Greetings, and welcome to the Ball Corporation Fourth Quarter 2023 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Dan Fisher, CEO. Thank you, sir. You may begin.

Thank you, Christina. Good morning, everyone. This is Ball Corporation's conference call regarding the company's fourth quarter and full year 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. In addition, the release includes a summary of non-comparable items, as well as a reconciliation of comparable net earnings and diluted earnings per share calculations. Before we discuss Ball's strong earnings and cash flow performance, I would like to remind call participants that on August 17, 2023, the company announced an agreement to sell its aerospace business. The transaction is subject to regulatory approvals and certain closing conditions and adjustments. Relative to the company's aerospace divestiture, which is projected to close in the first half of 2024, certain forward-looking financial metrics provided in today's earnings release and conference call commentary may differ from those expressed or implied due to the timing of a successful closing and the timing of the proposed use of proceeds. Today I'm joined on our call by Howard Yu, EVP and CFO. I will provide some brief introductory remarks. Howard will discuss 2023 financial performance and key metrics for 2024, and then we will finish up with closing comments and Q&A. Our team delivered strong operations-driven fourth quarter results and for the full year. We achieved double-digit comparable operating earnings growth and generated $818 million in free cash flow. 2023 also delivered a dynamic set of strategic decisions and factors that influenced results and sharpened Ball's vision for the future, including our decisions to sell aerospace for a premium valuation and to reduce fixed costs by adjusting our manufacturing footprint and factors that influenced year-over-year results, such as a large U.S. customer experiencing major brand disruption, an $86 million comparable operating earnings headwind due to the Russian business sale, and the effect of Argentine hyperinflation and currency devaluation. Late in 2023, we also had the good fortune of welcoming Howard to Ball. Many of you listening have already had the pleasure of meeting with Howard at multiple conferences and our investor community welcome reception in November. His financial expertise, engaging nature, and fresh perspective are adding value from the outset and activating another stage of continuous improvement actions at Ball. Over our 144-year history, each year has presented its opportunities, challenges, and changes, and the legacy of how the Ball team continuously adapts to position the company for long-term success is the reason we are all here today. I'm proud to say that the resiliency of our team and our chosen substrate, aluminum packaging, combined with improving plant and program execution, more than offset the earnings impact of challenges experienced in 2023. And there were many more things to be done to make the most of our opportunities. Reflecting further on 2023, our customer mix and inflationary effects on end consumer demand drove our shipments. Global shipments ended 2023 down 3.3%, excluding the Russian sale impact, and shipments would have ended the year roughly flat versus 2022 if not for the U.S. brand disruption issue. Overall, the aluminum packaging industry continues to outperform plastics and glass packaging. For Ball, continued volume strength in Brazil and better-than-expected volume in North America to close out 2023 offset regional softness in Argentina and EMEA. For a complete summary of regional shipments for the fourth quarter and full year of 2023, please refer to today's earnings release. Looking ahead, our global teams are energized by recent commercial wins and other constructive customer discussions to continue the packaged mix shift to cans. We will continue to advance the sustainability of aluminum packaging by accelerating our pathway to carbon neutrality and leveraging the scale of our footprint, innovative portfolio, and value chain partnerships to expand opportunities for our customers over the long term. Given seasonality, our customer mix, and the April 2024 anniversary of the U.S. customer brand disruption, we anticipate year-over-year volume growth to favorably inflect after the first quarter of 2024 and accelerate further in 2025. Significant opportunity lies ahead to offset the financial impact of the projected aerospace sale and to drive compounding value creation for our fellow shareholders. Key drivers in 2024 will be the utilization of net proceeds from the aerospace sale to deleverage and repurchase stock, improving operational efficiencies and fixed cost absorption, leveraging our well-capitalized plant assets to grow the use of innovative, sustainable aluminum packaging across channels, categories, and venues, in addition to further actions to strengthen the balance sheet and reduce long-term liabilities. Based on our current demand expectations and the potential timing and benefits of the aerospace sale proceeds, we are positioned to grow comparable diluted EPS, generate strong free cash flow, strengthen our balance sheet, and accelerate the return of value to shareholders in 2024. We look forward to showcasing our team and unveiling our future operating model and long-term growth plans at our biennial Investor Day scheduled for June 18th in New York City at the New York Stock Exchange. And with that, I'll turn it over to Howard.

