Silgan Holdings Inc

F:SL3

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Good day, and welcome to the Silgan Holdings Second Quarter 2024 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Alex Hutter. Please go ahead.

[Alexander G. Hutter, executive]

Thank you, and good morning. Joining me on the call today are Adam Greenlee, President and CEO; Bob Lewis, EVP of 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 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 EBITDA, free cash flow and adjusted net income per diluted share. Reconciliation of these metrics, which should not be considered substitutes for similar GAAP metrics can be found in today's press release under non-GAAP financial information in the Investor Relations section of our website at silganholdings.com.

With that, let me turn it over to Adam.

[Adam Greenlee, executive]

Thank you, Alex, and we'd like to welcome everyone to Silgan's Second Quarter 2024 Earnings Call. The second quarter continued to display the strength portfolio with another quarter of strong financial performance in our businesses and significant progress towards our long-term strategic objectives.

We delivered second quarter adjusted EPA above the midpoint of our estimated range with improving volume trends across all of our segments strong operational and cost performance driving our results, as the Silgan team remains focused on executing our plans for 2024 and beyond. After several quarters of destocking trends for our food and beverage products, we have -- we are particularly encouraged that our covers order patterns appear to be returning to more normal levels and as expected, have led to the positive inflection in our volume trends in the second quarter.

As demand for our product continues to recouple with what had been resilient in market demand, we expect this momentum to carry into the second half of the year. Additionally, we are pleased to have recently announced an agreement to acquire Weener Packaging of thin class differentiated dispensing business with very attractive margins and strong organic growth that has all the hallmarks of our highly successful dispensing acquisitions in the past, including WestRock's dispensing business, Albea Dispensing, Gateway and UNICEF. Our capital deployment model is a key component of the Silgan value creation story, and we're encouraged that after several year M&A market challenges and mounting certainty, during which time we were able to rate value with outstanding performance and by returning capital to our shareholders, it now appears that value, earnings and return accretive transactions are becoming more actionable.

We continue to believe that Silgan is advantagely positioned to win in this M&A market backdrop and create value for our shareholders as a result of our ability to act with speed and certainty, our long track record of achieving value-enhancing synergies, our access to capital and our ability to rapidly deleverage as a result of our strong free cash flow. We're excited that Weener represents such a clear cultural fit with our company and expect the combination to help drive incremental organic growth well into the future.

Turning now to the second quarter results for our segments. Our Dispensing and Specialty Closure segment delivered another quarter of strong results as demand for our global dispensing products remains at a high level with double-digit volume growth driven by continued success in the marketplace. Our market-leading innovation manufacturing and service capabilities continue to drive demand for our products that outpaces market growth and, in some cases, currently exceeds our own ability to supply certain portions of the market. Consumer demand for our food and beverage products improved sequentially and year over trends also improved from the first quarter as our customers' destocking activities appear to have come to an end and promotional activity has been more pervasive in the market for many beverage customers' products during the seasonal peak demand of the summer months.

We are on track for stronger year-over-year trends in the food and beverage closures in the second half of the year as demand for our products more accurately resembles end market demand. In metal containers, our year-over-year volume showed growth driven by pet food and soup, and we anticipate continued growth in these and other products for the remainder of 2024. We continue to make progress on our cost reduction initiatives during the quarter but as expected, the impact of lower production and less inventory build in the second quarter due to the previously discussed reduction in a large pack customers plan for 2024 led to under-absorbed fixed costs in the quarter that impacted our financial results.

Our Custom Container segment delivered strong results in the second quarter with 7% volume growth as a result of improving market demand, the successful commercialization of new business in the first quarter and the early commercialization of the second new business award in the second quarter.

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 [Audio Gap] are pleased to confirm our estimates for the year which includes 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 product, driving better profitability for the segment through an improved mix.

In metal containers, we continue to expect volume growth with mid-single-digit growth in pet food, which represent approximately half of our total volume, offset by lower fruit and vegetable volumes as a result of the previously discussed decision by customers to reduce their volumes in 2024 to reduce their working capital. In addition to the unfavorable fixed cost absorption in our system we experienced in the second quarter, the impact of growth in pet food and fewer than normal vegetable can sales will drive a less favorable mix in the third quarter. Custom containers volumes are expected to grow by low to mid-single-digit percentage as destocking trends appear to have concluded.

