CCL Industries Inc. (CCLB) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to CCL Industries Fourth Quarter (sic) [First Quarter] Investor Update. [Operator Instructions] 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.

Thank you very much, operator, and good morning, everybody. Welcome to our first quarter conference call. Before we start with the numbers, I just wanted to say a few words about the situation in the Ukraine. We are saddened as everybody in the world as about what's happening there. But we're very proud of all the efforts of our employees around the world to donate money and goods and channels to the support of the displaced population there, and particularly our employees in Poland, Austria and Germany who've organized accommodation for more than a few hundred Ukrainian refugees. We're very proud of their efforts, and I'd like to acknowledge that on the call here this morning. So with that, I'm going to hand the call over to Sean, who is going to take you through the numbers.

Thank you, Geoff. I'll turn everyone's attention to Slide 2, our disclaimer regarding forward-looking statements. I'll remind everyone that our business faces known and unknown risks and opportunities. For further details of these risks, please look at our 2021 annual report in the MD&A. You can also refer to our Q1 report, which has some updated risks regarding the conflict in the Ukraine and additional supply chain challenges. Our annual and quarterly reports can be found online at the company's website, cclind.com or on sedar.com. So we're moving to the next slide. Our summary of financial results. For the first quarter of 2022, sales increased 12.8%, with organic growth of 10.8%, acquisition-related growth of 4.5%, partially offset by 2.5% negative impact from foreign currency translation, resulting in sales of $1.52 billion compared to $1.35 billion in the first quarter of 2021. Operating income was $228.6 million for the 2022 first quarter compared to $223.1 million for the first quarter of 2021, a 5.1% increase, excluding the impact of foreign currency translation. Geoff will expand on the segmented operating results of our CCL, Avery, Checkpoint and Innovia segments momentarily. Corporate expenses were up for the quarter, principally due to higher expense for long-term variable compensation versus the prior year quarter. Consolidated EBITDA for the 2022 first quarter, excluding the impact of foreign currency translation, increased 5.3% compared to the same period in 2021. Net finance expense was $14.7 million for the first quarters of 2022 and 2021. The overall effective tax rate was 24.4% for the 2022 first quarter compared to an effective rate of 24.2% recorded last year first quarter. The comparative effective tax rates for the first quarter of 2022 was slightly higher due to a higher portion of taxable income being earned in higher tax jurisdictions. The effective tax rate may change in future periods depending on the proportion of taxable income that's earned in different tax jurisdictions. Net earnings for the 2022 first quarter were $150.2 million, up 4.7% excluding foreign currency translation compared to the first quarter of 2021. Moving to the next slide, earnings per share. Basic earnings per Class B share were $0.84 for the first quarter of 2022 compared to $0.82 for the first quarter of 2021. Adjusted basic earnings per Class B share were $0.85 for the 2022 first quarter compared to adjusted basic earnings per Class B share of $0.82 for the first quarter of 2021. The change in adjusted basic EPS to $0.85 is primarily attributable to $0.05 advance in operating income; $0.01 from equity contributions from our JVs, partially offset by $0.02 negative currency translation and $0.01 increased corporate costs. Moving to our next slide. Free cash flow from operations. For the first quarter of 2022, free cash flow from operations was $38.1 million compared to $87.6 million in the 2021 first quarter, an increase in net capital expenditures of approximately $43 million, reduced free cash flow from operations for the first quarter of 2022 compared to first quarter of 2021. For the 12 months ended March 31, 2022, free cash flow from operations decreased approximately $237 million compared to the 12 months ended March 31, 2021. The comparative decline is attributable to an increase in net working capital, coupled with an increase in net capital spending. Moving to the next slide. Our cash and debt summary. Net debt as at March 31, 2022 was $1.46 billion, an increase of $214 million compared to December 31, 2021. The increase is principally a result of new borrowings to finance the acquisition of McGavigan in January and the repurchase of shares under the company's NCIB. As at the end of the first quarter, the company had repurchased in excess of 1.7 million shares for approximately $100 million. Although the company's net debt increased, the balance sheet closed the quarter in a strong position. Our balance sheet leverage ratio was 1.24x, increasing from 1.06x at the end of December 2021. Liquidity was robust with $616.9 million of cash on hand and $1 billion of available undrawn capacity on the company's revolving credit facility. The company's overall average finance rate was largely unchanged at approximately 2.3% on March 31, 2022, compared to 2.4% at December 31, 2021. The company's balance sheet continues to be well positioned as we move through fiscal 2022. Geoff, over to you.

