Silgan Announces Strongest Quarterly Performance In Company History

Silgan Holdings Inc. (Nasdaq:SLGN), a leading supplier of sustainable rigid packaging solutions for consumer goods products, today reported record second quarter 2020 net income of $78.2 million, or $0.70 per diluted share, as compared to second quarter 2019 net income of $31.0 million, or $0.28 per diluted share.

Adjusted net income per diluted share was a record $0.85 for the second quarter of 2020, after adjustments increasing net income per diluted share by $0.15. Adjusted net income per diluted share in the second quarter of 2019 was a previous record of $0.55, after an adjustment increasing net income per diluted share by $0.27. A reconciliation of net income per diluted share to “adjusted net income per diluted share,” a Non-GAAP financial measure used by the Company that adjusts net income per diluted share for certain items, can be found in Tables A and B at the back of this press release.

“We are pleased to report a 55 percent increase in adjusted earnings per diluted share in the second quarter of 2020 as compared with the prior year period as strong demand growth continued for many of our products. This sustained growth has been driven by continued increased home preparation and consumption of food, enhanced marketing efforts by several of our customers and increased consumer focus on health and hygiene,” said Tony Allott, Chairman and CEO. “We are particularly thankful for the exceptional dedication and success of the Silgan team in meeting the sustained needs of our markets and customers under the challenging operational circumstances caused by the COVID-19 pandemic. Our metal container business reported strong second quarter segment income, driven largely by unit volume growth of approximately 15 percent in food cans which was sustained throughout the quarter. Our closures business also delivered strong second quarter segment income, with a 25 percent increase over the prior year period, driven by volume growth for pumps and triggers offset in part by demand declines in beauty and certain beverage products. In addition, on June 1, 2020, we welcomed 2,400 new Silgan employees through the acquisition of the dispensing operations of Albéa. Our plastic container business continued its multi-year progression of steadily increasing segment income with second quarter 2020 results that were nearly double the prior year period, driven by volume growth of approximately 14 percent and excellent cost control,” continued Mr. Allott. “As a result of the favorable performance realized in the first half of the year, the outstanding work of the Silgan team and the anticipated continued strong year-over-year growth for many of our products, we are increasing our full year earnings estimate to $2.70 to $2.85 per share, which represents a 28 percent increase over record 2019 levels at the midpoint of the range. We are also increasing our free cash flow estimate for 2020 from approximately $275 million to approximately $330 million. At the current share price, this represents a free cash flow yield of nearly 8.5 percent,” concluded Mr. Allott.

Net sales for the second quarter of 2020 were $1.18 billion, an increase of $83.3 million, or 7.6 percent, as compared to the same period in the prior year. This increase was the result of higher net sales in all of the businesses.

Income before interest and income taxes for the second quarter of 2020 was $131.2 million, an increase of $62.6 million as compared to $68.6 million for the second quarter of 2019, and margins increased to 11.2 percent from 6.3 percent for the same periods. The increase in income before interest and income taxes was the result of higher income in each of the businesses and lower rationalization charges, partially offset by higher selling, general and administrative expenses principally due to acquisition related costs and the negative impact of a $3.5 million charge for the purchase accounting write-up of inventory of the dispensing operations acquired from Albéa in June 2020. Rationalization charges were $2.0 million and $39.3 million for the second quarters of 2020 and 2019, respectively, and acquisition related costs were $16.1 million in the second quarter of 2020.

Interest and other debt expense for the second quarter of 2020 was $25.8 million, a decrease of $2.6 million as compared to the second quarter of 2019. This decrease was due to lower weighted average interest rates, partially offset by higher average outstanding borrowings primarily related to the acquisition of the dispensing operations of Albéa and additional revolving loan borrowings in the current year quarter principally to hold cash and cash equivalents to ensure liquidity against potential credit market disruptions as a result of the COVID-19 pandemic. The Company repaid the additional revolving loan borrowings in June 2020 but could borrow revolving loans under its senior secured credit facility at any time. Weighted average interest rates were lower during the current quarter due to lower variable market rates and the redemption of all outstanding 5½% Senior Notes due 2022 in the third quarter of 2019.

The effective tax rates were 25.8 percent and 23.0 percent for the second quarters of 2020 and 2019, respectively. The effective tax rate in the second quarter of 2020 was unfavorably impacted by certain nondeductible expenses principally related to costs incurred for the acquisition of the dispensing operations of Albéa. The effective tax rate in the second quarter of 2019 was favorably impacted by the resolution of a prior year tax audit.

