Q4 2024 Ball Corp Earnings Call - Q&A

Greetings and welcome to the Boal Corporation fourth quarter 2024 earnings conference call. At this time all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

Speaker Change: It is now my pleasure to introduce your host, Brandon Potthoff, Director of Investor Relations. Thank you, sir. You may begin.

Speaker Change: Thank you, Christine. Good morning, everyone. This is Ball Corporation's conference call regarding the company's fourth quarter 2024 results.

Speaker Change: The information provided during this call will contain forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied. We assume no obligation to update any forward-looking statements made today.

Speaker Change: Some factors that could cause the results or outcomes to differ are described in the company's latest Form 10-K, our most recent earnings release in Form 8-K, and other company SEC filings, as well as company news releases.

Speaker Change: If you do not already have the earnings release, it is available on our website at Ball.com. Information regarding the use of non-GAAP financial measures may also be found in the notes section of today's earnings release.

Speaker Change: References to net sales and comparable operating earnings in today's release and call do not include the company's former aerospace business.

Speaker Change: Year-to-date net earnings attributable to the corporation and comparable net earnings do include the performance of the company's former aerospace business through the sale date of February 16, 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.

Dan Fisher: I will provide some brief introductory remarks. Howard will discuss fourth quarter financial performance and key metrics for 2025. And then we will finish up with closing comments and Q&A.

Dan Fisher: Before I talk about the business and results, I want to highlight the amazing work our employees and teams have done to give back to their communities.

Dan Fisher: In 2024, our employees volunteered more than 23,000 hours of their time across 23 countries into more than 1,880 different causes and organizations, working to create a positive impact in the communities where we live and work.

Dan Fisher: In partnership with the Ball Foundation and our dedicated employees, we invested more than $4 million into our communities to support local causes and disaster relief efforts.

Dan Fisher: I want to thank all of our employees who devoted time in 2024 to uplifting our communities.

Dan Fisher: You truly represent our values of we care, we work, we win.

Dan Fisher: I also want to take a minute to highlight the work our teams have done to continue to improve our safety performance.

because our people are our most valuable resource.

Dan Fisher: We set aggressive targets to improve our total recordable incident rates. We continue to be well below industry incident rates and our continuous improvement mindset requires us to constantly improve.

Dan Fisher: Turning to business performance, we delivered solid fourth quarter results and returned $1.96 billion to shareholders via share repurchases and dividends in 2024, and we continue to execute on our goal of repurchasing at least $3 billion of shares between 2024 and 2025.

Aluminum packaging continues to outperform other substrates across the globe.

Dan Fisher: In EMEA, fourth quarter volume remains strong, driven by continued investment by our customers in canned filling across the region.

Dan Fisher: In South America, volume growth in Chile and Paraguay was more than offset by softer-than-anticipated volume performance in Argentina, as well as supply-demand tightness in Brazil caused by slower-than-expected ramp of idle capacity.

Dan Fisher: In North America, persistent economic pressure on the end consumer and our exposure to U.S. domestic beer led to softer-than-expected volume. Our regional performance culminated in Ball's global beverage can shipments being down low single digits year-over-year in the fourth quarter and up 1% in 2024.

Dan Fisher: Looking to 2025, our ball business system is in place and our teams are focused and excited about the opportunity that lies ahead of us to drive operational performance, volume growth, and productivity gains.

Dan Fisher: We are laser focused on delivering on our stated goal of exceeding 10% comparable diluted earnings per share growth in 2025 and beyond.

As we begin 2025

Dan Fisher: We feel confident in our ability to deliver 11-14% comparable diluted EPS growth.

Dan Fisher: We anticipate growing global volume in the 2-3% range and expect all of our businesses to grow in or above the ranges we laid out at our 2024 Investor Day.

Dan Fisher: and Amiya. Customer movement to cans from other substrates will continue in 2025.

Dan Fisher: We continue to be bullish on the opportunity to drive long-term growth across EMEA as sustainability legislation and the competitive advantages of aluminum packaging increase can penetration from a low base.

And while our North America business

Dan Fisher: faced volume challenges last year. We have confidence in our ability to deliver volume growth in line with or slightly above market.

Dan Fisher: We have been proactive about extending contracts and have over 85% of our 2026 volume under contract. That includes signing an extension with one of our largest customers that will take us to nearly the end of the decade.

Dan Fisher: This extension with our global partner also means that we will be building what is effectively a two-line can plant in Oregon.

Dan Fisher: This investment will not change our expected CapEx plans or our share repurchase targets, and will give us needed capacity in the market where our customers are also investing.

Dan Fisher: Additionally, in January, the company entered into an agreement to purchase Florida Can Manufacturing and its beverage can facility in Winter Haven, Florida.

Dan Fisher: The transaction, which carried a $160 million purchase price, closed this morning.

Are North American businesses running at high utilization rates?

Dan Fisher: and part of the U.S., and with the growth we expect in the coming years, this capacity will provide us the fuel for growth we need to deliver on our customers' plans.

Dan Fisher: We are purchasing this asset for well below replacement value, and with our strong balance sheet position, there will be no impact to our share repurchase plans.

