Silgan Holdings Inc.

Good day and welcome to the Silgan Holdings fourth quarter 2024 earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Alex Hutter. Please go ahead.

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 10k 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 financial metrics, including adjusted EBIT, adjusted EBITDA, free cash flow, and net income per diluted share or adjusted EPS. A 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 fourth quarter and full year 2024 earnings call. Our team delivered another year of strong performance in 2024 as the success of our winning strategy, the power of our portfolio, the strength of our team, and our disciplined approach to capital deployment continue to set us apart from our competition and drive value for our shareholders. Normalizing in-market conditions in most of our businesses showcased the organic growth potential of our strategic initiatives, and we delivered mid-single-digit organic adjusted EPS growth and double-digit free cash flow growth in 2024, despite customer destocking activities that impacted the first half of the year. We made significant progress towards achieving our multi-year $50 million cost savings initiative, while continuing to invest organically in our businesses to drive growth into the future. Our disciplined capital deployment model continued to create value for our shareholders as we announced and closed the acquisition of Vayner Packaging during the year. We are pleased to add another high margin, strong organic growth business to the Silgan portfolio and believe this to be a logical next step in the evolution of our capabilities in the attractive dispensing markets as we continue to evolve our portfolio. Its advanced product and manufacturing technologies and strong innovation pipeline will bolster the organic growth and enhance the profile mix of the company for years to come. At the segment level, our dispensing and specialty closure segment continued to perform exceptionally well in 2024 and delivered three consecutive quarters of double digit organic growth in dispensing products to close out the year. Our adjusted EBITDA margins in the segment expanded almost 75 basis points during the year and reached new record levels as the margin enhancing mix and higher growth rate of our dispensing products continues to deliver meaningful upside to our bottom line. We drove operational improvement in the segment and continued to make progress against our multi-year cost savings initiatives. In metal containers, our pet food markets, which represents a strategic growth category and approximately half of our segment volume, showed improving trends throughout the year with high single digit growth in the second half of the year and double digit growth in the fourth quarter as volumes normalized. We once again validated our leadership in the market and the strength of our customer relationships by extending our decades long supply partnership with our largest customer. Our team navigated dynamic volume conditions in the fruit and vegetable market with the impact of a large customer reducing their inventories to drive working capital during the year compounded by severe weather that drove the worst fruit and vegetable pack in many years. In custom containers, our business delivered strong operating performance and experienced continued success in the marketplace as the commercialization of new contractual business wins and more normalized market conditions drove mid single digit volume growth and over 200 basis points of adjusted EBIT margin improvement. As we now turn our focus to 2025, With our strategic initiatives yielding strong organic growth, the contribution of the Vayner acquisition and first-year synergies, the full benefit of our cost savings program, and a partial recovery in the fruit and vegetable market, our business exits 2024 with strong momentum and is positioned to deliver record performance in 2025 with double-digit increases to both earnings and free cash flow. At the segment level, we are expecting dispensing and specialty closures organic volumes to grow by a mid single digit rate in 2025 driven by another year of high single digit growth in our dispensing products and low single digit growth in our closure products resulting in an improved mix. Metal containers volumes are expected to grow by a mid single digit percentage driven primarily by mid single digit growth in pet food and a partial recovery in the fruit and vegetable volumes. Custom containers volumes are expected to grow by a mid single digit percentage driven by the annualization of the new business wins that ramped up in 2024, as well as additional new business awards in 2025. As we enter 2025, we are excited about the opportunities that lay ahead for the company and our ability to execute upon them. Our customer partnerships remain strong and our teams remain focused on meeting the unique needs of our customers. We continue to compete and win in the markets we serve. Our strategic growth initiatives continue to shape the company's future And our discipline capital to deployment model continues to create significant value for shareholders. Before I turn it over to Kim, I'd also like to highlight that earlier this week, we announced that Philippe Chevrier will join our team as executive vice president and chief operating officer as part of our executive office in Stanford. We look forward to Philippe fully participating in the collaborative management process that has proven to be so successful since the founding of our company. He brings additional strong leadership capabilities to our team, a broad operational skill set, significant international experience, and a deep understanding of the importance of commercial relationships, all of which will help him be successful at Filgun. With that, Kim will take you through the financials for the quarter and our estimates for the first quarter and full year 2025.

