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Good morning, ladies and gentlemen. Welcome to CCL Industries fourth quarter investor update. [Operator Instructions] 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.
Good morning, everyone. It's Sean Washchuk here. I'll draw your attention to Page 2, 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 2019 and now 2020 annual MD&A under 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, and good morning, everybody. So we're announcing our 2020 results today, 2 months since given COVID. And I thought you might like a few facts about what happened to our employees during the course of the year, who we've taken a lot of time and effort and energy to keep safe all the way through pandemic. So we have a little over 22,000 employees and 191 locations in 42 countries. During the course of the pandemic, just less than 2,000, or about 10% of those have been working from home. The rest have been work every day at our factories as an essential business. And we've had about 650 positive cases during the pandemic. Currently, there's about 72 of those still positive. And 53 currently in their homes in quarantine. We have had 2 fatalities, neither of them caused by going to work both infected at their homes. One in the United States and 1 in Mexico. And then, of course, very excited about that. But very grateful for all the herculean assets by our employees around the world. And I'd like to take this opportunity to thank them. Now I'm going to hand you back to Sean, who will take you through the numbers.
Thanks, Geoff. Turning to Slide 3. For the fourth quarter of 2020, sales increased 5.7%, including the almost 0.5% of positive impact from currency translation, 2.8% acquisition-related sales growth and a consolidated organic growth rate of 2.5%, resulting in sales of $1.35 billion compared to $1.28 billion in the fourth quarter of 2019. Operating income increased 22.3%, excluding currency translation, to $213.3 million for the fourth quarter of 2020 compared to $173.9 million for the fourth quarter of 2019. Geoff will expand on the segmented results of our CCL, Avery, Checkpoint and Innovia segments momentarily. Corporate expenses for the 2020 fourth quarter were $16.4 million compared to $2.6 million for the 2019 fourth quarter. The increase in the corporate expenses is primarily attributable to a clawback of variable compensation accruals in the 2019 fourth quarter that reduced corporate costs. Consolidated EBITDA for the 2020 fourth quarter, excluding the impact of foreign currency translation, increased 11.2% compared to the same period in 2019. Net finance expense was $15.8 million for the fourth quarter of 2020 compared to $18.9 million for the 2019 fourth quarter. The decrease in net finance costs is primarily attributable to lower average debt outstanding for the comparative quarters. The overall effective tax rate was 19% for the 2020 fourth quarter, less than the 22.8% effective tax rate reported for the fourth quarter of 2019. The decline and competitive fourth quarter effective tax rates can be attributed to the utilization of a previously unrecognized deferred tax asset subsequent to some tax restructuring we did in our German subsidiaries. Net earnings in the 2020 fourth quarter was $145.9 million, up excluding the impact of foreign currency translation from $104.4 million from the 2019 fourth quarter. For the year ended December 31, 2020, sales declined 1.8%. Operating income improved 4.3% and net earnings increased 10.7% compared to 2019. 2020 included the results from 15 acquisitions completed since January 1, 2019, delivering acquisition-related sales growth of 2.1% on organic sales decline of 3.9% and a foreign currency translation tailwind of 0.3% on sales. Moving to Slide 4. Basic earnings per Class B share increased 37.3% to $0.81 for the fourth quarter of 2020 compared to $0.59 for the fourth quarter of 2019. Net loss from restructuring and other items amounted to $0.03 for the 2020 fourth quarter compared to $0.08 for the 2019 fourth quarter. Restructuring and other costs in the 2020 fourth quarter were primarily for reorganization and severance costs associated with our Checkpoint segment. Adjusted basic earnings per Class B share were $0.84, up 25.4% compared to adjusted basic earnings per Class B share of $0.67 for the fourth quarter of 2019. The increase in adjusted basic EPS to $0.84 is primarily attributable to an increase in operating income, resulting in $0.17 per share. The decline in quarterly effective tax rate, adding $0.04, and a reduction in net interest expense and an increase in joint venture income, each accounted for $0.01, partially offset by an increase in corporate costs, reducing EPS by $0.06. For the year ended December 31, 2020, the $0.29 improvement in adjusted basic earnings per Class B share was principally attributable to increased operating income adding $0.13, reduced net interest expense adding $0.07 and a decline in effective tax rate adding $0.05. This resulted in record annual adjusted basic earnings per Class B share of $3.08 for the 2020 year compared to $2.79 for the 2019 year. Moving to Slide 5. For the fourth quarter of 2020, free cash flow from operations improved to $255 million compared to $242 million in the 2019 fourth quarter. The improvement can be attributed primarily to increased operating income for the company. For the year ended December 31, 2020, free cash flow from operations was a record $616 million, compared to the prior year of $444 million. The comparative improvement is attributable to improved income for the company, a change in working capital and reduced capital expenditures for the comparative years. Moving to Slide 6. Net debt as at December 31, 2020, was $1.39 billion, a decrease of approximately $325.3 million compared to December 31, 2019. This decrease is primarily a result of the record free cash flow for the 2020 year. The company's balance sheet closed the quarter in a strong position. Our balance sheet leverage ratio was 1.24x, declining from 1.61x at the end of December 2019. Liquidity was robust, with almost $704 million of cash on hand and $1.2 billion of available undrawn credit capacity in the company's revolving bank credit facility. Furthermore, the company does not have any significant debt maturities until 2022. The company's overall finance rate was 2.29% at December 31, 2020, lower than the approximate 2.35% average finance rate at December 31, 2019, this was a result of a decrease in rates on our variable drawn debt. The company's balance sheet is well positioned to start the 2021 year. Geoff?
