Q4 2023 CCL Industries Inc Earnings Call
Speaker Change: [music].
Operator: Thank you for holding, and please remain on the line. The CCL Industries event will begin momentarily. Thank you for your?? Good morning and welcome to the CCL Industries 4th Quarter Investor Update. Please note that there will be a question and answer session after the call. The moderator for today is Mr. Jeff Martin, President and Chief Executive Officer, and joining him is Mr. Sean Washchuck, Senior Vice President and Chief Financial Officer. Please go ahead, Mr. Martin.
Thank you for holding and please remain on the line. The CCL industries event will begin momentarily. Thank you for your patience.
[music].
Speaker Change: Good morning, and welcome to the CCL industries fourth quarter Investor update. Please note that there will be a question and answer session. After the call.
Speaker Change: The moderator for today is Mr. Jeff Martin President and Chief Executive Officer, and joining him is Mr. Sean Walsh, Chuck Senior Vice President and Chief Financial Officer. Please go ahead gentlemen.
Jeff Martin: Thanks, Holly. Welcome everyone to our fourth quarter call. Move everyone to slide number two, our disclaimer regarding forward-looking information. I'll remind everyone that our business faces known and unknown risks and opportunities.
Jeff Martin: Thanks Ali welcome everyone to our fourth quarter call.
Jeff Martin: Everyone 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.
Jeff Martin: For further details of these key risks, please take a look at our 2022 and 2023 annual reports, particularly the section Risks and Uncertainties. Our annual and quarterly reports can be found online on the company's website, cclind.com, or on the new cedarplus.ca website. Moving to slide three, our summary of financial results. For the fourth quarter of 2023, sales increased 4.7% with 3% acquisition-related growth, 2.2% positive impact from currency translation, partially offset by 0.5% organic decline, resulting in sales of $1.66 billion compared to $1.59 billion in the fourth quarter of 2022. Operating income was $254.8 million, up 18%, excluding foreign currency translation, compared to $211.2 million for the 2022 fourth Jeff will expand on our segmented operating results of our CCL, Avery, Checkpoint, and Inovia segments momentarily. Corporate expenses were up for the fourth quarter due to an increase in Associated Expenses for Long-Term Variable Compensation.
Jeff Martin: For further details of these key risks please take a look at our 2022 and 2023 annual reports, particularly the section risks and uncertainties.
Jeff Martin: Our annual and quarterly reports can be found online on the company's website <unk> dot com or on the new SEDAR plus dot C. A website.
Jeff Martin: Moving to slide three our summary of financial results.
Jeff Martin: For the fourth quarter of 2023 sales increased four 7% with 3% acquisition related growth, 2.2% positive impact from currency.
Jeff Martin: Translation, partially offset by 0.5% organic decline, resulting in sales of $1 66 billion compared to 1.59 billion in the fourth quarter of 2022.
Jeff Martin: Operating income.
Jeff Martin: It was $254 $8 million up 18%, excluding foreign currency translation compared to $211 $2 million for the 2020 to fourth quarter.
Jeff Martin: Jeff will expand on our segmented operating results of our CCL, Avery checkpoint and adobe or segments more materially.
Jeff Martin: Corporate expenses were up for the fourth quarter due to an increase.
Jeff Martin: And associated expenses for a long term variable compensation.
Jeff Martin: Consolidated EBITDA for the 2023 fourth quarter, excluding the impact of foreign currency translation increased 14% compared to the same period in 2022.
Sean Washchuck: Consolidated EBITDA for the 2023 fourth quarter, excluding the impact of foreign currency translation, increased 14% compared to the same period in 2022. Net finance expense was $19.1 million for the fourth quarter of 2023 compared to $17.6 million in the 2022 fourth quarter due to an increase in interest rates on our variable rate debt, in line with our December 23 press release. CCL recorded an impairment of goodwill associated with our Inovia segment of $ 95 million.
Jeff Martin: Net finance expense was $19 $1 million for the fourth quarter of 2023 compared to $17 $6 million in the 2022 fourth quarter due to an increase in interest rates on our variable variable rate debt.
Jeff Martin: In line with our December 23 press release, CCL recorded an impairment of goodwill associated with our novia segment of $95 million.
Sean Washchuck: This impairment was a result of our closure of our Belgian production facility and continued demand challenges in the label material industry post-pandemic. We also recorded a restructuring charge of $37.2 million, largely for the closure of our Belgian operation. The overall effective tax rate was 57% for the 2023 fourth quarter compared to an effective tax rate of 21.2% recorded in the fourth quarter of 2022. This was due to the fact that the goodwill impairment charge and the associated restructuring costs for our Belgian operation were not tax-deductible. The effect of the tax rate may change in future periods depending on the proportion of taxable income earned in different tax jurisdictions at different rates.
Jeff Martin: This impairment was a result of our closure of our Belgian production facility and continued demand challenges in their label materials industry post pandemic.
Jeff Martin: We also recorded a restructuring charge of $37 $2 million largely for the closure of our Belgian operation.
Jeff Martin: The overall effective tax rate was 57% for the 2023 fourth quarter compared to an effective tax rate of 21, 2% recorded in the fourth quarter of 2022.
Jeff Martin: This was due to the fact that the goodwill impairment charge and the associated restructuring costs for our Belgian operation were not tax deductible.
Jeff Martin: The effective tax rate may change in future periods, depending on the proportion of taxable income earned in different tax jurisdictions at different rates.
Sean Washchuck: Therefore, net earnings for the 2023 fourth quarter were $38.8 million compared to $145.2 million for the 2022 fourth quarter. For the year ended 2023, sales and operating income, excluding foreign currency translation, were flat and increased 3%, respectively. Net earnings decreased 20% compared to 2022, principally driven by the Google impairment charges and restructuring events that were recorded in the fourth quarter for the Inovia sector.
Jeff Martin: Therefore, net earnings for the 2023 fourth quarter were $38 $8 million compared to $145 $2 million for the 2020 to fourth quarter.
Jeff Martin: For the year ended 2023 sales and operating income excluding foreign currency translation were flat and increased 3% respectively.
Jeff Martin: Net earnings decreased 20% compared to 2022.
Jeff Martin: It's really driven by the goodwill impairment charges and restructuring events that were recorded in the fourth quarter for the <unk> segment.
Jeff Martin: Moving to the next slide earnings per share.
