Prepared remarks
Ladies and gentlemen, thank you for standing by, and welcome to Aptar's 26 Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session. Introducing today's conference call is Mrs. Mary Skafidas, Senior Vice President, Investor Relations and Communications. Please go ahead.
Hello, everyone, and thank you for being with us today. Joining me on today's call are Stephan Tanda, our President and CEO; Vanessa Kanu, Executive Vice President and CFO; and Gael Touya, our CEO designate and President of Aptar Pharma. Our press release and accompanying slide deck have been posted on our website under the Investor Relations page. During this call, we will be discussing certain non-GAAP financial measures. These measures are reconciled to the most directly comparable GAAP financial measure, and the reconciliations are set forth in the press release. Please refer to the press release disseminated yesterday for the reconciliations of non-GAAP measures to the most comparable GAAP measure discussed during this earnings call. As always, we will post a replay of this call on our website. I would now like to turn the conference call over to Stephan.
Thank you, Mary, and good morning, everyone. As many of you know, this is my final earnings call as CEO of Aptar before I will retire later this year. It has been a tremendous honor to lead this company and work alongside our talented teams around the world. I am incredibly proud of what we have accomplished together and confident that Aptar is well positioned for continued success. With Gael Touya assuming the role of President and CEO on September 1st, I am assured in the future success of the company and excited as a shareholder. Gael and I have worked closely together throughout this transition and for much of the last decade. I know Aptar will greatly benefit from his deep experience, leadership, and vision. Gael is joining us on the call today and he will be sharing our outlook towards the end of the call. On a personal note, leading Aptar has been the greatest privilege of my career. What I will remember most is not any single accomplishment, but the people I have had the opportunity to work alongside and the relationships I have built with employees, customers, the investment community, and partners around the world. I have always believed that great companies are built by great people, and Aptar is fortunate to have an exceptional team, a strong culture founded in performance and purpose, and a consistent focus on execution, innovation, agility, and value creation. While there is always more work to do, I believe Aptar is entering its next chapter from a position of strength. I am excited about the future under Gael's leadership and remain confident in the company's ability to deliver profitable growth and create long-term value for shareholders. And now back to the business at hand. Let me begin my earnings remarks by highlighting our second quarter results. And later in the call, our CFO, Vanessa Kanu will provide additional details on the key drivers for the quarter. I am pleased to report that all three of our segments delivered positive sales growth during the quarter, and we delivered adjusted EPS results above our guidance range due in part to better-than-expected pharma performance. The pharma segment continued to perform well, driven by strong demand across our injectables, consumer health care, and prescription businesses, highlighting the strengths of our innovation-led portfolio and the dedication of our teams around the world. We saw continued momentum in injectables supported by demand for elastomeric components used for biologics, vaccines, and GLP-1 therapies, which according to a recent survey showed that 11% of Americans are currently taking GLP-1 for weight loss, up from just 3% in 2024. Consumer health care benefited from strong nasal decongestion and eye care solutions sales. Prescriptions saw growth in central nervous system therapeutics and asthma COPD applications, which helped offset the anticipated destocking-related decline in emergency medicines. Beyond pharma, beauty benefited from double-digit core sales growth in prestige fragrance while closures saw strong beverage demand, particularly in bottled water. Operational performance in both segments improved progressively from the first quarter. Shifting gears from performance highlights, I want to spend a few minutes discussing how we continue to strengthen the pipeline and long-term growth of pharma. Beyond our core delivery systems, we continue to expand the value we bring to customers across formulation development, analytical services, regulatory support, and patient engagement. A few good examples include the patent applications we announced during the quarter related to inhaled and nasal GLP-1 therapies. While these programs remain in the early stages, they build on formulation expertise that we currently provide to customers and demonstrate our continued exploration of capabilities that could create future growth opportunities in the delivery of biologics and other high-value therapeutic areas. Turning to active material science, our U.S. patent application for Ensorb has been approved. Ensorb is designed to address unacceptably high levels of nitrosamine impurities in pharmaceutical products. The FDA has issued guidance on nitrosamine predicted carcinogenic potency categorization, and recommendations on when a manufacturer should recall a product. As a first-of-its-kind packaging-delivered solution, Aptar's Ensorb technology is intended to give pharmaceutical companies a new tool to reduce risk, meet regulatory demands, and deliver safer products. Additionally, we announced a collaborative system framework for injectable therapies, providing customers with earlier insight into assembled system performance for injectable therapies. These expanded capabilities help customers make more informed development decisions, better manage