Dan Fisher: Lastly, on CUPS, during the fourth quarter, our board approved for the company to pursue alternatives for the business. This includes an option to form a strategic partnership in early 2025, which is expected to result in deconsolidation of the business.

We expect to complete the process in the first quarter.

Dan Fisher: And with that, I'll turn it over to Howard to discuss full year and fourth quarter 2024 results as well as key metrics for 2025.

Howard Yu: Thank you, Dan. Starting with our results, 2024 full-year comparable diluted earnings per share was $3.17

versus $2.90 in 2023.

Howard Yu: Fourth quarter 2024 comparable diluted earnings per share was $0.84 versus $0.78 of the fourth quarter of 2023, an increase of 9.3% and 7.7% respectively.

Howard Yu: Full year, comparable net earnings of $977 million were up year-over-year driven by strong operational performance, cost management initiatives, and lower interest expense, which were able to more than offset the earnings headwinds.

Howard Yu: Fourth quarter comparable net earnings of $250 million were up year over year, driven by cost management initiatives as well as lower tax and interest expense, which were able to more than offset the earnings headwinds from the sale of our aerospace business.

Howard Yu: In North and Central America, stronger-than-expected performance in December volumes was more than offset by lower-than-expected volumes in October and November.

Howard Yu: Despite a softer U.S. mass beer category and stretched end consumer, we continue to believe that our 2025 volume will return to growth and will be in line or slightly above market.

Howard Yu: Throughout 2024 our team has done a great job of improving operational efficiencies, lowering costs, and effectively countering measuring risk.

Howard Yu: And through our ball business system, we will continue to drive operational improvement in the plants to more profitably serve our customers' growth.

Howard Yu: While we have a tough comp in the first quarter, as well as headwinds from poor weather across the U.S. in January, we expect sequential improvement throughout the quarters, leading to volume growth in 2025.

Howard Yu: In EMEA, fourth quarter segment volumes was strong and the segment comparable operating earnings increased 12.5%, matching our expectations entering the quarter.

Howard Yu: Recent demand trends remain favorable, and the business is on track for significant year-over-year comparable operating earnings growth in 2025, driven by improving operational efficiencies and volume growth.

Howard Yu: In South America, segment-comparable operating earnings increased slightly while segment volumes declined due to continued weakness in Argentina and the supply-demand tightness in Brazil, partially offset by volume growth in Chile and Paraguay.

Howard Yu: During the fourth quarter, consumer conditions in Argentina continue to demonstrate some gradual signs of recovery and we continue to monitor the dynamic economic situation in Argentina and potential scenarios that could impact results.

Howard Yu: Looking at the businesses within our other, our personal and home care business, which was previously called Aerosol, performed well and grew volume mid-single digit in the fourth quarter, and we expect to grow volumes above our long-term range in 2025.

Howard Yu: Moving on to Additional Key Financial Metrics and Goals for 2025.

Howard Yu: We anticipate year-end 2025 net debt to comparable IVID-DA to be 2.75 times as we work to deliver on our stated goals of repurchasing at least $3 billion worth of shares between 2024 and 2025.

Howard Yu: After repurchasing $1.7 billion of shares in 2024, we will repurchase at least $1.3 billion of shares in 2025.

Howard Yu: and we'll remain aggressive in repurchasing our stock at what we believe is very attractive pricing.

Howard Yu: Through today's call, we have repurchased $290 million worth of shares year-to-date.

Howard Yu: 2025 CAPEX is expected to be slightly below DNA in the range of $600 million.

Howard Yu: We anticipate being able to deliver on our target if comparable net earnings equal to adjusted free cash flow in 2025.

Howard Yu: Relative to the estimated tax payments due on the aerospace sale, we now expect total payments to be $875 million. We paid a total of $766 million as of the end of the fourth quarter and expect the remaining portion to be paid in the first half of 2025.

Howard Yu: Our 2025 full year effective tax rate on comparable earnings is expected to be slightly above 22%, largely driven by lower year-over-year tax credits.

Howard Yu: Full year 2025 interest expense is expected to be in the range of $270 million.

Howard Yu: And last week, Ball's board authorized the repurchase by the company of $4 billion of our common stock through the end of 2027, as well as declared its quarterly cash dividend.

Howard Yu: Looking ahead to 2025 we are hyper focused on operational excellence, cost management, driving efficiency and productivity across our business, and monitoring emerging marketing volatility.

Howard Yu: We are fully committed to maximizing the potential of our company over the long term. We have executed on de-risking the corporation through debt retirement, and we have minimal near-term maturities. The runway is clear for us to activate near-term initiatives to consistently deliver high-quality results and generate compounding shareholder returns.

With that, I'll turn it back to Dan.

Dan Fisher: Thanks, Howard. The business is operating well, and we have future-proofed our business through long-term contract renewals, deleveraging, and footprint optimization.

Dan Fisher: Through the strength of our portfolio and the unwavering dedication of our employees, we are confident we will deliver on our long-term financial goals of exceeding 10% comparable diluted EPS growth.

Dan Fisher: generating adjusted free cash flow in line with our comparable net earnings and returning value to shareholders through large-scale share repurchase and dividends.

