Operator: Good morning, and welcome to CCL Industries Fourth Quarter Investor Update. Please note that there will be a question-and-answer session after the call. The moderator for today is Mr. Geoff Martin, President and Chief Executive Officer; and joining him is Mr. Sean Washchuk, Senior Vice President and Chief Financial Officer.

Please go ahead, gentlemen.

Sean Washchuk: Good morning, everyone. Sean Washchuk here. Let's jump right into it. Moving to Slide 2, our disclaimer on forward-looking information.

I'd like to draw everyone's attention to our updated disclaimer regarding the forward-looking statements. I'll remind you that our business faces known and unknown risks and opportunities. For further details of these key risks, please take a look at our 2024 and 2023 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 on sedarplus.ca. Moving to the next slide, our financial summary for the fourth quarter and the year.

For the fourth quarter of 2024, sales increased 9% with 6.8% organic growth, 1.4% acquisition related growth and 0.8% positive impact from foreign currency translation, resulting in sales of $1.81 billion compared to $1.66 billion in the fourth quarter of 2023. Operating income was $267.9 million for the 2024 fourth quarter compared to $254.8 million for the fourth quarter of 2023, a 5% increase excluding the impact of foreign currency translation. Jeff will expand on our segmented operating results of our CCL, Avery, Checkpoint and Innovia segments. Corporate expenses were down for the 2024 fourth quarter due to reduced long term variable compensation expense compared to the fourth quarter of 2023. Consolidated EBITDA for the 2024 fourth quarter, excluding the impact of foreign currency translation, increased 7% compared to the same period in 2023.

Net finance expense was $19.1 million for the fourth quarter of 2024, the same amount for the 2023 fourth quarter. The overall effective tax rate was 22.9% for the 2024 fourth quarter, less than the 57% effective tax rate recorded in the fourth quarter of 2023. The decrease in the effective tax rate can be attributed to a $95 million goodwill impairment loss recorded in the 2023 fourth quarter without any associated tax benefit. The effective tax rates may change in future tax periods depending on the proportion of taxable income earned in different tax jurisdictions with different rates. Net earnings for the 2024 fourth quarter were $179.8 million compared to the $38.8 million recorded in the 2023 fourth quarter.

This was impacted by the aforementioned goodwill impairment charge in 2023. For the year ended December 31, 2024, sales, operating income and net income increased 8%, 13% and 60%, respectively, compared to the year ended December 31, 2023. 2024 included results from nine acquisitions completed since January 1, 2023, delivering acquisition related sales growth for the period of 2.3%, organic growth of 6.1%, foreign currency translation was a tailwind of 0.6%, all to sales. Net income included a $78.1 million non-taxable, non-cash revaluation gain recorded in the second quarter of 2024 when we acquired the final 50% interest in our Pacman CCL joint venture, now fully consolidated. In the 2023 year, the company recorded the goodwill impairment charge of $95 million within the Innovia segment, all impacting the 60% increase to net income for the comparative years.

Moving to the next slide, earnings per share. Basic earnings per Class B share were $1.01 for 2024 fourth quarter compared to $0.22 for the 2023 fourth quarter. Adjusting for the $0.01 of restructuring and other expenses resulted in adjusted earnings per Class B share of $1.02 an improvement of 5.2% compared to the $0.97 for the fourth quarter of 2023. The increase in adjusted basic EPS of $0.05 is principally attributable to an improvement in operating income accounting for $0.06 a reduction of corporate expense for $0.03 partly offset by the combination of a reduction in JV equity earnings, the negative impact of currency translation and the higher adjusted effective tax rate summing to a reduction of $0.04. Moving to the next slide, our free cash flow from operations.

For the fourth quarter of 2024, free cash flow from operations was an inflow of $261.7 million slightly behind the $273.8 million posted in the 2023 fourth quarter. For the year ended December 31, 2024. Free cash flow from operations was $606.5 million compared to $559.6 million for the 2023 year. This change is primarily attributable to an increase in cash provided by operating activities, which was generated by improved adjusted earnings, partly offset by an increase in working capital compared to 2023. Moving to Slide 6, our returns to shareholders.

