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May 02, 2018 02:00 AM

Silgan signals stronger outlook for its plastics business

Jim Johnson
Senior Reporter
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    Silgan Holdings Inc.

    Silgan Holdings Inc. believes its plastic container business, once the subject of company concern, is back on solid footing, and it expects those operations to grow.

    The Stamford, Conn.-based company, which also makes plastic and metal closures and metal cans, enjoyed a strong first quarter, company officials said on a conference call to discuss earnings.

    "The team has done a really good job stabilizing the business and getting a good solid foundation for us to start to grow," Chief Operating Officer Adam Greenlee said.

    The plastics container business has had seven consecutive quarters of year-over-year improvement, he said.

    When it first signaled to the market that it needed to do better in making and selling plastic containers, Silgan indicated it was looking for 15 percent earnings before interest, taxes, depreciation and amortization. That number improved to 13 percent during the first quarter.

    Part of the company's plastic container reorganization involved closing some sites and opening new facilities. That includes a new location in Fort Smith, Ark., that is expected to begin operations during the second half of this year, the company said.

    "The underlying business is really good for us right now and it's where we wanted to be at this point on our journey towards our 15 percent target," Greenlee said. "We've made very positive steps."

    While Greenlee and CEO Tony Allott both had positive things to say about the plastic container business during the conference call, the CEO also emphasized there is more work to be done.

    Allott said he did not want to "let our plastics team off the hook too soon. Even though the operation is really good, there is still room to improve the current operations."

    He said investment in the new Fort Smith plant shows that Silgan believes in the plastics container business.

    "There's opportunities here," he said.

    The company's past message that it was going to concentrate on fixing the plastic containers business before even considering new business opportunities in that area is now over, Allott said.

    "I don't think we feel that way right now. I think we feel like plastics is a very good contributing business. It's not where we want it to be," he said. "We want to get to 15 percent. So we're not done yet."

    The company's plastic containers business had sales of $156 million in the first quarter, an increase of $14.5 million, or 10.2 percent, compared to the previous first quarter.

    The company's closures business, which includes both plastic and metal products, had sales of $370.3 million, an increase of $172.6 million, or 87.3 percent, compared to the previous first quarter. The spike in sales largely was due to Silgan's acquisition of WestRock Co.'s specialty closures and dispensing systems business last year.

    The company's largest single business is in metal containers, which had $486 million in sales during the quarter, up $19.8 million, or 4.2 percent.

    Overall, the company had a profit of $45.7 million, or 41 cents per diluted share, on sales of $1.01 billion for the first quarter. That compares with a profit of $23.2 million, or 21 cents per diluted share, on sales of $805.4 million during last year's first quarter.

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