Q1 2025 Silgan Holdings Inc Earnings Call
Yeah.
Speaker Change: Good day and welcome to the Silicon Holdings first quarter 2025 earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Alex Hutter, Vice President of Investor Relations. Please go ahead.
Alex Hutter: Thank you and good morning, joining me on the call today are Adam Greenlee, President and CEO Felipe every eight EVP and CFO, Bob Lewis EVP, corporate development, and administration, and Kim or SVP and CFO.
Speaker Change: Before we begin the call today, we would like to make it clear that certain statements made on this conference call maybe forward looking statements.
Speaker Change: Forward looking statements are made based upon management's expectations and beliefs concerning future events impacting the company and therefore involve a number of uncertainties and risks, including but not limited to those described in the annual in the company's annual report on Form 10-K for 2024 and other filings with the Securities and Exchange Commission.
Speaker Change: Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in the forward looking statements. In addition commentary on today's call may contain references to certain non-GAAP financial metrics, including adjusted EBIT adjusted EBITDA free cash flow and adjusted net income per diluted share or adjusted EPS.
Speaker Change: Yes.
Speaker Change: A reconciliation of these metrics, which should not be considered substitutes for similar GAAP metrics can be found in today's press release and under the non-GAAP financial information portion of the Investor Relations section of our website at Silicon Holdings Dot com.
Adam: That let me turn it over to Adam.
Adam: Alex and we'd like to welcome everyone to Silicon as first quarter earnings call before we get into our discussion on the quarter today I wanted to take a moment to welcome Felipe Jeopardy, a silicones chief operating officer to the call since joining the company in February the leap is integrated into the Silicon culture and is already contributing to the success of our organization. We're excited to have Phil.
Adam: On the holdings team.
Felipe Jeopardy: Thank you item for the warm welcome and it is a pleasure to join up with at least any investors on today's call.
Adam: Just be unexciting quarter personally and professionally.
Adam: We had almost 90 days could become more fully acquainted with the company and our businesses I continue to be very impressed with the caliber of our people it still get the effectiveness of our operating model the intense focus on execution and the strong position, we enjoy as long term partners with our customers across all our businesses.
Adam: The unique structure clearly drive that opportunity culture in the company that is build upon sense of accountability and naturally creates opportunities for profitable growth with our customers I have been impressed by the passionate people I've met and the high level of efficiency in our operations and manufacturing technology I'm excited to be part of the startup.
Adam: I look forward to contributing to <unk> continued success.
Speaker Change: That's great. Thank you Phillipe now turning our attention back to silicones performance. Our company is off to a very strong start in 2025 as our team delivered another quarter of record results that reflect the success of our long term strategic efforts the efficiency of our operating model our focus on meeting the unique needs of our customers the resilience of our Cho.
Speaker Change: And end markets and products and the power of our capital deployment model. The continued normalization of volume conditions in our food and beverage markets highlighted the success of our strategic initiatives as we delivered double digit revenue growth and nearly 20% adjusted EPS growth in the first quarter, primarily driven by strong organic growth in each of our businesses.
Speaker Change: Our cost savings actions and the contribution of the vein or acquisition.
Speaker Change: Our dispensing and specialty closure segment continues to capitalize on our momentum in the marketplace, our market, leading innovation and the strength of our long term customer relationships by delivering our fourth consecutive quarter of double digit organic growth in dispensing products.
Speaker Change: Our acquisition integration is on track and we continue to see incremental opportunities to leverage both our commercial presence and our expanded product offering to drive accelerated growth well into the future. As a result of this combination our teams are executing well on both the synergy capture for the vein or acquisition and our multi year cost.
Speaker Change: <unk> initiative and our legacy businesses.
Speaker Change: Metal containers are volume growth continued to accelerate in the first quarter driven by strong demand for both pet food and soup products consumer demand for our customers' pet food products continues to grow at a mid single digit rate driven by pet population growth and mainstream premium amortization in our core markets for cats in.
Speaker Change: Small dogs.
Speaker Change: In soup consumers continue to appreciate the value that these highly efficient low cost meal occasions provide and we have commercialized several new customer product launches in the category to drive growth.
Speaker Change: And custom containers, our business delivered record operating performance and experienced continued success in the marketplace is the commercialization of contractual business awards more normalized market conditions and growth in pet food products drove low single digit volume growth and nearly 250 basis points of adjusted EBIT.
Speaker Change: Margin improvement with.
Speaker Change: With our strong start to the year and momentum into the second quarter, we remain confident in our ability to achieve our objectives in 2025 and deliver record results are long term contractual arrangements and localized manufacturing philosophy of sourcing materials and producing packaging in regions, where the products are consumed insulate our business.
Speaker Change: For much of the recent uncertainty in international trade policy that has impacted the financial markets. The deliberate construct of our portfolio of products and end markets. Our long term partnerships with our customers and our low cost global manufacturing footprint continue to uniquely position silicon to outperform.
Speaker Change: Through all stages of the economic cycle. Additionally.
