Q4 2023 AptarGroup Inc Earnings Call
Operator: ?? ?? Ladies and gentlemen, thank you for standing by. Welcome to Aptar's 2023 fourth quarter conference call. At this time, all participants are in a listen-only mode.
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Speaker Change: Ladies and gentlemen, thank you for standing by welcome to the out towards 2020 freight fourth quarter conference call.
Speaker Change: At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.
Operator: Later, we will conduct a question and answer session. Introducing today's conference call is Mary Skafidas. Sika.
Speaker Change: Trickiest in todays conference call is Mary.
Speaker Change: Okay.
Speaker Change: It does.
Mary Skafidas: Vice President of Investor Relations and Communications, please go ahead. Thank you. Hello, everyone, and thanks for being with us today. Joining me on today's call are Stephan Tanda, President and CEO of Aptar, and Bob Kuhn, Executive Vice President and CFO of Aptar. Our press release and accompanying slide deck have been posted on our website under the Investor Relations page. During this call, we will be discussing certain non-GAAP financial measures. These measures are reconciled to the most directly comparable gap financial measure, and the reconciliations are set forth in the press release; please refer to the press release disseminated yesterday for reconciliations of non-gap measures to the most comparable gap measures discussed during this earnings call. As always, we will also post a replay of this call on our website. And now, I would like to turn the conference call over to Stephan. Thank you, Mary.
Speaker Change: Precedent.
Mary: That's the relations uncommitted put patients. Please go ahead.
Mary: Thank you Hello, everyone and thanks for being with US today, joining me on today's call are Stefan tender, President and CEO of Avatar, and Bob Kuhn Executive Vice President and CFO of laptops.
Speaker Change: Our press release and accompanying slide deck had been posted on our website under the Investor Relations page.
Speaker Change: During this call we will be discussing certain non-GAAP financial measures.
Speaker Change: These measures are reconciled to the most directly comparable GAAP financial measure and reconciliations are set forth in the press release. Please refer to the press release disseminated yesterday for reconciliations of non-GAAP measures to the most comparable GAAP measures discussed during this earnings call.
Speaker Change: As always we will also post a replay of this call on our website.
And now I would like to turn the conference call over to Stephane.
Stephane: Thank you Mary and good morning, everyone. We appreciate you joining us on the call today.
Stephan B. Tanda: And good morning, everyone. We appreciate you joining us on the call today. I will begin my remarks by highlighting our results for the fourth quarter and the full year. Later in the call, Bob Kuhn, our CFO, will provide additional details on the quarter and year-end results. Starting on slide three, for the fourth quarter, Aptar achieved core sales growth of 2% and finished the year strong with adjusted EPS of $1.21 per share, due to a record year for both our proprietary drug delivery systems as well as our fragrance dispensing technology. Additionally, we achieved significant margin improvement in the quarter with an adjusted EBITDA margin of more than 21%, a three-point increase over the prior year's quarter. The margin improvement was driven by a strong focus on cost management across the company, as well as rapid growth in the pharmaceutical and medical device markets. In quarter four, robust demand continued for proprietary pharmaceutical drug delivery systems, which grew across several key applications such as emergency medicines, allergic rhinitis, central nervous system therapeutics, and natal decongestants. Solid growth from fragrance dispensing solutions also drove positive results in the quarter.
Stephane: I will begin my remarks by highlighting our results for the fourth quarter and the full year later in the call well Qunar CFO will provide additional detail on the quarter and year end results.
Ghanshyam Punjabi: Starting on slide three for the fourth quarter. After our achieved core sales growth of 2% and finished the year strong with adjusted EPS of $1 21 per share due to the record year for both our proprietary drug delivery systems as well as our fragrance dispensing technologies.
Ghanshyam Punjabi: Significant margin improvement in the quarter with an adjusted EBITDA margin of more than 21% to three point increase over the prior year's quarter. The margin improvement was driven by a strong focus on cost management across the company as well as rapid growth in the pharma end markets in quarter four robust demand.
Ghanshyam Punjabi: <unk> continued for our proprietary pharma drug delivery systems.
Ghanshyam Punjabi: Which grew across several key applications, such as emergency medicine, allergic rhinitis central nervous system therapeutics and nasal decongestants.
Ghanshyam Punjabi: Solid growth in fragrance dispensing solutions also drove positive results in the quarter.
Stephan B. Tanda: Turning to slide four for the full year, Aptar delivered core sales growth of 3%, with Pharma delivering 10% core sales growth. Well, beauty was up 2%, and closures declined 7%. About half of the decreased foreclosures were due to the passing through of lower resin costs to our customers.
Ghanshyam Punjabi: Turning to slide four for the full year.
Ghanshyam Punjabi: After delivered core sales growth of 3% with pharma delivering 10% core sales growth.
Ghanshyam Punjabi: Well the beauty was up 2% enclosures declined 7%.
Ghanshyam Punjabi: About half of the decrease for closures to walk you through the passing through of lower resin costs to our customers.
Ghanshyam Punjabi: As a reminder, our pharma business is a pipeline driven business as project, taking anywhere from five to 15 years to be ready for commercialization.
Stephan B. Tanda: As a reminder, our pharma business is a pipeline-driven business with projects taking anywhere from 5 to 15 years to be ready for commercialization, in 2023, with the highest number of new product launches since 2018, while adding an equal risk-adjusted value of new project opportunities to the pipeline, which bodes well for continued solid growth. It is important to note that sales for most of our new launches continue to build once they have been on the market for a few years, which underpins the setting of our long-term core sales growth targets for our farmer segment. Turning to our beauty and closure segments, order books have steadily grown. In our beauty segment, we have improved our win rate for new business and the retention of existing business. After our first full year of operating the closure segment, we are also seeing our beauty, home, care, and personal care closure opportunities increase. As a reminder, focusing more intently on opportunities in these areas was one of the reasons we brought closures under one roof.
Ghanshyam Punjabi: In 2023, with the highest number of new product launches since 2018, while adding an equal risk adjusted value of new project opportunities to the pipeline, which bodes well for continued solid growth.
Ghanshyam Punjabi: It is important to note that sales for most of our new launches continue to build once they have been on the market for a few years, which underpins the raising of our long term core sales growth targets for our pharma segment.
Ghanshyam Punjabi: Turning to our beauty enclosure segments order books have steadily grown our beauty segment, we have improved our win rate of new business and the retention of existing business. After our first full year of operating the closure segment.
Ghanshyam Punjabi: We're also seeing a beauty home care and personal care closure opportunities increase as a reminder, focusing more intently on opportunities in these areas was one of the reasons, we brought closures under one roof.
Stephan B. Tanda: Overall, 2023 was a pivotal year filled with many accomplishments, with an increased focus on both the top and bottom line, Aptar Achieved double-digit earnings growth. Double-digit adjusted earnings per share growth, an increase of 24%. Very meaningful EBITDA growth, and significant margin improvement across each segment. We improved ROIC by 2 percentage points within our raised long-term target range and reduced SG&A expenses as a percentage of sales. In 2024, we will continue to focus on growth and cost management, which will, in turn, help us expand our EBITDA margins into our long-term target range. Our cost management efforts will remain a key focus as we continue to reduce SG&A expenses as a percentage of sales.
Ghanshyam Punjabi: Overall 2023 was a pivotal year filled with many accomplishments.
Ghanshyam Punjabi: With an increased focus on both the top and bottom line after achieved.
Level digit earnings growth double digit adjusted earnings per share growth an increase of 24%.
Ghanshyam Punjabi: Very meaningful EBITDA growth and significant margin improvement across each segment improved ROIC by two percentage points within our raised long term target range and reduced SG&A expenses as a percentage of sales.
Ghanshyam Punjabi: In 2024, we will continue to focus on growth and disciplined cost management, which will in turn help us expand our EBITDA margins into our long term target range.
