Years of work restructuring its plastics container business is paying off for Silgan Holdings Inc. as that part of the company is now on solid footing and looking to expand.
"We think the business is well positioned for further growth. We've got the operational cost platform where we wanted it to be. The business is at a profit level that allows us to continue to invest to grow the business," Chief Operating Officer Adam Greenlee said.
Silgan makes both metal and plastic containers as well as closures.
A focus for the company in recent years has been a reorganization of its plastics container business, including the closure of locations, new facility construction and the wringing out of millions of dollars in annual costs.
The result, Silgan said on a conference call to discuss second quarter earnings, is a business that can expect expansion.
"A 3 percent growth rate for the plastics business is definitely attainable. We had posted really good growth last year as we were recovering and putting volume back into our system. So there's still opportunity here. As we said all along, we don't think anybody is winning in this market that we serve with our plastic bottle business. In fact, we probably are at the forefront of now winning in that business. So I do think there is opportunity for growth," CEO Tony Allott said.
While growth is expected, the company also told stock analysts on the call that the improvements might ebb and flow.
"As we said all along, the growth in the plastics is going to be a little lumpy for us. Looking at it by quarter, it's difficult at times," Greenlee said.
He pointed to last year's results that saw 4 percent growth and indicated those results make it challenging to continue growth at that pace.
With single-use plastics increasingly under attack, Silgan said its plastics business is essentially not exposed to that portion of the business. Only about 2 percent of Silgan's plastic container business is in the single-serve beverage market.
"That's not a huge business for us," Allott said.
Silgan, instead, relies on multiuse plastic containers for items, such as shelf-stable foods and personal care products, for the bulk of its business.
The increased focus on plastics has Silgan talking to more with customers in terms of sustainability, but those conversations center around the use of bioplastics or recycled resins, not the elimination of plastics.
"The conversations have increased. I think awareness is greater, but I think no fundamental change," Greenlee said.
While the metal container business represents the bulk of Silgan's annual sales, the plastics container business is no shrinking violet. The company's website lists 15 domestic plants and eight more in Canada.
Silgan saw net sales in that portion of the business fall by $1.2 million to $154.2 million during the second quarter, but that drop "was principally due to the pass through of lower raw material costs and the impact of unfavorable foreign currency translation," the company said in a statement.
Production volume actually increased by about 1 percent, the company said.
The company's closures, which includes both plastic and metal products, business saw sales fall $15.4 million during the second quarter to $363.4 million, primarily due to "foreign currency translation and a less favorable mix of products sold."
Overall, Silgan had a profit of $31 million, or 28 cents per diluted share, on sales of $1.093 billion during the second quarter. That compares with a profit of $55.3 million, or 50 cents per diluted share, on sales of $1.059 billion during the second quarter of 2018.