Q3 2024 Silgan Holdings Inc Earnings Call
The
Please stand by for about to begin.
Speaker Change: Good day and welcome to the Silgin Holdings 3rd quarter, 2024, or means call. Today's conference is being recorded. At this time of my light-touching the conference, I'd like to miss your Alexander. Please go ahead.
Alexander: 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: 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.
Alexander: These forward-looking statements are made based upon management's expectations and beliefs concerning future events, in fact, in the company and therefore involve a number of uncertainties and risks including but not limited to those described in the company's Ann Report on Form 10K for 2023 and other filing for the Security's Exchange Commission.
Alexander: Therefore, the Actual results of operations are for an answer condition of the company could differ materially from those expressed or implied in the forward looking statements.
Alexander: In addition, commentary on today's call may contain references to certain non-gap metrics, including adjusted EBIT, for cash flow, and adjusted that income for the student share. Reconciliation of these metrics.
Alexander: which should not be considered substitutes for similar gap metrics. Can be found in today's press release and under the non-gap financial information portion of the Investor Relations section of our website at Sylvanhollings.com.
Speaker Change: with that. Let me turn it over, Adam.
Adam Greenlee: Thank you, Alex and we'd like to welcome everyone to Sagan's third quarter or 2024 earnings call.
Adam Greenlee: I'd like to begin today's call by welcoming the approximately 4,000 new slogan team members who recently joined our company through our acquisition of Ainer packaging.
Adam Greenlee: We're excited to have you join the SILG in team and for what we can accomplish together as we continue to build momentum as the leading global dispensing solutions partner for the world's most iconic brands.
Adam Greenlee: The Vainer Act position brings advanced product to manufacturing technologies that will help bolster our innovation pipeline and represents a clear and logical extension of silkins existing capabilities in the dispensing market.
Adam Greenlee: We believe the acquisition will drive organic growth, margin expansion, and financial accretion for our shareholders. And create significant value as we integrate the business, create efficiencies, and generate cash to deliver its back to our target range by the end of next year.
Adam Greenlee: Turning now to our results, the third quarter continues to showcase the success of our long-term strategic road initiatives with some fantastic operational and commercial successes in our businesses in another quarter of resilient financial performance.
Adam Greenlee: We continue to see strong volume trends in each segment and overall margin improvement driven by growth in our dispensing products and the benefit of our cost reduction programs.
Adam Greenlee: In our segments, dispensing and specialty closers delivered record-thrk order adjusted ebit with record volume and double digit growth in our global dispensing products.
Adam Greenlee: Our commitment to innovation, customer service, and operational excellence continues to drive our success as our team's capitalized on this winning business strategy.
Adam Greenlee: As a result, we continue to gain traction with new and existing customers in our core high-end fragrance and beauty and home care markets.
Adam Greenlee: and we are seeing incremental opportunities now in healthcare and farm markets as well.
Adam Greenlee: Our dispensing momentum remains strong in the year end as we execute on our near and long-term priorities in this rapidly growing high-value portion of our business.
Adam Greenlee: and the Food and Babbage portion of the segment, consumer demand for our products remain strong, and our European closures volume grew by a mid-singled digit percentage in the quarter.
Adam Greenlee: However, promotional activity, particularly for isotonic beverages in North America, was less impactful than our customers had anticipated, and as a result, the recovery in these volumes will be more prolonged than initially anticipated.
Adam Greenlee: While consumers are managing their purchases more closely as a result of inflation, it remains clear that consumer preferences have not changed when it comes to these products, and our customers remain focused on driving sales volume back to more normal levels.
Adam Greenlee: While volumes are below our expectations in these specific products, the financial impact of the shortfall is more than offset by the favorable mix impact of our dispensing products.
Adam Greenlee: With the seasonal peak for hot-though products now behind us, this headwind should be less meaningful to our results as we move into the fourth quarter and behind us as we enter 2025.
Adam Greenlee: and metal containers are teams once again validated our leadership position in the market by successfully extending our decades long exclusive supply relationship with our largest customer through a long-term contract extension.
Adam Greenlee: This customer who was also Silkins Barry first customer represents a significant portion of our growing pet food business.
