Q1 2024 Crown Holdings Inc Earnings Call
Thank you first anybody conference will begin momentarily until such time, you will hear music. Thank you and please continue to standby.
Operator: Thank you for standing by. The conference will begin momentarily, and until such time, you will hear music.
Operator: Thank you and please continue to stand by. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Good morning and welcome to Crown Holdings' first quarter 2024 conference call. Your lines have been placed on a listen-only mode until the question and answer session.
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Operator: Please be advised that this conference is being recorded. I would now like to turn the call over to Mr. Kevin Clothier, Senior Vice President and Chief Financial Officer. Mr. Clothier, you may begin. Thank you.
Kevin Charles Clothier: Thank you, Al, 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 crowncourt.com. On this call, as in the earnings release, we will be making a number of forward-looking statements. However, actual results could vary materially from such statements.
Kevin Charles Clothier: Additional information concerning factors that could cause actual results to vary is contained in the press release and our SEC filings, including Form 10-K for 2023 and subsequent filings. Earnings for the quarter were $0.56 per diluted share compared to $0.85 per diluted share in the prior year quarter. Adjusted diluted earnings per share were $1.02 compared to $1.20 in the prior year quarter. Net sales for the quarter were $2.8 billion, compared to $3 billion in the prior year, reflecting higher beverage can shipments in America than Europe, offset by the pass-through of lower raw materials and lower volumes than most other businesses.
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Good morning, and welcome to Crown Holdings first quarter 2024 conference call. Your lines have been placed in a listen only mode until the question and answer session. Please be advised that this is this conference is being recorded I would now like to turn the call over to Mr. Guffey, with Kay Senior Vice President and Chief Financial Officer.
Guffey: Sir you may begin.
Guffey: Thank you al and good morning with me on today's call is Tim Donahue, President and Chief Executive Officer.
Kevin Charles Clothier: Segment income was $308 million for the quarter, compared to $320 million in the prior year, reflecting improved results in global beverage offset by lower volumes in the other business and $12 million higher corporate costs, which include $8 million of costs related to a facility fire. Free cash flow in the quarter improved by $296 million, driven by improved operating cash flow from lower working capital and lower capital spending. The balance sheet remains strong, with net leverage at 3.4 times at quarter end compared to 4.1 times for the same period last year, as stated in the earnings release.
Guffey: If you don't already have the earnings release it is available on our website at Crown Court dotcom.
Guffey: On this call as in the earnings release, we will be making a number of forward looking statements actual results could vary materially from such statements.
Guffey: Information concerning factors that could cause actual results to vary.
Guffey: And in the press release.
Guffey: Our SEC filings, including Form 10-K for 2023 and subsequent filings.
Guffey: Earnings for the quarter were 56 cents per diluted share compared to 85 cents per diluted share in the prior year quarter.
Guffey: Adjusted diluted earnings per share were $1.02 compared to $1.20 in the prior year quarter.
Guffey: Net sales for the quarter were $2 8 billion compared to 3 billion in the prior year, reflecting higher beverage can shipments in Americas, and European beverage offset by the pass through lower raw materials and lower volumes in most other businesses.
Kevin Charles Clothier: Second quarter, adjusted earnings per diluted share are projected to be in the range of $1.55 to $1.65, with full year projected to be $5.80 to $6.20 per share. The earnings guidance includes net interest expense of approximately $380 million. Average common shares outstanding of approximately $120 million, exchange rates at current levels, a full year tax rate of approximately 25%, depreciation in the range of $310 million, non-controlling interest in the range of $130 to $140 million, and dividends and non-controlling interest of approximately $110 million.
Guffey: Segment income was 308 million for the quarter compared to $320 million in the prior year, reflecting improved results in global beverage offset by lower volumes in the other business and $12 million higher corporate cost, which include $8 million of costs related to the facility fire.
Guffey: Free cash flow in the quarter improved by $296 million driven by improved operating cash flow from lower working capital and lower capital spending.
Guffey: The balance sheet remains strong with net leverage at three four times at quarter end compared to $4. One times for the same period last year.
Kevin Charles Clothier: We currently estimate 2024 full-year adjusted free cash flow to be in the range of $700 to $750 million, with no more than $500 million of capital spending. At the end of 24, we would expect net leverage to be at the lower end of the targeted leverage range of three to three and a half times. With that, I'll turn the call over to Tim.
Guffey: As stated in the earnings release second quarter adjusted earnings per diluted share are projected to be in the range of $1.55 to $1 65.
Guffey: With full year projected to be $5.80 to $6 20 per share.
Guffey: The earnings guidance includes net interest expense of approximately $380 million.
Guffey: Average common shares outstanding of approximately $120 million exchange rates at current levels full year tax rate of approximately.
Timothy J. Donahue: Kevin, thank you. Good morning, everyone. I'm going to actually be very brief, and then we'll open the call to questions. As reflected in last night's earnings release and as Kevin just summarized, first quarter performance came in better than expected, with global beverage can results up more than 11% over the prior year. Increased shipments of beverage cans in both North America and Europe offset lower shipments in Asia. Cash flow performance was again strong due to lower working capital usage combined with lower CapEx.
Guffey: 25% depreciation in the range of $310 million non.
Guffey: Non controlling interest in a range of $130 million to $140 million in dividends to noncontrolling interests of approximately $110 million.
Guffey: We currently estimate 2020 for full year adjusted free cash flow to be in the range of $700 million to $750 million with no more than $500 million of capital spending.
Guffey: At the end of 'twenty four we would expect net leverage to be at the lower end up targeted leverage range of three to three and a half times with that I'll turn the call over to Sam.
Timothy J. Donahue: America's Beverage recorded unit volume growth of 5%, reflecting 7% growth in North America and a 1% decline in Brazil. While the Brazilian market grew mid-teens in the first quarter, our shipment performance reflects a comparison against a very strong first quarter last year, in which we grew 23%. We maintain our full-year volume growth target of 4 to 5 percent for the North American business and expect low to mid-single-digit growth in Brazil in 2024.
Sam: Kevin Thank you good morning, everyone.
Sam: I'm going to actually be very brief and then we'll open the call to questions.
Sam: As reflected in last nights earnings release, and as Kevin just summarized first quarter performance came in better than expected.
Sam: With global beverage can results up more than 11% over the prior year increased shipments of beverage cans in both North America, and Europe, offset lower shipments in Asia.
Sam: Cash flow performance was again strong due to lower working capital usage combined with lower Capex.
Sam: Americas beverage recorded unit volume growth of 5%.
Timothy J. Donahue: In Europe, shipments bounced back nicely from the destocking of the prior year's fourth quarter. And, in contrast to the fourth quarter, our weighting towards southern Europe delivered benefits versus the overall market, as that region, combined with the Gulf states where we're more heavily represented, performed better than northern Europe. Perhaps too early to declare an inflection in Europe, but April shipments were also strong, and the sentiment for beverage can shipments is more positive than only three months ago. We continue to expect 2024 segment income will exceed the 2021 level, and the relocation from our Braunstone UK plant is now complete, with the Peterborough plant in full startup.
Sam: Reflecting 7% growth in North America, and a 1% decline in Brazil.
Guffey: While the Brazil market grew mid teens in the first quarter.
Guffey: Our shipment performance reflects the comparison against a very strong first quarter last year in which we grew 23%.
Guffey: We maintain our full year volume growth target of 4% to 5% for the North American business and expect low to mid single digit growth in Brazil in 2024.
Guffey: In Europe shipments bounce back nicely from the Destocking in the prior year's fourth quarter.
Guffey: And in contrast to the fourth quarter, our weighting towards southern Europe delivered benefits versus the overall market is that region combined with the Gulf States, where we're more heavily represented.
Guffey: Form better than northern Europe.
Guffey: Perhaps too early to declare an inflection in Europe, but April shipments were also strong and the sentiment for beverage can shipments is more positive than only three months ago.
Guffey: We continue to expect 2020 for segment income will exceed the 2021 level.
Guffey: And the relocation from our Braunstone UK plant is now complete with.
Guffey: With the Peterborough plant in full startup.
Timothy J. Donahue: Our income performance in Asia-Pacific advanced 15% as cost reduction efforts initiated in the fourth quarter more than offset 8% lower shipments in the region. We do expect full-year income improvement in this segment as continued benefits from capacity pruning offset the impact of lower volumes. As expected, first quarter transit performance was down compared to the prior year, with price and volume contributing equally to the overall shortfall in both revenues and income. Specific to the various lines of business, the protective products businesses accounted for more than 50% of the revenue and income decline, reflecting weakness in the freight industry during the first quarter.
Guffey: Our income performance in Asia Pacific Advanced 15% as cost reduction efforts initiated in the fourth quarter more than offset 8% lower shipments in the region. We do expect full year income improvement in this segment has continued benefits from capacity pruning offset the impact of lower volumes.
Guffey: As expected first quarter transit performance was down to the prior year with price and volume contributing equally to the overall shortfall in both revenues and income.
Guffey: Specific to the various lines of business the protective products businesses.
Guffey: For more than 50% of the revenue and income decline.
Guffey: Reflecting weakness in the freight industry during the first quarter.
Guffey: We are expecting conditions to improve later in the second half in line with expectations across the trucking industry.
Timothy J. Donahue: We are expecting conditions to improve later in the second half, in line with expectations across the trucking industry. However, performance and other reflects lower demand for beverage can equipment and aerosol cans that we previously discussed. So in summary, Beverage Cans had a very good start to the year, and we see that momentum continuing into the second quarter. We continue to grow share in North America, maintain and restore margins to more appropriate levels, and generate significant free cash flow per share. 2023 was a record year of EBITDA for the company, and we aim to match that performance despite the headwinds previously discussed. And I think, El, with that, we are now ready to take questions.
Guffey: Performance in other reflects lower demand for beverage can equipment in aerosol cans that we previously discussed.
Speaker Change: So in summary.
Speaker Change: Beverage cans at a very good start to the year and we see that momentum continuing and continuing into the second quarter.
Guffey: We continue to grow share in North America maintain and restore margins to more appropriate levels.
Guffey: And generate significant free cash flow per share.
Guffey: 2023 was a record year of EBITDA for the company and we aim to match that performance. Despite the headwinds previously discussed.
Speaker Change: I think L with that we are now ready to take questions.
Operator: Thank you, sir. We will now begin the question and answer session. If you would like to ask a question, please press star and then the number 1. Please unmute your phone and record your name and your company name clearly when prompted. Your name and company name are required to introduce your question. To withdraw your request, please press the star and then the number 2. Our first question comes from the line of Ghansham Panjabi of RW Baird. Your line is now open.
Speaker Change: Thank you Sir we will now begin the question and answer session. If you'd like to ask a question. Please press Star then the number one lever and make your phone and record your name and your company name clearly written poem called your name and company name or required to introduce your question to withdraw. Your question. Please press Star then the number two our first question comes from the line of Ghansham Panjabi.
Ghansham Panjabi: E. R. W. Baird. Your line is now open.
Ghansham Panjabi: Thank you, operator. Good morning, everybody. Good morning, Ghansham. Good morning.
Ghansham Panjabi: Thank you operator, good morning, everybody.
Ghansham Panjabi: Good morning, guys good morning.
Ghansham Panjabi: You know, Tim, the 7% growth in North America that you're forecasting for 2024, you mentioned share gains were part of that. One of your peers, when they reported last week, we're talking about having lost share and having a line of sight towards filling that share. You know, what time period that is. Can you give us a sense as to your confidence in your share position as we look out to 2025 at this point? Or is it too early to tell?
Ghansham Panjabi: Good morning, Ken.
Ghansham Panjabi: The 7% growth in North America that you're forecasting for 2024, you mentioned share gains what part of that.