Ghanshyam Punjabi: Our cost management efforts will remain a key focus as we continue to reduce SG&A expenses as a percentage of sales.
Stephan B. Tanda: Looking back at 2023, we also took several important steps operationally that I would like to touch on now. These efforts are critical to executing our strategy and are helping to propel the company forward. We realigned the company to be closer to our customers, simplifying our beauty segment and bringing closures all under one rule. We continue to invest in our manufacturing operations with capacity expansion, as well as new state-of-the-art sites in France, the United States, China, and India. We initiated restructuring and cost reduction actions in all regions.
Ghanshyam Punjabi: Looking back at 2023, we also took several important steps operationally that they would like to touch on now. These efforts are critical to executing our strategy.
Ghanshyam Punjabi: Are helping to propel the company forward.
Ghanshyam Punjabi: We realigned the company to be closer to our customers simplifying our beauty segment and bringing closures all under one roof.
Ghanshyam Punjabi: We continue to invest in our manufacturing operations with capacity expansion as well as new state of the art sites in France, the United States, China, and India, we initiated restructuring and cost reduction actions in all regions.
Stephan B. Tanda: For example, in our closure segment, these actions will continue to drive asset utilization, with benefits realized in the second half of 2024. Additionally, 2023 was focused on organic growth, especially with two of our three large capital projects coming online. Partnerships and acquisitions continue to play a key role in growing the company by adding key capabilities, technologies, and talent worldwide. Aptar Digital Health had a productive year from that perspective. We extended our partnership with Chiesi to conduct clinical studies in the U.S. for asthma and COPD, which will help demonstrate the positive effects of digital health in improving patient outcomes. Aptar Digital Health also recently signed an enterprise agreement with Biogen, a leading global biotechnology company, to operate and develop their digital health solution. The initial scope of the multi-year contract covers several indications in neurology and immunology across 15 countries.
Ghanshyam Punjabi: For example, in our closure segment.
Ghanshyam Punjabi: These actions will continue to drive asset utilization.
Ghanshyam Punjabi: With benefits realized in the second half of 'twenty 'twenty four.
Ghanshyam Punjabi: And while 2023 was focused on organic growth, especially with two of our three large capital projects coming online.
Ghanshyam Punjabi: Partnerships and acquisitions continue to play a key role in growing the company by adding key capabilities technologies and talent worldwide. After digital health had a productive year from that perspective.
Ghanshyam Punjabi: We extended our partnership with key easy to conduct clinical studies in the U S for asthma and COPD.
Ghanshyam Punjabi: Which will help demonstrate the positive effect of digital health and improving patient outcomes.
Ghanshyam Punjabi: <unk> Digital health also recently signed an enterprise agreement with Biogen, a leading global Biotechnology company.
Ghanshyam Punjabi: To operate and develop their digital health solutions.
Ghanshyam Punjabi: The initial scope of the multi year contract covers several indications in neurology and immunology across 15 countries.
Stephan B. Tanda: This opportunity will help us broaden the ways we can monetize our digital health capabilities, not only to build and deploy our own solutions but also to support our customers to deploy and commercialize their solutions. The details of this agreement will be announced in a press release right after this call.
Ghanshyam Punjabi: This opportunity will help us broaden the ways, we can monetize our digital health capabilities.
Ghanshyam Punjabi: Not only to build and deploy our own solutions, but also supporting our customers to deploy and commercialize their solutions. The details of this agreement will be announced in the press release right. After this call.
Stephan B. Tanda: I also wanted to talk about an exciting development to increase the competitiveness of our operations in Asia and beyond. We recently signed a joint venture agreement with a China-based pump manufacturer. As part of the partnership agreement, we will acquire a 40% stake in the company. Through this partnership, Aptar will have access to cost-effective pump manufacturing in the region.
Ghanshyam Punjabi: Also wanted to talk about an exciting development to increase the competitiveness of our operations in Asia and beyond.
Ghanshyam Punjabi: <unk> recently signed a joint venture agreement with a China based pump manufacturer.
Ghanshyam Punjabi: As part of the partnership agreement, we will acquire a 40% stake in the company.
Ghanshyam Punjabi: Through this partnership after we'll have access to cost effective pump manufacturing in the region.
Ghanshyam Punjabi: First the go to market agility and more complete end to end local supply chain.
Stephan B. Tanda: Faster go-to-market agility and a more complete end-to-end local supply chain, all of which will further increase our profitability in China and the Asian market more broadly. We expect to explore leveraging this partnership also for certain regional consumer health care dispensing. Additionally, we will have access to competitive mold and machine building capabilities that can be used globally and will provide us with high quality, better-cost capital investment alternatives. Finally, the partnership will also give us access to much needed regional anodization manufacturing capabilities.
Ghanshyam Punjabi: All of which will further increase our profitability in China, and the Asian market more broadly.
Ghanshyam Punjabi: We expect to explore leveraging this partnership also for certain regional consumer health care dispensing systems.
Ghanshyam Punjabi: Additionally, we will have access to competitive moat and machine building capabilities that can be used globally and will provide us with high quality better cost of capital investment alternatives.
Ghanshyam Punjabi: Finally, the partnership will also give us access to much needed regional amortization manufacturing capabilities.
Stephan B. Tanda: These capabilities will help us meet growing demand from the middle-class consumer across Asia, a consumer that is driving profitable growth across each of our segments. The transaction is subject to satisfaction and completion of various conditions and is expected to close later in 2024, at which time we will be able to disclose more details. Now, let me highlight a few of our recent innovations and product launches shown on slide five. In the pharmaceutical space, Aptar's unidose device is the nasal delivery system for another opioid overdose rescue treatment recently launched. Aptar's elastomeric components are featured on an existing GLP-1 molecule recently launched for a new indication.
Ghanshyam Punjabi: These capabilities will help us meet growing demand of the middle class consumer across Asia.
Ghanshyam Punjabi: Consumer that is driving profitable growth across each of our segments.
Ghanshyam Punjabi: Transaction is subject to satisfaction and completion of various conditions.
Ghanshyam Punjabi: And is expected to close later in 2024 at which time, we will be able to disclose more details now.
Ghanshyam Punjabi: Now let me highlight a few of our recent innovations and product launches shown on slide five in the pharma space. After its unit dose device is the nasal delivery system for another opioid overdose rescue treatment recently launched.
Ghanshyam Punjabi: <unk> lost American Ponant are featured on an existing G O P. One molecule.
Ghanshyam Punjabi: We recently launched for a new indication.
Stephan B. Tanda: Turning to beauty, in Europe, our customizable and interchangeable fragrance pump is featured in Yves Saint Laurent's new Prestige fragrance, and our premium pump is also the dispensing solution for a new L'Oreal facial skincare product. In the closure segment, we have a new technology on the market in China for the Gong Fu Tea and Cefe Coffee brands. Our solution separates the powder from the water until the user activates the closure with a push to dispense the powder into the bottle, while our active polymer technology protects the quality of the powder until it is ready to be used.
Ghanshyam Punjabi: Turning to beauty in Europe, our customizable and interchangeable fragrance pump is featured on eastern law, new prestige fragrance and a premium pump. It's also the dispensing solutions for our new l'oreal facial skincare product.
Ghanshyam Punjabi: In the closures segment.
Ghanshyam Punjabi: A new technology on the market in China for the growing food tea.
And so if a coffee brands.
Ghanshyam Punjabi: Our solution separate the powder from the water until they use it activates the closure with a push to dispense the powder into the bottle.
Ghanshyam Punjabi: While our active polymer technology protects the quality of the powder until it is ready to be used.
Stephan B. Tanda: This is just a great example of combining our active material science protection technology with our dispensing clothing. Now pivoting to sustainability, we are proud to receive recognition from both Newsweek and Forbes during the quarter. We rank number 29 on Newsweek's America's Most Responsive Companies lineup, and Forbes ranked us number 13 among the world's top companies for women, which places us in the top 5% of the 400 companies ranked.
