Crown Holdings, Inc. (CCK) Q3 2026 Earnings Call Transcript

Good morning, and welcome to Crown Holdings' third quarter 2026 conference call. Your lines have been placed on a listen-only mode until the question-and-answer session. 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, Rich, and good morning. With me on today's call is Tim Donahue, Chairman, President, and Chief Executive Officer. If you don't already have a copy of the earnings release, it is available on our website at crowncourt.com. On this call, as in the earnings release, we will make a number of forward-looking statements. Actual results could differ materially from those 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 2025 and subsequent filings. Reported diluted earnings per share were $2.08 compared to $1.85 in the prior year quarter. Adjusted earnings per diluted share were $2.39, compared to $2.24 in the third quarter of 2025, an increase of 7%. Net sales increased to $3.7 billion, compared to $3.2 billion in the prior year quarter. The increase primarily reflected higher global beverage can shipments and the pass-through of higher material costs, partially offset by $8 million of unfavorable foreign currency translation. Global beverage can volumes increased more than 6%, including double-digit growth in Asia, 6% growth in North America, and 4% growth in Europe. Segment income was $484 million, compared to $490 million in the prior year quarter. Higher global beverage can shipments were offset by inflationary cost pressures and lower results in transit packaging. Inflationary pressures from the Middle East conflict impacted third-quarter segment income by approximately $17 million across all businesses and adjusted diluted earnings per share of $0.12. We have included a similar impact in our fourth-quarter estimate. Adjusted free cash flow was $771 million through the first nine months of the year with capital spending of three hundred and ten million as we continue to invest in growth projects in Brazil Spain and north and northern India excuse me capital allocation remains important component of our value creation strategy during the third quarter we repurchased 81 million of the company's shares bringing year-to-date share repurchases to 598 million including $115 million of dividends. When including $115 million of dividends, we return more than $700 million to shareholders during the first nine months of 2026, while maintaining that leverage ratio at approximately two and a half times. Based on a strong year-to-date performance, we expect full year 2026 adjusted diluted earnings per share to be in the range of $8.35 cents to eight dollars and forty five cents and the fourth quarter adjusted diluted earnings per share to be in the range of one dollar and sixty three cents to one dollars and seventy three cents in fourth quarter our four-year outlook assumes net interest expense of approximately three hundred and fifty five million exchange rates at current levels including a euro dollar at approximately $1.12, effective tax rate of approximately 25%, depreciation of approximately $325 million, non-controlling interest expense of approximately $145 million, dividends to non-controlling interest of approximately $110, adjusted free cash flow of at least $950 million, capital spending approximately $550 million, year-end adjusted net leverage of approximately two and a half times. The company is executing well, delivered another strong quarter. As we look ahead, our strong balance sheet, consistent free cash flow generation, and disciplined capital allocation strategy position us well to continue to invest in attractive organic growth opportunities while returning capital to shareholders. With that, I'll turn the call over to Tim.

Thank you, Kevin, and good morning to everyone. As Kevin just summarized, the company had another solid quarter of performance as continued strong global demand for beverage cans helped offset the majority of rising input costs. Global beverage can shipments advanced 6% in the quarter, following 5% growth in both the first and second quarters. With year-to-date growth standing at close to 6%, we remain confident in the outlook for beverage can demand with our full-year global growth target in the 4% to 5% range. The company's businesses are responding well to global economic challenges to continue supporting our customers' needs as we all navigate a world of growing tensions. As Kevin described, inflationary headwinds, primarily a result of the Middle East conflict, were greater in the third quarter than we previously anticipated, and we have included a similar headwind in our fourth quarter estimate. Energy, industrial gases, freight, among other costs, all remain elevated from pre-conflict levels. And as many of you are aware, the contractual recovery of these and other non-metal costs will occur in 2027 via a look-back formula. Revenues in the America's beverage segment advanced 20% in the quarter, primarily a result of $240 million in the pass-through of higher metal costs and higher sales unit volumes. Volumes in North America grew 6 percent, Brazil was up 4 percent, with Mexico down about 1 percent in the quarter. Against a strong prior-year comp, income improved in the quarter on the back of contribution from volume gains, although the majority of the volume contribution was offset by rising input costs. Adjusting for the pass-through of higher material costs, segment income margin was 17.7% of sales in the quarter. Can demand remains strong in North America, and we expect full-year shipments to be up in the 3% to 4% range. European volumes increased 4% in the third quarter, with 7% growth recorded across the continent offset by a 4% reduction in the Gulf states. Capacity expansion projects in Greece and Spain remain on plan, and we are also installing a third line to the Peterborough UK plant. These capacity additions will bring much-needed capacity to our system, helping to serve our customers' growing needs. Income, level to the prior year, reflects higher volumes offset by rising input and startup costs. Income in Asia-Pacific advanced during the quarter on the back of mid-double-digit Southeast Asian volume gains, helping to offset higher energy and transport costs. Performance across the transit packaging business disappointed in the third quarter, with both volumes and profits falling short of prior expectations. Soft volumes across all product offerings were compounded by higher input costs, notably freight. While we do see some green shoots, we remain cautious until increased quoting activity results in firm orders. Strong vegetable and pet food demand contributed to high single-digit volume gains in North American food, offsetting softer aerosol can sales. And activity across our beverage can equipment business remains strong as global beverage can makers look to increase their capacity to meet a world of continuing, growing can demand. To summarize, before opening the call to questions, global beverage can volumes advanced 6% in the quarter, four-year growth now estimated at 4% to 5%. Earnings per share advanced 7%, up 11% through nine months. Cash flow remains robust, and as Kevin described, the company has now returned more than $700 million to shareholders year-to-date. The balance sheet remains strong with leverage remaining unchanged at two and a half times through the peak summer selling season. And with that, Rich, we are now ready to take questions. Thank you.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one. Please unmute your phone and record your name clearly when prompted. Your name is required to introduce your question, and to withdraw your request, you may press star 2. One moment, please, for the first question. Okay, our first question is from George Taffas from Bank of America. Your line is now open.