Market demand remains solid and new commercial awards continue to provide incremental volume and profit contribution through the year. We are encouraged we are on track to deliver another year of strong financial results for the company with success in our strategic growth initiatives, driving tangible improvements in our results. Additionally, we're pleased that our capital deployment model continues to yield opportunities to grow our company at attractive returns and drive organic growth and margin improvement.

With that, Kim will take you through the financials for the quarter and our estimates for the third quarter and full year of 2024.

[Kimberly Ulmer, executive]

Thank you, Adam. As Adam discussed, we delivered strong [indiscernible] in the second quarter that were consistent with our expectations with adjusted EPS above the midpoint of our expected range. Net sales of approximately $1.4 billion declined 3% from the prior year period, driven primarily by the pass-through of lower raw material costs, mostly in our metal container business.

Total adjusted EBIT for the quarter of $165 million increased by 3% on a year-over-year basis, primarily due to higher volume in each of the segments. Higher adjusted EBIT in dispensing and specialty closures and custom containers offset expected lower adjusted EBIT in the Metal Container segment. Adjusted net income per diluted share was $0.88, a 6% increase from $0.83 in the prior year quarter with higher adjusted EBIT and lower interest costs, partially offset by a higher tax rate.

Turning to our segments. Sales in our Dispensing and Specialty Closures segment increased 1% versus the prior year quarter, primarily as a result of higher volume mix of 3%, which was partly offset by the pass-through of lower raw material cost and unfavorable foreign currency. The increase in volume mix was driven primarily by double-digit growth in dispensing products and favorable mix. Second quarter Dispensing and Specialty Closures adjusted EBIT increased $16 million versus the prior year period driven by favorable price cost, partially as a result of the prior year impact from labor challenges that limited output at a U.S. food and beverage closures facility and improved volume and mix.

In our Metal Container segment, sales declined 8% versus the prior year quarter, primarily due to the pass-through of lower raw material costs, which was partially offset by higher volumes of 1%. As expected, metal containers adjusted EBIT was below the prior year quarter due to the impact of unfavorable price cost, including mix as a result of lower fixed cost absorption from a significantly lower inventory build for the food and vegetable pack due to the previously discussed reduction in pack plans of a large fruit and vegetable customer to reduce its working capital.

In custom containers, sales increased 6% compared to the prior year quarter driven by a 7% increase in volumes as a result of stronger market demand and the early commercialization of the second new business award during the quarter. Custom containers adjusted EBIT increased $4 million as compared to the second quarter of 2023, driven by higher 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 the range as compared to $3.40 in 2023. This estimate includes corporate expense of approximately $30 million, excluding costs for announced acquisitions, which is above our prior year -- prior estimate of $25 million due to higher legal and corporate development costs.

Also included in the adjusted EPS range for 2024, our interest expense of approximately $165 million and adjusted 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 the Metal Container segment adjusted EBIT below the prior year record level primarily due to the previously discussed reduction of pack plans by a large fruit and vegetable customers.

Based on our current earnings outlook for 2024, we are confirming our estimate of free cash flow of approximately $375 million, with CapEx of approximately $240 million in 2024. Turning to our outlook for the third quarter of 2024. We are providing an estimate of adjusted earnings in the range of $1.20 to $1.30 per diluted share as compared to $1.16 in the prior year period. The 8% year-over-year improvement in adjusted earnings in the third quarter at the midpoint of the range is driven primarily by improving volume trends, cost reductions and strong operating performance in each of the segments partly offset by a less favorable mix in our Metal Container segment.

Third quarter adjusted EBIT is expected to be above prior year levels in dispensing and specialty closures with improved volume mix and price cost. Third quarter metal container volumes are expected to be above the prior year level, while adjusted EBIT is expected to be below third quarter 2023. The year-over-year decline in metal containers adjusted EBIT is driven by a less favorable mix predominantly due to lower-than-normal vegetable can sales with the previously discussed reduction in volume plans for a large pack customer and higher pet food sales in the quarter.

