Crown Holdings Inc (CCK) 2012 Q4 法說會逐字稿

Good morning and welcome to Crown Holdings' fourth-quarter and full-year 2012 earnings conference call. Your lines have been placed on 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. Timothy Donahue, Executive Vice President and Chief Financial Officer. Mr. Donahue, you may begin.

Thank you, Shirley, and good morning to everybody. Welcome to Crown Holdings' fourth-quarter and year-end 2012 conference call. With me on the call today are John Conway, Chairman and Chief Executive Officer, and Tom Kelly, Senior Vice President, Finance.

Before we begin, I would like to point out that on this call, as in the earnings release, we will be making a number of forward-looking statements. Actual results could vary materially from such statements. Additional information concerning factors that could cause actual results to vary is contained in the press release and in our SEC filings, including comments in the section titled management's discussion and analysis of financial condition and results of operations in Form 10-K for 2011 and in subsequent filings.

A reconciliation of generally accepted accounting principles to non-generally accepted accounting principle earnings can be found in our earnings release. And if you do not already have the earnings release, it is available on the Company's website at CrownCork.com.

You will also find a reconciliation from net income to EBITDA, credit ratio computations, and supplemental cash flow data on the Company's website.

We will review performance for the year, update guidance, and then turn the call over to John for his comments. After John's comments, we will open the call to questions. We ask that you limit yourselves to two questions so that everyone may get a chance to ask a question.

For 2012, diluted earnings per share were $3.75, compared to $1.83 in 2011. On a comparable basis, diluted earnings were $2.81 in both 2012 and 2011.

For the fourth quarter, comparable diluted earnings per share were $0.51 against $0.48 in the 2011 fourth quarter and reflect lower inventory levels than earlier anticipated.

On a currency-neutral basis, full-year net sales were slightly ahead of 2011 as higher global beverage can unit sales offset lower sales in European three-piece packaging and the pass-through of lower raw material costs.

Fourth-quarter net sales were 1% short of the prior year as raw material pass-through offset overall net unit volume gains.

There was very little currency impact in the fourth quarter, but for the year, currency had the following unfavorable impact on the net US dollar sales of our segments -- $70 million in European Beverage, $130 million in European Food, and $36 million in nonreportables. The full-year unfavorable currency impact on segment income, as noted in the release, was $21 million, and by segment was $6 million in European Beverage, $13 million in European Food, and $2 million in nonreportables. Currency had a negative $0.09 per diluted share impact for the year.

Globally, beverage can sales were up 5% for the year as growth in Latin America, Europe, and Asia-Pacific all offset a decline in North America. As noted throughout the year, volumes in our European three-piece packaging businesses, that is food can enclosure, aerosol can, and specialty, were impacted by poor weather and the persistently sluggish European economy. As we described in October, we did adjust our production schedule significantly to right-size inventory levels by year-end.

As we look ahead to 2013, we expect continued strong unit volume performance in global beverage and more normal weather in Europe with a resultant recovery in food can unit volumes. The European aerosol business is expected to show income improvement on the back of the 2012 restructuring, despite the impact of a continuing weak economy.

Segment income at $187 million was down $5 million from the fourth quarter of 2011 and reflects underabsorption of costs from lower production levels, lower unit volume sales in European three-piece, and new plant start-up costs in Asia.

In Americas Beverage, revenue for the quarter and year was right on top of 2011 levels, reflecting overall unit volume growth of 1% in the quarter and more than 2% for the year, offset by the pass-through of lower aluminum costs.

Volume in Brazil, Colombia, and Mexico continued to be strong, up more than 16% for the year, offsetting a 1.5% decline in North America. The overall Brazilian market was up 7% in 2012, with our share of the market growing to almost 26% on the back of investments made in 2009 and 2011.

We expect another year of high utilization rates in each region across the entire segment with improving productivity in 2013.

Our North American food business had another strong performance in the fourth quarter and for the year and clearly remains best in class. Cost reductions from the prior-year restructuring and productivity offset lower volumes.

Fourth-quarter sales in European Beverage were 2% below the prior year, primarily from the pass-through of lower aluminum costs. Unit volume growth was notable in Greece, Slovakia, and Turkey, offsetting softness in Spain and the UK. We opened a new plant in Osmaniye, Turkey, during 2012, and plant performance is coming up the learning curve on schedule.

