Q4 2024 Earnings Call Transcript

Greetings, and welcome to the Ball Corporation Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Brandon Potthoff, Director of Investor Relations. Thank you, sir. You may begin.

Thank you, Christine. Good morning, everyone. This is Ball Corporation's conference call regarding the company's fourth quarter 2024 results. The information provided during this call will contain forward-looking statements.

Actual results or outcomes may differ materially from those that may be expressed or implied. We assume no obligation to update any forward-looking statements made today. Some factors that could cause the results or outcomes to differ are described in the company's latest Form 10-K, our most recent earnings release and Form 8-K and other company SEC filings as well as company news releases. If you do not already have the earnings release, it is available on our website at ball.com.

Information regarding the use of non-GAAP financial measures may also be found in the notes section of today's earnings release. In addition, the release includes a summary of non-comparable items as well as a reconciliation comparable net earnings and diluted earnings per share calculations. References to net sales and comparable operating earnings in today's release and call do not include the company's former Aerospace business. Year-to-date net earnings attributable to the corporation and comparable net earnings do include the performance of the company's former Aerospace business through the sale date of February 16, 2024. I would now like to turn the call over to our CEO, Dan Fisher.

Thank you, Brandon. Today, I'm joined on our call by Howard Yu, EVP and CFO. I will provide some brief introductory remarks. Howard will discuss fourth quarter financial performance and key metrics for 2025 and then we will finish up with closing comments and Q&A.

Before I talk about the business and results, I want to highlight the amazing work our employees and teams have done to give back to their communities. In 2024, our employees volunteered more than 23,000 hours of their time across 23 countries and to more than 1,880 different causes and organizations, working to create a positive impact in the communities where we live and work. In partnership with the Ball Foundation and our dedicated employees we invested more than $4 million into our communities to support local causes and disaster relief efforts. I want to thank all of our employees who devoted time in 2024 to uplifting our communities.

You truly represent our values of we care, we work, we win. I also want to take a minute to highlight the work our teams have done to continue to improve our safety performance. Because our people are our most valuable resource, we set aggressive targets to improve our total recordable incident rates. We continue to be well below industry incident rates and our continuous improvement mindset requires us to constantly improve.

Through that mindset, we were able to decrease our 2024 incident rates versus 2023, and outperformed our goal for the year. For us, our safety metrics represent more than just numbers, they exemplify the health and well-being of our employees, and we will continue to do everything in our power to improve every year. Turning to business performance. We delivered solid fourth quarter results and returned $1.96 billion to shareholders via share repurchases and dividends in 2024. And we continue to execute on our goal of repurchasing at least $3 billion of shares between 2024 and 2025. Aluminum packaging continues to outperform other substrates across the globe.

In EMEA, fourth quarter volume remained strong, driven by continued investment by our customers in can filling across the region. In South America, volume growth in Chile and Paraguay was more than offset by softer-than-anticipated volume performance in our Argentina as well as supply/demand tightness in Brazil caused by slower-than-expected ramp of idle capacity. In North America, persistent economic pressure on the end consumer and our exposure to U.S. domestic beer led to softer-than-expected volume. Our regional performance culminated involves global beverage can shipments being down low single-digits year-over-year in the fourth quarter and up 1% in 2024. Looking to 2025, our Ball Business system is in place, and our teams are focused and excited about the opportunity that lies ahead of us to drive operational performance, volume growth, and productivity gains.

We are laser-focused on delivering on our stated goal of exceeding 10% comparable diluted earnings per share growth 2025 and beyond. As we begin 2025, we feel confident in our ability to deliver 11% to 14% comparable diluted EPS growth. We anticipate growing global volume in the 2% to 3% range and expect all of our businesses to grow in or above the ranges we laid out at our 2024 Investor Day. In EMEA, customer movement to cans from other substrates will continue in 2025. We continue to be bullish on the opportunity to drive long-term growth across EMEA as sustainability legislation and the competitive advantages of aluminum packaging increased can penetration from a low base.

In South America, recovery in Argentina and Chile, coupled with growth in Brazil, is expected to drive volume above our long-term range and operating earnings growth in in 2025. And while our North America business faced volume challenges last year, we have confidence our ability to deliver volume growth in line with or slightly above market. We have been proactive about extending contracts and have over 85% of our 2026 volume under contract. That includes signing an extension with one of our largest customers that will take us to nearly the end of the decade. This extension with our global partner also means that we will be building what is effectively a two-line can plant in Oregon.

This investment will not change our expected CapEx plans or our share repurchase targets and will give us needed capacity in in the market where our customers are also investing. Additionally, January, the company entered into an agreement to purchase Florida can manufacturing and its beverage can facility in Winter Haven, Florida. The transaction, which carried a $160 million purchase price closed this morning. Our North American business is running at high utilization rates in part of the U.S. and with the growth we expect in the coming years, this capacity will provide us the fuel for growth we need to deliver on our customers' plans.

