Q1 2021 Crown Holdings Inc Earnings Call
Assuming the sale of the European tinplate business closes at the beginning of the third quarter. We expect that their earnings dilution impact over the balance of the year of about fifty cents per share will be offset by improved results in the remaining operations as compared to our original guidance are expected tax rate for the year remains at 24 to 25% off with that. I'll turn the call over to him.
Thank you, Tom. Good morning, everyone. Thank you for joining us in our best wishes for the continued health and safety of you and your families.
As reflected in last night's earnings release the company is off to a very good start in 2021 demand was strong across all major businesses and despite the ongoing challenges posed by the Panthers and severe winter weather in the United States the company continued to convert strong volume growth in to record earning record earnings.
This performance could not have been possible without great people in our Global Associates continue to perform extraordinarily in the face of the pandemic ensuring that our customers receive high-quality products or services in a safe and timely manner and while it feels that we're turning the corner with widespread vaccinations now available new strains and increased positivity rates in some jurisdictions remind us we must remain Vigilant in our hearings to recommended behaviors.
Global demand continues to be very strong for the beverage can and we are committed to deploy necessary Capital to meet customer needs as detailed in last night's released. We expect to commercialize 6 billion units of Beverage kanka pack of twenty Twenty-One with further Investments being made to bring on at least that much more in 2022.
Before reviewing the operating segments. We thought it would be well to remind you that delivered aluminum in North America sits around $1.28 a pound versus seventy-five cents a pound last year at this time. So an increase of 70%
and as we contractually passed through the lme and the delivery premium reported revenues will reflect both volume increases and the higher aluminum cost this year.
Americas beverage demand remains strong across all of the markets we serve with over all the segment volumes up 9% in the first quarter.
We expect that the man will continue to outweigh supply for the foreseeable future and is described to you in February. We have eight production lines in various stages of construction to bring more Supply to these markets during my twenty one and twenty twenty-two
While I no longer publishes industry volumes, we can tell you that our North American volumes increased 12% in the first quarter compared to the same prior-year.
Unit volumes in European beverage increased 6% in the first quarter as growth across North West Europe and the Mediterranean offset softness in Saudi Arabia segment income tax contribution from the volume growth and the two aluminum lines in Seville Spain, which we're down for conversion in last year's first quarter.
Sales unit volumes in European food increased 6% in the first quarter as the business continues to benefit from strong consumer demand for packaged food segment income which almost doubled the prior-year name reflects the above noted volume growth five million of favorable foreign exchange and the negative impact of template carryover included in the prior-year first quarter.
As reported on April 8th 2021 the company entered into an agreement to sell its European template businesses, which includes European food. And as Tom said we expect the sale to be completed in the third quarter and beginning with the second quarter results will be reflected in discontinued operations.
Asia-pacific reported 8% volume growth in the first quarter as both southeast Asia up 5% and China up more than 30% continue to show recovery from the pandemic related job as described in February activity levels are returning. However, we expect there will be virus related shutdowns and movement control orders from time to time across the region throughout 2021.
excluding foreign exchange results for Transit packaging were in line with the prior-year
With industrial demand surging activity remains extremely strong in transit and we expect the segment will post full-year segment income growth of approximately 25% interest over twenty 20% There will be a large outperformance in the second quarter against an easy, with further gains through the end of the year.
Other operations also reported strong results in the first quarter led by North American food and our beverage can making equipment businesses.
in summary a great start to 2021
With numerous projects completed last year and several more underway. Currently. We remain well-positioned to continue to capture our share of global beverage can't growth importantly. We continue to convert growth in a suspended earnings and cash flow as Tom discussed our full-year garden guidance remains unchanged despite expected dilution from the sale of the European template businesses, better-than-expected first-quarter performance combined with continued strong demand across beverage and Transit will allow us to earn through sale related dilution and a rising commodity cost environment and just before we open the same questions. We ask you that you limit yourselves to two questions initially so that everyone will have a chance to ask their question, but always as feel free to jump back into the queue.
And with that deal we're now ready to open the call to questions.
Thank you. So much participants will now begin the question-and-answer session. If you'd like to question. You may press star followed by the number one, please let meet your phone in the car. Your name. Your name is according to do sir question. And if you want to cancel your request, you may press start.
One moment speakers as I get the name of the participants the beautiful question.
Our first question comes from the line of gunshot Punjabi Berry your last name open. You need to see good morning everybody. I got you down.
Hey, so, you know relative to your to the guidance for the first quarter you gave on February 10th. Can you just kind of bridge as to what exactly drove the upside specific to the first quarter? And then also do you know terms of guidance for two Q generally speaking, you know two cubes of seasonally strong quarter just curious as to why you know, the earnings number for the second Port. It's not higher than what you deliver the first. Relative to history. Okay. So ghansham it's it's throughout. I'll just read you off, you know against what we might have budgeted for the first quarter every operation in segmenting come was ahead. So for example, South America was up fifteen million signal was up ten million food North America up six European food up seven European beverage up, you know twelve to Fifteen just across the board everybody up.
