Q4 2021 Silgan Holdings Inc Earnings Call
Please standby were about to begin.
To everyone and thank you for joining me still going holdings fourth quarter and year end 2021 earnings results call. Today's conference is being recorded at this time I'd like to turn the call over to Kim Ulmer Senior Vice President Finance and Treasurer. Thank you. Please go ahead ma'am.
Thank you joining me from the company today I have.
Executive Chairman, Adam Greenlee, President and CEO , and Bob Lewis EVP and CFO before we begin the call today, we would like to make it clear that certain statements made today on this conference call. Maybe forward looking statements. These forward looking statements are made based upon management's expectations and beliefs concerning future events impacting the company and therefore involve a number of uncertain.
And risks, including but not limited to those described in the company's annual report on Form 10-K for 2020 and other filings with the SEC. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in the forward looking statements with that I'll turn it over to Adam.
Great. Thank you Kim and welcome everyone to so again 2021 year end earnings conference call with 2021 in our rear view, having navigated the continued complexities of the pandemic managed unprecedented inflation and supply chain disruptions and an <unk> to an improved future I want to thank the entire silicon team.
A few of the 2021 highlights and then provide a brief preview of 2022.
Bob will then review the financial performance for the full year and the fourth quarter and provide more details around our 2022 outlook afterwards, Bob and I would be pleased to answer any questions.
I'd like to first express my gratitude and respect for the entire silicon team and what we have accomplished together, including delivering another year of double digit adjusted EPS growth of 34% increase in adjusted EPS for the fourth quarter of 2021 versus the prior year record achieved in 2022.
And most importantly, we've also achieved a 10 year compounded annual growth rate for adjusted earnings per share of over 10%.
We've accomplished this performance is our employees have repeatedly demonstrated their strength and commitment and the power of our performance based culture as our employees have done everything possible to ensure our ability to continually supply our customers in a timely efficient and complete manner.
As a result, we are able to achieve several mile. Several important milestones in 2021 and are well positioned for further growth in 2022.
As you saw in the press release in 2021 was an exceptional year for the company and some select highlights would include achieving record financial performance, including the following revenue improved to $5 $7 billion driven by strong volumes adjusted net income per diluted share of $3 40.
Up 11% versus the record prior year free cash flow of $466 million or $4 19 per diluted share each a new record for the company improve.
Improved our capital structure to facilitate further growth opportunities in.
In addition, we increased our cash dividend for the 17th consecutive year.
We also invested in several growth initiatives, which positions us well for the future completing the strategic acquisition of Gateway UNICEF and easy check expanding the commercial supply for a major pet food customer expansion in eastern Europe .
Investing in operational improvements to drive cost out and improve.
Customer service levels.
Our business franchises are poised for further growth in 2022, as we integrate the new acquisition invest alongside core customers and continue to improve are proud of our operational excellence. Therefore, as Bob will discuss in more detail, we're providing full year guidance for adjusted earnings per diluted share in the range of three.
Dollars 80 to $4 per diluted share the midpoint of this range represents a 15% increase over the record performance in 2021, our free cash flow is expected to be approximately $350 million as we anticipate higher working capital increased capital expenditures for growth invest.
With core customers and higher cash taxes to more than offset the earnings growth provided.
With that I'll turn it over to Bob.
Good morning, everyone as Adam highlighted demand for our products remains strong as we saw year over year volume improvement in our dispatching and specialty closures and metal container segment.
As importantly, each of our businesses did an outstanding job managing unprecedented inflation through unwavering price discipline and operational improvement yielding significant cost reductions across the businesses.
In addition, we completed three strategic acquisitions that are making good progress on their integration as a result in 2021, we delivered adjusted earnings per diluted share of $3 40, we delivered free cash flow of 466 million a significant increase over the prior year up three.
384 million.
On a consolidated basis net sales for the year were $5 billion $680 million, an increase of $755 2 million or 15, 3% over the prior year. This increase was the result of higher net sales across each of our businesses, including the pass through of higher raw material costs across all.
And favorable foreign currency translation of approximately $40 million.
We converted these sales into adjusted income before interest and taxes for the year of $598 7 million after adjustments of $15 million for rationalization charges.
$5 million for costs attributable to announced acquisitions and $2 6 million for the purchase accounting write up of inventory versus $551 2 million in 2021.
After adjustments of $16 million for rationalization charges of $19 3 million for costs attributable to announced acquisitions and three $5 million for purchase accounting write up of inventory.
The increase was primarily result of higher unit volumes in dispensing and specialty closures and metal containers, a more favorable mix of products sold and the pass through of other cost increases in dispensing and specialty closures strong operating performance across each business the benefits from acquisitions completed in 2022.
'twenty, one and higher pension income, partially offset by the lagged pass through of higher raw material costs, primarily resin higher costs associated with labor and supply chain challenges.
Lower volumes and custom containers, and a less favorable mix of products sold in metal containers.
Highlights of adjusted segment income for each of our segments is as follows.
Segment income in the dispensing and specialty closure segment for the full year of 2021 increased $35 9 million to $269 5 million, primarily due to the inclusion of recent acquisitions, including the full year effect that the Albea acquisition completed in 2020.
Year over year volume growth, a more favorable mix of products sold.
<unk> operating performance and the pass through of other cost increases.
These benefits were partially offset by the unfavorable net impact from the lagged pass through of significantly higher resin costs.
Higher costs associated with labor and supply chain challenges and foreign currency transaction losses.
The unfavorable net impact, resulting from the lag pass through of resin was approximately $10 million after netting approximately $15 million of price recovery later in the year.
Adjusted segment income in the metal container segment was $263 6 million for the full year 2021, an increase of $7 1 million or two 8% versus the prior year as the.
Benefit of approximately 4% higher unit volumes higher pension income and higher foreign currency transaction losses in the prior year were partially offset by the negative impact from operational inefficiencies.
Costs associated with labor and supply challenges and more smaller cans sold.
Adjusted segment income in the custom container segment increased $4 5 million or 5% to $92 7 million for the full year 2021.
This increase was primarily attributable to strong operating performance cost control and lower SG&A costs, partially offset by lower volumes of approximately 10% as compared to record pandemic volumes in the prior year.
For the fourth quarter, we reported earnings per diluted share of <unk> 76 cents as compared to 54 cents in the prior year quarter.
Earnings per diluted share were adjusted by <unk>, <unk> and 2021 and by <unk> in 2020, resulting in adjusted earnings per diluted share of 79 cents in the fourth quarter of 2021 versus 60 cents in the same period a year ago.
Net sales for the quarter were 1.44 billion up $212 7 million versus the prior year, driven primarily by the pass through of higher raw material and other manufacturing costs higher volumes and dispatching and specialty closures in metal containers.
And a more favorable mix of products sold in the metal container and custom container segments, partially offset by lower volumes and caused some containers and unfavorable foreign currency translation of approximately $10 million.
Adjusted income before interest and income taxes for the fourth quarter of 2021 increased by $19 2 million to 133.3 million after adjustments of $2 million for rationalization charges 900000 for costs attributable to announced acquisitions and $1 7 million for the purchase accounting write up of.
Tori.
The increase in adjusted income before interest and income taxes was primarily due to higher volumes and a more favorable mix of products sold in dispensing and specialty closures and metal containers straws.
