Good morning, and welcome to Crown Holdings First Quarter 2024 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, Ell, 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 is 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 our SEC filings including Form 10-K for 2023 and subsequent filings. Earnings for the quarter were $0.56 per diluted share compared to $0.85 per diluted share in the prior year quarter. Adjusted diluted earnings per share were $1.02 compared to $1.20 in the prior year quarter. Net sales for the quarter were $2.8 billion compared to $3 billion in the prior year, reflecting higher beverage can shipments in the Americas and European Beverage, offset by the pass-through of lower raw materials, and lower volumes in most other businesses. Segment income was $308 million for the quarter compared to $320 million in the prior year, reflecting improved results in global beverage offset by lower volumes in the other business and $12 million higher corporate costs, which include $8 million of costs related to a facility fire. Free cash flow in the quarter improved by $296 million, driven by improved operating cash flow from lower working capital and lower capital spending. The balance sheet remains strong with net leverage at 3.4x at quarter end compared to 4.1x for the same period last year. As stated in the earnings release, second quarter adjusted earnings per diluted share are projected to be in the range of $1.55 to $1.65, with full-year projected to be $5.80 to $6.20 per share. The earnings guidance includes net interest expense of approximately $380 million; average common shares outstanding of approximately 120 million with exchange rates at current levels; full-year tax rate of approximately 25%; depreciation in the range of $310 million; noncontrolling interest in the range of $130 million to $140 million; and dividends to noncontrolling interest of 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 of capital spending. At the end of '24, we would expect net leverage to be at the lower end of the targeted leverage range of 3 to 3.5x. With that, I'll turn the call over to Tim.

Kevin, thank you. Good morning, everyone. I'm going to actually be very brief, and then we'll open the call to questions. As reflected in last night's earnings release and as Kevin just summarized, first quarter performance came in better than expected with global beverage can results up more than 11% over the prior year. Increased shipments of beverage cans in both North America and Europe offset lower shipments in Asia. Cash flow performance was again strong due to lower working capital usage, combined with lower CapEx. Americas Beverage recorded unit volume growth of 5%, reflecting 7% growth in North America and a 1% decline in Brazil. And while the Brazil market grew mid-teens in the first quarter, our shipment performance reflects a comparison against a very strong first quarter last year in which we grew 23%. We maintain our full year volume growth target of 4% to 5% for the North American business and expect low to mid-single-digit growth in Brazil in 2024. In Europe, shipments bounced back nicely from the destocking of the prior year's fourth quarter. And in contrast to the fourth quarter, our weighting towards Southern Europe delivered benefits versus the overall market as that region, combined with the Gulf states where we're more heavily represented, performed better than Northern Europe. Perhaps too early to declare an inflection in Europe, but April shipments were also strong, and the sentiment for beverage can shipments is more positive than only three months ago. We continue to expect 2024 segment income will exceed the 2021 level. And the relocation from our Braunstone U.K. plant is now complete with the Peterborough plant in full start-up. Our income performance in Asia Pacific advanced 15% as cost reduction efforts initiated in the fourth quarter more than offset 8% lower shipments in the region. We do expect full year income improvement in the segment as continued benefits from capacity pruning offset the impact of lower volumes. As expected, first quarter transit performance was down to the prior year, with price and volume contributing equally to the overall shortfall in both revenues and income. Specific to the various lines of business, the protective products businesses accounted for more than 50% of the revenue and income decline, reflecting weakness in the freight industry during the first quarter. We are expecting conditions to improve later in the second half, in line with expectations across the trucking industry. Performance and others reflect lower demand for beverage can equipment and aerosol cans that we previously discussed. So in summary, beverage cans had a very good start to the year, and we see that momentum continuing into the second quarter. We continue to grow share in North America, maintain and restore margins to more appropriate levels, and generate significant free cash flow per share. 2023 was a record year of EBITDA for the company, and we aim to match that performance despite the headwinds previously discussed. And I think, Ell, with that, we are now ready to take questions.

Our first question comes from Ghansham Panjabi of RW Baird.

