Good morning and welcome to Crown Holdings’ Fourth Quarter 2023 Conference Call. Please be advised that this conference is being recorded. I would now like to turn the call over to Mr. Kevin Clothier, Senior Vice President and Chief Financial Officer. Sir, you may begin.

Thank you, Bill, and good morning. With me on today’s call is Tim Donahue, President and Chief Executive Officer. If you don’t already have the earnings release, it’s available on our website at crowncork.com. On this call, as in the earnings release, we will be making a number of forward-looking statements. Actual results could vary materially from such statements. Additional information concerning factors that could cause actual results to vary is contained in the press release and in our SEC filings, including our Form 10-K for 2022 and subsequent filings. Earnings for the quarter were $0.27 per share compared to $0.74 per share in the prior year quarter. Adjusted earnings were $1.24 compared to $1.17 in the prior year quarter. Net sales in the quarter benefited from a 5% higher volume in North American beverage, which were offset by the pass-through of lower raw material costs and lower volumes across most other businesses. Segment income was $382 million in the quarter compared to $292 million in the prior year, reflecting higher beverage can volumes in Americas Beverage, the contractual recovery of prior year inflationary costs in European beverage more than offsetting the underabsorption of fixed costs. During the quarter, the company decided to optimize its footprint in certain markets and closed a beverage can plant in Batesville, Mississippi, an aerosols plant in Decatur, Illinois, and beverage can plants in Ho Chi Minh City, Vietnam, and Singapore. These actions were necessary to align supply and demand and will lead to greater utilization, operational efficiencies, and fixed cost absorption. For the year, the company delivered record adjusted EBITDA of $1.882 billion, an 8% improvement compared to the $1.744 billion in 2022. The improvement was driven by a 4% overall volume growth in Americas Beverage, the contractual recovery of prior year inflationary costs in European Beverage, and cost-saving initiatives in Transit Packaging. The company achieved $661 million of free cash flow in 2023, driven by record EBITDA, exceptional working capital management that also included the reduction of approximately $200 million in off-balance sheet factoring, and a continued disciplined approach to capital spending. For 2024, we see EBITDA in line with the 2023 record performance as continued strong performance in North American Beverage and Transit Packaging was offset by lower results in the can-making equipment and aerosol businesses due to lower demand. As stated in the earnings release, first quarter adjusted earnings per diluted share are projected to be in a range of $0.90 to $1, with the full year projected to be in the range of $5.80 to $6.20 per share. The adjusted earnings guidance includes net interest expense of $380 million. It assumes average common shares outstanding of approximately 120 million shares, with an exchange rate at current levels with the euro at 1.08 to the dollar; a full-year tax rate of approximately 25%; depreciation of approximately $320 million; non-controlling interest to be in the range of $130 million; and dividends to non-controlling interests are expected to be approximately $110 million. We currently estimate 2024 full year adjusted free cash flow to be in the range of $700 million to $750 million, with no more than $500 million in capital spending. At the end of 2024, we would expect net leverage to be at the lower end of our targeted leverage range of 3.0x to 3.5x. With that, I will turn the call over to Tim.

