Greetings. And welcome to the Ball Corporation 2Q 2023 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterward we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded, Thursday, August 3, 2023. I would now like to turn the conference over to Dan Fisher, Chairman and CEO. Please go ahead.

Thank you, Malika. Good morning, everyone. This is Ball Corporation’s conference call regarding the company’s second quarter 2023 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. Some factors that could cause the results or outcomes to differ are in the company’s latest 10-K and in other company SEC filings, as well as company news releases. If you do not already have our 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. Historical financial results for the divested Russia operations will continue to be reflected in the Beverage Packaging EMEA segment. See Note 1, Business Segment Information, for additional information about the sale agreement and a quarterly breakout of Russia’s historical sales and comparable operating earnings. In addition, the release also includes a summary of non-comparable items, as well as a reconciliation of comparable operating earnings and diluted earnings per share calculations. Late in the quarter, the company also announced that is considering options for its aerospace business. There are limitations regarding the depth of commentary we will provide on that topic today. If and or when additional comments are necessary, they will be made via a separate public press release. Joining me on the call today is Scott Morrison, our Executive Vice President and CFO. I'll provide some brief introductory remarks. Scott will discuss key financial metrics and then we will finish up with closing comments. Our outlook for the remainder of 2023 and Q&A. Let me begin by thanking our employees for working safely and with the utmost level of agility while fulfilling our customers' needs. On our first quarter…

Thanks, Dan. Second quarter of 2023 comparable diluted earnings per share were $0.61 versus $0.82 in the second quarter of 2022. Second quarter sales decreased compared to the same period in 2022, primarily due to the sale of our Russian business in the third quarter of 2022, lower volumes, currency translation, and the pass-through of lower aluminum prices, partially offset by the pass-through of inflationary costs. In the second quarter, net comparable earnings decreased compared to the same period in 2022, primarily due to higher interest expense, the headwind from the sale of our Russian business in the third quarter of 2022, and lower volumes, as well as higher corporate costs, partially offset by the contractual pass-through of inflationary costs, fixed cost savings, lower depreciation expense, and SG&A cost out initiatives. To reiterate our prior earnings call commentary, we have been and will continue to proactively manage regional supply demand balance across our system of plants in the near term. Starting in the third quarter, segment earnings in North America will accelerate through the majority of the anticipated contractual inflation recovery, having kicked in July 1. In EMEA, the business will lap its last Russian earnings headwind in the third quarter, and then accelerate to an improved level of earnings in the fourth quarter as they move beyond this multi-quarter headwind and the start of costs for the two new plants. In South America, customer and product mix, which has unfavorably influenced the seasonally slower second quarter, will reverse and consistent with our prior commentary, we anticipate a more robust second half in Brazil as customer hedges roll off and the fourth quarter summer selling season kicks in. As we sit here today, some very consistent commentary and key metrics. We ended the second quarter in a very solid liquidity…

Thanks, Scott. We continue to believe that given the economic environment and global dynamics impacting our world, it is a great time for investors to get up to speed on Ball. Our improved results following the challenging 2022 is progressing. Our products and technologies are resilient and provide solutions for our customers. Our focus remains on delivering earnings, free cash flow and high quality products to our customers and consumers. And as leverage continues to come down and free cash flow expands, our return of value to shareholders will grow in 2024 and beyond. Thank you to everyone listening today. And with that, Malika, we are ready for questions.

Thank you. [Operator Instructions] Our first phone question is from the line of George Staphos with Bank of America. Please go ahead. Your line is open now.

Hi, thank you. Hi, everyone. Good morning. Thanks for the details, and congratulations on the performance. I guess, the first question I had, can you talk -- I haven't tried to reverse engineer the full-year volume guidance relative to the year-to-date, but what kind of volume trends are you seeing early in the third quarter across the region? And are there any regions left with any notable filled product that needs to be destock? How would you -- have you think about that, guys?

