Good morning, and welcome to Crown Holdings ' First Quarter 2022 Conference Call. Your lines have been placed in 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, Kerry (ph). 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 in our SEC filings, including our Form 10-K for 2021 and subsequent filings.

The company's recorded earnings in the quarter of $1.74 per share compared to earnings of $1.57 a share in the prior-year quarter. Adjusted earnings per share increased to $2.01 in the quarter compared to $1.83 in 2021.

Net sales in the quarter were up 23% from the prior year primarily due to the pass-through of higher raw material costs, and increased beverage can volumes.

Segment income was $383 million in the quarter compared to $369 million in the prior year primarily due to improved profitability in North America n tinplate businesses and can-making equipment, including a net benefit of $30 million from lower cost inventory, offset by the timing of insurance recovery for the incremental costs related to the Bowling Green tornado and $8 million of unfavorable foreign exchange.

We have repurchased 400 million of Crown common stock to date from the $3 billion. Program that was that the board authorized in December. While Brazil remains soft, we do expect volumes to begin to recover in Q2. And throughout the year. And when combined with the stronger U.S.

dollar and higher energy costs in Europe, we now project EBITDA to be 1 billion $970 million for the year for the full-year. Our estimate for adjusted earnings for the Second Quarter is in the range of $2 to $2.10 per share. And for the full year, we remain in the guidance range of $8 to $8.20 per share.

The full-year estimate continues to assume all losses from Bowling Green will be recovered from the timely collection of insurance proceeds for by year-end. It assumes we repurchased an additional $600 million of common stock in 2022, and a few on $1 billion for the year.

We continue to expect free cash flow to be $400 million, with capital spending of $1 billion. And we maintain a target leverage ratio in the range of 3.25 times for 2022. With that, I will turn the call over to Tim (ph)..

both European beverage and transit, $3 million each, while Asia was $2 million. In Americas beverage like-for-like North America unit volume growth was 6%, excluding the temporary loss of Bowling Green production capacity.

Due to the temporary loss of Bowling Green, we carefully managed our capacity and inventory levels ahead of the busy summer selling season, reducing opportunities for further volume growth in the quarter. Demand remains strong in Mexico and Colombia, with unit volume growth of 4% limited by capacity.

Low consumer confidence, driven by high inflation in unemployment, and the delay of carnival led to significant first-quarter softness in the Brazilian market. We do see volumes beginning to return early in the second quarter. And as Kevin noted, we expect further recovery as the year progresses.

Segment income in the quarter reflects approximately $20 million in incremental system operating costs due to the Bowling Green tornado.

We do expect to begin receiving insurance recoveries during the second quarter, with both lines at Bowling Green now backing up operation and continued learning curve improvements on recently installed capacity, we expect second-quarter income will exceed the prior year, offsetting Bowling Green insurance timing.

Unit volumes in European Beverage advanced 6% over the prior year, with notable growth across Mediterranean operations and Saudi Arabia. Moving into the second quarter, we remain sold out, and look forward to incremental 2023 capacity, from recently announced projects in Spain and the UK.

Income in the segment was better than forecast, due to volume growth and mix, but as previously discussed, we do expect significant earnings headwinds in this segment during the second quarter and for the balance of the year.

Beverage can volumes in Asia-Pacific advanced 8% in the first quarter, as strong shipments across Southeast Asia offset the impact of COVID restrictions in China.

Adjusting for currency, segment income and transit packaging declined $6 million in the quarter primarily due to higher costs, including the impact of inflation and the carryover of higher-priced year-end steel balances brought into 2022.

Appropriate pricing actions have been taken, and we expect second-quarter income in the segment will reflect that. As noted in the release, our North American tinplate and beverage can making equipment businesses had strong results in the first quarter.

In North American food, we benefited from additional two-piece food can capacity Installed in 2021, leading to 16%-unit volume sales growth in self-made two-piece food cans in the first quarter of 2022. Additionally, pricing actions were taken to recover 2020 inflationary cost items, including the benefit of prior year-end inventory.

So in summary, a solid start to the year with results mixed, but overall, ahead of plan.

