SLGN - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for joining the Silgan Holdings Second Quarter 2020 Earnings Results Conference Call. Today's call is being recorded. At this time, I'd like to turn the call over to Ms. Kim Ulmer, Vice President, Finance and Treasurer. Please go ahead, ma’am.

Kim Ulmer

you. Thank

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

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

Tony Allott

to everyone XXXX to ongoing pandemic. Welcome, that earnings COVID-XX safely navigate Kim. continues trust We our everyone Thank, call. the conference quarter second

to grateful many quarter our then few that adapted to happy the few and the Bob, be comments to provide be of and environment questions. about customers I'll a food With work to perform vital products. the further levels, seriously. new to health and produce of safety will and for and year. our home Bob, for second products products, that, at quarter members our demands of employees and of the highest consumers. I these full and continued continue thoughts customers any supply prepared and to We the take and will who that the a Adam, take make details on provide about hygiene very proud normal working We're desperately Silgan meet We able team needed the continue particularly the we're have unselfishly come increased so

you the quarter a we were release, earnings expectations an delivered strong prior of in remarkable As and across record Each increase sustained our quarter posted delivered ahead performance well $X.XX, the strong the the quarter. of the truly of the results to saw range quarter, XX% the volume adjusted demand nature incredibly record gains quarter, operating our share with throughout for over the of board. press per levels segment These due businesses of second income. and

volumes - in consumption sustained it consume geographies While patterns gains the for double also home note several hygiene requirements we consumer quarter have growth food stay continued volume favorably important expect at in high products. volume Demand July, and remain where home quarter, markets, throughout is impacted strong and the indicating been key was early eased. pantry for levels in even to the stocking repeat that in digit

each Just at of levels operate as our businesses peak importantly, productivity quarter. during the

on of also acquisition June the Albéa dispensing We business on the closed Group X.

remain COVID-XX, convinced the We this levels strong position long and believe the a market we negatively COVID-XX with synergy demand are of are of by portion business fit what this the are eased. be on-premise of as the While business pleased thus progress and retail restrictions from pullback integration fragrance for on will we impacted term far. our

XX% With $X.XX earnings explanation we to per for cash to of represents our provide and $X.XX to range in full This our earnings current increasing free and of turn financial million. additional nearly outlook flow up share performance price range represents As it the of detail and the of year At free volume $X.XX increase to a to review approximately to X.X%. a results cash remainder strong to million, our for guidance first that up year guidance from Bob also the the $XXX around a are over I'll result flow for the a $XXX in increasing $X.XX. to compares XXXX, from more estimates that, of year, yield the the continued at midpoint. a of previous half share, the previous We're approximately $.XX XXXX.

Bob Lewis

Good Thank you, Tony. morning, everyone.

of highlighted, our of operating key Tony exceeded in the high results pension and the quarter performance As for income. businesses, benefited higher improvement volumes board, expectations, in strong the from as we across end markets our sustained our

up lower sales average to were $X.XX potential dispensing million write-up of had as result, included incremental or market costs which liquidity all in for during quarter, million, costs of the disruptions for Albéa included to from the to improved raw material quarter revolver to a primarily the as impact borrowings outstanding as foreign the borrowings held quarter of per while of of the we of currency and proactively As the offset XXXX ensure to of from equivalent which versus as $X.X in and the X,XXX $X.XX had largely $XX.X Therefore, charges Fund, consolidated $X.XX the pass-through basis, midst the Central operations acquisition XXXX facilities charges adjusted translation. On income for of of $X expense per billion, quarter other diluted two earnings COVID-XX outstanding year cash quarter, net and million, attributable share, share. increase aggregate the in XX% $X.XX consequences second the and Interest by to share the of in a access rates, an lower were related compared for $X.X $XX.X average to our of per liability the share the of delivered credit acquisitions the $X.XX million second in higher X.X%, of businesses, volumes withdrawal we of the inventory $X.XX an accounting of metal prior million unfavorable partially XXXX. diluted cash rationalization Results by partially million, withdrawal diluted rationalization the adjusted Pension of the States $XX.X offset and associated the pandemic. in XXXX decreased per a diluted $XX.X and quarter with announced down of purchase recognition aggregate million the due announced an the shut XXXX. US, container of impact debt result

the available in $XXX.X $XXX XX% XXXX the of for year $XX.X this for of to XX.X% million the prior tax deal Capital a $XX.X quarter of XXXX as The quarter capital a expenditures of We higher any totaled in borrowed Year-to-date acquisitions. prior the in rate million the at Given could from we revolver did be includes capital the audit. $XXX.X to certain repay improvements of costs. credit capacity markets compared tax June, spending with This totaled second now outstanding later compares maintain result for incremental that prior The again the second the million which resolution quarter. time. in XXXX. in our year. rate the spending full anticipate million, expected than benefited year recent but quarter, million year compared to the in revolver $XXX tax XXXX year non-deductible approximately million be was

