Q3 2021 CCL Industries Inc Earnings Call
[music].
Okay.
Good morning, ladies and gentlemen, welcome to CCL industries third quarter Investor update please.
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 Wash, Chuck Senior Vice President and Chief Financial Officer. Please go ahead gentlemen.
Thank you Paul Good morning, everybody welcome to our third quarter Investor update.
Nicole dive straight away to show more struck him take you through the numbers.
Thank you, Jeff I'll turn everyone's attention to slide number two.
Our disclaimer regarding forward looking information 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 2020 annual M D N a.
Particularly the section risks and uncertainties, our annual and quarterly reports can be found online at the company's website, CCL and dot com or on SEDAR Dot com.
Thank you.
Looking ahead for the third quarter of 2021 sales increased eight 4% with organic growth of 10, 3% acquisition related growth of two 2%, partially offset by four 1% negative impact from foreign currency translation results.
And sales of $1 $49 billion compared to 1.3 dollars 7 billion in the third quarter of 2020.
Operating income was $223 $9 million for the 2021 third quarter compared to $246 3 million for.
For the third quarter of 2020, a 5% decline excluding the impact of foreign currency translation.
Jeff will expand on our segmented operating results for our CCL, Avery checkpoint and and <unk> segments.
Consolidated EBITDA for the 2021 third quarter, excluding the impact of foreign currency translation decreased approximately 3% compared to the same period in 2020.
Net finance expense was $14 2 million for the third quarter of 2021 compared to $16 $4 million for the 2023rd quarter.
The decrease in net finance costs is due to the lower average debt outstanding for the comparative quarterly periods.
The overall effective tax rate was 24, 1% for the 2021 third quarter down from 25, 1% effective tax rate recorded in the third quarter of 2020.
The effective tax rate may change in future periods, depending on the proportion of taxable income earned in different tax jurisdictions with different tax rates.
Net earnings for the 2021 third quarter was $153 3 million in line with the prior year comparative quarter, but up 5% excluding foreign currency translation.
For the nine months period sales increased 14%.
Operating income increased 16% and net earnings increased 23%, excluding the impact of foreign currency translation on the nine months periods.
2021 included results from 13 acquisitions completed since January one 2000.
2020, delivering acquisition related sales growth for the period of two 1% organic sales growth of 11, 5% and four.
Currency translation headwind of four 5% to sales.
Yeah.
Moving to earnings per share.
Basic earnings per class B share were <unk> 85 for the third quarter of 2021 compared to <unk> 86.
For the third quarter of 2020.
Adjusted basic earnings per class B share were <unk> 85.
For the 2021 third quarter compared to adjusted basic earnings per class B share of <unk> 93.
For the third quarter of 2020 the.
The change in adjusted basic earnings per share to <unk> 85 from <unk> 93.
<unk> is primarily attributable to a decrease in operating income of <unk>.
<unk> negative foreign currency translation offset by a <unk> reduction in tax rate.
For the 2021 nine months period to 32% increase in adjusted basic earnings per class B share was largely due to 42.
Increased operating income.
Offset by <unk> 11 from foreign currency translation.
And increases in corporate expenses of <unk> offset by a similar reduction in <unk> from lower taxes, and lower interest expense at <unk>.
This resulted in adjusted basic earnings per share of $2 56 for.
For the $2021 nine months period compared to $2 24.
For the 2029 months period.
Yes.
Free cash flow from operations for the third quarter of 2021 was $152 $4 million compared to $234 million for the 2023rd quarter.
An increase in cash taxes paid and net capital expenditures, coupled with the retraction retrenchment of net working capital reduced free cash flow from operations and cash provided by operating activities for the third quarter of 2021 compared to the third quarter of 2020.
For the 12 months ended September 32021, free cash flow from operations decreased $13 4 million.
Compared to the 12 months ended September 32020. This comparative decline is attributable to an increase in net capital spending over the trailing 12 months period.
Our cash and debt summary.
Net debt as at September 32021 was $1 two 5 billion.
