Ball Corporation

Greetings, and welcome to the Ball Corporation 4th Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brandon Pottoff, Director of Investor Relations. Thank you, sir. You may begin.

Thank you, Christine. Good morning, everyone. This is Ball Corporation's conference call regarding the company's fourth quarter 2024 results. The information provided during this call will contain forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied. We assume no obligation to update any forward-looking statements made today. Some factors that could cause the results or outcomes to differ are described in the our most recent earnings release and form 8K and other company SEC filings as well as company news releases. If you do not already have the earnings release, it is available on our website at ball.com. Information regarding the use of non-GAAP financial measures may also be found in the notes section of today's earnings release. In addition, the release includes a summary of non-comparable items as well as a reconciliation of comparable net earnings and diluted earnings per share calculations. References to net sales and comparable operating earnings in today's release and call do not include the company's former aerospace business. Year-to-date net earnings attributable to the corporation and comparable net earnings do include the performance of the company's former aerospace business through the sale date of February 16, 2024. I would now like to turn the call over to our CEO, Dan Fisher.

Thank you, Brandon. Today I'm joined on our call by Howard Yu, EVP and CFO. Hello. I will provide some brief introductory remarks. Howard will discuss fourth quarter financial performance and key metrics for 2025. And then we will finish up with closing comments and Q&A. Before I talk about the business and results, I want to highlight the amazing work our employees and teams have done to give back to their communities. In 2024, our employees volunteered more than 23,000 hours of their time across 23 countries and to more than 1,880 different causes and organizations, working to create a positive impact in the communities where we live and work. In partnership with the Ball Foundation and our dedicated employees, we invested more than $4 million into our communities to support local causes and disaster relief efforts. I want to thank all of our employees who devoted time in 2024 to uplifting our communities. You truly represent our values of we care, we work, we win. I also want to take a minute to highlight the work our teams have done to continue to improve our safety performance. Because our people are our most valuable resource, we set aggressive targets to improve our total recordable incident rates. We continue to be well below industry incident rates, and our continuous improvement mindset requires us to constantly improve. Through that mindset, we were able to decrease our 2024 incident rates versus 2023 and outperformed our goal for the year. For us, our safety metrics represent more than just numbers. They exemplify the health and wellbeing of our employees, and we will continue to do everything in our power to improve every year. Turning to business performance, we delivered solid fourth quarter results and returned 1.96 billion to shareholders via share repurchases and dividends in 2024. And we continue to execute on our goal of repurchasing at least 3 billion of shares between 24 and 25. Aluminum packaging continues to outperform other substrates across the globe. In EMEA, fourth quarter volume remains strong, driven by continued investment by our customers in canned filling across the region. In South America, Volume growth in Chile and Paraguay was more than offset by softer than anticipated volume performance in Argentina, as well as supply-demand tightness in Brazil caused by slower-than-expected ramp of idle capacity. In North America, persistent economic pressure on the end consumer and our exposure to U.S. domestic beer led to softer-than-expected volume. Our regional performance culminated in Ball's global beverage can shipments being down low single digits year over year in the fourth quarter and up 1% in 2024. Looking to 2025, our ball business system is in place and our teams are focused and excited about the opportunity that lies ahead of us to drive operational performance, volume growth, and productivity gains. We are laser focused on delivering on our stated goal of exceeding 10% comparable diluted earnings per share growth in 2025 and beyond. As we begin 2025, we feel confident in our ability to deliver 11 to 14% comparable diluted EPS growth. We anticipate growing global volume in the 2 to 3% range and expect all of our businesses to grow in or above the ranges we laid out at our 2024 Investor Day. In EMEA, customer movement to cans from other substrates will continue in 2025. We continue to be bullish on the opportunity to drive long-term growth across EMEA as sustainability legislation and the competitive advantages of aluminum packaging increase can penetration from a low base. In South America, recovery in Argentina and Chile coupled with growth in Brazil is expected to drive volume above our long-term range and operating earnings growth in 2025. And while our North America business faced volume challenges last year, we have confidence in our ability to deliver volume growth in line with or slightly above market. We have been proactive about extending contracts and have over 85% of our 2026 volume under contract. That includes signing an extension with one of our largest customers that will take us to nearly the end of the decade. This extension with our global partner also means that we will be building what is effectively a two-line can plant in Oregon. This investment will not change our expected CapEx plans or our share repurchase targets, and will give us needed capacity in the market where our customers are also investing. Additionally, in January, the company entered into an agreement to purchase Florida Can Manufacturing and its beverage can facility in Winter Haven, Florida. The transaction, which carried a $160 million purchase price, closed this morning. Our North American business is running at high utilization rates in part of the U.S., and with the growth we expect in the coming years, this capacity will provide us the fuel for growth we need to deliver on our customers' plans. We are purchasing this asset for well below replacement value, and with our strong balance sheet position, there will be no impact to our share repurchase plans. Lastly, on CUPS, During the fourth quarter, our board approved for the company to pursue alternatives for the business. This includes an option to form a strategic partnership in early 2025, which is expected to result in deconsolidation of the business. We expect to complete the process in the first quarter. And with that, I'll turn it over to Howard to discuss full year and fourth quarter 2024 results, as well as key metrics for 2025. Thank you, Dan.

