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Feb. 4, 2026 at 8:30 a.m. ET
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Silgan Holdings (NYSE:SLGN) reported 4% quarterly sales growth to approximately $1.5 billion, driven by raw material pass-throughs and currency tailwinds, while adjusted EPS decreased to $0.67 due to elevated interest and tax costs. Continued integration and synergy capture from the Vayner acquisition, alongside record performance in its dispensing and specialty closures segment and sustained volume gains in metals—especially pet food—underpinned stable earnings despite operational headwinds. Management guided for 2026 adjusted EPS of $3.70-$3.90, supported by low to mid-single-digit EBIT growth in dispensing and metals, stable custom containers performance, and expected free cash flow of about $450 million amid higher interest and tax outlays.
Adam Greenlee: Thank you, Alex, and we would like to welcome everyone to Silgan Holdings Inc.'s fourth quarter earnings call. Before we begin our discussion on our fourth quarter and full year results and our outlook for 2026, I want to welcome Sean Fabry, who was promoted to CFO in November, to the call. Sean joined the company through the IPEC closures acquisition in 2010 and has served in senior finance roles in each of our operating segments, and most recently on our corporate development team. Sean brings a wealth of knowledge and experience to his new role, that I know will make him and our company successful well into the future.
Sean's looking forward to meeting our analysts and investors in the coming quarters. Please join me in welcoming Sean to the call. I also would like to take a moment to thank Robert Lewis, who informed the company of his decision to retire in March, for his over twenty-one years of steadfast commitment to our company. Since Bob joined the company in 2004, our sales have nearly tripled, and our stock price has appreciated over seven times, representing a 10% compound annual growth rate. Bob's leadership in our finance and corporate development efforts has contributed meaningfully to our growth and value creation. He has been a trusted and valued partner to me, our executive team, and to our advisers.
We wish Bob all the same success as he enters his retirement.
Moving now to our results. Our team continued to show exceptional focus and determination in 2025. Our business navigated evolving consumer spending trends throughout the year, which created a more challenging operating environment for our customers and our company. We delivered our second highest adjusted earnings and free cash flow in the history of the company, returned approximately $150 million in capital to our shareholders, and returned to within our target leverage range just over a year after closing the Vayner acquisition. We made significant progress towards our strategic goals in 2025 as we successfully integrated the Vayner acquisition, continued to outpace the market and our peers, and targeted organic growth products and end markets.
We completed our multiyear cost savings program as expected. We continue to validate the success of our unique operating model in our customer partnerships and are being rewarded in the market with new business opportunities and awards as a result of our unmatched focus on operational excellence, market-leading innovation, and relentless efforts to provide the best total value solutions to our customers. Our dispensing and specialty closures segment, which now represents over half of our adjusted EBITDA, delivered another year of record sales, adjusted EBIT, and adjusted EBITDA, with continued EBITDA margin expansion and significant free cash flow generation.
With the Vayner acquisition now fully integrated and our run rate synergies fully achieved, the business is positioned to continue to achieve organic growth well in excess of our peers as we continue to win an outsized proportion of new product launches in the market. The combined innovation engine of these two market-leading businesses has already yielded additional contractual business wins, and the business pipeline in dispensing products continues to accelerate.
While 2025 included some unforeseen challenges, our team adapted during the year to the changing landscape and, more importantly, have used the learnings from 2025 to further strengthen our processes, which will help the businesses operate and serve their markets in an even more agile and adaptive way in the future. Our metal containers business delivered another year of positive earnings and volume trends, with 4% growth in volume led by 7% growth in pet food products.
While our business was faced with a very challenging circumstance with one of our long-term customers during the year, our teams were focused on protecting our business ahead of this outcome and worked diligently to nearly fully offset the secondary impact of this customer exiting certain markets. More importantly, with the recently announced developments with this customer, we believe we are uniquely positioned to continue to supply this business in the future and, at this time, do not anticipate any further impact from this situation.
In custom containers, our teams continue to build on our commercial success, and despite significant destocking in personal and home care products in the fourth quarter, delivered a record year of profitability driven by our cost reduction programs and continued commercial successes. Our adjusted EBIT and EBITDA margins expanded by 150 basis points to a level well above the target we laid out about a decade ago, and the business is now in a strong position to transition into an accelerated growth phase over the next several years.
Our team continues to demonstrate and validate our unique position in this market, and despite being of smaller scale than some of our competitors, the levels of service we provide, new product innovation, and the value of our long-term customer partnerships create significant opportunity to deliver organic growth in this business. As we turn our focus to 2026, we continue to see significant opportunities to grow our company both organically and inorganically. Our teams remain focused, our strategic initiatives continue to bear fruit, our balance sheet is within our target leverage range, and we believe the opportunities for significant value creation for shareholders in 2026 and beyond remain as compelling as at any time in our history.
At the segment level, we are expecting dispensing and specialty closures organic volumes to grow by a low to mid-single-digit rate in 2026, driven by another year of growth in our dispensing products and improved mix. We expect metal containers volumes to grow by a low single-digit percentage, driven primarily by another year of mid-single-digit growth in pet foods. In custom containers, after a record year of profitability, volumes are expected to be flat as the first quarter is expected to see some continued but limited impact from customer destocking. Importantly, we anticipate this impact to be offset in the remaining three quarters as the business repositions to longer-term growth with key franchise customers.
