Welcome to the Ardagh Metal Packaging S.A. Second Quarter 2022 Update Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Oliver Graham, CEO of Ardagh Metal Packaging. Please go ahead.

Thank you, Anna. Welcome, everybody, and thank you for joining today for Ardagh Metal Packaging's second quarter 2022 earnings call, which follows the earlier publication of AMP's earnings release for the second quarter. We have also added an earnings presentation onto our investor website for your reference. I'm joined today by David Bourne, AMP's Chief Financial Officer; and by Stephen Lyons, AMP's Investor Relations Officer. Before moving to your questions, I'll first provide some introductory remarks around AMP's performance and outlook. Remarks today will include certain forward-looking statements. These reflect circumstances at the time they are made, and the company expressly disclaims any obligation to update or revise any forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied due to a wide range of factors, including those set forth in AMP's most recently filed Form 20-F with the SEC and any other public filings. AMP's earnings release and related materials for the second quarter can be found on AMP's website at ardaghmetalpackaging.com. Information regarding the use of non-IFRS financial measures may also be found in the Notes section of the earnings release, which also includes a reconciliation to the most comparable IFRS measures of adjusted EBITDA, adjusted operating cash flow and adjusted free cash flow. Details of AMP's forward-looking statements disclaimer can be found in AMP's earnings release. If I turn to some opening remarks. For the second quarter of 2022, we are pleased to have delivered a result in line with our guidance despite currency headwinds and unprecedented inflationary and supply chain pressures. Global demand remains robust. And while the near-term macroeconomic outlook is more challenging and less predictable, the beverage can industry has historically proven resilient through economic cycles. We remain confident in the long-term secular growth of the beverage can, from which we're well placed to capitalize. That growth continues to be underpinned by category growth and expansion with 75% of beverage innovation in North America weighted towards the beverage can; the can's pack-mix advantages in terms of efficiency, quality and branding potential; and strong backing by favorable sustainability characteristics and associated regulatory drivers. Our expansion plans are customer-led, but the plans do have flexibility as we have recently demonstrated with our announced rephasing to adjust to changes in demand patterns and are assessed based on strict returns criteria. Our capacity is highly contracted and underpinned by volume clauses. We remain focused on the factors within our control, including phasing of investments, taking action to address our energy requirements, recovering exceptional inflationary costs, ramping up our growth investments and progressing our sustainability agenda. We recently published our first green bond allocation report, highlighting our sustainability achievements and the numerous eligible green projects advanced as part of our sustainability strategy. We acknowledge concerns over gas availability in Europe, but our operations are spread across the continent, and we have not experienced any operational disruption. The sector has historically been favored as an essential industry by governments, most recently during COVID. And as a reminder, we'd also like to highlight that we have no operations in either Ukraine or Russia nor do we source any supplies directly from the region. The global supply of can sheet has also been in focus, and conditions remain tight. But we are well supplied over the medium term as we have benefited from our actions in recent years to diversify our mostly local supplier base. In this regard, we also welcome the recent can sheet capacity announcements in North America, which will help protect the domestic supply-demand balance. We have also elected to prudently carry higher levels of inventory in the current environment. Turning to AMP's second quarter results. We recorded revenue of $1.3 billion, which represented growth of 38% on a constant currency basis, predominantly reflecting the pass-through of increased input costs. Adjusted EBITDA of $181 million was 10% higher than the prior year on a constant currency basis. This reflects favorable volume mix effects, which includes an impact from the group's growth investment program and recovery of input cost inflation, partly offset by increased operating costs. Total beverage can shipments in the quarter were 8% higher than the prior year. Growth was driven by our new investments across our global footprint, including from the ramp-up of our more recently installed capacity in North America and Europe and improved momentum in Brazil. Specialty cans represented 48% of shipments in the quarter, up from 46% in the prior year. Our specialty mix was higher still at 62% in the second quarter, inclusive of 50-centiliter cans in Europe, which some of our competitors include in their definition of specialty cans. Looking at AMP's results by segment and at constant exchange rates. Revenue in the Americas increased 46% to $770 million, mainly due to the pass-through of higher input costs. Shipments were 11% higher than the second quarter of 2021 with increases in both markets driven by growth investments and improved momentum in Brazil. In North America, shipments grew by mid-single-digit percentage for the quarter. Growth was spread across a broad mix of categories, including energy and fitness drinks, spirits-based drinks, ready-to-drink coffees and CSDs. New capacity additions continue to support category growth and the substitution of expensive imports which continued to reduce. The growth outlook in North America remains robust, albeit recent weeks have seen some softer demand than anticipated at the beginning of the year. This is partly due to the significant price increases consumers are facing at retail and partly a result of the well-documented declines in the hard seltzer category. While the category overall remains very significant, representing a 10% share of beer, the third largest category over the July 4 weekend in beer, we have purposely added increased swing flexibility to our network to respond to variations in category demand. And we will now also phase in some of our planned capacity more slowly. In Brazil, second quarter shipments grew by a strong double-digit percentage, significantly outperforming the market, which returned to very modest growth, an encouraging turnaround due to increased consumer mobility and spending as social restrictions eased. Our outperformance reflected strong execution and customer mix effects and as our customers seek to diversify their supply through us. Good volume growth in both North America and Brazil drove the second quarter adjusted EBITDA advance in the Americas of 36% to $120 million. Growth reflected higher volumes and strong recovery of input cost inflation, partly offset by increased operating costs. Looking forward, we expect further improvement in shipment growth in the Americas as contracted new capacity