CCL Industries Inc. has reported its second quarter 2014 results.
Sales for the second quarter of 2014 increased 80.0% to $650.4 million, compared to $361.4 million for the second quarter of 2013, with 6.2% organic growth, 6.7% positive currency translation and the balance primarily from the Avery, DES, Dekopak and Sancoa acquisitions. For the six months ended June 30, 2014, sales increased 66.4%, excluding foreign currency translation, compared to the 2013 six-month period.
Operating income (a non-IFRS measure; see note 2 below) for the second quarter of 2014 was $89.2 million, an increase of 77.7% compared to $50.2 million for the comparable quarter of 2013. The Label Segment posted a 24.4% increase in operating income partially offset by the Container Segment, which posted a $0.4 million or 7.7% decline in operating income for the comparable second quarters. The Avery Segment recorded a strong second quarter with $28.4 million of operating income. All three segments, Label, Avery and Container, contributed to the strong results for the six-month period ending June 30, 2014, resulting in a 58.5% improvement in operating income for the comparable six-month period.
EBITDA (a non-IFRS measure; see note 1 below) was $118.8 million for the second quarter of 2014, an increase of 68.0% compared to $70.7 million for the second quarter of 2013, driven principally by the above noted acquisitions. EBITDA improved 61.4% excluding the impact of currency translation. For the six-month period ended June 30, 2014, EBITDA was $236.8 million, an increase of 56.1% compared to $151.7 million in the comparable 2013 six-month period.
The company's joint ventures contributed equity earnings of $1.0 million for the three-month and six-month periods ended June 30, 2014 compared to $0.2 million and $0.6 million, respectively, for the same periods ended June 30, 2013. Solid performance in the Middle East and a bounce back in the ruble to euro exchange rate in Russia drove improved results this quarter.
Geoffrey T. Martin, president and CEO, says, "Second quarter earnings were another record, with our legacy businesses contributing meaningful improvement and our new Avery consumer arm powering ahead of planned results. While the Canadian dollar strengthened sequentially, it remained weaker against many currencies compared to the prior year, notably excluding the Brazilian real. This translated to seven cents earnings per share positive impact adding to our fifteenth consecutive quarter of year-over-year improvement in adjusted earnings per share."
Martin continues, "CCL Label sales increased 37% driven by acquisitions, over 7% organic growth and positive currency translation. North America recorded high-single digit organic growth with Healthcare improving notably as certain customers recovered from FDA quarantines. Specialty was mixed with strong World Cup promotional activity, offset by a soft Agricultural Chemicals season attributed by the market to the prolonged tough winter. Home & Personal Care sales, excluding the Sancoa acquisition, improved on new business momentum but in the face of continuing sluggish market demand. Results in Food & Beverage improved meaningfully with notable gains at our West Coast wine plants. CCL Design sales benefited from a robust North American automotive market but operating margins remain below the Segment average. Excluding acquisitions, European sales were up low-single digits in local currencies as demand improved in our consumer and automotive businesses with the Food & Beverage sector an area of strength. Operating Income was negatively impacted $1.7 million by the insolvency of a large German automotive customer at CCL Design. Emerging Markets posted double digit sales increases led by exceptional results in China but also on higher Food & Beverage sales in South East Asia and South Africa. Growth in Latin America tapered markedly to mid-single digits as macroeconomic deterioration, soft consumer demand and currency related pricing challenges all impacted us, most notably in Brazil. Results in Australia were mixed with gains in Wine labels offset by lower Healthcare performance. The recent typhoon in the Philippines will postpone the start-up of our new plant near Manila. Our joint ventures posted solid results, inclusive of start-up costs at the Tube operation in Thailand. The Middle East performed well and currency challenges in Russia largely reversed. Absolute profitability continued to improve for the Label Segment with margins compressed entirely due to the acquisition mix effect.
"Results at Avery significantly exceeded expectations with operating income at $28 million. Shipments to retailers for the North American back-to-school season started earlier than expected and translated to improved profitability compared to the first quarter of this year and the pre-acquisition second quarter of 2013. Cost saving initiatives globally, solid operating execution and label category market share gains in the United States were additional drivers. The consolidation of supply chain facilities remains on track for a successful completion later this year without service disruption. Third quarter back-to-school volumes are unpredictable depending heavily on the timing of initial shipments and ultimately retailer replenishment orders based on actual consumer demand as the season unfolds. Third quarter performance at Avery is highly dependent on back-to-school success."
Martin then adds, "CCL Container posted improved results on higher volumes in North America but total performance was held back by disruption in Mexico for the months of April and May as we commissioned one of the transferred production lines from our Canadian plant. June results returned to normal levels. Operating income for the Segment, after adding back the $0.3 million in equipment move expenses incurred in the quarter, was down only 2%. Year to date we have expensed $0.5 million of our planned $4 million cost to redistribute capacity from the Canadian facility to our US and Mexican operations. We remain committed to deliver $10 million in annualized cost savings after the transition is completed towards the end of 2015."