Q2 2019 Earnings Call

August 1, 2019

Ladies and gentlemen, thank you for standing by welcome to Aptargroups 2019 second quarter Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.

Introducing today's conference call is Mr., Matt Dellamaria Senior Vice President Investor Relations and Communications. Please go ahead Sir.

Thank you Howard and welcome everyone participating on our call today are Stefan Tanda, President and Chief Executive Officer, and Bob Kuhn Executive Vice President Chief Financial Officer, and Secretary you can find a copy of our press release as well as the slide presentation file that summarizes our results on our web site.

Howard: Ladies and gentlemen, thank you for standing by. Welcome to AptarGroup's 2019 Q2 Conference Call. At this time, all participants are on a listen-only mode. Later, we will conduct a question-and-answer session. Introducing today's conference call is Mr. Matt Della Maria, Senior Vice President, Investor Relations and Communications. Please go ahead, sir.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to AptarGroup's 2019 Q2 Conference Call. At this time, all participants are on a listen-only mode. Later, we will conduct a question-and-answer session. Introducing today's conference call is Mr. Matt Della Maria, Senior Vice President, Investor Relations and Communications. Please go ahead, sir.

We will also post a replay of this conference call on our web site.

Matt Della Maria: Thank you, Howard. Welcome everyone. Participating on our call today are Stephane Tanda, President and Chief Executive Officer, and Bob Kuhn, Executive Vice President, Chief Financial Officer, and Secretary. You can find a copy of our press release as well as the slide presentation file that summarizes our results on our website. We will also post a replay of this conference call on our website. Lastly, 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 those projected or contained in the forward-looking statements. Aptar undertakes no obligation to update the forward-looking information contained therein. I would now like to turn the conference call over to Stephane.

Matt DellaMaria: Thank you, Howard. Welcome everyone. Participating on our call today are Stephan Tanda, President and Chief Executive Officer, and Bob Kuhn, Executive Vice President, Chief Financial Officer, and Secretary. You can find a copy of our press release as well as the slide presentation file that summarizes our results on our website. We will also post a replay of this conference call on our website. Lastly, 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 those projected or contained in the forward-looking statements. Aptar undertakes no obligation to update the forward-looking information contained therein. I would now like to turn the conference call over to Stephan.

And lastly, 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 those projected or contained in the forward looking statements.

After undertakes no obligation to update the forward looking information contained therein.

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

Turning to slide four of the deck, our pharma segment continued to benefit from strong sales momentum in the allergic rhinitis and central nervous system categories.

Stephane Tanda: Thanks, Matt. Good morning, everyone. Thank you for joining us. As you saw yesterday, we reported good Q2 results with consolidated core sales growth of 4% and solid double-digit earnings growth. Turning to Slide 4 of the deck, our Pharma segment continued to benefit from strong sales momentum in the allergic rhinitis and central nervous system categories. We also saw a broad-based increased demand across our other Pharma applications, including our Consumer Health Care and Injectables division. I'm also pleased that we closed on two acquisitions of leading pharmaceutical service companies, namely Nanopharm and Gateway Analytical. It is our strategy to expand our Pharma Services offerings that support pharmaceutical customers for both small and large molecules to help them accelerate and de-risk their complex product developments. Both acquisitions bring value-added and differentiated analytical, testing, and development services for all stages of drug development and commercialization.

Stephan Tanda: Thanks, Matt. Good morning, everyone. Thank you for joining us. As you saw yesterday, we reported good Q2 results with consolidated core sales growth of 4% and solid double-digit earnings growth. Turning to Slide 4 of the deck, our Pharma segment continued to benefit from strong sales momentum in the allergic rhinitis and central nervous system categories. We also saw a broad-based increased demand across our other Pharma applications, including our Consumer Health Care and Injectables division. I'm also pleased that we closed on two acquisitions of leading pharmaceutical service companies, namely Nanopharm and Gateway Analytical. It is our strategy to expand our Pharma Services offerings that support pharmaceutical customers for both small and large molecules to help them accelerate and de-risk their complex product developments. Both acquisitions bring value-added and differentiated analytical, testing, and development services for all stages of drug development and commercialization.

I'm also pleased that we closed on two acquisitions of leading pharmaceutical service companies, namely nano farm and gateway analytical.

It is our strategy to expand our pharma service offerings that support pharmaceutical customers for both small and large molecules.

To help them accelerate and de risk their complex product developments.

Both acquisitions bring value added and differentiated analytical testing and development services for all stages of drug development and commercialization.

The expanded services platform will enable I've talked to collaborate earlier with customers to support their drug formulations and delivery requirements as they face increasingly competitive markets and increasingly demanding regulators.

The us food and drug administration approved Unidos powder system for a drug which is intended to treat severe hyper hypoglycemia in people with diabetes.

Stephane Tanda: The expanded services platform will enable Aptar to collaborate earlier with customers to support their drug formulations and delivery requirements as they face increasingly competitive markets and increasingly demanding regulators. In addition to the two acquisitions, we had another interesting pharma-related announcement just last week. The US Food and Drug Administration approved our Unidose Powder System for a drug, which is intended to treat severe hypoglycemia in people with diabetes. This marks the first FDA approval of a prescription drug using Aptar's patented Unidose Powder System and is Aptar's first combination of a drug delivery device with a solution from Aptar CSP Technologies, as the device is protected by an Activ-Polymer container. This is also the first needle-free rescue treatment for severe hypoglycemia. Delivering the drug intranasally replaces the often difficult-to-assemble injectable kits, which require a multi-step, time-consuming process of mixing powder and liquid.

Stephan Tanda: The expanded services platform will enable Aptar to collaborate earlier with customers to support their drug formulations and delivery requirements as they face increasingly competitive markets and increasingly demanding regulators. In addition to the two acquisitions, we had another interesting pharma-related announcement just last week. The US Food and Drug Administration approved our Unidose Powder System for a drug, which is intended to treat severe hypoglycemia in people with diabetes. This marks the first FDA approval of a prescription drug using Aptar's patented Unidose Powder System and is Aptar's first combination of a drug delivery device with a solution from Aptar CSP Technologies, as the device is protected by an Activ-Polymer container. This is also the first needle-free rescue treatment for severe hypoglycemia. Delivering the drug intranasally replaces the often difficult-to-assemble injectable kits, which require a multi-step, time-consuming process of mixing powder and liquid.

This marks the first FDA approval of a prescription drug using actors patented unidos powder system and adapters first combination of a drug delivery device.

Well the solution from after a CSP technologies as the device is protected by an active polymer container.

This is also the first needle free rescue treatment for severe hypoglycemia.

Delivering the driver Intranasally replaces the often difficult to assemble injectable kits, which require multi step time consuming process of mixing powder and liquid.

This launch is another validation of nasal delivery as an attractive non invasive way to administer life changing and life saving treatments.

Turning now to slide five in our beauty and home segment, we are comparing to a very strong second quarter last year, which included a significant amount of custom tooling sales and the pipeline fill for customers global launch in the personal care market, both of which did of course not repeat.

Stephane Tanda: This launch is another validation of nasal delivery as an attractive, non-invasive way to administer life-changing and life-saving treatments. Turning now to slide 5 in our Beauty + Home segment, we are comparing to a very strong Q2 last year, which included a significant amount of custom tooling sales and a pipeline fill for a customer's global launch in the personal care market, both of which did, of course, not repeat. We continue to make good progress on our transformation initiatives, including the operational improvements at some of our manufacturing facilities that are part of our three-year phased approach. We look to make further progress throughout the remainder of the year and all of next year.

Stephan Tanda: This launch is another validation of nasal delivery as an attractive, non-invasive way to administer life-changing and life-saving treatments. Turning now to slide 5 in our Beauty + Home segment, we are comparing to a very strong Q2 last year, which included a significant amount of custom tooling sales and a pipeline fill for a customer's global launch in the personal care market, both of which did, of course, not repeat. We continue to make good progress on our transformation initiatives, including the operational improvements at some of our manufacturing facilities that are part of our three-year phased approach. We look to make further progress throughout the remainder of the year and all of next year.

That are part of our three year phased approach and we look to make further progress throughout the remainder of the year and all of next year.

Looking at the product on the right. We continue to help our customers bring innovative solutions to market and in the quarter Mona studio one introduced the air freight and features our twist to lock actuator with a patented technology that allows for two dispensing setting.

In addition, the lockup.

The locking technology is designed to provide protection fueling e-commerce shipping.

Stephane Tanda: Looking at the product on the right, we continue to help our customers bring innovative solutions to market, and in the quarter, MONAT Studio One introduced a hairspray that features our twist-to-lock actuator with a patented nozzle that allows for two dispensing settings. In addition, the locking technology is designed to provide protection during e-commerce shipping. Moving on to Slide 6, our Food + Beverage segment had a strong quarter with increased demand for our dispensing closures, particularly in the food market. The segment continues to benefit from conversion opportunities, especially for condiments and dairy products. Some of you may also have read the recent article in The Washington Post that highlighted the differentiating benefits of the STANDCAP inverted flexible pouch solution, enabled by our pouch fitment and dispensing closure with our SimpliSqueeze valve.

Stephan Tanda: Looking at the product on the right, we continue to help our customers bring innovative solutions to market, and in the quarter, MONAT Studio One introduced a hairspray that features our twist-to-lock actuator with a patented nozzle that allows for two dispensing settings. In addition, the locking technology is designed to provide protection during e-commerce shipping. Moving on to Slide 6, our Food + Beverage segment had a strong quarter with increased demand for our dispensing closures, particularly in the food market. The segment continues to benefit from conversion opportunities, especially for condiments and dairy products. Some of you may also have read the recent article in The Washington Post that highlighted the differentiating benefits of the STANDCAP inverted flexible pouch solution, enabled by our pouch fitment and dispensing closure with our SimpliSqueeze valve.

Moving onto slide six our food and beverage segment had a strong quarter with increased demand for our dispensing closures, particularly in the food market.

The segment continues to benefit from conversion opportunities, especially for condiments and dairy products.

Some of you May also have read the recent article in the Washington post that highlighted the differentiating benefits of this damn cap inverted flexible cloud solution enabled by our pouch fitment in dispensing closure without simplisqueeze valve.

If you missed it just Google Aptar, Washington post to fight the article.

Also after was selected by Nestle to develop a dispensing closure for the first creamer launch under the Starbucks brand partnership.

This custom dispensing pour spout, featuring a unique pressed to open and close design provides strong visual appeal shelf differentiation and added convenience for the server consumers.

Stephane Tanda: If you missed it, just Google Aptar The Washington Post to find the article. Also, Aptar was selected by Nestlé to develop a dispensing closure for the first Creamer launch under their Starbucks brand partnership. This custom dispensing pour spout, featuring a unique press to open and close design, provides strong visual appeal, shelf differentiation, and added convenience for the Starbucks consumers. Finally, our infant formula closure with a built-in scoop is featured on a line of organic infant formula by Yili, the large dairy in China. In summary, a good quarter overall, with top line gains in Pharma and Food + Beverage, offsetting some softness in Personal Care, with strong earnings growth, and several new interesting product introductions. With that, I will now turn it over to Bob, who is going to walk through some of the financial details that impacted the quarter. Bob?

