Silgan Holdings Inc. (NYSE: SLGN) Q1 2023 Earnings Call Transcript April 26, 2023
Silgan Holdings Inc. beats incomes expectations. Reported EPS is $0.78, expectations were $0.77.
Operator: Good day, everybody, and welcome to the Silgan Holdings First Quarter 2023 Earnings Call. Today’s call is being tape-recorded. I would now like to turn the conference over to Alex Hutter, Vice President, Investor Relations. Please go on.
Alex Hutter: Thank you, and good early morning. Joining me on the call today are Adam Greenlee, President and CEO; Bob Lewis, EVP, Corporate Development and Administration; and Kim Ulmer, SVP, CFO and Treasurer. Before we begin the call today, we want to make it clear that particular declarations made today on this teleconference might be positive declarations. These positive declarations are made based upon management’s expectations and beliefs worrying future occasions affecting the business and, for that reason, include a variety of unpredictabilities and threats, consisting of, however not restricted to, those explained in the business’s yearly report on Form 10-K for 2022 and other filings with the Securities and Exchange Commission. Therefore, the real outcomes of operations or monetary condition of the business might vary materially from those revealed or suggested in the positive declarations. With that, let me turn it over to Adam.
Adam Greenlee: Thank you, Alex, and we want to invite everybody to Silgan’s First Quarter of 2023 Earnings Call. I’d like to start today’s call by congratulating both Kim Ulmer and Bob Lewis on their brand-new functions at the business. One of the trademarks of the Silgan culture is rewarding the efficiency of our individuals, and I am extremely happy with their achievements and anticipate their continued successes at Silgan. Now returning to the very first quarter efficiency. Once once again, good the year with strong operating efficiency in each of our businesses and continue to take advantage of and advance the strong momentum created through the pandemic as we go into the 2nd quarter of 2023. Our businesses stay extremely concentrated on performing our near-term and long-lasting tactical concerns, which continues to drive our outperformance in the markets we serve and substantial worth production for our investors.
Our groups did an outstanding job browsing the marketplace challenges along with our consumers, once again in the very first quarter. Overall, our company believe that our durable customer staple end markets, our consumer intimacy and market positioning, integrated with the dexterity and proficiency in our operations continue to set us apart from our competitors. The tactical portfolio advancement were advancing considering that 2017 continues to carry out as we visualized, and we stay positive with the potential customers for our business in 2023 and beyond. In the very first quarter, our Dispensing and Specialty Closures sector provided strong outcomes in spite of substantial headwinds in the quarter from resin and foreign currency. With our Dispensing items, building on the momentum we saw early in the year and volumes enhancing as we left the quarter.
Our items for high-end scent and appeal end markets continue to win in the market, publishing double-digit volume development in the very first quarter and a lot of the Dispensing items that had actually experienced headwinds from stock management in 2022 started to see year-over-year enhancement in the very first quarter with the pattern speeding up as we left the quarter. While these positive effects were balanced out by the timing of consumer orders for food and drink closures in the very first quarter, patterns in April are strong, and we are anticipating volumes for the sector to effect favorably in the 2nd quarter. Our metal containers business continues to perform exceptionally well, publishing record internet sales and changed EBIT. With the effect of the pandemic now behind us, our effective operating platform, integrated with natural volume development is driving our efficiency.
The challenges that a number of consumers experienced in 2022 in our family pet grocery store seem mostly behind us. And as an outcome, volumes for our family pet food containers were up mid-single digits in the quarter. Our running efficiency in the quarter continued to drive strong earnings enhancement in the sector and our early signs for the veggie pack follow our initial expectations. In our Custom Containers sector, our groups continue to do something about it to alleviate the effect of our choice not to renew an agreement that did not fulfill reinvestment obstacles in the timing inequality of the commercialization of brand-new business awards in the year in addition to unexpected headwinds from quickly increasing resin expenses in the quarter. That said, as we look forward, we are anticipating these products to likewise affect the 2nd quarter contrasts as we have actually recuperated cost connected with the nonrenewal and we’re unwinding deliveries and running activities in the 2nd quarter of 2022.
The 2nd quarter of 2023 is likewise anticipated to continue to experience greater resin expenses. Therefore, 2nd quarter earnings in Custom Containers is anticipated to be a little listed below very first quarter levels. We think this business stays well placed in the market and continues to win brand-new business based upon our distinct customer-focused operating design, which will be more obvious as we leave 2023. Overall, we’re off to an extremely strong start in 2023 and feel great in our outlook for the rest of the year. Before I turn it over to Kim to cover the specifics of our monetary outcomes for the quarter and to offer extra color around our incomes price quotes, I wish to take a minute to acknowledge the effect and long lasting tradition of our 2 creators, Phil Silver and Greg Oregon.
So Phil and Greg began this business 36 years ago with a clear vision and function to develop a business unlike any other that was simply concentrated on completing and winning in the markets served by being the very best at what they do. Proving the long-lasting knowledge and success of that vision, Silgan has actually grown to end up being an international leader in the product packaging market with 2022 sales of $6.4 billion and almost 16,000 workers all over the world who all accept the concepts Phil and Greg visualized. On behalf of our investors, consumers and the whole Silgan group, thank you for producing such an unique business for your long-lasting commitment to its success and for your personal contributions to our advancement. We are all extremely happy and honored to be part of the past, present and future of Silgan.
With that, Kim will take you through the financials for the quarter and our price quotes for the 2nd quarter and complete year.
