Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Ralph Polterman - VP and Treasurer

Peter Pfeiffer - President and CEO

Steve Hagge - EVP, COO and CFO

Analysts

George Staphos - Bank of America Securities

Ghansham Panjabi - Wachovia

Ross Gilardi - Merrill Lynch

Chris Manuel - KeyBank Capital

Meggan Friedman - William Blair and Company

Claudia Heuston - JP Morgan

Mike Hamilton - RBC

Greg Halter - Great Lakes Review

Timothy Burns - Cranial Capital

Brian Rafn - Morgan Dempsey

Susan McGarry - Granahan

Matt McGeary - Sentinel Asset Management

AptarGroup, Inc. (ATR) Q2 2008 Earnings Call July 21, 2008 8:30 AM ET

Operator

Welcome to AptarGroup's second quarter 2008 results conference call. At this time all participants are in a listen-only-mode. (Operator Instructions)

Later, we will conduct a question-and-answer session. Introducing today's conference call is Mr. Ralph Polterman, Vice President and Treasurer of AptarGroup. Please go ahead, sir.

Ralph Polterman

Thank you, Sean.

Before we begin, I would like to point out that the discussion to follow includes some forward-looking comments 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 in 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, who are 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 Peter Pfeiffer, President and Chief Executive Officer of AptarGroup; and Steve Hagge, Executive Vice President, Chief Operating Officer, and Chief Financial Officer.

I'd now like to turn the conference over to Mr. Pfeiffer.

Peter Pfeiffer

Good morning, everyone. This is Peter Pfeiffer. I will briefly summarize our press release and then comment on our Beauty & Home segment. Steve, will then provide insight on our Closures and Pharma segments and will follow his segment's [suite of] comments with his usual review of our financials.

Before commenting on our results, I'd like to take a moment to briefly discuss the announced increases in both our cash dividend and share repurchase authorization. The Board approved a 15% increase in the annual dividend rate for $0.52 per share to $0.60 per share. And at the same time, the Board approved $4 million increase with our share repurchase authorization.

Our cash generating ability and strong balance sheet allow us to improve shareholder value with these actions, and at the same time, remain well positioned to take advantage of strategic opportunities in the future.

Turning to our overall results, I would like to remind you that 2007 was a record year for us. And as a result, we are up against tough comparisons throughout 2008. In light of these comparisons, I am especially pleased to report that we achieved record sales and profits in the second quarter of 2008.

Sales increased in every segment. Segment income increased in the Pharma and Beauty & Home segments, but decreased in the Closure segment.

Focusing on our larger segment, Beauty & Home, for the second quarter of 2008, excluding changes in the exchange rates, Beauty & Home segment sales increased 4% over the prior year. This is mainly comprised of a 3% increase in sales to the personal care market, a 6% increase in sales to fragrance/cosmetic market and a 5% increase in sales to the household market.

Strength in the quarter was primarily in sales of our airless systems, mini-packaging systems and specialized accessories for fragrance/cosmetic pumps as well as sales in developing markets.

In May, The Fragrance Foundation held the annual award event in New York and named their 2008 award winners. I would like to point out that our dispensing systems were on all four of the men's winners and two of the four women's winners.

Looking forward, although we are expecting the Beauty & Home segment business in the developing markets to continue to grow, the growth rate there is not large enough to offset the slowdown we are seeing in both the U.S. and Western European, which we believe primarily relates to inventory adjustments. This situation is further aggravated by increases in input cost, both in US and Europe. Where market conditions allow, we are increasing our prices in order to pass these cost increases on to our customers.

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

Steve Hagge

Thanks, and good morning, everyone. I'll provide my comments and then Peter and I will be happy to answer your questions.

First looking at our Closures segment, second quarter results for Closures improved from the first quarter. When you compare the results to the prior year, second quarter reported sales increased 19% mainly due to changes in exchange rates, resin pass-throughs and higher tooling sales. Changes in exchange rates accounted for 9% of the sales increase and tooling sales and resin pass-throughs each accounted for about 4% of the increase.

Excluding currency impacts, increases in the markets were as follows. There was a 10% increase in sales in the personal care market, of which about three-quarters of the increase was due to higher custom tooling sales. There was a 15% increase in sales to the food/beverage market and a 15% decrease in sales to the household market.

The Closures segment income decreased from the prior year mainly due to underutilization of capacity due to lower sales volumes.

From a new product standpoint, our custom SimpliSqueeze system was introduced on a new line of Gillette 2-in-1 body washes for men. We also heard that Heinz has announced their intention to use SimpliSqueeze across the board for all of their ketchup. Neutrogena has launched a eye lift package using our new Pinpoint dispensing system. And we have many interesting projects, particularly in the food/beverage market that we expect to hit the market in the second half of 2008.

Now looking at our Pharma market: we had another good quarter with both increases in sales and profits in this segment. Reported sales grew 17%, and excluding changes in exchange rates, the Pharma segment sales increased 4% in the quarter, mainly due to increased sales of both pumps and metered dose valves.

Tooling sales declined compared to the previous quarter, giving us organic growth, excluding the decline in tooling, for the quarter of about 6%. The improved profitability of the Pharma sector to 30% operating margin in the quarter reflects higher product sales and better overhead utilization.

During the quarter we finished the construction of our addition to our pharmaceutical facility in France, and from a new product standpoint, early in the quarter, Alcon, one of our customers announced that they had received FDA approval of their allergy drug, PATANASE that uses one of our nasal spray pumps. And we're also benefiting from the increased of sales of pumps to the generic replacements of FLONASE.

And finally, yesterday, Schering-Plough announced that their NASONEX, anti-allergy drug was approved in Japan which will also be a positive for Aptar. We continue to have a high number of projects in this very profitable segment.

Now I'd like to summarize our consolidated results for the quarter. As you've seen our overall reported sales increased 17%. Changes in exchange rates accounted for 11% of this increase, resulting in organic growth for the quarter of 6%. Overall, sales from acquisitions were not significant.

From a geographic standpoint, sales to customers by European operations represented approximately 64% of net sales this year versus 63% of sales last year, while sales to customers by U.S. operations accounted for 24% of sales this year versus 26% last year.

We saw continued increase in resin costs in the U.S. during the quarter. Increasing resin costs affect us two ways. First, there is a lag in passing on the increases via higher selling prices, and also, the fact that our inventories in the U.S. are on a LIFO inventory valuation method further magnifies the impact. Our increase in our LIFO reserve cost is approximately $900,000 pre-tax in the second quarter and accounts for about $1.9 million on a year-to-date basis.

