TAMPA, Fla., July 24, 2023 /PRNewswire/ -- Crown Holdings, Inc. (NYSE: CCK) today announced its financial results for the second quarter ended June 30, 2023.
Net sales in the second quarter were $3,109 million compared to $3,510 million in the second quarter of 2022 reflecting higher beverage can volumes in Americas Beverage and favorable foreign currency translation of $11 million, offset by the pass through of $288 million in lower material costs and lower volumes across most other businesses.
Income from operations was $367 million in the second quarter compared to $466 million in the second quarter of 2022, which included a gain of $113 million for the sale of the Transit Packaging segment's Kiwiplan business. Segment income in the second quarter of 2023 was $414 million compared to $432 million in the prior year second quarter as benefits from the contractual recovery of prior years' inflationary cost increases in European Beverage and cost reduction initiatives in Transit Packaging were offset by lower volumes.
Commenting on the quarter, Timothy J. Donahue, Chairman, President and Chief Executive Officer, stated, "The Company performed well during the second quarter, as strong results in European Beverage and Transit Packaging offset softer than expected beverage can volumes in Asia and sluggish aerosol can demand in North America. Cumulative inflationary effects and challenging macroeconomic conditions in certain markets continue to adversely impact volumes. In North America, we anticipate increased second half beverage can shipment levels as retail promotional activity, while still somewhat limited, is expected for carbonated soft drinks. The benefits from actions taken in 2022 to negotiate more comprehensive raw material and other inflationary pass-through provisions in European Beverage and a significant overhead reduction program initiated in Transit Packaging are expected to continue to yield benefits throughout the remainder of the year.
"Looking ahead, we believe that the beverage can remains the preferred packaging option for customers and consumers alike, in part due to its unmatched sustainability benefits and infinite recyclability. As we near completion in late 2023 of the multi-year program to profitably expand global beverage can production capacity to support expanded customer requirements, the Company expects capital expenditures to be significantly reduced in 2024 and 2025 from this year's $900 million to approximately $500 million and we plan to use increased cash flow to pay down debt and return capital to shareholders."
Interest expense was $110 million in the second quarter of 2023 compared to $64 million in the second quarter of 2022 reflecting higher outstanding debt and higher interest rates.
Net income attributable to Crown Holdings in the second quarter was $157 million compared to $295 million in the second quarter of 2022. Reported diluted earnings per share were $1.31 in the second quarter of 2023 compared to $2.43 in 2022 and adjusted diluted earnings per share were $1.68 compared to $2.10 in 2022.
Six Month Results
Net sales for the first six months of 2023 were $6,083 million compared to $6,672 million in the first six months of 2022, primarily due to the pass through of $388 million in lower material costs, lower overall net volumes and unfavorable foreign currency translation of $25 million, partially offset by higher beverage can volumes in Americas Beverage.
Income from operations was $636 million in the first half of 2023 compared to $810 million in the first half of 2022, which included a gain of $113 million for the sale of the Transit Packaging segment's Kiwiplan business. Segment income in the first half of 2023 was $734 million versus $815 million in the prior year period, reflecting benefits from the contractual recovery of prior year's inflationary cost increases in European Beverage and cost reduction initiatives in Transit Packaging, offset by $60 million of year over year inventory impact of steel repricing in the Other segment and lower volumes.
Interest expense was $212 million for the first six months of 2023 compared to $118 million in 2022 primarily due to higher outstanding debt balances and higher interest rates.
Net income attributable to Crown Holdings in the first six months of 2023 was $259 million compared to $511 million in the first six months of 2022. Reported diluted earnings per share were $2.16 compared to $4.15 in 2022 and adjusted diluted earnings per share were $2.88 compared to $4.11 in 2022.
We continue to expect full year improved operating results in global beverage as well as in Transit Packaging.
Third quarter adjusted diluted earnings per share are expected to be in the range of $1.70 to $1.80 and full year 2023 adjusted diluted earnings per share in the range of $6.10 to $6.30 reflecting the impacts of higher transactional foreign exchange expense and lower equity earnings from our previous guidance.
We affirm our previously issued guidance of adjusted EBITDA growth between 8% and 12% for 2023 with an expected adjusted effective tax rate between 24% and 25%. Adjusted free cash flow is expected to be approximately $500 million after $900 million of capital expenditures and approximately $100 million in benefits from lower working capital. Through six months, working capital performance is on plan, as we realize efforts to reduce elevated inventory levels from the prior year end.
Segment income, adjusted free cash flow, adjusted net leverage ratio, adjusted net income, the adjusted effective tax rate, adjusted diluted earnings per share, net interest expense, EBITDA and adjusted EBITDA are not defined terms under U.S. generally accepted accounting principles (non-GAAP measures). Non-GAAP measures should not be considered in isolation or as a substitute for income from operations, cash flow, leverage ratio, net income, effective tax rates, diluted earnings per share or interest expense and interest income prepared in accordance with U.S. GAAP and may not be comparable to calculations of similarly titled measures by other companies.