For 2024 year, the company repurchased 2.6 million shares for total proceeds of $200.6 million. Including the 9.4% increase in the 2024 annual dividend that was announced in February of 2024. Dividends paid year to date have amounted to $206.4 million representing a solid 27% dividend payout ratio. This totaled $407 million returned to shareholders in 2024. Next slide, our cash and debt summary.

Net debt as at December 31, 2024 was $1.62 billion an increase of $110.7 million compared to December 31, 2023. The increase is principally a result of funds used for capital expenditures, business acquisition 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 1.08x, down from 1.13x reported at the December 2023. Liquidity was robust with $829 million of cash on hand, approximately US$1 billion dollars of available undrawn credit capacity on the company's revolving credit facility.

The company's overall average finance rate was approximately 2.6% at December 31, 2024, compared to 2. 8% at December 31, 2023. The company's balance sheet continues to be well positioned as we move into 2025. Geoff, over to you.

Geoff Martin: Thank you, Sean, and good morning, everybody.

I'm on Slide 8, highlights of capital spending for the year 2024, just around $457 million and we're forecasting to spend about $485 million in 2025. Slide 9, just a picture of a plant we have just completed in Ho Chi Minh City in Vietnam. It's our new apparel label plant. Vietnam is a very important country for apparel sourcing, and that plant will start up in the first quarter of 2025. Page 10, highlights for the CCL segment.

5.4% organic growth, low single digit in North America, high single digit in Latin America, double digit in Asia Pacific, a lot of that driven by the success of CCL Design and low single digit decline in Europe. Profitability gains were strong in the HPC business, CCL Design and CCL Secure, modestly lower in Healthcare and Specialty but a lot more reduced in food and beverage, which faced tough comps to a very strong fourth quarter and end of the year in 2023. Slide 11, highlights for our JVs. Just to note here, Sean mentioned it a couple times already, Pacman CCL became a fully owned subsidiary after five months of 2024, so we've had seven months consolidated. That's the reason for the difference in the net income in the fourth quarter there.

And you'll see we actually managed to, in the JV area, exceed last year's numbers. That was due to some foreign exchange issues in Egypt in the year of in the back half of 2023, then reversed in the early part of 2024. Page 12, highlights for Avery. A little soft quarter in the international business and a delayed start to the peak horticultural season in Europe, but that came back with a bang in January. Solid quarter in North America with favorable mix, some foreign exchange benefits related to the Mexican peso and continued improvement in the U.S.

horticultural business. Slide 13 highlights the checkpoint. Strong quarter in the merchandise availability business, solid gains all around, especially in Europe, on some new business wins. In the apparel label business, we continue to see strong sales growth north of 20%, aided by share gains in RFID. But profits fell on unfavorable mix.

A lot of issues with foreign exchange in Turkey and a poor quarter in Latin America. Slide 14 highlights for Innovia. Strong volume growth and share gain in North America, especially in the label segment, and profitability got boosted by productivity, cost savings and tight commercial discipline. We also saw improved results in Europe, also in Poland, where we continue to build share in label films and the Ecoflect product line, most of which we sell internally to CCL. The investment largely completed at the big new site in Germany in Leipzig for our new low-gauge films label plant for pressure-sensitive labels, that plant will start up likely sometime in Q2 of 2025.

Some comments on the outlook. The label and packaging businesses have had a solid start so far. New plant losses that we had quite a bit of in particularly in the second half of 2024, those should start to narrow. CCL Design, however, laps easy comps in electronics, so their comps are much more difficult this year than they were last year. And as you all know, we have a slowing automotive industry.

CCL Secure order backlog improved significantly compared to a slow start to 2024. Avery has had a solid start, particularly around all those comments I made about horticulture. Checkpoint comps in apparel are significantly more difficult, frankly, for the whole year ahead we faced, but RFID is still growing. Innovia continues to improve. And just another reminder about that German plant start-up costs that we'll have to face in Q2.

And at current exchange rate, we expect foreign exchange to be a modest tailwind for the year coming. So, with that, operator, we'd like to open up the call for questions, please.

Operator: [Operator Instructions] Your first question is coming from Ahmed Abdullah of National Bank of Canada.

