CCL Industries Inc.
TSX : CCL.A
TSX : CCL.B

CCL Industries Inc.

August 02, 2012 08:39 ET

CCL Industries Reports an 18.8% Increase in Second Quarter 2012 Net Earnings and Declares Dividend

TORONTO, ONTARIO--(Marketwire - Aug. 2, 2012) - CCL Industries Inc. (TSX:CCL.A)(TSX:CCL.B) -

Results Summary
For periods ended June 30 Three months unaudited Six months unaudited
(in millions of Cdn dollars, except per share data) 2012 2011 % Change % Change Excl. FX* 2012 2011 % Change % Change Excl. FX*
Sales $ 337.1 $ 318.9 5.7% 7.6% $ 678.5 $ 634.5 6.9% 8.2%
EBITDA(1) $ 66.9 $ 60.9 9.9% 11.9% $ 138.1 $ 127.3 8.5% 9.8%
Operating income(2) $ 47.9 $ 43.1 11.1% 13.2% $ 100.5 $ 91.8 9.5% 10.7%
Earnings (losses) in equity accounted investments $ - $ - $ 0.9 $ (0.1 )
Restructuring and other items - net loss $ - $ - $ - $ 0.5
Net earnings $ 25.9 $ 21.8 18.8% 22.4% $ 56.3 $ 48.7 15.6% 18.2%
Per Class B share
Basic earnings per share $ 0.77 $ 0.66 $ 1.68 $ 1.47
Diluted earnings per share $ 0.76 $ 0.64 $ 1.65 $ 1.44
Restructuring and other items - net loss $ - $ - $ - $ 0.01
Adjusted basic earnings per Class B share(3) $ 0.77 $ 0.66 $ 1.68 $ 1.48
Number of outstanding shares (in 000's)
Weighted average for the period - basic 33,452 33,040
Actual at period end 33,762 33,339
(*) - Change over prior year's comparative period excludes estimated impact of foreign currency translation.

CCL Industries Inc. ("CCL" or "the Company") is a world leader in the development of label solutions for global producers of consumer brands in the home & personal care, healthcare, durable goods, and premium food & beverage sectors; and a specialty supplier of aluminum containers and plastic tubes for the same customers in North America.

Second Quarter 2012 Results

Sales for the second quarter of 2012 were $337.1 million, an increase of 7.6% excluding the impact of foreign currency translation, compared to $318.9 million recorded in second quarter of 2011. For the six months ended June 30, 2012, sales increased 8.2%, excluding foreign currency translation, compared to the 2011 six-month period.

Operating income (a non-IFRS measure; see note 2 below) for the second quarter of 2012 was $47.9 million, an 11.1% improvement, from $43.1 million for the second quarter of 2011. Operating income improved 13.2%, excluding the negative impact of foreign currency translation for the comparative quarters. All three segments, Label, Container and Tube, contributed to the quarterly increase and to the 10.7% improvement in operating income for the six months ended June 30, 2012 compared to the first six months of 2011.

Earning before net finance cost, taxes, earnings in equity accounted investments, depreciation and amortization and other items ("EBITDA", a non-IFRS measure; see note 1 below) was $66.9 million for the second quarter of 2012, an increase of 9.9% compared to $60.9 million for the second quarter of 2011. For the six-month period ended June 30, 2012, EBITDA was $138.1 million, an increase of 8.5% compared to $127.3 million in the comparable 2011 six-month period.

The overall effective income tax rate was 28.6% for the second quarter of 2012 almost flat compared to the second quarter of 2011. The overall effective income tax rate was 28.0% for the six-month period of 2012 compared to 27.1% in the six-month period of 2011. The increase in the effective tax rate is primarily due to a higher portion of the Company's income being earned in high tax jurisdictions.

Net earnings for the 2012 second quarter were $25.9 million, an increase of 18.8% compared to $21.8 million for the second quarter of 2011. This resulted in basic and diluted earnings of $0.77 and $0.76 per Class B share, respectively, in the current quarter compared to basic and diluted earnings of $0.66 and $0.64 per Class B share, respectively, for the prior year second quarter.

Net earnings for the six-month period of 2012 were $56.3 million, an increase of 15.6% compared to $48.7 million for the same period a year ago. This resulted in basic and diluted earnings of $1.68 and $1.65 per Class B share, respectively, for the 2012 six-month period compared to basic and diluted earnings of $1.47 and $1.44 per Class B share, respectively, for the prior year six-month period. The increase in net earnings is attributable to the improvement in operating income, and a reduction in net finance cost partially offset by an increase in the effective tax rate.

