Q1 2024 CCL Industries Inc Earnings Call
Operator: Good morning and welcome to CCL Industries' first quarter investor update. Please note that there will be a question and answer session after the call. The moderator for today is Mr. Geoff Martin, President and Chief Executive Officer, and joining him is Mr. Sean Washchuk, Senior Vice President and Chief Financial Officer. Please go ahead, gentlemen.
Good morning, and welcome to C. C O industries first quarter Investor update.
Please note that there will be a question and answer session. After the call.
The moderator for today is Mr. Jeff Martin President and Chief Executive Officer, and joining him is Mr. Chau Unwashed, Chuck Senior Vice President and Chief Financial Officer. Please go ahead gentlemen.
Sean P. Washchuk: Good morning, everyone. Welcome to our first quarterly call for 2024. I'll draw 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.
Geoffrey T. Martin: Good morning, everyone welcome to our first quarter call for 2024.
Sean P. Washchuk: For further information on these key risks, please take a look at our 2023 annual report, particularly the section on risks and uncertainties. Our annual and quarterly reports can be found on the company's website, cclind.com or on cedarplus.ca. Moving to slide three, our summary of financial information. For the first quarter of 2024, sales increased 5.2% with 2% organic growth, 3% acquisition growth, and 0.2% positive impact from currency translation, resulting in sales of $1.74 billion compared to $1.65 billion in the first quarter of 2023. Operating income was $282 million for the first quarter of 2024 compared to $257.7 million for the first quarter of 2020, a 9.1% increase Geoff will expand on the segmented operating results of our CCL, Avery, Checkpoint, and Inovia segments momentarily.
Geoffrey T. Martin: I'll draw everyone's attention to slide number two our disclaimer regarding forward looking information.
Geoffrey T. Martin: To remind everyone that our business faces known and unknown risks and opportunities for further information on these key risks. Please take a look at our 2023 annual report, particularly dissection of risks and uncertainties.
Geoffrey T. Martin: Annual and quarterly reports can be found on the company's website C. C. L. I N E dot com or on SEDAR plus dossier.
Sean P. Washchuk: Corporate expenses were down slightly, $0.1 million for the quarter versus the prior year quarter. Consolidated EBITDA for the 2024 first quarter, excluding the impact of foreign currency translation, increased 9.8% compared to the same period in 2023. Net finance expense was $18 million for the first quarter of 2024 compared to $19.4 million in the 2023 first quarter. Due to a decrease in total debt outstanding and increased finance income on the company's
Geoffrey T. Martin: Moving to slide three our summary of financial information.
Geoffrey T. Martin: For the first quarter of 2024 sales increased five 2% with 2% organic growth 3% acquisition growth.
0.2% positive impact from currency translation, resulting in sales of $1 74 billion compared to <unk> six 5 billion in the first quarter of 2023.
Geoffrey T. Martin: Operating income was $282 million for the 2024 first quarter compared to $257 7 million for the first quarter of 2023 nine.
Geoffrey T. Martin: Nine 1% increase excluding the impact of foreign currency translation.
Geoffrey T. Martin: Jeff will expand on this segmented operating results of our CCL.
Geoffrey T. Martin: Checkpoint and in all the segments more materially.
Geoffrey T. Martin: Corporate expenses were down slightly zero point $1 million for the quarter versus the prior year quarter.
Geoffrey T. Martin: Consolidated EBITDA for the 2020 for first quarter.
Geoffrey T. Martin: Excluding the impact of foreign currency translation increased nine 8% compared to the same period in 2023.
Geoffrey T. Martin: Net finance expense was $18 million for the first quarter of 2024 compared to $19 4 million in the 2023 first quarter.
Geoffrey T. Martin: Due to a decrease in total debt outstanding and increased finance income on the company's deposits.
Sean P. Washchuk: The overall effective tax rate was 24.7% for the 2024 first quarter, compared to an effective tax rate of 24.9% recorded in the first quarter of 2023. The effective tax rate may change in future periods depending on the proportion of taxable income earned in different tax jurisdictions at different rates. Net earnings for the 2024 first quarter were $192.1 million, up 15.4% excluding foreign currency translation compared to the 2023 first quarter. Next slide, basic and adjusted basic earnings per class B share were a record.
Geoffrey T. Martin: The overall effective tax rate was 24, 7% for the 2024 first quarter compared to an effective tax rate of 24, 9% recorded in the first quarter of 2023.
Geoffrey T. 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.
Geoffrey T. Martin: Net earnings for the 2024, our first quarter.
It was $192 $1 million up 15, 4%, excluding foreign currency translation compared to the 2023 the first quarter.
Geoffrey T. Martin: Next slide.
Geoffrey T. Martin: Basic and adjusted basic earnings per class B share were a record.
Sean P. Washchuk: $1.08 for the 2024 first quarter, an improvement of 14.9% compared to $0.94 for the first quarter of 2023. The Change in Adjusted Basic Earnings, A $0.14 is principally attributable to an improvement in operating income, accounting for $0.09. Higher contribution from the label joint ventures of 4 cents, and a one cent reduction in that interest expense compared to the 2023 first quarter. Moving to slide 5, for the first quarter of 2024. Free cash flow from operations was an outflow of $7 million dollars, an improvement compared to the $6.5 million dollar outflow recorded in the first quarter of 2023. The trailing 12 months ended March 31st, 2024.
Geoffrey T. Martin: Eight for the 2024 first quarter, an improvement of 14, 9% compared to 94 cents for the first quarter of 2023.
Geoffrey T. Martin: The change in adjusted basic earnings.
Geoffrey T. Martin: Our 14th.
Principally attributable to an improvement in operating income accounting for nine cents.
Geoffrey T. Martin: Higher contribution from the label joint ventures of four cents.
Geoffrey T. Martin: And once that reduction in that interest expense compared to the 2023 first quarter.
Geoffrey T. Martin: Okay.
Geoffrey T. Martin: Moving to slide five.
Geoffrey T. Martin: For the first quarter of 2020 for free.
Geoffrey T. Martin: Free cash flow from operations was an outflow of $7 million.
Geoffrey T. Martin: An improvement compared to the $6 5 million dollar outflow recorded in the first quarter of 2023.
Sean P. Washchuk: Free cash flow from operations was $569.1 million, compared to $518.8 million for the last 12 months ended March 31st, 2021. The improvement is primarily attributable to improved adjusted earnings and working capital partially offset by cash taxes paid and an increase in net capital expenditures. Moving to our cash and debt summary slide, net debt as of March 31, 2024 was $1.61 billion, an increase of $101 million compared to December 31, 2023
Geoffrey T. Martin: The trailing 12 months ended March 31 2024.
