AptarGroup, Inc. (ATR) Q4 2025 Earnings Call Transcript
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Overview
The earnings call summary and Q&A indicate positive sentiment: strong injectables demand, beauty and closures recovery, and strategic acquisitions. Despite emergency medicine headwinds, overall margins are expected to improve. The $600 million buyback authorization and $100 million cost savings initiatives are additional positives. Although management avoided specific guidance, the overall outlook remains optimistic, justifying a positive stock price reaction.
Key Financial Performance
Reported Sales (Q4 2025) $963 million, up 14% year-over-year from $848 million. Core sales increased 5%, driven by healthy demand across the portfolio.
Adjusted EBITDA Margin (Q4 2025) Approximately 20%, down from 23% in the prior year. Decline due to higher production costs in Beauty and Closures segments and shifts in product mix.
Pharma Segment Core Sales (Q4 2025) Increased 4%. Excluding emergency medicine, core sales grew 10%. Emergency medicine sales declined 36%. Growth driven by systemic nasal drug delivery and injectables.
Beauty Segment Core Sales (Q4 2025) Increased 10%, with 25% of growth from tooling. Growth in fragrance, facial skin care, and personal care. Margins declined due to operational disruptions and lower-margin tooling projects.
Closures Segment Core Sales (Q4 2025) Increased 1%. Growth in beverage sales offset by lower resin pricing and food sales. Margins declined due to equipment maintenance and lower-margin tooling sales.
Reported Sales (Full Year 2025) $3.8 billion, up 5% from $3.6 billion in 2024. Core sales increased 2%, reflecting steady demand across key product categories.
Reported Net Income (Full Year 2025) $393 million, up 5% year-over-year. Reported earnings per share grew 7% to $5.89, while adjusted earnings per share slightly declined by 1% to $5.74.
Capital Expenditures (Full Year 2025) Decreased year-over-year to represent 7% of sales, reflecting a focus on efficiency and high-return investments.
Free Cash Flow (Full Year 2025) $303 million, down $64 million year-over-year due to timing of tax payments, higher pension contributions, and working capital changes.
Adjusted EBITDA Margin (Full Year 2025) 21.6%, consistent with the prior year. Adjusted EBITDA increased 5% year-over-year.
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Operating Highlights
Pharma pipeline: Systemic nasal drug delivery accelerated, injectables accounted for a greater portion of the pipeline, and new launches like CARDAMYST nasal spray and neffy needle-free epinephrine spray were highlighted.
Beauty segment: Unilever launched Nexxus hair care with Aptar's all-plastic pump technology, Chanel used Aptar's Airless beauty pump for HYDRA BEAUTY Micro Serum, and a Chinese brand adopted Aptar's airless pump for a new skincare line.
Closures segment: McCormick launched Cholula Cremosa with Aptar's flip top pour spout closure, Coca-Cola used Aptar's spout closure for Powerade and BonAqua in South Africa, and Unilever adopted a recycled resin dosing closure for fabric softeners in Brazil.
Geographic expansion: Aptar's products were adopted in North America, Europe, South Africa, and Brazil, showcasing global market penetration.
Cost reduction initiatives: Focused on back-office centralization, automation, and advanced manufacturing technologies to achieve over $100 million in structural cost savings.
Operational disruptions: Beauty and Closures segments faced higher production costs and operational disruptions, including supplier issues and equipment maintenance.
Capital allocation: Returned $486 million to shareholders through share repurchases and dividends, and announced a new $600 million share repurchase authorization.
Sustainability leadership: Recognized in CDP Climate A list and Newsweek's most responsible companies list, reflecting commitment to environmental and social governance.
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Risk or Challenges
Production Costs: Higher-than-expected production costs in the Beauty and Closures segments impacted adjusted EBITDA margin, reflecting operational inefficiencies.
Product Mix: Shifts in product mix, including a decline in demand for emergency medicine products, negatively affected margins.
Operational Disruptions: Operational disruptions in the Beauty and Closures segments, including supplier issues and required environmental upgrades, caused production inefficiencies.