Starting with our results. 2024 full year comparable diluted earnings per share was $3.17 versus $2.90 in 2023. Fourth quarter 2024 comparable diluted earnings per share was $0.84 versus $0.78 of the fourth quarter of 2023, an increase of 9.3% and 7.7% respectively. Full year comparable net earnings of $977 million were up year over year driven by strong operational performance, cost management initiatives, and lower interest expense, which were able to more than offset the earnings headwinds from the sale of our aerospace business. Fourth quarter comparable net earnings of $250 million were up year over year driven by cost management initiatives, as well as lower tax and interest expense, which were able to more than offset the earnings headwinds from the sale of our aerospace business. In North and Central America, stronger than expected performance in December volumes was more than offset by lower than expected volumes in October and November. Despite a softer U.S. mass beer category and stretched end consumer, we continue to believe that our 2025 volume will return to growth and will be in line or slightly above market. Throughout 2024, our team has done a great job of improving operational efficiencies, lowering costs, and effectively countering measuring risk. And through our ball business system, we will continue to drive operational improvement in the plants to more profitably serve our customers' growth. While we have a tough comp in the first quarter, as well as headwinds from poor weather across the US in January, we expect sequential improvement throughout the quarters leading to volume growth in 2025. In EMEA, fourth quarter segment volumes was strong and the segment comparable operating earnings increased 12.5%, matching our expectations entering the quarter. Recent demand trends remain favorable and the business is on track for significant year-over-year comparable operating earnings growth in 2025, driven by improving operational efficiencies and volume growth. In South America, segment-comparable operating earnings increased slightly while segment volumes declined due to continued weakness in Argentina and the supply-demand tightness in Brazil, partially offset by volume growth in Chile and Paraguay. During the fourth quarter, consumer conditions in Argentina continued to demonstrate some gradual signs of recovery, and we continue to monitor the dynamic economic situation in Argentina and potential scenarios that could impact results. To provide additional volume support for our Brazil business, we plan to reopen Posto Alegre facility. Looking at the businesses within our other, our personal and home care business, which was previously called Aerosol, performed well and grew volume mid-single digit in the fourth quarter, and we expect to grow volumes above our long-term range in 2025. Moving on to additional key financial metrics and goals for 2025. We anticipate year-end 2025 net debt to comparable EBITDA to be 2.75 times as we work to deliver on our stated goals of repurchasing at least $3 billion worth of shares between 2024 and 2025. After repurchasing $1.7 billion of shares in 2024, we will repurchase at least $1.3 billion of shares in 2025 and will remain aggressive in repurchasing our stock at what we believe is very attractive pricing. Through today's call, we have repurchased $290 million worth of shares year to date. 2025 CapEx is expected to be slightly below DNA in the range of $600 million. We anticipate being able to deliver on our target of comparable net earnings equal to adjusted free cash flow in 2025. Relative to the estimated tax payments due on the aerospace sale, we now expect total payments to be $875 million. We paid a total of $766 million as of the end of the fourth quarter and expect the remaining portion to be paid in the first half of 2025. Our 2025 full-year effective tax rate on comparable earnings is expected to be slightly above 22%, largely driven by lower year-over-year tax credits. Full-year 2025 interest expense is expected to be in the range of $270 million. Full-year 2025 reported adjusted corporate undistributed costs recorded in other nonreportable as expected to be in the range of $160 million, driven higher by lower interest income from the cash proceeds of the aerospace sale. And last week, Ball's board authorized the repurchase by the company of $4 billion of our common stock through the end of 2027, as well as declared its quarterly cash dividend. Looking ahead to 2025, we are hyper-focused on operational excellence, cost management, driving efficiency and productivity across our business, and monitoring emerging marketing volatility. We are fully committed to maximizing the potential of our company over the long term. We have executed on de-risking the corporation through debt retirement, and we have minimal near-term maturities. The runway is clear for us to activate near-term initiatives to consistently deliver high-quality results and generate compounding shareholder returns. With that, I'll turn it back to Dan.

