Crown Holdings, Inc. (CCK) Q2 2026 Earnings Report, Transcript and Summary

Thank you for standing by. The conference will begin momentarily. Until such time, you will hear music. Thank you, and please continue to stand Good morning, and welcome to Crown Holdings Second Quarter 26 Conference Call. Your lines have been placed in a listen-only mode until the question and answer session. Please be advised that this conference is being recorded. I would now like to turn the call over to Mr. Kevin Charles Clothier, senior vice president and chief financial officer. Sir, you may begin.

Thank you, Michael, and good morning. With me on today's call is Timothy J. Donahue, President and Chief Executive Officer If you do not already have a copy of the earnings release, it is available on our website at crowncourt.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 our Form 10 k for 2025 and subsequent filings. Reported diluting earnings per share were $2.23, compared to $1.56 in the prior year quarter. Adjusted earnings per diluted share were $2.49 in the second quarter compared to $2.15 in the second quarter of 25 That represents an increase of 16% Net sales increased to $3.7 billion reflecting 5% growth in global beverage can shipments the pass through of higher material costs and favorable foreign exchange currency translation. Segment income was $501 million compared with $476 million in the prior year quarter, The increase was driven by higher global beverage can shipments strong performance in our beverage can equipment business, and North American tinplate operations, partially offset by inflationary cost increases. Based on the strong first half performance, and positive demand outlook, we are increasing our full year 2026 adjusted diluted earnings per share guidance from $7.90 from $7.90 to $8.30, to a new range of $8.30 to $8.50. We currently expect the third quarter adjusted diluted earnings per share to be in the range of $2.20 to $2.30 Our full year outlook assumes net interest expense of approximately $355 million exchange rates at current levels with the euro at an average rate of 1.16 to the dollar. Effective tax rate of approximately 25%, depreciation of approximately $330 million, non-controlling interest expense of approximately $150 million while dividends to non-controlling interest are expected to be $110 million Adjusted free cash flow of at least $900 million capital spending of approximately $550 million. Capital allocation remains a key component of our value creation strategy. During the second quarter, we repurchased $305 million of company shares. Through the first 6 months of the year, we repurchased $517 million of shares and paid $77 million in dividends returning a total of $594 million to shareholders. This pace of repurchases reflects our confidence in the company's outlook the strength of our free cash flow generation and our commitment to a disciplined, balanced capital allocation framework. We continue to invest in our growth initiatives in Brazil Greece, Spain, and India which are progressing on schedule while maintaining a strong balance sheet. At the end of Q2, our adjusted net leverage ratio was approximately 2.5x, an improvement from the first quarter and consistent with our long term leverage target. Our results in the quarter reflect what we see every day. Consumers continue to choose beverages in aluminum cans. And our customers look to Crown to reliably support this growing demand. In fact, as I sit here this morning, enjoying a cold beverage in a can, I am reminded that millions of consumers around the world made the same choice throughout the second quarter. it is a simple but powerful reminder of the strength of our business and the appeal of the most sustainable beverage package. With that, I will turn the call over to Timothy.

Thank you, Kevin, and good morning to everyone. As Kevin so ably discussed and as reflected in last night's earnings release, the company had another strong performance with second quarter revenues and earnings per share both exceeding the prior year quarter by 16%. Global beverage can volumes were up 5% in the quarter with most regions experiencing strong demand. And this follows 5% growth in the first quarter. All of this is only possible due to the tremendous global team we have at Crown. Despite the ongoing Middle East crisis, and related global economic headwinds, the businesses responded well to not only support each other, but to also continue to provide the level of service and quality that our customers require. Revenues in Americas beverage advanced 21% in the quarter almost entirely due to the pass through of higher aluminum costs. Sales unit volumes in North America grew 5% offsetting declines across Latin America. Income in the segment declined by $3 million primarily due to cost inflation. North American can demand remained strong and we expect full year shipments to be 3% to 4% above 2025. European volumes increased 7% in the quarter with growth noted across almost all countries resulting in a 10% improvement to the segment's income in the quarter. As in North America, demand remained strong and the first line in Greece was commercialized earlier this month bringing much needed capacity to our European system. Further capacity will come on late in the year in both Spain and the second Greek line. Income in Asia Pacific advanced 6% in the quarter as volume gains across most countries offset cost headwinds arising from the Middle East crisis. Overall, volumes in Transit Packaging were level to the prior year with improved equipment and tool activity being offset by lower steel and plastic strap volumes. The income effect of this positive revenue mix is offset by inflation impacts running ahead of our cost recovery. The business remains resilient we expect second half performance to be firmer to the prior year than in the first half. Increased beverage can equipment activity combined with productivity improvements in North American tinplate resulted in segment income improvement across our other businesses. Our North American food can business which is now well balanced between human and pet food, saw volumes decline 3% in the quarter although we note that volumes advanced 9% in the prior year second quarter. Just a few points to summarize before opening the call for questions. Global beverage can volumes up 5% in the quarter. Earnings per share up 16% in the quarter with full year guidance raised, We returned almost $600 million to shareholders in the first half and the balance sheet remains strong with leverage remaining at our long term target of 2.5x. And with that, Michael, we are now ready to begin to take questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, you may press star followed by the number 1. Please unmute your phone and record your name and company clearly when prompted. Your name and company are required to introduce your question. To withdraw your request, you may press star followed by the number 2. Our first question comes from the line of George Leon Staphos of Bank of America. Your line is open.

