Greetings. And welcome to the Ball Corporation 1Q 2023 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded, Thursday, May 4, 2023. It is now my pleasure to turn the call over to Dan Fisher, Chairman and CEO. Please go ahead.

Thank you, Tina, and good morning, everyone. This is Ball Corporation’s conference call regarding the company’s first quarter 2023 results. 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. Some factors that could cause the results or outcomes to differ are in the company’s latest 10-K and in other company SEC filings, as well as company news releases. If you do not already have our earnings release, it is available on our website at ball.com. Information regarding the use of non-GAAP financial measures may also be found in the Notes section of today’s earnings release. Historical financial results for the divested Russia operations will continue to be reflected in the Beverage Packaging EMEA segment. See Note 1 Business Segment Information for additional information about the sale agreement and a quarterly breakout of Russia’s historical sales and comparable operating earnings. In addition, the release also includes a summary of non-comparable items, as well as a reconciliation of comparable operating earnings and diluted earnings per share calculations. Joining me on the call today is Scott Morrison, our Executive Vice President and CFO. I will provide some brief introductory remarks, Scott will discuss key financial metrics and then we will finish up with closing comments, our outlook for the remainder of 2023 and Q&A. Let me begin by thanking our employees for working safely and efficiently while fulfilling our customers' needs. Collectively, we delivered strong first quarter results amid tough year-over-year comparisons, driven largely by business divestments executed in 2022. In the first quarter, every business either achieved or exceeded their operating plan. Our aluminum beverage and aerosol shipments were in line with our regional expectations, and our aerospace technologies continue to be in high demand. Notable inflation recovery, benefits of cost-out actions, improved operational efficiencies and performance in every business offset higher interest expense and taxes. With near-term macroeconomic conditions continuing to pressure consumer demand, Ball’s year-to-date global beverage can volumes were down 1.4% in the first quarter, in line with our expectations. Looking ahead, the breadth of retail summer promotional activity across our customer mix in North America and the continuing successful ramp-up of our two new facilities in EMEA will be the key drivers of our ultimate 2023 shipment growth. We started 2023 with a conservative view on annual global beverage shipment trends, and we maintained that conservative second-half-weighted view. We have a lot of the year ahead of us and we look forward to serving our customers' needs. As we sit here today, in advance of seeing quantifiable promotional activity, we are proactively managing our beverage operations in North and South America for cash and supply-demand balance, as we continue to bring down raw coil and finished goods inventories and return to our just-in-time supply chain management versus the just-in-case supply chain requirement during the pandemic and extended period of higher-than-planned growth for beverage cans. Around the globe, beverage cans continue to win relative to other substrates and we continue to leverage our customer mix, scale, regional plant networks, innovation and capable teams across the organization to ensure the best near-term, medium-term and long-term outcomes for all our stakeholders. In our aerospace and aluminum aerosol businesses, operational performance and demand for our innovative products and technologies are accelerating. In aerospace, our technologies are well positioned to deliver unimpeachable data and monitoring capabilities for both environmental and national security needs. And in our global aluminum aerosol business, we continue to serve new categories and offer reuse and refill bottle innovations to a broader set of customers and occasions. As we look ahead, all of our businesses will continue to unlock additional value for Ball stakeholders in 2023 and beyond. Consistent with our prior commentary in 2023, we remain positioned to deliver our long-term goal of 10% to 15% diluted earnings per share growth, inclusive of the Russian business sale headwind, and we remain well positioned to generate strong free cash flow to deleverage and return value to our fellow shareholders. As we indicated in our prior call, the second quarter will remain choppy in North and South America metal beverage as we continue to work through higher inventory and manage regional production with an eye on cash. In addition, the positive momentum in our EMEA, aerospace and aluminum aerosol businesses will continue. During the Q&A, Scott and I will strive to provide additional clarity on the external environment and cadence for 2023 based on what we know today. Our global beverage teams continue to position our business to deliver for the year and have an eye on the future. For the full year and incorporating year-to-date trends, our customer mix and excluding Russia, we now estimate low single-digit global volume growth for Ball, with North America being slightly down, South America volume up mid-single digits, EMEA volume up mid-single digits plus and our other non-reportable beverage business volumes up mid- to high-single digits. We appreciate the work being done across the organization and extend our well wishes to our employees, customers, suppliers, stakeholders and everyone listening today. With that, I will turn it over to Scott.

