BALL Corp Q3 FY2025 Earnings Call

Greetings, and welcome to the Ball Corporation Third Quarter 2025 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 third 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 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 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, SVP and Interim CFO. I will provide some brief introductory remarks and discuss third quarter financial performance. Dan will then touch on key metrics for 2025, and we will finish up with closing comments and Q&A. First, I want to take a minute to highlight the amazing work our employees and teams have done to give back to their communities. During the third quarter, I'm proud to share that Ball employees donated over 7,000 hours of their time across 19 countries in support of 116 charities. This past September was also our annual Who We Are Month, where we celebrated our unmatched culture and talented people that help us and our customers navigate complexity and provide innovative solutions that enable us to win. I want to thank all of our employees for devoting time to uplift our communities and participating in Who We Are Month. I also want to thank all of our employees for our great third quarter business performance. Beverage can volumes grew 4.2%, comparable operating earnings increased 5.1%, and comparable diluted earnings per share rose 12.1%. In addition, we have now returned $1.27 billion to shareholders through share repurchases and dividends as of today's call. This strong performance reinforces our opportunity to deliver record comparable diluted earnings per share, record EVA, and approach record adjusted free cash flow in 2025, a testament to the strength of our portfolio and disciplined execution. Aluminum packaging continues to outperform other substrates globally, underscoring the resilient and defensive nature of our business. While we remain attentive to uncertainties related to tariffs and consumer pressures, particularly in the U.S., we are confident in our ability to proactively manage these dynamics and sustain our momentum towards delivering 12% to 15% comparable diluted EPS growth. Third quarter comparable net earnings of $277 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, segment comparable operating earnings increased 3.5%, driven by stronger-than-expected volume performance, though partially offset by product mix headwinds. Mid-single-digit percent volume growth was led by continued strength in energy drinks and nonalcoholic beverages. Our team continues to execute at a high level, successfully meeting elevated demand, navigating the complexities of Section 232 tariffs, and mitigating risks in a volatile environment. We remain vigilant in monitoring the evolving geopolitical landscape and tariff developments, and we are actively managing these dynamics to protect our business and support long-term growth. In EMEA, third quarter segment volume growth of mid-single-digit percent remained robust, contributing to a 14.8% increase in segment comparable operating earnings. Favorable demand trends continue to reinforce our confidence in delivering meaningful year-over-year growth in 2025. This outlook is supported by sustained volume momentum and ongoing operational efficiency, which position us well to capitalize on market opportunities and drive continued performance improvement. In South America, segment comparable operating earnings increased 2.6% as mid-single-digit percent volume growth was supported by strong performance in Argentina. While the Brazilian market came in slightly below our initial expectations due to weather-related softness, we anticipate a recovery in the fourth quarter as conditions normalize. Our teams across the region continue to execute well, positioning us for sustained momentum. We delivered a strong first nine months of 2025, positioning us well to achieve our full year objectives. While important work remains in the fourth quarter, our teams are fully engaged, navigating ongoing uncertainties with discipline and leveraging the strength and resilience of our global portfolio. We remain laser-focused on our goal of delivering 12% to 15% comparable diluted EPS growth for the year. Despite external challenges, we are confident in our team's proven ability to execute effectively and deliver meaningful value to shareholders. We anticipate 2025 global volume growth to end above the long-term 2% to 3% range and expect all of our reportable segment businesses to perform in line with or ahead of our long-term targets in 2025. This reflects the durability of our 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 both Argentina and Chile has progressed in line with our expectations. While Brazil experienced some softness earlier in the year, we anticipate a recovery in the fourth quarter. As a result, we now expect full-year 2025 volume growth across the region to fall within our long-term range of 4% to 6%. Our teams remain focused on execution and are well positioned to capture growth as market conditions stabilize. In our North American business, stronger-than-expected volume growth across nonalcoholic categories, particularly energy drinks, give us confidence that we will exceed the top end of our long-term 1% to 3% volume growth range in 2025. We remain confident in our ability to grow volumes slightly ahead of the market. The defensive nature of our portfolio, combined with strong customer alignment, positions us well to navigate potential economic uncertainty and continue delivering consistent performance. With that, I'll turn it over to Dan to talk about key metrics for 2025.

