CCL Reports Record Second Quarter Results and Declares Dividend



    Stock Symbol: TSX - CCL.A and CCL.B

    TORONTO, Aug. 2 /CNW/ -

    Dear Shareholder:

    Please find enclosed your Second Quarter 2007 shareholder report for CCL
Industries Inc. This package provides detailed information about your
Company's recent business activities and its financial performance.
    Over the last five years, CCL has developed into a global specialty
packaging business, operating 49 plants in 15 countries, and as a result of
this strategic evolution, we are seeing more interest from Canadian and
American investors that are looking for global franchises. Investors are now
routinely comparing CCL to our international specialty packaging peers as
there are no comparable Canadian public companies. These financial comparisons
have highlighted to the investment community in both Canada and the United
States that our stock has been relatively under-valued. We believe that the
globalization and performance of CCL has been and should continue to be a
positive influence on shareholder value.
    Your Board of Directors is very pleased with the strong financial
performance of your Company and today approved its quarterly dividend payable
on September 28, 2007. This dividend is supported by the strong cash flow and
earnings growth of your Company and is maintained at the current level after
having increased 9% in March 2007. This dividend is a continuation of CCL's
record of paying consecutive quarterly dividends for over 25 years without a
reduction. The dividend is $0.12 per Class B non-voting share and $0.1075 per
Class A voting share.
    Conference calls with our stakeholders are held following the release of
our quarterly results. Presentation materials used during the conference calls
and the annual Investors' Day, as described above, are posted on our website
along with audio recordings of the meetings. In addition, presentation
materials used in meetings with investors are also posted on our website.
Instructions for accessing these services are set out at the end of this
earnings release.
    We encourage all shareholders to access our website www.cclind.com on a
regular basis for investor and company news including scheduled dates for
future earnings releases. If you would like to have future Press Releases
e-mailed to you at the time they are issued, please complete the Information
Request Form under the "Investors" tab ("Contact Us" icon) on our website or
write to us at CCL to the attention of Christene Duncan.

    Yours truly,


    Jon K. Grant
    Chairman of the Board


    Investor Update
    ---------------
    1. Press Release - Second Quarter 2007 Results and Dividend Declaration
    2. Consolidated Financial Statements
    3. Notes to Consolidated Financial Statements
    4. Second Quarter 2007 Management's Discussion and Analysis


    
    Results Summary

                                     For Periods Ended June 30th
                        -----------------------------------------------------
                              Three Months                Six Months
                        -----------------------------------------------------
    (in millions of
     Cdn dollars, except                     %                          %
     per share data)       2007     2006   Change     2007     2006   Change
                        -------- -------- -------- -------- -------- --------

    Sales               $ 357.2  $ 296.6     20.4  $ 730.3  $ 609.8     19.8
                        -------- --------          -------- --------
                        -------- --------          -------- --------

    Restructuring and
     other items -
     net loss                 -     (1.0)             (0.3)    (0.6)
                        -------- --------          -------- --------
    Net earnings        $  28.8  $  17.6     63.6  $  58.8  $  38.7     51.9
                        -------- --------          -------- --------
                        -------- --------          -------- --------

    Per Class B shares
      Net earnings      $  0.89  $  0.54     64.8  $  1.82  $  1.20     51.7
                        -------- --------          -------- --------
                        -------- --------          -------- --------
      Diluted earnings  $  0.86  $  0.53     62.3  $  1.76  $  1.17     50.4
                        -------- --------          -------- --------
                        -------- --------          -------- --------

    Restructuring and
     other items and
     favourable tax
     adjustments
     included in
     net earnings -
     net gain (loss)    $  0.11  $ (0.03)          $  0.16  $ (0.06)
                        -------- --------          -------- --------
                        -------- --------          -------- --------

    Number of
     outstanding shares
     (in 000s)
      Weighted average
       for the period    32,233   32,212      0.1
      Actual at period
       end               32,708   32,580      0.4
    

    CCL Industries Inc., a world leader in the development of manufacturing,
packaging and labelling solutions for the consumer products and healthcare
industries, announced today its financial results for the second quarter ended
June 30, 2007 and the declaration of its quarterly dividend.
    Sales for the second quarter of 2007 of $357.2 million were 20% ahead of
the $296.6 million recorded in the second quarter of 2006, while sales for the
first six months of 2007 of $730.3 million were 20% higher than last year's
$609.8 million. Financial comparisons to the prior year's results have been
positively affected by the significant appreciation of the euro and most other
currencies relative to the Canadian dollar offset by further depreciation of
the U.S. dollar. Sales increased for the quarter by 19% due to organic growth
and an acquisition, while foreign exchange net of a disposition added a
further 1%. On a comparative basis with last year's second quarter, sales
increased significantly in all reporting segments with the exception of a
decline in the Tube Division. For the year-to-date, sales increased by 17% as
a result of organic growth and acquisitions, while foreign exchange net of
dispositions added a further 3%. For the quarter and year-to-date periods,
overall sales growth was split equally between organic growth and
acquisitions.
    Net earnings for the second quarter of 2007 were $28.8 million, up 64%
from the $17.6 million recorded in the second quarter of 2006 due primarily to
the substantial sales and operating income increases in the business, the
impact of favourable tax adjustments in 2007 and restructuring and other items
incurred in 2006. Divisional operating income improved by $7.9 million or 23%
from last year's second quarter due to substantially stronger performances in
the Label and Container Divisions and higher income from the ColepCCL joint
venture. Operating income in the Tube Division was below prior year's level.
In the second quarter of 2007, favourable tax adjustments due to a reduction
in tax rates in foreign subsidiaries and a positive tax settlement increased
net earnings by $3.6 million. In the second quarter of 2006, restructuring and
other costs of $1.0 million before tax were incurred ($0.7 million after tax)
primarily in the Container Division.
    For the first six months of 2007, net earnings were $58.8 million, up 52%
from the $38.7 million in the comparable 2006 period. Net earnings for the six
months of 2007 were affected by restructuring and other costs of $1.0 million
and a gain on the sale of a property of $0.7 million for a net loss of
$0.3 million before tax (net gain of $0.2 million after tax). Including the
positive effect of favourable tax adjustments of $5.0 million, net earnings
increased by $5.2 million due to the foregoing items.
    Earnings per Class B share were $0.89 in the second quarter of 2007
compared to $0.54 earned in the same period last year, an increase of 65%.
Favourable tax adjustments had a positive effect on earnings per share in the
second quarter of 2007 of $0.11. Restructuring costs in the second quarter of
2006 decreased earnings per Class B share by $0.03. Diluted earnings per Class
B share were $0.86 in the second quarter of 2007 and $0.53 in the second
quarter of 2006.
    For the first six months of 2007, earnings per Class B share were $1.82
compared to $1.20 in the prior year period, a 52% increase. A gain on the sale
of a property and favourable tax adjustments net of restructuring and other
items increased earnings per Class B share by $0.16 for the first half of 2007
versus a $0.06 reduction in the first half of 2006. Diluted earnings per
Class B share were $1.76 for the first six months of 2007 and $1.17 in the
first half of 2006.
    Donald G. Lang, Vice Chairman and Chief Executive Officer commented, "We
are very satisfied with another record quarterly earnings performance in CCL's
second quarter. We are pleased that our second quarter earnings per share were
65% ahead of the second quarter last year and, excluding restructuring and
other items and favourable tax benefits, were an exceptional 37% ahead of last
year's comparable period. Our global customers are generally enjoying good
sales growth in most of the world and are expanding rapidly into new
geographies. Our strategy to expand with them internationally has been
rewarding and we intend to continue to grow with them wherever we can add
value."
    Mr. Lang continued, "The Label Division continues to show robust growth
in sales and increased profitability. The conversion in the beer industry from
paper labels to pressure sensitive labels has given rise to a significant new
global business base for the Company. We continue to be extremely pleased with
the operating performance of the former Illinois Tool Works business
specializing in shrink and stretch sleeves, acquired in January. The Container
Division has also seen an increase in sales and improved profitability
relative to the last half of 2006, as it continues to adjust to higher
aluminum commodity costs. The Tube Division has experienced sluggish volume
and a reduction in income compared to last year's level due to softer personal
care markets and reduced consumer spending in the United States. Our ColepCCL
joint venture continues to enjoy strong sales and improved operating income in
the favourable European economic environment."
    Mr. Lang stated, "Our strategy to grow with our customers globally has
been successful and we will continue on that strategic path. Our finances are
in excellent shape with the net debt to total capitalization ratio at 38%,
well below our target level of 45%. We have $87 million of cash on hand and
additional financial leverage available, which will allow us to grow both
organically and to entertain accretive acquisitions in our core businesses."
    Mr. Lang concluded, "We remain optimistic about the balance of 2007
building on our very solid first half. We continue to generate growth in both
earnings and cash flow. As a result, your Board of Directors has declared a
dividend at the same level as the higher dividend declared earlier this year.
The quarterly dividend is $0.12 on Class B non-voting shares and $0.1075 on
Class A voting shares to shareholders of record at the close of business on
September 14, 2007 payable on September 28, 2007. CCL continues its record of
paying quarterly dividends without reduction or omission for over 25 years."

    CCL Industries Inc. manufactures pressure sensitive, shrink sleeve and
in-mould labels, aluminum containers and plastic tubes for leading global
companies in the home and personal care, healthcare and specialty food and
beverage sectors. With headquarters in Toronto, Canada, CCL Industries employs
approximately 5,000 people and operates 49 production facilities in North
America, Europe, Latin America and Asia. CCL's joint venture, ColepCCL
operates five plants in Europe and employs approximately 2,000 people.

    Statements contained in this Press Release, other than statements of
    historical facts, are forward-looking statements subject to a number of
    uncertainties that could cause actual events or results to differ
    materially from some statements made.

    
    Note:     CCL will hold a conference call at 4:00 p.m. EDT on Thursday,
    -----     August 2, 2007 to discuss these results.
              To access this call, please dial Toll-Free North America -
              1-800-633-8954 or Domestic and International - 416-641-6653.

              Post-View service will be available from Thursday,
              August 2, 2007 at 6:00 p.m. EDT until Saturday,
              September 1, 2007 at 11:59 p.m. EDT.

              Dial:    Toll-Free North America - 1-800-558-5253
                       Domestic and International - 416-626-4100
                       -  Access Code:  21343124.