Third quarter adjusted EBIT in the Custom Container segment is expected to be above prior year levels as a result of low to mid-single-digit volume growth. That concludes our prepared comments, and we'll open the call for questions. Jennifer, would you kindly provide the directions for the question-and-answer session?

[Operator]

[Operator Instructions]

We'll go first to Ghansham Panjabi with Baird.

[Ghansham Panjabi, analyst]

I guess on specialty closures, I know you sell into a bunch of different end markets and so on. But a lot of the companies that have reported on the consumer discretionary side, health and beauty and fragrance, et cetera, there pointing some level of a slowdown just given tougher comparisons and obviously, mixed consumer spending. And I know you're lapping the destocking comps and so the optics are favorable, et cetera, but -- can you give us a better sense as to what's going on in the market from your vantage point at this point?

[Adam Greenlee, executive]

Sure. And I think we see a lot of the same reports and trends out in the marketplace. I think you really have to focus on where we choose to compete and win in the markets that we're serving. So I think fragrance and beauty is a great place to start. And we really don't participate in the mass market fragrance and beauty. I know we've talked about that over time. But where we are very successful and where we continue to win new business in the fragrance and beauty side is at the very high end of that market.

And that market continues to perform and do well, have new product launches. And I do think, Ghansham, we're winning probably a disproportionate amount of the new product launches, just given our performance over the last, call it, 4 or 5 years. So we feel really good about that. And I think we talk about the power of our portfolio that it is a -- I mean you said it yourself, it's a broad base of markets and products that we take to market and we serve the markets with.

So I think over time, if you go back over, call it, the last 5 years, you've seen continued strength from Silgan, but maybe strengths in different markets as we have worked through the last 5 years. So lawn and garden is really good. Right now, we've got aerosol business that has, I'd say, more than fully recovered from what we were dealing with in destocking days. Our trigger sprayers are doing exceptionally well right now and have fully recovered. So just maybe to try to give you a couple of examples there.

In all fairness, that's more than offsetting sort of the continued, I think, challenged market that we're seeing in our food and beverage products. again, they're recovering, but they have not recovered to the same level as some of the other markets that I just described.

[Ghansham Panjabi, analyst]

Got it. And then in terms of consumer promotional activity, I mean, obviously, there's been many levels of theorization and it's we're seeing some initial signs just based on some of the other reports. But as you think about your end markets between North America and Europe, are you seeing a sustainable trend there? Or is it still just a minor relative to last year?

[Adam Greenlee, executive]

Well, I think it's a positive to last year. I'll give you a couple of examples. I think the targeted promotional activity in our food business has been very successful, but it's on a targeted basis. So it hasn't lifted the entire category. I'll give you another example in our aerosol business on dispensing and specialty closures, there was a lot of activity on the promotional side for aerosol and this is for kind of air care and home care products, et cetera.

And we saw it drive growth. And I think the market saw growth in that category as well. So I think we're still optimistic as we think about the remainder of this year, I think promotional activity is going to be important. I think the success of that promotional activity will be important as well. But for us, in our business, I think we're seeing more of it and we're seeing it be very effective when it's targeted I'd also finish, Ghansham, with the fact that we're in the middle of the summer months, and our beverage business typically does well when there's warm weather, and we need to see that promotional activity driving growth through the summer months as well.

[Operator]

We go next to George Staphos with Bank of America.

[George Staphos, analyst]

I guess first question, maybe I'll switch gears and we'll talk about metal a bit. And the commentary that you had in the first quarter was matched with performance in 2Q. But in terms of what your EBIT expectations were and volume expectations, did the quarter go pretty much as planned in metal as you'd expected?

Was it better worsen if you could fill in some of the gaps or that would be great. Secondly, and you've touched on this in the past, to the extent that the metal container business in North America continues to evolve and pet keeps getting bigger, broadly can sizes, keep getting smaller as a result we've seen the fruit market shrink significantly. What's next in terms of how you optimize that business relative to the way it's going to evolve in the next 2 to 4 years, whatever you can share there would be great.

[Adam Greenlee, executive]

Okay. Well, thanks, George. The quarter and the second quarter just may be slightly below our expectations just in the metal container segment. And really, the impact on our network of the volume decline due to the 1 pack customer that's reduced their volumes for 2024 was significant. It particularly accounts for most of the entirety of year-over-year change in the business. So think about our business, and we -- sorry, George, we are fully utilized between Q2 and Q3 and where our additional capacity exists is really in Q1 and Q4.