Speaker Change: Additionally, our unwavering focus on meeting the unique and at times evolving needs of our customers and adding those customers to solve any challenges they face through uncertain times solidifies. Our company is a long term packaging partner of choice to the worlds most recognizable and most successful brands.
Speaker Change: Our expectations for the remainder of 2025 remain largely unchanged. We continue to expect to Centene in specialty closures organic volume mix to grow by a mid single digit rate in 2025, driven by another year of high single digit growth in our dispensing products and improved mix.
Speaker Change: Metal containers are on track to grow by a mid single digit percentage driven primarily by mid single digit growth in pet food and a partial recovery in fruit and vegetable pack volumes.
Speaker Change: In custom containers with the annualized <unk> of the new business that ramped up in 2024 as well as additional new business Awards. In 2025, we continue to expect volumes to grow by a mid single digit percentage this year.
Speaker Change: We remain focused on the opportunities that lay ahead for the company in both the near and longer term and confident in our ability to execute on our plan our customer intimacy model continues to set us apart in the marketplace as we compete and win in the markets. We serve after several years of market disruptions. We are confident that the success of our strategic.
Growth initiatives will be more evident in our results in 2025 is our organic growth and the power of our capital deployment model drives our record results.
Speaker Change: With that Kim will take you through the financials for the quarter and our estimates for the second quarter and the full year of 2025. Thank you Adam as Adam highlighted we reported another quarter of record financial results that were near the high end of our expected range in the first quarter driven by strong performance from the senior acquisition organic growth in each of our segments.
Speaker Change: And the success of our cost reduction plan.
Kim: Net sales of approximately $1 $5 billion increased 11% from the prior year period, driven primarily by the addition of the dinner business, which closed in the fourth quarter of 2024 and organic volume growth in all segments.
Kim: Total adjusted EBIT for the quarter of 158 $3 million increased by 17% on a year over year basis, driven by the inclusion of Dania packaging strong organic growth and the benefits of our cost reduction reduction efforts, resulting in record adjusted EBIT in the dispensing, especially closures and custom container segment and higher adjusted EBIT.
Kim: In the metal container segment.
Kim: Record adjusted EPS of <unk>, 82 cents increased 13 cents or 19% from the prior year quarter.
Kim: Turning to our segments first quarter sales in our dispensing, especially closure segment increased 25% versus the prior year, primarily as a result of the contribution from the Zaner packaging acquisition, which added approximately $126 million during the quarter and higher volume mix of 4%.
Kim: The improvement in volume mix was driven primarily by a double digit increase in organic volume of dispensing products during the quarter, resulting in favorable net.
Kim: Record first quarter, 2025, dispensing, especially closures adjusted EBIT increased $21 million or 28% versus the prior year period. As a result of the contribution from the Zaner packaging acquisition, which added approximately $17 million and favorable volume mix.
Kim: And our metal container segment sales increased 2% versus the prior year as a result of a 4% increase in unit volumes. During the quarter you had mid single digit growth in pet food and strong demand for soup.
Kim: Higher volumes were partially offset by less favorable price mix due to the strong growth in smaller cancer pet food markets, which drove a less favorable mix.
Kim: I'll containers adjusted EBIT increased 10%, primarily as a result of favorable price cost and higher volumes.
Kim: And custom containers sales increased 2% compared to the prior year quarter, driven by a 2% increase in volumes as a result of the commercialization of New business Awards Hudson.
Kim: Cause some containers adjusted EBIT increased 22% as compared to the first quarter of 2024, primarily due to favorable price cost, including mix and higher volume.
Kim: Looking ahead to 2025, we are confirming our estimate of adjusted EPS in the range of $4 to $4 20.
Kim: A 13% increase at the midpoint of the range as compared to $3.62 in 2024.
Kim: This estimate includes interest expense of approximately $185 million a tax rate of approximately 24% corporate expense of approximately $45 million and a weighted average share count of approximately 107 million shares.
Kim: At the midpoint of our 2025 of adjusted EPS range, we will exceed our prior records of adjusted EBIT adjusted EBITDA and adjusted EPS achieved in 2022.
Kim: From a segment perspective, we are confirming our prior expectations of a mid teen percentage increase in total adjusted EBIT in 2025, driven primarily by a greater than 20% increase in dispensing, especially clear adjusted EBIT, a mid teen percentage increase in custom containers, adjusted EBIT and a high single digit percentage increase in metal.
Kim: Containers adjusted EBIT.
Kim: Based on our current earnings outlook for 2025, we are confirming our estimate of free cash flow of approximately $450 million a 15% increase from the prior year as earnings growth will be partly offset by higher cash interest and tax payments with capex of approximately $300 million.
Kim: The estimate also includes approximately $20 million of cash cost to support our cost reduction program.
Turning to our outlook for the second quarter of 2025, we are providing an estimate of adjusted earnings in the range of 98 to $1 eight per diluted share a 17% increase as compared to adjusted EPS of <unk> 88 in the prior year period.
Kim: Year over year improvement in adjusted earnings in the second quarter is driven primarily by the inclusion of the inner packaging higher volumes in the dispensing, especially closures and custom container segments and the ongoing benefits of our cost reduction program.
