Q2 2024 AptarGroup Inc Earnings Call
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The 2024 second quarter conference call will begin shortly.
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Operator: Welcome, and thank you for standing by. The Aptar 2024 second quarter conference call will begin shortly. If you would like to register a question at any time, please press star one on your telephone keypad. Thank you. ?? ?? Ladies and gentlemen, thank you for standing by. Welcome to Aptar's 2024 second quarter conference call. At this time, all participants are in a listen only mode.
Speaker Change: Ladies and gentlemen, thank you for standing by welcome to <unk> 2024 second quarter Conference call.
Speaker Change: Time, all participants are in 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 Mrs. Mary Skafidas, Senior Vice President, Investor Relations and Communications. Please go ahead.
Speaker Change: Introducing today's conference call is missed this marriage Cathetus Senior Vice President Investor Relations and Communications. Please go ahead.
Marry Skafidas: Thank you. Hello, everyone, and thanks for being with us today. Joining me on the call are Stephan Tanda, President and CEO, and Bob Kuhn, Executive Vice President and CFO. A press release and accompanying slide deck have been posted on our website. If you are following along on our website, you can advance the slides by hovering over the presentation screen and clicking on the arrows on the right and left.
Speaker Change: Thank you Hello, everyone and thanks for being with US today, joining me on the call are Stefan and tender President and CEO and Bob Kuhn Executive Vice President and CFO.
Speaker Change: Press release and accompanying slide deck has been posted on our website. If you are following along on our website you can advance the slides by hovering over the presentation screen and clicking on the arrows on the right and left as always we will also post a replay of this call on our website today's call includes some forward looking statements.
Speaker Change: Please refer to our SEC filings to review factors that could cause actual results to differ materially from what we are discussing today.
Marry Skafidas: As always, we will also post a replay of this call on our website. Today's call includes some forward-looking statements. Please refer to our SEC filings to review factors that could cause actual results to differ materially from what we are discussing today. I would now like to turn the conference call over to Stephan. Thank you, Mary, and good morning, everyone.
Speaker Change: I would now like to turn the conference call over to Stephane.
Stephane: Thank you Mary and good morning, everyone.
Stephan B. Tanda: We appreciate you joining us on the call today. I will begin my remarks by highlighting our second quarter results. Later in the call, Bob Kuhn, our CFO, will provide additional details on key drivers for the quarter. Starting on slide 3, for the second quarter, I am pleased to report that Aptar achieved core sales growth of 3% and delivered adjusted EPS of $1.37 per share, a 12% increase over the prior year quarter.
Stephane: We appreciate you joining us on the call today I will begin my remarks by highlighting our second quarter results later in the call Bob <unk>, Our CFO will provide additional details on key drivers for the quarter.
Robert W. Kuhn: Starting on slide three for the second quarter I'm pleased to report that after achieved core sales growth at 3%.
Robert W. Kuhn: Delivered adjusted EPS of $1 37 per share a 12% increase over the prior year quarter.
Stephan B. Tanda: Regroup Adjusted EPS was double digits for the first half of the year and in the quarter. Additionally, due to our confidence in our performance, we recently raised the dividend by approximately 10 percent on top of an almost 8 percent increase last year.
Robert W. Kuhn: We grew adjusted EPS double digits.
Robert W. Kuhn: For the first half of the year and in the quarter. Additionally, due to our confidence in our performance. We recently raised the dividend by approximately 10%.
Robert W. Kuhn: Talk of an almost 8% increase last year.
Stephan B. Tanda: The positive results in the quarter were driven by strong demand for our pharma-proprietary drug delivery systems, as well as continued broad-based marginal improvement. Our pharma segment continues to see healthy demand for our proprietary drug delivery systems with 7% core sales growth in the quarter, following more than 13% core sales growth in the second quarter of 2023. Additionally, proprietary drug delivery systems had double-digit growth in the quarter, on top of growing more than 30% in the prior year quarter.
Robert W. Kuhn: Positive results in the quarter were driven by strong demand for our farmer proprietary drug delivery systems.
Robert W. Kuhn: As well as continued broad based margin improvement.
Robert W. Kuhn: Our pharma segment continues to see healthy demand for our proprietary drug delivery systems with 7% core sales growth in the quarter.
Robert W. Kuhn: Following more than 13% of core sales growth in the second quarter 2023.
Robert W. Kuhn: Additionally, proprietary drug delivery systems had double digit growth in the quarter on top of growing more than 30% in the prior year quarter.
Stephan B. Tanda: One of the key drivers for this quarter was our drug delivery systems used for central nervous system drugs. Over the last decade, we have seen a growing number of pharma companies repurposing drugs from injectable to nasal delivery. This spans from emergency medicines used to reverse the effects of opioid overdose to nasal treatments for migraines, depression, and epilepsy. The wider benefits of nasally delivered medication, such as over-the-counter nasal sprays, have come to light even more in new studies.
Robert W. Kuhn: One of the key drivers for this quarter was our drug delivery systems used for central nervous system drugs.
Robert W. Kuhn: Over the last decade, we have seen a growing number of pharma companies repurposing drugs from injectables to nasal delivery.
Robert W. Kuhn: It spans from emergency medicine used to reverse the effects of opioid overdose.
Robert W. Kuhn: Treatment for migraine depression and epilepsy.
Robert W. Kuhn: The wider benefits of nasally delivered medication.
Speaker Change: Such as over the counter Amazing stories has come to life, even more new study.
Stephan B. Tanda: According to a July 2024 study funded by the National Institute for Health and Care Research, nasal sprays, such as Vicks First Defense, the gel-based nasal spray featuring a nasal pump that was used in the study, were shown to reduce the severity of cold and flu symptoms.
Speaker Change: According to the July 2024 study funded by the National Institute for Health and care research.
Speaker Change: <unk> space, such as Vicks first defense the gel based basal III featuring amazing pump.
Speaker Change: It was used in the study were shown to reduce the severity of cold and flu symptoms.
Stephan B. Tanda: Decrease the frequency and duration of respiratory infections, as well as limit the need for antibiotics in at-risk patients. This report is timely, also in light of the most recent surge of COVID cases spreading in the U.S. In addition to our proprietary drug delivery systems, we have also built a suite of service and digital offerings. These include formulation development support, analytical testing, and human factors testing.
Speaker Change: Decrease the frequency and duration of respiratory infections as well as limit the need for antibiotics in at risk patients.
Speaker Change: This report is timely also in light of the most recent surge of Covid cases, spreading in the U S.
Speaker Change: In addition to our proprietary drug delivery system.
We've also built a suite of services and digital offerings.
Speaker Change: Include formulation development support analytical testing human factors testing generating patient insights regulatory support digital health and drug lifecycle management, all to help biopharmaceutical customers bring their drugs to market successfully.
Stephan B. Tanda: Generating Patient Insight, regulatory support, digital health, and drug life cycle management, all to help our pharmaceutical customers bring their drugs to market successfully. We are focused on improving patient experiences and helping them successfully administer the therapy. Now moving to injectables sales declined when compared to the prior year quarter as sales normalized following last year's strong second quarter catch-up from the ERP implementation in the first quarter of 2023. Our pipeline of elastomeric components is going nicely, especially for a higher value. Both our beauty and closure segments saw volume increases. For beauty, lower tooling sales pulled down core sales growth.
Speaker Change: We're focused on improving the patient experiences.
Speaker Change: Helping them successfully administer the therapy.
Speaker Change: Now moving to Injectables sales declined when compared to prior year quarter, a normalized following last year's strong second quarter catch up from the ERP implementation in the first quarter of 'twenty three.
Speaker Change: Our pipeline of lots to marry components is growing nicely, especially for our higher value offerings.
Speaker Change: Both beauty and closure segment saw volume increases.
Speaker Change: Beauty lower tooling sales pulled that in core sales growth.
Stephan B. Tanda: Beauty saw pockets of strength in North America and Latin America with moustache fragrances and broad-based demand improvement for personal care dispensers. However, sales in Europe, which represent more than 50% of beauty's revenue, normalized after a period of significant growth a year ago. In terms of margins, BEAUTY improved by full percentage points over the prior year period, while CLOSURE's margins were flat due to the timing of the passing on of lower resin costs. During this talking period, we have focused on improving operational leverage.
Speaker Change: Already saw pockets of strength in North America.
Speaker Change: America is masstige fragrances, and broad based demand improvement for personal care dispensing.
Speaker Change: He is in Europe, which represent more than 50% of beauties revenue normalized after a period of significant growth a year ago.
