SLGN

Overall Firm Performance

• The company delivered Q2 2026 adjusted EPS of 98 cents, above the midpoint of management's expected guidance range, with total net sales of ~$1.6 billion, a 7% increase YoY. Total adjusted EBIT was $185 million, 4% below the prior year, as higher EBIT in Custom Containers was offset by higher corporate expenses and lower EBIT in Metal Containers.
• The business successfully navigated dynamic geopolitical conditions, raw material cost inflation, and shifting order patterns to deliver solid results in the quarter.

Business Segment Highlights

• Dispensing and Specialty Closures: Strong growth continues in high-value fine fragrance products, enabled by differentiated technology, customer partnership models, and market-leading innovation. The company successfully implemented commercial actions to recover 2026 raw material cost inflation, and the business continues to outperform broader end market trends despite softer-than-expected conditions in Brazil.
• Metal Containers: 7% YoY organic volume growth in wet pet food was achieved even against tough prior year comparables. A new long-term supply agreement was executed for the vegetable market, resolving multi-year operational disruption from a prior customer ownership transition, and the company expects to resume normal partnership with the new business owners.
• Custom Containers: Delivered solid results despite significant raw material volatility from elevated crude oil prices, with volumes stable on a comparable basis after accounting for exited low-margin businesses.

Strategic Positioning

• Silgan's differentiated market position is supported by a diversified portfolio of consumer staple products, long-term customer partnerships, market-leading innovation, a flexible capital deployment model, and a low-cost global manufacturing footprint, enabling outperformance across varied macroeconomic environments.

• Full year 2026 adjusted EPS guidance is maintained at $3.73 to $3.93, compared to $3.72 in 2025, with expected low-to-mid single digit total adjusted EBIT growth. Full year 2026 free cash flow is confirmed at approximately $450 million, with capital expenditures expected to be ~$310 million.
• Q3 2026 adjusted EPS is guided to a range of $1.21 to $1.31 per diluted share, compared to $1.22 in Q2 2025, with midpoint guidance calling for ~$10 million higher YoY adjusted EBIT, interest expense of $50 to $55 million, and an effective tax rate of 25% to 26%. Volumes are expected to be above prior year levels across all segments on a comparable basis.
• Dispensing and Specialty Closures is expected to deliver low-to-mid single digit organic volume growth for full year 2026, driven by low-to-mid single digit growth in core dispensing products.
• Metal Containers full year 2026 volumes are expected to grow low single digit overall, with mid single digit growth in pet food and stable volumes for human food products. Q3 2026 Metal Containers volumes are expected to grow low-to-mid single digit YoY, lifted by order timing shifts from Q2 and continued pet food growth.
• Custom Containers full year 2026 comparable volumes (after accounting for exited business) are expected to be flat to low single digit growth versus 2025, with second half volumes higher than prior year on a comparable basis as new business is commercialized.
• The 2026 full year expected corporate expense is maintained at ~$50 million, interest expense at ~$200 million, and the expected tax rate at 25% to 26%.

1. Dispensing and Specialty Closures: Net sales increased 2% year-over-year (YoY), driven by raw material cost pass-through and favorable foreign currency translation, partially offset by lower volumes and unfavorable product mix. Segment unit volumes declined 1% YoY, primarily due to softer market conditions in Brazil, which created a $5 million negative impact to segment results. Adjusted EBIT was flat compared to the prior year, as favorable price over cost offset the volume and mix headwinds. This segment accounts for approximately 35% of total company net sales.

2. Metal Containers: Net sales increased 13% YoY, driven by contractual pass-through of higher steel and aluminum raw material costs. Overall segment volumes were flat YoY: 7% YoY growth in wet pet food volumes was fully offset by the anticipated normalization of order patterns for fruit and vegetable products following a customer ownership change. Adjusted EBIT was below prior year levels, as a mix shift to smaller lower-margin pet food containers from larger higher-margin human food containers dragged down profitability. This segment accounts for approximately 41% of total company net sales.

3. Custom Containers: Net sales increased 3% YoY, driven by favorable price-mix, partially offset by a 4% YoY volume decline. The volume decline was expected, resulting from the planned exit of low-margin businesses as part of the company's footprint optimization cost reduction program. After accounting for exited business, comparable volumes were in line with prior year levels. Adjusted EBIT was above prior year levels, as favorable price over cost and cost savings from footprint optimization offset the volume impact. This segment accounts for approximately 24% of total company net sales.

• Dynamic geopolitical uncertainty, macroeconomic volatility, and ongoing raw material cost and pricing volatility create uncertainty around near-term margins and profitability. Unrecovered resin inflation, which created a $10 million headwind in Q2 2026, will remain a drag until resin prices decline, with no clear visibility on the timing of that decline.
• Soft demand in emerging markets (specifically Brazil) created near-term volume and mix headwinds in the Dispensing and Specialty Closures segment, though management expects this to be temporary.
• Mixed demand conditions in the North American market, driven by K-shaped economic trends, have created choppy performance in the middle tier of consumer product segments.
• All forward-looking results are subject to inherent uncertainty, and actual outcomes may differ materially from guidance due to the risks and uncertainties outlined in the company's SEC filings, including the 2025 Form 10-K.

Q: The 1% Q2 volume headwind for Dispensing and Specialty Closures came from Brazil. What was performance ex-Brazil, and when will Brazil recover? What underlying market trends are driving the weakness? / A: Brazil saw a 15% YoY volume decline in Q2, leading to an overall 1% segment volume decline and 2% mix headwind. Excluding Brazil, the segment business was essentially flat, in line with full year expectations. Europe performed very strongly, especially in fine fragrance, while North America saw mixed results with strong performance in high and low end segments, but choppy results in the middle market. Management expects the same Brazil impact to persist in Q3, with recovery starting in Q4 2026 and full recovery by 2027 driven by holiday season demand that makes up a large share of revenue for major Brazilian customers. No market share was lost, and the weakness is entirely demand driven by high inflation in the market.

Q: How did the human food segment of Metal Containers perform in Q2, and what visibility does the new long-term vegetable supply agreement provide for second half volumes? / A: In Q2, vegetable and soup volumes were down double digits, which was fully in line with expectations, driven by a shift in order timing following the customer ownership change. Under the new agreement, orders are now scheduled closer to packing season, shifting volume from Q2 to Q3. Growing conditions for North American fruit and vegetable crops have been good, and management has slightly raised volume expectations for the pack season, with additional volume expected to fall into Q4. Visibility is strong, and management is confident it can meet customer volume forecasts.

Q: How much of the 2027 fine fragrance business is already locked in, and are there additional growth opportunities with new customers? / A: Fine fragrance has long development and contract cycles, and most 2027 business is already under contract, as products are already in commercialization to meet launch timelines. Silgan is a leading player in the premium fine fragrance segment, with differentiated technology and a strong customer partnership model that drives customer loyalty. There are ongoing opportunities to grow with both existing and new customers, and management expects continued high single digit annual growth for the fragrance business globally.

Q: What is the company's current M&A pipeline, and how does management balance M&A versus share repurchases at current valuations? / A: The capital allocation framework remains unchanged: all opportunities are benchmarked against share repurchases based on expected returns, and management pursues the option that delivers the highest long-term shareholder value. The company expects to end 2026 below its 3x leverage target, leaving it well positioned to pursue all capital allocation options, including M&A. The M&A pipeline remains active and full, but management will maintain discipline on pricing and returns. Most high-return opportunities historically have been in Dispensing and Specialty Closures, but all three segments are capable of supporting acquisitions that meet return hurdles.