    For more details on CCL, visit our web site - www.cclind.com

    Financial Tables follow ...



    CCL INDUSTRIES INC.
    2007 Second Quarter
    Consolidated Statements of Earnings and Retained Earnings

                                     Three months                 Six months
    Unaudited                     ended June 30th            ended June 30th
    -------------------------------------------------------------------------
    (in millions of
     Cdn dollars, except                     %                          %
     per share data)       2007     2006   Change     2007     2006   Change
                        -------- -------- -------- -------- -------- --------

    Sales               $ 357.2  $ 296.6     20.4  $ 730.3  $ 609.8     19.8
                        -----------------------------------------------------

    Income before
     undernoted items      62.7     49.6     26.4    130.5    104.7     24.6
    Depreciation and
     amortization          21.5     18.5              42.3     36.6
    Interest expense,
     net                    6.5      5.3              13.1     10.9

                        -----------------------------------------------------
                           34.7     25.8     34.5     75.1     57.2     31.3
    Restructuring and
     other items - net
     loss (note 5)            -     (1.0)             (0.3)    (0.6)

                        -----------------------------------------------------

    Earnings before
     income taxes          34.7     24.8     39.9     74.8     56.6     32.2
    Income taxes            5.9      7.2              16.0     17.9

                        -----------------------------------------------------
    Net earnings           28.8     17.6     63.6     58.8     38.7    51.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Retained earnings,
     beginning of period
     as reported          499.8    430.9             476.6    413.0
    Transition adjustment
     on adoption of
     financial
     instruments
     standards, net of
     tax (note 1)             -        -              (3.0)       -
                        -----------------------------------------------------
    Retained earnings,
     beginning of period
     as restated          499.8    430.9             473.6    413.0

    Net earnings           28.8     17.6              58.8     38.7
                        -----------------------------------------------------
                          528.6    448.5             532.4    451.7
    Less dividends:
      Class A shares        0.2      0.2               0.5      0.4
      Class B shares        3.7      3.3               7.2      6.3
                        -----------------------------------------------------
                            3.9      3.5               7.7      6.7
                        -----------------------------------------------------

    Retained earnings,
     end of period      $ 524.7  $ 445.0           $ 524.7  $ 445.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share
      Class B           $  0.89  $  0.54     64.8  $  1.82  $  1.20     51.7
      Class A           $  0.87  $  0.52           $  1.79  $  1.17
    -------------------------------------------------------------------------
    Diluted earnings
     per share
       Class B          $  0.86  $  0.53     62.3  $  1.76  $  1.17     50.4
       Class A          $  0.84  $  0.51           $  1.73  $  1.14
    -------------------------------------------------------------------------

    See notes to interim consolidated financial statements.



    CCL INDUSTRIES INC.
    2007 Second Quarter
    Consolidated Statements of Comprehensive Income (Loss)

                                          Three months            Six months
    Unaudited                          ended June 30th       ended June 30th
    -------------------------------------------------------------------------
    (in millions of Cdn dollars)       2007       2006       2007       2006
                                  ---------- ---------- ---------- ----------

    Net earnings                       28.8       17.6       58.8       38.7
                                  -------------------------------------------
    Other comprehensive income,
     net of tax:

      Unrealized losses on
       translation of financial
       statements of
       self-sustaining
       foreign operations             (55.3)     (20.5)     (59.3)      (7.9)

      Gains (losses) on hedges
       of net investment in
       self-sustaining
       foreign operations,
       net of tax of
       $4.6 million                    24.4        6.7       25.3       (2.2)

                                  -------------------------------------------
    Unrealized foreign currency
     translation, net of
     hedging activities               (30.9)     (13.8)     (34.0)     (10.1)
                                  -------------------------------------------

      Losses on derivatives
       designated as cash flow
       hedges, net of tax              (3.9)         -       (4.0)         -

      Gains on derivatives
       designated as cash flow
       hedges in prior periods
       transferred to net
       earnings in the current
       period, net of tax
       of $0.3 million                  3.6          -        3.4          -

                                  -------------------------------------------
    Change in losses on
     derivatives designated as
     cash flow hedges                  (0.3)         -       (0.6)         -
                                  -------------------------------------------

    Other comprehensive loss          (31.2)     (13.8)     (34.6)     (10.1)
                                  -------------------------------------------

    Comprehensive income (loss)
     (note 1)                     $    (2.4) $     3.8  $    24.2  $    28.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See notes to interim consolidated financial statements.



    CCL INDUSTRIES INC.
    2007 Second Quarter
    Consolidated Balance Sheets
                                                  June   December       June
    Unaudited                                     30th       31st       30th
    -------------------------------------------------------------------------
    (in millions of Cdn dollars)                  2007       2006       2006
                                             ---------- ---------- ----------

    Assets
      Current assets
        Cash and cash equivalents            $    86.9  $   125.0  $   111.7
        Accounts receivable - trade              200.6      178.8      170.2
        Other receivables and prepaid
         expenses (note 1)                        27.1       23.1       27.4
        Inventories                               96.9       98.0       99.5
                                             --------------------------------
                                                 411.5      424.9      408.8
      Property, plant and equipment              655.8      628.0      561.5
      Other assets                                26.0       28.9       24.5
      Future income tax assets                    33.0       32.3       31.1
      Intangible assets                           36.4       39.5       46.9
      Goodwill                                   425.8      389.0      386.3
    -------------------------------------------------------------------------
      Total assets                           $ 1,588.5  $ 1,542.6  $ 1,459.1
    -------------------------------------------------------------------------

    Liabilities
      Current liabilities
        Bank advances                        $     7.5  $    12.4  $     3.8
        Accounts payable and accrued
         liabilities (note 1)                    254.5      280.8      227.3
        Income and other taxes payable             8.9       13.7       23.8
        Current portion of long-term debt         16.3       16.1       21.6
                                             --------------------------------
                                                 287.2      323.0      276.5
      Long-term debt (note 1)                    479.4      413.6      420.5
      Other long-term items                       50.6       52.3       52.1
      Future income taxes                        103.1      101.1      120.0
    -------------------------------------------------------------------------
      Total liabilities                          920.3      890.0      869.1
    -------------------------------------------------------------------------

    Shareholders' equity
      Share capital (note 2)                     187.5      190.3      189.9
      Contributed surplus                          6.3        4.2        3.1
      Retained earnings                          524.7      476.6      445.0
      Accumulated other comprehensive loss
       (notes 1 & 4)                             (50.3)     (18.5)     (48.0)
    -------------------------------------------------------------------------
      Total shareholders' equity                 668.2      652.6      590.0
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
      Total liabilities and
       shareholders' equity                  $ 1,588.5  $ 1,542.6  $ 1,459.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See notes to interim consolidated financial statements.

    Certain 2006 figures have been restated for comparative purposes.



    CCL INDUSTRIES INC.
    2007 Second Quarter
    Consolidated Statements of Cash Flows

                                          Three months            Six months
    Unaudited                          ended June 30th       ended June 30th
    -------------------------------------------------------------------------
    (in millions of Cdn dollars)       2007       2006       2007       2006
    Cash provided by (used for)   ---------- ---------- ---------- ----------

    Operating activities
      Net earnings                $    28.8  $    17.6  $    58.8  $    38.7
      Items not requiring cash:
        Depreciation and
         amortization                  21.5       18.5       42.3       36.6
        Stock-based compensation        1.0        0.6        2.1        1.1
        Future income taxes            (0.7)      (2.5)      (1.4)       0.3
        Restructuring and other
         items, net of tax
           (note 5)                       -        1.7       (0.2)       2.9
      -----------------------------------------------------------------------
                                       50.6       35.9      101.6       79.6
      Net change in non-cash
        working capital                 4.5        9.2      (41.3)     (30.5)
      -----------------------------------------------------------------------
      Cash provided by operating
        activities                     55.1       45.1       60.3       49.1
    -------------------------------------------------------------------------
    Financing activities
      Proceeds on issuance of
       long-term debt                   0.4        1.5      104.1      202.3
      Retirement of long-term debt     (1.1)      (6.0)      (3.3)    (146.5)
      Decrease in bank advances        (3.6)      (5.8)      (9.9)      (5.2)
      Issue of shares                   0.9        0.2        1.6        0.9
      Purchase of shares held
       in trust (note 2)                  -          -       (4.4)         -
      Dividends                        (3.9)      (3.5)      (7.7)      (6.7)
      -----------------------------------------------------------------------
      Cash provided by (used for)
       financing activities            (7.3)     (13.6)      80.4       44.8
    -------------------------------------------------------------------------
    Investing activities
      Additions to property, plant
       and equipment                  (39.0)     (25.1)     (70.2)     (67.6)
      Proceeds on disposal of
       property, plant and
       equipment                        1.7        0.3        4.6        1.5
      Proceeds on business
       dispositions (note 5)              -          -          -       24.4
      Business acquisitions
       (note 3)                           -          -     (105.6)     (62.2)
      Other                            (4.3)       2.2       (1.1)       3.9
      -----------------------------------------------------------------------
      Cash used for investing
       activities                     (41.6)     (22.6)    (172.3)    (100.0)
    -------------------------------------------------------------------------
    Effect of exchange rate
     changes on cash                   (5.9)      (3.0)      (6.5)      (2.4)
    -------------------------------------------------------------------------
    Increase (decrease) in cash         0.3        5.9      (38.1)      (8.5)
    Cash and cash equivalents at
     beginning of period               86.6      105.8      125.0      120.2
    -------------------------------------------------------------------------

    Cash and cash equivalents at
     end of period                $    86.9  $   111.7  $    86.9  $   111.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents are defined as cash and short-term investments.
    See notes to interim consolidated financial statements.
    Certain 2006 figures have been restated for comparative purposes.


                             CCL INDUSTRIES INC.

         NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                     Periods ended June 30, 2007 and 2006
       (Tabular amounts in millions of Cdn dollars except share data)
                                 (Unaudited)

    1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    a)  Changes in accounting policies

        The disclosures contained in these unaudited interim consolidated
        financial statements do not include all of the requirements of
        generally accepted accounting principles for annual financial
        statements. The unaudited interim consolidated financial statements
        should be read in conjunction with the annual consolidated financial
        statements for the year ended December 31, 2006.

