SLGN - Earnings call transcript Q4 2019

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Operator

Thank you for joining the Silgan Holdings Fourth Quarter 2019 Earnings Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Kim Ulmer, Vice President, Finance and Treasurer. Please go ahead.

Kim Ulmer

Thank you.

today, EVP Tony Greenlee, and COO. company CEO, Chairman President the Lewis, Bob CFO, me I Allott, have and and Joining and Adam

including uncertainties we are this limited Form future company, conference like implied the may for be beliefs statements. we that with not Before risks, concerning financial company's These the could Annual events actual XXXX filings condition statements upon call in and those call described and forward-looking management's or statements. a it and company the differ statements certain but on to, other the of the make Therefore number Report XX-K based therefore, clear the or materially would in forward-looking operations today made of forward-looking expressed the results begin from made impacting of to on SEC. involve and those today, expectations

turn I'll that, it Tony. With to over

Tony Allott

Kim. I year-end Thank with And you, Silgan's my call. unfortunately here yet. I like cough one were feel It's talking another. doubt XXXX just conference earnings gone we has Welcome everyone to funny,

So about provide you'll then highlights few start a by XXXX bear comments be outlook. XXXX want the performance Afterwards, through will regarding with usual, making I hopefully answer it. outlook. and to our our provide as full I update for details a year the more to and will Adam any review brief of XXXX the around financial me Bob pleased and the fourth questions. quarter, Bob, and

$X.XX, cash a diluted long-term on costs to These delivering of several our and price stock net financial share share dispensing approximately for XXXX cash of to initiating performance providing $X.XX good plan completing multi-year income per $X.XX, record XX%, diluted our the or year-end XXXX, generating X.XXX% with adjusted increase pursuit flow offer the Albea's notes record a optimization our of included yield acquire with per in the diluted portion in As our of share, senior net per press free our of income million X.X%, year metal operations, release, issuance $XXX.X of a metal delivering acquisition covered and several milestones. dividend of company growth take to container container out the due reviewing business. announcement relentless the a of effort by binding our footprint contracts, continue continuing was

our significant $X.XX growing impact per businesses We're record volatility. of pension We of year costs earnings in delivered and pleased and in adjusted spite the headwinds with to market X.X% by the another tariff-related negative performance XXXX. share of

year, While of moving pleased a the in outcome. lot there we're the parts are with

anticipated Our income. business despite metal improved due lower volumes on basis, lower an and pension pre-buys prior-year container to adjusted

comparisons let said in year can we little of that impact we and of have indicated volumes. pre-buy, XXXX focus a on in QX purchased price expected X% increases. Given negative call indicated the what ago which to of our XXX We would occurred. million and what the full-year impact has this we relative QX XXXX, volumes, that reversal this on over food cans had a XXXX would metal by ahead have the understandable volumes review me In XXXX, benefited

in continue the US leading a and in inventory, up business would can the market Further, expected large X% year, start volumes decline likely pack -- XXXX in a of also customer consistent to can to expect impact. indicated see at an some our We food call volumes overall one-year food US the can XXXX. aggregated to us we food work

still that that market XXXX, working of customer but specific quarters second inventories share. and not first the down indicated was In we re-treating

the representing year, when were we be decline the would impact the X%. the than Silgan categories is been for namely to believed historically declining. which down have growing up In end, X% have also more that in overall the represented and highlighted, is for This the reasons adjusted pre-buy. of can the growth result we can so categories we market real only less for only better in So X% the

believe we as industry compares trend of information confirmation our Therefore, volumes. So expected stands we volume how surprises in it around see no XXXX with Silgan's our totals.

the excellent the another multi-year of achieved our plastic posted volume control. and negative we container with pension business to growth for more expect cost Moving and target solid XX% impact, improvement year-over-year EBITDA the Adjusted progress come. on, margin

by exchange year currency, pre-acquisition currency seasonal well operating driven previously closures level. profit, growth impact adjusted and the discussed business systems in volume the at year lower operating had is was metal its Our income, closures. pack including of for The the volumes down levels items but and ahead pension unfavorable dispensing of business for foreign for -- profitable weaker

in Our are beyond. key to XXXX in profitability businesses also with well way positioned drive XXXX initiatives and under several

pension benefits customer as of price as and unfavorable lower from certain in of result and $XX growth prices and businesses container continued We the to to volume approximately impact metal efficiencies. renewals little costs expect modest expected average a gains in our plastic are change volume expect profitability contracts. impact selling growth due we cost closures metal significant In of million the be lower and business, offset by

ago we of average we of that Therefore, similar impact in business. as had our to we've our as years process you food a relative large Six price Many contracts. years period view this six recall contracts. a normal may can renewed fairly being of group a

business, plants, than in billion to drive We to our continue in and two intended closing to container of also units X.X is with further capacity the cost reductions reduce which six were targeted which more by announced closed footprint an expanded plan of optimization XXXX. metal

Monday, will further from announced to offer line our which our we as group, grow the closures dispensing business. acquire opportunity Finally, product business entered and binding on a Albea into enhance we've provide to

of The midpoint detail, full-year we're range represents diluted in the providing more increase X% guidance $X.XX for discuss the $X.XX. per earnings will As in over XXXX. to adjusted of Bob range share

expect also around free to begin -- million. We cash flow be $XXX

Bob. that, turn it to With I'll

Bob Lewis

Good everyone. morning, Tony. you, Thank

several strategic highlighted, XXXX well initiatives XXXX and Tony for benefited beyond. As our leave positioned businesses which from

