Good morning, ladies and gentlemen. Welcome to CCL Industries' Third Quarter Investor Update. Please note that there will be a question and answer session after the call. The moderator for today is Mr. Geoff Martin, President and Chief Executive Officer, and joining him is Mr. Sean Washchuk, Senior Vice President and Chief Financial Officer. Please go ahead, gentlemen.
Thank you, Crystal. Just before we begin, I'll draw everyone's attention to page two of our presentation, our disclaimer regarding forward-looking statements. I'll remind everyone that our business faces known and unknown risks and opportunities. For further details of these key risks, please take a look at our 2019 annual MD&A or in our quarterly MD&As for updates, particularly the section Risks and Uncertainties. Our annual and quarterly reports can be found online at the company's website, cclind.com or on sedar.com. Geoff?
Thank you, Sean, good morning, everybody. Very happy to be here this morning reporting record quarterly results for the company. Not a situation we expected to be in the depths of despair we were all in in April and May this year in the middle of the worst of the pandemic, but we are now where we are. I'd like to take this opportunity to thank all CCL employees throughout the world for the monumental efforts they've put on to post these numbers. Sean's now going to take you through them point by point.
Thank you, Geoff. Moving to slide three. For the third quarter of 2020, sales increased to 1.2%, including the 1.5% positive impact of currency translation, 2.2% acquisition-related sales growth, partially offset by a consolidated organic decline of 2.5%, resulting in sales of CAD 1.37 billion compared to CAD 1.36 billion in the third quarter of 2019. Operating income increased 16%, excluding currency translation, to CAD 246.3 million for the 2020 third quarter, compared to CAD 209.8 million for the third quarter of 2019. Importantly, operating income increased almost 51% sequentially from the second quarter of this year from the full impact of the COVID-19 initially took hold globally.
Geoff will expand on the segmented operating results of our CCL, Avery, Checkpoint, and Innovia segments momentarily. Included in the third quarter results was a CAD 5.8 million reduction in corporate expenses due to decreases in short-term and long-term variable compensation expenses for the comparable periods.
Consolidated EBITDA for the 2020 third quarter, excluding the impact of foreign currency translation, increased approximately 16% compared to the same period in 2019. Net finance expense was CAD 16.4 million for the third quarter of 2020, compared to CAD 19.5 million for the 2019 third quarter. The decrease in net finance costs is attributed to lower average interest rates and lower average debt outstanding for the comparable periods. The overall effective tax rate was 25.1% for the 2020 third quarter, less than the 25.7% effective tax rate recorded in the third quarter of 2019. The effective tax rate may change in future periods, depending on where the taxable income is earned. Net earnings for the 2020 third quarter was CAD 153.3 million, up 17.6%, excluding foreign currency translation, compared to CAD 127.7 million for the 2019 third quarter.
For the nine-month period, sales declined 4.1%, operating income declined 0.8%, and net earnings increased 2.5% compared to the nine-month period in 2019. 2020 included results from 13 acquisitions completed since January 1st, 2019, delivering acquisition-related sales growth for the period of 1.8%, organic sales decline of 5.9%, and foreign currency translation tailwind of 0.3% to sales. Moving to slide four, earnings per share. Basic earnings per Class B share increased 21.1% to CAD 0.86 for the third quarter of 2020 compared to CAD 0.71 for the third quarter of 2019. Net loss from restructuring and other items amounted to CAD 0.07 for the 2020 third quarter compared to CAD 0.01 in the 2019 third quarter. I'll get into these details momentarily.
Adjusted basic earnings per Class B share were a record CAD 0.93, up 29.2% compared to adjusted basic earnings per Class B share of CAD 0.72 for the third quarter of 2019. This record adjusted basic earnings per Class B share of CAD 0.93 exceeds the previous record of CAD 0.83 posted in the fourth quarter of 2017. An increase in adjusted basic EPS to CAD 0.93 is primarily attributable to an increase in operating income of CAD 0.13, a decline in corporate and interest expenses, et cetera, for CAD 0.02. Equity earnings and tax changes each accounted for CAD 0.01.
