Good day, and welcome to the Silgan Holdings Third Quarter 2025 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Alex Hutter, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Anna, and good morning. Joining me on the call today are Adam Greenlee, President and CEO; Philippe Chevrier, EVP and COO; Bob Lewis, EVP, 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 therefore, 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 2024 and other filings with the Securities and Exchange Commission. Therefore, the actual results of operation 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 EBIT, adjusted EBITDA, free cash flow and adjusted net income per diluted share or adjusted EPS. A reconciliation of these metrics, which should not be considered substitutes for similar GAAP metrics can be found in today's press release under the non-GAAP financial information portion of our Investor Relations section of our website at silganholdings.com. With that, I'll turn it over to Adam.

Thank you, Alex, and we'd like to welcome everyone to Silgan's third quarter earnings call. Our third quarter results continue to show the resilience of our business model, the success of our strategic initiatives and the power of our unique portfolio of products as we delivered another quarter of strong financial performance. Our teams executed well during the quarter and adapted our operating plans to the changing market conditions we identified midyear, delivering on our strategic growth initiatives, including meaningful organic growth in high-value dispensing products and Metal Containers for pet food, achieving our cost reduction goals and working closely with our customers to meet their unique needs as we head into the end of the year and begin to plan for 2026. We delivered 10% adjusted EPS growth to the first 3 quarters of the year, returned over $120 million in cash to our shareholders through dividends and share repurchases, successfully integrated the Weener acquisition and are on track to reduce leverage near the midpoint of our range, just over 12 months after closing the acquisition. Our Dispensing and Specialty closures segment delivered another quarter of significant year-over-year growth and record adjusted EBIT in the third quarter with nearly 40% growth in dispensing product sales and continued success in the markets we serve. Our team successfully responded to the anticipated decline in sports drinks volumes following more subdued first half volumes for these products. We've completed the integration of Weener and have one additional contractual volume based on the combined power of our innovation teams, complementary portfolios of products and the new product technology this acquisition brings to our platform. Our long-term customer relationships continue to expand as the execution and focus of our teams remains a key competitive advantage in our markets to drive organic growth that outpaces…

Thank you, Adam. As Adam highlighted, we reported another quarter of strong financial results in the third quarter that were consistent with our expectations with continued success in our Dispensing business and the execution of our cost reduction plan more than offsetting headwinds in sports drinks volumes and Metal Containers price cost in the quarter. Net sales of $2 billion increased 15% from the prior year period, driven primarily by growth in dispensing products, including the addition of the Weener business and the contractual pass-through of higher raw material and other manufacturing costs. Total adjusted EBIT for the quarter of $221 million increased by 8% on a year-over-year basis, driven by strong growth in dispensing products, including from the acquisition of Weener, improved price/cost in Custom Containers, higher volumes in Metal Containers and the benefits of our cost reduction efforts, which were partially offset by expected lower volumes for sports drinks in North America and unfavorable price/cost, including mix in Metal Containers. Adjusted EPS of $1.22 was slightly above the prior year quarter as the improvement in adjusted EBIT was mostly offset by higher interest expense and a higher tax rates. Turning to our segments. Third quarter sales in our Dispensing and Specialty Closures segment increased 23% versus the prior year period, primarily as a result of the increase in sales from Weener and higher volume for the high-value dispensing products. As anticipated, volumes for Food and Beverage closures declined 5% during the quarter, driven by a double-digit decline in North American hot fill products, predominantly for sports drinks. Record third quarter 2025 Dispensing and Specialty Closures adjusted EBIT increased $18 million or 19% versus the prior year period as a result of the contribution from Weener and higher organic volumes of high-value dispensing products. In our Metal Container segment,…

[Operator Instructions] We'll take our first question from Ghansham Panjabi with Baird.

Adam, just zooming a little bit and kind of looking back over the last 3 years when you had a previous sort of inventory destocking cycle, et cetera. This seems like the second iteration almost a double dip, if you will, in terms of volume improvement and then some level of decline, et cetera. What do you sort of attribute this towards this go run and how does this go run compared to the first iteration back in 2022 and 2023?