Thanks, Howard. The business is operating well, and we have future-proofed our business through long-term contract renewals, deleveraging, and footprint optimization. Through the strength of our portfolio and the unwavering dedication of our employees, we are confident we will deliver on our long-term financial goals of exceeding 10% comparable diluted EPS growth. generating adjusted free cash flow in line with our comparable net earnings, and returning value to shareholders through large-scale share repurchase and dividends. The focus on executing our purpose and our promise was certainly on display during 2024. In 2025, we have the opportunity to deliver record-adjusted free cash flow and comparable diluted earnings per share. We will continue to meet our customers where they are to deliver affordable, innovative aluminum packaging solutions that can lead to a world free from waste. Shareholder value creation remains our focus, and we continue to prioritize delivering compounding shareholder returns in 2025 and beyond. We are confident that consistent delivery of high quality results and operational performance, coupled with a significant share repurchases for the foreseeable future, in addition to dividends, will drive shareholder value creation. We appreciate the work being done across the organization and extend our well wishes to our employees, customers, suppliers, stakeholders, and everyone listening today. Thank you. And with that, Christine, we are ready for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of George Stappos with Bank of America. Please proceed with your question.

Thank you. Hi, everyone. Good morning. Thanks for the details, guys. I guess first question, recognizing there's been delays, to what extent extent have you been able to determine the effect of tariffs and what that might have relative to the guidance that you're providing, either in terms of volume and or supply chain on aluminum? You know, for instance, you know, if there is some impact on Mexican shipments, might that be made up in North America or not? And then I had a couple of quick follow-ons.

Yeah, George, great question. I'm on a call every single day and the details obviously are changing relative to tariffs. I think maybe start with what is imminent is what's happening to the aluminum supply chain in China. And we have spent the better part of the last few weeks mitigating what started as a potential $40 to $50 million issue, and I think we've got that resolved down to millions of dollars, a couple million dollars. So we've renegotiated deals with the supply base. We've enforced elements of our contract. A lot of that metal was going into South America, actually, because a lot of these supply chain Metal supply chains have been altered significantly back in the 15 and 16 time frames. So that one, you can put that one to bed as it having minimal nominal year-over-year impact to us. But I think what you're highlighting is our concern would be, depending on the size of this or the piece coming across the border from Mexico, it would be really end consumer additional pressure there and volume. The good news is some of the stuff that comes across the border from Mexico is the growing aspect of your beer portfolio. Obviously, we've been in constant contact with some of those customers, and we've got plans in place to help risk mitigate, but if it's 25%, that's a vastly different story than a 10% versus a two and a half percent. And, um, the 25% to me would be more concerning just in terms of, uh, a pretty stressed end consumer. So I would be more concerned about the volume, uh, for that aspect of the portfolio, which is not that big for us, but you know, every bit counts these days relative to, uh, accumulating a, uh, a tailwind on growth. So, uh, Not a lot of detail for you. The stuff that I know in detail, we've worked, we've mitigated it. The other stuff is still in flight. The 25% number would be more concerning, and it would be more concerning relative to end consumer demand, which would certainly dampen our current outlook.

That's clear, Dan. Thank you for that. Yep. And the other question, and it's a two-parter question, Can you talk about – I'll try to make it painless. Can you talk a little bit about how these investments you talked about, including the Florida can business, might affect your earnings and or volumes? In other words, would you have been comfortable with the growth outlook you gave if you weren't making these investments, or do you need these to get there? And then just – You know, look, having covered the company for a while, like a lot of folks on this call, the last few years, ball's been very busy. But at times, sort of getting to the bottom line, the investments, the activity has not been necessarily as you would have expected. And so what comfort would you give analysts and investors that you can manage another can plant, you can manage this investment, and at the same time execute and get to the bottom line to hit your goals. Thanks, guys, and good luck in the quarter.

Yeah, thanks. I think if I'm following that train, Elijah, I would just say that I guess over the last couple years in North America, we've significantly outperformed on earnings. So I guess I'm struggling with

some parts of the question, but I'll answer this in terms of... I mean, going back to the, you know, the camp plant additions from, you know, the growth boom and how that came through in terms of earnings. That's where I was going with that. I'm sorry about that. And clearly, you definitely did get great operating leverage the last couple of years. But that's where I was going with that part of the question.

Yeah, well, the investments have more than paid for themselves by restructuring aged assets that were less productive. So all of that, I mean... If you look at that, it's actually worked out pretty well. The two investments that we have, one, I've said repeatedly that we didn't want to abandon the Northwest Marketplace permanently, so that one shouldn't come as a surprise. It's in line with investments by our customer in that part of the world, so it's repositioning that footprint to be more closely aligned to their investments, so that should work well moving forward. It's a lot of thought in that application of investment there. And then picking up a significantly reduced price point on a great plant that's nearby an existing Tampa facility in a market that's growing. We're going to really like that in 2026 and beyond.