Kim: Thing, especially closure second quarter volume mix is expected to grow by a mid single digit percentage volumes in the custom container segment are expected to grow by a mid single digit rate.
Kim: Metal container volumes are expected to be flat to prior year levels in the second quarter with the majority of the volume improvement for the fruit and vegetable pack occurring in the peak harvest months during the third quarter.
Kim: That concludes our prepared comments and we'll open up the call for questions. Rachel just highly provide the directions for the question and answer session.
Rachel: Yes. Thank you.
Speaker Change: I dialed in via the telephone and we'd like to ask a question. Please signal by pressing star one on your telephone keypad.
Speaker Change: You are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment to remove yourself from the queue. Please press star two.
Speaker Change: Again, Please press star one to ask a question.
Speaker Change: And we will take our first question from George Staphos with Bank of America.
George Staphos: Hi, everyone. Good morning, Thanks for the details hope Youre doing well.
George Staphos: My question to start is just really around volume. The question I know, you've probably received because you've seen it from some of us on the phone and through all that we get from investors why you remain comfortable with the volume guidance that you've been providing.
George Staphos: The fact that no portions of your business, especially in metal.
George Staphos: The most rapidly growing.
George Staphos: Adam and <unk>.
George Staphos: Recognizing that a lot of the volume just because of the nature of the business is seasonally weighted to the second half from third quarter and we have the the overlays certainly.
George Staphos: Or potentially weaker economy.
George Staphos: As a factor. So can you go through the 123 in terms of why you remain or maybe have changed your view on the outlook secondly on volume.
George Staphos: Secondly, can you talk if at all whether you're seeing customers changing their purchasing patterns doing any tactical moves within the supply chain to get ahead of any potential risks in terms of tariffs and a like how that's.
Speaker Change: Factoring into your business as you mentioned earlier in the call I apologize I joined the call late.
George Staphos: And I'll stop there.
George Staphos: Great. Thanks George.
Speaker Change: Maybe just a couple of things getting back to kind of your first question with overall volume. So nothing has changed for US. We continue to expect mid single digit volume growth in each of our operating segments for 2025, and I think it's important to understand the details of that as we just talked about we've just delivered our fourth consecutive.
Speaker Change: Quarter of double digit growth in dispensing products. So very pleased with how the business continues to perform I think we've talked a lot about in the higher end segments that we participate and we are winning a disproportionate amount of the new product launches in those categories. So really right in line with our expectation.
Speaker Change: It's driving mid single digit growth for for that segment and we continue to feel really really good about that.
Speaker Change: Our innovation agenda, our customer relationships, all driving I think outperformance versus the market and versus competition I think when you move over to metal containers, it's really important to reiterate that about 50% of our overall unit volume falls into the pet food category and I know, we've talked about that many many times, but.
Speaker Change: You know we've been requirement supplier for 30, plus years and has decades of experience and understanding the dynamics of that market and having a another quarter, where we delivered mid single digit growth.
Speaker Change: In our pet food products is critically important to what we've done in <unk>.
Speaker Change: I'd probably throw in a comment here that you know our strategic growth initiatives include a significant capital deployment and our dispensing products, you're seeing that growth fall through our other strategic growth initiative around the metal containers business is the investments we've made over time to continue to support our customers growing.
Speaker Change: Food product demands and we've just continued to deliver results I think year after year in the pet food segment of our business. So feeling really good about that its half of our volume I'll dovetail just a second George and start to answer a part of your second question.
Speaker Change: For our volume in the quarter, we didn't see any unusual buying activity remember half of our volume is in pet food and for the most part those are aluminum cans are aluminum volumes are supported primarily by North American suppliers. So just take that that theres nothing nothing to do from a tariff for.
Speaker Change: A supply chain perspective on half of the volume I'll come back to the other side of that in just a second but wrapping up on custom containers.
Speaker Change: We talked a lot last year about two specific large new business awards, we've commercialize those in 2024 as we cycle over and get the full year annualized <unk> of those awards you know that's a bit of a driver for our growth, but it's very clear that we continue to win in that market and we've said for a while that we.
Speaker Change: Believe the market has been underserved from a customer service perspective, and Thats, what silicon brings to the table.
George Staphos: And then I'll jump back to the other part of the question George just going back to customers buying activities.
George Staphos: Food and beverage is a big part of what we do we've said I think on this call are roughly 75% of our products fall into that consumer staple category, but these really for the most part are non discretionary items that consumers are making purchase decisions on and we feel comfortable and confident in our outlook, we've got excellent relationships.
George Staphos: When you get to the food can side remember so much of that business is on site or near site with our customers.
George Staphos: We're returning back to the historic days of having quite a bit of transparency and clarity between us and our customers and the supply chain. So that support them having success in the marketplace. So George long question, probably even longer answer so I apologize for that but hopefully the detail is helpful.
George Staphos: No I appreciate it.
Speaker Change: Quickie and I'll turn it over just out of respect for body, just vein or it sounds like it's going well any what would be the one learning you've had that makes you comfortable on the deal model I'll leave it there. Thank you.