Tim, the 7% growth in North America that you're forecasting for 2024, you mentioned share gains were part of that. One of your peers reported last week, talking about having lost share and having line of sight towards filling that share, what time period that is. Can you give us a sense as to your confidence on your share position as we look out to 2025 at this point? Or is it too early to tell?

Just to clarify, Ghansham, we had 7% growth in the first quarter, and I confirmed our growth target for this year in North America is 4% to 5%. Regarding comments from another peer, I can't speak to that, but I can tell you that based on current activity, including the lighter or more sporadic promotions we've been observing compared to the past, I am very confident in achieving that 4% to 5% growth this year. Additionally, we have no reason to expect that our market share will do anything other than show slight positive growth in 2025 compared to where we stand today.

Okay. That's great to hear. And then for my second question on APAC, the improvement. I think some of your customers were talking about an improvement in regions such as Vietnam as well on a relative basis for them. How are you feeling about that region overall from a growth standpoint in terms of sustainability relative to what you delivered in the first quarter?

Our shipments are down 8%. I believe the market in Southeast Asia was likely up by about 9% to 10% in the first quarter. Our lower shipments compared to the market reflect our capacity adjustments. We removed 5 lines, reducing our operating beverage can lines from 29 to 24. This accounts for a reduction of 15% to 20% of the lines and approximately 12% to 13% of our capacity. The adjustments were made for better alignment with current demand and cost reduction strategies. I am optimistic that the market will continue to grow over the medium term, within the next 3 to 5 years. We have high expectations for growth in the Southeast Asian market, and our cost structure now reflects a stronger position.

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

It's Andrew here in place of Chris. Our main question is about the breakdown of Americas Beverage volume by category and geography. Can you provide details on beer, seltzer, and other products?

In North America, we saw a 7% increase, while Brazil experienced a 1% decline, and Colombia remained stable. Mexico had a mid-single digit increase. Our focus in Mexico and Brazil is mainly on beer, whereas in North America, we lean more towards nonalcoholic beverages, including carbonated soft drinks, sparkling waters, juices, and teas. Overall, our performance in North America was solid. We have received enough data to say that, while not everyone reports the CMI, it seems that the market was flat in Q1, and we achieved a 7% increase. We feel confident about that and are also seeing margin growth. Importantly, we are not just growing for the sake of growth; our objective is to enhance our margins. A few months ago, we provided an estimate for the market's performance this year, forecasting it to be flat or up 1%. You could revise that to flat or up 2%, though I am not overly concerned about that since I expect our growth will exceed those figures. As I mentioned, we are expanding our business and improving our margins, which is what truly matters.

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

In the release, there was a reference to continuous operational improvement. And I was just wondering if you could provide any detail or quantification of that in terms of how much efficiency you think you can bring out of the system? Are there some newer plants that maybe haven't reached the levels that you're looking for? Or do you feel like you kind of lost some efficiency during the pandemic? I'm just curious how you kind of think about that opportunity, especially with, I guess, CapEx coming down '24, '25?

Great question. I would see, actually, the opposite. I would tell you that our teams in the factories were incredible during the pandemic. And I don't think we lost any efficiency during the pandemic. I would tell you that they rose up and they were absolutely wonderful. I think the efficiency losses or increased spoilage is a natural effect of putting new capacity in as you disrupt the system, you move people around, you move support around, and newly hired workforces are learning how to make cans. That's a learning curve that can take anywhere from 12 to 24 months depending on any particular factory. So I think there's always improvement to be made in the new factories. And obviously, even in the more seasoned factories, the goal is to get better. And so today, we might have a plant that is the best performing plant. Next year, it may not be. So the goal for them is to try to become the best-performing plant again. So it's principally around productivity, less spoilage, more good cans out the back end of the line, but not an insignificant number, and it's a number that we aim to achieve in all businesses globally around the world. It's used for a variety of things. Those gains are used for a variety of things. It's incumbent upon us as we think about the value proposition that we deliver to our customers, to not only deliver them quality and service, but to deliver them the best price package and make our product as competitive as possible compared to the other substrates they deal with, and to make them as competitive as possible on the shelf as they look at the market for their products. Oftentimes, our productivity gains are sometimes kept for ourselves and sometimes they're transferred to the customers, and the customers use that to market their business, which in turn helps us in the future.

