Holdings' second quarter 2025 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Alex Hutter, Vice President of Investor Relations. Please go ahead.

Joining me on the call today are Adam Greenlee, President and CEO, Philippe Chevrier, EVP and COO, 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 2024 and other filings. Therefore, the actual results of operations are implied in the commentary on today's call with EBITDA, free cash flow, reconciliation of these metrics, which should not be considered in today's press release and under the non-GAAP financial information portion of the Investor Relations section of our website at silginholdings.com. With

that, let me turn it over to Adam. Thank you, Alex, and we'd like to welcome everyone to Silgin's second quarter earnings call. Our second quarter results showcase the structural changes that have been taking shape in our business over the past decade as our teams continue to build upon the momentum in our business and delivered 15% adjusted EPS growth and record adjusted EBIT driven by the success of operational, the integration of our cost reduction initiative, adjusted EP record first half, our dispensing and specialty closure segment shows significant year over year growth and delivered another quarter of record adjusted EBIT with over 40% growth in dispensing products and continued success in the markets we serve. Our market-leading innovation and design capabilities, the strength of our long-term customer relationships, and the execution and focus of our teams continue to set us apart in the market and drive organic growth that outpaces our peers and the end markets we serve. We have made meaningful progress in the integration of the Vayner acquisition from a cultural synergy and for product portfolio perspective and we have been very pleased with the incremental opportunities our teams are continuing to uncover to leverage both our global commercial presence and our expanded product offering to drive accelerated growth well into the future as a result of this combination we continue to have success with new and existing customers in our core high-end fragrance and beauty personal care and home care markets and are seeing incremental opportunities in healthcare and pharma markets as well. Our dispensing momentum remains strong into the second half of the year as we execute in our near and long-term priorities in this rapidly growing high-value portion of our business. Volumes for our North American beverage specialty closure products, particularly in the hot fill markets, fell short of our expectations entering the quarter due mostly to cool, wet weather experienced in much of the country during the second quarter. Additionally, with weather impacting consumption patterns in the first half, our customers have adjusted their promotional spending plans to reflect the lower consumption patterns during this period impacted our volumes. While weather conditions at the missed consumption occasions for these beverages in the first half of the year will not be recovered in the balance of the year as our customers work through the inventory they built, we continue to strong demand for our pet food products, which grew by a mid-single-digit percentage in the second quarter, driven by our strong presence in the fastest-growing portions of the pet food market. As expected, our total volumes in the second quarter were comparable to prior year levels, mostly as a result of the timing of orders for containers for soup markets in the first Our adjusted EBIT performance in metal containers during the second quarter was 21% above the prior year period, driven by a more normalized production environment relative to the prior year. In custom containers, our business delivered strong operating performance and experienced continued success in the marketplace as comparable volumes grew 2% after adjusting for the impact of lower margin business exited as a result of our cost savings initiatives. As expected, our adjusted EBIT margins expanded 190 basis points as a result of our cost reduction activity. With our strong start to the year, we remain confident and are ready to expect dispensing organic volumes. Our metal containers volumes are on track to grow by a mid-single-digit percentage, driven primarily by mid- to high-single-digit growth in pet food and a partial recovery in fruit and vegetable pack volumes. Unfortunately, a recent customer bankruptcy in North America that has resulted in that customer exiting certain markets is expected to impact metal containers adjusted EBIT by approximately $10 million in the second half of 2025. In custom containers, with the annualization of the new business that ramped up in 2024, as well as additional new business awards in 2025, we continue to expect comparable volumes to grow by a mid-single-digit percentage this year. We remain focused on the opportunities that lay ahead for the company and are confident in our ability to execute in our plan as the structural changes and evolution in our portfolio have positioned us to drive significant growth in our business in the near term and long term. Our financial performance remains strong and we are pleased that we are positioned to achieve a 9% increase in adjusted EPS and exceed $1 billion in adjusted EBITDA at the midpoint of our estimated adjusted EPS range in 2025. With that, Kim, we'll take you through the financials the quarter and our estimates for the third quarter in the full year of 2025.

