Crown Holdings Inc. 2026 Q3 Earnings Call

Sir, you may begin. Thank you, Rich, and good morning.

With me on today's call is Tim Donahue, Chairman, President, and Chief Executive Officer. If you don't already have a copy of the earnings release, it is available on our website at crowncork.com. On this call, as in the earnings release, we will make a number of forward-looking statements. Actual results could differ materially from those statements. Additional information concerning factors that could cause actual results to vary is contained in the press release and our SEC filings, including Form 10-K for 2025 and subsequent filings. Reported diluted earnings per share were $2.08 compared to $1.85 in the prior year quarter. Adjusted earnings per diluted share were $2.39 compared to $2.24 in the third quarter of 2025, an increase of 7%. Net sales increased to $3.7 billion, compared to $3.2 billion in the prior year quarter.

The increase primarily reflected higher global beverage can shipments and the pass-through of higher material costs, partially offset by $8 million of unfavorable foreign currency translation. Global beverage can volumes increased more than 6%, including double-digit growth in Asia, 6% growth in North America, and 4% growth in Europe. Segment income was $484 million, compared to $490 million in the prior year quarter. Higher global beverage can shipments were offset by inflationary cost pressures and lower results in Transit Packaging. Inflationary pressures from the Middle East conflict impacted third-quarter segment income by approximately $17 million across all businesses and adjusted diluted earnings per share of $0.12. We have included a similar impact in our fourth-quarter estimate. Adjusted free cash flow was $771 million through the first nine months of the year, with capital spending of $310 million.

As we continue to invest in growth projects in Brazil, Spain, and Northern India, capital allocation remains an important component of our value creation strategy. During the third quarter, we repurchased $81 million of the company's shares, bringing year-to-date share repurchases to $598 million, including $115 million of dividends. When including the $115 million of dividends, we returned more than $700 million to shareholders during the first nine months of 2026 while maintaining net leverage ratio at approximately 2.5 times. Based on our strong year-to-date performance, we expect full-year 2026 adjusted diluted earnings per share to be in the range of $8.35-$8.45, and the fourth quarter adjusted diluted earnings per share to be in the range of $1.63-$1.73 in the fourth quarter.

Our full-year outlook assumes net interest expense of approximately $355 million, exchange rates at current levels, including a euro dollar at approximately $1.12, effective tax rate of approximately 25%, depreciation of approximately $325 million, non-controlling interest expense of approximately $145 million, dividends to non-controlling interest of approximately $110 million, adjusted free cash flow of at least $950 million, capital spending approximately $550 million, year-end adjusted net leverage of approximately 2.5 times. The company is executing well, delivered another strong quarter. As we look ahead, our strong balance sheet, consistent free cash flow generation, and disciplined capital allocation strategy position us well to continue to invest in attractive organic growth opportunities while returning capital to shareholders. With that, I will turn the call over to Tim.

Thank you, Kevin, and good morning to everyone. As Kevin just summarized, the company had another solid quarter of performance as continued strong global demand for beverage cans helped offset the majority of rising input costs. Global beverage can shipments advanced 6% in the quarter following 5% growth in both the first and second quarters. With year-to-date growth standing at close to 6%, we remain confident in the outlook for beverage can demand with our full-year global growth target in the 4%-5% range. The company's businesses are responding well to global economic challenges to continue supporting our customers' needs as we all navigate a world of growing tensions. As Kevin described, inflationary headwinds, primarily a result of the Middle East conflict, were greater in the third quarter than we previously anticipated, and we have included a similar headwind in our fourth quarter estimate.

Energy, industrial gases, freight, among other costs, all remain elevated from pre-conflict levels. As many of you are aware, the contractual recovery of these and other non-metal costs will occur in 2027 via a look-back formula. Revenues in the Americas Beverage segment advanced 20% in the quarter, primarily a result of $240 million in the pass-through of higher metal costs and higher sales unit volumes. Volumes in North America grew 6%. Brazil was up 4%, with Mexico down about 1% in the quarter. Against a strong prior year comp, income improved in the quarter on the back of contribution from volume gains, although the majority of the volume contribution was offset by rising input costs. Adjusting for the pass-through of higher material costs, segment income margin was 17.7% of sales in the quarter.

Can demand remains strong in North America, and we expect full-year shipments to be up in the 3%-4% range. European volumes increased 4% in the third quarter, with 7% growth recorded across the continent offset by a 4% reduction in the Gulf states. Capacity expansion projects in Greece and Spain remain on plan, and we are also installing a third line to the Peterborough, U.K., plant. These capacity additions will bring much-needed capacity to our system, helping to serve our customers' growing needs. Income, level to the prior year, reflects higher volumes offset by rising input and startup costs. Income in Asia Pacific advanced during the quarter on the back of mid-double-digit Southeast Asian volume gains, helping to offset higher energy and transport costs. Performance across the Transit Packaging business disappointed in the third quarter, with both volumes and profits falling short of prior expectations.

Soft volumes across all product offerings were compounded by higher input costs, notably freight. While we do see some green shoots, we remain cautious until increased quoting activity results in firm orders. Strong vegetable and PET food demand contributed to high single-digit volume gains in North American food, offsetting softer aerosol can sales. Activity across our beverage can equipment business remains strong as global beverage can makers look to increase their capacity to meet a world of continuing growing can demand. To summarize before opening the call to questions, global beverage can volumes advanced 6% in the quarter, full-year growth now estimated at 4%-5%. Earnings per share advanced 7%, up 11% through nine months. Cash flow remains robust, and as Kevin described, the company has now returned more than $700 million to shareholders year to date.

The balance sheet remains strong, with leverage remaining unchanged at 2.5 times through the peak summer selling season. With that, Rich, we are now ready to take questions.