Okay. That's very helpful. And then maybe just on the full year guidance, I think you bumped up minority interest by $25 million, but reiterated the EPS guide. So I don't know if there's other puts and takes in there, but does underlying EBITDA go higher? Or just how is the view on full year EBITDA versus initial expectations?

So Anthony, regarding minority interest, we initially projected an expense of $130 million, and we are now adjusting that to a range of $130 million to $140 million because we believe results in areas with minority partners will improve slightly. As for EBITDA, we haven't shared that figure before, but based on first quarter performance, it seems to be trending above our previous estimates. However, it's still early in the year, and we want to monitor how it develops from here.

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

Tim, could you give a bit more color, Kevin, a bit more color in terms of why you think beverage cans have had a little bit of a stronger start to the year in your key markets? And as much as promotional activity doesn't sound like it's been anything to write home that hasn't been bad, but hasn't really been a surge yet? And then I had a couple of follow-ons.

Let me start with Asia. The economies in Asia have faced significant challenges in the aftermath of the pandemic. Disposable income levels in these markets are considerably lower compared to Western Europe or North America. However, there is a sense of improved certainty and reduced consumer fear in the region, leading beer companies to engage in more promotional activities. This is contributing to the growth of the Asian market, which is inherently a growth market as more people move up economically. Regarding beverage can shipment patterns in Europe, I agree that there was significant destocking last year in the fourth quarter. Currently, we are observing a bit more confidence from our customers. Although consumers in Europe remain relatively weaker when compared to North America, the extent of destocking has created a restocking effect, suggesting a healthy summer ahead. We anticipate excitement in Europe due to major events like the European Cup and the Olympics, both happening in the same time zone. Turning to Brazil, we've also seen destocking last year, and while the Brazilian market can be volatile, it generally trends upwards over a three to five-year period, a trend we expect will continue. In North America, the market remains flat, with imports down by about 0.5 billion units year-on-year. Excluding imports, there may have been a small increase of 1% or 2%. However, the overall market being flat does not indicate a significant change. Promotions are currently at historically low levels, which might be a positive sign, and we'll monitor how these promotions evolve as we approach Memorial Day and July 4. The Olympics, though, may not drive significant consumption. Overall, I'm confident in our projection of a 4% to 5% growth for Crown.

I guess the next question I have is, you mentioned as you have that you expect to spend no more than $500 million of CapEx the next two years, '24 and '25. What is the overall volume growth that underpins that? Are there any regions where maybe it would be the high-class problem where if you start trending much above a certain level, whatever level that would be that you have to start spending more CapEx? Are there certain growth thresholds in key markets? And if you could identify them where maybe that CapEx number has to start bubbling higher?

As we approach the years 2024 and 2025, we feel confident that our spending will not exceed $500 million. If you consider the two years together, that amounts to no more than $1 billion, but we don't intend to spend $700 million in one year and only $300 million in the other. We aim to be as measured as possible, as we have been for the past six years. In North America, we are currently operating at a high utilization rate in the mid-90s. We do have some capacity available in Brazil and Europe, but not much in Asia anymore. Overall, we believe we are well-positioned in most markets to manage historical growth or even double the historical growth in many of these areas over the next several years without needing to increase capacity. Unless something significant changes, such as a government deciding to ban one of our competitors' products, which could lead to a greater demand for aluminum beverage cans, we might need to invest more. However, we would welcome that opportunity.

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

Congrats on a solid start to the year and still a pretty choppy backdrop. I guess my first question is solid 1Q, 2Q guidance, a little ahead of consensus. You guys rated the full year guide, certainly very early in the year. But just kind of give us some thoughts on how you're thinking about the cadence? Are you less confident in back half or just being a little conservative here?

We are very confident in the guidance we provided. It's too early to adjust any of that guidance. Last year also started strong for us, but we experienced a significant destocking effect in Europe during the fourth quarter. I don’t want to imply a lack of confidence; it's just early in the year, and we will have more information to share with you in July.

Okay. That's helpful. And then, Tim, like what are your customers telling you? I mean it sounds like promotion is still a little even in North America. Europe is off to a better start, but Asia as well. But what are your customers telling you today in terms of how they're thinking about the year and how they're planning the year at this point versus a few months ago?

