Silgan Holdings has reported a record Q3 net sales of $1.97 billion, a 19.3% increase over prior year Q3 net sales of $1.65 billion, and a record Q3 2022 net income of $138.7 million, or $1.25 per diluted share, as compared to Q3 2021 net income of $106.3 million, or $0.96 per diluted share.

Adjusted net income per diluted share for the Q3 of 2022 was $1.27, after adjustments increasing net income per diluted share by $0.02.

Adjusted net income per diluted share for Q3 of 2021 was $1.02, after adjustments increasing net income per diluted share by $0.06.

Adam Greenlee, President and CEO, Silgan Holdings, said: “The Silgan team continued to deliver new all-time record adjusted EPS in both Q3 and year-to-date periods, with a 25% increase as compared to the prior year quarter and an over 20 percent increase for the year-to-date period,”

“Each of our businesses continued to consistently and successfully execute our operating plans while deploying a best-in-class service model across a diverse portfolio of essential products that produced record results in Q3.”

Greenlee continued: “Strong operating performance enabled our teams to provide tremendous value and reliability for our customers, while our commercial relationships drove deeper collaboration and partnership with our customers as we worked to reduce the impact of inflation,”

“Given our record performance to date and our expectations for Q4, we are tightening our estimate of full year 2022 adjusted earnings per diluted share to a range of $3.90 to $4.00, the midpoint of which represents a 16% increase over record 2021 earnings. This will be the Company’s 6th consecutive year of record earnings performance.”

In addition, we are maintaining our full year 2022 free cash flow estimate of approximately $350 million. As we look forward to 2023, we expect organic volume growth, continued benefits from strong operating performance in each of our business segments and a significant increase in free cash flow generation,” concluded Greenlee.

Net sales for Q3 of 2022 were $1.97 billion, an increase of $319.3 million, or 19.3%, as compared to the same period in the prior year. This increase was the result of higher net sales in all segments.

Income before interest and income taxes for Q3 of 2022 was an all-time record $219.4 million, an increase of $51.5 million, or 30.7%, as compared to $167.9 million for Q3 of 2021, and margins increased to 11.1% from 10.2% for the same periods. The increase in income before interest and income taxes was the result of higher income in each of the segments and lower corporate expenses.

Q3 of 2021 included costs attributed to announced acquisitions and a charge for the write-up of inventory for purchase accounting of $4.1 million and $0.9 million, respectively. Rationalisation charges were $2.7 million and $2.3 million in Q3 of 2022 and 2021, respectively.

Interest and other debt expense for Q3 of 2022 was $33.7 million, an increase of $6.7 million as compared to Q3 of 2021.

This increase was primarily due to higher weighted average outstanding borrowings during the quarter as a result of the acquisitions completed late in Q3 and in Q4 of 2021 and higher weighted average interest rates, partially offset by lower foreign currency exchange rates on outstanding Euro denominated debt.

The effective tax rates were 25.3% and 24.6% for Q3 of 2022 and 2021, respectively. The effective tax rate for Q3 of 2022 was unfavourably impacted by higher income generated in less favourable tax jurisdictions.

Dispensing and Specialty Closures

Net sales of the Dispensing and Speciality Closures segment were $575.5 million in Q3 of 2022, an increase of $42.1 million, or 7.9%, as compared to $533.4 million in Q3 of 2021.

This increase was primarily the result of higher average selling prices due to the pass through of higher raw material and other inflationary costs, higher unit volumes of approximately 1% and a more favourable mix of products sold, partially offset by unfavourable foreign currency translation of approximately $37 million.

Unit volumes increased over the prior year period primarily due to higher volumes for dispensing products, including from the businesses acquired in September 2021, partially offset by expected volume decreases in closures for certain food and beverage markets compared to record pandemic driven volumes in the prior year period.

Unit volumes in the quarter were approximately 15% higher than pre-pandemic levels for the same period in 2019.

Segment income of Dispensing and Specialty Closures for Q3 of 2022 increased $19.1 million to a record $79.2 million, as compared to $60.1 million in Q3 of 2021, and segment margin increased to 13.8% from 11.3% for the same periods.

The increase in segment income was primarily due to higher average selling prices due to the pass through of inflationary costs, the favourable impact in the current year period from the delayed pass through of lower resin costs as compared to the unfavourable impact in the prior year period from the delayed pass through of higher resin costs, strong operating performance, a more favourable mix of products sold.

Higher unit volumes and a $0.9 million charge for the write-up of inventory for purchase accounting in the prior year period, partially offset by inflation in manufacturing and selling, general and administrative costs and the impact of unfavourable foreign currency translation.

Metal Containers

Net sales of the Metal Containers segment were $1.21 billion for Q3 of 2022, an increase of $269.9 million, or 28.6%, as compared to $942.1 million in Q3 of 2021.

This increase was primarily the result of higher average selling prices due to the pass through of higher raw material and other manufacturing costs, partially offset by lower unit volumes of approximately 9% and unfavourable foreign currency translation of approximately $19 million.

As expected, the decrease in unit volumes was principally the result of lower fruit and vegetable volumes as compared to higher volumes from customer restocking in the record prior year period and the continued unfavourable impact from customers’ ongoing supply chain and labour challenges in 2022.

Unit volumes in the quarter were approximately 13% higher than pre-pandemic volumes for the same period in 2019.

Segment income of Metal Containers in Q3 of 2022 was $121.3 million, an increase of $27.0 million as compared to $94.3 million in Q3 of 2021, and segment margin remained unchanged at 10.0% for both periods.