Looking ahead to the second quarter, Bowling Green is now back up and running, contractual recovery of inflation commenced on April 1st in North America, pricing actions have been taken in transit to recover inflation, and we continue to expect global beverage can demand to remain strong.

So with that, Kerry, I think we are now ready to take questions..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question is coming from the line of Ghansham Panjabi of Baird. Your line is now open..

Thank you. Good morning, everybody. I guess, Tim, maybe focusing on the U.S., clearly mobility is starting to increase, people move around, flying, et c. On-promise -- on-premise, sales dollars seem to be improving as well, commensurate with that, and restaurants, et c.

Can you just characterize for us if that's having any impact on packaged beverage volumes or maybe even food as it relates to how you see the rest of the year unfolding?.

Ghansham, it's a good question. You would expect what you just said to be true. I haven't -- we haven't seen it yet. Now, as I said on the call, we were -- on the prepared notes, we weren't very aggressive trying to sell cans in Q1.

We're a little concerned with our summer inventory levels, given that we lost capacity early in the year, and we've, obviously, won't have full capacity until we get the plant back through initial learning curve stages at Bowling Green, but it does not appear that demand for beverage cans -- that the momentum is slowing that much..

Sounds good.

And then in terms of the modest reduction in EBITDA for this year, maybe you could just break out the various drivers, and then -- just given the timing of carnival last year versus this year, do you have a sense as to what the impact might have been, in theory at least, for the first quarter and maybe just quantify for us what you're seeing so far in Brazil -- so far in Q2?.

Right off the bat Ghansham, I think headwinds on the reduction of EBITDA currency, we were already forecasting currency to be a headwind this year, but it's probably an incremental -- where we sit today, it's probably an incremental 10 million from where we were at a couple of months ago.

I think the just using the euro as a proxy, not all currencies move similar to the euro, but using the euro as a proxy, we're 107, 108 right now. And I'll bet you two months ago when we talked to you or 2.5 months ago when we talked to you, it was 111 or 112. Energy in Europe.

Think about incremental $20 million of headwinds in Europe from where we were at a couple of months ago when we talked to you and Brazil, while it's offset by a minority interest at the EBITDA line, Brazil maybe 10 to 15 million, offset by gains, that we didn't anticipate at the time we talked to you in Asia beverage and food and obviously some out performance in European Beverage in the first quarter, that gets you to a 30 million net EBITDA reduction.

Brazil..

Yes, Brazil.

It's hard to, hard to quantify the delay of carnival. The market was down. I think the market was down 26% we were down to 20. It doesn't make me feel good that are better than the market we're still down 20 however, I got to tell you it, maybe carnival is. At best ten of the 26%. The balance is going to be shaky.

Consumer confidence in the face of high inflation in high unemployment. And so as we've said to you before, we've seen these conditions before in Brazil from time-to-time and it does not dampen our outlook for the growth in the Brazilian market long-term.

We have occasionally we had gifts in Brazil and as we've said before, we always seem to recover to higher levels. And that's what we fully expect..

Thanks so much..

Thank you. Ghansham..

Our next question is coming from the line of Kyle White of Deutsche Bank. Your line is now open..

Hey, good morning. Thanks for taking the question. I just wanted to follow up there and Austin's question on Brazil.

I guess given where the consumers that and kind of the deceleration that we saw at this quarter, what's giving you the confidence that you're going to see demand recover through the balance of the year?.

I think we've already started to see comparative -- comparatively year-on-year. Early here in April, we're three months -- three weeks -- 3.5 weeks into April, and we're starting to see not only comparative to last year, but in absolute terms, some positive momentum, some pull from the customer's positive momentum full.

So -- and I think obviously we'll get Carnival here shortly and we have the World Cup later in the year, and we'll have the summer selling season as we get to the fourth quarter for Brazil as well.

So I -- as I said to Ghansham, and I'll say it again, we've seen this before, it's an economy that can be volatile from time-to-time and the consumer can -- that will react to the volatility in the economy as their confidence wings or ebbs and we're pretty confident that's going to come back..

Got it. And then just transitioning to non - reportables.

Are you able to parse out the drivers of earnings improvement this quarter? How much was driven by the sell-through of inventory from last year? How much was underlying improvement in food cans as well as the equipment business that you own?.