Speaker Change: In terms of margins beauty improved four percentage points over the prior year period, while closures margins were flat due to timing of the passing on of lower resin costs.
Speaker Change: This destocking period, we have focused on improving operational leverage.
Stephan B. Tanda: Now that we are seeing progressive improvement in North American sales, we expect the benefits of volumes to rebound. Before I turn the call over to Bob to share further details on Q2, I want to speak about innovation and highlight recent technology and product launches, as shown on slide four. Starting with pharma, our unidose system is used in the U.S. to deliver medications that treat vitamin B12 deficiency and anemia. In China, our airless system is used for new acne medication.
Speaker Change: No.
Speaker Change: Seen progressive improvement in North American sales, we expect to benefit as volumes rebound.
Speaker Change: Before I turn the call over to Bob to share further details on Q2, I want to speak about innovation and highlight recent technology and product launches as shown on slide four.
Speaker Change: Starting with farm or a human dose system is used in the U S to deliver medications to treat vitamin B 12 deficiency and anemia.
Speaker Change: In China, our airless system is used for new acne medication and in Europe, our active file materials technology used for beers like Europe Diotic probe.
Stephan B. Tanda: And in Europe, our active bio-material science technology is used for Bayer's Ivera Biotics Pro. In our digital health business, Migraine Buddy is now part of our portfolio of products and is the leading headache and migraine tracking app to help users report and self-manage their migraine symptoms.
Speaker Change: And then our digital health business migraine body is not part of our portfolio of products and is the leading headache and migraine checking app to help users report and self manage their migraine symptoms.
Stephan B. Tanda: We have also added two digital solutions that enable patients to track their health and share reports with their care team through our partnership with BioGem. Clio for patients with multiple sclerosis and physio.me for people living with neuromuscular disorders. In Beauty, Park is used by locals.
Speaker Change: We have also added to digital solutions that enable patients to track their health.
Speaker Change: And share reports with the care team through our partnership with Biogen.
Speaker Change: <unk> for patients with multiple sclerosis.
Speaker Change: Physio dark meat for people living with neuromuscular disorders.
Stephan B. Tanda: Re-fillable E-Dome for railgrounds. Gael Lance, the First Fragrance Formulated Without Alcohol, Peaches Are Our Fragrance Pump, and Neutrogena's Hydroboost skincare product have selected a mono-material, fully recyclable pump. In Latin America, Aptar's custom overcap, made from post-consumer recycled resin, is featured on the fragrance kayak. Turning to closures, we have a 14-year partnership with Kraft Heinz for their Moneto brand beverage concentrates, and the rebranded packaging in the U.S. has a custom closure with our Simply Squeeze valve.
Speaker Change: In beauty pulp is used for loan Kohl's refillable don't fragrance.
Speaker Change: Go lives truthfully formulated without alcohol features a fragrance pump.
Speaker Change: Neutral genius hydro boost skincare product has selected mono material fully recyclable pump.
Speaker Change: In Latin America custom over cap Mitra post consumer recycled resin is featured on the fragrance kayak.
Speaker Change: Turning to closures, we have a 14 year partnership with Kraft Heinz for their meal branded beverage concentrates.
Speaker Change: The rebranded packages in the U S as a test and closure with our simply squeeze valve.
Stephan B. Tanda: Turning to slide five now, during the quarter, we released our 2023 Corporate Sustainability and ESG report, which highlights our significant progress across many key areas of our sustainability strategy. We pride ourselves on continuously raising the bar on sourcing renewable energy, certifying sites as landfill-free, and developing products that are more recyclable, reusable, refillable, and incorporate more sustainable materials.
Speaker Change: Okay and flipped up closure with PCR is used Adidas body cleansing in China.
Speaker Change: Turning to slide five now during the quarter, we released our 2023 corporate sustainability.
Speaker Change: <unk> report, which highlights our significant progress across many key areas of our sustainability strategy.
Speaker Change: Pride ourselves and continuously raising the bar of sourcing renewable energy certifying sites as landfill free and developing product that they're more recyclable reusable refillable and incorporate more sustainable materials.
Stephan B. Tanda: In June, USA Today named Aptar among America's climate leaders, and Time Magazine named us one of the world's most sustainable companies, where we are ranked number 194 out of 500 global companies. Both recognitions reflect a broad-based leadership in sustainability. Transparent Data Reporting and Continued Commitment to Advancing Sustainable Practice. Now, I would like to turn the call over to Bob.
Speaker Change: In June USA today named after among America's climate leaders in time magazine named US one of the world's most sustainable companies, where we are ranked number 194 out of 500 global companies.
Speaker Change: Both recognitions reflect our broad based leadership in sustainability.
Speaker Change: Transparent data reporting and continued commitment to advancing sustainable practices.
Speaker Change: I would like to turn the call over to Bob.
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 2%, but this included a currency translation headwind of approximately 1%.
Robert W. Kuhn: Thank you Stefan and good morning, everyone.
Robert W. Kuhn: Starting on slide six I would like to summarize the quarter.
Robert W. Kuhn: Our reported sales increased 2%.
Robert W. Kuhn: This included a currency translation headwind of approximately 1%.
Robert W. Kuhn: Therefore, core sales grew 3%, primarily due to strong growth in pharma's proprietary drug delivery systems, as well as a progressively recovering North American market for both beauty and closure. As shown on slide 7, we reported second quarter adjusted earnings per share of $1.37, which is a 12% increase over the prior year's adjusted EPS. During the quarter, we achieved Justitia Vitae of $193 million, which increased from the prior year's second quarter by 6% driven by expanding margins. Free cash flow increased to $75 million in the quarter compared to $7 million in the prior year's second quarter.
Robert W. Kuhn: Therefore core sales grew 3% primarily due to strong growth in farmers proprietary drug delivery systems as well as our progressively recovering north American market for both beauty and closures.
Robert W. Kuhn: As shown on slide seven we reported second quarter adjusted earnings per share of $1 37.
Robert W. Kuhn: Which is a 12% increase over the prior year's adjusted EPS.
Robert W. Kuhn: During the quarter, we achieved adjusted EBITDA of $193 million.
Robert W. Kuhn: Which increased from the prior year's second quarter by 6% driven by expanding margins.
Robert W. Kuhn: Free cash flow increased to $75 million in the quarter compared to $7 million in the prior year quarter.
Robert W. Kuhn: Turning to some of the details by segment for the quarter, our pharma segment's core sales increased 7% due to volume growth, especially in our proprietary drug delivery systems and active film solutions. Looking at sales in the pharma segment by market, I will start by breaking out our proprietary drug delivery systems, which performed well in the quarter. Prescription core sales increased 16%, driven by strong sales of allergic rhinitis, central nervous system therapeutics, as well as pain and emergency medicine. Core sales for consumer healthcare increased 6% due to higher demand for eye care, nasal saline, and nasal decongestant solutions. Injectables course sales decreased 10% over the prior year quarter.
Robert W. Kuhn: Turning to some of the details by segment for the quarter, our pharma segments core sales increased 7% due to volume growth, especially in our proprietary drug delivery systems and active film solutions.
Robert W. Kuhn: Looking at sales in the pharma segment by market I will start by breaking out our proprietary drug delivery systems, which performed well in the quarter.
Robert W. Kuhn: Prescription core sales increased 16% driven by strong sales of allergic rhinitis central nervous system therapeutics, as well as pain and emergency medicine.
Robert W. Kuhn: Core sales for consumer health care increased 6% due to higher demand for eyecare nasal saline and nasal decongestant solutions.
Robert W. Kuhn: Injectables core sales decreased 10%.
Robert W. Kuhn: The prior quarter.
Robert W. Kuhn: As Stephan mentioned, sales declined compared to the prior year quarter as sales normalized following last year's strong second quarter catch-up from the ERP implementation in the first quarter of 2023. However, we continue to see good growth in our higher value elastomeric components, including those used for GLP-1 applications. Core sales for our active material science solutions improved in the quarter, increasing 7%, with demand returning for our products used in probiotics, oral solid dose applications, and wearables.
Robert W. Kuhn: Stefan mentioned sales declined compared to the prior year quarter as sales normalized following last year's strong second quarter catch up from the ERP implementation in the first quarter of 2023.
Speaker Change: We continue to see good growth in our higher value elastomer components, including those used for G. O P. One applications.
Speaker Change: Core sales for active materials science solutions improved in the quarter, increasing 7% with demand returning for our products used on probiotics oral solid dose applications and wearables.