Thanks, Dan. Over the first few months of my onboarding and immersion, I have learned more about the business by visiting our teams in North America, South America, and EMEA, toured multiple manufacturing facilities to see how our innovative products are made, and attended several investor events where I've had the opportunity to meet many of you on this call. It has become more apparent what a terrific workforce we have around the world and what a tremendous opportunity we have in front of us to make an impact for our customers, shareholders, and communities. I would like to thank my global colleagues, investors, and analysts who have taken the time to give me such a warm welcome. Turning to our results, 2023 full year comparable diluted earnings per share was $2.90 versus $2.78 in 2022. And fourth quarter 2023 comparable diluted earnings per share was $0.78 versus $0.44 in the fourth quarter of 2022, an increase of 4.3% and 77.3%, respectively. Full year sales decreased due to the pass-through of lower aluminum prices, lower beverage can volumes, and the sale of our Russian business offset by the pass-through of inflationary costs and increased volumes in our aluminum aerosol. Full year comparable operating earnings increased nearly 10% year-over-year, primarily due to the contractual pass-through of inflationary costs, fixed cost savings, and benefits of our prior year SG&A cost-out initiative offsetting the headwinds in the sale of our Russia business and lower volumes. The global operations team finished the year strong, hitting their CapEx, raw and finished inventory goals, setting the stage for continued improvement of better fixed cost absorption in 2024, particularly after we anniversary the customer brand disruption and cease production in the Kent plant in the first quarter of 2024. Versus recent years, we anticipate our production aligning with shipments as we step into incremental volume growth later in 2024. In North America, supply demand has tightened following the footprint adjustments, and we continue to focus on lowering costs across our well-capitalized plant network and driving incremental volume growth without spending incremental capital. Exiting 2023, PPI remains a net positive. Non-alcohol global key accounts have started to gain traction in retail, and we continue to prepare for additional modest volume improvement after the first quarter and net of historic customer shifts. In EMEA, the business nearly filled the $86 million comparable operating earnings hole from the Russian business sale and continues to navigate varying consumer end demand conditions, particularly in Egypt, Turkey, and the U.K. The business is poised for year-over-year comparable earnings growth in 2024, largely in the second half. In South America, our volumes increased 2.2% in the fourth quarter of 2023, despite ongoing weakness in Argentina. We continue to monitor the situation in Argentina and potential scenarios that could impact results. We remain optimistic about Brazil, with January volumes off to a good start as the summer selling season continues. Our non-reportable results led by aluminum aerosol saw 8.2% volume growth and double-digit operating earnings growth finish 2023 strong. Moving on to additional key financial metrics and goals for 2024. We achieved our year-end 2023 net debt to comparable EBITDA goal of 3.7 times, and incorporating the use of projected aerospace sale proceeds and strong cash generation in 2024, we anticipate year-end 2024 net debt to comparable EBITDA to be in the range of 2.7 times. 2024 CapEx is targeted to be in the range of $650 million, a year-over-year reduction of $400 million, and largely driven by carry-in capital related to prior year’s projects. 2024 free cash flow is expected to be in the range of $500 million, excluding the impact of taxes due on the projected aerospace sale. Our 2024 full year effective tax rate on comparable earnings, including the effect of projected aerospace sale, is expected to be approximately 21%, largely driven by lower year-over-year R&D tax credit. Full year 2024 interest expense is expected to be in the range of $330 million, including the impact of lower leverage following the successful aerospace closing. Full year 2024 corporate undistributed costs recorded in other non-reportable as expected to be in the range of $85 million and more first half-weighted versus last year. Last week, Ball declared its quarterly cash dividend, and we look forward to reinitiating meaningful share purchases during 2024 and beyond. Also, a call-out about tough year-over-year comps we face in the first quarter of 2024, driven by North America and corporate costs. Due to the 2023 favorable virtual power purchase agreement settlement, totaling approximately $30 million and a similar impact of the customer brand disruption, which does not anniversary until April of 2024, North America earnings and volumes will be down year-over-year in the first quarter. Looking at 2024, we will be laser-focused on operational excellence, driving efficiency and productivity across our business, optimizing SG&A costs, and offsetting stranded costs post-aerospace divestiture. In addition to strengthening our balance sheet by deleveraging and other actions. We are committed to delivering value through share repurchases and dividends and will communicate and stay close to our shareholders. With that, I'll turn it back to Dan.

