CCL Industries Inc.

Thank you very much, operator and good morning, everybody. Welcome to our first quarter conference call.

Before we start with the numbers, I just wanted to say a few words about the situation in the Ukraine, we are as saddened as everybody in the world is about what's happening there. We're very proud of all the efforts of our employees around the world to donate money and goods and chattels to those supported displaced population there and particularly our employees in Poland, Austria and Germany has organized accommodation for more than a few 100 Ukrainian refugees, we're very proud of their efforts.

And I'd like to acknowledge that on the call here this morning. With that, I'm going to hand the call over to Sean, who is going to take you through the numbers.

Thank you, Geoff. I will turn everyone's attention to Slide 2, 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 risks, please look at our 2021 annual report in the MD&A.

You can also refer to our Q1 report which has some updated risks regarding the conflict in the Ukraine and additional supply chain challenges. Our annual and quarterly reports can be found online at the company's website cclind.com or on sedar.com.

Sorry, moving to the next slide. Our summary of financial results for the first quarter of 2022, sales increased 12.8% with organic growth of 10.8%, acquisition related growth of 4.5% partially offset by 2.5% negative impact from foreign currency translation, resulting in sales of $1.52 billion compared to $1.35 billion in the first quarter of 2021.

Operating income was $228.6 million for the 2022 first quarter, compared to $223.1 million for the first quarter of 2021, a 5.1% increase excluding the impact of foreign currency translation, Geoff will expand on the segmented operating results of our CCL Avery, Checkpoint and Innovia segments momentarily. Corporate expenses are up for the quarter, principally due to higher expense for long-term variable compensation versus the prior-year quarter.

Consolidated EBITDA for the 2022 first quarter, excluding the impact of foreign currency translation, increased 5.3% compared to the same period in 2021. Net finance expense was $14.7 million for the first quarters of 2022 and 2021.

The overall effective tax rate was 24.4% for the 2022 first quarter, compared to an effective rate of 24.2% recorded last year first quarter. The comparative effective tax rates for the first quarters of 2022 was slightly higher due to a higher portion of taxable income being earned in higher tax jurisdictions.

The effective tax rate may change in future periods, depending on the proportion of taxable income that's earned in different tax jurisdictions. Net earnings for the 2022 first quarter were $150.2 million up 4.7% excluding foreign currency translation compared to the first quarter of 2021.

Moving to the next slide, earnings per share. Basic earnings per Class B share were $0.84 for the first quarter of 2022 compared to $0.82 for the first quarter of 2021.

Adjusted basic earnings per Class B shares were $0.85 for the 2022 first quarter, compared to adjusted basic earnings per Class B share of $0.82 for the first quarter of 2021. The change in adjusted basic EPS to $0.85 is primarily attributable to $0.05 advance in operating income, $0.01 from equity contributions from our JVs, partially offset by $0.02 negative currency translation and $0.01 increased corporate costs.

Moving to our next slide. Free cash flow from operations, for the first quarter of 2022, free cash flow from operations was $38.1 million, compared to $87.6 million in the 2021 first quarter, an increase in net capital expenditures of approximately $43 million, reduced free cash flow from operations for the first quarter of 2022 compared to first quarter of 2021.

For the 12 months ended March 31, 2022, free cash flow from operations decreased approximately $237 million compared to the 12 months ended March 31, 2021. The comparative decline is attributable to an increase in networking capital coupled with an increase in net capital spending.

Moving to the next slide, our cash and debt summary. Net debt as of March 31, 2022 was $1.46 billion, an increase of $214 million compared to December 31, 2021.

The increase is principally a result of new borrowings to finance the acquisition of McGavigan in January, and the repurchase of shares under the company's NCIB. As at the end of the first quarter, the company had repurchase in excess of 1.7 million shares for approximately $100 million.

Although the company's net debt increased, the balance sheet close the quarter in a strong position. Our balance sheet leverage ratio was 1.24x increasing from 1.06x at the end of December 2021.