Speaker Change: One of your peers when they reported last week, we're talking about having lost share in having line of sight towards filling that sure.
Ghansham Panjabi: What sort of time period that is okay can you give us a sense as to your confidence on your share position as we look out to 2025 at this point or is it is it too early to tell.
Timothy J. Donahue: So, just a slight correction, Ghansham. We had 7% in the first quarter, and I said we reconfirmed our growth target for this year in North America of 4 to 5%. So, just a slight correction. And I would, I can't comment on what one of the other peers said. But I would tell you that, as we sit here today, based on the activity, even the lighter promotions or more sporadic promotions that we're seeing that we used to see in the past, extremely competent in that 4-5 percent for this year, and we have no reason to believe that our share would do anything other than be slightly positive in 25 versus where we are today.
Speaker Change: So just slight correction ghansham, we had 7% in the first quarter.
Ghansham Panjabi: I said, we reconfirmed our.
Ghansham Panjabi: Growth target for this year in North America of 4% to 5%, So just a slight correction.
Ghansham Panjabi: And I would I.
Speaker Change: I can't comment.
Speaker Change: One of the other peer said, but I would tell you that we are.
Speaker Change: As we sit here today based on the.
Speaker Change: Activity, even the lighter promotions are more sporadic promotions that were seeing that we used to see in the past are extremely confident in that 4% to 5% for this year.
Speaker Change: And we have no reason to believe that our share.
Speaker Change: We do anything other than be slightly positive in 'twenty five versus where we are today.
Speaker Change: Okay, that's great to hear and that's my second question on Asia Pac the improvement I think some of your customers were talking about an improvement in regions, such as Vietnam as well on a relative basis for them.
Timothy J. Donahue: Okay, that's great to hear. And then for my second question on APAC, you know, the improvement, I think some of your customers were talking about an improvement in regions such as Vietnam as well on a relative basis for them. How are you feeling about that region overall from a growth standpoint in terms of sustainability relative to what you delivered in the first quarter? So our shipment,
Speaker Change: Are you feeling about that region overall from a growth standpoint in terms of sustainability relative to what you delivered in the first quarter.
Speaker Change: So our shipments as we said our shipments.
Timothy J. Donahue: So our shipments, as we said, were down 8%. I do think the market in Southeast Asia was probably up on the order of 9-10% in the first quarter. And our lower shipments versus the market are reflective of capacity pruning. We took out... I think we took out five lines. So, if I had to sit here today off the top of my head, I think we have 29 beverage can lines operating. Before the program, And now we have 24.
Speaker Change: Down 8%.
Speaker Change: I do think the market in southeast Asia was probably up on the order of 9% to 10% in the first quarter.
Speaker Change: In our lower shipments versus the markets are reflective of capacity pruning we took out.
Speaker Change: I think we took out five lines. So if I if I had to sit here today off the top of my head I think we have 29 29 beverage can lines operating.
Timothy J. Donahue: So we took out, you know, 15 to 20% of the capacity or 15 to 20% of the lines, probably more on the order of 12 to 13 of capacity. So a capacity realignment, cost reduction, more appropriate for what we see in the near term. I do think that the market will, over the medium term, three to five years, continue to grow. There are great expectations for the Southeast Asian market for growth. And we think we're exceptionally well-positioned, and the cost structure is more reflective of that now.
Speaker Change: Before the program.
Speaker Change: And now we have 24, so we took out.
Speaker Change: 15% to 20% of the capacity.
Speaker Change: Or 50% to 20% of the lines, probably more on the order of 12% to 13 of capacity, so a capacity realignment cost reduction more appropriate.
Speaker Change: For what we see in the near term.
Speaker Change: So I.
Speaker Change: I do I do think that.
Speaker Change: The market will over the medium term three to five years continue to grow we still have.
Speaker Change: Great expectations for the southeast Asian market for growth.
Speaker Change: We think we're exceptionally well positioned in the cost structure is more reflective of that now.
Speaker Change: Okay. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Chris Parkinson of Wolfe Research. Sir Your line is now open.
Operator: Okay. Thanks so much. Thank you. Thank you. Our next question comes from the line of Chris Parkinson of Wolf Research.
Christopher S. Parkinson: Hey, guys. It's Andrew on for Kras, you are our main question is how did Americas beverage volume breakdown not only by category by geography, but by category. So you know would you be able to speak to be air Seltzer.
Christopher S. Parkinson: Thank you. Our next question comes from the line of Chris Parkinson of Wolf Research. Sir, your line is now open.
Timothy J. Donahue: So up 7% in North America, down 1% in Brazil. Flattish in Colombia, up mid-single digits in Mexico, um, Mexico and Brazil, we're heavily weighted towards beer, and then in North America, we're more heavily weighted towards non-alcoholic, although we do have some alcoholic, but more heavily weighted to non-alcoholic, carbonated soft drinks, sparkling waters, juices, teas, et cetera, and, um... You know, I'd say that in, uh... North America.
Andrew: Other our other products.
Christopher S. Parkinson: So up 7% and North America down 1% in.
Christopher S. Parkinson: In Brazil.
Christopher S. Parkinson: Flattish in Colombia up mid single digits in Mexico.
Christopher S. Parkinson:
Christopher S. Parkinson: Mexico, and Brazil were heavily weighted towards beer.
Christopher S. Parkinson: And then.
Christopher S. Parkinson: In North America, more and more heavily weighted towards non alcoholic, although we do have some alcoholic but more more heavily weighted to non alcoholic carbonated soft drinks sparkling waters juices teas et cetera.
Christopher S. Parkinson: And.
Christopher S. Parkinson: I would say that in.
Christopher S. Parkinson: North America.
Christopher S. Parkinson: We had a we had a pretty solid performance.
Timothy J. Donahue: We had a pretty solid performance. You know, all the numbers are in now. Not everybody reports to CMI, but... Based on what we do get from CMI and other commentary made from peer companies, it appears that, including exports, the market was flat in Q1. And we were up 7%, so we feel pretty good about that. And we're up 7% and growing margin. The important thing is that we're not just growing for growth's sake, but we're growing to improve margin. You know, and if I, you know, I just, while I'm on the topic, we...
Christopher S. Parkinson: All the numbers are in now we not everybody reports to CMI, but.
Christopher S. Parkinson: Based on what we do get from CMI and and others.
Christopher S. Parkinson: Other commentary made from the peer companies it appears that including <unk>.
Christopher S. Parkinson: Exports the market was flat in Q1.
Christopher S. Parkinson: And we were up 7%, so we feel pretty good about that and were up 7% and growing margin. The important thing is that.
Christopher S. Parkinson: We're not just growing for growth's sake, we're growing to improve margin.
Christopher S. Parkinson: And if I E.
Christopher S. Parkinson: Just while I'm on the topic we.
Timothy J. Donahue: I think a few months ago, we gave you an estimate of what we thought the market would do for this year. So the market was flat in Q1. And I think at the time...
Christopher S. Parkinson: I think a few months ago. We gave you an estimate of what we thought the market would do for this year. So the market flat in Q1, and I think at the time.
Timothy J. Donahue: In early February, we said we expected the market to be flat to up 1%. If you want to change that to flat to up 2%, you can do that. Not necessarily my overall concern. I know we're going to be up more than that. As I said, we're growing our business, and we're growing our margin, which is the important thing.
Christopher S. Parkinson: In early February we said, we expected the market to be flat to up 1%. If you want to change that to flat to up 2% you can do that.
Christopher S. Parkinson: <unk>.
Christopher S. Parkinson: Not necessarily my overall concern I know, we're going to be up more than that and.
Christopher S. Parkinson: As I said, we're growing our business and we're growing our margin which is the important thing.
Speaker Change: Great. Thanks, guys I'll turn it over thank you.
Anthony James Pettinari: Thank you. Our next question comes from the line of Anthony Pettinari of Citigroup. Sir, your line is now open.
Christopher S. Parkinson: Yes.
Speaker Change: Thank you. Our next question comes from the line of Anthony Pettinari Citigroup. Sir Your line is now open.
Anthony James Pettinari: Good morning.
Anthony James Pettinari: In the release there was reference to continuous operational improvement and I was just wondering if you could provide any detail or quantification of that in terms of how.
Anthony James Pettinari: In the release, there was reference to continuous operational improvement, and I was just wondering if you could provide any detail or quantification of that in terms of how much efficiency you think you can bring out of the system. Are there some newer plants that maybe haven't reached the levels that you're looking for, or do you feel like you kind of lost some efficiency during the pandemic? I'm just curious how you kind of think about that opportunity, especially with, I guess, CapEx coming down 24, 25.
Anthony James Pettinari: How much efficiency you think you can bring.
Anthony James Pettinari: Bring out of the system are there some newer plants that maybe haven't reached the levels that youre looking for or do you feel like you've kind of lost some efficiency during the pandemic I'm. Just curious how you kind of think about that opportunity, especially with I guess capex coming down 'twenty four 'twenty five.
Timothy J. Donahue: Great question; you know, I would actually say the opposite. I would tell you that our teams in the factories were incredible during the pandemic, and I don't think we lost any efficiency during the pandemic. I would tell you that they rose up and... They were absolutely wonderful.
Speaker Change: Great question.
Speaker Change: So you're actually the opposite.
Speaker Change: I would tell you that.
Speaker Change: Our teams in the factories were incredible during the pandemic.
Speaker Change: And I don't think we lost any efficiency during the pandemic I would tell you that they rose up in.
Speaker Change: They they were absolutely wonderful.
Speaker Change: I think the.
Timothy J. Donahue: I think the, you know, efficiency losses or increased spoilage are natural. The effect of putting new capacity in as you disrupt the system, you move people around, you move support around, and newly hired workforces are learning how to make cans. And that's a learning curve, as you've heard us and others describe, can take anywhere from 12 to 24 months, depending on any particular factory.
Speaker Change: The efficiency losses are increased spoilage is a natural.
Speaker Change: Effect of putting new capacity in is as you disrupt the system you move people around you move support round.
Speaker Change: Newly hired Workforces are learning how to make cans and that's a learning curve as you've heard us and others described it.
Speaker Change: Can take anywhere from 12 to 24 months, depending on any particular factory. So I think there's always improvement to be made.
Timothy J. Donahue: So I think there's always improvement to be made, in the new factories and, obviously, even in the more seasoned factories. The goal is to get better. And so, you know, today we might have a plant that is the best performing plant. Next year it may not be, so the goal for them is to try to become the best performing plant again.
Speaker Change: In the new factories, and obviously, even in the more seasoned factories.
Speaker Change: The goal is to get better.
Speaker Change: And so.
Speaker Change: Today, we might have a plant that is the best performing plants.
Speaker Change: Next year it may not be so the goal for them is to try to become the best performing plant again, so it's principally around productivity.
Anthony James Pettinari: So it's principally around productivity, less spoilage, and more good cans out the back end of the line. But not an insignificant number, and it's a number that, you know, we aim to achieve; in all businesses globally or around the world, it's used for a variety of things. Those gains are used for a variety of things. You know, it's incumbent upon us. As we think about the value proposition that we deliver to our customers, not only to deliver quality and service, but to deliver them the best priced package and make our product as competitive as possible compared to the other substrates they deal with, and to make them as competitive as possible on the shelf as they look at the market for their products. And oftentimes, our productivity gains, sometimes we keep them for ourselves, sometimes they're transferred to the customers, and the customers use that to market their business, which in turn helps us in the future.
Speaker Change: Productivity less spoilage more more good cans out the back end of the line, but not an insignificant number and it's it's a number that.
Speaker Change: We aim to achieve.
Speaker Change: All businesses globally around the world.
Speaker Change: It's used for a variety of thing those gains are used for a variety of things we are.
Speaker Change: It's incumbent upon us.