I think it's a really good question because I think there are some very stark differences between what is occurring in the fourth quarter now versus kind of what we're dealing with in the very broad destocking post pandemic cycle that we dealt with in 2023. Maybe I'll start with 2023 and just talk about it that was a broad-based the cycle post-pandemic that really affected all of our products and pretty well described, I think, throughout the portfolio. And then I think about what's going on in 2025, and I'll just start with last quarter and say, we did have a large customer bankruptcy. Unfortunately, that had a negative impact to our '25 earnings. We had very poor weather that affected the sports drink category. We've already talked about those, but those are very unique one-off instances that we think affected 2 of our key markets and fruit and veg, fresh fac and then our sports drinks category. And really, I think the difference now is the kind of the bifurcation of consumer activity, right? So we've got our high-value, high-end products continue to do well that are targeted at kind of a higher-income consumer. I think the lower to mid tier of income consumer is really struggling. I mentioned earlier that between inflation and maybe some muted wage growth they're trying to stretch dollars at point of purchase. And we're seeing it. Gansham, I think we've talked for many, many years that the food can business is a bit of an indicator of the broader economy. We are seeing strength in food cans as those consumers that are making that purchase point and -- decision and trying to stretch the dollars moving into categories like shelf-stable cans for nutrition. So it's pretty consistent with what we've seen in the past. And then likewise, we see in some products, we've specifically called out kind of hard surface cleaners and hand soaps and lotions and some of the other products that move into our personal care categories, those are nondiscretionary, but in fairness, those can be stretched, right? You can move that purchase from one month to another, whereas when you're feeding your family and you're stretching those dollars, that purchase point decision becomes pretty clear. And again, we're seeing it. We've also, I think, collectively, the market, in general, we've taught consumers to buy on promotion. And if there's not promotional activity that is moving volume or is very focused on moving volume. We have seen consumers be reticent to make that purchase and purchase decision. And we're seeing effective promotional activities drive volume, much like we've seen to some degree in our wet pet food category.

Okay. That's helpful. And then just related question. So within the last 3 months, last -- 3 months ago, you called out weakness in food and beverage closures in North America, now it's Personal Care and Home Care. Do you see that broadening to perhaps even pet food? I mean, is that a risk as you kind of think about how the sequencing will work through the early part of -- into 2026?

Yes. So to answer your question directly, no, we don't. And we just delivered 10% growth in Q3 in our Pet Foods segment we're expecting high single-digit growth in the fourth quarter, which we communicated on the last call as well. So Pet Foods is playing out exactly as we thought it would. For the year, we're looking at mid-single-digit growth in the Containers business, the Metal Containers business. So really, everything is playing out exactly as we expected. I'll go back to your point on food and beverage. Again, we were very specific that, that conversation, while we talked about food and beverage, it was very specific to sports drinks, and related to the really bad weather and wet weather that really limited the drink occasions for those products in the early part of the summer, and our customers responded to that with further inventory reductions because they were not getting the sell-through because the drink occasions were limited. They also hold back their promotional dollars and allocated them to other categories. So I just think it's different and I think it's much different than it was in '23 back to your earlier question, and we think it's isolated to these specific instances. So it's back to -- it's the bifurcation of the consumer and the consumer that's stretching the dollar is making those purchase point decisions and focus on low-cost nutrition at this point.

We'll now take our next question from George Staphos with Bank of America.

I guess the first question I had, even though it's not surprising given the ultimate release today, Adam, why did DSC miss on what was -- I think at one point in time, you said mid- to high 20s revenue growth for the quarter. I didn't hear kind of a specific comment there. I don't think I did, and I had a couple of follow-ons in terms of what's going on in the business and your vantage point?

Sure. Yes, you're right, George. So as we guided kind of mid- to high 20s and delivered something like 22%, 23%, it was really the late September change that we were seeing some pressure in the Personal Care and Home Care market. So really, the change started to really show in our numbers kind of late in the month of September. And as we really pressed hard for additional forecast clarity and visibility with our customers, that's what led to the ultimate reduction here for Q4 as well.

Okay. So look, just on that point, it's kind of a minor point. But since you already were seeing signs of this in late September, did you ever think about -- what were your considerations in terms of maybe just doing a guidance reduction or pre-announcement? Recognizing the third quarter was coming in, in line, the fourth quarter was going to look a lot different versus what was implied for the fourth quarter in your prior guidance.

