Silgan Holdings Inc.

Good day and welcome to the Selgin Holdings 3rd Quarter 2023 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Alex Hutter, Vice President of Investor Relations. Please go ahead, sir.

Thank you and good 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 would like to make it clear that certain statements made today on this conference call may be forward-looking statements. These forward-looking statements are made based upon management's expectations and beliefs concerning future events impacting the company and, therefore, involve a number of uncertainties and risks, including, but not limited to, those described in the company's annual report on Form 10-K for 2022 and other filings with the Securities Exchange Commission. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in the forward-looking statements. In addition, commentary on today's call may contain references to certain non-GAAP financial metrics, including adjusted EBIT, adjusted EBITDA, free cash flow, and adjusted net income per diluted share. The reconciliation of these metrics, which should not be considered substitutes for similar GAAP metrics, can be found in today's press release available in the investor relations section of our website at silganholdings.com. With that, let me turn it over to Adam.

Thank you, Alex, and we'd like to welcome everyone to Silgan's third quarter 2023 earnings call. The third quarter delivered strong performance that was consistent with our expectations despite continually challenging market conditions, and we reported our second highest quarterly earnings as our businesses manage their costs proactively to offset softer than expected volumes in the quarter. During the quarter, we finalized our previously discussed plans to improve our cost structure and have announced a $50 million cost reduction program through the end of 2025. We expect to achieve these cost reductions through a combination of footprint rationalizations and other cost reduction actions with benefits in each of our reporting segments over the next two years. Additionally, we believe these cost improvements will help position the company to continue to meet the unique needs of our customers and compete and win in the markets we serve. Through our disciplined and balanced capital allocation process, we've repurchased $155 million worth of Silgan stock during the quarter, bringing our year-to-date repurchases to $175 million and putting the company on track to return over $250 million to shareholders through a combination of buybacks and dividends in 2023. Turning to trends in the business, demand for our high-value dispensing products remained strong, with mid-single-digit growth for these products during the quarter that drove significant mix improvement for the company overall and the dispensing and specialty closure segment. We continue to see recovery in products that experienced post-pandemic destocking last year and benefited from strong organic growth in our fragrance, dispensing products for prestige markets. The consumer destocking we saw develop near the end of the second quarter across all three segments expanded during the third quarter as these plans deepened in the food and beverage markets and grew to include adjacent categories. Importantly, all market indications we have continue to show that consumer level demand for our products remains robust and our customers inventory unit levels are trending below historic levels as their focus remains on the absolute dollar value levels of inventory in their systems at year end. Turning to our third quarter results, performance in each of our segments was consistent with our expectations, with mid-single-digit adjusted EBIT growth driving record results in dispensing and specialty closures, and with metal containers adjusted EBIT comparable to the prior year record levels. In dispensing and specialty closures, our high-value dispensing products were a highlight for the quarter, with mid-single-digit volume growth and a significant mixed benefit that more than offset the headwinds we've talked about in food and beverage end markets. Domestic food and beverage volumes were flat year over year, as customer destocking in the United States had a more pronounced impact on our volume than we anticipated in our guidance. International food and beverage volumes remain challenged as a result of the increased levels of inflation on premium products, in particular, for metal closures on glass packages. Despite these headwinds on volume, the growth in dispensing products, mixed benefit, and strong cost management drove record performance for this segment in the quarter. In metal containers, we again delivered strong results despite softer than expected volumes. Customer destocking priorities appear to have expanded to include adjacent categories, including pet food, and many customers are targeting further inventory reductions in categories that we were already anticipating these trends the north american fruit and vegetable pack was delayed due to late plantings and volumes in europe were below our expectations due to lower fruit yields and the impact of flooding from greece overall the 2023 crop will be below our expectations as only a small amount of volume will be packed in the fourth quarter despite the late start Despite these headwinds, our team offset the volume shortfall from a profit perspective with effective cost management and drove results that were consistent with our expectations. In custom containers, results were below prior year but consistent with our expectations due to the impact of customer destocking, including the delay in commercialization of new business wins. Turning now to our expectations for the fourth quarter and the full year. We have revised our estimate for full-year earnings to reflect deeper and more pervasive customer destocking priorities in the fourth quarter, which has resulted in a lower volume outlook in our metal containers and dispensing and specialty closure segments. We believe the continued progress we have made with regard to our strategic priorities and the actions we've taken to effectively manage the factors that are within our control position the company to return to earnings growth in 2024. We see positive signs in our customers' promotional activity, inventory unit levels trending below historic norms, and while we expect market volumes to improve in 2024, we are not dependent upon it to deliver earnings growth. We'll continue to manage the business in a disciplined manner, focusing on meeting the unique needs of our customers while delivering a compelling value proposition for our shareholders. With that, Kim will take you through the financials for the quarter and our estimates for the fourth quarter and full year.