additions continue their ramp-up in North America and market growth continues to normalize in Brazil, especially in the unrestricted Q4 summer period, which also includes, for the first time, a World Cup. In Europe, second quarter revenue increased by 28% to $533 million compared with the same period in 2021. Shipments for the quarter grew by 5% on the prior year, supported by a recently installed new capacity in the U.K. and Germany. Across the categories, energy drinks and soft drinks grew well, while softer alcoholic beverage demand, particularly in the U.K., reflected increased on-trade activity. In addition, we have seen some transitory weakness in the export market for filled drinks from Europe as a result of the elevated cost of ocean freight. Inflationary pressures remained strong, and second quarter adjusted EBITDA in Europe fell by 20% to $61 million as input cost headwinds were not fully offset by higher volumes. We have now covered our outstanding 2022 energy requirements for Europe prior to the recent spike of costs in June and July, and we are well progressed on building out our hedging requirement on a rolling basis for 2023. We continue to actively pursue cost recovery initiatives with our customers, and in some cases, are working to a more permanent and separate pass-through arrangement for energy costs going forward. We are not changing our prior assumption of full year 2022 net impact from European energy cost inflation of $25 million. Looking to the remainder of 2022 in Europe, the continued ramp-up of recently installed capacity in Germany and the U.K. will contribute to shipment growth. Turning to AMP's growth initiatives. During the second quarter, AMP made additional growth investments of $192 million, supporting the pickup in shipments during the quarter and anticipated growth in the future. Our project teams continued to perform an exceptional job despite the inflationary and supply chain challenges to deliver our investments largely to budget and with minimal delays. To recap on some of the larger growth investment projects, all of which are backed by multiyear customer agreements. In North America, the second of our two high-speed lines in Winston Salem, North Carolina, started production during the quarter following the commencement of the first line earlier this year. In Huron, Ohio, can production recently commenced with additional capacity to be added later in the year. As a reminder, we acquired the Huron brownfield site in late 2020 and commenced ends production in late 2021. In Europe, new capacity in the U.K. and Germany continues to ramp up, as does the new line in Jacarei in Brazil that was added at the end of last year. We also provided an important update to our investment plans, alongside our financing and capital allocation update at the start of June that set out our new shareholder returns policy. In that update, we detailed how our cash outlay for growth investments in 2022 has been lowered by approximately $300 million and includes a rephasing of certain projects. However, our overall planned footprint remains unchanged for the medium term, and the timing of its build will be driven by demand. AMP is well placed to capitalize on the long-term secular growth drivers supporting the beverage can through our global scale, long-standing customer relationships and our strategic relevance to key customers. Moving now to our financial position. During the quarter, we raised $600 million of senior secured green notes and ended the quarter with strong liquidity of $761 million, of which $436 million was held in cash and $325 million by way of an undrawn ABL facility. We have announced our intention to upsize this facility to approximately $400 million. We further supplemented our liquidity with the issuance of EUR250 million in July of perpetual redeemable non-convertible preference shares. Our funding needs are fully covered into next year. Net leverage ended the quarter at 4.5x LTM adjusted EBITDA, and pro forma for the issuance of the preference shares was 4.1x. As a reminder, currency effects are broadly neutral from a leverage perspective given the currency mix of our debt. The majority of our debt has also been issued on fixed rate terms, and we have no bonds maturing before 2027. Adjusted EBITDA minus maintenance capital expenditure was $152 million for the quarter or 84% of adjusted EBITDA, which illustrates the strong underlying cash generation of the business. We declared and paid our second quarter dividend of $0.10 in June and also launched our buyback program, for which we have authorization to repurchase up to $200 million of ordinary shares through to the end of 2023. Given the proximity to quarter end, there was only a minor impact in quarter 2 with $3 million of stock repurchased. But repurchases have since continued. And as of yesterday's close, our total repurchases are approaching $15 million of stock. We believe that AMP's approach to shareholder returns represents an attractive investment proposition through: firstly, an attractive, recurring $0.10 quarterly ordinary dividend, currently representing a dividend yield of over 6%; secondly, share buybacks to effectively return capital to shareholders, amplified in scale by the fact that Ardagh Group does not intend to participate; and thirdly, growth investments to support global demand with attractive payback terms backed by customers. Before moving to take your questions, I'd like to recap on AMP's performance and key messages. Today, AMP reported second quarter EBITDA that was in line with our guidance despite challenging conditions. While the near-term demand outlook has some uncertainty, global demand remains robust, and beverage can industry performance has historically proven resilient through economic cycles. Secular long-term growth trends supporting the beverage can remain intact, and AMP is very well placed to capitalize on these. There are some specific areas of demand weakness, in particular, in hard seltzers in North America, around which we will continue to adjust our capacity ramp-up as required to match demand. We are taking action to reduce near-term energy risk while remaining focused on improving cost recovery and pass-through mechanisms in Europe. Our current view of the market leads us to project global shipment growth for 2022 of high single-digit percentages. Full year 2022 adjusted EBITDA is projected to be of the order of $710 million, assuming a euro-U.S. dollar parity exchange rate to year-end. This compares with the prior year reported adjusted EBITDA of $662 million or $629 million on a constant currency basis. As a proxy, every $0.01 movement in the euro-dollar rate represents circa $2 million on an annual basis. Our estimate compares with our previous full year 2020 guidance of $750 million. Of the $40 million reduction, approximately $20 million is attributable to currency impacts, and the balance reflects lower volume assumptions. In terms of guidance for the third quarter, adjusted EBITDA is anticipated to be in the order of $175 million, which compares with prior year adjusted EBITDA of $176 million or $167 million on a constant currency basis. Having made these opening remarks, we will now proceed to take any questions that you may have.

