Good morning, ladies and gentlemen. Welcome to CCL Industries second quarter investor update. Please note that there will be a question and answer session after the call. The moderator for today is Mr. Geoffrey Martin, President and Chief Executive Officer, and joining him is Mr. Sean Washchuk, Senior Vice President and Chief Financial Officer. Please go ahead, gentlemen. Good morning. This is Sean Washchuk here. I'd like to thank everyone for joining us on our second quarter investor update. We're having some challenges with the website right now, so in order to view the slides, everyone will have to go to our website, cclind.com, and go to Investors drop-down menu, then to Investor Presentations and download our second quarter investor update presentation. From there, I'll guide you along through our deck today. Moving to our slide two, our disclaimer regarding forward-looking information. 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 2021 annual MD&A, particularly the section Risks and Uncertainties. You can also refer to our second quarter report for updated risks and uncertainties. Our annual and quarterly reports can be found online at the company's website, cclind.com, or on sedar.com. Moving to slide three, our financial summary for the three and six months. For the second quarter of 2022, sales increased 14.9%, with organic growth of 10.9%, acquisition-related growth of 4.8%, partially offset by almost 1% negative impact from foreign currency translation, resulting in sales of CAD 1.62 billion, compared to CAD 1.41 billion in the second quarter of 2021. Operating income was CAD 247.8 million for the 2022 second quarter, compared to CAD 235.5 million for the second quarter of 2021. A 6% increase excluding the impact of foreign currency translation. Included in this figure is a CAD 3.5 million non-cash acquisition accounting adjustment to fair value inventory for the acquisition of Aldora in the quarter. Excluding this adjustment, operating income improved 7% excluding currency translation. Geoffrey T. Martin will expand on the segmented operating results of our CCL, Avery, Checkpoint, and Innovia segments momentarily. Corporate expenses were up for the quarter, principally due to higher expense for long-term variable compensation versus the prior year quarter. Consolidated EBITDA for the 2022 second quarter, excluding the impact of foreign currency translation, increased 7.3% compared to the same period in 2021. Net finance expense was CAD 15.4 million for the second quarter of 2022, compared to CAD 14.1 million in the 2021 second quarter, due to an increase in total debt outstanding this year versus last year. The overall effective tax rate was 24.4% for the 2022 second quarter, compared to an effective rate of 25.5% recorded for the second quarter of 2021. Primarily reflecting a higher portion of taxable income earned in lower tax jurisdictions, as well as a U.K. tax legislation that was enacted in the second quarter of 2021 that increased the prior year tax rate. This effective tax rate may change in future periods, depending on the proportion of taxable income earned in different tax jurisdictions with different rates. Net earnings for the 2022 second quarter were CAD 163.4 million, up 8% excluding foreign currency translation, compared to the 2021 second quarter. For the six-month period, sales increased 16%, operating income increased 5%, net earnings increased 6% compared to the six-month period in 2021. 2022 included results from 12 acquisitions completed since 1st January 2021, delivering acquisition-related sales growth for the period of 4.7%. Organic sales growth is 10.8%, and foreign currency translation was a headwind of 1.7% to sales. Moving to slide four, our earnings per share. Basic earnings per Class B share were CAD 0.91 for the second quarter of 2022, compared to CAD 0.86 for the second quarter of 2021. Adjusted basic earnings per Class B share were CAD 0.94 for the second quarter, a quarterly record, compared to adjusted basic earnings per Class B share of CAD 0.89 for the second quarter of 2021. The change in adjusted EPS to CAD 0.94 is primarily attributable to a CAD 0.08 advance in operating income, CAD 0.01 increase from equity contribution from our joint ventures, partially offset by CAD 0.02 negative currency translation, CAD 0.01 from increased finance costs, and an additional CAD 0.01 from our adjusted tax expense year-over-year. Moving to slide five, free cash flow from operations. For the second quarter of 2022, free cash flow from operations was CAD 115.1 million, compared to CAD 94.7 million in the 2021 second quarter. Reflecting an improvement in cash flow from operations of almost CAD 42 million, partially offset by an increase in net capital expenditures for the comparable periods. In the 12 months ended 30th June 2022, free cash flow from operations decreased CAD 165 million compared to the 12 months ended 30th June 2021. This comparative decline is attributable to an increase in net working capital, coupled with an increase in net capital spending for the periods. Moving to slide six. Dollars returned to shareholders. During the second quarter, the company renewed a normal course issuer bid or a share buyback program for the buyback