risk, accelerate development timelines, and address the expectations of the United States Pharmacopeia. Taken together, these investments continue to advance our strategy, focusing all the way from drug formulation to the patient, and deepen our role in the pharmaceutical development process. During the quarter, we also saw several milestones that reinforced the strength of our core pulmonary, nasal, and injectable delivery platforms. In respiratory health, products utilizing Aptar technologies received FDA approvals across both rescue and maintenance therapies for asthma and COPD, further validating the performance and regulatory track record of our pressurized metered dose inhaler, or PMDI, platform. Chiesi received approval from the UK Medicines and Healthcare Products Regulatory Agency for the world's first PMDI utilizing HFA-152a, one of the next-generation propellants with low global warming potential. This achievement is particularly meaningful because in 2023, Aptar was selected by the U.S. Food and Drug Administration to conduct research on next-generation propellant PMDIs through our NanoFarm business, recognizing our deep expertise in inhaled drug delivery. It is encouraging to see the first approval with this new propellant come to market, helping expand patient access to essential respiratory therapies while helping to reduce environmental impact. We continue to see growing interest in nasal delivery across a widening range of therapeutic areas. A recent example is Eli Lilly's announced acquisition of atai Life Sciences and Beckley Psytech centered on an intranasal therapy for treatment-resistant depression that has received FDA breakthrough therapy designation, and the program has begun initiating Phase 3 trials. We believe this highlights and confirms a broader trend we have been discussing for some time now: nasal delivery is increasingly being explored not only in allergy, migraine, and emergency medicines, but also in central nervous system disorders, where rapid onset and direct access to the central nervous system may provide meaningful therapeutic advantages. One of the most significant developments during the quarter was the FDA's update to multiple product-specific guidance documents for generic inhaled therapies. These changes remove certain requirements, including certain clinical studies and bioequivalence testing, representing a significant shift in the FDA's expectations for generic PMDI development. We believe this is a positive development for Aptar, as the streamlined requirements should help bring more generic inhaled products to market more efficiently while also highlighting the value of the scientific expertise and data generated through our collaboration with the FDA. Moving to beauty, we continue to focus on premiumization, differentiated consumer experiences, and dispensing technologies that help our customers stand out in increasingly competitive categories. We had the first commercial launch of our autoloading dosing dropper technology for Dermalogica's Pro-Collagen Banking Booster skin care product. This technology features an autoloading dropper cap which fills the applicator with the same dose after each use and addresses consumer needs around dosage control, convenience, and clean usage. I also want to highlight a new range of fragrances by a French luxury brand launched in the Middle East market featuring our Prestige Fragrance Pump. Lastly, in closures, recent launches showcase our ability to improve convenience, functionality, and the overall consumer experience through differentiated dispensing solutions. Heinz is featuring our tabletop closure for clean, convenient directional dispensing on its new line of flavorful dipping sauces in North America. In China, our closure with Simply Squeeze valve is being used for easy, one-handed spill-free hydration on the go. In terms of sustainability, there are several notable accolades to touch on. Aptar was named a CDP Supplier Engagement Leader for the sixth consecutive year. This assessment highlights companies that are engaging their suppliers on climate change and supporting efforts to address emissions throughout the value chain. We have also been named one of the world's most sustainable companies by Time for the third consecutive year, and we have been named among the magazine's Top 100 America's Best Companies. This inaugural list highlights top U.S.-based companies during the nation's 250th anniversary. The America's Best Companies 2026 ranking identified the top performing companies based on employee satisfaction, financial performance, as well as sustainability performance and transparency. Aptar is ranked within the top five companies nationwide in the engineering, manufacturing, and medical technology category and is ranked in the top ten companies nationwide for sustainability and transparency. I also want to provide an update on litigation. Recently, the court issued a favorable ruling for Aptar in our litigation against ARS Pharmaceuticals related to Aptar's proprietary nasal drug delivery technology and confidential manufacturing know-how. The court granted our motion to amend the complaint to maintain our state law trade secret misappropriation claim and denied ARS's motion to dismiss the remaining claims. We were also pleased that the court transferred the later-filed California action brought by ARS to New York under the first-to-file rule, ensuring the related matters will proceed in a single jurisdiction. The litigation remains ongoing, and the next phase will allow us to further develop the factual record. Overall, we view this decision as a positive step allowing Aptar to continue pursuing the claims at the heart of the case and reinforcing the importance of protecting the intellectual property, technical expertise, and manufacturing know-how that differentiate us in the marketplace. Now I would like to turn the call over to Vanessa to provide additional details.