Thank you, Sean. Good morning, everybody. I'm on the Slide 7, highlights of capital spending. As Sean just mentioned on the cash flow slide there, capital expenditures were up $43 million quarter-on-quarter. But we're pretty much in line with Q1 '20 before we saw the impact of the slowdown in capital spending in the COVID area. It excludes right-of-use assets and depreciation under IFRS 16, and we are planning to spend $380 million for the year. Slide 8 highlights the CCL segment. 7.3% organic sales growth, a lot of that price driven. North America, high single digit; Europe, mid-single digit; Asia Pacific, low single digits; and Latin America have a very strong 25% where we gained some share. Very strong quarter in the Home & Personal Care business, offset tough comps at CCL Secure. We had a very good start to the business last year. So it's really more about all the timing anything going on in the business. CCL Design was slower in automotive than we expected. Electronics was pretty good, but it's much slower in automotive than expected for all the reasons you've read about in the newspapers. Sales up at Food & Beverage and Healthcare & Specialty, but our profits were impacted by inflation and mix in the latter. Slide 9 highlights about JVs. As everybody knows, by our press release, we've suspended our future -- any future investment in our joint venture in Russia. Our partner continues to run that business with the plants we have there, and we had a strong quarter in the Middle East. Slide 10 highlights Avery. One of the success story for the quarter. Strong trajectory continues, especially in North America, where we had a good recovery of inflation and a very good recovery in the growth of name badges, which are almost back to pre-COVID levels. Mastertag and RFID hotel acquisitions outperformed. Raw materials availability and inflation and elevated component costs from China remains challenging. And it probably did hold back our sales somewhat in the quarter, but our price pass through is very well done and there's more of that still to come in the second half of the year. On to Slide 11 to Checkpoint. So mixed story here. Merchandise Availability or what we call our MAS business grew in all regions except Europe. Profits were impacted by Chinese freight and component inflation, although we implemented some price increases, the benefit of that, we're not really going to feel until the second half of 2022. But that was more than offset by very strong growth in our Apparel Label business, 40% for the quarter, organic, driven by our RFID and then augmented on top of that by the Uniter and Tecnoblu acquisitions. So ALS really outperformed and MAS underperformed, but the total was above the prior year quarter. The Meto's -- full Meto price margin operation in Germany was impacted by inflation. We've implemented price increases there, which will have impact in the second half of the year. Slide 12, highlight for Innovia. Sales gains here, really all about resin and freight inflation pass through. A big surprise for the quarter was the energy inflation surge we experienced in Europe. A lot of that due to the situation in the Ukraine, did impact profitability. We have implemented pricing surcharges, which will begin to take effect in the beginning of the second quarter. We'll get progressively better as the year moves ahead. The changes to resin pricing in the Americas also impacted. So we had a drop in resin prices in the latter part of last year, which we have to pass through to customers, but we had resin -- inflated resin prices in inventory at that time. So we got a bit of a margin squeeze around that. But we've got the reverse impact of that in Q2 as resins have increased again in North America. Slide 13, some comments about the outlook. Many inflation price pass throughs have been implemented to benefit the core CCL Label businesses, especially in the second half. Avery volume should continue to improve, augmented by recent acquisitions. Checkpoint price increases are also underway, and we expect RFID to continue to grow at ALS. The CCL Design customer supply chain issues remain, especially in automotive, but recent acquisitions and new business wins are on offset. The biggest concern we have for the coming quarters is the situation in China with lockdowns. It's affecting Checkpoint and CCL Design, which have very big operations in the country. Q2 impact, frankly, depends on the duration, how long the government keeps things locked down there for. So some of our businesses are about -- in China are about domestic consumption and some are about production for the world markets and domestic consumption. So we think some of this demand constrained in China will be temporary and will recover. So the demand for cars is later and their demand for soft consumer goods probably, if you lose that demand, you don't never see it again. So it's a pretty mixed story there. Comps are difficult but less challenging at CCL Secure for Q2, but do ease significantly for the second half of 2022. And then finally, we'll be starting up the EcoFloat line in Poland in this quarter, lots of customer interest there about enabling PET bottle recycling by easier sleeve removal. So we're very excited about that opportunity in Poland. So with that, operator, we'd like to open up the call for questions.

