Silgan Holdings Inc.
) 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
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SILGAN HOLDINGS (SLGN): Free Stock Analysis
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Including rationalization charges of 2 cents per share, new plant
start-up cost of 1 cent per share and acquisition cost of 1 cent
per share, earnings were $1.13 in the reported quarter. Earnings
in the prior-year quarter were $1.12 per share including a
rationalization charge of 1 cent per share and a loss of 1 cent
per share from early extinguishment of debt.
Total revenues 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.
Cost and Margins
Cost of goods sold decreased 0.4% to $960.7 million. Gross profit
declined 2.3% to $178.8 million. Consequently, gross margin
contracted 20 basis-points (bps) to 15.7% in the quarter.
Selling, general and administrative expenses fell 4.3% to $44.3
million. Adjusted operating income plunged 2.7% to $132.4
million, thereby contracting operating margin by 30 bps to 11.9%
in the reported quarter.
Total revenues in the
segment rose 1.9% to $814.1 million. Sales improved as higher
unit volumes and average selling prices, partially offset the
negative impact of foreign currency translation. Unit volumes
benefited from the Ontas acquisition in Turkey along with
improved fresh vegetable pack in 2012 compared to 2011. Operating
income dropped 7.3% to $103.5 million, contracting operating
margin by 130 bps to 12.7%
segment's total revenues dipped 3.6% to $182.7 million due to
unfavorable foreign currency translation, which was partially
offset by favorable unit volumes. Operating income fell by 1.2%
to $24.1 million. However, operating margin increased 30 bps to
segment, total revenues decreased 10.7% to $142.7 million, driven
by weak unit volumes due to shut down by certain customers,
reduced average selling prices because of lower resin costs along
with a negative impact of foreign currency translation. The
negatives were partially offset by plastic food container
business from Rexam Plc. Operating income jumped 63% to $6.2
million, expanding operating margins by 190 bps.
Cash and cash equivalents were $422.5 million as of September 30,
2012, compared with $140.5 million as of September 30, 2011.
Inventories decreased to $561.5 million as of September 30, 2012,
compared with $580.4 million as of September 30, 2011.
Current and long-term debt increased to $1,989.7 million as of
September 30, 2012, compared with $1,431 million as of September
30, 2011. Debt-to-capitalization ratio was 73% as of September
30, 2012, compared to 68.2% as of September 30, 2011.
Cash used in operating activities was $6 million during the first
nine months of fiscal 2012 compared with an inflow of $76.2
million in the first nine months of fiscal 2011. Capital
expenditure was $84.7 million during the period versus $123.2
million during the year-ago comparable period.
During third-quarter 2012, Silgan repurchased 288,655 shares of
its common stock for $11.8 million at an average price of $40.80
per share. Aggregate dividend payment amounted to $8.4 million.
Outlook for 2012
The company narrowed its guidance range of adjusted earnings to
lie in between $2.80-$2.85 per share from the previous range of
$2.80-$2.90 per share for 2012. Adjusted earnings are expected to
be in the range of 58 cents-63 cents per share for the
Silgan faces tough competition from companies like
Crown Holdings Inc.
). During the third-quarter 2012, Ball Corp.'s adjusted earnings
were 90 cents per share, which exceeded the Zacks Consensus
Estimate of 87 cents, as well as the year-ago adjusted earnings
of 81 cents. While Crown Holdings third-quarter adjusted earnings
declined 1% year over year to $1.00 per share and were in line
with the Zacks Consensus Estimate.
Silgan retains a short-term Zacks #3 Rank (Hold). We have a
long-term Neutral recommendation on the stock.