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Silgan's net income decreases in Q1 2017

Published 27 April 2017

Silgan Holdings, a supplier of rigid packaging for consumer goods products, has reported first quarter 2017 net income of $23.2m or $0.42 per diluted share, as compared to first quarter 2016 net income of $26.6m or $0.44 per diluted share.

“We are pleased with our first quarter 2017 results, as we reported record adjusted net income per diluted share of $0.62, representing a 37.8 percent increase over the prior year,” said Tony Allott, President and CEO. “As expected, our metal and plastic container businesses benefitted from lower manufacturing costs and improved efficiencies resulting from our recently completed footprint optimization programs.

In addition, our metal container business benefitted from a favorable mix of products sold in the current year period. Our closures business performed well as compared to a record quarter in the prior year. We are off to a good start to the year, driven primarily by timing benefits in the quarter, and are excited to welcome the newly acquired Dispensing Systems business into Silgan. As a result of the net impact of the recent acquisition and financing activities, we are raising our full year 2017 estimate of adjusted net income per diluted share to a range of $3.20 to $3.40,” continued Mr. Allott.

Adjusted net income per diluted share was $0.62 for the first quarter of 2017, after adjustments increasing net income per diluted share by $0.20. Adjusted net income per diluted share was $0.45 for the first quarter of 2016, after adjustments increasing net income per diluted share by $0.01. A reconciliation of net income per diluted share to “adjusted net income per diluted share,” a Non-GAAP financial measure used by the Company that adjusts net income per diluted share for certain items, can be found in Tables A and B at the back of this press release.

Net sales for the first quarter of 2017 were $805.4 million, an increase of $12.7 million, or 1.6 percent, as compared to $792.7 million in 2016. This increase was primarily the result of an increase in net sales in the metal container business.

Income from operations for the first quarter of 2017 was $56.8 million, a decrease of $0.6 million, or 1.0 percent, as compared to $57.4 million for the first quarter of 2016, and operating margin decreased to 7.1 percent from 7.2 percent for the same periods. The decrease in income from operations was primarily the result of initial costs attributed to the acquisition of the Dispensing Systems business of $13.2 million, partially offset by an increase in income from operations in the metal and plastic container businesses.

Interest and other debt expense before loss on early extinguishment of debt for the first quarter of 2017 was$20.4 million, an increase of $4.0 million as compared to the first quarter of 2016. This increase was primarily due to higher weighted average interest rates, including the impact from the issuance in February 2017 of the 4 3/4% senior notes due 2025 and 3 1/4% senior notes due 2025, and higher average outstanding borrowings.

Loss on early extinguishment of debt of $2.7 million in the first quarter of 2017 was primarily a result of the prepayment of outstanding U.S. term loans and Euro term loans under the previous senior secured credit facility in conjunction with the issuance of the new senior notes.

The effective tax rates were 31.0 percent and 35.2 percent for the first quarters of 2017 and 2016, respectively. The effective tax rate in the first quarter of 2017 benefitted from higher income in more favorable tax jurisdictions. The effective tax rate in the first quarter of 2016 was unfavorably impacted by the cumulative adjustment of a change in tax law in a certain foreign jurisdiction.

Metal Containers

Net sales of the metal container business were $466.2 million for the first quarter of 2017, an increase of$12.8 million, or 2.8 percent, as compared to $453.4 million in the same period in 2016. This increase was primarily a result of a favorable mix of products sold and the pass through of higher raw material costs, partially offset by the impact of unfavorable foreign currency translation.

Income from operations of the metal container business in the first quarter of 2017 increased $6.3 million to $43.9 million as compared to $37.6 million in first quarter of 2016, and operating margin increased to 9.4 percent from 8.3 percent over the same periods. The increase in income from operations was primarily attributable to lower manufacturing costs, a favorable mix of products sold and foreign currency transaction gains, partially offset by the unfavorable impact from the contractual pass through to customers of indexed deflation and higher depreciation expense.

Closures

Net sales of the closures business were $197.7 million in the first quarter of 2017, an increase of $1.6 million, or 0.8 percent, as compared to $196.1 million in the first quarter of 2016.This increase was primarily the result of the pass through of higher raw material costs, partially offset by the impact of unfavorable foreign currency translation.

Income from operations of the closures business for the first quarter of 2017 decreased $0.7 million to $23.8 million as compared to a record $24.5 million in the same period in 2016, and operating margin decreased to 12.0 percent from 12.5 percent over the same periods.The decrease in income from operations was primarily due to the unfavorable impact from the lagged pass through of increases in raw material costs.

Plastic Containers

Net sales of the plastic container business were $141.5 million in the first quarter of 2017, a decrease of $1.7 million, or 1.2 percent, as compared to $143.2 million in the first quarter of 2016. This decrease was principally due to a less favorable mix of products sold, partially offset by the pass through of higher raw material costs, an increase in volumes of approximately 1 percent and the impact of favorable foreign currency translation.

Income from operations of the plastic container business for the first quarter of 2017 was $6.8 million, an increase of $6.7 million as compared to $0.1 million in the same period in 2016, and operating margin increased to 4.8 percent from 0.1 percent over the same periods.The increase in income from operations was primarily attributable to lower manufacturing costs, higher volumes and lower rationalization charges, partially offset by higher depreciation expense. Rationalization charges were $0.1 million and $1.0 million in the same period in 2017 and 2016, respectively.



Source: Company Press Release