Sean Washchuck: Moving to the next slide, earnings per share. Basic earnings for Class B shares were $0.22 for the fourth quarter of 2023 compared to $0.82 for the fourth quarter of 2022. However, adjusted basic earnings per Class B share were $0.97 for the 2023 fourth quarter, an improvement of 16.9% compared to $0.83 for the fourth quarter of 2022. The change in adjusted basic earnings per share of $0.14 is principally attributable to an improvement in operating income accounting for $0.18, with foreign currency translation adding one cent. Partially offset by an increase in corporate costs of $0.02, increased tax expense of $0.01, increased net interest expense of another penny, and reduced earnings from our joint ventures costing us another cent. Moving to the next slide, slide 5, free cash flow from operations.
Jeff Martin: Basic earnings per class B share were 22 for the fourth quarter of 2023 compared to 82 for the fourth quarter of 2022. However.
Jeff Martin: Adjusted basic earnings per class B share were 97 cents for the 2023 fourth quarter, an improvement of 16, 9% compared to 83 for the fourth quarter of 2022.
Jeff Martin: The change in adjusted basic earnings per share of 2014.
Jeff Martin: It's principally attributable to an improvement in operating income accounting for 18 cents.
Jeff Martin: Foreign currency translation, adding one cent.
Jeff Martin: Partly offset by an increase in corporate costs for two cents increased tax expense costing one said increased net interest expense costing another penny.
Jeff Martin: It reduced earnings from our joint ventures costing us another ships.
Jeff Martin: Moving to the next slide slide five free cash flow from operations.
Sean Washchuck: For the fourth quarter of 2023, free cash flow from operations was an inflow of $273.8 million, almost equal to the $271.6 million posted in the 2022 fourth quarter. For the 12 months ended December 31st, 2023, free cash flow from operations was $559.6 million compared to $573.4 million at the end of December 2022. This change is primarily attributable to an increase in net capital expenditures.
Jeff Martin: Fourth quarter of 2023.
Jeff Martin: Free cash flow from operations was an inflow of $273 $8 million.
Jeff Martin: Almost equal to the $2 $71 $6 million posted in the 2020 to fourth quarter.
Jeff Martin: For the 12 months ended December 31, 2023 free cash flow from operations was $559 $6 million compared to $573 $4 million at the end of December 2022.
Jeff Martin: This change is primarily attributable to an increase in net capital expenditures.
Sean Washchuck: Offset by an increase in and cash provided by operating activities generated by improved adjusted earnings. Moving to the next slide, cash and debt summary. Net debt as at December 31st, 2023 was $1.51 billion, a slight decrease compared to $1.52 billion of net debt at December 31st, 2022. The decrease is principally a result of higher debt repayments in the fourth quarter of 2023.
Jeff Martin: Offset by an increase in cash provided by operating activities generated by improved adjusted earnings.
Jeff Martin: Yeah.
Jeff Martin: Moving to the next slide.
Jeff Martin: <unk>.
Jeff Martin: The cash and debt summary.
Jeff Martin: Net debt as at December 31, 2023 was $1 five $1 billion a slot.
Jeff Martin: Decrease compared to $1 five $2 billion of net debt at December 31, 2022.
Jeff Martin: The decrease is principally a result of higher debt repayments in the fourth quarter of 2023.
Jeff Martin: Yeah.
Sean Washchuck: Although the company's net debt decreased only slightly, the balance sheet closed the quarter in a strong position. Our balance sheet leverage ratio was approximately 1.13 times, down from 1.24 times at December 31st, 2022. The liquidity was robust, with $774 million of cash on hand.
Jeff Martin: Although the company's net debt decreased only slightly the balance sheet closed the quarter in a strong position our balance sheet leverage ratio was approximately 1.13 times down from $1. Two four times at December 31 2022.
Jeff Martin: Liquidity was robust with $774 million of cash on hand.
Sean Washchuck: 0.97, almost a billion dollars U.S. of available undrawn credit capacity on the company's revolving bank credit facility. The company's overall finance rate at December 31st was 2.8% compared to 2.9% at December 31st, 2022, reflecting a strong reduction in the syndicated revolving variable interest rate during the fourth quarter of 2023. The company's balance sheet continues to be well positioned as we move through fiscal 2024. Jeff, over to you.
Jeff Martin: And zero point 97, almost $1 billion U S of available Undrawn credit capacity on the company's revolving bank credit facility.
Jeff Martin: The company's overall finance rate at December 31 was two 8% compared to two 9% at December 31 2022.
Jeff Martin: Reflecting a strong reduction in syndicated revolving variable interest rate during the fourth quarter of 2023.
The company's balance sheet continues to be well positioned as we move through fiscal 2024.
Jeff Martin: Jeff over to you.
Jeff Martin: Thank you, Sean. Good morning, everybody. I'm on slide 7, highlights of capital spending for the year, $444 million, just about, money at disposal, and we're planning about the same amount in the current year of 2024. Slide 8, a few highlights of a few of the projects that are in those numbers. We're completing, as we speak, a start-up plant in Raleigh, North Carolina, which will make special folded literature labels for the GLP-1 blockbuster drugs you That plant is due to come on in a bit, this current year. We're engaging in a major expansion of our Guanajuato, Mexico plant for CCL containers to handle the growth in aluminum bottles and aerosol. That plant can now house nine high-speed lines in the state-of-the-art campus. In Italy, we're building near Turin a new pressure-sensitive label production site for some major global spirits brands switching from wick-free bottle decoration and Precious Hempstead. That part was followed up in the first half, too.
Jeff Martin: Thank you Sean good morning, everybody I'm on slide seven highlights our capital spending for the year.
Jeff Martin: Yeah.
Jeff Martin: $144 million just about disposals.
Jeff Martin: Remember our planning about the same amount in the current year of 'twenty 'twenty four.
Jeff Martin: On slide eight a few highlights of a few of the projects that are in those numbers.
Jeff Martin: Completing as we speak are start up plant in Raleigh, North Carolina.
Jeff Martin: I just want to make a special folded nutritional labels for the G. O P. One blockbuster drugs, you're reading about in the newspapers up 12, two to come on in the middle of the current year.
Jeff Martin: Engaging in a major expansion of Guanajuato, Mexico plant, the CCL container to handle the growth in aluminum bottles in Arizona.
Jeff Martin: Tom will now come out.
Jeff Martin: <unk> high speed lines in respect of the off campus.
Speaker Change: And in Italy, but building niche you run in your pressure sensitive label production sites for some major global search brands switching from what can be volatile declaration to toothbrushes understood that Tom will start up also in the first half of 2024.
Speaker Change: Slide nine highlights for the Ccs segment.
Jeff Martin: Slide 9, highlights for the CCL segment. Return to organic growth 1.8%, which is nice to see all driven by high teens growth in Latin America, very modest declines in North America and Europe and Asia Pacific, Profit gains in all sectors, led by food and beverage, and particularly CCL Container. A notable turn at CCL design as electronics demand improved. In the recent trough we've seen over the last 12 months... Ethics tailwinds have reduced quite considerably in the court and will probably turn negative in the current court.
