Adam Greenlee: Sure. It’s a great question, George. And I think for starters, what I would say is, this is a program at Silgan in cost reduction and rightsizing our capacity that we’ve executed many, many times over the years at Silgan. So, there should be confidence that we can indeed execute what we’re putting in front of you, and we have tremendous confidence that we’ll be able to execute it. And then what is — the benefit that we get, there’s a couple of things. One, you think about Dispensing and Specialty Closures, clearly, we’ve got growing products, growing markets that we’re supporting there. It’s really not about taking any capacity out of that market. It is about optimizing the footprint, taking growing volume and putting it in more efficient facilities and driving improvement in that manner.
When you move to Metal Containers and Custom Containers, there’s a little bit of both of that. There is some capacity that’s going to be coming out of those two markets as we rightsize our capacity and this is an important statement, George, to the volumes that we see right now. So again, we’re not necessarily planning on volume growth next year because of markets recovering. We’ll have specific products that grow. But this is not predicated on volume recovery from the market. Importantly, what we learned during the pandemic is that we did have this tremendous ability to surge and flex our cost structure to meet incremental demand. So, we have tremendous confidence that by rightsizing to the existing capacity required and demand levels of our customers, as markets recover, as volume grows in Metal Containers and then Custom Containers, will have the ability to meet that demand head on with the adjusted footprint and capacity that we have.
One last important note to make is, we do view pet food separately in Metal Containers, because it has been growing for decades in our portfolio. We’ve invested for growth. Our customers have invested for growth and the good news there is there’s really no incremental capacity that we need to add to get this next level or incremental growth in pet food. But we will not be rationalizing any of the pet food assets or capacity as we sit here today and as we go forward, because as you, I believe, heard in the remarks a minute ago, our customers are planning for growth in pet food next year, and they’ve been very public about making those statements.
George Staphos: Okay. I have other questions, but I will turn it over to everybody else to be fair, and I’ll come back if there’s time. Thanks, guys.
Adam Greenlee: Thank you.
Operator: We’ll now take our next question from Anthony Pettinari with Citi.
Anthony Pettinari: Good morning. I’m wondering if you can talk a little bit more about Custom Container and any progress on customer wins. Is there anything kind of on tap for ’24 that you can share I don’t know if you’re maybe gaining some business back, but maybe destocking sort of offsetting that, or if you can just talk about how that’s progressing versus expectations.
Adam Greenlee: Yes, Anthony, I think you’ve got it right. I think we are having success in the market. We are winning in the market as well. And really, it’s largely just offset by the destocking activities that are very broad-based in the Custom Container segment. So we do have a couple of large new wins that we’ll be commercializing next year now. The first one, which is from a volume perspective, a significant win for us will be commercialized, call it, mid to late first quarter. And we feel pretty good about the timing of that one. The second new win has had a couple of delays on it, and we are now looking at a midyear commercialization of the second item. What’s interesting is, again, both are contractual. So the good news for us is our contracts start when the product is commercialized.
So we get the same three or five-year runway on the volume that we’ve contracted with our customers. So unfortunately, we’re ready to commercialize these products. And unfortunately, our customers have not been ready to do so just yet. And again, part of that does fall into destocking, spending the capital to commercialize those products and launch those new products at the end of the year is just not happening now as we had originally thought. So unfortunately, it’s two large wins in the next year, really good line of sight on the first one. The second one is slated for midyear, and it will be dependent upon our customers’ ability to execute that.
Anthony Pettinari : Okay. That’s very helpful. And then in terms of the expectation for earnings growth in 2024 is absent on whether a market recovery kind of materializes or not. Do you think you can get back to 2022 kind of EBITDA levels or potentially exceed that? I think that’s what consensus is maybe assuming, or I don’t know if there’s any kind of finer point you can put on maybe what you view as sort of normalized earnings in maybe a difficult environment.
Adam Greenlee: Yes. I think — honestly, Anthony, we’re just a little too early to really provide any additional color there because that’s — I think that’s a pretty specific question that’s going to require more maturity to our 2024 budgetary process. And we’re not at the beginning. We’re sort of in the middle of it right now, but just not able to provide a whole lot more color than what we already have.
Anthony Pettinari : Okay. I’ll turn it over. Thank you.
Operator: We’ll now take our next question from Gabe Hajde with Wells Fargo Securities.
Gabe Hajde: Good morning, guys. So appreciating maybe just what we’re coming on the tail here of a couple of guidance cuts and a little bit of disappointing news. Your customers obviously are carrying less inventory for a variety of reasons, one of which is higher carry costs. But I also think for covering synergy for a bit, sometimes customers might deplete inventories in anticipation of lower pricing in the following year for, again, a variety of reasons. So I’m curious, number one, is there anything that you can do kind of preemptively to avoid such discussions? And are there any larger contracts that kind of come up for maturity next year across your three different businesses that we should be mindful of been thinking of for the year? Thank you.
Adam Greenlee : Maybe I’ll take the tail into that question first. As far as large contracts coming up in 2024, no, we don’t have anything and either at the beginning, really were at the end of 2024, just kind of normal course contracts as we always do, but nothing significant. You raised a good question, Gabe, about moving procurement activities for customers between years given price changes. As you very well know, a lot of our business is long term — it’s covered under long-term contracts with very clear pass-through mechanisms associated with them that may on the French drive some of that activity. But usually, that occurs when there are significant changes in the raw material component of those pass-throughs. And then we just don’t see the significant change in raw materials year-over-year at this point, as we’re heading into 2024, there is likely some deflation, and that will be a good answer for our customers and for consumers.
But I don’t know that it’s going to be something that would drive the activity. But in fairness, that the destocking activity has been a challenge to work with our customers as we head towards year-end. And it might just be a benefit that there is a small deflationary item coming their way in the early part of next year.
Gabe Hajde: Okay. Maybe just a quick follow on that. Sometimes you give us a sense for maybe where tinplate might be shaking out for the following year. I know there are some, I think, settlements on countervailing duties and antidumping duties. So just maybe a sense of direction there. And then I’ll just ask to get it over with DSC, the high-value solutions that you guys provide has been a bright spot and you talked about mid-single-digit growth. You talked about kind of some of that carrying over into next year. How contingent on a good holiday season is that, meaning things are good now for pipeline fill, it gets on the shelf and maybe people pull back a little bit around the holiday. Is there a potential for them destock activity in those high-value solutions in the first half of 2024?
