Q3 2024 Ball Corp Earnings Call
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As your reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Brandon Potthoff, Head of Investor Relations. Thank you sir, you may begin.
Thank you Christine. Good morning everyone. This is Paul Corporation's conference call regarding the company's third quarter of 2024 results.
The information provided during this call will contain forward-looking statements.
Actual results are outcomes may differ materially from those that may be expressed or implied.
We assume no obligation to update any of the forward-looking statements made today. Some factors that could cause results or outcomes to differ are described in the company's latest form 10K, or most recent earnings release, and form 8K in other companies as well as companies use releases.
If you do not already have our earnings release, it is available on our website at ball.com.
Information regarding the use of non-gap financial measures may also be found in the note section of today's earnings release.
In addition, the release includes a summary of non-comparable items, as well as a reconciliation of comparable nepharonings and deluded earnings for share calculations.
References to net sales and comparable operating earnings in today's release and call, do not include the company's former aerospace business.
and the company's former aerospace business through the sale date of February 16th, 2024.
Speaker Change: I would now like to turn the call over to our CEO Dan Fisher
Dan Fisher: Thank you, Brandon. Today I'm joined on our call by Howard Yu, EVP and CFO. I will provide some brief introductory remarks. Howard will discuss third quarter financial performance and key metrics for 2024 and then we will finish up with closing comments and Q&A.
Before I talk about the third quarter, I want to take a moment to recognize our team in Tampa, Florida, who have shown incredible resiliency while dealing with the impact of two devastating hurricanes.
Our thoughts are with everyone impacted by these terrible storms. We are fortunate that all of our employees are safe and that our tanker facility avoided major damage and was back up and running quickly.
The Ball Foundation supported critical leaf efforts by providing monetary donations to organizations with teams, actively supporting impacted cities, and in conjunction with customers, we donated over 250,000 cans and bottles of drinking water.
A thoughts remain with the communities impacted by these terrible storms and we will continue to support our employees, customers and communities through our global employee-giving program.
Dan Fisher: I would also like to welcome our new colleagues who recently joined ball following our October 29th acquisition of All You Can't Intek. A European Extraterative Women Amaris-Sau and Bottle Technology Leader.
Dan Fisher: As the demand for sustainable aluminum packaging continues to grow among customers and consumers, this transaction is a capital efficient way to add incremental capacity to expand our three-terde aluminum aerosol business in Europe.
Dan Fisher: While also allowing us to serve the growing, extruder-deluminum beverage bottle market and diversify our customer base across the continent.
Turning to business performance, we delivered strong third quarter results, and year-to-date every turn to approximately 1.4 billion to share holders via share, repurchase, and dividends as of today's call.
reflecting further on year to day 2024 performance, aluminum packaging continues to outperform other substrates across the globe. In a mea third quarter volume from a strong driven by continued investment by our customers and can filling across the region.
and South America, software-demand-tissipated volume performance was driven by our exposure to Argentina and supply the man-tightenance in Brazil.
and North America, persistent economic pressure on the in-consumer and are exposure to U.S. domestic beer led to softer than expected volumes.
Our regional performance culminated in balls global average can shipments being essentially flat year over year and the third quarter and up 2% year to date. For a complete summary of regional shipments for the third quarter, please refer to today's earnings release.
Dan Fisher: Consistent with our previous commentary and given our customer mix and year-to-date regional volume performance.
We now anticipate full year global shipment growth and the low single digit range.
Key drivers for our company's performance in 2024 continue to be the benefits of deal-everageing.
Reed-Purchasing Shares, and Proving Operational efficiencies, and leveraging our well-cathedral-ized plant assets to grow the use of innovative, sustainable aluminum packaging across channels, categories, and venues.
Based on our current demand trends and the previously mentioned drivers, we are positioned to grow full-year comparable diluted EPS mid-Single Digis Plus off 2023 reported comparable diluted EPS of $2.90 per share.
Generate Strong adjusted free cash flow, strengthen our balance sheet, and return a value in excess of 1.6 billion to share our holders via share repurchases and dividends in 2024. With that, I'll turn it over to Howard to discuss the quarter and key metrics.
Thank you, Dan. Turning to our results, third quarter 2024 comparable to Luded earnings per share was 91 cents versus 83 cents in the third quarter of 2023.
Howard Yu: Third Quarter Contorable Net earnings of $278 million, were up 6% year over year, primarily due to strong operational performance and price mix.
leading to improved year-over-year performance in North America, in Maya, and South America. In addition, we had lower interest expense.
Dan Fisher: In North and Central America, segment comparable operating earnings increased 4% and we're in line with our expectations, despite a softer US, mass-beer category and stretch and consumer.
Benefits of Effective Cost Management and Plant Deficiencies across our well-capitalized plant network more than offset for the impact of lower volumes.
Our team has done a great job improving operational efficiencies, lowering costs, and effectively countermeasuring risk.
and in future years, when end customer demand influx more favorably, we are set up to more profitably serve our customers growth.
In a Maya, overall segment volumes were strong and segment comparable operating earnings increased 24% matching our expectations entering the quarter
Dan Fisher: Recent demand trends remain favorable, and the business is on track for significant year-over-year comparable operating earnings growth in 2024 driven by improving operational efficiencies and volume growth.