Thank you Adam. As Adam highlighted we reported another quarter strong financial results in the second quarter driven by the continued success of our dispensing business, more normalized production of metal containers, and the execution of our cost reduction plan. Net sounds of approximately 1.5 billion dollars increased 11 percent from the prior year period driven primarily by growth and dispensing products including the addition of the Vayner business and the pass-through of higher raw material and other manufacturing costs in metal containers. Record total adjusted EBIT for the quarter of $193 million increased by 17% on a year-over-year basis, driven by strong growth in dispensing products, including from the acquisition of Vayner, improved price cost in metal containers, and the benefits of our cost reduction efforts, resulting in higher adjusted EBIT in all segments, and record adjusted EBIT in the dispensing and specialty closure segments. Adjusted EPS of $1.01 increased $0.13 or 15% from the prior year quarter. Turning to our segments, second quarter sales in our dispensing and specialty closure segment increased 24% versus the prior year period, primarily as a result of the inclusion of the sales from Vayner and higher organic volumes of dispensing products. Due to the rapid integration of Vayner and the overlap in customers and products, organic volume mix calculations have become less meaningful for the segment and for dispensing products in particular. Volumes for food and beverage specialty closures declined 3% during the quarter, driven by a mid-single-digit decline in North American beverage products, predominantly in hot sale markets. The decline in North American beverage volume was the result of cool, wet weather in the second quarter, which drove lower overall consumption of these products and, as a result, lower promotional activity. Record second quarter of 2025 dispensing and specialty closures adjusted EBIT increased $15 million or 16% versus the prior year period as a result of the contribution from Vayner and higher organic volumes of dispensing products. The previously discussed decrease in North American beverage volumes resulted in an approximately $5 million year-over-year headwind to adjusted EBIT in the second quarter. In our metal container segment, sales increased 4% versus the prior year period as a result of a failable price mix due to the contractual pass-through of higher raw material and other costs and a 1% benefit from foreign currency translation. As expected, unit volumes during the quarter were comparable due to mid-single-digit volume growth in pet food and higher volume for fruit and vegetable markets, partially upset by lower volumes for supermarkets, primarily related to the timing of orders during the first half of the year. Metal containers adjusted EBIT increased 21%, primarily as a result of favorable price costs due to a more normalized production schedule and better fixed cost absorption relative to the prior year quarter, which was impacted by a customer's reduction of their fruit and vegetable pack plants mid-year. In custom containers, sales decreased 3% compared to the prior year quarter, driven by a 2% decrease in volume due to the exit of lower margin business as a result of a planned footprint reduction to achieve the previously announced cost reduction goals. Excluding the lower-margin business exited to achieve cost reduction plans, volumes increased 2%. Custom Containers Adjusted EBIT increased 11% as compared to the second quarter of 2024, primarily due to favorable price costs, including MIX, as a result of cost savings initiatives. Looking ahead to the full year of 2025, we are revising our estimate of adjusted EPS from a range of $4.00 to $4.20 to a range of $3.85 to $4.05, a 9% increase at the midpoint of the range as compared to $3.62 in 2024. The revision in our estimate of adjusted EPS is the result of lower volume expectations for specialty closures in the North American beverage market, which we expect to impact dispensing in specialty closures adjusted EBIT by approximately $10 million, and the impact associated with certain changes in the market due to a customer bankruptcy in metal containers, which is also expected to impact the second half in full year by approximately $10 million. This estimate includes interest expense of approximately $185 million, a tax rate of approximately 24%, corporate expense of approximately $45 million, and a weighted average share count of approximately 107 million shares. At the midpoint of our estimated 2025 adjusted EPS range, we will exceed the prior record levels of adjusted EBIT and adjusted EBITDA and exceed $1 billion of adjusted EBITDA for the first time in the company's history. From a segment perspective, we now expect a low teen percentage increase in total adjusted EBIT in 2025, driven primarily by an approximately 20% increase in dispensing and specialty closures adjusted EBIT, a mid-teen percentage increase in custom container segment adjusted EBIT, and a mid-single-digit percentage increase in metal containers adjusted EBIT. Based on our current earnings outlook for 2025, we are revising our estimate of free cash flow from approximately $450 million to approximately $430 million, a 10% increase from the prior year, as earnings growth will be partly offset by higher cash interest and capex of approximately $300 million. This estimate also includes approximately $20 million of cash costs to support our cost reduction program. Turning to our outlook for the third quarter of 2025, we are providing an estimate of adjusted earnings in the range of $1.18 to $1.28 per diluted share. Third quarter earnings are expected to benefit from the inclusion of Vayner, higher organic volumes of dispensing products, and the ongoing benefits of our cost reduction programs. These benefits are expected to be partially offset by the reduction in specialty closures volumes in the North American beverage markets and the impact of a recent customer bankruptcy in metal containers. Dispensing in specialty closures third quarter net sales are expected to grow by a mid-to-high 20s percentage rate driven by strong volumes for dispensing products, including the results of Zainer. Metal containers and custom containers' third-quarter volume is expected to increase by a mid-single-digit percentage. Third-quarter adjusted EBIT in the dispensing and specialty closures and custom containers segments are expected to be above prior year levels. Metal containers' third-quarter adjusted EBIT is expected to be slightly below prior year levels as a result of a $5 to $10 million impact related to the previously discussed recent customer bankruptcy. That concludes our prepared comments and we'll open the call for questions. Rachel, would you kindly provide the directions for the question and answer session?

Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star 1 to ask a question. To remove yourself from the queue, please press star 2. We will pause for just a moment to allow everyone an opportunity as a signal for questions. And we will take our first question from Matt Roberts with Raymond James.

Hey, good morning, everyone. Thank you for taking the question. First, on metal, maybe you could help me understand that customer. I believe they used to be 3% of revenue. They cut 30% last year, so called about 2% of revenue now, if my math is right there how much of a hit to volume was that in 25 and what categories that expand to versus 24 or maybe long longer term coming out to 26 and what's what's a worst case scenario that two percent revenue goes away i mean how much would even be down in 26 are there any assets or facilities that are co-located or dedicated to this customer or what is a more likely scenario for 26 any any additional color would be great there thank you sure thanks matt

um you know obviously it was a recent filing that this or one of our large customers uh went into bankruptcy proceeding so uh we've been dealing with that for a little bit of time now and one thing i would say just to be really clear um our company and our teams did a great job of protecting to any downside financial risk related to that filing. So our teams worked very hard and diligently to make sure there was no financial impact of the filing itself. Move forward to the ongoing operations. There's a couple things to think about. One, you know, you're right, it's a large customer. You can probably figure out for yourself who that might be. We've got near-site, on-site locations that are competitively advantaged to any other potential supply scenario that that particular customer could consider. We continue to operate under our contract as normal, and we are working really hard to help them have a successful 2025 PAC. And as they ramped into the bankruptcy proceeding, they've been operating under an asset light strategy. So by that, I guess I would say they've been sort of shedding some of their operating facilities and moving some of their volume to copac um and that's where really the impact is is where we're feeling at this year they've closed a couple of facilities um and i'll just you know i won't give you the specific markets that they closed those facilities for um they've moved most of that volume they've lost some share uh they've moved most of the remaining volume to copac locations and in some instances we are the supplier of of that copac locations or location excuse me in some instances we are not so where we are not is where we would have a shortfall in volume that we've now included in our forecast for the remainder of the year the bankruptcy proceeding should conclude sometime probably in the first quarter of next year so we'll like i said work really hard to help them have a successful 2025 pack season anything beyond that would be speculation but i'll just reiterate what i started with is we have competitively advantaged facilities on-site or near-site to the filling location, and that's proven for about 38 years to be a very effective business.

Thank you.

I really appreciate all that. Sorry, maybe just one last thing. Sure, please. You know, look, if the volume doesn't come back or if the volume doesn't stay, you know, we have a long track record of right-sizing our capacity to the demand levels of our customers, and we'll absolutely do that here. I think we're premature in saying that at this point is going to be, But clearly, that's a core part of our strategy is we do right-size our capacity, cost-out opportunities if we need them.

I really appreciate all the color there, Adam.

Maybe if I may ask another one on the dispensing side.

Anyone can take it, but I know, Kim, I believe you said mid-teens 25 EBIT increase, where I think last quarter you were expecting 20%. So my math says it's about a $20 million shortfall, and beverage was 10 of that. Am I missing anything there or maybe my map is wrong? And on the dispensing side, I think you still said you expect high single digit volume and mix, but hard to parse that out with Vayner now. So is that high single digit volume mix inclusive of Vayner or could you discuss how Vayner is done versus 24 and your legacy dispensing volumes in 25 and just any color on end markets and dispensing how that's performing amid tariffs or whether it's fragrance, beauty, and the likes, any additional color there would be great. Thanks again for taking the question.

And I think maybe you were a little high on your increased prospects.

And when you think about the broadening of our basket of products we take to our customers, we're finding more opportunities than what we had initially identified. And as a reminder, we don't include those commercial synergies in our estimates when we set our synergy estimates at the beginning of the announcement of the acquisition.

So we're feeling really good about it.