Thank you. Hi, everyone. Good morning. Thanks for the details. Tim, I wanted to ask a question with a couple of parts trying to get at the fourth quarter. So can you talk about what sort of exit rate you're seeing on volumes from the third quarter into the fourth quarter for your key regions? And relatedly, and again, trying to get at the fourth quarter, and you said most of this is the elevated level of inflation. With inflation being higher than expected, what's the offset such that your free cash flow is actually going up? You would think that with inflation being a bigger burden, understandably, that the free cash flow guy would have been lower, but it's higher. So help us understand what's going on in volume in the fourth quarter as you're entering and how you're offsetting the inflation such that free cash flow is up. And I had a quick follow on.

Okay. So very quickly, George, I'll let Kevin deal with the cash flow element. We've got two things in our fourth quarter estimate. it. One, as Kevin described, if we had previously told you that we expected inflation to be about a 10 cent headwind in the back half of the year, it probably a little bit more than double that split equally between third and fourth quarter. So we've got another, what Kevin, 12 or 13 cents baked into our estimate for the fourth quarter. The way we're able to offset that, at least in the third quarter, was exceptionally high volume. As you know, contribution for more volume can cover a lot of costs and other problems as you describe exit rates coming into the fourth quarter still fairly strong you know it's it's hard for us to sit here though and anticipate that we're going to have six percent global volume growth in the fourth quarter so you know our estimate for the fourth quarter probably on the order of three and a half to four percent global volume growth which historically speaking george you've been around a long time like i have i always say that It helps to have you around because I don't feel so old. Watch it, Tim. Three to four percent historically, you know, in the canned business, we would all do backflips if we could do that every quarter. It's just not the six percent we had in the third quarter, but three to four percent, maybe a little bit better than that, were quite happy. So continued elevated costs, continued volume growth, although hard to sit here today with an estimate to give you to think that while we're going to have volume growth, it could be as strong as the third quarter. Still have volume growth, but maybe a touch lighter. And I'll let Kevin deal with the inflation vis-a-vis cash flow.

Yeah, we were just trying to see that there wasn't something that had now become negative, but I appreciate that. Keep going. Hey, Kevin.

Hey, George. Yeah, George, I mean, think about it. Look, the guide, the midpoint to the guide is still exactly where it was at the end of the second quarter. So even though we've had higher inflationary pressures, we basically offset it with volume here. And that's the expectation because we've maintained the midpoint. We just narrowed the range. And then the delta to get the cash flow higher is just working capital is just running better than it ever has. So we expect working capital to be better than what we originally expected. And that's why we feel we can get at least $950 out versus at least $900. Okay.

George, I just want to one last thing I'll talk about because Kevin talked about working capital. We have two primary metrics whereby our managers are compensated in their bonus. Economic profit and cash flow. And people will perform based on how you compensate them. They are well aware of how they're compensated and they work to generate as much cash as possible. So it's just a function of a compensation program that we've had for almost two decades that works quite well.

Understood. Tim, you know what? I'll turn it over to be fair, and it's tenure. It's not age. Anyway, thanks.

It's experience, yes.

It's perspective, yes.

Rich, next question. Thank you. Our next question is from Matt Roberts from Raymond James. Your line is now open.

