Earnings Call Transcript
APTARGROUP, INC. (ATR)
Earnings Call Transcript - ATR Q4 2021
Matt DellaMaria, Senior Vice President, Investor Relations and Communications
Thank you. Hello, everyone, and thanks for being with us today. Joining me on today's 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 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.
Stephan Tanda, President and CEO
Thanks, Matt, and good morning, everyone. We appreciate you joining us today and hope that you're doing well. Before we close 2021, I would like to take a moment to recognize our teams for overcoming all of the challenges presented throughout yet another year of pandemic. We are resilient in delivering on our promises to patients, consumers, and our customers across the many markets we serve, despite pandemic uncertainties, rising inflation, supply chain issues, and labor shortages. We have kept our manufacturing sites operating and we are successfully passing on cost increases as we navigate this extraordinary inflationary period. Turning now to Slide 3, the commitment of our teams was instrumental in enabling us to deliver top-line growth across all of our segments for the full year. Our total reported sales increased 10%, and on a comparative basis, core sales increased 7%. Our Pharma segment finished the year with positive core top-line growth. Despite the decline in sales to the prescription drug market that has been temporarily impacted by pandemic-related destocking in the industry, the steady strong demand for our elastomeric components for injected medicines and active material solutions as well as the recovery in the latter part of the year in the consumer health care market resulted in the top-line improvement for the year and margins within our long-term target range. During the past 12 months, we took important steps to further strengthen the competitive position of our Pharma segment and support our long-term growth. First, we began investing to expand our capacity to produce premium coated elastomeric components, and we have been awarded a €13 million grant from the French government to support our component expansion plans in Europe. Second, we acquired 80% of Weihai Hengyu Medical Products, a leading Chinese manufacturer of elastomeric and plastic components serving the fast-growing and second-largest pharmaceutical market in the world. Given the ongoing pandemic development and our growing pipelines since our last Market Day, we are adding another €60 million to our capital investment plan to increase capacity in the U.S. and Europe for components for injectable medication, bringing the new total for this accelerated expansion plan to €180 million. Third, we have been gaining solid traction with our Active Material Solutions, which have proved very successful, for example, in protecting the integrity of certain at-home COVID-19 tests. In addition to growing that business nicely, we were awarded a contract from the U.S. government with €19 million in funding to expand our capacity in the U.S. for our Activ-Film technology. Fourth, we are laying the foundation for our future digital health solutions with the completion of our acquisition of Voluntis, a pioneer in digital therapeutics. Lastly, we have begun to expand our pharma capacity in Asia. In 2021, we broke ground on a new facility in Suzhou, China, to optimize our footprint and bring all our existing operations in the Suzhou area under one roof. This investment includes state-of-the-art machinery and automation for all three of our segments with more than half of the investments dedicated to the Pharma segment. Earlier this year, we broke ground on the new pharma production facility in Mumbai to further increase our local manufacturing capacity, including the addition of molding capabilities to offer more innovative product solutions to pharma customers in Southeast Asia. We remain optimistic about current and future growth in the beauty, personal care, and home care market, and we made an investment in YAT, a Chinese online influenza and skincare company to collaborate on solutions for the growing and attractive skincare market. We continue to develop a more integrated local supply chain to lower lead times and faster market launches, leveraging the insights from a FusionPKG acquisition. With Beauty volume still lagging behind 2019 levels due to successive COVID variants, and the dramatic global supply chain disruptions and labor issues, especially in the U.S., the profitability of this business has not yet achieved our target margin range despite the restructuring completed to date. We remain confident in reaching the target margin range in due course and are increasing our focus on SG&A cost containment, footprint optimization, and product innovation. Our Food and Beverage segment continues to grow with strong demand from the food market and recovering demand towards the end of the year in the Beverage market. The margins were compressed this year by the impact of the significant resin cost pass-through we have been diligently managing. On the sustainability front, we are recognized in many countries for our efforts towards becoming an ever more sustainable, inclusive, and diverse company. We are number one on Forbes 2021 Green Growth 50 list and a top 10 company on both Forbes' 2021 Global Female-Friendly Company list and Newsweek's America's Most Responsible Companies for 2022. EcoVadis has just awarded us that coveted top 1% Platinum