Ghanshyam Punjabi: This is just a great example of combining our active materials science protection technology with our dispensing closure.
Ghanshyam Punjabi: Pivoting to sustainability.
Ghanshyam Punjabi: Proud to receive recognition from both Newsweek and Forbes during the quarter.
Ghanshyam Punjabi: We ranked number 29 on Newsweek's America's most responsible companies lineup.
Ghanshyam Punjabi: And Forbes ranked US number 13, among the world's top companies for women, which places us in the top 5% of the 400 companies ranked.
Stephan B. Tanda: Before I turn the call over to Bob to share further details on Quarter 4, let me summarize shareholder returns for 2023. We returned over $104 million to shareholders through dividends and the repurchase of over 399,000 shares for $47.6 million. We have also completed our 30th year of paying an increased annual total dividend and celebrated our 30th anniversary as a New York Stock Exchange listed company. With that, I will turn the call over to Bob.
Ghanshyam Punjabi: Before I turn the call over to Bob to share further details on quarter four let me summarize shareholder returns for 2023.
Robert W. Kuhn: We returned over $104 million to shareholders through dividends and the repurchase of over 399000 shares for $47 6 million.
Robert W. Kuhn: We also completed our 30th year of paying an increased annual total dividend and celebrated on the 30th anniversary as the New York Stock Exchange listed company with that I will turn the call over to Bob.
Robert W. Kuhn: Thank you Stefan and good morning, everyone starting on slide six I would like to summarize the quarter our reported sales increased 5%.
Robert W. Kuhn: Thank you, Stephan, and good morning, everyone. Starting on slide six, I would like to summarize the quarter. Our reported sales increased 5%, and this included a currency translation benefit of approximately 3%.
Robert W. Kuhn: This included a currency translation benefit of approximately 3%.
Robert W. Kuhn: Therefore core sales grew 2% primarily due to strong growth in farmers proprietary drug delivery systems and continued demand for fragrance dispensing solutions in Europe, and Latin America.
Robert W. Kuhn: Therefore, core sales grew 2% primarily due to strong growth in pharma's proprietary drug delivery systems and continued demand for fragrance dispensing solutions in Europe and Latin America. As shown on slide 7, we reported fourth quarter adjusted earnings per share of $1.21, which is a 27% increase over the prior year's adjusted EPS. During the quarter, we achieved adjusted EBITDA of $179 million, which increased from the prior year's fourth quarter by 22%, driven by expanding margins in all three segments. Turning to some of the details by segment, our pharma segment's course sales increased 11%.
Robert W. Kuhn: As shown on slide seven we reported fourth quarter adjusted earnings per share of $1 21.
Robert W. Kuhn: Which is a 27% increase over the prior year's adjusted EPS.
Robert W. Kuhn: During the quarter, we achieved adjusted EBITDA of $179 million, which increased from the prior year's fourth quarter by 22% driven by expanding margins in all three segments.
Robert W. Kuhn: Turning to some of the details by segment for the quarter, our pharma segments core sales increased 11%.
Robert W. Kuhn: Approximately 9% of the growth came from increased volumes, especially in our proprietary drug delivery system. Looking at sales in the pharma segment by market, for our proprietary drug delivery systems, prescription core sales increased 24%, primarily due to continued strong demand for dosing and dispensing technologies for emergency medicines, allergic rhinitis, and central nervous system therapeutics. Consumer Health Care core sales increased 13%, driven by higher sales for eye care, nasal saline rinse solutions, and nasal decongestants. Injectables core sales were basically flat due to difficult comparisons over the prior year fourth quarter. Demand for elastomeric components used for biologics continues to grow, and this helped offset other categories that were down in the quarter. Additionally, turning to our active material science solutions, core sales decreased 15%.
Robert W. Kuhn: Approximately 9% of the growth came from increased volumes, especially in our proprietary drug delivery systems.
Robert W. Kuhn: Looking at sales in the pharma segment by market.
Robert W. Kuhn: For our proprietary drug delivery systems prescription core sales increased 24%, primarily due to continued strong demand for dosing and dispensing technologies for emergency medicine, allergic rhinitis and central nervous system Therapeutics.
Robert W. Kuhn: Consumer health care core sales increased 13% driven by higher sales for eyecare nasal saline rinse solutions and nasal decongestants.
Robert W. Kuhn: Injectables core sales were basically flat due to difficult comparisons over the prior year fourth quarter.
Robert W. Kuhn: Demand for Alaska America components used for biologics continues to grow and this help offset other categories that were down in the quarter.
Robert W. Kuhn: Additionally, turning to our active materials science solutions core sales decreased 15%.
Robert W. Kuhn: Excluding the non-recurring sales of COVID-19 at-home test kits in the fourth quarter of 2022, core sales decreased 7%. Lower demand for our products used in probiotics, which experienced rapid growth over the last couple of years, also contributed to the decline in sales. Farmer's adjusted EBITDA margin was 34%.
Robert W. Kuhn: Excluding the nonrecurring sales of COVID-19 at home test kits in the fourth quarter of 2022 core sales decreased 7%.
Robert W. Kuhn: Lower demand for our products used on probiotics, which experienced rapid growth over the last couple of years also contributed to the decline in sales.
Robert W. Kuhn: Farmers adjusted EBITDA margin was 34%.
Robert W. Kuhn: A two-point improvement from prior years. The margin improvement was driven primarily by a strong product mix. Turning to our beauty segment, core sales decreased 6% in the quarter. Looking at the beauty segment by market, core sales decreased 4% due primarily to lower sales in North America. Fragrance sales in Europe continue to be strong, but lower sales of our products used in facial skin care applications. Personal care core sales decreased 7% with lower demand across all regions. Home Care Corps sales decreased 20% due to lower demand in both North America and Europe.
Robert W. Kuhn: Two point improvement from prior year.
Robert W. Kuhn: The margin improvement was driven primarily by strong product mix.
Robert W. Kuhn: Turning to our beauty segment core sales decreased 6% in the quarter looked.
Robert W. Kuhn: Looking at the beauty segment by market.
Robert W. Kuhn: Core sales decreased 4% due primarily to lower sales in North America.
Robert W. Kuhn: Fragrance sales in Europe continued to be strong, but were offset by lower sales of our products used in facial skin care applications.
Robert W. Kuhn: Personal care core sales decreased 7% with lower demand across all regions.
Robert W. Kuhn: Home care core sales decreased 20% due to lower demand in both North America and Europe.
Robert W. Kuhn: This segment's adjusted EBITDA margin for the quarter was 15%.
Robert W. Kuhn: This segment's adjusted EBITDA margin for the quarter was 15%. The improvement in the margin was due to our continued focus on cost management, restructuring actions, and a net positive impact of one-time items. The closure segment's core sales declined by 4% compared with the prior year's quarter due to the passing through to our customers of lower resin costs as well as lower volumes. When looking at the market field foreclosures, food core sales decreased 10%. The decline in sales was driven by lower sales in Europe and North America for sauces and condiments and in Asia for infant nutrition.
Robert W. Kuhn: The improvement in the margin was due to our continued focus on cost management restructuring actions and a net positive impact of one time items.
Robert W. Kuhn: The closure segment's core sales declined by 4% compared with the prior year's quarter due to the passing through to our customers of lower resin costs as well as lower volumes when looking at the market feels for closures food core sales decreased 10%.
Robert W. Kuhn: The decline in sales was driven by lower sales in Europe, and North America for sauces, and condiments in Asia for infant nutrition.