Geoffrey T. Martin: Free cash flow from operations was $569 $1 million compared to $518 $8 million for the last 12 months ended March 31 2023.
Geoffrey T. Martin: The improvement is primarily attributable to an improved adjusted earnings and working capital, partially offset by cash taxes paid and an increase in net capital expenditures.
Geoffrey T. Martin: Moving to our cash and debt summary, slide.
Geoffrey T. Martin: Net debt as at March 31, 2024 was $1 six 1 billion.
Geoffrey T. Martin: An increase of $101 million compared to December 31, 2023.
Sean P. Washchuk: This increase is principally a result of a lower cash balance at Q1 2024 versus December 2023, and an increase in debt drawn on the company's syndicated credit facility as well. The company's net debt increased, yet the balance sheet closed the quarter in a strong position. Our balance sheet leverage ratio was 1.18 times, slightly higher than the 1.13 times reported at the end of December 2020. Liquidity was robust, with 748 million of cash on hand, and almost a billion dollars of available capacity in the company's revolving credit facility. The company's overall average finance rate was 2.8% at March 31st, 2024, unchanged from December 31st, 2023. The company's balance sheet continues to be well positioned for the balance of 2024 and beyond.
This increase is principally a result of lower cash balance at Q1 2024 versus December 2023, an increase in debt drawn on the company's syndicated credit facility as well.
Geoffrey T. Martin: Company's net debt increased yet the balance sheet closed the quarter in a strong position.
Geoffrey T. Martin: Our balance sheet leverage ratio was 1.18 times slightly higher than the 1.13 times reported at the end of December 2023.
Geoffrey T. Martin: Liquidity was robust with $748 million of cash on hand and.
Geoffrey T. Martin: And almost $1 billion of available capacity in the company's revolving credit facility.
Geoffrey T. Martin: The company's overall average finance rate was two 8% at March 31, 2024 unchanged from December 31 2023.
Geoffrey T. Martin: The company's balance sheet continues to be well positioned for the balance of 2024 and beyond.
Jeff over to you.
Geoffrey T. Martin: Thank you, Sean. Good morning, everybody.
Geoffrey T. Martin: Thank you Joe and good morning, everybody I'm on slide number seven.
Geoffrey T. Martin: Capital spending.
Geoffrey T. Martin: I'm on slide number seven, highlights of capital spending. So far for the year, $178 million in Q1, and we're planning to spend $455 million for the year ahead. Slide eight, a few highlights about where we're putting some of that money. Well, I thought it would be interesting this quarter to highlight that we're still investing in emerging markets. So in 2023, we acquired land to build a large new campus for Checkpoint and CCL Label outside Istanbul. We'll be doing the planning for that in 2024.
Geoffrey T. Martin: So we thought for the year I'm getting $78 million in Q1.
Geoffrey T. Martin: I'm really just trying to spend 455 million for the year ahead.
Geoffrey T. Martin: A few highlights about where we are putting some of that money when I thought it would be interesting that's cool to highlight we're still investing in emerging markets.
Geoffrey T. Martin: So in 'twenty to 'twenty, three we acquired land to build a large new campus for checkpoint in CCL label I'm, sorry, the booth.
Geoffrey T. Martin: We'll be doing the planning for that in 2024.
Geoffrey T. Martin: The capex will occur in 'twenty to 'twenty five.
Geoffrey T. Martin: Most of the CapEx will occur in 2025. In Vietnam, we're completing the construction of a new checkpoint ALS plant in Vietnam, including RFID and coding and insertion. We should complete that factory this year in 2020. In Singapore, a few, maybe 18 months or so ago, we acquired a label business in Singapore, removed all the business that was being conducted at that site to our plant in Thailand, and we renovated the site as a pharmaceutical-grade operation, and we now have labeling and insert equipment in there, making products for a couple of very important strategic global customers, and trading commenced in the first quarter of 2024. Slide nine.
Geoffrey T. Martin: You've yet non with completing construction of a new checkpoint less plants and getting them, including RFID encoding and intuition, we should complete factory.
Geoffrey T. Martin: This year in 2024.
Geoffrey T. Martin: In Singapore.
Geoffrey T. Martin: Hugh.
Geoffrey T. Martin: Maybe 18 months or so ago, we acquired the label business in Singapore.
Geoffrey T. Martin: Moves all the business that was being conducted at sites in our plant in Thailand.
Geoffrey T. Martin: Renovated the sides as a pharmaceutical grade operation with labeling in sort of the equivalent of the making products for a couple of very important strategic global customer trading commenced in the first quarter.
Geoffrey T. Martin: Yes.
Geoffrey T. Martin: Slide nine.
Geoffrey T. Martin: CCL for the cause of organic growth, term continues to make progress, high single digits in Asia Pacific, a lot about the recovery in CCL design, mid single digits in Latin America, low single digits in North America, and pretty much flat in Europe. We had strong results in home and personal care and food and beverages. The consumer products industry continues to make progress towards retrieving gold volume growth, modestly down in healthcare and specialty and slower at CCL Secure. CCL Designs posted strong gains in electronic markets, part offset by a decline in orders. Slide 10 highlights the joint ventures. The story here is all about what happened in Egypt.
Geoffrey T. Martin: Oh, that's a C C O for the cool sort of organic growth.
Geoffrey T. Martin: Returns continues to make progress high single digit and Asia Pacific loved about that about the recovery in CCL design.
Geoffrey T. Martin: Mid single digits in Latin America, low single digits in North America has been pretty much flat in Europe yet.
Geoffrey T. Martin: We had strong results in home and personal care and food and beverages casino products industry continues to make progress towards retrieving golf volume growth.
Modestly down in health care, and specialty and slower in CCL secure C.
Geoffrey T. Martin: He'll design posted strong gains in electronic markets, partly offset by a decline to ultimate.
Geoffrey T. Martin: Slide 10 highlights sort of joint ventures story here is all about what happened in Egypt. So those of you who were on the Q4 call Nicole we we booked some foreign exchange losses.
Geoffrey T. Martin: So those of you who are on the Q4 call might recall we booked some foreign exchange losses in Egypt in Q4, which we reversed in 2024. So that's the reason for the strong improvement in the joint ventures, although the underlying progress was also very good indeed. Moving to slide 11, highlights for Avery direct to consumer growth in the US and Europe offset slower performance in the distribution-based product lines. But I might hasten to add compared to a strong prior year, Latin America, Latin America, and Australia were both a little soft, but we had strong recovery and horticultural markets in both the United States and Europe. Slide 12.