rating for our sustainability achievements in the areas of environment, labor and human rights, ethics, and sustainable performance, and Aptar has also recently been named the supplier engagement leader by CDP, a global leader in environmental impact disclosure. To conclude our 2021 highlights, our balance sheet remains in excellent condition. We are well-positioned to continue to invest in growth opportunities, including strategic M&A opportunities, while we deploy capital to enhance shareholder returns. I'm happy to report that in 2021, we returned around $100 million in cash dividends to shareholders. This was our 28th consecutive year of paying increased annual dividends. We were also active in our share repurchase program, deploying €78 million to repurchase over 600,000 shares, and we expect to be in the market with further repurchases over time. Now, I will briefly comment on our quarter four results as shown on Slide 4, before turning it over to Bob, who will go into a bit more detail. As you saw in our press release, we reported strong top-line growth of 9% with core sales growth of 10%. This increase was particularly notable as it reflects strong contributions from each of our segments. Our Pharma segment continued to see strong demand for our solutions for vaccines and other injected medicines, and the return to a more normal cough and cold season resulted in increased demand for our nasal drug delivery devices and other dispensing solutions in the consumer health care market. We have been very pleased with the performance of our Active Materials Group across a variety of applications, including protective vials for diagnostic diabetes test strips and probiotics. We are supplying our Activ-Film technology for at-home COVID-19 antigen test kits. Collectively, this has resulted in a 50% increase in core sales year-over-year for the active materials group in the fourth quarter. We are also pleased to see demand for our nasal system used to treat allergic rhinitis and pulmonary systems for asthma and COPD conditions return to levels on par with the prior year's Q4. However, as previously mentioned, the comparison to the prior year's fourth quarter included a significant and outsized order for inflector devices used for central nervous system treatments. Our Pharma margin remains within our target range and was comparable to the prior year's fourth quarter. Our Beauty and Home segment generated strong sales growth with rebounding demand for fragrance and skincare solutions for the beauty market and increased demand for dispensers for hair care and body care products. Pricing contributed to the majority of the core sales growth in the quarter. Turning to Food and Beverage, this segment reported double-digit core sales growth with approximately 60% of the growth coming from price adjustments to pass-through rather than other cost increases. The remaining growth was driven by strong demand for dispensing closures in both the Food and Beverage markets. Our Beauty and Home and Food and Beverage margins continue to reflect the extraordinary inflationary environment and related pass-through effect, as well as supply chain challenges. Now, I would like to highlight a few recent launches, and the custom of using our technologies in the next few slides, starting with our Pharma segment on Slide 5. Padagis, formerly Perrigo's generic prescription pharmaceutical business, has announced the launch of a generic version of a leading nasal spray for the treatment of migraine headaches with our Unidose nasal device. Teva announced the launch of the first U.S. generic version of Naloxone Hydrochloride in a nasal spray form using our Unidose nasal device, and Sandoz is also using our Unidose device for their generic Naloxone Hydrochloride Nasal Spray. Glenmark's Ryaltris recently received new drug application approval by the U.S. FDA for the treatment of allergic rhinitis with our multidose nasal device. We recently announced a new digital solution called HeroTracker Sense, which transforms a standard metered-dose inhaler into a smart connected device, allowing patients to track usage and promote adherence to their prescribed therapy and improve outcomes. Finally, our Activ-Film technology is also enhancing the diagnostic capabilities of InBios' at-home antigen COVID-19 test kit. On Slide 6, in Beauty and Home, we were selected to produce a custom inverted closure with our self-sealing flow control valves for the global launch of a new inverter digital package by a leading CPG company. This is a perfect example of how Aptar creates value by helping our clients drive the conversion of a major retail category through breakthrough innovation that enhances the consumer experience and through disciplined execution in key markets around the world. We are also very pleased to announce that our fully recyclable monomaterial pump was chosen by Unilever for their leading skincare brand, Dermalogica's facial cleansers. Our FusionPKG BeautyLab is providing a line of nine beauty products for the brand cosmetology. In Food and Beverage, in the Chinese nutrition market, Junlebao is featuring our bi-injected closures for two of its children's powdered milk brands, and the new launch for Sauces and Condiments in Latin America, Sabor do Chef, features our new lightweight closure with flow control dispensing system. With that, I will now turn it over to Bob, who will provide additional comments on our fourth-quarter results.
