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On Aug 17, we issued an updated research report on AptarGroup, Inc. ATR. The company is poised to gain from its focus on business-transformation plan, product roll-outs and the acquisition of CSP Technologies. However, rising costs might thwart the company’s margin performance.
Let’s illustrate these growth factors in detail.
CSP Technologies Acquisition to Fuel Growth
AptarGroup remains committed to expand its business through inorganic growth. In sync with this, the company recently made a binding offer to acquire CSP Technologies, a leader in active packaging technology based on proprietary material science expertise, for an enterprise value of $555 million. The proposed transaction is expected to close in fourth-quarter 2018.
This buyout will help AptarGroup fortify its existing business in the Pharma and Food Safety markets given that CSP Technologies' current business is roughly 75% in the pharma market and 25% in the food safety market.
Business-Transformation Plan to Stoke Growth
In late 2017, AptarGroup began a business-transformation plan to boost sales growth, increase operational excellence, enhance its approach to innovation and improve organizational effectiveness. The company remains on track with its business transformation which primarily focuses on the Beauty + Home segment. The business-transformation plan is expected to yield incremental EBITDA of approximately $80 million by the end of 2020, principally within the Beauty + Home segment.
AptarGroup to Grow on Product Roll Outs
AptarGroup is well poised to gain from product launches. It provided LVMH with customized dispensing solution for double serum facial skin care product in Europe. The company also designed a custom pump for Johnson & Johnson's major global relaunch of their iconic baby-care line, ranging from shampoo to bubble bath to lotion. AptarGroup’s Fine Mist pump, with prolonged spray technology, is also featured on a room refresher spray by J.R. Watkins.
Further, its preservative-free, multi-dose Ophthalmic Squeeze Dispenser was announced as the approved delivery device for Bausch+ Lomb's prescription Levofree Multidose in France. AptarGroup’s Advanced Preservative Free Plus pump for eye care is found on a new dry eye mist by Similasan in the CVS store brand in the United States. A muscle relaxer in Mexico, and a pain reliever and aesthetic products in North America have also been rolled out. Also, the company’s Flow Control silicone valve is performing very well.
Rising Costs to Impede Margins
AptarGroup expects to incur implementation costs of approximately $90 million over the next three years related to the business-transformation plan. It also anticipates capital investments of about $45 million for the plan, the majority of which will occur in 2018. These costs remain a drag for earnings in the near term. Further, rising resin prices will hurt margin performance.
Share Price Performance
AptarGroup has outperformed its industry with respect to price performance over the past year. The stock has gained around 26%, while the industry has recorded growth of 3%.