Aptargroup, Inc. Q2 FY2024 Earnings Call

Ladies and gentlemen, thank you for standing. Welcome to Aptar's 2024 Second Quarter Conference Call. At this time, all participants are in listen-only mode. Later we will conduct the question-and-answer session. Introducing today's conference call is Mrs. Mary Skafidas, Senior Vice President, Investor Relations and Communications. Please go ahead.

Thank you. Hello everyone, and thanks for being with us today. Joining me on the call are Stephan Tanda, President and CEO; and Bob Kuhn, Executive Vice President and CFO. Our press release and accompanying slide deck have been posted on our website. If you are following along on our website, you can advance the slides by hovering over the presentation screen and clicking on the arrows on the right and left. As always, we will also post a replay of this call on our website. Today's call includes some forward-looking statements. Please refer to our SEC filings to review factors that could cause actual results to differ materially from what we are discussing today. I would now like to turn the conference call over to Stephan.

Thank you, Mary, and good morning, everyone. We appreciate you joining us on the call today. I will begin my remarks by highlighting our second quarter results. Later in the call, Bob Kuhn, our CFO, will provide additional details on key drivers for the quarter. Starting on Slide 3, for the second quarter, I'm pleased to report that Aptar achieved core sales growth of 3% and delivered adjusted EPS of $1.37 per share, a 12% increase over the prior year quarter. We grew adjusted EPS in double digits for the first half of the year and in the quarter. Additionally, due to our confidence in our performance, we recently raised the dividend by approximately 10% on top of an almost 8% increase last year. The positive results in the quarter were driven by strong demand for our pharmaceutical proprietary drug delivery systems, as well as continued broad-based margin improvement. Our pharma segment continued to see healthy demand for our proprietary drug delivery systems with 7% core sales growth in the quarter following more than 13% core sales growth in the second quarter of 2023. Additionally, proprietary drug delivery systems had double-digit growth in the quarter on top of growing more than 30% in the prior year quarter. One of the key drivers for this quarter was our drug delivery systems used for central nervous system drugs. Over the last decade, we have seen a growing number of pharma companies repurposing drugs from injectables to nasal delivery. This spans from emergency medicines used to reverse the effects of opioid overdose, to nasal treatments for migraines, depression, and epilepsy. The wider benefits of nasally delivered medications such as over-the-counter nasal sprays have come to light even more in a new study. According to the July 2024 study, funded by the National Institute for Health and Care Research, nasal sprays such as Vicks First Defense, the gel-based nasal spray featuring our nasal pump that was used in the study, were shown to reduce the severity of cold and flu symptoms, decrease the frequency and duration of respiratory infections, as well as limit the need for antibiotics in at-risk patients. This report is timely also in light of the most recent surge of COVID cases spreading in the U.S. In addition to our proprietary drug delivery systems, we have also built a suite of service and digital offerings. These include formulation development support, analytical testing, human factors testing, generating patient insights, regulatory support, digital health, and drug lifecycle management, all to help our pharmaceutical customers bring their drugs to market successfully. We are focused on improving the patient experience and helping them successfully administer the therapy. Now moving to injectables. Sales declined when compared to the prior year quarter as sales normalized following last year's strong second quarter catch-up from the ERP implementation in the first quarter of 2023. Our pipeline of elastomeric components is growing nicely, especially for our higher-value offerings. Both our Beauty and Closure segments saw volume increases. For beauty, lower tooling sales pulled down core sales growth. Beauty saw pockets of strength in North America and Latin America with prestige fragrances and broad-based demand improvement for personal care dispensing. Sales in Europe, which represent more than 50% of Beauty's revenue, normalized after a period of significant growth a year ago. In terms of margins, beauty improved by a full percentage point over the prior year period, while closures' margins were flat due to the timing of the passing on of lower resin costs. During this destocking period, we have focused on improving operational leverage. Now that we are seeing progressive improvement in North American sales, we expect the benefit of volumes to rebound. Before I turn the call over to Bob to share further details on Q2, I want to speak about innovation and highlight recent technology and product launches as shown on Slide 4. Starting with pharma, our unidose system is used in the U.S. to deliver medications that treat vitamin B12 deficiency and anemia. In China, our airless system is used for a new acne medication. And in Europe, our active biomaterial science technology is used for Bayer’s IberoBiotics Pro. In our digital health business, Migraine Buddy is now part of our portfolio of products and is the leading headache and migraine tracking app to help users report and self-manage their migraine symptoms. We have also added two digital solutions that enable patients to track their health and share reports with their care team. Through our partnership with Biogen Cleo for patients with multiple sclerosis and Physio.Me for people living with neuromuscular disorders. In beauty, our pump is used for Lancôme’s refillable Idôle fragrance, Guerlain’s first fragrance formulated without alcohol features our fragrance pump, and Neutrogena’s Hydro Boost skincare product has selected a mono-material, fully recyclable pump. In Latin America, our first custom overcap made from post-consumer recycled resin is featured on the fragrance Kaiak. Turning to closures, we have a 14-year partnership with Kraft Heinz for their meal brand beverage concentrate, and the rebranded packaging in the U.S. has a custom closure with our simply squeezed valve. Our custom flip-top closure with PCR is used on an Adidas body cleanser in China. Turning to Slide 5 now. During the quarter, we’ve released our 2023 corporate sustainability and ESG report, which highlights our significant progress across many key areas of our sustainability strategy. We pride ourselves on continuously raising the bar on sourcing renewable energy, certifying sites as landfill-free, and developing products that are more recyclable, reusable, refillable, and incorporate more sustainable materials. In June, USA Today named Aptar among America’s Climate Leaders and Time Magazine made us one of the world's most sustainable companies, where we are ranked number 194 out of 500 global companies. Both recognitions reflect our broad-based leadership in sustainability, transparent data reporting, and continued commitment to advancing sustainable practices. Now I would like to turn the call over to Bob.

