aicc canada presentation€¦ · 13/9/2016 · source: factset; q3 16 data until aug 30, 2016...
TRANSCRIPT
Refer to pages 34-36 for Important Disclosures, including Analyst’s Certification. For Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx
AICC CanadaAGM & General Meeting
Update on North American Containerboard & Corrugated Markets
Mark Wilde, PhDManaging [email protected] / 212-883-5102
Mississauga, ON, CanadaSeptember 13, 2016
2
Our Focus Today
1. Current Industry Backdrop
2. Trends in the Industry
3. The Industry From an Investor Perspective
3
Current Industry Backdrop
1. Demand Is Mixed
Many Emerging Markets Have Slowed
N.A. Volumes Are Expanding Slowly
European Demand Has Been Surprisingly Strong
2. Supply Is Creeping Up
Mix of Greenfield Recycled and PM Conversions
‒ Examples: IP/Madrid, Pratt, PCA, Hamburger, LEIPA, Metsa Board,
Parenco, SCA, StoraEnso, VPK/Klingele, Atlantic, Greenpac, Kruger
Note: SCA, StoraEnso, and Metsa = not covered
4
Current Industry Backdrop (Cont’d.)
3. Cost Pressure Has Been Limited OCC Has Been Near Historical Trough Levels, but Rising Since April
U.S. OCC Prices ($/s.ton)
Source: RISI, BMO Capital Markets
-
25
50
75
100
125
150
175
200
Jan-
03
Aug
-03
Apr
-04
Dec
-04
Aug
-05
Mar
-06
Nov
-06
Jul-0
7
Mar
-08
Nov
-08
Jun-
09
Feb-
10
Oct
-10
Jun-
11
Feb-
12
Sep
-12
May
-13
Jan-
14
Sep
-14
May
-15
Dec
-15
Aug
-16
Long-Term Avg since Jan 2003: $100
5
Current Industry Backdrop (Cont’d.)
4. Limited Cost Pressure
Energy Costs Have Been Very Low
Spot Prices for Natural Gas Rose 21.9% q/q in Q3 QTD
Henry Hub Natural Gas Price (USD/MMBtu)
Source: Bloomberg, BMO Capital Markets
0
2
4
6
8
10
12
14
16
Jan-
05
May
-05
Oct
-05
Feb-
06
Jul-0
6
Dec
-06
Apr
-07
Sep
-07
Feb-
08
Jun-
08
Nov
-08
Apr
-09
Aug
-09
Jan-
10
May
-10
Oct
-10
Mar
-11
Jul-1
1
Dec
-11
May
-12
Sep
-12
Feb-
13
Jun-
13
Nov
-13
Apr
-14
Aug
-14
Jan-
15
Jun-
15
Oct
-15
Mar
-16
Aug
-16
Long-Term Avg: 5.0
6
Current Industry Backdrop (Cont’d.)
5. Large Foreign Exchange Moves
U.S. Dollar Has Strengthened Against Most Currencies
Impact on Trade Flows and Pricing?
Creates Local Issues in Markets Like Canada
US Dollar vs Major Currencies
Source: FactSet; Q3 16 data until Aug 30, 2016
Exchange Rates Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 QTD Y/Y Change
EUR/USD 0.90 0.91 0.91 0.89 0.90 -0.2%
CAD / USD 1.31 1.34 1.37 1.29 1.30 0.5%
BRL / USD 3.55 3.85 3.90 3.51 3.24 9.4%
RUB / USD 63.20 66.09 74.61 65.83 64.67 -2.3%
AUD / USD 1.38 1.39 1.39 1.34 1.32 4.6%
CNY / USD 6.30 6.39 6.54 6.53 6.66 -5.4%
7
Current Industry Backdrop (Cont’d.)
5. Large Foreign Exchange Moves (Cont’d.)
US Dollar vs CAD
Source: FactSet
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
Jan-
06
Apr
-06
Aug
-06
Nov
-06
Feb-
07
Jun-
07
Sep
-07
Jan-
08
Apr
-08
Aug
-08
Nov
-08
Mar
-09
Jun-
09
Sep
-09
Jan-
10
Apr
-10
Aug
-10
Nov
-10
Mar
-11
Jun-
11
Oct
-11
Jan-
12
May
-12
Aug
-12
Nov
-12
Mar
-13
Jun-
13
Oct
-13
Jan-
14
May
-14
Aug
-14
Dec
-14
Mar
-15
Jun-
15
Oct
-15
Jan-
16
May
-16
Aug
-16
Avg Since 2006 : 1.08
8
Current Industry Backdrop (Cont’d.)