million charges, pass-through This of of segment volumes primarily lower the favorable each offset partially million. and unit previous payments in approximately as The a purchase second Albéa. in XXXX, quarter favorable impact our dispensing quarter Segment favorable products more products increased of due acquisitions. of the unfavorable raw volume for lower for approximately and favorable of million of from less $X partially by consumed sales costs product in recorded in by year Segment to an for in increased income, $XXX.X primarily million the million metal in quarter. inventory acquired the and of review mix plastic higher XX%, was of franchises. increase a favorable versus certain legal care $XX.X volumes income the as the and foreign Segment versus strong ago. and charge for $X.X a increased business the approximately a $XXX.X prior unit the higher pension result higher dividend volumes sold, for $XX.X business to recent products volumes, unit and products, translation the of million. paid a of metal in periods. closures offset $XX.X $X.X currency $XXX.X relating and partially primarily same products a approximately costs. of of the as Net a container periods. sold increase million income million. quarter and This the principally partially less from million had year cash home material Additionally, result volume the the improvement well the raw XXXX, of The products prior inventory second translation mix income of unit in to year-to-date totaled the million million business of million million offset volumes, of beauty negative lower partially the of XXXX, cash who million. and quarter of the of The gains unfavorable a result higher by demand $XX higher second quarter offset container higher rationalization as foreign in volumes $XX.X $XX been of These million higher the the three sold, the second lower material result primarily about unit to from $XX.X versus were to The net foreign by the sales by higher second prior share lower mix operations a I’ll from with destocking in translation increase $XX.X performance impact for sold. a pension partially $X.XX million X% of inclusion personal $XX.X year the pass-through by increased per more partially the consumer increase $X.X products. income, of costs, increase $X million in primarily pension for increased a dispute $XX.X of of of partially demand now a million closures weak by offset less container in in offset the for some a food year were for was for XXXX [ph] customer material business June, write-up the sales result volume currency benefits unfavorable currency non-commercial a million continued of quarterly period million cost of an mix $XXX.X higher costs of of XX% primarily of we of raw impact the and manufacturing to of business total was beverage income sold unit XXXX Net $X business attributable of basis a by the dividend income, offset pass-through offset resulted quarter accounting volumes were quarter. of prior mix the was On health, financial volumes hygiene, to

Turning our to XXXX. for outlook now

seen range of to prior adjusted diluted $X.XX. range of diluted share We're the increase the compared adjusted year you've a of of $X.XX. As at XX% release, in $X, providing are income record which $X.XX the represents represents of $X.XX, share versus earnings revised adjusted to the of as XX% net year our share midpoint $X.XX. estimate estimate increase a prior we full of a year the increasing to per quarter midpoint per range from third adjusted of also $X.XX in press a the per diluted XXXX to of $X.XX previous range up earnings earnings to the The earnings

could of Given of harvest the US results the half third around between for Europe, the and in and year the the uncertainties shift timing and fruit back fourth the quarters. vegetable the

flow of That improved free earnings our like outlook, generation comments, our million. we the prepared up estimate limit approximately up. concludes follow from I'd it approximately of And previous Given questions their are also can and Q&A. one million, to estimate increasing $XXX we our cash everyone so $XXX as permits. time time take follow And up for again, happy to question open to remind to one to we're once up

Q&A it you for David, I'll the So direction to turn back to provide session.

Operator

comes question Anthony Instructions] Mr. Pettinari Citi. [Operator you. Our with Thank first from

Bryan Burgmeier

cash flow for Hi. possible say EPS of was actually in of driven how Albea to This Is Burgmeier sitting the it free revision Bryan the inclusion much is and Anthony. guidance by the indicated any XQ you versus call? in had And are versus in base – strength working the that drag capital the business? then the slight changes think there I on expectations to

Tony Allott

the Bob It's Tony, the I'll one. part. let second Brian. first give Sure, you I'll take

to longer saying team about give QX impressed we solid the I'll nothing, just very been that, and so We on that, to in that, by happy very [ph] Albea, synergies. the but really a we're good came start headway and business us feel organization have making experience slightly joining have over, dispensing by answer the that good markets, really So

we So feel good all about. that very

it dilutive, of that at the it but basically If had primarily meaningful was month, the impact, because slightly you purchase look was accounting. no

you look If our side. year, meaningful the the on not remainder forecast as the being either in release, said has of for that we press

course, So heavily in talked roughly call travel-based. dilutive. about the we last meaningfully the market market. that, and fragrance accretive not which meaningfully The fragrance The not and retail-based is for business of reason is is, half

Really, XX% began since more much. until XX%, Right maybe pandemic that will somewhat. of on little while part over of normal be It's So kind the not retail, and continues to to true. change volumes. that get we it's to now, a going it, a enough the was world e-commerce XX%. between small market somewhere back see off That grow

of And so, our through be those would declines that. expectation year-on-year kind

you're numbers capital, to back. and with will have stage once those Albea, really the to do really, nothing this come Working business be the at think markets performer with legacy we therefore, which everything seeing So strong Bob? a do base really

Bob Lewis

at capital. high Yeah, capacity do just take we're slight running selling capital second the working side, in working a on that, part everything very Obviously, of through. levels, we benefit to see the

So continue been collection that, start through very year. COVID collections that the benefit particularly the we closely we'd see the side, expect the obviously, inventory we side to That come We've the as will we'll pandemic not to that be back well. of would to far, year. as and on so dependent a had the of watch moving and have through problems upon half monitoring highly any

So that us should working the line. be on capital a benefit for

Bryan Burgmeier

Yeah, producers second helpful. in soup thanks. constraints know, food quarter. really that's in Great, then, And some you capacity cited the

As soup the year. second you like half guys move into the season, of more

you did you from meet second And you able suffer stock do know, all expect outs did be the in your will and to quarter? any You that - the demand? customers you

Adam Greenlee

the thrown alluded challenges terrific We operating to way prepared through teams faced It's that kind Bryan. were, question. Good QX. Hey, Adam. as were actually kind of in you our a job we know, the Tony remarks, the our all demand And customers. of did meeting of our

we that ability to our we know, go clear forecast, as we've our guidance a forward, you of this as specifically no, did of their got understanding point, pretty the we that's any have not customers can to any increase the soup really, So able forecast, outs, side dramatic going our but the well. pretty a embedded businesses, in in and for to in in of volume, we support our QX. at business, meet stock were provided And be

Bryan Burgmeier

really turn it That’s I’ll over. helpful. Great.

