Q1 2021 Aptargroup Inc Earnings Call

So on it.

[music] accounts.

Ladies and gentlemen, thank you for standing by and welcome to at par of 2021 the first quarter conference call.

At this time all participants are in a listen only mode.

Later, we will conduct the question and answer session.

Introducing todays conference call is the Mr. Matt The Maria Senior Vice President Investor Relations and Communications. Please go ahead Sir.

Thank you Hello, everyone. Thanks for being with US today, joining me on today's call are Stephane Panda, President and CEO, and Bob Kuhn Executive Vice President and CFO.

Our press release and accompanying slide deck had been posted on our website.

If you are following along on our web site you can advance the slides by hovering over the presentation screen and clicking on the arrows on the right and left.

As always we will post a replay of this call on our website.

Today's call includes some forward looking statements.

Please refer to our SEC filings to review factors that could cause actual results to differ materially from what we are discussing today.

I would now like to turn the conference call over to Stephane.

Thank you, Matt and good morning, everyone I hope that you are doing well.

Starting on slide three you will find the two highlights from the quarter reserve patients and consumers across the variety of end markets and this makes after a resilient business through economic cycles.

And the most recent period is no exception.

We of the industry's right is the range of dispensing systems excuse me of Geoscience solutions and drug delivery technologies and services the deleverage across our reporting segments.

Customers benefit from our commitment to research and development and the new innovations that allow us to help the growth there and businesses.

We have also maintained a strong focus on sustainability and the upside was recently made there on the top 10 of the company's food, reducing environmental impact, but just capital.

Alongside the Dell IBM, Microsoft and that's occurred and several other large companies.

As you saw on our press release issued yesterday reported sales increased 8% of core sales increased 1%.

This is of course compared to the first quarter of 2020, the COVID-19, and working on it yet the major factor in our quarterly results.

We also achieved an adjusted EBITDA margin comparable to the prior year, while absorbing the mix shift within our pharma segment and the relative mix across our three segments.

Our food and beverage segment delivered stellar performance this quarter as consumers continued to cook at home during the pandemic driving strong demand for our innovative food dispensing closures.

This increase is also contributed to our top line growth the.

Since we are passing on increased resin costs to our customers.

Demand from the beverage market was below the prior year those sales grew modestly on the resin price adjustments.

In pharma the increased demand for our injectable components, including supplying some of the COVID-19 vaccine distributions and increased demand for our active material science solution, including those from COVID-19 test kits offset declines in the prescription drug and continue the health care markets.

As we had mentioned when giving guidance for the quarter fewer non critical doctor visits and the lower incidence of cold and flu illnesses have resulted in certain pharma customers, drawing down inventory levels of LNG and other respiratory treatment delivery devices.

We continue to be well positioned to niche healthcare sectors, and we see these pandemic related supply chain adjustments as transitory.

The beauty and home sales to the personal care and home care market increased.

While sales of the beauty market declined due to the continued low level of retail beauty of activity related to the ongoing pandemic related lockdowns.

We are cautiously optimistic that the second half of the year onshore of recovery in the beauty market.

We are also maintaining initiatives to contain costs and managing inflation that includes raising prices to offset the increases in raw material and other costs, while investing in key growth areas, including adding capacity to supply the beauty market in China.

Many of our customers remain optimistic the consumers are harboring pent up demand for the beauty products that will help bring a feeling of normalcy to the lives post pandemic in.

In addition to the beauty market. We also expect the hair care category to recover as more consumers who are outside of move above and we are already seeing small, but positive trends and some share in the U S.

Turning to slide four and new product launches I would like to briefly comment on several product introductions that will highlight the breadth of our offerings.

In pharma our acquisition of the Geoscience technology was selected the protect two new at home COVID-19 tests. The increasingly received emergency use authorization from the FDA.

These tests provides convenient access to testing without the need to visit the doctor's office.

Our technology is integrated into these diagnostic kits to protect against the moisture in the other environmental conditions that would otherwise impact test accuracy.

In the prescription drug market on a unit dose powder device is being used in the pivotal trial of intranasal powder based Nellix zone by Mrs Pharma.

Also landmarks new nasal spray treatment, which combines an antihistamine with the steroids to treat allergic rhinitis was recently approved in Europe with on a nasal spray device is confirmed that the ongoing conversion to nasal delivery continues in this important area.

In the Injectables market, we continue to support various COVID-19 vaccine distributions in all regions with the most recent projects being added in India and Latin America.

In beauty and home on E Commerce capable high flow pump was chosen the P&G. So the new indie brand shampoo natus.

And on a post consumer recycled resin closure was selected by P&G. So the planet kind of refreshing phase swash.

We're also supplying a PCR solution to union labor for the Dove brand pure refining charcoal and globe hydrating body wash.

In Europe, we are providing the pumps for in store refillable personal care products in the aluminum bottles for the body shop.