Thanks, Howard. As we continue to make progress in 2024, we anticipate growing our EPS and offsetting the divestiture through growth in our aluminum packaging operations, interest income, lower interest expense, and the benefit of a lower share count. Looking ahead, we are focused on executing our enterprise-wide strategy to advance sustainable aluminum packaging solutions on a global scale by accelerating our pathway to carbon neutrality and unlocking additional value from within the organization by driving continuous process improvement and operational excellence. Together, we will strive to deliver innovative aluminum packaging solutions that can lead to a world free from waste and embark on a path to deliver compounding shareholder returns in 2024 and beyond. We appreciate the work being done across the organization and extend our well wishes for a prosperous 2024 to our employees, customers, suppliers, stakeholders, and everyone listening today. Thank you to everyone listening, and with that, Christina, we're ready for questions.

Thank you. We will now be conducting a question-and-answer session. Our first question comes from the line of Ghansham Panjabi with Baird. Please proceed with your question.

Thank you, operator. Good morning, everybody.

Hey, good morning.

Dan, maybe you could just start off just kind of giving us the base case for volume assumptions across the different geographies you have exposure to for 2024. I know you made some comments on the first quarter, but how do you think the full year is sort of going to unfold with all these ups and downs across the statements, Europe starting to decelerate and obviously comps in North America?

In Europe and North America, we expect volumes to improve sequentially. By the second quarter, North America should start to return to growth, while Europe will likely experience growth throughout the second, third, and fourth quarters. North America is in a unique position as we navigate a tough comparison, but we anticipate ending the year flat or slightly better in that region. Sequential improvement should become evident toward the year-end, and as we look to 2025, I believe we will be in the growth range of 2% to 3%. It's early days, but we're slightly ahead in January across all three regions. Notably, for the past four weeks, we've seen positive trends in the U.S., which is encouraging. Although it's just one month, having favorable data is a good sign, and it's the first time in a couple of years that we've seen this. In South America, we’re projecting mid-single-digit growth, with Brazil remaining strong. While Argentina is slightly better than expected, it still shows a year-over-year decline. However, changes made by the executive branch have been more favorable than anticipated from a macroeconomic perspective towards the end of last year. So, we feel cautiously optimistic, but we need to see how things develop. Overall, we're forecasting 2% to 3% global growth, mid to high single digits for South America, low to mid-single digits for Europe, and a possibility of some growth in North America for 2024.

Great. You need Taylor Swift to push cans.

Yeah.

I just want to clarify if the free cash flow was $500 million for 2024. If that’s correct, what are the underlying assumptions? I understand you mentioned cash interest, but we're struggling to reach that figure with $650 million.

Sure, Ghansham. I’ll walk you through that a bit. We have a tax payment related to the aerospace divestiture that will affect our operations, which in turn will impact our free cash flow. We’ve mentioned a projected $650 million in capital expenditures. Additionally, we discussed in the third quarter that in 2024 we will be unwinding some of the factoring of our balance sheet accounts receivable that we've used historically, resulting in cash outflows. We are targeting approximately half a billion dollars for that as well. Regarding the underlying business, we expect to continue generating operating earnings within a range of $15 to $18 billion, consistent with what we saw in 2023.

Fantastic. Thank you so much.

Yeah.

