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

Good morning, everybody. Thank you for coming. Before we start the meeting today, I need to refer you to this rather boring document. Disclaimer, which you should read in conjunction with our MD&A, which you'll find on our website or it's also posted on SEDAR. We are here this morning to tell you about a great Canadian success story. A family company that started by an entrepreneur in 1951, initially with the domestic approach, broadened into North America that has been globally transformed over the last 20 years to be a real international player. Just 2% of our sales are in Canada today, and 50% of our sales are outside of North America. You're going to hear about all our businesses today from all of our people. The 5 sectors that make up the CCL segment, also Avery, also Check Point and also Innovia. Since our founder in 1951, created the company, we've always been focused on M&A. More than 100 transactions in my time in the company the last 23 years and 72 transactions since 2010, including the 3 biggest we've ever done. As any private equity firm in the world would tell you, some deals go better than others. They usually go either better or they go worse. And we've had a feel of both. But in general, our portfolio of acquisitions has created enormous shareholder value over the long term, and we expect that to continue. You find CCL every day in all of your lives. Our customers are mainly global players who operate all around the world in concert with us. And I think that's a very important part of our business. Most important, when we do M&A, we buy secondhand equipment and secondhand buildings, and we also find great people. And this really what binds the company together today. The group of people who are in the room today from all over the world who run our enterprises and you're going to hear from all of them today. We share a bond in common. We are all in love with our business. Normally, when you're at a party and somebody says, what do you do and you say you make stickers. It's a pretty quick way to end the conversation, but that's what we all do. We also have big cars to supporting professionals and regional business heads. And one person who asked me to pass along his apologies for not being here today, [indiscernible], one of the senior people. He has a pressing family problem in Austria and can't be here, which is he really wanted to be with us to where we can't be. A few words on the timetable. So each of the speakers, I'm not going to do much of the talking today. Each of them will talk for about 10 to 12 minutes, and we've allowed 10 to 12 minutes for Q&A. So if you want to ask a question, if you'd raise your hand, so we are all doing this online. So we want people online to be able to hear the Q&A. We'll pass the microphone over to you and you can ask your questions, and we'll address them all as we go forward. So without any further ado, I'm going to hand you over to Ben Rubino, who is the President of CCL Industries Home & Personal Care business. Ben.

Good morning, everyone. Ben Rubino, I've been with CCL for just over 33 years at this point. So I've seen some of the growth that Jeff was talking about firsthand as far as going from 12 operations and the label side of the business to 27 operations alone just from a home and personal care standpoint. Joining me today also is Eric Frantz, who's our VP of Operations for our Home and Personal Care Group in North America. Also has been intimately involved in running our container division and responsible for the operations for both the label side and our tube side of the business. As I mentioned, we've grown to 27 operations on a global basis. On the label side, there's 19 facilities across 5 different continents. On the tube side, North American-based as far as -- just on U.S. operations and on the container side, again, it's North American-based with 3 operations for the manufacturing and 1 slug operation overall, that supports our vertical integration for the business. As far as the reason why we've grouped these divisions, really, it comes from a customer perspective. This is a customer-facing business in the sense that the customers that we deal with -- deal with us across all 3 of our divisions overall. So when we have negotiations, when we have discussions about expansions, when we have discussions about what we're going to do to grow the business together, it involves generally the 3 divisions overall. On the label side of the business with our global footprint, we've really worked closely with our customer base to make sure that we have our locations wherever they need us to be at this point. I think if there's anything that we've learned over the past 5 or 6 years with all the supply chain issues and challenges that we faced, whether it was COVID, whether it was shortages or whether it was just overall shortages in personnel, our locations has allowed us to survive and actually flourished during this time period and grow our business with them and continue to support them. When you look at our label business, global platform, global business, they depend on us from a standpoint is being able to globally launch their products overall. So when you have a company that's launching a product, whether it's going to start in Asia or 1 that's going to start in the U.S. or in Latin America, they expect us to be able to start it, initiate it and then be able to roll it out and package it up across all the regions across the world. We've also become their gatekeeper for some of the things that we're doing for them at this point. As they're stretched with personnel, they're utilizing us as far as making sure that the execution is going to be flawless across the board. When you look at our tube business, from a North American standpoint, where premium -- we basically deal on the premium side of the business in the premium tubes. It's extruded tubes. We don't play in the dental market, which some of you are familiar with, the way you tell the difference. If you squeeze the tube and it flexes back, that's an extruded tube. If you flex it, it's generally a laminate tube, and it keeps us form. That's the business that we've stayed away from and really focused on the premiumized segments on the tube side of the business. Container side of the business has been really a dynamic business over the past couple of years. It's actually growing significantly in market share and the businesses continue to grow. From a standpoint what we're doing, whether it's deodorants which has been a growth market for us this past year or if it's Sun Care business, but we've also grown significantly in the beverage side of the business, whether it's recycled water containers that you see in some of the airports. So it's been a fantastic market growth share for us at this standpoint. From a customer standpoint, it's a portfolio of all brands that you know, globally positioned, high-end Fortune 100 companies. We have long-term relationships. Some of these have been dealing with for over 25 years at this point and know them intimately. Also some very, very strong regional players that you see up there as well that we're participating in and continue to grow our share of the business with them. Their expectation from CCL is really, again, from an execution standpoint, so be able to provide them with the necessary components that they have to launch every day. For us, the worst thing that could happen is they arrived with their formulation, they have their bottles and they don't have something to decorate it with. If you can imagine shutting down an operation or a line because you don't have that, it's unbelievable. But it's often times the last thing that they think about the last component that they think about. So for us, we've been able to be near sight to them, deliver every day and be able to have a fantastic execution program overall. If you look at what the basis of the success that we've enjoyed over the past 20 or so years, it really gets down to the execution side of the business. Our supply chain tools and our supply chain dynamic overall has been something that we've worked on that, we've cultivated with our customer base. If you look at previously over the past 5 years, everyone talked about just-in-time inventories and just-in-time production. A lot of that was going towards people looking at centers of excellence, centers of manufacturing that they would then ship to their operations, which was all well and good. They could get economies of scale and do some of those things. CCL's philosophy and my philosophy overall for the personal care side of the market is to make sure that we are going to be as near sight to the customer as possible. And I believe that's actually helped in our success. Over the past 4 or 5 years, we've had just absolute chaos in the marketplace. We went from a just-in-time type inventory system to a just get whatever you can during COVID, and how to have the flexibility and the change to be able to adapt to what the needs were. People were buying shampoo and deodorant for years before that, suddenly, it became a switch to sanitizers. And we had to be able to switch production and manufacturing and be able to deliver to them in a very short period of time. COVID comes to an end and it became a just get whatever you can. Because there were shortages across the market, there were supply issues across the market and CCL was able to again adapt and because we were a near-site able to deliver to our customers on a very daily basis and be able to take market share during that period of time. I think what we're starting to go back to is it was just in case ordering over the past year or so, where people didn't know what was going to happen. We saw a spike in demand, people were building up inventories because they didn't know what they were going to be able to get from a supply standpoint, and that was just really building up as far as the inventories. I think what we've seen over the past year is getting back to some level of normalization. I think from a standpoint of inventories, you see an inventory reduction, but our flexibility, our ability to react to what the customers have needed and what we're being able to do has been a major change for us. Again, I think we've been -- we established ourselves over this period of time as the premier supplier for them. I think we were also a company that they looked at as a safe haven for them. There was very little issues from a supply standpoint from us. There was very little issues from a capability standpoint for us. So I think we've set ourselves up for the long term to be able to do it. Three things that we always look at from an investment standpoint. One, do we have the right capability to service our customers? Two, do we have the right capacity to handle what the growth is going to be going forward? And then finally, do we have enough flexibility to react to what the market changes are going to be? And again, I think this past 5 years has taught us anything, without those 3 factors working in unison, it's setting up for failure at this point. A number of issues going forward, a number of issues going forward. There's been a big focus around the sustainability side of our business and customer-driven sustainability. There's not a day that goes by or a meeting that goes by with our customer base that this isn't one of the overriding issues as far as what they're talking about and where they're going forward to. There's a number of commitments that have made to the marketplace as far as what they're going to do, how they're going to reduce some of their waste and what we can do to help them to move forward. One of the areas that we focused on, in particular, on the tube side of the business, this has been at the forefront of what we've been doing for over 15 years. We started with post-consumer resins in our tube side of the business in 2005. And Year-to-date, we produced over 1 billion tubes that utilize PCR resins. Year-to-date, we -- over 30% of our capacity right now utilizes sustainable tube technology for them, whether it's thin walling technology or whether it's the resin that we're using going forward. But again, it's continued to be a focus for us. Our commitment to our customers going forward as really we will not be a blocker for them and for them creating a sustainable product or for them to be able to have something that can be recycled in the stream depending on what country it's going to go forward. So again, it's a huge commitment, continue to have developments going forward as far as what we're doing and will continue to be an investment for us going forward. Next slide, Sean. So to kind of wrap it up as far as what we're doing from a growth standpoint and from our future plans, 4 things that we look at, industry leader -- continue to enhance our position with our customers from a relationship standpoint. It's conversations as far as what we're going to be doing from a capability standpoint and capacity standpoint. Number two, it will be investments driven by our customers as far as what we're going to be doing every day, it's about capacity, about where we need to buy, build plans for them as far as where they're expanding next and grow. Number three, developing sustainable solutions that will not only allow them to premiumize their products, that will be suitable for their growth going forward. And finally, it's really superior execution on the supply chain management side of the business. Very simple, very straightforward questions.

[indiscernible] market share and home and personal car. I think you're the [indiscernible].

We are the market leader at this point in the Home and Personal Care side of the business. As far as market share is concerned, to be honest with you, I think people are always looking to have either 2 or 3 suppliers still have a major player, a global player involved in their business. I think where we've seen our market share grow has been through these years of chaos. Again, we've been really the supplier of safe haven for them. There's been a number of supply issues that a number of our competitors have faced during the past couple of years. Again, there's been times where I've paid more from our materials in order to get them to make sure that we have a long-term plan. The other side of it has been in the business for a long time. This is not a short-term game for us, not looking to do something that's going to be a short-term game and not that it's up for long-term success. So, I think the entire team that we have involved here is really focused on the long term and making sure that these relationships with customers are going to be sustainable over the long term. And I think they very much appreciate that as far as knowing that what we continue to grow with them going forward.

With the customer like P&G for example. Is there more opportunity for you to add more business with Procter & Gamble or would you be completely [indiscernible]?

I think it really depends on what their launch is going to be and where they're going to be going. There's geographic opportunities to grow the business with large customers like that. Every so often, they're going to be coming up with new launches as far as their product lines and how they're going to be launched in different regions. I think we have our fair share of the market share with them. And it's going to be an ebb and flow over the years going forward.

Just a couple of questions. One is -- you talked about synergies between the tube business and the label business. I'm just curious if you can expand on that. And then secondly, when you think about your business, tubes, labels and container, where do you see the most incremental growth opportunities?

On the synergies between label and tube for the most part, there's a supply chain efficiency that we get in decorating some of our tubes overall. So we actually use labels on some of the tubes for a couple of customers in general that have a very rapid change in their programs. So they need to be able to -- what they do is they use a common base color for their tube itself, and they use label decoration to be the point of differentiation. They're a very seasonal business. It's constantly changed. There's some patent technology around that, whether we're able to decorate over the shoulder and through the crimp on some of these things and provide a very premiumized look. So between the 2 -- those 2 divisions work very, very closely together from both the supply chain from a decoration and from a premiumization standpoint for them. Your second question, I'm sorry?

So when you look at the business between labels, tubes and -- HPC labels, tubes and container, where do you see the biggest growth opportunities, when you think about capital investment?

Yes. I think -- listen, I think there's going to be continued growth on all 3 segments of the business. I don't think there's any one. I think we've seen some phenomenal growth in the container side of the business in the sense that the pie itself has gotten a bit bigger from us in the beverage side of the business, in the refillable water side of the business, which is a little bit nontraditional for the home and personal care side. So there's been some great opportunities to grow in the segments there. Again, even in the container side of the business, some of the things that we've been doing, where there's been fantastic growth for some reason this past year in deodorants. It seems like deodorants seem to be the new fragrance for men and for women as opposed to fragrance that you think of in colognes and whatnot. So that market has expanded in double digits for the most part this year, and that's impacted both our label side of the business for if they're using a stick or a roll on and for our can side of the business overall. So it's really segment-based overall. So, again, I think there's opportunities to grow and there's opportunities as our customers are looking for new areas to go into and expand as well.

It's Walter Spracklin, RBC Capital Markets. You made reference to quite a bit of variation, fluctuation during COVID and as we exited COVID. Is that pretty much done? And -- or is there anything that you foresee over the next little while that's going to lead to some abnormal type of fluctuations going forward? And secondly, to your growth question, are these growth opportunities enough to get you kind of above GDP growth in your segment? Or is it something that is still kind of more aligned with GDP growth?

Yes. First question as far as what do I see. As far as going forward and change, I think if anything has taught me over the past 5 years, there's nothing that's going to be consistent going forward. I don't think anyone expected a major pandemic globally entering in potentially 2 wars going on across the world at this point, supply issues that we faced over the past couple of years, as far as strikes going on from the material side of the business. I think we went through a period of 10 or 15 years of really stable environments. I think people were used to getting price decreases year-over-year over year-over-year. And then suddenly, COVID happens, supply issues happen, and you're training a whole new generation of people to understand that prices actually do go up every year. And it's really training them to go forward to accept that this is going to be a reality going forward. I can't tell you what the next crisis is going to be. I have no idea. But I am sure there will be another crisis that comes up. And we have to make sure that we're established going forward from an operational standpoint and from a physician standpoint that we can handle and have enough flexibility to manage that going forward. Your next question, I'm sorry?

GDP or growth relative to GDP...

Yes. It's really -- it's going to ebb and flow. I mean, as we can't -- listen, there's nothing that I can do that's going to sell more deodorant or more shampoo. I can't create markets with my labels and my containers. So it's really dependent upon my customer base, finding new avenues for them to grow at the standpoint. So I think we're well positioned with the major customers to service them and to handle their growth. We're well positioned geographically for them to work with them. We're extremely well positioned from a flexibility, from a supply chain standpoint. We've been able to manage our costs and be very competitive for them and being able to do this. And finally, from a capability standpoint, we're second to none as far as being able to do an execution and do whatever they need. So, listen, we've established ourselves over a number of years from an investment standpoint that I think I've built enough of a lead over my competition that for them to invest and catch up to IM across multiple regions. It's quite difficult. And with interest rates the way they are, it makes it even more difficult. So I think we've done the right things to build the basic blocks to get us to where we are today.

Yes. As people are buying more shampoo and -- as people are buying more shampoo and these kind of personal care goods digitally, like on e-commerce, how has that changed how the role of the label for consumer products companies?