It gets harder and harder to parse out our legacy volume from Vayner because we are making investments into Vayner facilities. And, you know, one thing I would say is remember those facilities are very well capitalized and, you know, carry with them a slightly higher depreciation. So if you think of EBIT margin, maybe the incremental EBIT margin didn't appear to be as robust. as you would have thought, that when you get to the EBITDA margin level, we're delivering exactly what we would have expected from the Vayner acquisition. And then the last point I'd make in DFC is you've got this powerhouse in fragrance and beauty for our products that continues to perform. And what we've seen a good indicator of future market needs is our sampler platform. I'll just say we continue to essentially be sold out in samplers, and volume has been very, very strong. Our fragrance and beauty volumes are accelerating in the second half of the year. So we're expecting significant growth with new product launches, and I think many of our customers in the market segment have been talking about new product launches on their public calls and talking about how these products continue to perform versus some of the other portfolio products they have in their company, and we feel really good about high-end fragrance and beauty, and our customers do, too. They continue to invest.

Thank you again for all the detail there and correcting my user error. Back to math class, I go.

Thank you. And we will take our next question from George Staffos with Bank of America.

Hi, everyone. Hope you're doing well. Thanks for the details. Hey, Adam, I know you've already said you don't really want to get into the organic legacy growth question on dispensing. But I want to give it one more shot, if you can answer the question this way. I mean, clearly, you know, the number of parts, you know, the number of units you're shipping, and you probably knew what Vayner was doing at the time you acquired it. If we sort of stop the clock at that point, with Vayner's units being what they were, And you measured all the other incremental growth from here as growth and legacy.

What kind of growth would that show?

X beverage? Is there any way you can talk to that?

Sure. And, George, you're exactly right. I think we can do that. We obviously have done that. But there's a little bit of mathematics that it takes to get there, and you're making some assumptions, too. So maybe let me just be really clear. Our legacy dispensing products are in the mid to high single-digit growth rate in the quarter, which is right in line with our expectations. So the business continues to perform. There are no issues whatsoever. You mentioned hot fill beverage. Unfortunately, with the wet, cool weather that we talked about, you know, our customers did pull back a bit on their promotional spending in the second quarter, as they saw really limited opportunity for consumers to be out about enjoying their sports drinks, as an example, given that it was raining just about everywhere. I think one of the anecdotal comments from a customer was that they didn't put in their forecast for the year 25 consecutive weekends of rain in a particular market that they served. So those are the kind of issues we're dealing with. It is really, I mean, we mentioned food and beverage in the press release, but this is really a North American hot fill. You can call them isotonic, sports drinks, on the go, whatever you want. It's those products that people typically enjoy when they're not in their home and out doing activity.

Sure, and at the end of the day, the customer is the customer. You're not going to dictate to them. They're going to ask you to help them in the market. But with that being said, you knew there was a butt coming. All right. So it's not going to rain 52 weeks out of the year. Presumably, they are going to need to defend share in the third quarter and even into the fourth quarter in football season. What are they doing in terms of promotional activity? Why haven't they at least dialed it back up to capture that portion of the market again to the extent that you can comment? And what might it mean for your business for the rest of the year? last question for me and i'll turn it over um after this to come back um so soup was down you mentioned it was timing what is the outlook for third and fourth quarter and how's that factored in and then um yeah i'll turn it over there and i'll come back thank you okay thanks george uh

back to the the hot fill segment for just a second so um it's a great question one that obviously we're working really hard to understand with our customers, too. So there's a couple things. The preseason filling for hostile beverages, sports drinks, et cetera, really starts in February and March. So they're building inventory to support the demand of the season, call it late in the first quarter through the second quarter and through the summer. The reality is with the lower consumer demand that we've seen, they've actually built a little bit of inventory, nothing to be worried about. But they're going to burn off their inventory. And then the reality of that market is, you know, there's a summer season for sports drinks. And the shoulders is just less demand. There is less demand. So, you know, there is going to be a recovery. It's highly unlikely that's in 25. It will be in 26. I'm not going to try to forecast weather for 26 at this point. But there's nothing about the underlying demand on maintaining or growing their market share. and usually that plays out pretty well for the packaging suppliers. So we feel good that there's a recovery. It's just unfortunate that it's going to be beyond the current calendar year. And then when you think about soup, you know, look, soup in the first half, there was a little bit of pull into Q1, and then we had a really strong Q2 last year. So outside of that, soup volumes are really consistent. We've got super close relationships with those customers and those markets and understand what their programs are for the back half and feel like we're in a very good spot. And SUP continues to perform well.