Adam Greenlee: During the quarter of Pet Food, which represents approximately half of our volumes that our metal containers business, continue to show accelerating volume trends and grew by a high single digit percentage and we continue to see market growth for these products.
Adam Greenlee: Demand in the soup category also remains strong as volumes recover from the prior year destocking impacts, but volumes for fruit and vegetable markets, bubble of prior year levels and below our expectations when we enter the quarter.
Adam Greenlee: While we are expecting lower pack volumes in the quarter.
Adam Greenlee: As the result of a large pack customer reducing their pack plan in 2024 to manage their working capital, adverse weather disruptions negatively impacted harvest yields and caused the pack season to come to an early conclusion this year.
Adam Greenlee: As a result, our pack volumes in 2024 were at historically low levels.
Adam Greenlee: Well, these weather events have impacted our segment results in the second half of 2024. We believe that the fruit and vegetable market is positioned for a strong recovery in 2025.
Adam Greenlee: Our custom container segment delivered another quarter of strong results in the third quarter, with 5% volume growth primarily as a result of the commercialization of new business awards.
Adam Greenlee: and Edition, our team's continued to validate our competitive advantage in this business with additional wins in the market that will benefit the segment in 2025 and beyond.
Adam Greenlee: As we now move into the fourth quarter we continue to believe the company's position to deliver volume and profit growth for the year, but have narrowed the range of our EPS estimates primarily to reflect the impact of lower pack volumes in 2024.
Adam Greenlee: For the fourth quarter we expect dispensing and especially closures volume mix to grow by a low to mid-single digit rate with high-single digit growth and dispensing products, driving better profitability for the segment through improved mix.
Adam Greenlee: and metal containers. We continue to expect mid-single digit growth in pet food, which represents approximately half of our volume, but with the impact of severe weather on packed volumes, we now expect full-year volume to be comparable to 2023 levels.
Adam Greenlee: Custom containers volumes are expected to grow by a low to mid-single-digit percentage in 2024, as market demand continues to recover and new business winds provide incremental volume and profit contribution throughout the remainder of the year.
Adam Greenlee: The market has continued to evolve in 2024 and has presented our company with both exciting opportunities and new challenges.
Adam Greenlee: and we believe our winning business strategy are focused the excellence of our teams and our unwavering commitment to our founding principles, have uniquely positioned the company to derive significant growth in the near term and for many more years into the future.
Adam Greenlee: As we move close to year end and begin shifting our focus to 2025 with the Vaynerach position now complete.
Adam Greenlee: The continuing success of our long-term strategic initiatives in the full benefits of our cost savings programs flowing to the bottom line. We are well positioned to deliver significant earnings growth in 2020-25.
Speaker Change: and Alexander Hutter.
Speaker Change: In addition, PAC volumes in our metal container segment should improve in 2025 from historically low levels in 2024. But given that our customers are still in the very early stages of planning for the 2025 back, it's too early to know how much of a recovery the industry will experience.
Speaker Change: None the less, even without factoring in an improvement in PAC volumes in 2025, we believe we are well positioned to deliver double-digit EPS growth in 2025 and meet or exceed our prior record for adjusted EPS of $4.00 in one cent.
Speaker Change: With that, we'll take it through the financials for the quarter and our estimates for the fourth quarter in full year 2024. Thank you, Adam.
Speaker Change: As Adam discussed, we delivered strong growth in the third quarter as a result of the success of our strategic initiatives, but our adjusted EPS results fell below the midpoint of our expected range, mostly due to the impact of softer pack volumes in mental containers.
Speaker Change: That fails of approximately $1.8 million in client's 3% from the prior year period, driven primarily by the past to a lower raw material cost, mostly in our mental container business.
Speaker Change: A religious at EVIC for the third quarter of $206 million, decreased by 4% on a year over year basis due to the impact of lower-pack volumes in our mental container segment, which offset higher-adjusted EVIC in the dispensing and specialty closures in custom container segments.
Speaker Change: Adjusting net income for Joludit Share was a dollar 21, a 4% increase from a dollar 16 in the prior year quarter, with higher adjusted e-bit and dispensing and specialty closures and custom containers, lower interest costs, and a lower tax rate partially offset by lower adjusted e-bit and metal containers.