Stephan Tanda: If you missed it, just Google Aptar The Washington Post to find the article. Also, Aptar was selected by Nestlé to develop a dispensing closure for the first Creamer launch under their Starbucks brand partnership. This custom dispensing pour spout, featuring a unique press to open and close design, provides strong visual appeal, shelf differentiation, and added convenience for the Starbucks consumers. Finally, our infant formula closure with a built-in scoop is featured on a line of organic infant formula by Yili, the large dairy in China. In summary, a good quarter overall, with top line gains in Pharma and Food + Beverage, offsetting some softness in Personal Care, with strong earnings growth, and several new interesting product introductions. With that, I will now turn it over to Bob, who is going to walk through some of the financial details that impacted the quarter. Bob?

Finally, our infant formula closure with a built in Scoop is featured on the line of organic infant formula by Uli the large dairy in China.

So in summary, a good quarter overall with top line gains in pharma and food and beverage offsetting some softness in personal care with stronger earnings growth and several new interesting product introductions with that I will now turn it over to Bob who is going to walk through some of the financial details that impacted the quarter Bob.

Thank you Stefan and good morning, everyone.

I'll briefly walk through some of the details concerning our second quarter results.

If youre following the slides, we published with the press release, you can refer to slide seven.

Bob Kuhn: Thank you, Stefan. Good morning, everyone. I'll briefly walk through some of the details concerning our Q2 results. If you are following the slides we published with the press release, you can refer to Slide 7. We reported sales growth of 5% that was comprised of core sales growth of 4%, with a positive impact from acquisitions of 6% and a negative impact from currency rates of 5%. Reported earnings per share increased 30%, mainly due to the higher amount of transformation costs incurred in the prior year. As you saw in our press release, our Pharma segment achieved a core sales growth of 10% and an adjusted EBITDA margin of 36%. The strong sales volumes, particularly in the Prescription Division, drove margins to the high end of our long-term range.

Bob Kuhn: Thank you, Stephan. Good morning, everyone. I'll briefly walk through some of the details concerning our Q2 results. If you are following the slides we published with the press release, you can refer to Slide 7. We reported sales growth of 5% that was comprised of core sales growth of 4%, with a positive impact from acquisitions of 6% and a negative impact from currency rates of 5%. Reported earnings per share increased 30%, mainly due to the higher amount of transformation costs incurred in the prior year. As you saw in our press release, our Pharma segment achieved a core sales growth of 10% and an adjusted EBITDA margin of 36%. The strong sales volumes, particularly in the Prescription Division, drove margins to the high end of our long-term range.

With a positive impact from acquisitions of 6%.

And a negative impact from currency rates of 5%.

Reported earnings per share increased 30%, mainly due to the higher amount of transformation costs incurred in the prior year.

As you saw in our press release, our pharma segment achieved core sales growth of 10%.

And an adjusted EBITDA margin of 36%.

The strong sales volumes, particularly in the prescription division drove margins to the high end of our long term range.

Core sales to the prescription market increased 15%.

Primarily due to increased demand for our nasal spray systems used with allergy and central nervous system treatments.

Core sales to the consumer healthcare market increased 4%.

Driven primarily by increased demand for our systems used with ophthalmic and nasal sealing products.

Bob Kuhn: Core sales to the prescription market increased 15%, primarily due to increased demand for our nasal spray systems used with allergy and central nervous system treatments. Core sales to the consumer healthcare market increased 4%, driven primarily by increased demand for our systems used with ophthalmic and nasal saline products. Lastly, core sales to the injectables market increased 6% as we continue to bring additional molding capacity online to resolve certain production bottlenecks. Turning to our Beauty and Home segment, core sales, excluding acquisitions and keeping currencies constant, decreased 3%, primarily due to lower custom tooling sales compared to a year ago. When we look at profitability, our Beauty and Home segment had an adjusted EBITDA margin of 14%. Margins were favorably impacted by lower raw material costs and our transformation efforts.

Lastly, core sales to the Injectables market increased 6%.

Turning to our beauty and home segment core sales, excluding acquisitions and keeping currencies constant decreased 3%.

Primarily due to lower custom tooling sales compared to a year ago.

When we look at profitability, our beauty and home segment had an adjusted EBITDA margin of 14%.

Margins were favorably impacted by lower raw material costs and our transformation efforts.

Looking at sales growth by market on a core basis.

Core sales to the beauty market increased 4%.

Mainly due to strong growth across all categories in Europe .

Core sales to the personal care market decreased 11%.

More than half of which was due to lower custom tooling sales.

Bob Kuhn: Looking at sales growth by market on a core basis, core sales to the beauty market increased 4%, mainly due to strong growth across all categories in Europe. Core sales to the personal care market decreased 11%, more than half of which was due to lower custom tooling sales, difficult comparisons due to pipeline filling in the prior year for customers' global launch, and some softness in the US market. Core sales to the home care market increased 5% due to increased demand across a variety of categories, primarily air fresheners and insecticide sprays. Looking at our Food + Beverage segment, core sales increased 10% in the quarter, and this segment had an Adjusted EBITDA margin of 18%, which was even with the prior year.

Difficult comparisons due to pipeline filling in the prior year for customers global launch and some softness in the us market.

Core sales to the home care market increased 5%.

Due to increased demand across a variety of categories, primarily air Fresheners and insecticide sprays.

Looking at our food and beverage segment core sales increased 10% in the quarter and this segment had an adjusted EBITDA margin of 18%.

Which was even with the prior year.

Looking at each market core sales to the food market increased 17%.

Due to increased sales of our dispensing closures for sauces, and condiments as well as granular foods and dairy products.

Core sales to the beverage market increased 1%, primarily due to increased custom tooling sales compared to a year ago.

Bob Kuhn: Looking at each market, core sales to the food market increased 17% due to increased sales of our dispensing closures for sauces and condiments, as well as granular foods and dairy products. Core sales to the beverage market increased 1%, primarily due to increased custom tooling sales compared to a year ago, which offset weak demand across most categories, and in particular in Europe, where we believe the weather conditions in the spring impacted our demand. Turning to Slide 8, comparable adjusted earnings per share totaled $1.15 and rose 10% compared to the $1.05 adjusted earnings per share in the prior year. We also grew Adjusted EBITDA by 14% in the quarter, with each segment reporting increases in Adjusted EBITDA despite foreign currency headwinds. We expanded our overall adjusted EBITDA margin to approximately 22%.

Which offset weak demand across most categories and in particular in Europe , where we believe the weather conditions in the spring impacted our demand.

Turning to slide eight comparable adjusted earnings per share totaled $1.15 cents and rose, 10% compared to the dollar five cents adjusted earnings per share in the prior year.

We also grew adjusted EBITDA by 14% in the quarter with each segment reporting increases in adjusted EBITDA, Despite foreign currency headwinds.

We expanded our overall adjusted EBITDA margin to approximately 22%.

Slide nine and 10 cover our good year to date performance and highlight our 5% core sales growth and 13% adjusted earnings per share growth.

Slide 11 refers to our outlook.

We are expecting earnings per share in the third quarter to be in the range of 91 to 97 cents per share.

Bob Kuhn: Slide 9 and 10 cover our good year-to-date performance and highlight our 5% core sales growth and 13% adjusted earnings per share growth. Slide 11 refers to our outlook. We are expecting earnings per share in Q3 to be in the range of $0.91 to $0.97 per share, using an expected tax rate range of 30% to 32%. Our tax rate for the Q3 guidance includes an estimate of the impact of a recently enacted corporate tax rate increase in France. I'd also like to point out that last year's Q3 adjusted tax rate was 24%, so there is a significant difference in the year-over-year comparison due to the tax rate differential.

Using an expected tax rate range of 30% to 32%.

Our tax rate for the third quarter guidance includes an estimate of the impact of the recently enacted corporate tax rate increase in France.

I'd also like to point out that last year's third quarter adjusted tax rate was 24%.

So there is a significant difference in the year over year comparison due to the tax rate differential.

Also we are up against currency headwinds and are using a 112 euro rate in our guidance.

Which compares to 116 euro rate in Q3 of 2018.

I have a few other details to share and then I will turn it back over to Stefan.

In the quarter cash flow from operations was approximately $144 million.

Bob Kuhn: We are up against currency headwinds and are using a EUR 1.12 rate in our guidance, which compares to EUR 1.16 rate in Q3 2018. I have a few other details to share, and then I will turn it back over to Stefan. In the quarter, cash flow from operations was approximately $144 million. Capital expenditures were approximately $73 million, and our free cash flow was approximately $70 million, compared to $52 million a year ago. Looking at our balance sheet capitalization on a gross basis, debt-to-capital was approximately 45%, while on a net basis, it was approximately 38%, and we remained less than 2x levered. At this time, Stefan will provide a few comments before we move to Q&A.

Bob Kuhn: We are up against currency headwinds and are using a EUR 1.12 rate in our guidance, which compares to EUR 1.16 rate in Q3 2018. I have a few other details to share, and then I will turn it back over to Stephan. In the quarter, cash flow from operations was approximately $144 million. Capital expenditures were approximately $73 million, and our free cash flow was approximately $70 million, compared to $52 million a year ago. Looking at our balance sheet capitalization on a gross basis, debt-to-capital was approximately 45%, while on a net basis, it was approximately 38%, and we remained less than 2x levered. At this time, Stephan will provide a few comments before we move to Q&A.

Capital expenditures were approximately $73 million.

And our free cash flow was approximately $70 million compared to $52 million a year ago.

Looking at our balance sheet capitalization on a gross basis debt to capital was approximately 45% while on a net basis. It was approximately 38%.

And we remain less than two times levered.

At this time Stefan will provide a few comments before we move to QNX.

Thank you Bob.

In closing I'd like to leave you with a few key takeaways as shown on slide 12.

We sell 5% core sales growth through the first half.

The year with double digit earnings growth. This was driven by our pharma and food and beverage segments, which had an excellent year on year core sales growth.

Stephane Tanda: Thank you, Bob. In closing, I'd like to leave you with a few key takeaways, as shown on Slide 12. We saw 5% core sales growth through the first half of the year with double-digit earnings growth. This was driven by our Pharma and Food + Beverage segment, which had excellent year-over-year core sales growth. Beauty + Home sales were even with the prior year, despite some challenges. We had improved profitability across each segment. Looking to Q3, we anticipate core product sales growth across each segment. Pharma is expected to continue the positive momentum seen in the first half of the year. While we anticipate product growth in our Beauty + Home segment, some personal care customers foresee weaker volumes in the near term, and we expect lower custom tooling sales compared to a year ago.