And on a fragrance pump is featured on the floor and gilt the Gucci pool from spec Cody.

Finally, the reality.

Is using our Airless chart fluids revised diluted facial skincare product in China.

In food and beverage <unk> infant nutrition closure was selected for.

On the La Creme instant enriched milk powder for Europe and for <unk>.

<unk> in China.

On closures with routes for Inc. Murdered condiments of the dispensing solutions for several barbecue Manning ketchup and jelly product in Brazil.

Also in the condiment aisle, our dispensing food closures are featured on Microsoft Honey original sales and Burmans Cross sales of original here in the U S.

Finally in the beverage market out of sports closure is featured on two new flavors of the well known functional beverage in China.

With that I will now turn it over the bulk who will provide additional comments on our results Bob.

Thank you Stefan and good morning, everyone.

I will walk through some of the details around the first quarter performance starting with slide five.

As defined stated from the first quarter, we reported sales growth of 8%.

With the core sales up 1%.

I will go into our growth by market shortly but wanted to comment on our earnings.

We reported earnings per share of $1 24.

Which is an increase of 48% over the prior year.

Current period reported earnings included a noncash pretax gain of $17 million or <unk> 19 per share.

<unk> to an increase in the fair value of an equity investment.

This investment happens to be our investments in pure cycle technologies, a strategic partner pursuing ultra pure post consumer resin that will one day be part of our circular economy.

Turning to slide six first quarter adjusted earnings per share, excluding restructuring expenses and the gain on the equity investment increased 10% to $1 90 per share on a comparable basis with the prior year.

Including adjusting for currency effects.

Our earnings also reflect certain tax benefits, including the tax deduction that we receive from stock based compensation that as you know can fluctuate from quarter to quarter.

<unk> adjusted EBITDA increased 6% to $152 million compared to the prior year.

This included the positive effects of currency translation rates as well as the impact of the shift in business across our markets and resin cost increases.

Briefly summarizing our segment results our pharma business performance was mixed across the different divisions with total segment core sales even with the prior year and then the adjusted EBITDA margin of approximately 35%.

Looking at sales growth by market compared to the prior year.

Core sales to the prescription market decreased 8% and core sales to the consumer healthcare market decreased 1% for the reasons that the upon mentioned earlier.

Core sales to the Injectables market increased 14% with higher demand for our vaccine components.

Price accounted for approximately 2% of the total growth and about one third of the remaining growth is from COVID-19 related sales, mostly to supply vaccine distributions.

Core sales of our active material science solutions increased 5%.

Primarily due to increased sales of our active containers used for probiotics.

Turning to our beauty and home segment core sales decreased 3% and the segments adjusted EBITDA margin of 10% in the quarter on with <unk>.

<unk> impacted by increased resin and other raw material costs, which are pass through where possible, albeit through a process that had typically been on a 60 to 90 day lag.

With the net sales growth by market on a core basis.

Core sales to the beauty market decreased 10%.

The continued localized lockdowns, especially in Europe.

In global travel restrictions, which have caused a significant reduction in traditional retail the duty free sales.

Core sales to the personal care market increased 2% due to continued strong demand for our hand, sanitizer and liquid soap dispensers.

Core sales to the homecare market increased 13% on strong demand for our cleaners, and disinfectants and some automotive products.

Turning to our food and beverage segment, which had a solid performance core sales increased 14% and.

In the segment achieved adjusted EBITDA margin of 17%, primarily due to the ongoing strength in the food market.

Looking at each market core sales to the food market increased 19% as consumers continued the dine at home trend because of the pandemic.

Core sales to the beverage market decreased 2%, primarily due to the pass through of higher resin prices.

Moving to slide seven which summarizes our outlook for the second quarter current underlying demand conditions in most of our markets are not expected to change dramatically from what we experienced in the first quarter.

We anticipate the demand for our prescription drug and consumer healthcare devices will remain under pressure compared to the prior year as customers continue to work off of existing inventories.

However, in some of our other markets, including beauty.

We'll have easier comparisons to the prior year second quarter, which was the most difficult period when you consider the impact of pandemic lockdowns.

We expect our second quarter adjusted earnings per share, excluding restructuring and any change in the fair value of equity investments to be in the range of 91 to <unk> 99 per share.

The estimated tax rate range for the second quarter was 26% to 28%.

In closing we continue to have the strong balance sheet with the leverage ratio of one four.

On a gross basis that the capital was approximately 37%.

While on the net basis it was approximately 31%.

In addition, we continue to invest in innovative growth projects and we are confirming our forecasted range of capital expenditures for the year at a range of 300, the $330 million.

At this time the fund will provide a few closing comments before we move to Q&A.

Thank you Bob.

In closing on slide eight.

I'd like to mention that the broad range of end markets that we serve mix after a very resilient company through economic cycles and the most recent period was no exception the.