As diluted a share we $XXX.X million, we free line our adjusted and of delivered per in in $X.XX target. of XXXX, with result, flow earnings cash delivered

plastics a by diluted year. million, basis, diluted or compared in share. the share, of net partially year $X.XX per increases On these of the billion, or to an for income result to increase consolidated sales increase for over sales million the in $XXX.X net the prior We income $XX was containers, $X.XX of revenue were $XXX metal the closures and offset lower of the $X.XXX or X.X% per as sales businesses. converted million, net year XXXX This

per debt. of increased earnings that costs share In XXXX share in per extinguishment Adjustments restructuring including early attributable earnings per and debt. XXXX acquisitions loss and announced early rationalization charges, share by for $X.XX benefited totaled charges increasing on by $X.XX adjusted of a to adjustments extinguishment earnings loss on

share result, $X.XX the As $X.XX a diluted prior versus XXXX income year. net in in was adjusted per

rates, Interest borrowings, expense lower decreased before average debt of million, foreign loss due average on currency. weighted $XXX.X impact early extinguishment outstanding primarily the favorable and interest to $XX.X lower of to million

from of redemption early $X.X on notes May extinguishment redemption and resulting remaining notes incurred X% facility of August X.X% senior credit XXXX, senior of amendment in of April XXXX, the debt million of million result addition, a we a all in as In the of XXXX XXXX. in the $X.X of loss XXXX the of senior secured of the the in in and

XXXX Our XXXX effective in tax and rate was respectively. XX.X% and XX.X%

expanded slightly higher which totaled is in capital expenditures XXXX, capital million million. optimization footprint certain metal of investments result than with in $XXX in the $XXX.X containers. XXXX capital associated totaled plan Full-year a as anticipated And projects

December. Additionally, share we paid of per quarterly dividend $X.XX in

of And full for $XX.X $XX.X returned to dividends. million. The was total of the the in year, shareholders cash dividend we the form million cost

$X.XX generated outlined of Table diluted year. the is prior cash share, capex in million, a cash free the due prior $XXX.X The per As record and working the flow million, benefit or primarily C, in free to sizable in capital $X.XX in versus reduction per higher share flow year-over-year the we year. $XXX.X

financial of the regarding year. businesses. increase metal billion, was each specifics $X.XXX some to of due less of favorable primarily provide a approximately now partially offset business foreign and by material of products container unfavorable higher million performance raw prior sales I'll of of This up versus costs, $XX lower the X%, million unit through volumes recorded and other approximately mix pass manufacturing currency the net The sold. translation the $XX.X of

current quarter volumes the customers, unit unfavorable The in due and fourth XXXX from in by lower the to pet and as vegetable food reduction volumes as year impact in in was growth well continued principally of the volumes offset fruit principally higher soup. the pre-buy

the products decreases prior from larger These to of This charges, income, current metal of million, were favorable the for lower a of mix production offset year. part was decrease favorable amount sold. $XX.X impact less versus partially due rationalization $XXX primarily business $XX.X Segment in finished in was US the income unit the of efficiencies inventory million lower decrease container the million volumes and higher pension attributable a to in produced goods a year. by

unfavorable X Pension Plan. and $X.X in million. $XX.X footprint of closures Central a billion of sales prior a optimization the currency the of costs, year. were $X.X of of Net States of less foreign unit million, Rationalization The pass-through charges XXXX business mix result the Rationalization in favorable in million approximately decrease decrease from sold, largely plan Phase the a was withdrawal of X%. the a the translation totaled lower charges versus of were XXXX, and lower of volumes the result approximately $XX.X $XX primarily raw material net million products

pack quarter a offset Unit were fruit declined, pre-buy. These current higher the the of vegetable volumes by dispensing in weakness in systems. unfavorable year of the the as partially impact and declines fourth volumes in result principally XXXX and

unit in These and the through offset to resin facility as lagged favorable currency to favorable of Segment to XXXX charges $X.X due manufacturing impact increased announced prior shutdown sold compared the income, the primarily the income translation, the pass million unfavorable less mix costs impact pension related lower $XXX.X a impact lower principally year. rationalization of products lower for in and lower business were XXXX, of partially the $XX.X million, volumes. resin of headwinds million in costs in from the from costs by Spain, foreign unfavorable higher of decreased to an closures'

offset $X translation principally and raw sales decreased Segment costs $X foreign container million, the currency XXXX, the X%. business of higher through Net due in million offset of million from unfavorable pass by manufacturing to for the of approximately by to cost approximately lower impact $XXX.X volumes more year the Fort prior of plastic increased $X.X material partially lower lower in favorable partially income to a the of million to Arkansas attributable the income. unfavorable Smith, $XX.X year, higher and start-up pension from largely products the costs, million volumes, mix impact sold, facility,

Taking the to quick a in increasing as adjustments earnings at $X.XX per $X.XX of XXXX We by quarter. the look we XXXX. year reported in compared diluted recorded fourth $X.XX in by per prior share diluted and income $X.XX share quarter,

a of share each of we adjusted $X.XX XXXX XXXX. diluted four result, the per quarters earnings in and As delivered of

the for resin metal were the lower the closures in decreases XXXX Net and the driven unfavorable businesses, sold the container of were year, business, quarter versus of favorable mix currency approximately sales pre-buy, businesses, to material These volumes largely the metal through the down plastic slightly million. primarily quarter prior more impact of container period in billion, through fourth unfavorable container volumes in the manufacturing the businesses. plastic pass $XX.X current the business, higher costs other in due pass container impact closures of and and by million in in the translation foreign year partly enclosure raw a higher $X.XXX the products offset of and costs by of $X the lower

foreign of million taxes approximately $X.X million attributable business. and charges, closures for currency of quarter XXXX million, decreased of announced the lower $X.X and closures Income acquisitions, of before costs to rationalization business, $XX.X in metal pension in to and income transactions the income, higher primarily interest fourth to million unfavorable due $X unit $X container million volumes lower the

in of higher were These prior which significant declines produced by plastic and as of the quarter. inventory businesses in A current the as quarter. of versus products the produced the volumes container the sold start-up business, the production an and associated period, more business, in impact the finished in in the in mix due XXXX, also year in in unfavorable costs benefited Smith closures plastic with Fort container well part partially inventory a favorable metal year reduction offset the efficiencies to container increased goods