Hey, Jim, Kevin, Tom, good morning. I'm at volume strength. So North America, 3Q, really strong and actually better than 2Q despite World Cup benefit last quarter. So maybe in hindsight, is the strength in 2Q still due to World Cup or is North America just generally stronger given it carried through and any timing or spot volume considerations in second half here and given those strong underlying trends despite part of comps in 27? Any early indications on what we could expect for North America in 27?

Well, the first thing I'll answer is Q3. You know, the comp last year, Q3, was very high. As you say, we had a very strong Q3 in earnings terms. Would have liked it to have been better given the volume growth. But I think what you don't see is that, although we've talked about it before, We had positive volume momentum in Brazil in the third quarter, whereby in the second quarter, I think we had negative volume momentum. So Brazil was a little bit of a turnaround. I don't believe, although we had 4% growth in Brazil in the third quarter, I think the industry probably did better than that. We're still running behind the industry a bit in Brazil, given customer mix. But our third quarter in Brazil was stronger than our second quarter in Brazil. And that's the reason why you might be referencing that Q3 was better than Q2. You know, a little early to say what 2027 is going to look like. I hesitate to say this, but it feels like we're going to be full next year in North America. You know, the upshot of that is that we won't have a lot of spare capacity. So we'll see how it progresses from here until the next time we talk to you.

All right. Thanks, Jen. And on Europe, another strong growth there on volume, segment income was flat. Was that really all the inflation impact or any impact on startup costs?

Well, you've got startup costs, Kevin, I don't know, maybe $4 million or $5 million or something like that. I think the other thing you have is on the continent, we were up 7%, and in the Gulf states, i.e. the Middle East, we were down 4%. And so you've got some mix issues. but again given everything that's going on in Europe we're not disappointed with that result right right and with the startup cost is there any way 4Q operating income could be up or should we have more startup 4Q or any considerations there? I think we're going to continue to have startup costs and that's already baked into the fourth quarter estimate and we'll even have a little bit of startup cost in the first quarter that's right we've got enough projects going on right now between the three projects in europe we've got a project in brazil and um you know as i mentioned to you in the prepared remarks our equipment business uh the order book is really firm uh and it's not just a north america or european thing it is a global growth spurt right now we're experiencing across beverage cans it feels a little bit like pre-covid although this feels a bit more organic It's not fueled by COVID. This feels like there's a real momentum globally towards beverage cans, either from the growth of beverages and or substrate changes globally. So this feels really positive as we look forward. Very good. I appreciate that. Thank you. Thank you, Matt.

Thank you. Our next question is from the line of Ganshan Punjabi from Baird. Your line is now open.

Thank you, Peter. Good morning, everybody. Morning, Dr. Morning. You know, on the cost inflation piece, you know, I understand there's been a lot going on this year, and it just continues to get more volatile, et cetera. But if costs hold at this point, for 2027, will you be price-cost at least neutral, or will there be some lags, or will you be ahead of the cost curve?

So, you know, as we sit here today, you all are well aware of the contractual mechanism we use, at least in the North American market. which is PPI. I think, correct me if I'm wrong, Kevin or Tom, but I think PPI right now is running at about 9%.

That's right. Yep.

So it's a pretty big number as we get into 2027 as we reprice mostly around the April 1st timeline, but it'll be a fairly large repricing, which will recapture much of the headwind we've had in 2026, and we'll see where prices go next year. You know, with any luck, we'll get some abatement on rising prices. We're already starting to see LME levels come down. Now, that's not part of the PPI, but declining LME is a good sign with respect to the affordability of cans for our customers and the consumer. So, you know, I'd like to say yes to answer your question. Ganshan, why don't you let us come back to you in late January when we talk to you and just firm that up? But it feels like we're going to be in a much better position next year than we are this year with respect to the Middle East inflationary pressures.

Okay, perfect. And then for volumes, you know, again, looking out to 2027, and I realize it's early. So it sounds like the America segment is in a pretty good spot. You mentioned being sold out, et cetera, certainly North America. What about the other regions? Would Europe start to benefit from the incremental capacity additions? Can Asia sustain the growth? I'd love to hear your initial thoughts on those other regions.

Yeah, I think, listen, there's always – you and I have talked before, Gancham, there's always business that moves around. People don't always like to hear that. Perhaps some business has moved around, but we're going to be full next year, and we think we're going to be full with a better mix. I'll just say it that way, in the North American market. We are hopeful that customer mix will be a benefit to us in Brazil next year as opposed to a headwind this year. Europe, we expect to continue growing in the order of 3% to 5% or 2% to 4%. It's off a much bigger base now, the market, and we are as well positioned to benefit from market growth as anybody else. So we feel like we're at least in line with market growth in Europe. Hopefully, and it's a big hope, but we get a resolution to the Middle East conflict or we get the Strait of Hormuz loosening up a bit, perhaps we can return to growth. We've had a little headwind in volumes in the Middle East operations. We get a little return to growth there. And Asia will continue to grow. It will not grow next year at the rates that it grew this year, but it will continue to grow in the low to mid-single-digit range. So I think, as I said to Matt, Matt gave me the opening to comment about global beverage can demand. I think not just for Crown, but for all can makers, I think we're entering a world over the next couple of years where we're going to see very strong demand.