Robert W. Kuhn: The Farmers adjusted EBITDA margin was 34%, a nearly two-point improvement from the prior year's quarter due to increased sales of higher-value products, increased royalties on customer sales, and ongoing efforts around operational improvement. The Beauty Segment's overall sales decreased 1% in the quarter, driven by lower product sales in Europe after a period of significant fragrance launches, as well as lower tooling sales compared to Q2 of 2023.
Speaker Change: Farmers adjusted EBITDA margin was 34% a nearly two point improvement from the prior year's quarter due to increased sales of higher value products increased royalties on customer sales and ongoing efforts around operational improvements.
Speaker Change: The beauty segment's core sales decreased 1% in the quarter driven by lower product sales in Europe. After a period of significant fragrance launches as well as lower tooling sales compared to Q2 of 2023.
Speaker Change: The segments on modest volume improvement with stronger sales globally in the personal care and home care end markets and the beauty end market in North America.
Robert W. Kuhn: The segment is on modest volume improvement with stronger sales globally in the personal care and home care end markets and the beauty end market in North America. However, as we look closer at the segment's performance by end market, core sales for the beauty market decreased 6% in a quarter.
Speaker Change: As we look closer at the segment's performance by end market.
Speaker Change: Core sales for the beauty market decreased 6% in the quarter.
Robert W. Kuhn: Overall, difficult comparisons for Prestige Fragrance dispensing solutions in the prior year quarter were the main reason for the lower sales. Regionally, sales were up in North America, Latin America, and more modestly in Asia, while sales in Europe were down due to tough fragrance comparisons. Core sales for the personal care market increased 4% due to demand for body lotions and hair care products. However, growth was broad-based across most regions. Home care sales increased 10%, driven by strong sales in North America, primarily for our products used in air care applications.
Speaker Change: Overall difficult comparisons for prestige fragrance dispensing solutions in the prior year quarter with the main reason for the lower sales.
Speaker Change: Regionally sales were up in North America, Latin America, and more modestly in Asia, while sales in Europe were down due to tough fragrance comparisons.
Speaker Change: Core sales for the personal care market increased 4% due to demand for body lotions and hair care products.
Speaker Change: Growth was broad based across most regions.
Speaker Change: Homecare sales increased 10% driven by strong sales in North America, primarily for our products used on air care applications.
Robert W. Kuhn: This segment's adjusted EBITDA margin for the quarter was approximately 14 percent, nearly a one-point improvement over the prior year's quarter despite softer sales. The margin improvement was due to continued focus on operational performance along with cost management. Turning to the closure segment, core sales were flat compared with the prior year's quarter.
Speaker Change: This segment's adjusted EBITDA margin for the quarter was approximately 14% nearly a one point improvement over the prior year's quarter Despite softer sales.
Speaker Change: The margin improvement was due to continued focus on operational performance along with cost management.
Speaker Change: Turning to the closure segment core sales were flat compared with the prior year's quarter.
Robert W. Kuhn: Volumes for closures increased slightly, but core sales were negatively impacted by the pass-through of lower resin costs. Sales increased for beverage, offsetting the softer food market. When looking at sales by market foreclosures, food core sales decreased 3%, driven by market softness in North America and Europe.
Speaker Change: Volumes for closures increased slightly but core sales were negatively impacted by the pass through of lower resin costs.
Speaker Change: Sales increase for beverage offsetting the softer food market.
Speaker Change: When looking at sales by market for closures food core sales decreased 3% driven by market softness in North America and Europe.
Robert W. Kuhn: BeverageCore sales increased 7%, with sales of bottled water, functional sports drinks, and concentrates contributing positively to the result. Sales were driven by overall regional growth, including Europe, which is our largest beverage market. Core sales for personal care closures decreased 3%. However, growth in North America, Latin America, and Asia could not offset the decline in Europe.
Speaker Change: Beverage core sales increased 7% with sales of bottled water functional sports drinks and concentrates contributing positively to the results.
Speaker Change: Sales were driven by overall regional growth, including Europe, which is our largest beverage market.
Speaker Change: Core sales for the personal care closures decreased 3% growth in North America, Latin America, and Asia could not offset the decline in Europe.
Robert W. Kuhn: In our fourth category, which includes beauty, home care, and health care, core sales increased 9% as demand for dish care, surface cleaners, and laundry products grew in the quarter. The segment's adjusted EBITDA margin was 16% for the quarter, which was flat compared to the prior year quarter, as ongoing cost containment efforts and operational performance were offset by the timing of pass-through of lower resin costs. In the second quarter of 2024, we had capital expenditures of approximately $68 million, and about 60% was spent on our pharma segment. Reported depreciation and amortization expense increased by almost $3 million over the prior year quarter to approximately $65 million, or 7% of sales.
And our fourth category, which includes beauty home care and health care core sales increased 9% as demand for dish care surface cleaners, and laundry products grew in the quarter.
Speaker Change: The segment's adjusted EBITDA margin was 16% for the quarter, which was flat compared to the prior year quarter as ongoing cost containment efforts and operational performance were offset by the timing of pass through of lower resin costs.
Speaker Change: In the second quarter of 2024, we had capital expenditures of approximately $68 million and about 60% was spent on our pharma segment.
Speaker Change: Reported depreciation and amortization expense increased by almost $3 million over the prior year quarter to approximately $65 million or 7% of sales.
Robert W. Kuhn: In the quarter, we experienced higher corporate expenses than usual, including more than $3 million in expenses for the review of potential acquisition targets. I also want to note that, in early July, we amended and restated our multi-currency revolving credit facility to replace the existing facility that matures in June 2026. The new facility now matures in July 2029 and provides for unsecured financing of up to $600 million. Also, in July, we entered into a term loan that matures in July 2027 and provides for unsecured financing of up to $330 million.
Speaker Change: In the quarter, we experienced higher corporate expenses unusual including more than $3 million in expenses for the review of potential acquisition targets.
Speaker Change: I also want to note that in early July we amended and restated our multi currency revolving credit facility to replace the existing facility that matures in June 2026.
The new facility now matures in July 2029, and provides for unsecured financing of up to $600 million.
Speaker Change: Also in July we entered into a term loan that matures in July 2027, and provides for unsecured financing of up to $330 million. This will be used to finance near term maturities and for general corporate purposes.
Robert W. Kuhn: This will be used to finance near-term maturities and for general corporate purposes. Slide 8 and 9 cover our year-to-date performance and show a core sales increase of 4% and our adjusted earnings per share, which were $2.63, up 21% compared to $2.18 a year ago, including comparable exchange rates. Moving to slide 10, which summarizes our outlook for the third quarter, we anticipate our growth to continue and expect third 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 $1.38 to $1.46 per share. The estimated tax rate range for the third quarter is 23.5% to 25.5%.
Speaker Change: Slides eight and nine cover our year to date performance and show a core sales increase of 4% and our adjusted earnings per share which were $2 63.
Speaker Change: Up 21% compared to $2.18, a year ago, including comparable exchange rates.
Speaker Change: Moving to slide 10, which summarizes our outlook for the third quarter, we anticipate our growth to continue and expect third quarter adjusted earnings per share <unk>.
Speaker Change: Excluding any restructuring expenses acquisition costs and changes in unrealized fair value of equity investments to be in the range of $1 38 to $1 46 per share.
Speaker Change: The estimated tax rate range for the third quarter is 23 and a half the 25.5%.
Robert W. Kuhn: We are expecting currencies to have a small positive impact compared to the prior year quarter. We currently estimate depreciation and amortization for 2024 to be between $260 and $270 million. We expect our capital expenditures in 2024 to be between $280 and $300 million, with the majority of capital allocated to our pharma sector. In closing, we continue to have a strong balance sheet with a leverage ratio of approximately 1.3, 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. In addition to our cash dividend payments to shareholders, which totaled approximately $27 million in the quarter, we repurchased about 34,000 shares for approximately $5 million.
Speaker Change: We are expecting currency to have a small positive impact compared to the prior year quarter.
Speaker Change: We currently estimate depreciation and amortization for 2024 to be between $260 million to $270 million.
We expect our capital expenditures in 2024 to be between $280 and $300 million with the majority of capital allocated toward our pharma segment.
Speaker Change: Loathing, we continue to have a strong balance sheet with a leverage ratio of approximately $1 three 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 repurchases.
Speaker Change: In addition to our cash dividend payments to shareholders, which totaled approximately $27 million in the quarter.
Speaker Change: We repurchased about 34000 shares for approximately $5 million.