Geoffrey T. Martin, President and Chief Executive Officer stated, "We are pleased to report a strong second quarter despite softening global economic conditions with all of our operating segments outperforming the prior year period."

Mr. Martin continued, "CCL Label posted solid second quarter organic growth with sales in local currencies up 7% on a good prior year period. Double digit growth rates in North America and Emerging Markets were offset by low single digit gains in Europe. Profitability improvement, however, did not match up to regional sales trends. Despite the negative impact of foreign currency translation due to the weaker euro our European business drove much of the quarterly improvement in segment operating income on the back of cost reductions and turnarounds in underperforming business units. North American results were enhanced on translation by the stronger U.S. dollar but held back by start-up costs for new product lines and facilities plus pricing challenges in some consumer markets as economic conditions softened noticeably as the quarter progressed. Local currency profit gains in Latin America were eliminated on translation due to devaluations in the peso and the real but recovered from first quarter levels. Foreign exchange to the U.S. dollar eased related material cost pressures in Mexico and Brazilian results were aided by exceptional sales growth. Profits in Asia Pacific were below a very strong prior year quarter; held back by initiatives to reorganize our operations in Thailand to prepare for further expansion while performance in China was strong. A weak quarter in South Africa was mitigated by strong sales gains and a profitable result in Australia. Overall global profitability levels increased in line with sales and reached record levels for the second quarter. Contributions from our associate companies in Russia and the Middle East were largely offset by start-up costs at the new joint venture in Chile."

Mr. Martin then added, "CCL Container sales in local currencies were up 13% in the current quarter and 5% for the first six months of 2012 compared to the respective periods in 2011. This confirms an unusual demand pattern this year shifting the peak period from the first quarter into the second. New regulatory information required for sun care aerosols was an important one-time factor affecting timing of production orders. Container's turnaround plan continues to gain traction as all four of our plants recorded solid operating profits, collectively doubling results for the quarter over the prior year period. CCL Tube continued its outstanding performance, with record profitability on low single digit sales gains driven by exceptional results at the Los Angeles operation."

Mr. Martin continued, "Given the global economic trends, we are pleased with the Company's performance for the first half of the year and remain cautiously optimistic for the balance of 2012. The widely discussed European economic conditions have now been in place for some time and therefore we see limited risk on the downside, in part aided by our limited exposure to countries in southern Europe. Our main cause for doubt has shifted to the United States and the economic softening we have seen after three consecutive quarters of improved market conditions since mid-2011. While GDP growth rates have sharply reduced in Emerging Markets so far the impact on domestic consumer demand has been limited and we continue to enjoy share gain opportunities. Input cost pressures have eased considerably but the coming quarter will bring translation challenges at today's exchange rates to the Euro and Latin American currencies which are significantly below prior year levels to the Canadian dollar. The second quarter of 2012 also marks the end of soft prior year comparisons at Container as the current turnaround began mid-2011 at our historically problematic Canadian operation."

Mr. Martin concluded, "The Company continues to enhance its strong balance sheet ending the second quarter with $162 million of cash on hand, and taking advantage of favourable financing markets to expand our primarily undrawn credit facility from $95 million to $200 million on July 11, 2012. Our net debt to total book capitalization is down 260 basis points to 18.1% compared to 20.7% at December 31, 2011. Based on our strong cash flow and our prospects for the remainder of the year, your Board of Directors has declared a dividend of $0.1950 per Class B non-voting share and $0.1825 per Class A voting share payable to shareholders of record at the close of business on September 14, 2012, to be paid on September 28, 2012."

With headquarters in Toronto, Canada, CCL Industries now employs approximately 6,500 people and operates 73 production facilities globally located to meet the sourcing needs of large international customers. CCL Label is the world's largest converter of pressure sensitive and film materials for label applications and sells to leading global customers in the consumer packaging, healthcare, automotive and consumer durable markets. CCL Container and CCL Tube are leading producers of aluminum aerosol cans, bottles and extruded plastic tubes for consumer packaged goods customers in the United States, Canada and Mexico.

