Silgan Q4 2024 Earnings Report

Silgan EPS Results

• Actual EPS: $0.85
• Consensus EPS: $0.82
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: N/A

Silgan Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $1.41 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Silgan Announcement Details

• Quarter: Q4 2024
• Date: 1/29/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, January 29, 2025
• Conference Call Time: 11:00AM ET

Silgan (NYSE:SLGN), together with its subsidiaries, manufactures and sells rigid packaging solutions for consumer goods products in the United States and internationally. It operates through three segments: Dispensing and Specialty Closures, Metal Containers, and Custom Containers. The Dispensing and Specialty Closures segment offers a range of metal and plastic closures, and dispensing systems for food, beverage, health care, garden, home, personal care, beauty products, and hard surface cleaning products, as well as capping/sealing equipment and detection systems. The Metal Containers segment manufactures and sells steel and aluminum containers for food products, such as pet food, vegetables, soups, proteins, fruits, and other miscellaneous food products, as well as general line metal containers primarily for chemicals. The Custom Containers segment manufactures and sells custom designed and stock plastic containers for use in personal care and health care; food and beverage; household and industrial chemical; pharmaceutical; pet food and care; agricultural; automotive. This segment also provides thermoformed barrier and non-barrier bowls, and trays for food products, such as soups, other ready-to-eat meals, and pet food products; and plastic closures, caps, sifters, and fitments, as well as thermoformed tubs for food, household, and personal care products. The company markets its products primarily through direct sales force, as well as through a network of distributors, and an online shopping catalog. The company was founded in 1987 and is headquartered in Stamford, Connecticut.

Silgan Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day, and welcome to the Silgan Holdings 4th Quarter 2024 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Alex Hutter. Please go ahead.

[Alexander Hutter, VP - Investor Relations at Silgan]

Thank you, and good morning.

[Alexander Hutter, VP - Investor Relations at Silgan]

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. Before we begin the call today, we would like to make it clear that certain statements made on this conference call may be forward looking statements. These forward looking statements are made based upon management's expectations and beliefs concerning future events impacting the company and therefore involve a number of uncertainties and risks, including, but not limited to, those described in the company's annual report on Form 10 ks for 2023 and other filings with the Securities and Exchange Commission. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in the forward looking statements. In addition, commentary on today's call may contain references to certain non GAAP financial metrics, including adjusted EBIT, adjusted EBITDA, free cash flow and net income per diluted share or adjusted EPS.

[Alexander Hutter, VP - Investor Relations at Silgan]

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 atsilganholdings.com. With that, let me turn it over to Adam.

[Adam Greenlee, President & CEO at Silgan]

Thank you, Alex, and we'd like to welcome everyone to Silgan's Q4 and full year 2024 earnings call. Our team delivered another year of strong performance in 2024 as the success of our winning strategy, the power of our portfolio, the strength of our team and our disciplined approach to capital deployment continue to set us apart from our competition and drive value for our shareholders. Normalizing end market conditions in most of our businesses showcased the organic growth potential of our strategic initiatives and we delivered mid single digit organic adjusted EPS growth and double digit free cash flow growth in 2024, despite customer destocking activities that impacted the first half of the year. We made significant progress towards achieving our multi year $50,000,000 cost savings initiative, while continuing to invest organically in our businesses to drive growth into the future. Our disciplined capital deployment model continued to create value for our shareholders as we announced and closed the acquisition of Vayner Packaging during the year.

[Adam Greenlee, President & CEO at Silgan]

We are pleased to add another high margin strong organic growth business to the Silgan portfolio and believe this to be a logical next step in the evolution of our capabilities in the attractive dispensing markets as we continue to evolve our portfolio. Its advanced product and manufacturing technologies and strong innovation pipeline will bolster the organic growth and enhance the profile mix of the company for years to come. At the segment level, our Dispensing and Specialty Closure segment continued to perform exceptionally well in 2024 and delivered 3 consecutive quarters of double digit organic growth in dispensing products to close out the year. Our adjusted EBITDA margins in the segment expanded almost 75 basis points during the year and reached new record levels as the margin enhancing mix and higher growth rate of our dispensing products continues to deliver meaningful upside to our bottom line. We drove operational improvement in the segment and continued to make progress against our multiyear cost savings initiatives.

[Adam Greenlee, President & CEO at Silgan]

In metal containers, our pet food markets, which represents strategic growth category and approximately half of our segment volume showed improving trends throughout the year with high single digit growth in the second half of the year and double digit growth in the Q4 as volumes normalized. We once again validated our leadership in the market and the strength of our customer relationships by extending our decades long supply partnership with our largest customer. Our team navigated dynamic volume conditions in the fruit and vegetable market with the impact of a large customer reducing their inventories to drive working capital during the year compounded by severe weather that drove the worst fruit and vegetable pack in many years. In Custom Containers, our business delivered strong operating performance and experienced continued success in the marketplace as the commercialization of new contractual business wins and more normalized market conditions drove mid single digit volume growth and over 200 basis points of adjusted EBIT margin improvement. As we now turn our focus to 2025, with our strategic initiatives yielding strong organic growth, the contribution of the Vayner acquisition and 1st year synergies, the full benefit of our cost savings program and a partial recovery in the fruit and vegetable market, our business exits 2024 with strong momentum and is positioned to deliver record performance in 2025 with double digit increases to both earnings and free cash flow.

[Adam Greenlee, President & CEO at Silgan]

At the segment level, we are expecting Dispensing and Specialty Closures organic volumes to grow by a mid single digit rate in 2025, driven by another year of high single digit growth in our dispensing products and low single digit growth in our closure products, resulting in an improved mix. Metal Containers volumes are expected to grow by a mid single digit percentage, driven primarily by mid single digit growth in pet food and a partial recovery in the fruit and vegetable volumes. Custom containers volumes are expected to grow by a mid single digit percentage, driven by the annualization of the new business wins that ramped up in 2024 as well as additional new business awards in 2025. As we enter 2025, we are excited about the opportunities that lay ahead for the company and our ability to execute upon them. Our customer partnerships remain strong and our teams remain focused on meeting the unique needs of our customers.

