Q1 2024 Silgan Holdings Inc Earnings Call
You are currently on hold for Silicon Holdings first quarter 2024 earnings call at this time, where someone sees audience and plan to be in the waste. Shortly we appreciate your patience and pushed me down the line.
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Good day and welcome to the Southern Holdings first quarter 'twenty 'twenty four earnings call. Today's conference is being recorded at this time I'd like to turn the presentation over to Mr. Alex Hutter, Vice President of Investor Relations. Please go ahead Sir.
Alexander Gerhard Hutter: 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 and CFO.
Alexander Gerhard Hutter: Before we begin the call today, we would like to make it clear that certain statements made 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 Companys annual.
Report on Form 10-K for 2023, 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 diluted share.
Alexander Gerhard Hutter: A reconciliation of these metrics, which should not be considered substitutes for similar GAAP metrics can be found in today's press release and under non-GAAP financial information available in the Investor Relations section of our website at Silicon Holdings Dot com with that let me turn it over to Adam.
Adam: Great. Thank you Alex we'd like to welcome everyone to Silicones first quarter 2024 earnings call. We're off to a solid start in 2024 and our team delivered another quarter of strong financial performance, while making progress towards our long term strategic objectives and delivering on our multi year cost improvement and improvement initiatives we did.
Adam: <unk> first quarter adjusted EPS at the high end of the expected range with strong operational and cost performance driving our results as the silicon team remains focused on managing the items that are within our control while volumes in the first quarter were mix relative to our expectations entering the quarter. We continue to believe that the broad destocking trends.
Adam: We have been experiencing over the past year are coming to a conclusion during the first half of 2024 and are seeing positive trends early in the second quarter. Additionally.
Adam: Additionally, in certain instances, we have seen customers accelerate their first half destocking initiatives to be more weighted to the first quarter than initially expected and we continue to see positive activities from our customers in the marketplace with increased promotional spending in 2024 that has expanded to include more of the products we produce.
Adam: Turning to our segments, our dispensing and specialty closures segment delivered another strong quarter as market demand for our global dispensing products remains strong with significant momentum in the marketplace, our market, leading innovation production and service capabilities and excellent operational execution continued to drive compelling value.
Adam: For our customer partnerships.
Adam: <unk> have been accelerated to be more weighted to the first quarter.
Adam: In metal containers, we continue to make progress on our cost reduction initiatives during the quarter and believe we are well positioned to service the market from our low cost manufacturing network, while maintaining the ability to grow volumes through our market, leading pet food platform first.
Adam: First quarter metal container volumes were fairly consistent with our expectations as our customers work to achieve the majority of their first half destocking initiatives in the first quarter.
Adam: Our custom container segment delivered strong results in the quarter with volumes improving sequentially for the first time in several quarters as we saw strong volumes related to the commercialization of new products.
Adam: In addition, custom Oh excuse me in addition customer order patterns began to show signs of recovery from the Destocking trends, we have seen over the past several quarters.
Adam: Turning now to our outlook for the full year of 2024, we continue to believe the business is positioned to deliver volume and profit growth and are pleased to confirm our estimates for the year, which includes adjusted EPS growth of 7% at the midpoint of our guidance range. We continue to expect dispensing and specialty closures volumes to grow by.
Adam: Mid single digit rate with high single digit growth in our dispensing products and low single digit growth in our closure products driving better profitability for the segment with improved mix.
Adam: Metal containers volumes are expected to grow by a low single digit percentage as we continue to expect mid single digit growth in pet food, which represents approximately half of our overall volume for the segment.
Adam: But now expect that growth to be partially offset by lower pack volumes in 2024.
Adam: Food and vegetable volumes, which represent roughly 20% of our metal container volume are now expected to decline by a mid single digit rate as a large pack customer has announced plans to reduce their north American pack in 2024 to pursue a reduction of working capital.
Adam: Decrease its financial leverage.
Adam: This decrease will lead to both lower volumes and unfavorable fixed cost absorption in our system in 2024.
Adam: Custom containers volumes are expected to grow by a low single digit percentage with volumes in selecting positively in the second quarter and improving through the year as Destocking trends conclude and new commercial awards continue to provide incremental volume and profit contribution through the year.
Adam: As we entered the second quarter, we are confident that our focus and our active and effective management of these factors that are within our control will lead to another year of strong financial results for the company our strategic growth initiatives continue to see success in the market and shape, the companys future and our customer partnerships remains strong.
Adam: With that Kim will take you through the financials for the quarter and our estimates for the second quarter and full year 2024. Thank you Adam as Adam highlighted our business continues to deliver strong financial results in the first quarter. Despite a volatile evolving customer plans and we delivered adjusted EPS at the high end of our expected range net sales of approximately one.