Dan Fisher: In South America, segment comparable operating earnings increased 28% while segment volumes decline due to continued weakness in Argentina and supply demand tightness in Brazil late in the quarter.
During the third quarter, consumer conditions in Argentina demonstrate some gradual signs of recovery and we continue to monitor the dynamic economic situation in Argentina and potential scenarios that can impact results.
In Brazil, strong demand in the month of September outpaced our ability to service that demand.
We remain bullish about Brazil and our ability to deliver year over year comparable operating earnings and volume improvement as we enter the summer selling season in South America.
Looking at the businesses within other, the aerosol business performed well and offering earnings were helped by insurance proceeds received during the quarter.
The camp plants and beverage packaging other were in line with our expectations and we continue to see growth opportunities in India.
Lastly, while our Cubs Business slightly improved operating earnings year over year, the growth of this business has not been at the level we initially expected, and as a result, the company is currently evaluating various options for this business.
Moving on to additional key financial metrics and goals for 2024. These reflect very consistent figures to those provided throughout the year.
We continue to anticipate year-end 2024 net debt to comparable EVDA to be low to be below 2.5 times.
While we are currently at 2.2 times at the end of the third quarter, net debt to comparable EVCA may not slightly higher by year end as the company continues payments of tax due on the gain from the sale of aerospace.
Dan Fisher: 2024 CapEx is on track to be in the range of $650 million, a year over to your reduction of $400 million, and largely driven by carrying capital related to prior years projects.
We're your main on track to achieve our adjusted free cash flow target.
Chair, we purchase is our expected to be in excess of $1.4 billion by year-end. Through today's call we have repurchased approximately $1.2 billion in shares year-to-date.
Dan Fisher: Our 2024 full year effective tax on comparable earnings is expected to be slightly above 21% largely driven by lower year over year R&D tax credits associated with the sale of the company's aerospace business.
Dan Fisher: Relative to the estimated tax payments due on the aerospace sale, we have paid a total of $484 million as of the end of the third quarter, and we now expect our total taxes on the transaction to be in the range of $950 million.
Full Year 2024, Interest Expense, is expected to be in the range of $300 million.
Excluding the non-comparable aerospace-disposition compensation costs, fully year 2024 reported adjusted corporate under-scruvity costs, recorded and other non-reportable are expected to be in the range of $100 million.
Dan Fisher: and last week, Balls Board declared its quarterly cash dividend.
Looking ahead to the rest of 2024, we remain laser focus on operational excellence.
Driving efficiency, amperativity, process, business, and cost management and monitoring emerging market volatility.
Dan Fisher: We are committed to maximizing the full potential of our company over the long term.
We have executed on de-rescaning the corporation through debt retirement, we have no significant near-term maturity
The runway is clear for us to activate near-term initiatives to consistently deliver high quality results and generate compound shareholder returns.
Speaker Change: With that, I'll turn it back to Dan.
Thanks, Howard.
The business is operating well and we have wine of sight to growing our 2024 comparable diluted EPS mid-single digit plus. While the consumer back drop remains volatile, we will remain disciplined and through the strength of our portfolio and the unwavering dedication of our employees.
We are a confident we will deliver on our commitments laid out at our investor day.
We are focused on executing our purpose and our promise.
was certainly on display during the third quarter.
By the Karen Support we have provided our employees, customers and communities by enabling the greater use of aluminum packaging with our bolt-on aluminum aerosol acquisition and by working together to deliver strong results.
operating efficiencies in the consistent return of value to shareholders to ensure we win together over the near and long term.
Dan Fisher: We will strive to deliver innovative aluminum packaging solutions that can lead to a world-free and waste and continue down a path to deliver compounding shareholder returns in 2024 and beyond.
Shareholder value creation remains our focus. And going forward, we anticipate exceeding 10% per annum diluted comparable EPS growth, including in 2025.
Constitence Delivery of High Quality Results and Operational Performance, coupled with significant share repurchases for the foreseeable future. In addition to dividends, we'll drive shareholder value creation.
Dan Fisher: We appreciate the work being done across the organization and extend our well wishes to our employees, customers, suppliers, stakeholders and everyone listening today.
Dan Fisher: Thank you and with that Christine, we're ready for questions.
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation to indicate your line is in the question 2. You may press star 2 if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick your hands that before pressing the star keys. When moment please, while we pull for questions.
Thank you. Our first question comes from line of George Staffos with Bank of America. Please receive a dear question.
George Staffos: Hi, thanks very much everyone. Good morning. Thank you.
George Staffos: Howard, I guess the first question I had, regards the operational excellence work that you've been doing and what might you have seen year to date?
George Staffos: What might we see either in absolute terms or sequentially?
and to 4Q and then into 2025. What I'm really trying to get is, is there any sort of incremental catalyst that we might be able to see from the cost side, given that things are pretty much status quo on the top line, both in terms of volume and price mix.
Yeah, George, I think you'll see for the next couple of years.
and I continue and sort of two to three percent of...
Our cost structure is what we're trying to drive to in terms of an overall goal of productivity. Now there's a chunk of...
