Q2 2021 Crown Holdings Inc Earnings Call
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Good morning, and welcome to Crown Holdings second quarter 2021 conference call. Your lines have been placed on a listen only mode until the question and answer session. Please be advised that this conference is being recorded.
I'd now like to turn the call over to Mr. Thomas Kelly Senior Vice President and Chief Financial Officer, Sir you may begin.
Thank you Harley and good morning with me on today's call is Tim Donahue, President and Chief Executive Officer.
If you don't already have the earnings release it is available on our website at <unk> Dot com.
On this call as and the earnings release, we will be making a number of forward looking statements actual results could vary materially from such statements.
Additional information concerning factors that could cause actual results to vary is contained.
And in the press release and in our SEC filings, including in our form 10-K for 2020 and subsequent filings.
Earnings for the quarter were <unk> 95 per share compared to 94 cents and the prior year quarter.
Adjusted earnings per share increased to $2.14 in the quarter compared to $1.33 and 2020.
Net sales in the quarter were up 34% from the prior year, primarily due to increased volumes across all segments favorable foreign currency translation and the pass through of higher material costs.
Segment income improved to $395 million and the quarter compared to 250 million and the prior year, primarily due to higher and higher sales unit volumes, including recovery in many locations affected by Covid and last year's second quarter.
And as outlined in the release, we currently estimate third quarter 2021, adjusted earnings of between $1.90 says and $2 per share.
This estimate includes the results of the European since late operations through August 31.
We are increasing the midpoint of our full year adjusted earnings guidance from $6.70 per share to $7.35 per cent per share again, assuming the sale of the Europeans and play business closes at the end of August.
And our expected adjusted tax rate for the full year remains at 24% to 25%.
And then I'll turn the call over to Tim.
Thank you Tom good morning to everyone.
And thank you for joining us this morning, and our continued best wishes for the continued health and safety of you and your families.
And as reflected in last Night's earnings release, the company recorded another strong quarter for the 3 months ended June 30th 2021.
And despite numerous transitory headwinds such as supplier and transportation delays Covid Lockdowns and cost increases our global associates continue to rise to the challenge of supplying our customers with high quality packaging products and of safe and timely manner.
Demand remained strong across all product lines and geographies and importantly, the company continues to convert this growth into record earnings.
<unk> segment income from continuing operations over the last 4 quarters or last 12 months June 2021 is.
It was approximately $100 million per quarter of higher than the average at the 4 preceding quarters, where LTM June 2020.
With approximately $60 million of that income growth bound in the Americas beverage segments.
Clearly a step change and our earnings output.
We look forward to commercializing significant new capacity and the second half of this year into next to take the next step change up.
The results of the European Tin-plate operations are now shown as discontinued had the business has been included in continuing operations LTM June EBITDA would have approximated $2.1 billion.
And.
Before reviewing the operating segments, we remind you that delivered aluminum and North America is approximately 65% higher today than at this time last year, and let me and delivery premium our contractual pass throughs. So reported beverage revenues reflected both the volume increase and the higher aluminum costs.
As last year's second quarter was the so called Covid quarter.
We will also provide beverage growth percentages for the first half of 2021 versus the first half of 2019 to give you a bit more information and perhaps relevance related to our beverage can unit volume growth.
And Americas beverage demand remained strong across all of the markets. We serve with overall segment volumes up 18% compared to the second quarter of 2020 for.
First half 'twenty, 1 versus first half of 19 volumes advanced 19%.
And as described previously we expect demand will continue to outweigh supply for the foreseeable future.
Commercial shipments from the first line of the Companys, new beverage can plant and bowling Green, Kentucky commenced in June with shipments from the second line is scheduled to begin in September.
The third line and Olympia, Washington, and the second line and Rio Verde, and Brazil are now scheduled for and early fourth quarter startup.
As previously announced the company will commercialize 5 new can lines in 2022, new true line beverage can plants are being constructed and both Uber, Rob of Brazil, and Martinsville, Virginia, along with the second can line being installed in Monterrey, Mexico.
Additionally, the company announces today that it will construct a new 2 line beverage can plant and the southwestern United States with commercial shipments commencing late second quarter of 2023 customer commitments have already been secured for the plants production capacity.
Unit volumes in European beverage advanced 28% over the prior year second quarter and 14% for the first half compared to the first half of 2019 income reflects contribution from the volume growth, which was recorded throughout the segment.
Asia Pacific recorded 15% volume growth and the quarter and 8% for the first half versus the first half of 2019 as.
As most operations across southeast Asia were able to grow despite numerous COVID-19 lockdowns and movement control orders.
We do expect both crown and customer operations to be subject to various and intermittent COVID-19 lockdown measures throughout the balance of the year.
Commissioning will commence at the new plant and volatile Vietnam and September with customer shipments beginning in October.
Results and transit packaging were significantly higher than last year and in line with our expectations and strong demand for transit products and solutions mirrored the surge and overall industrial activity.
The business did well to navigate transportation delays cost increases and supply shortages and is well positioned for continued earnings growth. As these continue these conditions gradually ease.
We expect earnings growth and the back half of the year to approximately approximate first half growth.
Demand remained firm across North American food and aerosols, along with the beverage can equipment, making businesses.
In summary, our record first half for the company new capacity was commercialized during the quarter and significant new capacity will commission be commissioned over the back half of the year and.
Importantly, we continue to convert growth into expanded earnings and cash flow segment income and adjusted earnings and the first half up 50% to 60% over the prior year and leverage at 3.6 times after repurchasing $300 million of company common stock is ahead of plan.
And as Tom discussed, we have raised full year guidance and the expected closing of the tin plate sales still remains in the third quarter.
And with that Harley we are now ready to take questions. Thank you.
And certainly we will now begin the question and answer session. If you would like to ask a question you May press star followed by the number 1.
The fallen and record your name and slowly and bigger when prompted the canceling your request and the press star followed by the number too.
The first question is for Mike and meet head from Barclays. Your line is open.