I don't think they're prepared to give up their value over volume strategy. It's yielding incredible benefits for them. Obviously, the more volume of anything you ship, the greater risk you take. So they're able to make more money by taking less risk. I understand their strategy. If I were them, I would do the same thing. At some point, they may get pressure from their bottlers or they may get pressure as they look at their share of the market versus their competition, and sometimes people get concerned about share, more concerned about share perhaps than they should. The way they deal with that is promotion, and we'll see who goes first. But I think in Europe, it's more just restocking. In Asia, it's more restocking and the market returning to growth, and more healthy consumer. In Brazil, I think it's largely to do with a transition away from one-way returnable glass to aluminum beverage cans in the near term, or returning back to the can after we came out of the pandemic. In North America, I think they like the value proposition they have. We'll see how the year progresses.

Okay. And then on transit, I mean, I guess your comments were fairly in line with your expectations, at least for us, it was a little softer. I think we're expecting kind of flattish first half earnings once again, Tim, it's my forecast, not yours. The view was maybe perhaps costs would offset a lot of that. So relative to how you're thinking about that business, did you see incremental weakness on demand on the trucking side? How are things progressing in 2Q? And do you expect earnings to be up in the back half with perhaps demand getting a little better? Or incremental cost actions? So just help us think about the progression of transit this year.

I think most of the costs that we described to you from the program we initiated in 2022 were out last year. There are always incremental things we do to reduce costs, but most of our costs were out last year. The markets, we did well last year. The market's obviously digesting a lower volume environment. Any time you have a lower volume environment, the price comes into it. We're constantly measuring price versus volume. If you look at the commentary from the trucking firms, they're talking about having a very strong fourth quarter, and they're talking about being fully contracted or more heavily contracted in the fourth quarter than they are right now. That gives us a little bit of confidence as it relates to our protective products businesses. We don't see anything on the equipment or tooling side that would give us any pause for concern as we sit here today.

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

First question, I think last quarter, there was obviously a lot of talk about areas like Mexico glass, can-making equipment, and aerosol, areas there are headwinds this year. I guess, how did those areas perform in 1Q relative to your earlier expectations? And has your full-year expectations for those businesses changed at all as we sit here today?

The Mexican glass business is part of the Americas Beverage sector, and we mentioned previously that while it performed exceptionally well last year, it would return to more historical levels this year. I want to clarify that some reports suggested we were losing money in Mexican glass, which is not accurate. The business still maintains high teens to low 20% EBITDA margins. Last year, it would have achieved high 20% EBITDA margins as some customers were rebuilding their returnable glass. We're just returning to more normal levels now. We estimate that this business is down about $30 million to $40 million year-over-year, but it remains very healthy and profitable. In the other segment, which includes food cans and aerosol cans in North America, as well as the beverage can equipment business, we indicated that the BevCan equipment sector is down approximately $35 million to $40 million. It is still profitable, although less so than before, as we are currently focusing on service and tools instead of new equipment shipments. The performance of aerosol cans was consistent with our expectations. However, the only area that was weaker than we anticipated in the first quarter was North American food shipments, which were softer than expected. Nevertheless, April showed strong performance, with a couple of customers experiencing delays in their marketing plans, but they rebounded nicely in early Q2. Overall, the estimates we provided earlier for these businesses remain consistent, particularly for Mexico glass, and by the end of the year, we expect to be very close to our budget estimates, within a few million dollars.

Great. That's super helpful. And just a quick clarification. The facility fire impact was that contained to the first quarter? Or is there any lingering impact as we continue into 2Q here?

Mike, that's contained in the first quarter.

Our next question comes from the line of Adam Samuelson of Goldman Sachs.

I would like to follow up on some earlier questions. As we look at the full year, the first quarter guidance of $1.02 and your second quarter forecast suggest a significant increase in EPS for the second half compared to the first half, which is not typical based on the company’s past performance. Many of the underlying factors don’t seem to impact that much either way. I’m trying to identify which businesses are expected to perform notably better in the second half compared to the first half to account for this increase. I understand that transit could contribute to this, but it doesn’t seem to fully explain the extent of the change. Could you clarify the expected strength in the second half of the year at the EPS level compared to what you're projecting for the first half?