As we enter 2026, we remain excited about the opportunities that lay ahead for the company and are confident that the structural changes and evolution in our portfolio have positioned us to drive growth in our business in the near and long term. Our teams remain focused on meeting the unique needs of our customers as we continue to compete and win in the markets we serve. Our strategic growth initiatives continue to shape the company's future. The power of our portfolio, the strength of our teams, and the discipline of our capital deployment model continue to drive significant opportunity to create value for shareholders in 2026 and beyond.
With that, Sean will take you through the financials for the quarter and our estimates for the first quarter and full year of 2026.
Sean Fabry: Thank you, Adam. As Adam highlighted, we reported another year of strong financial results for 2025, driven by the continued success of our long-term strategic initiatives, the discipline of our capital deployment model, and the resilience and growth of our products and end markets. During the year, we successfully integrated the Vayner transaction and achieved full run rate synergies. We returned our balance sheet leverage to within our target range in just over a year following the closing of the transaction and completed our multiyear cost reduction program.
Turning to the fourth quarter 2025 results, net sales of approximately $1.5 billion increased 4% from the prior year period, driven primarily by the contractual pass-through of higher raw materials, mostly in our metal containers business, and favorable foreign currency translation. Total adjusted EBIT for the quarter of $150.6 million was relatively flat from the prior year, with higher adjusted EBIT in our Metal Containers segment offset primarily by higher corporate expense. Adjusted EPS of $0.67 decreased by $0.18 from the prior year period due to higher interest expense and a higher tax rate in the fourth quarter.
The fourth quarter tax rate was negatively impacted by certain non-recurring, non-cash tax items, which impacted the tax rate in the quarter by approximately 3% and the year by approximately half a percent. Turning to our segments, fourth quarter sales in our Dispensing and Specialty Closures segment increased 1% versus the prior year, primarily as a result of foreign currency translation of 4%. Higher volumes for high-value fragrance and beauty products were offset by the destocking impact for products in the personal and home care markets. Fourth quarter 2025 dispensing and specialty closures adjusted EBIT was comparable to the record level in the prior year.
As expected, the contribution of double-digit growth in high-value fragrance and beauty products and favorable foreign currency translation were largely offset by the anticipated impact of lower volumes of products for personal care and home care markets and related under-absorbed costs for production and inventory reductions in the quarter. Relative to our expectations entering the quarter, both sales and adjusted EBIT in Dispensing and Specialty Closures were largely in line. In our Metal Containers segment, sales increased 11% versus the prior year quarter as a result of the contractual pass-through of higher raw material costs, principally for steel and aluminum, and higher volumes of 4%.
Our volume growth in the quarter was largely a result of higher volumes for pet food markets of 7%, as we continue to experience strong volume growth in this category. Additionally, we did see a limited amount of pre-buy volume in the fourth quarter, as certain customers pulled forward volume ahead of the anticipated raw material inflation in 2026. Metal Containers adjusted EBIT increased approximately 5% for the prior year quarter. The segment benefited from both strong operational cost management, which was responsible for the majority of the outperformance in the segment versus our expectation entering the quarter, and a limited impact from pre-buy volumes. We estimate the impact of pre-buy volumes to 2025 adjusted EBIT was approximately $2 million.
In Custom Containers, our results were largely consistent with our expectations as sales decreased 8% compared to the prior year quarter due to lower margin business exited as a result of a planned footprint optimization. Excluding these volumes, our volume increased 1% versus the prior year quarter. Custom Containers adjusted EBIT was comparable to the prior year levels. Looking ahead to 2026, we are estimating EPS in the range of $3.70 to $3.90, as compared to $3.72 in 2025, with higher operating income partially offset by higher interest and tax expense during the year.
This estimate includes interest expense of approximately $205 million, a tax rate of approximately 25% to 26%, corporate expense of approximately $45 million, and a weighted average share count of approximately 106 million shares. Interest expense is expected to be above 2025 levels due primarily to the maturity of our 1.4% senior secured notes that come due in April. At the midpoint of our 2025 adjusted EPS range, we will exceed the prior year levels of adjusted EBIT and adjusted EBITDA achieved in 2025.
From a segment perspective, low to mid-single-digit percentage total adjusted EBIT growth in 2026 is expected to be driven primarily by a low to mid-single-digit percent increase in dispensing and specialty closures adjusted EBIT and a low single-digit percent increase in metal containers adjusted EBIT. Custom Containers segment adjusted EBIT is expected to be comparable to 2025 levels as the business completes its multiyear cost reduction initiative and transitions to organic growth during 2026. 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 containers 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 now represent more than half of the segment volume. Custom containers volumes are expected to be comparable to prior levels as first-quarter volume will be lower than the prior year due to a limited carryover of destocking activity, which is expected to be offset by growth in the subsequent quarters.
Based on our current earnings outlook for 2026, we are providing an estimate of free cash flow of approximately $450 million as operating earnings growth will be partly offset by higher cash interest and tax, and slightly higher CapEx of approximately $310 million to support investments in future growth in dispensing and pet food products. Turning to our outlook for the first quarter of 2026, we are providing an estimate of adjusted earnings in the range of $0.70 to $0.80 per diluted share as compared to adjusted EPS of $0.82 in the prior year period. First-quarter interest expense is anticipated to be in the range of $45 million with a tax rate of approximately 25% to 26%.
From a segment standpoint, first-quarter dispensing and specialty closures adjusted EBIT is expected to be below the prior year period, principally as a result of the year-over-year impact of the benefit of selling through prior year inventory in an inflationary environment in 2025 as compared to the headwind assigned to prior inventory in 2026 for steel food and beverage products in Europe. Metal containers adjusted EBIT is expected to be comparable to slightly below the prior year level in the first quarter as a result of the impact of limited pre-buy volume in 2025 that pulled volume forward from 2026.