Segment income was up significantly in the quarter and reflects favorable mix and better cost performance, notably in Slovakia.

Sales in European Food were down 6%, ex-currency, in the quarter. Overall unit volume sales were flat in the quarter, with softness in Germany, Eastern Europe, and the UK being offset by higher shipments in France and Italy.

There was no currency impact, but unfavorable mix and some price compression affected segment income performance in the quarter.

Unit volume sales in Asia-Pacific were up 10% in the quarter as demand remained firm throughout Cambodia, China, and Singapore. Segment income performance in the quarter benefited from volume growth, albeit offset by costs associated with numerous startups and a competitive environment in China.

During 2012, we began commercial operations at three new plants in China, expanded one of our plants in Vietnam, and completed a major modernization program for the plant that we acquired in Vietnam. We currently have five major projects underway in Asia, which will be completed over the course of the first three quarters in 2013. These include three new plants, one each in Cambodia, Thailand, and Vietnam; and the addition of second beverage can production lines to existing facilities in Putian, China, and Malaysia.

So it will be another year of heavy activity for our Asian management team, who will grow their business to more than $1.3 billion in revenue in 2013, almost double the $700 million recorded in 2010. They have managed this growth extremely well, while continuing to provide exemplary service as their customers build their own brands throughout the Asia-Pacific region.

As provided in last night's earnings release, Asia-Pacific is now a reportable segment. The nonreportables now include aerosols, specialty packaging, and our equipment business. With manufacturing operations in Cambodia, China, Malaysia, Singapore, Thailand, and Vietnam, this segment serves the entire Asia-Pacific region and continues to grow its sales and income and in importance to the Company.

One of the many positive features of the metal can industry is that our equipment, properly maintained, will function effectively for a long time. We recently completed a review of depreciable lives with external advisors, which Tom will now discuss.

Thanks, Tim.

As Tim mentioned, we recently completed a study evaluating the estimated useful lives over which we depreciate our production equipment. Based on the results of this study and beginning in the first quarter of 2013, we are increasing the estimated useful lives on production equipment to 18 years from the 10 and 14 years we previously used.

We think these new estimates better reflect the useful lives of the equipment and are in line with other industrial and packaging companies.

The 2013 earnings-per-share guidance that we will provide on today's call includes annual depreciation expense of approximately $160 million that has been calculated in accordance with the new policy. The net impact on 2013 earnings per share from this change after tax and non-controlling interest is approximately $0.04 per diluted share per quarter. Tim?

Thanks, Tom.

We ended the year with net debt of $3.3 billion, up $125 million from 2011 due to fourth-quarter acquisition activity and currency. For the year, we purchased $257 million in Company common stock, or 7 million shares.

Liquidity and credit quality remained strong. We ended 2012 with an excess of $1.4 billion of cash and availability under our revolving credit facility.

Net debt to adjusted EBITDA ended the year just above 3 times and interest coverage at 4.8 times. Early in 2013, the Company issued $1 billion of 10-year senior unsecured notes due in 2023 at par to yield 4.5% at issue. The proceeds of the refinancing were used primarily to retire existing debt, which extends our maturity profile at a very attractive rate.

For the year, net interest expense was $219 million and should be similar in 2013. Our tax rate from ongoing operations was 25% in 2012, slightly below our earlier projections, due to positive country mix. For 2013, we currently forecast a tax rate in the range of 26% to 27%.

We had another year where asset performance in our pension plans outpaced assumptions, more than offsetting another decline in the discount rates. Pension expense, which totaled $98 million in 2012, is currently projected to be $77 million for 2013. Cash contributions for pensions in 2013 should be about $20 million below 2012's $103 million, with the US plans currently projected to have a funding holiday at least for the next three years.

Net of the insurance proceeds used to rebuild beverage can capacity in Thailand, net capital expenditures totaled $278 million in 2012 and are currently projected at $230 million in 2013.

Free cash flow for 2012 was $345 million, a bit above our earlier estimates. Within the cash flow statement, the $100 million usage in working capital is comprised of $40 million in restructuring cash, with the balance being an increase in trade working capital, mainly the result of four new plants being added to the system.