Speaker Change: Turning to our segments, sales and our dispensing and specialty closure segment increased 1% versus the prior year quarter. Primarily as a result of higher volume mix of 2% which was partially offset by the past through a lower raw material cost.
Speaker Change: Increasing volume mix is primarily due to double digit volume growth and dispensing products, which result in favorable mix.
Speaker Change: Third quarter, dispensing and specialty closures adjusted EBIT increase $1.4 million versus the prior year period with favorable price cost in mix, partially offset by the unfavorable impact of foreign currency.
Speaker Change: The positive volume and mix impact of double digit growth in our dispensing products, which partially offset by the limited success of our customer's promotional activity in the hot-filled beverage volumes in North America, particularly in isotonic beverages, which cost us approximately $5 million versus the prior year period.
Speaker Change: In our metal containers segment, sails decline 7% versus the prior year quarter, primarily due to the past through a lower raw material cost in less favorable mix, which was partially offset by higher volumes of 2%.
Speaker Change: Products for Pet Food Market School by a high single digit percentage. And products for soup recovered to more normal levels following the D-Sauking Trans in the third quarter of 2023.
Speaker Change: Volume's for fruit and vegetable tax products, many of which were high value large cans for product linked tomatoes declined by a low team presented and significantly impacted our mix of product sold in the quarter.
Speaker Change: Medal containers adjusted even with below the prior year quarter, due largely to the previously discussed impact of volume and mix associated with the reduction impact volumes in the third quarter of 2024.
Speaker Change: Relative to our expectations entering into the quarter, the short-following pack volumes in the Associated Negative Mix costs us approximately $10 million in the quarter.
Speaker Change: and Custom Containers, sales increase 6% compared to the prior year quarter, driven by a 5% increase in volumes primarily as a result of the commercialization of new business awards during the quarter.
Speaker Change: Custom containers adjusted EBIT increased $8.2 million as compared to the third quarter of 2023. Driven by more favorable price costs, including mix and higher volumes.
Speaker Change: Looking ahead to the fourth quarter of 2024, we are providing an estimate of adjusted earnings in the range of 780 cents per diluted share as compared to 63 cents in the prior year period.
Speaker Change: The 32% year-over-year improvement in adjusted earnings for the fourth quarter at the mid-poir of the range is driven primarily by improvement in the dispensing and specialty closure segment, as well as cost reductions, strong operating performance and a small benefit from the inclusion of VaynerPagging.
Speaker Change: Fourth quarter of just a few years is expected to be approximately $25 million of a prior-levels in dispensing and specialty closures, with improved volume, mix and price cost and inclusion of Vayner packaging in the segment.
Speaker Change: Fourth quarter, mental containers volumes are expected to be below the prior year level, with high single digit growth in pet food more than offset by the early end to the pack, compared to a strong late pack in 2023.
Speaker Change: Medell containers adjusted even is expected to be comparable to the prior year period as a result of improved price cost as the segment continues to benefit from cost reduction programs.
Speaker Change: Fourth quarter adjusted event in the Custom Container segment is expected to be above prior your levels as a result of low single digit volume growth, primarily from the continued benefit from new business wins.
Speaker Change: to
Speaker Change: Here to the shortfall in 34 earnings as a result of lower volume as from the early end of the pack and the resulting negative mixed implications, we are narrowing our estimate of adjusted net income per due to share for the full year, to arrange of $3.50 to $3.65 a 6% increase at the midpoint of the range as compared to $3.40 in 2023.
Speaker Change: This estimate includes the Vayner Acquisition as of the closing date, corporate expense of approximately $30 million, interest expense of approximately $107 million, and adjusted tax rate of 23 to 24 percent, an awaited average share count of approximately 107 million shares.
Speaker Change: From a segment perspective, adjusted ebit is expected to grow by most single digit percentage in 2024, driven by a double digit percentage increase in dispensing and specialty closures and growth in the custom container segment.
Speaker Change: Adjusted EBIT in the mental container segment is expected to be below the prior year record level by approximately $35-$40 million. Primarily due to a double digit decline in pack volumes in 2024, which negatively impacts volume, mix, and cost.
Speaker Change: Based on our current earnings outlook for 2024, we are confirming our estimate of free cash flow of approximately $375 million, with CapEx over approximately $255 million in 2024.