Robert W. Kuhn: BeverageCore sales increased 17% due to healthy demand across all regions, with higher sales of bottled water, concentrates, and sports drinks. However, personal care core sales decreased 2% compared to the prior year's quarter. While we saw improved volumes, particularly in North America and Latin America, the resident pass-through more than offset the volume increases we experienced in this market. In our fourth category, which includes beauty, home care, and health care, core sales decreased 2%. The segment suggested EBITDA margin was around 13%. This represents a three-point improvement over the same period last year, primarily due to cost and productivity management. Our total CapEx spend for Q4 2023 was $81 million, with the majority going to our pharma segment. Two of our three large capital expansion projects are now online, with our injectables capacity expansion targeted to be completed by the end of 2024. For the quarter, the three large capital projects made up about 15% of our total TAPx spend, with the majority allocated to our injectables capacity expansion.
Robert W. Kuhn: Beverage core sales increased 17% due to healthy demand across all regions with higher sales of bottled water concentrates and sports drinks.
Robert W. Kuhn: Personal care core sales decreased 2% compared to the prior year's quarter.
Robert W. Kuhn: While we saw improved volumes, particularly in North America, and Latin America, the resin pass through more than offset volume increases we experienced in this market.
Robert W. Kuhn: And our fourth category, which includes beauty home care and health care core sales decreased 2%.
Robert W. Kuhn: The segment's adjusted EBITDA margin was around 13%. This represents a three point improvement over the same period last year, primarily due to cost and productivity management.
Robert W. Kuhn: Our total Capex spend for Q4, 2023 was $81 million with the majority going to our pharma segment tool.
Robert W. Kuhn: Two of our three large capital expansion projects are now online with our injectables capacity expansion targeted to be completed by the end of 2024.
Robert W. Kuhn: For the quarter the three large capital projects made up about 15% of our total capex spend with the majority allocated to our injectables capacity expansion.
Robert W. Kuhn: Slides 8 and 9 cover our year-to-date performance and show 3% core sales growth and our adjusted earnings per share, which were $4.78, up 24% compared to $3.87 a year ago, including comparable exchange rates. Looking ahead to 2023, Aptar finished the year with good top-line growth and adjusted EBITDA despite a difficult environment in North America and our injectables expansion and ERP implementation. We also took steps to reduce our fixed costs, a focus that will continue in 2024. In 2023, cash flow from operations was a record $575 million. Free cash flow was $263 million for the year, up from $196 million in 2022 due to improved earnings and working capital management. Our strong cash flow has allowed us to neutralize any impacts on our interest expense coming from rising rates by paying down a portion of our debt that had come due.
Robert W. Kuhn: Slides eight and nine cover our year to date performance and showed 3% core sales growth and our adjusted earnings per share which were $4 78.
Robert W. Kuhn: Up 24% compared to $3 87, a year ago, including comparable exchange rates.
Robert W. Kuhn: Reflecting on 2023 after finished the year with good top line growth and adjusted EBITDA, Despite a difficult environment in North America, and our Injectables expansion and ERP implementation.
Robert W. Kuhn: We also took steps to reduce our fixed costs, our focus that will continue in 2024.
Robert W. Kuhn: In 2023 cash flow from operations was a record $575 million free cash flow was $263 million for the year up from $196 million in 2022, due to improved earnings and working capital management.
Robert W. Kuhn: Our strong cash flow has allowed us to neutralize any impact on our interest expense coming from the rising rates by paying down a portion of our debt that had come due.
Robert W. Kuhn: Reported depreciation and amortization expense increased 6% or $15 million to approximately $249 million in 2023.
Robert W. Kuhn: Reported depreciation and amortization expense increased 6% or $15 million to approximately $249 million in 2023. Moving to slide 10, which summarizes our outlook for the first quarter, we anticipate our strong momentum to continue and expect first quarter adjusted earnings per share, excluding any restructuring expenses, acquisition costs, and changes in the unrealized fair value of equity investments, to be in the range of $1.10 to $1.18 per share. The estimated tax rate range for the first quarter is between 24.5% and 26.5%.
Robert W. Kuhn: Moving to slide 10, which summarizes our outlook for the first quarter, we anticipate our strong momentum to continue and expect first quarter adjusted earnings per share, excluding any restructuring expenses acquisition costs and changes in the unrealized fair value of equity investments.
Robert W. Kuhn: To be in the range of $1 10 to $1 18 per share.
Robert W. Kuhn: The estimated tax rate range for the first quarter is 24, and a half to 26, 5%.
Robert W. Kuhn: We are not expecting currencies to have an impact compared to the prior year. We currently estimate depreciation and amortization for 2024 to be between $260 and $270 million. We expect our capital expenditures in 2024, net of any government grants, to be between 280 and 300 million dollars, with the majority of capital allocated to our pharma segment. In closing, we continue to have a strong balance sheet with a leverage ratio of approximately 1.5, which allows us to continue to invest in the business, pursue strategic opportunities, and continue to return value to shareholders in the form of dividends and share repurchase. In addition to our cash dividend payments to shareholders, which totaled $27 million in the quarter, we repurchased approximately 81,000 shares for approximately $10 million.
Robert W. Kuhn: We are not expecting currency to have an impact compared to the prior year.
Robert W. Kuhn: We currently estimate depreciation and amortization for 2024 to be between $260 million to $270 million.
Robert W. Kuhn: We expect our capital expenditures in 2024 net of any government grants to be between $280 and $300 million with the majority of capital allocated toward our pharma segment.
Robert W. Kuhn: In closing we continue to have a strong balance sheet with a leverage ratio of approximately 1.5, which allows us to continue to invest in the business pursue strategic opportunities and continue to return value to shareholders in the form of dividends and share repurchases.
Robert W. Kuhn: In addition to our cash dividend payments to shareholders, which totaled $27 million in the quarter, we repurchased approximately 81000 shares for approximately $10 million.
Robert W. Kuhn: At this time Stefan will provide a few closing comments before we move to Q&A.
Stephan B. Tanda: Thank you Bob.
Stephan B. Tanda: At this time, Stephan will provide a few closing comments before we move to Q&A. Thank you, Bob. In 2023, we delivered very strong results, and we intend to build on this momentum in 2024, starting the year with a solid first quarter. Our first quarter growth will be spurred by our Pharma franchise, Proprietary Drug Delivery Systems, which saw double-digit core sales growth already in the first quarter of 2023, as well as the demand for elastomeric components for biologics. We also expect our beauty enclosure segment to benefit from the progressive recovery of the North American market. And we anticipate continued demand for our fragrance dispensing technologies, which also had double-digit core sales growth in Q1 of last year. We remain focused on reducing SG&A expenses and reducing our manufacturing fixed costs as a percentage of sales.
Stephan B. Tanda: In 2023, we delivered very strong results and we intend to build on this momentum in 2020 for starting the year with a solid first quarter.
Stephan B. Tanda: Our first quarter growth will be spurred by a farmers franchise proprietary drug delivery systems, which saw double digit core sales growth already in the quarter one of 2023.
Stephan B. Tanda: As well as the demand for elastomer components for biologics.
Stephan B. Tanda: We also expect our beauty closure segment to benefit from the progressive recovery of the North American market and.
Stephan B. Tanda: And we anticipate continued demand for our fragrance dispensing technologies, which also had double digit core sales growth in quarter one of last year.
Stephan B. Tanda: We remain focused on reducing SG&A expenses, and reducing our manufacturing fixed cost as a percentage of sales.
Stephan B. Tanda: We took several steps in 2023 to expand our margins and that remains a key priority for 2024.
Stephan B. Tanda: We serve attractive rapidly growing markets really create differentiation through our technologies with an emphasis on sustainable solutions.
Stephan B. Tanda: We are a trusted partner to our customers because of our regulatory expertise and our end user focus.
Operator: We took several steps in 2023 to expand our margins, and that remains a key priority for 2024. We serve attractive, rapidly growing markets where we create differentiation through our technologies with an emphasis on sustainable solutions. We are a trusted partner to our customers because of our regulatory expertise and our end-user focus. Our advantageous market position enables top-line growth. While our focus on food and cost management benefits our bottom line, we are energized and excited for the year ahead, and we expect a strong start to the year. With that, and I would like to open the call up for your questions. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you want to withdraw your question at any time, you can press star followed by two to do so.