Good morning, and thank you, Dan. We anticipate year-end 2025 net debt to comparable EBITDA to be slightly above 2.75x, and we will repurchase at least $1.3 billion of shares in 2025. Through today's call, we have already purchased $1.27 billion of shares year-to-date. CapEx is expected to be below D&A in 2025. We anticipate being able to deliver on our target of adjusted free cash flow in the range of comparable net earnings in 2025. Relative to the estimated tax payments due on the aerospace sale, we expect the remaining portion to be paid in the fourth quarter 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 now expected to be in the range of $320 million. Full year 2025 reported adjustable corporate undistributed costs recorded in other non-reportable are expected to be in the range of $150 million. And last week, Ball's Board declared its quarterly cash dividend. We remain focused on driving operational excellence, sharpening cost discipline, and unlocking productivity across our global footprint. Our teams are actively adapting to shifting conditions in emerging markets and broader geopolitical developments, maintaining agility and responsiveness in an increasingly dynamic environment. This proactive approach continues to support our ability to deliver consistent performance and long-term value. Our business model remains resilient and well positioned to weather external volatility, supported by the proactive steps we've taken to strengthen our balance sheet and enhance financial flexibility. With a solid foundation and clear visibility into our path forward, we are executing on initiatives designed to deliver sustainable high-quality results. We remain focused on driving long-term creation for shareholders through consistent performance and disciplined decision-making. With that, I'll turn it back to Dan.

Thanks, Dan. Our business continues to perform well, fueled by strong demand across our global network. Tight capacity conditions highlight the importance of operational precision and reliability in meeting customer expectations. Thanks to the agility and dedication of our teams, we remain on track to achieve our financial goals for the year, including 12% to 15% comparable diluted EPS growth, record EVA dollar generation, adjusted free cash flow aligned with comparable net earnings, and significant capital returns through robust share repurchases and dividends. While external volatility persists, particularly around geopolitical developments and market dynamics, our resilient business model and proactive footprint optimization continue to position us well. Long-term contracts and disciplined financial management further strengthen our ability to deliver consistent high-quality results. This year has been a testament to the grit, talent, and relentless focus of our team. We put in the work, and now we're seeing that effort translate into real momentum across the business. We're not just competing; we're winning, and we're just getting started. Our commitment to delivering longer-term shareholder value remains unwavering, driven by volume, operating earnings, free cash flow, and EVA growth. The foundation is strong, the strategy is working, and the future is ours to shape. Thank you. And with that, Christine, we are ready for questions.

Our first question comes from the line of Ghansham Panjabi with Baird.

Starting off with the Beverage NCA segment, in Q2 you mentioned some operational inefficiencies due to the growth in certain categories. Dan, how does that situation look for Q3? Operating profit seems to have improved slightly with comparable volume growth, but the operating leverage is still significantly below historical averages. Your thoughts on this would be appreciated.

I appreciate the question. We remain encouraged by the underlying market momentum as cans continue to perform well in multipack value for at-home consumption, similar to last quarter. In the third quarter, we observed a shift in customer and pack size mix toward lower-margin categories, which was influenced by market trends and our strategic decisions to align with the fastest-growing brands, ensuring the future health of our North America business. We increased NCA volume by mid-single digits, with operating earnings up 4% year-over-year. We see strong volume growth and expect to navigate a more efficient future as our Millersburg, Oregon facility becomes operational in the second half of next year. Overall, profit per can in our North America business has increased by 32% since 2019. We are pleased with the levels of profitability and while we would like operating leverage to be higher, we are committed to improving that. The business is in a solid position, and having volume enables us to transition into a more efficient operational footprint and supply chain moving forward.

Okay. And then I know it's difficult to predict volumes in this operating environment 3 months out, let alone in a year out, but comparisons are going to get more difficult for that segment in 2026. Relative to the industry volumes for 2026, would you be at least in line with the industry? Or how should we think about that dynamic for next year?