Bob Kuhn, Executive Vice President and CFO
Thank you, Stephan, and good morning, everyone. To summarize the quarter, our reported results show that, after neutralizing currencies and acquisitions, we achieved a solid core sales growth of 10%. About 4% of this growth is attributed to price increases, while the remainder stems from strong broad-based demand across most of our markets, which I will explain further. We reached adjusted earnings per share of $0.93 and adjusted EBITDA of $154 million. These adjusted earnings were impacted by currency translation rates and a net negative inflation effect of around $5 million. Our consolidated adjusted EBITDA margin of about 19% would have been approximately 170 basis points higher if not for the net price cost effects, including the margin compression from passing on higher costs. Now, looking at the details by segment, our Pharma segment saw core sales rise by 8%, with around 2% coming from price. Pharma's adjusted EBITDA margin was approximately 33%, which is consistent with the previous year's fourth-quarter margin, although we faced about 100 basis points of headwind from the price pass-through effect on margins. In the prescription market, core sales fell by 7%. We did observe some positive trends in orders for nasal and pulmonary devices, but this was in contrast to the previous year's fourth quarter, which had a spike in demand for central nervous system treatment devices. Therefore, we experienced a decline in quarterly sales to the prescription market. In consumer healthcare, core sales grew by 14% across various categories, particularly for nasal decongestants treating cough and cold symptoms. Additionally, solutions for vaccines and injectable medicines saw core sales rise by 19%, mainly due to sustained demand for our components used in vaccines for COVID-19 and influenza. Our active material science solutions market performed exceptionally well, with a core sales increase of 50%, driven by our Activ-Film technology, which enhances the integrity of at-home COVID-19 test kits. In our Beauty and Home segment, core sales improved by 7% from the prior year's fourth quarter, with most of this growth, about 6%, coming from pricing initiatives. This segment's adjusted EBITDA margin stood at 11% for the quarter, consistent with last year, but also reflected a net negative inflation impact of about $1 million, alongside approximately $5 million attributed to significant labor shortages and supply chain challenges in the U.S. Without these negatives, including margin compression from passing on higher costs, EBITDA margins could have been roughly 250 basis points higher. In terms of individual market performance within Beauty and Home, core sales in the Beauty market rose by 11% due to price adjustments and heightened demand for dispensing solutions for prestige fragrance and skincare. Personal care market sales increased by 6% for similar reasons, while sales in the home care market fell by 10% due to decreased demand for air care and surface cleaners. Our Food and Beverage segment had robust growth, with core sales up by 28%. This robust performance was primarily due to strong volume growth and pricing adjustments, which accounted for about 60% of the segment's core sales growth in the quarter. The adjusted EBITDA margin for this segment was at 14%, lower than last year's margin due to a net negative inflation effect of approximately $3 million. If it weren't for this negative impact and the margin compression from passing on higher costs, EBITDA margins would have been over 500 basis points higher. Looking closer at the Food and Beverage markets, core sales in the Food market rose by 25%, buoyed by price adjustments and growth of our dispensers for various applications, particularly closure solutions for condiments and dairy products. In the Beverage market, core sales surged by 41% thanks to price adjustments, favorable comparisons, and recovery in sales of closures for bottled water and functional drinks. For our annual performance, we achieved 7% core sales growth, and adjusted earnings per share rose to $3.88, a 4% increase from $3.74 a year ago, accounting for comparable exchange rates. Cash flow from operations amounted to $363 million for the year, down roughly $200 million from the previous year, mainly due to increased working capital driven by sales growth, including the effects of price increases on our accounts receivable and higher inventory costs. Looking ahead, we expect some of the momentum from the fourth quarter to carry into the first quarter. Although we anticipate ongoing supply chain and inflation pressures in the near term, some raw material costs, like resin, are expected to decrease, while others, such as metals, may rise. We also factor in a headwind of approximately $0.02 per share per quarter from our recent acquisition of Voluntis. Additionally, we foresee currencies remaining a challenge compared to the prior year, with a predicted euro rate adjustment from 1.21 to 1.14. We estimate that for every $0.01 fluctuation in the euro rate, it impacts earnings by about $0.02 for the full year. Thus, in the upcoming quarter, we anticipate a currency drag of roughly $0.03 on earnings compared to last year. Considering all factors, we expect our first-quarter adjusted earnings per share, excluding restructuring expenses, acquisition costs, and changes in unrealized fair value of equity investments, to fall in the range of $0.92 to $1 per share. The estimated tax rate for the first quarter is projected to be between 27% and 29%. Our depreciation and amortization estimates for 2022 are between $245 million and $255 million. Our anticipated capital expenditures for 2022, after accounting for government grants, are expected to range from $300 million to $330 million. This includes $109 million for critical growth projects that we've previously discussed, such as enhancing our capacity for components for injectable medications, establishing a new facility in Suzhou, China, and optimizing our operations in France for decorative capabilities. In conclusion, we maintain a strong balance sheet with a leverage ratio of 1.84%, which enables us to continue investing in the business, seek strategic opportunities, and return value to shareholders through dividends and stock repurchases. In addition to $25 million in cash dividends paid to shareholders this quarter, we repurchased approximately 395,000 shares of common stock in the fourth quarter for $49.7 million. Over the past 12 months, we repurchased around 615,000 shares for $78.1 million, leaving about $200 million authorized for future stock repurchases at the end of the fourth quarter. Now, I will turn it over to Bob for more comments on our fourth-quarter results.
