CCL Industries Inc.

Thanks, everyone. Sean here.

Welcome to our first quarter investor update, and we’ll jump right in. Turn everyone’s attention to Slide number 2, our disclaimer regarding forward information.

I’ll remind you that our business faces known and unknown risks and opportunities. For further details of these risks, please take a look at our 2024 Annual Report, particularly under the section Risks and Opportunities.

Our annual and quarterly reports can be found online on the company’s website, cclind.com or on sedarplus.ca. The next slide, our summary income statement.

For the first quarter of 2025, sales increased 8.6%, with 3.8% organic growth, 1.4% acquisition-related growth and 3.4% positive impact from foreign currency translation, resulting in sales of $1.89 billion, compared to $1.74 billion in the first quarter of 2024. Operating income was $316.9 million for the 2025 first quarter, compared to $282 million for the first quarter of 2024, a 9% increase, excluding the impact of foreign currency translation.

Geoff will expand on the segmented operating results of our CCL, Avery, Checkpoint and the Innovia segments momentarily. Corporate expenses were up for the 2025 first quarter due to slightly higher variable compensation expense and other general items compared to the prior year first quarter.

Consolidated EBITDA for the 2025 first quarter, excluding the impact of foreign currency translation, increased 8% compared to the same period in 2024. Net finance expense was $18.5 million for the first quarter of 2025, slightly higher than the $18 million for the first quarter of 2024.

The increase is due to a reduction in finance income earned on the company’s cash and cash equivalents. The overall effective tax rates for Q1 2025 was 24.7%, unchanged from the prior year first quarter.

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 2025 first quarter were $207.4 million, compared to $192.1 million for the 2024 first quarter, an increase of 6% excluding foreign currency translation.

The next slide, earnings per share. Basic and adjusted basic earnings per Class B share were $1.18 for the 2025 first quarter, compared to $1.08 for the 2024 first quarter.

This is record quarterly adjusted earnings for CCL of $1.18. The $0.10 increase in adjusted basic EPS was primarily driven by improved operating income of $0.13, favorable currency translation of $0.02.

These gains were partially offset by lower joint venture earnings of $0.04 and higher corporate expenses of $0.01. Moving to the next slide, our free cash flow from operations.

For the first quarter of 2025, free cash flow from operations was an inflow of $39.1 million, compared to an outflow of $7 million posted in the first quarter of 2024. This was largely due to a reduction of net capital expenditures in the first quarter of 2025 compared to the prior year first quarter.

For the trailing 12 months, March 31, 2025, free cash flow from operations was $652.6 million compared to $569.1 million for the 2024 trailing 12-month period. This change is primarily attributable to an increase in cash provided by operating activities, which was generated by improved adjusted earnings and reduced net capital expenditures over the comparative periods.

Next slide, returns to shareholders. For the 2025 first quarter, the company repurchased 1.4 million shares for $100 million.

Including the 10.3% increase in our 2025 annual dividend announced in February of 2025, dividends paid year-to-date have amounted to $56.3 million for a total of $156.3 million returned to shareholders. Next slide, our cash and debt summary.

Net debt as at March 31, 2025, was $1.75 billion, an increase of almost $134 million compared to the December 31, 2024. This increase is principally a result of funds used for capital expenditures and share buyback.

Although the company’s net debt increased, the balance sheet closed the quarter in a strong position. Our balance sheet leverage ratio was approximately 1.14 times at March 31, 2025, up from 1.08 times reported at the end of December 31, 2024.

Liquidity was robust with $821 million of cash on hand and US$1.9 billion of available undrawn credit capacity on the company’s revolving bank credit facility. The company’s overall finance rate was 2.5% at March 31, 2025, compared to 2.6% at December 31, 2024.

The company’s balance sheet continues to be well positioned as we move through 2025. Geoff, over to you.

Thank you, Sean. Good morning, everybody.

I’m on Slide 8, highlights of our capital spending, fairly low quarter, a little under $114 million for Q1, much bigger number last year when we were building the plant for Innovia in Germany, and we’re still anticipating spending about $485 million for the year of 2025. Slide 9 highlights the CCL segment, 4.5% Q1 organic growth, low single digits in North America, Europe and Asia; double digits in Latin America; very strong profitability gains at Home & Personal Care and CCL Design with Healthcare & Specialty modestly up.

But down a little in Food & Beverage, and we faced tough comps at CCL Secure driven by timing of banknote substrate shipments. Slide 10, highlights of the joint venture, just pointing out here that we no longer include the Pacman CCL numbers, which are now fully consolidated this quarter versus being in the JV line this time last year.