        The unaudited interim consolidated financial statements are based
        upon accounting principles consistent with those used and described
        in the annual consolidated statements, except that: starting
        January 1, 2007, the Company adopted the new Canadian Institute of
        Chartered Accountants ("CICA") Handbook Sections 1530, "Comprehensive
        Income", Section 3251, "Equity", Section 3861, "Financial Instruments
        - Disclosure and Presentation", Section 3865, "Hedges" and Section
        3855, "Financial Instruments - Recognition and Measurement".

        Section 1530 establishes standards for reporting and presenting
        comprehensive income, which is defined as the change in equity from
        transactions and other events from non-owner sources. Other
        comprehensive income refers to items recognized in comprehensive
        income that are excluded from net income calculated in accordance
        with generally accepted accounting principles.

        Section 3861 establishes standards for presentation of financial
        instruments and non-financial derivatives, and identifies the
        information that should be disclosed about them. Under the new
        standards, policies followed for periods prior to the effective date
        are generally not reversed, therefore, the comparative figures have
        not been restated except for the requirement to restate currency
        translation adjustment as part of other comprehensive income.

        Section 3865 describes when and how hedge accounting can be applied
        as well as the disclosure requirements. Hedge accounting enables the
        recording of gains, losses, revenues and expenses from derivative
        financial instruments in the same period as for those related to the
        hedged item.

        Section 3855 prescribes when a financial asset, financial liability
        or non-financial derivative is to be recognized on the balance sheet
        and at what amount, requiring fair value or cost-based measures under
        different circumstances. Under Section 3855, financial instruments
        must be classified into one of these five categories: held-for-
        trading, held-to-maturity, loans and receivables, available-for-sale
        financial assets or other financial liabilities. All financial
        instruments, including derivatives, are measured on the balance sheet
        at fair value except for loans and receivables, held-to-maturity
        investments and other financial liabilities, which are measured at
        amortized cost. Subsequent measurement and changes in fair value will
        depend on their initial classification, as follows: held-for-trading
        financial assets are measured at fair value and changes in fair value
        are recognized in net earnings; available-for-sale financial
        instruments are measured at fair value with changes in fair value
        recorded in other comprehensive income until the investment is
        derecognized or impaired at which time the amounts would be recorded
        in net earnings.

        Under adoption of these new standards, the Company designated its
        cash and cash equivalents as held-for-trading. Long-term investments
        are designated as available-for-sale. Cash and cash equivalents and
        long-term investments are measured at fair value. Accounts receivable
        are classified as loans and receivables, which are measured at
        amortized cost. Bank advances, accounts payable and accrued
        liabilities and long-term debt are classified as other financial
        liabilities, which are measured at amortized cost. The Company has
        also elected to expense, as incurred, transaction costs related to
        long-term debt.

        Upon adoption of these new standards, the Company recorded a decrease
        to opening retained earnings of $3.0 million. The decrease to opening
        retained earnings was a result of the write-off of previously
        deferred transaction costs related to issuance of long-term debt
        ($1.0 million loss, net of tax of $0.5 million), the write-off of a
        deferred loss on the termination of various cross currency interest
        rate swaps that did not meet the new requirements ($2.1 million loss,
        no tax) and the ineffectiveness of cash flow hedges discussed below
        ($0.1 million gain, net of tax).

        All derivative instruments, including embedded derivatives, are
        recorded on the balance sheet at fair value unless exempted from
        derivative treatment as a normal purchase or sale. All changes in
        their fair value are recorded in net earnings unless cash flow hedge
        accounting is used, in which case, changes in fair value are recorded
        in other comprehensive income. The Company has applied this
        accounting treatment for all embedded derivatives in existence at
        transition. The impact of the change in accounting policy related to
        embedded derivatives is not material.

        The Company uses various financial instruments to manage foreign
        currency exposures, fluctuation in interest rates and exposures
        related to the purchase of aluminum for the Container Division. These
        financial instruments are classified into three types of hedges: cash
        flow hedges, fair value hedges and hedges of net investments in self-
        sustaining operations.

        In a cash flow hedge, the effective portion of changes in the fair
        value of derivatives is recognized in other comprehensive income. Any
        gain or loss in fair value relating to the ineffective portion is
        recognized immediately in the statement of earnings. Upon adoption of
        the new standards, the Company remeasured its cash flow hedge
        derivatives at fair value. Aluminum forward contracts with a
        favourable fair value of $1.7 million are the largest component of
        the Company's cash flow hedges and are recorded in other receivables
        and prepaid expense. In addition, the Company entered into Cross
        Currency Interest Rate Swap Agreements (CCIRSAs) that converted
        U.S. dollar fixed rate debt into Canadian dollar fixed rate debt in
        order to reduce the Company's exposure to the U.S. dollar debt and
        currency exposures. This CCIRSA is also designated as a cash flow
        hedge and has an unfavourable fair value of $5.6 million for the
        current period and is recorded in long-term debt. The Company also
        uses forward contracts to hedge foreign exchange exposure on
        anticipated sales. All existing forward contracts matured during the
        current quarter. These hedges were previously recorded in accounts
        payable and accrued liabilities.

        In a fair value hedging relationship, the carrying value of the
        hedged item is adjusted by gains or losses attributable to the hedged
        risk and recorded in net earnings. This change in fair value of the
        hedged item, to the extent the hedging relationship is effective, is
        offset by changes in the fair value of the derivative also measured
        at fair value on the balance sheet date, with changes in value
        recorded through net earnings. The Company has two CCIRSAs designated
        as fair value hedges, which convert U.S. dollar fixed rate debt into
        Canadian dollar floating rate debt in order to reduce interest rate
        and currency risk. In addition, the Company has an interest rate swap
        converting U.S. dollar fixed rate debt to U.S. dollar floating rate
        debt to reduce interest rate risk exposure. These fair value hedges
        have an unfavourable fair value of $7.7 million and are recorded in
        long-term debt.

        In a hedge of a net investment in a self-sustaining foreign
        operation, the portion of the gain or loss on the hedging item that
        is determined to be an effective hedge should be recognized in
        comprehensive income and the ineffective portion should be recognized
        in net earnings. During 2006, the Company entered into CCIRSAs that
        converted Canadian dollar fixed rate and floating rate debt into euro
        fixed rate debt and euro floating rate debt in order to hedge the
        Company's exposure to the euro, with a view to reducing foreign
        exchange fluctuations and interest expense. These CCIRSAs have been
        designated as net investment hedges and have a net favourable fair
        value of $3.6 million at the end of the current period and are
        recorded in other assets and long-term debt. The Company had also
        entered into a non-deliverable forward foreign exchange contract to
        hedge its investment in its Brazilian subsidiaries. This foreign
        exchange contract was previously recorded in accounts payable and
        accrued liabilities. It expired in April 2007 and was settled by a
        payment of $1.5 million in cash from CCL. The Company has elected to
        record the forward points associated with the forward contract in
        accumulated other comprehensive income. The forward points are
        recognized in income on maturity of the contract.

    b)  Recently issued accounting standards

        In May 2007, the CICA issued a new Handbook Section 3031,
        "Inventories", which addresses the measurement and disclosure of
        inventory. The new standard is effective for interim and annual
        financial statements for fiscal years beginning on or after
        January 1, 2008. Management is currently reviewing the potential
        impact on the financial results of the Company. However, further
        disclosure will be required in the Consolidated Statement of Earnings
        as it will now be necessary to disclose the amount of inventories
        recognized as an expense during the period. The Company will comply
        with this standard on January 1, 2008.

        In October 2006, the CICA issued new standards related to financial
        instrument presentation and disclosure, Handbook Section 3862,
        "Financial Instruments - Disclosure" and Handbook Section 3863,
        "Financial Instruments - Presentation". These standards revise and
        enhance the disclosure requirements of Handbook Section 3861,
        "Financial Instruments - Disclosure and Presentation". These
        standards are effective for interim and annual financial statements
        relating to fiscal years beginning on or after October 1, 2007.
        Management is currently reviewing the potential impact on the
        Company. The Company will comply with the requirements of the new
        standard when the standard becomes effective.

        In October 2006, the CICA approved new accounting standards, Handbook
        Section 1535, "Capital Disclosures". This new section establishes
        standards for disclosing information about an entity's capital and
        how it is managed. This standard is effective for interim and annual
        financial statements relating to fiscal years beginning on or after
        October 1, 2007. Management is currently reviewing the potential
        impact on the Company. The Company will comply with the requirements
        of the new standard when the standard becomes effective.

    2.  SHARE CAPITAL

       Issued and outstanding

                                           June 30, December 31,     June 30,
                                           -------- ------------     --------
                                              2007         2006         2006
                                              -----        -----        -----
        Issued share capital            $    199.2   $    197.5   $    197.1
        Less: Executive share purchase
               plan loans                     (1.6)        (1.6)        (1.6)
              Shares held in trust           (10.1)        (5.6)        (5.6)
                                        -------------------------------------
        Total                           $    187.5   $    190.3   $    189.9
                                        -------------------------------------
                                        -------------------------------------

        During 2007, the Company granted an award of 120,000 Class B shares
        of the Company. These shares are restricted in nature and will vest
        in 2009 dependent on continuing employment and company performance.
        The Company purchased these 120,000 shares in the open market and has
        placed them in trust until they vest. The fair value of this stock
        award is being amortized over the vesting period and recognized as
        executive compensation expense.

        Actual number of shares:
                                           June 30, December 31,     June 30,
                                           -------- ------------     --------
                                              2007         2006         2006
                                              -----        -----        -----
          Class A                        2,378,496    2,378,496    2,381,584
          Class B                       30,329,847   30,223,047   30,198,759
                                       --------------------------------------

                                        32,708,343   32,601,543   32,580,343
          Less: Executive share
                 purchase plan shares
                 - Class B                (125,000)    (125,000)    (125,000)
                Shares held in trust
                 - Class B                (320,000)    (200,000)    (200,000)
                                       --------------------------------------
          Total                         32,263,343   32,276,543   32,255,343
                                       --------------------------------------
                                       --------------------------------------

        Year-to-date weighted average
         number of shares               32,232,585   32,240,324   32,211,906
                                       --------------------------------------
                                       --------------------------------------
        Year-to-date weighted average
         diluted number of shares       33,501,168   33,259,055   33,256,345
                                       --------------------------------------
                                       --------------------------------------


    3.  ACQUISITIONS

        On January 26, 2007, the Company completed its purchase of the sleeve
        label business of Illinois Tool Works Inc. (ITW). ITW's sleeve label
        business, through its two locations in the United Kingdom and one
        location in each of Austria, Brazil and United States, is a leading
        supplier of shrink sleeve and stretch sleeve labels for markets in
        Europe and the Americas. The purchase price was $105.6 million, net
        of cash acquired. The Company established a $95.0 million line of
        credit, of which $75.0 million was drawn to facilitate the purchase.
        The Company is reviewing the valuation of the net assets acquired,
        including intangible assets, therefore, certain items disclosed below
        may change when the review is completed in 2007.