Thank you, Stephan, and good morning, everyone. Let me begin by summarizing the highlights for the quarter. Our reported sales increased 6% to $1 billion, a new quarterly record. Core sales, which adjust for currency effects and acquisitions, increased 1% compared to the prior year. We achieved adjusted EBITDA of $213 million, a decrease of 3% from the prior year, and adjusted EBITDA margin of 20.7% compared to 22.6% in the prior year, primarily due to less favorable product mix and ongoing operational challenges in beauty and closures that have progressively improved since the beginning of the year. Adjusted earnings per share were $1.42 compared to the prior year's adjusted earnings per share of $1.68 at comparable exchange rates. Before moving to segment performance, I would like to briefly address the higher input costs experienced since the start of the recent conflict in the Middle East. As anticipated, we experienced higher input costs during the quarter, which we largely offset through customer pass-throughs, with some timing lag in beauty. As we look beyond Q2, we continue to monitor the situation closely, and we will also continue to take appropriate pricing actions to offset higher costs where necessary. And with that, let's turn to our pharma segment results. Pharma core sales increased 1%, impacted by the anticipated decline in emergency medicine. As previously discussed, emergency medicine sales are expected to decrease by approximately $65 million in fiscal year 2026. Approximately two-thirds of this decline has already been incurred in the first half of the year, with the majority of that having been in the second quarter, as we had anticipated. The remaining one-third is expected in the second half of the year, and primarily in the third quarter. We continue to expect that the year-over-year headwind will abate by the fourth quarter. Excluding emergency medicine, core sales in our pharma segment grew by 8% in the quarter, demonstrating the resilience of the portfolio. Let me break that down by market, starting with our proprietary drug delivery systems. Prescription core sales decreased 7%. Excluding emergency medicine, prescription core sales increased 8%. Central nervous system and asthma COPD therapeutics were drivers of growth in the quarter. Consumer healthcare core sales increased 15% due to strong demand for nasal solutions, which grew 9%, with strong demand primarily for elastomeric components used for GLP-1, biologics, and vaccines. Services also contributed positively in the quarter. We continue to see strong pipeline build for Annex 1, GLP-1, and biologics projects. For our active material science solutions, core sales decreased 2% in the quarter. Growth in probiotics and oral solid dose sales partially offset the decline in diabetes test strips, which reflected customer inventory normalization following robust growth in the prior year. Pharma's adjusted EBITDA margin for the quarter was 33.6%, a 180-basis-point decline from the prior year. The margin decline was anticipated and driven by short-term unfavorable product mix, primarily due to the decline in high-margin emergency medicine sales. While royalties and productivity initiatives continue to positively impact margins, excluding emergency medicine the adjusted EBITDA margin for the segment would have improved year over year. Moving to our beauty segment, core sales increased 1% as demand for beauty dispensing systems and the pass-through of higher input costs more than compensated for lower tooling sales. Looking at the two largest end markets for beauty — fragrance, facial skin care, and color cosmetics — core sales increased 2%, primarily due to strong sales growth for prestige fragrance pumps and color cosmetics. Our turnkey indie beauty business also continues to perform well, benefiting from the growth of indie brands, which continue to capture consumer interest across the beauty market. Personal care core sales were flat. Applications for hair care continued to show good demand but did not offset lower tooling sales from the prior year. Beauty's adjusted EBITDA margin for the quarter was 12.2%, which, while improved sequentially from the prior quarter, represented a decline of 190 basis points year over year. This was primarily attributed to lower product volumes, unfavorable mix, and the timing of resin