Speaker Change: As we think about the value proposition that we deliver to our customers to not only deliver them quality in service, but to deliver them the best price package and make our product as competitive as possible compared to the other substrates they deal with.
Speaker Change: And to make them as competitive as possible on the shelf as they look at the market their products.
Speaker Change: And often times our productivity gains.
Speaker Change: So we keep them for ourselves sometimes there.
Speaker Change: They are transferred to the customers and the customers use that too.
Speaker Change: Two to market their business, which in turn helps us in the future.
Speaker Change: Okay, that's very helpful.
Anthony James Pettinari: Okay, that's very helpful. And then maybe just on the full year guidance, I think you bumped up minority interest by 25 million but reiterated the EPS guide. So I don't know if there are other puts and takes in there, but does this underlying EBITDA go higher? Or just, you know, how is the view on full year EBITDA versus initial expectations?
Speaker Change: And then maybe just on the full year guidance I think you bumped up minority interest by $25 million, but reiterated the EPS guide. So I don't know if there's other puts and takes in there but does it does.
Speaker Change: Just underlying EBITA go higher or just you know how is the view on full year EBITA versus initial expectations.
Kevin Charles Clothier: So, Anthony, in terms of minority interest, we're generally, I think we initially got it to $130 million of actual expense, and we are now in between $130 and $140 because we think the results are going to be a little bit better in those areas where we have minority partners. In terms of EBITDA, you know, we didn't disclose it previously, but I think, based on what we saw in the first quarter, it's trending higher than where we were, but, you know, it's early in the year, and we want to, you know, see where it goes from there.
Speaker Change: So Anthony in terms of minority interest, where we're generally I.
Anthony James Pettinari: I think we initially guided to $130 million of actual.
Speaker Change: Since then we've now got in between 130 and 140 <unk>.
Speaker Change: Because we think the results are going to be a little bit better.
Speaker Change: In those areas, where we have minority partners.
Speaker Change: In terms of EBITDA.
Speaker Change: You know why don't we we didn't disclose it previously, but I think you know based off of what we saw in the first quarter.
Speaker Change: It's trending higher than where we were.
Speaker Change: But it's early in the year, and we want to see where it see where it goes from there.
Speaker Change: Yeah.
Speaker Change: Okay. That's helpful I'll turn it over.
Anthony James Pettinari: Okay, that's helpful. I'll turn it over.
Speaker Change: Thank you.
George Leon Staphos: Thank you. Our next question comes from the line of George Staphos of Bank of America. Sir, your line is now open.
Speaker Change: Thank you. Our next question comes from the line of George Staphos of Bank of America. Sir Your line is now open.
George Leon Staphos: Thanks, everyone. Good morning. Thanks for the details.
George Leon Staphos: Thanks, Hi, everyone. Good morning, thanks for the detail.
Timothy J. Donahue: How are you doing? Um, Tim, could you give a bit more color, Kevin, a bit more color in terms of why you think beverage cans have had a little bit of a stronger start to the year in your key markets, in terms of promotional activity? It doesn't sound like it's been anything to write home about. That hasn't been bad, but it hasn't really been a surge yet. And then I had a couple of follow-on...
George Leon Staphos: How're you doing Tim.
George Leon Staphos: Tim could you give a bit more color Kevin a bit more color on in terms of why you think beverage cans have had a little bit of a stronger start to the year in your key markets and as much as promotional activity doesn't sound like it's been anything.
Kevin: To write home about hasn't been bad, but it hasn't really been.
George Leon Staphos: Our search yet.
Speaker Change: And then I had a couple of follow ons.
Timothy J. Donahue: So, George, let me start with Asia, and I'll talk about the market in Asia, not our shipments, but I think the economies in Asia, post the pandemic, have really struggled. Obviously, disposable income is a much different number in Asian economies than it would be in Western Europe or North America.
Timothy J. Donahue: So George let me start.
George Leon Staphos: With Asia, and I'll talk about the market in Asia, not our shipments, but I think the the economies in Asia post the pandemic.
George Leon Staphos: Have really struggled.
George Leon Staphos: Obviously.
George Leon Staphos: Disposable income as.
George Leon Staphos: He is a much different number.
George Leon Staphos: Economies in Asia than it would be in Western Europe, or North America, So I think the.
George Leon Staphos: Oh, we're back to the point where.
Timothy J. Donahue: We're back to the point where you've got a little bit more certainty or less fear in the environment for the consumer, and beer companies, principally beer, are doing a bit more promotional activity in Asia, and that's why you see the Asian market growing again, but naturally, the Asian market is going to be a growth market; more and more people are moving up the economic ladder. I do think I agree with your comment when we talk about a change in beverage can shipping patterns in Europe, certainly.
George Leon Staphos: You've got a little bit more certainty or less fear in the environment for the consumer and the <unk>.
George Leon Staphos: Beer companies principally beer.
George Leon Staphos: Are doing a bit more promotion promotional activity in Asia, and that's why you see the Asian market growing again, but but naturally the Asian market is going to be a growth market more and more people.
George Leon Staphos: Are moving up the economic ladder.
Speaker Change: I do think I agree with your comment.
George Leon Staphos: When we talk about.
George Leon Staphos: A change in.
George Leon Staphos: Beverage can shipping patterns in Europe, certainly I think the Destocking was so great.
Timothy J. Donahue: I think the destocking was so great last year in the fourth quarter, and there's again a bit more confidence in the market from our customers. Hard to understand because I do still think that consumers are relatively weak in Europe. They're certainly weaker in Europe than they are in North America, but I think the destocking was so great that we have a little bit of a restocking effect, but all signs point to a pretty healthy summer as we sit here today. And obviously, as you know, we're going to have it.
George Leon Staphos: Last year in the fourth quarter, and there was again a bit more confidence in the market from our customers.
Speaker Change: Hard to understand.
Speaker Change: Because I do still think the consumers are relatively weak in Europe.
Speaker Change: And Theres certainly a weaker in Europe than they are in North America, So, but I think the Destocking was so great that we have a little bit of a restocking effect and.
George Leon Staphos: But all signs point towards.
George Leon Staphos: A pretty healthy summer as we sit here today.
George Leon Staphos: And obviously as you know we're going to have <unk>.
Timothy J. Donahue: 7 or 8 weeks in a row where we go from the European Cup right into the Olympics, beginning in mid-June right into the middle of August. So I think there's a fair amount of excitement in the European marketplace around two large events, both of which are going to be held in Europe in the same time zone.
George Leon Staphos: Seven or eight weeks in a row, where we go from the European Cup right into the Olympics beginning in mid June right in the Middle of August. So I think there is.
George Leon Staphos: A fair amount of excitement in the European marketplace around two large events.
George Leon Staphos: Both of which are going to be held in Europe in the same time zone.
George Leon Staphos:
George Leon Staphos: Aye.
Timothy J. Donahue: Brazil up again; we had destocking in Brazil last year. And as you know, the Brazilian market fluctuates from time to time; it goes up and down. And you've heard us say in the past that we don't like to get too concerned about any one quarter versus the next; we take a longer-term view. And as we've always said to you, if you look at Brazil over any three to five-year measuring period, you always see the line going up, and we continue to expect that going forward. North America. You know, as I said, George, the market was flat, which is reflective. Let me just back up for a second.
George Leon Staphos: <unk>.
George Leon Staphos: Brazil up again, we had destocking in Brazil last year, and as you know the Brazil market fluctuates from time to time it it goes up and down and you've heard us say in the past that we.
George Leon Staphos: We don't like to get too concerned about any one quarter versus the next week, we take a longer term view and.
George Leon Staphos: And as we've always said to you if you look at Brazil over any three to five year measuring period, you'll always see the line going up and we continue to expect that going forward.
George Leon Staphos:
George Leon Staphos: North America.
George Leon Staphos: As I said, George the market was flat, which is reflective of.
Speaker Change: Let me just back up a second including <unk>.
Timothy J. Donahue: Including imports. I think the imports were down about half a billion units, year on year. So the imports are not very large anymore. Excluding imports, maybe the market was up one or two percent. But including imports, the market was flat. So, you know, that would not be a reflection of what you described as a turn in the market. But I think it is.
George Leon Staphos: Imports.
George Leon Staphos: Sure.
George Leon Staphos: I think the imports were down about a half a billion units.
George Leon Staphos: Year on year. So the imports are not very large anymore. Excluding imports maybe the market was up one or 2%, but including in the imports the market was flat so.
George Leon Staphos: That would not be a reflection of.
George Leon Staphos: What you described a churn in the market, but I think it is.
Timothy J. Donahue: It is a positive sign, in that, as you rightly point out, that promotions are at a lower level than we've seen historically and perhaps even a lower level than we'd like to see. And we'll see what... You know, how promotions look as we get here ahead of Memorial Day. And then, obviously, will have... July 4th. And then after July 4th, we have the Olympics, although I don't view the Olympics as a huge drinking event, certainly not to the level of the European Cup, and Americans are not so interested in the European Cup.
George Leon Staphos: It is a positive sign and that as you rightly point out.
George Leon Staphos: That promotions are at a lower level than we've seen historically and perhaps even a lower level than we'd like to see.
George Leon Staphos: And we'll see what.
George Leon Staphos: You know how promotions look as we go over the next couple of weeks as we get here ahead of Memorial day.
George Leon Staphos: And then obviously.
George Leon Staphos: We will have <unk>.
George Leon Staphos: July 4th.
George Leon Staphos: And then after July 4th we have the Olympics, although I don't view the Olympics is a huge.
George Leon Staphos: Drinking event, certainly not to the level of the European Cup and Americans.
George Leon Staphos: Not so interested in the European Cup. So we'll see what the market brings I think as I said I think the market in North America.
Timothy J. Donahue: So we'll see what the market brings. I think, as I said, I think the market in North America will be 0% to 2%, but as I said in reference to Ghansham's question earlier, we're exceptionally confident in our 4% to 5% projection.
George Leon Staphos: Zero to 2%.
George Leon Staphos: But as I said in reference to <unk> question earlier.
George Leon Staphos: We're we're exceptionally confident in our 4% to 5% projection for crown.
Speaker Change: Thanks, Tim.
George Leon Staphos: Thanks, Tim. The next question I have is, you know, you mentioned, as you have, that you expect to spend no more than $500 million on CapEx the next two years, 24 and 25. What is the overall volume growth that underpins that? And are there any regions where it doesn't? You know, maybe it would be the high-class problem, where if you start trending much above a certain level, whatever level that would be, you'd have to start spending more CapEx. Are there certain growth thresholds? and Key Markets, if you could identify them, where maybe that CapEx number has to start bubbling higher. And then, my last one, I'll turn it over to you.
Speaker Change: I guess the next question I have is you mentioned as you have.
Timothy J. Donahue: That you expect to spend no more than $500 million of Capex. The next two years 'twenty four and 'twenty five.
Timothy J. Donahue: What is the overall volume growth.
Timothy J. Donahue: That underpins that and are there any regions, where you know maybe it would be the high class problem, where if you start trending much above a certain level whatever level that would be that you'd have to start spending more capex or are there certain growth thresholds.
Timothy J. Donahue: In key markets.
Timothy J. Donahue: And if you could identify them.
Timothy J. Donahue: Where it maybe that Capex number has to start Bubbling higher.
Speaker Change: And then my last one I'll turn it over and it's really just a quickie Asia Pac South East Asia ex China is not a huge market.
George Leon Staphos: And it's really just a quickie, you know, Asia-Pac, Southeast Asia, ex-China is not a huge market. You took your capacity down 12, 13%. You were down, I think you said 8%.
Speaker Change: You took your capacity down 12, 13% you were down I think you said, 8% the rest of the market was up significantly. It's it's that suggest that ex crown.