Dan Fisher: The focus on executing our purpose and our promise was certainly on display during 2024. In 2025, we have the opportunity to deliver record-adjusted free cash flow and comparable diluted earnings per share.

Dan Fisher: We will continue to meet our customers where they are to deliver affordable, innovative aluminum packaging solutions that can lead to a world free from waste.

Dan Fisher: Shareholder value creation remains our focus, and we continue to prioritize delivering compounding shareholder returns in 2025 and beyond.

Dan Fisher: We are confident that consistent delivery of high-quality results and operational performance, coupled with significant share repurchases for the foreseeable future, in addition to dividends, will drive shareholder value creation.

Dan Fisher: and extend our well wishes to our employees, customers, suppliers, stakeholders, and everyone listening today.

Dan Fisher: Thank you. And with that, Christine, we are ready for questions.

Dan Fisher: 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 tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Dan Fisher: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.

Speaker Change: Thank you. Our first question comes from the line of George Stappos with Bank of America. Please proceed with your question.

George Stappos: Thank you. Hi everyone. Good morning. Thanks for the details guys. I guess

First question.

recognizing there's been delays.

Speaker Change: For instance, if there is some impact on Mexican shipments, might that be made up in North America or not? And then I had a couple of quick follow-ons.

Speaker Change: Yeah George, great question. I'm on a call every single day and the details obviously are changing relative to tariffs. Maybe start with...

Speaker Change: What is eminent is what's happening to the aluminum supply chain in China.

And we have spent the better part of the last...

a few weeks mitigating what started as a potential

Speaker Change: 40 to 50 million dollar issue and I think we've got that resolved down to

Speaker Change: millions of dollars a couple million million dollars so we've renegotiated deals with the supply base we've we've enforced elements of our

Speaker Change: of our contract a lot of that metal was going into South America actually because a lot of these supply chain

Speaker Change: Metal supply chains have been altered significantly back in the 15 and 16 time frames So that one you you can you can put that one to bed as it having

minimal, nominal, year-over-year impact to us.

Speaker Change: but I think what you're highlighting is our concern would be depending on the size of this

for the peace coming across the border from Mexico.

Speaker Change: really end consumer additional pressure there in volume. The good news is you know some of the cut some of the stuff that comes across the border from Mexico is

Speaker Change: is the growing aspect of your beer portfolio. Obviously, we've been in constant contact with some of those customers, and we've got plans in place to help risk mitigate, but if it's 25%, that's a vastly different.

Speaker Change: story than a 10% versus a 2.5%, and the 25% to me would be more concerning just in terms of a pretty stressed-in consumer, so I would be more concerned about the volume.

Speaker Change: For that aspect of the portfolio, which is not that big for us, but you know every bit counts these days relative to

accumulating a tailwind on growth, so...

Speaker Change: Not a lot of detail for you. The stuff that I know in detail, we've worked, we've mitigated it. The other stuff is still in flight. The 25% number would be more concerning, and it would be more concerning relative to end consumer demand.

which would certainly dampen our current outlook.

Speaker Change: That's clear, Dan, thank you for that. And the other question, and it's a two-parter...

Speaker Change: Can you talk about, I'll try to make it painless, can you talk a little bit about how these investments you talked about including the Florida

Speaker Change: can business might affect your earnings and or volumes. In other words, would you have been comfortable with the growth outlook you gave if you weren't making these investments or do you need these to get there?

Speaker Change: And then just, you know, look, having covered the company for a while, like a lot of the folks on this call, the last few years Ball's been very busy.

But at times, sort of getting to the bottom line

the investments, the activity.

Speaker Change: has not been necessarily as you would have expected. And so...

Speaker Change: what comfort would you give analysts and investors that you can manage another can plant, you can manage this investment, and at the same time, execute and get to the bottom line to hit your goals. Thanks guys, and good luck in the quarter.

Yeah, thanks. I think...

Elijah: If I'm following that train Elijah, I would just say that

Speaker Change: I guess over the last couple years in North America, we've

significantly outperformed on the earnings.

Speaker Change: So I guess I'm I guess I'm struggling with some of the some parts of the question, but I'll answer this I mean going back to the you know The camp plant additions from you know, the growth boom and how that came through in terms of earnings. That's where I was going with that I'm sorry, but and clearly you definitely did get great operating leverage the last couple of years But that's where I was going with that part of the question. Yeah. Well the the investments have more than paid for themselves

by restructuring

Speaker Change: aged assets that were less productive. So all of that, I mean...

Speaker Change: If you look at that, it's actually worked out pretty well.

Speaker Change: The two investments that we have, one, I've said repeatedly that we didn't wanna abandon the Northwest Marketplace permanently, so that one shouldn't come as a surprise. It's in line with investments by our customer in that part of the world, so it's repositioning that footprint to be.

more closely aligned to

Speaker Change: their investments, so that should work well moving forward. So a lot of thought in that application of investment there and then picking up a...

Significant.

Speaker Change: significantly reduced price point on a great plant that's nearby an existing Tampa facility in a market that's growing. We're going to really like that in 2026 and beyond.