Yes. I mean you're seeing a number of -- you're seeing the growth as far as the online purchase is continuing. What it's done is some of the functional things that are needed for the products have become more important. If you think about tubes, suddenly, you have to put a seal over the orifice to make sure that when a chip, it's not going to leak and explode all over. So it's created some functional choices, from a decoration standpoint. I still don't think it's made any difference. I think every single one of our customers this year, in particular, is talking about making their products more premium and they're continuing to move in that direction. I think still people are looking at buying -- they're still going to the store and looking at the entire wall to see what's going to be differentiated. And then it may end up ordering online for the second and third time, but there's still a number of people that go into bricks and mortar to do the ordering. And it hasn't changed one bit as far as the look at the label overall. No one's really down scale that. At the end of the day, people still want something that's sitting on their counter, whether it's in their bathroom or shower, that [indiscernible] has a premium look and feel to it so it hasn't changed at all.

Ahmed Abdullah, National Bank. Looking at your 3 segments of product offerings that you have, is there a low-hanging fruit that you can utilize some of the capabilities that you have to perhaps expand the product offering, gain more business and drive incremental growth that's maybe easy for you given your established infrastructure and label, containers and tubes.

I think where we have some synergies across the board, particularly on the label on the tube side overall. I think where we also have some synergies as some of the execution on the graphics side of the business across all 3 segments. Some of our equipment, in particular, on the label and the container side, some of the manufacturers are the same. So we can drive some of the developments, what we're trying to do as far as changes in the business, there's some synergies there. But as far as combining the 3 and say we're going to get synergies and grow the business overall, it really depends. I mean I can tell you, if one of the groups isn't executing well, it will have an impact. So for me, I need to have all 3 hitting on all cylinders to make sure that it's working. So again, if I have an issue in the U.S. or I have an issue in China, I hear about it tomorrow. And I know about it tomorrow when I get a call from the customer and say, "Hey, you have an issue here and there." So I think it can hurt me if we're not doing the right things. But as far as synergies with the groups, probably limited at this point. Yes. I think what we try to do is make sure that we're taking some of the learnings that we have across the 3 divisions, especially some of the digitization of the technologies across the board, whether it's inject technologies that we can expand across the decoration side across all 3 segments.

[indiscernible] from TD Securities. You touched on it a moment ago, but the premiumization strategy, is that being driven by your customers? Or to what extent are you pushing for it because you see better returns there? And how can you distinguish between opportunities there in developing markets versus more mature markets?

It's interesting because in the developing markets at times, they're moving towards premiumization even faster than some of the developed markets already. What we're able to do is we have the capability -- first of all, you have to have the capability in order to make sure that you can execute the premiumized looks that they're asking for. So I need to be able to stay ahead of my competition and the customer to make sure that I can execute programs seamlessly for them. It takes an investment to be able to do that. It takes understanding and having the conversations as far as directionally where they're going to go. Can I push them and say, okay, this is what you can do. We're giving kind of learning sessions to them and capability presentations to them almost on a weekly basis overall. So you're meeting with marketing, you're meeting with product managers as far as providing them with ideas as far as what the execution is can be. So yes, we can influence it at that point, but it also has to be part of their brand strategy as far as what they're doing going forward. The execution is going to be... So yes, we can influence it at that point, but it also has [indiscernible] what they are doing going forward. Does that answer your question?

Yes, it does.

Ok.

[indiscernible] premiumization. Is there any way to [indiscernible]

[indiscernible].

Can you just -- can you just touch on the M&A runway within home and personal verticals? Is there still stuff out there that you can go after and buy?

Yes. I mean it's interesting you asked this question all the time. For me, it's very easy to buy companies. I think we can go around and buy whoever we want. Challenge really becomes what are they going to bring to the table and whether it's going to be from a capability standpoint or from a personnel standpoint. And also, it's -- for me, it's very important to make sure that you get the integration right. And the acquisition is very easy. The integration is very, very hard. And we've done a very good job. I found that if there's geography that I need to go into and there's an opportunity, there's someone who's well established, absolutely, we'll have that conversation. But I have to make sure that they're going to be part of what we're trying to do and build up the culture that we already have existing within the organization. I also found that it's also good to be able to go in and set up a greenfield and do it from the ground up the way that I want to do it for the customer base as well. So generally, the M&A side of the business comes through a lot of conversations that I'm having with customers as far as where they like to see us go. And also, they've actually put us in touch with companies that they say, this is someone you may want to talk to that may be looking to exit because whether it's financial constraints where they don't have family members and entrepreneurs that they don't really have a succession plan going forward. But I really -- for me, M&A is probably less on the table than it is developing greenfields for our customer base. 13 seconds, and I'm done. Any other questions? Great. Thank you very much. Appreciate your time.

Good morning, everyone. My name is Lee Pretsell. I run the Healthcare & Specialty division globally. I've been in the label industry for 30 years now, 18 of which with CCL previously with Avery Dennison. So various jobs through operations and technical to running businesses and they're running the group. So I'm going to talk to you a little bit about Healthcare and Specialty today and starting off with a little video. [Presentation]

So as you can see, my business not quite as sexy as Ben's, sexy in a different way, I'd say. So we're really selling the quality system, and we're selling into a regulated industry. The onerous nature of the quality system means that big clients around the world want to have the same quality system globally. That's what they're paying for. So the addressable market for us is secondary packaging, secondary packaging within health care and agrochemical. And as you can see, it's around a $6.5 billion business in healthcare that grows at a rate of about 9.7%. And in secondary packaging and agrochemical around GBP 380 million and our year-over-year growth rate was around 5.8%. Okay. We're dealing with the top 200 or so healthcare providers globally. And you can see in healthcare, we have 29 facilities around the world and the split out strong in North America, Europe, LatAm and now starting up in Asia Pacific region. And by products, we -- we're very strong, we're the global leading player in clinical trials. We're very big in label and literature, and we're just starting in the niche cotton business. So where are we getting this growth from? There's a growing incidence of chronic disease in the world and mainly around some of the diabetes drugs. People will have seen a lot of reports about obesity, these new blockbuster weight loss drugs, but also into vaccines through the pandemic, and obviously, more and more indivilidualization around on oncology, cancer treatment, gene therapy, et cetera. The type of products and services we provide -- we're very strong in clinical -- clinical trial labeling. We do a lot of patient information labels and booklets. And we're now getting into more and more into digital printing on folded cartons and RFID labeling. On the specialty side of the business, which is more agrochemical and specialty chemicals, we have 8 facilities globally. We have a very strong presence in North America and Latin America. It's slightly smaller in Europe and starting again in Asia. Again, there's been big consolidation in this industry. There's probably only 6 to 10 global companies you're dealing with now, and they want a global service and supply. I think someone asked about margin. In healthcare, we had a very strong tailwind during the COVID period, but we had to change some of our products. OTC Became very big. People were taking more medications. So we had a nice tailwind during COVID. But a lot of elective surgeries were canceled during this period. So some of the products we used to make for elective surgeries. We then concentrated on vaccines, COVID kits, et cetera. On the specialty side, we were very busy in the early part of COVID doing hand sanitizers. Everybody in the U.S. had a very nice green grass. They were looking after their lawns. So Lawn & Garden products were exceptionally well sold in the early part of COVID. And then it was tailed off during the last couple of years where we've -- we had a lot of inventory in the system. It's coming back now reasonably good, but we have significantly strong growth opportunities in both sectors, and we're probably just above the average profitability of the CCL Group. Some of our competitive advantage, the global footprint and the capacity we can do globally. People want to have one source for certain products, one supplier and want a global roll out like Ben talked about. We also have the same thing in the pharmaceutical and healthcare industries. They don't give us all the business. It's generally split, but the development of these products is often done with the biggest player, which is normally is. We have very advanced quality systems, and we're very strong in clinical trials. So the path forward is to keep penetrating the emerging markets more and more of the vaccines or products are being made locally and invest more and more in automation and human capital to keep growing our business. We have done some strategic M&As over the last couple of years, which have been quite fruitful. And we will continue to look for quite niche players or some geographic expansion in M&A? So I guess, questions.

Daryl Young from Stifel. Just a quick move from TD. Just heading into the pandemic, we had talked a little bit about generics being a headwind and the shift to generic. And I think during the pandemic, we saw a flight to the quality manufacturers and the big brands. Are you seeing that trend reverse and shift back towards generics? And what are the implications for profitability?

Not really. I mean, actually, our generic business has declined during this period. And I think what the supply chain crisis told people is that you need to buy the brand product, and there was often a shortage of materials in the world and the big brands won. So during COVID, we had a bit of a switch back to a big branded product. We're less and less in the generic part of the business these days because quite often, a lot of the generic medicines are made in India or in parts of the world where it may be not necessarily strong.

Jonathan Goldman, Scotiabank. Could you discuss the market share in Healthcare and Specialty compared to Home & Personal Care and Food & Beverage and what the runway is there?

Yes. I think probably we're very much more fragmented, I think not being route to Ben's business, he probably has 10 really good customers, and I have 2,000. So it's a little bit more complicated. We use a lot more different materials, as you saw from our products. We make vastly different products. And every project is quite specific and specked in. In terms of market share, I'd say we have some runway to grow, but it is more fragmented than the other divisions, I would say.

And then as a follow-up, the $250 billion TAM that you referenced, the primary market, is that a possibility to move into there? Or is it really just the second [indiscernible].

Well, it's more like blister packs and you're really touching the product at that stage. So that's what a lot of the CMOs are doing. And a lot of the CMOs are our customers. So we'd be sort of interrupting into the -- we'll be getting into their areas. We really want to stay in the secondary packaging market. We may do some more primary [indiscernible] films, foils. We do a little bit of a niche business around that, but it's very small.

David McFadgen from Cormark. Just looking at the slide that you put up on the margin profile for '24, are you looking for much better margin profile there? I was just wondering, can you comment on the drivers as to why you think the margins are going to be so much better in '24?

I think there's 2 things. One is the -- this movement in the blockbuster anti-obesity drugs that's driving a huge growth for us. We're building a big plant for that. It's no secret. And the second thing is we bought -- we did a big acquisition this year in the clinical trial space, which has a much higher margin.

Okay. And then earlier, you referenced that you said there are about 6 to 10 global competitors. Can you name as your top 2 competitors that you'd be competing against?

Yes. I mean some of our competition are begin to folded cartons, and they also do some label and some literature. We're a label company that does literature and folded cartons. So it's the likes of WestRock, the MM Group. They would be the two.

You had that -- you showed a picture that RFID label. Is that a product that is completely -- do you manufacture every portion of that RFID label?

Great question.

Can you -- and also, can you just maybe give some idea of pricing difference between that label and other labels in the segment?

Okay. So first of all, we have an end-to-end supply chain now through Check Point. So we developed the tags. We do end-to-end system. We did an acquisition last year that some of you guys might have seen called Agile, where we can -- we can make an end-to-end system for RFID. So development of the tag, the software, the readers and the application and the validation of the customer's line. We're vertically integrated through Check Point. So we don't need to use third-party suppliers anymore. And a lot of developments are going on to be able to do the target checkpoints. The converting at CCL and the full system through the Agile. So that's where we're heading. And from a margin perspective, I guess, it's a factor of x times. Let's just say if you put RFID.

I just had a question [indiscernible]. I just had a question on -- you mentioned emerging markets as an area for growth. Is most of that -- would most of that come greenfield? Or are there potential acquisition opportunities in those markets?

A little bit of both, depends where you are. I mean we just set up a site in Singapore, for instance, and we did that in our HPC building that was -- where they were vacating some of their assets somewhere else. And we took over the building and we set up a greenfield specifically for a customer who's doing a very large project in Malaysia.

Ahmed Abdullah, National Bank. Your early days on the folding carton and RFID. Where do you see that driving incremental growth for the segment on a revenue basis?

I think RFID is the one that will give us the most growth. Carton is a bit complementary to what we do today. We've got lots of customers that would like to buy all 3 pieces from us. And to be in the niche carton game, we only want to do it for healthcare. So we're not going to become a carton company. We're going to become a healthcare carton provider that's digitized and that gives us kitting opportunities. So if you imagine they're buying the insert, they're buying the carton and they're buying the labels, we can kit them all together so that they have one supply chain. On the RFID side, the growth will be tremendous because hospitals are becoming equipped with RFID trolleys versus having 2 people dispensing drugs. So therefore, you have to go right the way back in the supply chain and say, once the hospitals get the equipment and the capability then all of the drug service providers and all of the providers of those drugs need to embed RFID in the drug. So every label that's going into those hospital trollies will become RFID-enabled. So it won't be done in -- it's an industry that moves slow. So over time, it will -- it's moving in that direction. There's great developments, but it takes time.

Are you seeing an elevated level of inquiries, orders that are coming in from customers that have not used RFID before?

Yes, we have a huge pipeline, but a typical project takes 2 years to implement.

Yes, there's always a lot of discussion about RFID and how big it could be and that could be really a big growth driver for the business. Can you tell us where are you in the whole transformation to RFID on your business? Like we still really in the really early innings here. And maybe you could give us some metrics like what percentage of revenue might be attached to RFID, that kind of thing.

David, I think if you wanted to quantify RFID across CCL, so all the divisions of CCL, it's about $250 million today. So 70% in the CCL in the checkpoint apparel segment, about 20% of Avery and about 10% at CCL Design. So I think that's the starting point. So we have capacity next year to make $5 billion in-lays, that's in-lays that go inside the labels and tags, that's about 10% of the global market growth expected next year. [indiscernible] a frame of reference. Thank you very much.