Kimberly I. Ulmer: $3 billion declined 7% from the prior year period, driven primarily by lower volumes in each of our segments and the pass through of lower raw material costs.
Kimberly I. Ulmer: Adjusted EBIT for the quarter of $135 $5 million decreased by 9% on a year over year basis, primarily due to lower volumes in each of the segments higher adjusted EBIT and custom containers offset expected lower adjusted EBIT in the dispensing, especially closures in metal container segment.
Kimberly I. Ulmer: Adjusted net income per diluted share was <unk> 69 cents with lower volumes, primarily driving the year over year decline.
Kimberly I. Ulmer: Turning to our segments sales in our dispensing and specialty closures segment declined 8% versus the prior year, primarily as a result of lower volume mix of 8%. The decline in volume was driven primarily by first half 2024 customer destocking activities and domestic food and beverage markets, which accelerated during the quarter to be more weighted to the first quarter.
Kimberly I. Ulmer: First quarter dispensing, especially closures adjusted EBIT decreased $5 million versus the prior year period with strong price cost, including mix that overcame the negative impact of the sell through of higher cost metal closure inventory in Europe due to lower metal costs in 2024, and partially offset the negative impact of lower volumes.
Kimberly I. Ulmer: And our metal container segment sales declined 8% versus the prior year, driven primarily by lower volumes of 5% as compared to very strong volumes in the prior year period.
Kimberly I. Ulmer: Talking priorities continued to weigh on order patterns throughout the quarter and similar to our dispensing, especially closures volumes, we did experienced customers accelerating first half destocking priorities to be more first quarter weighted price mix was negative 4% in the quarter as a result of the contractual pass through of lower raw material costs.
Kimberly I. Ulmer: As expected metal containers adjusted EBIT was below the prior year quarter, primarily due to the impact of unfavorable price cost, including mix, mostly as a result, the sell through of higher cost inventory in our European business due to lower metal costs in 2024, and the impact of lower volume in the quarter.
Kimberly I. Ulmer: And custom containers sales declined 3% compared to the prior year quarter, driven by a 3% decline in volumes.
Kimberly I. Ulmer: Custom containers adjusted EBIT increased to $100000 as compared to the first quarter of 2023, primarily due to improved price cost, including mix, which more than offset the impact of lower volumes.
Kimberly I. Ulmer: Looking ahead to 2024, we are confirming our estimate of adjusted net income per diluted share in the range of $3 55 to $3 75 to.
Kimberly I. Ulmer: A 7% increase at the midpoint of the range as compared to $3 40 and 2023.
Kimberly I. Ulmer: This estimate includes corporate expense of approximately $25 million interest expense of approximately $170 million a tax rate of 24% to 25% and a weighted average share count of approximately 107 million shares.
Kimberly I. Ulmer: From a segment perspective mid single digit percentage total adjusted EBIT growth in 2024 is expected to be driven primarily by the dispensing, especially closures and custom container segments with metal container segment adjusted EBIT below the prior year record level, primarily due to the previously discussed reduction in fruit and vegetable volumes.
Kimberly I. Ulmer: Based on our current earnings outlook for 2024, we are confirming our estimate of free cash flow of approximately $375 million in 2024 with capex of approximately $240 million.
Kimberly I. Ulmer: Turning to our outlook for the second quarter of 2024, we are providing an estimate of adjusted earnings in the range of 82 to 92 cents per diluted share as compared to 83 in the prior year period.
Kimberly I. Ulmer: 5% year over year improvement in adjusted earnings in the second quarter at the midpoint of the range is driven primarily by improving volume trends in operating performance in each of the segments, partly offset by unfavorable price cost including mix in our metal container segment.
Kimberly I. Ulmer: Second quarter, adjusted EBIT is expected to be above prior year levels, and dispensing, especially closures with improved price cost despite continuing but lesser impact from the sell through of higher cost European metal closures inventory due to lower metal costs in 2024, and a low to mid single digit improvement in volumes in the quarter.
Kimberly I. Ulmer: Second quarter metal containers, adjusted EBIT is expected to be below the prior year record level with volumes comparable to the prior year period, the year over year decline in metal containers. Adjusted EBIT is driven by unfavorable price cost, including mix predominantly due to lower production volume in the quarter and the negative impact on fixed cost absorption.
Kimberly I. Ulmer: The previously discussed reduction in fruit and vegetable volumes for a large pack customer.
Kimberly I. Ulmer: Second quarter adjusted EBIT in the container segment is expected to be modestly above prior year levels as a result of low single digit volume growth.