What I would tell you is overall food can volumes for Crown, were flat in the quarter however we sold 16% more cans that we made which means, while we were flat, that means we bought a whole bunch of cans from third-parties last year that were not buying this year, that we are able to sell.

That's a significant piece of profit for us, we're not paying, profit to somebody else and we're not paying the freight to come in from Europe. As Kevin noted, we had about a net $30 million inventory gain, so that's a significant -- that's about a half of the growth I think in the quarter and the other half.

Think about the other half being 2/3 food cans and a 1/3 equipment..

Got it. That's very helpful. I'll turn it over..

Thank you..

Thank you. Next in queue George Staphos, from Bank of America. Your line is now open..

Thanks very much. Hi, guys. Good morning. Thanks for the details. Just point of clarification there, Tim, on Kyle's question. So you said, you sold 15 more -- 15% more food cans than you made.

That was only two-piece, right? And can you give us a rough breakdown of three-piece versus two-piece for the Crown network as it stands currently? And then, my first question -- or second question I guess, is, in terms of transit, I think you said something in your release about there was inflation as you had expected.

I remember, from fourth quarter, you were expecting signal -- you were expecting transit to be a contributor to profit growth this year.

Can you give us a bit more guidance in terms of what you're expecting this year and whether your outlook for the segment has changed at all versus where you were in February?.

I think -- I was going to give you a number. I hate to give you a number. It's just --.

We'll take numbers, Tim..

Yeah. I know you will. It's just like, I'll take half of your salary too, George. Come on, now..

Half of nothing is nothing, Tim [indiscernible]..

So I think -- if we think about transit for the full-year, I think we're probably considering currencies a headwind, and we sold a fairly profitable business that after those two items were probably still going to be up on the order of $15 million for the full year, which would tell you that in the next three quarters, we're going to be up about $20 to $25 million net of the loss of the Kiwi business and a little bit of currency headwind..

Understood. And on --.

Question on three-piece cans..

Yeah, three-piece versus two-piece in terms of where you sit and you said -- go ahead..

We don't buy any three-piece cans. Everybody in the market, as you know, George has excess three-piece can capacity. We are principally a two-piece cans maker. We're probably at Crown 60% to two-thirds, two piece with about a third of our business being in three-piece.

And just looking at the first quarter three-piece cans were up a few percent, 3% in the quarter. But the big growth that we had was in two-piece cans, which were largely flat, but self-made cans were up tremendously..

Thanks. That's great, that's very helpful. Tim, my last one just broadly on America's Beverage Can volume. Is there anything that you're seeing in the market related to North America that is in dampening your growth outlook, or if you could talk as to why you might feel comfortable or reaffirmed and your growth outlook relative to new products.

And within Brazil, there's been a lot of questions already from Ghansham and Kyle on Brazil, which is obviously a concern right now from you. One of your peer rigid packaging companies today was talking about the fact that they're sold out in a different substrate.

Do you worry at all about cans losing share to glass because the macro conditions, because of what you typically see from one way to returnable packaging when you have macro downturns? Thanks and good luck in the quarter..

Thank you, George. So I think in the short term, you will see potentially a shift in the large 600 ml glass bottle -- to the 600 ml glass bottle..

Okay..

As consumers have less buying power and they look to share a beer among two or three people as opposed to having their own single-serve in a can. Now, having said that, these are short-term data points. This is a three to six months headwind in the economy.

I think the outlook for the overall Brazilian economy, and the outlook for Brazil as a global economy is quite bright over the next 10 to 15 years. And so we remained -- we've continued to remain very bullish on Brazil. I think if you look at anything in the short-term, you can become concerned.

We're not exceptionally concerned in the short-term because we've seen it before and we're very confident that it's going to turn, and the can continues to be the increasingly preferred package in Brazil..

And North America?.

North America. As I said to Ghansham, I got to say we weren't very aggressive in selling in the first quarter. As I said, and having said that, we've got our own customers and our other customers or smaller, potential customers continue to ask for cans at rates that are much higher than we've ever seen.