Good morning, dear investors. Ladies and gentlemen, my name is Reinhard Streit. I'm based in Europe. And in my current role, I'm responsible for our Food and Beverage operations as well as I'm taking over a sales strategic role from a global perspective within the beverage and spirit segment. Well, I started my career back in 1993, actually, with an American company at the time, ALS automated labor systems based in Cleveland, Twinsburg, Ohio, and then got the great opportunity to build up together with the team, a greenfield in Austria at the time when the U.S. market exported into Europe, the first stretch and started to produce ring sleeves as well there. Well, from that, we builded up some more business units in 1997 to build the factory or the business got sold to ITW at that time. And we added some more operations in Europe, in the U.K., but also in Brazil at that time. And well, 2006, which was a great year for us because we got acquired by CCL and we found a great home and from there, the journey really started. I have to say that now I'm turning 30 years now in this label business, so supplying consumer goods, fast-moving consumer products which you hold every day in your hands or there are many products, people around the globe, trust and value and purchase on everyday scale. Going into the next slide. So you see this year, we are -- and this is a great achievement. I'm very proud of it. We're exceeding the first time at CAD 1 billion in sales. This is divided into various different product categories. As you can see here, shrink sleeves represents about 40% of the business. Shrink sleeves up made of various different materials. So you can do full body decoration on containers, PET, HDPE or glass containers, PSL beverage for nonalcoholics, acholic drinks as well as in the spirit segment represents about 30% of the business. Special category wines and spirit for 15%. And just recently, added as a complementary product portfolio, closures, pouches and IML as we see a lot of synergies coming across through convenience buyout from the consumer bases. Covering the CCL footprint. So you see that approximately 43% of the business share is generated in the European market, where we have also our operations based as well as 24% in the U.S., 19% in South America, 7% in Southeast Asia and roughly 4% in Australia and New Zealand. And last but not least, we just build it up a new greenfield a couple of years ago, 3 years ago, exactly when COVID kicked in and started operations in South Africa, producing for the beverage and food segment down there. Well, strategic growth drivers. As Ben already mentioned and Lee, sustainability is a key factor within our businesses. And what we clearly see that sustainability is driving the global trends for packaging legislations. Packaging and packaging waste regulation will have an effect globally. And that what we clearly see on all the brands we are supplying. As we also see that demand for sustainable label options that enable recycling of overall packaging all over the globe brands will have strict recycling targets. And it is mandatory use of recycled plastics drives design for recycling in Ecodesign. That means CCL and our team, we have developed sustainable label solutions over the time. And thanks to that, we started already almost 10 years ago and introduced the first very sustainable label solutions to help recycling. At the end of the day, a label is a bit of a trivial product. But it's most important that you decorate the product. It is so important that you ensure that there is a circularity given and the legislations around the globe, they will play for it. You have probably heard about the green deal in Europe with very ambitious targets, net zero C02 by 2050 as well by 2030 that every single product needs to contain a certain amount of recycled content. What I also would like to mention because as you see, this is a very important point for me as we grow on sustainability. When we develop products, especially during the COVID period, we were somehow blocked really to go out and qualify the products. But one of -- many of the brand owners consulted CCL as a development partner. And we are just not a labor supplier anymore. We become really development partner through our sustainable label solutions to help the brand owners to reach their recycling targets. This is all connected to the operational execution. Operational execution is mandatory to be efficient, what we're doing on a day-to-day scales. And it goes along with value engineering and certainly crossover divisional technology exchange and development. As we just heard about RFID technology is also something we see in our product segment kicking in for food and beverage. When it comes to spirit applications or later on also to pouches, refilling systems. So RFID laminated into material substrates will bring benefits to the consumers. So they don't need to choose. They just go with the pack to the dispensing unit and the unit knows exactly what needs to be dispensed. Just an example. It is not as far as developed really in the conventional food and beverage business, but we see a lot of inquiries coming along into that segment. And last but not least, we are partnering with many initiatives. It starts from Mikasa Foundation to the EPBB-European Plastic Bottle recycling organization, also the APR, like in the U.S., but with many, many others, with [indiscernible] with RecyClass with Petco just recently won a great award in South Africa that clearly support our initiatives in terms of sustainable label developments. I'm going to show you a little video. [Presentation]

So you see sustainability is a very important part in our daily business as it belongs to all our businesses for the various different business units. And I would like to just give a bit of a brief of the real developments because it's just not the fact that it's a label. I would like to name the EcoFloat development, which has been in cooperation developed via our division under CCL Nobia and CCL from a technical perspective, it is a low-density material. So it floats when it gets grinded with the -- can easily be separated with the PET flakes and this is a very efficient and fast methodology to separate the materials in order to bring it back to bottle-to-bottle recycling, for example. What is most important you see here quite some prominent brands like Nestle, the known Coca-Cola, Chobani, Pepsi, all are using them. And not only the big brands, also the regional heroes, I would say, in the various different markets and countries and continents are starting to use EcoFloat as a brand. The next Boshoff label, we have developed a few more decorations just in a nutshell. You can -- the labels can detach from the glass surface when it's a returnable glass. It can detach when it's a 1-way glass. It can also detach from PET bottles. And you can really clearly separate the materials from the packaging and you can reuse it and bring it back to recycle here. It's mainly used in the beverage industry, some prominent names here, the known Heineken, Avion, Coca-Cola again or ABI in the U.S. are all using this one. And here is a clear trend answering the question where you see the market going since the legislation is kicking in, returnable packaging are reinvented for many products. And we see a clear rise in terms of projects, pipelines increasing and new business opportunities coming up. Pouches are relatively new to us, really responding to brand owner needs as you sometimes see a rigid pack next to a soft pack. Pouches have various different advantages, is low light, is very safe. It's convenient. It offers long-lasting shelf life, for example. And what we see here clearly is the trend also in sustainability, the direction of mono-material development, which is also mandatory in the future. So going away from a Triplex Alu, PET, PE compound into mono material compound. And here, we have the development resources available within the group. And we see growth potential into various markets, especially in Europe, U.S. and Southeast Asia. Inboard label also recently added to our portfolio has also advantages when it comes to recycling because in molds the material itself and the label is a term reforming process or a blow molding process, so the label got integrated at the moment. The park is being produced, and you can recycle it together. It's very efficient, and we see quite a large product spectrum and a nice playground for us in the future to grow the business from there. Well, that's it in short. Questions.

Thank you. So clearly, a focus on sustainability. So just kind of wondering, where do you stand with respect to your competitors on your sustainability solutions. How do you protect any technology that you've developed for sustainable solutions? Like how quickly is it or can your competitors replicate what you've developed?

Good question. First of all, we very much value when competitors really moving and developing into the right direction as we do because we don't want to be in like a single supply position. And that what we have seen is that if competition is starting to develop in the same way, then it's just confirming that we did the right thing to us. We even -- the material we use, for example, for polyolefin, it's been under the development of the Innovia Group, but it's sold to the free market.

When you want to gain a competitive advantage on a sustainability solutions, you could gain market share. You talk about how it's great that your competition is doing the same thing. But do you want to get some sort of lead on them and then you can take market share from them because you have the solution, people want it and they don't have it?

Yes. Well, this is -- as I said, this is one of the growth drivers anyway. I mean, we see lots of brand owners we approach or they approach us that they want to go this way and they have to go this way. So I think we definitely grow from there next to other innovations. So some brands, they have a stronger look just on the visual identity, some other brands, they want to go to tick all the boxes from a visual identity to the right material, to the right product, to the right process, the entire value chain. And and here, we come in, as being said, we are a development partner for many of those or wants to be the development partner. And we clearly see that this is greatly valued from the international audience brand owners.

And where do -- when you have a sustainable solution, how does that compare on price? Because in the past, people want to go that way, but it's more expensive. So they don't want to -- there's friction to go that way just because the price then it reduces their margin? And maybe if you could talk about price and in margins for you as you develop these sustainable solutions.

I mean, ideally, we increase our margins with such products. And we claim that with our processes and with our operational execution that we gain some advantages there. Nevertheless, brand owners are not ready to pay a huge upcharge just because of it is more sustainable. But when it comes to taxes like -- or let's say, like in regions in all over Europe, when you don't use recyclable material, so you pay taxes. So that can be a nice exchange to spend more money on the label instead of paying taxes and even give the message to the consumer base is that you are more green, that you more eco designed following the recycling targets from the authorities.

So just one last one, and I'll pass mike. So what percentage of your revenue is generated from products that are sustainable?

I would say already above 30% approximately growing, year-on-year growing.

Just sticking with that gentleman's theme. The EcoFloat, what is -- what are the top maybe 1 or 2 things that are preventing faster and greater adoption of that product? Is it simply a question of greater consumer awareness, education? Is there really some friction around paying more for that sustainable product? Is it you just don't have the capacity to generate it fast enough? What are the top hurdles to faster and greater adoption of that?

Well, there are 2 things. Brand owners started to educate their consumers. So they really -- they want the green dot on their product. And this is going to be viral. We see it in social media. We see it on exhibitions. So we see it on their promo ads everywhere, they really promote sustainable pack. EcoFloat itself or EcoStream or EcoFloat are our brand names, is the way how we developed it, is comparable. It's simply to understand if you use, for example, PTG film on a PET bottle is the same material so you can't separate it from each other. By using an EcoFloat film is a PO film, a polyolefin film has a lower density. And when it comes to the grinding process, then you can separate the flakes, the virgin PET flakes from the label itself. And this is what the industry wants. They want to collect the PET flakes in that sense and bring it back to a bottle-to-bottle recycling stream and safe. Therefore, acquiring of any virgin PET fraction, for example. And yes, that's what we see, and it can be applied on not only on PET bottles, so it's -- there are various container types you can use that this format. I hope this answers your question.

I just had a question on -- you mentioned -- you highlighted pouches and IML as areas for growth. And I'm just wondering, can you just give a little bit of color to how much of your business is currently in pouches and IML? And then secondly, in terms of growth, who are the largest competitors in those two product segments?

Well, as we just added this acquisition roughly about 6 months ago, it's still a founding investment as we have seen that we see a lot of potential here. It's probably roughly about 5% to 6% of the overall revenue on the F&B organization currently with a lot of room to grow. And yes. And the second question you asked was.

I was just wondering who are the biggest players in those segments.

The main competitors are -- well, yes, it's MCC at the end. So it's one of our major partner in the label industry or competitor. So they own quite some large market share here. And Amcor MCC. So those are the main player. And we see a niche for us as we are extremely well connected to our customer base across the globe as we are supplying F&B across the globe and -- there are a lot of synergies that really brand owners approaching us and asking us if we can supply like pouches for form fill in seals, meaning all the finished pouches, retort and this business is definitely to grow, not only in F&B, many other applications when it comes to dairy products, fruit puree, pet food. Yes. Dry food. This is a large playground for us.

So historically, a big contributor of growth for this F&B segment has been premiumization of the products. So -- do you still expect this to be a meaningful contributor in the future? Or is the focus more on sustainability now?

No, definitely. Premiumization is going along with brand development and brand marketing initiatives. We are running independent studies, not only we, but also our major clients. So they clearly see that premium brand is much more attracted to the consumer base. The decision almost is still being done to 72% on the point of sale, what kind of product I'm going to buy. It has a strong connection to bond and means that consumers like to buy a premium brand with a high sophisticated label declaration or brand image overall. So there is still a clear shift in between discount and premium product segments. We see that in particular on the even though in the nonalcoholic and alcoholic business segment, like in the water segment or in the beer segment, here is a very clear separation between mainstream and premium. But if it comes to spirit applications, you see that when you run through a duty free, you see all those fancy nice, decorated products. It really attracts. And here we are with all our technologies with all the printing technologies and finishing possibilities. We have to add a lot of embellishments to the product itself. And here, again, we develop with the brand owners and the designers, attractive designs. And yes, that's one part. And it will definitely grow. That what we clearly see.

When we read about Food and Beverage business, we often read about flexible packaging, and I think some of your business lines would be defined as flexible packaging. But is that -- are there areas of the flexible packaging market that you want to get more involved in because it seems like it's a big market opportunity that you're not as involved in as some of your competitors?

No, we actually have no intention to move into any flexibles. This is not our core business. This is a business we don't see really suitable to us. That's why we stay on our label segment with the various different product segments, and that's what we are going to continue and to grow.

And is that a function of competition and margin? Like what is it about that market [indiscernible].

Flexible is pretty low. So on that segment, so we don't want to just run our prices or equipment to, at the end, not make any money out of it. So we want to deliver returns. Thank you.

Good morning. I'm Derek Cumming, responsible for CCL Design business globally based in Scotland and the U.K. I joined CCL when our business was acquired in 2015, so been part of the CCL family for about 8 years now, but been 37 years in the industry until now. So I'd like to tell you a bit about our business. So we're just under $1 billion in sales, and we focus on 3 main sectors: electronics, automotive and industrial. In terms of split, it's roughly 50% electronics and 50% automotive and industrial. And we are working with the main brands in those sectors around the world, and their manufacturing partners. It's quite well known in electronics that not many electronics OEMs manufacture themselves, but they work through a lot of contract manufacturers and in the OEMs electronic manufacturing service partners in the world. So we work with -- mainly with the brands and try and get specified in maybe a year in advance of a product coming to life. So there's a high amount of design engagement in our business. And to do that effectively, we've got to have a lot of knowledge on the material science and the chemistry that's needed to develop some of the products that go on electronic devices and automotive components. But what that really means is a lot of in-house coating capability because many -- let's take a laptop computer as an example. When that changes design, it quite often involves customized coatings being on, let's say, the TouchPad overlay that's on the TouchPad assembly. So we have to customize things and quite often the materials that we need -- we can't get off the shelf very quickly so. So we have to be able to do a lot of that ourselves. And our growth strategy is quite simple. It's really all about new products to existing customers and adjacent customers that recognize the value proposition that we have. But it's a very simple strategy that's worked for us. We've got the right type of customer base. And we have the capability to grow by doing more with those existing customers by reaching into new applications via new product, but also investment in capabilities when needed. We've got a world-class global footprint, and that actually aimed at covering the hot spots of both manufacturing and design for both electronics and automotive and industrial. And what that can mean is that we design -- we give design support in certain parts of the world, and we have to follow the sales related to that design engagement into another part of the world. A good example of that being the importance of Silicon Valley to the electronics sector and what we have to do there to face customer design teams, but have a very strong access between California and China for the electronics and even countries like Taiwan as well, where there's a lot of display technology developed in Taiwan, but the manufacturing is in China. So we've got 7 design and technical centers aimed at engaging with customers at a design level and then our best-of-breed manufacturing infrastructure all around the world that's the current in 32 different locations. So short video [indiscernible]. [Presentation]