Slide 11, highlights for Avery. Solid quarter in North America, a little bit aided by foreign exchange, offset by slower international markets.

Horticulture slightly up in Europe and the reverse in the U.S., but overall, a solid quarter. Slide 12, highlights for Checkpoint.

Strong quarter at the MAS business in Europe, but that was more than offset by declines in other regions, especially in the Americas. Apparel Label delivered very good organic sales growth, aided by RFID with much stronger profitability gains.

Slide 13. Good news at Innovia, very good quarter, strong volume growth and share gain, especially in North America, where we had outsized profitability improvement.

Results were also up in Europe on the benefits of the Belgium closure volume in the UK and also Poland building share in label films. And we had one of the best quarters we’ve had in some time in this business.

We do plan to start up our new plant in Leipzig in Germany for low-gauge label films in the current quarter, and there’ll be some start-up costs going on there for a few more quarters to come. Slide 14.

I know this is on many of your questions later on, but I thought I’ll deal with it upfront. The impact of tariffs on the company.

Vast majority of the company’s business globally is based on in-country demand from locally produced supply. We do have some CCL and Innovia products made in Mexico, but they are all U.S.

MCA compliant and they’re currently tariff-free for the U.S. The exception from Mexico is our ring binder products for Avery that could be subject to higher tariffs due to Chinese content and the impact of back-to-school coming up in – later in this quarter.

Checkpoint MAS products, which represent about 30% in the U.S. rely significantly on the China supply chain currently.

We had planned even before all the tariff noise to change that for part of the business, but we’re obviously accelerating that in view of the current situation. And the company’s global footprint remains a competitive advantage to help customers reconsidering their global supply chains.

Slide 15, a few comments on the outlook. So just you all know, we had a Easter vacation that straddled the two quarters.

So part in March last year, part in April last year, all in April this year. So that will have some impact.

CCL segment backlog was very solid going into Q2 and April orders were stable. We had a very good month of April, just as by the way.

Avery outlook is, however, marked by uncertainty for the U.S. back-to-school season.

I’ll address that in the Q&A later on. Checkpoint growth continues to be expected in RFID, and our apparel labeling business has very limited exposure to U.S.

apparel sourcing from – particularly from China. Innovia should continue to improve, but we do have the German plant start-up costs take into consideration, and we expect FX to continue to be a modest tailwind.

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

Yes. Hi, good morning.

Thank you for taking my question. Congrats on the strong quarter.

Just touching on that tariff slide and your comments around competitive advantage as customers reconsider supply chains. Can you give us a bit more color?

Are these conversations already happening? Do you foresee significant market share gain there because of that?

Well, I think we’re just in a good position to help. So we’ve got operations all over the world.

So if somebody wants to move production from country A to country B, we are typically a go-to company because we’re everywhere where our customers are. So that’s really our strength.

So we think we’ll be very well placed to handle any company, any part of our business that decides to move production from one part of the world to another.

Okay. Thanks.

And given the backdrop of tariffs and some cost pressures that are obviously yet to come as a result of that, how much of the segments – of CCL segment’s growth this year do you see coming from pricing?

I don’t think the CCL segment is particularly affected by tariffs or pricing in the way you’re suggesting because it’s very – that’s really a local, local business. So the impact will probably be where customers may decide to move operations from one country to another.

But that’s with Switzerland on that, we’re neutral on it. It’s not a big impact on us.

But I don’t see it being a factor in our pricing decisions.

Okay. That’s fair.

And just one last one for me. In some instances, there’s been complexity in implementing tariffs.

Do you see an opportunity there in leveraging RFID solutions or other logistics or verification solutions that you have as the CPB tries to formulate how to apply tariffs. Is that a possible tailwind?

Yes.

Okay, I’ll get back in queue. Thank you.

Hi, good morning. Geoff, for your main CCL segment, I know you said orders have been solid quarter-to-date.

But would you expect a slower year-over-year level of growth from the 4.5% that you printed in Q1, just given – just thinking about the tough 9% organic comps you had in Q2 a year ago?

Well, we had a very good April. So in fact, April was, I think, one of the best months we’ve ever had as a company.

So we certainly didn’t see that in April. And as you know, we have the full impact of Easter in this April.

But it’s a very tenuous situation we’re in. So we just really have to wait and see how things unfold.

But the order intake has been okay.

Fair enough. And Geoff, just want to think about the M&A environment and the pipeline.

Have you seen any sort of change in vendor expectations? And would you expect to be able to sustain the same pace of tuck-in M&A that you did last year in 2025?

