Operating income for the second quarter of 2013 was $50.2 million, an improvement of 4.8% compared to $47.9 million for the second quarter of 2012. Both the Label and Container Segments contributed to the quarterly improvement and to the 11.5% increase in operating income for the six months ended June 30, 2013, compared to the same six-month period of 2012.
Earnings before net finance cost, taxes, earnings in equity accounted investments, depreciation and amortization and restructuring and other items was $70.7 million for the second quarter of 2013, compared to $66.9 million for the second quarter of 2012. For the six-month period ended June 30, 2013, EBITDA was $151.7 million, an increase of 9.8% compared to $138.1 million in the comparable 2012 six-month period.
Geoffrey T. Martin, president and CEO, stated, "We are pleased to announce our eleventh consecutive period of year-over-year improvement in quarterly adjusted earnings per share. Operating income increased modestly over a strong prior year, with robust results at CCL Container and the Label Segment delivering steady improvement. Foreign currency translation positively impacted earnings by $0.02 per share in the current quarter."
Mr. Martin continued, "CCL Label posted a 7.2% increase in sales with strong growth in emerging markets, solid improvement in Europe and a decline in North America; plus contributions from bolt-on acquisitions and currency. Operating income increased modestly with a 14.5% return on sales. North American revenues and profitability were impacted by a soft quarter in our higher margin Healthcare & Specialty business due to FDA quarantines at certain pharmaceutical customers and a weather related slower season for lawn and garden chemical markets. The second quarter of 2012 in this sector was unusually strong resulting in a $0.08 earnings per share negative comparative in the current period. European sales gains were up mid-single digits and profitability improved on strong results in most markets; a very good result given the macro environment. Latin America and Asia Pacific both delivered double digit revenue growth driving strong profit improvement with particularly robust results in Mexico and China. Globally our Food and Beverage sector had another good quarter with double digit sales and profit gains. Our joint ventures contributed good results in the Middle East, significant improvement in Chile and solid operating results in Russia offset by the devaluation of the rouble."
Mr. Martin then added, "CCL Container delivered surprisingly solid sales gains for the quarter given challenging comparatives to a prior year period including the peak sun care season, which returned to the first quarter in 2013. Profitability increased more than 20% compared to the 2012 second quarter, with strong results in our U.S. and Mexican operations and breakeven performance in Canada. Cash flow remains excellent."
Mr. Martin continued, "Order intake levels were strong for the first quarter, moderated significantly this past period, improved in July and year-to-date are up mid-single digits. We continue to expect low single digit growth rates in developed economies and strong demand in emerging markets. Currency markets remained favourable as the Canadian dollar weakened through the second quarter. The input cost situation remains stable."
Commenting on the OCP and DES acquisition, Mr. Martin said, "Profitability at the OCP business, now trading simply as "Avery," recovered from a very soft 2013 first quarter. An estimated $15 million EBITDA had been pulled forward into the fourth quarter of 2012 as certain customers purchased additional volume to reach year end rebate targets. With inventories worked through, results in the 2013 second quarter normalized and met expectations. New leadership has been announced for both our North American and international units. Results at the DES operations were also solid and the unit will now be managed as part of the Label Segment. We expect to post restructuring and integration related charges in the $25 to 30 million range over the second half of 2013 and first quarter of 2014 targeting $40 to 50 million in annualized synergies with the vast majority of any incremental benefit coming next year. The degree to which we can deliver these savings to the income statement will depend on our success in stabilizing revenue for the Avery Segment in 2014. The second half of 2013 will include sales derived from the approximately $80 million of finished goods inventory acquired at close, which will be recorded at fair value on acquisition, impacting profit in subsequent periods in accordance with acquisition accounting. A significant portion will ship in the "back-to-school" sales season in the third quarter. The company will now benefit from the cash flow associated with selling this inventory due to an amended Purchase & Sale Agreement increasing the transaction working capital base by US$35 million."
"The company ended the quarter with $684 million of cash on hand and US$453 million additional debt in order to complete the Avery Dennison transaction on July 1, 2013, a national holiday in Canada,” Mr. Martin concluded. “Setting aside the acquisition financing, the balance sheet remains strong with our net debt to total capital ratio down to 12.7% compared to 18.1% at June 30, 2012. Based on our strong cash flow and prospects for the remainder of the year, your Board of Directors has declared a dividend of $0.2150 per Class B non-voting share and $0.2025 per Class A voting share payable to shareholders of record at the close of business on September 16, 2013, to be paid on September 30, 2013."