Good morning, and welcome to Crown Holdings First Quarter 2024 Conference Call. [Operator Instructions] Please be advised that this is -- this conference is being recorded..

I would now like to turn the call over to Mr. Kevin Clothier, Senior Vice President and Chief Financial Officer. Sir, you may begin. .

Thank you, Ell, and good morning. With me on today's call is Tim Donahue, President and Chief Executive Officer. If you don't already have the earnings release, it is available on our website at crowncork.com..

On this call, as in the earnings release, we will be making a number of forward-looking statements. Actual results could vary materially from such statements. Additional information concerning factors that could cause actual results to vary is contained in the press release and our SEC filings including Form 10-K for 2023 and subsequent filings..

Earnings for the quarter were $0.56 per diluted share compared to $0.85 per diluted share in the prior year quarter. Adjusted diluted earnings per share were $1.02 compared to $1.20 in the prior year quarter.

Net sales for the quarter were $2.8 billion compared to $3 billion in the prior year, reflecting higher beverage can shipments in Americas and European Beverage, offset by the pass-through of lower raw materials, and lower volumes in most other businesses..

Segment income was $308 million for the quarter compared to $320 million in the prior year, reflecting improved results in global beverage offset by lower volumes in the other business and $12 million higher corporate costs, which include $8 million of costs related to a facility fire..

Free cash flow in the quarter improved by $296 million, driven by improved operating cash flow from lower working capital and lower capital spending. The balance sheet remains strong with net leverage at 3.4x at quarter end compared to 4.1x for the same period last year..

As stated in the earnings release, second quarter adjusted earnings per diluted share are projected to be in the range of $1.55 to $1.65, with full year projected to be $5.80 to $6.20 per share.

The earnings guidance includes net interest expense of approximately $380 million; average common shares outstanding of approximately 120 million with exchange rates at current levels; full year tax rate of approximately 25%; depreciation in the range of $310 million; noncontrolling interest in the range of $130 million to $140 million; and dividends to noncontrolling interest of approximately $110 million..

We currently estimate 2024 full year adjusted free cash flow to be in the range of $700 million to $750 million, with no more than $500 million of capital spending. At the end of '24, we would expect net leverage to be at the lower end of targeted leverage range of 3 to 3.5x..

With that, I'll turn the call over to Tim. .

Kevin, thank you. Good morning, everyone. I'm going to actually be very brief, and then we'll open the call to questions. As reflected in last night's earnings release and as Kevin just summarized, first quarter performance came in better-than-expected with global beverage can results up more than 11% over the prior year.

Increased shipments of beverage cans in both North America and Europe offset lower shipments in Asia..

Cash flow performance was again strong due to lower working capital usage, combined with lower CapEx. Americas Beverage recorded unit volume growth of 5%, reflecting 7% growth in North America and a 1% decline in Brazil.

And while the Brazil market grew mid-teens in the first quarter, our shipment performance reflects a comparison against a very strong first quarter last year in which we grew 23%. We maintain our full year volume growth target of 4% to 5% for the North American business and expect low to mid-single-digit growth in Brazil in 2024..

In Europe, shipments bounced back nicely from the destocking of the prior year's fourth quarter. And in contrast to the fourth quarter, our weighting towards Southern Europe delivered benefits versus the overall market as that region, combined with the Gulf states where we're more heavily represented, performed better than Northern Europe..

Perhaps too early to declare an inflection in Europe, but April shipments were also strong, and the sentiment for beverage can shipments is more positive than only 3 months ago. We continue to expect 2024 segment income will exceed the 2021 level. And the relocation from our Braunstone U.K.

plant is now complete with the Peterborough plant in full start-up..

Our income performance in Asia Pacific advanced 15% as cost reduction efforts initiated in the fourth quarter more than offset 8% lower shipments in the region. We do expect full year income improvement in the segment as continued benefits from capacity pruning offset the impact of lower volumes..

As expected, first quarter transit performance was down to the prior year, with price and volume contributing equally to the overall shortfall in both revenues and income.

Specific to the various lines of business, the protective products businesses accounted for more than 50% of the revenue and income decline reflecting weakness in the freight industry during the first quarter. We are expecting conditions to improve later in the second half, in line with expectations across the trucking industry.

Performance and other reflects lower demand for beverage can equipment and aerosol cans that we previously discussed..