We are purchasing this asset for well below replacement value. And with our strong balance sheet position, there will be no impact to our share repurchase plans. Lastly, on cups. During the fourth quarter, our Board approved for the company to pursue alternatives for the business.

This includes an option to form a strategic partnership in early 2025, which is expected to result in deconsolidation of the business. We expect to complete the process in the first quarter. And with that, I'll turn it over to Howard to discuss full year and fourth quarter 2024 results as well as key metrics for 2025.

Thank you, Dan. Starting with our results, 2024 full year comparable diluted earnings per share was $3.17 versus $2.90 in 2023. Fourth quarter 2024 comparable diluted earnings per share was $0.84 versus $0.78 of the fourth quarter of 2023, an increase of 9.3% and 7.7%, respectively. Full year comparable net earnings of $977 million were up year-over-year, driven by strong operational performance, cost management initiatives and lower interest expense, which were able to more than offset the earnings headwinds from the sale of our Aerospace business. Fourth quarter comparable net earnings of $250 million were up year-over-year, driven by cost management initiatives as well as lower tax and interest expense, which were able to more than offset the earnings headwinds from the sale of our Aerospace business.

In North and Central America, stronger-than-expected performance in December volumes was more than offset by lower-than-expected volume in October and November. Despite a softer US mass beer category and stretched end consumer, we continue to believe that our 2025 volume will return to growth and will be in line or slightly above market. Throughout 2024, our team has done a great job of improving operational efficiencies, lowering cost and effectively countering measuring risk. And through our Ball Business system, we will continue to drive operational improvement in the plants to more profitably serve our customers' growth.

While we have a tough comp in the first quarter as well as headwinds from poor weather across the US in January, we expect sequential improvement throughout the quarters, leading to volume growth in 2025. In EMEA, fourth quarter segment volumes were strong, and the segment comparable operating earnings increased 12.5%, matching our expectations entering the quarter. Recent demand trends remain favorable and the business is on track for significant year-over-year comparable operating earnings growth in 2025, driven by improving operational efficiencies and volume growth. In South America, segment comparable operating earnings increased slightly, while segment volumes declined due to continued weakness in Argentina and the supply-demand tightness in Brazil, partly offset by volume growth in Chile and Paraguay.

During the fourth quarter, consumer conditions in Argentina continued to demonstrate some gradual signs of recovery, and we continue to monitor the dynamic economic situation in Argentina and potential scenarios that could impact results. To provide additional volume support for our Brazil business, we plan to reopen [indiscernible] facility. Looking at the businesses within our Other. Our Personal & Home Care business, which was previously called Aerosol performed well and grew volume mid-single digit in the fourth quarter, and we expect to grow volumes above our long-term range in 2025. Moving on to additional key financial metrics singles for 2025. We anticipate year-end 2025 net debt to comparable EBITDA to be 2.75 times as we work to deliver on our stated goals of repurchasing at least $3 billion worth of shares between 2024 and 2025. After repurchasing $1.7 billion of shares in 2024, we will repurchase at least $1.3 billion of shares in 2025. And we'll remain aggressive in repurchasing our stock that what we believe is very attractive pricing.

Through today's call, we have repurchased $290 million worth of shares year-to-date. 2025 CapEx is expected to be slightly below D&A in the range of $600 million. We anticipate being able to deliver on our target of comparable net earnings equal to adjusted free cash flow in 2025. Relative to the estimated tax payments due on the Aerospace sale, we now expect total payments to be $875 million. We paid a total of $766 million as of the end of the fourth quarter and expect the remaining portion to be paid in the first half of 2025. Our 2025 full year effective tax rate on comparable earnings is expected to be slightly above 22%, largely driven by lower year-over-year tax credits.

Full year 2025 interest expense is expected to be in the range of $270 million. Full year 2025 reported adjusted corporate undistributed costs recorded in other non-reportable as expected to be in the range of $160 million, driven higher by lower interest income from the cash proceeds of the Aerospace sale. And last week, Ball's board authorized the repurchase by the company of $4 billion of our common stock through the end of 2027 as well as declared its quarterly cash dividend. Looking ahead to 2025, we are hyper focused on operational excellence, cost management, driving efficiency and productivity across our business and monitoring emerging marketing volatility.

We are fully committed to maximizing the potential of our company over the long term. We have executed on derisking the corporation through debt retirement, and we have minimal near-term maturities. The runway is clear for us to activate near-term initiatives to consistently deliver high-quality results and generate compounding shareholder returns. With that, I'll turn it back to Dan.