Speaker Change: I conclude our prepare-recommence and we'll open up the call for questions. Jennifer, would you please kindly provide the directions for the question and answer session?
Jennifer: Thank you. If you'd like to ask a question, please sign up by pressing star 1 on your telephone keypad. If you are using a speaker phone, please make sure your meet function is turned off to Liar Signal Research equipment.
Jennifer: If you find that your question has been answered, you may remove yourself from the cue by pressing the star key, followed by the digit two. Again, press star one to ask a question. We'll post for just a moment, tell all everyone an opportunity to signal for questions.
Jennifer: Episode 2
Speaker Change: and we'll go first to George Stethos with Maks America.
George Stethos: Yeah, I've been morning this actually, cash to you on Fr. George.
Speaker Change: Um...
George Stethos: I appreciate the comments around metal and recognize that maybe too early to give a view on that for 2020-25, but for custom and dispensing, I guess what a year customers are telling you for next year at this point, and if they possible, there's a scuff at all what you would expect in terms of playing drums.
Speaker Change: Sure, I think we'll start with really nothing's changed about the longer-term trends that we've seen both in dispensing and in custom containers. I mean, we're early in our own budget process for 2025, so we've taken some of the early indications that we've seen, but our customers are returning to volume and focus on volume, particularly in the food and beverage side of dispensing and specially closures.
Speaker Change: as we look forward to 2025. So, you know, I think it's right in line with our longer-term expectations and you can think about DSE probably growing somewhere in the...
Speaker Change: Mid-Single Digit Range with Custom Containers, if more in the most single digit range.
Speaker Change: We've been buoyed in custom container, certainly with new winds and new business awards that we've been talking about and we're continuing to have success both in that market and in dispensing especially closures as well.
Speaker Change: Okay, and congrats on our closing day-no, and I just now that you've had half of that business and perhaps got your arms around it. I guess what else needs to be done in terms of integrating that.
Speaker Change: and then also as we sit here today and think about your capital priorities, you know, I guess what we'll be kind of a focus from here.
Speaker Change: May all jump in and then Bob can finish up, but just, you know, we did close on the Vayner Acquisition 15 days ago, so we are hard at work.
Speaker Change: Getting the integration activity to kick off and underway as just as a reminder, you know, we did say the synergies and the full integration. We'll be more on the 18-month timeline, so you know, as we sort of close out 2025, we should be getting the full benefits near the full benefits of the acquisition.
Speaker Change: Yeah, cash, and I'll jump in on what's next if you will in terms of capital allocation. You know, obviously Adam's right, our focus is on an efficient integration here, but given the experience of our team and I think the quality of the team that came along with the banner acquisition, we feel really good that that will go smoothly and that will get to that pretty quickly. The business will generate a fair bit of free cash flow and a go-for-vases which will allow us to deliver pretty quickly, not that this is an overly leveraging transaction anyway, but with the de-leverage.
Speaker Change: That puts us right back in the spot where we can be thinking about how we strategically.
Speaker Change: Alicate Capital to continue down the past of MMA.
Speaker Change: I think I said this before and I still believe it that I think we remain competitively advantage than that market. I think that there will certainly be opportunities for us to be thinking about in the next 12 to 18 months.
Speaker Change: and that we would find attractive and I think given our leverage profile, our access to and our cost of funds, as well as our ability to act swiftly and close it deal quickly, that and bringing synergy opportunities to the table are really in our advantage.
Speaker Change: So I think our first and foremost priority is to get this fully integrated and operate the business effectively, but pretty quickly turn the barrel toward what's next from that perspective.
Speaker Change: and then as we think about impact in 2025 for Vainer, you know, on the Vainer acquisition announcement call we talked about 10% accretion, you know, post-energy and once we are back with our cast generation to our kind of our targeted leverage ratios.
Speaker Change: We should get just over half of the accretion in 2025 and then we'll have full accretion beyond that.
Speaker Change: Episode 2
Speaker Change: Okay thanks.
Speaker Change: for the next two Anthony Pesonary with City.
Speaker Change: Hi, good morning, this is Gregor from Anthony.