(1) EBITDA is a critical non-IFRS financial measure used extensively in the packaging industry and other industries to assist in understanding and measuring operating results. It is also considered as a proxy for cash flow and a facilitator for business valuations. This non-IFRS financial measure is defined as earnings before net finance cost, taxes, depreciation and amortization, goodwill impairment loss, earnings in equity accounted investments and restructuring and other items. See section entitled "Supplementary Information" below for a reconciliation of operating income to EBITDA. The Company believes that it is an important measure as it allows management to assess CCL's ongoing business without the impact of net finance cost, depreciation and amortization and income tax expenses, as well as non-operating factors and one-time items. As a proxy for cash flow, it is intended to indicate CCL's ability to incur or service debt and to invest in property, plant and equipment, and it allows management to compare CCL's business to those of CCL's peers and competitors who may have different capital or organizational structures. EBITDA is a measure tracked by financial analysts and investors to evaluate financial performance and is a key metric in business valuations. EBITDA is considered an important measure by lenders to the Company and is included in the financial covenants of CCL's senior notes and bank lines of credit.

(2) Operating Income is a key non-IFRS financial measure used to assist in understanding the profitability of the Company's business units. This non-IFRS financial measure is defined as income before corporate expenses, net finance cost, goodwill impairment loss, earnings in equity accounted investments, restructuring and other items and taxes.

(3) Adjusted Basic Earnings per Class B Share is an important non-IFRS financial measure used to assist in understanding the ongoing earnings performance of the Company excluding items of a one-time or non-recurring nature. It is not considered a substitute for basic net earnings per Class B share but it does provide additional insight into the ongoing financial results of the Company. This non-IFRS financial measure is defined as basic net earnings per Class B share excluding gains on dispositions, goodwill impairment loss, restructuring and other items and tax adjustments.

Supplementary Information
For periods ended June 30th
Reconciliation of Operating Income to EBITDA
Unaudited
(In millions of Canadian dollars)
Three months ended Six months ended
June 30th June 30th
Operating Income
2012 2011 2012 2011
Label $ 39.1 $ 37.3 $ 85.3 $ 79.2
Container 4.3 2.1 6.7 5.8
Tube 4.5 3.7 8.5 6.8
Total operating income 47.9 43.1 100.5 91.8
Less: Corporate expenses (6.5 ) (7.2 ) (13.0 ) (13.4 )
Add: Depreciation & amortization 25.5 25.0 50.6 48.9
EBITDA $ 66.9 $ 60.9 $ 138.1 $ 127.3

The financial information presented herein has been prepared on the basis of IFRS for financial statements and is expressed in Canadian dollars unless otherwise stated.

This press release contains forward-looking information and forward-looking statements (hereinafter collectively referred to as "forward-looking statements"), as defined under applicable securities laws, that involve a number of risks and uncertainties. Forward-looking statements include all statements that are predictive in nature or depend on future events or conditions. Forward-looking statements are typically identified by the words "believes," "expects," "anticipates," "estimates," "intends," "plans" or similar expressions. Statements regarding the operations, business, financial condition, priorities, ongoing objectives, strategies and outlook of the Company, other than statements of historical fact, are forward-looking statements. Specifically, this press release contains forward-looking statements regarding the anticipated growth in sales, income and profitability of the Company's segments; and the Company's expectations regarding general business and economic conditions.

Forward-looking statements are not guarantees of future performance. They involve known and unknown risks and uncertainties relating to future events and conditions including, but not limited to, the after-effects of the global financial crisis and its impact on the world economy and capital markets; the impact of competition; consumer confidence and spending preferences; general economic and geopolitical conditions; currency exchange rates; interest rates and credit availability; technological change; changes in government regulations; risks associated with operating and product hazards; and CCL's ability to attract and retain qualified employees. Do not unduly rely on forward-looking statements as the Company's actual results could differ materially from those anticipated in these forward-looking statements. Forward-looking statements are also based on a number of assumptions, which may prove to be incorrect, including, but not limited to, assumptions about the following: global economic recovery and higher consumer spending; improved customer demand for the Company's products; continued historical growth trends, market growth in specific sectors and entering into new sectors; the Company's ability to provide a wide range of products to multinational customers on a global basis; the benefits of the Company's focused strategies and operational approach; the achievement of the Company's plans for improved efficiency and lower costs, including stable aluminum costs; the availability of cash and credit; fluctuations of currency exchange rates; the Company's continued relations with its customers; and general business and economic conditions. Should one or more risks materialize or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward-looking statements. Further details on key risks can be found in the Management's Discussion and Analysis section of CCL's 2011 Annual Report, particularly under Section 4: "Risks and Uncertainties." CCL's annual and quarterly reports can be found online at www.cclind.com and www.sedar.com or are available upon request.

