Silgan (US:SLGN)2019-07-24 21:09Financial Data and Key Metrics Changes - The company reported record second quarter adjusted earnings per share of $0.55, a 6% increase from the prior year quarter, and at the upper end of expectations for the quarter [7][10] - Consolidated net sales for Q2 2019 were $1.090 billion, an increase of $34.1 million or 3.2% compared to the previous year, primarily due to higher raw material costs in the metal container business [12][13] - The tax rate for Q2 2019 was 23%, slightly lower than expected due to favorable resolution of a prior year tax audit [15] Business Line Data and Key Metrics Changes - The metal container business recorded net sales of $575.6 million for Q2 2019, an increase of $50.7 million versus the prior year, driven by higher unit volumes and the pass-through of higher raw material costs [16] - Sales in the closures business decreased to $363.4 million from $378.8 million in the prior year, primarily due to unfavorable foreign currency translation and a less favorable mix of products sold [18] - Net sales in the plastic container business decreased slightly to $154.2 million, primarily due to lower raw material costs and a favorable foreign currency translation [19] Market Data and Key Metrics Changes - The company noted that extreme weather conditions in Q2 affected volumes across all three business segments, particularly in Europe [36] - The U.S. market experienced a delay in the vegetable and fruit harvests, pushing some volumes into Q3 and increasing risks for Q4 [21][37] Company Strategy and Development Direction - The company announced a footprint optimization program, including the shutdown of two metal container manufacturing facilities and withdrawal from the Central States Pension Fund, resulting in a restructuring charge of $39.3 million [9][13] - The company reaffirmed its full-year earnings guidance in the range of $2.10 to $2.20 per share, despite headwinds from reduced non-cash pension income [20] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the European market, noting it feels weaker compared to North America, and highlighted the impact of weather on harvests [54][72] - The company anticipates free cash flow generation to be approximately $275 million for the year, with restructuring activities having minimal cash impact [21][33] Other Important Information - The company is focused on cost reductions and continues to evaluate opportunities for further optimization in its operations [67] - Management indicated that sustainability discussions have increased, but no material changes have been observed in the business yet [91][114] Q&A Session Summary Question: Regarding food can business volume growth - Management clarified that the 6% growth was a partial recovery from a seasonal customer and does not indicate a significant change in overall expectations for the year [28][30] Question: Impact of restructuring on free cash flow - Management confirmed that the restructuring activities would not significantly impact free cash flow guidance of $275 million [32][33] Question: Effects of extreme weather on volumes - Management acknowledged that extreme weather affected volumes, particularly in Europe, and noted potential delays in U.S. harvests [36][37] Question: Competitive pricing in Europe - Management indicated that there is some competitive pricing pressure in Eastern Europe but does not view it as a significant threat to the overall business [72] Question: Tax rate guidance for the year - Management maintained the tax rate guidance for the full year around 24% [80] Question: Sustainability impact on business - Management stated that there has been no material impact from sustainability trends on the food can or plastic container businesses [91][114]