Stephan Tanda, President and CEO
Thank you, Bob. In closing, on Slide 13, we are pleased with our ability to deliver solid results while navigating the impact to our operations and end markets from the surge of various COVID-19 variants, considerable supply chain and labor challenges, and significant inflationary pressures. Aptar is well-positioned for continued growth and improved margins beyond the current pandemic and economic environment. We will continue to seek out market opportunities and strategic partnerships that will contribute to our success in the new era. Looking ahead to the first quarter, we anticipate solid growth in our Pharma segment, with growth in each division. The prescription division is expected to report growth in the allergy category, as the destocking appears to be ending across most accounts, but we may still face a tough comparison in the central nervous system category. Other areas of our Pharma segment are expected to continue to do well, especially Active Material Solutions, where demand for at-home COVID-19 antigen tests should remain strong in the near-term. Our beauty business continues to recover, although we have not yet returned to 2019 volumes. Our Beverage business is also seeing signs of recovery. Other COVID-19 variants may impact the pace of these recoveries, and supply chain disruptions are expected to continue in the near-term, impacting our business primarily in the U.S. and in some cases, impacting certain customers in both Beauty + Home and Food + Beverage. However, we are optimistic that the general momentum towards the post-pandemic recovery will not be delayed, even if it is a bit bumpy. In parallel, we will continue to contain costs, improve efficiencies, and plan to increase prices to offset the effect of rising input costs. Our products are in the hands of millions of people every single day, and we have built a strong reputation in high-growth areas that we will continue to build upon for the future. Our customers recognize us as a true innovation leader who has shaped the drug delivery and consumer product dispensing industries. At the same time, we continue to advance our mission of becoming a proactive leader in sustainability. Our businesses have a very clear competitive advantage. I'm very proud of all that our people have accomplished in the fourth quarter and full year of 2021. With that, I would like to open the call up for your questions.
Operator, Operator
We will be taking our first question today from George Staphos of Bank of America Merrill Lynch. George, please go ahead.
George Staphos, Analyst
Thank you very much. Good morning, everyone. I appreciate the details provided. I have two questions. First, regarding Food and Beverage, it was encouraging to see the core growth you reported, acknowledging that much of it was pass-through. However, the operating leverage, meaning the growth in EBIT compared to that core growth, wasn't in line with our expectations. It seems like earnings were down quarter-on-quarter. Could you elaborate on what happened there? Was the operational leverage in line with your expectations? For Beauty and Home, you mentioned additional focus points concerning SG&A and cost reduction, which we appreciate. Can you provide more details on that? Also, understanding that there are no guarantees, if we see a reopening and growth aligns with the trend line, when do you anticipate Beauty and Home will return to the targeted 15% margin? Thank you.
Bob Kuhn, Executive Vice President and CFO
Good morning. I can take …
Stephan Tanda, President and CEO
Good morning, George.
Bob Kuhn, Executive Vice President and CFO
Sure. I'll start with the first question, then pass it to Stephan. Regarding the growth in Food and Beverage, approximately 40% of the 28% increase is due to volume. The remaining 60% of that growth is essentially a direct pass-through. Additionally, we estimate that we are about $3 million behind the curve in terms of net pass-through versus cost increases in the Food and Beverage sector. These two factors, the direct pass-through and the $3 million shortfall, together account for roughly 500 basis points. If we account for these items, we would be looking at a margin closer to the range of 18.5% to 19%.
Stephan Tanda, President and CEO
Yes. Regarding Beauty and Home, the volume recovery has been delayed due to Delta and Omicron. We are still below the volume levels of 2019, and we recognize that. Initially, we treated this as we would any other recession, operating in low-idle mode while waiting for the recovery to occur. We want to signal an increased focus on cost management since the recoveries are uneven. Geographically, we are encouraged by the volume recoveries in Europe and China, although Latin America is struggling, particularly Brazil, which is important for our Masstige fragrance business and is experiencing decline. Overall, the volumes are not meeting our expectations. Another significant issue has been the labor and supply chain disruptions in North America, which have significantly affected our Beauty and Home plants in the Midwest. We need to resolve these challenges. While I can't provide a specific timeline, we are committed to our target range and will work through these North American labor and supply chain issues, which are substantial and will persist for at least the next one to two quarters, affecting not just us but also our customers and suppliers, requiring considerable effort to overcome. On a positive note, we see demand improving. With the reopening, particularly in travel between Europe and the U.S., we are optimistic as we navigate through these challenges while staying committed to our target range.
George Staphos, Analyst
Stephan, thank you for that. And Bob, just a point of clarification, and I'll turn it over. So, operations in Food and Beverage were as expected, no hiccups there. It's just being behind on the curve. And Stephan, can you give us a little pencil on paper in terms of what additional cost reduction efforts you had mentioned as part of my question? Do you think you might be able to get out of Beauty and Home this year or next year? Thank you, guys. I will turn it over.