Stephan B. Tanda: Alright advantage market position enables topline growth.
Stephan B. Tanda: While our focus on prudent cost management benefits our bottom line.
Speaker Change: We are energized and excited for the year ahead, and expect a strong start of the year with that and I would like to open the call up for your questions.
Speaker Change: Thank you if you'd like to ask a question. Please press star followed by one on your telephone keypad to withdraw your question at a time you can press star followed by today's site. If you are using a speaker phone. Please remember to pick up your handset.
Speaker Change: And your question.
Speaker Change: In the interest of time and fairness to all participants please limit yourself to three question and then come back into the queue. If you have more questions.
Speaker Change: As time allows.
Speaker Change: Thank you.
Punjabi: Our first question comes from the line of comes from Punjabi.
Operator: If you are using a speakerphone, please remember to pick up your handset before asking your question. In the interest of time and fairness to all participants, please limit yourself to three questions and then come back into the queue if you have more questions, if time allows. So, our first question comes from the line of Ghanshyam Punjabi. Of course, your line is now open; please go ahead. Thank you, operator. Good morning, everybody.
Punjabi: Your line is now open. Please go ahead.
Punjabi: Thank you operator, and good morning, everybody.
Punjabi: I guess first off on the pharmaceutical specific to <unk> and the 11% core sales growth.
Speaker Change: Yes versus let's say, 8% in the third quarter did the fourth quarter came in essentially in line with your internal plan and.
Speaker Change: If it was above which sub verticals sort of came in better or worse than you thought specific to pharma.
Speaker Change: Okay.
Speaker Change: Good morning Ghansham.
Ghansham: Good morning, Yeah look overall, we continue to just do it.
Ghanshyam Punjabi: I guess, you know, first off on the pharmaceuticals specific to 4Q and the 11% core sales growth. Versus, let's say, 8% in the third quarter. Did the fourth quarter come in essentially in line with your internal plan? And, you know, if it was above, which sub-verticals sort of came in better or worse than you thought, specific to pharmacy? Good morning, Ghanshyam.
<unk> be impressed with the pool of our proprietary drug delivery systems.
Ghansham: Clearly nasal delivery or the allergic rhinitis emergency medicine continues to do well.
Ghansham: The growth is really broad based so maybe.
Ghansham: There was a tick better but really it's really broad based.
Ghansham: Okay, and then in terms of biologics.
Ghansham: Obviously, including GOP dish, one clearly a growth driver for elastomers.
Stephan B. Tanda: Yeah, look, overall, we continue to just be impressed with the pool of proprietary drug delivery systems. Clearly, nasal delivery, whether it's allergic rhinitis, whether it's emergency medicines, continues to do well, but the growth is really broad-based. So maybe there was a tick better, but really, it's really broad-based.
Ghansham: And you're supporting that with capacity additions et cetera, how is your market share trended for this class of drugs relative to the historical share that you've had and elastomers.
Ghansham: Yes.
Ghansham: We really don't track it that way, but we do track is the applications as a reminder forward for any of those.
Ghansham: Auto injectors and patterns that you have a plunger.
Ghansham: And then you have a needle shield.
Stephan B. Tanda: 2013 University of Georgia College of Agricultural and Environmental Sciences UGA Extension Office of Communications and Creative Services Okay, and then in terms of, you know, biologics, obviously including GLPD-H1, clearly a growth driver for elastomers, and you're supporting that with capacity additions, etc. How has your market share trended for this class of drugs relative to the historical share that you've had? We really don't track it that way. What we do track is the application. So as a reminder, for any of those auto-injectors and pens, you have a plunger. And then you have a needle shield.
Ghansham: And clearly.
Ghansham: As we said before we are on three major.
Ghansham: M S.
Ghansham: As the use of those drugs out there in the auto injectors.
Ghansham: But.
Ghansham: Market share, we really track much more broadly for the injectable space and as you know there is still much smaller than the market leader, but.
Ghansham: <unk> had very good project built in our pipeline and feel good about our prospects.
Speaker Change: Okay and then just finally for the third question just.
Speaker Change: Comparisons on EPS are going to get much more difficult year over year, starting in the second quarter.
Speaker Change: How should we sort of think about earnings growth profile as the year unfolds more fully I mean, obviously, you've given guidance for <unk>, but again the comparisons are quite a bit more difficult <unk> onwards. Thanks, so much.
Stephan B. Tanda: And clearly, as we said before, we are on three major. Stu's of those drugs out there and the auto injectors, but our market share we really track much more broadly for the injectable space, and as you know, we are still much smaller than the market leader, but we continue to have very good projects built in our pipeline and feel good about prospects. Okay, and then just finally, for the third question, you know... Comparisons on EPS are going to get much more difficult year-over-year starting in the second quarter. How should we think about earnings growth as the year unfolds more fully? Comparisons are quite a bit more complicated.
Speaker Change: Yeah look we really executing the plan that we shared with you in September of ensuring we have strong operating leverage by attacking cost often in areas, where we haven't done really in the history of the company like in Europe.
Speaker Change: Increasing productivity in our plants, bringing on capacity, it's more productive so.
Speaker Change: Alright.
Speaker Change:
Speaker Change: Our intent is really to have the bottom line grow quite a bit faster than the top line.
Stephan B. Tanda: Yeah, look, we're really executing the plan that we shared with you in September of ensuring we have strong operating leverage by attacking costs, often in areas where we haven't done so in the history of the company, like in Europe, increasing productivity in our plans, bringing on capacity, it's more productive. So, our intent is really to have the bottom line grow quite a bit faster than the top line. Bottom line growth will not be disconnected from the top line, but certainly double digit EPS growth remains our ambition. Yeah, maybe I could add to Ghanshyam that even with the very good 2023, we did have two pockets of weakness, right?
Speaker Change: Bottomline growth will not be disconnected from the topline, but certainly double digit EPS growth remains our ambition.
Ghansham: Yes, maybe I could add ghansham that.
Ghansham: Even with the very good 2023, we did have two pockets of weakness right. One was in North America.
Ghansham: In our consumer goods side of the business and the other one was injectables with with the ramp up of the new facility and the ERP implementation.
Ghansham: The strength that we saw throughout the year, whether that was from proprietary drug delivery systems or our fragrance business in Europe.
Ghansham: He is expected to continue to grow not at the same pace of course because of the strong double digit that we saw this year, but is growing nonetheless, you take that with an improving situation gradually in North America and a non repeat of what we saw in the Injectables in Q1, and that's where the confidence comes in these.
Robert W. Kuhn: One was in North America, on the consumer goods side of the business, and the other one was injectables with the ramp-up of the new facility in the ERP implementation. The strength that we saw throughout the year, whether that was from proprietary drug delivery systems or a fragrance business in Europe, is expected to continue to grow. Not at the same pace, of course, because of the strong double-digit growth we saw this year, but it's growing nonetheless. You take that with a gradually improving situation in North America and a non-repeat of what we saw in injectables in Q1, and that's where the confidence comes in. But these cost reductions will still flow into the P&L as the year progresses. For example, just one example, the fertility enclosures that we are shutting down in France in the middle of the year; the benefits of that will only start to show in the second half of the year. And that's just one example.
Ghansham: Cost reduction is still flowing through the P&L.
Ghansham: The year progresses, I mean, just one example.
Ghansham: The facility closures that were shutting down in France, and the middle of the year. The benefits of that you will only start to see in the second half of the year and it's just one example.
Speaker Change: Okay perfect. Thanks, so much guys.
Speaker Change: Thanks.
Speaker Change: Thank you our next.
Speaker Change: Our next question comes from the line of George Staphos of Bank of America. Your line is now open. Please go ahead.