Ahmed Abdullah: Can you provide us any color on start-up costs that you flagged last quarter? How much of that impacted EBITDA in this quarter?

Sean Washchuk: It's not a material number. It's worth calling out because we've had a number of start-ups last year.

We had a wine and spirits plant in Italy that started from scratch, one in Spain that started from scratch. We opened up a new plant in North Carolina for the pharmaceutical industry that had to go through qualification processes with its customers. We have the RFID inlay plant in Checkpoint. So, if you look at it annually, it certainly will be less than $10 million annually. So that gives you a rough flavor, something in that order.

Ahmed Abdullah: Okay. Perfect.

Sean Washchuk: And should we factor in a similar run rate in the first quarter of 2025? Time will tell.

Ahmed Abdullah: Okay. And so, we've been seeing some industries that operate across the U.S.

borders with Canada and Mexico increasing their level of inventory domestically. Are you noticing any of that in your results? Is there a pull-forward dynamic that we kind of should think about in 2025?

Sean Washchuk: I don't think we saw any of that in the fourth quarter. We haven't seen much of that in the Q1 order trends. But most of our businesses are local, local. We've seen a little bit of it in our aluminum can business because obviously, a lot of speculation about how these tariffs will affect aluminum products and downstream aluminum products.

So, we've seen a little bit of it there, but that's 5% of our sales. So, it's not a big factor in how we see things.

Operator: Your next question is coming from Nicolai Goroupitch of CIBC Capital Markets.

Nikolai Goroupitch: One of your competitors on the RFID side had recently scaled back its growth outlook due to volume headwinds with a large logistics customer. Do you see any sort of similar headwinds in your business?

Geoff Martin: We don't have any logistics customers in RFID.

So, our business is largely retail-driven and over 90% apparel driven. So, I think most of the headwinds you're referring to there have been around the competitive elements in the logistics space. And we are currently not a participator in that part of the RFID segment.

Nikolai Goroupitch: Okay. Great.

And then considering the year-over-year decline in Check Point EBITDA margins for Q4, do you have any expectations where margins can stabilize in the segment going forward?

Geoff Martin: Well, we had a very -- we had an unusually strong fourth quarter last year. So, the swing in the foreign exchange in Turkey was a meaningful number. So, that was a factor. We had a weak result from our business in Brazil in the fourth quarter. And then we had mix, which was not as favorable as it was last year.

So, depending on the types of RFID labels bought by which customers, the mix was quite a positive factor last year and a negative factor this year. But I think it's just the vagaries of 4Q last year versus 4Q this year. But I think the underlying trend is if you look at the year-to-date number, that's probably more representative of what's really going on in the business as we speak right now.

Operator: Your next question is coming from Sean Steuart of TD Cowen.

Sean Steuart: I wanted to follow up on the RFID industry trends, and there was mention native Avery Dennison seeing some slowdown in their growth path.

You're much earlier on the growth curve than they are. Curious on your perspective on the runway for further market share gains for CCL and RFID applications and further context on rollout into non-apparel applications as you move forward?

Geoff Martin: Well, our focus is on apparel and then goods that go into the non-apparel retail supply chain. So, the Walmart initiative and in particular, and the numbers of CPG companies that are required now to tag products that go into the general merchandise aisle of a Walmart store. And that's what our plant in Mexico is particularly focused on starting up with. And they are the two things that we're focused on.

And we still think RFID will grow. We certainly can see that our growth rates, the factor of our size compared to others in the space. So, as we grow, we'll probably see our growth rate narrow down to what the industry average is at some point. But right now, we're in a good spot, and we'll see what the next year brings.

Sean Steuart: And just one other question.

The qualitative commentary with respect to the Q1 outlook, it sounds constructive, and there was a lot of reference to various segments having a solid start to the year. Should we read that as ongoing clear organic growth for a number of these segments? Is it a solid start relative to typical seasonal trends? Just trying to qualify the reference point you're talking about with that commentary.

Geoff Martin: It's one month in. So, I'm not going to paint the picture based on one month's data, but the start of the year was okay. And that's about all I can really say.

