Silgan Holdings Inc. (NYSE:SLGN) Q1 2026 Earnings Call Transcript

Silgan Holdings Inc. (NYSE:SLGN) Q1 2026 Earnings Call Transcript April 29, 2026

Silgan Holdings Inc. beats earnings expectations. Reported EPS is $0.78, expectations were $0.74.

Operator: Good day, and welcome to the Silgan Holdings First Quarter 2026 Earnings Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Alex Hutter, Senior Vice President, Strategy and Investment Relations. Please go ahead.

Alexander Hutter: Thank you, and good morning. Joining me on the call today are Adam Greenlee, President and CEO; Philippe Chevrier, EVP and COO; and Shawn Fabry, EVP and CFO. Before we begin the call today, we would like to make it clear that certain statements made on this call may be forward-looking statements. These forward-looking statements are made based upon management’s expectations and beliefs concerning future events impacting the company and therefore, involve a number of uncertainties and risks, including, but not limited to, those described in the company’s annual report on Form 10-K for 2025 and other filings with the Securities and Exchange Commission. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in the forward-looking statements.

In addition, commentary on today’s call may contain references to certain non-GAAP financial metrics, including adjusted EBIT, adjusted EBITDA, free cash flow and adjusted net income per diluted share or adjusted EPS. A reconciliation of these metrics, which should not be considered substitutes for similar GAAP metrics can be found in today’s press release and under the non-GAAP Financial Information portion of the Investor Relations section of our website at silganholdings.com. With that, let me turn it over to Adam.

Adam Greenlee: Thank you, Alex, and we’d like to welcome everyone to Silgan’s first quarter earnings call. Our first quarter results displayed the resilience of our business and the power of our diverse portfolio and continue to demonstrate the unique value of our critical packaging products and the strength of our long-term customer partnerships in the market. . Our teams executed well during the quarter and adapted to dynamic operating and market conditions. We’re pleased to have delivered first quarter results that were at the high end of our estimated range and we remain confident in our outlook for the balance of the year despite the evolving macroeconomic and geopolitical environment. Our results in defensing and specialty closures were consistent with our expectations entering the quarter despite significant weather events in North America that impacted both our and our customers’ production and volumes during the quarter.

We delivered another quarter of double-digit organic volume growth in our fragrance and beauty products as a result of our market-leading innovation and customer partnership model. We continue to outperform the market in these high-value strategic growth products. And with the Weener portfolio now fully integrated, and the power of the combined innovation engines of our legacy business in Weener, we see ample runway to continue to deliver organic growth well in excess of the market for many years to come in this business. Our metal containers business started the year strong with volume 2% higher than the prior year as pet food products increased by 11% over the prior year by facing a more difficult year-over-year comp with the prior year quarter up 6% year-over-year.

Consumer demand for our customers’ market-leading pet food products continues to grow at a mid-single-digit rate as our mainstream wet pet food products serve the fastest-growing segments of the pet food market for cats and small dogs. The strength we experienced in pet food in the first quarter was partially offset by the expected impact of pre-buy related volumes for fruit and vegetable markets. In Custom Containers, our team continued to prove the value we provide as an innovative partner of choice in the unique small and medium run length portion of the market we serve. And our results were consistent with our expectations entering the quarter. As expected, our Custom Containers volumes were below prior year levels as customer destocking from the prior year carried into and concluded in the first quarter of 2026.

In addition, we continue to lap the volume impact of our cost reduction activities in 2025, which should become less impactful as we move through the quarters in 2026. We are pleased to have started 2026 on a positive note, and our business remains on solid footing as we move into the second quarter and look ahead at the second half of 2026. While much has changed in geopolitics since our last earnings call and the economic landscape is less certain to deliberate construct of our portfolio of products and end markets, our long-term partnerships with our customers and our low-cost global manufacturing footprint continue to uniquely position Silgan to outperform through all stages of the economic cycle. Turning now to our outlook. We are raising our 2026 earnings estimate to reflect the operational outperformance in the first quarter and our volume expectations for the remainder of the year remain largely unchanged.

We continue to expect Dispensing and specialty closures organic volume mix to grow by a low to mid-single-digit rate in 2026 driven by mid-single-digit growth in our dispensing products. Our Metal Containers volumes are on track to grow by a low single-digit percentage, driven by mid-single-digit growth in pet food and stable volumes in human food. We continue to expect our custom containers volumes to be comparable to prior year levels as destocking in first quarter and the exit of business to achieve cost reduction goals in the prior year weigh on first half volumes, while second half volumes are expected to grow as new business ramps up. Our teams remain laser-focused on executing our plans for the year and the opportunities that lay ahead for the company in both the near and longer term, and we are confident in our ability to execute on our plan.

With that, Shawn will take you through the financials for the quarter and our estimates for the second quarter and full year 2026.