program that expired in May of this year. Under this new bid, the company may purchase up to 9.9% of its public float of Class B voting shares up until 24th May 2023. This is all subject to the normal restrictions of the TSX. During the first six months of 2022, the company repurchased almost 3.4 million shares at an average price of CAD 58.95, for total proceeds of CAD 200 million. Including the 14.3% increase in the 2022 annual dividend in February of this year, dividends year to date have amounted to CAD 85.4 million, representing 26.7% dividend payout ratio. Moving to slide seven, our cash and debt summary. Net debt as of 30th June 2022 was CAD 1.76 billion, an increase of approximately CAD 515 million compared to 31st December 2021. The increase is principally a result of new borrowings to finance the company's acquisitions during the first six months of this year, and dollars needed to repurchase shares under the aforementioned buyback program. Although the company's net debt increased, the balance sheet closed the quarter in a strong position. Our balance sheet leverage ratio was approximately 1.47x, increasing from 1.06x at 31st December 2021. Liquidity is still robust, with CAD 634.3 million of cash on hand and $0.8 billion of available undrawn credit capacity on our revolving credit facilities. The company's overall finance rate was largely unchanged at approximately 2.43% at 30th June 2022, compared to 2.42% at 31st December 2021. The company's balance sheet continues to be well positioned as we move through fiscal 2022. Geoffrey, over to you. Thank you, Sean, and good morning, everybody. Hope you're managing to follow the slides. Sorry about the webcast snafu this morning. I'm on slide eight. We've highlighted the capital spending for the year so far, CAD 190 million net in disposals. Exactly half what we planned for the year, CAD 380 million. Slide nine, highlights for the CCL segment. Very good quarter in this part of the company. 10.9% organic sales growth, largely price led. Some little bit of volume growth, but largely price led. North America up high single digits. Europe up double digits. Asia Pacific up mid-single digits and Latin America up more than 30%. Very strong quarter in our home and personal care business and healthcare and specialty. Upside, soft comps at CCL Secure. CCL Design, sales were up, but profits were still impacted by lockdowns in China and soft demand in the electronics sector. Sales were up at the food and beverage business. The profitability gains there were held a little bit by inflation. Slide ten, highlights of our joint ventures. Very good quarter. Excellent quarter, in fact. So we're very pleased to see that. Slide eleven, highlights for the results of Avery. Our strong trajectory in this business continued, especially in North America, where we've seen a big recovery in name badges. Not quite yet a full recovery because we're still seeing some slowness in the convention space, but sports events and other forms of events are back to normal. Non-cash acquisition accounting affected the Avery results, as Sean already mentioned, to the tune of CAD 3.5 million at our Bryan business. Raw materials inflation and elevated freight component costs from China pass through was successfully implemented. Supply availability in this business is still challenging. Slide 12, highlights for Checkpoint. The MAS business had a tough quarter actually. We saw declines in all regions except Latin America, but versus a very strong prior year. Profits were impacted by China freight and component inflation and lockdowns in the country, which affected our large supply plant that's based in China. The apparel labeling business, on the other hand, had another exceptional quarter, exceeding expectations. 25% organic growth driven by RFID and augmented by the Uniseal and Technical acquisitions. One soft story at MAS and one strong story at AMS. Slide 13, Innovia. Two stories again here. Volume was up in the Americas but down in Europe. The sales gain was largely price pass through of inflation. The down story was really all in Europe, where we had higher than expected energy and freight inflation and the cost of the new line startup in Poland, all three of which impacted profitability in the quarter, which accounted for all of the decline in the quarter. Profitability did increase in the Americas, but was held by the revaluation of inventory, which was resin decline, and we also saw higher freight costs in North America. Slide 14. Our outlook comments for the coming quarter. Final price pass-through initiatives have now been implemented to benefit the core CCL label businesses, where we had some lag. That will definitely benefit the second half of the year. The order picture remains very solid. CCL Design still depends on the chip availability recovery, especially in automotive. Consumer demand holding up in the electronic space where it's been a little bit soft recently. Recent acquisitions are additive. Contribute to CCL Secure significantly for the second half. Avery velocity continues to improve and are benefited by recent acquisitions. Checkpoint RFID growth there is also expected to continue. The softer MAS picture in broad retail may well continue in the second half. We'll have to just wait to see. Innovia sales likely to decline on lower resins. Resin's been dropping in the last three months of today's purchase prices. We have to balance the freight and energy inflation in Europe to match the second half of 2021 profitability. We are working on both of those things. Company-wide, our China operations are back to near normal. The demand in the country overall remains soft. Okay, operator, with that, we'd like to open the call for questions. Great. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, Please Press star one on your phone at this time. We ask that while posing your question, you please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Once again, Please Press star one if you have a question at this time. The first question today is coming from Mark Neville from Deutsche Bank. Mark, your line is live. Hey, good morning, guys. Good morning. Thanks for taking the time. Thanks for the kind job. Maybe first just on prices, just so it's all clear. Are all the price increases that you intend to do sort of through now? There's a little bit of lag in a couple of parts of the businesses. I'd say there's three areas of lag you can think about. Food and beverage in the CCL space, we've got some lagging contracts there that we've now fixed. We'll have the benefit of that in the second half. Checkpoint MAS, the freight and component cost inflation increases going through, particularly in Europe in the second half. We've got some energy and freight transportation first allowed us to pick up in Europe. But they're not. I wouldn't say any three of them are terribly material. I would say we've passed on 85%-90% of the inflation we've received. Okay. No, that's useful. Can you just on the regional differences that you're seeing in the CCL segment, is that more to do with sort of the rate of inflation in those geographies or the mix? Well, the Latin American situation is really about share gain in some parts of the business. That's one of the tiers it is. I think in Europe it's definitely inflation in Europe has been running at a higher clip than it has in the U.S., so that's probably fair comment about the contrast in Europe versus U.S. for sure. Okay. also in Asia, where it's running at a much lower clip. Okay. In terms of sort of volumes and sort of demand that you're, I guess I'm just curious how that differs sort of regionally. If there's a marked difference between sort of what you see in Europe and sort of North America and in Asia, I guess. Feels like with the economic data, they're at risk. Feels they like Europe, but they don't know. Yeah, I would say the strongest region right now for us is North America. Europe is patchy in parts, and Asia is patchy in parts, especially in China. Sure. It pretty much mirrors what most of our customers are saying, you know. North America's held up pretty well from bothersome data coming out of Europe and also from parts of Asia. No, that's helpful. Just it gets a little blurred by the price. That's super helpful. Maybe just one last one for me then. Maybe just on NCIB. Like your stock's gone from sort of mid-50s to mid-60s. I'm just curious if you intend to be as active. We'll have to wait and see. All right. Got it. All right, thanks. Thanks, Thanks, Geoffrey Martin. Okay. Thank you. The next question is coming from Stephen MacLeod from BMO. Stephen, your line is live. Thank you. Good morning, guys. Morning, Steve. Morning. Just on the CCL segment, you had really nice EBIT performance there. Given the fact that most of the growth was from price, I would have thought you'd see a little bit of EBIT margin pressure. I'm just curious if you can talk about some of the drivers on EBIT in the CCL business in Q2. Well, two of our biggest businesses in there, HPC and healthcare and specialty did particularly well. I would say have done, particularly in North America, have done probably the best job of the price pass-through. We had very little lagging inflation in those two parts of the businesses. CCL Design, you know, was more of a mixed story because we had the impact of the chip problem. Demand was soft in automotive. Demand was soft in electronics. In food and beverage, we had some contracts where we had inflation lag. Then in CCL Secure, we had a very strong EBIT quarter last year with very high margins. We had higher sales this quarter, but mix was very challenging and some still above the average for the company, but not as good as it was last year. Okay. That's great. Mostly sounds like mix and price related. On the MAS business in Checkpoint, it sounds like you expect some of the softer resell impact to continue in H2. I'm just curious, do you expect it to worsen or is your guidance based on what you're seeing today? What we're seeing today, I mean, it's that business is broad retail. We sell into all kinds of store operators in the mass business. Grocery, pharmacy chains, you know, all the chains you see in the malls. It's really broad-based retail. We've certainly seen some slowdown in sales globally. That business in North America is not the largest region in that business. Europe is. Some softness in Europe and some softness in Asia, partly due to the lockdowns in China. Okay. That's great. Just