pass-throughs. Moving to the closure segment, core sales increased 4% compared to the prior year. Strong volume growth, particularly in beverages, and the pass-through of higher input costs more than compensated for lower tooling sales. Looking at the two largest end markets for closures, food core sales decreased 1% primarily due to lower tooling sales, which was partially offset by continued demand for our sauces and condiments dispensing closures. This end market also faced a challenging comparison from the prior year period of double-digit growth. Beverage core sales increased 14% primarily driven by increased sales of bottled water and functional sports drinks. The segment's adjusted EBITDA margin was 14.9%, a 200-basis-point decline over the prior year. These results were temporarily impacted by the ramp-up of new production lines and by a previously reported maintenance initiative that continues to make sequential progress. Selling, research and development, and administrative costs, or SG&A, increased in absolute dollars largely due to currency effects and the impact of acquisitions. Excluding currency effects and acquisitions, SG&A dollars were flat year-over-year. SG&A as a percentage of sales decreased from 15.6% in Q2 2025 to 15.4% in Q2 2026, a 20-basis-point reduction year over year. These amounts include approximately $4 million in legal expenses for non-ordinary course litigation, which did not exist in the prior year period. As I noted earlier, adjusted earnings per share of $1.42 were down 15% year over year at comparable exchange rates. This was due to lower sales of emergency medicine products in pharma, operational issues in beauty and closures, as well as higher depreciation and amortization expenses associated with our capital investments and acquisitions. Interest expense also increased from higher interest rates and a higher average debt balance. Our adjusted effective tax rate for the quarter was 23.7% compared to the prior year's 20%. In the prior year period, the tax rate benefited from the realization of a deferred tax benefit as well as greater excess tax benefits from share-based compensation. Moving to our year-to-date performance, reported sales increased 8% and core sales increased 1%. Strong growth in consumer healthcare and injectables offset the emergency medicine destocking, while beauty and closures also saw growth on a year-to-date basis. Adjusted EBITDA remained consistent at $401 million while adjusted EBITDA margin decreased by 170 basis points to 20%. Adjusted earnings per share decreased 12% to $2.61 compared to the prior year period, on a comparable exchange rate basis. Free cash flow year-to-date increased by $8 million to $99 million, comprising cash from operations of $222 million less capital expenditures net of government grants of $123 million. Over the last six months, the company has returned $212 million to shareholders through share repurchases and dividends. So far this year, we have repurchased 1.1 million shares for $150 million. Finally, we ended the quarter with a cash balance of $190 million, net debt of $1.2 billion, and a leverage ratio of 1.49x, reflecting a very strong balance sheet. Now on to our outlook for Q3. We anticipate third-quarter adjusted earnings per share to be in the range of $1.45 to $1.53. This assumes an effective tax rate range of 22.5% to 24.5% and a euro-to-U.S. dollar exchange rate of 1.14. For full-year 2026, we continue to expect capital investments to be in the range of $260 million to $280 million and depreciation and amortization expense to be between $310 million and $320 million. Before I hand the call over to Gael, I want to take a moment to address Stephan. Stephan, it has been a pleasure to partner with you during an important chapter in Aptar's history. I joined Aptar because of its unique strengths: a rich history, a strong foundation that you have helped to build, its culture and values, and importantly, the robust opportunities that lie ahead. I have enjoyed working with you and appreciate your partnership. Stephan, thank you for your leadership, your contributions to Aptar, and the solid foundation you leave for the future. We wish you and your family all the best in retirement and do not be a stranger. With that, I will turn it over to Gael to provide a few closing comments before we move to Q&A.