Kimberly I. Ulmer: That concludes our prepared comments, we will open the call for questions. Anna would you kindly provide the directions for the question and answer session.
Anna: Yes, ma'am. Thank you 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 a lot your signal to reach our equipment. If you find your question has been answered you may remove yourself from the queue at any time by pressing star two.
Anna: Once again that is star one if you would like to ask a question.
Kimberly I. Ulmer: And we'll take our first question from Ghansham Panjabi with Baird.
Ghansham Panjabi: Hey, guys good morning.
Ghansham Panjabi: Good morning, Ghansham, Hey, so Adam on the.
Ghansham Panjabi: Accelerated destocking in the first quarter that you called out I assume there was some to some extent a pull forward from the <unk>.
Ghansham Panjabi: Previously expected in the second quarter as well.
Ghansham Panjabi: Can you just give us a bit more color on that you know which categories were most impacted as you kind of think about the various operating segments.
Speaker Change: Yeah, I think you've got the right way to think about it ghansham I mean, we had expected some destocking activity, primarily in food and beverage again, mostly in North America for our business the impact.
Speaker Change: First half of the year and what we saw again, we talk a lot about our customer relationships. So just kind of in those regular discussions that we have with our food and beverage customers during the first quarter.
Kimberly I. Ulmer: Several made the decision to to bring forward that destocking activity and really they increase the percentage of their sales from their inventory and that affected late.
Kimberly I. Ulmer: Late in the first quarter, our shipment volumes. So really we were really right on plan kind of halfway through the quarter as far as our volume expectations and so what's interesting is that did happen late in Q1 were sitting here on may 1st. So we've got a pretty good read how Q2 has started now to at least from a volume perspective.
Kimberly I. Ulmer: So we've started Q2 strongly so we are seeing the benefit of of that volume returning in and the positive inflection that we were anticipating for Q2.
Kimberly I. Ulmer: That's with the month of April already behind Us and our order book for Q2 is really solid right. Now. So we believe that we're reaching that inflection point that we've been talking about for some time again the product specific you can think about pet food on the metal container side and you can really think about our beverage business.
Kimberly I. Ulmer: The closure dispensing, especially closure segment.
Speaker Change: Okay, great. Thank you and then just as a follow up question to that so if your customers.
Kimberly I. Ulmer: Pull forward inventory destocking and into the first quarter does that necessarily mean that.
Speaker Change: They've changed their promotional cadence as you look out to <unk> and beyond.
Speaker Change: I'm, just asking because you know obviously you've seen a.
Speaker Change: Slight recalibration of input costs, and so on and so forth. So has there been any change in terms of your customers. The delek with your customers as it relates to promotional activity.
Speaker Change: Really there hasnt.
Speaker Change: We've got pretty good Intel into that spend for promotional activity in Q1, and how that compares to the prior year and so the increases that we were expecting were actually realized in Q1, and I think the important part of that at least for our product ghansham.
Speaker Change: Those promotional activities were pretty effective for our customers. So they were pleased with kind of that very directed targeted promotional activity for the products that they were were looking to promote and it did lead to incremental sell through I think the other thing for US is we talk a lot about promotional activity in food and beverage it's certainly.
Speaker Change: Has expanded outside of those two categories into other segments for us in other parts of our business and you can talk about home care you can talk about lawn care personal care other products, we're seeing increased <unk>.
Speaker Change: Promotional activity across those segments as well.
Speaker Change: Fantastic. Thanks, so much.
Speaker Change: Sure.
Speaker Change: We will now take our next question from Gabe Haiti with Wells Fargo Securities.
Gabrial Shane Hajde: Good morning, Adam.
Speaker Change:
Gabrial Shane Hajde: Good morning, I just had a question you called out 20% of the pack mix.
Gabrial Shane Hajde: Your metal containers business being fruit and veggie.
Gabrial Shane Hajde: Are you.
Gabrial Shane Hajde: But would you disclose how much of that might be co located with with your customers and we.
Speaker Change: We asked a similar question earlier today, just in terms of reading articles about imported.
Gabrial Shane Hajde:
Gabrial Shane Hajde: Full Kansas food, just trying to measure risk across the portfolio.
Gabrial Shane Hajde: Sure.
Gabrial Shane Hajde: And maybe for that first question look I think when you think about fruit and vegetable for us and just the business model itself right, where we're near site to where those products are growing right. They typically are grown across a certain set of acreage than their aggregate into a filling site, where we're really close to where the products are actually sold.
Gabrial Shane Hajde: So that's broadly across our fruit and vegetable category. So that's.