Great. Thanks, and good morning, guys and congrats on the quarter.
Thank you.
Tim I think you touched on some of the supply chain disruptions and you overcame in the quarter I was hoping you could talk a little bit more about where you're seeing that and is it quantifiable and how much you maybe less of them. The table are missing out on this quarter because of some of these disruptions and does that just got pushed into the third quarter or just any way to kind of help us think through debt.
Yes, so I would I would say that.
You're I think you're all well aware of their container shortages globally. So.
Getting container suppliers getting containers to move product around the has been a challenge.
There are with the rapid restart of the economy.
And here and in Europe.
Component manufacturers are overwhelmed and so their ability to manufacture components.
For for Assembly for US for example, and our beverage can equipment, making business and or the transit businesses.
A little bit delayed.
Construction steel other construction products, whether it's lumber cement dry wall.
All of that in high demand and a bit delayed.
So I don't want to characterize I mean, clearly there is the biggest impact we had in earnings and transit would've been and the transit business and maybe thats, a handful of 5 or $6 million.
It probably gets pushed into the next several quarters not just the back half of the year of the next several quarters.
There is a limitation as to how much of our teams.
If we received everything we were waiting on tomorrow. There is still a limitation on how much our teams can process at 1 time as well so that'll take a little while but and <unk>.
Given the performance and the trajectory of the overall company and each of the individual businesses.
I'm not overly concerned about it.
And the business of providing.
You know service to our customers, whether that'd be Uh huh.
High quality products, where service and so you always hate.
To tell the customers are you know, they're going to have to wait or turned customers away and.
Sure.
But they're generally they're hearing it from all of their suppliers and we're hearing it for many of our suppliers as I expect the.
And many companies are.
Great. That's helpful color and then maybe a follow up question for Tom and I was hoping could you give us how much of the pass through all of the aluminum and other input materials boosted sales year over year and the quarter I was just hoping to get a cleaner look at it overall incremental margins of the business. Yes, I don't have that in front of me, Mike I can follow up post call.
And that.
Got it thanks guys.
Thank you.
Thank you.
The next question is from Arun Viswanathan of RBC capital markets. Your line is open.
Good morning, Thanks for taking my question Congrats on the strong results.
I guess I just wanted to understand maybe and get your thoughts and perspective on.
Some of the scanner data. So you know, we've obviously seen some some conflicting reports on volumes and that those are up against some tough comps. So when you think about your own kind of beverage can volumes are up and stay up nicely year on year.
Where would you expect those volumes and the kind of I guess, a shake out over the next couple of quarters would you would you expect similar kind of percentage gains within your own system and again.
Could you help us kind of understand maybe where maybe just off of your own perspective on what we're seeing and the and the scanner declines as well thanks.
<unk> provided you the.
Not only the second half of second quarter volumes versus the second quarter of last year and I don't want to say, it's not relevant.
But clearly the second quarter of last year.
Had a had a large event that none of us anticipated at that time, making the comparisons for easier. This year, it's why we.
And why we gave you the first half of 'twenty, 1 versus the first half of 19, you get a better picture of perhaps.
And it forces you to extrapolate what growth is because of its over a 2 year period, but nonetheless, it's extremely significant and especially for our packaging business.
The growth.
We continue to expect growth across the businesses.
For all of the businesses, perhaps the Asia business will be a little slower.
And depending on some of the Covid lockdowns, but we expect significant growth through the back half of the Europe.
And will not be at the second quarter levels, because the second quarter last year was so depressed and certain markets, but <unk>.
Significant growth, we are still turning away. Unfortunately.
And Europe and.
And the Americas were still turning away customer requests.
We are still importing cans and the United States.
Not quite at the level of last year, but fairly close.
And.
Demand remains high so.
And I understand.
Some of the scanner data may have some of you worried I think.
I'm not sure.
That scanner data includes all retailers and when it doesn't include all retailers, especially the largest retailer and the country.
You know you need to take that you need to try to find another way to measure it but I can tell you where we're our company sits and within our industry and what we're hearing from our customers.
And they are desperate for cans.
We are desperate to get as much capacity up and running as quickly as we can.
And so the growth outlook for us remains very strong.
Okay, great, Thanks, and and as a quick follow up maybe I can just ask a question on capital and cash.
Yeah, so you'll be exiting this year and a relatively high rate of Capex and obviously you know at your Investor Day, you kind of laid out of you know our plan.
And outlook for for capital from here on but you also have some some new commitments as far as a dividend and potentially some stock buyback.
And so could you just kind of review of the the priorities for cash use at this point and where you expect to kind of finish the year on a.
Our net debt and leverage.
And what we've said before as you know leverage we'd like to be and the 3 to 3.5 times and.
And depending on how we see.
Capital requirements going forward that will determine whether or not we're at the higher end of that range of the lower end of that range I think we should be.
Comfortably within that range by the end of this year and it will allow us to buyback a significant amount of stock.
Obviously, we've initiated the dividend we were going to you know the intention is to continue to pay the dividend and.
And the.
Depending on the capital requirements going for I think the leverage is going to be where we want it by the end of the year.
Especially after the the tin plate sale and.
You know so the.
The piece of that moves around is how much to occupy each year. So.
And in other words, almost all of the cash flow.
Free cash flow, we generate each year will be used for dividends and share buyback.
The 1 thing I will say.
We've got.
Some of you fellows that have been covered and the industry for a longer time than some of the newer fellows and some of the newer investors on the buy side who are unfamiliar.
With the cash flow characteristics of a packaging company, especially in metal packaging company, you're you're not so comfortable with higher levels of debt.
And we have tried to maintain and we still maintain we never had of leverage problem and.
And as you can see even with buying $300 million of stock before the proceeds from tin plate. The Leverages 3.6 times, so it leverages not an issue.
For our metal packaging company.
You may not like the time it takes us to get there, but we're fully confident we're going to get there and we're going to generate the cash now that we're there we're going to buyback a lot of stock.
Thanks.
Thank you.
The next question is from Kyle White of Deutsche Bank. Your line is open.