Timothy J. Donahue: The rest of the market was up significantly. That suggests that ex-Crown, the market, if I'm doing, if I interpreted what you're saying correctly, was really up really. A lot, and I'm just, Just trying to square that with your volume outlook there, if you understand what I'm saying. Small market, you're the biggest guy in the market. So I do. And obviously, George, the 10% is our best estimate of what we think the Southeast Asian market is, and keep in mind, it's a variety of countries, right? It's eight or nine countries, so that's our best estimate. Maybe the number's wrong, maybe it's six, but we think it's nine to 10.
Speaker Change: The market if I'm doing if I, if I interpret what you're saying correctly was up really well.
Speaker Change: A lot and I'm just.
Speaker Change: Just trying to square that with our with your volume outlook. There if if you're entering when I'm, saying small market you are the biggest guy in the market. So I do and obviously George to 10%.
Speaker Change: That's our best estimate of what we think the southeast Asian market and keep in mind, it's a variety of countries right.
Speaker Change: There are nine countries. So that's our best estimate.
Speaker Change: Maybe the numbers wrong, maybe its six but we think it is nine to 10.
Timothy J. Donahue: And so that would imply, as you say, that the Crown perhaps lost a little share, which we knew we would when we took some capacity out. But we still have... You know, we're still by far the largest participant in Southeast Asia with in excess of 40% of the market. And again, we, as we've discussed repeatedly, In almost every market that we've talked about over the last couple of years, we're not here just to make cans. We need to make money for the shareholders. So we're focused on the fact that some others really grew.
Speaker Change: So that would imply as you say that.
Speaker Change: The crown, perhaps lost a little share, which we knew we would when we.
Speaker Change: It took some capacity out, but we still have.
Speaker Change: We're still we're still by far the largest.
Speaker Change: Participant in South East Asia was in excess of 40% of the market.
Speaker Change: And again we.
Speaker Change: As we've discussed repeatedly.
Speaker Change: In almost every market that we've talked about over the last couple of years were.
Speaker Change: We're not here just to make cans, we need to make money for the shareholders. So we're focused on.
Speaker Change: Trying to return appropriate margin levels and so the pruning we did what was necessary, but but you are right.
Speaker Change: It does imply that.
Speaker Change: Some others really grew.
Speaker Change: No.
Timothy J. Donahue: You know, as I said, it's not a perfect science estimating the growth in Indonesia versus Thailand versus Malaysia, et cetera, so. And because.
Speaker Change: Yeah.
Speaker Change: As I said, it's not a perfect science estimating the growth in Indonesia versus Thailand versus Malaysia et cetera. So.
Speaker Change: And because my memory is awful what was the first question.
Timothy J. Donahue: The first question was... Oh, I got it. Yeah, now I remember.
Speaker Change: First question was.
Speaker Change: Got it.
Timothy J. Donahue: more than five. I think as we sit here today in the United States, for the years 24 and 25. Regardless of what comes at us, we feel very comfortable with no more than 500. If you wanted to combine that and say over the next two years, no more than a billion, but it's not like we want to do 700 in one year and 300 in the other. So I think we're going to be as measured as we can be. And we've tried to be very measured over the last six years.
Speaker Change: It will require more than five.
Speaker Change: As we sit here today.
Speaker Change:
Speaker Change: For the years 'twenty, four and 'twenty five.
Speaker Change: Regardless of what comes at US, we feel very comfortable with no more than 500.
Speaker Change: And.
Speaker Change: Yeah.
Speaker Change: If you wanted to combine that and say over the two years no more than 1 billion, but it's not like we want to do 701 year and 300 and the other so I think we're going to be as measured as we can be in and we've tried to be very measured over the last six years I do think that.
Timothy J. Donahue: I do think that North America is highly utilized right now; we're in the mid-90s. I do think we have some open capacity in Brazil and Europe. Not so much in Asia anymore, but I think we're positioned well in most markets to handle historical growth or even double the historical growth we've seen in many of these markets over the next several years without having to add more capacity unless something dramatically changes, George. We get a, you know, if we get somewhere in the world, if...
Speaker Change: North America, we are.
Speaker Change: We utilized right now we're in the mid nineties.
Speaker Change: I do think we have some open capacity in Brazil and.
Speaker Change: In Europe.
Speaker Change: Evil not so much in Asia anymore, but I think where we're positioned well in most markets to handle.
Speaker Change: <unk> historical growth or even double the historical growth.
Speaker Change: We've seen in many of these markets over the next several years without having to add more capacity unless something dramatic changes George if we.
George Leon Staphos: If we get a.
George Leon Staphos: You know if we get some somewhere in the world.
Speaker Change: If we get a government that outlaw as one of the competing substrates for whatever reason and we have a much bigger move towards aluminum beverage cans and then yeah. We're all going to have to spend a little bit more money, but we would certainly welcome that opportunity.
Timothy J. Donahue: If we get a government that outlaws one of the competing substrates for whatever reason, and we have a much bigger move towards aluminum beverage cans, then yeah, we're all going to have to spend a little bit more money, but we'd certainly welcome that opportunity.
Speaker Change: Okay.
Speaker Change: Thank you Tim I'll turn it over thanks.
Speaker Change: Yes.
Philip H. Ng: Thank you. Our next question comes from the line of Phil Ng of Jefferies. Sir, your line is now open.
Speaker Change: Thank you. Our next question comes from the line of Phil <unk> of Jefferies. Sir Your line is now open.
Philip H. Ng: Hey guys, congrats on a solid start to the year and still a pretty choppy backdrop. I guess my first question is, solid 1Q, 2Q guidance, you know, a little ahead of consensus. You guys rated the full year guide, you know, certainly very early in the year, but just kind of give us some thoughts and how you're thinking about the cadence. Are you less confident in that gap, or just being a little conservative?
Phil: Hey, guys congrats to a solid start to the air and still a pretty choppy backdrop. I guess my first question is a solid one <unk> QQ guidance well ahead of consensus.
Phil: You guys raised the full year guide.
Phil: Certainly very early in the year, but just kind of give us some thoughts on how youre thinking about the cadence are you less confident in back half or just being a little conservative here.
Speaker Change: Well I think we are as we sit here today, we're very confident in the guidance we've given you.
Timothy J. Donahue: Well, I think we're, as we sit here today, we're very confident in the guidance we've given you, a bit early to change any guidance. You know, we had a... We had a very good start to the year last year as well. And then we had a huge de-stocking effect in Europe in the fourth quarter, just perhaps too early to change so I don't I don't want to say we're certainly confident I don't want to say we're not confident and I don't want to say we're being overly conservative I just think it's it's early in the year and we'll know more as we talk to you in July, Okay, that's helpful.
Phil: A bit early to change any guidance you know we had a we.
Phil: We had a very good start to the year last year as well.
Phil: And then we had a huge destocking effect in Europe in the fourth quarter.
Phil: Just perhaps too early to change so I don't I don't want to say, we're certainly confident I don't want to say, we're not confident and I don't want to say, we're being overly conservative I just think it's early in the year.
Phil: We'll know more as we talked to you in July.
Speaker Change: Okay. That's helpful and then Tim that like what are your customers, telling you I mean, it sounds like promotions dull a little uneven in North America, Europe's off to a better start, but our Asia as well, but like what are your customers telling you today in terms of.
Philip H. Ng: Okay, that's helpful. And then Tim, what are your customers telling you? I mean, promotion is still a little uneven in North America, Europe's off to a better start, but Asia as well. But like, what are your customers telling you today in terms of how they're thinking about the year and how they're planning the year at this point versus, let's say, a few months from now?
Timothy J. Donahue: How they are thinking about the year and how theyre planning the year at this point versus let's say a few months ago.
Timothy J. Donahue: Yeah.
Timothy J. Donahue: I don't think they're prepared to give up their value over volume strategy yet. It's yielding incredible benefits for them, and... Obviously, the more volume of anything you ship, the greater the risk you take, so they're able to make more money by taking less risk, and Listen, I understand their strategy. If I were them, I'd do the same thing. So I think, you know, at some point...
Timothy J. Donahue: So I don't think they are prepared to give up their their value over volume strategy.
Timothy J. Donahue: Yielding incredible benefits for them.
Timothy J. Donahue: And.
Timothy J. Donahue: Obviously, the more volume of anything you shipped a greater risk you take so they're able to make more money.
Timothy J. Donahue: By taking less risk and.
Speaker Change: Listen I understand their strategy, if I was that might do the same thing.
Speaker Change: So I think at some point.
Speaker Change: They may get pressure from their bottlers or.
Timothy J. Donahue: They may get pressure from their bottlers or, where they may get pressure as they look at their share of the market versus their competition, and sometimes people get concerned about share. More concerned about share, perhaps, than they should. And the way they deal with that is promotion, and we'll see who goes first.
Speaker Change: They may get.
Speaker Change: Pressure as they look at their share of the market versus their competition and sometimes people get concerned about share.
Speaker Change: I'm more concerned about share perhaps than they should.
Speaker Change: And the way they deal with that as promotion and we'll see who goes first but.
Timothy J. Donahue: You know, I think in Europe, I think it's more just restocking. In Asia, it's more restocking, and the market is returning to growth, a more healthy consumer. Brazil, I think it's largely to do with... as in Mexico as well, largely to do with... One-way or returnable glass-to-aluminum beverage cans in the near term are returning back to the can after we came out of the pandemic. And in North America, I think they like the value proposition they have. So we'll see how the year progresses.
Speaker Change: You know I think in Europe, I think it's more just restocking Asia, it's more restocking in the market returning to growth more healthy consumer.
Speaker Change: Brazil, I think it's largely to do with.
Speaker Change: As in Mexico, as well largely to do with you.
Speaker Change: Transition away from.
Speaker Change: One way of returnable glass to aluminum beverage cans in the near term or.
Speaker Change: Or returning back to the Cana. After we came out of the pandemic and in and in North America I think they like the value proposition. They have so we'll see how the year progresses.
Speaker Change: And then on transit I mean, I guess your comments was fairly in line with your expectations at least for US. It was a little softer I think we're expecting kind of flattish first half earnings once again, it's my forecast not yours.
Timothy J. Donahue: And then on transit, I mean, I guess your comments were... So just kind of help us think about the progression of transit this year.
Speaker Change: He was maybe perhaps cost that would offset a lot of that so relative to how you are thinking about that this is did you see incremental weakness on the man on the trucking side, how are things kind of progressing into Q and do you expect earnings to be up in the back half with perhaps demand getting a little better or incremental cost actions. So just kind of help us think about the progress.
Timothy J. Donahue: Yeah, so I think most of the costs that we described to you from the program we initiated in 2022 were already out last year. So there's... You know, there's always incremental things we do to reduce costs.
Timothy J. Donahue: But most of our cost out was last year. The markets, we did well last year. The market's obviously digesting a lower volume environment, and any time you have a lower volume environment, they're... Price does come into it, so we're constantly measuring price versus price versus volume. But I think if you were to go back and... take a look at how some of the large trucking firms performed. In the first quarter of this year, compared to last year, you wouldn't be surprised that they were also slightly down. Some of the trucking numbers are down. Some very large numbers, so...
Speaker Change: Enough transit this year, yes.
Speaker Change: So I think most of the cost that we described to you from the program. We initiated in 2022 was out last year. So there's.
Speaker Change: You know theres always incremental things, we do to reduce cost.
Speaker Change: But most of our cost out was last year.
Speaker Change: The markets are.
Speaker Change: We did well last year the market. Some obviously digesting a lower volume environment and anytime you have a lower volume environment or.
Speaker Change: Price does come into it so we're constantly measuring.
Speaker Change: Price versus price versus volume.
Speaker Change: But I think if you were to go back in.
Speaker Change: Take a look at how some of the large trucking firms performed.
Speaker Change: In the first quarter this year compared to last year, you wouldn't be surprised at.
