Executive Summary / Key Takeaways

• Silgan Holdings is executing a strategic evolution, shifting its portfolio towards higher-margin, faster-growing dispensing and specialty closures, significantly bolstered by the recent Weener Packaging acquisition.
• The company is demonstrating strong operational momentum, delivering organic volume growth across all segments in Q1 2025 and making tangible progress on a multi-year cost reduction initiative.
• Management forecasts robust performance in 2025, guiding for double-digit adjusted EPS and free cash flow growth, exceeding prior records, driven by the Weener contribution, cost savings, and continued organic momentum.
• Silgan's competitive position is underpinned by long-term customer contracts, a localized manufacturing philosophy, and a focus on innovation and customer service, particularly in high-value dispensing and custom plastic markets.
• While facing typical industry risks like raw material volatility and seasonality, the company's diversified portfolio and disciplined capital deployment strategy position it for continued value creation, with M&A remaining a priority.

Setting the Scene: A Foundation Built on Packaging and Partnerships

Silgan Holdings Inc. stands as a prominent manufacturer of sustainable rigid packaging solutions, serving a diverse array of essential consumer goods markets globally. The company's operational footprint spans three primary segments: Dispensing and Specialty Closures, Metal Containers, and Custom Containers. From its inception, Silgan's strategy has centered on enhancing shareholder value through a combination of efficient capital deployment, organic growth, operational cost reduction, and the cultivation of sustainable competitive advantages, often pursued through disciplined, accretive acquisitions. This foundational approach has guided the company through 41 acquisitions over its history, complementing its internal growth efforts and shaping its current portfolio.

The company's position within the competitive landscape is defined by its multi-segment approach, contrasting with more specialized rivals. In metal packaging, Silgan competes with global players like Crown Holdings Inc. (CCK) and Ball Corporation (BALL), leveraging long-term contracts covering approximately 90% of its volume and often employing near-site or on-site manufacturing to foster deep customer relationships. The custom plastic container segment sees competition from companies like Berry Global Group Inc. (BERY), where Silgan differentiates through customer service and new business wins. In the dispensing and specialty closures market, a key area of strategic focus, Silgan competes with innovators like AptarGroup Inc. (ATR), emphasizing its own innovation pipeline and service capabilities.

A critical element of Silgan's competitive edge lies in its technological capabilities and operational efficiency. While specific, quantifiable performance metrics for all technologies across all competitors are not uniformly detailed, Silgan highlights its strengths in areas like thermoformed plastics within Custom Containers, which contribute to efficient material usage and potentially offer enhanced barrier performance in applications like food trays. In the Dispensing and Specialty Closures segment, innovation in design and functionality is paramount, particularly at the high end of the fragrance and beauty market, where the company's offerings are designed to meet unique customer needs and enhance the consumer experience. The strategic intent behind R&D and capital investment, particularly in dispensing, is clearly aimed at supporting customer growth, bringing new products to market, and securing long-term contractual volumes, reinforcing its competitive standing against both broad-line and specialized packaging providers.

Strategic Evolution and Portfolio Power

Silgan's strategic narrative is increasingly defined by the evolution of its portfolio, with a pronounced shift towards the Dispensing and Specialty Closures segment. This segment, targeting attractive markets like fragrance and beauty, personal care, and healthcare, is characterized by higher margins and stronger organic growth potential. The company has actively built out its capabilities in this area through a series of targeted acquisitions, including the significant addition of Weener Packaging in October 2024. This acquisition is viewed as a "logical next step," integrating advanced product and manufacturing technologies expected to bolster Silgan's innovation pipeline and drive accelerated growth and margin expansion. Pro forma with Weener, the DSC segment is now larger than the entire company was roughly a decade ago, underscoring the magnitude of this strategic pivot.