[Adam Greenlee, President & CEO at Silgan]

We continue to compete and win in the markets we serve. Our strategic growth initiatives continue to shape the company's future and our disciplined capital deployment model continues to create significant value for shareholders. Before I turn it over to Kim, I'd also like to highlight that earlier this week, we announced that Philippe Chevrier will join our team as Executive Vice President and Chief Operating Officer as part of our executive office in Stanford. We look forward to Philippe fully participating in the collaborative management process that has proven to be so successful since the founding of our company. He brings additional strong leadership capabilities to our team, a broad operational skill set, significant international experience and a deep understanding of the importance of commercial relationships, all of which will help him be successful at Silgan.

[Adam Greenlee, President & CEO at Silgan]

With that, Kim will take you through the financials for the quarter and our estimates for the Q1 and full year 2025.

[Kimberly Ulmer, CFO & Senior VP of Finance at Silgan]

Thank you, Adam. As Adam highlighted, our business continued to deliver strong financial results and converted our profits into double digit free cash flow growth in 2024. We closed on the Vayner acquisition in October, which we financed using cash on hand, our revolver and a new €700,000,000 term loan and we successfully amended and extended our credit agreement during the Q4. Our balance sheet and access to capital markets remains very strong and after completing the Vayner transaction, we ended the year at 3.3 times pro form a net debt to EBITDA, which is within our target leverage range. Turning to the Q4 2024 results.

[Kimberly Ulmer, CFO & Senior VP of Finance at Silgan]

Net sales of approximately $1,400,000,000 increased 5% from the prior year period, driven primarily by the addition of the Vayner business, which closed on October 15, which was partially offset by less favorable mix in the metal container segment as expected. Total adjusted EBIT for the quarter of $151,700,000 increased by 12% on a year over year basis with record adjusted EBIT in dispensing and specialty closures and higher adjusted EBIT in the metal containers and custom containers segments. Record adjusted EPS of $0.85 increased $0.22 or 35% from the prior year. Turning to our segments, 4th quarter sales in our dispensing and specialty closures segment increased 22% versus the prior year, primarily as a result of the contribution from the Vayner Packaging acquisition, which added approximately $100,000,000 or 19% during the quarter and higher volume mix of 5%. The improvement in volume mix was driven primarily by a double digit increase in organic volume of dispensing products during the quarter.

[Kimberly Ulmer, CFO & Senior VP of Finance at Silgan]

Record 4th quarter 2024 Dispensing and Specialty closures adjusted EBIT increased $13,000,000 or 15% versus the record achieved in the prior year period as a result of the contribution from the Vayner Packaging acquisition, which added approximately $11,100,000 unfavorable volume mix. Late in the quarter, as a result of the announced restructuring program, we had the opportunity to further reduce inventories to more optimal levels, which cost us approximately $10,000,000 in adjusted EBIT relative to our expectations entering the quarter as we sold through some higher cost inventory. This inventory reduction contributed to the reduction in working capital for the company, which was the primary driver of free cash flow exceeding our prior estimate for the year. In our metal container segment, sales declined 8% versus the prior year as a result of the lower price mix due to less favorable mix driven by a double digit increase in smaller cans for pet food and lower volumes for larger cans for the fruit and vegetable markets. Total volumes in the quarter were comparable to the prior year period.

[Kimberly Ulmer, CFO & Senior VP of Finance at Silgan]

Metal Containers adjusted EBIT increased 3%, primarily as a result of favorable price cost and mix, including SG and A cost management. In Custom Containers, sales increased 6% compared to the prior year quarter, driven by a 4% increase in volumes as a result of the commercialization of new business awards and more favorable price mix. Custom containers adjusted EBIT increased 40% as compared to the Q4 of 2023, primarily due to an improved mix of products sold and higher volumes. Looking ahead to 2025, we are estimating adjusted EPS in the range of $4 to $4.20 a 13% increase at the midpoint of the range as compared to $3.62 in 2024. This estimate will include interest expense of approximately $185,000,000 a tax rate of approximately 24%, corporate expense of approximately $40,000,000 and a weighted average share count of approximately 107,000,000 shares.

[Kimberly Ulmer, CFO & Senior VP of Finance at Silgan]

Depreciation is expected to increase $40,000,000 to $50,000,000 on a year over year basis and be in the range of $265,000,000 to $275,000,000 At the midpoint of our 2025 adjusted EPS range, we will exceed the prior record levels of adjusted EBIT, adjusted EBITDA and adjusted EPS achieved in 2022. From a segment perspective, mid teen percentage total adjusted EBIT growth in 2025 is expected to be driven primarily by a greater than 20% increase in dispensing and specialty closures adjusted EBIT. Custom Containers segment adjusted EBIT is expected to grow by a mid teen percentage. In the metal container segment, we expect to recover approximately half of the $40,000,000 decline in adjusted EBIT that we experienced in 2024. Based on our current earnings outlook for 2025, we are providing an estimate of free cash flow of approximately $450,000,000 a 15% increase from the prior year as earnings growth will be partly offset by higher interest and tax with CapEx of approximately $300,000,000 This estimate also includes approximately $20,000,000 of cash costs to support our cost reduction program.

[Kimberly Ulmer, CFO & Senior VP of Finance at Silgan]

Turning to our outlook for the Q1 of 2025, we are providing an estimate of of adjusted earnings in the range of $0.74 to $0.84 per diluted share, a 14% increase as compared to adjusted EPS of $0.69 in the prior year period. The year over year improvement in adjusted earnings in the first quarter is driven primarily by the inclusion of Vayner Packaging, higher volumes in each segment and operational improvements, including the benefits from our cost savings program, partially offset by higher interest and corporate expense. 1st quarter volume and adjusted EBIT is expected to be above prior year levels in all three segments. That concludes our prepared comments and we'll open the call for questions. Justin, would you kindly provide the directions for the question and answer session?