Thanks, Good morning, Tim Tom Congrats on the quarter.
I just wanted to walk through the guidance for the full year of the raise specifically on the back half of them kind of get to about a 26 EPS range for the back half and just wondering how much of that is driven by having the European template results for July and August how much is driven by some of the reason refrigerants that you've made and the quarter and then just how much is driven by underlying business grow.
Thank you.
And so the European Tin plate business. The 2 months is worth about <unk> 20.
So then the residual is effectively and everything else you mentioned.
Improvements and the underlying business net of any anything going the other way.
Gotcha, and then I wanted to talk about Europe, you know you announced the new capacity here and the U S. A and you haven't really announced any new capacity in Europe, while other competitors or peers have are you concerned at all of that you might be losing share and that reason. The reason is it just a function of the markets you're in and the customers you have maybe not growing as fast or is it just.
And you'd rather allocate capital to better markets, such as Americas and Asia Pac.
No I don't I think it's just a matter of timing and.
Don't go to sleep on it and so that's all I'll say so you know we have.
With the exception of the 1 market over there the we don't participate in and we participate in the in the balance of the Western European market. So.
Crown and at the appropriate time, we'll make those decisions and make those announcements but no.
No.
And we're fully confident and our platform in Europe, and and the platform's ability to offer continued growth for the company.
Got it thanks, good luck and the balance of the year.
Thank you for the next question is from George Staphos of Bank of America Merrill Lynch. Your line is open.
Hi, everyone. Good morning morning, George Thanks for the details.
And congratulations on your progress so far.
And I wanted to come back to some commentary from last quarter.
And see what if any effect, we should consider for the rest of the year and 2022 for from your comments. So last quarter. You said you were worried a little bit about a pull forward of volume accelerating volumes and that was the reason why sequentially you were looking for a.
A downtick in <unk> versus <unk> as it turned out that was not the case you had a better quarter sequentially do we still have to worry about that pull forward or are you less concerned about that.
In terms of the back half of the year and stretching a bit.
Recognizing it's not fourth quarter.
Do you think that given what youre seeing from customers.
From your capacity plans and your ability to allocate capital.
That you should be able to grow through the dilution and 'twenty 2.
Considering European food European template and won't be part of the portfolio.
So I think the.
Okay.
And we had this discussion last quarter because.
And I understand the.
And I understand the question Georgia.
We are sometimes of baffled by the outperformance as you are.
And as I said last time the the.
The reason why youre not overly ecstatic with it as it could go the other way and then that's the more difficult conversation.
Having said that.
I would say as we look forward to the back half of the year.
The amount of available capacity that we have to have and upside earnings surprise is significantly limited from where we were in the first quarter or even at the end of the first quarter.
And then we are.
It's.
The Asian Covid situation across several of the countries.
There were.
Some lockdowns and Q2, but not to the extent that we were anticipating we do anticipate that across Asia and some of the markets, we're going to get more of Lockdowns, we have lockdowns and 2 jurisdictions right now for the next 3 weeks.
And so that'll have an impact.
And the other thing is.
Transitory inflation.
We'll get the inflation back and the Formula is next year, but.
But there is some inflation and the business and.
Having said that we are.
And we're earning through it.
With the growth we have.
Looking at the fourth quarter and in the next year do we have enough growth to earn through.
And the dilution from Tin plate.
Well I think the.
1 of the ways, you're going to earn through the dilution from tin plate is buying back of Mt and the stock and.
It's not clear to me George that we're trading on a p/e multiple anyway. So.
Whether we post $7.50 or $7, it's not short of them either.
And if anybody is really looking at it and appropriate p/e multiple for our company and I'd leave it at debt.
Fair enough fair enough time and for the record nothing really matters for this call, but I mean, Europe performance was better than expected. This was your guidance relative of our model for what it's worth but just for for the record what are.
Beverage company marketing folks.
Telling you about the outlook for new categories, New product innovation and other words.
Is there something else that can take the baton or at least keep up and the race with spiked seltzer.
What's your view on that on next categories. If there are any or do we have to where you're just about work expect just new flavors out of spiked seltzer is to be the driver of of of can growth over the next couple of years.
Well.
I know of 1 I don't want to talk about it because I don't want to.
Expose.
The idea of which as you know.
Specific to 2 of 1 customer or perhaps a group of customers but.
I think.
We should expect that the marketers are going to continue to try to develop the.
Doesn't mean, they're all going and be successful, but theyre going to continue to try to develop.
New products and new flavors.
New mixed new mixed cocktails.
Mhm.
Across a variety of.
Of whether it's real alcohol based or some kind of mash of alcohol mixed with a variety of flavors.
Be it.
More healthy or less healthier and that's probably the wrong term to use but.
But I will leave it at that I don't think we see any shortage of ideas coming from them.
We are.
Historically, we might have been worried about.
About how much we're going to spend on incremental artwork for some of these labels, but given the strength of the market now we charge for the artwork. So I'm not so worried about it.
Incremental art work that we do that.
The product sales, but.
1 of the equity as we've said we continue to maintain.
The outlook is really strong and it's.
Given the amount of imports we have coming into North America. This year.
And I'm, a little bit more bullish.
On the next.
24 months, perhaps and I was before because it hasn't really slowed down for.
From last year like I thought it would.
Thanks, Tim My last 1 and I'll turn it over just from some inbound and that we've gotten can you update us on on the portfolio and and how you look at.
Transit and you look at North America, and template relative to the fit the relevance.
The importance and the portfolio and in particular, what you think the trajectory for transit is over the next couple of years. Thanks, and good luck in the quarter for so the first thing I'll say is that we've pegged August 31 for the tin plate sales for the purposes of the discussion today, we're hopeful that it closes earlier than that.
I don't think its going to close July.
July 31.
As we look at the other businesses and the portfolio and specifically to your question the non beverage businesses.
We have discussed previously.
And they don't require a lot of capital.
The return on capital from those businesses is quite high and the cash flow generated is quite high.
And so.