While the DSC segment takes center stage for future growth, Silgan's other businesses remain integral to its strategy and financial performance. The Metal Containers segment, a foundational business, benefits from stable, long-term contractual relationships. The growing pet food market, representing approximately half of the segment's volume, is a strategic growth category where Silgan has consistently invested to support customer demand, achieving mid-single-digit growth in Q1 2025 and roughly 20% growth over the last five years. The Custom Containers segment continues to demonstrate its value through successful commercialization of new business awards, driven by a focus on customer service in a market management believes has been underserved.

Underpinning the performance across segments is a multi-year $50 million cost reduction initiative. This program, which includes rationalization efforts like plant closures and downsizings, delivered $20 million in savings in 2024 and is expected to contribute an additional $30 million in improvement in 2025, enhancing overall profitability and operational efficiency. This focus on cost management complements the company's growth initiatives, contributing to its objective of driving shareholder value.

Recent Performance and Operational Dynamics

Silgan commenced 2025 with a strong first quarter, delivering results near the high end of its expected range. Consolidated net sales reached $1.47 billion, an increase of 11.4% compared to Q1 2024. This growth was primarily fueled by the inclusion of net sales from the Weener Packaging acquisition, higher organic volumes across all segments, and the pass-through of higher raw material costs in the Metal Containers and Custom Containers segments. Unfavorable foreign currency translation partially offset these gains.

Profitability also saw improvement, with the consolidated gross profit margin increasing by 1.4 percentage points to 18.4% in Q1 2025. Income before interest and income taxes rose by $18.8 million to $130.5 million, with margins expanding to 8.9% from 8.5%. This increase was largely attributed to the inclusion of Weener Packaging's results, coupled with improved manufacturing productivity, cost performance, and higher organic volumes. Selling, general, and administrative expenses increased, primarily due to the inclusion of Weener's expenses and higher corporate development costs. Interest expense rose to $42.9 million, up $4.3 million, reflecting higher average borrowings related to the Weener acquisition.

Segment-specific performance in Q1 2025 highlighted the strategic momentum:

• Dispensing and Specialty Closures: Net sales grew significantly by 25.2% to $671.1 million. Adjusted EBIT increased by 27.4% to $99.2 million, with the margin improving to 14.8%. This performance was driven by the Weener contribution ($126M in sales, $17M in Adj EBIT) and 4% higher organic volume/mix, including double-digit organic growth in dispensing products.
• Metal Containers: Net sales increased by 1.8% to $628.4 million. Adjusted EBIT rose by 10.2% to $49.6 million, improving the margin to 7.9%. Higher unit volumes (4%), driven by pet food and soup demand, and favorable price cost were the primary drivers, partially offset by a less favorable mix due to growth in smaller pet food cans.
• Custom Containers: Net sales grew by 1.9% to $167.1 million. Adjusted EBIT saw a substantial 21.9% increase to $24.6 million, with the margin expanding to 14.7%. Higher volumes (2%), driven by new business awards, and favorable price cost contributed to this strong result.

Liquidity remains a key strength. Silgan's principal sources of liquidity are cash from operations and borrowings under its debt instruments, including its senior secured credit facility. The company successfully repaid the $650 million aggregate principal amount of its 3¼ Senior Notes in March 2025 using revolving loan borrowings and cash on hand. As of March 31, 2025, the company had $1.10 billion in revolving loans outstanding with $398.2 million available capacity. Management believes its cash generation and borrowing capacity are sufficient to meet operating needs, planned capital expenditures ($300M estimated for 2025), debt service, and shareholder returns (dividends and repurchases). The company maintains compliance with its financial covenants and expects to delever towards the low end of its 2.5x to 3.5x net debt to EBITDA target range by the end of 2025, supported by strong earnings and free cash flow generation (normalized FCF estimated around $500M). A supply chain finance program is also in place, supporting supplier liquidity, with $262.9 million in outstanding payables subject to the program as of March 31, 2025.

Outlook, Guidance, and Future Trajectory

Looking ahead, Silgan's management expresses confidence in the company's trajectory, projecting record performance in 2025. The company confirmed its adjusted EPS guidance range of $4.00 to $4.20 per diluted share for the full year, representing a 13% increase at the midpoint compared to $3.62 in 2024. This outlook anticipates exceeding prior record EPS levels achieved in 2022.