Stephan B. Tanda: Over the last five years, we have returned more than $780 million to shareholders through dividends and share repurchase. At this time, Stephan will make a few closing comments before we move to Q&A. Thanks, Bob.
Over the last five years, we've returned more than $780 million to shareholders through dividends and share repurchases at.
Speaker Change: At this time Stefan will provide a few closing comments before we move to Q&A. Thanks.
Stefan: Thanks, Bob.
Stephan B. Tanda: In closing, we had a strong first half and see that growth continue into the third quarter. We seek good momentum for our proprietary drug delivery system, driven by demand for nasally-delivered central nervous system drugs, as well as our proprietary drug delivery systems for allergies and eye care.
Stefan: In closing, we had a strong first half and see that growth continuing into the third quarter.
Stefan: See good momentum for our proprietary drug delivery systems, driven by demand for amazingly delivered central nervous system drugs.
Speaker Change: As soon as our proprietary drug delivery systems for LNG and Ikea.
Stephan B. Tanda: As a reminder, we expect our proprietary drug delivery systems to grow within our long-term core sales target range of 7 to 11% for the full year. While we expect 2024 to be a bit noisy for our injectable division, we see demand for higher-value products continuing to grow. For our consumer dispensing technology, we see progressive recovery in North America. As volumes come back, we expect to benefit from our continued focus on cost management and improved operational leverage.
Speaker Change: As a reminder, we expect our proprietary drug delivery systems to grow within our luxury core sales target range of 711% for the full year.
Speaker Change: While we expect 2024 to be a bit noisy for our injectable division, we see demand for higher value products continuing to grow.
Speaker Change: For our consumer dispensing technology, we see progressive recovery in North America as volumes come back we expect to benefit from our continued focus on cost management and improved operational leverage lastly, our strong performance and continued positive outlook.
Stephan B. Tanda: Lastly, our strong performance and continued positive outlook led to our recent dividend increase of almost 10% on top of last year's 8% increase. Now, before I open the call up for questions, I want to touch on the announcement we made last night. My colleague, Bob Kuhn, Aptar CFO, has decided to retire at the end of this year.
Speaker Change: Through our recent dividend increase of almost 10% on top of last year's 8% increase.
Stephan B. Tanda: Bob has been with Aptar for 37 years, 16 of them as our CFO. I want to sincerely thank Bob for his guidance, leadership, and many contributions to AFT. No doubt Bob is one of the best CFOs in the business. He has played an instrumental role in our success while building a strong team and putting in place an incredible financial foundation from which Aptar can continue to grow and create shareholder value. After an extensive search process, I am pleased to announce that Vanessa Kanu has been selected as Aptar's next CFO as of the 1st of January 2025.
Speaker Change: Now before I open the call up for questions I want to touch on the announcement, we made last night.
Speaker Change: My colleague Bob Kiernan after our CFO.
Robert W. Kuhn: Guided to retire at the end of this year.
Rob: Rob has been with after 37 years 16 of them as our CFO.
Speaker Change: I want to sincerely thank Bob for his guidance leadership and many contributions to <unk>.
Bob: No doubt Bob is one of the best vehicles in the business.
Speaker Change: He has played an instrumental role in our success, while building a strong team and putting in place an incredible financial foundation from which after can continue to grow and create shareholder value.
Stephan B. Tanda: Vanessa is expected to start early in the fourth quarter of this year as CFO-designated. Vanessa brings tremendous experience as a CFO in financial reporting, global operations, M&A, and cost management that Aptar and our shareholders will greatly benefit from. Most recently, she was the CFO of TELUS International, a technology services firm that operates in 32 countries. She also serves on the board of directors of Manulife Financial Corporation.
Speaker Change: After an extensive search process I am pleased to announce that Vanessa <unk> has been selected as <unk> next CFO as of the first of January 2025.
Speaker Change: <unk> is expected to start early in the fourth quarter of this year as CFO designate.
Speaker Change: And as it brings tremendous experience as a CFO in financial reporting global operations, M&A and cost management, the appetite of our shareholders will greatly benefit from.
Most recent issue both the CFO of Telus International.
Speaker Change: Technology services firm that operates in 32 countries.
Speaker Change: She also serves on the board of directors of Manulife Financial Corporation.
Stephan B. Tanda: A Global Financial Services Institution. I am pleased to welcome Vanessa to the Aptar team, and I look forward to working with her and introducing her to many of you listening on the call. As a testament to the strong finance team in place, we have also promoted Dan Ackerman, the Chief Accounting Officer of the company. Dan has become a trusted advisor, valued for his integrity and dedication to Aptar. He will continue to lead all corporate accounting functions, working closely with the second and final team, and continue to help the company's long-term financial planning strategy.
Speaker Change: A global financial services institution.
Speaker Change: I am pleased to welcome Melissa <unk> and I look forward to working with her and introducing her to many of you listening on the call.
Speaker Change: As a testament to the strong finance team in place. We have also promoted Dan acumen to Chief accounting officer of the company.
Speaker Change: Then it become a trusted advisor value through his integrity and dedication to <unk>.
Speaker Change: He will continue to lead all corporate accounting functions working closely with the Semgroup pilot and continue to help the company's long term financial planning strategy with that I would like to open the call up for your questions.
Stephan B. Tanda: With that, 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 would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally.
Speaker Change: Okay.
Speaker Change: Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad.
Speaker Change: If you would like to withdraw your question. Please press star followed by two.
When preparing to ask a question. Please ensure your devices and makes it locally.
Speaker Change: In the interest of time and fairness to all participants please limit yourself to two questions and then come back into the queue. If you have more questions as time allows.
Operator: In the interest of time and fairness to all participants, please limit yourself to two questions and then come back into the queue if you have more questions as time allows. Our first question comes from George Staphos with Bank of America. Your line is open. Please go ahead. Thanks so much, everyone.
Speaker Change: Our first question comes from George Staphos with Bank of America. Your line is open. Please go ahead Sir.
George Leon Staphos: Thanks, So much hi, everyone. Good morning, thanks for the details.
George Leon Staphos: And Bob, it's been wonderful working with you. We appreciate all your support of our research and everyone's, I'm sure everybody in the community thinks that, and we congratulate Vanessa and Dan on their next chapters in their careers and Vanessa joining Aptar as well. My two questions, first of all... and there are a lot. Discussion of de-stock. How much of that... Relative to, obviously, the tough comps that you
George Leon Staphos: Bob It's been wonderful working with you. We appreciate all your support of our research and everyone's I'm sure everybody in the community thinks that and we congratulate Vanessa and then on there.
Next chapters in their careers and Vanessa joining after as well.
Speaker Change: I guess my two questions.
Speaker Change: First of all there's been a lot as you might know discussion of regarding destocking in the injectables market not necessarily for you guys, but for some of your peers.
Speaker Change: Much of that is affecting your business relative to obviously, the tough comps that you spelled out.
Speaker Change: And then secondly.
Stephan B. Tanda: What I'd say is this, you know, it looks like... migration of share perhaps back? How are you seeing growth in your proprietary dispensing systems when injectables were supposed to be where the growth was going to be? Thanks so much. Great, George, and I can only echo your thanks to Bob and the team. As for your questions, let me take one at a time. Look, we did not have a huge COVID boom for our injectable business.
Speaker Change: What I'd say is this it looks like Youre seeing a migration of share perhaps back into your traditional your proprietary dispensing devices out of Injectables.
Speaker Change: Or at least if you can comment if that's happening given everything we've heard.
Speaker Change: Molecule large molecule have been sort of gaining share in terms of remedies and so is how is how are you seeing growth in your proprietary dispensing systems win Injectables was supposed to be where the growth is going to be thanks, so much and I'll come back in queue.
George Leon Staphos: Great George and.
Speaker Change: I can only echo your thanks.
Speaker Change: To Bob and the team.
Speaker Change: On your question.
Speaker Change: Let me take one at a time.
Stephan B. Tanda: As you know, the major benefits of COVID in our injectable business were the credibility gain as we got vetted. Of course, we see some destocking of anti-thrombotics and things like that that people consumed more when they were in the hospital. But in the context of the overall growth of the high-value products, GLP-1, that is more than offset. And the noisiness of the quarter is quite simple.
Speaker Change: Look we did not have a huge kobe boom for our injectable business as you know the major benefits of Covid in our injectable business as well as the credibility gain as we get it.
Speaker Change: Of course, we see 70 start seeing some destocking.
Speaker Change: Oh, antithrombotic and things like that that people consume more of than they were in the hospital.
Speaker Change: In the context of the overall growth of the high value products with <unk>.