Shawn Fabry: Thank you, Adam. As Adam highlighted, we reported another quarter of strong financial performance in the first quarter of 2026. With results coming in towards the high end of the expected range due to strong operational EBIT performance and favorable interest expense, which was partially offset by higher corporate expense. . Net sales of $1.6 billion increased 6% from the prior year period, driven primarily by the contractual pass-through of higher raw material costs, mostly in our Metal Containers business and favorable foreign currency translation. Total adjusted EBIT for the quarter of $152 million was 4% below the prior year with higher adjusted EBITDA in our Metal Container segment offset by lower adjusted EBIT in the dispensing and specialty closures and Custom Container segments and higher corporate expense.

Adjusted EPS of $0.78 decreased $0.04 from the prior year period due to lower adjusted EBIT and a higher tax rate, which was partially offset by lower interest expense. Turning to our segments. First quarter sales in our Dispensing and Specialty closures segment increased 2% versus the prior year, primarily as a result of the pass-through of higher raw material costs and foreign currency translation of 6%. The which was partially offset by lower volume and less favorable mix. Volumes in the quarter were adversely impacted by severe weather events that curtail production are in our customers’ production facilities, which also caused an adverse impact on the mix of products sold. As expected, first quarter dispensing and Specialty Closures adjusted EBIT was below the prior year levels, in part due to the year-over-year impact of the benefit of selling through prior year inventory in an inflationary environment in 2025 and as compared to the headwind of selling through higher cost inventory in 2026 for steel, food and beverage products in Europe.

The strong growth in dispensing products for fragrance and beauty markets were offset by the adverse volume mix and cost impact of severe weather during the quarter in North America. In our Metal Container segment, sales increased 15% versus the prior year quarter as a result of the contractual pass-through of higher raw material costs, principally related to steel and aluminum and higher volumes of 2%. Our volume growth in the quarter was largely the result of higher volumes for pet food markets of 11% as we continue to experience strong growth in this category. As expected, volumes for fruit and vegetable markets were below the prior year levels as a result of prebuy activity in the fourth quarter of 2025 as certain customers purchased ahead of anticipated raw material inflation in 2026.

Metal Containers adjusted EBIT was comparable to the prior year quarter as higher volumes for the pet food market were partially offset by the adverse mix impact of lower volumes for the fruit and vegetable markets due to the prebuy. In custom containers, our results were largely consistent with our expectations as sales decreased 10% compared to the prior year quarter as a result of lower margin business exited due to a planned footprint optimization to achieve the previously announced cost reduction goals and the continuation of destocking activities that concluded during the first quarter of 2026. Custom Containers adjusted EBIT was below prior year levels as a result of the lower volumes. Turning to our outlook for the second quarter of 2026.

We are providing an estimate of adjusted earnings in the range of $0.92 to $1.02 per diluted share as compared to adjusted earnings of $1.01 in the prior year period. Second quarter interest expense is anticipated to be in the range of $50 million with a tax rate of 25% to 26%. From a segment standpoint, second quarter dispensing and specialty closures adjusted EBIT is expected to be comparable to the prior year period, with higher year-over-year volumes largely offset by significant inflation in the quarter. Based on the current resin market, we are expecting approximately $50 million of incremental cost in this segment during the quarter related to the inflationary pressure from the Middle East conflict, which is anticipated to impact adjusted EBIT by approximately $10 million in the second quarter.

Metal Containers volume and adjusted EBIT is expected to be below prior year levels as mid-single-digit growth in pet food products is expected to be offset by a normalization in the seasonal or in patterns for the fruit and vegetable markets. as the segment reverts to a more typical volume pattern following several years of volatility related to one of our customers. This normalization is expected to be predominantly impact the timing of orders between the second and third quarters. and does not impact our expectations for volumes for the year. Custom Containers adjusted EBIT and like-for-like volumes are expected to be modestly above prior year levels in the second quarter. For the full year 2026, we are increasing our estimate of adjusted EPS by $0.03 to the range of $3.73 to $3.93 as compared to $3.72 in 2025 to reflect the strong operational EBIT performance in the first quarter.

This estimate includes corporate expense of approximately $50 million as increase — an increase of approximately $5 million from our prior estimate, which is offset by lower anticipated interest expense of approximately $200 million. Our 2026 estimate of adjusted EPS continues to factor in an expected tax rate of approximately 25% to 26% and a weighted average share count of approximately 106 million shares. Our updated 2026 adjusted EPS range now exceeds the prior record level of adjusted EBIT and adjusted EBITDA achieved in 2025 at the low end of the range. From a segment perspective, low to mid-single-digit percentage total adjusted EBIT growth in 2026 is expected to be driven primarily by a mid-single-digit percent increase in dispensing and specialty closures, adjusted EBIT and a low single-digit percent increase in adjusted EBIT in the Metal Containers and Custom Containers segments.