Custom Containers adjusted EBIT is expected to be modestly below prior year levels in the first quarter due to the carryover destocking activity into January. With that, we will open the call for questions. Melinda, would you kindly provide the directions for the question and answer session?
Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one to signal for a question. We will take our first question from George Staphos with Bank of America. Please go ahead.
George Staphos: Thanks very much. Hi, everyone. Good morning. Thanks for the details. Bob, congratulations on a well-earned retirement. And Sean, nice to chat with you again, and welcome to the call. I guess my first question, Sean, could you give us a bit more detail in terms of the first-quarter outlook for DSC? Just kind of the puts and takes that you see. I think you mentioned there was also some impact from pre-buy.
More broadly, with DSC having grown now to being the largest business, I would imagine maybe you disagree that the order patterns, the operations, the way that business runs might be different than what you know, you normally would have seen in a traditional Silgan business, say, you know, five and ten years ago. Philippe and Sean, what and Adam, you know, how do you manage the business? How do you manage forecasts? Do you keep your customers in a narrower band relative to say what traditionally you would have seen in metal? And then I might have one follow-on after that. Thank you.
Sean Fabry: Sure. So I will take the first part of that question, Adam will take the second part. So for the DSC segment in the first quarter, we are seeing low to mid-single-digit volumes. And one of the challenges that we are facing there is that we do have some low-cost inventory that we put through the system in 2025. So a little bit of a headwind going into the quarter to overcome that EBIT benefit from that position.
Adam Greenlee: And then, George, on the dispensing and specialty closures business, you know, the portfolio evolution that we have been talking about for the last decade, you are right, has moved that business to our largest business in the portfolio now. And also correct that, you know, that it is a bit of a different business than kind of the historic food can business for Silgan or maybe even some of the rigid plastic packaging businesses that, you know, the company started with when we were founded back in the eighties. You think about colocated facilities that, you know, you are integrated very deeply into your customers.
In many cases, you are buying customer assets so you are part of their production model already right out of the gate. And I think as you think about, you know, the growth that we have had in fragrance and beauty and some of the care and home care products and dispensing, especially closures, it is a bit of a different supply relationship or more of a supply partner with an outside-in perspective versus being kind of on-site and in the weeds with how they are running their business. So I think, you know, it has we have some learnings from '25. We will be very clear about that.
And I think what you know, part of those learnings are taking a broader view, broader perspective on the macro environment and other influences that may affect our customer businesses more so than maybe just what is within our own two, four walls. As we are on-site near site in those kind of food can operations. So yeah, part of that, George, is as we have talked, you know, we have taken a broader view of risk as we have come out with our guidance now for Q1 and also for 2026. To try to take into account some of the unknown risks that maybe we had not included in guidance before, again, taking those learnings from 2025.
George Staphos: Adam, thanks for that. May my follow-on, I will turn it over to everyone else. If for you to be and recognizing there are no guarantees in life. Right? Forecast can be significantly above or below. That is the world that we are all in. At the low end of your guidance, what would be some of the key volume and margin considerations across the business? So, again, not saying that is where you are necessarily going, nothing is guaranteed. But at your low end of guidance, what is embedded in that? Thank you.
Adam Greenlee: Yes. I think, George, I mean, Sean walked through kind of our volume expectations for each of the segments. I think we have got a pretty good feel for demand profiles and patterns with our customers and with the business that we have. I think maybe to try to answer your question, I would say, you know, broader market conditions that might influence our customers' demand for their products probably is one of the items I would point you to that move us closer to the low end of the range.
But, again, we have taken a very broad approach to taking those risks into consideration to develop the range that we have and that is included in our guidance to the midpoint as well.
George Staphos: Okay. Thank you.
Operator: If you find that your question has been answered, you may remove yourself from the queue by pressing star 2. We go next to Matt Roberts with Raymond James. Please go ahead.
Matt Roberts: Hey, Adam, Sean, Alex. Good morning. Congratulations to Sean and Alex on your new roles. First on the PSC volume for 2026, wondering if you could help me parse that out and bear with me. I am going to put about three in one here. But first, on hot fill beverage, how did volumes perform in 4Q? And the outlook there for '26 or contribution from new contracts there. In Home and Personal Care destocking, was there any lingering impact in 1Q in DSC that might have missed that? And lastly, in fragrance, I mean, that continues to grow double-digit growth.
And by now, for comps alone, you would think that it would have slowed at some point, but based on customer orders or innovation pipeline, what are you expecting there? And is it a function of high-end consumer doing well or continued new product launches or partners expanding their distribution channels? What is going to sustain momentum there?
Adam Greenlee: Sure. So maybe just jumping back to kind of fourth-quarter volume. So, you know, for DSC, Matt, really volumes were very close to what we expected. Right? So, you know, as Sean pointed out, double-digit growth in our fragrance and beauty volumes. You know, personal care and home care had anticipated the destocking. It did happen in Q4. It was essentially right in line with our expectation. I think there is a slightly different answer here than containers. So to be really clear, we think the destocking activity is complete in our dispensing and specialty closures segment. And so, you know, volumes were right in line with expectations, including food and beverage as well.
So fourth quarter played out pretty close to what we thought. As we turn to the full year of 2026, you know, again, as Sean just outlined, you know, significant growth, again, expected in fragrance and beauty. You think about food and beverage and maybe some of my comments I just made to George. Our assumption for volume right now is going to be comparable. So you mentioned, you know, new contractual wins. Yes. There are some. We have taken an approach that we are going to include some conservative guidance for the market. For our food and beverage, hot fill products, and sports drinks, etcetera. As we are looking at 2026, and we will see how that plays out.