Liquidity was robust, with $616.9 million of cash on hand and $1 billion of available undrawn capacity on the company's revolving credit facility. The company's overall average finance rate was largely unchanged at approximately 2.3% on March 31, 2022, compared to 2.4% at December 31, 2021.

The company's balance sheet continues to be well positioned as we move through fiscal 2022. Geoff, over to you.

Thank you, Sean. Good morning, everybody.

I'm on Slide 7, highlights the capital spending. As Sean just mentioned on the cash flow slide there, capital expenditures were up $43 million quarter-on-quarter.

But we're pretty much in line with Q1 20, before we saw the impact of the slowdown in capital spending in the COVID area, excludes right of use of assets and depreciation under IFRS 16. And we're planning to spend $380 million for the year.

Slide 8, highlights for CCL segment 7.3% organic sales growth, a lot of that price driven North America high single-digit, Europe mid single-digit, Asia Pacific low single-digit, and Latin America are up a very strong 25% where we gain some share. Very strong quarter in the home and personal care business offset tough comps of CCL secure.

We had a very good start to the business last year. So it's really more about all the time and anything going on in the business.

CCL design was slower in automotive than we expected. Electronics was pretty good, but so it's much slower in automotive than expected, for reasons you've read about in the newspapers.

Sales of food and beverage and healthcare and specialty, that our profits were impacted by inflation, and mix in the latter. Slide 9, highlights about JVs.

As everybody knows, by a press release, we've suspended our future -- any future investment in our joint venture in Russia, our partner continues to run their business with the plants we have there. And we had a strong quarter in the Middle East.

Slide 10 highlights Avery. One of the success stories for the quarter strong trajectory continues, especially in North America, where we had a good recovery of inflation and a very good recovery in the growth of name badges, which are almost back to pre-COVID levels.

Mastertag & RFID hotel acquisitions outperformed. Raw materials availability and inflation and elevated component costs from China remains challenging.

And it probably did hold back our sales somewhat in the quarter, but our price pass throughs are very well done. And there's more of that still to come in the second half of the year.

On Slide 11 for Checkpoint. Mix story here, merchandise availability and what we call our MAS business grew in all regions except Europe.

Profits were impacted by Chinese freight and component inflation. Although we implemented some price increases the benefit of that we're not really going to feel to the second half of 2022, but that was more than offset by very strong growth in our Apparel Label business.

40% for the quarter organic, driven by RFID and then augmented on top of that by the Uniter & Tecnoblu acquisition. So ALS really outperformed and MAS underperformed, but the total was above the prior quarter.

The Meto small Meto price margin operation in Germany was impacted by inflation. We've implemented price increases there, which will have impact in the second half of the year.

Slide 12, highlight for Innovia. Sales gains here really all about resin and freight inflation pass through.

Big surprise for the quarter with the energy inflation surge we experienced in Europe a lot of that due to the situation in the Ukraine that impact profitability, we'd have implemented pricing surcharges, which will began to take effect in the beginning of the second quarter. We'll get progressively better as the year moves ahead.

The changes to resin pricing in the Americas also impacted. So we had a drop in resin prices in the latter part of last year, which we have to pass through to customers, but we had resin -- inflated resin prices in the -- in inventory at that time.

So we got a bit of a margin squeeze around that. We've got the reverse impact of that in Q2 as resins have increased again in North America.

Slide 13 some comments about the outlook. Many inflation price pass throughs have been implemented to benefit the core CCL label businesses especially in the second half.

Avery volume should continue to improve, augmented by recent acquisitions. Checkpoint price increases are also underway.

And we expect RFID to continue to grow ALS. For CCL design customer supply chain issues remain, especially in automotive and -- but recent acquisitions and new business wins are an offset.

The biggest concern we have for the upcoming quarter is a situation in China with lockdowns, it's affecting Checkpoint and CCL Design, which have very big operations in the country. Q2 impact, frankly, depends on the duration, how long the government keeps things lock down therefore, so.

