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

region. The Company enjoyed particularly dramatic growth in the Sleeve business in Brazil and the Healthcare and Specialty business there also continued to post solid operating results. 

The Asia Pacific region continued to post double-digit increases in sales and operating income in 2011 compared to 2010. Despite flooding that impacted many customers’ plants for a number of weeks in the fourth quarter of 2011, operations in Thailand recorded significant improvement over 2010. CCL’s facilities in Bangkok were not damaged, but the ability to operate normally was substantially impaired by the event and profitability reduced significantly, decreasing earnings per share by approximately $0.03 in the fourth quarter. Operations in China continued to perform, notwithstanding the delayed start-up of the new Tianjin plant as customers’ pharmaceutical certification procedures have taken much longer than anticipated plus continuing share loss in the battery sector. The Australian Wine and Healthcare Label operations finished 2011 with stronger revenue but operating income was held in check by competitive pressures in the Wine industry and the negative foreign exchange impact of the stronger Australian dollar. Sales at the South African business also grew for the year but operating income was negatively affected by a management restructuring of the operation and the impact of the rand devaluation against the euro on products imported from Germany. 

Results from the 50% joint ventures in Russia, CCL-Kontur, and in the Middle East, Pacman-CCL, are not proportionately consolidated into the Label Segment but instead are accounted for as equity investments. The Company has effective day-to-day management control over the Middle East venture where the partner is a financial investor. In Russia, the Company brings significant influence but delegates control to the partner who is a strategic player in the local label industry. Sales at CCL-Kontur improved due to a much better second half of 2011 after a slow start to the year caused by a government led restructuring of the important vodka producers. Profitability at the venture reached record levels in the fourth quarter and contributed equity earnings of $0.3 million for 2011. Pacman-CCL, acquired September 13, 2011, contributed equity earnings of $0.9 million for 2011. Both ventures generated positive cash flow and remain debt free with cash balances sufficient to finance operations including capital expenditures. 

Operating income for the Label Segment in 2011 was $142.5 million, flat to the $142.3 million recorded in 2010. Excluding the impact of currency translation, 2011 operating income increased 1.4% compared to 2010. Operating income as a percentage of sales was 14.1% in 2011 compared to the 14.9% return generated in the prior year, but was still at the high end of CCL’s target range. 

The Label Segment invested $74.9 million in capital spending in 2011 compared to $72.1 million in the same period last year. These expenditures are in line with the prior year and consistent with the Company’s planned level of investment. Investments in the Label Segment are expected to continue in order to increase its capabilities, expand geographically and replace or upgrade existing plants and equipment. Depreciation and amortization for the Label Segment was $77.7 million in 2011 compared to $73.3 million in 2010. 

## C) Container Segment 

## Overview 

The Container Segment is a leading manufacturer of aluminum specialty containers for the consumer products industry in North America, including Mexico. The key product line is recyclable aluminum aerosol cans for the personal care, home care and cosmetic industries, plus shaped aluminum bottles for the beverage market. It operates from four plants, one each in the United States and Canada and two in Mexico. One of the plants in Mexico is a modern, world-class facility that commenced production in late 2008. The Segment functions in a competitive environment, which includes imports and the ability of customers, in some cases, to shift a product to competing alternative technology. 

The strategic plan for this Segment is to focus on improving overall profitability in the United States and, in particular, Canada while minimizing investments and growing CCL’s presence in Mexico. The Segment invests significant resources in the development of innovative shaped and highly decorated containers. As the demand for these new, higher value products has grown, the Segment has adapted existing production equipment and acquired new technology in order to meet expected overall market requirements and to maximize manufacturing efficiencies. 

Aluminum represents a significant variable cost for this Segment. Aluminum is a commodity that is supplied by a limited number of global producers and is traded in the market by financial investors and speculators. Aluminum prices have been extremely volatile in the past few years. Aluminum has continued to have the largest impact on manufacturing costs for the Container Segment and thereby requires increased focus on managing selling prices to CCL’s customers. 