The 2020 nine-month period CAD 0.12 improvement in adjusted basic earnings per Class B share was principally attributable to a decrease in corporate expenses, net interest expense amount, partially offset by a reduction in operating income. That resulted in adjusted basic earnings per share of CAD 2.24 for the 2020 nine-month period, compared to CAD 2.12 for the 2019 nine-month period. Moving to slide five, the restructuring and other items. These included an additional accrual of CAD 9.4 million for a long-standing legal matter that was settled during the quarter. It also included CAD 6.8 million of restructuring that is expected to generate CAD 18 million annually. This is largely at the Avery and Checkpoint segments. These two items amounted to the CAD 0.07 adjustment to earnings per Class B share. There will be modest restructuring in the upcoming fourth quarter. Moving to slide six, free cash flow from operations.
For the third quarter of 2020, free cash flow from operations improved CAD 45.1 million compared to the third quarter of 2019. The improvement can be primarily attributed to improved operating income and a decline in capital spending for the comparative quarters. For the last 12 months ended September 30th, 2020, free cash flow from operations improved CAD 140.3 million compared to the last 12 months ended September 30th, 2019. This comparative improvement is attributable to a change in working capital and reduced capital spending for the comparable periods. Moving to slide seven. Net debt as of September 30th, 2020, was CAD 1.65 billion, a decrease of approximately CAD 65 million compared to December 31st, 2019. This decrease is primarily due to an increase in cash equivalents, which is attributable to an improvement in free cash flow. The company's balance sheet closed the quarter in a strong position.
Our balance sheet leverage ratio was approximately 1.51x , declining from 1.9x at the end of the first quarter 2020. Liquidity was robust, with CAD 760.2 million of cash on hand and an additional US $1.2 billion of available and undrawn capacity on our revolving credit facility. Furthermore, the company does not have any significant debt maturities until its term loan comes due in 2022. The company's overall average finance rate was 2.1% at September 30th, 2020, lower than the 2.3% average finance rate at December 31st, 2019, due to a decrease in interest rates on the company's variable drawn debt. In absence of any significant acquisitions, management expects to continue deleveraging the company's balance sheet through the final quarter of 2020. Geoff, over to you.
Thank you, Sean, we're now on page eight, the highlights of capital spending. We look like coming in about CAD 290 million for the year, slightly below annual depreciation and amortization, and about CAD 60 million under our original CAD 350 million budget for the year. Moving to slide nine, results for CCL. Best quarter we've had in this part of the company for quite some time. 4.2% organic sales growth, which is very good to see. Regionally, that was up in the low single digits in North America, mid-single digits in Europe. Latin America was up double digits, although a lot of that was eaten away by inflation. A modest decline in Asia Pacific, which was really driven by Australia and South Africa. Asia itself was up like Europe, mid-single digits. The profit gains really were led by CCL Secure and Home & Personal Care.
In CCL Secure, we benefited from the run on cash in many central banks around the world during the pandemic. Slightly counterintuitive, I know, but it is the case. That's benefited us for sure. We had very good results with all the moves in the HPC companies to add cleansers and hand sanitizers to their product range. Our healthcare and specialty business continued to do well, as did CCL Design, and that improved significantly on an automotive rebound, which was much faster and much quicker than we expected it to be. We're very pleased to see that. Food and beverage profits were also up modestly, but on-premise demand for a lot of our customers remains curtailed. Moving on to slide 10, results of our two joint ventures.
There's two label businesses left in this line on the P&L, one in Russia and one in the Middle East. Both had exceptional quarters in Q3. Despite many challenges in Russia with the devaluation of the ruble, we still had excellent results there. Slide 11, results for Avery. A mixed story here. Our direct-to-consumer business was strong in labels, but that was more than offset by very steep declines in badges. A lot of the badges business we do in this part of Avery is driven by events. Sports events, business conventions, rock concerts, and the like. They're all down pretty significantly. The back-to-school selling was good, but the consumer pull-through faded as the quarter progressed and the chaotic school return in North America and workplace-related demand remains down. We did have solid results internationally, which were an offset, and cost savings globally boosted profitability.