Speaker Change: But were also slightly down some of the trucking numbers are down.
Speaker Change: Some very large numbers so.
Timothy J. Donahue: I think we expect similar performance in Q2 as in Q1, to three, uh... maybe a little flatter and, and so we are hoping for a bounce back in Q4. So, you know, if there's — we got a lot of puts and takes. And to your earlier question, are we confident? Are we being cautious? Maybe in one business we're being more conservative than in another, and we'll just see how the year progresses in each of the businesses, but I think, in the overall context... fairly confident in the guidance that Kevin provided you, but it could move around by business. But the one business where we're hoping for a recovery in Q4 is transit. Thank you.
Speaker Change: I think we expect similar performance in Q2 as Q1.
Speaker Change: Q3.
Speaker Change: Maybe a little flatter in.
Speaker Change: And so we are hoping for a bounce back in Q4. So you know if there's we got we got a lot of puts and takes.
Speaker Change: Your earlier question of are we confident in or are we being conservative maybe.
Speaker Change: Maybe in one business, we're being more conservative than another.
Speaker Change: And we'll just see how the year progresses in each of the businesses, but I think in the overall context.
Speaker Change: Really confident in the guidance that Kevin provided you, but it could move around by business, but the one the one business, where we're hoping for a recovery in Q4 as transit.
Speaker Change: Okay. Thank you I appreciate the color.
Philip H. Ng: Okay. Thank you. I appreciate the call.
Speaker Change: Sure.
Michael James Leithead: Thank you. Our next question comes from the line of Michael Leithead of Barclays. Sir, your line is now open.
Speaker Change: Thank you. Our next question comes from the line of Mike Lee Head of Barclays. Sir Your line is now open.
Michael James Leithead: Great. Thank you good morning, guys.
Michael James Leithead: Great, thank you. Good morning, guys. First question, I think last quarter there was obviously a lot of talk about areas like Mexico Glass, can making equipment, aerosols, areas that are headwinds this year. I guess, how did those areas perform in one quarter relative to your earlier expectations, and has your full year expectations for those businesses changed at all as we sit here today?
Michael James Leithead: My first question I think last quarter. There was obviously a lot of talk about areas like Mexico glass can making equipment aerosol areas that are a headwind. This year I guess, how did those areas performed in <unk> relative to your earlier expectation and has your full year expectations for those businesses changed at all as we sit here today.
Timothy J. Donahue: So the Mexican glass business is inside America's beverage business, and I think we described to you previously that that business, which performed exceptionally well last year, would return to more historical levels this year. And I just want to clarify one thing.
Michael James Leithead: So the Mexican glass business is inside the Americas beverage business and I think we described to you.
Michael James Leithead: Previously that.
Michael James Leithead: That business, which performed exceptionally well last year.
Michael James Leithead: Would return to.
Michael James Leithead: More historical levels this year.
Speaker Change: I just want to clarify one thing somebody I saw somebody wrote something that we were losing money in Mexico glass.
Timothy J. Donahue: I saw somebody wrote something that we are losing money in Mexico Glass. Not true. The business still makes high teens, and a low 20% EBITDA margin. Last year it would have made a high 20% EBITDA margin as some of the customers rebuilt the returnable glass float. So we're just back to more..., more normal levels, but I think we should describe that business as being down on the order of 30 to 40 million year over year for you, but still a very healthy, very profitable business. And then in the other segment... Food Cans North America, Aerosol Cans North America, and the Beverage Can Equipment Company business.
Michael James Leithead: Not true.
Michael James Leithead: The business still makes high teens low 20% EBITDA margin.
Michael James Leithead: Last year, it would've made hot high 20% EBITDA margin is at.
Michael James Leithead: As some of the customers rebuilt the returnable glass flow. So we're just back to more.
Michael James Leithead: More normal levels, but I think we describe that business as being down on.
Michael James Leithead: On the order of $30 million to $40 million year over year for you.
Michael James Leithead: But still a very healthy very profitable business.
Michael James Leithead: And then in the other segment.
Michael James Leithead: Food cans in North America aerosol cans in North America in the beverage can equipment company.
Michael James Leithead: And I think previously as we described we told you that Bev can equipment down on the order of 35 to 40 million, but again still profitable.
Timothy J. Donahue: And I think previously, as we described, we told you that bed can equipment down on the order of $35 to $40 million, but again, still profitable, just not as profitable as it used to be as we, as we're principally. I would tell you, in line with what we expected, the only business in the first quarter that was a little weaker than we would have expected was North American food shipments were a little softer than we expected.
Michael James Leithead: Just not as profitable as it used to be as we as we're principally.
Michael James Leithead: Doing servicing tools at this point as opposed to new shipment, new new equipment shipments and in aerosol cans I would tell you in line with what we expect that the only business in the first quarter a little weaker.
Michael James Leithead: Then we would have expected was north American food shipments were a little softer than we expected.
Michael James Leithead: Having said that April was strong.
Timothy J. Donahue: Having said that, April was strong. So we have a couple customers that were, I don't know if they were delayed or whether their marketing plans were delayed. But they picked up nicely and early in Q2 in April. For those businesses, certainly Mexico Glass, in line with the earlier estimate, and the other businesses, I think by the time we get to the end of the year. If we're not right on target of where the budget was, we'll be within a few million.
Michael James Leithead: So we have a couple of customers that were on.
Michael James Leithead: Don't know if they were delayed or their marketing plans were delayed.
Michael James Leithead: Oh.
Michael James Leithead: But they picked up nicely.
Michael James Leithead: In Q2 or early in Q2 in April I think I think overall.
Michael James Leithead: The estimates we gave you earlier.
Michael James Leithead: For those businesses, certainly Mexico glass in line with the earlier estimate and.
Michael James Leithead: And the other businesses I think by the time, we get to the end of the year.
Michael James Leithead: If we're not in a rush right on target of where the budget was will be within a few million dollars. So.
Speaker Change: Great. That's Super helpful. And then just a quick clarification the facility fire impact was that contained to the first quarter is there any lingering impact as we continue to pursue here.
Michael James Leithead: Great, that's super helpful. And just a quick clarification, the facility fire impact, was that contained to the first quarter? Is there any lingering impact as we continue with the 2Q here? Mike, that was contained to the first quarter.
Michael James Leithead: Mike that's contained in the first quarter.
Speaker Change: Great. Thanks, Kevin.
Michael James Leithead: Thank you. Our next question comes from the line of Adam Samuelson of Goldman Sachs. Sir, your line is now open.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Adam Samuelson of Goldman Sachs. Sir Your line is now open.
Adam Samuelson: Yes, thank you. Good morning, everyone.
Adam Samuelson: Yes, Thank you I can when everyone.
Adam Samuelson: Maybe following up on some of the earlier questions, just trying to think about the full year, and you've given the first quarter 102, and you've given the guidance for the second quarter, it implies a pretty decent step up in the second half EPS versus the first half, which, based on the company's recent history, is less common, and a lot of the bullet line items don't seem to be a big mover either way Just trying to think about the businesses that are going to be notably stronger in the second half versus the first half that would drive that uplift, and transit, I appreciate, can be a part of that based on the framing, but it wouldn't seem to explain the full magnitude. So can you just help me a little bit on the strength implied in the second half of the year at the EPS level versus what you're implying for the first half?
Adam Samuelson: Good morning.
Adam Samuelson: Maybe following up on some of the earlier questions just trying to think about the full year and the <unk>.
Adam Samuelson: The first quarter of one or two that you've given the guidance for the second quarter. It implies a pretty decent step up.
Adam Samuelson: In the second half EPS versus the first half which are based on the company's recent history is less common and blah blah blah line items don't seem to be a big mover either way.
Adam Samuelson: Just trying to think about with the businesses that are going to be notably stronger in the second half versus the first half that would drive that up left Tonight transit I. Appreciate it can be a part of that based on the framing but.
Adam Samuelson: Wouldn't seem to explain the full magnitude. So could you just help me a little bit on the strength of implied in the second half of the year at the EPS level versus what you are implying for the first half.
Speaker Change: I think for the <unk>.
Timothy J. Donahue: The big mover in the second half this year versus the second half last year would be Europe.
Speaker Change: The big mover in the second half this year versus the second half last year would be Europe.
Speaker Change: Yeah.
Timothy J. Donahue: Well, I appreciate year-over-year, we'll be up a bunch, but I'm thinking... second half versus first half and seasonality-wise, your business doesn't have that seasonality historically kind of halves versus halves as clearly.
Speaker Change: Well I appreciate year over year, Europe will be up a bunch, but I'm thinking <unk>.
Speaker Change: Second half versus first half in seasonality why is your business doesn't have that.
Speaker Change: Audi <unk>.
Speaker Change: Historically kind of half versus half. So this is clearly.
Timothy J. Donahue: Well, I mean, the third quarter is always bigger than the second, and, traditionally, the fourth quarter is always bigger than the first. And, um... So I, you know, without. Without going back and looking at what specifically happened in prior years, I do remember we had a huge stockpile in Europe last year in the fourth quarter, and we don't anticipate that this year. So there's going to be. We believe there will be a large step up in Europe in the second half of this year versus the second half of last year, principally around what was a very weak fourth quarter.
Speaker Change: I mean, the third quarter is always bigger than the second and traditionally the fourth quarter is always bigger than the first.
Speaker Change: And.
Speaker Change: So like you know without.
Speaker Change: Without going back and looking at what specifically happened in prior years I do remember we had a huge the stocking.
Speaker Change: And in Europe last year in the fourth quarter, and we don't anticipate that this year, so there's going to be a.
Speaker Change: We believe a large step up in Europe in the second half of this year.
Speaker Change: Versus the second half of last year.
Speaker Change: Supply around what was a very weak fourth quarter last year.
Adam Samuelson: Yeah, okay. I mean, I'll take that offline.
Speaker Change: Okay.
Speaker Change: Yeah, Okay, Okay, I'll take that offline I appreciate the year over year point, and then maybe following up on transit and just some of the market better market environment and in the second half of the year is that based on.
Timothy J. Donahue: I appreciate the year over year point and then maybe following up on transit and just some of the better market environment in the second half of the year. Is that based on orders and a book to bill that is now above one? Or is that just thinking that your freight customers are talking about better freight demand in the latter part of the year? What gives you confidence in the improvement in transit?
Speaker Change: Orders in our book to Bill that is now above one or is that just thinking at your freight customers are talking about better better freight demand in the later part of the year. What gives you the confidence on the improvement in transit.
Timothy J. Donahue: Well, you know, as I look at the first quarter performance, the protective businesses, which largely service the trucking over-the-road intermodal businesses, were down. Equipment slightly down but offset by tools and service. Steel strap up a little, plastic strap down a little.
Speaker Change: As I look at the.
Speaker Change: At the first quarter performance.
Speaker Change: The protective businesses, which largely service the trucking over the road intermodal.
Speaker Change: Businesses.
Speaker Change: Was down equipment slightly down, but offset by tools and service steel strap up a little plastic dropped down a little.
Timothy J. Donahue: I think if you look at the commentary from the trucking firms, the trucking firms are all talking about a very strong fourth quarter, and they're talking about being fully contracted or more heavily contracted in the fourth quarter than they are right now. So that gives us a little bit of confidence as relates to our protective products businesses. We don't see anything on the equipment or tooling sign that would give us any pause for concern as we sit here today. That's all very helpful, Collar. I'll pass it on. Thank you.
Speaker Change: I think if you look at the commentary from the trucking firms. The trucking firms are all talking about very strong fourth quarter, and they're talking about being fully contracted or more heavily contracted in the fourth quarter.
Speaker Change: Then they are right now so that gives us a little bit of confidence as it relates our protective products businesses.