Thank you, Kevin, and good morning to everyone. As reflected in last night’s earnings release and as Kevin just reviewed, operating performance in the fourth quarter was well ahead of the prior year’s fourth quarter. Beverage can volumes remained strong in North America and Brazil, offsetting demand weakness in Europe and Asia. Cash flow performance was well above the prior year and earlier expectations, as we significantly adjusted production schedules to drive down working capital. As has been the case throughout the year, below the line items, that is, interest expense, pension and equity earnings, were all negative to the prior year. In total, earnings were ahead of last year, but short of prior expectations due mainly to a higher tax rate and lower equity earnings. As Kevin noted, we achieved record EBITDA performance for the company in 2023, with double-digit segment percentage gains found among the three largest businesses, Americas and European Beverage and Transit Packaging, more than offsetting headwinds faced from the 2022 steel repricing and weak aerosol can demand. Also, as Kevin noted, during the fourth quarter, we made the decision to close five production facilities globally based on our installed capacity, including newer facilities which continue to progress through the learning curve and our view of future market growth and demand. Difficult decisions, but necessary to adjust our cost structure with expected future demand. Looking ahead to 2024, in Americas Beverage, we expect another year of volume growth in North America and Brazil, although that will be somewhat offset by the glass business in Mexico. After two strong years of returnable glass shipments, we project a mix change to more one-way glass, combined with the timing lag for our glass PPI adjustment. In Europe, shipments were down mid-teens in the fourth quarter, with our shortfall compared to the market being the result of our weighting more towards Southern Europe versus Northern Europe. We expect a flatter demand environment in 2024 and projected income in the segment will return to 2021 levels. As provided in last night’s release, we recast European corporate costs from Corporate and Other to the European Beverage segment. Post the sale of the European tinplate business and completion of all associated service agreements, all remaining costs relate to the European Beverage business. As you can deduce from the table, it is $5 million to $6 million per quarter, totaling $21 million for 2022 and $22 million for 2023. Volume softness was noted across each Asian country we operate in as the region continues to struggle with the effects of inflation, which have led to higher base cost levels against declining consumer purchasing power. For 2024, income is projected to be in line with 2023 as cost reductions offset continuing demand weakness. Transit Packaging realized the benefits of significant cost savings in 2023, leading to their highest ever income performance despite a muted industrial backdrop. Free cash flow in the segment was again strong, with more than $300 million being generated on an unlevered basis. Income growth is again forecast for the segment in 2024, albeit weighted towards the back half of the year. The business has a cost structure that positions well for further growth when industrial activity accelerates in the future. Across our non-reportable businesses, income is forecast to be down in 2024 versus 2023, the result of continuing weak aerosol can demand and a significant slowdown in orders for new beverage can manufacturing equipment. As you may recall, in the first quarter of 2023, we initiated a downsizing of the beverage equipment business in response to slowing demand for can manufacturing equipment. The North American food business, with income above pre-pandemic levels, is well capitalized and continues to experience growth in the pet food category. Operationally, 2023 was a strong year, with segment income up more than $100 million. We generated significant free cash flow, with deleveraging on plan to the lower end of our targeted range. The higher interest rate environment led to significant headwinds below the line in the form of higher interest and pension costs and lower equity earnings. We took significant action to right-size production capacity in both the U.S. and Asia given our view of market demand, which will lead to higher utilizations near term while allowing the company to meet future demand growth as new plants progress through the learning curve. Looking ahead to 2024, segment income is projected to be in line with 2023 as continued growth in beverage and transit will offset headwinds in aerosols and equipment. We remain focused on operational improvements, generating cash from the businesses and further strengthening the balance sheet, positioning the company well for future growth. Before we open the call to questions, we just ask that you limit yourselves to two questions so that everybody has an opportunity in the time allotted. And with that, Bill, we are now ready to open the call to questions.

Thank you. We will now take the first question from the line of George Staphos of Bank of America. Your line is now open.

Thanks. Hi, everyone. Good morning. Tim, thanks for the details. Same to you, Kevin. My two questions. First of all, is there any carryover into 2024 from higher inventory that you need to still work down and/or any kind of inventory charge on steel? That’s question number one. Question number two, Tim, obviously, quarters come and go. Sometimes some segments do better than others. As you look at the non-beverage segments, what makes you still comfortable with the portfolio as it’s aligned? And why do you think the tinplate businesses, machinery and transit can be drivers of earnings as you are seeing in Americas Beverage or maybe rethinking things as we sit here today? Thank you and good luck in the quarter.