Everyone. Good morning. Thanks for the details. How are you? Congratulations on the progress. I had a couple of questions, obviously. I guess, first of all, with America's EBIT, the guidance so far for this year has been for earnings to be down. You have talked about that in the past. The quarter was relatively flat which was better than expected. Do you think that potentially there is the chance that earnings might be flat overall for Americas given the volume momentum that you have? Or would that still be a bridge too far And what are the considerations in that Maybe second question related, I know it is early, it is middle of the year. But do you have any thoughts that you could share in terms of how you think your volume your market shares particularly in North America, might develop in 2027? Any thoughts there? Then I had 1 last follow-on.

So George, on the first question, I think the second half of the year, could be level to the second half of last year. To use your terms, just given the softness we experienced in Brazil in the first half, it might be a bridge too far for this year to equal last year in segment income in the Americas, although we will if we do not get to a billion of segment income, I know we crossed last year. If we do not get to a billion of segment income, we will get real close to that number in the Americas. But I think the customer mix related softness we had in the first half in Brazil as you say, a bridge too far. But second half should be pretty firm to the prior year. I think the strategy we have employed as it relates to volume and market share in all regions has been 1 in which we have tried to develop a business that rewards our company and our stakeholders for the efforts that we make. And sometimes that is not so volume dependent. Sometimes that is more dependent on sound commercial strategies, which yield higher income. Having said that, the market is growing. You know, it is probable that our volume next year will be up compared to this year What that means for market share, I do not know. Less concerned about market share, although we do have a pretty good position in North America. We are we are probably about 25% of the market. there is nothing wrong with being a strong number 2 in the market, and I think we are pleased with our position. And as I said, we are more focused on getting a proper return on the assets that we have employed in the system.

Understood. Thanks for the thoughts on that, Timothy. Last 1 for me. Again, the quarter was for 2Q was ahead of your guidance. And again, congratulations on to your team on that. As we look early into the third quarter, any thoughts on where volumes are right now? And if somebody wanted to ask the question, why are earnings lower sequentially from 3Q versus 2Q? What would what are the key considerations there? And to some degree, what are you guarding against? With that, I will turn it over, and thanks very much.

Yeah. Listen, I think just looking at volumes globally in beverage cans everything feels very firm right now. That is North America, is continuing to see high demand. You know, 1 of the large retailers has a number of rollbacks in place, and they typically run for from 1 to several months. And so as an industry, we are excited about that, not just in beverage cans, but also in food cans. Hopefully, that drives more volume. George, you have been around a long time like I have. You recognize that in times when consumers are stretched and stressed, that dining at home or consuming at home becomes more prevalent. You know, we are sitting here in Tampa right now. I can tell you not that I am gloating about this. I think it is unfortunate, the Tampa restaurant scene is really struggling this summer. Which tells me people are eating at home. And if we are seeing that in Tampa, I guess we are seeing that all around the country. So, you know, I think demand's going to remain strong for aluminum beverage and steel food we look through the rest of the year. Europe remains sold out more or less. You know, it will slow down seasonally, but it is still sold out And we have new capacity coming online. Asia, we have had double digit growth in the first half of the year. I think we will have high single digit growth in the second half of the year. So that is a slowdown, but it is still high single digit growth. We will take high single digit growth all the time. Now we obviously do not have a World Cup in the second half of the year, but as I said, demand remains strong. You have asked the question that everybody else wants to ask. I think we have a little bit of caution around the second half. You know, if we were sitting here 3 months ago, we might have had hopes as many people did that the Middle East war, Middle East crisis perhaps would be drawn to some conclusion. It seems to only be picking up right now, which is unfortunate for a lot of reasons. And that, again, will give us some caution as we look at ocean freight, other industrial gases, inflation that we might expect there. So we probably have an inflation number penciled in for the second half that we did not have as high a number when we spoke to you 3 months ago. So I will leave it at that and let some others ask some questions.

Okay. And we should expect Signode will be up sequentially, just implied. Right? And thanks. I will turn it over.