Thank you, Stephan, and good morning everyone. Starting on Slide 6. I would like to summarize the quarter. Our reported sales increased 2%. This included a currency translation headwind of approximately 1%. Therefore, core sales grew 3%, primarily due to strong growth in pharma's proprietary drug delivery systems, as well as a progressively recovering North American market for both beauty and closures. As shown on Slide 7, we reported second quarter adjusted earnings per share of $1.37, which is a 12% increase over the prior year's adjusted EPS. During the quarter, we achieved adjusted EBITDA of $193 million, which increased from the prior year's second quarter by 6% driven by expanding margins. Free cash flow increased to $75 million in the quarter compared to $7 million in the prior year quarter. Turning to some of the details by segment for the quarter, our Pharma segment's core sales increased 7% due to volume growth, especially in our proprietary drug delivery systems and Aptar home solutions. Looking at sales in the Pharma segment by market, I will start by breaking out our proprietary drug delivery systems, which performed well in the quarter. Prescription core sales increased 16%, driven by strong sales of allergic rhinitis, central nervous system therapeutics, as well as pain and emergency medicines. Core sales for consumer healthcare increased 6% due to higher demand for eye care, nasal saline, and nasal decongestant solutions. Injectables core sales decreased 10% over the prior year quarter. As Stephan mentioned, sales declined compared to the prior year quarter as sales normalized following last year's strong second quarter catch-up from the ERP implementation in the first quarter of 2023. We continue to see good growth in our higher-value elastomeric components, including those used for GLP-1 applications. Core sales for our active material science solutions improved in the quarter, increasing 7% with demand returning for our products used on probiotics, oral solid dose applications, and wearables. Pharma's adjusted EBITDA margin was 34%, a nearly 2-point improvement from the prior year's quarter due to increased sales of higher-value products, increased royalties on customer sales, and ongoing efforts around operational improvements. The Beauty segment's core sales decreased 1% in the quarter, driven by lower product sales in Europe after a period of significant fragrance launches, as well as lower tooling sales compared to Q2 of 2023. The segments saw modest volume improvement with stronger sales globally in the personal care and home care end markets, and the beauty end market in North America. As we look closer at the segment's performance by end market, core sales for the beauty market decreased 6% in the quarter. Overall, difficult comparisons for prestige fragrance dispensing solutions in the prior year quarter were the main reason for the lower sales. Regionally, sales were up in North America, Latin America, and more modestly in Asia, while sales in Europe were down due to tough fragrance comparisons. Core sales for the personal care market increased 4% due to demand for body lotions and hair care products. Growth was broad-based across most regions. Home care sales increased 10%, driven by strong sales in North America, primarily for our products used on air care applications. This segment's adjusted EBITDA margin for the quarter was approximately 14%, nearly a 1-point improvement over the prior year's quarter despite softer sales. The margin improvement was due to continued focus on operational performance along with cost management. Turning to the Closure segment, core sales were flat compared with the prior year's quarter. Volumes for closures increased slightly, but core sales were negatively impacted by the pass-through of lower resin costs. Sales increased for beverages offsetting the softer food market. When looking at sales by market for closures, food core sales decreased 3% driven by market softness in North America and Europe. Beverage core sales increased 7% with sales of bottled water, functional sports drinks, and concentrates contributing positively to the results. Sales were driven by overall regional growth, including Europe, which is our largest beverage market. Core sales for the personal care closures decreased 3%, and growth in North America, Latin America, and Asia could not offset the decline in Europe. In our fourth category, which includes beauty, home care, and health care, core sales increased 9% as demand for dish care, surface cleaners, and laundry products grew in the quarter. The segment's adjusted EBITDA margin was 16% for the quarter, which was flat compared to the prior year quarter as ongoing cost containment efforts and operational performance were offset by the timing of pass-through of lower resin costs. In the second quarter of 2024, we had capital expenditures of approximately $68 million, and about 60% was spent on our Pharma segment. Reported depreciation and amortization expense increased by almost $3 million over the prior year quarter to approximately $65 million or 7% of sales. In the quarter, we experienced higher corporate expenses than usual, including more than $3 million in expenses for the review of potential acquisition targets. I also want to note that in early July, we amended and restated our multicurrency revolving credit facility to replace the existing facility that matures in June 2026. The new facility now matures in July 2029 and provides for unsecured financing of up to $600 million. Also in July, we entered into a term loan that matures in July 2027 and provides for unsecured financing of up to $330 million. This will be used to finance near-term maturities and for general corporate purposes. Slides 8 and 9 cover our year-to-date performance and show a core sales increase of 4% and our adjusted earnings per share, which were $2.63, up 21% compared to $2.18 a year ago, including comparable exchange rates. Moving to Slide 10, which summarizes our outlook for the third quarter, we anticipate our growth to continue and expect third quarter adjusted earnings per share, excluding any restructuring expenses, acquisition costs, and changes in the unrealized fair value of equity investments, to be in the range of $1.38 to $1.46 per share. The estimated tax rate range for the third quarter is 23.5% to 25.5%. We are expecting currencies to have a small positive impact compared to the prior year quarter. We currently estimate depreciation and amortization for 2024 to be between $260 million to $270 million. We expect our capital expenditures in 2024 to be between $280 million and $300 million, with the majority of capital allocated toward our Pharma segment. In closing, we continue to have a strong balance sheet with a leverage ratio of approximately 1.3 and which allows us to continue to invest in the business, pursue strategic opportunities, and continue to return value to shareholders in the form of dividends and repurchases. In addition to our cash dividend payments to shareholders, which totaled approximately $27 million in the quarter, we repurchased about 34,000 shares for approximately $5 million. Over the last five years, we have returned more than $780 million to shareholders through dividends and share repurchases. At this time, Stephan will provide a few closing comments before we move to Q&A.