We benefited in the quarter from lower stock option expenses, which had a benefit of about $700,000 pre-tax and reduced net interest expense of about $1.9 million pre-tax due to our strong balance sheet.

Our effective tax rate in the second quarter of this year was less than the prior year, due to lower tax-rates in Germany and Italy as well as higher R&D tax credits in France.

Our diluted earnings per share increased 23% to $0.64 per share from $0.52 per share in the prior year. Free cash flow defined as cash flow from operations less capital expenditures, for the quarter was $11 million versus $28 million in the prior year. Our cash flow from operations for the second quarter was $59 million compared to $58 million in the prior year, while our capital expenditures were $48 million in the quarter compared to $30 million in the same quarter of last year. We spent approximately $20.3 million to repurchase 460,000 shares during the quarter at an average cost of $44.24.

On the balance sheet, our mix of debt at the end of the quarter continues to be roughly 40% fixed versus 60% variable, with an average interest rate of around 4%. On a gross basis, debt-to-cap is about 23% while on a net basis it's approximately 6%.

Now, briefly looking at the six months, reported sales increased approximately 17% and changes in exchange rates accounted for 10% of the increase, or 7% organic growth rate. Our diluted earnings per share year-to-date were up 25% to a $1.16 per share versus $0.93 per share a year ago.

Now looking forward, presently we expect our depreciation and amortization in 2008 to be in the area of a $140 million while total cash outlays for capital expenditures in 2008 are expected to be in the area of a $180 million. Both of these amounts could vary depending on changes in exchange rate. Our overall tax rate for 2008 is expected to be in the area of 29% to 30.5%.

I'd like to remind you that during the third quarter of last year, the German government ratified a reduction in the tax rate which was effective January 1st 2008. The net reduction of our net deferred tax liabilities recorded in the third quarter of 2007 related to this change was approximately $223 million, which had a positive impact of $0.03 per share which was included in the earnings of $0.56 per share reported in the third quarter of last year. Excluding this deferred tax adjustment, earnings per share in the third quarter were $0.53 per share.

Now we look going in to the third quarter coming off the second quarter as Peter had talked about, we are seeing increasing input pressure and the normal delay in passing these input costs on to our customers in terms of increased selling prices. Segment income is returning to a more normal operating margin percentage level. We are also seeing a softer demand from the fragrance cosmetic and personal care markets in the US and Europe within our Beauty & Home segment, which is being offset somewhat by improved results in our Closures segment.

Looking forward, diluted earnings per share for the upcoming quarter are expected to be in the range of $0.55 to $0.58 per share. This range represents an increase of 4 to 9% over the $0.53 per share last year on a comparable method. At this time Pete and I would be glad to answer any of your questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Our first question comes from George Staphos with Banc of America Securities.

George Staphos - Bank of America Securities

Thanks. Hi everyone. Good morning, good afternoon Peter. I had a couple of questions just looking at the third quarter guidance and Steve in your comments you were saying margins are returning to a more normal level. There is a break in the transmission, I am assuming you are talking about pharmaceutical margins returning to a more normal level in the third quarter. Is that correct?

Steve Hagge

Yeah. I think if you look at it George our margins in Pharma have ranged between 25% and 30% and we were 26% in the first quarter and 30% in the second. So we expect that to moderate somewhat back to more of an average in the third quarter.

George Staphos

I know you've touched on it, and you said some of it was improved operating overhead utilization, but can you touch on what drove the margin in 2Q? Whether there were any aberrational factors and in turn what are things that are driving it towards a more normal level. We've noticed too that the core growth ratios decelerate a little bit in 2Q. Is that also one of the factors?

Steve Hagge

Well little bit. First of all I think the product mix was very good, because in the second quarter the product mix was very good and the customer base related to that was a positive. But again, going back we had very strong growth in the first quarter also when the margins were at 26. So, I wouldn't say there is anything unusual in the second quarter; utilization was good, mix was good and overall we would expect that margin to be fluctuating again between 25% and 30% per quarter as we go forward George. So, nothing specifically, that would be a negative going into the third, it's more just returning to the norm.

George Staphos

Okay, maybe one last question on that and then I will leave it alone for now. What was, when we think about the mix, what was so good about the mix in 2Q? Could you give us a little bit of clarity there?

Steve Hagge

Frankly, we sell, we've have generics we sell to within the customer mix, we have branded drugs and we have new drugs coming out. There are different price points that we sell all of these together with our pumps and metering valves. So, again it's a mix across the whole board depending on the products that we are selling with. So, there is nothing specific I can give you as to why.

George Staphos - Bank of America Securities

Alright. So, you know it was good, but you can't necessarily parse it, just because of the diversity?

Steve Hagge

Correct, and I think that's been the real plus that we've seen in the Pharma, it is a good diverse business for us. Frankly all with good margin. I think that's the other relative standpoint even when we talk about the low end of that margin at 25%, it's still an excellent margin.

George Staphos - Bank of America Securities

Okay. Two quick ones and I will turn it over. One, the pharmaceutical core growth rate should we expect this to be the rate for the foreseeable future. I know it's very lumpy, I understand. And then secondly Closures you saw some acceleration revenue, as you had suggested back on the first quarter but there was very little incremental profit and you were still down year-on-year. Was most of that negative variances on EBIT driven by resin and could you give us some color there? Thanks guys.

Steve Hagge

First of all with the Pharma side. The Pharma growth was reported, came in at 4%, but because we had some decreased tooling if you take organic growth just on product sales we were at the 6% level. That is at the lower end of the range that we expect long-term. We expect long-term growth to be in that 6% to 10% area. So again, still our long-term expectations that we'll stay with, but it will be lumpy, which as you suggested, between the quarters.

Looking at Closures in the quarter, really the one change that happened was frankly the resin price increase and the lag in the second quarter did have a negative impact with us. As well as some slowdown in the business, right at the end of the quarter in Europe, but going into the third quarter. We are seeing an improvement in our US operations, which have been soft for the last nine months and also we are coming back and we have got several new products coming back out into the food/beverage market. So, overall we expect increased profitability in the Closures segment on the third-to-third quarter comparison.

George Staphos - Bank of America Securities

Okay thanks Steve I will turn it over.

Operator

Our next question comes from Ghansham Panjabi from Wachovia.

Ghansham Panjabi - Wachovia

Hi guys, good morning.

Steve Hagge

Good morning.

Ghansham Panjabi - Wachovia

The slowdown in your consumer business was that specific to June or did you see a fade in May as well?

Peter Pfeiffer

Good morning Ghansham.

Ghansham Panjabi - Wachovia

Good morning.