Deferred taxes and other includes $28 million of asbestos payments and $92 million of cash taxes paid.

We currently estimate $500 million of free cash flow for 2013.

At this time, we project full-year 2013 comparable earnings per share at current exchange rates to be in the range of $3.20 to $3.40 per share, compared to $2.81 in 2012. First-quarter 2013 comparable earnings are currently projected to be in the range of $0.45 to $0.50 per share, compared to $0.46 per share in the first quarter of 2012.

And with that, I'll turn it over to John.

Thank you, Tim, and good morning.

As usual, Tim, aided by Tom, did a thorough job in reviewing the quarter and describing to you briefly our expectation for 2013. Everything considered, we think we had a solid year. Our operations around the world continued to improve. Our factories showed operational improvement in turn terms of better efficiencies, lower spoilage, and lower unit costs.

The poor weather in Europe, practically in the United Kingdom, Italy, and France, was disappointing. However, our food can business depends on customers having reasonably good growing seasons, so we reacted quickly when we saw that the weather was going to disrupt demand. Our strong free cash flow generation for the year supports the fact that we reacted properly to the situation.

As you know, we have had an ambitious capacity expansion program underway for the past number of years, focused primarily on beverage cans in the emerging markets of Latin America, Eastern Europe, and Asia-Pacific. These capacity additions generally went very well over the course of 2012.

Brazil performed strongly and will grow further in 2013. Colombia and Mexico also had good performance. In 2012, our new Slovakian plant finished its first full year of output from its two high-speed beverage can lines and will increase production and sales in 2013.

Asia-Pacific continued to grow strongly. Crown's beverage can sales in Asia-Pacific increased 16% for the year and we gained market share.

Our decision during 2012 to scale back capital expenditure in China was the right one and reflected slowing demand growth. However, it is well to keep in mind that two-piece beverage can market demand in China did, in fact, increase in 2012 by 13%. And we expect market growth of 16% in 2013.

Across the Asia-Pacific region, we expect two-piece beverage can market growth in 2013 of 14%. Crown will do better than that.

As Tim noted, we believe that in 2013 our European Food can business will return to a more normal demand year. That is, we anticipate less adverse weather conditions and that our customers will resume normal filling levels as a consequence.

Looking ahead, we believe that can demand in all of our markets will be solid, with continuing significant growth in the emerging markets. We have been fortunate that our capacity additions have gone smoothly and on budget and that all of the markets in which we have been making investments have continued to grow nicely. As a consequence, we think that we have laid a foundation for the future, combining improving operations, cost efficiencies, cost savings from efficiency improvements and restructurings, and unit volume growth in our beverage can business globally.

Tim noted our expectation of $500 million of free cash for the year. Again, this is the result of steadily improving our mature businesses' performance and realizing increasing cash from our newly-installed capacity.

In sum, 2012 was a solid year, particularly given conditions in Europe, and we think 2013 will be even better.

And Shirley, with that I think we're ready for questions.

(Operator Instructions). Adam Josephson, KeyBanc.

In China, how much growth do you think the market needs such that supply and demand will be in balance? And when do you expect the market to reach that point? I know you said you expect the market to grow by about 16% this year.

Well, it is a tough question. Let's combine the two, 2012 and 2013. So without compounding, we think the market is going to be up almost 30%, 27%, I think, added, but let's say, call it, 30% over two years.

And clearly, capacity is being added. We've added a fair bit of capacity. And some others have done the same, not all.

I think there are a couple of things you have to keep in mind. First of all, geographically, we're a huge country. So we've tried to be very careful about where we've gone so we don't create regional imbalances or minimize regional imbalances.

Everybody comes up learning curves differently. Everybody installs somewhat different capacity in their plants. Everybody runs more or less effectively.

So it's a real tough question. But my view is with a market that is growing 15% to 20% year on year, and we think it's going to continue, possibly accelerating, undoubtedly you're going to have periods of price choppiness, regionally and typically in a country as big as that. But the overall direction is upward.

So the reason that we cut back on our capacity additions in 2012 was simply we thought we were getting a little ahead of ourselves and ahead of the market. The market slowed a little bit in 2012 versus prior years, and so we cut back. We think we did the right thing.

