Interviews
TORONTO, Feb. 21, 2020 (GLOBE NEWSWIRE) CCL Industries Inc. (TSX:CCL.A) (TSX:CCL.B) (“the Company”), a world leader in specialty label, security and packaging solutions for global corporations, government institutions, small businesses and consumers, today reported fourth quarter and annual financial results for 2019.
Sales for the fourth quarter of 2019 decreased 4.1% to $1,277.9 million, compared to $1,332.8 million for the fourth quarter of 2018, with 0.5% acquisition-related growth, offset by a 1.2% negative impact from foreign currency translation and a decline in organic sales growth of 3.4%.
Operating income(1) for the fourth quarter of 2019 was $173.9 million compared to $189.2 million for the comparable quarter of 2018. Operating income(1) for the 2019 fourth quarter included a $9.6 million pension curtailment gain, associated with Company’s decision to close the legacy Innovia U.K. defined benefit pension plan.
Selling, general and administrative expenses, include lower corporate costs of $13.7 million due to reduced long-term variable compensation expense for the 2019 fourth quarter compared to the same period in 2018.
Restructuring and other items were $19.8 million for the 2019 fourth quarter, consisting of $13.3 million for settlement of lawsuit attributable to business practices employed by the pre-acquisition management at Checkpoint and $6.4 million of restructuring charges across all segments. For the fourth quarter of 2018, restructuring and other items summed to $6.6 million, consisting of reorganization and acquisition transaction costs totaling $3.3 million and other expenses of $3.3 million.
Tax expense for the fourth quarter of 2019 was $30.2 million compared to $35.0 million in the prior year period. The effective tax rate for the 2019 fourth quarter was 22.8% resulting in an annual effective tax rate of 25.3% equal to the annual effective tax rate for 2018.
Net earnings were $104.4 million for the 2019 fourth quarter compared to $114.2 million for the 2018 fourth quarter. Basic and adjusted basic earnings per Class B share(3) were $0.59 and $0.67 respectively, compared to basic and adjusted basic earnings per Class B share(3) of $0.65 and $0.68, respectively, in the prior year fourth quarter.
For the year ending December 31, 2019, sales and operating income improved 3.1% and 1.5% to $5.3 billion and $787.3 million, respectively, compared to December 31, 2018. Operating income for 2019 included the aforementioned $9.6 million pension curtailment gain while 2018 operating included a $4.3 million non-cash acquisition accounting adjustment to fair value the acquired inventory from Treofan expensed through cost of sales. The year ending December 31, 2019, included results from twelve acquisitions completed since January 1, 2018, delivering acquisition related sales growth for the period of 2.7%, coupled with organic sales growth of 0.7% and partially offset by 0.3% negative impact from foreign currency translation. Foreign currency translation had a negative impact of $0.01 per share. For the year ended December 31, 2019, basic and adjusted basic earnings per Class B share(3) were $2.68 and $2.79, respectively, compared to basic and adjusted basic earnings per Class B share(3) of $2.64 and $2.73, respectively, in the prior year.
Geoffrey T. Martin, President and Chief Executive Officer, commented, “CCL Segment performance was mixed for the fourth quarter resulting in a modest decline for 2019. CCL Design results continued 2019 trends with strong sales growth and significant profitability gains in electronics outweighing slower automotive markets. Home & Personal Care sales gained in some emerging markets but declines in North America and Europe more than offset although profitability improved. Slow sales of aerosols drove lower profitability for 2019. Healthcare & Specialty results declined for the quarter and year on challenging generic drug markets, especially in North America, conditions in agricultural chemicals also remained difficult; emerging markets growth a partial offset. Food & Beverage faced difficult comparisons including near 20% organic growth in the fourth quarter of 2018. Results declined on slower new project wins, some share loss and pricing challenges. The same issues drove lower mid-single digit organic growth for 2019 with reduced profitability. CCL Secure posted a strong year with double-digit sales and profitability gains although order timings affected fourth quarter comparisons. Checkpoint had a steady quarter and year as solid organic sales growth in MAS product lines offset slower apparel label sales; profitability declined modestly for both periods excluding the settlement of the outstanding legal case. Avery’s direct-to-consumer business continued to grow double-digit, driving the Segment’s first annual organic growth since 2015, with significantly improved profitability. Legacy product lines were stable in 2019 but seasonally slower this quarter with modestly lower profit. Fourth quarter Innovia results declined on soft end markets and share loss in commodity films. Annual profitability improved meaningfully in 2019 on price increases, lower resin cost, favorable U.S. dollar exchange rates on U.K. export sales and accounting gains on the closure of the U.K. pension scheme while mix improved on higher sales of security and specialty films. The first full year of the Treofan acquisition contributed positively while below pre-acquisition levels although fourth quarter performance improved over prior year.”
Mr. Martin continued, “Foreign currency translation had a negligible impact for the fourth quarter and a negative $0.01 impact on earnings per Class B share for the full year 2019. At today’s Canadian dollar exchange rates, currency translation would be a modest headwind, if sustained, for the first quarter of 2020.”
Mr. Martin concluded, “The Company finished the year with a strengthened balance sheet, despite investing over $40 million in acquisitions and $336 million in capital equipment, net of disposals. The Company’s consolidated leverage ratio(5) declined to 1.61 times EBITDA(2). Combined $704 million cash-on-hand and US$596 million undrawn capacity on our syndicated revolving credit facility gives significant liquidity to develop the Company while navigating through a period of slower global economic growth. With a strong free cash flow outlook for 2020, the Board of Directors declared a 5.9% increase in the quarterly dividend to $0.18 per Class B non-voting share and $0.1775 per Class A voting share, payable to shareholders of record at the close of business on March 17, 2020, to be paid on March 31, 2020. Continued deleveraging and strategic tuck-in acquisitions remain the priority for excess cash flows in 2020.”
Mr. Martin added, “We do expect temporary disruption from the coronavirus outbreak as China sales represent approximately 8% of the CCL Segment. Checkpoint also ships apparel labels to global retailer vendors located in China and manufactures the vast majority of its MAS product line in the country. Most of our plants resumed operations on February 18 after an extended Lunar Holiday.”
2019 Fourth Quarter Highlights
CCL
Avery
Checkpoint
Innovia