Thank you, Sean, and good morning again, everybody. I'm on Slide 7, highlights of capital spending for the year. We curtailed our project plan for the year somewhat. We'd originally budgeted $350 million or thereabouts, and we came in at $266 million net of some disposals, excludes right-of-use assets and depreciation thereof for the IFRS 16 lease treatment. We had $330 million planned for 2021. I would say it would be at least $330 million, may jump a little higher than that, depending on how the year unfolds and how much capacity we need to keep up with demand in the recovering economy. Page 8 highlights the CCL. It was a very good quarter, 7.4% organic sales growth. So it's up double-digit in the Americas, that's low double digits in North America and up over 20% in Latin America and up low single digits in Asia, growing mix there. So Europe is up slightly. Real Asia for China and the ASEAN countries, up in mid-single digits and Australia and South Africa, down low double digits. All sectors post increased sales, and we had excellent profitability changes in CCL design, food and beverage, health care and specialty and CCL Secure. Our Home & Personal Care profits were down slightly on capacity building costs for our aluminum slugs for our container business, and we had lower results in Asia. Profitability for 2020, improved in all sectors, except food and beverage, but there's only slight lag there in that particular part of the company and really all caused by the impact of price -- on-premise and travel-related channel for key customers in that space. So moving to Slide 9 for highlights for our joint ventures here. We only consolidate the net income line. So we have 2 labeled joint ventures in here, 1 in Russia and 1 in the Middle East. So the 1 in Russia, is that to deal with the decline of the value of the ruble, which has moved from 45 to 60 million in the year of 2020, so that's impacted the sales line because we saw very strong organic growth in Russia, 24% in Q4 and 12% for the year of 2020. So as you can see on the earnings line, we've had a very good period of time here. We're very pleased with the results in these 2 businesses. Moving on to Avery. Another good improved quarter. So if you look at the quarterly progress during the course of the year, we started 2020 in the first quarter, up 1% in revenue. Q2, we dropped 30% as the pandemic hit. Q3, we were down 16%, and then fourth quarter, we were down 11.8%. So we are seeing a slow gradual recovery in this space as we will begin to return to normal. Direct-to-consumer strength in labels more than offset steep declines in badges sort of the declines in the badge business is still a significant headwind for us and probably will continue to be so for the first half. Organization products. That's 2 most important the binders and indexes are still down on workplace closures. But the Printable Media business, it's many labels for impending has been improving, especially in the U.S., but also internationally. So we are seeing gradual improvement in Avery, which we're pleased to see. Slide 11, Checkpoint. So Checkpoint here was started off in Q1 this year, down 10% of the apparel industry really began its pandemic affected period in January of this year -- of last year, sorry, in 2020. We were down 33% in Q2, down 8% in Q3 and down just less than 3% or around 3.1% in Q4. But in the second half of the year, our profits moved above the prior year period. So we're seeing a good recovery there, particularly with our sales to retailer in the essential category, both within the discretionary category. We had record results in our power label business, boosted by robust RFID performance. Our MAS sales were down in hardware but held out nicely in labels and tags, which aided our mix and cost savings initiatives, as Sean talked about earlier, augmented results. Moving on to Innovia. Another strong quarter here. Innovia's really had a banner year, quarter-by-quarter, and we've had a slow period in the summer months, but we've had very strong Q2 and a very strong Q4, and profits have really followed that, really driven by improved mix, cost savings and much better asset utilization. Resins have been increasing dramatically they've actually doubled in North America and have been really serious -- quite seriously impacted by the storms. You've all been reading about in the newspaper. So I'll give you some more commentary about that in the outlook section. So Page 13, a few comments on the first quarter and how things look. So the start of the year has been good so far, despite lockdowns in many countries. As I indicated, Avery remains below prior year, but the gap is -- I think, will continue to close in Q1. Checkpoint is now moving