And we'll take our first question from Kyle White with Deutsche Bank.

I just wanted to focus on the revised growth outlook now pointing to high single-digit volume growth versus the mid- to high teens initially coming into the year. Can you just walk us through some of the details of why that lowered outlook versus the initial one? How much is related to maybe a slower first half in Brazil? How much is related to underlying consumer demand of hard seltzer? Or however you would characterize that would be helpful.

Sure, Kyle. So I think if we take it region by region, obviously, we're still projecting significant growth in all 3 regions. But the change in the guidance links to a number of specific factors. So in North America, obviously, it's the well-documented decline in hard seltzers in the last quarter, which we're, therefore, taking a more cautious approach through to the end of the year. And that's obviously aligned with the 2 major customers in the category, 1 of which announced recently. There is some volume weakness in North America due to lower promotional activity in the core categories, so slightly higher price points as customers passed through significant input cost inflation. So those are the 2 factors really that led us to more caution in North America. In Europe, we talked about a couple of factors. The on-trade hubs reopened more quickly than anticipated this year. And so there's been a shift to kegs, in particular, and some one-way glass by our customers. And then we're also seeing the export volumes that we talked about down because of the ocean freight issues. So the exports of beer and sparkling waters into North America have declined. And then we also see our customers now increasingly facing their own supply chain issues in terms of raw material inputs, logistics. And so they're also struggling sometimes to get their product out of the door and into retail. So there's certainly some operational disruption in Europe as opposed to any market weakness. We still see good market growth in a number of categories. And then Brazil, actually, we're looking at a very strong growth through to the end of the year. We anticipate a good Q4 on the back, as I said, of the football World Cup. We see Carnival, hopefully, will be fully open this year. And hopefully, we have better weather as well. And so I think our customers, and we're the same, are anticipating a strong Q4 in Brazil. So it's pretty much Europe and North America where we're being more cautious on the outlook.

