Silgan Holdings Inc.

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 and CFO. Before we begin the call today, we would like to make it clear that certain statements made 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 2023 and other filings with the Securities and 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 metrics, including adjusted EBIT, free cash flow, and adjusted debt income per diluted share. Reconciliation of these metrics, which should not be considered substitutes for similar GAAP metrics, can be found in today's press release and under the non-GAAP financial information portion of 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 2024 earnings call. I'd like to begin today's call by welcoming the approximately 4,000 new Silgan team members who recently joined our company through our acquisition of Vayner Packaging. We're excited to have you join the Silgan team for what we can accomplish together as we continue to build momentum as the leading global dispensing solutions partner for the world's most iconic brands. The Vayner acquisition brings advanced product and manufacturing technologies that will help bolster our innovation pipeline and represents a clear and logical extension of Silgan's existing capabilities in the dispensing market. We believe the acquisition will drive organic growth, margin expansion, and financial accretion for our shareholders and create significant value as we integrate the business, create efficiencies, and generate cash to deleverage back to our target range by the end of next year. Turning now to our results, the third quarter continued to showcase the success of our long-term strategic growth initiatives with some fantastic operational and commercial successes in our businesses and another quarter of resilient financial performance. We continue to see strong volume trends in each segment and overall margin improvement driven by growth in our dispensing products and the benefit of our cost reduction programs. In our segments, dispensing and specialty closures delivered record third quarter adjusted EBIT with record volume and double digit growth in our global dispensing products. Our commitment to innovation, customer service, and operational excellence continues to drive our success as our teams capitalize on this winning business strategy. As a result, we continue to gain traction with new and existing customers in our core high end fragrance and beauty and home care markets. And we are seeing incremental opportunities now in health care and pharma markets as well. Our dispensing momentum remains strong into year end as we execute on our near and long term priorities in this rapidly growing high value portion of our business. In the food and beverage portion of the segment, Consumer demand for our products remained strong and our European closures volume grew by a mid single digit percentage in the quarter. However, promotional activity, particularly for isotonic beverages in North America was less impactful than our customers had anticipated. And as a result, the recovery in these volumes will be more prolonged than initially anticipated. While consumers are managing their purchases more closely as a result of inflation, It remains clear that consumer preferences have not changed when it comes to these products, and our customers remain focused on driving sales volume back to more normal levels. While volumes are below our expectations in these specific products, the financial impact of the shortfall is more than offset by the favorable mix impact of our dispensing products. With the seasonal peak for hot fill products now behind us, this headwind should be less meaningful to our results as we move into the fourth quarter, and behind us as we enter 2025. In metal containers, our teams once again validated our leadership position in the market by successfully extending our decades-long exclusive supply relationship with our largest customer through a long-term contract extension. This customer, who was also Silgun's very first customer, represents a significant portion of our growing pet food business. During the quarter, pet food, which represents approximately half of our volumes in our metal containers business, continued to show accelerating volume trends and grew by a high single-digit percentage, and we continue to see market growth for these products. Demand in the soup category also remains strong as volumes recover from the prior year destocking impacts, but volumes for fruit and vegetable markets fell below prior year levels and below our expectations when we entered the quarter. While we are expecting lower pack volumes in the quarter as the result of a large pack customer reducing their pack plan in 2024 to manage their working capital, adverse weather disruptions negatively impacted harvest yields and caused the pack season to come to an early conclusion this year. As a result, our pack volumes in 2024 were at historically low levels. While these weather events have impacted our segment results in the second half of 2024, We believe that the fruit and vegetable market is positioned for a strong recovery in 2025. Our custom container segment delivered another quarter of strong results in the third quarter with 5% volume growth, primarily as a result of the commercialization of new business awards. In addition, our teams continue to validate our competitive advantage in this business with additional wins in the market that will benefit the segment in 2025 and beyond. As we now move into the fourth quarter, we continue to believe the company is positioned to deliver volume and profit growth for the year, but have narrowed the range of our EPS estimates primarily to reflect the impact of lower pack volumes in 2024. For the fourth quarter, we expect dispensing and specialty closures volume mix to grow by a low to mid single digit rate, with high single digit growth in dispensing products driving better profitability for the segment through improved mix. In metal containers, We continue to expect mid single digit growth in pet food, which represents approximately half of our volume. But with the impact of severe weather on pack volumes, we now expect full year volume to be comparable to 2023 levels. Custom containers volumes are expected to grow by a low to mid single digit percentage in 2024 as market demand continues to recover and new business wins provide incremental volume and profit contribution throughout the remainder of the year. The market has continued to evolve in 2024 and has presented our company with both exciting opportunities and new challenges. And we believe our winning business strategy, our focus, the excellence of our teams, and our unwavering commitment to our founding principles have uniquely positioned the company to derive significant growth in the near term and for many more years into the future. As we move close to year end and begin shifting our focus to 2025, with the Vayner acquisition now complete, the continuing success of our long-term strategic initiatives, and the full benefits of our cost savings programs flowing to the bottom line, we are well positioned to deliver significant earnings growth in 2025. In addition, pack volumes in our metal container segment should improve in 2025 from historically low levels in 2024. But given that our customers are still in the very early stages of planning for the 2025 pack, It's too early to know how much of a recovery the industry will experience. Nonetheless, even without factoring in an improvement in PAC volumes in 2025, we believe we are well positioned to deliver double-digit EPS growth in 2025 and meet or exceed our prior record for adjusted EPS of $4.01. With that, Kim, we'll take you through the financials for the quarter and our estimates for the fourth quarter and full year 2024. Thank you, Adam.