Fragrance and beauty, it is really more of the same story. And I think, Matt, as we have talked before, you know, the development pipeline for these products, it is multi-year. It is probably not quite as long as some of our health care products, but you are talking two to three years. So all of this volume that we are going to deliver in 2026 has really been in the innovation pipeline for us for several years. So, you know, there is really no surprise to us. I think the really important point here is that we keep getting rewarded with our performance from our customers with new business wins.
We get a disproportionate amount of the new product launches they have, and that is what is continuing to drive, you know, I will say the double-digit growth that we had in the last February 2025. In our estimate for 2026 as well. So maybe to go back to your question, Matt, I would say it is for fragrance and beauty, it is all of the above. All of the things that you outlined are the reasons why we continue to grow faster than the market. And, again, we take a lot of pride in that. We take it very seriously. We are right now on twenty-seven and twenty-eight product launches.
And have a pretty good feel for what that is going to look like at this point. Given that development pipeline. So hopefully, that covered all your items.
Matt Roberts: Certainly did. Appreciate all the detail there. And as a follow-on, I think I asked about metal. So 4Q EBIT came in better than I think your prior expectations and margin even improved with the higher pet volume mix. So you continue to invest and see pet food growth there, are there any contractual changes in metals that are going on as you continue margin expansion, excluding any raw materials impact, of course? Or was it cost outs that are driving strong results there? Any additional color you could have on margin expectations absent raw materials in '26?
Adam Greenlee: Sure. There are probably three things to really think about. I think the single largest is the cost reduction initiatives that we put forward in actually all three of our segments. Certainly, metal containers have had a good portion of that cost savings program over the last two years. So they have executed really well against that cost savings initiative and have lowered the overall cost structure. As you can imagine, you know, volume leverage in this business is incredibly important. So as you continue to deliver growth in pet food and 4% growth in the entirety of the business, that leverage is pretty strong as well. So that it is helpful for the operating margin.
And then finally, you know, you are right. We continue to invest to grow with our largest customers. I think it was and guys, correct me if I have got it wrong. It was 2024 that we announced a significant long-term extension with our single largest customer. And we said at that time that, you know, there is nothing structurally changing about the contract, Matt. But we thought that contract would be margin accretive over the life of the agreement. And it is playing out the way we anticipated. So that is a little bit more on the margin versus our cost reduction initiative.
But, you know, our anticipation is our largest contracts are going to be slightly margin accretive over the life of those agreements as well.
Sean Fabry: Matthew, the only other thing to add is as you think about 2026, remember we have, you know, again, raw material inflation in this segment. So that will have a mathematical impact on margins, so probably stable on margins for 2026 given the incremental leverage on pet food offset partly by the higher sales from pass-through raw materials.
Matt Roberts: Adam, Alex. Super helpful. Thank you again.
Operator: We will go next to Ghansham Panjabi with Baird. Please go ahead.
Ghansham Panjabi: Yes. Thanks, operator. Good morning, everybody. And my congrats to Sean, Bob, and Alex as well for all the news and the promotions. Best wishes into the future. I guess, you know, Adam, if we go back to the dispensing closure segment and thinking back from a high-level standpoint on 2025. Right? So if you, you know, I think you started to see the destocking impact on beverage pretty early on. Relative to your initial guidance, and then broadened to other categories as the year unfolded. Have you seen normalization in demand for the categories that were initially into the downturn? And just more broadly, where are we on destocking?
Do you still see some lingering impacts into, you know, early part of the year, given the sequence of what unfolded last year?
Adam Greenlee: Sure. Yes, I think you pretty much got that right, Ghansham. So the food and beverage destocking activity really took place for us. We saw that in Q2. And to your point, you know, the rest of the year in food and beverage roughly played out as we expected. We think those volumes are now normalized. We think that year-end inventory levels in the system are at the level that our customers had targeted for year-end. And as we turn the page going to 2026, you know, we are calling out comparable volumes for food and beverage. So we had a little bit of destocking in Q4 for our personal care and home care products in the segment.
We believe that is completed in Q4 and will not have an impact on Q1 volumes for the dispensing of specialty closures segment. Shifting gears slightly, there is a little bit of a carryover of destocking for custom containers. And really, that just is a simple probably unique position that business has in our portfolio. As you know, Ghansham, most of our customer relationships are direct. We have got a 10 to 15% distribution business in our custom containers or our plastic bottle business. And typically, destocking just takes a slightly different timeline in that distribution segment. Again, thinking just the simple fact that there is another layer of inventory in the supply chain.
So typically, destocking starts a little bit later, ends a little bit later, and so we are seeing that carry over a little bit into Q1. Saw that activity a little bit in January as well. So that is included in our guidance. But to be really clear about DSC, that destocking activity is now completed as of the 2025.
Ghansham Panjabi: Gotcha. Perfect. Thanks for that. And then Vayner packaging, you know, I think originally when you outlined it the logic behind the transaction, it was going to be additive as it relates to growth. It was very complementary, etcetera. It sounds like the integration is well underway. What about the commercial synergy specific to the asset? The underlying growth that you are seeing there? Any specific wins you can cite as it relates to, you know, step functioning, your position in pharmaceuticals and health care and so on?