Yes. So I mean, certainly some conversation around that, George, but maybe just to reiterate what you said, our third quarter came in exactly with our expectations. And in fairness, we were trending ahead of the third quarter prior to this conversation regarding personal care and home care products. It takes a little bit of time to work with our customers to work all the way through their forecast. Obviously, as I would relay the information here, George, we're really good a week out. We're great a week out. We're really good a month out. And as we get kind of further and further out with our customers, it takes more time for them to aggregate their forecast information and for us to then react to it. So while we did see volumes starting to soften in late September, we didn't have forecast until the kind of first -- probably late first week, second week of October from our customers, and then we're putting our plans together and did not feel it was within the timeline to talk about it prior to this call.

Okay. That's fair. It's just given the volatility that we've seen in equities over the last number of quarters with variation from performance and guidance. That's kind of what drives the question. We understand. So if we look at the pretax amount of $25 million, and that's what we were getting and very, very simplistically apply the mid-single digit to the revenue in DSC and Custom Containers, I wind up with a relatively high incremental margin. Now I know you're saying there's decrementals from overhead absorption and so on. But can you give us a bit more color in terms of how much is the absorption versus the impact from earnings? And how does that split across the segments? And is it pretty even on the mid-single-digit decline, I think you said for both segments?

Yes. So I think maybe to carve into that, George. So the $25 million, I think you can think about $20 million in DSC and $5 million in Custom Containers. And then -- this will apply to both businesses because we did take proactive actions to mitigate kind of the impact here and make sure we secured our free cash flow to obtain our deleveraging goals for the year. So of the $25 million, I'd say it's probably half of that is going to be related to volume and half of it is going to be related to kind of us taking cost out and reducing our own inventories in response to the customer forecast change. So it's kind of a 50-50. And I think that the volume is not a permanent reduction by any stretch, and we'll expect to recover that in future periods. The lost inventory -- or the impact of the inventory is kind of a onetime gain that we likely aren't going to recover.

Okay. My last one, I'll turn it over. So if we take the midpoint of your guidance for this year to $3.71, and so that means you're trading right now roughly at less than 10x trailing 12 months. And while I know you're not guiding on '26, we'll take it if you have it, but we assume we'll have to wait until February for that. We assume any growth at all, you're at 9x, and that's the lowest valuation Silgan's been at, I think, in 20 years, even with your Dispensing acquisitions. So clearly, it's a very skeptical market out there relative to Silgan, recognize the market has been volatile period. So what mile markers are you going to tell investors here and now and then analysts that we should hold you to in terms of fourth quarter and 1Q to mark your progress and to gain -- it's kind of to Ghansham's question as well, gain more faith in the outlook for the next year.

Sure. Thanks, George. Look, performance matters, and we'll take full ownership and accountability of the performance of the business. So you're right, we're not providing '26 outlook yet or Q1 guidance. So if you're looking for a marker, I think it's very clear that we need to deliver the fourth quarter as we've discussed here already on the call and you saw in the press release. So I think holding us accountable and we're holding ourselves accountable for delivering the free cash flow, deleveraging, as we've talked about. And again, unfortunately, it's not the growth that we anticipated for 2025, but delivering a year of growth in 2025, while setting ourselves up for growth, not only in EPS for '26, but also in free cash flow.

So 1Q, should we be looking at low to mid-single-digit growth across the platform? That's what I was kind of getting at. Thanks guys, sorry about that, because I know fourth quarter is what it is, but...

Yes. Thanks, George. We're just not going to comment on outlook for Q1 at this point.

We'll take our next question from Matt Roberts with Raymond James.

Adam, I was wondering in Dispense, if you could help parse that down a bit more. First, could you isolate the revenue mix exposure to just those personal and home care products and how much those markets are expected to be down? Fragrance that continues to shine. Is that just general demand resilience? Or how much of that 15% growth was really innovation ahead of holiday releases? And then lastly, within that segment, you did say health care and pharma could contribute more meaningfully in '26. How much growth do you think that could bring in 2026?