Speaker Change: Is more than offset and.
Speaker Change: The noise in the quarter, it's quite simply last year's quarter, two will be to kind of get a quarter and a half in quarter two.
Stephan B. Tanda: Last year's quarter two, we kind of did a quarter and a half in quarter two because we caught up from almost no sales in quarter one. That's why you have this noisy comparison. But injectables have grown through the first six months in unit sales, and we expect it to continue to grow in the second half. Nevertheless, never mind the destocking of some SKUs like anti-thrombotics. Now, on your second question, this is really, you're talking different orders of magnitudes, you know. Injectable medicines, you know, it's like the Pacific Ocean, and then you talk about drugs administered through the nose, it's maybe the Danube, so you're talking different orders of magnitude, so there's not really a big shift.
Speaker Change: We caught up from almost no sales in quarter. One that's why you have this.
Speaker Change: Noisy comparison, but.
Speaker Change: Injectable has grown through the first six months in unit sales and we expect it to continue to grow in the second half.
Speaker Change: Nevertheless.
Speaker Change: Mike.
Mike: You're starting to make some skus like antithrombotic.
Mike: Now on your second question. This is really you are talking different order of magnitude.
Mike: Injectable medicines.
Speaker Change: It looks like the Pacific Ocean, and then you talked about the.
Speaker Change: Drugs administered through the nose.
Speaker Change: It may be the venue so different orders of magnitude, there's not really a big shift.
Stephan B. Tanda: We continue to see injectable medicines grow, and especially biologics continue to grow. What nasal delivery offers to many pharma companies is a way to improve lifecycle management. These may be older drugs, may be well-established drugs with a new delivery method, one that perhaps is more efficient for that type of molecule. Sometimes it's repurposing injective medicines like naloxone, sometimes it's repurposing oral dose medicines, and sometimes it's maybe an alternative like, you know, epinephrine from the EpiPen to hopefully a nasal delivery.
Speaker Change: We continue to see injected medicines to grow.
Speaker Change:
Speaker Change: And especially biologics continue to grow what the nasal delivery offers to many pharma companies the way too.
Speaker Change: If cycle management.
Speaker Change: Maybe older drugs, maybe well established drugs.
Speaker Change: Two with the new delivery methods.
Speaker Change: Or is it more.
Speaker Change: Efficient means for that type of molecule and sometimes just repurposing injected medicines like <unk>, sometimes it's III repurposing.
Speaker Change: Repurposing oral dose medicines.
And sometimes it's maybe an alternative like epinephrine.
Speaker Change: The epipen to hopefully nasal delivery, but.
Stephan B. Tanda: But this takes nothing away from the growth of the Pacific Ocean, so to speak, in terms of overall injective medicine and biologics, and we are a small part of this, but we are very excited about the growth, and that's why we invested in it. Aptargroup Inc. We now turn to Ghansham Panjabi with Baird. Your line is open, please go ahead. Hi, good morning.
Speaker Change: Let's take nothing away from the.
Speaker Change: The growth of the Pacific Ocean, So to speak in terms of overall injected medicine and biologics.
Speaker Change: We are some more a part of it.
Speaker Change: But we are very excited about the growth in that.
Speaker Change: We're invested.
Speaker Change: Invested in it.
Speaker Change: Thank you I'll turn it over I'll come back.
Speaker Change: We now turn to Ghansham Panjabi with Baird. Your line is open. Please go ahead.
Ghansham Panjabi: And I just want to echo George's comments for Bob. Obviously, a big congratulations on your retirement. Amazing career, and you'll certainly be missed by all of us.
Ghansham Panjabi: Hi, good morning, and I, just want to Echo George's comments for Bob obviously, congrats on your retirement and amazing career and you'll certainly be missed by all of us.
Stephan B. Tanda: I guess, you know, following up on the last question, so on pharma, I mean, plus 7% core sales growth, you know, obviously prescriptions boosted that injectables down. So if the assumption, Stephan, is that injectables continue to grow in the back half of the year or reverts to that, should we expect a reacceleration in terms of growth in core sales relative to that 7%, and how does that Yeah, we don't really guide by subunit.
Speaker Change: I guess following up on the last question. So on pharma, I mean, plus 7% core sales growth.
Speaker Change: Obviously prescription boosted that.
Speaker Change: Injectables down so if the assumption Stephane is that.
Speaker Change: <unk> continues to grow in the back half of the old reverts towards that should we expect a reacceleration in terms of growth or sales relative to that 7% and how does that impact margins as well.
Speaker Change: Okay.
Stephan B. Tanda: I think we have already leaning out the window by giving you some comfort that our proprietary drug delivery dispensing will continue to grow at 7 to 11 percent for the full year, despite the double-digit growth last year. And yeah, you can take from my comments that we see continued growth in injectables. And yeah, technically, technically, that is a re-acceleration from a decline in quarter two. But you understand the quarter two comparison, okay?
Speaker Change: Yeah, we don't really guide.
Speaker Change: By stop unit I think you already leaned out the window.
Speaker Change: You can give some comfort that our proprietary drug.
Speaker Change: Delivery dispensing and continued to grow in the $7 11 per se.
Speaker Change: In India for the full year, despite the double digit growth last year and yes, you can take from my comments that we see continued growth in injectables.
Speaker Change: Deeply technically that is a reacceleration from a decline in quarter, two but you understand the quota to comparison here.
Stephan B. Tanda: And then for my second question, you know, it sounds like, go ahead. No, go ahead, go ahead. Yeah, look, on the margin, obviously, a part of that is mixed dependent. As you know, certainly our proprietary sensing devices are by far the highest-margin business. Objectable is nice, but not in that range.
Speaker Change: And then for my second question on the model.
Speaker Change: It sounds like.
Speaker Change: Yes.
Speaker Change: Sorry go ahead.
Speaker Change: No. No go ahead go ahead please.
Speaker Change: Yeah look on the <unk>.
Speaker Change: Margin, obviously, a part of that is mix dependent as you know.
Speaker Change: Certainly our proprietary dispensing devices, but probably the highest margin business.
Speaker Change: Injectables is nice, but not in that range. So it will always have a mix impact on the other hand.
Stephan B. Tanda: So it will always have a mixed impact. On the other hand, as you heard Bob say, overall, we also had three and a half million of non-recurring corporate costs in Q2 that we did not adjust out, so they will not repeat in Q3. Also, you know, we will start to have the benefits of having shut down the closures plans in France. So we continue, across the board. Okay, and then my second question was about the beauty segment.
Speaker Change: Overall, we also have.
Speaker Change: $3 5 million of nonrecurring corporate cost.
Speaker Change: In Q2 that we did not adjust out so that will not repeat in quarter three.
Speaker Change: Also we will start to have the benefit of having shut down the <unk>.
Speaker Change: <unk> plant in France, So we continue.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Across the board.
Speaker Change: Okay.
Speaker Change: Okay and then my second question was on the beauty segment. So.
Stephan B. Tanda: So, you know, as it relates to North America showing pockets of growth. How do you see that unfolding in the back half of the year in context of just very, very mixed consumer spending? And then your comment on Europe specific to fragrances, I mean, clearly, comparison is going to be tough for the back half of the year as well. Should we expect the same timeline for the back half? Yeah.
Speaker Change: As it relates to North America, showing pockets of growth.
Speaker Change: How do you see that unfolding in the back half of the year in context of just very very mixed consumer spending and then your comment on Europe specific to fragrances, clearly comparison is going to be tougher.
Speaker Change: For the back half of the year as well should.
Speaker Change: Should we expect the same trend line for the back half specific to Europe and also for that segment. Thanks.
Speaker Change: Yes.
Speaker Change: Yeah.
Stephan B. Tanda: I would say first, North America, obviously, we compared to a relatively low base, and we see broad-based recovery, not only in beauty, but also in closures. And I think that bodes well for the second half of the year. Now, given that Europe is so much bigger, clearly, we have this avalanche of new prestige launches coming out of COVID that don't repeat. We will also see that in the second half of the year, the comparisons will get a little bit easier.
Speaker Change: I would say first North America, obviously be compared to a relatively low base and we see broad based recovery.
Speaker Change: Beauty, but also in closures and I think that bodes well for the second half of the year given that Europe is so much bigger.
Speaker Change: Clearly we have this avalanche of new prestige launches coming out of Covid.
Speaker Change: Don't repeat.
Speaker Change: You'll also see that in the second half.
Speaker Change: The.
Speaker Change: Comparisons will get a little bit easier.
Speaker Change: Actually have some nice growth of Masstige launches that's.