ahead at prior year levels. Bearing in mind, we were down 10% in the corresponding quarter last year. We expect the CCL segment to progress in the first half. So the first half last year of CCL, we were flat in Q1, down 6% in Q2, and our profits were pretty much flat in the first half. So we'd expect to do better than this year. The second half of the year, we were up 26% in profits so that will take some -- will be a hurdle we'll have overcome in the second half of the year. We are seeing commodities beginning rise, as I mentioned, in some cases, rapidly. We do have some supply shortages in certain areas. Chips which you've been reading about for RFID in the newspapers. So we're slightly concerned about that. But the impact of the storms in Texas on a couple of our operations that need LPG gas supply from the energy production sources down there. And the fact that 75% of the resin making capacity in North America has really been closed down for 10 or 15 days. So that's causing us some short-term problems and will likely affect Innovia and particularly in the first quarter of the year. We expect FX to be nominal or moving to the slight headwind depending on what happens with the U.S. dollar, Canadian dollar. So U.S. dollars is a drag, but other foreign currencies are in. So we'll see how that pans out. So with that, operator, we'd like to open the call for questions.
[Operator Instructions] Your first question comes from the line of Mark Neville with Scotiabank.
Maybe just to follow-up the conversations on the commodities. When I think about your business, again, I think it's obvious, the to Innovia, I guess I'm thinking about the sales segment and some of the other businesses. Just maybe talk about the commodity exposure. And I think historically, you've done a great job of sort of managing some volatility, but maybe some kind of see a sense for how material do impact you think could be?
Yes. I think you've called it out right, Mark. I think the one to be concerned about is Innovia. Specifically, it's all happened in North America. So the impact will be more there than it will be in Europe and Asia. Because that's where we've seen the spike in inflation. And the rest or it's really about LPG supply down into Mexico, it also impacts Innovia and impacted our can business in terms of its ability to produce. So there are the 2 impacts we're seeing. I don't see much commodity risk in the other parts of the company that couldn't easily be raised.
Sure. Okay. And the comments you made about CapEx that were interesting. I'm just curious, I guess, 2 parts to the question. First, if there any parts of the business now where you're capacity constrained? And I guess, second part, when you think about reopening, is there sort of any part of your business you think that are sort of obvious that maybe face some headwinds? I think about hands sanitizer , but I don't think that actually goes away. So I'm just curious if you think there's anything -- parts of the business that face obvious challenges as you reopen.
Yes. Well, I think the past that have done well will probably received, and the past that have been badly affected will come back. So I think it's the scale really. And so we'd expect Avery and Checkpoint, which is the 2s that have been most affected by the pandemic to recover quite significantly and quite quickly in the year ahead. And businesses that have been on a tear because of the restrictions. So we've had a very good year with sanitizers. And I think some of that won't go away. I think you're right about that, but probably the levels of demand will probably recede. And some of our businesses are focused on products for home improvement. So whether that will receive or not later in the year as travel opens up and people spend less money at home and more money or more discretionary things and only time will tell. But I think we've got the things that are coming back will outweigh the things that are likely to recede, in my opinion.
Next question comes from the line of Stephen MacLeod with BMO Capital Markets.
I just wanted to turn quickly to the CCL segment. You gave some comments for the first quarter expected to progress. Can you give a little bit of color around maybe some segment-specific performance and how that has been different will vary based on lockdowns around the world?
I don't think it's been a lot different to how it was in the second half of the year so far in the quarter. So things that we're doing well in the second half of the year is still doing well. So that's kind of what we see. We haven't seen any change in trend since the second half of last year. So Q3 and Q4 were both good in the CCL segment space. And those trends have continued so far in Q1.