Got it. That's very helpful. And then on the rephasing of some of the capital projects, can you just talk about that? What exactly is being rephased or delayed? Any thoughts about potentially canceling the projects or maybe canceling additional lines that you're opining on initially?

Yes. So we're not canceling any projects. Our footprint plans remain intact, but we're certainly going to be very careful and disciplined about bringing up capacity in line with demand. We signaled that the debt raise that we were pushing out by, on average, a quarter or 2, and that took $300 million out of this year and more out of next year and some out of next year. What we're looking at now very carefully is the timing of the greenfields, how much we bring up, what lines we're bringing up, in what sequence and what timing. And we don't have exact dates on that now because I think we want to make sure we're absolutely clear on the growth and the support that we're going to get because we'll be very focused on the overall utilization of our network. And we won't ramp up lines until we need them.

We'll now take our next question from George Staphos with Bank of America.

I was hoping you could perhaps give a bit more granularity on the 5 or so things that you mentioned in answering Kyle’s question in terms of how they contributed to the call down more specifically. Or should we just take whatever it would be, kind of the, call it, 7% to 10% sequential drop or not - or drop from where you were to where you are now at high single digits and sort of apply it evenly to each of those, the North American decline in hard seltzer or the promotional activity? And then I have a couple of follow-ons.

Okay. Yes, George. No, I think we can give you a bit more around that. So sort of broadly with 60-40 percentages across North America and Europe in terms of the change. And the majority of the North America is around the seltzer market, where we'd anticipated growth this year. And obviously, we haven't got growth this year. There is some, as I said, around the increased pricing at retail. But as I say, the majority of that is the seltzer side. And then on the European side, I mean, you've broadly got a 50-50 split around this exports and other supply chain issues and the more rapid opening of the on-trade, particularly in the U.K. So I think that's broadly how those split out.

I appreciate that. I didn’t hear anything in your comments indicating a change in your perspective on the long-term growth of the beverage can market. However, if we adopt a more cautious stance, you mentioned promotional activity. For the past couple of years, the industry relied on such activities to sell more cans than it could produce. You seem to be taking a more cautious approach in how you add capacity, which is wise to ensure full utilization. If the long-term outlook remains unchanged, why would your long-term capital plans be different? I’m just trying to understand what you might be observing on the customer side that could be introducing more uncertainty. Or perhaps I’m overthinking this. Any insights on that would be appreciated.

No. Sure. Look, I think that the can has always had significant promotional activity, as you know, and particularly in North America. So I think what we're seeing at the moment on that side is just an unprecedented level of inflation, which is leading to price rises that we've not seen. So I'd expect that to normalize. Obviously, there's been more positive economic sentiment in the last few days with what the Fed has been doing. So I'd expect that to normalize and you to see our customers return to their normal promotional patterns, which will be very accretive for the beverage can. And one of the encouraging data points in all the market data at the moment is the growth in share in beverage cans in the soft drinks category in North America through this whole period, which I think shows that it's winning in the pack mix particularly versus plastic. And that is the thing that's really shifted the long-term growth outlook for the can almost globally by removing the drag that used to be in North America. And we definitely anticipate that to continue with the sustainability tailwinds, regulatory challenges for our customers to get hold of recycled PET and the permanent nature of the beverage can. So I think that fundamental sustainability story is fully intact and is what has reversed particularly the North America situation. The rest of the world, as you know, has always grown and always grown very healthily. And that's, again, about the pack-mix advantages of the can, the efficiency of the can through the whole supply chain, the way it works for the quality of the drink, the branding. And that's why we see so much innovation going into the cans. So all the things we laid out when we came to market, the category growth in beer in Brazil, the growth in Germany, all those things we believe are completely intact. But it's certainly true that the last 12 months with the inflation, supply chain challenges, and some weakness in hard seltzers has been a more difficult environment than we anticipated. But as I say, I think we take the position of the rest of the industry that the secular growth drivers that really came to play in the last few years are still fully intact.