Thank you, Adam. As Adam highlighted, our business continued to deliver strong financial results and converted our profits into double digit free cash flow growth in 2024. We closed on the Vayner acquisition in October, which we financed using cash on hand, our revolver, and a new 700 million euro term loan. And we successfully amended and extended our credit agreement during the fourth quarter. Our balance sheet and access to capital markets remains very strong. And after completing the Vayner transaction, we ended the year at 3.3 times pro forma net debt to EBITDA, which is within our target leverage range. Turning to the fourth quarter 2024 results, net sales of approximately $1.4 billion increased 5% from the prior year period, driven primarily by the addition of the Vayner business, which closed on October 15th, which was partially offset by less favorable mix in the metal container segment as expected. Total adjusted EBIT for the quarter of $151.7 million increased by 12% on a year-over-year basis, with record adjusted EBIT in dispensing and specialty closures and higher adjusted EBIT in the metal containers and custom containers segments. Record adjusted EPS of 85 cents increased 22 cents or 35% from the prior year. Turning to our segments, fourth quarter sales in our dispensing and specialty closures segment increased 22% versus the prior year. primarily as a result of the contribution from the Vayner packaging acquisition, which added approximately $100 million or 19% during the quarter and higher volume mix of 5%. Improvement in volume mix is driven primarily by a double digit increase in organic volume of dispensing products during the quarter. Record fourth quarter 2024 dispensing and specialty closures adjusted EBIT increased $13 million or 15% versus the record achieved in the prior year period as a result of the contribution from the VaynerPackaging acquisition, which added approximately $11.1 million and favorable volume mix. Late in the quarter, as a result of the announced restructuring program, we had the opportunity to further reduce inventories to more optimal levels, which cost us approximately $10 million in adjusted EBIT relative to our expectations entering the quarter as we sold through some higher cost inventory. This inventory reduction contributed to the reduction in working capital for the company, which was the primary driver of free cash flow exceeding our prior estimate for the year. In our metal container segment, sales declined 8% versus the prior year as a result of the lower price mix due to less favorable mix driven by a double digit increase in smaller cans for pet food and lower volumes for larger cans for the fruit and vegetable markets. Total volumes in the quarter were comparable to the prior year period. Metal containers adjusted EBIT increased 3%, primarily as a result of favorable price cost and mix, including SG&A cost management. In custom containers, sales increased 6% compared to the prior year quarter, driven by a 4% increase in volumes as a result of the commercialization of new business awards and more favorable price mix. Custom containers adjusted EBIT increased 40% as compared to the fourth quarter of 2023, primarily due to an improved mix of products sold and higher volumes. Looking ahead to 2025, we are estimating adjusted EPS in the range of $4 to $4.20, a 13% increase at the midpoint of the range as compared to $3.62 in 2024. This estimate includes interest expense of approximately $185 million, a tax rate of approximately 24%, corporate expense of approximately $40 million, and a weighted average share count of approximately 107 million shares. Depreciation is expected to increase $40 to $50 million on a year-over-year basis and be in the range of $265 million to $275 million. At the midpoint of our 2025 adjusted EPS range, we will exceed the prior record levels of adjusted EBIT, adjusted EBITDA, and adjusted EPS achieved in 2022. From a segment perspective, mid-teen percentage total adjusted EBIT growth in 2025 is expected to be driven primarily by a greater than 20% increase in dispensing and specialty closures adjusted EBIT. Custom containers segment adjusted EBIT is expected to grow by a mid-teen percentage. And in the metal containers segment, we expect to recover approximately half of the $40 million decline in adjusted EBIT that we experienced in 2024. Based on our current earnings outlook for 2025, we are providing an estimate of free cash flow of approximately $450 million A 15% increase from the prior year as earnings growth will be partly offset by higher interest in tax with capex of approximately $300 million. This estimate also includes approximately $20 million of cash costs to support our cost reduction program. Turning to our outlook for the first quarter of 2025, we are providing an estimate of adjusted earnings in the range of 74 cents to 84 cents per diluted share. a 14% increase as compared to adjusted EPS of 69 cents in the prior year period. The year-over-year improvement in adjusted earnings in the first quarter is driven primarily by the inclusion of Vayner packaging, higher volumes in each segment, and operational improvements, including the benefits from our cost savings program, partially offset by higher interest and corporate expense. First quarter volume and adjusted EBIT is expected to be above prior year levels in all three segments. That concludes our prepared comments, and we'll open the call for questions. Justin, would you kindly provide the directions for the question and answer session?

Thank you. If you would like to signal with questions, please press star 1 on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. If you would like to withdraw, please press star 2. Again, if you would like to withdraw your questions, you may press star 2. Once again, please press star one if you would like to signal with questions. And our first question today will come from George Staffos with Bank of America.

