Greetings, and welcome to the Ball Corporation Second Quarter 2024 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brandon Potthoff, Director of Investor Relations. Thank you, sir. You may begin.

Thank you, Christine. Good morning, everyone. This is Ball Corporation's conference call regarding the company's second quarter 2024 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 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. References to net sales and comparable operating earnings in today's release and call do not include the company's former Aerospace business. Year-to-date net earnings attributable to the corporation and comparable net earnings do include the performance of the company's former Aerospace business through the sale date of February 16, 2024. I would now like to turn the call over to Dan Fisher, CEO.

Thank you, Brandon. Today, I'm joined on our call by Howard Yu, EVP and CFO. I will provide some brief introductory remarks. Howard will discuss second quarter financial performance and key metrics for 2024. And then we will finish up with closing comments and Q&A. We remain laser-focused on creating a better, more sustainable world. During the quarter, Ball was included in the FTSE4Good Index Series, which is designed to measure the performance of companies demonstrating strong environmental, social, and governance practices. This highlights our unwavering commitment towards a more circular future. Across our global organization, our employees continue to demonstrate our values in the areas of recycling, education, and STEM manufacturing and disaster relief and preparedness, as evidenced by our recent global volunteer month impact. During the month of April, our employees contributed over 3,100 volunteer hours across 17 countries. Thank you to our 16,000 colleagues that continue to demonstrate that we care. Under the themes that we work and we win, our team delivered strong second quarter results. Global beverage can and global extruded aluminum aerosol shipments increased 2.8% and 5.6% in the quarter, respectively. In addition, we executed on our share repurchase plans and have returned approximately $925 million to shareholders via share repurchases and dividends as of today's call. Reflecting further on year-to-date 2024 performance, aluminum packaging continues to outperform other substrates across the globe. In North America and EMEA, second quarter volumes exceeded our internal expectations. In South America, softer than anticipated volume performance was driven by our exposure to Argentina. For a complete summary of regional shipments for the second quarter, please refer to today's earnings release. Consistent with our previous commentary and given our customer mix and incorporating second quarter and year-to-date regional volume performance, we continue to anticipate full year global shipments to grow in the low to mid-single digits range. Key drivers for our company's performance in 2024 continue to be the benefits of deleveraging, repurchasing shares, improving operational efficiencies, and leveraging our well-capitalized plant assets to grow the use of innovative, sustainable aluminum packaging across channels, categories, and venues. Based on our current demand trends and the previously mentioned drivers, we are positioned to grow comparable diluted EPS in the mid-single digits off of 2023 reported comparable diluted EPS of $2.90 per share, generate strong adjusted free cash flow, strengthen our balance sheet, and now expect a return of value in excess of $1.6 billion to shareholders via share repurchases and dividends in 2024. With that, I'll turn it over to Howard.