Strong operating performance across all businesses higher pension income and the benefits from recent acquisitions. These gains were partially offset by lower volumes and a less favorable mix of products sold and the custom containers business higher costs associated with labor and supply chain challenges.
Unfavorable impact of the lagged pass through of higher resin costs in dispensing and specialty closures.
Turning now to our outlook for 2022, our estimate of adjusted earnings per diluted share for 2022 is a range of $3 80.
To $4 with the midpoint, representing a 15% increase over our record adjusted earnings per share of $3 40 for the full year 2021.
Reflected in our estimate for 2022 are the following.
Segment income in the dispensing and specialty closure segment is expected to increase significantly over the prior year, primarily due to the inclusion of a full year of the acquisitions of gateway and units up the cost pass through benefits of a less volatile resin market more efficient operating performance.
Recovery in the beauty and fragrance markets and Vaughan volume normalization for hygiene and cleaning products.
Net income in the metal container segment is forecasted to benefit from improvements in operational efficiencies cost reductions to pass through other inflation and the inclusion of a full year of the easy Tech acquisition.
These benefits will be partially offset by lower volumes.
We're expecting segment income in the custom container segment to benefit from anticipated higher volumes as a result of a return to normal volume levels for hygiene and cleaning products continued growth in pet food and manufacturing efficiencies.
In addition, we expect interest expense to increase versus 2021, largely as a result of higher average outstanding borrowings as a result of the recent acquisitions and higher weighted average interest rates.
Currently expect our tax rate to be approximately 25% as compared to the effective rate of 23% in 2021. This estimate does not contemplate the effect of any tax law changes that may arise during the year.
Also we expect capital expenditures in 2022 to be approximately $280 million up from $232 million in 2021, as a result of various growth opportunities where core customers and the impact from the recent acquisitions.
We're also providing a first quarter of 2022 estimate of adjusted earnings in the range of 70% to 80 per diluted share as we include benefits from the recent acquisitions improved operational efficiencies and anticipated lower resin costs offset by volume declines in the metal container and custom container segments as compare.
The prior period.
The decrease in volumes for metal container is due to the pre buy activity in 2021 ahead of significant raw material inflation for 2020 to.
The decrease in volumes for custom container is due to strong pandemic driven volumes in the first quarter of 2021 that are not expected to repeat.
These estimates exclude rationalization charges costs attributable to announced acquisitions and loss on early extinguishment of debt.
Based on our current outlook for 2022, we're providing an estimate of free cash flow of approximately $350 million as earnings growth is offset by a sizable headwind for working capital higher capex as we have attractive growth opportunities with core customers and the onetime cash tax benefit of $25 million.
Related to the accelerated depreciation resulting from the recent acquisitions that will not repeat.
Working capital headwind is largely the result of the significant ongoing inflation in raw materials.
That concludes our prepared comments.
Before I turn it over to Alan though we would ask you that you limit your questions to one question and one follow up to Alan I'll now turn it back to you to provide directions for the Q&A session.
Thank you Sir to ask a question at this time, please signal by pressing star one on your telephone keypad. Please make sure that your mute function is turned off to allow your signal to reach our equipment.
As I said, please limit yourselves to one question. So that we can take as many questions as possible.
We will take our question first question from the line of George Staphos with Bank of America.
Thanks, very much higher one.
Thanks for the detail.
My questions will be around volume. So if possible can you give us a view on volume for the fourth quarter by segment excluding acquisition effects.
And Relatedly as we look to 2022, what is embedded roughly in your volume outlook ex acquisitions. My second question is how comfortable are you in particular or is that both custom container and DSC can grow through some of the post.
Covid.
And Destocking and other headwinds you mentioned hygiene and cleaning volumes returned to more normal levels.
Custom containers, what gives you the comfort that you'll be able to do that in both segments again ex acquisitions. Thanks guys.
Sure Good morning, George.
Touching on the fourth quarter volume.
I'll just go through each of the operating segments. So unfortunately, I'm going to give you the total for dispensing and specialty closures first and then I'll give you what you asked for in the organic volume so volumes were up 15% and dispensing of specialty closures organic volume growth of eight 5% in Q4.
Moving to metal containers volume was up 3%.
In the quarter no acquisitions really had an impact there and then custom containers as you saw on the press release volume was down 12% in Q4 as we now turn the page and talk about 2022, and what's embedded in our guidance I'll go back to dispensing and specialty closures.
Organic volume growth, excluding acquisitions, we're targeting 4% and our guidance for 2022 for.
For metal containers.
Ill remind you saw in the press release that there was a little bit of pre buy activity, we'll be cycling over that and Q1 of 2022. We've also anticipated a normalization of the vegetable pack, we had significant growth in 2021 and the vegetable pack.
For the metal container business, we're normalizing that back to pre pandemic levels. So that being said, we're expecting food can volumes to be down in the 4% to 5% range.
And then over to custom containers.
Again, where we're cycling through the end of what we'll call the surge of the pandemic related buying around specific.
<unk> that we manufactured.
For the most part to support customers for the pandemic, we've got one more quarter of that in Q1, where we have elevated volumes that we'll be cycling over and even with that we're anticipating volume growth in the custom container business of between 2% and 3% for 2022.
Your second question is just now how do we feel about those growth numbers that I, just provided particularly for dispensing and specialty closures and custom containers feel really good about dispensing and specialty closures to start their first we've got a terrific food and beverage business that continues to be a very stable.
Provider of growth across our franchise and we're anticipating continued growth there as we have seen in the past.
We are also experiencing now late in Q4, we saw a normalization of volumes or at least the beginning of a normalization of volumes for the hygiene home cleaning products. So some uptick versus where we were hasnt completely normalized yet, but we believe it will in 2022 and then finally George.
For DSC I'd tell you fragrance and beauty has fully recovered to kind of our pre acquisition pre pandemic volume levels.
Our order book is incredibly strong all the way through Q1 and.
We're at the point now where we are you heard Bob talk about are our opportunities for additional capital expenditures. We are looking at additional capacity to support the growth of our fragrance and beauty business. That's how far that has recovered at this point and I'll stop talking in a second but I'll give you the custom container.
Answer for 2022, what I would tell you.
This is a 15% EBITDA business, that's what we were targeting for many years what happened over time is we've made improvements to the business. We created a stronger more profitable mix of business. The pandemic happened and what that allowed us to do was to fill all of our assets on a very low cost structure base.
And some of that pandemic volume reverts back to norm, we do believe we'll be able to take that capacity and sell it into the market at more favorable margins than what we've historically had in the business and then we've also been winning in the market that has not stopped through the pandemic. We do have new commercial awards that are coming on stream.
In 2022, and we expect to have further wins in 'twenty three and beyond so long answer for you George but I think I captured everything you asked.
No Adam I really appreciate the rundown I'll turn it over thanks for the comments.
Sure.
Alright next question will come from the line of Adam Josephson with Keybanc.
Thanks, Good morning, everyone happy new year.
Bob.
Couple of questions about your guidance assumptions can you help me with pension income compared to last year.
<unk> cost what magnitude of benefit you're expecting versus the $10 million drag last year acquisition accretion better operational performance, just given the supply chain and labor Defoe.
Difficulties you had a much of last year, just help walk us through the 50 cent expected growth <unk>.
Including any below the line items, if you don't mind.
Yeah. So.
So as we said relative to the acquisitions.
We expected that we would see 10 to 12 cents accretion when we gave you preliminary guidance back at the end of the third quarter.
