Afternoon. I'm Gabe Hajde, Wells Fargo's paper and packaging analyst, joined by my colleagues today. I think maybe one of them might be in the room, Bailey Gordon, Richard Carlson as well. We'd like to welcome you today to AptarGroup. Representing the company is CFO Vanessa Kanu, who has been with the company for about 18 months. Also attending from Aptar is Mary Skafidas, in the room as well. As many of you may or may not know, Aptar is the global leader in dosing, dispensing, and protection technologies for drugs and consumer products. Pharmaceutical is by far its largest segment in EBITDA terms, with the other two segments being beauty and closures. Thank you all for attending again. This is intended to be a fireside chat. To the extent folks have questions in the room, don't hesitate to ask.
With that introduction, Vanessa, I think you guys have a couple of slides and prepared remarks to go through.
We have a presentation.
Yeah.
Which, let me just make sure this clicker works. Are you ready?
Yeah. Love to hear everything about Aptar today.
Okay, fantastic. Well, thank you, Gabe. Thanks, everyone, for joining us. Thank you for describing what we do. I think if I were to synthesize this, it really just means that we are an expert in the end user. We create experiences for patients, for consumers. At the core, we are a technology company. We own the IP of everything that we manufacture, so we're not a contract manufacturer. We're truly global, operating in about 20 countries across four regions. The lion's share for us being in Europe. As you can see here, for the year ended 2025, $3.8 billion in revenue, about 46% of that from pharma, beauty being 35%, and closures 19%. You can kind of see there as well what the split of our adjusted EBITDA is by segment.
I'll also add, as you look at our segments across all of these end markets, we've got really good growing end markets and really good growth potential. We have a strong balance sheet. Our leverage is actually towards the lower end of many of our peers, if not most of them. Feeling very proud about that. Really, that strong balance sheet is also very helpful to us, particularly for our pharma customers, as you think through the long development cycles in pharma. Our customers want to make sure that they're dealing with a partner who is very financially strong and can stay through the course of those long development cycles as well. Also very proud of our capital allocation and return of capital to shareholders. In the last five years, we've returned about $1.2 billion to shareholders through dividends and through buybacks.
Of course, we're very proud of our sustainability credentials. We get a lot of awards for sustainability. I won't go through all of them that you see on the slides here. Certainly, this is a differentiator for our customers, particularly in the consumer businesses and also for our employees, in terms of attraction and retention of our employees. This really just looks at technologies and industrial capabilities and how these are shared across our different end markets. When you look at the verticals here, you see the different end markets that we play in, and the horizontals kind of show you how we share these technology and technology platforms across our end markets. For example, whether it's dispensing fine mist pumps or frankly airless systems or even aerosol valves and bag-on-valve, you see how we share these technologies across different end markets that we serve.
You look at the different industrial capabilities, precision injection molding, high-speed assembly, AI, and quality control. These are all areas where we share these capabilities across our entire footprint. You may also know that our pharma business was actually born from our beauty business, speaking also to the synergies that we share across our different end markets and platforms. I mentioned earlier that we're a technology company, and we own the IP of everything that we manufacture, and this really gives you a little more color around that. We've got about 7,300 patents across our portfolio. You see there pharma being just around two-thirds of that. For us, these patents are obviously know-how, trademarks, and patents.
This is really important to us, and this is why we defend our patents when we need to, because clearly from our perspective, this is what differentiates us relative to a lot of our competition. Innovation is how we drive change and growth across all three of our segments. Frankly, it's also a lot of the times how we also reprice and price upwards, is through coming to market with new innovative solutions. Patents and IP being a key component of that. I mentioned earlier that we are in growing end markets, and I really like this slide because when you think about any market, the first question is, well, what are the secular trends in that market, right? When you look across our three businesses, pharma, beauty, and closures, you can see the size of our TAM on this slide.
You can also see here, these are market growth rates, not Aptar growth rates. We are in a pharma packaging end market that's $165 billion, and the market growth is 7%. You can see what the market growth there is for beauty, as well as for closures. I will say, going back to my earlier comments around innovation, when you think about closures, for example, we have consistently grown better than market, higher than market, and that's through category conversion. The category conversion comes through driving innovation and new innovative products to the market. This is what makes us frankly excited about our long-term growth potential because we are in markets that do have secular tailwinds. Also, it's a highly diversified model. As we typically say, no single product is going to make or break our long-term target.