Thank you, Dan. Turning to our results. Second quarter 2024 comparable diluted earnings per share was $0.74 versus $0.61 in the second quarter of 2023. Second quarter sales were influenced by the pass through of lower aluminum prices as well as lower volumes in South America, offset by increased volumes in North America and EMEA, as well as favorable price/mix in South America. Second quarter comparable net earnings of $232 million were up year-over-year, primarily due to strong operational performance, including improved year-over-year performance in North America, EMEA, and South America, lower corporate undistributed costs, and lower interest expense. In North America, segment comparable operating earnings exceeded our expectations and offset year-over-year headwinds associated with the US beer brand disruption. Benefits of effective cost management and plant efficiencies across our well-capitalized plant network will continue to support incremental volume growth. We continue to anticipate year-over-year earnings improvement during the second half of 2024, driven by improving operational efficiencies, lowering costs, and effectively managing risk. In EMEA, overall segment volumes were up stronger than anticipated. Recent demand trends remain favorable, and the business continues to be poised for year-over-year comparable operating earnings growth throughout the remainder of 2024, driven by improving operational efficiencies and volume growth. In South America, our segment volumes decreased 3.2%, following a strong first quarter where volumes increased 26.3%. During the second quarter, consumer conditions in Argentina deteriorated further, though we appear to be beyond the most difficult comparisons, given the timing of Argentina's 2023 slowdown. Despite these challenges, strong demand in Brazil of mid-single-digit volume growth and our customer mix continue to drive our business. We continue to monitor the dynamic economic situation in Argentina and potential scenarios that could impact results. We remain optimistic about Brazil and our ability to deliver sequential earnings and volume improvement as we enter the summer selling season in South America. Moving on to additional key financial metrics and goals for 2024. Very consistent figures to those provided during our first quarter earnings call and June Investor Day commentary. We continue to anticipate year-end 2024 net debt to comparable EBITDA to be below 2.5 times. While we are currently at 2.3 times at the end of the second quarter, net debt to comparable EBITDA may nudge slightly higher by the end of the year as the company continues payments of taxes due on the gain from the sale of the aerospace. 2024 CapEx is targeted to be in the range of $650 million, a year-over-year reduction of $400 million, largely driven by carrying capital related to prior year's projects. We are on track to achieve our adjusted free cash flow target, and share repurchases are expected to be in excess of $1.4 billion by year-end. Through today's call, we have repurchased approximately $800 million in shares year-to-date. Our 2024 full-year effective tax rate on comparable earnings is expected to be approximately 21%, largely driven by lower year-over-year R&D tax credit associated with the sale of the company's aerospace business. Relative to the estimated tax payments due on the aerospace sale, the first payment was made during the second quarter, and the remainder of the approximately $1 billion in taxes due will be paid throughout the second half of 2024. Full-year 2024 interest expense is expected to be in the range of $300 million. Excluding the non-comparable aerospace disposition compensation costs, full-year 2024 reported adjusted corporate undistributed costs recorded in other non-reportable are expected to be in the range of $90 million. And last week, Ball's Board declared a quarterly cash dividend. Looking ahead to the rest of 2024, we remain laser-focused on operational excellence, driving efficiency and productivity across our business, cost management and monitoring emerging market volatility. We are committed to maximizing the full potential of our company over the long term. We have executed on de-risking the corporation through recent debt retirements, and we have no significant near-term maturities. The runway is clear for us to activate near-term initiatives to consistently deliver high-quality results and generate compounding shareholder returns. With that, I'll turn it back to Dan.

Thanks, Howard. The business is operating well. And as we look forward to the second half of the year, we continue to anticipate growing our 2024 comparable diluted EPS in the mid-single digits plus. While the consumer backdrop remains volatile due to the strength of our portfolio and the unwavering dedication of our employees, we are confident we will deliver on our 2024 guidance and long-term commitments laid out at our June Investor Day. 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 through 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. As we communicated at our June Investor Day, shareholder value creation is our focus. Going forward, we anticipate 10% plus per annum diluted EPS growth, consistent delivery of high-quality results and operational performance, coupled with significant share repurchases for the foreseeable future. In addition to returning value to shareholders via dividends, we'll drive shareholder value creation. We appreciate the work being done across the organization and extend our well wishes to our employees, customers, suppliers, stakeholders, and everyone listening today. Thank you. And with that, Christine, we are ready for questions.

Our first question comes from Ghansham Panjabi with Baird.

I guess first off on 6.5% growth in the EMEA segment for 2Q. I think you mentioned it came in above your internal expectations. If you could just give us a bit more color on that, what drove that specifically? And then also how do you see that evolving into the back half of the year?

I think we experienced a bit of relief as we moved from Q1 to Q2, seeing some inflation easing. The end consumer showed signs of strengthening in certain areas, along with more assertive pricing from customers with whom we have a partnership rather than just a supplier relationship. This positively impacted our product mix. I believe this trend is ongoing, and I have mentioned throughout the year that whether companies are succeeding or struggling depends more on regional product mix rather than winning or losing contracts. In Europe, our mix is different, with a stronger focus on consumer packaged goods and energy compared to North America, which leans more towards beer. We benefited from this mix in Europe and expected strong performance due to competition in the euro market. Interestingly, we were ahead in Europe despite challenging weather conditions in the Nordics, the UK, and Ireland before the holiday season, which usually helps boost sales. This added unexpected but not drastic surprises. We remain optimistic about Europe for the medium and long term, seeing plenty of potential there. There are encouraging signs that competitors in Europe are fighting for volume, perhaps even more so than in North America. We believe we will continue to perform well in Europe for the rest of the year and into the future.