Thanks Bob. In closing, we had a strong first half and see that growth continue into the third quarter. We see good momentum for our proprietary drug delivery systems, driven by demand for nasally delivered central nervous system drugs, as well as our proprietary drug delivery systems for allergies and eye care. As a reminder, we expect our proprietary drug delivery systems to grow within our long-term core sales target range of 7% to 11% for the full year. While we expect 2024 to be a bit noisy for our injectable division, we see demand for higher-value products continuing to grow. For our consumer dispensing technologies, we see progressive recovery in North America as volumes come back, and we expect to benefit from our continued focus on cost management and improved operational leverage. Lastly, our strong performance and continued positive outlook led to our recent dividend increase of almost 10% on top of last year's 8% increase. Before I open the call up for questions, I want to touch on the announcement we made last night. My colleague, Bob Kuhn, Aptar’s CFO has decided to retire at the end of this year. Bob has been with Aptar for 37 years, 16 of them as our CFO. I want to sincerely thank Bob for his guidance, leadership, and many contributions to Aptar. No doubt, Bob is one of the best CFOs in the business. He has played an instrumental role in our success, while building a strong team and putting in place an incredible financial foundation from which Aptar can continue to grow and create shareholder value. After an extensive search process, I'm pleased to announce that Vanessa Kanu has been selected as Aptar's next CFO as of the first of January 2025. Vanessa is expected to start early in the fourth quarter of this year as CFO designate. Vanessa brings tremendous experience as a CFO in financial reporting, global operations M&A, and cost management that Aptar and our shareholders will greatly benefit from. Most recently, she was the CFO of TELUS International, a technology services firm that operates in 32 countries. She also serves on the Board of Directors of Manulife Financial Corporation, a global financial services institution. I'm pleased to welcome Vanessa to the Aptar team, and I look forward to working with her and introducing her to many of you listening on the call. As a testament to the strong finance team in place, we have also promoted Dan Ackerman, the Chief Accounting Officer of the company. Dan has become a trusted adviser, valued for his integrity and dedication to Aptar. He will continue to lead all corporate accounting functions, working closely with the segment finance team, and continue to help the company's long-term financial planning strategy. With that, I would like to open the call up for your questions.