Speaker Change: We don't see anything on the equipment or tooling sign that would give us any pause for concern as we sit here today. So.
Speaker Change: That's all very helpful color I'll pass it on thank you.
Gabrial Shane Hajde: Thank you. Our next question comes from the line of Gabe Heide of Wells Fargo Securities. Sir, your line is now open.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of David <unk> of Wells Fargo Securities. Sir Your line is now open.
Gabrial Shane Hajde: Kim, Kevin, and Tom, good morning. Kim, I'm going to try to take a stab at a high-level question for you about the webcam business. During the pandemic, obviously, it was about getting product on the shelf and servicing your customers. Post-pandemic, obviously, there's been some facility rationalization. You know, you guys are obviously one of the bigger global players in Asia-Pacific. But my question is, we've had a couple of customers kind of move around, you know, choosing different suppliers.
David: Kevin Kevin Tom Good morning.
David:
David: Tim I'm going to try to take a stab at a high level question for you on the Bev can business.
David: During the pandemic, obviously, there was it was about getting product on the shelf and servicing your customers post pandemic.
David: There's been some facility rationalization.
David: You guys are obviously one of those.
David: Bigger global players that are in Asia Pacific well. My question is we've had a couple of customers kind of move around.
David:
David: Choosing different suppliers and again historically speaking you guys have kind of won and lost with your customers.
Gabrial Shane Hajde: And again, historically speaking, you guys have kind of won and lost with your customers. I'm just curious, on a go-forward basis, what your expectations are. I mean, you talked about being utilized in North America in the mid-1990s. I got an announcement that there was another player here in North America, maybe a little bit bigger than what people were planning for. Can you just remind us, bigger contracts that come up, do they renew in 2025 for 26? Or do you have something that renews for 25? And then just from a competitive landscape, and I'm really thinking about Brazil and Europe, if there's anything that we should be mindful of thinking about.
David: Hum.
David: I'm just curious on a go forward basis, what your expectations are I mean, you talked about being mid Ninety's utilized in North America.
David: Got an announcement that there was another player here in North America, maybe a little bit bigger than what people were planning for.
David: Can you just remind us bigger contracts that come up is it they renew in 2025 426 or do you have something that renews for 25.
David: And then just from a competitive landscape and I'm really thinking about Brazil.
David: Brazil.
David: In Europe, if there's anything that we should be mindful of thinking about.
David: So North America.
Timothy J. Donahue: So North America, you know, I would say that, as I said earlier to Ghansham's question, we are...
David: Right.
David: I would say that.
David: As I said earlier to Ghansham as question we are.
Timothy J. Donahue: Very confident in our 25 shares being no less, perhaps greater than where we sit today, and I'd probably tell you the same about 26. So, without commenting on customer contracts, I'll say it that way. There's always business that moves around in Asia. Asia, with the exception of a few customers, is more of an annual market.
David: Very confident.
David: Our 25 shares being no less perhaps greater than where we sit today.
David: And I'd, probably tell you the same about 26.
Timothy J. Donahue: So without commenting on customer contracts I'll say it that way.
David: There's always business that moves around.
David: And in Asia Asia Asia with the exception of a few customers Asia is more of an annual market.
Gabrial Shane Hajde: But we're so big, and we do have good coverage and good locations and high quality service. We, you know, on the margin, you're plus or minus the market, and some Brazil. Brazil, you know, is a healthy market. It's going to get stronger and. I don't think we're overly concerned about Brazil, really good locations relative to most of the customers and um... Brazil's markets look like they might be, inflecting a little bit from what was, you know, fairly poor last year as, or the last couple of years as glass was, gives me no great concern for next year. So, you know, there's always... Gabe, it's... It's a business, like any other business; there's competition. And, you know, we're prepared for the competition. That's all I can tell you.
David: But where we're so big.
David: I mean, we do have good coverage in good locations and <unk>.
David: High quality and service, we on the margin, you're plus or minus the market.
David: Uh huh.
David: That's in Brazil.
Gabrial Shane Hajde: Brazil, Brazil is a healthy market, Brazil is going to get stronger.
Timothy J. Donahue: I don't think we're overly concerned about Brazil, we have.
Gabrial Shane Hajde: Really good locations relative to.
Gabrial Shane Hajde: Most of the customers and.
David: Brazil markets looks like it might be.
Gabrial Shane Hajde: Inflicting a little bit from what was fairly poor last year or the last couple of years those glass was.
David: Recovering a little but we seem to be recovering against glass now so and then in Europe I'm not.
Speaker Change: Off the top of my head I'm not aware of anything that.
Gabrial Shane Hajde: Gives me any great concern for next year. So you know theres always.
Gabe: Gabe it's a.
Gabrial Shane Hajde: It's a business like any other business theres competition.
Gabe: We're prepared for the competition.
Gabrial Shane Hajde: You know, look, I mean, you talked about some of your customers' value over volume, and it looks like you guys elected to do that. As you said, you would.
Gabrial Shane Hajde: All I can tell you.
Gabrial Shane Hajde: Yep.
Gabe: Look I mean, you talked about some of your customers.
Gabrial Shane Hajde: Value over volume and it looks like you guys have elected to do that.
Gabe: You would.
Gabrial Shane Hajde: So that's what we're just trying to dial in on a little bit. A question about mandatory deposit laws going into effect, I think, in 26 in the UK. Any context around that? I think Germany, and again, I know it's a completely different fact pattern, but expectation for disruption, or does that tend to favor the can over time?
Gabrial Shane Hajde: So that's what we're trying to dial in on a little bit.
Gabrial Shane Hajde: A question about I think I saw a mandatory deposit laws going into effect I think in 2006 and in the U K.
Gabrial Shane Hajde: Any context around that I think Germany, and again I know it was completely different back pattern, but.
Gabe: Expectation for disruption or does that tend to favor the cam.
Gabrial Shane Hajde: Over time.
Gabe: Well I.
Timothy J. Donahue: Well, I, you know, I think... depending on which substrates are included in the mandatory deposit law. So we, and others across the can in the aluminum industry, are working to ensure that. We're not unfavorably challenged by new laws that go into place where they pick the can and they don't pick all the other substrates, or they pick the can, which already has high recycling rates, in an effort to subsidize other materials which either don't have high recycling rates or really don't have any intention to get high recycling rates.
Gabe: Think.
Timothy J. Donahue: Depending on.
Timothy J. Donahue: Which substrates are included in the mandatory deposit wall, so, we and others across the Cayenne and the aluminum industry working to ensure that.
Gabe: We are not.
Timothy J. Donahue: Unfavorably challenged by new laws to go into place, where they where they pick the can.
Gabe: And they don't pick all the other substrates or they pick the can.
Timothy J. Donahue: <unk> already has high recycling rates in an effort to subsidize other materials, which either don't have high recycle them you say rates.
Timothy J. Donahue: Or really don't have any intention to get high recycling rates.
Gabe:
Timothy J. Donahue: So you know you were aware of it.
Timothy J. Donahue: Generally.
When you get deposit laws initially, there's a little bit of softness with the market.
Timothy J. Donahue: So we're aware of it, generally. When you get deposit laws, initially there's a little bit of softness, but the market... you know, is across Europe and It would be good if we had one European law as opposed to a variety of them.
Anthony Pettinari: Absorbs the where the consumers in the market absorb it and it returns to normal.
Timothy J. Donahue: Within a couple of years. So we're mindful of these changes a lot of these changes.
Timothy J. Donahue: You know our <unk>.
Timothy J. Donahue: Across Europe.
Timothy J. Donahue: Would be good if we had one European law as opposed to a variety of them but.
Gabrial Shane Hajde: Now, having said that, we generally are in favor, as an organization and, I think, as an industry, for deposits, because as we think about the sustainability of the aluminum beverage can. I think using recycled material, we compare as favorably as any other substrate on carbon when we use higher levels of recycled content. So, from where we sit. We're very confident in the package we provide, in terms of sustainability and the environment, as you have now seen.
Timothy J. Donahue: Now having said that we generally are in favor.
Gabe: As an organization and I think as an industry for deposits I think.
Gabrial Shane Hajde: As we think about the sustainability of the aluminum beverage can.
Gabrial Shane Hajde: I think using recycled material.
Gabe: We compare as favorably as any other substrate on carbon.
Gabrial Shane Hajde: When we use higher levels of recycled content.
Gabe: So from where we sit.
Gabrial Shane Hajde: We're very confident in the package we provide.
Gabrial Shane Hajde: In terms of sustainability in the environment I think you've now seen.
Timothy J. Donahue: At least one very large global consumer products company stepped back from their plastics reduction target, and in large part, I don't think that has anything to do with, as I heard somebody call it pragmatism; I think it has to do with it was never achievable in the first place. The infrastructure is not there. For more information, please visit www.cdc.gov. More recycling and I think deposits give us more product to be recycled. We just need to ensure that it doesn't unfairly punish the can, whereby the can pays for all the other products which are not recycled or are not recycled economically.
Gabrial Shane Hajde: At least one very large global consumer products company step back.
Timothy J. Donahue: Their plastics reduction target.
George Leon Staphos:
Timothy J. Donahue: And in large part.
Timothy J. Donahue: I don't think that has anything to do with as I heard somebody call. It pragmatism I think it has to do with it was never achievable in the first place.
Timothy J. Donahue: The infrastructure is not there.
Timothy J. Donahue: For plastics to be recycled at great levels, nor do the economics work for recycled plastics as they do for recycled aluminum so in general we're in favor of.
Timothy J. Donahue: Of more recycling and I think deposits give us more product to be recycled.
Timothy J. Donahue: We just need to ensure.
Timothy J. Donahue: But it doesn't unfairly punish the Cannes whereby they can pays for all the other products, which are not recycled or are not recycled economically.
Speaker Change: I agree.
Gabrial Shane Hajde: I agree. Based on our research, it looks like... Aluminum Can is sort of coordinating across the value chain, and you guys are doing good work there. One last point of clarification, I apologize for three questions: Asia Pacific, closing five lines, are those curtailments, or are they, in fact, uninstalling the lines? And then the savings from that look like maybe four to five million a quarter. Can you confirm that? Thank you.
Timothy J. Donahue: Just on the research it looks like.
Gabrial Shane Hajde: Mmm, Kansas and sort of coordinated across the value chain and you guys are doing good work there one last point of clarification I apologize for three questions Asia Pacific.
Gabrial Shane Hajde: Closing five lines just does that are those curtailments centers are in fact on installing the lines.
Gabrial Shane Hajde: And then the savings from that it looks like maybe it's $4 million to $5 million a quarter.
Speaker Change: Thank you.
Gabrial Shane Hajde: I'm sorry, but what's $4 to $5 million a quarter? The savings. Oh.
Speaker Change: I'm, sorry, what's four to 5 million a quarter savings.
Timothy J. Donahue: [inaudible] Yeah, if you want to use four to five million a quarter, that's fine. I think we closed a plant in Singapore, which was a one-line can plant with an end line. The Singapore market is a very small market, and we had used that for exports in the region as we built new plants or entered new markets until that market in the new plant was up and running, but a one-line plant is really not efficient, and it's a very high-cost location. We had a plant in Saigon where the lease... The plant was built in 1993.
Gabrial Shane Hajde: Yes.
Speaker Change: Yeah, if you want to use four to 5 million a quarter, that's fine I think.
Timothy J. Donahue: We we closed a plant in Singapore, which was a one line can plant with an inline.
Timothy J. Donahue: The Singapore market is it's a very small market and we'd use that for.
Timothy J. Donahue: For exports in the region as we built new plants or enter new markets until that market and the new plant.
Timothy J. Donahue: Was up and running but a one line plant is really not efficient and it's a very high cost location.
Timothy J. Donahue: We had a plant in Saigon, where the lease.