Thanks, Howard. The business is operating well, and we have future-proofed our business through long-term contract renewals, deleveraging and footprint optimization. Through the strength of our portfolio and the unwavering dedication of our employees, we are confident we will deliver on our long-term financial goals of exceeding 10% comparable diluted EPS growth, generating adjusted free cash flow in line with our comparable net earnings and returning value to shareholders through large-scale share repurchase and dividends. The focus on executing our purpose and our promise was certainly on display during 2024. In 2025, we have the opportunity to deliver record adjusted free cash flow and comparable diluted earnings per share.

We will continue to meet our customers where they are to deliver affordable, innovative aluminum packaging solutions that can lead to a world free from waste. Shareholder value creation remains our focus, and we continue to prioritize delivering compounding shareholder returns in 2025 and beyond. We are confident that consistent delivery of high-quality results operational performance, coupled with a significant share repurchases for the foreseeable future, in addition to dividends will drive shareholder value creation. We appreciate the work being done across the organization and extend our well wishes to our employees, customers, suppliers, stakeholders, and everyone listening today.

Thank you. And with that, Christine, we are ready for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of George Staphos with Bank of America. Please proceed with your question.

Thank you. Hi everyone, good morning. Thank you for the details guys. I guess, first question, recognizing there's been delays to what extent have you been able to determine the effect of tariffs and what that might have relative to the guidance that you're providing, either in terms of volume and/or supply chain on aluminum?

For instance, if there is some impact on Mexican shipments might that be made up in North America or not? And then I had a couple of quick follow-ons.

Yes, George, great question. I'm on a call every single day and the details, obviously, are changing relative to tariffs. I think maybe start with what is imminent is what's happening to the aluminum supply chain in China, and we have spent the better part of the last few weeks mitigating what started as a potential $40 million to $50 million issue. And I think we've got that resolved down to millions of dollars, a couple million dollars.

So, we've renegotiated deals with the supply base. We've enforced elements of our of our contract, a lot of that metal was going into South America actually because a lot of these supply chain -- metal supply chains have been altered significantly back in the 2015 and 2016 timeframes. So, that one -- you can put that one to bed as it having minimal nominal year-over-year impact to us. But the I think what you're highlighting is our concern would be depending on the size of this or the piece coming across the border from Mexico, it would be really end consumer additional pressure there in volume.

The good news is some of the stuff that comes across the board for Mexico is the growing aspect of your beer portfolio. Obviously, we've been in constant contact with some of those customers. And we've got plans in place to help risk mitigate, but if it's 25%, that's a vastly different story than a 10% versus the 2.5%. And the 25% to me would be more concerning than in terms of a pretty stressed end consumer.

So, I would be more concerned about the volume for that aspect of the portfolio, which is not that big for us, but stuff that I know in detail. We've worked, we've mitigated it. The other stuff is still in flight. The 25% number would be more be more concerning and it will concerning relative to end consumer demand, which would certainly dampen our current outlook.

That's clear, Dan. Thank you for that. And the other question, and it's a two-parter. Can you talk about -- I'll try to make it painless.

Can you talk a little bit about how these investments you talked about, including the Florida can business might affect your earnings and/or volumes? In other words, would you have been comfortable with the growth outlook you gave, if you weren't making these investments? Or do you need these to get there? And then just, look, having covered the company for a while, like a lot of folks on this call.

The last few years, Ball has been very busy. But at times, sort of getting to the bottom line, the investments, the activity has not been necessarily as you would have expected. And so what comfort would you give analysts and investors that you can manage another can plant, you can manage investment and at the same time, executing get to the bottom line to hit your goals. Thanks guys and good luck in the quarter.

Yes. Thanks. I think if I'm following that triannual. I would just say that, guess, over the last couple of years in North America, we've significantly outperformed on earnings. So I guess I'm struggling with some of the -- some parts of the question, but I'll answer this in terms of...

Dan, I mean going back to the can plant additions from the growth boom and how that came through in terms of earnings. That's where I was going with that. I'm sorry, but -- and clearly, you definitely did get great operating leverage the last couple of years. But that's what's going with that part of the question.

Yes. Well, the investments have more than paid for themselves by restructuring aged assets that were less productive. So all of that, I mean, if you look at that, it's actually worked out pretty well. The two investments that we have, one, I've said repeatedly that we didn't want to abandon the Northwest marketplace permanently.

So that one shouldn't come as a surprise. It's in line with investments by our customer in that part of the world. So it's repositioning that footprint to be more closely aligned to their investments, so that should work well moving forward. So a lot of thought in that application of investment there and then picking up a significantly reduced price point on a great plant that's nearby an existing Tampa facility in a market that's growing, we're going to really like that in 2026 and beyond.

