Greetings, and welcome to the Ball Corporation Second Quarter 202 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brandon Potthoff, Head 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 2025 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. We assume no obligation to update any forward-looking statements made today. Some factors that could cause the results or outcomes to differ are described in the company's latest Form 10-K, our most recent earnings release and Form 8-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 noncomparable 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. Prior to prior 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 our CEO, Dan Fisher.

Thank you, Brandon. Today, I'm joined on our call by Dan Rabbitt, Senior Vice President and Interim CFO. I will provide some brief introductory remarks and discuss second quarter financial performance. Dan will touch on key metrics for 2025, and then we will finish up with closing comments and Q&A. Before we move on, I'd like to extend my sincere appreciation to Dan for stepping in as Interim Chief Financial Officer. Dan has served as our Senior Vice President of Corporate Planning and Development since 2016 and has successfully led more than 25 strategic transactions from acquisitions and joint ventures to investments and divestitures. He also previously led our aerosol business as Vice President and General Manager. His deep institutional knowledge and proven deal-making expertise have brought immediate leadership and continuity to our finance organization. In just over one month since assuming the role, Dan has ensured we're on track with our financial discipline, supporting both our capital allocation targets and partnered closely across the business. Dan, thank you for your steady leadership and dedication during this important time. Turning to business performance. We delivered strong second quarter results and returned $1.13 billion to shareholders via share repurchases and dividends through today's call. This performance reemphasizes our opportunity to deliver record adjusted free cash flow and comparable diluted earnings per share in 2025. Aluminum packaging is outperforming other substrates across the globe, demonstrating the resilient and defensive nature of our global business. We continue to monitor the ongoing uncertainties related to tariffs and consumer pressures, particularly in the U.S., and we are confident in our ability to proactively manage these challenges and sustain our positive momentum throughout the year to deliver 12% to 15% comparable diluted EPS growth. 2025 second quarter comparable diluted earnings per share was $0.90 versus $0.74 in the second quarter of 2024, an increase of 22%. Second quarter comparable net earnings of $249 million were driven by higher volume and cost management initiatives, partially offset by higher interest expense and lower interest income. In North and Central America, stronger-than-expected volume performance was not enough to offset product mix and cost to serve headwinds. Our team executed well, successfully serving higher-than-expected demand, managing the impacts of the Section 232 tariffs and mitigating risks despite a volatile environment. Volume growth was largely driven by strength in energy drinks and nonalcoholic beverages. We remain attentive to the ongoing geopolitical landscape and tariff developments and are actively managing these dynamics. In EMEA, second quarter segment volume remained robust, and segment comparable operating earnings increased 14%. Demand trends continue to be favorable, strengthening our confidence in achieving significant year-over-year comparable operating earnings growth in 2025, driven by sustained volume growth and ongoing operational efficiency. In South America, segment comparable operating earnings increased 38%, supported by strong volume performance in Argentina and Chile. While the Brazilian market performed below our initial expectations, we expect to return to growth in the second half of the year. Our regional performance culminated in Ball's global beverage can shipments being up 4.3% year-over-year in the second quarter of 2025. We delivered a strong first half of 2025, positioning us well for the rest of the year. We recognize there remains important work ahead to achieve our full-year objectives. Our teams are committed to carefully navigating ongoing uncertainties and leveraging the resilience and strength of our global portfolio. We're laser-focused on our updated goal of delivering 12% to 15% comparable diluted EPS growth for the year. And while mindful of the challenges, we have confidence in our team's proven ability to execute effectively and deliver meaningful value to shareholders. After a strong first half, we now anticipate 2025 global volume growth to be above the long-term 2% to 3% range and expect all of our businesses to perform in line with or ahead of our long-term targets in 2025. This reflects the durability of underlying global demand, the strength of our customer relationships in addition to the operational consistency of our teams across markets. In EMEA, we continue to expect mid-single-digit volume growth in 2025 as the competitive advantages of aluminum packaging and low can penetration rates continue to drive share gains across the region. In South America, recovery in Argentina and Chile, coupled with anticipated growth in Brazil and Paraguay is expected to drive volume above our 4% to 6% long-term range in 2025. In our North American business, higher-than-expected volume growth across nonalcoholic categories, especially energy drinks, gives us confidence that we will see volume grow near the top end of our 1% to 3% long-term range in 2025. We remain confident in our ability to deliver volume growth in line with or slightly above the market in 2025. We believe the defensive nature of our portfolio, combined with our strong customer alignment, positions us well to navigate potential economic uncertainty. With that, I will turn it over to Dan to talk about key metrics for 2025.