So some of our businesses are about in China are about domestic consumption, and some are about production to the world markets and domestic consumption. So we think some of this demand constraint in China will be temporary and will recover.

So the demand for cars is latent and their demands for soft consumer goods probably if you lose that demand, either never seen it again. So that's a pretty mixed story there.

[Indiscernible] difficult and less challenging at CCL secure for Q2 doing significantly for the second half of 2022. And then finally, we'll be starting up the EcoFloat line in Poland.

In this quarter, lots of customer interest there about enabling PET bottle recycling by [indiscernible] and sleeve removal. So we're very excited about that opportunity.

So with that operator, we'd like to open up the call for questions.

Geoff and Sean, good morning.

Good morning, Adam. How are you?

I'm well, thanks. I hope the same goes for you, Geoff.

Good, we are great.

Good, good, good. At China, Geoff, you mentioned that's your biggest concern at 2Q.

Can you give us a little more perspective on the impact in April and if that were to continue, what that might mean for the balance of the quarter?

Well, the problem we've got really, we would say much about April, April was the shorter month this year than it was last year. So April had an extra workday in 2021 versus 2022.

So that probably had more impact than China. But we did see some profits drop in China in the CCL Design and Checkpoints space because our plants, a number of our plants were impacted by shutdown measures.

So a few million dollars of EBIT will be how describing now. Obviously, that was a few million dollars per month, for the quarter because it ended up being a much larger number.

So it depends on how quickly the government allows things to normalize. And it's really a double, a double question is whether your plant is impacted in terms of whether it's open or shut, the more importantly, what's happening with the customers, so I'm sure most of the people on the call and you heard what Tim Cook said about the impact on Apple.

And yesterday in the Wall Street Journal, there was an article about Tesla in China, which I'm sure a lot of people have read. So I think everyone is waiting for the call to be pulled out of the bottom, so things can get back to normal there.

But right now, it's still the difficult country to operate in for sure.

Have you seen any recent changes Geoff for the better or worse along those lines?

But I think there are signs that the government is beginning to let people back to work in the affected areas. But if there's an outbreak in City X or Y, then the authorities come down pretty hard still.

So it's really, it's really about where your factory is located and where your customers factories are located. So things seem to be easing a little bit in Shanghai now.

So that's a good thing. But other cities, it's got worse.

So it's a pretty, it's a mixed story, I would say, and everyone wants it to normalize. I think the important thing, Adam is, I think if you think about it, for things like cars and phones, which we're somewhat focused on in China, we were able to produce that in inventory, we may not sell it, but we could still produce it in the plants that make it, so we will eventually get those sales come what May, whereas domestic consumption in China, so whereas in the consumer business, a lost sale for shampoo in China is really a lost sale for good, a lost sale for a car in April, you may well still get in May and June.

So that's really the difference.

Thank you for clarifying that, Geoff. In terms of demand more broadly, how was it compared to what you expected in the first quarter, what was it like in April and what are you thinking thereafter?

I would say the Q1 results for us was better than we thought we might get, I think a lot of that was due to, we did a better job with the pricing execution. I think that applies to a lot of companies, both our customers, retailers there everybody in the supply chain, I think has done a good job of doing inflation cost pass through.

So that was the positive surprise for the quarter. Demand is still relatively strong in Q1, a bit stronger than we thought not as CCL Secure, but that's just all the timing.

But outside of that relatively strong and at Avery, we saw a big bounce back, as you've seen, so that was a very pleasant surprise.

And three months ago, you said look demand is the million dollar question, because there's all this inflation, everyone's passing on these huge price increases, and we really don't know what the consumer impact is going to be. Do you feel any differently now than you did three months ago?

No, I think it's still the big unanswered question is what will the demand picture look like? Really, in the second half of next year, I think there'll be some noise in Q2, like there was in Q1.

But what's the long-term trend? I don't think anybody has the answer to that.