6. Export Pricing Has Been Under Pressure
Kraftliner Export Prices (USD/tonne)
Source: RISI-Pulp & Paper Week, BMO Capital Markets
Aug export prices to: 1) S. Europe are down $59/tonne y/y and -$205/tonne since mid-2013 peak; and 2) Mexico are down $55/tonne y/y and -$85/tonne since mid-2013 peak
350400450500550600650700750800850
Aug
-04
Feb-
05
Aug
-05
Feb-
06
Aug
-06
Feb-
07
Aug
-07
Feb-
08
Aug
-08
Feb-
09
Aug
-09
Feb-
10
Aug
-10
Feb-
11
Aug
-11
Feb-
12
Aug
-12
Feb-
13
Aug
-13
Feb-
14
Aug
-14
Feb-
15
Aug
-15
Feb-
16
Aug
-16
Unbleached Kraftliner, 42 lb (export, to Laredo for Mexico)
Unbleached Kraftliner, 175 g+ (export), Southern Europe
Unbleached Kraftliner, 175 g+ (export), Hong Kong
9
Current Industry Backdrop (Cont’d.)
7. Domestic Containerboard Pricing
Producers Have Announced a $50/ton Price Hike Effective Oct 1
Containerboard Pricing (USD/s.ton)
Source: RISI-Pulp & Paper Week, BMO Capital Markets
100
200
300
400
500
600
700
Aug
-00
Aug
-01
Aug
-02
Aug
-03
Aug
-04
Aug
-05
Aug
-06
Aug
-07
Aug
-08
Aug
-09
Aug
-10
Aug
-11
Aug
-12
Aug
-13
Aug
-14
Aug
-15
Aug
-16
Linerboard - Open Market Price - 42-lb Corrugating Medium - Open Mkt Price - 26-lb
10
Trends in the Global Industry
1. Industry Consolidation
North America
‒ One More Large Deal, Several Smaller Deals?
Europe
‒ Potential for More Consolidation in Europe
• Could Involve Public, Private, or Offshore Players
Latin America (L.A.)
‒ Has Seen Moves by U.S./European Players
‒ SmurfitKappa Has Been Especially Active
‒ WestRock Is Becoming More Active
11
Trends in the Global Industry
2. Increased Emphasis on Vertical Integration
For Past 15+ Years, U.S. Integrated Producers Have Been
Buying Independent Converters
Recent Deals‒ PCA: TimBar / Crockett Packaging‒ GP: Reliable / Excel / LACorr‒ KapStone: Victory Packaging / Central Florida Box / US Corrugated‒ Hood: Action Box / Stronghaven / Packaging Unlimited‒ New-Indy: Carolina Container‒ Pratt: Visy / Minnesota Corrugated / Robert Mann / Triad Packaging‒ Atlantic / BlackHawk Corrugated JV / Skybox Packaging
Valuation Multiples for Independent Converters Have Risen:
‒ 6-7x 9-10+x
12
Trends in the Global Industry (Cont’d.)
3. Increasing Globalization
Large U.S. Players Have Limited Room at Home‒ IP into Brazil, Mill Conversion in Spain, Expansion in Morocco and Turkey
‒ WRK into Brazil, Mexico, and India
With Stronger Balance Sheet, SKG Has Become More Active in
U.S. and Latin America
Foreign Players Eye High Margins and Stable Prices in U.S.
Pratt, SmurfitKappa, SAICA?
4. Re-Purposing of Capacity Will Continue to Be Source of Supply
Both Virgin Fiber and Recycled Fiber
N.A., Europe, L.A., . . . Elsewhere?
13
The Industry From an Investor Perspective - What Do Investors Want?
1. Superior Financial Returns
2. Stable & Consistent Returns
Lower Volatility & Reduced Exposure to Outside "Shocks"
3. Strong & Steady Cash Flow Generation
Disciplined Use of Cash
‒ No Overly Aggressive Capital Programs
‒ No Overpriced & Poorly Executed Acquisitions
‒ In Absence of Good Growth or Deleveraging Opportunities, Return Cash to Shareholders
o Dividends - - Ordinary and Special
o Share Repurchases
• Tax Efficiency
14
How Do Investors “Score” Packaging Companies?