Got it. So I'll do the last one quickly for you, Matt. The health care and pharma for '26, we'll be talking about that on our next call when we're providing guidance for '26. So we've got contractual wins that will impact '26 favorably, and we'll get into that in a little more detail in the future period. Back to your beginning of the question, for personal care and home care products, again, how about this from a volume perspective, we were guiding to kind of mid-single-digit growth for Q4 and now expect a mid-single-digit decline in volumes for Q4 versus prior year. So that's kind of the magnitude. It's sort of an average margin for the portfolio. And then you rightly highlighted the fragrance business. Again, as we said on the last call, we were expecting double-digit growth in Q3. We delivered that. We're expecting double-digit growth in Q4 as well and are positioned for nice growth in '26. And the reasons why I think you touched on a couple of them. One, we continue to win a disproportionate amount of the new product launches in the space where we compete and win every single day, and that's in the premium end of the fragrance and beauty market. So a lot of product innovation from our teams, and that's winning and being rewarded in the marketplace. And then as our customers continue to innovate, we are being chosen as the partner of choice to help them get their products to market. And that's been a successful story really since we've been probably all the way back to the Albéa acquisition in 2020, no 2021, excuse me. And that is set up for continued growth going forward. And I think as we've talked, Matt, once you're kind of -- it's not pharma, it's not health care, but it's pretty darn close. Once you're spec-ed in, you have a long runway with those product launches that occur. And so we benefit in the long term, but again, continue to win a disproportionate amount of the new product launches being made by customers as well.

Matt, just one point of clarification. The margins on these products in Personal Care Home Care. Their average for dispensing, which is obviously higher for the overall portfolio of DSC. So there's mix involved as well.

That makes sense. And then as a follow-up on Weener. So you've talked about for 12 months now. Could you break out what the 10 or 12-month revenue and EBITDA contribution was from that business? Any update on the $20 million in synergies achieved to date? And it sounded like Personal and Home Care was isolated to North America. Is that really in legacy products or any impact on the Weener portfolio given it has, I think, about 1/3 U.S. exposure.

Yes, great question. And really, the Personal Care and Home Care impact within the legacy business. So that's the traditional Silgan side of Dispensing Closures business. So Weener, Matt, honestly, it's fully integrated. It's nearly impossible now. Yes, we had a standalone P&L, but we've made investments into their facilities. So it would gone into legacy Silgan facilities. So it really is difficult to try to break anything out there. What I'll say is that the product portfolio that came over with the acquisition continues to perform well. And right in line, if not slightly ahead of expectations in many of the cases. And the synergies, yes, so very detailed synergy estimates that we come up, we do bottoms up synergies. The phasing is very specific. So there are no surprises. So we delivered exactly what we expected from a synergy standpoint and really have another 6-ish months to deliver the remaining synergies. So right on track. I think it's $20 million of the $25 million have been delivered and we're in good shape to deliver the balance.

Our next question will come from Gabe Hajde with Wells Fargo Securities.

Adam, I'm trying to reconcile, I think in your comments, you said you expect 2026 free cash flow to be up from 2025. Appreciating that you guys. It sounds like you're obviously whittling down, I think you said some of your own inventory this year. And historically speaking, we've kind of seen an inverse relationship with production EBITDA and cash flow, right? So if you're ramping up earnings, typically cash flow is going to go the opposite direction and vice versa. So -- and unless the business is in wind down or something like that, I'm curious how you're thinking about or what the levers are to grow cash flow in '26 to be in '25.

Yes. And I don't disagree with what you said, Gabe . I think for us, if we're looking at '26 it's continued improvement in working capital and incremental programs that will execute next year, frankly, just as we have been doing for the last several years. So a, there's always room to improve, but we've got specific working capital initiatives that we'll be executing in '26.

Okay. And then I guess maybe to George's point on communications as it relates to expectations and things like that. Outside of giving us a view about earnings for next year or guidance on volumes. Is there anything that you can think of to do that would instill some confidence and conviction in sort of the strategy? Because I do believe that DSC should be a faster growing, higher-margin segment. You guys have spent a lot of time and effort over the past 3 to 5 years to reposition the business. So I'm just curious from your perspective as there are other considerations to infill some confidence.

Sure, Gabe. Look, it's -- I think performance matters, delivery upon expectations matters. I think if we take a half a step back and and talk about our businesses. dispensing of specialty closures is still growing and is delivering tremendous organic growth and inorganic opportunities for the business. I think it's some of the legacy applications have been a bit of a challenge in 2025 specifically. Metal Containers has done exactly what we expected it to for the year, and we're going to have another record year of performance in our Custom Container segment. So I think just how we communicate that to the market. And we talked, I think, even on the last call about as we think about giving guidance for 2026, it's likely that we're going to be a little more conservative as far as our outlook of what we'll be delivering for the business to try to take into account more of the unknown things like the customer bankruptcy and whether that impacted a specific product.