George Leon Staphos: Thanks, everyone. Good morning Hope you are on a good start today. Thanks for all the details I just piggybacking maybe on Ghansham.
George Leon Staphos: Questions first question from me should we expect pharma growth still in your target range for core growth and should we expect that we will see margin expansion both for closures.
Ghanshyam Punjabi: Perfect, thanks so much. Thanks. Our next question comes from the line of George Staphos of Bank of America. Your line is now open, please go ahead. Thanks, everyone. Good morning. I hope you're having a good start to the day. Thanks for all the details.
George Leon Staphos: And beauty in 2024.
George Leon Staphos: Given what Youre seeing right now.
George Leon Staphos: So.
Speaker Change: Hi, George Yes, we certainly expect farmer.
Speaker Change: Normalized its growth, but that means staying within its long term target range of 7% to 11%.
George Leon Staphos: Q&A Q&A: Should we expect pharma growth to still be in your target range for core growth? http://www.youtube.com.uk, 2024. So, hi, George.
Speaker Change: And yes, all of this productivity work to your second question is designed to have a career.
Speaker Change: Tumor facing businesses.
Speaker Change: Increased their margin and getting to their target ranges.
Stephan B. Tanda: Yes, we certainly expect pharma to normalize its growth, but that means staying within its long-term target range of 7 to 11 percent. And yes, all this productivity work, to your second question, is designed to help our consumer-facing businesses increase their margins and get into their target ranges. That's the whole point.
Speaker Change: That's the whole point.
Speaker Change: We are making good progress on the productivity and EFT.
Speaker Change: And I have to say the teams are energized to find additional.
Speaker Change: Ideas and additional opportunities and it's starting to become a point of pride in the company and really taking root in our culture.
Stephan B. Tanda: And we are making good progress on productivity and efforts. And I have to say, the teams are energized to find additional ideas and additional opportunities. And it's starting to become a point of pride in the company and is really taking root in our culture. Stephan, do you think you're in your target range as... Yeah, I'm not going to paint myself in the corner, I've learned that, but we certainly, depending on the recovery in North America and how polymer does, will see that top line growth, and it should be in the target ranges, and we continue to make progress on our My last one; I'll turn it over to be fair.
Speaker Change: Stephane do you think you are in your target ranges, maybe exiting the year.
Stephane: From a margin standpoint.
Stephane: Or is there I'm not going to paint myself in a corner I've learned.
Stephane: But.
Stephane: We are certainly.
Stephane: Depending on the recovery in North America, and how polymer does see that topline growth and it should be in the targeted ranges and we continue to make progress on our profitability.
Speaker Change: Okay. My last one and I'll turn it over to be fair I know you said you can't share much but we'll try again can you talk a bit about the investment that you're making in China.
Speaker Change: Kind of some color around that.
Speaker Change: <unk>.
Speaker Change: Cost return expectations or anything you can share there and just factually did you say there were some one off items in beauty did I hear that right Bob. Thank you I'll turn it over.
Stephan B. Tanda: I know you said you can't share much, but we'll try again. Can you talk a bit about the investment? Kind of some color around that, white.
Speaker Change: Yeah, Let me take the first one and then come back on the second one so fundamentally.
Robert W. Kuhn: © The Bulletproof Executive 2013, , , , , , , , , , , , , , , And just factually, did you say there were some one-off items? Did I hear that right, Bob? Thank you. Yeah, let me take the first one.
Robert W. Kuhn: With enterprises for this that we're living in a new world.
Robert W. Kuhn: Competitiveness of supply chains regionally is very important and we have a number of steps that we are executing on to.
Stephan B. Tanda: And then I'll come back on the second one. So fundamentally, We've done prizes for this, we're living in a new world, the competitiveness of supply chains regionally is very important and we have a number of steps that we are executing on to increase our competitiveness. This one that I mentioned earlier in China is really a company we've collaborated with for some time and now making a minority investment in and we really see it as filling out some of the gaps we have in our industrial footprint in China that will serve us well to serve not only the Chinese consumers but consumers across Asia and in particular I would highlight that it's an integrated capability of designing and building molds, building equipment, some additional dispensing manufacturing capability that's complementary to what we have, some additional products, dispensing products that are complementary to what we have and last not least additional metal and anodizing capability that's almost impossible to get new approvals for and it's very important to have for integrated solutions. In respecting our partner's wishes we are only to disclose a lot more detail when we close but what we can disclose you will find in the case.
Robert W. Kuhn: To increase our competitiveness. This one that I mentioned earlier in China is really key.
Robert W. Kuhn: Company, we've collaborated with for some time and now making a minority investment in <unk>.
Robert W. Kuhn: And we really see it as filling out some of the gaps we have in our industrial footprint in China.
Robert W. Kuhn:
Robert W. Kuhn: It will serve us well to serve not only the Chinese consumers.
Consumers across Asia.
Robert W. Kuhn: And in.
Robert W. Kuhn: In particular I would highlight that.
Robert W. Kuhn: It's an integrated capability of designing and building molds building equipment.
Robert W. Kuhn: Some additional dispensing manufacturing capability.
Robert W. Kuhn: It's complementary to what we have some additional product dispensing products that are complementary to what we have and last not least additional metal and energizing capability, that's almost impossible to get new approvals for and it's very important to have four four integrated solution. So.
Speaker Change: In respecting our partner's wishes, where oney to disclose a lot more detail when we close but what we can do is kind of what you will find in the K.
Speaker Change: Yeah and George.
Robert W. Kuhn: Yeah, and George, on the point about one-time items positively impacting, we were happy to report that we were able to close out our insurance claim dating back to our fire in our anodization facility in France. So that's now behind us, which is great news. The huge devaluation in Argentina was an unforeseen negative in the quarter, and then we had some other... other items that popped up from a quality perspective that were not anticipated. All in all, it netted, let's say, roughly about a $2 million positive in the quarter for beauty. Our next question comes from the line of Daniel Rizzo of Jeffreys. Your line is now open; please go ahead. Hi, good morning.
Speaker Change: On the point on the one time items positively impacting.
Speaker Change: We were happy to report that we were able to close out our insurance claim.
Speaker Change: Dating back to our fire in our amortization facility in France. So that's now behind US which is great news.
Speaker Change: The data that the huge devaluation in Argentina was was an unforeseen negative in the quarter and then we had some other other items that popped up from a quality perspective, we're not.
Speaker Change: <unk> all in all it netted to let's say roughly about a $2 million positive in the quarter for beauty.
Speaker Change: Thank you so much.
Speaker Change: Mhm.
Speaker Change: Yeah.
Speaker Change: Thanks Gene.
Speaker Change: Our next question comes from the line of Daniel <unk> of Jefferies. Your line is now open. Please go ahead.
Daniel: Hi, Good morning. Thank you for taking my questions just getting back to what's happening.
Daniel Rizzo: Thank you for taking my questions. Just getting back to what's happening in China with the JV, which sounds exciting, I was wondering if there's a concern with protecting IP in the region, just given the working with a local manufacturer.
Daniel: In China with the JV, which sounds exciting I was just wondering if there was a concern was protecting IP in the region just given the working with the local a local manufacturer.
Stephan B. Tanda: Look, we've been operating in China since the mid-90s, so I think we are quite experienced in how to manage IP risks, and it really depends. In this case, we're really accessing a lot of technology from the partner and getting that at competitive conditions, and it's just making the local supply chain more complete and more competitive. I mean, by analogy, we also... at www.globalonenessproject.org. Okay, and then with the restructuring and productivity costs, just two questions. One, what is the cash cost going to be for 2024 for the restructuring and productivity you're doing? And two, when should we think that we're kind of getting towards the end of the program, or is it ever going to end, when a lot of the heavy lifting is already done?
Speaker Change: Look we've been.
Speaker Change: Operating in China since the mid nineties, though I think we are.
Speaker Change: Right.
Speaker Change: Experience in how to manage IP risks and it really depends.
