Crown Holdings, Inc.

Good morning and welcome to Crown Holdings' second quarter 2021 conference call. Your lines have been placed on a listen-only mode until the question and answer session. Please be advised that this conference is being recorded. I would now like to turn the call over to Mr. Thomas Kelly, Senior Vice President and Chief Financial Officer. Sir, you may begin.

Thank you, Harley, 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 crownfork.com. On this call, as in the earnings release, we will be making a number of forward-looking statements. Actual results could vary materially from such statements. Additional information concerning factors that could cause actual results to vary is contained in the press release and in our SEC filings, including in our Form 10-K for 2020 and subsequent filings. Earnings for the quarter were $0.95 per share compared to $0.94 in the prior year quarter. Adjusted earnings per share increased to $2.14 in the quarter compared to $1.33 in 2020. Net sales in the quarter were up 34% from the prior year, primarily due to increased volumes across all segments, payroll foreign currency translation, and the pass-through of higher material costs. Segment income improved to $395 million in the quarter, compared to $250 million in the prior year, primarily due to higher sales unit volumes, including recovery in many locations affected by COVID in last year's second quarter. As outlined in the release, we currently estimate third quarter 2021 adjusted earnings of between $1.90 and $2 per share. This estimate includes the results of the European tin plate operations through August 31st. We are increasing the midpoint of our full year adjusted earnings guidance from $6.70 per share to $7.35 per share. Again, assuming the sale of the European tin plate business closes at the end of August. Our expected adjusted tax rate for the full year remains at 24 to 25%. I'll now turn the call over to Tim.

Thank you, Tom. Good morning to everyone. And thank you for joining us this morning and our continued best wishes for the continued health and safety of you and your families. As reflected in last night's earnings release, the company recorded another strong quarter for the three months ended June 30th, 2021. And despite numerous transitory headwinds, such as supplier and transportation delays, COVID lockdowns and cost increases, Our global associates continue to rise to the challenge of supplying our customers with high-quality packaging products in a safe and timely manner. Demand remains strong across all product lines and geographies, and importantly, the company continues to convert this growth into record earnings. Average segment income from continuing operations over the last four quarters, or last 12 months, June 2021, is approximately $100 million per quarter higher than the average of the four preceding quarters, or LTM, June 2020, with approximately $60 million of that income growth found in the America's Beverage segment, clearly a step change in our earnings output. We look forward to commercializing significant new capacity in the second half of this year into next to take the next step change up. The results of the European SYNPLATE operations are now shown as discontinued. Had the business been included in continuing operations, LTM June EBITDA would have approximated $2.1 billion. Before reviewing the operating segments, we remind you that delivered aluminum in North America is approximately 65% higher today than at this time last year. LME and delivery premium are contractual pass-throughs. so reported beverage revenues reflect both the volume increase and the higher aluminum cost. As last year's second quarter was the so-called COVID quarter, we will also provide beverage growth percentages for the first half of 2021 versus the first half of 2019 to give a bit more information, perhaps relevance, related to our beverage can unit volume growth. In America's beverage, demand remains strong across all the markets we serve with overall segment volumes up 18% compared to the second quarter of 2020. First half 21 versus first half 19 volumes advanced 19%. As described previously, we expect demand will continue to outweigh supply for the foreseeable future. Commercial shipments from the first line of the company's new beverage can plant in Bowling Green, Kentucky commenced in June. with shipments from the second line scheduled to begin in September. The third line in Olympia, Washington, and the second line in Rio Verde, Brazil, are now scheduled for an early fourth quarter startup. As previously announced, the company will commercialize five new can lines in 2022. New two-line beverage can plants are being constructed in both Uberaba, Brazil, and Martinsville, Virginia, along with a second can line being installed in Monterrey, Mexico. Additionally, The company announces today that it will construct a new two-line beverage can plant in the southwestern United States with commercial shipments commencing late second quarter of 2023. Customer commitments have already been secured for the plant's production capacity. Unit volumes in European beverage advanced 28% over the prior year's second quarter and 14% for the first half compared to the first half of 2019. Income reflects contribution from the volume growth which was recorded throughout the segment. Asia Pacific recorded 15% volume growth in the quarter and 8% for the first half versus the first half of 2019, as most operations across Southeast Asia were able to grow despite numerous COVID lockdowns and movement control orders. We do expect both crown and customer operations to be subject to various and intermittent COVID lockdown measures throughout the balance of the year. Commissioning will commence at the new plant in Vung Tau, Vietnam in September, with customer shipments beginning in October. Results in transit packaging were significantly higher than last year and in line with our expectations, as strong demand for transit products and solutions mirrored the surge in overall industrial activity. The business did well to navigate transportation delays, cost increases, and supply shortages, and is well positioned for continued earnings growth as these conditions gradually ease. We expect earnings growth in the back half of the year to approximate first-half growth. Demand remained firm across North American food and aerosols, along with the beverage can equipment-making businesses. In summary, a record first half for the company, New capacity was commercialized during the quarter, and significant new capacity will be commissioned over the back half of the year. Importantly, we continue to convert growth into expanded earnings and cash flow. Segment income and adjusted earnings in the first half up 50% to 60% over the prior year, and leverage at 3.6 times after repurchasing $300 million of company common stock is ahead of plan. As Tom discussed, we have raised four-year guidance and the expected closing of the tin plate sale still remains in the third quarter. And with that, Harley, we are now ready to take questions. Thank you.