Thanks, Dan. I’d like to congratulate Dan on his election to Chairman of the Board and thank John for his service as Chairman. Dan was battle-tested on many fronts in 2022 and he has the skill set and drive to take the company to new heights. First quarter 2023 comparable diluted earnings per share were $0.69 versus $0.77 in the first quarter of 2022 and excluding the notable Russian aluminum packaging business sale headwind, first quarter comparable diluted earnings per share were flat versus the prior year. First quarter sales decreased compared to the same period in 2022, primarily due to the sale of our Russian business in the third quarter of 2022, currency translation, lower volumes and the pass-through of lower aluminum prices, partially offset by the pass-through of inflationary costs. In the first quarter, net comparable earnings decreased compared to the same period in 2022, primarily due to the sale of our Russian business in the third quarter of 2022, lower volumes in North and South America, and increased interest expense, partially offset by fixed cost savings, lower depreciation expense and SG&A cost-out initiatives, as well as the contractual pass-through of inflationary costs. To reiterate our prior earnings call commentary and to help frame some of Dan’s earlier comments about choppier second quarter performance in North America and South America segment earnings, we have been and will continue to proactively manage regional supply-demand balance across our system of plants in the near term. After July, segment earnings will reaccelerate when the majority of the contractual inflation recovery begins and a larger portion of summer selling volume flows through segment results. Also remember, the virtual power purchase agreement settlement recorded in North America’s first quarter results will not replicate in the second quarter. However, we estimate that North America’s second quarter segment results will be relatively in line with the $183 million first quarter segment results reported today. In South America, customer and product mix is unfavorably influencing the seasonally slower second quarter, and consistent with our prior commentary, we anticipate a more robust second half in Brazil, as customer hedges roll off and the fourth quarter summer selling season kicks in. As we sit here today, some very consistent commentary and key metrics. We ended the first quarter in a solid liquidity position with in excess of $1.5 billion in cash and available credit facilities; 2023 CapEx will be in the range of $1.2 billion, driven by cash outflows related to prior years' projects; 2024 CapEx is targeted to be in the range of GAAP D&A levels. We are targeting free cash flow in the range of $750 million in 2023 and focusing on deleveraging. Our 2023 full year effective tax rate on comparable earnings is expected to be in the range of 20%. Full year 2023 interest expense is expected to be in the range of $425 million, while the first quarter corporate costs appear lower than the expected run rate. We continue to anticipate full year 2023 corporate undistributed costs recorded in other non-reportable to be in the range of $90 million, with the second quarter costs being higher year-over-year, driven by announced key employee retirement costs. Including the $86 million Russia business sale operating earnings headwind, comparable operating earnings should increase nearly $200 million and full year 2023 comparable D&A will likely be in the range of $550 million. As we look forward and incorporating near-term demand trends, year-end 2023 net debt to comparable EBITDA is expected to trend in the range of 3.7 times, and in future years, we will drive that lower. Last week, Ball declared its quarterly cash dividend, and as Dan mentioned, reducing leverage is our key focus prior to resuming share repurchases in 2024. Rest assured, as fellow owners, we will manage the business through the lens of EVA and cash stewardship and we will effectively manage our supply chain and customers in this current economic climate to secure the best cash, earnings and EVA outcome for our shareholders. With that, I will turn it back to you, Dan.

Thanks, Scott. Given the economic environment and global dynamics impacting our world, it’s a great time for investors to get up to speed on Ball. Our significantly improved plan following a challenging 2022 is kicking in. We produce products that consumers use daily, we deliver unique technologies to analyze, observe and defend what we value most, and employee owners are showcasing incredible resiliency while delivering earnings, free cash flow and high-quality innovative solutions to our customers and consumers, and as leverage comes down and free cash flow expands, our return of value to shareholders will grow in 2024 and beyond. Thank you to everyone listening today. And with that, Tina, we are ready for questions.

Thank you. (Operator Instructions) Our first question comes from Ghansham Panjabi of Baird. Please go ahead.

Hi. Good morning, everybody. Thank you, Operator. Dan, maybe you can just start off with how the volume outlook by region has changed relative to your forecast three months ago. I mean, clearly, a lot has changed in the last few weeks and months, consumer spending in certain regions including the U.K. seems to be much weaker. So just curious as to how that’s impacted your thought process for the year?