Stephan Tanda: Thank you, Bob. In closing, I'd like to leave you with a few key takeaways, as shown on Slide 12. We saw 5% core sales growth through the first half of the year with double-digit earnings growth. This was driven by our Pharma and Food + Beverage segment, which had excellent year-over-year core sales growth. Beauty + Home sales were even with the prior year, despite some challenges. We had improved profitability across each segment. Looking to Q3, we anticipate core product sales growth across each segment. Pharma is expected to continue the positive momentum seen in the first half of the year. While we anticipate product growth in our Beauty + Home segment, some personal care customers foresee weaker volumes in the near term, and we expect lower custom tooling sales compared to a year ago.

Beauty and home sales were even with the prior year. Despite some challenges.

We have improved profitability across each segment.

Looking to the third quarter, we anticipate core product sales growth across each segment.

Pharma is expected to continue the positive momentum seen in the first half of the year and while we anticipate product growth in our beauty and home segment, some personal care customers foresee weaker volumes in the near term and we expect lower custom tooling sales compared to a year ago.

In closing, we will continue to bring value to our customers and their consumers by continually introducing innovations to come work non dispensing packaging into innovative product dispensing systems.

To change with the times and to create innovative technologies, which drives the future of dispensing and drug delivery systems has always been our key to success.

Stephane Tanda: In closing, we will continue to bring value to our customers and their consumers by continually introducing innovations that convert non-dispensing packaging into innovative product dispensing systems. To change with the times and to create innovative technologies, which drives the future of dispensing and drug delivery systems, has always been our key to success. With that, I would like to open it up for your questions. Thank you very much.

Stephan Tanda: In closing, we will continue to bring value to our customers and their consumers by continually introducing innovations that convert non-dispensing packaging into innovative product dispensing systems. To change with the times and to create innovative technologies, which drives the future of dispensing and drug delivery systems, has always been our key to success. With that, I would like to open it up for your questions. Thank you very much.

With that I would like to open it up for your questions.

Thank you very much.

Ladies and gentlemen, if you have a question or comment at this time. Please press Star then one on your telephone keypad.

If your question has been answered or you wish to remove yourself from the queue simply press the pound cake.

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

Then come back into the queue. If you have more questions as time allows.

Operator: Ladies and gentlemen, if you have a question or comment at this time, please press star, then one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press the pound key. In the interest of time and fairness to all participants, please limit yourself to two questions and one follow-on. Then come back into the queue if you have more questions, as time allows. Again, to ask a question at this time, please press star, then one on your telephone keypad. Our first question or comment comes from the line of Gabe Hajde from Wells Fargo. Your line is open.

Again to ask a question at this time. Please press Star then one on your telephone keypad.

Our first question or comment comes from the line of Gabe Poggi from Wells Fargo. Your line is open.

Good morning, gentlemen, thanks for taking my question on the game.

Okay.

I think Bob you mentioned that the personal care weakness had been isolated a little bit to the us but the forward look comment was that you expected to persist I was curious if that.

Expanded by geography at all or if it's still mostly isolated to the US and then I had one other question.

Gabe Hajde: Good morning, gentlemen. Thanks for taking the question.

Bob Kuhn: Good morning, Gabe.

Stephane Tanda: Morning, Gabe.

Stephan Tanda: Morning, Gabe.

Gabe Hajde: I think, Bob, you mentioned that the personal care weakness had been isolated a little bit to the US, but the forward-look comment was that you expected it to persist. I was curious if that expanded by geography at all, or if it's still mostly isolated to the US. I had 1 other question.

Sure. So yes, the reference to the US was really primarily for the Q2, the other regions weren't necessarily robust.

And so there is a certain element of caution in our Q3 guidance.

That's basically bought it.

Okay, and then can you.

Bob Kuhn: Sure. Yeah, the reference to the US was really primarily for the Q2. The other regions weren't necessarily robust. There is a certain element of caution in our Q3 guidance. That's basically about it.

I missed a couple of minutes on the first part of the.

So I apologize if you guys.

Comment on this but the CSP acquisition can you talk at all how it's performing relative to sort of maybe our acquisition expectations.

Et cetera.

Sure.

So we're very pleased with the performance of CSP.

Gabe Hajde: Okay. I've missed a couple minutes of the first part of the... Apologize if you guys commented on this, but the CSP acquisition, can you talk at all how it's performing relative to sort of maybe, I don't know, acquisition expectations, et cetera?

Any integration that we've accomplished thus far loan with our legacy Aptar operations.

They continue to exceed where our topline sales forecasts are there double digits in Q2 again.

Bob Kuhn: Sure. We're very pleased with the performance of CSP and the integration that we've accomplished thus far with their legacy Aptar operations. They continue to exceed where our top line sales forecasts are. They're double digits in Q2 again. They're performing above our accretion expectations on a quarterly basis. They were about $0.03 accretive in both Q1 and Q2, we maintain our 10% or $0.10 per share accretion target on an annualized basis. And as Stephane Tanda mentioned, you know, we're excited about the first joint product that is going to be out in the market very shortly in the nasal Unidose Powder.

Bob Kuhn: Sure. We're very pleased with the performance of CSP and the integration that we've accomplished thus far with their legacy Aptar operations. They continue to exceed where our top line sales forecasts are. They're double digits in Q2 again. They're performing above our accretion expectations on a quarterly basis. They were about $0.03 accretive in both Q1 and Q2, we maintain our 10% or $0.10 per share accretion target on an annualized basis. And as Stephan Tanda mentioned, you know, we're excited about the first joint product that is going to be out in the market very shortly in the nasal Unidose Powder.

They are performing above our accretion expectations on a quarterly basis.

They were added they were about three cents accretive in both Q1 and Q2 and so we maintain our 10% or 10 cents per share accretion target on an annualized basis.

And is the fund mentioned, we're excited about the the first joint product.

That that is going to be out in the market very shortly in the the nasal unit dose powder I think I think it shows.

What the technology inside a CSP can do.

In comparison with our legacy products. So we're actively promoting.

That as well as Csps core business.

Which is in diabetes file containers and the like and we're very we're very hopeful in the future that some of that material science technology. They have is is also has some potential beyond just today pharma and food and beverage, but potentially also some possibilities within the beauty and home segment.

Bob Kuhn: I think it shows what the technology inside of CSP can do, in comparison with our legacy products. We're actively promoting that as well as CSP's core business, which is in diabetes vial containers and the like. We're very hopeful in the future that some of that material science technology they have also has some potential beyond just today, Pharma and Food + Beverage, but potentially also some possibilities within the Beauty + Home segment.

Thank you.

Thank you. Our next question or comment comes from the line of Daniel Rizzo from Jefferies. Your line is open.

Good morning.

You mentioned the personal care softness.

Expect to lessen the end of the third quarter driven other companies kind of serve that market expecting it to continue to the end of the year and potentially into 2020 I was wondering if that's something you would care to comment on if you have any visibility into that.

Gabe Hajde: Thank you.

Operator: Thank you. Our next question or comment comes from the line of Daniel Rizzo from Jefferies. Your line is open.

Thanks Daniel.

Look good the visibility there is really somewhat limited we had some last minute constellation cancellations at the end of Q2.

Daniel Rizzo: Good morning. You mentioned the personal care softness, expected less in the Q3. There have been other companies that kind of serve that market, expecting it to continue to the end of the year and potentially into 2020. I was wondering if that's something you would care to comment on, if you have any visibility into that?

Or slash deferrals.

Stephane Tanda: Thanks, Daniel. Look, the visibility there is really somewhat limited. We had some last minute cancellations at the end of Q2, or slash deferrals. Clearly there is some anticipation in the supply chain, and things will be soft. We give you quarterly guidance, our visibility is really to the quarter. You know, these are products we use every day. There is some share shift in the market between different companies. You may have read about that. There's a lot going on right now. We are confident that this will return to growth in the longer term, as you have those products in your home and so does everybody else on the call.

Stephan Tanda: Thanks, Daniel. Look, the visibility there is really somewhat limited. We had some last minute cancellations at the end of Q2, or slash deferrals. Clearly there is some anticipation in the supply chain, and things will be soft. We give you quarterly guidance, our visibility is really to the quarter. You know, these are products we use every day. There is some share shift in the market between different companies. You may have read about that. There's a lot going on right now. We are confident that this will return to growth in the longer term, as you have those products in your home and so does everybody else on the call.

We give you quarterly guidance so our visibility is really through the quarter.

These are products, we use everyday.

Various some share shift in the market between different companies you may have read about that.

So there is a lot going on right now.

But.

We are confident that this will return to growth in the longer term. Once you have those product in your home and so does everybody else on the call.

Okay. Thanks, and then.

You mentioned that there was softness in Europe in the spring because I think of wet weather or unfavorable weather conditions. I was wondering if there is a catch up with that in the in the third quarter.

Yeah, it's a bit too early to tell but certainly the weather has gotten a lot of the warmer.

Especially in Europe , and that should bode well for the beverage business. We also see some more isolated development the middle East sits on regulatory changes so that might counteract that it's too early to see but certainly the weather has shifted.

Daniel Rizzo: Okay, thanks. You mentioned that there was softness in Europe in the spring because I think of wet weather or unfavorable weather conditions. I was wondering if there's a catch up with that in the Q3.

Stephane Tanda: Yeah, it's a bit too early to tell, but certainly the weather has gotten a lot warmer, especially in Europe. That should bode well for the beverage business. We also see some more isolated developments. The Middle East had some regulatory changes. That might counteract that. It's too early to see, but certainly the weather has shifted.

Stephan Tanda: Yeah, it's a bit too early to tell, but certainly the weather has gotten a lot warmer, especially in Europe. That should bode well for the beverage business. We also see some more isolated developments. The Middle East had some regulatory changes. That might counteract that. It's too early to see, but certainly the weather has shifted.

Okay. Thank you very much.

Thank you.

Our next question or comment comes from the line of.

George Staphos from Bank of America Lynch. Your line is open.

Thanks, very much hi, guys. Good morning, great quarter. Thanks for taking my question I jumped on the call little bit late so you might have already mentioned this and apologies in advance if you have.

Daniel Rizzo: Okay. Thank you very much.

When we look at the commentary on personal care are you seeing and you are not alone here are you seeing any of the volume softness.

Operator: Thank you. Our next question or comment comes from the line of George Staphos from Bank of America, Merrill Lynch. Your line is open.

Bleeding into more competitive pressure from your peers in the sector or you're not really seeing that.

George Staphos: Thanks very much. Hi, guys. Good morning. Great quarter. Thanks for taking my question. I jumped on the call a little bit late, so you might have already mentioned this, and apologies in advance if you have. When we look at the commentary on Personal Care, are you seeing... You're not alone here. Are you seeing any of the volume softness bleeding into, you know, more competitive pressure from your peers in the sector, or you're not really seeing that? Kind of a related question, ultimately, this is our forecast, not yours, but margins were a little bit off from what we had been modeling. You had much stronger growth than we were looking for.