[Operator]

Thank

[Operator]

And our first question today will come from George Staphos with Bank of America.

[George Staphos, Analyst at Bank of America]

Hi, everyone. Good morning. Thanks for the details. Hope you're doing well. Two quick ones from me and then a follow on.

[George Staphos, Analyst at Bank of America]

Can you talk a little bit about what the learnings with Vayner have been so far? What did you learn since you've owned it that are additive or for that matter maybe a little bit more challenging than you expected as you were closing the deal and relative to the deal model? 2nd question, can you talk about within the guidance for this year, what is discrete cost reduction and or sort of built in earnings gains, not that anything is ever guaranteed relative to your initiatives from the last couple of years? And then as I said, I had a quick follow on.

[Adam Greenlee, President & CEO at Silgan]

Sure. Good morning, George. Look, the Vayner addition to our portfolio, it's gone really well. We closed in mid October. To your point, there are always learnings as you bring 2 organizations together.

[Adam Greenlee, President & CEO at Silgan]

And I think that process has been very good. One that I would tell you initially is that, they probably had more commercial opportunities in the business than maybe what we had given them credit for through our diligence process. And it's a similar conversation that we've had in some other acquisitions that we've done that we actually did take the opportunity to approve some capital prior to the close of the acquisition for future growth. And this is contractual business. In fairness, these are primarily with customers that you can think about as both Silgan customers and Vayner customers.

[Adam Greenlee, President & CEO at Silgan]

But the capital opportunity was there and we took advantage of it. So I think one learning is we're gaining confidence and even more confidence in the combined entity's ability to deliver the growth profile that we've projected. So feeling really good about it. I think outside of that, again, we anticipated a strong team coming over, talented team and that's exactly what we've got. So we're excited about the future.

[Adam Greenlee, President & CEO at Silgan]

I think the teams are working well together and delivering on really the synergies and all the other integration activities as we get kind of into the process now with a full quarter. And then secondly, on the cost reduction side of the portfolio, our 2nd year of the $50,000,000 cost reduction program, year 1, we did deliver the $20,000,000 of cost savings in $24,000,000 So feel really good about that. Teams did an excellent job executing against the programs that we established. And then for 2025, it's really the second portion of the EBIT improvement, which will be about $20,000,000 I'm sorry, dollars 30,000,000 of improvement to round out the $50,000,000 cost reduction program.

[George Staphos, Analyst at Bank of America]

Okay. Adam, just on Veiner, just a quick follow on. So there's always going to be things that don't go as well. What have those been so far? And then where have the commercial opportunities been, where you've been maybe able to invest a little bit ahead of the curve?

[George Staphos, Analyst at Bank of America]

And then just the tax rate was a little bit lower than we were expecting. What drove that? Thanks and I'll turn it over.

[Adam Greenlee, President & CEO at Silgan]

Sure. Just back to Vayner. Right, clearly, not everything is seashells and balloons, George. So there's a lot of good stuff. There's a lot of stuff when you're bringing 2 organizations together that you have to work through.

[Adam Greenlee, President & CEO at Silgan]

And I think it's just communication, but I'd tell you also this is our 41st acquisition that we've done as a company. And I think it's just as you integrate an organization of this size, let's call it 6,000 employees, communication is really important and just making sure you're speaking the same language and communicating effectively back and forth through the organization. So that's it. And just sometimes that's easier than not. And I'll just say it was pretty standard for us, but we've got a lot of experience, in working through those issues.

[Adam Greenlee, President & CEO at Silgan]

I'll let Kim answer the tax rate question.

[Kimberly Ulmer, CFO & Senior VP of Finance at Silgan]

Sure. So for the tax rate for the Q4, it was about 8.8% and that was a benefit from tax restructurings we did in foreign operations. We do not expect that to repeat in 2025. So we'll be back to our 24% average rate as we go through the year next year.

[Robert Lewis, Executive VP of Corporate Development & Administration and Director at Silgan]

Yes. George, just to come back to

[Robert Lewis, Executive VP of Corporate Development & Administration and Director at Silgan]

you guys.

[Robert Lewis, Executive VP of Corporate Development & Administration and Director at Silgan]

This is Bob. Come back around to the question you asked in terms of where the investments were. In typical markets that they have been operating in, very similar markets to where our dispensing business plays as well. So nothing far afield from what the 2 organizations combined are very capable at doing. They are a growthy market.

[Robert Lewis, Executive VP of Corporate Development & Administration and Director at Silgan]

So we think there's good opportunity with those customers to not only launch these product lines, but to continue to grow with them on a go forward basis.

[Adam Greenlee, President & CEO at Silgan]

And as is typical with us, George, you can just assume that those are kind of mid- to longer term contracts that support the capital investment.

[George Staphos, Analyst at Bank of America]

Thank you very much.

[Operator]

And the next question will come from Ghansham Panjabi with Baird.

[Ghansham Panjabi, Senior Research Analyst at Baird]

Thank you, operator. Good morning, everybody. Adam, just sort of looking at our model from a volume metric standpoint, in 'twenty two volumes were down, 'twenty three as well and up a little bit in 'twenty four. And just based on your characterization of 2025%, it sounds like you're expecting sort of a mid single digit increase in terms of volume. So can you help us bridge the differential as it relates to your confidence being able to achieve that?

[Ghansham Panjabi, Senior Research Analyst at Baird]

And just in context of many of your customers that have reported so far, especially the off cycle reporters that seem much more muted on the outlook for volumes?

[Adam Greenlee, President & CEO at Silgan]

Yes, sure. It's you highlighted some challenging years with a lot of moving parts between 2022 and 2024 there. But what I would tell you Ghansham, as we came into those years, there was a lot of noise around the market of what was going on with consumers and what was going on with our customer base. And I think what you see at the back half to certainly the Q4 of 2024 is just a much more normal kind of business environment that we're dealing with our customers. We're sort of through the we're through all the destocking activities.