Copyright: maridav / 123RF Stock Photo
Kim Ulmer: Thank you, Adam. As Adam highlighted, the business continued to perform at a high level in the very first quarter of 2023, providing strong very first quarter sales and changed EBIT and adjusted incomes per diluted share. Net sales for the very first quarter of 2023 were around $1.4 billion. Sales were similar to the previous year quarter, omitting sales connected with Russia of $9.5 million in the very first quarter of 2022 and a foreign currency headwind of around 1% in the very first quarter of 2023. First quarter 2023 sales efficiency was driven by strong volumes in Metal Containers, which was balanced out by anticipated lower volumes in the Dispensing and Specialty Closures and Custom Container sector. Total changed EBIT for the quarter of $149.4 million increased over 2% on a year-over-year basis with greater adjusted EBIT in the Metal Container sector balancing out lower adjusted EBIT in the Dispensing and Specialty Closures and Custom Container sectors.
Adjusted earnings per diluted share decreased $0.01 from the very first quarter of 2022 with nonoperating headwinds from greater interest expense and foreign currency and the lag pass-through of resin expenses driving around $0.15 of incomes headwind in the quarter, of which we would anticipate to recuperate $0.05 in the 2nd half associated to resin. Excluding these products, our strong operating efficiency would have driven changed EPS greater by a double-digit portion. Turning to our sectors. Dispensing and Specialty Closures sector sales were similar to the previous year, omitting a 2% headwind from foreign currency and a 1% effect from Russia versus the previous year. As a 2% enhancement in cost was balanced out by lower volume/mix. First quarter 2023 Dispensing and Specialty Closures changed EBIT reduced $13.6 million versus the previous year duration, with enhancing however lower year-over-year volume mix patterns and tough year-over-year cost contrasts as an outcome of relative modifications arising from the lagged pass-through of resin expenses and the previous year gain from a stock management program.
Volume/mix enhanced throughout the quarter with development in our giving items reinforcing in the latter part of the quarter. While this pattern was eclipsed by the timing of consumer orders in the food and drink markets in the very first quarter, we are anticipating those items to go back to a more typical pattern in the 2nd quarter of 2023. Relative to our expectations, the Dispensing and Specialty Closures sector provided strong operating efficiency however did not balance out the substantial headwinds from greater resin expenses throughout the quarter and undesirable foreign currency. As our agreements in the Dispensing and Specialty Closures sector normally include a longer lag legal pass-through of resin expenses in our other businesses, we anticipate this effect will likely continue to weigh on lead to the 2nd quarter, however eventually recuperating the effect later on in the year as resin expenses are anticipated to ease off.
In our Metal Containers sector, our group’s efficiency was remarkable in the quarter with volume development of 3%, driven by strong need for family pet food, and veggie containers, omitting effects connected with Russia and foreign currency, sales grew 5% from the previous year quarter. While the very first quarter is seasonally among our smaller sized quarters, changed EBIT increased almost 60% from the previous year quarter as the business continued to contractually recuperate cost inflation and the operating utilize of greater volumes drove strong incremental margins. The business began the year strong and is well placed to provide low single-digit volume development and mid-single-digit adjusted EBIT development for 2023. In Custom Containers are nonrenewal of a piece of legal business in the sector Joe volumes are lower by 10% year-over-year in the very first quarter of 2023, which, combined with lower resin expenses on a year-over-year basis and undesirable foreign currency translation drove sales 13% listed below the previous year duration.
Despite these leading line obstacles, our business has the ability to partly balance out the effect of lower volumes through functional efficiency, however the timing and rate of resin cost increases affected changed EBIT in the very first quarter. We anticipate the headwind from resin expenses to continue to weigh on adjusted EBIT in the very first half of 2023, however recuperate in the back half of the year. In the 2nd quarter, we are anticipating lower sales on a year-over-year basis as we advertise brand-new business later on in the 2nd half of the year to balance out the business we left in 2022. As an outcome, we are anticipating Custom Containers changed EBIT will be a little listed below very first quarter 2023 levels in the 2nd quarter due likewise in part to the effect of the lag pass-through of resin cost escalation.
As we move into the 2nd half of the year, we anticipate the year-over-year volume pattern to enhance in each quarter on a consecutive basis. Looking ahead, we are approximating adjusted earnings per diluted share in the variety of $0.85 to $0.95 in the 2nd quarter of 2023. We are anticipating greater interest expense of $0.10 per share and a $0.06 per share effect connected with Russia. And combined with the ongoing effect of the lag pass-through of greater resin expenses from the very first quarter, this represent almost all of the $0.19 year-over-year decrease from the record $1.09 in the 2nd quarter of 2022. On a section level, changed EBIT is anticipated to be greater than the previous year in Metal Containers, similar to the previous year in Dispensing and Specialty Closures and lower than the previous year in Custom Containers.
For the complete year 2023, we continue to anticipate overall adjusted EBIT to increase by mid- to high single digits as compared to the previous year. As an outcome, we are verifying our outlook of adjusted earnings per diluted share of $3.95 to $4.15, that includes a year-over-year headwind of $0.20 per share for interest expense, which we continue to anticipate to be around $155 million and a tax rate of around 24% to 25%. These approximates omit the effect from particular modifications described in Table C of our news release. Based on our existing incomes outlook for 2023, we are likewise verifying our quote of complimentary capital of around $425 million and CapEx of around $250 million in 2023. That concludes our ready remarks, and we’ll open the call for concerns.
Operator, would you kindly offer the instructions for the question-and-answer session.
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