In Egypt in Q4, which we reserved in 2020 fold. So that's the reason for the strong improvements in these joint ventures.
Geoffrey T. Martin: Underlying progress was also very good indeed.
Geoffrey T. Martin: Moving to slide 11 highlights Avery threats are concerned with growth in the U S and Europe offset slower performance in the distribution based product lines.
Geoffrey T. Martin: Patients rather compared to a strong prior year, Latin America, Latin America, and Australia, but both are a little soft, but we have strong recovery in horticulture markets in both the United States and Europe.
Geoffrey T. Martin: Checkpoint was certainly the best performing business we had in the company in terms of sales growth. The MAS business had a solid quarter on strong results in Asia Pacific but actually offset slower results in Europe and North America. So the gains this quarter all came from our apparel label business, which substantially improved more than 25% organic growth driven by RFID. There were some signs of European retailers forward ordering to avoid Red Sea supply disruption across all the supply chains. [inaudible] Page 13, Highlights for Innovia.
Geoffrey T. Martin: Slide 12.
Geoffrey T. Martin: Check point, certainly the best performing business, we had in the company in terms of sales growth.
Geoffrey T. Martin: You may ask business had a solid pull through on the strong results in Asia Pacific, but actually is.
Geoffrey T. Martin: Slower results in Europe, and North America. So the games. This cools rule came the hydropower label business.
Geoffrey T. Martin: Substantially improved more than 25% organic growth driven by out of I D.
Geoffrey T. Martin: Theres some signs of European retail its full with ordering.
Geoffrey T. Martin: The Red sea supply disruption, but all of those supply chain issues through the Suez Canal.
Geoffrey T. Martin: Page 13 highlights renewed yet.
Geoffrey T. Martin: There was a decline in lower Belgian shipments post-closure, so we're moving the operations from that plant to our site in the UK, and there was also some associated mixed impact, so overall volume increased only slightly, but the labor industry volume improved very significantly. A long period of destocking came to an end in both North America and Europe. Early benefits from the transition out of Belgium drove the increase in profitability.
Geoffrey T. Martin: Sales declined on the lowest Belgian shipments post closure. So we've been moving the operations from US without club to a site in the U K and there was also some associated mix impact. So overall volume increase only slightly but label industry volume improved very significantly and for long periods of Destocking.
Geoffrey T. Martin: Came to an end in both North America and Europe.
Geoffrey T. Martin: What are the benefits and the transition of the Belgium drove the increase in profitability.
Geoffrey T. Martin: So outlook for the coming quarter. Consumer products, as I said, are showing early signs of a return to volume growth. It's not, it's not stunning, but it's certainly better than it was for most of the last five or six quarters and back in 2022 and all of 2023. But healthcare is a little bit slower.
Geoffrey T. Martin: So I'll look for the coming quarter consumer products industry as I've said, showing some early signs of very solid volume growth.
Geoffrey T. Martin: So it's starting but it's certainly better than it was for most of the last five or six quarters in the back end of 2022.
And all of the 'twenty to 'twenty, three but health care is a little bit slow some some destocking elements that vaccines coming to an end.
Geoffrey T. Martin: Some de-stocking elements there, vaccines coming to an end. On the GLP-1 side, the industry is a bit slower than it was. CCL Design Recovery should accelerate this quarter in electronics with automotive repeating what happened in Q1. CCL Secure comps are much easier this quarter in the passport component business, still very strong. Avery has tough Q2 comps and the usual timing uncertainty when back to school starts, whether that's in June or July. Multicultural should be a significant obstacle.
Geoffrey T. Martin: G O P well inside the industry is a bit slower than what it was [noise] CCL design recovery.
Geoffrey T. Martin: Do they accelerate this cold right now.
Geoffrey T. Martin: With automotive repeating what happened in Q1.
Geoffrey T. Martin: T cells to kill comps are much easier this quarter and the possible components businesses is still very strong.
Geoffrey T. Martin: Now you've really has tough Q2 comps.
Geoffrey T. Martin: The usual timing uncertainty went back to school starts whether that's in June or July.
Geoffrey T. Martin: It holds the cultural should be a significant upside.
Geoffrey T. Martin: Checkpoint growth continues driven by RFID, and apparel inventories remain low. But there's still some science, as I mentioned earlier, about this forward ordering from, particularly European retailers. Inovia will see the Belgian transition complete this quarter. It's gone extremely smoothly, and the labor industry volume continues to strengthen. So we're continuing to expect good things at Inovia. And overall, in the quarter so far, close the month of April, which is extremely strong. So we're quite optimistic about the quarter ahead. FX is still a modest tailwind at current exchange rates. So with that said, we'd like to open up the call for questions.
Geoffrey T. Martin: Checkpoints checkpoint growth continues driven by RFID apparel inventories remain low.
Geoffrey T. Martin: There's still some signs as I mentioned above this forward ordering from particularly European vetoes.
You know that you will see that the Belgium transition complete its coltrane's gone extremely smoothly and label industry volume continued to strength and so we're continuing to expect good things where they move yet.
Geoffrey T. Martin: And overall and with Kohl's. So closed the month of April which is extremely strong and so we're quite optimistic about the corporate head FX is still a modest tailwind with current exchange rates.
Speaker Change: So with that operator, we'd like to open up the call for questions.
Operator: Certainly, 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 in the question queue. You may press star 2 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. One moment, please, while we poll for questions. Your first question for today is from Hamir Patel with CIBC Capital Markets.
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: Confirmation tone will indicate your line is into question. Kim you May Press Star two if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Speaker Change: Your first question for today is from Javier <unk> Patel with CIBC capital markets.
Hamir Patel: Hi Jeff, in your outlook, when you talked about momentum continuing into Q2, does that suggest you'd expect a sequential improvement in profitability in the second quarter?
Javier Patel: Hi, good morning.
Javier Patel: Jeff in your outlook when you talked about momentum by continuing into Q2 does that suggest that you would expect a sequential improvement in profitability in the second quarter.
Geoffrey T. Martin: Yeah, for sure. It's sequential year over year.
Javier Patel: Yeah for sure.
Javier Patel: Since the sequential year over year.
Geoffrey T. Martin: I guess I'll ask on both. Well, we had a very strong April.
Javier Patel: I I I guess asking on boats.
Speaker Change: Well, we had a very strong April.
Speaker Change: I'm sorry, it broke up.