Adam, just a point of clarification. You said you expect stable second half of the year on SUP. Did I hear that right? Yes, you got it. Thank you very much.

Thank you. We will take our next question from Ganshan Panjabi with Bart.

Thank you, Operator. Good morning, guys. I guess, you know, as you step back a bit, You know, Adam, coming into the year, I think your initial view was that volumes would be up mid-single digits across the three operating segments, if I remember that correctly. And, you know, so is the adjustment for EPS for 2025 specific as of this morning? Is that specific to the weakness in specialty closures in North American beverage and then the bankruptcy impact at the customer level, or is there anything else we should consider?

I know. I think you've got it exactly right. I mean, I think it's two incredibly discreet items. the hot pill beverage item in North America and the customer bankruptcy and metal containers and everything else about our message and our story remains exactly the same as we came into the year. So, you know, I mean, we actually feel, we feel very confident that, that A, we had it right with the exception of those two discrete items and B, our businesses continue to, to perform and maybe the last item I tell you is our key strategic markets of dispensing and to accelerate in the second half of the year and we will see that acceleration in both of those product categories

and that statements true even with the mixed consumer across the US and Europe just just to be clear on some of your discretionary categories and so on right

yeah yeah and in fairness you know with literally 100% of our products being consumer staples, you know, we feel like we fall very much into the category that consumers use and need the products that we manufacture.

And just as a clarification, so the weakness in specialty closures in North American beverage, when did you start seeing that, you know, during the quarter relative to, you know, when you reported last and you had visibility in the first month into the quarter at that

Yeah, it was shortly thereafter, really kind of the mid part of the quarter that they are we saw the weather, we kept asking the questions. Our customers did not pull back their forecast until mid to later in the quarter, unfortunately. Got it. Thank you. Thank you. We will take our

next question from Jeff Sakaskis with J.P. Morgan. Thanks very much. For 2026, should we think as a

base case of the effect of the food can bankruptcy as an additional $10 million versus $2,025?

I think what we have in there right now is a $10 million impact and the back half of $25. I think that there is some element of that where that customer has exited the market in certain areas, and that volume has gone to co-packers that we don't supply. There is a chance some of that comes back next year, to be clear. I think the base case, as far as the remaining assets and remaining volumes, it'll largely depend on who actually and what their intention.

What you did is you talked about these two $10 million pre-tax items, and you lowered your free cash flow by $20 million. And, you know, I would think currencies would be a help to you in the second half. Does the free cash flow generation reduction contain something more than these two items?

And there's a lot of moving parts on currency, foreign currency, too.

We've got some favorability with the euro. We've got some unfavorable in other jurisdictions. So all of that is factored in and really came out in the wash of the net zero, and the $20 million impact is directly attributed to the two discrete items that we're talking about. So from an earnings, from a free cash flow perspective, those are the only things that have changed as far as our outlook for the year.

Thank you so much.

Thank you. We will take our next question from Gabe Hady with Wells Fargo Securities.

Morning, 17. team. I guess with the stock reacting the way it is, I'll try to take one more stab at the question. I mean, Jeff asked about, you know, if there's an incremental 10 million in the next year, but maybe as it sits today, you mentioned you're assuming kind of the business that's transitioned to co-packers for the bankrupt customer sits where it is for the remainder of the year. um i kind of came up with the same revenue number that um matt did so you know in a worst case scenario which seems to be what's sort of implied in like i said today's stock move would that total hit be in the notwithstanding cash costs that may you may have to put out to restructure the business but would that in ebitda terms be in that 20 to 25 million dollar range is there anything

else that we should be aware of we're thinking about significantly competitive so the question i hold disclosure here is is what is the new owner going to do with those assets in fairness again under the asset life strategy they exited a couple facilities they they still own several facilities and those facilities are some of the best in the world and anybody who buys them i think it'll be a very interesting set of conversations as to whether they want to run them or not i think their advantage versus others in the market and we feel really good about our position

right next door to them understood clear okay um maybe kim one for you it seems like every year that goes by um the working capital swing gets bigger and adam talked about the team being proactive in terms of protecting silgin again from from any sort of ar or inventory exposure to this other customer. So I think the outflow, including changes in outstanding check balances, was an outflow of $1.325 billion. Is there anything that you all are doing different operationally, or maybe with Vayner or some addition of assets that the working capital outflow is so large at this point? And then anything that gives you consternation that, I mean, I know you talked about 430 of free cash flow that it won't come back in the second half.