And then.

I was kind of a related question and ultimately this is our forecast not yours, but margins were.

A little bit off from what we had been modeling you had much stronger growth and were looking forward were there any other things and your mix that with aside from tooling that was notable in the quarter for the for the segments that we should be aware of as we model going forward.

Yes, let me comment on the first one and then Bob can maybe catch the second one.

We don't really see a shift in competitive behavior with our peers of competitors.

George Staphos: Were there any other things in your mix that was, aside from tooling, that was notable in the quarter for the segments, that we should be aware of as we model going forward?

Of course, we all see that some of the assets of changing hands, but those are not new entrants to the room just new owners.

Stephane Tanda: Yeah. Let me comment on the first one, then Bob can maybe catch the second one. We don't really see a shift in competitive behavior with our peers and competitors. Of course, we all see that some of the assets are changing hands, but those are not new entrants, those are just new owners. Within our customers, we do see some share shifts, and... That ultimately has nothing to do with the end demand. I don't know whether you were on just a couple minutes ago, but certainly, we see softness in Q3, in the personal care sector, both in the US and Europe. Ultimately, as is, as these are broadly used products, demand will return.

Stephan Tanda: Yeah. Let me comment on the first one, then Bob can maybe catch the second one. We don't really see a shift in competitive behavior with our peers and competitors. Of course, we all see that some of the assets are changing hands, but those are not new entrants, those are just new owners. Within our customers, we do see some share shifts, and... That ultimately has nothing to do with the end demand. I don't know whether you were on just a couple minutes ago, but certainly, we see softness in Q3, in the personal care sector, both in the US and Europe. Ultimately, as is, as these are broadly used products, demand will return.

Within our customers, we do see some share shifts.

And the bus. This ultimately has nothing to do with the end and demand in that I don't know whether you were on just a couple of minutes ago, but certainly.

We see softness in quarter three in the in the power grid is personal care sector, both in the us and Europe .

But ultimately is the.

His approach these are broadly used products demand will return.

And George I can take the.

Your comment on the margin so for us.

We weren't weren't all that surprised I'm not sure exactly if you were to your comment was focused on a particular segment or whether it was on a consolidated basis for one thing the.

Keep in mind. If it was good response were related it's is still is at the upper end of the range of 36% understanding that CSP has a slightly lower margin profile on pharma. So its going to have a little bit of a dilutive effect on that.

Bob Kuhn: George, I can take the your comment on the margin. For us, you know, we weren't all that surprised. I'm not sure exactly if your comment was focused on a particular segment or whether it was on a consolidated basis. One thing to keep in mind, if it was Pharma related, it still is at the upper end of the range at 36%, understanding that CSP has a slightly lower margin profile on Pharma, so it's gonna have a little bit of a dilutive effect on that. Beauty + Home, in spite of some lower core sales, granted, most of it being in tooling, where we don't have the same margin profile, still was up to 14%.

Duty in home in spite of some lower.

Core sales granted most of it being in tooling, where we don't have the same margin profile still was up.

To 14%.

And in food and beverage was was relatively flat with last year. So I'm not sure. If there was one particular, one that we were off from your model on.

No it was more pharma and food and beverage, but it's it sounded like your margins in the quarter were as you had expected.

Plus or minus there's always variances, but it was as you expected and there were no significant items that you would call out here on the call.

Bob Kuhn: Food + Beverage was relatively flat with last year. I'm not sure if there was one particular one that we were off from your model on.

No. That's that's correct. Okay and then my additional question I'll turn it over to the extent that you Havent commented already what are you seeing in terms of Asian luxury good demand and how that might be filtering into your.

George Staphos: No, it was more Pharma and Food + Beverage, it sounded like your margins in the quarter were as you had expected, you know, plus or minus, there's always variances. It was as you expected, and there were no significant items that you would call out here on the call.

Expectations for it to happen.

Second half either better or worse. Thank you guys I'll turn it over.

Bob Kuhn: No, that's correct, George.

George Staphos: Okay. My additional question, I'll turn it over. To the extent that you haven't commented already, what are you seeing in terms of Asian luxury good demand and how that might be filtering into your, you know, expectations for second half, either better or worse? Thank you, guys. I'll turn it over.

Thanks.

Well.

The short story is that we don't really see an impact on the luxury end of our product because we see continued good growth.

In our European sales, which ended up.

In luxury fragrances and skin care in Asia, I think the longer story is.

Stephane Tanda: Thanks. Well, the short story is that we don't really see an impact on the luxury end of our products, because we see continued good growth in our European sales, which end up in luxury fragrances and skincare in Asia. I think the longer story is that all this trade tension does have or did have a significant impact on consumer confidence in China. I think that's fair to say. It's all of you, and we follow the fact that, you know, big-ticket items, cars, large electronics and so on, those markets have contracted, but we haven't seen it in kind of personal products like fragrances and skincare or travel retail. That's actually been strong and we continue to see that.

Stephan Tanda: Thanks. Well, the short story is that we don't really see an impact on the luxury end of our products, because we see continued good growth in our European sales, which end up in luxury fragrances and skincare in Asia. I think the longer story is that all this trade tension does have or did have a significant impact on consumer confidence in China. I think that's fair to say. It's all of you, and we follow the fact that, you know, big-ticket items, cars, large electronics and so on, those markets have contracted, but we haven't seen it in kind of personal products like fragrances and skincare or travel retail. That's actually been strong and we continue to see that.

That the oldest traits tension that does have or did have.

A significant impact on on consumer confidence in China, I think Thats fair to say and that is.

All of you and we follow the fact that big ticket items cars large electronics and so on.

Those markets have contracted but we haven't seen it in.

And of personal products like fragrances, and skin care or travel retail that's actually been a strong and continue to see that.

The last point I would make.

Sales.

That we make in China for China, There, we do see a softness but I think that has much more to do that with the fact that multi level marketers really got hammered.

But a jet Chinese government that was.

Safety and health scare with some nutritional supplements and that kind of.

Stephane Tanda: The last point I would make that we make in China for China, there we do see a softness, but I think that has much more to do that with the fact that multilevel marketers really got hammered by the Chinese government. There was a safety and health scare with some nutritional supplements. That kind of brought the wrath of the Chinese government on multilevel marketers, and that's a significant customer set for us. There's a lot of churn in China from multilevel marketers to indie brands to e-commerce startups. It's hard to see who's gonna catch the business. In the end, the business is still growing, but we see a lot of churn on who supplies the business.

Stephan Tanda: The last point I would make that we make in China for China, there we do see a softness, but I think that has much more to do that with the fact that multilevel marketers really got hammered by the Chinese government. There was a safety and health scare with some nutritional supplements. That kind of brought the wrath of the Chinese government on multilevel marketers, and that's a significant customer set for us. There's a lot of churn in China from multilevel marketers to indie brands to e-commerce startups. It's hard to see who's gonna catch the business. In the end, the business is still growing, but we see a lot of churn on who supplies the business.

Throughout the wrath of the Chinese government, a multi level marketers and that's a significant customer set for us.

So there is a lot of churn in China from multi level marketers through indie brands through ecommerce startups.

And.

It is hard to see who is going to catch the business in the end the business is still growing both we see a lot of churn on who supplies the business.

Thank you very much Stefan thank you bye.

Thank you.

Our next question or comment comes from the line of Adam Josephson from Keybanc. Your line is open.

Stefan Bob and Matt Good morning, and congrats on a good quarter as usual ABC Dot Bob just one question on guidance and then Stefan I've got one or two on on B and Bob just regarding the Threeq guidance. It implies about a 20 cents sequential decline, which is a little more than normal but the tax rates are skewing things a bit because the tax rate was lower into Q higher entry queue. So if you adjust for that.

[Analyst] (Aiera): Thank you very much, Stefan. Thank you, Bob.

George Staphos: Thank you very much, Stephan. Thank you, Bob.

Operator: Thank you. Our next question or comment comes from the line of Adam Josephson from KeyBank. Your line is open.

Operator: Thank you. Our next question or comment comes from the line of Adam Josephson from KeyBanc. Your line is open.

Adam Josephson: Stefan, Bob, and Matt, good morning, and congrats on a good quarter, as usual.

Adam Josephson: Stephan, Bob, and Matt, good morning, and congrats on a good quarter, as usual.

It's a more normal.

Stephane Tanda: Good morning.

Stephan Tanda: Good morning.

Adam Josephson: Bob, just one question on guidance, and then, Stefan, I've got one or two on Beauty + Home. Bob, just regarding the Q3 guidance, it implies about a $0.20 sequential decline, which is a little more than normal, but the tax rates are skewing things a bit because the tax rate was lower in Q2, higher in Q3. If you adjust for that, it's a more normal sequential decline. Would you say there's anything unusual in your Q3 guidance just in light of that, or? I don't think there is, I just wanted to make sure.

Sequential decline would you say there is anything unusual on your Threeq guidance just in light of that or I don't think there is I just wanted to make sure.

Adam Josephson: Bob, just one question on guidance, and then, Stephan, I've got one or two on Beauty + Home. Bob, just regarding the Q3 guidance, it implies about a $0.20 sequential decline, which is a little more than normal, but the tax rates are skewing things a bit because the tax rate was lower in Q2, higher in Q3. If you adjust for that, it's a more normal sequential decline. Would you say there's anything unusual in your Q3 guidance just in light of that, or? I don't think there is, I just wanted to make sure.

No I mean, if you if you try to piece it together I mean, I think you hit on some of the major points. So obviously couple of pennies is coming from the higher tax rate guidance that we put out there our share count is increasing as we havent been repurchasing.

As many shares as we have in the past Thats about a penny our corporate expenses are running a little bit higher that's two to three cents and Thats you know our continued investment not only at the senior level, but in the regions in some of our our excellent centers.

Stephane Tanda: No, I mean, you know, if you try to piece it together, I mean, I think you hit on some of the major points. Obviously, couple pennies is coming from the higher tax rate guidance that we put out there. Our share count is increasing as we haven't been repurchasing as many shares as we have in the past. That's about $0.01. Our corporate expenses are running a little bit higher. That's $0.02 to $0.03, and that's, you know, our continued investment, you know, not only at the senior level, but in the regions and some of our excellence centers. You know, the FX is probably about $0.02, you know, compared comparatively, and again, we see the dollar strengthening again today. It's nothing in particular.

Stephan Tanda: No, I mean, you know, if you try to piece it together, I mean, I think you hit on some of the major points. Obviously, couple pennies is coming from the higher tax rate guidance that we put out there. Our share count is increasing as we haven't been repurchasing as many shares as we have in the past. That's about $0.01. Our corporate expenses are running a little bit higher. That's $0.02 to $0.03, and that's, you know, our continued investment, you know, not only at the senior level, but in the regions and some of our excellence centers. You know, the FX is probably about $0.02, you know, compared comparatively, and again, we see the dollar strengthening again today. It's nothing in particular.