Speaker Change: below DNA and despite that that investment in the Northwest and so I wanted to make that clear as well. Okay and you do you need these to hit your goals or these would have been additive to the goals you gave? Thanks guys.

Additive in 26.

Okay, thank you very much guys.

Speaker Change: Our next question comes from the line of Phil Eng with Jefferies. Please proceed with your question.

Speaker Change: Hey guys. Volumes in North America has been, you know, anything but predictable. It's been weaker, but you sounded pretty confident North America will grow faster than the market and, you know, faster than your longer-term target. So I guess...

Speaker Change: first out of the gates, what are you seeing? And then you called out contract renewal with one of your larger customers in North America, which is great, gives you visibility into the out years. Did you pick up any volumes and how should we think about pricing for those contracts that you guys renewed?

Speaker Change: Yeah, I would say 2025 let me start let me start with that piece

I think the industry is expecting...

Speaker Change: kind of that 1%-ish growth rate. For us, obviously, we were lapping 2023, pretty significant.

Speaker Change: marketing dislocation and then last year we had a sizable share reallocation.

Speaker Change: one of our major beer partners. So we're stable heading into this year, some incremental volume picks pickups and you know it's going to boil down to health of the end consumer.

Speaker Change: Are you with the right customers with the right partners from a mixed perspective so I believe we are so that's why I'm more bullish that will

and then

Speaker Change: Relative to pricing, fairly stable in the out years relative to the large customer contract that we picked up.

Some of that, obviously...

Speaker Change: When you're making investments on behalf of those customers, you're able to offer a different value proposition, so that's created some structure and some stabilization for us relative to that customer.

Speaker Change: Any share gains and volumes picked up as part of that investment?

Speaker Change: I would characterize it this way. I think where we have secured volume, we believe that'll be

Speaker Change: It'll be growing at a faster rate than their portfolio, given some of the pressure, for instance, in the Northwest on some anti-plastic sentiment.

Speaker Change: Okay, super. And then when I think about, Dan, how you've historically been aligned globally and certainly North America as well, you guys have been aligned with the big brands, big customers. And when I think about North America, frankly, there's been a lot of innovation in the beverage industry.

Speaker Change: you know, and a lot of that's actually coming from smaller brands and entrepreneurs, whether it's...

Speaker Change: You know, ready to drink cocktails, non-alcoholic beers, and actually non-alcoholic beverages on that ready-to-drink side, functional soda and stuff of that nature. So, my question to you is, how is your growth to market strategy...

Speaker Change: Perhaps evolving. Are you going after some of these customers in a bigger way just because, you know, demand's been pretty muted in North America and the big concern's been, you know, is this a structural dynamic you can't grow out of? So how is your go-to-market strategy pivoting in an evolving marketplace where there's still a lot of innovation out there?

Speaker Change: No, I think that's a great comment, Phil. Historically, we're kind of with everybody in the marketplace. Our portfolio is exponentially larger than any of our competitors in terms of

It's interesting, you commented on ready-to-drink cocktails.

Speaker Change: One of our bigger customers actually acquired the brand that owns 40% of the ready-to-drink cocktail. So these two things generally...

If they're really successful.

Innovative

Speaker Change: launches, they typically get acquired. So you have to play, candidly you have to play kind of, who are the acquirers, who are the innovators? You kind of start there with your anchor investors, and then you work both sides of the equation to help stimulate.

Speaker Change: product launches and so the poppies of the world, the liquid deaths, those it's like they're large in our portfolio so

But, you know, it's hard to...

Speaker Change: If if coke is growing and ABI is growing and the large customers are growing we're going to grow if they're not growing

Speaker Change: You know you can have all of the startups in the world And you're just not going to move the needle on the size of volume, so there's definitely a balance I don't think we've moved away from

innovation, driving sustainability

Speaker Change: and helping the smaller innovation driven brands and customers in the marketplace. But at the same time, you know, you gotta.

Speaker Change: You've got to help make sure that your key partners are winning in the market, and that's really how you're going to win.

Okay, Dan, really appreciate you calling. Yeah, thank you, Phil.

Speaker Change: Our next question comes from the line of Ghanshyam Punjabi with Baird. Please proceed with your question.

Speaker Change: Hey guys, good morning. You know, Dan, going back to the...

Speaker Change: And we'll stay from June of last year where they spent a fair amount of time on some of the productivity initiatives that we're gonna

Speaker Change: unfold over a multi-year basis, largely North America, and to put that in, you know, just kind of given what you've done or have announced with Oregon and also the acquisition in Florida.

Speaker Change: Does that allow you the opportunity, a bigger opportunity, as it relates to reconfiguration of your footprint and to re-accelerate that productivity, because it's not like volumes are growing faster in the industry relative to those two additions.

Speaker Change: I think once these are in place, yes, you'll be able to pick up efficiencies. We didn't vacate demand, for instance, in the Northwest, so you're shipping in.

Speaker Change: that demand, so that will be a benefit, right, in terms of delivered cost, and then it's

Speaker Change: down in Florida that we can do some things relative to running different can sizes and then becoming more efficient on lines within that sub region.