Interest to average the average million was rate tax quarter rates fourth and as to effective weighted outstanding borrowings. compared the as XXXX. for XXXX fourth in a expense of interest XX.X% for $XX.X quarter The lower million result XXXX decreased $X.X XX.X% of lower

our X% This adjusted binding increase As share earnings of to we estimate adjusted full look from representing for an of systems. for at XXXX is earnings estimate a $X.XX diluted the does midpoint any XXXX, per $X.XX, impact over XXXX. dispensing share range Albea's per recently on include year announced the $X.XX record for not the offer the

is anticipated expect Reflected the benefit volumes by closures higher benefits anticipated the volume income, estimates continued to manufacturing container plastic business improvements. impact the in gains are income, significant benefit following; in from higher container manufacturing expecting expected our the and certain from efficiencies. benefit the and We're These forecasted pension to for the manufacturing pension from business XXXX efficiencies. offset income of from be higher anticipated renewal segment pension are income, metal in contracts, business higher and again, customer we higher and to to volumes,

XX.X% Also than from million expense XXXX, $XXX rate the spending to interest and plan rates addition, lower in allocated XXXX, expanded we average approximately expect XX% to largely expect expenditures tax expect to in In versus in the We footprint a borrowings. be lower decline approximately currently XXXX as of we higher our to result average optimization to of slightly outstanding compared effective rate interest down anticipated, but containers. have capital we metal as some be XXXX.

addition, guidance all businesses. the this includes all is from million XXXX our of for $XX decline pension, recovery across recovery In a nearly of the and also spread of

adjusted the of exclude $X.XX to first we the expect early benefits in from to unchanged of any cash attributable offer exclude business. charges. costs announced We're earnings compares also loss extinguishment XXXX, virtually $XXX to XXXX. quarter share, our rationalization of to for million, on also outlook These of and providing the debt, per in our and dispensing Albea's quarter $X.XX range the diluted be current excluding $X.XX acquire first to binding estimates estimate announced quarter impact This XXXX on for acquisitions XXXX. rationalization charges, Based for free approximately the recently flow

conclude will That prepared our remarks.

I'll turn Stephanie, Q&A. and provide it let to So back the you you directions for

Operator

Instructions]. Thank you [Operator

Montreal. from Wilde with comes Mark question Bank first Our of

Mark Wilde

where in but XXXX from; thinking you're you know to coming of in like also if to because increase help it pet through wonder us 'XX. just I could seems continue going in I capacity about be the volumes, can food invested can that's business the out taking the market, you've

So if of about think in kind that as kind we just us, of you business? help can volumes

Adam Greenlee

in of Mark, have we market. for Sure really on Adam. driving XXXX the U.S. outlook things can is There that couple a it's particularly volume, food the

year so don't we of from normalized for impact that the XXXX we're QX being an first volume a more standpoint. The have negative pre-buy, the overall looking

had and to can food Tony we've of see categories pet you to for we said some the back that our some outweighing Investor heavily Secondly, are cans, items calls business. and point, and if -- how continue like you Day, on protein, as about lot Investor pretty even mentioned, market time good to weighted moves food could going general to a growth we we're see the of growth amount we a of at food dialog the go growth, the our these at so spend of of Day,

big So are two those our items.

A I'd soup you one our give third volumes. is

the story not through on as right out, we what where soup first that's standpoint to positive in like two going a to continue promotional now trends of the we certainly but activity exactly the think I play last soup. will quarters we and We're the from see head seen quarter what sure go, you've are year.

first have can customers' volume can talk to year over related on three life up, from lot but course volumes. catch the either and two or the filled packs a of of to we've the two at about our two we years three a pack going of that are shelf, can inventory some There's Finally, seen to there, that's related pack shelf with so four volumes and components the historically. is or being a fruits point, vegetables manage what period,

So say than us it's continued see rare bad momentum two a little for packed a of, to years. more

a we're normal we to So going are pack have thinking more that year. this

of and The the now volumes talking last reflective component their be of more time is, that that been one for reduction inventory them. we've will some program, customer is about their to through our now, usage

And so little might lot there upside. of volume, fact, of that a we downside is think and be in don't bit there a

a answer lot to but moving big your of question So parts.

Tony Allott

And Mark, we're doing added of capacity of on sort would ago. say you as part, plant, think that, you capacity just as a to Tony. I we added couple that, point added had then we two-piece I is, the out, what years

We have three been out some indicated to time. take going we piece were capacity over

what's some trying been Silgan really, that We're So and to know, has excess you But capacity. that's as there happening. sell from our out not system. honing fill

strategy is whole customers our Our etc. growing with

is ability there out the to the meet connection our and really, capacity coming our So growth customers. no of between

Mark Wilde

And two as they you've in last back remaining can you and these color think could, a announced today, can has those Because a little then, follow-on. other six months? changed maybe plants us just if all June? that domestic Tony, in I I the give closures on are Are you plants, what announced just four

Adam Greenlee

considered evaluating it's for are be we're which plant exactly going the Mark, Adam closures. still again. plants to Again,

amount a have excess equipment. prepared capacity we the can making in remarks, mentioned Tony that three-piece our As on targeting really now of we're certain

[Multiple plants And Speakers]. a is primarily we've a so, of got But variety that situation. domestic

our to our to footprint the out As optimize manufacturing out meet of and we're and better said, it of unique Tony needs cost customers. take of always looking

as domestic, more this, course is we forward we'll be and go we and move of about as talking So the evaluation the year, forward. through the completed, primarily

Tony Allott

And through we these we our for requirements contract coming had or negotiations, the changed only of more all so. five years as were thing is, that's to the going to what next got clarity be

Operator

Thank you. [Operator Instructions].

