AptarGroup, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to APTUS 2022 Fourth Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Introducing today's conference call is Mrs. Mary Scafidis, Senior Vice President in Massive Relations and Communication. Please go ahead.

Thank you. Hello, everyone, and thanks for being with us today. Joining me on the call are Stefan Tanda, President and CEO, and Bob Kuhn, Executive Vice President and CFO. Our press release and accompanying slide deck have been posted on our website. If you are following along on our website, you can advance the slides by hovering over the presentation screen and clicking on the arrows on the right and left. As always, we will also post a replay of this call on our website. Today's call includes some forward-looking statements. Please refer to our SEC filings to review factors that could cause actual results to differ materially from what we are discussing today. I would now like to turn the conference call over to Stephan.

Thank you, Mary, and good morning, everyone. We appreciate you joining us on the call today. I'm going to begin my remarks by highlighting our results for the fourth quarter and the full year. Later on in the call, Bob Kuhn, our CFO, will provide additional details on the quarter and year end results. I will also spend some time talking about the strategic realignment that we announced in early December and the benefits we expect to achieve. Starting on slide three, for the fourth quarter, I'm pleased to report that Aftar achieved core sales growth of 4% and delivered adjusted EPS of $0.92 per share. We guided our adjusted earnings per share for the fourth quarter to be in the range of 73 to 83 cents. The results were driven by strong volume growth in our farmer segment, which continued to benefit from demand for nasal decongestants and saline rinses, as well as allergic rhinitis and emergency medications. Solid volume growth from beauty dispensing solutions, especially in prestige fragrance and skincare, also drove positive results in the quarter. We also ended the quarter with a more favorable exchange rate and a lower tax rate than we previously anticipated. As we identified during our third quarter call, our dispensing solutions for food, personal, and home care, areas that had benefited from the pandemic, were experiencing a decline in sales as certain customers, especially in North America, are working through the safety stock they had built up over the pandemic. We are seeing signs that sales for food dispensing solutions, which were impacted first, are starting to stabilize, while beverage, personal and home care are still being affected, although we see a few green shoots. We received a number of recognitions during the fourth quarter. We ranked number 15 on Newsweek's America's Most Responsible Companies and number 70 on the World's Top Female-Friendly Companies by Forbes. In China, Chiro recognized us with one of the best companies for female executives awards. And in France, the country where we have the single largest footprint, Le Point, a leading French news magazine, named us as one of the most responsible companies. More recently, we again achieved the platinum level rating in recognition of our sustainability efforts from EcoVadis. This places APTA among the top 1% of the more than 90,000 companies that are rated by ECOVATES across all industries. For the year, APTA achieved strong core sales growth of 9%, with pharma delivering 13% core sales growth, while beauty and homes core sales were up 7%, and food and beverage grew 5% for the year. Growth in core sales for the year was driven almost evenly between volume and pricing, I am very proud of our AAPTO team members around the world who have worked tirelessly to create and deliver solutions that make the lives of people better every single day. We ended the year achieving the highest full-year sales in adjusted EBITDA, hopefully leaving the pandemic behind us. We do recognize there is more work needed to achieve our long-term profit margin ranges. Some of that work is well underway, including our investments in new state-of-the-art sites in France and China that will enable us to capture growth. And on the cost side, we continue our work to reduce our fixed costs and drive profitable growth and margin improvements while spending capital wisely. In 2022, we started to leverage our fixed cost base and reduce our SG&A as a percentage of sales. We will continue to focus on increasing efficiencies in 2023 and beyond. Turning to slides four through six, as of January, our three reporting segments are APTA Pharma, APTA Beauty, and APTA Closures. In December, we announced the strategic realignment of our closures and non-pharma complex multi-component dispensing solutions, which is expected to benefit us in four key areas. First, it strengthens our market position in both closures and beauty by aligning us more closely to the way our customers are structured and purchase our products. Secondly, it better positions us to enter new end-use markets for our closure technologies. Thirdly, it enables bottom-line improvements by capturing efficiencies and streamlining operations. And fourth, increases capital efficiencies by leveraging common assets. In addition, the realignment builds on the work done as part of the transformation and enhances our ability to achieve our long-term targets. A key learning from that work was that closures and our complex multi-component products each require a different focus. Over the last 10 years, we have grown our food and beverage business, which is predominantly a closures business, and have more than doubled its revenue. Our focus was on capturing and driving conversions from a simple closure like a flat cap to value-added solutions like a hinge closure that may also use our elastomeric flow control valve, like the daisy squeeze sour cream in the pouch. Since then, end markets have evolved considerably, and today, the food and beverage closures markets share much more in common with the personal and home care closures markets we serve. Aligning ourselves to directly serve all these end markets in one segment will enable us to enhance our operational and capital efficiencies. For APTA Beauty, the simplification and focus of this segment allows us to better leverage our complex spray and dispensing solutions for prestige and premium brands in the beauty and personal care markets. The realignment will