Where we're running right in line with that there may be a little bit of upside opportunity as we as we continue to look to commercialize new business wins, but that's what's it forecasted in our in our.
EPS guidance for 2022, as we as we sit here today priced cost side of things.
As we said, we're running about $10 million negative on the resin side.
It's about a $25 million resin cost issue and we put through some.
Some out of market price increases there.
Or that our customers have taken that we've offset about $15 million of that so.
So we should continue to recover that in next year. That's that's in our guidance as well and then you heard the volume outlook.
That Adam laid out in that sort of the.
The rest of the story to get us to the numbers for next year.
Oh, Yeah, I'm, sorry, you asked about pension as well so pension it'll be about a 5 million dollar headwind on a year over year basis, and that's that's due more to do with our funded status being.
At about 128% at the end of the year. So we very consciously made a decision to derisk that plan, a little bit and so we're moving our asset portfolio to be a bit more weighted to fixed income versus historically more weighted to our to the equity side. So.
So that change will cost us about $5 million year over year in getting the income side.
Thanks, Bob and just one other guidance related question. So the <unk> guidance implies a modest year over year decline yet the full year guidance implies.
<unk> sense of growth and I know you had the the buy ahead in for Q, but is there anything else. Besides the buy ahead that will come out of one Q that is influencing that the year over year rate of change in other words, why such significant growth in the latter three quarters compared to a modest decline in the first quarter.
<unk>.
Well part of it part of what you have is it is a comp issue right to the prior year. So you had really strong pandemic driven volumes across the board in the prior year that you know as Adam laid out we're expecting that to normalize.
For 2022.
So that's probably the big driver.
Got it thank you.
Alright. The next question will come from the line of Gabe <unk> with Wells Fargo.
Good morning, everyone.
Hope you and your families are well.
My first question and I apologize in advance maybe tough to talk about.
Open like but just I'm looking at kind of some transactions that have happened in the market within the past six months or so in the metal container side and.
And just curious your perspective.
Either what the market might be missing in terms of how valuable.
Your business may be worse, and I appreciate there's a difference between strategic value in sort of ongoing running the business, but just.
How that could influence your kind of thought process going forward.
Yes. Thanks, Gabe look I think this is the message that we've been trying to send for some time now right.
The food can business is not is not what everybody thinks it is from a from a negative perspective, it does perform pretty well through all cycles quite frankly, it generates a lot of free cash flow.
I think what we're seeing is in more private transactions that value is being ascribed.
Two two to those businesses so.
We'll continue to beat the drum continue to improve performance and hopefully the equity markets begin to see that I think that's a big part of of Adam's opening dialogue about that performance.
And the 10 year CAGR and improvements here that's driven.
Lot by acquisitions, but those acquisitions are funded bond the strength of that food can business. So we don't find anything that's real surprising about those valuations other than the public market, perhaps not getting all the way there just yet.
And maybe just one other thing I would add to that Bob I agree with everything you said I think as we.
We think about food can volumes again on a full year basis in 'twenty. One we were up 4% on top of the 14% growth that we experienced in 2020, what we just said about our 2022 guidance as we believe now.
Volumes have normalized rate for the most part everything normalized back in 2020, the peak of the pandemic occurred in 2020 vegetable peak was in 2021. So we believe 22 is a normalized year and that year is going to be double digit volume increases over.
Pandemic levels and we feel really good about the line of sight, we have into those volume levels that are again up over 10% versus pre pandemic levels.
Alright. Thank you guys and then not to try to pin you down too far, but maybe some other building blocks on guidance, if I sort of back into the midpoint at 390.
Can you give us I mean, I think the implied EBITDA might be around $9 75.
If you can kind of confirm that or help us again, maybe what building blocks as it relates to <unk>.
What you're expecting for DNA <unk> interest.
Yes, youre pretty close on the on the EBITDA side interest will be up a bit.
On a year over year basis, and that's largely the.
The acquisition and some increase in our weighted average rates.
DNA.
Hmm.
Okay.
Bear with me one second.
Okay.
Yes.
You're forcing them to go to the book Gabe Yeah.
I I, just with the acquisitions I apologize.
Yes, let's just come back around to that one offline if you don't mind.
No worries thank you.
Alright, well next go to Salvator Tiano with Seaport Research partners.
Yes, hi, and congratulations on the strong year.
My first question is about the growth investments you mentioned for some core customers.
Providing more color both of them we carry us.
Besides beauty and fragrance that you've already clarified the D R.
You've already measurable additions to your volume growth, we should expect for <unk>.
They are decent the topics for 'twenty to 'twenty two.
Sure.
Ill talk about the specific projects and Bob can talk about is the impact on Capex for 2022, So again I think as Bob correctly highlighted yes.
These investment opportunities are with our core customers in our strategic markets that we continue to allocate capital to so the first one you would say is dispensing and specialty closures. We have many opportunities to continue to invest with our customers. In these investments would be very similar to kind of the historic.
Silicon investments, where these are going to be backed by customer contracts and customer commitments and.
We feel like we've got a plethora of opportunities again, I mentioned fragrance and beauty a little bit earlier on the dispensing side of the business.
But we'll be investing there for sure.
Our flat cap business again, we've seen continued growth in <unk>.
And flat caps required for products like sports drinks et cetera. So we've got plenty of opportunities throughout our dispensing and specialty closures segment. We do have a couple of pet food investments that we're going to continue to make in our metal container segment and then on custom containers, we have a large <unk>.
<unk>, that's going through this year.
For a new business win that will be included in our guidance for this year I think the rest of the items I described to you for the most part are going to be capital spent this year with a return that begins in 2023.
Yeah. So so that all nets to a capex number that's up on a year over year basis call. It round numbers about $50 million. Some of that is is acquisition related but a large part of that additional capex is related to those projects that that Adam just laid out.
Okay perfect.
Uh huh.
My follow up question, because that will be done that twice.
'twenty two free cash flow guidance was 300 excuse me I think last quarter, you were expecting a little bit higher number or is it pretty even though they get speed here.
Yes.
What changed.
It seems this is largely a working capital and obviously the Capex W. Boston.
Impact here, how do you see a significant boost from 'twenty to 'twenty, three and free cash flow.
Yeah, Great question look there's a few things that are that are sort of I'll call them more timing related issues that are that are hitting here. So.
So 2021 benefited from the.
The buy ahead, which helped us on volume many of those customers paid us as well. So we got the benefit of that in in in the upside to the free cash flow forecast.
For 2021 that was about $15 million.
We also which we talked about earlier in the year as we raised the free cash flow guidance that we were getting an accelerated tax benefit coming with the acquisition of gateway to the tune of about of about $25 million, that's kind of a onetime benefit that won't continue to to recur.
And Conversely, as you look into 2022.
The working capital is going to be a pretty significant headwind.
It was a benefit in 2021, maybe even a bit more so than we were expecting because we werent able to rebuild inventory to the level that we intended.
So you've got that rebuilding effort coming back at us in terms of a headwind in working capital and then you've got the impact of the significant inflation in raw materials that are coming through the.
The other piece of that will be the capex that we just talked about.
And then the the higher cash taxes of that $25 million, so that kind of nurture back down to the to the $3 50.
I would say if you were thinking about this business on a on a.
Kind of what's the right run rate basis.
Probably the normalized free cash flow looks like something in the four to $4 20 kind of range.