Operator

you. Thank

Americas. Bank Staphos comes next Mr. with George Our of question from

George Staphos

one-off sustainable morning. versus your bit and on all My can getting, Thank in two of one-off? Bob, the Hi, should quarter. details relatively congratulations brands based about assume for you're question, goes hearing seeing had what reinvest you. hopefully you and know, you take can to in customers of is the everyone. you been kind And your Adam, ‘XX, benefit what Thanks and, back more do their to a growth within talk from Or that metal what perpetuate? this think from And, on normal know, team, this markets customers, your level? we the Tony, end to container? windfalls you doing, what the second growth they're know, the questions, you are is a you're and Good advantage ‘XX, in

Adam Greenlee

part and the Good question, Tony second. George. I'll take first the take let

way quarter us just around. which markets QX all particularly So increases. good the of market, all serve, and QX and market, the was focus our the food Look, data. you focusing markets really business. key we a substantial and for the CMI it market, saw saw three our And on, on pet Everyone you really soup container in in protein metal know, that's our

a You know, CMI the in over little I data. think soup was XX% up

We’re greater little actually number was soup, overweight that. soup a bit to our so than

like think to because interesting, So category the Really, of which it is data be what of I really growth a CMI vegetable, X%. go limited data, seems you that's to the us. in the market outlier at

customer indeed that one who to planned before, the we to had talked and year have had we've QX pack happened. volume we from shift during As QX

QX, that there as hundred planned we volume we’ll in to. units So of realize several were million had

So know, a overweight data pet food experience. was again, been again, market the to done customers, think our requirements different in one large did and that's category. of are what's we're know, that food than interesting, been really And, their customers I food it products. from And volume above of one little we've it's a sourcing the talked pet all example there's lot where, we've of pet market volume we've And much food you successfully. been a protein We finally, challenging but our about some meeting our then have standpoint. pet had, the for growth you difficulty so for

to standpoint, little that get their, to their they food then in our I’d all I and George from were thus market to you, a that they markets that's I’ll they planned. But think not because serve. muted a it Tony. ingredients know, So, prioritized volumes the pet were you able [ph] tell pass And what had core ingredients

Tony Allott

obviously all at of the view can if in George we Yeah, a March, this do April period. you of as second your spike I a numbers, part that on question, look stuff, see there one-off, pantry not was definitely think we the

as really didn't of pantries continued destocking went what's saw that, and double-digit against is, through think telling, I see you growth. you Adam the

so consumption lowest if it continuing can to it’s be the All that ways sustainable at great home are on. good, do exposed logical, food the what And to seems And is and soup these right, been pattern stickier makes these that. being And the value. clear could saying more, is products us, along exists. everything that to pretty deliver to point it are means about this this those is eating we've all is values think to are that get fact us people the there that got that far, that it's that most means by price now is people tastes good, foods, a

so of And continuation we a of sort there'll new you know, to and that go being forward. think consumers food as we exposed some be cans

in So doing anything seeing as doing. our I cans main it's really for what know, that that's be customers they them could a else there, same, of through Obviously, more the out one, thermal are financial. good drivers, them, that's choice that? they two as said, I And more for terms see sustainable they're you And about think processing. their than

large, lined a And on trying them ways. the to doing educate cook marketing and consumers lot so up these and more, our that by doing with Use side, and e-commerce customers, how are through other about foods. to

and say have are we we this up And can value doing the of really the to the to are the of all opportunity the sure can customers one on know, And same, we're to so it. we're of make we're, dedication to more see we're as it lot to pleased the I that that value and were can, try a thing, advantage at all that. you lined spending re-expose kind putting to for into focus marketing was things again, alternative that and always consumers the it's George, recall talked about and eating our not you trying packages just competition, about years, take and restaurants Last said main is we know are always more home. we're people shifting, us I'll over of I've

less home And fundamental in we think level But on. consumption, which more we'll shift than is tough, kind see at of long how Americans do this economies that shift are of goes really a course, anywhere of that there'll the else to so question. as And as long be world. a sustained

Adam Greenlee

point, XXXX, February, if course far, And date. you cans add more we've maybe over volume our since volume at you just here one for largest of June with know, thus every I'd month the to monthly volume Tony, that, being had our increasing month look

some fully was that So canned idea there pantry the has but and repurchase supports loading, it been of goods market, benefiting we're know, you there the that. in initial from

George Staphos

food guys. canned some it need restaurants. just We over. good. turn I’ll Sounds Thanks,

Adam Greenlee

Great, thought.

Operator

you. Thank

comes question Mr. Wilde next with Bank Our the Mark of from Montreal.

Mark Wilde

Bob. morning, Tony. Morning, Good Adam.