Sure, George. So, the answer to the first question, no, no carryover. Inventory is pretty much in line with where we think the business is going to go going forward in the tinplate businesses. To your second question, listen, I think the answer is any business is for sale under the right terms and conditions. But we are not in the market to give our businesses away in the hopes of driving some short-term multiple gain just so private equity can make money because we sold a business below where it’s true value. These businesses all generate pretty substantial cash. I mean, I have a difficult time understanding how we create more value by getting smaller. We sold a business a couple of years ago, a very large business. We got a very good price, especially historically when you consider where a food can business trades; it didn’t move the needle on valuation. So I have a hard time understanding it. Now specifically to the business as you mentioned, listen, transit is an excellent business. We don’t spend a lot of time talking about it because you folks don’t want to talk about it, but this is a business with low- to mid-teens margins that requires almost no capital investment. I wish I had five more businesses like this where I didn’t have to invest any money and all it did was send me cash every day. Pretty stable business. Some of the end markets, as we’ve said before, might not be as stable or they might fluctuate more than other businesses. But our business servicing a variety of end markets is remarkably stable with the exception of the COVID year. The tinplate businesses, the food business is, as we said, well capitalized, doing quite well, income above pre-pandemic levels. Aerosol, well, it is an expensive way to dispense products. There are some things happening in the aerosol market. I would say that some of the large CPGs, despite their claims to meet their environmental goals, if you were to go into a market, you would see that a lot of air fresheners now are in all plastic. They are not in metal anymore. They are not in aluminum and/or steel. So it is a changing business. We’re going to right-size the business for what we expect future demand to be, and we’ll see where it goes from there. The beverage can equipment business, it’s been an excellent business for us for a number of years. I would project that this year and next year that it’s predominantly a service and parts business, and there are a few new machine orders or new lines being installed globally, with the exception of China. And so we’ll hold on. We’ve right-sized the business. We’ll see what other end markets that our skilled technicians and mechanics can serve us besides beverage can equipment. But this is a charge we took in the first quarter last year, George, and I won’t say which analyst, but one of you analysts called me afterwards and said, this was kind of the canary in the coal mine. You talked about your beverage can equipment business taking a big charge because of reduced expected demand and nobody brought up the question, as if nobody wanted to understand what was going on with expected future growth in beverage. And so I’ll leave that answer to a future question. But that’s my long-winded answer to your question, George. I apologize for being so long.

No, Tim, not at all. We appreciate the thoughts. We’ll turn it over. And thanks and good luck in the quarter.

Thank you. We will move now to the next question coming from the line of Phil Ng of Jefferies. Your line is now open.

Hey, guys. First quarter earnings per share is a big step down. And if I look at your full year guidance, it seems to be more front-end loaded in terms of headwinds. Tim, can you kind of flesh out some of the things that might be weighing on your results in the early parts of the year versus hopefully the later part of the year, if maybe any other good guides that could kind of kick in?

Yes. I think that, again, our guidance versus your estimates, these were your estimates, not ours. I understand your estimate for Q1 was trying to somewhat move from what we reported in the first quarter of 2023 back towards the first quarter of 2022, and we’re going the opposite direction. I would say that European Beverage is probably a bit weaker in Q1 than we would have, or you would have anticipated, and that’s largely the result of Q1 being a smaller quarter. While we do expect the European market to pick up in 2024, we would expect that to be more back-weighted, not Q1. And then the other segments, we had a very strong result in the equipment business in Q1 last year, and I’ll bet you if I had numbers in front of me, I bet you our equipment businesses are probably down in the order of $10 million to $12 million alone in Q1 2024 versus Q1 2023. And then aerosol probably makes up another handful of the shortfall. So they would be the three buckets.

Okay. And then can you give us a little more color on what’s going on in Europe? Certainly, it’s well telegraphed, Europe has been soft. Where are things right now? I mean, is inventory really already flushed out in Europe? Are you starting to see any green shoots in terms of order patterns with your customers in Europe? And I guess one follow on. On the D&A side, you guys talked about potentially a 36 tailwind. Is that in the guide already? Or is that something that...

No, it’s in the guide already. So I think in Europe, as I said in the prepared remarks, we are much stronger in Southern Europe than we are in Northern Europe. So if you want to think about Spain, Italy, Greece, those markets were significantly weaker than the Northern European markets. We actually did quite well in the Middle East and Turkey, but our weakness was in the Southern Continental European countries. I think that there are some things in the European market that are certainly different from a retail perspective and a customer promotion perspective than what we see in North America. But I do think Europe is a market that will grow this year. It’s a market that might be down one year, but it doesn’t stay down for long. It generally – if we have a down year in Europe, we generally bounce back pretty quickly within a year, not much more than a year. So I do expect Europe, although weak in Q1, to strengthen beginning in Q2 and forward.