The volumes in 2026 are expected to grow by a low to mid-single-digit percentage in dispensing and specialty closures driven by a mid-single-digit increase in dispensing products. Metal Container volumes are expected to grow by a low single-digit rate as a result of mid-single-digit growth in products for pet food markets, which represent more than half of the segment volume. Custom Containers volumes are expected to be comparable to the prior year on a reported basis and above prior year levels on a like-for-like basis, excluding restructuring impacts. As lower first quarter volumes, primarily due to destocking activities are expected to be offset by growth in the subsequent quarters. Based on our current earnings outlook for 2026, we are confirming our estimate of free cash flow of approximately $450 million, which includes CapEx of approximately $310 million.

With that, we’ll open the call for questions. Margo, would you kindly provide the directions for the question-and-answer session.

Q&A Session

Operator: [Operator Instructions] We will take our first question from George Staphos with Bank of America.

Bradley Barton: This is Brad Barton on for George this morning. I was just wondering if you could — looking at your M&A pipeline, just discuss how you’re reviewing the pipeline. And relatedly, when you view candidates, can you discuss how you assess their capital and cash intensity relative to Silgan?

Shawn Fabry: Yes. Thanks, Brad. Appreciate the question. So I think as you think about silicon, one of the real strengths of the company over time has been capital deployment. Really nothing has changed regarding our approach to capital deployment or how we evaluate M&A. So one of the key hurdles that every acquisition that we the value it has to clear is the other opportunity of buying back stock or paying down debt. We continue to look at our opportunities on a cash-on-cash return basis over a long period of time that factors in all the opportunities for the business, the capital that the business will require any advantageous tax situations and the like. So nothing has changed about our return hurdles as well. I think as you think about the M&A pipeline, we’ve said now for a number of quarters that the M&A pipeline remains active.

We see a number of opportunities or assets that could be coming to market that would fit nicely in our strategy where we have been building out a portfolio of higher-margin, higher growth businesses in the dispensing and specialty closures laying money now. We look at everything that’s rigid packaging for consumer goods. But I think that’s kind of how you should think about our M&A pipeline and the way we look at M&A.

Operator: We’ll take our next question from Matt Roberts with Raymond James.

Matthew Roberts: I have a couple of questions on the volume outlook. Sounds like not many changes there, but just a couple of puts and takes by segment. Maybe I’ll knock them off here all in a row. Maybe on Metal Containers. I believe you called out timing any impact from weather [indiscernible] or fertilizer availability that could impact the pack season or what you’re hearing from customers heading into 3Q on that or if it’s still too early. And then on dispensing and specialty closures. First, Fragrance and beauty continues to see good gains. Are you seeing any impact from export out of Europe or shipping constraints or or ask given limited exposure, but anything from the lower duty free travel or no impact there? And then lastly, on beverage, how did that perform in on a same-store basis without new contracts and anything you’re seeing there in April into the summer season.

Adam Greenlee: Sure, Matt. Thanks for the questions. Maybe just kind of taking them up in the order that you went through them. So for Metal Containers, really the timing issue that we talked about is the simple fact that one of our large fruit and vegetable customers now is in new ownership hands and the profile of that credit essentially is different than it has been. So you should probably think about those products being shipped and consumed and products being filled closer to the time that the product is packed in the field. So I think as we’ve talked a long time, our manufacturing philosophy of Silgan is we basically make hands all year long, particularly for the pack products. And we sell them kind of 2Q, 3Q and Q4, and this is just moving the timing more to Q3 where products are picked and filled from the crop perspective.

So no change whatsoever to the full year with that customer and how that has played out in 2026. As we then move over to our Dispensing and Specialty closures segment, the organic growth in Fragrance and Beauty has been terrific and it’s been strong and has been strong for quite a while now. The pipeline is very very full and the opportunities are in front of us. I think we’re winning simply because of our innovation in our customer partnership model. And as we’ve talked before, that’s a much longer developmental cycle than maybe some of our other products, call it, in food and beverage or personal care. So here it is 2026, and we’re talking about product launches for certainly known product launches for ’27 and developmental ideas in ’28 and beyond.

So pretty good line of sight into how that business is going to continue to perform for us. Obviously, with the conflict in the Middle East, there is potentially an impact on some luxury business. But we don’t think it applies in our customer. I don’t think it applies to to the products that we sell in fragrance and beauty. We’re a little bit on the lower end of the luxury scale. And I think one of the great ideas here is that our customers through the pandemic were able to identified find new ways to reach their consumers. So particularly those duty-free and travel consumers, tourism consumers that you referenced. What we found is those consumers are continuing to buy the product, whether they’re traveling or not. They’ve found avenues to continue to consume those products.

And then finally, on the side, Q1 performance right in line with expectations. You’re right, we did have a new contractual win this year that has already been commercialized. That is part of our volume outlook for 2026. But I would say, again, on the beverage side, I think we talked about this a little bit last time, a fairly muted outlook from our perspective on market performance. We’re taking a conservative view on the market, adding in our contractual volumes and that’s what’s embedded in our guidance for ’26. We’re not really at all subject to needing the market to grow in order to hit the guidance that we put forward.