Okay. Okay. That's great. And then just turning back to resins. The Innovia business, you did a lot of work sort of changing the contract structures to pass-through those resin -- pass-through resin inflation. Woul you talk a little bit about sort of what you see in terms of that business' ability to manage this current period of resin inflation? I don't know what that might give the margins?
Well, they have pass-through mechanisms. But if you get 100% inflation in the space in 3 months, it's pretty difficult. So we'll pass -- it's really about timing, Steve. So some of our contracts have monthly pass through. Some of them are quarterly. So the ones that are causally pass-throughs will be problematic. The ones in a monthly and we only have a 30-day lag, and we've got some of them with 90-day lags. And the inflation is pretty dramatic. So I think we just have to work our way through it. I think once the resin cracking capacity comes back online, I think we'll see this quickly adjust, I mean, polypropylene is at all-time highs. It's never been higher, and it's in history. So a combination of tight capacity and then the storm has just been made life very difficult. So -- but I think we've done a good job of organizing the pass throughs. But like I say, there's always a lag between getting the prices put through and moving on from there. So I think there will be an impact in Q1. On top of the fact that we haven't been able to run the plant properly given the availability of LPG from Texas.
Okay. Okay. That's helpful. And then maybe just turning to the Avery business. You talked about recoveries through the year, which has been impressive as things have rebounded. Would you expect maybe the full year to be up year-over-year in Avery?
Yes.
Yes. Okay. Okay, that's perfect.
I think what we're seeing now, Stephen. I mean, Australia is 1 country where we can see an impact because Australia, life is relatively normal down there compared to many other parts of the world. But it's a domestic business, and they're not dependent on traveler. And we've seen a very, very strong start to the year down there. It's like currently more or less operating normally. And obviously, in the first half of the year, the comps are very easy. And if we have a good back-to-school, we didn't have a good back-to-school this year. It's not difficult to see how Avery could bounce back pretty quickly as the economy opens up.
Next question comes from Walter Spracklin of RBC Capital Markets.
So Geoff, you pointed to a fairly big variance in your organic sales growth by region in the CCL division. Can you speak a little bit to why the big variance? And also comment on CCL Secure, would you say -- is there still cash hoarding going on? Or is that more normalized now here in the fourth quarter?
Well, I would say the regional call out is pretty much what you hear from our customers, too. So if you talk to the consumer products industry, they've all seen very strong numbers in the U.S., not so strong numbers in Europe, strong numbers in Latin America, and sort of in between in Asia. And Asia is really a mix between what's going on in China and what's going on in the ASEAN countries where the lockdowns are pretty extreme so I think the results we see there pretty much far the same trends you see from the big consumer products groups. CCL Secure had another strong quarter in Q4, we see no end in sight to growth of cash continuing. So that was -- we will have some tough comps in the second half of next year. That's first half of the year, I think we'll be in good shape. And so we're still pleased to see how things are going there.
Okay. And CCL was up mid-single digits in the second half, as you mentioned, and you said that's going to continue here in the first half. Comps are fairly, obviously, meaningfully easier in the first half. Is mid-single digit -- is higher than mid-single digit
Could be. I mean, we'll have to see. It could be.
Next question comes from Adam Josephson of KeyBanc.
Good to talk to you about. A couple of questions just about the comps as you see them for this year. So last year was quite an odd year, obviously, in many ways, but your organic sales were down 4%, but your earnings growth as the best it's been in 3 years, your margins were near record. So you actually had really quite a good earnings year despite sales being down 4%. So how difficult or easy do you think the earnings comp is in '21?
Well, I think you have to bear in mind, Adam, the Checkpoint and Avery, 2 of our more profitable businesses, and we expect both of those to come back quite strongly this year. So I don't think we -- the earnings comp is that difficult really. It's more difficult in the CCL segment in the second half because we had 25%, 26% increases in both Q3 and Q4. But in Q4 last year, in 2019, it was a soft quarter. So if you look at it over a longer period of time, it's certainly not that difficult. And we do expect our food and beverage business, which has been difficult all the way through the pandemic because of the impact of that on-premise trade restriction. Once bars and restaurants open up again, we expect that business to recover quite quickly. And then -- and so that's another one that could bounce back. So I don't feel we've got difficult earnings comparison.