The aluminum that's built in there that's told, which you really don't have a great deal of ownership on how to drive productivity there.
but the teams are continuing to fill the funnel with projects and build on that. I think the simple way to think about it, George, is we are planning better.
George Staffos: by planning better that results in less conversions and less turnover of label changes.
George Staffos: that creates less spoilage and less overtime. And so those fundamental ratios got out of whack during COVID.
We've taken some of the higher-cost less-efficient assets out. So you're seeing that first wave of productivity gains back half a last year and into this year.
and then the second half of this year and then the next year.
The manifestation of, you know, really this operational excellence in lean standardization, continuous improvement, but they're going to come through those primary factors.
and a little bit of volume. We'll go a long way and also improving that and improving our leverage flow through. I think you can see.
We're making more money on a per-can basis. Through a lot of the actions we've taken.
I think we can maintain that offset inflation, offset merit increases and maybe even margin up a bit more.
George Staffos: Moving forward in North America, specific my comments are really about getting the volume for each more tailwind.
George Staffos: and leverage and it also enables the susceptibilities of efficiency gains where it really shows up in those areas and then further down the road enables you to grow absent capital investments.
at the rate we've seen historically. So that's how we're looking at it. And I think you'll start to see the incremental nature of the standardization and the process improvements now and moving forward.
But the easier stuff candidly, not easy in terms of dealing with your people and closures of plants, but easier in terms of retiring assets that really weren't fit for purpose for the long term.
We're kind of through that way. Yep.
understood my next two in turn over. You mentioned that you will be ready for the summacies in Brazil yet you had some capacity constraints in September so it's sort of begs the obvious question. So how do you manage that is there?
Capacity that is multiple that you can turn back on that will allow you to hit the market in an appropriate way.
Speaker Change: and then taking a step back, you know, a recurring question topic for ball is obviously the maturity to put it one way of mass beer.
What can you do with the portfolio?
Speaker Change: As you look out to the next couple of years to either change up your mix or get a higher return if it's required in that mass beer portfolio. Is it in fact a real-life EVA is something you don't emphasis quite as much?
is that portfolio EVA positive and doing what it needs to do. South America and MassPierre, thanks guys and good luck in the quarter.
Speaker Change: Thank you George
Stark Start with South America.
So this is just a function of obviously in the second and third quarter.
and the summer hemisphere you are curtailing. The answer is, it got hotter much faster in Brazil and so we have uncurtailed the wines.
and we should have had a little bit of the safety stock build. So you're basically two to three weeks of...
Not using N2 pick season but hitting it full on in that probably cost somewhere in the neighborhood of 3 to 400 million units.
Speaker Change: So those lines are turned on now. We do have capacity that can help serve that market. So it's really more of a key three phenomenon. And so that's been put into place.
Obviously, you're running incredibly tight right now to make sure that wind demand in flex. The one thing that we're preserving obviously is earnings.
Speaker Change: and we probably managed it a bit too tight in Brazil but I think we're...
and our toes moving forward in our partner in that region is doing quite well.
Speaker Change: and will continue to do that during peak season. That's more or less their focus period generally speaking. And then on the mask period, it's a great question. We've acquired in North America first of all historically, why are you there? Evie H drives you to profit pools.
Big Prophet Pools, versus others fear also keep in mind. If you look at the category, it has declined for 20 years.
However, the substrate shift in the cans has more than offset that. And the innovation in those categories have more than offset that.
So what we need to be aware of and ensure is where with the rights for Teasuk partners in that category. Some folks are winning.
and we're with them, but we're also with folks that are not doing well. And so we've already started some elements of rebalancing that portfolio. It does become a bit more challenging because the acquisitions over 30 years.
and have assets right across the street from breweries. So there is some...
There is some connected tissue there that it's not a quick pivot.
Speaker Change: At the same time, we've always done a nice job of creating new white spaces, innovating with the winners.
Speaker Change: We're seeing some of those gains but given the weakness of the end consumer you won't start to see that.
appreciate at a rate that's more visible. I think in the top line results until you see a little bit more relief to the end consumer by virtue of.
and Andrew Sprayc cuts and things of that nature. We've been on this particular topic George for a handful of years now. I think we're moving in the right direction. We're with the folks that are going to win in this category and the other blurry line here is...
Speaker Change: Don't just focus on historical beer companies, focus on
Viveridge companies, Alcohol companies.
and one of our biggest partners.
Speaker Change: has...
The fastest growing RTD.
probably the fastest growing non alcohol beer and the two fastest growing domestic light beers.
Speaker Change: There are elements of winning with the right brands, winning with portfolios, winning with folks that are innovative, all of those factor into that. It's not a quick pivot, but it's one that we're encouraged about the direction of flight run. Thanks for the question.
Speaker Change: Alright, thank you.
Our next question comes from line of Gonchel Pajave with Beard, please to see with your questions.
Gonchel Pajave: Hey guys, good morning. Good morning, Dan. I just want to build on your last comments and you know, go back to beverage North America.
Can you just give us a bit more color on how the other categories performed, especially some of the premium categories for that segment in this region?
and simply what is the catalyst for volumes as we look at to 2025 for this segment? And just as a corollaries do that, are you winning your share of new business as it comes up in North America? And if so, how do you measure that?
Yeah, so I think first things first, there's probably a macro comment here. I am.