So in summary, beverage cans had a very good start to the year, and we see that momentum continuing into the second quarter. We continue to grow share in North America, maintain and restore margins to more appropriate levels and generate significant free cash flow per share.

2023 was a record year of EBITDA for the company, and we aim to match that performance despite the headwinds previously discussed..

And I think, Ell, with that, we are now ready to take questions. .

[Operator Instructions] Our first question comes from the line of Ghansham Panjabi of RW Baird. .

Tim, the 7% growth in North America that you're forecasting for 2024, you mentioned share gains were part of that. One of your peers when they reported last week, were talking about having lost share and having line of sight towards filling that share, what time period that is.

Can you give us a sense as to your confidence on your share position as we look out to 2025 at this point? Or is it too early to tell?.

So just a slight correction, Ghansham. We had 7% in the first quarter, and I said we reconfirmed our growth target for this year in North America of 4% to 5%, so just a slight correction.

And I would -- I can't comment on what one of the other peers said, but I would tell you that we are -- as we sit here today, based on the activity, even the lighter promotions or more sporadic promotions that we're seeing that we used to see in the past, extremely confident in that 4% to 5% for this year.

And we have no reason to believe that our share would do anything other than be slightly positive in '25 versus where we are today. .

Okay. That's great to hear. And then for my second question on APAC, the improvement. I think some of your customers were talking about an improvement in regions such as Vietnam as well on a relative basis for them.

How are you feeling about that region overall from a growth standpoint in terms of sustainability relative to what you delivered in the first quarter?.

So our shipment -- as we said, our shipments down 8%. And I do think the market in Southeast Asia was probably up in the order of 9% to 10% in the first quarter. And our lower shipments versus the market are reflective of capacity pruning. We took out -- I think we took out 5 lines.

So if I had to sit here today off the top of my head, I think we have 29 beverage can lines operating before the program, and now we have 24. So we took out 15% to 20% of the capacity -- or 15% to 20% of the lines, probably more in the order of 12% to 13% of capacity.

So capacity realignment, cost reduction, more appropriate for what we see in the near term. So I do think that the market will, over the medium term, 3 to 5 years, continue to grow. We still have great expectations for the Southeast Asian market for growth.

And we think we're exceptionally well positioned and the cost structure is more reflective of that now. .

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

It's Andrew on for Chris.

Our main question is how did Americas Beverage volume breakdown not only by category -- by geography but by category, so would you be able to speak to beer, seltzer, the other products?.

So up 7% in North America, down 1% in Brazil, flattish in Colombia, up mid-single digits in Mexico. Mexico and Brazil, we're heavily weighted towards beer.

And then in North America, we're more heavily weighted towards nonalcoholic, although we do have some alcoholic but more heavily weighted to nonalcoholic carbonated soft drinks, sparkling waters, juices, teas, et cetera..

And I'd say that in North America, we had a pretty solid performance. All the numbers are in now. We -- not everybody reports the CMI, but based on what we do get from CMI and other commentary made from the peer companies, it appears that including exports, the market was flat in Q1, and we were up 7%.

So we feel pretty good about that, and we're up 7% and growing margin. The important thing is that, we're not just growing for growth's sake that we're growing to improve margin..

And if I just -- while I'm on the topic, we -- I think a few months ago, we gave you an estimate of what we thought the market would do for this year. So the market flat in Q1. And I think at the time in early February, we said we expected the market to be flat to up 1%. If you want to change that to flat to up 2%, you can do that.

Not necessarily my overall concern. I know we're going to be up more than that. And as I said, we're growing our business, and we're growing our margin, which is the important thing. .

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

In the release, there was a reference to continuous operational improvement.

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

Great question. I would see, actually, the opposite. I would tell you that our teams in the factories were incredible during the pandemic. And I don't think we lost any efficiency during the pandemic. I would tell you that they rose up and they were absolutely wonderful.

I think the efficiency losses or increased spoilage is a natural effect of putting new capacity in as you disrupt the system, you move people around, you move support around and newly hired workforces are learning how to make cans, and that's a learning curve as you've heard us and others describe can take anywhere from 12 to 24 months depending on any particular factory.

So I think there's always improvement to be made in the new factories..

And obviously, even in the more seasoned factories, the goal is to get better. And so today, we might have a plant that is the best performing plant. Next year, it may not be. So the goal for them is to try to become the best-performing plant again.