[Adam Greenlee, President & CEO at Silgan]

And we're seeing in many cases, our volumes are more indicative of what consumer demand is for our products. So we feel like as we turn the page now to 25, there's just a lot less noise around what's going on with our customers and what's going on with consumers. And I'll continue to say through that window of time that you outlined Ghansham, consumer demand for our products remains fairly strong through that entire process. And really the disruption was more with our customers and what they were doing with their inventory, what they were doing with their commercial activities and pricing and promotional activities in the market. So as we sit here today, I think we've got a really good degree of confidence that the strategic initiatives that we've outlined that we're executing against them, they're delivering the value and creating value for our shareholders that we had outlined.

[Adam Greenlee, President & CEO at Silgan]

And I think 2025 is going to be a much more normal year than what we've seen in the last several years.

[Ghansham Panjabi, Senior Research Analyst at Baird]

Okay, understood. And then can you help us also bridge the earnings between the $362,000,000 you generated in 2024 and the midpoint of your guidance? How much of it is from the acquisition? And what sort of operating leverage are you assuming on the legacy silicon businesses excluding Weyner?

[Adam Greenlee, President & CEO at Silgan]

Yes. It's a very good question. So a couple of things. One, just some of the big numbers right out of the gate. I'm just going to give you some adjusted EBIT numbers.

[Adam Greenlee, President & CEO at Silgan]

So call it 50,000,000 dollars from the Vayner acquisition of additional adjusted EBIT. I mentioned the $30,000,000 of the cost savings program for year 2. And then you've really got organic growth that's driving the remainder of the improvement year over year. And then we're cycling over things. Some of the headwinds that we see, we've got some additional incremental interest expense.

[Adam Greenlee, President & CEO at Silgan]

You've got some FX changes that have been taking place. And then our corporate line is a little more expensive next year in 2025 than it was in 2024. But all of that gets us to double digit adjusted EBIT, adjusted EPS growth. And as Kim said earlier, double digit adjusted free cash flow growth as well.

[Ghansham Panjabi, Senior Research Analyst at Baird]

Okay, terrific. Thank you so much.

[Adam Greenlee, President & CEO at Silgan]

Thank you.

[Operator]

And the next question comes from Matt Roberts with Raymond James.

[Matthew Roberts, Equity Research Analyst at Raymond James Financial]

Hey, Adam, Kim, Alex. Good morning, everybody. I appreciate the bridge you just gave there on the total EBIT expectations. But maybe you could provide any additional color on how you're thinking about that by segment. I mean DSC seems like high value continues to drive growth there.

[Matthew Roberts, Equity Research Analyst at Raymond James Financial]

In metal, any impacts you're expecting as pet food continues to be a higher mix or as steel is a pass through, but any margin considerations there as we look into 2025?

[Adam Greenlee, President & CEO at Silgan]

Yes. Good question. I mean maybe just going through the segments quickly for you. So DSC, obviously with double digit 1st quarter growth in dispensing volumes, again, our 4th straight quarter with expected double digit growth in dispensing products, kind of high single digit for the year. That's a very mix enhancing portfolio growth, not only for the company, but for the segment as well.

[Adam Greenlee, President & CEO at Silgan]

So really that's the driver for us in DSC. We'll see kind of low single digit growth for our specialty closures business, non dispensing closures. And then you go over to metal containers, it's really the story that we've been talking about, right? You've got mid single digit, pet food growth through the course of the year in 2025, partial recovery of fruit and vegetable. And all of that is driving kind of lowtomidsingledigitgrowth for the segment in 2025.

[Adam Greenlee, President & CEO at Silgan]

And then lastly, you get to Custom Container. We continue to win in that market. We're looking at kind of mid single digit growth in 2025 off of a really good year in 2024. And I think maybe back to Ghansham's question, this is probably the market that's most clearly the one that normalized as we came through 2024. And I think we've got really good momentum heading into 2025 that's driving the confidence behind the volume growth expectations.

[Matthew Roberts, Equity Research Analyst at Raymond James Financial]

Certainly. I appreciate the additional color there. Secondly, if I think of your M and A strategy, so recently under TiptoeViner acquisition, now going through some deleveraging, as you look into 2025, I mean, things like there's some talk for a potential competitor to sell parts of their portfolio. But specifically for Silgan, are there any certain end markets or areas of technology that you'd still be interested following banner integration in 2025? And if so, kind of what size or timeline are you all comfortable with?

[Matthew Roberts, Equity Research Analyst at Raymond James Financial]

And relatedly on the cash, I don't know if I missed this somewhere, but I believe you saw the euro bonds due in March. Any considerations in addressing those? Thank you.

[Robert Lewis, Executive VP of Corporate Development & Administration and Director at Silgan]

Yes, Matt, this is Bob. I'll take the first part of that question. Yes, look, having closed Vayner in October, we're feeling really good as Adam suggested about the collective teams. While there's work to be done, we're well on our way to the integrating of the operations, identifying and capturing the synergies there. So we are actively looking at what's out there in the market from an M and A perspective.

[Robert Lewis, Executive VP of Corporate Development & Administration and Director at Silgan]

Our balance sheet would certainly support that. As Kim talked about, we're kind of right within our range with the free cash flow profile looking forward into 2025 will be to the low end of that range by the time we're there. So there's nothing sort of getting in our way from an M and A perspective. We think that there's a good pipeline of potential opportunities out there and very specifically things that we think would be actionable in the near term and that would fit exactly where our investment thesis has been of late. So, we're optimistic and hard at work to try and to identify and get those next opportunities out in front of us.

[Kimberly Ulmer, CFO & Senior VP of Finance at Silgan]

And on the 3.25 percent notes, so we'll be opportunistic in the markets around those as well. But we do have capacity under our revolver. So we're not feeling like we're constrained or forced to do something.