So to the extent that.
And the organization has a lot of demands on its cash be it.
Our growth capital and 1 business versus another and or share buybacks dividends return of capital to shareholders. It is important and our view to have a well balanced and and.
And businesses that generate a lot of cash flow.
Were you just tend the garden youre not having the plan a lot of trees and so for the time being.
We're running those businesses as efficiently as we can and I would like to have a discussion.
And with all of you at some point.
We were able to demonstrate to you the the.
And the upside to a business like transit packaging for the for the time being we're just going to tend the garden.
Okay.
Alright, very good I'll turn it over thanks, Thanks George.
Thank you.
The next question is from Gabe Haiti of Wells Fargo Securities. Your line is open.
Tim and good morning, I hope that you and you and.
And everyone. That's important is doing well.
I'm trying to revisit the question that I think George started to go out and the path of recognizing difficult.
To talk about some of these topics and a form of like this but.
I guess is there any.
And the share with us from customer and dialogue that gives you comfort that the industry doesn't find its sales kind of in the meaningful oversupply situation in 19 of 24 months.
And part of it is obviously predicting consumer behavior, but more talking about potential for substrate gains or maybe the multiplier effect.
The premix cocktails that maybe we are under appreciating.
Similar to kind of what we're observing and Brazil, that's happened overtime with returnable glass.
So.
We touched on this a bit last time gave I think even if we even as we come back from the pandemic.
Thank the spiked Seltzer reserve.
Or 1 thing right and mixed cocktails or another and if you had.
If you were of bar owner, when you think about people going back to the bar first and it's.
Theyre going to drink those products they are going to be served and it can.
They're not going to be served.
And I'm going to and mixed by the bartender.
And if Europe.
The bar owner.
And it offers you the opportunity to control inventory and control waste and control theft, and a much better way.
And bottles of alcohol of would have to be mixed with the.
And with sell through out of a gun et cetera. So.
I think from that standpoint, we're not so worried about the reopening and I think.
Piggybacking on that when you think about that it offers.
A lot of upside to the can.
Into the future, but you are right you never know what consumer behavior is going to be.
I do think there is a large portion of the population.
Not only in the United States, but especially in Europe.
We're habits.
I've changed post pandemic.
We're not really post pandemic, we're still in it but.
And it's going to take a longer time.
For that the return to what we view as historic historical normal.
The perhaps.
We anticipate but.
Yes, Theres always a possibility we're as an industry, we're going to overbuild and.
And I don't see that happening for the next 2 to 3 years I think as I've said and.
And I can only say of so many times a day.
Demand is going to far outweigh supply for the next several years and.
No.
Youre not going to scare me right now by telling me.
Some guys doing this for some guys doing that and.
How do you feel of where we sit today we know.
We've got customers banging the door every day looking for more supply and we're not and the business of telling people know so.
We're not worried about it.
Okay. Thanks for that and then I guess.
Kind of early indications from on premise and factory opening and I think kind of going back to the the scanner data something that I don't necessarily think we have great visibility on at least on the sell side.
And obviously the supply chain is much different and pipeline fill ahead of kind of of July 4th holiday.
From our research type of I think that was pretty robust do you have any visibility in terms of anything and share with us in terms of the kind of where those inventories are.
Again I appreciate the like I said kind of the Memorial day holiday and I think was somewhat Miss just given the timing of reopening across the country.
Yes.
It's an interesting question because.
And cans are in short supply typically the.
The customers don't warehouse of lot of cans of warehouses, a lot of filled product, but given the cancer and short supply.
What I don't have a handle and right now.
He was are they buying ahead and warehousing empty or fill cans.
For the balance of the summer and the labor day, because they are worried about supply.
And.
The debt.
And I Couldnt honestly tell you, but I can tell you that.
And the demands on us have only increased from the conversation we had 3 months of 6 months ago.
Okay. Thank.
Thank you.
Thank you.
Thank you for the next question is from Ghansham Panjabi of RW Baird. Your line is open.
Thanks, Good morning, everybody on the margin.
And what do you what do you think is realistic in terms of the growth rates for the industry specific to the U S and 'twenty 1 versus 'twenty and then the new plant that you just announced.
The 2 line plant is that you know for existing product categories. You categories that we just don't know about at this point or a combination of the 2.
I would say it's a is.
Is it existing and new customers, but existing categories Ghansham.
I'm sorry, what was the first part of the question.
Just the industry growth rate.
Yeah.
The problem is the.
The COVID-19 quarter kind of screws it up right. So.
I would tell you that.
And if last year, we had.
What do we have Tom 97 billion units and.
And with imports were about 100 <unk> hundred 10.
112.
Is it reasonable.
The reasonable to say that the.
This year you could of 10% of 112 of that seems like a big number.
I think it depends on.
The suppliers and.
Initiation of capacity output.
If we were apples to apples I would say the crown is comfortable with 10% on its base.
Yeah.
It could well be.
That we of 10% this year, but I feel more comfortable and the <unk>.
5% to 7% range.
As an industry.
Got it and then in terms of fun.
Is the Delta V I N and the impact on.
And the Lockdowns et cetera.
And you know what do you what are you seeing across the regions real time, and then also in Brazil, and I don't think you mentioned much about Brazil, but you know that.
The country is going to lap some pretty significant comparisons for the back half of the year versus and extraordinary last year.
And just your outlook for the back half of the specific Brazil as well.
Yes, I think that's for sure I mean.
And we're going to remain sold out and Brazil, the only headwind, we have and Brazil is.
How quickly we get the second lineup and Rio Verde.
Yes, clearly the.
The comparisons are much higher and Brazil, if we all had more capacity it wouldn't matter, we're going to chew up all of this new capacity as quickly as we can make the cans and theyre going to be taken by the customers.
On the Delta variant or the other miscellaneous variance around the world and we've talked about Asia.
And the Asian governments are really trying to restrict.
The number of new cases.
And I say restrict the number of new cases.
You take some big Big Asian cities with several million people. They don't like to have 20, new cases. So that's why the restrictions are so much different now the.