Hi, everyone. Good morning. Thanks for the details. Hope you're doing well. Two quick ones from me and then to follow on. Can you talk a little bit about what the learnings with Vayner have been so far? What did you learn since you've owned it that are additive or for that matter, maybe a little bit more challenging than you expected as you were closing the deal and relative to the deal model. Second question, can you talk about within the guidance for this year, what is discrete cost reduction and or sort of built in earnings gains, not that anything is ever guaranteed relative to your initiatives from the last couple of years? And then, as I said, I had a quick follow on. Sure. Good morning, George.

You know, look, the Vayner addition to our portfolio, it's gone really well. You know, we closed in mid October. To your point, they're always learning as you bring two organizations together. And I think that process has been very good. One that I would tell you initially is that they probably had more commercial opportunities in the business than maybe what we had given them credit for through our diligence process. And, you know, it's a similar conversation that we've had in some other acquisitions that we've done. that we actually did take the opportunity to approve some capital prior to the close of the acquisition for future growth. And this is contractual business. In fairness, these are primarily with customers that you can think about as both Silgan customers and Vayner customers. But the capital opportunity was there, and we took advantage of it. So I think one learning is we're gaining confidence and even more confidence in the combined entity's ability to deliver the growth profile that we've projected. So feeling really good about it. I think outside of that, again, we anticipated a strong team coming over, a talented team, and that's exactly what we've got. So we're excited about the future. I think the teams are working well together and delivering on really the synergies and all the other integration activities as we get kind of into the process now with a full quarter. And then secondly, on the cost reduction side of the portfolio, our second year of the $50 million cost reduction program, year one, we did deliver the $20 million of cost savings in 24. So feel really good about that. Teams did an excellent job executing against the programs that we established. And then for 25, it's really the second portion of the EBIT improvement, which will be about $30 million. of improvement to round out the $50 million cost reduction program.

Okay. Adam, just on Feiner, just a quick follow-on. So there's always going to be things that don't go as well. You know, what have those been so far? And then where have the commercial opportunities been where you've been maybe able to invest a little bit ahead of the curve? And then just the tax rate was a little bit lower than we were expecting. What drove that? Thanks, and I'll turn it over.

Sure. Just back to Vayner. Right. Clearly, not everything is, you know, seashells and balloons, George. So, you know, there's a lot of good stuff. There's a lot of stuff when you're bringing two organizations together that you have to work through. And I think it's just communication. But, you know, I tell you also, this is our 41st acquisition that we've done as a company. And I think it's just as you integrate an organization of this size, let's call it 6,000 employees, you know, communication is really important and just making sure you're speaking the same language and communicating effectively back and forth through the organization. So that's it. And, you know, just sometimes that's easier than not. Um, and I'll just say it's, it was pretty standard for us, but we've got a lot of experience, um, and, and working through those issues. I'll let Kim answer the tax rate question.

Sure. So for the tax rate for the fourth quarter, it was about 8.8%, and that was a benefit from tax restructuring we did in foreign operations. We do not expect that to repeat in 2025, so we'll be back to our 24% average rate as we go through the year next year.

Yeah, George, I'll come back to the question. This is Bob. Come back around to the question you asked in terms of where the investments were. You know, in typical markets that they have been operating in, very similar markets to where our dispensing business plays as well. So nothing far afield from what the two organizations combined are very capable at doing. They are a growthy market, so we think there's good opportunity with those customers to not only launch these product lines, but to continue to grow with them on a go-forward basis.

And as is typical with us, George, you can just assume that those are kind of mid to longer term contracts that support the capital investment.

Thank you very much.

And the next question will come from Gancham Panjabi with Baird.

Thank you, operator. Good morning, everybody. Adam, just, you know, sort of looking at our model, you know, from a volume metric standpoint, 22 volumes were down. 23 as well and up a little bit in 24 and just based on your characterization of 25. It sounds like you're expecting sort of a mid single digit increase in terms of volume. So can you help us bridge the differential as relates to your confidence being able to achieve that? And just in context of many of your customers that have reported so far, especially the off-cycle reporters that seem much more muted on the output for volumes.

Yeah, sure. You highlighted some challenging years with a lot of moving parts between 22 and 24 there. But what I would tell you, Gontem, as we came into those years, there was a lot of noise around the market of what was going on with consumers and what was going on with our customer base. And I think what you see at the back half to certainly the fourth quarter of 24 is just a much more normal kind of business environment that we're dealing with with our customers. We're sort of through all the destocking activities. And we're seeing in many cases our volumes are more indicative of what consumer demand is for our products. So we feel like as we turn the page now to 25, there's just a lot less noise around what's going on with our customers and what's going on with consumers. I'll continue to say through that window of time that you outlined, Gancham, consumer demand for our products remained fairly strong through that entire process. And really the disruption was more with our customers and what they were doing with their inventory, what they were doing with their commercial activities and pricing and promotional activities in the market. So, you know, as we sit here today, I think, You know, we've got a really good degree of confidence that the strategic initiatives that we've outlined that we're executing against them, they're delivering the value and creating value for our shareholders that we had outlined. And I think 25 is going to be a much more normal year than what we've seen the last several years.