I would say yes to that. Currently, our focus is on finishing a strong 2025 and maintaining the earnings momentum we reported in Q3. Regarding 2026, it is early in our strategic planning process to provide detailed guidance. The next 4 to 6 weeks will give us a clearer outlook. However, we are confident in our ability to grow our global volumes in line with long-term expectations. We expect to grow earnings and EPS, and our share buyback program will remain robust. Those are some highlights for 2026, with more details to follow in the next 4 to 6 weeks. In North America, we aim to align with the market, if not surpass it, and we anticipate being ahead in 2027 and potentially 2028 based on our current views.

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

Congratulations on the progress. Question for you, recognizing we're ultimately not going to be able to hold you to any of this per se. But how do you think tariff situations right now and aluminum strategies are affecting volume patterns and what it can mean for next year? And then we can cover world peace, if you'd like after that. But all thing aside, do you think there's been any sort of loading of volume into the market ahead of tariffs? Or what else are your customers doing into next year? Relatedly, I don't think there's going to be any move on 232, but if there was a reversal on tariffs, if any of these are challenged, does that make life better or just complicates things? And I had a couple of follow-ons.

Yes. I believe changes in tariffs, linking your second question to the first, will facilitate demand. Currently, we are passing on about a 25% to 30% price increase to our customers. While this has a minimal impact on the per can price, it is significant in North America, especially regarding the price increases expected in October and January. A reversal of this would positively affect the cost of goods sold for our customers. It's challenging to gauge the demand impact since our product mix and favorable customer portfolio contribute to our performance. We are achieving strong market results thanks to effective strategic partnerships. Our partners are managing the situation well, and we are supporting them in that effort. When demand challenges arise, we will likely hear from our customers, which may relate to specific demographic factors or external influences. However, I don't see any direct negative impact on our can volume, which is encouraging since those numbers are up. Still, it could affect other elements of production and consumer behavior regarding purchasing through traditional channels. We're currently performing well despite these uncertainties, and I am optimistic about our team's ability to navigate these challenges and continue our growth. In some cases, these circumstances may even benefit us.

Are you seeing any indications that your customers are considering switching to nonaluminum packaging due to costs? We've heard that from other materials. Could there be an increase in South America with a shift to refillable glass? What are your thoughts on whether this poses a real threat? I don't see any evidence from the scanner data regarding 2-liter packaging in North America. Lastly, one of your major customers is promoting mini cans in convenience stores. Can you share any insights about what that might mean for you next year?

Thank you, George. I have brought up this question at the highest levels of our strategic relationship, and they have indicated that cans will continue to grow. I can't specify the can size or the channel, but growth is expected. We will continue to use cans. We haven't seen a shift towards returnable glass in South America, which is typically driven by inflationary market dynamics. There has been more cold weather lately, and Brazil is experiencing some inflation. We are monitoring this closely. As we approach 2026, we also have an election and a World Cup, events that usually favor can sales. This suggests we may have some protection for a while. Additionally, we are cognizant of public statements made regarding the smaller 7.5-ounce format, which is appealing for both consumers and manufacturers. This is an opportunity to use the 7.5-ounce can at a price point that reflects consumer behavior regarding grocery sizes. The can is ideal for smaller sizes, and we are enthusiastic about the potential. While I can't predict its scale, it should provide an additional boost for us, both from our larger customers and as a ripple effect from their competitors.

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

So I guess maybe just to start, there's been some discussion regarding contract movements potentially impacting next year by your peers in North America. Do you see any potential shifts impacting your volume performance in 2026 in the region?

Short answer, no. This is as strong a contractual outlook as I've seen for us in the 15 years I've been at Ball. There have been some movements. In many instances, we benefited from those movements, and '27 will benefit further. For us, we're a bit hamstrung on growth in 2026 until we get our Millersburg facility up. So it will be tight for us, but we appear to be full. And that's the plan we're operating against right now.