Gregor Anthony: My first question is just on a, morning, just on a meddling of stories. So you mentioned a large protest packer, these stocks.
Gregor Anthony: You know, given the early end to the packages in this year, I'm wondering if you can put some context around how poor this packages and was relative to what you've seen historically. I know you mentioned it was kind of pushing a historical love, but maybe just some numbers there would be really helpful, and then how long should expect.
Gregor Anthony: the D-stock to impact volumes in that and market.
Speaker Change: and maybe just a reminder, we came into the pack this year, one of our large pack customers reduced their pack plan by 30%. So I think that's the specific these stock and Gregory that you're talking about. And that has...
Speaker Change: worked itself through the market. We believe through this axes and they'll be, they should be back next year with a more normal pack, we're early in that process. So, you know, we don't have a pack plan, but...
Speaker Change: You know, indications from consumer preference, consumer demand still is really good for these products. In fact, we saw, I think, scanner data indicating increases in canned vegetable consumption by consumers as we kind of came into the second half of the year.
Speaker Change: and so to put, you know, that's the beginning point of what happened with our pack this year and then just as a reminder, you know, during the pack on the West Coast for really tomatoes and fruit products, you know, rain early, that then led to delay packs and...
Speaker Change: You know, as we were working through the pack, you know, excessive heat kind of during the summer months that really impacted.
Speaker Change: the quality of the pack and also yields very similar situation for core badge up in our mid-west products.
Speaker Change: Early lanes, early lanes led to delayed pack.
Speaker Change: and then really dry weather through the middle of the growing season, just reduced yields and at the end of the day, our customers decided it was poor quality and poor yields to shut down the pack earlier than expected. So kind of in the month of September.
Speaker Change: and then I'll just say we've all been here kind of a long time. I'm looking at a bunch of 20 year folks including myself and say it was by far the worst pack that I've seen since I've been at Silgon. So, you know, I think that's a full picture of.
Speaker Change: of how the pack played out. It had a negative impact in Q3 and then remember last year the pack did just the opposite. It went very late in the Q4 and we got the benefit of that in Q4 last year that will not repeat in 2024.
Speaker Change: Thank you for the detail, that's all from me out that's it over.
Speaker Change: Next to Gontrem Pinjabi with beard.
Speaker Change: Hey guys, good morning. Adam, I just kind of want to go back to your comment about the promotional activity. I think it was specific to, uh...
Gontrem Pinjabi: The closures, but what you're trying to get across is that the customers were basically not seeing the level of uptake they would have assumed with a promotion activity picking up or did I miss you or that.
Adam Greenlee: You know, I think you've got that right, and I think the message I want to send got some of it was the results are more mixed. So I actually start with the favorable one first. In pet food, we're seeing significant promotional activity. It is absolutely being successful and driving volume in pet food. So, you know, where we were anticipating volume growth and utilization of promotional activity, the dry volume growth, it's happening in pet food.
Adam Greenlee: Unfortunately, it's a little bit of a different conversation when you get to Isoponics and the Hotfield Beverage segment.
Speaker Change: I think the good news, Gantzram is about.
Speaker Change: 67% of products in Q3 were sold on promotion that is an all-time record high for the electronic segment for our customers.
Speaker Change: Unfortunately, it did not drive the gross that our customers had anticipated as we came in Q3 and really the reality is...
Speaker Change: with all the inflation that's been passed through to consumers over the last couple of years, the absolute price point, and therefore the total value of the promotional activity did not drive the growth that they had anticipated.
Speaker Change: Successful and Petsug, a little less successful driving the volume in the isotonic segment that we were looking for.
Speaker Change: Gotcha, thanks for the clarification, and then as it relates to, you know, your comments about 2025. I think you said dispensing closure volumes up mid-Single Lidgets, custom up low.
Speaker Change: You know, is that, is that?
Speaker Change: You're assuming that there's more of an uptake associated with commercial activity And then if you could just give us a bit more of the variances I know you've done with your planning period etc But as relates to your comments about EPS, double the decro, then pretty close to a high watermark from before
Speaker Change: Sure, and maybe just back to kind of the comments on custom and discreencing both, you know that.
Speaker Change: God, so that's just our longer term thesis for those two businesses. There's nothing about that that's changed.