Okay, understood. And then can you help us also bridge the earnings between the 362 you generated in 2024 and the midpoint of your guidance? how much of it is from the acquisition, and what sort of operating leverage are you assuming on the legacy silicon businesses, excluding Vayner?

Yeah, that's a very good question. So a couple things. One, you know, just some of the big numbers right out of the gate. I'm just going to give you some adjusted EBIT numbers. So call it $50 million from the Vayner acquisition of additional adjusted EBIT. I mentioned the $30 million of the cost savings program for year two. And then you've really got organic growth. that's driving the remainder of the improvement year over year. And then we're cycling over things, you know, some of the headwinds that we see. We've got some additional incremental interest expense. You've got some FX changes that have been taking place. And then, you know, our corporate line is a little more expensive next year in 25 than it was in 24. But all of that gets us to double-digit adjusted EBIT, adjusted EPS growth. And as Kim said earlier, double-digit adjusted free cash flow growth as well.

Okay. Terrific. Thank you so much.

Thank you. And the next question comes from Matt Roberts with Raymond James.

Hey, Adam, Kim, Alex. Good morning, everybody. I don't appreciate the bridge you just gave there on the total EBIT expectations, but maybe you could provide any additional color on higher thinking about that by segment. I mean, DSC seems like high value continues to drive growth there. In metal, any impacts you're expecting as pet food continues to be a higher mix or kind of steals a pass-through? But, you know, any margin considerations there as we look into 2025?

Yeah, good question. I mean, maybe just going through the segments quickly for you. So DSC, obviously, with double digit first quarter growth and dispensing volumes, again, our fourth straight quarter, with expected double digit growth and dispensing products, kind of high single digit for the year, you know, that's a very mix enhancing portfolio growth, not only for the company, but for the segment as well. So Really, that's the driver for us in DSC. We'll see kind of low single-digit growth for our specialty closures business, non-dispensing closures. And then you go over to metal containers. It's really the story that we've been talking about, right? You've got mid single-digit pet food growth through the course of the year in 25, partial recovery of fruit and vegetable. And all of that is driving kind of low to mid single digit growth for the segment in 2025. And then lastly, you get the custom container, you know, we continue to win in that market. Um, we're looking at kind of mid single digit growth, uh, in 25 off of a really good year in 24. And I think, you know, maybe back to Gonsham's question, this is, this is probably the market that's most clearly the, the one that normalized as we came through 24. And I think we've got really good momentum heading into 25 that's driving the confidence behind the volume growth expectations.

Certainly, I appreciate the additional color there. Secondly, if I think of your M&A strategy, so recently undertook Vayner acquisition, now going through Sunview leveraging, as you look into 2025, I mean, James Forrest, Norcal PTAC, he's like there's some talk for a potential competitor to sell parts of their portfolio, but specifically for so again, are there any certain end markets or areas of technology that you'd still be interested following banner. James Forrest, Norcal PTAC, Integration in 2025 and it's so kind of you know what size or timeline are you all comfortable with and related the on the cash I don't know if I missed this summer, but I believe the euro bonds do in March any considerations and addressing those Thank you.

Yeah, Matt, this is Bob. I'll take the first part of that question. Yeah, look, having closed Vayner in October, we're feeling really good, as Adam suggested, about the collective teams. While there's work to be done, we're well on our way to the integrating of the operations, identifying and capturing the synergies there. So we are actively looking at what's out there in the market. From an M and a perspective, our balance sheet would certainly support that. As Kim talked about, we're, you know, we're kind of right within our range. With the free cash flow profile, looking forward. Into 25 will be to the low end of that range. By the time we're there, so there's nothing sort of getting in our way from from an M and a perspective. We think that there's a good pipeline of potential opportunities out there and very specifically. Things that we think would be actionable in the near term, and that would fit exactly where investment thesis has been has been of late. So we're optimistic and hard at work to try to identify and get those.

Those next opportunities out and part of us, and on the 3 and a quarter notes, so we'll be opportunistic in the markets around those as well. But we do have capacity under our revolver. So we're not feeling like we're constrained or forced to do something.

Kim, thank you all again. Thank you.

And the next question will come from Anthony Pettinari with Citi.

