Despite supply chain disruptions and massive resin price increases, rigid packaging company Silgan Holdings Inc. posted a record first-quarter net profit of $73.3 million.
In plastics, Stamford, Conn.-based Silgan is a major blow molder, injection molder and thermoformer. It also has metal packaging operations.
The publicly traded company also announced name changes for its plastics businesses. Plastic Containers is becoming Custom Containers, while Closures is now Dispensing and Specialty Closures.
In an April 28 call with analysts, officials highlighted that profit grew despite power and supply chain disruptions associated with winter storms across the Southern U.S. and "unparalleled increases in resin costs."
President and Chief Operating Officer Adam Greenlee said those price increases will hurt the company's bottom line in the second quarter, too. He cited a $10 million lag in pass-through resin cost increases expected in the second quarter.
In the first quarter, Silgan saw prices double for some resins, Greenlee said.
"So polypropylene is a great example. In November, polypropylene was roughly 60 cents a pound on the indices. And in February, it peaked out at over $1.26 a pound. So that's the kind of magnitude of inflation we're talking about," Greenlee said in response to a question about when the company can expect to recover higher resin costs.
"The good news is, as I said, it did peak in Q1. And we've seen kind of the tip, if you will, where we're going back down on polypropylene prices," he said. "But to be crystal clear, it's going to be a net negative on the year."
Greenlee further explained that PP index prices in April had dropped to $1.07 per pound. But he added that the company has contracts with customers with price pass-throughs ranging from 30-90 days, with most of the 90-day contracts in the Dispensing and Specialty Closures business.
"We've done a really good job across our resin-based businesses, shortening the lag for the pass-through both up and down with our customers. And we're starting to see that improvement in the dispensing portion of our Dispensing and Specialty Closures segment," he said.
The company credited the closures unit with leading the way with strong sales and profit growth in the first quarter, thanks to the personal care, hygiene, health care and fragrance markets.
Net sales for the first quarter of 2021 were $1.24 billion, an increase of $207.7 million, or 20.2 percent, as compared to the same period in the prior year. This increase was the result of higher net sales in all segments.
Earnings before interest and income taxes for the first quarter hit a record $126.6 million, an increase of $24.5 million, or 24 percent.
Dispensing and Specialty Closures sales hit $509.3 million an increase of $152.1 million, or 42.6 percent, compared to the first quarter of 2020. Unit volumes were up 9 percent, and the company was able to pass through some higher raw material costs.
Growth was slower in Custom Containers, which posted sales of $174.7 million, an increase of $10 million, or 6.1 percent, compared to the first quarter of 2020.
The company expects net profit for the year to be up about 10 percent. "Our full-year estimate assumes some return to more normal resin cost levels later in the year," Chairman and CEO Tony Allott said in the call with analysts.