        Details of the transaction are as follows:

          Current assets                                          $     24.3
          Current liabilities                                           (8.5)
          Non-current assets at assigned values                         39.4
          Future taxes                                                  (0.8)
          Goodwill and intangible assets                                51.2
                                                                  -----------
          Net assets purchased                                    $    105.6
                                                                  -----------
                                                                  -----------
          Total consideration:
          Cash, less cash acquired of $2.8 million                $    105.6
                                                                  -----------
                                                                  -----------

        In January 2006, the Company purchased Prodesmaq, based in Vinhedo,
        Brazil. Prodesmaq operated two state-of-the-art plants and is
        Brazil's largest supplier of pressure sensitive labels for many
        global companies in the home and personal care, healthcare and
        premium food and beverage markets. The purchase price was
        $62.2 million, net of cash acquired.

        Details of the transaction are as follows:

          Current assets                                          $      9.8
          Current liabilities                                           (2.1)
          Non-current assets at assigned values                          9.3
          Intangible assets                                             14.8
          Goodwill                                                      30.4
                                                                  -----------
          Net assets purchased                                    $     62.2
                                                                  -----------
                                                                  -----------
          Total consideration:
          Cash, less cash acquired of $1.7 million                $     62.2
                                                                  -----------
                                                                  -----------


    4.  ACCUMULATED OTHER COMPREHENSIVE LOSS

                                           June 30, December 31,     June 30,
                                       ------------ ------------ ------------
                                              2007         2006         2006
                                       ------------ ------------ ------------
        Unrealized foreign currency
         translation losses, net of tax
         of $12.0 million               $    (52.5)  $    (18.5)  $    (48.0)
        Impact of new net investment
         hedge accounting standards on
         January 1, 2007, net of tax
         $0.1 million                          0.4            -            -
        Impact of new cash flow hedge
         accounting standards on
         January 1, 2007, net of tax
         of $1.3 million                       2.4            -            -
        Change in derivatives designated
         as cash flow hedges, net of tax
         recovery of $0.5 million             (0.6)           -            -
                                       ------------ ------------ ------------
                                        $    (50.3)  $    (18.5)  $    (48.0)
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------

    5.  RESTRUCTURING AND OTHER ITEMS

                                       Three months ended   Six months ended
                                            June 30th           June 30th
        ---------------------------------------------------------------------
                              Segment     2007      2006      2007      2006
                              -------     ----      ----      ----      ----

        Container segment
         restructuring      Container   $    -    $ (0.9)     (1.0)     (2.2)
        Sale of non-
         operational land   Corporate        -         -       0.7         -
        Gain (loss) on net
         assets sale of
         CCL Dispensing
         Systems, LLC            Tube        -      (0.1)        -       1.6
                                       --------------------------------------
        Net loss                        $    -    $ (1.0)   $ (0.3)   $ (0.6)
                                       --------------------------------------
                                       --------------------------------------
        Tax recovery
         (expense)                      $    -    $  0.3    $  0.5    $ (2.3)
        ---------------------------------------------------------------------

        The Company commenced a senior management restructuring of the
        Container segment and recorded provisions related to severances of
        $2.2 million ($1.5 million after tax) in the first six months of
        2006, and by year-end, additional costs related to obsolete equipment
        and spare parts were recorded of $9.2 million ($5.7 million after
        tax). In 2007, further costs of $1.0 million ($0.7 million after tax)
        were incurred.

        In March 2007, the Company sold its non-operational land in Toronto,
        Canada for $2.0 million cash and realized a gain of $0.7 million
        ($0.9 million after tax).

        In February 2006, the Company sold its CCL Dispensing Systems, LLC
        net assets for $24.4 million cash and realized a gain of $1.6 million
        (loss of $1.3 million after tax).

    6.  EMPLOYEE FUTURE BENEFITS

        The expense for the defined benefit plans in the second quarter is
        $0.4 million (2006 - $0.5 million) and year-to-date of $0.8 million
        (2006 - $0.9 million).



    7.  SEGMENTED INFORMATION

        Industry segments

               Three months ended June 30th     Six months ended June 30th
    -------------------------------------------------------------------------
                                 Operating                       Operating
                   Sales           income          Sales           income
              ---------------------------------------------------------------
                2007    2006    2007    2006    2007    2006    2007    2006
              ------- ------- ------- ------- ------- ------- ------- -------

    Label     $238.4  $191.5  $ 31.6  $ 23.2  $483.5  $396.6  $ 69.4  $ 52.4

    Container   49.3    48.3     6.0     5.7   102.2    92.7    12.0    11.9

    Tube        15.8    17.7     0.2     1.5    34.0    36.8     1.6     2.5

    ColepCCL    53.7    39.1     4.4     3.9   110.6    83.7     9.7     8.0
              ---------------------------------------------------------------
    Total
     opera-
     tions    $357.2  $296.6    42.2    34.3  $730.3  $609.8    92.7    74.8
              ---------------                 ---------------

    Corporate expense           (1.0)   (3.2)                   (4.5)   (6.7)
                              ---------------                 ---------------

                                41.2    31.1                    88.2    68.1

    Interest expense, net        6.5     5.3                    13.1    10.9
                              ---------------                 ---------------

                                34.7    25.8                    75.1    57.2

    Restructuring and other
     items - net loss (note 5)     -    (1.0)                   (0.3)   (0.6)
                              ---------------                 ---------------

    Earnings before income
     taxes                      34.7    24.8                    74.8    56.6

    Income taxes                 5.9     7.2                    16.0    17.9
                              ---------------                 ---------------

    Net earnings              $ 28.8  $ 17.6                  $ 58.8  $ 38.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                        Identifiable Assets                 Goodwill
                        -------------------                 --------

                      June 30th  December 31st      June 30th  December 31st
                      ---------  -------------      ---------  -------------
                           2007           2006           2007           2006
                           ----           ----           ----           ----
    Label             $ 1,018.6      $   909.3      $   343.4      $   303.6
    Container             179.2          194.4           12.7           12.8
    Tube                   86.2           96.9           27.4           30.0
    ColepCCL              174.3          172.4           42.2           42.6
    Corporate             130.2          169.6            0.1              -
                     --------------------------------------------------------
    Total             $ 1,588.5      $ 1,542.6      $   425.8      $   389.0

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                             Depreciation &
                              Amortization              Capital Expenditures
                             --------------             --------------------

                            Six months ended              Six months ended
                                June 30th                     June 30th
                           -------------------           -------------------
                           2007           2006           2007           2006
                           ----           ----           ----           ----
                         Continuing operations
                         ---------------------
    Label              $   28.9       $   23.9       $   59.1       $   48.3
    Container               5.7            5.2            2.5           13.1
    Tube                    3.6            3.6            1.3            4.0
    ColepCCL                3.9            3.6            7.3            1.9
    Corporate               0.2            0.3              -            0.3
                      -------------------------------------------------------

    Total              $   42.3       $   36.6       $   70.2       $   67.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    MANAGEMENT'S DISCUSSION AND ANALYSIS
    Second Quarters Ended June 30, 2007 and 2006

    This document has been prepared for the purpose of providing Management's
Discussion and Analysis (MD&A) of the financial condition and results of
operations for the second quarters ended June 30, 2007 and 2006 and an update
to the 2006 Annual MD&A document. The information in this interim MD&A is
current to August 2, 2007 and should be read in conjunction with the Company's
June 30, 2007 unaudited second quarter financial statements released on
August 2, 2007 and the 2006 Annual MD&A document, which forms part of the CCL
Industries Inc. 2006 Annual Report, dated February 21, 2007.
    The financial statements have been prepared in accordance with Canadian
generally accepted accounting principles (GAAP) and in accordance with the
requirements of section 1751, Interim Financial Statements, of the CICA
Handbook. Unless otherwise noted, both the financial statements and this
interim MD&A are expressed in Canadian dollars as the reporting currency. The
measurement currencies of CCL's operations are the Canadian dollar, the
U.S. dollar, the euro, the Danish krone, the U.K. pound sterling, the
Mexican peso, the Thailand baht, the Chinese renminbi, the Brazilian real, the
Japanese yen and the Polish zloty. CCL's Audit Committee and its Board of
Directors have reviewed this interim MD&A to ensure consistency with the
approved strategy and results of the Company.
    Management's Discussion and Analysis contains forward-looking statements,
as defined in the Securities Act (Ontario) (hereinafter referred to as
"forward-looking statements"), including statements concerning possible or
assumed future results of operations of the Company. Forward-looking
statements typically are preceded by, followed by or include the words
"believes", "expects", "anticipates", "estimates", "intends", "plans" or
similar expressions. Forward-looking statements are not guarantees of future
performance. They involve risks, uncertainties and assumptions, including, but
not limited to: the impact of competition; consumer confidence and spending
preferences; general economic and geo-political conditions; currency exchange
rates; and CCL's ability to attract and retain qualified employees and,
accordingly, the Company's results could differ materially from those
anticipated in these forward-looking statements.

    1. Overview
    -----------
    In a continuation of recent trends, most of CCL's global customers are
experiencing higher sales levels than last year based on the current
favourable worldwide economy. CCL also continues to benefit from this positive
business environment and has enjoyed good sales growth in most product
categories through the second quarter of 2007. Both CCL and its customers have
continued to see firm demand in Europe, Asia and Latin America with more
modest growth in North America.
    Based on recent economic data, it is expected that markets will remain
very strong in Latin America, Asia and Europe. European growth will be driven
by the large demand for consumer products in Central and Eastern Europe. There
are continued concerns about a slowdown in the U.S. economy and this has been
reflected in cautionary comments from some of our customers and suppliers in
North American. CCL continues to expect only modest sales growth in North
America for the balance of 2007. CCL's first half of the year is generally
stronger and more profitable than the second half due to the extended holiday
and vacation periods in the second half of the year around the world and the
seasonality of specific products.