Of course, on a shorter-term basis, you'll have some products be stronger contributors than others. When you look at the overall longer-term picture, no one product is going to make or break our overall long-term trajectory. I talked a bit earlier about capital deployment and $1.2 billion return to shareholders. When you look at our capital allocation, and you look at the last several years, typically about two-thirds of our capital has been reinvested back in our business. Why? We're a growing business, and we also get really good returns. These are investments, both organic capital investments as well as M&A. Really good returns, and of course, we preferentially allocate capital to pharma, given the higher growth, higher profitability profile of pharma relative to other segments.
Of course, as I mentioned earlier, about a third of that being returned to shareholders, 32 years of annually increasing dividends. Of course, we also do some share buybacks. We've been very active in share buybacks, particularly over the past 12 to 14 months. Again, that remains a more discretionary element of our capital allocation framework. We already talked about sustainability and all the different awards that we see there. Just taking a little bit of a closer look at pharma. This is the growth engine of our business and will continue to be the growth engine of our business. We are differentiated here, not only through our very strong patent portfolio, but also the knowhow that we've built over the last 40 years.
When you look at the key strengths, we've been so deeply involved in this market over the last 40 years through a lot of technical regulatory knowhow, and that's what we help our customers with. We help our customers through the life cycle, both from obviously from the very beginning, where we start earning service revenues right through to different parts of the drug development cycle. A lot of knowhow we've built here over the last 40 years, a lot of engineering and scientific knowhow. When you look at the customers that we serve, we are serving a lot of the big pharma companies and also delivering to their larger CMO partners as well. This shows drug sales by delivery route. We like this slide because it's a good way to characterize the end market.
$1.7 trillion in the end market, oral being the largest part of that end market, followed by injectables. Respiratory, which is where a lot of our revenue comes from today, is a smaller part of the market, but actually a market that we do very well in. When you look at the margins across our portfolio, we actually make very strong margins in that part of the business, respiratory and nasal. We're also doing quite well in ophthalmic solutions. Our injectables business is growing really well, and doing quite well from a margin perspective as well. We also play a role in the oral route of delivery through our active material science portfolio. This gives you a sense for our historical growth trajectory, and I think it's important to level set on this because obviously, we've got some near-term headwinds with emergency medicine.
We've quantified that to investors, these are near-term headwinds. When you look at over a longer period of time, we've got long-term target growth of 7%-11% in pharma. When you look at the last 10 years, you see here we've done 9% CAGR. Not every single quarter was in that range, not every single year was in that range, but it's a CAGR. This is why, again, when we look at our targets, these are long-term growth targets, and you'll see that they're very much anchored in our historical growth profile, which we've achieved, and also, in our pipeline, which we're very excited about. Speaking of the pharma pipeline, the pipeline here, you'll hear us say pharma is a pipeline business. It's a numbers game for us, right? There's a lot of attrition in the pharma cycle.
We want a pipeline that is big, that is growing, and that as that pipeline converts, that obviously contributes to revenue growth. When you look at the pipeline over the last five years, it has grown significantly, not only in terms of scale, but also in terms of scope. The pipeline has become a lot more diversified. This shows you what the top 8 areas are, therapeutic areas are in our pipeline. I won't go through all of them, but you can see here it is fairly well diversified, which is very exciting to us because, again, no single product is going to make or break that long-term growth profile. Top three items, respiratory, biologics, and systemic nasal drug delivery, SNDD, which is essentially delivering medicines through the nose-to-brain, a very exciting area of growth for us in the future.
We are seeing more and more drugs being administered nasally, which bodes very well for us given what I said earlier in terms of our participation and really our level of experience in nasally administered therapies. This slide is really important because it really shows you how we actually grow over the life cycle of a drug. In the early days, we typically provide services to our customers. We are earning revenues from the early days. Then it shows you what happens when the drug goes from originator to generic to over-the-counter. So you can see there how we generate revenue in those early days with the originator. The drug then goes off patent. It is the API that goes off patent. We are part of the Drug Master File, and so when the generic comes online, they tend to use our product as well. Why?
