AptarGroup, Inc. (ATR) Earnings Call Transcript & Summary

Hey, everyone, good morning. My name is Marry Skafidas. I'm really excited to be able to welcome you to Aptar's Investor Day, and we are happy to share with you why we are energized for the future. Just some little housekeeping, of course, our forward-looking statements. A copy of our presentation is now posted on our website. We're going to be using non-GAAP information to find the reconciliation of the most directly comparable GAAP measures. You can find it in the appendix of the presentation that's online. For those of you who might not know us as well, I just wanted to take a quick moment to introduce the company to you. So Aptar is a global leader in drug and consumer dosing, dispensing and protection technologies with a 75-year history. Our mission, our vision, our values, unite our employees and really underscore the importance that Aptar plays in the lives of millions of patients and consumers around the world daily. When you look at our product portfolio, if we look first at the products serving the pharma end markets, ranging from our proprietary drug delivery systems to our injectable components and our active material science, when you combine those with our digital therapeutics and services, they really make Aptar the partner of choice for pharma companies, allowing them to derisk and accelerate their drug development pipeline. Our consumer technologies help shape markets through the convenience that they offer consumers around the world and the ability that they offer our customers to differentiate themselves. Just some quick financial figures on Aptar. Obviously, we're very proud of our consistent track record of returning capital to shareholders. Our footprint is truly global. Europe is our largest manufacturing hub and also makes the largest portion of our revenue. But when you track where those medication and consumer products are ultimately purchased, the breakdown is really much more evenly split between U.S., Europe and Asia. And lastly, our agenda for today, which is quite full. We have with us our CEO and CFO, who many of you know well; our heads of each of our segments and our Head of Sustainability. There's going to be prepared remarks followed by Q&A. [Operator Instructions] And lastly, we're going to send out a survey, so we hope that you will share feedback with us after the Investor Day. And with that, let me please turn it over to our CEO Stephan Tanda who will illustrate again why we're energized for the future.

Very good. Thank you, Marry, and welcome, everyone. Thanks for joining us here in the room and on the web. And even though it's really great to see you all in person, we still have 70% plus of the attendees online. This hybrid thing is hard to get rid of, but it's really great to see everyone. So why are we energized? Let me kind of summarize the last few years. The pandemic was truly a net negative for the company across all segments. Yes, we had some green shoots with the hand sanitizer business and so on, but all 3 segments suffered. On top of that, war in Europe is still going on but, of course, massive energy inflation for a while and then the huge supply chain whiplashes, especially in the U.S. During all that time, we've been hunkering down, focusing on improving the business, working projects, keep investing in growth in the business. And now many of these things start to come progressively to fruition. And as the top line returns, and in some cases, accelerates and the demand swings kind of even out, we see an acceleration not just in the top line but even more in the bottom line. You will see us often talk about operating leverage basically via a focus on driving down fixed cost versus revenue. So why should you invest in Aptar or, more importantly, why should you stay invested in Aptar. This is kind of some key points. I will not go in detail but clearly, exposed to reliably growing attractive markets; a leading pharma franchise with an injectable business that has a strong growth potential, we say it should double in the next 5 years or close to double; huge technology differentiation and sustainability; and of course, a long track record of returning money to shareholders with a conservative balance sheet that allows us strategic flexibility. So if we just look back from the last Investor Day that was virtual, 100% virtual, some of you we met in virtual breakout rooms. But it was just 2 years ago. So revenue was up 11%; EBITDA, 12%; EPS, 8%. Of course, we just announced an almost 8% dividend increase. And as I said, we continue to invest in growth in the business. We realigned the segment by refocusing Beauty on its core activities of fragrance, skin care, and color cosmetics or makeup, and combined the Closures activities. And you will hear a lot more about that from the segment presidents. We also devised our approach to reduce fixed cost across the system and, more importantly, do that where the fixed cost is, in Europe, including in France, which has not been done in the history of the company before. So we are very proud of that, and we'll tell you more about that. So as we look to the next 5 years, of course, Pharma will continue to grow, and the majority of the top line and EBITDA contribution in terms of growth will come from Pharma. We expect the injectable business to almost double with significant profitability upside. Remember, injectables is the lowest profitability business within Pharma, so it has quite some headroom to expand margins, but we see opportunity across the entire portfolio; and with the fixed cost reduction, also margin improvement opportunity. In many ways, the segment reporting we do is, of course, to facilitate things, to make things simple, but it's an oversimplification. In each of the segments, we have units that are stellar performers that can soar even higher. And in each of the segments, we have units that need a lot of work to improve profitability and productivity. And some even still need to get off the runway like our digital business, a great future performer but currently a drag on results. Overall, we see tremendous value growth opportunity in the company for the next 5 years. So that gives us confidence, despite our conservative nature, to raise some of the targets, most notably the profitability target by 100 basis points to 21% to 23% of EBITDA; the top line in Pharma by 100 basis points, 7% to 11%; and of course, with a more judicious use of capital as we come off the large investments that will also benefit the return on invested capital. We also give you guidance for the new Closures segment, top line 4% to 7% and profitability, 16% to 18%. So overall, on the company level, upgrading the profitability. What is driving this acceleration? I will not go through that list. But what I haven't mentioned yet is we're also very proud of the talent we've built over the last 5 years up and down the organization, the leadership pipeline. Of course, you will see the top leaders here today, but there is a lot below that. I'm proud to say Aptar has become an academy company in the industry. There are many competitors looking to employ some of our people. Given that we are a purpose-driven company, most often, they are not successful. Some of the detractors, we've talked a lot about and, of course, most recently, the ERP deployment in the injectable business has been a much deeper pothole than we would have liked. But that's behind us, mainly in quarter 1 and into quarter 2, but still a lot of work to be done in the injectable business as we bring the new capacity online. So I will cover these 5 points that we kind of call the value creation framework, again, attractive, rapidly growing end markets; the differentiation through technology, sustainability and innovation; the portfolio evolution and a keen eye on total shareholder return; then over the last 18 months or so, we've really instilled this cost management and operational efficiency drive in the company, we have our own internal name and culture change that goes with that, but I won't bore you with that; and then, of course, again, we remain committed to a strong balance sheet that gives us optionality. So let's key into the market growth. Again, we won't go through all the detail here. There's a lot there, but suffice to say, strong high single-digit growth in Pharma, in some cases, of course, faster than that in biologics and sometimes faster also in the under segment. But over time, as I said, we see 7% to 11% for us. Beauty is mid-single digits, also with high pockets of growth. And then food market is more GDP plus kind of a market. On the other hand, we still see a lot of opportunity to convert categories, and we will talk about that. Let's hone in on what drives Pharma growth. You know we have a tremendous strength in respiratory, whether it's inhalers or nasal delivery. So the nasal delivery growth is really driven by 3 things. One, repurposing of existing molecules, existing APIs, from a different delivery method to the nasal delivery method. Especially when it comes to deliver drugs to the brain, it is a much more efficient way of getting the health outcomes to pharma companies' need, the patient's need. Then we see ongoing switch to over-the-counter, whether it's your allergy medication, you have some of those on your table, or Narcan, that gives more distribution, that gives more consumer pickup and, of course, accelerates growth. And then just the fact of life, whether it's the environment, whether it's our vulnerability, allergies just keep growing and growing. Most people suffer not only in the allergy season but year-round in some countries, and we see geographic growth in that allergy business, especially also in Asia. And then, of course, biologic, you've all heard about the promise of biotechnology. Well, the promise has arrived. Although we're still early in the inflection curve of biotech, recent innovations with mRNA and with the GLP-1 drugs. In all, even just the first generation of GLP-1 drugs, there is decades of good growth to come from biotech, and we are exposed to all of these trends. On the consumer side, just highlighting again. In our core areas, fragrance, color cosmetics and facial skin care, we see good growth, also good geographic growth. On the food side, I want to highlight foodservice, especially our active material business, and you see some examples in the back. With our InvisiShield product, we see good opportunity in the foodservice space that traditionally we've not been as strong in. And then last, not least, sustainability is really going across the board. It is a key driver of innovation. It is a key reason for customers to engage with us. It starts, of course, on the consumer side, but it's starting to be adopted on the pharma side, first, in consumer health care. But even in the proprietary dispensing side, new propellants that are even more friendly to the ozone layer, sustainability drives growth across the company. This is our top line growth over the last 6 years, frankly, after a period of stagnation, and we continue to see good growth opportunity in the company, maybe some acceleration. It is, of course, a combination of organic and bolt-on and tuck-in acquisitions. Let me switch to technology. It's really what we like to talk most about. The reason people engage with us is, yes, we have proprietary technology. We drive our innovations based on our deep insights in consumers, in the consumer occasion and in patients. And I will talk more about that and then, again, sustainability, as I mentioned. So let's start with technology. We design and own the IP of our devices. Let me say that again. We design and own the intellectual property of our devices. There's nothing wrong with making devices for other people, it's just not what we do. We take pride in innovating and then owning the intellectual property. So we own over 7,000 patents. For example, 80% of our revenue stream in Pharma is based on a patent and/or proprietary know-how and/or inclusion in regulatory filings. We operate clean rooms from ISO 5 to ISO 9, also predominantly in Pharma, but not only. Also in the food side, so in infant nutrition, we operate clean rooms. At the end of the day, the performance of our dispensing devices is critical to either get the drug to the place in the body where it should go at the concentration levels for the efficacy or it creates the consumer experience of evacuating the product, whether it's powder, whether it's liquid, and helps the brands to differentiate. That's why we are so focused on the intellectual property of our devices. A lot more information here, but let me just highlight some recent products. You see the mono-material pump, Future pump here; a similar technology we pulled over to Pharma over-the-counter with our Futurity pump; the high-value elastomeric products, you will hear more about; and we're setting the standard with a new fragrance pump. We haven't talked a lot about that, but also in the last few years, we have expanded our innovation network. You heard us talk about our InVision Lab in Paris but we also put in innovation center in Shanghai, some locations in the U.S. and built out collaboration with universities and start-ups. So we are at the forefront of innovation. Let me talk about the end use and patient experience. Why is that so important? Let me give you one example in Pharma. A few years ago, Gael and his team bought a company called Noble. They make training devices. What does that mean? Think autoinjector. You look at an autoinjector, it looks the same, same brand. It feels the same. It has the same maturation forces. And you can train injecting yourself with that without the needle, without the drug. It is very important to engage with pharma companies early on as you think about the next iteration. And once you're engaged early on, you really go through the whole pipeline development process with them. We have also training devices for other delivery forms, of course. And because we've added the service businesses, we make good business in the development phase and don't take a deep hole in the development phase in a project that can take a decade or more. On the consumer side, we have deep experience at how consumers look at products, how they consume products. You would never know it, but there are 7 different gestures of applying fragrance. And that knowledge comes in with cocreation session in these innovation centers with customers that allows brands then to come out with the next iteration. Take Clarins DS, double serum, talking about the internal code. And we went through 4 iterations of that, always improving the consumer experience by using our next iteration dispensing technology. And of course, we have the ability to execute all of that in all major regions. Look at Dawn here changing the dish soap category. You need a partner that couldn't do that in Japan, can do that in Europe, can do that in the Americas. We are the partner of choice for something like that coming from deep consumer experience. When we engage with you many times or most of the times, we talk about the vertical here, okay, the Pharma business, the Beauty business. Internally, we manage a lot across the horizontal. When you look at this allergy pump, a fine spray mist pump, it's the same pump that dispenses the high-end fragrance. Of course, the quality systems are different, but the technology platform is the same, the same with airless, the same as aerosol valve and so on. And to drive productivity across the system, looking at this from a technology point of view, very important, you go into any of our factories, what you will see, precision injection molding, high-speed automated assembly and AI-assisted quality control, usually vision systems that also go into the quality file. So we really manage across both axes here. As I mentioned, we kept investing over the last few years despite the pandemic and really not only invest in hardware but improve the way we manage these factories. We have a few pictures here for you. This is the new facility in France that's just coming online now that we opened real-time operating statistics. You can monitor all the factory performance in real time every machine. Here you see in France, where we put in a new updated capacity at our flagship facility in Le Vaudreuil; Suzhou, really state-of-the-art, on a worldwide level plant that's just being started up now, it is housing our pharma and our consumer facilities; a dedicated pharma facility in India; and then last, not least, our new injectable site in France in Granville that Gael will talk a lot more about. These are just some of the big examples, but as I said, we used the last 3 years to upgrade our whole manufacturing system. So let's talk about sustainability. This is why customers come to us also, is they can rely on us not only to run our own business in a sustainable manner, for example, more than 90% of our energy comes from renewable sources, which is very important when they look at their Scope 3 emission, but also our solutions are sustainable, whether it's circular solutions that are fully recyclable and mono-material or have reusable components, or solutions that are made with recycled materials, as well as the fact that we are a purpose-driven company, the people that work for us hold their head high, allows us to attract and retain the best in the industry. Now let's talk about creating value for all of you and all of us as shareholders, a balanced capital approach. About 30%, over the last 5 years, we spent on bolt-on acquisitions, 30% being returned to shareholders and the balance in capital to grow the business, to maintain the business. We've shifted our capital allocation dramatically. When you look at where we spent our capital in 2017, where we spent it last year, that is what has resulted in the dramatic growth of the Pharma business, investing the money, of course, in higher margin, higher-returning business. But it's not an automatic. It takes a lot of work. The injectable business will take a lot of work to get to be a great contributor on the bottom line. I will skip this slide, but you've seen that before, all the things we've added inorganically to the Pharma business. Those of you and some of you who have been with us from the beginning, we have a consistent track record, over the last 30 years, in annually rising dividend. We are in our 30th year of that. And of course, we keep an eye on the share count to make sure we return appropriately to shareholders. Now if I sum all that up in the long-term targets, as I said, we are confident to raise our profitability target by 100 basis points, our top line target for Pharma by 100 basis points and, of course, in combination with coming off these high CapEx projects that will also flow through to higher return on invested capital. We leave our Beauty targets alone at the moment not because we don't see upside but we're conservative. We want to make sure we're reliably in them before we raise them. And we give you the Closures targets. So as you look at our strategic priorities for the next 5 years, those who may compare with the past, the fourth strategy is the one that we've really added and reformulated to instill that fixed cost discipline both in SG&A and in manufacturing fixed costs in the company. That's why we are confident that our operating leverage has increased and we will be able to grow bottom line faster than top line, which we all know hasn't been the case in the past. I still want to highlight that next to all this, upgraded leadership everywhere in the company. I just want to highlight that, for example, in Closures and Beauty, 70% of the team is new in the last 2 years. Now they've been in place now for a couple of years, so they're performing really well as a team. And you will see Hedi and Marc talk about it. Also upgraded the team in Pharma, so make no mistake, we upgrade across the board. Let me say a few words about the speaker that you don't listen to every day. Bob and me, you can hear a lot on the road. So Gael has been with the company for quite some time. He's been active in all the businesses. He's lived in Asia for 7 years, and he's now in the U.S. for his second year. So he really knows the company well. What has he brought back to Pharma? Well, number one, a deep focus on the consumer, a deep focus on the patient. That's really what's needed to be engaged with pharma companies early on, especially also the smaller ones. Number two, an intensity and an operating speed that's commensurate with consumer business. Not everything in pharma needs to take 10 years. So a sense of restlessness and a sense of urgency that is honed in the consumer business is very well done there. He has built a nice team. And like all the others, he's overseeing things for the company. He's overseeing the innovation capability for the company. Marc Prieur has been with the company also for a long time, also active in all 3 businesses in different functions. He's done both P&L management and operations. He's the one who stood up the Operational Excellence pillar for the company that we've had for quite some time. He's also, if you want, the father of the Congers facility that many of you visited. Being part of the French diaspora but not living in France, he's also the one who broke the taboo to address the cost monster in France, including a social plan. We talk about the first phase, we have additional ideas there. So to change the system, you need to know the outside, but you also have lived somewhere else. And by the way, all of these folks have lived and worked outside of their home continent and educated both in Europe and in the United States. Hedi has been with us not quite as long but very experienced also in multiple businesses: in packaging, in food, in closures. He has been the one who kicked off the renewal of the Beauty business in Europe, for example, with getting the Board to buy into the Oyonnax investment. And he's a keen commercial operator and very focused on cost and capital. And he also leads the commercial activities for the company. Last, not least, I couldn't be more proud to reintroduce Beth to you. She has been the one who early on spearheaded our safety drive, where we went from, to be honest, quite worse than average to now being world-class in safety across the company. And as you all know, if you see a safe operation, you see an efficient operation. And in the last few years, she has really put us on the map in sustainability, challenging our operations across the world and, at the same time, telling the story not only the rating agencies but also to investors, so she regular meets investors also in the industry. And to be honest, many of my fellow directors borrow her to talk to the other Boards they are sitting on to help improve their sustainability drive. And with that introduction, I'm happy to turn it over to Gael.