Speaker Change: So, we just closed a deal today, so we've got some ideas on what we're going to do, but we're going to have to get in there and do that. But yes, that will, anytime you've got incredibly efficient assets, well-run assets, that gives you opportunity to be more flexible in a system of our size.

Speaker Change: Okay, perfect. And then as it relates to Europe, you know, obviously Europe was a very nice surprise, I would say, for the industry from a volume perspective last year. How are you thinking about 2025 as relates to volume growth, you know, tough comparisons and just the fact that it is Europe, so.

Speaker Change: Yeah, well, as we sit here today, like we thought we'd be entering into, you know, 2023, fourth quarter, there was the de-stacking event that took place, which muted volume.

Speaker Change: Then everybody got off to a pretty good start in the first quarter So I thought the comp would be a little bit more challenging this year 25 versus 24 because of that sequencing of events and

We're off to a really good start there.

Speaker Change: I think it's just, listen, we've always talked about the opportunities that Europe presents because it's got the lowest can penetration.

Speaker Change: and as it evolves into a focus on carbon footprint we've got a great product for that. It's a glass-rich environment in Europe as you know and I think the health of the end consumer to some extent is a little more balanced in terms of

Speaker Change: our customers not necessarily being able to put through price at the same rate with the same veracity that they're able to in North America and as a result of that I think it's a really stable environment for continued growth and

Speaker Change: We're fortunate that we put in place a couple of large assets there to grow into and we're continuing to grow into those So I think we'll be at the high end of our long-term guidance for Europe again this year

Thanks so much.

Speaker Change: Our next question comes from the line of Stephan Diaz with Morgan Stanley. Please proceed with your question.

Stephan Diaz: Hi everybody, thanks for taking my question. Maybe first, going back to North America,

Speaker Change: Do you need to see low single-digit volume growth to be able to hit your EPS guide?

Speaker Change: or can we sort of have like a flat to down environment in 2025 and still grow earnings just considering the shares you're buying back or maybe is it just as simple as if you grow 2 to 3% globally, you know, you should be able to hit your EPS guide.

Yeah, I'd say for a...

Speaker Change: A negative print on volume that looks like what we did this year I think will be very challenged to hit EPS target even with share buyback, I don't know, at a more aggressive rate. A flat-ish.

environment.

Speaker Change: offset by maybe a little bit more growth in Europe. I think it's probably a good recipe to deliver the range we outlined.

Speaker Change: Yeah, we're getting to a point where you're going to need some growth in North America. It's not only the profitability associated with the volume growth, it's also really hard to offset negative volume with productivity gains.

Speaker Change: You know at some point we're a volume business. We've done a lot of heavy lifting and done some tremendous things to

Speaker Change: increase the level of profitability in North America, but you'll start running into a bit more of a challenged environment.

Speaker Change: relative to North America, and then you'll have to rely more on mix and some other things to steer you to a heavier profitability lift there. But yeah, I'm feeling really good where we're at right now, starting the year.

Speaker Change: things are pointing in the right direction with the strength of Europe and the event that things you know don't materialize in the growth of North America but certainly growth is going to at some point be a be an important cog if not necessary to expand margins.

Speaker Change: Okay, perfect. No, that's really helpful. And then, so the last couple calls now, you noted a supply-demand mismatch in Brazil.

Speaker Change: And then maybe if you could also just parse out Brazil volumes in the quarter versus Argentina volumes just so it's easier for us to compare versus your competitors. Thanks.

Sure.

Speaker Change: So Brazil grew in the fourth quarter, we didn't. I would say we entered into, we're managing

Certainly the downturn in

Speaker Change: Argentina, aggressively, from a cost perspective, in the second and third quarter. We were doing the same thing in Chile, which has been soft and has declined for the last two or three years. And then Brazil was...

kind of low single-digit growth.

for the first two quarters.

and we also were running a much tighter

capacity outlook within our network there.

Speaker Change: And then suddenly, it got real hot at the end of Q3, so we entered...

Thank you. Bye-bye.

We were tight and running short.

on inventory positions at the end of Q3.

Speaker Change: We started turning on a curtailed mine in Argentina, a curtailed mine in Chile, multiple curtailed mines in Brazil, and as we said in the opening, we're turning back on a curtailed plant, but that's just taking longer than we anticipated, so

Speaker Change: We'll return to growth in Q1, and we'll grow in excess of our...

Speaker Change: long-term outlook next year because we're seeing recovery in Chile, we're seeing recovery in Argentina, we'll be fit to serve Brazil, and we'll be coming off a much easier comp obviously in Q3 and Q4, 25 versus 24.

Great, thank you. I'll turn it over. Thank you.

Speaker Change: Our next question comes from the line of Anthony Pettinari with Citi. Please proceed with your question.

Anthony Pettinari: Good morning. Morning. You know, in previous quarters, you know, you've kind of been able to grow EBIT year-over-year without much volume growth. And, you know, I guess that changed in 4Q. I'm just wondering, did you…

Anthony Pettinari: I don't know, lap any, you know, key cost saves or were there any kind of PPI pass-throughs or change in price mix? I guess maybe you lapped the wall kill plant closure, but I'm just curious if there was anything that kind of drove that leverage.