Our next question comes from the line of Arun Viswanathan with RBC. Please proceed with your question.

Great. Thanks for taking my question.

Sure.

I would like to understand the current promotional activity in North America and whether you could update us on your approach for the first half of the year. Additionally, has there been any offset from the loss of Bud Light in terms of other brands or customers?

Sure. Your question touches on whether I'm observing any promotional activity or changes in the domestic market. From what we're hearing from our customers, there hasn't been much promotional activity in January. However, as we approach the Super Bowl, which typically brings traditional promotions, we are starting to see some of that. Overall, large CPG customers acknowledge they will need to compete for revenue this year, which should be beneficial for us and the industry as a whole. We're noticing some positive trends in growth that stand out compared to the last 18 to 24 months. Regarding the impact of Bud Light, there is some additional volume helping to address that gap. We handle a significant amount of that product, and our exposure to that brand is substantial. While there are smaller brands growing and contributing to this, it's not significantly substantial; it's improving but not dramatically. The best scenario would involve other products from the same brewer to drive growth. We expect that the Bud Light brand has reached its lowest point and is beginning to recover. We've anticipated this scenario for the past six to nine months and have communicated that. Currently, there's nothing significant to update regarding guidance. We may see an increase in activity as we near the Super Bowl and more traditional promotions, but I don't foresee us closing the gap entirely until other brands and products help us address the impact of the marketing changes that will phase out in April.

Great. Thanks. And then if I could just ask about one more follow up.

Yeah, sure.

Do you think there will be further actions regarding supply and demand or changes to your capacity in different regions? Is there a need to adjust your presence in Europe or North America? I know you are not proceeding with Las Vegas, but what are your thoughts on this? Are you expecting to announce a larger cost reduction program in North America, or are you content with your current situation? Thank you.

I believe we are content with our position in North America. We have noticed that other industry players are starting to follow our lead. At a high level, we have retired older, less efficient assets that required excessive maintenance capital expenditures to perform at the required market standards. This leaves us with a more appropriate structure for our needs. As volumes increase, we won't need to cut costs; instead, we plan to continue operating our facilities as they are while enhancing our learning processes with the new lines we have. This approach will lead to increased productivity and higher profit margins as we see growth. Regarding Europe, we must keep monitoring that market, as well as South America, due to ongoing issues in those regions, including conflicts in Europe and the Middle East. These factors will certainly affect our decisions. We also need to consider inflation and the potential for regasification in Europe. Overall, we believe our infrastructure is strong enough to achieve our plans for modest growth this year, and we aim to capitalize on the measures we have implemented while ensuring our plants operate efficiently to boost productivity as volumes increase.

Thanks a lot.

Yeah.

Our next question comes from the line of George Staphos with Bank of America. Please proceed with your question.

Hi. Thanks very much. Good morning, everybody. Thanks for the details.

Morning.

Hey, Dan, good morning. My first question is about your expectations. I know you're focused on Ball Corporation, but what do you anticipate for market growth in North America this year? Should we expect the usual growth range of two to four percent, or do you think it will be slightly lower or higher than that?

I believe it will be in the two to four percent range. There have been some well-documented contractual changes. Our being flat indicates that we've adjusted our portfolio. Some others may be experiencing growth, but I would consider the lower end to be around 2%. We’ll see how things go in the peak season, but we're observing a more normalized pricing behavior from our customers, which is important for having confidence in the underlying volumes, as they require volume. Overall, I'm feeling optimistic. It's within the longer-term range with potential growth into 2025. There are several discussions taking place regarding substrate changes, which are being revisited after a couple of years. So, you might end the year with a slightly improved run rate, but I think that the two to three or two to four percent range is a solid estimate across the industry.

