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October 27, 2016 02:00 AM

Silgan likes what it's seeing in its plastics containers business

Jim Johnson
Senior Reporter
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    Silgan Holdings Inc.
    Silgan Holdings Inc. says it has been putting more emphasis on plastic container for the food market.

    Silgan Holdings Inc., which has been reorganizing the company's plastics container business, is now signaling the potential to start expanding that business once again in the future.

    Profits improved in Silgan's plastics container unit during the third quarter, which saw the firm close a plant in Cape Girardeau. Mo., in September as part of the ongoing reorganization.

    The plastics container portion of Silgan posted a profit of $800,000 for the third quarter, an $8.1 million swing from a loss of $7.3 million during last year's third quarter. Silgan also makes metal containers and both plastic and metal closures

    Net sales totaled $103.3 million in plastic containers, down $12.1 million from last year's third quarter total of $142.4 million. But that's been part of the plan as the company has become more selective about the types of jobs it will accept. Unit volumes decreased and a pass through of lower resin prices helped lower the sales total, the company said.

    Silgan CEO Tony Allott provided some insight about the company's view on cost cutting and future growth during the company's third quarter conference call.

    “Historically, our plastic business was heavy in personal care. It's also in household chemical. What we've been doing of late, to some extent, is moving a little more towards food. None of these are particularly high-growth markets, and so I would not describe it as a real high-growth opportunity.

    “But there are big customers in there that Silgan has long relationships with that present opportunities for us in the future to capture share,” he said.

    “And so we do see opportunities. But, again, it's going to be kind of modest on the growth side. We're much more focused on our cost picture right now and getting the right footprint. And then, in time, we will drive that growth stronger. But that's more of 2018 and beyond, 2017 is much more about holding the gains that we've got,” Allott said.

    Overall, for the third quarter, Silgan reported net income of $69.8 million, or $1.15 per diluted share, on revenue of $1.14 billion. That compares with net income of $70.3 million, or $1.16 per diluted share, on revenue of $1.2 billion for last year's third quarter.

    Chief Operating Officer Adam J. Greenlee told stock analysts that the company had “pulled back a little bit” on sales efforts in the plastics containers portion as the company went through some operational challenges brought on by the reorganization. Silgan is making the changes in an effort to seek $15 million in annual cost improvements.

    “We're now out in the market actively selling and winning business today,” he said. “So I think that we're just cycling over a period of time where we did decide to walk away from some business. And as we go forward, you will start to see some growth in our plastics business.”

    Stamford, Conn.-based Silgan also recently revealed plans to purchase up to $250 million in common stock.

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