Current Market Valuations on Leading Packaging CompaniesEnterprise Value / Forward EBITDA (2017)
Source: FactSet, Company filings, BMO estimates
Average of BLL, SEE, ATR, BMS, SON, CCK, and SLGN = 10.4xAverage of IP, GPK, DS Smith, PKG, KS, WRK, and SKG = 8.1x
Note: Enterprise Value (EV) = Market Capitalization + Net Debt + Minority Interest; SKG and DS Smith – FactSet Consensus estimates, SKG and DS Smith are not covered; 2018 estimates for DS Smith. As of 8/26/2016.
12.0x
11.1x10.8x
10.1x9.7x 9.7x
9.3x 9.3x9.1x
8.7x 8.4x 8.4x 8.3x 8.2x7.8x 7.5x
7.1x 6.9x
6.0x
7.0x
8.0x
9.0x
10.0x
11.0x
12.0x
13.0x
BLL
SE
E
ATR
BM
S
SON
CC
K
SLG
N
LAB
L
BER
Y IP
GPK
DS
Sm
ith
PK
G KS
MP
SX
WR
K OI
SK
G
15
What Does This Tell Us?
They Aren't High Growth . . . at Least, Domestically
Canmakers Receive a Premium Valuation From Investors – Why??
Beverage Can Volumes (US & Canada) - % Chg Y/Y Food Can Volumes (US only) - % Chg Y/Y
Note: Beverage can data includes the U.S. and Canada, while food can data is U.S. onlySource: The Can Manufacturers Institute
2003 – 2015 CAGR: -0.6% 2003 – 2015 CAGR: -1.0%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
1H16
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
1H16
16
What Does This Tell Us?
They Have Generated Growth via:
‒ Consolidation in Core Markets
‒ Selective Growth in Adjacent Markets
‒ Disciplined Expansion Into Offshore Markets
‒ Willingness to Return Cash to Shareholders
o Ball Has Repurchased $1.5B of Stock Since 2012
17
What Does This Tell Us?
Reduced Earnings Volatility by Reducing “Commodity Risk”
‒ Commodity Price Risk Hedged or Passed to Customer
Segment EBITDA Margins for North America Canmakers
Note: BLL – includes Americas/Asia – Beverage Packaging, Europe Beverage Packaging and Metal Foods & Household Packaging segmentsCCK includes Americas Beverage, North America Food, European Beverage, and European Food segments SLGN – includes Metal Containers segmentSource: Company Filings, BMO Capital Markets
BLL
CCK
SLGN12%
13%
14%
15%
16%
17%
18%
19%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
1H 2
016
BLL CCK SLGN
18
What Does This Tell Us?
How Have Stocks Performed?
Stock Performance (Indexed) of N.A. Metal Canmakers vs. Paper Packaging Companies vs S&P
Source: FactSet, BMO Capital Markets
Metal Cans Index includes – Ball (BLL), Crown (CCK), and Silgan (SLGN)Paper Packaging Index includes – International Paper (IP), WestRock (WRK), Packaging Corp of America (PKG), KapStone (KS)Note: WestRock is RKT prior to July 2015
0
200
400
600
800
1,000
1,200
1,400
1,600
Jan-
01
Aug
-01
Feb-
02
Sep
-02
Apr
-03
Nov
-03
Jun-
04
Jan-
05
Aug
-05
Mar
-06
Oct
-06
May
-07
Dec
-07
Jul-0
8
Feb-
09
Sep
-09
Apr
-10
Oct
-10
May
-11
Dec
-11
Jul-1
2
Feb-
13
Sep
-13
Apr
-14
Nov
-14
Jun-
15
Jan-
16
Aug
-16
Metal Cans - Indexed Paper Packaging - Indexed S&P500 - Indexed
19
Performance of Paper-Based Packagers
Paper Packaging Sector (Indexed) Relative to S&P 500 (Indexed)
Source: FactSet, BMO Capital Markets; Note: Paper-based packagers include IP, WRK, PKG, and KS (WRK is RKT prior to July 2015)
Historically, Most Paper Cos. Delivered Subpar & Highly Volatile Returns
1991 - 2000
2001 – To Date
- 50
100 150 200 250 300 350 400 450 500
1/4/
91
8/4/
91
3/4/
92
10/4
/92
5/4/
93
12/4
/93
7/4/
94
2/4/
95
9/4/
95
4/4/
96
11/4
/96
6/4/
97
1/4/
98
8/4/
98
3/4/
99
10/4
/99
5/4/
00
12/4
/00
Paper Packaging - Indexed S&P - Indexed
0
200
400
600
800
1,000
1,200
1/2/
01
10/1
/01
6/30
/02
3/29
/03
12/2
6/03
9/23
/04
6/22
/05
3/21
/06
12/1
8/06
9/16
/07
6/14
/08
3/13
/09
12/1
0/09
9/8/
10
6/7/
11
3/5/
12
12/2
/12
8/31
/13
5/30
/14
2/26
/15
11/2
5/15
8/23
/16
Paper Packaging - Indexed S&P500 - Indexed
20
What Have Investors Worried About?