It was all volume and so as we look forward to the rest of the year, we start trying to understand, you know, you always look at how how could we have been off that much and home team off that much. I will tell you that we we pushed the teams extremely hard to come with a budget this year. That was
we that we believed was more realistic than perhaps what we saw in the third and fourth quarter last year because we had these big outperformance in the third fourth quarter and and while it's nice to outperform, you don't want to miss by that month because you could always miss in the other direction and that's a different conversation than we're having today. So but all volume related and so as I said as we started looking forward to the second quarter into your question about the second quarter, sequentially, why would it be lower? You know, we're trying to understand the two together. I think we certainly had some volume pulled ahead one from what we expected and so as we sit here and look at the second quarter, you know, our second quarter guidance is higher than than our budget for the second quarter as we we look at a second quarter, but certainly lower than the first quarter obviously as I said volume pulled ahead. I think we're up.
We're probably going to be more capacity constrained in the second and third quarters than we are in the first quarter. So your volume outperformance year-on-year in q1 and Q4 is always has faith is the opportunity to be greater just because of the denominator smaller and then just you know as we look at the balance of the year.
looking at the commodity cost environment and while we have pass-throughs for a number of specific Commodities a whole bunch of others go into a basket the PPI basket, whether that's you know, the labor Coatings and they're all up right now, especially in the Coatings the you know, the specialty chemical side, so,
we'll see how the second quarter progresses but
that's where we're at now. Okay got it. And then for my second question, you know just on your pull forward comment. Was that specific to any region and then second related to that, you know, just Brazil just given a virus operation all the headlines that we see etcetera is that have you started to see any impact associated with that in terms of mobility and you know the impact on your business and I know you're cycling through easy. There's very noisy, but what's the real time Beyond Brazil?
So the the second quarter will be the cops will be easier for Mexico Brazil South East Asia as you state, correct, as you know, the virus wage not only Brazil but the the other country that doesn't get a lot of discussion here in the US but is is really bad right now is India and so that that'll be another reason why perhaps we should be taking a just a a different approach to the balance of the year. We don't know what's going to happen. We have yet to see in those two countries off any real restrictions or movement control orders. We do have some movement control orders in restrictions in one or two of the South East Asian countries right now.
But not in Brazil or India.
Thanks so much. You're welcome.
Thank you for that. The next question comes from the line of my head. Berkeley is now open you mean.
Yeah, great. Thanks. Good morning guys on Transit packaging highlight in their lease. I think a number of cost structure will cost improvements you've made long as we continue with this industrial recovery here. How should we think about the sensitivity of this business or the earnings leverage to an industrial Up Cycle either terms of incremental margins or or however you guys think about it internally.
I think you know as I said in the prepared remarks, we're going to see Transit up. You know, I'm saying approximately twenty-five. I think it's going to be at least 25% year-on-year. So that's about you know, what is that six sixty to seventy million dollars a second income Improvement year-on-year which you know, that's if it does well combination of a number of cost reductions we've done over the last couple of years and and the recovery of of industrial demand. I think that
They did much better in the first quarter. Let's say that the
Our ability to to meet demand was much better in the first quarter than we budgeted. They like a lot of businesses globally not just the can business or the transit business but am businesses globally challenges being availability of raw materials and then the time necessary to convert raw materials and or assemble equipment and so we had a a software budget for q1 based on those concerns, but they were able to pull through that. I think we feel very good about this year. We'll see how long that's just really awful demand surges. Is it just COVID-19 related or is there something more to it with all the stimulus that's been put into the global economies, but the business has in our view tremendous upside.
With the platform as it exists today, and we feel very positive about the business. You know, one thing it's not just in transit. We we point out the cost we've taken out in transit, but you know, one of the other reasons for the significant outperformance over the last several quarters compared to the prior-year quarter's is the tremendous amount of cost that our teams have taken out across all of our choices, whether that's European food European beverage throughout the Americas beverage businesses. So all of that when you do that and then you get a little volume come back it just fall straight through the bottom line and that's what we're seeing.
Great that that's super helpful. And then maybe just after the recent European template announcement is the Strategic review officially complete or would you look to potentially do something similar with other aspects like your North American food business? Well, you know, I I don't know.
If a strategic review is ever complete, I think it's always incumbent upon the board and management to look at all the assets from time-to-time determine what the best outcome is for the company long-term and and for Thursdays long-term shareholders, and I'm delineating between Traders and long-term shareholders, but we have a we have a duty to shareholders first, but we also have a duty to other constituents supplier is employees Etc. So we're always looking at that and we feel we feel this was a you know, this was a great business, right? You probably could tell from my comments over the last several quarters. I really I really like this business. I like the what the business can do for an overall organization in terms of its stability and it's high cash flow generation. Having said that we did we did receive what we believed was a full and fair cash price.