You know as well as I do, there's a lot of black clouds on the horizon that tariffs may not affect us particularly in a big way because we're more of a local, local supplier, but our customers may be forced into a lot of decisions that could be quite disruptive. So, we're as concerned as most people in business are about what this all means and particularly the rather chaotic way they're being implemented. So, we wish it was a bit more -- it has to be done. We wish it was a bit more organized. And so, it's not like we're looking at a year that the sun is shining and the roses are all smelling of nice things.

There's a few things to sort out. So, we'll have to just wait and see how things unfold. But we haven't seen anything that causes us in our order intake to have pause for worries so far.

Operator: Your next question is coming from Jonathan Goldman of Deutsche Bank.

Jonathan Goldman: Geoff, in the outlook, you noted so far in Q1 sales orders are stable.

I just want to clarify, does that refer to year-on-year or quarter-on-quarter? And is that across all segments?

Geoff Martin: I think you're referring to the CCL commentary I gave.

Jonathan Goldman: Whatever it was printed in the press release, I believe.

Geoff Martin: Yes. So, I would say it's in line with what we expected, and we expect it to grow. And so far, we've seen what I said, a solid start.

It's in line with our expectations so far. I mean we grew earnings last year by 16%. So, are we going to repeat that in 2025? That's probably, frankly, a bit of a long shot. But are we expecting to grow them by some amount? Yes, we are, but we'll have to wait and see how all of this stuff going on in the world affects our customers. And that's -- to the extent we're cautious, I mean, that's what we're cautious about.

Jonathan Goldman: No, that's fair. And I guess speaking of your customers, like we've been reading about CPG companies increasing advertising and marketing spend to support demand. Maybe it's too early if you've seen any of that impact your volumes, but what's the typical lag between when they start increasing?

Geoff Martin: The environment we're in, in the CPG space, is it's very difficult for them now to pass through pricing increases. There's a lot of pressure at retail to at least put a plug in the plug hole and even start to reverse some of the inflation that we've seen in the last two or three years. So, there's a lot of pressure around that.

So, if you're a CPG company, then growing by volume and by value and doing promotions and all that sort of thing is the only way to grow. And that often breeds interest in packaging to promote products in store and online. So, we -- I mean, I think the CPG space is still muted, but it's okay as I would describe it.

Jonathan Goldman: Interesting. And maybe if I could just squeeze one more in.

Are you able to quantify the FX headwind in Turkey, the impact on margins?

Geoff Martin: It's not material. It's material to Check Point, but it's not material to the company.

Jonathan Goldman: Could you quantify the Checkpoint impact?

Geoff Martin: No.

Operator: Your next question is coming from Daryl Young from Stifel.

Daryl Young: Just wanted to follow up a little bit on the tariff question.

Are you anticipating any pull forward of demand or changes to your order flow as companies maybe build safety stock in advance of some of the uncertainties that are out there or have you seen that at all to start the year?

Geoff Martin: We haven't seen it so far. And the business where we think we may have seen a bit of it is in our aluminum can business, which probably isn't too surprising. But that's a fairly small part of the company at Check Point at Innovia, CCL Label, CCL Design, CCL Secure, we haven't seen any of that activity so far.

Daryl Young: Okay. And then with respect to CCL Design, can you just remind us of the relative profitability of automotive and electronics and whether the slowdown in auto could be a margin headwind for the broader CCL segment? Or is it too small to move the needle?

Geoff Martin: Too small to have that much impact.

It's a $300 million business. The margins in the electronics space are quite a bit higher. And we've got one or two of our operations in automotive have come off a difficult 2023, and we expect them to do better in 2024. So, we've got some internal things going on that may balance some of the industry downtrend in automotive. But the demand is -- I wouldn't say it's declining, but it's slow.

The new project arena is, I would characterize as slow.

Daryl Young: Got it. Okay. And then going forward, as we move into -- in the CCL segment, I would say, more of a normalized or balanced volume price mix versus the last few years, which I think was more maybe volume weighted. Is there any impact to operating leverage? And I guess, said differently, can you sustain the margins you've seen across '24?

