Q3 2023 Silgan Holdings Inc Earnings Call

[music].

Good day and welcome to the socket Holdings third quarter 2023 earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Mr. Alex Hutter, Vice President of Investor Relations. Please go ahead, Sir Thank you.

And good morning, joining me on the call today are Adam Greenlee, President and CEO, Bob Lewis EVP, corporate development and administration, and Kim Ulmer, SVP CFO and treasurer.

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 uncertainties and risks, including but not limited to those described.

And the company's annual report on Form 10-K for 2022, and other filings with the Securities and Exchange Commission.

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. In addition commentary on today's call may contain references to certain non-GAAP financial metrics, including adjusted EBIT adjusted EBITDA free cash flow and adjusted net income per dilute.

Chair a reconciliation of these metrics, which should not be considered substitutes for similar GAAP metrics can be found in today's press release is available in the Investor Relations section of our website at Silicon Holdings Dot com.

With that let me turn it over to Adam.

Thank you, Alex and we'd like to welcome everyone to silicon.

Third quarter 2023 earnings call.

The third quarter delivered strong performance that was consistent with our expectations. Despite continually challenging market conditions, and we reported our second highest quarterly earnings as our businesses manage their cost proactively to offset softer than expected volumes in the quarter during the quarter, we finalized our previously discussed plans.

To improve our cost structure and have announced a $50 million cost reduction program through the end of 2025, we expect to achieve these cost reductions through a combination of footprint rationalization and other cost reduction actions with benefits in each of our reporting segments over the next two years.

Generally we believe these cost improvements will help position the company to continue to meet the unique needs of our customers and compete and win in the markets we serve.

Through our disciplined and balanced capital allocation process, we have repurchased $155 million worth of silicon stock during the quarter, bringing our year to date repurchases to $175 million and putting the company on track to return over $250 million to shareholders through a combination of buybacks.

And dividends in 2023.

Turning to trends in the business demand for our high value dispensing products remained strong with mid single digit growth for these products during the quarter that drove significant mix improvement for the company overall and the dispensing and specialty closure segment, we continue to see recovery in products that experience post pandemic Destocking last.

At year end benefited from strong organic growth in our fragrance dispensing products for prestige markets.

The consumer Destocking, we saw develop near the end of the second quarter across all three segments expanded during the third quarter as these plans deepened in the food and beverage markets and grew to include adjacent categories. Importantly, all market indications. We have continue to show the consumer level demand for our products remains robust.

And our customers inventory unit levels are trending below historic levels as their focus remains on the absolute dollar value levels of inventory in their systems at year end.

Turning to our third quarter results performance in each of our segments was consistent with our expectations with mid single digit adjusted EBIT growth driving record results in dispensing and specialty closures and with metal containers adjusted EBIT comparable to the prior year record levels.

In dispensing and specialty closures are high value dispensing products were a highlight for the quarter with mid single digit volume growth and a significant mix benefit that more than offset the headwinds we've talked about in food and beverage end markets domestic.

Domestic food and beverage volumes were flat year over year as customer Destocking in the United States had a more pronounced impact on our volume that we anticipated in our guidance.

International food and beverage volumes remained challenged as a result of the increased levels of inflation on premium products in particular for metal closures on glass packages. Despite these headwinds on volume the growth in dispensing products mixed benefit and strong cost management drove record performance for this segment in the <unk>.

Order.

In metal containers, we again delivered strong results despite softer than expected volumes customer destocking priorities appear to have expanded to include adjacent categories, including pet food and many customers are targeting further inventory reductions in categories that we were already anticipating these trends.

The North American fruit and vegetable pack was delayed to late planting.

In volumes in Europe were below our expectations due to lower fruit yields and the impact of flooding from Greece.

Overall, the 2023 crop will be below our expectations as only a small amount of volume will be packed in the fourth quarter. Despite the late start.

Despite these headwinds our team offset the volume shortfall from a profit perspective with effective cost management and drove results that were consistent with our expectations.

And custom containers results were below prior year, but consistent with our expectations due to the impact of customer destocking, including the delay in commercialization of new business wins.

Turning now to our expectations for the fourth quarter and the full year, we have revised our estimate for full year earnings to reflect deeper and more pervasive customer destocking priorities in the fourth quarter, which has resulted in low a lower volume outlook and our metal containers and dispensing and specialty closures segments.

We believe the continued progress we have made with regard to our strategic priorities and the actions we've taken to effectively manage the factors that are within our control position. The company to return to earnings growth in 2024, we see positive signs in our customers' promotional activity inventory unit levels trending below historic norms.

While we expect market volumes to improve in 2024, we are not dependent upon it to deliver earnings growth.

We'll continue to manage the business in a disciplined manner focusing on meeting the unique needs of our customers, while delivering a compelling value proposition for our shareholders.

With that Kim will take you through the financials for the quarter and our estimates for the fourth quarter and full year.

Thank you Adam.

Net sales for the third quarter of 2023 were approximately $1 $8 billion, excluding nonrecurring sales associated with Russia in the third quarter of 2022 third quarter 2023 sales declined 7% from the record prior year period, driven primarily by lower volumes in each of our segments, partially offset by the pass through of cost inflation.

Total adjusted EBIT for the quarter of $214 4 million decreased by 4% on a year over year basis with record adjusted EBIT in the dispensing and specialty closures segment offset by lower adjusted EBIT in the custom containers in metal container segment.

Adjusted net income per diluted share declined 12 from the record achieved in the third quarter of 2022 with higher interest expense of nine cents nonrecurring sales associated with Russia, <unk> and lower volumes driving the year over year decline.

Turning to our segments dispensing, especially closure segment sales declined 2% versus the prior year, excluding a 1% impact from Russia sales, primarily as a result of lower volume mix of 3%.

A decline in volumes driven by double digit declines for higher volume closures for international food and beverage markets, which more than offset record volume and higher value dispensing products, which grew by a mid single digit percentage compared to the prior year.

Record third quarter, 2023, dispensing and specialty closures adjusted EBIT increased $5 $4 million versus the record achieved in the prior year period as a result of improvements in mix in this segment due to a higher volume and high value dispensing products and lower sales in high volume closures for food and beverage markets as well as effective cost management, including SG&A.

And our metal container segment sales declined 8% versus the prior year, excluding a 2% impact from Russia sales due to lower volumes across all product categories as customer destocking priorities for more pervasive and impacted adjacent categories with the largest year over year decline in the soup category.

Fruit and vegetable volumes were below our expectations.

Metal containers adjusted EBIT was slightly below the record level in the prior year quarter. Despite the shortfall in volumes as the business continued to successfully pass through labor and other manufacturing costs, while actively managing our cost structure.

In custom containers lower volume in most categories drove volumes, 10% below the third quarter of 2022, which coupled with lower resin costs on a year over year basis resulted in sales, 18% below the prior year period as expected custom containers adjusted EBIT declined $11 million as compared to the third quarter of 2022, primarily as a REIT.

Out of lower volumes due to customer destocking and a less favorable mix of products sold.

Looking ahead to the fourth quarter, we are estimating adjusted net income per diluted share in the range of 55 to 65.

Which includes higher interest expense of <unk> <unk> per share in the fourth quarter weighted average share count of approximately $107 million.

On a segment level fourth quarter adjusted EBIT is expected to be higher than the prior year period in dispensing and specialty closures comparable to the prior year period, and custom containers and lower than the prior year period in metal containers, primarily due to the timing of previously discussed benefits from inventory management in the prior year.

As a result, we are revising our outlook of adjusted net income per diluted share from a range of $3 40 to $3 60.

To a range of $3 30 to $3 40.

Primarily due to a more pervasive customer destocking and food and beverage and adjacent markets.

This estimate includes a year over year headwind of <unk> 33 per share for interest expense, which we now expect to be approximately $175 million of.

A tax rate of approximately 24% and weighted average shares outstanding of approximately $109 million.

These estimates exclude the impact from certain adjustments outlined in table C of our press release.

Based on our current earnings outlook. We are also revising our estimate of free cash flow in 2023 from $375 million to $340 million, which incorporates capex of $230 million.

The outlook for free cash flow reflects the revision and estimated earnings for the year as well as estimated cash costs in 2023 associated with the announced cost reduction program, including additional working capital to facilitate the program.

That concludes our prepared remarks, we will open the call for questions.

<unk> would you kindly provide the directions for the question and answer session.

Operator: Today's conference is being recorded.

Alexander Hutter: At this time I let's turn the conference over to Mr. Alexander Vice President of Investor Relations. Please go ahead sir. Thank you and good morning.

Yes, Thank you and if you would like to ask a question. Please take now by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Alexander Hutter: Joining me on the call today are Adam Greenlee, President and CEO, Bob Lewis, EVP Corporate Development Administration and Kim Ulmer, SVP, CFO and Treasurer. Before we begin the call today we would like to make it clear that certain statements made today on this conference call may be 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 uncertainties and risks including but not limited to those described in the company's annual report on form 10K for 2022 and other filings with the Securities and Exchange Commission.

If you you may remove yourself from the queue at any time by pressing star to once again that is star one if you would like to ask a question.

And well take our first question from Ghansham Panjabi with Baird.

Yeah, Hey, guys good morning.

I guess first off maybe you can just give us more color on the cadence of Destocking and how that unfolded during the third quarter.

You mentioned adjacent categories, and I think you'd called out pet food as well.

But just you know based on what you're seeing at this point.