Have you seen order patterns and inventory get flushed down the channel at this point, like orders pick up, or still too early to call?

No, I think it’s still too early for that.

Okay, appreciate the color, Tim.

You're welcome.

Thank you. We will now move to the next question coming from the line of Mike Roxland of Truist Securities. Your line is open.

Hi, thank you, Tim, Kevin, and Tom for taking my questions. Just wanted to follow-up on the last one that have been asked about Europe, especially as it relates to some of these retailers. That Carrefour would stop selling Pepsi and 7UP given unacceptable price increases. We’ve been hearing that other retailers are doing the same. Has that impacted demand in Europe? And do you explore – and if it has, do you expect it to impact demand in Europe if an agreement can’t be reached between these retailers and CPGs?

Well, I think what’s impacting demand in Europe is the pressure on the consumer from all the other things that they are faced with, energy and all their other costs. I don’t think the expulsion of one particular brand from a large retail chain affects us because it’s just replaced with other products on the shelves. Part of the issue in Europe is that this has more to do with government control around inflation than it does with the retailer. The retailer, in my view, is trying to avoid a government problem by putting the blame on the big soft drink company. I think if you were to – if somebody walked through the store, you would see that that particular soft drink company, what they are charging for beverages is not the highest charge for beverages on the shelf. But they do have other products perhaps in the retail store and they are being punished across their entire portfolio, be it snacks and soft drinks, whereas their soft drink pricing is not the highest in the store. So I think – but this has more to do with overreaching government regulation in that central banks around the world have created a problem for all of us, specifically consumers on the lower end of the scale, and they are trying to paint somebody else as the bad guy and they first point their finger at the retailer, and then the retailer points their finger at the CPG. So this will sort itself out in time. But specifically, the expulsion – again, I’ll say it again, the expulsion of one product does not impact demand. It’s just replaced with another product. What impacts demand is significant inflation across a variety of cost buckets for the consumer, notably energy.

Got it. Thank you, Tim. And just one quick follow-up on North America. How much additional runway do you think you have with respect to share gains? Is it something that has benefited the company in recent years? You think a lot of the share gains versus some of your peers is not a high leverage or do you still think there is some road left?

How would I say this? I would say that we’ve not been – well, let me say it this way. I think you should be able to appreciate from the margins we have versus others that we’ve tried to grow our business in a responsible way in the marketplace. That is to say, that the share gains we’ve experienced were more likely the result of higher aspirations by others, which were not fulfilled and/or customers wanting to rebalance. I do think that by the end of – I think by the end of 2024, from where we sit, we think the market vis-a-vis customers and suppliers is probably set where it’s going to be for the next couple of years. It’d be difficult for me to understand significant share moves beyond that, unless somebody does something extremely foolish.

Got it. Thank you very much, and good luck with 2024.

Thank you.

Thank you. We will move now to the next question coming from the line of Ghansham Panjabi of RW Baird. Your line is now open.

Hi, guys. Good morning. Maybe we could first start off with an EPS bridge, if you could, off of the $586 million in earnings for 2023. You have a lot going on; cost savings, change in useful life for the asset, last issue you called out, and non-reportable. Can you sort of dimensionalize those impacts on the EPS bridge?

Yes. So what do we have? We’ve got $0.30 coming from – roughly $0.28 to $0.30 coming from the depreciation change. You’ve got higher depreciation year-on-year just from prior year’s capital investment. So I wouldn’t say it’s a wash, but it’s probably two-thirds of the depreciation changes offset by higher depreciation from prior year’s capital investment. You got the benefits of restructuring. And then you’ve got pretty sizable headwinds if you combine equipment, aerosols in Mexico. And I bet you if you took the equipment business, that could be down – Ghansham, year-on-year, that could be down on the order of $40 million. Aerosols and Mexican mix more one-way glass versus returnable in the PPI lag. We are on a one-year lag basis for PPI in Mexico. So as utility prices go up and down, we either get it and pay it the next year or pay it this year and get it next year, and we’re in the cycle where we will get it next year. But I would say, if you took the equipment business, aerosol in Mexico, you’re looking at a combined $80 million across those three buckets. Offset by volume gains and some restructuring gains.