Okay. No, I appreciate that Dan. And one question I had in terms of impact. It's having other positive or negative for you in terms of your operations and demand. There's been some discussion in the trade about some of the beverage companies having their operational issues to plan around which may have led or may lead to disruptions? Will that be a help ultimately for you to that impact fourth quarter at all? Just trying to peer there to the extent that we can. And then my last question, I'll turn it over. When you talk about carbon footprint, what we've seen is, and we've talked about this in the past, the plastic guys beginning to push on carbon footprint. What's your one-two punch in terms of why you think aluminum is better on that metric versus plastics when we look about carbon footprint through the supply chain? Thanks guys and good luck in the quarter.

I think our balance sheet situation varies by region, and for full transparency, it can be better or worse in different areas. Our plans and investments are starting to show, with capacity coming online that isn't fully operational yet but continues to be developed. Many of our initiatives involve 85% recycled content in our products and green energy for our facilities. This is occurring globally, and for instance, in Brazil, we have a lower carbon footprint than other substrates. The supply chain and investments in the aluminum industrial complex will aim to reach Brazil’s standards. Additionally, new technologies in virgin aluminum production are promising. We have recently introduced a product with 10% virgin aluminum and 90% recycled content that is nearly carbon neutral, thanks to a couple of companies that have implemented carbon-free smelting technologies. Continued investments in these technologies are essential as we approach 2030, which is a critical deadline for achieving our goals. I have a more positive outlook on the aluminum industry compared to two years ago, and our investments are evident. The supply chain is aligning with various associations to meet ambitious targets, and there are agreements in place to support this progress. This is no longer just theoretical; we have concrete plans and I'm confident we will achieve our goals more quickly than others. However, we need to maintain that investment trajectory. We are moving toward greater transparency and collaborating with our customers who also require this, especially with upcoming SEC reporting in 2027 and European regulations in 2026. We are pursuing carbon neutrality vigorously, and I believe we are well-positioned to deliver on these goals.

Thanks Dan. And just on customer disruptions and what it might mean for you.

We now have the capability in North America to better handle our operations. We are utilizing our plants more efficiently than we did over the past two to three years. As a result, we should be able to respond more effectively. Our communication, supply plans, and S&OP processes have significantly improved. Our experiences during COVID and the supply chain challenges prompted us to refine those processes, and I believe we are well-positioned to address any surges in volume. The combination of our operational efficiency and the established S&OP processes—which we are continually enhancing—gives us confidence in our ability to respond.

Thanks Dan. That's great.

Our next question comes from the line of Mike Leithead with Barclays. Please proceed with your question.

Great. Thank you. Good morning, guys.

Good morning.

First question just on North America. I think for the full year, your volumes were down about 7%, but your operating EBIT was up about 11%, which suggests your unit economics got quite a bit better this year. So, if we do return to say a 1%, 2% volume type environment, I guess what sort of incremental margin should we expect on actual volume growth here in the business?

Yeah. Just as a reference point, this year involved some catch-up regarding PPI economics. Moving forward, aligning more with our historical trends, if we achieve a percent of growth, we should see a doubling of earnings. There’s potential for even better performance since our operations are positioned more effectively and cost-efficiently. I would expect that doubling of volume unit growth will translate into earnings flow, possibly with a slight increase in the coming years, depending on the mix, channel, category, and customer factors.

Great. Thank you. And then second, just for Howard, I think you mentioned, if I heard correctly about $500 million for AR factoring unwind in 2024. I guess how much cost savings would you expect from that action? And where is that cost currently showing up in your P&L today?

We use the current spot interest rate for savings. For example, if you take $0.5 billion, that would be roughly 4% of that amount. As it pertains to the savings, we would reflect it at the operating level in the SG&A line, which is typically where we would see the savings associated with that.

And the two regions, specifically building on that, is where the higher cost programs are in South America and in North America, but South America even the current spot market interest rates.

Great. Thank you.

Sure.

Our next question comes from a line of Edlain Rodriguez with Mizuho. Please proceed with your question.

Thank you. Good morning, everyone.

Good morning.

Just a quick follow-up on the capacity closure question. I mean, yes, you have rationalized your footprint. Like, do you think the industry as a whole is where it needs to be? Like, do other industry players need to close some capacity? Or is the market balanced now given the expected recovery in volume?