    2. Review of Consolidated Operations
    ------------------------------------
    Sales for the second quarter of 2007 of $357.2 million were 20% ahead of
the $296.6 million recorded in the second quarter of 2006, while sales for the
first six months of 2007 of $730.3 million were 20% higher than last year's
$609.8 million. Financial comparisons to the prior year's results have been
positively affected by the significant appreciation of the euro and most other
currencies relative to the Canadian dollar partially offset by the further
depreciation of the U.S. dollar. Sales increased for the quarter by 19% due to
organic growth and an acquisition, while foreign exchange net of a disposition
added a further 1%. On a comparative basis with last year's second quarter,
sales increased significantly in all reporting segments with the exception of
a decline in the Tube Division. For the year-to-date, sales increased by 17%
as a result of organic growth and acquisitions, while foreign exchange net of
dispositions added a further 3%. For the quarter and year-to-date periods,
overall sales growth was split about equally between organic growth and
acquisitions.
    The following acquisitions and divestitures affected financial
comparisons in the second quarter and year-to-date results of 2007 versus
2006:

    
    -   In January 2006, the Label Division acquired the label converting
        assets of Prodesmaq and its subsidiaries in Vinhedo, Brazil for
        $62 million.

    -   In February 2006, the Company divested the assets of its CCL
        Dispensing business in Libertyville, Illinois for $24 million. It is
        included in the Tube Division for comparative purposes.

    -   In October 2006, the non-core label business in Houten, the
        Netherlands was sold for $3 million.

    -   On January 26, 2007, CCL acquired the shrink sleeve and stretch
        sleeve business of Illinois Tool Works ("ITW") located in the
        United Kingdom, Austria, Brazil and the United States for
        approximately $106 million. The purchase equation for this
        acquisition will be finalized by fourth quarter 2007.
    

    Net earnings for the second quarter of 2007 were $28.8 million, up 64%
from the $17.6 million recorded in the second quarter of 2006. This
improvement was due primarily to the substantial sales and operating income
increases in the business, the impact of favourable tax adjustments in 2007
and restructuring and other items incurred in 2006. Divisional operating
income defined as operating income before corporate expenses, interest and
restructuring and other items improved by $7.9 million or 23% from last year's
second quarter due to substantially stronger performances in the Label and
Container Divisions and higher income from the ColepCCL joint venture.
Operating income in the Tube Division was below prior year's level. In the
second quarter of 2007, a favourable tax settlement was reached in a foreign
subsidiary and corporate income tax rates were lowered in Canada, the United
Kingdom and Denmark, resulting in a decrease in future tax liabilities and
income tax expense of $3.6 million in the quarter. In the second quarter of
2006, restructuring and other costs of $1.0 million before tax were incurred
($0.7 million after tax) primarily in the Container Division.
    For the first six months of 2007, net earnings were $58.8 million, up 52%
from the $38.7 million in the comparable 2006 period. Net earnings for the
six months of 2007 were affected by restructuring and other costs of
$1.0 million and a gain on the sale of a property of $0.7 million for a net
loss of $0.3 million before tax (net gain of $0.2 million after tax).
Including the positive effect of favourable tax adjustments of $5.0 million,
net earnings increased by $5.2 million due to the foregoing items.
    Net interest expense for the second quarter was $6.5 million,
$1.2 million higher than last year's corresponding quarter due primarily to
higher net debt levels (defined as bank advances and long term debt net of
cash and cash equivalents) and slightly higher floating interest rates.
Corporate expenses for the quarter of $1.0 million were substantially below
last year's second quarter of $3.2 million due to lower insurance costs
including a reduction in self-insured claims reserves and reduced variable
executive compensation. The overall effective income tax rate was 17% for the
second quarter of 2007 compared to 29% in the second quarter of 2006. If the
impact of restructuring and other items and favourable tax adjustments were
excluded, the effective tax rate in the second quarter of 2007 would have been
27% compared to 29% in last year's second quarter (a non-GAAP measure; see
Section 12 later in this report discussing key performance indicators and
defining non-GAAP measures).
    Earnings per Class B share were $0.89 in the second quarter of 2007
compared to $0.54 earned in the same period last year, an increase of 65%.
Favourable tax adjustments had a positive effect on earnings per share in the
second quarter of 2007 of $0.11. Restructuring and other items in the second
quarter of 2006 decreased earnings per Class B share by $0.03 (a non-GAAP
measure; see Section 12).
    Diluted earnings per Class B share were $0.86 in the second quarter of
2007 and $0.53 in the same period last year.
    For the first six months of 2007, earnings per Class B share were $1.82
compared to $1.20 in the prior year period, a 52% increase. A gain on the sale
of a property and favourable tax adjustments net of restructuring and other
items increased earnings per Class B share by $0.16 for the first half of 2007
versus a $0.06 reduction in the first half of 2006 (a non-GAAP measure; see
Section 12).
    The following table is presented to provide context to the change in the
Company's financial performance.

    
    (in Canadian dollars)
     -------------------
                                               2nd Quarters     Year-to-date
                                            ---------------------------------
    Earnings per Class B shares               2007     2006    2007     2006
                                            -------  -------  ------  -------
    Net earnings                            $ 0.89   $ 0.54   $1.82   $ 1.20

    Net gain (loss) from restructuring and
     other items and favourable tax
     adjustments included in net
     earnings(*)                            $ 0.11   ($0.03)  $0.16   ($0.06)

    (*) A non-GAAP measure - see Section 12

    The following is selected financial information for the ten most recently
completed quarters. In May 2005, the North American Custom Manufacturing
business was sold and was treated as Discontinued Operations.

    (in millions of Canadian dollars, except per share amounts)
     ---------------------------------------------------------

                               Qtr 1     Qtr 2     Qtr 3     Qtr 4     Total
                               -----     -----     -----     -----     -----
    Sales-continuing
     operations
      2007                    $373.1    $357.2
      2006                     313.2     296.6    $293.5    $308.9  $1,212.2
      2005                     265.7     280.1     281.9     282.4   1,110.1

    Net earnings-continuing
     operations
      2007                      30.0      28.8
      2006                      21.1      17.6      13.6      25.1      77.4
      2005                      16.1       5.1      15.3      13.5      50.0

    Net earnings
      2007                      30.0      28.8
      2006                      21.1      17.6      13.6      25.1      77.4
      2005                      19.7     113.8      15.3      15.0     163.8

    Net earnings per
     Class B share -
     continuing operations
      Basic
      2007                     $0.93     $0.89
      2006                      0.66      0.54     $0.43     $0.78     $2.41
      2005                      0.50      0.16      0.48      0.43      1.57

      Diluted
      2007                      0.90      0.86
      2006                      0.64      0.53      0.41      0.75      2.33
      2005                      0.49      0.16      0.46      0.41      1.52

    Net earnings per
     Class B share
      Basic
      2007                      0.93      0.89
      2006                      0.66      0.54      0.43      0.78      2.41
      2005                      0.61      3.53      0.48      0.48      5.10

      Diluted
      2007                      0.90      0.86
      2006                      0.64      0.53      0.41      0.75      2.33
      2005                      0.60      3.45      0.46      0.46      4.97

    Restructuring and other
     items and favourable tax
     adjustments and gain on
     discontinued operations
     per Class B share((*))
      2007                      0.05      0.11
      2006                     (0.03)    (0.03)    (0.10)     0.20      0.04
      2005                         -      2.96         -     (0.02)     2.94

    (*) A non-GAAP measure - see Section 12
    

    The impact on net earnings per Class B share of the gain on the sale of
Custom in 2005 is included in the table above. Net earnings per Class B share
have generally increased over time but have also fluctuated significantly due
to changes in foreign exchange rates, restructuring costs and other items, and
favourable tax adjustments.
    In addition, the seasonality of the business has evolved over the last
few years with the first and second quarters being the strongest and second
strongest, respectively, due to the aggressive marketing plans of many
customers at the beginning of the year. Also, there are many products that
have a spring-summer bias in North America and Europe such as agricultural
chemicals and certain beverage products, which generate additional sales
volumes for CCL in the first half of the year. The last two quarters of the
year are negatively affected from a sales perspective by summer vacation in
the Northern Hemisphere, Thanksgiving, and the Christmas season shutdowns in
the fourth quarter.

    3. Business Segment Review
    --------------------------

    
    Label Division
    --------------
    ($ Millions)                                 Q2 2007   Q2 2006     +/- %
                                                 --------  --------  --------
    Sales                                         $238.4    $191.5      +25%
    Operating Income                              $ 31.6    $ 23.2      +36%
      Return on Sales(1)                           13.3%     12.1%

                                                1st Half  1st Half
                                                    2007      2006     +/- %
                                                 --------  --------  --------
    Sales                                         $483.5    $396.6      +22%
    Operating Income                              $ 69.4    $ 52.4      +32%
      Return on Sales(1)                           14.4%     13.2%
    Capital Spending                              $ 59.1    $ 48.3
    Depreciation and Amortization                 $ 28.9    $ 23.9

