitability, even though it was exceptionally strong in the quarter. Moving on to slide 11 checkpoints, another strong calls refer to our retail label business here.

Our merchandise availability business grew organically in all regions that our profits were impacted by normalized expenses. We'd had some benefits last year, particularly in China, around Social Security rebates and in particular, significant freight and component inflation from China, where we source a lot of our parts.

Apparel labeling business had its best ever calls were under our ownership, results far exceeded expectations, over 30% organic growth in this part of the company driven by our RFID. Very pleased to hear about that, and a very good start of the Uniter acquisition, which augmented our results.

We did benefit from some FX benefits in Turkey on the decline of the Turkish [Indiscernible] as we basically operate in that country in euros. Getting out to Slide 12 highlights for Innovia, very strong sales gains, but largely raising cost pass through volume was up any modestly.

There's real stories in the call to significant energy, particularly energy and freight inflation in Europe, which impacted our profitability. Lower resin prices in the U.S.

was also part of the story. Resins dropped in the U.S.

and so we had higher inventory of high cost resin, which we had to eat on the [Indiscernible] so those two things combined, but the energy is a big story in Europe for the quarter so the numbers you can see here. However, commentary on page 13, so for the first half of next year will be a pulse through period of a number of inflation drivers, and we also expect continuing supply or variability issues in a number of our businesses.

We are hopeful that company release as the year unfolds. Regardless, Avery should continue to improve, augmented by acquisitions.

Checkpoint business needs to execute price increases in the MAS business to recover inflation. But we expect with strength we saw in the ALS business in the fourth quarter to continue on our RFID growth.

The CCL Design chip shortage issues continue, especially in automotive, but acquisitions in that part are also a significant offset. In the CCL segment, we expect the HPC, Food and Beverage, and Healthcare and Specialty units all to have to deal with significant inflation in the first quarter and some extent in the second quarter, while we pass through the rising cost of tape and chemicals, films, energy, insurance, and just about everything we have on our P&L [Indiscernible].

Trying that demand is difficult to predict at CCL Secure resin markets that declining in the U.S. so Innovia must navigate that and energy and freight inflation, we're seeing in Europe and managed through the startup line of the EcoFloat investment in Poland.

And with that Operator, we'd like to open up the call for questions.

KeyBanc. Good morning, everyone.

Geoff and Sean hope you're well.

Morning, Adam. How are you?

I am well, thank you, Geoff. And I hope the same goes to you.

Sean, can you help me with FX? Geoff mentioned in the release that at current exchange rates, FX translation would remain a drag this year, can you help us, order of magnitude 1Q, full-year, anything you can share with us?

Particularly, to the drag that you had in 4Q.

It won't be as significant as the 4Q drag. It likely could be as half as much as the 4Q drag, but it's still going to be a headwind.

And I think reminder Adam given the situation in Russia, the foreign exchange markets are likely to be very volatile so we really don't know the bottom line.

Now, I understand you. And just one on the fourth quarter.

Can -- Geoff, can you talk about the 6% organic growth in CCL. How much was price versus volume.

And then compare that to what you've seen thus far in the first quarter, any changes in demand trends thus far across your businesses.

Well, it's very difficult to measure price impact in the label business because we have millions of transactions of flavors of all shapes and sizes, so it's difficult to split price. No organic growth.

I can't really comment on that, just tell you that's the number. But we know there is some pricing that could we did rise prices in key fall because it'll have to be raised significantly again in the coming quarter.

But right now that demand patents is reasonably strong. How much of it's being caused by, how much of it is real end-user demand, consumer demand, how much of it is people rebuilding inventory and concerned about supply chain is less clear.

But certainly our older books are reasonably following the moment.

Perfect Geoff. And you mentioned in the release that you're experiencing supply chain disruptions and inflationary issues, the likes of which you rarely seen in your history.

Can you try to rank them in order of importance to you at the moment, including the ongoing strikes at UPM's pulp and paper mills in Finland that one of your suppliers referenced on its call?

Yes. Well, we're certainly concerned about that.

The good thing is it's a strike rather than a factory burning down. So things begin and things have a middle and things have an end.

So we've seen that strike will at some point end. But there are a major supplier to the pressure-sensitive materials industry.