Good morning. This is actually Brian Bergmeier sitting in for Anthony. Thank you for taking the question. First one, just kind of on dispensing, you called up the $10 million impact from inventory reduction in December. Was that within beverage caps or trigger sprayers or within beauty products? Any detail on that? And then just kind of broadly, maybe how much line of sight does Silken usually have to these types of customer inventory actions?

Hey, Brian, a couple things. Maybe first off, just in our dispensing and specialty closures segment, so this was actually a part of a restructuring program that we had initiated in our flat cap kind of specialty closures business. What we had done is really streamlined the operations and moved volume to more efficient facilities, to more efficient manufacturing lines. And as we got through that process, in fairness, we got to it earlier than anticipated in Q4. And it allowed us to make a conscious decision that we actually drove down our inventory. So in fairness, this didn't really have anything to do with our customers. This was us saying, Geez, we have improved the operational footprint that we've been working on, and our optimal inventory levels can be much lower than what we anticipated. So we took the opportunity to go ahead and do that. Obviously, there was a benefit of free cash flow. That really wasn't why we did this, but this was an opportunity to optimize kind of our inventory management, realize the full benefits of the restructuring programs that we had initiated, and move forward from there. So it was part of our flat cap closures business really as a result of the restructuring programs that we'd already initiated.

Got it. Got it. Thanks for that detail. That makes a lot of sense. And then just on the guidance for high single-digit volume growth for your dispensing products this year, are there more kind of new business wins being layered in in 2025? Or is there maybe a benefit from new business wins in 2024 that you haven't lapped yet? You know, just kind of following up on Matt's question, I'm just thinking about sort of the growth that Silicon is seeing versus sort of the underlying market growth. Thanks, and I'll turn it over.

Great. Good question. We are continuing to have a lot of success, particularly with the dispensing products. portion of our portfolio in the dispensing and specialty closures segment. So many new wins in 2024, some of which we've talked about, many more new wins in 2025. And really, you know, as we've talked previously, the thesis here is we're competitively advantaged in this marketplace. You know, our innovation, our design teams are meeting very unique needs from a variety of customers and markets in this space. And we're continuing to have tremendous success. So yes, we'll have additional new wins in 25. And that's a broad base across many, many markets that we serve. And then interestingly enough, we'll be preparing. We've recently had a significant business award in our specialty closure segment that is more focused on 2026, but we'll be ramping up late in the year of 25. So that's included in our guidance, but Really, as we think about the forward look of where we're going, we're taking that innovation, design, lightweighting for certain products. All of those elements are winning thesis or ideas in the market, let's say that. And we're driving growth through many, many of our markets.

And the next question will come from Gabe Haydee with Wells Fargo Securities.

Adam, Kim, Bob, Alex, good morning. I'm going to use a saying I learned today, give a mouse a cookie that'll ask for some milk. If I start with $1.2 billion of EBITDA sort of at the midpoint and I build down to the $450 of free cash flow, I have about $100 million in there for cash taxes and which would imply maybe a $35 million working capital benefit. And I think I heard $20 million of integration and savings spend in there. Are there other cash components that we should be thinking about? And really the crux of the question is just trying to understand sort of what the baseline should look like and then maybe what that enables you all to do on the M&A side.

Yeah, it's an interesting question, Gabe. I mean, I think, you know, some of the things that we're talking about that are working against free cash flow in 2025, again, we talked about kind of higher interest expense, higher cash tax. You know, I think you had most of the other components correct. So I think you're on the right line of thought. And I don't know if there was anything else that we can provide there that you didn't already have.

benefits from our rationalization programs as well so we have lower cash year over year on the rationalization programs okay and then right yeah i've got the the 300 million in there i was really kind of walking from a billion 20 of evita to 450 and i had the 185 of interest etc and that's where like i said there was a little bit of a it looks like there's a working capital benefit this year

And there will be. Maybe not quite as big as we had in 2024, but there will be a working capital benefit in 2025. Got it.

Okay. And then the other one, Adam, you guys have talked a little bit, and I feel like I missed part of what you answered to Anthony in the last question. Being capacity constrained in parts of DSC, and I'm thinking it's the high value add dispensing systems, that you're adding some capacity this year explains the higher cap backs, but would you be incurring any sort of startup expenses or frictional costs in the back half of this year to ramp for 2026? Or how should we think about that?