George Staphos: Sure look banner is going really well, we're very pleased with the acquisition as you know George we've known that business for a long time, so not a whole lot of surprises probably a confirmation.
George Staphos: And our thesis for dispensing products that there is greater than market growth rate activities available for the right business for the right innovation for the right customer service model and so we talked on the last call. We had some opportunities to invest in and some new capital.
George Staphos: Supporting customer growth, we did that at the end of last year that is part of the I'll say beat that we had in vain or in Q1 as we're realizing the volumes that we were able to invest in at the end of last year.
It's been really good it's right in line with what we were hoping for and it's a really strong business.
George Staphos: Thank you very much.
George Staphos: Thank you.
George Staphos: Okay.
Speaker Change: Thank you we will take our next question from Ghansham Panjabi with Baird.
Speaker Change: Thank you operator, and good morning, everybody.
Speaker Change: Adam I just want to go back to.
Speaker Change: Your comments to Georges question, you know, obviously, you laid out guidance assumption for 2025, which seems very comparable to what you said when you reported <unk> you know it seems like a lifetime ago.
Speaker Change: But just given the sequence of events that have occurred which you know.
Speaker Change: Create more uncertainty from a macroeconomic standpoint, maybe you can answer the question as it relates to customer new product activity and if you've seen any change there across the different regions and businesses that you sell it to.
Speaker Change: Look I think we're at the forefront of innovation and new product development with our customers.
Speaker Change: Maybe the one thing that I would give you ghansham that I can think of the change versus Q4, one of our large soup customer is actually initiated two new product launches for 2025 in the first quarter.
Speaker Change: And as you know is a large CPG those two launches fall into their top five of total spend for new product launches in 2025. So if anything I would tell you we're feeling more comfortable with our <unk> volume in particular, we had a good first quarter as you heard as we look to the rest of the year. We think there is potential opportunity there.
Speaker Change: And then when you think about as it relates to same project.
Speaker Change: Well, let me just jump to dispensing really fast.
Speaker Change: Again, a little longer pipeline with our dispensing products. So no no knee jerk reaction to the uncertainty that maybe the market has felt here in the first quarter.
Speaker Change: You think about kind of the fragrance and beauty market, we're catering to a specific set of consumer demographic that just simply less elastic with the products that they purchased the utility we provide to our customers at that high end of prestige and luxury fragrance and beauty.
Speaker Change: We haven't seen any slowdown in the development activities and innovation requests from our largest customers. So again I understand the question and I think what I would tell you. We were confident on the last call I think our confidence is unchanged as we look at the rest of the year given the intelligence and knowledge, we have about our businesses.
Speaker Change: Okay Fair enough and then in terms of the impact of tariffs.
Speaker Change: Obviously, the direct impact seems pretty low for you, but in terms of what your best estimate is in terms of the DSA segment.
Speaker Change: Do you have a sense as to how much crosses borders you know you mentioned some of the categories like luxury fragrances etcetera, those get shipped around.
Speaker Change: Would that equate to and then just separately what do you expect net debt to EBITDA to add 2025.
Speaker Change: Sure I'll pass it to Kevin for the second part of that question, but for the impact of tariffs Ghansham I mean, it's a good question for D C. Specifically in.
Speaker Change: There just isn't that much cross border activity within that business and it's back to what I had mentioned earlier you know our our manufacturing philosophy, we like to buy raw materials make it and sell it in the same geography. So you sort of take out the noise of all this cross border activity that we've been dealing with so.
Speaker Change: And D. S E. There's not a whole lot of impact that we see on tariffs in fairness specifically on fragrance.
Speaker Change: A lot of that product is still in Europe and shipped around the world. So.
Speaker Change: You talked about the price point of those products and I think again as I mentioned before it's just a different consumer demographic that we're addressing what we have seen in several of our customers on the high end.
Speaker Change: Beauty and fragrance side of the business have actually gone out with price increases to reflect any additional inflation from the tariffs. So again, we're feeling comfortable that we've got a good understanding of the impact.
Speaker Change: First silicon as you mentioned you know there really isn't much of an impact financially to silicon, we will pass through the inflation to our customers and I'll say that irrespective of the segment that we're talking about and.
Ghansham: I think that's kind of in summary, ghansham, how we're feeling about tariffs at this point, we don't believe it's driving any different purchase activity for our customers.
Speaker Change: And on the leverage ratio side, so in a long term basis.
Speaker Change: Our range is two and a half to three and a half times, we would expect to be towards the low end of that range by the year end, assuming there are no acquisition opportunities and that's driven primarily by our strong earnings as we talked about including the diner acquisition and a strong free cash flow of about $450 million at the end for the year and so I think from us.
Speaker Change: So you've heard us say before with our range of two and a half to three and a half when we get to the lower end of that range, we would expect to be deploying cash in them.
Speaker Change: Okay perfect. Thank you guys.
Speaker Change: We will take our next question from Matt Roberts with Raymond James.
Matt Roberts: Hey, good morning, everyone and.
Speaker Change: Welcome Felipe good to hear you.
Speaker Change: My first question, if I may ask a metal containers I believe you said flat volume expectation into Q or was that EBIT and if it is volume.