Low Returns on Invested Capital
Overpriced & Poorly Executed Acquisitions
Cyclical Pricing
Containerboard Pricing ($/s.ton)
Source: RISI, BMO Capital Markets
-
100
200
300
400
500
600
700
Aug
-95
Aug
-96
Aug
-97
Aug
-98
Aug
-99
Aug
-00
Aug
-01
Aug
-02
Aug
-03
Aug
-04
Aug
-05
Aug
-06
Aug
-07
Aug
-08
Aug
-09
Aug
-10
Aug
-11
Aug
-12
Aug
-13
Aug
-14
Aug
-15
Aug
-16
Linerboard - Open Market Price - 42-lb Corrugating Medium - Open Mkt Price - 26-lb
21
How Do Investors Think About Paper Packaging Companies
Modestly Cyclical End Market Demand
Box Shipments (% Change Y/Y)
Source: FBA, BMO Capital Markets; 2016 YTD data until July
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
YTD
22
How Do Investors Think About Paper Packaging Companies
Unpredictable Export Volumes
U.S. Linerboard Export Volumes (‘000 Tons)
Source: AF&PA, BMO Capital Markets; * 2016 annualized using data until July
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
*
23
How Do Investors Think About Paper Packaging Companies
Periodic Surges in Capacity
North America Containerboard Capacity (% Change Y/Y)
Source: AF&PA, BMO Capital Markets
“Run Full” Mentality
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
24
The Situation Has Been Changing
The N.A. Industry Has Consolidated
WY, 8%
Stone, 8%
IP, 7%
Champion, 6%
Union Camp,
5%
Other, 66%
Stone, 14%
G-P, 9%
TIN, 7%
IP, 7%
WY, 7%
Other, 56%
SSCC, 25%
WY, 16%
IP, 13%G-P, 10%
TIN, 9%
Other, 27%
U.S. Containerboard Market Share – Changing Landscape
Source: FBA, BMO Capital Markets
1984 (Top 4 Players = 29%) 1995 (Top 4 Players = 37%)
2003 (Top 4 Players = 64%) 2016 (Top 4 Players = 71%)
IP, 33%
WRK, 19%G-P, 10%
PKG, 9%
KS, 4%
Other, 25%
25
The Situation Has Been Changing
Valuation Discipline on Deals Has Improved
Producers Have Become More Disciplined About Capital Spending
Capex as a % of D&A for Major Producers in North America
Source: Company Filings, BMO Capital Markets; Note: WRK is RKT for 2014 and prior
IP
WRK
PKG
KS
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
2008 2009 2010 2011 2012 2013 2014 2015
IP WRK PKG KS
205% 174% 124%
26
The Situation Has Been Changing
Increased Attention on Capacity and Attentive to Supply-Demand
Dynamics
Major Capacity Closures / Shutdowns in North America since 2006
Source: RISI, AF&PA, Company Filings and BMO Capital Markets