I think we’ve seen some expectations in some sectors, automotive, in particular, just given all the concerns people have about the automotive supply chain. So expectations there have certainly changed.

In the CCL label space, not really. People still have memories of the la-la [ph] days a few years ago and not many expectations have changed in that space.

So I wouldn’t say we’ve noticed a particular change. We hear it’s more difficult to finance private equity transactions than it was a few years ago.

That’s no surprise to anybody, but I don’t see the environment having changed a whole lot.

Fair enough. Thanks.

That’s all I had. I’ll turn over.

Thanks. Good morning, everyone.

Geoff, a question on the Checkpoint organic sales growth, which slowed down this quarter. How much of that was tied to the North American MAS products tariff fallout?

And can you give us some more specifics on the mitigation initiatives you’ve talked about to address that particular issue?

Yes. Yes.

It was certainly a slow quarter in Q1. It often is because the retailers move into the new year, you have the January sales season.

So the MAS business is often slow in Q1 in North America in particular. It certainly was this quarter.

It was very strong in Europe that was on some new business wins. And in the apparel space, Q1 last year, we grew over 25% in apparel labeling driven by RFID.

We obviously couldn’t carry on growing at that pace and still high single-digit growth in apparel labeling. So – but the comps were obviously a lot more difficult given what happened in Q1 last year.

And the mitigation initiatives around the China supply, how long does that take to play out?

So these products have been tariff from China for – since Trump one, since the first era of Trump and continue throughout the Biden area. So we have been making some plans to move some of the production to other parts of the world for some time.

We’re accelerating those now as we speak. We import around $5 million or $6 million a month, just to give you a cost from our plants and sub-suppliers in China.

And that would be subject to the premium tariffs you’ve all read about from China, just to give you a frame of reference on it.

Okay. Thanks for that.

And a question for Sean. The seasonal increase in working cap was a little larger than we would normally expect.

Should we just chalk that up to the broader macro environment? And how should we think about the cadence of that unwind going forward through the rest of the year?

I don’t think there’ll be any changes. It’s just a little bit bigger this year, could be the macro circumstances, but it will unwind as we go through the year and into the fourth quarter, we’ll call the working capital.

And you’ve got a bit of tariff build up there, too. So a bit of internal inventory build to avoid tariffs.

Understood. Okay.

that’s all I have for now. Thanks guys.

Thank you. Good morning, guys.

Just on the outlook side as it relates particularly to the CCL segment. In past quarters, you’ve had kind of the breakdown of some of the moving parts on the components in the CCL segment.

I was just wondering if you can provide that color for the Q2 outlook.

Well, it’s – I wouldn’t say it’s changed from Q1. So the one business that has changed in terms of outlook from Q1 is CCL Secure because we’ve got a full order book now for the balance of the year.

So that’s one change. I think Home & Personal Care and CCL Design is still both strong, very strong actually.

The Healthcare business has picked up. That’s modestly better, and we expect that to continue in Q2.

Food & Beverage was slightly down and – slightly up in sales in Q1, down in profit. And I expect that will be the same in same sort of picture in Q2.

Okay. That’s helpful.

Thank you. And then just on the ALS business, I was just wondering if you could give a little bit of color around the RFID growth within that business.

And then secondly, with that – for the new plant you have in Vietnam, are you seeing increased demand from apparel suppliers, apparel manufacturers exiting China for that – you seeing increased demand level because of that phenomenon?

Well, you have to bear in mind our apparel labeling business is heavily focused on European and Australian retailers. So they are not subject to the tariff issues that obviously U.S.

retailers are. So our position in the U.S.

is pretty small and other people dominate the market in the U.S. So our biggest play is in Europe.

But I can tell you that there’s certainly a big move of many U.S. retailers looking at changing their sourcing policies, particularly in Asia and not easy to do because of the availability of components in some of these other countries.

But we’re very well placed to pick up share in those circumstances because we’re in all the countries where you would likely want to go. Bangladesh, Vietnam, in particular, being probably number one or number two on the list where if you didn’t want to source in China, where else would you go?

They would probably be the two most important countries where people would look to go, and we’re very well placed.

Right. Okay.

That’s great. And then maybe just finally for Sean, just on the D&A, it was a little bit higher step-up in Q1 from Q4.

And I’m just wondering if that’s a new run rate?

It’s a bit of foreign exchange, and it is a new run rate. We had some assets come on in the fourth quarter in Q1 here.

So it’s roughly a new run rate.

Right. Okay.

That’s great. That’s helpful.

Thanks guys. Appreciate it.