Metal Containers
Net sales of the metal container business were a record $597.2 million for the second quarter of 2020, an increase of $21.6 million, or 3.8 percent, as compared to the previous record of $575.6 million in the second quarter of 2019. This increase was primarily the result of higher unit volumes of approximately 15 percent, partially offset by the pass through of lower raw material costs, a less favorable mix of products sold and unfavorable foreign currency translation. Record unit volumes in the second quarter of 2020 resulted from continued higher demand for products consumed in the home and were partially offset by the volume benefit in the prior year second quarter from a certain customer that increased purchases following a destocking of inventory in previous periods.

Segment income of the metal container business in the second quarter of 2020 was a record $71.8 million, an increase of $57.8 million as compared to $14.0 million in the second quarter of 2019, and segment income margin increased to 12.0 percent from 2.4 percent for the same periods. The increase in segment income was due primarily to lower rationalization charges, higher unit volumes and higher pension income, partially offset by a less favorable mix of products sold. Rationalization charges were $1.2 million and $39.0 million in the second quarters of 2020 and 2019, respectively.

Closures
Net sales of the closures business were a record $410.5 million in the second quarter of 2020, an increase of $47.1 million, or 13.0 percent, as compared to $363.4 million in the second quarter of 2019. This increase was primarily the result of higher unit volumes of approximately 3 percent and a more favorable mix of products sold, partially offset by unfavorable foreign currency translation and the pass through of lower raw material costs. The increase in unit volumes was principally the result of strong volumes for certain consumer health, hygiene, personal care and food products as well as the inclusion of the recent acquisitions of Cobra Plastics and the dispensing operations of Albéa. These volume gains were partially offset by weak demand for certain beauty and beverage products.

Segment income of the closures business for the second quarter of 2020 increased $11.7 million to a record $58.6 million as compared to $46.9 million in the second quarter of 2019, and segment income margin increased to 14.3 percent from 12.9 percent for the same periods. The increase in segment income was primarily due to higher unit volumes, a more favorable mix of products sold and higher pension income, partially offset by the negative impact of a $3.5 million charge for the purchase accounting write-up of inventory of the dispensing operations acquired from Albéa.

Plastic Containers
Net sales of the plastic container business were a record $168.8 million in the second quarter of 2020, an increase of $14.6 million, or 9.5 percent, as compared to $154.2 million in the second quarter of 2019. This increase was principally due to higher volumes of approximately 14 percent, partially offset by a less favorable mix of products sold, the pass through of lower raw material costs and unfavorable foreign currency translation. The increase in volumes was due primarily to continued higher demand for certain food and consumer health and hygiene products.

Segment income of the plastic container business in the second quarter of 2020 was a record $23.0 million, as compared to $13.4 million in the second quarter of 2019, and segment income margin increased to 13.6 percent from 8.7 percent over the same periods. The increase in segment income was primarily attributable to higher volumes, lower manufacturing costs including for raw materials and higher pension income, partially offset by the unfavorable impact of a $2.8 million charge for a non-commercial legal dispute relating to prior periods.

Six Months
Net income for the first six months of 2020 was $135.8 million, or $1.22 per diluted share, as compared to net income of $77.7 million, or $0.70 per diluted share, for the first six months of 2019. Adjusted net income per diluted share for the first six months of 2020 was $1.42, an increase of 39 percent as compared to $1.02 in the prior year period, after adjustments increasing net income per diluted share by $0.20 for the first six months of 2020 and by $0.32 for the first six months of 2019.

Net sales for the first six months of 2020 increased $86.5 million, or 4.1 percent, to $2.21 billion as compared to $2.12 billion for the first six months of 2019. This increase was primarily a result of higher volumes in each of the businesses, including the impact from acquisitions, and a more favorable mix of products sold in the closures business, partially offset by the pass through of lower raw material costs across all businesses, a less favorable mix of products sold in the metal and plastic container businesses and the impact of unfavorable foreign currency translation.

Income before interest and income taxes for the first six months of 2020 was $233.4 million, an increase of $78.1 million from the same period in 2019, and margins increased to 10.6 percent from 7.3 percent for the same periods. The increase in income before interest and income taxes was primarily due to higher volumes and strong operating performance in each of the businesses, $40.7 million of lower rationalization charges in the first six months of 2020 as compared to the same period in 2019, higher pension income and a more favorable mix of products sold in the closures business. These increases were partially offset by higher corporate expenses, a less favorable mix of products sold in the metal container business, the negative impact from the purchase accounting write-up of inventory of the dispensing operations acquired from Albéa and the unfavorable impact of a charge in the plastic container business for a non-commercial legal dispute relating to prior periods. Corporate expenses were higher for the first six months of 2020 primarily as a result of acquisition related costs and the one-time plant employee incentive payments in the first quarter of 2020.
more detail at: https://silganholdingsinc.gcs-web.com/news-releases/news-release-details/silgan-announces-strongest-quarterly-performance-company-history