Peter Pfeiffer

The turn-down basically started in the beginning of the second quarter, especially in the US. We are seeing this spilling over now slowly also to the European -- western European market. It seems a general trend in this perfume personal care market for the time being.

Ghansham Panjabi - Wachovia

Okay. And so, as we look ahead to the holiday shopping season understanding that we are in a borderline weaker consumer environment in the US and certainly plenty of rhetoric gone to slow down spudding to Europe as well. Has customer sentiment changed in terms of the level of interest in new product introductions as it relates to your business, or is it too early to tell at this point?

Peter Pfeiffer

No, it's not. What we are seeing is that we are seeing some inventory correction for the time being, but we also hear from our customers that they are working on new products for the last part of the year going into the year 2009. So it's not, the world is not coming to an end for the time being. So there are lot of activities for new products coming out.

Ghansham Panjabi - Wachovia

And Steve, if you could just quantify the impact of resin on 3Q guidance, how much do you expect to be behind? And do you expect to get caught up at the end of the quarter with your price increases? Thank you.

Steve Hagge

Ghansham, it's a difficult one. We are estimating that the price impact in Q2 on resin, on the Closure segment, for example, was about 1%. The difficulty right now is we are, excuse me, 4% for the Closures, 1% overall in terms of price impact for overall Aptar. The difficulty right now is we've heard that the resin guys in the States have announced about a 10% to 12% increase in resin pricing for July and potentially August. We are not sure if that's going to hold.

So as usual, we are continuing to pass these costs on in our Closures business on generally a 30 to a 90 day delay. So it's really difficult for us to estimate how big the increase will be in the quarter and we're starting to see frankly some of the other materials moving up which would be some of the chemical costs, some of our steel and aluminium cost also moving up in the other sectors and we've anticipated that some of those costs will be coming into the third quarter and we'll be moving prices up to reflect those additional input costs.

Ghansham Panjabi - Wachovia

Okay, great. Thanks so much, Steve.

Operator

Our next question comes from Ross Gilardi with Merrill Lynch

Ross Gilardi - Merrill Lynch

Good morning. And good afternoon, Peter. Thanks, guys. I've just had a couple of questions, if you could just elaborate a little more on bridging the gap from the $0.64 that you did in the second quarter to the $0.55 to $0.58 you're projecting for Q3. How much of that sequential decline would you attribute to volume and how much of it to raw materials, just roughly speaking?

Steve Hagge

It's difficult to come back and quantify, Ross, what we tried to do. Certainly, there's going to be a drop off in volume in the Beauty & Home sectors, as Peter talked about, in the personal care and fragrance markets in Western Europe and the States. Offsetting that is still an increase in the developing market. So you're getting a drop off. And we would estimate volume to be more flattish in that area rather than a dramatic downturn.

Closures, we expect to be up in volume. Again, a lot of that will be coming in the food/beverage market. Margins in Pharma, as I mentioned, were about 30% in the quarter, the operating margin. We'd expect that to be moderating back into the kind of the mid-20% which accounts for a portion of that, so. And then the input costs, if we've got a rough estimate at the back and it's probably a $0.01 or $0.02 just on the time lag on the input costs coming in.

Ross Gilardi - Merrill Lynch

Okay, thanks. That's helpful. And then, Peter, could you just talk about, your level of confidence in the European economy, overall right now, and you've commented that the emerging markets remained strong, are you seeing any deceleration though in emerging markets side as well?

Peter Pfeiffer

First of all, what we are seeing in Europe is that the weak economy of US is slowly spilling over to the rest of Europe. We are seeing downturn and slowdown in France. The Consumer Confidence Index in France was recently published and it has a very low rate, the historical even. And we are seeing some slowdown also in Germany, where the economy is becoming bit more difficult.

Concerning the developing markets, Asia is doing very well as does Latin America. They are still very fast growing, much more than the western world. And what we're also seeing is that the Eastern Europe market is growing still. Russia is one of the fastest growing markets for us and for our customers.

Ross Gilardi - Merrill Lynch

But, is it growing any slower than it was a quarter or two ago?

Peter Pfeiffer

No, we don't see any change in the developing markets.

Ross Gilardi - Merrill Lynch

Okay.

Steve Hagge

Ross, just as a point, one of the things that is difficult for us in the developing market is that some of the product is shipped from Western Europe. So, sometimes it's difficult for us to get a full impact. Our customers, whether it's L'Oreal or some of the other ones continue to be very bullish about the growth. And that's frankly where we tried it, that's where we get most of our data.

Ross Gilardi - Merrill Lynch

Sure. And then just on the pricing, Peter was careful to say that you'll seek to get price increases, I think through automatic pass-throughs where you can. Are there any areas where market conditions allow, or might not allow you get pricing? And as consumer branded companies have got to slug it out a little bit more on the retail shelf with weaker consumer spending, are you seeing potentially any price competition there that might flow back to your business?

Peter Pfeiffer

I mean what we are seeing is that our customers are very reluctant to accept price increases. But I'll tell you something; in a world of inflation which we are seeing now much more in the States and also starting in Europe, we have to push through our cost increases. And this is true not only for us it's true also for our competitors. The margins though do not allow to eat the cost increases in energy cost, in transportation, in resin costs, in metal, steel and aluminium.

So, it has to come. And traditionally in the fragrance/cosmetic market, we have price increases once a year. In those situations we are facing today, we have to do this several times in the year. So, it's a big fight, but we are positive to be successful, because also our customers, these are retailers, are starting to increase prices. Procter & Gamble, Unilever, all these have announced price increases in front of the retailers.

Ross Gilardi - Merrill Lynch

Okay. Thank you.

Operator

Our next question comes from Chris Manuel from KeyBank Capital.

Ralph Poltermann

Good morning, Chris.

Peter Pfeiffer

Good morning, Chris.

Chris Manuel - KeyBank Capital

Good morning, gentlemen. Just if I could a get a little deeper into the temporary, what you talked about an inventory adjustment by your customers, it kind of sounds like they continued to order at maybe a faster pace than what they their sell-through was through the second quarter, and now they have adjusted it downward. I guess, obviously the organic growth rate for the third quarter will be a little challenged. Is it your view that the new order rate reflects the sell-through? I am talking with some of your customers and what you are seeing in the markets, particularly this personal care and perfume market, is going to continue to be soft in the beginning of next year.

Peter Pfeiffer

What we are seeing really is that there is some inventory corrections at our customers. Whether the weaker economy in the western world also will affect our sales in the fragrance/cosmetic market is not yet sure. What would be the normal reaction of people in these kind of situations? They will maybe buy less expensive products. That's what we are seeing. The private label market is growing maybe a little bit on the cost of the branded market, but since we are in both products, we are not really seeing the dramatic reaction on that market.

