By the numbers
Q1 net income: $102M
Down from $216M in Q1 2022
Americas Beverage net sales: $1.26B
Up from $1.23B in Q1 2022
- Economic outlook: While Crown Holdings’ Americas Beverage business saw higher can volumes, most other businesses had lower volumes. “Global beverage can volumes were down 2.5% to the prior year and reflect the impact of an inflation-weary consumer, as well as economic slowdowns in some markets,” said President and CEO Tim Donahue on a Tuesday earnings call. During Q1, the company also moved “to right-size headcounts in our U.K. can-making equipment business to reflect lower expected activity.”
- Americas Beverage: Income for the company’s largest segment was $178 million, versus last year’s $164 million. Volumes were up 6% in Q1, with North America up 4%. Additionally, on April 1, “inflation-recovery mechanisms” included in North American beverage can contracts began, allowing the company to “begin to recover cost increases experienced during the past year,” said Donahue. Similar cost recovery mechanisms had already kicked in for the company’s European Beverage division.
- Market dynamics: Donahue said promotional activity was “lighter than anticipated” in North America but the company expects summer selling season efforts to begin in Q2, with carbonated soft drink promos expected to pick up around Memorial Day and July Fourth. Donahue also sees smaller growth potential in energy drinks.
- Other businesses: While net sales were down year over year in other categories, the Transit Packaging segment saw an increase in income due to cost reduction efforts and “selective pruning of lower-margin SKUs and accounts [that] more than offset like-for-like volume declines.”
- International dynamics: Particularly weak markets for European Beverage were Spain, Turkey and the U.K. Factors included the devastating earthquake in Turkey, retail price increases and customers deferring can purchases closer to the summer selling and tourism seasons. The company was also affected by a Brazilian customer bankruptcy. In Asia, the Cambodian market has been especially weak, and activity related to Chinese New Year was less than anticipated.
- Facility updates: Donahue said that this quarter a second line at Crown’s new plan in Martinsville, Virginia, recently began commercial shipments. The company expects a first line in Mesquite, Nevada, to begin shipments in July, with a second line coming online in October.
- Looking ahead: The company reaffirmed its previous guidance for 2023 earnings in multiple categories, including a target for adjusted free cash flow to be approximately $500 million after $900 million in capital expenditures. As the company nears the end of expansion investments that started in 2019, which Donahue said have boosted annualized beverage can capacity by more than 30%, it plans to direct more free cash to paying down debt and shareholder returns.