So that's a big concern to us and everybody in their industry. There's a lot of public commentary about it among other found it can readily add to what's already being said, so significant concern for our industry.

But like I say, strikes have a beginning and middle than an end. And all the indications we get is we're heading towards the end rather than the beginning, and we hopefully that'll be the case.

We'll some good news hopefully during the month of March. But I would say just on the supply availabilities as much a concern in our industry as inflation is, I would rank the two of them pretty equally.

And it's not just released line from UPM's mills. I mean, we're just finally getting what we need on time on the days we need it to be more challenging than any of us can ever remember.

But on top of that, we're also dealing with inflation, which I think most companies in the manufacturing industry are experiencing, mid-teens inflation and that certainly applies to us, in all the things that we buy, some significantly in excess of that, some less, but probably mid-teens is a fair comment on the average. So it's pretty significant, and I certainly haven't seen anything like it since the 1970s.

I appreciate that, Geoff. And just one last one for me.

It seems clear based on your commentary that your earnings growth will be skewed to the second half of the year. Can you help me at all with what you're thinking in terms of the -- how you're thinking about earnings growth throughout the year?

Are you expecting any in the first half? Are you expecting -- any sense you can give about?

We don't give guidance on our earnings, Adam, so I'm not going to comment on that. But certainly managing in the short term at the moment.

So the short-term is making sure we've got raw materials that we need to supply people and given some commentary on the areas that we think where we might see some growth. Beyond that, I couldn't really comment.

But we expect the first quarter to be like the fourth quarter. I think matching last year will be challenging depending on how the price increases pan out and how volume pans out, but it's -- we are in a very volatile situation at the moment and I couldn't really comment more than that really.

Thanks so much, Geoff.

No problem.

Yeah. RBC Capital Markets.

Good morning, everyone.

Hello.

I would like my first question to focus on the concept of down ordering, is there any risk from your customer base and the conversations you are having, whether there will be a movement down in terms of lower margin products, lower demand for premiumization. Any concerns among your existing base, customer base based on the coverage?

Good, good.

Any of that is cool.

Okay. Fantastic.

On the geopolitical, Geoff, you commented $3 million in earnings in Russia. Is that how we should -- when I get inevitably get the question around that, both in terms of your production and your sales in the region, is that how we should frame the impact?

So we have a joint venture that covers the Russian territories, $70 million in sales which we don't consolidate. The only thing we consolidate is our share of earnings which were a little over $3 million last year.

$3 million. Got it.

Okay and then M&A, when you look at your pipeline right now compared to a year ago, what would you characterize it as? How is it different from where it was a year ago?

Is pricing -- are price expectations still the same, higher or lower? Is there more sellers out there now lower or higher?

And just the overall landscape of what the pipeline might look like as compared to what it looked like a year ago.

I want to say a lot of change Walter

Okay.

Still very much focused on bulk-on transactions. We were pretty active last year.

So we're concentrating also making sure those are properly integrated and run smoothly. But I wouldn't say the environment has changed much so far about the impact with situation in Ukraine, we'll have them equity markets and valuations is too early to say.

Okay. And back on raw material supply.

Compared to a lot of your competitors, you've fared pretty well, even Avery, where you highlighted that, it was impacted, but it just means a good result would've just been even better. Is that just a function of where you're set up in your access into different areas for raw materials, or is it prescient pre -buying that you did that may be running out now, and we might need to look with a little bit more concerned around raw material supply?

Well, we're in many segments of the global economy. So we diversify, I think that's the first comment I think, so that helps.

So we've got businesses that are in recovery mode from the COVID and doing exceptionally well and we've got businesses that are losing their COVID tailwind in the combination of those two things. So inflation in FX businesses that are going down after a COVID tailwind more than businesses that are recovering after the COVID tailwind, probably it's reasons.

But we certainly not doing a lot of pre -buying, so most of it is execution of prices. I think the thing that's called us a little bit in the back end of last year was the energy situation, particularly in Europe, which has just escalated at levels I've never seen before but -- so that's the thing we were most concerned about that we saw in the fourth quarter that will be addressing in Q1 with the energy surcharges to most of our customers.

Okay. Fantastic.

Really appreciate the time, Geoff.

No problem.