Operator: And we’ll take our next question from Michael Roxland with Truist. .

Niccolo Piccini: This is Nico Piccini on for Mike Roxland. Just to start out, I think last quarter, you mentioned that Vainer is positioned to grow ahead of peers and then take kind of outsized portion of new product launches. Just wondering how that performed in 1Q, highway to perform versus peers? And what does the backlog look like for 2Q? And then how can you measure that as performance against peers and kind of tell with certainty that you’re actually gaining shares? .

Adam Greenlee: Sure. It’s an interesting question. I think, Nico, what I would say is it’s the combination of Vainer with our dispensing especially closures business that that drives kind of the commentary that you referenced. So really, it’s the combined portfolio now including Weener. And I think I — the area I’d probably point you to directly is is fragrance and beauty. And we’ve had tremendous success in fragrance and beauty. We’ve delivered another quarter in Q1 of double-digit growth. I feel confident that we’re winning a higher percentage of the new product launches that are in the market and have been now for a couple of years in a row. So I think that’s how we really determined that we are continuing to garner a larger percentage, larger share of that market.

To be clear, we are not at all competing on price. This is about innovation. This is about partnership and helping our customers get new creative and innovative products into the market well into the future. again, my comments from the last question were we’re already working on commercializing ’27 product launches and developing ’28, ’29 product launches right now. And that’s that is a core component to how we’re going to continue to grow out the business with our, I’d say, market-leading innovation pipeline in those products.

Niccolo Piccini: Got it. If I could just do one follow on here. You called out some incremental opportunities for long-term growth in customer tenders, I think, both with new and existing customers. Can you provide a little more detail on that, maybe if you can quantify how that could impact the P&L or just some additional details on those wins.

Adam Greenlee: Sure. And I think maybe just going back, we did exit a facility in 2025 as we were exiting some lower-margin business. And I think as we’ve talked historically, the exit of volume doesn’t always line up perfectly with the new volume coming on to replace it. So I think what you see in ’26 is we’ve had really good success in the marketplace. Those volumes will be commercialized over the back half of the year. And that’s when you sort of see the inflection point on a like-for-like basis where volumes turned positive in the back half of the year.

Operator: And we’ll take our next question from Gabe Hajde with Wells Fargo Securities.

Gabe Hajde: I wanted to ask about some of the health care applications that you guys have in the market. I think you kind of talked about over a medium term 3- to 5-year basis trying to 2x that business. Anything that you can talk about that’s been commercialized this year, maybe where capacity utilization sits or growing into some capacity that you’ve added in the past couple of years?

Adam Greenlee: Yes. Look, it’s a core focus of where we’re going, a big part of the growth profile of our dispensing and Specialty closures segment going forward. we’ve had tremendous success in our nasal and acholic applications, and we see really good growth in both of those specific target areas. We’ve invested, as we’ve talked in the past, Gabe, to support that volume growth. And we’re seeing the growth that we expected right now. So I think we had talked, call it, a $200 million health care business at one point and it’s closer to $250 million now as as we look into the rest of 2026. So we’re getting the growth that we had targeted. And again, it’s really focused on nasal and ophthalmic applications. And I would say, Gabe, the application opportunities continues to expand within kind of that nasal and ophthalmic frame.

Gabe Hajde: Got it. I guess, dimensioning what ’26 could look like. Going back to the M&A question, there was obviously some reports out there pretty public about a competitor over in Europe. . My question is less about that specifically and more about by scale. That would have been a fairly large transaction. I know you can’t dictate timing when the when these things come available, but pushing the balance sheet a little bit. Can you just talk around appetite for that? And maybe as you fill through some of the other opportunities, is there anything out there that strikes you as a similar size and scale or that was probably on the high end of what you’d be looking at?

Adam Greenlee: Well, sure. Obviously, we’re not going to comment on any rumors. And I think what we’ll say has been consistent with kind of where we’ve always been. I mean I look at the scale of the company today versus maybe 10 years ago, Gabe, and it’s in a much different position just simply because of the profitable growth that we’ve added to the business. And I look at the Weener acquisition, roughly just round numbers, $1 billion acquisition where we actually did lever up and went outside of our target leverage range with a very clear plan to get back to that target leverage range within 15 months. and we executed very well and delivered that target. So $1 billion acquisition on top of Silgan and being able to get back within our leverage guidance within 15 months is a pretty impressive feat as far as I’m concerned as far as how the company has evolved over time.