Speaker Change: and it's fairness, I think we've over to liver in 2024. So we've got really good moments in there, and we're just in the planning process now. So there's nothing really has changed from that perspective.
Speaker Change: and you think about the dispensing products, you know, we've got another quarter and two, three of double digit rooms, we're projecting kind of high single digits and two, four for dispensing products.
Speaker Change: We're going to see good growth and dispensing products next year as well.
Speaker Change: and then in how some container obviously the annualization of the larger business winds that we commercialized early in the year and in the success we've had also in the market.
Speaker Change: We've got a lot of good momentum in those two businesses in particular, and it gives us confidence. And as we look at 2025.
Speaker Change: and then you know kind of turning the quarter to 2025, you know, Vayner is a big part of the addition with got the incremental impact of our cost savings program for next year as well. So double digit.
Speaker Change: Dispensing products, growth, organic growth, and dispensing especially closures in total, and organic growth at custom containers. And that is before we really opine on what's going to happen with the back next year.
Speaker Change: Great, thanks so much.
Speaker Change: We'll go next to Jeff Zacakis with JP Morgan.
Speaker Change: Thanks very much. You said you renewed your long-term year.
Speaker Change: Long-term contracts with your largest metal container customer.
Speaker Change: Were there any changes in contractual terms? That is, was it neutral or positive or negative relative to your previous contract, or how was the contract different if it was different?
Speaker Change: Good morning Jeff. What I say, we won't get into the details of any of our specific contracts. What I'll tell you about this one is our largest customer for the entire company. It's also the largest customer for the metal container segment. It is also a customer we've been doing business with since day one at Silkins. So this is...
Speaker Change: Another in a long series of renewals that we've had, so the contract is going to be very consistent with prior contracts.
Speaker Change: and I'm going to be talking about this in terms of us continuing to invest to support their growth. And so by doing so we need to secure the volume over a long period of time.
Speaker Change: Very typical with our prior extensions.
Speaker Change: Think of long term in the metal container side of the business between seven.
Speaker Change: and 10 years think about exclusive supply relationships. And I would just say economics will be very similar to what we have in the current agreement.
Speaker Change: and thank you for that. And secondly, if you didn't have the reversal of the tax reserves and the quarter, what would your tax rate have been?
Speaker Change: It would have been in the normal 25% range.
Speaker Change: Okay, thank you very much. Thanks, Jeff.
Speaker Change: Next to Matt Roberts with Raymond James.
Speaker Change: and Adam Kim Alex Good Morning.
Matt Roberts: Look at the BSC7, can you maybe give a little color on how the speech fragrance volumes are tracking and you're out look on that.
Matt Roberts: and the product of particular in 4Q and in 2025, an 18-grade growth there. I would think, come to get tougher as that becomes a greater mix of the segment, but really just wondering what you're seeing there, or if there are any pockets of lower demand, or if that's still proving out the beat, relatively in the last week.
Speaker Change: Yes, still really pleased with the performance, particularly of that high-end segment for our fragrance and beauty products.
Speaker Change: The man continues to be very strong for those products.
Speaker Change: Again, another quarter of double digit kind of gross in Q3 for our dispensing products and expecting more not only for Q4 but more into 2025.
Speaker Change: So its banner you noted I think it was a combined $200 million in revenue and while still small healthcare is a growing part of the portfolio. So maybe aside from higher end market growth or are there certain products or technologies that you could.
Speaker Change: That could help you gain share in health care or their specific health care markets that you think so again really has a right to win and thanks for taking the question well.
Yes, I think it's a really good question and really it's back to everything I, just said really around the fragrance and beauty and other high end dispensing market that it's we've got an innovation pipeline.
Speaker Change: That is helping our customers.
Speaker Change: Grow their business and address the consumer demands on these applications. So youre right. We said it was about a $200 million business for us in revenue good position in the Americas good position in Europe.
Speaker Change: I think we have the ability to continue to grow we will continue to grow this part of the business.
Speaker Change: We will have organic growth opportunities investment opportunities, we really focus on kind of ophthalmic and nasal today and I think it was we think about innovation and service model to support that market, it's very applicable to other areas, where we can take our existing knowledge base and knowhow and <unk>.