Geoff Martin: Well, I think if you look back in the history of CCL Label over a decade or more, you don't see much margin variation.

And we've been through the global financial crisis and COVID.

Operator: Your next question is coming from Arthur Nagorny of RBC Capital Markets.

Arthur Nagorny: One of your suppliers has called out deflationary cost pressures, which they're passing on. I was just wondering what you're seeing on the cost side and the kinds of conversations you're having with your customers today?

Geoff Martin: Deflation or inflation. I didn't hear the first -- you said inflation?

Arthur Nagorny: Deflationary, deflation.

Geoff Martin: Yes. I would say in some parts of the label space, we're expecting some modest deflation in 2025. But I would characterize it as modest. Nothing is going to move the needle for us one way or the other.

Arthur Nagorny: Got it.

And then I just wanted to follow up on tariffs. I think you mentioned you supply locally. But in terms of sourcing, do you have any exposure in terms of cross-border exposure? Or is –

Geoff Martin: By and large, local to local. So, we do have little pain points here and there. And -- but it's so chaotic.

If you try and find out what's -- how these things are going to be implemented, it's very difficult to get straight answers from anyone dealing with border control. So, we expect it will be -- it will probably go ahead on things that are already tariffs like China, like the metals arena, but what happens beyond that in terms of the broad brush stuff that was announced earlier and then very quickly withdrawn we're not -- we haven't seen anyone panicking about that and doing things in the way they interact with us that would suggest there's anything going on with the order mix coming into us with the exception of our can business.

Arthur Nagorny: Got it. And then I just had a question on buybacks. Obviously, you're active once again this quarter.

But just given where the share price is today, do you see any potential for accelerating the pace of buybacks going forward?

Geoff Martin: Possibly.

Arthur Nagorny: And I'll just try to sneak one last one in here. On M&A, can you maybe just share what your pipeline looks like today and what you're hearing from potential acquisition candidates?

Geoff Martin: No change. No change from the previous comments we've made. We have a lot of things that we're working on.

The environment hasn't changed.

Operator: Your next question is coming from Ahmed Abdulla of National Bank of Canada.

Ahmed Abdullah: Just a follow-up on the M&A question. Are you or sellers holding off on signing anything given the macro uncertainty?

Geoff Martin: No.

Ahmed Abdullah: Not a factor at all.

Geoff Martin: No.

Ahmed Abdullah: Okay. And just one last one. On Innovia, it's nice to see the top line growth continuing. Where are we in terms of achieving the operational savings that were being targeted? And did we see any of that in this quarter?

Geoff Martin: Some of it, not all of it.

But we had a much better year in Europe than we had in '23. So, the closure of the Belgium plant has gone very well. We've agreed now the sale of the real estate. So, that looks like that will go forward in the first half of the coming year. So, the project went ahead very smoothly, and we're very pleased with the outcome.

Operator: And your next question is coming from Stephen MacLeod of BMO Capital Markets.

Stephen MacLeod: I had a little bit of trouble connecting this morning. So, I just wanted to get a few questions in. I appreciate the color so far. Just with respect to Check Point, I know you called out sort of the Turkey FX being a big impact.

Was that most of the -- would that account for most of the margin decline on a year-over-year basis?

Geoff Martin: No, no, no. I think it was that. It was mix. Mix was a pretty big factor. So, we had very rich mix in the fourth quarter.

And I wouldn't say we had bad mix in fourth quarter this year, but it was nowhere near as rich as it was the year prior. And then we had a very difficult end of the year period of our operation in Brazil. So, all three of them were contributing.

Stephen MacLeod: Okay. That's helpful.

And then I guess as you swing into 2025, it sounds like the outlook is sort of mixed on the Checkpoint business. Are you still seeing mix as a negative headwind?

Geoff Martin: No, I don't think so. I think we'll just have to wait and see how things unfold. But it's all driven by how technically complex the particular RFID inlays are used, and we have to wait and see who orders what in the first quarter of the year. But it was unusually strong in Q4.

Stephen MacLeod: Okay. That's helpful. And then maybe just turning to Innovia. -- you've currently called out kind of $17 million to $20 million in savings from the Belgium plant closure. Is that -- I know you said you didn't see all of it in Q4, but you saw some.