finally on Innovia. Obviously, with resins lowering, you're talking about sales being impacted. Would you expect the back half EBIT to be flat given what you see right now? Or are you sort of guiding to it potentially being lower at this point? I think it depends on how well we do with the energy and freight situation in Europe. That was the main problem this past quarter. I mean, it's still got the start-up cost of the line in Poland. That wasn't terribly material. The freight and energy catch up on that, making sure we've got enough recovery on that and that pricing is important in the second half. If we do that, I think we'll be okay. If we don't do it, we'll have a repeat of what happened this past quarter. We're working on it. Okay. Okay. I'd expect to see some sequential improvement. Maybe doing as well as we did this time last year with the squeeze in inventory we're gonna have. It might be difficult. Okay, that's great. Okay, great. Thanks, Geoffrey Martin. Thank you. The next question is coming from Walter Spracklin from RBC. Walter, your line is ours. Hi, gentlemen. Thanks for taking the question. This is Lewis on for Walter. I know we ask you this every quarter, but any change to the M&A landscape? Is market volatility prompting any new sellers? Are valuations still elevated? No change. Okay. No change. Okay. This one's on CCL. Organic growth in CCL core segment has been solid and your outlook sounds optimistic. How far would you say you have visibility on demand, and any view as to sustainability beyond that direct line of sight? Well, it's a short lead time business in large part. You know, and you know it, so we have visibility for about six weeks. We don't see any anecdotal change in circumstance. Customers are still very much focused on supply availability than anything else. Supply chain issues still remain in many areas of packaging, and customers are more focused on making sure they've got what they want when they need it. That's the big issue right now. Okay. Thanks, Geoffrey Martin. Thank you. The next question is coming from Adam Josephson from KeyBanc. Adam, your line is live. Geoff and John, good morning. Morning. Morning. Jeff. Morning, Jeff. You just in response to the last question, you just talked about how supply chain problems are leading packaging buyers to keep their stocks up, yet in the earnings release you talked about supply chain problems easing globally. Can you help me square those two things? Well, the supply chain is still relative. It's not as bad as it was, but it's still terrible compared to how it was a year ago. Is it better than it? Is it looking like it's improving? Yes, it is. How does it compare to a year ago? Terrible. You know, our key raw materials, price sensitive raw materials, typically we used to wait 2-3 days to get an SKU of raw material from the supplier. Today we wait 6-8 weeks. Yeah. You see. It's pretty dramatic change. Yeah. It has some of the pain points we were experiencing, you know, UPM strike particularly, you know, is obviously over. Some of the pain points are easing. Compared to how it was in what the last time you would call it normal, it's still pretty difficult. Do you see that easing? I'm sorry. Go ahead, John. No, go ahead. Do you see that easing further in the weeks and months ahead? I mean, there's no other event like the UPM strike. Is there anything that sticks out to you that would suggest to you that these problems will significantly further ease in short order? Well, yeah. I would say we're certainly seeing some signs of easing and also you're seeing that in deflation rather than inflation, you know, resins and aluminum. Things are a little bit easier than they were. I think paper is a big question. Paper supply industry in the U.S. with all these conversions to boxboard, paper supply in the U.S. has become challenging just in general. Yeah. No, understood, Jeff. When we, you know, look at your CCL segment organic growth and try to compare it to, you know, historically when we've been in recessionary periods, it's fluctuated anywhere from, call it flat to up 5%-6%, but this time it's distorted with all the price increases related to all the inflation. How would you characterize your volume trends now compared to what you've seen in past recessions? I think you said your volume was slightly up in the second quarter, and I assume you're expecting something similar in the third quarter. Can you just frame what the volume trends you experience are compared to years past and recessions past? It's a very different economic outlook compared to how it was in the last one. The last big one was the global financial crisis of 2008 and 2009. Which was a real recession, you know, unemployment and all the rest of it. This time we had a technical recession and GDP declined two quarters in a row, but we still can't find people and unemployment is and employment is at record levels. It's an unusual situation. On top of it, you've got supply chain constraints which we didn't have in the last recession. It's very hard to read what's actually going on underneath it all. If you look at the results of our customers, most of them, the sales increases that we saw, there were exceptions, but a lot of them were price-led