I think, George, maybe just one thing to add is that, that that Northwest investment that Dan is talking about, that would still be within our envelope of CapEx that we've described. And so our CapEx in 2025 will be below D&A and despite that investment in the Northwest. And so I wanted to make that clear as well.

Okay. And do you need these to hit your goals or these would have been additive to the goals you gave? Thanks, guys.

Additive than in 2026.

Okay. Thank you very much, guys.

Our next question comes from the line of Phil Ng with Jefferies. Please proceed with your question.

Hey, guys. Volumes in North America…

Hey, good day, Phil.

Good day. Volumes in North America has been anything but predictable, it's been weaker. But you sounded pretty confident North America will grow faster than market and faster than your longer-term target. So I guess, first out of the gate, what are you seeing?

And then you called out contract renewal with one of your larger customers in North America, which is Greg gives you visibility to the out years. Did you pick up any volumes? And how should we think about pricing for those contracts that you guys renew?

Yes. I would say 2025 let me start with that piece. I think the industry is expecting kind of that 1%-ish growth rate. For us, obviously, we were lapping 2023 pretty significant marketing dislocation.

And then last year, we had a sizable share reallocation on one of our major beer partners. So we're stable heading into this year some incremental volume pickups and it's going to boil down to held the end consumer. Are you with the right customers with the right partners from a mix perspective? So I believe we are.

So that's why I'm more bullish that will tick a little north of how the market performs. And then relative to pricing, fairly stable in the out years relative to the large customer contract that we picked up. Some of that obviously when you're making investments on behalf of those customers, you're able to offer a different value proposition. So that's created some structure and some stabilization for us relative to that customer.

Any share gains in volumes picked up as part of that that investment, that customer?

We believe we picked up, I would characterize it this way. I think where we have secured volume, we believe that it will be growing at a faster rate than their portfolio given some of the pressure, for instance, in the Northwest on some anti-plastic sentiment.

Okay. Super. And then when I think about, Dan, how you've historically been aligned globally and certainly North America as well, you guys have been in line with the big brands, big customers. And when I think about North America, frankly, there's been a lot of innovation in the beverage industry.

And a lot of that is actually coming from smaller brands and entrepreneurs, whether it's ready-to-drink cocktails, non-alcoholic beers and actually non-alcoholic beverages on that ready-to-drink side functional soda and stuff of that nature. So my question to you is, how is your growth to market strategy perhaps evolving? Are you going after some of these customers in a bigger way just because demand has been pretty muted in North America and the concern has been, is this a structural dynamic you can't grow out of. So how your go-to-market strategy pivoting in an evolving marketplace where there's still a lot of innovation out there?

No, I think that's a great comment, Phil. Historically, I mean, we're kind of with everybody in the marketplace. Our portfolio is exponentially larger than any of our competitors in terms of the customer and the category mix. We've got a pretty healthy balance across everything.

It's interesting, you commented on ready-to-drink cocktails. So, one of our bigger customers actually acquired the brand that owns 40% of the ready-to-drink cocktail. So these two things, generally, if they're really successful innovative launches, they typically get acquired. So, you've got -- you have to play candidly, you have to play kind of who are the acquirers, who are the innovators.

You kind of start there with your anchor investors and then you work both sides of the equation to help stimulate product launches. And so the copies of the world, the liquid depth, this is like they're large in our portfolio. So, -- but it's hard to -- if Coke is growing and ABI is growing and the large customers are growing, we're going to grow. If they're not growing, you can have all of the startups in the world and you're just not going to move the needle on the size of volume.

So, there's definitely a balance. I don't think we've moved away from innovation driving sustainability with -- and helping the smaller innovation-driven brands and customers in the marketplace. But at the same time, you got to help make sure that your key partners are winning in the market and that's really how you're going to win.

Okay, Dan, really appreciate the color.

Yes, thank you, Phil.

Our next question comes from the line of Ghansham Panjabi with Baird. Please proceed with your question.

Hey guys, good morning.

Hey morning.

Dan, going back to the Analyst Day from June of last year where you spent a fair amount of time on some of the productivity initiatives that were going to unfold over a multiyear basis, largely North America. And to put that in just kind of given what you've done or have announced with Oregon and also the acquisition in Florida, does that allow you the opportunity -- a bigger opportunity as it relates to reconfiguration of your footprint and to reaccelerate that productivity because it's not like volumes are growing faster in the industry relative to those two additions?

Ghansham, I think these -- once these are in place, yes, you'll be able to pick up efficiencies. We didn't vacate demand, for instance, in the Northwest, so you're shipping in. that that demand. So, will be a benefit, right, in terms of delivered cost. And then it's -- we're acquiring an incredibly efficient asset base down in Florida that we can do some things relative to running different can sizes and then becoming more efficient on lines within that subregion.