I couldn't resist another Scottish voice in the video voice. So we're a little bit different from other CCL companies and probably only about 30% of our portfolio is in the label space. But a lot of the technology that we developed is originated from [indiscernible] it's taken us into other products. And reality is, you don't find too many labels nowadays on electronic devices and you don't find too many labels inside, say the car, but they are there in certain applications. But we've developed from that label industry core technology base into other coated and printed and [indiscernible] type products. But just to give you a view of what we actually make. You'll recognize some of our products because you can see them, but some of them are actually inside devices and components that you won't see. So a lot of durable labels and graphic overlays used in various devices, either on the top or on the bottom or inside battery wells. Smart intelligent labels, that could be anything from a security label with 7 covert features that help our brand protect the supply chain around the world or it could be something very complex, driven by a printed battery technology that we have that basically control -- the powers are a smart label that tracks and traces the world's vaccines around the world that's got logic on a board, where it's very, very, very complex, and that's an interesting area for the future, we believe. Well, what I mean the printed electronics and human machine interface, that's control panels. So that can be anything from a simple membrane switch that you might find on a device in a hospital room that controls an orthopedic bed or the IV drips, all the way to something on a washing machine, which is part decor, part functional. So we're involved in those type of things. The Precision die-cuts, you'll never see unless you open up a device, a good example being a laptop, computer. If you were to open up a laptop or a tablet or even a smartphone, you probably found about 30 components inside that device that would have functional materials for [indiscernible], temperature control, waterproofing. These might be a teaser back. They may be printed button, they're inside devices. So you'd have to open up to see some of those products. But -- that's a fairly significant product set for us. Treadplates in the automotive world, that's been a long-standing product range. That's an assembly, which might have a metal. It might have a backlit logo. It may have a circuit board and lots of adhesive tapes for bonding. So we're heavily involved in treadplates and all decorated plastic components and assemblies. So think of inside and automotive -- an automobile, where you've got all the high gloss Piano black looks or 3D formed. So many of those are components that make up a final assembly. And the [indiscernible] is a hard-coated film that's then screen printed to kind of give it the graphics and the decoration, it could be foiled. It's then formed into a 3D shape, and then it's inserted into the female cavity of an injection mold too and you get a fully integrated, completely durable, 3-dimensional decorated plastic. So that's an area that we're heavily involved in as well. An area that's becoming more and more important to us is what we call decorative products. And that's an area where I think will really drive a lot of growth for us, especially in electronics. And that's putting coatings on to certain materials that end up maybe as a piece of trim on a device, so it might be an LCD cover, which basically protects and gives a capacitive touch function and might have antifingerprint coatings. Every LCD display that's out there has a cover, right? So that's a big market, and we've developed some interest in coating technology that I believe will be very important for us in the future. Backlight logos and modules. Again, you look at a gaming laptop, the likes of Lenovo and Dell, for example, have lots of gaming devices. You can see a screen there with a -- screen of logo with Lenovo logo. That's got 13 layers from the acrylic plastic that the shapes routed from it and the light guides, is electronics, there's LEDs and there's all sorts of diffusers. So we make the entire assembly working with the brand owner to develop functionality from it. So a little bit different from labels, but a lot of synergies in terms of where are the kind of core competencies from a chemistry and core technology come from. So I mentioned some of these already, but I'm quite often to describe our core competencies based on printing, coating, laminating and cutting and lots of subsets thereafter within all that. One of the things that you'll find in most of our operations is Class 10,000 clean rooms because we're making components that end up on electronic devices and also in kind of fairly mission-critical applications and automotive components. We have to operate in a very, very clean conditions. So we've got a lot of clean room Class 1000 even down to Class 1000, which is very important from a manufacturing point of view. Our world is becoming very heavily automated and as much from a precision point of view as anything. So our factories have got lots of robots and a lot of picking and placing. And over the years, in China, we've built up a very strong automation team in there now that the Chinese team can travel again. We're deploying some of those automation development sales elsewhere in the world to reduce costs and make our operations more precise. So it's a fairly important element of our business. It's quite an -- very important area for us. This allows us material science and in-house coatings or vertical integration, call it what you want. This allows us to face customer design teams very, very well and professionally. We live in a world where customers don't always know what they want until they see things. And so we're constantly trying to take new materials, new ideas, new coatings, new technology to design teams. And we do that supported by a team of scientists and engineers around the world and it's really an important aspect for us. And again, I'll draw the parallel to the engagement in the electronics business in Silicon Valley, we're dealing with some fairly senior scientists, so we have to put the right type of people with the right type of data when it comes to a new product idea or a concept in front of them because what we're really asking a brand owner to do is to trust us with their design. So we need a lot of technical credibility, establishing technical credibility both with customers we're engaging with them for the first time or within groups is mission critical to us winning business. So the whole technical engagement is really important, and those are some of the kind of key elements of that. Just a few words about sustainability. CCL design, probably different pressures from what Reinhard spoke about and the other guys. But -- we started to see what used to be like screen protectors when you used to buy phones, you would get sophisticated optical clear films protecting the screen, it's now moved away to coated papers. So there's a lot of just moving away from oil-based products moving away from tapes to printable adhesives and just that whole move away from oil-based packaging, certainly affecting us in the packaging type business that we have. Starting to work on biopolymers that could be injection molded. So there's a lot of work on coatings and materials that are more sustainable. But just some key metrics from our point of view, more than -- more than 50% of our sites have zero landfill-based waste. And we've had a 20% reduction overall and waste going to landfill over the last sort of 12 months. We've made 2 major investments in Germany and China for solar panels, and that's obviously driving some of the metrics that you can see on the screen here. So we'll continue to do that in response to doing the right things from a sustainability point of view from a customer point of view. So it's obviously important. That's a 10-minute overview. So very happy to try and answer your questions.

Ahmed Abdullah, National Bank. You mentioned or at least in the video was mentioned that electrification as a trend in the automotive industry. How would that drive some incremental growth for you?

Yes, good question. It's -- Is something we're right in the middle of right now. So there's some obvious opportunities with label and identification products. But that's quite small in comparison to some of the kind of safety type products and some of the designs that we're working with for what we call thermal runaway, where inside the car, there might be 200 to 300 lithium cells and within -- between each cell, there might be a spacer, very complex assembly. And where -- I mentioned using some of the Chinese automation technologists to develop some solutions for elsewhere. That's an area where we've taken some of the electronics expertise and auto assembly and applied it to those type of products. So looking some of the numbers when you do the math there are quite [indiscernible]. And I certainly got 3 or 4 projects in that space, which I think it's important to note that the whole EV battery technology is still evolving. Designs are changing. I think we'll see the upside of that end of '24 and '25 and beyond. There's still a lot of designs moving around, a lot of materials getting specified. But working with materials that are resistant up to 1,000 degrees C, for example, and then putting them into an assembly that the automotive brand wants. Then you've got things like some of the charging stations. Most of the charging stations have got an HMI interface, just a control panel. So that plays to our capabilities. It's outdoor, so you want to protect everything from water ingress and everything. So that plays to the in-mold decoration from a plastic molding and everything below the surplus of plastic. So yes, I think that's started to become a really interesting space for us. And I think over the next 5 years, it will be interesting to see the growth there.

And I suspect the sales cycle and certification would be a tedious process to get -- to be certified to provide these. Does it require any additional investment on your part to be able to deliver these.

We do that every day. Our automotive business is highly regulated, and sometimes it can take 12 months to kind of get a final approval and it's a fairly rigorous process for anything that goes inside a car. So it's really more of the same. And we have a lot of that infrastructure already in place.

Ben Jekic from PI Financial. I have a question. You mentioned decorative products in electronics. Is the opportunity there in the future sort of -- I am selling 2 products to a customer. Option A, I can sell 2 better, more customized products or Option B, I can sell 2 products plus convince the customer to buy 2 more?

Probably the former. I think it's definitely an interesting space where some of the coating technology we've developed allows us to disrupt commercially and technically. And so what I mean by that is if we can -- if we can use some of our own in-house coating chemistry to give a customer equal to or better than their current plan of record, i.e., what they currently use, but do it at a price that is meaningful that may increase our margin significantly and give them a cost reduction. We've got a few projects like that. And those tend to be the opportunities where there's less competition, which is where you can obviously work the commercial advantage. So I see -- see a lot of opportunity of that nature based on some of the recent technology developments that we've started to commercialize.

Just going back to an M&A deal you did a number of years ago, Worldmark. I'm just wondering, can you just give us some thoughts like since you've acquired Worldmark, how has that deal gone for you? How has that business growing. What have you done with that over the acquisition timeframe?

I came with the Worldmark acquisition. I was part with the management team at Worldmark. I think really what Worldmark has given CCL and Jeff jump in if you want here, it's given it scale and credibility in the electronic space, and it's taken -- took CCL design into China, which is obviously the biggest marketplace for both electronics and automotive. And what I think it's really given us -- and it's quite -- it's obviously business is pretty close to my heart having worked there for 37 years. We still have some of the kind of key technical people today. Worldmark started manufacturing in China, I think, 23 years ago. And we still have many of the key technologists and technical leaders there to this day. And I think that has given CCL Design, a real platform to kind of grow from in China and some of that transferred into Southeast Asia. I think going back to some of the kind of comments at the rest of the guys said about the pandemic. The reality is, Worldmark was an electronics facing business, first and foremost. We've not had a normal year in electronics since 2019 for one is another up and then down starting to kind of come back, hopefully, but it's not really been the same since 2019, but I think really from a CCL design point of view in the years running up to 2019, that was the highest growth part of CCL Design, maybe even CCL. So it's kind of really generate a lot of organic growth by -- and I go back to the point I made earlier by just doing more with existing accounts, right? It's one of the easier ways to grow. It's easier to grow within an account, I think, than it is to kind of go and find the new one. So as long as we have a value proposition and capabilities that can allow us to get into different areas. And I think Worldmark certainly delivered a lot of that organic growth momentum. And we'll continue to do so, I think, because it is still the kind of key footprint in electronics from CCL Design perspective.

And are there other businesses like Worldmark that make logical add-ons.

Yes. Our world is very fragmented from a competition point of view. So there's lots of small players, right? One of the things that we have is probably a capability set and a footprint that no other competitor has, but we obviously have competition, but it might be people that are focused more on precision die-cuts and don't have anything else and people that make labels and don't make anything else. So yes, yes, there are people that we know and we talk to that could have that type of sort of big growth number that could add on a couple of hundred million dollars easily yes. Those companies exist as well -- with some small bolt-ons as well. We play in -- because we are at the component level, we are supplying components, automotive electronics, you could easily define that in the trillions of dollars, right? So there's a lot of people that make products in those sectors. So it's -- it's a massive market where we've probably got a fairly small market share just because of the size. When you take it to the component level.

I just had a question on -- so when you think about the outlook for -- between automotive and electronics/industrial, is it safe to assume that there's more growth from the evolution in the automotive industry than electronics?

I think it's both. I really do. And I think, well, I think the opportunities for us are strong for growth in both sectors. I really do. And that's driven by expanded capabilities. As you expand your capabilities, you automatically grow your market size because you can your addressable market is bigger. So I wouldn't say it's one or the other. You could argue, yes, electrification will potentially drive higher value components for us. But I think there's as much growth opportunity in electronics as a automotive based on what we do and how we do it. Thank you.

Good morning, everybody. Glad to see you're still awake. I'm the last one in this segment. So no worries. We're going to get a break here in a little bit. I'm very happy to be here today to talk about a segment that is unique to CCL, I believe. I've been in the security print industry for 30 years. I joined Banknote Corporation of America in 1990. At the time, it was a family-owned business that my father formed. In 1995, I became President and CEO, and served in that capacity until we were acquired by CCL in 2015. Since that time, I have remained with CCL and responsible for the continuing growth of government printing contracts in the security space. So CCL has two distinct business lines. Banknotes, polymer banknotes, which I'm sure everybody in this room is very familiar with as Canada has all polymer banknotes. There are -- and CCL, this particular business came with the acquisition of Innovia in 2017, right. So we're the #1 leader in polymer banknotes, there's 80 billion notes in circulation today. We have 70% of the market share in 35 countries, 5 of them being in G20, which is Mexico, Australia, the U.K., Saudi Arabia and did I miss one? Okay. We have 3 production locations worldwide in Mexico, the U.K. and Australia. Australia is where the first polymer bank note was developed and issued for circulation with the Australia Bank. The other side of the business is a business that I grew up in, which is security print documents and we're located in North Carolina in the United States, and we predominantly service the U.S. government. Basically printing all the documents that they no longer print inside the government. So we're doing things like passport elements, treasury checks, social security cards, poster stamps. The poster stamp business is really what put us on the map. We were -- all poster stamps used to be printed inside the government and we privatized the industry. In 2006, I think, was the last poster stent that was produced by the U.S. government. [Presentation]

So as I said, we serve all the key government sectors in the United States, Department of Treasury, government printing office, the United States Postal Service. But since that time, since being acquired by CCL, with the worldwide audience and the abilities of CCL, we've been able to actually get international business. So we are growing in that respect. Through our relationship with the United States government as a trusted supplier, many other governments look to them for leadership in security features, et cetera. And so they will put -- point them in our direction, many opportunities out there for production of security documents and other governments as they see it as a benefit to have them produce in the United States. So significant growth ahead, yes. Since the acquisition, CCL has invested significant capital investment. We've been able to diversify in many other products. At the time of our acquisition, we were paper-based secure documents. Since that time, we have put in a clean room. We're able to do credentialing for the federal government and for ID cards, et cetera, with the identification fraud today, it is very important that we can secure these documents. So the federal government has looked to us to help them with that. They actually do credentialing inside the government as well, but mostly just for the U.S. passport. So they're looking to us to do all the credentialing for all the other units, FBI, TSA, et cetera. We have a very unique and talented design group within BCA. And by investing in the latest and greatest security design software, you have to have certain credentials and certifications in order to have the software. We're the only one in the United States that has that. And so it enables us to do security design. We have been -- we have just been awarded a contract with the U.S. government for all security documents. We are doing the design for them. So the new U.S. passport will be designed by us. Digital printing. There's a lot of secured -- digital printing has been around for a while, but not in security print. There's now software that allows us to put features that you can only get in digital printing into security documents. So we're now working on that, and we are the only printer in the United States that has that capability. We also have patent pending card technologies for ID credentialing. By working with Checkpoint, we're able to develop an RFID inlay that is sourced in the U.S., which is extremely important for the supply chain. So what is the CCL Secure polymer banknote products? With electronic transactions today, everybody asked the question, is cash here to stay. It is definitely here to stay. We have seen year-over-year growth in banknote circulation of 4% to 5% per year. 29% of the people in developing countries are unbanked. In the United States, we too have unbanked, about 5% of the people in the United States are unbanked. It's widely used for point-of-sale transactions. It's secure. It's recognized by everybody. And it definitely -- polymer only represents 5% of the bank notes that are out there today. So we find great growth and the opportunity to bring polymer to other countries. We're continuously innovating with new products that meet certain product sectors in the banknote industry. So you can see the polymer adoption since 2018, the countries in red there have adopted polymer. It's an interesting sell in the polymer market. Somebody has to be first. Nobody wants to take that risk. And so Australia came on first and then banks such as Mexico and Canada came on. In Canada, they adopted polymer in 2011 and got all their notes transferred to polymer by 2013. In 2015, the study came out, that counterfeiting had been reduced by 75% because of the polymer note. Okay, any questions.

So the obvious question is, is there any discussion within the U.S. government to adopt the polymer bank note for the U.S.

Yes, there has been discussion and it is certainly being considered. It's a long sales cycle, as you can imagine, when you're looking at banknote production because of the redesign, how you handle the cash and the cash systems, et cetera, but it is being looked at as an option.

So given I think you said you were awarded a contract for all of the U.S. security documents. Is that correct? That's what you said?

Any security document that the government doesn't print. So obviously, they focus on banknotes and passports in the United States in the government. They typically had printed Visa -- the travel visas and other documents postal stamps, for example. But they soon realized that, that really wasn't their core competency, and when we were at Senate or a Banknote Corporation of America when we started, that was our goal was to privatize the stamp industry. At the time, the stamp industry was about $200 million in sales annually and that was our goal to privatize. So in 2006, the industry totally privatized. And of course, we saw competitors come in.

So if the U.S. government puts up an RFP to print polymer banknotes, obviously, you would be a prime candidate, I would think. Who else would be in the running, it would seem like you would probably be most likely choice.

I can pretty much guarantee here today that the U.S. government will never give up the actual printing of the document. Now whether they get a polymer, that's a different situation. So CCL Secure supplies the base polymer substrate with high-security features embedded in it. It is then shipped to state printers like the United States or well, Canada, Mexico, where the actual printing of the note is then applied and finished. So we are providing the substrate, the polymer substrate with the opacification that allows for the reception of [ intaglio ] printing and also with high security features that you really can't get in paper notes.

Okay. And then just the last one, just a contract that you talked about -- or you mentioned that you were awarded, can you give us a dollar value for that contract?

No.

Can you just give a rough size for this segment from a dollar figure and then how it splits between the -- your legacy business and the currency printing -- the currency business.

Yes, CCL Secure is about $250 million annually. And I'd say we are about 1/3.

And on polymer, the slide indicated 70% market share. Can you just talk about the competitive dynamic in polymer?

So of course, we got the hard work, right? We developed the product. We got the first bank signed on to actually issue and circulate polymer bank notes. The success of that situation in Australia triggered other banks to be looking at. There's many reasons why polymer notes are advantageous to any government. The durability. They last 4x longer than paper notes. The security, you can embed many more security features into a polymer note than a traditional paper bank note. It's safer, it's secure, it's clean. It doesn't have a poor surface. So it doesn't -- you can wipe off the surface that you can't do in a bank note. Also for recyclability and sustainability, polymer is very good. It recycles much different than a paper bank note, which you would think would be recyclable, but the ink actually penetrates into the fibers and it's difficult to recycle.