Speaker Change: White encouraged actually for 2025 on a couple of fronts, right, that have been the drags for the in consumer one. We finally saw the rate cuts in the manifestation of...
I think the Fed are recognizing that.
Folks needs more discretionary spending power. I think versus 2019.
Speaker Change: We've got
Speaker Change: and the eight percent less discretionary spending power. So I think that's manifesting and in the food and...
beverage categories, there's been a lot more in place.
and so that's really weighing on the end consumer there. So the rate cuts starts to help. We've also seen an acceleration of savings here for the last six to eight weeks.
I think the uncertainty of the election would be nice just up.
Get through that period. So the combination of those two things are certainly going to. When we talk to all of our customers, they're very encouraged about 2025 on that stage and on that front.
So, you're going to see...
Speaker Change: In the beer side, in the beer category, in the alcohol category, it is going to be folks that are paying attention to the low end on the price.
Speaker Change: Paradigm and on the innovation high in and some some
Some of our customers have better portfolios to do that than others and they will lean into that and they will win and as they get a tailwind of discretionary spending coming back, that category will get better.
and so we're bullish on seeing growth next year and that category writ large and where I think we're with the right folks that are going to be well in that category. And then secondarily remind me you're sorry, you're second question there. Go on, John. Yeah, I'll be honest.
The premium sub segments are exposed to an North American bed, out of date form, and then also you winning, you winning your share of your business in the end.
and I think you're hearing this pretty consistently. This year was, you saw some contractual shift from us to a couple of our competitors. That was done.
Speaker Change: 2022 is when that contract was...
that contract shuffle happened. Since then, it's been a really rational marketplace relative to that and we should grow and win.
Speaker Change: with the market moving forward with one business that...
Speaker Change: has offset.
Speaker Change: Some of the contractual headwinds we were facing. I think the issue is underlying those winds. Is then a backdrop of flat-ish energy.
Todd this year.
and beer and then domestic beer on a decline. So the combination of those two have kind of muted the winds that we've had, but you...
Speaker Change: It's not hard to figure out whether you've won contractually or not. I think the share positioning all year has been a manifestation of mix category mix, winners and losers within categories, and where you sit within those portfolios and categories.
Okay, got it. And then for my second question, maybe for you and Howard as well, just in terms of, you know, what is the starting point for base volumes for 2025 that kind of gets you to that 10% plus earnings target that you've got blind or reaffirmed I should say.
Yeah, I mean, but we're as you know our process we are in the throws of it right now, but initial stages say we're in line with the our long-term algorithm that 2 to 3% range for top line that'll be stronger in Europe and South America.
We feel like 2025 will be better than the run rate that we're currently experiencing in North America
Speaker Change: So we'll have the volume we need and we'll have the back drop, the efficiency games we need.
and we're still holding a line on 650 million or in line with the NA in terms of capital investment. So the share we're purchasing, I'm then the second half algorithm of the shares we've purchased this year are all going to contribute to. So really nice tailwinds into 25.
Perfect, thanks so much. Thank you.
Our next question comes in line of Jeff Secloscus with JP Morgan. Please see with your questions.
Jeff Secloscus: Thanks very much. I think your restructuring charge is excellent. Sure, and its recovery was a little bit more than 90 million.
is that all related to Santa Cruz and Brazil and the Kent Washington plant, or are there any other crotelments or closures that are involved in that chart?
Yeah, Jeff, I think some of that, the bathroom majority I believe is related to some of these closures that we've had. We've also had a closure and a photo that...
that is also reflected in some of that number or two. The other component of this I would say is around I see and related to if you're thinking about it in the context of non.
Non-containing operations related to the sale of aerospace and so that's a component of that that you would see in there as well
Jeff, we also took um...
through the Outmodel Restructure with Deadtakes and Action's mid-year.
So there was cyber-inspiracy with a number of individuals here as we were right-sizing the business post aerospace acquisition.
and then secondly, when you reflect on your aluminum cup initiative, what do you think are the key reasons that held that initiative back?
I think the biggest, the two biggest things, biggest issue is inflation, week-in consumer, a price point that's unsustainable relative to what people are willing to pay for sustainability. I don't think anybody was anticipating.
Kind of the world would live in here right now in terms of the inflationary pressures and the reduced discretionary spend of the of the end consumer so that was
That was a challenge environment for sure and then I think the-
The downstream recycling infrastructure that's required.
Jeff Secloscus: is also far more complicated.
and we know it pretty well but I think in some of the service industry airports travel transportation we found that.
and President some pretty significant barriers to move quickly.
at least on that side of the house.
Speaker Change: Thank you very much. Thank you.
Our next question comes from line of Arun Bislana Flan with RBC. Please receive with your question.
and I guess first question was that...
I think there's an $85 million closure charge. And the quarter is that correct? What was that for in North America and South America?
Yeah, I think we just answered that question, saying to what Jeff was asking, and is the closure associated with the reductions in tents, some of these other ones that we've done here in North America as well as the ones that we've done in South America as well.
I think you're asking fundamentally the same same question. And restructure of course.
Okay, great. And then just on the, it seems like a large amount though, but nevertheless, just wondering about the volume progression, how you see that kind of evolving over the next few quarters, I know that you have some of the easier cops.