Okay. Maybe anything on the capital redeployment side? I know leverage is a consideration, but...

Yes. Look, capital allocation is a focus for us, certainly here in our corporate office all the time. And so we did buy back about $60 million worth of of shares in the third quarter. Clearly, we thought there was a dislocation in the market, and we were opportunistic with that. We continue to evaluate our capital allocation all the time. And again, I'll just say we thought there was a dislocation in Q3, and we were opportunistic with that.

Yes, Gabe, I think what's not said in that is that our leverage point is kind of stripping back towards the midpoint of the range after we fully integrated the Weener acquisition. So what that means is that we're well positioned to continue looking for M&A opportunities to deploy capital and continue to grow the business.

We'll take our next question from Mike Roxland with Truist Securities.

Adam, can you tell us why you're seeing North America hot fill beverage is a good market to be in. Obviously, stating some issues this year. It seems like it only started to recover from a volume perspective, last year from destocking. And at the same time, one of your peers is looking to exit. So I would love to get just any color you have about why you think this is a business that it makes sense to be in.

Yes. It's always been a really good business for Silgan, very stable I think if you go back a decade, growth rates were a little bit more accelerated than we've gotten to today, but it is still a growing market. And we think that we're very well positioned with the largest players in that market. When we think about sports drinks specifically, it's really not a commodity beverage. It's a higher volume beverage in some of the specialty applications that we deal with. But nothing close to kind of the CSD water market from a volume standpoint. So those packages are differentiated. The beverages themselves are differentiated and there's a lot of technology that goes into the packaging around those products. So the closures that we provide to the North American beverage market, particularly for these hostile beverages, is a technologically advanced solution versus some of the other more commoditized products. And we believe we get value for providing the silicon service model along with really technologically advanced closure systems for the beverage market. So we've always thought it's a good market, Mike, and it's provided a really stable growth overtime and none of us had anticipated the weather challenge that the sports drinks category was going faced earlier in the year. We think it's isolated to the year. For the most part, I would tell you, volume played out in the second and third quarter, ultimately, as we expected, fourth quarter volumes have stabilized and we think that the inventory corrections took place in Q2 and Q2 and Q3 as we had discussed previously.

Got it. So if I heard you correctly or came correctly, there was a double-digit decline in volumes of hostile for sports drinks in 3Q. So that was line with...

Yes. Right at 10% food and beverage and DSC was down, call it, 5%, and the hot fill beverage of course and sports drinks was down 10%, but that was right in line with where we expected it to be.

Got you. Okay. And then just one quick follow-up. In terms of Metal Containers, that -- any update on the cost of growing through bankruptcy volumes came in better than we were expecting earlier in the quarter. See you guys for your significant increase in pet food. But just wondering where that Metals Container bankruptcy stands and whether the $10 million EBIT impact, you mentioned last quarter is still relevant for 2H. And do you have any sense of what that impact could be for 2026?

Yes. So metal containers had a really good third quarter, right? Volume came in right as expected, not only for the pet food market, as you mentioned, Mike, but also before the customers going to the bankruptcy. So really, we don't have an update. We can tell you timing would indicate at this point that there should be some indication of resolution to the bankruptcy proceeding, call it, around year-end. So we think as we go into '26, we'll have much greater clarity, but just want to make it really clear, that customer did exactly what they said they were going to do in Q3 and volumes were right in line with our expectations. There's a little bit of rollover into Q4 as some of the pack was a little bit later than the September date for Q3 that we typically talk about. So I think everything is going essentially as planned. I think the thing that we want to make really clear is, we think we're probably at a low point with volume for that customer, given what happened in '24 and in '25. There could be a potential where a new owner wants to grow the business and put put support behind that brand, that would be a great thing because we'll be able to utilize the capacity that essentially we put on hold for this customer in a requirement-based contract. If that doesn't happen, if we just maintain the volume that we have right now. Again, I think as I said earlier today, we're going to look to take out costs. And I think that's kind of at least in the $10 million range as I sit here now. It will all be in 2026, but that's kind of the magnitude that we see at the current volume level.