Thanks. Good morning, guys.

Stephen MacLeod from BMO. Just a couple of questions here, you called out RFID, which I know has been a driver of sales in the check point business not just this quarter, but for the last several quarters.

But sales were up more than 30%. I'm just wondering if you can give an update on sort of the size of that business within the Checkpoint segment.

Well, the apparel label business overall is over $200 million. So I can tell you that and a lot of the growth is coming in that with RFID driven.

Okay. Great.

Thank you. And then just really turning to the CCL segment, you highlight sort of first-half needing to pass-through inflation drivers, so I guess would we expect to see potential margin growth in CCL pushed into Q2, potentially Q3?

Yeah. We've got some catch-up to do at CCL.

We got price increases coming, thick and far. So the problem at the moment is you have a price increase in October of 8% then you pass through and then you got another one coming in January as the same amount.

So that's the kind of environment we're wrestling with. It's changing literally month to month.

So we've got some catch-up to do in Q1 and that energy situation at Innovia, which I've talked about a couple of times, just to give you a frame of reference on that in dollar terms. If we didn't make any price adjustments to Innovia for the cost advantage, the impact would be $50 million, that's a big number.

And that's $50 million on --

15, 1-5

On EBITDA on operating income.

And even if we didn't have anything to recover that [Indiscernible], the negative impact would be $15 million just in energy.

Right. I see.

Well, okay. Yeah.

Big number absolutely. Just maybe sticking on the Innovia business, you talked a lot about the top line growth being largely price.

Can you can you give a breakdown as to how much was price and how much was volume?

It was largely price.

Okay, great. And then just finally --

In terms we grew a little bit in the U.S., the Treya fan operations in Mexico, they're the ones that grew last year and also grew in the fourth quarter. That's where the volume is coming from.

Okay. Great.

Thank you. And then on the Avery business, the event badge business is continuing to recover but still below pre -pandemic levels.

Can you just give any color on how far down you are, like how much more ground you need to make up to get back to pre - COVID on the badge business? Obviously, Omicron has impacted.

About a $100 million pro forma and it declined 70%-- about 70% during the COVID year and we're back -- it's back to about half the level at was the last year. But the month-to-month gains are much better than that.

So we expect this year to be still below where we were in 2019, but a lot closer than we were for 2021 where we were about 5,000. I don't know what the exact number would be, maybe will be $20 million below where we were in 2019.

I think the thing that needs to change as the business convention, so sports and entertainment will so be making quite a comeback in the America less so in Europe, but business conventions, which was another sort of ID badges, they need to return to some sort of normality before we see that business bounce back to normal levels. But it's -- but in every month it's getting better.

Right. Okay.

And it's a high margin business, so.

Okay. That's great.

Okay. Well, thanks, Geoff.

Thanks, Sean, appreciate it.

No problem.

Scotia Bank. Hi, good morning, Geoff.

Good morning, Sean.

Good morning, Mark.

Geoff, the energy equation you're dealing with the Innovia in Europe, why would not be impacting the rest of your businesses in -- through CCL segment --

[Indiscernible] of energy we use in when you extrude sale, that's an energy intensive process. So we have we have a Orion Energy gas turbine plant at the operational makes around energy and we buy some from the grid.

So energy is a big -- a big factor in the extrusion of the films so -- much more so than it would be to running a label plant or a checkpoint plant, or an Avery plant.

Okay. Yeah.

That makes -- that makes sense. Got it.

And the $15 million number you quoted, Geoff, that was Q4 or that's an annualized number?

Annualized.

Okay. I mean, you just sorry, on the Russia Ukraine situation.

Appreciate the numbers that you helped us with the facilities you have in Russia, would that be a local business but they'll still be operating?

Oh no. It's like with major -- I mean, well known that some of the major consumer package goods customers have significant operations in Russia.

The largest consumer products company in Russia is Pepsi Co. I think that well over $5 billion in Russia.

For P&G, L'Oreal, Unilever, the HPC and food and beverage customers, Carlsberg, all of the huge multi-billion-dollar operations in Russia and that goes around major customers there.

Okay. I guess when you think about the broader region, Ukraine, the Baltics, how far west do you want to go.

But -- I mean, do you guys have significant exposure outside of Russia and that part of the world?