[Operator Instructions] Your first question is coming from Adam Josephson of KeyBanc.

China, Geoff, you mentioned that's your biggest concern in 2Q. Can you give us a little more perspective on the impact in April? And if that were to continue, what that might mean for the balance of the quarter?

Well, the problem we've got really would say much about April. April was a shorter month this year than it was last year. So April had an extra workday in 2021 versus 2022. So that probably had more impact than China. But we did see some profit drop in China in the CCL Design and Checkpoint space because our plants -- a number of our plants were impacted by shutdown mergers. So a few million dollars of EBIT would be how I'd describe it now. Obviously, if that was a few million dollars per month, for the quarter, it could end up being a much larger number. So it depends on how quickly the government allows things to normalize there. And it's really a double question into whether your plant is impacted in terms of whether it's open or shut, but more importantly, what's happening with the customers. So I'm sure most of the people on the call heard what Tim Cook said about the impact on Apple. And yesterday in the Wall Street Journal, there was an article about Tesla in China, which I'm sure a lot of people have read. So I think everyone is waiting for the COVID to be pulled out of the bottom. So things can get back to normal there. But right now, it's still -- it's a difficult country to operate in, for sure.

And have you seen any recent changes, Geoff, for the better or worse along those lines?

Well, I think there are signs that the government is beginning to let people back to work in the affected areas. But there's an outbreak in city X or Y, then the authorities come down pretty hard still. So it's really about where your factory is located and where your customers' factories are located. So things seem to be easing a little bit in Shanghai now. So that's a good thing, but other cities has got worse. So it's pretty -- it's a mixed story, I would say, and everyone wants it to normalize. I think the important thing, Adam, is I think if you think about it, for things like cars and phones, which we're somewhat focused on in China, we were able to produce that in inventory. We may not sell it, but we can still produce it in the plants that make it. So we will eventually get those sales come what may, where it's domestic consumption in China. So whether you move into the consumer business, the lost sale to shampoo in China is really a lost sale for good, a lost sale for a car in April, you may well still get in May and June. So that's really the difference.

Yes. No. In terms of demand more broadly, how was it compared to what you expected in the first quarter? What was it like in April? And what are you thinking thereafter?

Well, I would say that Q1 results for us were better than we thought we might get. And I think a lot of that was due to -- we did a better job with the pricing execution. I think that applies to a lot of companies. Both our customers, retailers, everybody in the supply chain, I think, has done a good job of doing inflation cost pass through. So that was the positive surprise for the quarter. Demand was still relatively strong in Q1, a bit stronger than we thought, not at CCL Secure, but that's just all the timing. But outside of that, relatively strong. And at Avery, we saw a big bounce back, as you've seen. So that was a very pleasant surprise.

And 3 months ago, you said, look, demand is the million dollar question because there's all this inflation, everyone is passing on these huge price increases and we really don't know what the consumer impact is going to be. Do you feel any differently now than you did 3 months ago?