I think, George, maybe just one thing to add is that that Northwest investment that Dan's talking about, that would still be within our envelope of CapEx that we've described. And so our CapEx in 2025 will be below DNA, and despite that investment in the Northwest. And so I wanted to make that clear as well.

Okay. And do you need these to hit your goals, or these would have been additive to the goals you gave? Thanks, guys.

Additive in 26.

Okay. Thank you very much, guys.

Our next question comes from the line of Phil Eng with Jefferies. Please proceed with your question.

Hey, guys. Volumes in North America has been anything but predictable. It's been weaker. But you sounded pretty confident North America will grow faster in the market and faster than your longer-term target. So I guess first out of the gates, what are you seeing? And then you called out you know, contract renewal with one of your larger customers in North America, which is Greg, gives you visibility into the out years. Did you pick up any volumes and, you know, how should we think about pricing for those contracts that you guys renew?

Yeah, I would say 2025, let me start with that piece. I think the industry is expecting kind of that 1%-ish growth rate. For us, obviously, we were lapping 2023, pretty significant marketing dislocation. And then last year, we had a sizable share reallocation on one of our major beer partners. So we're stable heading into this year, some incremental volume pickups. And it's going to boil down to health of the end consumer. Are you with the right customers, with the right partners from a mixed perspective? So I believe we are. So that's why I'm more bullish, that will tick a little north of how the market performs. And then relative to pricing, fairly stable in the out years relative to the large customer contract that we picked up. Some of that, obviously, when you're making investments on behalf of those customers, you're able to offer a different value proposition. That's created some structure and some stabilization for us relative to that customer.

Any share gains and volumes picked up as part of that investment?

We believe that we've picked up – I would characterize it this way. I think where we have secured volume, we believe that'll be – it'll be growing at a faster rate than their portfolio, given some of the pressure, for instance, in the Northwest on some anti-plastic sentiment. Okay, super.

And then when I think about, Dan, how you've historically been aligned globally and certainly North America as well, you guys have been aligned with the big brands, big customers. And when I think about North America, frankly, there's been a lot of innovation in the beverage industry, you know, and a lot of that's actually coming from smaller brands and entrepreneurs, whether it's you know, ready to drink cocktails, non-alcoholic beers, and actually non-alcoholic beverages on that ready to drink side, functional soda and stuff of that nature. So my question to you is, how is your growth to market strategy perhaps evolving? Are you going after some of these customers in a bigger way just because, you know, demand's been pretty muted in North America and the big concern's been, you know, is this a structural dynamic you can't grow out of? So how is your go-to-market strategy evolving? pivoting in an evolving marketplace where there's still a lot of innovation out there.

No, I think that's a great comment, Phil. Historically, we're kind of with everybody in the marketplace. Our portfolio is exponentially larger than any of our competitors in terms of the customer and the category mix. We've got a pretty healthy balance across everything. It's interesting. You commented on ready-to-drink cocktails. So one of our bigger customers actually acquired the brand that owns 40% of the ready-to-drink cocktail market. So these two things generally, if they're really successful, innovative launches, they typically get acquired. So you have to play, candidly have to play kind of who are the acquirers, who are the innovators. You kind of start there with your anchor investors and then you work both sides of the equation to help stimulate product launches. And so the poppies of the world, the liquid deaths, it's like they're large in our portfolio. But it's hard to, if Coke is growing and ABI is growing and the large customers are growing, we're going to grow. If they're not growing, you can have all of the startups in the world and you're just not going to move the needle on the size of volume. So there's definitely a balance. I don't think we've moved away from innovation, driving sustainability, and helping the smaller innovation-driven brands and customers in the marketplace. But at the same time, you know, you've got to help make sure that your key partners are winning in the market, and that's really how you're going to win. Okay, Dan, really appreciate you calling. Yeah, thank you, Phil.

Our next question comes from the line of Gansham Punjabi with Baird. Please proceed with your question.

Hey guys, good morning. You know, Dan, going back to the analyst day from June of last year where you spent a fair amount of time on some of the productivity initiatives that were going to unfold over a multi-year basis, largely in North America. And to put that in, you know, just kind of given what you've done or have announced with Oregon and also the acquisition in Florida, does that allow you the opportunity, a bigger opportunity as it relates to reconfiguration of your footprint and and to re-accelerate that productivity because it's not like volumes are growing faster in the industry relative to those two additions.