I think the big mover in the second half this year versus the second half last year would be Europe.

I appreciate year-over-year; Europe will be up a bunch, but I'm thinking second half versus first half and seasonality wise, your business doesn't have that seasonality historically kind of half versus half, clearly?

The third quarter is always bigger than the second, and traditionally, the fourth quarter is always bigger than the first. Without going back and looking at what specifically happened in prior years, I do remember we had a huge destocking in Europe last year in the fourth quarter, and we don't anticipate that this year. So there will be a large step up in Europe in the second half of this year versus the second half of last year, principally around what was a very weak fourth quarter last year.

Yes. Okay. I mean I'll take that offline. I appreciate the year-over-year point. And then maybe following up on transit and just some of the better market environment in the second half of the year. Is that based on orders and a book-to-bill that is now above 1? Or is that just thinking that your freight customers are talking about better freight demand in the latter part of the year? What gives you the confidence on the improvement in transit?

If we look at the first quarter performance, the protective businesses which largely service the trucking over-the-road intermodal businesses was down. Equipment slightly down but offset by tools and service; steel strap up a little, plastic strap down a little. I think if you look at the commentary from the trucking firms, they are all talking about a very strong fourth quarter, and they're talking about being fully contracted or more heavily contracted in the fourth quarter than they are right now. So that gives us a little bit of confidence as it relates to our protective products businesses. We don't see anything on the equipment or tooling sign that would give us any pause for concern as we sit here today.

Our next question comes from the line of Gabe Hajde of Wells Fargo Securities.

Tim, I'm going to try to take a stab at a high-level question for you in the Bevcan business. During the pandemic, obviously, it was about getting product on the shelf and servicing your customers. Post-pandemic, obviously, there's been some facility rationalization. You guys are obviously one of the bigger global players that are in Asia Pacific. But my question is we've had a couple of customers kind of move around choosing different suppliers. And again, historically speaking, you guys have kind of won and lost with your customers. I'm just curious, on a go-forward basis, what your expectations are? I mean you talked about being mid-90s utilized in North America. Got an announcement that there was another player here in North America, maybe a little bigger than what people were planning for. Can you just remind us bigger contracts that come up? Is it they renew in 2025 for '26? Or do you have something that renews for '25? And then just from a competitive landscape, if there's anything that we should be mindful of thinking about?

In North America, I am confident that our market share for 2025 will be at least the same, if not greater, than it is now. I would express similar confidence for 2026. Without discussing specific customer contracts, I can say that there is always some movement in Asia. Generally, Asia tends to operate on an annual basis, but our significant presence and quality service position us well, allowing us to maintain our standing in the market. Brazil's market is healthy and poised for growth, and we are not overly worried about it. Our locations are well-positioned relative to most customers, and we are seeing some recovery in Brazil compared to a poor performance last year. Regarding Europe, I don’t have any specific concerns for next year; however, there is always competition, which we are prepared to face.

It seems you discussed how some of your customers prioritize value over volume, and it appears you have chosen to pursue that strategy as you mentioned. We are trying to gather more information on this. Regarding the upcoming mandatory deposit laws in the U.K. set to take effect in '26, could you provide some context on that? Also, considering Germany, while I understand the situation is different, what are your expectations for any potential disruptions? Do you believe this trend generally favors the can over time?

Well, I think depending on which substrates are included in the mandatory deposit laws. So we and others across the can and the aluminum industry are working to ensure that we're not unfavorably challenged by new laws that go into place, where they picked a can and they don't pick all the other substrates, or they pick the can, which already has high recycling rates in an effort to subsidize other materials, which either don't have high recycling rates or really don't have any intention to get high recycling rates. So we're aware of it. Generally, when you get deposit laws, initially, there's a little bit of softness while the market absorbs those changes, but it returns to normal within a couple of years. So we're mindful of these changes. A lot of these changes are across Europe, and it would be good if we had one European law as opposed to a variety of them. But now having said that, we generally are in favor as an organization, and I think as an industry, for deposits. I think as we think about the sustainability of the aluminum beverage can, I think using recycled material compares favorably as any other substrate on carbon when we use higher levels of recycled content. So from where we sit, we're very confident in the package we provide in terms of sustainability in the environment. I think you've now seen at least one very large global consumer products company step back their plastics reduction target, and I don't think that has anything to do with, as I heard somebody call it pragmatism. I think it has to do with it was never achievable in the first place. The infrastructure is not there for plastics to be recycled at great levels nor do the economics work for recycled plastics as they do for recycled aluminum.