No, I think it's still the big unanswered question is what will the demand picture look like really in the second half of next year. I think there'll be some noise in Q2 like there was in Q1. But what's the long-term trend, I don't think anybody has the answer to that. That's the thing everybody is waiting to see what really happens when some of this inflation noise dies down and then what the impact is on the consumer, what would the job market be like, what would the economy be like, what impact will that higher interest rates have on demand and so on and so forth, and will supply [ chain ] side return to normal somewhat. So I think a lot of the inflation at the moment is really supply side driven. So if that supply side returns to normal, we'll have some calming effect on the markets. So we don't know the answer for that any more than anybody else does.

No, I get that. There are 2 other ones. Just on that demand question, again, was it -- I would have thought that demand might have been hit more in Europe, just given the inflation is particularly acute there. Did you not see that? Are you not seeing that? What are you seeing in Europe for our [indiscernible]?

Yes. I would say Europe is -- I mean we still saw a growth in Europe in Q1 and continued in Q2 so far. But I don't think the rubber has hit the road yet. So what the impact is on this whole situation in Russia is still open to debate. And we're waiting to see. But so far, we haven't seen anything dramatically different from what we saw in Q1.

And just one last one on the NCIB, Geoff. So last year, you had up to 8 million shares authorized through 1Q. I think you said you bought back 1.73 million. Can you just talk to us about why not more than that? Obviously, your balance sheet remains in very good shape. Were you expecting to buy roughly this number of shares over the past year? Just walk us through that situation, if you don't mind.

Well, we only started buying back stock this past quarter, and there are limits to what we're allowed to do by the rules of how much stock we can buy in any one quarter and how many trading days there are. So you have to remember, in Q1, we didn't release our results until -- we were in a blackout period for most of Q1. So we didn't have very many days where we could buy back stock. So -- and there are limits to how much we can buy at any one time. Sean can talk you through that if you want.

Your next question is coming from Walter Spracklin of RBC Capital Markets.

So maybe we could go back to the demand environment. I think I heard you that Food & Beverage, Health Care, you have a lot of price increases as part of the organic growth there, but demand [ sell ]. But it's the Home & Personal Care, where I guess you had the most swings in disruption within the division, right? I mean there are a lot of products that were extremely in demand during pandemic and a lot that fell off significantly and perhaps reversing now. Do you have any better sense now on what the overall picture is with Home & Personal Care now that we're going into a bit of a new normal here?

Yes. Well, I would say it was very strong in Q1 in North America. So by North America, I mean, Mexico and the U.S. So those markets and Brazil also was strong. So throughout the Americas, I would characterize the demand picture as strong and across all the categories we're in, in those markets. So aerosols, tubes and labels. And so things that subsided like sanitizers, obviously, that was a negative. But the upsizes were things that are more cosmetic and travel-related where we got a big bounce back. So sun care creams, things like that bounced back. Internationally, in Europe and in Asia, demand was a lot more muted. But the weighting of Home & Personal Care is very much driven towards how we performed in the Americas.

And moving to pass throughs, I think you've done a great job with pass throughs to date, and you signaled some more to come. Can you walk us through how a pass through works? Is it simply you're just waiting until the contract renews and you build in a new pricing structure? And secondly, when that new contract renews, is there anything that you're doing differently now in terms of building in perhaps some automatic or formulaic pass throughs like we see with fuel and others in other sectors? Is there any opportunity for you in this demand environment to be able to change a little bit the way you construct a contract to allow yourself a better ability to pass through costs?

Well, we have thousands of contracts, I mean, literally thousands. So -- and you have to remember, it's across the whole spectrum of our businesses. So at Avery, we're dealing with retailers, the Checkpoint, we're dealing with retailers, at CCL Design, it'd be automotive Tier 1s and the electronics OEMs. Then you go into the consumer label business and you've got all the P&Gs and Unilevers, L'Oreals and all those kinds of companies in HPC. So it's a pretty broad picture. And I wouldn't say there's any rules for it. But things are always changing in our business. So we've got some parts of the company where we're able to just finance the price increases through. Others where we have to go and knock on the door and say, this is what's happened in the world and the prices have to go up. And if you can't get a price increase now, Walter, I don't know when you ever do. So it's probably -- many of our customers are more focused today on supply availability than they are at the price point. So getting hold of what you need is as important as being able to as to what the price point is. So -- but I wouldn't say we're changing particularly the dynamics of our contractual arrangements. And as you've seen, we've -- considering the degree of inflation we've had, we've done a pretty good job, I think, in managing it.