So, we just closed the deal today. So, we've got some ideas on what we're going to do, but we're going to have to get in there and do that. But yes, that will -- any time you've got incredibly efficient assets, well-run assets, that gives you opportunity to be more flexible in a system of our size.

Okay, perfect. And then as it relates to Europe, obviously, Europe was a very nice surprise, I would say, for the industry from a volume perspective last year. How are you thinking about 2025 as it relates to volume growth, tougher comparisons and just the fact that it is Europe?

Yes, as we sit here today, like we thought we'd be entering into -- 2023 fourth quarter, there was the destocking event that took place, which muted volume, then everybody got off to a pretty good start in the first quarter. So, I thought the comp would be a little bit more challenging this 2025 versus 2024, because of that sequencing of events and we're off to a really good start there. So, I think it's just -- listen, we've always talked about the opportunity set that Europe presents because it's got the lowest can penetration and as it evolves into a focus on carbon footprint, we've got a great product for that.

It's a glass-rich environment in Europe, as you know. And I think the health of the end consumer to some extent, is a little more balanced in terms of our customers, not necessarily being able to put through price at the same rate with the same velocity that they're able to in North America. And as a result of that, I think -- it's a really stable environment for continued growth. And we're fortunate that we put in place a couple of large assets there to grow into, and we're continuing to grow into those.

So, I think we'll be at the high end of our long-term guidance for Europe again this year.

Thanks so much.

Our next question comes from the line of Stefan Diaz with Morgan Stanley. Please proceed with your question.

Hi everybody. Thanks for taking my question. Maybe first, going back to North America, do you need to see low single-digit volume growth to be able to hit your EPS guide? Or can we sort of have like a flat to down environment in 2025 and still grow earnings?

Just considering the shares you're buying back? Or maybe is it just as simple as if you grow 2% to 3% globally, you should be able to hit your EPS guide?

Yes, I'd say for a negative print on volume that looks like what we did this year, I think we'll be very challenged to hit EPS target even with share buyback at a more aggressive rate. A flattish environment, offset by maybe a little bit more growth in Europe, I think it's probably a good recipe to deliver the range we outlined. But yes, we're getting to a point where you're going to need some growth in North America. It's not only profitability associated with the volume growth, it's also really hard to offset negative volume of productivity gains.

At some point, we're a volume business. We've done a lot of heavy lifting and done some tremendous things to increase the level of profitability in North America. But you'll start running into a bit more of a challenged environment relative to North America and then you'll have to rely more on mix and some other things to steer you to a heavier profitability lift there. But yes, I'm feeling really good where we're at right now starting the year.

Things are pointing in the right direction with the strength of Europe and the event that things don't materialize in the growth in North America, but certainly growth is going to at some point, be an important cog, if not necessary to expand margins.

Okay, perfect. No, that's really helpful. And then so the last couple of calls now, you noted a supply/demand mismatch in Brazil. So, I guess, how are your inventory levels in the region?

And maybe how has demand shaken out versus your expectations so far quarter-to-date? And then maybe if you could also just parse out Brazil volumes in the quarter versus Argentina volumes, just so it's easier for us to compare versus your competitors? Thanks.

Sure. So, Brazil grew in the fourth quarter, we didn't. I would say we entered into -- we're managing certainly the downturn in Argentina aggressively from a cost perspective in the second and third quarter. We were doing the same thing in Chile, which has been soft and has declined for the last two or three years.

And then Brazil was low single-digit growth for the first two quarters. And we also were running a much tighter capacity outlook within our network there. And then suddenly, it got really hot at the end of Q3. So we entered -- were tight and running short on inventory positions at the end of Q3. We started turning on a curtail line in Argentina, curtail line in Chile, multiple curtailed lines in Brazil. And as we said in the opening, we're turning back on a curtailed plant, but that's just taking longer than we anticipated.

So we'll return to growth in Q1 and will grow in excess of our long-term outlook next year because we're seeing recovery in Chile. We're seeing recovery in Argentina, we’ll be fit to serve Brazil and will be coming off a much easier comp, obviously, in Q3 and Q4, 2025 versus 2024.

Great. Thank you. I’ll turn it over.

Thank you.

Our next question comes from the line of Anthony Pettinari with Citi. Please proceed with your question.

Good morning.

Good morning.

In previous quarters, you've been able to grow EBIT year-over-year without much volume growth. And I guess that changed in 4Q. I'm just wondering, did you I don't know, lap any key cost saves? Or were there any kind of PPI pass-throughs or change in price mix. I guess, maybe you lap the Wallkill plant closure. But just curious if there was anything that drove that leverage?