Speaker Change: Technology platform and serve other areas of the health care and pharma markets. So we're excited about the potential growth opportunity, yes, Matt I would jump in year, two and say look.
Matt Roberts: The growth of the healthcare business for us as it is has come in a very structured way around our M&A strategy. So it's not that we're necessarily out there elephant hunting in that side.
We've found businesses that bring niche businesses to us in the healthcare market and Thats something that we would continue to focus on over the longer term very similar to the way the whole dispensing and specialty closures business has grown out over time, so a disciplined way paying reasonable multiples on a relative.
Speaker Change: <unk> for those types of businesses until we can get to some kind of scale.
Speaker Change: Hey, guys.
And thank you all very much again.
Speaker Change: Okay.
Speaker Change: We'll go next to Gabe <unk> with Wells Fargo.
Hi, Good morning, this is Alex on for Gabe.
Speaker Change: I was wondering if you could maybe walk through or just talk about the consumer health.
Speaker Change: Across your different geographies.
Speaker Change: And maybe.
Speaker Change: I'm talking about.
More promos or where youre seeing more promos.
Speaker Change: Cross the different end markets for those geographies, Dan what your expectations are in 'twenty five as it relates to what.
What you've been hearing from your customers. Thanks.
Speaker Change: Sure.
Speaker Change: As we think about Europe.
Europe in particular will start in that geography, really food and beverage.
There's a large part of our dispensing and specialty closures segment dispensing products as well and we've seen nice growth in the European segment as far as promotional activity in Europe, where we're not seeing a whole lot of promotional activity. What we're seeing is there's a bit of a trade to private label and <unk>.
Private label and continuing to expand and grow in those markets.
Do you think about the U S market.
And specifically for dispensing and specialty closures you know you've got a much broader array of markets certainly our traditional food and beverage market plus.
Speaker Change: A bit of fragrance personal care home care products et cetera, and really delivering good growth with the exception of isotonic call. It in Q3.
Promotional activity, we talked about isotonic.
Speaker Change: Not working as well as we would've liked we're seeing nice success in promotional activity and other home care and personal care and lawn care products.
So I think as we then rotate into 2025 and thinking about how our customers are going to go to market. We do believe our customers continue to focus on volume growth and have specific initiatives for volume growth that will include promotional activity. So again, I think it'll be more targeted in the U S.
With specific products and I'll say more dollars behind the promotional activity to really garner the interest of the consumer and I think that's all built into our general thinking for 2025 as well.
Thanks, and another question on just simply pricing outlook into 2025, Howard how are you guys thinking about that.
Speaker Change: Yeah, it's still early.
We're definitely in the middle of negotiations, obviously, where large buyer globally, particularly U S and Europe.
Speaker Change: I would say.
We were anticipating deflation in the U S market U S market is the highest cost template market in the world.
Speaker Change: So there was a little bit of catch up there that we were thinking was going to take place maybe.
Speaker Change: Maybe that deflation has lessened just a bit we're still thinking flat to down in the U S and for Europe or thinking stable prices at this point for the European market and template.
Speaker Change: Got it and if I could just squeeze one more one last question here and I'll turn it over.
Thank you guys raised capex, a little bit and you are guiding to slightly lower earnings maybe you guys reiterated the cat the free cash flow numbers. So can you just walk us through what the offset is for.
Speaker Change: For those.
Sure. So we did maintain our $375 million free cash flow, we obviously reduced our guidance to more of the higher end of the range in the low to the midpoint of the range. So we do have benefits in working capital that we expect will offset some of that additional capital that will be coming on and those benefits.
Primarily in inventory as we look at the in the inventory levels that will be needed for primarily for the containers business.
And then in the Capex piece of that we did include the vein or Capex as we now rolled forward our guidance for the remainder of the year.
We'll go next to Iran, Vishwanathan with RBC capital markets.
Great. Thanks for taking my questions I guess.
Speaker Change: That's on the progress so maybe I can just ask a little bit on <unk>.
Speaker Change: See.
So you know there is this a little bit surprising that we've continued to see that strength in beauty I mean, it's just a little bit different than what we've seen on the scanner data. So is it a is it a function of maybe your customer mix in your.
You know again that high and doing really well or maybe you can just kind of clarify.