Because if they don't, they have to go back through, because we are part of the Drug Master File, they have to go back through clinical trials. That adds a level of stickiness to our revenues, and our margin profile doesn't change when we go from originator to generic, which is pretty exciting. Then, of course, when the drug then goes over the counter, the market expands, volumes continue to expand, and our delivery devices are also part of that. And so volumes expand, we participate in that volume growth, and our margin profile doesn't change. It is actually the same and sometimes even better, depending on the particular product. So this tells you how our revenues tend to grow and compound over time.
Again, this is just really adding more color to my earlier comments about how we support a number of our customers through the drug development life cycle. Again, this also speaks to all the different therapeutic areas that we are seeing growth in our pipeline, and the key message here is diversification. Diversification, no one product, no one area, and this is what really excites us, particularly in the nose-to-brain area. Very quickly touching on beauty, a $1.3 billion business. Beauty, we went through a de-stocking cycle, particularly with high-end fragrance in the last couple of years. We are now seeing growth again in beauty. We saw growth overall, 2% core sales growth in 2025. We ended 2025 with positive growth in Q4. We also just had good growth in Q1 of this year.
As we've said on our last earnings call, we do expect to see strong growth in beauty also through the rest of 2026. We're very excited about that. We do have some short-term operational challenges that we talked about last quarter. We're impacted by a certain supplier, and we're working through some of those issues. We do expect the margins to improve, particularly as we get through the balance of 2026. You can see here, again, the diversification, not only geographically speaking, and by the way, the 60% that goes to Europe, our customers tend to ship that to other regions as well. That's just where we're shipping to the customers. They tend to actually ship that outward.
A very globally diversified business for us, and you can see all the very large names and brands that you'll recognize in terms of the customers that we serve in beauty. Also a very diversified portfolio from fragrance pumps to airless systems to turnkey solutions that we provide for our customers. Last but not least, closures, which is a newer segment for us that was created just a few years ago by consolidating our food and beverage business and some personal care out of our beauty business. That business is doing quite well for us. We continue to have very good product growth in closures. Margins have generally been at the lower end of our long-term target range. We also had some operational challenges there in the last couple of quarters, which we are working through.
We see good growth potential in closures and also the opportunity to get our margins more consistently in that long-term target range. Again, here, a very diversified portfolio, just looking at the breadth of all the different products that we bring to the market in this part of our business. Key takeaways, I think it's very clear the fundamentals of our pharma business, we've been very, very strong. What excites us is frankly, the pipeline. It's good that our growth historically has been consistent, but as we look outward, very excited about the breadth of the pipeline and the growth in the pipeline as well. Injectables is doing very well. You would have seen from the last few quarters of our earnings call, double-digit growth in injectables, and so we're excited about that.
Innovation, a key driver of our growth, not only in the past, but also going forward. Of course, the strong balance sheet that I spoke to, which is something that we're very proud of because it gives us the flexibility to invest back into our business, but also return capital to our highly valued shareholders. With that, Gabe, let me stop there. That was a quick flyby. Thank you, Mary. That was more than a couple of slides.
Appreciate, it's a general session, it's an equities conference here at Wells Fargo today. We recently got more constructive on the name March 20th, part of it was the strong balance sheet and the resilience of your pharma segment. There's a lot of detail in here that it's tough to walk through everything that you do for your customers. We'll start on the negatives first. You mentioned this emergency medicine de-stocking, that's been a little bit of a nagging issue. You talk about hitting singles and doubles. I've covered the stock now for close to 20 years. That's historically speaking been the case.
That singles and doubles, you consistently deliver. NARCAN naloxone is a little bit of an exception to that.
You kind of framed up for us that it was going to be down about 35%, maybe 40% this year, going from maybe 7% of revenue to 5% of revenue. Can you just talk about how that's kind of the cadence of that through the first half? Is it playing out the way you expected? From a profitability standpoint, I think it tends to be one of the more attractive areas within your portfolio. Operating leverage, de-leverage. Is there anything unique about that product relative to everything else that you'd like to call out for us?