Our next question will come from Jeff Zekauskas with JPMorgan.

You have a lower outlook for the fourth quarter, but your free cash flow for the year is unchanged. Why is that or what are the compensatory mechanisms to generate the same amount of free cash flow this year?

Yes. So Jeff, we -- obviously, with the reduction from our customers, we look to drive cost out of our system in Q4. And as we take additional downtime, obviously, that's going to allow for us to reduce our inventory as well. So really, a couple of components of working capital improvements, but it's really driven by the inventory reductions that we're taking, I'll just say proactively as a response to our customers, reducing demand in Q4.

Propylene values have really come down. And I would think that this might be an opportunity in your Dispensing to build inventories. Do the polypropylene and propylene changes make a difference to that business?

It does, and I think you got it exactly right. It is a business that has the most impact, and I'll come back to that in a second. Our Custom Containers business is very tight on the pass-through mechanisms. And there isn't much benefit or detriment to moves in resin. I'd say the same thing about our food and beverage closures. When you get to the Dispensing Systems business, while we've made improvements in reducing the lag, they still exist. So we are a little more subject to kind of a quarterly lag, maybe a little bit longer in some cases. And so we kind of have a benefit or detriment depending upon how resin is moving. This most recent change is a pretty significant one. And we have included a couple of hundred thousand of upside in our forecast for the most recent change that just happened at maybe late last week in the resin market. So I think you've got it right. That's the business that gets impacted and polypropylene is their largest component of buy in that business.

Our next question will come from Arun Viswanathan with RBC Capital Markets.

Apologies if this was asked earlier, but I guess I just wanted to ask about the last few quarters we've had a few discrete items show up and they were -- I guess, did you contemplate potentially preannouncing those items at all? And maybe that would help kind of frame that they are kind of onetime in nature. Did you contemplate that this time around as well or no?

I don't -- we talked about it a little bit earlier, Arun. And I think the message I was trying to convey was really, while we did see some softening in a couple of the markets, Personal Care and Home Care products, in Dispensing and Specialty closures and Custom Containers, very late in September. It wasn't until we got all the way through the October, early October forecast cycle. So this was a second -- late first week, early second week of October, that we were running through those numbers and then had to do our kind of reaction and what we were going to proactively do it Silicon to respond to the reduced demand requirements from our customers in Q4. So I just -- I would say Q3, we delivered exactly what we said we were going to do. And that was a very well known to us as we exited September and nothing to talk about there. And the Q4 forecasting process was pretty dynamic given the magnitude of the change and working with our customers and internally to Silicon to make sure we got that right.

Okay. And then I guess on a related -- or not necessarily related, but along the lines of clarifying what's in each business, is there a way to kind of segment out maybe within DSC how much of that business you would consider as highly cyclical or prone to some more of this volatility versus the portion that is maybe higher growth and less cyclical I think that the sports drinks side, while you highlighted a number of positives also does exhibit some of that cyclicality, whereas fragrance and some other markets, maybe more structural growers. So could you help kind of frame that maybe in the buckets for DSC and maybe even Metal Container, I imagine is not so much included there because it's a little bit more mature. But yes, maybe for DSC, that would be helpful.

Yes. I mean, Arun, here's how we think about our Dispensing and Specialty closure segment. It's basically all of it are consumer staple products. So we really don't view any of that business as being cyclical in nature. Yes, we've had a couple of onetime instances here like really bad weather that affected the sports drinks category. And I think the reality is it hasn't been clear yet, I'll just try to say it one more time. This inventory correction is our customers' growth, they are growing. They did not grow in 2025 as much as they had anticipated. So this Q4 correction is kind of moving from a mid- to high single-digit growth expectation for those categories, back to a mid-single-digit growth or maybe a low single-digit growth in certain products. So it's kind of -- it's fixing, running through the year with higher expectations for growth. They're still growing. So that's what we've been working through with our customers. So I really don't think that our products are cyclical in nature. I agree with your point. I think how I would probably try to bucket that, I'm looking around the table to my team and say, we think we have a bifurcated consumer right now, and that's what's driving this activity. The higher-end consumer is doing exceptionally well and is buying products and driving growth for our company. The mid- to lower-end consumer is really thinking hard about where they're spending their dollars and how they're stretching those dollars. We get the benefit to your very point in our Metal Containers business because nutrition and low-cost nutrition is a really important item for all consumers, particularly for that portion of the consumer portfolio. So I mean we have products in Personal Care. We do Home Care products like hard surface cleaners. We think those products continue to get it purchased. It's just maybe they're put to purchased a month later. We'll see what happens with 2026 and tax initiatives from the U.S. administration. But I do think no caps on tips. I do think no caps on over time is a very clear response trying to provide some support to that lower and mid-tier consumer that is trying to stretch dollars today.

