(ATR) 2007 Q3 法說會逐字稿

Welcome to AptarGroup's third quarter 2007 results conference call.

At this time all participants are in a listen-only mode.

Later we will conduct a question-and-answer session.

Introducing today's conference call is Mr.

Ralph Poltermann, Vice President and Treasurer of AptarGroup.

Please go ahead, sir.

Thank you.

Before we begin, I would like to point out the discussion to follow includes some forward-looking statements and that actual results or outcomes could differ materially from those projected or contained in the forward-looking statements.

To review important factors that could cause actual results to differ materially from those projected or contained in the forward-looking statements, please refer to AptarGroup's SEC filings.

The information on this conference call is relevant on the date of this live call.

Although the Company will post a replay of this conference call on its website as a service to those investors that were not able to listen today, the information contained in the replay will be dated and should be used for background information only.

The Company undertakes no obligation to update material changes and forward-looking information contained therein.

Participating on this call today are Carl Siebel, President and Chief Executive Officer of AptarGroup; Peter Pfeiffer, Vice Chairman; and Steve Hagge, Executive Vice President and Chief Financial Officer.

I would now like to turn the call over to Mr.

Siebel.

Thank you very much.

Good morning, ladies and gentlemen.

This is Carl Siebel.

I will briefly summarize our press release and then we will focus on each of our segments.

I will comment on our Beauty & Home segment myself, Peter will discuss our Pharma segment, and Steve will provide insight on the clothing segment and then will follow his segment-specific comments with his usual review of our financials.

Overall we continued to benefit from our international presence, the broad-based strength of demand across our segment, and a high level of new product activity, both our own innovations as well as new applications by our customers for our products.

I'm pleased to report that we continued to have a very strong year with record sales and profits for the third quarter as well as for the first nine months.

Sales and profits increased in every single segment of the quarter.

Looking at our largest segment, the Beauty & Home segment, and excluding changes in exchange rates, Beauty & Home segment sales increased 16%.

This is mainly comprised of a 23% increase in sales for the Personal Care market, a 10% increase in the sales for the fragrance cosmetics market, and a 9% increase in sales for the households markets.

Acquisitions had a minor impact on Beauty & Home segment sales for the quarter.

The increase in Personal Care sales reflects increased use of our Bed and Bath system.

For example, our Bed and Bath system was introduced for the first time ever on a tooth gel in Europe under GlaxoSmithKline's AquaFresh brand.

Systems are used on an oxygen based skin care product introduced by BioCell under the Nivea design brand.

Strong demand continued for our fragrance sample systems.

This includes our (inaudible - highly accented language) spray pumps for vials as well as our skin sampling system known as Imagine.

Lastly, interest in the (inaudible) pumps for (inaudible) sprays is growing as (inaudible) has introduced a salad dressing in the U.S.

using our pumps and we expect that at least one other company that markets salad dressing will be introducing a product with one of our systems early next year.

I would like to turn over the call to Peter.

Thank you, Carl, and good morning, everyone.

Speaking about our Pharma segment, the third quarter continues to be strong and the Pharma segment's results were mainly driven by increased demand for both (inaudible - highly accented language) and pumps.

Excluding changes in exchange rates, the Pharma segment sales increased 21% in the quarter.

The increase in demand was fairly broad-based and included increased sales of pumps for generic equivalents of Flonase allergy medication, pumps for Glaxo's VeriMist allergy medication, which was approved by the FDA earlier this year, and (inaudible) for Glaxo's Advair and AstraZeneca Simbicort combination formulas for the treatment of asthma.

The improved profitability of the Pharma segment in the quarter reflects operational improvements in addition to the higher product sales.

I would like to take a minute to speak about some recent pharmaceutical product announcements.

On last quarter's call, we mentioned that Glaxo's new allergy medication called VeriMist had been approved in the U.S.

and that we supplied pumps to them for this product.

Approval for VeriMist has recently been expanded to Canada.

Another generic version of Glaxo's Flonase allergy medications offered by a company called (inaudible) was recently approved by the FDA and we supply the pumps to them.

In summary, we continue to have a number of pharmaceutical applications for our dispensing systems at various stages of development.

With this I would like to turn it over to Steve.

Thanks, Peter, and good morning, everyone.