And the availability of vaccines.
And the availability of quality vaccines is much lower.
Cross many of these Asian insurance fictions than the than it is in Europe and the United.
States I don't.
And.
I am not in Europe, and we haven't been able to get to Europe.
Ill pass on that for the time being 1 of I would say in the United States I don't believe any of the governors.
1 of go to back the Lockdown and I and I would go as far to say.
To the extent that they were able to use lockdowns.
For whatever other political purpose they had.
They've accomplished that other political purpose theyre not going back to the Lockdowns at this point and.
With.
Some of the bigger cities, I know, where and Philadelphia, we've got at least $60 to 65 per cent of the people fully vaccinated and the city of Philadelphia.
And at some point.
Perhaps not popular saying I don't really care.
And get vaccinated.
Don't complain when something bad happens to you.
There is and there is an opportunity out there for you to be vaccinated and for you to protect yourself and your family.
And.
And if you're not willing to do that.
And that's on you, but don't ask the rest of us to suffer.
And.
And delay living our lives because you've got some belief 1 way or the other where you don't want to take the vaccine.
And it's pretty clear right drug companies arent trying to kill US we're trying to extend our lives. So they can excel us more drugs.
I haven't heard of good reason why people don't get the vaccination. So I don't think.
Regardless of any of the variance we might have some cities like Los Angeles sort of forcing us to mask up again, I don't think were going back to any shutdowns and the United States anytime soon.
Got it thank you.
Thank you.
Next question is from Jacqueline Schakowsky of of JP Morgan Your line is open.
Thanks, very much you spoke about your year over year Ken growth.
The sequential growth.
And beverage.
From Q1 to Q2, yes.
Hold on for Q1 was up 8% none of it.
All of these.
And I know that was up 8 percentage.
That's it.
The number of Thats, a meaningless number right because it's got total quarter last year I think.
What you really want and knows how many more cans that we sell and the second quarter than the first quarter.
That's the question.
The 1919, 5 and the first quarter.
Yeah. So.
What I can tell you is globally of <unk>.
Little over 20%.
And the.
Tom said 19 flow, but I think it's yes, maybe it's 20% 19, 5% 19, 9% and the second quarter and.
And maybe for the full year were like 13, and a half something like that so that that gives you a help.
Okay, I'll take what you're giving them.
And the.
And the quarter.
What was the EPS from continuing operations.
What we saw what was the question again, Jeff sure and the second quarter EPS.
EPS from continuing operations and what was EBITDA from continuing operations and pro forma if you didn't.
This continues the trend of plate business.
So the well the EPS is on the schedule right.
The $2.14.
And from keynote the index.
The housing.
And the disc ops.
So the well that's earnings per share from continuing operations was 57 and.
Discontinued was 37.
Alright.
Continuing with 97 and this.
Discontinued was a loss of <unk>.
Adjusted.
And that's the $2 for change.
For the.
The $2.14, 50, and disc ops and $1.64, and continuing operations is that the rough for.
And.
And yet you've got to be careful of that because he has the profile on the 2.
Disc ops doesn't mean, what we're going to lose right you have to back out of interest and everything else. There is there is no on the face of the income statement and when we show you.
Income from discontinued operations. It is not reduced by any interest expense all of the interest expense was up and continuing operations as required.
Yes.
And.
And your second question was EBITDA.
For the second quarter.
From continuing operations right and pro forma.
So.
I don't have the first quarter press release, So pro form of 12 months June I got I know pro forma.
Have you had the prior press release, if you backed out.
It's $5.59.
For our pro forma if you look at the prior numbers, but I don't know if that's correct is that the right numbers at 559% of or at least for the quarter pro forma.
So what I was trying to say, Jeff if we look at the first quarter.
Pete.
LTM March.
EBITDA was.
It was 100.917 and that has food as continued operations right. There were no discontinued operations.
And pro forma 12 months June is 2081, so the second quarter.
On a if we didn't have discontinued operations the second quarter is $164 million higher than the second quarter last year.
And on this call Thats the best I can do for you of without spending a lot more time and some others don't want to spend.
Okay. Thanks, very much thank you.
Thank you the.
The next question is from Martin Wilkie of Bank of Montreal. Your line is open.
Thanks, Good morning, Tim Good morning, Tom Good morning.
First of all of them did.
Provide a capacity number for that new southern.
Southern U S plant.
I would tell you to think about $2.5 billion of.
Very similar to bowling Green and Andover Martinsville.
Okay, Alright, that's helpful and.
And transit packaging when you acquired the business I think you were pointing to about 85 or $90 million of quarter and EBITDA.
Is that still a.
A reasonable number and your view in light of kind of the the efforts you've made to improve the business or is a little higher a little lower than that going forward.
So I think where we see segment income plus depreciation and we're going to be.
$90 million would be $3.60, a year, we're going to be higher than $3.60, this year and no doubt and.
And so we will see what.
For the industrial activity is for the balance of this year and into next year and and into 'twenty 3 but.
There's no reason why that number of Shouldnt continue to grow at least at GDP rates.
And until such time that.
And we take a different view on on how much we want to try to grow that business.
And would you say, Tim just if we looked at that second quarter number where there any pieces of that business that we're still you know cyclically weak or is that second quarter number.
Like the business is pretty much up and running full.
So theres nothing cyclically weak what is a little depressed.
Is the equipment business, just because we are having.
Issues on the supply side from our suppliers getting components and other items and.
And I estimated that maybe at about $5 million earlier in the call.
Demand is exceptionally strong.
And as I said earlier, even probably far stronger than we can handle right now with the with the folks we have in place.
If we had all of the supply, but we don't have all of the supply.
Okay and the last 1 for me is it possible for you to just talk with US broadly about what crown is doing to help boost the the recycling rate for North American beverage cans, and I think thats running apart.
50% and I, just I wonder given the energy intensity of aluminum cans and so if we continue the landfill 50% of all of them is this going to somehow threaten the whole sustainability argument around cans if that rate isn't moving.