rather than volume-led. We look at that quite closely and follow it quite closely. You know, the outlook is probably like it's been this quarter. There will still be a little bit of volume growth, yes, but not much. Yeah. No, I appreciate that. On the price pass-through initiatives that you talked about earlier, how much inflation did you actually recover in your CCL business in the first half? I'm just trying to understand how much more growth one should reasonably expect year-over-year in profitability, given whatever additional price recovery you will have had along with all the other benefits, the easier comps, CCL Secure, the acquisitions in CCL Design, et cetera. Yeah. It's very hard to measure that in the label business because it's millions of transactions with all shapes and sizes. You can only really intuitively guess at it, really, Adam. It's very hard to answer that numerically. I think all I can say is the volume was up slightly in the past quarter. My gut tells me volume revenue situation unlikely to change for the second half of the year. Presumably the price cost relationship will be more favorable in the second half than it was in the first half. Yes. Don't forget we've got a lot of pass-through arrangements and the things that are really dropping like aluminum will be passed on pretty much real time. Yeah. Kind of a wash on the bottom line, really. It's I got it. Okay. Yep. Just one last one, Jeff. On RFID. Can you talk about what from your seat what the penetration is in apparel and other markets compared to what it was, say, a year ago? Has your thinking or outlook changed with respect to the long term opportunity you have in RFID? Well, most of our sales, like everybody in the industry today, are in apparel. Apparel is a 100-pound gorilla in the room of RFID, and it's still continuing to grow. The technology is still continuing to develop. The form factor of RFID is also beginning to change. It's not just the rollout of RFID, it's the form factor that's used. More use of soft tags, less use of hard tags specifically. We still think we're in the early to mid stages of RFID growth. I haven't seen a lot of change in that comment since, you know, since last quarter. We are getting quite excited about opportunities outside of apparel, but they're all in niches and there's lots of them. The challenge there is finding out, making sure you've got the last mile of business development, sales and marketing activities and the product's properly priced to make a real profit in that part of the business. We're excited about it. Wonderful. Thanks, Geoffrey Martin. No problem. Thank you. The next question is coming from Ahmed Abdullah from National Bank of Canada. Ahmed, your line is live. Thank you. Good morning, all. You managed to deliver strong results of about 11% organic growth in the first and second quarters of this year. Given where you stand on all the moving pieces and how prices have gone and inflationary pressures, should you be thinking about a similar level of organic growth in the back half of the year? We'll have to wait and see. I mean, we've got some, you know, resins and aluminum are both dropping quite significantly. So we definitely won't see the same rate of growth in Avery in the second half of the year because resins are dropping. Where we've got pass-through arrangements like in our aluminum can business, which has also been dropping, we're gonna see impacts there. So bottom line is, no, I don't think we'll see the same rate of organic growth because I don't think we'll have as much inflation in the second half. I mean, what the number will be, I wouldn't like to say. Okay. That's fair. At Avery, you highlighted that you saw a bit of pull forward as the back-to-school season saw an earlier than usual start this year. Can you perhaps quantify how much of a pull forward that may have been? I mean, will we still see a bigger third quarter in the year for the segment? Well, typically the big month for the back-to-school shipments is July, but this year it was in June. Because the pull forward was really from June into May. First time I can ever remember back-to-school shipments beginning in May. They started in May, accelerated in June. July was below what it was for July last year. We're expecting to see some pickup in August because the reorders are much more organized this year. The retail industry had a calamitous back-to-school industry last year. It It over-catered to retail. They're much better organized this year. Over the season, we look at it over the season, we're expecting sales to be up. But I think there'll be more in Q2 this year than there was this time last year, and less in Q3 than this time last year. Okay. That's fair. On the organic sales decline, given the lower resin prices, are you thinking more sequentially or versus last year as well? Sequentially. Sequentially. Okay. Yeah, I think we'll be inaudible to this last year, but we'll have to wait and see. Okay. That's fair. That's it for me. Thank you. Thank you. The next question is coming from Michael Glen from Raymond James. Michael, your line is live. Thanks. Just to start, if we're looking at CCL Design, and we're thinking of the automotive business there, can you give some sense as to