Stephan Tanda, President and CEO
Yes. We are aware that Europe will be a focal point for this, and there are definitely other parties that need to be included in the discussion.
Operator, Operator
Thank you, George. We will be taking our next question from Ghansham Panjabi of Robert Baird. Please go ahead.
Matthew Krueger, Analyst
Hi. Good morning. This is Matt Krueger sitting in for Ghansham. Thanks for taking my questions. I guess I just wanted to start with maybe, if you could provide some added details on the budgeted volume outlook for each of your segments, with a particular emphasis on maybe, the sequential progression in the Pharma business, given the prescription recovery and then also, maybe, some details on what Beauty and Home could look like, given the kind of sequential recovery that we are expecting or hoping for there?
Stephan Tanda, President and CEO
We don't typically provide guidance for the full year or share our budget. However, we enter 2022 with a lot of optimism. The prescription division has clearly regained its momentum, and we anticipate growth not just for this quarter but for the year as well. The growth prospects in the other areas of Pharma appear promising. We also expect growth in the other two segments, but we won't provide guidance beyond the current quarter. For the first quarter, we expect growth across all three segments, and particularly within Pharma, we anticipate growth in all its units.
Matthew Krueger, Analyst
Great. That's helpful. I guess I will follow-up with one there. Maybe if you could touch on any unusual comp-related items that we should keep in mind for 2022 modeling from a volume perspective? And then my second question is, can you just provide an update on what level of new product introductions we are likely to see in 2022 versus the prior couple of years at the customer level? If you're concerned at all about any demand degradation from the significant price increases that you and your customers are thus passing through to the end consumer? Just any thoughts there would be great.
Stephan Tanda, President and CEO
Yes, sure. So, in terms of comps, I mean, the one I already mentioned is the CNS business; notably, NARCAN tends to be lumpy. Whenever you compare quarter with a quarter a year ago, that lumpiness can move around. All I can say is, unfortunately, the demand continues to grow because the epidemic continues to worsen. Every NARCAN nasal spray that is in the market is sold by us. That will continue to be lumpy. The other one that we called out is clearly the at-home COVID testing business. It depends very much on how the pandemic evolves and how testing discipline evolves. We don't really look at that beyond quarter one at this stage. The rest of the business, we see continuing to grow very nicely. We called out the recovery in allergy and pulmonary. The Consumer Healthcare business continues to grow nicely as the injectable business. On your question, in general, we see good engagement by customers. We see good engagement on the tooling side where customers are more willing to invest in their own custom tooling. Certainly, from a win-rate point of view, we ended the year very optimistic. We called out some of the launches earlier, and I just would reiterate that new dish soap by a major CPG player is just a classic example of category conversion that we have done many times before from condiments to infant nutrition. And here, you see the dish soap category moving. Those are good signs. In the rest of Beauty and Home, we see good pickup and optimism with customers, with the regional color I gave you earlier, Brazil and Latin America being a bit behind, and North America really just going through this supply chain situation. In North America, it's not a demand issue. There's plenty of demand. It's the whole supply chain that needs to fulfill that demand, including, also Food and Beverage to be honest, for quarter one. If you have been to retail outlets regularly, we have noticed that stores are often half empty. The North American supply chain issues need to be overcome. They'll be overcome, and thankfully, our Pharma business is pulling very strongly to allow us to give you the guidance that we provided.
Operator, Operator
Thank you. Our next question will be coming from Mark Wilde of BMO Capital Markets. Mark, over to you.
Mark Wilde, Analyst
Thanks. Good morning, Stephan. Good morning, Bob.
Stephan Tanda, President and CEO
Good morning, Mark.
Mark Wilde, Analyst
Stephan, if you could just help us a little more with the Beauty business. You said you're not back to '19 levels, but if we call it '19 a 100, where would Beauty be at right now? And what does the trajectory look like in recent months?
Stephan Tanda, President and CEO
So, we are probably around 90%, and certainly the trajectory is going up with significant regional differences. Again, very positive about the progress in Europe, very positive about the growth in China, declining in Latin America in the recent quarter, and North America dealing with the issues that we’ve laid out.
Mark Wilde, Analyst
Okay. And then, Bob, just on the sort of price cost, can you give us a sense of where you're at across the portfolio right now in terms of the price cost and what you anticipate there as we move through '22?
Bob Kuhn, Executive Vice President and CFO
Sure. We are catching up, and again, I think looking forward into the first quarter, we are anticipating us to be slightly positive on that net price cost. Now, again, I would caution you that there are a lot of assumptions that go into that, right? We are starting to see some resin abatement in North America. Europe is still relatively stable. There are some people we think should be trending lower in the next couple of quarters, but we haven’t really seen that yet. The big unknown for us, looking forward, is going to be the increase in the metal pricing. We’ve seen some pretty significant increases recently in tin plate and aluminum, in particular. So, we are keeping an eye on that. I would say our assumption is that we should be catching up going into the first quarter and flipping to a slight positive. But we will have to see what happens as we weather through this metal price increase.