So you could see it getting back into that level in 2023.
Great. Thank you very much.
And next we'll go to Mark Wilde with bank of Montreal.
Good morning, Adam Good morning, Bob.
Just to start out I wonder if you can give us any color on sort of where the tin plate increases have settled out.
In 2022, and whether the cost increases are.
Or having any effect that you can see on consumer behavior, or if you were gonna see which markets you see it in.
Sure Good morning, Mark.
Ken we did spend some time talking about that on the last call I think the guidance. We gave us is roughly a doubling of the cost associated with with steel template for our metal containers business.
As it turns out that's essentially where we settled so just under a doubling of the cost and.
It was a challenging negotiation from every respect.
As you've heard us talk for many years, we do have pass through mechanisms.
With our long term contract customers, but.
We take it very very seriously that this type of inflation is incredibly stressful for their business models in order to be able to deal with passing that kind of inflation onto retailers and ultimately consumer so.
So the market is stressed right now.
Those increases roughly took took effect at the beginning of the year and as you can imagine.
From a pre buy perspective, mark literally anyone who bought metal packaging from silicon.
Asking to participate in a pre buy.
Go back and talk about our supply chain challenges that we had in 2021, well, we just weren't able to get all the raw materials that we wanted to in order to support customers every chance we could support them, we did and we worked with them.
To facilitate a little bit of a pre buy mostly for on site near site type customers. So.
Everybody is concerned about the inflation and the impact is going to have a <unk>.
Certainly in the at the beginning of the year, but we will not have seen consumer activity around this this cost inflation at this point in the year. So I think it's a great question I think it's one that we'll probably have some data points as we as we move into the first quarter results that we'll be talking about in <unk>.
April but you.
It's a challenge because it was significant inflation that we've never seen in our metal container segment.
Okay, and then just as a follow on is it possible for you to give us some sense of what you see in <unk>.
Terms of inventory in the channel between yourselves and consumers, so whether it's food or packaged goods firms like packaging distributors.
What's your sense for kind of where the channel is right now.
Yeah, I think we are.
There was a bubble certainly they got created I think through 2021.
<unk> to the pandemic kind of surge of volumes and how quickly some of those volumes.
Reverted back to a normalized level and so you had this inventory bubble. It was working its way through the system I think what our data what we see Mark would tell you that it did start to move through onto consumers.
Sometime in the fourth quarter I think our data would say we saw a nice pickup in the month of December just from a trending perspective.
For many of those products, where we had been challenged and been going through an entire supply chain inventory correction for most of the last three quarters of 2021, so as we sit here today.
We feel like we're at the end of the inventory correction cycle and those volumes are going to normalize and will normalize very very early in 2022.
Okay. That's helpful. Thanks, Adam I'll turn it over.
Alright. Your next question will come from the line of Arun Viswanathan with RBC capital markets.
Great. Thanks for taking my question.
Congrats on the strong performance here.
I guess I just wanted to get back to the some of the comments you had on growth I guess in food containers. So as you noted there was about 14% growth in.
In 'twenty.
And then 4% on top of that on the volume side.
In the past you had talked about some some rationalization.
Now it seems like youre, putting against capacity on <unk>.
On pet food.
How do you kind of look at this business going forward I guess is this kind of a low single digit business now that you can.
Have confidence in that will turn into some kind of.
Consistent growth in that range.
And then similarly on the closure side. It seems like this business now is actually poised for for that or maybe slightly better growth. So overall I guess would you look at the silicon portfolio is kind of a low single digit grower and then you leverage that on the on the EBITDA line.
A little bit more than that is that the right way to look at.
Those two algorithms.
Well, let me start with.
Kind of the growth conversation on on the metal container business very quickly. So again I think you've got the growth numbers correct for 2021, and before 2020 as well I want to clarify pet food has been a growing market for us that we've been investing in for years and I would go back a decade and longer.
As far as where we've continued to see strong growth in pet food and we've continued to invest in that growth. So there's nothing new about our investments in additional pet food capacity and in fairness that is going to continue as we go forward as well again during the pandemic what we did see was.
Ownership increase dramatically that was skewed more to smaller dogs and cats.
Those smaller dogs and cats typically have a higher consumption rate of wet pet food and we're seeing that in our numbers would show that and they've shown that for quite some time. So that is a growth portion of our business in metal containers.
And we believe metal containers is going to settle back to a point of normalization that is call. It 10% higher than we were pre pandemic. So the baseline is shifted right. So were up significantly in volume I do think the forward trajectory is now going to return to.
A very similar plus or minus 1% on the margin with core markets like pet food like protein continuing to provide growth.
We go forward, so we feel terrific about where metal container sits in our portfolio. The growth that's provided and now the baseline that has been reset for the future.
As we think about closures, what I would tell you again.
We just guided to 4% organic growth in 2022, that's also our longer term growth rate for the organic growth of the business.
We have lots of opportunities to continue to invest around our closures and dispensing and specialty closures business.
So that is where a lot of our capital allocation has gone thats, where our acquisition dollars have gone as well so I don't want to give you a abroad.
How to think about so again from a.
Our growth perspective, including custom containers I'd, rather just talk about each of the individual components and go from there.
Bob I'll throw it over to you on how you want to think about EBITDA in the room question.
Yeah. So.
I think we will and I'll come back around a little bit to gauge question. So.
EBITDA, probably grows about 40 million 35 or $40 million on a year over year basis, and that's largely the acquisitions.
I think we do have a bit of an acceleration down to the profit line because of our efficiencies and the scale that will get all of that volume growth coming through the system. So bottom line as you see our bottomline as grow to growing as Adam has said you know north of 10.
Is that on a CAGR basis. That's also the benefit of acquisitions, but I don't see any reason why that that isn't what the future looks like on a go forward basis as well and then one last comment for your revenue had asked about <unk>.
Previous rationalization plans, obviously, we put those on hold for the pandemic right and now again I just want to reiterate the new baseline for our metal containers business is significantly higher than it was prior to the pandemic. So we're evaluating that we've got a relentless focus on driving cost out of our business.
That has never changed.
I think as as volume as we projected 4% to 5% decline in volume what that's going to allow us to do in 2022, it's more efficiently operate the footprint that we have to support our customers and that's that's the immediate focus of what we're doing now and we'll obviously continue to work on driving cost out.
As we always do.
Yes.
Great. Thanks for the comprehensive answer there so and then just as a follow up on capital allocation.
So it sounds like you know normalized free cash flow in the $400 million level.
This year, it's going to be impacted a little bit by working capital.
And some of the investments, but as you look into 'twenty three than.
Would you prioritize maybe capital return or is there is there any potential to do that or would you still be looking at deleveraging and if so where would you want to get the leverage to I guess.
Yeah look I think we're in a good spot from a leverage perspective, if you look at where we are today.
We're kind of back toward the higher end of our range.
Particularly on a pro forma basis, and then you layer on that incremental free cash flow coming next year, and you're kind of right back in and solidly in the range. So.
Speaker 1: next year and you're kind of right back in and solidly in the rain.
Speaker 1: You know, I think that's the beautiful part of the Silgan story, right, is we have options and I think our preference
I think that's the beautiful part of the Silicon story right is we have options and I think our preference is to continue to deploy that capital to continue to grow out in the markets that we serve in support of the customers that we serve.