And from a market share perspective, like when you -- when I -- when you say the U.K. government putting out the king on the note. How does that process work for Innovia? And like how does that RFP.

We -- yes. The RFPs are -- we do supply the Bank of England, that as I said, there's been some other competitors coming to the space now. And many governments, just like many companies don't always still real comfortable with the single-source solution. So by having this competition come in, sometimes those are split, but we do have contracts. There are long-term contracts that we have with the government for the supply.

There's been an increasing use of nonphysical currency in the world for transactions. And have you done any analysis as to -- how much of that is and how fast and steep is that decline in the use of physical currency? And to what extent can you offset that by new wins with new central banks to foster either sustainable growth or actual growth if you can acquire or if you can penetrate those central banks at a faster rate than the reduction in currency.

Right. Even with all the electronic and e-commerce today, there are countries 11% of the transactions are even though they're e-commerce, they're delivered and they are paid by cash. So that is happening. There's legislation around the world to ensure that cash is accessible and being accepted at point-of-sale, locations, et cetera. There's actually legislation to make that happen. Even with the electronic e-commerce that we see growing today, we're still seeing a 5% increase year-over-year in the circulation of bank notes.

Net Cash -- so the United States, the [indiscernible] is very public. So the iPay was launched in 2007. And since 2007, notes in circulation in the United States have doubled. You have to remember, cash is used for a lot of things outside of retail transactions. And it's -- and we're also more focused on the number of notes in circulation, rather than the percentage of the GDP that might occur. So when you have inflation, that's also a driver of consumption of bank notes. So it's not all about what happens with the retailer.

But the outlook for growth is tremendous in polymer notes. 5% of the countries today are -- have adopted polymer. There's great opportunity.

If you exclude China and U.S. -- if you exclude China and U.S. from that, what percent would you say is available for polymer. I know it's 5% when you include U.S. and China?

The big -- you've got China, you've got the euro, you've got the United States and you've got India. So they're the big 4 that everybody wants, but they're also the 4 most difficult. So you really have to think about those as one group. And you have to work on them very long-term, very long horizon. And you have a whole bunch of countries in the middle that you can then go after. So -- but it's a long sales cycle, very conservative customers, probably the most conservative customer of the [indiscernible] we have anywhere in the company and things can happen very slowly and then suddenly, bang, you get a big contract like the one Sandy got from the U.S. government in the past year, which we never would have predicted 5 years ago, but it's happened. So you have to have a long-term horizon and think and think about any country in the world, literally.

If you think about the pandemic and what did most governments do, they printed more bank notes, right? So those were great years during the pandemic. But now you will see that slow down, just like everybody else is seeing the effects of the pandemic today. But there's growth out there to we have, and I think it's sustainable and I think the future is great for polymer notes as well as security printing. We're going to be able to leverage the high-security facilities, which are that carry a lot of overhead to meet the strict requirements of the government, what you have to do to be able to print a secure document, but we're going to leverage those locations and expand our footprint in security printing as well, security print documents.

Just a follow-up or another way to ask that same question. So within the next 2 years, is there a big volume opportunity for the polymer bank note business.

There is always big volume opportunities.

But for example, like when you closed Innovia in Q1 of 2017, the Bank of England was already talking about the GBP 20 note in 2020. Is there something out there that perhaps always, we haven't realized that's always.

Always. Well, first of all, we can't talk about any of them because they won't let us. All these are pretty sensitive people about what we can say publicly about what's going on before something has been publicly announced. So we can't talk about that because that's confidential. But there's always a huge pipeline of confidential projects with customers. But whether they happen this year, next year, 5 years or 10 years, that we don't know. Bank of England, to give you an idea, it took 13 years to migrate from paper to polymer. 13 years from the first moment or the first project to execution. Romania did it in 6 months. So you just don't know and you can't predict and you have to accept that's the way it is.

To be fair, the GBP 20 note was like over $2 billion like notes. So maybe just an accounting related part.

The GBP 20 note is not a big note in the context of the world. I'm sorry, it's just not. It's not -- in the world of currency, the big demand is typically in emerging market countries. So the developed world notes outside of the United States and outside of the euro, there's no single denomination that's economically meaningful.

Just in terms of pricing of polymer versus paper, when you present the idea of switch, how much of a switching cost would that be to the central banks? Is it an issue and how do you pitch the idea of the benefits versus the cost.

Depending on the product line in there, there's a product today that we are working for the lower notes, which is a very good opportunity. We've developed a new product, and that cost to go from paper to polymer is 0, it's equal. And the durability is 4x to 5x longer.

It depends how many security features you're putting in the note. So the developed countries typically pay more for their bank notes because they want more security features in because not many people want to counterfeit the Pakistani rupee with the $100 bill who gets a lot of attention. So depending on where you are and the likely to counterfeit, you're going to pay a lot more for the security features in your notes. Okay. Thank you, Sandy. So we're going to take a short break now. It's just after 10 o'clock, so we'll be back in the room at 10:25. Thank you very much. [Break]

Okay, everybody. If you could take your seats. We're going to get started again. Thank you. So I'm going to introduce you now to Mark Cooper, who's the President of our Avery segment.

Good morning. I'm Mark Cooper. I run the Avery division and I spent most of my career working in the label and print industry, spent a little over 20 years working for Avery Dennison and I joined CCL in 2013, just after the Avery acquisition. Just going to give you a short overview of Avery today, tell you about who we are and where we're heading. So today, Avery is a $1 billion segment in CCL. We're the world's #1 label brand using homes, offices, businesses and schools. We sell our products in more than 50 different countries around the world, operating from around 22 manufacturing facilities and employing more than 2,500 people. Since the acquisition by CCL in 2013, we've acquired something like another 20 different bolt-on businesses. And to give you a little insight into Avery and what we do, I've got a short video for you. [Presentation]

Under Avery Dennison's ownership, the Avery business was 100% focused on the reseller community, selling its products to stationary wholesalers and dealers, office superstores and to mass-market retailers. That strategy really changed after the acquisition to focus on a third segment, our direct-to-consumer or direct-to-business brands. And that started with the creation of our own online WePrint business. The reseller business, though, remains hugely important to Avery, represents about 60% of revenue, 75% of which are today in North America. And with very stable, healthy margins. We have a greater than 70% market share in the label category in our core markets. And growth is really fueled by 4 areas: the trends in personalization and customization, growth in e-commerce and the rise in the number of small and micro businesses. And there's also potential share gains in our commodity categories as well. And whilst we retain a strong position with our reseller customers, demand for traditional office supplies is threatened by ever-changing consumer behaviors, digitization and more recently by the reduction in office working. Our reseller customers are also looking for growth beyond the traditional office supplies categories to fuel their future growth. At the same time, we've seen a rise in those shopping and searching online, those who traditionally not purchased through these reseller communities and who prefer to deal directly with the manufacturer. This was a growing market, not being served by Avery before the acquisition. So it's both a GAAP and an opportunity. Our direct-to-consumer business, the strategy really since 2013 has been to reduce our dependency on this reseller channel and focus on that growth potential of those shopping online and the adjacent categories with similar consumer needs. Our WePrint business allows consumers to design custom labels and have us print them for them. And we've expanded that business now into more than 20 countries. And we've acquired businesses that have the potential to be market-leading brands through their design, product innovation and service that offer custom products in small quantities. These businesses can also leverage Avery's web capabilities and our best-in-market material pricing, R&D expertise, design and web capabilities and also our supply chain benefits. Now we have 8 badge businesses and 8 online label businesses. We see opportunities for further growth through collaboration, sharing ideas, geographic and product expansion as well as more acquisitions. So why do -- what makes Avery successful and why will we continue to win? The things really driving our success and enabling future growth as shared across a number of these direct-to-consumer businesses. That's our expertise in personalization and customization. Avery has been a pioneer in software that allows users to design and print labels and many of our direct-to-consumer brands are focused on that same need. Avery has a history of innovation. It's not only in our DNA. It's in our name. Stan Avery invented the first pressure-sensitive label in the 1930s, and we've been innovating in that category ever since. We brought the first laser principle labels to the market in 1980s and today, we continue to innovate, bringing new features and new products to the market that set us apart from the competition. Our businesses also share a commitment to fast and reliable service. That's often critical for these last-minute but crucial consumables that we supply. And we're focused on listening to what our customers tell us about our products, reading reviews, understanding website data to improve the web experience and offer new products. For example, we were puzzled why people continue to buy our 3.5-inch disk labels when the reason for their existence has long since disappeared. But by looking at what people were using on our sites and what they were designing, we found that this is mostly product labeling and their purchasing because of the size of the product and not because of the application. That allowed us to change content and repurpose packaging to focus on how consumers were actually using the products today. Short-run and low minimum order quantities are a common factor. WePrint, you can order one sticker with no touch to web, web to print production software that allows us to effectively and efficiently make what the customer needs. So for example, our kids labeling business here in Canada, Mabel’s Labels, parents don't need to order hundreds or thousands of labels. They can just buy the small number required to label their children's belonging. And a passion for customer intimacy, understanding what our customer needs are, has allowed us to introduce new services like in our IDMC wristband business, we not only supply the band, the RFID band. Now we can produce it and we can fulfill it providing a service that mails each one directly to each individual festival goer. And then as another example. Our PC Name Tag business now provides preassembled name badge service that takes the hassle away from event organizers. So when you arrive today, it was easy for you to find your name badge because it was already in an alphabetized section for you to find it easily and for the event organizers to not have 80 people crowded around their desk at the beginning of a conference. We'll focus on expanding and growing our direct-to-consumer businesses in new geographies with new products and continually improving the web experience for shoppers. We'll defend our Avery brand, selling more and more on e-commerce sites, an expanded range of more than 3,000 label SKUs is already available online today, made to order and shipped in any quantity within 48 hours. This has already expanded to many of our reseller customers too without the need for unnecessary stock and will expand further. We'll continue to innovate and differentiate our products, and we'll manage commodity categories for cash. We'll leverage those synergies I mentioned earlier to get better click rates, access to web tools, best-in-market material and freight prices and drive operational efficiencies in our supply chain. We'll continue to focus on consumer and customer needs for more sustainable solutions, as well as leading the way with solutions to questions that are yet to be asked. So we'll continue our journey transforming from a once analog reseller-focus business to an increasingly digital direct one. And we'll look for more strategic acquisitions that give us access to new markets, new products, where they can leverage the benefits of being part of the larger Avery business. And we'll continue to build on those aspects that make us unique and will help us drive long-term sustainable growth. Thank you.

Yes. A couple of questions. So just looking at some of the segments of your business, which ones are the ones that are declining just from changes in consumer behavior? What are you doing to offset that? And just on an overall basis, how has the reseller business done over the last couple of years?

Let's start with the first of those. The categories that have seen the most impact from those changing consumer behaviors and the digitalization that I talked about is really in that organization and presentation products category. Think about ring binders, indexes, things like that. You might have attended a conference or a meeting like this many years ago, and you'd had a binder with presentations all preprinted and you just carried that away or you dumped it in the trash on the way or whatever. You would have typically had more of those physical materials, whether in offices or meetings, and that's been going away. And we've noticed that trend has certainly declined markedly since the pandemic. People haven't gone back. If I think of our index business, people haven't gone back to doing the things they once did. They just have stopped doing them all together. So that's probably the category with the most obvious declines currently. And we're managing those categories in different ways. Of course, we're still bringing product innovation, but we're taking cost out of the product as much as we can. We're streamlining and reducing and rationalizing where possible. So we're looking at those types of products in a different way to the way we might have done it in the past. The second part of your question, how is the reseller community doing? It's a mixed bag. There are some -- the obvious ones that are doing pretty well. There are good many dealers that are doing exceptionally well, if I think about dealers in the U.S. and in the United States. But they've typically been really good at service, and they've expanded into other categories that aren't these traditional office supplies categories, the so-called [indiscernible] categories and others. So they've done a really good job of knowing what their customers want, understanding how to sell more to those same customers and not be as reliant on the traditional office supplies. Some of the brick-and-mortar big customers are probably still struggling, and you could see that in some of their results. And they too are transforming to move their business either more online or into other segments. But if I give you a number, for example, I think the total number of office superstores that used to exist in the United States 10, 12 years ago was twofold, yes, probably about 4,000, and now there's less than 2,000 office superstores in the U.S. And whatever -- whenever our customers take stores out and close them, then that becomes an inventory reshuffle, and you see that over that period of time when that happens.

Sorry, so what's been the trend of your reseller revenue over the last couple of years, like your revenue to resellers?

Well, it's a mix because there's been a share shift across those resellers. So some of it has been a movement from typical brick-and-mortar resellers to more online resellers. So we've seen some volume decline. If I looked back between now and 2019, I mean, the pandemic certainly had a significant impact on the office supplies arena, just by people not being in the office and not using supplies. Our volumes in something like the label category are down maybe small single-digit volume numbers. But bigger volume declines is something like the binder category or the index category where the usage has just gone away.

Okay. And just one last one from me. When I was looking at your presentation on the slides, I don't know if you segment your business this way, but what percentage of Avery's revenues from labels from all those categories?

It's probably about -- just adding up in my mind, it's probably 2/3, maybe a little bit more than that, maybe it's 2/3 to 70%. If I think about the -- what I would call, a label within some of the direct-to-consumer businesses, it's around that.

Can you touch on margins in the segment? And are there opportunities for margin expansion? How should we think about that? And maybe if you can give some insights into the margin difference between the reseller business and your online business as well?

Okay. Well, the online businesses generally have better margins than the reseller business overall. The reseller business, as I said, is they have healthy stable margins. But let me give you an example because it plays into why we are acquiring businesses, why we're going to acquire more. If I think of a business like the PC Name Tag business, I mentioned earlier, or Mabel’s Labels, we acquired those businesses in '15 -- 2015, 2016. With PC Name Tag, they were kind of a broker business. They had great customer relations, great service-focused business, but they didn't really make that much in-house. So when we look at acquisitions, we look at how can we improve margins through what we bring, whether that's our web expertise or whether it's capital investment the owners of these businesses might not typically have done. So there's been significant margin improvement a business like PC Name Tag, through their ability to do more in-house production, which improves margins, but it also means they're able to provide better, faster service, which means they can go out and win new business and more customers. So that -- we've seen our ability to do that with most, if not all, of these acquisition companies that we've looked at. That's the first part of your question, I think.

Yes. In the current margin profile for the business now, are we looking next year or the year [indiscernible] for expansion?

Sure, I do. Within the direct-to-consumer business, I think we'll continue to see expansion in that business. We'll see more growth in that business than we will in the reseller business. And when I said -- when I showed one of the slides earlier, I said one of the reasons we were reducing dependency on the reseller channel is we could see that the reseller channel was producing its focus on these typical office supplies categories, and they've continued to do that. And to the gentleman's question earlier, this is a business that we still think is really important, but it's a business that will decline over time. And so our -- and coupled with this change in shopping habits, people are buying our types of products from different types of arenas, and they want them served in a different way. So that's why our online label kind of businesses are going to be growing much faster than our traditional 100 sheet label boxes in -- that you buy out staples or wherever you might buy them. That business, whilst it still has some growth potential, has more limited growth potential than the online business. Is that okay?