Signode feels like it is going to be very level to the second half of last year in the second half, which would imply sequentially up in the second half, yes. You, Timothy. Thank you. Thank you.

Our next question is from the line of Anthony Pettinari of Citi. Your line is open.

Good morning. Good morning. Just following up on the last question. I think previously, you had given an EPS impact from Middle East conflict of $0.05 in 2Q and $0.10 for the full year, if I got that right. Can you any update there?

Yes. Yes. So the $0.05 in the second quarter maybe it was $0.05 or $0.06 and we saw a lot of that in the Asian business. Having said that, we earned through it with higher volumes. And, you know, we have got a much lower cost structure there than we had several years ago. So the Asian businesses is well prepared to defend itself against cost increases Having said that, we do expect the second half of the year to continue to see higher inflation that currently runs ahead of our cost recovery mechanisms which will reset either at the end of the year or early next year. So I would, if we were back in April, if we were modeling $0.05 in the second quarter and 5¢ in the second half, I would tell you we probably had $0.05 or $0.06 in the second quarter, and we probably have $0.07 or $0.08 in the $0.08, maybe $0.10 in the second half in our model right now, and it is just, you know, I am always afraid to say we are being overly cautious. I think we are just trying to be mindful of the challenges that we see in the global economic system. And not unhappy with our projected results, just trying to make sure we and you do not get ahead of ourselves right now until we see some resolution to some of the geopolitical instability we are seeing right now.

Got it. Got it. that is very helpful. And then I am just wondering, when all is said and done, is it possible to gauge what the World Cup may have done for Crown in calendar 2026 in terms of you know, volume, sales, earnings, whatever metric you might want to use. And then just directionally, is there anything that sort of surprised you about the impact positively, negatively? Anything you call out?

So, Anthony, when you look at the World Cup and we kind of look at our volumes, right, the second quarter, we were up 5%. You look at our full year expectation, you know, we are looking at 3% for the full year. You can almost equate the 2% probably whether it is World Cup or, you know, America 250, it seemed like the activity around it was definitely elevated. You know, it is hard to say how much is directly correlated, but you know, there is clearly some volume impact that we have seen in the second quarter. And if I was going to equate a number, I would say it is close to maybe it is 2% of the you know, North American volume for sure.

Okay. Understood. that is very helpful. I will turn it over.

Thank you. Thank you.

Our next question is from the line of Ghansham Panjabi of Baird.

Thank you, operator. Good morning, everybody. Just going back to the comments on, you know, relative caution, if you will, for the back half versus what you delivered in 2Q. Just to confirm, are you actually seeing something that worries you as it relates to either volumes or cost? Or are you anticipating some sort of pressure as it relates to those 2 dynamics as you think about the back half of the year?

Ghansham, that is a really good question. I think Kevin's comment if we saw 5% volume growth, and let's just deal with North America to start, if we saw 5% volume growth in North America in the second quarter and we attribute perhaps roughly half of that to outsized World Cup activity, which was certainly beyond what we expected. Our comments previously with respect to the World Cup would have been something along the lines that it is a 4-week tournament, and how much more can people drink? Well, guess what? They drank a lot more, and so we are not gonna see that in the third quarter. So we know that while the full year, we are still gonna be up 3% to 4%, it is not gonna mirror the 5% we saw in the second quarter or the first half. So and then you know, some caution around inflation in the second half. We will not get a chance to recover a lot of these costs, be it in Transit, Asia, and even some of where we do not have freight in some of the contracts, some of the incremental freight costs and diesel that we see in our businesses here in North America. So I do not think there is anything specific. I think it is just it is a reflection of we had an outsized North American gain In terms of volume from the World Cup in Q2. I think we had a let's be honest. We had a quarter we did not expect for a lot of reasons. A lot of things to use Kevin's term, a lot of things went right When you take a step back and you look at it, everything that went right, you are trying to be honest with yourself and go through all the things that went right and things may still go really good in the back half of the year, but are they gonna go that good as it related to the second quarter? So just caution. I do not think anything specific. Just caution.

Okay. Thanks for that. And then can you give us a sense on Latin America? I am sorry if I missed that in terms of volumes for 2Q. And then separately, as it relates to the beverage can business and the tinplate businesses, obviously, very, very strong operating performance. Was there anything unique in there that boosted the second quarter? Or is that just you know, you are on the flip side of perhaps some tougher quarters previously?

What was the first question? First was on beverage business is well, did they Gotcha. On the other businesses, the other segment, remember, that is tinplate businesses and also the can-making equipment business. And, really, we are at a really easy comp on the equipment making business. Where I would say the majority of the gain that you are seeing in other is largely related to the equipment and tooling business that we have. Versus the prior year. The tinplate business is still the equipment business. And then what was your other question?

strong and doing well, but when you are looking at the quarterly gain, the majority of it was on South American volumes. Oh, I am sorry. So North America up 5% Latin America down 10%.