Emergency Medicine Portfolio: Decline in demand for emergency medicine products is expected to continue through 2026, representing a revenue headwind of approximately $65 million.
Higher Interest Expenses: Higher interest expenses due to increased debt levels and bond offerings impacted financial performance.
Tax Rate Increase: Adjusted effective tax rate increased, reducing net income.
Maintenance Issues: Equipment maintenance issues in the Closures segment impacted production and margins.
Currency Effects: Currency effects contributed to increased SG&A expenses, impacting overall profitability.
Litigation Costs: Nonordinary course litigation costs increased SG&A expenses.
Tooling Sales: Record tooling sales, while beneficial for customer retention, carried lower margins, impacting overall profitability.
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Guidance & Outlook
Pharma Segment Growth: Aptar expects continued strong growth in its Pharma segment, excluding emergency medicine, which has experienced a period of destocking. Growth is anticipated across injectables, systemic nasal drug delivery, and consumer healthcare solutions.
Emergency Medicine Revenue Headwind: The company anticipates a revenue headwind of approximately $65 million in 2026 due to a decline in emergency medicine demand. The impact will be more pronounced in the first half of the year, with moderation expected in the second half.
Capital Investments for 2026: Capital investments are projected to be in the range of $260 million to $280 million for the full year 2026.
Depreciation and Amortization Expense: Depreciation and amortization expenses are expected to range between $320 million and $330 million in 2026.
Q1 2026 Adjusted Earnings Per Share: The company anticipates Q1 2026 adjusted earnings per share to be in the range of $1.13 to $1.21.
Productivity and Cost Savings: Aptar has achieved sustained cost savings and productivity improvements exceeding $100 million, which are structural and ongoing. These include footprint rationalization, automation, and advanced manufacturing technologies.
Beauty Segment Margin Improvement: Operational disruptions in the Beauty segment are expected to abate through the first half of 2026, with steady margin improvement anticipated quarter-by-quarter.
Closures Segment Performance: The Closures segment is expected to deliver steady performance supported by ongoing innovation and category conversions.
Structural Actions and Optimization: The company is pursuing further centralization of back-office functions, consolidation of metal operations in France, and rationalization of a U.S.-based beauty R&D office to optimize resources.
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Shareholder Return Plan
Dividend Payments: In 2025, the company returned $486 million to shareholders through dividends and share repurchases. This marked the 32nd consecutive year of paying an annually increasing dividend, highlighting the company's commitment to shareholders and the resilience of its business model.
Share Repurchase Program: In 2025, the company repurchased 2.7 million shares for $365 million, the highest repurchase amount in the past decade. Additionally, the Board of Directors authorized a new share repurchase program of up to $600 million, replacing all existing authorizations.
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Key Q&A
Q:Do you see any deceleration in GLP-1 demand and elastomers in general in 2026?
A:Stephan Tanda stated that injectables are expected to grow in the high single-digit to low double-digit range. GLP-1 is important but not the sole driver of injectable growth, which is broader-based, including vaccines, biologic projects, and blood factors.
Q:What are your EBITDA margin trends as we roll out through the year?
A:Vanessa Kanu explained that margins are expected to be more robust in the second half of the year due to factors like reduced emergency medicine impact, increased volume in Beauty and Closures, and productivity measures. The full-year margins are expected to be within the long-term target range.
Q:What happened in Beauty and Closures segments in terms of the fourth quarter, and when should we expect margins to improve?
A:Stephan Tanda and Vanessa Kanu explained that operational issues in Beauty were due to new environmental measures and supplier issues, while Closures faced unscheduled maintenance. Margins are expected to improve significantly in Q1 and continue improving quarter-by-quarter.
Q:Could you provide additional color on the emergency comp in 4Q and what it will be in 1Q and 2Q in emergency medicine?
A:Vanessa Kanu stated that Pharma core sales were up 10% excluding emergency medicine in Q4. The $65 million full-year headwind from emergency medicine will be more pronounced in the first half, with a 70-30 split between H1 and H2.
Q:How should we think about NARCAN growth over the long term?
A:Stephan Tanda mentioned that NARCAN is expected to grow at a low to mid-single-digit rate from the new baseline, driven by its use in harm reduction and geographic expansion.