I have one here. Just -- over the years -- over the past couple years, you sort of acquired into somewhat adjacent industries relative to like the core Avery, hotel key cards, the horticultural acquisitions that you've done. Can you just talk about sort of the rationale on how that connects to the traditional labor business? And then are there other industries that you would consider entering in a similar way as you did with horticulture and hotel key cards, things like that?

Yes. I'll deal with those one by one because they're slightly different, but I think some of the reasons are the same. So we bought a significant number of badge businesses. Avery was in the badge business, and we've expanded into that segment because a lot of things are the same. It's about being able to customize. It's about small orders, fast service and increasingly online from the point of view where the shoppers are going. And within those segments, as we've expanded into something like the badge business, we find ourselves dealing with lots of the same types of segments. So to give you an example there, all of our badge businesses deal in the Hospitality segment. So -- and our ID&C band business regularly being asked, supplying RFID risk bands to hotel resorts, can you also do key cards? Okay. So you would -- you naturally see these adjacencies of where you can add value and service that same customer, a little like Derek said earlier. We're serving that customer and we're just bringing more products to them. So that's one of the reasons why something RFID band -- sorry, RFID hotel made sense to link with the ID&C band business and broadly with our badge businesses. And in terms of the horticultural business, yes, it's a label business. And it's -- if you look -- if you went to the master side business, if you're a small nursery, you're a grower, which is a highly fragmented market here in the U.S., not in the retailer end where it's dominated by Lowe's and Home Depot and Walmart. That's where all the reselling activity is. But the growth market, the growing market is like fragmented with all these hundreds of thousands of different growers. And you're providing a range of plants you need access to and in the case of MasterTag, it's an online ordering platform, it's software driven. You have access to 300,000 different photos of different plant types with all the relevant care instructions. These all -- this thing is a small grower, you don't have the time to really deal with. And so you can go online, order your 6500 plant tags or your 65 plant tags, exactly what you need. They arrive 3 days later and you stick them in the plant pots and the plants go straight to store. So it's that same kind of service custom products, low minimum quantities and focused around why we still call the label or the printed final product. So 2 examples. I hope that answers the question.

So within the direct-to-consumer business, you guys already have lot of the technology and the software. You see opportunities to organically incubate DTC brands versus -- yes, like how do you make that decision between buying versus building?

Yes. That's a good question. I mean, I think when it was -- I think we now have a position, for example, within our badge businesses where we have maybe a little more scale and a little more capabilities where we have started to get into other segments within, for example, that badge business where we're doing it ourselves and growing that -- the new product capabilities organically because we have the customer access. Within the label business, it was easy for us to get into the WePrint business because that was our fundamental product, and we already have the software capabilities and the web presence to be able to get there. But as soon as we start looking at adjacent categories where players already exist, it gets much harder, just push your way into that market. So sometimes you ask the question, how long is it going to take me to build that organically? And how much is it going to cost me because the cost is not always about building a plant. It's often -- the cost is about building market awareness, and that's more of a marketing cost than anything else. Whereas can I get there more quickly by getting a foothold by buying a niche player or somebody has those capabilities or has that market share or market presence. And so each time we look at those things, we look at the trade-off. I think as we got scale more in these online businesses and particularly in this badge and online labeling segment, I think we'll have the capability to do more organically in the future. But at this point in time, if you gave me the option, I'd say, we're going to do much more in the acquisition area than the organic area today.

Hello. My name is Ben Lilienthal. I've been working for CCL for the last 20 years. I started in the Home & Personal Care division. And through the years, I got the responsibility to run the other divisions in Mexico, Security Innovia, Avery and the ones that we have in Mexico. In the last 2.5 years, I had the responsibility to be in charge of Checkpoint. So let me talk about Checkpoint. In Checkpoint, we have 2 technologies specifically. We have RF and RFID. For the people that don't understand what is RF, it's value of frequency. It is a label that you can see when you are leaving the store and you don't pay that [indiscernible] if you don't pay. So we call those labels [ dumb ] labels because you have only one and zeros. The natural evolution of these labels took us to the RFID. In RFID, who have the capacity to handle much more data that start opening a lot of opportunities for the group through the different industries that we have. Checkpoint is a global company. We have a participation in 34 countries. We have 56 locations with a total employment of 4,900 people. On top of that, we have 50 people on R&D and 70 people in the software area, plus 500 people in the field service. How is divided Checkpoint? In Checkpoint, we have 3 product lines. We have the hardware part, that is the antennas, the readers, the things that you see on the store. The second product line is the software. We are creating the different softwares that we are helping the customers to manage their stores or the different environments that they are. And the last segment is the labels and tax. That is where we relate to everything. Through these 3 product lines, we have different verticals. Our strongest vertical is garment, but through the evolution of RFID, we've been participating in different segments. As you've been hearing from other colleagues in the different divisions, we are participating in the food and beverage, pharmaceutical, logistics, do it yourself, et cetera. What is our competitive advantage in Checkpoint. I believe we have a great reputation on RF and RFID in the different retail verticals. We've been in the market for a long time, and we recognize as one of the leaders in the market. We have 500 field service technicians. This is important. We connect every one of our hardwares to the different stores with the capacity to install around 35,000 locations in a year. We can deliver a full solution in a faster way. Why? Because we control all the manufacturing and all the products. So when the customer needs something, we can deliver really fast. Through the departments of R&D and software, we can deliver unique solutions to the customer. So we are completely integrated. We are one of the few companies in the market completely integrated. Why we see an opportunity for Checkpoint to grow? I think the -- through the years, we've been having the problem of destocking. I believe and we believe that in the first quarter, the end of destocking is going to get and maybe not the end, but at least we can see light at the end of the tunnel, so I think the good times can come back. Second, we are going to take advantage of all the infrastructure that we have on CCL. We have different divisions as you've been hearing through the day with around 240 different facilities in the world. The customers believe in CCL. We deliver day-to-day, the best quality, innovation and service. So through them, we are going to expand our footprint in the market. That's what we call, last mile. As I said, we have a solid reputation on the RF market and a solid reputation on RFID. To make this happen, I base all the strategy in, what I call, the 3 Ss: simplification, standardization and systematization. When we are talking about these 3 topics, we are evaluating every single process, every single activity and every single operation in the company to be able to really focus on the cost cutting, cost control and efficiencies. To make this happen, you may ask how you are going to do it? You will need some extra capacity. We decided to put a new plant in Mexico for cheap bonding, that is going to be ready on the first quarter. With this, we are addressing couple of topics that are important. One, we have a real contingency plan that is important in the market. And second, we are close in the supply chain, the supply chains for all the Americas. So let me show you a small video. [Presentation]

So we are not new in Mexico. Mexico is one of the few countries that will have all the divisions. So we clearly understand the dynamics and the execution of every division. In Mexico, we have around 4,000 employees. So not only we are taking care on the supply change and contingency plan, we are maximizing our position in the new [indiscernible] that is going to bring us a lot of benefits. Lastly, sustainability. You've been hearing across the Board about the commitment that CCL has on this topic. We are evaluating in Checkpoint from the packaging, exclusion of plastic with utilization of the parts and creation of the energy even for the plants. So we are on top of that. Thank you. Questions?

Do you have sense of margin profile of RF and RFID versus traditional clothing labels or other sorts of labels in Checkpoint?

It's a better margin because we are covering more performance on the label. When you are talking about the normal level, it's pure decoration. Here, you are controlling inventory and efficiency on the process, so you can charge and get a better margin.

I guess you're not going to be able to quantify the multiple of how much better it is?

It's better as they describe it.

Fair enough.

You recently on the last call talked about just expansion outside of retail. And you had an interesting point in one of your slides about leveraging CCL's relationships outside of retail. And if I'm reading that correctly, you're suggesting that, that will help you get potential RFID adoption in those industries. Can you just talk about where you see the biggest opportunities in terms of industries beyond retail -- beyond apparel retail, I guess?

I think we have a -- our weakest market right now is garments. So I see opportunities in every one of the segments in Checkpoint. Why? When we are talking about hardware, we've been one of the leaders in RF antennas in the stores, what we call, the [ dumb ] labels, one and zeroes. As RFID is evolving and [Star] impacting the different industries, we believe -- we started noticing a transformation from RF antennas to RFID antennas. So we believe that we are going to have a huge impact on the hardware part. Second, we are moving or we are extending our position from the stores to the different segments. When I'm saying that, we've never been in the warehouses. So we are moving our applications to the warehouses because at the end, what you need in every solution is hardware, software and labels. So we are just moving through the technology that we have, our know-how to the warehouse. At the same time, as Lee was expressing the position on the hospitals, the new stores for us are going to be hospitals. It's the same handling on inventory, it's the same speed that they are looking and the same security that they are looking. Practically, it's the same software with some level of modifications, some levels of modification in the servers, but the same label. So we are expanding in all these different environments on the part of hardware and so forth. So I believe the market is still learning. RFID is not a new technology. It came from second world war, too. They just started using it in a different way. So the people -- it's been really creative in the way they are using it, how to control the agriculture part. When you are talking about the food industry, there are 2 important segments on that. The one that they are talking about single-use to multi-use, how you control all the plastic parts. So it's infinite possibilities on the plastic products. And the other part on the [indiscernible], how you control the supply chain. If you are going to get the salad, they want to know from where comes the avocado and where comes the lettuce. And when you compare this to any product, it's the same need. They want to look how the garment is produced, from where it came the cotton, so where it was produced the jeans. So at the end, it's really hard to define where is the market of Checkpoint. At the end, to be honest, our market is any physical product that you need to count and you need to accelerate the know-how and the speed to the market through the supply chain. So our market is going to expand dramatically because we are moving from garments that it was the traditional use to every physical product. So imagine the possibilities. And through CCL 240-plus facilities, we have a good reputation, good understanding. The ones that we don't know, we are going to learn.

Can you just help understand a bit as you ramp up this RFID tag facility? Like what kind of impact is that going to have on revenue within the Checkpoint segment? And then are all of the tags that this plant is manufacturing, are they entirely for the Checkpoint segment? Or are they for other parts of the CCL business as well?

We are going to have some, let's call it, last mile customers, that they are all CCL customers in the different segments. So naturally, we are already in pharmaceutical, food and beverage, home care, automotive and electronics. Maybe we are missing logistics. So the 2 facilities that we are going to have right now for chip bonding. One is in China, one is going to be in Mexico. Practically, the one in Mexico, it's not so much for garments because we don't have so much garments in America. Everything moved to Asia. Maybe in America, we have Central America for the fast response on the garments. So it's going to be more focused on the segments that we've never been, in the segments of logistics, aerospace, food and beverage, et cetera. And the one in China is going to be for those segments, [indiscernible] the natural segments that we have on garments. So it's going to impact all across the Board. What is for segments where -- every day, we have a new opportunity because every day, the people want to control a different product.

And what is RFID as a percentage of sales within Checkpoint right now?

Right now, our total number is $250 million -- in Checkpoint. 70% in Checkpoint, 20% Avery, the rest is in the different divisions.

And with this new capacity coming on, would you expect those sales to increase with that...

Double digit.

With double digit. Okay.

For the next years.

For the next years, okay.

At least double digit.

Would cost be still the biggest determinant to even faster adoption? I know it's obviously double-digit growth, very attractive, but is it the cost of implementation that's still the pushback? And will building scale bring your cost down sufficient to keep accelerating the adoption trend of RFID?

The question is the cost of the tag factoring adoption?

I think everything is offer and demand. And I think there are lot of big projects that they are making the chips cheaper. And you have a lot of initiatives in the states about the chips, the initiative called chips. So there are many initiatives to produce chips. So in China, you have some players. In Vietnam, you have some players. So I don't believe the chip issue that we used to have in previous years is going to be a factor. I think the prices are going to go down as the demand grows up. We just need a couple of good players or big players in the different segments, in logistic, in retail to force the rest of the market to incorporate these benefits. Once they incorporate it, everything is going to be downhill there. So it's going to be natural. We are talking about COVID. Many industries were affected. I think for the RFID, it really changed the game. Why? Maybe at the end, you have a couple of seconds when you are in front of the screens to make a decision. And those seconds you need to decide in 2 milliseconds from what warehouse is going to come and from what store you are going to ship. So there is not another way at least today that you can make a fast decision to make that shipment. So all the e-commerce really accelerate this decision, the supply chains accelerate this decision. So the people are looking for that. When we were in the market and we are selling in the market of protecting the products, this is more about education. You go to different countries and maybe the level of selling the thing is less or -- more or less when you are talking about RFIDs, about inventory, and everybody needs to control the inventory and everything needs to move faster. Five years ago, you were happy if Amazon was delivering to you in 2 days. Today, if they don't deliver in the same hour, you are not happy. So to make that happen, you can put an army in a big store. There is no way the data is going to be up to date. So everything is going to move in that direction. And when you are talking about that, you are talking about every physical product. So imagine the size of the market.

Biggest limitation today to broader adoption is reading. So the cost of the tank is not a prohibitive factor, the coding of the tag is not a prohibitive factor. But in the stores, you need a certain proximity to the item to be read. So if you had a retailer here, they'd say they'd like to be able to put them like the research lighting in this room and have it fixed and then just press the button on their phone and then have everything automatically read. So the reading of the tag is still and the technology around that and the software behind it, that's still a factor in the adoption here.

And the location of the people. Right now, we are in the stage to educate. So it's a new market that is appearing. So having the 3 fundamentals hardware, software and labels, I think we are one of the few or the only one that can give that solution.

Are there any M&A opportunities that would help accelerate your efforts in RFID? And then on the software side, is there room perhaps for artificial intelligence to help provide some sort of offering that would accelerate the RFID adoption as well?

I think the RFID is going to be the vehicle. The artificial intelligence is going just to be a new way to analyze the decision on the product, but you need to have the data and what we are bringing is the data. So artificial intelligence is going to impact also in every activity that we have, just to make it faster.

Is there something on your software offering that you are developing?

We are working on the software for sure to make the stores and the hospitals more intelligent in the decisions. That's for sure.

And on the M&A targets, are there M&A targets that would help accelerate the development of RFID at Checkpoint?

Yes.

Just want a better understanding of the sales efforts. Are you marketing directly to retailers? Or are you marketing to tech vendors who are then selling into retailers?

Both.

Okay. Is there a mix between that or?

It's a mix.

Okay.

It's by far direct. We do some software things with third-party resellers, but it's by far direct.