Maybe just stepping back, NARCAN naloxone, pharma generally has a pretty long cycle. It takes a while to bring these products to market. Let's talk about why we saw such rapid growth in a short amount of time. Clearly, we were in a crisis, opiate crisis, and the FDA accelerated the timelines. We saw a very large amount of growth over a much, much truncated cycle. It got to a point where we did start to see that inventory was likely building up. This is a channel that is very, very opaque. There's not a lot of data, third-party external data. You can't go to IQVIA, you can't go to Nielsen, you can't go to other credible sources of external data to say, "I'll just plug these numbers into my model and just see what it spits out," right?
That's a very opaque channel. Frankly, what's the channel for this product? Hospitals, fire departments, libraries, and so on. There's not really one single source of information. We started to see that we thought inventory was building up, and of course, our customers, however, because we're B2B, kept on ordering, and of course, you're going to fulfill your customer's orders. You're not going to tell your customers, "No thanks, I'm going to hold your order because I think you might be building up inventory." They also had some of their data possibly incorrect.
We suspected we were building up inventory, and we started to put our own information together, and shared these concerns. We were able to quantify it, to your point, Gabe, and we did quantify that Q4 of 2025 would be a pretty big impact, and we shared what that was. Then for 2026, we said it was about a $65 million full year headwind is what we expected. We also said roughly two-thirds of that would be the first-half impact, and about a third of that would be the second-half impact. We are so far tracking pretty close to those estimates. Partly good forecasting on our end, partly luck because we can't all take the credit for everything that goes well, but it's tracking pretty closely so far. That all bodes well.
To your point, this is a very high-margin part of our portfolio, emergency medicine, saving lives, controlling the dosage, five nines of reliability, and quality. Of course, in pharma, these are the kinds of medicines that command a pretty high price point. Very high margins for us. As we experience these headwinds to the top line driven from NARCAN, of course, that is having an outsized impact to the bottom line. With all that being said, we're super proud of the fact that even in Q1, when we looked at the year-over-year impacts, pharma still was in its long-term target margin range. I think that also speaks to the strength of the rest of our portfolio. Also other mitigating factors that we're taking internally, just so that we're not seeing all of this flow straight through to the bottom line.
I would agree with that. Just maybe specifically on emergency medicines or however you guys track that internally, would you consider that anecdotally, what we hear from first responders is that, unfortunately, it's still something that they're using on a day-to-day basis, and oftentimes they administer three at a time because you may not always necessarily get the response you want.
Yeah
After the first one. Just any sort of dialogue with customers that would suggest this will be a growing product line for Aptar, or is it too soon to tell?
Certainly, we want to get through the destocking dynamics. We think that the destocking should be behind us at the end of this year. Back to my earlier points about we're tracking to that. The question is what happens after, right? There was a period of uncertainty around the funding climate, that seems to have stabilized. Funding is important for this product because it's largely funded by the government. That's how states and locals get the budget to buy these lifesaving products. Funding is really important and we had a period of early last year, there was a lot of uncertainty. Is it cut, is it not cut? Then we got some clarification from the administration.
That climate is now stabilizing, and in fact, I think the funding expectations for 2027 are looking pretty healthy based on what we're seeing right now, which is good. Once we pass these destocking dynamics, unfortunately, the crisis is not behind us, right? The need for these lifesaving medications will continue. The originator in this space has certainly said publicly that they do expect this to be a high single to mid-single digit grower over time. For us, we think that's the right range once we're past this period.
Fairly consistent with the portfolio overall.
Yeah.
Okay.
Yeah.
One question that I'm trying to ask all the companies that are at our conference, I think it's relevant. How would you compare this recent acceleration in input cost to what we observed during the pandemic or 2021, 2022 timeframe? Obviously, everyone's pretty laser-focused on oil, petrochemical derivatives, which are somewhat impactful for your business from a raw material standpoint. But obviously, day-to-day transportation.
Those types of things, internal meetings or however you characterize it. How are you thinking about that? Then relationship with your customers, your ability to recover that.
Yeah. I would say we're better organized. Having experienced it before, what's different this time is we're better organized. At least from our organization, we were able to hit the ground running relatively quickly because we had already developed this muscle internally through COVID, through other periods of inflation. Frankly, also through tariffs last year.