Yeah. So, I mean, we have been adding capacity, you know, literally every year since we've been, you know, working through the dispensing systems business and our DSC segment. So, I would say it's nothing really outside of the norm. So you're right, Gabe, and we always have startup costs with these projects and programs. We really don't talk about them a whole lot in this segment because they are much more on the incremental capacity addition side. So, you know, we absorb those costs and we commercialize those products and spend more time talking about the commercialization of the product and the startup costs. So really it's more of the same. And, you know, I would just tell you in the marketplace, We're having success, and we're having success implementing the program and kind of strategy that we've laid out over the last several years, and it's driving significant value for us.

Great. Thank you.

And moving on to Mike Roxland with Truer Securities.

Thanks, Adam, Bob, Kim, for taking my questions. First, congrats on the year and the outlook as well. First question I had was, obviously, the company's done a tremendous job over the last decade transforming the portfolio, focusing on growth in DSC, high-end dispensing, perfumes, fragrances, and the like, obviously, more recently with Vader and healthcare. Can you help us understand how you're seeing this business evolve, let's say, over the next five years? Currently, DSC represents, I think, 52% to 53% of EBITDA, roughly. Where do you see that headed?

Hey, Mike, thank you. Yeah, I mean, maybe let's just look back quickly. I mean, if you go back, I think we talked about this maybe on the last call. If you go back, call it 10 years ago. You know, the DSC segment today, pro forma with Vayner, is bigger than the entirety of Silgan. just 10 years ago. So you're right, we talk about this evolution that has sort of taken place as we've moved and invested heavily in our dispensing and specialty closures growth segment. Now fast forward, does that same sort of opportunity exist as we look forward? Sure it does. We're going to continue to generate a lot of cash flow. Our job in our executive office here is to find the most efficient means and opportunities to deploy that capital. And, you know, I think as we also talked, you know, our healthcare business now is a $200 million business. It's growing. It's growing faster than our other segments. And I think there's a lot of opportunity to grow both organically and through acquisition in the healthcare segment.

Got it. And would it be fair to say that is your primary focus as you look to grow in DSC?

Yeah, Mike, this is Bob. Look, what I would say is it's obviously our highest margin, fastest growing business. So we will continue to allocate capital toward that business as we continue to develop what are already pretty strong relationships with our customers. And we will look to grow with our customers, which is exactly what we've done in some of our other segments as well. That doesn't mean that we're necessarily going to starve the remainder of the business. we continue to have good access to capital to grow those businesses as well. The growth profile of those businesses just by their very nature tend to be slightly less than the dispensing business. So that is the priority for capital for sure.

And the other thing I would add to that is on the organic investment side of the business, you know, we do have opportunities with existing customers in healthcare where we are investing, where we have long-term partnerships, with those same customers. And, you know, we're excited about what the future holds for us, and we have been investing with those customers over time. And we'll probably have more to talk about here as we go forward, sharing some of those successes throughout the course of the year.

Perfect. And then just one quick follow-up. Can you just comment on the competitive landscape in metal cans? Obviously, it's been somewhat fluid the last few years, both here and in Europe. you have conditions, have you seen market conditions become more challenging? Maybe if some new players try to gain share, any concerns over pet food and, you know, maybe more, particularly if some companies try to mix up? Just want to get a sense of what you're seeing on the metal can side of things.

Yeah, and, you know, I mean, we've talked about this one over time as well. You know, just as a reminder, Mike, you know, about 90% of our business is covered under long-term contracts in the metal containers business. So, Historically, Silgan has sort of been out of the fray of maybe some of those market activities. And, you know, I'd also note, as you saw in the press release, you know, a highlight for the year is that we did extend our single largest customer, you know, another significant long-term contract. So, you know, that's really where we spend our time in the marketplace is working with our customers, helping them grow their business. And, you know, you don't have to look much further than pet food to say, You know, those investments that we've made over time, those long-term contracts that support our pet food volumes and investments have paid off for our customers, our shareholders, and for Silgan. So, you know, look, we don't see a whole lot of difference in the market activity at this point in metal containers, and frankly, we're a little bit outside of the normal fray anyway.

Got it. Thanks very much, and good luck in 25.

Thank you. And the next question will come from Arun Viswanathan with RBC Capital Markets.

Great. Thanks for taking my question. Congrats on a strong year and a good outlook here. I guess, first off, maybe you can just help us understand what you're hearing from your customers. I know it's maybe a seasonally less strong part of the year, but... How are they feeling as you go into the new year as far as promotional activity and potentially, you know, have they seen any inflection point on demand trends, maybe just especially for metal container and DSC? Thanks.