That makes a lot of sense. And last question for me is just on public market volatility and the impact that, that might have on private market multiples. Are you seeing any sense that the volatility we're seeing in the public markets is weaving its way into the private sector takeout multiples at all? Or what you said is [indiscernible]?

No. Yes. No. Yes. But I would predict it will come. And that's -- it probably takes a good old-fashioned credit crunch for that to really change. So private equity firms are difficult to getting leverage finance sort of the rates they're getting it at today, and probably I'm not going to see any contraction in the multiple. So there is still some pretty fancy takeout multiples at -- even in Q1. So you saw one in Canada with ITP, a pretty nice takeout multiple for that company. And so that's probably indicative of what's going on in the world out there still today. But will that change over the next year or 2, I think quite possibly.

Your next question is coming from Stephen MacLeod of BMO Capital Markets.

I just -- my first question, I just want to follow up quickly on China. You talked about the differing dynamics between domestic manufacturing and export. Wondering if you could just break down your business in China. And how much of it is domestic and how much of it is export?

Well, I'll comment to the extent I can on that. So pretty much everything we make for the MAS business in Checkpoint is made in China, not all of it, but the vast majority of it. So if you're talking about the MAS revenues, they're all China derived. So the CCL Design, you've got the extent to which the car industry exports, probably it's more domestic focused than it is export focused. So that's a factor. And electronics is more export focused than it is domestic focused. So I think the demand level there. That's the one probably what I would say. If we lose demand in 1 month, we'll pick it up the next because we're dealing with the world market for components, not the Chinese market. And then you get into the CCL Label business with consumer products, which is entirely domestic focused. Beyond, I couldn't break it down to you any more than that, Steve.

Yes. No, that's really helpful. And in terms of your plants, I mean, are your plants that are focused on domestic markets up and running right now? Or are you sort of in a hold mode as well?

Yes. We had some disruption in April. I mean I would call it sporadic. So we had some plants closed for a couple of weeks in some cases. So we saw some impact in April from plant closures. I've said the bigger impact was the closure of our more of our customers. So a number of customer factories were closed in the month of April, particularly in the Shanghai region. So that had more of an impact than in our operations, to be honest.

Right. Okay. And then just on the CCL segment, you talked about -- you did get price, obviously. Can you talk about how volume broke down versus price in the CCL segment? Apologize, there's a fire alarm in the building right now.

Yes. We just [ must be ] guessing.

Sorry, Geoff, I didn't hear you.

No. I don't think we can do that, Steve. It's too many transactions. We can't measure volume in the CCL space.

Yes. Okay. I understand. And then just for the full year, I mean, obviously, I know a lot of moving parts, but in the past, you've talked about overall demand this year being up in sort of the 4% to 5% range. Is that still something that you think is a reasonable expectation?

We would hope so. For the current quarter, we are quite optimistic about -- till the news about China here, we were quite optimistic about Q2. So that's the [indiscernible] really. But that aside, we're still -- our plants are still busy. We had still got more orders than we can cope with in parts of the business. So the demand picture still is quite strong, but China is a big country. So China catches a cold, the world has -- it's not just the U.S. any more than -- when the U.S. has a problem with the cold, the rest of the world gets pneumonia. But with China, if they get a cold, we get a cold, too. So I think that's just something you have to bear in mind.

Yes. Okay. Okay. Great. And then maybe just one last one, just switching gears a little bit. Just with Innovia, you've had 2 quarters of massive price pass through. Wondering what you think sort of Q2 would look like in that business, just given some of the raw material movements and other inflation.

