APTARGROUP, INC. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Fourth Quarter Results: Achieved core sales growth of 2% and adjusted EPS of $1.52, exceeding guidance due to better operational performance and lower effective tax rate. Driven by strong pharma proprietary drug delivery, royalties, and food closure technologies, with adjusted EBITDA margin at 23%.
• Full Year Performance: Pharma core sales grew 8% within its raised long-term target range, with adjusted EBITDA margin ~35%. Beauty had mixed growth with unit volume up but mix affected. Closures core sales grew 7%, with adjusted EBITDA margin improved.
• Innovation and Products: Pharma examples include Spravato approval and NFE/URIN launch. Beauty innovations: Inyun fragrance dispensing and alcohol-free fragrance pump. Closures: Easy squeeze inverted packaging for dish care.
• Sustainability and Recognitions: Secured Climate A List, named World's Top Companies for Women and America's Most Responsible Companies, focusing on sustainability efforts.

Segment Performance

• Pharma: Fourth quarter core sales grew 4%, adjusted EBITDA margin 35.7%. Full year core sales grew 8%, adjusted EBITDA margin ~35%. Proprietary drug delivery systems saw strong growth; consumer health care declined due to weaker cold/flu season; injectables decreased due to lower service revenue; active material science grew 35% aided by a large tooling sale.
• Beauty: Fourth quarter core sales declined 3%, adjusted EBITDA margin 12.4% (decline). Full year core sales grew 3%, adjusted EBITDA margin expanded. Fragrance, facial skin care, and color cosmetics declined due to lower prestige product sales; personal care grew 3%; home care grew 15%.
• Closures: Fourth quarter core sales grew 7%, adjusted EBITDA margin 16.1% (improvement). Full year core sales grew 3%, adjusted EBITDA margin expanded. Food sales grew 9%, beverage sales grew 10%, personal care declined 5%, other categories (beauty, home care, health care) grew 12%.

Guidance

• First Quarter 2025: Adjusted EPS expected in range of $1.11-$1.19, including ~7-cent currency headwind. Effective tax rate range 25%-27% due to French corporate tax rate increase. Anticipate softer demand in prestige fragrance, skin care, nasal saline, and decongestants, with foreign currency and higher tax impacts.
• 2025 Outlook: Pharma to drive growth with proprietary drug delivery, injectables higher value products, and active material science growth. Beauty top line expected to improve, closures with ongoing innovation and cost management.

Risks

• Foreign Currency Fluctuations: Impact on earnings due to US dollar strength against other currencies.
• French Corporate Tax Rate Increase: Affects effective tax rate for the full year.
• Consumer Health Care and Beauty Market Mix: Challenges in cold and flu destocking, mix issues in beauty prestige segments.

Question and Answer

• Q: Talk about green shoots in China and EPS growth in 2025 A: China's beauty market has local brands gaining share, '11.11' was solid. Normalizing FX and tax, cautiously optimistic for double-digit EPS growth in 2025.
• Q: Q4 corporate below trend, destocking in cold and flu, beauty weakness A: Q4 corporate had reverse accruals. Consumer health care seeing bottoming out, beauty mix effect due to fragrance and prestige launches.
• Q: Capital allocation and ROIC goal A: Capital allocation includes organic growth, M&A, dividends, share buybacks. ROIC improvement from operational performance, no immediate target change.
• Q: Tariffs and royalties A: Tariffs not a major concern, royalties from drug development. Contribution to margin improvement, expected to continue.