Anthony Pettinari: yeah I think you're talking specifically about North America yeah yeah we've done listen we're running

Anthony Pettinari: We're running to historical assay utilization rates now. So we've done kind of the heavy lifting over the last couple of years. So we've lapped that. So in many respects, what you're describing is, yes, we're gonna have to

Anthony Pettinari: We're going to have to get a little bit of growth. I think the new investments that we're making will also give us an opportunity to create an even more efficient economy.

Anthony Pettinari: supply chain with the Florida Can investment in particular. So there are things that we can do now that we have that asset in the portfolio. But yeah, we're

Anthony Pettinari: We're tight and we're also obviously shipping Products as I indicated to an earlier question into the northwest so there's inefficiency relative to that

Anthony Pettinari: that will lap once we get the new facility up in Oregon. So there's opportunities there to do some more and gain productivity, but turning on curtailed lines and running them is going to be the most efficient way to lever up margin-wise.

Got it, got it.

like that.

Speaker Change: Yeah, we have, I guess over the last two to three years, we've added two huge facilities, one in the UK and one in the Czech Republic. So we've been, those will both be four line plants.

By the end of next year, so we have done

Speaker Change: You know some incremental line enhancements and investments and that's that's been able to to lift us

It's actually getting quite tight all throughout Europe right now.

Speaker Change: got stuff going on around this. Dave Zhou, this is Jeff Zayarin signing out. Thank you all very much. Follow and don't forget to tune in again later today at 11 p.m.

Speaker Change: There's a lack of capacity to meet the demand in the UK, so we're looking at things there.

Speaker Change: But yeah, if these growth rates continue, I mean, that's a big market growing at.

three, four, five percent, so that would...

Speaker Change: that's going to require probably think about 27, 28 to be doing other things in that part of the world.

Got it. Got it. I'll turn it over. Thank you.

Speaker Change: Our next question comes from the line of Mike Roxlin with Truist. Please proceed with your question.

Mike Roxlin: Thank you, Dan, Howard, and Brandon for taking my questions. You bet.

Mike Roxlin: I just wanted to talk to you about the competitive backdrop. There have been some concerns out there, in North America anyway, that pricing could be a risk. Later this year, early next year, when some big contracts come up for renewal, obviously again you addressed one of them, as you mentioned you got that extended to the end of the next decade, or this decade, excuse me, I should say.

Mike Roxlin: But just trying to get a sense from you as to what the competitive environment is like, particularly given softer demand, maybe some competitors looking to gain share. And I think in a recent conference, you also called out the Midwest in particular as being somewhat challenged. So any call you can provide would be very helpful.

Speaker Change: Yeah, I think I've been pretty consistent on this, Michael, as you know. When you look at the number of facilities that were built, there was quite a few facilities built in the upper Midwest.

Speaker Change: Northern Kentucky region, and the demand growth has really been on the coast, in the southeast, in Texas.

Speaker Change: There are reasons for those bills. I think there were a lot of subsidies that went into those bills, but they're not necessarily positioned for the demand profile moving forward.

Speaker Change: With that said, we're tight. We've structured our asset base in a way that has enabled us to

Speaker Change: Be tight, but also be very close with our strategic partners to make sure that we're doing the right things for them, medium and long term. That was rewarded in the contract renewal.

Relatively speaking, the pricing...

that we're seeing is better than

Speaker Change: The past 20 years, minus the pricing that we were securing during a massively undersupplied marketplace.

Speaker Change: So, they're really healthy margins to make money and flow cash.

and manage...

Speaker Change: They could potentially not be as good as what we were looking at three years ago.

Speaker Change: I'm talking about incremental differences, not, you know, meaningful differences. But I think we're happy with what we're securing, at the prices we're securing, and we think we can grow and expand margins based on that and flow really nice cash.

Speaker Change: Got it. I appreciate all the comments. Thank you for that.

Speaker Change: One quick follow-up, just in terms of beer, obviously category is still lagging, they're still trying to figure out the SKUs, the mix, how to target both premium and discount without getting stuck in the middle. How far along do you think the beer companies are in this process? And I'll throw it out there, when do you expect beer demand to inflect higher? Any sense on that, you don't know the target?

Speaker Change: You know, honestly, I don't know the inflection. I would expect it would be very aggressive behavior here in the peak season coming up in North America.

Speaker Change: You're starting to see, I even saw one of our customers today, in a non-alcohol range there.

Speaker Change: The pricing is not enough to grow the top line. So I think once they start hitting these price Elasticity curves where they cannot grow the top line. I think behavioral patterns will will change I think some Some of the plans I've seen

Speaker Change: I'm encouraged. I really do think it's going to be what customer and what partner you have is going to matter. Obviously some of the some of the folks that had really nice growth trajectory, they're dealing with tariffs right now and they're dealing with how they make sense out of that.

Speaker Change: relationship they have with the population growth that prefers those those products and then

Speaker Change: and others I think are going to get more focused on their portfolio, there's going to be some new innovation that comes out, and the folks that have struck a nice balance between being a beverage company and being a beer company, those are the ones that I believe will win medium and long term, and I think we have an overweight to them.