So I -- you would expect perhaps, with everything that's reopening as Ghansham noted, that perhaps we'd see a little, dampening of demand but it hasn't happened I think that, I said it last time on the earnings call I think the prospect of eating out, at restaurants is not a very compelling prospect right now.

And I don't mean to take a shot at some of those restaurants but it's really expensive, the service is lousy, the food isn't that good. And so if you decide you want to prepare a meal at home and I think the kitchen is being used a lot more nowadays that we've used pre-pandemic and it will continue to be used pre-pandemic.

The can for purposes of food and beverages is going to continue to be strong. And I think we're in a period where we felt really good from a sustainability standpoint as it relates to can a couple of years ago when I think post-pandemic, we're seeing the can usage being re-energized by consumers in their own kitchens..

Okay. Thank you, Tim..

Thanks, George..

Thank you. Our next question is coming from the line of Philip Ng of Jefferies. Your line is now open..

Hey, guys. Good morning. Tim. I guess Russia, clearly large export of commodities, including a little bit of an energy, any supply issue that we should be mindful of. And in certainly you called out energy that's going to have a bigger impact on your margins in Europe.

But it sounds like a few of your peers are trying to push pass energy and freight costs a little more on a real-time basis. How are your conversation going? And your kind of renegotiated as contracts in Europe as we speak..

Well, I think we renegotiate contracts. We are steadfast in our determination to be fairly compensated for the goods and services that we provide and that includes energy, freight, raw materials, and the conversion of those raw materials in the [indiscernible], as well as any other costs, regulated unregulated labor, etc.

So I think in the interim, however, we do have contracts. We expect our suppliers and customers to adhere to their contracts, and likewise, they expect us to adhere to ours. Having said that, we have not seen any disruption in the supply of raw materials and to our energy to our global sites, including the sites in Europe..

Got it. That's helpful. And my question on [indiscernible] helpful to get good color that the contracts will reset from an inflation standpoint in Q2.

Can you remind us how those contracts were? Is it largely the bulk of your business have contractual pass-through so the lag is more of a one-quarter hiccup there? And then when you think about this business in the medium, longer-term, certainly, it tends to be a little more cyclical.

How is your outlook in that business? It seems like you're still expecting pretty strong results. Curious, anything you've done since owning it to moderate that cyclicality going forward. Thanks a lot..

Thank you. First part of the question. The contracts, I'm sorry, on the Signode. So for the most part, the larger customers have contracts and they will have escalator clauses. But that probably makes up a small proportion, let's say 20% of the overall Signode business.

The rest of the business is priced monthly or by order based on where commodities will be, whether it's hot rolled coil index, where paper or where resin is from time-to-time. So we do have the ability to price more rapidly in that business than we do in the can business.

Since owning the business -- even before we owned it, the prior owner, we both have taken significant steps to move the business away from being principally as supplier to the metals industry with much greater supply to food and beverage and other consumer products.

And having so -- having said that, if 10 to 15 years ago they were selling 30% to 35% into the metals industry, maybe they're only selling 20% into the metals industry. And food and beverage, if it was 8% back then, it might be 20% now. I think nobody wants to talk about the R word. I do think the backlogs,.

not only for equipment and tools and services in Signode, but also on our can-making businesses, I think the backlog is so large that even if things do slow a little bit, it will take a little while for the backlog to clear such that we don't see any disruption to the forecast I provided to George earlier for this year..

Okay. Thanks a lot..

Thank you..

Next one in queue is Mr. Mike Leithead of Barclays. Your line is now open..

Great, thanks. Good morning guys. First congrats on the transit packaging divestment, it's really nice transaction multiple there.

Are there other call them singles or doubles like that within the portfolio? Or I guess just how do you think about your overall portfolio as it stands today?.

And so I think that one was an easy one, it's software. We're not in the software business. Obviously looking at the multiple, I wish I was in the software business. Small business is self-contained, it was it was fairly easy to do.

The reason it took a couple of years to get it done is we're trying to find the right partner for that business who is going to continue to grow the business and service the customers in the corrugated industry. But many of those customers are the customers for signaled for equipment and also the commodities. There are numerous businesses.

under the transit umbrella. And I would say to you that the focus is on improving the portfolio of businesses that Crown operates, whether that be in transit or in metal. And I think it would be probably inappropriate for me to see anything other than app, but we're always trying to improve the portfolio of businesses we operate..