how much below trend or how much opportunity for upside there might exist there? Well, it's about CAD 300—a little over CAD 300 million in sales. This is the former Innovia. The Innovia we've added a fair chunk to it. It's still difficult in automotive. We've still got lots of problems with OEMs rescheduling production, parts availability. That's the big challenge in automotive. It's disrupting our operations everywhere, particularly in the U.S. We're not very big in China, but particularly in the U.S. Europe seems to be better. Europe is performing better than North America. That's probably the best color I can give you. Is the bigger exposure for that business overall, is it in, it's in North America versus Europe? No, no. Europe is the biggest. Okay. In terms of in automotive. Okay. For the MAS, there's these stories we read about. You talk about the grocery and the pharma, broad exposure, and then we read these stories about increased use of security products or an expanding line of items. Are you seeing any of that come through in your results? You see that in the CCL space, not in Checkpoint MAS. Okay. If a pharmaceutical company wants to use RFID, those revenues would appear in the CCL segment, not at Checkpoint. Like, we read these articles about people putting security products around meat and stuff like that. Are you... Is the. Yeah. It's really around RFID. It's not really around security. It's really around RFID. It's around tracking of inventory. Okay. We're doing some of that at Checkpoint in Europe, so we're doing in-store. In-store fresh meat is one of the new applications, new potential applications for RFID. It seems we have a lot of traction about at Checkpoint in the pilot stage. There's a bunch of M&A. How much M&A contributed to the EBITDA in the quarter? Are you able to isolate that out? No. Okay. Thanks for taking the question. No problem. Thank you. The next question is coming from Daryl Young from TD Securities. Daryl, your line is live. Hey, good morning, gentlemen. This first question is just around potential for trade downs to private label products. We're starting to hear what is called an acceleration of companies talking about consumers stretched and trading down. I'm just curious if that started to percolate into your order book yet, or if it's still the supply chain driving ordering volumes. Yeah. We don't see a lot of that in the spaces we're in the CCL business, so, Daryl. The home and personal care sector is the area where we see it as in a recessionary environment, is less use of salons. Professional products, which are a premium product, people tend to buy a professional grade shampoo at Walmart rather than go to a hair salon and pay for it there. You see a little bit of that. It's not very material. In the food and beverage space, we don't see a lot of that. Private label is not very big for us. The categories that we're in the CCL space, are not really vulnerable to private label attack. Got it. Okay. You've called out both paper and aluminum as being big costs and potentially some easing there. I guess it's free and. The paper was a supply problem, not a cost problem. Paper was a supply problem. Okay. Sorry. When you were on freight as well and potential for what's called over-the-median, some softening there as well. Does that pose a pretty big headwind for the revenue line and the organic growth trends, as we look out, say, 12 months from now? No. Freight is really only a factor in Europe for us, because in the United States, you know, most of our customers pay for the freight themselves and/or organize the freight themselves. It's not a big factor in North America for us. It is in Europe. It affects Innovia in Europe particularly, and Innovia in North America, because we transship from Mexico into the United States and pay for that. I wouldn't say freight's the material item for the revenue line. The revenue line's gonna be driven by what's going on in the resin market and what's going on in aluminum. Both of which are dropping quite. Well, in aluminum's case, it's dropped 25% in three months. Got it. Okay. Perfect. Just one last one on CCL Design and the electronics market. There is some talk of lower PC sales. I guess the mix within CCL Design between the consumer electronics, how big of a exposure or concern would that be? Or are you seeing any of that with your clients at this point? Yeah. Well, you know, they're all large customers of ours, all the big names in that space. The PC industry had a big boom in the pandemic and now has soft sailed. Global predictions are that the PC market will drop 10% this year. Cloud computing's also on the wane. We're expecting to have to contend with that in the second half. We've got some new programs in some other parts of CCL Design that are quite a big offset, so we'll have to wait and see how that all unfolds. Okay. That's great. That's all for me. Thanks for your time. No problem. Thank you. The next question is coming from David McFadgen from Cormark Securities. David, your line is live. Yeah, thank you. A couple of questions. First of all, on the MAS business, I was wondering was that a surprise to the results that you recorded in the second quarter? Is it kind of indicative of just the general