Yes. Well, we won't have the problem of the Americas margin squeeze that I talked about, where we had the dip in resins at the end of last year and then it bounced back. So when you get the bounce back, we get the reverse squeeze. So we're more optimistic about Innovia in the current quarter. And we've implemented a number of energy surcharges in Europe. So -- but it's still difficult. We've raised prices very extensively. I mean most of our customers have passed it on. We know that because we have paid for some of it indirectly ourselves. But there's no question in the film extrusion business where you make 2 carves of resin and energy. It's pretty obvious. There's been a lot of inflation in both of those categories.

Your next question is coming from Mark Neville of Scotiabank.

Great job on the quarter. If I could follow up on some of these questions. Maybe to Walter's question on price. Kind of you're not waiting on anything sort of to go -- sort of go after price? Like you're not waiting for contracts reset, anything like that, right? Like you're…

Well, sometimes we do. If you got a contract that's up in June, and it's April, the contract term has ended and the renewal date is July 3, we'll go on July 1. So you've got a whole mix of -- we've got thousands of these contracts. So some of them we do -- depending on who the customer is, we'll pick our moment and others we would demand it immediately. So it's -- when you've got just no contract at all, it's just what's the prices there of product X or products Y where we put the building inflation immediately. So it's a very broad picture of different commercial circumstances. But yes, sometimes we do weight because there's no point in rubbing salt in the wound, if you don't have to.

Right, right. Yes. No. Understood. And still on pricing, could you sort of maybe just help us categorize or help us understand sort of roughly where you're at with pricing. I mean are lot of the actions almost done? Is there still quite a bit to do? Yes.

Yes. Well, [ always ] some more to do because it's -- inflation is still going on. It's not like it all happened in 1 month and we just have to then pass it through. We have inflation happening in March. So it's a permanent battle. That's the issue really. I think most companies are facing is it's just nonstop. It's just like a wall of walls are coming down on you. And as soon as you got through the first wave, the second wave is coming at you. So that's the issue. It's really -- it's still going on. So there are signs that it's plateauing out, but it's been pretty full on. So that's really the difficulty in market. It's not one moment in time, the price goes from extra wide. Just every month, the price of the components changing and then you have to pass that through. But then you pass it through, and then it goes up again.

Right. Yes, yes. And I guess in Innovia, I guess ignoring the margin percentage, like do you think you'd be able to get enough price to get sort of EBIT dollars back? Again, I know there's a lot of inflation in that business, and I'm more curious for EBIT dollars, I guess, in the percentage.

We'll have to wait and see. It's just -- we just have to wait and see. There's been so much inflation. I think the market needs to settle down, and I think everyone is tired of the mass inflation. So I think things need to settle down a bit to see where it pans out. But I think the team at Innovia have done an excellent job of passing it through. I mean no customers want to hear about inflationary price pass throughs. But let's face it, and what we're doing, it's not exactly like we're the only company in the world doing it, everybody is. And it's not just in Innovia. It's paper. It's freight. It's sink. It's adhesive. It's silver cone. It's varnishes. It's cardboard. It's pallets. It's everything. Insurance.

Yes. Yes. No, for sure. Understood. Just 2 more. In Checkpoint, does the RFID growth, does that sort of structurally change or improve the margin for Checkpoint? [ You sure it is? ]

Yes. We've really improved the ALS business out of all recognition from when we bought it 5, 6 years ago. So that's now from being a loss-making business when we bought Checkpoint in 2015, 2016, it's now soundly profitable business and doing better and better each quarter. So this past quarter, MAS was really impacted by the China situation and the component inflation in the hardware business. So electronic components. So the inflation around that in China is pretty immense.

Yes. Last question, just on the buyback. I think this is the first time you've been buying stock in maybe 10, 15 years, maybe longer, I'm not sure.

Right.

I guess I'd just be curious for the motivation. Is it more balance sheet where the stock is trading or just the difficulty doing large M&A?