Adam Greenlee: Sure. You are right. It has been a great addition to our portfolio. I would say the acquisition integration is now complete. We achieved our synergy targets. You know, we are now at fifteen months, let us call it, post-acquisition. We have achieved our run rate synergy targets. And I think, you know, you are touching on an item that the commercial synergy is not really something we typically include in our synergies, but they are absolutely there in this business. And you are taking two market-leading dispensing businesses and combining them, you know, particularly you think about Vayner's position in North America, great products, very limited reach, and very limited scope in North America.
We have been able to take some of their products, their technology, to our large food customers that Silgan has such a great history and relationship with. And we have been awarded new business not only on the food side but some of our other consumer products as well. So, you know, I think we are getting the best of both worlds. Between the two businesses, leveraging those relationships wherever they may exist, whether it is legacy Silgan dispensing, or at the Vayner customer relationship level. And we are seeing growth opportunities on both sides of that equation.
Ghansham Panjabi: Okay. Thank you for that.
Operator: We go next to the line of Gabe Hajde with Wells Fargo. Your line is open.
Gabe Hajde: Yes. Sorry about that. Adam, Alex, Sean, good morning. Wanted to ask, we are hearing a lot of mixed messaging from some of your peers as well as, you know, customers trying to navigate the current environment. Do not want to go down the laundry list but population trends, affordability, GLP-1, etcetera. We are seeing some restagings, some strategy changes at big CPGs. I am just curious, in this type of an environment, obviously, nothing has been sort of normal, let us say, the past five, six years. But just as you look across your portfolio, think about your go-to-market strategy, your long-term relationships and contracts, etcetera.
Do you see the current environment where it seems like customers are looking to reduce costs complexity, things like that in the supply chain as an opportunity for Silgan? And, you know, how would you say that is incorporated into your thinking and or the guidance for '26?
Adam Greenlee: Sure. I mean, I think, you know, '25 was a very volatile year for all the same reasons that you outlined, Gabe. And I think, you know, we all had to deal with that one way or another. And I think, you know, for us, you know, the vast majority, I mean, almost all of our products are in consumer staples category. So, you know, we get away from the discretionary spend quite a bit of our portfolio. So, you know, I think we feel confident that our products continue to have good underlying demand even with population trends and affordability conversations.
You know, the food can will continue to say even with some inflation that we pass through, is the lowest cost means of getting nutrition to consumers that need it. So we feel like our portfolio of products is advantaged in this kind of environment. And I would agree with you that we think there is quite a bit of opportunity with our customer relationships, our portfolio of products, and, you know, some of the sustainability initiatives that we have got underway, not only just at Silgan, but with our customers as well. Whether it is lightweighting or other cost-out initiatives, you know, those are always top-of-mind activities between us and our customers.
So to answer your question, Gabe, you know, yes. We think those are opportunities. How that fits into our guidance for 2026, what I tell you is we have actually broadened the kind of view of the unknown risk as it relates to things like population trends, GLP-1s, affordability discussions. And, you know, we have taken probably a more conservative approach to how those opportunities might play out. But, you know, it gives us confidence that our products are well-positioned for the marketplace and the volatility that we are all dealing with.
Gabe Hajde: Alright. Thank you for that. One, I guess, digging into maybe Ghansham's question a little bit with Vayner. As well as I want to say in 2021, you guys had acquired Unicep. But just anything that you can talk about maybe higher margin products beyond fragrance in the dispensing business. You are seeing growth opportunities I think you guys were working on a couple of maybe, you know, dose products and things like that.
Adam Greenlee: Sure. Look. I think health care and pharma is probably the next logical step of the conversation. As we have talked about before. And clearly, the margin profile, the growth rates of that part of our portfolio really are similar, if not even stronger than what we have seen in our fragrance and beauty business. The size and scale of our pharma health care business, you know, it is growing rapidly, but it started from a much smaller starting point at Silgan. Obviously, with the Vayner acquisition, what we brought in from their health care, assets and business portfolio has been very complementary, very beneficial. We are continuing to grow.
It is a longer development cycle than what I mentioned on fragrance and beauty as I think you will all appreciate. So, yes, we have been working for many years on some of these products. And have some that are reaching market now, some that are in final stage development. But the pipeline is as strong and active as we have seen, you know, really since you go all the way back to the acquisition of WestRock. And I think it, you know, we were talking at one point that it would be disappointing if we did not double the size of our health care business and call the next three to five years.
Gabe Hajde: Great. Thank you.
Operator: We turn next to Mike Roxland with Truist Securities. Your line is open.
Mike Roxland: Thanks, guys, for taking my questions. Sean, congrats on the role. Bob, congrats on your upcoming retirement. It has been great working with you. First question that, Adam, just want to follow-up on what Gabe mentioned in terms of Vayner. Can you provide some more color just around the wins that you achieved? You mentioned that in your remarks. So can you tell me the type of products that were or be maybe speak broadly about the type of products that you are, gain wins in and what type of growth you are expecting, this year. From Vayner with those wins?
Adam Greenlee: Yeah. I think, you know, again, we will try to say, Mike, that Vayner's been fully integrated into our dispensing business. So when we talk about dispensing products growing in a mid-single-digit, that is including Vayner. Again, we fully lapped the comparative. You know, we acquired the business, I think, in October of 2024. So yeah, those results, for the most part, were already fully comparable in our fourth-quarter results. So, you know, I think combined, we feel confident with that mid-single-digit growth. I mean, either the product portfolio and where we are able to get new business awards with the combination. I will give you a great example.
Again, in the North American market, you know, we talked a lot about during the acquisition that they have a terrific valve technology for their business and for their portfolio of products. And that is really something that we were very small in Silgan. We have been able to take that technology and apply it with other customers that really advanced kind of Silgan technology with existing customers. So, you know, I do not know how we want to get credit there. It is an existing customer for Silgan. And we are using Vayner's technology. So I think we all win in that scenario, including our customers.