    (1) A non-GAAP measure - see Section 12
    

    Sales for the Label Division were strong at $238.4 million for the second
quarter, up 25% from $191.5 million in the same quarter last year. The sales
increase was a result of an acquisition and organic growth contributing 23%,
and foreign exchange net of a disposition adding a further 2%. For the first
six months of 2007, sales of $483.5 million were 22% ahead of the
$396.6 million recorded in the same period last year with 18% coming from
organic growth and acquisitions and 4% from foreign exchange net of a
disposition.
    Sales growth in the second quarter was due in part to the ITW sleeve
business acquisition (owned by CCL since the end of January 2007). Overall,
however, the base business also experienced a continuation of very positive
organic sales growth and operating income improvements.
    North America continued to report only modest sales growth based on a
slowing U.S. economy. Personal care volume was down for the quarter compared
to the very strong markets enjoyed last year, as our key customers experienced
softer sales and a reduction in new product launches. This was partially
offset by increased volumes in shrink sleeves and in-mould labels for new
product lines in the home care sector. In addition, new orders for beverage
labels for international customers were supported by the North American
operations. Healthcare sales were up slightly due chiefly to the strength in
expanded content labels. Specialty products sales were slightly below last
year's second quarter with good growth in agricultural chemical labels more
than offset by a relatively soft promotional label market compared to a strong
prior year, influenced by the World Cup. Overall in North America,
profitability was up modestly on slightly higher sales despite weaker market
conditions.
    Brazil continued to show strong sales growth with improvements in
operating income due to the volume growth and operating efficiencies and the
recently acquired ITW sleeve business. Profitability in Brazil is well above
the average of our Label Division.
    In Europe, sales showed good growth in personal care compared to last
year, driven by consumer demand in Central and Eastern Europe, and there was
enormous growth in beverage applications as two plants in other business lines
were converted to beverage products to support the demand. Healthcare and
specialty sales were strong as we continue to secure new business through
global customer relationships. This business continues to be very profitable.
The ITW sleeve acquisition generated strong sales and operating income, well
above its recent history under prior ownership and much better than
management's expectations for this business.
    The battery label business was managed geographically in the past. The
business is now organized on a global basis and experienced modest growth in
Europe and the United States but generated less sales in China than expected
due to a customer delay in transferring volume from Europe into that
operation.
    Asia continued to generate very strong sales and income growth from a
very small base. Sales in Thailand were substantially ahead of last year. In
addition, the Guangzhou, China operation that opened only a year ago, was very
busy in personal care. The Label Division continues to benefit from its
international presence with large global personal care customers.
    Operating income for the second quarter of 2007 was $31.6 million, up 36%
from $23.2 million in the second quarter of 2006. Positive currency
translation contributed modestly to this improvement. Drivers of this
improvement were the performance of the recent ITW acquisition and higher
sales in most product categories in each region. During the quarter, plants in
Memphis, Paris and Mexico were in the process of relocating, and incurred
direct moving costs of $0.6 million. The Mexican and Memphis locations are two
of the largest facilities in the Label Division's network. Further moving
costs are expected during the balance of 2007. Operating income as a
percentage of sales at 13.3% exceeded our internal targets and was well above
the 12.1% return generated in last year's second quarter. The first and second
quarters have become the strongest and second strongest, respectively, for the
Label Division due to the aggressive marketing plans of many customers at the
beginning of the year, seasonal products such as agricultural chemicals, and
minimal vacation and holiday shutdowns. Year-to-date, operating income was
$69.4 million versus $52.4 million last year, up 32%.
    Sales and operating income in the second quarter of 2007 for the ITW
acquisition noted earlier in this report were $28.3 million and $5.5 million,
respectively. The operation in Houten, the Netherlands, disposed of in the
fall of 2006 generated sales of $2.0 million and nominal operating income in
the second quarter of 2006.
    Sales backlogs for the label business are generally low due to short
customer lead times, but indications are that customers' orders overall
continue to be seasonally firm through the third quarter of 2007.
    The Label Division invested $59.1 million in capital in the first six
months of 2007 compared to $48.3 million in the same period last year. The
capital was spent throughout the business to maintain and expand the
manufacturing base by adding presses in strategic locations, plant
construction for the future relocation of the Memphis, Tennessee and Mexico
City operations and a plant extension in Brazil. Depreciation and amortization
for the Label Division were $28.9 million for the first half of 2007 and
$23.9 million in the comparable 2006 period.

    Container Division
    ------------------
    ($ Millions)                                 Q2 2007   Q2 2006     +/- %
    --------  --------  --------
    Sales                                         $ 49.3    $ 48.3       +2%
    Operating Income                              $  6.0    $  5.7       +5%
    Return on Sales(1)                           12.2%     11.8%

    1st Half  1st Half
    2007      2006     +/- %
    --------  --------  --------
    Sales                                         $102.2    $ 92.7      +10%
    Operating Income                              $ 12.0    $ 11.9       +1%
    Return on Sales(1)                           11.7%     12.8%
    Capital Spending                              $  2.5    $ 13.1
    Depreciation and Amortization                 $  5.7    $  5.2

    (1) A non-GAAP measure - see Section 12

    Sales in the second quarter were $49.3 million, up 2% from $48.3 million
last year. Sales increased organically for the quarter by 3% due to price
increases with volume generally unchanged. Foreign currency translation was a
negative factor, reducing the sales growth by 1%. For the first six months of
2007, sales of $102.2 million were 10% above the $92.7 million recorded in the
same period last year.
    The Container Division experienced a modest sales increase as management
has been able to pass on higher aluminum costs to its key customers and has
benefited from strong demand for aluminum aerosol containers with bag-in-can
technology. Personal care volume in the aerosol format had been satisfactory
into the second quarter but recent order levels have slowed due in part to the
weaker U.S. economy, volume losses due to predatory competitive pricing and
customer uncertainty concerning consumer demand in this market. Beverage
volume has continued to be light but there are many interesting sizeable
opportunities that may come into production in the second half of 2007.
Mexican aerosol container sales volumes were substantially higher in the
second quarter compared to last year. The growth by our global customers
located in Mexico provides further justification for the seventh new aluminum
container line to be installed in the new plant in Guanajuato, Mexico for
start-up in mid 2008.
    Operating income for the Container Division before restructuring and
other items for the second quarter of 2007 was $6.0 million, up 5% from
$5.7 million in the second quarter of 2006. The key issues continue to be the
significant increase in aluminum costs, the reduction of aluminum hedges and
related income, and our ability to pass on price increases to customers. The
reduction in higher margin beverage volume has also resulted in unfavourable
product mix. Return on sales for the second quarter of 2007 was 12.2% compared
to 11.8% in last year's second quarter. For the first half of 2007, operating
income was $12.0 million versus $11.9 million last year, up 1%.
    The aluminum container plant in Penetanguishene, Ontario sells a large
part of its production to the United States market in U.S. dollars. The
business has hedged a part of the Canadian dollar value of these U.S. dollar
sales by way of forward contracts and sells the rest of its U.S. dollar sales
at spot currency rates. The change in the exchange rates on U.S. currency
transactions reduced comparative income for the Container Division by
$0.9 million in the second quarter of 2007 and $1.4 million year-to-date.
Further discussion of currency hedging follows later in this report.
    The Container Division invested $2.5 million in capital in the first six
months of 2007 compared to $13.1 million in the same period last year. Only
modest maintenance capital was expended in the first half of 2007 compared to
the acquisition and installation of production lines last year. Depreciation
and amortization for the first half of 2007 and 2006 were $5.7 million and
$5.2 million, respectively. The Division has successfully installed six new
aluminum container lines in the last four years. A seventh new line is ready
to be shipped and will be installed at a new plant under construction in
Guanajuato, Mexico. The new plant will come on line in the first half of 2008.
    The Container Division continues to hedge a small portion of its
anticipated future aluminum purchases through futures contracts. The
proportion of future contracts outstanding has dropped considerably over the
last few years since the Division and its customers have been less inclined to
hedge aluminum costs at recent record price levels. The cost of aluminum
persists in remaining at relatively high levels and the Division continues to
be challenged to recover these additional costs by adjusting prices to its
customers. Also, most of the aluminum hedges that were acquired at much lower
prices in prior years have been realized and there has been and will continue
to be less benefit from aluminum hedges going forward. Generally, the Division
has either pricing agreements with customers that may fluctuate to adjust for
the changes in aluminum costs or fixed pricing contracts that are hedged by
agreement with key customers using aluminum forward contracts.

    
    Tube Division
    -------------
    ($ Millions)                                 Q2 2007   Q2 2006     +/- %
                                                 --------  --------  --------
    Sales                                         $ 15.8    $ 17.7      -11%
    Operating Income                              $  0.2    $  1.5      -87%
      Return on Sales(1)                            1.3%      8.5%

                                                1st Half  1st Half
                                                    2007      2006     +/- %
                                                 --------  --------  --------
    Sales                                         $ 34.0    $ 36.8       -8%
    Operating Income                              $  1.6    $  2.5      -36%
      Return on Sales(1)                            4.7%      6.8%
    Capital Spending                              $  1.3    $  4.0
    Depreciation and Amortization                 $  3.6    $  3.6

    (1) A non-GAAP measure - see Section 12
    

    Sales in the second quarter for the Tube Division were $15.8 million,
down 11% from $17.7 million last year. Sales decreased for the quarter due to
the slowing economy in the United States and the impact it has had on consumer
spending and the related marketing plans of our personal care customers. This
trend is expected to continue into the third quarter with some improvement by
the fourth quarter. Sales in the first half of 2007 were $34.0 million, down
8% from the $36.8 million recorded in 2006 due to lower volume, the
disposition of CCL Dispensing and unfavourable foreign exchange.
    Operating income for the Tube Division for the second quarter of 2007 was
$0.2 million, down 87% from $1.5 million in the second quarter of 2006. The
decrease was due to the downturn in sales and new orders with the current
level of fixed overhead to support the business, negatively impacting margins.
As a result, return on sales was 1.3% in the second quarter compared to an
8.5% return in prior years' second quarter. Year-to-date operating income was
$1.6 million, down 36% from $2.5 million recorded in the same period last
year.
    The Tube Division invested $1.3 million in maintenance capital in the
first six months of 2007 compared to $4.0 million in the same period last
year. Depreciation and amortization for the first half of 2007 and 2006 were
$3.6 million in each year.

    
    ColepCCL Joint Venture - CCL's 40% proportionate share
    ------------------------------------------------------
    ($ Millions)                                 Q2 2007   Q2 2006     +/- %
                                                 --------  --------  --------
    Sales                                         $ 53.7    $ 39.1      +37%
    Operating Income                              $  4.4    $  3.9      +13%
      Return on Sales(1)                            8.2%     10.0%

                                                1st Half  1st Half
                                                    2007      2006     +/- %
                                                 --------  --------  --------
    Sales                                         $110.6    $ 83.7      +32%
    Operating Income                              $  9.7    $  8.0      +21%
      Return on Sales(1)                            8.8%      9.6%
    Capital Spending                              $  7.3    $  1.9
    Depreciation and Amortization                 $  3.9    $  3.6

    (1) A non-GAAP measure - see Section 12
    

    For the second quarter of 2007, CCL's share of the joint venture's sales
was $53.7 million. This sales level was 37% higher than the comparative sales
last year of $39.1 million due to a continuation of strong markets in Europe
and Eastern Europe for ColepCCL's products and the 5% increase in the value of
the euro over last year's second quarter. New order levels continue to be firm
and it is anticipated that sales will grow in the second half of the year. For
the first half of 2007, sales were $110.6 million, up 32% from last year's
$83.7 million.
    Operating income in the second quarter of 2007 for ColepCCL was
$4.4 million, indicating a return on sales of 8.2%, and in the second quarter
of 2006, operating income was $3.9 million, with a return on sales of 10.0%.
Operating income was 13% ahead of last year's level due to higher sales and
currency translation, partially offset by lower margins due to product mix and
additional expenses incurred to service the substantially higher sales level.
For the first half of 2007, operating income of $9.7 million was 21% ahead of
the $8.0 million recorded in the first half of 2006.
    Capital spending for the first six months of 2007 was $7.3 million
compared to $1.9 million in the comparable 2006 period. Major expenditures
have been undertaken to expand aerosol can manufacturing capacity.
Depreciation and amortization were $3.9 million in the first half of 2007, up
from $3.6 million in the first half of 2006.