Gabrial Shane Hajde: Thats, how ill answer the first part of that clearly on the import of finished goods that's something that we've been tracking for some time, we continue to monitor that and in fairness gave it.
Gabrial Shane Hajde: We've seen that over time with some fruit products, particularly coming from Asia, but as far as what what in our business today in fruit and vegetable it really hasn't had much of an impact at all it's really not a material volume that we've seen coming through and really just not enough to impact our customers' business at this point.
Gabrial Shane Hajde: Okay. Thank you and then and then maybe a little bit trying to tie together the Q1.
Gabrial Shane Hajde: I think segment profit or EBITDA. However, you want to think about it was generally in line.
Gabrial Shane Hajde: The little bit of a weaker volume backdrop.
Gabrial Shane Hajde: And so when I think about the rest of the year.
Gabrial Shane Hajde: And kind of a multi year cost out program did you guys perform a little bit better on that I mean, I know you're still called out $20 million I think for this year, keeping another $30 million on the table for next year.
Gabrial Shane Hajde: But was it just you know what was the offset better performance in.
Gabrial Shane Hajde: And then like I said that 20 million is there a potential for this year to be a little bit better than that or are let's just kind of wait and see.
Speaker Change: Yeah, It's a really good question and as we look at Q1, what I would tell you again, we have a very stable kind of operating environment for the first time in several years and so we're sort of back to the silicon playbook I mean, we.
Speaker Change: We are good operators at the end of the day and really I think the primary.
Speaker Change: The.
Speaker Change: Impact in the first quarter was really just really good solid operating performance and our normal continuous improvement activities really benefited the quarter end and all the other programs that we've been working on that in addition to the multi year $50 million cost reduction initiatives. So we made.
Speaker Change: Really good progress we've got <unk>.
Speaker Change: Several plants that we've we've rationalized we've got assets that are not already in the location they need to be there on their way. So we've made significant progress there was a little savings in the first quarter from that $50 million project, but really it was much more about that.
Speaker Change: The silicon operating model and our continuous improvements that drove great operating performance in the quarter.
Speaker Change: Good to hear thank you.
Speaker Change: Thank you.
Speaker Change: We will now take our next question from George Staphos with Bank of America.
George Leon Staphos: Hi, everyone. Good morning, Thanks for the details hope you're doing well.
Speaker Change: Guess what.
George Leon Staphos: I'll take a different sort of approach to the question of Destocking. So to the extent that your customers accelerated destocking in the quarter, Adam does that I know your order books are good.
George Leon Staphos: And that's encouraging but does that give you any concern about what your customers are thinking about their volume outlook for the year.
George Leon Staphos: Their ability to get product whenever they need it through the supply chain right. I mean, you you get restocking when is it.
George Leon Staphos: Purchasing manager you're worried you worried kind of caution, where you're where you're not able to get it you're worried that demand your supply won't keep up with demand. So is there a kind of a gray cloud in this narrative that yeah destocking is nearly over yes. It was accelerated that's all wonderful.
George Leon Staphos: But it's probably because your customers are worried a little bit about the outlook in the second half of the year. How would you have to think about that.
Speaker Change: Yes, it's an interesting take.
Speaker Change: I think again, what I would tell you is is sitting here a month into the quarter. We can talk specifics about maybe pet food as an example, where we did that was coming back there was a lease okay well it was delayed.
Speaker Change: And to the Destocking activities last year right. So it was one of the primary categories that was going to linger into.
George Leon Staphos: 2024 in the first half and so that was an area, where we saw the accelerated destocking activity April shipments.
George Leon Staphos: Were terrific and where we're seeing the growth.
George Leon Staphos: The order book for May and June back to where it should be so again as you know George we were so close with these customers where we are onsite near site that we've got a pretty good understanding of what they believe their demand forecast looks at our it looks like excuse me going forward. So.
George Leon Staphos: I don't think its a great cloud I think actually.
George Leon Staphos: Good news is that we're just about done talking about destocking, because I think the larger impact in the first half just happened in Q1, and we've said we're sitting here with quite a bit of confidence that we have reached that inflection point for our volumes as we sit here in the middle of Q2. The other thing I would tell you just as in.
George Leon Staphos: Indicator run over two are accustom containers business for just a moment and really.
George Leon Staphos: A different volume story really than what we were talking about and the other two businesses at this point and the changing order patterns, we were referencing it's.
George Leon Staphos: There is good in consumer demand and then Theres also short order lead times, where one of the items that we were concerned about is as our as our customers reduced their inventories. They didn't have enough to meet the end consumer demand. We're getting these kind of short order short lead time orders certainly in the custom container business.