Thank you, Dan, and it's a pleasure to be on this call with you today. We anticipate year-end 2025 net debt to comparable EBITDA to be around 2.75x, and we will repurchase at least $1.3 billion of shares in 2025. Through today's call, we have already purchased $1 billion shares year-to-date, 2025 CapEx is expected to be slightly below the D&A in the range of $600 million. We anticipate being able to deliver on our target of comparable net earnings equal to adjusted free cash flow in 2025. Relative to the estimated tax payments due on the aerospace sale, we expect the remaining portion to be paid in the second half of 2025. Our 2025 full year effective tax rate on comparable earnings is expected to be slightly above 22%, largely driven by lower year-over-year tax credits. Full year 2025 interest expense is expected to be in the range of $300 million and full year 2025 reported adjusted corporate undistributed costs recorded in other nonreportable are expected to be in the range of $150 million. And last week, Ball's Board declared its quarterly cash dividend. As we look ahead to the second half of 2025, we remain committed to operational excellence, disciplined cost control, and enhancing productivity across our global footprint. We continue to actively monitor developments in emerging markets and broader geopolitical conditions, staying agile and responsive in a dynamic environment. Our resilient defensive business model, along with the proactive measures we've implemented to reinforce our balance sheet positions us favorably against external volatility. With a solid financial foundation and a clear runway ahead, we are confident in executing initiatives designed to deliver sustainable, high-quality results and drive consistent long-term value creation for the shareholders. And with that, I'm turning it back to Dan Fisher.

Thanks, Dan. Our business continues to perform well, driven by robust demand across our global network. Tight capacity conditions reinforce the critical importance of executing at the highest level operationally, ensuring we meet customer expectations reliably and efficiently. Thanks to the agility and dedication of our teams, we remain firmly on track to deliver on our financial objectives for the year, including achieving 12% to 15% comparable diluted EPS growth, generating adjusted free cash flow aligned with comparable net earnings and returning significant capital to shareholders through substantial share repurchases and dividends. While external volatility persists, particularly relating to geopolitical events and market conditions, the resilience of our business model positions us strongly to manage through uncertainty. Our proactive steps to optimize our footprint, secure long-term contracts and maintain disciplined financial management further bolster our ability to deliver consistent high-quality performance. Creating long-term shareholder value remains our top priority. As we continue to execute effectively, leverage our strengths in innovative and sustainable aluminum packaging solutions and manage our operations with rigor, we are confident in our ability to generate meaningful and compounding returns for shareholders through 2025 and beyond. 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.

Dan, could you just give us a bit more color on what's driving the outperformance in the nonalcohol categories for the beverage North America and Central America segment, especially during the second quarter? And given the strength there and your obvious positive view for the back half of the year for the segment as well, can you just give us more context as to why margins were down 140 basis points for that segment? I know you called out price mix and higher costs. Just give us some detail there.

Sure, Ghansham. Yes, I think coming into the year, we did think that there would be a more aggressive nature relative to the energy drink customers. They got out of the gate strong. One of our large strategic partners is growing nearly 20%. So that was unanticipated. And so I'm encouraged. There's some innovation in that category, probably more so than any other category, flavor proliferations and the right can mix, the right promotional activity, advertising. So I think they figured out a recipe that's winning right now. I think the other thing in the nonalcohol category, in particular, is we're seeing a lot of multipack purchases that are connected to purchasing on promotional activity. The promotional activity is not higher than it has been in the last couple of years, but people are buying connected to that. So that's certainly good for the can. We continue to believe that those tailwinds will persist for the back half of the year. Obviously, beer is softer than we anticipated. Some of our customers in that category, some brands are doing a little better than the aggregate. So I think some of our mix has certainly benefited there. And then just in terms of maybe transitioning to the margin piece, certainly some inefficiencies when you're growing that fast, unanticipated in the delivery of that. Yes, we highlighted mix, less beer, more nonalcohol is lower margin for us. So we'll take the volume growth, and I think we just need to figure out how to more effectively and efficiently deliver that. The spike in the one customer in particular, growing nearly 20%, created some pretty inefficient service model and delivery schedules for us. And then there's a little bit of mix related to tariffs, a little bit of a drag on that. So we'll see that kind of level off here quarter-to-quarter, but that didn't help. So I think somewhere in the neighborhood of $10 million worth of all of that was a drag and just our inability to deliver in sequence on time from some of our faster-growing categories and then a bit of a drag on the tariff.