Pettinari next with Citigroup. Our comes from question Anthony

Anthony Pettinari

morning. Good

footprint rationalization if initiative, reduction, the way On any fixed quantify is to cost any? there from benefits

Adam Greenlee

Again, we're really capacity said, reduction. targeting as I

you I the associated the year, that to million will in with a translate $XX of magnitude, in that completed. broad now, of that base like thinking of the overall when savings something we're back costs kind think be ballpark business, as a direct kind

Anthony Pettinari

just mean three has plastics, How I in recovering been now. for, XXXX then, I the think pretty that sort business? shifting you the margins And that maybe nicely do segment incremental exiting and to opportunities of the think years business' about

Adam Greenlee

it's XXXX. a and the I'll now say, business journey about we really been have we good Again, ended just plastics with where feel

mentioned, Tony As EBITDA the several pension income. years XX% achieve when margin set the that we for goal impact we had the you of ago, did normalize lower

said once we that assets. about always be, where footprint had achieve it will we filling where be and what want want it be So we get to it we is, our the structure to cost our rate and

be footprint existing of -- part on the the for the most It about will in kind growth asset. existing

that and we're nice more positioning done is we and going we're in themselves So more They've out be growth market, the to footprint the a where the footprint. right job very for of looking this turning growth now for across looking corner, probably cost now, structure the are business.

Operator

Thank you.

Vertical Chip Dillon with question comes Research from next Partners. Our

Chip Dillon

bit thanks also kind the about was morning assume that for of cost for and do Does terms those on opportunities? in million opportunities? business? talk wondering, And a acquisition Monday, of synergies of of should what sort synergies, we the cost Yes, in of the the being that $XX spent details. include you rationalization you as commercial think all that how commercial mentioned And dispensing debt little I -- deal? the versus and good the Could you about

Bob Lewis

Chip this Bob. is

is So as we said, the of $XX roughly synergies million target.

practices of plants, count of as There'll that so businesses is we have commercial businesses the we some said are really assume that aggregation as which Some what we not there that plays call, provide across on But synergy that the opportunities from. opportunities will in it. there from cost these side, historic purely the we synergize any best synergies, SG&A be There put -- when kind together how we are playbook there, is is the synergy. done to procurement consolidated. nothing can from an get think attack the new coming These of benefit we we some there. all

committed is profile terms the come looks see admittedly fundamental We'll capital term In delayed-draw structure interest of as days. that rates there, it what loan, debt like, with the relatively acquisition. got obviously, we've low through at which these we the

somewhere basis, say the kind -- So it would low it's be in a of on I to will to of X.X% be a debt, going range. relatively comparative be that, going it's cost to but X% probably

Chip Dillon

areas quick the in have you involved a can, packaging? when arguments, but any know I promote And arguments general the food footprint and sense. other a lot the a or of plastics, the of, perception picture aspects moves impact efforts or at made help advantages in based just plastics to very a in then to of past you plastic are lot of carbon you big involved look involve sort in the And you're that of not a heard of follow-up, concern number we've about obviously all

Adam Greenlee

Adam. they're on of it's in packaging wide packaging in our general specific We work involved Chip, and certainly to very a variety closely and well. as customers, plastic initiatives with

or really entities we agencies plastic around related So customers. support packaging to involvement that with any have them. directly any our don't aren't direct We

Operator

Thank you.

W. question Ghansham Robert Our comes from next Baird. Panjabi with

Ghansham Panjabi

guess side, up give off, the negotiations the you did metal First your part as any part contract I back? pick as price food of new of volume on

Adam Greenlee

those of have categories. with contracts Hi Ghansham, products and No. that growing are customers Adam. some it's Again,

Tony earlier, our usually existing comes customer our through as again growth mentioned So base.

new, you for does So will. but nothing growth, if allow it

Ghansham Panjabi

business? you sense to news travel, to on that market And portfolio Albea now is you cash Thanks. is million, going the then of back what the corona have -- the guidance capital. obviously in impacted separately, do is in have end then free be virus Do for flow big your how for Albea's $XXX a and embedded duty-free etc. there acquisition, And being going working with is to as

Tony Allott

on free sell kind channels they and we're going the the get So, of into. not to duty question into subsets

it the as both a part is say, you think sale, know, of I business our beauty well to the. for and is duty-free their fair business,

So I think that's simple the answer.

I bigger to could your think well anticipate the we there some be answer impact travel. that, is temporary to question

that, is think and world If temporary to view not Our I going think term. a at. in whole is it's that's that nature long industry we're and more the to changed, be I see we long-term issue, across the going then every has look

So our it our of on some that's would temporarily. part businesses. of impact is a But it. kind have of It view both

Bob Lewis

I'll the cash free take flow. Ghansham,

So cash said, have is the $XXX to modest the the free we're benefit main incremental from essentially there, million going tax as year. and tax is flow is the driver takes -- a inventory puts next is year-over-year, including that's payment working up and for of we that for purposes. cash capital. to There But fact why is target a an tax that result the accounting not as required,

So to of accounting tax the around LIFO technical, payment. it's get impact

not basis. a you if go-forward will, So cash a permanent on item flow hit, one-time it's a that's

Operator

you. Thank

Gabe next question Wells Securities. Our Fargo comes Hajde from with

Gabe Hajde

just going much in how be of you I out give be portion do, $XX is you there was us and might a terms And to more go specific, is the can but year go-forward not contracts, that of a that headwind? business renegotiated sense for couple the on hit what into think in getting If a the that to anything we to called a basis? would headwind, XXXX, or something all that million

Adam Greenlee

things, normal for talking jumping about. of we of contracts of -- average metal The seven that as tenure So a those represents we agreement. into agreements is this said, XXXX revenue. we It the couple years just and specifically are on about those renegotiated., our that XX% kind our about of have business container Tony the

as costs talking talked average $XX something as that Tony an that to of take of about, you if impact. roughly far So close you're million X%, about price

the XXXX -- is the renegotiations. $XX those XXXX million of the is that impact So of impact

much tend it chunk of of costs So to lined tend would some we get a And for we us, take in that, that the incentive a try consider out, to get end some we contracts. near to price of from customer. We big exactly as more of do a ourselves up and normal to which kind our we're process the position business, here well. is do is, to there, to then in what what work as give

Gabe Hajde

Well, always go the trying also on inflationary talked outrun have pass-through to about years. you guys forward

Okay.

