Silgan Acquires Cobra Plastics, Expands In Closures Market

Silgan Holdings Inc. (NASDAQ:SLGN) has announced the acquisition of Cobra Plastics, Inc., in a bid to expand closures franchise into new markets. Cobra Plastics produces and sells injection molded plastic closures for a broad range of consumer products, primarily focused on the aerosol overcap market.

Cobra Plastics currently operates from two manufacturing facilities in Macedonia, OH, with sales volume of $30 million.

Notably, the acquisition will expand Silgan’s global closures franchise product offerings into various new markets and applications. Together Cobra Plastic’s overcap product line, and Silgan’s aerosol actuators and dispensing systems, will enable the company to offer a wider range of integrated solutions, including functional overcaps, in order to fulfill customers’ requirement.

Silgan recently reported fourth-quarter and full-year 2019 results. In the fourth quarter, the company posted adjusted earnings of 38 cents per share, in line with the Zacks Consensus Estimate, while sales beat the same. However, the top-line figure declined year over year due to lower volumes in the metal container and closures businesses.

In 2019, the company reported net sales of $4.49 billion, which surpassed the Zacks Consensus Estimate of $4.47 billion. The improved performance stemmed from higher net sales in the metal container business, partly offset by a decrease in net sales in the closures and plastic container businesses.

Silgan now expects adjusted earnings per share between $2.28 and $2.38 for the current year. Segment income across all businesses is anticipated to benefit from higher pension income, solid unit volumes and continued manufacturing efficiencies. For first-quarter 2020, Silgan now expects adjusted earnings per share in the range of 45 cents to 50 cents compared with the 46 cents recorded in first-quarter 2019. The quarterly results are expected to benefit from higher pension income and continued manufacturing efficiencies across all businesses, higher unit volumes in the metal container, and closures businesses and lower interest costs.

In 2020, net sales in the metal container business are expected to decrease, year on year. Unit volumes in the business are anticipated to increase as compared with the 2019 levels, owing to customer pre-buy activity, continued growth in pet food volumes, and more normal fruit and vegetable pack in Europe.

Net sales in the closures business are projected to decrease in the ongoing year, mainly due to the pass through of lower raw material costs, partly negated by unit volume growth in anticipation of a more normal European fruit and vegetable pack and continued growth in dispensing systems units. Moreover, current-year net sales in the plastic container business are expected to decline from the 2019 levels thanks to the pass-through of lower raw-material costs, partly muted by volume growth.

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The company is expanding its footprint-optimization plan in the metal container business to reduce capacity and slash costs. In sync with this, the company is likely to shut down six manufacturing facilities over a three-year period.

Silgan Holdings Inc. Price and Consensus