Hey, good morning, everyone. Just wanted to follow-up a little bit on Stephen’s question and maybe with respect to your facility development plans over the last 18 months to 24 months, you’ve had a pretty good pipeline.

Are you hitting pause on new facility development or shifting the geographies you want to be in as a function of what’s happening today in the tariff environment?

No, not at all. No, we’re expanding one of our plants in China.

You have to bear in mind the world doesn’t begin and end in the United States. There is Europe, there is the rest of Asia, there’s Australia, there’s all of Latin America.

And so we’re still investing. We’re rethinking some things in certain geographies based on – we may upscale a plant here, we may downscale a plant there, but we’re making decisions based on what we think the customers might do.

So we’re certainly not pausing anything.

Got you. Okay.

And then in terms of CCL Secure, with the recent completion of the acquisition of your competitor in that market, is there any shifting market dynamics or opportunities that, that might come from that or anything that we should be thinking about going forward on the money printing side?

Too early to tell.

Okay. And then just one last one on Innovia and the profitability.

Obviously, very strong on the facility rationalization. But is there any changes in the commodity price and resins and what might be happening in that market that’s a benefit as well?

A little. So resins have come off.

So – but we pass those along almost instantly. So it doesn’t really have a huge impact.

The big gain in profitability, though was in the Americas. So it was – Europe was up, but the reason for the outsized gains is really driven by North America and share gain in North America.

So an operating leverage impact in North America?

Correct.

Great. Thanks very much for your time.

No problem.

Hey, good morning. Just maybe starting with the Checkpoint segment.

It sounds like your RFID facilities in China and Mexico don’t have direct exposure to tariffs. But are you seeing any indirect impacts in that business?

Or are things relatively unchanged so far?

Well, so RFID impact from us is largely in apparel and our customers in apparel labeling are largely in Europe and Australia and not subject to tariff.

That’s helpful. And I think you quantified your tariff exposure in MAS within Checkpoint.

Can you maybe help quantify your China sourcing exposure within Avery as well?

Well, that’s a very good question. And what we don’t know about Avery is what the customers are going to do.

The back-to-school season is normally planned 9, 10 months in advance because we build a lot of inventory. And I can tell you when the premium tariffs were announced that caused total chaos amongst U.S.

retailers planning for their back-to-school sessions, not just with our products, but right across their entire portfolio of school bags, lunch supply boxes, and all the things you can imagine being in a Walmart aisle at back-to-school time. And a lot of orders were suspended right across the Board by some of these retailers.

And for the season coming up, it’s such a short season. I think many retailers are still pondering what to do about that, whether to still have the season, which merchandise to stock, which price increases they can accept given the tariffs that are coming in.

And by far, the biggest impact on them is their own direct sourcing from Chinese suppliers, not through people like ourselves. So back-to-school is, frankly, for us a very big unknown this year.

Our opinion is most of the big retailers are hoping and praying there will be some tariff relief announcement that would allow them to deal with it. But the problem is we’re getting very near the knuckle on the timing now.

We normally start shipping back-to-school in June. So it’s a June, July shipment period.

Sometimes drift a little bit into August, but June and July are the two big months, and they’re coming up pretty soon. So that’s a big unknown.

So how big could it be maybe $10 million in EBIT for Avery in Q2, something like that, could be something like that.

That’s helpful. And then I think within CCL Design, you called out slowing auto markets.

And I was just wondering what you’re seeing kind of globally and how you expect to navigate the current environment?

Well, we just adjust our cost to suit. So we’re definitely seeing unit volume declines across the Board in North America and Europe.

So you’ve all read what’s going on with the big car producers. So we just adjust our cost to suit.

So it’s not a huge business for us, $300 million or thereabouts, just to give you a frame of context. And when volume goes down, we just adjust our cost to see.

Okay. And then last question for me.

Just wanted to touch on the EcoFloat line in Poland. Just wondering how that’s coming online and when you expect to hit sort of full run rate in that facility?

Well, it will be a while before we’ll hit full run rate, but it’s – every month, the numbers get better. It’s solidly profitable now and every month, they’re making money, but it’s by no means at full capacity yet.

Great. That’s all for me.

Thank you for the time.

Yes. Hi, this one is for Sean.

The Belgium facility is up for sale, and it’s anticipated to happen in 2025. Should we expect an EBITDA bump in one of the quarters like what happened in the third quarter of 2022 when you sold excess China real estate?

Our expectation is that facility will be sold probably in the next 50 to 90 days with no material impact to EBITDA.

Okay. That’s it for me.

Thank you very much.

Okay, everybody. Thank you for joining us this quarter, and we look forward to talking to you in the summer.