So it's principally around productivity, less spoilage, more good cans out the back end of the line, but not an insignificant number, and it's a number that we aim to achieve in all businesses globally around the world..

It's used for a variety of things. Those gains are used for a variety of things.

We -- it's incumbent upon us as we think about the value proposition that we deliver to our customers, to not only deliver them quality and service, but to deliver them the best price package and make our product as competitive as possible compared to the other substrates they deal with, and to make them as competitive as possible on the shelf as they look at the market their products.

And oftentimes, our productivity gains. Sometimes we keep them for ourselves. Sometimes they're transferred to the customers, and the customers use that to market their business, which in turn helps us in the future. .

Okay. That's very helpful. And then maybe just on the full year guidance, I think you bumped up minority interest by $25 million, but reiterated the EPS guide.

So I don't know if there's other puts and takes in there, but does underlying EBITDA go higher? Or just how is the view on full year EBITDA versus initial expectations?.

So Anthony, in terms of minority interest, we're generally, I think we initially guided to $130 million of actual expense, and we're now guiding between $130 million and $140 million because we think the results are going to be a little bit better in those areas where we have minority partners.

In terms of EBITDA, I don't -- we didn't disclose it previously, but I think based off of what we saw in the first quarter, it's trending higher than where we were. But it's early in the year, and we want to see where it goes from there. .

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

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

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So George, let me start with Asia, and I'll talk about the market in Asia, not our shipments. But I think the economies in Asia post the pandemic have really struggled. Obviously, disposable income is a much different number in economies in Asia than it would be in Western Europe or North America.

So I think the -- we're back to the point where you've got a little bit more certainty were less fear in the environment for the consumer and the beer companies principally beer are doing a bit more promotional activity in Asia, and that's why you see the Asian market growing again. But naturally, the Asian market is going to be a growth market.

More and more people are moving up the economic ladder..

I do think -- I agree with your comment when we talk about change in beverage can shipment patterns in Europe. Certainly, I think the destocking was so great last year in the fourth quarter. And there's, again, a bit more confidence in the market from our customers.

Like hard to understand because I do still think the consumers are relatively weak in Europe, and they're certainly weaker in Europe than they are in North America. So -- but I think the destocking was so great that we have a little bit of a restocking effect and -- but all signs point towards a pretty healthy summer as we sit here today.

And obviously, as you know, we're going to have 7 or 8 weeks in a row where we go from the European Cup right into the Olympics beginning in mid-June, right to the middle of August. So I think there's a fair amount of excitement in the European marketplace around two large events, both of which are going to be held in Europe in the same time zone..

I think, Brazil up again, we had destocking in Brazil last year. And as you know, the Brazil market fluctuates from time to time. It goes up and down, and you've heard us say in the past that we don't like to get too concerned about any one quarter versus the next. We take a longer-term view.

And as we've always said to you, if you look at Brazil over any 3- to 5-year measuring period, you always see the line going up, and we continue to expect that going forward..

North America, as I said, George, the market was flat, which is reflective -- let me just back up a second, including imports, I think the imports were down about 0.5 billion units year-on-year. So the imports are not very large anymore. Excluding imports, maybe the market was up 1% or 2%. But including the imports, the market was flat.

So that would not be a reflection of what you described a turn in the market. But I think it is a positive sign in that, as you rightly point out, that promotions are at a lower level than we've seen historically and perhaps even a lower level than we'd like to see.

And we'll see what -- how promotions look as we -- over the next couple of weeks as we get here ahead of Memorial Day..

And then obviously, we'll have July 4. And then after July 4, we have the Olympics, so although I don't view the Olympics as a huge drinking event, certainly not to the level of the European Cup and Americans not so interested in the European Cup. So we'll see what the market brings. I think as I said, I think the market in North America from 0% to 2%.

But as I said in reference to Ghansham's question earlier, we're exceptionally confident in our 4% to 5% projection for Crown. .

I guess the next question I have is, you mentioned as you have that you expect to spend no more than $500 million of CapEx the next 2 years, '24 and '25.

What is the overall volume growth that underpins that? And are there any regions where maybe it would be the high-class problem where if you start trending much above a certain level, whatever level that would be that you have to start spending more CapEx? Are there certain growth thresholds in key markets? And if you could identify them where maybe that CapEx number has to start bubbling higher?.