A decrease of approximately $144 million compared to.
December 31 2020.
This decrease is principally a result of debt repayments during the first nine months of the year, partially offset by a decrease in cash on hand at September 32021, compared to December 31 2020.
The companys balance sheet closed the quarter in a strong position our balance sheet leverage ratio was 1.06 times declining from one to four times at the end of December 31 2020.
Our liquidity was robust with $622 5 million of cash on hand at U S. $1 2 billion of available Undrawn credit capacity on the company's revolving bank credit facility.
The company expects to repay the current portion of its long term debt from its free cash flow or from its bank revolving credit facility in the near term.
The Companys overall finance rate was largely unchanged at approximately two 4% at September 32021, compared to two 3% at December 31 2020.
The company's balance sheet continues to be well positioned as we move through 2021 and into 2022.
Jeff over to you.
Thank you Sean Milligan, everybody I'm on slide number seven highlights the capital spending for the year $197 million net of disposals.
Is it lower than we would've liked really due to supply chain issues also in the machine building industry slowing up the rate of the pace of our investments and.
We expect to spend about $100 million and the remaining quarter of the year and 300 million three year of 2021 in total.
Slide number eight highlights for the <unk> segment.
Regionally organic sales growth up mid single digits in North America double digit in Latin America, and low single digit decline in Europe.
It was really due to the <unk> <unk> decline.
It impacted our organic growth globally, excluding ccs secure organic growth in the other businesses in the segment was six 4%.
So I think I explained to you already that Knowles here, we had a large windfall banknote orders in third quarters in 2020 last year, which boosted.
Operating margin for last year considerably and also top line. So just for you know historical reference our operating margin reported in the year of 2019 was 15, 3% 14, 4% in the year of 2018 and 13, 3% in the year of 2017. So you can see quite clearly the third quarter.
Through 2020 last year.
An unusual quarter to put it mildly.
Operating income declined really came from the exceptionally tough comps.
And the FX translation between the two it amounted to about $30 million.
<unk> was also a factor in raw materials labor freight and energy.
Hard to quantify in specific size details, but it wouldn't be unreasonable to assume we were unable to recover about 100 basis points of sales and unrecovered inflationary impacts during the quarter.
Next slide page nine highlights about joint ventures solid quarter, some challenges in Russia due to the foreign exchange with the ruble, but otherwise the solid quarter all around.
Slide 10, the success success story for the coals are a result of debris. This was a record called we've ever enjoyed with this business.
Both in absolute dollars on an operating margin is everything recovered very nicely over and soft prior year period. Despite the foreign exchange rate translation challenges we've experienced in every business we have globally.
The strong recovery in all regions and in all products. The one business. It doesn't just still remain below normal as there had been batch business, particularly in business conventions that sports events and things of that it will get to a return to normal.
Let's see.
And the category in total is vastly improved.
The back to school season was much better than 2020, despite supply chain issues and significant frightening and component inflation from China, where we source critical components for our back to school product lines.
Very pleased with the results for maybe for the quarter.
Moving onto slide 11 highlights the checkpoint very strong sales quarter, particularly in our apparel label business, which is up 30% on strong growth in RFID and the units are acquisition.
However, I am I guess business, which also grew in all regions of the world, except Asia Pacific, where many retailers remain under lockdown restrictions.
The ability of it was impacted by normalizing expenses and significant freight and components inflation from China, and China as a source for most of the products, we sell in that category antenna gates.
Labels tags.
All kinds of components that it falls to run our SaaS business coming out of China, and we sell them all around the world So fragrant fried.
And shipping culled from China, as well as significant component inflation really was the cause of all the profit drop for the for the quarter.
Moving on to slide 12 highlights III Innovia very strong sales gain about 44% sales gain that we see that excluding FX about 80% of that is really down to the resin pass through the other 20% is down to volume improvements in our mix.
Roughly an 80 20 principle.
So our productivity and the volume gains that we enjoyed was largely offset to a very significant extent by energy and freight inflation and the effect of the UK pound strength against the US dollar on export sales from a large operation in the U K to the United States.