No. The FX is probably about two cents compared comparatively and again, we see the dollar strengthening again today. So it's nothing in particular, it's a lot of little things at all sure kind of add up to the to the guidance, yes, no. It makes total sense, Bob and one on restructuring for either Stefan or Bob. So it's been going on for a year and a half you Mr guided to $80 million of cumulative savings.

Most of which correct me if I'm wrong word to come in beauty and home beauty and home EBITDA is up $16 million in the last year and a half since the program started compared to that savings target of 80. So I'm just wondering if if the restructuring program is as you expect it to be or beauty and home and then just.

Stephane Tanda: It's a lot of little things that...

Stephan Tanda: It's a lot of little things that...

Adam Josephson: Sure

Stephane Tanda: kind of add up to the guidance.

Stephan Tanda: Kind of add up to the guidance.

Adam Josephson: Yep. No, it makes total sense, Bob. One on restructuring for either Stefan or Bob. You know, it's been going on for a year and a half. You, I remember, guided to $80 million of cumulative savings, most of which, correct me if I'm wrong, were to come in Beauty + Home. Beauty + Home EBITDA is up $16 million in the last year and a half since the program started, compared to that savings target of $80. I'm just wondering if the restructuring program is as you expect it to be, or if Beauty + Home has been just more difficult than you imagined it would be, such that the $80 million of savings will be more difficult to come by than perhaps you thought when you announced the program?

Adam Josephson: Yep. No, it makes total sense, Bob. One on restructuring for either Stephan or Bob. You know, it's been going on for a year and a half. You, I remember, guided to $80 million of cumulative savings, most of which, correct me if I'm wrong, were to come in Beauty + Home. Beauty + Home EBITDA is up $16 million in the last year and a half since the program started, compared to that savings target of $80. I'm just wondering if the restructuring program is as you expect it to be, or if Beauty + Home has been just more difficult than you imagined it would be, such that the $80 million of savings will be more difficult to come by than perhaps you thought when you announced the program?

More difficult than you imagined it would be such that the 80 million of savings will be more difficult to come by then perhaps you thought when you announced the program.

Let me take that on I think fundamentally we are half way through a three year transformation and just as a reminder for everybody.

The year, one was really focused on top line and.

Quarter to an unknown with standing we are very happy with the topline development, we feel good about the pipeline the definition of the pipeline and.

Stephane Tanda: Let me take that one. I think fundamentally, we are halfway through a three-year transformation. Just as a reminder for everybody, year one was really focused on top line, and, Q2, notwithstanding, we're very happy with the top line development. We feel good about the pipeline, the definition of the pipeline, and, of course, things happen, but we can react and have a good grapple on the top line. The second year, which is the middle of the year, which we're in, is all about operational improvements. We feel good about some of the operational improvements we've made at our decorative side. The analyzing side in ONC has come back strong. We have still further to go.

Stephan Tanda: Let me take that one. I think fundamentally, we are halfway through a three-year transformation. Just as a reminder for everybody, year one was really focused on top line, and, Q2, notwithstanding, we're very happy with the top line development. We feel good about the pipeline, the definition of the pipeline, and, of course, things happen, but we can react and have a good grapple on the top line. The second year, which is the middle of the year, which we're in, is all about operational improvements. We feel good about some of the operational improvements we've made at our decorative side. The analyzing side in ONC has come back strong. We have still further to go.

Of course.

Things happen, but we can react and.

Have a good grasp on the topline and segment year, which is the middle East.

Of the year, which we are in is all about the operational improvements.

We feel good about some of the operational improvements we've made to our decorative side the.

Analyzing side in and see as come back strong.

We have still further to go and then.

Several sites and then the third year is all around the further fine tuning footprint reducing headcount.

Particularly MSG M&A in Europe and in some of the support functions. Those things are being discussed resource Council. As you know we have 5000 people in France. These processes take time, but theyll slotted in.

Stephane Tanda: Several sites, then the third year is all around, further finding footprint, reducing headcount, particularly in SG&A in Europe and in some of the support functions. Those things are being discussed with works council. As you know, we have 5,000 people in France. These processes take time, but they're all slotted in. Overall, we are on track. I feel good about the transformation. Remember, the $80 million was a gross number, but we and it was an EBITDA improvement number, not all savings, those are top-line growth. We feel good about the transformation. It is designed to get us comfortably back into our EBITDA margin range of 15% to 17% for Beauty + Home.

So overall.

Stephan Tanda: Several sites, then the third year is all around, further finding footprint, reducing headcount, particularly in SG&A in Europe and in some of the support functions. Those things are being discussed with works council. As you know, we have 5,000 people in France. These processes take time, but they're all slotted in. Overall, we are on track. I feel good about the transformation. Remember, the $80 million was a gross number, but we and it was an EBITDA improvement number, not all savings, those are top-line growth. We feel good about the transformation. It is designed to get us comfortably back into our EBITDA margin range of 15% to 17% for Beauty + Home.

We are on track to feel good about the transformation remember the $80 million with a gross number but we ended was the EBITDA improvement number nodal saving goals of topline growth.

But we feel good about the transformation.

It is designed to get us comfortably back into our EBITDA margin range of 15% to 17% for beauty and home.

Yes, so we expanded to 14 from 13 and.

So overall feel good about it and we are on track.

You always have.

Challenges, but the.

Organization has become much much quicker to react and much more skill to a direct.

Stephane Tanda: We expanded to 14 now from 13, and so overall, feel good about it, and we're on track. You always have challenges, but the organization has become much, much quicker to react and much more skilled to attract, attack issues as they arise. You also can see that the muscles are, have been built up.

Tech issues.

Stephan Tanda: We expanded to 14 now from 13, and so overall, feel good about it, and we're on track. You always have challenges, but the organization has become much, much quicker to react and much more skilled to attract, attack issues as they arise. You also can see that the muscles are, have been built up.

As they arise. So you also can see that the multiples that have been built up.

And just one thanks, Stefan and just one last one on that same sort of topic just under your predecessor, the pharma segment thrived and beauty and home would just have just occasional slip Bob cedar market related or otherwise and it just seems like a more difficult business to manage and it's a more competitive business would you say that's changed fundamentally got under your leadership and it just seems like it's still.

Adam Josephson: Thanks, Stefan. Just one last one on that, the same sort of topic. Just, you know, under your predecessor, you know, the Pharma segment thrived, and Beauty and Home would just have occasional slip-ups, either market-related or otherwise, and it just seems like a more difficult business to manage, and it's a more competitive business. Would you say that's changed fundamentally under your leadership? I mean, it just seems like it's still been much more difficult to manage than has Pharma since you took over. Correct me if you think otherwise.

Adam Josephson: Thanks, Stephan. Just one last one on that, the same sort of topic. Just, you know, under your predecessor, you know, the Pharma segment thrived, and Beauty and Home would just have occasional slip-ups, either market-related or otherwise, and it just seems like a more difficult business to manage, and it's a more competitive business. Would you say that's changed fundamentally under your leadership? I mean, it just seems like it's still been much more difficult to manage than has Pharma since you took over. Correct me if you think otherwise.

Been much more difficult to manage than has pharma. Since you took over correct me if you think otherwise.

Well I wouldn't I wouldn't pin it on predecessors recurrence leaders, but clearly the transformation has turned what was a nine quarters of.

Declining or flat sales into.

Seven quarters of growing sales so.

That is a fundamentally the result of a fundamentally different approach in addition of course.

Stephane Tanda: Well, I wouldn't pin it on predecessors and current leaders, but clearly, the transformation has turned what was 9 quarters of declining or flat sales into 7 quarters of growing sales. That is a fundamentally the result of a fundamentally different approach, in addition, of course, a good macroeconomic development. To your larger question, the consumer-facing businesses, Food + Beverage and Beauty + Home, are fundamentally different animals in terms of their rhythm, their cadence. You're talking of a constant customer project churn. That's why it's so important that in our commercial efforts, we track customer projects, customer win rates on a weekly basis, take corrective actions.

Stephan Tanda: Well, I wouldn't pin it on predecessors and current leaders, but clearly, the transformation has turned what was 9 quarters of declining or flat sales into 7 quarters of growing sales. That is a fundamentally the result of a fundamentally different approach, in addition, of course, a good macroeconomic development. To your larger question, the consumer-facing businesses, Food + Beverage and Beauty + Home, are fundamentally different animals in terms of their rhythm, their cadence. You're talking of a constant customer project churn. That's why it's so important that in our commercial efforts, we track customer projects, customer win rates on a weekly basis, take corrective actions.

Good macroeconomic development.

But to your larger question.

The consumer facing businesses food and beverage and beauty and home are fundamentally different animals in terms of their rhythm.

Their cadence you're talking of a constant.

Customer project churn that's why it's so important that in our commercial efforts, we track customer projects customer win rates on a weekly basis.

Take corrective actions, that's the nature of any consumer facing business.

And.

We have a much better handle on the customer project pipeline conversion rates and so on.

It's just becoming better at executing against that business another pharma business.

Is that much more long cycle business. So whatever we put in the pipeline. We harvest 5678 years down the road. We commented several times that some of the great success stories. The seeds were sown 10 years ago or so it's a much longer cycle business what was the.

Stephane Tanda: That's the nature of any consumer-facing business, and we have a much better handle on the customer project pipeline, conversion rates, and so on. It's just becoming better at executing against that business. Now, the Pharma business is a much more long cycle business. Whatever we put in the pipeline, we harvest 5, 6, 7, 8 years down the road. We commented several times that some of the great success stories, the seeds were sown 10 years ago, or it's a much longer cycle business. What connects the two is, of course, that the product technology is in many instances, the same. Just you do it in a clean room under all the Pharma quality systems and so on, and you execute towards different quality standards.

Stephan Tanda: That's the nature of any consumer-facing business, and we have a much better handle on the customer project pipeline, conversion rates, and so on. It's just becoming better at executing against that business. Now, the Pharma business is a much more long cycle business. Whatever we put in the pipeline, we harvest 5, 6, 7, 8 years down the road. We commented several times that some of the great success stories, the seeds were sown 10 years ago, or it's a much longer cycle business. What connects the two is, of course, that the product technology is in many instances, the same. Just you do it in a clean room under all the Pharma quality systems and so on, and you execute towards different quality standards.

Connected through is of course that the product technologies.

In many instances the same 60 do it in the clean room on their old pharma quality systems, and so on and you execute towards different quality standards.

And therefore, we can.

Leverage across everything around operational excellence.

Enterprise systems.

And so on.

As well as talent so.

You will see that the leaders often move from one business to another because the fundamental operations logic is the same is that even though the commercial business development logic has a very different timeline.

Stephane Tanda: Therefore, we can leverage across everything around operational excellence, enterprise systems, and so on, as well as talent. You will see that the leaders often move from one business to another because the fundamental operations logic is the same even though the commercial business development logic has a very different timeline.

