Good day, and welcome to the Silgan Holdings First Quarter 2024 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the presentation over to Mr. Alex Hutter, Vice President of Investor Relations. Please go ahead, sir.

Thank you, and good morning. Joining me on the call today are Adam Greenlee, President and CEO; Bob Lewis, EVP, Corporate Development and Administration; and Kim Ulmer, SVP and CFO. Before we begin the call today, we would like to make it clear that certain statements made on this conference call may be forward-looking statements. These forward-looking statements are made based upon management's expectations and beliefs concerning future events impacting the company and therefore, involve a number of uncertainties and risks, including, but not limited to, those described in the company's annual report on Form 10-K for 2023 and other filings with the Securities and Exchange Commission. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in the forward-looking statements. In addition, commentary on today's call may contain references to certain non-GAAP financial metrics, including adjusted EBIT, adjusted EBITDA, free cash flow and adjusted net income per diluted share. A reconciliation of these metrics, which should not be considered substitutes for similar GAAP metrics can be found in today's press release and under non-GAAP financial information available in the Investor Relations section of our website at silganholdings.com. With that, let me turn it over to Adam.

Great. Thank you, Alex. We'd like to welcome everyone to Silgan's First Quarter 2024 Earnings Call. We're off to a solid start in 2024, and our team delivered another quarter of strong financial performance while making progress towards our long-term strategic objectives and delivering on our multiyear cost improvement initiatives. We delivered first quarter adjusted EPS at the high end of the expected range, with strong operational and cost performance driving our results as the Silgan team remains focused on managing the items that are within our control. While volumes in the first quarter were mixed relative to our expectations entering the quarter, we continue to believe that the broad destocking trends we have been experiencing over the past year are coming to a conclusion during the first half of 2024, and are seeing positive trends early in the second quarter. Additionally, in certain instances, we have seen customers accelerate their first half destocking initiatives to be more weighted to the first quarter than initially expected, and we continue to see positive activities from our customers in the marketplace with increased promotional spending in 2024 that has expanded to include more of the products we produce. Turning to our segments, our Dispensing and Specialty Closure segment delivered another strong quarter as market demand for our global dispensing products remains strong with significant momentum in the marketplace. Our market-leading innovation production and service capabilities and excellent operational execution continue to drive compelling value for our customer partnerships. Consumer demand for our food and beverage products continues to be strong. And we've been encouraged to see increased promotional activity in the market for many of these products as seasonal demand begins to accelerate. As expected, our customers' destocking plans for the first half of 2024 impacted our volumes in the quarter. In metal containers, we continue to make progress on our cost reduction initiatives during the quarter and believe we are well positioned to service the market from our low-cost manufacturing network while maintaining the ability to grow volumes through our market-leading pet food platform. First quarter metal container volumes were fairly consistent with our expectations as our customers work to achieve the majority of their first half destocking initiatives in the first quarter. Our Custom Container segment delivered strong results in the quarter with volumes improving sequentially for the first time in several quarters as we saw strong volumes related to the commercialization of new products. In addition, customer order patterns began to show signs of recovery from the destocking trends we have seen over the past several quarters. Turning now to our outlook for the full year of 2024. We continue to believe the business is positioned to deliver volume and profit growth and are pleased to confirm our estimates for the year, which includes adjusted EPS growth of 7% at the midpoint of our guidance range. We continue to expect dispensing and specialty closures volumes to grow by a mid-single-digit rate with high single-digit growth in our dispensing products and low single-digit growth in our closure products, driving better profitability for the segment with improved mix. Metal containers volumes are expected to grow by a low single-digit percentage as we continue to expect mid-single-digit growth in pet food, which represents approximately half of our overall volume for the segment, but now expect that growth to be partially offset by lower pack volumes in 2024. Fruit and vegetable volumes, which represent roughly 20% of our metal container volume, are now expected to decline by a mid-single-digit rate as a large pack customer has announced plans to reduce their North American pack in 2024 to pursue a reduction in working capital and to decrease its financial leverage. This decrease will lead to both lower volumes and unfavorable fixed cost absorption in our system in 2024. Custom Containers volumes are expected to grow by a low single-digit percentage, with volumes inflecting positively in the second quarter and improving through the year as destocking trends conclude and new commercial awards continue to provide incremental volume and profit contribution through the year. As we enter the second quarter, we're confident that our focus and our active and effective management of these factors that are within our control will lead to another year of strong financial results for the company. Our strategic growth initiatives continue to see success in the market and shape the company's future. And our customer partnerships remain strong. With that, Kim will take you through the financials for the quarter and our estimates for the second quarter and full year 2024.