Chris Manuel - KeyBank Capital

Okay. Have you seen any changes to folks buying smaller size? Maybe there is a one-ounce or two-ounce version instead of the five-ounce bowl or things of that nature.

Peter Pfeiffer

This is one of the reactions of our customers. We are trying to make smaller packages at the same prices by the way, the market prices, so they can cover a bit of their costs. But this is a good move for us, because more packages means also more dispensing closures and pumps and valves.

Steve Hagge

And to second that, Chris, I think we are also saying in addition to downsizing kind of the normal use package, the travel market continues to be an increasing segment where if you want the three-ounce and less part of the market, it's still a positive.

Chris Manuel - KeyBank Capital

Okay. And, Steve, could you, I am a little confused with the tooling numbers. It sounds like it was down in Pharma, but up in Closures. Can you just give us for the whole company maybe what the tooling dollars were up or down year-over-year?

Steve Hagge

Yes. Let me do it by segment, and then we'll come down to the totals. For the Pharma segment, we were roughly $4.7 million in tooling in the second quarter of '08 compared to $6.1 million a year ago. So, we were down about a $1.3 million or so. B&H, we're about $4 million compared to $3.5 million, so up about $500,000. And Closures was about $8.6 million compared to $3.2 million or an increase of $5.5 million. That gave us for the quarter total tooling sales in the second quarter for us around $17.5 million compared to about $12.8 million a year ago.

Chris Manuel – KeyBank Capital

Okay, that's helpful. It's exactly what I was looking for.

Steve Hagge

And currency does impact that.

Chris Manuel - KeyBanc Capital

Okay. And it [probably swings] around. The new Pharma plan, it sounds like that's up and running. Are you at full commercial quantities or is there a little time lag between what gets all the way up or can you help us: one, think about the incremental capacity; two, I am assuming that's predominantly going to be sold out as it comes on-line; and the last point, about the timing?

Steve Hagge

Well, again, I think when we talked about that facility a year ago, it added about 25% of capacity in our French pharmaceutical operation. We have to remember by just adding the building doesn't fill it up. So, we've moved some equipment in there, and it's really to handle the increase in terms of both our pumps and metering valves as well as additional accessories.

So, I would say you are going to see a quarter-by-quarter increase in our normal sales that we'll be able to handle in the facility. We also think we're also going to get certain in productivity improvements because we were very crowded before. And now, with the new facility, we're going to be able to be more effective in our production. But it's not like a one-time jump. When we open the door, we get 30% more capacity. So, it's more of an incremental move Chris.

Chris Manuel - KeyBanc Capital

So, it'll kind of slowly moving up.

Steve Hagge

Correct.

Chris Manuel - KeyBanc Capital

And then the last point is -- question I have is, in your press release you talked about freight and -- if memory serves, I don't remember you guys ever talking about that you were experiencing slowness or having issues with freight, pass-throughs and things of that nature. Can you give us a little color there? Has anything changed or different? Have you seen a new pressure?

Steve Hagge

Well, I think here we got a couple of things to remember in the freight area. You are seeing freight on two sides. One is, shipments to our customers and in some cases our customers are picking up the freight, which is primarily in the US. So, it has not been a bigger factor. We also pay more freight in Europe, so as fuel costs move up, that is a higher cost to us, and we need to pass that on.

And secondly the input cost, our suppliers for the product being shipped to us are now fuel surcharges. So again, it has not been a huge factor, but we haven't seen, frankly, the type of increases in fuel that we've started to see over the last two quarters.

Chris Manuel - KeyBanc Capital

Okay. And do you have adjuster CPIs, PPIs or different things -- or do you need to go out and put surcharges in as well? Please help me with how the mechanism works?

Steve Hagge

We've been looking at surcharges, looking at total kind of basket of overall cost. But, right now, we are looking at surcharges which is a lot of what frankly, our suppliers have come back and done to us because they are saying it's just outside the normal scope.

Chris Manuel - KeyBanc Capital

Okay.

Steve Hagge

So, again, it's more of a negotiated basis that we're going to have to do on a case-by-case basis.

Chris Manuel - KeyBanc Capital

Okay. Perfect. Thank you much.

Operator

Our next question comes from Meggan Friedman with William Blair and Company.

Meggan Friedman - William Blair and Company

Hi. Good morning. Good afternoon.

Peter Pfeiffer

Good morning.

Meggan Friedman - William Blair and Company

Most of my questions have already been answered. I just have a couple of questions on the segments. First, on the fragrance and cosmetic slowdowns. Could you characterize where you are seeing slowing in the category? Is it across the board? Is it primarily high-end? Is it primarily Euro-denominated manufactures like a L'Oreal, for example?

Peter Pfeiffer

We are seeing this basically across the board. There are some customers which are more affected than the others, but it seems to be a general trend and it's only in the Western Europe and in the United States for the time being. As I have already pointed out that the emerging market trends in Eastern Europe is still going very well. Not enough to offset the changes in the Western World.

Steve Hagge

And I think, Meggan, it's important to note that this is really more of a third quarter look which we think is some inventory issues, because frankly fragrance for us going into the quarter, we had a 7%, 6% growth in that segment on an organic basis in the second quarter. So this is more of a look forward rather than an existing position.

And we do think that our customers, now we have to remember as we get into Europe, we're going into the vacation period also. So there is some inventory adjustment factor. We think it's built into the incoming orders.

Meggan Friedman - William Blair and Company

That's helpful. And then just wanted to see if you could provide a little more color on what is driving the expected strength in food and beverage. Is that primarily new product? Is it package downsizing? If you could share a little bit more there.

Steve Hagge

It's really a couple areas. Number one, I think we've mentioned last quarter, the quarter before. We've seen some new product applications coming out. The example being, we are now on Kraft's salad dressing with a new closure, which took out about 20% of the weight of the previous closure which was by the way a non-dispensing system. So we are seeing new product categories coming back up that we are being able to ship to.

So we are seeing areas like mayonnaise continued expansion into the condiment area. We're going to be now supplying almost all of the Hunt's ketchup brand. We've seen Heinz converting over everything to Simply Squeeze. So we are seeing new categories coming out, which are going to help us going into second quarter with a lot of products.

This is really an area when you sit back and you go, this is a consumer driven move. The consumer is looking for more convenience and they are wanting an effective cost. So we're able to do that with cost effective dispensing systems.

Meggan Friedman - William Blair and Company

Great. Thank you.

Operator

Our next question comes from Claudia Heuston from JP Morgan.

