Silgan Holdings Inc 2026 Q3 Earnings Call

Please go ahead, sir. Thank you, and good morning.

Joining me on the call today are Adam Greenlee, President and CEO, and Shawn Fabry, EVP 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-K for 2025 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 adjusted net income per diluted share or adjusted EPS. 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 silganholdings.com. With that, let me turn it over to Adam.

Thank you, Alex, and we'd like to welcome everyone to Silgan's third quarter earnings call. Last week, we discussed with you a transformative portfolio acceleration as Silgan embarks upon the next stage of our value creation journey through the proposed acquisition of Trivium by establishing two exceptional packaging companies in Silgan MCC and Silgan DS. Today, we are happy to be back together with you to discuss another strong quarter of financial performance in our business and our continued progress on the strategic direction of the company. Our objectives for 2026 have been clear: continue to execute on our strategic growth initiatives, deliver earnings growth irrespective of the growth of our end markets, and invest in the future growth of the business.

Year to date, we have delivered mid-single-digit growth in fragrance dispensing products, mid-single-digit growth in wet pet food and Metal Containers, and we have seen significant and growing interest in our healthcare pharma dispensing products. We have increased the midpoint of our full-year adjusted EPS range twice, despite a more challenging consumer demand environment and significant raw material and other cost inflation during the year. I am proud of our teams and their relentless focus on execution and commitment to serving the unique needs of our customers, allowing Silgan to continue to be the best at what we do. I believe the company is very well positioned to deliver on our commitments to our shareholders as we move into this next phase for Silgan in 2027. Turning to the third quarter, our businesses performed well, and our team successfully managed challenging consumer conditions, continued cost headwinds, and adverse currency impacts.

Silgan delivered record adjusted EPS at the high end of our estimated range, and once again, the strength and agility of our teams and the success of our strategic growth initiatives delivered strong financial results. In Dispensing and Specialty Closures, we delivered another strong quarter of mid-single-digit growth for our high-end fragrance products, and our prescription pharma dispensing products continue to gain traction in the marketplace and grew by a double-digit percentage in North America. Our teams continue to stand out in the market as our best-in-class innovation, investment and growth, and customer partnership model continue to differentiate us from our competition and drive volume growth that exceeds our end markets.

While cost inflation remained a headwind in the third quarter, and the pass-through mechanisms in this business tend to lag slightly longer than in our other businesses, we successfully implemented actions to recover cost increases during the third and fourth quarters that will help offset much of the impact. Our Metal Containers segment reported growth in fruit and vegetable and wet pet food products. In spite of softer than anticipated volumes in soup markets, adjusted EBIT grew 10% year over year. As our business returns to a more normalized demand and production pattern in the fruit and vegetable market following several years of disruption, our team's relentless focus on cost efficiency continues to deliver benefits to the bottom line.

In Custom Containers, our teams delivered another quarter of solid results despite sustained raw material volatility, higher freight costs, and more challenging demand patterns across the end markets we serve in this business. While volumes were below the prior year, in part due to the exit of lower margin business to achieve cost reduction plans last year, we delivered another quarter of record adjusted EBIT in this business. Our third quarter results continue to highlight the success of our strategic growth initiatives, the resilience of our business through a more muted consumer demand environment, and our ability to outpace our competition and our end markets through our unique commercial partnerships. As we move into the fourth quarter, we are confident in our ability to deliver our increased financial expectations for the second half and for the full year, despite the incremental challenges that have developed since we last reported.

As we have repeated throughout the year, our approach to 2026 included planning for more unknown risks throughout the year. While we did not plan for a conflict in the Middle East, resin costs increasing more than 50%, softness in Brazil, or many of the other challenges that arose and were mitigated throughout the year, the overall strength of our business and the focused execution by our teams enables us to increase our financial expectations for the year. In a challenging macro backdrop, we think this performance shines brightly amongst our competitive landscape. As always, our unique portfolio of consumer staple products in the end markets we serve, our market-leading innovation, our unique capital deployment model, our long-term partnerships with our customers, and our low-cost global manufacturing footprint continue to separate Silgan in the market and position us to continue to outperform through a variety of economic conditions.

Delivering on our financial commitments for 2026 remains our near-term focus. While we are embarking on an exciting new phase for Silgan, fundamentally, nothing has changed about how we think about our strategic growth initiatives, end market growth, capital deployment, business strategy, customer partnerships, or any of the foundational elements of Silgan. In fact, we believe that under the new structure we have outlined, both Silgan DS and Silgan MCC will be better positioned to execute their unique strategic priorities and drive shareholder value. With the proposed acquisition of Trivium expected to close mid-2027, our focus in the first half of the year will be on continuing to deliver on these strategic initiatives, planning for the integration, and preparing the businesses for success under the new operating structure.

While this transaction will likely also entail some level of incremental investment throughout both entities to appropriately set the businesses up for long-term success, we are expecting another year of organic earnings and free cash flow growth in 2027. With that, Shawn will take you through the financials for the quarter and our estimates for the fourth quarter and full year of 2026.

Thank you, Adam. As Adam highlighted, we reported another quarter of strong results in the third quarter of 2026, with adjusted EPS coming in at the top of our expected range due to strong operational EBIT performance in each of our segments and favorable interest expense, which was partially offset by a higher adjusted tax rate versus the prior year quarter. Net sales of approximately $2 billion increased 2% from the prior year period as a result of the pass-through of higher raw material and other costs in each of our segments. Total adjusted EBIT for the quarter of $235 million was 6% higher than the prior year, mostly as a result of higher adjusted EBIT in our Metal Containers business.

Adjusted EPS of $1.31 increased 7% from the prior year period due to higher adjusted EBIT and lower interest expense, which was partially offset by a higher adjusted tax rate. Turning to our segments, third quarter sales in our Dispensing and Specialty Closures segment increased 1% versus the prior year, primarily as a result of the pass-through of higher raw material and other costs. Volumes in the quarter were flat year-over-year, with strong growth in fragrance and prescription pharma dispensing products offset by lower volumes for food and beverage products. Third quarter Dispensing and Specialty Closures adjusted EBIT was down $2 million versus the prior year quarter, mostly as a result of unrecovered inflation experienced in the current year quarter that we expect to recoup through pricing actions in the market over the next couple of quarters.