Gotcha. I think once these are in place, yes, you'll be able to pick up efficiencies. We didn't vacate demand, for instance, in the Northwest, so you're shipping in that demand. So that will be a benefit, right, in terms of delivered cost. And then it's – We're acquiring an incredibly efficient asset base down in Florida that we can do some things relative to running different can sizes and then becoming more efficient on lines within that sub-region. So we just closed a deal today, so we've got some ideas on what we're going to do, but we're going to have to get in there and do that. But, yes, that will – anytime – you've got incredibly efficient assets, well-run assets that gives you opportunity to be more flexible in a system of our size.

Okay, perfect. And then as it relates to Europe, obviously Europe was a very nice surprise, I would say, for the industry from a volume perspective last year. How are you thinking about 2025 as it relates to volume growth, tougher comparisons, and just the fact that it is Europe?

Yeah, well, as we sit here today, like we thought we'd be entering into, you know, 2023, fourth quarter, there was the destocking event that took place, which muted volume. Then everybody got off to a pretty good start in the first quarter. So I thought the comp would be a little bit more challenging this year, 25 versus 24, because of that sequencing of events. And we're off to a really good start there. So I think it's just, Listen, we've always talked about the opportunities that Europe presents because it's got the lowest can penetration. And as it evolves into a focus on carbon footprint, we've got a great product for that. It's a glass-rich environment in Europe, as you know. And I think the health of the end consumer, to some extent, is a little more balanced in terms of our customer's not necessarily being able to put through price at the same rate with the same veracity that they're able to in North America. And as a result of that, I think it's a really stable environment for continued growth. And we're fortunate that we put in place a couple of large assets there to grow into, and we're continuing to grow into those. So I think we'll be at the high end of our long-term guidance for Europe again this year.

Thanks so much.

Our next question comes from the line of Stefan Diaz with Morgan Stanley. Please proceed with your question.

Hi, everybody. Thanks for taking my question. Maybe first, going back to North America, do you need to see low single-digit volume growth to be able to hit your EPS guide? Or can we sort of have like a flat-to-down environment in 2025 and still grow earnings just considering the shares you're buying back? Or maybe is it just as simple as if you grow 2% to 3% globally, you should be able to hit your EPS guide?

Yeah, I'd say for a negative print on volume that looks like what we did this year, I think we'll be very challenged to hit EPS target, even with share buyback at a more aggressive rate. A flattish offset by maybe a little bit more growth in Europe, I think is probably a good recipe to deliver the range we outlined. But, yeah, we're getting to a point where you're going to need some growth in North America. It's not only the profitability associated with the volume growth. It's also really hard to offset negative volume with productivity gains. You know, at some point, we're a volume business. We've done a lot of heavy lifting and done some tremendous things to increase the level of profitability in North America. But you'll start running into a bit more of a challenged environment relative to North America. And then you'll have to rely more on mix and some other things to steer you to a heavier profitability lift there. But yeah, I'm feeling really good where we're at right now starting the year. Things are pointing in the right direction with the strength of Europe. in the event that things don't materialize in the growth in North America, but certainly growth is going to, at some point, be an important cog, if not necessary, to expand margins.

Okay, perfect. No, that's really helpful. And then, so the last couple calls now, you noted a supply-demand mismatch in Brazil. So I guess maybe how are your inventory levels in the region changing? And maybe how is demand shaken out versus your expectations so far quarter to date? And then maybe if you could also just parse out Brazil volumes in the quarter versus Argentina volumes, just so it's easier for us to compare versus your competitors. Thanks.

Sure. So Brazil grew in the fourth quarter. We didn't. I would say we entered into – we're managing – Certainly the downturn in Argentina, aggressively, from a cost perspective, in the second and third quarter. We were doing the same thing in Chile, which has been soft and has declined for the last two or three years. And then Brazil was kind of low single-digit growth for the first two quarters. And we also were running a much tighter capacity outlook within our network there. And then suddenly it got real hot at the end of Q3. So we entered, we were tight and running short on inventory positions at the end of Q3. We started turning on a curtail mine in Argentina, a curtail mine in Chile. multiple curtailed mines in Brazil and as we said in the opening we're turning back on a curtailed plant but that's just taking longer than we anticipated so we'll return to growth in q1 and we'll grow in excess of our long-term outlook next year because we're seeing recovery in Chile we're seeing recovery in Argentina we'll be fit to serve Brazil, and we'll be coming off in much easier comp, obviously, in Q3 and Q4, 25 versus 24. Great. Thank you.

I'll turn it over. Thank you.

Our next question comes from a line of Anthony Pettinari with Citi. Please proceed with your question.

Good morning. Good morning. You know, in previous quarters, you know, you've kind of been able to grow EBIT year over year without much volume growth. And, you know, I guess that changed in 4Q. I'm just wondering, did you, I don't know, lap any, you know, key cost saves or were there any kind of PPI pass-throughs or change in price mix? I guess maybe you lapped the wall kill plant closure. But I'm just curious if there was anything that kind of drove that leverage.