A wide variety of technologies and solutions that we provide combined with our commitment to R&D and new innovative solutions will further build upon kind of solid customer pipeline.

We have a profound respect for the environment that drives lower energy consumption landfill free facilities since the.

Sustainable product designs, we will continue to advocate for a circular economy and each packaging is reused and recycled therefore.

Therefore on a positive mid and long term view is unchanged and the when we look past this global pandemic induced crisis, the future's quite promising.

We look forward to growing after for the long term benefits all stakeholders.

The debt I would like to open up the call for your questions.

Thank you you asked the question please.

And the number one on your telephone keypad.

In the interest of time of standard to all participants please limit yourself to two questions and one follow up question.

Can you come back into the queue. If you have more questions at time of low.

You have price responses from George Staphos of Bank of America Securities. Please go ahead.

Thanks, very much hi, guys. Thanks for taking my question hope you're doing well.

Thanks for the details I guess the first question I had is really more of a point of clarification.

Bob Stefan when you talk about not much change in trends in Q2 versus what you saw on <unk> I assume youre talking about the year on year change that you saw on <unk> in terms of volume more or less occurring at the same rate in <unk> youre not the volumes are flat <unk> versus <unk>.

On a clarify on that.

Yes.

Correct basically when you look sequentially.

The pattern that we've laid out of inquiry will continue to see some destocking on the pharma side.

And the recovery in beauty and home.

Which really depends on Europe reopening will not be in food.

On <unk>, yet but of course sequentially.

The improving and the compared to quarter two of last year, which was the brought on very strong growth but.

On the overall demand pattern similar to what we saw in Q1 okay.

I appreciate the additional color there Stefan.

If we talk about pharma and food.

Both consumer health and <unk>.

We're still going through the Destocking is there anything that's unique about this destocking.

Period that we're going through relative to others that you've seen in the past and if you can remind us.

Whatever that context might be then.

One when do you think.

On to see some inflection on the volumes in those categories as well.

Yes, I think Bob can speak a bit of history.

What I've learned is that when these happen.

It usually is a two quarter of fair answer we certainly expect this to be behind us in the third quarter.

It's you see of course potential inventory buildups of multiple levels of our direct customers.

At the.

On the drug manufacturers in the trades in the homes and clearly.

In the earnings side, there has been some buildup of its people.

<unk>.

We're getting ready for the <unk>, making sure everybody stopped and now we.

We see the result, with the non existing flu season, the new to the allergy season last year as people were seeing indoors and masking up.

On the other hand.

It will run its course.

You may hear from my words, the can personally of test of the allergy season is in full bloom.

And the strong and if people go outside of the will be affected in the vehicle no doubt.

The unfortunate of fluid these loans come back of people are running out in the boat.

You saw that.

With the Glenmark approval, we continue to see conversion to the.

The nasal delivery in the allergic rhinitis category in and of course of the top of that we have the strong central nervous system of franchise. So theres no reason.

Not to believe that.

The long term growth rate of around 6%.

Four.

On this category in <unk> for pharma overall will not return, but maybe Bob you can speak a bit more to history.

Yes, no I think I think you nailed it the farm.

Typically two quarters.

What we've seen in the past.

I can perspective, so I think that the fund mentioned.

The.

US returning to growth starting in Q3 of them.

Mutual above the EBITDA compared to any others.

Thanks, Bob Thanks for the thoughts my last one quickly just you mentioned that beverage was relatively flat.

Could you talk about the regional trends there and are we still seeing the lingering weakness in Asia.

Come back or is that was that a non event in the quarter. Thank you guys.

Yes actually.

The China as you know has.

The reopened already a year ago. So.

We're in full swing in there.

Beverage category is no exception.

Clearly what we're missing is the on the go beverages in Europe and sales in the U S.

As the U S is really the reopening just not on living in New York is going back to normal in the coming weeks in the Europe is really the quarter to four months behind the U S. Non thankfully.

We see more and more definition of <unk> in Europe that things are coming together.

Germany is getting its act together on vaccines, the UK is doing better France.

And then May 15, and hopefully that's going to stay open.

So.

We certainly have some confidence that Europe will reopening of the quarter, maybe four four months behind the U S and that will.

It'd be very good total for the on the go beverage.

Business.

Thank you.

Please go ahead lots of our add little more color on the on the geographic side, so really beverage.

<unk> was up in every region, except for Europe.

And if we just look generally speaking across all of the segments.

Europe will be either flat or down.

In Europe from the other segments, but I think the remarks about.

Mid quarter, Europe reopening are going to be.

Very helpful on beneficial across all three segments.

Thank you mid year, you mean during the quarter.

On may 15th and Europe reopening some of this quarter looks like the same.

Turnaround.

Your next response is from John Kreger of William Blair. Please go ahead.