Perfect. Thank you so much.

Thank you.

Thank you. Our next question is from the line of Phil Ang from Jeff Rees. Your line is now open.

Sorry about that. Volumes are strong, certainly in an inflationary backdrop. I mean, you're still growing earnings this year, so kudos to the team. When we look at the 27, obviously gave some great color on PPI, how that kicks in for North America. Europe, I believe there's an element that's tied to that. But I'm most curious about other markets like Asia, transit, your ability to take price and to offset inflation, certainly a very strong demand environment right now.

So Asia, we do have a few long-term contracts. Many of the contracts in Asia are annual in nature, so we reprice those annually. Having said that, there are some markets in Asia that are very competitive, so we always look to remain competitive and either maintain a very stable business with a lot of cash flow or grow it when there's an opportunity. So I do think we'll have an opportunity to grow the business next year. A little early to say where income will come in, but perhaps marginally up next year compared to this year.

I'm very hopeful that we'll see the Middle East return to volume growth next year. as well as brazil and again um pass through mechanisms in those markets a little different than north america and europe okay helpful um and then and then um given the cash flow generation um you know you're buying back stock returning cash what about um growing the business outside of projects you have um i'm most curious about north america i mean as you kind of alluded to your sold out what's the path uh on that front is that something we should be focused on and any other markets where you see an ability to kind of deploy capital for organic growth?

Yeah, I think until we announce a project, I would tell you right now, we've got four fairly large projects underway right now, three in Europe, and we're finishing one in Brazil. So it's a lot of work for our team. You know, we do all of the work ourselves in-house. We don't outsource the work. So I've got a big, very sophisticated, competent project management and engineering team. We make a lot of our own equipment. And, you know, I would just tell you that we continue to evaluate the opportunity with respect to how much we can sell ahead of making a commitment to put more capital in the ground. And so until we make an announcement, you should assume that the four projects we have is what we have at this point.

Okay. Appreciate the color, Tim. Thank you.

Thank you.

Thank you. Our next question is from Hilary Cacanando from Deutsche Bank. Hilary, your line is now open.

Great. Thank you. So on transit, you mentioned some green shoots and, you know, coding activity. Can you give us a little more color on where you're seeing that improvement and, you know, what would need to happen for you to become more constructive on the demand outlook into 2027?

Yeah, you know, you could probably tell from my prepared marks we're a bit disappointed with the performance in transit. We've started to see an uptick in industrial demand. Certainly PMI in both the United States and Europe has been running in the expansion category for the last several months, and we have yet to benefit from that. We are starting to see quoting activity pick up across the equipment sector. Obviously, we'd like to sell more equipment. You sell more equipment, you get more tools and service in the future, and a lot of quotes, but we need to get some firm orders before we're going to get a little bit more constructive to use your words and or confident to use my words before I want to put my neck back out there again. So disappointing, but it feels like things could be getting better. We're just not ready to say it yet.

Got it. Got it. Thank you. And then as a follow-up, you recently broke ground on your first beverage can facility in India. So can you talk about the opportunity you see in the Indian market and how you're thinking about the ramp and return profile of that investment?

Sure. So I think one thing I'd like to say is that it's our first plant in India. But let's be clear, Crown has been at the forefront of entering new markets well ahead of anybody else for decades. We were the first Western can company in China. We were the first Western can company across Southeast Asia in the Middle East. We've not had a lot of hesitancy to go into new markets. Our hesitancy with India over the years had more to do with the fact that it was more of a spirits market than a beer market. That is changing as the Indian consumer continues to consume more beer, as well as soft drinks. And it appears that cans are becoming a more preferred package as well in that market, like many other regions in the world. So I think it's fair to say that India is a very large country with a very large population and a very large middle class. I mean, you know, the population of the United States is 330 million. The population of India is pushing a billion and a half. And I'll bet you the middle class in India is the entire population of the U.S., such that 20 percent, at least 20 percent of India, 300 million, is middle class. And they have growing disposable income. And the opportunity set would be there for us to have not one plant. I don't think we ever would envision going to a market as large as India over a 3-, 5-, or 10-year period and only want to have one location. So we'll look to get this capital in the ground and get started up as quick as possible. You know, it's a big two-line plant. I would tell you that right now more than 90% is under contract. Our challenge is to get it up and running as quick as possible to serve those contracts. and the payback should be in line or better than we've seen with other large projects that we've put in the ground over the last six years.