George Leon Staphos: To support and consumer demand and so we just think for our products, which for the most part our discretionary.
George Leon Staphos: Demand has been very resilient and we feel confident about the volume outlook.
Speaker Change: Thanks for that Adam.
Speaker Change: The next question that I had is I think gabe sort of teed it up.
Speaker Change: And if you had answered I wasn't quite sure.
Speaker Change: <unk>.
Speaker Change: What the ultimate view was but are you seeing any concerns do you have any concerns about.
Speaker Change: Procuring metal steel or aluminum given the various trade sanctions and other things that have been bantered about I know the last few years have probably been very good learnings.
Speaker Change: And learning periods for everybody.
Speaker Change: No listen for Silicon I would imagine is an issue, but nonetheless, I want to check that box how do you how do you view that right now.
Speaker Change: Yeah sure I think it's a good question, there's a lot of change going on particularly on the metal supply base and as you know with our size and scale.
Speaker Change: We feel like we are advantaged in getting the raw materials that we need to support our customers. So it has not been a problem for us it's something that we actively manage each and every day, but our teams have done a really good job of maintaining that supply chain all the way throughout and we talked a couple of years ago, particularly on the aluminum side about how we.
Speaker Change: We extended our supply chain and the network of suppliers.
Speaker Change: And support our business and that's been beneficial as as we worked through any supply chain challenges, but as we sit here today, we're confident in our ability to procure the materials for our customers' products.
Speaker Change: Last question for me and I'll turn it over.
Speaker Change: Have you seen within your your segments any sort of evidence of maybe you commented on this earlier if you did I missed it in terms of a trade down.
Speaker Change: Or a move by the consumer to lower price point more staple types of products and that's showing up in your results are really not seeing that at all across your various categories and customers. How would you have us think about that from silicon perspective. Thank you.
Speaker Change: Yeah.
Speaker Change: Again, another really good question I think Q1 is probably too early to try to draw conclusion in our products for that but I go to our custom container segment, where we have seen that increase in the short lead time orders, where consumers are seemingly focusing their spend on more non discretionary.
Speaker Change: <unk> items and again, that's really where we play with our business in all three segments are primarily non discretionary spend so I think our order books would say our products are continuing to do well our consumers remain resilient, but I think there is a component of that George that these are mostly non discretionary products.
Speaker Change: And I think we will be able to comment further on that at the end of Q2 as we see those volumes play through.
Speaker Change: Thanks, so much on them.
Speaker Change: Our next question will come from Matt Roberts with Raymond James.
Matthew Burke Roberts: And it looks like here.
Speaker Change: They have lost his connection well move to Daniel Rizzo with Jefferies.
Daniel Dalton Rizzo: Hi, you mentioned non discretionary spend being up but I was wondering if if you look at the fragrance and beauty. If that's that's still kind of intact as well as consumer trends are perhaps shifting away from that I think in the past it's been mentioned that that's kind of.
Daniel Dalton Rizzo: Fairly stable as well.
Speaker Change: Yeah, actually I think demand for our global dispensing products remains really really strong so yes.
Speaker Change: That's really unchanged thoughts as we think about fragrance and beauty. We spent some time talking about which part of that market that we plan and we are at the very high end of the.
Speaker Change: Premium luxury end of that business and those consumers really have not really changed there.
Speaker Change: <unk> patterns over some long period of time now so really we feel like those are are largely.
Speaker Change: Effective and then for some of our other dispensing items.
Speaker Change: As we were.
Speaker Change: Preparing for some of our cost out initiatives. There there were some instances where demand did outstrip our capacity. We've put we built inventory to move a couple of lines and had quite a bit of demand.
Speaker Change: Those products. So that was part of our shortfall in Q1 that will indeed recover in Q2 and again part of why we have such good confidence that the DSC in particular is going to see a nice inflection in volume in Q2.
Speaker Change: This increase in short lead time orders suggested that your customers are willing to live kind of hand to mouth. So to speak or can we expect a restock cycle, a real restock cycle I dunno sometime in the second half were truly thereafter.
Speaker Change: Yes.
Speaker Change: Good question I, probably would try to answer that similarly to how I just answered George George's question, I think there's a combination of things Dan and again its all underlying end consumer demand remains strong for our products.
Speaker Change: We believe and we talked about a lot last year that we thought there were instances, where our customers, where we're taking inventory levels below historic levels.
Speaker Change: And we.
Speaker Change: We were having good conversations about that and maybe the need to replenish those so you know there.