Thank you, Stephan. Good morning, everyone. So with this slide, I'd like to spend a little bit more time for you to better understand who we are and to give you some elements of differentiation. Starting with the upper left corner, I mean, as we said, our business requires strong R&D capabilities, and we are leveraging about 4,500 patents. Our business is quite sticky. I mean 80% plus of the business is protected by IP, by, I will say, proprietary know-how, but also because we are part of the regulatory filing of our customers. Our business requires patience. Yes, not all the business requires 10 to 15 years on an average, but whenever you go for a new drug, a new API, active pharmaceutical ingredient, really from early stage to a market launch, I mean that's a 10 years' plus development. Our business requires very strong regulatory expertise. I mean on a yearly basis, we are facing on average 11 FDA-type inspection in one of our locations. And we are facing above 140 customer audits. We need to be top of mind, on top of quality from a regulatory standpoint. Our business requires reliability of supply, safety of supply. That's why we are present in all continents. We are leveraging 14 GMP, good manufacturing practice, on a worldwide basis with clean room. And happy to report that you've got, as we speak, 1,000-plus of drugs on the market, having at minimum one of the Aptar pharma solutions. This slide represents the addressable market. I mean the overall value, retail value of the pharma space is above $1.5 trillion, okay? And Aptar is the leader in certain routes of delivery. Nasal, pulmonary, ophthalmic, dermal represent 12% of the addressable market. We are the leading company. We are present in the injectables space. Remember that we acquired a company back in 2012, Stelmi. So we are supplying components, elastomeric components, stopper for multi-dose vials, plunger, needle shield protection for prefilled syringe. This is the fastest growing delivery route of the pharma ecosystem. Our market intel is telling us we are #3 in that space. Last, but not least, with below 50% of the overall addressable market is the overall solid dosage form. We are entering into that market, thanks to the acquisition of CSP that we did in '18. We supply expertise on material in order to better protect any formulation, sensitive formulation, for our customers. Take a look at the broad range of technical solutions we are having, and we've got many of them, from spray pumps for preserved formulation but also non-preserved formulation; unidose and bidose, a typical example being Narcan behind; to airless technology for dermal treatment; but also, I will say, bag on valve for upper airways; training devices up to digital therapeutic solutions. I'm going to spend a little bit of time with that slide, on the left part of that slide, really to share with you our competitive advantage, and we've got quite of them. Number one, we have a leading high-value, precise, proprietary drug delivery franchise that operates in highly regulated markets. Number two, we own our IP. Whatever we design, commercialize, basically, we own the IP. And by the way, it gives us an additional layer of protection around our business. Number three, our regulatory know-how, once again, is positioning us as a trusted partner of the ecosystem. In the injectables space, we are investing a lot. And I'm going to discuss a little bit more in capacity increase, in technology increase, in order to better serve the market needs and specifically the biologics space. And we might discuss in the Q&A around the GLP-1. The Activ-Film technology with CSP outside the oral dosage form. We can leverage that technology in different routes of delivery. The service capabilities, I mean, to really support our customers from end to end, in the early stage of their drug development program up to patient monitoring, we are really helping them to accelerate and derisk their drug development program. Digital Therapeutics, that's a major trend. It's top of mind of many, many key players. We are with the C-suites of those big pharma companies, of those pharma companies, in order to provide them the support to build their digital strategy. Last, but not least, we've got a very strong balance sheet. It gives us optionalities, I mean either to invest on capability and expertise, either to keep on investing on internal programs to support our innovation and to stay through the long basically drug development pipeline of the industry. You know the performance of Aptar Pharma. I'm really proud to report a fantastic track record. I mean from a top line perspective, in the last 10 years, we have been increasing our top line by 8%, profitability by 9%. I'd like to spend 2 minutes to discuss 2020 and 2021. 2021 is an anomaly for Pharma. The performance of the segment has been rather flattish. Why? Because the industry was destocking. 2020, we faced first time COVID-19. We faced shutdown, isolations, lockdown. But the industries have been asking us to make sure that we won't disrupt the supply chain. The reliability of supply is key in the industry. All the customers were calling us, "Please guys, keep on delivering your product because that's quite critical." We've got what patients are needing. Obviously, no flu, no allergies. By the beginning of 2021, they all called us, telling us, "Guys, stop delivering product. We can't send our orders. We've got the inventory full." So that's the challenges we have been facing back in 2022. First half 2023, I'm happy to report that we are back to a normal situation. And we are even confident that we are raising our long-term growth target by 1% from 7% to 11%. In Pharma, pipeline build and pipeline conversion is more than critical. In the last 5 years, I mean, if you take 2018 as a base, a reference, we have been increasing the number of programs we are having in our pipeline by 33% and the value of those programs by 43%. How we did that one, by gaining flexibility in the value chain. Instead of coming in conversations with our customers, with our drug delivery devices on full stop, we've got the ability to be in the early stage because we've done, remember, quite a lot of bolt-on acquisitions around very specific experiences and capabilities. So by now, we've got the formulation expertise and capabilities. Remember, the acquisition of Nanopharm, a CRO? We can discuss with the market whenever you have to develop a formulation for the nasal and preliminary route, for example. So we are early in the drug development program. We also invested in analytical expertise on top of the one we were having. We have been strengthening our regulatory, I will say, performance internally, giving us the ability to derisk and accelerate the drug development program. But also in the downside of the value chain, we have been investing in patient understanding. And we did acquisitions to be able to do human factor, to bring to the pharma player basically the understanding around patients, how they're going to react, how they're going to behave, what kind of drug delivery devices will be best, in order to make sure that drug delivery devices on the market will be safe and compliant up to the acquisitions we've done in the digital space. When I came back to Pharma, I mean, 5 years ago, I did my onboarding. Everything that I was going through was around safety of supply, reliability of supply, very good; FDA, inspection, quality control, clinical stages and so on. But nowhere we were discussing inside Aptar Pharma about patients. Nowhere. And coming from multi-years of experience in beauty, in food and beverage, you do understand how critical is it to understand the end consumer. That's what we have done in order to be better positioned with our customers to discuss patients, to understand what they need and to bring the necessary basically solution that's going to help them once again to be on the market. There are 2 major trends driving the Pharma business and both of which are excellent news for us. Trend number one, I mean, small- and medium-sized pharma company represent by now 70% of all drug approvals. That was 30% years back, 10 years back. Those companies, they are looking for a partner to provide them support. We are, Aptar Pharma, the perfect partner to provide them basically from formulation to patients and to help them to derisk and accelerate their drug development program. Trend number two, the complexity around regulatory challenges just keeps increasing. All the players are facing that complexity. We are helping them to better navigate that complexity. Why? Because in the combination products, whenever a formulation is associated to a complex drug delivery devices, we've got over 3 decades of experience with the different regulatory bodies in wherever, in Europe, in the U.S., in Brazil, in China, in Japan. We can provide them that support. So whenever you combine trend number one, small and medium-sized companies, with trend number two, the regulatory complexity, you do understand why we put a strong focus around services on top of our, let's say, product device vertical because we've got that ability to provide them that support. And you know what, it's helping us to fuel our pipeline. That's why our pipeline build and pipeline conversion is good. That's a real example there. And I'd like you just to focus on the bottom part, so just explaining why we are way more than just a device company. That's basically a traditional and standard drug development program from an early stage to market launch and post launch. By now, at any stage, Aptar capabilities or expertise is present. And because we are present at any stage, we change also our revenue extraction, our ability to extract value from our value propositions, through access fees, through milestone payments and sometimes even through royalties on drug sales. That's the real-life example. For confidentiality reasons, you won't have any name. But let's call that program [ Affirm ]. Back in '17, company X approached us in order to provide them support on a drug repurposing program with an existing formulation that was an injected formulation, and they wanted to look at another route of delivery. They wanted us to work with them on taking a formulation that is injected to be nasally delivered, leveraging one of our existing devices. And during that journey, from '17 to '23, basically we provided formulation support, analytical support, regulatory support, human factor on top of our devices. And along that journey, we have been extracting value from the business model of Aptar Pharma. The approval has been given by the FDA in the U.S. in 2023. Now patients are having a way more convenient way to take their medicine. Millions of patients are afraid of needle, and part of them, "Whenever I have to go to an injection, I don't like it at all." You can spray it through the nose. That's a lifesaving drug example. And I can tell you, we are also giving a third-party the ability to provide a lifesaving medication act to somebody that is on the way to die. It happened to me. My son is diabetes Type 1. And he faced a severe hypoglycemia. You have to inject immediately or the person is going to die. I'm not a med by training. I would have loved to get a product to spray through the nose. When you've got a needle, you have to reconstitute your formulation. Where do I inject? That's very challenging. So giving conveniency and giving ability to a third-party to save a life. That's what we are doing. So our competitive advantage, combined with our pipeline development, give us basically the confidence to raise our top line commitment from 7% to 11% while maintaining a best-in-class EBITDA profile. Let me walk you through briefly through the different Aptar Pharma divisions, 5 of them. In this one, 2 divisions are represented, prescription and consumer healthcare. 100% of their solutions are proprietary drug delivery solution. Combined, they represent 65% of the overall Aptar Pharma business. You're going to find their solutions in different delivery routes: pulmonary, nasal, ophthalmic, dermal, sublingual and so on. You're going to find their solutions for different therapeutical areas: allergic rhinitis, pain management, central nervous system, live-saving, cough and cold, dermal, ophthalmic. And because of our IP, because of the uniqueness of our capabilities, most of the time, we are the device that's going to stay throughout the drug life cycle, started from a branded prescribed product, moving to a generic and moving to an OTC-type delivery route. The third division is injectable. Injectable represents 21% of the Pharma revenue. We manufacture components, I mean stopper for multi-dose vial. Our plunger and needle shield protection for prefilled syringe. You're going to find our products in different markets, small molecules, vaccines, antithrombotics but also biologics. And biologics is a key trend. I'm going to spend a little bit more time on injectable. Okay, the additional slide I'd like to share. You know that we have been investing a lot. I mean, $180 million organically and $65 million with acquisition. We wanted to be present in China for the Chinese market and making sure we've got a long-term play in China. We are building capacity to increase the overall capacity of the division by 30% plus. Most of the programs are on their validation. Some of them have been qualified and validated. Some of the others will be validated throughout 2024 to be ready up and running by 2025. We have been investing, a, to increase our capacity, this is what I've said; but b, to premiumize our offering. And if you think about biologics, because they are extremely sensitive, we had to develop, I will say, and to premiumize our technical offering. This is PremiumCoat. You don't have any interactions between our components and the biologics. If you've got any interactions, if you've got eligibles, meaning permeation between your elastomeric components and the formulation, you're going to create what we call aggregates. And aggregates might be fatal for patients. You want to make sure your components with a very sensitive biologics will stay in it. But also, we have been investing in the technology with PremiumFill, PremiumVision in order to make sure that the level of contamination is really at the best, highest level of performance and in line with the regulatory expectation. And we are confident we're going to nearly double our top line with a significant margin expansion by 2027. That's a short movie on Granville 2, one of the investments we have done. This is in the north part of France. This is around PremiumCoat for sensitive formulation. This is where our products are used. 100% of our production is on their clean room. We've got different ISO clean room based upon the process, the most challenging one being ISO 5, meaning you control and you guarantee you've got less than 3,000 particulates per cubic meter. Right now, we've got millions. We control 3,000. So we are on the way for investment around new building for new mixers, for new injection machines, for new trimming, clean rooms for PremiumCoat, and premium process, PremiumFill, PremiumVision. And that's some of the examples. We welcomed 30-plus of our customers, I mean, recently. And all of them were really impressed, telling me, "Seeing is believing. So now we do understand why you are investing and you are really a long-term partner." Robotizations because, obviously, we need to be cost-effective on that market. Division #4 is active material science, 14% of our business. Since the acquisitions, we have been, on a yearly basis, increasing on a double-digit top line. You're going to find our solutions, I mean, for diabetes care, oral solid dosage, dermal drug delivery. What is really CSP doing? They are controlling the internal atmospheric conditions of a packaging. Because the formulation is going to react with components, because the formulation might react with light, might react with water vapor emissions, so we control the environment. So we give better safety, better shelf life, better stability of a drug formulation. This is what is about active material science. Last, digital. Digital is a mega trend of the pharma industry. It's top of mind of many, many companies. When you combine drug delivery devices with a connected add-on device, with a Software as a Medical Device regulated by the FDA, we have to prove, whenever we come with our solution, that our software is fully in line with regulatory constraints. It's based on clinically relevant data. And the [ IDB ] only needs to come with our pharma partner as a digital companion to a drug and to get the regulatory body, prescribing a drug with a digital companion for what, better life treatment of patients, remote monitoring, adherence tracking and overall cost reduction. A lot of insurance companies are quite interested by a real-world data in order to reimburse. That's why we are investing in that market. That's going to be a long runner. That's dilutive so far for us, but we are investing there because we believe that's going to be a trend shaping the market. Why we are energized, a great sense of purpose, we are there to save lives, for patients to better breathe. Two, the markets are growing. Three, we believe we've got a fantastic business model and value proposition. And every day, the Pharma team is looking at making sure we can strengthen this value proposition. We're going to work for, let's say, new chemical entity, to generic, to biotech-type drug delivery. The active material science, the digital therapeutics, the services we are having, is really complementary to our drug delivery basically platform. We better extract value in that space because we navigate the ecosystem and because we are the true partner of our customers. And we are in line with very favorable mega trends and happy to be one of the GLP-1 players. So that's why we are confident with our basically long-term target and profitability. Thank you very much, and I hand it over to Marc.