Except as otherwise indicated, forward-looking statements do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made may have on CCL's business. Such statements do not, unless otherwise specified by the Company, reflect the impact of dispositions, sales of assets, monetizations, mergers, acquisitions, other business combinations or transactions, asset write-downs or other charges announced or occurring after forward-looking statements are made. The financial impact of these transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them and therefore cannot be described in a meaningful way in advance of knowing specific facts.

The forward-looking statements are provided as of the date of this press release and the Company does not assume any obligation to update or revise the forward-looking statements to reflect new events or circumstances, except as required by law.

Note: CCL will hold a conference call at 1:30 p.m. EDT on Thursday, August 2, 2012, to discuss these results. The analyst presentation will be posted on the Company's website.
To access this call, please dial:
416-340-8530 - Local
877-240-9772 - Toll Free
Audio replay service will be available from Thursday, August 2, 2012, at 6:00 p.m. EDT until Thursday, August 16, 2012, at 11:59 p.m. EDT.
To access Conference Replay, please dial:
905-694-9451 - Local
800-408-3053 - Toll Free
Access Code: 2106150
For more details on CCL, visit our website - www.cclind.com
CCL Industries Inc.
Consolidated condensed interim income statements
Unaudited
In thousands of Canadian dollars, except per share data
Three months ended June 30 Six months ended June 30
2012 2011 % Change 2012 2011 % Change
Revenue $ 337,062 $ 318,894 5.7 $ 678,458 $ 634,519 6.9
Cost of sales 253,367 243,670 510,987 481,707
Gross profit 83,695 75,224 167,471 152,812
Selling, general and administrative 42,265 39,367 79,985 74,420
Restructuring and other items - - - 542
(Earnings) loss in equity accounted investments (24 ) (5 ) (854 ) 84
Results from operating activities 41,454 35,862 88,340 77,766
Finance cost 5,513 5,588 11,024 11,577
Finance income (263 ) (265 ) (571 ) (589 )
Net finance cost 5,250 5,323 10,453 10,988
Earnings before income taxes 36,204 30,539 18.6 77,887 66,778 16.6
Income tax expense 10,338 8,707 21,599 18,126
Net earnings $ 25,866 $ 21,832 18.5 $ 56,288 $ 48,652 15.7
Attributable to:
Shareholders of the Company $ 25,866 $ 21,832 $ 56,288 $ 48,652
Net earnings for the period $ 25,866 $ 21,832 $ 56,288 $ 48,652
Basic earnings per Class B share $ 0.77 $ 0.66 16.7 $ 1.68 $ 1.47 14.3
Diluted earnings per Class B share $ 0.76 $ 0.64 18.8 $ 1.65 $ 1.44 14.6
CCL Industries Inc.
Consolidated condensed interim statements of financial position
Unaudited
In thousands of Canadian dollars
As at June 30 As at December 31
2012 2011
Assets
Current assets
Cash and cash equivalents $ 162,332 $ 140,698
Trade and other receivables 217,229 192,003
Inventories 86,796 86,932
Prepaid expenses 9,074 5,304
Income tax recoverable - 802
Derivative instruments 884 820
Total current assets 476,315 426,559
Property, plant and equipment 680,810 688,099
Goodwill 351,943 355,788
Deferred tax assets 55,095 54,152
Equity accounted investments 40,083 38,464
Intangible assets 30,724 34,853
Other assets 17,450 15,566
Total non-current assets 1,176,105 1,186,922
Total assets $ 1,652,420 $ 1,613,481
Liabilities
Current liabilities
Trade and other payables $ 226,572 $ 233,963
Current portion of long-term debt 18,330 19,750
Income taxes payable 11,507 -
Derivative instruments 2,447 2,530
Total current liabilities 258,856 256,243
Long-term debt 332,737 334,218
Deferred tax liabilities 112,767 118,827
Employee benefits 82,043 77,806
Provisions and other long-term liabilities 10,574 9,507
Total non-current liabilities 538,121 540,358
Total liabilities 796,977 796,601
Equity