Speaker Change: and the back out for this year, those will start dropping off. You expect kind of, you know, how do you kind of expect to make that greater than 10% or 10% of greater earnings growth? I know you've laid out some...
You know, low single digit growth targets in the past, your best your day and so on, but How are you thinking about Cam Growth from here?
Yeah, I think the easy, easy or conf would only be in Europe for the fourth quarter
Fourth Quarter was incredibly strong in South America. There was a little bit, so a little bit of Argentina too that we'll have to offset there. North America will be...
Speaker Change: our reflection of and consumer health.
Speaker Change: in the fourth quarter. How quickly the right cuts.
and I think the elections stabilization there and the people are stopping.
To save money and spend money, those will all help that. In the 25 we're feeling confident about all three regions.
I think we've answered this question as well, but bears repeating 2-3% growth in mymathar analyst, expectations led by what we laid out as analyst as well. Europe will continue to grow at a healthy rate South America will grow at a healthy rate.
Speaker Change: North America will be kind of in that lower end of the one to 3% range based on what we see today, but there's...
There's hope coming in optimism coming in North America where they're finally getting after the rate cuts and that's what our consumers need.
that couple with consistency of share by-back returning value and then you'll get the compact effect of the lower weighted average shares going into 2025. So 2025 will love.
Should Safe have to be a nice year for us? Yeah, I think we're going to maybe just to piggyback on that. Well, we did outline during the best of days that we're on this journey to reduce costs on a gross basis of $500 million over the next several years. And you've heard us talking about...
Speaker Change: The traction that we're getting here in 2024 and I would expect that we would continue on this journey as we're just starting it really and so 2025, 26 and 27 all of those and so as again indicated we have a very high low confidence in being able to look at the 10 plus percent EPS next year.
and just real quickly on the footprint. I know that you guys have, you know, obviously closed some plants as you noted.
is that kind of a comful circle?
You know we've been hearing that utilization rates for your system maybe in the low 90s So that require more closures or you feel pretty good about where you are with the footprint. Thanks.
Speaker Change: Yeah, we feel good about the footprint at this point.
Thank you.
Speaker Change: Next.
Speaker Change: Our next question comes from a line of Anthony Pettenari with City. Please receive with your question.
Speaker Change: Good morning.
and I'm just making a big backing on that last question. You know, given the strength in the, can you talk about what you're operating rate in Europe is and then just in terms of the ability to meet, I think, three to five percent growth, you know, long term that you outlined.
Speaker Change: at the Fiannless Day. How long can you go before maybe some debottal-making projects or maybe even possible green field? Can you kind of talk about the system and your ability to meet the man there?
Yeah, in Europe, I don't
Speaker Change: Anthony, we don't see a need for an additional brain field.
In Europe, I think mainland Europe for the next two to three years, that's sort of our planning period that we're looking at. We did build, as you know, to two new facilities that have ability or run rate to add lines.
and so we'll maximize that. We'll also maximize to your point where we can speed up lines and add process equipment and devolumack and all of the things that you're familiar with. The one caveat will be that Amelia region.
there are areas that are growing even at a faster rate. And...
Speaker Change: But there are a little bit more volatile markets, so you have a bit more patience at their places like Egypt, places like Turkey
Speaker Change: India's in that mix.
Speaker Change: I would caveat or pull those regions out of my initial comments. But all of what we're talking about here is in the envelope of our spending capital at DNA.
We can do all of what we need to to help grow.
specifically Europe and South America at those outside growth rates. I think we spent the capital we needed to in North America. So the teams laser focused on ensuring that we're...
Speaker Change: returning value to shareholders and...
Speaker Change: and enabling the investments in the areas that are going to give us the greatest payback.
and everyone, one more thing to add there, Anthony, I would say on the substrate shift, Europe is still relatively early in that journey and so we're seeing a good lift and we will continue to see that. I think the substrate shift is something less than 32 percent as we speak today and so there's plenty of runway there as well.
Okay, okay, that's very helpful.
and then just a quick question on the consumer weakness that you've seen in North America. You talked about standard sizes versus specialty sizes versus super specialty. I think at the end of the day, cops were included in that super specialty category and obviously it's been a bit weaker. I just wonder when you look at kind of the broader portfolio are you seeing?
Speaker Change: kind of a mix down in North America between specialty cans and 12 ounce, where you're more likely to sell a six pack of a 12 ounce standard can and some of those higher ASP products in specialty sizes.
are not growing as fast or maybe you're losing some mix there and is that impacting the overall profitability of the business or is that cutting it maybe able to finally.
Speaker Change: I think Anthony is cutting it a bit too finely, but you are on this something here and I'll just draw this out a bit.
You look at energy specifically.
Right, and you look at the end consumer for energy categories and where they consume those products.
and the show. They shop at a sea store channel and many of these individuals are in construction or they're in the service industry. And overwhelmingly, the majority of these consumers are Hispanic. The Hispanic unemployment rate is nearly 6%.
and so when we talk to our energy customers they're telling us that the interest rates
Those are overwhelmingly specialty cans in that category, but they're not, they're the less special for Haiti, so it's 16 ounce, right?
and so that's what's happening with in the energy category right now. So that starts to relieve itself, interest rate cuts.
and a couple other things. So that's why I'm more bullish about moving in at 2025 with some tailwinds in and around that, but you do have to slice it down.
to a pretty discrete level to kind of parcel out, cancels, channel, customer, regional aspects to it. Specialty, it's still special and it's still tight.