I believe the North American industry is in a good position overall. It's important to note that we are currently maintaining most of the excess capacity related to the beer brand, and we are managing that on a cash basis. We expect this situation to change over time. If the industry is growing at a rate of 2% to 4%, I think we are at a solid point regarding asset utilization and the balance between supply and demand.

Okay. Just a quick question about Argentina. Can you tell us what the sales percentage from Argentina is for the company? Also, do you anticipate a decrease in beer consumption due to currency devaluation? What are your expectations regarding that?

The beer market has shown strong resilience, with growth in aluminum packaging compared to glass being quite positive over recent years. In Argentina, we expect volume to remain roughly flat, possibly showing slight improvement year-over-year from 2022 to 2023, with potential growth in the latter half of the year and into 2025. People are still consuming beer, particularly from cans, but I don't anticipate significant growth compared to last year until the situation stabilizes.

Yeah. I think maybe just to go ahead and characterize the size of business for us. It's roughly about 1% of our operating earnings in 2023 and represents about 2% of our volume. And so, clearly, despite seeing 2023 negative volumes there in Argentina in the region, we still drove to 2%-plus growth driven by the strength of Brazil. So, hopefully that helps characterize a little bit about the size of that business.

Okay. Thank you very much.

Our next question comes from the line of Phil Ng with Jefferies. Please proceed with your question.

Hey, guys. You guys have been cutting on and off and I think Howard, when you gave your outlook, part of that was cut off. So, I just want to make sure I heard you correctly. So you're guiding to $500 million of free cash flow for 2024, but from a normalized basis, that would probably look a lot better. Did you say Howard, it was like a $500 million headwind from factoring reversing and there's some impact on the tax for aerospace? Can you kind of flush that out? Just make sure we understand what the true free cash flow power of this business would look like.

Sure. You are correct that in 2024 we expect around $500 million of factoring. This will effectively add back to our working capital and represents a cash outflow in that sense. From the total $5.6 billion proceeds related to aerospace, we expect approximately $1 billion to be allocated for tax payments, which also impacts our operating cash flow. Although the cash inflow is categorized under investing, the outflow occurs in operating cash flow. To give you some context from 2023, our operating cash flow was around $1.8 billion, slightly above that. After accounting for working capital, which we estimate to be about $300 million to $360 million, we have a base for 2024 of approximately $1.5 billion. After factoring in the tax payment, this leads us to the $500 million of free cash flow I mentioned.

Okay. That's helpful. And then on Europe, can you guys provide a little more color? The quarter is definitely a little softer from a volume perspective. Profitability still looks quite strong. How are things kind of shaping up to start the year? I think, Dan, you were kind of pointing to maybe that business inflecting positively from a volume standpoint, maybe sometime in Q2, but just kind of give us a little more color on how things are progressing in Europe and what you're seeing there.

I agree with you, Phil. North and South America finished the year on a positive note in terms of volume, while our expectations for Europe were not met, being even softer than anticipated. Regions like Egypt and Turkey also contributed to the lower volumes in the fourth quarter. Starting the year, we're performing slightly better than we expected. We initially anticipated a flat to down first quarter year-over-year for Europe, but after the first four weeks, the situation looks a bit more optimistic. As we approach the peak season in the second half of next year, we hope inflation will ease in Europe, which could benefit consumers. Retailers have been proactive in their pricing strategies, which should help improve our volumes. We're still aiming for modest growth in Europe, with a potential positive trend in the later quarters of the year. If current conditions persist, we might see a little more improvement in the first quarter as well.

Okay. Appreciate the color.

Yeah.

Our next question comes from the line of Adam Samuelson with Goldman Sachs. Please proceed with your question.

Yes, thank you. Good morning, everyone.

Hi, Adam.

Hi. So, I guess, maybe just going back to South America and I know Argentina had issues in the fourth quarter. Volumes in the segment were up 2%, profit was up 60%. And I'm just trying to make sure with FX and hyperinflation and the Argentine impact, I'm understanding kind of the magnitude of that profit growth in South America as we think about what that business will do or can do into the future if you don't have some of those disruptive impacts by the end of next year.