Yeah. I think you're talking specifically about North America.

Yeah.

Yeah, we've done -- listen, we're running to historical assay utilization rates now. So we've done the heavy lifting over the last couple of years. So we've lapped that. So in many respects, what you're describing is, yes, we're going to have to get a little bit of growth.

I think, the new investments that we're making will also give us an opportunity to create an even more efficient supply chain with the Florida can investment in particular. So there are things that we can do now that we have that asset in the portfolio. But yeah, we're tight. And we're also obviously shipping products, as I indicated to an earlier question, into the Northwest.

So there's inefficiency relative to that. That will lap once we get new facility up in Oregon. So there's opportunities there to do some more and gain productivity. But turning on curtailed lines and running them is going to be the most efficient way to lever up margin-wise.

Got it, got it. And then can you maybe talk about operating rates or system utilization in Europe? I guess, volume growth has probably been ahead of other regions, but I don't think you've added a lot of capacity in recent years. I'm just wondering if there's anything in the CapEx plan for 2025, 2026 for Europe or opportunities for debottlenecking or new lines or anything like that.

Yeah, we have – I guess, over the last two to three years, we've added two huge facilities, one in the UK and one in the Czech Republic. So we've been -- those will both be 4-line plants, by the end of next year. So we have done some incremental line enhancements and investments and that's been able to lift us. It's getting -- it's actually getting quite tight all throughout Europe right now.

Over there's a lack of capacity to meet the demand in the UK, so we're looking at things there. But yes, that's -- if these growth rates continue, I mean, it's a big market growing at 3%, 4%, 5%. So that would -- that's going to require probably think about 2027, 2028 to be doing other things in that part of the world.

Got it. Got it. I’ll turn it over.

Our next question comes from the line of Mike Roxland with Truist. Please proceed with your question.

Thank you, Dan, Howard and Brandon for taking my questions.

You bet.

Just wanted to talk to you about the competitive backdrop. There have been some concerns out there in North America anyway, the pricing could be a risk later this year, early next year when some big contracts come up for renewal. Obviously, then you addressed one of them, as you mentioned, you got that extend to the end of the next decade or this decade, excuse me, I should say. But just trying to get a sense from you as to what the competitive environment is like, particularly given softer demand maybe some competitors looking to gain share.

And I think in a recent conference, you also called out as the Midwest, in particular, as being somewhat challenged. So any color you can provide would be very helpful.

Yes. I think I've been pretty consistent on this, Michael. As you know, there -- when you look at the number of facilities that were built, there was quite a few facilities built in the upper Midwest, Northern Kentucky region. And the demand growth has really been on the coast in the Southeast and Texas.

So there are reasons for those builds. I think there were a lot of subsidies that went into those builds. But they're not necessarily positioned for the demand profile moving forward. With that said, we're tight.

We've structured our asset base in a way that has enabled us to being tight, but also be very close with our strategic partners to make sure that we're doing the right things for them, medium and long-term. That was rewarded in the contract renewal. Relatively speaking, the pricing that we're seeing is better than the past 20 years minus the pricing that we were securing during a massively undersupplied marketplace. So they're really healthy margins to make money and flow cash and manage.

They could potentially not be as good as what we were looking at three years ago. I'm talking about incremental differences, not meaningful differences. But I think we're happy with what we're securing and at the prices we're securing and we think we can grow and expand margins based on that and flow really nice cash.

Got it. I appreciate the color Dan, thank you for that. One quick follow-up. Just in terms of beer, obviously, category is still lagging.

We're still trying to figure out the SKUs, the mix, how to target both premium and discount without getting stuck in the middle. How far along do you think the beer companies are in this process? And I'll throw it out there, when do you expect beer demand to inflect higher? Any sense when that could ultimately target?

Honestly, I don't know the inflection. I would expect it would be very aggressive behavior in the peak season coming up in North America. Starting to see -- you even saw one of our customers today in a non-alcohol range there. The pricing is not enough to grow the top line.

So I think once they start hitting these price elasticity curves where they cannot grow the top line, I think behavioral patterns will change. I think some -- some of the plans I've seen, I'm encouraged. I really do think it's going to be what customer or what partner you have is going to matter. Obviously, some of the folks that had really nice growth trajectory.

They're dealing with tariffs right now and they're dealing with that make sense out of that. I think that will continue to grow medium and long term because of the relationship they have with the population growth that prefers those products. And then others, I think, are going to get more focused on their portfolio. There's going to be some new innovation that comes out and the folks that have struck a nice balance between being a beverage company and being a beer company, those are the ones that I believe will win medium and long term.