Moving on to slide 12, results for Checkpoint. Another good quarter here, too. Our merchandise availability business faced very tough comps this quarter. We had a record quarter in the U.S. this quarter last year. Considering that, I think we did pretty well, and we sequentially improved quite significantly from the downs of Q2. Our apparel label business was up on the demand rebound and strong growth in RFID and cost savings everywhere boosted the results. Moving on to page 13, results for Innovia. Volume here did soften after the Q2 pantry hike that we experienced that benefited the previous quarter, but it was still reasonable. Profitability was really driven by much improved mix. That's the CCL Secure impact was something to do with that. Across the board, right across the business, we had much improved mix.
Cost savings in the business, better productivity and asset utilization definitely helped. Resin was not our friend this quarter. It was stable in Europe, and it increased actually quite significantly in North America from June lows. A better than expected contribution from the Polish acquisition continued. We're very pleased with the performance of that acquisition. Page 14, just a few outlook comments on Q4. October results came in consistent with the results we've seen during the summer months. We had one less workday in October than we had this time last year, pretty reasonable month overall. We do expect Avery and Checkpoint still to be down in Q4, we also expect CCL and Innovia segments to progress. Commodities are beginning to rise. We do have a modest FX tailwind at today's rates, we're now expecting fiscal year 2020 free cash flow to exceed CAD 500 million.
With that, operator, we'd like to open up the call for questions.
Thank you. Ladies and gentlemen, if you have a question at this time, please press the star followed by the number one key on your touchtone telephone. If your question has been answered or you wish to remove your phone from the queue, please press the pound key. Once again, to ask a question, please press star and then one now. Our first question comes from Adam Josephson from KeyBanc Capital Markets. Your line is open.
Geoff and Sean, good morning, and congrats on a really nice quarter.
Thank you, Adam.
Geoff, you mentioned that the run on cash during the pandemic, as well as auto having been much better than you expected. Were those factors principally why CCL segment results were so much better than what you were expecting just three months ago? Were there a number of other factors as well?
Well, the businesses that did really well in the quarter were, in order of how well they did, the best performing business was CCL Secure by far. The next best performing business was Home & Personal Care. We had very good results in the label and tube businesses in that part of the company. Aerosols was a negative, labels and tubes were strong. Healthcare and specialty did also continue to do well in the quarter. The CCL Design also had a good quarter. The automotive rebound was the main reason. Automotive was actually up on prior year, which surprised us. It came back very fast.
Got it. I appreciate that. You mentioned in the release-
For perspective, Adam, automotive is CAD 300 million out of our CAD 5 billion in change revenue.
Sure. Yeah.
It gives you that in perspective.
Yeah. In your commentary in the release, Geoff, you talked about the second wave of the virus as a reason for some caution regarding November and December. I'm just wondering if it's possible or probable that the lockdowns and the related changes in behavior are in fact benefiting many parts of your business, and that they're leading to exceptionally strong demand for all manner of at-home goods. I just ask, obviously, because your organic sales growth in CCL was the best you've had since 1Q 2019, which is obviously well before the pandemic hit and amid what was a reasonable economy at that point.
Yeah. Well, the organic sales growth was heavily driven by CCL Secure and heavily driven by healthcare. Our consumer packaged goods business was okay, certainly well below the average. We just don't know. The problem with telling you about the Q4, it's always a difficult quarter with the two short months in November and December. Who knows? In the U.S., I think we haven't seen much change so far, but if you talk to our people in Europe, it's very different environment over there.
Yeah. Relatedly, Geoff, when the pandemic hit, you thought your earnings wouldn't exceed 2019 levels until 2022. Now you just reported a record quarter. Your earnings are actually up nicely year to date. Obviously the year has played out, I think, dramatically better than what your worst fears were in April/May. Given that, what lessons, if any, do you draw for next year?
I think it's still uncertain. I think what we know is it's very difficult to predict anything. No one would have predicted in December what happened in March, April, and May. No one in March, April, and May would have predicted what's happened in Q3. How are we supposed to predict what's going to happen next year?
Right.
I think it's very hard to say.
Yeah. Understood. Thank you.
Yeah.
Thank you. Our next question comes from Walter Spracklin from RBC Capital Markets. Your line is open.