Speaker Change: I know that there were new product launches in soup and while there is a harder comp into Q and metal maybe you could just talk about the split between pet and food.
Speaker Change: Food cans into Q and just.
Speaker Change: Generally what you're seeing on each of those you know it seems like some of your peers have also put up strong results in metal food cans as well so just getting your view there.
Speaker Change: Sure, Yes, you've got it right. So so volume for metal containers was expected to be flat in Q2. So the one thing I would mention Matt you know we're working through the details there may have been a slight pull forward of some aluminum can volume on the pet food side.
Speaker Change: Into Q1 is one of our customers was dealing with.
Speaker Change: Labor issue in one of their facilities, so it doesn't materially impact anything but as they were preparing for.
Speaker Change: Those issues have now been fully resolved there might've been a little bit of volume that got brought into Q1, but outside of that not a whole lot of activity. So as we you're right. It's a pretty tough comp as we look at last year's volume. So soup in particular was up quite a bit last year.
Speaker Change: The second quarter. So as we look at the year over year comps were expecting nice growth again in pet food.
Speaker Change: What we will see as our veg and fruit volume that's going to happen more in the back half of the year and I'm, saying back half intentionally because that's when the products packed.
Speaker Change: It'll be stronger in Q3, we will see how late the pack runs this year, but given that and some pack volume in Q2 last year. It's just it's just the timing of a couple of our specific markets, but nothing out of a.
Speaker Change: Surprise or out of the realm of what we were expecting as we came into the year for Q2.
Speaker Change: Okay that makes sense, thank you Adam and maybe on pet.
Speaker Change: Performance here continues to impress and customers seem to corroborate that Neal.
Speaker Change: In pet are you seeing any changes in the promotions in that category or maybe even just more broadly what you're seeing in terms of the promotional environment. Overall. Thank you again for taking the questions.
Speaker Change: Sure Great question, we talked about on the last call that one of the examples that we talked about was where promotional activity had been successful was on the wet pet segment and are our canned pet food.
Speaker Change: We continue to see that so the first quarter. There was strong promotional activity in a I think one thing that I want to bring in thats on a broader base, it's not only our customers promoting the product its retail establishment establishment promoting product as well. So I think we've been a beneficiary of that now for a couple of quarters where it.
Speaker Change: Dissipating not to continue it is a big part of our customers play.
Speaker Change: Plans and profiles for 2025, and I think broadly speaking, where we see that targeted promotional activity. We are seeing volume follow that we have a couple of instances, where maybe to jump over to dispensing, especially closures for a quick second we're seeing.
Speaker Change: Very good promotional activity in certain areas of the business and items like isotonic and sports strengths, we're seeing a mixed bag, where we've got several customers with very aggressive promotional activity. We're seeing volume followed the promotional activity and grow and we're seeing others that that didnt promote quite as aggressively as <unk>.
Maybe what we would have liked them to do and therefore, they're not seeing the growth that they expected. So I photonics is the one point, where I'd probably tell you. It's just a little mix customers that are targeted and aggressive they are driving growth and where that's not happening. The growth is not following outside of that across the businesses targeted promote.
Speaker Change: <unk> activity is driving growth throughout all of silicon.
Speaker Change: Very helpful. Thank you Adam.
Speaker Change: Sure.
Speaker Change: Thank you will.
Speaker Change: Our next question from Gabe Haiti with Wells Fargo Securities.
Speaker Change: Adam Kim Bob.
Speaker Change: Morning.
Speaker Change:
Speaker Change: I had a question on <unk>.
Speaker Change: <unk> tariffs a little bit from a different angle Adam based on your conversations with some of your fruit and vegetable customers.
Speaker Change: Has there been any discussion around Chinese.
Speaker Change: Chinese food not making its way into the U S and on to Michele and I know again, it requires planning ahead and planting et cetera.
Speaker Change: But maybe that leads to actually a better than expected.
Speaker Change: I guess harvest in 2025 and better plantings in 'twenty six.
Speaker Change: Yeah, It's a really interesting question Gabe.
Speaker Change: As you very well know, we're putting crops in the ground right now so.
Speaker Change: It's the time that contracted acreage is concluded their planting crops. So they are planning right now for the the pack season of this year back to import it feels good that that was an issue a large issue we'll call it a year ago.
Speaker Change: One of the large retailers in the U S market for their private label brand had brought in feels good from southeast Asia, and actually had a social media campaign that went against that change in their private label brand and they did move back too.
Speaker Change: Purchasing canned vegetables for the U S market from U S. Producers. So that was a good thing last year I think that continues a bit. This year I think your question is spot on I think there probably is some upside in the event that there is a tariff on finished goods coming in from any other region outside of the U S.
Speaker Change: And to the U S market and really that should be the benefit to the the packers of fruit and veg and in the U S market and obviously as a we're a little underweight to the category, but two they can makers that should also be a benefit as well. We don't have anything that says that's what's happening, but it's one of the opportunities on our list as well.
Speaker Change: Okay and then.
Speaker Change: Pet food.