Thank you, Adam. As Adam highlighted, our business continued to deliver strong financial results in the first quarter despite evolving customer plans, and we delivered adjusted EPS at the high end of our expected range. Net sales of approximately $1.3 billion declined 7% from the prior year period, driven primarily by lower volumes in each of our segments and the pass-through of lower raw material costs. Total adjusted EBIT for the quarter of $135.5 million decreased by 9% on a year-over-year basis, primarily due to lower volumes in each of the segments. Higher adjusted EBIT in custom containers offset expected lower adjusted EBIT in the dispensing and specialty closures and Metal Container segment. Adjusted net income per diluted share was $0.69, with lower volumes primarily driving the year-over-year decline. Turning to our segments, sales in our Dispensing and Specialty Closures segment declined 8% versus the prior year, primarily as a result of lower volume mix of 8%. The decline in volume was driven primarily by first half 2024 customer destocking activities in domestic food and beverage markets, which accelerated during the quarter to be more weighted to the first quarter. First quarter Dispensing and Specialty Closures adjusted EBIT decreased $5 million versus the prior year period with strong price cost, including mix that overcame the negative impact of the sell-through of higher cost of metal closure inventory in Europe due to lower metal costs in 2024 and partially offset the negative impact of lower volumes. In our Metal Container segment, sales declined 8% versus the prior year, driven primarily by lower volumes of 5% as compared to very strong volumes in the prior year period. Destocking priorities continue to weigh on order patterns throughout the quarter. Price/mix was negative 4% in the quarter as a result of the contractual pass-through of lower raw material costs. As expected, Metal Containers adjusted EBIT was below the prior year quarter, primarily due to the impact of unfavorable price costs, including mix, mostly as a result of the sell-through of higher cost inventory in our European business due to lower metal costs in 2024 and the impact of lower volume in the quarter. In Custom Containers, sales declined 3% compared to the prior year quarter, driven by a 3% decline in volumes. Custom Containers adjusted EBIT increased $100,000 compared to the first quarter of 2023, primarily due to improved price costs, including mix, which more than offset the impact of lower volumes. Looking ahead to 2024, we are confirming our estimate of adjusted net income per diluted share in the range of $3.55 to $3.75, a 7% increase at the midpoint of our range as compared to $3.40 in 2023. This estimate includes corporate expense of approximately $25 million, interest expense of approximately $170 million, a tax rate of 24% to 25%, and a weighted average share count of approximately 107 million shares. From a segment perspective, mid-single-digit percentage total adjusted EBIT growth in 2024 is expected to be driven primarily by the Dispensing and Specialty Closures and Custom Container segments, with Metal Container segment adjusted EBIT below the prior year record level, primarily due to the previously discussed reduction in fruit and vegetable volumes. Based on our current earnings outlook for 2024, we are confirming our estimate of free cash flow of approximately $375 million in 2024, with CapEx of approximately $240 million. Turning to our outlook for the second quarter of 2024, we are providing an estimate of adjusted earnings in the range of $0.82 to $0.92 per diluted share as compared to $0.83 the prior year period, a 5% year-over-year in adjusted earnings in the second quarter of the midpoint of the range is driven primarily by improving volume trends and operating performance in each of the segments, partly offset by unfavorable price cost including mix in our Metal Container segment. Second quarter adjusted EBIT is expected to be above prior year levels in Dispensing and Specialty Closures, with improved price cost despite a continuing but lesser impact from the sell-through of higher-cost European metal closures inventory due to lower metal costs in 2024 and a low to mid-single-digit improvement in volumes in the quarter. Second quarter Metal Containers adjusted EBIT is expected to be below the prior year record level, with volumes comparable to the prior year period. The year-over-year decline in Metal Containers adjusted EBIT is driven by unfavorable price cost, including mix predominantly due to lower production volume in the quarter and the negative impact on fixed cost absorption with the previously discussed reduction in fruit and vegetable volumes for a large pack customers. Second quarter adjusted EBIT in the Custom Container segment is expected to be modestly above prior year levels as a result of low single-digit volume growth. That concludes our prepared comments, and we'll open the call for questions. Anna, would you kindly provide the directions for the question and answer session?

And we'll take our first question from Ghansham Panjabi with Baird.