Yeah. Thanks, Ghansham. I guess, where we are at today, it’s been largely in line with the first quarter and even what we are anticipating in the second quarter. Things that have moved around in regions have been largely related to customer mix. So the industry writ large is largely in line. There’s been movement in quarters; some have benefited, some haven’t. We have done a little better than the market in Europe, we were a little behind in South America and we were a little behind in North America. The benefits of what we saw in terms of the things within our control, we outperformed almost in every spin category and operational efficiency category. So that all helped us to effectively manage our earnings profile in the first quarter. We came into the year with a conservative view on things like promotional activity in the first half. We believe that you will see some benefits in the second half from that. But, again, we haven’t seen it and we are not counting on a lot of it. We put in place a very conservative volume plan at the outset of the year to underpin our earnings and our cash generation and that’s what our focus is. So we will continue to focus there. I don’t know if that helps you, but we are not seeing a lot of difference. We are seeing some movements and some share shifts by customer and by category. But it’s largely in line with what we anticipated heading into the year, at least for what we know in the first half. In the second half, I think this business, as you know, requires volume. We are a volume business. So we will need a little bit of that uptick in the second half of the year, but we got a lot of things breaking our way and the things that we can control will enable us to hold the cash and hold the earnings profile here for the majority of the year.

Okay. Perfect. And then just so I understand this correctly. So you are benefiting from inflation recovery this year versus last year, right?

Correct.

Maybe you can touch on how inflation is tracking this year, 2023 versus 2022, and if there is any element of deflation, would that mean that in 2024 you would pass it on to your customers, just to clarify?

Yeah. I will take a shot at it. Just at a high level, we are definitely seeing some improved inflation in terms of the run rate and the cost structure, and to your point, the way these contracts work. Keep in mind that the majority of our PPI benefit, specifically in North America, isn’t going to come into the second half of the year. That will carry forward until it laps into the second half of next year. We will maintain the overwhelming majority of the lift that we are seeing on all of these inflationary pass-throughs as catch-ups. There will be a limited amount; right now as we are looking at the year-over-year components, it doesn’t look like there will be much movement one way or another, absent what we are counting on for the catch-up from 2022 into 2023, but this will continue to evolve throughout the year depending on where the headwinds or tailwinds on inflation manifest. Scott, anything?

No. There’s not deflation typically built in our contracts. There might be something unique in certain contracts where it’s tied to maybe an energy index somewhere. But, in general, we are not seeing deflation; we are seeing inflation slow down and that’s usually a really good environment for us.

Perfect. Thank you so much.

Thank you.

Thank you. The next question comes from Christopher Parkinson of Mizuho. Please go ahead.

Hi. This is John on for Chris. Thanks for taking my question.

Hi, John.

Can you expand on the promotional trends that you are seeing around the globe, particularly in North America? And then also, can you please break down the various categories that you expect to drive growth going forward? Thank you.

Sure. Promotional activity is really a thing in North America specifically, given the pantry-stuffing effects in the larger case packs. We are not seeing much of any right now. I think it’s reflected in the performance of our customers in terms of the revenue growth they are seeing and volume being flattish and so we are sort of tied to that volume being flattish component. Where you would see the impact — the one thing that is clear in the last 12 to 18 months is the folks that have taken less price versus inflation or have held pricing are the ones growing share. And as share becomes more important, which we believe as the year moves on, there will be an opportunity for folks. If they are more focused on share gain, then you will see more activity, and I would expect to see, given the performance of beer with larger packs being down, they have more impetus and need to push volume than what I am seeing out of the energy and the non-alcohol spaces. So I anticipate a little bit in the second half of the year across the board, but I don’t anticipate much. And if there’s one area where you could see or anticipate some, it will probably be in the alcohol categories, in beer specifically, because shares look more challenged in that category.

Perfect. Thank you so much. I will turn it over.

Thank you. The next question comes from George Staphos of Bank of America. Please go ahead.

Thank you. Hi, everyone. Good morning. Thanks for the detail.

Hi, George.

Hi, George.

