CCL Industries Inc.

Good morning and welcome to CCL Industries 2025 Fourth Quarter and Year End 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. Thank you, Holly. Welcome to our fourth quarter investor call and record year-end results. I'll draw everyone's attention to page two of this presentation and remind everyone of our disclaimer regarding forward-looking statements. If you would like more information about the risks and opportunities facing our business, please have a look at our 2024 and 2025 annual reports, particularly the sections Risks and Opportunities. Our annual and quarterly reports can be found online on the company's website, CCLIND.com, or on CDARplus.ca. Moving to page three, for the fourth quarter of 2025, sales increased 3.5%, with 0.6% organic growth, 0.2% acquisition-related growth, and 2.7% positive impact from foreign currency translation, resulting in sales of almost $1.9 billion compared to approximately $1.8 billion in the fourth quarter of 2024. Operating income was $280.7 million for the 2025 fourth quarter compared to $267.9 million for the fourth quarter of 2024. a 2% increase excluding the impact of foreign currency translation. Jeff will expand on our segmented results for CCL, Avery, Check Point, and Inovia momentarily. Corporate expenses were up for the 2025 fourth quarter compared to the prior year fourth quarter due to higher variable long-term compensation expenses. Consolidated EBITDA for the 2025 fourth quarter excluding the impact of foreign currency translation, increased 3% to $383.6 million. Net finance expense was $17.2 million for the fourth quarter of 2025, lower than the $19.1 million for the fourth quarter of 2024. The decrease is due to higher finance income earned on the company's cash and cash equivalents. The overall effective tax rate for Q4 2025 was 28.5% compared to an effective tax rate of 22.9% recorded in the fourth quarter of 2024. This is primarily due to an increase in withholding taxes in the period resulting in a $10.1 million increase in tax expense for the comparative quarters. The effective tax rate may change in future periods depending on the proportion of taxable income earned in different tax jurisdictions and the timing of withholding taxes. Net earnings for the 2025 fourth quarter were $171.1 million compared to $179.8 million for the 2024 fourth quarter. For the year ended December 31st, 2025, sales and operating income increased 3% and 6%, excluding the impact of foreign currency transition, respectively. Net income for the 2024 year included a $78.1 million non-cash revaluation gain recorded in the second quarter of 2024, resulting in a decline in 2025 net income compared to the 2024 year. Excluding this gain, adjusted net income increased 5.3%. 2025 results included the results of three acquisitions completed since January 1st 2024 delivering acquisition related sales growth for the period of 0.7% organic growth of 2.5% and foreign currency translation was a tailwind of 2.6% to sales moving to the next slide our earnings per share basic and adjusted basic earnings per Class B share were $0.99 and $1.03 respectively for the 2025 fourth quarter compared to $1.01 basic and $1.02 adjusted basic earnings per Class B share for the 2024 fourth quarter. Adjusted earnings per Class B share increased 1% compared to the fourth quarter of 2024. The $0.01 increase in adjusted basic EPS was primarily driven by improved operating income of $0.05 favorable currency translation adding four cents and reduced net finance costs adding one cents. These gains were partially offset by lower joint venture equity earnings of one cent and higher income tax rate amounting to an eight cent. Moving to our next slide, free cash flow from operations. For the fourth quarter of 2025, Free cash flow from operations was an inflow of $292.8 million compared to an inflow of $261.7 million posted for the fourth quarter of 2024. The increase is principally due to improved net working capital partly offset by higher net capex for the fourth quarter of 2025 compared to the prior year fourth quarter. For the year end of 2025, free cash flow from operations was a record $891.3 million, surpassing the $606.5 million posted for the 2024, a 47% increase. This change is primarily attributable to improved adjusted earnings and an improvement in working capital over the comparative periods. Moving to slide six, our returns to shareholders. For the year ended December 31st, 2025, the company repurchased approximately 3.9 million shares for $300 million. Including the 10.3% increase in 2025 annual dividend announced in February of 2025, dividends paid year-to-date have amounted to $223.7 million for a total of $523.7 million returned to shareholders. It is the company's expectation that more money will be returned to shareholders in 2026, as indicated in our 2025 Q4 press release, where we announced a 12.5% increase in the 2026 annual dividend. And hopefully everyone had a look at our press release this morning, where we have announced we have modified our normal course issuer bid from a discretionary buyback to an automatic share or repurchase plan going forward. We're authorized to potentially spend up to $1.2 billion over the next 12 months. Moving to the next slide, our cash and debt summary. Net debt as at December 31st, 2025 was $1.26 billion, a decrease of $356.9 million compared to December 31st, 2024. This decrease is principally a result of lower total debt outstanding and an increase in 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 0.78 times at December 31st, 2025, down from 1.08 times reported at the end of December in 2024. Liquidity was robust with almost a billion dollars of cash on hand and U.S. $1 billion available undrawn of credit capacity in our revolving credit facility. During the fourth quarter, the company amended its syndicated revolving credit facility, extending the maturity almost four years to November 2030. The company's overall finance rate was approximately 2.5% at December 31st, 2025, just below the 2.6% at December 31st, 2024. The company's balance sheet continues to be well positioned as we move into 2026. Jeff, over to you.

Thank you, Sean. Good morning, everybody. Slide eight, capital spending highlights for the year. 441 million gross, 430 million net, mainly the disposal of the building for Inovia in Belgium. And we are estimating to spend approximately 470 million in the year of 2026. Slide nine highlights the CCL. Solid Q4 organic growth, 3.6%. Low single digit in North America, mid single digit in Europe. double-digit in Asia Pacific, particularly driven by CCL design and including the Middle East, part offset by a modest decline in Latin America. Profitability gains are very strong at CCL design, solid at healthcare and specialty, slightly down at home and personal care, and a bit more than that in food and beverage. CCL secure profits halve compared to a good Q4-24 on shipment timings. Slide 10, I won't spend much time on this, just earnings from our one remaining joint venture. Slide 11, very good quarter at Avery, very strong quarter for our direct-to-consumer business, especially in North America. Solid overall internationally and good progress in the horticultural space. Slide 12, highlights for Check Point. MAS had another strong profit quarter in Europe and Asia that was weak in North America, particularly around tariff impacts from China and the slow Christmas season that many retailers reported. Apparel labeling profitability improved. That was a mixed story, somewhat RFID related. The sales were still soft on the impact of Paris on the apparel supply chain with inventory caution in abundance. Order intake improved so far in Q1, 2026. Slide 13 highlights for Inovia. Sales declined on the lower resin cost pass-through and volume decline in slow consumer markets. We did see good share gain progress for Ecofloat and in-mold label films predominantly made at that plant in Poland, and we incurred about $4 million on startup costs in the new German plant, although we're hoping that picture's going to change as we go through the year in 2026. Outlook commentary. Overall, the CCL segment orders continue to be stable. U.S. plants were impacted by snow-related outages in January and again this week in February. Avery is expected to be stable. ALS and the RFID business is expected to strengthen at checkpoint driven by the uptick in orders. In obvious German plans I mentioned, we expect to see that improve as the year progresses. And we do have challenging comps in the first half of the year, much less challenging in the second half of the year. And foreign exchange is expected to be a modest tailwind. So, with that operator, we'd like to open up the call for questions.