And then my last one, I'll turn it over. And it's really just a quickie. Asia Pac, Southeast Asia ex-China is not a huge market you took your capacity down 12%, 13%, you were down, I think you said 8%. The rest of the market was up significantly.

It's -- that suggests that ex-Crown the market, if I'm doing -- if I interpret what you're saying correctly, was up really a lot. And I'm just trying to square that with your volume outlook there. If you understand what I'm saying. Small market, you're the biggest kind of the market... .

So I do -- and obviously, George, the 10% that's our best estimate of what we think the Southeast Asian market. And keep in mind, it's a variety of countries, right? It's 8 or 9 countries. That's our best estimate. Maybe the number is wrong, maybe it's 6%, but we think it's 9% to 10%.

And -- so that would imply, as you say, that the Crown perhaps lost a little share, which we knew we would when we took some capacity out, but we still have -- we're still by far the largest participant in Southeast Asia with -- in excess of 40% of the market..

And again, we -- as we've discussed repeatedly in almost every market that we've talked about over the last couple of years, we're not here just to make cans. We need to make money for the shareholders. So we are focused on trying to return appropriate margin levels and -- so the pruning we did was necessary. But you are right.

It does imply that some others really grew. As I said, it's not a perfect science estimating the growth in Indonesia versus Thailand versus Malaysia, et cetera. So because my memory is awful.

What was the first question?.

First question was, [indiscernible] more than 5... .

So I think as we sit here today for the years '24 and '25, regardless of what comes at us, we feel very comfortable with no more than $500 million. And if you wanted to combine that and say over the 2 years, no more than $1 billion, but it's not like we want to do $700 million in 1 year and $300 million in the other.

So I think we're going to be as measured as we can be, and we've tried to be very measured over the last 6 years..

I do think that in North America, we are highly utilized right now. We're in the mid-90s.

I do think we have some open capacity in Brazil and Europe, not so much in Asia anymore, but I think we're positioned well in most markets to handle historical growth or even double the historical growth we've seen in many of these markets over the next several years without having to add more capacity, unless something dramatic changes, George, if we get a -- if we get somewhere in the world, if we get a government that outlaws one of the competing substrates for whatever reason, and we have a much bigger move towards aluminum beverage cans.

And then yes, we're all going to have to spend a little bit more money, but we certainly welcome that opportunity. .

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

Congrats to a solid start to the year and still a pretty choppy backdrop. I guess my first question is solid 1Q, 2Q guidance, a little ahead of consensus. You guys rated the full year guide, certainly very early in the year.

But just kind of give us some thoughts on how you're thinking about the cadence? Are you less confident in back half or just being a little conservative here?.

Well, I think we're -- as we sit here today, we're very confident in the guidance we've given you. A bit early to change any guidance. We had a very good start to the year last year as well. And then we had a huge destocking effect in Europe in the fourth quarter. Just perhaps too early to change. So I don't want to say -- we're certainly confident.

I don't want to say we're not confident. And I don't want to say we're being overly conservative. I just think it's early in the year, and we'll know more as we talk to you in July. .

Okay. That's helpful. And then, Tim, like what are your customers telling you? I mean it sounds like promotion is still a little even in North America. Europe is off to a better start, but Asia as well.

But like what are your customers telling you today in terms of how they're thinking about the year and how they're planning the year at this point versus, let's say, a few months ago?.

I mean the -- I don't think they're prepared to give up their value over volume strategy. It's yielding incredible benefits for them. And obviously, the more volume of anything you ship, the greater risk you take. So they're able to make more money by taking less risk. And listen, I understand their strategy. If I was them, I do the same thing.

So I think at some point, they may get pressure from their bottlers or they may get pressure as they look at their share of the market versus their competition and sometimes people get concerned about share, more concerned about share perhaps than they should. And the way they deal with that is promotion, and we'll see who goes first..

But I think in Europe, I think it's more just restocking. Asia, it's more restocking and the market returning to growth, more healthy consumer.

Brazil, I think it's largely to do with -- as in Mexico as well, largely to do with a transition away from one way of returnable glass to aluminum beverage cans in the near term, or returning back to the can after we came out of the pandemic. And in North America, I think they like the value proposition they have. So we'll see how the year progresses.

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Okay. And then on transit, I mean, I guess your comments was fairly in line with your expectations, at least for us, it was a little softer. I think we're expecting kind of flattish first half earnings once again, Tim, it's my forecast, not yours. The view was maybe perhaps costs that would offset a lot of that.