Yes, thank you. In the mass beer space, I think you'd have to look at that on a net basis. Clearly, there's one customer that's got more filled goods right now than the others, and I think they've commented on that. There is a little bit within our portfolio in terms of the energy space where we're working through some inventory. Our largest energy customer in our space in North America is growing at a slower rate than the balance of that space. And so, the scanner data is reflecting more growth than our shipment sales. That normalizes, we believe in Q4 based on the projections that we have. Nothing notable. We're in a really good inventory spot, George. You can see that reflected in our cash generation in Q2. You always have, this is the softer period for South America, so there's nothing really of news there. We expect to start building inventory here in the quarter to execute against the back half of the quarter and then peak season for that part of the world. So absent the obvious mass beer player, not as much.

Okay. And actually, what I was getting at to some degree was what you were seeing in South America. So in South America, you -- from your vantage point, not a big amount of de-stocking, if anything, that needs to get done at the customer level. That would be fair?

No, we've been running.

Other than you large -- I'm sorry, go ahead.

Yes, that's correct. There's nothing meaningful in South America. You always run to get, you're always doing maintenance and there's always a level of curtailment in Q2. And so, there's just not a lot of room to run additionally to build inventory, because you're already planning that you're going to be running full out in Q3. The inventory builds, if you have that effect, typically it shows up at the end of our fiscal year down in South America. If things aren't selling through in Q4, you usually have a bit more inventory heading into Q1. So we're in a really good position inventory-wise. That was something that we commented heading into the quarter. The teams and the plants managed that tremendously, even with the mass beer inflection that showed up in the quarter and persisted throughout the quarter.

Okay, Dan, thanks for that. I want to sort of come back to part of the question as I asked it and ask you to follow and then I'll step down just to be fair to everybody else. So what trends are you seeing early in the quarter volume-wise across the regions if you can talk about, put a number on that if that's possible? And then from our research and contacts, we've seen an uptick in promotional activity. We haven't necessarily seen a pickup in consumption yet. How would you have us think about the efficiency and the yield on promotion and the level of promotion that you're seeing into 3Q? And are we beginning to see some finally, some uptick in beer just based on what we're seeing out of the scanners and why, if that's the case, would you be confident about that continuing the rest of the year? Thank you.

Yes, that's a good question. Let me see if I can parse out the elements of that. Let's look at North America. There's nothing really to report in terms of inflection one way or another in South America because it's still winter there. We wouldn't see that behavior until the second half of Q3. So nothing to report other than the conversations that we're having with our customers. Again, I'll be down there next week. They're planning to deliver against what we've modeled in right now, which is a pretty nice inflection of volume heading into Q4 Brazil. We've comment on this previously. Bullish on the Brazil -- Brazil was the first to go into a recession and experience inflation and higher interest rates. They're starting to relieve some of that. So the combination of that, plus previously disclosed comments in and around hedge positions, all of that is playing out as we would hope. The only thing in South America obviously is the question mark in and around Argentina, but Brazil is stronger and we still believe that what we've contemplated for the back half of the year is going to manifest. In North America, both Scott and I have been very public with our comments on what we were seeing throughout the second quarter relative to the mass beer dynamic. And they have been confirmed by our customers. One is our beer customers are always running full out in the second quarter and even most of the third quarter. So if there's a mixed shift that's taking place, it's going to come from working capital or filled goods. So the scanner data won't be necessarily a one-to-one reflection of what we're experiencing. We believe that there will be resets at retailers. Some of the customers that have opportunities…

Thank you, Dan.

Thank you.

Thank you. Our next question is from the line of Anthony Pettinari with Citi. Please go ahead. Your line is now open.

Hi, this is actually Bryan Burgmeier on for Anthony. Thanks for your question. Dan, Scott, you've been asked about the possibility of selling or spinning aerospace for many, many years. So, why now for the strategic review? Did something change for Ball for the aerospace business? Is it about capital allocation or returns? Just any detail you can add there and maybe why this is happening now?