Stephan Tanda: Therefore, we can leverage across everything around operational excellence, enterprise systems, and so on, as well as talent. You will see that the leaders often move from one business to another because the fundamental operations logic is the same even though the commercial business development logic has a very different timeline.

Thank you Stefan.

Thank you our next question or comment comes from the line of.

Ghansham Panjabi from Baird. Your line is open.

Hey, guys good morning.

Good morning, I guess first off going back to Twoq. You can you can you disaggregate, Bob floor as volumes versus price across the across the three segments I'm just trying to get a sense as to how many pricing component from previous resin fluctuations et cetera flowed through in the quarter specifically.

[Analyst] (Aiera): Thank you, Stefan.

Adam Josephson: Thank you, Stephan.

Operator: Thank you. Our next question or comment comes from the line of Gansham Punjabi from Baird. Your line is open.

Operator: Thank you. Our next question or comment comes from the line of Ghansham Panjabi from Baird. Your line is open.

Yes, so I mean, specifically talking about.

Gansham Punjabi: Hey, guys, good morning.

Ghansham Panjabi: Hey, guys, good morning.

Stephane Tanda: Good morning.

Stephan Tanda: Good morning.

Gansham Punjabi: I guess first off, going back to Q2, you know, can you disaggregate, Bob, for us, volumes versus price across the three segments? I'm just trying to get a sense as to how any pricing component from previous resin fluctuations, et cetera, flowed through in the quarter specifically.

Ghansham Panjabi: I guess first off, going back to Q2, you know, can you disaggregate, Bob, for us, volumes versus price across the three segments? I'm just trying to get a sense as to how any pricing component from previous resin fluctuations, et cetera, flowed through in the quarter specifically.

You know resin in terms of sales growth it was on a consolidated basis about.

1% positive on on the resin pass throughs.

Positive on the beauty and home side negative on the food and beverage side.

Bob Kuhn: I mean, specifically talking about, you know, resin in terms of sales growth, it was on a consolidated basis, about 1% positive on the resin pass-throughs. Positive on the Beauty + Home side, negative on the Food + Beverage side. Relating to the volumes, I mean, I think we had some weaker volumes in Beauty + Home, which were offset by some pricing that we've implemented as part of the transformation. The other segments were primarily volume related in terms of the growth in both Food + Beverage and in Pharma.

Relating to the volumes I mean, I think we had.

We had some weaker volumes in beauty and home, which were offset by.

Some pricing that we've implemented as part of the transformation and then the other the other segments were primarily volume related in terms of the growth in both food and beverage and pharma.

Okay understood and then.

On the Threeq guidance and the tax rate being higher partly because of the French tax increase and it being retroactive.

Should we assume that fourq will be lower sequentially than threeq, just given that retroactive nature, that's impacting threeq, you and just trying to think about the.

Tax rate for Q onwards.

Yes, no thats it thats a good call I mean.

Gansham Punjabi: Okay, understood. You know, on the Q3 guidance and the tax rate being higher, partly because of the French tax increase and it being retroactive, should we assume that Q4 will be lower sequentially than Q3, just given the retroactive nature that's impacting Q3? I'm just trying to think about the tax rate Q4 onwards.

Ghansham Panjabi: Okay, understood. You know, on the Q3 guidance and the tax rate being higher, partly because of the French tax increase and it being retroactive, should we assume that Q4 will be lower sequentially than Q3, just given the retroactive nature that's impacting Q3? I'm just trying to think about the tax rate Q4 onwards.

It's it's it should be lower because we get we got the catch up which is essentially.

You know a couple of pennies in Q1 and Q2, that's going to have to be booked along with Q3. So yes, I mean, we've been saying that our tax rate is somewhere between 29 and 31.

Bob Kuhn: Yeah. No, that's a good call. I mean, it should be lower because we've got the catch up, which is essentially, you know, a couple pennies in Q1 and Q2, that's gonna have to be booked along with Q3. Yeah, I mean, we've been saying that our tax rate is somewhere between 29% and 31%, on an annualized basis. You know, it'll move up slightly, but definitely less than where our Q3 tax rate guidance is.

On a on an annualized.

Basis so.

It will it will move up slightly but definitely less than where Q3 tax rate guidance is.

Okay, and then just one final one.

I think in your prepared comments, you called out personal care being down 11% year over year half of it was lower tooling sales you had a tough comp from pipeline fill and then us being softer can you just give us more insight as to what how exactly the U.S. business in terms of personal care progress during the second quarter and then just thinking more broadly I mean, you have a lot of complexities radio Brexit, which which will occur.

Gansham Punjabi: Just one final one. You know, I think in your prepared comments, you called out Personal Care being down 11% year-over-year. Half of it was lower tooling sales. You had a tough comp from, you know, pipeline fill, and then the US being softer. Can you just give us more insight as to how exactly the US business, in terms of Personal Care, progressed during Q2? Just thinking more broadly, I mean, you have a lot of complexities, right? You have Brexit, which will occur. You know, Europe has slowed, China looks like on a slowing trajectory, and the US, the jury's out as to, you know, how the consumer is gonna progress as we head into the holiday season.

Ghansham Panjabi: Just one final one. You know, I think in your prepared comments, you called out Personal Care being down 11% year-over-year. Half of it was lower tooling sales. You had a tough comp from, you know, pipeline fill, and then the US being softer. Can you just give us more insight as to how exactly the US business, in terms of Personal Care, progressed during Q2?

You know Europe had slowed China looks like on a slowing trajectory.

In the us the jury's out as to how the consumer is going to progress as we head into the holiday season, but just more broadly what are your customers sort of indicating as it relates to the upcoming holiday shopping period et cetera.

Ghansham Panjabi: Just thinking more broadly, I mean, you have a lot of complexities, right? You have Brexit, which will occur. You know, Europe has slowed, China looks like on a slowing trajectory, and the US, the jury's out as to, you know, how the consumer is gonna progress as we head into the holiday season. Well, just more broadly, what are your customers sort of indicating as it relates to the upcoming holiday shopping period, et cetera?

All right overall gone from I would say, we feel good about the new project pipeline we have.

Of course pharma.

He is.

Going very well and we do not see that fundamentally changing but also food and beverage and beauty and home as good.

Gansham Punjabi: Well, just more broadly, what are your customers sort of indicating as it relates to the upcoming holiday shopping period, et cetera?

New customer project pipeline.

Stephane Tanda: I mean, overall, Gansham, I would say, we feel good about the new project pipeline we have. Of course, pharma is going very well, and we do not see that fundamentally changing. Also, food and beverage and beauty and home has good new customer project pipeline. You're pointing out, clearly, yes, the economy is slowing. Now, that has some impact on this personal care business, as we discussed, but I don't see strong signs of a slowdown in what we hear from customers.

Stephan Tanda: I mean, overall, Ghansham, I would say, we feel good about the new project pipeline we have. Of course, pharma is going very well, and we do not see that fundamentally changing. Also, food and beverage and beauty and home has good new customer project pipeline. You're pointing out, clearly, yes, the economy is slowing. Now, that has some impact on this personal care business, as we discussed, but I don't see strong signs of a slowdown in what we hear from customers.

Yes, you are pointing out the clearly yes, the economy is slowing.

No that.

Has some impact on the personal care business as we discussed.

But I don't see strong signs of a slowdown.

In.

What we hear from customers.

And then particularly guns and may be on a geographic basis.

And it's going to tie in with the comments that we mentioned already use us was down not only in personal care, but also in beauty in Q2 Europe was while it was up.

Was primarily related to the growth in the beauty side of the business.

Bob Kuhn: Particularly, Gansham, maybe on a geographic basis, and it's gonna tie in with the comments that we've mentioned already. You know, the US was down, not only in Personal Care, but also in Beauty in Q2. Europe was, while it was up, was primarily related to the growth in the Beauty side of the business. Personal Care was actually down a little bit in Europe. In the other two regions, Latin America, we were down slightly, and that was kind of a mix between Personal Care being flat and Beauty and Home Care being down. In Asia, for the reasons that Stephane mentioned previously, we were down in all markets. The one exception is that tooling in Asia weighed negatively on the Personal Care.

Bob Kuhn: Particularly, Ghansham, maybe on a geographic basis, and it's gonna tie in with the comments that we've mentioned already. You know, the US was down, not only in Personal Care, but also in Beauty in Q2. Europe was, while it was up, was primarily related to the growth in the Beauty side of the business. Personal Care was actually down a little bit in Europe. In the other two regions, Latin America, we were down slightly, and that was kind of a mix between Personal Care being flat and Beauty and Home Care being down. In Asia, for the reasons that Stephan mentioned previously, we were down in all markets. The one exception is that tooling in Asia weighed negatively on the Personal Care. Actual volume, volumes in Asia, of products were actually up slightly.

Personal care was actually down a little bit in Europe .

And then in the other two regions Latin America were down slightly and that was kind of a mix between personal care being flat and beauty and home care being down.

And then in Asia for the reasons that Stefan I mentioned previously we were down.

In all markets.

The one exception is that tooling in Asia weighed negatively on.

On the personal care actual volume volumes in Asia.

Of products were actually up slightly.

The one that I would make is.

Brazil is certainly doing a little bit worse than what we would have expected them.

The rest of Latin America is better, but Brazil is not where it should be.

Understood. Thanks, so much.

Bob Kuhn: Actual volume, volumes in Asia, of products were actually up slightly.

Thank you. Our next question or comment comes from the line of Neel Kumar from Morgan Stanley . Your line is open.

Stephane Tanda: The one add I would make is, Brazil is certainly doing a little bit worse than what we would have expected. The rest of Latin America is better, but Brazil is not where it should be.

Stephan Tanda: The one add I would make is, Brazil is certainly doing a little bit worse than what we would have expected. The rest of Latin America is better, but Brazil is not where it should be.

Hi, good morning.

Good morning, Neil.

I'm just curious if you could you discuss what level growth you've seen in your TNS applications and then approximately what percentage of pharma portfolio does CNS represent now and how large you taking debt.

[Analyst] (Aiera): Understood. Thanks so much.

Ghansham Panjabi: Understood. Thanks so much.

Operator: Thank you. Our next question or comment comes from the line of Neil Kumar from Morgan Stanley. Your line is open.

Operator: Thank you. Our next question or comment comes from the line of Neel Kumar from Morgan Stanley. Your line is open.

Yes.

Thanks Neil.

The short answer is we don't really.

Neil Kumar: Hi, good morning.

Neel Kumar: Hi, good morning.

Bob Kuhn: Morning, Neil.

Give guidance on that detail I know you've done a lot of work in this area.

Neil Kumar: I was curious if you could just discuss what level of growth you've seen in your CNS applications. Approximately, what percentage of the Pharma portfolio does CNS represent now, and how large do you think it can get?