But we're not alarmed by capacity additions in China. We think it's absolutely natural.

Got it. Okay. Thank you for that, John. And just my other question, John, you've talked about the potential for improving your returns by adding second lines to your existing plants because the cost of a second line is much lower than the first. However, given that a few of your plants that can accommodate a second line are in China and given the overcapacity there, when do you expect to realize the benefits of adding those second lines, generally speaking?

I think within the next five years. I mean, you just need a few more years of growth in the neighborhood of 16%, 17%, 18% in China, and there is going to be more capacity needed.

Keep in mind, Adam, one of the projects we have scheduled to come up very early in 2013 is the second-line addition in Putian.

Got it. Thank you both for that. I appreciate it.

You're welcome.

Scott Gaffner, Barclays.

Just sticking on Asia-Pacific here for a minute, we talk about China a lot, but as you mentioned before, you are in China, Thailand, Vietnam, many other countries. And China might be the largest for you, but you also have significant presence elsewhere. Can you parse the commentary on price pressure in Asia-Pacific by region? Is it mostly in China or is it spread across the region?

Yes, I think the pricing pressure in, let's say, the latter half of the year, certainly in the fourth quarter, was pretty much confined to China.

Southeast Asia -- well, the balance of Asia for us, all those countries that Tim listed, ex-China, we have about a 50% market share. And essentially, we're the leading beverage can maker in virtually every one of the countries that we're in -- not virtually, in every one of the countries we're in. So price-cost was solid there.

The growth, obviously, was substantial in Southeast -- in that region. Non-China growth, for example, for the year was 17%. Or rather, I'm sorry, let's see, okay, between 10% and 11%, I think that's right -- no, no, no. I'm looking at so many numbers. Growth was 19%. Unit volume growth in those countries was 19%.

So you can see right there there are no price issues in Southeast Asia. The choppiness was China.

Okay. And then, just looking at the pricing, is it on existing facilities or more on the newer facilities coming online? Is there some contrast there?

No, generally speaking, a can is a can. So I think the issue's tended to be more regional than associated with capacity.

Okay. Thanks (multiple speakers)

Scott, just clarification to your comment that China may be our largest country. It may be the largest, it is very close with one of the other countries, but it represents about a third of our beverage can output in Asia.

Okay, thanks for the clarification.

Chris Manuel, Wells Fargo.

A couple questions for you. First, when we think about -- you announced a couple of acquisitions this morning, or embedded within there. Can you give us a little color on those as to sizes, revenues they add, things of that nature, and what you anticipate doing with them?

Yes, Chris, the Superior Multi-Packaging, I think we noted, is about $130 million in sales annually.

It's predominantly paint can, industrial, and household-use metal packaging company in Singapore, China, and Vietnam. And our plan is to continue to expand it and expand its product lines with the equipment it has and the factories it already has established. We think we can easily over the years add food and aerosols. So that's the thinking.

As to the Vietnamese plant that we mentioned, it was an independent -- well, a Vietnamese company that owned two can plants, one in the north, one in the south. The one in the south they decided was not strategically important to them. Their industrial activity is essentially in the north of the country.

And it's a really great fit for us because it's literally immediately adjacent to another beverage can plant that we added in Dong Nai. So that we had -- basically, we are going to end up here in a couple of years with a four-line can plant and end making in a very large industrial facility.

So, it worked great. Their sales, I think when we acquired it, were on the order of $40 million, $30 million, $40 million, fairly small. They hadn't done very well, but we're building it out and we expanded it, as Tim mentioned in his comments.

A second follow-up question, you talked a little bit about some price issues in China. I know in the past year or so and in the past few quarters, there have also been some price pressures in select parts of Europe. Could you give us a little more color there as to how you feel with respect to pricing in Europe? Are those issues largely behind you? Are you able to start to recover or what have you?

Yes, I think beverage Europe pricing was very firm in the fourth quarter. So sometimes in Europe, you might have some seasonal discounting and special deals, et cetera. There was virtually none of that.

We think supply-demand in Europe is quite tight. We know it is. And so, our plans, and we've been putting them into effect and they have been effective, is that we think we have an opportunity for margin improvement through price in Europe for 2013. That's the plan. It's underway and it appears to be working.