Plug power.
Investment is on track for the end of 2021 early 'twenty two to start up and we have seen some easing of the resin environment in the early months.
Sorry early days of November so we've seen the first signs of some normality returning to the resin market.
Slide 13 outlook commentary for the coming fourth quarter.
Fourth quarter 2020 earnings were up 40% on a normal non pandemic affected pandemic comparative period in 2019, so it's a pretty high bar, especially at today's FX rates.
We do expect things that ABB will continue to improve.
Both businesses in the middle of executing price increases to recover the inflation I talked about any wrong.
<unk> designed business will be affected by the chip shortage smoke jumped in automotive, but also in the electronics space, whereas the on supply chain challenges and affecting certain component.
Component availability in China.
Certain devices.
Coal CCL units and home and personal care food and beverage and health care and specialty will do well to manage through the results of the prior year quarter, but T cells to kill Tom <unk> significantly as we won't have a repeat of what we saw in Q3 because of it.
Windfall orders that we received in Q4 of last year.
I mentioned on the resin market is stabilized, but we still have not thought to navigate through tough energy and freight inflation challenges.
With the <unk> business, especially in Europe, and we have to get through the Alco trend that can float transitioning the large investment, we're making in Poland, which is which will happen in Q4 and start up in Q1 next year.
So with that operator, we'd like to open up the call for questions.
Certainly ladies and gentlemen, the Soros now open for questions.
Do you have a question or comment please press star one on your phone at this time.
We ask that while posing your question you. Please pickup your handset is listening on speaker phone to provide optimum sound quality. Once again, please press star one.
Have any questions. Please hold while we poll for questions.
And we have some questions that she was the first one is coming from Adam Josephson from Keybanc Adam Your line is lives.
Jeff and Sean Good morning.
Got it.
At Jefferies. Sean FX can you help me with that current rates, what the drag would be either on sales or EPS this quarter.
John do you want to take that.
Talking about both Colorado milk third quarter, Yeah, just fourth quarter Jeff.
Well I think we saw a.
So far its starting at about the same.
And it's largely driven right now by the U S dollar and the Euro where I would've said earlier on this year. It was principally the U S dollar, but we're seeing both the drag on sales right now.
The drag would be comparable the earnings drag would be comparable a year I'm just trying to trade to trade a false sense probably.
Yeah. Okay. Okay. Thank you for that Geoff on the inflationary pressures that you've talked about in the press release, you expect them to continue well into next year, obviously, you're seeing some easing in resin prices in the U S and Europe I believe you just said so what are the inflationary pressures that you expect to persist well into next year and then can you.
Just elaborate on the measures that you've talked about in our press release and trying to offset those pressures.
Well they they vary a lot by segments. So in the CCL space.
It's small raw materials than it is right in the TCR space most of our customers pick up from us, especially in the U S already a factor there, but we've had inflation labor materials business, which we're having to pass through to our customers and.
And we usually don't have pass through arrangements in that in that industry, but because there's so much churn in the kinds of labels people buy it changes all the time.
So as they would design change, we reprice and it always takes a cultural so to work through inflationary pressures I.
I think also we've had the cost benefits we had last year. So we had social security tax holidays in China, which were a big impact.
Which have all gone away. So we had some cost benefits last year, which have gone away so different kind of inflation, but costa is written.
Because of that too.
Uh huh.
The checkpoint.
Business is really around the stuff.
The stuff that we have to import from China. So you've probably read all about the challenges of a 40 foot shipping containers coming out of China.
But I don't think we're gonna have to pause on some.
Some increases.
Due to that.
Fourth quarter.
And we'll be mitigating some of it through reengineering product lines and doing all the things you'd expect us to do but.
Total company wide.
I would estimate.
In Q3, we probably had between.
Between 80 and $85 million.
Total inflation is a pretty big number for a company about size.
We probably mitigated.
A good chunk of that 70, well over $60 $60 million to $65 million, but we probably have to eat 20 million something like that companywide.