Fantastic. Thanks so much.

Thank you. Thank you.

Our next question comes from the line of Matt Roberts of Raymond James. Your line is open.

Morning. I appreciate all the buoyant I cannot even state comments. Good word there, Timothy. Listen. I have been dealing with sevens of billions for the last week and a half. It was like trying to calm down an excited kid getting ready to go out for Halloween. So Sure. Well, always entertaining. Have not talked about Europe much. That continues to be strong. So maybe just more granularity there by region, what you are seeing in Southern Europe, Gulf States, and exposure in Northern Europe as well. Seems like a hot summer starting out over there. Starting to run up against tough comps. So any comments there and how we should think about the timing of incremental volumes as Spain and Greece start to ramp?

Yeah. So as I said in the prepared comments, the second I am sorry, the first line in Greece commercialized earlier this month. So we will work through some start up costs, but we are gonna have incremental volumes between now and the end of the year, Spain will come online Early in Q1. The second line in Greece will come online late in the year later in Q4. We did not talk about Brazil. Brazil should be up and running sometime in Q4 as well. The new line in Ponte Grossa. The market remains very tight. Our system remains tight. I hesitate to say sold out, but probably sold out is the right term. Combination of factors. Just an increasing acceptance of the beverage can compared to traditional glass bottles that have existed in Europe for the last 200 years or more. and a growing propensity of fillers to use cans for a variety of reasons, not the least of which is the lowest cost through distribution Obviously, the inherent sustainability characteristics and also, you know, the billboard that is used to advertise your product via the 360-degree graphics on a can graphics on a can. So understand that we are going to have tougher volume comps as we go forward, and, obviously, the bigger the denominator gets, the lower the percentage gain is. We do not always get so concerned about the percentage gain. We like absolute unit numbers because absolute unit numbers are what drive our need to put more capacity in and grow earnings. So really, a lot of positive thoughts around our European business. I think if we look at specifically the second quarter, maybe all markets all of our businesses in Europe up all locations up with the exception of a slight decline in Eastern Europe and the business in The United Arab Emirates down unit volumes down about 20% in the quarter owing to the Middle East But in total, our Middle East volume was up for the quarter. Meaning that the other units in Jordan and Saudi more than made up for the Dubai shortfall.

And maybe 1 on transit. In the prepared remarks, you noted tepid global industrial protect production. PMI levels where they are currently. Are you seeing any green shoots or bright spots in that business, and while you had success in pulling costs out? Are there any further cost opportunities or commercial adjustments you are considering in that business? Thanks again for taking the question. Yes.

We have taken a lot of cost out. there is you know, you never say it is the end. Right? There are all can companies, all businesses that operate in businesses that are looking at margins and trying to keep cost down, it is continuous improvement. We are always looking for ways to improve and take cost out. We have taken the majority of the cost out of that business that we feel we need to take out. So the business is in a really good place. The team has done an excellent job rightsizing the overhead cost structure for what the business should have as a packaging business. The green shoots we are seeing is, you know, we continue to see manufacturing production manufacturing indices being level or expanding from time to time. Little different where we are seeing it, but we are starting to see some green shoots in capital goods orders, which helps our business because capital goods. We have a the most profitable piece of our business is the equipment and tools and the service that goes along with that. And so that is a that is a really good sign. Obviously, gasoline and diesel and some other things impact the segments we serve, I. The transportation segments and so the transportation industry under some pressure with that, although gasoline and diesel, obviously, have pulled back a little here in June. We will see what it does the balance of the year with the war picking up But I think we feel better about the business today than we have over the last 18 months, and we will see where that takes us.

Our next question is from the line of Philip Ng of Jefferies. Your line is open.

Congrats, guys, on a strong quarter. And, Kevin, if that was intentional, it was a very nice touch when you cracked open your can at the start of the call. So congrats to all that.

Thanks. We have been practicing that all week.

I know. it is good execution. I guess question for you, Timothy, to kind of kick things off. You mentioned that North America and across your portfolio, focus is profitability. So I guess when we look at the 2027, do you have a path to kind of drive EBIT per can grinding higher in 2027 in that North America business? You know, it is certainly very tight. So how much slack capacity is out there just from an industry standpoint kind of moved around? And have any of your customers even actually come out reached out to you to add capacity? Now once again, I appreciate the focus here is making more money, but any more color on some of those dynamics?