So relative to how you're thinking about that business, did you see incremental weakness on demand on the trucking side? How are things kind of progressing in 2Q? And do you expect earnings to be up in the back half with perhaps demand getting a little better? Or incremental cost actions? So just kind of help us think about the progression of transit this year.

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Yes. So I think most of the costs that we described to you from the program we initiated in 2022 was out last year. So there's always incremental things we do to reduce costs, but most of our cost out was last year. The markets, we did well last year. The market's obviously digesting a lower volume environment.

And any time you have a lower volume environment the price does come into it. So we're constantly measuring price versus volume. But I think if you were to go back and take a look at how some of the large trucking firms performed in the first quarter this year compared to last year, you wouldn't be surprised that we're also slightly down.

Some of the trucking numbers are down some very large numbers..

So I think we expect a similar performance in Q2 as Q1. Q3 may be a little flatter. And so we are hoping for a bounce back in Q4. So if there's -- we got a lot of puts and takes.

And to your earlier question, are we confident, are we being conservative? Maybe in one business, we're being more conservative than another? And we just see how the year progresses in each of the businesses. But I think in the overall context, fairly confident in the guidance that Kevin provided you, but it could move around by business.

But the one business where we're hoping for a recovery in Q4 is transit. .

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

First question, I think last quarter, there was obviously a lot of talk about areas like Mexico glass, can-making equipment and aerosol, areas there are headwinds this year.

I guess, how did those areas perform in 1Q relative to your earlier expectations? And has your full year expectations for those businesses changed at all as we sit here today?.

So the Mexican glass business is inside the Americas Beverage business, and I think we described to you previously that business, which performed exceptionally well last year would return to more historical levels this year. And I just want to clarify one thing. I saw somebody wrote something that we were losing money in Mexico glass, not true.

The business still makes high teens, low 20% EBITDA margin. Last year, it would have made high 20% EBITDA margin as some of the customers rebuilt the returnable glass float. So we're just back to more normal levels.

But I think we describe that business as being down on the order of $30 million to $40 million year-over-year for you, but still a very healthy, very profitable business..

And then in the other segment, food cans in North America, aerosol cans North America and the beverage can equipment company business. And I think previously, as we described, we told you that Bevcan equipment down in the order of $35 million to $40 million.

But again, still profitable, just not as profitable as it used to be as we -- as we're principally doing service and tools at this point as opposed to new shipment, new equipment shipments..

And then aerosol cans, I would tell you, in line with what we expected. The only business in the first quarter, a little weaker than we would have expected was North American food shipments were a little softer than we expected. Having said that, April was strong.

So we have a couple of customers that were -- I don't know if they were delayed or their marketing plans were delayed, but they picked up nicely in Q2 or early in Q2 and April.

I think overall, the estimates we gave you earlier for those businesses, certainly, Mexico glass in line with the earlier estimate and the other businesses, I think by the time we get to the end of the year, if we're not right on target of where the budget was, we'll be within a few millions. So... .

Great. That's super helpful. And just a quick clarification.

The facility fire impact was that contained to the first quarter? Or is there any lingering impact as we continue into 2Q here?.

Mike, that's contained in the first quarter. .

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

Maybe following up on some of the earlier question. Just trying to think about the full year and you've given the -- first quarter $1.02 that you've given the guidance of the second quarter, it implies a pretty decent step-up in the second half EPS versus the first half, which based on the company's recent history is less common.

And a lot of the bloodline items don't seem to be a big mover either way. I'm just trying to think about the businesses that are going to be notably stronger in the second half versus the first half that would drive that uplift. And transit, I appreciate it can be a part of that based on the framing, but wouldn't seem to explain the full magnitude.

So can you just help me a little bit on the strength implied in the second half of the year at the EPS level versus what you're implying for the first half?.

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

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

Well, I mean the third quarter is always bigger than the second. And traditionally, the fourth quarter is always bigger than the first. And so like without going back and looking at what specifically happened in prior years, I do remember we had a huge destocking in Europe last year in the fourth quarter, and we don't anticipate that this year.

So there's going to be a -- we believe, a large step up in Europe in the second half of this year versus the second half of last year, principally around what was a very weak fourth quarter last year. .

Yes. Okay. I mean I'll take that offline. I appreciate the year-over-year point. And then maybe following up on transit and just some of the better market environment in the second half of the year.