Tony Allott

Mark. Hey,

Mark Wilde

and wonder in into might with just Adam about you capacity of talk just off, issues, food And capacity issues, gains us any as plastics. with of tinplate, well be kind enough things can kind supply you start through of cans of that, kind along Can as kind like chain? the any big in get of type over to constraints these on that? running I transportation with you issues or both

Adam Greenlee

I look, and and luck of Mark, food the our in was we've both requirements our Silgan contract, supply a don't you been, effort companies. canned say want in goes into the business lot because that elsewhere Sure. there's know, discipline throughout to this

know, You expected requirement to some to able degree. to take be a are we supplier, surges being

teams job their what the literally patterns in fail kind working are their but volume with Now, without increases terrific met of and have our seen exceed that, what those a any And needs think and needs are. done occasion. understanding demand I we've we've customers on

most well is capacity part, our our think capacity. you customers the capacity for constraints, the with about filling aligned So, pretty

customers. from So, a you I our not supply really to capacity perspective, capacity of bottleneck we're or the say, in my know, would

that consolidated SKUs stride they of walk, productivity. we've lines, in food, to them increase period So, been for you time limit stride filling have to particularly their that know, our I changeovers, on to their this know, run able you think, know, you customers, of model. with in throughout And supply sort

our closures, So that happened businesses in as in happening it's our business, plastics well.

a So interesting really process. it's been

And of service and it's the rewarded know, supply and right being component through think level interesting we're our line a the businesses, we I I business you pretty expectations. in on the in bottom it. model our sustainable some showing exceeding plastic effects are, winning here to think have market. does And now, is significant one very into

and the worked now same kind our our We've resin As closely managing far chain, to it's our back supply. as very thing. metal of supply Again, suppliers. with of our it kind supply on had a daily not we've the that the and basis, getting while we always volume maybe seeing perfect, across to not issues, that of significant any it's increase we're need products supply the We're board.

Mark Wilde

helpful. at legal And is one point other resolved is nit, little That's Okay. plastics, in charge just $X.X there? that issue there tail that or potential million this completely any

Tony Allott

You small meaning. know, but suppose, tail, there's nothing a of I potential

Mark Wilde

guys. Okay, Thanks, turn that's over. good. I'll it

Operator

you. Thank

Our Ghansham next Baird. with question comes from Panjabi

Ghansham Panjabi

Hi, morning. guys. Good

going your for quarter legacy and standpoint? half volume for came outlook food - And guidance What's of within the from second in much to back Just a how metal Silgan in know, volume Albea the versus year. closures on also George's you question terms of the the embedded back from plastics? and then

Adam Greenlee

Hey is Adam. Ghansham, Okay, great. this

So I'll volumes into heading start strongest quarter we're Obviously, with with harvest seasonally our and coming pack through. the metal containers.

expecting into year-over-year in QX, a strong business. kind double-digit digits, we're metal container volumes, strong our very So well volumes double of so so

just you closure that our mix something again, I our and flat the I'll versus selling to On the value here. and growth. remember, necessarily couple we products now, closure for have our is about beverage utilize that business, a said a say business, closure of of another XX market. dispensing digit we'll produce products, product, cap see and like of a standard food as think it's closures to And of double X over know, plastics isn't those Because then kind important to the year-on-year the think you we've quarter volume times

when beverage the see So, strengthen be then given beverage think to of nature you are. we'll products in little those continued dispensing, strength continue QX, markets food. our you a what know, continued bit to our And see challenged, we'll

like dairy milk, that And like Those catering other think down European the business things volume sports far largely year. a you high, while as is to and in be cetera. products, we'll market for the pressure we're talking as business recovery, So premium call you is will likely beverage, and drinks, of that about of our versus gallon are and closure we model serve parts with, be you think jugs some what about products, under have US prior is they Europe. our there then et product think bit in kind a segment QX largely single well know, underperformed of of know, subsided, going hotel, about tourism to you recreation particularly thus

dispensing with you think significantly. to all I said, So, that being know, is going be up

third And year. so low be you the versus a and digits double quarter, bit beverage, low down double the know, I quarter we're prior to just it's foods digits think for third be for the I looking at like going little up said, likely to

Tony Allott

inventory just well you everything during or that, point as that know, prior year the capacity for closures time business liquidated to that, basically not That's as business in will food cam don't we businesses, one that, that. Adam have the of answered and QX. for to want the if I'd not to aggregate. on food to you sequentially, game compared add we strong the it's look our QX, do we quite that reserve true as plastic some is to we want to So in Because the at have at the make

the business. if will will metal for sequentially then be plastic go closure that'll containers, you but comparison a tougher for up So in

Adam Greenlee

Ghansham then Albea. And on Sure.

we'll strong, large year percentage just double-digit The again up will about business, is the strong fragrance be over portion of far And quite driver. about it. Albea. spent business balance going that's I say, fragrances Sorry, some Tony biggest But year. just by talking of is the our business deal their know, with was you time the legacy Albea the part to fragrance of portion dispensing a

Ghansham Panjabi

just great. near help my increase on second magnitude in increase quarter And that's operating know, $XX can improvement. Okay, then operating Was in there? million just the leverage us of segment, in from food apart per anything there comparable as metal sales, you that's question income, second a the that reconcile on

Tony Allott

No of assets those fixed base volume really, it's of. cost power those running lot across and that - the just cost a our fixed of which pension you're aware and

Ghansham Panjabi

Pension, guys. okay. much, so Thanks

Tony Allott

Thanks.