Speaker Change: When I returned to organic growth of one 8%, which is nice to see all driven by high teens growth in Latin America, very modest declines in North America, and Europe and Asia Pacific.
Speaker Change: Well the games in all sectors led by food and beverage I don't particularly see sell container.
Speaker Change: Notable tunnel CCL design as electronics demand improved in the recent trough, saying over the last 12 months I'm, sorry, ethics, <unk> reduced quite considerably and Nicola will probably turn negative in this current quarter.
Speaker Change: Yeah.
Jeff Martin: Slide 10, highlights for our joint ventures. You see some numbers here that are on the negative side; that's all due to the devaluation in Egypt. Calls, Slide 11.
Speaker Change: Slide 10 highlights for our joint ventures.
Speaker Change: You see some numbers here.
Speaker Change: Sorry, that's all due to the devaluation in Egypt, which caused me to take a big write down on that IRA balance sheet and the.
Jeff Martin: Results for Avery. Solid quarter to end a record year. Outstanding free cash flow. All of that EBITDA and a little bit converted into free cash, so a very good year and a good improvement in the horticultural business, especially in the United States. Slide 12.
Speaker Change: Fourth quarter around that so that's the reason for the change in the numbers.
Speaker Change: The joint ventures.
Speaker Change: Slide 11, there's also a very solid pull through and a record year.
Speaker Change: Outstanding free cash flow.
Speaker Change: All of that EBITDAR, I'm, a little bit to converted into free cash. So a very good year and a good improvement in the hole to cultural business, especially in the United States.
Speaker Change: Slide 12.
Jeff Martin: Another very good quarter for Check Point. The MAS business improved internationally on productivity gains and easing supply inflation. Business is stable in North America compared to a very strong prior year. But the star was really the apparel label business delivered 20% organic sales growth and the cause of, driven by robust RFID win. The record year overall for Check Point 2, Slide 13, results for Inovia.
Speaker Change: Another very good quarters for checkpoint, Yeah. My S business improved internationally on productivity gains and easing supply inflation business is stable in North America compared to very strong prior year.
Speaker Change: Because I saw it was really the apparel label business delivered 20% organic sales growth in the quarter driven by robust holiday D wins, and a record year overall for checkpoint too.
Speaker Change: Slide 13.
Speaker Change: Results for Nova.
Jeff Martin: Much better quarter than the poor quarter last year, and we saw late in the quarter the first signs of the demand trough that we'd seen really for five quarters in a row, in the fourth quarter of 2022, all the way through last year. We saw the final turn in the pressure-sensitive legal materials spaces, demand accelerating also quite rapidly in the first six weeks.
Speaker Change: Much better calls within the poll called the last year.
Speaker Change: I mean, so late in the call that the first two months of the demand trough that we'd seen really for five quarters in a row and the fourth quarter of 2022, all the way through last year, we sold the final tab in the pressure sensitive label materials spaces Tebaldi accelerating also quite rapidly in the first six weeks maybe too much.
Jeff Martin: 82 months now 2024, the Belgian plant closure has been agreed with the people over there quite smoothly, and we expect to complete that sometime between the end of Q1 and the end of Q2, and all is going quite nicely, and we had a good Q4 and a very good 2023 in the Americas. Slide 14, some comments on the outlook, say we feel better about the outlook than we did for a number of years. The consumer products industry is certainly showing signs of a return to volume growth, with, of course, easier comps than they've had in the past few years. The only business we see a little bit of weakness in is in healthcare, where the inventory building and supply crisis last year have also been able to show some effect, but that's somewhat offset by the growth in GLP-1. CCL Design Recovery is continuing this quarter and has continued so far in the year to date, and we have fairly easy comms for all of next year. Especially in the electronic space, so we're quite encouraged by that. CCL's secure comps are a little more difficult, but the passport-related business is strong.
Speaker Change: So out of 'twenty 'twenty four the bell.
Speaker Change: And plant closures as been agreed with the people over there quite smoothly.
Speaker Change: Right the complete.
Speaker Change: Sometime between the end of Q1 and the end of Q2.
Speaker Change: Oh oldest was getting quite nicely I mean, you had a good Q4.
Speaker Change: Good 'twenty to 'twenty three in the Americas.
Speaker Change: Slide 14, some comments on the outlook.
Speaker Change: Save you feel better about the outlook will be felt.
Speaker Change: A number of years.
Consumer products industry and suddenly things for some time.
Speaker Change: Signs of a return to volume growth.
Speaker Change: It's easier comps than they've had in the recent.
Speaker Change: The recent years.
Speaker Change: The only business, we do see some little bit of weakness it is in health care.
Speaker Change: Where is the inventory build in the supply crisis, well she was supposed to be able to show some effect, but that's somewhat offset by the growth in the G. L. P. One space.
Speaker Change: Co design recoveries, continuing this quarter and continuing so far in the in the year to date.
Speaker Change: Easy comps for all of next year.
Speaker Change: Especially in the other end in the electronics space. So we're quite encouraged by that.
Speaker Change: <unk> secure comps are a little more difficult, but the powerful related business is strong.
Operator: Avery results are expected to be stable, and we move now into the horticulture busy production season. Checkpoint growth will continue to be driven by RFID, and the recovery in apparel volumes is also beginning to show. Most of all, the Inovia SPARC 2024 is much improved, with very good order intake compared to a week prior. And as I mentioned earlier, the FX tailwinds that we have enjoyed will probably tighten out or even turn into a modest headwind of the current exchange rates at some point in the forthcoming session. So with that operator, we'd like to open the call to questions. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is busy. You may press star two if you would like to remove your question from the list.
Speaker Change: <unk> results are expected to be stable I mean move now into the whole cultural busy production season.
Speaker Change: We make most of our money.
Speaker Change: Boy checkpoint, Greg from continued to be driven by RFID on the recovery in apparel volumes, but also beginning to see.
Speaker Change: But most of all you know if you start with 224 with much improved very good order intake compared to a weak prior year as.
Speaker Change: As I mentioned earlier, the FX tailwind that we've enjoyed will probably flatten out or even tubs.
Speaker Change: Headwind at the current exchange rates at some point in the fourth quarter.
Speaker Change: So with that operator, we'd like to open up the call for questions.
Speaker Change: Certainly at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Jeff Martin: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions. Your first question for today is coming from Hamir Patel with CIBC Capital Marks. Hi, good morning. Jeff, which, if you were at your business units, would you call out as joining the recovery cycle? CCL Design Electronics and Inovia.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Your first question for today is coming from Sameer Patel with CIBC capital markets.