Speaker Change: In this case, we really exiting exiting a lot of.
Technology from the partner and getting that at a <unk>.
Speaker Change: Competitive conditions, and it's just making the local supply chain more complete and more competitive.
Speaker Change: By analogy we also.
Speaker Change: Improving the competitiveness of North America supply chain, and we are actually expanding capacity in Mexico.
Speaker Change: As more and more of our customers want to do near shoring and reroute some of their suppliers in the U S. So we are expanding our capabilities in Mexico to make the U S. Our supply chain more competitive so it's really similar kind of concept just broader based.
Speaker Change: Okay, and then with the restructuring and productivity cost just two questions. One what is the cash cost is going to be for 2024 for the restructuring and the productivity Youre doing and two when should we think that we're kind of getting towards the end of the program or is it evergreen and where a lot of the heavy lifting is already done.
Speaker Change: Yeah. So.
Stephan B. Tanda: Yeah, so we don't give guidance on that. When you do these things in Europe, roughly, you can have a two to one kind of rule of thumb, meaning that, you know, the annual savings rate costs about two times as much in terms of restructuring costs, because basically, you're talking about severance for people. And that's guided by law and the social plans.
Speaker Change: We don't give guidance on that when you do these things in Europe, roughly that you can have a two to one kind of rule of thumb.
Speaker Change: Meaning that.
Speaker Change: The annual savings rate.
Speaker Change: It costs about two times as much in terms of restructuring cost because basically you're talking about severance for people.
Speaker Change: And that's guided by law and the social.
Speaker Change: Social plans and.
Speaker Change: Yes.
Stephan B. Tanda: And, Yeah, what we have on the hopper now, so to speak, we see contributing to the bottom line in 24 and well into 25. But if we get additional ideas, of course, we will execute on those. But you know, the big themes are reducing labor, streamlining the factories, shutting down some factories like the closure facility in France, and moving activities into global talent centers in Eastern Europe, in Mexico, and in Asia. So those themes will continue.
Speaker Change: What we have on the Hopper now so to speak we see contributing to.
Speaker Change: To the bottom line in 'twenty, four and well into 'twenty five but if you.
Speaker Change: We get additional ideas of course, we will execute on those.
Speaker Change: Hmm.
Speaker Change: The big themes are reducing reducing labor.
Speaker Change: Streamlining the factories shutting down some factories like the closure of facility in France.
Speaker Change: Moving.
Speaker Change: Moving activities into.
Speaker Change: Global talent centers in Eastern Europe, and Mexico and in Asia. So those things will continue.
Stephan B. Tanda: And as we have new ideas and additional ideas, we will disclose them at the time when we are ready. Thank you. Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad. Our next question comes from the line of Alexander Yee of Wells Fargo. Your line is now open; please go ahead.
Speaker Change: And as we have new ideas and additional ideas we will.
Speaker Change: Disclose them at the time when we already.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: We'd like to ask a question. Please press star followed boardwalk on your telephone keypad.
Our next question comes from the line of Alexander E. Whilst Barker. Your line is now open. Please go ahead.
Alexander Yee: Hey, this is Alex. Thanks for taking my question. Um, I guess I want to ask about the pharma pipeline. I know, you know, you guys laid out a path in your investigation in September. Can you maybe provide any updates that you guys have in terms of new projects or any kind of conversion, commercialization, and career news that you guys are. For 2024, we're... Thank you. Sure, Alex.
Speaker Change: Hey, This is Alexander gave up I'm sort of taking my question here.
Speaker Change: I guess I wanted to ask about the pharma pipeline I know you guys laid out.
Speaker Change: Backing.
Speaker Change: So can.
Speaker Change: Can you maybe provide any updates that you guys have in terms of projects.
Speaker Change: Projects were in kind of conversion.
Speaker Change: <unk> and prove themselves.
Speaker Change: For 2024 versus from when you gave us the last update.
Speaker Change: Sure Alex.
Speaker Change: When we tried to describe maybe a bit complicated is of course the pipeline.
Stephan B. Tanda: What we try to describe may be a bit complicated is, of course, the pipeline has things going in and things coming out. And when you launch a product, those are no longer in the pipeline. We had in 23 a record year of new product launches; those things come out of the pipeline, and then, of course, it depends how well they do in the marketplace, and that's usually a multi-year build, and what we said is that new projects that we put into the pipeline were on a risk-adjusted basis, that's how we measure the pipeline value at the equal value of what has come out of the pipeline in terms of So we feel actually very good about that, given that the record launches in 2023.
Speaker Change: Things going in and things coming out when you launch a product those are no longer in the pipeline.
Speaker Change: We had in 2003, a record year of new product launches those things come out of the pipeline and then of course, it depends how well they do in the marketplace and that's usually a multiyear a built in.
Speaker Change: And what we said is new projects that we put into the pipeline. We're on a risk adjusted basis Thats, how we measure the pipeline value of equal value of what has come out of the pipeline in terms of product launches. So we feel actually very good about that given.
Speaker Change: The record launches in 'twenty three and.
That's why it's another reason why we feel very comfortable with the rates the long term target for pharma incidentally, we often see.
Stephan B. Tanda: And that's another reason why we feel very comfortable with the raised long-term target for pharma. Incidentally, we also see, although it doesn't have the same mechanics, but we see the order book, or you can call it the order pipeline, growing in the consumer-facing market as we are more on the front foot with project opportunities. Okay, thanks. And I guess, can you? I don't know if you can, but if you could, how much would last biologics be?
Speaker Change: Although it doesn't have the same mechanics, but we see the order book if you want a deal.
Speaker Change: Or the pipeline growing in the consumer facing market, we are more on the front foot.
Speaker Change: With project opportunities.
Speaker Change: Okay. Thanks, and I guess can you I don't know if you can.
Speaker Change: How much would last.
Speaker Change: Biologics B as.
Stephan B. Tanda: as part of the forum. Yeah, we really don't give that detail. But what we have said is that, I'm going back a little bit. The pandemic has really been good for us in the sense that our technical capability has been tested by everybody, and they came to the conclusion that they are equal to the market leader, which means that as companies do new projects in biologics and otherwise, especially in biologics, look to us as being a partner for a particular project. So our biologics pipeline is growing quite well. But we aren't, and that has led us to the significant investments we made in additional capacity, $180 million, plus an acquisition in China, plus the build-out in North America. So that gives you a sense of the confidence we have in the pipeline. But that doesn't say anything about the other pipelines, or the other end markets. The overall pipeline continues to do very well. Okay, thank you.
Speaker Change: Part of it.
Pharma portfolio.
Speaker Change: Yes, we really don't give that detail.
Speaker Change: What we have said is that Ah.
Speaker Change: I'm going back a little bit.
Speaker Change: <unk> has really been good for us in the sense that our technical capability were tested by everybody.
Speaker Change: And they came to the conclusion that they are equal to the market leader, which means.
Speaker Change: Companies do new projects in biologics and otherwise, but especially biologic.
Speaker Change: Look to us as being a partner for a particular project. So our biologics pipeline is growing quite well, but.
Speaker Change: We're not and that has led us to the significant investments we've made in additional capacity $180 million plus an acquisition in China.
Speaker Change: Plus the build out in North America. So that gives you a sense for the confidence we have in the pipeline.
Speaker Change: Doesn't say anything that the other pipeline.
Speaker Change: And markets are shrinking the overall pipeline continues to do very well.
Speaker Change: Okay. Thank you and one last question and I'll turn it over here.
Stephan B. Tanda: And one last question and I'll turn it over to you. And in the beauty segment, you know, it seems like you're, you know, some companies are talking about consumer weakness in Europe. But you guys are, you're, are, are. Strength and improvement. Um, is that, do you think, is that a difference in just, you know... demographics and target consumers between your portfolio and other Packagers, I guess, or any kind of color you can kind of show? What's driving this?