So a pretty big number for for just for one quarter.
And are you expecting a similar situation in <unk> in terms of what you'll have to eat.
Well without the benefit of some price increases kicking in.
In Q4, and we will have some benefit in some easing so we'd seen China shipping freight ease.
The peak holiday season month shipping as October, but getting stuff into the retail channel into the into our into still into the distribution centers the distributions and the holiday period.
So we've seen freight shipping ease a little bit in Q4, we've seen aluminum come down quite.
Quite significantly in the in the early months of early early days of November we've seen them, a big resin tail off in the U S.
So some of the some of the steam that was in the cooker and summer has blown out of the base, but there's still a fair amount there relative to what we had before so we've still got some pricing work to do to recover right.
But that's that's great. Thanks, Jeff and a couple of other just you Didnt mentioned demand trends in your outlook commentary I don't think so I assume it's the trends are flattish sequentially, but.
Is that.
Is that the correct.
Demand is still still still a pretty strong yeah, we haven't seen any falloff in revenue or anything like that so.
Most of our businesses are facing.
Strength in demand.
Or is it still weak as automotive so.
You've read all about the chip shortage in that industry and we haven't seen really much of any improvement there. So for every for every OEM. That's gone one step forward. Another one that's taken one step back.
So that leaves about it looks like that wasn't really improved very much in October I'm going to get significantly worse in the in the electronics industry really more around the closure of supply chains in Vietnam.
The critical components for our cell phones and things like that.
Yeah, and just one last one Jeff as we approach next year are there any segments that stand out to you as having opportunities for particularly good growth next year I asked because Avery is probably on track to get close to where it was two years ago.
Obviously.
<unk> had a.
Nice year, even with the with to secure a falloff in <unk> or is there any particularly obvious source of profit growth that comes to mind for you next year.
And anything we'll have I think it will have a big recovery in CCL design next year. So.
Because the automotive has been in the dumps ready. It's I mean, it's gonna have a worse here in 'twenty one than they had in 2020, you just really unbelievable when you think about it but it looks like that's what's going to happen.
So we will have a huge recovery next year I think in in CCL designed so that'll be a pocket of growth.
RFID at checkpoint will be a pocket of growth.
And then the good old label language same thing is pretty solid and.
And we've still got some pickup to come at Avery in the badge business switches, which is we're looking forward to and I don't think we'll have the same supply chain challenges that we faced in back to school. This year next year, because we will have a bit of time more time to plan and things are easing somewhat.
Were easier this year than they were last year and I think it would be easier again next year. So we'll have some pick up there too. So and then we've got some important new investments coming on stream at a movie and so we're pretty optimistic about next year.
Perfect. Thanks, Jeff.
Problem.
Thank you.
And the next question is coming from Walter <unk> from RBC capital markets. Walter Your line is last.
Thank you very much operator, good morning, everyone.
Manuel.
So just touching on your commentary on <unk>.
Into next year, I know I've already gotten a barrage of questions on there. So I wanted to reframe. It again, so when we go back to.
Late call it third or fourth quarter of 2019, we did see some slowdown in your core CCL Division.
Right.
That.
Came about and what I'm gathering from you based on just the answer to your last question that is not the case here that the third and fourth quarter really were.
Up against some tough compares and the business looks pretty strong going into 2022 is that am I framing that correctly.
Yep.
Excellent alright.
Moving onto Innovia Innovia, you had always indicated that was a $700 million business with high teen margins, but now with resin.
That kind of throws that off given the pricing dynamic.
And the pass through impact on that.
High teens high teens EBITDA.
That's right yeah.
Teens EBITDA.
Can you can you.
If resin prices were to stay at this level, you're already trending 750, now because you're pricing. It on it's hard for us to decompose the capacity because we're not getting a volume number in there but is there a new kind of frame of reference that you can provide us with.
With regards to what the revenue run rate possibility given the capacity of that that division is and what the new margin EBITDA margin would be under a higher rate environment.
Well.
