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## MANAGEMENT’S DISCUSSION AND ANALYSIS 

Years ended December 31, 2011 and 2010 (Tabular amounts in millions of Canadian dollars, except per share data) 

## Business Segment Results 

<img src='content_image/161417.jpg'>

* This is a non-IFRS measure. Refer to “Key Performance Indicators and Non-IFRS Measures” in Section 5A below. 

## Comments on Business Segments 

The above summary includes the results of acquisitions on reported sales and operating income from the date of acquisition. 

Operating income in 2011 was $163.7 million, an improvement of 11.7% compared to $146.6 million in 2010. The increase in operating income was primarily attributable to the improvements in the Container and Tube Segments in 2011 compared to 2010. Excluding foreign currency, operating income increased by 13.4% over the prior year. Return on sales increased to 12.9% in 2011 compared to 12.3% in 2010. 

B) Label Segment 

## Overview 

The Label Segment is the leading global producer of innovative label solutions for consumer product marketing companies in the personal and beauty care, food and beverage, household, chemical and promotional segments of the industry, and also supplies major pharmaceutical, healthcare, durable goods and industrial chemical companies. The Segment’s product lines include pressure sensitive, shrink sleeve, stretch sleeve, in-mould and expanded content labels and pharmaceutical instructional leaflets. It currently operates 63 facilities located in Canada, the United States (including Puerto Rico), Australia, Austria, Brazil, China, Denmark, France, Germany, Italy, Mexico, the Netherlands, Poland, Russia, South Africa, Thailand, the United Kingdom, Vietnam, the United Arab Emirates, Egypt, Oman and Saudi Arabia. The two plants in Russia and four plants in the Middle East, attributable to the equity investments in CCL-Kontur and Pacman-CCL, respectively, are included in the above locations. 

This Segment operates within a sector of the packaging industry made up of a very large number of competitors that manufacture a vast array of decorative, product information and identification labels. There are some label categories that do not fall within the Segment’s target market. The Company believes that the Label Segment is the largest consolidated operator in its defined global label market sectors. Competition comes from single-plant businesses, often owned by private operators that compete in local markets with CCL. There are also a few multi-plant competitors in certain regions of the world and specialists in a single market segment globally. However, there is no major competitor that has the global reach and scale of CCL Label. 

CCL Label’s mission is to be the global supply-chain leader of innovative premium package and promotional label solutions for the world’s largest consumer product and healthcare companies. It aspires to do this from regional facilities that focus on specific customer groups, products and manufacturing technologies in order to maximize management’s expertise and manufacturing efficiencies to enhance customer satisfaction. The Label Segment is expected to continue to grow and expand its global reach through acquisitions, joint ventures and greenfield start-ups and expand its product offerings in segments of the label industry that it has not yet entered. 

The Company has completed several label acquisitions over the past few years that have positioned the Label Segment as a global leader within its multinational customer base in the personal care, healthcare, household, food, beverage, durable goods and specialty label categories. 