How are you doing? So I wanted to come back to the question on end markets and trends you would expect for the rest of the year to the extent that you can comment. One, are there any categories, without giving away proprietary information, that you expect will be particularly helpful and particularly a headwind to your volume outlook for the rest of the year? Relatedly, you mentioned, Dan, the beer category and there’s been lots of news there. What are you seeing in terms of your relative share of beer relative to what is happening to perhaps your mix or your customer mix? And then I had a couple of follow-ons.

Sure. Let me take the second part of the beer question first. As you know, George, you have been following us a long time. We have an overweight in beer and we love all our beer customers and we serve that market. Net-net, and I know the specifics and I am not going to go into the specifics relative to customers. But I will tell you this: how you should look at Ball’s portfolio as it relates to beer is that we win when folks drink beer. So if there’s a mix impact, we may have one customer that’s up; in a short period of time there may be a share shift, and we pick up both sides of that equation generally. So what we are more interested in is the health of the entire category and we believe that beer is going to need to galvanize itself and push in the second half of the year. They are going to have to promote across the entirety of the industry.

And on the end market trends, it’s been a long earnings season, so we are trying to help you ask them later this weekend but…

In the category space, I don’t anticipate any significant wins or significant losses by category. What I — in my prior answer to the prior question, I will reiterate. I think there will be a share shift that happens in each category, depending on the approach that each brand owner takes, and so folks that have decided to not pass on price increases aggressively have done better on share gain over the last 12 to 18 months. So if they have taken a posture where they are going to pass through a portion, but not pass through what everybody else in the category is doing, they are the ones that are winning share and so depending on what decision you are making within the category, I think it’s going to be a share shift within the category. I think every category is going to do well and some will do a little better than others, but it’s really going to be the customers that win within categories. That will be the determining factor on our volume versus our competitor’s volume.

George, the only thing I would add is, long term, the positive — the best positive here is the can is winning. New product introductions are still heavily weighted to cans and so that bodes well for the can in the long run and that’s how we are playing a long game here.

Understood. Two questions and I will turn it over. One, on aerospace, can you talk to the degree that you can sustain the performance that you saw in 1Q after what was obviously a challenging 2022, whether this is kind of a one-off quarter or you think you can maintain that into the rest of the year and hopefully 2024? And then back to beverage cans and capacity, can you talk to what you think operating rates will be this year? And Scott, should we really be expecting CapEx in 2024 in the range of $550 million to $600 million based on what you said on D&A? Thank you and good luck in the quarter.

Thank you. So aerospace, I think the way you think about aerospace is that I wouldn’t do a run rate on sequential improvement, meaning quarter two being better than quarter one. But I would say the quarters year-over-year will be improved. There is real underlying improvement in performance. In the second half of last year we had some pretty significant supply chain disruption. So that has been fixed. And then what you saw in the first quarter was a really nice performance execution and a couple of nice breaks in terms of efficiency gains and just a better run enterprise there in the first quarter. So I think that will continue to be a tailwind in each quarter. It just won’t be sequential lifts; it will be dependent on the projects and the mix. But that business is poised to have an exceptional year this year. And I will let Scott tackle the efficiency question.

Sure, George. On the D&A, I said GAAP D&A for CapEx, not the comparable operating earnings ones.

Okay. Got it. Got it. Thank you for that. And operating rates this year?

Operating rates: we are running our plants. I mean we are taking downtime and we are taking more of it in the second quarter to make sure that we are operating at pretty high levels above 90%. So we will take downtime in Q2 in North America and South America. South America, that’s pretty typical given the seasonality of that business, but we are really focused in Q2 on getting our inventories to the right level so we can run at fairly high operating rates for the year, and so that will be a bit of a drag in Q2.

Understood. Thank you, guys.

Thanks.

Thank you.

Thank you. The next question comes from Angel Castillo of Morgan Stanley. Please go ahead.

Hey. Sorry. Can you hear me?

Yes. Hi, Angel.

Hey. Thanks for taking my question. Just wanted to follow up on the commentary around downtime in 2Q. Could you quantify what the drag will be from that and kind of, related as you think about the cost or operational leverage that your business has to volumes potentially improving as kind of promotional activity returns, just could you talk about maybe the degree to which some of that is variable and comes back as you bring assets back online versus how much is just operating leverage that would be upside to our volume?