Particularly in Latin America, but that's not large enough to offset.
Speaker Change: The year over year comparisons with Europe, So it's going to be a bit of a mixed bag, but overall very positive for North America. Good growth in Latin America, clearly, we're all a little bit.
Stephan B. Tanda: We actually have some nice growth in mustache launches, particularly in Latin America, but that's not large enough to upset the year-over-year comparison with Europe. So, yeah, it's going to be a bit of a mixed bag, but overall, very positive for North America, and good growth in Latin America. Clearly, we're all a little bit looking at China and wondering when it's going to start firing again on all 12 cylinders, and that also has an impact on European sales, as you recall, that a lot of our European beauty sales also feed into China. Thank you. Thanks so much.
Speaker Change: Looking at China, and wondering when it's going to start firing again on all 12 cylinders and that also has an impact on European sales as you will recall that a lot of our European beauty sales also feed into China.
Speaker Change: So thats why its a bit trillium expect for the second half of beauty, but.
Speaker Change: Overall I feel good about.
Stephan B. Tanda: And Bob, congrats again. Our next question comes from Daniel Rizzo with Jeffreys. Your line is open, please go ahead.
Speaker Change: Okay. Thanks, so much and Bob Congrats again.
Bob: Thanks, Ghansham I appreciate it.
Speaker Change: Okay.
Speaker Change: Our next question comes from Daniel Rizzo with Jefferies. Your line is open. Please go ahead.
Daniel Dalton Rizzo: Hey, good morning, and thanks for taking my questions. You mentioned CapEx is mostly for pharma. I was just wondering how we should think about the cadence over the next few years, if there are any big projects ending or starting, and yeah, how we should think about this, I mean, toward the end of the decade. Yeah, we look overall. Go ahead, Bob.
Daniel Dalton Rizzo: Hey, good morning, and thanks for taking my questions. You mentioned Capex is mostly for pharma I was just thinking how we should think about the cadence over the next few years, if theres any big projects ending or starting and how we should think about this too.
Speaker Change: Towards the end of the decade.
Daniel Dalton Rizzo: Yeah.
Daniel Dalton Rizzo: So look overall that well go ahead Bob.
Daniel Dalton Rizzo: Alright.
Robert W. Kuhn: I was just gonna say we don't have anything today on the long-term rise in terms of major CapEx other than I would say continuing to industrialize and increase capacity for high-performance product lines, you know, as we've seen in pharma. I see the trend toward spending on PhRMA, and again, large capital, nothing building-wise or anything at the moment like we've gone through, but we'll continue to increase capacity for product lines that are performing well.
Bob: I was just going to say Aye aye.
Bob: I don't see we don't have anything.
Speaker Change: Today on the long term horizon in terms of major <unk>.
Bob: <unk> other than I would say continuing to industrialize and increased capacity for high performing <unk>.
Bob: Product lines.
Bob: As we've seen in pharma.
Bob: I see the trend towards.
Bob: Higher weighting towards pharma to continue.
Bob: But again opportunities to go out there and all three segments, we do see though the high point of 300 million that we've touched the last couple of years beginning to decrease.
Bob: As we start to leverage all of those investments that we've made over the past couple of years overall slight decrease from where we were at the high point continued majority spend on pharma and again large capital nothing building wise or anything at the moment like we've gone through but we will continue to do.
Bob: The increased capacity for product lines that are performing well.
Robert W. Kuhn: And then you mentioned in prepared comments about royalties in the pharma industry. I was just wondering if that's an ancillary business or something that's growing and could be a larger revenue driver in the coming years or how we really should think about it. I can respond to that.
Speaker Change: And then you mentioned in your prepared comments about I think royalties in pharma I was just wondering if that's an ancillary business or its something thats, that's growing and it could be a larger revenue driver in the coming years or how we should think about it.
Bob: Yeah.
Bob: Okay.
Robert W. Kuhn: So that's part of that's part of the business model, ongoing business model for a pharma team, particularly in the proprietary drug delivery system. So it is a, Business Model News, slightly new revenue stream. We fully anticipate it will continue to grow. But at this point, we're not prepared to really disclose how big it could become. Okay, thank you.
Bob: Randy I can respond to that so that's part of that's part of the business model ongoing business model.
Bob: For our pharma can particularly in proprietary drug delivery systems. So.
Speaker Change: It is a it is a new <unk>.
Bob: This model slightly new revenue stream.
Bob: We fully anticipated we'll continue to grow but at this point, we're not prepared to really disclose how big it could become.
Speaker Change: Okay. Thank you.
Stephan B. Tanda: Yeah, if I just add to that, look, every time we enter into a new development project, and often that is with small companies long before they get bought by bigger companies. Sometimes they don't have all the funds and can't pay for everything up front, so we enter into milestone payments, and sometimes we get royalties on the back end, so it's just part of the overall revenue mix, and it's part of our value creation model. Thank you. As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad now. We now turn to Matt Larew with William Blair.
Yes, if I just add to that.
Speaker Change: Every time, we enter into new development project.
Speaker Change: Often that is a smaller company long before they get booked by bigger companies.
Speaker Change: Sometimes they don't have all the phones and.
Speaker Change: To pay for everything upfront. So we entering two milestone payment and sometimes we get royalties on the back end so.
Speaker Change: As part of the overall revenue mix and.
Speaker Change: It's part of our value creation model.
Speaker Change: Thank you.
Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad now.
Matthew Richard Larew: We now turn to Matt <unk> with William Blair. Your line is open. Please go ahead.
Operator: Your line is open. Please go ahead. Hi, good morning.
Matthew Richard Larew: You talked about progress you've made on HVP within injectable, so would maybe just be curious about your assessment of your overall participation rate? Today versus pre-COVID and what you've seen since you've brought new capacity to bear, and perhaps how that capacity and some of the products have helped both with GLPs but, you know, more broadly in the market. Sure, up to the... As you may remember from the investor day, the capacity increase is really being split over a number of smaller projects. We had two legacy sites in France, and both of them have been upgraded.
Matt: Hi, Good morning, you talked about progress you've made on HCP within injectable so maybe.
Matthew Richard Larew: Maybe just be curious for your assessment of your overall participation rate.
Stephan B. Tanda: And then a new site has been built that's still being completed and validated. And then the Congress New York site, and then within those different steps in the value chain. But overall, we've increased our capability and our high-value products. And because of the COVID event, there is more and more interest by customers to work with us on new projects. Biologic Projects, and of course, GLP-1 is part of that. As a reminder, in GLP-1, there are two SKUs; at least one is the plunger, and one is the mean shield.
Speaker Change: Today versus pre Covid and what you've seen since you've brought new capacity to bear and perhaps how that capacity into the new products have helped both with the <unk>.
Speaker Change: Plp's, but.
Speaker Change: Broadly in the market.
Speaker Change: Sure.
Speaker Change: Judy.
Speaker Change: You may remember from the Investor day, the capacity increase is really being split over a number of smaller projects.
Speaker Change: Two legacy sites in France.
Speaker Change: Both of them have been upgraded.
Speaker Change: And then a new site has been built that's still being.
Speaker Change: Completed and validated and then the Congress New York site.
Speaker Change: And then within those different steps in the value chain, but overall, we have increased our capability and high value products.
Speaker Change: And.
Speaker Change: Because of the Covid event.
Speaker Change: More and more interest by customers to work with us on new projects.
Logic projects and of course.
Stephan B. Tanda: And we're quite happy with our participation rate overall there and see that business continues to grow. So this is an ongoing growth trajectory. We have the capacity to grow with the market and, Yeah, fortunately, you don't, you're not as exposed to the de-stalking. Right.
Speaker Change: GOP one as part of that as a reminder, in GOP. One there are two skus at least the plunger wanted the meeting shield.
Speaker Change: And we are quite happy with participation rate overall, there and see that business continuing to grow. So this is an ongoing growth trajectory we get the.
Speaker Change: The capacity to grow with the market.
Speaker Change: Yeah.
Speaker Change: Fortunately.
Speaker Change: Not as much exposed to the Destocking.
Speaker Change: Yeah.
Speaker Change: Right.
Matthew Richard Larew: And then, you know, in your prepared remarks, you obviously make comments about M&A diligence as well. Some debt restructuring, you know, balance sheet moves. You know, Gersha Amorousi recently did the formula deal, so there's been some activity in sort of the M&A space. The broader packaging market, just given that you made the comments practically curious, either from an appetite or availability perspective, what you're saying. Look, we have a strong balance sheet, and there's a force of strategic flexibility.