But it is really the power of the combination as I think the bigger part of the discussion. Have some other products again just to, you know, deodorant products that are winning. I think they were a little stronger in some of their personal care kind of shower, you know, multi-use products with dispensing closures. And we have just been able to continue to leverage that strength on the Vayner side and grow out that part of our portfolio, particularly in North America. With our existing customer base.
Mike Roxland: Very helpful. Appreciate the color there, Adam. And just one quick follow-up. In the past, I believe one of your peers around medical containers may have picked up some of the tomato business. Which cost you some share. With this bankruptcy settlement, it appears that one of the asset buyers is getting some of that business back. So could you potentially regain some of the Tomato share that you previously lost? And then relatedly, you mentioned, in your script that you expect no further issues from this customer that was in bankruptcy.
If there are no other changes on the assets continue to run as is, can you remind us as to the total EBITDA loss in medical containers if any? I am not saying there is any, but if there is any EBITDA, if there is a reset lower, could you remind us if that what that is? And does Silgan still intend to pursue any rationalization and consolidation in metal containers? Thank you.
Adam Greenlee: Sure. And maybe I think the first thing I would say, Mike, is that, you know, the situation with that customer is not fully resolved. It is a process. And they are making progress in the process. So you are right. There was an auction, and there were three winners of the auction. I mean, the business that we are talking about really falls into three categories. There is a broth business, a fruit business, and a core vegetable business. So good news for us is that from an outcome, again, there are still procedural steps that have to be taken before, you know, the winners of the auction take over the assets and the brands.
But the broth and the fruit are going to our customers that we supply today. And so we feel pretty good about the ongoing relationship there. The veg business is a new player into canned vegetables, but a prominent player in the fresh category. So, you know, I look at that and I say, you know, on the veg side, we are colocated. We are incredibly well-positioned to continue to supply all of the can requirements that new customer would need to continue to operate the facility where we are colocated. So I think that, you know, again, we will see what happens as this final resolution plays out.
You know, we are taking, again, a cautious approach to our thoughts here. We do not think there is significant upside. We do not think there is significant risk from where we are either because of those ongoing relationships and the supply situation of where we are. Regarding our facilities, again, we are going to wait and make sure we understand exactly what the go-forward position is once the proceedings have reached a resolution. But, you know, we as part of our $50 million cost reduction program, we had closed a facility in 2024 that was supplying fruit products to that customer. And we consolidated that into other operations to get the benefit of the consolidation.
So really nothing to do from that perspective. And, you know, I think it is a great question for the next earnings call. Hopefully, the entire process will be resolved. But, you know, for us, Mike, I do not view 2026 as having any further risk than what we experienced in 2025.
Mike Roxland: Great to hear, Adam. Good luck in the quarter and the year.
Adam Greenlee: Thank you.
Operator: Our next question comes from Anthony Pettinari with Citi.
Anthony Pettinari: Good morning. With regards to the steel and aluminum tariffs, is it your view that customers and consumers have sort of fully absorbed the impact of the tariffs and it is reflected in their behavior and the price of the package? Or is it possible that you could see some kind of lagged customer change or consumer change over the course of the year? Either changing product positioning or consumer change in behavior, just wondering how you kind of think about that in 2026.
Adam Greenlee: Yes. Well, maybe let us start with 2025. It was a very volatile year on raw material costs because of those tariffs and kind of the limited notice that we had to deal with that prior to the implementation of tariffs. And Anthony, as you very well know, you know, our contracts are sort of designed to make sure we are insulated from those kinds of activities. So, you know, we contractually pass through those costs and those tariffs onto our customers and they then onto the consumer. So, you know, I think, you know, those tariffs were kind of let us just round about, call it, midyear, you know, April, May, June of '25.
So there is some full-year annualization of those costs in 2026 as we get a full-year impact of those. I do think the market has absorbed those costs. In many cases, our customers had passed those costs on through to consumers. And they are now really challenging themselves on kind of promotional activity trying to understand what the price elasticity is. Across the board for those products. But to be really clear, the food can we still think is competitively advantaged from a cost standpoint on the store shelf. Again, for those consumers that are looking for nutrition, we think it is the lowest cost means of getting nutrition to those consumers.
So, you know, we are still talking to our customers about their pricing activities for 2026. It is a blend. It is different by customers. You can imagine there is a blend of promotional activity trying to drive some volume. There is also, you know, still some conversation about cost recovery. So I think we will see it play out more as we get through the year, but I think it is a balanced approach that all of that means I think it is fairly well absorbed in the market. I think our volumes, again, nice growth for food cans in 2025. See continued growth in 2026 as well.
So we think that particular package is positioned very well even with the tariffs that they have already incurred.
Anthony Pettinari: Got it. That is very helpful. And then just switching gears and following up on health care and the opportunity there. I think you disclosed that health care was 3% of sales in 2024, maybe at better than company margins. When you talked about doubling, I think, over the next few years. So, I guess, just make sure I got it right, should we think about healthcare maybe going from low single-digit percentage sales maybe to high single-digit percent of sales, you know, in the next three years or so or something like that?
And I guess, related, are there acquisitions that could really accelerate that exposure or is it really more kind of the organic growth with clean rooms and all the stuff that you are doing internally?