Thank you, Vanessa. As I prepare to assume the role of CEO on September 1st, I do so with great confidence in Aptar's future. We expect growth across all three segments, supported by strong broad-based demand in pharma across injectables and consumer health care and prescription applications excluding emergency medicine, as well as continued momentum in closures and improving trends in beauty. Before we open the call for questions, I would like to take a moment to recognize Stephan on his final earnings call as CEO of Aptar. Over the past nine years, Stephan has led Aptar through a period of significant transformation, strengthening our position in pharma, expanding our global footprint, advancing our innovation capabilities, and reinforcing our leadership in sustainability. He leaves Aptar a stronger company with a robust pipeline of opportunities, leading market position, and an exceptional team that is well positioned for the future. On behalf of our employees, customers, shareholders, and board of directors, I want to thank Stephan for his leadership, partnership, and dedication to Aptar. It has been a privilege to work alongside him and I am grateful for the strong foundation he leaves behind. And now I would like to open up the call for Q&A. Operator, I think we are ready for questions.
Questions and answers
We will now begin the question-and-answer session. In the interest of time and fairness to all participants, please limit yourself to two questions and then come back into the queue if you have more questions as time allows. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A roster. The first question comes from the line of George Staphos with Bank of America. Your line is open. Please go ahead.
Everyone. Good morning. Thanks for the details. Gael, congratulations again to you. Stephan, it has been an absolute pleasure covering Aptar in the time that you have been CEO. Not many CEOs can move as deftly from tachycardia to the latest in ketchup squeeze technology or have the buy side or sell side taking over unders on the references to systemic nasal drug delivery references on the call. But you have done a great job, no matter the rating. You have helped reinvigorate the growth at Aptar. You are on the front foot and remain so on sustainability. And you built and continue to build a great bench. So congratulations, and enjoy retirement, Stephan. Best of luck to you. In terms of my questions, first of all, it looks like some have noted some weakness in the Brazilian market. Have you seen that at all relative to your beauty or personal care business? And then I want to stay on beauty and closures. I know there has been improvement but, you know, beauty in particular has lagged improvement for a number of periods. When should we — and Gael, obviously, feel free to step in here too — when are we going to see beauty actually be a sustained grower both of volume and earnings? Thank you, guys.
Technical difficulties. We are experiencing some technical difficulties.
Technical difficulty.
You hear me now? Hello? We can hear you. All right. Sorry about that. I am sure there will be an after-action report. George, I did not hear your very nice comments. Thank you for that. Much appreciated. On your questions, yes, we have experienced weak sales in Brazil. This is often a feast-or-famine cycle, and there are really two main customers that trade shares. So we experienced quite some weakness in Brazil. On your larger questions, if I zoom out, certainly there is always more to do, and certainly the beauty bottom-line performance in particular is something that is left to do for Gael. As you remember, it is a story of two halves or two hemispheres. On the one hand, we are very proud of the turnaround we have achieved in Europe and I will not repeat all the things we did with shutting down plants and improving the cost base; Europe is firmly in the target range. Asia has done very well and is well above that. But we have fallen short in the Americas for different reasons. We have fallen short in North America and are still wrestling with operational issues and now came this Brazil situation. So with respect to the future, in terms of timing, I certainly made the mistake of giving time-certain guidance in the past, but I will leave it to you, Gael.
The one comment I will make, George: last time I worked in beauty was some time ago, more than eight years. What I am doing right now is really to focus on making sure I have a fresh view and perspective as we look ahead. So I have been reengaging myself with the business, visiting factories and R&D centers around the world, and more importantly, I am starting to engage with customers. What I can tell you is that we have got all the ingredients. We have deep capabilities, and customers are really looking at Aptar. It is not just being part of their supply chain, but being part of their success. Looking ahead, I am going to focus on building on what works and address and course-correct what needs to be corrected, protect what makes Aptar special, and really focus on delivering on our commitments and preparing the company for future growth.