Claudia Heuston - JP Morgan

Hi. Thanks very much.

Steve Hagge

Good morning.

Claudia Heuston - JP Morgan

Most of my questions have been asked. I just have a couple. One was on the CapEx. I think the guidance had been for a $170 million in CapEx before, is the increase you expect now just currency driven or is there something else going on there?

Steve Hagge

The majority, Claudia, is currency. In fact, you'll see that we had to move up D&A. When we started the year we were at about a 141, 145 Euro and now with 158, 159. That's the majority of the issue.

Claudia Heuston - JP Morgan

Okay. Thanks. And then I was hoping you could comment just a little bit on the M&A environment, maybe a little bit just on valuations and if they seem to have come back to maybe more interesting levels for you. And if there is any real difference in terms of geographies or end markets as you look out at the climate overall right now?

Steve Hagge

I think the M&A market continues to be for us, with the balance sheet we have, very interesting. We had seen multiples come down over the last six to eight months. So yes, there are more, I think, more companies that today would make sense to acquire. It's still a challenging market, I'm not sure it has moved, everything is in alignment but given the strong balance sheet, we think that the M&A market today is much more advantageous for Aptar than its been over the last three or four years.

Claudia Heuston - JP Morgan

Okay and then --

Steve Hagge

And on the geographic side, I don't know that there is major differences that we're seeing in any one geographic -- when I'm talking geographic it will be primarily Western Europe and the US. Certainly you see some of the Asian markets, which have higher growth potentials which is a really different valuation model we have to look at.

Claudia Heuston - JP Morgan

Okay, thanks and then just any comment on the recent acquisitions that you've done and how is NextBreath doing and folding into your operations?

Steve Hagge

It has done well, they have pretty much met expectations as we said when we acquired them, they're relatively small, didn't have a material impact. NextBreath continues to work well with our existing operations in terms of regulatory effort and frankly it's continuing to provide its great conditional technical expertise which we didn't have as much in the past.

The acquisition of the Bag-on-Valve has also met our expectations in the quarter, we're just coming off when they fill the sun care season, so we expect that to be somewhat slower until we get into the fourth quarter when they start filling again for the next summer season. So, overall done well.

Claudia Heuston - JP Morgan

Okay, great, thanks very much.

Operator

Our next question comes from Mike Hamilton with RBC.

Mike Hamilton – RBC

Good morning, I was wondering if you could comment a little on your thinking on revenue components in the coming quarter, issues like product mix factoring?

Steve Hagge

Well, I mean, we tried to take a look, I mean certainly there were some product mix issues as we look at the business and again, we have to always come back when we look at it compared to last year we had a very strong third quarter, which was a record for us at the time. So, we see a bit of a balancing, we're seeing as we talk about some movement up in the Closures, down a little bit in Beauty and Home and kind of a market moderation in the Pharma. So, I don't know if there is any one area I can give you Mike that would stand out.

Mike Hamilton – RBC

Are you anticipating mix shift on the part of customers as a result of where consumers are going with their spending?

Steve Hagge

Well, we've seen some of that. I think Peter even alluded to this, we have seen an increase in our store brand. Because the dispensing system is critical to the product, store brands almost all use dispensing systems. So we have seen a movement up in terms of what we sell to that marketplace, which may be impacting negatively some of the bigger brands. We are seeing a couple other areas, we've seen maybe some movement to smaller dispensing systems from a large cap to a small cap, as they look at cost and in some cases we are getting into the Costco's or the Sam's club where you have, lets say a bigger product that people are buying more for the value side. So, you get a little bit of those not any of those are by themselves overly material but you are getting small movements kind of across each of those different sectors.

Mike Hamilton – RBC

Anywhere in your product categories where your sense is that customer inventory levels are way out of balance going into the corrections?

Steve Hagge

I don't know that there is, again what we get is the customers when they see a bit of slowdown and certainly you've seen it in the States and we are seeing a little bit in Europe, kind of the first reaction is let's take a look what we have in inventory and we are not going to be building to that side. So it tends to be -- most of our markets, the inventories are pretty, they are not huge amounts of product that they are carrying. So I don't know if it's any one sector that would be bigger than the other. I have to say that, the one area that we don't see it in is in the pharmaceuticals side.

Mike Hamilton – RBC

Yeah, okay. Thanks Steve.

Operator

Our next question comes from Greg Halter with Great Lakes Review.

Greg Halter - Great Lakes Review

Hello guys, how were you?

Steve Hagge

Hi, Greg doing fine.

Greg Halter - Great Lakes Review

Relative to pricing for your products, is there a differential between generic products and brand name products, in terms of the end item?

Peter Pfeiffer

It will depend on the sector. In the Pharma sector because the generics are generally less volume than the branded we actually have higher pricing on the Pharma side. It will be very dependent when you get into personal care, when you look at those on the type of product we're selling. So, I would tell you margins are not significantly different between the branded and the store brands and in the Pharma they may even actually be higher. So, I think there is a one size fits all for that.

Greg Halter - Great Lakes Review

Okay and given the fact that you've announced the 4 million additional share repurchase authorization, does that signal that you would be more aggressive in that regard?

Steve Hagge

No, I think, well, if you would have looked before we would have, we've been buying back about a 0.5 million shares per quarter and that's been pretty consistent over the last three years. That authorization would have run out basically by the end of this year. I don't think I would read into that. We will either be more or less aggressive in the share buyback because of the new increase. We will continue to plan as we stay, continue to be in the market on the share repurchase.

Greg Halter – Great Lakes Review

Okay and is there anyway that you can characterize the percentage increase that you saw both in the US and Europe in terms of resin costs?

Steve Hagge

Well, I can give you some numbers. Percentage wise for example, right now in Europe. Let's take resins in Europe. Really that's been relatively flat up until to the end of the second quarter. We're starting to see some movement in the third. But in the US, we're up compared to the second quarter of last year, lets say we're up around 25% round number. Since the beginning of the year, we are up around 12% to 13% in resin and for the quarter alone, we are up like 5% to 6%. The challenge in the US is that we are seeing announced increases anywhere in the 10% to 15% category, in both July and August. At least it's been talked about in increases. So that's on the resin side to give you kind of an order of magnitude.

Greg Halter - Great Lakes Review

Okay. All right. And I know in the French plant, you have some issues there, just wondering if that has been cleared up to your satisfaction at this point?

Steve Hagge

I think you might be referring to the closure facility, those continued to improve. We are not done with all the work we need to do there. But frankly, operating results have improved from a year ago and even more positive for us is that the operating efficiencies which was one of the big areas, had made significant improvements. So, we are pretty much along the line that we had expected from a budget standpoint. But we still have a long way to go.