The combination of all 3 is -- I think the stock is very attractively priced right now. So then doing what you would expect us to do when the stock is attractively priced. So I think the stock is undervalued. And so it seems like for us a very good time to start. We have the balance sheet capability to do it, no large M&A on the horizon. We've got a nice balance sheet with stocks underpriced. So why wouldn't we do it?

Your next question is coming from Michael Glen of Raymond James.

Geoff, just in terms of that Checkpoint MAS business over in China. Are you looking at all? Or has the discussion come up towards looking at some new locations for manufacturing or perhaps restoring some of that business?

Yes.

Okay. And then on the Adelbras acquisition in Brazil, I'm not sure if I'm pronouncing that right, but can you maybe speak to the opportunity within that market? This is a Brazil-focused business, but is this something that you want to grow perhaps in North America or Europe?

Could be. We're going to test the water in Brazil. So this should takes us to the category that's in the Avery kind of business. It's a pretty big business around the world. There's a lot -- 3M is the dominant player in it globally. And there's a number of Tier 2 and Tier 3 players available to buy in that sector. And this company is actually located just down the road from our CCL Label operation in Brazil. So our manager down there is one of the most highly talented people we have in the company. Wanted to buy this company, and we thought it was a good idea. So we did. And we'll see how it goes in Brazil. If it goes well down there, we know there are lots of other opportunities around the world to expand it. But the strategy is to test it in Brazil and see if it works before we get anywhere else with it.

Can you export that product from Brazil?

No. No. [indiscernible]. No, Mike. No, no.

Okay. And then I think there's a split between Avery and CCL Design on that. Like can you give what the rough split is?

The vast majority of it will fall under Avery.

Okay. And then also in terms of semiconductor, I know there's a ton of commentary out there. There's a lot of people giving opinions on what's happening in that market, but just interested in hearing your thoughts on the chip situation. Are you starting to see things in these at all? Do you think the industry has moved beyond the worst of the chip situation?

I think we answered that. We definitely hasn't got better. That's for sure. And I think the parts problem isn't just chips, it's components in general. So I think the supply chain side of the automotive and now electronics because of the shutdowns in China is semi broken. And that's why everyone is having to buy as long as they're waiting for their component. And chips is a huge problem, but it's not the only problem. So I think there's a lot of people focused on trying to improve it. But -- and we buy chips from -- for our RFID labels. And we know from that experience that's kind of hand-to-mouth and they're pretty low end chips compared to the ones that are going in cars. But we don't see any signs of anything good happening yet.

Your next question is coming from Daryl Young of TD Securities.

Just one quick one from me with respect to CCL segment and the CPG companies that are operating in Russia. Did that present any market share redistribution opportunities as they maybe look to move out of manufacturing capacity in Russia for you? Or is there any commentary you can give there?

No, I wouldn't say that's a factor, much of a factor at all, actually.

Your next question is coming from David McFadgen of Cormark Securities.

A couple of questions. Just looking at Avery, was every segment up in that business? Or was there any segments that actually declined?

Well, it was -- the positive sides, all came out of North America. So the international business was not as good, but in North America, it fired on all cylinders.

Okay. And then just on like MAS, you said was -- I'm just wondering if it was up overall despite it being weak in Europe.

No, no. MAS was down. Profits was down in MAS.

Okay. Okay. And then I think maybe a lot of people are kind of wondering, how much price increase do you still have to implement to recover all the inflationary costs like, would you guys [indiscernible]?

No. We don't know, David, because you have a price increase in March, you have another one in April, you have another one in May. So the price increases, it's not a singular event in time where the prices go up 15%, you just pass it through. It's happening every month, everywhere. So -- and it's not stopping. So you've got to constantly be putting the prices up to reflect the current realities. And that's the problem. So the reason there's a lag, and I think this applies to all companies, including all the big CPGs. You make your pricing adjustments and then the next part of inflation comes the next month. And that's the challenge. It's -- when will the way it stop coming and we go down to carve our waters to go, and that's what we don't know. And that's why we say there's still some more price to pass through because we -- I think we passed through everything pretty much that we had through most of last year. But in Q1, we had more inflation.