Sure. Well, first of all, congratulations on being a new dad and how quickly Leela can start drinking out of cans. That will help to answer the downtime question. But, in all seriousness, Scott laid it out really well. In South America, you are entering the off-peak season. So you typically do curtail. The balance of this comment about curtailment is curtailment and maintenance. So it’s plant maintenance. So you are going to have that for certain. And then in North America, our plants performed extraordinarily well in Q1 and volumes were a little down versus our expectation. So we carried in a little bit more inventory into the second quarter and we are going to manage that tightly here for the balance of the year for cash-generative purposes. We have got a lot of flexibility in our lines, as you know. The curtailment question for us is harder to answer. As you know, we have multiple can sizes on every line. There is one can size that certainly has excess capacity, writ large in the North and Central American market. We do have exposure to that, but it’s limited. And so the next question, I think, that you were leaning into is there, depending on what the brand or product is that’s innovating and that’s winning, we can flex to that, and we can turn that on. We are in a really healthy position in terms of safety stock and we are in a healthy position in terms of performance. So if things suddenly shift, we have got dry powder and we have dry powder in a number of can sizes that gives us flexibility to move into whatever the winning product and whatever the winning brand is going to be. So I am not concerned about us stepping into upside. We are going to manage inventory positions and safety stock levels really with a lot of discipline here in the second quarter.

And Angel, just to give more granularity in the prepared comments, I said in North America we would essentially be flat sequentially first quarter to second quarter given the downtime of things that we are going to do and getting our inventories right. In South America, the negative will be larger than that. Given the volume, the mix and the absorption, it will be softer than it was in Q1 and then we expect to be in a better position as we move into the busier second half of the year.

That’s very helpful. Thank you. And then just maybe following up on the strength in the other segment. I am curious, you talked about corporate, you reiterated the guidance there. Just maybe some of the other pieces, some of the strength you are seeing in aerospace and just what the underlying expectations for that segment will be for the full year?

Our aerosol business is doing really well. We continue to win business. We continue to have nice volume growth. That business was really impacted during COVID and we are seeing that really come back nicely. We are seeing new products and innovation driving a lot of that, both in the typical aerosol personal care space and in the refill and reusable side. And in aerospace, we had a choppy year last year due to supply chain challenges that cost us. The business is performing exceptionally well. They are stepping into newer contracts that we were confident would be good and they are good, and we will see the benefits of that for the full year. So we are really excited about those businesses.

Thank you, Dan. Appreciate it.

Thank you. The next question comes from Cleve Rueckert of UBS. Please go ahead.

Hey. Good morning. Thanks for taking my questions.

Good morning.

A couple of quick follow-ups from me. I am just curious, digging into the inventories a little bit. Where do inventories, both finished product and raw material, stand versus your target as of the end of the quarter? And are you building inventories or starting to work them down at this point?

We are working them down in North America and in South America. So that’s why you see a big swing in payables. We are not ordering as much metal, both finished goods and coil raw material. And so we have got another quarter of that to do in Q2 and then we think we will be in a much better position from an inventory standpoint. In Europe, it’s a different dynamic since we are turning on a couple of plants. But in North America and South America, it’s about getting our inventories down.

Is that more on the raw material side? You mentioned coil — is finished product inventory also being worked down?

It’s both. In North America we are talking days of finished goods inventory. A lot of the raw material piece is still a bit of an overhang from last year because we were bringing in a lot and anticipating growth. So we have held on to larger raw material stores and we have been working that off. We are continuing to work that off. And the finished goods are not significantly different than what we anticipated heading into the year. But a few days of additional curtailment is meaningful in a quarter and I think that’s what Scott is signaling to you.

Okay. And did you import any cans into North America in the first quarter?

No.

Okay. That’s very clear. One last one: on promotional activity, when do you expect to gain visibility? Is there still at this point in the year potential for promotional activity to pick up and have a material impact on volumes?

Yes, absolutely. Promotion works really well for us from a volume perspective. The degree to which the promotion is effective is the big question. We are not trying to avoid the question, but here’s the backdrop: if you look at a 12-pack of CSD cans, three years ago it was about $4 on average; today it’s $8. So is $1 off going to move it? Is $2 off going to move it? It’s not just promotion; it’s the elasticity around the price of the promotion that is difficult to characterize and I think it’s difficult even for our customers to understand. At this point, we need to plan to deliver cash and deliver earnings and the end consumer strength or weakness is also difficult to understand given stimulus packages and higher interest rates. It’s ambiguous and difficult to quantify right now. So we are running for cash and we are managing what’s in front of us, and until something changes substantively, that’s the best tone for our corporation and our employees to manage to.