Good morning, everyone. My name is Simon Huber. I'm responsible for Innovia European Films Business. I'm in sales since 2014. I came through the Bandfix acquisition in Switzerland at that time. But I'm in the industry since 2017 -- since 17 years. And alongside of Penny who is managing the Innovia America business here, but she will take questions if there are any questions about the North American business specifically, but I will hold the presentation. So Innovia has 90 years of experience supplying specialty films to the labeling and the packaging industry. Our expertise lies in designing product to resolve demanding customer applications. We serve engineering these products to enhance the performance at the customer on their machines or on the -- or for the product itself. This is all supported by high-class technical engineers and polymer scientists to deliver these technical products. Here's a little video which will give you an impression on our extrusion side in Mexico, which I'm going to show you now. [Presentation]

So Innovia has a global footprint. We have around -- we have 6 production facilities in Europe, one in Mexico and one in Australia. We employ around 1,400 employees, around 15 R&D, mainly scientists and technical engineers to develop the products in 2 research and development centers. One is in the U.K. and the other one is in Mexico. We have around 250,000 tonnes of production capacity to produce polypropylene and polyolefin films. We have around CAD 700 million in sales. And we're delivering in around -- to around 100 countries in the world from our 6 production sites. So we serve 4 major markets. We're very concentrated and focused on the labels market where we cover the full product portfolio range, be it precious entity flavors in most labels, wrap-around, shrink sleeves, [indiscernible] and possible film. We also have a graphics art division which we just launched 1.5 years ago, where we're selling PVC-free films for self, the use of short and intermediate graphics art application. This is mainly going for promotional window applications to the retailers or for bus advertisements. We're producing also the banknote film and applying them to CCL secure and we're also playing in the packaging field market, but we only concentrate their niches where we can make money. So we are not playing the commodity game there. So we focus on coated films in packaging or mono structure with recycled content in it or with barrier function films, which we deliver to the packaging industry. Our sales by region. So by far, our biggest region is the Americas region, it's 54%. And around 40%, we delivered to Europe and Middle East and have recurred around 7% to Asia Pacific. By far, the biggest market segment, as I said before, is labels, which accounts for about 48% of our sales. We delivered -- 31% is packaging, [tobacco] is 17% and 4% graphics is reported into the label segment as it's still small, but it's one of our growth initiatives and where we see a big potential for our film in the future. The strategy to grow the business for Innovia is, first, to achieve leadership in label films with all kind of label techniques and especially in the [indiscernible] sleeves in pressure sensitive market. In sleeves, [indiscernible] before. We're producing what they're promoting as EcoFloat but Innovia's setting [indiscernible] in the market, this is a big growth driver for us on the top and bottom line. In-Mould, we just entered that with our Poland acquisition in 2020 and this is where we see big potential, also through acquisition to CCL that we can cross-sell there. We continue to invest in new coating lines and extrusion technology. Not sure if you have seen the announcement. We're building a greenfield plant in Germany for -- specifically for our label, for pressure sensitive label applications. And we invested in new coater in Mexico, they first coated [indiscernible] and to serve the North American market with top coating products out of Mexico. And we also invested in a new coater in the U.K. to expand our graphics arts business. The third pillar is finding more niches in the packaging space. As stated, there is more. It's all about recycling and the legislations, which are in place or coming up in Europe, which drives this segment for us, but it's all specialty niches. We are not serving any commodity type of film. We are not really interested in that space. There's a lot of other competitors, which are better suited to play the game in [indiscernible]. And lastly, we are optimizing in 2024, our capacity and footprint. So we are reviewing our footprint and capacity in the next few months, and you'll hear more of that in a later stage, I guess. Sustainability is for -- we are -- very important is, as we heard it many times before, legislation is moving into it. We have already in Europe. Taxes apply to plastic manufacturer like in the U.K. or we have it in Italy now, where you have to pay certain taxes if you have not 30% recycled content in your film. So this is very important for us and the industry has to move there. I think we're in very good shape there and our -- the industry leader with mechanical putting mechanical recycled and chemical recycled content back to our process. We also have achieved since 2019, zero waste to landfill in our Innovia plants, which is a good achievement. We try to save energy wherever we can. We are part in all the -- of all the associations to influence the regulations and to be on top of the game there. And yes, it's about Innovia and happy to take any questions for Innovia now.

I'll kick it off. One question is, how much of your sales are for internal purposes or how much of your capacity is used internally to CCL?

Well, in the revenue numbers is 0 because we -- it's in the company, but it's about 10% of the tonnage in vol, less than 10% of the tonnage in vol. It's sold in ton. It's -- that will change dramatically as second float comes up the pipe.

Okay. And my second question, if you want to elaborate on the -- you often say that it's a pass-through business. Is -- can you maybe granularize a little bit more? Like is there any cost plus part of the business and the rest is sort of just cost or...

I mean, if it's cost plus, it's all cost plus business, what we do. So we are -- the whole pricing mechanism works always on an index plus a spread. This is how the business works, yes. I think there are some specialties which are not working like that, especially coated films, which we can differentiate. But if you talk about uncoated film is always index plus a certain spread you get and you can achieve in the market.

So just on the contracts again. What kind of margin do you expect going forward? And how volatile do you think those margins would be? Relative to the last couple of years?

I think the margins are going to recover again. I think you have all seen the results during this year and that the margins have been under pressure. This has to do with a lot of overcapacity in the market and destocking, which has been ongoing for a year now. And -- but we expect the margins are recovering, and we're seeing that already happening.

Just one question, [ Sean Stewart ] from TD. When you talk about optimizing the footprint, any updates on -- I suppose you're not going to get into specific measures, but scale of what you're thinking of and time frame to implement?

Well, the big challenge for us is going to be we've got two big new plants coming on board. So one in Germany and one in Mexico when we put the top coding line there. That's going to make us think a lot about what we're going to produce where and we'll get into that when we can, we can't do that today, but that's the driver for it is we've got much lower cost factories now in -- the new one in Germany, one in Mexico and the one we already have in Poland. And that's going to make us think about what we produce where.

How much scale advantages are there in this business? Because I believe when you acquired Treofan, it was doing about 19% margins. I mean, I think, Geoff, you mentioned that legacy can get there in a normalized resin world. That deal or just scale generally provide any margin benefits?

Well, it's a pass-through industry. So if resin goes up a lot, you get a spread. So -- and the spread isn't a percentage spread, it's a dollar spread. So when you have very, very high resin prices, the new margins tend to go down. And when you have very low resin prices, your margins tend to go up. So it's a math of being in the pass-through industry. We have the same problem in CCL Container. So when aluminum goes up, our margin comes down. I mean aluminum is low, our margins go up because it's a pass-through industry.

Is there much leverage on the overhead manufacturing?

Well, that's so many hours you run it. So it's all driven by how many operating hours you run the plant by that's really the driver, not the really the margin.

Can you speak to how commoditized this product is? Is -- are you able to keep -- able to innovate at all? Are you able to earn a better margin than some of your competitors? How that works in the industry?

It depends really on the product, but I would say the coated products are less commoditized than the uncoated product, but we have just recently launched a couple of new products, which are entirely new to the industry and which will replace, in fact, other substrates in the market, especially in the labels industry. We're talking about polyethylene constructs. So the which are widely used in the Home & Personal Care industry. And it's about in Europe and 80-micron [indiscernible] film, which we have launched a product, the polypropylene in for 45 micro which is going to replace polyethylene film, 80-micron film.

And are you able -- when you develop these type of products, are you able to hold on to them or do competitors just [indiscernible] in?

No, we tend to hold on it. We also try -- always try to put the patent on it, if possible.

And with the new capacity coming on, I just want to -- will there be -- should we then expect with the new capacity coming on, there's going to be more sales here, but we still -- we will still see the volatility in the margin with the resin price?

You're always going to see that because resin is going up and down. Yes. I mean we have -- have gone through years, the last 2 years, resin has been in Europe at EUR 2,000. And 6 months later, it has been EUR 1,100. And you all -- you lose that on the top line, yes. So you have -- and then you're working through your inventory, yes, keep in mind there is the pass-through has always a lack of probably 2 to 3 months until you really see the benefit again in the results. So it all takes time to work through than the [industry].

Can you comment on the size, like the dollar amount, the margin profile and then the internal usage of the EcoFloat line?

No. I think we're not prepared to give that information.

Sorry, just here. Just to clarify, the 250,000 tons capacity, does that include the German and Mexican facilities?

So the German facility is not included in there because it's just building up and we plan to start the production in quarter 1, 2025. The coating line is not included there because that's purely the extrusion capacity on our standard lines and bubbles. We are very producer film. The coat -- the top coating is then a further step in the process, which we don't add in these numbers. Yes.

Can you help us understand maybe capacity utilization or what sort of asset turnover you might have from the capacity once it's built. Where are we today because I know there are volume impacts in the current market, but then again, there's capacity being built, perhaps footprint optimized? Where exactly could the utilization improve or some sort of magnitude of improvement potential?

Well, I think the most important thing in this business is not asset utilization, but the business mix. So I would say the important factor for us is the more we sell films designated to the label industry, the better off we are. There are parts of the packaging business, which are profitable through a past fit, which are very unprofitable, but it's feeding the volume to keep the plants running. So the more we migrate to being a producer of label films and more money we're going to make. And it -- mix is much more a factor in this business to drive profit than the volume.

Good morning, everybody. I'm Luis Jocionis. I'm responsible for South America operations. I joined CCL back in 2006 when CCL arrived in Brazil. By the way, I'm Brazilian. And my career start with labels many, many years ago. So I was real young man or a child, let's say, like this. And since then, I'm in the label business, so more than 40 years doing that with passion. So today, I'm going to talk about South America. I have my friends talking about the business we have worldwide. So I'm not going to deep in the details you had a lot already. So South America, we are 440 million people basically in 10 countries. We have three [indiscernible], but they are very small. And per capita, GDP is [ 96,000 ]. So I'm going to talk about South America. There is a small video for us. [Presentation]

So as shown in the video, we are eight facilities in South America so far, reached 0.3 billion in sales. Biggest facility is in [yellow] where we -- where it all started back in 2006. So since then, we are managing mostly all the businesses you guys see this morning from Checkpoint to CCL HPC or CCL Design, we do all in South America. So we have been growing pretty much since 2006. I think the growth is driven by very strong execution. I'm proud to tell you that we could manage to form and to build a very strong team with talent people. And with these kind of people, we could make acquisitions. We did eight acquisitions since 2006, and these acquisitions help us to grow. GDP growth was also impacted as it is in all the world. And for next year, we are forecasting 3.1% growth in the region. Brazil is the right place to be. I think it is. Brazil represents 50% of South America GDP. And it was back in 2022, the fourth position in FDI, it was ranked fourth position in FDI, foreign direct investments. First was U.S., second China, third Netherlands and Brazil was four, #4. As half of GDPs in Brazil, mostly half of population is also in Brazil. We are 260 million people there and USD 2.1 billion in GDP. So we have a lot of growth opportunities in the country. We are managing mostly all the business we have. Few ones, we are very small, still very small, and a few ones we are still growing like tapes. We are just starting tapes in the region, and it's growing very -- in a good way. And [ Emma ] labels, we did not start yet, but it's a very opportunity to grow and to make our business continue in the right direction. So strong position with talent team, like I said, I'm very proud to say that we have a very, very good team over there. We have six plants just in Brazil. So from the eight, six are in Brazil, we have from Amazon region and tax-free zone up to the south of Brazil. So very well positioned, very geographically -- stronger geographically presents. Labels are still our primary business, but we have a potential and solid potential with tapes, which I believe is going to grow very rapidly. Talk about ASG, we are doing a couple of initiatives there. We have a dedicated team just look into this. I think this is the main driver for us. So we did in the last few years a good experience with solar panels, and we are probably go -- continue growing these fields to capture the energy that is free for us. So we are as of 14,000 in some of our plants. And in the other ones, we are working to get it. Zero land fuel as well. We reached a zero land fuel in some plants right away. We are working for all the plants to be zero land fuel as well. We are 100% certified renewable energy. So I don't know if you have the knowledge, but Brazil is 100% -- more or less 100% of energy is hydro -- hydroelectric generated. So we are very clean in this point of view. And we treat 100% of the water we use today. So -- and we treat 100% of the water at 10%, we use in the flushing and the toilets. So that's very quick story about CCL. I see a great potential to grow. All the fields I look into it, I see that there is opportunities. A lot to do, still a lot to do. And we have been growing since 2006, about 606%. It's a good growth. GDP, the same period was 95%. So I think there is a space to continue. So questions?

Yes. Just looking at your footprint there in South America, would you consider this an optimized footprint? Or are you looking to expand it in certain countries versus others? And why would you select that?

Okay. Yes, we do all the time. We are not present -- we have no presence in Peru or Columbia yet, but we are looking for that. For sure, like I said, Brazil is a place to go because of the place to be because it's 50% of GDP, but we are looking to other countries as well. And we -- I'm sure we are going to move. We complete now 10 years in Argentina. It's not an easy place to be, believe me. But it's 10 years already, and I think we are very strong in the country and continue -- it's going to continue to grow, but we are definitely looking for new acquisitions or greenfields plants for other countries.

Hi, everyone. Most of you know me, I'm Sean Washchuk. I'm the CFO for CCL Industries. I didn't grow up in the label industry. I don't have 30 years' experience doing labels, but I've been an accountant for over 30 years. I've worked in all kinds of accounting offices since I was 17 years old. I've been in the recycling industry, I've been in the transportation industry in the past 13 years here at CCL. So with that 30 years and like everyone else today, I'm going to start with a very exciting dynamic video on debits and credits. That doesn't exist. So we'll get right to the numbers. So for the past 12 years, CCL has generated strong free cash flow. We have a 16.4% CAGR on that. Our free cash flow turnover ratio has always been in excess of 1. Now we've managed our free cash flow in years like the pandemic, where we called our CapEx and our cash flow turnover ratio has gone up. These past couple of years, our capital expenditures have gone up as we've had some pent-up capital demand and our free cash flow turnover ratio has dropped, but still in excess of 1. Looking at our dividend track record. For the past, I guess that's 15 years -- 13 years, our CAGR on that is 17.5%. But I think unparalleled in the containing manufacturing space as we've increased our dividend year-over-year for the past 30 years. Our dividend payout ratio is quite high in excess of 20% in the last few years. Looking at our balance sheet. We have a solid balance sheet, ample liquidity. We have $800 million of cash on hand, $1.1 million of unused revolver capacity. Our leverage ratios are low. We finished 2022 at 1.37x -- sorry, we finished 2022 1.24x, we're up at 1.37x here at the end of September. During the course of the first 9 months, we deployed $400 million in proceeds for acquisitions. Leverage ratio has gone up. We expect that leverage ratio to drop by the end of this year. We have no significant maturities in our debt until 2026. So we're well positioned to get through the current interest rate environment. Our capital allocation philosophy, nothing you haven't heard from us before. Geoff and I have talked about it many times. We're going to maintain a strong balance sheet. We need flexibility to action our plans. There could be big acquisitions in any 1 year, and we need the free cash flow. We need the cash on hand and the excess capacity in our revolver to access those large acquisitions. So we'll preserve liquidity. Our leverage goalposts are 1 to 3.5x so we can maintain our investment-grade rating. We'll invest in growth, organic growth initiatives. You heard about a lot of those things today. We're going to be a leader in sustainability investments. So investments like EcoFloat, investments like the [indiscernible] project in Germany and other small add-ons throughout our organization. Our CapEx is oriented towards 50% growth CapEx. You don't always hear about these things, but there's little projects going on here and there could be a new coder in Mexico. It could be the greenfield site in Innovia. It could be our new plant in Indonesia. It could be the new container plant we're building in Mexico, the new RFID plant we have on the come. Lots of things going on at CCL to enhance our growth. And of course, will maintain tuck-in acquisitions every year. We'll return capital to our shareholders. Annual dividend increases for the last 30 years. We expect that to keep going, going forward. We'll repurchase shares when we feel our shares are undervalued or if our leverage ratio ticks below 1. So what did that mean over the last 15 years? Well, our share price has grown at 18% CAGR for the last 15 years. Our share price has exceeded $70 at times and we expect that to continue growing. We're long-term investors. So we expect our share price to grow in the long term. The CCL long-term outlook. We expect through all the things that the fellows and Sandy talked about today, our organic growth rate should exceed worldwide GDP augmented by tuck-in acquisitions. We should improve our results at Innovia which will boost our return at [indiscernible]. We expect to maintain top quartile EBITDA, so 20% margins in the EBITDA. In so doing, we've aligned our management compensation arrangements. Our short-term management incentive plan only rewards executives at the target level if our year-over-year EPS growth exceeds 5%. On top of that, we have a long-term incentive plan. That's based on 3 years of operating income, cumulative operating income that's at a premium to our annual incentive plan. And to further align that plan with our shareholders, we intend to add a modifier to that that's based on return on capital or total shareholder return. I can take questions or we can jump right to Geoff? All right, Geoff.