Our first question comes from George Staphos with Bank of America.

Bob, it's been great working with you. We appreciate all your support of our research and everyone here. I'm sure the entire community feels the same way, and we congratulate Vanessa and Dan on the next steps in their careers, with Vanessa joining Aptar as well. I have two questions. First, there has been considerable discussion about destocking in the injectables market, which may not directly impact your business but does affect some of your peers. How much of that is influencing your business, particularly in light of the tough comparisons you mentioned? Secondly, it appears that there may be a shift of market share back to your traditional proprietary dispensing devices from injectables. Can you comment on whether that's the case? Given everything we've heard, large molecules seem to be gaining share in terms of remedies. How are you seeing growth in your proprietary dispensing systems when injectables were expected to be the main growth area?

I want to express my gratitude to Bob and the team. Regarding your questions, let’s address them one by one. We didn’t experience a significant boost in our injectable business due to COVID. The main advantage we've gained from COVID in this area is increased credibility. We are observing some destocking in antithrombotics, as consumption was higher when patients were hospitalized. However, when considering the overall growth of high-value products like GLP-1, those effects are more than offset. The variability in this quarter's performance relates to last year's second quarter, where we effectively had 1.5 quarters of sales in that period due to a rebound from minimal sales in the first quarter, which makes comparisons difficult. Nonetheless, our injectable sales have increased over the first six months, and we anticipate continued growth in the latter half of the year, even with some destocking in certain SKUs like antithrombotics. As for your second question, we are comparing two different scales. Injectable medicines represent a vast market, while drugs administered nasally are comparatively smaller. Therefore, there is not a significant shift in focus. We expect continued growth in injected medicines, particularly biologics. Nasal delivery offers pharmaceutical companies a means for lifecycle management, providing new delivery methods for established drugs, which can sometimes involve repurposing injected and oral medications. For instance, we might see alternatives like epinephrine administered through nasal methods instead of via EpiPens. However, this does not detract from the growth we see in the larger injectable medicine and biologics market. We are a minor player in this space, but we are excited about the growth potential, which is why we are investing in it.