Tony Allott

right. That's

Adam Greenlee

Exactly.

Gabe Hajde

you a side. out, as Bob, was abnormally Maybe for question tax on the This year, you low. pointed

about going is up a look in to normalized what the like way that rate about asset be might weave a like? basis? think of there to of that And little I'm Is tax sort then, bit step XXXX Sounds higher, question try a benefit cash and in Albea. to an the purchase, a might such you get

Bob Lewis

probably -- is the I in there's up lot that fact it's a end perhaps there's to we international in Albea, you're the as some tax higher so in rate, in just work do. we'll But bringing larger a that, by the Yes, exposure think But to will that. bring going slightly muted thought yes, with there. Obviously we portfolio. still higher given tax a be

change one other a or significant from I perspective. don't way see the So that

year. we around I in all the that's to in -- felt think on jurisdictions, tax based rate various true-ups your certain and earlier our just really point, moves

anything change. I So that into read wouldn't

Tony Allott

say, low characterize I would if I 'XX you unusually tax just as think year.

one-time unusually tax get I that's year, because in something benefit impact, going a for cash future, think to of the what we're really as basically that which liquidate high you is be talking that about, cash the 'XX is then would theoretically, inventory. is inventory you sometime and

that So it's But a one-time item it's if not item. cash kind it's tax. type cash recurring will, prepaying you of a

Operator

you. Thank

Our Kyle comes Bank. White next from question Deutsche with

Kyle White

kind focusing others? Do take and Just that the that on out your of the balanced, more overall on just view curious as excess you the following taken supply how from is do what you be could out? capacity industry you think much or capacity reduction, demand view

Adam Greenlee

work I think market. on the side, capacity our we fully the not through as addressing overcapacity reduction in it's the obviously,

billion So something of are will be X reduction until that's to we that efforts further continue market units excess around made. of the in the in think capacity market, remains and

Kyle White

first think metal you particularly QX containers in about the third in the And to going volumes, quarter. I shipment talked guidance, from half

bit and then little this, why is details way as on size of this kind more this Just on any well? occurring, to

Adam Greenlee

have of one a to as that we related renegotiation the relationship typically supply long-term it of this they essentially, a to of we of what those all that of packed customer as moving is and cans. far of more really now it So just-in-time does store We're contract. a agreements the long those supply to year cans mentioned, cans. is, to And that had takes ship a Tony

So doesn't versus really them change the season, the be shipping we'll if cans the in but you cans, shipping cans when pack will, more we make year to long. all

going impact second bigger the the will be shift first shipments it's in QX, timing also QX as a So really it half well. pack to season. impact to half it around that of is and Probably but

Operator

you. Thank

Bank with Staphos George from comes of question America. next Your

George Staphos

some questions, shorter-term guys. I had a then longer questions term of couple and bigger some picture

what's the out, first just have rationalization probably variance at $XX.X the something, press to type of and that later million. between higher same a the those look rationalization they when I bit seem come of So the source, two, metal charges $XX.X on from because we are more of question, question, release but is charges. net-net missing little a on, million there called then containers, I'm

Bob Lewis

George. you I'm exactly Yes, not with following

the the I the between there's difference think the during guess years, million $XX I then and there its and is is million. what $XX charge years, -- difference and charge, [Multiple the Speakers].

Tony Allott

that's think right. I

George Staphos

the sorts that account the or $XXX of in on, The would you be with that cash period free on of had, happening capex that on any yet second later I do already, just something you to adjustments have cash nature things? these past have theory, be $XXX would footprint outlays million of related for the question that, I in later or might know forecast to the because anyway, in of that need you make of we flow the employment million. rationalization the

Bob Lewis

yes. the short think answer Well, to that I is

we'll So project this is in the that, of guidance our a remember three And meaningful and XXXX some that forward roll here, the be some from will relatively that will so have a that timeframe. small again That impact will nothing for year of period. that is XXXX number. there, in

George Staphos

as perhaps in and the tenure time largest, better in get in stable that these less been through Bigger food North the America.And giving in else for maybe over to given more out than you containers on sort to focused this and down yes, come some early food any happen the what most Silgan of with your out of terms renegotiation the the the contracts is for the had it and -- over perhaps excess gone this renegotiations is road, comes of past? providing ability capacity we've market. the years, the seen that you've Is of that and more market make this the picture normal most market? America, as question, of a on of pressurized of terms process other in North has metal you cans in you've still, anybody Or you've customers, players

Adam Greenlee

that say So customers the in George, point are is to I question. mean are not huge without I would is, our stress a change. good the we player we would there that, a focused. it's market, we long-term this doubt, broadly

that's sustainability continue the opportunities, still for doubt, We focus. invest without technology, other so to and

customers that us that want point on can in a capacity, the to of as process. course to conversation leverage You our use of get imagine excess hear

which down, perfect would X% I environment. of that makes kind a sense a in why of say, kind is that the balance, So of all is net

the the broadly, on similar, seem to seem terms similar, every discussed, but items the sides. So tension have be lengths has to both be different negotiation negotiations

than And so characterize wouldn't past. massively the we -- it really that's different

George Staphos

are an the mean, it's has that the end had you analyst running at company power. company easier a I the of staying day, you as do. look, But most being than the guys

always the business, because food in the manufacturing ones process. the food of can. the have And who there's can in excess been You're investing the just nature capacity of

get time, for. that's would I and can over something you hopefully So leverage imagine, that should

to played would been well We things. back didn't that it for how expected? question look XXXX? program it's It go can of went that a and over. XXXX XXXX and maybe learnings? time food What like think a maybe and as you seems EBIT, some at last it's as you? over What I'll Thanks grade now other My some that lot down but out? look CanVision turn in What we're How remind at time, the pension of you good us guys. you of were flat well CanVision the can kind of that's to period