Sameer Patel: Hi, Yeah, good morning morning.
Sameer Patel: So what what would cause you write in your business units when you I call out is joining the a recovery cycle this year.
Sameer Patel: PCL design electronics, and then Olivia.
Jeff Martin: Thanks. And on CCL Design, your outlook pointed to the next cycle in tech being upwardly long as buyers look for AI-compatible devices. Do you think you have the right customer mix there to fully benefit from that? Or is that an area where we could see more M&A to capture that demand growth? I think we have a very good cross-section of all the players in that space. The PC industry, the server industry, mobile cell phone industry, all the devices that are present with all the major OEMs around the world, so we're in a good place. Probably the ones in the Far East, the Koreans, and the Japanese OEMs are the ones where we're weaker, but the ones in North America and Europe we're in very good positions with, and also some of the bigger OEMs in China.
Sameer Patel: And as you saw it in detailed design. Your you know your outlet pointed to you with the next cycle and tech being upwardly long as buyers look for AI compatible devices do you have the do you think you have the right customer mix. There soon to fully benefit from that or is that an area, where we could see more M&A too.
Sameer Patel: You are to capture that demand growth.
Sameer Patel: I think we have a very good cross section of all the all the players in that space. It's.
Sameer Patel: And as the PC industry said or industry.
Sameer Patel: The lightbulb cell phone industry.
Sameer Patel: All the older devices with president, but all the major Oems around the world.
Sameer Patel: The good place probably the ones in the far east the Koreans and the Japanese Oems are the ones, where we're where we're where we're weaker but the ones in North America, and Europe, where we are in very good position, but then also some of the bigger Oems in China.
Speaker Change: Great. Thanks, Kevin just the last question I had was on that and now we are you know I think there are at least highlighted that industry demand in Europe, there was off 35%.
Jeff Martin: Great. Thanks, Jeff. And just the last question I had was about Inovia.
Jeff Martin: You know, I think your release highlighted that industry demand in Europe was off 35% last year. Are you able to quantify the demand rebound that you're seeing so far in 2020? Well, it's up double digits.
Speaker Change: Last year are you able to quantify the demand rebound that you're seeing so far in <unk> 2021.
Kevin: Well, it's up double digit.
Speaker Change: Double digits alright, Thanks, that's all I had I'll turn it over.
Jeff Martin: All right. Thanks. That's all I had. I'll turn. Your next question is coming from Ahmed Abdullah with the National Bank of Canada. Yes, hi, good morning.
Speaker Change: Thank you.
Speaker Change: Your next question is coming from Ahmed Abdul that with National Bank of Canada.
Ahmed Abdul: Yes, hi, good morning in the API segment seasonality is definitely been reduced after the horticultural M&A that has been done there and margins seem to be moving back towards previous level do you see 2020 for margins returning to the levels. We had seen prior to award a cultural business acquisitions or is there more work to be done.
Jeff Martin: In the Avery segment, seasonality has definitely been reduced after the horticultural M&A that has been done there, and margins seem to be moving back to the previous level. Do you see 2024 margins returning to the levels we had seen prior to the horticultural business acquisitions? Or is there more work to be done that you can elaborate on? Yeah, there's some more work still to be done.
Speaker Change: Done that you can elaborate on.
Yeah, there's some more work still to be done so.
Jeff Martin: So the two businesses, one in the US, one in Europe, I would say we've seen business return to pre-pandemic levels in North America during the stay-at-home period, and then companies, all the resellers in that space, the Home Depots and Lowe's and all those people, have seen their business begin to come back after a pretty difficult 2023. So I would say in Europe that it's still a little bit behind there, but It's coming along quite nicely. Okay, thanks. And it was a record year for checkpoints.
Speaker Change: The two businesses one one in the U S. One in Europe, I would say we've seen.
Speaker Change: The the business return to pre pandemic levels in North America had a big boom.
Speaker Change: And in the stay at home period, and then companies.
Speaker Change: Oh, the resellers in that space of home Depot's in Lowe's will all those people.
Speaker Change: Saying that business will begin.
Speaker Change: Begin to come back after a pretty difficult 2023.
Speaker Change: So I would say in Europe.
Speaker Change: So there's been a bit behind that but.
Speaker Change: But it's good it's coming along quite nicely.
Speaker Change: Okay, Thanks, and a record year for checkpoint would you say RFID in that segment has reached critical mass that it could drive a bulk of the growth here.
Jeff Martin: Would you say RFID in that segment has reached critical mass where it could drive a bulk of the growth here? I would say so. It's becoming a ubiquitous technology in most retail channels and expanding beyond its base in apparel.
Speaker Change: I would say, it's a it's becoming ubiquitous technology in most retail channels and expanding beyond building space in apparel.
Jeff Martin: We're involved in both spaces, so we're quite excited about the potential for growth in RFID. Okay, and just a final one for me on Inovia's restructuring efforts: do you expect to immediately see the benefits of the incremental operating income you referenced in H2 of this year, or is there a ramp-up period for that? H2 Yes, H2 we should see it, so we'll have a transition to go through, so the extrusion operations will stop in the first quarter, the finishing operations will stop a little bit later than that, and the business will all be moved by the spring or early summer this year, and then the benefits should kick in. Okay, well, I'll get back in line. Thank you very much.
Speaker Change: We're involved in both spaces.
Speaker Change: But excited about the potential for growth in RFID.
Okay, and just a final one for me on and nobody has a restructuring efforts do you expect to immediately see the benefits of the incremental operating income you referenced in H two of this year or is there a ramp up period for that.
Speaker Change: H two we shouldn't we should say it so it will have a transition to go through.
So the extrusion operations will stop in the first quarter and finishing operations.
Speaker Change: Talk a little bit lighter than that in the business of all be moved.
Speaker Change: Bodies, but the spring the spring early summer this year and then and then the benefits should kick in.
Speaker Change: Okay.
Speaker Change: Get back in queue. Thank you very much.
Speaker Change: No problem.
Speaker Change: Your next question for today is coming from Stephen Macleod with BMO capital markets.
Jeff Martin: Your next question for today is coming from Stephen MacLeod with BMO Capital. Thank you. Good morning.
Stephen Macleod: Thank you and good morning, good morning, guys.
Jeff Martin: Good morning, guys. Morning, just wanted to ask a question about the new capacity you have coming online. You highlighted sort of three major projects, CC Label USA, and Container in Italy, and I'm just curious if you can give a little bit of color around what kind of revenues those plants may be able to support. Well, the one in Italy is not huge, so that's...