Only in Poland.

Only in Poland? Okay.

Okay. Got it.

Yeah. We've got a couple of our operations in Poland.

Okay. Hence -- sorry.

On the capex budget for the year, the three aided that's a bigger number than we've seen in recent years. I'm just curious that sort of stepping up growth or some of the inflationary as well.

Some inflation in there. So capital equipment prices have kind of like the secondhand come markets, you know, it's no difference, so inflation is just everywhere.

So there's probably -- if we went back to 2019 prices that non-low probably would be $330 million rather than $380. But it's the cost of putting up a building, it's the cost of buying equipment, chip bolts, you name it steel and aluminum, over things that you have in capital -- by the nature of capital equipment.

The inflation there is running as actually frankly higher than some other areas of the economy

And I guess, just broadly on inflation again, obviously you guys are managing it quite well, you're raising prices. But I mean, when you think about your ability to recover and pass-through, is there any areas or parts of the -- or where you don't think you can recover?

I'm just curious, like how big of an impact would this have on margin sort of the things actually calm down?

Well, we're in the -- I think every company on the planet is in pass-through mode. I think that applies to our suppliers, it applies to our customers, it applies to retailers.

So I think every company on the planet in pass-through mode. And we're no exception.

Got it. Maybe just one last one, if I could.

Just curious about the buyback, balance sheet's great shape, generating lots of cash. I can't remember the last time stocks traded in the low nines.

I'm just curious your thoughts there.

Nothing to add other than know what you've seen in the press release on the non-local since you have it.

Thanks [Indiscernible].

Okay. No problem.

Raymond James. Hey, good morning.

Geoff Maybe just to start on Checkpoint 2, how characterize where your market share is? most deferred the closest in Checkpoint?

Well in the MAS business, we're the global leader in RF technology, so in merchandise availability section, I would characterize us as a global leader. We're 1 of the 3 main plant in the world in that business and where it's a global enterprise in the apparel labeling business got the exact number here now with $240 million sales last year in 2021 in apparel labeling and we're one of market leader there.

There's about $1.5 billion in revenue and there are maybe a pack of 4 or 5 companies about our size chasing them and we're one of them. Our business in apparel labeling is somewhat focused on you.

Okay. And at recent M and a transaction, the auto parts for the call.

Can you talk about your interest in that segment in particular with what did you find attractive about that acquisition in particular?

Well, we've been building our CCL Design business in the automotive space for some time. And so any technologies which are focused on small added value parts that involve films technology or extrusion or surface decoration or coating or technical screen-printing or clean room -- clean room activities is of interest to us.

And probably what really the big driver was its big footprint in China, got a very nice large operations in China. And our business in China in automotive is -- before that, actually, the acquisition was rather small, fairly -- fairly $5 million.

So the footprint in China with its principal attractions, as well as the product set fits very neatly into the business as we already own.

And are there resin pass - throughs associated with that business that were already in place?

Right, it is a very tiny portion of -- the raw materials are a tiny portion of the component prices in all of those business.

Okay. And just in terms of, maybe for Sean can you give us an indication on working capital for the coming year?

Well, it's a bit of a challenge to predict. It's something we work at every day.

So I think supply chain issues and different things like that that are going on in the current environment make it even more challenging to predict. So we're managing for improvement, but we have to deal with the current environment.

Okay. And then maybe start --

I think a big factor, Michael, you have to bear in mind is when you have a big change in inflation, it impacts the inventory pretty quickly when you have a double-digit price increases. So that's a big factor.

So once you get past the anniversaries of those inflation, you tend to be comparing like-to-like. But while we're all going through the transition, will be some build that for sure.

Got it. And then any thoughts on the tax rate in 2022?

Sean?

Sure. No, we would be expecting an annual rate around 25%.

25%. Okay.

Thanks a lot. That's it for me.

TD Securities. Good morning, gentlemen.

Morning Daryl.

First question is just around the consumer packaged goods companies. This past quarter, we saw most of the growth coming out of the volume -- sorry, out of price versus volume.

I'm just curious if you have any commentary about the volume trends there. And if we're looking more like 2019 period where volumes were petering out or it's just far too early to tell given all the disruption.