WAC, we're incredibly confident, as we are every year, that that all comes back and it's cleansed by the end of the year. So I just think that we took advantage of that opportunity to provide even more value to our customers in the metal containers market.

And Adam has it right. It's just it will go back to our normalized level, and we're still expecting to be at our regular pre-cashable levels.

And I know you're probably tired of me saying it, Gabe, but everything else remains exactly as it was before. So the Vayner Acquisition Working Capital is exactly what we expected. The balance of the businesses are exactly what we expected. It was this one item that will have no impact on the full year.

Sounds like you guys sleep better at night than I do. Thank you.

Thank you. We will take our next question from Anthony Pettenari with Citi.

Good morning. um regarding tariffs on uh steel and aluminum i think a few weeks ago uh one large can buyer talked about maybe potentially repositioning the food can in their portfolio and i'm just wondering if there's sort of any finer point you can put in terms of how tariffs are impacting your customers or just the competitive environment i guess we also had recent trade deal with europe So just maybe how that's evolved or the impact that you're seeing or not seeing.

Yeah, I think, you know, we've talked a lot about the impact on our acquiring through our customers. The contractual pass-throughs of our long-term agreements allow for the pass-through of all of those costs, and that's what's going to happen, which makes the last conversation really interesting because we're helping mitigate some of those costs for our customers within the year. So, you know, we think that, you know, the purpose of the food can is many things. It's the lowest cost means of getting nutrition to consumers that need it. And for the most part, you know, our customers, what's in a can today, our customers actually cook their product in our can. It's an integral part of their filling operation and how they take nutrition to the market. So it's not easy to replace. It's not easy to replicate. And we think those barriers to entry still remain. And what's in a food can today pretty much has to be in a food can from a preparation and a process standpoint. I think with the 232 tariffs maintaining it, call it 50% on steel, you know, I think that the impact on the food can itself is about something like $0.05. When you get to the largest part of our business, which is our wet pet food category, those are primarily aluminum cans. And again, we've talked a lot about the idea that, you know, we like to source raw materials in the markets where we manufacture and the markets in which we sell. Most, the vast, vast majority, and not subject to the consumer to make a different decision at the purchase point when they're securing product for their families themselves or their pets. So, you know, we think, you know, we've got a really good mechanism to pass those cough through. We think our customers understand how to deal with it. And we think consumers are paying a little bit higher price. Okay. That's very helpful. And then just maybe two quick

follow-ups on hot fill closures. The 10 million hit from, you know, as customers work down inventories, is it your view that it's highly unlikely that that headwind could persist into 26? I don't want to put words into your mouth, but that's kind of what it sounded like. But maybe maybe not. And then the second question, you know, enclosures, I mean, there's some scanner data that shows that, you know, PET, maybe in some cases, has, you know, lagged Bev cans in the first half of the year. And obviously, you know, sports drinks and juices are not, you know, one for one, you know, what goes into a beverage can. But I'm just wondering, if you think about substrate, you know, share shift, or maybe, you know, certain containers doing better than others, Do you think any of that could have crept into the weaker volumes that you saw in the first half?

And there's been no discussion with our customers about gaining their market share in the Hockville segment. And we think that'll be what drives. I think if you, inventory levels that we understand our customers have will meet the needs. We're disappointed it's not this year.

Got it. That's very helpful. I'll turn it over.

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

Yeah, thank you, Adam, Bob, Kim, Philippe, and Alex for taking my questions. Just one quick one on metal containers. Are you aware of any other customers who may be facing similar headwinds in their fruit can businesses? Or is this particular customer that you mentioned in terms of bankruptcy the only one that you're aware of that has these issues?

Well, it's a requirements customer for us since we acquired their assets 25 or 30 years ago. So it really made it very simply. We are the only one dealing with this in the canning industry because we're a requirements supplier, and we continue to operate underneath that.

Yeah, I'm giving you so close.

I would say the balance of our pack business is actually doing pretty well. You know, no one's asked about the weather for the pack yet. But, you know, for the most part, the pack we're expecting a normal season. And thus far, you know, so far the reports from the fields have been pretty good. So the balance of our pack business is right in line with our expectations for the year.

