Efforts to turn around Silgan Holdings Inc.'s plastics container business in recent years are now starting to pay off, company officials said.
Word about the progress comes as the Stamford, Conn.-based company released its latest financial results and discussed plans for a new plastics packaging manufacturing facility.
"We're expecting the plastic container business to benefit from continued manufacturing efficiencies and volume growth," Chief Financial Officer Robert Lewis said on a conference call to discuss financial results. "These benefits will be partially offset by costs associated with the start up of the new Fort Smith, Ark., facility."
News just recently broke about the new Arkansas location. Company officials, on a Jan. 31 conference call with stock analysts, provided more details about that project.
"That is a plastic thermoform business. As I think you know, we had acquired the Rexam [thermoformed food container] business several years ago and have been very happy with the free cash generation of that business and have been seeing some growth as it filled up its capacity in a single plant," CEO Tony Allott said.
"Really, our hope all along was that it would be able to grow out into a second plant. And, essentially, what's happened here is it has had that opportunity with some really interesting growth opportunities coming forward where we are now building a second plant," he said.
The CEO estimated the new plant will cost about $30 million to construct this year, with work expected to be completed in the third quarter.
The company then will qualify the plant and expects commercialization of production in 2019.
Creation of the new plant comes at a time when Silgan has been working to lower costs and improve production in the plastic container portion of its business.
"We're obviously very pleased with the progress the business made on the cost side this year, which was our key focus," the CEO said.
"This all started for us with an effort to get the competitive cost position of the business in a better spot. That took a little longer than we though, was a bit more challenging as we went through it. I would say we have come through that process, feel very good about the cost position of that business," he said.
While the company has made strides to turn around plastics container operations, Silgan also touted its 2017 acquisition of WestRock Co.'s specialty closures and dispensing business. That deal added 13 plants.
Allott also called Silgan a "poster child for a company that benefits" from the recent federal tax changes.
"We've been a highly profitable, high tax payer for a long period of time, heavily in the U.S., competing with a lot of companies that are in different jurisdictions that get the benefit of global tax structures, treaties that we didn't have," the CEO said.
The tax reform gives Silgan new advantages and permanently improves the free cash flow of the business, he said.
Silgan had a profit of $269.7 million, or $2.42 per diluted share, on sales of $4.09 billion for 2017. That compares with a profit of $153.4 million, or $1.27 per diluted share, on sales of $3.61 billion for 2017.
Profit was $146.1 million, or $1.31 per diluted share, on sales of $995.7 million during the fourth quarter of 2017. That compares with a profit of $23.7 million, or 20 cents per diluted share, on sales of $805.9 million for the fourth quarter of 2016. Full-year earnings per diluted share in 2017 are a company record.
"Each of our operating businesses improved solidly over the prior year, for the quarter and the full year," Allott said. "Perhaps, more importantly, we've increased the growth opportunities for the company both organically and through potential future acquisitions."
Metal containers accounted for $2.28 billion of sales in 2017 for Silgan. Closures had $1.25 billion in sales, and plastic containers posted sales of $565.1 million.
