Crown Holdings(CCK) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Earnings for Q4 2023 were $0.27 per share, down from$0.74 per share in the prior year quarter. Adjusted earnings increased to $1.24 from$1.17 year-over-year [5] - Record adjusted EBITDA for the year was $1.882 billion, an 8$1.744 billion in 2022 [7] - Free cash flow for 2023 was $661 million, driven by record EBITDA and exceptional working capital management [7] Business Line Data and Key Metrics Changes - North American beverage volumes increased by 5$382 million, up from $292 million in the prior year, primarily due to higher beverage can volumes in Americas Beverage [5] - Transit Packaging achieved its highest income performance despite a muted industrial backdrop, with more than$300 million generated in free cash flow [15] Market Data and Key Metrics Changes - In Europe, shipments were down mid-teens in Q4, with a projected flatter demand environment for 2024 [13] - The Asian market experienced volume softness due to inflation effects, impacting consumer purchasing power [15] - North American food business income is above pre-pandemic levels, particularly in the pet food category [16] Company Strategy and Development Direction - The company is optimizing its footprint by closing several production facilities to align supply and demand, leading to greater utilization and operational efficiencies [6] - For 2024, the company expects EBITDA to remain in line with 2023 performance, driven by strong performance in North American Beverage and Transit Packaging, but offset by lower results in can-making equipment and aerosol businesses [7][18] - The company remains focused on operational improvements and strengthening the balance sheet to position for future growth [18] Management's Comments on Operating Environment and Future Outlook - Management noted that operating performance in Q4 was well ahead of the prior year, with strong beverage can volumes in North America and Brazil offsetting demand weakness in Europe and Asia [11] - The higher interest rate environment has led to significant headwinds in interest and pension costs, impacting overall earnings [17] - Management expects a rebound in European Beverage in the second half of 2024, despite current consumer pressures [101] Other Important Information - The company anticipates adjusted earnings per diluted share for Q1 2024 to be in the range of $0.90 to$1, with full-year guidance of $5.80 to$6.20 per share [8][9] - The company has projected full-year adjusted free cash flow for 2024 to be between $700 million and$750 million, with capital spending capped at $500 million [9] Q&A Session All Questions and Answers Question: Is there any carryover into 2024 from higher inventory that you need to still work down? - Management indicated that inventory is in line with business expectations, and there is no significant carryover [25][46] Question: What makes you comfortable with the non-beverage segments? - Management expressed confidence in the transit business, highlighting its stable cash generation and low capital investment requirements [26] Question: Can you provide more color on the European market? - Management noted that Southern Europe is performing better than Northern Europe, and while Q1 is expected to be weak, growth is anticipated in the summer months [32][101] Question: What is driving the softness in European Beverage? - The softness is attributed to consumer pressure from rising costs, but management expects a rebound as economic conditions improve [101] Question: How long will it take to right-size the aerosol business? - Management believes that the recent closures have positioned the company better, and further volume growth could enhance performance [101]