Is that based on orders and a book-to-bill that is now above 1? Or is that just thinking that your freight customers are talking about better freight demand in the latter part of the year? What gives you the confidence on the improvement in transit?.

Well, I -- if we -- as I look at the first quarter performance, the protective businesses which largely service the trucking over-the-road intermodal businesses was down. Equipment slightly down but offset by tools and service, steel strap up a little, plastic strap down a little.

I think if you look at the commentary from the trucking firms, the trucking firms are all talking about very strong fourth quarter, and they're talking about being fully contracted or more heavily contracted in the fourth quarter than they are right now. So that gives us a little bit of confidence as it relates to our protective products businesses.

We don't see anything on the equipment or tooling sign that would give us any pause for concern as we sit here today. .

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

Tim, I'm going to try to take a stab at a high-level question for you in the Bevcan business. During the pandemic, obviously, it is about getting product on the shelf and servicing your customers. Post-pandemic, obviously, there's been some facility rationalization. You guys are obviously one of the bigger global players that are in Asia Pacific.

But my question is we've had a couple of customers kind of move around choosing different suppliers. And again, historically speaking, you guys have kind of won and loss with your customers. I'm just curious, on a go-forward basis, what your expectations are? I mean you talked about being mid-90s utilized in North America.

Got an announcement that there was another player here in North America, maybe a little bit bigger than what people were planning for.

Can you just remind us bigger contracts that come up? Is it they renew in 2025 for '26? Or do you have something that renews for '25? And then just from a competitive landscape, and I'm really thinking about Brazil and Europe, if there's anything that we should be mindful of thinking about. .

So North America, I would say that, as I said earlier, to Ghansham's question, we are very confident in our '25 share as being no less perhaps greater than where we sit today. And I'd probably tell you the same about '26. So without commenting on customer contracts, I'll say it that way..

There's always a business that moves around in Asia, Asia with the exception of a few customers, Asia is more of an annual market. But we're so big and we do have good coverage in good locations and high quality in service we -- on the margin year, plus or minus the market. Brazil is a healthy market. Brazil is going to get stronger.

And I don't think we're overly concerned about Brazil. We have really good locations relative to most of the customers. And the Brazil markets looks like it might be inflecting a little bit from what was fairly poor last year as -- over the last couple of years as glass was recovering a little but we seem to be recovering against glass now..

So -- and then in Europe, I'm not off the top of my head, I'm not aware of anything that gives me any great concern for next year. So there's always -- Gabe, it's a business like any other business, there's competition, and we're prepared for the competition. It's all I can tell you. .

Look, I mean, you talked about some of your customers' value over volume, and it looks like you guys have elected to do that as you said you would. So that's what we're just trying to dial in on a little bit. A question about -- I think I saw mandatory deposit laws going into effect, I think, in '26 in the U.K.

Any context around that? I think Germany -- and again, I know it was completely different back pattern, but expectation for disruption? Or does that tend to favor the can over time?.

Well, I think depending on which substrates are included in the mandatory deposit laws.

So we and others across the can and the aluminum industry, working to ensure that we're not unfavorably challenged by new laws that go into place where they picked a can and they don't pick all the other substrates or they pick the can which already has high recycling rates in an effort to subsidize other materials, which either don't have high recycling rates or really don't have any intention to get high recycling rates..

So we're aware of it. Generally, when you get deposit laws, initially, there's a little bit of softness with the market absorbs the -- where the consumers in the market absorb it and it returns to normal within a couple of years. So we're mindful of these changes.

A lot of these changes are across Europe and would be good if we had one European law as opposed to a variety of them. But now having said that, we generally are in favor as an organization.

And I think as an industry for deposits, I think as we think about the sustainability of the aluminum beverage can, I think using recycled material we compare as favorably as any other substrate on carbon when we use higher levels of recycled content..

So from where we sit, we're very confident in the package we provide in terms of sustainability in the environment. I think you've now seen at least one very large global consumer products company step back their plastics reduction target. And in large part, I don't think that has anything to do with, as I heard somebody call it pragmatism.

I think it has to do with it was never achievable in the first place. The infrastructure is not there for plastics to be recycled at great levels nor do the economics work for recycled plastics as they do for recycled aluminum..

So in general, we're in favor of more recycling, and I think deposits give us more product to be recycled.