Yes, why now is, if you look back five years ago versus today, the business is much bigger, much healthier, much more profitable, and it could fundamentally stand on its own. Those are the key cruxes for why you could potentially do something else with this business. It's really a manifestation of that business has performed tremendously and gotten to a point where it's an incredibly valuable asset. We believe that was the case. And so, we ran a process to validate that. Early indications are it is a valuable business. If and when I've got more to talk about, I'll let you know. It's really nothing about capital allocation and return threshold. It is just that it's a valuable asset. It's increasingly so. And we always need to look at our shareholder value equation and make sure that that asset is sitting in the right spot for the long-term generation.

Understood. Thank you. One quick follow-up here is, Dan, during the quarter, I think you talked about kind of retail points and the supply chain being displaced by the customer mix developments in U.S. beer. Do you have a sense of where we are kind of in that process and maybe when Ball start to see the benefits of being exposed to some of the other brewers that are doing very well right now?

There's been very minimal movements in terms of retail displacement. I know those questions are being posed. There's a significant reset that happens kind of tail in the Q3 heading in the Q4 across most of the major retailers. So you will see this net impact fully manifest. Probably not until the first half of 2024 will all of the shakeout happen. So I'm not looking at anything appreciably changing in Q3. But the customers that have the opportunity to take a broader position in the retail, they will be gearing up their supply chains. They will be entering into these new retail positions over the course of the third quarter. And then you will start to see Q4, first half of 2024, where things start to settle out.

Understood. Thanks a lot. I'll turn it over.

Thank you.

Thank you. Our next question is from the line of Adam Samuelson with Goldman Sachs. Please go ahead. Your line is open.

Yes, thank you. Good morning, everyone.

Morning Adam.

Good morning. Maybe just a starting point on, as we think about the guidance and think there was a new kind of qualifier this quarter around kind of the potential to be at the low end of the 10% to 15% long-term kind of range. And I guess help me. Is it just a volume question more in the back half of the uncertainty with some easier comps and the magnitude of bounce that drives kind of the introduction of that qualifier? Or is it further disruption in the U.S. beer? Or just help me think about range of outcomes that drive potential versus actually achieving?

I wouldn't characterize it as further deterioration of mass beer. It's going to be persistent through the third quarter. And so, yes, but from a volume standpoint, the third quarter from a mass beer standpoint, what we anticipated at the beginning year versus what we're experiencing, it's softer. And nothing's going to change here probably in the next 90 days, meaningfully, to inflect. The good news is everything that we set out to accomplish in terms of our operational performance, the PPI pass-through, the tailwinds of some inflationary benefits, the SG&A actions, the fixed cost savings, all of that is allowing us to have a line of sites at that low end. We wouldn't be there without the -- we wouldn't be able to characterize our belief in that low end without the performance of the operations right now. So, it is mass beer, and in every one of the regions, we believe there's an inflection in the fourth quarter in volume. We've talked about the CSD market. We've talked about, I think, what's going to happen in mass beer, and then also a peak season in South America with an improved economic environment in Brazil. All of those things have to come through, but they were already baked in. What wasn't baked in is mass beer in North America.

Got it. Now, that's very helpful. And as you look at -- start to think about 2024 in that context, and start working with customers, obviously, some of the market share shifts could present incremental opportunities. And I guess as you think about the mass beer channel in 2024 volumetrically, if that rebounds, do you think you gain disproportionately from that? Or is it some of that potentially grew back to the one of the captive can makers that are known by one of your big customers?

No, I don't believe the captive can makers will benefit. Obviously, they're going to prioritize in the short term their assets. One in particular that's having the marketing issue, we've come to an agreement that we've got a stable go forward position where we understand what the bottom is. And so, we should see inflection off of that, if they're able to turn around. And then to your point, we are with everyone in the beer space. So we should see net benefits into 2024. I would characterize Q2 and Q3 as a bit of a trough for us right now. So relative to that, and then what happens in the mass beer space and clearly the economy writ large, there's reason for optimism for sure in 2024 and beyond.