Okay. Very helpful. And then for my second question, you're on track for a new high watermark on EPS. It was 2021. It's been an oscillating journey since then. As I look at the segment distribution, North America is at a high watermark in terms of earnings margins, I should say, and I guess earnings. What about Europe? I mean, Europe has had a good spurt in terms of growth. It's been very consistent. Is there any reason why Europe cannot benefit from a margin expansion standpoint to the same extent North America has relative to what you delivered in 2021?

I wouldn't expect margins to improve, but the operating leverage will be more consistent. We're already operating at a pretty high margin. If we're able to re-enter Russia, those margins were significant, but I think we'll sustain mid-single-digit growth and maintain operational leverage in a way that's more effective and efficient than in other regions. I'm feeling really good about that.

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

I guess maybe just to begin, how have your conversations with customers sort of gone so far regarding their plans around tariffs, their hedging strategies? And have you started discussing 2026 and the potential impacts around increased prices and the impact of that on potential ordering patterns?

Yes, that's a great question. As we approach 2026 and have a clearer picture of how things settle, I believe we will have more insights. One advantage we have is that consumers, who are facing financial constraints, require cans to boost their sales volume. There aren't many prices that are being passed along, which is evident industry-wide. Therefore, I'm not concerned about pricing dynamics that previously limited our volume. The demand for multipacks is increasing because consumers are in a tight spot, and cans are essential for our customers’ growth. However, I haven't yet discussed specific 2026 plans with our customers. Many are focused on addressing trade issues in Washington and figuring out the outcomes of global trade agreements. But it's a valid question, and we will provide more information in the next call.

Great. That's really helpful. And then I just want to clarify some of the margin headwinds in North America in 2Q, all of that had to do with operational inefficiencies with the higher-than-expected growth, none of that was due to contractual pricing. So you don't really expect this to continue on until the second half and into 2026, if that's correct?

Yes, that's a great point. And think about this, it wouldn't necessarily be contractual pricing. But as you see us growing at a faster rate, the categories that that growth allows for out of alcohol, it's lower margin. And so there's an element there. When we talk about mix, I guess you could talk about the portfolio thinking that that's price mix, but it's not contractual in nature in terms of going down.

Does that complete your question?

Yes. Thank you so much. I'll turn it over.

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

Dan, I guess one of your larger competitors talked about how North American demand has been strong and it's been stronger than you expected as well. And they're going to run pretty tight going into next year and they don't have much inventory. Curious to get what's your situation in terms of capacity and ability to service that demand and appreciating a lot to still discuss with your customers in 2026. Remind us how you are set up from a contract standpoint? Is there any movement there? And do you kind of hope to at least grow in line with the market next year?

Yes, great question. So we do have the new facility that's going to come online in the Northwest. So that will be helpful. So that part of the country for us is really tight. One thing that we're hoping to get a little bit more clarity to, Phil, is, I mean, we have used our Monterrey facility to kind of ship into North America. So if these tariffs persist at the levels, they are without some relief valves, and that actually creates even a tighter landscape in the Southwest and Texas in particular. So the reality is as we start to go through our plans and our strategic planning process that will be happening here over the next 6 to 8 months, what I expect is that we will be running full out in all of our facilities, potentially carrying a little bit more inventory to balance that. I mean we can continue to grow. We did buy the asset in Florida that will help as a relief valve as well. But if we continue to grow at 5%, I think for the next 18, 24 months, we'll have to incrementally probably add a few lines here or there, do some speed up projects. But I think we're comfortable to spend in line or below D&A for our North America business for the next couple of years still. The wildcard is just going to be, can we use those facilities in Mexico as relief valves as we historically have, right, for the last decade or so.

Okay. That's helpful. And then earnings is pretty...