Thank you, Sean. So the purpose of the day today was to give you peek under the cover into what CCL is as a company, the diversity of our end markets, the variety of our technologies and the people who operate these businesses around the world to give you a chance to meet them and hear from them directly. And to give you just an insight into what our financial expectations are in the years ahead. So we're excited about the business as we were 20 years ago when I joined the company. We still think there's lots of room to grow in all the segments we have because all those businesses that need to do better, there's businesses that need to grow, they are already doing well. We'd like to get the benefit of growth and their profit margins coming straight to the bottom line. So we're very optimistic about the next period ahead. We know that the economic situation out there is rocky. But we're still confident we sailed through good times and sunnier times in our history through on many occasions, and we expect to be able to do so again and continue in the future. So with that, that's the end of the formal remarks for the day. But we're all here, so we can take any Q&A you would like to me or to Sean or to any of the guys here or we can just wrap up and go on, whichever you will prefer.

Sean, you went out and you flagged a bullet point there of 5% EPS growth, and that's what the incentive for the short-term incentive is. Did you put that up there to kind of indicate that, that's your goal or intention? Or is that just, hey, FYI, this is how they're incented?

Well, Walter, inherently, we're all kind of greedy. So we want to make our bonus. So 5% to that minimum target, achieving better than 5% growth pays out a lot more. And I think that's for all the executives at CCL, and we want to achieve those higher targets. I can't tell you what those are but we want to do better than 5%.

And I'm going to ask this question, knowing that we're in person and Geoff has the ability to throw things at me. So I'm going to be mindful of that when I ask this question, but on the M&A side, Sean, you pointed at 1 to 3.5x leverage range. Obviously, that's a very wide range. It gives you lots and lots of capacity to do deals. You haven't been overly active outside of tuck-ins. Interest rates are much lower -- are much higher now. That gives a lot more opportunity. Geoff, is there any indication that you're seeing out there that some of those opportunities might lead to [indiscernible]?

I had to say in the last several years, private equity valuations in our industry, partly driven by our own success. So private equity industry looked at our industry said it's highly fragmented. Made some big investments in it that are universally failed. So all the private equity investments in the label industry have been failure. None of them would admit it, but it's financially a fact. And so that's made it difficult to do the kinds of transactions we would like to have done at scale in the last decade or so. But things change and interest rates have gone up, so private equity valuations now are more difficult than they were. A couple of them have tried to sell themselves in the very recent past and failed to do so as they can get the valuations they wanted. So -- and we -- and we've seen valuations come down. So -- and we keep those railway lines broad because you never know when you might need it. So -- and a lot of the things we buy are private companies. We have bought 1 or 2 public companies in our history, but most of our transactions are private. And one of the things you want to be when you're a buyer of these kinds of assets, you want to have dry powder kick. You have to go and finance things, and you've done a [ what the ] financing markets like. We don't want to be in that situation. We want to be a certain buyer with certain financing that's why we need the growing wide -- growing tracks. So we'd like to do big acquisitions if we can buy them at the multiples that we're willing to pay. And that's not been an easy thing to do in the last several years, but we found lots of good bolt-ons at multiples that were good. And we'll certainly carry on doing those.

And is it possible to accelerate the pace of tuck-ins or bolt-ons such that in aggregate, you'll get a big deal?

Sometimes yes, so you've seen -- you saw that chart I had earlier on the years, that were following years that were good. So we've had years we've done $350 million or $400 million of transactions. When you have to do $1 billion of transactions at an average size of, say, $50 million, that's 20. So that might not be easy to do in a year, frankly speaking. I think you're more prone to make mistakes when you do that. So we've never worried about letting the powder dry in our pocket. The reason we have the one turn -- one railway line on the bottom side of that financing is we like to buy back stock when we get below 1x. So our Board gets very nervous if our leverage goes below 1. It's only done a couple of times in our history. So -- but we'd like to keep up to 3.5x. So we've got lots of room to maneuver because when these deals come along, we did three in a fairly short space of order 10 years ago, and that might happen again, you just never know.

Just another one then on margins. A lot of the organic growth initiatives and the target you outlined, Sean. Seem to have an implicit component of margin expansion and just by virtue of the fact of a mix shift the higher-margin verticals? Is it your expectation that margins could grind higher? Even marginally over time?

Well, we've been in a year of inflation compression. The last 2 or 3 years since the middle of the early part of '21, really, that's when inflation really speeded ugly head. And when inflation comes, you chase it. So you're chasing in payroll, you chase it in raw materials, and we've been chasing it for 2 or 3 years. Now, we moved into the deflationary period. So prices of most of the things we buy are dropping. So freight is down, oil is down. Power is down, paper is down, film resin prices are down. So we're getting some margin benefit currently that we haven't seen for a while. So how much of that we'll have to give back to the customers in the end remains to be seen. We will not keep all of it. That I can guarantee you. We will not keep all of it. So the challenge is how much of it can we keep for ourselves given all the hard work we went through recovering it from them in the first place.

Is there a possible component of secular margin expansion with RFID or sustainability or?

Yes, so mix is a factor. So we've got certain businesses of ours that have more inherently better margins than others. So that's always a big factor for us in the mix. So Avery is a high-margin business, parts of Checkpoint and high-margin businesses. Benz business is a high-margin business, [Leases] business is a high-margin business. So the more that they grow in the total of the pie. And regionally, I can tell you, Latin America, Luis and Benny are here today. It is by far the most profitable region we have in the world. By far. I think that's not an unusual comment from many of our customers do would reflect the same thing, but we are particularly well managed in south of the Rio Grande from Mexico all the way down through Argentina. And it's -- so the more we grow in Latin America will -- that's a good thing for us. Europe is our lowest-margin region. Asia is about the same as Europe and North America is not quite as good as Latin America. Any other questions? Yes, David.

So just following on your previous comment, is Latin America the most profitable just because of the cost of labor?

No, no. It's -- I don't blame the horns too much. These two guys are incredible operators. So we run -- our plants in Latin America are the best plants we have in the world. So if you want to see our Food & Beverage plants, they're all good. So there's a new one we've just finished building in Austria that was out a few weeks ago, it's world-class. But the Latin American plants -- anyone from CCL who comes from outside of Latin America visits and for the first time, just goes well. Goes home and thinks how can I outbeat that. We're at our most advanced in IT down there, which is not typical of most companies, but it is true for us. And the operations down there are really spectacular. Do you have -- any of you ever down and want to come and visit us, you'd be more than welcome.

So if I can ask a couple of more questions. Just on the stock buyback. I think earlier this year, you guys bought about $200 million worth of stock, right? That was last year.

I see when the spin the stock was in the low 50s.

Okay. Is that because the leverage dropped below 1x?

That's because the stock dropped to a point where we felt that was a good use of our cash. They are the two drivers for us. If we think we've got leverage below 1, could certainly buy the stock back almost at any price. Once -- if the stock goes below a level, we feel it's worth spending our own money on it, then we'll definitely do it. So that's the $200 million was really driven by that purpose.

Okay. So if we're thinking about stock buybacks, it's going to be driven by stock price and leverage?

Stock price, leverage and what the outlook is.

Okay. And then just on the dividend, I mean, Sean, you mentioned that CCL has raised the dividend every year for the last 30 years. Can you paint a picture for us where you wouldn't raise the dividend?

Well, we've never reduced it. So how much we raise it by, I think, depends on the year we've just had, and we're not going to get into commenting on that until we've seen how the year closes. So you have to wait and see what's going to happen next year. But it's fair to say, we're all shareholders. So CCL's managed by people who are all shareholders. We're an owner-occupied company. We've got a large family shareholders particularly interested in the dividend payment. So you've got the benefit of that on our board every year. So the dividend going up every year is an important factor for everyone in the room. Stephen?

Just lots of color on the day today, which is great. Lots of areas of identified areas of growth. But just as you sit at the top here, looking at everything, is there any -- are there any areas that you'd call out where you're particularly excited about in terms of the opportunity?

Very excited about RFID. We're very excited about the possibilities that sustainability brings for our products. So I can tell you the two products that we talked about today, one was the plastic tubes with the PCR resin. We developed that in the late '90s for a company called [ Births Bees ], which makes cosmetics out of bee's wax, and they didn't want any anything for any virgin resin in any of their products. And we tried for years to sell those tubes with post-consumer resins to other customers. Zero interest. 10 years ago, suddenly that changed. Now 30% of our plastic, tube production is made from post-consumer resin. And when we make those decisions, we tend to get premium margins for those kinds of products as we've sold all the R&D stuff around it. Another one is wash off labels that we developed many, many years ago for Heineken for plastic labels that come off beer bottles and juice bottles and water bottles. So if you want to ask Coca-Cola 15 years ago, how -- what do they think of the future was for returnable bottles. You will get a very different answer for the answer you get from them today. So there's a lot more interest in returning -- the return bottles in the beverage business. Coca-Cola put that in their mission-critical -- mission-critical statements for them as a company. Not the packing engineers, the CEO of Coke will stand on and say one of the most important things for me to do is to retrieve one bottle for every bottle like sell. So that's so important to him, but you have to get the damn labels off. So we had all these technologies many years ago for different reasons that now suddenly beginning the benefit of. So I'd say that's another big, big factor for us. So RFID on sustainability-driven innovation for our customers is another.

One question following up on the share buyback commentary. How do you assess intrinsic value back last year when you were buying back stock? What metrics are you thinking about when you're looking at attractive [ else ]?

We're looking at the multiple of the stock is trading for. And so when you're looking at doing M&A transactions, and you got some dumb private equity group, so I'm going to pay you 11x EBITDA and the stock is trading at 8%. If I go and compete for an 11x EBITDA business at an auction. And you start suddenly selling at 8% and the stock price is $52 and you got $1 billion of cash on the balance sheet and $1 billion of unused debt. To be a magician to work out or the right answer is. So we don't -- there's not a lot of science behind it. So it's very tactical around the balance sheet and the stock price.

So historically, you guys have done a lot of acquisitions. Would you guys -- for whatever reason you would -- offered a good price, would you possibly without offending anybody in the room, would you possibly think about selling some of the divisions that you have?

No one has ever called us about ever selling any of the specific divisions. When we -- several years ago, when we were a lot smaller market cap coming in, we had a lot of interest from private equity, which we entertained. So that was -- but that was many years ago. And the market cap of the company probably would prevent that today in today's world. So we're shareholders. So we're operators of the business, but we're also shareholders with the same drivers that everybody else has. So if somebody comes along and office is $100 a share tomorrow, we get on a serious thing. [ With me ] guys. But we're also long-term investors. I mean we're passionate about this industry. We've all been in it a long time. So we're passionate about the business. We believe in it long term. We think it's a good place to be. We think we can grow. We think we -- I certainly believe this can be a $10 billion company to show in revenue in the not too distant future. We certainly see enough things on our runway organically and by M&A, then we could certainly become a $10 billion revenue company in the medium term. I have the margins we make today Last one, Ben?

Very big picture question. When I listen to you and all the esteemed guests, I can't sort of 100% distinguished between the idea. Are you the guys [innovator] drivers to your customers? Or are they coming to you and saying like, "Hey, this is what you should innovate with" and back to us.

We never do blue sky lab developments ever. So in Mark Cooper's business, he runs consumer test panels with consumers asking what are your problems and what little things can we go away and work on. When we develop wash off labels for Heineken, we didn't think of that idea and go to Heineken and they came to us and said, we'd like a label you can wash off the bottle, but we want to be clear and made a plastic so we can wash it off and reclaim the bottles. So we don't do any of our developments in isolation. We do it in conjunction with our customers always.

Just a question for [indiscernible] long-term view. How do you train folks on the bench to be potential future CEOs of the firm? And how do you groom that talent? And then as we take a long-term view, is it fair to think?

And so -- just talked about the people on the bench here. So Luis used to be a shareholder in his own company in Brazil and his father started CCL Label in Mexico on their own. We bought Sandy's company, with Sandy. Sandy was the CEO of our own company. We've got people who have been acting as CEOs and entrepreneurs of their own businesses, and we've got 30 or 40 of them dotted around the company. So the people who run our businesses run them as if they are their own. So I'm not calling Luis every day and saying, "what the hell is going on?" he's calling me and saying, "Here's what I'm going to do". We just hadn't got on with it. But the most important factor for us is to find people who've got the experience and the coal face that these people have. So I just don't want you to underestimate how important that is. So one of the reasons for the private equity failures in our industry, they've been driven by the -- purely by financial metrics. And most of the nuances to make money in our business and nonfinancial. They're operational, something to do with the customer. There's something to do with human beings. There's some chemistry we've -- somebody spotted somewhere that can open up a door and you need experience and insight to be able to capture those, not crunching numbers. It's one of the reasons, by the way. We've done -- in my time in the company, we've done 110, I think, acquisitions. We have never used an investment banker on one of any of our deals. Not one investment bank has ever bought as a deal worth of sand. It's really not an exaggeration not one of it. I've got books in my office knee deep of somebody's idea about things we should buy fills up the garbage basket. So we get all of our deals from people like this to my left. That's where the ideas come from. That's where the best ideas in our business come from. Yes?

Looking ahead, you're saying you see the company reaching $10 billion of revenue. What are some concerns that you have that you need to navigate and in order for you to get to that $10 billion?

Standing and finding enough good people like this. It's the only shortage we have. Capital, we have. Money, we have. Ideas, we have. Human capitals, the critical thing. And we can't hire it. We have to train it. We have to develop it. We sometimes find it from rough diamonds in the edge on some of our suppliers, but human capital is the critical missing link of them to growing at a faster clip. Growing is easy, growing profitably is not so easy.

Just very quickly on the back end of that, would you be able to get to $10 billion within the existing verticals that you have or would you [insist]?

[ Yes ].

Just another follow-up on that. To get to 10%, if we classify medium term is 5 years, that would be a 12% revenue growth rate CAGR for 5 years? Is medium term is 5 years not?

5 to 7. Yes. I think if you look at GDP growth rate, 3% or 4%, could we add 3% or 4% M&A to that? One big deal in that time frame? It's not difficult to get there. Okay. Well, thank you very much for all coming out today. I really appreciate it. I hope we've giving you some insight. Have a good holiday. Merry Christmas, Happy New Year. 2024 will be good. Thank you.