Okay. Great. That's helpful. And maybe just sticking with the Oregon plant. Can you remind us of what volume impact this will have in 2026 or not really because I believe you were maybe shipping those cans from elsewhere? And then secondly, how should we think about the potential margin lift when that plant gets up the learning curve or at least starts to open, I guess, in the second half of 2026? And then balancing that with a potential Mexico headwind because I know you're shipping cans from there. I guess, how should we think about those puts and takes?

Yes, we are currently working on several plans regarding the situation in Mexico that will help guide us through any necessary supply chain adjustments. This will be a temporary change occurring between 2026 and 2027. For Millersburg, I anticipate about $1.5 billion in increased volume in 2027, which could amount to around 3%. This increase will come from a very tight portfolio in the western U.S., particularly in Texas, Mexico, and the Southwest. We will be able to secure some contracted volume for 2027, allowing us to supply our customers in the Northwest from the most efficient locations. There will be some initial costs in 2026, but we expect to recover those and see improved margins afterwards. I believe we will return to record can profitability and enhanced profitability in 2027 compared to what we have today.

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

This is Nico Piccini speaking on behalf of Mike. I wanted to ask about Q4 and explore the volume trends you are observing or predicting by category in North America. Additionally, could you provide insights on promotional activity and an update on the volume for October and the current month of November?

In the third quarter, everyone on this call likely has access to the scanner data, including us, so I won't go into the specifics for each category. However, across the board, our customers are focusing on multipack value, and cans are performing well compared to other materials in this context. For the remainder of the year, we anticipate achieving a global growth rate exceeding 2% to 3%. Regionally, North America is expected to fall between 1% and 3%, allowing some deductions for the fourth quarter. In EMEA, we could be at the higher end of the 3% to 5% range, and South America should be in the long-term range of 4% to 6%. As for October, conditions are aligning with our anticipations. There were some price increases introduced by our customers in October, but these were counterbalanced by traditional promotional efforts, like buy 2, get 1 free. Therefore, the blended price does not accurately reflect the complete retail pricing. Historically, December tends to show variability for both Europe and North America, especially after the football season. In the U.K., it’s referred to as the silly season leading up to the holidays and the performance of seasonal products. Currently, feedback from our customers and trends observed in October give us confidence that we'll meet our expectations by year-end.

Got it. And then just one quick follow-up for me. As you've owned Florida Can and brought that production there up, have you been able to unlock any additional capacity at that plant specifically?

Yes. And we're needing it to manage through some of the tariff supply chain challenges, but that plant is performing in line with our expectations. And next year, we'll be stepping into even more volume and unlocking even more opportunities there. So that's been a really good deal for us thus far.

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

Looking to 2026, understanding you're not giving precise guidance, but are there any kind of directional about CapEx? And any kind of additional color on the Oregon plant? And I think the North Carolina plant, which I don't know if you broke ground on, but there were some news stories about that in December. Any details there?

Yes, I'll let Dan share insights on the early signs of capital expenditures. The Oregon plant is still scheduled to launch in the second half of this year, which is encouraging and will enhance our supply chain efficiency. We will need to hire staff and get the facility operational, and there will be typical start-up costs involved. However, this sets us up for a robust 2027 in several areas. Regarding Concord, we recently held a ribbon-cutting ceremony with one of our major strategic customers, but the actual capital investments and the timeline for start-up are still to be determined, and that will depend on market conditions. We are prepared to support additional production for them, and we have opportunities for smaller, short-term investments. If they maintain their growth trajectory, we will be eager to proceed with constructing that facility. These are our current plans.

Yes. And this is the other, Dan. A little more about the CapEx. With this year and last year being below CapEx, below the depreciation levels, it's still real early for us to be able to call next year, but we'd be guiding you a little more in line with depreciation or even slightly above, thinking about depreciation as a long-term average for our CapEx. But take it as its early days on our budget for next year.

Okay. That's very helpful. A follow-up on North America. I think last quarter, you talked about a $1 million operating cost headwind, and I think that was due to can tariffs, maybe mix was a part of that. Did that repeat or step down in Q3? Or is that kind of over with? Or I'm just curious how that operating cost sort of headwind maybe 2Q to 3Q, maybe to 4Q.