So utilization rates are always very, very high in Q2 and Q3. And that's where we took the volume out as -- again, you think about the pack volume. Those cans need to be ready at the end of Q2 to sell in Q3 when our customers need them. So it was an outsized impact. In fairness, we probably underestimated what that impact was just by a few million dollars as we came into the quarter. So then I think about when you when you move forward and kind of what's next? You mentioned fruit as a product that moved away from the can into an alternative package.

And what we've consistently said, George, is that -- the products that are essentially processed in the can are really what's left than they can these days. So we think there's -- dry products have moved because it didn't require a can for processing -- fruit was a very similar example. But what's left in the food can a particularly wet pet food, which as you mentioned, is over half of them are growing. I look back over the last 5 years, as an example, and our pet food volumes are up about 20%. So call it right in that mid-single-digit kind of range. And that's how I would talk about metal containers.

[George Staphos, analyst]

Right. So with that, does that -- maybe not tomorrow, but over the next few years mean that you'll look to adjust the network again. I'm not necessarily saying plant closures, but just what do you need to do from a converting standpoint, and network as that market evolves. And just quickly on third quarter, and I'll turn it over, yes, it will be lower. I think you said but we're still talking about triple digits in terms of dollars for EBIT, right? We're not going back to some of the -- a few years ago had some weaker quarters there. And good luck in 3Q.

[Adam Greenlee, executive]

Thanks, George. And yes, you're right on Q3. I think if you think about what our next steps are in metal containers, I mean, look, we've got half of the business is growing, half of the business that we are investing to support our customers' growth in pet food. So we've got a very optimized platform and I think a very low-cost platform, certainly on that side of the business. And I think when you think about the balance of the business, the other less than 50%, we do have the announced cost reduction initiative.

That's not just about closing and that's also about just driving cost out of the business. And I think one thing I will absolutely say particularly about our metal container business as they've been terrific at doing cost out of their business. And that's absolutely what we're going to continue to do on that part of the business that's not pet food.

[Operator]

We go next to Anthony Pettinari with Citi.

[Bryan Burgmeier, analyst]

This is actually Bryan Burgmeier on for Anthony. Adam, in the prepared remarks, you sounded maybe quite a bit more optimistic on M&A opportunities than you had previously. I guess can you remind us where your pro forma leverage is going to be by the end of this year? And is it accurate to say that heading into 2025, Silgan could have a pretty full pipeline of accretive deals.

[Robert Lewis, executive]

Yes, this is Bob. I'll jump in on that one. I think you read it pretty well. Our balance sheet right now is as we come through the pack season into the end of the year, we should be just below the high end of our range. And I'll remind you that, that range is 2.5 to 3.5x on a net debt basis. So comfortably within what our normal operating range is -- right now, we're focused on completing the acquisition of Weener and then the integration.

But that does not at all mean that we're slowing down in terms of paying attention and looking at investment opportunities in the -- particularly in the dispensing space. So I think you got it right that the balance sheet allows us the opportunity to look -- we think the market is to our benefit right now given our access to capital, given our ability to move swiftly and with certainty. So I think all of those things, coupled with a market backdrop that may not be so favorable for some of the other institutions that we might be competing with for potential targets.

So I do think that now we're in a pretty good period from a structural perspective as well as the backdrop of the market. And again, our focus will be largely around continuing to build out the tip of the spear around the dispensing and specialty closure side of the business.

[Adam Greenlee, executive]

And I think the only thing I would add to that is that the pro forma EBITDA with Weener, we're talking about over $1 billion. There's the capacity to do more is greater today at Silgan than it was, call it, 5 or 10 years ago.

[Bryan Burgmeier, analyst]

Got it. Got it. And then maybe just kind of switching to custom containers are we looking for more quarter-over-quarter EBIT growth in 3Q and into 4Q? I guess, can you remind us how the business wins are going to be kind of layering on in the second of the year? And maybe any consumptions for price cost I'll turn it over.