I'll provide my comments and then Carl, Peter, and I will be happy to answer your questions.

First, looking at the closure segment, overall, both sales and income increased in the quarter despite weaker sales to the U.S.

personal care market in the quarter versus the prior year.

Excluding changes in exchange rate, closure's segment sales increased 6%.

This was mainly comprised of a 16% increase in sales to the food market, a 9% increase in sales to the personal care market, and a 3% decline in sales to the household market.

Acquisitions had a minimal impact on the closure segment sales in the quarter.

Focusing on some of the new closure product initiatives, we shipped our first order of our closure system, which we call Pinpoint that has a conical shaped silicone valve for use on a European acne medication and a number of other markers have expressed interest in this unique system and we expect to begin shipping those starting in the fourth quarter.

In the U.S., Kraft launched its salad dressing in an upright package using our dispensing closure to replace their traditional screw off cap.

And finally Wellla has introduced a new hair-paste product using our patented easy-open jar lids.

Again, interest in this system continues to grow.

Now I would like to summarize our consolidated results for the quarter.

Reported sales overall increased 20%, changes in exchange rates accounted for about 6% of the increase, and acquisitions accounted for 1% of the increase, which resulted in our organic growth for the quarter being 13%.

From a geographic standpoint, sales to customers by European operations represented approximately 61% of net sales this year versus 59% of sales last year, while sales to customers by our U.S.

operations accounted for 26% of sales this year versus 30% a year ago.

Our pretax stock option expense for the quarter was less than the prior year by approximately $550,000.

During the quarter, the German government ratified a reduction in the German tax rate effective January 1, 2008.

As a result our deferred tax liability in Germany decreased.

The net reduction of our deferred tax liability recorded in the third quarter of 2007 was approximately $2.3 million, or a positive impact of about $0.03 a share.

Also, this will reduce our overall taxes that we pay in Germany of approximately 38% today to 30% next year.

Bottom line, we reported earnings per share of $0.56 compared to $0.40 per share a year ago or an increase of 40%.

Our free cash flow, which we define as cash flow from operations plus capital expenditures for the quarter was approximately $58 million, up from $45 million a year ago.

Our cash flow from operations for the quarter was roughly $94 million in the current year compared to $71 million in the prior year while our capital expenditures were around $36 million in the third quarter versus $26 million in the third quarter of last year.

We spent approximately $19.7 million to repurchase roughly 545,000 shares during the quarter at an average cost of a little over $36 per share.

At the end of the quarter, the remaining number of shares authorized for repurchase was around 2.5 million.

The mix of debt at the end of the quarter is roughly 40% fixed versus 60% variable with an average interest rate around 5.6%.

On a growth basis, debt-to-capital is around 25% while net debt to net cap is approximately 7%.

Now briefly looking at the first nine months, similar to the quarter, reported sales increased 19%, changes in exchange rates accounted for approximately 6% of this increase, and acquisitions accounted for about 1% of the increase in sales.

Which resulted in organic growth rate for the first nine months of 12%.

Now looking forward, presently we expect our depreciation and amortization in 2007 to be in the area of $125.

While total cash outlays for capital expenditures in 2007 are expected to be in the area of 130 million to $140 million depending on the timing of when these projects will complete.

Capital expenditures in 2007 will exceed our depreciation and amortization, primarily due to the previously-announced expansion at our Pharma facility in France.

The normal effective tax rate for 2007 is expected to be in the area of 31 to 32%, but the actual reported rate will be less than this due to the reduction in deferred taxes in Germany that I previously mentioned during my third quarter comments.

Looking forward, we expect the positive momentum from the third quarter to continue into the fourth quarter.

Diluted earnings per share for the upcoming quarter are expected to be in the range of $0.43 to $0.46 per share versus $0.38 per share from the fourth quarter of 2006.

This represents an increase in the range of 13 to 21%.

Our fourth quarter 2006 results were very strong and I would like to point out that the split-adjusted earnings of $0.38 per share reported in the fourth quarter of last year includes roughly $0.01 per share positive impact of a tax law change in Germany that was recorded in the fourth quarter a year ago.

So an a comparable basis, earnings per share are expected to increase by 16 to 24%.

At this time Carl, Peter, and I would be glad to answer any of your questions.

