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Silgan Closes 2 Metal Container Manufacturing Facilities

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Silgan Holdings Inc. (SLGN - Free Report) has announced the wrapping up of its two metal container manufacturing facilities in Mt. Vernon, MI and Waupun, WI. Both facilities are expected to close during the fourth quarter this year.

Notably, volumes from the closed facilities will be absorbed in the existing facilities and in a new plant to be rented in the Midwest of the United States. The company’s footprint-optimization moves are driven by reduction of overall cost structure, improving operating efficiencies and an enhancing competitive position in metal container business.

These plant closures also mark the company’s complete withdrawal from the Central States Pension Fund. Excluding charges related to the withdrawal from the Central States Pension Fund, Silgan expects to recognize pre-tax rationalization charges related to the plant closings, of around $5.2 million in 2019. Out of $5.2 million, approximately $2.1 million is expected to be realized in the second quarter of 2019.
 
The company also expects to recognize an estimated pre-tax rationalization charge of around $37 million in 2019 for withdrawal liability, of which around $36 million is anticipated to be recognized in the second quarter of 2019. Silgan expects its payments related to the company’s annual withdrawal to the Central States Pension Fund to be about $2.8 million for not more than 20 years, likely to start in 2020. Further, these charges will also not have an impact on the company’s financials.

Since its inception, Silgan Holdings has acquired 35 businesses. Backed by acquisitions and organic growth, the company has increased its share of the metal food container market in the United States from 10% in 1987 to slightly more than half of the market in 2018. Through buyouts, it has become a leading global manufacturer of closures for food, beverage, health care, garden, personal care, home and beauty products, with net sales of $1.46 billion in 2018, marking a seven-fold increase since 2003. It has also improved its market position in the plastic container business since 1987, with net sales increasing seven-fold to $614.1 million in 2018.

Silgan reported year-over-year improvement in first-quarter 2019 adjusted earnings per share and revenues. Both top and bottom lines beat the respective Zacks Consensus Estimate. The company expects adjusted earnings per share in the range of $2.10-$2.20 for 2019 compared with the prior year’s $2.08. The company also provided its adjusted earnings per share guidance of 51-56 cents for the current quarter. In second-quarter 2018, the company had reported earnings per share of 52 cents.

For the ongoing year, the company estimates capital expenditures of $200 million. It also projects free cash flow guidance at $275 million for the year. It remains focused on returning value to shareholders. Silgan Holdings expects the effective tax rate for 2019 to be 24%, in line with 2018, excluding certain effective tax-rate adjustments. 

Silgan Holdings Inc. Price and Consensus

Zacks Rank & Other Stocks to Consider

Silgan currently carries a Zacks Rank #2 (Buy)

Some other top-ranked stocks in the Industrial Products sector are DMC Global Inc. (BOOM - Free Report) , Lawson Products, Inc. and Harsco Corporation , each sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

DMC Global has an estimated earnings growth rate of 83.5% for the ongoing year. The company’s shares have surged 49.3%, in the past year.

Lawson Products has an expected earnings growth rate of 24.5% for the current year. The stock has appreciated 57.4% in a year’s time.

Harsco has a projected earnings growth rate of 9.1% for 2019. The company’s shares have gained 5.4%, over the past year.

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