Alexander Hutter: 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. In addition, commentary on today's call may contain references to certain non-gap financial metrics including adjusted EBIT, adjusted EBIT, free cash flow and adjusted net income per deluded share. The reconciliation of these metrics which should not be considered substitutes for similar gap metrics can be found in today's press release available in the Investor Relations section of our website at silganholdings.com.

I guess related to that do you think this ends in the fourth quarter or will they be a residual tail into the first quarter next year as well.

Yeah sure. Good question Ghansham and look I think we are as frustrated with Destocking as anybody else is at this point and.

For us we anticipated in the third quarter based upon all of the conversations we were having with our customers and their new priorities.

At the end of the second quarter. So in fairness, we had the yearend details what actually happened during Q3 is that those programs accelerated in and the inventory destocking that our customers were working on actually happened earlier in Q3 than we anticipated and that's what's reflected in our numbers. So you know.

Adam Greenlee: With that let me turn it over to Adam. Thank you Alex and we'd like to welcome everyone to silgan's third quarter 2023 earnings call. The third quarter delivered strong performance that was consistent with our expectations despite continually challenging market conditions and we reported our second highest quarterly earnings as our businesses manage their cost proactively to offset softer than expected volumes in the quarter. During the quarter we finalized our previously discussed plans to improve our cost structure and have announced a $50 million cost reduction program through the end of 2025.

That's one part of the Destocking the second piece of it is late in the quarter.

Several of our pet food customers indicated that they would also endeavor on a destocking program for the end of the year, so a little bit of impact late in the quarter, but more of an impact in Q4 as we include pet food now in the Destocking conversation.

And so I think from a broad standpoint.

Adam Greenlee: We expect to achieve these cost reductions through a combination of footprint rationalizations and other cost reduction actions with benefits in each of our reporting segments over the next two years. Additionally we believe these cost improvements will help position the company to continue to meet the unique needs of our customers and compete and win in the markets we serve. Through our discipline and balance capital allocation process we repurchased $155 million worth of silgan stock during the quarter bringing our year-to-date repurchases to $175 million and putting the company on track to return over $250 million to shareholders through a combination of buybacks and dividends in 2023.

The Destocking that happened post pandemic, we feel pretty confident that we have the timing of that correct and those products have worked their way through the system. The inventory cleanse itself through the system, we're seeing the recovery of of those markets for the most part these new items that we're talking about in food and beverage and now in pet food.

We're anticipating they're going to be done by year end ghansham, but at this point I'd just say we knew.

To continue to work with our customers and understand what their programs are the last piece of it as we know for a fact that unit level inventory across our food and beverage and certainly our pet food market is lower than historic norms and a lot of the dialogue with our customers right now is about the absolute dollar value of that <unk>.

Adam Greenlee: Turning to trends in the business demand for our high-value dispensing products remain strong with mid single-digit growth for these products during the quarter that drove significant mix improvement for the company overall and the dispensing and specialty closure segment. We continue to see recovery in products that experienced post-pandemic destocking last year and benefits from strong organic growth in our fragrance dispensing products for prestige markets. The consumer destocking we saw developed near the end of the second quarter across all three segments expanded during the third quarter.

Inventory not the unit volume level. So at some point it does have to stock in order to service the market and consumers and at this point, whereas we're anticipating that that is at year end.

Got it.

And then just my second question as it relates to the 2020 for outlook and your confidence on earnings being up year over year.

Obviously volumes are a moving target, but you have cost savings. It's a two year program. It sounds like just curious as to help us with the variances as it relates to how much you think.

Adam Greenlee: These plans deepened in the food and beverage markets and grew to include adjacent categories. Importantly all market indications we have continue to show that consumer level demand for our products remains robust and our customers inventory unit levels are trending below historic levels as their focus remains on the absolute dollar value levels of inventory and their systems at your end. Trying to do our third quarter results, performance in each of our segments was consistent with our expectations, with mid-single digits adjusted ebit growth driving record results and dispensing and specialty closures, and with metal containers adjusted ebit comparable to the prior year record levels.

In terms of cost savings will flow through in 2024 and any other variances, we should keep in mind apart from a lower share count.

Sure and you know I think first off a lot of the dialogue, we just had on destocking.

You know will influence the actual guy.

Guidance that we'll give for 2024 on our next call.

As we sit here today, what we have done is as we've decided to proactively and aggressively manage the things within our control and that is part of the $50 million cost reduction program and really from a P&L savings standpoint, you should think about call it 40% of that to.

To be impacting in 2024, so we'll just round about $20 million of the $50 million cost savings program. So that is in large part.

What is going to drive our earnings growth next year irrespective of what happens with market recovery in volume so yeah.

Adam Greenlee: We talked about in food and beverage and markets, domestic food and beverage volumes were flat year over year, as customer destocking in the United States had a more pronounced impact on our volume that we anticipated in our guidance. International food and beverage volumes remain challenged as a result of the increased levels of inflation on premium products in particular for metal closures on glass packages. Despite these had wins on volume, the growth in dispensing products, mixed benefit, and strong cost management for record performance for the segment in the quarter.

That's one input ghansham the other big input is.

What's not being talked about a lot right now is our dispensing and specialty closures segment. The mix benefit we're getting from our high value dispensing products and frankly, the growth that thats generated and hasnt been generating all year long those trends will continue next year and 2024, and we anticipate continued growth in mix benefit.

From the high value dispensing products again irrespective of recovery in food and beverage markets and our other aspects of the business. So so really we believe we can control what what's immediately in front of US the cost savings program will drive earnings growth for next year irrespective of market recovery.

Adam Greenlee: In metal containers, we again delivered strong results despite softer than expected volumes. Customer destocking priorities appear to have expanded to include adjacent categories, including pet food, and many customers are targeting further inventory reductions in categories that we were already anticipating these trends. The North American Fruit and Vegetable Pack was delayed due to late plantings, and volumes in Europe were below our expectations due to lower fruit yields and the impact of flooding from Greece.

Yeah.

Okay. Thanks, so much.

Sure.

We will now take our next question from George Staphos with Bank of America.

Hi, everyone. Good morning, Thanks for the time the details.

Adam Greenlee: Overall, the 2023 crop will be below our expectations, as only a small amount of volume will be packed in the fourth quarter despite the late start. Despite these had wins, our team offset the volume shortfall from a profit perspective with effective cost management and drove results that were consistent with our expectations. In custom containers, results were below prior year, but consistent with our expectations due to the impact of customer destocking, including the delay and commercialization of new business wins.

Adam I assume are the pet's aren't on G. L. P. One yet so that's probably not a reason why you're saying destocking there, but in terms of the adjacencies that you're seeing destocking in food and beverage.

Is it was it soup what else is going on and what are your customers, saying in terms of why they're doing this relatedly you said they are accelerating their destocking and that's great, but wouldn't that then mean a pickup in volume in the fourth quarter or soon thereafter, you're just pulling forward the destocking that would've occurred and related to that.

What was the volume and metal for the quarter and I had a couple of follow ons.

Adam Greenlee: Turning now to our expectations for the fourth quarter in the full year, we have revised our estimate for full year earnings to reflect deeper and more pervasive customer destocking priorities in the fourth quarter, which has resulted in a lower volume outlook in our metal containers and dispensing and specialty closure segments. We believe the continued progress we have made with regard to our strategic priorities, and the actions we've taken to effectively manage the factors that are within our control position the company to return to earnings growth in 2024.

Sure Thanks, George and again half of our volume in the metal container segment roughly is in pet food So you're right.

That is not part of the G. L. P. One conversation at this point, which is.

Then meaningful.

<unk>, which is a more meaningful part of our business. So.

Fundamentally Georgia right with your Destocking thought and question. So it's great that it's accelerated at some point that will mean that there is as volume recovery to replenish inventory levels and again, it's not about the unit volume of inventory for our customers at this point it is about the year and App.

Adam Greenlee: We see positive signs in our customers' promotional activity, inventory unit levels trending below historic norms, and while we expect market volumes to improve in 2024, we are not dependent upon it to deliver earnings growth. We will continue to manage the business in a disciplined manner, focusing on meeting the unique needs of our customers while delivering a compelling value proposition for our shareholders.

$8 of inventory that they hold on their balance sheet. So you know even though it's accelerated I don't think it's going to be a favorable upside for Q4, because they are targeting the year end value. It should be for 2024, but that's not what we're factoring into our ability to drive earnings growth for next year. So I.

Kimberly Ulmer: With that, Kim will take you through the financials for the quarter and our estimates for the fourth quarter in full year. Thank you, Adam. Next sales for the third quarter of 2023 were approximately $1.8 billion, including non-recurring sales associated with Russia in the 3rd quarter of 2022, 3rd quarter of 2023 sales declined 7% from the record prior year period driven primarily by lower volumes in each of our segments partially offset by the pass-through of cost inflation.

That's an important component.

So what we're we're thinking about for the fourth quarter and for next year and then Adam.

Thank you and beverage so we're in food and beverage was it where you had this additional destocking.

Sure So think about our in the metal container segment, we'll start there so additional destocking really in our pack volume.

A little bit of Destocking in soup, but really it's the adjacency that got included now for the pet food market. So that's the biggest the biggest change we're out as last time, we talked.

Food and beverage also applies to dispensing and specialty closures as well, particularly in the U S market. So it is impacting our our traditional kind of hot fill and cold fill closure market in the U S business.

Kimberly Ulmer: Adjusted net income for diluted share declined 12 cents from the record achieved in the 3rd quarter of 2022 with higher interest expense of 9 cents, non-recurring sales associated with Russia of 3 cents and lower volumes driving the year over year decline. Turning to our segments, dispensing and specially closures segment sales declined 2% versus the prior year excluding a 1% impact from Russia sales, primarily as a result of lower volume mix of 3%.