Gael, look, I just want to step in quickly here. I will turn it over. You know, time's certain. We have been patient. Your investors have been patient. And, look, the track record of Aptar has been quite good over the years, so no complaints with that. But within beauty, does it come to a point in time where you actually take action in the next year to do something more structural to fix the performance? Thanks, and I will turn it over there. Thank you.
Maybe I jump in first. Look, we of course are not taking the situation as is, and we have clear ideas on how to also address the shortfall in the Americas. But it is too early to commit to that.
I mean, that was an open-minded approach: looking at what is in the best interest for our customers and our shareholders. I will come back to you on that in due course.
All right. I will be back in queue with pharma. Thanks.
The next question comes from the line of Paul Knight with KeyBanc Capital Markets. Your line is open. Please go ahead.
Yeah. Congratulations, Gael. Stephan, congratulations as well. As I look at the quarter, the gross margin was not the driver of expansion in Q2. Was it the gross margin line or was it below the operating margin line with a big drop at SG&A? Going forward, I think the guide is implying margin expansion. Is it more on the gross margin line that we should be thinking about modeling, Vanessa? Paul from KeyBanc.
Thanks for the question. We are actually quite happy when you think about the emergency medicine pullback; in quarter two compared to the prior year, pharma was still within the long-term guidance range. As the emergency medicine situation normalizes, we expect the company margin to get back within its guidance range and not just within its long-term targets, and not just the pharma business. I did not quite fully understand the rest of your question. Maybe you can repeat and then I will address it.
Should we expect gross margin expansion in the second half of the year? Or is it still below that line item?
Yes. A lot of what you are seeing on the gross margin line is the emergency medicine dynamic that we previously discussed, and that dynamic was strongest in the first half. Two-thirds of that year-over-year headwind was incurred already in the first half, which had the greatest amount of pressure on the gross margin. As that starts to ease in the back half, I do absolutely expect gross margins to improve from where we have been in the first half. Also, Q2 was the biggest quarter of that emergency medicine headwind, as we previously communicated, so that is the compression that we are seeing.
Also, we see progressive improvement both in beauty and closures. Closures are already showing progressive improvement and will continue as the maintenance issues abate. We also expect some progressive improvement in beauty.
And then lastly on pharma, a really solid 8% quarter of growth. Is that momentum continuing here in the rest of the year?
I can take that question. We stated we are confident with our long-term targets and 2026 is the story of the emergency medicine as we explained. We have got a strong pipeline build, pipeline conversion is robust, the underlying market is strong, and customers really are looking at us to be the partner of trust to support them from an early stage to market launch. So we are confident in achieving our long-term targets.
Thank you.
The next question comes from the line of Ghansham Panjabi with Baird. Your line is open. Please go ahead.
Everybody. Sorry. We are confused. Congrats on our end as well. Wish you the very best, Gael. Been a pleasure working with you, Stephan. Thank you. During the first quarter, if I remember correctly, Rx was down about 10%, and roughly half of that was emergency medication related. What was part of the improvement in Q2 then — was it just related to a catch-up from the previous shortfall in Rx? I'm trying to get a sense as to what the underlying growth in Rx suggests, given a lot of noise with the destocking and comparisons.
When you look at the pharma business, we are present in different categories. The asthma and COPD market has been a great market for us in the quarter. The market is going to transition to a new propellant, and Aptar is well positioned in that transition. We are supporting the FDA in defining their guidelines for propellant switch approvals. If you look at the press release recently, Chiesi announced the very first COPD product using the new propellant gas in the U.K. with an Aptar solution. So the underlying performance of prescriptions in asthma and COPD is strong.
Okay. Thank you, Gael. For my second question, can you confirm if there is any benefit from any sort of tariff refunds and so on? And then, Gael, back to you: obviously, core sales in pharma have been below trend for two years now for different reasons. You have expressed confidence in the secular growth there. For 2027, is there any reason why we should not expect growth in pharma to be within your 7% to 11% core sales growth rate?