Great. Thank you. That's helpful. Thank you very much.

You're welcome. Thank you.

Thank you as well. Our next question is from Aaron Vishwanathan from RBC Capital Markets. Aaron, your line is now open.

Great. Thanks for taking my question. Congrats on the strong Q3 on the volume side. I guess I wanted to continue that discussion. Obviously, maybe you can just offer some of your thoughts on what you're hearing from some of your customers. We know that inflation is up. The beverage companies, I think, have been struggling with balancing promotions and price with volumes. So I guess what are you hearing on that front? Do you expect promotions to continue as you enter into 27? And do you expect, you know, you are facing a pretty tough comp. So do you think you can still grow volumes off of this, say, mid-single-digit performance in 26?

Yeah, I think as I've said to some, Arun, to some of the previous questions, I think we see continued volume growth in 27, albeit perhaps not to the same level, certainly in Asia, that we see this year. You're not going to grow business double-digit every year. And some of the Asian growth we had this year was on the back of a renewed commercial strategy. After a couple of years of getting our cost structure in line, we're now back in the market with a renewed commercial strategy. We'll have growth next year, but as I said, low to mid-single digits. Middle East, I would hope, is better than this year in the face of a war. Europe is going to continue to grow. It's just a matter of how quickly we can get capital in the ground and others can get capital in the ground to meet customers' growing needs across the European continent. As I said, we're very hopeful that customer mix next year is more positive for us in Brazil than it was this year. And in North America, we're going to be sold out, and the limits of our capacity will be tested, and that will determine whether or not our growth next year is 2% or 4%. And we'll come back to you. Phil wanted to press the issue on new capacity in North America. We're not there yet, but we'll come back to you in due time if we feel that's necessary.

Okay, thanks for that. And then just real quickly on the promotional activity, I guess that's more what I'm wondering about is just, you know, customers, I guess, last time when there was some inflation, the beverage companies, you know, raised prices. And then when the inflation retreated, they weren't really willing to promote this, you know, immediately. So do you think those promotions will continue that kind of buy two, get one free in North America specifically?

I think they need to move volume, right? And the parent companies look to sell syrup, and the bottlers look to move volume. I think the one thing that's very positive for the can makers, where the can makers sit right now, is LME looks like it's dropped below 3,000 or very close to 3,000 from a high of, what, Kevin, 35 or 3,600. So we're starting to see some easing on LME. It would be nice to see some easing on the Midwest Premium. But certainly the LME has come off almost 20%. and that will give the beverage companies the opportunity to promote if they continue to want to do so.

Okay. I appreciate that. And then just real quickly, if I could just squeeze in one more, just on PPI. So, you know, in years past when you've had, you know, an inflationary pass-through, you know, maybe that weighed on EPS a little bit. Could you just kind of speak to, you know, how that would impact your 27 outlook, if at all, you know, will there be a lag before you can see some earnings growth, you know, due to that PPI pass-through?

Well, the pass-through will occur by contract. It is formulaic. Some contracts are early in the year. The majority, I think, are April 1. So, you know, it is formulaic, and it's going to happen. And, you know, the timing is, as it relates to the third and fourth quarter of 26 is unfavorable. We know how this works every year. I think, as Kevin has said before, for the last couple of years, I think PPI was flatter, one or two percent. And clearly flat to two percent doesn't reflect the cost environment post-April this year when the war started. So we'll get it back next year. Sure. Thanks. Thank you.

Thank you. Our next question will be coming from the line of Jeff Zekoskis from J.P. Morgan. Jeff, your line is now open.

Thanks very much. I think this summer was the hottest on record in the United States and Europe. Do you think that that affected beverage demand and your canned demand?

I don't know. Jeff, I don't know, to be honest with you. I think globally and even in the North American market, people are embracing cans, more fillers and more companies that are introducing new beverage products are introducing them in higher rates into cans than ever in the past. And I think the younger consumer, which isn't me, but the younger consumer is well aware of the sustainability benefits surrounding the can and the infinite recyclability of aluminum, as opposed to mass piles of plastics that are floating in the ocean and clogging our nation's waterways. So I think there's a lot of things that are positive for the can. it's you know you could argue if it's too hot people don't go outside and if people don't go outside they don't have picnics so you can you can look at it a lot of different ways I'm going to try to stay out of the global warming debate I don't know so but I I think we're in a world where cans are being recognized for for the benefits that they they offer versus other substrates and I'll leave it at that.

Okay. And you talked about a look-back benefit in 2027 because of the inflation that was felt in the second half of 26, but not immediately recouped. So all things being equal, should there be, I don't know, a 20-cent-a-share benefit that accrues to Crown in 2027 because of the inflation in 26?

