Silgan Holdings Inc
. (
SLGN
) posted adjusted earnings per share (EPS) of 55 cents per share in
the second-quarter 2012, a 4% increase from the year-ago quarter
EPS of 53 cents. The EPS was on the lower end of its guided range
of 55-60 cents per share, and fell short of the Zacks Consensus
Estimate of 58 cents per share.
Including new plant start-up costs of 2 cents per share,
acquisition costs of 1 cent per share and a 37 cent per share loss
on early extinguishment of debt, EPS was 15 cents in the reported
quarter. Earnings in the prior-year quarter were 73 cents per
share including a rationalization charge of 2 cents per share,
acquisitions costs of 2 cents per share and proceeds of 37 cents
per share from termination of merger agreement.
Total revenues declined 0.1% year over year to $821.6 million in
the quarter, missing the Zacks Consensus Estimate of $834 million.
Sales dipped in the metal container and closures businesses mainly
due to the impact of unfavorable foreign currency translation,
which was somewhat offset by increased sales in the plastic
container business.
Cost and Margins
Cost of goods sold increased 0.1% to $706.3 million. Gross profit
declined 1% to $115 million. Consequently, gross margin contracted
20 basis-points (bps) to 14% in the quarter.
Selling, general and administrative expenses increased to $46.5
million from $20 million in the year-ago quarter. Adjusted
operating income plunged 29% to $68.8 million, thereby contracting
operating margin by 340 bps to 8.4% in the reported quarter.
Segment Performance
Total revenues in the Metal containers segment decreased 1% to
$479.7 million, and operating income declined 12% to $42.0 million
in the quarter. Sales declined as a result of unfavorable foreign
currency translation, a less favorable mix of products sold,
partially offset by higher average selling prices. Unit volumes
benefitted from the Nestlé Purina PetCare steel can operations
acquisition last year. However, this improvement was offset
by volume declines due to a slow start to the vegetable pack and
weakness in the European markets, particularly in general line
cans. A less favorable mix of products sold, increased price
pressure and volume declines in European markets led to the decline
in operating income.
Closure segment's total revenues dipped 1% to $183.0 million due to
unfavorable foreign currency translation, weaker sales in Europe
which was partially offset by favorable unit volumes in the U.S.
single-serve beverage market. Operating income remained flat at $29
million.
In the Plastic containers segment, total revenues increased 2% to
$158.8 million attributed to a favorable mix of products sold
and an increase in unit volumes, both due primarily to strong
seasonal sales in the agricultural and chemical markets and
customers building inventory in advance of planned shut downs.
However, foreign currency translation had a negative impact of
approximately $1.6 million. Consequently, operating income jumped
79% to $9.3 million in the quarter.
Financial Updates
Cash and cash equivalents were $368.9 million as of June 30, 2012,
compared with $684.5 million as of March 31, 2012. Inventories were
worth $741.4 million as of June 30, 2012, compared with $687.9
million as of March 31, 2012.
Current and long-term debt amounted to $1,781.5 million as of June
30, 2012, compared with $1,911.8 million as of March 31, 2012.
Debt-to-capitalization ratio remained flat at 73% as of June 30,
2012 compared with as of March 31, 2012.
Cash used in operating activities was $195 million during the first
half of fiscal 2012 compared with $52.5 million in the first half
of fiscal 2011. Capital expenditure was $59.4 million during the
period versus $84.2 million during first-half 2011.
Share Repurchase
During second-quarter 2012, Silgan repurchased 396,679 shares of
its common stock for $17.1 million at an average price of $43.03
per share. Aggregate dividend payment amounted to $8.5 million.
Fiscal 2012 Outlook
The company re-affirmed its previous guidance of adjusted earnings
to lie in between $2.80-$2.90 per share for fiscal 2012. It
projected adjusted earnings in the range of $1.15-$1.25 per share
for the third-quarter 2012.
Peer Comparison
Silgan competes with companies like
Ball Corporation
(
BLL
) and
Crown Holding Inc.
(
CCK
). Ball Corporation reported second-quarter adjusted earnings of 89
cents per share, exceeding the Zacks Consensus Estimate of 87 cents
as well as the year-ago quarter earnings of 85 cents. Crown
Holdings reported second-quarter adjusted EPS of 84 cents, flat
with the year-ago quarter and also in line with the Zacks Consensus
Estimate.
Currently, we have a long-term Neutral recommendation for Silgan.
The stock retains a short-term Zacks #4 (Sell rating).
BALL CORP (BLL): Free Stock Analysis Report
CROWN HLDGS INC (CCK): Free Stock Analysis
Report
SILGAN HOLDINGS (SLGN): Free Stock Analysis
Report
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