Speaker Change: That's a great question, you know, when when are we going to see it? The end consumer is obviously still weak. You're in the dry January portion of the year, so no surprises here that you see softness in the beer side right now. Things start to pick up here.

Speaker Change: right now with Super Bowl week, and then beyond that, heading into spring break, weather patterns.

Speaker Change: That will all be important to see pricing behaviors and hopefully a return to volume growth being the principal driver of their economic decisions.

Speaker Change: Got it. Thanks very much for the call and good luck in 25. Thank you.

Speaker Change: Our next question comes from the line of Mike Leahead with Barclays. Please receive your question.

Mike Leahead: Great, thank you. Good morning, guys. I have two semi-related questions. Howard, just a quick housekeeping. I think the release dates you plan to deconsolidate cups starting in 2025, I think in the past you've talked about that being about a $40 million drag. So is that a $40 million earnings tailwind as we think about 25 year over year?

Mike Leahead: Yeah, Mike, I think it depends on when we're able to get to a full agreement here as it relates to the joint venture structure. As it is today, you know, those losses associated with CUPS is still flowing through right now in the quarter.

Mike Leahead: And so timing matters here. If we assume that, you know, we had talked about $40 million historically, and we go through the first quarter, get this transaction done, then it's probably somewhere around the $25 million that we'd see improvement year over year.

Mike Leahead: Okay, that's great. And then second, on the share repurchase, if I do the math, it's about $1.3 billion, I believe, of repurchases this year, which today is about 8.5% of the company. So is cups and buybacks the largest drivers of the 10% year-over-year EPS growth, or just how should we think about poor beverage can earnings growth compared to 2004?

Speaker Change: I mean, I think we're going to see some. Obviously, operating earnings growth is going to matter. When we talked about the ALGO, certainly Dan talked about the North America piece and maybe a little bit of challenges there.

Speaker Change: And so I think that there's no reason to believe that we're not going to be able to achieve that healthy Algo in that region as well. And then as you said, I mean we are going to have a significant amount of

Speaker Change: share buyback and the like. One thing to keep in mind is that you know we will see less interest income this year because with the proceeds associated with the aerospace sale we had over 42 million dollars of interest income that won't repeat year over year.

Thank you guys.

Speaker Change: Our next question comes from the line of Edlin Rodriguez with Mizuho. Please proceed with your question.

Thank you, good morning guys.

Speaker Change: Big picture question, Dan, in terms of now you have questions that whether beer or alcoholic drinks.

Speaker Change: might be bad for your health. I think somebody has said, you know, it's probably cancerous or dangerous for you. So at the margin, this will make some people think twice about drinking alcohol, beer included. So of all the things that you think about that keeps you awake at night, is this one of them? Should this be one of them? Any thoughts there would be appreciated.

Speaker Change: you're probably asking the wrong guy because I enjoy my alcohol. You and me both. Yeah, I really don't.

I think we've known, it's probably not...

Speaker Change: at moderation everything I mean I don't want to what when I go down this path with you but the thing that keeps me up at night right now is the health of the end consumer in North America that's what keeps you up at night

All of this other stuff is noise.

Speaker Change: And that's what I'm hearing from our customers as well. So until which time I can sift through a return to some normal spending patterns by the end consumers, this stuff is...

Speaker Change: It's on the radar, as it should be, but we're not losing sleep over this. This is not going to...

in the next three to five years create.

A challenge for us.

Speaker Change: In fact, you know, beer, you're counting on beer growth everywhere else in the world.

Speaker Change: I mean, if beer doesn't grow, then, you know, we're not growing in the can. So it doesn't seem to be a concern in other parts of the world, but it seems to be a focus of a lot of conversation in North America. So it's dislocated in that sense.

Speaker Change: But, yeah, I wish I had a better answer for you, but... No, no, that's good enough. And...

Speaker Change: Just a follow-up in terms of the share buyback. I mean, of course, you know, the share price has come down quite a bit Over the past couple of weeks months. Like what are you thinking in terms of the pace of the share buyback? Are you trying are you should we be thinking like more aggressive in the near term or just gonna be like more discipline systematic? throughout the year

Everyone, I think

Speaker Change: You've seen our behavior here, and I think I indicated even earlier that we bought back

Speaker Change: with the shares in a month plus. So the answer to your question is yes, we see this as an opportunity for us to be overly aggressive perhaps.

Speaker Change: And with the value of this stock, we're going to lean into that here in the short term, certainly recognizing that we'll likely exceed the $1.3 billion worth of shares here in 2025.

Okay, perfect. Thank you very much.

Speaker Change: Our next question comes from the line of Chris Parkinson with Wolf Research. Please receive with your question.

Chris Parkinson: Great, thank you so much. Can you just give us a little bit more color since you went over the beer thesis on, you know, what you're seeing in energy markets in particular in both the U.S. and Europe? You know, there's been a lot of noise over the last, you know, 6 to 12 months, so just hoping to hear kind of the best updates there as well. Thank you.