I believe there is a lot happening in Argentina. We've noticed the volume change. As we assess the business and engage in various scenario planning, we continue to consider the situation regarding fiscal policies and similar factors. Traditionally, this area has been one of our strongest performing regions. We are actively monitoring the situation and working to mitigate risks where we can. For now, we are confident in the long-term stability of the market, and we want to ensure that we support our customers there.

I would like to add a few comments. In more volatile emerging markets, you typically receive a significant premium for being active there. When volume decreases, your margins can shrink due to the mix of countries involved. This is the current situation compared to a couple of years ago, especially in Argentina, where the volume is crucial. As that volume increases again, we expect to see an upward trend and improved leverage. Brazil has shown remarkable resilience, with a positive trend in the second half and a strong start in January. Our team is optimistic about a solid and improved first quarter, which will be beneficial. Key factors in Brazil will be reflected in the product mix, and the way we sell our cans and ends to major customers has considerable tax fluctuations. Overall, the full year may be a bit inconsistent from quarter to quarter, but we anticipate a more profitable business with mid to single-digit growth. Chile and Paraguay have also started off well, giving me confidence in the South American market. However, Argentina is significant for us regarding your question. We are maintaining relatively flat earnings year-over-year, and while growth in other areas may impact margins on a mixed basis, earnings will align with the performance of those regions and historical customer deliveries.

Okay. Now that's really helpful. And then if I just ask a follow-up on the other kind of non-reportable businesses, the aerosol and the cups business. The aerosol business had a good fourth quarter. How do we think about that line item offsetting corporate moving into 2024?

We experienced a year-over-year improvement of 40% in operating earnings for the aerosol business. We anticipate double-digit growth in earnings next year. The team has done an excellent job revitalizing that business, which is driving growth, particularly due to the emerging reuse category in regions like Europe, especially in personal care and beverages. We're also implementing disciplined contract management to address inflation and related issues. Over the next 36 months, we expect that business to have doubled its earnings. We continue to see encouraging growth in that area. The performance of cups is expected to improve slightly. Food service has shown growth, while retail faced challenges this year. However, we should see ongoing positive trends in food, which represents a significant opportunity for cups, with minimal margin improvements anticipated, possibly ranging from $5 million to $10 million better year-over-year.

Okay. That's all really helpful color. I'll pass it on. Thanks.

Thanks.

Our next question comes from the line of Mike Roxland with Truist. Please proceed with your question.

Thanks, Dan, Howard, and management for taking my questions.

Sure.

A lot of ground covered today. And just wanted to follow up quickly on the business development efforts you're pursuing. You called it out in the press release. Any reason why you felt the need to call it out? Is this something that you've recently accelerated?

Yes. We are making a more conscious effort to push innovation, and it's being received. It's a catch-22, right? Somebody has to be asking for it as well. And we're seeing more of that. I think I made reference to this in the last earnings call as well. It's going to take innovation, and it's going to take differentiation for our customers. It's not just going to be pricing as they move forward. In order to grow, they're going to have to get back to what they've historically done. New product launches, new brand launches, new innovations, all of that is going to matter. That is something that we do really well. So, we're stepping into those opportunities, and that's why we called it out. I suspect over the back half of this year and in 2025, you'll start to see some things show up on shelves that we're encouraged about. I'll leave it there.

Got it. And does that require any headcount?

No, it doesn't require additional headcount. I believe we have what we need. It's essential to assess whether we have the right mix of skills and capabilities, and that's what we're focusing on. We'll discuss this further during Investor Day in June, but we are close to becoming solely an aluminum packaging company. We have some advantages; we excel in innovation and can promote sustainability at scale. These two aspects need adequate resources, but that doesn't imply increased costs. In fact, we should be able to achieve this more efficiently than we have in the past.

Got it. And one quick follow-up, Dan. Just in terms of the retailers resetting shelf space, any early signs of how that's going to play out and when you can start maybe using some of that underutilized capacity that you have?