Yes, we'll grow in line or ahead of the market depending on somewhat the success of our customers. But right now, a couple of our large strategic partners have certainly got a winning recipe, and they believe that will continue here for the foreseeable future.

Okay. That's a great backdrop, running full out and customers winning. So that's great.

Different than a year ago.

Indeed. From an earnings perspective, South America was pretty strong. So it's good to see that improvement. How is Argentina shaping up? And when you look at Brazil, a little softer to start the year, but you sounded pretty upbeat in the back half, certainly a lot of noise on trade flow, uncertainty on that front. So just give us some line of sight what gives you confidence that the back half would be better in Brazil as well.

Yes. In Brazil, we saw significant benefits in the second quarter primarily because we did not make much profit in Chile and Argentina, which helped us with our comparisons. Specifically for Brazil, we have a strong dependence on one customer, and our performance generally mirrors the market trends. If the market grows around 3% in Brazil this year, our partner will need to grow a bit faster in the latter half, and they are confident in their plans to achieve that, as they have consistently done so in the past. We'll be meeting with them in two weeks for more insights, but they believe this positive trend will continue. Additionally, other areas in Brazil are performing well. While we're cautiously optimistic about Argentina, the leadership there appears to be steering things in the right direction. The crop performance will be key to watch, but overall, the economy seems to be stabilizing. As long as we continue to grow steadily and avoid any backsliding, we should be in a good position for the remainder of the year.

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

Congratulations on the quarter and the progress made. The growth in North and Central America is at the top end of your range, around 3% for the year. How much of this growth is based on your current customer mix and their strategies? If other customers start adopting the successful strategies of those currently winning, what impact would that have on your volume growth? Additionally, could you clarify what you mean by connected promotion? I also have a quick follow-up question regarding aluminum.

Yes. When we examine the overall situation, I want to start with the latter part first for clarification. The level of promotional activity, including price adjustments and special offers, remains the same. However, the pace at which consumers are making purchases during these promotions has increased significantly. This suggests that consumers are becoming more price-sensitive, seeking out multipacks at a faster rate than in previous years. This shift is likely contributing to a slightly higher volume growth than we expected in the first half of the year. In response to your first question, the focus is primarily on beer. One of our customers is facing challenges due to tariffs, so unless that situation improves, we do not foresee any performance exceeding the top end of 3%. However, we will manage fine because our Monterrey facility is currently underutilized for that customer. If circumstances improve, we will be well positioned to ship and deliver more efficiently. If growth continues with a few of our customers at 15% to 20%, we may experience tight conditions, but as peak season ends, we expect delivery patterns to become more efficient in the second half of the year. At the moment, it’s tight, but we believe we can still deliver. We have room to grow in facilities near breweries that have underperformed, so if that category rebounds, we can address it without much difficulty. The greater concern lies in any increased activity from our strategic partners in the non-alcoholic or carbonated soft drink sectors, which could lead to less efficient operations. We will need to prepare for next year by possibly maintaining higher inventory levels if growth continues at this rate.

I appreciate that review. My second question is, if you can estimate and feel comfortable discussing it, Mike, where do you believe the average large customer’s embedded aluminum price stands in relation to the spot market, particularly concerning the Midwest premium? Also, when do you anticipate that this will converge? Essentially, are customers utilizing cans more now because they are hedged, and when is that likely to change? It seems you’re not particularly worried about this due to the consumer outlook for 2026, but I’d like to hear your thoughts, and then I'll hand it over to you.

Yes, you will start to notice that in the second half of the year and into next year. I believe it's about a quarter for a 12-pack. The impact on price sensitivity is that cans are clearly cheaper than PET, except for the 2-liter PET, and they are still cheaper than glass. If that quarter for a 12-pack leads to different buying behaviors, you will start to see that, and we have noticed the beginnings of it. Consumers will be far more conscious of their purchasing patterns with 24 packs and 30 packs, which will affect the velocity of sales and the overall performance of the business. This, to me, seems more indicative of future trends than any dramatic shifts due to hedges or similar factors.

Understood. It will mean more operational planning on your side, but we'll turnover and thanks for the color.

Yes, yes. Correct. Correct. Yes.