[Operator]

And the next question will come from Anthony Pettinari with Citi.

[Bryan Burgmeier, Analyst at Citigroup]

Good morning. This is actually Brian Bergmeier sitting in for Anthony. Thank you for taking the question. First one, just kind of on dispensing. You called up the $10,000,000 impact from inventory reduction in December.

[Bryan Burgmeier, Analyst at Citigroup]

Was that within beverage caps or trigger sprayers or within beauty? Any detail on that? And then just kind of broadly, maybe how much line of sight does Silgan usually have to these types of customer inventory actions?

[Adam Greenlee, President & CEO at Silgan]

Hey, Brian, a couple of things. Maybe first off, just in our dispensing and specialty closure segment, so this was actually a part of a restructuring program that we had initiated, in our flat cap kind of specialty closures business. So what we had done is really streamlined the operations and moved volume to more efficient facilities to more efficient manufacturing lines. And as we got through that process, in fairness, we got to it earlier than anticipated in Q4 and it allowed us to make a conscious decision that we actually drove down our inventory. So in fairness, it didn't really have anything to do with our customers.

[Adam Greenlee, President & CEO at Silgan]

This was us saying, geez, we have improved the operational footprint that we've been working on and our optimal inventory levels can be much lower than what we anticipated. So we took the opportunity to go ahead and do that. Obviously, there was a benefit of free cash flow. That really wasn't why we did this. But this was an opportunity to optimize kind of our inventory management, realize the full benefits of the restructuring programs that we had initiated and move forward from there.

[Adam Greenlee, President & CEO at Silgan]

So it was part of our flat cap closures business really as a result of the restructuring programs that we'd already initiated.

[Bryan Burgmeier, Analyst at Citigroup]

Got it. Thanks for that detail. That makes a lot of sense. And then just on the guidance for high single digit volume growth for your dispensing products this year. Are there more kind of new business wins being layered in, in 2025?

[Bryan Burgmeier, Analyst at Citigroup]

Or are there is there maybe a benefit from new business wins in 2024 that you haven't lapped yet? Just kind of following up on Matt's question, I'm just thinking about sort of the growth that Silgan is seeing versus sort of the underlying market growth. Thanks and I'll turn it over.

[Adam Greenlee, President & CEO at Silgan]

Great. Good question. We are continuing to have a lot of success particularly with the dispensing products portion of our portfolio and the dispensing and specialty closures segment. So many new wins in 2024, some of which we've talked about, many more new wins in 2025. And really, as we've talked previously, the thesis here is we're competitively advantaged in this marketplace.

[Adam Greenlee, President & CEO at Silgan]

Our innovation, our design teams are meeting very unique needs from a variety of customers and markets in this space. And we're continuing to have tremendous success. So yes, we'll have additional new wins in 2025. And that's a broad base across many, many markets that we serve. And then interestingly enough, we'll be preparing, we've recently had a significant business award in our Specialty Closure segment that is more focused on 2026, but we'll be ramping up late in the year of 2025.

[Adam Greenlee, President & CEO at Silgan]

So that's included in our guidance. But really, as we think about the forward look of where we're going, we're taking that innovation, design, lightweighting for certain products. All of those elements are winning thesis or ideas in the market, let's say that. And we're driving growth through many, many of our markets.

[Operator]

And the next question will come from Gabe Hajde with Wells Fargo Securities.

[Gabe Hajde, Analyst at Wells Fargo]

Adam, Kim, Bob Ellis, good morning. I'm going to use a saying I learned today, give a mouse a cookie they'll ask for some milk. If I start with $1,200,000,000 of EBITDA sort of at the midpoint and I build down to the $450,000,000 of free cash flow, I have about $100,000,000 in there for cash taxes, which would imply maybe a $35,000,000 working capital benefit. And I think I heard $20,000,000 of integration and savings spend in there. Are there other cash components that we should be thinking about?

[Gabe Hajde, Analyst at Wells Fargo]

And really the crux of the question is just trying to understand sort of what the baseline should look like and then maybe what that enables you all to do on the M and A side?

[Adam Greenlee, President & CEO at Silgan]

Yes. It's an interesting question, Gabe. I mean, I think it's some of the things that we're talking about that are working against free cash flow in 2025. Again, we talked about kind of higher interest expense, higher cash tax. I think you had most of the other components correct.

[Adam Greenlee, President & CEO at Silgan]

So I think you're on the right line of thought. And I don't know if there was anything else that we can provide there that you didn't already have.

[Kimberly Ulmer, CFO & Senior VP of Finance at Silgan]

Some benefits from our

[Kimberly Ulmer, CFO & Senior VP of Finance at Silgan]

rationalization programs as well. So we have lower cash year over year on the rationalization programs.

[Bryan Burgmeier, Analyst at Citigroup]

Okay.

[Adam Greenlee, President & CEO at Silgan]

And higher CapEx.

[Bryan Burgmeier, Analyst at Citigroup]

And then Right. Yes. I've got the $300,000,000 in there. I was really kind of walking from $1,200,000,000 of EBITDA to $450,000,000 And I had the $185,000,000 of interest, etcetera. And that's where like I said, there was a little bit of a it looks like there's a working capital benefit this year.

[Adam Greenlee, President & CEO at Silgan]

And there will be, and maybe not quite as big as we had in 2024, but there will be a working capital benefit in 2025.

[Bryan Burgmeier, Analyst at Citigroup]

Got it. Okay. And then the other one, Adam, you guys have talked a little bit and I feel like I missed part of what you answered to Anthony in the last question. The capacity constrained in parts of DSC and I'm thinking it's the high value add dispensing systems, that you're adding some capacity this year explains the higher CapEx, but would you be incurring any sort of startup expenses or frictional costs in the back half of this year to ramp for 2026? Or how should we think about that?