Okay.

And the volume and metal overall for the quarter what was it.

Down about 10%.

Yes.

Understood. Thanks for going through all of that I wanted to go to the cost reduction program.

You mentioned its footprint, we can surmise, what that means and other cost reduction activities, but.

Kimberly Ulmer: The decline of volumes driven by double digit declines for higher volume closures for international food and beverage markets, which more than offset record volume and higher value dispensing products, which grew by a mid-single digit percentage compared to the prior year. Record 3rd quarter 2023 dispensing and specially closures adjusted EBIT increased 5.4 million dollars versus the record achieved in the prior year period as a result of improvements in mix in the segment due to a higher volume and high value dispensing products and lower sales and high volume closures for food and beverage markets, as well as effective cost management including SGNET.

Can you and you gave us some delineation in terms of the cadence Ghansham as question.

But what's going to change it silicon as a result of this you know so give us a bit more titles in the mosaic here in terms of what capability you get why it doesn't disrupt your service.

You know why it actually makes you more competitive company going forward aside from the fact, yeah, we'll try to build in $50 million of cost reduction into our models over time.

Silicon get out of it what are your shareholders get out of it.

Sure. It's a great question, George and I think for starters, what I would say is is this is a program at silicon in cost reduction and right sizing our capacity that we have executed many many times over the years at silicon So.

Kimberly Ulmer: In our mental container segment sales declined 8% versus the prior year excluding a 2% impact from Russia sales due to lower volumes across all product categories as customer destocking priorities were more pervasive and impacted adjacent categories with the largest year over year decline in the soup category. Fruit and vegetable volumes were below our expectations. Mental containers adjusted EBIT was slightly below the record level in the prior year quarter despite the short fall on volumes as the business continued to successfully pass through labor and other manufacturing costs while actively managing our cost structure.

There should be confidence that we can indeed execute what we're putting in front of you.

And we have tremendous confidence that we will be able to execute it and then what is the benefit that we get there is a couple of things one.

Think about dispensing and specialty closures.

Clearly, we've got growing products growing markets that we're supporting there it's really not about taking any capacity out of that market. It is about optimizing the footprint, taking growing volume and putting it in more efficient facilities and driving improvement in that manner. When you move to metal containers and custom containers Theres a little.

Kimberly Ulmer: In custom containers lower volume in most categories drove volumes 10% below the 3rd quarter of 2022, which coupled with lower resin costs on a year over year basis resulted in sales 18% below the prior year period. As expected, custom containers adjusted EBIT declined 11 million dollars as compared to the 3rd quarter of 2022, primarily as a result of lower volumes due to customer destocking and a less stable mix of product sold.

Both of that there is some capacity that is going to be coming out of those two markets as we right size our capacity and this is an important statement George to the volumes that we see right now so again, we're not necessarily planning on volume growth next year because of markets recovering we'll have specific products that grow but this is not predicated on.

Kimberly Ulmer: Looking ahead to the 4th quarter, we are estimating adjusted net income per diluted share in the range of 55 cents to 65 cents, which includes higher interest expense of 6 cents per share and a 4th quarter weighted average share count of approximately 107 million. On a segment level, 4th quarter adjusted EBIT is expected to be higher than the prior year period in dispensing and specialty closures comparable to the prior year period in custom containers and lower than the prior year period in metal containers, primarily due to the timing of previously discussed benefits from inventory management in the prior year.

Volume recovery from the market importantly, what we learned during the pandemic.

We did have this tremendous ability to search and flex our cost structure to meet incremental demand. So we have tremendous confidence that by right sizing to the existing capacity required and demand levels of our customers.

As markets recover as volume grows in metal containers, and and then custom containers will have the ability to meet that demand head on with the adjusted footprint and capacity that we have one last important note to make is we do view pet food separately in metal containers, because it has been growing for.

Kimberly Ulmer: As a result, we are revising our outlook of adjusted net income per diluted share from a range of $3.40 to $3.60 to a range of $3.30 to $3.40, primarily due to a more pervasive customer destocking in food and beverage and adjacent markets. This revised estimate includes a year over year headwind of 33 cents per share for interest expense which we now expect to be approximately 175 million dollars. A tax rate of approximately 24% and weighted average shares outstanding of approximately 109 million.

For decades in our portfolio, we've invested for growth our customers are invested for growth and the good news. There is there's really no incremental capacity that we need to add to get this next level or incremental growth in pet food, but we will not be rationalizing any of the pet food assets or capacity as we sit here today and.

As we go forward because as you I believe heard in the remarks a minute ago.

Our customers are planning for growth in pass through next year and they've been very public about making those statements.

Kimberly Ulmer: The revised outlook for free cash flow reflects the revision in estimated earnings for the year as well as estimated cash costs in 2023 associated with the announced cost reduction program including additional working capital to facilitate the program.

Okay.

Have other questions, but I'll I'll turn it over to everybody else to be fair and I'll come back if there's time thanks guys.

Okay. Thank you.

Well now take our next question from Anthony Pettinari with Citi.

Operator: That concludes our prepared remarks and we'll open the call for questions.

Hi, good morning.

I'm wondering if you can talk a little bit more about custom container and any progress on.

Operator: Anna, would you kindly provide the directions for the question and answer session? Yes, thank you and if you would like to ask a question please signal by pressing star one on your telephone keypad. If you are using a speaker phone please make sure your mute function is turned off to allow your signal to reach our equipment.

Customer wins is there anything kind of on tap for 24 that you can share I don't know if you are maybe gaining some business back, but maybe destocking sort of offsetting that or if you just.

Operator: If you may remove yourself an IQ at any time by pressing star two. Once again, that is star one.

Talk about how that's progressing versus expectations.

Yeah, Anthony I think you've got it right I think we are having success in the market.

Ghansham Panjabi: If you would like to ask a question and we'll take our first question from Gon Shin Panjabi with Baird. Hey guys, good morning. I don't know, I guess, you know, first up maybe you can just give us more color on the cadence of the stocking and how that unfolded during the third quarter. You mentioned adjacent categories and I think you called that pet food as well, but just based on what you're seeing at this point I guess related to that.

We are winning in the market as well and really it's largely just offset by the destocking activities that are are very broad based and the and the custom container segment. So we do have a couple of large new wins that will be commercializing next year now.

First one which is from a volume perspective, a significant win for us will be commercialized call. It mid to late first quarter and we feel pretty good about the timing of that one the second new win has had a couple of delays on it.

Ghansham Panjabi: Do you think this ends in the fourth quarter or will they be residual tail into the first quarter next year as well? Good questions Gon Shin Panjabi. I think we are as frustrated with the stocking as anybody else at this point and you know for us you know we anticipated it in the third quarter based upon all the conversations we were having with our customers and their new priorities at the end of the second quarter.

And we are now looking at our mid year commercialization of the second item. What's interesting is again, both our contractual and so you know the good news for US is our contract start when the products commercialized. So we get the same three or five year runway on the volume that we've contracted with our customers. So.

Ghansham Panjabi: So in fairness, we had the year end details what actually happened during Q3 is that those programs accelerated and the inventory destocking that our customers were working on actually happened earlier in Q3 than we anticipated and that's what's reflected in our numbers. So you know that's one part of the destocking the second piece of it is late in the quarter are several of our pet food customers indicated that they would also endeavor on a destocking program for the end of the year.

Unfortunately, we are ready to to commercialize these products and unfortunately, our customers have not been ready to do so just yet and again part of that does fall into destocking spending the capital to commercialize those products and launch those new products at the end of the year is just not happening now as we had originally thought.

So unfortunately, it's two large wins in the next year really good line of sight on the first one the second one is slated for mid year and it'll be dependent upon our customers' ability to execute that.

Ghansham Panjabi: So a little bit of impact late in the quarter but more of an impact in Q4 as we include pet food now in the destocking conversation. And so you know I think from a broad standpoint you know the destocking that happened post pandemic we feel pretty confident that we had the timing of that correct and those products have worked their way through the system the inventory cleans itself through the system we're seeing the recovery of those markets for the most part these new items that we're talking about in food and beverage and now in pet food.

Okay, that's very helpful.

And then in terms of.

You know the expectation for earnings growth in 'twenty, four you know absent the weather a market recovery kind of materializes or not.

Do you think you can get back to you know too.

2022 kind of EBITDA levels or potentially exceed that I think that's what consensus is.

Assuming or I don't know if there's any kind of finer point you can put on maybe what you view as sort of normalized earnings.

And maybe a difficult environment.

Ghansham Panjabi: We're anticipating they're going to be done by year and gone some but you know at this point I just say you know we need to continue to work with our customers and understand what their programs are. The last piece of it is we know for a fact that unit level inventory across our food and beverage and certainly our pet food markets is lower than historic norms and you know a lot of the dialogue with our customers right now is about the absolute dollar value of that inventory.

Yeah, I think honestly I think we're just a little too early to really provide any additional color there because I think thats a pretty specific question, that's going to require more maturity to our 2020 for budgetary process and we're not at the beginning we're sort of in the middle of it right now, but just not able to provide a whole lot more color then.

What we already have.

Okay I'll turn it over thank you.

Ghansham Panjabi: Not the unit volume level so at some point it does have to stop in order to service the market and consumers and at this point where we're anticipating that that is at your end. And then just my second question relates to the 2024 outlook and your confidence on earnings being up year-to-year, obviously volumes are moving target, but you have cost savings. It's a two-year program, it sounds like, just curious as to help us with the variances as it relates to how much you think in terms of cost savings will flow through in 2024.

