Q3 2025 CCL Industries Inc Earnings Call
Good morning and welcome to CCL Industries' third quarter investor update. Please note that there will be a question and answer session at the close.
The moderator for today is Mr. Geoffrey 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, everyone. Sean Walsh here, checking in with Jeff Martin. We're in New Jersey at our Home and Personal Care office in Lumberton, New Jersey.
And we'll begin our Q3 presentation.
Turning to slide 2, our disclaimer regarding forward-looking statements. I'll remind everyone that our business space is known and includes unknown risks and opportunities. For further details of these key risks, please take a look at our 2024 Annual Report, particularly the section on Risks and Uncertainties.
Our annual and quarterly reports can be found online.
on the company's website, CCL indeed.com
Or Cedar plus CA.
Moving to slide 3, our summary of our financial results.
For the third quarter of 2025, sales increased by 6.3%.
With 3.7% Organic growth.
1% acquisition-related growth and 2.5% positive impact from foreign currency translation resulted in sales of almost $2 billion compared to approximately $1.8 billion in the third quarter of 2024.
Operating income was $321.8 million for the third quarter of 2025, compared to $288.9 million for the third quarter of 2024.
A 9% increase, excluding the impact of foreign currency translation.
Jeff will expand on our segmented operating results for our CCL, Avery, Checkpoint, and Anovia segments momentarily.
Corporate expenses were up for Q3 2025 compared to the prior year due to higher variable long-term compensation expenses.
Consolidated EBITDA for the third quarter of 2025, excluding the impact of foreign currency translation, increased 7% compared to the same period in 2024.
Net finance expense was $18.2 million for the third quarter of 2025.
The decrease is due to higher finance income earned on our higher cash and cash equivalent balances.
The overall effect of the tax rate for Q3 2025 was 25.5%.
Compared to an effective tax rate of 24.5% recorded in the third quarter of 2024, this was due to a higher portion of our taxable income being earned in higher tax jurisdictions.
Our effective tax rate may change in future periods, depending on the proportion of taxable income earned in different tax jurisdictions with different rates.
Net earnings for the 2025 third quarter were $210.8 million, compared to $191.7 million for the 2024 third quarter.
For the 9-month period.
Sales operating income and net income increased 6.5%, 9.9%, and 7.9%, respectively. This all excluded the impact of a $78.1 million revaluation gain recorded in the second quarter of 2024, also compared to the 9-month period of 2024.
2025 included, the results from 2 acquisitions, completed since January 1st, 2024.
Delivering acquisition-related sales growth for the period of Q3.
Organic growth of 3.1%.
With foreign currency translation tailwind of 2.6% to sales.
Our next slide: earnings per share.
Basic and adjusted basic earnings per class B share were $1.21.
For Q3 2025, compared to $1.8 basic and $1.9 adjusted basic earnings per Class B share for Q3 2024.
Adjusted earnings per Class B share increased 11% compared to the third quarter of 2024.
This 12% increase in adjusted basic EPS was primarily driven by improved operating income, which was attributable to 14 cents.
Foreign currency translation.
Adding 2 cents.
Reduced net finance costs; added 1 cent.
These gains were partly offset by lower joint venture earnings of 1 cent.
Higher corporate costs of $0.02 and a higher income tax rate of $0.02.
Moving to slide 5, our free cash flow from operations.
for the third quarter of 2025,
Free cash flow from operations was an inflow of $333.4 million compared to an inflow of $233 million posted in the third quarter of 2024.
This increase is principally due to improved earnings and improved working capital for the third quarter of 2025 compared to the prior year’s third quarter.
For the trailing twelve months, September 25, free cash flow from operations was $860.2 million.
Compared to 618.6% for the trailing 12 months ended September 24.
This change is primarily attributable to improved adjusted earnings and reduced net capital expenditures over the comparative periods.
Moving to the next slide.
I'll return to shareholder slide.
For the 20125, third quarter.
We repurchased 1.3 million shares for $100 million, including the 10.3% increase in the 2025 annual dividend announced in February of this year.
Dividends paid year to date have amounted to $167.9 million, for a total of $467.9 million returned to shareholders.
Moving to slide 7, our cash and debt summary.
Net debt.
as of September 30th 2025,
It was $1.49 billion, a decrease of $131 million compared to December 31st, 2024.
This decrease is principally a result of higher total debt outstanding, more than offset by an increase in our cash and cash equivalents.
With the decrease in the company's net debt, the balance sheet closed the quarter in a strong position.
Our balance sheet leverage ratio was approximately 0.93 times at September 30, 2025.