Over time.
Mark and we did this last time and I and I want it.
And I went back and thought about it.
Thought cross my mind that Youre of shelf for the paper industry. So.
Yeah.
And so.
[laughter].
1 thing I feel really good about is the paper guys are never going to find a way to package carbonated beverages. However.
Your point your question is a good question.
And.
You and I had a.
Disagreement on whose responsibility it is no doubt the government is going to make it either of our responsibility of our customer's responsibility, because we don't vote and elections individuals' vote and elections.
But of consumers, who are individuals don't start properly handling or disposing of products that have real value and in this case, the aluminum has real value.
And we're going to have.
To find a different answer, but we have talked in the past about higher recycling rates and deposits states versus non deposit states and.
I don't really want to get on 1 side or the other of that issue because some of our customers have strong feelings of that however.
And my view is if we're going to of deposits for aluminum cans, you better start having deposits for everything else that goes into the waste stream, it's not fair to pick on 1 substrate.
Okay, what are the crown doing we sponsor of number.
All of efforts.
Around the organization nationally and internationally and we do it not only individually as a company.
But we do it and coordination with the can manufacturers Institute as well.
Okay Fair enough. Thanks, Tim Thank you and good luck and the second half of them. Thank you.
Thank you for the next question is from Neel Kumar of Morgan Stanley. Your line is open.
Great. Thanks for taking my question in.
In terms of the 18% segment volume growth year over year and Americas beverage can you just break down the volume growth and North America, Brazil and Mexico.
And then Mike.
And congrats I could I think.
Youre going to have <unk>.
The exceptional numbers and Mexico and Brazil.
Because those markets were so depressed depressed last year.
And the that was the COVID-19 quarter and.
And many of our alcohol customers for shutdown.
The Kansas those some of those a lot of those cans were made but they were sold in the North America. So I would say the north American number.
And the high single digits, the Mexican and Brazil numbers.
The high double digits, and when I say high double digits, I mean of high double digits.
Yes.
As I said earlier, Neil as I said earlier I don't want to characterize some of the growth rates.
And the second quarter is meaningless, but when we start seeing numbers like that there is somewhat meaningless because of what the COVID-19 quarter was last year.
Right and that makes sense.
And here's what I'll tell you we looked at if we looked at the first half of 'twenty.
<unk> 21 versus the first half of 2019, Mexico, and Brazil are up.
High single to mid double digits in that period, so growth still quite high.
North America.
Up more than 20% over that period.
It's just I think it is a more relevant.
Measurement period, then comparing against the second quarter of last year.
Yeah.
Or we can sit here and talk about unbelievable growth rates that mean, nothing because you can't model of them forward.
Right that makes sense.
And then just in terms of the Beggars can't important I know, you mentioned that crown and energy and importantly, a bit lower than last year and it seems and the importance and the overall industry are up significantly year to date.
And I'm just wondering if you had an estimate of how many can potentially be important this year and.
Second the Epo in canned and point of last year and are you seeing any evidence and beverage customers and continue.
And sort of cans from abroad, and you and the other large pieces of January sold out.
Yes.
If I I didn't mean for you to think that we're importing a lot less cans, we're importing a lot of Kansas year again slightly below what we imported last year.
So.
I.
I don't know what the.
Industry and ports, where last year, you mentioned number of $8 billion. If that's the case, we probably important to 25 per cent of those.
Can't tell you what the other what the other guys day, but we're still importing of an extraordinary amount of cans. This year.
There are customers out there trying to make their own deals to import cans, because we and the other global manufacturers. There's only so much we can do.
Great. Thank you.
Thank you.
Thank you the next.
Next question is from Alton Stump of Longbow Research Your line is open.
Great Hi, Tim and comment you know thank for taking my question.
Alright.
And of course, and you guys pretty much beat every.
And would be 70 versus expectations, but the fixed price to be you know it was European Bev can volume number and particularly the first half versus the first half of 19.
Almost as strong as Americas, you know I guess, what drove that is there a certain region, where you are seeing strength and drive that.
Huge growth of.
The mid tier versus first half of.
2 years ago.
So well yeah.
Yes, there is.
There is growth and the market and.
Even per.
Prior to all of those beverage candy euphoria of Theres been consistent 3% to 5.4% to 6% growth across Europe, Europe and year round for the last decade or decade and a half.
A couple of that with we have installed new capacity.
And throughout our European operations, Although we don't have anything announced right now between 19 and and today we.
And we put a new 2 line can plant in Valencia, Spain, and a new 1 line can plant and Parma, Italy. So.
So we have new capacity, so that would be the specific to crown and that'll be the reason why our growth numbers are are pretty high compared to the first half of 19.
Okay.
Okay, Great makes sense and then just you know as you just referenced.
The net capacity I guess, you know how soon might that be coming up or how big is the need over next 12 to 18 months to add capacity in Europe and your view.
Oh I don't.
I don't want to.
Yes, we're not going to talk about that right now, we'll let you know and do John Okay makes sense.
Thanks, guys. Thank.
Thank you.
Thank you. The next question is from Anthony Pettinari Citigroup. Your line is open.
Good morning, good morning.
And.
At the Analyst day, you talked about expectations to grow global beverage can volumes I think by 10% and in 2021, I think and your response to Jeff you talked about maybe being able to grow 13% plus if I heard that right and so that's the first question and then to the extent that there has been that change and view is it primarily driven by better than expected.
Demand or is it really driven more by better operations in terms of getting some of these plants up earlier than expected and and running well.
And so what we said was.
I think Jeff was asking the rate of growth.
And the second quarter versus the first quarter and what we said was the second quarter was up about 20% and year to date June were up about 13 or 13, 5%. So clearly the second half of second quarter had higher growth.
And then the first quarter some of which is due to COVID-19.
I still think.
We're going to grow and the third and fourth quarter, but those growth rates and the third and fourth quarter will not match the growth rate and the second quarter because of the comparison to COVID-19.
So I think perhaps.
On a global basis, perhaps.