Great. Appreciate it, Tim. And then second, if we could just go back to European Beverage, it sounds like the market is quite strong, you're filled out. I appreciate -- and are these gone almost hyperbolic there.

But the market demand gives you any sort of leverage for faster price recovery or contract structuring? I guess just how should we expect the cadence of recovery there?.

Yes. So I think we'll get a -- I think what we said whether we said it in October or February is that the -- it will take us a couple of years to get it back and we get about a third of it next year and we get the balance of it in '24. If we had excess capacity, you could price those cans at spot, or let's call it today's market.

We don't have any excess capacity so we are selling within the constraints of our contracts that exist right now..

Got it. Thank you..

Thank you..

Our next question is coming from the line of Gabe Hajde of Wells Fargo Securities. Your line is now open..

Good morning, Tim, Kevin..

Morning Kevin..

I had a question not to focus too much on the near-term, but I think there was some commentary about normalization above can volumes in the UK. And I'm trying to marry that up, I mean, I know it's common practice for you'd have a large portion of business on your contract before committing capital.

So just curious what you're seeing in underlying demand in that country, and then confidence interval and future demand trajectory there. And I guess relatedly, if I missed it, I apologize. But you said profitability in Europe was a little bit better.

What was driving that? Was that better volume or production levels or is there something else that happened?.

So Q1 better volumes than we had forecast principally in Saudi Arabia and Jordan. UK is the largest can market in Europe. It continues to migrate away from other substrates to the can.

There's a lot of capacity that's going into the UK and the market remains sold out and demand for cans exceeds not only the existing capacity, but the announced capacity. So I think we're -- we remain very bullish on the UK can market is all I really want to say at this point..

Okay. Thank you. And then again, I apologize if I missed it. Do you can you quantify the earnings impact from steel volatility that we saw in Q4 and then in the Q1 for the transit packaging business.

And then I guess conceptually the way I think about it is to the extent those products are protecting high-value items on the road or in transit, I would suspect that you're able to get price efficiently and I know you've said that. But is there opportunity for margin expansion or uses ensuring that you were getting back inflation,.

I think Kevin described net 30 million inventory and think about inside of transit we probably had a headwind of 3 or 4 or 5 million, add that to the 30 and that gives you what we had on the tinplate side, about four or $5 million headwind in transit, you got two things you've got, obviously we're trying to make sure we recover inflation.

We're also trying to obviously grow the business and grow earnings, you're always trying to do a little better, to answer your question yes we're trying to expand margins. Now, that's absolute margins I think, in an environment where the raw material costs, i.e. the pass-through, is significantly higher year-on-year.

Do we do appreciate that? Because of the denominator effect of I tinplate at 75% higher aluminum percentage margins are likely to be lower in that environment and then vice versa when, when the commodities come down, percentage margins go up..

Thank you..

Thank you..

The next one is coming from the line of Anthony Pettinari of Citi. Your line is now open..

Hi, this is actually Bryan Burgmeier, sitting in for Anthony. You've announced two new capacity adds in Europe in the last month or so.

Is that an indication that your contract renewal talks in Europe are going well and you expect to see more raw material pass - throughs moving forward, or are those unrelated to one another?.

Well, I think they are always related. I think it's a reflection of the demand that we see in the market from existing customers who are willing to enter into volume commitments and also new customers. But it's underpinned by the notion that we're not going to add capacity unless we're fairly compensated for products.

So the answer is, it is connected, but you wouldn't built it if it didn't have more volume..

Got it. Makes sense. Last question for me. In the U.S. and in Europe, are you seeing any signs of consumers trading down to lower priced beverage products? And if you are not seeing that already, is it possible.

I will say how it trade down dynamic towards lower-priced fear, lower-price soft drinks would impact Crown, given your beverage portfolio?.

So we are seeing store brands and the demand for cans from those who fill store brands and other labels that are not national labels, expand exponentially right now, obviously limited by our capacity and the Bowling Green temporary shutdown.