Mark Wilde, Analyst
Okay. That’s helpful. I will turn it over. Thank you.
Operator, Operator
Thank you, Mark. Our next question will be coming from Kyle White of Deutsche Bank. Kyle, please go ahead.
Kyle White, Analyst
Hi, good morning. Thanks for taking the question. On the Active Materials Solution, quite a large increase there. I assume you're seeing a decent size increase here in the first quarter as well. Is this just a two-quarter event of outsized volume just given the government supply in at-home COVID tests? Or do you expect continued strength throughout the year in that business?
Stephan Tanda, President and CEO
It's really all of the above. The business is developing very well, and test strips for diabetes and the vials for those test strips are performing strongly. Probiotics are also doing well. However, at-home COVID tests have made a significant contribution in both the fourth quarter and the first quarter. Beyond that, it’s difficult to predict at this point. That said, there is a substantial halo effect as this technology has been validated, including the €19 million grant from the U.S. government. The pipeline remains active with projects stemming from the recognition that this technology can be beneficial in various areas, such as protective sensors and test kits. We view this as a robust growth business, a valuable acquisition that will continue to propel growth. As for the home test kit, while we acknowledge that it won’t last indefinitely concerning COVID, we anticipate a solid pipeline with other test kits and related products.
Kyle White, Analyst
Got it. And then, Bob, can you just talk about your M&A pipeline and how attractive it is from a valuation and technology standpoint? And then how do those returns look relative to just buying back your stock given current levels? It looks like you purchased $50 million this quarter. How should we think about the level and activity of your repurchases going forward?
Bob Kuhn, Executive Vice President and CFO
Sure. We don’t typically comment, Kyle, specifically on M&A in the pipeline. I would say that it still is fairly active, pricing is still fairly robust. In general, I would say that we are going to look at potential targets, but we are going to remain disciplined in our approach to what we do. There’s really not much to speak of there. As far as share repurchases, yes, we were active in the market in the fourth quarter. We would expect to be active in the first quarter, but we have a little bit smaller open window to do that in, but nothing unusual, nothing extraordinary. I mean, we are really coming out from when we had put a hiatus early on in the pandemic from not buying back our shares. Now we're a little bit more confident in the future and where things are going. So, we will be active.
Kyle White, Analyst
Got it. It sounds good. I will turn it over.
Operator, Operator
Thank you, Kyle. Our next question will be coming from John Kreger of William Blair & Company. John, the line is yours.
John Kreger, Analyst
Hi, thank you very much. Stephan, could you share your current perspective on the destocking that has hindered growth in the Pharma segment? Are we finished with that issue, and have there been any adjustments made to provide more clarity on the direction of those stocking levels?
Stephan Tanda, President and CEO
Yes. So, the way we see it, we are largely done with the destocking in the prescription business. The vast majority of customers are back to normal order patterns. Of course, new variants and masking may crimp that, but each successive variant seems to have less of an impact. We see that has run its course. I continue to remind everybody of the lumpiness of the CMS business. In Consumer Healthcare, I think it's well behind us. You saw strong growth in quarter four with a normal or strong cough and cold season. This episode has sharpened us to track very carefully all the statistics that are available to us as well as other trade information to be sure that we can identify significant dislocations. It's never perfect. E-commerce and club stores are not being tracked. Statistics outside of Western Europe and North America are hard to come by. But despite those caveats, I think our ability to gauge things has improved through this episode, no doubt about it.
John Kreger, Analyst
Great. Thanks. That’s helpful. A follow-up. Can you just talk a little bit about the digital health investments you guys have made like Voluntis? How does that fit into the broader Pharma strategy? And what bucket will those revenues from those types of deals fall into within Pharma?
Stephan Tanda, President and CEO
Yes, our acquisition and ongoing developments are certainly contributing factors. Digital health operates similarly to a startup. These solutions align well with our device business as they enable us to interact with customers in more advanced ways earlier in the drug development process. The devices we offer are essentially long-term solutions. As you know, digital health includes companion therapies for actual drugs that have algorithms approved by regulatory bodies like the FDA and EMA, as well as direct-to-consumer setups in non-regulated markets. We find this to be an intriguing business model, generating significant customer interest and enhancing our offerings. Additionally, we have some legacy operations in digital health that we have developed over time. Besides Voluntis, which may generate revenues this year, we anticipate combined revenues of $15 million to $20 million from this segment. It's important to note that this is an investment, and we will experience a modest impact of about 2 to 3 cents per quarter during its startup and growth stages. We view this as a significant addition, supported by dedicated leadership to drive the business forward.