Okay, thank you. Good luck.

George Staphos, Bank of America Merrill Lynch.

Congratulations on the year. Two questions, one on Europe, maybe piggybacking a little bit on Chris's question, and one on capital deployment and use of cash.

In Europe, can you comment on how negotiations have gone thus far and the outlook for food can pricing? And then, overall, I think you mentioned we've heard that you have some restructuring opportunities in Europe. Can you comment a bit there?

And then, on the use of cash, can you update us on your views in terms of repurchases, the potential for a dividend at some point? I realize that's a Board decision, but any thoughts would be welcome. Thanks, guys. Good luck in the quarter.

Thank you.

George, thanks. Why don't I do European Food can pricing, and then Tim will do the balance of the question?

We think price-cost is going to improve year on year in Europe, but the pricing environment is still difficult. We're anticipating, however, as we said in our comments, more normal weather patterns. We know that our customers in Italy, France, and the UK in particular, who were down quite a bit as a consequence of the weather, need to restock and build inventory. And they're planning to do that and we're counting on the weather cooperating, and, of course, that is helping somewhat on the price-cost front.

But it's still -- it's quite a competitive environment, but improving. And we're largely through price negotiations in Europe, and so we're reasonably confident with what I'm saying. But Tim, you might want to carry on.

Yes, to answer the second question, George, I think if you look at the last three years, 2010 to 2012, post the 2008-2009 recession, we've repurchased each year about 7 million or 8 million shares, so a significant proportion of the Company's free cash has been returned to the shareholders over that time.

And we've used additional leverage to accomplish other corporate goals, be they small acquisitions or otherwise.

I think, given the Company's free cash flow guidance that we provided earlier, that you should consider that, again, we will use a significant portion of the Company's free cash to return to shareholders, be it in the form of share buybacks and/or dividend. And as you say, the dividend is a Board decision and that's an ongoing dialogue that occurs at each Board meeting as to the appropriateness of the timing and the potential of such a dividend.

And as for restructuring, George, just to finish up, the restructuring that we're going to be doing in principally the European Food can business is moving ahead. The returns are quite good.

I wouldn't say that we're finished restructuring in our metal, steel packaging business in Europe, food, aerosol, spec pack, but we largely are or will be by the end of the year. So I think we feel real good about the cost improvement in our asset base that is going to result, in that the whole program's gone smoothly and continues to go smoothly.

Thank you very much.

Thanks, George.

Ghansham Panjabi, Robert W. Baird.

On earnings guidance, there seems to be a healthy growth rate projected for full-year 2013 EPS, but the first quarter seems to be an outlier, just based on the runrate trends. Are there any specific one-offs pressuring the quarter?

No. It's typically -- as you know, it's a smaller quarter, but it will be up a touch over last year and we will see how it progresses.

Okay, because it is -- at the midpoint, the earnings forecast is for flat earnings, right, for the quarter? Versus your full year, which is up high single digits, low double digits.

Yes, it's just a small quarter. It's early in the year. Let's see how it progresses.

Okay. All right. And then for your Asia business, you called out startups and pricing pressure. Can you quantify the EBIT impact of each for the quarter?

I'm sorry, pricing pressure I heard. What was the other?

And the start-up costs.

Well, we can try a little bit with startups, I suppose, for the past year. Tim, do you want to take a (multiple speakers)

I don't have a quarterly number. I can tell you that the startup for the year was around $12 million or $13 million. But I don't have a quarterly number for you.

And then, the pricing pressure?

Pricing, we're going to be up sharply, substantially, throughout the region, including China, year on year. So it had a small effect for us in the quarter, but it wasn't terribly large.

Okay, all right. Thank you.

Most of our business is multi-year contract, but not all. And the pricing pressure was more in the almost seasonal spot, if you will, quarterly, monthly business.

Okay, all right. Thank you.

Alex Ovshey, Goldman Sachs.

For the Asia segment, I think you gave us a revenue number for 2013 of $1.3 billion. Can you provide some incremental color on just how to think about the margin for that segment and how you see that developing over the next couple of years as you're fully ramping the plants out there?

I think the absolute margin is obviously going to expand.