And then for beverage, North America, Central America, how did that sort of break out between US, Canada versus, let's say, Mexico and some of the other regions down there? And then just holistically then, as you think about your portfolio and the new products that the industry has introduced to higher price point items, etc., in context of consumer affordability, so as you kind of think about the weakness you're still seeing in portions of the North American business. How is that propagating, is it still at the low end or is it starting to permeate towards the middle consumer and the high end as well?

I believe the US is distinct from other parts of the world. There's a notable difference. You can see it with one of the major brewers, which is experiencing growth in both the high-end and low-end brands. However, the premium light beer segment seems to be where consumers are downgrading. We've observed this pattern for about 18 months, which is why we've been adjusting our cost structure and modifying our operating model. For instance, there's slower growth in the energy drink category. Such trends suggest we're nearing the lower end of recessionary pressures and the overall health of consumers. We're functioning in that environment, yet we continue to grow and increase profitability, which is reassuring. If there’s an interest rate cut in September and more clarity surrounding the election, it could foster greater optimism among us and our competitors. I don’t anticipate much further decline regarding consumer behavior, even though we've been navigating these challenges for 18 months. We've recognized shifts toward lower spending and less frequent purchases. Consequently, our customers and certain market segments will likely need to implement different pricing strategies to boost sales volume. Overall, I feel we're in a favorable position compared to how the industry has been performing during the past 18 months, so I’m feeling more optimistic than pessimistic.

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

I just want to pick up my first question, piggyback on the topic Ghansham raised. So at this juncture, are your customers talking about doing more incremental net promotion price reduction, etc., or do they see kind of the next way to grow out of this really on innovation? The context, if we go back not quite ten years ago, but sort of post-Rexam, especially in alcohol, there was a lack of volume growth, and it was innovation that drove growth, at least in part. At this juncture, innovation comes at a higher price. Is this the wrong time to drive innovation? So really, the only way to deal with this is to drop price and raise promotion, how are your customers thinking about that? And what are you doing to help them in that evaluation?

This is primarily a US trend, more than in any other region I observe. Innovation is concentrated at the high end. For instance, in the beer market, high-end brands are increasing their advertising and innovating more because consumers are willing to pay for it. Conversely, the lower end is driven by value. The largest brewer in North America has two brands that are significantly outperforming others: one targets high-end consumers and the other focuses on low-end consumers. The premium light beer segment, which falls in the middle, will need to adopt different pricing strategies. Innovation will keep advancing into new categories and existing high-end brands, while maintaining competitiveness in the low-end segment may be even more crucial than before. In the middle ground, companies excelling in the market, whether in carbonated soft drinks or alcohol, are effectively navigating inflation, branding, discounts, and revenue models, leading to brand superiority. The brand's integrity and value are becoming evident after years of observation in this space. We are assisting them in innovation and leveraging our resources to help reduce supply chain costs and improve agility in delivery. We can utilize our economies of scale to cater to both ends of the market strategy. The remaining challenge for the customer is to determine how to position major brands, assess brand value, and decide on pricing to boost volume. I expect to see a shift toward growth strategies over the next six months, focusing on whether the end consumer demand is sufficient to sustain or increase volume. I believe we will at least maintain our current stable position, with a possibility of a slight improvement. This scenario is distinct from the past, especially post-Rexam, and the discussions are indeed different. Innovation is necessary, even for high-end brands, while it’s essential to maintain strict control over supply chain efficiencies for low-end products. This requires more deliberate efforts on both sides.

So what does that mean for your mix as you layer those two or three or pull those two or three levers that your customers do into the back half of the year, what are you seeing in terms of volume trends to start 3Q? And how do you feel about the plant network overall as it exists relative to those trends as you see them?

There is a short-term impact from the product mix, particularly with a minor reset in October, but the significant changes will come during the January-February retail reset, which typically sees more innovation and new product introductions focused around the Super Bowl in North America. We are experiencing a decrease in fleet costs due to the strategic decisions we've made regarding the fixed costs at our plants. The new operational model is showing benefits as we prioritize efficiency and operational excellence. Improvements in freight costs and a smaller warehousing footprint are enhancing our supply chain efficiency. As our volumes increase, we expect to see more gains from these efficiencies. Our discussions with customers are productive, and they are noticing our efforts, reflected in our rising Net Promoter Score. In the immediate term, the makeup of our customer base is crucial, and we have seen significant benefits from the customers we have this year, especially in North America.