Portfolio is growing at high mid-single digits.

Chris Parkinson: And that has continued to perform that way for the last 5, 6, 7 years, so not a lot of change.

on that front. I think in North America

There are tiers to the energy drink. Classification.

Chris Parkinson: One product, I think one of the larger products, it's definitely tied to.

Chris Parkinson: industry and so interest rates matter to that particular product. Others have different effects, the end consumer though matters.

Chris Parkinson: What we're seeing right out of the gate is more aggressive pricing, and we're seeing growth through January in the energy segment.

So, I think they're...

Chris Parkinson: They're in a place where they have a lot more price, I think, to work with relative to their products to push for growth in some instances, and I think you're going to see that.

Chris Parkinson: a much more competitive baseline to grow volume and grow share, which is good. I haven't seen the same behavioral pattern in beer.

Chris Parkinson: But energy looks to be an area where I think you'll have return to growth.

2025 in North America.

Chris Parkinson: Got it. And just in terms of the longer term South American algo, putting let's put Argentina aside for a second, you know, there's been a lot going on once again, in terms of customer, you know, or let's say industry bankruptcies to, you know, a few rainy carnivals, you know, post COVID, all that stuff, you know, when you take a stance, you're right here right now, heading into 25,

Speaker Change: how much confidence do you have in that growth rate, at least in Brazil, and forecasting that aluminum should still be the primary substrate winner versus glass and everything else. Just any comments there would be also very helpful. Thank you. Yeah, we're.

Speaker Change: We believe that there'll be growth in Brazil. It'll be in the kind of 2, 3, 4 percent range next year. But for us, we'll grow in excess of 4 to 6 percent because Chile is returned to growth, Paraguay,

Speaker Change: is growing at double digits. Argentina is returning and inflecting the growth. So we've got some, where we had unfavorable comps this year, we'll have favorable comps next year.

Speaker Change: and those economies and Brazil will actually grow at a slower rate than we will Because of our portfolio, but we believe Brazil will grow but to your point It's probably a little bit more muted than what you saw this year

Thank you. You bet.

Speaker Change: We'll do one more question. Our final question comes from a line of Arun Viswanathan with RBC. Please proceed with your question.

Arun Viswanathan: Great, thanks for taking my question. I hope you guys are well. Maybe I could just get first your thoughts around these two beverage can plant acquisitions. Could you provide maybe you know your thoughts on

Arun Viswanathan: ROIC or kind of payback period, if there's any synergies, what can those two kind of add to your, you know, kind of outlook over the next, say, two to three years, maybe from a EBITDA standpoint, if at all, or free cash flow? Thanks.

Yeah, I think the

Arun Viswanathan: So we're only acquiring one the other one would just be a

a new facility, so we began in growth.

volume growth that we can't serve today in the upper...

Arun Viswanathan: in the Northwest and then we'd be positioning the supply closer to the to the customer so probably 20 million bucks additionally a year

the beginning of

Arun Viswanathan: for the Florida Can acquisition, so about a four-year to generate positive EVA.

That's great. Thanks, Dan.

Speaker Change: Just back to the beer question. So it sounds like, you know, there is a I mean, I can appreciate the large customers of yours could could acquire some some some nice growing properties. But what are they going to what is it really going to take for them to accelerate?

beer because

Speaker Change: You know, as you said earlier and throughout the call that, you know, if you're not growing beer globally, it's going to be difficult, and especially in North America.

Speaker Change: You know, is it something where, you know, they can take a leadership position within the category? Was that done in CSD? Is it going to require some new beverage development or what do you think and what are you hearing from them as far as ways to really energize that growth profile?

Speaker Change: Yeah, in beer specifically. So I guess there's beer, beer volume writ large, and there's beer in cans. So I still like our ability to move the substrate needle over time.

Speaker Change: and the baseline and that's we've been growing in beer for a decade plus.

Speaker Change: So a lot of it has to do with substrate. But then when you look at...

portfolios, there's certainly been

with disaggregation from having too many.

Speaker Change: And so we're helping to make sure that we have a more strategic supply chain.

Speaker Change: If you look at the largest brewer in the world, I mean, their portfolio, they have the largest ready-to-drink cocktail.

Speaker Change: They have the fastest-growing domestic light beer, so there are, I think you really have to look within these portfolios, what they're doing, what they're going to do, and do you believe in that trajectory, and how can you help play a role in that. So I think innovation matters.

Speaker Change: I think you'll see an investment in a lot more non-alcohol moving forward. It's not going to be a surprise to see that. But when you find a winner, I think, and it might be

Speaker Change: I just look at, I look at these traditional beer players as

beverage companies.

Speaker Change: and they've got to get that right because they own the distribution patterns, they own the shelf space to a large extent and so they got to put things on those shelves that are going to sell and there's a greater likelihood that it's going to be in a can than any other format and so that's that's sort of how we're thinking about it but the beer question I think that that's a that's the right question.

But does it have to be beer?

Thanks. You bet.

Speaker Change: Thanks, Christine. We will leave it there and look forward to talking to you again here at the end of the first quarter. Hope everybody stays safe and healthy.

Speaker Change: Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.