    4.  Currency Translation and Currency Transaction Hedging
    ---------------------------------------------------------
    Approximately 90% of CCL's sales are generated from our international
operations and therefore, are recorded in foreign currencies and then
translated into Canadian dollars for reporting purposes. The U.S. dollar is
the functional currency for approximately 33% of the Company's total sales and
it depreciated 2% on average compared to the Canadian dollar in the second
quarter of 2007 versus last year's second quarter. In addition, European
currencies are now the measurement currencies for over 48% of CCL's sales. The
primary European currency, the euro, however, strengthened by 5% compared to
the Canadian dollar versus prior year's quarter. Changes in foreign exchange
rates have increased earnings per share due to currency translation by $0.01
in the second quarter compared to 2006 and $0.06 year-to-date.
    Additionally, CCL has utilized a hedging program to lock in a portion of
its expected U.S. dollar revenues earned in Canada by the Container Division.
These hedge transactions were at an average rate of $1.24 (US$ 6.0 million
sold forward) for the second quarter of 2006 and were $1.13 (US$ 3.0 million
sold forward) for the second quarter of 2007. The Container Division in Canada
also collected an additional US$ 12.5 million at this year's average rate, 2%
below the prior year's rate. This change in the exchange rates on U.S.
currency transactions reduced comparative income by $0.9 million in the second
quarter of 2007 and reduced comparative earnings per share by $0.02 for the
quarter and $0.03 year-to-date. As at June 30, 2007, there were no outstanding
foreign exchange contracts due to the overall reduced materiality and risk.
The Company has discontinued its hedging program as it has a partial natural
hedge due to interest payments on its long-term debt being primarily in U.S.
dollars.
    After the acquisition of Prodesmaq early in 2006, the Company hedged a
portion of its expected cash flow from Brazil. The hedge involved locking in
20.8 million reais at $0.48 per Canadian dollar ($10.0 million in total),
which matured in April 2007 at $0.55. The loss on the contract settlement of
$1.5 million was charged to other comprehensive loss. The Company is not
anticipating further hedges against the Brazilian currency or any other
currencies on the basis that the Company has a diversified basket of foreign
exchange exposures in many different regions and currencies.

    5. Liquidity and Capital Resources
    ----------------------------------

    The Company's capital structure is as follows:

    
    $ Millions                             June 30  December 31      June 30
                                              2007         2006         2006
                                       ------------ ------------ ------------
    Total debt                          $    503.2   $    442.1   $    445.9
    Cash and cash equivalents                 86.9        125.0        111.7
                                       ------------ ------------ ------------
    Net debt(1)                         $    416.3   $    317.1   $    334.2
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------

    Shareholders' equity                $    668.2   $    652.6   $    590.0
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------
    Net debt: total capitalization(2)        38.4%        32.7%        36.2%
    Book value per share(3)             $    20.79   $    20.24   $    18.34

    (1) Net debt is a non-GAAP measure - see Section 12
    (2) Net debt: total capitalization is a non-GAAP measure - see Section 12
    (3) Book value per share is a non-GAAP measure - see Section 12
    

    The Company has considerable cash resources and operates below
management's optimal target of financial leverage. As of June 30, 2007, cash
and cash equivalents amounted to $87 million compared to $112 million at
June 30, 2006. Net debt amounted to $416 million at June 30, 2007, $82 million
higher than the net debt of $334 million at the end of June 2006. The increase
in net debt in this time frame is primarily due to the ITW sleeve business
acquisition in the first quarter of 2007.
    Net debt to total capitalization (a non-GAAP measure - see Section 12) at
June 30, 2007 was 38%, up from 36% at the end of June 2006 and 33% at the end
of 2006 primarily due to the ITW sleeve business acquisition. Book value per
share was $20.79 at the end of the second quarter of 2007, 13% above $18.34 a
year ago. The increase is primarily the result of earnings retained in the
Company, offset in part by the decrease in shareholders' equity due to the
changes in accumulated other comprehensive loss (mainly due to currency
translation).
    The Company's debt structure is comprised of three private debt
placements completed in 1997, 1998 and 2006 for a total of US$ 336.2 million
(Cdn$ 358.2 million) and a 5-year revolving line of credit initiated in
January 2007 for $95 million, of which $86 million was drawn at June 30, 2007.
The Company's overall average interest rate is 5.6% after factoring in the
related Interest Rate Swap Agreements ("IRSAs") and Cross Currency Interest
Rate Swap Agreements ("CCIRSAs"). The IRSAs and CCIRSAs are discussed later in
this report.
    The Company believes that it has sufficient cash on hand and the ability
to generate cash flow from operations to fund its expected financial
obligations during the balance of 2007.

    6. Cash Flow
    ------------
    During the second quarters of 2007 and 2006, the Company generated cash
from operating activities of $55.1 million and $45.1 million, respectively.
The increase in cash flow compared to last year's second quarter was due
primarily to higher net earnings.
    Working capital was reduced in the second quarter by $4.5 million
compared to a $9.2 million decrease last year. The smaller reduction is
indicative of the high level of activity across the business.
    Capital spending in the second quarter was $39.0 million compared to
$25.1 million last year. The major capital expenditures in the second quarter
were for many new presses for the Label Division and building purchases and
expansions. This level of capital spending was higher than the $21.5 million
of depreciation and amortization in the second quarter of 2007 and the
$18.5 million in the second quarter of 2006 as the Company continues to invest
in new growth opportunities for the business. Plans for capital spending in
2007 are expected to be below the $150 million spent in 2006 with $70.2
million spent in the first half of 2007.
    Dividends declared in each of the second quarters of 2007 and 2006 were
$3.9 million and $3.5 million, respectively. The total number of shares
outstanding as at June 30, 2007 and 2006 were 32.7 million and 32.6 million,
respectively, with the increase due to the exercise of stock options. The
Company has historically paid out dividends at a rate of 20-25% of net
earnings. Since the Company's cash flow and financial position are strong, the
Board of Directors approved a continuation of the higher dividend declared
earlier this year of $0.1075 per Class A share and $0.12 per Class B share to
shareholders of record as of September 14, 2007 and payable on September 28,
2007. The annualized dividend rate is $0.43 per Class A share and $0.48 per
Class B share.

    7. Interest Rate and Foreign Exchange Management
    ------------------------------------------------
    The Company has utilized Interest Rate Swap Agreements to allocate
notional debt between fixed and floating rates by converting the underlying
U.S. dollar fixed rate private placement debt into U.S. dollar floating rate
debt. The Company has utilized IRSAs with a view to reducing interest expense
over time.
    The Company has developed into a global business over the last few years
with a significant asset base in Europe. It has utilized Cross Currency
Interest Rate Swap Agreements to effectively convert notional U.S. dollar
fixed rate debt into fixed and floating euro debt in order to hedge its
euro-based assets and cash flows.
    The effect of the IRSAs and CCIRSAs has been to reduce interest expense
by $0.2 million in the second quarter of 2007 compared to a reduction of
$0.3 million in the second quarter of 2006. Interest coverage (a non-GAAP
measure - see Section 12) improved to 6.2 times in 2007 compared to 5.8 times
in 2006 as at June 30th.

