CCL Industries Q1 Earnings Call Highlights

CCL Industries TSE: CCL.A reported modest first-quarter sales growth and nearly flat operating income, while management said demand remained generally stable despite inflation pressures and macroeconomic uncertainty.

On the company’s 2026 first-quarter investor update call, Sean Washchuk, senior vice president and chief financial officer, said sales rose 2.8% to CAD 1.94 billion, compared with approximately CAD 1.89 billion in the first quarter of 2025. The increase included 1.9% organic growth, 0.3% acquisition-related growth and a 0.6% positive impact from foreign currency translation.

Operating income was CAD 317.5 million, up 0.2% from CAD 316.9 million a year earlier. Net earnings were CAD 204.9 million, compared with CAD 207.4 million in the prior-year quarter. Basic earnings per Class B share were CAD 1.18, unchanged from the first quarter of 2025, while adjusted basic earnings per Class B share rose to CAD 1.20 from CAD 1.18.

Washchuk said the CAD 0.02 increase in adjusted basic earnings per share was primarily driven by a lower share count and reduced interest expense, partly offset by a higher tax rate. The company’s effective tax rate was 25.4%, up from 24.7% a year earlier.

Cash Flow, Buybacks and Balance Sheet

Free cash flow from operations was CAD 37.3 million in the first quarter, compared with CAD 39.1 million in the same period last year. Washchuk said the slight decrease was mainly due to higher net working capital, partly offset by lower net capital expenditures and taxes paid.

The company returned CAD 129.8 million to shareholders during the quarter, including CAD 62.3 million in dividends and CAD 67.5 million in share repurchases. Washchuk said CCL moved from a discretionary share buyback to an automatic share repurchase plan during the quarter. From March 2 through March 31, the company repurchased approximately 779,000 shares, and during the subsequent blackout period through the day before the call it bought an additional 1.4 million shares for CAD 119.5 million.

Washchuk said CCL expects to return more capital to shareholders in 2026 because the automatic repurchase plan is active in the market daily, including during blackout periods when the prior discretionary program was restricted. The board authorized management to purchase up to CAD 1.2 billion of shares over the 12-month period beginning March 2, 2026.

Net debt at March 31 was CAD 1.38 billion, up CAD 115.3 million from Dec. 31, 2025, mainly due to capital expenditures and share buyback activity. Washchuk said the balance sheet remained strong, with leverage of approximately 0.8 times and nearly CAD 1 billion of cash on hand. The company also had US$949 million of available undrawn credit capacity under its revolving credit facility.

Segment Performance

Geoff Martin, president and chief executive officer, said the CCL segment delivered 3.1% organic growth. That reflected a low single-digit decline in North America and the Middle East, mid-single-digit growth in Europe and Latin America, and strong growth in Asia Pacific, where CCL Design was up in the mid-teens.

Martin said CCL Design, CCL Secure and Healthcare & Specialty posted good results, while Food & Beverage recovered from a recent period of soft comparisons. Home & Personal Care profits declined due to a capacity interruption at the company’s U.S. aluminum container plant and slow tube sales. Labels for mass markets were solid globally, with strong results in Europe and Asia.

At Avery, Martin said the company had a strong quarter in direct-to-consumer products globally, especially RFID-enabled cards and wristbands. Recent acquisitions were also performing, and back-to-school orders are expected to be “up a little” this year. Martin said those orders are now tariff-free, unlike last year, and the company saw progress in horticulture.

Checkpoint’s MAS business had another good quarter in Europe, but was weak in the Americas and slower in Asia Pacific. Martin said apparel label results were affected by inventory caution across the industry’s supply chain. RFID inlay sales were up despite a down market, while startup losses continued at the company’s new plant in Mexico.

Innovia posted strong results in Poland, where the company produces label films, including growth from EcoFloat. Volume declined from its U.K. and Australian plants, and deliveries to the Middle East were impeded. Startup costs at the new German plant declined sequentially, while North America had what Martin described as a very solid quarter, modestly below a robust prior-year period.

Inflation and Demand

In response to a question from Sean Steuart of TD Cowen, Martin said inflation pressures were significant in aluminum and European resin markets. He said aluminum had reached CAD 6,000 per ton a few weeks earlier, and while pass-through mechanisms in that business are “pretty robust,” there is a lag depending on customer contracts.

Martin said resin markets in Europe had “escalated pretty significantly,” with some increases also seen in the U.S. but not to the same extent. He said pass-through mechanisms in resin-related areas are more mixed and often negotiated, though suppliers and industry participants have been declaring price increases.

On demand, Martin said the consumer packaged goods space was “quite reasonable” in the first quarter, and orders had been okay. He said the company had not seen much change in business levels with customers, though management is monitoring potential effects from higher gasoline prices and geopolitical uncertainty.

Asked about higher-end beauty markets, Martin said certain specialty brand owners in that category were slow in the first quarter, though activity had picked up in the second quarter. Everyday categories such as shampoos, skin care and deodorants remained solid, he said.

Outlook and Key Questions

Martin said overall CCL segment orders were solid, but the company had “significant inflation to manage.” The Sleever acquisition is expected to close late in the quarter, likely in June. Avery direct-to-consumer growth is expected to continue, and apparel orders at Checkpoint are expected to improve in coming quarters. Martin said the company remains confident in RFID.

For Innovia, Martin said April demand was strong, supported by buy-forward activity in the label materials supply chain. He cautioned that this could aid the second quarter but potentially hurt the third quarter as activity normalizes. Foreign exchange was described as “decidedly neutral” for the coming quarter.

In the Q&A, Martin said the thermal oxidizer outage at the Pennsylvania facility had an impact of about $5 million. Asked about the new thin-gauge line in Germany, he said the order pipeline was progressing but that positive EBITDA may be a quarter or two away, with EBIT contribution likely small to limited this year and a “very different picture” expected in 2027.

Martin also said RFID inlay growth for CCL was double digits in the quarter, mostly in non-apparel markets, while the overall market was “flattish.” He attributed the company’s outperformance partly to its smaller position in the market.

Washchuk said the company expects to remain active in the market daily under its automatic buyback, buying more shares when the stock price is lower and fewer when it is higher.

About CCL Industries TSE: CCL.A

CCL Industries Inc manufactures and sells packaging and packaging-related products. The company operates through various segments, which include The CCL segment, which generates the majority of revenue, sells pressure sensitive and extruded film materials used for labels on consumer packaging, healthcare, automotive, and consumer durable products. The Avery segment sells software, labels, tags, dividers, badges, and specialty card products under the Avery brand. The Checkpoint segment includes the manufacturing and selling of technology-driven, inventory management and labeling solutions.

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