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By the numbers
Down 11% from $3.51B in Q2 2022 in line with company expectations and below analysts’ expectations.
Americas Beverage net sales: $1.292B
Down from $1.378B in Q2 2022
Q2 net income: $157M
Down from $295M in Q2 2022
- Q2 trends: Sales unit volumes were higher in Crown’s largest segment, Americas Beverage, but lower in most other businesses, CFO Kevin Clothier said during the company’s second quarter earnings call Tuesday. CEO Tim Donahue described trends as similar to the first quarter, including double-digit volume declines in the Asia-Pacific, with lower consumption expected to continue in the region. Inventory issues have been top of mind for many packaging manufacturers, but that hasn’t been a concern for Crown in North America and Europe specifically, because the company provides “just-in-time” delivery there, Donahue said.
- Consumer spending: In North America, “I think that we have seen a lot more consumer activity over the last several months, and we can see that from the amount of cans that our customers are taking,” Donahue said. In Southeast Asia, inflation and slowing economies are factoring into lower consumption. Meanwhile, Europe is “no doubt” in a recession, he added. Core consumers in nations like France and the U.K. are stretched. “Our customers are adjusting their buying patterns to deal with a weaker consumer.” Donahue noted, however, that Crown’s own strategy is to focus on margin improvements rather than “chasing volume” in Europe.
- Promotional activity: Donahue said that a weak April for promotional activity gave way to acceleration in May and June. “We remain optimistic about the prospects for improved volumes in the back half of the year. And while still very early in the third quarter, volumes to-date in July are also strong versus the prior year,” Donahue said. North America saw unit volume growth of 2.5% in Q2, while Latin America was flat year-over-year. He also noted that the company is starting to see more promotional activity around carbonated soft drinks, teas, energy drinks and enhanced waters.
- Expansion: The company shared an update that construction on a delayed Mesquite, Nevada, facility is nearly complete, and the plant is scheduled for commercial startup in August. Crown announced in 2021 that the new beverage can plant would be located in Mesquite to service Western customers. Donahue said that with this development, the company is “satisfied” with its geographical and size footprint. Crown is also nearing completion on the construction of a plant in Peterborough, U.K., which is also expected to be ready for a commercial shipment in August. Last year, Crown announced that it would build a new beverage can facility in Peterborough to meet demand for new product introductions in cans. “These are 50-year investments,” Donahue said.
- Looking ahead: As those expansions are realized, capital expenditures are expected to drop from $900 million in 2023 to about $500 million in 2024 and 2025. That freed up cash will likely to go toward shareholders and paying down debt. Executives expect the second half of this year to have stronger results, in part due to new capacity and easier year-over-year comparisons.