Speaker Change: Seems like maybe just depending on which scanner data you look at.
Speaker Change: The trend could be decelerating or disappointing if youre talking about through traditional channels.
Speaker Change: Do you have a sense for how much pet food goes through E. Commerce at this point and is your is the best of your knowledge I know, it's tough to say once it leaves your factory, but are you overweight or underweight or under index to the overall ecommerce channel in pet food specifically.
Speaker Change: Yeah, So what I can tell you and it's a little bit of a loose number Gabe but call. It 25% of the market goes through kind of an E Commerce channel.
Speaker Change: And now it's very loose after that so what I would tell you is we are significantly overweight in the market for wet pet food product. So I assume that our market share sort of correlates to that 25% of the market that goes through an e-commerce channel and in fairness, our small dog and cat products.
Speaker Change: Shipped very efficiently so.
Speaker Change: My guess is were appropriately represented through ecommerce and you wouldn't see a big change of of our share of that particular channel.
Speaker Change: Again, we think that we've got a winning solution with our largest branded customers were represented in private label that really think about us as the big brands that are driving the volume growth into two this segment on a continued basis.
Speaker Change: Understood last one maybe a little bit of a in the weeds question on corporate I think Kim you reaffirmed around $45 million for the year a bit elevated in the first quarter.
Speaker Change: Guys run on a mostly decentralized fully allocated.
Speaker Change: <unk>.
Speaker Change: I guess reporting basis for <unk>, specifically I'm thinking about.
Speaker Change: So was there is there any added corporate expense as it relates davina.
Speaker Change:
Speaker Change: And if not that means that Bob is really busy.
Speaker Change: [laughter], Bob is very busy and yes, so from our perspective, it's all in here at the holdings office and it was about $45 million or about $5 million higher as a result of them.
Speaker Change: Corporate development activity in the first quarter. So our expectation is going forward that we're going to be at a total for $45 million as we mentioned in the opening remarks and Gabe to your point I think that the SG&A is in the corporate costs associated with banner resides down in the business. So what Ken is describing is our corporate activities here at the holdings level.
Speaker Change: Same functionality as all of the other businesses that we have exactly right.
Speaker Change: Perfect. Thank you guys and good luck.
Speaker Change: Thank you.
Speaker Change: Take our next question from Anthony Pettinari with Citi.
Brian Birchmeier: Hi, Good morning. This is actually Brian Birchmeier sitting in for Anthony. Thank you for taking the question, maybe just one housekeeping item to start after acquiring banner.
Speaker Change: Jupiter can earnings sensitivity to changes.
Speaker Change: Or could you share maybe what your guidance is assuming in terms of FX.
Speaker Change: FX rates for the euro, but at this point I think silicon it's about 25%.
Speaker Change: Oh from Europe now so just wanted to check on that.
Speaker Change: Great.
Speaker Change: Just from an FX perspective, what we have I mean, typically what we do is we kind of hold our current rate spot rate through the end of the forecast period. So that's where we are we're kind of taking the end of Q1 spot rate and we hold that for the balance of the year on all currency, so specific to the euro as well and really it's.
Speaker Change: Of our $1 13, $1 14 number I'm not sure exactly which one.
Speaker Change: From a sensitivity perspective, we.
Speaker Change: Talk a lot about the fact that we've got a natural hedge that we like to have local debt in local currency.
Speaker Change: That offset any exposure to FX. So we can come back to you on that one I'll just say the exposure sensitivity is pretty limited from an FX perspective.
Speaker Change: Okay got it got it makes sense and then.
Speaker Change: Maybe just on the M&A landscape, you know Adam you've been spoken for a while.
Speaker Change: In your experience do you think do you see as kind of a heightened levels of economic uncertainty can can create more less appetite from sellers do you think people want to cash out or.
Speaker Change: Interest rates become kind of a.
Speaker Change: A roadblock for Sogou, even perhaps just kind of your general thoughts here, just kind of given the macro backdrop. Thank you I'll turn it over.
Speaker Change: Yes sure.
Speaker Change: Look at I've been here for a little over 20 years, Bob has been beat by a stretch. So we'll ask his opinion too but from my perspective, what I would tell you is that I think the opportunity for corporate development and M&A activity is probably as great as it's ever been in my time with Silicon and I also would say that I think we are more advantaged and these kind of <unk>.
Speaker Change: Environment because of our ability to be deep into our market. So we understand the business as we're talking about we are quick and thorough in our diligence we have access to capital we've got tremendous cash generation in our legacy businesses and and we are re.
Speaker Change: Unable to move when the time is right so much like what the vein or transaction very competitive process. We thought we were advantaged from the get go and there were a lot of reasons for that but I feel like we're sort of in the same position today and I'll throw it over to Bob for for any other comments he might add yes.
Speaker Change: I think Adam's answer was spot on I think if you if you recall back to the last earnings call.
Bob: We spoke pretty optimistically about our ability to get a deal done.
Bob: I still certainly believes that that level of optimism is warranted, a particularly from an internal perspective right for all the reasons that Adam just laid out.
Bob: We feel like we've got our arms around the <unk> acquisition, and we're well on our way to that integration and on track with the synergy capture.