Stephen Macleod: Good morning, just I just wanted to ask a question about the new capacity you have coming online you highlighted sort of three major projects yeah excuse.
Stephen Macleod: C C label USA container in Italy, and I'm, just curious if you can give a little bit of color around what kind of revenues those plants may be able to support.
Speaker Change: Well the one that you had for me its not huge its so that's.
Speaker Change: If all goes well down there that could turn into a 20 million dollar operation.
Jeff Martin: If everything goes well down there, that could turn into a $20 million operation. The GLP-1 plant will have to scale up. So it's sized so that one day it could probably manage $40 or $50 million in revenue. But how long it takes to build that up remains to be seen. The expansion in Mexico, a little bit more than that. They're up in the sort of, not $100 million, but between $50 and $100, in terms of the additional capacity and revenues we're expecting there. And CCL Container, as a business, we used to report that segment publicly. It's now well over 300 million.
Speaker Change: G O P. One club that but that'll have to scale up so it's it's sorry, sorry, one day, it could probably manage 40 or $50 million in revenue, but how long it takes to build that up remains to be seen.
Speaker Change: The operation.
Speaker Change: <unk> in Mexico.
Speaker Change: A little bit more than that they are up in the sort of hot rolled out 100 million both between 50 and 100.
Speaker Change: In terms of the additional capacity in revenues, we're expecting there and CCL container as a business we used to report that segment publicly.
Speaker Change: It's now well over $300 million.
Jeff Martin: Canadian and with EBITDA margins well above the corporate average. Okay, that's that's great. Thank you. That sounds like a good color.
Speaker Change: Canadian and with EBITDA margins, well above the corporate average.
Speaker Change: Okay. That's that's great. Thank you that sounds Oh, that's good color.
Jeff Martin: And then maybe just secondly, in terms of the Inovia restructuring, I assume, would we expect to see any kind of sales impact from the closure of the Belgian plant? Or is it, or is it really just that the customers for that operation are not really in Western Europe; they're all over the world. So it was an export-driven plant and hardly any local business, and most of the orders were actually placed by the Inovia operation in the UK.
Speaker Change: And then maybe just secondly in terms of the Adobe restructuring I assume what do we expect to see any kind of sales impact from the closure of the Belgium plant or is it or is it really just aren't already.
Speaker Change: As the customers. So that operations are not really in in western Europe, but they're all over the world. So it was an export driven cloud hardly any local business.
Speaker Change: And most of the old is actually placed in the <unk>.
Speaker Change: Can I have your operation in the U K.
Jeff Martin: So it was really a production plan for largely non-European businesses that we exported to. That's why we made the decision because it's an easy transaction transition to do without any, any difficulties with the customers. So I mean, we make the same product already today in the UK. So the transition is an easy one.
Speaker Change: So it was really a production plant.
Speaker Change: Largely non European based base business.
Speaker Change: Do we export it to that's why we made this decision because it's easy transaction transition to do without any any difficulties with the customer. So I mean, the same product already today and in the U K. So the transition is an easy one.
Jeff Martin: Right. Okay. And then maybe just along those lines with respect to Inovia, just on the back of the closure of the Belgian plant, are there any other major restructurings that you would consider for that business? The Belgian plant is always the one we've been thinking about ever since we bought the company because it's an older plant.
Speaker Change: Okay, and then and then maybe just along those lines with respect to Adobe I just went through on the back of the closure of the Belgium plant I mean, there are there any other major restructurings that you would consider for that for that business or do you feel like one.
Speaker Change: The Belgian plant as well as the one we've been thinking about ever since we bought the company because it's it's an old applaud San Diego and then you had two lines in it.
Jeff Martin: It only had two lines in it, and you know, it's always made money. It was always a successful operation, but all the technology and so we have to face a decision whether to invest in the operation or to close it and integrate it into the other ones we have. But I would say now, plant footprint wise, we're in good shape. Okay, that's great. Thanks.
Speaker Change: And.
Speaker Change: You know, it's it's always made money was also successful operation, but all of the technology in.
Speaker Change: And we had to face a decision whether to invest in the operational or to close and integrate it into the other ones, we have but I would say now cloud footprint wise, we're in good shape.
Great.
Speaker Change: I appreciate it great. Thanks, guys.
Jeff Martin: Great. No problem. Your next question is from Michael Glenn with Raymond J. Hey, good morning.
Speaker Change: Hello.
Speaker Change: Your next question is from Michael Glen with Raymond James.
Michael Glen: Hey, good morning.
Jeff Martin: Jeff, going back to Investor Day, I recall you described kind of a mid-single-digit type earnings hurdle for the business. You know, if you look at the past couple of years, you described a tougher environment, but you've still been able to grow earnings in that environment. And now you're saying, hey, things are looking better, finally. How do we think about what earnings growth should look like in 2024 versus 2023 with that type of backdrop? Martha, better than the 5?
Michael Glen: Jeff going back to the Investor Day, I recall, you described I'm kind of a mid single digit type earnings hurdle for bids.
Michael Glen: Business.
Michael Glen: You know if you look at the past couple of years.
Michael Glen: You you described the tougher environment, but you've still been able to grow earnings in that environment I know you're.
Michael Glen: Saying, hey, things are looking better finally so.
Speaker Change: Like how do we think about what earnings growth should look like in 24 versus 23 with that type of backdrop.
Speaker Change: Uh huh.
Speaker Change: At or better than the five.
Jeff Martin: Okay, and then in the MD&A, you have these. You do publish these return on equity, return on total capital metrics, and how do you think about those? Are those troughing now?
Speaker Change: Uh huh.
Speaker Change: Okay and then in the in the MD&A you.
Speaker Change: Have these you do publish seats return on equity return on total capital metrics.
Speaker Change: And how do you think about those are are those trough thing now and like what are going to be the big drivers to get those moving in the other direction from this point forward.
Sean Washchuck: And what are going to be the big drivers to get those moving in the other direction from this point forward? Well, return on equity is always a tricky measure because it depends on your retained earnings balance. So I think return on capital is by far the more important of the two measures, and earnings growth is really the driver of that. So if we see recovery, in the businesses that have been laggards and during the COVID era, if they all normalize and we see recovery, and we get increased earnings, that's going to be the driver of improvement in return on capital. Okay, and can you give me a corporate expense? What should be the right number for corporate expenses in 24?
Speaker Change: Well, we were telling them accurately.
Speaker Change: Finally measured because it depends on the retained earnings balance and so I think return on capital was by far the more important measures.
Speaker Change: Earnings growth is really the driver of that so.
Speaker Change: If we see recovery in the in the businesses that have been laggards in the during the during the Covid era, we pay all normalize and we see recovery, let me get increase that supposed to be the driver of improvement in return on capital.