Greg Halter - Great Lakes Review

Okay. And one last one, I think on the last quarter's conference call, you indicated that your new product pipeline was as strong as ever. Just wondering if you could characterize your thought process in that regard as we could move into the third quarter here?

Peter Pfeiffer

This is true, especially for the pharmaceutical business, but I underlined already last quarter that this is a long-term issue. So, we have a lot of new products and new projects going on, but you never know when the FDA is giving us the okay. We're seeing and I mentioned this at the beginning of the today's call, we are seeing new projects in the fragrance/cosmetic market for the fourth quarter going into the year 2009. So we are still very confident. The level of projects we have is still very strong. So we are pretty positive for the future in both segments.

Greg Halter - Great Lakes Review

Okay, great. Thank you.

Operator

Our next question comes from Timothy Burns from Cranial Capital.

Timothy Burns - Cranial Capital

Hi, guys.

Steve Hagge

Good morning, Tim.

Peter Pfeiffer

Hi, Timothy.

Timothy Burns - Cranial Capital

Hey, I had one question. Maybe I missed it in your comments. But the miscellaneous net in the third quarter was a positive swing. It looks like over a million bucks. Is that where the stock option expenses reside or what are we missing there?

Steve Hagge

No, the biggest issue there, stock options by the way would be primarily up in SG&A.

Timothy Burns - Cranial Capital

Right, okay.

Steve Hagge

The biggest move in that was foreign exchange. So that is where we end up booking the biggest changes. So it depends on where we've hedged foreign exchange on the pluses and minuses coming through. So that has some volatility in it based on where the rates are going.

Timothy Burns - Cranial Capital

Okay. I don't know if you can help me on this Steve, but maybe Ralph can. What is an eye lift?

Steve Hagge

Yeah, by the way Ralph can't, because I know, when I have looked at him his eyes don't lift very well. To make you look more beautiful we should send some of that. So it is a beauty product that keep those wrinkles away from your eyes.

Timothy Burns - Cranial Capital

All right, I will try it. We have talked about kind of the move to private label and maybe smaller sizes. What is happening at the consumer product companies, beverage companies, food companies in terms of new product development, I mean have they shut it off? Do they have programs going on, but not willing to release? What are your thoughts?

Steve Hagge

Well, on the food/beverage side, one of the growth that we see coming back that is going to accelerate our Closures business, is a lot of new food/beverage and different applications. So what we have seen is new back-offs to-date in the process.

Timothy Burns - Cranial Capital

Okay.

Steve Hagge

Now, the other side is, certainly what we are seeing is that if something was 15 ounces or 12 ounces, they may repackage that into a 10 ounces package at the same price point. For us that's generally been a net positive. But as Peter talked about at least on the food/beverage side, we're spray salad dressings, we're seeing that continue to increase in terms of where that market has been moving. So in the sectors we are at, we haven't seen a back off at this point in any of our customers.

Timothy Burns - Cranial Capital

Okay. And we've talked about smaller sizes. Couple of my teenage sons are now carrying around what looks like Gatling guns of Axe body spray. And I agree it's a favourable trend for -- the fact that you have instead of one closure for a large one, dispensing system for a large container, you now may have six. Some people would say that consumption will be the say. I guess if these are mobile dispensers, consumption in fact should increase. Are you seeing that with the sales of the product?

Peter Pfeiffer

That's true. The increase for smaller packages is true and in fact certainly also our sales for these packages. It makes a difference whether you have one big, with only one closure or pump, or you have two or three, as you said. They are all equipped with the same kind, sometimes very sophisticated closure. So, that's a trend which we are seeing and it's a very positive for us.

Steve Hagge

Well, I think so too, Tim. The other thing we are finding is, your teenage kids could probably see it. They are carrying maybe even two different scents. So, it's no longer just one they are carrying to. So again, at this point, we think that there may actually be even an increase in consumption that you get people that weren't using much of the fragrance before and now using more of it.

Timothy Burns - Cranial Capital

Got you. So it's really up to what the girls do to get this product sold. Is that a fair question?

Steve Hagge

I think the MTV crowd, if you watch it, that's certainly how they are selling it?

Peter Pfeiffer

Timothy, these companies are always selling dreams.

Timothy Burns - Cranial Capital

Well, if you can get something for my dream, give me a call.

Steve Hagge

Okay.

Timothy Burns - Cranial Capital 

Some of our callers and analysts have talked about it, but historically, many industry analysts have thought that sales to the store brand were less profitable. But, doesn't the selling model change a little bit where you become kind of the bigger fish again and have a little more leeway with these types of customers?

Peter Pfeiffer

First of all, I think that for us, the margins to the store brand is not different from that to the brand and the products.

Timothy Burns - Cranial Capital

Okay.

Peter Pfeiffer

And what we are seeing that those products are basically cheaper, because they have less advertising to carry. So, it's a reaction of the retailers to increase prices from the brands.

Steve Hagge

The other thing, Tim, that's been interesting that we have seen, that's been unusual, is it used to be that store brands wanted to be just like the brand. Johnson's baby shampoo had the ones from Walgreens or whatever.

We are actually not saying that the store brands wants even a distinct package. For example, I think it's in Walgreens or CBS, There is now a [Axe] knock-off that is the store brand that had the different package than Axe. So, they've been trying to go one step further and differentiate their own products to create a little bit more branding image to it.

Timothy Burns - Cranial Capital

Got you. Got you. Well, listen, that answers my questions. Thanks a lot. Good luck in the second half. And I hope the vacation period in Europe is good to your peer?

Peter Pfeiffer

Thank you very much, Timothy.

Timothy Burns - Cranial Capital

As you know, we only take a three-day weekend in United States.

Peter Pfeiffer

Yes, you are lucky. I have less than you.

Timothy Burns - Cranial Capital

Take care.

Operator

Our next question comes from Brian Rafn from Morgan Dempsey.

Brian Rafn - Morgan Dempsey

Good morning, guys.

Peter Pfeiffer

Good morning, Brian.

Brian Rafn - Morgan Dempsey

A question for you, Peter. You guys have talked about the fragrance side and seeing kind of, I think you said, weakness perhaps across the board, both high-end and premium and kind of lower economy. Are you seeing any differences in the new product launches from the standpoint of either number of launches or the size of the units being launched?

Peter Pfeiffer

No, really not. What we have seen that in this year, in the second and third quarter, the new products were a little slower than anticipated. They are catching up for the rest of the year, more the fourth quarter and through year 2009. The volumes are not different for the traditional and newer products. So, you don't see a big change there.