Bob: Our leverage outlook as we've talked about is really good trending to the to the lower end, having just completed nearly $1 billion acquisition and getting back inside the range pretty quickly.
Speaker Change: As Adam indicated we've got some strategic.
Speaker Change: Candidates out there that we've identified we've begun doing our internal work there so should they become available. We believe we can move really quickly.
Speaker Change: So all of that is still intact I think the only thing that's changed from the last call is a bit of the economic slash political backdrop and the only difference that that makes to us is whether or not some of those targets choose to come to market, otherwise, where we're armed and ready to go.
Speaker Change: Thank you we'll take our next question from Mike <unk> with <unk> Securities.
Mike: Yeah. Thank you for taking my questions and congrats on the quarter and the progress.
Mike: Thanks, Brian you've spoken at length about volume, but volume outlook.
Mike: The trends you're seeing thus far in April how our order books here.
Mike: I mean is there anything consistent truly I think maybe yes. It isn't like we go into the next question, but I figured I'd throw it out there anyway in terms of how things have trended in April and what the orders look like for myself.
Mike: Sure and you know again, we're about 30 days into the second quarter and so what I'd tell you the momentum we carried into the quarter continues on and where we're right in line with what we expected for the month of April and so you know our quarter is off to exactly the start that we were expecting and that we were looking for.
Mike: Each of our businesses continues to perform banner continues to perform so again hopefully it comes across in the conversation there is a level of of clarity and confidence here and what we're doing and how we're doing it that's that's translating.
Mike: Two continued growth for the company and we're looking forward to the remainder of 'twenty five as well.
Speaker Change: That's great and any early read on May thus far in terms of order books.
Speaker Change: Yeah, obviously its order book, yes, its order book activity and again start with DSC and dispensing, especially closures very strong you know as we prepare for the summer months.
Speaker Change: Now heading into kind of the the beverage season, we have our heartfelt beverages.
Speaker Change: And dispensing and specialty closures metal containers right in line with expectations Nice nice month already in pet food and expect it to continue you know art, we talked a while back Mike about our customers investments and manufacturing capacity.
Speaker Change: The expansions, they're running those lines are better this year than they did last year and that's great news for us that they can improve their efficiencies as well that's part of the support for the the year over year volume increases in pet food products and then in custom containers again I'll just say the team has done a great job they continue to win in the market.
Speaker Change: Place multiple new business awards, nothing quite as big as we had last year at this point to announce but winning every single day in that business and again it just flows through to the bottom line and it flows through to the volume conversation, So right, where we wanted to be in Q2 and feeling confident in the delivery of Q2.
Speaker Change: That's great. Thank you and then just one quick follow up I believe when you call that part of the 2025 guidance in DSV included some new wins.
Speaker Change: I think you mentioned that youre going to.
Speaker Change: The ramp up late this year and really have more of an impact in 2026 can you give us a little more color on where those wins are coming from I'm trying to get a sense, whether they're coming from your base business, whether it's from the hiring and for teams of closures maybe seen from.
Speaker Change: From beta as well.
Speaker Change: We can provide them on that I'll comment on those but thank you.
Speaker Change: Sure sure and to be really clear in dispensing and specialty closures were winning literally in all of the segments that we serve again, it's back to that innovation and customer service model that silicon is really well known for that we've rolled out across all of the acquisitions over time so.
Speaker Change: There are new business wins in beauty and fragrance for sure lawn and garden for sure. The one that I, specifically mentioned I think on the last call. Mike. It was a beverage application and it's sort of in the legacy business and it does it is a new contractual award that we're investing for right now and we will bring that Ah <unk>.
Speaker Change: <unk> online later in 2025, just given lead times and we will start 26 with a with a nice step up in our heartfelt beverage volume as we move into 'twenty six so right in line with where we expect it to be but probably not much of an opportunity to bring that volume into twenty-five for whatever that's worth.
Speaker Change: That's great color. Thank you and good luck. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you we will take we will take our next question from Iran, Swanson with RBC capital markets.
Iran Swanson: Great. Thanks for taking my questions Congrats on the.
Speaker Change: The strong quarter there.
Speaker Change: I apologize if I missed this I think the volume expectations. You provided last time were mid single digits for each segment.
Speaker Change: He may have moderated that a little bit, but maybe could you just review what your.
Speaker Change: Expectations for the full year are now again thanks.
Speaker Change: Sure No problem and we did talk about that a little bit earlier on so no just for clarity no change in our original expectations for the year. So mid single digit volume growth in each of the segments and again I think with a really strong first quarter. It is confirming our belief that our confidence in the full year as well.
Speaker Change: Thanks, and then on.
Speaker Change: On free cash flow, so I know you've got it to 450 this year and.
Speaker Change: I think last time around you had mentioned that there is maybe 50 million of working capital drags in there that won't repeat next year.
Speaker Change: So next year, you're at a base of $500 million mm is that still the way you're thinking about it and if so I guess, that's and just given your your other comments around M&A.