Good morning, everyone. So today, I'm very excited to share with you how we have refocused the Beauty business of Aptar, drastically improved our talent base and our innovation pipeline, and also that we are well underway to adjust our cost structure, increase our margins and capture more value from the market. And this with less capital invested in the business. But let me drive you through some of the specifics of Beauty business. So first, we play in a very large, broad, global, growing market. And this is where we push our innovative solutions, sustainable solutions. But when you look at that market, there is a temptation and we have that temptation to play a bit everywhere. So recently, we decided to focus on some areas of this market to better capture market value. And these areas are namely fragrance, mass and prestige, facial skin care. And in both cases, we have very strong market position and we are set for growth. We add to this the color cosmetic, where we have a small piece of business, but that is also set for a very strong growth. And if you look on the personal care side, we definitely focus on 2 big parts of the business, the hair care and the body care. In these 2 markets, this is where immediately now our customers are calling for sustainable solutions, sustainable solutions that we have. Some of them are in the market. Some others are on their way. And this is where we can create also a big change in the market and a competitive advantage. Of course, in these markets, we try to stay away from the commodity side of it. We try to play more on the premiumization, masstige, prestige of the market where we can command better margins. And what we bring to these markets is a very broad set of solutions, dispensing solutions, certainly one of the broadest portfolio you can find with the players in that market, maybe the broadest. But what is important to notice here is, a year ago, we would have shown something much bigger. And the realignment of the segment has been helping us to reduce the size of that portfolio. At the same time, Closures is also focusing on a very strict portfolio. And this is, of course, helping us to focus and get more value from the market. If you speak about Aptar in the business, you will most likely get, and this is historical, the comments, that we are an innovative leader with a global reach. This is the way we are perceived. This is the way we want to be perceived. And this is coming from several competitive advantage, namely, the first one and the most important one is our interactions with our customers. We interact with a real intimacy with our customers. We are the go-to-market partner in the business when they need solutions. We are a trustable partner. And we deal with a very broad range of customers worldwide, from the CPGs, to the indie brands, to the regional small- and medium-sized customers. And we address these customers, all of them, in a very adequate way. The second competitive advantage is the innovation capabilities we have connected with our regional technical centers where we can do ideation sessions, we can do prototyping, where we create, we cocreate, with our customers. And as we do this, along the way, we generate a lot of IP. Stephan was talking about IP. IP is important for Pharma. IP is important for Beauty as well. The third important competitive advantage is about our custom beauty capabilities. We mentioned the Oyonnax factory in France, which is part of the network of our custom beauty capabilities. We live in a business where you have standard products, but in many cases, the consumer and the customers are looking for differentiation, for something that is different from someone else, customized. And we bring these capabilities that are unique in the world in our business and we bring them at scale globally. Beyond this, and leveraging the acquisition we made of FusionPKG 2 years ago in U.S., we can also offer full pack and turnkey, turnkey being the full pack plus the formulation, plus the filling. This is still a tiny portion of our business today with a very high-value margin business that we intend to develop. And last, in terms of competitive advantage, of course, we can offer all these, the services, the support, the cocreation, on a global scale. Our customers are very happy to see that they can get the same level of service, quality, same products, everywhere in the world. As I said, we strategically focus on where we believe the growth will be and where we have the most competitive advantages, namely, fragrance, mass and prestige, color cosmetics, facial skin care. Facial skin care that is a big area where you have a lot of creativity, differentiation, where we bring all our technologies. And we are really a leader in that market. And then personal care, as I mentioned, which is a very broad market where we are also doing fantastically well. Across these 4 categories, you have the sustainability. We will not be able to deliver the market value we intend to deliver in the coming years if we don't bring to the market the sustainable solution. This is mandatory. We have already several of them on the market. Many others are on their way. And we tend to believe that as we push these new solutions to the market, not only that we keep our market shares, but as we innovate, we try to capture more, and we are currently capturing more. This is coming also from the fact that we know the market trends. Sustainability is one. You have many more. This is a beauty market. And the world is made of general big trends, but also local trends. We know these trends and what we do is when we innovate, we try to find the gaps in the market. Innovate, create something new, we even do our own consumer testing and we bring this to the customer in an effort to say this is exactly what you should be doing. And even the large customers are appreciative of this. So we go way beyond just proposing a dispensing system or a PEM. We propose solutions, we propose adaptation of these solutions, innovative solutions that our customers are taking. So this is really where we bring a lot of added value, and this is another competitive advantage, of course. Talking about innovation, we recalibrated our innovation pipeline, but we put also a lot of data review on it to make sure that what we do in innovation goes to the market. Otherwise, this is an invention. And we are not interested only in invention. We want to innovate to create market value and to extract value from the market. So we have a very rigorous process to review our pipeline. We increased the win rate of that pipeline. The size of the pipeline increased, but the win rate increased as well. We are at 60% today on the growth opportunities, which is very high in our business. We are also retaining very solidly our business. There is always a lot of churn in our business. That's normal. But we were able to retain more than 80% of the business that goes for a refuse on a periodic time. You see at the bottom, some of our innovations. I will not go into the details of them. But what you need to know is we restricted or reduced the size of our innovation pipeline to make sure that we put our resources and adequate resources to push them to the market. So this is a new mindset. Before, we are going a bit everywhere, spreading thin our resources. Now we focus on what makes sense because we understand the market and we push them through to the market with our customers. As we do this, of course, we do it with our customers through ideation lab, and you will see a video of one of the fantastic ideation labs we have in Trumbull, Connecticut, north of New York. We set up that lab, let's say, a year ago, 1.5 years ago. Customers are overexcited. They are just rushing to the lab. Why? Because we can in that lab, in the very same day, go through ideation sessions with our customers, with our experts. They can leave that very same day with prototypes made out of 3D printing, whatever technology we want to use. And within a few days, we are capable of producing functioning prototypes that they can use for consumer testing, things that were taking weeks before or months. And as we add more elements to this, we were able to reduce the time to market drastically, at least by half. And from where we were a year or 2 ago at the back of the train in terms of time to market, we are now at the forefront, especially in U.S., which is a high-speed market. Now we are not anymore the limiting factor to go on the market. Our customers very often are the limiting factor. So we are back into the game. We can push the innovation, we push it fast and we push it in a cost-effective way. We are an industrial company. We have factories everywhere, 25 locations. We are an industrial company. And to deliver the value to the market, we must have very efficient factories at the right place, but also very efficient factories. And honestly, 3, 4 years ago, this was not really the case. We had good factories, but many of them were not at all at the level we wish them to be. So what we did is, of course, we improved the footprint. I will come back to this. We improved the efficiency. But also, and this is also a competitive advantage, we made sure that we add geographical locations of our factories. Before COVID, having a global footprint was good to have. Through COVID, we demonstrated that this was very resilient because it's not only about our factories but also the entire supply chain of our suppliers that is also regional. And in the post-COVID world, in the regionalization trends we see today, this is becoming now a competitive advantage when you can serve all your customers in an even way in all regions where they operate, if they are CPGs, for instance. So in the past 12 to 18 months, we saw a good momentum being built in the business, top line growth adequate, the bottom line even better. This is coming from a set of many initiatives. Some of them started 2 years ago, some others a year ago, some others recently such as the realignment of the segment with Closures. This has been helping us to really focus on our Beauty business and deliver more value to that business. We also recalibrated upgraded our go-to-market strategy, so to be more efficient. And we already see the outcome, the positive signs of it. For instance, in the fragrance franchise we have, we have been regaining market shares. We were losing market shares. We have been regaining market shares, and the momentum is very strong. We have been able to also solidify our facial skin care business, and we are now underway to add more market shares. We were able also to interact in a very different way with our indie brands. They are very special brands. We drive the business in a different way, but we are very dynamic. It's one of our levers for growth. And of course, this is paying off already now. As I said before, we are very excited with our new custom capabilities, especially the one we built in France. But this is not enough. When you look at the numbers, we are not satisfied. We are not satisfied with the profitability we are delivering. But to understand why we are here and why we believe we can be much better, you need to look at the regional situations we have in Beauty. And starting with the most important one, which is the European region, this is by far the largest region in terms of sales for Beauty. This is the most complex. This is where we have all the customers, most complexity in terms of products and operations. From a very low single-digit EBITDA percentage back during COVID in 2020, we were able to move that business, with everything I explained before, to the 15% plus last year. So we crossed the bottom of our external range of EBITDA, and we are trending now midyear in the 16-ish percent EBITDA. So on a very complex and large piece of our business, we know how to make it happen. We know it works. We see it solid. It has been now many quarters that we are solidly within our external targets, so we know how to deliver this. We have also China. That is within the target, but on a smaller base. You know China is a big reservoir for growth for us. So if we are already within the targets today, we are very confident that as we grow the business in the first skin care market of the world, we will definitely stay within the targets. Where we have issues, and this was displayed in many calls with you during the quarterly reviews, is in the Americas. In Latin America, we are progressing. We certainly need to do some additional footprint adjustments. But what is really for us an issue today is North America. And in North America, we did the job. We did the ground job. We restructured. We closed factories. We had a lot of pain during COVID. We also streamlined the organization. We adjusted everything. We made it leaner. But we are suffering now, from mid last year, from a massive destocking that is coming after a massive overstocking in the post-COVID period of time. And we saw that in the past, it happens from time to time, but this is the massive one, that size of destocking and length of time was never seen before. But we know that as the business will come back and we also work hard on making sure that it is coming back, we will flow this to the bottom line. So this is the reason, what Stephan was explaining, we are not changing our external targets, 3% to 6% top line, which is within the general market growth; and 15% to 17% bottom line, but we have to deliver it at segment level. Again, we know how to deliver it on a large portion of our business in Europe. We see the slide with a lot of details, but it's important for you to understand that we keep looking at how to expand our margins. We did a lot already. We currently do a lot, and we will continue to do a lot, including in Europe, to drive the business even to other heights of profitability. And we play on 3 big levers. One is deep operational improvements. As I said, we closed 8 factories. We also opened new ones. We go deep into the efficiency, the continuous improvement. We leveraged our IT systems. We are now data-driven. You know the recipes. I have been in Operational Excellence. These are the usual recipes, and we apply these recipes to all our factories. The second big lever is on R&D. We made our R&D leaner and refocused on what makes sense when before we were a bit spreading our resources thin and with a very average outcome. So now we are very focused. We're much better organized. We have better talent. We are also definitely refocusing on the sustainable solutions that the market is calling. And the last one, we focused on the cost structure, SG&A, percentage of sales. And we restructured EMEA, and we see this paying off. We restructured North America, still muted in terms of results due to the destocking. We are also looking at how to be more efficient in all our operations. And as we do this, of course, it calls for a reduction of head count. Reduction of head count that goes through social plans that Stephan was mentioning. We have been going through social plans in Europe and in North America this year. It takes a lot of time and pain in EMEA, but we know we are at the end of the process, and this will flow into next year. We are also looking for many transactional activities that we were doing in high-cost country, to do them in lower-cost countries, such as Mexico, for the Americas or Czech Republic for Europe. And this is giving us confidence, and we know that and this is our target, that by 2025, as a segment, we will be within the targets, especially for the profitability. But we should reach this progressively in 2024 and definitely by the end of next year. So to conclude, first, we did a lot, and we will not stop doing a lot. We have a brand-new leadership team in Beauty. If you look at the team, we have a global team. In January 2021, only one person is still with us today. We changed the team. We brought people from the outside. It's a big change of mindset. We challenge the status quo everywhere. Second, as I said, we refocused the go-to-market strategies, the customer intimacy. We need to deal with our customers. They are the ones bringing the business to us. And this is now much better, and the customers are loving us again. We massively adjusted the operations. And we had to go, as I said, very deep, deep, deep into the organization. It's from the inside. We had to really change everything. It takes more time, but we know that we are setting this for much better, much more solid business moving forward. We reignited innovation, of course, with sustainable solutions. But more important, the fifth point, is the new mindset. We have a new mindset in the team driven by the financial data, KPI-driven, ROIC mindset. This is what we were missing before. We see it working in EMEA. Again, we are very confident that Latin America and China will move up. And of course, we are now focusing on having the business back to where it should be in North America. And as we are more efficient than ever in North America, we should flow to the bottom line. So in conclusion, we are not done. But we did a lot. We continue to do a lot. We will not stop because the momentum is there now. We are well positioned as a company, as a global business in very attractive, solid, resilient, growing end markets. We have a full set of fantastic solutions that are highly appreciated by our customers. We have a strong leadership, and we strongly believe that this is how we are going to deliver on our long-term targets in the short term. And with this, I pass it to Hedi.