Ollie, we appreciate that. And actually, I mean, from our data, we'd agree with your comment on share, not just in CSD from what we've seen of cans versus other materials. But we'll see how that plays out. Two last ones, I'll turn it over. One, can you talk about how the surcharge efforts went for you? What were the learnings? What can you continue, again, to the extent that you can comment on a live mic conference call? And then any thoughts on the California legislation SB 54, the positives or negatives as you see them for the industry and for Canada, in particular?

Thanks, George. I appreciate it. While I can’t discuss customer contracts in detail during this call, we have positive engagement with customers regarding the energy surcharge. They recognize that this is an unprecedented situation that requires cooperation across the entire supply chain. Their recent announcements indicate that they are managing to raise prices at retail successfully, which justifies not absorbing the supply chain costs. We've had constructive discussions, though the pace varies between smaller and larger customers. I expect to see a quicker recovery in our numbers in the second half of the year. As I mentioned earlier, we are also exploring specific strategies to address the significant dislocation in the energy sector in Europe, which we believe needs special consideration compared to typical inflation-related adjustments. We're having productive conversations with our customers about this, as they are also affected and understand the current situation. Regarding California, I see positive developments there. There have been ongoing rumors about significant legislation on single-use plastics in California, which supports our interest in the Southwest region. So, we remain optimistic about that.

We'll take our next question from Mark Wilde with Bank of Montreal.

Ollie, just curious if you’re seeing any shifts in consumer behavior in any of your regions just in reaction to higher inflation and a slower economic climate. I’m thinking like in Brazil, are you seeing kind of a toggle back to maybe returnable glass bottles, things like that?

Yes. I think that was definitely a factor in Brazil in the last 12 months. So I think that there's much less protection on the consumer through COVID, much lower savings rates. So when the real devalued and the economic conditions became more difficult and when LME increased significantly, which is priced there in dollars, the can did become less competitive for a short period of time in the pack mix. And I think that did have an impact, and you did see a return to renewable 2-way glass temporarily as our customers took some margin there. And that did impact the can. But I think that what you've seen in the last few months is the stabilization of those trends. I think April, the market actually grew, though May and June were still a bit weak but not as weak as Q1 or Q4. And I think that's, again, because the economy is stabilizing and LME is falling and the real has strengthened somewhat, though, obviously, recently, the dollar is strengthening again. So that will continue to be a slight headwind. And then I think we did have a set of market factors that we talked about, Carnival, poor weather, that also played in, as in the Carnival being canceled. I think Brazil is the only region where we can identify an economic issue in our numbers, unless you think, and this has been cited, that one of the reasons for hard seltzer weakness is the price gap to premium light beer, which I think is cited at around 7%. And that does seem plausible to me that there's some trading down on price. But otherwise, I think North America, obviously, consumer savings rates have been high. European, the same. And our only issue, I think, is to look carefully into the winter in Europe, in particular, with the energy inflation and just keep a weather eye on whether the consumer spending is impacting us. But what we do know and what our customers have reinforced to us is that the last thing to get cut back is the grocery shop. And it will be the holiday, which currently people are not canceling because we're in that post-COVID period, but it will be the holiday, the day out, the restaurant, the discretionary spending, and it won't be the at-home consumption that gets cut when times get tight.

Yes. Okay, that's helpful. I was very glad to see the kind of pullback and the market-based approach to kind of how and when you add capacity. I just wonder, is it too early to talk about adjusting some of those medium-term financial targets that you laid out around the SPAC?

I think we've already indicated during the debt raise that there will be delays in meeting those targets. It's important to recognize that if we postpone some of our business growth investments, it will also delay the timing for reaching those targets. However, we remain highly confident in our overall business plan and the goals we've established. Given the unusual and unexpected events over the past year, we need to be realistic about when we can achieve these targets. We will enter our business planning cycle in the autumn and will gain a clearer perspective on timing for 2023 and 2024 then. Consequently, we won't provide specific guidance this quarter, but it's clear there will be some delays. That said, we are still very optimistic about the overall trends in the category and for our product, and we remain fully committed to our business plan. The matter at hand is primarily one of timing and phasing.

Yes. Okay. Last one for me. Any sense on the recovery of that $25 million of energy headwind in 2023?

Yes. We expect a material step-up in profitability for Europe in 2023 off the back of, as I say, extremely constructive set of conversations with customers around the input cost inflation where I think it's fully understood that it can't be held in the supply chain like this and needs to go through to the consumer. So yes, I think we'd be anticipating recovery and not exact numbers yet. We'll go through the process again in the autumn once we've finalized all these conversations, but we expect material increases in the profitability of our European business in 2023.