Our next question comes from the line of Jeff Zekauskas, JPMorgan.

So over the past few years, Ball has increased its capacity in North America. And then what it did is, it reduced it to become more efficient. If you compare your North American capacity today to what it was in 2019, has it changed very much?

Yes, we have more capacity. We're selling more. We have more capacity and there's additional envelope and room for us to grow capacity further.

And in terms of the volume that you experienced in the Americas in the second quarter, was the beer market down and the consumer soft drink market for you up?

That's correct. Our customer portfolio on the CSD side was a benefit to us.

Our next question comes from the line of Josh Spector with UBS.

I was wondering if you could square kind of your short-term view here around growth versus your long-term view. And just given kind of some of the outperformance here in 2Q, do you think you could start to see, call it, high single digit to 10% plus growth in EPS in the second half, considering you're starting to face some easier comps, or do you need a more favorable backdrop to really drive more of that?

I would like to mention that we experienced a notable situation in Q3, which Howard will explain. As for Q4 and beyond, your observation is accurate. There is an anomaly in Q3 that he will clarify for you.

Yes, that's correct, Josh. We experienced a substantial impact from the R&D tax credit in Q3 of last year, particularly related to the aerospace sector, amounting to nearly $40 million. This will make the comparisons for Q3 somewhat more difficult. However, as Dan mentioned, I believe that as we move into the fourth quarter and beyond, we are on track to achieve more than 10% EPS in 2025 and in the subsequent years.

And in Q3, just to reiterate, if you take out the one-time benefit, then yes, we're operating at 10%-plus EPS moving forward.

I think just even despite the tax credit, I think that we will be up as it relates to third quarter EPS. And so that $40 million or nearly $40 million is a pretty meaningful impact. But despite that we'll still be up year-over-year.

I just wanted to follow up on specifically inventory in beer in North America. I don't know if you have any visibility around your customer levels of where things are at in terms of days or cases? And if there is more promotional activity, is that a big pull forward for you or do you think inventories probably stay leaner for longer?

I think our inventories are going to be a bit stronger moving forward, will lift a little. They're a bit too low. As you recall, this going back to Q1, we helped one of our beer partners significantly in Q1. So we kind of overshipped in one and now we're operating at lower inventory levels. So it's a rebalancing because of that for us that will settle out by the end of the year. And then I'm encouraged about kind of the trajectory of flight on a couple of the beer brands in particular. So yes, I'd say it's yet to be determined. But for us, in particular, no, we will still have some uplift in the second half of the year because we were operating so low in the first half because of some unique anomalies with uni negotiations and things like this.

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

Good to see the results. So I guess just a couple of questions on South America. So obviously, some challenging conditions in Argentina, some volatility down there. Do you still expect a very robust second half in your South America business, especially Q4? And what gives you that visibility? I mean, I guess, again, there is a lot of volatility on there, but are there any specific drivers that you'd point to?

We've had some positive developments. First, thank you, and I hope all is well. Here in Denver, we're dealing with a couple of forest fires, which explains any coughing you might hear. Now, regarding the second quarter and the situation in Brazil, I want to provide some context. In 2023, the third largest brewery filed for bankruptcy and didn't play a significant role in the market, despite a decent performance this quarter. When comparing year-over-year, we were stronger last year since this competitor wasn't active. However, year-to-date, we're seeing over a 10% increase because our partners are outperforming in the market, which has been the case for over a year. Our business is closely connected to a few key partners, and we're optimistic about several trends. We've noted that cans are regaining market share. Two years ago, returnable glass saw a 6 to 7 point share increase, which often happens in inflationary times. That trend is reversing gradually, and we've gained a couple of points of can share in Brazil, which is significant as we approach peak season, even though the second quarter is typically the lowest. Chile experienced a severe winter, but that will recover. Our business in Paraguay is thriving, and Peru is also performing well, while Argentina remains a concern. We have a good understanding of most of our operations and are hopeful for a positive trajectory in the second half. In Argentina, we anticipate a decline in volumes during the latter part of the year due to a slowdown that began this quarter and into the first quarter. Last year, various regulatory, monetary, and fiscal policies negatively impacted our margins, such as taxes and prolonged receivables. Therefore, margins in Argentina should remain steady year-over-year until conditions improve. We do expect volumes to drop, roughly by 1% year-over-year for Ball, which is significant for volume but less so for earnings going forward. As the end consumer shows signs of recovery, we expect that to improve. We're optimistic about the second half in South America, with ongoing positive developments in the region. The fundamentals in our largest market continue to be supported by good fiscal discipline, and inflation is stabilizing at the lower end of projections from central banks. We're feeling positive about the situation and believe conditions will improve in both Chile and Argentina over the next six to twelve months.