That's the thing everybody's waiting to see what really happens when some of those inflation noise dies down. And then what the impact is on the consumer or the job market be like, well, the economy is like, what impact will that higher interest rates have on demand, and so on and so forth.

And those supply side returns are normal somewhere else, so I think a lot of the inflation at the moment is really supply side driven. So if that supply side returns to normal, will that have some calming effect on the markets, we don't know the answer there any more than anybody else does.

No, I get that. There is two other, just on that demand question again, was it I would have thought that demand might have been hit more in Europe, just given the inflation is particularly acute there?

Did you not see that, are you not seeing that? What are you seeing in Europe broadly taking?

I would say, I would say Europe, we still saw growth in Europe in Q1 and continued in Q2 so far. But I don't think the rubber has hit the road yet.

So what the impact is on this whole situation in Russia is still open to debate, and we're waiting to see but so far, we haven't seen anything dramatically different from what we saw in Q1.

And just one last question on the NCIB, last year you had up to 8 million shares authorized through 1Q, I think you said you bought back 1.739, can you just talk to us about why not more than that, obviously, your balance sheet remains in very good shape. Were you expecting to buy roughly this number of shares over the past year again, just walk us through that situation, if you don't mind?

Well, we only started buying back stock this past quarter and there are limits to what we're allowed to do by the rules of how much stock we can buy in any one quarter. And how many trading days there are.

So you have to remember in Q1, we didn't release our results until during the blackout period, so most of Q1, so we didn't have very many days where we could buy back stock. So, and there are limits to how much we could buy at any one time.

Sure. We'll talk you through that if you want.

No, I appreciate that. That sounds terrific.

Thanks, Geoff.

No problem.

Thank you very much, operator. Good morning, everyone.

Good morning, Walter.

So maybe we could go back to the demand environment. I think I heard you that, food and beverage healthcare, yes, a lot of price increases as part of the organic growth there but demand saw, but it's the home and personal care where I guess you had the most swings in disruption within the division, right.

I mean, there were a lot of products that were extremely in demand during pandemic and a lot that fell off significantly and perhaps reversing now, do you have any better sense now on what the overall picture is with home and personal care now that we're going into a bit of a new normal here?

Yes, well, I would say it was very strong in Q1 in North America. So by North America, I mean, Mexico in the U.S.

So those markets are so and Brazil also was strong. So throughout the Americas, I would characterize the demand picture as strong and across all the categories we're in those markets.

So aerosols, tubes, and labels. And so things subsided, like sanitizer, obviously, that was a negative.

But the upside is where things that were more cosmetic and travel related, where we got a big bounce back. So some categories, things like that bounce back.

Internationally in Europe and Asia demand was a lot more muted. But the weighting of home and personal care is very much driven towards how we perform in the Americas.

And moving the pass throughs, I think you've done a great job with pass throughs to date and you signaled some more to come. Can you walk us through how a pass through works?

Is it simply you're just waiting until the contract renews and you build in a new pricing structure? And secondly, when that new contract renews?

Is there anything that you're doing differently now, in terms of building in, perhaps some automatic or formulaic pass throughs like we see with fuel and others in other sectors? Is there any opportunity for you in this demand environment to be able to change a little bit the way you construct a contract to allow yourself a better ability to pass through costs?

Well, we have 1000s of contracts, I mean, literally 1000. So and you have to remember, it's across the whole spectrum of our businesses.

So at Avery, we're dealing with retailers. The Checkpoint, we're dealing with retailers.

That CCL design is the automotive Tier 1s and the electronics OEMs. When you go into the consumer label business, and you're going to order P&G's and Unilever's, Loreals [indiscernible] all those kinds of companies in HPC.

So it's a pretty broad picture. And I wouldn't say there's any rules for it, but things are always changing in our business.

So we've got some parts of the company where we're able to just finesse the price increases through. Others, where we have to go and knock on the door and say, this is what's happened in the world and the prices have to go up.

And if you can't get a price increase now, or I don't know when you have to do. So it's probably many of our customers are more focused today on supply availability than they are the price point.