Date Company Name Location Volume (tons)1Q 06 Weyerhaeuser NC 350,000Mar-06 Groveton Paperboard NH 150,0003Q 06 Noram pac ONT 300,000Jan-07 Longview Fiber WA 246,000Jun-07 Sm urfit-Stone IN / CA 200,000Jul-07 Banner Fiberboard WV 20,000Oct-07 International Paper IN 200,000Oct-08 Sm urfit-Stone AZ 135,000Oct-08 International Paper OR 250,000Nov-08 Catalys t BC 131,000Nov-08 International Paper OK 430,0004Q 08 Sm urfit-Stone QC / MT / FL 515,0001Q 09 Georgia Pacific GA / FL 305,0001Q 09 Sm urfit-Stone MI 280,000Dec-09 Sm urfit-Stone MT 440,000Dec-09 International Paper OR / LA 720,0001Q 10 West Fraser BC 370,0001Q 12 Rock-Tenn QC 176,0002Q 12 Rock-Tenn LA 145,0004Q 12 Minas Bas in NS 90,0004Q 15 WestRock OR 140,0004Q 15 WestRock OH 310,0001Q 16 WestRock CT 165,000Total Closures / Shutdowns since 2006 6,068,000
ContainerboardDate Company Name Location Volume (tons)1Q 06 Meadwes tvaco TX 180,0003Q 09 Meadwes tvaco TX 200,0004Q 09 International Paper VA 140,0001Q 13 International Paper GA 140,0002Q 16 International Paper NC 350,000Total Closures / Shutdowns since 2006 1,010,000
Bleached Paperboard
27
The Situation Has Been Changing
Containerboard Inventories (In Weeks of Supply)
Source: FBA, AF&PA, BMO Capital Markets
Increased Attention on Capacity and Attentive to Supply-Demand
Dynamics
3.1
3.6
4.1
4.6
5.1
5.6
Jul-9
7
Jul-9
8
Jul-9
9
Jul-0
0
Jul-0
1
Jul-0
2
Jul-0
3
Jul-0
4
Jul-0
5
Jul-0
6
Jul-0
7
Jul-0
8
Jul-0
9
Jul-1
0
Jul-1
1
Jul-1
2
Jul-1
3
Jul-1
4
Jul-1
5
Jul-1
6
10 Year July Avg: 4.0
28
The Situation Has Been Changing
Historical EBITDA Margins for Key North America Containerboard Producers
Source: Company Filings, BMO Capital Markets
Margins Have Become Stable
PKGIPWRK
KS GEF
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
PKG IP WRK KS GEF
IP acq. WY Pkg RKT acq. SSCC IP acq. TINKS acq. Longview
PKG acq. BZ
29
The Market Has Begun to Reward Paper Packaging Companies
Historical Valuation: Enterprise Value / Forward EBITDA – Paperboard Packaging Companies
Source: FactSet, BMO Capital Markets: Data as of 8/26/16.Note: Procter & Gamble (PG), Kimberly Clark (KMB), SKG and DS Smith not covered by BMO; Forward EBITDA estimates are consensus estimates
Consumer Products
12.8x10.6x
9.7x 8.7x7.7x 7.3x 7.5x 7.3x
6.8x 6.9x 6.3x 5.8x 6.2x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
PG KMB BLL CCK SON DS Smith GPK PKG KS GEF IP SKG WRK
5-yr avg. Premium to 5-yr Current 5-yr peak 5-yr trough
30
The Market Has Begun to Reward Paperboard Packaging Companies
What Will It Take to Move Closer to Average Market Values?
‒ Continue to Demonstrate Reduced Cyclicality
‒ Strong Track Record of Capital Discipline
‒ Some Element of Growth
31
Questions?