10 of 11% is still still a reasonable number.
Okay. Okay. That's helpful.
And then we've read about increases and construction costs, whether it's materials or steel or labor.
And you look at the cost of constructing and staffing of Greenfield Bev can plant, maybe compared to a couple of years ago.
Is it up 10%, 15% is there any kind of rough you know.
Any kind of color you can give us on that and then in terms of impact of risk from rising construction costs, the capex guidance and maybe the longer term capex schools that you articulated at the analyst day any thoughts there.
So.
And where we sit today and its plant specific because it's.
We expect some of the so I don't know what the steel guys are at the apex, yet, but they might be at the at their apex.
But as we sit today.
And I sat down to sketch out a plant cost today versus what we thought the plant was going to cost us to build 2 or 3 years ago. It could be 20% to 25% higher today than it was 2 or 3 years ago. I don't think we're going to stay at that level over the next several years. So I don't think we need to adjust our long term capital planning to take that and Nokia and I think we're going to get a reversion.
On some of that.
The risk.
So the company by spending.
And extra 30 of $40 million to build a factory today versus.
2 or 3 years ago, I think you need to look at the at risk over a 40 to 50 year period, because when you build a factory for beverage cans.
You know you plop it down in the place and as we've said before it's not like moving of call Center right.
It's not like moving all of you all you Fellows out of New York City to the Hoboken.
Youre not going to move of can plant. So that plant is going to be there for 40 or 50 years. So we're not going to get overly excited we don't like it.
But we're not going to get overly excited nor change our strategy and.
And as it relating to trying to service of our customers.
Okay. That's extremely helpful. I'll turn it over thank you.
Thank you for the next question is from Adam Samuelson of Goldman Sachs. Your line is open.
Yes. Thank you good morning, everyone.
Good morning.
A lot of ground has been covered I really just wanted to clarify.
So on the guidance.
And Europe, 1 of the earlier comments, you mentioned that about 20 of the 25%. So increasingly implied second half guidance is really a reflection on the treatment of the divestiture and the timing impact.
And then separately you just said that.
And May talk global can volumes for the year and be up 10 and.
And you saw that that was still a pretty good asking maybe 10% to 11 I'm trying to make sure I'm characterizing that right, especially given the magnitude of the second quarter outperformance and so.
The view have you tempered your second half of volumes exceeded the full year range price so much and the second quarter I'm, just trying to kind of comparing apples to apples there no but the the comparisons in the second half for a much different and the comparisons and the first half specifically the second quarter right.
You've got growth rates and some of the locations that were severely impacted by Covid last year and the second quarter.
Youre not going to have those same growth rates and the second half because those markets came back and the second half of last year, So while theres still going to be very good growth and the second half you just can't have a.
Another COVID-19 quarter, nor do we want another COVID-19 quarter.
And that again, maybe framed differently than in.
And the guidance that you'd given for both the second quarter and frankly for going back to <unk> for the first quarter.
You meaningfully exceeded in both cases as the.
Is the real variance you had left the good amount of kind of volume contingency out of your formal guidance because you work and uncertain about the macro and ultimately mobility was good demand was good and operations ran well that you were able to outperform your initial expectations and both the first and second quarter.
Yeah I think.
Okay.
I think we're doing our best to bring capacity on us as quickly and as efficiently as possible.
And.
If we're up 13, 5% through 6 months.
Maybe for the full year, we're going to be up.
11, and a half of 12 or 13% as I sit here today Im telling you of 10 or 11 interest.
It really depends on how quickly we can get the capacity up and running and how efficient the factory as and when it comes up and run we have a lot of capacity coming up in.
And the second half and I have no doubt that whatever we bring the market we're going to fully sell out it's just the.
It's a function of how quick we can get it up.
Thank you for any additional questions Adam.
Yes, that's very helpful. Thank you very much thank you.
Thank you for the next question is from Adam Josephson of Keybanc. Your line is open.
Thanks, Tim and Tom Good morning, Hope you well good morning, John and thank you.
And just a couple of guidance questions. Tom just on the the buyback can you clarify what youre expecting to buy back. This year is it just the 379 or and amount significantly greater than that as part of your for your guidance.
As Tim was saying.
Kind of solving for the leverage so we went the leverage to be 3% to 3.5 pick the midpoint of that.
And we'll buy back.
Stock such that where the.
Such a word about 3 and a quarter. So the $3.79, there will be more to come as we go through the last 6 months.
Got it okay and.
Tim on the <unk> guidance similar question of what came up on the last call, which is normally or of <unk> earnings are higher than your <unk> earnings and are you, losing a few cents I assume.
In the September from Europeans of the the.
Presumed.
Absence of European template, but can you just again remind me or help me understand why the implied sequential earnings decline and I know you said you you.
You think you'll have some production constraints, which I think you saw it as well.
Going into the second quarter, you talked about and inflation, but at the you also talked about inflation of your expectation of inflation last quarter and obviously you ended up beating your guidance quite significantly.
Yes.
We've we've modeled and giving you a forecast assuming we keep Europe European Tin plate through August.
For the most of you who followed us for some time you know the the.
European food business is heavily weighted to the third quarter and it's heavily weighted to September.
So that is a that's a.
Fairly good size number.
I think that.
As we sit here.
There are areas we're.
The inflation, there is inflation and the business and it'll take us till we.
So we get the contract risers, the opportunity to do that next year to recover that and.
And I hope we're being.
I hope for being a bit cautious, but we will see rates just the.
It's.
And as I said earlier, the 1 of the big things Adam is that.
The available capacity and the third quarter to outperform what you were I would forecast of the available capacity is lower because you've already built into your forecast that youre going to sell everything and more of that you can make and Q3.
Got it and I appreciate that Tim and just longer term 1 on Capex. So I think you'd talked about $900 million. This year, and obviously, you just announced a new plants.
The 23 ish.
Is there any reason to expect the decline in Capex from this year is presumed levels of $900 million over the next call. It 2 to 3 years.
So I think there is I think.