Operator

you. Thank

Brian Goldman from next with Our question Mr. Sachs. comes Maguire

Brian Maguire

morning, Good Hey. guys.

accelerated Europe. a with cans, mix I a a wondered little things if foodservice the big differences service part bit in if there. pantry any in about quarter, seeing in even of think some stocking, versus I signs everybody cans were talked may the portfolio. the you And trends volume be there of improvement the market? but on then wondering Just into food little kind the any of could the bit metal similarly, a question at home, about know you headwind of talk US last Are eating you Europe's in less Europe. of per If

Adam Greenlee

Hey, volumes the actually, us were good for us. quite Brian, in it's Adam. Europe Europe for

So business. pleased our we're can very European with

going us. that I a QX Europe, net well know, that's is setting that we an be continue so, feel ice to strong think contributor to up you can for in for pack as

know, then US changed the large service food I market the our know, question, you perspective. I rest for apply for would know, part, you XX from I the kind do you of that about that the that say, the to of nothing's number most talked that's world, we think earlier. you know, And So, the comments, cans cans, restaurant think

the products. now, that think take being there those regardless US an a a as in-home And are to cans advantage lot up good restaurants But is lined are more part, pressure that you most in think the strong particularly pack, for of I that the there think I are a under is pack related year, idea those products I consumption. know, very pack. in of know, are pack right You this

Brian Maguire

Just you Kansas, volume difference Europe, clarify was no to the that, XX% know, similar growth the US pretty and between meaningful real in that there.

Adam Greenlee

Europe bit the the meaningfully. same, a Yeah, little XX%, ahead not of but roughly actually was

Brian Maguire

that that wondering was SKUs contributor productivity I sort for quantify just up, about increased my then have cans, - what you follow customers and to see for if think Mark's it and did just Okay. And changes, question, customer some to margins? talked rationalized had for think of was benefit if might if anyway you throughput earlier, I

Adam Greenlee

as the were closely Honestly, I our to meeting indeed very you them just know, the quarter happen. know, moving forecasts was. it's with to lot we And, you throughput, quantify working there's customers what you increased it did it throughout for that, to us you know, bottom-line know, us and, the again, to impact But of quantify you very hard their do. us we for for and always think, difficult parts but a know,

Tony Allott

do it to to didn't of it could clear, their, less did cans to so of them system more But as easier own we out so it them, customers for it be that because get cost SKU. part customers took their run

of kind or back, time this if development. you're know, more don't good revert if SKU know to saw time, over will that's thinking But you we think, not. I I reason the SKU. So you at think I case limit But a see probably everyone

Adam Greenlee

to get. So limit capacity increase cost and

Brian Maguire

sense outsize just just you it And don't mechanism. you stagnant fair you So can, saving the drive it cost try now rediscovered it's reason to a got and to and consumer of a long know, that Is as as that, you've SKUs know, proliferate market, to only growth this, the period into some the has to kind is do growth. makes it need that? say of

Adam Greenlee

they mean; And think And over I should marketing growth will continue I think right to time. do you're right that's I know, group I you curve you that way over time, the that's more that. the to right. the think want will, of

So extreme And had my right, it'll be will proliferation. value for it the think, given years guess it's the leading here, saw But slow. I there be the happened said, couple of I been everybody into what situation. like

Brian Maguire

Yeah.

much. Thanks Okay. very

Operator

Thank you.

Our next question comes with from Adam KeyBanc. Josephson Mr.

Adam Josephson

been Thanks. sustainable, If were it that at Good or year. morning, flat it's - so be this you would be next outsize volumes reasonable Tony, quarter. think is a demand to to demand, just a on mean, stays a and Congrats year that earlier. expect - others expect than good is even scenario demand year some really your is one think this think data to looking demand come maybe we're the would CMI to that even think George volumes is declines food more when you reasonable actually can level historically, do better level this if or if that that's you everyone. up it next questions of and on do asking reasonable

Tony Allott

time then good to that year. I doubt, you almost a period there here, up that be a will restaurants was out was level of hard of one-time completely some happened I there's entry year thought Yeah, That a won't stuff that the from question. is there's there go trying were next comp against And I know, here to clear, game. case where of bill basically the without be think now. some some

were, I our think that that on some go to not doubt these main to you before. have where to we back so data point you'll way back us all this does is, issue way But were volume the doesn't lead right compare at conclude we least, know, as the we all where negative without comp see the now goes on it to And alone.

I between, they to in after see we're think I customers months strong they're you so know, their are everything the fact pack that digits somewhere to four expectation. that going think seeing is can double continuing it's,

bad Where know, just to XX% that sustainable. up had, quite So one. know, next XX you you something cop about XX don't digit a think some like double leads all tough to not for I sure. XX%, that know, feel of that you the you at be us you that as things can year were point is that mean, is But

can the a it we our to continue ought that, there. basic chunk keep big to that, on though, that's if sustainable, out story feel So be of

Adam Josephson

appreciate announced XQ the balance You the EBITDA for TTM us of what of on on or you the you're expecting the know, EBITDA at And Tony. when and one TTM level give where XX. was EBITDA end just that, of Albea, just you quarterly Could of kind that an update was deal the year?

Tony Allott

think Well, basically of we're pretty to could you the back year. expecting accretive I be saying nor think remainder well. dilutive work this the that we for We're I not

XX% that, top that number right think that million the you to when line. to find So XX-ish Which off about, you I know, if now. on there's going XX% some, you decline know, do you're you makes think if you sense

So months know, that's, you. frankly, you two rough We've And those for numbers it, are you yet. not we're know, for early this. days owned on even

costs now of you that know, figuring what out, for So, out production. you given kind the volume there know, first we're time that, come in

there to we less will is is time us the a for working going So think they good customers advantage for figure a long long-term the get be way short-term selling good the really business. are a out out less them them do what's to they answers things the try really term lot important on take we we're importantly, the that? that and frankly, More greater that? take little best which and clear, e-commerce, hard help How back into have to really do of for how us a mode, opportunity. but impact work But than do to for of little to

Adam Josephson

totally I Thank you, get it. Tony.