Okay. All right. Now, that color is very helpful. I'll pass it on. Thanks.

Thank you.

Thank you. Our next question is from the line of Christopher Parkinson with Mizuho. Please go ahead. Your line is not open.

Great. Thank you so much. I want to circle back to the Brazilian market and everything going on. There's been some macro volatility debates about glass recycling, the relative cost of various packaging substrates. Obviously, the rebound is highlighted and the potential for the rebounds highlighted in your press release. Can you take a step back and just how should we be thinking about that, that evolution during the kind of the fourth quarter which you already highlighted and in the 2024 in terms of kind of like the normalized progression there, just because it seems like they're just a plethora of moving parts which we have to consider? Thank you.

Yes. So what we've stated in an inflationary environment, recessionary environment, which is clearly what Brazil's been saddled with here the last couple of years. Two or three times when we've had similar macro events in that country, we've seen shared shift to returnable glass in the five to high single digit range. We experienced the same thing from second half of 2021 all the way through today. As -- a lot of it has to do with the economics, lot of it has to do with the per unit price point of aluminum, the aluminum package in the hedge positions that were constructed by our customers. The cost of aluminum has come off, the hedge positions have come off, the economy is rebounding, inflation is declining, interest rates are coming off. So, all of those things point to we should normalize back to mid 50%, low 50% can penetration in Brazil. So we're betting on can penetration improving in Q3, Q4 and stabilizing in Q1 for 2024. We haven't done a ton of work on 2024 right now, but I would think about it's principally an improved economy and a returnable glass shift that took place during inflationary period, which has always come back to cans, because that's the preferred choice and the preferred choice of our customers. We expect the same thing to happen. It's too early in the process given, excuse me, in the year given it's winter there to see much movement if anything, but we anticipate that tailwind into Q3 and into Q4, more in Q4. Hopefully that helps.

Of course, understood. And just a very quick follow-up on the North American market regarding your volume commentary there. There's been a lot of start and go on various promotional excitations this year and euphoria and then waning, euphoria and then coming back. How do we think about that in the mass beer market? I mean there's been some competitor commentary and optimism for CSD at least a little bit, but what are you actually seeing from your customer base and how is that actually flowing in to your outlook for the second half? Thank you.

We began the year with the expectation that we wouldn't see promotional activity, but promotional activity does not generate volume momentum. We thought volume momentum would come in Q4 when there are more challenging comps. We still anticipate that. We didn't build in much in terms of volume momentum happening in the first three quarters of the year. And even though you're right, there's increased activity on promotion. It hasn't been enough to move volume. There has been share shift from the major CSD players into private label over the last four weeks. That is usually a light bulb that goes off and folks behave differently as a result of that, but I'm encouraged that what we built into our plan heading into the year will manifest in the fourth quarter. I don't see any appreciable movement in the third quarter, because the promotion to your point is happening, but it's not manifesting in volume momentum yet.

Helpful color. Thank you.

Thank you.

Thank you. Our next question is from the line of Ghansham Panjabi with Baird. Please go ahead. Your line is open.

Hey guys, good morning.

Hey, good morning Ghansham.

Good morning. Obviously a lot going on. If food is just going to step back and you know the first quarter beverage packaging North and Central America, you know volumes were down roughly 5% and then in 2Q down 8.5. Is that delta purely mass beer or is there anything else that perhaps was a little bit worse on a year-over-year basis?

I think you characterized it correctly. It's the net beer impact in the second quarter. There were pretty stable trends across everything and it kind of lends into my previous comments on the CSD sector. You know energy continues to -- almost all the categories are performing year-over-year in line with the exception of mass beer and that fell off. I think net, there was negative 2.5 points of growth in the first quarter, net minus 4.5 points and obviously our mix would have weighted us further down.

