Silgan Holdings Inc.
) has trimmed its earnings per share guidance for fourth quarter
and fiscal 2012 and extended the expiration date of its tender
offer to purchase up to $250 million worth of common stock to
February 5, 2013.
For fiscal 2012, Silgan now expects earnings per share to
range between $2.65 and $2.75, down from the prior expectation of
$2.80 to $2.85. Compared to adjusted earnings per share of $2.63
in 2011, this represents an annual growth of 1% to 5%.
The company also lowered its adjusted earnings per share
guidance to the band of 43 cents to 53 cents, down from the
previous range of 58 cents to 63 cents. Compared on the base
quarter's earnings per share of 56 cents, this depicts a decline
of 5% to 23%.
The reduction in guidance was primarily due to lower demand
for metal food containers. Even though volumes are expected to
trend higher on a year-over-year basis, it is expected to remain
below the prior expectations. Furthermore, the extended shutdown
of two facilities, due to hurricane Sandy, has affected product
mix and manufacturing costs in the fourth quarter.
The company has also extended the expiration date of its
tender offer to purchase up to $250 million of its common stock
at a price not less than $40.75 per share or higher than $45.25
per share to February 5, 2013. The offer was previously scheduled
to expire at on December 18, 2012. As of December 17, 2012,
a total of 4,547,611 shares of common stock have been deposited
under the tender offer.
Silgan Holdings posted adjusted earnings of $1.17 per share in
the third-quarter 2012; a 3% increase from the year-ago quarter's
EPS of $1.14. Earnings were on the lower end of its guided range
of $1.15-$1.25 per share, missing the Zacks Consensus Estimate by
a penny. Total revenue declined 0.7% year over year to $1.140
billion in the quarter, missing the Zacks Consensus Estimate of
$1.155 million. Sales dipped in the plastic container and
closures businesses, which were somewhat offset by increased
sales in the metal container business.
Silgan Holdings is the largest manufacturer of metal
containers for food products in North America. Silgan has managed
to increase its overall share in the U.S. metal food container
market to approximately 50% on the back of accretive acquisitions
and organic growth. Silgan Holdings continues to enhance
profitability through productivity and cost reduction
opportunities. Backed by the additional capacity resulting from
the acquisitions, the company has been able to rationalize plant
operations and reduce overhead costs by closing plants and work
However, Silgan's exposure to Europe has increased after its
Vogel & Noot acquisition and expansion of the Closures
segment in the region, accounting for almost 50% of the segment s
revenues. In Europe, weakening demand and softer pricing has
emerged as a result of the ongoing economic instability in the
region. With the European conditions expected to remain
challenging over the next few quarters, we expect additional
Silgan Holdings high debt-to-capitalization ratio is a
concern. As of September 30, 2012, debt-to capitalization ratio
of Silgan was 73%. Its strategy to leverage for acquisitions will
further aggravate the company s debt position.
Silgan is one of the leading North American manufacturers of
metal and plastic consumer goods packaging products. Its products
are used in a wide variety of end-markets. It is the largest
metal container supplier for food products in North America. The
company has 82 manufacturing plants throughout North and South
America, Europe, and Asia.
Silgan retains a short-term Zacks #3 Rank (Hold). Silgan
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