[Adam Greenlee, executive]

Sure. Look, the business has done a nice job. We continue to win new awards. The story for here and custom containers was really about the 2 large awards. The first one was commercialized in the first quarter, and we had identified the second 1 to be commercialized, call it, midyear. So we had it in our business, call it, -- the team did a great job working with the customer, we're able to commercialize that early, and we saw the benefits of that in Q2. So being disciplined and thoughtful about how many big pieces of businesses that we take on, those were the 2 big items this year. We're continuing to win other new business look all the time. I think as you look at the sequential quarter, so going from Q2 to Q3, I think it's actually more important to look at the prior year.

So I think we'll see nights nice growth versus the prior year, both from a volume perspective and from a profit perspective. I think that the seasonality of our custom container business is definitely more weighted to the first half, and you'll see that again in 2024.

[Operator]

We'll go next to Gabe Hajde with Wells Fargo.

[Gabe Hajde, analyst]

Adam, I think in your prepared remarks, you talked about bumping up against maybe some capacity constraints in DCS. I know some of it might require some new molds, maybe pieces of equipment and then maybe some assembly lines if it's for more of the true dispensing components. Just curious, is that true? And then would you have to expand brick-and-mortar? Or is it within the rollout of, call it, $250 million of base CapEx for legacy Silgan?

[Adam Greenlee, executive]

Sure, Gabe. I would say the last part of that is the easy part. So that's absolutely considered in our total CapEx. We're not talking about new facilities or anything at this point. This really is more to your first point. This is more about the molding side. So assembly and other parts were just fine. This is about getting the right molds into the right machines that we already have at place.

And frankly, it's just the output of customers be surprised, I think, at the demand levels that they're seeing for some of their products, and that's what we're reacting to. So I think, unfortunately, some orders came in late as there was a surprise element for our customers, and we're doing all we can to support their growth and get those additional products into the market. So much more about the molding side and really specific to kind of tooling at this point.

[Operator]

We go next to [indiscernible] with Raymond James.

[Unknown Analyst]

On the DSC segment, so the margin came in strong in the quarter with destocking ending. I think that the mix shift would have to move a little bit towards lower margin items later in the year. So could you discuss how you expect volume and mix shift in the category to evolve between 3Q and 4Q? I mean double-digit growth in dispensing is impressive. But I imagine as a function of math, that just has to taper at some point. So trying to see how you're planning for 3Q and 4Q there?

[Adam Greenlee, executive]

Yes. It's a really good question, Matt. And look, you're right. We've got the double-digit growth in dispensing products. So that obviously is going to drive the margin for the segment. But -- when you think about kind of the food and beverage side of the business, number one, we've got the cost out. So that important element. Number two, you've got kind of a year-over-year comp versus last year as well when we had a challenge in kind of the Q2 through Q4 period for one of our beverage facilities in the U.S. market. So we solved that one before the end of last year. You've got the cost out on the food and beverage side. So I think margins actually should continue to move up as we kind of work our way through the second half of the year in the DSC segment.

[Unknown Analyst]

Okay. That's helpful. And then maybe along the same lines, but looking a little further out. So given the growth in that business, plus the incremental margins you have coming from Weener next year, is there an appropriate margin target to shoot for longer term within that segment? Or any bit that you kind of internally think about?

[Adam Greenlee, executive]

Sure. Yes, we talked about on the [indiscernible] when we announced the Weener acquisition that we bought vendor came through and added roughly 100 basis points of margin expansion to the segment. So I think as we think about continuing growth in the dispenser side of the business, that's more like a 25% EBITDA margin rate. So as we continue to grow out dispensers, it will impact the overall margin for the segment.

[Operator]

We go over next to Mike Roxland with Truist Securities.

[Michael Roxland, analyst]

Congrats on the quarter. Just want to follow up on the food and beverage volumes improving. How does your comment on food and bev related to the metal European closures and how that's going. That would want you last year. Has demand improved there as European inflation has moderated you're seeing some more growth from some of the [indiscernible] guys in Europe as consumers have come back. So whether that's parlayed also into those metal players.

[Adam Greenlee, executive]

Yes. Actually, it has, Mike. So we've seen stability really more from our food and beverage business in the European market. And just to be very candid, that -- it was a very difficult year last year for the business. So we've seen improvement off of an easy comp, if you will, but we've also seen stability. So I think that's the important part. And we're seeing some nice volume growth year-over-year just because we're getting back to a more stable environment in the European market.