Adam Greenlee: Sure. Again, it is a great market. We are excited that we are continuing to grow and what the future looks like for our healthcare business. So I think you are right. I think you mentioned a 2024 number, so it has grown a little bit beyond kind of that number. I would say we are still in that 200-ish million just as a proxy of total revenue. So could that easily get to 400 million over the course of the next couple of years? Yes. We absolutely think so. How we get there?
That is with our own pipeline, and that is with our own kind of contractual obligations that we have already secured over the next three to five years with the drugs and pharma and health care products that are in development with our largest customers. I think you raised a really good point, Anthony, that, you know, I think as we have continued to expand our dispensing and specialty closures segment, with each acquisition, we say it opens a broader horizon for future acquisition opportunities. Vayner is a great example. It brought a lot of products, but it brought a very strong health care business with it.
And we think that opens up even more opportunities from a corporate development perspective and where we can inorganically continue to grow out the business as we have done in the past. So I think, yeah, we even said it in maybe some of the prepared remarks, you know, the opportunities for organic and inorganic growth for Silgan are probably as great as at any time in my twenty-one years that I have been with the company. And, you know, we are extremely positive and excited about what the future, particularly in health care products, looks like for the company.
Anthony Pettinari: Great. That is very helpful. I will turn it over, and congrats to Bob and Sean.
Operator: Move next to Daniel Rizzo with Jefferies. Please go ahead.
Daniel Rizzo: Good morning. Thank you for taking my questions. So not to belabor the point, but on the last call, thought consumer caution within dispensing and also in custom containers was kind of something that they are watching because of, again, affordability issues and things like that. But it does it seems to have faded. So I was wondering if that was just kind of a temporary blip amongst your customers or something that kind of bears monitoring over the rest of the year.
Adam Greenlee: Well, I definitely think it bears monitoring over the course of the year. I think, you know, what I was trying to convey, Dan, is that in that affordability discussion, we think our products are incredibly well-positioned to be a very positive value driver for customers that are seeking affordability across a whole bunch of different products. And that is really where a good swath of our portfolio sits. So we actually encourage that conversation and, you know, we will be watching it closely. But we think our products are very well-positioned for that discussion.
Daniel Rizzo: Right. And then everything that has happened with your bankruptcy with the customer, does that change how you kind of, I do not know, design contracts or do business with the customer like that or just in metal containers in general? I mean, is this just kind of a one-off thing that you just move past?
Adam Greenlee: Well, again, I think since our founding, it would be the first large customer bankruptcy that we dealt with in our metal containers business. And, you know, I go back to the contractual nature of this part of our portfolio that it is just the contracts have been so well written over a long period of time that, you know, the company did not face any detriment during the course of one of our large customers going bankrupt during the year. So, you know, our teams did a great job of protecting the company, but in fairness, the contracts allow us to do that as well.
So, you know, I think it is just again, it is more of the same as far as the contractual nature and the protections that we build into those contracts to make sure we protect our company and our shareholders from any adverse outcome.
Daniel Rizzo: Thank you very much.
Operator: We will go next to Anas Shah with UBS. Please go ahead.
Anas Shah: Hi, good morning, everyone. Thanks for taking my questions. We have some new FDA food guidelines that came out recently promoting protein. It seems to me like that would be pretty positive for your metal cans business. Do you see that as a significant opportunity for you, or are there offsets elsewhere in the portfolio? From these guidelines?
Adam Greenlee: Sure. I think, you know, we are working very closely with our customers to make sure that we help them position products into the marketplace to really accommodate or maybe incorporate the new FDA guidelines. So, you know, we look at protein as part of our portfolio. And, you know, our high-protein products. Again, the can is a great vehicle to get that nutritional value to consumers. And, sure, I mean, we think it is an opportunity, but there are several opportunities that we continue to work on. You know? So I do think we are working with our customers. There is nothing specific that we are outlining in our guidance or anything at all.
It is just one of the puts and takes. We would typically consider as we give forward guidance.
Sean Fabry: And then noted just for context, protein is about 10% of the metal containers volume.
Anas Shah: Right. Thank you. Okay. Thank you for that. And then also, just your CapEx this year is stepping up modestly. I think, $10 million year over year. And you mentioned dispensing and pet food growth sort of driving that. Any details you can give there on what way you expect CapEx to step up?
Sean Fabry: Yes. I think our guidance was $310 million for 2026. And really, that is driven by increased growth in pet food, as you mentioned, and dispensing products. We are really happy with our pet food customers, and we are continuing to invest money in that space where we see the growth prospects. And, honestly, we are under a long-term agreement to do so. So we are happy to do it and to invest in that space where we see the growth.
Adam Greenlee: And I think I just maybe to add to that, if you look back over the last thirty years of our CapEx portfolio, you know, investments in wet pet food have been very consistent in our CapEx profile. It might not be every year, but we are investing to support that customer growth, again, driving significant volume growth for the company over a very long period of time.
Anas Shah: Great. Thank you.
Operator: We go next to Arun Viswanathan with RBC Capital Markets. Please go ahead.
Arun Viswanathan: I guess, yes, first off, congrats to Bob. Great working with you over the last several years. And Sean, look forward to working with you as well. And then just on the results. So, the guide, I guess, first on volume. So I think you said low to mid-single digits in DSC. And low single digits in metal driven by pet food. Just curious on the pet food item because you do face a pretty tough comp there, and you have seen some volatility. So maybe you can just kind of parse out, what drives that and I guess, where are you in kind of penetration in wet pet?
And then on DSC, you know, I think you had a relatively kind of choppy year last year just given some of those consumer trends. Would you say that, you know, you have kind of settled down? And were there any execution issues that you had last year that you have maybe addressed, or was it just mainly market impacts? Thanks.