Speaker 1: is to continue to deploy that capital to continue to grow out in the markets that we serve and in support of the customers that we serve. So I wouldn't rule out aqua...
So I wouldn't rule out acquisitions.
Speaker 1: But if in the absence of those, where we don't find good opportunities or we don't find the right kind of return.
If in the absence of those where we don't find good opportunities or we don't find the right kind of returns with those opportunities then our return of capital is certainly within the purview.
Speaker 1: with those opportunities, then a return of capital is certainly within the purview. Thank you.
Thank you.
All right next we'll go to Anthony Pettinari with Citi.
Speaker 2: Is it possible to give any more detail on the inventory management issue in the inventory management area? Yes, I think so.
Good morning.
Is it is it possible to give any more detail on the inventory management issue and in dispensing.
The EBIT impact in <unk> kind of any lingering impact in <unk>, and just sort of what drove that issue.
Sure Anthony I think.
Speaker 3: Sure Anthony, I think I'll try to boil it down to its simplest terms. If you go back a year ago,
I'll try to boil it down to its simplest terms if you go back a year ago.
Speaker 3: at the beginning of a global pandemic. You know, I'll just, I'll take our office here in Stanford as an example. We were using disinfecting wipes to wipe down tables and handles and light switches. We were using trigger sprayers and disinfectants to clean anything and everything around because no one knew what the heck was the transmissive factor of what we were dealing with with COVID.
They are getting is a global pandemic.
I'll take our office here in Stanford as an example, we were using disinfecting wipes to wipe down tables and handles and light switches, we were using and trigger sprayers and disinfectants to clean anything and everything around because no one knew what the heck.
Was that the transmission factor of what we were dealing with with Covid.
Speaker 3: Obviously as the CDC came out with updated guidance later in the year that
Obviously as the CDC came out with updated guidance later in the year that surface contact was not our main priority that's when our hard surface cleaners and home cleaning products went through a transition where the inventory correction needed to take place because at that point our.
Speaker 3: surface contact was not a main priority.
Speaker 3: That's when our hard surface cleaners and home cleaning products went through a transition where the inventory correction needed to take place. Because at that point, our customers were continuing to order it significantly elevated demand levels. And all of that product had to move through the system. And that's what happened. That was the story of, call it the last nine months of 2021.
<unk>, we're continuing to order it significantly elevated demand levels and all of that product had them all through the system and that's what happened that that was the story of call. It the last nine months of 2021.
Speaker 3: I'm giving you one example for hard surface cleaners. It happened for hand sanitizers. It happened for other home cleaning products. So really in our dispensing and specialty closure segment and our custom container segment, that's in a nutshell what we've been dealing with from an inventory correction. The shut off from, I'd say the governmental guidance.
I'm, giving you. One example for hard surface cleaners. It happened for hand, Sanitizers. It happened for other home cleaning products, so really in our dispensing and specialty closure segment and our custom container segment.
In a nutshell, what we've been dealing with from an inventory correction the shut off from I'd say, the governmental guidance of of what to do and how to conduct business with.
Speaker 3: of what to do and how to conduct business with, you know, frequent hand washing with hand soap, etc.
Frequent hand washing with with hand so.
Et cetera.
Speaker 3: Those products that were on order and in inventory and throughout the retail chain had to flush their way through the system. And we believe now we're at the very end of that cycle.
Those products that were on order and in inventory and throughout the retail chain had to flush their way through the system and we believe now we're at the very end of that cycle.
Okay. Okay. That's very helpful. And then you mentioned beauty is essentially back to pre COVID-19 levels and maybe metal containers is going to come out of the pandemic, maybe just structurally higher level of demand I'm just wondering how your foodservice business within metal containers is doing versus pre pandemic levels.
Speaker 2: Okay, okay, that's very helpful. And then you mentioned beauty is essentially back to pre COVID levels and maybe metal containers is going to come out of the pandemic.
Speaker 2: I'm just wondering how your food service business within Metal Containers is doing versus pre-pandemic levels. I know it's a smaller business for you.
It's a smaller business for you, but it's I think it's.
Pretty high margin any.
Any thoughts there it is and it's a great question and actually I believe in our press release for the first time in a long time.
Speaker 3: there? It is and it's a great question and you know actually I believe in our our press release for the first time in a long time we had a more favorable mix of products sold in our metal container business and and that's exactly what you talked about Anthony that is our our restaurant kind of you know number 10 cans our large cans
Had a more favorable mix of products sold in our metal container business and that's exactly what you talked about Anthony that is our our restaurant kind of number 10 cans are large cans being sold for restaurant and institutional demand. So we had good growth in our small cans as well.
Speaker 3: being sold for restaurant and institutional demand. So we had good growth in our small cans as well, but we saw a recovery in Q4. And I think for the most part, we'd say restaurants, while I don't know that they're back to pre-pandemic levels.
But we're seeing we saw a recovery in Q4 and I think for the most part we'd say restaurants, while I I don't know that they are back to pre pandemic levels, but they are very active and the orders that we had in Q4 and I think on an ongoing basis for 'twenty two the expectation is that normalizes as well.
Speaker 3: They're very active and the orders that we had in Q4, and I think on an ongoing basis for 22, the expectation is that normalizes as well.
<unk>.
Okay. That's very helpful I'll turn it over.
All right next question will come from the line of Alton Stump with loop capital.
Speaker 4: Alright, next question will come from the line of Alden Stump with Loop Capital.
Speaker 4: Great, thank you. And good morning. Just want to follow up on the food can and tin plate pass-through, which obviously, as you mentioned, we're in an unprecedented inflation environment. But could you just clarify that you are confident that you'll be able to protect your margin dollars. Obviously, percentages, of course, will be impacted by the pass-through. But that you have confidence that you'll be able to fully offset from a dollar standpoint and that huge inflation that you are.
Great. Thank you hey, good morning.
Just wanted to follow up.
Sue can play pass through which obviously that's weird.
And then unprecedented deflation environment, but.
Could you just clarify that you are confident that you'll be able to go to.
To.
Particularly margin dollars, obviously percentages of course will be impacted by the pass through but you know that you've got confidence that you'll be able to fully.
Offset from a dollar standpoint.
Huge.
If we assume that you are seeing this year.
Speaker 3: It's a great question and I think Alton, as you know our business very well, we've talked for many, many years about the pass through mechanisms that what we experienced, we passed through. And so yes, our contracts allow for that. We do not take that lightly in any way because...
It's a great question and I think all in as you know our business very well.
We've talked for many many years about the pass through mechanisms that we experience with pass through and so yes, our contracts allow for that we do not take that lightly in any way because that burden gets borne by our customers and they have to deal with it in the market. So yes, youre right the mathematical cause.
Speaker 3: that burden gets borne by our customers and they have to deal with it in the market.
Speaker 3: Yes, you're right, the mathematical consequence of the higher inflation will hurt our margin rate, but...
Sequencers the higher inflation will will hurt our margin rate, but from a margin perspective.
Speaker 3: from a margin perspective, you know, we will be passing through those costs as we always do to our customers and then helping them deal with their ultimate customers and retailers through the rest of the supply chain.
We will be passing through those costs as we always do to our customers and then helping them deal with their ultimate customers and retailers through the rest of the supply chain. All now I'll also remind you that 90 plus percent of that food can business is under contract and all of those contracts allow for the direct pass through.