All right. Thank you, Marc. So we're going to be talking for the first time about Closures as a segment after the realignment. I think this is the first time that we do that since 2010. I will start by talking about the markets in which we operate. So we operate and serve food, beverage, home care, personal care and health care. But our starting point in each of these markets is different. We have been very strong lately in food and beverage, developing new product, new innovation. We struggled, and this is probably why we wanted to reunite the 2 part of Closures, in home care and personal care. And I will share some more details around that. And the last one is health care in which we do not operate and where we see a large opportunity for us to grow going forward. So what are closures in general? So we're talking about premium closures. We do not manufacture flat caps that you can find on carbonated products. This is not where we are, and this is not where we want to be. Gael insisted on being an IP-driven company for Pharma. We are also an IP-driven company for Closures. It's not different for us. And we have more than 800 patents just for Closures and for closure products. You can also see here active material science that is added to our portfolio of closures. And we did it because we know that the foodservice industry is served by us for other type of products. We are serving them for closures. And so we thought that it would be the best fit for us to continue to serve them in terms of active materials. What's important in this slide is what we call the trends that we see happening today. And I will start by sustainability, and I would like to show an example, what do we mean by sustainability in Closures. So this is a sport closure that you can find on the go. And you can see that we here, we can take off the tamper evidence. This is not any more acceptable today on the market. People want to have nondetachable tamper evidence because we don't know where this plastic part will end up. So this is just an example of how we can innovate from a sustainability standpoint. In terms of omnichannel shoppers, what we see happening today, Amazon, for us, is a blessing in a way because it's an opportunity for us to develop products that can go through fast-moving warehouse environment and shipping conditions that today are difficult, how do we make sure that we upgrade the packaging of our customer so they can ship them safely. Shipping liquids is difficult. So how do you ship liquids without breaking the packaging and breaking, of course, the closure [ in which we are ]? At-home consumption was really a trend that we are noticing today and specifically post-pandemic. People are working from home. And when we looked at our beverage business going forward, we said, "Okay, we cannot be only on the go with this type of sport closures. We need to enter the home of our consumers." So how can we develop products for 1-gallon, 2-gallon type of large containers? And this is where today we're pushing in terms of innovation. From a customer standpoint, we, of course, operate with all the large CPGs that you can see on the list. But what I would like to insist here and bring in front of you is that we like these guys, but we also like what we call regional champions. You have a lot of companies that are big in each of the regions in which we operate. So for me, it's great to be able to work with P&G, L'Oréal, but I also want to work with Daisy and Maspex because sometimes the margin level can also be better. If I look here, our business is $700 million. You can see that food and beverage roughly represents 70% of our turnover, and you will see that we have really grown our business in food and beverage in Closures. And probably we lost our focus on the beauty side, the personal care side, and I will spend some time on that. But what's important for us is really our geographic footprint. You will see later on in the dish care industry with P&G, we were selected for, of course, the technology that we have and that we bring with our elastomeric flow control valve but also because of our ability to develop the same product in 3 geographies. So you will see there are 3 products coming from 3 different geographies with different names. Dawn will be in the U.S. I'm sure some of you know that name. And then you will have Joy for Japan. And you would have Fairy in Europe, for example. So how as a company can I implement the same product with the same reliability in 3 different geographies? The second point I would like to emphasize here in terms of advantage is our ability to work in terms of platform. Can I develop a platform in a country and then sell it in another country without reinvesting in R&D? This platform, I can give you an example. We can develop closures for sauces and condiments, let's say, for ketchup. But in China, the ketchup is not the sauce that they use on a daily basis. So how do I use that same technology and go in China and implement it for oyster sauce, for soy sauce? So I'm not changing what I'm doing. I'm just saying I'm adapting my platform to the region that I want to service. Of course, we have unique capabilities with our active packaging. So we're trying to do with active packaging in the food industry, two things, first of all, extend shelf life. This is our first priority. And the second thing that we're trying to do is to eliminate contamination risks. Gael shared that from a pharma standpoint. We're doing the same thing in the food industry. And this has proven very successful. Of course, what we need to do more and more and more is to have a look at our application field and how can we innovate each time using one platform into different application fields. We're talking about inverted closure, for example, inverted packaging we started in the food industry, and now we are operating into personal care or dish care. So I'm using the same technology and trying to sell it in different applications, but I can only do that if I understand my consumer. What is my consumer behavior? And I was giving an example of a chocolate product that is known as Nutella. The kids, they love it, they use it. But how do you spread that in an easier way? And our job is to identify that and to find opportunities for our customers to grow. And for me, there is one element that is very, very important that I will be covering later in terms of innovation is what conversion means because we talk about category conversion. What it means is for Daisy, for example, when they moved from the tub to the inverted pouch that you will see there, what they did is that they increased their price per ounce by 23%. So how do I contribute to the change, to the increase of the value that is generated by my customer so they can afford to buy my product? This is our performance in H1. We suffered from a decline in sales, mostly coming from a resin effect. You know that you're passing through resin, so minus 6% in terms of resin impact and minus 1% in terms of volumes. And this is mostly coming from North America with a lot of destocking that we faced in Q1 and in Q2. And despite that, and I'm very happy with the results that you see on the EBITDA side, we increased our EBITDA by 18%. And this is the conjunction of 3 things. First of all, we did a footprint optimization in North America. So we shut down 1 factory. The second is the price increases we entered into negotiation with our customers to increase our prices. And the last one is really a big effort on cost in the factories, so of course, improving our efficiency, reducing our fixed cost in the factories and reducing our SG&A level. But we started that 3 years ago. We had a project called [ Cheetah ] we started 3 years ago to work on that, and it's now paying off. And it's good that it's paying off in a moment where the volumes are not here because we expect the volumes to come back and to be ready then to really fully take advantage of this situation. These are the new long-term targets for the segment, 4% to 7% in terms of sales. We expect to grow at the double of the market because of the conversion effect. So as we are not only following the trend of the market, we are following the trend of the market, and we believe we can also accelerate that from a growth standpoint. And you will see it's feasible because we have proven that in the food and beverage segment just before. And the last part is our long-term target for EBITDA is 16% to 18%. And we anticipate to be there hopefully soon. On the right-hand side, you can see the difference in terms of sales. You have the Closures sales in food and beverage from 2017 to 2022 with a CAGR of 6%. And this is why when I said that I felt comfortable with the 4% to 7%, it's because we've done it, and we know how to do it. On the other hand, and probably because we lack of focus on the beauty side, we reduced our sales by 3% year-over-year. For me, what's important here, and the message that I want to convey, is our business will grow and we will find growth in 3 areas: first, innovation, and I will share more with you in the coming 2 slides; two, geographic expansion; and three, we're going to go after health care closures. So I repeat, very simple, we want to grow with innovation. We want to grow in other geographies and we would like to grow in new markets for us. All right, talking about geographies. We want to go and target countries where we see the GDP growing faster than in, I would say, the Western world. We acquired the company in the Middle East, in Bahrain, where we will be putting more and more product. That will be our platforms for the region. We're seeing all these countries growing, from a GDP per capita standpoint, double than the rest. So we need to be there. We have a factory in Mexico. We have a factory now in Bahrain. We have a factory in Thailand. So we are located today in the areas where people will be able to consume the type of product that we are putting to the market and that are premium products. If I look at the growth through innovation for us, the access, I talked about sustainability a little earlier. Conversion is the second one that we see. I talked about the ability to use elastomeric flow control into inverted product, but we are agnostic in a way. We don't care if it's a PET bottle or if it's a flexible. What we would like is how do we help the dispensing happening, how do we improve each time we help the consumer and we improve their life and how they consume the product. Rocket is our solution to the product that I see here. So this is our new closure that will be without a detachable tamper evidence. The tamper evidence is included in there. And we're very happy, and I hope you saw the advertising for the red cap of McCormick, and we're very happy to bring the freshness to bring something different to this market. On the right-hand side, all the activities that we have on food protection with InvisiShield, FreshWell and SeaWell. And I'm happy to report that SeaWell now is really very well sold in Thailand. So it's produced today in the U.S., sold in Thailand, and we're very happy to see that this can be used also in countries that are, what I call, developing countries. This is the last slide. So I would like to recap and it's going to be, hopefully, very simple. Growth, growth, growth. Again, this is our key element, how do we put product on the market that are innovative, in the regions that can consume them and also go and try to enter into the health care industry. So these are our 3 areas of growth. And I insist on that because we can do all the work that we do today on SG&A and cost reduction, but we will not be able to reach our target if we do not grow. Our role is to grow and, in the meantime, continue to work on the cost in the segment. And I think Bob will be sharing next what we intend to do as a company to work on broader cost and broader cost base. Look, we will do rationalization. We did that in the U.S. We have other projects to do, and that will be started in Q3 this year in other parts of the world. So our objective is growth and cost reduction on the other end, and we're very confident with our ability to deliver our long-term target. Thank you. And Bob, I guess it's your turn.