And then maybe if I could just ask a follow-up. So I appreciate the long-term comment on greater than 10% or 10% or better EPS growth. In our models, it seems like we're modeling kind of mid-single-digit or better EBIT growth in '25 and the rest is coming from lower interest expense and share buyback. Assuming that's correct, are you saying that you're able to maintain that level of growth in '25 and beyond? So are you kind of implying that you will continue to buy back stock and pull on some other levers other than just volume in order to achieve that level of EPS growth? Maybe you can just elaborate on what gives you the confidence that you'll continue to maintain that greater than 10% EPS growth rate?

I'll just make one high-level comment, and then I'll have Howard chime in. And so if you go back to our Investor Day, and I probably didn't do a great job of pointing this out. But what we laid out, and we have a high degree of confidence in is probably somewhere closer to the 13% to 15% range as opposed to the 10% plus, and it's coming from exactly what you described: a steady diet of us staying within our $650 million capital envelope and expanding operating cash flow by managing our earnings and managing our working capital with a real intention and focus. And so we don't need a whole lot of growth to do that. It's a much more repeatable model. And I think we're encouraged by the trajectory of growth with the rebound in the end consumer here hopefully happening in the next 12 months. There's probably more upside than not. Howard, what did I miss?

I think that's right. And Arun, we are committed to buying back shares. I mean, we're increasing how much we're buying back even this year. We've talked about it in the context of over $1.4 billion that we'll get through and essentially since mid-February, since the sale of Aerospace. And so, obviously, that will have a meaningful impact on the share count going into next year, and we'll continue to do that as well. The other thing I think to point out, and we talked about during the Investor Day, is the cost savings, gross cost savings that we're going to be undertaking. We've seen great traction. You're seeing some of that readout even in the numbers this quarter. You saw some of that in the first quarter as well. And you'll continue to see that well into 2024 and into 2025. And so there's no reason to expect that we're going to deliver anything less than 10%-plus, and probably ahead of that for the next couple of years, for sure, on the EPS side.

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

On this call and in some prior calls and also on the recent Investor Day, you mentioned improving plant efficiency, centralizing best practices, standardizing them, documenting processes, ensuring that all your facilities are sort of benchmarked with one another. How far along are you in that process right now? And if we think two to three years from now, what do you think this standardization, focus on cost takeout efficiency, what do you think it can add to the business in terms of dollars and profit?

I'd say we're just getting started. This will enable us to consistently achieve our growth target by increasing productivity and efficiency in the plants, which will require less capital to support that growth. Historically, this has been a significant barrier to reaching our goals. In financial terms, this approach is our strength. We're already seeing positive results, which should be quite substantial. We're aiming for a growth range of 2% to 3% over the next three years, compared to our previous target of 1.5, and that's the gap we're looking to close.

And then just one quick question in terms…

It's meaningful. I don't have a $1 per thousand number or cent per can number, but it is meaningful in terms of our ability to deliver organically higher end of that 2 to 1 range.

And I think we've laid out that of the $500 million of gross savings, I mean, we're going to have a meaningful part of that will be front-end loaded here in 2024 and 2025. But certainly, going into '26, '27 and beyond, as we aspire to be a best-in-class manufacturer, we will continue to see efficiencies there. I mean, as Dan said, we're early innings but we're putting up runs. And so that's a good thing to see as it relates to the corporation and what we're doing operationally.