Well now take our next question from Gabe <unk> with Wells Fargo Securities.

Good morning, guys.

So appreciating maybe just.

Coming on the table here, but a couple of guidance cuts and a little bit of disappointing news.

Your customers, obviously are carrying less inventory for a variety of reasons one of which is.

Higher carry costs, but.

I also think for carbon centre shoot for a bit sometimes customers might deplete inventories in anticipation of.

Lower pricing in the following year for again, a variety of reasons. So I'm curious number one is there anything that you can do kind of preemptively to avoid such discussions.

Ghansham Panjabi: And any other variances we should keep in mind apart from a lower chair count. Sure, and I think first off, a lot of the dialogue we just had on destocking will influence the actual guidance that we'll give for 2024 on our next call. As we sit here today, what we have done is we've decided to proactively and aggressively manage the things within our control, and that is part of the $50 million cost reduction program.

And are there any.

Are your contracts that come up for maturity next year across your three different businesses.

That we should be mindful of and thank you for for the year. Thank you.

So maybe I'll take the tail end of that question first.

Ghansham Panjabi: And really from a P&L saving standpoint, you should think about, call it 40% of that to be impacting in 2024. So we'll just round about $20 million of the $50 million cost savings program. So that is in large part what is going to drive our earnings growth next year, irrespective of what happens with market recovery and volume. So that's one input, Gonchum, the other big input is what's not being talked about a lot right now is our dispensing and specially closures segment, the mixed benefit we're getting from our high value dispensing products, and frankly the growth that that's generated and has been generating all year long.

As far as large contracts coming up in 'twenty four no. We don't have anything in either at the beginning really we're at the end of 'twenty for just kind of normal course contracts as we always do but nothing significant.

<unk>.

You raise a good question gave about.

Moving procurement activities for customers between years, given price changes as you very well know a lot of our businesses is long term is covered under long term contracts with with very clear pass through mechanisms associated with them that may on the fringe.

Drive some of that activity, but usually that occurs when there are significant changes in the raw material component of those pass throughs and then we just don't see the significant change in raw materials year over year at this point as we're heading into 24, there is likely some deflation.

Ghansham Panjabi: Those trends will continue next year in 2024, and we anticipate continued growth and mixed benefit from the high value dispensing products. Again, irrespective of recovery and food and beverage markets, and our other aspects of the business. So really we believe we can control what's immediately in front of us the cost savings program will drive earnings growth for next year irrespective of market recovery.

And that'll be a good answer for our customers and for consumers, but I don't know that it's going to be something that would drive the activity but.

In fairness the Destocking activity has been a challenge to work with our customers as we head towards year end and it might just be a benefit that there is a small deflationary item coming their way in the early part of next year.

Ghansham Panjabi: Okay, thanks so much.

George Staphos: We'll now take our next question from George Stasso with Bank of America. Hi everyone, good morning. Thanks for the time, the details.

Okay, maybe just a quick follow on that sometimes you give us a sense for maybe where tin plate might be shaking out for the following year.

George Staphos: Adam, I assume the pets aren't on GLP1 yet, so that's probably not a reason why you're saying destocking there, but in terms of the adjacencies that you're seeing destocking and food and beverage, was it soup, what else is going on, and what are your customers saying in terms of why they're doing this? Relatedly, you said they're accelerating their destocking, and that's great, but wouldn't that then mean a pickup and volume in the fourth quarter or soon thereafter, you're just pulling forward the destocking that would have occurred, and related to that, what was the volume in metal for the quarter, and that had a couple of problems.

I know there was some I think settlements on.

Okay.

Countervailing duties and anti dumping duties. So just maybe sense of direction there and then.

Just ask to get it over with.

DSC the high value solutions that you guys provided has been a bright spot and you talked about mid single digit growth.

George Staphos: Sure, thanks George, and again, half of our volume in the metal container segment roughly is in pet food, so you're right, that is not part of the GLP1 conversation at this point, which is not more than meaningful, which is a more than meaningful part of our business. So, fundamentally, George, you're right with your destocking thought and question, so it's great that it's accelerated. At some point, that will mean that there is volume recovery to replenish inventory levels, and again, it's not about the unit volume of inventory for our customers at this point, it is about the year end absolute dollars of inventory that they hold on their balance.

You talked about kind of some of that carrying over into next year.

How contingent on a good holiday season is that meaning.

Things are good now for pipeline fill it gets on the shelf and maybe people pull back a little bit around the holiday.

Is there a potential for then destock activity in those high value solutions in the first half of 'twenty four.

Okay. Great question, so I'm going to start with a template to begin with and so.

It's still in process right now we're deep in negotiations and as usual Gabe we are fighting like crazy for our customers and for consumers.

And you know.

I think the guidance, we'd give now is there will be.

<unk>.

Kind of a maybe a mid single digit kind of deflation that we're anticipating for <unk>.

<unk> played in 2024, and really that's going to probably be a little bit greater in Europe than it is going to be in the U S market.

George Staphos: So, even though it's accelerated, I don't think it's going to be a favorable upside for Q4, because they are targeting the year end value. It should be for 2024, but that's not what we're factoring into our ability to drive earnings growth for next year. So, I think that's an important component to what we're thinking about for the fourth quarter and for next year.

But obviously most of our a.

A significant portion of our buyer kind of a U S base.

In the metal container segment, and then I think you raised a really good question on dispensing and specialty and and the higher value items. So as we sit here today.

We're seeing a slight shift of <unk>.

George Staphos: And then- Adam, you're saying food and beverage, so where in food and beverage was it, where you had this Okay. Sure. So think about our, in the metal container segment, we'll start there. So additional destocking, really in our packed volume, a little bit of destocking and soup, but really it's the adjacency that it got included now for the pet food market. So that's the biggest, biggest change we're out of last time we talked. Food and beverage also applies to dispensing and specialty closures as well, particularly in the US market. So it is impacting our traditional kind of hot fill and cold fill closure market in the US business. Okay.

Customer mix and and we're going to be able to deliver kind of that same mid to high single digit growth rate in 2024 irrespective of the holiday season.

We've already seen a little bit of a shift we've seen some customers that are working on destocking activities already and we've been able to offset that volume with market opportunities with other customers in other areas of the market. So it's a very balanced portfolio that we have that's consistently been providing kind of mid to high single digit growth rates.

For some period of time now.

Great. Thank you for the color there.

George Staphos: And the, and the volume and metal overall for the quarter, what was it? I found about 10 percent. Okay. Understood. Thanks for going through all of that.

Okay.

Well take our next question from Matt Roberts with Raymond James.

Hey, good morning, everybody and thanks for getting me on here.

George Staphos: I want to go to the cost reduction program. You mentioned it's, it's footprint. We can surmise what that means and other cost reduction activities, but can you, and you gave us some delineation in terms of the cadence to Ghansham's question. But what's going to change it, Silgan, as a result of this? So give us a bit more tiles in the mosaic here in terms of what capability you get, why it doesn't disrupt your service, you know, why it actually makes you more competitive company going forward.

Maybe I'll just ask last quarter, you discussed some of those labor issues. I mean are there any changes there have those been resolved or.

As you look forward are there any potential contracts coming up for renewal that maybe haven't been reset for a couple of years anything we need to be mindful of there in terms of how that bargaining works.

Hey, Matt welcome to the coverage universe first so again felt good to have you.

Yes.

As far as the labor issues that we talked about at the one food and beverage plants in the U S business on the last call what we the guidance, we'd given that the cost improvement that we would see.

George Staphos: Aside from the fact, yeah, we'll try to build in 50 million dollars of cost reduction into our models over time. What is Silgan get out of it? What are your shareholders get out of it? Sure. It's a great question, George. And, you know, I think for starters, what I would say is, is this is a program at Silgan and cost reduction and right sizing our capacity that we've executed many, many times over the years at Silgan.

We estimated to be about 4 million. So the $10 million cost impact that we had in Q2 would be reduced to $6 million in Q3, and we basically delivered right on that number. We've also gave guidance on the last call that that would reduce to $3 million in Q4, and that's absolutely what we've.

George Staphos: So there should be confidence that we can indeed execute what we're putting in front of you. And we have tremendous confidence that we'll be able to execute it. And then what is the benefit that we get? There's a couple things. One, you know, you think about dispensing and specialty closures. Clearly, we've got growing products, growing markets that we're supporting there. It's really not about taking any capacity out of that market. It is about optimizing the footprint, taking growing volume and putting it in more efficient facilities and driving improvement in that manner.

Got embedded into our forecast it's absolutely what we are executing upon so good news we've done exactly what we thought we were going to do and said we were going to do related to that specific labor issue.

And I.

I'll answer your question two ways on the major contracts so.

Again, we always have a normal set of customer contracts that come up nothing significant as I mentioned earlier and then from a labor standpoint, our union facilities nothing significant I mean, we have our normal course churn that we worked through every year or so on the labor agreements that we rather.

George Staphos: When you move to metal containers and custom containers, there's a little bit of both of that. There is some capacity that's going to be coming out of those two markets as we write size our capacity. And this is an important statement, George, to the volumes that we see right now. So again, we're not necessarily planning on volume growth next year because of markets recovering. We'll have specific products that grow, but this is not predicated on volume recovery from the market.

<unk>. Several this year, we'll have a couple of and negotiate next year, but that's all very much normal course for us.

Okay perfect. Thanks, Adam and then maybe lastly on and.