Speaker Change: There's a combination in Q1 of that happening. The order book is really strong for Q2 I'm sure. It's a combination of those things as well. So I think it's a really good question that we'll have more detail at the end of the second quarter to really provide a stronger opinion of what we really think is happening, but it clearly is a combination of all those.
Speaker Change: And last question do you get the higher price points for short lead time orders does it matter really I mean, the length of I don't know.
Speaker Change: Right.
Speaker Change: It does depend.
Speaker Change: Remember most of our business model is long term contractual arrangements. So.
Speaker Change: For that part of our business no not really those prices are set over a long period of time with very calculable pass through methods et cetera.
Speaker Change: For our more transactional business, yes, we do.
Speaker Change: Alright, Thank you very much.
Speaker Change: Sure.
Speaker Change: Well now take a question from Matt Roberts with Raymond James.
Matthew Burke Roberts: Hey, good morning, everybody and see if I can.
Matthew Burke Roberts: That's right sorry for the user error.
Matthew Burke Roberts: That's all right.
Matthew Burke Roberts: Quickly I mean.
Matthew Burke Roberts: On the fruit and vegetable customer could you give a little more color on the timing of when that occurs or is it just the ongoing wind down through 2024, and it seems like you've reiterated your volume outlook in metal containers for the year versus a couple months ago. So are there any offsets within that segment, we should be thinking of.
Speaker Change: Yeah look for the.
Speaker Change: The timeline of the communication and how it impacts silicon couple of things one the customer we're talking about announced that publicly kind of in mid March. So we were working with them a little bit before that just to understand and frankly help them through the thought and planning process of how to implement a change like what.
Speaker Change: They change as far as silicon is concerned how it affects us again most of our pack volume is in Q3, that's when our shipments are as we've talked a lot about we make it we built inventory we make cans all year long.
Matthew Burke Roberts: And so really for US we've got a production shortfall now in Q2, because we would have been building inventory for that particular customer for shipments in Q3, along with the pack. So you've got some lost absorption in Q2, and then as we turn to Q3, that's where you'll see the volume impact so hopefully that's key.
Matthew Burke Roberts: Clear.
Matthew Burke Roberts:
Speaker Change: And then just real quick.
Speaker Change: Matt of your the second part.
Matthew Burke Roberts: What I'm, saying are there any offsets we've been within metal container segment yeah.
Matthew Burke Roberts: Okay fair enough.
Matthew Burke Roberts: You're exactly right so.
Matthew Burke Roberts: We're probably to the lower end of the range that we provided now versus maybe being at the higher end of kind of low single digit so.
Speaker Change: We've got pretty good visibility to it now and feel comfortable that we're going to have growth in 2024.
Speaker Change: Okay. Thank you Adam and then on the $20 million in savings in 2024, I think you said there was a small portion in one Qs are there any changes that or how we should think about the timing throughout 'twenty 'twenty four and hypothetically if volumes didn't recover.
Speaker Change: As expected.
Speaker Change: Have you identified any incremental opportunities that could exist beyond the 50.
Speaker Change: Let me take the back part of that question and I'll pass it over time to take the first part so as far as you know how we view responses to.
Speaker Change: It may be potential <unk>.
Speaker Change: Reductions later in the year I mean number one we are focused on driving cost out of our business each and every day and it's just part of our DNA and it's it is what we do we're really focused on right sizing our capacities to the demand that we see with our customers and really don't think that there's any change to that is.
Speaker Change: We sit here today, but that's an ongoing iterative process that we really do work on each and every day in each of our businesses and remember that we've got some nice growth opportunities as we sit here today in each of our segments as well and with that I'll throw it to Ken sure. So of the $50 million cost reduction program, we have identified 30 million.
Ken: Cash this year it was about $20 million in savings and most of that savings will be in the back half of the year, but we have fully identified the savings and the cost to achieve it and we're on track.
Ken: Perfect. Thank you very much.
Ken: We will take our next question from Mike Rosslyn, which list.
Michael Andrew Roxland: Yes. Thanks.
Michael Andrew Roxland: Bob Campbell, Alex for taking my questions.
Michael Andrew Roxland: I'm, just thinking a little more color on where youre seeing demand outstrip your capacity what are you doing to address that.
Michael Andrew Roxland: Demand in those categories, given what seems to be very strong order books on a go forward basis.
Michael Andrew Roxland: Yeah. That's a really good question I, probably should've been clearer when I was talking about that so it is in our global dispensing business. So that is an area, where we have been adding capacity over time in this particular instance, it.
Michael Andrew Roxland: Product line that.
Michael Andrew Roxland: Again, we had.
Michael Andrew Roxland: Land that we had worked through with our customers to relocate a couple of assets.