It's not we don't know what resin is going to do both so we are not really not really interested but it's a policy III business.
But we had $50 million of inflation in Q3 relative to the prior year. So we did recover at all but it obviously has a pretty dramatic effect on your on your operating margins. When you just have a cost pass through.
So that's probably the most important number for you here so.
So if you take a $207 million of sales in this in this call do you have to take $50 million off of that to normalize it relative to the same period last year for inflation.
And operating income and EBITDA would stay the same so and even with that we send it out we still have EBITDA margins of 15, 8%.
Yes, it was fantastic okay.
And just.
On T cell design, you mentioned that it could be a good good good year for next year any way you can frame for investors because right now we don't have a.
Separately disclosed that any indication that you can provide us as to what level of impact overall that would a rebound in CCL design would have on your numbers next year, just a frame of reference.
It's about a $700 million segment.
Okay.
Okay. Thank you very much that's all my questions I appreciate it.
Thank you.
And the next question is coming from Stephen Macleod from BMO capital markets.
Steven Your line is live.
Great. Thank you and good morning, guys.
I just wanted to clarify just one thing from on your commentary on the call I just missed it but you gave some color on the CCL segments about a $30 million impact and 100 basis points on Unrecovered, Yeah can you.
Yeah, the $30 million is really the combination of the <unk>.
Parity, but in CCL secure which is about $24 million and foreign exchange translation, which was about six.
So the two combined is about $30 million.
Year over year, and then the inflation impact.
Unrecovered inflation and inflation, we had more than this number but unrecovered inflation was probably 1% of sales.
Okay, Okay, so about 100 basis points.
Margin headwind, okay. Thanks for clarifying that.
Just one I think obviously lots of lots of moving parts on the CCL segments heading into Q4 and into next year.
But on balance is it fair to assume that the Q4 outlook in terms of.
The CCR settlement is on balance positive I mean is it or is it more sort of flattish.
Flattish to potentially negative.
Well, we had a very good quarter last year.
Very strong end to the year last year, so repeating repeating that will be difficult. We did we did it in October so that's a good sign.
So it's always difficult to say what happens in the last months of the year. So overhangs on what happens in November and December now.
So but that business is still quite strong so.
But you know you.
We're just waiting to see how things unfold, but going into next year, we feel quite encouraged about the prospects.
Okay.
Okay, that's great.
And then.
Lots of impacts of inflation and supply chain issues and I'm just curious when you when you when you're facing those issues in the business broadly.
What are you managing to are you managing to surety of supply are you managing to.
Our margin level I'm, just curious how you think about.
Facing these challenges overall well.
Well you know I think it's the higher margin businesses, when you're focusing more on the <unk> on the security of supply. So while we've got business with lots of lots of cover with more focus on making sure. We keep our customers supplied well, we've got sort of a pause.
Parts of the banks, which are more price sensitive.
I'm more focused on price recovery and.
And the supply chain challenges already happened or wherever you go into Intercontinental.
Travel involved so where things are moving from one part of the world to another that's been the most difficult thing we've got.
To deal with.
Well, it's in in inside a region, but you know it's been challenging everyday but we've been able to keep customers supplied in it's been much less of an issue.
<unk>.
So so it's a combination really it depends on which part of the business you're sitting in the margins you've got to play with.
Right Okay. Okay.
Maybe when you're when you're meeting with you if you're if you're running innovia and you've got $50 million of inflation and one calls I guess what are you focused on.
Right Okay. Okay.
And then maybe just just two last questions on the checkpoint business.
You indicated you have some price increases going through to offset inflation.
Can you just give a little bit of color about what the lags are on that on those price increases going through and then maybe on the checkpoint business secondly, what what's sort of the long term margin profile here, it's moved around a bit on a quarter to quarter basis, and I'm, just curious how you're thinking about that over the longer term.
Well last year, we had a lot of benefits in the in Asia from the from the government support programs. So so when the business turns back on last year, we had a we had it.
Very favorable cost profile.