Yeah, I think you're talking specifically about North America. Yeah, we've done, listen, we're running to historical asset utilization rates now. So we've done kind of the heavy lifting over the last couple years. So we've lapped that. So in many respects, what you're describing is, yes, we're going to have to get a little bit of growth. I think The new investments that we're making will also give us an opportunity to create an even more efficient supply chain with the Florida can investment in particular. So there are things that we can do now that we have that asset in the portfolio. But yeah, we're tight. And we're also obviously shipping products, as I indicated to an earlier question, into the Northwest. So there's inefficiency relative to that. that will last once we get the new facility up in Oregon. So there's opportunities there to do some more and gain productivity, but turning on curtailed lines and running them is going to be the most efficient way to lever up margin-wise.

Got it, got it. And then can you maybe talk about operating rates or sort of system utilization in Europe? I guess volume growth has probably been you know, ahead of other regions, but I don't think you've added a lot of capacity in recent years. I'm just wondering if there's anything kind of in the CapEx plan for 25, 26 for Europe or opportunities for de-bottlenecking or new lines or anything like that.

Yeah, we have, I guess over the last two to three years, we've added two huge facilities, one in the UK and one in the Czech Republic. Uh, so we've been, those will both be four line plants, um, by the end of next year. So we have done some incremental line enhancements and investments, and that's been able to lift us. It's actually getting quite tight all throughout Europe right now. There's a lack of capacity to meet the demand in the UK, so we're looking at things there. But, yeah, if these growth rates continue, I mean, that's a big market growing at 3%, 4%, 5%. So that's going to require probably, think about 27%, 28% to be doing other things in that part of the world.

Got it.

Got it.

I'll turn it over. Thank you.

Our next question comes from the line of Mike Roxland with Truist. Please proceed with your question.

Thank you, Dan, Howard, and Brandon for taking my questions.

You bet.

Just wanted to talk to you about the competitive backdrop. There have been some concerns out there, in North America anyway, that pricing could be a risk later this year, early next year when some big contracts come up for renewal. Obviously, Dan, you addressed one of them. As you mentioned, you got that extended to the end of the next decade. Or this decade, excuse me, I should say. But just trying to get a sense from you as to what the competitive environment is like, particularly given softer demand, maybe some competitors looking to gain share. And I think in a recent conference, you also called out the Midwest in particular as being so much challenge. So any call you could provide would be very helpful.

Yeah, I think I've been pretty consistent on this, Michael, as you know. When you look at the number of facilities that were built, there was, quite a few facilities built in the upper Midwest, northern Kentucky region. And the demand growth has really been on the coast, in the southeast, in Texas. So there are reasons for those builds. I think there were a lot of subsidies that went into those builds. But they're not necessarily positioned for the demand profile moving forward. With that said, we're tight. We've structured our asset base in a way that has enabled us to be tight, but also be very close with our strategic partners to make sure that we're doing the right things for them, medium and long term. That was rewarded in the contract renewal. Relatively speaking, the pricing that we're seeing is better than the past 20 years minus the pricing that we were securing during a massively undersupplied marketplace. So they're really healthy margins to make money and flow cash and manage. They could potentially not be as good as what we were looking at three years ago. I'm talking about incremental differences, not you know, meaningful differences. But I think we're, we're happy with what we're securing at the prices we're securing. And we think we can grow and expand margins based on that and, and flow really nice cash.

Got it. No, I appreciate it. Thank you for that. One quick follow up, just in terms of beer, obviously category is still lagging. It's still trying to figure out the SKU, the SKU is the mix, how to target both premium and discount without getting stuck in the middle of How far along do you think the beer companies are in this process? And I'll throw it out there. When do you expect beer demand to inflect higher? Any sense when that could ultimately turn?

You know, honestly, I don't know the inflection. I would expect it would be very aggressive behavior here in the peak season coming up in North America. You're starting to see I even saw one of our customers today in a non-alcohol range there. The pricing is not enough to grow the top line. So I think once they start hitting these price elasticity curves where they cannot grow the top line, I think behavioral patterns will change. I think some of the plans I've seen, I'm encouraged. I really do think it's going to be what customer and what partner you have is going to matter. Obviously, some of the folks that had really nice growth trajectory, they're dealing with tariffs right now, and they're dealing with how they make sense out of that. I think that'll continue to grow medium and long term because of the relationship they have with the population growth that prefers those products. And then others, I think, are going to get more focused on their portfolio. There's going to be some new innovation that comes out. And the folks that have struck a nice balance between being a beverage company and being a beer company, those are the ones that I believe will win medium and long term. And I think we have an overweight to them. That's a great question. When are we going to see it? And the end consumer is obviously still weak. You're in the dry January portion of the year. So no surprises here that you see softness in the beer side right now. Things start to pick up here. Right now with Super Bowl week and then beyond that, heading into spring break, weather patterns, that'll all be important to see pricing behaviors and hopefully a return to volume growth being the principal driver of their economic decisions.