macroeconomic slowdown, and you're seeing that show up on retail? Yeah, I would say so because it was broad-based. If you saw where it happened, it was most pronounced in Asia. The lockdowns in China was a factor in that. The next region that was most impacted was Europe, which is probably not a surprise. Uh- The region that was least impacted was North America, which was certainly most interesting. Latin America was up. The regional color was a big factor in it. Our largest business in MAS is in Europe and Asia. North America is smaller part of that segment. It would appear based on your Q2 results that the business that seems most impacted by a slowing macroeconomic environment is Checkpoint and MAS. Is that correct? I mean, the rest of the business is pretty resilient despite maybe a slowing macroeconomic environment. I think that's fair to say even yet. Okay. Can you remind us about the size of the MAS business in revenue? CAD 400 million. Okay. Lastly, just on inflation, it seems like you're nearing the end of the pass-through. Is the correct way to interpret that inflation is indeed slowing down and you're seeing that show up in your numbers? We're definitely seeing inflation easing in the direct commodity space. Resin’s going down, aluminum’s going down, metal’s going down. We haven't seen that transfer into where the commodity gets converted into intermediary material. We haven't seen any deflation in that of any significance so far. If it does eventually flow through, so resins drop, then film prices go down, laminate prices from raw material suppliers go down. It's just how it is. Okay. I would characterize it as easing at the moment rather than deflation. The area where we see real deflation is in resins and aluminum. Okay. Resins is only for Innovia, and aluminum's for our container business which is CAD 250 million in sales. As a company, it's not having an impact. Okay. All right. Thank you. Okay. Thank you. The next question is coming from Ben Rubino from CI Financial. Ben, your line is live. Thank you. Good morning. Geoffrey, I just have a quick question on MAS just to make sure I understand fully. You had an operating margin that was the lowest in the last 8 quarters. Is it demand driven or is it the impact of the freight and component inflation? Or both? Both. In what relation? Both. Okay. If I look at your outlook, it seems like that dynamic is still going to persist in the second half. You know, should we be thinking of a similar margin as in 2Q or at least directionally a little bit higher? We'll have to wait and see. Okay. Okay, thank you. Thank you. The next question is a follow-up coming from Mark Neville from Scotiabank. Mark, your line is live. Hey. Thank you. Good morning, Jeff. Good morning again. I'm just curious to talk about sort of energy and freight costs in Europe, so your success or what you're doing with those if you're pushing surcharges through. I'm also curious about maybe if there's any risk or if your businesses are reliant on natural gas from Russia and if you're taking sort of countermeasures. Just how you're dealing with the whole situation. Yeah. The energy intensive business we have in Europe is Innovia. The plant, the main supply plant for that business is in the U.K. We do have a small operation in Germany, but it's not very big. The main supply plant is in the U.K. The freight transportation has been the fact that it's in the U.K. has been a significant factor because most of the revenues are on the continent. U.K. energy prices have been rampant. That's also been a factor. Yeah. We are implementing surcharges and there is some lag in that. We've got some significant improvement over Q1. I think we'll see some sequential improvement in Q3 and Q4 again too. Certainly that's something very much top of mind at the moment. Got it. All right. Thanks, Geoffrey Martin. No problem. Thank you. Once again, ladies and gentlemen, if there are any final questions, please press star one on your phone at this time. Our first follow-up coming from Adam Josephson from KeyBanc. Adam, your line is ready. Thanks, Geoffrey. Just one more question on the label demand issue. Geoffrey, the last call you talked about how it wasn't clear to you how much of the demand was related to your customers just keeping excess supply on hand versus real end demand. Is it any more clear to you now than it was three months ago? Not really. I think if you look at the impact of packaging on the gross margin of our customers, it's pretty immaterial. Particularly when you talk about labels. No one's going to run risk of supply availability in label supply in a situation like this. If your job is to buy labels for the XYZ big CPG company, and there's a huge plant somewhere filling whatever brand it is, and there's no labels, you're gonna sink pretty much straight away. There's a lot of people taking supply risk out of the equation, making sure there's no availability of labels is not a problem. We're seeing demand levels that don't really gel with the sales, with the volume and results of our customers. It's particularly in North America. In Europe and Asia, it's more matched to the customers. In North America, where retail is bigger and supply chain is more, businesses are