We have a little stub will retain and we'll and we'll move forward but the business the remaining businesses we have are are are performing very, well, We have a lot of capital. We need to spend over the next couple of years to deploy new beverage can capacity and the transit business and the North American tinplate businesses will supplement our Capital needs with cash flow until such time that that the board takes a a different View.
Great. Thanks.
Thank you.
Thank you for that. The next question comes from the line of Neel Kumar Morgan Stan your lies. No open you mean.
Great. Thank you. In terms of the Europeans employed sale. I was just curious what the rationale was for a pre-owned a 20% stake in the business. And then I'm just wondering if you can just offer any thoughts on how you're thinking about Target leverage posted sale. I mean particular the remaining 14% Equity interest in European template will not show up in either the so how long just your leverage Target to account for the cash flow.
Well, I think I think you know we ended last year with 3.9 or four. I think one thing that was interesting that we get to the end of the first quarter here and
this is the first time I can remember.
My career crown and I've been unfortunately been around a long time. Now that our leverage at the end of the first quarter is actually lower than what our leverage was at the end of the three months earlier the end of the year, So there there are a couple of ways to reduce your Leverage The the easiest way to reduce Leverage is to increase earnings and that's what we did but I think going forward understanding a new cash flow profile of the company that we would say that we're comfortable in the 3 to 3 and 1/2 x range depending upon what we see for Capital needs and other business conditions globally.
The rationale for keeping the 20% that was the best deal. We believed we could make for shareholders. So keep in mind. You've got a private Equity SPAC making a bid for a company. They've got to put Equity up and the less Equity they have to put up perhaps the greater price. They can pay you for a business. So while it appears that the 20% costs just you know, on the order of what about a hundred twenty five million euros, I would tell you that the the net of the increased purchase price we received
Versus what the price would have been had we not taken an equity stub. Probably only cost us on the order of about 40 to 45 million Euros. So it didn't cost us a lot to keep the stub because we got a greater overall Enterprise value for the business by allowing the sponsor to have to put less Equity up if that's if if you understood what I said there.
Yeah, that's very helpful. And then this is my follow-up. You know, I think your prior expectations for North American girls for the full year was in the high single-digits low double-digit range. Is that still the case? And is there a way to kind of break up that growth by beverage categories? And how much is that coming from parts sales or sparkling water other emerging alcoholic categories versus more mature categorize like carbonated soft drinks or beer. I think what we said in February, we I think I'm trying to remember what we said. I think we said we'd be up about 10% in North America this year. I think we're
Turn up 12%
First quarter opiate as I said earlier that it's easier to be up more in the first and fourth quarters in a second and third just because you have more capacity available for a lower denominator, but I think we're still very comfortable with I sent will bring the Bowling Green lines up this year will bring Olympia up later in the year. Listen. I'm sure it's possible to to to break that down by category. I haven't spent a whole lot of time trying to do that by category myself only because we're we're making and selling everything we can make and at some point it becomes less critical to understand.
What categories are growing up much as a as it is to try to meet your customer needs and not disappoint your customers. And and that's where we're at now is they said earlier demand is going to far outweigh supply of over the next year or two at least over the next year or two. If not for the next three or four years and we like others probably are most focused on trying to get as much capacity in place where we see the opportunity for us and that also means not disclosing to you or others where we see our opportunity.
All right. Thank you. Thank you.
The next question comes from Adam Josephson KeyBank your lines know open you mean?
Thanks, Tim and Tom. Good morning. Congrats on another really good quarter.
Thank you, Tim or Tom just one on the delusion and the guide and so it's fifty cents diluted in the second half you beat your guidance by close to fifty cents in the first quarter. So it's not like you're effectively raising full year by the amount of the one QB. And I know you said to ghansham there may have been some demand pull forward in the corridor, which is perhaps why your rest of your outlook dead effectively unchanged. Is that kind of the right way to think about it. And do you do you think there may be an element of conservative conservatism in there just given what's happened over the past three quarters?
Well, I hope you're right. You know, you don't sound like the Prince of Darkness. You sound like Bosco to, right now the great Explorer talking to Adam Josephson or not here I couldn't resist. Listen. I I said also to ghansham and I had four points written down here, and I were talking about this and I said the month ahead capacity constraints as you go forward commodity costs and and I didn't say the virus in Brazil and India, but but ghansham reminded me of that. So, you know, there are there are a lot of things going on right now with global units sourcing of raw materials to cost of raw materials. Globally not just affecting the can business of the Tran businesses business, but all businesses and Thursday. We're we're trying to take an approach here. That's a little bit measured it would be it'd be really easy to get real excited about the performance over the last couple of quarters and even here in the first quarter, but it's you know, we're we're we're running a birth.