Speaker Change:
Geoffrey T. Martin: And sorry, when you say that, do you mean on both the year over year and sequential basis? Correct. Okay, thanks. That's, that's helpful.
Speaker Change: And sorry, when he said that you made on both a year over year and sequential basis.
Speaker Change: Correct.
Geoffrey T. Martin: And Jeff, a checkpoint on how much of the 25% ALS organic growth you think reflected that call for orders by European retailers? Very hard to say. It's a fact that, Yeah, we've got a number of things at play there. Apparel inventories are still low.
Speaker Change: Okay. Thanks, that's that's helpful and dripping checkpoint out how much of the 25% a L. S. Organic growth do you think reflected that the coal forward of orders by European retailers.
Speaker Change: Okay. That's good.
Speaker Change: Hard to say, it's a fact.
Yeah, we've got a number of things at play that apparel inventories are still it's still low.
Geoffrey T. Martin: So we definitely know there's been some forward ordering. So, as you might imagine, if you're a European return and you're sourcing from places like Bangladesh and Vietnam and those goods are coming through. Unknown Attendee, Jonathan Goldman, Ben Jekic, Daryl Young, Sean Steuart, Unknown Attendee, I can't say more than I've already commented. Okay, great.
Speaker Change: So, but we definitely definitely noted there's been some food ordering food. So as you might imagine if you're if you're a European retailer and you're sourcing from.
Speaker Change: From places like Bangladesh, and Vietnam, and those those goods coming through.
Speaker Change: Through the Suez Canal does cause some concern about disruption there. So we see some signs of a food ordering that we also see very low apparel inventory. So it's very hard to say what it will mean in the coming quarter.
Speaker Change: And April is it still seems still very strong so.
Speaker Change: Well, it's accounts I cant say more than I've already commented.
Geoffrey T. Martin: And just the last question I had, Geoff, your outlook also referenced new business wins in China driving significant gains for CCL design in the quarter. Are you able to quantify sort of how significant those gains were? And would you expect that to continue to build?
Speaker Change: Okay, Great and just a blockbuster had Jefferies is that your your outlook also referenced new business wins in China, driving significant gains for CCL design and in the quarter are you able to quantify sort of how significant those gains were.
Speaker Change: When do you expect that to continue to build in in Q2.
Geoffrey T. Martin: Well, we're very optimistic about the CCL design electronic space. So a number of things are going on there.
Speaker Change: Well, we're very optimistic about the CCL design electronic space.
Speaker Change: A number of the things that are going on that subject.
Geoffrey T. Martin: The market's definitely bounced back from its inventory correction issue, and so we're seeing improved demand for production in all sectors of the electronics space. And then you've got the AI factor. So the number of new PCs that will need upgraded chips, so that's that's another factor. And then we've got some new business wins in some other sectors. But I can't talk about customer by customer, but they're very good. So that's a business we have; we see considerable upside for the remainder of the year.
Speaker Change: Mark its definitely bounce back from its inventory correction issue.
Speaker Change: We're seeing it in all sectors of the electronics space and improved demand for production.
Speaker Change: And then you've got the I always talk to service the number of new P sees it will need upgraded chips.
Speaker Change: So that's that's another factor and then we've got some new business wins and so some of those sites as well.
Speaker Change:
Speaker Change: I cant talk about customer by customer.
Speaker Change: They're very good so, but that's a business we have we see considerable upside for the remainder of the year.
Geoffrey T. Martin: Fair enough. Thanks, Geoff. That's all I had. I'll get back to you.
Speaker Change: Fair enough. Thanks, Jeff that's that's all I had I'll get back in queue.
Ahmed Abdullah: Your next question is from Ahmed Abdullah with the National Bank of Canada.
Speaker Change: Your next question is from Amit <unk> with National Bank of Canada.
Ahmed Abdullah: Yeah, good morning. Thanks for taking my question.
Amit: Yeah. Good morning, Thanks for taking my question.
Geoffrey T. Martin: In the CCL segment, it seems that most of the trends across your subsectors are going in your favor, which is translating into better even margins. Can you give us some color around how much of these margin improvements are purely driven by better market conditions? And are there any levers you're pulling to further boost margins?
Amit: Hum.
Amit: Ccs segment it seems that most of the trends across your Subsectors are going in your favor, which is translating into better EBITDA margins can you give us some color around how much of these margin improvements are purely driven by better market conditions and are there any levers you're pulling to further boost margins.
Geoffrey T. Martin: I think it's just a function of a better mix and recovering sales. I don't think it's more complicated.
Amit: I think it's just a function of that.
Amit: Better mixing and recovering sales I don't think it's more complicated than that.
Geoffrey T. Martin: Okay, so there's no like cost cutting or cost adjusting on your solid function and better mix and improved revenues. There are probably some benefits in the CCL design space. We did quite a bit of restructuring. In China last year, there was a little bit of margin benefit in the electronics industry. CCL Design for the company, it's immaterial. Okay, perfect. And on checkpoint, another solid quarter for the segment with RFID continuing its trend higher and margins also moving higher.
Speaker Change: Okay. So there's no like cost cutting or cost adjusting.
The function of a better mix.
Improving improving revenues was probably some benefits in the CCL design studies, we did quite a bit of restructuring and.
Speaker Change: In China last year.
A little bit about margin benefit in the electronics industry and he's got a design win for the company it's immaterial.
Geoffrey T. Martin: Is there a new EBITDA margin goal as RFID picks up for this segment? Okay. And then finally, versus your comments from the last quarter of earnings growth, has that changed in any way, given the current outlook?
Speaker Change: Okay, perfect and Oh checkpoint another solid quarter for the segment with RFID continuing to trend higher and margins also moving higher.
Speaker Change: Is there a new EBITDA margin goal as RFID picks up for the segment.
Speaker Change: Okay.
Speaker Change: Okay, and then finally just versus your comments from the last quarter of earnings growth.
Speaker Change: That changed in any way given the current outlook.
Geoffrey T. Martin: I think we see the outlook. The same way we saw Q4, the same way we saw Q1, we see in Q2, it's, I think, that's how we're doing relative to the prior year. So that's how we do when we get into the back half of the year. We've got to worry more about the back to school season at Avery and how that will be this year, and then when we get into Q4, obviously, the cold situation changes pretty dramatically.
Speaker Change: We see the outlook.
Speaker Change: The same way we saw Q4 the same movies. So Q1, we see in Q2, it's it's I think.
Speaker Change: That's the that's what that's how we're doing relative to the prior prior year. So that's that's how we see when we get into the back half of the year.