Speaker Change: And then in your prepared remarks, you made comments about M&A diligence as well.
That restructuring balance sheet moves.
Speaker Change: <unk> recently did the formula like deal. So there's been some activity in turn it on M&A space within the broader pack.
Speaker Change: Packaging market data.
Speaker Change: Kevin you made the comments practically curious.
Speaker Change: From an appetite or availability perspective.
Speaker Change: You are seeing.
Speaker Change: Well look.
Speaker Change: We have a strong balance sheet that affords us strategic flexibility as you know.
Matthew Richard Larew: As you know, we are fans of bite-sized, both in partnerships and acquisitions, and have a solid track record. And, periodically, we evaluate opportunities, but we don't get into any of the details of those until they're ready to be announced, but there's nothing at the moment that's ongoing. We now turn to Gabe Headey with Wells Fargo. Your line is open, please go ahead. Stephan, Bob, good morning. Echo the same congratulations, Bob. I'm sure you're going to enjoy the weather. Unknown Attendee, and welcome Vanessa. I had a question about the pipeline. Sometimes it's always tough on the outside; we sort of have to trust the team.
Speaker Change: We are fans of bite sized bolt on.
Speaker Change: Partnerships and acquisition delivered a solid track record in.
Speaker Change: Very articulate.
Speaker Change:
Speaker Change: Evaluate opportunities, but we don't get into any of the details soon.
Speaker Change: Of those until they are ready to be announced.
Speaker Change: At the moment.
Speaker Change: Ongoing.
Speaker Change: Okay. Thanks.
Wells Fargo: We announced plan to Gabe Haiti with Wells Fargo. Your line is open. Please go ahead.
Stefan Bob: Stefan Bob Good morning.
Speaker Change: Echo the trend congratulations Bob Im sure Youll enjoy the weather.
Gabrial Shane Hajde: But you gave us some data points that, in dollar terms for projects and number of projects, I think versus 2019, that pipeline has been up kind of consistently, just above 40% or so. Can you give us an update today on where it sits and where you would expect that to trend, maybe over the next 18 months or some timeframe that seems reasonable, 24 months, as you commercialize some of these things that are in the pipeline, you know, maybe central nervous system treatments that you guys are working on. Yeah, sure. We feel very good about the pipeline.
Stefan Bob:
Stefan Bob: And welcome Vanessa I had a question about the pipeline.
Speaker Change: Sometimes always tough on the outside we sort of have to trust the team.
Speaker Change: But you gave us some data points that in dollar terms project and number of projects.
Speaker Change: I think versus 2019 that pipeline has been up kind of consistently just above 40% or so.
Speaker Change: Can you give us an update maybe today, where it sits and where you would expect that to trend maybe over the next 18 months or so.
Speaker Change: Some timeframe that seems reasonable at 24 months.
Speaker Change: As you commercialize some of the things that are in the pipeline.
Speaker Change: Maybe the central nervous system treatments.
Speaker Change: Hey, you guys are working on.
Stephan B. Tanda: It continues to grow. We mentioned last time that even though we have commercialization, that means things come out of the pipeline, we have replenished the pipeline with the same or larger amount. I think we'll give you an update on the pipeline again in October when we have our investor event, small commercial. We will be in France on October 2 and 3.
Speaker Change: Yes sure.
Speaker Change: We feel good.
Speaker Change: Very good about the pipeline continues to grow.
Speaker Change: We mentioned I think last time that even though we have commercialization and that means things coming out of the pipeline.
Speaker Change: We have replenished it with the pipeline with the same or larger amount I think it will give you an update on the pipeline again in October when we have our.
Speaker Change: Investor event small commercial.
Stephan B. Tanda: So anybody who hasn't signed up yet, Mary would love to hear from you, and I'm pretty sure at that time we'll be able to give you an update, and I don't expect significant deviation from the trend line overall; whether it's nasal devices, whether it's inhalation, whether it's ophthalmic, whether it's injectables, we see good pipeline inflow. Also, on the digital health front I mentioned a few apps. The Biogen deal continues to help us in our business development efforts.
Speaker Change: We will be informed to October $2 three so.
Speaker Change: Anybody who I can sign up yet Marriott would love to hear from you and I'm pretty sure of that time will be able to give you.
Speaker Change: An update and I don't expect.
Speaker Change: <unk> deviation from the trend line overall, whether it's.
Speaker Change: Nasal devices, whether it's innovation whether it's.
Speaker Change: Ophthalmic, whether it'd be injectables and see good pipeline inflow.
Speaker Change: Also on the digital health front, we make very good progress.
Speaker Change: You mentioned, a few apps the biogen deal.
Speaker Change: To help us.
Speaker Change: Business development efforts overall.
Stephan B. Tanda: So overall, I feel good about the pipeline, feel good about... The prospect, and, you know, ultimately, that has also informed our decision to raise our dividend again after the 8% last year and almost 10% this year. So that kind of gives you a feeling of the underlying confidence in the pipeline. Thank you, Stephan. And maybe just one more.
Speaker Change: I feel good about the pipeline we feel good about.
Speaker Change: The prospects and ultimately that is also informed our decision to raise again our dividend after the 8% last year and almost 10%. This year. So a big chunk of it gives you a feeling of the underlying confidence in the pipeline.
Speaker Change: Okay.
Gabrial Shane Hajde: I'll take another stab at the M&A question. From your vantage point, is there anything that you see in the pipeline from a size perspective that's different than what you all have done in the past, or assets that you see potentially coming to market in size wise that are larger in nature versus, Again, like what you've done in the past? Thank you. Yeah, I would not say that. In principle, there is something different.
Stefan Bob: Thank you Stefan.
Speaker Change: And maybe just one more.
Speaker Change: I'll take another stab at the M&A question.
Speaker Change #100: From your vantage point is there anything that you see in the pipeline from a size perspective.
Speaker Change:
Speaker Change: Different than what you all have done in the past or assets that you see potentially coming to market.
Speaker Change #101: Size wise that that are larger in nature versus.
Speaker Change #104: Again like what you've done in the past thank you.
Speaker Change: Yes.
Speaker Change #102: I would not say that.
In principle, there is something different clearly today, we have a market cap that's approaching 10 billion. So bolt onsite means probably something different then when the market cap was half that size, but the general attitude is still the same.
Stephan B. Tanda: Clearly, today, we have a market cap that approaches $10 billion. So bolt-on size probably means something different than when the market cap was half that size, but the general attitude is still the same. We love these bolt-on deals that come with good management and that give us additional capabilities, technologies that we can spread across the company and leverage our geographic footprint. And I'm not a big fan of large transformative deals that tend to be much riskier.
Speaker Change #103: We love this.
Speaker Change #103: Bolt on deals that come with good management that gives us additional capability technologies that we can spread across the company and leverage or geographic footprint and.
Speaker Change #103: Not a big fan of large transformative deals that tend to be much riskier.
Speaker Change #103: Yeah.
Speaker Change #103: Perfect.
Speaker Change #105: Thank you and good luck.
Stephan B. Tanda: Perfect. Thank you and good luck. Thank you. We have a follow-up question from George Staphos with Bank of America. Your line is open, please go ahead.
Speaker Change #108: Great. Thank you we have a spot.
Speaker Change #105: We have a follow up question from George Staphos with Bank of America. Your line is open. Please go ahead.
George Leon Staphos: Thanks for taking my question. There are questions here at the end of the call regarding M&A. Obviously, there were some headlines earlier in the... Spelling Market getting together, and look, that happens all the time.
George Leon Staphos: Hi, Thanks for taking my question.
Speaker Change #105: <unk>.
Speaker Change #106: Following on some of the debt.
Speaker Change #112: Questions here at the end of the call regarding M&A in.
Speaker Change #107: The pipeline.
Speaker Change #107: Obviously, there were some headlines earlier in the week.
Speaker Change #107: With some peers in the <unk>.
Speaker Change #109: Fencing market getting together and that look that happens all the time can you talk Stefan and Bob about how the competitive landscape may be changing.
Stephan B. Tanda: Can you talk, Stephan and Bob, about how the competitive landscape may be changing? Do you view some of the more recent announcements as something that Aptar will have to navigate even more carefully now from a competitive standpoint in terms of making sure your moat is as solid as ever, and making sure your pipeline is growing? Unknown Attendee, Gael Touya, Marc Prieur, Bhavana Balakrishnan, Aptargroup Inc., Question 1. And question 2, I recognize, having covered you for a long time, you're not going to guide necessarily on the fourth quarter, but should we expect at a minimum, Unknown Attendee, Gael Touya, Marc Prieur, Bhavana Balak Thanks and good luck. Sure. I'm going to leave the second question for you, Bob. Now, let me take the first question.