(OPERATOR INSTRUCTIONS) Our first question comes from George Staphos from Banc of America.

Hi, everyone.

Good morning and good afternoon.

Good quarter.

Steve, maybe a question for you to start.

The cash position built a bit more than I would have expected sequentially when considering even the good performance in the quarter from an earnings standpoint and some of the other things that you mentioned on the cash flow.

Was there anything else that helped your cash position in the quarter that we're forgetting about?

Well, I think the cash was, as you said, George, was impacted by the positive earnings, but also we also we also saw an improvement in the working capital position as compared to where we were a year ago.

That was the other driver for the positive cash flow.

Okay.

That's good.

Now, do you think you can continue that year-on-year improvement in working capital, or how should we think about your ability to be even more efficient with working capital looking out the next, say, six quarters?

The fourth quarter is always a challenge as we go into the quarter because it's difficult to see when customers want to pull off inventories as we get to year end.

But we've had major efforts within the Company to continue to reduce particularly our inventory area, so the goal is on a sequential basis that we would be able to still continue to see comparable reductions in working capital, but we may get a quarter popping up one quarter and then seeing again bigger improvements on the following.

Understand.

Do you have a longer-term target that you would share?

At this point, it really is different by business segment because the distribution channels are different.

Again, we've done it by each business unit and I don't have a collective one.

Okay.

Obviously, your performance is very strong across your businesses.

The one outlier you had called out, the slowdown in U.S.

personal care, what are your customers saying to you about what I they've slowed down?

Is that just more of an inventory correction as a precaution given everything that we're reading about, or is there something else at work?

Well, again, as we pointed out in the call or in the press release, the slowdown affects primarily our closure segment on the personal care.

Right now, it's our feeling that it's more the cautionary inventory contraction as opposed to the sell-through from our customers.

We don't feel we've lost any significant market share, and at least in that particular segment of the business, we're hoping to start to see a recovery.

And right now we think the marketers, as you said, George, are somewhat more conservative on what they see as the consumer spend.

How is the holiday season shaping up for your customers?

What are they telling you right now about, here I'm talking obviously about fragrances?

George, this is Carl Siebel speaking.

Carl, how are you?

Thank you, I'm doing great.

How are you?

Doing okay.

What our customers are telling us presently, they are optimistic for the fourth quarter.

They also expect the business continue to be strong into the first half of next year and also I would like to mention that the Christmas season has always been, and obviously had an important impact on our fragrance business, but that may be now changing somewhat and somewhat be mitigated by the fact that we are now seeing this very strong growth in the developing markets, our customers are exporting a lot, and that may change somewhat the dependence on our sales in Europe and the U.S.

for the Christmas season.

As I said, essentially, at this point, the outlook is rather positive.

Okay.

I'll turn it over there.

Thanks.

I'll be back.

Our next question comes from Ghansham Panjabi from Wachovia Securities.

Looking at the pharmaceutical business, can you give us a breakdown of where exactly the growth is coming from, maybe split between new products and existing products?

That would be helpful.

Thanks.

Hello, Ghansham, this is Peter speaking.

Hi, Peter.

The growth is coming from both from new product, which were introduced recently and I have mentioned some of them, the products from Glaxo and from AstraZeneca, and also from existing products.

So we are seeing growth across the board.

So there is nothing specific.

So is it 50/50 between the two?

I wouldn't say -- I mean, the amount is different, it's less than 50/50, it's more coming from existing products than from the new products.

So with all these new products that you also mentioned, I assume some of the growth that's been going into the generics might slow as inventory builds, et cetera.

Is it fair to say that pharmaceutical growth is going to be sort of at this range for the next few quarters because of these new products, or should we expect a slowing there?

Yes, for the time being, our order backlog is still very strong and we don't have any signs that there will be dramatic changes in the months to come.

So it's very difficult to predict, but we are not -- we are rather positive than negative.

Okay.

Just real quick, Steve.

How should we model SG&A for the fourth quarter?

I think you could probably model at a continuing rate to what you've seen through the third in terms of percentages.

Certainly currency has an impact to that.

We would hope to be able to continue the SG&A leverage that we've seen throughout the year.

Great.

Thanks so much.

Our next question comes from Chris Manuel from KeyBanc Capital.

