CROWN HOLDINGS, INC. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Global Beverage operations strong with 5% volume growth and manufacturing efficiencies.
• Americas Beverage saw 10% volume growth, including 5% in North America.
• European Beverage benefited from 6% shipment growth and margin recovery.
• Asia-Pacific embraced capacity reduction, realizing benefits earlier than expected.
• Transit Packaging impacted by weak global manufacturing; tight cost control.
• Strong free cash flow of $668 million through nine months, driven by operational performance and reduced capital spending.
• Balance sheet strengthened by transferring pension plan liabilities, annuitizing ~$4 billion of pension liabilities since 2021.
• Board authorized $2 billion share repurchase through 2027; repurchased $110 million in the quarter.

Segment Performance

• Global Beverage: Combined segment income up 23% on 5% global volume growth.
• Americas Beverage: 21% increase in segment income with 10% volume growth (5% in North America).
• European Beverage: Income advanced 18% due to 6% shipment growth and margin recovery program.
• Asia-Pacific: Segment income advanced 50% with benefits from capacity reduction, offset by 11% unit volume decline.
• Transit Packaging: Income down due to weak global manufacturing conditions.
• North American Tinplate: 5% higher food can volumes, but can-making equipment had lower activity.

Guidance

• Fourth quarter adjusted earnings per diluted share projected $1.45-$1.55.
• Full year adjusted earnings per diluted share increased to $6.25-$6.35 from previous $6-$6.25.
• 2024 full year adjusted free cash flow at least $750 million after $100 million pension contribution and no more than $450 million CapEx.
• Expect net leverage below 3 times by year end and aiming for 2.5 times net leverage target through debt reduction and EBITDA growth.

Risks

• Potential headwinds from aluminum price trends affecting margins.
• Global manufacturing conditions in contraction impacting Transit Packaging.
• Uncertainty around interest rate reductions affecting interest expense.
• Volatility in exchange rates and pension funding requirements.

Question and Answer

• Q: On the Americas segment, what drove strong margin conversion and any non-recurring benefits?

A: Timothy Donahue mentioned factors like market share gains in North America and Brazil, lower aluminum costs (though aluminum is trending up), and manufacturing improvements with $20-25M benefit from efficiency and spoilage.

• Q: Regarding leverage and cash flow, any thoughts on working capital and interest expense?

A: Kevin Clothier said working capital drove $100M benefit, interest expense could decrease with rate cuts, and expected share buybacks next year.

• Q: On Europe's consumer trends and margin outlook?

A: Timothy Donahue noted European consumer weaker than US, but restocking, events, and substrate shifts helped, with margins having low-hanging fruit gone, needing edge sharpening.

• Q: On beverage can volumes and future capacity?

A: Timothy Donahue said no need for new capacity for expected market growth in next two years, CapEx no more than $450M.

• Q: On pension funding and expense post-3Q?

A: Kevin Clothier said minimal US pension funding next year, ~$0.05 impact on pension expense.