I agree. According to our research, it seems that the aluminum can is aligning well across the value chain, and you are making good progress in that area. One final clarification, I apologize for asking three questions. Regarding Asia Pacific closing five lines, are these curtailments or are they in fact related to installing the lines? Additionally, it appears that the savings from this may be around $4 million to $5 million per quarter. Can you confirm that?

I'm sorry, what's $4 million to $5 million a quarter?

Savings...

Yes, if you want to use $4 million to $5 million a quarter, that's fine. We closed a plant in Singapore, which was a single-line can facility in a small market. Initially, we used that plant for exports in the region as we built new facilities or entered new markets until those were operational. However, a single-line plant is not efficient and is located in a high-cost area. We had another plant in Saigon, built in 1993, with a 30-year land lease, but the government required the land back. Therefore, at the end of 2023, we had to cease operations and are now in the process of returning the land. Based on market conditions, we decided not to reinstall those lines at this time. Additionally, we had another plant in the Saigon area that resulted from combining two companies we acquired on the same site. We are offering six or seven can lines onsite, and we removed two of the slower-speed lines to modernize and enhance the plant's efficiency.

We have our next question from Arun Viswanathan of RBC Capital Markets.

Congratulations on the strong results. My first question is about Bevcan growth in North America. You experienced a 7% increase this quarter, which is impressive given the challenging comparison. You mentioned earlier a projection of 0% to 2% for the year. What are your thoughts on long-term beverage can volumes in North America? Do you see the potential to reach the 2% to 4% growth range looking ahead to 2025? I would like to hear your insights on medium to long-term Bevcan growth.

So Arun, I apologize for the confusion. Let me clarify. We experienced a 7% increase in North America during the first quarter. Our full-year growth estimate is between 4% to 5%. We mentioned that the market for the year is expected to be in the 0% to 2% range after a flat performance in Q1. Anything is possible, and we'll see how the market evolves. If we see a rise in promotions and larger companies become more concerned about their market share, they may start promoting more aggressively to retain their shares, which could allow us to reach the 2% to 4% range you mentioned. However, if these companies prioritize value over volume, we will likely remain within the 0% to 2% range. There's nothing wrong with this; that 1% to 2% growth we are discussing is based on a volume of 115 billion or 120 billion units, not 90 billion units anymore. To put this in perspective, 2 billion units on 120 billion translates to 2.5 billion units, which is equivalent to two full can lines. Essentially, it means that the industry would need to set up a new plant each year.

Great. And then I guess I just had another question around leverage and interest expense. What is your longer-term leverage target? I mean, would it make sense to maybe bring that down into the 2s just so your interest expense will be much lower and you can see your EBITDA growth translate to nice EPS growth as well? Just along those lines, I'm curious if you are comfortable with the idea of pivoting to buybacks in 2025. Maybe you can just give us your thoughts on some of those issues.

We haven't altered our target range. We are pretty confident that we will be at the lower end of that range by the end of this year. You may have a valid point regarding the potential impact of a higher-rate environment and the possibility of increasing inflation. We will have to wait and see how the U.S. government approaches this situation, particularly with their treasury options and the need to sell bonds. Eventually, we will find out if there is demand for our bonds, especially if inflation remains high and investors feel they are not being adequately compensated. This will indicate whether the global perception is leaning toward rising inflation despite current lower rates. It might then make sense for us to consider reducing our levels. Additionally, you're aware that we have at least two competitors in the beverage can industry; one is currently at a leverage level similar to ours and has indicated historical goals in the low 2s. Another competitor has mentioned a target in the mid-2s by the end of this year, suggesting they view it as more prudent to lower leverage based on their outlook on rates and inflation. We are mindful of these industry dynamics, and it is a recurring topic in our Board discussions. Good question.