Neel Kumar: I was curious if you could just discuss what level of growth you've seen in your CNS applications. Approximately, what percentage of the Pharma portfolio does CNS represent now, and how large do you think it can get?

We really only give the breakdown by Rx.

Meaning prescription consumer healthcare and Injectables and the.

Stephane Tanda: Yes. Thanks, Neil. The short answer is, we don't really give guidance on that detail. I know you've done a lot of work in this area. We really only give the breakdown by Rx, meaning prescription, consumer healthcare, and injectables. Bob mentioned the growth rates. I think it's also nice that injectables has come back to a nice 6% growth rate. We don't break it down further into the subcategories.

Stephan Tanda: Yes. Thanks, Neel. The short answer is, we don't really give guidance on that detail. I know you've done a lot of work in this area. We really only give the breakdown by Rx, meaning prescription, consumer healthcare, and injectables. Bob mentioned the growth rates. I think it's also nice that injectables has come back to a nice 6% growth rate. We don't break it down further into the subcategories.

Bob mentioned the growth rates I think it's the automotive injectables us come back to a nice 6% growth rate, but we don't break it down further into the sub categories.

Okay.

And then I think in your outlook you mentioned that you expect farmer to continue to positive momentum.

In the first half of the year.

Can we take that to me that pharma core growth should continue at the higher end of your exit 10% range in the second half of the year.

We're very comfortable with our.

Ranges that we put out there in the 6% to 10% for pharma.

Neil Kumar: Okay. I think in your outlook, you mentioned that you expect Pharma to continue to positive momentum seen in the first half of the year. Can we take that to mean that Pharma core growth should continue at the higher end of your 6% to 10% range in the second half of the year?

Neel Kumar: Okay. I think in your outlook, you mentioned that you expect Pharma to continue to positive momentum seen in the first half of the year. Can we take that to mean that Pharma core growth should continue at the higher end of your 6% to 10% range in the second half of the year?

And then just lastly in food and beverage.

I'm just curious what type of impact do you see over the next few quarters from the Karma beverage closure launch.

It is an exciting launch it's interesting new technology, but please keep in mind that any single launch any single product doesn't move the needle.

Stephane Tanda: Yeah, we're very comfortable with our ranges that we put out there and the 6% to 10% for Pharma.

Stephan Tanda: Yeah, we're very comfortable with our ranges that we put out there and the 6% to 10% for Pharma.

Neil Kumar: Okay. Just lastly, in Food + Beverage, I was just curious, you know, what type of impact do you see over the next few quarters from the Karma Beverage closure launch?

Neel Kumar: Okay. Just lastly, in Food + Beverage, I was just curious, you know, what type of impact do you see over the next few quarters from the Karma Beverage closure launch?

We have hundreds and thousands of products.

And.

If they started trend and get rolling and get multiple followers like for example, with the flexible standup pouch then it starts to move the needle, but anything launch will.

Stephane Tanda: It, it is an exciting launch. It's an interesting new technology, but please keep in mind that any single launch, any single product doesn't move the needle. We have hundreds and thousands of products. If they start a trend and get rolling and get multiple followers, like, for example, with the flexible stand-up pouch, then it starts to move the needle, but any single launch will not move the needle.

Stephan Tanda: It, it is an exciting launch. It's an interesting new technology, but please keep in mind that any single launch, any single product doesn't move the needle. We have hundreds and thousands of products. If they start a trend and get rolling and get multiple followers, like, for example, with the flexible stand-up pouch, then it starts to move the needle, but any single launch will not move the needle.

We will not move the needle.

Thanks.

Thank you. Our next question or comment comes from the line of Chip Dillon from vertical research. Your line is open.

Yes, Hi, Vicsaly soundtrack channel filling in for chip.

Thanks for taking my question.

Firstly I wanted to ask about your recent acquisitions in pharma can you elaborate a little bit on how that will impact your financials and I guess.

Neil Kumar: Thanks.

Neel Kumar: Thanks.

Operator: Thank you. Our next question or comment comes from the line of Chip Dillon from Vertical Research. Your line is open.

If theres going to be any.

Small revenue boost and or if it's more margin and helping you maintain a very strong pharma growth rates and that will be the first question.

Paulo Triatano: Yeah, hi, this is Paulo Triatano filling in for Chip. Thanks for taking my question. Firstly, wanted to ask about your recent acquisitions in Pharma. Can you elaborate a little bit on how they'll impact your financials? I guess if there's going to be any, you know, small revenue boost, or if it's more on margin and helping you maintain, you know, a very strong Pharma growth rate. That would be the first question.

Yes, one is.

We're very excited about both the.

Quite a bit different in size.

They are both profitable and will contribute to our already contributing.

To our results.

Those are not research project those are profitable businesses that.

We are supporting the pharma financials, but more importantly, it is really a strategic play.

Stephane Tanda: Yeah, one is, we're very excited about both. There's quite a bit different in size. They are both profitable and will contribute or are already contributing to our results. Those are not research projects, those are profitable businesses that are supporting the Pharma financials. More importantly, it is really a strategic play to strengthen and build out further our services. As you know, before many years, we had small Pharma Services businesses that helped, particularly in the nasal delivery. Gateway Analytical, in particular, also has this strong service offering around injectables testing. Nanopharm really helps in the early stages of drug development, again, supporting our inhalation and nasal delivery.

Stephan Tanda: Yeah, one is, we're very excited about both. There's quite a bit different in size. They are both profitable and will contribute or are already contributing to our results. Those are not research projects, those are profitable businesses that are supporting the Pharma financials. More importantly, it is really a strategic play to strengthen and build out further our services. As you know, before many years, we had small Pharma Services businesses that helped, particularly in the nasal delivery. Gateway Analytical, in particular, also has this strong service offering around injectables testing. Nanopharm really helps in the early stages of drug development, again, supporting our inhalation and nasal delivery.

To strengthen and build out further our services as you know we for many years we had.

Small pharma services businesses that help particular in the nasal delivery.

Gateway analytical in particular also.

Strong service offering around the Injectables testing and.

Nano from really helps in the early stages of drug development.

Again, supporting our installation and the.

Nasal delivery and that will allow us just to add more projects into the pipeline support customers better.

In the pharma world more and more you see smaller startups, so called to people with one molecule companies getting into the act and they need everything they can possibly source from service providers to get through the regulatory process to get samples to support them in a clinical trial setting.

Stephane Tanda: That will allow us just to add more projects into the pipeline, support customers better. In the pharma world, more and more you see smaller startups, so-called two people with one molecule companies getting into the act, and they need everything they can possibly source from service providers to get through the regulatory process, to get samples, to support them in a clinical trial setting. Of course, we charge for those services, that's their business model. At the same time, of course, the device that we then deliver is part of the drug master file and guarantees decades of business afterwards. That's really the model. Since many of these early-stage pipeline projects are smaller companies, not the large pharma companies, they need these services, and that drives the business.

Stephan Tanda: That will allow us just to add more projects into the pipeline, support customers better. In the pharma world, more and more you see smaller startups, so-called two people with one molecule companies getting into the act, and they need everything they can possibly source from service providers to get through the regulatory process, to get samples, to support them in a clinical trial setting. Of course, we charge for those services, that's their business model. At the same time, of course, the device that we then deliver is part of the drug master file and guarantees decades of business afterwards. That's really the model. Since many of these early-stage pipeline projects are smaller companies, not the large pharma companies, they need these services, and that drives the business.

Of course, we charge for those services that's their business model at the same time of course, the device that reason the delivery as part of the drug Master file and guarantees decades of business. Afterwards, so thats really the model.

And since.

Many of these pipe early stage pipeline project to smaller companies not the large pharma companies.

They need these services and.

That drives the business.

Perfect. Thank you very much and just building a little bit on pharma on the previous question you did mention you're very comfortable that 6% to 10% grade and you know generally you've been on the higher end for quite some time now what it will do thank you for for that 6% to change to be perhaps revised higher and do you have any visibility towards 2020 with regard to volume in pharma.

Paulo Triatano: Perfect. Thank you very much. Just building a little bit on Pharma and the previous question. You did mention you're very comfortable with that 6% to 10% rate, and, you know, generally, you've been on the higher end for quite some time now. What would it take you for, you know, that 6% to 10% to change, to be perhaps revised higher? Do you have any, you know, visibility towards 2020 with regard to volume in Pharma?

Again, we stand by our targets for all three segments by the way not just performer.

We see no reason to change them and we said previously that we don't expect double digit growth rates in pharma forever.

And there are more getting back into that range. We certainly had a number of tailwinds, but we also don't see any headwinds.

Stephane Tanda: Again, we stand by our targets for all three segments, by the way, not just for Pharma. We see no reason to change them. We said previously that we don't expect double-digit growth rates in Pharma forever, and they're more getting back into that range. We certainly had a number of tailwinds, but we also don't see any headwinds coming.

Stephan Tanda: Again, we stand by our targets for all three segments, by the way, not just for Pharma. We see no reason to change them. We said previously that we don't expect double-digit growth rates in Pharma forever, and they're more getting back into that range. We certainly had a number of tailwinds, but we also don't see any headwinds coming.

Coming.

Okay understood just changing a little bit.

Segments, I guess in a in a food and beverage your margin did indeed decline from a year ago and I'm wondering what are there any have any specific coaster led that because you know volumes were pretty good and I think you mentioned we had.

Hi benefit from tooling sales of custom Marley.

Paulo Triatano: Okay, understood. Just changing a little bit, segments, I guess. In Food + Beverage, your margin did indeed decline from a year ago. I'm wondering, were there any specific costs that led that? Because, you know, volumes were pretty good, and I think you mentioned you had a benefit from tooling sales that customarily helped the margin. You know, it was a little bit surprising for us to see the percentage margin being lower.

How does the margin so it was little bit surprising for us to see the percentage margin being lower.

So I mean I can I can give you a couple of things its primarily mix.

On the product sales.

And also actually in a food and beverage had stronger tooling sales, which which traditionally bring lower margins not higher margins. So that would that would negatively impact the food and beverage margin in the quarter.

Bob Kuhn: I mean, I can give you a couple things. It's primarily mix on the product sales. Also, actually, you know, Food + Beverage had stronger tooling sales, which traditionally bring lower margins, not higher margins.

I mean.

Sorry, I can't resist to add on here.

Of course, we are accountable and deliver every quarter and give you a lot of transparency, but.

The other is really a long term growth story.

Paulo Triatano: Mm.

Bob Kuhn: That would, you know, that would negatively impact the Food + Beverage margin in the quarter.

You will have moving parts every single quarter.

Just talking about the pharma business is very solid, but remember in quarter, one the injectables that didnt grow with quarter. Two we are back to growth.