Yes, I think we've followed the results of our customers, same as you do, and they said the more, the volume uplift was not great, there were some companies that did well, so it wasn't universally flat, so depending on the customer was you could do well, or not so well, but I think all of those consumer packaged goods companies are very worried about supply availability. So I'm sure there's some precautions being taken in inventory of raw materials that in a normal well they probably wouldn't be doing.

Okay. And then just in terms of Eco-Float, is there anything specific in terms of margin concerns there alongside the ramp up or specific downtime that we should be factoring intermodeling in to be aware of or just the general risks starting up a major new profit?

Well, it's probably the last for those two things. Most of the sales will be internal to CCL, so we'll be making our own film versus sourcing it on the outside.

We haven't got to go out to the market to look for the volume and looking for it internally rather than externally certainly to begin with. And the story is more about sustainability.

There's a lot of interest in the sale. So we're making it on a piece of very old equipment in Mexico at the moment and it's sold out.

And the -- so the signs are quite encouraging. But when you start up an extrusion line that far, there will be some dollar cost to do that, it's not free of charge.

But we don't expect the line to start up until sometime in the second quarter, maybe -- maybe towards the end of Q2.

Okay. That's great.

That's all from me. Thanks, gentlemen.

Okay. Thank you.

Cormark Securities. Just to start off on Avery.

So you talked a little bit about the badges business, how it's recovering. I was surprised at the level of organic growth in the quarter, I was wondering if you can give a little more color on the other components, like direct-to-consumer, sheet protectors, indexes, binders.

Just how are those various segments performed in the quarter and what was driving the results?

Well, it was just freight prior year was still somewhat COVID impacted, so I think it's really around that David knows anything else but it was across the board so other than badges everything else was up on the same period last year. But four quarters, you can often be impacted by people rebate chasing, so there may have been some activity around that so people trying to build inventory to get rebate -- can up tier on rebates and maybe at a bit of that, but generally -- in general terms, Avery performed pretty well all the way through 2021 and we saw that continuing in Q4.

Okay. Then just moving onto Checkpoint Obviously, greater than 30% growth in ALS is pretty strong.

Is a lot of that just the retail reopening that's driving that or is it just the gaining more and more clients because they want the RFID technology?

I think it's RFID is the driver there. But even in the base business, we're seeing quite strong growth.

So how much of that is the apparel supply chain recovering in COVID. So retail stores reopening in the across Europe and the United States, why they weren't in 2020, so how much of it is supply chain rebuilding those is real end use developed, hard to say that currently the market is strong and continues to be strong so far this year.

And then can you provide any signing commentary on MAS like, how -- what's the growth-wise at that business and Checkpoint?

I think we already given some commentary on that and the slides but I'm not really want to add to, but I think the biggest story in MIS was impacted by inflation. So freight, we make all those products in China or the vast majority of that we made in China.

And freight inflation from there was a huge factor in the fourth quarter impacted margins and also component to sourcing in China itself for electronic components and chips was also affected.

Okay. All right.

Thank you.

No problem.

PI Financial. Hi, Jeff.

Hi, Sean. Two quick questions.

Just on the Checkpoint, seems like this quarter the theme was a lot about growth and obviously the contribution of the acquisition but if I recall in the third quarter that you were mentioning also about the need for pricing to adjust. Has that not been an issue at checkpoints or am I mixing it up with something else?

I think, you're probably referring to the comment I just made about MIS to the last caller. So freight -- freight inflation from China to distribution hubs scattered around the world in every country.

So we make most of the MIS products in China. They're distributed around the world to distribution centers, largely in-country.

And the freight -- the freight bills are really what was the major source of inflation. And then some to a lesser extent, the component increase in component cost, particularly for gates and antenna.

Okay, thank you. And then I just wanted to ask, is the build-out of the EcoFloat capacity in Poland Is that finished now or?

Not yet. Not yet.

Not yet. And is there anything [Indiscernible]

We expected the line to be ready to start production at some point in Q2, maybe towards the end of Q2.

Thank you. That's it for me.

Thank you, Geoff and Sean. Thanks very much.

Geoff, just back to the supply chain discussion, other than the chip shortage and the paper situation in Europe, are there any regional differences you've experienced in terms of supply chain issues? Some other companies have talked about the U.S.

being a particular problem other's not any regional commentary you can provide?

