- Revenue: $1.85 billion, up 12.2% from $1.64 billion in Q2 2023.
- Organic Growth: 8.5%.
- Acquisition-Related Growth: 3%.
- Foreign Currency Translation Impact: 0.7% positive.
- Operating Income: $303.5 million, up 25% from $242 million in Q2 2023.
- Corporate Expenses: Increased due to higher discretionary expenses and short-term variable compensation.
- Consolidated EBITDA: Increased 21% excluding foreign currency translation.
- Net Finance Expense: $18.6 million, down from $19.2 million in Q2 2023.
- Effective Tax Rate: 18.8%, down from 24% in Q2 2023.
- Net Earnings: $279.5 million, up from $155.9 million in Q2 2023.
- Basic Earnings per Class B Share: $1.56, up from $0.88 in Q2 2023.
- Adjusted Earnings per Class B Share: $1.13, up 25.6% from $0.90 in Q2 2023.
- Free Cash Flow from Operations: $118.8 million, compared to $120.1 million in Q2 2023.
- Net Debt: $1.76 billion, up $252 million from December 31, 2023.
- Balance Sheet Leverage Ratio: 1.23x, up from 1.13x at the end of December 31, 2023.
- Liquidity: $666 million cash on hand and $907 million available undrawn credit capacity.
- Capital Spending: $304 million year-to-date, expected to reach $450 million for the year.
- CCL Segment Organic Growth: 9%.
- Checkpoint Segment Growth: Apparel labeling systems up 40%.
- Innovia Segment Sales Growth: Driven by label materials industry recovery in Europe.
Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales increased by 12.2% year-over-year, reaching $1.85 billion.
- Operating income rose by 25%, excluding the impact of foreign currency translation.
- Net earnings for Q2 2024 were $279.5 million, a significant increase from $155.9 million in Q2 2023.
- Free cash flow from operations remained strong at $118.8 million for Q2 2024.
- The company's balance sheet remains robust with $666 million in cash and $907 million in available undrawn credit capacity.
Negative Points
- Corporate expenses increased due to higher discretionary expenses and short-term variable compensation.
- Net debt increased by $252 million compared to December 31, 2023, primarily due to capital expenditures, business acquisitions, and share buybacks.
- The effective tax rate, excluding a noncash revaluation gain, remained high at 24.5%.
- The automotive segment showed only modest growth, indicating potential sector-specific challenges.
- The company faces uncertainties in the back-to-school season and potential volatility in replenishment orders.
Q & A Highlights
Q: On Checkpoint, you noted solid organic growth trends in ALS from RFID and retailers for ordering. Does that continue in the back half?
A: Not sure yet. We'll have to wait and see how the current quarter unfolds. It was strong again in the month of July, but it's hard to quantify the forward ordering impact.
Q: Given the back-to-school season was a bit earlier this year, do you expect a large sequential decline in margin in Q3 for Avery?
A: Hard to say because back-to-school is always very uncertain when the replenishment orders come in. We had a good July, and we'll see what August and September bring.
Q: The CCL segment organic growth of 9% looked very strong. Do you think you could sustain that high single organic growth for the CCL segment in Q3?
A: July started strong. We'll have to wait and see what August and September bring. We expect solid organic growth, but the exact percentage is hard to predict.
Q: In the Checkpoint business, the 40% growth in ALS, how much of that was RFID?
A: Most of it. Total company RFID sales are around $200 million, so that gives you a frame of reference.
Q: Looking at the CCL segment results, how much of the better margin was driven by mix?
A: The volume was strong, which was the main driver. There wasn't anything particularly unusual in the mix.
Q: Is there any inventory concerns that you have in terms of the inventory levels at customers for any buildup in the automotive segment?
A: No.
Q: Can you talk about the impact of the Pacman integration on your business, like top line and EBITDA?
A: It's only 3.5 weeks in the quarter, so it's hard to talk about it relative to this quarter. The press release fully discloses the results of the operation.
Q: Can you characterize market share in label when you look across CPG companies and some peer results?
A: We may have picked up a bit here and there, but we focus more on our customers and how well they're doing rather than our competitors.
Q: Some of the commentary from large CPG companies is around consumers trading down to private label or non-branded products. Would you see any impact from that trend on your label business?
A: It's limited. We tend to be focused more on premium priced brands. The spirits industry is notably soft, but the impact of trading down has not been particularly noticed.
Q: Can you speak to the sustainability of the double-digit sales growth in Asia Pacific and Latin America in the CCL segment?
A: It's a function of the recovery of our CCL Design business in China and strong performance in Latin America, which is the strongest region for most CPG companies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