Sector Comparison
32
(in US$ millions, except per share amounts)
BMOCM Price 52-week Dilut. Market Revenues EBITDA EBITDA Margin EPS Div. YieldRating Target 9/8/16 High-Low Shrs Cap. 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E Current
ContainerboardInternational Paper IP Mkt $47 $49.07 $50 - 33 414 $20,315 $31,017 $21,006 $21,336 $3,573 $3,567 17.0% 16.7% $3.43 $3.30 3.6%WestRock WRK OP 52 48.19 $63 - 30 257 12,404 17,726 14,541 14,619 2,328 2,356 16.0% 16.1% 2.55 2.80 3.1%Packaging Corp PKG OP 78 80.86 $82 - 44 94 7,617 10,096 5,709 5,973 1,148 1,205 20.1% 20.2% 4.85 5.20 2.7%KapStone KS Mkt 16 18.47 $25 - 9 98 1,801 3,328 3,052 3,098 385 391 12.6% 12.6% 1.10 1.20 2.2%
Other Paper/PackagingGraphic Packaging GPK OP 15.5 14.38 $15 - 11 324 4,662 6,853 4,413 4,560 787 815 17.8% 17.9% 0.76 0.80 1.4%Sonoco Products SON Mkt 46 52.38 $53 - 37 102 5,336 6,516 4,932 5,038 550 662 11.2% 13.1% 2.72 2.82 2.8%MPS MPSX Mkt 17 14.03 $19 - 13 77 1,087 1,950 1,661 1,608 254 255 15.3% 15.8% 0.61 0.75 -- Greif GEF Mkt 36 49.00 $49 - 24 59 2,891 3,733 3,355 3,480 431 476 12.8% 13.7% 2.30 2.70 3.4%Multi-Color LABL Mkt 61 69.57 $80 - 40 17 1,180 1,658 931 976 162 173 17.4% 17.8% 3.60 3.92 0.3%
Rigid PackagingBall BLL Mkt $79 $80.10 $81 - 60 177 $14,178 $21,794 $9,128 $10,732 $1,390 $1,800 15.2% 16.8% $3.45 $4.43 0.6%Crown CCK Mkt 56 55.66 $57 - 43 139 7,756 13,638 8,520 8,940 1,301 1,373 15.3% 15.4% 3.90 4.16 -- Owens-Illinois OI Mkt 20 18.33 $24 - 12 163 2,984 9,535 6,781 6,870 1,291 1,343 19.0% 19.5% 2.28 2.45 -- Berry Plastics BERY Mkt 43 44.69 $46 - 28 126 5,626 11,283 6,497 6,546 1,197 1,244 18.4% 19.0% 2.29 2.56 -- Silgan SLGN Mkt 47 49.89 $56 - 47 61 3,036 4,851 3,680 3,725 472 506 12.8% 13.6% 2.76 3.13 1.4%
Flexible/Other PackagingSealed Air SEE Mkt $50 $47.06 $53 - 38 198 $9,313 $13,894 $6,917 $7,151 $1,169 $1,252 16.9% 17.5% $2.55 $2.94 1.4%Bemis BMS Mkt 52 51.92 $54 - 39 96 4,969 6,535 4,166 4,362 607 649 14.6% 14.9% 2.70 3.00 2.2%AptarGroup ATR Mkt 79 79.21 $82 - 64 65 5,132 5,657 2,420 2,558 481 522 19.9% 20.4% 3.19 3.50 1.5%
Paper & Fiber ProductsDomtar UFS Mkt $37 $36.85 $43 - 30 63 $2,314 $3,476 $5,083 $5,202 $660 $680 13.0% 13.1% $3.10 $3.30 4.3%P H Glatfelter GLT Mkt 22 23.39 $24 - 14 44 1,031 1,324 1,670 1,691 173 179 10.3% 10.6% 1.53 1.65 2.1%
Source: BM O Research Estimates, Company filings, FactSet.
Note: BM O ratings abbreviated as M kt (M arket Perform), OP (Outperform), and Und (Underperform). WFT, CFP and IFP in Canadian do llars. LABL is on a M ar 31 fiscal year, so amounts shown are for F2017E and F2018E. BLL's market cap is pro forma for new shares to be issued.
Company Name Ticker EV
33
DisclosuresImportant Disclosures
Analyst's CertificationI, Mark Wilde, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA (exception: Brodie Woods). These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific DisclosureFor Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx.
Distribution of Ratings (September 7, 2016)Rating BMOCM US BMOCM US BMOCM US BMOCM BMOCM StarMineCategory BMO Rating Universe* IB Clients** IB Clients*** Universe**** IB Clients***** UniverseBuy Outperform 40.3% 20.1% 54.9% 41.4% 52.9% 54.7%Hold Market Perform 5.9% 10.9% 41.5% 55.0% 44.8% 39.8%Sell Underperform 3.8% 14.3% 3.7% 3.4% 1.8% 5.5%
* Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within
ratings category.*** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of
Investment Banking clients.**** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment
Banking clients.
34
DisclosuresRating and Sector Key (as of April 5, 2013):We use the following ratings system definitions:OP = Outperform - Forecast to outperform the analyst’s coverage universe on a total return basis;Mkt = Market Perform - Forecast to perform roughly in line with the analyst’s coverage universe on a total return basis; Und = Underperform - Forecast to underperform the analyst’s coverage universe on a total return basis;(S) = Speculative investment;NR = No rating at this time; andR = Restricted – Dissemination of research is currently restricted.
BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small Cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating).
Prior BMO Capital Markets Ratings System (January 4, 2010–April 4, 2013):http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf
Other Important Disclosures For Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3.
Dissemination of ResearchDissemination of Research BMO Capital Markets Equity Research is available via our website https://research-ca.bmocapitalmarkets.com/Public/Secure/Login.aspx? ReturnUrl=/Member/Home/ResearchHome.aspx. Institutional clients may also receive our research via Thomson Reuters, Bloomberg, FactSet, and Capital IQ. Research reports and other commentary are required to be simultaneously disseminated internally and externally to our clients.
~ Research distribution and approval times are provided on the cover of each report. Times are approximations as system and distribution processes are not exact and can vary based on the sender and recipients’ services. Unless otherwise noted, times are Eastern Standard and when two times are provided, the approval time precedes the distribution time.
BMO Capital Markets may use proprietary models in the preparation of reports. Material information about such models may be obtained by contacting the research analyst directly. There is no planned frequency of updates to this report.
35
DisclosuresGeneral Disclaimer“BMO Capital Markets” is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its subsidiaries BMO NesbittBurns Inc., BMO Capital Markets Limited in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Limited and BMO CapitalMarkets Corp are affiliates. Bank of Montreal or its subsidiaries (“BMO Financial Group”) has lending arrangements with, or provide other remunerated services to, many issuerscovered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject tochange without notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and containinformation and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes noresponsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents.Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primarybasis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. Thismaterial is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell tocustomers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short positionin many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO CapitalMarkets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein.
Additional MattersTo Canadian Residents: BMO Nesbitt Burns Inc. furnishes this report to Canadian residents and accepts responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should do so through BMO Nesbitt Burns Inc.The following applies if this research was prepared in whole or in part by Alexander Pearce, David Round, Edward Sterck or Brendan Warn: This research is not prepared subjectto Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and subject to the regulations of the Financial Conduct Authority (FCA) in theUnited Kingdom. FCA regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5%or more of the equity of the issuer. Canadian regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it andits affiliates own 1% or more of the equity of the issuer that is the subject of the research. Therefore BMO Capital Markets Limited will disclose its and its affiliates' ownershipinterest in the subject issuer only if such ownership exceeds 5% of the equity of the issuer.To U.S. Residents: BMO Capital Markets Corp. furnishes this report to U.S. residents and accepts responsibility for the contents herein, except to the extent that it refers tosecurities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp.To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct Authority. The contentshereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in matters relating to investments falling withinArticle 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (II) high net worth entities falling within Article 49(2)(a) to (d) ofthe Order (all such persons together referred to as “relevant persons”). The contents hereof are not intended for the use of and may not be issued or passed on to retail clients.
Unauthorized reproduction, distribution, transmission or publication without the prior written consent of BMO Capital Markets is strictly prohibited.
Click here for data vendor disclosures when referenced within a BMO Capital Markets research document.
36
Disclosures
ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
BMO Financial Group (NYSE, TSX: BMO) is an integrated financial services provider offering a range of retail banking, wealth management, and investmentand corporate banking products. BMO serves Canadian retail clients through BMO Bank of Montreal and BMO Nesbitt Burns. In the United States, personaland commercial banking clients are served by BMO Harris Bank N.A., (Member FDIC). Investment and corporate banking services are provided in Canadaand the US through BMO Capital Markets.
BMO Capital Markets is a trade name used by BMO Financial Group for the wholesale banking businesses of Bank of Montreal, BMO Harris Bank N.A,(Member FDIC), BMO Ireland Plc, and Bank of Montreal (China) Co. Ltd. and the institutional broker dealer businesses of BMO Capital Markets Corp.(Member SIPC) in the U.S., BMO Nesbitt Burns Inc. (Member Canadian Investor Protection Fund) in Canada, Europe and Asia, BMO Capital Markets Limitedin Europe and Australia and BMO Advisors Private Limited in India.
® Registered trademark of Bank of Montreal in the United States, Canada and elsewhere.TM Trademark Bank of Montreal
©COPYRIGHT 2016 BMO CAPITAL MARKETS CORP