[Michael Roxland, analyst]

Got it. And then just in terms of metal containers EBIT for 2025. I know you haven't brought any guidance yet, but I believe the same customer you keep referencing expects to get down their working capital next year at [indiscernible] lower. So how should we think about EBIT -- [indiscernible] EBIT next year as well?

[Adam Greenlee, executive]

Well, I think just on a larger scale, I mean, nothing's changed about our long thesis as it relates to the containers. So as you try to get a little more detail about 2025, we're not even close to a budget cycle yet. So I wouldn't really want to offer anything from that perspective.

We're working very closely with that customer to achieve their working capital goals this year. And our understanding is that it was going to be a 1-year program in discrete. But crops are in the ground right now. We don't have a pack plan yet for next year. So we'll be happy to talk about that as we get closer to the end of the year.

[Operator]

We'll go next to Daniel Rizzo with Jefferies.

[Daniel Rizzo, analyst]

But just to follow up on that last point. That customer is going to be destocking or reducing the working capital going into 2025 -- that is the plan that the idea that relate to you guys?

[Adam Greenlee, executive]

Well, I think it's their fiscal '25 just for clarity. So we're already in fiscal '25 for them right now. So we're talking about calendar year '24 for Silgan.

[Daniel Rizzo, analyst]

Okay. That's helpful. And then have you ever -- I mean, is there a large margin difference between soup and pet food versus food and beverage in metal containers like in terms of product mix?

[Adam Greenlee, executive]

No, not really. I think it's pretty consistent across the board. I mean from a margin rate perspective, I mean, we talk a lot about mix now as that food continues to grow. And you think about the smaller can size supporting the pet food market versus kind of our standard vegetable and maybe even institutional vegetables can sizes, there -- it's the margin dollars that are delivered to Silgan are less just but the margin rate is very consistent across the business.

[Daniel Rizzo, analyst]

Okay. And then final question. You mentioned something in the prepared remarks about the strength of sales and dispensing products. I mean you talked a lot about that, but dispensing products around the world. I was wondering if you're running to a situation where you're kind of sold out of certain products, you may need more capacity. Is that the case anywhere?

[Adam Greenlee, executive]

Yes. It's -- I'm going to start with the end of your comment. So yes, we're adding capacity in our dispensing business and have been for several years to support the growth in that business. And I'll go all the way back to when we acquired the stock dispensing business. We've been allocating quite a bit of capital to that business to support their growth. And I think you can see that normally in their volume numbers, but in the bottom line of the segment as well. So yes, backing up into your question. There are certain categories where we are very tight on capacity. In some cases, as we mentioned, we've got orders exceeding it for certain products, and we are working hard to address that.

This is a global business for us. So the first thing we do is we look at our own network for potential solutions from other geographies. And in some cases, we've executed upon that. We've also just, again, tried to add short-term capacity on the molding side to get customers the products that they need to support the markets that they're serving. So a really good problem to have, Dan. And I think we're working very closely with our customers to address those needs. And most of that under our long-term contracts. So these are really good investments for our company, and we'll continue to make them.

[Operator]

We'll go next to Jeff Zakauskas with JPMorgan.

[Jeffrey Zekauskas, analyst]

Was price cost favorable in the quarter? And if so, by how much? And what's price cost been for the first 2 quarters?

[Adam Greenlee, executive]

And Jeff, are you to a specific segment with a question on price cost?

[Jeffrey Zekauskas, analyst]

No, no, for the whole company. For the consolidated results, but if you want to go through the individual segments, that's great.

[Adam Greenlee, executive]

Okay. Well, how about this. I think price costs, we've talked a lot about the metal container segment with the under absorption of the fixed cost base there. So that was a negative for us in the quarter. [indiscernible] of the resin-based businesses, both in dispensing and specialty closures and in custom containers, really, there wasn't a whole lot of variance on the price cost, so not much of an impact. But for the total company, the significance of the metal containers item drove entirely for the business kind of a slight negative in the quarter.