The percentage margin will obviously be impacted by two things, in the near term start-up costs to complete the projects and, a little further out, the removal of those start-up costs. Obviously on a percentage basis, it's hard to look at percentage all the time because depending on what aluminum does, up or down, you have the denominator effect.

But the bigger item will be the Superior Multi-Packaging business, that John described, obviously is a lower-margin business than our existing food and beverage cans business. And as we fold that in and make improvements to that to get that margin up to acceptable levels, then obviously it might have some small drag. But certainly in absolute terms, we're expecting a healthy increase in 2013 in the segment from 2012.

Okay, thanks, Tim. And then, just on share buyback, in the past I think you've bought more shares back in the back half of the year. Given the free cash flow profile is so much more robust than where we've seen it in the past, should we expect a more smooth share buyback progression throughout the year?

I think this year you should. We will see how it progresses, but I think that is a fair assumption for this year.

Thank you.

Thank you.

Phil Gresh, JPMC.

Just on the guidance, wondering how restructuring saves are playing into your outlook. I think when you did your initial restructuring program at the end of 2011, you had called out $35 million of potential saves there. Wondering, are we seeing the full impact of that in 2013 or how are you thinking about that right now?

We certainly saved -- we had large cost reductions this year in European Food and aerosol in the back half of 2012. We will get the full-year impact in 2013 from the plants that were closed early to mid-2012. And we expect -- there's nothing that tells us that we shouldn't expect to continue to realize those savings.

Obviously, the pressure that we've had, economic pressure that we and many companies had in Europe, offset some of those savings, but the savings are there. It has to do with how much of that savings falls to the bottom line or is offset by economic pressure, as you are well aware of.

Any way to quantify how much of that $35 million was in 2012?

About, what, $10 million (multiple speakers). No, in 2012. We only -- because we --

Yes (multiple speakers). I'd say $7 million to $9 million.

$7 million to $9 million, Tom says.

Got it, okay. And then, the second question is -- sorry to belabor China, but for the business that is annual contracts, I forget what percentage that is for you, but you talked about some seasonal pressure in the fourth quarter, but I know that a lot of the local players there are annual contracts. So maybe you could just talk about how that's progressed and whether there is a step function lower into 2013 around some of those annual contracts.

Well, it is just a repeat of what we had said. There was price pressure in the fourth quarter. It's going to carry over, to a degree, in the next year.

We're fortunate, though, because our unit volumes are growing so sharply and also because we are coming out of a learning curve in these new plants that Tim mentioned. I mean, simply getting out of a loss-making position on the learning curve into a positive position is going to have a dramatically improving effect on our China business.

So there will continue to be some price pressure over the course of the year. I think it will abate as we carry on, as the market continues to grow, but it's a big country. It's a big market. It's got rapid growth and it's got a lot of players and people adding capacity. It's going to be choppy.

But the fundamental direction is up. We're really pleased with China. We're happy that we didn't carry on with all the projects that we'd planned, but we're really pleased with the ones that we've done. And it's going to be great for us.

I mean, look, Tim mentioned we had about $700 million in sales in 2010 in Asia-Pacific. We are going to be $1.3 billion, at least, in the upcoming year. As the plants that we've built, as they come fully up the learning curve, start running well over 90% efficiency and so on, and then as we increase capacity, it's going to be a great story for Crown. I mean, I couldn't be more pleased with it. But it's going to be a little difficult as you go along.

So just to be clear, it doesn't sound like you expect price to get worse in 2013 relative to what you saw in the fourth quarter.

No, absolutely not.

Okay. All right, that's really helpful. Thanks for all the color today. I appreciate it.

Thank you.

Philip Ng, Jefferies.

Just want to get your thoughts on Brazil. The focus on this call has been China, but just want to see what your thoughts are in terms of demand, and demand supply as well since some of your competitors are adding a little bit of capacity in 2013.

Yes, we have the market in Brazil and we think our numbers are pretty good, up 7% year on year, 2012 over 2011. We think it will be up between 6% and 7% on 2013 to 2012.

We think the trends are all very good in Brazil. The underlying economy is still doing reasonably well. Everybody that's -- all the beverage companies, alcoholic and non-alcoholic, continue to grow.