Yeah, thanks very much. Yeah, great quarter, everyone. I want to focus on your margins here. I know, Geoff, when I asked you last time about operating leverage, your job shop comment sort of suggested that there wasn't any. Clearly margins are going up. Is this really a mix? They're going up in areas that tend to just be higher margin, or are you indeed now seeing new ways to operate or efficiencies to take advantage of that's allowing your margins to go up?
No, it's all mix.
Yep.
It's all mix. The businesses that did well this quarter are our higher margin businesses, so it was a very mix-driven result.
Okay. That makes sense. When you look at your acquisition pipeline and you see the divisions and what COVID-19 did to the divisions that are doing well and those that are doing less well, are you changing at all your focus on where you want to build up scale when you're looking at acquisitions? Are those acquisition opportunities becoming more plentiful because of COVID-19? I know you've gradually gotten warmer and warmer to the idea as the quarters have unfolded. Just love to get your take there on the pipeline now for acquisitions.
Yeah. Well, we've done CAD 170 million-CAD 180 million worth of deals so far this year, at multiples we wanted to pay, and they've all been bolt-ons, but most of them have worked out. We haven't changed our approach in any shape, way or form. We're still looking in the areas we've talked about in the past, direct to consumer at Avery, some small bolt-ons in Checkpoint, CCL Design in the CCL space. We're looking at anything and everything, but there's been no change in approach as a result of COVID.
All right. Thank you very much. That's all my questions.
No problem.
Thank you. Our next question comes from Stephen MacLeod from BMO Capital Markets. Your line is open.
Thank you. Good morning, guys.
Morning, Stephen.
Morning. I just, in addition to the color on the CCL outlooks, I was just wondering, would you characterize, you talked about October being okay, would you characterize the movements being similar to how they were in Q3 by segment in terms of?
I'm not going to get into that. I just reacted to this comment that October was one workday shy of last year. That's the only thing I would just point out. The calendar this year is not a replica of the calendar last year.
The overall trends in October were broadly similar. We don't expect to repeat the call that we had in CCL Secure in Q4, so that will have an impact. Beyond that, I wouldn't have anything I could add.
Okay, that's helpful. In the past, you've been able to quantify, when CCL was lumpy, you've been able to quantify what the impact has been within a quarter. Are you able to do that for Q3?
In what respect?
In respect to the dollar contribution on a relative year-over-year basis, since it was so strong in Q3.
Well, the big driver of it was CCL Secure. I'd say close to half of the profit improvement in the quarter came from CCL Secure in the CCL segment.
Okay. Thank you. Maybe just finally, you made an interesting comment on Checkpoint with respect to growth in RFID, and I know that's a smaller business that you've always sort of driven an R&D engine with. Are you seeing more RFID adoption in the pandemic, or do you think you'll see more adoption coming out of the pandemic?
I don't know. We did get one new rollout with a large customer in China, that had an impact. I think what we saw in apparel labeling this quarter was just a big bounce back. After what happened between February and May in China and South Asia, with the impact on just being able to get supply to retailers from there was a big bounce back in the summer months. I think we felt some benefit from that. Our RFID inlay factory in China is now running full bore, we're getting the benefit of insourcing all of the inlays we used to buy on the outside. The combination of those two things. Just to keep it in perspective, apparel labeling is less than CAD 200 million for us.
It's not a huge business, but we're quite optimistic now about continuing to improve this for the coming quarters.
Okay. That's great. Thanks, Geoff, and congratulations.
Thank you.
Thank you. Our next question comes from Mark Neville from Scotiabank. Your line is open.
Hey, good morning, guys.
Good morning.
Great quarter. Yeah, great quarter. Impressive timing to put up a record quarter. It's all good for you. I just want to follow up on, I guess, some of the questions. I appreciate, again, October sounds like it was trending well. I guess I'm just trying to get a sense of real time. There's a lot happening, thinking about Europe and lockdowns in other economies. Is there anything to speak to? Again, I appreciate it's only a few weeks into November. Anything to speak to materially?
Well, I can't. If we had anything, I would've said something, Mark.
Sure.
