Crown Holdings, Inc.

Good morning and welcome to Crown Holdings' second quarter 2025 conference call. Your lines have been placed on a listen-only mode until the question and answer session. Please be advised that the conference is being recorded. I would now like to turn the call over to Mr. Kevin Cloutier, Senior Vice President and Chief Financial Officer. The story 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 release, It is 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 Form 10-K for 2024 and subsequent filings. Earnings for the quarter were $1.81 per share compared to $1.45 per share in the prior year quarter. Adjusted earnings per share were $2.15 compared to $1.81 in the prior year quarter. Net sales were up 3.6% compared to the prior year quarter, primarily reflecting 1% higher shipments in North American beverage, a 7% increase across European beverage, and a 5% increase in North American food can volumes, the pass-through of higher raw material costs, and the favorable foreign currency translation. Segment income was $476 million in the quarter compared to $437 million in the prior year, reflecting increased volumes noted previously and improved operations across the global manufacturing footprint. For the six months at June 30, free cash flow improved to $387 million from $178 million in the prior year, reflecting higher income and lower capital spending. The company returned $269 million to shareholders in the first six months. The company had a very strong quarter and first half, with record segment income, adjusted EBITDA, and free cash flow. We're mindful of the potential impacts of tariffs that tariffs may have on the consumer and industrial activity. Considering the strong first half and the potential impacts from tariffs, we're raising our guidance for the full year adjusted EPS to $7.10 a share to $7.50 a share and project a third quarter adjusted EBITDA to be in the range of $1.95 a share to $2.05 per share. Our adjusted earnings guidance for the full year includes the following assumptions. We expect net interest expense of approximately 360 million. Exchange rates assume the US dollar at an average of $1.10 to the Euro. Full year tax rate of 25%. Depreciation of approximately 310 million. Non-controlling interest to be approximately 160 million. Dividends to non-controlling interest are expected to be approximately $140 million. Our estimate for 2025 full-year adjusted free cash flow is now approximately $900 million after $450 million of capital spending. And at the end of 2025, we expect net leverage to be approximately 2.5 times. With that, I'll turn the call over to Tim.

Thank you, Kevin, and good morning to everyone. Some brief comments, and then we'll open the call to questions. As Kevin just summarized and as reflected in last night's earnings release, second quarter performance came in better than anticipated. Global beverage segment income advanced 9% in the quarter after a 21% improvement in the prior year second quarter. Strong global beverage and North American food results combined with lower capital expenditures resulted in a higher second quarter free cash flow. driving net leverage below the first quarter level. America's beverage reported a 10% increase in segment income, with shipment gains noted in both North America and Brazil. Shipments in North America advanced 1% as expected, following a 9% gain in the prior year's second quarter. While in Brazil, demand led to 2% growth after a 12% increase last year. Volume growth continues to compound, leading to high utilization across a well-performing plant network. And as stated previously, we expect little direct tariff impact to this business. Across European beverage, unit volumes advanced 6%, following 7% growth in the prior year, leading to another quarter of record income. Growth was noted throughout each region of the segment, that is, northern and southern Europe and also across the Gulf states. As in the Americas, we expect little direct tariff impact to the business. Income in Asia Pacific declined as Southeast Asian market volumes were down high single digits to the prior year. The impact of tariffs on various Asian industries ultimately impacting consumer confidence and buying power. Despite weekend markets, the business continues to operate well with income exceeding 19% to net sales in the quarter. Increased shipments of steel and plastic strap combined with savings from ongoing cost programs almost entirely offset the impact of lower shipments in the equipment and tools business. Segment income remained relatively flat to the prior year despite continuing soft industrial demand. And within the transit business, we still remain cautious as to the impact that tariffs may have and update the potential tariff effect as follows. The potential exposure is estimated to be approximately $25 million with direct and indirect exposures of approximately $10 million and $15 million, respectively. And these estimates are included in the revised guidance that Kevin has provided. North American food demand increased 9% in the second quarter, principally a result of exceptionally strong vegetable volumes. And when combined with better results in closures, income in the other segment improved by 150% in the quarter. In summary, we had another very strong quarter. Segment income improved 39 million, or 9%, and for the six months is up 129 million. Trailing 12 months EBITDA is now approaching $2.1 billion. Combined global beverage segment income was up 8% in the second quarter. North American food volumes, first led by pet foods in the first quarter and now vegetables in the second quarter, reflects the diversity of our food business. As Kevin provided to you, the adjusted earnings per share guidance range now sits 50 cents a share above the initial guidance that we provided, and free cash flow is now estimated at $900 million. The balance sheet is healthy, and it allows for continued return of cash to shareholders. Of course, none of this would be possible without the efforts of the entire Crown family, and we thank them for their dedication in fulfilling the company's mission of outstanding service to the brands we partner with. And with that, Elle, we are now ready to take questions.