And the cost savings associated with the restructuring, what is that number?

Yes. I mean, think about this year; it sounds like we will get everything done. Think about like $15 million, and we get more next year. Generally, there are – these are one-year paybacks. The two plants in Asia were older plants built in the early ‘90s by a company we acquired. They were built – the one was built in the market it should have never been built in. These were initially built as slow-speed lines. We’ve sped them up the median-speed lines. But in today’s marketplace, they can’t compete with a high-speed line factory. So the savings there are not as great as you would otherwise imagine because they weren’t very expensive to begin with. You got to remember, if you take an old plant out, there is no depreciation on it, so you don’t get the depreciation savings.

Yes. Understood. And then on North America, with the shutdown in Mississippi, is that just sort of a one-off sort of adjustment? Or is this something that’s part of a more holistic approach towards optimizing your footprint in North America? And then just the last question, just to clarify, on the off-balance sheet financing unwind, I think it was $200 million in 2023. Is there – is that going to be an incremental headwind in 2024 as well? And if so, how much?

It will not be a headwind in 2023. We took the opportunity to reduce the off-balance sheet financing – it’s just financing of another form, Ghansham. We’re just trying to optimize the cost of financing. We generated probably on the order of $300 million to $350 million of working capital source of cash. So we offset it by buying that down off balance sheet. The closure of Batesville, I described that to you as one-off. Post the closure of Batesville, our utilization rates are mid-90s. I’ll bet you the industry is 90 to 92 right now, and we’re probably 94 to 96. So we’re in pretty good balance in North America.

Alright. Thank you so much.

You're welcome.

Thank you. We will move now to the next question coming from the line of Adam Samuelson of Goldman Sachs. Your line is now open.

Yes. Thank you. Good morning, everyone.

Good morning.

First question, maybe just if we could unpack the outlook on Transit. Specifically – and as we think about the outlook for the year, just – I know you talked about income growth, but can you talk about the top-line volume, price/mix assumptions against that? Is there any kind of carryover savings from the restructuring actions? Are those effectively annualized at this point? And just how should we think about incremental kind of margins from here if demand did actually improve?

Yes. So I think we described the business to you all when we acquired it in 2018 as a GDP-like business. So in the absence of a large capital plan organic or inorganic, this business is going to grow with GDP. And as you know, the industrial activity is down. We’ve been able to offset that with cost reductions over the last couple of years. I’d tell you that little – it’s a little difficult to describe volume to you, but I can give you volume dollars. Our volume dollars in Q4 were down on the order of 3.5%. And for the full year, we’re down in the order of 8.5%. That’s volume dollars. But obviously, as you could tell by the income results, that was significantly offset by cost reduction activities and better price/cost management. So we would expect that the first half of this year, again, volume dollars to be a headwind. We will continue to offset that a bit with cost, but the income growth that we’re looking to experience in transit is weighted more towards Q3 and Q4 than the first half of the year. But again, pretty – I know you guys are tired of hearing because you don’t like the business, but it’s a solid business that generates low to mid-teens returns on no capital.

Okay. No, that’s helpful color. And then just going over to the Americas Beverage. You lumped the PPI headwind on Mexico glass with the other non-reportables, but the whole segment is up inclusive of what I presume to be, what, $25 million, $30 million or so headwind in Mexico. So just help us think about the volume assumption embedded...

No, I think Americas Beverage, you’ve got growth in North America and Brazil, and I’d say it’s mostly offset by the headwind in Mexico. So I think the segment is largely flat year-on-year given the Mexican headwind.

Got it. And what’s the volumes for volume assumption for Americas or North America and Brazil within that?