Speaker Change: We've got to worry more about the.
Speaker Change: Back to school season, the debris and how that will be this year and then when we get into Q4, obviously, the coal situation changes pretty pretty dramatically.
Ahmed Abdullah: Okay, but the expectation is still for better earnings growth for the year. For sure. Okay, perfect. Thank you. That's it for me.
Speaker Change: Okay, and but the expectation is still for better earnings growth for the year.
Speaker Change: Sure.
Speaker Change: Okay perfect. Thank you that's it for me.
Speaker Change: Yeah.
Walter Noel Spracklin: Your next question for today is from Walter Spracklin with RBC Capital.
Your next question for today is from welfare Spracklen with RBC capital.
Unknown Attendee: Hey, it's Luis Sturluson for Walter. So just continuing on checkpoint and driven by our RFID growth. Just given what we saw in ALS and the Mexico plant coming online mid year, how should we think about revenue growth this year at the high single-digit organic growth rate we saw in Q1. Is that a good run rate going forward?
Speaker Change: It's Louis Sterling on for Walter So just continuing on on checkpoint and are driven by our RFID growth just given what we find out less than in the Mexico plant coming online mid year, how should we think about revenue growth. This year is high single digit organic growth rate. We saw in Q1 is that a good.
Speaker Change: The run rate going forward.
Geoffrey T. Martin: Well, time will tell. You know, the plant in Mexico will come on stream in the second half of the year. So that will have a positive impact. It also has some benefits. Some of the products we import today into the US directly from China have tariffs on them, so they'll start to go away.
Speaker Change: Well time will tell.
Speaker Change: Yeah.
Speaker Change: Pause in Mexico will come on stream in the second half of year. So that that will have a positive impact to the also have some benefits in.
Geoffrey T. Martin: So there are some P&L benefits as well as sales benefits. So time will tell how it affects checkpoints. We're very pleased with the performance, and we're expecting things to continue in good shape. I mean, you get into the second half of the year, that's the busiest season for the checkpoint business just
Speaker Change: And some of the products, we import today and into the U S directly from China tariffs all of them. So they'll they'll start to go away.
Speaker Change: So there's some there's some P&L benefits as well as sales benefits.
Speaker Change: Time will tell us what are the effects.
Speaker Change: Checkpoint.
Speaker Change: But we're very pleased with performance and we're expecting things to continue and are in good shape.
Speaker Change: When you get into the second half of the year, that's the busier season for the checkpoint business just in general.
Speaker Change: Yeah.
Unknown Attendee: Okay, thanks. And these plants in Vietnam and Turkey, do you have any idea of the kind of revenue contribution they can be expected to provide? Turkey's business in total is about $50 million. Unknown Attendee, Jonathan Goldman, Ben Jekic, Daryl Young, Sean Steuart, Unknown Attendee, Based on our belief that Turkey is going to continue to be a very important source for the Fast Fashion Industry in Europe, and we want to be the leader in that space. Okay, and one more question, if I could, can you remind us what percentage of checkpoint revenue is driven by RFID currently versus RF?
Speaker Change: Okay. Thanks, and these these plants in Vietnam in Turkey, and do you have any idea of the kind of revenue contribution that they can be expected right.
Speaker Change: What other key business in total is about $50 million.
Speaker Change: So but.
Speaker Change: Well have a lot of capacity to grow that pretty significantly beyond that so it's a long term investment.
Speaker Change: Based on I believe with bookings is going to continue to be a very important sourcing country for fast fashion industry in Europe.
And we want to be the leading run.
Speaker Change: Once but.
Speaker Change: Okay, and one more if I could can be can you remind us what percentage of checkpoints are revenues driven by RFID currently versus RF.
Geoffrey T. Martin: Well, I think the investor conference with we said our RFID business company-wide, including checkpoints, our business, which is by far the majority of it's about $200 million last year.
Speaker Change: Well I think.
Speaker Change: The Investor Conference, We said all right if I D business company wide, including checkpoints or business, which is by far the majority of its about $200 million last year.
Unknown Attendee: Okay, great. Thanks. I'll turn it over.
Speaker Change: Okay, great. Thanks, I'll turn it over.
Okay.
Stephen MacLeod: Your next question is from Stephen MacLeod with BMO.
Speaker Change: Your next question is from Stephen Macleod with BMO.
Stephen MacLeod: Thank you. Good morning, guys.
Stephen MacLeod: Thank you good morning, guys.
Stephen MacLeod: Morning, Steve.
Stephen MacLeod: Morning, Steve.
Stephen MacLeod: Good Thanks, how are you.
Stephen Macleod: Good.
Stephen MacLeod: Good, good. Great. Well, thanks for the color so far.
Speaker Change: Okay. Good.
Speaker Change: Well thanks for the color so far I'm just a couple a couple of follow up questions.
Speaker Change: On the on the checkpoint business you know you had some very strong margin growth in the quarter and I'm. Just curious just curious if you can give a little bit of color around sort of what the key drivers are around that margin growth and if that's kind of a new run rate that you expect in that business going forward.
Speaker Change: Well that makes it was good so the customer makes us very good RFID was strong which is good.
Speaker Change: Uh huh and the consumable business in N. A S was stronger than the hardware business. So that's another mix.
Speaker Change: Mixing running in our favor.
Speaker Change: That's the main underlying reasons behind my check wasn't as good as I would call strong sales.
Speaker Change: Yeah, I'll, let together.
Speaker Change: Lots of lasers going in that direction.
Speaker Change: Any slight offset was returned in some higher freight expense.
Due to the Suez situation, you know coming coming round coming round with thousands of Africa, it's about that increased freight rates for some of our intermodal.
Speaker Change: Shipments coming out of China as well.
Speaker Change: So the company started to propose it around the world.
Speaker Change: Switching to Europe.
Stephen MacLeod: Just a couple of follow-up questions. You know, just on the checkpoint business, you had some very strong margin growth in the quarter. And I'm just curious, just curious if you can get a little bit of color around sort of what the key drivers are around that margin growth and if that's kind of the new run rate that you expect in that business going forward.
Speaker Change: Okay. Okay. That's that's great.
Speaker Change: And then and then maybe just turning to the the CCL segment.
Geoffrey T. Martin: The mix was good, and the customer service was very good. RFID was strong, which is good, and the consumables business in NAS was stronger than the hardware business. So that's another Next thing running in our favor. So that's the main underlying reasons behind why Check Point was good, and then of course, strong sales. Due to the sewage situation, you know, coming around the south of Africa, so that increased freight rates for some of our intermodal. Shipments coming out of China to our sales companies started to deposit around the world.