1.08 times, reported at the end of December 2024.
The liquidity was robust with $1.1 billion of cash on hand and $0.8 billion of available undrawn credit capacity in our revolving credit facility.
The company's overall finance rate was 2.6% as of September 30, 2025, which is equal to December 31, 2024.
The company's balance sheet continues to be well-positioned for the balance of 2025, and well-positioned as we move into 2026.
Jeff over to you.
Thank you, Sean. Good morning, everybody.
On slide, 8 highlights for Capital spending for the year, we're expecting growth grow, grow growth, coughs for the year to end up about 450 million dollars. Most of it spent in the CCL segment.
Page 9 highlights for the quarter for the CCL segment, which was the strongest part of the company for the quarter, at 6.6% Q3 organic growth. That was on top of 4.9% for the same quarter last year, with single-digit growth in North America and Europe, and high single-digit growth in Latin America and Asia Pacific, including the Middle East.
Very good courses in healthcare and specialty home, and personal care, and especially CCL Design. CCL Secure was up significantly, but compared to a week prior year.
And the food and beverage business was flat.
Moving on to slide 10.
Just one comment really on our joint ventures here. Pac-Man CCL was acquired in the middle part of last year.
So, we're just seeing the results of the one joint venture. We have left remaining here for the quarter.
Page 11.
Pilot for Avery. As we expected, we had some impact in the back to school season in the US from tariffs particularly affecting our ring binder business. We'll talk more about that in the Q&A but that was part of set by continuing growth, in our direct to Consumer segments in North America and Europe.
Latin America was affected by currency, particularly for imported materials, and especially in Brazil.
Page 12 highlights for checkpoint.
Another strong quarter in Europe in the MAS business. A few large technology rollouts, chain-wide, roll-out technology.
And European retailers solid elsewhere, except the Americas, where we had also tariff impacts from our intercompany supply of products from China.
The apparel label industry continues to be disrupted by the supply chain disruption from the tariff policies.
So, that's continuing to affect us. We had very strong growth in this quarter last year.
It was modestly better this year.
But we are expecting to see that gradually improve as the apparel supply chain settles down.
Page 13 highlights for Inovia: profits are down for the quarter entirely due to the Germany scale-up.
We had a pretty pretty good quarter in in Europe, soft and in North America on the on the volume side and sales declined. Also on Lower resin cost paths through particularly in North America,
Slide 14. Some outlook comments for the coming quarter.
For the CCL segment, orders are stable.
Most of you would have seen the CPG; customer volumes are still soft.
Um, but, uh, CCL Design business continues to be quite an offset to that.
Results were modestly ahead of those from the same time last year in October.
Avery had it slow quarter.
A multicultural aside, but also have a pretty good October.
The checkpoint tariff-related risks remain in Mas internally, and in the apparel supply chain externally.
And then in Germany, we've got the continuing.
Startup cost and we'll have a shutdown. This December to fix some problems on the line, and we'll start up with with gusto. In the New Year. We have challenging comps for the 4 quarter, but we also have FX as a an increasing toe. Wind
So, we'll all wait and see how that pans out as the year finalizes at the end of December.
So, with that operator, we’d like to open the call for questions.
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 *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, please hold on for a moment while we pull for questions.
Your first question for today is from Amed Abdullah with National Bank Capital Markets.
Yeah, good morning. Thank you for taking my question. Solid results at CCL. I just wanted to clarify the commentary about the softer volumes on the CPG customers. Are you seeing any dramatic step change there, or is it like a step change down? Or is this referencing the ongoing sluggishness that we've been seeing throughout the year?
Ongoing sluggishness we've seen throughout the year.
Okay, perfect. And, uh, just the CCL segments, are you still seeing a benefit from customers rethinking their supply chains and helping you gain some share there? Any color you can give on that, please? We have seen some share again on the margin, but it's not material.
Okay.
Thank you. For RFID at checkpoint, you called out a strong September. Any color you can give us on how Q4 has been trending for RFID growth?
We don't have the data for Q4 yet, but September was pretty strong. So the Q3 data showed that July was actually below prior year, August was modestly above, and September was up well into double digits.
Okay.
And just the final question for me, uh, on the German plan startup costs. Um, this quarter was a bit higher than last quarter. Uh, should we expect this number to be trending down as we head into early 2026 or kind of staying around that level? I think it would be 3 to 4 million a quarter for another quarter or 2 and until we get through the qualification with all the customers. So it's a, a new line with new technologies. So we have to get the films approved by all the customers, which are now doing. So, we we expect that situation to improve in the second half of next year.