So I think that we project the market in North America to be flat to up 1%. And just to remind ourselves, we believe the market was down on the order of 5% in 2022, and it was up about 1% in 2023. We don’t see why 2024 would be up any more than 1%, so flat to 1%. And in that kind of market, we’re currently projecting we’d be up 4% to 5%. Having said that, obviously, January is off to a rocketing start, but it’s one month and it’s a small month, so we don’t get too excited about it. Brazil, again, I’d suggest to you that we think the market and ourselves are up in the 2% to 3% range.

Got it. That’s all very helpful. I’ll pass it on. Thank you.

You're welcome.

Thank you so much. We will move now to the next question coming from the line of Arun Viswanathan of RBC Capital Markets. Your line is now open.

Great. Thanks for taking my questions as well. So first question, on the EBITDA line, it looks like if you annualize kind of the reduction in depreciation that you’re expecting, that’s about $48 million or $50 million. And then we kind of walk through your guidance of the $5.80 to $6.20. We’re coming up with an EBITDA of around $1 billion – $1.82 billion or so. I guess, is that right? And then that would also imply kind of down segment EBIT in the Americas. So I just wanted to clarify those kinds of questions. Thanks.

Can you ask the second question again?

Sorry, go ahead.

I’ll answer the EBITDA question. You got to ask me the second question again. So if we had $1.882 billion of EBITDA in 2023, the number you just quoted is far too low. We’re within $10 million to $15 million of that number in 2024. So think about $1.860 billion to $1.870 billion. So you’re well off that number. And then what was your second question?

Yes, the second question was, what are you expecting for segment EBIT in the Americas? It does appear that maybe that would be flat to down? Or are you still expecting growth there?

No, no. So I think what I just answered to Adam’s question, we said flat year-on-year, and that’s growth in North America and Brazil, offset by glass in Mexico.

Okay. And then if I could just squeeze in one last one, sorry. So, then when you think about the other businesses, it is a little surprising that there is so much volatility and I know you have been asked this before, but would you consider – is there any way that you could maybe shift a little bit more into the aluminum aerosol business, or is that not necessarily a good use of capital? Thank you.

Well, I think we could consider doing anything. I don’t particularly like the economics of aluminum aerosol; it’s really expensive, and it doesn’t provide you with the incremental growth opportunities that you see in D&I beverage cans. The impact of extruded aluminum aerosol can is generally one line gives you the output of x number of units. And there is really no way to add equipment to it to increase those x units to y units on that one line. If you want more units, you need to add more lines. So for me, the – it’s an expensive business. If you are already in it, like a lot of businesses, if you are already in it, you can talk yourself into spending more money. It’s really difficult to talk yourself into getting into that business. There are better uses of capital.

Okay. Thanks. I will turn it over.

Yes.

Thank you. We will move now to the next question coming from the line of Anthony Pettinari of Citigroup. Your line is now open.

Hi. Good morning. I was wondering if you could talk a little bit about competitive intensity in Asia and just when you might be able to get back to kind of mid-single digit plus growth. It seems like this region was growing for several years and a lot of capacity was added. Are you seeing foreign entrants from China or Japan kind of impacting competitive intensity within the region, or just how you sort of characterize the environment?

Good question. The first thing I would say is that the real headwind that you faced last year and looking into this year is just the consumer is weak. And it’s a much weaker consumer to start with than we are used to in Western Europe or North America. And so what would really help is if we had volume growth, obviously. And for that, we need some kind of economic stimulus in the region. Now, there has been a significant amount of capacity installed mostly in China, where we are very small. There has been some incremental capacity installed in Southeast Asia, but not to the level that would give you concern if there was adequate growth in the market and adequate growth being defined as mid-single digits, which should be achievable in a market like Southeast Asia with a consumer that’s continuing to experience more purchasing power, albeit over the last 1.5 years, last two years, they have had declining purchasing power. So that’s the real challenge at this point.

Okay. That’s helpful. And then just following up on, I think it was Ghansham’s question. I think you identified Mexico can-making machinery and aerosol as an $80 million headwind potentially, if I got that right for those three things.

Rough number, yes.

Yes. It’s obviously too early to think about 2025. But just from a big picture perspective, you would expect Mexico to kind of come back on that pass-through in 2025, if I characterized that correctly. For aerosol and can-making machinery, do you think we are at a trough? I mean do you think it gets better as the year goes on? Like just how would you characterize where those businesses are kind of within the earnings cycle and the potential for maybe some kind of recovery in 2025 or not?