It's just like the general malaise, I think at the end consumer is what we're experiencing right now across all categories in all kinds sizes.
Okay, that's very helpful caller. I'll turn it over. Thanks.
Our next question comes from line of Stefan Diaz with Morgan Stanley. Please appreciate the question.
Stefan Diaz: Hello, thanks for taking my questions. Maybe to start and piggybacking off George's question around South America. Can you tell us what the volume number was in Brazil and maybe what you think the market grew in the quarter? I understand what it's the seasonably, you know, slow period there. And maybe additionally, if you could speak to the profitability upside versus street expectations despite the volume headwinds you faced in the quarter. Is that more operational excellence or was there potentially some more end shipments in the quarter? If you could just stick into that a little bit. That'd be helpful.
Good afternoon, Scott.
Speaker Change: and New York, nearly double-digit growth in South America and Brazil specifically, sorry. And we were flat to slightly down and I think we'd left about three to four percent of growth on the table by not matching our production.
Speaker Change: with the demand our primary strategic partner did not win in the quarter.
Speaker Change: But...
We expect them to do well in the fourth quarter and the first quarter which is of course their peak season which you referenced.
Speaker Change: and then I would say it wasn't actually end mix.
Speaker Change: and typically...
Speaker Change: As you know, we make those ends in a very favorable texture as well. So that makes him...
Speaker Change: and Creason.
Speaker Change: or Techramon profitability as a result of that mix, but we're shipping less ends actually. This is all.
and proof performance and really appreciate the team with regards to that down in South America. So hopefully continued.
Margin benefits through our focus on operations with a little bit of a tailwind.
there in South America, Boads well for us. I think we'll certainly make more money in Q4 and then it's for us, it's the culmination, really, the country's outside of Brazil that.
Speaker Change: will dictate whether we're growing or we're not. We'll certainly grow for the year and grow in line with expectations that we've laid out, but whether we grow...
Med-Single Digits or Closio-Gloose-Single Digits, I think it'll be all indicative of what happens in Paraguay, Uruguay, Peru, Chile and Argentina. And that recovery there.
Speaker Change: yeah
Great, thanks for the color and I'm glad to hear that everybody is okay in the Tampa region following the storm there. You know that said with the two storms in the southeast, we believe that they had any impact on North American volume in the quarter.
No, I don't. I think we lost almost two, two, four days, three days of production. But that, like you said in a shoulder period, this would have contributed to...
and some misball you and probably a bridge items, it had it been June to live August time period, but we were able to, we were able to source those customers largely from our other regional assets there.
and thanks for the well wishes.
Great, thank you so much.
Speaker Change: Our next question comes from line of Mike Lee Head with Barclays. Please receive a new question.
Great, thanks, good morning, team. Thank you.
Morning. The first question on South America, can you help us better understand the impact of Argentina on segment volumes if I heard you correctly Brazil was
Speaker Change: Blattish, so it's Argentina down something like double the segment average and then relatedly how are you assessing your presence or foot print in our container just given all the uncertainty and volatility there.
Speaker Change: Yeah, for the full year, Howard and I'm all we're anticipating right now is the miss would include the fourth quarter.
Summer which made 5 to 600 million units of decrement at year over year due to Argentina volumes when you compare it to 2023.
and the third quarter was approximately 270 million in that Argentina was down in the third quarter versus the prior year.
Speaker Change: So, as a relates to Argentina, I'll give you.
It Argentine is really good when it's good, and it's not so good when it's not. Having said that, we've been there the last 30 years ago.
Speaker Change: We stayed in that market and it's grown significantly and the can does really well there and are two most important strategic partners in South America
Speaker Change: are there, they're going to continue to be there and they want us to be there to support them.
Speaker Change: Having said all that, we're eyes wide open. Howard and I went down an April met with a central bank met with a vice president met with.
and Secretary of Commerce.
Speaker Change: Um, everything they laid out at that time, they're executing against.
and so we're seeing currency controls easing.
We're seeing inflation and that sort of the lowest levels.
Speaker Change: Howard, I'd ask you to. Yeah, I think that's right. I think if anything, it's incrementally a little bit better. And so that gives us, I think, some optimism overall as it relates to their policies taking hold.
Speaker Change: and even being able to repatriate funds and things of that nature. I think that the banking system is improving a little bit there as well in the increment.
and so I think that we expect 2025 to continue on that progress path and as Dan said, this is Argentina and it's historic we've been a very profitable area. That all said we do recognize that the volumes down in Argentina and the third quarter were an excess of 30%.
Speaker Change: That being said, we don't see as much of a profit impact.
this year as we did last year when these policies and the initial shock associated with that, those turns had happened. So overall I think, you know, we're going to be watchable and mindful and doing a lot of scenario planning, which is what we do.
but we feel as though the long-term prospects are still remaining quite favorable for us in our GTN.