Speaker Change #110: Do you view some of the more recent announcements as something that after I will have to navigate even more carefully now from a competitive standpoint in terms of making sure. Your moat is as solid as ever making sure. Your pipeline is growing to <unk> point earlier or do you feel hey, listen this is normal course and.
Speaker Change #111: We will focus on our our pipeline, our new products, our commercialization and the rest will take care of itself. So that's question one and question two I recognize having covered you long time youre not going to guide necessarily on a fourth quarter, but should we expect at a minimum.
Speaker Change #113: Continued increases in earnings throughout the year.
Speaker Change #114: Can you maintain relatively consistent trends in earnings from third quarter into fourth quarter based on the pipeline based on the fact, you raised the dividend.
Speaker Change #121: Based on the fact that comps maybe get a little bit easier.
Speaker Change #115: And pharma from your earlier Q&A, we've got you thanks, and good luck in the quarter.
Speaker Change #117: Sure I'm going to leave the second question.
Speaker Change #115: Okay.
Speaker Change #116: Let me take the first question, yes look.
Stephan B. Tanda: Yeah, look, these packaging assets are very attractive assets, especially for PE firms. They change hands often. You referred to an instance where one of them was picked up by a strategic.
Speaker Change #116: The packaging assets.
Speaker Change #120: Very attractive assets, especially for P/e firms they change hands off from.
Speaker Change #118: You referred to.
Vincent Ware: Vincent Ware.
Vincent Ware: Yes.
Vincent Ware: One of them was picked up by a strategic but we don't really see.
Stephan B. Tanda: We don't really see a change in the competitive environment. I would much more call this in ordinary courts. I mean, to specifically talk about that one, Hildon is a respected company, a respected operator. We don't see any change in the competitive environment here. And we wish him good luck. And George, you're 100% right. We're not going to comment on the fourth quarter, looking forward. So I don't want to disappoint you. I have one more in me, George. Come on. Come on. I've got one more in me. Don't push me out just yet.
And changing the competitive environment and it was much more Paul is in the ordinary course.
Vincent Ware: We talked about that one kilogram is with respect to company respected operator.
Vincent Ware: We don't see a change in the competitive environment here.
Speaker Change #122: We wish them good luck.
Vincent Ware: Okay.
Vincent Ware: And George you're 100% right, we're not going to comment.
George Leon Staphos: On our fourth quarter earnings looking forward so.
George Leon Staphos: I don't want to disappoint them on box to go out with a bang.
Steve: Thank you Steve.
Steve: I got one more than me George come on come on I got one more and maybe Duncan.
Robert W. Kuhn: But I think the dividend increase of 10%, you know, in my opinion, was a strong signal of our confidence in the near-term future of what we're doing. Fourth quarter, to be perfectly transparent, is always very difficult to forecast, right? You know, we've had really strong fourth quarters. We've had very weak fourth quarters, right?
George Leon Staphos: Don't push me out just yet.
George Leon Staphos: But I think the dividend increase of 10%.
Speaker Change #124: My opinion was a strong signal and our confidence in the near term future of what we're doing fourth quarter to be perfectly transparent is always very difficult to forecast right.
Speaker Change #125: Had really strong fourth quarter as we've had very weak fourth quarter's rate it depends on where we will be probably an economic cycle and where the confidence level. There is a lot of uncertainty going on particularly with collections and things like that so, let's see where it goes but certainly sitting here today.
Robert W. Kuhn: It depends on where we will probably be in the economic cycle and where the confidence level is. There's a lot of uncertainty going on, particularly with elections and things like that. So, let's see where it goes. But certainly sitting here today and, you know, that dividend increase should be an indicator that we see a good near-term future on the horizon. Thank you so much. Good luck in the quarter. See you next one.
Speaker Change #126: And you know that.
Speaker Change #127: That dividend increase should should be the indicator that we see are good.
Speaker Change #127: Near term future on the horizon.
Speaker Change #128: Okay. Thank you so much good luck in the quarter to the next one.
George Leon Staphos: Thanks, George. This concludes our Q&A session. I will now hand the microphone back to Mr. Stephan Tanda for closing remarks. All right, thank you.
George Leon Staphos: Thanks George.
Speaker Change #129: Thank you.
Stephan B. Tanda: This concludes our Q&A I'll now hand back to Mr. Stefan <unk> for closing remarks.
Stephan B. Tanda: So, as you'll see, we continue to focus on executing the ambitious earnings growth plan that we shared with you at investor day, with a strong focus both on the top line and on the structural and ongoing productivity gains, all to ensure that the bottom line grows faster than the top line. In that vein, Q2 was another solid quarter, continuing our double-digit adjusted EPS growth for the quarter as well as for the first half. And again, as a reminder, we had $3.5 million under current costs that was not adjusted out in the court also.
Alright, thank you.
Stephan B. Tanda: So.
Speaker Change #131: As you see.
Stefan Bob: We continue to focus on executing the ambitious earnings growth plan that we shared with you at the Investor day.
Speaker Change #132: With a strong focus both on the top line and the structural and ongoing productivity gains.
Speaker Change #132: To ensure that the bottomline growth faster than the top line.
Speaker Change #132: In that vein Q2 was another solid quarter, continuing our double digit adjusted EPS growth for the quarter as well as for the first half.
Speaker Change #132: And again as a reminder, we had $3 5 million nonrecurring cost that was not adjusted out.
Speaker Change #132: In the quarter also.
Speaker Change #132: We see our momentum continuing in the second half.
Speaker Change #132: Further pharma growth.
Stephan B. Tanda: We see how momentum continues in the second half with further farmer growth. If you can hear from my voice, COVID is life and well, so while we're not sitting in separate rooms, that will certainly help consumer health care also. Cost management and stronger operational performance continue, and we will benefit from productivity measures such as the quarter two plan closing frame. Also, as a reminder, even in a sluggish economy, we are confident about our future trajectory.
Speaker Change #133: You can hear from my voice.
Speaker Change #134: <unk> is alive and well so far we now sit in separate rooms.
Speaker Change #133: Zero.
Speaker Change #133: Consumer healthcare, so cost management and stronger operational performance continuing.
Speaker Change #133: And we will benefit from the productivity measures such as the quarter to plant closing fragrance.
Speaker Change #133: Although as a reminder, even in a slowing economy, we are confident about our future trajectory as we just discussed.
Stephan B. Tanda: As we just discussed, it also underpins our decision to increase our dividend yet again by 10%. Audit Book and Project Pipeline remain strong, and customers continue to engage well with our innovations. They appreciate the technology and value we bring to their brands and their direct developments, including our ongoing leadership and sustainability. They're well positioned from an operational perspective.
Speaker Change #133: It also underpins the.
Speaker Change #133: My organization to increase our dividend yet again by 10%.
Speaker Change #133: Order book, a project pipeline remains strong.
Speaker Change #133: And our customers continue to engage well with our innovations.
Speaker Change #133: They appreciate the technology and value, we bring to their brands and their drug development, including our ongoing leadership in sustainability.
Speaker Change #135: Ill positioned from an operational perspective.
Stephan B. Tanda: And as we discussed, our larger investments are behind us, and CapEx is kind of normalizing, adding to our cash generation. We talked about the strong balance sheet and strategic flexibility. And with that, I would say all this bodes well for the second half. Bob, Vanessa, Mary, and I, and Dan are looking forward to discussing with you more on the road. And again, a small commercial for our investor event in France on October 2 and 3.
Speaker Change #135: And our regional footprint.
Speaker Change #135: The increase in competitiveness around the world.
Speaker Change #135: As we discuss our larger investments.
Speaker Change #135: Behind us and Capex is kind of normalizing, adding to our cash generation.
We talked about the strong balance sheet and strategic flexibility.
Bob: And with that I would say all of this bodes well for the second half Bob.
Bob: Mary Anne and I looking forward to discuss with you more on the road.
Speaker Change #136: And again, the small commercial for our Investor event in France on October two and three and with that I wish everybody a good summer and see on the road.
Stephan B. Tanda: And with that, I wish everybody a good summer and see you on the road. Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
Bob: Yeah.
Speaker Change #137: Ladies and gentlemen, today's call is now concluded wed like to thank you for your participation you may now disconnect your lines.
Speaker Change #137: [music].
Speaker Change #137: Okay.
Speaker Change #137: [music].