Listen. Philip, it is a great question. Given the given the industry missteps maybe 5 or 6 years ago, as you remember, we tried to be very cautious around that, but you get caught up in all that. I would say that let's be clear. Customers are always telling you to add more capacity. They want an overcapacity situation, we all act like desperate wolves. And we and I think we you know, the recent memory has taught us all a good lesson, and nobody's trying to do We are all trying to be very responsible. Having said that, the market continues to grow. I think we see further growth. And you know, where we see growth is the continuing growth in energy drinks which largely come in cans and offset many products that are consumed in other substrates, be it a coffee cup or plastic bottle. And so that is a positive end market development for the can industry, as are flavored alcohols, flavored teas, sparkling alcohols that offset perhaps other alcohol, namely beer that comes in glass and/or draft versus just a can. So all these are positive substrate moves for the can industry, those are end-market moves. So we see the we see the market growing. There may come a time when we need to consider more capacity. And when we believe we can do that in a responsible way we will take a look at that much closer.

Jim, any color on how much slack capacity is there in North America? I think there is not much, but in terms of any high-level stock market-- you know what?

I apologize for all of you that know this already, and just very quickly, if you took the rated speed of the equipment that is out there, you would posit that perhaps the industry is running at 92%-93%. But if you adjust that for changeovers for sizes, label changes, maintenance, you know, we have got to be in the mid to high nineties, which is you know, real terms from April to August, it is 110% utilization, and then you have gotta do a lot of maintenance catch up and other things in the in the fourth quarter. So I think it is a market that is pretty well utilized. I mean, there is some new capacity coming on the West Coast. It will be specific to West Coast and some certain customers in that region. there is been other capacity that is come on, and some of these smaller companies that have brought capacity on will get better, and they will they will create more capacity from their own creep. But I think the market's in a really good place right now.

Okay. And then on South America, you talked about Brazil being down, I think, 10% or South America at large. Timothy, any more color on what is driving that? Is that the comp dynamic, shared movement, and then you are bringing on more capacity in Brazil. So how do we shore that up in terms of a little weakness right now and more capacity and just broadly how are you thinking about Brazil this year?

Philip, I will take this. Philip, I will take this. Look, Brazil is all about mix, right? You have a high end consumer, and you have cans that are sold to I would say, the more premium brands, which is not our customer. Largely. We service the lower end of the market, which is, you know, our main customer. So I do not think I think Brazilian economy is doing okay. I think it is similar to the United States, where the high end is doing better than the low end. And right now, I think in the first half, what we have seen is that the lower end consumer is struggling a little bit. I think as and it is also the weakest time of the year. Just remember that. it is their winter if you remember. So I think as we look through the rest of the year, we feel okay with where the projection is. But it is all a mixed game in Brazil. And this happens from time to time. You will have years where, you know, we will do really well in above market growth because our customers are better. This year, it looks like we are we are probably below the market. And that is, again, customer mix.

So, Philip, just a little further color. The big guy there, far more active in promoting beginning and the beginning of the year through the World Cup. And as Kevin said, resulting in a mix for us where we service principally the other 2 big beer companies there and not the larger 1 in great to great extent. The line in Ponte Grossa, we have a 2-line can plant currently in Ponte Grossa. Which is multisize. We need more size capability in the Southeast, and that is the reason for the addition even though the market for us has been soft this year. it is just regional size expansion.

Timothy, any color on what you are expecting for Brazil for the full year? Roughly.

You know, we did not you know, to Ghansham's question, I could have also said that as we look at the back half of the year, Brazil had a massive fourth quarter last year. They are forecasting a similar fourth quarter this year, and Kevin and I, as we look at the first half, we are being a little cautious on what we think our Brazilian team is going to deliver. Currently, our Brazilian team being down high single digits in the first half is projecting that they are going to be flat for the year. So some of our second half caution is just putting some caution against our own Brazilian forecast.

Okay. Super. Thank you so much.

Thank you. Thank you.

Our next question is from the line of Christopher Parkinson of Wolfe Research. Your line is open.

Great. Thank you so much. Just as it pertains to North America, I think we cheated on this on a few prior questions, but could you just give some just baseline assumptions on how you see different substrates of the market, growing? It seems like energy is still generally positive. You know, nonalcoholic seltzers. You know, just any color you could give on those as well as, the your Mexican glass business would be particularly helpful for the second half. Thank you.

Yeah. Listen. I think all segments felt like they were up in the second quarter. I think beer was flattish. I mean, that is a that is a win for beer. It might have been and I am only going from data we get from the CMI, the Can Manufacturers Institute, but 1 of the companies does not report, and they are a bigger beer supplier. So maybe beer was up. But it felt like everything was really strong in the second quarter across all segments. Mexican glass, we had a positive really strong quarter. You know, as the economy tightens, especially in the lower income economies, glass does better and we have a real nice position in the Mexican glass business with 2 factories, 5 furnaces, and results have been very good this year across Mexican glass.