first thing we've got to do is
Satisfied customer demand and and meet the customers needs. We understand you'd like to know everything we we would too. It. Just I there's a whole bunch of things that are that are going on. This is a a really exciting time with the recovery in the in global economies. And but there are some suppliers that are that are pushing price and wage squeezing and are also I shouldn't say squeezing but they're they're having similar demand surges in their businesses. So
You know, I I don't know. I I it's where we're at right now. I think that you know, I would characterize the outperformance in q1 on the order of forty to forty-five cents, not Fifty. So there's a little
a little bit of outperformance in the in the remaining three quarters. I know we
second point of the second quarter Guidance the time just gave you a certainly above the but the original budget we had so and we'll just see what the back half of the year brings us. Yeah, I appreciate that and just on the verge cash flow. Look, I know you didn't give a cancel guidance this time presumably cuz of the sale but you were guiding to $500 three months ago with cat facts of 850. Can you update us wage Tom perhaps on what you're thinking in terms of capex working capital and consequently, roughly. What neighborhood you're thinking for free cash this year appreciate. I know you didn't give guidance office for a reason, but sorry, go ahead. I think the cash flow for this year. Perhaps is not meaningful because depending on when we close the transaction Tom Tom gave you an arbitrary date of July 4th, but it could be July 15th or August. Who knows when it's going to be we think sometime in the third quarter. We just did that because it was an easy cut off the to give you some guidance for the balance of the year, but depending on when that happens.
is there will be working capital movements Plus in minus which hit the cash flow statement, but the recovery of which goes against the purchase price, so it's almost not meaningful to cash flow, but I think if we could tell you
Is that we believe capital for this year will be in the order of nine hundred million. We're going to take Capital up a little this year combination of accelerated project spending and also accelerated Bridge construction cost steel cement dry wall Lumber, you know, you're seeing it out there, right? All Commodities are up, especially construction materials, so, but but assuming let's just assume that we had sold the business with a closed on the business December 31st 2020, and if we said we were going to spend nine hundred million in capital, I would tell you that we would as we sit here then we would have told you that free cash flow for the year will be on the order of three hundred and fifty million if that helps you that's perfect. Thank you Tim. That's the luck. Thank you.
Next question comes from the line of filling Jeffery relies know open you mean. Hey guys congrats, very strong quarter wage earnings were particularly strong in Europe and Americas Bev. I mean typically see margins build from here, but you did call out and pull forward demand. So I'm trying to get a better handle if price cost is a big enough impact life. You don't see your typical so you don't Improvement in profitability and I'm just trying to flush that out a little bit more you're talking about percentage or absolute Bill percentages. Yeah. So am I mentioned on in the prepared notes the aluminum cost is up 70% right delivered aluminum. Yep. So you've got the denominator effect as we have this much higher aluminum cost money now, that'll that'll be in effect. We we see for at least a second and third quarter so, you know on a one-for-one pass through, you know revenues or higher, but you're it doesn't affect birth.
reported or absolute
Margins, but the percentage margin on a one-for-one pass-through comes down. So I you know, you just want to be a little careful about percentage margins with in an increasing commodity cost environment that you're passing through. What about like profitability per can or however metric you think that's cleaner. Do you expect the you know see it Improvement because you did call it some as a potential price cost. Mismatch. No. No yea listen. I think I think we're going to have profitability Improvement just because we're going to get into the summer selling season and the more we sell you spread your fixed costs across greater volumes. And so you naturally get profitable.
Got it. That's helpful. And then when you talk about your outlook for demand, you know, I guess the risk is certainly in some of these markets like Brazil Mexico and even India for that matter, but any concerns on, you know, the tougher Cons with the nice uptick you saw in at home consumption last year. I know when we look at the Nielsen data, you're starting the laptop for Compton slipping negative wage. But you know, I assume you got some good growth a new products, but any color on that front in terms of some of the puts and takes on, you know potential offsets.
yeah, so
Yeah, well first thing I'll say is we're seeing a real Improvement in the virus in Mexico. So I wouldn't throw Mexico in the same category as Brazil and India.
I I think over time it remains to be seen how long it's going to take for people to consume less at home and and start consuming more outside the home. I think there's still a a big percentage of the population that's worried about the virus and and rightly so and so that'll that'll take some time. But I think the man that we have for life, especially in the beverage can business and especially in the Western Hemisphere for new products and for beer in beer and Latin America, and new product introductions shelters down in North America is going to far outweigh any of that reversal of at home consumption over the next couple of years. Okay. Thanks a lot. Appreciate the color. Thank you.
Christopher that the next question comes from the line of my mark Bank of Montreal open you need
Good morning, Tim. Good morning, Tom. I'm work. I wondered is it possible for you to give us any more color at this point in terms of you know prioritizing the the use of proceeds from the template transaction and also just thinking how you might kind of cadence that through the year.
yeah, I want to be a little careful cuz you know, we we've got
you're going to pay off some debts going to buy backs in stock and and which tranches of debt and how much stock obviously we don't want to we want to do it as efficiently as possible. So I don't really want to get into too much of that. I mean wage.