But what you described is happening, I'm certain it's also happening in food, but I can't off the top of my head, I can't point to it. I can absolutely point to it in beverage cans. We do have a very strong private label beverage can business and we're very strong with some of the regional marketers of beverage products.

So I think that we do well in that environment, yes..

Got it. Thanks a lot and good luck in the quarter..

Thank you..

Next one in queue is Arun Viswanathan of RBC Capital Markets. Your line is now open..

Thanks for taking my question. Sorry about that. I just have a question about the ready-to-drink market. So that's one of the few markets we're actually seeing growth.

Do you expect the negative comps and the scanner data to continue for non-ready-to-drink cocktail markets, and I guess ready-to-drink continue to show mid-single to high single-digits? And how does that square with -- what you guys are seeing within your own system.

Is it just that you're seeing the growth because of the capacity that you have in place? Thanks..

I think we've talked about ready-to-drink for a little over a year, maybe a couple of years. It is picking up some momentum.

Some of that momentum offsetting the slowdown in growth of [indiscernible], all those [indiscernible], while the growth has slowed or [indiscernible] an incredibly important part of the beverage can market, it's 10% to 12% or maybe even a little bit more of the beverage can market, and -- so many of these drinks are in sleek cans and, obviously, all of the capacity we've announced as sleek capabilities, one of the reasons for expanding the industrial footprint is to grow the business in line with volume demand but also grow the business for the types of products, and the size or shape of the can that the marketers and the consumers prefer, so yes..

Okay thanks and then as a follow-up, I'm curious about the CSD market in a similar way. That's a market that was relatively weak for many years, showing -1 or -2 and seems to have turned around.

Do you expect that positive growth in CSD to continue, and what should we expect as far as growth rates, and maybe if is it across North America versus Europe, and some of the [indiscernible]? Thanks..

So you want growth rates for CSD?.

Yeah, I'm just curious if you expect positive growth rates in CSD to continue and if it's across regions, what are you expecting?.

I mean, I think in North America, as you point out, it did decline for a while. It seems like we're back on the uptick on CSD, so I think we do expect some growth. I would tell you, if you want exact numbers, you probably should be talking to your beverage analysts.

But certainly, the two large marketers of CSD products have been showing fairly good growth and I think they're fairly bullish certainly in North America. And with respect to the one who is a bit more global than the other, they've been showing tremendous growth on a global basis.

But I think in Europe, the big growth that we're going to see in CSD is more from conversion away from glass into the can. And I think the hope is that globally we all get a bit more responsible with respect to the environment and we start to see some PET come back to cans in several markets.

But the only thing I would tell you is that pretty hard for us right now in most markets to entertain that growth just given the sold-out conditions. So it's going to take us a while as an industry to get capacity to the levels where we can absorb the growth that we think will come to the can over time..

All right. I'll turnover..

Thank you..

Next question is coming from the line of Chris Parkinson of Mizuho. Your line is now open..

Great. Thank you. Just very quickly on your comment on the environment and the PET. Just given what's happening in a few states and most notably California and a couple of airlines and even Miami Beach has an agreement with Pepsi kind of shifting over to aluminum versus plastic.

Have there been any other incremental signs that there could be actually somewhat of a material shift even off of an incredibly low base, or is that just something that continues to linger off in the distance?.

No, I think. I don't want to say it's lingering in the ultimate distance as you say. I think what you point out in a couple of jurisdictions, the momentum is there. There are some jurisdictions, there are some states.

At least in the United States where it will take a little longer but I think let's just say in the blue states, if you will, we're going to see a lot more momentum in that regard. I think all throughout Europe, we're going to see momentum in that regard. But as I said earlier, to Arun 's question.

I think the limiting thing for us is our ability as an industry to get capacity in to accept more rapid fashion. That conversion that we think from an environment mental standpoint that wants to be driven from those who have greater environmental concerns.

So we're as an industry, you've seen over the last couple of years, a significant number of announcements that we're all making. I think it's pretty clear that new product introductions by existing marketers or new marketers have beverage products are significantly weighted more towards the aluminum can and other substrates.

So as an industry we're trying to get there, it takes time to build equipment it takes time to procure equipment, and it takes time to, build a factory and trained workforce, we're doing the best we can as an industry and, we're here to help clean up the planet..