[Unknown Analyst]

Maybe if I can ask it differently, why did your cost of goods sold go down faster than your sales change?

[Adam Greenlee, executive]

Well, we have raw material on the metal side, in particular, that is declining year-over-year, that's getting passed through to our customer. So it might just be the timing of when those costs hit our P&L versus when the product is sold, again, think of a more seasonal side of our business like the metal container side, on the fruit and vegetable pack just 1 example.

[Jeffrey Zekauskas, analyst]

If you exclude the inventory readjustment, how was price cost in the metals business?

[Adam Greenlee, executive]

I would say it's relatively neutral. The single largest item on the P&L is this item of underabsorbed fixed costs.

[Operator]

We'll go next to Arun Viswanathan with RBC Capital Markets.

[Arun Viswanathan, analyst]

I just wanted to clarify, maybe I misheard your earlier comments. Food Bev, obviously, the destocking has ended. But we're kind of seeing some mixed signals in the scanner data. What are you guys seeing, I guess, we have seen some improvement in private label. We've seen some improvement in some at home categories, but others are still a little sluggish.

Did you say earlier that you're not seeing that improvement yet? And I guess what's your outlook as you look into the back half of the year? Do you think promotional spending should continue to increase and that may be less some improvement in food beverage markets? Or are you thinking about underlying demand trends there?

[Adam Greenlee, executive]

Yes. I think our underlying demand has been very resilient for those products and not just in 2024 and prior periods as well. And the destocking activity was related to the activities at our customers' level, not necessarily the market. So for our food and beverage business, I would just say we've seen nice year-over-year recovery, again, off of the destocking period of the prior year. But as we then turn to the back half of the year, we're expecting more of that. So we are expecting volume growth year-over-year in our beverage business as plural for the second half of the year.

That's both metal containers and on the closure side for our food and beverage business. And then to your last point -- yes, just think quickly around the promotional activity. We do think that's an important part. We do think the targeted activity has been successful and are looking for more of that with our customers as we head through the remainder of 2024.

[Arun Viswanathan, analyst]

Great. And there's been a lot of volatility over the last 2 years between destocking and customer actions. So I guess, maybe would '25 be a more normal environment? And when you think about that, maybe we could just get some initial thoughts of how you're thinking about the business? Looks like Weener will definitely improve your overall growth profile with more contribution from closures. And so do you think kind of low to mid-single digit, and I think that's kind of what you're laying out. Top line growth is really possible. And then what kind of leverage would you get on that as you walk down into the EBIT line?

[Adam Greenlee, executive]

Sure. Well, I do think it's a little bit too early to start talking about '25. But I think from a normalized perspective, we can probably help with maybe some of the building blocks as far as maybe the earnings power of the business going forward. So I think I'd start with, first off, Arun, nothing has changed about the thesis that we have as far as our 3 segments and their growth profiles going forward. So I think that's an important point.

On the Weener call, last week, we did point to 10% EPS accretion. And that's once we achieve the full synergies and I think we said something like 18 months is when we would get the synergies in. So those are the 2 important points as we go in. I would also say this large vegetable, fruit and vegetable customer that's impacting 2024. That should normalize. We think that's a discrete item. But we don't have a pack plan for next year. So I think on top of Weener, I would just point you to kind of the longer-term thesis that we have on top of the cost savings initiatives that we've implemented that we think we've got not only clear line of sight, but great confidence in delivering not only in '24, but in '25 as well.

[Operator]

We'll go next to George Staphos with Bank of America.

[George Staphos, analyst]

Adam, can you talk at all to whether customers are maybe using perhaps -- let me say it differently. I mean start differently, how are customers evaluating performance in metal packaging from what you can see from the suppliers. Have the KPIs change in terms of how you're being evaluated now versus, say, 2, 3 years ago? And relatedly, are you sensing any change because, again, you've seen some of the assets change hands in recent years. Has there been any kind of move in that regard because it's become more competitive I think it's always a competitive business. So how are customers evaluating performance here, perhaps differently, perhaps the same versus a couple of years ago? Any change in the competitive footing?

