Crown Holdings, Inc.

Good morning and welcome to Crown Holdings' first quarter 2025 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. Kevin Cloutier, Senior Vice President and Chief Financial Officer. Sir, you may begin.

Thank you, Elle, 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 released, It's available on our website at crowncourt.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 2024 and subsequent filings. Earnings for the quarter were $1.65 per share compared to $0.56 per share in the prior year quarter. Adjusted earnings per share were $1.67 compared to $1.02 in the prior year quarter. Net sales in the quarter were up 3.7 percent compared to the prior year quarter, reflecting a 1 percent increase in global beverage can volumes 16 percent increase in North American food can volumes, the pass-through of higher raw material costs partially offset by lower volumes in transit packaging. Segment income was $398 million in the quarter, compared to $308 million in the prior year, reflecting higher beverage can volumes in Americas and European beverage, increased volumes in North American food, and improved manufacturing performance in the beverage businesses. The company returned $233 million to shareholders in the first quarter of 2025, including $203 million of share repurchases, after returning $336 million in the full year of 2024. The company had a strong first quarter, with year-on-year improvements in segment income, adjusted EBITDA, and free cash flow. As we look forward, the potential impact of tariffs creates a wide range of possibilities. including potential slowdown in consumer industrial activities. With all this in mind, we're raising our guidance for the full year adjusted EPS to $6.70 to $7.10 and project the second quarter EPS to be in the range of $1.80 compared to $1.90. Our adjusted earnings guidance for the full year includes modest changes in certain assumptions, We now expect net interest expense to be approximately 360 million. Exchange rates assume a euro of 108 to the dollar, non-controlling interest expense to be 160 million, and dividends to non-controlling interest are expected to be approximately 140 million. Remaining unchanged are assumptions for a full-year tax rate of approximately 25 percent and depreciation of approximately 310 million. Also unchanged, we currently, estimate 2025 full-year adjusted free cash flow to be approximately $800 million after $450 million of capital spending. And at the end of 2025, we expect net leverage to be approximately two and a half times. With that, I'll turn the call over to Tim.

Thank you, Kevin. As always, a sea of numbers. Good morning to everyone. As reflected in last night's earnings release, and as Kevin just summarized, Crown got off to a tremendous start in 2025 with segment income up 29% over the prior year. First quarter beverage can segment income improved 24% over the prior year, led by higher than expected shipments in the Americas and Europe. Outstanding manufacturing performance globally, including some additional benefits from the prior year's Asian capacity growth. Optimization program also contributed to the excellent results. In total, earnings per share were significantly ahead of last year, reflecting a quarter in which we executed very well. America's beverage reported a 25% income improvement over a very strong first quarter last year. This was led by higher than expected quarterly volumes in North America and Brazil, up 2% and 11% respectively. The segment also benefited from high utilization rates as we build inventory for what looks to be a strong summer selling season and a tightening supply situation. With little direct tariff impact in this business, we'll keep an eye on consumer demand as the segment strives to achieve income of $1 billion. European beverage volumes improved 5%, with growth noted throughout Eastern and Southern Europe and the Gulf states, leading to a more than 30% increase in segment income in the quarter. The conversion to the aluminum beverage can from other substrates continues and almost feels as if it is accelerating, leading to what we expect will be a very tight supply situation for the segment in the summer as well. Again, we expect very little direct tariff impact to this business. Income in Asia Pacific advanced 12% in the quarter, reflecting two important items. the continuing benefits of our efforts to improve revenue quality, and our ongoing cost reduction programs. These offset the volume impact from the closure of an underutilized regional facility. We do expect the Asia Pacific region to be more sensitive to current global trade tensions, so we continue to watch consumer demand there closely. As expected, transit performance was down in the first quarter. As subdued industrial demand continues, most notably impacting the higher margin equipment and tools business. In our view, the transit business is the business that could be most affected by tariffs, both directly and indirectly. For 2025, we have estimated Crown's potential income exposure to be below $30 million in total, below $10 million of direct exposure, and the indirect exposure, that is lower spending by our customers given uncertainties in the business environment, to be below 20 million. It is important to note that these are just rough estimates at this time and only our best effort to estimate the range of risk that may or may not occur. These estimates are included in the revised guidance shown in last night's earnings release. First quarter volumes of North American food advanced 16% on the back of increased demand from vegetable and pet food customers. When combined with improving two-piece food can manufacturing performance and a flatter tin plate steel environment in 2025, income and other increased $21 million in the quarter. Reflecting on the first quarter, the beverage can businesses are off to a very good start with the momentum carrying through to the end of April. On a global business, we continue to generate improving margins, necessary in our view considering the amount of capital and manufacturing know-how required to efficiently run beverage can lines at high speeds. Both 2023 and 2024 were record EBITDA performances for the company, and 2025 is poised to set another record. While the world may feel a bit uncertain, we are well positioned in our markets to And we are reminded in times like these that it is good to be in the can business. Operationally in the first quarter of 25 was outstanding. To summarize, segment income was up $90 million. Trailing 12 months EBITDA is now above $2 billion for the first time with EBITDA margins up 260 basis points in the quarter. A significant increase in North American food can volumes led by pet foods. Improved cash flow from operating activities now positive in the first quarter. and we returned more than $200 million to shareholders with minimal impact to our leverage versus year-end. Lastly, we want to thank our more than 23,000 associates globally for their hard work and dedication they display each day in supporting Crown's customers. As important, I want to congratulate the entire Crown family, as together we have surpassed $2 billion in EBITDA for the first time. And with that, Elle, I think we are now ready to take questions.