We'll take our next question from Arun Viswanathan with RBC Capital Markets.

Great. I wanted to revisit the growth question. It seems there might be some elasticity concerning the beverage can. Is that what you're noticing in certain categories, like hard seltzers and perhaps with the customer in Brazil? Could you share your insights on that? Additionally, you mentioned high energy and retail costs, as well as inflation impacting consumers. Do you anticipate that demand will increase if inflation decreases? How should we interpret that situation?

Sure. Yes. No, I mean, look, I think every consumer category has a degree of elasticity. And if you push the consumer to a certain point, they will inevitably buy a bit less. And I think the scale of inflation that's going through at the moment is having an impact. But as I said to George's question, I mean, the beverage can has always been a heavily promoted product. And that's because it's a super-efficient way to package beverages. So our customers and their customers can make good margins promoting beverage cans. So we'll always see a high percentage of promotional activity. And what's going on at the moment is that our customers are raising and the retailers are raising average retail prices with fewer promotions. And so more is being bought off the shelf. So I think we shouldn't be surprised. And in fact, the unusual period was really the back end of last year when there were significant price rises going through in North America and volumes continued to grow; that's quite unusual. So I think, therefore, you're right to say that the reverse does apply, which is as inflation comes off, which are much more, hopefully, in North America than Europe, you would expect to see back to full-scale promotional activity. And therefore, you expect to see a growth in beverage cans, which would then be additive to the growth that we're seeing because of sustainability, because of innovation. So yes, we'd be very hopeful around that trend.

Okay. And then you have weathered quite a bit of FX and energy, inflation. You noted that your energy outlook is similar as it was in the past. But maybe you can just kind of give us your thoughts on kind of the longer-term targets that you laid out either at the time of the SPAC or more recently. How does some of your comments around kind of making sure that the growth is there before you add lines kind of relate to that? So are there any capital projects that you’re pausing on that would change your kind of ‘24, ‘25 EBITDA build-out? Or how should we think about that?

Yes. As I mentioned earlier, we have already adjusted some of our business growth investments, averaging about a quarter or two. We will be closely monitoring our greenfield investments, which represent our largest expenditures. We will ensure that we phase these appropriately in terms of capacity, including how many production lines we introduce and when, based on demand. This adjustment will influence some of the capital outlined in our original plan, particularly concerning the second-generation capital we previously discussed. There will definitely be an impact on the timing of the EBITDA ramp, but I won't share specifics today. We will be reviewing this during our business planning cycle in the fall, but it will affect the timing. Nonetheless, we remain fully committed to our overall objectives.

And then, I just - I wanted to ask just one quick question on Brazil. So you noted well above market growth. Do you think that market now has kind of resumed its recovery or - and passed its headwinds that you experienced the last couple of quarters? Or are there some that are still lingering? How would you kind of characterize the Brazilian market at this point?

Yes. Thanks. We're hopeful that it will grow from here out. I mean, sometime in Q3, we think it will get into a consistent growth pattern. And Q4, we expect to be strong. By then, obviously, we'll be lapping some weaker comps as well. You could say there's some economic uncertainty into '23. But again, we remain very confident in the fundamentals of that market because they're driven by the long-term economics of the switch from on-trade to off-trade, which you can see in markets all over the world as they develop. So yes, we're very comfortable overall for the market. And we think that Q3 through Q2 of next year should be good levels of growth. And we also are very confident in our own growth at this point.

We'll now take our next question from Angel Castillo with Morgan Stanley.

Just wanted to touch base on inventories. So you’ve talked in the past about hard seltzer end market. I think there’s a very clear inventory issue there. But just wondering, across the other categories, is there anywhere else do you think that there may have been some inventory build maybe because of the supply chain concerns or maybe customers might have stocked up a little bit more than normal and just - yes, just what you’re seeing across all the categories in that respect?

Yes. I'll kick off, and I'll pass it to David. So I think that we did see some inventory build. We deliberately have some inventory build in our system because of supply chain concerns, particularly on metal. So we had some deliberate prudence in the quarter to make sure we covered that. And then particularly in Europe, we're also working on and working with customers to get appropriate inventory positions in case of any disruption, particularly in the German market. But that's the high-level picture. I'll pass it to David for more detail.