We are not guiding for the year, so I cannot provide a specific annual projection here. The long-term target for pharma, the 7% to 11%, comes from the underlying robustness of our pipeline and the market positions we have with our customers. We are confident in that. Some years we will be up, some years we will be down. If you look at the past performance for the last eight years, we've pretty much delivered on our long-term targets. The team remains focused on delivering on our commitments and continuing to strengthen our capabilities to stay the leading company in our respective markets.
Ghansham, I can absolutely confirm that there is no P&L benefit in the quarter from tariff refunds. The beat to our guide was purely operational, coming from the strength of pharma as we discussed earlier. In fact, our guidance was $1.18 and actual exchange rates came at 1.16, so we, in fact, had a headwind of a couple of cents that we had to absorb. So the beat was all operational. None of it was tariff refunds or anything of that nature.
Okay. Perfect. Thank you for that.
The next question comes from the line of Matthew Roberts with Raymond James. Your line is open. Please go ahead.
Good morning, everyone. Stephan, I send my congratulations as well. Gael, congratulations and welcome. For my first question, as you step into the role after roughly ten years of growth in pharma, as we sit here, Q2 pharma margin is still in the mid-30% range, while beauty and closures are in the low- to mid-teens range. What benefit do you see from either an operational or cost standpoint as you look to allocate capital? Would you do it differently than your predecessor? Ultimately, is the coexistence of these businesses something you feel is necessary and should be maintained?
First, Matthew, let me express how excited I am to step into the role and to stand on the shoulders of my predecessors. I have been with the company for the last 30 years and I am very confident in the company. As I said earlier, I am focusing on reconnecting and refreshing my approach with the different businesses. I have been a beauty person and closures person years ago, but that was almost a decade ago, so I need to update my perspective. As I step into the role, my priorities are: deliver on our numbers as the number-one priority; be very disciplined on execution; and be extremely thoughtful in our resource allocation. I will keep protecting what makes Aptar special and focus where we can create more value for customers and shareholders.
Thanks. Next question, Vanessa: good color on emergency. It sounds like two-thirds of the impact was in the first half, but given this went from down 7% to up 8% in Rx, can you say what the dollar impact was in Q2? And then also on core sales, how much was the resin pass-through in Q2 and how is that split by segment? Any benefit you are expecting in Q3 on that? Thank you for taking the questions.
Matthew, the most I can say is that emergency medicine is two-thirds and one-third across the year; we did not provide a specific dollar breakdown by quarter, but the quarter was in line with where we expected and the full year is tracking as expected, and this should fully abate by Q4. Regarding resin pass-throughs, we did pass on resin and other inflationary pass-throughs successfully in every segment, as we had said last quarter. I am not going to break down the impact by segment, but you will know that pass-throughs tend to be bigger in closures because of the resin percentage used in closures. That being said, closures had strong revenue and volume growth independent of the resin pass-throughs. For beauty margins, we did have a timing lag in the beauty segment on the pass-throughs, which was a detriment — probably about 80 to 90 basis points of margin impact in the quarter — and we expect that to be resolved in Q3.
Your next question comes from the line of Matthew Larew with William Blair. Your line is now open. Please go ahead.
Okay. Thank you. Stephan, congratulations on your retirement. I wanted to ask on consumer: it has now grown for three consecutive quarters after that period of decline, so it seems like destocking has worked its way through. But 15% growth is very strong. Was that a function of easy comps or was there any pull-forward in the quarter? And how does that factor into the Q3 outlook?
I will hand to Gael here, but the destocking has run its course. We have already confirmed that in the previous quarter. It was a strong quarter, especially in decongestants.
On consumer health care, we have seen demand up nicely. The ophthalmic area, where we are converting some of the market to multi-dose preservative-free formulations, continues to be solid across regions. Nasal decongestion is positive for us. That is the color I can share as we move into Q3.
Also, please go out and get some Theraflu. Great gesture.
I wanted to ask on injectables: again, strong growth here. You referenced the Annex 1 opportunity as you have. Is there any way you can describe how that funnel has started to build as a new growth driver? And then also, it would be great to get an update on Congruence just in terms of how you have been building into capacity and how that plan is scaling up.