Great, that's super helpful. And then, secondly, can you talk a bit more about what the Allu can acquisition brings to your existing extranity aluminum business and are there other aerosol or or adjacent opportunities in the M&A pipeline still out there for you guys?
Yes, well, I think first things first, it's one of the facilities.
Speaker Change: was actually part of our original investment in this space.
and so we've actually run the plant and spaint. Some of our employees have, so we know it well and we know the customer base very, very well. They also built a new facility and Belgium so we're stepping into...
Speaker Change: A foot grant that will enable us to grow incrementally without having to build a greenfield facility and that is a business that has been growing mid-single digits, high single digits.
Capital Allocation Decisions and this was just uniquely presented the individual who was the owner is retiring and so you know this.
Anything in M&A, it all looks good on paper but you have to have a buyer in a seller and this was, we were the right owner for it and we're excited to welcome these folks on board. So that came, came nicely and there are other opportunities within the space. It's pretty fragmented. And so we, uh,
Writers and Opportunity and there's a buyer in seller, I mean this is...
Speaker Change: These are really nice bolt-ons for us and fits well within our cap of allocation structure. We can continue to return value to our shareholders. So all the stars lined on this one and so hopefully they're more of those out there.
Speaker Change: Thank you.
or next question comes from the line of Josh Spector with UBS, please be seated with your question.
Speaker Change: Yeah, hi, good morning. I apologize. I miss this but I wanted to ask specifically on the 4Q EPS expectations. So last call.
He talked about fourth quarter being up maybe about a 10% kind of normal growth.
you reiterated your mid-singled digit growth for the year. So, you know, that's at the low end that could mean that UPS is flat or maybe even slightly down. So, can you just clarify what your expectation is for the quarter?
Speaker Change: Yeah, Josh, what I would say is that, you know, we did have a little bit of...
Improvement in Q3, we had our insurance proceeds, I think we outlined that.
Speaker Change: in our prepared comments as well that came in associated with the Barona Fire. And so that was probably a couple of pennies.
You know, that was pulled in to Q3 based purely on timing so that comes out of Q4. That said, I think that the expectation is that Q4 will continue to increment upwards as it relates to EPS.
Speaker Change: and as we said that would probably be a mid-Single Digitment Single Digit plus range as well to get us for the full year at that range.
Okay, that's helpful. And I wanted to go back to one of the earlier questions just on the cost savings and efficiency. Just talked about scenario planning. I guess if we're scenario planning for next year and saying maybe there's a scenario where volumes are more flat as first is up low single. What kind of cost efficiencies or earnings could you see in that scenario from what's in your control and what you're doing today?
What I would say Josh is that we're focused on controlling what we can and making sure that this operational efficiency standardization journey that we're on can continue.
Speaker Change: and we continue to gain traction. That all said, Dan outlined, we're in the throws of our annual process as we look at 2025. So we'll have some more prepared comments for you with our deep forwardings.
Okay, thank you.
Speaker Change: Our next question comes from line of edeline Rodriguez with Mizuhu. Please receive your questions.
Good morning. Thank you everyone. I mean just a quick observation on Argentina. All people really drinking less because of the stuff economic conditions because you would think they would want to forget the problems.
Speaker Change: So I guess like not everyone is like my friends down there so I'm a little surprised in there to see volume down so much because of the economic conditions So if you go into Europe then
Again, we've been seeing like nice recovery there. Like would you attribute that to improving and consumer demand? Or is that just like we're talking easier your comps? Like what's really driving that strength? Yeah. There.
Speaker Change: Good. So I think if you get outside of Buenos Aires, yes, dramatically less spending power in Argentina, people are drinking a lot less.
I was, we were just down there last week, by the way. So, significantly, different consumption profile then a year ago. And then, secondarily, in a mea,
Speaker Change: There has been two things that have happened this year that have been better than we anticipated coming into the year one.
Speaker Change: the phrasing and other.
Customers have been a bit more aggressive, not the same point in Europe. There's a bit more control by the retailers on what you can pass through in terms of price.
Speaker Change: So there's been conscious effort by a number of our customers to go get share. Number two, there has been relief on energy. So relatively speaking, folks in Europe.
Don't have as much discretionary spend power as they did in 19 before the energy spikes. However, they've got relatively more on their pocket, right then they did suddenly at this time of year ago. So those two things contributed the destocking, restocking event that you're characterizing, that'll be a Q4 impact.
and not as much of a quick Q3.
So, what you've seen through the first nine months are real, maybe a bit of improvement and Q1. That was...
Speaker Change: I had of true demand because I think they lowered the inventory levels too much and Q4 last year
So you would have seen that come through in Q1, more than you would have seen at this point and then it should be a relatively easier half in Q4 because of this phenomenon that you characterized.
Speaker Change: Thank you very much. Thank you.
Our next question comes from a line of fill, and with Jeffries, please proceed with your question.
and Howard, this is John McGole. I appreciate all the details, guys. Thank you. I just wanted to first touch on the cup business. I mean, you said, you know, the looking at strategic alternatives.
John McGole: I mean, is there anything else that you're really looking to explore outside of a potential sale? Is there more investment or acquisition to bolster up the business or anything along those lines?
Speaker Change: Yeah, hey John. Well, let me say first that no formal or firm decision has been made.
Speaker Change: But you know as we think about that business, it's just...
