CCL Industries Inc.

Good morning and welcome to CCL Industries' 2026 First 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. Thank you, Holly. Here we are on our first quarter investor update. I'll draw everyone's attention to slide two. If I can advance the slide here. That's our disclaimer regarding forward-looking information. I'll let everyone note that our risks and uncertainties and opportunities are under our annual MD&A and our first quarter 2026 report. particularly under the section risks and uncertainties. Our annual and quarterly reports can be found online at the company's website, CCLIND.com, or on CDARplus.ca. Moving to our summary of financial results, slide number three. For the first quarter of 2026, sales increased 2.8%. with 1.9% organic growth, 0.3% acquisition-related growth, and 0.6% positive impact from foreign currency translation, resulting in sales of $1.94 billion compared to approximately $1.89 billion in the first quarter of 2025. Operating income was $317.5 million for the 2026 first quarter compared to $316.9 million for the first quarter of 2025, an improvement of 0.2%. Jeff will expand on the segmented operating results of our CCL, Avery, Check Point, and Inovia segments momentarily. Corporate expenses were down for the 2026 first quarter compared to the prior year first quarter due to lower variable compensation expenses. Consolidated EBITDA for the 2026 first quarter, excluding the impact of foreign currency translation, increased 1% compared to the same period in 2025. Net finance expense was $16.7 million for the first quarter of 2026, lower than the $18.5 million for the first quarter of 2025. The decrease is due to higher finance income earned on the company's cash and cash equivalents and a reduction of finance costs on the company's drawn bank debt. The overall effective tax rate for the first quarter of 26 was 25.4% compared to an effective tax rate of 24.7% recorded in the first quarter of 25 due to an increase in taxable income and higher tax jurisdictions. Gift. 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 2026 first quarter was $204.9 million compared to $207.4 million for the 2025 first quarter. Moving to slide four, earnings per share. and adjusted basic earnings per Class B share were $1.18 and $1.20 respectively for the 2026 first quarter compared to $1.18 basic and adjusted basic earnings per Class B share for the 2025 first quarter. Adjusted earnings per Class B share increased 1.7% compared to the first quarter of 2025. The $0.02 increase in adjusted basic earnings per share was primarily driven by $0.02 from reduced share count one cent from reduced interest expenses offset by a one cent increase from our tax rate. Moving to the next slide, free cash flow from operations. For the first quarter of 2026, free cash flow from operations was an inflow of $37.3 million, almost equal to the inflow of $39.1 million posted for the first quarter of 2025. The slight decrease is principally due to an increase in net working capital, part offset by lower net capex and taxes paid for the first quarter of 26 compared to the prior year first quarter. For the trailing 12 months, our free cash flow from operations remains near record levels. Moving to the next slide, returns to shareholders. During the first quarter of 2026, the company moved from a discretionary share buyback to an automatic share repurchase plan. Therefore, commencing March 2nd to the end of the quarter, March 31st, 2026, the company repurchased approximately 779,000 shares for $67.5 million. In addition, during the blackout period April 1st until yesterday, the company also repurchased an additional 1.4 million shares for $119.5 million. Including the 12.5% increase in the 2026 annual dividend that we announced in February, dividends paid for the quarter amounted to $62.3 million for a total of $129.8 million returned to shareholders during the quarter. It's the company's expectation that more will be returned to shareholders in 2026 as the automatic share repurchase plan is active in the market daily, including blackout periods where we were previously restricted in 2025 due to our normal course issuer bid being discretionary. Our Board of Directors has authorized management commencing March 2, 2026 to purchase up to $1.2 billion of shares over the next 12-month period. Moving to our next slide, cash and debt summary. Net debt as at March 31st, 2026 was $1.38 billion, an increase of $115.3 million compared to December 31st, 2025. This increase is principally a result of higher total debt outstanding due to capital expenditures and share buyback activities. Despite the increase in the company's net debt, the balance sheet closed the quarter in a strong position. Our balance sheet leverage ratio was approximately 0.8 times at March 31st, 2026, up from 0.78 times reported at December 31st, 2025. Liquidity was robust, with nearly $1 billion of cash on hand and $949 million U.S. of available undrawn credit capacity in our revolving credit facility. The company's overall average finance rate was approximately 2.5% at March 31st, same as December 31st, 25. The company's balance sheet continues to be well positioned as we move through 2026. Jeff, over to you.

Thank you, Sean. Good morning, everybody. I'm on slide eight, highlights for capital spending for the year. A little under $100 million spent in the first quarter. We're planning to spend $470 million for the year of 2026. Slide nine, highlights for the CCL segment. Solid 3.1% organic growth, driven by low single-digit decline in North America and the Middle East, mid-single-digit growth in Europe and Latin America, and Asia-Pacific, where we were very strong due to CCL design, up in the mid-teens. We had good results at CCL design, CCL secure on healthcare and specialty, and had a strong recovery in food and beverage from recent period of soft-gons. But HPC profits were down under the capacity interruption we mentioned in the press release at our U.S. aluminum container plant and slow tube sales. Labels for mass markets were solid globally with strong results in Europe and Asia. Slide 10 highlights for Avery. Strong calls for the direct-to-consumer space globally, especially RFID-enabled cards and wristbands, and recent acquisitions are also performing. Back to school orders, we expect to be up a little this year, and that's to say they're now tariff-free, unlike last year, and we saw solid progress in horticulture. Checkpoint segment. The MAS business had another good quarter in Europe, but was weak in the Americas, and also a little slower in the Asia-Pacific region. Apparel label results were impacted by an abundance of inventory caution across the industry's supply chain. RFID inlay sales are still, however, up in a down market, but Mexican startup losses in our new plant may continue. Slide 12 highlights Renovia. Strong results in our Polish operation, where we make a lot of label films. Good growth there, including good success with Ecofloat. Volume, however, declined from our UK and Australian plants. The deliveries to the Middle East also impeded. The new German plant start-up costs sequentially declined. Very solid quarter in North America, modestly below a very robust prior year period. Outlook for the coming quarter. The overall CCO segment orders are solid, but we have significant inflation to manage, which we'll talk about on the Q&A session, and the sleeper acquisition is due to close late this quarter, probably in June. Avery-directed consumer growth is due to continue. Apparel orders are expected to improve in coming quarters at checkpoint, and our confidence in RFID remains very solid. Innovative demand was strong in April on buy-forward activity in the labor materials supply chain. That could aid Q2, but potentially hurt Q3 as buy-forward activities normalize as things progress. FX looks decidedly neutral for the coming quarter. So, with that, operator, would you like to open up for questions?