Abnormally favorable cost profile the went away this year as things normalize so the social security tax holiday in China, which is a big benefit last year with Goldman this year.
And then just with the pick up in business you know some operating expenses just normalizing so that was a factor in the ILS business.
I would I would say the other thing is the you know the intermodal freight.
Some of that May end up being transitory it doesn't look like it's settling down a little bit.
But the intermodal freight to get stuff out of China to every country every market in the world was pretty big hit in Q3 and in the SaaS business. So in a last week all of our deliveries are local you know it was delivering to apparel manufacturers and inside the region, but in SaaS with shipping all over the world.
The United States to Western Europe in particular.
Intermodal freight challenge was pretty painful in Q3 because of the cost of 45 foot shipping containers out of China.
Okay.
Okay, that's great and then.
On the price increases how how long has it typically take to offset the inflation that you're seeing.
I don't think it would take very long ago.
We'll see how Q4 goes so but you know.
I'd expect we'd get that back fairly quickly you know some of it in Q4 and certainly the rest of it by the first quarter of next year, we should be back on track no problem.
Okay. Okay. That's great. Thanks, guys I'll re queue with some follow ups will happen. Thank you.
Problem.
Thank you.
And the next question is coming from Mark Neville from Scotiabank Mark Your line is nice.
Hey, good morning, Jeff Good morning, John.
Yes.
Maybe just first point of clarification on the challenge to match Q4.
Would you still expect it sounds like it but would you still expect sort of to see positive prompt revenue comps across the businesses in <unk>.
Yes.
Okay.
Jeff You mentioned it was somewhere in the I think the MD&A or the release pricing difficult pricing in home personal care Asia I was just curious what that was.
Yeah, well the Asia was difficult in two two to two two reasons really in Q3, so demand got really curtailed in ASEAN. The ASEAN countries because of the Lockdowns in Thailand, and Vietnam and Singapore. These kinds of countries. So so we've got a very soft quarter demand wise and then in <unk>.
China the domestic market has also been slowed.
I know you've got a lot more price sensitive as a result of it being slug, that's changing a little bit and as we go into the into the Q4 period, because it's got a little busy but it was it was pretty tough in Q3.
In China, rather than us yet.
Okay.
And just want to see all segments.
Yeah.
The impact was 100 basis points I mean, all things considered not that large but yeah I guess I was under the impression was.
Everything was sort of produce consume locally so I'm just sort of curious the the.
The inflationary pressures was it he was on the material and I assume it gets passed all raw materials. So so so most of our most of our raw.
Zero suppliers laminate things pieces bond issues.
The price increases.
I mean, the old and the double digit range.
You know over the last 90 to 120 days.
So.
So it takes a while to first about into the system and we don't it's not a pass through industry. So.
So because labels change all the time, you get pricing repricing opportunities you know fatty regularly but it's not all immediate.
<unk> came very quick very hard very fast.
Got it got it.
Maybe just one last one just on M&A.
Now I'll ask the question Jeff.
I'm just curious of your thoughts around that I.
I don't know, if youre able I'd, probably still a bit difficult but.
But none of it travels good after this call them off to the Middle East, Russia and Brazil.
So we're able to travel a lot more is it still kind of get to Asia Asia is still problematic but.
The rest of the World is pretty much open and we've got a good list of the bolt on opportunities nothing nothing of the scale currently but a long healthy list of good bolt on opportunities.
Alright.
Job managing through through everything.
Thanks Mark.
Thank you and the next question is coming from Michael <unk> from Raymond James Michael Your line is lives.
Okay.
Jeff can you just talk a little bit more about the consumer electronics vertical in CCL design are what the demand trends it looks like there and what that looks like for 2022.
Yeah, it's been very strong.
But we know in the.
The peak periods and that industry is is really tight.
And the third quarter and the beginning of the fourth quarter and we know many many Oems about trouble getting parts in China, because the demand the demand curve ramps up.
The holiday preparation period. So there has been some disruption so many customers talking about it on the conference calls.