Hi, Thanks, very much Stephane could you just maybe go back to the year I know you quickly just sort of reiterated your long term expectations for the pharma business, but maybe just.

Kind of reset that a little bit what is what does the pipeline of opportunities that you guys have been seeing recently tell you about the various components within the pharma business and what you think that will kind of do long term as we get beyond the pandemic.

Yes.

Just walk through the the categories.

The the.

The punch line is really really don't see any change to the <unk>.

6% to 10% long term.

Starting with the allergic rhinitis.

Two of the base LNG businesses.

Agenda of the low.

Low single digit but.

You will have additional conversions going on.

On the Glenmark approval.

And then.

You have geographic growth in that business.

On <unk>.

<unk>, obviously much as the rest of the phenomenon.

And then continuing in Rx of of course, the central nervous system category continues to grow nicely.

We called out the clinical trial with the part of <unk> zone.

Just this morning Hikma.

The approval for a higher dose <unk> zone drive growth the clocks.

<unk>.

<unk>, Inc.

We see good project flow in.

In the central nervous system category. So then you go with the consumer healthcare of course the.

Of the congestion saline.

Ophthalmic.

All of the target rich environment.

Injectables as we've discussed on calls before.

Didn't really heartened by in the new project activity.

And the recognition of <unk> capability as part of the whole vetting of.

The COVID-19 supply chain, we are still a small player in this in this large market, but we see good project activity and continued good growth there.

And then the active packaging.

Calling out the.

The approval of the in home COVID-19 tests.

The another proof point for the the powerful technology.

<unk>.

Our active material solutions business provides for four are important.

The important tests, whether it's diabetes related COVID-19.

<unk>.

And of course, the probiotic product category continues to grow so.

Across the board of.

A lot of reasons too.

The support the 6% to 10% as you know we've been for a number of quarters well above that.

Clearly the inventory drawdown normalize some of that.

But no reason not true.

Continue to see EBIT of 6% to 10% growth.

That's helpful. Thank you and then maybe for a follow up can you just talk a little bit about any supply chain pressures you are seeing and how youre managing of thoughts from the standpoint of raw materials, and also just sort of labor and productivity across your facilities.

Yes, I think you touched on all of the things clearly there of friction losses as the economy starts to sputter up to higher speed again, whether this logistics.

Availability.

Freight rates.

Air freight rates.

Labor labor availability in pricing.

Clearly as we have to.

Higher people train them there is more cost there.

Of course are working hard to pass that on the clearly we are very cognizant of the more inflationary environment.

<unk>.

On making sure that we pass it on so we have price increases slower than for later in the quarter.

Some of those will be announced some of them will just be put through.

So.

Clearly.

As I said I think lot of things you don't just push a button on the call.

It goes back to full speed, the friction losses, but we're working through those and to our suppliers and sort of our customers.

Great. Thank you.

Thank you. Your next response is from Mark loans.

Of BMO capital markets.

Good morning step on Bob Matt.

Morning.

Stefan I wondered just to start out if you could give us a little more color on what youre hearing from your beauty and fragrance customers.

Earlier on the week one of the one of your peers was suggesting that they were starting to see some pickup in the fragrance activity.

When you sound a little more cautious about that so I wondered if you can just the.

Update us on what Youre seeing kind of around the world of beating fragrance.

Sure of course, it all of the dose.

Depends on what Youre comparing to if you compared to quarter two of last year of course, it's better.

Both the <unk> comparing to.

The EBITDA with <unk>.

Two of last year, but if we walk around the world.

China is in full steam.

Very happy for example, with L'oreal project that we highlight.

Eclipse pre pandemic level within some time in project activity is good.

India is a bit worrisome, so while it's not a big factor in our numbers.

The clearly.

The thing that makes there is in full.

Fully active from a significant impacts and that goes to the impact of it.

Beauty business, the lesser of the pharma business.

Latin America has remained quite resilient.

Through the pandemic.

Obviously very concerning what's going on there, but it hasnt impacted consumption level as much as.

As in other regions.

In the U S. Clearly we start to see the opening now so we see improvement there.

And the key question for US is Europe and of course, that's for US a very important question, because that's where a significant part of our businesses.

And Europe is not where the U S as in terms of reopening.

The we expect the three to four months lag in the reopening of Europe.

It puts us squarely in the second half.

And then for US and the addition of course.

It's very important the travel activity resumes in the.

Impulse purchase in the duty free.

Ill get triggered in the.

The customer the very positive day of a bunch of launches.

And their planning.

Working with them.

We're not going to pull the final trigger until the travel activity resumes and certainly.

We're not going to hit the mother's day in Europe.

And then the next big events are in the <unk>.

Fall in China and of the.

The year Christmas in the in the rest of the growth.

That's helpful and then Bob just a couple of financial items of a follow on can you first of all give us some comfort.