So we like acquisitions of all sizes and scale. I think with WestRock, with Albéa with Weener, we did go outside of our targeted range, but we’ve always had the ability to utilize the free cash flow of the business to delever quickly. And that’s really more of the important point. I think what our businesses have shown is a tremendous ability to integrate and bring on board the acquisitions that we’ve executed upon. And I think what our team here at our corporate group has done has shown a real core competency in navigating the M&A landscape. And I think we — I’ll say it again, I think we are advantaged in many ways as we look at assets and properties in the space. and we’re excited about the opportunities that still sit out there in front of us.

Gabe Hajde: Perfect. No, look, execution has been really solid the past 10 years.

Operator: Our next question comes from Hillary Cacanando with Deutsche Bank.

Hillary Cacanando: So based on the double-digit volume growth in the fragrance and beauty segment, it seems like consumer remains bifurcated. Is that what you’re continuing to see? Just talk about how other patents in the DSD segment like personal care and home care products have performed.

Adam Greenlee: Great. First of all, Hillary, welcome to the call. So it’s nice to hear from you on the first call, so welcome to the space. . Sure. Look, fragrance and beauty, we do think there continues to be evidence of a cashed economy. And I think Silgan is a great example of where that plays out because of the diverse nature of our product portfolio. So fragrance and Beauty, you’re right. I mean that’s a luxury item. And I think the high-end consumer continues to do fairly well. And those purchase patterns with double-digit volume growth in those segments continue to to show tremendous strength. Maybe on the other end of that K-shaped economy that we’ve talked about, you have the consumer that is more focused on value and is making decisions at the point of purchase.

And I think you can look right at our food can business. And again, when you think about the consumer, the food can typically is targeting. It’s it’s for folks that are looking for the greatest value to deliver the highest nutritional content for the low cost. And that’s what our food can products allow our customers to do for consumers. So I think the low-end consumer is more focused on value and stretching those dollars and the food can, I think, plays a really important part in that dynamic. So we see the K-shaped economy continuing to play out.

Hillary Cacanando: Okay. So how about in your like home care, spray, aerosol, the cleaning spray, any impact there since it’s kind of, I would say, less — not as elastic, I guess?

Adam Greenlee: Yes. I think it’s a really good point. And I think you look at our portfolio of products, and it’s the vast majority of our products are consumer staples. We consider them to be nondiscretionary. I do think, in fairness, there are pockets of strength and pockets of some slight weakness, but you would expect that across a diverse portfolio like ours. So I think it’s more about the consumer staples that we support our customers with that really are more protected than the discretionary spend items that consumers are dealing with.

Hillary Cacanando: Okay. Got it. And then just on — in the pet food category, doing so well. We’ve heard all your peers pounding their pet food performance. So are you seeing any competitive pressures there with everyone trying to increase their pet food business?

Adam Greenlee: Well, I think for me, as I look at our metal container business, and obviously, that was a large part of that. So much of this business is under significant long-term contracts that historically, we stayed out of the fray of the market. As it relates to wet pet food specifically, we are heavily overweighted to that segment. So I think with our largest customers, continuing to grow and drive the growth in that category. Obviously, we continue to win and increase our volume in that market I think on maybe some of the private label side, there’s other opportunity for smaller growth for some other folks. But we’re really focused on our largest customers driving that volume again, and we are focused on caps and small dogs and the portfolio of products that we take to market.

Operator: We’ll take our next question from Ghansham Panjabi with Baird.

Unknown Analyst: Actually Josh Westley on for Ghansham. Maybe just piggybacking off of Hillary’s question there, just maybe focusing more so on your CPG end markets. And just on a high-level basis, do you guys get any sense that they’re shifting philosophy at all from kind of the volume emphasis that they were talking about at the beginning of the year, right? Just given the context of pricing for them across the board has been very high for year basis. Again, they started switching towards more constructive volume commentary at the beginning of the year. Do you think they’re going to kind of revert back to maybe pushing pricing just in context of the inflationary backdrop we’re in? Or will they kind of stick to this volume dynamic just because of the pricing that’s been in the past?

Adam Greenlee: Yes. Very good question. I think that certainly, as we came into the year, volume was the focus, and I think there was more promotional and price activity supporting volume growth. I think with the conflict in the Middle East and the impact on inflation, I think we’re still in now in deep conversations with our customers, trying to understand exactly how they’re thinking about the rest of the year. But I would say, even up through early part of April, promotional activity was still pretty good for most of the products that we were looking for. And then I think how that ultimately relates to Silgan, it’s back to the comment I made earlier. I mean, really we looked at market growth in a fairly muted lens for 2026.

So we’re not expecting significant growth in markets to support the guidance that we’ve given. We’ve added kind of our contractual wins to our volume outlook. But outside of that, we’re expecting pretty muted volume trends across the markets that we serve.

Unknown Analyst: Okay. Great. That’s super helpful. And then maybe just if I can sneak in one more, just on the input cost inflation component. Obviously, a lot of that is resin and you have contractual pass-through mechanisms there. But how are you thinking about the inflation specific to maybe some other derivatives such as energy, freight, coatings for cans, et cetera. Can you quantify that impact? And can you also remind us, too, is that pass-through contractually as well? And if not, how do you plan on offsetting that?