So if you're still in the initial stages, what is your timeline for having everything standardized? In two years, three years, when do you expect everything to be comparable?

Yes, I would give us somewhere in that two to three year range is what I and myself are talking about, and it won't be 100% standardized, but 80%. And the reason I say that, you know this business is we got 40-year-old plants, we've got a brand new plant. So we're not going to recapitalize to standardize everything. But the performance, the meeting cadence, the S&OPs, all of that should look and feel like you're walking into a Ball plant everywhere in the world.

And then just one quick question. Obviously, you've now lapped the problem child product at this point. But it seems like Bud Light is now number three after Modelo Especial and Michelob ULTRA. So that really seems to be a more function for at least, as I can tell, a function of shelf space reset. So two-part question. One, to the extent you can comment, has any of that decline been offset by gains in Michelob ULTRA? And two, do you think that Bud Light will ultimately regain some shelf space in the fall or the early winters as you noted when it occurs?

Two brands are experiencing growth within their portfolio. One has been mentioned, and the other is Busch Light. Both are showing positive growth and helping to fill some gaps in the portfolio. I'm encouraged by the promotional efforts for both brands. It would be great if Bud Light can recover, but they have two strong brands that they are focusing on. This strategy probably aligns better with the diverse preferences of consumers.

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

First, just on aerosol. The business saw a nice, I think, 6% volume growth. I guess my understanding was this overall market is still a bit soft. So is there some competitive share gains, is it a mix with your extruded bottles? Just if you could help unpack that a bit, that would be helpful.

No, the market is growing probably half that rate globally, a little bit more than that. The advantage that we've got is strategically is our plants are able to produce bottles that have higher recycled content, and we also make the alloys with the highest recycled content in the industry. And so the environmental and the sustainability message to somebody like a Unilever or a buyer store, they have a big packaging carbon issue. So if they could move into aluminum out of other substrates, and we have the highest recycled content, we are winning disproportionately because of that. Not on price. In fact, it probably costs a bit more. But the light-weighting of the bottle on the less alloys, steel versus aluminum continues to be a positive trend. So there's a lot going into it. And we're very well positioned in the strategic partners and innovative partners and sustainability leads in that area. And we're bullish about that business moving forward because of the moat that we've created there.

And then I wanted to circle back to the US. Dan, you've given a lot of really helpful color around the different product category dynamics. But I want to circle back, I'm not sure if I heard in the answer to Ghansham's question earlier. But in 2Q, how did your US business for Ball perform relative to, say, the overall segment up one?

I think it's in line. It's actually the US was driving it more so than anything. Keep in mind, our Mexican business, 80% of it is products that go north. And it's one major brewer and they did well; that category didn't do great, but they did well. But everything was more or less in line, favorable CSD, flat energy, a decline in domestic beer, uplift in the imported beer. We participated in all those and net-net-net. Some of our customers within certain categories did a little better, so we did a little better. That's probably how it would shake it out.

Our next question comes from the line of Edlain Rodriguez with Mizuho. Our next question comes from Anthony Pettinari with Citi.

This is actually Bryan Burgmeier on for Anthony. Maybe just a question on ‘24 EPS guidance, and I apologize if I missed this. Just thinking about kind of the magnitude of strong 2Q results, some modest tailwinds from lower interest expense, more share repurchases. It seems like there's maybe a tiny bit of upside to the full year guide versus your previous outlook. Is it South America and Argentina that makes you feel like reiterating is most prudent right now, so I know you reiterated volume growth expectations. So I'm just trying to kind of rectify the two different points.

Honestly, we're looking at the same thing you are. More constructive on the plus side of our guide. And when I hear the entire competitive landscape and our entire customer landscape, all saying similar things that we’re going to be delivered despite a little bit more volatile second half given the election, et cetera. I've been encouraged every month this year by the performance of the business and our commitment to doing the things that we can control, and those are going to continue. And then we have benefited a bit from mix in North America. Does that continue? I suspect it will. So yes, we're leaning to the plus side of that algorithm for sure.