Got it. And, you know, given that you're so close to your customers, I mean, is there any way you could have preempted this a little bit? I mean, given that you're, you know, you're situated so closely, is there anything you could have done in advance? Like, when did you find out if there's anything you could have done earlier, maybe to preempt it?

That's a good question. And can you operate under our contract? And, you know, we're going to try to help them have as good a pack season as they can have in 2025.

Got it. And one last question, Adam. I really appreciate all the color. Just is this something that's structural, meaning that if, let's say, the company goes through with the bankruptcy, they close more plants. But is mail containers now at a lower base in terms of both revenue and EBITDA, or is there a way for you to maybe attract other customers, bring in other customers that could get you back to where you were with this customer?

I think what I would tell you, Mike, I mean, the first thing we would look at is outside of that, we absolutely have cost-out measures that we would implement in a worst-case scenario, sort of what you're describing. So, you know, I don't think it's a rebasing of the EBITDA of the business because we'll either fill those assets because they're incredibly low cost, or we will exit facilities and take out higher cost operations.

Thank you very much.

Thank you. We will take our next question from Arun Viswanathan with RBC Capital.

Great. Thanks for taking my question. Sorry to belabor the point here. But, you know, I guess this is maybe the second or third time we've seen this in the last few years, not necessarily bankruptcies, but some major customer disruptions on the metal container side. Maybe you can just talk about if there's further impacts on the inventory side that you expect from this. And then related to that, just wondering, you know, if it's really, you know, I'm sure you guys have these discussions, but is it more indicative of some structural, you know, concerns about the food can market in general and, you know, maybe some shifting consumer tastes or what would you attribute some of these, you know, disruptions to, I guess, if anything?

You're right. Last year, pack volume by about 30% right at the beginning of the pack last year. Unfortunately, it's the same customer we're talking about. So, again, we keep calling these things discreet. It is discreet to the same customer. They have been, you know, as we talked about, we were preparing for a variety of potential outcomes over a longer period of time. So a very similar conversation. The good news of that is there's absolutely nothing about the structural components of the food can market, the fruit and vegetable market, anything about what we do with the balance of the business. Pet food is a wonderful growing product category for us. Soup is stable. The balance of our fruit and vegetable pack business is very good this year. Even in spite of this discrete item, we're on track to deliver mid-single-digit growth in the metal container segment this year. and feel pretty good about that. So, unfortunately, it was the same customer. You know, we go great about food cans. And with our product portfolio and mix of markets that we serve, I think we are well advantaged for the future. And wet pet food, again, is growing at a very nice rate. It will accelerate. And I'll just say it will be something around 50% of our total volume. And that's part of our thesis, is driving growth and continued growth in WebPets.

Okay, appreciate that. And then I did have a related question, which is you mentioned redirecting some of these volumes, which are very low-cost assets, elsewhere. So it sounds like you may have a strategy to offset some of this loss. You know, is that a fair characterization? And then I guess similar question for closures, you know, given the weakness that we've seen in isotonics now for quite a while, does that also appear to be structural? Are there any customer concerns there that we should be aware of? And if something like that happens, can you redirect your volumes elsewhere, and could Could you potentially even do that in an anticipatory fashion, just given the last few quarters of weakness?

Thanks. One, on the metal container side, first of all, we're continuing to operate under a requirements contract. So there's no shifting of volume anywhere else at this point. I think what I'd like to give our team a lot of credit for is, again, planning for a whole series of potential outcomes and not being surprised by any of them. So as this bankruptcy proceeding continues on and hopefully gets to conclusion sometime in the maybe first quarter, early second quarter of next year, we'll be prepared for any of those eventual outcomes. I can't tell you which one will be the actual outcome. We'll be ready for a whole variety of them with specific we'll talk about probably more on this call. And actually, we'll see what happens. So nothing structural about the business. and the market continues to grow and our customer relationship in that business. We think we're positioned for success on the long term and certainly in 26.

Great. Thanks. And if I may, just one quick one. So given that you're reducing guidance only by, what, 4% at the midpoint here and then your stock is off quite a bit more than that, maybe triple, So can you pivot and change your strategy maybe to focus more on shared buyback and be opportunistic here rather than deleveraging? Or maybe you can just comment on how you view that. Thanks.

Yeah, so you're right. I think we view this guide as something like a 4% change for two specific items on the full year basis with the entirety of the rest of the thesis intact. So there is no change to strategy. There's no change to really anything else in the business outside of these two items. And I think Bob can talk about capital deployment and how we think about share repurchases in the grand scheme of what else we do.