And think we have overweight to them. That's a great question. When are we going to see it? The end consumer is obviously still weak.

You're in the dry January portion of the year. So no surprises here that you see softness in the beer side right now. Things start to pick up here. Right now, with Super Bowl week and then beyond that, heading into spring break weather patterns, that will all be important to see pricing behaviors and I think, hopefully, a return to volume growth being the principal driver of their economic decisions.

Got it. Thank you very much for the color and good luck in 2025.

Thank you.

Our next question comes from the line of Mike Leithead with Barclays. Please proceed with your question.

Great. Thank you. Good morning, guys.

Good morning.

I have two semi-related questions. First, Howard, just a quick housekeeping. I think the release states you plan to deconsolidate cups starting in 2025. I think in the past, you've talked about the being about a $40 million drag. So is that a $40 million earnings tailwind as we think about 2025 year-over-year?

Yeah, Mike, I think it depends on when we're able to get to a full agreement here as it relates to the joint venture structure. As it is today, those losses associated with cups are still flowing through right now in the quarter and so timing matters here. If we assume that we had talked about $40 million historically and we go through the first quarter, get this transaction done, and it's probably somewhere around the $25 million that we'd see improvement year-over-year.

Okay. That's great. And then second, on the share repurchase, if I do the math, it's about $1.3 billion, I believe, of repurchases this year, which today is about 8.5% of the company. So is cups and buybacks, the largest drivers of the 10% year-over-year EPS growth? Or just how should we think about for beverage can earnings growth compared to 2024?

I mean, I think we're going to see some. Obviously, operating earnings growth is going to matter. When we talked about the algo, certainly -- Dan talked about the North America maybe a little bit of challenges there. But we feel very good about our growth profile, both in terms of volume and the leverage associated with operating earnings in EMEA as well as in South America.

We're bullish on Argentina and the green shoots that we're seeing there, the macro are going to improve. And so I think that there's no reason to believe that we're not going to be able to achieve that healthy algo in that region as well. And then as you said, I mean we are going to have a significant amount of share buyback and the like. One thing to keep in mind is that we will see less interest income this year because with the proceeds associated the Aerospace sale, we had over $42 million of interest income that won't repeat year-over-year.

Got it. Thank you guys.

Yes.

Our next question is from the line of Edlain Rodriguez with Mizuho. Please proceed with your question.

Thank you. Good morning, guys.

Good morning.

Quick -- I mean, big picture question, Dan. I mean, in terms of now you have questions that whether beer or alcoholic drinks, might be bad for your health. I think somebody has said it's dangerous for you. So at the margin, this will make some people think twice about ranking alcohol being included.

So of all the things that you think about, that keeps you awake at night, is this one of them? Is this -- should this be one of them? Like any thoughts there would be appreciated.

You're probably asking the wrong guy, because I enjoy my alcohol.

You and me, both.

Yes, yes. I really don't. We -- I think we've known it's probably not at moderation everything. I mean I don't want to go down this path with you.

But the thing that keeps me up at night right now is the health of the end consumer in North America. That's what keeps you up at night. All of this other stuff is noise. And that's what I'm hearing from our customers as well.

So until which time I can sit through a return to some normal spending patterns by the end consumers. I -- this stuff is really -- it's on the radar as it should be, but it's not -- we're not losing sleep over this. This is not going to in the next three to five years, create a challenge for us and the slides. In fact, beer, you're counting beer growth everywhere else in the world.

I mean, if beer doesn't grow, then we're not growing in the can. So doesn't seem to be a concern in other parts of the world, but it seems to be a focus of a lot of conversation in North America. So it's dislocated in that sense. Yes, I wish I had a better answer for you, but...

No. No, that's good enough. And just a follow-up in terms of the share buyback. I mean, of course, the share price has come down quite a bit over the past couple of weeks, months. Like what are you thinking in terms of the pace of the share buyback? You just should we be thinking like more aggressive in the near term or just going to be like more disciplined systematic throughout the year?

Edlain, I think you've seen our behavior here, and I think I indicated even earlier that we bought back $290 million worth of shares in a month plus. So the answer to your question is, yes. We see this as an opportunity for us to be overly aggressive perhaps. And with the value of the stock, we're going to lean into that here in the short-term.

Certainly, recognizing that we'll exceed -- likely exceed the $1.3 billion worth of shares here in 2025.

Okay, perfect. Thank you very much.

Yes.

Our next question comes from the line of Chris Parkinson with Wolfe Research. Please proceed with your question.

Great. Thank you so much. Can you just us a little bit more color since you went over the beer thesis on what you're seeing in energy markets, in particular, in both the U.S. and Europe. There's been a lot of noise over the last six to 12 months, so just hoping to hear kind of the best updates there as well? Thank you.