Big you estimate the resin the heart Glen took the bulk of first quarter and second quarter.

And then can you just talk briefly about the tax rate, it's been dancing around a lot of the <unk> quarters.

Sure from.

On the resin side.

<unk>, we had about $6 million across all segments kind of negative impact on EBITDA.

The majority of that was going to be.

Beauty <unk> home.

And then the majority of that relates to RASM resin increases, but the results also other substrate increases doesn't seem like aluminum metal as well, but that of contributing there.

We're actually anticipating approximately the same impact in Q2. So if you think about it we will be passing on the.

The price increases the Stefan mentioned, but essentially will be we'll be catching up for Q1, while we while we believe that the input costs are going to continue the increase from Q2, so it'll be the second half of the year before.

On the Q2 increases again, assuming some stability and input costs from the second half of the year.

On the tax rate so.

So the couple of items the most significant was the.

The additional benefit you get from stock based compensation.

Which really is the delta between.

The in the money.

Exercise price for legacy options versus book expense.

All of those are virtually impossible to forecast.

But.

You can see with the share price, having the run up that it's had.

You do tend to get additional option exercises and then Q1, we had <unk>.

So the it's the it's the benefit of the increase in share price, that's triggering outside tax deductions, but thats. The good thing that the real cash the I will take that.

Uh huh.

Absolutely right, that's not a that's not of deferred benefit that that's the that's the.

The true cost the cost savings. So you did also see.

Some state tax law of portion of the changes in Alabama, which benefits our active material solutions business down there, but that the lesser impact on the tax rate. So you see the we guided slightly lower than typically have for tax.

Tax rate of $26, 28% and that was near the kind of looking at exercises to date already and kind of putting that already baked into the baked into the range.

So okay.

The headcounts.

It's really really challenging to forecast what those exercises.

B because it relates to the things that are kind of outside of our control.

Okay.

The pump.

Yes.

Thank you your next from sponsors from Ghansham Panjabi with Baird. Please go ahead.

Good morning, everybody.

And the gunshot ghansham.

Hi.

So on the on the beauty and home segment. So I'm just looking on our model. It looks like volumes have been down for on a year over year basis from about eight quarters.

I mean, obviously a ton of has happened in between there in terms of COVID-19 and so on and so forth channel Destocking et cetera.

But stephane how would you benchmark.

That progression relative to the end markets over that time period, and then on the flip side of that as vaccines get deployed in some of the bigger markets such that you're exposed to in Europe et cetera.

Will we see a commensurate rebound thats actually faster.

And then maybe.

Maybe maybe appeared just as the consequence of the upcoming out of the flip side of this COVID-19 issue.

Overall I think.

With the exception of.

So on personal care.

Care.

<unk> missed this in the U S. Before we went into the pandemic.

<unk>.

We certainly have been in line with the market.

There are other areas, where I would.

Certainly hear from our people that we have gained market share so on balance.

I would say.

The bookings cancel each other at least out in <unk>.

Certainly the things that we are in line with market.

And.

On the speed of recovery whatever assumptions, you are making about the reopening of Europe and the travel assumptions.

I think the commensurate the.

Bounce back of from.

The specialty fragrance sales, but those of duty free sales.

We will go with it.

So im not sure how much color I can give you there, but maybe the book do you have a different way of describing it.

No.

Don I think you got it.

Described it.

Okay and then on the.

The second question in terms of your customers I mean, clearly you are seeing the velocity increase off.

The beauty products in China as they came on the flip side of COVID-19 et cetera.

Can you just touch on activity level for maybe of your larger customers specific to the NH as they position in front of.

The vaccine deployment and potential of reopening of Europe and then.

Separate question on active material you called out some of the technology being used for COVID-19 tests and stuff like that.

Are there other opportunities associated with the material.

You can sort of leveraged into other.

The future growth verticals within the testing and so on and so forth requirement.

Sure I'm going on.

I'll, let Bob address the act of materials.

I'll take the first part of the question.

On.

The project activity in China is very brisk.

And while I wish we had a much larger footprint, there and larger and therefore, a larger share of the growth.

Given the more footprint and given our current footprint and given the current.

Activities of available is very high.

And as I mentioned before customers appreciate of course, our global capability to execute especially on from projects that are cross regional.

And while many customers on the middle of shifting some of those there Phil and execution capability of the Asia, There's still a lot being sales in Europe.

That is for China. So.

I'm very happy with the activity level in China in Europe.

I think.

The use of different analogy of the bid to get all of the horses for courses are in the gates and the reading for the gates to open.

And clearly people have not launched new fragrances and during the pandemic, but they have new launches ready.

We are on.

Fair, maybe unfair share.

Part of those launches.

The activity certainly has picked up also on <unk> E Commerce format.

But having said all that the proof of the putting us in the reopening.

We need the reopening in Europe to happen.

So on the active the tiered solution so.