I don't know I think of you.
I don't know. What time you got to have you. Yeah, I think you have to look at the leverage and some said we'd be somewhere between 3 and 3.5 times at the end of the year a big range. So probably close to the middle.
Okay, all right and the profile on him, you know, there's a lot of Goodwill for the toward the beverage can and the beverage can business right now, but I was reading the latest issue of the can page the other day and they were talking about the low us recycling rate on aluminum cans kind of being the elephant in the room for the industry right now and I just curious about your thoughts about how you improve that recycling rate cuz I think we're at about 50% right now.
We are around 50% which is certainly higher than plastic or glass recycling, right? Yeah to be sure and keep in mind the can maker is a UK publication and recycling rates are generally higher outside the United States and certainly they are across Europe as well. So I you know, they're trying to point out, you know in a society as wealthy as the United States. Sometimes we take for granted items of value and aluminum has value. So it's a it's a relevant point that the can make our money. So, you know, we're we live in a disposable Society, right if your DVD player breaks you don't buy it get it fixed you buy a new one cuz they only cost 2999 so
How do you fix it?
You can get you can get real Draconian. You can do it like Switzerland does and you can have people go around and you know route through people's trash and see if they're properly separating every item and and find them. I don't think that'll be popular in the United States and pretty tough to find any politician is going to want to take that on but it's it has to come down to the consumer and
Pretty hard to force it back on the producers or the or the the customers of The Producers. I mean, you're the guy buying the can market and not properly disposing of it. You generally not you specifically month. So like, you know, it's an education process and
So I'm not sure if there's a way to 2 to prepare an incentive program that would force consumers or or incentivize consumers to want to recycle more. But but we all know about has great value and it's really a shame for it to end up in the common way stream as opposed to recycling stream. I don't have the answer for you.
Yeah, well what what are your peers have talked about, you know actually advocating for you know, increased use of of deposit laws things like this. Do you guys have any view on that?
well, I think certainly if you look at deposit the deposit states, there is more recycling that occurs in the deposit States now you
Courtney for example has deposits is that higher rate of cans coming back in to California from canceled in California due to California sales or is it people acting cans in Arizona, New Mexico and Nevada and bringing them into California to get a to get the nickel they didn't pay the nickel in in their home state, but they brought in California to get their nickel. I don't know but there is no way that the rates are higher in states with deposits. I think the
The the challenge is that our customer base understands that at the initiation of the deposit. There's likely to be a dip in demand and and they don't want to face that different demand wage. I think once once that dip and demand normalizes then you're back to normal demand patterns. I would say that it would be unfair to put a deposit on aluminum cans off and not put a deposit on everything and that doesn't just mean you put a deposit on a plastic bottle but you put a deposit on a PT bottle that used for for ketchup and mayonnaise and everything else. So I think you know PT bottles also have deposits but I but that's generally only on beverage product products probably should be deposits on everything.
How much can the consumer withstand because then the consumers got to try to find a way to get that back. But if you're really looking to control waste you want to put a deposit on everything and not just on not just on the product that has the most value.
Okay, I'll leave it at that. Good luck in the the balance of your Tim. Thank you.
The next question from some of the line of George staphos Bank of America your lies now open you mean to see? Hey guys. Good morning. Congratulations on the progress so far my first question. I just want to try one more time to dig into some of the guidance assumptions that you have and then I've got a longer-term in terms of what your guidance assumes for this year. Should we assume that in the 660-2686 assuming debt paid down to the midpoint of that range and that the rest of your available cash goes to buy back and within the p&l where we'll need the stub on European template show up. Will you include it somehow and ebitda or will it be purely in in in equity earnings?
So the stubble being Equity earnings at 20% as far as the the leveraging the stock buyback. Yeah lucky. It's it's by the time the business or actually where we are today and you start flowing through stock BuyBacks. That's not a meaningful contributor to you know, the earnings growth this year off, but for modeling, I I think using the midpoint of that 3 to 3 and 1/2 sounds about right.
Okay, Tom, and then thanks for that and I guess my other question if we take a step back, you know signode had you know, very strong performance in the quarter ending better than the expected for the year in South East Asia. And China values were very very strong. And I think you said China China volume up to 30% off obviously versus a very easy comparison. Yes, what are the implications if any for the trend that you saw in the first quarter and the performance versus budget money for Capital allocation to those businesses. And do you see signode Tim even more of a keeper these days given that performed within the portfolio or no? It's doing well, but you're going to be every bit as clinical about that business and it's fit in the portfolio as you would have been six months and nine months ago dead.
And within China given the performance you're saying what what does that do to your supply-demand around the rest of Southeast Asia and your willingness to put Capital both into China and frankly the rest of the region which is to us to be very taken our supply and demand more. Thanks guys. Good luck in the quarter.