Speaker Change: Is M&A is still kind of the the priority use of that cash flow could you potentially pivot more to buybacks just given some of the uncertainty and if deals come to market.
Speaker Change: Sure. So yes, our assumption is that our free cash flow was $450 million. This year that includes a really strong earnings growth as Adam has been talking about both organically and from Dana we have a lower rationalization spend year over year, so $30 million last year for $20 million run rate savings and then the reverse this year $20 million.
Speaker Change: Spend for $30 million of run rate savings.
Speaker Change: We are assuming a lower working capital benefit versus the prior year, but it is still a benefit in our numbers and we do have higher interest and cash tax again from from the diner acquisition and then our profit from that perspective.
Speaker Change: Capital expenditures are expected to be.
Speaker Change: Well, we had provided as guidance last time and our working capital is is as I mentioned, a little bit less of a benefit this year than last year.
Speaker Change: And so I think the normalized free cash flow maybe to that very point is about $500 million and thats. How we continue to think about the business. So.
Speaker Change: Does that answer your question around.
Speaker Change: Yes, and just as far as the deployment what would you say priorities there.
Yeah.
Speaker Change: Clearly I mean, I think you heard Bob mentioned as well, where we're comfortable with the pipeline of activity and in our corporate development activities. So we we obviously put M&A as a priority for our capital allocation and again, we are incredibly disciplined as I think you've seen over the years with our 41 acquisitions.
Speaker Change: And how we evaluate and integrate and bring on M&A.
Speaker Change: M&A opportunities into the company outside of that sure we've got the usual.
Speaker Change: Levers that we can pull for capital allocation, whether it's returning cash to shareholders, whether it's paying down debt, but clear preference to continuing to to grow out the portfolio in a very <unk>.
Speaker Change: Deliberate way and as we've done in the past through M&A activity.
Speaker Change: He wrote if I could just add one thing to that I think we've got a long history of discipline and patience here about how we deploy capital and yes, while we would love to get an M&A deal done and we think that's how we've created a lot of value for shareholders on an ongoing basis, we've also been disciplined and patient.
Speaker Change: Around how we how we deploy capital so I don't think theres anything changed in that strategy.
Speaker Change: And we'll we'll go where we need to go relative to capital deployment, but I think given where the leverage is at year end, we still have ability to read the tea leaves relative to the M&A market and we're going to do what's right for shareholders and the returns therefore.
Speaker Change: Got it thanks a lot.
Speaker Change: Thank you we'll take our next question from Jeff Zekauskas with J P. Morgan.
Jeff Zekauskas: Thanks very much.
Speaker Change: Propylene values have come down pretty sharply does that give you a benefit in your dispensing and specialty closure business.
Jeff Zekauskas: Hey, Jeff.
Jeff Zekauskas: As we think about resin pass through maybe I'll start with custom containers quickly because that's that's the business that silicones had for so long we worked very diligently over the years to shorten.
Jeff Zekauskas: The exposure to changes in resin cost pass through and so we've really limited the lag in that business and I would say virtually eliminated it obviously with dispensing as we continue to invest and expand that portfolio. What we typically find through acquisition is the pass throughs of.
Jeff Zekauskas: Of resin changes are a little longer than what silicon typically has so we get to work right away and shortening those those resin pass through lag whenever we can and.
Jeff Zekauskas: And as quickly as we can so in fairness to your question. Yes, there is a little more lag effect in our dispensing, especially closure segment, but it's a small impact.
Jeff Zekauskas: Overall for the business and their.
Jeff Zekauskas: There would be a slight benefit to the company. If if if propylene continues on the trend that we just saw posted I think it was earlier this week or late last week.
Jeff Zekauskas: And.
Jeff Zekauskas: As far as the diner acquisition when you look at the first quarter results.
Jeff Zekauskas: Pro forma basis.
Jeff Zekauskas: How did you do in terms of volumes and operating profit.
Jeff Zekauskas: Before the Veda acquisition.
Jeff Zekauskas: It really really well in other words.
Jeff Zekauskas: Pro forma results.
Jeff Zekauskas: From last year.
Jeff Zekauskas: Yeah.
Jeff Zekauskas: Yeah, So I mean, a silicon performed really well be better performed really well.
Jeff Zekauskas: As two separate entities, both grew versus prior year, and again I think for vein or specifically the ability that we had to put some capital into play to support customer growth that is indeed, driving not only volume growth at banner, but also bottom line growth as well so versus our models.
Jeff Zekauskas: <unk> came in slightly ahead of where we were expecting as we came into the year Jeff.
Speaker Change: Okay, great. Thank you so much.
Jeff Zekauskas: Thank you.
Speaker Change: Thank you once again, if you would like to ask a question. Please signal by pressing star one.
Speaker Change: Yeah.
Speaker Change: And at this time, we have no further questions I would now like to turn the call back for any additional or closing remarks.
Speaker Change: Thank you Rachel and we appreciate everyone I appreciate everyone's interest in the company and look forward to reviewing our second quarter results towards the end of July. Thank you.
Speaker Change: Yeah.
Speaker Change: This does conclude today's call. Thank you for your participation you.
Speaker Change: You may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].