Adam Greenlee: Sure. Maybe just to address the DST item. I think really, the big items that we talked about during the year were much more related. Right? So you had the food and beverage item, and sports drinks in Q2 that we talked about earlier on the call. Yes. A little destocking in Q4 for personal care and home care products. Those are definitely market-related activities that were the two items, I think, in DSC that went a long way to challenge kind of the performance and fragrance and beauty that was fantastic through the course of the year. So moving over to metal containers.
Again, you know, I think if you think about wet pet food, this has been an annual grower for us for decades. And we have been a requirement supplier to our largest customer since we bought assets associated with their business. And, you know, they continue to invest in capacity. Arun, you know, I know we have talked about this before, but the primary animals that we are talking about here are cats and primarily cats and a little bit of small dog as well. So those populations have grown over time. They continue to grow going forward. I think wet pet food in these categories is considered to be a premium product.
So, you know, we have not talked a lot about the k-shaped economy on this call, but it is as you get back to some of those larger macro trends, high-end consumer is still seemingly doing pretty darn well. And we see that in our wet pet food segment. And then the last piece of it, and we have seen this for decades again, once pet owners feed their animals wet pet food, it is very rare that they move out of the category and they in a cat or a small dog. Large dog moves in and out, and we have always talked about that. It is a very small part of our portfolio.
But for cats, you know, we have seen the stickiness of that product with pet owners and with the consuming animals for a very, very long time.
Arun Viswanathan: Thanks for that. And just as a quick follow-up, just on the cash flow. So the $450 million guide, was there any inventory impact? And is there potential for upside if that is not as bad? Or how would you kind of characterize that $450? Is there any, you know, kind of variability in that? Thanks.
Sean Fabry: Yes. This is Sean. We normally have working capital improvement initiatives every year in our free cash flow and 2026 is no different in that regard. I would call it a modest amount of working capital improvement, but generally speaking, we are expecting our operating earnings to go up, call it, $20 million, $25 million. And that is offset mostly by higher cash interest and taxes in the year. And that gets us to the $450 million for 2026. Bridging that versus our 2025 number.
Arun Viswanathan: Thanks a lot.
Operator: And we will return back to the line of George Staphos with Bank of America. Please go ahead.
George Staphos: Hi, guys. I will try to make it quick. So you have talked a lot about on this call here and there kind of the impact healthier living and the like. As you have analyzed across your categories, is it a net positive, neutral, negative all that commentary relative to the end market growth and demand you would see across food can DSC and custom containers as you have analyzed it? Second question related we have seen over the last year or so new products, zero-calorie products on the beverage side. Anything that we should be aware of that could perhaps help growth in the dispensing segment for this year or in the next couple of years that you know.
Last question from me, just on availability and supply chain in metal, steel and aluminum. I assume you are doing fine. Just wanted to check the box on that. And has there been any commentary at all from your suppliers about maybe bringing back some tinplate capacity to the US? So thanks for that guys. Again, congratulations to everybody to Sean Alex and Bon Voyage. Bob, talk to you guys soon.
Adam Greenlee: Thanks, George. As far as the healthier conversation that we were having and its impact on volume growth. I mean, I think it is relatively neutral to our volume growth. I mean, I think we are, you know, we are well-positioned already for a variety of outcomes across the portfolio that we have. It is a bit of the intentional nature of how we built out the portfolio that we can do well in different economic circumstances. We can do well with different consumer preference patterns evolving. And feel pretty good that, you know, we have got that captured. And we will support our customers in whatever way we need to. You are right.
I think 2026 on the food and bev or on the beverage side, is going to be a year of innovation. You know, one of our largest customers has clearly stated that. And, you know, whether it is zero-calorie or better-for-you products, you know, we are watching very carefully to see what is new volume brought into the category versus cannibalizing some of the existing products. So, you know, again, I would say roughly we are neutral in that scenario because the cannibalization is just it is a similar volume comp volume to what we already had. I think they are looking at it from a value perspective as well.
With potentially healthier for you products requiring a premium in the marketplace. And then as we think about, you know, aluminum and steel supply, you know, our two largest expenditures that we have and critically important to our success as well. So, you know, we have talked a lot about tinplate in particular and the US market, and the US market being a net importer now with significant tariffs. So it is a challenging environment. You know, we are one of the largest buyers for both steel and aluminum can sheet anywhere in the world. So you are right. You can check the box for us. We get the products that we need.
Our contracts allow us to pass through those costs. Whatever they need may be to our customers. Take that very seriously, and we fight like crazy to get the lowest cost for ourselves and for our customers, George. But, you know, I think the market dynamics are continuing to evolve. I would love to tell you there might be more tinplate capacity coming on in the US. It has to be high quality, wide tinplate capacity. For it to really work well in the manufacturing systems and not just Silgan. But can manufacturers have assembled now over time. So there will be some hurdles to that.
So I think our perspective is it is going to be more of the same as we go forward. We will get the products that we need. And regardless of where that supply comes in from, we would love to buy product raw materials in the market where we are making products and selling products. Unfortunately, the way the tinplate market in the US has evolved over time we are no longer able to do that.
George Staphos: Thank you, Adam.
Adam Greenlee: Sure.
Operator: We have no further questions. I will turn the floor back over to Adam Greenlee, President and CEO, for any additional or closing remarks.
Adam Greenlee: Great. Thanks very much, Melinda. We appreciate everyone's interest in the company, and we look forward to discussing our first-quarter results near the end of April. Thank you.
Operator: This concludes today's conference. We thank you for your participation. You may disconnect at this time.
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