Boston had a presence in the diagnostic category you can think of diabetes test strips. Obviously the perform of of diagnostics. There is also some applications in Europe that are.

Using our technology on the DNA test kits as well.

So this whole new in home.

COVID-19 testing.

<unk> is really interesting and exciting for US we're also on customers.

The kit and that would even pre pandemic as well so.

The like the space a lot the technology certainly is increasing at warp speed in the space and it will be a crowded space right and you already see some in the home COVID-19 test kits that are out there, but you of a lot of people talking about the since just the beginning of being able to provide.

The more.

More than just COVID-19 testing could have a you can imagine diagnose the leader in the home where you could have for headsets separate strips for flu for of bronchitis for ne net and that could be the first step before you reach out to your doctor. So.

And see how it all from a doubt, but definitely we like the space and we think it's can you continue to progress.

Thanks, so much.

Thank you and the interest of time and fairness to all participants please limit yourself to two questions and one follow up question then come back in the queue. If you have more questions as time allows.

Your next response is from Gabe <unk> with Wells Fargo. Please go ahead.

Okay.

Bob Matt Good morning.

Okay.

Curious if you guys could comment at all.

On the.

Some of the joint venture Slash minority interests are performing on I'm kind of thinking about Kali care and maybe some of the connected devices and I appreciate that they are relatively small on and still embryonic but.

I think the scenario, where <unk> been successful in the past in terms of cash.

And on nurturing cultivating these technologies and then one for kind of more widely adopted.

Being able to leverage your distribution and global footprint. So just.

Anything that stands out to you I guess.

Sure and maybe just.

As context for everybody.

We look at.

M&A invention weighted to complement our organic activities complement organic growth with bolt on acquisitions in terms of complement our in house R&D and innovation was the adventuring investments. These mentioned the investments that are really they're not the net.

Certainly drive.

The internal venture capital business, but really get a front row seat of innovations.

Usually with the adventuring investments recombine the.

<unk> see there were some kind of licensees on.

The rights so the things that the MC.

Good linkage with our business so.

You mentioned Kali care and of course, we've done propeller, which then.

From a sold and we made the good gain on the <unk>.

I had some more often the connected device space.

And.

In the food area, we've looked at.

<unk> invested in loop.

In the second system in Eastern Europe.

We fill of Blue <unk>.

Dana as the at retail.

And.

In between the bolt on M&A and the.

The venture investments.

Joint ventures, and sometimes those joint ventures or acquisitions in stages, so low.

Anthony I would highlight BP y in China, which really the acquisition in chain in stages.

But we already narrow leveraging their capability to build the.

The beauty project pipeline in.

In China, so by and large the severity of rewarding area.

On the.

Sometimes you win.

From a capital gain point of view I mentioned already the propeller of course, we reported a big paper gain this quarter, but that's not the main purpose. The main purpose of jewelry and make sure that the innovation happen.

If we stick with pure cycle for a moment.

I mean.

The main purpose of pure cycle of investment was really to make sure the food grade.

Post consumer recycled polypropylene becomes a reality because thats, what we need.

There is certainly of no intention of getting into the basic materials business, but we need true great.

<unk> fully recycled polypropylene in the pure cycle technology, certainly has seen seem very promising when EBITDA due diligence and certainly it seems like of the capital market the grease.

That's really the purpose of these investments and the.

If we make a gain on the and that's also great with the purpose of really advanced the innovations and advance our organic efforts.

Thank you.

The next question comes down to the the transformation plan restructuring the EIA kind of initiated.

Years ago give or take.

I think the yield $80 million savings from obviously, the the pandemic kind of threw a range from Apple.

I think you guys have delayed some footprint consolidation efforts.

Curious if you could update us on how those are progressing.

I guess, given a little bit more stability in the operating environment and then.

Again, I guess the first.

First on the outside World to understand that you would call of envision came back to kind of mid teens margins on beating home again, assuming some sort of a normal volume environment.

So the short answer to that last point is yes that is the.

The expectation is.

Certainly also with their use of the analogy of the of horse being ready in the gates ready to go.

On your question on the delay, yes, we escalate the North American footprint.

Optimization.

With the pandemic moving equipment around starting up equipment in different locations.

Of the proved more challenging so that will be with us through the middle of this year, but we should be done by the middle of the year. So certainly.

On between.

Raw material being a drag of about of the margin points of the delay in north American footprint up in the physician and other margin point.

Yes.

Are transitory and will go away and specifically on the footprint optimization that should be done by the middle of the year.

Thank you guys. Good luck.

Thanks Kate.

The next responses from Adam Josephson with Keybanc. Please go ahead.

Thanks, Good morning, everyone I hope the Justin field to pick one overwhelming crystal Lake last evening.

Moving on.

While we won't comment on that for several years.

Okay.

Stephane just on BD and Hock just a follow up on a couple of gates question. So.