The Company views segment income as the principal measure of the performance of its operations and adjusted free cash flow and adjusted net leverage ratio as the principal measures of its liquidity. The Company considers all of these measures in the allocation of resources. Adjusted free cash flow has certain limitations, however, including that it does not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure. The amount of mandatory versus discretionary expenditures can vary significantly between periods. The Company believes that adjusted free cash flow and adjusted net leverage ratio provide meaningful measures of liquidity and a useful basis for assessing the Company's ability to fund its activities, including the financing of acquisitions, debt repayments, share repurchases or dividends. The Company believes that adjusted net income, the adjusted effective tax rate and adjusted diluted earnings per share are useful in evaluating the Company's operations as these measures are adjusted for items that affect comparability between periods. Segment income, adjusted free cash flow, adjusted net leverage ratio, adjusted net income, the adjusted effective tax rate, adjusted diluted earnings per share, net interest expense, EBITDA and adjusted EBITDA are derived from the Company's Consolidated Statements of Operations, Cash Flows and Consolidated Balance Sheets, as applicable, and reconciliations to segment income, adjusted free cash flow, adjusted net leverage ratio, adjusted net income, the adjusted effective tax rate, adjusted diluted earnings per share and adjusted EBITDA can be found within this release. Reconciliations of estimated adjusted diluted earnings per share for the third quarter and full year of 2023 to estimated diluted earnings per share on a GAAP basis are not provided in this release due to the unavailability of estimates of the following, the timing and magnitude of which the Company is unable to reliably forecast without unreasonable efforts, which are excluded from estimated adjusted diluted earnings per share and could have a significant impact on earnings per share on a GAAP basis: gains or losses on the sale of businesses or other assets, restructuring and other costs, asset impairment charges, asbestos-related charges, losses from early extinguishment of debt, pension settlement and curtailment charges, the tax and noncontrolling interest impact of the items above, and the impact of tax law changes or other tax matters. We have not provided a reconciliation of the range of anticipated growth of projected adjusted EBITDA to the most comparable GAAP measures due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including restructuring and other charges which are event-driven.
The Company will hold a conference call tomorrow, July 25, 2023 at 9:00 a.m. (EDT) to discuss this news release. Forward-looking and other material information may be discussed on the conference call. The dial-in numbers for the conference call are 630-395-0194 or toll-free 888-324-8108 and the access password is "packaging." A live webcast of the call will be made available to the public on the internet at the Company's website, www.crowncork.com. A replay of the conference call will be available for a one-week period ending at midnight on August 1, 2023. The telephone numbers for the replay are 203-369-3350 or toll free 800-819-5739.
Cautionary Note Regarding Forward-Looking Statements
Except for historical information, all other information in this press release consists of forward-looking statements. These forward-looking statements involve a number of risks, uncertainties and other factors, including the Company's ability to continue to operate its plants, distribute its products, and maintain its supply chain; the future impact of currency translation; the continuation of performance and market trends in 2023, including consumer preference for beverage cans and increasing global beverage can demand; the future impact of inflation, including the potential for higher interest rates and energy prices and the Company's ability to recover raw material and other inflationary costs; future demand for food cans; the Company's ability to successfully complete its previously announced capacity expansion projects and begin production within expected timelines; and the impact of overhead reduction efforts in the Transit Packaging business, that may cause actual results to be materially different from those expressed or implied in the forward-looking statements. Important factors that could cause the statements made in this press release or the actual results of operations or financial condition of the Company to differ are discussed under the caption "Forward Looking Statements" in the Company's Form 10-K Annual Report for the year ended December 31, 2022 and in subsequent filings made prior to or after the date hereof. The Company does not intend to review or revise any particular forward-looking statement in light of future events.
Crown Holdings, Inc., through its subsidiaries, is a worldwide leader in the design, manufacture and sale of packaging products for consumer goods and industrial products. World headquarters are located in Tampa, Florida.
For more information, contact:
Kevin C. Clothier, Senior Vice President and Chief Financial Officer, (215) 698-5281
Thomas T. Fischer, Vice President, Investor Relations and Corporate Affairs, (215) 552-3720
Unaudited Consolidated Statements of Operations, Balance Sheets, Statements of Cash Flows, Segment Information and Supplemental Data follow.
Adjusted net income, adjusted diluted earnings per share and the adjusted effective tax rate are non-GAAP measures and are not meant to be considered in isolation or as a substitute for net income, diluted earnings per share and effective tax rates determined in accordance with U.S. generally accepted accounting principles. The Company believes these non-GAAP measures provide useful information to evaluate the performance of the Company's ongoing business.
Adjusted free cash flow is defined by the Company as net cash from operating activities less capital expenditures and certain other items. A reconciliation of net cash from operating activities to adjusted free cash flow for the three and six months ended June 30, 2023 and 2022 follows.
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SOURCE Crown Holdings, Inc.