We're definitely growing with folks that are taking shelf space and share. It is inflecting in a couple of plants directly located to those customers. I wouldn't say it's meaningful across the system and it will continue to grow. But you really won't see those shelf space impacts until peak season. That's where it really manifests. So, Q2 and Q3 will be something that could alter hopefully positively our outlook as we're giving it today.

Got it. Thanks very much and good luck in 2024.

Thank you.

Our next question comes from the line of Gabe Hajde with Wells Fargo. Please proceed with your question.

Dan, Howard, good morning.

Hi, Gabe.

Somewhat of a fact check here, Dan. You mentioned growth would have been flattish, I guess on the volume side, had it not been for the brand disruption. Is that directionally then about 3 billion units that we should be thinking about?

That's exactly it. I mean 3 billion and somewhere in that $8,200 million impact.

Thank you for that. It seems we have addressed each segment through different answers to questions. I believe you mentioned earlier that segment earnings in South America are flat for the full year, despite the mid-single-digit volume growth you've indicated. In North Central America, we are facing a $30 million negative impact from the energy contract, but there is a potential positive of $10 to $15 million from the unwinding of accounts receivable factoring, depending on timing. Volume growth remains flat. You noted that the producer price index should show positive results, and there may be a mid-year reset on the prior contracted amount of around $180 million. Additionally, low single-digit growth in Europe is leading to some improvement in operating earnings at the segment level in that region.

Ladies and gentlemen, please stand by. Your conference will resume momentarily. Again, ladies and gentlemen, please continue to hold. Your conference will resume momentarily.

Okay. Thank you. Sorry about that. We lost connection there for a second. I think in response to the last question, I think we're in a good spot to react to volume surges, if you will, just because of how we're operating in North America, the slack capacity we have in the conversations and the S&OP process that's been established and currently being refined and improved upon each and every day. So, feel good about our ability to react to that.

Thank you for that, Dan.

Our next question comes from the line of Mike Roxland with Truist. Please proceed with your question.

Thanks, Dan, Howard, and management for taking my questions.

Sure.

A lot of ground covered today. And just wanted to follow up quickly on the business development efforts you're pursuing. You called it out in the press release. Any reason why you felt the need to call it out? Is this something that you've recently accelerated?

Yes. We are making a more conscious effort to push innovation, and it's being received. It's a catch-22, right? Somebody has to be asking for it as well. And we're seeing more of that. I think I made reference to this in the last earnings call as well. It's going to take innovation, and it's going to take differentiation for our customers. It's not just going to be pricing as they move forward. In order to grow, they're going to have to get back to what they've historically done. New product launches, new brand launches, new innovations, all of that is going to matter. That is something that we do really well. So, we're stepping into those opportunities, and that's why we called it out. I suspect over the back half of this year and in 2025, you'll start to see some things show up on shelves that we're encouraged about. I'll leave it there.

Got it. And does that require any headcount?

No, it doesn't require additional headcount. I believe we have what we need. It's important to continuously evaluate our business to ensure we have the right mix of skills, and I think that's what we're focusing on. We will elaborate more on this during Investor Day in June, but we are close to becoming solely an aluminum packaging company. We have a couple of advantages: we excel in innovation, and we can promote sustainability on a large scale. These two areas will need proper resources, but that doesn't mean we will incur extra costs. In fact, we should be able to manage this in a significantly more efficient way than in the past.

Got it. And one quick follow-up, Dan. Just regarding the retailers resetting shelf space, any early signs of how that's going to play out and when you can start using some of that underutilized capacity that you have?

We're definitely growing with folks that are taking shelf space and share. It is inflecting in a couple of plants directly located to those customers. I wouldn't say it's meaningful across the system and it will continue to grow. But you really won't see those shelf space impacts until peak season. That's where it really manifests. So, Q2 and Q3 will be something that could alter hopefully positively our outlook as we're giving it today.

Got it. Thanks very much and good luck in 2024.

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.