APTARGROUP, INC. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Corporate Awards: Named Barron's most sustainable US company for the seventh consecutive year and achieved EcoVadis' Platinum level rating for the fifth consecutive year.
• Innovations: Pharma's nasal delivery system for nasal saline rinse in Germany, ophthalmic squeeze dispenser in China, and SmartTrack clinical validation study; Beauty's refillable fragrance pump for Yves Saint Laurent, etc.; Closures' lightweight closure for Hidden Valley Ranch.
• Share Repurchases: Ramped up share repurchases, repurchasing over 0.5 million shares for ~$80 million, with ~$30 million in dividends also returned to shareholders.

Segment Performance

• Pharma Segment: Core sales increased 3%. Proprietary drug delivery systems: Prescription core sales grew 10% due to strong demand for emergency medicines, CNS, asthma, and COPD therapeutics; Consumer healthcare core sales decreased 10% due to softer demand for nasal decongestants, etc., but ophthalmic solutions sales growth couldn't offset; Injectables core sales decreased 8% due to tough comps from prior year; Active material science solutions core sales increased 11% driven by demand for diabetes and probiotics. Pharma's adjusted EBITDA margin was 34.8%, a 230 basis point improvement.
• Beauty Segment: Core sales decreased 3%. Fragrance, facial skincare, color cosmetics core sales down 11% (largely due to lower prestige fragrance sales), while Masstige fragrance core sales grew double-digits; Personal care core sales up 9%, Home Care core sales up 15%. Adjusted EBITDA margin was 12.1%, a 50 basis point decline.
• Closures Segment: Core sales decreased 2%, offset primarily by lower tooling sales and discontinuation in Argentina. Product sales grew in virtually all end markets. Adjusted EBITDA margin was 15.8%, an 80 basis point improvement.

Guidance

• Second Quarter Outlook: Anticipates adjusted earnings per share in the range of $1.56 to $1.64 per share, with an effective tax rate range of 19% to 21% due to a one-time tax benefit and ongoing tax optimization. Expects positive contributions from all segments in the second quarter, with stronger performance anticipated for Beauty and Closures.

Risks

• Soft demand for dispensing technologies in nasal saline and decongestants, with inventory issues still present in the cold and flu season outside the US.
• Impact of tariffs on supply chains, though the net effect is expected to be limited at this stage.

Question and Answer

Q: George Staphos asks about order patterns, inventory levels, and GLP-1.

A: Stephan Tanda responds that the company is seeing reacceleration in demand across segments, with inventory issues in cold and flu outside the US being tricky to tease out, and GLP-1 showing strong demand with continued ramp-up of capability.

Q: Ghansham Panjabi asks about cold and cough inventory, GLP-1 oral pill impact, and fragrance sales divergence.

A: Stephan Tanda responds that cold and cough inventory outside the US is not depleted yet, GLP-1 demand is strong with no immediate abandonment of investments, and Masstige fragrances are gaining share with prestige launches expected to improve.

Q: Matt Roberts asks about prestige fragrance, tariffs, and drug approvals.

A: Stephan Tanda responds that tariffs are passed on, prestige fragrance sees muted engagement but positive Q2 outlook, and drug approvals have not significantly impacted Pharma's long-term pipeline.

Q: Daniel Rizzo asks about tariffs and injectables comps.

A: Stephan Tanda responds that tariffs have limited impact, and injectables are catching up after ERP deployment challenges.

Q: Matt Larew asks about FX and tariffs impact.

A: Vanessa Kanu responds that FX guidance accounts for rate changes, and tariffs' net effect is expected to be limited in Q2 and the balance of the year.

Q: Gabe Hajde asks about consumer healthcare business size and pharma outlook.

A: Stephan Tanda responds that consumer healthcare is a portion of pharma sales, and Pharma has solid long-term growth prospects despite choppy quarters.

Q: George Staphos asks about customer trends and tooling outlook.

A: Stephan Tanda responds that Aptar is well-positioned in recessions, and tooling activity is expected to be strong in the second quarter as customers explore differentiation.