So, like, Mexico, as you stated, comes back next year, no doubt. The can-making equipment business, as I have said earlier, this year will be a service and parts business for previous equipment sold and installed. So, there won’t be a headwind next year from less machines sold because there will be no – minimal machines sold this year. So, that probably – that business will come back in the future, but it’s probably 2026 and after. I don’t forecast based on where we see global growth rates for beverage cans outside of China; I don’t see the need for more beverage can equipment in any market. But we do expect there will be enough growth that there will be further lines installed in the future, but that’s a 2026 and after phenomenon. Aerosols, as I have said, there are some things happening in the aerosol business. I think that there are some substrate changes to plastic. I would say the business is – I don’t see the business getting any worse, but it could be a year or two before it gets better. We need some demand pickup in that business, and certainly, would demand pick up perhaps with some better behavior by some of the others in the marketplace.

Okay. That’s helpful. I will turn it over.

Thank you. We will move now to the next question coming from Gabe Hajde of Wells Fargo Securities. Your line is now open.

Tim, Kevin, Tom, good morning.

Good morning, Gabe.

Tim, bear with me here. I wanted to ask a question about Americas Beverage, and it’s always tough to pick a starting point. But if I look at sort of pre-pandemic segment profit, you are up, I don’t know, maybe $450 million. I think there is roughly maybe 13 billion units more sold. So, maybe that gave you $200 million to $225 million. So, there is another $225 million or so of favorable mix and price in there. I am just curious, sort of replicating the competitive intensity question in North America. You talked about your system being mid-90s utilized and the rest of the market, maybe low-90s. But as we go into the middle of the decade and forward, do you feel like that improved profitability is sustainable? And then a similar question in Europe, but a little bit different in the sense that whenever there is a conflict in the Middle East, sometimes some of those cans find their way into Eastern Europe and then Eastern Europe ships into Western Europe. Is there any fear of that and risk to your 2024 outlook as it relates to Europe Beverage? Thanks.

No. I think to answer the second part of your question, the Middle East has remained – despite the conflict, has remained very firm. I think the – perhaps the labels are different, but the volume is similar to higher. So, we don’t see that challenge that you just described. So, North America, I think that there is no reason why we can’t, as an industry, remain disciplined at utilization rates in the low to mid-90s levels. These are very high utilization rates. So, in the absence – as I have said earlier, in the absence of somebody doing something foolish, we don’t see significant share shifts beyond 2024.

Okay. And then I am going to try to sneak in two last ones. I take your comments on the equipment business and the sort of flat to up 1% growth in North America. Does that suggest that sort of your medium-term outlook in terms of like, hey, our beverage equipment business is sort of at a normalized spot, and that’s how we should think about growth? And then are you telling us that $15 million of total restructuring savings from the five plant consolidation efforts, or did I mishear what you were trying to tell us?

$15 million this year, with more to come next year. I mean, obviously, you announced them; it takes you some time to get the plant closed and realize the benefits through the remaining system. No, I think on the beverage can equipment business, I wouldn’t say this is a normal run rate; I would say this is a low point, considering that we don’t project any machine sales this year or next year. Clearly, when machine sales return, the profits go back up. So, I don’t think this is the normal. I do think that it’s hard to project as we sit here today after the last two years that the market for North American beverage will grow any more than zero to 1%. I know some others have higher growth aspirations for the market than that, but we are going to grow more than that this year, but I don’t see the market growing more than that. As you know, the customers have a new value over volume model. It’s hard for me to understand how much more volume they would need to sell to offset price loss if they do significant promotions. And I am sure they are much smarter about that, and they target their promotions in a way that I wouldn’t understand market-by-market. But you would have to sell an incredible amounts of volume more than you are projecting now to offset the price that they have realized. So, if a 12-pack used to be $3, Gabe, that’s $6 for a case versus $18 for a case now, not promoted. And even promoted, if you are talking about buy two get one, that’s $12 a case. So, significant price inflation that they put into the market, hard to understand how they can reverse that and keep profits moving in the right direction for them. I understand for them that, like all business, you always say volume covers all sins. Well, I don’t think they want to create the sin of under-pricing their product anymore. So, I think that zero to 1% for the market is probably a fair assessment as we sit here today.