Yes. You should assume that we're continuing to manage through like-for-like inefficiencies from tariffs, but we're past the inefficiencies in terms of the suddenness of the volume. The tariffs are still ongoing, and we're managing through those. And more to come on that as we evaluate long-term supply chain dynamics and what's the best and optimal footprint for us.

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

One more question on North America. Great to see volume has been strong and mix has been a modest drag just as you optimize that portfolio. When we think about '26, are you going to be in a pretty good spot, Dan, where mix is more neutral as we think about that going forward? And then some of the cost headwinds and inefficiencies that have weighed on operating leverage in North America. Should we expect that to get back to more normal next year or still going to be kind of a work in progress?

We are making progress on a smaller scale compared to the changes in our product mix. The facility in Oregon is about to start up. I mixed up Ohio with Oregon, sorry about that. We need to manage the inefficiencies caused by tariffs that have impacted us this year. The issues we face will be temporary in 2026, including the facility start-up and managing the ongoing effects of tariffs. We're taking the necessary steps to position ourselves for a promising outlook in both the short and medium term.

Yes, Dan, it sounds like you secured business in '27 and '28 in North America, which is great. You mentioned the potential for record profitability per can in '27, which is exciting. Are most of the improvements more related to cost and efficiency, or should we anticipate a better pricing environment considering the positive changes in supply, demand, and volumes over the past year?

Yes. The market is tight, Phil. I think you're right. You should see an elongated improvement in underlying economics of the business that I think the industry will benefit from. And for us, in particular, the things that we've been able to manage via the operating model changes, the operating earnings construction, the inefficiencies of just a better performing manufacturing environment. And we're kind of early days even with AI technology deploying, and there's a number of applications, both commercially with AI and secondarily within the supply chain and in our plants and operating our plants more efficiently through technology. So there's room for margin improvement, and it doesn't have to come on the backs of our customers. It can just come through improved performance. And I'm encouraged about that. Yes.

And just to sneak one in for the other, Dan. How should we think about capital deployment when we think about 2026? Obviously, you guys have done a phenomenal job in returning cash back to shareholders. Is that going to be the focus still? Or could M&A be an opportunity, at least there's some chatter about Europe was the market you guys are at least taking a look at. So kind of help us think through medium to long term, how you going to deploy that excess cash?

Yes, I think it's important to note that the level of share repurchase will not be the same as in the past, as we will have bought back over $3 billion worth of shares this year. This sets us on a path toward being private, if you consider it. We will likely return to some of our historical averages, though the exact numbers are still being finalized. We're committed to maintaining a conservative balance sheet and being prudent in our capital expenditures. This approach is consistent with how we've always managed the business, focusing on those key factors to ensure we deliver strong returns for our shareholders.

And Phil, I would say yes to both of those questions. So stay tuned.

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

Your inventories year-over-year are up around $500 million. I take it that's higher aluminum costs. Should your inventories continue to rise into the fourth quarter as aluminum values have lifted?

It's a combination of both. Great question. As you know, we didn't have the right inventory mix in the third quarter last year, specifically in South America in terms of unit volume and days, I think we've added a few days to make sure that we're fit for purpose of what our customers need. We've had a couple of customers even within our portfolio that are really outpacing what they expected at the beginning of the year and have had some really good market trends. So we want to make sure we're ready for that and managing that more appropriately. I'd say the two to three days is a better reflection of a healthy level of inventory. And then your other question is probably 50%, 60% is the increased aluminum value and aluminum costs. So I'd say two-thirds, one-third, but that's how I would construct it.

And I think we might add that this is some terrific volume growth, too, that we've come into, especially here in the United States, too, that has a role in this, too.

Also in your financials, it mentioned that you purchased an investment linked to the common stock of ORG Technology. You have a $47 million investment. What is ORG Technology? Why do you own it? And what exactly do you own?