One of the really good things that has been happening for the last number of years and it continues on is that the brewers' favorite cans, package mix, continues to move more and more from blast to cans. And so, we look at the capacity that has been added and the market growth and even the new capacity that has been recently announced, and we think the market is going to continue to be tight for the next three to five years.

Okay, that is helpful. And then, just switching gears towards Europe, I think you mentioned that you are expecting a more normal seasonal pack in Europe on the food side. What about your thoughts about aerosol? Is that starting to stabilize a little bit here? And then, your beverage can business in Europe in terms of demand for 2013?

Yes, it is. Aerosols, we think we are going to have a good year. We will get the benefit of the -- a big benefit from the cost restructuring that we did in 2012 for aerosols, in particular. And demand seems to be firming quite a bit.

I would characterize, just quickly and let's talk about all of them -- the food business we think is stabilizing and will improve for the reason we've talked about. Aerosol is going to improve substantially for the reason we just talked about. We think our spec pack business will continue to be soft year on year. It's a lot of industrial containers, paints, chemicals, et cetera, and we're anticipating that the demand for those products is going to continue to be strong -- weak, rather. So that's going to be a tough one for us.

In terms of unit volume growth, we think the European market will continue to grow 3% to 5% a year for beverage. And as I said, the market is going to be tight. We are not adding capacity; we are not aware of anybody who is. So I think everybody says, I'm just going to run a little better with what I have. So price-cost in Europe in Beverage, we think, is going to be very good in Europe next year.

Okay. Thanks, guys.

Thank you, Phil.

Alton Stump, Longbow Research.

Just two quick ones. One, and I think I might have missed it, I apologize if I did, but did you give the fourth-quarter volume number for the US and also for Europe?

For (multiple speakers) which product line?

Sorry, for beverage can, sorry.

For the US and -- fourth quarter for the US, I think we were down about 0.75%. And Europe was fairly flat.

Got you. And then, a quick question, Tim, with these acquisitions, is there any, in your view, accretion coming from those assets this year? And if so, any color on how big that might be?

They're both very small, but certainly there's going to be accretion. We didn't buy these just to -- they're not defensive purchases. They're purchases for growing the business in the region, not only now, but in the future. But there will be some small accretion. But not more than $0.01 or $0.02, I think, until we get the plants improved to where -- to a Crown standard.

Okay, great. Thanks, Tim.

Mark Wilde, Deutsche Bank.

A couple of questions. First, John, can you just give us a little color on what you saw in North Africa and the Middle East, and what your outlook is in that area into 2013?

Well, generally, and I know there is a great big condition here, generally demand was pretty strong in the region, despite of all the political activity and so on.

And we think that 2013 will be strong again, particularly in the Gulf, so for us, Jordan, Saudi Arabia, Dubai. We think demand is going to continue to be quite strong. Growth continues to be strong, and we're going to -- we were sold out through the region in 2012 and we will be again in 2013.

Business in north Africa in 2013 is going to be stronger than it was for beverage, in particular, and we think food, also. We've a fairly large, in our terms, anyway, Morocco food business. So we think it's going to -- it should be a good year.

Okay, all right. The other question I had is just we're continuing to see consolidation in beverage containers, whether it is metal or otherwise. Could we just get your thoughts on what we might think about in the aluminum beverage can, in terms of consolidation going forward?

Industry consolidation.

Yes.

Well, Mark, if you think about it, we've got -- we're pretty consolidated in beverage in the Americas, Western Hemisphere, and in Europe.

And the obvious place -- and frankly, our Asia-Pacific region, ex-China. China is the place where we have more -- huge opportunity, huge growth, and a lot of ambitious companies. So I think over time there's going to be an opportunity for consolidation in China, but it's going to take some time.

Okay, fair enough. Good enough. Good luck in the first quarter and through 2013.

Yes, thank you.

Thank you, Mark.

Chip Dillon, Vertical Research.

First question is, Tim, you mentioned the CapEx, which is, as you've been mentioning on these calls, would certainly start to come down as your buildout hits its peak and beyond. How does 2014 look? We have these five plants coming on, I guess mostly all in the Far East, in 2013, but we don't have any view, I guess, yet to 2014. Is that a function of just waiting to see how the markets develop? I know you mentioned it would be quite easy, if China continues to grow these mid-double -- you know, 15%, 17% rates, for you to put second lines in there. When do you think would be the time you would consider pulling the trigger?