Thank you.

You're welcome.

Thank you. We will move now to the last question coming from the line of Edlain Rodriguez of Mizuho. Your line is now open.

Thank you. Good morning, guys. Two quick ones for me. One on European Beverage: what do you think is driving the softness we are seeing right now? And what will drive a rebound in the second half as you expected? And then the second one, you talked about rightsizing the aerosol business. But how long do you think it will take you to get to where you want to be in there?

Second question, listen, I think we announced the closure of Decatur. I think we are in a much better position after the Decatur closure. Now, you are back to, you have the capacity you need, a little more volume would help. And I think as I have said earlier, a little more volume perhaps brings about a little bit better behavior across the industry. I will leave it at that. On Europe, as I have said earlier, the challenge, and you probably heard others say as well, the challenge that we have right now is the consumer is under incredible pressure across Europe. If you were to look at any index measure of economic activity or consumer confidence, it’s pretty low across Europe right now. But I do think, as I have said earlier, we have had periods before where in the can business where Europe has been down and it never stays down for long. So I do think by the summer months here, as we get into the summer months, we will start to see a pickup late in the second quarter through the summer.

Okay. Thank you very much.

You're welcome.

We have the last person to ask a question coming from the line of George Staphos of Bank of America. Your line is now open.

Hey guys. Thanks for taking the follow-on. I just want to make sure, factually, the restructuring savings we are talking about this year: it’s a $15 million out of $50 million? And what would you say the carryover is into 2025, recognizing it’s only February of 2024? And then secondly, Tim, if you had a figure for European Beverage can growth for this year, if you mentioned, I had missed it, what is that figure? And with that, I will turn it over. Thank you.

Thanks, George. So, I think $15 million this year and perhaps another $15 million next year. Keeping in mind, these are all old plants. So, there is no depreciation, right? So, you don’t get the depreciation savings that you see from a plant that’s not 30-plus years old. For Europe, we are expecting a flatter – so zero to 1% volume environment for Crown in 2024, and I think the market is up on the order of 2% to 3%.

Hey Tim, maybe I will double up here, one last one. And I recognize it’s a small business in relation to the entirety of Crown. But as you talked about the aerosol business, in North America and globally, and we have obviously followed it for Crown for a number of years. It doesn’t sound like things are going to get massively better from a secular basis longer term. So, yes, you have right-sized it, yes, maybe you get some volume growth, but it doesn’t sound like it’s a real driver for you going forward. Is it something that you could ultimately parse from the rest of tinplate, or is it so integrated that it’s really hard to do, and so it stays as long as you are in the North American tinplate, which you still seem to like? Thank you and good luck in the quarter.

Yes. Good question. So, listen, I think you are right. It doesn’t get measurably better in the future, but it doesn’t get any worse from where we are. Yes, it is integrated. As you think about the process to cut, coat, and print sheet across aerosols and food, it’s very integrated. You could carve it out, but it probably leads to more dissynergies than it’s worth. And again, as I have said earlier, the prospect of selling any business is always on the table, but you have to think about how you are going to replace the cash flow if you would sell any one or a combination of businesses, specifically North American tinplate. We still generate a sizable amount of free cash flow across these businesses on an annual basis. As you consider, we don’t spend any capital in these businesses. And I think I addressed earlier why we are not interested to spend any capital in the aluminum aerosol business. So, we run these – those businesses, we specifically run for cash. And we will continue to run them for cash until something else breaks, but they are cash positive.

Understood. No, I appreciate the color, Tim. Thank you very much.

Thanks, George. So Bill, I think you said that that was the last question. So, we thank everybody for joining us, and we will speak to you again in April after the completion of the first quarter. Thanks very much. Bye now.

Thank you. And that concludes today’s conference. Thank you so much everyone for joining. You may now disconnect and have a great day.