Thanks, Ollie. So yes, I think working capital has 2 factors. As you get elevated input costs, even if your days inventory outstanding and so forth stays the same, then you get a dollar build in the working capital balance. But as Ollie says, we very deliberately took the opportunity we had in quarter 2 to push up our inventory levels a little bit really as a contingency against potential future supply chain disruption, which could come from a number of sources that are fairly obvious from what's out there in the market. And also, we are actively diversifying our supplier mix on aluminum to make it a more global mix. Yes. And this is a good opportunity to protect while we're in that transition process.

And have you seen your customers do something similar outside of hard seltzers?

Not that I'm aware, to be honest. But again, I think we are looking into the European situation. And we have a team obviously on contingency planning for the situations that may emerge in the autumn. And part of that will be and already is dialogue with customers about what inventory positions they want to hold on our side and their side.

Got it. That’s helpful. And then I wanted to just clarify on the high single-digit growth for the year. I think you talked about where the sources of maybe some of the incremental weakness came from. But as we think about those regions, how do you characterize the growth in each region in terms of the makeup of that high single digit?

Sure. Yes. So I think the factors I mentioned are the main factors going through to the end of the year. So we see Europe in the mid-single digits. We see Americas low to mid-teens, and that's split between America lower and Brazil higher. So that's pretty much how we see the full year.

We'll now take our next question from Jay Mayers with Goldman Sachs.

Wanted to follow up on the kind of guidance you just gave, thinking about Americas shipment volumes. Can you help us think about how much of the volume growth for the rest of the year in North America is going to come from outright kind of consumer-driven demand versus replacing some of the imports that you’ve talked about?

Yes. I mean, I think hard to put very definitive numbers on it. But you've got a few points, I think, of growth that have come out of imports this year. That has been a significant reduction from the $14 billion, but there are still imports coming into North America. And so it's not that they all go away. And then I think the other few points of growth are sitting in the actual consumer demand. And you can see some of that in the published data.

Got it. And then just kind of - can you help us think about your ability to actually offset the imports? So you have some kind of competitors who have a large number of the imports coming into North America. Are those kind of contracted volume agreements? Or are those kind of more spot market-type contracts that you can go in and offset with either lower-priced cans or kind of a better contract for those customers?

Most of those, I think, were contractual situations if they were being brought in by our competitors is my understanding. So I think it's not that they then suddenly appear in the market. I think there were some spot situations where customers obviously got quite desperate at points over the last few years. And so those opportunities are available to us. But I believe a significant number were contracted.

That’s helpful. And then just a final one for me. On Brazil, I wonder - we’ve spent a lot of time talking about the kind of demand situation, but had a competitor announce a new capacity addition there this week. Can you just talk about a little bit how the supply situation is shaping up there and kind of how you feel about the kind of supply outlook versus what you’re seeing on the demand front?

Yes. I mean, look, there's clearly some short-term weakness, and you can see that in the data. But our customers, and we share their view, are very confident about the future of cans in Brazil. And the long-term guidance we gave, the 6% to 10% growth when we came to market, we'd stand that. So we think this is a short-term blip. And I think that it’s not surprising that our competitors are being asked by our customers and other customers to plan projects and bring additional capacity to that market. We see ourselves being short canned through the back half of this year. And it doesn’t take much, and we’ve seen it many times in Brazil, it doesn’t take much for it to turn. And when it turns, it turns very fast, and the growth is very strong. So yes, I wasn’t surprised to see an announcement of additional capacity in Brazil. I think the market is one of the strongest for beverage cans in the world.

We'll now take our next question from Ed Brucker with Barclays.

My first one, I wanted to get the ultimate reason for doing the share buybacks versus paying the larger dividend that you had telegraphed before. Was that uncertainty of free cash flow or earnings going forward? Or was it more of a cautious outlook on the beverage can market?

No. I think we were very responsive to our shareholders. There are several ways we could support them, and this is one of the ways we received feedback. We ended up with a strong combination of the dividend, the share buyback, and the growth investment program. We haven't lost confidence in our program. I mentioned that the timing isn't exactly what we originally planned, but our confidence remains intact. We received a lot of feedback and spent considerable time listening to our shareholders, so we took that advice seriously.

Got it. And my next question, if there is some pullback of the business growth investments or I guess the timing is pushed back, what would you do with the cash that you’ve built up to spend on that and then expected free cash flow that you get over the next couple of years? Would you look to reduce debt, maybe do higher dividends or buybacks?