Michael Andrew Roxland: To increase capacity and as we did that we took those lines out of production and we're relying on inventory our customers demand picked up just a bit so they stripped through the inventory that we had agreed upon prior to the asset move the good news that was in the first quarter that assets those assets are in.
Michael Andrew Roxland: Place in and producing now again in Q2, so unfortunately, it's a blip.
Michael Andrew Roxland: But it is a good reason for a blip and that our customers demand has remained very strong and we're now in a better position to supply that from our lower cost and from a higher capacity standpoint.
Speaker Change: Got it. Thank you for the color and then just continuing on the dispensing, especially flow you're seeing.
Speaker Change: Last quarter, you mentioned some business wins I think you highlight anything in the press release.
Michael Andrew Roxland: Can I keep it provides more color on those wins and maybe what the cadence is of your deployment throughout 2024.
Speaker Change: Sure I think and especially in our specialty I mean, it really is more on the higher value products and talking about new product launches in fragrance and beauty I'd, rather not give the names of what those are but again, just think about where we play in those segments against the premium and luxury end of.
Speaker Change: That profile that just has continued to experience really good growth for years now regardless of what the economic circumstances are so I think really that's that's where we're having tremendous success and we're having really nice success in other parts of the business.
Speaker Change: The one that we tend to focus our conversations are.
Speaker Change: So if I could just slip one more in here because you did mentioned earlier.
Michael Andrew Roxland: High single digit growth in dispensing for the year, you're not really seeing as the customer your customers feed the goal. Although when you look at some of the companies that have reported.
Michael Andrew Roxland: Fragrance side.
Michael Andrew Roxland: Their volumes have been a little bit.
Michael Andrew Roxland: Lackluster.
Michael Andrew Roxland: With certain companies didn't like this morning call.
Speaker Change: Yeah, we can China.
Speaker Change: Just how do you reconcile I guess your growth in terms of premium or high end fragrance with what some of the beauty companies have posted over the last couple of weeks or unless you Budd.
Speaker Change: Yeah. It's a good question, Mike and it's a couple of things one.
Budd: Again, it's the sub segment of that market that we participate in back to that premium and luxury and so that's part of the answer. The other answer is I mean, our team is doing a really good job, we're winning in that market.
Budd: Our innovation, our design and research capabilities are clearly advantaged and being rewarded for that market space.
Budd: We've become sort of a go to in that market, so with new product launches.
Budd: We are winning a disproportionate amount of those new product launches and that's really what's driving our growth that I think is going to look a little different than what those luxury retailers or or fragrance companies like maybe the ones. You mentioned are going to show in their full company results were in a sub segment that continues to grow.
Budd: So at a very nice clip.
Speaker Change: Got you thanks for all the color and good luck in <unk>.
Speaker Change: Thank you.
Speaker Change: Well now take our next our next question from around Vishwanathan with RBC capital markets.
Vishwanathan: Great. Thanks for taking my question.
Vishwanathan: Grant's on the solid Q1 in the face of continued Destocking here so.
Vishwanathan: Yes, I wanted to ask about two things.
Vishwanathan: First I.
Vishwanathan: I think.
Speaker Change: Maybe could you just comment again on what you're seeing on the promotional side.
Vishwanathan:
Vishwanathan: And.
Vishwanathan: Are you hearing from your customers that they're accelerating their destocking because of the interest rate environment is still very high and carrying costs are high.
Vishwanathan: And that's we wouldn't really see any kind of restocking until interest.
Vishwanathan: The interest rate environment normalizes.
Vishwanathan: And then further on that point are they.
Vishwanathan: Conversely, saying that look we're just going to start doing more with lower inventory and operating them a little bit more just in time is that a structural change or.
Vishwanathan: You guys have been in this industry for a long time. So I just wanted to get your perspective on how your customers are really managing their own order portfolio. Thanks.
Vishwanathan: Sure.
Vishwanathan: Regarding promotional activity again, what we've seen in several categories and it's not just in metal containers. It also applies to dispensing and specialty closures and custom containers. There is a notable increase from our customers on their promotional spend in the marketplace and.
Vishwanathan: Certainly I think we focus the next part of the conversation on metal containers, we think that spend is being very effective it's an efficient spend that's very targeted in where they allocate those promotional activities. They are seeing success and I think the best example of that we can probably even go back.
Vishwanathan: Quarter, or two and talk about the soup category that around the holidays very targeted.
Vishwanathan: Promotional activity that drove the volume activity that they were desiring and it was very successful they are rolling that out in 2024 as part of their marketing campaign as well. So we think it's it's a more effective and more efficient spend that's very targeted and we think so far the results have been quite good so.