Yes. You're referring to one of the notes in the release. And ORG Technology is the party who just acquired the controlling stake from our Saudi Arabian joint beverage can joint venture. And we have a long history and a good strategic relationship with them that dates back to the year 2018 when they bought our beverage can business, and probably not too many people were at that earnings call, but we had, at that time, announced that we would be putting some investment into their company. They are the largest beverage can producer in China, and they are traded publicly. So it's a small stake in their public company for an important strategic relationship for us.

And Jeff, I think you would anticipate that there's a number of strategic elements to that investment. So more to come on that.

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

You mentioned in the previous earnings calls about the mix, including the differences between big beer and craft beer, new CSD contracts, and some logistical issues related to a large energy customer. What quarter in 2026 do you expect to see normalization that would help the market better project volume and operating leverage in your NCA business?

It will be much cleaner in 2027 when we have a bit more capacity. Capacity is one factor that complicates predicting leverage fall-through. The second factor is the trend towards acquiring higher growth customers and higher growth categories. We have already navigated 80% of that for the next three years, so there isn't expected to be a significant change in our mix. However, managing incredibly tight capacity means we anticipate reaching 99% asset utilization next year. Delivering on volume fluctuations, both increases and decreases, on a detailed level will be challenging for us in terms of traditional flow-through. Conversely, we've added excess capacity to tap into a growing market in Europe, which makes it easier to achieve operational leverage at a more conventional rate when you have that capacity instead of managing everything on a very tight basis. We are looking forward to having more capacity in the right locations by 2027.

So that actually leads me to my second question on Europe. I don't know if we've explicitly hit this on the call, but growing into a growing market, I mean what's your kind of latest and greatest assessment based on what you're hearing from your customers in terms of the outlook for '27, '28 in terms of the need or perhaps it's already accounted for additional supply capacity in Europe in particular?

Yes. Europe presents a significant opportunity, as echoed by many of our competitors and customers. The market is still heavily dependent on glass substrates, which have a considerable carbon footprint, leading to a shift away from glass in favor of cans. However, Europe is diverse, and market conditions will dictate the appropriate can sizes. For instance, tourist areas in Southern Europe are more seasonal. All these elements influence the right capacity and location decisions. Additionally, the investment in Europe is complicated by strict labor laws, Works Council considerations, and the challenges in obtaining environmental permits. Establishing operations there requires careful planning and a thoughtful approach. I am optimistic about the capital we have already invested in the region and the positive outcomes we are seeing. Moving forward, it's crucial to adopt a methodical strategy.

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

Dan, a quick one for you. I mean you've addressed most of the key issues. So one quick one here. As you look at all the puts and takes in the different regions and so forth, like what worries you the most? Like what do you see as under your control? And what do you see as things you cannot control? Yes, like what worries you the most as you get into the next year and year after that.

Little worries me at this point. I say this with great respect for the team I manage and work with. We have faced several significant challenges over the past three to four years that others in our industry have not encountered. No one had to deal with Russia or the marketing issues in the light beer category. No one has a business in Argentina. The team has skillfully navigated these obstacles, and we have established a new operating model, in addition to the recent trade challenges. However, I can't spend too much time deliberating on the decisions made by older leaders controlling major economies and their future actions. Instead, I focus on trusting and supporting our team, ensuring they are energized, believe we are succeeding, and that we have a winning formula. That is where my attention is primarily directed. I appreciate the question.

No. So that says. So as you look at your stock price kind of been under pressure. So when you look at capital allocation, are you looking like in terms of share buyback more opportunistically or trying to be more aggressive? Like what are you thinking there in terms of the disconnect between what you think you can deliver and what the stock is reflecting?

We believe our stock is undervalued. When we assess our 5-year outlook, our plans, and our historical valuation, it’s clear that we are succeeding in nearly every area. While we recognize the current undervaluation, we intend to be intentional in how we return value to our shareholders. Our goal is to provide consistent returns when we perform at our best. As long as we maintain a positive outlook, we will continue to actively engage in share buybacks.