Just name your inflation. There's been a lot of inflation in the last few years, right? Tariffs were similar to that extent. This time, we didn't see a lot in Q1. We started to see it towards the tail end of March. It didn't feature a lot in our commentary in our Q1 earnings. We did talk about it in terms of Q2 and beyond. We are seeing a significant amount of inflation. For us, the biggest impact is resin. Resin prices, particularly in our closure segment. Why closures? Well, closures just has a higher percentage of resin in the actual product itself compared to, say, pharma and beauty. Closures sees the biggest impact. In closures, we have indexation clauses in our contracts. We pass that on to customers.
The company has also done a really good job learning from those earlier experiences, Gabe, where we're now passing that on a much shorter time lag than before. If you go back many years, you would've seen a bit of a time differential where we incurred the cost, but we didn't quite pass it through right away, you saw some margin degradation, then we caught up. I think it's a lot smoother this time. We've built up that muscle internally, which is great. In beauty and in pharma, where we don't quite have the same level of indexation, just again for reasons I just mentioned, we're actually passing those cost increases through as discrete line items, as surcharges. It's raw materials cost, but frankly, it's also transportation.
Energy prices are higher across the board, which has ripple effects across a number of things, and we've been passing those through. Again, so far, so good. Nobody likes getting a price increase. I don't like getting a price increase. We're very transparent. Again, that's because we've built that muscle over time where we're showing them and sharing with our customers exactly why and where the cost increases are coming from.
Nola, I think the muscle memory is an important distinction. What's interesting is, you see that over time these companies develop that, things have changed for sure, I think, in terms of how go-to-market used to be versus where it is today. That's good to hear. What we also hear is your product typically as a portion of the, whether it's the retail price on the shelf-
Yeah
or think about a drug, is typically a small fraction. They're focused on some other items.
That's correct. Yep.
You mentioned tariffs. I've got a different question about it. Just we kind of have this 150 days, I think now we're focused on Section 301 tariffs, is how we're going to get this through. As you look at the business, is there anything that jumps out at you, and I'm thinking more maybe in the closures or Beauty segment, where whether it's to get ahead of price increases, whether it's we've got some certainty on tariffs, where customers may be trying to sneakily build some inventory, or is that not something that-
We haven't really seen that, we were watching for that, are people going to pre-buy?
to get ahead of expected changes in tariffs. We were very acute in looking for this even last year, but also now. We don't really see that. We may have a couple of anecdotal cases where we've heard that, okay, maybe that could be a driver, but we have not seen this as anything sort of notable across the board. Not really any big impact there.
Okay. I want to get to the exciting stuff, because Aptar is one of the few stocks in the group when you look over a long period of time that is a compounder, and it's been driven by the investment in pharma. You mentioned pipeline in your prepared remarks. Nasal delivery is a big part of that. Injectables is a big part of that. I think other folks, this isn't a healthcare conference, but to the extent that we're seeing more and more biologics and biosimilars that are out there in the marketplace for a variety of different treatments. When you look at the pipeline, and I'm looking at things that are out there in the public domain that we know about, Envy Mist, Cardemyst, neffy. It's easier from a patient compliance standpoint.
Getting back to that 7%-11% growth, which seems to be sort of the linchpin for the stock. Are those the types of drugs and introductions, number one, are there other ones that I'm missing? Number two, you kind of gave us that flowchart, which almost looked like it was, I want to say 17-20 years when you kind of go from.
I think it was 30 years.
30 years. Okay. As you look out at maybe over the next 12-18 months, we feel good that we can get back into that range, assuming a normalized backdrop, whatever that looks like.
Yeah. Let me just maybe start with, the range is a long-term range.
Yeah.
It's not a 12-month range.
Yep.
Again, emergency medicine, you kind of get these one-time effects, but when you look out over a longer term period, we absolutely expect to continue that compounding that you just described. Honestly, Gabe, I think a lot of the examples you gave are just exactly the reasons why we're very excited. The examples you gave of neffy, Embymist, and so on, these are cases where an existing molecule was taken, where the molecule was delivered in a particular way. In the case of neffy, it's epinephrine, which we all know, you jam it into your thigh as an injection. Now being nasally delivered. You've got a big part of the population that may not necessarily, my children, to start with. They don't like needles. So they would be perfect case studies for why neffy, for example, is a very exciting development.