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

Dan, earlier you mentioned North American profitability and pointed out maybe $10 million in inefficiencies, or something along those lines, but...

Correct.

Would tariffs be a smaller part of that $10 million? Or was it separate? And then does that go down in 3Q? And then just a related question, did Florida Can kind of weigh on profitability meaningfully in 2Q? Or just how did that asset perform versus expectations?

Yes. Florida Can will likely contribute around $1 million to $2 million, and we expect to reach breakeven by Q4, with incremental profit in '26. The tariffs will account for about $2 million to $3 million of that $10 million impact, so it's not a significant amount.

Yes. That's helpful. And then kind of maybe a broader question. In terms of the impact of One Big Beautiful Bill on your business and thinking maybe especially about bonus depreciations, any kind of broad thoughts about how that could impact you this year, next year?

Thank you. The other Dan will address this question. The short answer is we don't expect it to significantly alter the effective growth tax rate. The benefits are mainly going to arise from faster depreciation and a slight increase in deduction capacity, though this is limited by the EBITDA cap compared to the operating earnings cap. Overall, we are still in the early stages of fully understanding the implications, but I don't anticipate it will make a substantial difference for us.

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

I mean, Dan, you've heard some beverage companies talking about the impact of immigration enforcement on certain customers. Like are you prepping for a potential demand slowdown in certain markets? Or is there a disconnect between what's being said and what you're seeing out there from your customers?

Yes, this is a very difficult analysis. So I'll give you the optimistic viewpoint on this challenged issue, social issue. So there's more consumption happening online, multipack and in grocery channels, multipack, less at the C-store channel. So that has a real impact for some of our customers that sell and have an overwhelming profit pool within the C-store channel because folks are concerned that ICE is going to be there. So it could be a benefit for the can. So it's actually the opposite. I'm not thinking about a slowdown; I'm thinking about a continuance of a volume lift with the multipack purchasing, the at-home, and the grocery channel. Over a longer period of time, absent immigration, our economy doesn't work without immigration in some balanced form. But for right now, I would gather there's probably a bit of a benefit absent a headwind in the way you characterize that.

Okay. Got it. One quick one on Europe. I mean, again, continues to perform well. Can you talk about how balanced supply/demand is in that market and whether some new supply might be needed to meet the growing demand that we're seeing there?

Yes. It's a land of opportunity. And I think all of our competitors are saying the same thing because of the under-penetration in cans, the carbon footprint of glass that we're capitalizing on. We put in a few big boxes, big facilities, and we're continuing to build those out. So there's incremental capacity that's being added to step into exactly what you described, the sustained growth at this mid-single-digit level, which will have to be supported. We're starting to hear some announcements from other competitors that they're adding some capacity line by line. But if we continue to grow at the rate we're growing, we're going to have to move some of our projects probably to the left and do things by next year, '27, '28. All of that will still be within our capital envelope that we've outlined. But yes, there's going to be a need for capacity adds if the market continues to grow mid-single digits.

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

It's Anojja Shah sitting in for Josh. We kind of touched on this a bit, and I know cans have performed well historically in recessions as consumers tend to trade down, eat more at home. But what's the outlook if inflation goes up? Because we still don't know the full tariff impact yet. How have cans performed during high inflation times? What are the puts and takes we should be thinking about?

I believe we faced challenges over the last couple of years due to inflation. It’s a complex issue. We're somewhat resistant to recessions, but not to inflation. When our customers raise prices to manage increased input costs, it directly impacts our volume. We experienced that. At this moment in the economy, if the end consumer struggles to afford those higher costs, both our customers and we will face difficulties, leading us back to a recessionary situation. During such times, we can expect heightened promotional activity and purchasing. Both our customers and we have fixed costs, so finding a balance will be essential. Moreover, with hamburger prices at $10 a pound, that isn't a sustainable situation for long. While we may gain from it now, no one will benefit from that scenario for an extended period if interest rates remain high and things don't stabilize. That’s a great question.

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

So Dan, if you take a moment to evaluate your geographic portfolio and your future goals, what have been the two most significant positive surprises? What about the two biggest disappointments, considering the varying conditions we've observed, perhaps with positive trends in Europe and a more mixed situation in the U.S.? Where do you see yourself as we move into the second half of 2025 and approach 2026?