Key drivers underpinning this optimistic forecast include the full-year contribution from the Weener Packaging acquisition, the realization of the remaining benefits from the $50 million cost reduction program (approximately $30 million expected in 2025), and continued organic growth momentum across all segments. Management expects total adjusted EBIT to increase by a mid-teen percentage in 2025.

Volume expectations remain a central theme, with management anticipating mid-single-digit volume growth in each segment for 2025. Specifically:

• Dispensing and Specialty Closures organic volume mix is expected to grow by a mid-single-digit rate, driven by continued high single-digit growth in dispensing products and an improved mix.
• Metal Containers volumes are projected to grow by a mid-single-digit percentage, primarily led by mid-single-digit growth in pet food and a partial recovery in fruit and vegetable pack volumes from the historically low levels experienced in 2024.
• Custom Containers volumes are expected to increase by a mid-single-digit percentage, benefiting from the annualization of new business wins commercialized in 2024 and additional new awards in 2025.

Financial assumptions supporting the 2025 guidance include interest expense of approximately $185 million, a tax rate of around 24%, corporate expense of approximately $45 million, and a weighted average share count of approximately 107 million shares.

The company also confirmed its estimate for free cash flow in 2025 at approximately $450 million. This represents a significant increase compared to 2024, driven by expected earnings growth, though partially offset by higher cash interest and tax payments and planned capital expenditures of around $300 million. Management views M&A as a priority for capital allocation and continues to evaluate acquisition opportunities in the consumer goods packaging market, leveraging its strong cash generation and balance sheet capacity.

Risks and Challenges

Despite the positive outlook, Silgan operates in an environment subject to various risks and challenges. Market risks include exposure to changes in interest rates, foreign currency exchange rates, and commodity prices (such as natural gas). The company employs derivative financial instruments and internal hedging strategies to manage these exposures, but they can still impact financial results.

Seasonality is a factor, particularly in the Metal Containers segment and parts of DSC, as sales are dependent on agricultural harvests, which can be significantly affected by weather conditions. The historically low fruit and vegetable pack in 2024 due to adverse weather and a large customer's decision to reduce volumes for working capital management highlights this vulnerability, impacting the Metal Container segment's performance. While a partial recovery is anticipated in 2025, the timing and magnitude remain subject to harvest outcomes.

Effectiveness of customer promotional activities can also impact volumes, as seen with mixed results in certain beverage categories in 2024. Furthermore, strong demand in certain dispensing products has led to tight capacity, with orders occasionally exceeding the company's ability to supply, requiring ongoing investment and operational adjustments.

While the company's localized manufacturing philosophy helps mitigate risks from international trade policy uncertainty, raw material cost volatility remains a factor, requiring effective pass-through mechanisms to protect margins. The successful integration of acquired businesses, such as Weener Packaging, also carries execution risk, although management's extensive M&A experience and the integration timeline aim to mitigate this.

Conclusion

Silgan Holdings is executing a clear and compelling strategy centered on evolving its portfolio towards higher-growth, higher-margin segments, particularly dispensing and specialty closures, while maintaining strength in its core metal and custom container businesses. The recent acquisition of Weener Packaging is a significant step in this evolution, enhancing capabilities and contributing meaningfully to future growth.

The company's Q1 2025 performance and robust 2025 guidance underscore the momentum from strategic initiatives, cost reduction programs, and a return to more normalized market conditions following past destocking cycles. Silgan's competitive positioning, supported by long-term customer partnerships, operational efficiency, and a focus on innovation and customer service, provides a resilient foundation. While risks inherent to the packaging industry persist, the company's diversified portfolio, disciplined capital deployment, and proactive risk management strategies position it favorably. Investors should monitor the continued integration of Weener, the execution of cost savings, and the trajectory of organic volume growth, particularly in the high-value dispensing segment and the recovery in fruit and vegetable volumes, as key indicators of Silgan's ability to deliver on its projected record performance in 2025 and beyond.