CCL Industries Inc.

Good morning, and welcome to CCL Industries' Third Quarter Investor Update. Please note that there will be a question and answer session after the call. The moderator for today is Mr. Jeff Martin, President and Chief Executive Officer, and joining him is Mr. Sean Waschuk, Senior Vice President and Chief Financial Officer. Please go ahead, gentlemen.

Good morning, everyone. Sean Waschuk here with Jeff Martin. We're in New Jersey at our home and personal care office in Lumberton, New Jersey, and we'll begin our Q3 presentation. Turning to slide two, our disclaimer regarding forward-looking statements. I'll remind everyone that our business faces known and unknown risks and opportunities. For further details of these key risks, please take a look at our 2024 annual report, particularly the section Risks and Uncertainties. Our annual and quarterly reports can be found online on the company's website, CCLIND.com, or CDARplus.ca. Moving to slide three, our summary of our financial results. For the third quarter of 2025, sales increased 6.3%, with 3.7% organic growth 0.1% acquisition-related growth and 2.5% positive impact from foreign currency translation, resulting in sales of almost $2 billion compared to approximately $1.8 billion in the third quarter of 2024. Operating income was $321.8 million for the 2025 third quarter compared to $288.9 million for the third quarter of 2024. a 9% increase excluding the impact of foreign currency translation. Jeff will expand on our segmented operating results for our CCL, Avery, Check Point, and Inovia segments momentarily. Corporate expenses were up for the 2025 third quarter compared to the prior year third quarter due to higher variable long-term compensation expenses. Consolidated EBITDA for the 2025 third quarter excluding the impact of foreign currency translation, increased 7% compared to the same period in 2024. Net finance expense was $18.2 million for the third quarter of 2025, lower than the $19.3 million for the third quarter of 2024. The decrease is due to higher finance income earned on our higher cash and cash equivalent balances. The overall effective tax rate for Q3 2025 was 25.5% compared to an effective tax rate of 24.5% recorded in the third quarter of 2024. This was due to a higher portion of our taxable income being earned in higher tax jurisdictions. Our 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 third quarter was $210.8 million compared to $191.7 million for the 2024 third quarter. For the nine-month period, sales, operating income, and net income increased 6.5%, 9.9%, and 7.9% respectively. This all excluded the impact of a $78.1 million revaluation gain recorded in the second quarter of 2024, also compared to the nine-month period of 2024. 2025 included the results from two acquisitions completed since January 1st, 2024, delivering acquisition-related sales growth for the period of 0.8%, organic growth of 3.1%, with foreign currency translation tailwind of 2.6% to sales. Our next slide, earnings per share. Basic and adjusted basic earnings per Class B share were $1.21 for the 2025 third quarter compared to $1.08 basic and $1.09 adjusted basic earnings per Class B share for the 2024 third quarter. Adjusted earnings per Class B share increased 11% compared to the third quarter of 2024. This 12 cent increase in adjusted basic EPS was primarily driven by improved operating income, which was attributable to 14 cents, foreign currency translation adding 2 cents, reduced net finance costs added 1 cent. These gains were partly offset by lower joint venture earnings of 1 cent, higher corporate costs of 2 cents, and a higher income tax rate of 2 cents. Moving to slide five, our free cash flow from operations. For the third quarter of 2025, free cash flow from operations was an info of $333.4 million compared to an inflow of $233 million posted in the third quarter of 2024. This increase is principally due to improved earnings and improved net working capital for the third quarter of 2025 compared to the prior year third quarter. For the trailing 12 months September 25, free cash flow from operations was $860.2 million, compared to $618.6 million for the trailing 12 months ended September 24. This change is primarily attributable to improved adjusted earnings and reduced net capital expenditures over the comparative periods. Moving to the next slide, a return to shareholder slide. For the 2025 third quarter, we repurchased 1.3 million shares for $100 million, including the 10.3% increase in the 2025 annual dividend announced in February of this year. Dividends paid year-to-date have amounted to $167.9 million, for a total of $467.9 million returned to shareholders. Moving to slide seven, our cash and debt summary. Net debt as at September 30th, 2025 was 1.49 billion, a decrease of $131 million compared to December 31st, 2024. This decrease is principally a result of higher total debt outstanding more than offset by an increase in our cash and cash equivalents. With the decrease in the company's net debt, the balance sheet closed the quarter in a strong position. Our balance sheet leverage ratio was approximately 0.93 times at September 30th, 2025, down from 1.08 times reported at the end of December 2024. Liquidity was robust, with $1.1 billion of cash on hand and U.S. $0.8 billion of available undrawn credit capacity in our revolving credit facility. The company's overall finance rate was 2.6% at September 30, 2025, equal to December 31, 2024. The company's balance sheet continues to be well-positioned for the balance of 2025 and well-positioned as we move into 2026. Jeff, over to you.

Thank you, Sean. Good morning, everybody. On slide eight, highlights for capital spending for the year. We're expecting gross costs for the year to end up about $450 million, most of it spent in the CCL segment. Page nine, highlights for the quarter for the CCL segment, which was the strongest part of the company for the quarter, 6.6% Q3 organic growth was on top of 4.9% at the same quarter last year. It's single-digit growth in North America and Europe, high single-digit in Latin America and Asia Pacific, including the Middle East. Very good quarters in healthcare and specialty home and personal care, and especially CCL design. CCL secure was up significantly, but it compared to a week prior year, and the food and beverage business was flat. Moving on to slide 10, just one comment really on our joint ventures here. Pac-Man CCL was acquired in the middle part of last year, so we're just seeing the results of the one joint venture we have left remaining here for the quarter. Page 11, highlights for Avery. As we expected, we had some impact in the back-to-school season in the US from tariffs. particularly affecting our ring binder business. We'll talk more about that in the Q&A. But that was part offset by continuing growth in our direct-to-consumer statement in North America and Europe. Latin America was affected by currency, particularly for imported materials, and especially in Brazil. Page 12 highlights the checkpoint. Another strong quarter in Europe in the MAS business. few large technology rollouts, chain-wide rollout technology in European retailers and elsewhere except the Americas where we had also tariff impacts from our intercompany supply of products from China. The apparel label industry continues to be disrupted by the supply chain disruption from tariff policies. So that's continuing to affect us. We had very strong growth in this quarter last year. It was modestly better this year. But we're expecting to see that gradually improve as things settle down in the apparel supply chain. Page 13, highlights for Inovia. Profits down to the quarter entirely due to the Germany scale-up. We had a pretty good quarter in Europe, softer in North America on the volume side, and sales declined also on lower resident cost parts, particularly in North America. Slide 14, some outlook comments for the coming quarter. For the CCL segment, orders are stable. Most of you would have seen the CPG customer volumes are still soft. But our CCR design business continues to be quite an offset to that. October results were modestly ahead of this time, October prior year. Avery had its slow quarter, horticultural aside, but also had a pretty good October. The checkpoint tariff-related risks remain in MAS internally and in the apparel supply chain externally. And then in Germany, we've got continuing startup costs, and we'll have a shutdown this December to fix some problems on the line. And we'll start up with gusto into the new year. We have challenging cons for the fourth quarter, but we also have FX as an increasing tailwind. So we'll all wait and see how that pans out as the year finalizes at the end of December. So with that, operator, we'd like to open the call for questions.