Got it. And just a real quick question, you hit on RTD already. Just very quickly, could you hit on just what you're seeing in both North America and European energy drinks, just what you've seen in the last four months as well as your outlook for the remainder of '22 and perhaps longer? Thank you..

Thank you. So we are -- we do have energy drink customers. We have a -- we don't have a huge energy drink business. We're looking to expand on that, but the energy drink market and both -- on both continents that you've just mentioned exploding right now. So the outlook for energy is quite high..

Thank you very much..

Thank you..

Our next question is coming from the line of Mike Roxland of Truist Securities. Your line is now open..

Thanks. Congrats. Tim, Kevin, and Tom on the good quarter despite all the puts and takes. Just a lot of my questions have already been asked, just two quick ones here. There's been some talk about improving supply chains. And obviously, that was prior to some of the recent Chinese COVID lockdowns.

What have you seen, just from a supply chain material transportation, any of those constraints that were really bottlenecks? Have you seen any improvement in them recently?.

So let's put Port Shanghai port aside for a second. Shanghai is the one that's happened over the last several weeks, month, that has been something that's caught many industries off guard. We are managing our businesses effectively so far. And the hope is that some of that tension will ease.

The port might be open, but they can't get [indiscernible] so it's a trucks from province or count the town in China also difficult, but I think we're working through that.

I think the big headwind that we've seen from a supply chain standpoint is in our equipment businesses for beverage can making equipment and some of the signaled equipment or transit equipment, tors and circuit boards, display screens, things like that still in short supply globally and we Like many other industries, are doing the best we can to try to procures as much of the components that we need from a select few suppliers.

Let's be honest, as a select few suppliers that meet the standards that we require and that our customers require, so we're all doing the best we can to try to do that. But that's still remains tight..

Got you. And then Just one quick follow-up.

On that last point, Tim, on the constraints with respect to Bevcan making, any impact [indiscernible] to your own expansions? So if there is -- or if there are delays in terms of procuring or getting the metals and other things you need to make your -- for that business, does that put at risk any of the expansions that you have planned given longer lead times to procure that?.

So the only thing we've had is the second line in Martinsville, Virginia has slipped into early '23 from -- We thought we'd have both lines up and running in Martinsville this year. And the second line will slip into, I think, February of '23. And that really had to do with the supply of construction steel.

But from time-to-time, we might have some Bevcan equipment or some transit equipment that slips 30 or 60 days from what we thought original deliveries would be. But as I said, we and others are doing the best we can to try to service our customers, procure goods to service our customers. It's been tight, but we're managing..

Got you. Good luck in the balance of the year..

Thank you..

We have three more question in queue. Our next one is coming from the line of Anojja Shah of BMO Capital Markets. Your line is now open..

Thank you. Morning, everyone..

Good morning, Anojja..

Good morning..

Morning. Just wondering. We're hearing a lot about elevated glass demand weaker in this morning from a major glass producer.

Given that, can we get an update on your Mexican glass business? Are you seeing a pickup in interest or business around that?.

So we are. The answer is yes. And again, we are capacity constrained. We operate 4 furnaces in 2 factories, a significant proportion, of our volume, is tied under a long-term agreement with one customer. And we do our best to try to push more tonnage, through the furnaces, depending on the type of bottles we're making.

Obviously you make more or less depending on the bottle but you can only push through, so much tons. So we're doing our best to service other customers, we have many, a few other customers under contract as well. And then there's non-contract spot customers, obviously that we'd love to be able to service. But as you say, demand is quite high.

For glass, at least as we see it in Latin America, we don't follow the other glass markets. We do follow the Latin American markets because of our exposure in Mexico, but it is quite strong..

Great. Thank you for that. And then that new line that you just announced in Agoncillo in Spain. If I'm correct, I think you have steel lines there right now, two steel lines.

Is the idea eventually to retire those steel lines or is there enough demand for all those lines?.

So we -- you are correct. It was a steel beverage can facility. It's in the north of Spain towards the Bilbao region where the steel mills are, and for that reason, it was set up as a steel plant many -- or decades ago. We have beverage can in making in the plant now. We have one steel line, and we're putting in the aluminum line.