What about buybacks? Would that be a preference in '25?

Well, I think we can achieve both. We're going to have significant cash flow. Certainly, as you pay down debt, you generate more cash flow, all else being equal. Yes, I mean, we'll review with the Board what the uses of capital are, and do they want to keep the dividend roughly where it is? Do they want to increase the dividend or not? Do they want to use all cash to pay down debt? Do they want to use some to buy back stock? It’s a use of capital discussion we have at every board meeting. But everything is available to the company. We have a lot of cash flow. So we'll see what the Board thinks, and what they believe is the most prudent thing to do in an environment, depending on what kind of environment we think we're entering.

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

This is Nico Piccini standing in for Mike Roxland. I would like to follow up on the situation with Mexican glass. I understand the reasons behind its acquisition and its historical profitability. However, it is linked to a significant customer contract. If that contract is up for renewal, could it affect profitability? Is that something you consider a core asset, or is divestment a possibility? Additionally, regarding your various joint ventures in the Middle East, South America, and Asia, are those opportunities you might consider unwinding or bringing completely in-house?

I would tell you that the customer that we purchased the Mexican glass assets from along with the Mexican can assets, the customer is core to Crown. As we think about the glass business in Mexico, we don't think about the glass business separate from the can business; we think about the customer relationship, and I'll leave that at that. Again, we've told you before, any business under the right terms and conditions would be considered as a yes or no in the portfolio. But as we sit here today, we have an excellent relationship with this global customer. We view the Mexican beverage as a business in which we service a very core customer to the global company. I think the joint ventures that we have around the world have served the company well. We have, for the most part, in the Middle East and Asia, ventures with partners who are also fillers. In some of those markets, it would be very difficult to participate and grow the business without a venture partner. In South America, we have a partner who's quite happy to be invested in the business. I don't think they're in any way contemplating wanting to sell their interest. So it's a relationship and a partnership agreement that we've had in place for 30 years, and we continue to operate as such.

Understood. Just one follow-up. Apologies if I missed it earlier on the call, but can you cover the utilization rates by segment?

Certainly! Here's the rewritten Earnings Call remark: I'll discuss the beverage segment. In North America, our utilization is in the mid-90s. For Asia, due to the capacity reduction, we're looking at low 80s, which is a good utilization rate for that market. In Europe and Brazil, Mexico, we are also mid-90s, while Europe and Brazil are in the low to mid-80s, close to high 80s.

We have our last question from Edlain Rodriguez of Mizuho Securities.

Tim, I got a quick question for you on transit. In the past, you've talked about how this is like a very good business, which doesn't get much love from investors or analysts, and you wish you had more businesses like that, stable, low mid-teens margins, doesn't require much capital. The question is, would you be interested? Or can you still get bigger there, like other opportunities to get bigger in that space?

As part of our strategy, back in late 2019, we communicated to our shareholders that our growth focus would be solely on the beverage can business globally, and we would not pursue growth in other areas. This decision is primarily about capital allocation. While you mentioned it well, I operate a business that requires no capital investment. It's important to note that, like you observed, there isn't much appreciation for this business, and I understand that those in my transit business probably feel a lack of attention from me too since I don’t allocate funds to it. We could certainly invest more if we chose to, and when we acquired that business, we indicated that its growth would primarily come from strategic acquisitions. There are still many opportunities to purchase companies that either align directly with or are related to our transit operations, with many of these businesses achieving EBITDA margins between 20% and 25%. An old adage suggests that if you want to attain a better valuation, you need to purchase better companies. While we are not against expanding the business, we believe our investors currently prefer that we focus on reducing debt and repurchasing shares rather than pursuing growth in that sector. We rely on this business to generate cash, which enables us to invest in beverages, pay dividends, repurchase stock, and reduce debt. There are possibilities for expansion, but we don't see that as a priority from our investors at this time.

I think that's the right strategy. Thank you very much.

You are welcome. Ell, did you say that was the last question?

Yes, you're right, sir.

Well, thank you very much. That concludes today's call, and we thank you all for joining, and we'll speak to you again in 3 months. Bye now.

That concludes today's conference. Thank you, everyone, for joining. You may now disconnect, and have a great day.