And we've certainly seen it so but the demand is still strong, but what well into double digits.
Okay, and then on food and beverage vertical when you look across the various sales channels. There is there still much upside left as we think about the reopening dynamic.
Our beds.
I was.
It's really Asia.
The place it's still largely affected so if you looked at some of the big companies results in Q3, they all reported huge double digit drops in Asia.
So that's the region of the world, but still impacted so, but I would say North America, Western Europe, and South America, some pretty good recovery in the on premise demand.
You know our business has done pretty well in Q3, but.
Possible, but its still soft as Asia.
Okay, and then on checkpoint is there anything else recovering our sales catch up that could take place in Q4 that wasn't.
No it would be done no matter what you do we have no problems meeting demand there was the cost of meeting demand there was the issue.
Got it and then any update on the share repurchase program.
No no nothing nothing that I can talk about.
And is there any press release.
Okay.
Okay I'll leave it there thanks.
Yeah.
Thank you and the next question is coming from David Mcfadden from core Mark David Your line is lives.
Hi, Thank you a couple of questions.
First of all on Avery you talk about the event business still being below normal I was just wondering if you could give us an update on where you stand compared to pre pandemic levels.
Well the the part that's still below normal is really business convention. So.
<unk> sedans rock concerts things of that order.
The full ball because this business is really not dependent on Asia in any way, it's all of Western Europe and North America.
A big part of it is returning to normal but the bid.
Convention business events is still significantly below normal so it was maybe.
Things that would be normal we made about it to just a couple of million dollars to EBIT in the quarter.
Could you quantify it for you.
What.
Maybe just another way if you look at the revenue line would you still be down something like 30% pre pandemic I don't know if you can find.
That detail, but well it's no it's not.
It's a high margin business. So I think it's the EBIT impact that's really important for investors just to give you a frame of reference if things had been totally normally would've been a couple of million dollars higher.
Bravery.
Then we would go.
Okay, and then just moving on to the price increases so looking at your various divisions is it safe to assume that the price increases are really going to be taking more fracking checkpoint.
Checkpoint going fine.
Well, we've had a pretty sizable price increases at Danone, VR and AR and we even have covered all the red line, we didn't recover freight and inflation. So.
So going forward, we still got we still got some energy and freight issues too.
I didn't know if you.
But we certainly have managed our way through the resin impact.
Checkpoint, yes price increases at CCL, Yes, just price increases there and we've also got prices price increases coming in Avery, particularly in those those businesses that are sensitized to intercontinental supply chains.
Yeah.
Okay.
Are you seeing any pushback on painting of these price increases are not a problem, but anyone who can't get a price increase and I might as well go hug them forget about it.
Okay Alright.
Okay. Thank you.
Okay.
Thank you and the next question is coming from Ben <unk> from Pi Financial Your line is live.
Good morning, most of the questions have been asked I just wanted to ask about Avery.
I guess, especially the back to school bus.
Business I know in the in the last quarter you were just talking about.
Supply issues in China and results were pretty pretty strong.
Would they have been even stronger if those issues didn't exist like what was.
Hum.
Really what it is.
Things.
Completely normal normal supply chain from China, we probably would have been a few million dollars better than we were for back to school. So.
So maybe a couple of million dollars in batches that I've just talked about was the last question if I may.
Two to 3 million more on the back to school and we would have otherwise made around.
Fried so freight is a big big factor.
But that's that's fantastic. Thank you so much.
No problem.
Thank you.
And next we have Adam Josephson from Keybanc with a follow up Adam Your line is lives.
Thanks, Jeff and Jeff just back to design for a moment, you mentioned up to $700 million business.
Should we assume it's roughly segment average margins or is it above or I'm, just trying to get a sense of how much of a hit you took this year and consequently, what a reasonable expectation for how much you might get back next year as well automotive is three.
With 300 million of electronics is near $400 million.
So electronics is the bigger part so what was the motive.
Sizable sizable drain this year because it's.
But really we had a good start but then you know when the when the chip thing, yes, it ready.