That makes a lot of sense. Good luck with it all. Thank you.

Thank you.

Thanks.

Thank you. The next question comes from Anthony Pettinari of Citi. Please go ahead.

Good morning. This is actually Bryan Burgmeier filling in for Anthony. Thanks for taking the questions.

Hi, Bryan.

So the $28 million tailwind from the power agreement settlement in 1Q, was that part of full year guidance originally? I don’t remember hearing that on the 4Q earnings call. And when you talk about North America being kind of flat quarter-to-quarter, I assume this means it will actually be on an apples-to-apples basis, because I don’t expect this tailwind to repeat in 2Q, is that accurate?

You are correct; it will be up year-over-year but flat with the first quarter. In terms of the virtual power purchase agreement, when we had our previous call we were negotiating the settlement, so we weren’t going to discuss it. Part of that was built into our first quarter numbers because we knew we were going to settle it, we just didn’t know what the amount would be. That amount would have run through our P&L over time last year. But the provider wanted to exit the contract and we were able to extract a very favorable outcome for us and all of that outcome benefited us in the first quarter, but that will not repeat. We have entered into other virtual power purchase agreements to make up for the lost clean energy that we were buying and so we are in a pretty good spot.

Okay. Understood. Thank you for the detail. And last question: in March, you announced you were having discussions about the possible closure of the Wallkill plant. How are those discussions going and based on what you know right now, is it possible to say when or if that plant will close?

I would say in terms of filling out your model, I wouldn’t count on anything in 2023 relative to an uptick in fixed cost savings. We said we were entertaining closing it. I think we are committed to closing that facility now. That’s a subtle change. And the other thing is there’s just not a lot to talk about at this point, because we are entering into effects bargaining now. As we know more, we will update you. But you will see capacity coming out at some point this year and you will see that tailwind in 2024 is what I would anticipate, but I don’t know the specifics of it at this time.

Okay. Thanks a lot for the detail there. Good luck in the quarter.

You bet.

Thank you. The next question comes from Arun Viswanathan of RBC. Please go ahead.

Great. Thanks for taking my question and congrats on the strong quarter.

Thank you.

First off, in North and Central America, you were able to hit very high levels of segment income in Q1 that I thought would be more likely to materialize in Q2. As you look into Q2, do you expect flat performance there? And maybe you could comment also on Brazil — what are your expectations as far as substrate mix as you look into Brazil for the rest of the year?

I’d say North and Central America: what you are seeing is all the hard work from last year in terms of cost-out. You see our SG&A is much lower, the plants are operating better. We are getting our group back with how we operate. So it performed at or above our expectations. We expected softer volume and our game plan is to perform very well even if volumes are soft and that’s exactly what you are seeing. You also got a benefit of that virtual power purchase agreement in the first quarter that won’t repeat, and so we will keep earnings relatively flat and that’s due to improved performance across the business.

In terms of the glass versus aluminum substrate penetration or shift we have seen in the last 12 to 18 months, it’s in line with what’s happened historically. In a higher inflationary environment, you do see a return to returnable glass, somewhere in that 5% to 7% share shift. That’s what we saw last year. As Scott indicated, we anticipate a strong peak season in the second half as customer hedges roll off and they see the true cost of aluminum. We are not hearing anything different. I will be down in South America next week. I anticipate to hear more of the same. But I don’t see it as a permanent shift.

Great. Thanks. As a follow-up on Europe, was there any work done on your side to renegotiate contracts for energy or other cost items? Any extra work you have to do on that side?

A lot of that was already done. The European business has done a really good job both on the commercial front and the supply chain front to manage our costs. You are seeing that in their performance.

Both that business and our aerosol business, which has significant presence in Europe, have done an extraordinary job partnering with customers to get to good medium- and longer-term outcomes as we manage through a very different energy and inflationary backdrop in Europe. Teams have done the right thing by customers and stakeholders.

Great. Thanks a lot.

Thank you.

Thanks. The next question comes from Mike Roxland of Truist. Please go ahead.