Adam Greenlee: Sure. Well, maybe I’ll just start with kind of reminding everyone I’m still in sourcing strategy. I mean what we like to do is as we like to buy raw materials. We like to manufacture and we like to sell all within one geography. So you take some of the global influence out of of the relationship with our customers. So I think that’s an important point to start with. You’re right. I think resin costs are probably the biggest item here to address. And we talked a little bit about it in Shawn’s comments earlier. And I think just for the inflation we’re anticipating is something around $50 million in our Dispensing especially closure segment. I think the net impact of that inflation with our lag pass-through is going to be something like $10 million.

So I think it’s embedded in our guidance. As we talked about earlier in the year, we planned for more unknown risk in 2026. So it really doesn’t change our guidance. We’re able to absorb that and still maintain our guidance. And then I’ll maybe pass to Shawn to talk a little bit about how we manage through the other inflation that we’re experiencing as well.

Shawn Fabry: Yes, sure. So you specifically asked about freight and energy. I’ll start with freight. Freight is a relatively small spend for us, it’s under 3% of our cost of sales. Most of the freight in this business is FOB. So from that perspective, it doesn’t really apply on the inflation side. And what’s left is predominantly pass-through-based different formulas, fuel surcharges, things like that. So we don’t see a lot of exposure on the inflation side for freight. Similar comment on energy. It’s again, a relative — you think it might be larger than what it is, but it’s still around 3% of our cost of sales. We have an active hedging program in place, and we’re well hedged for the balance of the year. So we don’t see much risk there for 2026.

And if inflation does kind of linger here towards the back half of the year, we’ll address that inflation with our customer base in the 2027 renewals. So no real impact on either of those categories, I’d say modest headwinds, if anything.

Operator: And we’ll take our next question from Anthony Pettinari with Citi.

Bryan Burgmeier: This is actually Bryan Burgmeier on for Anthony. I appreciate the detail on dispensing and resin costs that you provided there, is that $10 million drag in 2Q something that you would expect to recover in kind of 3Q or 4Q. Can you maybe just kind of remind us the timing of these pass-throughs. Just trying to frame, I guess, like rising resin costs versus raising the 2026 outlook seemingly with most of your assumptions unchanged .

Adam Greenlee: Yes. I mean, look, I think the rapid kind of unprecedented inflation that we’ve seen in resin is specifically what we’re talking about. I think as you look at the indices for the remainder of the year, there’s expected to be some stability kind of mid to late here and then potentially depending on the resolution to the conflict in the Middle East, some recovery to lower cost of resin. But that’s relatively unknown at this point. So we’re not anticipating that anticipating that happening. . I think as we think about the net impact of that $10 million, I mean, I think it’s not ideally recoverable in Q2 or Q3. I think as we’re thinking about it today, is resin markets decline in the future, that’s when that recovery would ultimately happen. So it’s going to be spread over a longer period of time, and I would not anticipate that probably starting but more potentially Q4 and well into ’27 as we think about the resolution of the conflict in the Middle East.

Bryan Burgmeier: Okay. Got it. Got it. Yes, just following up, maybe curious if there’s anything that’s maybe been better than expected, that allows you to offset that $10 million drag. Maybe it’s the 1Q result. And then just in the press release, I think you mentioned you’re now expecting custom containers EBIT to be up year-on-year when I think last quarter was kind of flattish year-on-year. So just curious what kind of drove that change in view?

Adam Greenlee: Yes. I mean, look, I think our businesses continue to perform at a very high level. We had a very strong start to the year. And for the most part, as we look at the balance of the year, nothing has really changed from our expectations. You mentioned Custom Containers. It is we continue to win in that market, and we continue to commercialize new volume. And that’s really what’s driving the growth in the back half of the year for Custom Containers. But I think as we came into the year, again, sort of muted market assumptions. So a lot of stuff can happen, and we think we’ve factored that into our guidance for the year. So with really nothing changing as far as our portfolio of consumer staple products, we’re very confident in the remainder of the year and importantly, the performance of each of our businesses as we go forward.

Operator: We’ll next go to Daniel Rizzo with Jefferies.

Daniel Rizzo: So with Weener fully integrated. I mean, is it — can you provide color or just kind of some sort of numbers around what kind of revenue synergies you might see over the next 2 to 3 years? Or I mean, what the runway is and how we should think about it?

Adam Greenlee: Well, I mean, Dan, yes, so it is fully integrated. You’ve got that innovation engine that we continue to talk about. And it’s really difficult to say does that come from Weener or from our dispensing group. I think I would say, look at the growth rate that we have from a longer-term perspective on this segment. And that’s what supports that growth rate. Is this very powerful innovation engine combining our business with Weener.