Now, it takes time in pharma. It's not just you don't launch the product tomorrow, all of a sudden it grows like gangbusters. These things do take years to grow, insurance companies, adoption, and so on. This is a very exciting development for us. Some of the other items that you mentioned as well. Again, existing molecule, new method of delivery, nasal administration. It's a lot more efficacious. It's a lot more convenient. When you think about the broader population demographics, also other broader pressures across healthcare. Aging population, also, the cost of hospitalization is very, very high. It's one of the biggest problems that we have.
This move towards self-administration, patient can treat themselves at home without a nurse or some kind of a supervision because you can administer through the nose versus having somebody help you with an injection, or God forbid you do it wrong, because you're so careful about your fears around needles and so on. This is a lot more convenient and efficacious. These are broader trends that actually work in our favor. We're also seeing more and more research around the nose-to-brain overall, and depression is a key area. Also, other diseases such as Parkinson's, Alzheimer's, all of these are areas being researched for nasal administration of the drugs. Very, very exciting for us. As I kind of shared that slice of the market that we play so well in, this is all just fantastic. This is exactly our sweet spot.
At risk of.
The highest in our portfolio.
Right.
As that grows, very good for our margins as well.
I think you guys put out a press release on May 20th, and unfortunately, Gael's not here. He's CEO-elect.
Yeah
head of pharma. Maybe he can speak a little bit more eloquently about this. I think it was kind of like patent applications.
Yep
for pre-clinical data supporting intranasal delivery for, or pulmonary of GLP-1.
Yep. semaglutide? Yeah.
Which a lot of people are really excited about. Again, we're not at the healthcare conference. Just from the packaging guys' perspective, presumably patient compliance may go up. Maybe adoption could go up. There's a lot of, I guess, net benefits of that. Is this something where the molecule is already proven? Can you walk us through maybe some of the technical aspects? Is it a truncated timeline that we should think about?
This is not going to deliver revenue tomorrow.
Right
It really speaks to our level of innovation. It comes back to the whole nasal administration, right? This is GLP-1 being delivered not only as an injectable, not only as an oral, but potentially, through the nose. Aptar, just given our knowhow in this space, we just filed patents on this to give us points a couple of weeks ago. We're very excited about this. Clearly, we're not a pharmaceutical company, so we're not going to start developing the drug to sell. There's so many different potential routes to market for this. Licensing, so many other opportunities that may come along with it. Of course, you got the device sale, as well. This really shows our innovation in this area, really leading in this area. Also, this is something that could unleash a lot of potential future revenue for us.
The other aspect, it goes back to the nasal administration. It's also interesting, back to the innovation thing, as we talk about GLP-1, maybe getting a little bit less questions now, but a quarter or two ago it was all about what's going to happen to your injectables because now GLP-1s are going to be through oral. We always said, there will be a market, right? We don't see this as being cannibalistic to the injectables portfolio. We do think that it expands the market. There will be coexistence of oral solutions to injectable solutions. Now we're looking at potentially delivering GLP-1 through the nasal tract. Very exciting. This is exactly the area where Aptar is frankly leading the pack.
I guess if we were in the business of tooting horns, you guys are the only company out there that could do all three. You have active packaging for oral-
Yeah
solid dose, right? You have injectables, and you also have the-
100%.
Yeah.
100%. Very exciting. The other thing is, I would say, just as we're talking about injectables, GLP-1s are of course very important, but that's not the only driver of our injectables growth. Biologics are a huge driver of our injectables growth. When you looked at the slide on the pipeline just a few slides ago, we saw Biologics being a big part of that. In fact, I think it was the second biggest area in our pipeline, so we're very excited about that. While we will participate in GLP-1 growth, it's not the only driver of growth in our injectables business, Annex 1 also being a big driver. These are all areas, to your earlier question, Gabe, that we are quite excited about and we think supportive of that long term, 7%-11%.
I want to ask a general corporate question and then maybe two on the other businesses. Stephan told us that he's going to be retiring in March. He was an outside CEO. Now, like I said, Gael, who heads up pharma, is an internal candidate. Just a fresh set of eyes. You've worked with him now, obviously. I think, at least maybe for me, it seemed like he was kind of being groomed. I think it's going to be a good internal promotion. Are there any things that you see that, during the Touya era- that might be in focus operationally, commercially, or anything like that you'd call out for us?