Over the years, that that's kind of the third returns of capital allocation.

Obviously, we would target and urge the kind of returns that we're accustomed to and that shareholders are accustomed to.

In the near term, we would delever. But, you know, as in the past, we have done share repurchases when the market has gotten and stayed dislocated. So I don't think there's anything that's changed about that strategy, and we will continue to kind of focus on what opportunities we have.

Thank you. We will take our next question from Daniel Rizzo with Jeffreys.

Good morning. Thanks for fitting me in. So with the bankruptcy by the customer, with everything that's going on, is your contract now more liberal, whereas it gives you a lot more flexibility as this becomes resolved, where you don't have the same commitments that you've had since you bought the asset, as you mentioned?

The contract continues on in the bankruptcy filing. So we are operating, they are operating, and we are operating under the same requirements that I've been operating under for many, many years. that has been renewed multiple times since we will honor the contract as they...

Okay. And then, I mean, the weather issue was, I guess, a little bit unique with the wet spring we had, at least here in the Northeast, but I was wondering if weather has ever been kind of an issue before or something that, I mean, just with global warming, just the kind of more extreme weather patterns, if it's something that could crop up from time to time as we move forward. No, no, I get that. I guess what I was also thinking was, like, if something like with global warming, I feel like warm weather could affect soup going forward, I mean, from time to time.

I think, I mean, who knows? What I tell you, again, is I think the food can, and soup included, is probably the lowest cost of means or lowest cost of getting nutrition to consumers that need it. And I just feel very comfortable saying that we'll always have a real value for consumers at the end of the day, regardless of what the other services are.

All right. Thank you very much.

Thank you. We will take our next question from George Staffos with Bank of America.

Hi, everyone. It's late in the call. I'll try to ask these quickly. Just for posterity, you know, for the next couple quarters, what should we expect is your volume outlook for the segments for 2025 after 2Q? So I think you already said metal is still mid-single digits. Correct me if I'm wrong on that. Is custom still mid-single digits even with – okay. And DSC, ex-beverage, legacy, mid-single digits are better. Would that be all correct?

Yeah, exactly.

Number two, on the working capital and the work that you did for your customers to mitigate their cost increase, Is there any way that you can get paid for that extra working capital effort that you're putting out for them? Or no, it's just part of being, you know, a great supplier in the market. How can you get paid for that, if at all, or it's normal part? It's, you know, table six.

Yeah, so it's an interesting question, George. So my first answer is we do get paid for that, and we do get paid for that. You know, through we have our contractual pass-throughs, all of the costs associated of procuring that raw material, whether it's freight, whether we ultimately lock and they understand that those costs will be passed through, the opportunity to help them be advantaged versus their competition.

Appreciate that, Adam. And then the last question, and it came up a couple times before. So let's assume the customer in question here is acquired or has some of those operations acquired. How does the contract work at that stage? Are you still covered? Are you still the supplier, number one? Number two, and you've mentioned, and certainly we've known this, we've covered something for a very long time, that your operations are going to be lower costs, you're well-located logistically, and so on. But since some of the volume has now moved to co-pack operations, do your operations have the same status being the best logistically placed, the lowest cost, because now that volume isn't necessarily running at where it used to run? How would you answer those questions? Thanks, and good luck the rest of the year.

We won't go into specific details of any of our contracts, but I would just say broadly speaking, you know, our long-term agreements in metal containers provide for a follow-the-liquid provision. And so that's how we think about metal containers' volumes anytime there's a change of control being considered. So there's that component. The second component is, you're right, you know, we support these filling assets with the lowest cost, again, near-site, on-site production model available in the market. I tell you that even if we bring in a disadvantaged freight component, these sites that we're talking about are probably still advantaged at the end of the day in the can-making market in North America. So we feel good about that position, and whether it's these assets or other higher-cost assets in our system, we'll have the ability to respond to really anything that happens from a market perspective with the assets and whether a new owner wants to run them or not. Maybe the last point for you, George, is those COPAC locations. It's not that we can't supply them. It's just that we're not supplying them today. We focus on our brands and helping them be successful in the marketplace, and that's where a lot of our effort and energy is. If we need to pivot there, certainly we could do that with our very low-cost footprint.

Thanks so much, Adam.

This does conclude today's question and answer session. I would now like to turn the call back for any additional or closing remarks.

Thank you for sharing our third quarter results.

Thank you.

This does conclude today's call. Thank you for your participation. You may now disconnect.