Operator

Thank you.

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

Gabe Hajde

quarter. a Good morning, congratulations solid on gentlemen, and

Tony Allott

Gabe. Thanks,

Gabe Hajde

kind that so don't of or QX mentioned implied you moves QX. five you sequential bit average bridge of little basis, over there's slowdown of You in and years possible the top $X.XX on anyways, guidance the you from by October? guys something $X.XX side, sequential when enclosures [ph] sequential EPS, to historically you incremental beat volumes necessarily police guys if bit give but little plastics, guys again profitability at earnings guys in on anything seeing at, I'm that your your that or to have you're gives where on of I a take is $X.XX curious a you're the in we're know versus define the look you business, of talking kind know, or the a a just on and you of the of on pause, I'm seeing otherwise kind but you're trying QX end costs didn't it past seen range, guide manufacturing

Tony Allott

It's question. good a

running That not about So do QX right, QX. normally to in it's QX case for a really at QX capacity lot not sold-out all. for has and a quarter is with that us, we're

So you've a surge through side, plastic and the of anything particularly could the liquidating businesses. volume just the on inventory in closure true you that's in got higher QX

have step QX, same degree. come out, opportunity happens same to you seasonally what have which an that up you're such is is So to that essentially you into Just don't elevated just it sold QX, you

just was to but going QX so a wouldn't be you for see up we're typical solidly from you prior sequentially nonetheless, as be strong. So year, year

Gabe Hajde

the you closure maybe acquisitions revenue specifically on answered guess down, the even contribution, follow if know Albea the up but would volumes acquisitions? what And Adam, excluding added don't you Cobra and organic I And Albea have in a can Understood. Albea. us enclosures? question, tell line I been QX, on

Adam Greenlee

closure in yes, without been the closure, so, answer would have volume. down is QX total Sure, volume acquired the

you the XX%, business you segment think was I'll know, down about our food and was business know, is know, dispensing, which was about know, for legacy again, I up, unit go standpoint just when you serve, our highest a little dispensing said a markets you from So, beverage, what the XX% bit we back three that you about our food you up around volume volume think X%. business beverage big

quarter So played that's out. the how

incredibly so So because favorable our in mix had we much growth systems products. was dispensing

acquisitions million legacy So $XX acquired an the revenue. business that's then the from and [ph] $XX about of million, - were

Gabe Hajde

Thank it. Good luck. guys. Got you,

Operator

Thank you.

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

Arun Viswanathan

the in and re-contemplated talk years start looking you last it change footprint footprint I on at as so on term, some out, move little and maybe Great. Thanks, even kind and customers medium you North just Thanks. quarter. well, that the guess, sequential first could point, just I questions the off, rationalization maybe good answered can with possibilities relates capacity, that. to had about couple food you in can you on market American, we Have of the bit you’ve talked Europe? of and also morning North congratulations given maybe where as about guess, generally America. of I certain just this comment,

Tony Allott

question. Good Arun. Sure,

last demand kind XXXX. for we at container full of food in sizeable the had that metal obviously the announced for of plan end we’ve year our optimization footprint clearly the a On business, year of jump

focus to requirements chain meeting customers, do that supply you put so is tell I So jeopardy. of demand wouldn’t we back our one would continue number of and those evaluate all plans, our that we anything

portion would all see So a plans planned, There is as as conversation, Therefore we our we’ll going understanding stickiness later clear. forward of make but a we crystal meeting forward, moving we evaluate that of of by anticipate the needs we’d we’ll we get those and the the implementation have earlier customers. a re-evaluate to that, and forward. delayed optimization we’ll those plans how to to this is in volume, subject I the volume of year what plan continue sustainable the that that un-affected think that is really the portion be to us all and want originally again of of that had clear

Adam Greenlee

capacity good volumes very we able from not a Obviously, we the customers, demand meet a our related US quite market, is capacity contracts. our filling we’ve as been in we’ve stand where we’ve only really well. And with to concerned, European nice but Tony increased standpoint. again, the to as serve pairing customers about capacity our and also the capabilities and then as feel market of a capacity requirement as got our far job said, done as bit And

capacity for So and side, going forward. the our just evaluate our to fits additional how point, continue at we’ll demand this capacity no on need market

Arun Viswanathan

changes, cash some then And that in uses free you cash so then congrats year, completed cash, just got and flow, how so the discuss also that capital, more is on how on that, CapEx, next questions you’ve [indiscernible] this just for I you maybe if growth? even you large number change can step there would outside working year any of materially free on guided see of obviously guess, transaction

Bob Lewis

Bob. Arun. is This Yeah,

was, when probably cash that’s accelerate to talked the did in the with from and what our of standpoint, we free free original bit cash fours – strength flow. about a just be a we we’d flow as generation the where low plan acquisition deleveraging this we on So of post-acquisition, leverage we’ll mid kind thought the [ph] a

be it upon of through year. the really what look I think the end credit the do overall what will as of like come we question with we the markets contingent

proactively liquidity. revolver we commentary, see de-levering in go then is have to tightness just said we another then of if a did our tough would a against see cash that the we for probably our If of we obviously As borrow sit that protect is again, think that, get our possible period we around here. on which in around things don't we kind time. If right short opportunity liquidity,

leverage pay we So will we have to our protect priorities comes look our get down foremost. terms liquidity our what from how from M&A And And range typical ongoing a there, what continue - of way, couple but of of the a to in appetite first to you the how is. to to then into then know, to and our and standpoint, debt existing choices the see front the back deliver. opportunistically business to at are