    8. New Accounting Standards
    ---------------------------
    A. Changes In Accounting Policies
    ---------------------------------
    Starting on January 1, 2007, the Company adopted the new Canadian
Institute of Chartered Accountants ("CICA") Handbook Sections 1530,
"Comprehensive Income"; Section 3251, "Equity"; Section 3861, "Financial
Instruments - Disclosure and Presentation"; Section 3865, "Hedges" and Section
3855, "Financial Instruments - Recognition and Measurement".
    Section 1530 establishes standards for reporting and presenting
comprehensive income, which is defined as the change in equity from
transactions and other events from non-owner sources. Other comprehensive
income refers to items recognized in comprehensive income that are excluded
from net income calculated in accordance with generally accepted accounting
principles.
    Section 3861 establishes standards for presentation of financial
instruments and non-financial derivatives, and identifies the information that
should be disclosed about them. Under the new standards, policies followed for
periods prior to the effective date are generally not reversed, therefore, the
comparative figures have not been restated except for the requirement to
restate the currency translation adjustment as part of other comprehensive
income.
    Section 3865 prescribes when and how hedge accounting can be applied as
well as the disclosure requirements. Hedge accounting enables the recording of
gains, losses, revenues and expenses from derivative financial instruments in
the same period as those related to the hedged item.
    Section 3855 prescribes when a financial asset, financial liability or
non-financial derivative is to be recognized on the balance sheet and at what
amount, requiring fair value or cost-based measures under different
circumstances. Under Section 3855, financial instruments must be classified
into one of these five categories: held-for-trading, held-to-maturity, loans
and receivables, available-for-sale financial assets or other financial
liabilities. All financial instruments, including derivatives, are measured on
the balance sheet at fair value except for loans and receivables,
held-to-maturity investments and other financial liabilities, which are
measured at amortized cost. Subsequent measurement and changes in fair value
will depend on their initial classification, as follows: held-for-trading
financial assets are measured at fair value and changes in fair value are
recognized in net earnings; available-for-sale financial instruments are
measured at fair value with changes in fair value recorded in other
comprehensive income until the investment is derecognized or impaired at which
time the amounts would be recorded in net earnings.
    Under adoption of these new standards, the Company designated its cash
and cash equivalents as held-for-trading. Long-term investments are designated
as available-for-sale. Cash and cash equivalents and long-term investments are
measured at fair value. Accounts receivable are classified as loans and
receivables, which are measured at amortized cost. Bank advances, accounts
payable and accrued liabilities and long-term debt are classified as other
financial liabilities, which are measured at amortized cost. The Company has
also elected to expense, as incurred, transaction costs related to long-term
debt.
    Upon adoption of these new standards, the Company recorded a decrease to
opening retained earnings of $3.0 million. The decrease to opening retained
earnings was a result of the write-off of previously deferred transaction
costs related to issuance of long-term debt ($1.0 million, loss net of tax of
$0.5 million), the write-off of a deferred loss on the termination of various
cross currency interest rate swaps that did not meet the new requirements
($2.1 million loss, no tax) and the ineffectiveness of cash flow hedges
discussed below ($0.1 million gain, net of tax).
    All derivative instruments, including embedded derivatives, are recorded
on the balance sheet at fair value unless exempted from derivative treatment
as a normal purchase or sale. All changes in their fair value are recorded in
net earnings unless cash flow hedge accounting is used, in which case, changes
in fair value are recorded in other comprehensive income. The Company has
applied this accounting treatment for all embedded derivatives in existence at
transition. The impact of the change in accounting policy related to embedded
derivatives is immaterial.
    The Company uses various financial instruments to manage foreign currency
exposures, fluctuation in interest rates, and exposures related to the
purchase of aluminum for the Container Division. These financial instruments
are classified into three types of hedges: cash flow hedges, fair value hedges
and hedges of net investments in self-sustaining operations.
    In a cash flow hedge, the effective portion of changes in the fair value
of derivatives is recognized in other comprehensive income. Any gain or loss
in fair value relating to the ineffective portion is recognized immediately in
the statement of earnings. Upon adoption of the new standards, the Company
remeasured its cash flow hedge derivatives at fair value. Aluminum forward
contracts with a favourable fair value of $1.7 million are the largest
component of the Company's cash flow hedges and are recorded in other
receivables and prepaid expenses. In addition, the Company entered into Cross
Currency Interest Rate Swap Agreements (CCIRSAs) that converted U.S. dollar
fixed rate debt into Canadian dollar fixed rate debt in order to reduce the
Company's exposure to the U.S. dollar debt and currency exposures. This CCIRSA
is also designated as a cash flow hedge and has an unfavourable fair value of
$5.6 million for the current period and is recorded in long-term debt. The
Company also uses forward contracts to hedge foreign exchange exposure on
anticipated sales. All existing forward contracts matured during the current
quarter. These hedges were previously recorded in accounts payable and accrued
liabilities.
    In a fair value hedging relationship, the carrying value of the hedged
item is adjusted by gains or losses attributable to the hedged risk and
recorded in net earnings. This change in fair value of the hedged item, to the
extent the hedging relationship is effective, is offset by changes in the fair
value of the derivative also measured at fair value on the balance sheet date,
with changes in value recorded through net earnings. The Company has two
CCIRSAs designated as fair value hedges, which convert U.S. dollar fixed rate
debt into Canadian dollar floating rate debt in order to reduce interest rate
and currency risk. In addition, the Company has an interest rate swap
converting U.S. dollar fixed rate debt to U.S. dollar floating rate debt to
reduce interest rate risk exposure. These fair value hedges have an
unfavourable fair value of $7.7 million and are recorded in long-term debt.
    In a hedge of a net investment in a self-sustaining foreign operation,
the portion of the gain or loss on the hedging item that is determined to be
an effective hedge should be recognized in comprehensive income and the
ineffective portion should be recognized in net earnings. During 2006, the
Company entered into CCIRSAs that converted Canadian dollar fixed rate and
floating rate debt into euro fixed rate debt and euro floating rate debt in
order to hedge the Company's exposure to the euro, with a view to reducing
foreign exchange fluctuations and interest expense. These CCIRSAs have been
designated as net investment hedges and have a net favourable fair value of
$3.6 million at the end of the current period and are recorded in other assets
and long-term debt. The Company had also entered into a non-deliverable
forward foreign exchange contract to hedge its investment in its Brazilian
subsidiaries. This foreign exchange contract was previously recorded in
accounts payable and accrued liabilities. It expired in April 2007 and was
settled by a payment of $1.5 million in cash from CCL. The Company has elected
to record the forward points associated with the forward contract in
accumulated other comprehensive income. The forward points are recognized in
income on the maturity of the contract.

    B. Recently Issued Accounting Standards
    ---------------------------------------
    In May 2007, the CICA issued a new Handbook Section 3031, "Inventories",
which addresses the measurement and disclosure of inventory. The new standard
is effective for interim and annual financial statements for fiscal years
beginning on or after January 1, 2008. Management is currently reviewing the
potential impact on the financial results of the Company. However, further
disclosure will be required in the Consolidated Statement of Earnings as it
will now be necessary to disclose the amount of inventories recognized as an
expense during the period. The Company will comply with the standard on
January 1, 2008.
    In October 2006, the CICA issued new standards related to financial
instrument presentation and disclosure, Handbook Section 3862, "Financial
Instruments - Disclosure" and Handbook Section 3863, "Financial Instruments -
Presentation". These standards revise and enhance the disclosure requirements
of Handbook Section 3861, "Financial Instruments - Disclosure and
Presentation". These standards are effective for interim and annual financial
statements relating to fiscal years beginning on or after October 1, 2007.
Management is currently reviewing the potential impact on the Company. The
Company will comply with the requirements of the new standard when the
standard becomes effective.
    In October 2006, the CICA approved new accounting standards, Section
1535, "Capital Disclosures". This new section establishes standards for
disclosing information about an entity's capital and how it is managed. This
standard is effective for interim and annual financial statements relating to
fiscal years beginning on or after October 1, 2007. Management is currently
reviewing the potential impact on the Company. The Company will comply with
the requirements of the new standard when the standard becomes effective.

    9. Commitments and Contingencies
    --------------------------------
    The Company has no material "off-balance sheet" financing obligations
except for typical long-term operating lease agreements. The nature of these
commitments is described in note 14 of the December 31, 2006 Annual
Consolidated Financial Statements. The Company does not have any material
related party transactions. There are no defined benefit plans funded with CCL
stock.

    10. Risks and Strategies
    ------------------------
    The 2006 Management's Discussion and Analysis in the Annual Report
detailed risks to the Company's business and the strategies that were planned
for 2007 and beyond. There have been no material changes to those risks and
strategies. CCL is now more exposed to the inherent risks associated with
running a more internationally diverse specialty packaging business. The
Company now has a greater dependence on the European, Latin American and Asian
economies and their currencies. These non-Canadian risks were described in the
2006 Management's Discussion and Analysis.

    11. Outlook
    -----------
    The Company continues to focus on the growth prospects of its specialty
packaging business and the prudent management and reinvestment of its cash on
hand and cash flow generation with a view to the continued improvement in
shareholder value in 2007 and beyond. CCL is continuing to integrate and
reorganize the large number of recent acquisitions it has made into its global
network to improve profitability and simplify administration. The Company is
investigating mid-sized potential acquisition and joint venture candidates
that meet its criteria of core products and customers, and its expectation of
earnings accretion in the first year of ownership.
    The organic growth in sales and income experienced in 2006 and the first
half of 2007 is anticipated to continue into the balance of 2007 as the
Company is expected to generate additional returns from its capital
investments and acquisitions. Growth is predominantly expected to come from
outside North America due to the slowdown in the U.S. economy.
    The seasonality of the business continues to evolve, particularly in the
Label Division, with the first quarter being the most profitable by a
considerable margin followed by the second quarter. The overall outlook for
the balance of the year is positive. However, there are challenges expected
during the remainder of 2007 associated with the cost of aluminum in the
Container Division and its ability to maintain margins through higher selling
prices to its customers. Sluggish customer demand for personal care products
in North America are expected to impact the Tube and Container Divisions at
least through the third quarter. In addition, the Label Division will be
relocating its operations to new facilities in Mexico and Memphis over the
remainder of 2007 and Paris into 2008, and will be incurring additional costs
associated with these moves. The recent weakness in the U.S. dollar compared
to the Canadian dollar will continue to negatively impact comparative results
due to adverse currency translation. Currently, the Canadian dollar relative
to the European currencies, primarily the euro, and other currencies is
effectively unchanged from last year's rates and may have little impact on
comparative results.

    12. Key Performance Indicators and Non-GAAP Measures
    ----------------------------------------------------
    CCL measures the success of its business using a number of key
performance indicators, many of which are in accordance with Canadian GAAP as
described throughout this report. The following performance indicators are not
measurements in accordance with Canadian GAAP and should not be considered as
an alternative or replacement of any other measure of performance under
Canadian GAAP. These non-GAAP measures do not have any standardized meaning
and may not be comparable to similar measures presented by other issuers.
    Restructuring and other items and favourable tax adjustments - A measure
of significant non-recurring items that are included in net earnings. The
impact of restructuring and other items and favourable tax adjustments on a
per share basis is measured by dividing the after-tax income of these items by
the average number of shares outstanding in the relevant period. Management
will continue to disclose the impact of these items on its results because the
timing and extent of such items do not reflect or relate to the Company's
ongoing operating performance. Management evaluates the operating income of
its divisions before the effect of these items.
    Return on Sales - A measure indicating relative profitability of sales to
customers. It is defined as operating income divided by sales, expressed as a
percentage.
    Net Debt - A measure indicating the financial indebtedness of the Company
assuming that all cash on hand is used to repay a portion of the outstanding
debt. It is defined as current debt including cash advances plus long-term
debt less cash and cash equivalents.
    Net Debt to Total Book Capitalization - A measure indicating the
financial leverage of the Company. It measures the relative use of debt versus
equity in the book capital of the Company. Net debt to total book
capitalization is defined as Net Debt (see above) divided by Net Debt plus
shareholders' equity, expressed as a percentage.
    Book Value per Share - A measure of the book shareholders' equity per the
combined Class A and Class B shares. It is calculated by dividing
shareholders' equity by the actual Class A and Class B shares outstanding
excluding amounts and shares related to shares held in trust and the executive
share purchase plan.
    Interest Coverage - A measure indicating the relative amount of operating
income generated by the Company compared to the amount of interest expense
incurred by the Company. It is calculated as operating income before
restructuring and other items plus net interest expense divided by net
interest expense calculated on a 12-month rolling basis.





For further information:

For further information: Steve Lancaster, Executive Vice President, and
Chief Financial Officer, (416) 756-8517; For more details on CCL, visit our
web site - www.cclind.com

Organization Profile

CCL INDUSTRIES INC.

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