So getting hold of what you need is as important as being able to as well as to what the price point is. So, but I wouldn't say we're changing particularly the dynamics of our contractual arrangements.

And as you've seen, we've considering the degree of inflation we've had, we've done a pretty good job, I think in managing it.

That makes a lot of sense. And last question for me is just on public market volatility and the impact that that might have on private market multiples.

Are you seeing any sense that the volatility we're seeing in the public market is weaving its way into the private sector take out multiples at all or what you said…

Not yet. But I would predict it will come as you know, probably would takes a good old fashioned credit crunch for that to really change.

So private equity firms have difficulty getting their rich finance so that the rates they're getting it out today. And probably -- we're not going to see any contraction in the multiple.

So there's still some pretty fancy take out multiples happening even in Q1. So you saw one in Canada with ITP is pretty nice take out multiple for that company.

And so that's probably indicative of what's going on in the world out there still today. But I -- will it -- will that change over the next year or two, I think quite possibly.

Okay, that's all my questions. Thanks for the time as always.

No problem.

Thank you. Good morning, guys.

Good morning, Stephen.

Good morning. I just -- my first question just wanted to follow-up quickly on China.

I mean you talked about the differing dynamics between domestic manufacturing and export. Wondering if you could just break down your business in China?

And how much of it is domestic and how much of it is export?

Well, I'll comment to the extent I can on that. So pretty much everything we make it for the MAS business in a checkpoint is made in China, not all of it, but the vast majority of it.

So think about the MAS revenues. They're all trying to derive.

So then CCL design, you've got the extent to which the car industry exports, probably it's more domestic focus than it is export focus. So that's the factor.

And electronics is more export focus than it is domestic focus. So I think the demand level there, that's the one probably when I would say if we lose demand in one month, we'll pick it up the next, because we're dealing with a world market for components not the Chinese market.

And then you get into the CCL label business with consumer products, which is entirely domestic focus. Beyond I couldn't break it down for you any more than that, Steve.

Yes, that's really helpful. Thanks, Geoff.

And in terms of your plants, I mean, are your plants that are focused on domestic markets up and running right now? Or are you sort of in hold mode as well?

We had some disruption in April, I mean, I would call it sporadic. So we had some plants show closed for a couple of weeks in some cases.

So we have the source some impact in April from plant closures. I've said the bigger impact was the closure of more of our customers.

So a number of a number of customer factories were closed in the month of April, particularly in the Shanghai region. So that's more of an impact than in our operations to be honest.

Right. Okay.

Thank you. And then just in the CCL segment, you talked about -- you did get price, obviously.

Can you talk about how volume broke down versus price in the CCL segment? Apologize for the fire alarm right now?

[Indiscernible].

Sorry, I didn't hear you?

I think we can do that, Steve.

Okay.

It's too many transactions. We can't measure volume in the CCL space.

Yes. Okay.

I understand. Thank you.

And then just for the full-year, I mean, obviously, I know, a lot of moving parts. But in the past, you've talked about overall demand this year, being up in sort of the 4% to 5% range.

Is that still something that you think is a reasonable expectation?

We would hope so. For the current quarter, we're quite optimistic about till the news about China hit, we are quite optimistic about Q2.

So that's the dampener really, but that aside, we're still -- our plants are still busy, we've still got more orders than we can cope with in parts of the business so. So the demand picture still is quite strong, but the China is a big country, so the China catches a cold the world has it's not just the U.S.

anymore, when the U.S. has a problem of the cold, the rest of the world gets pneumonia.

But with China, they get a cold or we get a cold too. So I think that's just something you have to bear in mind.

Yes, okay. Okay, great.

And then maybe just one last one, just switching gears a little bit, just with Innovia you've had two quarters of massive price pass through. Wondering what you think sort of Q2 would look like in our business, just given some of the raw material movements and other freight inflation -- other inflation?