Okay. Thanks for clarifying that and then in terms of the curtailment that you're doing in terms of managing supply et cetera across multiple regions. What was that number for 2Q and how are you thinking about that for the back half of the year as well?

The curtailment in South America is exactly what we planned. I mean candidly it's negligible in terms of the curtailment that we planned in 2Q versus what actually happened. You could say the delta that you just confirmed and volume that was additional curtailment that we took in the second quarter. Apart from that we've got a little bit more curtailment that will manifest throughout the third quarter versus what we entered the year with because of the mass beer phenomenon. Apart from that everyone's in alignment with what we entered the year with and what we expected.

Got you. And then just one final one. You seem generally constructive on Europe on beverage packaging side based on what you've seen so far this year. Just judging by the commentary and just some of the macro news. It seems like the European consumer is just much weaker in terms of spending and trade-downs and so on and so forth. Has your view changed at all in terms of the outlook for Europe specifically as it relates to the beverage can or is it pretty much the same?

The outlook for the long term and the medium term continue to -- it is just a wealth of opportunity for us in terms of substrate shift given our current position. The end consumer is absolutely weaker than where we entered the year because of everything you cited. The can generally benefits from the on-prem off-prem shift even some of the trade-downs are beneficial. We've got a more diversified portfolio that has helped us heavier energy, heavier CSD. Beer has been the -- from a pan-European standpoint. Beer has been the softer category, there but I think our portfolio has helped us. And so we see we see a little bit more opportunity given that than maybe some of the other comments area that's been that's been put out there. But yes consumer in the second half of the year softer. We're still going to see nice growth and we're still going to -- that business continues to perform extremely well.

Thanks so much.

Thank you. Our next question is from the line of Mike Roxland with Truist Security. Please go ahead your line is open.

Thank you, Scott and Dan, thanks for taking my questions.

You bet Mike.

I might as well jump on the mass beer right over here and ask the question just you know. How are you just thinking about your portfolio and your end market exposure going forward. I think so, you made the comment that you could see some you know some shares shift later this year until 2024. So you could see you know mass beer improved and then your volumes are probably not possibly dead out but if there isn't that recovery in mass beer what happens to your volumes then. And so, I guess the question really is, one, let's assume that mass beer doesn't recover what happens to your volumes then. And two, are you actually considering trying to shift your production to other product categories. I made a comment in the press release that you said you're trying to align yourself with customers that are experiencing higher growth, so that means, you're trying to really shift or minimize your exposure to mass beer relative to other categories that maybe have more potential on a go forward basis.

Yes Mike let me, this is all North America related I'm assuming, so I'll start there. Let's just talk about the categories, because we're spending an awful lot of time on the domestic beer category, which is which is down and I believe we're at a trough so it will recover from this point and it's consistent with all of the customer commentary within that space. But domestic beer is down 4.5% last 12 weeks, which is a further versus 52 weeks down, nearly 3%. So there's an acceleration of the decline obviously because of the marketing issue, but import beer is up 11% , non-alcoholic beer is up 27% cider is up 8% S&B is up 15%, ready to drink cocktails are up 41%. As we've seen the evolution of our customers transition to beverage companies, because they're going to be forced to put stuff on the shelf that sells. We've only experienced this phenomenon here for the past 12 weeks and there's a lot that is going to be repositioned and given we participate with everyone in the market, we should win with whatever's going to win in the market. At what percentage? It's a great question. We don't know, but the trough that we're experiencing now in the second quarter the third quarter will improve we should benefit from that in the first half of 2024 I would expect continued benefit throughout that first half of the year. But there's a lot of t questions. but I'm confident that these are customers understand their world real well and they know that they need to be putting stuff on the shelf that's going to sell and folks will find a home. Nothing's going to change candidly from that import beer number. The Hispanic population continues to grow. They already have all gut plans to lean into that to add more capacity. So there's an ability for those folks to accelerate. And obviously we're very close to them. So I'm encouraged. From today moving forward I'm encouraged what's going to show up in the first half of 2024 and beyond.