Got it. One on CCL organic growth outlook. So somewhat remarkably, it was up as much last year as it was the year before. And I know '19 was a global slowdown. But one would think that '20 would have been worse than '19 in terms of CCL organic growth, that was and it was and it was identical. So in light of that, how are you thinking about '21 organic growth in CCL? Do you think the last 2 years were quite depressed? And therefore, '21 should be much better than the past years? Or how are you thinking about?
I think we had 1.1% organic growth in both of those years. And I think you have to remember about the pandemic year, we have had the health care boom. So hand sanitizers and excess sales of over-the-counter medicine. And then the CCL design, the IT peripheral phenomenon was another very good tailwind. So I think that offset the things that were down, food and beverage, parcel, Home & Personal Care business, high end cosmetics and things like that. SO we have sort of balance in the portfolio. But if you look at what happened in the last 2 years slowdown, same thing happened, we slowed right down to flat to up a little or even down a little, and I expect our organic growth rate if the economy recovers, to get back to its normal previous run rate, 3% to 5%, something like that.
Right. Right. Got it. And just 2 more. One on the Innovia margin. So they were the highest they've been, obviously, you had a tremendous year there, 20.5% EBITDA margins. I'm trying to remember what the margins were when you announced the deal. How do you think about those -- the margins you are in last year, just in the context of what you think normalized margins should be for that business as you see it now?
Well, I think the industry had a record year. So the supply was tight in some parts of the world, and we were in -- we had -- we were fortunate to be in places where we could supply from. We didn't have any plant closures. And we did a lot of operational work. So I think a lot of the improvements in the results of that business came from a lot of operational turnaround type activity. And then pruning the mix. So we had some, particularly the former businesses. We had some bad mix to prune out. So that also helps, it got replaced by things that more fundamentally more profitable. So it's hard to say, in the first quarter, I think we're going to have to deal with this situation in North America with the sort of incredible rise in resin. It's the fastest it's ever happened in history, at the highest level it's ever been in the history. But I think it's likely to recede as quickly as it started. So resin hit over $1.20 per pound in the month of January, and I think it will probably end up closer to $1.30 by the time February is out. But I wouldn't be surprised to see a drop $0.50 or $0.60 by the time the summer arrives. So it's a short-term peak, really, and I don't expect to see it stay at these elevated levels for very long. And we just have to work our way through it.
Right. One last one, Geoff, on M&A. You had a comment in your release about being well placed to fund your global ambition. Obviously, your balance sheet is in terrific shape. Asset prices globally are very high. So with all that in mind, how are you thinking about sizable M&A in the next year or so?
No change. It's difficult right now for -- we still -- travel is still a real problem for us. I mean we're able to get about a little bit now, but it's still pretty restricted. So I think taking on anything in the near term, not likely, but valuations are still up there. Found things that we've liked the prices of any time soon. There's a good level of activity in the bolt-ons, but large-scale M&A, nothing immediately on the horizon. But I think that may change as the year progresses, and we're able to be a bit more aggressive about going and looking at things that we've been restricted from doing so throughout the pandemic.
Next question coms from the line of Michael Glen of Raymond James.
Just on the checkpoint. As we think about the merchandise availability solutions and security tax business ramping. Is there incremental cost that comes back into Checkpoint for that business and that will keep the margin, say, stable at these levels? Or should we think about the margin there potentially moving even higher?
Well, the MAS hardware business, the MAS hardware has a lower operating margin than the supply side. So if we get more hardware orders, that hurts the mix. So -- but I think generally, it improves the overall result because we've got people involved in that to a fixed cost. So if we get some sales in that area comes back, which I expect is, we are already starting to see it happen. It will be an overall benefit. But we did benefit certainly in the second half cycle from the mix. So being more supplies based and being quite strong in what we would call essential retail, the Walmarts and Targets and supermarket chains, places like adverse versus some more discretionary type retailers.
Okay. And just on Innovia, do you -- how do we think about the opportunity for M&A growth in that segment, in particular, are there -- do you see a wider M&A opportunity in Innovia versus some of the other businesses?
Well, we've made 1 acquisition last year. There's others in the pipeline, whether any of them happen or not, time will tell.
Okay. And the resin inflation, does that impact the CCL secure margins?
No.
And tax rate for next year?
Sean?
Sure. Slightly less than 25%, maybe 24.5-ish.