George Staphos: Importantly, what we learned during the pandemic is that we did have this tremendous ability to surge and flex our cost structure to meet incremental demand. So we have tremendous confidence that by right sizing to the existing capacity required and demand levels of our customers, as markets recover, as volume grows and metal containers and and then custom containers, we'll have the ability to meet that demand head on with the adjusted footprint and capacity that we have.

<unk>.

Can you your cash and debt buybacks in the quarter were certainly encouraging is there any update to where you expect leverage to shake out at year end or any considerations in 2024 in terms of either paying down debt or worse more of those shareholder returns.

And you're going to be clear there would be helpful. Thank you you bet.

Taking the questions.

Okay I'll answer the leverage ratio and then I'll pass it onto that so from a leverage ratio perspective for the end of the year will probably be a little bit over three times as you know our stated ranges between two and a half and three five times that we're right in the middle of that and feel like it is not restricting us from any opportunities that we may see.

George Staphos: One last important note to make is we do view pet foods separately and metal containers because it has been growing for decades in our portfolio. We've invested for growth, our customers have invested for growth and the goodness there is there's really no incremental capacity that we need to add to get this next level or increment of growth in pet food. But we will not be rationalizing any of the pet food assets or capacity as we sit here today and as we go forward because as you I believe heard in the remarks a minute ago, our customers are planning for growth in pet food next year and they've been very public about making those things.

Yeah and on the share repurchases as you saw we are we did buyback.

Upsized.

Amounts relative to maybe what we've done historically.

Open market transactions, but I don't think it's any secret that that we have maintained and continue to maintain a fairly sizeable authorization historically, it's been about 300 million over over three years.

Where are we where we stand today after buying back roughly $175 million on a year to date basis.

Operator: I have other questions, but I'll turn over to everybody else to be fair, and I'll come back if there's time. Thanks, guys.

We've got about $100 million left so where we've typically been most active in the share repurchase.

Anthony Pettinari: Thank you. Well, now I'll take our next question from Anthony Pettinari with City. Good morning. I'm wondering if you can talk a little bit more about custom container and any progress on customer wins. Is there anything kind of on tap for 24 that you can share? I don't know if you're maybe gaining some business back, but maybe destocking sort of offsetting that or if you can just talk about how that's progressing versus expectations.

Arena is as we start to trend to the lower end of our guidance from a leverage standpoint.

The 331 times, we're kind of right in the middle.

That combined with the fact that we saw some market dislocation in the stock performance. It seemed like a good time to be active in the market, particularly relative to the backdrop around the M&A environment, where I think there's just some clunkiness in that market right now given everything thats going on in the economy.

Anthony Pettinari: Yeah, Anthony, I think you've got it right. I think we are having success in the market. We are winning in the market as well, and really it's largely just offset by the destocking activities that are very broad based in the in the custom container segment. So we do have a couple of large new wins that will be commercializing next year now. The first one, which is from a volume perspective, a significant win for us will be commercialized, call it mid to late first quarter.

Joining me on interest rates.

But the activity has has slowed to maybe.

A few specific ideas that are that are being floated, but I think generally the M&A activity is kind of go on it.

Anthony Pettinari: And we feel pretty good about the timing of that one. The second new one has had a couple of delays on it, and we are now looking at a mid-year commercialization of the second item. What's interesting is again, both are contractual, so the goodness for us is our contract start when the products commercialize. So we get the same three or five year runway on the volume that we've contracted with our customers.

On a pause if you will likely waiting for the calendar flip.

And then I think that's just another example of our disciplined capital allocation program that is intended to create value for our shareholders and I think clearly that debt.

Okay. Thank you all again.

Okay.

Our next question will come from Iran, Vishwanathan with RBC capital markets.

Great. Thanks for taking my question.

So I guess I had a broader question you know.

Obviously, the Destocking has been.

Anthony Pettinari: So unfortunately, we're ready to commercialize these products, and unfortunately our customers have not been ready to do so just yet. And again, part of that does fall into destocking, spending the capital to commercialize those products, and launch those new products at the end of the year is just not happening now as we had originally thought. So unfortunately, it's two large wins in the next year. Really good line of sight on the first one. The second one is slated for mid-year, and it'll be dependent upon our customer's ability to execute that.

A little bit deeper than maybe some of us expected.

Now, it's obviously a move.

Moved over into the pet food category as well.

I guess, what are you hearing from maybe brand owners or retailers.

As far as some.

Some of these issues would you say that any of those companies are making structural changes.

To deal with maybe lower inventories on the retail side, and then maybe lower consumption rates on the.

Anthony Pettinari: Okay, that's very helpful. And then in terms of the expectation for earnings growth in 24 is absent, whether a market recovery kind of materializes or not. Do you think you can get back to 2022 kind of EBITAL levels or potentially exceed that? I think that's what consensus is maybe assuming, or I don't know if there's any kind of finer point you can put on maybe what you view as sort of normalized earnings in maybe a difficult environment.

The brand owner side I mean is there anything you're hearing from.

And any of these companies.

No its not and in fairness to the second point you know what we've seen is for our product in particular that the consumer purchases have been pretty resilient. So their consumption still remains fairly robust for our products and and we don't see at this point any any structural change.

Do either retail or our customers branded products.

Inventory programs or our go to market programs that are really any different what we have seen which is a positive as is more promotional activity and we.

Anthony Pettinari: Yeah, I think honestly, we're just a little too early to really provide any additional color there, because I think that's a pretty specific question that's going to require more maturity to our 2024 budgetary process. And we're not at the beginning, we're sort of in the middle of it right now, but just not able to provide a whole lot more color than what we already have.

We anticipate that to provide a benefit to volume when it's fully integrated into the sales cycle for our customers again, I'm just going to repeat a room that really our customers have been talking about the dollar value of inventory in their system at year end and that's what's driving the destocking activity for the most part across <unk>.

Anthony Pettinari: Okay, I'll turn it over. Thank you.

Gabe Hadia: We'll now take our next question from Gabe Hadia with Wells Fargo Security. Please. Good morning, guys. So, I'm appreciating maybe just what we'll come on the tail here of a couple of guidance cuts and a little bit of disappointing news. Your customers obviously are carrying less inventory for a variety of reasons, one of which is higher carry cost. But I also think for covering the censorship for a bit, sometimes customers might deplete inventories and anticipation of lower pricing in the following year for, again, a variety of reasons.

Food and beverage and now our pet Foods segment I'll talk about two of our largest customers have now publicly stated.

That they believe 2024 is going to be a year of volume growth specifically for our products that we provide to them. So we're we're.

Gabe Hadia: So I'm curious, number one, is there anything that you can do kind of preemptively to avoid such discussions and are there any larger contracts that kind of come off from maturity next year across your three different businesses that we should be mindful of in thinking of for the year? Thank you. Maybe I'll take the tail end of that question first. As far as large contracts coming up in 24, no, we don't have anything, either at the beginning really weren't the end of 24, just kind of normal course contracts as we always do, but nothing significant.

Anxious to move on to 2024 and get back to a more normalized volume level, but as we said earlier, we're not waiting for that we're going to control our destiny and take good aggressive action to drive earnings growth for 2024.

Okay.

Okay. Thanks for that and if you were to think.

I think again on the on this volume kind of progression that you saw in 2023.

Would you be able to parse it out into.

You know, maybe what what is related to Destocking and maybe what's related to primary demand.

Just kind of curious how.

You know, we've obviously had gyrations through COVID-19 and supply chain issues, but.

You know it does appear that there has been some.

Structural weakness.

On on primary demand related to that.

And just wondering if that's what it's really going to take to see some improvement on that side.

Gabe Hadia: You raised a good question, Gabe, about moving pro-curement activities for customers between years, given price changes, as you very well know, a lot of our businesses is covered in a long-term contract with very clear pass-through mechanisms associated with them, that may on the French drive some of that activity, but usually that occurs when there are significant changes in the raw material component of those pass-throughs. And we just don't see the significant change in raw materials year over year.

Well I think in fairness, we need to get through the fourth quarter to really understand the full impact of destocking in the year, but I'll go back to a little bit of what we said earlier that you know.

For our high value dispensing and specialty closures items, we are seeing significant growth in the products that we define as gross products and that is driving benefit for the company from a mixed standpoint, so really I think it is back to food and beverage I think.

We all probably can go right now based upon the expectations for the fourth quarter and do some math and get work to figure out what the Destocking value was for 2023, but I think we'd rather sit here three months from now in January on our earnings call, we'll actually talk about what we did.

Gabe Hadia: At this point is we're heading into 24. There is likely some deflation, and that'll be a good answer for our customers and for consumers, but I don't know that it's going to be something that would drive the activity, but in fairness, the destocking activity has been a challenge to work with our customers as we head towards year end, and it might just be a benefit that there is a small deflationary item coming their way in the early part of next year.

<unk> from a destocking standpoint in 2023.

Okay. That's helpful. If I can just add.

Ask one more on promotional activity you noted that there has been an increase there.

Could you just elaborate on that is it kind of broad based and we've also been hearing that the depth of promotional activity is not necessarily.

Gabe Hadia: Okay, maybe just a quick follow on that. Sometimes you give us a sense for maybe where template might be shaking out for the following year. I know there's some, I think, settlements on counter-vailing duties and anti-dumpen duties, so just maybe sense of direction there. And then I'll just ask to get it over with. DSC, the high-value solutions that you guys provide has been a bright spot, and you talked about mid-single digit growth.

That strong that meaning that you know maybe the discounts aren't as deep.

What are you seeing on the promotional activity kind of incrementally.

It gives you a little bit more confidence.