[Adam Greenlee, President & CEO at Silgan]

Yes. So I mean, we have been adding capacity literally every year since we've been working through the dispensing systems business and our DSC segment. So I would say it's nothing really outside of the norm. So you're right, Gabe, and we always have start up costs with these projects and programs. We really don't talk about them a whole lot in this segment because they are much more on the incremental capacity addition side.

[Adam Greenlee, President & CEO at Silgan]

So we absorb those costs and we commercialize those products and spend more time talking about the commercialization of the product and the start up costs. So really it's more of the same. And I would just tell you in the market, we're having success and we're having success implementing the program and kind of strategy that we've laid out over the last several years and it's driving significant value for us.

[Bryan Burgmeier, Analyst at Citigroup]

Great. Thank you.

[Operator]

And moving on to Mike Roxlund with Truett Securities.

[Michael Roxland, MD - Equity Research at Truist Securities]

Thanks, Adam, Bob, Kim and thanks for taking my questions. Just congrats on the well, 1st congrats on the year on the outlook as well. First question I had was, obviously, the company has done a tremendous job over the last decade, transforming the portfolio, focusing on growth in DSC, high end dispensing, perfumes, fragrances and the like, obviously more recently with Vayner and Healthcare. Can you help us understand how you're seeing this business evolve, let's say over the next 5 years? Currently DSC represents I think 52% to 53 percent of EBITDA roughly.

[Michael Roxland, MD - Equity Research at Truist Securities]

Where do you see that headed?

[Adam Greenlee, President & CEO at Silgan]

Hey, Mike. Thank you. Yes, I mean, maybe let's just look back quickly. I mean, if you go back, I think we've talked about this maybe on the last call. If you go back, call it 10 years ago, the DSC segment today, pro form a with Vayner is bigger than the entirety of Silgan just 10 years ago.

[Adam Greenlee, President & CEO at Silgan]

So you're right, we talked about this evolution that has sort of taken place as we've moved and invested heavily in our dispensing and specialty closures growth segment. Now fast forward, does that same sort of opportunity exist as we look forward? Sure, it does. We're going to continue to generate a lot of cash flow. Our job at our executive office here is to find the most efficient means and opportunities to deploy that capital.

[Adam Greenlee, President & CEO at Silgan]

And I think as we also talked, our healthcare business now is a $200,000,000 business. It's growing. It's growing faster than our other segments. And I think there's a lot of opportunity to grow both organically and through acquisition in the Healthcare segment.

[Michael Roxland, MD - Equity Research at Truist Securities]

Got it. And to be fair to say that is your primary focus as you look to grow in DSC?

[Robert Lewis, Executive VP of Corporate Development & Administration and Director at Silgan]

Yes. Mike, this is Bob. Look, what I would say is it's obviously our highest margin fastest growing business. So we will continue to allocate capital toward that business as we continue to develop what are already pretty strong relationships with our customers. And we will look to grow with our customers, which is exactly what we've done in some of our other segments as well.

[Robert Lewis, Executive VP of Corporate Development & Administration and Director at Silgan]

That doesn't mean that we're necessarily going to starve the remainder of the business. We continue to have good access to capital to grow those businesses as well. The growth profile of those businesses just by their very nature tend to be slightly less than the dispensing business. So that is the priority for capital for sure.

[Adam Greenlee, President & CEO at Silgan]

And the other thing I would add to that is on the organic investment side of

[Adam Greenlee, President & CEO at Silgan]

the

[Adam Greenlee, President & CEO at Silgan]

business. We do have opportunities with existing customers in healthcare where we are investing, where we have long term partnerships with those same customers. And we're excited about what the future holds for us and we have been investing with those customers over time and we'll probably have more to talk about here as we go forward sharing some of those successes throughout the course of the year.

[Michael Roxland, MD - Equity Research at Truist Securities]

Perfect. And then just one quick follow-up. Can you just comment on the competitive landscape in metal cans? Obviously, it's been somewhat fluid the last few years, both here and in Europe. You have conditions have you seen market conditions become more challenging, maybe some new players trying to gain share.

[Michael Roxland, MD - Equity Research at Truist Securities]

Any concerns over pet food and maybe more some more, particularly some companies try to mix up. Just want to get a sense of what you're seeing on the metal can side

[Michael Roxland, MD - Equity Research at Truist Securities]

of things.

[Adam Greenlee, President & CEO at Silgan]

Yes. And I mean, we've talked about this one over time as well. Just as a reminder, Mike, about 90% of our business is covered under long term contracts in the metal containers business. So historically, Silgan has sort of been out of the fray of maybe some of those market activities. And I'd also note, as you saw in the press release, a highlight for the year is that we did extend our single largest customer, another significant long term contract.

[Adam Greenlee, President & CEO at Silgan]

So that's really where we spend our time in the marketplace is working with our customers, helping them grow their business. And you don't have to look much further than pet food to say those investments that we've made over time, those long term contracts that support our pet food volumes and investments have paid off for our customers, our shareholders and for Silgan. So look, we don't see a whole lot of difference in the market activity at this point in metal containers. And frankly, we're a little bit outside of the normal freight anyway.

[Michael Roxland, MD - Equity Research at Truist Securities]

Got it. Thanks very much and good luck in 2025.

[Adam Greenlee, President & CEO at Silgan]

Thank you.

[Operator]

And the next question comes from Arun Viswanathan with RBC Capital Markets.

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

Great. Thanks for taking my question. Congrats on a strong year and a good outlook here. I guess, first off, maybe you can just help us understand what you're hearing from your customers. I know it's maybe a seasonally less strong part of the year, but how are they feeling as you go into the New Year as far as promotional activity and potentially have they seen any inflection point on demand trends, maybe just especially for metal container and DSC?

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

Thanks.

[Adam Greenlee, President & CEO at Silgan]

Sure. Maybe we'll start with metal containers. And just I think it's one of the real successes, a couple of real successes in the promotional activity. And we've talked about that. Really the targeted promotional activity that we've seen in the wet pet food segment, particularly for TAP for our business has been very successful.