Daniel Rizzo: Okay. And you mentioned a couple of times about the muted beverage environment, which I understand, but what could trigger just some acceleration, I guess, improved consumer confidence? Or what would — I guess you have to wait for your customers. So how should we think about that as something that can provide some upside maybe in the back half of the year and into 2027.

Adam Greenlee: Well, I think for us, first quarter was essentially flat in the beverage business and right in line with our expectations. So again, we are not expecting a tremendous amount of growth. I think if the market grows that’d be a great thing, and that would be upside for our company, but that’s not what’s embedded in our current guidance to the midpoint. .

Operator: Our next question comes from Arun Viswanathan with RBC Capital Markets.

Arun Viswanathan: Congrats on the strong results. I guess I’m just curious on the volume side, would you attribute a portion of some of the growth to customers kind of trading down from towards maybe food can and some other of your products. Maybe you can just kind of comment on the bifurcated customer trends that you’ve seen in the past. I mean are you seeing growth kind of continuing at the high end and the low end and maybe the middle kind of weakening? Or how would you describe kind of the consumer environment out there?

Adam Greenlee: Yes. I think maybe to summarize it, I would say, yes, we continue to see that bifurcated consumer I think you have some strength at the high end of the consumer portfolio. And I think you also have strength for us in the lower end consumer as well. I think the middle range consumer, what I would say is it’s been relatively stable. And I think that’s because of the portfolio of consumer staple products that we supply. And again, our feeling of a lot of our products being nondiscretionary for that middle part of the consumer. But going back to that high-end consumer, I mean that’s right where our fragrance and beauty product set and delivering another quarter of double-digit organic growth in that — in those market it is really important to us, and I think reflects the high-end consumer doing it really well and the high-end consumer continuing to put those dollars to work.

I think when you look over at our Metal Containers business and think about food cans for a minute, you get that consumer, again, it’s looking to a value play for nutrition. And we think we’ve got a wonderful vehicle to get nutrition to the folks that are stretching dollars that need it most. And we think that’s a bit of what’s driving our strength in our Metal Container segment as well. So we see it. And I think that middle consumer is struggling a bit. But with our consumer staples portfolio of products, we’re protected to some degree.

Arun Viswanathan: And then just on the pricing side. So obviously, there is some inflation going through. I guess maybe you can just describe potential for demand destruction. I know that the question was asked about CPG companies wanting to not necessarily just yet pushing price. But do you see that — foresee that happening, especially with potential increases in tariffs including on the tinplate side, but then also on resin as it relates to your closures business and custom containers. How do you see kind of demand destruction playing out here?

Adam Greenlee: Yes. I think it’s very early to try to make a final decision on that inflation, the level of inflation and how it’s getting passed through to consumers. I think maybe a couple of things I would give you is just with the construct of our portfolio, we can look back and talk about what happened during maybe CCOVID as an example, where there was significant inflation, particularly in metals that was passed through to consumers, and we did not see much of an impact to demand. I think in some of those more discretionary items. That’s where you do see some general impact from pricing activities that do impact volume, but I continue to firmly believe that our metal containers business is incredibly well positioned for that scenario if it plays out that way.

I think the high-end consumer has shown for the entirety of our time and owning the Dispensing Systems business, shown an ability to continue to acquire and purchase the products at the high end of our product portfolio. So again, I think it’s early, but I would say we’ve got a pretty good degree of confidence that history is not a bad example of what may happen if that situation plays out that you described.

Operator: And we’ll next go to Anojja Shah with UBS.

Anojja Shah: My question is about the guidance this year. And just walk through the quarter on a year-over-year basis. it seems like you’ll be down 4% on the EPS guide in the first half, which is, of course, understandable with the Middle East situation. But on a year-over-year basis, the guide implies a 10% increase in the second half, so quite a big swing from the first half. And I know we talked a lot about it already on this call like new wins, pass-throughs other positive factors. But maybe just to put it all in one place, can you frame out the top couple of drivers of strength that you expect to see in the second half that would let you hit the midpoint of your guidance?

Adam Greenlee: Sure. Maybe just kind of going to the segments and trying to look at a high level, I would say, something of specialty closures, we’re continuing to win and another quarter of double-digit growth in Fragrance and Beauty in Q1. We’re expecting full year growth in the mid-single digit kind of range for dispensing and specialty closures product. So it is new wins and its commercialization of new wins. And we’re not expecting tremendous growth on the food and beverage side. So it’s really driven by the high end of our portfolio that continues to show tremendous strength. On the Metal Container side, I think it’s mostly related to the timing impact that we talked about with one part of our portfolio in fruits and vegetables that that those customers are going to be buying the products more when they are harvested and filled.