Appreciating that beauty and fragrance is not coming roaring back as yet in Europe, the snow on Lockdown.

And you have the resin related hits concentrated in the beauty and home.

What do you think is a reasonable expectation in terms of when you can get that either get back to mid teens EBITDA margins or recover.

A good chunk, let's say the $50 million EBITDA that you lost last year.

Yes.

I think the best guidance I can give is weak.

Before in the normal post COVID-19 weak volume environment.

<unk>.

We should get back to the 15 range and build from there.

So the question is venues that the post COVID-19 normal volume environment.

Michael the put the opinion mccarran lender.

Before the fed.

The euro a year ago whenever you're expecting that this pandemic.

With us of a year later.

But we are standing by that.

Adams and the the.

The resin pass through yes is slower in the beauty and home business than it is in the food and beverage business, but it is it will happen so I'm.

I am very confident about.

In addition to passing on the other inflationary increases and as I mentioned, the North America footprint optimization will be done by middle of the year.

Got it. Thank you and also following up on line of gauge questions on on the restructuring of beating on that.

Was over three years ago much has happened in terms of currency COVID-19 personal care issues et cetera et cetera, but.

What have you learned.

Since then.

Compared to what you were initially expecting in terms of generating that $80 million of savings what has gone as you expected it to what has gone.

Differently and what lessons have you learned since then.

If you go through the different elements so.

In terms of.

The restructuring the from them of the business.

Can you can really divided up into two things one is creating smaller accountable entrepreneurial units with dedicated sales forces.

And then.

Advancing the practices to <unk>.

From temporary.

Best practices in terms of sales force management customer project management and customer project.

Conversion tracking.

Moving to from <unk>.

Along the cadence is through weekly cadence.

And then.

Making sure of the car doesn't go into niche of course correct before.

I think.

By and large from very happy with what we did there.

Never finished with this.

You need to keep training those muscles for example, the price increase muscle.

Again needs to be trained here.

We entered this period, but by and large from the commercial front end.

Are you happy to keep building there we have.

The much stronger leaders in place and the smaller entrepreneurial units and very happy with that.

I think I spoke earlier about the learnings on the operational improvements and some of those took longer than the.

In a few cases, we had to go back and do it again.

Those of you who of school and six Sigma.

With each project there at the end of the Controle plan to maturity of don't slip back in some cases, the Controle plan was noticed food because I would have hoped.

Probably a lifelong learning the changes you make for them to stick you got to make sure that those changes are irreversible.

The move out the door with the next the organization change or people change.

That the pay per line and you make every time, but the power for the course I guess.

At this moment.

Im quite happy with the operational performance of the.

Those sites.

The kpis on the right place.

Over the same period of time.

On.

The safety performance just to the use one range from our move from moving much worse in the industry average to be close to.

On a world class.

It's just one indicator of how we've improved that we do these operations but.

Of course, we need the volume to go through them.

And then when you get to the fixed.

Fixed cost improvements.

Think there.

Arne quite happy with.

<unk> done the building up the shared service center in the Czech Republic in the streamlining the back office.

No.

Only partially happy with the fixed cost reduction in Europe.

<unk>.

The learning certain is that we're counting on friends on the easiest the deal with both of them.

Dress piece by piece by piece.

And that continues now the.

Having said all of that the operational improvements that have been.

Quite the.

Significant enough that we were able to take plants offline.

On.

Sooner than we thought.

In Europe for example, the the plant in Ireland the.

Plenty of in Spain in the U S.

Got hit by the pandemic, but certainly.

Going into the transformation, we were not expecting to take the three plenty of three plants offline in the northeast, which we will be doing.

So there is also some positive surprises I think overall.

Overlay of all of that is of course, the massive shift of growth to the east.

<unk>.

Never done and we will have the continued to make sure that we are very well positioned to capture the growth in the east.

The kind of a long answer but the great. Thank you Stefan I appreciate it.

The next response is from Neel Kumar with Morgan Stanley. Please go ahead.

Great and thanks for taking my question.

The include <unk> had 18 quarters of very strong growth.

Do you think thats on that strength from carry relative to the second half of the year.

The consumption plus the come down and.

And you saw sort of changes in the market post COVID-19.

But at the pump.

While the.

On the food.

<unk> team is really doing an excellent job.

On the reported.

The intention of the beauty and home, but we have a strong team in place there.

On the the growth is not only a mathematical result of depend on mix and in home consumption, but.

Competitive wins from new projects.

Strong expansion in Asia.

And certainly with beverage coming back I have no doubt.

That will continue to grow.

Also in the second half.

Okay.

And the polls.

Also on the post COVID-19 the advantages so on what we're going to get wondering of can puts and takes I think what's important that we're keeping an eye on is with how robust the.

One of the standard Kaiser and the cleansing environment in Washington, and that is that kind of staying of adhere to stay.