[Adam Greenlee, President & CEO at Silgan]

And we talked about double digit organic growth in Q4. Yes, we were cycling over a bit of destocking that happened in Q4 of 2024, but really the demand level was very strong. And we think that targeted investment by customers in promotional activity drove volume in the quarter. And the good news for us is that will continue into 2025. And so we spent a lot of time understanding that with that specific customer.

[Adam Greenlee, President & CEO at Silgan]

Another market in food cans, I would tell you that we saw success in promotional activity was in the soup market. And really, it was very early in the process. So really, as we were cycling over maybe some easier comps earlier in the year because promotional activity did take hold late in 2023 and through 2024 in the soup market. So we feel good that our customers understand in the food can markets where promotional activity has worked, maybe where it could be more targeted. And then on the dispensing and specialty closure side, it really does vary by market.

[Adam Greenlee, President & CEO at Silgan]

You think about things like lawn care, very effective promotional activity, air care, fabric care, those kinds of products have had very targeted and very successful promotional activity. I think the one that we have talked about that wasn't quite as effective is on kind of the isotonic beverage products. And we've spent a lot of time with our customers as we now are putting forward our 2025 programs and objectives together. A more targeted and focused promotional activity is what our customers are planning to drive volume growth in 2025. So I think almost back to George's first question, there were definitely learnings that we had as far as working with our customers on their promotional activities, what was successful, what was challenged and maybe what modifications could be made to ensure success in 2025.

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

Great. Thanks for that. And then, I guess, you mentioned potentially elevated corporate costs or in 2025. Obviously, you have a bigger company now. So what should we think about as a full year kind of corporate range?

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

And then similarly from a cash flow standpoint, obviously, you're performing at a much stronger rate now with a 15% increase in 25%. Do you expect to kind of continue to grow free cash flow at a much greater rate than say your EBITDA? Is there an increase in free cash flow conversion that's driving that? Or maybe you can just address those two issues?

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

Thanks.

[Kimberly Ulmer, CFO & Senior VP of Finance at Silgan]

Sure. So on the corporate side, we called out about $40,000,000 for this year and that increase year over year is primarily related to corporate development activities. So as we continue to see our leverage ratio come down and see opportunities in the market, we can be opportunistic around that. And then on the free cash flow, we have, as you mentioned, really good improvement year over year from strong earnings as well as lower working care or offset by a bit of a working capital benefit.

[Kimberly Ulmer, CFO & Senior VP of Finance at Silgan]

We see those improvements in the earnings to continue and we would expect that at some point we'll be at $500,000,000 of free cash flow as we go through the years.

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

Great. Thanks a lot.

[Operator]

And moving on to Jeff Zekauskas with JPMorgan.

[Jeffrey Zekauskas, Analyst at JP Morgan]

Thanks very much. You took $17,500,000 in restructuring charges and custom containers. What are you spending the money on?

[Adam Greenlee, President & CEO at Silgan]

Well, hey, Jeff. It's part of our $50,000,000 multiyear cost savings program. So in fairness, we are putting that cash and capital back to work in the broader Silgan portfolio. So as we look at continuing to invest and we're talking about $300,000,000 of CapEx in the year supporting primarily growth initiatives, that it's Custom Containers is one portion of that conversation. So in particular, in Custom Containers, we did close 2 plants in 2024 or announced the closure of 2 plants.

[Adam Greenlee, President & CEO at Silgan]

And really that's what's driving the cost profile. The benefits will be accrued across all of Silgan.

[Jeffrey Zekauskas, Analyst at JP Morgan]

Okay. In terms of Xena, when you look at it on a pro form a basis, how did the business perform in the Q4?

[Adam Greenlee, President & CEO at Silgan]

Actually, it did really well. So we had expected them to have year over year growth in kind of their portfolio and they delivered upon that. It was very consistent from both a volume and a profit standpoint versus our acquisition model. So actually in fairness, it was slightly above it. So we're very pleased with the performance of the business right out of the gate.

[Adam Greenlee, President & CEO at Silgan]

And I think we're feeling more confident about delivering 2025 as well in the growth profile that we projected.

[Robert Lewis, Executive VP of Corporate Development & Administration and Director at Silgan]

Yes. Jeff, the only other thing I would add to what Adam just gave you is that, the free cash flow of that business was maybe slightly less than what we were anticipating, and that is entirely due to the fact that we had some investment opportunities come to us right at the outset of closing and in one particular case even prior to closing that we were able to approve. So I think all of that leads to a very positive fundamental outlook for the business going forward.

[Jeffrey Zekauskas, Analyst at JP Morgan]

Thanks very much.

[Operator]

And we'll take a question from Daniel Rizzo with Jefferies.

[Daniel Rizzo, Analyst at Jefferies]

Hey, guys. Thank you for squeezing me in. So you mentioned the commercial opportunities with Vayner. I was just wondering if you're specifically referring to revenue synergies, I mean, cross selling and also kind of flip side of that, if you will have to kind of give up some sales because of too much overlap with a particular customer or that's not a problem at all?

[Adam Greenlee, President & CEO at Silgan]

Hey, Dan. So no, I mean, in fairness, we did not model any revenue synergies between the businesses. And that really is not something that Silgan really does. Clearly, there are opportunities that we can cross sell amongst our groups that are out in the field. So we are seeing opportunities come up between the businesses, but that wasn't part of our acquisition model.

[Daniel Rizzo, Analyst at Jefferies]

Okay. And then I think you mentioned in within the metal business, metal containers that you expect to get half of the fruit and vegetable business back that was lost in 2024, if I'm wrong, just correct me there. But also in addition to that, I was wondering if soup is still kind of doing better than historically speaking and what the outlook is for there and if it's even meaningful at this point?