Well, there is a benefit, yes. It won't be the full amount we incurred this year because not all regions have that contractual look-back mechanism. We certainly have it in North America, and we have it to a large extent in Europe. We do not really have it in the Middle East or Asia as more of those contracts are annual in nature. So perhaps half of that number you might want to fairly say that we should see next year.

Great. Thank you so much.

You're welcome.

Thank you. Our next question is from Chris Barkinson from Wolf Research. Chris, your line is now open.

Awesome. Thank you so much. Tim, can we just circle back at kind of the beginning of this year? Obviously, there are a lot of moving parts. When you take a step back and look at where you stood then versus where you stood now, what are the things you feel generally better about in terms of the way the industry is trending specifically North America? And what are the kind of one or two things we should be focusing on the most for 2027 in terms of moving parts, in terms of your own thinking as CEO?

Well, listen, I think that if you had told me on January 1st that we'd get through nine months of the year and we'd be global beverage can shipments for crown would It would be up on the order of 5% to 6%. I would have taken that in a heartbeat on January 1st. And if you told me then that my quoting activity and my order book at CMB Engineering, our beverage can equipment company, would be as full as it is now for the outlook, I'd be thrilled. I don't think we anticipated demand for us in North America or the world to be as strong as it has been this year. on January 1, and we certainly didn't anticipate the strength of equipment demand that we're seeing right now as we look forward. So I think, as I said earlier, it feels like we're entering a world of increased beverage can growth, and it certainly feels, as I said earlier, much more organic than it felt during the COVID period. So I think the only thing I would tell you to look at as we get into next year, because things feel pretty good as relates to demand, you know, hopefully we see some easing on input cost pressures such that when we do get the contractual mechanisms, we recover what we lost this year that we're just not keeping pace with further cost pressures next year.

Got it. And just a quick follow-up, a couple of questions ago, you kind of ran through some quick math in terms of, you know, the entry into the Indian market. You know, you've obviously been focusing on a couple of the anchor customers per the press releases, but how are you thinking about that intermediate and long-term? Is that mainly, is that the beer thesis? Are there possibilities with additional CSD customers? Is any additional color on how you're going to anchor yourself into that market and eventually obviously grow would be greatly appreciated? Thank you.

I'm sorry. If I gave you the impression that we only had beer customers, what I was trying to say that historically the Indian consumer was more of a spirits drinker than a beer drinker. But we do have soft drink customers under contract, and I'd say that perhaps at least 40% of what we have under contract in this new facility is soft drink, with 60% of it being beer. So we have a number of soft drink customers, including some of the very largest soft drink companies in the world. And our growth aspirations, requirements in that country will be anchored to our customers as they want us to go to other regions of a very large market with a very large consumer base.

Thanks for the clarification.

Thank you.

Thank you. Our next question is from Mike Roxland from Choice Securities. Mike, your line is now open.

Thank you, Tim, Kevin, Tom, for taking my questions. um tim you mentioned that the last few years that you were focused on reducing costs but now you're back to a renewed commercial strategy or commercial focus can you provide some more color on what that strategy your commercial strategy entails and maybe what has changed versus your prior strategy well i was specifically talking about asia um so we had um one thing that happens in Asia, I'll just give you a quick recap here.

One thing that happens in Asia when you build a facility in many countries, you don't own the land. You get a long-term lease on the land. Fortunately or unfortunately for Crown, we've been there so long that some of the leases came due. The properties happen to be in areas which, while they were industrial in nature in the past, when the factories were built, they're now more residential, and the government wanted those back to build residential housing as opposed to industrial complexes. So we had to exit two locations across Southeast Asia, three CAN lines and three N lines. So we took the opportunity as we were doing that to reset the cost base across Southeast Asia in the 23-24 timeframe. And having completed that and getting the cost base back to where we wanted it, we had a look at our commercial strategy and understood that we could use that lower cost base to go back into the market and grow our business and increase utilization or absorption in the remaining factories that we had.

Very clear, Tim. And just one quick follow-up on food cans. You mentioned, you know, strong veg and pet food demand. Any impact on the pack due to hotter-than-expected weather in the Midwest?

No, we had a, I would tell you, we have a pretty balanced food can business. We have a number of East Coast producers, Southeast producers, and a big, strong presence in the upper Midwest, not the lower Midwest. So, really, it's been a tremendous year. We have what we think is, it's not the biggest food can business, but we believe it's the best food can business. Really great partnerships with some great people, great family businesses and other businesses, and we really enjoy the business, and it does well. And we continue where we have opportunity to invest smartly to support those customers. But it's been a great last couple of years and, again, another great campaign this year. Thank you. Thank you.

Thank you. Our next question is from Anthony Petnari from Citigroup. Your line is now open, Anthony.