We now turn to Ghansham Panjabi with Baird.

I just want to echo George's comments for Bob. Obviously, big congrats on your retirement and amazing career, and you'll certainly be missed by all of us. I guess following up on the last question. So on pharma, I mean, plus 7% core sales growth, obviously, prescription boosted that injectables down. So if the assumption, Stephan, is that injectables continues to grow in the back half of the year, it reverts towards that, should we expect a reacceleration in terms of growth or sales relative to that 7%, and how does that impact margins as well?

We don't provide specific guidance on top units. However, I can confirm that our proprietary delivery dispensing is expected to grow at a rate of 7% to 11% for the full year, despite achieving double-digit growth last year. Additionally, we do anticipate ongoing growth in injectables. While there has been a reacceleration following a decline in the second quarter, it's important to consider the context of the second quarter comparison.

And then for my second question, it sounds like.

Sorry, go ahead.

No, go ahead, please.

Yes. On the margin, part of this is dependent on our product mix. Our proprietary dispensing devices represent our highest margin business. While injectables are good, they don't match that margin level, so there will always be a mixed impact. Additionally, as Bob mentioned, we had $3.5 million in non-recurring corporate costs in Q2 that we have not adjusted out, which will not recur in Q3. Furthermore, we will begin to see the benefits from closing the plant in France. We continue to see growth across the board.

And then my second question was on the Beauty segment. So as it relates to North America showing pockets of growth, how do you see that unfolding in the back half of the year in context of just very mixed consumer spending? And then your comment on Europe specific to fragrances. I mean, clearly, comparisons are going to be tough for the back half of the year as well. Should we expect the same trend line for the back half, specific to Europe also for that segment?

Yes. I would say, first, North America, obviously, we compared to a relatively low base and we see broad-based recovery, not only in beauty but also in closures. And I think that bodes well for the second half of the year. Now given that Europe is so much bigger, clearly, we have this avalanche of new prestige launches coming out of COVID that don't repeat. We will also see that in the second half, albeit the comparisons will get a little bit easier. We actually have some nice growth of must-have launches that's particularly in Latin America, but that's not large enough to offset the year-over-year comparison with Europe. So it's going to be a bit of a mixed bag, but overall, very positive for North America, and good growth in Latin America. Clearly, we're all a little bit looking at China, wondering when it's going to start firing again on all drop cylinders, and that also has an impact on European sales. As you recall, a lot of our European beauty sales also feed into China. So that's why it’s a bit of a mixed bag for the second half of beauty, but overall, I feel good about it.

Our next question comes from Daniel Rizzo with Jefferies.

You mentioned that capital expenditures are primarily for pharmaceuticals. I'm curious about how we should anticipate the pace of projects over the next few years. Are there any projects that will be concluding or starting? Additionally, how should we view this as we approach the end of the decade?

So look, overall, go ahead, Bob.

I don't see any major long-term capital expenditures on the horizon right now, other than our ongoing efforts to industrialize and increase capacity for high-performing product lines in the pharmaceutical sector. I expect the trend of focusing more on pharmaceuticals to persist. However, there are still opportunities in all three segments. That said, we are beginning to see a decline from the $300 million high we reached in the last couple of years as we start to leverage the investments made recently. Overall, there is a slight decrease from our previous peak, with continued emphasis on spending in pharmaceuticals. Currently, there are no large-scale projects in the works, but we will keep enhancing our capacity for the products that are performing well.

And then you mentioned in your prepared comments about, I think, royalties in pharma. I was just wondering if that's an ancillary business or it's something that's growing and could be a larger revenue driver in the coming years or how we really should think about it.