We just need to ensure that it doesn't unfairly punish the can, whereby the can pays for all the other products, which are not recycled or not recycled economically?.

Agree. Based on our research, it looks like the aluminum can is sort of coordinating across the value chain, and you guys are doing good work there. One last point of clarification, I apologize for three questions. Asia Pacific closing 5 lines.

Just is that -- are those curtailments or those are in fact on installing the lines? And then savings from that looks like maybe it's $4 million to $5 million a quarter.

Can you confirm that?.

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

Savings... .

Yes. Yes, if you want to use $4 million to $5 million a quarter, that's fine. I think we closed a plant in Singapore, which was a one-line can plant with an in-line.

The Singapore market is a very small market, and we had used that for exports in the region as we built new plants or entered new markets until that market and the new plant was up and running, but a one-line plant is really not efficient. And it's a very high-cost location..

We had a plant in Saigon where the lease -- the plant was built in 1993. We had a 30-year land lease. The government wanted the land back. So at the end of '23, we had to terminate the operations, and we're in the process of handing the land back now to the government.

So -- and we chose based on where the markets are, not to reinstall those lines currently. And then we had another plant that also in the Saigon area, which is a combination of two companies that we purchased that we put together on the same site. And I think probably we're offering 6 or 7 can lines on site.

So we took two of the slower speed lines out just to modernize and make the plant more efficient. So... .

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

Congrats on the strong results here. So I guess my first question is just around Bevcan growth in North America. You were up 7% this quarter, and that was off of a pretty tough comp. How do you think -- I think you made the comment of 0% to 2% maybe now for the year, I think.

What do you think about longer-term beverage can volumes, especially in North America, do you think we have the ability to get into the 2% to 4% range as you look into '25. Just wanted to get your thoughts on kind of medium to longer-term Bevcan growth. .

So Arun, let me just -- I apologize. Let me just take a step back and just clarify. We were up 7% in North America in the first quarter. Our estimate for our full year growth is 4% to 5%. We said the market for the year in the 0% to 2% range coming off as a flat performance in Q1, just so we're clear. I think that anything is possible.

I think that we'll see where the market takes us. If we get -- if we return to a higher level of promotions and perhaps some of the larger companies get a little bit concerned about share and they want to start promoting so they don't lose share, they want to gain share. Then sure, we could get to the 2% to 3% -- 2% to 4% range that you described..

But if they're going to stay with value over volume, we're going to be in this 0% to 2%, 1% to 2%, 1% to 3% range. And there's nothing wrong with that, right? That 1% to 2% growth that we're describing now is coming off a base of 115 billion or 120 billion units. It's no longer coming off a base of 90 billion units.

So what I would tell you is 2 billion units on 120 billion, you can do the math. It's 2.5 billion units. It's two full can lines. So it is a new plant every year in the industry that somebody would need to put up..

And as you're well aware from -- you've been around the industry a long time, you know that we're well oversold in the season. So we need to either make cans early and warehouse them or we need to have more capacity so that we can run more balance.

So I do think that even at a 2% level, especially where we've all been over the last 20 years, we all became very accustomed to running a flat to down business for 15 years before we had the uptick in '19, we all know how to do that, and it's incumbent upon us to be responsible across the industry for our shareholders. .

Great. And then I guess I just had another question around leverage and interest expense. So what is your longer-term leverage target? I mean, would it make sense to maybe bring that down into the 2s just so your interest expense will be much lower and you can see your EBITDA growth translate to nice EPS growth as well.

And then just along those lines, I'm just curious if you are comfortable with the idea of pivoting to buybacks in 2025, maybe you can just give us your thoughts on some of those issues. .

So we haven't changed our target range. We're going to be at the low end of the target range. We're pretty confident that by the end of this year. To your point, you're -- you may be right, it may be as we think about a higher rate environment in an economic environment where inflation could get bad again, right? I don't know. We'll see how the U.S.

government does if they -- they got treasury options. They need -- they still need to sell bonds.

At some point, we're going to understand whether or not anybody wants to buy our bonds if somebody thinks inflation is too high and they're not getting well paid for inflation, which would tell us that if everybody else in the world believes there's going to be more inflation regardless of lower inflation right now..

Then perhaps it makes more sense for us to bring the levels down. I do know, and you're well aware that we have at least two competitors in the beverage can space one, I think, has leverage right around where we're at right now, and they've described their long-term goal, their historical long-term goal in the low 2s.