[Adam Greenlee, executive]

Yes. It's interesting. I think on the metal container side, obviously, when you think about Silgan's business, so much of it is under long term contract, so call it 90%. we're deep in those relationships. We're with our customers and their production planning meetings. And really none of that's changed. Nearside in many cases we're on any cases. So I just I think our metrics, George, really haven't changed a whole lot. So I am trying to think about broadly if the market has changed. And I'm not really aware of anything that I would say has impacted how our customers or the market value suppliers at this point.

So I'll just say maybe we were advanced in our relationships and our metrics because we are on-site and near-site and maybe others are catching up to that I don't really know. But I think our relationships are as good as strong as they've ever been. And I think that also helps answer the second part of your question on the competitive front. Again, really, we're not seeing any engine competitive activity on the Silgan side of the equation. Again, long-term contracts, protecting the vast majority of our business with very, very deep relationships I think that we're really secured through the pandemic and just completely enhanced as we've moved out of the pandemic, helps our customers work through some destocking activities, and we're back to a normal business on ship at this point with order books more, I guess, relatable to the end consumer demand for those products.

[Robert Lewis, executive]

Yes. George, the only other thing I would add to that is, yes, assets have changed hands, but I think the market capacity is relatively well balanced. And in our particular case, we've talked about some of the cost-outs that we're doing as well. So that with the backdrop of the long-term contracts keeps the market pretty well organized and stable.

[George Staphos, analyst]

Yes. No, good point. I mean I wasn't suggesting people are adding capacity, but as assets change hands, relative return thresholds can change. And certainly the long-term relationship you've had and the way you've gone about with near site and on-site has served you well. I think I know what you're going to say. And certainly, it's been a success story over the last few years.

But with Weener now, custom winds up being relatively -- well, all the business do, right? But custom-wise think 10% of the portfolio I think, from an EBITDA standpoint. And correct me if I'm if I'm wrong in that rough number, I think is from your slides. How do you see the long-term strategic fit of custom now, if at all differently? Versus where it was prior to Weener. And is it just as simple to say, listen, it's a great franchise as well and nothing changed those, then it's relatively important. And then my last question, and then I'll turn it over. We spent the last 1.5 years plus probably talking about destocking and the consumer being weak and the like, and promotion is finally starting to have an effect as we would have expected. The sense maybe now the scales tipping other way where customers are having a [indiscernible].

[Robert Lewis, executive]

Yes, George, maybe I'll take the first part of that question relative to custom container, and I'll leave the destocking commentary with Adam. But yes, look, I don't think there's anything that's changed about our view of the customer container business, right?

I mean, first and foremost, right now, we're focused on getting the Weener deal closed and integrated. So that's where our time and attention is being spent at the moment. But I think if you look at the performance of the business, the custom container business, it's doing pretty well operationally, they're hitting on all cylinders. We've gotten to the commercialization activities that we were talking about. And as Adam pointed out, a second case got to it faster than what we were originally anticipating.

So the business is performing, and so we're happy about that. I think what we've said in the past and it still holds true that as long as we're not putting the business in a competitively disadvantaged position [indiscernible] training capital to it which we're obviously not by taking on new business awards, then we like the business for what it is. And from that perspective, happy to have it as part of the portfolio.

[Adam Greenlee, executive]

And then George, thinking about kind of destocking and any shift there. I think we loosely commented in the first quarter that some of the volume gains that we have seen, particularly in custom containers, we thought might have been sort of related to the restocking activity, and that's just where customers cut inventory too far and weren't able to support the market. So we saw a little bit of that in the first quarter. I think there's a little bit of that in Q2.

And I think in our Dispensing and Specialty closures segment, part of the capacity constraint we're seeing is our customers -- I'll just say challenge of forecasting that band. So I think they got caught a little short on their inventory, and that's now backing up to us, trying to actually manufacture in more parts in order to support that market. So we'll get through all of that. Sure, there's a little bit of restocking, and we'll just continue to watch that very closely as we kind of navigate through the remainder of '24 and cycle against those destocking comps from last year.

[Operator]

At this time, I'd like to hand the call back to Adam Greenlee for any additional or closing remarks.

[Adam Greenlee, executive]

Great. Thank you, Jennifer, and thanks, everyone, for your interest in Silgan, and we look forward to sharing our third quarter results later in the year.

[Operator]

This does conclude today's conference. We thank you for your participation.