Speaker Change: The BDA segment.
Speaker Change: Seems like you are.
Speaker Change: Some companies are talking about consumer weakness in Europe.
Speaker Change: Yeah.
Speaker Change: But you guys are.
Speaker Change: I'm talking continue strengthen fragrances.
Speaker Change: Does that do anything is that a difference in gist.
Speaker Change: Demographics entire consumers between where portfolio and another year.
Speaker Change: Uh huh.
Speaker Change: Packagers I guess or.
Speaker Change: Any kind of color you can kind of share.
Speaker Change: What's driving this stuck there thank you.
Stephan B. Tanda: Sure, and as a reminder, when you look at what we record in Europe, part of that is actually what's consumed in Europe, and we do see some weakness in home care and personal care. What we found in terms of fragrance is that those products tend to end up... So, there, we're not only signaling what's happening in the European consumer market but, you know, fragrance globally because, you know, LVMH launched its fragrance, and it went around the world, and so on. What you hear from us is not that different, except that when we talk about fragrance, it's more a signal that launch activity continues for our fragrance customers, and we expect growth in the kind of 3 to 6% range for our fragrance Thank you. As there are no additional questions waiting at the time, I'd like to hand the call back over to Mr. Tanda for closing remarks. Great, thank you.
Speaker Change: Sure.
Speaker Change: As a reminder, when you look to what we recorded in Europe part of that is actually consumed in Europe, and we do see some weakness in.
Speaker Change: Home care in Europe in personal care.
Speaker Change: What we found in terms of fragrance that those products tend to end up.
Speaker Change: The world. So they are we don't only signaling what's happening in the Europe consumer market, but fragrance globally, because there'll be MH loans to the fragrance and that goes around the world.
Speaker Change: And so on so so what do you hear from US is not that different except that when we talk about fragrance, it's more signal.
Speaker Change: <unk> activity continues.
Speaker Change: For our fragrance customers and we expect growth in the kind of 3% to 6% range for our fragrance businesses, while we experienced the same kind of consumer that other companies experienced and indeed, we see pockets of weakness.
Speaker Change: In that.
Speaker Change: Then it gets consolidated into a beauty results.
Speaker Change: Those results soon.
Speaker Change: Thank you.
Speaker Change: As there are no additional questions waiting at the time I would like to hand, the call back over to Mr. <unk> for closing remarks.
Speaker Change: Great. Thank you. So let me end the call by assuming out a bit.
Stephan B. Tanda: So, let me end the call by zooming out a bit. Again, we are closing out another very successful year with 2023. It's really the company, and all of our businesses are much stronger than a year ago, as many of the initiatives and projects that we kicked off during the pandemic are now coming to fruition, and our enhanced execution capabilities are being put to work in our factories and in the marketplace. As we talked about, we are executing the ambitious plan that we shared with you at Investor Day last September and have a very strong focus on both the top line and on productivity gains, ensuring that our bottom line grows faster than the top line and keeping us on this double-digit EPS growth trajectory.
Speaker Change: And again, we're closing out the very successful year with 2023.
It's really the company and all of our businesses are much stronger than a year ago as many of the initiatives and projects that we kicked off during the pandemic are not coming to fruition.
Speaker Change: And our enhanced execution capabilities are being put to work in our factories and in the marketplace.
Speaker Change: And as we talked about we are executing the ambitious plan that we shared with you at the Investor Day last September and have a very strong focus on both the top line and on productivity gains ensuring that our bottom line growth that grows faster than the top line and keeping us on this double.
Speaker Change: <unk> EPS growth trajectory so.
Stephan B. Tanda: So, as we enter 2024, we have strong pipelines and a growing order book. We expect the momentum to continue. Even though, as we just talked about, we see pockets of economic weakness in some of our regional ant markets, we also ended the year with a number of productivity and cost reduction efforts well underway, mid-flight, so to speak. And they will keep adding to the bottom line throughout 24 and into 25. And, in addition to that, our teams are eager to find additional productivity opportunities. Just at a leadership event last week, it's really becoming a point of pride in the company and taking root in our culture.
Speaker Change: So as we enter 2024.
Speaker Change: Have strong pipelines and a growing order book, we expect the momentum to continue.
Speaker Change: Even though as we just talked about we see pockets of economic weakness in some of our regional end markets.
Speaker Change: We also entered the year with a number of productivity and cost reduction efforts well underway mid flight so to speak.
Speaker Change: They will keep adding to the bottom line throughout 'twenty four and into 'twenty five and then in addition to that our teams are eager to find additional productivity opportunities.
Speaker Change: Just had a leadership event last week.
Speaker Change: Becoming a point of pride in the company and taking root in our culture.
Speaker Change: I'm just.
Stephan B. Tanda: Just like innovation and sustainability, we are increasing the competitiveness of our regional footprints with our actions that we talked about in Europe, in Asia, now including a joint venture, and in North America, including expanding our Mexican capacity for the North American market. Our strong balance sheet allows us to continue to invest in future growth and productivity. As you know, we are fans of bite-sized, bolt-on partnerships and acquisitions and have developed a solid track record to deliver on those, as well as return funds to shareholders. So when you consider all the puts and takes for the coming period, its proprietary drug delivery systems will continue to grow. Even after the strong year 23 and remain inside the growth target of our overall pharma growth target, injectables, for sure, will not repeat the ERP issue and are benefiting from a strong pipeline in biologics and otherwise. We didn't talk about digital health, but this project win that we have with Biogen, again, the press release is coming out in 15 minutes or so, bodes well for our digital health business as we start to more and more operate digital health solutions for our clients. Elsewhere, fragrance will continue to grow, also after a year of double-digit growth.
Speaker Change: Just like innovation and sustainability.
Speaker Change: We are increasing the competitiveness of regional footprint with our actions that we talked about in Europe, and Asia, including a joint venture and in North America, including expanding our Mexican capacity for the North American market.
Speaker Change: Our strong balance sheet allows us to continue to invest in future growth and productivity investments as you know we are fans of bite sized bolt on partnerships and acquisitions and have developed a solid track record to deliver against those as well as.
Speaker Change: Return funds to shareholders.
So when you consider all the puts and takes for the coming.
Speaker Change: It's a proprietary drug delivery systems will continue to grow.
Speaker Change: Even after the strong year 2003 and to remain inside the growth target.
Speaker Change: Overall pharma growth target injectable for sure we will not repeat the ERP issue.
Speaker Change: And it's benefiting from a strong pipeline and biologics and otherwise we.
Speaker Change: We didn't talk about digital health, but.
Speaker Change: This project win.
Speaker Change: We have with Biogen again, the press releases coming out in.
Speaker Change: 15 minutes or so bodes well for our digital health business as we start to more and more operate digital health solutions for our clients.
Speaker Change: Elsewhere, our fragrance will continue to grow.
Speaker Change: Also after a year of double digit growth.
Stephan B. Tanda: We anticipate that North America is starting to abate, and Asia is pulling nicely, while China's recovery is a bit more muted. India is starting to really pull much stronger, and our expenses, whether it's SG&A or manufacturing fixed costs, are coming down.
Speaker Change: We anticipate the North America, starting to abate.
Speaker Change: And Asia is pulling nicely, while China recovery is a bit more muted India starts to really pool are much stronger.
Speaker Change: And our expenses, whether it's SG&A or manufacturing fixed costs are coming down. So when you sum that all up that bodes well for 2024 and beyond and we look forward to discuss in more detail with you on the road.
Stephan B. Tanda: So when you sum that all up, that bodes well for 2024 and beyond, and we look forward to discussing it in more detail with you on the road. Thanks for joining us. Ladies and gentlemen, that concludes today's conference call. Have a great rest of your day. You may now disconnect your lines.
Speaker Change: Thanks for joining.
Speaker Change: Ladies and gentlemen that concludes today's conference call have a great rest of your day you may now disconnect your line.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].