Thank you, Hedi, and good morning, everyone. So I'm going to focus the first part of my presentation around the cost management efforts that we embarked upon late last year and how we expect to convert that into operating leverage as we continue to grow the business that you heard about from the 3 segment presidents. As Stephan mentioned earlier on today, this is a multiyear project to reduce not only SG&A but fixed costs in our factories. Here, you see in the upper left, just an example of our SG&A expenses. Our target is to reduce overall fixed cost by 2% from where we ended in 2021 and achieve that by year-end 2025. Now to size the prize, every 1% of reduction in fixed cost generates another $35 million in earnings power. You can see from the slide that we're well on our way to achieving that, and we expect to be, from an SG&A perspective, about 16% at the end of the year. So how are we going to get there? And what's different this time? You heard the word used several times today by the segment presidents. This time it's different. It's a mindset change. We talked about, several years ago, how we stood up some global talent centers, to move in some of our financial transactional processes into these global talent centers. We've been blessed at Aptar to have really best-in-class IT information systems. You heard Marc talk about the data that's driven, using data to run the business. And we're taking that next step on this journey to put not only additional finance processes into these global talent centers but also to look at the business from an end-to-end process perspective. So what do I mean by end-to-end process? I'm talking about not just working on the payments of the suppliers or the processing of those payments but all the way to the beginning of the process when we order the goods, so procure to pay; on the commercial side, looking at order to cash; on the HR side, looking from hire to retire. So our HR organization has fully embraced this, and they're well on their way in their journey to move their transactional processes into these global talent centers. And we're now starting to look at other things like the procurement, the customer service Marc touched on hiring in lower-cost countries. And so how do we generate these savings? Obviously, first off, there's a labor rate arbitrage in where some of these global talent centers are set up. But the more important thing to realize is we can now then take that last step, that last extra mile in standardizing our processes. That gives us the advantage then to use technology today to automate those processes. So not only will we benefit from the labor rate arbitrage, we will also benefit from automating these processes and redeploying those people as we bring in new functional areas in there. That's attacking the SG&A side of things. Marc mentioned some of these activities are a workforce reduction in certain countries in Europe. That's why they take a certain amount of time. That's why we have to deal with collective bargaining arrangements with our unions. Another area, like everyone else, we're embracing a hybrid working environment. So we don't need nearly the amount of office space that we used in the past, and we've already begun to start reducing that office space in the U.S. and we have further plans to do that in Europe as well. Regarding the fixed cost for the factories, you heard a lot about footprint rationalization. You also saw videos of where we're deploying some of our capital. In Gael's video, you see a lot of robotics, automated handling of the materials, ultimately reducing the amount of people that we have in the factories. What's this going to cost? So for the first phase, and we talked about the first phase here, we've already expensed approximately $17 million last year through the first half of this year. And we've got about another $7 million of cost that will be incurred through 2024. Now let me spend a little bit of time on the strength of our balance sheet, and why that's important and how that provides us optionality. These are just some of our key financial policies, many of them which you know. Our total debt at the end of last year was slightly less than $1.2 billion. At the same time, we had about $140 million of cash on the books and an untapped revolving credit facility of about $600 million. We're not changing our leverage corridor. Stephan showed that earlier. We're very comfortable operating between 1 and 3x leverage. And at the end of the first half of this year, we're sitting at about 1.8x. From a capital allocation perspective, we prioritize our organic investments, and I'll talk a little bit more about our capital process later; M&A, dividends and share repurchases. Our long-term dividend payout ratio remains 30% to 40% of adjusted EBITDA, and we talked about already the 8% increase or $0.03 per share per quarter that we raised at the end of the second quarter, all that surrounding the continued growth story that you heard about today from our 3 segment presidents. So with a really great balance sheet and great financial policies, why am I spending any time talking about debt maturities? The key point here is the makeup of our existing debt. So about 60% of our existing long-term debt is from historical private placements. And thanks to our inaugural bond offering last year, we now have about 35% from public debt. The total of that debt has an average interest rate of a little over 3% today. We all know we're in a very different interest rate environment. If we look at that first tranche of debt repayment this year, which actually was recapitalized in July of this year, $116 million, replacing that 3% debt with current borrowing rates is going to cost us an additional $2 million in the second half of the year and an additional interest expense compared to the first half of the year. Now I wish I could say that I'm hopeful that interest rates will come down by next year, but you see the very large tranche of nearly $370 million that we'll have to refinance as well. Making the same assumptions of where interest rates are today, that refinancing of debt is going to cost us an additional $7 million of interest expense over where we'll end this year in 2023. One thing that's been pretty consistent in the Aptar story is the cash generation that we've had. So since 2017, our EBITDA has grown 26%. We convert nearly 78% of that EBITDA in operational cash flows. Over that same period, our capital expenditures have averaged about a little over 8% of sales, while our depreciation and amortization is slightly [ averaging ] 7%. This slide here shows you a little bit of a historical recap of our capital expenditures. And you can see, back in 2018, we were averaging about 8% of sales and capital investment. Now some of the big 3 projects that we've been talking about, you can see the impact starting in 2021, 2022 and 2023, where we peaked at 10%, and we're now getting closer to 9%. We would fully expect as we complete these capital expenditures and these big projects that we will then return more to our historical average of about 8% of sales. The right side kind of recaps where those 3 organic projects are. I'm not going to touch on them. I think you heard them from the segment presidents. You saw the videos. What I'm here to tell you is that, of all our capital split between growth and capacity improvements and maintenance of business, we averaged well over 20% across each segment in terms of return on capital on those projects. And if I just isolate some of these big growth projects that we embarked upon, we're well above those return on invested capital. That's why the prioritization of organic growth is truly important to us. The key takeaway, though, that I want you to walk away with is we spent nearly $350 million in organic growth CapEx over the last 2 years. We are only now just starting to reap the benefits of that capital. That's partly why we're up here today energized and excited about where the future comes. These are just now coming onboard. So in addition to organic growth, obviously, we partake in acquisitions and, in certain cases, partnerships. So our acquisition criteria hasn't changed much over the years. We're looking for well-run businesses, ideally with the management team that wants to stay onboard and become a part of the Aptar family. If it has technology that we can leverage across our organization, our existing product platform, think of CSP that Gael talked about earlier, that's ideal. In some cases, we can provide an accelerator to their growth. Also think of CSP. This company was roughly 70% U.S.-based, 30% European-based. With our presence in Asia and Latin America, we're now just starting to cultivate a great pipeline of opportunities in Asia and Latin America, which will continue to fuel their growth on existing platform of products that we make today. In some cases, it is an adjacency to one of the markets we're in. Think of Stelmi in 2012. That's how we got into the elastomeric business. In some cases, it's an alternative to a greenfield. Think Hengyu on the bottom there. Entry into the elastomeric world in China is much faster if you can acquire in and have the proper regulatory certificates to operate that business rather than build it yourself. Now in addition to acquisitions, Stephan mentioned briefly some of our partnerships with universities around the world and where we can source ideas and information. But also, we participate in certain start-up companies. We're not afraid to make small venturing investments. Typically, we get a seat on the Board. Typically, this is new revolutionary concepts. We've done that with sustainability. That's how we've embarked upon our journey in sustainability. It's how we learn from people who know things about areas that are important to our business and to our customers. And that's been a nice source for us also staying on top of the trends in the marketplace as well. Lastly, I'm going to focus on return on invested capital. Again, similar story. You've seen those big investments that we've made that yet have not yet produced the results that are anticipated in the future. You see that decline in 2022. We fully expect to be above 10% by the end of this year. And as Stephan pointed out, we're raising our long-term target to 11% to 13% based on the improvement in profitability in all 3 of the segments but also in the additional business that we have on the horizon. And with that, I'll turn the presentation over to Beth.