So we’ve got a shift from Q2 to Q3. that is impacting our metal containers business. Again, to be clear, no change on the full year outlook for metal containers. And then finally, in Custom Containers, again, we continue to win in that market. So contractual wins that are being commercialized in the second half of the year, versus a prior year that had some destocking activity associated with it, particularly in custom containers, I’d say, a little bit in DSC last year as well. But I think those are maybe the top drivers to to why we’re comfortable because we’ve got pretty good line of sight into all of those items as we look at the back half of the year.

Shawn Fabry: Anojja, the only other thing I’d add is if you look at the cadence of earnings through last year, the first half was incredibly strong. I think both live up 17%. And then a lot of the headwinds that we faced materialized in the second half of the year. Some of those were self-inflicted like destocking impact in the fourth quarter. So that — I think just as you look at a year-over-year comp, when you’re talking about 10% growth year-over-year, that impact as well is [indiscernible].

Anojja Shah: Yes, that’s very helpful. And then in the release, you called out a severe weather volumes in the first quarter, but you were confident you would get it back later in the year. Was the point — I’m just surprised that those orders weren’t permanently displaced. Was the point that those orders are coming back? Or is that new wins in that segment were sort of offset later in the year?

Adam Greenlee: Well, I think the general consensus is those orders will ultimately get refilled because it’s not only impacted our business, it impacted our customers’ production as well. I think the challenging part for some of those high-value dispensing items that we’re talking about specifically is that order books are full. And lead times are — I don’t want to say stretched, but lead times are longer than for some of our other products. So really, the next time that we and our customers have open filling capacity probably get to into Q3. So yes, I think it will eventually be recovered in the course of the year, but it will not be recovered in Q2.

Operator: And we’ll next go to George Staphos with Bank of America.

George Staphos: Congratus on the progress so far. So you may have already covered this. If you have, apologies. Any sense, Adam, in terms of whether there’s any prebuying affecting any of the volumes in your business as much as you’re passing along the inflation that you’re feeling? And might that be an issue in terms of why lead times are stretched. Second question, I’m not really sure necessarily whether the products themselves would lend themselves to this because it’s more high end. And that seems to be doing well for you in relation to answering some of the other questions earlier in the call. But the inflation in resin, is that causing any of your customers on at Beauty in fragrance to be considering other structures, other compositions that you’ll need to deal with in terms of your business.

It sounds like if I want to check on that. And then the last question again, maybe this came up already. You raised the guidance a little bit, that’s terrific. But given the uncertainty, why even do that at this juncture, what do you want us to take away from your outlook for the business that even with the headwind you feel comfortable taking the numbers up a few percentage points.

Adam Greenlee: Thanks, George. For prebuy activities and impact, it’s something we’re watching very closely right now is given how much inflation that we’re talking about. And so we’re deep in conversations with all of our resin-based customers and think we have a pretty good understanding of what those activities are. We have not seen any yet. And we’re working with customers to try to figure out the best path forward through these inflationary times. And so I think all of that is captured within the guidance that we’ve given for Q2. The lead time question. I think what I’d say there, George, is that’s just more of a product mix perspective, right? I mean we’re talking about 9, 10, 11 parts sprayers that are a much more complex manufacturing system and assembly profile than maybe kind of our flat cap beverage closures as an example.

So our lead times are typically longer anyway. And so I don’t want to say our lead times have gone out. It’s just lead times are a bit longer in the order book is essentially full for Q2. So that’s when we’ll see the recovery of those weather-related impacts. Maybe on the high-end product, the luxury end of our fragrance and beauty products as well with inflation. I’d just remind you that our product is a very small percentage of the cost of those products that consumers are purchasing at the luxury and premium level. So obviously, we’re making our customers aware of the inflation. They understand that. But I think in the grand scheme of thing, that inflation is relatively small compared to the overall cost of that product. So no, we are not seeing any look to diversify or change the product or anything at all.

It’s with the strength that they’re seeing. It’s just — it’s continuing on the path that we’ve already laid out.

Shawn Fabry: And George, I’ll just answer the question on the change in the full year forecast. Yes, we did increase our guidance about $0.03 for the full year at the midpoint. That’s really about the operational beat on the unit line for the first quarter that we see holding for the balance of the year. Also some on the corporate expense side, it’s a little bit higher in the quarter, primarily due to corporate development activities that we incurred. So we are calling that up about $5 million for the year. And we’re also seeing favorable movement on the interest line. We had some — versus our expectations. We were a little better in the quarter. So we’re moving that down from $205 million to $200 million. primarily driven by some global treasury management initiatives we did. And also we did do an amendment to our credit agreement that improved our pricing for the go-forward period.

Operator: [Operator Instructions] We have no further questions over the phone. I’d like to turn the call back over to our speakers for any closing remarks.

Adam Greenlee: Great. Thank you, Margo, and thank you, everyone, for your interest in the company, and we look forward to reviewing our Q2 results in late July.

Operator: Thank you. And this does conclude today’s call. We thank you for your participation. You may now disconnect.