Yes, well, we won't have the problem of the Americans margin squeeze that I told about where we had the dip in resins at the end of last year, and then it bounce back. So when you get the bounce back, we get the reverse squeeze.

So we're more optimistic about it earlier in the current quarter, and we've implemented a number of energy surcharges in Europe. So but it's still difficult, we've raised prices very extensively.

Most of our customers have passed it on, we know that because we're paying for some of it indirectly ourselves. But there's no question in the Film Extrusion business where you may incur two costs of resin and energy.

It's pretty obvious. There's been a lot of inflation in both of those categories.

Right, okay. Well, thank you, Geoff.

Appreciate the color.

No problem.

Hey, good morning, Geoff. Good morning, Sean.

Good morning, Mark.

Great job in the quarter. If I could follow-up on some of these questions, maybe the Walter's question on price.

If you're not waiting on anything, sort to go -- sort of go after price. Like you're not waiting for contracts for reset or anything like that, right?

Like your…

Well, sometimes we do. If you've get a contract its up in June.

And it's April, the contract term center and renewal dates July 1st, will go on July 1st. So you've got a whole mix of -- we've got 1000s of these contracts.

So for some of them, we do depending on who the customer is, we'll take our moment. And others we implemented immediately.

And so when it's -- when you've got just not -- no contract at all, this just what is the price of product X or product Y, we put the bill the inflation immediately. So it's a very broad picture of different commercial circumstances.

But yes, sometimes we do wait, because there's no point in rubbing salt in the wounds if you don't have to.

Right, I understood. In pricing, could you sort of maybe just help us categorize or help us understand sort of roughly where you're at with pricing?

I mean, are a lot of the actions almost done, is there still quite a bit to do, yes.

Yes, some more to do, because inflation is still going on, it's not like it all happened in one month, and you just have to then pass it through, we had inflation ending in March, so it's a permanent battle, that's the issue really, I think most companies are facing is it's just nonstop, it's just like a wall of water coming down on you. And as soon as you got through the first wave, the second wave coming at you.

So that's the issue. It's really it's still going on.

So there are signs that it is plateauing out but it's been pretty, pretty full on. So, that's really the difficulty Mark.

It's not a one moment in time, the price goes from X to Y. So it's every month, the price of the components changing, and then you have to pass that through.

But then you pass it through, and then it goes up again.

Right, yes, I guess in Innovia, I guess ignoring the margin percentage, like do you think you'd be able to get enough price to get sort of EBIT dollars back again, I know there's a lot of inflation in that business, I was more curious with EBIT dollars, I guess and the percentage.

Not the wait and see, it's just, we just have to wait and see, it's because there's been so much inflation, the market needs to settle down and I think everyone is tired of the mass inflation, so I think things need to settle down a bit to be see where it pans out. But I think the team of Innovia have done an excellent job of passing it through and we know customers want to hear about inflationary price pass throughs.

But let's face it, we know what we're doing, it's not exactly like we're the only company in the world doing it, everybody is. And it is not just in Innovia, it's paper, it's freight, it's ink, it's adhesive, it's varnishes, it's cardboard, it's pallets, it's everything, insurance.

Yes, now for sure, understood. Just two more, Checkpoints does the all-in RFID growth, does that sort of structurally change or improve the margin for Checkpoints?

Yes, we've really improved the ALS business out of all recognition from when we bought it five, six years ago. So that's now from being a loss making business when we bought Checkpoint in 2015, 2016.

It's now soundly profitable business and doing better and better each quarter. So this past quarter, MAS was really impacted by that China situation and the component inflation in the hardware business, so electronic components.

So the inflation around that in China is pretty immense.

Yes, last question, just on the buyback, I think this is the first time you've been buying stock and maybe 10, 15 years, maybe longer I'm not sure.

Right.

I guess I'd just be curious for the motivation is it more balance sheet where the stocks trading or just the difficulty doing large M&A?

Combination of all trades, I think the stock is very attractively priced right now. So we are doing what you would expect us to do when the stock is attractively priced.