help us to focus on what is most important to our beauty customers, reinforcing their brand equity and providing consumers with exceptional user experiences. APTA Beauty will continue to supply home care, food and beverage customers that use spray technologies which is a small part of our business today. As we implement this realignment, we are fortunate to be guided by proven leaders in our businesses. Hedy Tlili is leading APTA Closures, and Mark Priore is leading APTA Beauty, each of whom has broad experience across APTA, including deep knowledge of their respective markets. We have shared on past calls about the operational and supply chain challenges we have experienced in North America. That has very much impacted our ability to deliver the benefits of our transformation work to the global bottom line. In Europe, where we did not have these challenges, there has been significant improvement in operations and profitability. Beauty and Home in Europe delivered adjusted EBITDA of 14% for the full year, showing consistent improvement and overcoming strong inflationary pressures. As part of our continued focus on cost, we announced internally the closing of a Beauty and Home plant in North America in December of 2022, as well as a reduction in regional staffing levels, which will be completed by the end of Quarter 1, 2023. And earlier this week, we initiated the formal consultation process, which is quite detailed and extensive, with the European Works Council, the respective national works councils, and union representatives regarding a potential reorganization of our European beauty segment. The processes will take time and will be subject to both pan-European and national bargaining obligations and timelines in each affected country. We are in the early stages of this process and we will keep you updated. We will also accelerate the streamlining of shared business functions across the company by expanding in-house business service centers in the Czech Republic, Brazil, and the United States. We expect to record one-time costs in the second half of 2023 and into 2024 associated with these efforts. While we cannot preempt the labor consultations and bargaining processes, our objective is to improve our margins by executing on our growth plans as well as managing and leveraging our fixed cost base. On slide seven, I want to comment on the strength of our balance sheet and our capital allocation approach. Aptar has historically maintained a strong and relatively conservative balance sheet, which has served our customers and shareholders well during challenging economic times. In recent years, we have been focusing the majority of our capital allocation toward our higher-margin, faster-growing pharma segment. Our $180 million injectables expansion program began in 2020 and is ongoing. The first phase of our premium product capacity expansion in Granville, France, has been completed. A new additional large state-of-the-art factory, also in Granville, as well as expansions of our U.S.-based manufacturing facility in Congress, New York, will be operational in 2024. In 2023, we expect our capital expenditures to be in the range of $260 to $280 million, as two of our large projects are nearing completion. In Suzhou, China, a new plant that will serve all three segments is scheduled to progressively come online starting in the first half of 2023. Our state-of-the-art site for prestige custom beauty in Ollana, France, in the heart of the French manufacturing beauty industry, is scheduled to open in the second quarter of 2023. The new LEED, as in L-E-E-D, certified site, brings together operations from five older, inefficient manufacturing plants into one modern site and will service a growing part of the market for us. Dividends and share repurchases are also part of our balanced capital allocation strategy. In 2022, we returned over $190 million to shareholders through dividends and the repurchase of over 860,000 shares for $92.1 million. We completed our 29th year of paying an increasing annual dividend. Before I turn the call over to Bob to share further details on Q4, I want to speak about innovation and highlight recent technologies and product launches as shown on slide eight. In pharma, we recently announced our first metal-free nasal spray pump, a development made possible by the sustainability expertise well honed in our consumer-facing businesses. When used in combination with a high-density polyethylene or polypropylene container, this pump can be conveniently recycled as one piece without needing to separate or dismantle any parts. This pump strengthens the circular approach for nasal delivery devices and serves the growing needs for simple-to-recycle packaging. Also in pharma, we launched our first-ever active bottle featuring post-consumer recycled content, which is now part of After CSP Technologies' active vial solutions. Incorporating PCR content in our active polymer solutions is yet another step towards material circularity. For beauty and home, We are providing refillable packaging made with recycled plastic for clowns, Julie Rouge lipstick, and our award-winning fully recyclable monomaterial pump is the dispensing system for Ren Pure's new hair line and the Body Shop's shower wash, both in Europe. Several fragrance launches in Europe feature our prestige fragrance spray pumps, including perfume brands by Dior, L'Oreal, and Coty. Turning to food and beverage, Kraft Heinz is featuring our custom closures on several ketchup flavors along with our poor spout closure for their wild style condiment line in the US. In addition, our closure and flow control valve technology is featured on Hy-Vee's squeezable cream cheese spread in the US and Prima brand condiments in Spain. As seen on slide nine, This past year also marks the first full year of operation of our Envision Lab, APTAR's state-of-the-art innovation center in France. The Envision Lab showcases the latest in design, engineering, and material science that APTAR has to offer enterprise-wide. In 2022, we hosted ideation sessions with about 150, primarily beauty, customers. During these sessions, we were able to engage and collaborate with our customers at a high level Between our landmark investments in Oyonnax and the InVision Lab outside of Paris, our customer engagement has continuously increased, and our beauty pipeline has been significantly strengthened and grown. Now I would like to turn the call over to Bob.