Dan, I can respond to that. So that's part of the ongoing business model for our pharmacy, particularly on the proprietary drug delivery system. So it is a new business model and a slightly new revenue stream. We fully anticipate it will continue to grow. But at this point, we're not prepared to disclose how big it could become.

If I just add to that. Look, every time we enter a new development project, and often there are small companies long before they get bought by bigger companies. Sometimes, they don't have all the funds to pay for everything upfront. So we enter into milestone payments and sometimes we get royalties on the backend. So it's just part of the overall revenue mix. It’s part of our value creation model.

We now turn to Matt Larew with William Blair.

You talked about progress you've made on HVP within injectables. So I would maybe just be curious for your assessment of your overall participation rate today versus pre-COVID. And what you've seen since you've brought new capacity to bear and perhaps how that capacity and some of the products have helped both with GLPs and more broadly in the market.

Sure. As you may recall from Investor Day, the capacity increase has been divided among several smaller projects. We've upgraded two legacy sites in France and are still completing and validating a new site, along with the Congress New York site, across different steps in the value chain. Overall, we've enhanced our capabilities in high-value products. Due to the COVID situation, customer interest in new projects, particularly biologic projects, has increased, with GLP-1 being a significant focus. For GLP-1, there are at least two SKUs, including the plunger and the needle shield, and we are pleased with our overall participation rate, which we expect to continue to grow. This is a consistent growth trajectory, and we're well-positioned to expand alongside the market. Fortunately, we are not heavily impacted by destocking.

And then in your prepared remarks, you obviously made comments about M&A diligence as well as some debt restructuring balance sheet moves. Obviously, recently did the formulary deal. So there's been some activity in sort of the M&A space within the broader packaging market, just given that you made the comments proactively, curious either from an appetite or availability perspective what you're seeing?

Look, we have a strong balance sheet and forge of strategic flexibility. As you know, we are fans of bite-size bolt-on partnerships and acquisitions and have a solid track record. And periodically, we evaluate opportunities, but we don't get into any of the details of those until they are ready to be announced, but there's nothing at the moment that's ongoing.

We now turn to Gabe Hajde with Wells Fargo.

I had a question about the pipeline. Sometimes always tough on the outside. We sort of have to trust the team. But you gave us some data points that in dollar terms project and a number of projects, I think versus 2019, that pipeline has been consistently just above 40% or so. Can you give us an update maybe today, where it sits and where you would expect that to trend maybe over the next 18 months or some time frame that seems reasonable 24 months, as you commercialize some of these things that are in the pipeline, maybe the central nervous system treatments that you guys are working on?

Yes, sure. Look, we feel very good about the pipeline. It continues to grow. We mentioned I think last time that even though we have commercializations and that means things coming out of the pipeline. We have replenished the pipeline with the same or larger amount. I think we'll give you an update on the pipeline again in October, when we have our investor event, small commercial. We will be in France on October 2 and 3. So anybody who hasn't signed up yet, Mary would love to hear from you, and I'm pretty sure of that time we'll be able to give you an update, and I don't expect a significant deviation from the trend line. Overall, whether it's nasal devices, whether it's inhalation, whether it’s ophthalmic, whether it’s injectables. We see good pipeline inflow. Also on the digital health, we made very good progress. I mentioned a few apps. The Biogen deal continues to help us in our business development efforts. So overall, I feel good about the pipeline. We feel good about the prospects, and ultimately that has also informed our decision to raise again our dividend after the 8% last year, almost 10% this year. So that kind of gives you a feeling of the underlying confidence in the pipeline.

And maybe just one more. I'll take another stab at the M&A question. From your vantage point, is there anything that you see in the pipeline from a size perspective that's different than what you all have done in the past or assets that you see potentially coming to market size-wise that are larger in nature versus again, like what you've done in the past?

