CROWN HOLDINGS, INC. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Strong Start: Crown had a strong first quarter with year-on-year improvements in segment income, adjusted EBITDA, and free cash flow. Segment income was $398 million, up from $308 million prior year.
• Beverage Cans Execution: Americas Beverage saw 25% income improvement with higher volumes in North America and Brazil. European Beverage volumes up 5% with segment income up over 30% due to substrate shift. Asia Pacific Beverage income up 12% from revenue quality and cost programs.
• Shareholder Returns: Returned $233 million to shareholders in Q1 2025, including $203 million in share repurchases.
• Operational Excellence: Outstanding manufacturing performance globally, including benefits from Asian Capacity Optimization program. North American Food volumes up 16% from vegetable and pet food demand.
• Sustainability Focus: Work on recycling and meeting EPR requirements in Europe, aiming for 90% recycled content collection.

Segment Performance

• Beverage Cans:
  • Americas Beverage: 25% income improvement, North American volumes up 2%, Brazil up 11%, high utilization rates. Revenue contribution from Americas Beverage was significant due to strong volumes and inventory building for summer.
  • European Beverage: Volumes up 5%, segment income up over 30%, conversion to aluminum cans accelerating, leading to tight supply in summer. Revenue contribution from European Beverage grew due to volume and substrate shift.
  • Asia Pacific Beverage: Income up 12%, benefits from revenue quality efforts and cost reduction programs, but sensitive to global trade tensions. Revenue contribution from Asia Pacific was bolstered by revenue quality and cost cuts but impacted by trade tensions.
• Transit Packaging: Down in first quarter due to subdued industrial demand, especially higher margin equipment and tools. Revenue contribution from transit was lower due to weak industrial activity.
• North American Food: Volumes up 16% due to increased demand from vegetable and pet food customers, improved manufacturing performance. Revenue contribution from North American Food grew significantly from pet food and vegetable demand.

Guidance

• Raised full-year adjusted EPS guidance to $6.70 to $7.10, with second quarter EPS projected in range $1.80 (vs prior $1.90).
• Adjusted earnings guidance includes net interest expense ~$360 million, exchange rates €108 to dollar, non-controlling interest expense $160 million, dividends to non-controlling interest ~$140 million.
• Full-year adjusted free cash flow expected ~$800 million after $450 million capital spending.
• Net leverage expected ~2.5 times by end of 2025.
• Guidance reflects consideration of tariff impacts and market uncertainties.

Risks

• Potential impact of tariffs, including slowdown in consumer industrial activities and indirect impacts on markets like Mexico and Southeast Asia due to inflation and demand concerns.
• Transit business sensitivity to tariffs and industrial demand, with potential exposure to tariffs below $30 million total.
• Global trade tensions creating uncertainty in consumer demand, especially in regions sensitive to economic fluctuations.

Question and Answer

Q: George Staphos asks about customer behavior ahead of seasonal peak and pre-buying due to tariffs.

A: Timothy Donahue discusses no significant pre-buy in beverage, some in food due to steel tariffs from European suppliers.

Q: Phil Ng inquires about North America performance and transit side.

A: Timothy Donahue talks about North America performance in line with market, and transit quoting high but orders slower due to uncertain capital budgets.

Q: Ghansham Panjabi asks about Americas Beverage profitability and summer selling season confidence.

A: Timothy Donahue attributes Americas Beverage profit to incremental volume and running well, and confidence in summer selling due to high demand but cautious on linearizing Q1 trends.

Q: Stefan Diaz asks about share repurchases and FX impact.

A: Kevin Clothier states share repurchases expected ~$300 million, and FX assumptions revised to €108 to dollar with FX gains factored in.

Q: Arun Viswanathan questions guidance and free cash flow.

A: Timothy Donahue explains guidance considers tariff uncertainties and multiple ways to view the forecast, and free cash flow expected not to be below $800 million.