And we have another competitor who's probably stated they're going to be in the mid-2s by the end of this year, which would tell you that their view on rates and inflation in the economy is such that they believe it's more prudent to bring leverage down. And so we're mindful of that. It's a topic we talk about with the Board at every Board meeting.

And good question though. .

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

Well, I think we can achieve both. We're going to have significant cash flow. Certainly, as you pay down debt, you generate more cash flow, all else being equal.

And so yes, I mean, listen, we'll review with the Board what the uses of capital are and do they want to keep the dividend roughly where it is? Do they want to increase the dividend or not? Do they want to use all cash to pay down debt? Do they want to use some to buy back stock? It's a use of capital discussion we have at every board meeting.

But everything is available to the company. We have a lot of cash flow. So we'll see what the Board thinks, what the Board believes is the most prudent thing to do in an environment, depending on what kind of environment we think we're entering. .

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

This is Nico Piccini on for Mike Roxland. Just a follow-up on Mexican glass. I understand how and why it was acquired and the historical profitability there. But -- and also it's tied to a larger customer contract.

Should that contract come up for renewal and profitability will be impacted? Is that an asset that you could consider being core? Or would you maybe divest that? And then relatedly, on your various JVs in the Middle East, South America and Asia, are those things that you could look to unwind or maybe bring entirely in-house?.

Well, I would tell you that the customer that we purchased the Mexican glass assets from along with the Mexican can assets, the customer is core to Crown. So as we think about the glass business in Mexico, we don't think about the glass business separate from the can business, we think about the customer relationship, and I'll leave that at that..

But again, we've told you before, any business under the right terms and conditions would be considered as a yes or no in the portfolio. But as we sit here today, we have an excellent relationship with this global customer. And we view Mexican beverage as a business in which we service a very core customer to the global company.

I think the joint ventures that we have around the world have served the company well. We have, for the most part, in the Middle East and Asia, ventures with partners who are also fillers. And in some of those markets, it would be very difficult to participate and grow the business without a venture partner..

In South America, we have a partner who's quite happy to be invested in the business. I don't think they're in any way, contemplating wanting to sell their interest. So it's a relationship and a partnership agreement that we've had in place for 30 years, and we continue to operate as such. .

Understood. Just one follow-up.

Apologies if I missed it earlier on the call, but can you cover the utilization rates by segment?.

By segment?.

By geography... .

I'll do beverage for you because the other markets -- the other business lines not so important. But North America, I think we're utilized mid-90s. I think there is -- in Asia, with the capacity reduction, we're going to be in the low 80s, which is pretty well utilized in a market like Asia.

I would say, in Europe and Brazil -- Mexico were, again, mid-90s. Europe and Brazil, again, in the low to mid-80s, high 80s, something like that. .

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

Tim, I got a quick question for you on transit I mean in the past, you've talked about how this is like a very good business, which doesn't get much love from investors or analysts, and you wish you had more businesses like that, stable, low mid-teens margins, doesn't require much capital.

The question is, would you be interested? Or can you still get bigger there, like other opportunities to get bigger in that space?.

There are. We -- as a matter of strategy or principle, and I'm going to take you back to late 2019, we delivered a strategy to the shareholders that more or less told the world that all of our growth would be focused on the beverage can businesses that we had around the world that we would not look to grow other businesses.

So again, it's always a use of capital argument. But you just summarized for me, and I don't want to sound like I'm defensive. But you just summarized for me, I have a business where I spend no capital. And let's be clear, just like you said, nobody gives us love for the business.

I can assure you that people in my transit business think I don't give them any love either because I don't give them any money..

So we could always spend more money. But I think as we said when we acquired the business, that the growth in that business would more or less be from bolt-on acquisitions. There are still numerous opportunities to acquire businesses, which are either directly in the same business that transit operates in or adjacent.

And there are numerous of those businesses make EBITDA margins in the 20% to 25% range..

And there's an old saying, if you want to trade for a better multiple, you better buy better businesses. So we're not opposed to growing the business, but our sense right now is the -- that our investor base would prefer to see us pay down the debt and buy back shares as opposed to grow that business.

So we use that business to harvest cash that allows us to not only invest in beverage, but pay a dividend, buy back stock and delever. So there are opportunities to grow it, but we don't see that as the mandate from the investor base at this point. .

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

You are welcome.

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

Yes, you're right, sir. .

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

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