Really tanked, so there's a big upside there.
And also in electronics I mean, we've got some big new programs, we've won which are going to become full too.
The system next year.
And hopefully we'll have some of this inflation out of our system to sue them. So.
Very encouraged by the prospects of CCR design next year.
Any rough sense of.
Just for us as to how much your automotive business is down this year.
Well, if you thought about the segment in total.
700 million in sales could you know.
Might have a couple of points of margin. We can we can improve on next year over this year something like that.
To give you a frame of reference.
I appreciate that Chuck on the eco slowed investment same kind of question how much.
Remind us how sizable that investment is in and what.
Benefit one could reasonably expect next year as it starts up.
Well, it's the $35 million.
Capital investment.
Well, we obviously want to make a 20% return on that side on sort of probably the starting point.
And the good and the good news is most of the volume we're targeting is already into and suddenly is all internal.
So that kind of flowed films.
Ooh would substitute for films, we currently buy on the outside the.
The amount is.
Environmentally sensitive as I can.
So it'll be largely for internal consumption, we will settle on the outside to but it's largely for internal consumption.
Yeah. That's that's great. Thanks, and just one last one for me in terms of just.
CCL segment growth and I think you've talked in the past about depending on where we are in the economic cycle. The high end of the segment's organic growth might be six ish, the low end might be zero to one.
Obviously last year was one actually the last two years or one this year, it's going to be call. It sex. So at the high end so you've gone from the low end to the high end.
Do you think a reasonable expectation on them along those lines next year might be just given whatever your views of whats happening to the global economy are.
Well, that's the big answer question, but if the economy holds up low to mid single digits. So full.
5% maybe.
Another factor is how much inflation, we still have an assessment to come next year. So that's another thing.
So we're not we.
We don't actually know about so, but I would I would say something in the in that range.
The phone went off and it could.
And it could be biased upwards, just given all the price increases you're having ample Matt yeah. So it depends how much prices, we're going to have to factor into the system next year.
And whether some of the inflation in some of these commodities it ends up being transitory or north.
Yep, Thanks, so much Jeff no.
No problem.
Thank you and ladies and gentlemen, once again, if you wish to enter the queue to ask a question you can press star one on your telephone keypad.
We did have another follow up coming from Stephen Macleod from BMO capital markets. Steven Your line is lives.
Okay. Thank you I just had a quick follow up on the <unk> segment.
You had a big benefit obviously as you talked about the price price versus mix in the revenue.
Do you as most of that already gone through or are you still see some some price impact coming through in Q4.
There's probably a little a little bit more price to come in Q4, but.
But I think we have to bear in mind, Steven the resin indexes have traded down in November pretty is pretty extensively so they dropped out.
Almost double digits.
A week or so ago.
So it will be feeding those into the system as well so so I doubt when you're out when you add that when you factor that in.
It would be a lot of a lot of our resident recovery in Q.
Q4, because other people need it.
Okay. Okay. Okay, and then maybe just following on to.
Adam's question about 2022, and sort of how youre thinking about the business for <unk>.
Thank you for the color on the organic sales growth.
Margin wise would you expect to sort of maintain that historical range of like 15% to 16% on the EBIT line up in 'twenty two.
Sure Yeah, Okay.
Okay, and then and then just finally.
The Avery every margins were quite strong in the quarter end.
Were weaker in 2020 for obvious reasons, but would you expect next year to sort of return back to historical levels in that 'twenty to 'twenty, one versus 'twenty, one 'twenty, 2% range.
Right.
Yep Okay.
Right, Okay, well, thanks, Jeff Thanks, John appreciate it.
Thanks, Steve.
Thank you there are no other questions left in queue. At this time I would now like to hand, the call back to the CCR management team for closing remarks.
Okay, everybody well. Thank you very much for joining our call. We look forward to talking to you again early next year. Thank you very much.
Tony.
Thank you ladies and gentlemen, this does conclude today's conference you may disconnect at this time and have a wonderful day. Thank you for your participation.
Yeah.
Okay.