Got that. Thank you for the color. And then just one quick question I think you recently restarted production Avital [ph] and Venus, George. And so wondering, I think that plan was taken down due to the weak macro and also because you lost a customer contract. So wondering is you need to bring them up and restart the plant because of your anticipation of better Brazil demand. Did you win new business? Just wondering why you've went up and restart. And I think that was done within the last month or so?

Yes. We're bringing it up for the other customers in that market that are winning and we anticipate that they will win further and take further share as a result of the one brewer who filed for bankruptcy at the tail end of Q1, that's one issue. But we're not bringing that hands up for the customer that we originally built it for.

Got it. Very clear. Good luck for second half.

Thanks very much.

Thank you. Our next question is from the line of Arun Viswanathan with RBC Capital Markets. Please go ahead. Your line is open.

Yes, thanks for taking my question. I guess I just wanted to ask a little bit more on two things. So first off, when you look into the back half of the year and in the next year, you do have relatively easier comps for next year, already down to mid-single digits on the volume side and high single digits for North America. So would that allow you to get back into the, say, that low single digit range for next year's volume growth? And are there any other capacity considerations we should consider when thinking about how your volumes evolve and maybe settle into that low single digit range?

Thanks for the question. As we sit here today, we haven't spent a whole lot of time on 2024, I think for both Europe and South America, given they're growing, we continue to believe that growth will persist. So the question mark will obviously be North America, but as I stated several times in this call, I think Q2 and Q3 we're at a trough. So we should see improved volumes over these periods. I believe that will be enough to push us into growth territory. So the aggregate position and the answer to your question is yes, I believe we will be in that low single digit growth for 2024. We've also stated several times that the capacity we've put in place over the last two to three years is enough to grow into at that range. And so, we should see nice lift in terms of profitability and performance without having to spend additional growth capital. We've spent the growth capital we need and I don't anticipate much in the beverage business over the next two years from a growth CapEx standpoint.

And so with that comp, I guess, when you think about free cash flow, I imagine it could be nicely up over the next couple of years from that 750 base. Could you just touch on that opportunity as well as the capital that you plan to spend?

Yes, I'll have Scott.

Yes, I can get better. No, you're exactly right. I mean, we're going to spend less capital, just put up a $1.2 billion this year. Next year, we're expected to go down closer to GAAP depreciation. So all that freed up cash flow can go back to shareholders. So I think it gets better.

Thanks.

Thank you.

Thank you. Our next question is from the line of Phil Ng with Jeffries. Please go ahead your line is open.

Good morning. Thank you guys for taking the time and providing all the details. This is John on for Phil.

Hi, John.

Hey. I want to start just, I know it's kind of been beaten to death a little bit, but with the North American volumes down 8.5% in the quarter, obviously much worse than the overall market. I mean, you called out, obviously, that's vastly driven by the mass beer declines. But with the additional capacity that's now in the market over where demand is kind of falling to and supply chains obviously ease globally, have you been experiencing any customer shift or pressure on your contract at this point in time in the North America business?

No pressure on the contracts at this point. I think a good reflection of that commentary would be the fact that we're passing through the inflationary mechanisms. So, if you weren't seeing that come through, I think you could probably could see that there's been some negotiation that's taken place. And that's not the case. The way I would look at volume, I think we're in a short-term dislocation for the second quarter and the third quarter because of mass beer. That correction relative to curtailments or decline shipments will revert in the second half of the year, but more meaningfully in the first half of 2024. The other thing that we've done is we've managed to inventory. So we built too much inventory last year. We've worked that off. So there's been an elevated level of curtailments relative to versus 2022. We'll be running much closer to scanner data in 2024 and Q4 likely to be a lot closer to scanner data. So those are the things that are well understood within the industry and with our customers. I think the theoretical excess capacity versus the reality versus the intentionality of running to cash, all of those things stabilized heading into 2024 in a, what I believe is a much tighter marketplace with growth underpinning every industry participant moving into 2024.

