Crown Holdings (NYSE:CCK), a global supplier of packaging products, reported a rise in third-quarter earnings to $1.33 per share, up from $1.06 in the same quarter the previous year. Adjusted earnings per share were $1.73, a growth from $1.46 in 2022. Despite a 6% decline in net sales due to lower unit volumes in most businesses, the company saw higher sales volumes in Americas Beverage and a positive impact from foreign currency translation.
Key takeaways from the call include:
- Crown Holdings' net sales dropped by 6% due to lower unit volumes in most businesses, offset by higher sales volumes in Americas Beverage.
- The company posted a segment income of $430 million, up from $336 million in the prior year, driven by higher unit volumes in North America and cost reduction initiatives.
- Cash flow for the first nine months of 2023 was $832 million, compared to $134 million in the prior year.
- The company expects fourth-quarter adjusted EPS to be in the range of $1.40 to $1.50 per share, with a full-year adjusted EPS of $6 to $6.10 per share.
- Crown Holdings recently completed the acquisition of Helvetia Packaging (NYSE:PKG) for approximately $125 million.
During the earnings call, Timothy Donahue, CEO of Crown Holdings, highlighted the strong performance of the North American market, which saw a 12.6% increase in volumes compared to the previous year. This growth was attributed to promotional activity and recovery from a weak Q3 in 2020.
In Europe, profit recovery is progressing faster than expected, with the company aiming to return to 2021 income levels by the end of next year. Crown Holdings' presence in Europe is more weighted towards the UK, Spain, Italy, Greece, Turkey, France, Germany, and Slovakia. Donahue expects the European market to be flat or slightly positive, with growth more likely in Northern or North Central Europe.
The company is considering using excess free cash flow for debt reduction in response to shareholder preferences. This is in line with the company's focus on reducing working capital, generating free cash flow, and improving the balance sheet.
In terms of growth, Crown Holdings expects to expand in various markets without significant capital investments. The North American market is healthy, with operating rates around 90-92%, and there is no supply/demand imbalance expected. In Europe, the company has added capacity and is well-positioned to meet ongoing growth.
However, the aerosol market has seen a decline in demand due to economic factors and a shift from steel to aluminum cans. The company expects the market to recover gradually. The company is also uncertain about the recovery of the Asia-Pacific region and its impact on Crown's business.
The company does not have any contracts coming due until the end of 2026. Donahue also discussed the company's capital expenditures, stating that around $250-300 million would be allocated for maintenance, while the remaining amount would be for minor growth and product replacement.
Regarding the potential impact of obesity drugs on sugary drinks, Donahue stated that he does not believe these drugs will significantly affect consumption levels and that there has been no impact on Crown's business so far.
Despite a 15% drop in aerosol can shipments in Q3 and a 15-17% drop in Vietnam's volume in the quarter, Crown Holdings remains confident in its supply and receivable balance. The company anticipates further absorption loss in Q4, potentially around $10-12 million. The call concluded with plans to speak again in early February.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.