Silgan Holdings Inc.
) posted adjusted earnings of 47 cents per share in the
fourth-quarter of 2012; a 16% decline from 56 cents earned in the
year-ago quarter. Earnings were within the company's guided range
of 43 to 53 cents per share and in line with the Zacks Consensus
Including rationalization charges of 3 cents per share and new
plant start-up cost of 2 cents per share, earnings stood at 42
cents per share in the reported quarter versus 53 cents per share
(including a rationalization charge of 3 cents per share) in the
Total revenue increased 2.7% year over year to $859 million in
the quarter, ahead of the Zacks Consensus Estimate of $848
million. Sales increased in metal food container and the plastic
container businesses, which offset a dip in sales in the closures
business. The impact of weak economic conditions in Europe and
unfavorable foreign currency translation somewhat tempered the
Cost and Margins
Cost of goods sold increased 4% to $749 million. Gross profit
declined 6% to $109 million. Consequently, gross margin
contracted 130 basis points (bps) to 12.7% in the quarter.
Selling, general and administrative expenses increased 9% to
$47.8 million. Adjusted operating income plunged 16% to $61.6
million, leading to a 150 bps contraction in operating margin to
7.2% in the reported quarter.
Total revenue in the Metal Containers segment rose 3% to $555
million attributed to higher unit volumes. Adjusted operating
income dropped 23% to $48.7 million, contracting operating margin
by 300 bps to 9%.
Closures segment's total revenue dipped 2% to $151.2 million.
Adjusted operating income fell 36% to $8.4 million and operating
margin plunged 290 bps to 5.6%.
In the Plastic Containers segment, total revenue increased 7%
to $152 million. Adjusted operating income in the quarter was
$8.5 million compared with $0.3 million in the prior-year
Fiscal 2012 Performance
Silgan reported record adjusted EPS of $2.70 in fiscal 2012,
up 3% from $2.63 in fiscal 2011 and a penny ahead of the Zacks
Consensus Estimate. The reported earnings were within management
guidance of $2.65 to $2.75. Including one-time items, EPS in the
reported fiscal stood at $2.17, a 21% decline from $2.75 in the
Revenues stood at $3.59 billion, up 2.3% from $3.5 billion in
2011. This increase was driven by higher sales in the metal
container and plastic container businesses, partially offset by a
decline in sales in the closures business.
Cash and cash equivalents were $466 million as of 2012 end
compared with $397 million as of 2011 end. Current and long-term
debt increased to $1,671.3 million as of 2012 end from $1,376
million as of 2011 end. Debt-to-capitalization ratio was 68.9% as
of Dec 31, 2012, compared to 68% as of Dec 31, 2011.
Cash flow from operating activities was $351.7 million during
2012 compared with an inflow of $359.6 million in 2011. Free cash
flow almost doubled to $303.7 million in 2012 from $152.9 million
in 2011. Free cash flow per share was a record $4.35 in 2012
compared with $2.17 in 2011.
Outlook for 2013
The company expects adjusted earnings per share in the range
of $3.05 to $3.20 in 2013. This is expected to be achieved
through improved profitability in each business, the full year
benefit from the 2012 acquisitions and the estimated impact from
the purchase of $250 million of common stock pursuant to the
company's tender offer expected to be completed in February 2013.
Adjusted earnings are expected to be in the range of 40 cents-50
cents per share for the first-quarter of 2013.
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 force downsizing.
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
Furthermore, Silgan Holdings high debt-to-capitalization ratio
is a concern. Its strategy to leverage for acquisitions will
further aggravate the company s debt position.
Silgan retains a short-term Zacks Rank#3 (Hold). Its peers
) and C
rown Holdings Inc.
) are slated to release their fourth quarter results tomorrow,
Jan 31 while
Mobile Mini, Inc.
) will announce its results on Feb 22.
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SILGAN HOLDINGS (SLGN): Free Stock Analysis
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