Okay, that's it for me. I'll pass the line. Thank you.
Your next question is from Hamir Patel with CIBC Capital Markets.
Hi, good morning, Jeff for the uh, cpg softness. Um that that you've been seeing this year. Are there any maybe notable differences uh that you'd point to across geographies? Um and is that also affecting price comps with with those customers?
Well, well, I would say on the geography side that the most notable change is that things are improving in China.
So we've seen that pretty much across the board with all the customers, so we're seeing definitely improving strength in China, Europe, and the U.S. I think the best would be described as flat.
Latin America volumes are okay, but inflation is.
Foreign exchange driven inflation, you know, can present some challenges in in in Latin America Middle East is is is very strong.
Great. Uh thanks. Uh that's helpful. And and and for anovia just given the I think a planned outage you referenced for Q4, uh, how much of a headwind would that be? In addition to the the startup costs, you mentioned?
Well, I don't think it'd be very much because it's a short month. So we're just taking a little bit of extra time.
So there's no, no, it's there's not much point in running the line between Christmas and New Year. So it's really taking that sort of Christmas New Year period to make some adjustments to the line on the trials. We've been running, that's really what we're doing.
I think the impact would be very modest compared to what we saw in Q3.
Fair enough, and Sean, for CapEx, what would you expect for 2026, just given the strength of the balance sheet?
Well, I think it'll be plus or minus our current run rate of $450 million. We'll have an update for the Q1 core because we'll have our entire budget process completed by then.
Great. Uh, thanks. Uh, that's all I had. I'll turn it over.
Next question for today is from Stephen McCloud with BMO.
Uh, thank you. Good morning. Uh, morning guys. Um, morning just a couple of things, I wanted to circle around on, um, just with respect to, uh, the CCL segment and, and the, uh, performance in the quarter and, and the Outlook commentary, um, you know, did you? It was a very strong, very strong quarter, but it sounded like a bit of more of a moderate moderated Outlook. So I was just curious, if if I'm interpreting that correctly and then, secondly, um, along those lines. Um, did you see sort of, uh, uh, uh, growth kind of decelerate into the end of the quarter?
No.
No, no, no. We didn't see that.
So, it was difficult in Q4 because you've got two short months.
So forecasting the end of the year is always tough. I wouldn't say the environment is terribly different.
So, yeah, we had a good core fourth quarter last year.
So it's just we haven’t seen an improvement, really. The message is that we haven’t seen.
A robust consumer environment that shouldn't come as a surprise to anyone.
So we're just we're just taking it into the account. The fact that it's, it's a difficult quarter to predict because of the 2 months of holiday seasons.
And we haven't really seen any improvement.
Compared to how it's been all year.
Okay. Okay, no that's helpful. Um and then I just wanted to ask about the CCL segment margin which was uh quite quite strong. And uh you know the highest quarterly margin I think you've had in 4 years so I I was just curious if there's anything kind of 1 time or or or unique to the quarter. That was driving that um 17/10 2% margin. And yeah yeah comparatively we we had a very weak course of last year in CCL secure.
So, so that was, that was certainly an impact, and we, we didn't have an exceptional quarter and in in, in Q3 compared to other forces, we've had in that business over the years. But, but the comparisons were, were, were were very were very strong because it was good this year and not good last year.
Okay. Okay. That's uh that's helpful and then I guess maybe as we think about that margin into Q Q4 and into next year um you know is it still is there reason to think that it you know, we could continue to sit above 16%
Well, we'll have to wait and see.
Okay. Okay, we we hope we have to wait and see. Yeah, yeah. Okay, thanks, Josh. And then maybe just finally. Um, I noticed in in the Outlook commentary, you you highlighted, uh, particularly on Avery focus on tucking Acquisitions. Um, and I'm just curious if if if you're seeing anything um, popping up in the pipeline on, on the CCL side as well.
Uh, no, no, no change on the CCL side. There are always things we're looking at.
The those direct to Consumer right Acquisitions with Avery have been largely home runs in in the name. So we want to do more more, more of them and and we we we we we've announced a couple of this year. There's a few more in the hopper and we we'd like to do to do to do more of those because that's the part of the business that's really growing.
Yeah. Okay, that's great. Um, that's helpful. Thanks, Jeff. Thanks, Sean. I'll pass it back to the line. Appreciate it.
No problem.
The next question.
Today is from Michael Glenn, with Raymond James.
Good morning. Um, just going back to the CCL games.
Uh, the 6.6, Jeff, you're talking about low CPG volumes and then not a share gain. So what, what's the explaining factor for the outperformance on an organic basis?