Your next question is coming from Ben Jekic of PI Financial.

2 quick questions for me, Geoff. Just on the Adelbras acquisition, it seems like the margin profile for that addition is lower than Avery. And is -- are you expecting that the synergies will happen from sort of procurement? Or will it be volume growth down the road?

Time will tell.

Okay. Okay. Second question on energy costs in Europe and specifically Germany. Can you quantify where for you -- how much higher they are compared to like February 24, when Russia attacked Ukraine? Or year-over-year, how much higher are they?

Well, I think the Germany wasn't a big impact for us because we're not -- we don't extrude much film in Germany. So -- and our CCL Label business and other businesses use energy, but not to the same extent we use it. So the impact was really all in the U.K. in the Innovia facility, and it's pretty significant. I can't say more than that, but very significant. So -- but I think consumers in the continent of Europe are talking about their domestic heating bills going up by factors of 2 and 3 and 4x what they were this time last year.

Your final question is coming from Adam Josephson of KeyBanc.

Just a couple of follow-ups for me. One on -- Geoff, you made a comment on inflation. Even though it's everywhere at the moment, you're seeing some signs that it may be plateauing. Can you just talk about what those signs are and how consequential you think they are?

Well, we see -- the one category where we track it daily is aluminum. So aluminum has started to drop in the last few weeks. So that's, I think, a good indicator. And aluminum is energy dependent as well as raw material dependent, but we've seen the price of aluminum drop in North America in the last few weeks, not by a lot, but by some. And it is only headed in one direction for pretty much all of 2021. But we did see a dip in the last few weeks. And we've seen paper prices stabilize a bit. The UPM strike is now over. So we're hoping that will stabilize things a bit in Europe and take some of the heat out of the paper market. So that's probably a good thing too.

Yes. [ Understood. ] And a couple of others. You mentioned that your plants have more orders than they can produce. I think maybe that was before China lockdown. But just intuitively, do you understand or does it make sense to you that demand, broadly speaking, would have remained this good for as long as it has, given what's happening in Europe, given weakness in Brazil, et cetera, et cetera, et cetera?

Yes. Well, I think in -- we haven't seen any weakness in Brazil, by the way. I mean our Brazil business has been very strong and was in Q1. So that's why I made a comment about share down there. But -- so we haven't seen any weakness in Brazil. But I would say, the real question to everyone to try and understand is how much of the demand we see today is people taking caution in the supply chain to make sure they've got what they want in an era where availability is an issue as opposed to how much of it is real end demand related. I would say we don't really know the answer to that. So the CPG numbers for Q1 were mixed, right? So some companies did very well. Coke, P&G, others did less well. And so the numbers were mixed, but some did well, some didn't, less well. But I wouldn't have said we saw a crisis in the CPG business in Q1 at the demand level. And we do know that I think many of them are taking some caution in the supply chain to make sure they've got what they need to be able to supply the demand that's out there.

Yes. [indiscernible] And last one for me on the NCIB. Can you just remind me why you didn't buy back any in the preceding 3 quarters? Just how much higher the share price was than it was in 1Q, just to give us a little perspective along those lines.

Well, I think we filed the NCIB a year ago. Stock prices in the mid-70s last summer. So we released our half year numbers in August. I think we start with at 70-something. And then we began to ponder it as things changed in Q4. We're certainly positive in Q1 when the Ukraine happened. But you have to remember, Adam, we can't buy stock in a blackout period. So January -- most of January and a good portion of February, we were blacked out.

Got it. And have you bought stock subsequent to 1Q? I forgot if you disclosed that, Geoff.

We can't. We can stop buying stock next week. It wouldn't blackout [indiscernible].

Okay. There appears to be no further questions in the queue. I'll now hand back over to Geoff for closing remarks.

Thank you very much, Jennifer, and thank you for everybody joining the call today, and we look forward to talk with you again in August. Thank you.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may now disconnect your phone lines, and have a wonderful day. Thank you for your participation.