If you look at our pipeline in injectables, GLP-1 is and will continue to be a driver of our outperformance. GLP-1 is part of the growth for the division, but biologics are also strong and robust — both in performance and in the pipeline. Biologics are now more than 50% of pharmaceutical R&D. Annex 1 regulatory compliance is raising the bar, and customers are looking for partners who can be fully compliant. These are some of the drivers for injectables. As far as Congruence, we are done with the big investment phase and are positioned from an injectable perspective in Europe, the U.S., and in Asia, specifically China for Congruence. We have validation of our implementations; customer audits and inspections are panel-ready, which helps us deliver the growth that we are facing.
Very good. Thanks.
Your next question comes from the line of George Staphos with Bank of America. Your line is now open. Please go ahead.
Thanks very much. Two questions to wrap. On the one hand, can you talk, Gael and Stephan, about the collaborative framework you mentioned in the opening remarks regarding injectable therapy? What is behind it, what do you get out of it, and how does it help your shareholders? I'm guessing it is part of the more service-oriented approach Aptar has been taking to become something more than just a device company. Switching gears to the third quarter, Vanessa, what should we assume for FX based on your guide — kind of a $0.03 to $0.04 headwind there? Thank you and good luck in the quarter.
Let me take the first question. The job for us is to make validation and qualification by our customers way easier. Instead of customers qualifying components individually, we are working with the different players, for example prefilled syringe players, to come up with fully integrated validation. So they know the performance not only of the plunger, but the plunger with the prefilled syringe and the complete device they will acquire. They have, from day one, the validations and key elements for entering into their process in better shape. We are making their process and validation way easier. It also gives us insight into the close relationships we have with other players in that space.
George, on Q3 assumptions for FX: we are assuming a euro-to-USD rate of 1.14. Q2 average was 1.16, so that is a quarter-over-quarter headwind. These days we are trending about four cents annualized for every penny that we are off on the USD-to-euro exchange rate, so that equates to roughly a two-cent quarter-over-quarter headwind.
Got it. Thank you, Vanessa. Good luck in the quarter.
George, before you leave, I just want to acknowledge that I think you are the only one who now follows five of the six CEOs of Aptar as a public company, starting with Carl Beetert, Steve, myself, and now Gael. So you can be relied on to keep us on our toes, so thank you for that.
We will be here. Thank you.
We have reached the end of the Q&A session. I will now turn the call back to Gael for closing remarks.
Before we conclude, let me leave you with a few thoughts on the quarter and the path ahead. For the second quarter, we delivered a solid performance driven by better top-line performance across all three segments, strong productivity improvements, and disciplined cost management. We delivered adjusted earnings per share above our guidance range. Across the broader pharma portfolio, we continue to see encouraging demand trends in areas such as biologics, GLP-1, systemic nasal drug delivery, but also consumer health care and other attractive end markets. Beauty benefited from continued strength in prestige fragrance, while closures delivered strong beverage growth and continued momentum in food. Aptar has a great foundation built on differentiated technologies, deep customer relationships, leading market positions, and very talented people. We are what I call an indispensable partner to our customers, helping them to innovate, grow, and succeed across attractive end markets. Everything we do is ultimately focused on improving patient and consumer outcomes, whether it is expanding access to therapies, improving adherence, enhancing safety and reliability, or creating simply better end-user experiences. Our solutions bring meaningful value to the people who use our products on a daily basis. That combination of a strong foundation, trusted customer partnerships, and a clear focus on end-user outcomes gives me tremendous confidence in our ability to create sustainable growth and long-term value for our shareholders. As I step into the CEO role on September 1st, I am excited about this tremendous opportunity, and I believe my priorities are clear: drive profitable growth, execute consistently, and allocate capital thoughtfully. Based on the demand trends we see today and the momentum exiting the second quarter, we are confident in our outlook for the third quarter and our long-term prospects. Thank you for your continued interest in Aptar, and I will see you on the road in the coming months.
That concludes our call. Thank you, everyone.