Yes, I think Europe is probably pretty easy. Our Europe energy portfolio is growing at high mid-single-digits. So, -- and that has continued to perform that way for the last five, six, seven years. So, not a lot of change on that front.

I think in North America, there are tiers to the energy drink classification. One product, I think one of the larger products, it's definitely tied to Hispanic population, the construction industry. And so interest rates matter to that particular product. Others have different effects, the end consumer though matters.

Now, what we're seeing kind of right out of the gate is more aggressive pricing, and we're seeing growth through January in the Energy segment. So, I think there -- they're in a place where they have a lot more price, I think, to work with relative to their products to push for growth in some instances, and I think you're going to see that, a much more competitive baseline to grow volume and grow share, which is good. I haven’t seen the same behavioral pattern in beer. But Energy looks to be an area where I think you'll have a return to growth in 2025, in North America, and it will maintain growth at similar rates in Europe.

Got it. And just in terms of your -- the longer term South American algo putting, let's put Argentina aside for a second, there's been a lot going on once again in terms of customer -- or let's say, industry bankruptcies to a few rain carnivals, post-COVID all that stuff. When you take a stance right a year right now, heading into 2025, how much confidence do you have in that growth rate, at least in Brazil and forecasting that aluminum should still be the primary substrate -- versus glass and everything else? Just any comments there would be also very helpful.

Thank you.

Yes. We're -- we believe that there will be growth in Brazil in the kind of 2%, 3%, 4% range next year. But for us, we'll grow in excess of 4% to 6% because Chile has returned to growth, Paraguay is growing at double-digits, Argentina is returning and inflecting the growth. So, we've got some -- where we had unfavorable comps this year, we'll have favorable comps next year in those economies.

And Brazil will actually grow at a slower rate than we will because of our portfolio. But we believe Brazil will grow, but to your point, it's probably a little bit more muted than what you saw this year.

Thank you.

You bet. We'll do one more question, Christine.

Our final question comes from the line of Arun Viswanathan with RBC. Please proceed with your question.

Great. Thanks for taking my question. I hope you guys are well. Maybe I could just get first your thoughts around these two beverage can plant acquisitions.

Could you provide maybe your thoughts on ROIC or payback period, if there's any synergies? What can those two can add to your outlook over the next, say, two to three years, maybe from an EBITDA standpoint, if at all, or free cash flow? Thanks.

Yeah. I think the -- so we're only acquiring one. The other one would just be a new facility. So we began in growth, volume growth that we can't serve today in the Northwest, and then we be positioning the supply closer to the customer.

So probably $20 million additionally a year back half of 2026, most likely beginning of 2027, and we'll hit a $25 million to $35 million EBITDA run rate in the beginning of 2027 for the Florida can acquisition. So about a four-year to generate a positive EVA.

That's great. Thanks, Dan. And then just back to the beer question. So it sounds like there is I mean, I can appreciate the large customers of yours could acquire some nice growing properties.

But what are they going to -- what is it really going to take for them to accelerate beer, because as you said earlier and throughout the call that if you're not growing very globally, it's going to be difficult, especially in North America. So is it something where they can take a leadership position within the category? Was that done in CSD? Is it going to require some new beverage development?

Or what do you think -- and what are you hearing from them as far as ways to really energize that growth profile?

Yeah. In beer specifically, so I guess there's beer volume writ large and there's beer in cans. So I still like our ability to move up straight needle over time. In the baseline, and that's -- we've been growing in beer for a decade plus.

So a lot of it has to do with substrate. But then when you look at portfolios, there's certainly been disaggregation from having too many too large of a portfolio, so really moving to a more efficient delivery of brands that they believe are going to win with an affordability lens on that. And so we're helping to make sure that we have a more strategic supply chain. But in the -- if you look at the largest brewer in the world, I mean, their portfolio, they have the largest ready-to-drink cocktail.

They have the fastest growing domestic like beer. So there are -- I think you're really have to look within these portfolios, what they're doing, what they're going to do? And do you believe in that trajectory? And how can help play a role in that.

So I think innovation matters, I think you'll see an investment in a lot more non-alcohol moving forward. It's not going to be a surprise to see that. But when you find a winner, I think -- and it might be I just look -- I look at these traditional beer players as beverage companies, and they've got to get that right because they own the distribution patterns, they own the shelf space to a large extent. And so they got to put things on the shelves that are going to sell.

And there's a greater likelihood that it's going to be in a can than any other format. And so that's sort of how we're thinking about it. But the beer question, I think that's the right question, but does it have to be beer.

Thanks.

Thanks, Christine. We'll leave it there and look forward to talking to you again here at the end of the first quarter. I hope everybody stays safe and healthy.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.