bigger. You know, we're seeing some caution in the behavior of big CPGs to make sure they have what they want. You have no good way of knowing, it seems like, if your customers, in effect, have excess inventory that eventually they're gonna have to work off? Well, they don't always work it off. Sometimes they may just throw it away because labels stock and change all the time too. So labels are economically immaterial to them. Just at the moment, there's so much caution on the supply availability. People are just buying. If you need 1 million, buy 2 million. You know, you can do that with labels. They don't take up space. There's a lot of caution being taken to make sure the customers make sure they have what they want when they need it. I guess for all you know, they could keep buying more than they need for months, if not quarters to come. It's just there's no way to know. It tends not to happen in things that take up space. You know, our cheese business and our aerosol business, that wouldn't happen. Although we also have long lead times there that are beyond what we would expect to see given the current condition of, you know, when our large big CPGs report, you know, 1% volume growth and we see 10 or 15. Something tells you that doesn't gel. This has been going on for how long, this seeming disconnect between the volumes they're reporting and their order? I think since the supply chain issues really started. It's, you know Yeah. Probably a year old now. It's been going on for about a year. There's signs of it easing a little bit in the summer, but only a little. We'll have to wait and see. Why do you suppose that's a North American phenomenon and not also happening elsewhere? Well, you got space here. Right. Yeah. It's a good point. You got much more space. You know, in Europe, the people. It's a much more congested part of the world than is Asia. So the U.S. has always got warehouse space available to put stuff. Not so easy in Germany. Yeah. Yeah. No, understood. Just two other things. On M&A multiples, I mean, you talked about, I think, private market multiples for label companies having been quite high in recent years. Have you seen any changes along those lines recently? How would you characterize multiples these days, and how attractive or unattractive they might be to you? Well, I think they're still elevated. We are seeing signs of transactions being impaired by the financing markets. That's usually the first indicator that things are going to change. We've seen some public to private transactions go slightly pear-shaped in the financing of those deals. The deals still went through, but the financing was very difficult. That's the first early sign you tend to see, and we've seen early evidence of that. Yeah. Just one last one on it. Your exposure to ocean freight, Geoffrey. Have you in terms of the supply chain easing but staying pretty bad on a from a historical perspective, any observations on the ocean freight to the extent you're reliant on that? Well, we're reliant on it with Avery for importation of rings supplies in North America in particular. That's a big factor. Checkpoint is we make everything in Checkpoint is made in countries, in places where we ship by ocean freight and in a container. That's also a big factor. Yeah. The heat, the rampant inflation has stopped, but it's the pricing levels are still highly elevated compared to historical norms. Is that because of the port congestion that continues from the best you can tell? Oh, it's everything, you know, just, you know, China lockdowns, you know, just one thing after another. Port congestion in the U.S. Yeah. Yep. Thanks so much, Geoff. No problem. Thank you. We have another follow-up coming from Mark Neville from Scotiabank. Mark, your line is live. Yeah, yeah. Sorry to keep coming back. Maybe it's a follow-up on Adam's question, just in terms of the inventory situation. I don't know if you have a sort of a historic comparison to this, but if they are building inventory and it gets to a point where, you know, they're overstocked, does this inventory become obsolete, or is it something they work through? You touched on it earlier, but just, I guess, a little more color if you could. Well, labels do tend to obsolete pretty quick. If you overorder, the rate of obsolescence typically goes up because designs change all the time. Regulatory comments have to be added into the label graphics. There's a fair amount of obsolescence can occur when people overorder. Okay. It doesn't sound like the risk is that material risk. No, I don't think it's material. I just think, you know, I think what will happen, Mark, is when if demand once the supply chain issues go, people will be less conservative in the supply chain risk taking than they are today. Yeah. Okay. Thanks, Geoff. No problem. Thank you. There were no other questions from the lines at this time. I would now like to hand the call back to Geoffrey Martin for closing. Okay, everybody. Well, thank you very much for joining our call today. We look forward to seeing you next quarter. Thank you very much. Thank you, ladies and gentlemen. This does conclude today's conference. You may disconnect your lines at this time. Have a wonderful day. Thank you for your participation.