Good morning. Tim, hey, just following up on the Middle East, I think you previously had estimated a 7 to 10 cent headwind in the second half, you know, after a 5 cent headwind in 2Q. I'm just wondering how you think that might shake out. And you talked about Gulf volumes down 4% in 3Q. I mean, is that what you're seeing in October? or is there any...

Again, Anthony, just to be clear, when we said 5 cents in Q2 and then 10 cents in the back half, we were talking about the inflationary impact of the Middle East conflict across our global operations. We clearly got that wrong in the back half. 5 cents in Q2 and 10 cents in the back half has morphed into 20 to 25 cents split equally between Q3 and now our estimate for Q4. Some of that being volume declines in the Middle East, much of it being elevated energy costs and elevated freight costs globally.

Got it. Got it. And then the Gulf volumes down in single digits, I mean, is that reasonable for 4Q? Are you seeing any change there? Is there any kind of comp we should be mindful of?

No, I think we should, until we see the Strait of Hormuz, the restrictions there ease, I think you should consider that our estimate for Q4 includes continued declines across a couple of the Middle East operations. Got it.

And then maybe just one more. You know, you've been taking share from glass maybe in most of your markets. I'm just curious, as you see these moves in aluminum with LME, you know, spiking and now coming back down, Does that really drive or impact adoption of cans versus glass or substitution out of glass? Like if you just think about the last, you know, three to five years, I'm wondering if you can talk about that dynamic, if it's accelerating, slowing, like how sensitive is it to LME? I just, any kind of.

Yeah, you're going to give me a chance to talk about sustainability, and Kevin's going to get real excited here because he loves this. I think, and let's be clear, in North America, there's almost no CSD in glass any longer. The CSD guys are not going back to glass. So where a declining LME helps us, it makes the can much more competitive against the PET bottle from a cost perspective, and we all know it's much more competitive across an environmental spectrum. Globally, glass only works globally when it's returnable glass. And for those of you who have traveled internationally, you know that many storefronts are very, very small. Those shopkeepers do not want to recollect glass and have empty used bottles sitting there waiting for somebody to come pick them up because it's taking up very precious real estate they have to put saleable product. They prefer to have saleable product on the floor, not empty bottles waiting to be picked up. So the movement towards cans away from glass is real. I don't need to pile. Glass has a problem. I don't need to pile on the glasses problem. I'm not trying to do that. But the opportunity for cans to continue growing at the expense of glass is very real.

Okay. That's helpful. I'll turn it over. Thank you.

Thank you. Our next question is from the line of Josh Aspector from UBS. Josh, your line is now open.

Yeah. Hi. Good morning. I wanted to come back to the inflation questions, and I feel like you've been pretty comprehensive around North America and Europe, and just kind of given the comments around Asia and not having the pass-throughs, is that a good or bad thing for you now? I guess is a tighter environment for Cannes something you think you can get pricing faster, or do you see that being more of a lag recovery?

Well, you know, depending on who the competition is and how realistic the competition is and where the competition is in terms of their own profitability, you would expect that we're larger we have a much better footprint I firmly believe we operate better that is more efficiently with less spoilage we should have opportunities as the competition looks to raise price and we saw a little bit of that in China this year for the first time in a long time the Chinese competition raised price in China I think we're going to expect to see that as we go forward that as prices or as contracts reprice on an annual basis, we'll see the competition becoming more responsible.

Okay, thanks. That's helpful. If I could shift gears quickly here, just on M&A, I mean, there's plenty of noise going around on one of the smaller competitors about potential restructuring. Can you just talk about your appetite for doing any large-scale M&A in cans today?

Well, I think, as Kevin said, We are well-positioned to continue organic growth opportunities and returning cash to shareholders. Organic growth may contain can acquisitions. It's hard to see how we could do a large-scale can acquisition just given the concentration across so many of the markets. Would we or do we have opportunity to pick up a plant here or there? Yes, and we'll see what happens. It's too early to say what might become available from any of the two or three situations that are out there or recently announced. But as we sit here today, no large-scale M&A because we just don't think it's available in cans, and certainly no large-scale M&A outside of cans.

Okay, thank you.

Thank you.

Thank you. Our next question is from Adeline Rodriguez from Missoulo. Your line is now open.

Thank you, and good morning, everyone. I mean, Kevin, quick one on transit. I mean, as you noted, you know, a little disappointment there. So what does 4Q look like? You know, given seasonality and the cost inflation, does it get much worse before it gets better? Like, should we expect, like, a big step down in 4Q's earnings for transit? it?

Well, I think that we would expect Q4 and transit to have a similar comparison to the prior year as Q3 did. It'll be down a little bit, but maybe similar to the third quarter.