Understood. Thank you for the details.

Thank you.

And then just touching on the, I think if I heard you correctly in the early part of the call, you said you were still exploring opportunities to accelerate the leveraging efforts. Could you maybe just talk a little bit more about what you were referring to? If that maybe meant some smaller divestitures or, other actions that you're taking for that do leveraging efforts?

No, we have what we were referring to as, you know, we've generated a lot of cash here in the back half of the year. We're sitting out a lot of cash. And so we have the flexibility to, you know, pay down whatever piece of the debt we want to pay down. And so that's really what that's about.

Okay. Understood. Thank you very much.

Thank you. Our next question is from the line of Gabe Hajde with Wells Fargo Securities. Please go ahead, your line is open.

Dan Scott, good morning.

Morning

I appreciate that there's been a lot of ground cover here, but maybe just because we don't have access to the industry data anymore and a perfect, I guess, lens into what the market is. Can you parse out the maybe 8.5% decline in the second quarter and sort of, what's embedded in the second half. I mean, between share shift between the market being soft and then maybe the kind of what's going on with the beer disruption? And then another volume related question in Europe. I think volume decelerated in the second quarter. I'm curious if that's a function of not having the capacity that you need. You talked about obviously the UK and the Czech facility ramping up. So, I'm just curious if that's what's driving your optimism for the second half to recover. You talked about your largest energy customer maybe being a little bit weak based on sell through in North America. They're a pretty big customer over in Europe. Is that part of what's driving the optimism or just help me understand because I'm assuming the business in Europe is sort of contracted.

Yes, maybe let me start with Europe. Everything is coming in line with what we anticipated heading into the year. Inclusive of the large energy player. The one area that's softer is beer. I think that's related to the macro environment there. So the higher single digits that we anticipated having the year are going to be closer to mid single digits, but still nice growth. And it's not a function of bringing on the capacity. The capacity that's being brought on is in the growth areas. It's going to be the capacity that's a little less utilized in the beer space. That's what's happening in Europe. Relative to North America, we had a decline, as you mentioned, of roughly 5% in the first quarter. We are in that eight and a half range for decline in the second. We will see declines in the third with a return to some volume momentum in the fourth. What happens in the mass beer space will be the indicator of is it growth? Is it flat? But that's fundamentally, it is the mass beer impact and it is the fact that we're overweight in the beer space and overweight to one customer within that space. So that's the delta.

Okay. Maybe I didn't ask the question explicitly. Do you have any sense for what the market was down in North America? And then last one, if I can flip it in. I think there was $20 million of year-over-year improvement embedded in for the Cup's business, I think there was some basketball championship, that was a good thing for that product. Can you talk about sort of how that business is evolving and maybe expectations going into 2024?

Yes, I think the overall marketplace in North America down slightly, 1%. And so the delta between that and our customer mix is really the delta there. And then on the Cup side, we're seeing incremental improvements. I think an LA Boston Series versus a Denver Miami Series would have helped the cup a little better, believe it or not, but making good ground and good traction in the food service space, things are breaking our way in terms of the regulatory environment as well on that product with Hawaii and now the mid-Atlantic's either banning or contemplating banning single-use plastic cups. So we're looking for trajectory over the second half of the year. I would not say that we will make a $20 million improvement in that business year-over-year, but we will continue to improve against it more in the $10 million range.

Thank you, Dan.

Thank you.

Thank you. And at this moment, I'm seeing no further question on the phone lines.

All right. Thank you very much. We will look forward to talking to you again in the third quarter. Everybody enjoy the rest of your summer.

Thank you. Ladies and gentlemen, that does conclude today's call. We thank you for your participation and ask that you please disconnect your lines. Have a good day.