Yes. I would not say that in principle, there is something different. Clearly, today, we have a market cap that approaches $10 billion. So bolt-on size means probably something different now than the market cap was half that size. But the general attitude is still the same. We love these bolt-on deals that come with good management that give us additional capabilities, technologies that we can spread across the company and leverage our geographic footprint and not a big fan of large transformative deals that tend to be much riskier.

We have a follow-up question from George Staphos with Bank of America.

Following on some of the questions here at the end of the call regarding M&A and the pipeline. Obviously, there were some headlines earlier in the week with some peers in the dispensing market getting together. And look, that happens all the time. Can you talk Stephan and Bob, about how the competitive landscape may be changing? Do you view some of the more recent announcements as something that Aptar will have to navigate even more carefully now from a competitive standpoint in terms of making sure your moat is as solid as ever, making sure your pipeline is growing to Gabe's point earlier? Or do you feel, hey, listen, this is a normal course. And we'll focus on our pipeline, our new products, our commercialization, and the rest will take care of itself. So that's question one. And question two, I recognize having covered you a long time, you're not going to guide necessarily on the fourth quarter, but should we expect at a minimum continued increases in earnings throughout the year? Can you maintain relatively consistent trends in earnings from third quarter into fourth quarter based on the pipeline, based on the fact that you raised the dividend, based on the fact that comps can get a little bit easier in pharma from your earlier Q&A with Ghansham.

Sure. I'm going to leave the second question for you, Bob. Let me take the first question. Look, these packaging assets are very attractive assets, especially for PE firms. They change hands of you referred to an incident where there was some was picked up by strategic. We don't really see a change in the competitive environment, so I would much more call it an ordinary course. I mean, specifically talk about that one. SiloGen is a respected company, a respected operator. We don't see a change in the competitive environment here and we wish you good luck.

George, you're 100% right. We're not going to comment on the fourth quarter earnings looking forward. So I don't want to disappoint you. I got one more in me, George. Come on, I got one more in me. Don't push me out just yet. But I think the dividend increase of 10% in my opinion was a strong signal of our confidence in the near-term future of what we're doing. The fourth quarter is always very difficult to forecast, right? We've had really strong fourth quarters. We've had very weak fourth quarters, right? It depends on where we will be probably in the economic cycle and where the confidence level is, there's a lot of uncertainty going on, particularly with elections and things like that. So let's see where it goes. But certainly, sitting here today and that dividend increase should be the indicator that we see a good near-term future on the horizon.

This concludes our Q&A. I will now hand back to Mr. Stephan Tanda for closing remarks.

All right. Thank you. So as you see, we continue to focus on executing the ambitious earnings growth plan that we shared with you at the Investor Day, with a strong focus both on the top line and the structural and ongoing productivity gains to ensure that the bottom line grows faster than the top line. In that vein, Q2 was another solid quarter, continuing our double-digit adjusted EPS growth for the quarter as well as for the first half. And again, as a reminder, we had $3.5 million in non-recurring costs that were not adjusted out in the quarter. Also, we see our momentum continue in the second half with further pharma growth. You can hear from my voice, COVID is alive and well when I sit in separate rooms, so that will certainly help consumer healthcare. Also, cost management and strong operational performance continue. And we will benefit from the productivity measures such as the quarter two plant closing in France. Also, as a reminder, even in a difficult economy, we're confident about our future trajectory. As we just discussed, it also underpins our decision to increase our dividend yet again by 10%. Order book and project pipeline remain strong, and customers continue to engage well with our innovations. They appreciate the technology and value we bring to their brands and their drug developments, including our ongoing leadership in sustainability. We're well-positioned from an operational perspective, and our regional footprints gain increasing competitiveness around the world. And as we discussed, our larger investments are behind us, and CapEx is kind of normalizing, adding to our cash generation. We talked about the strong balance sheet and strategic flexibility. And with that, I would say all this bodes well for the second half. Bob, Vanessa, Mary, and I, and Dan are looking forward to discussing with you more on the road. And again, a small commercial for our investor event in France on October 2 and 3. And with that, I wish everybody a good summer and see you on the road.

Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.