Tony Allott

our cetara. projects, a and So us XXXX The remind in push let's what always that ourselves. there it extend put merge to to it's get a CanVision did, to et always allowed value for is at it did not go it out were and But contracts us, as back us. order customers. We out and clear for certainly these big was

seems long-term time. got the our customers, cetera. again, through our contract. to they that idea problem drive get So was who retained to box this and large have But et through, value this customers with had price worked. We've to couldn't retailers We

talked doubt, as customers else we lot about, a without been our time, that market. in right? So in come new benefited have competition Yes, the have

had You've our raw in volatility materials. wild

pleased to and to allowed to how continue worked lot been those program So that them our But -- doubt, so with a and out. it try would like costs those They there out. moving parts, But more, delivered has we're through going without we're that. and ways efforts, was to but. to of customers value do find programs to get

on competitive making focus taking costs stops. can Our out the and never more

out name, we the make Can find we out, the take had So right ways Vision more even costs trying customers there competitive. sustainable, are XXXX, though to our to now, still can make more

a broad our but and with on, way pleased the a it we as we're capsulated took goes program to So customers. that, more way it in

Operator

you. Thank

with Our Josephson KeyBanc Adam Capital comes question Markets. next from

Adam Josephson

a for moment. pension on just Bob,

at year think this on ago pension. I guidance a from drag your time, earnings you called 'XX $X.XX out

be that, 'XX you at said think in $X.XX. you lost earlier as the much what I the will almost as gain

number So could for 'XX? precise us give a you just

Bob Lewis

precise could. you to Well, an tried I of I give as estimate as

$XX is the that million. $X.XX So

be share And year. in it or the So same lion's $X.XX it's that the same amounts of is spread the was basically back dollar year. that to percentage going in on coming the again, the prior

is that half, the the So closures. then the and of lion's and business, share going plastics half being roughly other split between to containers

Adam Josephson

Bob, costs about result what the years, cash I level talked being any of of in with associated closures the over anticipating to you some cash the of as terms program? you're you guides. of of you're those that sense plant a three next In food that can as kind 'XX planning. can know us six But costs your give roughly,

Adam Greenlee

as Adam, is roughly right it's two course last evaluation phase we're to going XXXX. million years. did on over next of $XX that I we based the in said And be we are now, still the Adam, what in number thinking years, the two the again

point, to first year the three-year program. was Tony's So XXXX of the

Adam Josephson

the end year. toward them the of closed You

planning of food that us the of what can on you roughly percentage that your eliminating, what just represents? capacity remind billion X.X you're terms In cans can --

Bob Lewis

calculator. a got We've

Tony Allott

in that something X%, like range. It's

Adam Josephson

X% once capacity or moment. at then you've Supply about demand the balance, industry's obviously, Tony, would point? think over-capacity that, how that the you so, the at there done is And

reduce are point, added what's industry the balanced still over do to that be expect get acting be years? that. You to past going expect be or you few from there to rid the of Once you you would just to been do this X%, hangover at

Tony Allott

Adam business sell think really in units been as something of In we think capacity. there. because there's it, I think I think have billion the still of out this this said, like we to don't changing a way, probably X we not trying

shifted some by But we that we And capacity. our to two-piece our three-piece is we that. added out in we not to customers What capacity the customers, two-piece, nature do sell from -- we our our way business. two-piece supply That from indicated marketplace. weren't so take As things three-piece grow try out. of to trying to need we the is

the heightened be access, out there market, just really clear, chopping wasn't. So up overall while I I it was the does think not -- it's it's to it it want that

And But now. got I so still we our to billion out no say, there's of that -- right reporting probably think there. view we're Nobody be don't there -- is X that would number. speculating we roughly that.

Adam Josephson

lower sales your Monday, you then EBITDA. And to and and and one EBITDA, can this reduce last just prices. one, about Tony, and cans food on the acquisition it's you sales and talk just closure And you closures plant how announced your food going the announced program increase

that from it. way that's the know you're trying food away one you conclusion run So the to could jump to not see I And cans.

think heading away everything you've just the direction which us could food of in how from this in for So week you terms is kind frame that and announced the you of toward closures about company cans?

Tony Allott

creation. we cans. started So why just we you're say view I -- running I Monday's say that food would from that's how are would value are definitely right, again, talking we we not presentation

that going the we our business of highest that's without cash that lot have can again, really businesses Silgan a that you valuable. have. So consider do view It's if through exactly cash, the food we this slogans, really And strong have generate we returning that.

there. We invest in keep to it it

make want the investments. don't making -- any impression to running I we're So for that leave right

and in In fact, business six these it way that taking stronger is better future. out for make plants a and invest to the

we of So can before other our we anything I in cash, is want that. businesses get -- don't to sure and franchise our care we knitting the take deployment make food

a And the has really think we we us. it. second of that invest choose that great one The where we that world money is to we and for dispensing been get the thing then take side

performed above The business bought we bought we very well, plus WestRock well from synergies. has where

kind So growing the product like we're highly it people. where it's of is and accretive what done, on and the development we

we investments in that see to Silgan make than to do done, is we which opportunity more businesses an like. nothing packaging it's really rigid what So has always

set is is some The something cans consider to lot last has is One to and if of have things the that. that we we are value of in a I'd do in all of always needs but all businesses. bring at point into dispensing, have we with These food look about suggesting -- If thing packaging, is parts, are to there's as skill not Silgan down you packaging all to been a think shared broken say, -- a etc., a XX% Silgan lot in to businesses. in our thing be you these rigid The business talk these know. certainly, rigid that future team we those elements. multiple adds capabilities.

they're which marketing those lacks at Some of sharing and really good the are that. on businesses food our with side, marketing can efforts

food are try product that to We're plants. really their The is of operator at sharing other areas. good an sharing incredible those get skills. consistent business to can We're Some development.

these, is so. that will do power to there comes it's So the from all and past Silgan of continue for and worked in