So I think the principal allocation of capital dollars in the company right now is in the beverage can business there are there's minimal Capital that we put into transit for specific projects.
That's Supply Industries where we see good growth, but the capital allocation is signode is is fairly minimal considering the size of the business and and the cash flow. It generates month. We do have we have consistently commercialized new capacity across Asia southeast Asia over the last several years. We had a plan come up last year will have bought a new plant and another line come up this year. So so two lines with a new plant and plans for more. Obviously. We have no current plans to expand the city in China.
Okay, and and that's because you just you've been there done that the growth is great, but it's difficult to earn a profit on a long-term basis given the amount of capacity. Would that be a fair summation off amount? Not a competition? I should say. Yeah among among other factors. Yes.
Okay. Thank you guys. You're welcome.
The next question comes from the line of Anthony pettinari.
Beauty is your line still open you may proceed.
This is actually Brian burgmeier sitting in Brandon e, you know following the style of European food or there any impacts to non-reportable or corporate expense that we should be aware of money and are there any synergies and separating? You know, the the European food can businesses?
so
No Des energy separating European food can and retaining North American food. Can there are in the in the other other segments or the non-reportable the European aerosol business and the specialty packaging business.
Probably on an annual basis a zebra. Around ten twelve million dollars something like that. So that'll come out over the balance of the year after it's sold or or starting in the second quarter cuz it goes to discontinue Top surgery and I'm sorry Brian. What was the other part of the question?
Just any impact a corporate expense. Oh, yeah, so
there are you know, what we're going to be less. We're going to have a a European business now, which is beverage cans only so as opposed to a a very large $4,000 for and half billion dollar division. We're going to have a beverage can business and
the product itself is more homogeneous. It's all one material sizes while there are sizes. It's certainly not as diverse as food cans and and the manufacturing is a little bit more money and food manufacturing. So it'll require far less corporate overhead in Europe to manage the beverage business than it did to manage the division when it was, you know, a multi-product divorce so that that is already in the numbers that Thomas provided.
Got it. Thanks for the detail on that. And as my follow-up, is it possible to quantify the impact of the winter storm in Texas on your America's bad results and one Q. Do you know your your facilities forced to take any downtime in 1 Q?
We have about two big beverage cam plants in in the Houston area in Texas and they were down for a couple of days each, you know, if I had a quantifier, you know pick a number of million, but but that's a guess but probably not a bad guess.
Got it. Thank you. You're welcome.
The next question comes from the line of Kyle white dog. She Bank your lines now open you may proceed.
Good morning. Hope everyone is doing well. I think the more introduction of myself into Europe and just curious what you're seeing on this front and what kind of growth expectations do you happen to stub beverage category of origin? And then also are you seeing that this message category is primarily going into the can over in Europe or or is it a much more even mix between cans and glass? Thank you.
I mean, I mean just like you see in the United States. I think you're going to see as those products are introduced more and more into Europe. That'll be more cans than than glass or other materials.
We'll see how much growth we actually get in European beverage this year. We we expect very good growth from the beer side on the carbonated soft drinks site depending on jurisdiction and depending on the rollout of scenes with the exception of UK. It's going very slow and the rest of the continent so we'll see what the summer tourist season looks like and and outside dining, you know, on-premise outside dining looks like that'll that'll have some impact as to the the full recovery of of the can and and other substrates as it relates to carbonated soft drink, but it'll be a good season it just going to take a little longer than than what you're going to see in North America.
Got it, and then you mentioned the information on aluminum particularly the us and you're prepared to Marge and and understand that you pass it through from learning standpoint. But is this an expected to have a large impact on the working capital cash upload this year?
You don't you don't have an impact on working capital during the year. I think you know as we're typically with the exception of
some South East Asian countries in Brazil. We're we're we have big fourth quarters, you know, we're a summer selling season business. So most of that is collected before you get to the end of the year off it'll depend on how much inventory we believe we need to carry in the next year depending on demand. But as everything is basically hand them out right now, we're selling what we can make I don't expect that would be I don't expect that us to have a whole lot of opportunity to build inventory. Let's put it that way so some impact, but again the working capital impact already built into the into the numbers Tom's provides.
Right I ended up right. Thank you. Thank you.
The next question comes from the line of salvator Tiano Deport Global your lies. No open you mean.
Yeah, hi. So firstly I want to ask about Transit packaging. You mentioned that constant currency revenues were fluttering here, but I will demand was restrung. So can you provide a little bit more color on what than markets or regions the better and what markets and regions outperform then perhaps still be glad here on here. Yeah, so I think I think what we what I meant to say if I said it wrong, I apologize on a constant currency basis. I was talking about segment income or operating income. I think on a constant currency basis sales were certainly up year-on-year very strong in Asia. Very strong in in Europe. I think volume strong across everywhere, but on an income performance Jabo age or Europe and and the equipment and tool side a little softer in the Americas. I think that's just the timing of passing through commodity costs, which will see come through.
