Acquistions and price rises fuel solid Silgan results

By Rory Harrington

- Last updated on GMT

Related tags Raw material costs Revenue

Silgan announced increased net sales and stable net income in its first quarter results, thanks mainly to passing on raw material costs to customers and gains from recent acquisitions.

Income from its metal can operations fell on falling volumes in the US. Cash from closures rose, due in part to a re-evaluation of its Venezuelan segment but these benefits were partially offset by payments for worker lay-offs in Germany. Plastic container income came primarily from higher resin prices.

Two recent acquisitions played a key role in the company’s Q1 performance. In March, Silgan completed the takeovers of Austrian company Vogel & Noot’s food can business for €260m ($359m). It also bought US-based IPEC in November 2010.

Figures

The US-based rigid packaging company posted net sales of US$703m in the period, an increase of $39m, or 5.9 per cent, as compared to $664m in 2010.

“This increase was primarily the result of higher average selling prices in each of the businesses due to the pass through of higher raw material costs, the inclusion of net sales from the recently acquired Vogel & Noot and IPEC operations and higher unit volumes in the closures business,”​ said the company.

Such gains were hit “by lower domestic unit volumes in the metal containers business”,​ the firm added.

Net income for the three month period ending 31 March reached $26.1m, a slight drop on 2010's $26.8m.

Metal packaging

Net sales for the metal division rose over 4 per cent to $390m compared to the previous year – mainly due to the performance of recently acquired Vogel & Noot and passing on higher average prices.

The gains were partially off-set by lower unit volumes – although Silgan said this had been triggered in the wake of the customer buy-ahead at the end of 2010.

Income actually fell $8m year-on-year to $38m for a number of reasons – including lower volumes and higher manufacturing costs compared to 2010.

Closures

Net sales for the closure business jumped 11 per cent to $160m – thanks mainly to the takeover of IPEC at the end of last year and passing on raw material hikes to customers.

An increase in income from operations of $4.7 million to $15.8 came mainly from a $3.2m charge recognized in the Q1 2010 for the revaluing of net assets in the Venezuela operations, said Silgan.

But such benefits were dented the delayed pass through of “significant resin inflation and rationalization charges of $1.1m in the first quarter of 2011 for the workforce reduction in Germany”.

Plastic Containers

Net sales of the plastic container business rose $7.7m to $152m on the pass through of higher resin costs.

Income from operations almost doubled to $6.3m thanks to better performance and lower rationalisation charges, which fell from over $2m in 2010 to just $0.6m in this period.

Related topics Processing & packaging

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