So Adam, regarding the accelerated destocking in the first quarter that you mentioned, I assume that was partly a shift from what you had previously anticipated for the second quarter. Can you provide more details on this and which categories were most affected when considering the different operating segments?

Yes. I think you've got the right way to think about it, Ghansham. I mean, we had expected some destocking activity, primarily in food and beverage, again, mostly in North America for our business to impact the first half of the year. And what we saw, again, we talk a lot about our customer relationships. So just kind of in those regular discussions that we have with our food and beverage customers during the first quarter, several made the decision to bring forward that destocking activity. And really, they increased the percentage of their sales from their inventory, and that affected late in the first quarter our shipment volume. So really, we were right on plan kind of halfway through the quarter as far as our volume expectations. And so what's interesting is that did happen late in Q1, we're sitting here on May 1. So we've got a pretty good read to how Q2 has started now to at least from a volume perspective. So we've started Q2 strongly. So we are seeing the benefit of that volume returning and the positive inflection that we were anticipating for Q2. That's with the month of April already behind us. And our order book for Q2 is really solid right now. So we believe that we're reaching that inflection point that we've been talking about for some time. Again, product specific. You can think about pet food on the metal container side, and you can really think about our beverage business in the closure, dispensing and Specialty Closure segment.

Okay. Great. As a follow-up question, if your customers decide to pull forward inventory destocking into the first quarter, does that imply that they have altered their promotional strategies for Q2 and beyond? I'm asking this because, clearly, there's been a slight increase in input costs and related factors. Has there been any change in the conversations with your customers regarding promotional activities?

Really, there hasn't. We've got pretty good intel into that spend for promotional activity in Q1 and how that compares to the prior year. And so the increases that we were expecting were actually realized in Q1. And I think the important part of that, at least for our product, Ghansham, those promotional activities were pretty effective for our customers. So they were pleased with kind of that very directed targeted promotional activity for the products that they were looking to promote, and it did lead to incremental sell-through. I think the other thing for us is we talk a lot about promotional activity in food and beverage. It certainly has expanded outside of those 2 categories into other segments for us in other parts of our business. And you can talk about home care, you can talk about lawn care, personal care, other products. We're seeing increased promotional activity across those segments as well.

I'll now take our next question from Gabe Hajde with Wells Fargo Securities.

I have a question. You mentioned that 20% of the pack mix of your metal containers business consists of fruit and veggie. Could you share how much of that is co-located with your customers? We asked a similar question earlier today regarding the risk across the portfolio, especially in light of discussions about imported full cans of food.

Sure. Maybe for that first question. Look, I think when you think about fruit and vegetables for us, it's just the business model itself, right? We're near site to where those products are growing, right? They typically are grown across a certain set of acreage, then they're aggregated to a filling site. We're really close to where the products are actually filled. So that is broadly across our fruit and vegetable category. So that's how I'll answer the first part of that. Clearly, on the import of finished goods, that's something that we've been tracking for some time. We continue to monitor that in fairness, Gabe. We've seen that over time with some fruit products particularly coming from Asia. But as far as what's in our business today in fruit and vegetables, it really hasn't had much of an impact at all. It's really not a material volume that we've seen coming through. And really just not enough to impact our customers' business at this point.

Okay. Looking at Q1, the segment profit or EBITDA was generally in line despite some weaker volume conditions. As I consider the rest of the year and the ongoing multiyear cost-reduction program, did you see any improvement in that area? I know you mentioned $20 million for this year, with another $30 million planned for next year. Was there any offset from better performance? Also, do you think that the $20 million figure could potentially improve this year, or should we just wait and see?

It's a really good question. And as we look at Q1, what I'd tell you, Gabe, we have a very stable kind of operating environment for the first time in several years. And so we're sort of back to the Silgan playbook. I mean we are good operators at the end of the day. And really, I think the primary impact to the first quarter was really just great solid operating performance and our normal continuous improvement activities really benefited the quarter and all the other programs that we've been working on. That's in addition to the multiyear $50 million cost reduction initiative. So we made really good progress. We've got several plans that we've rationalized. We've got assets that are if not already in the location, they need to be, they're on their way. So we've made significant progress. There was a little savings in the first quarter from that $50 million project. But really, it was much more about the Silgan operating model and our continuous improvements that drove great operating performance in the quarter.

We'll now take our next question from George Staphos with Bank of America.