As Adam discussed, we delivered strong growth in the third quarter as a result of the success of our strategic initiatives, but our adjusted EPS results fell below the midpoint of our expected range, mostly due to the impact of softer pack volumes in metal containers. Net sales of approximately $1.8 billion declined 3% from the prior year period, driven primarily by the pass-through of lower raw material costs, mostly in our metal containers business. Total adjusted EBIT for the third quarter of $206 million decreased by 4% on a year-over-year basis due to the impact of lower pack volumes in our metal container segment, which offset higher adjusted EBIT in the dispensing and specialty closures in custom container segments. Adjusted net income for diluted share was $1.21, a 4% increase from $1.16 in the prior year quarter, with higher adjusted EBIT in dispensing and specialty closures in custom containers, lower interest costs, at a lower tax rate, partially offset by lower adjusted EBIT in metal containers. Turning to our segments, sales in our dispensing and specialty closure segment increased 1% versus the prior year quarter, primarily as a result of higher volume mix of 2%, which was partially offset by the pass-through of lower raw material costs. The increase in volume mix is primarily due to double-digit volume growth in dispensing products, which resulted in favorable mix. Third quarter dispensing and specialty closures adjusted EBIT increased $1.4 million versus the prior year period with favorable price cost and mix partially offset by the unfavorable impact of foreign currency. The positive volume and mix impact of double digit growth in our dispensing products was partially offset by the limited success of our customers' promotional activity in hot fill beverage volumes in North America, particularly in isotonic beverages, which cost us approximately $5 million versus the prior year period. In our metal container segment, sales declined 7% versus the prior year quarter, primarily due to the pass-through of lower raw material costs and less favorable mix, which was partially offset by higher volumes of 2%. Products for pet food markets grew by a high single-digit percentage, and products for soup recovered to more normal levels following the destocking trends in the third quarter of 2023. Volumes for fruit and vegetable pack products, many of which were high-value large cans for products like tomatoes, declined by a low teen percentage and significantly impacted our mix of products sold in the quarter. Metal containers adjusted EBIT was below the prior year quarter, due largely to the previously discussed impact of volume and mix associated with the reduction in pack volumes in the third quarter of 2024. Relative to our expectations entering into the quarter, the shortfall in pack volumes and the associated negative mix cost us approximately $10 million in the quarter. In custom containers, sales increased 6% compared to the prior year quarter, driven by a 5% increase in volumes, primarily as a result of the commercialization of new business awards during the quarter. Custom containers adjusted EBIT increased $8.2 million as compared to the third quarter of 2023, driven by more favorable price costs, including mix and higher volumes. Looking ahead to the fourth quarter of 2024, We are providing an estimate of adjusted earnings in the range of $0.78 to $0.88 per diluted share, as compared to $0.63 in the prior year period. The 32% year-over-year improvement in adjusted earnings for the fourth quarter at the midpoint of the range is driven primarily by improvement in the dispensing and specialty closures segment, as well as cost reductions, strong operating performance, and a small benefit from the inclusion of Vayner packaging. Fourth quarter adjusted EBIT is expected to be approximately $25 million above prior year levels in dispensing and specialty closures with improved volume mix and price cost and the inclusion of Vayner packaging in the segment. Fourth quarter metal containers volumes are expected to be below the prior year level with high single digit growth in pet food more than offset by the early end to the pack compared to a strong late pack in 2023. Metal containers adjusted EBIT is expected to be comparable to the prior year period as a result of improved price cost as the segment continues to benefit from cost reduction programs. Fourth quarter adjusted EBIT in the custom container segment is expected to be above prior year levels as a result of low single digit volume growth, primarily from the continued benefit from new business wins. Due to the shortfall in third quarter earnings as a result of lower volumes from the early end of the pack and the resulting negative mix implications, we are narrowing our estimate of adjusted net income for diluted share for the full year to a range of $3.55 to $3.65, a 6% increase at the midpoint of the range as compared to $3.40 in 2023. This estimate includes the Vayner acquisition as of the closing date, corporate expense of approximately $30 million, interest expense of approximately $170 million, an adjusted tax rate of 23% to 24%, and a weighted average share count of approximately 107 million shares. From a segment perspective, adjusted EBIT is expected to grow by low single-digit percentage in 2024, driven by a double-digit percentage increase in dispensing and specialty closures and growth in the custom container segment. Adjusted EBIT in the metal container segment is expected to be below the prior year record level by approximately $35 to $40 million, primarily due to a double-digit decline in PAC volumes in 2024, which negatively impacts volume mix and cost. Based on our current earnings outlook for 2024, we are confirming our estimate of free cash flow of approximately $375 million, with CapEx of approximately $255 million in 2024. That concludes our prepared comments, and we'll open up the call for questions. Jennifer, would you please kindly provide the directions for the question and answer session?