Yeah. I mean, yes. First, we wish Stephan the best in his retirement. He chose to retire. He is very excited about his future plans with his wife. They fly planes. They go hiking. I mean, Frankly, the rest of us are just jealous about all the fun things he plans to do when he retires, but we are very happy for him. He certainly deserves it. Now we welcome Gael, and as you say, Gael is a very strong leader, very well-known and very well-respected within the organization. I think one of the unique things about Gael as well is not only is he an internal candidate, but he also knows all the segments very well. I think that is important.
Obviously has run the pharma business for the last 10 years and has been quite successful in running the pharma business for the last 10 years. I think, Gael, I have worked with him very closely for the last 18 months since I joined the organization. Of course, even more closely now since the board made its succession decision, as he is now going through the transition with Stephan. You will find in Gael likes to study things.
He is very much data-driven, very thoughtful, wants the facts, which as a CFO, goodness gracious, thank you.
Yeah
Let us talk facts. You will also see in Gael a very strong drive for innovation. I think you are going to see that from him as well. I think you are going to see, being somebody who has been with Aptar for a long time and loves the organization, a very strong focus on culture, values. I think that is going to be important. Also performance, right? Gael holds his team accountable. He is not looking for excuses. He is looking for, "Show me the data, show me where you are growing, and let us dig into the details." He is very detail-oriented, which again, I think for a CFO, I could not be more grateful for that, because I think those are all the attributes that will bode well as we go forward. Excited to have him on board, and looking forward to what potentially comes next.
Data-driven.
Data-driven.
I like it, yep. Beauty, I think Q1 growth was in the 3% range. Margins, a tick below. You talked about having to re-qualify a supplier on some particular applications.
Target is 15%-17%. You're pretty close. Do we need that?
We're oh-so-close. That's the frustrating part, Gabe. Let's just call a spade a spade.
Well.
We're really close, yeah.
You're close. I wanted to ask about, you mentioned de-stock, high-end fragrance versus kind of massage. Do we need that incremental volume bump to kind of get in that range, or are there things that we can do internally to get there?
We've done a lot, which is my comment about the frustrating part is we've done so much, and we've come so close. Then, of course, we saw some of these operational challenges which set us back a little bit. That's my comment around just being frustrated. It really is within distance.
Yep.
If you look at the work we've done in beauty for the last couple of years, we've shut down 10 plants. We've right-sized the labor force to the tune of 10%, 11%, 12%. The organization has not sat back, has done a lot of work around cost management in beauty, and continues to do a lot of work around cost management in beauty. We did go through this de-stocking cycle, which obviously was a headwind to the top line, and in manufacturing, volumes matter.
Right.
Volumes matter for your absorption and all of those different things, right? We are excited that we're now seeing volume growth in beauty after that long period of de-stocking. We saw growth in Q4. We saw growth in Q1. The margins, they don't just rebound in your first quarter of growth, we do need to see this consistently, but we're absolutely optimistic that we will start to see improvement in the beauty margins, and we need to get through these short-term operational hiccups that you mentioned, like the fire and the new supplier and having to incur additional costs, that should all be behind us, we think, by the end of the first half. Hopefully, we're expecting to see sequential improvement in the margins as we go forward.
Last question for you, similar line of questioning for closures, just kind of the path forward for profitability. Starting the year, I think, food and beverage, at least, customers were optimistic they could promote. We're hitting another wave of inflation. How should we think about that?
Yeah. Closures, again, newer segment, as I mentioned earlier. We've been pretty good from a growth perspective in closures. Our products, again, the reported growth tends to, depending on rest and pass-through-
and so on. If you kind of strip that out and just look at what's happened to the products revenue in closures, we've done pretty well. We've typically grown better than market, as I mentioned earlier, through innovation, converting categories, and so on. We actually expect that to continue. We're expecting 2026 to be a good growth year for closures. There again, as we kind of look at the last 12 to 18 months, we've been at the lower end of our target margin range. We have not been in the last couple of quarters because of some operational challenges, some maintenance issues that we've had to deal with. The closures team continues to work pretty diligently through those issues. There again, we did say that we expect that to continue into the first half.
Again, we expect sequential improvement in the closures margins going forward.
Perfect. I think that wraps it up. Unless there's any questions from the audience
You asked all the questions.
We tend to do that. Thank you very much.
Thank you, Gabe. Thanks, everyone.