And last question for me, and then I can turn it over. Just can you comment maybe on European can shipments versus underlying consumption growth in the region? Do you think that the industry maybe did a little bit of restocking this year or are brewers maybe ordering ahead for the summer? Just any color on maybe shipments versus consumption in Europe.

The destocking and restocking event that happened sort of December and then January and February. So Q1 had a little bit of that favorability in it. But what we've seen is this is actual consumption that's happening, a more aggressive pricing environment in some instances. I think if you talk to anybody in our industry, everybody is tight. We're getting very close to can allocation scenarios. So this is 100% consumption at this point, benefit from the euro, benefit maybe from the Olympics, but more of a benefit from just inflation dissipating in a different return of value equation by our customers needing to price differently. So all of that's been a healthy dynamic in Europe and fingers crossed that continues here for the foreseeable future. We do have some can share that's also helping in pockets of the EU, specifically the UK; they continue to move more into cans. So there's some different dynamics that are unique to each country and each category in each geography. But overall, yes, I'm really pleased with our performance in Europe and constructive on Europe at large right now.

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

Pretty encouraging to see Brazil still up mid-single digits. Argentina has been problematic, it’s a little noise in general just all the movement. How would you like us to think about the back half? And certainly, you had outsized earnings last year from some mix dynamics in Brazil in the fourth quarter. So just kind of give us a little more color on do you have enough levers for your volumes to be up in South America given the weakness in Argentina, and then your ability to kind of drive earnings in the back half in South America as well?

There is an opportunity ahead. I believe Q3 will see some decline in volume due to issues in Argentina, but Q4 should experience growth. However, our earnings in Argentina were already affected in Q3 by taxes imposed on metals being imported from Brazil and the outflow of dollars from Argentina. Numerous currency controls have been implemented, which impacted our margins. While our volumes remained stable, our margins experienced a significant decline, and this further decreased in Q4. Therefore, you can expect margin growth in the latter half of the year, and volumes may be flat or slightly increased, although we will still face considerable negative pressure from Argentina in Q3, estimated at around 500 million cans.

Overall, earnings for Argentina are somewhat subdued, although margins may improve according to the budget.

You're right. From this point forward, it's muted. Here's the situation in Argentina. For the last two months, they've managed to bring inflation down to around 4%, which was their target. However, there has also been price fixing, and the end consumer is quite weak. This is the lowest level of consumer spending we've seen, yet they have achieved all their monetary and financial goals related to reducing inflation. We're beginning to see some easing in that country, which will lead to employment improvements and a return to a more stable consumer environment. I'm not an economist, but it appears they have successfully guided the situation where they wanted it to be, and now I am hopeful for progress from here. It won’t be immediate, but at least they have brought us to the point they had aimed for last October and November.

I mean, I think certainly, there are some concerns coming into the quarter that mass beer in the US would be a drag, and you obviously put up really strong results in that segment in North America. If I heard you correctly, Dan, you sound a little more upbeat on the plus side of your mid-single-digit type growth. Does a lot of that come from North America or is it more Europe, some of the other segments, just because you're lapping that tough ABI comp, right, and you still put up 1% volume growth in 2Q. It sounds like your customers are promoting a little bit. Is that enthusiasm more on North America? And then are you expecting volumes perhaps to pick up a little bit in the back half?

I believe all of our business units and regions will see increased profits year-over-year in the third quarter. There might be a bit more emphasis on that. In fact, I think it will be more indicative of a fourth-quarter boost rather than a third-quarter one, given our low inventory levels and tight conditions in North America. We can expect a rise in absorption more likely in the fourth quarter. However, I remain optimistic, as a significant part of this hinges on mix and the competitive landscape in the third quarter. I am hopeful that premium light beer and domestic light beer will need to adjust their pricing strategies. The trend has been quite consistent for the past few quarters, and I believe we will see different consumer behaviors emerge at some point.

Our next question comes from the line of Chris Parkinson with Wolfe Research.

I'd like to explore the Brazilian market further. Could you provide an update on how things have been over the past couple of years, especially as we emerged from COVID? There have been some shifts in the substrate market and changes in consumer behavior. Where do you see us heading for the latter half of this year and what are your projections for 2025 and 2026, along with your competitive standing?