Thank you. Hi, Dan, Scott, and congrats on a solid quarter given the results there. Just some quick ones for me. In terms of the guide and EBITDA for North America and particularly exports in 2Q, what type of volume growth is that embedded? Does that embed a slightly down expectation for the year, and if so, could there be upside to the forecast if promotional activity kicks off?

You are correct: we believe North America will be slightly down at this point as we look out over the balance of the year, given very little insight into customer decisions related to pricing and volume. It’s a volume business and we will need some volume. All of the cost actions we took give us the ability to execute against our earnings and cash profile on a flat to slightly down volume profile and that’s what we currently anticipate. The plan is second-half weighted in terms of PPI pass-through mechanisms and additional cost savings we anticipate in the second half. If volume moves meaningfully off of our current run rate, that would be upside and we are positioned to step into that upside.

Got it. And one follow-up: in South America you mentioned being a little behind the market — was part of that due to the bankruptcy of a large beer producer down there? And on idled plants in Brazil like Frutas, could those become permanent closures?

The only permanent closures we have had we have announced. We have dry powder in that marketplace. Some of these assets are being contemplated to open back up depending on what happens in the market. There was share shift in Q1 and one of our competitors benefited because they had overweight exposure to one beer brand. A weaker beer customer or beer mix may shift around as it does from time to time. We believe customer relationships are strong and they are excited about the second half for the hedge roll-offs and our aluminum profile. It was a little choppier because of customer mix in Q1.

We didn’t have any exposure to the customer that went bankrupt.

Got it. Very clear. Good luck in 2Q.

Thank you.

Thank you. The next question comes from Phil Ng of Jefferies. Please go ahead.

Hey, guys. Congrats on a solid quarter in a pretty tough demand environment. Dan, it would be helpful to give us some color in terms of how intra-quarter volume trends sell throughout North America and Central America. How is April shaping up and do you expect more of the same in 2Q in terms of volume trends?

Thanks for the question. April is probably a little softer than Q1, but that’s anticipated and we are managing against that. April is usually not the month you see activity; the second half of May and June becomes important as you head into peak season. As we sit here today, it’s largely in line with Q1 and pockets depending on customer mix may be a bit softer.

Got you. For Latin America you are expecting mid-single-digit growth; that implies a sizable ramp in the back half. That’s partly predicated on customer hedges rolling off. How much line of sight do you have that customers will behave as such and help jump-start demand?

We built our plan second-half loaded because of exactly that. The conversations we are having with customers are that you should count on that; that’s what they are planning for. Plans aren’t absolute, though. I haven’t heard anything that would suggest otherwise, but your point is valid — there is risk in a significantly elevated volume position. Our contracts have backstop provisions that give us more protection than in years past.

One last: North America volumes are expected to be flat to down a little bit. Any color on the back half — is that more like flat, down a little bit, or inflect a little bit up in the back half for North America?

How we get there is slight declines in the first half and flattish in the back half. There’s opportunity for more in the back half, but that’s not what’s built in our current plan.

Okay. Thanks.

Thank you.

Thank you. The next question comes from Mike Leithead of Barclays. Please go ahead.

Hey. Thanks. Good morning, guys.

Hi.

I just wanted to follow up on Phil’s last question regarding North America earnings cadence for the year. Scott, you were fairly clear on the 2Q outlook. How should we think about the magnitude of the second-half step-up as the new contracts roll in?

We get more of the PPI in the back half of the year, and Q4 comps are easier versus last year. We should do meaningfully better than Q4 of last year. The third quarter last year was pretty good in North America. It’s definitely back-half weighted with most of it in the fourth quarter.

Got it. And could you speak to the EMEA earnings outlook into the second quarter and beyond?

Europe has the headwind of Russia: that was $32 million in the first quarter, $40 million in the second quarter, and it moderates to $14 million in the third quarter. The second quarter is the largest headwind because Russia performed really well last year. All of the things they have been doing from a cost, contract, and inflation pass-through standpoint have been positive and they are seeing nice volume and new plants coming up. We feel really good about the European business for the full year.

In the simplest terms, the plan we set out this year inclusive of Russia is we are going to make significantly more money on less volume and generate more cash; a lot of that comes from Europe offsetting the comparable operating earnings headwind. Europe has a significant plan for improvement and they are off to a good start.

Great. Thank you.

Thank you. The next question comes from Kyle White of Deutsche Bank. Please go ahead.