Thank you. Thanks, Bob. Okay. So we're proud of our inclusion on a lot of different lists in the ESG realm. A lot of times, we're actually achieving these for consecutive years. But the one that I want to focus on the most today is EcoVadis because we've achieved platinum level rating in EcoVadis. So I think EcoVadis actually supports all of these, and let me explain that. EcoVadis is a third-party ESG assessment platform that requires the responding companies to fill out a very lengthy survey, but it doesn't just end there. You actually have to, for every single question that you're responding to, submit a proof point. So you're submitting a company policy, a procedure, some sort of standardized report. So if I look back a decade ago, Aptar had achieved a bronze level rating on EcoVadis, which is great because it's still a rating level. We moved eventually to silver and then to gold. And within the past few years, we finally achieved platinum, and that's the highest level that you can get. We did this by taking the EcoVadis information and really focusing our strategy, so that was going to inform our strategy. So if we had gaps, then we knew the next year, that was something we're going to try to focus on to close that gap. And that really helped us to keep up with trends of things that were happening in the sustainability realm. A lot of times, maybe we heard about it through organizations that we're a member of, but most definitely, it would be a topic, like just recently biodiversity, that would be then included in EcoVadis and we wanted to make sure that we had something to respond with. So in addition to that being really important to Aptar, it's also extremely important to our customers. So we have almost 150 of our customers who specifically are looking for this EcoVadis rating. And they're doing that by, in some cases, if there's a request for a proposal, then we actually have to submit our rating information to them as part of that request for proposal. So sometimes it's a go/no-go decision for who they're going with for a supplier. In other cases, we have customers where they have taken the EcoVadis rating, so it's a scorecard, and they said that, okay, Aptar, next year, we want you to achieve whatever score. And so they're really looking for us to improve our performance year-over-year. So again, by us focusing on EcoVadis, I think this is most definitely helped us to achieve all of these other badges that we have up here, all right, so giving us that competitive advantage there. And speaking of the competitive advantage, so Aptar has been publishing a GRI-based sustainability report annually since 2014. What that means is that we have experience with materiality assessments and we also have experience with achieving assurance on our data. So we're assuring our energy and our environmental data every year since 2014. And this is important because, as you're looking into what we're seeing coming out of the SEC proposal, so the SEC and the proposal has not passed yet, but what they're saying is that they want our energy and emissions data to be assured to a reasonable level. Okay, well, in the past, Aptar had achieved limited assurance level, and so last year, hearing this from the SEC, we went for reasonable assurance level. And we got it. We did that because we wanted to make sure if it were to pass, that we had time to make up for that gap. And that said, that's exactly what we're doing with CSRD as well. So you might know that CSRD just passed. I think it was like in August just recently. Well, Aptar will be subject to CSRD reporting with reporting year 2024, and there's a lot more that comes with it. We think we're pretty well prepared because, like I said, we've been doing the GRI report. We've also been responding to CDP annually for many, many, many years since even before my time. So with CSRD, what we decided to do is, this year, start our double materiality assessment, which is one of the requirements, and also start to look at the assessment from the basis of the EU taxonomy. So the idea is that, by the end of 2023, we're going to know if we have any gaps, and then we have a whole year of 2024 to figure out what we do with those gaps before we do our first CSRD disclosure in 2025, right? As you are analyzing companies, Aptar even included, I would encourage you to, from a sustainability perspective, always make sure that said companies are using standardized protocol and standardized definitions when they're making their big or audacious claims of what they're going to do. For obvious reasons, like we want to avoid greenwashing, so Aptar is following all the standards that we can think of. And that's a slight exaggeration, but let me get into the details of the ones we are following. But we also want to make sure that because we have to work throughout the entire value chain, that everybody along every player is speaking that same language. So we all have the same definitions of recyclable. We all have the same definitions of recycled content and so forth. So the first thing here on science-based targets. Aptar does have validated science-based targets. You might know, you might not, but Science Based Targets Network just updated their protocol in October of last year. Aptar updated our science-based target to align to that protocol in March of this year. So what that means is there's other companies that might already have a science-based target, and they're also going to have to update to the new protocol. Aptar has done it. So we have a science-based target that's aligned to the 1.5-degree ambition on Scopes 1 and 2. For us, that means that we're trying to achieve roughly 82.5% reduction from 2019 baseline year. And at year-end 2022, we had already achieved a 75% reduction. So that's on Scopes 1 and 2. We also have a Scope 3 target, and we also have renewable energy electricity target. So we're trying to achieve 100% of coverage of our electricity by 2030. And at year 2022, at year-end, we had already reached, as Stephan mentioned, 97%. So we're really close there. We're constantly looking for the other opportunities to close those gaps on that remaining 3%. I mentioned we have done annual reporting with CDP for many, many years. We actually have been listed to the Supplier Engagement Leaderboard for several consecutive years, which means that we are leading the entire value chain to reduce emissions through all of our suppliers. And then finally, when you look at our product targets, so our product targets are based on, as I mentioned, putting recycled content into our products and then also recyclability of our products. We have aligned those to the Ellen MacArthur Foundation's New Plastics Economy. And the reason that we chose that group is because it works with many organizations, many recyclers in all different countries, but also it was the one that most of our customers and most of our peers showed up in. So we wanted to make sure that we are benchmarking, that we're all speaking the same language, like I said, and that eventually, as we're designing our products and we're looking at environmental impacts, using our life cycle assessments, which, by the way, the process is also ISO-certified, that everything is standard and that we're all speaking that same language. So there's many other things that I can talk to you about. We have a lot of disclosures that are on the ESG hub at aptar.com. I'm going to leave it here for now, but I will be available later for questions. And I turn it back over to Stephan to close out the day.

Super. Thank you, Beth. If you were wondering why we are so excited about sustainability is because we live it. And if we don't, Beth is certainly challenging us to get there with a hurry. Our people feel really proud to work for this company, partly because of this. So I cannot finish this without talking with a great deal of pride about our Board of Directors. Deep, deep experience in our end use from health care, pharma, consumer, including across our geographies, including different ownership forms, corporate restructuring. Three sitting or former CEOs, so a lot of experience, a lot of robust discussions which, in the end, improve the outcome for the company. With that, let me summarize again our value creation framework on the left: attractive, rapidly growing markets; differentiation through technology, innovation that is consumer-based, patient-based and sustainability conscious; directed evolution of the portfolio towards higher-margin business with, of course, pharma being first and foremost on that list. We have introduced a much stronger cost focus and implemented that and imprinted that onto the culture. And of course, we maintain our conservative balance sheet. So you will see our bottom line growing faster than the top line over the next 5 years with a higher profitability range, continued investment into the Pharma platform and driving increased returns on capital and keeping fixed costs in check, including SG&A. And with that, we turn it over to Q&A. We're going to do a brief reshuffle here, bring all the speakers back up, and then we'll go right into the Q&A.

All right. Marry, are we going to alternate between the room and online. Is that correct?

Yes, absolutely, within the room first.

Okay, starting in the room. Who has a question?

I'm Lucas Hudson from Bank of America Securities on behalf of George Staphos. First of all, thank you so much for your presentation today. You guys are on all 3 major GLP-1 drugs, but as with past product categories, it's like you're hitting singles and doubles and not necessarily a story that one drug will move the needle. Do you guys have anything to add since you commented on this during your Q2 report?

Yes. Look, of course, we get asked a lot about GLP. You read it every day, 2 articles in the newspaper, whether it's diabetes, whether it's weight loss, whether it's shopping behavior. Clearly, it has impact not only on your metabolism but they're more centered on the brain and you have additional drugs in the pipeline. So barring any negative side effects, and some of these GLP drugs have been around for a while, clearly, the pharma industry is betting big time. European pharma company investing several billions a year, U.S. pharma company investing several billions. Specifically, we're not allowed to speak specifically about each customer. But also keep in mind, each autoinjector has multiple components. So Company A will say they're in the autoinject, Company B will say they're in the autoinject. It can both be true because you have multiple components in each autoinjector. And we talked about it in the Q because it already started to contribute to growth in that business. And it will, for sure, keep continuing to contribute for growth. For competitive reasons and all kinds of other, we cannot give you the percentage of revenue and the percentage of the pipeline. But we wouldn't be talking about it if it isn't for the injectable business, a significant growth driver.

And a quick follow-up, if I may. Can you guys discuss how the bargaining discussions with pan-European and National Labor representatives have progressed or concluded in regards to the adjustments you guys are making to make the Beauty segment more competitive?