Well, we don't... we can't measure physical volume.
Organic gains. We can only really measure revenue gains.
So, it's more mixed driven than anything. I, I can, I can say that for sure. We we know it's more more mixed driven and, uh, and probably a little bit of share game on on, on, on, on the margins. But it, it, it it doesn't really move the needle that much. So mix would have been the the biggest factor for sure.
Business, uh, it's really about the comps. So it's just the fact that last year, CTO secured Q3 was not good.
There's nothing unusual. It's just back to normal. That's, that's all it is.
Okay, and then just on Avery um, with the back to school. How, how do we parse between the Tariff impact and what might be an underlying structural decline in in those, um, Legacy products? Well, well, the Tariff impacts a couple of million
So, in terms of cost on us,
And then you've got the effects the whole tariff regime has had on retailers, sourcing products for a very short selling season.
So you have to remember that the Tariff shop came as quite quite as surprised right in the middle of the the the time of the year, where retailers are preparing for the back to school season, they do it well in advance.
So their ability to deal with that this year was materially impacted.
So, that affected how many products they could put on the shelf by when.
And then, on top of that, we had tariff impacts ourselves directly on some products we had, which were not USMCA compliant, that we had to pay tariffs on.
Okay. Um, thanks for taking the questions. I'll leave it there. No problem.
Your next question for today is from Sean Stewart with TD Cowen.
Thanks. Good morning, everyone.
Jeffa wanted to follow up on the the m&a opportunity Set. Uh, you touched on the direct to Consumer opportunities for for Avery and, and maybe more on the hopper there. You know what you've announced this year are pretty small scale.
Are there can I... I guess I'm hoping you can frame the scale of some of these opportunities. Are there?
Are there opportunities out there that are larger scale than what you've announced this year? That could maybe move the needle to a greater extent?
Well, we can't discuss things like that. I'm sorry. I know we go over this and get asked these questions, but...
But uh we we we we have a hopper of opportunities. We look at constantly all the time developed over over many years and we just have to wait and see how how many of them come up.
And, uh, I think the higher, the director consumer space, because it's doing so well. And, uh, we want to do more of it, but beyond that, I don't have any other comments to make.
Okay. Understood um in in anovia uh you you touched on sales being affected by the the lower resin cost passed through would would you qualify? That is strictly a timing issue. Is there anything structural there like, can we expect that normalized? It's just the pass through of resin. So, if if resin drops 20% well in residents, half your costs or sales, go down 10%.
And it's so in in, in the, in this, in this quote, we had mid single digit, volume decline. So you can look at the revenue Decline and see did did use from that how much the resin passed through impacted us.
Got it. So that, I mean, the margin effect was strictly the German scale-up. That's right. Yeah. So the difference in the bottom lines all came from the German scalar.
Got it.
Okay. Uh, the rest of my questions have been answered. Thanks very much, no problem.
Your next question is from Arthur Nagourney with RBC Capital.
Good morning. Thank you.
For taking my questions. Um, just maybe going back to the margin questions, one of your suppliers is continuing to point to deflationary cost pressures.
Is this something that you're seeing as well, and is that maybe contributing to some of the strong margin performance that we're seeing?
Uh, I know it's really much more about the mix.
It's not it's not let me certainly don't see a huge amount of deflation in our space. So when you when you think you know the aluminum we we buy is is is up like 50% year on year.
So so we we we we certainly if you look at the company in total I wouldn't say we see if we see any deflation at all. It's on the raw material side. It's pretty modest on an overall basis. So the margin impact is very much mixed derived.
All right, and then, maybe just touching on an obvious as well. Um,
Piece. Uh, is that that mid single digit decline, really being driven by the weaker cpg, operating backdrop, or are there any other moving pieces in there as well? It it it's really the flat. The flat to down label materials,
Volume and the pressure. The pressure-sensitive material is manufactured.
So, that segment is slow, is how I would characterize it.
Got it. Um, and then you called out some restructuring expenses across CCL Design and Checkpoint. Should we expect anything else going forward, or is that largely it?
Isolated to this quarter.
Yeah. So we made some changes in in in checkpoints in in in in a in a Iberian Peninsula operations. We've got a number of operations that we've done some consolidation.
So that's pretty much done.
And, um, no, I don't have any other comments to make other than the ones we've already done.
Got it and then, um, just just touching on tariffs, I guess uh, wasn't much color. Uh, this quarter in the press release or presentation. Um, are you seeing any impacts beyond what you disclose in the Q2 whether that's direct or indirect via customer impacts. Um, and just wondering, you know, how you're mitigating actions or trending so far as well it's the the the Tariff impacts on on, on, on, on the financial side, really occurs.