Q:When do you know if the winter was strong or soft for cough and cold with nasal delivery?
A:Stephan Tanda stated that the company will have a clearer picture by the Q1 or Q2 call. The consumer healthcare destocking is behind, and the current season appears strong.
Q:Can you quantify the one-off issues in margins and provide confidence in underlying margin improvement?
A:Vanessa Kanu stated that operational issues in Beauty and Closures are transitory, and the rest of the business is healthy in margin. Margins are expected to be stronger in H2, with the full year within the long-term target range.
Q:What are your capital allocation priorities and potential investments in 2026?
A:Stephan Tanda and Vanessa Kanu explained that the company focuses on bolt-on acquisitions, technology acquisitions, and geographic expansion. The $600 million buyback authorization provides flexibility for share repurchases.
Q:Can you provide details on the $100 million cost savings and productivity initiatives?
A:Vanessa Kanu clarified that the company has achieved over $100 million in annualized cost reductions and continues to execute productivity initiatives to combat mix issues and drive efficiencies.
Q:Are you seeing initial pipeline fill for CARDAMYST in 2026?
A:Stephan Tanda stated that it is difficult to project the adoption curve for new drugs like CARDAMYST, but the company is optimistic about its potential.
Q:Did emergency medicine in 4Q come in line with your initial view?
A:Vanessa Kanu confirmed that emergency medicine performance in 4Q was in line with expectations.
Q:How should we think about the $600 million buyback authorization?
A:Vanessa Kanu explained that the buyback authorization provides flexibility and will be funded through free cash flow and balance sheet flexibility.
Q:What drove the build in working capital in 4Q?
A:Vanessa Kanu explained that the $64 million decline in free cash flow was primarily due to timing of tax payments ($44 million) and pension contributions ($10 million), with no significant concerns in working capital quality.
Q:What caused the maintenance backlog in Closures?
A:Stephan Tanda explained that maintenance issues at one site in North America were due to large equipment being taken offline and not coming back up as expected. The team is addressing the issue.
Q:What is driving the respiratory drugs in the pipeline?
A:Stephan Tanda stated that the respiratory category is undergoing a change in propellant with lower greenhouse warming potential, making it a significant part of the business.
Q:Review of Unclear Management Responses
A:Management avoided providing specific quarterly guidance for Pharma margins and emergency medicine headwinds, instead offering general statements about full-year expectations and H1 vs. H2 dynamics. Additionally, they did not provide specific projections for the adoption curve of new drugs like CARDAMYST or detailed quarterly breakdowns for cost savings and productivity initiatives.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
CARDAMYST
CDP
Core sale
II study
PSVT
Unilever
ability term
action
adult
centralization
core drug
decline demand
decline margin
decrease
delivery injectables
delivery technology
depreciation amortization
dynamic
focus
interest expense
intranasal
margin combination
message
metal
milestone
mix production
molecule
nasal drug
office
ophthalmology
ounce
pain
point decline
product mix
production Closures
repeat
respiratory
sale Core
sale margin
saving
shift
spray
supplier
vaccine
ATR Transcript
AptarGroup, Inc. (ATR) Q4 2025 Earnings Call Transcript
Positive2-6
The earnings call summary and Q&A indicate positive sentiment: strong injectables demand, beauty and closures recovery, and strategic acquisitions. Despite emergency medicine headwinds, overall margins are expected to improve. The $600 million buyback authorization and $100 million cost savings initiatives are additional positives. Although management avoided specific guidance, the overall outlook remains optimistic, justifying a positive stock price reaction.
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Neutral1-14
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Neutral11-19
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Unknown10-31
The earnings call summary shows mixed results: strong performance in the Pharma segment with positive growth expectations, but challenges in Beauty and Closures segments. The Q&A reveals uncertainties, particularly in emergency medicine and litigation costs, causing concern. Although there are positive long-term growth prospects, the lack of specific guidance and declining margins in some segments temper optimism. Given these factors, the overall sentiment is neutral, with no strong catalysts for significant stock price movement in either direction over the next two weeks.
ATR Slides
ATR Report
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