Timothy J. Donahue: It was built in 1993, we had a 30 year land lease the government one of the land back.
Timothy J. Donahue: We had a 30-year land lease. The government wanted the land back, so at the end of 23,
Timothy J. Donahue: So at the end of 'twenty three.
Timothy J. Donahue: We had to terminate the operations, and we're in the process of handing the land back now to the government. And we chose, based on where the markets are, not to reinstall those lines currently. And then we had another plant also in the Saigon area, which is a combination of two companies that we purchased that we put together on the same site. And I think We probably were operating six or seven can lines on site, so we took two of the slower speed lines out just to modernize and make the plant more efficient.
Timothy J. Donahue: We had a terminate.
Timothy J. Donahue: The operations and we're in the process of handing land back now to the government. So.
Timothy J. Donahue: And we chose based on where the markets are not.
Timothy J. Donahue: Not to reinstall those lines currently and then we had another plant.
Timothy J. Donahue: Also in the Saigon area, which is a combination of.
Timothy J. Donahue: Of two companies that we purchased that we put together on the same site.
Timothy J. Donahue: And I think.
Timothy J. Donahue: We probably were operating six or seven can lines onsite. So we took two adult to the slower speed lines out just to modernize and make the plant more efficient so.
Timothy J. Donahue: Okay.
Speaker Change: Thank you for the detail.
Gabrial Shane Hajde: Thank you. We have our next question from Arun Viswanathan of RBC Capital Markets.
Speaker Change: Youre welcome.
Gabrial Shane Hajde: Thank you we have our next question from Arun Viswanathan of RBC capital markets. Sir Your line is now open.
Arun Shankar Viswanathan: Great, thank you for my question. Congratulations on the strong results here. So, I guess my first question is just around Bev Can growth in North America. You were up 7% this quarter, and that was off a pretty tough comp. How do you think? I think you made the comment of 0-2%, maybe now for the year. What do you think about longer-term beverage can volumes, especially in North America? Do you think we have the ability to get into the two to 4% range as we look into 25?
Speaker Change: Great. Thanks My question Congrats on the strong results here. So I guess my first question is just around a bev can growth in North America, you were up 7% this quarter.
Arun Shankar Viswanathan: And that was off of that.
Arun Shankar Viswanathan: Tough comp.
Arun Shankar Viswanathan: How do you think I think you made the comment of zero to 2% maybe now for the year I think.
Arun Shankar Viswanathan: What do you think about longer term beverage can volumes, especially in North America. Do you think we have the ability to get into that 2% to 4% range as you look into 'twenty five mm.
Arun Shankar Viswanathan: Just wanted to get your thoughts on kind of medium to longer-term development can growth. So, Arun, let me just, I apologize. Let me just take a step back and just clarify. We were up 7% in North America in the first quarter.
Arun Shankar Viswanathan: I just wanted to get your thoughts on kind of medium to longer term Bev can Greg let.
Speaker Change: Let me just I apologize, let me just take a step back and just clarify we were up 7% in North America.
Arun Shankar Viswanathan: In the first quarter.
Timothy J. Donahue: Our estimate for our full-year growth is four to five percent. We said the market for the year was in the 0-2% range coming off as a flat performance in Q1, just so we're clear. You know, anything's possible.
Arun Shankar Viswanathan: Our estimate for our full year growth is 4% to 5%.
Timothy J. Donahue: We said the market for the year in the zero to 2% range coming off of a flat performance in Q1, just so we're clear I think that.
Timothy J. Donahue: Anything is possible I think that.
Timothy J. Donahue: I think that, uh... We'll see where the market takes us. I think if we get, if we return to a higher level of promotions, and perhaps some of the larger companies get a little bit concerned about share and they want to start promoting so they don't lose share; they want to gain share. Then, sure, we could get to the 2% to 3%, 2% to 4% range that you described. But if they're going to stay with value over volume, we're going to be in this 0 to 2, 1 to 2, 1 to 3 range. You know, there's nothing wrong with that, right?
Timothy J. Donahue: We'll see where the market takes us.
Timothy J. Donahue: You know if we get if we return to a.
Timothy J. Donahue: A higher level of promotions in.
Timothy J. Donahue: And perhaps some of the larger companies get a little bit concerned about share and they want to start promoting so they don't lose share they want to gain share.
Timothy J. Donahue: And sure we could we could get to the 2% to 3%, 2% to 4% range that you described but.
Timothy J. Donahue: If theyre going to stay with value over volume, we're going to be in this.
Timothy J. Donahue: Zero to two one to two one to three range in <unk>.
Timothy J. Donahue: There's nothing wrong with that right.
Timothy J. Donahue: That.
Timothy J. Donahue: That... One to two percent growth that we're describing now is coming off a base of 115 or 120 billion units. It's no longer coming off a base of 90 billion units. What I would tell you is 2 billion units on 120, you can do the math, it's 2.5 billion units, it's two full pan lines. So it is a new plant every year in the industry that somebody would need to put up.
Timothy J. Donahue: 1% to 2% growth that were describing now it's coming off a base of 115 or 120 billion units, it's no longer coming off a base of 90 billion unit. So.
Timothy J. Donahue: What I would tell you is 2 billion units on on one 'twenty you you can do the math, it's two and a half million units its two full pan lines.
Timothy J. Donahue: So it is a new plant every year in the industry that somebody would need to put up.
Timothy J. Donahue: And.
Timothy J. Donahue: As you're well aware, you've been around the industry a long time, you know that we're well oversold in the season, so we need to either make cans early and warehouse them, or we need to have more capacity so that we can run more balanced. So I do think that even at a 2% level, especially where we've all been over the last 20 years, we all became very accustomed to running a flat-to-down business for 15 years before we had the uptick in 19. We all know how to do that, and it's incumbent upon us to be responsible across the industry for our shareholders.
Timothy J. Donahue: As you're well aware from you've been around the industry a long time.
Timothy J. Donahue: You know that we're well oversold in the season, so we need to either make cans early.
Timothy J. Donahue: And warehouse them.
Timothy J. Donahue: Or we need to have more capacity so that we can run more balanced so.
Timothy J. Donahue: I do think that even at a 2% level, especially where we've all been over the last 20 years. We all became very accustomed to running a flat to down business for 15 years before we had the uptick in 19, we all know how to do that and it's incumbent upon us to be responsible across the industry for our shareholders.
Arun Shankar Viswanathan: Great, thanks for that. And then I guess I just have another question around leverage and interest expense. What is your longer-term leverage target? I mean, would it make sense to maybe bring that down into the twos, just so your interest expense would be much lower, and you can see your EBITDA growth translate to nice EPS growth as well? And then, just along those lines, I'm just curious if you are comfortable with the idea of pivoting to buybacks in 2025. Maybe you can just give us your thoughts on some of those issues. Thanks.
Speaker Change: Great. Thanks for that and then I guess I just had another question around leverage and interest expense. So.
Arun Shankar Viswanathan: What is your longer term leverage target I mean would it make sense to maybe bring that down into the twos just so.
Arun Shankar Viswanathan: You know your interest expense would be much lower and you can you can see your EBITDA growth translate to a nice EPS growth as well and then just along those lines I'm. Just curious if you are comfortable with the idea of pivoting to buybacks in 2025 mm maybe you can just give.
Timothy J. Donahue: So we haven't we haven't changed our target range. We're going to be at the low end of the target range. We're pretty confident in that by the end of this year. To your point, you're You may be right, it may be... As we think about a higher rate environment and an economic environment where, you know, inflation could get bad again, right? I don't...
Arun Shankar Viswanathan: Give us your thoughts on some of those issues.
Timothy J. Donahue: So we haven't we haven't changed our target range, we're going to be at the low end of the target range, we're pretty confident that by the end of this year to your point you're.
Timothy J. Donahue: You may be right it may be.
Timothy J. Donahue: As we think about.
Timothy J. Donahue: A higher rate environment and in an economic environment, where.
Timothy J. Donahue:
Timothy J. Donahue: You know where inflation inflation could get bad again, right I don't.
Timothy J. Donahue: I don't know. We'll see how the U.S. government responds. You've got treasury auctions; they still need to sell bonds at some point. You know, we're going to understand whether or not anybody wants to buy our bonds if... If somebody thinks inflation is too high and they're not getting well paid for inflation, which would tell us that if everybody else in the world believes there's going to be more inflation, regardless of lower inflation right now, then perhaps it makes more sense for us to bring the levels down.
Timothy J. Donahue: I don't know well, we'll see how the U S government does if they you know.
Timothy J. Donahue: You've got treasury auctions, they need they still need to sell bonds at some point.
Timothy J. Donahue: We're going to we're going to understand whether or not anybody who wants to buy our bonds.
Timothy J. Donahue: If somebody thinks inflation is too high and they're not getting well paid for inflation, which would tell us that if everybody else in the world believes there's going to be more inflation, regardless of lower inflation right now.
Timothy J. Donahue: Than perhaps it makes more sense for us to bring the the levels down I do know in.
Timothy J. Donahue: I do know and you're well aware that, um... We have at least two competitors in the beverage can space. One, I think, has leverage right around where we are right now, and they've described their long-term goal, their historical long-term goal in the low twos. And we have another competitor who probably stated they're going to be in the mid twos by the end of this year, which would tell you that their view on rates and inflation and the economy is such that they believe it's more prudent to bring leverage down. So we're mindful of that. It's a topic we talk about with the board at every board meeting and, You know, a good question though.
Timothy J. Donahue: You're well aware of that.
Timothy J. Donahue: We have at least two competitors.
Timothy J. Donahue: In the beverage can space.
Timothy J. Donahue: Oh, one I think has leverage right around where we're at right now and they've described.
Timothy J. Donahue: There long term goal there historical long term goal in the low twos.
Timothy J. Donahue: And we have another competitor who's <unk>.
Timothy J. Donahue: Probably stated they're going to be in the mid twos.
Timothy J. Donahue: By the end of this year, which would tell you that.
Timothy J. Donahue: You know their view on.
Timothy J. Donahue: On rates in <unk> and.
Timothy J. Donahue: And inflation in the economy is such that.
Timothy J. Donahue: They believe it's more prudent.
Timothy J. Donahue: To bring leverage down and.
Timothy J. Donahue: So we're mindful of that it's a topic, we talk about with the board.
Timothy J. Donahue: At every board meeting and.
Timothy J. Donahue: Good question.
Speaker Change: What about buybacks.
Arun Shankar Viswanathan: What about buybacks? Would that be of preference in 25? Next. Well, I think we...
Speaker Change: Yeah, our preference in 'twenty five.
Speaker Change: Well I think we can achieve both we're going to have significant cash flow certainly as you pay down debt you generate more cash flow all else being equal.
Timothy J. Donahue: Well, I think we can achieve both. We're going to have significant cash flow. Certainly, as you pay down debt, you generate more cash flow, all else being equal. And so.
Timothy J. Donahue: Yeah, I mean, listen, we'll... We'll review with the board what the uses of capital are and whether they want to keep the dividend roughly where it is? Do they want to increase the dividend or not? Do they want to use all the cash to pay down debt? Do they want to use some to buy back stock? You know, it's a... It's a use of capital discussion we have at every board meeting, so but
Timothy J. Donahue: And so.
Timothy J. Donahue: I mean listen we will we.
Timothy J. Donahue: We will review with the board.
Timothy J. Donahue: What the uses of capital are in.
Timothy J. Donahue: Do they want to keep the dividend roughly where it is do they want to increase the dividend or not they want to use all cash to pay down debt that they want to use some to buy back stock.
Timothy J. Donahue: It's a use of capital discussion we have at every board meeting so but.
Timothy J. Donahue: Everything is available to the company. We have a lot of cash flow, so we'll see what the board thinks. What the board believes is the most prudent thing to do in an environment, you know, depending on what kind of environment we think we're entering.