And just, as a follow-up, you have been pretty methodical on adding new capacity linking it to customers, all the things the street likes to hear. When we take a step back and we look at your projected free cash flow you have been buying back shares, surprised most of us, think, for the second quarter. Which has been a theme for the last 2 years. How are you thinking about capital allocation from here? Is there any update on the dividend you would like to give? Or how aggressive you would like to be outside of growth initiatives? Just any other things you would like to share as an update.

Thank you. Well, I mean, obviously, it is something we talk about at every board meeting. And what is the best use of the cash to generate as much shareholder value as we can? You know, I think the goes without saying the fortunate problem we have is we have a lot of cash. So we will we will again look at as we get towards the end of the year with the board what an appropriate dividend level or what we want our dividend policy to be. I think we took a big step at the beginning of this year to bring the dividend up to a level that more appropriately reflects our confidence in our future cash flow generation capabilities And from time to time, Christopher, we may spend 450 million in capital. We may spend 600 million in capital, that does not really move the cash free cash flow around that much from year to year. it is more about taking advantage of opportunities when they present themselves and the first thing to do is to service our customers and be present when our customers need us. And from there, all manners of success should follow. So good question, and I apologize for not giving you a more specific answer, but there is a lot of cash there. And thing is to be as Kevin said earlier, we are gonna be really disciplined about what we do with the cash. Very much appreciated.

Thank you. Thank you. Thank you.

Our next question is from the line of Mike Roxland, Truist. Your line is open.

Yeah. Thank you. Timothy, Tim, and Tom for taking my questions. First 1, Timothy, just you mentioned earlier in response to a question that you think North America volumes will probably be up in 2027. What gives you pause? Is it is it a tougher comps from World Cup America 250? I mean, what are you thinking when you think about 2027, the volume growth there? That volumes would not would not be up? And you used the word probably, which implies some caution.

Well, you know, I think certainly the World Cup you know, if the World Cup was worth a few hundred million cans in Q2, if we wanna just throw a dart and try to pick a number you have gotta try to overcome that. The only thing that will give you pause if growth slows. I mean, we had a I think we had a market in Q2 Tom gave me the information the other day. I think we had a market in Q2, we feel like the market was up 3% to 4%. 3% or 4% in Q2, 3.5%. Tom's telling me in Q2, which is a, you know, that is a pretty strong performance for beverage cans which is, you know, largely a mature market, obviously, with some modicum of growth. Some of that will be World Cup driven, and so you are always looking at how much growth we are going to have if we if we return to more historical levels of growth, be it zero to 2 or zero to 1 versus 2 to 3, then as business moves around and we pick and choose which business we want based on profitability, We could be flatter or up, and that is that is all we are saying.

Got it. But nothing that, as you stand here today, there is a reason that gives when you think about your book of business for 27, there is reason for concern.

No. There listen. there is wins and losses every year. We have got some wins. We have got some losses. But in total, we are gonna be flat to up.

Got it. Thank you for that. Just 1 quick 1 on food can volumes. You mentioned down 3% on tough comps. I think you mentioned called out 9% growth in 2Q 2025. Aside from comps, is there anything else that negatively impacted volumes during the quarter?

No. No, it was a pretty strong quarter. More important than the second quarter is obviously the third quarter. So obviously, as all the crops come in from harvest and but, no, the business is operating really well. About 40% of the business now is pet food so that is a very stable business. Cats do not know if it is August or January. Right? They are they eat the same all year round. And on the human side, a really nice mix of FreshPack and other products. So just a really sound business that we have taken a lot of lot of great strides, and the team has made great efforts. And built a really, really good business, over the last decade.

Got it. Thank you. Thank you.

Thank you.

Our next question is from the line of Hillary of Deutsche Bank. Your line is open.

Hi. Thank you for taking my questions. On the free cash flow guidance, you revised the wording to say at least $900 million versus approximately $900 million last quarter. Is that just due to higher earnings? Or is there something else driving the upside like working or CapEx timing or something else?

Hillary, it is largely just the earnings increase. Hillary, it is largely just the earnings increase. Working capital is a little early to say where we are gonna be. You know, it is really the back half of the year is what determines where working capital ends up for the year. But we have not changed any other expectation. Capital's still $550 million. Working capital is still with use right now. So but we will we will we will, you know, fine tune that number as we move through the year, but we feel really good about the you know, the cash flow at this point And I think as we look at our capital allocation strategy, you know, we should be able to buy close to, you know, $200 million worth of stock back in the, second half.

Oh, great. Yeah. That was going to be my next question. So that is $200 million. And then just, you know, just on the food can volumes, I know you said, you know, it is down 3%. You just mentioned that it was, you know, it was strong. Can you just break down between you said 40% was pet food, but was pet food also down 3%? Like, were they down both down 3% or was pet food stronger than the human food or vice versa?