But only at Avery and checkpoint.
So, everything else?
We're largely local, and any tariff impact that we had in the other parts of the operation got passed through.
So, so, we had a little bit of financial impact the checkpoints on, on, on the importation of mas products into the United States from China. And, and the impact, we, we had particularly in our ring binder business that Avery but, but, you know, total company 3 or 4, 3 to 4 million, something like that, for the quarter.
Unrecovered tariff cost.
Perfect. That's all for me. Thank you. Okay.
Your next question is from David McFadden with Cormark Securities.
All right, uh, yeah, a couple of questions. Um, maybe just, uh, first of all, just on the CCL organic growth rate in the quarter. And, you know, obviously quite strong, I was just wondering what what, CCR secure, really a big factor and say taking it from 3, just to sign up to 6%, or was it just? It's, it's too small, too small, a business to do that. So the impact of CCL secure was much more on the bottom line.
Rather than the Top Line.
So, so, it had some, some impact, but but it's not a big enough business. So it's 50 million a quarter. Just to give you a frame of reference
it's just, it's just, it's just a solid solid quarter and
In in in all the spaces you know so Healthcare HBC food and beverage.
CCL design. So everywhere was up. So it was across the board.
Okay, okay, here's the thing. Um, so then just a question on checkpoint then. Uh, so if you look at the ALS business, you know, it's down in Q2 but it was up in Q3. And then, you know, just on your comments about the RFID growth, you know, down in July, August flat, September up to the digit. So can we assume that the worst is behind you now and things just look a lot better?
I think it's still still somewhat volatile so I think until there's some certainty about
If you're a retailer wondering about where you're going to make stuff and import it from,
A lot of head scratching going on around that and some changes being made and then having to undo changes based on based on on what happens with the with the, with the, uh, the Tariff policy. So, until that noise settles down. I think that there's likely to be some ongoing volatility.
In in, in the apparel supply chain. But eventually that it'll have to it'll have to normalize and settle down. There'll be certainly saw some improvement in September October. We haven't got the details of that relative to our R RFID
But um, but we'll have to wait and see.
Okay.
It's gone.
No problem.
so if we, if we, if we have, if we have rich rich, rich Max that definitely helps the think the revenue divided,
So I I it's certainly volume in, in CCL secure compared to the prior year, which we've already called out and be weakened this last last year versus strength this year.
But in the rest of the business, it's really about mix.
Okay. And then can you just remind me in anovia? The mid single digit declines in the? In the materials volumes is that a leading indicator at all for the CCL segment or or not related at all? No, not really.
Your next question is from Jonathan Goldman with Scotia Bank.
I I I don't think we've seen anything different to what we've seen, all all, all all year. So I I I think all all the cpgs are reporting, sluggish, sluggish volume.
I I I think I think, as I said earlier, we've seen a broad-based recovery in China, so and that's been a while coming. So we're we're we're pleased about that.
And give them what you read in the newspapers. We're surprised by...
The market is still being as as good as they are in North America and Europe even though they're slow.
and and so are they so things seem to have held up better than you might imagine when you when you, when you read the financial times or the Wall Street Journal,
The Outlook last quarter was calling for order stable.
um, year on year, the Delta I guess versus bad and what you guys actually reported, I guess that's mixed
Correct.
so sometimes you can have quarters where where you have you had it this year and you didn't have it last year and vice versa
But but, but it, it does introduce some some volatility to the course, course to the quarter sales profile, and the Mas business and checkpoint.
And we've had some good wins, particularly in Europe.
Okay, that makes sense. I'll get back in queue. Thank you.
No problem.
Yeah. Uh, just a couple housekeeping questions. Uh, the capex expectations kind of was revised down from last quarter. Um, any color you can give us on that, is this projects that we canceled delete.
Yeah, we we we we we we had 1 large project in Turkey.
Is going to solve the power from.
Okay. Uh, and I see that there was a disposal in the quarter of PP&E. Um, any color on what was sold, or was that the Belgian plant?
This is the old, the old donovia property in Belgium, we sold that of course.
Perfect. Um, that answers my housekeeping questions. I'll pass the line. Thank you.
No problem.
Once again, if you would like to ask a question, 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 Martin for closing remarks.
Well, thank you very much for joining the call today. Thank you for all your questions, and we'll look forward to seeing you in the new year.
Includes today's conference and you may disconnect your lines at this time. Thank you for your participation.