Speaker 3: I'll also remind you that 90 plus percent of that food can business is under contract and all of those contracts allow for the direct pass through. And I would say given the severity of the inflation, it is untenable for anybody in this market to not be passing it through. So we're confident that we'll get it on the non-contract side as well. And I would say untenable for our customers not to be able to pass it through as well. This will ultimately make its way to the consumer is our belief.
And I would say given the severity of the inflation is untenable for anybody in this market to not be passing it through so we're confident that we'll get it on the non contract side as well and I would say untenable for our customers not to be able to pass it through as well that will ultimately make its way to the consumer is our belief.
Great understood thanks for that color.
Speaker 5: Great, thanks for that call. And then just as a follow up, as you mentioned, obviously it's too early in the year to see if there will be any consumer impacts just from a demand standpoint for food cans. But what are your customers saying? I mean, obviously costs are going up everywhere, not just in templates, so other categories are going up as well. But just kind of how they are feeling from a demand standpoint when they do begin to pass through the huge inflation increase.
As a follow up.
As you mentioned, obviously, it's too early in the year to see if it will be a consumer you know impacts.
Just from a demand standpoint for some cans, but you know what are your customers, saying I mean, obviously costs are going up everywhere.
Justin Timberlake, so other categories are going up as well, but just kind of how they are feeling from a demand standpoint, when they do begin to pass through.
The huge push increases.
Sure.
Speaker 3: Sure, we spend a lot of time talking with our customers about
Spend a lot of time talking talking with our customers about.
Speaker 3: you know, their activities and passing through these cost increases to market. And you're right, it's we're talking about template on this call, but it's in every other packaging substrate. It's an ingredient that's in secondary packaging. It's prevalent across the board. And I think for the most part, I would say our customers have taken the position that
Their activities in passing through these cost increases to market and you're right. It's we're talking about 10 played on this call, but it's in every other packaging substrates, it's an ingredient and secondary packaging, it's prevalent across the board and I think for the most part I would say our customers have taken the position that to Bob's point.
Speaker 3: To Bob's point, it's untenable for them to absorb the cost inflation they're experiencing and they have to pass it through and that, again, in my opinion, will get all the way through to the consumer. So everybody's a little nervous about that as we get started here in 2022, but I think the outcome, everyone is aligned on the outcome that the increases in the inflation need to be passed all the way through the system.
Untenable for them to absorb the cost inflation that we're experiencing and they have to pass it through and that again in my opinion, we will get all the way through to the consumer so everybody's a little nervous about that as we get started here in 2022, but I think the outcome everyone is aligned on the outcome that the.
Increases in the inflation needs to be passed all the way through the system.
Okay, great. Thanks, so much I'll hop back in queue.
Okay. Your next question will come from the line of Kyle White with Deutsche Bank.
Speaker 4: Okay, your next question will come from the line of Kyle White with Deutsche Bank.
Hey, good morning, Thanks for taking the question just.
Speaker 6: Hey, good morning. Thanks for taking the question. Just on the supply chain, can you provide an update? Are you experiencing any challenges given the rise of Omicron in terms of labor? Is the steel supply issue and metal containers fully resolved now? Just overall kind of update on supply chain in terms of anything getting better or worse throughout the quarter.
Just on the supply chain can you provide an update are you experiencing any challenges given the rise in <unk> in terms of labor is it still a supply issue in metal containers fully resolved now just overall kind of update on supply chain in terms of anything getting better or worse throughout the quarter.
Sure.
Speaker 3: Sure. So maybe I'll start with Omicron and what I would tell you is that, you know, we're having much of the same experience in our operating network that you hear about and read about regarding Omicron.
So maybe I'll start with omicron in what I would tell you is that.
We're having much of the same experience and in our operating network that you hear about and read about.
Regarding omicron.
So our our quarantine and are positive rates are actually up quite a bit but it is a different experience in the fourth quarter and even into the early part of 2022 than we experienced in.
Speaker 3: So, you know, our our quarantine and our positive rates are actually up quite a bit, but it is a different experience in the fourth quarter and even into the early part of 2022 than we experienced.
Speaker 3: in 2020 and 2021. So employees are largely asymptomatic for us and they are also returning to work in a more timely manner than the original 10 days that was mandated earlier in the pandemic. So it's less disruptive is ultimately the point I would make.
In 2020 in 2021, so employees are largely asymptomatic for us and they are also returning to work in a more timely manner than the original 10 days that was mandated earlier in the pandemic. So it's less disruptive is ultimately the point I would make for our operations.
Speaker 3: for our operations. Our customers are dealing with many of the same things. One of the items that we had a lot of talk about with our customers in Q4 is their concern about labor availability early in 2022. And they wanted to fill product and have filled product available to support needs of the consumers in the event they couldn't get labor in Q1. I think we're very early days on Q1, whether they have that labor issue or not related to Omicron.
<unk>.
Our customers are dealing with many of the same things one of the items that we had a lot of talk about with our customers in Q4 as they are concerned about labor availability.
Early in 2022, and they wanted to fill product and have filled product available to support needs of the consumers in the event. They couldnt get labor in Q1, I think we're very early days on Q1, whether they have that labor issue are not related to omicron.
Speaker 3: So then let's move back to the supply chain. And you know, we spent a lot of time last year talking about the challenges, particularly with metal supply and steel supply. What I would tell you is it did improve in Q4.
Then, let's move back to the supply chain and we spend a lot of time last year talking about the challenges, particularly with the metal.
Supply and steel supply what I would tell you is it did improve in Q4.
We had not anticipated, having really any availability of raw materials to support any customer requirements outside of what the order book reflected and as it turns out our on time delivery performance from key suppliers improved in Q4. So we were able to have a little more steel, which then led to.
Speaker 3: We had not anticipated having really any availability of raw materials to support any customer requirements outside of what the order book reflected. And as it turns out, our on-time delivery performance from key suppliers improved in Q4. So we were able to have a little more steel, which then led to a small amount of pre-buy activity as we talked about.
A small amount of pre buy activity as we've talked about.
Speaker 3: As we go forward for 22, I'll remind you that we said we were going to reward those suppliers that.
As we go forward for 'twenty, two I'll remind you that we said we were going to reward those suppliers that.
Did perform in 2021, and we would reduce volume requirements with those that did not exactly what we've done. So we have shifted our supply portfolio and we are rewarding those suppliers that have continued to perform at a higher level and.
Speaker 3: did perform in 2021 and we would reduce volume requirements with those that did not.
Speaker 3: Exactly what we've done. So we have shifted our supply portfolio, and we are rewarding those suppliers that have continued to perform at a higher level and
Speaker 3: You know, I tell you, we're not where we want to be from an on time and full delivery perspective, but we are significantly better than the 25 and 30% that we were dealing with early in 2021.
I'd tell you, where we're not where we want to be from an on time in full delivery perspective, but we are significantly better than the 25% and 30% that we were dealing with early in 2021, we finished the year something in the.
Speaker 3: We finished the year something in the high 60s or 70%, and we believe we'll be well into the 80s for the first part of 2022.
The high 60% or 70% and we believe we'll be well into the eighty's.
For the first part of 2022.
Speaker 6: Got it. That's helpful. And then on metal containers, can you just help us better understand what is driving earning growth for this segment in 2022? I mean, historically, it would be pretty challenging to see growth with volumes down 4 to 5%. I know you have the easy tech acquisition, but it's somewhat marginal. So, is it just better mix and lapping of the steel supply issue? Are you anticipating any benefits from a moderating supply chain and inflation environment in the back half? Just any color could provide. Thank you.