Yes, I think there's a couple of things one we know the activities increase from where it was so let's let's start with that and then we also know that the activity level is not what it was pre pandemic. So I think there was a report out earlier in the week it was pretty clear that one of the largest <unk>.

Gabe Hadia: You talked about some of that carrying over into next year. How contingent on a good holiday season is that, meaning things are good now for pipeline fill, it gets on the shelves, and maybe people pull back a little bit around the holiday. Is there potential for then destocking activity in those high-value solutions in the first half of 24?

Food manufacturers CPG wise.

Hi.

Their sales 21% of their sales were on promotion versus pre pandemic at 24%. So below pre pandemic levels. However, up from prior quarters that had a lower than 21% promotion right. So again I'm viewing that as progress and.

Adam Greenlee: Okay, great question. So I'm going to start with a template to begin with. And so, you know, it's still in process right now where deep in negotiations, and as usual, we are fighting like crazy for our customers and for consumers. And, you know, I think the guidance we give now is, there will be, you know, a- kind of a maybe a mid-single digit kind of deflation that we're anticipating for Ken played in 2024 and really that's gonna probably be a little bit rater in Europe than it's gonna be in the US market but obviously most of our the significant portion of our buy is gonna be US-based in the metal container segment and then I think you raise a really good question on dispensing and specialty and the the higher value item so as we sit here today you know we're seeing a slight shift of customer mix and and we're going to be able to deliver kind of that same mid to to high single digit growth rate in 2024 with irrespective of the holiday season we've already seen a little bit of a shift we've seen some customers that are working on desocking activities already and we've been able to offset that volume with market opportunities with other customers and other areas of the market so it's a very balanced portfolio that we have this consistently been providing kind of mid to high single digit growth rates for some period of time now. Great, thank you for the color there.

We think that largely the market is following that kind of progression I think the other item that you raise is is the absolute <unk>.

Rice or our cost of the product on the store shelf theres been a lot of inflation, that's been passed through to customers and what we're seeing is yes. There is increased promotional activity.

The promotional value is not the same proposition that was provided to consumers pre pandemic and what we're waiting to see now is how effective those promotions are and.

And that's all happening in real time right now in Q4, and I think as we enter 2024, we're encouraged that the percent of product being sold on promotion is going up in approaching kind of pre pandemic levels and we think that will be a benefit for consumers and should as it always has in the past.

<unk> some volume activity across the segment.

Arun I think I would take you back to the discussion that we had in the last quarter and that was that we were getting the sense from our customers that this destocking was all about setting the stage for promotional activity and we didn't at that point didn't exactly know when that was going to start so if theres a bright spot in there.

So I think it's the fact that we are seeing.

The Destocking began and whether that's just testing the waters in terms of what the ultimate program is going to look like we don't yet know, but the fact that the activity is there is this kind of proof of concept. If you will relative to the to the destocking activity.

Matthew Roberts: We'll take our next question from Matt Roberts with Raymond James. Hey good morning everybody and thanks for getting me in here. Maybe I'll just ask last quarter when you discuss some of those labor issues and are there any changes there? Have those been resolved or as you look forward are there any potential contracts coming up for renewal that maybe haven't been reset for a couple years anything we need to be mindful of there in terms of how that bargaining works.

Got it thanks a lot.

Yeah.

Well take our next question from Mike <unk> with <unk> Securities.

Yes. Thank you I had a Bob Campbell, Alex for taking my questions.

Adam I just wanted to follow up quickly on a comment you made earlier about how your customers told you about how destocking is going to occur later in <unk> and ultimately they pulled that forward, which we're not anticipating a.

Matthew Roberts: Hey Matt welcome to the coverage universe for still good to have you as far as the labor issues that we talked about at the one food and beverage plants in the US business on the last call what we the guidance week given that you know the cost improvement that we would see we estimated to be about four million so the ten million dollar cost impact that we had in Q2 would be reduced to six million in Q3 and we basically delivered right on that number. We've also gave guidance on the last call that that would reduce to three million dollars in Q4 and that's absolutely what we've got embedded to our forecast it's absolutely what we are executing upon so good news we've done exactly what we thought we were going to do and said we were going to do related to that specific labor issue and I I'll answer your question two ways on the the major contract so you know again we always have a normal set of customer contracts that come up nothing significant as they mentioned earlier and then from a labor standpoint our union facilities nothing significant I mean we have our normal course churn that we work through every year or so on the labor agreements that you know we we've ratified several this year we'll have a couple to negotiate next year but that's all very much normal course for us.

Can you just speak to how you got your customers' forecast and the comments that they make to you and whether you've seen any change in your approach to that given the disconnect between what's actually you know between what they're telling you what they're actually doing.

Yeah sure Ann.

Maybe just for clarity, Mike I think as we were talking about.

The destocking activity on our last earnings call. The information was fresh hot off the presses. So there's a couple of things to think about it.

Just to take that into context number one I think.

Remember many of our facilities were either co located or near located to our.

Our customers were in their production planning meetings for the most part so we we understand exactly what they're planning to manufacture and they understand exactly what we're planning to manufacture so that level of the relationship has remained very strong very transparent we've got a really good understanding of.

Of what our customers are doing I think the issue that we had as they were.

It is an objective that we are coming from outside of the location. So thinking more from a corporate activity with a year end free cash flow number at our customers that they were targeting so I think the disconnect was simply a timing issue that the corporate information from our customers was working its way down to the production planners.

Matthew Roberts: Okay perfect thanks Adam and then maybe lastly on to your cash and debt that the buybacks in the quarter were certainly encouraging. Is there any update to where you expect leverage to shake out at your end or any considerations in 2024 in terms of either paying down debt or more of their shareholder returns anything to consider there would be helpful. Thank you, but thank you all for taking the questions. Okay, I'll answer the leverage ratio and then I'll pass it on to Bob.

And at the same time it was very much focused on the year end metric of free cash flow and and what their objectives were and then the simple reality was as those plans get embedded into the production schedules of our customers. They were accelerated so versus what we were originally thinking because the disconnect for us as we thought it was a year end target.

Whereas they accelerated the timing and moved it earlier into Q3. So that's just the reality of what happened I think we've got a good handle on it now and I think those programs are vetted through our customers and the new item here is pet food and we're continuing to work through that as we talked earlier.

Matthew Roberts: So from a leverage ratio perspective for the end of the year, we'll probably be a little bit over. For three times, as you know, our stated ranges between two and a half and three and a half times. So we're right in the middle of that and feel like it is not restricting us from any opportunities that we've been seeing. Yeah, I'm on the share repurchases. As you saw, we we did buyback upsized amounts relative to maybe what we've done historically in open market transactions.

Got it okay.

Second question.

I realized that it might still be a little early and I know you said.

We're still working through all the budget.

Details, but can you help us just initially frame.

Through 2024.

Matthew Roberts: But I don't think it's any secret that we have maintained and continue to maintain. A fairly sizable authorization historically. It's been about 300 million over over three years where we where we stand today after buying back roughly 175 million on a year date basis. We've got about a hundred million dollars left. So where we've typically been most active in the share repurchase arena is as we start to trend to the lower end of our guidance from a leverage standpoint.

You mentioned the $20 million of cost savings do you expect next year that you won't be $10 million $10 million of head.

Closure planned headwinds that don't repeat.

On the two new custom computers customers, you mentioned, which were all positives, but on the other.

Opposite that you still have continued destocking you have elevated inflation, especially in Europe, and you have higher resin costs can.

Can you help us with any.

Is there any of those tankers to be mindful of but thinking about the EBITDA trajectory in 2024.

I think you've got them pretty much what we've we've talked about and what we're thinking about at a high level at this point so.

Matthew Roberts: At the 3.1 times, we're kind of right in the middle. That combined with the fact that we saw some market dislocation in the stock performance. It seemed like a good time to be active in the market, particularly relative to the backdrop around the M&A environment where I think there's just some clonkiness in that market right now given everything that's gone on in the economy and interest rates. That the activity has slowed to maybe a few specific ideas that are being floated.

Maybe the overarching statement I would make to that Mike is nothing has changed as far as our thesis on each of the operating segments as to where we think the kind of near term and longer term growth rates are for each of the segments and we feel pretty good about that we've got to get through this destocking.

Whether it trails into next year in the first quarter, we're not we don't believe so, but we need to get through it and make sure we understand exactly what it is but you've got the big moving parts to what we're thinking about 'twenty four we then need to add.

Matthew Roberts: But I think generally the M&A activity is kind of on a pause, if you will, likely waiting for the calendar to flip. And then I think it's just another example of our kind of discipline capital allocation programs that is intended to create value for our shareholders. And I think clearly that did. Thank you again.

How we're viewing volumes as it relates to our customer programs for next year that we're still working through those details and will be frankly for the balance of the quarter.

Okay.

Understood. Good luck good luck at 14.

Thank you.

Well now take our next question from Daniel Rizzo with Jefferies.

Arun Vishwanathan: Our next question will come from Arun Vishwanathan with RBC capital markets. Great. Thanks for taking my question.

Good morning. Thank you for taking my question I was just wondering if you could provide a little more color on why there wouldn't be any destocking at all with the high value customers with the high value products that are now kind of growing it just seems it just.

Arun Vishwanathan: So I guess I had a broader question. You know, obviously the destocking has been, you know, a little bit deeper than maybe some of the expected. You know, now it's obviously moved over into the pet food category as well. Well, I guess what are you hearing from maybe brand owners or retailers as far as, you know, some of these issues? Would you say that any of those companies are making structural changes to deal with maybe lower inventories on the retail side and then maybe lower consumption rates on the brand owners side?

