Crown Holdings, Inc.

Thank you for standing by. The conference will begin shortly. Until such time, you will hear music. Thank you and please continue to hold. Thank you. Good morning and welcome to Crown Holdings' first quarter 2022 conference call. Your lines have been placed in a listen-only mode until the question and answer session. Please be advised that this conference is being recorded. I would now like to turn the call over to Mr. Kevin Cloutier, Senior Vice President and Chief Financial Officer. Sir, you may begin.

Thank you, Carrie, and good morning. With me on today's call is Tim Donohue, President and Chief Executive Officer of If you don't already have the earnings release, it is available on our website at crowncorp.com. On this call, as in the earnings release, we will be making a number of forward-looking statements. Actual results could vary materially from such statements. Additional information concerning factors that could cause actual results to vary is contained in the press release and in our SEC filings, including our Form 10-K for 2021 and subsequent filings. The company's recorded earnings in the quarter of $1.74 per share compared to earnings of $1.57 a share in the prior year quarter. Adjusted earnings per share increased to $2.01 in the quarter compared to $1.83 in 2021. Net sales in the quarter were up 23% from the prior year, primarily due to the pass-through of higher raw material costs and increased beverage can volumes. Segment income was $383 million in the quarter compared to $369 million in the prior year, primarily due to improved profitability in North American tin plate businesses and can-making equipment, including a net benefit of $30 million from lower-cost inventory, offset by the timing of insurance recovery for the incremental cost related to the Bowling Green tornado and 8 million of unfavorable foreign exchange. We have repurchased 400 million of Crown Commons stock to date from the $3 billion program that the Board authorized in December. While Brazil remains soft, we do expect volumes to begin to recover in Q2, and throughout the year. And when combined with the stronger US dollar and higher energy costs in Europe, we now project EBITDA to be $1,970,000,000 for the year, for the full year. Our estimate for adjusted earnings for the second quarter is in the range of $2 to $2.10 per share. And for the full year, we remain in the guided range of $8 to $8.20 per share. The full year estimate continues to assume all losses from Bowling Green will be recovered from the timely collection of insurance proceeds by year end. It assumes we repurchase additional $600 million of Crown common stock in 2022 and a cumulative $1 billion for the year. We continue to expect free cash flow to be $400 million with capital spending of $1 billion, and we maintain a target leverage ratio in the range of 3.25 times for 2022. With that, I will turn the call over to Tim.

Thank you, Kevin, and good morning to everyone. I'll be brief, and then we'll open the call to questions. As reflected in last night's release, And as Kevin just summarized, overall first quarter performance was better than expected, although compared to the prior year, results were mixed across the operating segments. Global beverage can volumes, up 1 percent in the quarter, reflect sold-out conditions in most markets and demand for beverage cans remaining in excess of our ability to supply, the exception being Brazil, where our unit sales declined by 20 percent in line with the market decline of 26%. Overall global volumes advanced by 6.5% in the quarter when excluding the Brazil market. We have summarized our major capacity expansion projects in the release with second quarter startups as follows. The second line in Monterrey, Mexico, began commercial shipments earlier this month, and the first line of the new Greenfield plant in Uberaba, Brazil, will begin shipping to customers next month. Reported revenues increased 23 percent in the first quarter, primarily due to the pass-through of inflated raw material costs. Comparatively, the cost of tinplate steel is almost double the prior year, while delivered aluminum is up approximately 75 percent on average in the first quarter of 2022. Recent strength in the U.S. dollar impacted segment income in the first quarter by $8 million, and by operating segment was as follows. both European beverage and transit, $3 million each, while Asia was $2 million. In America's beverage, like for like, North American unit volume growth was 6%, excluding the temporary loss of Bowling Green production capacity. Due to the temporary loss of Bowling Green, we carefully managed our capacity and inventory levels ahead of the busy summer selling season, reducing opportunities for further volume growth in the quarter. Demand remains strong in Mexico and Colombia, with unit volume growth of 4% limited by capacity. Low consumer confidence driven by high inflation and unemployment and the delay of Carnival led to significant first quarter softness in the Brazilian market. We do see volumes beginning to return early in the second quarter, and as Kevin noted, we expect further recovery as the year progresses. Segment income in the quarter reflects approximately $20 million in incremental system operating costs due to the Bowling Green tornado. We do expect to begin receiving insurance recoveries during the second quarter. With both lines at Bowling Green now back in operation and continued learning curve improvements on recently installed capacity, we expect second quarter income will exceed the prior year, offsetting Bowling Green insurance timing. Unit volumes in European beverage advanced 6% over the prior year with notable growth across Mediterranean operations and Saudi Arabia. Moving into the second quarter, we remain sold out and look forward to incremental 2023 capacity from recently announced projects in Spain and the UK. Income in the segment was better than forecast due to volume growth and mix. But as previously discussed, we do expect significant earnings headwinds in the segment during the second quarter and for the balance of the year. Beverage can volumes in Asia Pacific advanced 8% in the first quarter, as strong shipments across Southeast Asia offset the impact of COVID restrictions in China. Adjusting for currency, segment income in transit packaging declined $6 million in the quarter, primarily due to higher costs, including the impact of inflation and the carryover of higher priced year-end steel balances brought into 2022. Appropriate pricing actions have been taken, and we expect second quarter income in this segment will reflect that. As noted in the release, our North American tin plate and beverage can making equipment businesses had strong results in the first quarter. In North American food, we benefited from additional two-piece food can capacity installed in 2021, leading to 16% unit volume sales growth in self-made two-piece food cans in the first quarter of 2022. Additionally, pricing actions were taken to recover 2021 inflationary cost items, including the benefit of prior year-end inventory. So in summary, a solid start to the year with results mixed, but overall ahead of plan. Looking ahead to the second quarter, Bowling Green is now back up and running. Contractual recovery of inflation commenced on April 1st in North America. Pricing actions have been taken in transit to recover inflation, and we continue to expect global beverage can demand to remain strong. So with that, Kerry, I think we are now ready to take questions.