Yes. For this year, in particular, I think, is the question. Is that correct?

Yes.

Yes, yes. No, I think Europe is mostly in line with where we expected. Our strategic partners are doing well. Like beer is not doing as well, and we have a higher customer concentration in CSD and energy, and those have really outperformed and kept us probably in line or a little ahead of the market. So that continues to be a good story. I think South America is a mixed bag. Brazil has underperformed. Some of the other countries have overperformed. I think that balances out as we move into the back half of the year because we have such a customer concentration with one particular player down there, and they will certainly not continue to lose share in the marketplace. They've demonstrated that historically. And then I think North America's beer is not as good as we anticipated; there are pockets of I think 'American beer' is doing okay. It's not domestic anymore apparently. And I think the energy market has certainly outpaced what we anticipated. So that's kind of the backdrop. All in all, it's better, net better. And I think cans are winning. So that's a good part. I think we finally hit a bit more of a recessionary window, which the can has a better playbook for sustained performance in that. And so we're more bullish probably in the second half of the year than the balance of most packaging companies.

Got it. If I could build on your question regarding your Analyst Day comments, you mentioned a volume growth of 2% to 3%, an operating leverage of 2%, and a share count increase of 4% to 6%. The market seems to already expect around 10% to 11% EPS growth. How do you assess the volume outlook? You briefly touched on this for one or two regions. Do you anticipate trending towards the higher end of those growth ranges? What other factors should we consider when evaluating the guidance you provided last June?

Yes, that's a good question. We're definitely performing at the higher end of our expected range. This is largely influenced by our customer portfolio, as many of our clients are currently thriving. We expect to surpass the upper end of our range. Additionally, over the past couple of years, we've made some adjustments to our portfolio, especially as we were previously more focused on beer. These adjustments are starting to show positive effects, and we anticipate continued benefits through 2026 and 2027. While I won't change our projected growth of 2% to 3% at this moment due to the uncertainties in the world, we are definitely on track to exceed that range this year, and the outlook for next year looks promising as well.

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

Can you talk about your rates of volume change in consumer soft drinks and beer in the different geographies and in the aggregate?

Yes. Beer in South America is experiencing growth, although it's at a slower rate due to Brazil and inflation issues. However, there is still some growth. In Europe, beer growth is stable to slightly increasing, likely at a slower pace than in the past. Conversely, carbonated soft drinks and energy drinks are growing at a faster rate than historically in that region. Competition is on the rise, especially after a major brewer acquired some Pepsi bottlers in Europe, which has increased competition with Coke in particular. This has created some positive dynamics. In North America, I've shared my insights earlier. There are a few brands performing better than expected, but tariffs on one specific brand have impacted overall category growth, leading to a more balanced growth trajectory. These brands are facing challenges, and as partners, we are also facing those challenges alongside them.

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

Okay, great. And when you think about the profitability of the North and Central American beverages, should it jump because the incremental costs that you're feeling seem to be more transitory?

Yes, that's a good question. The only uncertainty I have right now is whether the volume will continue at this pace and where it will settle. Also, the tariffs are a concern since we've been somewhat dependent on supply patterns using our plants in Mexico to ship north. If that changes, there may be some fixed cost burdens affecting the supply chain. We'll be in a better position once our plant in the Northwest is operational. The volume is looking good, but when it comes from nonalcoholic sources, it tends to be less profitable due to the lower price points consumers are paying. Overall, I feel optimistic about our trajectory 18 months out, once our new facility is up and running efficiently. Let's hope for a resolution on the tariffs as well. While I can't predict the next six to nine months specifically, I do think your concerns are valid.

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

Just wanted to ask about the kind of the EBIT algorithm. I know that margins have been under pressure here. And so maybe you can just discuss your thoughts on returning that 2:1 kind of EBIT leverage on top line growth. And also, you mentioned so goes your exposure to one customer, so goes your exposure or your performance. So I guess when you think about that portfolio of customers that you have, how do you think about volumes evolving, I guess, in North America as you look out maybe over the next 6 to 12 months?