Okay. And then just lastly, on the free cash flow. So the $430 million sounds very respectable in light of what's going on. And I know that you're taking an inventory hit right now in Q4. Just 2 things. So would you say that the inventory reduction that you're proactively pursuing will address all of that and maybe it lingers a little bit into Q1, but does get you a substantial part of the way there. And then given that you will be generating that level of free cash flow, could you potentially more aggressively pursue share buyback, just given what's going on with the stock here today and more recently?

Yes. So we do think the inventory reduction, both for our customers and for us is going to be limited to Q4. And to your point of Arun, that part of us being able to deliver the $430 million of free cash flow. I think as we sit here today, again, we talked a little bit about capital deployment and capital allocation. I'll just repeat what I said earlier that we repurchased $60 million of shares in the third quarter because we thought the market was dislocated. And I think we have the ability to consider capital allocation in any of the tools that we have in our toolkit. And I think as Bob said, very clearly, we're getting back to the midpoint of our leverage ratio by the end of the year. So we've got flexibility, whether it be it for M&A activity, whether it be for share recurs activity, we aren't announcing anything by any stretch today, but I think all things are on the table as we move forward. And focusing on delivering value to our shareholders.

We'll now take our next question from Anthony Pettinari with Citi.

Following up on Arun's question, is it possible to talk a little bit more about what your Dispensing and Specialty closures customers are saying about the weakness in Personal Care and Home Care. I mean are they expecting volume growth in '26? Or are they changing product mix or promotions or strategies to grow volumes. Just wondering how they're -- kind of what they're sharing about maybe volume outlook? And do they see this as sort of a speed bump or an adjustment or something that could be kind of longer duration.

Yes. So I think just to cut right to the chase, Anthony. It is an adjustment to where we have been, right? So those markets are -- and those customers are delivering growth in 2025. Just want to try to be really clear about that. it just is going from a mid- to high single-digit expectation to a low to mid-single-digit expectation. And that adjustment for the year is occurring all in Q4. So these aren't growing markets. They are growing categories, they are growing products. And the expectation is very clearly that they will grow in 2026 as well. And I think what I would say is from a conservative standpoint, I would say you would think about them growing in the low to mid-single digits in 2026 versus the original expectation for '25 of mid to high. So that's probably adjustment that we're thinking about as we turn to '26 even though we're not giving guidance yet. That's how we're thinking about these specific markets.

Okay. Okay. That's very helpful. And then just switching gears to Metal Containers. Is there any dialogue with Metal Containers customers on rising metal costs? Or are you seeing any kind of like push out of buying into '26 potentially? Is anyone waiting for tariffs maybe to get pulled back or some kind of move in metal. I'm just curious if you've seen any kind of push from 3Q to 4Q or maybe 4Q into '26 on Metal Containers.

Yes. So as I think you know, Anthony, the metal component is the largest cost component of a metal food can. So it is literally a daily conversation with our customers and a really important one. So maybe to get to the end of the question, so no pushout from Q3 to Q4 for us and our franchise customer model, they pay the same value for the can in January that they're going to pay in November. So really, we don't see that within a year kind of product moving between quarters. I think maybe there's 2 things to talk about as we think about turning the calendar to '26, yes, I think we're going to have maybe -- hopefully, we'll see more clarity on what happens from the tariff perspective and kind of the rulings that are expected between now and the end of the year from the court system. That is probably -- it would drive some activity, I would think if the courts overturn the tariffs. I think the other component is, right now, we're looking at sizable increases and the raw materials on the steel side of the Metal Containers business for '26. So in fairness, we're actually having prebuying conversations with some customers ahead of inflation that we're all expecting for 2026 outside of whatever court ruling happened between now and then. So that's more of the conversation versus trying to push orders out into '26 at this point.