On a year over year basis, our pet food volumes would have been stronger than human. But that will. on the human side, I do not think we have any concerns. that is just a comp issue versus the prior year. Got it. Great. Great.

Thank you very much. Thank you.

Thank you. Thank you.

Our next question is from the line of Arun Shankar Viswanathan of RBC Capital Markets. Your line is open.

Great. Thanks for taking my question. Congrats on the very strong results there. Pleased to see that it was pretty broad based as well. So I guess on that issue, as you move into the second half, looks like you did take up your guidance by the Q2 beat. But just kind of wanted to get your thoughts as you are exiting the quarter, what kind of momentum have you maintained in the different regions? Do you see some of those strong volume growth numbers continuing? Maybe we will just start there.

I will take the volume, and then we are gonna let Kevin talk what Kevin needs to talk about. As I said earlier, you know, I think North America remains strong, but it is only July, and we will see how the consumer deals with ongoing inflation and other higher costs. And, obviously, even as inflation cools a little bit, the impact on the consumer becomes greater as they drain their bank account. So we will see how the business holds up in August, September, October, but it feels like it is still going to be firm. Certainly, July has been very firm. No slowdown yet seen in Europe. But again we will see how the business matriculates into the fourth quarter through the end of the year. And as I said earlier, Asia up double digits in the first half and realistically we are only expecting high single digits the second half. So not gonna apologize for high single digits, but it is a little lower than the first half. And then Kevin, you want to talk about some costs and some other things?

Yeah. Yeah. I mean, Arun, I think they have said it earlier. As we look out into the back half of the year, you know, the war in the Middle East is going to cause a little bit of a headwind for us. We look at Brazil where we had a really, really strong fourth quarter, it is gonna impact us. And, you know, when we look out in for the projection and we think about what happened in the quarter, the 1 thing we do not have going forward is the World Cup. So when we took it all together, you know, we came up with the increase, the low end of the guide by $0.40, and we increased the midpoint by 30. You know, the beat in the second quarter was not much more than that. So maybe there is a little conservatism in there, but, we wanted to kind of balance, give you a balanced you know, give you a balanced perspective for the rest of the year.

Yep.

Okay. Thanks for that. And then you mentioned inflation impacts on the consumer. So in our observations, it does appear that the beverage customers the companies are still continuing to promote, and they are favoring volumes over price in this cycle. I mean, is that a fair characterization? And then that do you think that is still sufficient to overcome tough comps as you move into 2027? Because you know, that would probably be our last kind of concern here is that you will start facing some tough comps as you move into next year.

Well, I am glad you only have 1 concern. I am concerned about 8 million things, but no, as you state, the companies are promoting more. As I said earlier, 1 of the large retailers has a number of rollbacks across beverage and food products. And that generally bodes well for our volumes So much of the national grocery runs through that chain You know, as we said earlier, as we look at conservatism in the back half of the year or even in the next year, the you know, as we looked at somebody asked the question, what we expected our volumes to be? You know, how much does the market continue to grow, and how much can the consumer continue to absorb. But And as we also said earlier, in times when the consumers are stressed, they typically or they generally in the past have consumed more at home, and that generally bodes well for canned products. So I think when we take it all in, while you may think we are being a little conservative in the second half, it does not mean we are not still really positive on our business.

Thanks. Thank you.

Thank you.

Our next question is from the line of Joshua David Spector of UBS. Your line is open.

Yeah. Hi. Good morning. Congrats on a solid quarter. I wanted to follow-up on North America and just ask if you have any view around inventories in the system at all. I mean, it looks like, you know, you guys outperformed the market. I do not know if you would attribute that just to your mix and say that is what has kind of gone out. But when we are looking at the sell out from, you know, the retail and distribution channels, it does look like the sell in was higher. So is that playing any role in maybe your conservatism or thought on 3Q, or is that largely, you know, normal in your view?

Very normal. That as we come out of major holidays, be it Memorial Day, July 4, Labor Day, that there is sometimes a little slack in the in the retail system, but you know, not a you know, it is not something we have forecasted in. No.

Okay. Thank you.

Thank you. Thank you.

Our next question is from the line of Jeffrey John Zekauskas of JPMorgan. Your line is open.

You are planning to expand build a new facility in India. what is a capital cost for plant like that? Is it 250 million or 350 million? You are new to India? Can you talk about that prospective investment?

I get this, Jeffrey. Jeffrey, so new plant largely cost around $250 million to build. You know, you are putting 2 high speed lines in a plant You know, the plants that we you know, install really around the world are all built the same way. They have same format, structure, capabilities, and $250 million you know, depending on, you know, land costs and construction costs. But you are you are largely right around that number. Mhmm.

