Yahoo Finance AptarGroup Inc (ATR) Q1 2024 Earnings Call Transcript Highlights: Strong Growth and Strategic ...
Core Sales Growth: 5% increase
Adjusted EPS: $1.26, up over 30% from previous year
Pharma Segment Sales Growth: High single-digit core sales growth
Injectables Unit Performance: Marked improvement, final phases of capacity expansions expected to be validated for commercialization in early 2025
Beauty Segment Sales Growth: Flat year-over-year
Adjusted EBITDA: $179 million, 16% increase from previous year
Pharma Segment Adjusted EBITDA Margin: 32%, improved by more than 1 point
Beauty Segment Adjusted EBITDA Margin: Approximately 13%
Closures Segment Adjusted EBITDA Margin: 15%
Free Cash Flow: Approximately $17 million
Capital Expenditures: Approximately $76 million, primarily in Pharma segment
Q2 Adjusted EPS Outlook: $1.30 to $1.38 per share
Release Date: April 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Stephan, you mentioned again that you expect pharma to grow in its normal core growth range of 7% to 11%. How should we expect the various end markets or product categories really to trend this year within that 7% to 11%? A: Stephan B. Tanda - AptarGroup, Inc. - President, CEO & Executive Director: Within pharma, the proprietary drug dispensing solutions are growing nicely and we expect that to continue throughout the year. In biologics, we are rebounding from last year's challenges and see continued good growth. The growth is broad-based, led by proprietary drug dispensing solutions.
Q: In terms of the timing issues that you mentioned in terms of beverage closures in Europe, should we be worried at all about what the implications are longer term for plastics and beverages in Europe? A: Stephan B. Tanda - AptarGroup, Inc. - President, CEO & Executive Director: Currently, everyone is transitioning to the tethered caps. There are some inventory and technical adjustments, but we do not see any long-term concerns for the beverage business. We believe that the reality of carbon footprint and total life cycle analysis prevails, indicating a return to general pragmatism.
Q: Did the operating margins for pharma come in line with expectations, especially considering the strong growth in that segment? A: Stephan B. Tanda - AptarGroup, Inc. - President, CEO & Executive Director: The margins were in line with expectations. The rapid growth in injectables, which grew by 50%, has a negative mix impact on overall pharma margins. We continue to reinvest in pharma, including in innovation and new business development, which aligns with our expectations for margin performance.
Q: For fragrance, are you expecting growth to remain positive for the rest of the year despite difficult comparisons? A: Stephan B. Tanda - AptarGroup, Inc. - President, CEO & Executive Director: Yes, we expect fragrance to end the year with growth in the 3% to 6% range. The regions continue to perform well, and we see strength in Latin America as well. Despite challenging comparisons, especially in Q1, the outlook remains positive.
Q: You mentioned that the capacity expansions in pharma are coming to an end. What is the expected capacity utilization post-expansion, and what are the plans for the next 5 years? A: Stephan B. Tanda - AptarGroup, Inc. - President, CEO & Executive Director: We are done with major new buildings for capacity expansion. Future capacity increases will be smaller increments within existing facilities, focusing on increasing cavity counts and further automation. This approach allows us to expand capacity as needed without significant new constructions.
Q: Can you discuss the participation rate in injectables and how customer preferences for sourcing arrangements have evolved post-pandemic? A: Stephan B. Tanda - AptarGroup, Inc. - President, CEO & Executive Director: The pandemic demonstrated our capabilities in injectables, equating them with the market leader. Customers typically do not start with dual sourcing for new biologic projects; they choose one provider. Our global footprint and business model, which does not compete with our customers, are significant factors in being selected.
Q: Regarding net cash from operations being slightly down from Q1 '23, what were the contributing factors? A: Robert W. Kuhn - AptarGroup, Inc. - Executive VP & CFO: The decrease was mainly due to more working capital, particularly in some inventory areas and higher receivables due to the timing of the holiday weekend at quarter end. These were timing issues, and the receivables were collected in April.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