So absolutely a not not, all. can it's at from run

be been say think I to try I'll again. and clear very trying to you we've with

feeling have that absolutely been Our elements is there are food with can declining.

better we where we areas case. there. see that the knew absolutely we is We It's food are growing it. and are can that. There absolutely why saw running not areas growth opportunities to from it, more That's of are are in and reacted because the it

to that flat marketing We become we It's bigger all generation. have these is can food point, or whether so you or be it's think X%, you'll down up great across most over the bit also flat. return business. product The might like growing we net and we But cash would other where skills would and that like the little a can get and get still made But service. a like of and development, X%, other growth customer importantly of it areas the from area invest we time.

and these markets. service of carefully we is, is the well the customers it important how we that and needs Silgan in of do other hallmarks measure all our of One

have that we think a we So not cash for it's from food again creates value the skills deploying where can. on then it a shareholders. run and It's the play most

Operator

Thank you.

comes from Rizzo question with Company. next Our Daniel Jefferies &

Daniel Rizzo

question. one Just quick

of specifically You kind growth, so out you come point of next where to the expansion. shifting help mentioned you with if margin will was I do just plastic from? for kind that is wondering containers growth future phase could the think

Adam Greenlee

got we what Adam. is of it's what once was talking EBITDA Dan, previously world. Sure, packaging said there plastic the a that's sustainable level is Really to in rigid kind the had about we really margin, I XX% --

we I through growth. our know or margin our where healthcare, at things the expansion, food, of market not. it's looking food, beyond do we that like pet what on core markets, really kind just personal have margin expansion we market. care, not if growth assets it's we're don't more will target is. come kind But of it's the etc. of think the servicing fixed the So XX% That's that But

Bob Lewis

thing is now many Bob. business. growth so Dan, add that and Likewise, really the idea away the in is, nice not big sort to volume happy much. on I in it's for through take-outs. One we'd actually this had of it's walk Hey this don't of be basis. might We're continual the past running a cost And with efficiencies side the coming margin operating And that with that we've has system. gaining kind that efficiently business incremental been quarters this those the at just because business not growing, now

Adam Greenlee

So on to that's seeing been consistent volume that pretty X% we're going we've X% what a looking for forward. That's basis.

Bob Lewis

Exactly.

Daniel Rizzo

wondering was a I And kind think if soup Okay, you for? like turnaround it having second legs thank of is think with quarter you that. has I and third the then for or long how sustainable improving, this

Adam Greenlee

days. very think early I it's

is activities QX we in what quarters, consistent months. just now right see six into last two seen a trend. were the with the are which -- that it we've say what positive I are really So would

not how plays first declaring we quarter are victory quite with So the but see soup. out yet, we'll

Operator

you. Thank Our next Morgan. [Operator with Tyler question Langton JP comes Instructions] from

Tyler Langton

have be could renewal? contracts. XX% much of you the Do like XXXX business have a Adam, sense metal XXXX, rough of was of of -- and rough for a do I on for mentioned for in you guess you sense you think how do renewed -- -- years containers, those seven business I have sort the up for

Adam Greenlee

-- here. no, don't just off I hand 'XX, For

turn happens I business. that a again, is just normal think the that there within

I sit really ' that today. think significant on up have XX again as are here basis. in contracts a large that's coming anything longer-term we we Our that's don't

Tony Allott

I think beyond. it's XX% are -- XX% contracts XXXX of and

Adam Greenlee

beyond… And

Tyler Langton

I for systems guess the saw sort just and you year? year. markets and on volumes the XXXX, And down sort kind then of of closure Could I give, detail the how those just of just of -- sort business, closures. little you for a legacy guess with provide you for X% were within view this what dispensing in

Adam Greenlee

earlier And were of had quarter, mention into Tony quarter. heard systems we dispensing jumping that just the dispensing the really performance our fourth were almost X% a They maybe on prior with to and on items really systems pleased the mostly up you nice the the Again, what our in Europe related closures metal the metal had of versus pre-buy And in was for the year. quarter segment, closures, North America. we both impact pack business.

full a a on from volume the standpoint. metal year at dispensing pre-buy that So of The in on closures segment muted basis, going was again, else good growth systems. everything closure impact

Tyler Langton

sort for of I And dispensing then just positive of other again? to the volume post of do legacy businesses and guess expect kind XXXX, you kind

Adam Greenlee

good Yes, XXXX. of all business we for are components in our growth looking closure in

Operator

Thank you.

with Capital Markets. Viswanathan question RBC comes Arun from Our next

Arun Viswanathan

Just a couple guess just questions, I the last question of with on soup.

on expect would wanted the continued trends of the through last I about moving guys can money little here. quarters. there on on, thoughts so guess, the have metal, with but seen your year? how get and is as guess parts quarters metal that seen pack containers thinking QX lot you've turn So now is you to given bit just improvement? we year, positive know a you a I pre-buy the but some in I yes, just are the the side

Tony Allott

there You out bit. little a faded

how containers year? about feel about soup around talking metal do for the we You're

Arun Viswanathan

the outside because pre-buy. being of the the just asking pack? quarterly comparison any -- Well, just guess, for I commentary, just a QX And I'm of business, of because bit the little

Adam Greenlee

think, can I we about again, good continue food the to feel business.

the did detail of moving a I think about and bit we there. parts go QX explain and quite through

pet categories are we into we expecting to year, be protein. can modest next in food the food business driven by growth as and it's our the and forward think go going I and

Soup, we pack well. pretty good feel And about. talked we the business, about as

shift the around one-pack talked in about second the say first from only quarterization half I the customer the quarter half XXXX would -- food thing to can the is the of that the of the we volume So earlier.