And are the contractual structures the same? For India as they would be in Europe, or The United States. And do you have is your idea that there would be commitment for almost the entire volume or for half the volume How do you see that?

Yeah. So, Jeffrey, normally, when you build a greenfield project, you have, you know, commitments for the large majority of the volume. Somewhere like India, you might get commitments for 70% or a little bit higher. And then you set yourself up as you know, make more cans and the market's growing. You support the growth. I mean, we typically get long term contracts. You know, that anchor the, you know, economics of building the plant in India. So we are building the plant anywhere really around the world.

And do you know exactly where you are building it or Northern India is a general approach?

Or specifically, have you found a site the answer is yes and yes, and we have not disclosed that yet because we are still negotiating land cost Okay. Great.

Thank you. Thank you.

Thank you.

Our next question is from the line of Edlain Rodriguez of Mizuho. Your line is open.

Thank you, and good morning, everyone. First of all, I wanna know, like, what beverage is Kevin drinking at 9:00 a.m. that comes in a can. And 2, again, 2 q was better than your expectation. What was so different from your internal model? For us, it is the other segment. That exceeds performance versus what we were looking at. Just trying to get a better sense of the earnings power of that segment. So we do a better job modeling it.

Okay. Alright. Let I will answer your first question here. In terms of what beverage I am drinking, well, 1 is the middle or beginning of the day. And 2, you look at our products that we sell. 80% of our products are in nonalcoholic or nonalcoholic. So you could probably assume I am drinking a nonalcoholic beverage, where we are at today. You ask me that question, you know, maybe at 5 or 05:00 or 5:30, I would say it is probably in the other 20% of our business.

Edlain Elaine, just on the surprise to the second quarter, a little bit for us and certainly for you. As Kevin said earlier, the large majority of the beat in other maybe at least 2 thirds of the beat in other, had to do with our can-making equipment business. And that can be from quarter to quarter a little lumpy. And so it is sometimes difficult for us to project as well as for you to project, but it is a business that we recognize as we build and as we ship. And there is can growth still happening around the world, it is not all of our can growth. We supply many can companies around the world, including some of our direct competitors here in The United States as they have projects. We have world leading equipment for several pieces of the equipment on a beverage can line. The other surprise we would have had would have been in the North or The Americas beverage segment I do not believe we forecasted 5% volume growth. That was probably a couple percentage points higher than we had forecasted. So that would have been the other surprise for us.

Okay. Another quick follow-up on that. The app would not leverage to volume. Does not seem to flow through either in The Americas or Asia again. 5% volume growth, double digit volume growth, but the earnings growth is that much lower than that? Maybe some of it is because of a lag in input cost recovery. Will it get better going forward? But how long it gonna take you to recover those costs?

In Asia, it is all around probably an incremental $4 million to $5 million from higher cost real related to the Middle East crisis that either will subside or we will build that into our pricing model for next year. Fortunately, we had enough growth to overcome that. Still have positive earnings momentum in the quarter. North America, we had a number of cost increases this year that we knew we would not fully recover in our in our pass through models, I e, PPI not enough to fully capture all the cost increases. As well as the negative mix associated with lower sales in Brazil. Compared to the other regions in the Americas segment.

Okay. Thank you very much. Thank you.

Thank you.

Our next question is from the line of Katan Mamtora of BMO Capital Markets.

Good morning, and thanks for taking my question. Maybe just coming back on capital allocation, talked about expectations for share repurchases in the back half. Can you talk about sort of how you will are thinking about M and A opportunities, what is most interesting, which regions, and sort of broadly, how are you all thinking about that?

I would tell you that from an m and a perspective as we sit here today, certainly not contemplating any large M and A Frankly, not contemplating any M and A. Hesitant to say that because if we buy something for $20 million, I do not want you to get all upset. But no m and a currently being contemplated. The uses of cash will be as Kevin described, for the balance of this year As we go into next year, where we would anticipate you know, as we sit here today, another 900 million to a billion dollars of free cash flow next year as well. We would anticipate perhaps a refreshed dividend policy subject to discussions with our board of directors And beyond investments in our business, continue share repurchases. Got it. that is, that is helpful. And then just coming back to what you mentioned earlier in response to the last question around pass through of the nonmetal cost. Is there a way for us to think about sort of rough ballpark order of magnitude you know, sort of what that amount could be on the nonmetal side? Yeah. So hesitant to wanna answer that question only because we do not like to give away too much of our cost model or pricing model. So I am gonna pass on that. that is fair. Thanks, and good luck. Thank you very much. Thank you.

At this time, there are no questions on queue. Thank you, Michael. As that was our last question, we thank you all for joining us and we look forward to speaking with you again in October. Bye now. Thank you. And that concludes today's conference. Thank you all for participating. You may now disconnect.