I would like to take a different approach to the question of destocking. Given that your customers accelerated destocking in the quarter, does this raise any concerns for you about their volume outlook for the year or their ability to access products through the supply chain? Typically, purchasing managers initiate restocking when they are worried about supply not meeting demand. While it's a positive sign that destocking is nearly over, could it also indicate that customers have some apprehensions about the outlook in the second half of the year? How should we approach this narrative?

Yes, it's an interesting perspective. From my viewpoint, a month into the quarter, we can discuss specifics, such as pet food, which was a late addition to last year's destocking activities. This category was expected to linger into the first half of 2024 and therefore saw significant destocking. April shipments were strong, and we're observing growth in the order book for May and June, returning to expected levels. We're very close with our customers, being on-site or nearby, which gives us a solid understanding of their demand forecasts moving forward. I don't view it as a negative situation; rather, the good news is that we're nearing the conclusion of our discussions about destocking, as the major impact in the first half occurred in the first quarter. Currently, we're quite confident that we’ve reached an inflection point for our volumes in the middle of Q2. Additionally, as a sign, our containers business is experiencing a different volume trend compared to our other businesses. The changes in order patterns indicate strong end consumer demand coupled with short order lead times. Some concern we had regarding our customers reducing inventories, which could result in insufficient stock to meet consumer demand, is being alleviated as we're receiving these short lead time orders, particularly in the Custom Container business to support that demand. Overall, we believe that for our products, which are largely non-discretionary, demand remains quite strong, and we feel optimistic about the volume outlook.

My next question is about any concerns you might have regarding the procurement of metal, steel, or aluminum, especially considering the various trade sanctions that have been discussed. I know the past few years have provided valuable lessons for everyone, including Silgan. I don’t expect it to be a problem, but I wanted to confirm your perspective on this issue. How do you see it right now?

Yes, sure. I think it's a good question. There's a lot of change going on, particularly on the metal supply base. And as you know, with our size and scale, we feel like we are advantaged in getting the raw materials that we need to support our customers. So it has not been a problem for us. It's something that we actively manage each and every day, but our teams have done a really good job of maintaining that supply chain all the way throughout. And we talked a couple of years ago, particularly on the aluminum side about how we extended our supply chain and the network of suppliers that support our business, and that's been beneficial as we work through any supply chain challenges. But as we sit here today, we're confident in our ability to procure the materials for our customers' products.

Last question for me, and I'll turn it over. Have you seen any evidence within your segments of a shift by consumers toward lower price point, more staple types of products reflecting in your results, or is that not apparent across various categories and customers? How should we view this from Silgan's perspective?

Yes. Again, another really good question. I think Q1 is probably too early to try to draw a conclusion in our products for that. But I go to our Custom Container segment, where we have seen that increase in the short lead time orders where consumers are seemingly focusing their spend on more nondiscretionary items. And again, that's really where we play with our business in all 3 segments are primarily nondiscretionary spend. So I think our order books would say our products are continuing to do well. Our consumers remain resilient. But I think there is a component of that, George, that these are mostly nondiscretionary products. And I think we'll be able to comment further on that at the end of Q2 as we see those volumes play through.

Our next question will come from Matt Roberts with Raymond James. It seems that the previous speaker has lost his connection, so we will move on to Daniel Rizzo with Jefferies.

You mentioned nondiscretionary spending up, but I was wondering if you look at fragrance from beauty, if that's still kind of intact as well or if consumer trends are perhaps shifting away from that. I think in the past, if you mentioned that, that's kind of fairly stable as well.

Yes, demand for our global dispensing products remains very strong and has not changed. In the fragrance and beauty market, we focus on the premium luxury segment, and consumers in this category have maintained their purchasing habits over time. Therefore, we believe they are largely unaffected. For some of our other dispensing items, during our cost-out initiatives, there were times when demand exceeded our capacity. We built inventory for a few product lines that had significant demand, which contributed to our shortfall in Q1, but we expect to recover in Q2. This gives us confidence that DSC, in particular, will see strong volume growth in Q2.

Does the increase in short lead time orders suggest that your customers are willing to live kind of hand to mouth so to speak? Or can we expect a restock cycle, a real restock cycle, I don't know, sometime in the second half or surely thereafter?

Yes. It's a really good question. I probably would try to answer that similarly to how I just answered George's question. I think there's a combination of things, Dan, and again, it's all underlying end consumer demand remains strong for our products. We believe, and we talked about a lot last year that we thought there were instances where our customers were taking inventory levels below historic levels, and we were having good conversations about that and maybe the need to replenish those. So there's a combination in Q1 of that happening. The order book is really strong for Q2. I'm sure it's a combination of those things as well. So I think it's a really good question, and we'll have more detail at the end of the second quarter to really provide a stronger opinion of what we really think is happening. But it clearly is a combination of all those.