Speaker Change: You know in the outlook it sounds like things are continuing to trend trend positively.
Speaker Change: You know last year, you had a bit of margin pressure in Q2 and would you expect that to sort of fully reverse this year.
Stephen MacLeod: Okay, okay, that's great. And then maybe just turning to the CCL segment. You know, in the outlook, it sounds like things are continuing to trend positively. You know, last year, you had a bit of margin pressure in Q2. And would you expect that to sort of fully reverse?
Speaker Change: Yes.
Geoffrey T. Martin: Yeah. Okay, great.
Speaker Change: Yeah, Okay great.
Geoffrey T. Martin: Because of the situation with CCL design. Yeah, I think we also had a difficult, we had a very slow Q2 in CCL Secure last year. We don't expect that to be the case.
Speaker Change: Steve because of the situation of the <unk> design.
Steve: Yeah, and I think we also had a difficult we had a very slow Q2 and CCI secured last year.
Steve: Expect that to be the case this year.
Stephen MacLeod: Okay, okay, great. And then you gave lots of interesting color about those plant investments you're making in emerging markets. I know that's been a market, an important market for you over the years. Just curious if you could give a little bit of color on, in aggregate, what do emerging markets represent in terms of your overall revenues now?
Steve: Okay, Okay great.
Steve: And then you gave us lots of that interesting color about those planned investments you're making in emerging markets.
Steve: I know that's been a a market pork market for you over the years just curious if you could give a little bit color on on like in aggregate what does emerging markets represent in terms of your overall revenues now.
Stephen MacLeod: Well, I think we disclosed that on the slides, Steve. You've got the percentages there on all the slides for each of the segments, it's already fully described. Right, okay.
Steve: But I think we disclosed that on the on the slides you've got the.
Steve: You've got the percentages there almost slides for each of those each of the each of the segments, it's already fully disclosed.
Stephen MacLeod: Okay. That's great. Okay. Thanks, Geoff. Thanks, Sean. I appreciate it.
Speaker Change: Right Okay.
Speaker Change: That's great. Okay. Thanks, Jeff Thanks, John appreciate it.
Speaker Change: From.
Michael W. Glen: Your next question is from Michael Glen, with Raymond James.
Speaker Change: Your next question is from Michael Glen with Raymond James.
Michael W. Glen: Hey, good morning. Uh, Geoff, maybe to start, it's, it's, I guess, a little bit surprising, like the last transaction, the M&A, last M&A transaction you guys made was, on July 23, was it the healthcare deal? Can you, can you give some thoughts surrounding M&A? I guess I would have thought you guys would have been more acquisitive on the tuck-in side.
Michael W. Glen: Hey, good morning, Jeff.
Michael W. Glen: Jeff maybe to start I, it's it's I guess, a little bit surprising like the last transaction the M&A chat last type of.
M&A transaction you guys. Just made was in July of 'twenty three what's the what's that health care deal can you can you give some thoughts surrounding M&A I'm I guess I would've given where the balance sheet is I guess I would've thought you would've been more acquisitive on the tuck in side.
No go ahead.
Geoffrey T. Martin: Well, I think we've said ad nauseum what the situation is. I mean, the focus is both on M&A, and what's his face?
Speaker Change: Well I think he said I had no idea what the situation is I mean, it's our focus is on bolt on M&A.
Speaker Change: And what's the space.
Okay.
Michael W. Glen: And then can you also speak to, I guess, capital allocation and maybe give some thoughts on the internal view or the board level, if you want, on share repurchases?
Speaker Change: And then can you also speak to I, I guess capital allocation and maybe give us some thoughts on the internal view.
Speaker Change: Or the board level of you one on the on share repurchases.
Geoffrey T. Martin: No change. I mean, M&A is the priority. And, you know, buybacks might be on the table, might not be; it just depends on the circumstance. We're certainly planning to renew the normal course issue a bit. So we'll wait and see what happens.
Speaker Change: No change I mean.
Speaker Change: M&A is a priority.
Speaker Change: With leverage gets to my one.
Speaker Change: We will get very nervous about about the situation on the balance sheet as leverage gets below one.
Speaker Change: And.
Speaker Change: But buybacks might be on the table might not be it just depends on the circumstance with 70 plenty to renewed normal course issuer bid.
Speaker Change: So, we'll wait and see what happens.
Michael W. Glen: Okay. And just to go back to school, is this a timing situation? If we think about the business in aggregate over Q2 and Q3, is it stable? Is it up? Is it down this year versus last year?
Speaker Change: Okay, and just on back to school.
Speaker Change: Is this a timing situation if we if we think about the business in aggregate over Q2 and Q3 is it is it stable is it up is it down this year versus last year.
Geoffrey T. Martin: I think Back to School is a secular decline business. It's declining consistently year after year. So it sometimes has positive bumps in the road driven by retailer confidence in sourcing from China. And that was obviously a big problem last year, so much less of a problem this year. And so, it's partly partly driven by the next quarter about how much will get shipped in June versus how much goes out in July.
I think back to school as the secular decline business has declined consistently year after year.
Speaker Change: So it has sometimes it has positive bumps in the road driven by bus.
Speaker Change: Retailer cold rooms, and sourcing from China.
Speaker Change: And that was obviously a big problem last year, so much less of a problem this year.
Speaker Change: So so it's partly partly driven Mexico or about how much will get shipped in June.
Speaker Change: It goes in July that's always a factor.
Geoffrey T. Martin: That's always a factor. But the long-term situation is that it's a business that's in long-term secular decline. It's profitable while we have it, and so we're still very much focused on it. But, as I said in the, in the, in the outlet comments, we'll probably see that offset this year by, by, stronger results in the horticultural space. So I wouldn't say these comments are particularly material for Avery; it's just the fact that they're certainly not material for the company overall.
Speaker Change: But the.
Speaker Change: The long term situations, that's a business that's in long term secular decline.
Speaker Change: It's it's profitable while we have it.
Speaker Change: And so.
Speaker Change: So we're still very much focused on it.
Speaker Change: But but as I said in the in the in the outlet comments, you'll probably see that offset this <expletive>, but but but stronger results in the hole to cultural space.
Speaker Change: So it's it's I wouldn't I wouldn't say with these comments that particularly material for IV is just it's just the fact that it's certainly not material for the company to grow.
Michael W. Glen: Okay, thanks for taking the question.
Speaker Change: Okay.