Good morning or good afternoon, gentleman.

Good morning, Chris.

Carl, is this the last conference call we're going to hear from you?

Yes.

This is my last one.

Well, it's been a pleasure.

You've done a terrific job.

Thank you very much.

Good luck in retirement.

A couple questions for you, gentleman.

First is, Peter, if I can ask you about -- I know you don't supply for the Exubera product, but this morning Pfizer took a large write-down and is going to pull, I believe, Exubera off the market.

And they talked about the dispensing system not going over so well.

I know the systems that you've been working on for inhaled insulin are significantly different.

Have you had any communications with customers to indicate that -- can you give us a little color as to where you are with that process and does this potentially bode very well for your smaller, better systems?

Hello, Chris.

You're right, we have heard also recently from this offer Pfizer from Exubera.

As you know, we were not involved in this product.

So for the time being, this is rather neutral for our business.

If you are telling me that the reason for the back-off was also a link to the rather bulky device that goes to the product, yes, we are free.

We are continuing to work with our customers on similar products for the time being.

We have not got any reaction from our customers because it's too short-term reaction.

We are continuing to work on these kind of products and we are pretty optimistic.

So your other projects are still on.

One of the things I just pulled out of their press release this morning was that they indicated they're still monitoring other inhalation technology.

Can you -- I don't know if you're allowed to or not, can you confirm whether you're working with Pfizer on other methods for delivery?

We are not commenting on things, we have confidentially agreements with our customers, we are not usually commenting on products which are not published yet by our customers.

That's fair.

Let me switch gears for a second.

One of the things George alluded to was, or talked about was the large cash bill.

By my math, you're up to almost $4 a share of cash at this point.

It's a pretty sizable amount.

Can you maybe talk with us a little about what you're seeing, what you're thinking with respect to either accelerating a share repurchase or accelerating the acquisitions, what you're seeing in the pipeline?

You've never done a deal quite that big, but can you help us with how you might be thinking about your cash position?

Chris, you're right.

The cash -- the good news is the Company continues to be a pretty strong cash generator and I think that's on the positive side.

Certainly, as you've seen through the third quarter, any kind of M&A type of activity was somewhat restrained just given some of the crazy things that were going on in the credit market.

Our preferred use of cash is still on the acquisition side.

We continue to be active in discussions with several different transactions, potential transactions in that market.

That's difficult to predict when those -- if they finalize or when they finalize.

We also, as the Board continues to look at the stock buyback, as you've seen, we were active in the quarter.

We'll continue to monitor that and determine if it makes sense to increase those activities.

But that's pretty much all we can talk about today.

Okay.

It's a high-class problem to have.

Yes.

There are certainly worse issues.

Right.

The last question I have is, when we think about the guidance that you gave us for the fourth quarter, when I think about it from the organic growth perspective or how that fits in, you're beginning to lap -- if I've got the model right here, you're beginning to lap in the fourth quarter your double digit growth comparisons.

Do you -- embedded within your $0.43 to $0.46, are you basically assuming that we go back to a more normalized 6 to 8% rate, or that it stays at double digit rate, or that it's more of a reversion to the mean of a, it doesn't sound like it, but a 0 to 3 that would get you back to the long-term sort of rate?

In our numbers, when we've looked at it, you can see it's strong earnings growth.

It's going to be difficult to continue to be at that 12 to 13%.

I think in our expectation, given how strong the fourth quarter was last year, it's more of a upper single digit growth rate.

It's more reverting back to what I would consider pretty much double the industry average in the growth rate, but more into the upper single digits.

Okay.

Perfect.

Thank you very much.

Our next question comes from Jason Rodgers from Great Lakes Review.

Hello.

Hello.

What were the tooling revenues for the quarter?

They were about the same as they were last year, Jason.

And we were about $14.6 million this year, $14.9 million a year ago.

Okay.

And for '07, do you still expect it to be 50 to 60?

We had a very big tooling quarter in the fourth quarter of '06, so at the high side, we would end up, it was about $23 million.

I would expect us to be somewhat less than probably last year when I look at the totals.

The only difference is, again, Jason, is currency to that.

Because we're talking dollars and the euro has appreciated.

I think that 50 to 60 is a still a reasonable number.

Okay.

And the internal growth in the Pharma segment.