Sure. So my apologies, a brief 101 on European labor relations. If you're active in multiple countries, you have something called a European Works Council that you need to have by law. That is a consultation body. It's a lot of work. You need to inform them. The actual bargaining then happens at the national level and at the legal entity level. We have many different legal entities. The legal entities are not by segment but by location and by country. And then you bargain at the legal entity level, both with the works council, which we do not have in the U.S., and with the unions. And in the end, you need to either bargain to agreement or bargain to impasse and then seek resolution in the courts or depending on the country. So to answer your question specifically, we have reached agreement in Italy. We have reached agreement in Germany. We have reached the resolution of impasse in France. So basically, what that means, the authorities approved measures and we can go and implement. Agreement in France is almost impossible, so you'll have to go through this process. And when I talk process, we started to have the detailed footprint a year ago. And now we got approval of the authorities to start implementing. So it's a long process, and that's Phase 1. So for Phase 1, we have all the approvals. We're implementing. Bob has given you some of the numbers. We are not done, as I said early on. Now that we've broken taboo, there are lots of ideas coming out of the woodworks. So as early as our Q3 call, we may probably be able to talk to you about a Phase 2. And certainly, in 2024, we will talk about additional phases. So sorry for the lengthy answer, but it is something we have avoided for many years doing, but there's just no way around it. And like with everything else, once you train that muscle, you're going to use that muscle more.

Alex Yi from Wells Fargo on behalf of Gabe Hajde. My question is on the new capacity that's coming online in Pharma. I guess how much of that new capacity will be serving the biologics market?

Do you want to take that, Gael?

Yes. So Alex, the one answer I'm going to share with you is that by 2027, I mean I would say 2/3 of our business will be coming from, what we call, high-value products. And obviously, biologics behind will be a great contributor to the growth; GLP-1, other type of products. The space is growing faster than the overall pharma industry, I mean, the injectable space. And biologics, if you look at all the approvals, I mean, 2021, 30% of the approvals were biologics. Last year, 50% of the approvals were biologics. So naturally, I mean, biologics will be a key part of our revenue and also a key contributor of the margin improvement. Because of biologics, you need high-value product.

I have a couple of questions that have come in. So this is from Gabe from Wells Fargo, following on Alex' question, for Pharma. Because this is a pipeline business and long-term compounder from an investor perspective, if we were to apply your long-term growth targets in Pharma, we would at least get to the low end of your implied 35% to 70% consolidated EBITDA growth. So a two-part question. Question number one, what needs to happen to get to the top end of that growth? And how would M&A contribute to that?

Okay. Let me talk it with Gael here. First of all, all these targets are organic. So anything M&A would be on top of that or change those targets depending on what we acquire. Second, I would say that the biggest rate-limiting step on, let's say, lower end of the range or high end of the range is how quickly and how far can we drive up the injectables profitability. So basically, you have the lowest-margin business being projected to grow pretty fast, double digit, over the next 5 years. So we need to get that profitability up significantly. So talking about Operational Excellence, the whole pillar that Marc stood up. They are all at the injectable side now, helping that business to improve their profitability and productivity. Think about it. This is a $200 million revenue business at the time we decided to spend $200 million in CapEx. That business by itself is not able to kind of bring us up with the capability and the profitability. So if we can get that business up well north of the company average, then also that Pharma upper range will be on the table. Gael?

Well, I won't add anything on what you said, so no additional commentary for me.

Digital also will help.

We've got digital. I mean we've got many drivers on that one. I mean when you look at the pipeline, the 33% of opportunities, weighted value by plus 43%. And now you know that's an industry where you've got a huge attrition along with the development. So basically, let's make sure we've got enough pipeline conversion in order to sustain the growth. Narcan also, let's see how Narcan is going to play the game there, I mean, around lifesaving. I mean, the U.S. government has been pushing strongly to get the medicine OTC, over the counter. You go to Duane Reade, you go to CVS. You're going to find that product. I mean you've got even automatic vending machine in New York for Narcan product. So how well it's going to have a positive impact to the opioid overdose crisis that we are having in North America, this also will be an element of.

Maybe just an additional comment to challenge you a little bit. One of the things we're looking at the digital business is the percentage between project revenue, which is basically you take on a project, you get paid for the project and move on to the project; and recurring revenue, where we get it on the per user fee or get the payers to pay us for a whole program. Chiesi is a great example. So the team did a fantastic job with that program, which has recurring revenue. And of course, as you know, with any software business, the more recurring revenue we get, the quicker we're going to be above the breakeven line.

I have a lot more questions. So when you think back to Pharma commanding about 21% of your CapEx in 2017 and growing to 59% in 2022, what specifically has driven that significant acceleration? Was the 2017 base level too low relative to the growth rate of the segment? And is the increase in the core sales growth targets for Pharma segment too modest relative to the CapEx spend? Gael?

That's funny because we have a lot of conversation on that one. Back in '17, I mean, our business, our top line, must have been in the range of $700 million. Okay, we are $1.4 billion, a different base, and we are increasing our long-term commitment from 7% to 11%. So you do the math. I mean, we've got a massive growth rate in front of us. Why we have been investing a lot? Because in certain part of the business, we've been underinvesting. I mean, you need to make sure in that pharma environment that you've got the capacity to face market demand. So we have been scaling up capacity not only in injectable but in the other part of the business. We have been developing new technology on that part of the business. And we have been accelerating our investment on a regional basis. I mean you've seen the picture of Namaste in India in order to make sure that we will be able to do molding but also finishing; [ APlus ] in China. I mean, in Congers, the one we have been to Congers, I mean, we are accelerating also our footprint in the U.S. We are having a presence, I mean, also in LatAm. So that's explaining why basically we have been investing a lot.

Yes. Just Namaste, [ APlus ], those are internal project names, no big secrets. It's the pharma plant in Mumbai and the Aptar site in Suzhou. The other thing I would say, the nature of the CapEx also has changed, especially as you invest more in injectable. In some of the pulmonary areas and nasal, we sometimes could get customers to invest in parts of the CapEx. The CapEx lives in our plant, but it's paid for by the customer. That's almost impossible in the injectable space because it's just a very different industry structure.

So a question on China, is management at all concerned with geopolitical situations with China and its investment there?

Well, we certainly live in a completely different reality than we did in 2018. So we are not concerned, but we have changed our approach, and we've changed our plans in terms of how much risk we take, how quickly we scale. But having said that, it's a massive consumer market. As you know, for Beauty, it's our largest market. We've always had the philosophy of in China, for China. We never looked at China as a low-cost source for the rest of the world. So we are investing appropriately. And thankfully, none of our products are geopolitically sensitive. We are seen as a good contributor to the Chinese economy, helping patients, helping customers. And at the local level, governments couldn't be more supportive to us, including preferential tax treatments, being treated as a high-tech company. So Gael was just in China, I was early in the year. If you forget about what's written for domestic purposes there, here in Europe, and you deal with the business reality on the ground. We do business there, it's quite profitable and life moves on. Yes, if we were in aerospace or in chips, it would be a different story. Do you want to add anything?

Yes. I've been living in China, in Suzhou, I mean, slightly below 7 years. But basically, I was going there on a regular basis. Due to COVID, I've not been to China since 2019. So that was the first time for me to be back in Suzhou, Shanghai, Beijing and so on and so forth. I mean well, they have been keeping on changing. I mean you've got Chinese people being very confident even though they realize that basically they are no longer in the high growth. They are all moving to a better quality of life. So they have been building Phase 1, the infrastructure, the cost base that they are having now. Xi Jinping, I mean, he's really pushing for a better quality of product. We're going to get our innovation center in Shanghai in what is called the design of Innovation and Institute (sic) [ Design and Innovation Institute ]. We were having conversation with the local authority. They want to make designs in Shanghai, manufacture somewhere else. I mean, they want to do what has been working in the northern part of the world: design in California, manufacture in China. They want to do design in China, design in Shanghai, and manufacture somewhere else. So quality of life, putting forth better solutions, better product. And this is where the overall, I mean, storytelling of Aptar is making a reality and because we have never considered China as a manufacturing base for the rest of the world. We have been in China, for China. We know our customers. We know the market. We know the trends. And we're working really to provide support to the local player, I mean, to win on the market space.

Do we go back to the room?

Yes. Any more questions in the room?

Sam Martin here on behalf of William Blair and Matt Larew. So just I want to focus a little bit on injectables, a multipart question, just given it's going to be a key growth driver for the company over the next couple of years. So looking at the overall elastomer market, there's obviously a major player there, just trying to understand the competitive dynamics. Are you guys looking to take share? Or is it sort of a rising tide lifts all boats sort of a situation given you've got biologics, cell gene therapy, GLP-1s, these numerous opportunities? And then building off of that, peers within the injectables and elastomer space have spoken about, as you move up the value chain to more higher and higher value products, they've seen maybe even a 15 to 20x multiple on pricing as they get to the higher end of that value chain from bulk products. Would you guys be able to provide any sort of information on sort of the pricing range in your premium products versus the lower value?

Let me take the first one. Gael, you take the second one. So it's much more of a rising tide scenario. There is so much opportunity out there. So it doesn't work like this. Okay, let me go bid and see whether I can shave off a few penny of the price and get the project. It's all about capability, data set, geographic footprint, relationships and track record. That's how you do business in this space. And as I said, there are multiple SKUs, you have plungers, you have stoppers, you have needle shields, you have coated, you have uncoated, you have combination products. So the pipeline is filling not because we go and take a lot of share and vice versa, of course, we are the small player here, but there's just plenty of opportunity for everyone.

So from a pricing perspective, I mean, I'm not going to share much on that one, but you can understand by the complexity of the biologics and the quality requirements, our processes, our technical offering has nothing to do with a traditional type elastomeric component. So obviously, I mean, we are pricing differently. But I will say with the different key players in that market, I mean, we are value players. So we're not trying to underquote. I mean there is a value to the solutions we are providing to the market because the complexity, the regulatory constraints. By the end of August, I mean, the European Commission just raised the bar in terms of contamination requirements. And basically, the level of liabilities we are having, making sure that our products are at the level of quality requested by the authorities, making that, yes, we've got a premium on a standard solution. And this is also why we are confident to significantly increase for the injectable divisions, our margin profile.

Sorry. Do you have a follow-up?

More just a follow-up, you said that in injectables, you're value players, I think, just clarify that.

It's language, value-added.

Sorry, sorry. we're a value-added player.

It's not Walmart, no.

I have an injectables follow-up online. You talked about potentially nearly doubling the size of injectables by 2027 but only adding 30% capacity. So does this require additional capital? Or is this really incremental price profit associated with the value products that you're adding?

Okay. So that's going to be, in priority, a mix profile, being different. As I've said, 2/3 of our business by 2027 will be with high-value product, having a different, obviously, margin profile. That's number one. Number two, I mean, we're going to keep investing mostly on the downside of the process, around certain, I would say, trimming of our injections. I mean the bulk, I mean the huge investment will have been done by then. So mix, then we will have also additional investment for the next 5 years.

So as it relates to Pharma EBITDA growth, specifically in the next couple of years, given that 2023 represents the high mark for the impact of the injectables build-out cost and, to a lesser extent, digital IT investments, would it be fair to assume that in the next couple of years, after 2023, EBITDA growth should be something above Pharma revenue growth?