Yes. The concentration of our customers is primarily in South America. We are optimistic about our growth trajectory. We have adjusted our portfolio, and you will observe this shift over the next 18 months. We are reducing our focus on beer, as we had previously over-emphasized that category. We are now pivoting towards categories and brands that are expected to have more growth potential going forward, which is encouraging for us. Regarding our EBIT algorithm, we had mentioned last year that there are two items impacting our results this year that will not be repeated. One is the interest income from holding cash as part of the aerospace transaction, which has a mid-$40 million impact. The other is nearly $20 million in insurance proceeds from our PHC business that we recorded in Q3 of last year. Excluding those, we are indeed aligned with the 2:1 algorithm. We may still achieve that and compensate for the $60 million shortfall. We are looking at this on an enterprise-wide level, recognizing there will be timing shifts, and managing our approach as a portfolio rather than focusing exclusively on achieving the 2:1 in each region. Over time, our target remains that 2:1 ratio by managing our portfolio to consistently deliver value to shareholders.

Okay. Could you clarify the comment about the category mix? Was that specific to North America? If so, how do you view the trends in your nonalcoholic and alcoholic beverage exposure? Would you estimate that your alcoholic exposure is around 40% and is decreasing to the 30% range? Can you elaborate on that opportunity for us?

I believe you are mostly aligned with that trajectory. Ideally, moving from around 40% to 30% would be beneficial over time. I don't want to delve too deeply into our strategy, but that's generally the thinking.

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

This is Niccolo Piccini on for Mike. I apologize if this is repetitive. I was joining from another call. But in Q4, I think you had mentioned that you had over 85% of your 2026 volumes under contract. I was wondering if you could give us an update on where that stands currently and then where 2027 volumes are.

Yes, '27 is still a bit early. I'd say 2026 for North America in particular is just slightly north of 90%. And we have one contract that's fairly sizable that comes due in '27 for North America. So you're probably 75% in '27 that's under contract. So we've really done a nice job of future-proofing the business and kind of repositioning some mix and some category movement. And then one of our big partners, that contract comes due, but we're feeling good that we're going to land that in a good spot for '27 and beyond.

Got it. And then just quickly, was there any manufacturing efficiency that contributed in the second quarter ahead of expectations? And how do you view efficiency gains moving forward?

Yes. I think the plants are running well. We're about 18 months into our Ball business system. You saw nice improvement in South America. Our ability to kind of deliver this higher-than-expected growth in Europe is largely attributed to the plants running well. It was a bit choppy in North America, but largely because we weren't able to use Monterrey to its full extent in Mexico because of the tariffs and then just some acceleration in a couple of areas where we had to convert to different can sizes to keep pace with the growth. So in the short term, I'd say we underperformed in North America, but a little bit more stable outlook here, and then we will lift up. Our goal longer term was at, I think, at the Investor Day a year ago was to kind of flow through 50% of our gross savings. And then we're still on track. You'll see last year; we were able to benefit from a lot of the fixed cost savings from some of the plant and facility closures. We're navigating a lot of supply chain challenges because of the accelerated growth here in North America, a bit of the tariffs. We've been able to offset that and continue to keep our EPS guidance, if not raise it as we just did. So yes, I'm feeling good. It's really a long-term outlook. I start with safety and quality. Both of those are at world-class levels. So once I see those two metrics in good order, the rest generally follows. And it's awfully difficult in peak season to look at kind of where you are. But I think when we reflect back at the end of the year, we'll be able to point to some really nice performance in the plants across the globe. Christine, we'll take one more question.

Our final question comes from the line of Richard Carlson with Wells Fargo.

So most of our questions have been answered. Thank you for the detail so far. But I guess one thing we wanted to ask was about scrap metal pricing and how that has been impacting you.

It's really negligible. Most of our contracts, particularly in tolling, are controlled by our customer. We are closely monitoring it, as tariffs increase; the scrap market will eventually rise as well, and it has already started to a degree. Additionally, with such a high recycled content number, there has already been some pressure on that market. Consequently, companies have made long-term commitments in various areas, especially in our market where we heavily rely on processed aluminum coil with higher recycled content. We depend greatly on our supply base to manage that. It’s a valid question, and we are certainly keeping watch, but it hasn't negatively impacted us so far. Frankly, we are more concerned about the overall demand side of tariffs across the economy than about any isolated issues in the metal market at this moment. All right, Christine, with that, we look forward to talking with you all in about 100 days. I hope the remainder of your summer goes well.

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.