Okay. Makes sense. And also in the other segment, should we expect similar trends in 4Q, You know, that $45 million to $50 million in terms of earnings? Because it's been pretty steady this year, but not last year. Like, should we expect something similar to what we've been seeing the past couple of quarters?

Yeah, I think you could expect – we were flat year-on-year in the third quarter. I think we're flat to maybe slightly down in the fourth quarter is what I would expect, but definitely not in the 40 to 50 range.

Okay, so compared to last year, you're saying like flat to slightly lower?

Yes, flat.

Okay, thank you very much.

Thank you.

Thank you. Our next question is from Kiran Mumtara from PMO Capital Markets. Kiran, your line is now open.

Thanks for taking my question. Just coming back to North America volumes, Tim, any additional color you can provide as to kind of how some of the products within, you know, product categories did, whether it is, you know, energy drinks, CSD, beer?

Well, energy has been exceptionally strong, as you know. What has been positively surprising this year is CSD. And for us, sparkling water is a big category, and we've done well in sparkling water. And, you know, I always hate to say this, but it feels like beer is stabilizing. But, no, listen, it's been a really good campaign. I think if we look at the last 52 weeks, at least the data I saw recently, it looks like every category was up over the last 52 weeks. Beer might have been slightly down, but it might have only been down like 1% or 2%. It wasn't down much bigger than that, but certainly offset by all the other categories.

Understood. Now, that's helpful. And then over in Brazil, last quarter you mentioned that the team was targeting sort of flat volume, you know, for the year. Is that still sort of how you all are thinking about it?

Yeah, I think what we said is the team was targeting flat volume. We weren't sure we believed it. We're still targeting on the top side. Maybe we're going to be down 2% for the full year. That's helpful.

I'll turn it over.

Thank you. Thank you. Our last question is from George Stafas from Bank of America. Your line is now open, George.

Hey, thanks very much for taking the follow-on. Hey, Tim, you were, you know, candid and we appreciate the comments on transit. And you also talked earlier about your philosophy on, you know, managing and incentivizing. you know what do you think will improve what changes might you make in terms of the incentives or anything else so that you do get better performance out of transit over the next year or two and then a separate question if you look out over the next year or so you know assuming we continue along this path right there are no guarantees in life but nonetheless the company and the industry generates a lot of cash, large acquisitions are seemingly less likely for obvious reasons. Can you help us think about what your goals might be on capital allocation, really share repurchase over the next year or so? Thank you, and good luck in the quarter.

So on the first thing, George, I'll be further candid on the transit, and I'll tell you the team does a very good job in transit with respect to cash. if you want to blame somebody, blame the CEO of the company. That's me for not giving them capital and or bolt-on acquisition dollars that they would otherwise like. We made a decision several years ago. We were going to run this business for cash and use that cash to support our beverage can growth strategy globally, as well as our opportunity to return cash to shareholders. Now, we probably do need to look to spend a little bit more capital per year in that business, but nothing on the order of more than $20 million a year. So not massive numbers, but maybe we need to give them a little bit more money. So if we want to say where the blame lies, you can blame me. The team would like a little bit more money. We've said no. We've generated a lot of cash, and we've used it for what we believe have been good reasons, delever the balance sheet rapidly, return a lot of capital to shareholders, and grow the beverage business. As we look at the future, again, as you rightly point out, hard to understand how we could do large-scale metal M&A. Unlikely we're going to do large-scale non-metal M&A. Going to generate on the order of $900 million to $1 billion of free cash flow every year. I think Kevin would probably tell you he feels pretty confident about that. And, you know, we pay a dividend right now on the order of $1.40. Maybe that increases a little, but that leaves a lot of money to repurchasing shares. And in the absence of something that we believe returns more value to shareholders, we're going to continue to buy back shares.

Would you put any goals out there, Tim, at this juncture or not at this juncture?

Well, we've bought back $600 million year-to-date this year, and maybe capital would like to buy a little bit more than $100 million throughout the rest of the year, so that would be like $700 million. And, you know, if you thought about $600, $700, $800 million a year for the next several years, I don't think that's too far out of the question. I think the share counts quickly approach. I think we're at $108 million right now. Now, I would say by mid-next year, could we get down to $100 million on a share count? Yeah, that's 8 million shares. That would be roughly another $800, $900 million. It's no reason to believe we couldn't do that, and then we'll see where we go from there. But listen, $600, $700, $800 million a year in share buyback is going to get the denominator down pretty quick.

Thanks so much, Tim. Good luck in the rest of the year. Thank you, George.

Rich, I think you said that was the last question, so thank you very much. And as that was the last question, we, again, thank you all for joining us, and we'll speak to you again in early 2027. Bye now.

And that concludes today's conference. Thank you, everyone, for participating. You may now disconnect.