[Adam Greenlee, President & CEO at Silgan]

It's very meaningful. It's an important market for us. So the good news, again, I'll kind of repeat what I said earlier. Through the variety of challenges that we've had over the course of working with our customers and volumes in the last 2 years, what I would tell you underlying demand for soup continued to be strong. So it has remained strong.

[Adam Greenlee, President & CEO at Silgan]

We had a good quarter in Q4. We're expecting kind of normalized soup volumes for 2025 and it still is an important part of the business and what we do. Over to the fruit and vegetable markets, what I tell you very quickly, Dan, is that we're still working with our customers on finalizing their pack plan. So we have a little less clarity at this point than what we would like, but we'll certainly have a lot more information as we come back together to discuss Q1 results in April. And I think what I would say, I just want to clarify the comment when we say recovering half, it's really the financial impact that the metal containers business saw year over year.

[Adam Greenlee, President & CEO at Silgan]

So about a $40,000,000 change in 2024 and we're anticipating getting half of that back as we move to 2025.

[Daniel Rizzo, Analyst at Jefferies]

Okay. All right. Thank you very much.

[Adam Greenlee, President & CEO at Silgan]

Thanks.

[Operator]

And we'll take a question from George Staphos with Bank of America.

[George Staphos, Analyst at Bank of America]

Hi, everyone. A couple of quick ones. So Philippe Chevrier, you mentioned that he brings strong leadership, strong operating skill set, international experience. Should we read into that that maybe as you're having these additional opportunities in corporate development that maybe some of this is going to be outside of the states to a larger degree than in the past? Or are we sort of overthinking it at this juncture?

[Adam Greenlee, President & CEO at Silgan]

Well, and it's not a bad thought, George. I think that, I mean, we like mature markets and we've never been shy about saying that. So, I think if you look at where the last several acquisitions have been, there's been a definitely an international flare, particularly a European flare to those acquisitions as well. So, I wouldn't read too much into it. For me, this is all about our executive office.

[Adam Greenlee, President & CEO at Silgan]

We're sitting in our founders room right now with Phil and Greg staring at us from their portraits on the wall. And it's that model that they generated with our collaborative office here that has been so successful for so long. So we're just excited that we're adding additional talent and thought leadership to our team here and excited to bring his experience to our skill set here in our Stanford office.

[George Staphos, Analyst at Bank of America]

Understood. And then just on pet food and it comes up periodically and just want an update. As it's become an increasingly large piece of metal over time, how does it change the operations? Has it changed perhaps the growth profile we know, but maybe does it bring any risks or supply chain factors that you've got to manage differently than used to be the case? I'm guessing certainly there's maybe some great reliance on aluminum to some degree.

[George Staphos, Analyst at Bank of America]

So anything you could share with us there? Yes, it's been helpful. Yes, it's grown. Sure, it's got a lower mix. But has it changed how you manage the business and maybe bring in some additional risks down the road?

[George Staphos, Analyst at Bank of America]

Thanks guys and good luck in the quarter.

[Adam Greenlee, President & CEO at Silgan]

Yes. It's a good question, George. I mean, look, the aluminum side of our business has grown significantly over time as you just sort of outlined. And now pet food is, call it, over half of our volume in 2025 from a unit volume perspective, the vast majority of that is in aluminum. So we're buying significantly more aluminum from a raw material standpoint than we have in the past.

[Adam Greenlee, President & CEO at Silgan]

And we have elected to, so it's a proactive statement I'm about to make, diversify the supply chain that we have for aluminum to make sure that we can continue to do what we do, which is support our customers on a requirements based, contractual arrangements for the long term. So you can think about our supply chain being diverse. You can think about it being kind of covered under long term contracts and supporting the growth that we not only have delivered, but we continue to anticipate going forward as we've continued to really invest along with our customers in the pet food market for growth.

[George Staphos, Analyst at Bank of America]

Do we reach a point in 2025 sorry guys, quick one here, where comps almost necessarily have to turn flat given that you're growing at high single digits and double digits right now? Or you don't see that at all during the 4 quarters during 2025? Thank you again.

[Adam Greenlee, President & CEO at Silgan]

Yes. George, I think we're still going to deliver growth for the course of the year. I think the comp I would maybe highlight right now is the one that we just delivered in Q4. So as you think of Q4 and twenty twenty five, that'll be a tough comp for us. But knowing what our customers have invested in from their capacity standpoint, knowing what our capabilities are and the growth rates that we collectively are expecting for pet food in 2025, I feel very we collectively feel very strongly about delivering that kind of mid single digit volume growth.

[Adam Greenlee, President & CEO at Silgan]

And again, we've been doing this for 30 plus years in the pet food market over a long horizon, that is the kind of growth that we've continued to drive through this marketplace.

[George Staphos, Analyst at Bank of America]

Thanks, Adam.

[Adam Greenlee, President & CEO at Silgan]

Sure.

[Operator]

And that does conclude the question and answer session. I'll now turn the call back over to Adam Greenlee for any additional or closing remarks.

[Adam Greenlee, President & CEO at Silgan]

Great. Thank you, Justin. Appreciate your support today, and thanks, everyone, for your interest in Silgan. Look forward to catching up again in April to review our Q1 results.

[Operator]

Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.

Participants

Executives

• Alexander Hutter, VP - Investor Relations
• Adam Greenlee, President & CEO
• Kimberly Ulmer, CFO & Senior VP of Finance
• Robert Lewis, Executive VP of Corporate Development & Administration and Director

Analysts

• George Staphos, Analyst at Bank of America
• Ghansham Panjabi, Senior Research Analyst at Baird
• Matthew Roberts, Equity Research Analyst at Raymond James Financial
• Bryan Burgmeier, Analyst at Citigroup
• Gabe Hajde, Analyst at Wells Fargo
• Michael Roxland, MD - Equity Research at Truist Securities
• Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets
• Jeffrey Zekauskas, Analyst at JP Morgan
• Daniel Rizzo, Analyst at Jefferies