But do you still expect to see that flowing through in fiscal 2025?

Geoff Martin: We hope so. We have some offsets with the start-up costs in Germany. So, this year, there's a lot going on at Innovia. So, we've got the benefits of the flow-through from Belgium, and then we've got the start-up in Germany. So -- but the strength in Innovia, I would say, was particularly driven by the results in the Americas and a very nice recovery in Poland, which we expect to see that continue in the first part of next year, too.

Stephen MacLeod: Okay. Great. And then maybe just finally, you highlighted on your investment highlights slide an investment in Vietnam. It doesn't look material if it's a single plant, but just wondering if you can give a little bit of color around kind of the investment and what you expect to --

Geoff Martin: Because it's important in the apparel space. So, when you think about the most important countries to be in the world for the apparel supply chain, China is still #1.

Bangladesh is #2. And Vietnam is certainly in the top 3 or 4 countries and we've never had much of a presence there. So that's for our apparel label and also, frankly, for growth in RFID, it was very important for us to have presence in Vietnam that was big enough to be credible to the customers and -- we've now gone through the process of building the building there, which is not easy. And we're in good shape for a start-up in 2025.

Operator: And your next question is coming from Michael Glen of Raymond James.

Michael Glen: Geoff, when we go back to your outlook for Q4, it feels like it was more conservative than how results came in. I'm just trying to understand how things differed versus expectations in the quarter on your side.

Geoff Martin: Well, I think what we called out was I think the comps were more difficult. I think we called out that the quarter was going to be difficult. We were pointing out that the comps are more difficult.

And as you saw, the rate of gain over prior year narrowed pretty significantly in Q4 compared to the prior three quarters, and that's what we were calling out. If you got interpreted that we were negative about Q4, that's not what we said or what we meant. And I think it transpired pretty much as we expected. So, we were not surprised in any shape, way or form by how Q4 panned out. As you've seen, the pace of gain over prior year quarters narrowed pretty substantially.

Michael Glen: And were there any segments in CCL that you would say like the Home and Personal Care, you're highlighting the strength there. Was that a surprise versus expectations in Q4?

Geoff Martin: No.

Michael Glen: Okay. And then with RFID, I know you're up against difficult comps, but you're also up against what looks like a pretty large increase in capacity. I'm just trying to reconcile the two items as we look through 2025.

Geoff Martin: Yes. So, at the end of last year, we think about numbers of inlays. The end of last year, we were running at about a 3 billion unit inlay clip. We now have capacity in place to raise that to $5 billion. And you need some service capacity in this space to look after the customers properly.

So, I'm quite sure we'll see unit volumes growing double digits in the year ahead. because we're focused on channels and parts of the business that are growing. And we're focused on the parts of the RFID market where we add value beyond the inlay. So, we're coding and distributing and have software integration with our customers. There's a lot more value add in that part of the business when you're just supplying a commodity inlay, which a number of people can make and the price point is a deciding factor.

Michael Glen: Okay. And then finally on my side, just overall, so $485 million of Capex this year and a fairly heavy level or high-level last year. So, are you able to indicate what type of manufacturing square footage growth you're seeing with that capital investment?

Geoff Martin: No, not offhand. But we put quite a bit of money last year into our aluminum can business, and we've got more going in this year because that's growing quite a bit. And so that was one factor.

You saw we've had quite a number of new plants we've referred to. That was another factor. But I couldn't quantify it in terms of manufacturing square footage. But if you look at the capital expenditure rate as a percentage of sales, the last five, six or seven years, you'll see it's in a pretty narrow range, and we're still well within that range.

Operator: Thank you very much.

Well, we appear to have reached the end of our question-and-answer session. I will now hand back over to the management team for their closing comments.

Geoff Martin: Okay. Thank you very much, Jennifer, and thank you, everybody, for joining the call today. We look forward to talking to you in May.

And hopefully, we'll all see a little bit of sunshine. Take care, and thank you very much.

Operator: Thank you, everyone. This does conclude today's conference. You may disconnect your phone lines at this time, and have a wonderful day.

Thank you for your participation.