And last question, do you receive higher prices for short lead time orders? Does it really make a difference? I'm not sure about the specifics.

It does depend. Most of our business model relies on long-term contracts. For that part of our business, not really. Prices are set over a certain period, but there are methods to pass through costs. For more transactional business, yes, we do see that.

We'll now take a question from Matt Roberts with Raymond James. Quick on the fruit and vegetable customer, could you give us a little more color on the timing of when that occurs? Or is it just ongoing wind down through 2024? And it seems like you reiterated your volume outlook in metal containers for the year versus a couple of months ago. So are there any offsets within that segment we should be thinking of?

Yes. Regarding the timeline of communication and its impact on Silgan, there are a few key points. The customer announced publicly in mid-March, and we had been collaborating with them prior to that to assist in their planning process for implementing the changes. In terms of Silgan's perspective, most of our past volume occurs in Q3, which is when our shipments take place. We build inventory and produce cans throughout the year. Currently, we are facing a production shortfall in Q2 because we were supposed to build inventory for that customer ahead of the Q3 shipments. This results in some lost absorption during Q2. As we move into Q3, that’s when the volume impact will be more noticeable. Hopefully, this clarifies things. Now, could you remind me of the second part of your question, Matt?

I was asking if there are any offsets within the container segment.

You're exactly right. So in fairness, we're probably to the lower end of the range that we provided now versus maybe being at the higher end of kind of low single digits. So we've got pretty good visibility to it now and feel comfortable that we're going to have growth in 2024.

Okay. And then on the $20 million in savings in 2024, I think you said there was a small portion in 1Q. Is there any change to that or how we should think about the timing throughout 2024? And hypothetically, if volumes didn't recover as expected, have you identified any incremental opportunities that could exist beyond the $50 million.

Let me take the back part of that question, and I'll pass it over to Kim to take the first part. So as far as how we view responses to maybe potential volume reductions later in the year. I mean, number one, we are focused on driving cost out of our business each and every day. It's just part of our DNA, and it is what we do. We're really focused on rightsizing our capacities to the demand that we see with our customers and really don't think that there's any change to that as we sit here today. But that's an ongoing iterative process that we really do work on each and every day in each of our businesses. And remember that we've got some nice growth opportunities as we sit here today in each of our segments as well. And with that, I'll throw it to Kim.

Sure. So of the $50 million cost reduction program, we had identified $30 million of cash this year as well as $20 million in savings and most of that savings will be in the back half of the year. But we have fully identified the savings and the cost to achieve it, and we're on track.

We'll take our next question from Mike Roxland with Truist.

I wanted to know more about where you're seeing demand exceed your capacity and what steps you're taking to address that demand in those areas, especially considering the strong order book moving forward.

That's a great question. I should have been clearer about this. It pertains to our global dispensing business, which we have been expanding over time. In this instance, we had a plan in place with our customers to relocate a few assets to boost capacity. As we took those production lines offline and relied on our inventory, customer demand increased slightly. They depleted the inventory we had previously agreed upon before the asset relocation. The positive news is that in the first quarter, those assets are now operational again in the second quarter. While it was a temporary setback, it’s due to the strong customer demand, and we are now better positioned to meet that demand with lower costs and increased capacity.

Got it. Continuing on the Dispensing Specialty Closures, last quarter you mentioned some business wins, which you highlighted again in the press release. Can you provide more details on those wins and the timeline for their deployment throughout 2024?

Sure. I think in dispensing and specialty, I mean, it really is more on the higher-value products and talking about new product launches in fragrance and beauty. I'd rather not give the names of what those are. But again, just think about where we play in those segments, again, it's the premium and luxury end of that profile. And it just has continued to experience really good growth for years now, regardless of what the economic circumstances are. So I think really that's where we're having tremendous success, and we're having really nice success in other parts of the business. That's the one that we tend to focus our conversations on.

Got you. If I can just slip one more in here because you did mention earlier high single-digit growth in dispensing for the year. You're not really seeing the customers pay at all. Although when you look at some of the companies that have reported, the fragrance side has had a little bit of lackluster volumes, with certain companies even in China. So just how do you reconcile your growth in terms of premium or higher fragrance with what some of the beauty companies have posted over the last couple of weeks or the last few months?