Stephane Tanda: Yeah. I mean, Sorry, I can't resist to add on here. Of course, we are accountable and deliver every quarter and give you a lot of transparency, Aptar is really a long-term growth story, you will have moving parts every single quarter. We just talked about the Pharma business, very solid, remember, in Q1, injectables didn't grow, Q2, we're back to growth. Food and Beverage, beverage volumes, the second half of last year were not that great. Now, we have a well-growing Food and Beverage business again. It's not a single quarter, when you look at the long-term compounding story, with a good pipeline and the transformation, we feel good about the further growth prospects of the business.

Stephan Tanda: Yeah. I mean, Sorry, I can't resist to add on here. Of course, we are accountable and deliver every quarter and give you a lot of transparency, Aptar is really a long-term growth story, you will have moving parts every single quarter. We just talked about the Pharma business, very solid, remember, in Q1, injectables didn't grow, Q2, we're back to growth. Food and Beverage, beverage volumes, the second half of last year were not that great. Now, we have a well-growing Food and Beverage business again. It's not a single quarter, when you look at the long-term compounding story, with a good pipeline and the transformation, we feel good about the further growth prospects of the business.

Food and beverage beverage volumes in the second half of last year were.

Another great now, we have a well growing food and beverage business again so.

It's not a single quarter, but when you look at the long term long term compounding story.

With a good pipeline in the transformation and feel good about the.

To further growth prospects of the business.

Great. Thank you very much.

Thank you our next question or comment comes from the line of.

At Lincoln Rodriguez from your I guess your line is open.

Hi, Thank you good morning, guys.

Good morning.

So how do you see or expect to see any impacts from the environmental backlash against plastics that swann and related to that there seems to be a trend towards that larger closures.

Paulo Triatano: Great. Thank you very much.

Operator: Thank you. Our next question or comment comes from the line of Adeline Rodriguez from UBS. Your line is open.

May be instead of multiple smaller ones for single use products.

Adeline Rodriguez: Thank you, good morning, guys.

Is that good or bad for you.

Stephane Tanda: Good morning.

Stephan Tanda: Good morning.

Bob Kuhn: Morning.

Adeline Rodriguez: Are you seeing or expect to see any impact from the environmental backlash against plastics? That's one. Related to that, there seems to be a trend towards, like, larger closures, maybe instead of, like, multiple smaller ones for single-use products. Is that good or bad for you?

Well the excellent question on sustainability.

Actually this is.

And net positive for us.

When you think about it most brand owners if not all of them have made some kind of a commitment that they will include increase too.

Rate of recycled content for the recyclability of their products.

Stephane Tanda: Well, the excellent question on sustainability. Actually, this is a net positive for us. When you think about it, most brand owners, if not all of them, have made some kind of commitment that they will increase the rate of recycled content or the recyclability of their products. They need partners like Aptar to make that happen. We have more customer projects around how to help them meet those commitments. We, on previous calls, talked about, for example, Flip Lid, which allows to replace the disposable cap on water bottles with one that stays with the cap. We have products with up to 100% post-consumer recycled content.

Stephan Tanda: Well, the excellent question on sustainability. Actually, this is a net positive for us. When you think about it, most brand owners, if not all of them, have made some kind of commitment that they will increase the rate of recycled content or the recyclability of their products. They need partners like Aptar to make that happen. We have more customer projects around how to help them meet those commitments. We, on previous calls, talked about, for example, Flip Lid, which allows to replace the disposable cap on water bottles with one that stays with the cap. We have products with up to 100% post-consumer recycled content.

And.

They need partners like after our to make that happen. So we have more customer projects around how to.

Hello Hello.

Meet those commitments we on previous calls talked about for example, flip blade, which allows to replace the disposable.

Cap on water bottles with one that stays with the cap.

We have products with.

Up to 100% post consumer recycled content, we participate in.

Pilots like loop.

Where we are on top of reusable containers and discuss making a product that can be reuse those are from the dispensing system.

We're looking at partnering with people who can make.

Food grade polypropylene Thats recycled.

Stephane Tanda: We participate in pilots like Loop, where we are on top of reusable containers and discuss making a product that can be reused also from the dispensing system. We are looking at partnering with people who can make food-grade polypropylene that's recycled. Many activities going on. The industry is going and will have to continue to go through an innovation push to meet those commitments they've made and progress more towards a circular economy. Ultimately, that drives customer projects, and that's our lifeblood to continue to innovate and help customers meet their commitments. We are really agnostic, whether we are on top of a plastic container, or aluminum container, or glass container, or a carton for that matter, or a flexible pouch.

Stephan Tanda: We participate in pilots like Loop, where we are on top of reusable containers and discuss making a product that can be reused also from the dispensing system. We are looking at partnering with people who can make food-grade polypropylene that's recycled. Many activities going on. The industry is going and will have to continue to go through an innovation push to meet those commitments they've made and progress more towards a circular economy. Ultimately, that drives customer projects, and that's our lifeblood to continue to innovate and help customers meet their commitments. We are really agnostic, whether we are on top of a plastic container, or aluminum container, or glass container, or a carton for that matter, or a flexible pouch.

So many activities going on.

The industry is going.

And we will have to continue to go through an innovation push to meet those commitments theyve made and progress more towards a circular economy.

And ultimately that drives customer projects and that is our lifeblood.

We continue to innovate and to help customers.

Meet the commitments and we are really agnostic, whether we are on top of a plastic container or aluminum container glass container or cards and for that matter are flexible pouch Indian business that still needs to come out in a consumer friendly convenient way and we can make that recyclable recycling.

Hundred percent recycling content or even reusable, depending on what the customer and the consumer experience demands.

Okay. Thank you.

Thank you again, ladies and gentlemen, if you have a question or comment at this time. Please press Star then one on your telephone keypad.

Stephane Tanda: In the end, that the stuff still needs to come out in a consumer-friendly, convenient way, and we can make that recyclable, recycling, 100% recycling content or even reusable, depending on what the customer and the consumer experience demands.

Stephan Tanda: In the end, that the stuff still needs to come out in a consumer-friendly, convenient way, and we can make that recyclable, recycling, 100% recycling content or even reusable, depending on what the customer and the consumer experience demands.

Our next question or comment comes from the line of caught White from Deutsche Bank. Your line is open.

Hi, good morning, Thanks for taking my question.

I know, we touched a lot of it on the volume targets and farm in terms of the long term targets. We have set out there, but also curious in terms of the margin targets that you have to spend about five quarters now we're at the high end or above this target and I know you have an analyst day coming up in a month or so here, where you typically you kind of update these targets, but just curious if there's anything specific that maybe gives you pause in terms of raising this margin target for the long term.

Adeline Rodriguez: Yes. Thank you.

Operator: Thank you. Again, ladies and gentlemen, if you have a question or comment at this time, please press star then one on your telephone keypad. Our next question or comment comes from the line of Kyle White from Deutsche Bank. Your line is open.

Kyle White: Hey, good morning. Thanks for taking my question. I know we touched a lot on the volume targets in Pharma in terms of the long-term targets that you have set out there, but also curious in terms of the margin targets that you have. It's been about five quarters now, we're at the high end or above this target. I know you have an analyst day coming up in a month or so here, where you typically kind of update these targets. Just curious if there's anything specific that maybe gives you pause in terms of raising this margin target for the long term?

No not really.

But.

Again.

Let's not the Skus the analyst David I don't see any reason at this stage to the change of targets. It is a very long term business you need to continue to reinvest in the business.

We talked in earlier calls that we are building a whole group around connected devices.

Stephane Tanda: No, not really. Again, let's not discuss the analyst day, but I don't see any reason at this stage to change the targets. It is a very long-term business. You need to continue to reinvest in the business. We talked in earlier calls that we're building a whole group around connected devices, and we're building up a services business capability. If you don't invest in this business and reinvest in this business, you will not drive the growth engine. Therefore, we feel comfortable with the range that we've got out there.

Stephan Tanda: No, not really. Again, let's not discuss the analyst day, but I don't see any reason at this stage to change the targets. It is a very long-term business. You need to continue to reinvest in the business. We talked in earlier calls that we're building a whole group around connected devices, and we're building up a services business capability. If you don't invest in this business and reinvest in this business, you will not drive the growth engine. Therefore, we feel comfortable with the range that we've got out there.

We are building up the services business capability. So if you don't invest in this business and reinvest in this business unit.

That drive the growth engine. So therefore.

We feel comfortable with the range that we've got out there and I would add that as we've said in the past the margin is highly dependent on the mix by division and so we've been benefiting.

In recent quarters from very strong.

Growth in the Rx Division.

We see good opportunities really across all four of the divisions now, including the exit packaging division of CSP. So.

Bob Kuhn: Yeah, and I would add that, as we've said in the past, the margin is highly dependent on the mix by division, and so we've been benefiting in recent quarters from very strong growth in the Rx division. We see good opportunities really across all 4 of the divisions now, including the active packaging division of CSP. You know, that's, that margin profile is gonna have a flow depending on where the growth is coming from, you know, division.

That's that margin profile is going to ebb and flow depending on where the growth is coming from.

Division.

Understood and then Bob on M&A, just how would you characterize the kind of M&A pipeline that you see right now and what exactly did you also care ties the valuations that you're seeing out there.

I would say not much change, it's still is pretty pretty active out there. We continue to monitor the market I don't see any any big change either up or down in the valuations at this stage, but.

Paulo Triatano: Understood. Bob, on M&A, just how would you characterize the kind of M&A pipeline that you see right now? How would you also characterize the valuations that you're seeing out there?

Kyle White: Understood. Bob, on M&A, just how would you characterize the kind of M&A pipeline that you see right now? How would you also characterize the valuations that you're seeing out there?

You know, it's something that we try to stay close to but I don't see any significant paradigm shifts either way from where its been previously you have seen us.

Bob Kuhn: I would say not much change. It still is pretty active out there. We continue to monitor the market. I don't see any big change, either up or down, in the valuations at this stage. You know, it's something that we try to stay close to, but I don't see any significant paradigm shifts either way from where it's been previously.

Pursue an active M&A agenda made smaller deals like renewal and.

The smaller pharma acquisitions made bigger deals like CSP.

We continue to look at a lot of deals but.

Remained disciplined the workings walking away from so many more deals than you see as announcing.

Stephane Tanda: Yeah, you have seen us pursue an active M&A agenda, made smaller deals like Reboul and the smaller pharma acquisitions, made bigger deals like CSP. We continue to look at a lot of deals, but remain disciplined. We're walking away from many more deals than you see us announcing after doing some serious work. In the end, we're a disciplined acquirer.

Stephan Tanda: Yeah, you have seen us pursue an active M&A agenda, made smaller deals like Reboul and the smaller pharma acquisitions, made bigger deals like CSP. We continue to look at a lot of deals, but remain disciplined. We're walking away from many more deals than you see us announcing after doing some serious work. In the end, we're a disciplined acquirer.

They are doing.

Some serious work and.

In the end.

We are disciplined acquirer.

Thank you and good luck in the quarter.

Thanks, Thank you.

Thank you our next question or comment comes from the line of.

I know Shaw.

From BMO capital your line is open.

Hi, good morning.

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