Speaker Change: Thanks for taking my questions.
Speaker Change: Tom.
Daryl Young: Your next question is from Daryl Young with Stiefel.
Speaker Change: Your next question is from Daryl young with Stifel.
Daryl Young: Hey, good morning, everyone. Just one for me, with regard to a lot of businesses that are recovering from the bottom and a bit of a restocking trade that seems to be happening in several segments. Is there a way to just, at a very high level, speak to demand for some of the products that are maybe a little more stable and just, I guess, just trying to get a picture of how much of this is sort of the whipsaw from the pandemic versus just really strong and market demand?
Daryl Young: Hey, good morning, everyone.
Daryl Young: Just one for me with regards to a lot of we got a lot of businesses that are recovering off the bottom and add a bit of a restocking trade that seems to be happening in several segments.
Daryl Young: Is there a way to just at a very high level speak to demand.
Daryl Young: And some of the products that are maybe a little more stable and just I guess just trying to get a picture of how much of this is it.
Daryl Young: The whipsaw from pandemic versus I'm, just really strong end market demands.
Geoffrey T. Martin: Well, I think the most volatile business we've had in that regard in the recent time is CCL Designs electronics business. I think you have a lot going on there.
Speaker Change: Well I think.
Speaker Change: So I think.
Speaker Change: The most volatile business we've had in that regard in the last recent times in CCL designs electronics businesses.
Speaker Change: You have a lot going on there so you would go.
Geoffrey T. Martin: So you definitely definitely had a boom in the pandemic and a bust that followed it. So that's for sure what happened. And then that bottomed out. And now we're recovering from that. You've got the impact of new technology on devices, which is for sure a factor. And then we've got some new business wins. So, CCL design has been the most volatile in the electronics element of it.
We definitely we definitely had a boom in the pandemic and the Boston followed it. So that's for sure what happened and then that's bottomed thousand member recovering from that.
Geoffrey T. Martin: But to give that context, it's three or 400 million out of the 4 billion segments, so it's 10% of the segment. When you get into the consumer products business, you know, if you look at the results of most of our consumer packaged goods customers, they're beginning to turn the corner. So most of the companies that she began to report, All be it low, but at least some return to low volume growth and less reliance on on price next. So that would be a good thing for us in the longer term.
Speaker Change: You've got the impact of new technology on all devices, which is for sure a factor.
Speaker Change: And then we've got some new business wins. So so so CCL design has been the most volatile.
Speaker Change: Electronics element, but it's giving it to give that context, it's three or 400 million of them either.
How does the full billion segment, so it's 10% of the segment.
Speaker Change: And when you get into the consumer products business.
Speaker Change: You know if you look at the results of most of our consumer package goods customers.
Speaker Change: Beginning to turn the corner. So most most companies this year began to recall.
Speaker Change: Albeit lows, but at least some return to volume growth and less reliance on.
Price and mix.
Speaker Change: So that's that'd be a good thing for us in the longer run.
Geoffrey T. Martin: Okay. And then maybe just one more on just some of the commodities and input deflation that is popping up in some other industries. Are you seeing anything there? Are there any benefits in your margins today from deflationary conditions that might normalize in the next couple quarters?
Speaker Change: Got it Okay, and then maybe just one more on just some of the commodities and input.
Speaker Change: Deflation that is popping up in some other industries are you seeing anything there or is there any benefits in your margins today from declared generic conditions that might normalize in the next couple of quarters.
Geoffrey T. Martin: I wouldn't say so. We saw a little uptick in... Clip driven by the price of oil and resin.
Speaker Change: No I wouldn't say services, we saw a little uptick in and.
Geoffrey T. Martin: So we've seen a little uptick. It's still pretty small, and we're still seeing year over year gains. So I would describe inflation as still reasonably benign. But the dramatic drops we saw at the back end of last year and in Q1. I wouldn't say it's stopped, but it's certainly paused a bit. We'll see what happens for the balance of the year. We still expect inflation to continue to head
Speaker Change: Driven by the price of oil and resins.
Speaker Change: We've seen a little uptick it's still pretty small and we're still seeing year over year gains food.
Speaker Change: I would describe it inflation is still reasonably benign, but the dramatic drops we saw at the back end of last year.
Speaker Change: Q1, that's I wouldn't say, it's stopped but it's it's certainly pulls the bed.
Speaker Change: And we'll.
Speaker Change: We'll see what happens for the bonds were used.
Still expected.
Speaker Change: <unk> had downloaded the relevant materials going out.
Speaker Change: So that's our thesis on looking at the business going forward.
Daryl Young: Okay, that's great. Thanks very much and congrats on a good result, guys.
Speaker Change: Okay. That's great. Thanks, very much and congrats on a good result, guys. Thank.
Speaker Change: Thank you.
Sean Steuart: Your next question for today is from Sean Steuart with TD Cowan.
Speaker Change: Your next question for today is from Sean Stewart with TD Cowen.
Sean Stewart: Thanks, Good morning, everyone.
Sean Steuart: A couple questions on Anovia. Pronounced a deceleration in organic sales declines this quarter, which I guess reflects an easier comp. I suppose we're at a position where we're going to start to see strong year-over-year growth in that business as you continue to lap easier comps. With the restructuring at Belgium, etc. Can you give us a sense of the cadence of sales growth expectations organically for Inovia over the next few quarters?
Sean Stewart: So a couple of questions on a on a novia pronounced deceleration in inorganic.
Sean Stewart: Sales declined this quarter, which I guess reflects an easier comp.
Sean Stewart: I suppose we're at a position where we're going to start to see strong year over year growth in that business as you continue to lap easier comps.
Sean Stewart: With the restructuring at Belgium, etcetera can you give us a sense of the cadence of sales growth expectations organically for and over the next few quarters.
Geoffrey T. Martin: Well, we had low volume growth this quarter, so the problem with Inovio is the pass-through industry, so the dollar signs at the top are not as important as tracking operating income and EBITDA because revenue moves up and down, driven by resident pass-throughs. So, looking at the absolute dollar numbers at the top line isn't terribly important. It's more important to focus on operating income and EBITDA. And we're certainly expecting to see the kinds of improvements that we saw in Q1 continue and even accelerate as the year progresses as we get the full benefit of
Speaker Change: Well, we haven't we had low low volume growth as the schools.
Yes.
Speaker Change: Problem, we didn't know if there is a pass through industry.
Speaker Change: All the signs of the Tulsa, all those impulse is tracking.
Speaker Change: Operating income and EBITDA, because revenue moves up and down drift driven by resin pass throughs.