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

Congratulations on a strong quarter and outlook. My first question is about the categories. In North America this year, it seems we have a very strong energy market, possibly benefiting from easier comparisons, but I also believe consumers are shifting towards energy drinks as a more cost-effective option compared to coffee. Are you expecting energy to continue growing next year at a similar pace despite tougher comparisons? On the other hand, beer sales have been relatively weak, yet you've managed well thanks to your strong position in carbonated soft drinks. Can you share your views on how the various categories are performing? You've mentioned some new contracts extending to 2027 and 2028, but do you anticipate continued low single-digit growth in 2026? Additionally, could you provide some insights by category?

Yes. I think your characterization of the categories is right. I think the other thing that needs to be impressed upon, I think, the broader audience is there are very aggressive innovations happening now in a number of areas that would be a little bit more challenging to define, but health and wellness is certainly promoting. I think there's protein going into everything these days. So I think that market is untapped. But we're connected to a lot of folks that we think are going to win disproportionately moving forward, and they're going to be in cans. But the non-alc 52 weeks, it's grown 4.8%. Alcohol has declined at 2.5%. We have plans to help everyone win in their categories in their preferred brand. There's a lot of can innovation happening. So all of that's going to be required to help all of our customers win. And then there's a lot of disruption that's coming in terms of innovation that we're excited about. So folks that are beverage companies are going to figure it out. And that's where we've also been repositioning some of our portfolio to make sure that we're winning disproportionately on favored mix and winning with the winners. So '26 is what your question, '26 for us is we're very, very tight. And we've bridged higher growth into the contract construction into '27 and beyond to make sure that we can stand up a facility in the Northwest in Oregon. And so we'll grow in line with what we believe the market, at least the low end of the market. And then you'll see a fundamental step change where we'll outpace the market in '27, '28, and beyond potentially.

Great. And so I guess what I'm hearing is the main issues that you're contemplating are just around complexity and maybe execution. And would there be any issues on metal supply that we should consider, maybe whether it's logistics and getting metal in the right places or imports or supply chain? Or have you already addressed those as well?

Yes, we have largely addressed those issues. There was some media attention on one of our suppliers that provides 8% of the can sheet in the North American market, primarily for the automotive sector. This was handled very effectively. While we still face a shortage of processed aluminum and can sheet in the U.S., this has been a challenge we have managed for several years. The impact of tariffs hasn't significantly increased our supply chain challenges. Additionally, Novelis and SDI are planning to establish a new facility in the coming years, which is promising for the medium to long term. In the short term, we are navigating the complexities of the NAFTA supply chain, but our team is performing well. We may need to make adjustments to improve efficiency, but these will involve low capital investments and optimizing our current operations, which we do regularly and will be tied to the tariff situations.

For metal, we feel pretty good, though, where we are.

And apologies if I missed this, but did you call out any special cash items for next year? I know CapEx you addressed, but was there anything on working capital or cash tax or minority interest or anything else that would drag cash flow? Or any thoughts on what your conversion from EBITDA or net income would be?

No. We really have nothing to report right now at this time. But I think we think the trends should continue into next year for the most part.

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

Just first, a quick follow-up. Just on the Novelis outage and the aluminum supply. Did that have any impact on you guys in Q3 or Q4 volumes or cost expectations?

No, it didn't.

That is clear enough. Secondly, I just wanted to ask more broadly on consumer elasticities here as you're thinking about inflation for carbonated soft drinks and beer, do you have any latest view around kind of what the sensitivity would be when consumers start to see the impact of higher prices next year or potentially the risk of?

Yes, I'm actually feeling more optimistic. We have been discussing the weekend consumer for three years now, and grocery baskets have been shrinking during that time. This isn't new for us or our customers. What's encouraging is that people are planning to spend their money on food and beverages rather than traveling or making large purchases. The focus of their spending is on the products we offer. In the past two to three years, we were competing with vacations and other expenditures, but that's changed. This indicates that pricing has reached a point where consumers are prioritizing putting food on the table, which is typically a favorable situation for us. Thank you for the questions, and I wish everyone a wonderful holiday season. I look forward to sharing our full year results and further details about 2026 shortly. 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.