Yes. It's a good question, Mike. And it's a couple of things. One, again, it's the subsegment of that market that we participate in back to that premium in luxury. So that's part of the answer. The other answer is, I mean, our team is doing a really good job. We're winning in that market. Our innovation, our design and research capabilities are clearly advantaged and being rewarded in that market space. We've become sort of the go-to in that market. So with new product launches, we are winning a disproportionate amount of those new product launches. And that's really what's driving our growth that I think is going to look a little different than what those luxury retailers or fragrance companies like maybe the ones you mentioned are going to show in their full company results. We're in a subsegment that continues to grow at a very nice clip.

We'll now take our next question from Arun Viswanathan with RBC Capital Markets.

Congratulations on the strong Q1 despite ongoing destocking. I wanted to ask about two things. First, could you comment again on what you're observing regarding promotions? Are your customers indicating that they are accelerating their destocking due to the high interest rate environment and associated carrying costs? Does this suggest that we won't see any restocking until interest rates stabilize? Additionally, are they saying that they plan to operate with lower inventory and adopt more just-in-time practices? Is this a structural change? Given your extensive experience in this industry, I would like to hear your thoughts on how your customers are managing their order portfolios.

Sure. In terms of promotional activities, we've observed a significant increase in spending from our customers across various categories, including Metal Containers, Dispensing and Specialty Closures, and Custom Containers. This promotional investment is proving to be very effective and well-targeted, leading to successful outcomes. A strong example of this is the targeted promotional campaigns in the soup category around the holidays, which successfully drove desired volume and are set to be implemented in 2024 as part of their campaign. We believe this spending is efficient and producing positive results, which is encouraging for our customers and our expected volumes in 2024. Regarding destocking, the conversation around interest rates is notable. Last year, we discussed how rising interest rates accelerated destocking activities. We maintain regular communication to understand current inventory levels and how they compare to historical standards. No one amongst our customers seems to be aiming to keep inventory significantly below historical levels due to interest rates. Instead, they are focusing on volume growth for 2024, which requires maintaining some inventory since our lead times do not allow for quick turnaround on consumer orders.

Could you quantify inventories either at your level or your customer level, such as in days of supply or weeks? Last year, we noted that retail inventories decreased from about 8 weeks to 4 weeks. I would like to hear your thoughts on that. Additionally, you mentioned something about nondiscretionary items, and I am having some difficulty with that. It seems that some categories that seem nondiscretionary are also sensitive to inflation. Could you share your thoughts on inflation and its impact on your volumes?

I’ll address the last question first. When I think about our core products, let's take food cans as an example. Soup is a meal, and it isn't discretionary—it's not a supplement or a snack, and it doesn't just accompany other categories. Pet food is another example; it constitutes full meals for pets and makes up half of our volume. Therefore, we believe that our products are not discretionary within the Metal Container segment. We also offer functional beverages and other food and beverage products, and we feel that much of our business is less discretionary compared to some of our competitors. Regarding inventory levels, last year our discussions with customers shifted around mid-year from talking about days on hand to focusing on the dollar amount on hand. This change was due to inflation affecting their packaging materials and all other aspects of their products and ingredients. We are now transitioning back to discussing unit level inventories instead of dollar amounts. It's an important point that unit level inventory is down, and we are collaborating closely with our customers to determine the right inventory levels moving forward. However, I don’t believe anyone expects to operate with inventory levels significantly below their historical norms as we plan for the future.

And we'll now take a follow-up from Gabe Hajde with Wells Fargo Securities.

I'll be brief. I just wanted to ask, I think one of the large functional drink customers that you're talking about your service here in North America, restate kind of how they get products from market. Curious if you experienced any impact from that or to a discernible from this "long-term destocking" phase that seems not persist for 18 months, generally seeing across packaging?

Yes, we agree. It's gone on longer than any of us had anticipated for sure. As far as that change in how they're supporting the market, really, for us, it does not touch our business. It's just whether the distribution point is a direct distribution or through a third party really doesn't affect us in really any way, Gabe. It's more about the end consumer demand that drives our volume versus how the product gets to retail.

And it appears there are no further telephone questions. I'd like to turn the conference back to our presenters for any additional or closing comments.

Great. Thank you very much, Anna, and I appreciate everyone's interest in Silgan's performance in Q1. Look forward to discussing our Q2 performance in July. Thank you.

And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.