Did tooling sales account for any points for that 21% rate?

No.

That was all product sales.

All right.

And in the Beauty & Home segment, I'm sorry, I missed the personal care, what it was up in the quarter, was it up 23?

Personal care was up 23, correct.

Okay.

Finally, do you have an early estimate for CapEx and D&A for '08?

No, we're right now just starting to go through the budgeting process and taking a look at the project, so it's a little early for us to be commenting on that.

Okay.

Thank you.

Next we have a follow-up from George Staphos from Banc of America.

Thanks.

One last question.

Steve, maybe taking a step back, given your expanded role as Chief Operating Officer, what have you seen in the last several months that you think you could -- that the Company can work on in terms of improving performance on the cost side, on the efficiency side, obviously the Company is performing at a very high level right now, so you're all to be congratulated, but what have you seen as the COO now here the last several quarters?

Again, George, I think it's been, as you're aware, the relationship between Carl, Peter, and myself has been somewhat unique in that I've had operating responsibilities in the past.

So I think when you look at it it's really continuing along the same path as we've been at.

We have strong initiatives in terms of both cost control, inventory controls, making sure we're leveraging our manufacturing, leveraging our personnel as best we can between the operations.

So I don't think there's like one or two specific items.

It's really continue on the same path we've been going down.

Okay.

A question for Peter.

Peter, there's been, as you well know, and I think the question comes up at least once a call, so we'll ring it again.

There have been other participants in the packaging market who have increasingly voiced a viewer or strategically moved in the direction that you've been in and trying to get more into dispensing systems.

Have you felt any affect, more than normal from increased competition in some of your better markets, like Pharmaceutical, or really not?

Thanks very much, guys.

As for the time being, we are seeing some changes.

There were a lot of active mergers and acquisitions in the past month.

We are seeing some changes in our competitive environment.

We are not really feeling it up to now very strongly on the market side.

Yet, as you know, have a pretty strong position in almost all the fields we are active.

We are prepared and competition, as we say, sometimes increases your own speeds and how soon should you come forward.

So we are pretty, how do you say--?

Confident.

Confident, yes, in the future and also with the relationships.

And certainly in the market, the leadership position you have typically builds a lead time by which your competitors can try to catch up to you, obviously with FDA approval, et cetera.

Let me leave it there.

Thanks, guys, congratulations.

Good luck, Carl.

We'll be talking to you.

Thank you.

Our next question comes from Sangita Jain from Lehman Brothers.

Hi.

Good morning.

I just wanted to get a little more update on the slowdown you said about in the U.S.

personal care market.

Do you think that slowdown has intensified a little bit in the last couple months, or is it kind of the same trend that you talked about on your second quarter conference call?

I think it is still about the same trend and as Steve pointed out, it was really essentially in our closure segment.

And it was to a large extent in the U.S.

market.

And we believe most likely that there's an adjustment on our side and it may be due to inventory movement.

And not necessarily to a reduction in consumption in the kind of personal products we are supplying in our closure segment.

I do not -- if we look at other parts of our Beauty & Home business, be it the perfume business or being the personal care business we have at our (inaudible) dispensing division in the United States, we still see a very good growth, which is essentially to a large extent due to our very good result with our new product introductions, our sampling products are very successful in the U.S.

market, and at the same time also our new product innovations, (inaudible) on valves, we have now three production lines fully running with (inaudible) on valves in the United States and also that's combined together with our locking actuator and I could cite some others.

So we believe that essentially the personal care market maybe somewhat weaker in the U.S.

than in other parts of the world, but we do not see that this is due to our risk diversification, geographic, and so on, and new product introductions will have a major impact on us going forward.

Okay, great.

Thanks so much.

Our next question comes from Ross Gilardi from Merrill Lynch.

Good morning, everybody.

Good morning.

In the past you guys have talked about being sort of happy with sustaining a 25%-ish operating margin in Pharma provided that you can get the desired topline growth.

You did 29% this quarter and you seem likely to do something well above 25% this year.

Could you just comment on your margin outlook for Pharma going forward and any noise that 25% number that you guys have talked about in the past too conservative?

I think it's going to depend on the mix of the products, I guess, when you get into it, Ross.

We've looked at it, I mean, even 25% is a good margin and a highly sustainable one.