Speaker Change: Okay and could you give us a corporate expense.
Speaker Change: What should be the right number for corporate expense in 'twenty four.
Speaker Change: Oh.
Jeff Martin: Oh, I think if you take our Q1 2023 number and multiply it by four, so I think Q4 was a bit overweight, and Q1 2023 was the right number. Okay, thanks for taking the question. Your next question for today is coming from Walter Spracklin with RBC. Yeah, thanks very much. Good morning, everyone.
Speaker Change: I think if you take our Q Q1, 2023 number and multiply it by four.
Speaker Change: So I think Q4 was a bit overweight in Q1 2023 was the right number.
Speaker Change: Okay. Thanks for taking the questions.
Speaker Change: No problem.
Speaker Change: The next question for today is coming from Walter Spracklen with RBC.
Walter Spracklen: Yeah. Thanks, very much good morning, everyone. So on the yeah. Good morning, I. The the the growth that you're seeing in apparel that was a big number are you mentioned it was driven by RFID.
Jeff Martin: So on the, yeah, good morning. The, the growth that you're seeing in apparel, that was a big number; you mentioned it was driven by RFID. Is that a number that we can now say, okay, there's an inflection here, we can start modeling that going forward, or was there anything in that this quarter that was seasonally high or one-time in nature that we should consider when we start to model that type of growth within the Checkpoint Division? Well, I would say the only thing to bear in mind is that Q4 last year was the beginning of the apparel supply contraction, so it was That's only one thing to bear in mind, but we do think the RFID ramp-up is going to be good, and we do see some recovery now in the contraction that has been in the apparel supply chain, and that's a worldwide phenomenon. A good thing to say. That's great. That's fantastic!
Walter Spracklen: Is that a number that we can now say, okay. There's an inflection here we can start modeling that going forward or was there anything in that this quarter that was seasonally high or onetime in nature that we should consider when we start to model that type of.
Walter Spracklen: That type of growth within the checkpoint division.
Speaker Change: Well I would say the other thing to bear in mind, the fourth quarter last year was the beginning of the apparel supply contraction. So it's a fairly easy comp, but that's that's one thing to bear in mind, but we.
Speaker Change: But we do think the RFID ramp up.
Speaker Change: Is it going to be good and we do see some recovery now and in the contraction has been in the apparel supply chain.
Speaker Change: And that's.
Speaker Change: So that's a worldwide phenomena.
Speaker Change: That's a good thing to say.
Speaker Change: That's great that's fantastic.
Jeff Martin: I guess just to clarify on Michael's question, in terms of when you said better, did you mean a better growth rate or just better than last year in a dollar number? Just to clarify that. On the M&A side, just incrementally, do you see more opportunity, less opportunity, or fairly consistent with what we've seen over the last couple of quarters in terms of M&A opportunities that might be surfacing? Confess to me what you've seen in the last couple of years.
Speaker Change: Yeah.
Speaker Change: I guess just to clarify on on on Michael's question in terms of when you said better did you mean, a better growth rate, one or or just better than last year and a dollar number.
Speaker Change: For that.
Speaker Change: The growth rate.
Speaker Change: Perfect and then on the on the M&A side.
Speaker Change: Just incrementally do you see more opportunity less opportunity or fairly consistent with what we've seen over the last the last couple of quarters in terms of M&A M&A opportunities that might might be surfacing.
Speaker Change: Consistent with what you've seen in the last couple of years.
Jeff Martin: Yeah, so private equity is still alive and well in that. We bought that company in the last half of last year. That would have been a very difficult business for us to buy if PE financing had been more easy. So we were able to do that with a multiple we were willing to pay because of that. We have seen some examples. And that was a $150 million transaction.
Speaker Change: Yeah, So Pete private equity is still alive, and well and that.
Speaker Change: Uh huh.
Speaker Change: You know, we bought a company puts out about it.
Speaker Change: In the last half of last year.
Speaker Change: That would have been a very difficult business for us to buy if P. E financing had been more E Z.
Speaker Change: So we were able to do that or the multiple we were willing to pay because because of that so we have seen some examples and that was $150 million transaction for <unk>.
Jeff Martin: So, we have seen some easing around situations like that, but larger transactions still have valuation expectations still pretty frothy. We've seen quite a few failed auctions in our space for people taking businesses to auction, failing because they couldn't get the valuations they wanted, so that's a good initial sign.
Speaker Change: So we have seen some easing around around situations like that.
Speaker Change: But larger transactions spill the valuation expectations are still pretty frothy.
Speaker Change: Seen quite a few failed auctions.
Speaker Change: Space, where people taking businesses to auction.
Speaker Change: Failing.
Speaker Change: Because they couldn't get the valuations. They wanted so that's the good initial signs.
Jeff Martin: That memories are still, are still long, and everyone's hoping that interest rates come down, and that valuations are getting frothy again. And public markets also pointed that out. Okay, last question for me, Jeff, if that is and remains the case on the acquisition front, I know you've increased the dividend nicely, just curious about your shareholder return strategy in 2024, anything that would be different from how you've seen in the past. Your stock is at trough multiples, hopefully up off trough multiples today, which would be great, but still, is this an opportunity for you to buy back stock a little bit You could probably do a bit of both, Walter.
Speaker Change: Memories are still are still long in everyone's hoping as interest rates come down, but valuations I got processing again on public market. So as I pointed out.
Speaker Change: Okay last question for me, Jeff is that you you know if that that is a it remains the case on the on the acquisition front I know you you you've you've increased nicely. The dividend just curious your your shareholder return strategy in 2020 for anything that would be different from how.
Speaker Change: What you've seen in the past your stock is at trough multiples hopefully oh off trough multiples today are which would be great. But still is this an opportunity for you to buy back stock a little bit more more significantly or or or just keep keep the powder dry with a balance sheet, where it is in an opportunistic for any deals that might come up.
Speaker Change: You could probably do a bit of both Walton.
Jeff Martin: So I think buying back stocks certainly is on the agenda, depending on the price of the stock, and but so is M&A. M&A remains our top priority, but in the event it doesn't materialize, then buying it by it from our own stock market would consider it to be reasonable. Then we'll definitely be doing that. I mean, we were in the market doing that very late last year. The last few days of the year, that's an indication of what's likely to happen in the future. Okay, that sounds good to me. Congratulations on a great quarter. I appreciate the time.
Walton: So I think buying back stock certainly certainly.
Walton: Depending on the.
Walton: The price of the stock.
And and but as far as M&A M&A remains a top priority.