Well, as you say, I think we are going to continue to review market developments, and as John mentioned, two of the primary markets where we have invested heavily over the last several years, Brazil and China, continue to grow.

We do have some excess capacity -- or the market has some excess capacity in China that needs to be absorbed, but, as John said, Brazil appears that it is going to remain tight. So we will continue to monitor the situation. I think it is incumbent upon us and the other players in the region to understand each of our own supply-demand dynamics within our organization and our production profile.

And I think it's a little early for us to give you any expectation about 2014 capital. But at this time, it doesn't feel like we're going to have five projects in 2014. But we'll wait to see how it develops.

Yes, I think, adding to that, these beverage can markets, Europe, of course, but the Middle East, Latin America, Brazil, in particular, our Asia-Pacific region, are getting bigger and bigger, as you know. So we run along at the same growth rates, 10% to 20%, depending on the market, then capacity additions are going to come naturally.

But we're going to be very careful. We continue to think that we have something of a competitive advantage in terms of our speed to which we can install capacity, the cost at which we install capacity. We continue to think that having a very large, capable equipment building division, which we do, focused on the beverage business is an advantage, but we are going to be real careful about capital deployment because we obviously want to maintain a supply-demand balance, capacity utilization balance, that results in reasonably good pricing.

Got you. Then as a quick follow-up, as we exit 2013, it seems like really with -- that alt players in the marketplace are in a very healthy position, including one that just a few years ago actually had to raise equity capital. Have you noticed, I guess, a continued sort of discipline in the marketplace, even compared to maybe a couple years ago, as you go around the world? Or had we gotten there two years ago and it's just sort of steady as she goes?

I think you could argue that the industry has become more and more careful about price-cost issues and capital deployment issues. These things go in cycles, you know, but right now we appear to be in a virtuous cycle.

We hope it stays that way. Thank you.

Thanks, Chip.

Our final question comes from Anthony Pettinari with Citigroup.

Looking at Americas Beverage, I was wondering if you could give any color on your utilization rates and maybe how you would describe the broader market.

And then, as you look at opportunities to tilt your mix towards specialty or maybe more toward beer, are there any kind of capital investments or footprint changes that you would consider in North America in 2013?

Yes, our utilization is well over 90%, so we just essentially have no spare capacity.

As far as specialty, we just -- we'll follow the market. We have increasingly customers that think that different shapes, designs, et cetera, will enhance their ability to go to market, and we're going to follow them.

In terms of beer, our beer business in Latin America is very, very strong. And of course, it has grown and we have grown as a consequence because of the -- what I discussed earlier about package mix change and underlying growth.

North America is very stable. The customers, pretty much all of them, ours included, in beer have had long-term relationships with their suppliers, and we don't anticipate that's going to change.

Okay, that's helpful. And then, just finally, when you look at the return on capital profile for the entire Company and opportunities to raise that return over the next two to three years, is it safe to say that Asia-Pacific presents the most attractive opportunities to raise your return on capital? And then, if that's true, beyond Asia-Pacific are there any businesses or geographies where you think that there is a lot of incremental opportunity over the next two, three years?

Yes. No, I wouldn't single out Asia-Pacific. You may be thinking as the plants run fuller, naturally we're going to get a much better return. And that's true.

But I think we've got an opportunity, frankly, globally. Europe, obviously. We had a very soft year in the steel packaging segments, aerosol, spec pack, and food. We mentioned that. I think there's a great opportunity there to improve returns, margins. We talked about consolidation of beverage globally; we didn't talk about consolidation of food and aerosol and spec pack, but Europe is really fertile ground for that.

So we think there are opportunities right around the world. We keep driving out costs; we keep finding that we can reduce overheads, and I don't think that is going to stop. We've got such a big fleet now of plants spread globally, a lot of opportunity.

Thank you. I'll turn it over.

Thank you very much.

At this time, I will turn the call back over to the speakers.

Thank you very much, Shirley. That concludes the call today. We thank you for listening and ask you to note that the first-quarter 2013 conference call will be scheduled for April 18 at 9.00 Eastern time. Bye now.

And this does conclude today's conference. We thank you for your participation. At this time, you may disconnect your lines.