Got it that's helpful and then on metal containers can you just help us better understand what is driving earnings growth for this segment in 2022, I mean, historically it would be pretty challenging to see growth with volumes down 4% to 5% I know you have the easy tech acquisition, but somewhat marginal so is it just better mix and lapping of the steel supply issue.
Are you anticipating any benefits from them from a moderating supply chain, an inflation environment in the back half.
Any color you could provide thank you.
Speaker 3: Sure. Well, you've got a couple of things. One, we really don't have much inventory supporting the business as we exit 2021. So there will be a little bit of inventory rebuilding that we just simply need to do for the business. We've been running very tight for the last two years, given the volume requirements.
Sure well, you've got a couple of things one.
We really don't have much inventory supporting the business as we exit 2021, so there will be a little bit of inventory.
Rebuilding that we just simply need to do for the business. We've we've been running very tight for the last two years given the volume requirements.
Speaker 3: The second piece of that is with volume declines, we're going to be able to reset our operating network. We're going to be back to making the right cans and the right facilities for specific customers versus doing whatever we could to
Piece of that is with volume declines, we're going to be able to reset our operating network, we're going to be back to making the right cans and the right facilities for specific customers versus doing whatever we could to.
Speaker 3: support our customers' requirements, and I'll say it in an inefficient way. So, you know, we've been talking a bit over the course of 2021 about the operating inefficiencies that we were experiencing. We believe we have line of sight of recovering those operational inefficiencies, just getting back to a more normal operating environment. So really, those are the two biggest things that really drive the performance from an operational standpoint in 2022 for metal containers.
Support our customers' requirements and I'll say it in an inefficient way. So we've been talking a bit over the course of 2021 about the operating inefficiencies that we were experiencing we believe we have line of sight of of recovering those operational inefficiencies just getting back to a more normal operating environment.
So really those are those are the two biggest things that.
Really drive the performance from an operational standpoint in 2022 for metal containers.
Got it I'll turn it over thank you.
Okay next we'll go to Mike <unk> with Truth Securities.
Speaker 4: Okay, next we'll go to Mike Roxland with Truist Security.
Speaker 7: Thanks very much. Good morning, Adam, Bob, Kim, congrats on the on the quarter in the year.
Thanks, very much and good morning, Adam Bob Kim Congrats on the quarter and the year.
Thanks.
Just a quick question follow up on supply chain logistics, given whats happened with the supply chain with logistics, how do you think about inventory levels coming out the other side should we expect maybe that there'll be 5% higher than 10% higher.
Speaker 7: Just a quick question to follow up on supply chain logistics, given what's happened with the supply chain with logistics.
Speaker 7: how do you think about inventory levels coming out the other side? Should we expect maybe that there'll be 5% higher, 10% higher? You know, to me, it seems like just in time might be a thing of the past and that all companies may need to maintain just some higher amount of inventory levels going forward, just in the customer demand. And not only on the finished product side, but really, you know, also with respect to raw material. So how do you, as you think about this normalization as you've termed it for 2022, how do you think about your inventory levels both for finished product and for raw material?
To me it seems like just in time might be a thing of the past and that all companies may be maintained just some higher inventory levels going forward just to be customer demand.
Only on the finished product side really smooth.
T raw materials. So how do you think about this normalization as you termed it to 2022, how do you think about your inventory level of finished product and raw materials.
Well, so I'll jump in first and I'll look over to Bob and have him chime in and clean up anything he disagrees with but I would say look at that really good question and I think adjust in time environment of the.
Speaker 3: Well, so I'll jump in first and I'll look over to Bob and have him chime in and clean up anything he disagrees with. But I would say, you know, look, it's a really good question. And I think the just-in-time environment of supplying the market
Supply in the market.
Is that it was definitely a challenge during these last two years I think where that gets addressed is with our customers and then their inventories to support retail. So I don't think this is about.
Speaker 3: It was definitely a challenge during these last two years. I think where that gets addressed is with our customers and then their inventories to support retail. So I don't think this is about unfilled cans at Sylvan. I don't think this is about
<unk> can that silica and I don't think this is about.
Speaker 3: dispensers sitting on our inventory balance sheet, waiting for the customers orders. I do think we're talking about filled good.
Dispensers sitting on our inventory balance sheet.
Waiting for the customer's orders I do think we're talking about filled goods waiting to go to retail is going to be I think where the inventory build actually takes place.
Speaker 3: waiting to go to retail is going to be, I think, where the inventory build actually takes place. And, you know, again, spending a lot of time talking to customers about strategies for 2022 and how they're going to meet the ongoing demand in the marketplace.
Spending a lot of time talking to customers about strategies for 2022, and how they're going to meet the ongoing demand in the marketplace that seem to be the most common thread just as we talked through it I Bob I don't know what else you would want to add yeah, I think Adam's got it right. The only thing I would add to that is that particularly in this <unk>.
Speaker 1: That seemed to be the most common thread just as we talked through it. Bob, I don't know what else you would want to add. Yeah, I think Adam's got it right. The only thing I would add to that is that particularly in this environment with, you know, severe infection.
Environment with what <unk>.
Severe inflation I think everybody is going to be low to want to build any more inventory than they have to.
Speaker 1: I think everybody's going to be loathe to want to build any more inventory than they have to.
Speaker 1: So I do think that there's some increase that just we felt so short, we as a system, not just Sylgian.
So I do think that there is some increase that just we felt so sure we as a system not just silicon fell so short of where we used to be that there'll be a rebuilding but I find it hard to believe particularly given the inflationary environment that we go all the way back to pre pandemic levels I think everybody has figured out how to be a little.
Speaker 1: fell so short of where we used to be that there'll be a rebuilding. But I find it hard to believe, particularly given the inflationary environment, that we go all the way back to pre-pandemic levels. I think everybody has figured out how to be a little more efficient with their inventory levels.
More efficient with their inventory levels. So I think there is somewhere between what the inventory levels used to look like and where they are at the low point, so there'll be some rebuilding but not all the way back.
Speaker 1: So I think there's somewhere between what the inventory levels used to look like and where they are at the low point, so there'll be some rebuilding, but not all the way back.
Speaker 7: Gotcha. And then one just quick question on the cash taxes, Bob. You mentioned that $25 million cash tax benefits not going to repeat this year. I thought the company was supposed to receive roughly $125 million of tax benefits, both from Gateway and UNICEF. So the $25 million from Gateway won't repeat, but aren't the cash tax benefits that you should be receiving from UNICEF?
Gotcha.
And then one just quick question on the cash tax is Bob you mentioned that $25 million.
Cash tax benefit is not going to repeat.
This year.
I thought the company was supposed to receive roughly $125 million of tax benefits, both from gateway and UNICEF. So.
The $25 million from Gateway will repeat but there isn't there so hard to split the cash tax benefits that you should be received can you give yourself.
Speaker 1: They're in there, but the order of magnitude is, it was front end weighted, so that's sort of where you're, the rest of it's going to come, but it's going to come over multiple years.
Yeah. They are in there, but the order of magnitude. It was front end weighted so so that's sort of where your where you get the rest of it is going to come but it's going to come over multiple years.
Got it.