Well, I would say the release line of problem is North America or slash Europe issue. So there's no issues in Asia numbers I've heard of emanating out of Latin America so through the North America and the Europe issue.

That's what I would say about that. I just want to point out that Russia is the world's largest producer of aluminum, as well as natural gas.

So I don't know what will happen to the price of aluminum and throughout more problems to do with importing from Russia. But that's the other thing coming from comments I make.

Perfect. On resin Geoff, your [Indiscernible], I think is $99 a barrel now.

I know prices have been falling in the U.S. They've been more resilient in Europe.

What is your outlook on resin, just considering what's happening to oil prices?

Well, normally, when oil goes up, resin at some point reacts to us. So it's hard to imagine that in the current environment, resin is going to continue to fall.

Might have done otherwise, but it did spike pretty significantly after the Texas storm in the U.S. So that was somewhat hopefully false interruption to the supply-demand curve.

So I think once things calmed down in the U.S. and things went to normal, we saw resin prices drop.

We haven't seen much of a drop anywhere in Europe. Little bit here and there, but not much.

So we don't know any more than anybody else though, because if we all knew the answer to that, we wouldn't be on this call, we'd be rich.

You wouldn't want to be talking to us, Geoff?

But if you go back to history, if natural gas goes up and if oil goes up, revenue usually at some point follows. So I think you'll just follow on to that.

Yeah. In terms of CCL, historically, the growth range has been anywhere from 1% to 6% depending on the state of the economy.

This year could be particularly unusual because you've rarely, if ever, had the inflation you're going to be dealing with. So you're going to be implementing very significant price increases which will obviously influence that organic growth number.

How would you have us think about where in that range you might expect to fall given the price increases, you're implementing and any impact on volume that could come from that?

Well, that's the -- the second part of your question, the unanswered question, is if volume were to stay as it were, we were going to implement that sale. Global average of a 6% price increase.

So you have to be obviously appear in our organic growth numbers but the bigger question is, how much of the demand we're currently seeing is real versus people building inventory to because of concerns about supply. And while will happen when that's over.

And that's unanswered, we just don't know the answer to that any more than anybody else does. But history would suggest that the after a period of shock slightly as the pandemic followed by this break of war in Europe.

History would suggest that some point there will be a correction to the current supply shock and whether that will happen this year or next year remains to be seen.

Are you getting any indications from your customers either way, Geoff, or is it just that there's just no way to know?

No, not really. If you look at the results of some of the home and personal care customers, which we're very close to, some of those companies have done exceptionally well, like L'Oreal, others have done not so well.

So it's hard to really say, really and it depends also which products you're making for those customers. It's not just who the customer is, but what you're making for them.

In the beer industry, some of the big beer producers have commented on the declines in volume in Asia during the pandemic crisis. But if you make the labels for the branded goods that have premiums attached to them, they've been rising.

It just depends on not who your customer is, but how you sit with our customer. But I would expect it's hard to imagine that there will not be some correction to the current demand curve in the consumer packaged goods business at some point once the shocks to the system.

So they come back to the low thought to imagine.

Yeah. Just one last one for me, Geoff, on your leverage ratio.

Obviously, the balance sheet is in -- remains in terrific shape. But what -- just given the outbreak of war, everything else that's going on, are you thinking -- has that changed your thinking in any way, shape, or form, about where you want to be levered over the next year plus?

Well, we've always taken a conservative view of leverage. We never levered up particularly highly.

Our railway tracks have always been not to be -- to take any risk our investment grade rating. So I will probably would imply a 3.5 to 4 at the top end.

We never been out that high. And once leveraged things below one, we begin to think about capital return to shareholders.

And we're at 106 today, but we've also had a number of transactions done and maybe some more to come. And we've got a pretty volatile situation out in the world.

So we'll have to ponder that and see how things unfold in the next couple of quarters.

Yes. Thanks so much, Geoff.

No problem.

Okay. Well, thank you very much, everybody for joining the call and sorry, it's been such difficult times for the people of the world and particularly in Europe and hopefully when we talk again in August, I think in May, things will be a lot calmer.

And there has to be also good news to report. So thank you for joining the call.