John Kreger, Analyst
Sounds good. Thank you.
Operator, Operator
Thank you, John. We are now moving over to Adam Josephson of KeyBanc Capital Markets. Adam, over to you.
Adam Josephson, Analyst
Thanks. Good morning, everyone. I hope you're doing well. Bob, following up on John's question about Pharma, we've noticed that margins declined significantly in the first three quarters due to destocking and reduced prescription sales. Now that the situation appears to have stabilized, could you share whether we should expect margins in that segment to return to levels more in line with what we saw from 2018 to 2020? Are there any other factors we should be aware of?
Bob Kuhn, Executive Vice President and CFO
Sure. Structurally, I would say that we’ve seen no decline in the Pharma divisions. The one change with our investments in digital health is that they are expected to be $0.02 to $0.03 dilutive per quarter, which is causing a slight drag going forward. That’s the main difference I would mention for the future. Generally, everything else appears to be okay, with no decline in other areas. In fact, as we continue to grow and become more efficient, we do see slight increases in some divisions. But that’s really the only point I want to highlight.
Adam Josephson, Analyst
I appreciate that, Bob. Regarding the margin issue, George asked Stephan about the possibility of returning to 15% EBITDA margins in Beauty and Home. Based on your comments, it seems that due to the situation in Latin America and the supply chain and labor issues in North America, there are still challenges to achieving those 15% margins at least this year. When do you think it would be reasonable to expect to reach that target, if not this year?
Stephan Tanda, President and CEO
The supply chain issues are significantly impacting them in the fourth quarter, and we anticipate similar challenges in the first quarter. Complete data will be available by the second quarter. I expect to see considerable progress on margins in the latter half of the year, provided there are no new obstacles. The cost focus I mentioned at the start of the call will also become more influential. While I can't provide a specific date, we are clearly working towards this goal, and you should see substantial improvements in the second half once we move past the North American challenges and transition into next year.
Adam Josephson, Analyst
Stephan, thank you. Bob, could you clarify the impact of working capital? I'm sorry if you covered this earlier, but what was the drag last year? Was it more significant than you anticipated, considering factors like supply chain inflation? Also, what are your expectations for this year? In other words, how much improvement do you foresee in your free cash flow performance due to working capital?
Bob Kuhn, Executive Vice President and CFO
Yes. Working capital changes were mainly influenced by a couple of factors. Firstly, the increase in revenue, which reflects a 10% core growth, has contributed to higher receivables, partially due to pricing factors. Importantly, we have not observed any decline in day sales or issues with collectability, so I have no concerns in that area. Regarding inventory, it may be surprising, but about half of the increase can be attributed to inflationary costs, a challenge faced by some of our peers as well. Additionally, we have been cautious due to supply chain disruptions amid volume recovery, ensuring we have sufficient stock to meet customer demand. We also closed some of our East Coast facilities earlier this year, which necessitated building inventory in advance for those consolidations. Looking ahead, our focus should be on inventory management. As raw material costs start to stabilize, especially for metals, I hope to see good progress in this area. For 2022, it's essential to monitor collections and related aspects, but as noted earlier, there are currently no issues.
Gabe Hajde, Analyst
Good morning. Thank you for taking my question. Bob, could you elaborate on the increase in the injectable investment from $120 million to $160 million? I noticed that 2022 remained at $55 million, so I assume most of the increase will impact 2023. Additionally, could you provide some insight on the expected payback or returns from that project and when we might see contributions?
Bob Kuhn, Executive Vice President and CFO
Sure. The numbers are 180. However, we have a grant, and the reason the cash number for next year remains unchanged is partly due to a grant we received from the French government for about $15 million. Some of that will carry over into 2023. In terms of payback, it's clear that this will be a profitable project. While we typically don’t discuss specific expansion projects in detail, it's important to note that we are not just expanding capacity for the sake of it. We're expanding capacity for our higher value-added COVID offerings. As Stephan has indicated before, we expect continued growth in injectable components. Some of this will start coming online later in 2023, and we will see the ramp-up after that.
Stephan Tanda, President and CEO
It's important to remember that our process includes a basic material forming stage, known as mixing, followed by product formation or molding, and then finishing and coating. Not all locations have every step, and we increase capacities in different stages in both the U.S. and Europe. As Bob mentioned, we are significantly enhancing our premium product capability. This reflects our previous discussions regarding the value we can deliver. There's a continuous growth among our customers, which keeps our pipeline active. Consequently, we are speeding up our overall investment program to reach $180 million. Sorry, Gabe, you can continue.