Bob Lewis

I you then into short. that we to quarter, in tomato might late might in XXXX, little bit more ran add fourth pack remember, one that. had a and up Yes, that it Arun, a came bit

say So expecting into back I would drag if we're QX. normal you that a pack,

Arun Viswanathan

get thoughts, your plastic soup back we've And from there given has hearing a to just ESG all metal I you're been pouches. customers? that talk converting that been was retraction that from about years then ago And the into there about, hearing into and containers trends of just want couple any your

Adam Greenlee

either. much so. No, a meaningful do food it from I have I Therefore, don't moving think didn't away don't far to think back the moved ever can, enough impact.

marketplace. look, that think, we actually things ideas we and the just are these commercial customers incubation I -- talk in are all talking are I earlier here what our -- about typically So and of are that just were doing results about

can So the move packaging we in see I away from significant think alternative to didn't a particularly soup.

Tony Allott

package. to a getting new customers, tell new soup conscious they so new the they better may don't customers do sustainable they're than their years ideas four And are but they a launching I really three that But I not of environmentally think have were head can with think the broadly can and -- etc., you feeling I more ago, or and our etc. packages, good stuff, think about to here about higher we're being marketing been holding other generation were, are

less I is them. to interesting balance, think on a that little

Adam Greenlee

should have think does -- the now recycled with the consumer the say, package is fact, most US in some that the I power the right our It with that I And staying customers consumers idea food can and in general. market.

food the is the the that's think closer messaging can. about getting So steel there consumer infinitely recyclable to I of attributes some

Arun Viswanathan

on on or And considering you to then and think played activity promotional but I.e., this soup. into cans even sorry just all? and harp Do at another maybe consumers I'm this, thing has -- there kind point down canned looks -- or volume is on price products kind trade of their products promotions pocket, going any soup but any that's there? into on lower driving of other

Adam Greenlee

is it I promotions we've time thing what one there would does can I say seen is, foods, the in think move are Well, volume. when over

is there we the now activity So having it. it's impact. market right an A, and in a promotional lot soup like B, think of we

of promoting there that part know again a is they per don't and I are consumers eating So they're soup habit. se, talking trade-down everyday about but as

So it working, be and driving to its the volume seems in category.

Tony Allott

I almost done. think we're

take Let's two then just one or more, an given end. it and

Operator

Thank you.

from question comes with Goldman Our Brian next Maguire Sachs.

Brian Maguire

be once stay of duration. lot, wanted just X% discussed we Just beginning to already starts a for just the clear just of that to on steps at million -- renegotiation, want sort the the $XX I on contract, level and down it. contract The the that that or flat to it at be clear this

make continued just pricing. everything have of else, life there sure You the to aren't the but through want all like pass-throughs contract the de-escalators on and

Adam Greenlee

right. For the that's exactly most part,

would only So contracts. is, our volume-based might over for normal I obviously, time it that deflation. mechanisms that have inflation say vary pass-through are The or thing we these

-- value increases were much be pretty customers. volume got would versa, less you've if to substantially, if be there decrease, would more So value. But volume there to And our vice it

Tony Allott

historically normal… Which is

Adam Greenlee

new point. That's a not

Brian Maguire

a And warehousing and the on something neutral I then guess just it you. All a I about bit. if for is [indiscernible] be there'll it timing recognizing result making pretty that you'll guess revenue you'll point other capital be of just else cans working equal, some a and then view, of if that, the modeling -- little point think any in seasonal as just use a flows? making course as of and we it that could more be cash of about little bit from of

Adam Greenlee

think it's in standpoint. change of the capital much Yes, working I a don't

of about the more are when on sales the profits I just think product. realized it's volume

Brian Maguire

then? historically The as cash the is same time have eventually at coming still have -- would it would flow in

Adam Greenlee

correct. That's

Brian Maguire

still any And Bob, for cleanup one. a D&A the XXXX? thoughts on

Bob Lewis

nothing is off. There rolling

say. significant So make if rolling should think you I -- nothing just off, your I

in just basically that capital put we it's additional change. will the So

up And it'll nothing basis, material. bit probably but so little on be year-over-year a a

Tony Allott

that've been rolling Which, dispensing, recently like remember business the on and have new because more additive that's parts you don't like closures acquired, a off. the anything

more a of that you case. So little in get bit addition the

Brian Maguire

in, a bit. of change comes sort view, slightly up obviously these flat Albea When base all little point just will lot, a sure. to of I'm business But from

Yeah. Thanks lot, guys. sense. a Okay, makes

Tony Allott

Thanks, Brian.

Operator

will Fargo from with final come you. question Thank Wells Securities. And our Gabe

Gabe Hajde

you of give by 'XX And if then first did to lower missed please? if I it, in Thanks XXXX deal it of specific to assuming second, for after from anticipation should talked volumes you try volume delay this about not, was this for costs? apologize. With I'm we metal squeezing in Bob, of follow-up, seven half the come the I'll have segment? guys. up, in fourth I if -- purchases you Did quarter could but there And QX did of not, you quick. coming make down, times, any

Adam Greenlee

Gabe. question This the first. I'll is second Adam, take

think first. of, challenges talked We'll good closures. we and again, it quarter call bit being we in start down fourth X%, by the in the call For talked about about I it offset X% metal again volume, growth was closure there dispensing little Volume that's the a volume.

lot impact the the told, cans, were good again in saw a we grabbing but again, over really were -- we we parts, it And little just fourth about not business, a of quarter the side, of a much growth a plastic do there On little sorry, buy which the another interest but in steel with there's question we you quarter. that, down bit for the then food down X%, X% plastic moving win in year-over-year on -- steel, around edge, the so nor was the you there, is big so have a not On of your that, lot do do steel can just lot pre-buy, there. companies expected. a all

Operator

is all our for you. questions remarks. Thank it presenters closing back we'd now the to like have. to That I'd turn

Tony Allott

time to late quarter a about you, talking Thank in Stephanie. We look you, April. thank Have appreciate and first we good-day. you everyone. forward your our Great, to

Operator

ladies gentlemen. Thank This concludes presentation. and today's you

disconnect. You now may

Silgan (SLGN) 29 Jan 202019 Q4 Earnings call transcript