In Europe now, we've got the whole of the U.K. locked down, many other countries in some form of lockdown. The impact of that for us is not clear. When it happened in April and May, it was the same all the way around the world. This time, it's much more prevalent in Europe. The impact of that so far is not very clear. We're only five, six weeks into it. We're into it in a very difficult time, because it's just coming up to the holiday season. We have the Thanksgiving holiday in the U.S., we have the early shutdown in December. How customers are going to behave in this next six weeks period before the holidays starts. It's always a difficult and volatile quarter to predict, and this year it's not been helped by the pandemic.
Sure. No, I appreciate that. The 12th one, to Walter's question, just on, again, the costs and the efficiencies. Is there anything to sort of speak to in terms of structural cost removals?
No.
No? Okay.
It's really a mixed story. The area where we've been doing some work on the cost side has been at Checkpoint and Avery. Those have been the two businesses that have been most challenged. In the CCL business which is doing well, there's really very little, no help there on the cost side at all. If anything, we've had to spend more money than we wanted to, just to deal with the pandemic and some absenteeism in certain places where you've had factories that have been affected by temporary shortages and stuff like that. I think very little we can really tell you. The story in the CCL segment is really about mix.
Okay. Maybe just one last one. This one, I don't know, maybe it's more difficult, but there's a lot of different moving parts to the business. Just holistically, will there still be sort of 20%, 25%-ish of your business sort of still down materially because of the pandemic? I'm just sort of trying to think about next year a little bit and sort of what might come back.
Well, the businesses to focus on that, Mark, are Avery and Checkpoint.
Yeah.
Avery, as you've seen, is still impacted, and we expect it to continue to be impacted for another two or three quarters. I don't think their situation is going to change anytime soon. Just to give you one frame of reference. Our badge business, which I talked about a little bit at the opening remarks, one of our operations last year in Madison, Wisconsin, had sales in the third quarter of CAD 13 million, and this quarter had sales of less than CAD 500,000. When you've got stuff like that going on in your business and there's no sports events, no conventions, no rock concerts, it's not likely to change anytime soon. When they all come back, as I'm sure they will at some point, maybe even next year, the back end of next year, our demand there will come back with it.
A little bit the same at Checkpoint. The MAS business at Checkpoint, it's not as badly affected as Avery is. There's certainly some impact there. Again, I think we've seen in jurisdictions where things have been more normal, we've seen more normal levels of demand. They're the two which we would expect to see some improved demand in when as next year unfolds.
Okay.
It'll take a little while.
Yeah, sure. Understood. Again, thanks a lot. Again, very impressed. Cool. Thanks.
No problem.
Thank you. Our next question comes from Michael Glen from Raymond James. Your line is open.
Hey, good morning. Geoff, just wondering on CCL Secure, good results. How's the new customer pipeline there evolving?
We have a long pipeline of customers there, who are all pretty sensitive about their security. We can never really comment on anything that's going on in this space until it's actually happened. There's a very good pipe. There's a lot of interest in polymer notes, and I would say it's accelerated during the pandemic because people are worried about the cleanliness of currency as well as the cost efficiency and all the other aspects of it. We've got a lot of interest in that field. It does remain a business that's volatile in terms of quarter-to-quarter demand, as we've seen the positive side of that this quarter. That's just a feature of the business.
Okay. You touched on the MAS part of Checkpoint before, and you do have a pretty broad customer mix in that business. Do you see big variances between different groups of customers taking place?
Oh, sure. Yeah, absolutely. If you look at supermarkets, business is strong. If you look at drug stores, they're down a bit, but not much. You go to apparel, it's down a lot. Anything which is discretionary retail, where we have them in our customer base, that's where you see the impact. Malls in the U.S. are a real problem.
Okay. You probably don't want to give me a quantification, but is it kind of like a 60/60 type up, good things are okay, and then 60% is down sort of dynamic? Or is it something?
If you can imagine I don't know what town you live in, but if you drive around the retail environment in your own town, our business looks like that. Where the stores are busy, we're busy, and where they're sharp, we're sharp.
Okay. Circling back to M&A, when we look at Checkpoint and Innovia and what you've been able to accomplish with those two segments in terms of integrating these acquisitions, when we look out five years in terms of what those two segments might look like, what type of growth opportunities from an M&A perspective do you see in front of you, are they meaningful or is it just a function of tuck-ins primarily?