Timothy J. Donahue: Everything is available to the company, we have a lot of cash flow. So we'll see what the board thinks.
Timothy J. Donahue: What the board believes is the most prudent thing to do.
Timothy J. Donahue: In an environment, you know depending on what kind of environment, We think we're entering.
Speaker Change: Got it thanks.
Michael Andrew Roxland: Thank you. Our next question comes from the line of Michael Roxland of Truist Securities. Sir, your line is now open.
Michael Andrew Roxland: Thank you. Our next question comes from the line of Michael Rockland of tourist Securities. Sir Your line is now open.
Michael Andrew Roxland: Thank you guys for taking my questions. This is Nico Puccini on for Mike Rox.
Michael Andrew Roxland: Thank you guys for taking my questions. This is Nick <unk> on for Mike <unk>.
Michael Andrew Roxland: Just to follow up on Mexican glass, I understand how and why it was acquired and the historical profitability there. But also, it's tied to a larger customer contract. Should that contract come up for renewal, and profitability be impacted? Is that an asset that you could consider being core? Or would you maybe divest that? And then, relatedly, on your various JVs in the Middle East, South America, and Asia? Are those things you can look to unwind or maybe bring entirely in-house?
Nico Puccini: Just to follow up on Mexican glass I understand how and why it was acquired and the historical profitability there right and also thats tied to a a larger customer contract should that contract come up for renewal and profitability to be impacted is that an asset.
Michael Andrew Roxland: So they're.
Michael Andrew Roxland: Being core or would you maybe that that's that and then relatedly on your various JV is in the Middle East South America and Asia.
Michael Andrew Roxland: Yes.
Michael Andrew Roxland: I guess, you could look to unwind or maybe bringing it entirely in house.
Timothy J. Donahue: Well, I would tell you that the customer that we purchased the Mexican glass assets from, along with the Mexican can assets, is core to Crown. So as we think about the glass business in Mexico, we don't think about the glass business separate from the can business.
Timothy J. Donahue: Well I would tell you that.
Timothy J. Donahue: The customer.
Timothy J. Donahue: That we purchased the Mexican glass assets from along with the Mexican can't assets the customer is core to crown.
Timothy J. Donahue: So as we think about the glass business in Mexico, We don't think about the glass business separately.
Timothy J. Donahue: Separate from the can business, we think about the customer relationship and I'll leave that at that.
Timothy J. Donahue: We think about the customer relationship, and I'll leave that at that. But again, as we've told you before, any business under the right terms and conditions would be considered a yes or no in the portfolio. But as we sit here today, we have an excellent relationship with this global customer, and we have you. Mexican beverage as a business in which we serve as a very core customer to the global company. I think the joint ventures that we have around the world have served the company well. We have them, for the most part, in the Middle East and Asia.
Timothy J. Donahue: But again, we've told you before any business under the right terms and conditions would be considered.
Timothy J. Donahue: As a yes or no in the portfolio.
Timothy J. Donahue: But as we sit here today, we have an excellent relationship with this global customer.
Timothy J. Donahue: And we view.
Timothy J. Donahue: Mexican beverage.
Timothy J. Donahue: As a business in which we serve as a very core customer to look global company.
Timothy J. Donahue: I think the joint ventures that we have.
Timothy J. Donahue: Around the World have served the company well.
Timothy J. Donahue: We have.
Timothy J. Donahue: For the most part in the Middle East and Asia.
Timothy J. Donahue: Ventures with partners who are also fillers in some of those markets. It would be very difficult to participate in and grow the business without a venture partner in South America. We have a partner who's quite happy to be invested in the business. I don't think they're, in any way, contemplating wanting to sell their interest. So it's a relationship, and 30 years, and we continue to operate as such.
Timothy J. Donahue: Ventures with partners, who are also fillers.
Timothy J. Donahue: And in some of those markets.
Timothy J. Donahue: It would be very difficult to participate.
Timothy J. Donahue: And grow the business without a venture partner.
Timothy J. Donahue: In South America.
Timothy J. Donahue: We have a partner who's.
Timothy J. Donahue: Who's quite happy to.
Timothy J. Donahue: To be invested in the business.
Timothy J. Donahue: I don't think there in any way contemplating wanting to sell their interest.
Timothy J. Donahue: So it's a relationship.
Timothy J. Donahue: And a.
Timothy J. Donahue: Partnership agreement that we've had in place for.
Timothy J. Donahue: 30 years, and we continue to operate as such.
Speaker Change: Understood. Thank you and I had just one follow up.
Michael Andrew Roxland: Okay, thank you. Just one follow-up. Apologies if I missed it earlier in the call, but can you cover the utilization rates by segment?
Michael Andrew Roxland: Apologies if I missed it earlier in the call, but can you can you cover the utilization rates by segment.
Timothy J. Donahue: I'll do beverage for you because the other markets The other business lines, not so important, but North America, I think, was utilized mid-1990s. I think there is, in Asia, with the capacity reduction, we're going to be in the low 80s, which is pretty well utilized in a market like Asia.
Michael Andrew Roxland: By segment.
Timothy J. Donahue: By geography wise.
Timothy J. Donahue: I'll do beverage for it because the other the other markets.
Timothy J. Donahue:
Timothy J. Donahue: The other business lines.
Timothy J. Donahue: Not so important but.
Timothy J. Donahue: North America, I think were utilized midnight mid nineties.
Timothy J. Donahue: I think there is in Asia with the capacity reduction we're going to be.
Timothy J. Donahue:
Timothy J. Donahue: In the in the low eighties.
Timothy J. Donahue: Which is pretty well utilized in a market like Asia.
Timothy J. Donahue: Uh huh.
Timothy J. Donahue: I would say in Europe and Brazil. Mexico were, again, mid-90s. Europe and Brazil were, again, in the low to mid 80s, high 80s, something like that.
Timothy J. Donahue: I would say in Europe.
Timothy J. Donahue: And Brazil, Mexico were again mid nineties euro.
Timothy J. Donahue: Europe and Brazil.
Timothy J. Donahue:
Timothy J. Donahue: Again in the in the low to mid eighties high 80% something like that.
Michael Andrew Roxland: Thank you very much. I'll turn it over to you.
Timothy J. Donahue: Yeah.
Speaker Change: Got it. Thank you very much I'll turn it over you are welcome.
Edlain S. Rodriguez: We have our last question from Edlin Rodriguez of Mizuho Securities. Sir, your line is now open.
Edlain S. Rodriguez: Okay.
Edlain S. Rodriguez: Yeah.
Edlain S. Rodriguez: We have our last question from Edlin Rodriguez of Mizuho Securities. Sir Your line is now open.
Edlain S. Rodriguez: Thank you. Good morning, everyone. I have a quick question for you on transit.
Edlain S. Rodriguez: Thank you and good morning, everyone.
Edlain S. Rodriguez: Tim a quick question for you on on transit I mean in the past you've talked about how this is a very good business, which doesn't get much love from investors or analysts and you wish you had more businesses like that in a stable low mid teens margins doesn't require much capital.
Edlain S. Rodriguez: In the past, you've talked about how this is a very good business, which doesn't get much love from investors or analysts, and you wish you had more businesses like that, stable, low mid-teens margins, that don't require much capital. The question is, would you be interested, or can you still get bigger there? Are there opportunities to get bigger in that space?
Edlain S. Rodriguez: Western is like would you be interested or can you still get bigger are there opportunities.
Edlain S. Rodriguez: Opportunities just to get bigger in that space.
Timothy J. Donahue: There are. We, you know, in.
Edlain S. Rodriguez: There are.
Timothy J. Donahue: We.
Timothy J. Donahue: And.
Timothy J. Donahue: As a matter of strategy or principal and I'm going to take you back to late 2019, we.
Timothy J. Donahue: As a matter of strategy or principle, and I'm going to take you back to late 2019, we delivered a strategy to the shareholders that more or less told the world that all of our growth would be focused on the beverage can businesses that we had around the world, and we would not look to grow other businesses. So again, it's always a use of capital argument. But, you know, you just summarized for me, and I don't want to sound like I'm defensive. But you just summarized for me that I have a business where I spend no capital. And let's be clear. Just like you said.
Timothy J. Donahue: We did we are deliberate strategy to the shareholders.
Timothy J. Donahue: More or less told the world that all of our growth would be focused on the beverage can businesses that we had around the world that we would not look to grow.
Timothy J. Donahue: Other businesses.
Timothy J. Donahue: So again, it's always a use of capital argument.
Timothy J. Donahue: <unk>.
Timothy J. Donahue: But you know you just summarize for me and I and I don't want to sound like I'm defense of.
Timothy J. Donahue: But you just summarized for me I have a business, where I spend no capital.
Timothy J. Donahue: And let's be clear.
Timothy J. Donahue: Just like you said.
Timothy J. Donahue: Nobody gives us love for the business. I can assure you the people in my transit business think I don't give them any love either because I don't give them any money. So we could always spend more money, but I think, as we said when we acquired the business, that the growth in that business would more or less be from bolt-on acquisitions. There are.
Timothy J. Donahue: Nobody gives us love for the business I can assure you that people in my transit business think I don't give them any love either because I don't give them any money.
Timothy J. Donahue: So.
Timothy J. Donahue: We could always spend more money, but I think as we said when we acquired the business.
Timothy J. Donahue: That the growth in that business with more or less be from bolt on acquisitions. There are.
Timothy J. Donahue: Still numerous opportunities to acquire businesses that are either directly in the same business that Transit operates in or adjacent. And there are numerous of those businesses that make EBITDA margins in the 20 to 25% range. You know, there's an old saying, if you want to trade for a better multiple, you better buy better businesses. So we're not opposed to growing the business, but our sense right now is that our investor base would prefer to see us pay down the debt and buy back shares as opposed to growing that business.
Timothy J. Donahue: Still numerous opportunities.
Timothy J. Donahue: To acquire businesses, which which are either directly in the same business that transit operates in or adjacent.
Timothy J. Donahue: And there are numerous numerous of those businesses make EBITDA margins in the 20% to 25% range.
Timothy J. Donahue: And.
Timothy J. Donahue: You know, there's an old saying if you want to you want to trade for a better multiple you better by better businesses. So.
Timothy J. Donahue: We're not we're not opposed to growing the business, but our sense right now is the.
Timothy J. Donahue: But our investor base would prefer to see us pay down the debt and buy back shares opposed as opposed to grow that business. So we we use that business to harvest cash.
Timothy J. Donahue: So we use that business to harvest cash that allows us to not only invest in beverage but pay a dividend, buy back stock, and de-lever. So there are opportunities to grow it, but we don't see that as the mandate from the investor base at this point. Thank you.
Timothy J. Donahue: Allows us to not only invest in beverage, but pay a dividend buy back stock and delever. So there are opportunities to grow it but we don't see that as the the mandate from the Investor base at this point.
Speaker Change: Thank you I think that's the right.
Edlain S. Rodriguez: Thank you. I think that's a good strategy. Thank you very much.
Speaker Change: And thank you very much.
Operator: Ella, did you say that was the last question, Elle?
Speaker Change: Youre welcome.
Ella: Did you say that was the last question now yes.
Operator: Yes, you're right, sir.
Ella: Yes, you are right.
Operator: Well, that concludes today's call, and we thank you all for joining us, and we'll speak to you again in three months. Bye now.
Speaker Change: Well. Thank you very much that concludes today's call and we thank you all for joining.
Speaker Change: And we will speak to you again in three months Bye now.
Operator: Thank you again. That concludes today's conference. Thank you everyone for joining us. You may now disconnect. Have a great day.
Speaker Change: Thank you again that concludes today's conference. Thank you everyone for joining you may now disconnect and have a great day.