How you're performing versus general industry trends within closures. Thanks.
Everyone I think you've got it exactly right. It is that high end part of the market, where we play again for our business. It's it's really at the prestige high end level of the market. We don't play a whole lot in the mass market that might be experiencing different performance. So.
It's a part of the market that does indeed reward innovation and the service levels that we provide to our customers and that is a winning strategy for us and continues to deliver very positive.
Speaker Change: Results, both on the bottom line and through the volume as well.
Okay. Thanks, and then obviously you guys and a lot of a lot of folks went through significant destocking.
Speaker Change: Last year and earlier this year it sounds like that is the kind of run its course.
But you know now we're seeing some deflation and maybe.
You know, maybe a little bit of a return to at home consumption.
Speaker Change: Is that is that correct or are your customers telling you that.
You know you sound they sound pretty positive about potentially increased consumer volumes are they continuing to promote more and you answered the question on the long term.
Speaker Change: Large crop.
Speaker Change: Customer within metal.
Are they all also communicating maybe a little bit of a renewed optimism.
On more at home consumption and do you see that as potential upside for for yourselves in 'twenty five.
Speaker Change: Yes, so I think a room, what I would say destocking for our business did indeed, and so we've now seen two quarters with a positive volume inflection that we were anticipating so.
Speaker Change: We have moved past that for all intents and purposes.
Speaker Change: As far as.
Increased at home consumption et cetera, I think we're still a little early in that process.
Speaker Change: We have scanner data that shows an in home consumption is actually up a little bit as we came in through the third quarter and then our largest customer that you mentioned you know that that's one where the.
Speaker Change: The consumer demand has continued to be really strong that's pet food products right. The destocking happened kind of at the beginning of the year, a little bit into <unk>, but it's done.
And all through that Destocking activity consumer demand and consumer preference remained very strong for our products in their products. So as we sit here, we think we're well.
Speaker Change: We're looking at it continued.
Speaker Change: Positive consumer.
Speaker Change: Sentiment and demand for our products that that really the underlying levels were always good through destocking as well, so feeling pretty good about it well, we'll see how the rest of the year plays out, but but our customers are noticing.
The underlying demand has remained strong through that entire process.
Great. Thanks, a lot.
Speaker Change: We'll go next to Michael <unk> with Truest Securities.
Yeah, Hi, guys. This is nick opportunity on for micro excellent.
Speaker Change: I guess first off it sounded like you had maybe some additional wins just containers. This quarter just curious if you can.
Provide maybe cadence of when those might commercialize.
Speaker Change: Or any other color you can give on that.
Sure obviously, the the two we talked about earlier in the year were large kind of contractual items, what I'd tell you about the ongoing wins a little bit smaller in scale much more kind of in the day to day combat of the business.
That is just kind of normal ebb and flow of the business, but I would tell you that we are winning business in custom containers at a rate that is eclipsing the the market growth that we see elsewhere in the category. So.
Those will have positive contributions in 2025.
But I will just say they were smaller in scale than the two large.
Business Awards that we commercialized earlier in 2024.
Got it. Thank you and then just I appreciate the color on Capex, maybe going forward past 'twenty four and is growing with customers seems to be a focus and maybe later on growing in healthcare spanner, how do you see capex evolving.
Speaker Change: Well again.
Again, where we're in the process of rolling out, but I don't think there's anything fundamentally that's changed obviously with banner, we're going to add.
Their capex requirements to our portfolio and support their ongoing growth they've been growing at a good clip and we will continue to support that.
Speaker Change: I think as we talk about opportunities in the.
Especially in our specialty and what healthcare brain will address those as they come but theres nothing specific that we're thinking about and.
I think maybe just in a broader scope.
For our three segments, you, probably should think about kind of DSC and capex something like 5% to 6% of revenue, maybe custom containers around that 5% of revenue perspective, and metal containers, and the 3% to 4% of revenue.
Speaker Change: That's very helpful. Thank you very much.
Speaker Change: Sure.
And at this time there are no further questions.
Great. Thank you Jennifer I appreciate everyone's interest in our third quarter results and we look forward to discussing the fourth quarter and full year results later in January.
This does conclude today's conference we thank you for your participation.
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