Silgan Holdings Q2 2015 financial results
Silgan taking ‘precautionary measures' around the perceived and real risk that resides in Greece
The company which supplies metal containers in North America and Europe as well as metal, composite and plastic closures for food and beverage products, supplies packaging for Feta cheese, olive oil, and peaches in Greece, which are largely exported out of the country.
'We are being very careful as to how much cash we accumulate in Greece'
Tony Allott, president/CEO, Silgan Holdings, said it has ‘been taking precautionary measures for some time just around the perceived risk and now maybe the real risk that resides there (in Greece).
“Very early on we were communicating with our customers that regardless of what currency Greece itself moved to, our agreements were euro based,” he said.
“We've been very selective on any credit that we've extended. Otherwise, we didn't pay either in advance or on delivery. We're also being very careful as to how much cash we accumulate in Greece. So we're holding very minimal cash balances there.
“To help manage costs we’ve also just taken some down time in the plants during the peak of the crisis. So as a consequence, the current outlook is the growing season is actually looking pretty good, particularly for peaches and we're expecting a strong pack.
“We haven't seen any real negative impact in the quarter largely because we took some downtime in the quarter to mitigate cost. And we're expecting that if it settles down, and I think our view is that there's a long way to go before we can say it has settled down that we'll take it as it comes, but no meaningful negative impact right now.”
The financial results revealed net sales for the second quarter of 2015 were $914.2m, a decline of $3.1m, as decreases in the closure and plastic container businesses, due partly to the impact of unfavorable foreign currency, were partially offset by increased sales in the metal container business.
Net income for the second quarter was $42.2m, or $0.70 per diluted share, compared to the second quarter of 2014 net income of $44m, or $0.69 per diluted share.
Van Can acquisition
The metal container business recorded net sales of $553.7m for the second quarter of 2015, an increase of $35m or 6.7% versus the prior year quarter. This increase is primarily a result of 11% higher unit volumes, partially offset by unfavorable foreign currency of $17.5m.
Volumes were higher year-over-year as a result of incremental US volumes associated with the Van Can acquisition and an earlier start to the Midwest vegetable pack and Europe also had stronger volumes.
“We're pleased with this growth in the metal container business and are focused on meeting the increased demand requirements from our existing infrastructure this year while at the same time working to better align our geographic footprint and reduce the cost of the recently acquired Van Can supply to more profitably service this business in the future,” said Allott.
Speaking about the Ukraine, Allott said the region is still a difficult market and its plant there was cited to export into Russia, but that is not happening to the degree it wants.
“There is very little activity happening in that plant right now, so that's a little bit of a drag for us,” he said.
“The Russian plants are actually from a volume perspective doing pretty nicely. They saw pretty good pack volumes. Caution remains and we've been at this for a while now trying to mitigate a lot of the risk here, around what's going to happen to the economy.
Middle East seeing 'decent volume'
“We did index all of our contracts over there into euros to mitigate exposure to the ruble which has been done and the market is still operating that way.
“We've indexed our customers on a credit worthiness basis, and we're being very prudent about what kind of credit we're extending to customers.
“Only the very top tier customers are getting extended credit. Others are being serviced, but serviced either cash in advance or cash on delivery.
“We're cautiously optimistic, given the volume outlook in Russia, but doing everything we can to mitigate the risk on a go-forward basis.”
Speaking about the Middle East, Allott said it was seeing decent volume as more and more filling capacity came into Jordan to service the broader Middle East.
“From time to time as the fighting gets closure to the various borders, we may see temporary shutdowns in terms of our freight lanes. And so we experienced some of that, but overall that business seems to be doing very good,” he added.