We certainly want to get the highest margins possible, but as we look at growth, if we have to grow at the expense of some margin, frankly, we've looked at 25 being at the low end of that.

I wouldn't say we're looking at trying to get back to 25.

That's kind of the low end of the target margins that we've looked at for the Pharma segment.

So the recent step-up you've seen, is that more from the new products or is it the productivity improvements that you referred to earlier?

What's accounted for the most recent step-up?

Once again, it's certainly productivity has been a big plus.

If you remember last year, we had some productivity issues.

Peter maybe you can comment on some of the other growth sides?

I think it's basically both.

It's the productivity improvements we have done in all our operations, in group Pharma, but it's also a product mix.

We have sold much more of more profitable products in the last two to three quarters which has helped to increase also our margin.

Got it.

Okay.

Then just wondering if you could comment on what you're seeing in the sunscreen market.

Obviously, your numbers in the Beauty & Home segment, you're seeing very, very strong results.

The sunscreen market, that's been a terrific product for you, particularly with Coppertone and now you're seeing these sprayable suntan lotions everywhere.

Are you seeing increased competition in that market, or are you on a lot of these other platforms as well?

There's certainly some increased competition, but because of our patented new products which we were able to launch, as you mentioned, the sunscreen, the Coppertone, from Seabring, for example, that is using on one side of the boat under our system which is very unique and also our patented blocking x-ray and that combination which makes the tan being -- to be used in all positions and saving also the overtap, which is an environmental (inaudible) to each on top of that really protect us.

This product is very successful and there are other marketers launching similar products.

So in effect we just saw some nonexpected, additional orders coming for this business for the fourth quarter because the selling season has started for these kind of products.

So we think that even if there would be, there is competition, certainly, we still believe that we have a very, a shielded position there and good potential for the future.

Okay.

Thanks a lot.

You're welcome.

Best of luck.

Our next question comes from Mike Hamilton from RBC Dain.

Good morning, everyone.

Good morning.

Steve, hoping you can give me a brief education on tax rate.

Where exactly is the benefit off of the German deferred showing up?

It shows up just in the tax rate itself.

So for the quarter, it's in the income expense line on the income statement and it will show up primarily in the long-term liability -- other long-term liability line on the balance sheet.

And we still ended up with a 31.5 rate in the quarter?

No, we were less than 31, we were about 26 or something, to get to the 56.

The 31 that we have going forward is what we would expect to be without the benefit.

Okay, got you.

Was wondering if you could comment at all on French plant efficiencies and what we're seeing there?

We have continued to improve the efficiencies, specifically in our fragrance business, manufactured in France.

We also, in our closure operation in France, where we had some issues over the past, we have been able to conservatively improve efficiency, quality, and service.

However, unfortunately, there was some slowdown in sales, which has somewhat compensated the advances which we had made, and in general we have made good progress in our operations in France in terms of productivity.

You still carrying some cost inefficiencies there?

Yes.

Yes, we do in our closure segment, we are still carrying some costs.

Thanks.

Was wondering if you had any comments on progress on new customer activity with Simply Squeeze?

On the Simply Squeeze side, we are making progress and taking new business on several fronts.

So the catch-up utilization, not only in the U.S., but also outside the U.S.

We are applying our Simply Squeeze system is continuing to be successful.

We also are quite successful with the utilization by certain marketers in the beverage area, using our newly developed dispensing closure for beverage for water and some of these customers are also using the Simply Squeeze valve.

Broadly, Carl, could you comment at all on where you are on capacity utilization or more particularly areas where you're constrained right now?

We are constrained in some areas and we are adding capacity which will come on stream next year.

We -- particularly, some standard products on the perfume side and also on the personal care side and then our Imagine Flex product sample product is next out completely.

These are some examples, also some of our major product lines in the pump area and we are making the necessary steps to improve capacity.

Thank you very much, Carl, and congratulations.

One last one for you, Steve.

With the change in effective German tax rate, have you concluded what you're looking at likely for '08?

We're still going through the process, Mike, but we would guess that the German impact would by itself reduce our overall effective tax rate by about 1 to 1.5% next year.

So that's on an everything else being equal.

So it has a pretty significant impact on our overall tax rate.

Thanks very much.

That's it for me.