Got it. Thanks very much for the call. Good luck in 25.

Thank you.

Our next question comes from the line of Mike Leehead with Barclays. Please proceed with your question.

Great. Thank you. Good morning, guys. Good morning. I have two semi-related questions. Sure. Howard, just a quick housekeeping. I think the release dates you plan to deconsolidate CUPS starting in 2025, I think in the past you've talked about that being about a $40 million drag. So is that a $40 million earnings tailwind as we think about 25 year over year?

Yeah, Mike, I think it depends on when we're able to get to a full agreement here as it relates to the joint venture structure. As it is today, you know, those losses associated with CUPS is still flowing through right now in the quarter. And so timing matters here. If we assume that, you know, we had talked about $40 million historically and we go through the first quarter, get this transaction done, then it's probably somewhere around the $25 million that we'd see improvement year over year.

Okay, that's great. And then second, on the share repurchase, if I do the math, it's about $1.3 billion, I believe, of repurchases this year, which today is about 8.5% of the company. So is cups and buybacks the largest drivers of the 10% year-over-year EPS growth? Or just how should we think about core beverage can earnings growth compared to 24%?

I mean, I think we're going to see some. Obviously, operating earnings growth is going to matter. When we talked about the ALGO, certainly Dan's talked about the North America piece and maybe a little bit of challenges there. But we feel very good about our growth profile, both in terms of volume and the leverage associated with operating earnings in EMEA, as well as in South America. We're bullish on Argentina and the green shoots that we're seeing there. The macros certainly are going to improve. And so I think that there's no reason to believe that we're not going to be able to achieve that healthy algo in that region as well. And then, as you said, I mean, we are going to have a significant amount of share buyback and the like. One thing to keep in mind is that, you know, we will see less interest income this year because with the proceeds associated with the aerospace sale, we had over $42 million of interest income that won't repeat year over year.

Got it. Thank you, guys.

Yep.

Our next question comes from the line of Edlin Rodriguez with Mizuho. Please proceed with your question.

Thank you. Good morning, guys. I mean, big picture question then. I mean, in terms of, you know, now you have questions that whether beer or alcoholic drinks might be bad for your health. I think somebody has said, you know, it's probably cancerous or dangerous for you. So at the margin, this will make some people think twice about drinking alcohol, beer included. So of all the things that you think about that keeps you awake at night, is this one of them? Should this be one of them? Any thoughts that would be appreciated?

You're probably asking the wrong guy because I enjoy my alcohol.

You and me both.

Yeah, yeah. I really don't. I think we've known it's probably not, at moderation, everything. I mean, I don't want to go down this path with you, but the thing that keeps me up at night right now is the health of the end consumer in North America. That's what keeps me up at night. All of this other stuff is noise. And that's what I'm hearing from our customers as well. So until which time I can sift through a return to some normal spending patterns by the end consumers, this stuff is really – it's on the radar as it should be, but it's not – we're not losing sleep over this. This is not going to, in the next three to five years, create a challenge for us. In fact, you're counting on beer growth everywhere else in the world. I mean, if beer doesn't grow, then we're not growing in the can. So it doesn't seem to be a concern in other parts of the world, but it seems to be a focus of a lot of conversation in North America. So it's dislocated in that sense. But, yeah, I wish I had a better answer for you.

No, that's good enough. Yeah. Just a follow-up in terms of the share buyback. I mean, of course, the share price has come down quite a bit over the past couple of weeks, months. What are you thinking in terms of the pace of the share buyback? Should we be thinking more aggressive in the near term or just going to be more disciplined, systematic throughout the year?

Edwin, I think... You've seen our behavior here, and I think I indicated even earlier that we bought back $290 million worth of shares in a month plus. So the answer to your question is yes. We see this as an opportunity for us to be overly aggressive, perhaps, and with the value of this stock, we're going to lean into that here in the short term, certainly recognizing that we'll likely exceed the $1.3 billion worth of shares here in 2025.

Okay, perfect. Thank you very much.

Yep.

Our next question comes from the line of Chris Parkinson with Wolf Research. Please proceed with your question.

Great. Thank you so much. Can you just give us a little bit more color since you went over the beer thesis on what you're seeing in energy markets in particular in both the U.S. and Europe? There's been a lot of noise over the last six to 12 months, so just hoping to hear kind of the best updates there as well. Thank you.