So looking at the absolute dollar dollar numbers on the top line isn't terribly important what's more important to focus on operating income and EBITDA.
Speaker Change: Suddenly you're expecting to see the kinds of improvements that we did we saw in Q1 continue and even accelerate as the year progresses as we get the full benefit of the closure of Belgium.
Sean Steuart: And I guess that's the follow-on question, Jeff, the 17 to 20 million annual profitability improvements tied to that restructuring. How should we think about the cadence there? I was under the impression it was a back half weighted... We start to get the full benefit from the second half of the year, and that should happen.
Speaker Change: And I guess, that's a follow on question, Jeff that 17 to 20 million of annual profitability improvements tied to that restructuring.
Geoffrey T. Martin: How should we think about the cadence there.
Geoffrey T. Martin: Was under the impression it was a back half weighted.
Geoffrey T. Martin: The full benefit from the second half the year.
Geoffrey T. Martin: And that should happen, but we have some benefit.
Speaker Change: We are still operating the plant Q2.
Geoffrey T. Martin: You know, we've got the transition to the UK, but by the summer of this year, Belgium will be long gone, and we'll be operating out of the UK. So we should see the full benefits kick in.
Speaker Change: You know, we got the transition to the UK, but but but the summer this year will be.
Speaker Change: And it will be long gone and will be operating out of the U K. So we should see the full benefit kicking.
Speaker Change: From the summer.
Sean Steuart: Thanks for that detail. The rest of my questions have been answered.
Speaker Change: Thanks for that detail the rest of my questions have been answered. Thanks.
David John McFadgen: Your next question for today is from David McFadgen with Cormark Securities.
Speaker Change: Your next question for today is from David Mcfadden with core Mark Securities.
David John McFadgen: Okay, great. Yeah, a couple of questions. First of all, on Avery, it seems like the legacy business, legacy products, declined sort of accelerated in Q1, and I'm just wondering, is this a new trend or is this just a bit of an anomaly for Q1.
David John McFadgen: Okay great.
David John McFadgen: A couple of questions persons on Avery.
David John McFadgen: It looks like Oh.
David John McFadgen: The legacy businesses legacy products decline accelerated in Q1 and I'm. Just wondering is this a new trend or is this just a bit of an anomaly for Q1.
Geoffrey T. Martin: Now, I think it's really driven by the prior year comp, David. So if you go back to Q1 last year, we commented that we'd have destocking in the back end of 2022 and then some restocking in Q1 of 2023. So the comps are difficult in the legacy business in Q1. That's really what the issue was. Okay. And then I'll see.
David John McFadgen: No I think it's really driven by the prior year comp.
David John McFadgen: If you go back to Q1 last year, we commented that.
David John McFadgen: We that destocking in the in the back end of 2022, and then some restocking in Q1 of 2023. So the comps are difficult in the legacy business in Q1, that's really well.
David John McFadgen: In Q1.
David John McFadgen: Okay.
On this.
David John McFadgen: Yeah.
David John McFadgen: This has affected the top line it didnt have much impact on the bottom line.
David John McFadgen: Okay. Okay, then just moving on to CCL Secure.
David John McFadgen: Okay. Okay, then just moving onto TCR secure so you noted that the passport business was a bit soft in Q1, but it seems like it's gonna be back to normal.
David John McFadgen: So you noted that the passport business was a bit soft in Q1, but it seems like it's going to be back to normal in Q2. Passport business was strong in Q1. It was the currency business that was slow in Q1. Oh, okay. So is that is expected to pick up again in Q2? Yeah, okay. And then just on checkpoint, you know, you talked about how retail inventory is low. So, that would not be a good thing because eventually, people will restock to a more normal level, right?
David John McFadgen: Cuba parcel business was strong in Q1. It was the it was the currency business. It was slow in Q1.
Speaker Change: Oh, okay.
Speaker Change: So is that is that expected to pick up again in Q2.
Right.
Yeah Okay.
Speaker Change: And then just on on checkpoint you know you talked about how retail inventories low so.
Speaker Change: Wouldn't that be a good currently presidentially people restocked them on more normal arrival right.
Geoffrey T. Martin: Right. Yeah, that's why we said, you know, you've got two dynamics going on here.
Yeah, that's why we would be as you said.
Speaker Change: Two dynamic going on there you've got some forward ordering.
Speaker Change: So I got my inventory so.
David John McFadgen: You've got some forward ordering. We've also got low inventory. So, when we get into the summer high season, you know, this forward ordering may not may not even get noticed if orders come in strong because of low inventory. Okay.
Speaker Change: So let me get into the <unk>.
Speaker Change: High season.
Speaker Change: No.
Speaker Change: There's food ordering.
Speaker Change: Even get noticed if if if all that's come in strong because of low inventory.
David John McFadgen: Okay, all right. Okay, that's it. Thank you.
Speaker Change: Okay alright, okay.
Speaker Change: Okay. That's it thank you.
No problem.
Ahmed Abdullah: You have a follow-up question coming from Ahmed Abdullah. Ahmed, your line is live.
Speaker Change: You have a follow up question coming from Ahmed Abdullah Ahmed Your line is live.
Ahmed Abdullah: Given where leverage is, and the absence of M&A, is there any consideration for higher activity on the NCIB regardless of where the stock price is? Any such questions we'll be discussing at the board meeting later today.
Speaker Change: Yeah.
Speaker Change: You are given where leverage is and.
Speaker Change: You know absent M&A that.
Speaker Change: That could be happening.
Speaker Change: Is there a consideration for higher activity on the N C I D, regardless of where the stock price is.
Geoffrey T. Martin: That's such a question that we'll be discussing at the board meeting later today. Okay. Thank you. Thank you.
Speaker Change: That's a question we will be discussing at the board meeting later today.
Speaker Change: [laughter] Okay perfect.
Speaker Change: Okay.
Geoffrey T. Martin: Once again, if there are any questions or comments, please press star 1. There are no further questions in queue. I would now like to hand the call over to management for closing remarks.
Speaker Change: Once again, if there are any questions or comments. Please press star one.
Speaker Change: There are no further questions in queue I would now like to hand, the call over to management for closing remarks.
Geoffrey T. Martin: Okay, everybody, thank you for joining us on the call today. Wish you a good summer, and we'll talk to you again in August. Thanks a lot. Bye-bye.
Speaker Change: Okay, everybody. Thank you for joining us on the call today, what should a good summer and we'll talk to you again in August Thanks, a lot bye bye.
Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.