Walton: And in the event it doesn't materialize, then buying or buying their own stock market multiples, we consider them to be reasonable then we will definitely be doing down there.
Walton: We're in the market doing that very late last year.
Walton: In the last few days of the year. So that's an indication of what's likely to happen in the future.
Speaker Change: Yeah that sounds good to me Ah Congrats on a great quarter I appreciate the time.
Speaker Change: Your next question is from Jackie <unk>.
Jeff Martin: Your next question is from Ben Jekic, with P.I. Finance. Good morning.
Jackie: <unk> with Pi financial.
Jackie: Good morning, I have two questions sort of similar logic to Walter but on the CCL segment Jeff.
Jeff Martin: I have two questions, sort of a similar logic to Walter, but on the CCL segment. Jeff, I see, so 1.8% organic sales growth, high teens in Latin America, modest declines everywhere else. Is there any sort of macro explanation, and how do we extend that through 2024? Well, I think what you see in our growth rates is very much a reflection of what you see in the consumer products industry, Ben. So volume growth in North America and Europe is non-existent for most of our CPG customers, and has been for all of last year. So we're moving – the comps are now much easier, so – and the ability of CPGs to pass on price increases is much harder. So I think we're going to see a lot more promotional activity because the only way they can now grow is through, you know, unit volume increases, and I expect we'll see some of that as the year unfolds. So that's why we're making commentary on that.
Jackie: I see so one 8% organic sales growth high teens in Latin America modest declines everywhere else is there any any sort of macro or explanation and now how do we extend that through 2020 four.
Jeff Martin: Well I think what you see and in our growth rates is very much a reflection of what you see in the consumer products industry.
Jeff Martin: And so as volume growth in North America, and Europe is nonexistent for most of our CPG customers and how it's been all of last year.
Jeff Martin: But it would be movie the comps now are much easier so.
Jeff Martin: And the the ability of Cpg's to pass on price increases is much harder. So I think we're going to see a lot more promotional activity.
Because the only way they can now grow as true true.
Jeff Martin: Unit volume increases.
Jeff Martin: And I expect we'll see we'll see some of that is there.
Jeff Martin: As the year unfolds. So that's why we are making commentary about.
Jeff Martin: We expect to see a return to growth this year. America has been strong for all of our CPG customers. If you look at all of the big CPGs, we've got big operations in Latin America. That's the strongest region in the world right now. Probably the only region of the world where there's some uncertainty is China.
Jeff Martin: We expect to see a return to growth. This year Latin America has been strong for all of our CPG customers. If you look at all of the Big Cpg's.
Jeff Martin: Big operations in Latin America, that's that's our strongest region in the world right now.
Probably the only any region of the world, where there's some uncertainty is China.
Jeff Martin: A lot of the big CPGs are pretty, pretty down still on China, but long term, they're pretty bullish on it. So wait. Okay. Thank you.
Jeff Martin: So a lot of the big CPG.
Jeff Martin: Pretty settled down still on China, but long term there.
Jeff Martin: They're pretty bullish on it and so are we.
Speaker Change: Okay. Thank you and my second question is on on check point, and if I recall when you were acquiring and this is.
Jeff Martin: And my second question is on checkpoint. And if I recall, when you acquired the business, and this is sort of the big picture, if I recall, when you acquired the business, I think you said, you know, down the road, in some time, the operating margin of this business is going to, Basically, you saw no reason why it shouldn't look similar to CCL's segment, and we are approaching those levels. But, you know, I think my question is basically, what are you expecting?
Speaker Change: Sort of Big picture.
Speaker Change: I recall when you were acquiring the business I think you said you know down the road and in some time, our operating margin of this business is growing too.
Speaker Change: Basically we saw no reason why it shouldn't look similar.
Speaker Change: Similar to Sushi all segment and we are approaching those levels.
Speaker Change: I think my question is basically are you are you expecting.
Jeff Martin: positive growth through 2024-2025. Yeah, well, the operating margin was 15.1 last year at Checkpoint, and the operating margin for the CCL segment was 15.4. So we are there, basically. Correct. Okay, thank you. On the EBITDA line, because Checkpoint is not as capital-intensive as the CCL space, the EBITDA goals are all slightly less.
Speaker Change: A positive growth through 'twenty 'twenty four 'twenty 'twenty five.
Speaker Change: Yeah, well the operating margin was 15.1 for last year, a checkpoint and the operating margin for the segment was 15 portfolio.
Speaker Change: Okay. So so weird there basically.
Speaker Change: Great.
Speaker Change: Okay.
Speaker Change: The EBITDA line, because checkpoint is not as capital intensive the CCL space.
Speaker Change: EBITDA goals or slightly less.
Jeff Martin: Gotcha. Okay. Thank you. Your next question is a follow-up question from Ahmed Abdullah. Hi, just a question on some of the EU regulations that have been going on with regard to the ban on misleading environmental claims or greenwashing.
Speaker Change: Gotcha, Okay. Thank you.
Speaker Change: Your next question is a follow up question from Ahmed Abdul there.
Speaker Change: Yeah.
Ahmed Abdul: Yes, Hi, just a question on some of the EU regulations have been going on with regards to ban on misleading environmental claims or greenwashing.
Jeff Martin: The regulation is outlawing certain terms that can be used on labels by companies. Do you see this providing you with any near-term catalysts for European business? Not really. I think it's well overdue.
Ahmed Abdul: Regulate soon as passing of outlawing certain terms that can be used on labels by companies do you see this providing you with any near term catalysts for European business.
Speaker Change: Not really I I I I think it's well overdue. So I think greenwashing is an issue that has to be addressed.
Jeff Martin: So I think greenwashing is an issue that has to be addressed. So I think making claims reasonable and real and not marketing to the sentiment, the environmental sentiment, and misleading people. So I think it's entirely reasonable legislation, but I'm not sure it's going to change the direction of travel for most of our CPG customers. Okay, perfect. Thank you. Your next question is from David McFadden with Cormorant. Oh, great. Yeah, I have a couple of questions.
Ahmed Abdul: So I think.
Ahmed Abdul: To make claims.
Ahmed Abdul: Reasonable in Rio.
Ahmed Abdul: And not marketing to the sentiment the environmental sentiment and misleading people. So I think it's entirely reasonable legislation, but I'm not sure it's going to change the direction of travel for most of the CPG customers.
Speaker Change: Okay perfect. Thank you.
Speaker Change: Your next question is from David Mcfadden with core Mark.
David Mcfadden: Great and a couple of questions.
Jeff Martin: First of all, Jeff, when you talked about, "You haven't seen a better outlook than what you're seeing right now," were you referring specifically to CCL, or were you referring to most of the business overall? I think the whole company.