Well, there are meaningful opportunities in both of them. I think we've looked at deals in both spaces, are looking at deals in both spaces. They are more of a tuck-in nature at the moment, just very difficult to deal with anything more than that right now. They both have opportunities to grow by acquisition. I think across our company, if you take the five segments from CCL, Avery, Checkpoint, and Avery, they all have opportunities to grow through M&A.
Okay. Thanks for taking the questions.
No problem.
Thank you. Our next question comes from Scott Fromson from CIBC. Your line is open.
Thank you. Good morning to you all. Nice quarter. Just thinking about market share gains. What are you seeing in terms of gains in the CCL consumer business? Are you seeing increases with your major global customers? Are they consolidating suppliers? I guess, in other words, taking advantage of your global footprint.
I wouldn't have said that was a factor in most of our packaged goods label customers for the quarter. Maybe long term, we could say we've got a bit of a trend there. Short term, we didn't see any real share gain that was material to the quarter. Does that answer your question?
Yeah, I guess it does. Are you seeing any distress in some of your larger, smaller competitors?
What's your question, Scott?
Are competitors, competing suppliers, are you seeing any financial distress? Are you seeing any pickup in business?
No. I wouldn't say anything out of the norm.
All right.
in the label industry in general, because this pandemic has increased at-home purchases. If you're in the label business, I don't think it's been a stressful time. The stress points have been more in the businesses that have had end markets that have had difficulties, and you wouldn't say it's been a bad time for consumer packaged goods companies.
Okay. Well, the results certainly show it. Are you seeing any inventory building in your customers?
I wouldn't say so.
Final question. I'm running out of steam here. Are you seeing any specific benefits from increased e-commerce, online shopping, work from home, or is it just moving, just a whack-a-mole?
I think e-commerce is changing the landscape of retail. I do think the mega trend there is to move towards the omni-channel world, where the best retailers in the world will do a bit of both and use their brick and mortar stores to the last mile pickup points. That's the mega trend we see in the retail landscape. Everyone's focused on that, across the consumer goods industry.
Okay, great. Thank you.
Thank you. Our next question comes from David McFadgen from Cormark. Your line is open.
Thank you. A couple of questions. You talked about, excuse me, CCL Secure, that it was quite strong in Q3, but you said it won't repeat in Q4. Would it be reasonable to think that CCL Secure's performance in Q4 2020 would be something similar to Q4 2019?
We'll talk about that next quarter. I mean, it's not something we can predict.
Okay. Just looking at your guidance for, no, sorry. Yeah, your guidance for free cash flow being greater than CAD 500 million. When you look at the LTM free cash flow of CAD 603 million, I am just wondering, is there something unusual that you expect in Q4 2020 that would lead you to think that it would be more closer to CAD 500 million as opposed to CAD 600 million?
Well, it's a short quarter, so we'll have to wait and see what the number ends up being. We'll find that out in a couple of months' time. It is a short quarter, so Q3 is a big cash flow quarter for us because we collect all of our back-to-school cash by the end of the quarter. Q4 is never as good as Q3, so we'll have to wait and see what we collect in the coming weeks.
Okay. Lastly, just on Avery and Checkpoint. Obviously they were down in the third quarter, and I don't know if you can provide any color here, but would it be reasonable to expect that for the fourth quarter, they'd be down on a similar rate in terms of revenue?
Well, we've commented that both of them will be down. I haven't got anything to add to that.
Okay. All right. Thank you.
Okay.
Thank you. Our next question comes from Adam Josephson from KeyBanc Capital Markets.
Thanks, Geoff and Sean. Appreciate it. Geoff, perhaps this is a stupid question, but the run on cash that you talked about, is that-
No
A global phenomenon? I mean, where did you see this? How significant an impact was it? Just a somewhat related question to that business, which is, there are a number of central banks that have talked about evaluating moving to digital currencies, just wondering any thoughts you might have on that and how that could potentially affect your Secure business.
Yeah. There's been a run on cash in every central bank in the world with the pandemic. There isn't a single bank in the world that hasn't seen increased demand for cash. There's lots of theories about why that might be, which I think are not really worth going into. That's all I can really tell you. I don't think digital currencies will have any impact on us any time soon. They certainly won't replace cash. They may come, but they certainly won't replace cash any more than credit cards did or bank checkbooks did or Apple Pay did. Digital currencies are likely to come in at some point in the next, I don't know, 10, 20 years, who knows? You have to think about cash is used in all countries in the world, so the continent of Africa and the continents of South Asia.