Brian Rafn - Morgan Dempsey

Okay. You guys talked about the downsizing, certainly in packaging sizes. And I think, Peter, you talked about having a net recovery in profitability, and the sales have actually increased as you go down in size. If you had $2 million or $3 million of a 10-ounce size, are you seeing the manufacturers double the unit volumes? Let's say they cut the per-ounce packaging size in half. I'm getting a sense of order they keep a larger size and a smaller size; you're seen those gratified volume launch or kind of give me a sense as to what you are seeing?

Peter Pfeiffer

It's a difficult question. I think, generally we've seen an increase when they go down. I don't know if you go from 10 to5. It's two.

Brian Rafn - Morgan Dempsey

Okay

Peter Pfeiffer

So, you may end up being 1.5, because the use-up rates or whatever. So, there tends to be an increase. I think, Brian, probably for us, it would be difficult to say it's rateable for us whatever decreases, it goes up percentage-wise.

Brian Rafn - Morgan Dempsey

Okay. As you guys here, specifically in the US, see a shift more toward value sizes which should be the warehouse club, the Costco's and the Sam's Club, and you have things that are multiple gallon sizes that are on roller casters. Do you guys have the same penetrations in caps and pumps in those mega sizes that you do in some of the smaller products that you may get in your department stores?

Steve Hagge

On some of the dispensing systems, I mean certainly, there you have the opposite effect, because if you have large items that have one dispensing system, we're only selling one. We have pumps, for example, to serve that. We're not the largest producer of high output pumps. So we're in that market, but we are not the largest producer of those. So generally, the answer would be we don't lose a lot there. We only lose because they are not selling as many products on a throughput basis.

Brian Rafn - Morgan Dempsey

Okay. Is that an area going forward, of interest to you or is it more of a commodity side for you?

Steve Hagge

It's been a little of both. Over the last year-and-a-half, we've added larger output size, because we've used those for different product categories also. So, it's an area that we'll continue to look at. There is one competitor that frankly has had the majority share of what is a very small margin, but they've had a majority of that. And we're continuing to look to increase that as particularly some of those areas in Asia have always been a plus for us. So, we're looking to expand to that over the next couple of years.

Brian Rafn - Morgan Dempsey

Okay. As you guys look at kind of, cross-selling or migrating your dispensing systems, historically meter valves, pumps have been kind of a pharmaceutical or perhaps a fragrance area where caps and closures now have been in package foods, now with the -- like the sprayable salad dressing. Do you see pumps going into new product areas or caps and closures going into new product areas from what your historic experience has been?

Peter Pfeiffer

I think we are always trying to cross-vertilize a little bit our products, which we have in the different markets. We have a product solution in the pharmaceutical or in the personal care product, we try to sell this also in other areas like food and beverages. This is traditionally one of the growth parts of Aptar Group. We are constantly searching for new fields of applications for our products.

Brian Rafn - Morgan Dempsey

Okay. And then just one for closing for Steve. What are you guys seeing as far as kind of wage and salary pressures across your global manufacturing base, maybe retention rates, turnover rates? Give me a sense of where you are?

Steve Hagge

Yeah, overall certainly with higher inflation we are seeing, lot of the discussions we'll have will come towards the second half of the year, but on a worldwide basis there is certainly some upward pressure in terms of where wages are moving. That being said, the overall economies are still pretty soft-- we're not seeing dramatic increases at this point.

In terms of retention, Aptar Group has historically had outstanding retention and that continues to be the case, not only here in the US, but also through our international operations. So, I think it is a concern as overall inflation picks up in the second half of the year, that we see there is going to be some upward pressure on the wages from general regional areas, whether it's Western Europe or the States. So, we'll have to deal with that along with all of our competitors and frankly customers as we look forward.

Brian Rafn - Morgan Dempsey

Okay. You often commented in the past, I think, off-line that Europe has had from the standpoint of product differentiation, packaging differentiation, branding imaging, a lead over the US, bit household, cleaners or package food, are you still seeing -- is the gap closing or you still see you're bleeding?

Peter Pfeiffer

I would say that the gap is practically closed.

Brian Rafn - Morgan Dempsey

Okay.

Peter Pfeiffer

The markets are very similar and there are new ideas coming out of the United States spilling over to Europe and visa versa.

Brian Rafn - Morgan Dempsey

Okay. Peter, are you seeing from the standpoint of after you get product line launches? Are you seeing that the life cycle or the duration of that product packaging is that extending? Is it about the same or you are seeing faster turns to keep that differentiation edge?

Peter Pfeiffer

What we are seeing especially in the fragrance cosmetic area that the products, celebrity products for example are becoming much shorter, their life cycle. But our customers are trying to turn this trend and trying to bring new long-term products on to the market. Because developing costs for these kind of products are pretty high and you would sometimes have problems to cover your cost during the lifetime of these kind of products.

Brian Rafn - Morgan Dempsey

Sure. Give me a time sense, how would you, if you put out a number on that, what's a long-term package cycles? That are a couple years, five years, what -- give me a sense.

Peter Pfeiffer

If you look at products like Chanel No. 5, this is now -- I don't know 50 years old even older, so it can be very long. I would say if a product stays longer than the three to five years, then it's really a success. Many of those celebrity products they last only for one or two years and less.

Brian Rafn - Morgan Dempsey

Okay.

Steve Hagge

And I think, Brian the other side would be, you got to look at personal care. You get a lot of new improved packages that will turn on through a couple of years and in the Pharma businesses, I'm sure you are aware, it's really not an issue because those products, because of all the regulations, don't change almost at all.

Brian Rafn - Morgan Dempsey

Right, I missed your opening five or ten minutes. Could you guys then go back and maybe highlight kind of across some of your newer products, Bag-on-Valve, Simply Squeeze, metered valves, blister pack anything new, new penetrations, new iterations across the world?

Steve Hagge

I think we continue to get new products. I mean there were several new products that have come out in the allergy area that were on the pharmaceutical side. We talked about, there is a new Gillette Body Wash for Men, which is getting lot of advertising, it's our dispensing system on. So we've got, yeah we did talk about several new products that we have that continue to come out. We are going more into the cosmetic with some of our dispensing closure systems. So we've got quite a few new products that are out and positively impacting what we think will be the rest of the second half going into '09.

Brian Rafn - Morgan Dempsey

Thanks guys, I appreciate it.

Operator

Our next question comes from George Staphos from Banc of America Securities.