Share capital 221,023 218,663
Contributed surplus 11,139 9,421
Retained earnings 672,748 629,469
Accumulated other comprehensive loss (49,467 ) (40,673 )
Total equity attributable to shareholders of the Company 855,443 816,880
Total liabilities and equity $ 1,652,420 $ 1,613,481
CCL Industries Inc.
Consolidated condensed interim statements of cash flows
Unaudited
In thousands of Canadian dollars
Three months ended Six months ended
June 30 June 30
2012 2011 2012 2011
Cash provided by (used for)
Operating activities
Net earnings $ 25,866 $ 21,832 $ 56,288 $ 48,652
Adjustments for:
Depreciation and amortization 25,467 24,992 50,576 48,942
Earnings (loss) in equity accounted investments, net of dividends received 393 403 (45 ) 492
Restructuring and other items - - - 542
Net finance cost 5,250 5,323 10,453 10,988
Current income tax expense 11,475 8,000 25,861 17,408
Equity-settled share-based payment transactions 990 1,000 2,071 2,090
Deferred taxes (1,137 ) 707 (4,262 ) 718
(Gain) loss on sale of property, plant and equipment 12 (257 ) (102 ) (710 )
68,316 62,000 140,840 129,122
Change in inventories 3,912 (2,803 ) 136 (7,251 )
Change in trade and other receivables 1,482 (5,088 ) (25,226 ) (34,695 )
Change in prepaid expenses (4,731 ) (3,093 ) (3,770 ) (1,919 )
Change in trade and other payables (4,792 ) 7,124 (7,124 ) 1,343
Change in income taxes 1,289 255 2,854 206
Change in employee benefits 1,650 2,722 4,236 5,538
Change in other assets and liabilities (4,870 ) (38 ) (4,263 ) 1,373
62,256 61,079 107,683 93,717
Net interest paid (386 ) (328 ) (10,718 ) (11,885 )
Income taxes paid (11,426 ) (7,769 ) (16,406 ) (10,985 )
Cash provided by operating activities 50,444 52,982 80,559 70,847
Financing activities
Proceeds on issuance of long-term debt 22 - 22 1,040
Repayment of long-term debt (2,042 ) (1,107 ) (3,288 ) (69,579 )
Increase in bank advance - (669 ) - (497 )
Proceeds from issuance of shares 316 - 1,868 1,073
Repayment of executive share purchase plan loans - - 233 -
Dividends paid (6,554 ) (5,802 ) (13,104 ) (11,604 )
Cash used for financing activities (8,258 ) (7,578 ) (14,269 ) (79,567 )
Investing activities
Additions to property, plant and equipment (19,667) (28,082 ) (42,967 ) (53,923 )
Proceeds on disposal of property, plant and equipment 39 455 611 1,119
Business acquisitions and other long-term investments (2,018 ) (6,837 ) (2,018 ) (8,792 )
Cash used for investing activities (21,646 ) (34,464 ) (44,374 ) (61,596 )
Net increase (decrease) in cash and cash equivalents 20,540 10,940 21,916 (70,316 )
Cash and cash equivalents at beginning of period 141,924 92,134 140,698 173,197
Translation adjustment on cash and cash equivalents (132 ) (129 ) (282 ) 64
Cash and cash equivalents at end of period $ 162,332 $ 102,945 $ 162,332 $ 102,945
CCL Industries Inc.
Segment Information
Unaudited
In thousands of Canadian dollars, except share and per share information
Three months ended June 30 Six months ended June 30
Sales Operating income Sales Operating income
2012 2011 2012 2011 2012 2011 2012 2011
Label $ 267,247 $ 255,883 $ 39,097 $ 37,303 $ 541,123 $ 503,639 $ 85,290 $ 79,238
Container 48,115 42,567 4,267 2,079 94,261 90,218 6,683 5,819
Tube 21,700 20,444 4,523 3,671 43,074 40,662 8,518 6,769
Total operations $ 337,062 $ 318,894 47,887 43,053 $ 678,458 $ 634,519 100,491 91,826
Corporate expense (6,457 ) (7,196 ) (13,005 ) (13,434 )
Restructuring and other items - - - (542 )
Earnings (loss) in equity accounted investments 24 5 854 (84 )
Finance cost (5,513 ) (5,588 ) (11,024 ) (11,577 )
Finance income 263 265 571 589
Income taxes (10,338 ) (8,707 ) (21,599 ) (18,126 )
Net earnings $ 25,866 $ 21,832 $ 56,288 $ 48,652

Contact Information

  • CCL Industries Inc.
    Sean Washchuk
    Senior Vice President and Chief Financial Officer
    416-756-8526
    www.cclind.com