So I think the stock is undervalued. And so it seemed like to us a very good time to start.

We have the balance sheet capability to do it, no large M&A on the horizon. We've got a nice balance sheet and stocks underpriced.

So why wouldn't we do it?

Sure, sure. All right, thanks for the time, Geoff.

Appreciate it.

Hey, good morning, Geoff just in terms of that Checkpoint MAS business over in China, are you looking at all or has the discussion come up towards looking at some new locations for manufacturing or perhaps reshoring some of that business?

Yes.

Okay. And then on the Adelbras acquisition in Brazil, I'm not sure if I'm pronouncing that right.

But can you maybe speak to the opportunity within that market, this is a Brazil focused business. But is this something that you want to grow perhaps in North America or Europe?

Could be, we are going to test the water in Brazil. So these are tasers, this is a category that's in the Avery kind of business, it's pretty big business around the world, 3M is the dominant player in it globally.

And a number of Tier 2 and Tier 3 players available to buy in that sector. And this company is actually located just down the road from our CCL label operation in Brazil.

So our Manager down there is one of the most highly talented people we have in the company wanting to buy this company, and we thought it was a good idea. So we did.

And we'll see how it goes in Brazil, as it goes well, down there. We know there are lots of other opportunities around the world to expand it.

But the strategy is to test it in Brazil and see if it works before we get anywhere else with it.

Can you export that product from Brazil?

No, no.

Okay and then I think there's a split between Avery and CCL design on that, like, can you give what the rough split is?

The vast majority of it will fall under Avery.

Okay. And then also with in terms of semiconductor, I know there's a ton of commentary out there.

There's a lot of people giving opinions on what's happening in that market. But just interested in hearing your thoughts on the chip situation, are you starting to see things ease at all?

Do you think the industry has moved beyond the worst of the chip situation?

Something else, we definitely hasn't got better for sure. And I think the past problem isn't just chips, it's components in general.

But I think the supply chain side of automotive, now electronics because of the shutdowns in China is semi broken. And that's why everyone's having to wait as long as they're waiting for their car, but chips is a huge problem.

But it's not the only problem. So I think there's a lot of people focused on trying to improve it, and we buy chips for RFID labels.

And we know from that experience, that's kind of hand to mouth, and they're pretty low end chips compared to the ones that go in cars, but we don't see any signs of anything good happening yet.

Okay, thanks for taking the questions.

No problem.

Hey good morning, gentlemen.

Good morning, Daryl.

Just one quick one for me with respect to CCL segment and the CPG companies that are operating in Russia. Did that present any market share redistribution opportunities as they may be looking to move out of manufacturing capacity in looking Russia for you or is there any commentary you can give there?

No, I wouldn't say that's a factor much of a factor at all, actually.

Okay, perfect. That's all for me.

Thanks, guys.

No problem.

Thank you. A couple of questions.

Just looking at Avery was every segment up in that business or was there any segments that actually declined?

Whatever the positive signs all came out of North America, so the international business was not as good, but in North America, they fired on all cylinders.

Okay. And then just on like MAS you said was, I'm just wondering if it was up overall, despite it being weak in Europe?

No, no MAS was down, profits were down.

Okay. Okay.

And then I think maybe a lot of people are kind of wondering, how much price increase do you still have to implement to recover all the inflationary costs like…

Well, we don't know David. Because you have a price increase in March, you have another one in April, you have another one in May.

So the price increases. It's not a singular event in time where the prices go up, 15%, you just pass it through, it's happening every month, everywhere.

So and it's not stopping. So you've got to constantly be putting the prices up to reflect the current realities.

And that's the problem. So the reason there's a lag and I think this applies to all companies, bidding all the big CPGs.

You make your pricing adjustments, and then the next part of inflation comes the next month. And that's the challenge.

It's when will we -- when will the wave stop coming, and we go down to calmer waters again. And that's what we don't know.

And that's why we say there's still some more price to pass through, because we -- I think we've pass through everything pretty much that we had through most of last year. But in Q1, we had more inflation.