I believe we're approaching a point where we can set COVID aside. Looking at the comparison from the first half of 2023 to 2024, let me explain the situation in Brazil. In Brazil, the third largest brewery had an exceptional first quarter in 2023, which we did not participate in. They filed for bankruptcy in the second quarter of 2023, resulting in very little activity during that time. Therefore, when considering comparisons, depending on the competition and the portfolio mix, we experienced some volatility. We were up 26% in the first quarter, benefiting from that comparison, although we didn't gain as much in the second quarter. However, in the third and fourth quarters, as well as the first quarter of 2023 and 2024, the major player we are aligned with performed well in the market. We remain optimistic about their ongoing success driven by innovation, market share, and their long-term strategy. We hold the position of the second largest player in all of South America, and they have also been performing well. I am positive about the second half of the year and the Brazilian economy, particularly its GDP, which is crucial for our outlook for 2025 and 2026. There are signs of moderate-to-low inflation, steady job growth, and stability in fiscal and monetary policies, all of which provide a favorable environment. The only lingering impact from COVID is the transition from glass to cans, and we are just beginning this shift. We have regained about two points of the seven points lost and anticipate further gains in the latter half of 2025 and into 2026. Additionally, our stake in Argentina could be significant if there is a swift recovery there in 2025 and 2026, as we would benefit entirely from that. Overall, I am optimistic about the future and believe we will operate at the upper end of our long-term growth expectations due to the prevailing conditions. In Brazil, I expect normalization and while the mix will play a role, it will be less influential compared to what we observed in the first and second quarters.

And just a real quick one, not once but twice. I tried to get a beer after a round of golf in New York, and I was handed to a Ball aluminum cup, and it's something people haven't really been discussing for quite some time, but they're starting to pop up a lot. And so I was just kind of curious what's the latest and greatest there in terms of your thought of trajectory? I mean it seems like it was kind of a thing and then it wasn't but now it's clear that you're making some additional strides. I'm just kind of curious on that front.

You do find it at places like that. I think ultimately, the backdrop, if you've got a weakened consumer and it's going to impact the volume on a project like that. And so we continue to gain traction but it's not near what we thought it would be two or three years ago. And so that's probably all I'll say about that for now. And we'll do one more question, Christine.

Our final question comes from the line of Stefan Diaz with Morgan Stanley.

I hope everybody is doing well. In the release for Europe, you mentioned seasonal and sustainability trends should improve demand throughout the year. Does this mean you're expecting mid-single-digit volume growth for the second half as comps look favorable? And then maybe sort of following up on Bryan's question, considering can shipments seems like they were ahead of scanner for the latest quarter, are you worried about any potential destocking like we saw late in 2023?

I don't anticipate destocking for us, all of this stuff is like competitor and customer-centric, right, on the destocking and stocking issues, nowhere near what you would have seen in '22 or '23. So I'm less concerned. Obviously, if volume were to fall off significantly, which we don't foresee or we're not anticipating, I might have to revisit that comment. But at this point, we've got incredibly low inventory levels. We're hand to mouth in Europe. We're in the throes of increasing our stacking in South America and then in North America, where we've got, like I said, historically low inventory levels that we'll need to manage that up over the second half of the year. So I'm encouraged and not concerned about that topic in particular. I get the question but for us, it's not as meaningful.

And then given strong volume results in the past couple of quarters, I was just wondering if you could remind us if you still have any capacity curtailed within your network. And if so, maybe what do you need to see to bring that back online? And then maybe if you could also just quickly comment on what you think utilizations are by region?

You always have curtailments in South America this time of the year. We have very few, if any, curtailments in North America or Europe. Absolutely none in Europe right now. And the only thing that we would be curtailing would be one can size fits in North America at times. So all of that's good. The industry is in a really healthy position, probably high 80s, if I look at the annual projection, high 80s in Brazil, low to mid-90s in Europe, and then low 90s in the US, which means you've got excess capacity in shoulder season, and you don't have any in peak season. And so it's in a good spot.

I would now like to turn the floor back over to management for closing comments.

Thanks. Again, really appreciate our 16,000 employees. We had a flood, and we've got some fires going on, and hope everybody remains safe and takes care of one another and look forward to talking with you all here at the end of the third quarter. So 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.