Silgan Holdings Inc. expects to see what one company official calls significant financial improvement this year after two years of restructuring the business.
Those changes have included include the opening of two new plastics container facilities for the Stamford, Conn.-based company.
“Our plastic container business continues to improve. In 2016, we commercialized two new facilities to better serve customers. And over the entire project, we added or relocated more than 100 manufacturing lines to further optimize our footprint and be more cost competitive,” CEO Tony Allott said on a conference call to discuss earnings.
“While there's still work to be done to improve profitability to target levels and get back to top line growth, we do expect significant improvements in 2017,” he said.
Silgan has business in plastic containers, plastic and metal closures, and metal containers. The metal containers business also has been undergoing an overhaul.
“The extensive transition efforts of the past 24 months are winding down, and we are pleased with the how the business is moving forward,” Allott told stock analysts on the call. “Our efforts were directed at improving customer service and eliminating excess costs throughout our system.”
While both the plastic and metal containers portions of the business have been undergoing change, the CEO also pointed to the closures business.
“The closures business got little fanfare as they completed the Portola integration and related footprint optimization flawlessly, successfully supporting record demand levels and positioning the business to leverage volume growth against a market-leading cost position. What's already a great business is positioned to become more important in terms of scope and growth opportunities with the pending acquisition of the dispensing systems business,” the CEO said.
Silgan acquired Portola Packaging in 2013, and in late January announced plans to acquire WestRock Co.'s specialty closures and dispensing business for $1 billion.
The company had a profit of $153.4 million, or $2.55 per diluted share, on sales of $3.613 billion in 2016. That compares with a profit of $172.4 million, or $2.81 per diluted share, on sales of $3.764 billion in 2015.
The company's plastic containers business posted sales of $543.9 million last year, down $49.8 million, or 8.4 percent from $593.7 million in 2015, the company said. Factors in the decrease include a volume decrease of about 3 percent, lower raw material prices that were passed through to customers, and “unfavorable foreign currency translations,” Silgan said.
In the closures business, which includes both plastic and metal products, 2016 sales were $797.1 million, a decrease of $7.9 million or 1 percent, from $805 million in 2015. Factors in this decrease included lower raw material prices passed through to customers that was partially offset by a 3-percent increase in unit volumes.
Metal containers represent the largest portion of Silgan's business and had sales of $2.27 billion last year, a decrease of $93.4 million or 3.9 percent from 2015.
Silgan is forecasting double digit earnings growth and adjusted net income per diluted share of $3.15 to $3.35 this year.
“With the new plant startups and footprint optimization largely behind us, we've eliminated excess manufacturing and logistical costs, exited from certain high-cost production facilities and are positioned to better serve our customers for the longer term,” Chief Financial Officer Robert Lewis said.