Okay, all right. Thank you.

No problem.

Good morning. Two quick questions for me.

Just on Adelbras acquisition it seems like the margin profile for that addition, is lower than Avery and is -- are you expecting that the synergies will happen from sort of procurement? Or will it be volume growth down the road?

Find motel.

Okay. Second question on energy costs in Europe in this and specifically Germany, can you quantify where for you?

How much higher they are compared to like, February 24th, when Russia attacked Ukraine or year-over-year? How much higher are they?

Well I think Germany wasn't a big impact for us, because we're not without extreme much film in Germany. So and our CCL Label business or other business used energy, but not to the same extent we use it.

So the impact was really all in the U.K., than in the Innovia facility, and it was pretty significant.

Okay.

I'll say more than that, but very significant. So but -- I think consumers in the continent of Europe, we're talking about their domestic heating bills going up by factors of 2x and 3x and 4x while they were this time last year.

Right. Okay, thank you.

That's it. That's all for me.

No problem.

Thanks, Geoff and Sean. Just a couple follow-ups for me.

One on, Geoff, you made a comment on inflation, even though it's everywhere at the moment, you're seeing some signs that it may be plateauing. Can you just talk about what those signs are and how consequential you think they are?

Well, we see as, the one category where we track it daily is aluminum. So aluminum has started to drop in the last few weeks.

So that's, I think, a good indicator. And aluminum is energy dependent as well as raw material dependent, but we've seen the price of aluminum drop in North America in the last few weeks, not by last, but by some and it only headed in one direction for pretty much all in 2021, but it we did see a death in the last few weeks.

And we've seen paver prices stabilize a bit. The EPM strike is now over.

So we're hoping that will stabilize things a bit in Europe and take some of the heat out of the paper market. So that's probably a good thing to.

Yes, [indiscernible]. And couple others, you mentioned that your plants have more orders than they can produce.

I think maybe that was before China lock down. But just intuitively, do you understand or does it make sense to you that demand broadly speaking, would have remained as good for as long as it has given what's happening in Europe, given weakness in Brazil, et cetera, et cetera, et cetera?

Well, I think in -- well, we haven't seen any weakness in Brazil by the way, I mean, Brazil, has been very strong, and was in Q1. So that's why I made a comment about share down there.

But so we haven't seen any weakness in Brazil. But I would say the real question to everyone to try and understand is, how much of the demand we see today is people taking courses in the supply chain, to make sure they've got what they want.

And in an era where availability is an issue, as opposed to how much of it is real and demand related. I would say we don't really know the answer to that.

Then in CPG numbers for Q1 were mixed, right. So some companies did very well.

Coke, P&G that did last well, and so the numbers were mix. But some did well, some didn't last well, but I wouldn't said -- I wouldn't have said we saw a crisis in the CPG business in Q1 as the demand level.

And we do know that I think many of them are taking some caution in the supply chain to make sure they go where they need to be able to supply the demand that's out there.

Yes. Understood.

And then last one for me on the NCIB. Can you just remind me why you didn't buyback any in the preceding three quarters?

Just how much higher the share price was, then it was in 1Q? Just to give us a little perspective along those lines?

Well, I think I mean, we filed the NCIB a year ago, stock prices in the mid 70s last summer. So we're released our half year numbers in August, I think the stock was at 70 something.

And then we began to ponder it as things changed in Q4. We certainly ponder it in Q1 when the Ukraine happened.

But you have to remember Adam, we can't buy stock in a blackout period. So January and most of January and a good portion of February, we were blacked out.

Got it. And have you bought stock subsequent to 1Q.

I forgot if you disclose that Geoff?

We can't, because we can stop buying stock next week.

Right. Okay.

Got it.

Blackout going slowly.

Yes, now I understood. Thank you, Geoff.

No problem.

Thank you very much, Jennifer, and thank you for everybody joining the call today and we look forward to sit down with you again in August. Thank you.