Simple answer is yes.

That was an easy one. Does anyone have another question in the room? I have some more that have come in online.

Yes. Can you guys please discuss what conclusions you guys have seen regarding the use of shared devices in the U.S., Brazil and also the Czech Republic?

Shared devices.

Shared services.

Shared services, sorry.

Yes. Let me start, and Bob, please. First of all, these are Aptar employees. So this is not third-party people. These are Aptar employees that take advantage of the single instance in SAP we have across the company, very good data access, and do all the things that Bob talked about. So why don't you take it from there?

Yes. No, I would say, apart from the obvious, and I want to understate this, when you put processes under one roof, you truly are able to get people focused on those processes and refining them in the most efficient manner, right? So you end up with much more efficient processes. But some of the not so obvious things that we've experienced is you get a better control environment as well, right? You're assured that it's going to be processed the same. I don't have 55 facilities processing transactions. I have 3 facilities that are processing them in the exact same way. So your SOX compliance cost from a public company perspective go down because now you don't have to go out and audit in the field at 55 different sites, you can audit in the 3 shared service centers. And really, there's more and more benefits that we're seeing. So our experience to date has been nothing but positive. And that's why we're taking that next step in a journey to put more in there.

Next question from online. How do you think about your portfolio? Do these segments belong together? Are there synergies among the segments? And can you talk to us about the benefits those synergies may bring?

Sure. I mean, look, first of all, we discussed this regularly with the Board. We have a very active Board. They've done all kinds of things, spinout, spin-in, taking things public, taking things private. I've got many of my Board members being private equity aficionados. So a lot of discussion about the portfolio, portfolio optionalities, but also understanding fully what the realities on the ground are from a legal entity point of view, from a tax position point of view and not just taking management's word for it. So the Board has certainly always periodically gets advisers involved to kind of look at all the different options. Having said that, I think what you hear from today's discussions, fundamentally, we are a technology company that operates these technology platforms and tailors them to the end use. So some of you have heard me talk, I started out my career in DuPont, selling Kevlar. Kevlar was developed to make tires. Then they found out you can make aircraft composites. Then they found out you can put it in brakes. Then they found out you can moot[ put it in ] firefighter coats and so on and so forth. And guess what? Aircraft composites pays probably 5x as much as tires. And some people have [ inquired ], "Well, why don't you create an aerospace company?" But in the end, you have the same core technology. So what we do, of course, is we shift our investments, our capital allocations and make sure we get the best possible return for our shareholders' money and, over time, evolve the portfolio. But the portfolio, portfolio optionalities, that's regularly discussed with the Board.

This is Matthew Goetzinger at Madison Investments. I'm a bit surprised to see just the segment margin and growth targets for Beauty be a bit below Closures. And I think Slide 66 is an interesting take on the business from a retention and win rate perspective. Maybe you could kind of unpack the historical maturation of what's happened there in terms of retaining business and how often a new piece of business stays before it's recontracted. What kind of pricing may look like on a renewal? And is that retention of around 80%, is that a good number? Or should it be higher or lower to kind of ultimately drive better margins in that business over time?

Yes. So for a consumer goods business, it's quite high. Let me begin and then, Marc, please follow up. So all of you know this, but let me just remind you, clearly, we had been continuing some work to do in Beauty. But it came from, in hindsight, not a good decision of creating this large entity, pulling everything together, integrating multiple entities more than a decade ago. I'm here standing today because that led to certain things where the business started to stagnate and lose touch with the market and an underinvestment in the business. We have remedied a lot of that. We have not remedied everything on it. But the renovation of the Beauty business continues to progress. And what you see in Europe now, we are well within that target range and we have more work to do for it globally. But this is not the end in terms of what this business can do. You see many beauty businesses out there. They're more in line with the overall company profitability. But we are conservative. So let us get within the range that we are, and then we'll talk about the next step. And maybe you talk more about the conversion in the business?

Yes, on the conversion, so the 80% could be misleading. It's a good percentage, but let's say, a very small portion of the business on a yearly base comes back for RFQs every 2 to 3 years, depending on the customers. It's single-digit percentage of the total business that every year is for RFQs. And here, what we wanted to highlight is our ability to retain that business because we innovate, because when it comes back, we can propose new solutions, including improving our margins as we do this. But I think the one percentage you need to keep in mind is the 60%. We are able on all growth opportunities to convert 60% of them, which is very high in the market. Not all companies are disclosing these percentages. We know a little bit how it goes in our business. This is very high because you need to fight. You need to have the adequate solutions. You need, of course, to be on the market price and to have the customer intimacy I was mentioning before. So this is where we can make the difference. So the 60% is very high. The 80% is high and also on a very small portion of the business.

The other thing I would highlight, that's more anecdotally, 5 years ago, 6 years ago, customers were fleeing us because of some of the operational issues that we talked about. Today, they are extremely energized. They see what we've put up in Oyonnax. They see the innovation centers. Our pipeline is growing. And we feel very good about the momentum in the business. But it takes quite some time.

Josh Vesely from RW Baird for Ghansham Panjabi. In terms of destocking, looking back to the call from the second quarter, I know you guys mentioned personal and home care, you're still maybe going through that a little bit. And then food, you're most of the way through. Just curious, any updates on that, if you guys have seen any green shoots. And also just regards to talking to customers about that, if they've kind of laid out a time line in terms of when they see any normalization or reduction.

Let me kick it over to Hedi who will get into more detail. I know you've heard this from a lot of different companies. But also to give you a perspective, in 30 years, I have never seen what happened in the U.S. And it is, in big parts, the result of how we chose to deal with the pandemic. We basically send people home, give them money without a job. In Europe, the money came basically to the companies and people kept the job. So it was much easier to restart the economy in Europe than it was in the U.S. And all these dislocations, we're not through yet, but we're hopefully getting to the end.

So I would try to give you an answer depending really on the market. We really see a rebound in food and beverage, clearly a rebound. And I think our order book is back to reasonable levels compared to pre-destocking. On the personal care, home care, we still see weaknesses on the market, and we anticipate probably that to change hopefully in Q4 and in Q1 of 2024. So this is what we're seeing. But again, it is very difficult to predict. So we're having discussions, of course, with our customers. I was visiting some of our major customers in the U.S. this week. And sometimes, we probably sometimes know better than they do or at least with predictive models that we have, we can predict a little better, but it's very difficult, very difficult to really have certainty about what's going to happen. What I can tell you on our side is that we are ready with the labor and with the machine and to be in a position to restart because we don't want to be seeing the business coming back and not being able to deliver because we would like to participate to the rebound.

And just a quick follow-up on not regarding that but to something else, just curious why there's no formal earnings growth and long-term outline and long-term targets.

Well, I think I've showed on my last slide earnings growth to be faster than top line growth. So we gave you the top line growth range and then an EBITDA range implied, of course, that the earnings growth grows at least and we show faster than the top line. Back online, Marry?

I have only one question, which is pharma services. Can you tell us a little bit more about pharma services and what your revenue is from services today?

Pharma services, I mean, from a sales level perspective, I mean, it's not a huge part of our revenue, but it's a critical part because it's helping us to better engage with our customers. And because we've got that range of expertise, we can engage early on with the formulation development. And then you start, I will say, engaging and proposing additional type of services to be with them during their drug development program. We can start being engaged with the customer with our patient intimacy, I mean, with our human factor capabilities through our onboarding solutions. And by the way, we're going to say, "We can provide you additional type of services." So that's really the engagement with the customer and resulting in a better pipeline build and pipeline conversion. And that's really what service is helping us. And Stephan shared the Chiesi program that we signed, I mean, back in 2022. That's really the sweet spot. I mean, with Chiesi, we're going to provide basically a lot of, I would say, services to them on top of our devices; disease management, which is a digital therapeutics platform with them but also analytical services with them and support. The pMDI market, the asthma/COPD market, is going to go through a switch of propellant. And in that switch program, for a greener-type propellant, we are providing way more than just a device. And the program we signed with them is having quite lots of different experiences and capabilities that Aptar is offering. So a better engagement, better pipeline build, but obviously, creating revenue for us. But it's not a majority of our business, far from it.

I think in several shareholders discussions, we said it's several tens of millions of dollars. It's certainly double-digit million, but we're far away from triple-digit million for our service business. Profitability is about in line with company profitability except for the digital business. Having said that, it's a nice business in its own right, but the key is to develop the pipeline for the devices and lock in the device business.

I wanted to circle back to CapEx. I guess what I'm curious to better understand is, as the company has grown and gotten larger, you've had first this push to build out CapEx for the Pharma business, and I understand for the acceleration that's coming there. But then, as you talk about how we get back down to maybe the 8 percentage as a percent of sales, it still seems like a very high structural number. And I just wonder why there's not more CapEx leverage to how the business is built organizationally.

Yes. So first of all, it has also to do with the mix. Pharma is more capital intensive than the consumer business. We certainly wouldn't stand in front of you and say, "Hey, this is the right CapEx ratio for the consumer businesses. That's where we closely get to the 7% that it's been historically." In general, we had a period of underinvestment. Clearly, we have not caught up, and we can go back to more steady state. We will not say no to an extraordinary pharma opportunity. But clearly, we want to prune that capital expenditure back down.

And if I could follow up with a different question line. on the sustainability side of things, it was mentioned that the EcoVadis is used by about 150 customers. I'm just curious, from a percent of sales basis, how significant is it to customers.

Maybe Marc, any of you guys want to chime in?

Yes, I don't know about the percentage, but I can guarantee you that all the CPGs today are taking EcoVadis as a reference point. And if you look at the size of the CPG in our total turnover, I'm talking about consumer, you know they're big. Our top 5 probably should be, in our industry, in my Closures business, probably 34%, 35%. These guys need EcoVadis certification to allow you in. So they can let you in and say, okay, if you're gold for the next 2 years, it's okay, but we want it to be platinum at the end of, I would say, 2026, for example. So it is a prerequisite now to do business with this large corporation because themselves, they're sharing with the market and with you guys their target in terms of recyclable content, all of this. So it's part of all the ecosystem, and it becomes a must, a necessity, for us to invest into this on top of diversity, on top of all these elements that, at the end of the day, is an investment for us, but we think that we can benefit from that investment.

And I can echo what you said. So it goes even beyond the CPG companies in beauty. So it is now a mandatory to do business with many of them. And for all of them very soon. And it's not only the CDP. So this is why we are also investing. And the good thing is we are also perceived as being at the forefront of what has to be done. And some of our leading customers are also inviting us to advertise what we do to tease a bit the others to follow. So we are here in advance, and it's a very hard work to do. Beth can tell you. It doesn't happen overnight. And therefore, this is going to turn, already turning into a very strong competitive advantage as the market is calling for it more and more.

There is no indie brand out there that comes to us and say, "Hey, first, tell us about sustainability and we'll talk about the rest."

Yes. What I wanted to add, even in Pharma, I mean, 5 years ago, when I came back, I mean, we were not discussing sustainability with the pharma companies. But now this is at the top of the agenda. So as a segment, and because we are part of Aptar, we benefit from the experience from those guys and all the work done by the company in order to be the pharma drug delivery player being ahead of the curve from a sustainability perspective.

I think there's no additional questions. There's no additional questions online. Maybe we can continue the discussion over lunch.

All right. Again, I appreciate everybody in the room and on the web. And let's continue, for those here, a conversation over lunch. Thank you.