Yeah, I think Europe's probably pretty easy. Our Europe energy portfolio is growing at high mid single digits so and that has continued to perform that way for the last five six seven years so not a lot of change on that front I think in North America there are tears to the energy drink classification One product, I think one of the larger products, it's definitely tied to Hispanic population, the construction industry, and so interest rates matter to that particular product. Others have different effects. The end consumer, though, matters. Nowhere we're seeing kind of right out of the gate is more aggressive pricing, and we're seeing growth through January in the energy segment. So I think they're in a place where they have a lot more price, I think, to work with relative to their products to push for growth in some instances, and I think you're going to see that. A much more competitive baseline to grow volume and grow share, which is good. I haven't seen the same behavioral pattern in beer. But energy looks to be an area where I think you'll have return to growth and 2025 in North America. And it'll maintain growth at similar rates in Europe.

Got it. And just in terms of the longer term, South America now, let's put Argentina aside for a second. There's been a lot going on, once again, in terms of, let's say, industry bankruptcies to a few rainy carnivals post-COVID, all that stuff. When you take a stance right here, right now, heading into 2025, You know, how much confidence do you have in that growth rate, at least in Brazil, and, you know, forecasting that, you know, aluminum should still be the primary substrate winner versus glass and everything else? Just any comments there would be also very helpful. Thank you.

Yeah, we believe that there'll be growth in Brazil. It'll be in the kind of 2%, 3%, 4% range next year. But for us, we'll grow in excess of 4% to 6% because Chile has returned to growth Paraguay is growing at double digits. Argentina is returning and inflecting the growth. So we've got some, where we had unfavorable comps this year, we'll have favorable comps next year in those economies. And Brazil will actually grow at a slower rate than we will because of our portfolio. But we believe Brazil will grow. But to your point, it's probably a little bit more muted than what you saw this year.

Thank you.

You bet. We'll do one more question, Christine.

Our final question comes from a line of Arun Viswanathan with RBC. Please proceed with your question.

Great. Thanks for taking my question. I hope you guys are well. Maybe I could just get first your thoughts around these two beverage can plant acquisitions. Could you provide maybe your thoughts on ROIC or kind of payback period, if there's any synergies, what can those two kind of add to your, you know, kind of outlook over the next, say, two to three years, maybe from an EBITDA standpoint, if at all, or free cash flow? Thanks.

Yeah, I think the – so we're only acquiring one. The other one would just be a new facility. So we'd begin in growth, volume growth that – we can't serve today in the upper, excuse me, in the northwest, and then we'd be positioning the supply closer to the customer. So, probably 20 million bucks additionally a year, back half of 26, most likely beginning of 27, and then we'll hit a 25 to 35 million dollar EBITDA run rate in, the beginning of 27 for the Florida can acquisition. So about a four year to generate positive EVA.

That's great. Thanks Dan. And then just back to the beer question. So it sounds like, you know, there is a, I mean, I can appreciate the large customers of yours could, could acquire some, some some nice growing properties, but what are they going to, what is it really going to take for them to accelerate beer? Because, you know, as you said earlier and throughout the call that, you know, that, you know, if you're not growing beer globally, it's, it's, uh, it's going to be difficult and especially in North America. So, you know, is it something where, you know, they can take a leadership position within the category? Was that done in CSD? Is it going to require some new beverage development or what do you think? And what are you hearing from them as far as ways to really energize that growth profile?

Yeah, in beer specifically. So I guess there's beer, beer volume writ large, and there's beer in cans. So I still like our ability to move the substrate needle over time in the baseline. And we've been growing in beer for a decade plus. So a lot of it has to do with substrate. But then when you look at portfolios, there's certainly been a disaggregation from – having too many, too large of a portfolio. So really moving to a more efficient delivery of brands that they believe are going to win with an affordability lens on that. And so we're helping to make sure that we have a more strategic supply chain. But if you look at the largest brewer in the world, I mean, their portfolio, they have the largest ready to drink cocktail. They have the fastest growing domestic light beer. So there are, I think you really have to look within these portfolios, what they're doing, what they're going to do, and do you believe in that trajectory and how can you help play a role in that. So I think innovation matters. I think you'll see an investment in a lot more non-alcohol Moving forward. It's not going to be a surprise to see that But when you find a winner, I think and it might be I just look at I look at these traditional beer players as Beverage companies And they've got to get that right because they own the distribution patterns. They own the shelf space to a large extent And so they got to put things on those shelves that are going to sell And there's a greater likelihood that it's going to be in a can than any other format. And so that's sort of how we're thinking about it. But the beer question, I think that's the right question. But does it have to be beer? Thanks. Thanks, Christine. We will leave it there and look forward to talking to you again here at the end of the first quarter. Hope everybody stays safe and healthy.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.