Your next question comes from the line of Daryl Young of TD Securities.
One quick one on the Checkpoint. I think with respect to RFID and apparel labeling last quarter, you mentioned the majority of the growth was just from the recovery and pent-up demand. Would you say that's still the same this quarter now that you've got record results again? Or would there be an element of shift towards more RFID during the pandemic.
Certainly in Q4. Q4 was -- we continue to see the shift of our apparel label business grew about 7% in Q4. So I think some of that is the rebound of the supply side of the retail and apparel supply chain and some of its RFID, it's a combination the 3.
And then on labels, we've heard some of the consumer package companies talk about taking share from the generics during the pandemic. Is that something you're seeing? And is that a trend that you think will continue as consumers look towards the safety of a premium brand just given pandemic concerns?
Yes. I think that's certainly true. I do think people have been loyal to the brands they know during the pandemic, and have been price shopping. So if you look at the results of P&G, they're probably type or the company in regards to your comment there. And so that's been a benefit to us. But I think it's -- for us, we see that space is still mixed because of the impact of travel retail-related products. So sun care creams, sun care aerosols, travel size, aerosols, things that specialty retail stores are still somewhat down. So it's still a mixed story in personal care between brands that are doing well and a shelf at a supermarket and ones that are associated with different types of activity from being in lockdown.
[Operator Instructions] Next question comes from Scott Fromson of CIBC. You've covered most of the operating and market growth issues. But I'm wondering if you can comment on planned initiatives in sustainability and other ESG issues.
So not a lot to say, and I've said in the past about that, Scott. We're very much tied to the behavior of our CPG customers in that regard. So we've got a whole suite of products that what I would call sustainability drivers. How -- whether they get adopted or not is in their hands more than it is in ours, that it's a topic de jour at the moment for sure, and I think it will continue to be so for some time.
Next question comes from Ben Jekic of PI Financial.
I have 3 very quick questions. Geoff, on the Avery side, and the badges and events business. Can you put that into context revenue, like -- so that's within DTC, how much of that is part of the overall Avery and there's also another part of DTC, if I'm not mistaken. Just to kind of give a...
The large part of Avery is about $100 million. And it's down 65%, 70%.
Okay. And the rest is growing well?
The direct-to-consumer -- the other part of direct-to-consumer is all labels, and that's growing well.
Okay. Okay. And then the second question is M&A, assuming it's done and when it's done, but you're not targeting any specific segment, like it will be opportunistic to wherever you --
I'm not going to comment any more than I have done on M&A again. I think we've said a more here about what our position on M&A is.
Got it. And then the third one, just probably the same answer. But just in Innovia, the way I understand it is you're -- Innovia is better prepared this time than in 2018, but the increase in resin now is more sort of -- or more higher than in 2018. Is that about -- if I compare Innovia now and 2 years ago and resin prices now and 2 years ago, is that about the ratio?
Yes.
Okay. Okay, got it. That's it.
Good way to put it, then. I think what you have to bear in mind is how extreme the price rises have been -- I'm just looking them up here for you. So if you take the -- so resin in the month of September was trading at $0.61 a pound in the U.S., and it's trading at close to $1.30 today. So it's really risen. So it's somewhat compounded by the storm in Texas because the 75% of the industry got shut down and when the storm came. And so I expect this will gradually alleviate itself as March unfolds. But right now, it's a pressure cooker.
Next question comes from David McFadgen of Cormark Securities.
Yes, 2 questions. First of all, just on Avery. I was wondering if you could maybe provide some color on where you think the business will perform. I would imagine that is still going to be pretty challenged in 2021, but maybe it will come back in the latter half as things normalize. And then there's still a lot of workplace closures to organizational products probably be down. So I was just wondering if that consumer going to carry today there. I was wondering if you could provide some color on that. And then just on free cash flow, obviously, very strong free cash flow in 2020. Do you actually think you could to grow your free cash flow in 2021 versus 2020?
Well, I not going to comment. We don't give guidance on free cash flow for the year ahead. So the numbers will be whether we'll see how the year unfolds. As to your questions on Avery, I think you have to bear in mind, there was a lot of significant drops in their performance last year, so down 30% in Q2, down 16% in Q3, down 11% in Q4. So the comps, once we get through Q1, are pretty easy for the rest of the year. So I think it will be difficult to do better than prior year in Q1 just because they weren't really impacted by the pandemic in 2020 until Q2 arrived. And we actually had a pretty strong start to the year in 2020 until the pandemic hit. But obviously, once we get through that, the next 3 quarters, the comps are going to be particularly easy. And I don't expect to see any of our product lines showing drops, and I think we'll all be showing increases of one side or another once we get into the second, third and fourth quarters of the year.