Cash is a global thing, and digital currencies, when they come, are likely to come initially in the more sophisticated economies. Even then, there's no sign any bank I know is talking about replacing currency with digital cash.
Got it.
It's kind of a forward payment.
Right. No, thanks, Geoff. On the sustainability front, you signed the New Plastics Economy Global Commitment and announced a CAD 35 million investment in a sustainable film project in the quarter. Have your thoughts or approach to the whole sustainability issue evolved or changed of late, perhaps driven by any recent conversations with customers or announcements from them? I'm just wondering if they've taken recent actions that are consistent with their 2025 pledges about using all recycled resin or what have you.
Yeah. There's a lot of interest. We've had products for labels that aid recycling for some time. There's been a lot more interest in them in the last five years than we had in the previous 10 before that. These are not new ideas we've had, but the interest in them has just become a lot more prescient due to what's going on with the end consumer. The big focus in our world is focusing on making packaging circular and making packaging easy to recycle. Most of the products we make in that investment that we talked about in Europe is really driven around that, allowing labels to come away from plastic containers so the plastic bottle itself is more easy to recycle.
Yep, got it. Just last question from me, Geoff. Have the respective performances of your businesses this year caused you to think, I want to, in the years to come, invest more or less in particular segments than you might have thought pre-pandemic? In other words, has it changed the way you think about the attractiveness of each of your segments?
The business has done much better than we could have imagined this year with Innovia. We didn't get any questions about that on the call, but that's the business that's seen the biggest change in performance year-on-year. It's basically made up for the downside of Avery and Checkpoint, so it's sort of shown the value of having a portfolio. We're very pleased with that. We're more optimistic about making investments in that space than we would've been, say, a year or two ago.
Just drawing on, what has fundamentally changed in Innovia this year? Just a high level.
Well, I think we've got very disciplined on pricing. We've been very disciplined on the resin pass-through, so that's really improved significantly. We've been much more focused on the value-added parts of the portfolio there, so mix management has been a big factor. Our success in currency is also a factor. I think we've done a very good job with the Treofan acquisition, particularly the plant in Mexico. That's really been transformed. The acquisition in Poland was a home run, so we've done very well out of that.
Thanks a lot, Geoff.
No problem.
Thank you. Again, ladies and gentlemen, to ask a question, please press star and then one now. Our next question comes from Stephen MacLeod from BMO Capital Markets. Your line is open.
Thank you. I just had one follow-up question for you, Geoff. You talked a little bit about M&A and how you have attractive M&A opportunities across all the portfolios. Has the M&A backdrop changed at all? It sounds as though you're not seeing any distressed sellers, certainly on the label side. I'm just curious, has the ability to do M&A improved with economies opening back up, notwithstanding the second wave that we're seeing right now?
I wouldn't have said it's changed a whole lot as the year's evolved, because we're still very travel restricted. We can look at things where we've got people in place. We announced the deal that you'd seen in Malaysia a couple of days ago. One of our more senior guys is based in Singapore, so he's been able to handle that transaction even though the business leader who is based in Europe hasn't been able to travel to Asia. The ability to travel is still a pretty heavy constraint on us. It improved a bit in the summer, but now it's kind of back to where we were. It's just very difficult to get around. That's the constraint we're operating under.
Where we've got people in situ, in country, in place, where we can do the due diligence we need and can have the kind of meetings we need to have, then we've been able to do what you've been able to see.
Okay, I guess it would be safe to assume that until travel opens up, acquisitions would be similar to the ones that you've done more tuck-in related.
Correct.
Yeah. Okay, great. Thanks, Geoff and Sean.
Thank you. That does conclude our question and answer session for today's conference. I'll allow us to turn the call back over to Geoff Martin for any closing remarks.
Okay, well, thank you very much for calling in, everybody, and we'll look forward to talking to you next quarter. Thanks very much for your time and attention.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect. Everyone, have a wonderful day.