The increase in segment income was primarily attributable to strong operating performance, including the benefit of an inventory management program, and higher average selling prices due to the pass through of inflationary costs, partially offset by inflation in manufacturing and selling, general and administrative costs, lower unit volumes, the impact of unfavourable foreign currency translation and higher rationalisation charges.

Rationalisation charges were $2.5 million and $1.8 million in Q3 of 2022 and 2021, respectively.

Custom Containers

Net sales of the Custom Containers segment were $182.9 million in Q3 of 2022, an increase of $7.3 million, or 4.2%, as compared to $175.6 million in Q3 of 2021.

This increase was principally due to a more favourable mix of products sold and higher average selling prices, including the pass through of higher resin and other inflationary costs, partially offset by lower volumes of approximately 7% and unfavourable foreign currency translation.

The decline in volumes was primarily for home, personal care and lawn and garden products.

Segment income of Custom Containers in Q3 of 2022 was $24.3 million, an increase of $1.6 million as compared to $22.7 million in Q3 of 2021, and segment margin increased to 13.3% from 12.9% over the same periods.

The increase in segment income was primarily attributable to the pass through of inflationary costs and the favourable impact in the current year period from the delayed pass through of lower resin costs as compared to the unfavourable impact in the prior year period from the delayed pass through of higher resin costs, partially offset by inflation in manufacturing and selling, general and administrative costs and lower volumes.

Nine Months

Net income for the first nine months of 2022 was a record $316.3 million, or $2.85 per diluted share, as compared to net income of $274.0 million, or $2.47 per diluted share, for the first nine months of 2021.

Adjusted net income per diluted share for the first nine months of 2022 was a record $3.14, a 20% increase over the previous record of $2.61 in the prior year period, after adjustments increasing net income per diluted share by $0.29 for the first nine months of 2022 and by $0.14 for the first nine months of 2021.

Net sales for the first nine months of 2022 increased $718.3 million, or 16.9%, to $4.96 billion as compared to $4.24 billion for the first nine months of 2021.

This increase was primarily the result of higher average selling prices across all segments principally related to the pass through of higher raw material and other inflationary costs, higher unit volumes of approximately 3% in the Dispensing and Specialty Closures segment and a more favourable mix of products sold in the Custom Containers segment, partially offset by lower volumes in the Metal Containers and Custom Containers segments and the impact of unfavourable foreign currency translation of approximately $123 million.

Income before interest and income taxes for the first nine months of 2022 was $520.8 million, an increase of $73.4 million as compared to the same period in 2021, while margins decreased slightly to 10.5% from 10.6% for the same periods.

The increase in income before interest and income taxes was primarily due to higher average selling prices principally due to the pass through of higher raw material and other inflationary costs, strong operating performances in each of the segments including the benefit of inventory management programs in the Dispensing and Speciality Closures and Metal Containers segments, the favourable impact from the delayed pass through of lower resin costs in the current year period as compared to the unfavourable impact in the prior year period from the delayed pass through of higher resin costs.

Higher unit volumes in the Dispensing and Specialty Closures segment, cost recovery for certain customer project expenditures in the Dispensing and Speciality Closures segment and lower rationalisation charges.

These increases were partially offset by inflation in manufacturing and selling, general and administrative costs, lower volumes and a less favourable mix of products sold in the Metal Containers segment, higher corporate expenses due to the inclusion of the European Commission settlement in the current year period, the impact of unfavourable foreign currency translation and lower volumes in the Custom Containers segment.

Rationalisation charges were $7.5 million and $13.0 million in the first nine months of 2022 and 2021, respectively.

The first nine months of 2021 also included costs attributed to announced acquisitions of $4.1 million and a $0.9 million charge for the write-up of inventory for purchase accounting.

Interest and other debt expense before loss on early extinguishment of debt for the first nine months of 2022 was $91.7 million, an increase of $11.8 million as compared to the same period in 2021.

This increase was primarily due to higher weighted average outstanding borrowings as a result of the acquisitions completed in Q3 and Q4 of 2021, partially offset by lower foreign currency exchange rates on outstanding Euro denominated debt and lower weighted average interest rates principally as a result of the redemption of the 4 3/4% Senior Notes in Q1 of 2022 with proceeds from revolving borrowings under the Credit Agreement and cash on hand.

Loss on early extinguishment of debt was $1.5 million and $0.9 million for the first nine months of 2022 and 2021, respectively.

The effective tax rate for the first nine months of 2022 was 26.0% as compared to 25.3% for the first nine months of 2021.

The effective tax rate in 2022 was unfavourably impacted by the non-deductible settlement with the European Commission and higher income generated in less favourable tax jurisdictions.

Outlook for 2022

Silgan tightened its estimate of adjusted net income per diluted share for the full year of 2022 to a range of $3.90 to $4.00, a 16% increase at the midpoint of the range over record adjusted net income per diluted share of $3.40 in 2021, from a range of $3.90 to $4.05. In addition, the Company confirmed its estimated full year free cash flow for 2022 of approximately $350 million.

Silgan is also providing an estimate of adjusted net income per diluted share for Q4 of 2022 in the range of $0.76 to $0.86, a 3% increase at the midpoint of the range over record adjusted net income per diluted share of $0.79 in Q4 of 2021 which benefited from a significant customer pre-buy in advance of metal inflation.

Q4 and full year estimates of adjusted net income per diluted share for 2022 exclude the impact from rationalisation charges, loss on early extinguishment of debt and the European Commission settlement.