Vishwanathan: We're very encouraged by what that means for our customers in 2024, and therefore, our volumes as well for.
Vishwanathan: For Destocking.
Vishwanathan: Look I think the interest rate conversations and interesting one I think that was part of our discussion last year is really destocking really sort of.
Vishwanathan: As interest rates were right raising rising excuse me destocking activity accelerated and so we're just in regular dialogue trying to make sure we understand where inventory levels are where they should be and how that compares to historic norms. So I don't think anyone is.
Vishwanathan: This point in our customer realm is saying that we now want to live with inventories well below our historic norms, just because of interest rate in fairness I think our customers are talking about volume growth in 2024 as a key objective for their businesses and in fairness they need to have some inventory in place to do.
Vishwanathan: That because our lead times, just don't support the turnaround that they need to to have short order recovery of orders from consumers. So it's.
Vishwanathan: It's an interesting question I don't think the interest rates are driving any destocking activity at this point.
Speaker Change: Okay, Thanks for that and.
Speaker Change: And just as a quick follow up is there any way you could kind of quantify inventories whether at your level of your customer level, whether it stays in supply or weeks I mean last year, we heard that inventories were.
Speaker Change: At the retail level Destocking from say eight weeks down to four weeks or something like that but.
Speaker Change: I guess, yeah, just wanted to get your thoughts on that and then you also mentioned something about non discretionary.
Speaker Change: Some of these categories that appeared non discretionary or inflation sensitive as well so.
Speaker Change: Maybe just give us your thoughts on that.
Speaker Change: On that question around inflation and the impact on your volumes.
Speaker Change: Sure I mean, I think that all of this.
Speaker Change: Just take the last one first and just for me.
Speaker Change: I sit here and think about our core products go to food cans for just a minute and you think about it's a meal.
Speaker Change: Soup is considered a meal that that really is not discretionary or it's not a supplement its not a snack it's not.
Speaker Change: That's something that as a company too.
Speaker Change: Another category.
Speaker Change: And I would also go with pet food as an example.
Speaker Change: Those are full meals for pets, and it's half of our volume. So for US. We just don't think that that our products really are discretionary by any real stretch of the imagination of the metal container side.
Speaker Change: We've got functional beverage and other food and beverage products as well and think it's the rest of our business is less discretionary than maybe what some of our competition has as well so.
Speaker Change: And then trying to quantify the inventory levels I think our commentary on that last year, a room is that our discussions with customers quickly turned call. It maybe mid year from a days on hand to kind of a $1 on hand discussion given all the inflation that they had taken not only.
Speaker Change: In their packaging materials, but everything else that goes through with their products and ingredients et cetera.
Speaker Change: And we're starting to transition back now to talking about unit level inventories versus dollar. So I think that's an important point.
Speaker Change: Unit level inventory is down and we're now working very closely with our customers to figure out what the right level of inventory is going forward, but I don't believe again any one is is it believing that they would be operating with inventory levels significantly below their historic norms. As we go forward from a planning purpose.
Speaker Change: Thanks.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: And as a final reminder, that is star one if you would like to ask a question and well pause for just a moment.
Speaker Change: And well now take a follow up from Gabe <unk> with Wells Fargo Securities.
Gabrial Shane Hajde: Hey, guys I'll be brief thanks for taking the follow up I just wanted to ask.
Gabrial Shane Hajde: One of the large.
Gabrial Shane Hajde: Functional drink customers that you're talking about your service here.
Gabrial Shane Hajde: In North America, restaged kind of how they're how they get product to market.
Gabrial Shane Hajde: I'm curious if you <unk>.
Speaker Change: Any impact from that or if it was discernable from this.
Speaker Change: This quote unquote long term destocking phase that that seems out persist for for 18 months generally speaking across packaging.
Speaker Change: Yeah, I think we agree it's gone on longer than any of us had anticipated for sure.
Speaker Change: As far as that debt.
Speaker Change: And how they're supporting the market really for us it does not touch our business. It just whether the distribution point is a direct store distribution or through a third party really doesn't affect us and really any way game. It's more about the end consumer demand that drives our volume.
Speaker Change: Versus how the product gets to retail.
Speaker Change: Okay, great. Thank you.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: And it appears there are no further telephone questions I'd like to turn the conference back to our presenters for any additional or closing comments.
Speaker Change: Great. Thank you very much on it and I appreciate everyone's interest and Silicon performance in Q1 look forward to discussing our Q2 performance in July Thank you.
Speaker Change: And once again that does conclude today's conference. We thank you all for your participation you may now disconnect.
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