Operator, Operator
Thank you, Gabe. We will be taking our next question from Angel Castillo of Morgan Stanley. Angel, please go ahead.
Angel Castillo, Analyst
All right. Thanks and good morning. Just wanted to follow-up on inventory and destocking. Maybe, on the flip side of everything, are you seeing your customers across segments, or particularly in Pharma, in terms of their behavior going forward? Where are inventory levels today, and where do you kind of see them moving as we kind of go into '22 and '23? Are people holding on to more safety stock? Do we need to do a little bit of restocking after this, like we have more normal, whether it's cold and flu season, over this period and next year? So just more color as to how you're seeing the underlying dynamics would be helpful.
Stephan Tanda, President and CEO
Yes. In general, it very much depends on the region when we answer this question. I think in Europe, of course, we also have issues, but it is much more muted, and we see normal order patterns and decent supply chain performance. The caveat is, of course, anything that comes in or goes to Asia is delayed multiple x of what it used to be, both in time and of course, also in cost, but that's pretty much on track. In the U.S., Pharma is doing reasonably well, and from a supply chain point of view. I think what we are seeing is the normal stocking levels return. We do not see pipeline builds or anything like that. In the consumer-facing businesses, they tend to not combat or to mix metaphors to get things to us, from us to customers, customer, factories have the exact same issues. There seem to be some regional differences. The Midwest is more affected than the South, but the U.S. is really in a difficult period, and it will take some time for all that to unwind. I could not begin to give you inventory effects here. Clearly, we are having safety stocks and sometimes we are waiting for one part to be able to get a customer's assembly run. I think that’s Asia. It's mainly in region for region that’s running well, and anything we ship to Asia, same issue with the supply lines and costs. Thankfully, our overall operation strategy has always been in-region for region, so the U.S. malaise is contained to the U.S. for the most part.
Angel Castillo, Analyst
Understood. Thank you. And then in terms of metals and aluminum and some of what you mentioned, can you just talk a little bit, not just about the pricing dynamic, but maybe on the availability of supply and how comfortable you are with just outside of the equation?
Stephan Tanda, President and CEO
Yes. There are really two factors to that. One is European energy costs increasing rapidly, so if you want, for us, in terms of pricing pass-through. We have a rotation from passing through the polymer costs, and now having to pass-through energy costs. Aluminum is by far the most energy-intensive metal that we use, and we see significant increases in aluminum. Availability is also an issue, but it trails to in terms of pricing. The teams are very active in passing on that higher aluminum cost, especially for prestige. There's really no alternative for aluminum, and we also use it in Pharma, as you know. It’s important that we pass it on, but the availability so far has been more or less okay.
Operator, Operator
Thank you, Angel. We will be taking our final question from George Staphos of Bank of America Merrill Lynch. George, go ahead.
George Staphos, Analyst
Thanks very much. I guess the first question I had related to, I guess, to Gabe's question. Can you talk at all about how the incremental investment in injectables will affect what you're doing at Congers? And then on Pharma, bigger picture question. Slide 5 talks to some of your customers' recent approvals and launches, the generic versions of Naloxone Hydrochloride, and that’s helpful. Is there a way to help us understand how that pipeline of new products in Pharma compares versus average versus 2 years ago in terms of what's coming out now that you should get a benefit from? Relatedly, the pipeline that we can't see, the products that your customers have in the approval process that haven’t been approved yet in Pharma. Is there a way to say, okay, that is 10% above average versus prior year's 5% below? Any way to size what that opportunity looks like in the stuff that we can't see just yet? Thank you, guys, and good luck in the quarter.
Stephan Tanda, President and CEO
In general, we are very satisfied and bullish about the Pharma pipeline, so let me say that. We have a policy of not disclosing what's in the pipeline for competitive reasons and confidentiality, and until it's launched or if a customer chooses to disclose what they're working on and which they are working in the development process, then obviously, we share that as well. The pipeline is tracked from all the stages, the phase transfers as it progresses across all different businesses. That gives us the confidence, one, to reconfirm our long-term target at the Market Day as we have done, as well as put money where our mouth is and our shareholders' money and invest like we do for the injectables division, but also active materials. Pharma in China and in India, just to mention those that we call out. In terms of your other question, yes, clearly, counters will be expanded significantly. Again, for competitive reasons, let me not get into what exactly, but it is part of that overall investment program. Hopefully, when we have the next Market Day, we can take some of you there as this facility is expanded significantly in Congers. I think that’s about all I can say, George. Thank you. That concludes the call. Thanks for joining us today, and we look forward to talking to you on the road and virtually.
Operator, Operator
This concludes today's call. Thank you all for joining. Have a great rest of your day. You may now disconnect from the call.