Speaker 1: Got it. Thank you. Maybe I misspoke in saying it won't repeat. It just won't repeat at that level.
I think it maybe I misspoke in saying it wont repeat it just wont repeat at that level.
Got you. Thank you.
Okay next question will come from the line of Ghansham Panjabi with Baird.
Speaker 4: Okay, next question will come from the line of Ghanshyam Punjabi with Baird.
Speaker 7: Thanks. Adam, just a clarification. So in an answer to George's question, when you're talking about the fourth quarter segment volumes, I thought I heard you say that dispensing was up eight and a half percent. I just want to clarify that's actually a volume number. And if that is the case, what do you attribute that strength to? Because it is well above what it looks like the industry grew specific to the fourth quarter.
Thanks, Adam just a clarification so yeah in an answer to George's question, when you're talking about the fourth quarter segment volumes I thought I heard you say that dispensing was up eight 5% I just wanted to clarify that that's actually a volume number and if that is the case.
What do you attribute that strength to because it is well above.
What it looks like the industry grew specific to the fourth quarter.
Sure.
Speaker 3: Sure, it is. We were up eight and a half percent Gansham and two four four organic volume So there's a couple things that go into that. Obviously, it's our dispensing and specialty closure segment So, you know, it's it's really the four key markets that I talked about. It's
We were up eight 5% Ghansham in Q4 for organic volume. So there's a couple of things that go into that obviously, its our dispensing, especially closure segment. So.
It's really the four key markets that I talked about it.
It's fragrance and beauty and then its beverage and food and we saw strength really in all four and I would say significant strength and that's really what drove the year over year improvement in the organic volume.
Speaker 3: It's fragrance and beauty, and then it's beverage and food. And we saw strength really in all four, and I would say significant strength. And that's really what drove the year-over-year improvement in the organic volume.
Speaker 8: Got it. And then on the same token, you saw some pull forward on the metal food side. I mean, resident prices did decline quite a bit in the fourth quarter, especially towards the back end of the quarter. Did you see any material sort of deferral of demand specific to custom containers, just based on that dynamic? And maybe give us some color as to what you're seeing so far in the early part of the quarter.
Got it and then on the same token you saw some pull forward on the metal food side, I mean resin prices did declined quite a bit in.
In the fourth quarter, especially towards the back end of the quarter did you see any material sort of deferral of demand specific to cause some containers just based on that dynamic and.
Maybe give us some color as to what you're seeing so far in the early part of the quarter.
Speaker 3: Yeah, it's a good question. And I just on the resin cost side, I think you said that correctly. So the resin did decline in Q4, but it was more at the end of Q4, late in Q4. So there was very little benefit to Silgon of that cost decline. And then
Yes, it's a good question and I just on the resin cost side I think you said that correctly. So resin did decline in Q4, but it was more at the end of Q4 late in Q4. So there was very little benefit to sell again of that cost decline and then.
Speaker 3: You know, we don't believe we saw customers push out orders from Q4 to Q1 because of potential declines in resin. So we think the demand level was was pretty consistent throughout the quarter. And, you know, as we move forward into 2022, obviously, we're we'll be passing through.
We don't believe we saw customers push out orders from Q4 to Q1 because of potential declines in resin. So we think the demand level was pretty consistent.
Throughout the quarter and as we move forward into 2022, obviously.
We will be passing through.
Speaker 3: Again, some lags, pass-throughs of the cost inflation that we incurred in 2021 here for the first half of the year, and then we'll see a normalization and if resin costs
Again, some lagged pass throughs of the cost inflation that we incurred in 2021 here for the first half of the year and then we'll see a normalization and if resin costs.
Transact the way they are projected by the indices that we will see some cost relief for customers in the second half of the year.
Speaker 3: Transact the way they are projected by the indices, then we'll see some cost relief for customers in the 2nd, half of the year.
Yes.
Okay. Thanks, so much.
Speaker 4: And it looks like we have time to take one more question, so we'll take that from Josh Wilson with Raymond James. Good morning, Adam and Bob. Thanks for filling me in.
And it looks like we have time to take one more question. So we'll take that from Josh Wilson with Raymond James.
Good morning, Adam Bob Thanks for fitting me in.
Good morning, Josh.
Speaker 6: I just wanted to get a little more color on some of the supply chain and mix questions. So in your guidance, are you assuming everything is completely normalized as we get out the end of the year on the labor and supply chain issues? And if so, can you put like a dollar value on the benefit there that's part of the EPS walk?
Just wanted to get a little more color on some of the supply chain and mixed questions. So in your guidance are you assuming everything is completely normalized as we get out at the end of the year on both the labor and supply chain issues and if so what's can you put a dollar value on the benefit there that's part of the EPS walk.
Well I think what I would say Josh as I would go back to kind of the work that Bob walked through on the 15th.
Speaker 3: Well, I think what I would say Josh is I would go back to kind of a walk that that Bob walked through on the 50 cents and what I would tell you
And what I would tell you.
Basically everything else falls into the operational improvements and that is the unwinding of the operational inefficiencies of the supply chain and labor issues that we experienced in 'twenty. One so I don't have a specific number for you, but it does encompass the balance of the operational improvement that we'll see for 'twenty two.
Speaker 3: basically everything else falls into the operational improvements, and that is the unwinding of the operational inefficiencies of the supply chain and labor issues that we experienced in 21. So I don't have a specific number for you, but it does encompass the balance of the operational improvement that we'll see for 22.
Speaker 9: And the mixed benefit in metal containers, is there any lag to that or will that start fairly early in the year?
And the mix benefit in metal containers is there any.
Leg to that or.
Fairly early in the year.
Speaker 3: No, I think what you'll see is, you know, again, a normalization of.
No I think what you'll see is again a normalization of.
Speaker 3: of volumes across the markets that we serve. So basically now all of our markets are we've pegged back to kind of a normalized level. So vegetable and
Volumes across the markets that we serve so basically now all of our markets are we've pegged back to kind of a normalized level, so vegetable and yeah.
Speaker 3: the vegetable pack, the industrial cans we talked about for restaurants.
<unk> Pak the industrial cans, we talked about for restaurants, we think thats just a back to a more normal volume with continued growth in pet food. So I think what you'll hear us talk about in Q1, if I were predicting it is mix will be unfavorable because we'll be selling more small cans again, just like we have been for the last several years.
Speaker 3: We think that's just back to a more normal volume with continued growth in pet food. So I think what you'll hear us talk about in Q1, if I were predicting it, is mix will be unfavorable because we'll be selling more small cans again, just like we have been for the last several years. That's where the growth is going to come from in the early part of the year.
That's where the growth is going to come from.
And the early part of the year.
Got it thanks, so much.
Yeah.
Alright, so at this time I'd like to turn the call back over to Mr. Adam Greenlee for any additional or closing remarks.
Speaker 4: Alright, so at this time I'd like to turn the call back over to Mr. Adam Greenlee for any additional or closing remarks.
Speaker 3: Great, thank you very much Alan and we appreciate everyone's time today and interest in the company and look forward to talking about our first quarter results in April . Thank you.
Great. Thank you very much Allen and we appreciate everyone's time today and interest in the company and look forward to talking about our first quarter results in April thank.
Thank you.
Speaker 4: And that does conclude today's conference. We thank everyone again for their participation. You may now disconnect.
And that does conclude today's conference we thank everyone again for their participation you may now disconnect.
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