What I've heard from other companies. This is fairly broad based across kind of the whole spectrum.

Hey, Dan and we think it's pretty broad based across all of our segments as well I think the the items that we're talking about in our high value dispensing items, you've got to think about kind of what.

What percentage of the overall package cost that we represent to our customers and really the consumer that's buying those items really is not subject to a lot of the challenges that we're talking about in other areas of our business. So we do think it's been very resilient.

Arun Vishwanathan: I mean, is that anything you're hearing from any of these companies? No, it's not. And in fairness to the second point, what we've seen is for our product in particular that the consumer purchases have been pretty resilient. So their consumption still remains fairly robust for our products. And we don't see at this point any structural change to either retail or our customers branded products, inventory programs or go to market programs that are really any different.

Grown mid to high single digit every quarter this year and frankly, it was last year as well and so we've got good confidence and good line of sight that we do continue to have that growth driver for our dispensing and specialty closures segment and 24.

So what we're talking about I guess beauty and fragrance is kind of the main thrust. There is what we're referring to and if I missed it I apologize and really it's it's elements of beauty and fragrance. So we are in the prestige slash luxury end of all of those markets again that I think are subject to some different economic drivers if you will.

Arun Vishwanathan: So we have pain, which is a positive is more promotional activity. And you know, we anticipate that to provide a benefit to volume when it's fully integrated into the sales cycle for our customers. Again, I'm just going to repeat a room that really our customers have been talking about the dollar value of inventory and their system that you're in. And that's what's driving the destocking activity for the most part across our student beverage and now our pet food segments.

Okay.

I don't know if I missed this either but what's the cash cost of a cost savings plan as it kind of a one for one basis or how should we think about that.

I think one for one is the right way to think about it and you know where we said the savings would be more over the two year period kind of 40% year, 160% year or two that's going to be flipped for the cash cost associated so yeah, we'll have a little bit more cash out the door upfront preparing to drive the car.

Arun Vishwanathan: I'll talk about two of our largest customers have now publicly stated that they believe 2024 is going to be a year of volume growth specifically for our products that we provide to them. So, you know, we're, we're anxious to move on to 2024 and get back to a more normalized volume level. But as we said earlier, we're not waiting for that. We're going to control our destiny and take good aggressive action to drive earnings grows for 2024. Okay, thanks for that.

Out of the business so call. It 60 40 on that the cash cost.

Thank you very much.

Sure.

Well now take our next question from Jeff Zekauskas with J P. Morgan.

Thanks very much.

Your.

Okay.

Your SG&A costs were $84 million in the quarter and in the previous quarter. They were one or two in the year ago. They were at <unk> 97.

Arun Vishwanathan: And if you were to think again on the on this volume kind of progression that you saw in 2023, would you be able to parse it out into, you know, maybe what what is related to destocking and maybe what's related to primary demand. Just kind of curious how, you know, we've obviously had gyrations through COVID and supply chain issues, but, you know, it does appear that there has been some structural weakness on on primary demand related to and just wondering if that's what it's really going to take to see some improvement on that side.

How did you get your SG&A down.

So much and so quickly.

At management bonuses or you're already capturing some of your cost savings.

Does this number contained any of the $50 million in cost savings can you explain it.

Sure. Thanks, Jeff So it's.

A couple of components. One there is some head count change there. So we are driving cost out of the business the $50 million will be incremental.

So what we've executed on in Q3, but we will continue to execute upon in Q4. So you've got head count you've got be employee related cost associated with lower head count as well and then we've got some other administrative costs that we were able to to take action on so that includes everything like.

Arun Vishwanathan: Well, I think in fairness room, we need to get through the fourth quarter to really understand the full impact of destocking in the year, but I'll go back to a little bit of what we said earlier that, you know, for our high value dispensing and specially closures items, we are seeing significant growth in the products that we define as growth products and that is driving benefit for the company from a mixed standpoint. So really, I think, you know, it is back to student beverage.

Management bonuses and all the other items associated with what kind of accruals for the course of the year and as you true some of those up you get a a larger impact in Q3, because you're truing up nine month of costs. So that was part of why maybe it does look like a little bit outsized reduction.

Arun Vishwanathan: I think, you know, we all probably can go right now based upon the expectations for the fourth quarter and do some math and get work to figure out what the destocking value was for 2023, but I think we'd rather sit here three months from now in January on our earnings column will actually talk about what we, we did experience from a destocking standpoint in 2023. Okay, that's helpful.

Versus either prior year or prior quarters.

Okay, Great and then I have a question about your 340, yet free cash while I was wondering if you could check my math.

And that through the first nine months, including <unk>.

Changes to an outstanding tax your cash flow was negative $6 60.

Arun Vishwanathan: If I can just ask one more on promotional activity, you noted that there has been an increase there. Could you just elaborate on that as it kind of broad based and we've also been hearing that the depth of promotional activity is not necessarily that strong, meaning that, you know, maybe the discounts aren't as deep. What are you seeing on the promotional activity kind of incrementally that gives you a little bit more confidence?

And you've got.

Call. It 230, <unk> capex for the year, that's $8 90.

And so in order to generate 340 and free cash flow, you've got to generate a little bit more than $1 2 billion in the fourth quarter.

Last year, I think you generated around nine.

900 and.

Arun Vishwanathan: Yeah, I think there's a couple things. One, we know the activities increased from where it was. So let's start with that. And then we also know that the activity level is not what it was pre-pandemic. So, you know, I think there was a report out earlier in the week. It was pretty clear that one of the largest food manufacturers, CPG-wise, was had their sales, 21% of their sales were on promotion versus pre-pandemic.

In this quarter or the fourth quarter, you think is going to be a little bit weak you've got some other things. So is that right you have to do $1 2 billion to get to that $3 40, and free cash flow.

Yes, so well we're looking at is we have higher receivables coming into this quarter, which we are expecting to collect through the end of the year and some of that will be offset by slightly higher inventory level is the rationalization programs that we have.

What was your accounts payable in the quarter.

Arun Vishwanathan: [inaudible] And, what we're seeing is, yes, there is increased promotional activity. The promotional value is not the same proposition that was provided to consumers pre-pandemic. And, what we're waiting to see now is how effective those promotions are. And, that's all happening real time right now in Q4. And, I think, as we entered 2024, we're encouraged that the percent of product being sold on promotion is going up. And, approaching the sale of the product is going up.

It's included with other outstanding checks.

On the balance sheet, let's see.

$652 million.

Okay. Thank you.

Thanks.

Yeah.

Well now take a follow up from George Staphos with Bank of America.

Hi, Thanks for taking the follow on so I just wanted to come back so what revenue effect.

And if you had it EBITDA effect should we bank on banks not the right term are you considering for the new customers that come in next year, and then I had a couple of follow ons.

Okay.

And George are you in the custom container segment.

Yes, correct, that's where you said you are commercializing the new customers.

Correct.

Look we were looking to replace the non renewal of the contracts from 2022, and we believe we will replace the income associated with that on a full year run rate basis, obviously, we're commercializing one in the first quarter one mid year. So.

Arun Vishwanathan: [inaudible] It's going up, it's going up. Initiatives and objectives that were coming from outside of the location. So think more from a corporate activity with a year-end free cash flow number at our customers that they were targeting. So I think the disconnect was simply a timing issue that the corporate information from our customers was working its way down to the production planners. And at the same time it was very much focused on the year-end metric of free cash flow and what their objectives were.

Run rate by the end of the year will fully replace that so call. It something round about $10 million of of run rate profit by year end. The revenue will not be a one for one replacement just simply because these are going to be smaller bottles that we're manufacturing.

But really it's more of the mix benefit we're getting as the profit will be.

Replacing what we decided not to renew.

Okay.

And my last two ones.

You know a lot of your customers and food are not on year end or calendar year ends for their physicals, but mid years. So you know back to the Destocking question, one more time why wouldn't we see them do the same destocking reduce.

Working capital drive cash flow higher relative to their end of fiscal year, which means you're still dealing with this through the through the first half of your calendar and fiscal year for 24, and then you know.

A question, we kind of touched on earlier I'm guessing, there's probably not a heck of a lot to talk about but your for your human food and beverage customers. What do they think on on G. L. P. One thanks, guys and good luck in the quarter.

Great. So.

So I think.

George on the the year end item, so theres a couple of things.

Your own account you're right several customers are not on a calendar basis or on a fiscal year and many customers are on a calendar basis. So clearly there is a component of that really the other piece of this is retail discussions and as our customers renew their retail conversations about.

Cost and price change for 2024, there is a January element to that discussion the retail discussions are based on our year end.

Calendar year so.

Again, we're working through that very closely with them and we do think that has an impact.

The destocking activity.

I'm sorry, Adam So you think it's it's really year calendar year and that.

And that has the impact not the physical which we're just talking about what could have some effect through middle of the year.

Yes, I think it is calendar year and again, some arent on a calendar year and some are in these these retail discussions are on a year end basis and then your other part of the question George I apologize.

Yeah, No worries just you know to the extent you have any commentary from your customers on anti obesity drugs in the effect, it's having on human food and beverage.

Arun Vishwanathan: So the simple reality was as those plans got embedded into the production schedules of our customers, they were accelerated. So versus what we were originally thinking because the disconnect for us as we thought it was a year-end target, where is they accelerated the timing and moved it earlier into Q3. So that's just the reality of what happened. I think we've got a good handle on it now. And I think those programs are embedded through our customers. And the new item here is that food and work continuing to work through that as we talked earlier. Got it. Okay. Yeah.