Yes. I think we haven't worked all that through. We've set some leverage targets that we're comfortable with, the 3.7 to 4x forward EBITDA. That's where we expect to be. Obviously, we have got a dividend policy. We can adjust that over time. So I think we haven't fixed on any of that. But we'd obviously think through all the different options and be very cognizant of what worked for all the shareholder base.

Our next question will come from Michael Wolfe with Credit Suisse.

Maybe just 2 follow-ups on Europe. I guess, first of all, just on aluminum sourcing, how is that looking at the moment? Are you sort of diversifying away from perhaps Russian suppliers? Appreciate some of the European suppliers are perhaps less upward integrated as well. So perhaps there’s not that many avenues for procurement, maybe a few in the Middle East. But just curious to sort of hear your thoughts around aluminum procurement, particularly in Europe.

Sure. Yes, we have no Russian supply. So no disruption from our perspective or for our main suppliers. We have diversified somewhat. We have a very local supply base, which is an advantage, I think. But we have diversified somewhat to address the growth. And there are investments coming or needed in that market on the can sheet side. So we're making sure we're covered with an appropriate mix of local and import, but none of it is Russian-based. And we've worked very hard, particularly on the end supply chain, to make ourselves secure. And that's partly why you see some of the inventory build that you see in our numbers. So right now, we're feeling very good actually about our aluminum supply chain and the security of our position.

A lot of that inventory is actually just in the form of sheets at the moment.

Correct.

Okay. And then maybe just understanding a little bit of the downside scenario with regard to sort of some of the ongoing gas challenges in Europe. Appreciate you have, was it, 4 facilities or so in Germany. I guess how are we to think about some of your production footprint? If there is a scenario perhaps where there is some gas rationing, how flexible is your production there with regard to maybe increasing capacity in some of the other facilities? I guess any kind of - appreciate it’s a complex question, and it’s sort of an ongoing challenge. But maybe for us to just better understand what you would do and kind of the levers you would pull and if you can quantify anything at all around that, that’s helpful.

We have a team focused on contingency planning for the situation. There are several options available, and we are confident that we will be regarded as essential just like we were during COVID, which puts us in a good position for prioritization. We are actively engaging with industry associations and our personal contacts to ensure this. While we believe it won't come to that, we have one of the most adaptable networks among can makers in Europe, with a wide range in terms of our network and the various sizes we operate across Continental Europe. We already transport substantial amounts of cans within this network, so as long as there's available capacity, we are well-equipped to make adjustments. Typically, at the year's end, we experience some seasonal line stops, so we could potentially remove some of those sooner and plan accordingly. We are also examining our inventory levels for both raw materials and customer stock, and we will discuss with our customers whether they wish to build up additional inventory in light of this situation, as they also have their own contingency measures. It's a multifaceted scenario and not entirely simple. In the event of a complete shutdown where we are not prioritized, fully compensating for that would be challenging. However, we are fortunate to have a flexible network and a variety of options at our disposal.

And how much of your European volume is German?

25%, I'd want to say. Yes. Yes. So something like maybe 20%, 25%. Because again, some of our German plants serve other markets, legacy reasons. You'll remember the German deposit scheme came in, the German market actually went to 0. So some of those facilities do serve customers in other regions.

We'll now take a follow-up from Mark Wilde with Bank of Montreal.

And Ollie, just a very simple one. Any prospects of us getting kind of North American industry data back? I mean, at a time when the market has been pretty volatile, the elimination of this CMI quarterly data seems like a real disservice to your shareholder base.

Yes. I would say that we weren't responsible for it, but I hear what you're saying. And yes, there is ongoing conversation about doing that. So I think it is a possibility, yes.

And it appears there are no further telephone questions. I'd like to turn the conference back over to our presenters for any additional or closing remarks.

So thank you very much, everybody, for joining the call. I think we were pleased to be able to present a strong quarter in very difficult circumstances, given the foreign exchange, the inflation and some of the demand weakness that we saw in certain categories. We’re looking forward to good growth for the rest of the year and into ‘23, with a material growth in both earnings and volumes into 2023. And we look forward to talking to you at the next quarter. Thank you.

And once again, that does conclude today's conference, and we thank you all for your participation. You may now disconnect.