Our next question comes from [Mark Masters] from JPMorgan.

Good morning.

Good morning, Mark.

I just had a quick question.

I was wondering if you could comment on current resin environment and your near-term outlook in that regard?

Thanks.

Well, if you look at it -- if you want to be unfortunate side, oil prices continue to escalate, but we had anticipated that we would have seen -- again, that there's two different resin environments we need to talk about.

One would be Europe and the other being the U.S.

In the U.S., we've saw resin come down a little bit in late September, but now it seems to be going back up and right now indications are that we're going to see resin increasing through the remainder of the year.

We've been flattening out more in Europe and more, and anticipate resins being flatter as we go through the end of the year for our resin purchases on the European side.

All right.

Good.

Thanks.

Our next question comes from Chris Manuel from KeyBanc Capital.

Just a couple of quick follow-ups.

First is your landmark system for the Pharma meter dose valve.

Have you begun shipping commercial quantities of that, or is it still in testing, and when does -- I guess what I'm asking is, do you need the new facility up in, I think it's towards the middle of '08 before you start mass shipping that, or where are you at with that?

Chris, we are still in discussion with the customers, the customers are still testing the device.

You're right, the initial idea for the new extension of the Pharma facility in France was for this product.

It's very difficult to predict when this product will be introduced to the market because there somebody else very important like the FDA has a say on it.

But we are working on it with several customers.

Okay.

And you're--?

Maybe we should add there that fortunately there's been talking about all the new product introductions of our customers notably on the metering valve side, the Advair products my Glaxo and the assembly costs of product buy AstraZeneca who need additional capacity and space and before we will be starting to produce the landmark we are producing those products for these customers in the new facility.

Okay.

When will the new facility be up and running?

It's foreseen for the second half of 2008.

Okay.

So is most of the spending for that being done principally here in this year or is there, half of that leaking into next year, or how should we think about that?

You're going to see half of that leak into next year, Chris.

It's timing of when we're getting the bills and going through, but since it won't be completed until the end of the year, you get a fair amount of costs on those projects towards the end of the project.

I consider it like a half/half type.

Half of it being spent this year, half next year.

That helps.

Then my final question is, as we look across your various geographies, have you seen any change in trajectory asides from the one area where you talked about here, with closures in the U.S., but have you seen any other changes in trajectory, either pick-ups or slowdowns or basically the same for your products or what?

Chris, I will try to give you a worldwide overview, if I may say so, what we are seeing is a certain slowdown on the U.S.

markets and we see continued very strong growth in the developing markets and we have this year first time very good general economic growth in Europe.

As you've seen from our numbers, the overall growth of our business was pretty strong specifically in Beauty & Home but also on the Pharma side, but if I specifically stay on the Beauty & Home side, it is naturally -- we don't know exactly what part of the products we are supplying to our European customers is then reexported by then, companies like (inaudible) where they sell a lot of product which we sell the pumps for for spilling in Europe into the developing markets, Eastern Europe and Russia.

So I think what's really happening is that while we see this slowdown in the North American markets, this is more than balanced by very strong performance and the coincidence of the strong growth -- stronger growth than we have had in preceding years in Europe and also strong growth and even stronger growth in the developing markets and also Eastern Europe and Russia.

Okay.

I thought of one other question I wanted to ask, if I may.

With the travel-sized containers, I think you have talked in the past that you're anticipating they begin to mirror the larger-sized product.

Have we begun -- or have you begun to see any impact yet of travel-sized containers going to the fancy dispensing products that you typically sell?

This is a very good question.

In fact, we are convinced that part of our success and specifically in our miniature and sampling business is due to that, is due to the new travel regulations, but also people are constantly on the go and prefer to have smaller packages of the same product available, which they can carry on easy with them.

So that part of the business is growing very fast and is very, very successful and that may be certainly partly due to the new travel regulations.

And congratulations on a good quarter and best wishes, Carl.

Thank you very much.

I'm showing no further questions at this time.

I would like to turn the call back over to Mr.

Siebel.

Thank you very much.

Ladies and gentlemen, I would like to thank you for participating in our call today and thank you and good-bye.

Ladies and gentlemen, thank you for participating in today's conference.

This concludes the program, you may all disconnect.

Everyone have a great day.