Hi. Good morning. Thanks for taking the question. I wanted to focus on beverage can new product introductions. With uncertainty in the economy and consumers pulling back on spend, are you seeing any reduction in new product offerings from your customers? Some of these new products in energy, alcoholic and ready-to-drink spaces have been key to growth. What are you seeing?

Lots of innovation is still happening and we continue to see share gains from ready-to-drink cocktails and nutritional energy drinks. Some customers have benefited in those spaces. Beer declines create impetus for innovation and new beverage companies are innovating at a fast rate. We’ve seen historical CSD companies introduce alcoholic beverages and do well. With cans available, cans will win; new product introductions remain at high levels. The can continues to win and we are excited about future prospects and new product introductions.

In fact, today one of the leading beverage innovation houses is visiting us here in Colorado. We are excited to be working with them and others with new ideas and new categories.

Got it. And regarding the start-ups in Europe, how are the U.K. and Czech Republic plants doing? Any start-up costs to call out?

They are right on track. The teams have done a great job. We have sister-plant concepts for training and we brought folks in to help. They will be well trained and ready on day one when we have production.

We had about $5 million of start-up cost in the first quarter. There will be more in the second quarter. I was just looking at start-up curves last night and execution has been phenomenally well executed. We are right where we thought we would be and are really happy with performance and execution of those projects.

Thank you. Appreciate the details.

Thank you.

Thank you. The next question comes from Gabe Hajde of Wells Fargo. Please go ahead.

Dan and Scott, good morning. Congrats.

Good morning.

Good morning. Thanks.

I have a question about full year cadence. North Central America profit being up almost 2x from 4Q — and Scott, the math you gave on being 3.7 times levered by year-end: if I subtract $750 million of cash plus the $260 million of dividends, that implies $21.50 of EBITDA — is that the right way to think about it? And sequentially, would you expect EBITDA to be up or down relative to the first quarter?

You are directionally correct on the debt math. The second quarter EBITDA will be down and then it will accelerate in the back half of the year. We explained some drivers: a $40 million drag from Russia, inventory work in South America, mixing and absorption hits. In North America, plants will perform very well and make more money than last year, but we don’t have the PPA benefit in 2Q that we had in 1Q.

Understood. One for you on the balance sheet and cash flow: your days payable are at 130, which is pretty high. Is there anything we should be mindful of thinking about that being a potential drag on cash flow in future years? Also, you have $1 billion of debt due in November — is any change in the potential rate on that included in the $425 million of interest expense?

The $425 million for interest expense is built with the actions we might take and when we might take them to deal with the November maturity. We will generate a lot of cash in the back half of the year, so debt paydown doesn’t happen immediately; peak leverage is around April/May and stays even through June and then comes down, with most of it coming down in Q4. The interest expense assumes anything we might do on the debt front. On days payable, we manage supply and customer sides of working capital every day; terms matter in contract negotiations. We focus on cash monthly. In a higher interest rate environment, anything with a time element of money is more expensive.

Right. Understood. Thank you.

Thanks.

Thanks, Gabe.

Our final question comes from Adam Samuelson with Goldman Sachs. Please go ahead.

Hi. Thank you and I appreciate you squeezing me in. Maybe going back to EMEA: you disclosed what the non-Russia EBIT was in the prior year. How do we think about that business on an organic profit or like-for-like profit basis progressing over the balance of the year? And as we think about the new capacity in Czech Republic and the U.K. layering in the second half, what's the implicit underlying volume growth that carries into 2024 without broader market expansion?

The game plan for Europe this year is to, on a euro basis, replace those Russian earnings we had for nine months last year. If we can do that, that’s a huge accomplishment. They have done a great job managing costs, contracts and the supply chain and we are really happy with EMEA performance.

The plan it to make significantly more money on less volume and generate more cash. A lot of that is coming from Europe offsetting the comparable operating earnings headwind. Europe has a significant plan for improvement and they are off to a good start.

Got it. And the carryover on volume into 2024 from the new facilities?

It would be in the range of 2 billion units from those two facilities.

Okay. That’s all really helpful color. I appreciate it. Thank you.

Thank you. And I think with that, we look forward to talking to you here in another quarter. Thanks for everybody’s attention and participation today on the call.

Thank you. This does conclude the conference for today. We thank you for your participation and ask that you please disconnect your lines. Thank you. Have a good day.