As I sit here today I can comfortably tell you that we expect to spend similar or more next year.
Beyond that.
My Crystal ball is not that good so we'll see.
Okay, and Tim just 1 last 1 on the the cash flow issue just given the the new assumed.
Closing date of the deal and any thoughts on what your cash flow might look like I know working capital is going to be messed up there are other issues are going to be messed up and any thoughts on what cash flow is likelihood of look like given the myriad issues.
Yeah. So.
Again, the food business.
A lot of shipments over the summer and.
<unk>.
The cash flow is lower because you lose the earnings from the business for the last 4 months not only that but the the working capital.
True up with the buyer happens within the purchase price mechanism not through the cash flow statement not through free cash flow.
So I think.
Again, I don't like to use the term meaningless, but it's not something that's meaningful for modeling purposes going forward.
Right.
Appreciate it and thank you. Thank you.
Thank you. The next question is from the sale of Jefferies. Your line is open and Hey.
Hey, guys. Thanks for squeezing me in.
I guess you mentioned, Tim your outlook for next 24 months of a bit more bullish than you previously thought it sounds like maybe a little less worried about the reversal from of reopening dynamic, but any more color.
And why you're a little more upbeat than you were call. It 3 months to 6 months ago and the demand side.
Well 2 reasons.
The 1 is that the.
Customer requests for cans have not the subsided at all in fact, they are increasing and.
And the level of imports that we and others are bringing in again or not really subsiding and.
Just as we we talked to customers.
You think about what of reopening might look like or of delayed reopening might look like.
And it just gives you a little bit more confidence that even and a full reopening.
It's of.
The growth rates are going to far outweigh any impacts from of reopening.
Got it and where their name.
Pockets that were.
And were stronger a bigger contribution is and any of these new products debt, we might not be as close to the spiked seltzer seems to be a little has moderated a little bit and maybe the reopening piece and just trying to flush out what are the any variables and or your customer base, where you've seen a little stronger demand and you previously expected.
Yes.
Obviously, they are not going to they're not going to have the same growth rates that they've had in the past right they've had tremendous growth rates, but they're growing off of a <unk>.
Much larger base so from the standpoint for from a can company standpoint.
Still a significant unit volume growth and.
Sometimes we get we get hung up on growth rates, and we forget about absolute unit volume growth and the contribution we get from that.
Sure.
The demand has been of across all products.
Sure.
Without saying something I don't want to say I'll just leave it at that.
Okay. That's helpful. And then when we think about the back half of your guidance you know a few of them.
A few of my peers have just mentioned that maybe the guidance looks a little more conservative and there is different reasons why youre accounting for that and you mentioned, maybe the capacity constraints for me.
It's a little more of a limitation for big upside surprises like we've seen the first half.
Appreciate and yet some of that capacity coming on later this year of Bud.
When you kind of expect that capacity kind of hit its full stride, where you have more optionality for outside of that early next year, but just any more color around that would be really helpful.
Yeah.
No.
Like to think we are and we.
We are getting better and I'd like to think we're getting better at.
And that bringing the lines on and getting up through through learning curve quicker and better than we have and the past I think I think we are doing that we have.
Some locations around the world the do it much better than others.
So far it feels like the first line of bowling Green is going real well.
And.
And now are they able to.
To continue that.
No.
Advancement through learning curve as well as Theyre doing and the first line when you complicate the plant and you bring up the second line at the same time, we will see so.
And so typically we like to tell you that.
Makes us about 12 months to get through full learning curve some of the factories do better.
As I said and.
<unk>.
Sure.
The only thing I can tell you is I know that all of the teams are trying as hard as they can.
Got it alright, thanks a lot.
Thanks Bill.
Thank you. Our last question is from Salvator Tiano of Seaport Research partners. Your line is open.
Yes, thanks for taking my question.
Just wanted to check I will become the new startups personally.
I was under the impression of that some of them and work scheduled for Q3, so want to confirm but you know the are being delayed by a few cents.
Most of the startups are 94 and.
And secondly, as we think about the startup expenses.
Do you expect most of them to align with the calendar of the startup of say Q4 or with the hiring and training them and absence.
Q3 include the lot more startup costs in Q4, how should we think about that so you are correct and saying that.
There's been a small slippage and bringing some of the factories up.
And maybe a month or 2.
<unk> <unk>.
Q3, and the early Q for some of that has to do with raw material supply of building supply.
And that Frank quite frankly has to do with the fact that we're right in the middle of the season and we're trying not to disrupt.
The plant from running.
At the highest efficiency and can possibly run it.
On startup cost you know.
The only thing I'm going to tell you is we don't talk about the impact of startup costs.
We have been.
Building plants.
<unk> field plants for.
And for well over 20 years, we've added significant greenfield capacity to our platform globally and in every market.
It's something we do and it's just something.
And that's embedded in the forecast the Tom's provided you. So I don't think I have an answer for you.
As to whether Theres more of less it's part of the business when you bring up factories and.
We're going to we're going to have enough growth and enough positive things happen that we don't need to talk about the impact from start up costs.
Yes, I guess and I think in the past you've mentioned also that you didn't know provides an experience of dollar number my question here would be more about the timing as we try to model and from our own and make our and assumptions should we see that because these are early 2 for startups that and most of the startup cost will happen in Q3 for.
Or should we see that now is going to be and Q4, regardless of what amount.
If you're going to model. It most of if you start and the plant up and.
And Q4, youre going to of a little bit of training and other expenses in Q3, and then you're going to have some.
As the plant comes up through learning curve, you've got significant expenditures.
In Q1, and Q2, and so you get the breakeven and that's just all part of the number of that you're.
That youre seeing.
Lets you guys model, how you want the model.
Okay perfect. Thank you very much.
Thank you.
So of Harley I think you said that was our last call. Thank you very much Harley and.
For all of you that will conclude our call today. Thank you for joining US we look forward to speaking with you again in October.
And now.
Thank you speakers and that concludes today's conference call. Thank you all for joining you may now disconnect.