Arun Viswanathan

to do concentrated consolidation And us. on improved and you dynamics it's like more market it consolidation? the looks like you pretty know, the think goes, then It lastly, And, food needs just M&A any looks can have here.

or know, So a in or you this is do any could the think you rationalization you market or, position point? consolidation see at unlikely that's

Tony Allott

needs don't in would a the consolidated that to hard I gauge market market said, think little a I Tony, necessarily do market it's as It's you it's a consolidations, you know, whether it's don't a transaction. already. pretty anybody

here sit happen. I to finding suppose. waiting that happen, we It could and don't for I So don't

Arun Viswanathan

more in. curious potentially that's could something I Well, I participate you just if that was

Tony Allott

Yeah, and have, period a always we - deal done can at meaningful it's we we haven't time. of opportunity look in every some food

again, up, it time. don't come could I if know is - So in we but it some happened hasn't

Arun Viswanathan

Okay, thanks.

Operator

you. Thank

question from next Our Daniel Jefferies. Rizzo comes with

Daniel Rizzo

Hey, guys.

year? of know, headwind a about should the mixes should mixing for eases how and segments, as kind economy was rest think wondering and how about metal containers metal for I forward, the that the containers, mentioned all of you you we think pandemic question going one we that recover, in the Just and really

Tony Allott

to That's the try have and not of a got pivot, like it we necessarily - riddled through negative. sort case. me Let mix that you're here right, sounds

really the but grew need volume mix and So protein about are cetera it's food the not into we've so explain are smaller have things foods during that. mixed pandemic, now that et been Those driving to before and how they had been they for get growing, drive now, right pandemic when you margin definitely - growing. growing cans talking cans, those been you the pet issue has been years just and

it was intended as a point. So not negative

to a have which see may laps the in restaurant bigger, will further because scale larger. can you QX, experience to profit, as little dollar when just is that is of in we would will you five could see per so alluded of much down QX You be Adam fact, bottom the which actually are in negative cans line

will of said, you in against when know, what that's story So it's sort happening, the beverage it's mix people time know, talked as closures, story news the grows, really or went really away. hot the a great point mixed can. happened was that pandemic feel come was off a Then some because fade you the we'll to at strongly a you I - we of what dispensing pandemic and outside, back it'll the get and

you know, And line. what's a et is or spending little that's cetera. growth mix up, decide investment like spot been of itself We system, of more And important on in that'll really an a area But that's kind great there what a the you the for know, future. plastic important know, out. saw that's just there. package food settle the, what's really we've bit dispensing you to we is, sizeable valuable point. that's, you going And product think so the where And

So it. negative is the just it's meant mix we really describe way as a

Daniel Rizzo

that's Okay, I mentioned the just but with just, soup, rebounding mean, know is so related, think And some one I pandemic business this very I'm I other been know, while and changed then the wondering, you. it's I best the is remembering And I like miss just now, good the in how question. - for, like Like, helpful. quarters past, Thank it last of I don't four has I for not what that year or a so about take, now? three over changed? year seems just

Tony Allott

row quarters and in And been of quite several the year, where a it's not a maybe but outpacing, it's been well. as other maybe year, yes, aspects certainly now prior but market

would can consumers And, So, have Tony realize I call think, and soup. that talking with a product. and vehicle happened, I Dan, a know, reach reach conveyed the think you time customers they their utilizing the to systems that of real to is the in say you to I more do trying of what and, new consumers and spent benefit on lot what's is this leveraging consistently our message there that given as to consumers can thermal the other aspect, value know, sell kind

good year you for to date. good growth deal they're know, it's monthly we'll the progression bullish QX, nice a and story And, of be yeah, at got story, it's So, year. us. into, been should story look our continue of in a rest and a We've to good you obviously, kind know, good see for QX on a very you again the

Daniel Rizzo

Thank Thank Operator you. you very much.

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

George Staphos

guys. Hi,

finish to a Just me. quick here up for

a Just good the would And is million. really growth of source marketing SG&A the luck if something development, is, what the to across I we investment, to that's on you there of going to legacy, you're what driving what chunk at be Albea. within again, your think in seeing the you they're will, you be year is numbers And that the was? probably Obviously, I'm a when year, quarter. know, that number good Thanks. know, like, $XX way business? up parse look that But at around perpetuate

Tony Allott

related Georgia, The all you’re right. on majority the increases deal is of costs. the

costs. like So drove costs, that. And it's know, that, everything diligence from, financing you and that

I all business on the quite large in level travel part you down board base has because restricted. think SG&A know, an the been frankly, across is and

We in people, customers around being airplanes flying know, alive. ways So on don't communicating you and have creative. other that, know, and with we're you

that's little side makes And of kind year on difference. over increase and we've you're that some the year wages there. bit So that a of is up inflation kind there, the, on and seeing got the what offsetting obviously

George Staphos

that travel but So reinvest you, sorts pick expect know, entertainment, that marketing, rebound it at on level? again, hold of the to ultimately some Thank expand and or we the that you'll point, should of and up beyond need things kind to development, guys. in

Tony Allott

is would all should George most No, embedded, our one hold able we are in all have resources R&D, the are or that costs. we that certainly more embedded that to that - level, less those the be

there'd embedded in So meaningful we've be already doing The effort that, no meaningful current one the no that's to marketing can change but others. there. around that be would number, been so

George Staphos

Thanks, Tony.