We'll now take a question from Daniel Rizzo with Jefferies.

So back in -- you mentioned that these are legacy issues with the destocking. I was wondering if back in 2008, 2009, the Great Recession, we saw something similar and how long it lasted during that kind of downturn?

2008, 2009, what I do remember about that and your testing with them, so that was quite a few years ago. Metal Containers volume was accelerating into the great recession, right? So that's sort of what I was mentioning earlier that for a very long time at Silgan, Metal Containers was an indicator of economic activity because you would see as times got tougher, metal food cans were the beneficiary of that. And we're seeing that to some degree now. So I'm trying to think of how the other categories performed then. I just would say, as consumer stretch dollars without knowing, specifically, Dan, I would assume that it was a very similar kind of phenomenon that impacted our Custom Container segment at that time and probably our beverage segment of our closures business prior to dispensing joining Silgan in 2017.

And then conversely, if credit is eased and the consumer is seeing some relief, how long that lets kind of flows through to your customers than to you guys? Is it relatively quick? Or does it take a couple of quarters? Or how should we think about that if things were to improve for the consumer because of that?

Well I missed the first part of your question. So..

If credit eases and consumers...

Yes. I do think that, that -- again, you're talking about the consumer that's making a purchase point decision of feeding their family or buying that hard surface cleaner in a given month. So I think you take a little bit of that pressure off. And ultimately, that consumer because these are not cyclical products, they're consumer staples. I think they buy both products, and that's what we've seen for a very long time. So if you provide that relief to those consumers. I do think purchase patterns return more to normal as we've seen for many years in this business.

And I'm just curious about is there time frame that we should about, how fast it flows through to you specifically?

I think that will flow through pretty quickly. If the consumer is -- has relief and is less worried about stretching that dollar. I think those decisions get made at the purchase point right then it's pretty quick.

We will now take a follow-up from George Staphos with Bank of America.

I'll just keep it to one since it's late. So as you look out to next year, I know you're not guiding per se, but you did say you do expect low to mid-single-digit growth in Dispensing and Specialty. Metal should do at least as well as this year, assuming you have a new owner of the affected customer, which would mean that volumes are at least flat. I forget exactly what you said as custom, but what would be the reasons why you wouldn't have growth in 2026, in volumes and in earnings versus '25, recognizing you're not giving formal guidance here. What is the biggest at this juncture concern you have? Would it be uncertainty in tariffs, although in some ways, that could actually help you? What would it be? And should we at least expect some growth next year?

I think as we're putting the building blocks together for '26 and as you alluded to, and we said early, we're not done yet. But you're right. I think you've got some of the positives there. I think some of the headwinds that we're going to face is, it's increased interest expense. Obviously, we've got the new bonds, we'll have a full year of the new 4.25% volumes that we just issued in Europe. Our investment grade bonds, the 1.4% that come due in April. So we'll probably be very opportunistic just as we were in 2025 as we think about refinancing those bonds, but 1.4% even if we're utilizing our revolver. We're going to have negative arbitrage on that rate as well. So interest expense will be a headwind, and we're going through the development of exactly what that headwind looks like. I mean tax will continue to be a slightly different profile for us going forward. With the Weener acquisition, we've got quite a bit more income outside of the United States. And the U.S. is our lowest cost tax jurisdiction for many, many years. That was -- will continue to be our largest tax jurisdiction. But we have more growth outside of the U.S. at higher tax rates. So I think it's going to probably be north of 25% without giving any guidance yet, and we'll see where we wind up as we get through the business planning process. And I think you had the rest of the components, right? I'll go back to what I said at the beginning of the call. Nothing's changed as far as how we as a company think about the growth profile of our dispensing, especially closure to business, nothing has changed about how we think about the growth profile of our Metal Containers business. And nothing has changed about how we think about the growth profile of our Custom Containers business. We have very unique instruments or attributes this year that are impacting our performance. And unfortunately, we're dealing with that as we speak. But we don't anticipate those repeating in 2026.

And that does conclude our question-and-answer session for today. I'd like to turn the conference back over to Mr. Adam Greenlee for any additional or closing comments.

Thank you, Anna. We appreciate everyone's interest in the company, and we look forward to sharing our fourth quarter and full year 2025 results in January.

And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.