CCL Industries Announces 33.1% Sales Increase in 2Q 2016

CCL Industries Inc. reported 2016 second quarter results.
 
Sales for the second quarter of 2016 increased 33.1% to $960.2 million, compared to $721.5 million for the second quarter of 2015, with 6.9% organic growth, 2.8% positive currency translation impact and 23.4% acquisition related growth, primarily driven by the May 13, 2016 acquisition of Checkpoint Systems, Inc. and Nov. 6, 2015 acquisition of Worldmark Ltd.
 
Operating income for the second quarter of 2016 was $143.1 million, an increase of 16.7% compared to $122.6 million for the comparable quarter of 2015. Included in the 2016 second quarter was a $16.6 million non-cash acquisition accounting adjustment related to the acquired finished goods inventory from the Checkpoint and Worldmark businesses that was expensed in the company’s cost of goods sold for the quarter.
 
Excluding this non-cash adjustment, operating income was $159.7 million for the three-month period ended June 30, 2016. Excluding the impact of currency translation and the non-cash accounting adjustment, operating income improved 30.3%.
 
Net earnings attributable to shareholders of the company was $72.3 million for the 2016 second quarter compared to $73.3 million for the 2015 second quarter.
 
For the six-month period ended June 30, 2016, sales, operating income and net earnings improved 28.0%, 22.2% and 14.5% to $1,827.0 million, $293.0 million and $161.9 million, respectively, compared to the same six-month period in 2015.
 
So far, 2016 included results from 12 acquisitions completed since January 1, 2015, delivering acquisition related growth for the period of 17.4%. Organic sales growth of 6.0% provided the foundation for solid profit improvement and foreign currency translation added $0.17 per share.
 
“Second quarter results were driven by exceptional organic growth in our CCL Label business throughout the world, with performance in Europe and Latin America fueled by the timing of Easter falling in March 2016,” Geoffrey T. Martin, president and CEO, said. “Continued cost savings, new product initiatives and pricing delivered solid profit improvement at Avery on flat sales excluding foreign exchange translation benefits. Results for CCL Container improved meaningfully on strong volume overall and excellent profitability in Mexico. We also announced during the second quarter, and subsequently closed in early July, an important Healthcare acquisition for CCL Label in Germany.
 
“In addition, with substantial majority support from its shareholders, we completed the acquisition of Checkpoint, now a new reportable operating segment of CCL,” Martin added. “For the seven-week period post acquisition, Checkpoint posted sales of $92.6 million with an operating profit of $9.9 million before the non-cash acquisition accounting adjustment. Results were in line with our expectations. In addition, we recorded restructuring charges of $13.0 million as part of our previously announced $40 million restructuring plan and remain committed to $40 million in annualized cost reductions. Our ability to convert these savings to reportable profits is predicated on maintaining sales levels in a challenging environment for retailers.”
 
CCL Label’s sales increased 28.8% to $604.0 million in 2Q 2016, with 10.4% organic growth, 15.8% acquisitions and 2.6% positive currency translation, and a 15.1% operating income margin excluding non-cash acquisition accounting adjustment related to Worldmark finished goods inventory.
 
In 2Q 2016, Avery sales increased 4.6% to $207.4 million, 1.1% from acquisitions and 4.5% positive currency translation partially offset by 1.0% organic sales decline. Operating income increased 11.7% on positive currency translation, cost savings, new products and pricing.
 
Checkpoint’s sales of $92.6 million included stronger international versus domestic results Operating income was $9.9 million, excluding $14.6 million non-cash acquisition accounting adjustment related to finished goods inventory.
 
CCL Container’s sales increased 3.3% to $56.2 million in 2Q 2016, with 4.6% organic growth and 1.3% negative currency translation. Strong volume overall and robust profit performance in Mexico resulted in a 46.3% increase in operating income(1)
 
CCL also announced that it has acquired the remaining minority 25% interest in its tube manufacturing joint venture in Bangkok, Thailand, from its former partner Taisei Kako Co., Ltd. of Japan for proceeds of $1.9 million. From this point forward, the entity will be a fully consolidated subsidiary of CCL.