You know, we're losing probably in the magnitude of $40 million this year and that can't continue.
and so we'll look at various different options, you know whether that means right-sizing that business going forward.
again as you outline maybe some sort of joint venture or third party.
Interaction there that can maybe focus more on that business and then you know obviously thinking through whether or not we want that down So all of those things are in play But certain something that we need to address here in the short term. I would not think in terms of additional capital
Speaker Change: either via a bonus acquisition or putting it into the business.
and I'm South America. I know we talked about it a lot. I mean, you guys did you start it up.
Speaker Change: and just maybe a couple of me, few me behind and on the schedule and kind of whether it came in. Is that something...
and you guys can catch up on. I mean, I know you're running full out now and it seems like the summer is good, but three to four percent, you know, maybe lots in in three cues, is that able to be recaptured in the summer selling season for two one two type. And then as you're thinking about
the region going into maybe next year and beyond.
already running full out is that a region that you see needing more capacity as you're as your primary customer growth.
is something where you can maybe owe some of the assets that you had in Argentina to help supply the Brazilian market and maybe before you really thought so, but.
No, I think you're thinking about the right way. Simply put, in all of our businesses, during the winter period or this low period, you're always curtailing.
You're always doing maintenance work. I think
Speaker Change: You were still, what's beyond it? Who were still kind of chasing the bottom?
Speaker Change: of Values in South America. It feels like we're inflecting positively now. And so it's a reframing of...
Speaker Change: Stocking levels, when you do your maintenance, pulling it up further earlier. So you can manage this, I think, more effectively. There's more capacity to run.
as opposed to curtail. We're a laser focused on...
to this magnitude. Nope, you've missed it in the third quarter. We're running to your point. We're running our assets in Chile and Argentina and other places where we might have a bit more access capacity to catch up.
So I think we'll be better prepared for it next year in a more stable top one environment, which is really encouraging. Scott, you kind of miss that shoulder season one time benefit there.
Anderson, appreciate the details guys. Thank you.
Our next question comes from line of Mike Rockflin with Trollist. Please receive your question.
Thanks, Dan Howard, Brandon Potthoff, and my questions. Be by me in here. Just two quick ones for me. Dan, can you go to the cadence of shipments in North America during the quarter? And where do October shipments stand in North America, President?
Yeah, it was, I would say August was okay and then things started to really slow.
Speaker Change: You know, September
Speaker Change: Time frame.
and as we're heading into right now, I think it's a continuum for that.
and you can see that reflected in the scanner data. But two things will have to happen. It's usually a 60-90 day impact for those interest rate cuts to float through number one and number two. I think you've seen this as well.
and people are saving. I'm pretty high grade right now. I think we got to get through next week and hopefully there's some stabilization there. And those two things.
Speaker Change: should help to reflect. Like I said, our customers are pretty darn encouraged about 2025. A little bit more stabilization, inflation stabilizing interest rate cuts, but I think we're still in a...
Speaker Change: A level of uncertainty here, as I said here in talks today about Q4.
Speaker Change: Got it. I did this one quick follow up on the HTT to customer realignment mentioned earlier, you know, obviously
A lot of things you can consider, particularly given where you're playing the situated, but also to me, in track it from morning, it's not like you're still focused on beer.
I mean, is there any way to really diversify more into other markets or is this strategy really just trying to real line with brands that are winning in beer?
Speaker Change: Well, we're with the brands that are winning a beer. Overwhelmingly, right? There's been a, I mean, we're with all the brewers and...
Speaker Change: is a company that's winning the most. We've...
Got it
Dramaticly significant share of that position and then I think within we don't look at it. I would say Michael as beer anymore. We look at it as alcohol. So the folks that have the best portfolio.
Speaker Change: Beth Alcohallport, Folios, where with them, can you reposition, of course?
Reiterate this. Historically, the margin in the beer space have been far better than any of the other. So you might get the growth.
Speaker Change: but the diversification historically would have come at a cost. And so the other thing about beer, just remind everyone it's like...
We weren't declining because we were taking substrate.
Speaker Change: So if you still believe a substrate shift is there and it's going to happen.
Then it's not a bad place to be, but making those calculations and prognocicating, it's different now because beer and I has a 70%
Sheriff of aluminum, or aluminum has a 70% share.
Speaker Change: of beer, but there's still opportunities. You know, there was another glass closure just announced this week.
Speaker Change: So...
Speaker Change: I think you've got to be really thoughtful about the mix. Generally speaking, we are very thoughtful about the mix and who's winning and we generally have those. The more innovative folks, the acquirers.
I think the demise of beer is a little bit overdone given the backdrop of that substrate ship. So beer in general, yes, has been declining for 20 years but it hasn't within our portfolio. And I think the end consumer softness has a lot more to do with this.
Speaker Change: the Beard of Clon.
Speaker Change: So...
Speaker Change: and that's what I would like to ask for. Very helpful, then thanks very much and I'm going to good luck and for you. Thank you. I think we're in Chris Danwer.
We're done here and very much appreciate everybody's questions and...
certainly hope that everyone has a good holiday and our folks remain safe and we'll talk to you again after the year. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lives at this time. Thank you for your participation and have a wonderful day.
Speaker Change: and the