We have a follow-up question from Adam Josephson of KeyBanc.
Just, Geoff, one question on your comment on resin that you think prices could rather quickly come back down heading into the summer. The reason I ask is, obviously, resin prices were up dramatically even before the winter storm a couple of weeks ago, just as many other global commodity prices had actually surged since last summer, whether steel, copper, iron or, lumber, you name it, oil has been surging. So I guess what gives you confidence in that forecast, if you will, that resin prices could quickly come back down. Do you think the supply issue...
It's really the situation in North America, Adam. Because resins have not gone up to the same extent in other parts of the world as it has in North America. So it's really a regional comment about the situation in the U.S. and capacity was tight. Pricing was tight before the storm. The storm has exacerbated there but a lot of new capacities coming on stream. In the second half and the storm will recover. And the rate of premium we have above supply of resin in the U.S. is not sustainable. So you will see, if you get one region of the world that has a price premium of 50% of another region in the world. That's doesn't sustain itself over time. So it's really the premium nature of the price change in North America versus other parts of the world that gives us [confidence] to say that.
Yes. Yes. Just one other question, Geoff. In terms of your visibility, I mean, obviously, when the pandemic started, you and everyone else had on and the year unfolded much better than I think you might have feared in March, April thereabout. So what are you thinking these days in terms of the economic outlook and how it pertains what do you think -- how would you characterize your visibility? And how much better is it now than it was 3, 6, 9 months ago?
Well, I mean, I think in the days of March and April last year, it's difficult to feel confident. So we feel dramatically bad this year than we did this time last year. So and I do think the stimulus that's happening all around the world from governments is going to have a big impact. And I think people's behaviors to go back to normal is also going to have a big impact. So there'll be some -- some of our businesses will receive -- benefited from COVID year and the lockdown year. But others are significantly hurt. And so I think we'll just see that sort of 2 edges of the scale. The ones that businesses that have done well in the pandemic will probably recede to normal. So the ones that are already in the toilet are going to come bouncing back. And I think the balance of that is probably a good thing for us overall.
Yes. I just -- and are you at all concerned about what happens after the government stop sending out checks? Or is that just
Yes, we have the same concerns as everybody else has about debt levels and what that means. But for the near term, I think for the year ahead, I wouldn't be surprised to see U.S. GDP grow 5%, 6% this year. And we tend to follow that. So if you see these rises from the previous lows, that's -- we can't help but follow it. So we feel quite confident about the year ahead. In short-term -- such short-term problem affects, but for that side we feel quite confident about the year ahead.
We have a follow-up question from Stephen MacLeod of BMO Capital Markets.
I just wanted to follow-up on Innovia. And I don't want to do that -- of course your giving the resin price inflation. But I just wanted to -- is it reasonable to expect that in Q1, you could be in a situation where EBIT gets sort of totally wiped out by the resin price inflation given how dramatic it was? Or is that too extreme of a situation? And then maybe...
That might be the case in the U.S. -- it might be the case in the U.S., Stephen. So in the U.S. because it's so dramatic. And then we had -- we've had our plant not able to operate at normal capacity because we can't get LPG. So I think in the U.S., we may have that problem. I don't think we'll have that problem in the rest of Innovia. So it's sort of a -- I think we disclosed on the chart there, the exposure we have to the U.S. So versus other parts of the world. And so that's the part that I think will be particularly impacted. But in January, we had a very good January. So I can tell you, we didn't see it in January. So January numbers were good. Do we expect February to be difficult, partly driven by the situation in Texas.
Yes. And would you expect that -- are you still seeing strong demand on the Innovia side, is this more a cost issue than a demand issue?
It's more driven by the inflation and our ability to operate the plant because of energy supply, those are the 2 combining factors not demand driven.
Right. So the demand is still robust?
Yes.
[Operator Instructions] There are no further questions at this time. Presenters, you may continue.
Well, thank you very much, everybody, for joining the call today. Thank you for your attention, and we look forward to talking to you again in May. Bye, everyone.
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