In April and May so, you know, just just the timing issue.
Okay, perfect. And I guess you already got a few questions about the buy backs that paid I would like to come back to that little bit just to understand life. You know that that I lose you said it's going to be around $0.50 from the sale of Europeans with this here full year basis. So we're looking probably close to $1 assuming you don't reinvest against the proceeds. So what what is the rationale I guess to not try to accelerate Buybacks in order to minimize the dilution from what would be a pretty big chunk of your earnings wage being sold. You know, why not consider this scenario? Just just what Leverage The we believe we're comfortable having going forward with a smaller company and a lower earnings base and a lower cash flow base.
but as we said we do intend to buy that stock so it's just a matter of how
I guess you were mentioning before the lever. Just read three and a half times perhaps remodeling if you think about the midpoint why you know, why would it make sense for you to buy backs and perhaps make sure you're on the upper end of The Leverage by urine because otherwise they will be material and that's the best way to minimize it is.
Again, it goes back to what which leverage ratio would comfortable that and it it the range is 3235. So, you know, we we do have that option if we'd like to take advantage.
Okay, perfect. Thank you very much. Thank you.
The next question comes from the line of viswanathan RBC Capital markets. July's know open you may proceed.
All right. Thanks. Good morning and congrats on the the very strong performance here. I guess, you know first off maybe I could just ask a question, you know, a lot of near-term questions have been home. Maybe maybe we can just ask a question about the next couple of years you noted that demand is going to far outstrip Supply and beverage cans. Um, you know, you're adding about six billion units this year. I'm going units of the next couple of years. Um, what are some of the things you're hearing from your customers, um that that kind of supports the statement that demand is going to far outstrip Supply and could you specifically address, you know, maybe Trends around freshness water Alternatives and most of the demand recently has been driven by, you know, potentially some new projects on the other side and and alcohol Alternatives. So is it is it kind of the the water Alternatives coming next and then also is it new product development because maybe some excuse dead.
Or or the the beverage companies favored high-velocity excuse this last year. And you know, do you do you see more new product development supporting that group?
In the future. I think I think there's a good there's always going to be new product development. I would not characterize our belief of continued strong demand to be new products, which was not aware of yet, but it is true that much of the growth we've seen over the last couple of years has been
Shelters and some water Alternatives. I will say that during the pandemic. We we've had a Resurgence in growth at least on the canned South soft drinks. And as I said earlier, I think that's going to take some time before before we see people start to go back out to restaurants and consume more on prep as opposed to in the home.
so, you know at this point we've got customer forecasts and
For the next you know several years and as we contract with those customers to try to meet their forecast over the next several years, that's where where we kind of get our comfort in what we believe demand is like likely to look like for the next couple of years. I don't really want to get into describing for you on a public hall anything which someone can determine specific to anyone customer.
Okay fair enough and then you know similarly I guess you guys have announced an investor event on May 27th. So is there anything you can provide as far as a preview as to what you'll discuss their, you know, maybe on financial strategy or at least the portfolio as you see it now, maybe you could touch on those too and I'm not even capex as well. Thanks. Well, I certainly think you'll get a full review of all the businesses we have remaining in the portfolio X the Europeans inflate. You'll get a a view as to where we see capital for the balance of this year and some of the projects were working on and I think it's a It's been a
It'll have been about at least a year and half is it you're in a half or two and half years since our last investor events. So it's probably time to do it and and describe for you what the company looks like in percentage terms of of revenues and and ebitda from the various businesses and and frankly hopefully try to re-educate or begin the education process for some of you that are new to the to the story of about Transit packaging. So again, we understand it's not well understood by many in the analyst or investment Community it off and it reasons for that. There is no public comp. So just to again re educate or begin the education process along that line of business.
Okay guys. Thanks a lot. Thank you.
the next question comes from the line of gave Haiti Wells Fargo Securities your life now open you mean
Tim, good morning. Thanks to take your questions pretty good as kind of privilege to skate. A lot of questions and asked I'm going to try to take another stab at the Strategic review page and I don't think many investors would dispute kind of the financial profile of signal and the apparent more resilience in the face of a recessionary environment. But I do think some people kind of scratch their head having a consumer-based packaging business married up with an industrial operation. So um, and I appreciate that you wouldn't want to Market that business on trial for earnings and perhaps this press depress multiples off. So I guess more directly is is a strategic reviewed you guys initiated back in November. Is that complete or is there still kind of more work being done behind the scenes than on any of them?
Well, you know as I said earlier, I I don't think it's ever complete. I think the board and the management are always looking at all the Assets in the portfolio to determine the best use of the company's assets. And do you want to convert you want to trade that for cash or do you want to continue to operate it? I would I wouldn't call this an industrial business. I'd call this an Industrial Packaging business. So it is a packaging business. It's just dead. It's a different packaging business and beverage cans but I would tell you that food cans is a different packaging business and beverage cans. There's nothing similar about food cans and beverage cans other than they're both cylinders, but they're manufacturing processes are different customers are different Market strategies are different. The seasons are different. The materials are different. So it's a different packaging business office not unlike food and beverage cans are different packaging businesses.