Depending on the price of steel versus aluminum, we'll depend on -- if and when we retire the steel line, but we would expect to add a second aluminum line in time.

Regardless of whether we keep the steel wide or not, but it will depend on the arbitrage between steel and aluminum for those customers in Spain that may still be willing to take a steel can..

Okay. Makes sense. Thank you very much..

Thank you..

Our next question is coming from the line of Angel Castillo from Morgan Stanley. Your line is now open..

Hi. Thanks for taking my question. Just a quick one, I guess. Could you update us on the global beverage shipments number? I think you'd given any kind of greater than 9% last year for the full year -- or last quarter, excuse me.

So just where do you see that coming in and how do we think about Q2, whether it's you have some seasonality, but you also have some of these plants coming online, and Bowling Green is coming back on to -- so how should we think about those shipment numbers in the cadence to that full-year again?.

We're looking at something here, so we were -- we initially told you, let's say 9% -- that we thought we grew 9% last year. We felt we grow another 9% this year.

I think if we were looking at it today, given the softness we saw in Brazil in Q1, and I think Brazil does recover as the year goes on, but if we're being honest with ourselves and with you, maybe the 9% is now 8%, just given the Q1 softness in Brazil..

Understood.

And then just wanted to switch to cash flow, given all the softness, it's impressive you're still able to maintain that $400 million, so curious what are some of the puts and takes there, and within that, any benefit or impact from pension as we see interest rates rising?.

In terms of cash flow guidance, clearly we reduced the EBITDA guidance to 1970 from 2 billion, you have a 30 million headwind there but we're looking all over the place for ways to make that up and the easiest way is to reduce our inventory. We've had a very high inventory level coming into '22 due to all the supply chain issues.

We've carried more inventory than we typically have had. So that is really the main driver, or the main item that will offset the EBITDA..

Understood.

And any I guess comments on pension?.

Pension contributions as we expected. The one thing on the pension, we are expecting to get in as part of the UK settlements in neighborhood of $100 million of proceeds this year, or through this year and through the first part of '23, that's on plan in our $400 million free cash flow guidance, that would be additive.

If you look at the press release, we've actually added back the proceeds that we've gotten so far this year..

So just [indiscernible] just to make sure we're clear on that, the 400 million free cash flow does not include the recovery of the illiquid pension assets from last year's settlement of the UK pension plan.

So when we talk about pension plans on a global basis, we really have the plant in the United States and Canada and other than that, it's very immaterial around the world for pensions..

Very helpful. Thank you..

Thank you..

Our last question in queue is coming from the line of Adam Samuelson from Goldman Sachs. Your line is now open..

Hi, yes. Thank you. Good morning and thanks for squeezing me in..

Good morning..

I was wondering if just on the equipment businesses in both transit and beverage can equipment, you talked about having a lot of visibility with the backlog, especially on transit through the year.

Where is the book-to-bill in that business sitting today? I'm just trying to get a sense of are we still rolling -- are still growing backlog and the visibility [indiscernible].

Yeah. So we are, I think, we're $220 million backlog, I always remain concerned that if the backlog stays too big for too long, does it stay there or does it -- do potential buyers lose interest or go somewhere else? As I said, we're trying to do the best we can to procure those components we need to complete the orders and ship out the backlog.

It's a business that when we acquire the business, the transit business, I think the backlog was $80 million and now it's $220 million. Some of that is new product introductions, enhanced product introductions, the retirement of equipment that many users and customers have had for several years are looking to upgrade, all of the above.

But the backlog is quite high..

And I guess specifically are orders still exceeding shipments at this point, especially for the longer lead bigger equipment?.

Yes..

Okay. All right.

And is that also true on the equipment on the beverage can equipment side?.

Yes. Believe it or not, we have more orders on hand. New orders coming in and we'll push out for specific pieces of the beverage can line this year. Yes..

That color is really helpful. I appreciate it. Thank you..

Thank you. Okay. Carrie, thank you very much. I think that concludes the call today. We thank all of you for joining us and we'll speak with you again in July. Bye now..

Thank you. Speakers. And that concludes today's call. Thank you all for participating. You may now disconnect..