What are you hearing, which you know, which we consider what should we not worry about any thoughts there would be great. Thanks, and good luck in the quarter.

Thank you.

<unk> had several discussions with our customers and you know I think for the most part.

Non pet food segment of our business or the earlier conversation I think the discussion has largely been around what we do is our products provide nutrition to consumers at a tremendous value and it's a safe means of getting.

Low cost high value nutrition products to consumers and so we do think that the consumers of our products likely won't be candidates for this kind of weight loss application and we also think that even though some may be that this is as high nutrition product.

Arun Vishwanathan: And the second question, I realize that it might still be a little early. And I know you said you're still working through all the budget details. But can you help us just initially frame the event on Q3 for 2024? You mentioned the $20 million of cost savings. You expect next year that you have the $10 million of had closure plant headwinds adult repeat. You also have two new customers you mentioned, which were all positives.

We support so.

Snacks, we're not are not a big part of what we do.

We've got some of our beverage products that probably are closer, but we just don't think according to our customers that there is any material impact for the foreseeable future from the advent of the <unk> type applications.

Arun Vishwanathan: But on the opposite end, you still have to continue destocking your elevated, you know, inflation, especially in Europe and you have higher resin costs. Can you help us with any. I think you've got pretty much what we've talked about and what we're thinking about at a high level at this point. So, you know, I think maybe the overarching statement I would make that Mike is nothing has changed as far as our thesis on each of the operating segments as to where we think the kind of near term and longer term growth rates are for each of the segments.

Thank you Adam.

Sure.

And it appears there are no further telephone questions I'd like to turn the conference back over to our presenters for any additional or closing comments.

Great. Thank you and I appreciate everyone's time today and interest in the company look forward to reviewing our year end and our 2024 outlook in January.

And once again that does conclude today's conference. We thank you all for your participation you may now disconnect.

Arun Vishwanathan: And we feel pretty good about that. We've got to get through this destocking whether it trails into next year in the first quarter. We're not, we don't believe so, but we need to get through it and make sure we understand exactly what it is. But you've got the big moving parts to what we're thinking about 24. We then need to add, you know, how we're viewing volumes as it relates to our customer programs for next year that we're still working through those details. And we'll be frankly for the balance of the quarter. Understood. Good luck. Good luck and for you. Thank you.

[music].

Daniel Rizzo: Well, now I'll take our next question from Daniel Rizzo with Jeffries. Good morning. Thank you for taking my question. I was wondering if you could provide a little more color on why there wouldn't be any destocking at all with the high value customers and with the high value products that are now kind of growing. It just seems that just what I've heard from other companies. This is fairly broad based across kind of the whole spectrum.

Daniel Rizzo: Hey, Dan. And we think it's pretty broad based across all of our segments as well. I think the the items that we're talking about in our high value dispensing items. You've got to think about kind of what percentage of the overall package costs are that we represent to our customers. And really, you know, the consumer that buying those items really is not subject to a lot of the challenges that we're talking about in other areas of our business.

Daniel Rizzo: So we do think it's been very resilient. It's grown mid to to high single digit every quarter this year and frankly, it was last year as well. And so we've got good confidence and good line of sight that we do continue to have that growth driver for our dispensing and especially closure segment in 24. So, we're talking about, I guess, beauty and fragrance is kind of the main thrust there is what we're referring to, and if I miss it, I apologize.

Daniel Rizzo: Yeah, and really it's elements of beauty and fragrance. So, you know, we are in the prestige slash luxury end of those markets. Again, that I think are subject to some different economic drivers, if you will. Okay, and I don't know if I missed this either, but what's the cash cost of the cost savings plan? Is it kind of a one for one basis or how should we think about that? I think one for one is the right way to think about it.

Daniel Rizzo: And, you know, where we said the savings would be more over the two year period, kind of 40% year one, 60% year two, that's going to be slipped for the cash cost associated. So, you know, we'll have a little bit more cash out the door upfront. So, we're not preparing to drive the cost out of the business. So, call it 6040 on the cash cost. Thank you very much.

Jeffrey Zekauskas: Well, now I'll take our next question from Jess, the cost cost with JP Morgan. Thanks very much. Your S-GNA costs were 84 million in the quarter. And in the previous quarter, they were 102 and in the year ago, they were 97.

Kimberly Ulmer: How did you get your S-GNA down so much and so quickly? Is that management bonuses or you're already capturing some of your cost savings? Does this number contain any of the 50 million in cost savings? Can you explain it?

Kimberly Ulmer: Sure. Thanks, Jeff. So, it's a couple of components. One, there's some headcount change there. So, we are driving costs out of the business. The 50 million will be incremental to what we've executed on in Q3 and what we will continue to execute upon in Q4. So, you've got headcount. You've got the employee related cost associated with lower headcount as well. And then we've got some other administrative costs that we were able to take action on.

Kimberly Ulmer: So, you know, that includes everything like management bonuses and all the other items associated with kind of accruals for the course of the year. And as you true some of those up, you get a larger impact in Q3 because you're truing up nine months of cost.

Kimberly Ulmer: So, that was part of why maybe it does look like a little bit outsized reduction versus either prior year or prior quarters. Okay.

Kimberly Ulmer: And then I have a question about your 340 and free cash flow. I was wondering if you could check my math. And that through the first nine months, including changes in outstanding checks, your cash flow is negative 660. And you've got, you know, call it 230 and capex for the year. That's 890. And so in order to generate 340 and free cash flow, you've got to generate a little bit more than 1.2 billion in the fourth quarter.

Kimberly Ulmer: And last year, I think you generated around 900. You know, and this quarter, you know, the fourth quarter you think is going to be a little bit weak. You've got some other things. So is that right? You have to do 1.2 billion to get to that 340 and free cash flow? Yes. So what we're looking at is we have higher receivables coming into this quarter, which we are expecting to collect through the end of the year.

Kimberly Ulmer: And some of that will be offset by a slightly higher inventory level is the rationalization programs that we have. What is your accounts payable in the quarter? It's included with other outstanding checks on the balance sheet. Let's see. 652 million.

Kimberly Ulmer: Okay. Thank you.

George Staphos: Well, now I'll take a follow up from George Staphos with Bank of America. Hi, thank you for taking the following. So I just want to come back. So what revenue effect? And if you had it, EBITDA effect, should we bank on banks not the right term? Are you considering for the new customers that come in next year? And that had a couple of follow-ons. And George, are you in the custom container segment?

George Staphos: Yes, correct. That's where you said you're commercializing the new customers. Correct. So, you know, look, we were looking to replace the non-renewal of the contract from 2022. And we believe we'll replace the income associated with that on a full year run rate basis. Obviously, we're commercializing one in the first quarter, one mid-year. So the run rate by the end of the year will fully replace that. So call it something round about $10 million of run rate profit by year end.

George Staphos: The revenue will not be a one-for-one replacement, just simply because these are going to be smaller models that were manufacturing. But really, it's more the mixed benefit we're getting as the profit will be replacing what we decided not to renew. Okay. Thanks for that. And my last two ones. You know, a lot of your customers in food are not on your end or counter your ends for their fiscal but mid years.

George Staphos: So, you know, back to the destocking question one more time. Why wouldn't we see them do the same destocking, reduce, working capital, drive cash for higher relative to their end of fiscal year, which means you're still dealing with this through the through the first half of your calendar and fiscal year for 24. And then, you know, question we kind of touched on earlier. I'm guessing there's probably not a heck of a lot to talk about.

George Staphos: But you are for your human food and beverage customers. What do they think on on GLP one? Thanks guys and good luck in the quarter. So I think, you know, George on the the year end item. So there's a couple things to take on account. You're right. Several customers are not on a calendar basis. They're on a fiscal year end. Many customers are on a calendar basis. So clearly there is a component of that.

George Staphos: Really, the other piece of this is retail discussions. And as our customers renew their retail conversations about cost and price change for 2024, there is a January element to that discussion that the retail discussions are based on a year end kind of calendar year. So again, we're working through that very closely with them. And we do think that is an impact to the destocking activity. I'm sorry, Adam, so you think it's really your calendar year end that has the impact not the fiscal which we're just talking about which could have some effect through middle of the year.

George Staphos: Yes, I think it is calendar year end again. Some aren't on a calendar year and some are and these these retail discussions are on a year end basis and if you're other part of the question or do I apologize? Yeah, no worries. Just, you know, to the extent that you have any commentary from your customers on anti obesity drug and the effect of having on human food and beverage. What are you hearing, which, you know, which we consider what should we not worry about?

George Staphos: Any thoughts? There would be great. Thanks. Good luck in the quarter. Sure. Thank you. You know, we've had several discussions with our customers. And, you know, I think for the most part, you know, the non pet food segment of our business for the earlier conversation. I think the discussion has largely been around what we do is our products provide nutrition to consumers. And it's a tremendous value. And it's a safe means of getting low cost high value nutrition products to consumers.

George Staphos: And so we do think that the consumers of our products likely won't be candidates for this kind of weight loss application. And we also think that even though some may be that this is high nutrition product that we support. So, you know, snacks. We're not are not a big part of what we do. You know, we've got some of our beverage products that that probably are closer, but we just don't think according to our customers that there's any material impact for the foreseeable future from the advent of the GLP type applications.

George Staphos: Thank you, Adam. And it appears there now for their telephone questions. I might turn the conference back over to our presenters for an additional or closing comments. Great. Thank you, Anna. I appreciate everyone's time today and interest in the company.

Alexander Hutter: Look forward to reviewing our year end and our 2024 outlook in January. And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect. Thank you.