David Mcfadden: First of all I'm Jeff.
David Mcfadden: You talked about.
David Mcfadden: You haven't seen them better outlook that you're seeing right now when you're referring specifically to CCL or were you referring to in most of the business somehow.
David Mcfadden: I think the whole company I think probably the best out.
Jeff Martin: I think it's probably the best outlook year we've seen since 2017, 2018, because we've got so many things now that are sort of coming out of that sort of COVID volatility and settling down. Probably the one space that's still got a bit of runway to go is health care. In the healthcare space, we've got a couple of large drug companies that have demerged their consumer arms into new entities, like Operating Those Products CPS or CPS Indigo Repair Corporation earlier, so I think healthcare is probably going to have a year like the CPGs had last year. But we've got GLP-1 to sort of compensate for that.
David Mcfadden: Outlook, Yeah, we've seen since 'twenty 2020.
David Mcfadden: 2017 2018.
David Mcfadden: Because we've got so many things now that are sort of coming out of that sort of COVID-19 up volatility volatility and.
David Mcfadden: Settling down probably the one space.
David Mcfadden: Runway is the Guy who is health care.
David Mcfadden: In the healthcare space, we've got a couple of the large drug companies have demerge, the consumer arms into new entities.
David Mcfadden: There's some noise around Boston and and I think there was a lot of inventory both in the last year or two that's closing out the supply chain a bit in the same way we saw it in the Cpg's.
David Mcfadden: Earlier, so I think health care is probably going to have a year like the CPG has had had last year.
David Mcfadden: But we've got G. L. P. You want to say about that but.
Jeff Martin: But no, the commentary is really about the whole company, not just any segment in particular. Okay. So if we just look at the CCL segment for a second, it seems like when you look at the various components, everything looks like it's doing well or expected to do well, at least in Q1, with the exception of, say, CCL Secure and Healthcare. Would that be an accurate characterization?
David Mcfadden: The commentary is really about the whole company not just on each segment in particular.
David Mcfadden: Okay.
David Mcfadden: It sounds like you just look at the Ccs and then and secondly, it seems like when you look at the various components everything looks like it's doing while our taxes due at least in Q1 with the exception of St Ccl's Mclaren health care without without being accurate characterization.
Jeff Martin: All right. Okay. And then just on checkpoint, you know, clearly ALS delivered strong growth in the quarter. Is that primarily a function of greater self-drone retail, or is that primarily a function of just greater RFID adoption? Greater RFID adoption. Okay, but are we still really in the early stages here? Like we are, right? Well, it's somewhat penetrated.
David Mcfadden: Right.
David Mcfadden: Okay.
David Mcfadden: And then just on checkpoint.
David Mcfadden: You know clearly a L S and delivered strong growth in our corner.
David Mcfadden: Is that a is that primarily a function of greater south here on retail or is that primarily a function of just greater RFID adoption.
David Mcfadden: Greater RFID adoption.
David Mcfadden: Okay.
David Mcfadden: Are we still really in the early stages here like we are right.
David Mcfadden: It's somewhat penetrated.
David Mcfadden: You know, it's the biggest RFID knock it's still by far I mean, trumps everything else, but by a long chalk.
Jeff Martin: You know, it's the biggest RSID market still by far. I mean, it trumps everything else by a long shot, and some of the early RFID adoption that was done with RFID hard tags. And now we're moving some of these companies from hard tax to soft tax, in other words, disposable tax. And that's also a growth driver. So it's partly increased adoption. It's partially a transformation from a hard tag environment to a soft tag environment.
David Mcfadden: And some of the some of the RFID adoption that was done in the early days was done with RFID heart attack.
David Mcfadden: And now moving into some of these companies switching from all types of salt taxes, and there was a disposable tax.
David Mcfadden: And that's not that's also a growth driver. So it's it's partly increase adoption, it's tough partially transformations from a hard time volumes on salt tag environment.
Jeff Martin: I'm just in a good place. We're one of the players in the game, and the other players in it are also in the same spot we are, forecasting strong growth. We're an industry player, and the industry is growing. Okay. And then just on Avery.
David Mcfadden: And and they're just in a good place we wanted to one of the players in the game and.
David Mcfadden: The players and it rolls in the same spot wherein forecasting strong growth in burn industry players in the industry is growing.
David Mcfadden: Okay.
David Mcfadden: And then just on <unk> here.
Jeff Martin: You know, revenue was down 1% in the quarter. Can you sort of characterize what happened in the quarter? What was the primary driver for that revenue to be down?
David Mcfadden: Revenue was down 1% in the quarter can you sort of characterize.
David Mcfadden: Characterize what happened in the car and what was the primary driver of that revenue would be down.
Jeff Martin: Yeah, hang on, I'll cut it. It was mainly driven by a soft quarter in Canada and Australia. I meant more on the product line, not geography. Yeah, so it's really driven by those two countries. North America was fine, Europe was fine, but we had these two locations. The two countries I mentioned had notably soft waters, and they had more dependence on one or two very large distributors. So an inventory move can switch a quarter off and then switch it back on the next quarter. So we don't pay too much attention to those in America.
Speaker Change: Yeah hang on until alternatives.
David Mcfadden: One.
David Mcfadden: It was mainly driven by a soft quarter in Canada and Australia.
David Mcfadden: I meant more on the product line not too bad.
David Mcfadden: So, but it's it's really driven by the others to come to North America was fine Europe was fine with me.
Got it.
David Mcfadden: The two locations in two countries I mentioned had motivates golf balls as a man mall dependent.
David Mcfadden: On one or two very large distributors so.
David Mcfadden: But inventory moves can switch a kohl's or off in.
David Mcfadden: Then switching back on the next call it and so.
David Mcfadden: We don't pay too much attention to those and buy a car.
David Mcfadden: Okay. So it's more of a geographic mix University, it's a product that's correct.
Jeff Martin: Okay, so it's more of a geographic issue versus a product issue. Okay, okay. All right. Thank you. Once again, if there are any questions, please press star 1. We have reached the end of the question and answer session, and I will now turn the call over to Jeff for closing remarks. Okay, well, thank you very much, everybody, for joining the call. We'll look forward to talking to you again in May when the sun is shining. Thank you very much. Bye-bye. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Correct Okay.
Speaker Change: Okay alright, thank you.
Speaker Change: Once again, if there are any questions. Please press star one.
Speaker Change: We have reached the end of our question and answer session and I will now turn the call over to Jeff for closing remarks.
Jeff Martin: Okay, well. Thank you very much everybody for joining the call. We look forward to talking to you again in may when the Sun is shining. Thank you very much bye bye.
Speaker Change: Okay.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.