But certainly as people.

Move out of the Lockdown.

Getting out.

On the kitchen of the more we would.

The categories like from screen and things like that to improve.

If people are dining out more on the food side.

And we see a little bit of of a pullback on some of that in home consumption remember the data are struggling part of our food business, which is food safety that we should see of rebound.

<unk>.

<unk>.

On goes up the other one the one go down rather of the other ones level on the come up and certainly we've talked about.

On <unk>.

Moving beverage situations when the people are back out traveling on the go and things like that.

Okay, and then in terms of the fund some of the input inflation youre seeing or the non resin raw materials also contractually passed through at a similar 15 to 90 day lag of resin or does that work differently.

And then from the cash flow perspective, despite the higher resin enrollment share prices to negatively impact working capital.

So on.

On the other substrate.

Increases those are those are more in general in many cases, you're talking about complex multi component products like the pumps and aerosol valves and things like that it tends to be a little bit more of a basket of goods approach. So when we trip certain thresholds, yes, we'll pass it on and certainly with with some of those increases the risk.

<unk> seen we have tripped some of those so.

We've kind of additional pass through on that on.

On your on your cash flow question I would say the the $15 million decrease in free cash flow that we saw last year first quarter. This year.

Primarily coming from slightly higher inventory levels and that I would think partially due to slightly higher cost, but I think probably the more due to some of the supply chain disruptions that we experienced in Q1 right not having container.

The ship internationally.

On the shoes and truck capacity on things like that so we're carrying a little bit higher levels of work in process and finished goods.

And some of our plants that we have in the past I see that.

We've also transitory.

Great. Thank you.

Thank you. Your next response is from Salvator Tiano with Seaport Global. Please go ahead.

Yes, hi, Stefan both the month.

So first thing I want to touch base, a little bit on personal care, where.

I think you mentioned that the core sales growth year on year was 2% and if I remember correctly last year, you were still comping against the well.

You should have been Comping this year against the.

The Destocking you so.

And I'm wondering if that.

2% growth shows that suddenly rationing in personal care demand now.

Not sure I can follow your question.

Yes.

I mean, so from yes.

Got it.

I was just kind of on.

I was going to say just to give a little bit more color on personal care. So we're still very strong.

From a product category.

And our lotion product category and net typically products that you would see for personal cleansing sanitizers and body lotion.

Suffering a little bit on the hair care side, and a little bit on the some cash side, so that that moving somewhat.

That growth coming from the first of all quantum mechanical.

Okay perfect.

My second question is that you can provide the inc.

Some more color on what was the price contribution include a beverage and core sales growth and also even though there was any meaningful price of Q1 for beauty and the health and pharma as well.

Yes, so on the on.

Overall, we started the profit.

Overall for the company as a whole it was about a 1% positive impact.

On the core sales growth and had a stronger impact on food and beverage is about 6% positive.

Of the 14% positive and then it was left on a percent positive on beauty and home is about a half a percent Russell.

Okay perfect.

Just my last question.

What are the Lucas pharma and obviously you have the Q1 and also Q2 with software prescription and consumer health care demand, but you meant.

My understanding is for example of this quarter last quarter I guess the injectable growth.

<unk> got 400 basis points roughly from.

From Colby channel weeks, so when we put everything together over the past year, how would you judge call of its effect on the farmers' bottom line when we take into account demand margins averaging.

Im going to yield on that one.

The supply.

It's the top right I mean, we haven't gone through that math I would.

Again, it's similar to kind of what I was just discussing in personal care, we are getting the positive on the.

On the injectable side of the business, we are getting a positive on the active material side of the business, but really those are smaller divisions compared.

To the total.

Rx and the <unk> contribution so how it depends on a category of variety of.

COVID-19 is responsible for the lower.

Incidents of cold and flu.

The negative on the needs of the kind of.

The Doctor visits and primary care visits.

Even for the allergy and asthma.

Related products Destocking.

The naphtha negative net.

That's about all but really haven't gone into that level of granularity on the pharma business.

I mean, just as a reminder, if you zoom out.

Overall.

The prescription.

The unit.

One of the highest margin followed by the consumer healthcare.

Then comes back the packaging an injectable.

In line with the industry, but.

In this line of the lowest in terms of profitability. So certainly as the.

Top line mix moves so the.

The ability.

We've been able to absorb the <unk>.

Part of that this quarter, but the.

Certainly if you have the top line in mind I think you can approximate the bottom line impact.

Okay perfect that's very helpful.

Thank you.

There are no further questions in the queue at this time I will now turn the call back over to Mr. Tandem.

Thank you very much of this.

Concludes our call today, certainly this year will be of the story of two halves.

We are very optimistic about the second half of the year and I would like to thank everyone for joining us.

Thank you. This concludes today's conference call you may now disconnect and have a good day.