Sure. Maybe we'll start with metal containers and just, you know, I think it's one of the real successes, a couple of real successes in the promotional activity. And, you know, we've talked about that. Really, the targeted promotional activity that we've seen in the wet pet food segment, particularly for CAP for our business, has been very successful. And we talked about double-digit organic growth in Q4. Yes, we were cycling over a bit of destocking that happened in Q4 of 24, but really the demand level was very strong. And we think that targeted investment by our customers and promotional activity drove volume in the quarter. And the good news for us is that will continue into 25. And, you know, so we spent a lot of time understanding that with that specific customer. Another market in food cans, I would tell you that we saw success in promotional activity was in the soup market. And really it was very early in the process. So, you know, really as we were cycling over maybe some easier comps earlier in the year, because promotional activity did take hold, late in 23 and through 24 in the supermarket. So we feel good that our customers understand in the food can markets where promotional activity has worked, maybe where it could be more targeted. And then on the dispensing and specialty closure side, it really does vary by market. You think about things like lawn care, very effective promotional activity, air care, fabric care, those kinds of of products have had very targeted and very successful promotional activity i think the one that we have talked about that wasn't quite as effective as on kind of the isotonic beverage products and you know we've spent a lot of time with our customers as we now are putting you know forward our 2025 programs and objectives together um a more targeted and focused promotional activity is is what our customers are planning to drive volume growth in 2025. So I think, you know, almost back to George's first question, there were definitely learnings that we had as far as working with our customers on their promotional activities, what was successful, what was challenged, and maybe what modifications could be made to ensure success in 2025.

Great. Thanks for that. And then, um, I guess, uh, you, you, uh, you mentioned, uh, potentially elevated, uh, corporate costs or, um, you know, in 25, uh, obviously you have a bigger company, um, now. So what should we think about as a full year kind of corporate range? And then, um, similarly from a cashflow standpoint, um, obviously you're, you're, you're, you're performing at a much stronger, um, rate now with a 15% increase in 25. Do you expect to kind of continue to grow free cash flow at a much greater rate than, say, your EBITDA? Is there an increase in free cash flow conversion that's driving that? Or maybe you can just address those two issues. Thanks.

Sure. So on the corporate side, we called out about $40 million for this year, and that increase year over year is primarily related to corporate development activities. So as we continue to see our leverage ratio come down and see opportunities in the market. We can be opportunistic around that. And then on the free cash flow, we have, as you mentioned, really good improvement year over year from strong earnings, as well as, you know, lower working or offset by a bit of a working capital benefit. We see those improvements in the earnings to continue, and we would expect that at some point we'll be at a half a billion dollars of free cash flow as we go through the years.

Great. Thanks a lot.

And moving on to Jeff Tsikoskis with J.P.

Morgan. Thanks very much. You took $17.5 million in restructuring charges and custom containers. What are you spending the money on?

Well, hey, Jeff, it's part of our $50 million multi-year cost savings program. So in fairness, we are putting that cash and capital back to work in the broader Silgan portfolio. So as we look at continuing to invest, and we talk about $300 million of CapEx in the year supporting primarily growth initiatives, it's Justin Capposian, Custom Containers is one portion of that conversation, so, in particular and custom containers we did close to plants in 2024 or announced the closure of two plants and and really that's that's what's driving the cost profile, the benefits will be accrued across all of silicon.

David Miller, Okay, i'm in in terms of veener when you look at it on a pro forma basis, how did the business perform in the fourth quarter.

Tad Piper- Actually, it did really well, so you know we had we had expected them to have year over year growth and kind of their portfolio and they delivered upon that. Tad Piper- It was very consistent from a both a volume and a profit standpoint versus our acquisition model, so you know it's actually in Paris, it was slightly above it so. Tad Piper- You know we're very pleased with the performance of the business right out of the gate, and I think we're feeling more confident. about delivering 2025 as well in the growth profile that we've projected.

Yeah, Jeff, the only other thing I would add to what Adam just gave you is that the free cash flow of that business was maybe slightly less than what we were anticipating. And that is entirely due to the fact that we had some investment opportunities come to us right at the outset of closing. And in one particular case, even prior to closing, that we were able to approved. So, you know, I think all of that leads to a very positive fundamental outlook for the business going forward.

Thanks very much.

And we'll take a question from Daniel Rizzo with Jefferies.

Hey guys, thank you for squeezing me in. So you mentioned the commercial opportunities with Vayner. I was just wondering if you're specifically referring to revenue synergies, I mean, cross-selling, and also kind of flip side of that, if you will have to kind of give up some sales because of too much overlap with a particular customer, or that's not a problem at all?

Hey, Dan, so no. I mean, in fairness, we did not model any revenue synergies between the businesses, and that really is not something that Silgan really does. Clearly, there are opportunities that we can cross-sell amongst our groups that are out in the field. So we are seeing opportunities come up between the businesses, but that wasn't part of our acquisition model.

