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October 26, 2017 02:00 AM

Silgan sees growth following operational changes

Jim Johnson
Senior Reporter
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    Silgan Holdings Inc.
    Silgan Holdings Inc. makes plastic containers, metal containers and plastic and metal closures.

    Silgan Holdings Inc. feels good about where the company's plastics containers business is going following a reorganization.

    The Stamford, Conn.-based firm said Oct. 25 the business saw a 3 percent improvement in volumes for the most recent quarter. But even with the increase, company officials offered some perspective.

    "We have been on a program of portfolio rationalization in our plastics business for some period of time, so we are cycling over exiting some business. As we bring new business on, it's against a lower base. So the 3 percent volume growth, while we feel good about it, it's important to realize where we are starting from as well," said Adam Greenlee, the company's chief operating officer, during a conference call to discuss third-quarter earnings.

    Silgan has spent the last few years taking a hard look at its plastic containers business, closing some sites and opening new locations to lower production costs and be more competitive in the market. That process resulted in lower production volumes as changes were made.

    "As we said all along, 2017 was all about getting cost out of the business and that's been our plan, and to deliver the $15 million of earnings improvement," Greenlee said about the plastic containers business. "The good news is obviously we're on track to do that and we feel good about where the business is heading."

    Silgan splits its business into three categories: metal containers, plastic containers, and plastic and metal closures.

    For the plastic containers portion, sales for the third quarter were up 5.3 percent. That included the volume increase of 3 percent as well as a pass-through cost on higher raw material costs and favorable foreign currency translation, the company said.

    Overall, Silgan reported third-quarter earnings of $72.4 million, or 65 cents per diluted share, on revenue of $1.27 billion. That compares with earnings of $69.8 million, or 57 cents per diluted share, on revenue of $1.14 billion during last year's third quarter.

    The higher revenue is due to the acquisition of WestRock Co.'s specialty closures and dispensing business earlier this year and the increase in the plastic containers business. This was partially offset by lower sales in the metal container business, the company said.

    "As we turn the page and look forward to 2018, we expect to see continued improvement in the business from a financial perspective," Greenlee said about the plastic containers unit.

    Silgan also reported that the company had three plants impacted by recent hurricanes.

    "The good news is that employees are safe, and while there's a lot of property damage, that's the bright side," CEO Tony Allott said.

    While it is difficult to put an exact figure on that the impact of the hurricanes had on operations, the range is around $1 million to $2 million for the third quarter, the company said, adding it expects some lingering impact during the fourth quarter.

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