Operator

Thank you.

Josephson next with Our comes question Adam from KeyBanc.

Adam Josephson

any then from contribution relatedly, you whatever there next incremental everyone. year expecting? you the you're the capital got Thanks, on follow to the Albea. number? to just on flow to be Bob working on to for Is it what XXX Albea this And free previous any And up how up just much it. of questions. some cash is Appreciate do expect of impact contribution year? cash on there year's based flow, cash

Bob Lewis

capital be about a of consumption. a originally the the working that it maybe talked on no little were number to bit we earlier would Yeah, thinking I that even call benefit, that

out. working now I seeing bring to capital a we're the of think little opportunity bit

cash market fragrance cut this where benefit depending part the that that's Albea free goes upon I that's, we're from way the in So forward. can seeing either here flow. Albea, of think year's

in be of I So minus the a meaningful go to we here free And can back for long guidance to for and a know, got of it between, free cash little half to that around think year, given cash consider next would next terms flow way when we or provide year plus would bit say year. flow. I that guesses neutral for you a fair guidance the

Tony Allott

to team, supporting customers for on but - ever, a Bob a of we now. One know, if done things this this don't of you tend might one don't is, job the really from assume answer we've you we there's moment, our the spectacular through hard brag that operating Really, our of it's ones is, to time.

we've supported customers we're term the how from well well a long how opportunities, we about performed of future hearing So market. given lot and

going have some us because answer opportunities So really just think capital little now before we we to think tricky I right a nice but I to is could be us, for. for as

Adam Josephson

Got it, appreciate that. I

have beneficial tinplate. that's weather you, those your for what been fallen, just Just expectation one that how to is year talk about Can and then regard? costs the on the much balance in you steel of

Tony Allott

think Sure, they American Adam, know, would. you know, that I to had I through play is the think, we you progress you biggest kind be thought tinplate the steel market of market. as year and obviously North going are we in know, And, has the

as to a year. the the single of of annual reduction cost of change versus So far, seeing and that the we're kind thus prior as that digit that high we've expect kind end year, far experienced continue to

Adam Josephson

Thanks.

Operator

you. Thank

Our with of the Mark Bank Montreal. next question comes from Wilde

Mark Wilde

is potential and remains then if relatively demand business for second targets thoughts some or in seems better capacity plastics new it expected? industry And in issue came segment doing ever recovery we of some now I'd and just elevated, the like One, market. margin particularly would couple ago by just than got it into follow-ons. five like have some are to right food much margin the me get I've can margin the on Thanks. seems six the a years to lost you the

curious, that? So some potential the now know, I'm about you recover of to just thoughts

Tony Allott

Great, Mark.

would here, liquidating lot inventory, I one So margins, least from say I of et is at right? cetera. expect what said, of tear, What as to a benefit it had QX

sustained. there doubt, QX without are that there's can't in be So benefits

year mean the here, the you're you've probably across our be seen going our rate, sequentially the which - company think see it So as needs about GAAP margins a from to going if through, it's just [ph] it. you a the think fine, on a way going way going volume peak decline really to prior would for to higher rate about. business happen the basis, to negative, be know, is so I don't to above to And have years, we going still business that can in that's we're to you what's be it's we're still

lot great driven that of if right, a is you're So not talk COVID. plastics specifically and a you was operational or want really quarter, to around volume

to seen inherent got great doing many but in years the And that's you power one so quarters, that row a a customers for where the of we how of I that's one what areas up are for there, of me and improvement team we've tell them have market tell in that I the could improvement. Adam to specifically. would We great things waking think in offer

long focus QX But what starting is and of an on it's to is the we've question your so those looking you increases is have will settle good say What given term too said and cans where relationship we think so Then that term lot opportunity necessarily on push that I that again, is the margin, customers. for a is, a and EBITDA there there. year, clearly is something really bit. we think good. And we right, in – I I been food - you're yes, we've levels. we're got it with is long past to beyond bag contracts, sort QX, know, the from now, and XX% got So would back customer a and that not that

we market. them letting where out and in wins win money make the Silgan supporting are pricing, the - our of of as our by cetera. And And them view to supply, in time. Our we et hell a consistency customers over we're that's terms

not doesn't model problem. that our expect not our share better of case, be come time, So term short we might over a around position to we from gradual like I position, terms of But a of our would be that that benefits looking that margin they in given as mean are return. for and that price. get that's that strengthening strengthened But think our a going recovery in to more

Mark Wilde

year. thanks that's second for assumed. would that, Yeah, I just the what half and luck But the of have in thoughts the good Tony, on

Tony Allott

Mark. Thanks,

Operator

Thank no queue. the in you. we At have questions time, other this

Mr. So it comments. for turn to back Allott Tony closing I'll

Tony Allott

everyone. your we talking in time, our and We day. about you, you Thank And appreciate to you, forward Great. third late David. good Thank to October look quarter.

Operator

Ladies that today's presentation. gentlemen, you. Thank and concludes

disconnect joining us You may you and phone lines thank for your afternoon. this

Silgan (SLGN) 22 Jul 202020 Q2 Earnings call transcript