Fair enough. All right, and then I guess on the hard Seltzer point maybe some folks are scratching their head in terms of our consumers really drinking that much more a month. Is it displacing other beverages et cetera? And maybe this is a delicate subject not asking you to speak on behalf of your customer strategy, but it seems as if some of these hard Seltzer's might be being imported into other countries similar to the kind of a a certain energy during strategy fifteen twenty years ago. So I'm curious if some of the growth that you're seeing in North America off as some of that in fact, perhaps earmarked for other parts of the world on on some of these new product introductions.
I think the if you're if you're talking about cans that are sold in the United States that are then filled here and then exported I think that's probably happening. But I think it's a pretty small number. I think there's no doubt that the pandemic has people drinking more at home than obviously on-premise since most bars or many bars have been shut down so often, you know, as opposed to drinking draft beer or bottled beer you're drinking can beer at home as opposed to drinking a gin and tonic or a vodka soda. You may be having a Seltzer at home. I do think oh
when bars reopen
I think there's a segment of the consuming population is that are going to continue to drink these spiked Seltzer's and the spiked Seltzer's are served in cans whether they're served in cans in your house or a bar. So I think from that standpoint. I think we we think this spiked Seltzer phenomenon is here to stay for a while. They're obviously as bars and restaurants reopen Thursday.
consumption of can beverages will be lost to to other substrates or draft, but I think as I said it's going to happen in a
In a phased way. I don't think we're going to see a big event and I think that natural growth. It'll be kind of lost in natural growth. We're not going to feel any real volume turned down in our business from that.
Understood. Thank you. Thank you.
The next question comes from the line of Adam Samuelson Goldman Sachs materialise know open you may proceed. Yes. Thank you. Good morning. Everyone home a lot of ground being covered too. But why did we come back to the to the operating profit margins and both Americas beverage in European beverage and the quarter and um, if I'm just thinking of Captain America is 14% Revenue growth forty percent profit growth kind of that incremental margin on I think he said 9% volumes, um would seem very high for the Norfolk incremental contribution. Margin. We would think in your business and just publish think about just the price mix, uh cost reduction. Just trying to think about the drivers of the significant operating leverage. You saw Americas beverage and same story again in European beverage to to try to make sure I mean, I mean last year we we installed lines third production lines into the facility Jeff.
One in New York one in Toronto. So the as you might imagine you put the second or third line into a plant the
contribution is certainly much greater than a one-line plan and and even more so when you spread costs out from a 2-line plan to a three-line plant and as I said earlier, we've been reducing costs throughout the entire system every year as all the can companies do it's incumbent upon us to reduce our cost to to provide the lowest cost option to our customers. So that just bought speeds through a big thing in Europe your own years. We had a we have a big beverage game plan. So they'll stain it was not in operation last year at all in the first quarter thought you were converting the lines from Seattle aluminum. And so that that plan is now back in production and you couple that with volume growth not only in Spanish that's throughout the Mediterranean and bought also in in France in the UK and and
You know when you cut costs and then you have volume come through. It really does fall to the bottom line. It's
How much more complicated than that?
Okay, that's just one quick follow-up. Just North America. You talked about 12% volume growth. We're import levels in the first quarter similar to what you experienced in 2020 or are you seeing that start to get backed up with domestic capacity or we still running kind of a similar level short version, so we did not really begin importing, Kansas until the second quarter last year.
When the Mexican and Brazilian businesses were you know, the beer industry was shut down in those countries over a period of time doing the second and third quarter. There were some imports into the US for for Crown at least in the first quarter, but but not very large that there will be Imports this year into the u.s. From other regions, but significantly lower than we had last year.
Okay, great. Thank you very much. I'll pass them. Thank you.
Next question comes from the line of Jeff the Costcos JPMorgan your line still open. You may proceed. Thanks very much. What were the after-tax proceeds of the template cells of the template business and what other Revenue subtractions need to be made in the other segments outside of European food the correct term. Oh boy, the revenue off the top of my head. I don't have two hundred million in aerosol and no no no no, no.
4 year and then promotional the less than a hundred, right?
On the after-tax proceeds we talked about a billion nine Euro in the release pre-tax the tax on that should be less than a hundred million dollars.
And and then for my follow-up thank you for that other competitors have announced very very large capacity additions and have those announcements in any way changed your strategy or made you think differently about the longer-term tightness of the beverage industry.
Not at this time.
Okay, great. Thank you so much. Thank you.
As of now we don't have any question in queue speaker. She may please.
Thank you Dale. So that concludes a call today will speak with everybody again in May during the virtual investor event. Thank you. Bye now.
And that concludes this conference. Thank you all for participating, you know.