Okay. And then I think you mentioned within the metal business, metal containers, that you expect to get half of the fruit and vegetable business back that was lost in 2024. for, if I'm wrong, just correct me there, but also in addition to that, I was wondering if, if soup is still kind of doing better than historically speaking and how, what the outlook is for there. And if it's even meaningful at this point.

Uh, it's very meaningful. It's an important market for us. So I, the good news again, I'll kind of repeat what I said earlier through the variety of, of challenges that we've had over the course of, of working with our customers and volumes in the last two years. What I would tell you, underlying demand for soup continued to be strong, so it has remained strong. We had a good quarter in Q4. We're expecting kind of normalized soup volumes for 2025, and it still is an important part of the business and what we do. Over to the fruit and vegetable markets, what I tell you very quickly, Dan, is that we're still working with our customers on finalizing their PAC plan. So, you know, we have a little less clarity at this point than what we would like, but we'll certainly have a lot more information as we come back together to discuss first quarter results in April. And, you know, I think what I would say, I just want to clarify the comment. When we say recovering half, it's really the financial impact that the metal containers business saw year over year. So about a $40 million change in 24, and we're anticipating getting half of that back as we move to 25. Okay.

All right. Thank you very much.

Thanks. And we'll take a question from George Staffos with Bank of America.

Hi, everyone. A couple of quick ones. So, Philippe Chevrier, you know, you mentioned that he brings strong leadership, strong operating skill set, international experience. Should we read into that that maybe as you're having these additional opportunities in corporate development that maybe some of this is going to be outside of the states to a larger degree than in the past, or are we overthinking at this juncture?

Well, and it's not a bad thought, George. I think that, you know, I mean, we like mature markets, and we've never been shy about saying that. So, you know, I think if you look at where the last several acquisitions have been, there's been definitely an international flair, particularly a European flair to those acquisitions as well. So I wouldn't read too much into it. For me, this is all about our executive office. We're sitting in our founder's room right now with Phil and Greg staring at us from their portraits on the wall. And it's that model that they generated with our collaborative office here that has been so successful for so long.

we're just excited that we're adding additional talent and thought leadership to our team here and excited to you know bring his experience uh to our skill set here in our stanford office understood and then just on pet food and it comes up periodically and just want an update as it's become an increasingly large piece of metal over time how does it change the operations Has it changed perhaps the growth profile we know, but maybe does it bring any risks or supply chain factors that you've got to manage differently than used to be the case? I'm guessing certainly there's maybe some greater reliance on aluminum to some degree. So anything you could share with us there? Yes, it's been helpful. Yes, it's grown. Sure, it's got a lower mix, but has it changed how you manage the business and maybe bring in some additional risks down the road? Thanks, guys, and good luck in the quarter.

Yeah, it's a good question, George. I mean, look, the aluminum side of our business has grown significantly over time, as you just sort of outlined. And, you know, now pet food is, call it over half of our volume in 2025 from a unit volume perspective. The vast majority of that is in aluminum. So we're buying significantly more aluminum from a raw material standpoint than we have in the past. And, you know, we have elected to, so it's a proactive statement I'm about to make, you know, diversify the supply chain that we have for aluminum to make sure that we can continue to do what we do, which is support our customers on a requirements-based contractual arrangement for the long term. So, you know, you can think about our supply chain being diverse. You can think about it being kind of covered under long-term contracts and, you know, supporting the the growth that we not only have delivered, but we continue to anticipate going forward as we continue to really invest along with our customers in the pet food market for growth.

Do we reach a point in 25, sorry guys, quick one here, where comps almost necessarily have to turn flat, given that you're growing at high single digits and double digits right now? or you don't see that at all during the four quarters during 2025. Thank you again.

Yep. George, I think we're still going to deliver growth for the course of the year. I think the comp I would maybe highlight right now is the one that we just delivered in Q4. So as you think of Q4 and 25, that'll be a tough comp for us. But knowing what our customers have invested in from their capacity standpoint, knowing what our capabilities are and the growth rates that we collectively are expecting for pet food in 25, I feel very, we collectively feel very strongly about delivering that kind of mid single digit volume growth. And again, we've been doing this for 30 plus years in the pet food market over a long horizon. That is the kind of growth that we've continued to drive through this marketplace.

Thanks, Adam.

And that does conclude the question and answer session. I'll now turn the call back over to Adam Greenlee for any additional or closing remarks.

Great. Thank you, Justin. I appreciate your support today, and thanks, everyone, for your interest in SILGIN. Look forward to catching up again in April to review our first quarter results.

Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.