George Staphos - Banc of America Securities

It's obviously late in the call. I'll try to make these quick. First of Steve, have you ever done anything like a general price increase. I know it goes against the nature of the products the niches that you serve, but as value added as Aptar is and as you think it is and differentiated versus your competition what would be wrong with the approach to raise pricing generally to improve your return?

Steve Hagge

We've done that George. Again it's going to be very much depending on the sector. So for example, we have come back in the US, we have done a general price increase related to some of our aerosol products and some of our pump products that was effective July 1st. Now that being said there are contracts that we're going to have that come back and make that more difficult to do on a general basis.

George Staphos - Banc of America Securities

Quite right.

Steve Hagge

So those we've announced and we are going forward and actually we've done that in the past. We haven't talked a lot about that, but that is something we do on in the personal care categories, household care and categories and even in the food/beverage side in addition to resin. We will also do general price increases.

George Staphos - Banc of America Securities

Okay. Do you find it is a little bit more difficult to do these sorts of things these days, or really there has been no different, no closing of the gap, if you will, in your relative pricing power versus your competition?

Steve Hagge

Some of it is size based, I mean on the customers. As Peter said, if there is any good news, the increase we are seeing in input costs, all of our competitors are seeing and it is not that we are buying poorly or whatever. So, what we are right now, it is difficult to get through. But it is no longer a question of do we pass them through, it is a matter of when we can pass them through. So that tends to be the negotiation.

George Staphos - Banc of America Securities

Okay. Last question. Given I don't want to make this to be too big of a deal. You are just getting to a more normalized level of profitability it sounds like. But given the deceleration in pharmaceutical, which will on the margin dilute the progress of your returns, and based on our analysis, even the return on capital has gone up. Your economic profit has been flat to slightly down because your invested capital has moved up more quickly than your margin growth. I am wondering why you wouldn't necessarily be more aggressive with share repurchase in the next year or two.

Steve Hagge

Well, I think we could be. It is partly going to depend, George, I think we have talked this in timing. Yes, I do think the acquisition market is opening up more than it has been in the past.

George Staphos - Banc of America Securities

Okay. So that is really the issue then.

Steve Hagge

Yeah. And I think frankly, if you look at that right now, I think there are more opportunities that we are looking at than we were historically because of some of the pricing. So, I do think that there is a value to come back and say instead of doing a very large share repurchase, let's take some time, see what that market is going to come back and open up for.

George Staphos - Bank of America Securities

Okay. Thanks guys. Good luck in the quarter.

Peter Pfeiffer

Thank you very much.

Operator

Our next question comes from Ross Gilardi from Merrill Lynch.

Ross Gilardi - Merrill Lynch

Hey guys. I just have one more. Your key competitor in metered dose valves has quantified the revenue opportunity from the dose counting devices at $40 million to $60 million over the next three to five years. Since you have roughly equal market share in the metered dose market, I mean is  there any reason why your opportunity shouldn't be similar, and then could you just talk a little bit more about where we are in the evolution of those products?

Steve Hagge

Well, I think, first of all, in the metered dose valve, I think our competitors continue to say that we have equal market shares. We actually in our data look like that we have a larger market share. That being said, we are both in agreement, both our competitor and ours at the dose counter is a significant area for growth. And I think that the volumes that they talked about and the market potential is definitely a growth opportunity. We are today -- we have a product as they do. We are working with several pharmaceutical companies as they are. We think ours has certain technical advantages.

So, I mean right now, I don't think there is going to be one product on the market, I think both companies will be out on the market and we continue to be very bullish about it. So, from that standpoint, Ross, we are absolutely in agreement that it's a good growth opportunity for both operations.

Ross Gilardi - Merrill Lynch

And remind me though Steve, I think that one of the products testing, is in stage three trials, is that right, when might we start to see commercial sales on that product?

Steve Hagge

To be honest with you, under the confidential agreements we got on that, that's really an area that I can't get into.

Ross Gilardi - Merrill Lynch 

Okay. Thanks guys. Good luck.

Steve Hagge

Thanks.

Operator

Our next question comes from Susan McGarry Susan from a Granahan.

Susan McGarry - Granahan

Hi. I just want to clarify something. Steve, did you say that the market is moderating in Pharma?

Steve Hagge

No, the margin percentage. Again we were, I think, coming back we've said that the operating margin percentage for Pharma will range from 25% to 30%. We were at 26% in the first quarter, 30% in the second. Our expectations, again these are, we are looking out, is that we will not be at 30% in the third that it will be more to that say 25% to 27% range. So, it tends to be that normal fluctuation we see quarter-to-quarter, Susan.

Susan McGarry - Granahan

Okay. Because none of the other messages that you or Peter have been conveying during this call about Pharma have been negative in terms of the market?

Steve Hagge

It's not, I think. And again, I think it's important to note, we continue to have strong growth. Our long-term growth potential is 6% to 10% as what we've said. We are still very bullish on the Pharma. I think, it's important to note last year Pharma's organic growth in the third quarter of '07 was over 20%. So the comparison growing that market even on a 20% previous year growth is still very good and I think it's still excellent opportunity for Aptar in the future.

So again, we certainly wouldn't want to convey anything negative, it's more that we are saying that we are not always, 30% margin is not something we expect every quarter going out.

Susan McGarry - Granahan

Thanks.

Operator

Our next question comes from Matt McGeary from Sentinel Asset Management.

Matt McGeary - Sentinel Asset Management

Hi, good morning. Just one quick one. You said 64% of sales to Europe. I think you've said before that while those sales are to Europe, all those products down town always end up in European markets at the end of the day, is that right?

Steve Hagge

Yes.

Matt McGeary - Sentinel Asset Management

Do you have any guess as to how much of that goes elsewhere? I mean there is a lot of talk now about the European economy slowing down and Peter mentioned earlier in the call. Just sort of curious what your thoughts are there?

Steve Hagge

I think it's difficult for us to get because of our customers, let me show you where we sell. A lot of our pharmaceutical sales go into Europe for example for Glaxo's Ventolin, asthma spray. Half of that ends up in the US just because of the way the US market is. So, if you take that 64, our guess is you get much more than the US, instead of being some 20 percentage of the end market, it will probably be in the 40s, just because of where pharma and fragrance gets exported. But it's no way we can really quantify Matt. I don't have that kind of numbers.

Matt McGeary - Sentinel Asset Management

Okay. Thanks guys. I appreciate it.

Operator

I am not showing any other questions at this time.

Peter Pfeiffer

Thank you very much. I would like to thank everybody for participating in today's call. Thank you, and goodbye.

Operator

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the conference. You may now disconnect. Good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: AptarGroup, Inc. Q2 2008 Earnings Call Transcript
This Transcript
All Transcripts