Crown Holdings Inc (CCK) 2014 Q1 法說會逐字稿

Good morning, and welcome to the Crown Holdings first-quarter 2014 earnings conference call. (Operator Instructions). Please be advised that this conference is being recorded. I would now like to turn the call over to Mr. John Conway, Chairman of the Board and Chief Executive Officer. Sir, you may begin.

Thank you, Shirley. Good morning, everyone. With me on the call are Tim Donahue, President and Chief Operating Officer; and Tom Kelly, Senior Vice President and Chief Financial Officer. I will make some brief introductory comments regarding the Company's performance in the first quarter and then turn it over to Tom Kelly, who will take you through the numbers and give you some additional detail. Tim Donahue will review carefully the performance of the various businesses and discuss our views about how the businesses are developing for the year.

Let me remind you 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, the financial condition and results of operations and Form 10-K for 2013 and in subsequent filings. We believe that we are off to a good start in the first quarter, and we are optimistic about our prospects for the full year. All of our businesses are performing on or ahead of plan for the quarter, and we anticipate that they will continue to do so.

Unit volume sales were particularly strong in beverage cans, especially in South America, with both Brazil and Colombia performing very well, and in Asia, with both China and Southeast Asia unit sales up substantially.

Our food businesses are generally in line with the plan for the quarter. We expect European food to gain momentum as the seasonal customers begin to draw from us heavily and cost reduction programs contribute more fully. New plants around the world continued to improve their operations as relatively new workforces gained further experience.

As we mentioned in the release, our new beverage can factory in northern Brazil in the city of Teresina began production this month, and we anticipate as the year progresses it will come up learning curve and make a significant contribution in the months and years ahead. Our new food can plant in Turkey began production earlier in the quarter.

As you know, all European Union approvals required for us to purchase Mivisa, the leading Spanish food can company, have been obtained, and we plan to close the transaction on April 23. We look forward to the addition of this fine company to the Crown organization. This is a tremendous opportunity for us and we could not be more pleased with the outcome. Plans for the combination and integration of Mivisa with our food business in Europe are prepared and ready to be implemented, and we will be moving forward with this process as soon as we close next Wednesday.

With that, I'll turn it over to Tom Kelly.

Thank you, John, and good morning, everyone.

Diluted earnings per share for the first quarter were $0.17 versus $0.28 in 2013. Diluted earnings per share on a comparable basis were $0.57 compared to $0.50 in 2013.

Net sales for the quarter were up about 1% due to higher global beverage can volumes, partially offset by lower food can volumes. As explained in the release, cost of products sold for the quarter included a pretax charge of $7 million to recognize the impact of hedge ineffectiveness on our outstanding aluminum contracts, as required by the accounting rules. This is a timing issue only with no net economic impact. The charge will be included in segment income and comparable earnings in a future period when it will be recovered from our customers through higher selling prices.

For the second quarter, excluding any impact from Mivisa, we expect comparable diluted earnings per share of between $0.90 and $1.00 per share. We will give additional detail on our second quarter call, but including the impact of Mivisa and removing the impact of share repurchases, we currently expect our full-year comparable diluted earnings per share will be somewhat better than our previous guidance of $3.15 to $3.35.

Tim will now take you through the operations.

Thanks, Tom, and good morning to everyone. As John and Tom both described we had a solid start to the year. Demand continues to be strong, particularly in beverage cans, which we expect will continue.

In Americas beverage, volumes were up 3% compared to last year as double-digit increases in both Brazil and Colombia offset a 2.5% decline in North America.

Our new plant in Teresina will begin commercial shipments by the end of the month, and the capacity is much needed as Brazil remains exceptionally strong to date in April ahead of the World Cup, which begins in June. The strength in Brazil is being driven by beer, and in the month of March, beer packed in cans surpassed returnable glass. It's too early to tell whether this shift in pack mix will continue post-World Cup, but a good sign nonetheless.

In North American food, the revenue decline was entirely attributable to the cessation of shipments to a customer which declared bankruptcy in the fourth quarter of 2013. Productivity improvements and tight cost controls improved margins despite the lost revenue and volume.

Unit volume sales in European beverage increased 1.5% in the first quarter as strong performances in the UK, Greece, and Spain offset softness in Jordan and Saudi Arabia. European food volumes were down 2.5% in the quarter as the year got off to a slow start. Encouragingly, however, the month of March was up 3%, and we remain confident on the outlook for the balance of the year. In contrast to North America, the winter in Europe was somewhat mild, so we are expecting a good seasonal crop planting followed by a good harvest this year. With far less frost this spring, planting has already begun in Continental Europe, well ahead of last year.

As for Mivisa, we are set to close next week and begin the integration process immediately. We are truly excited to have the opportunity to expand our food can presence in Spain and across Europe and Africa with great assets and a low-cost platform, which will allow us to deliver benefits to both our customers and shareholders.

Unit volume sales in Asia Pacific beverage were up double digits with growth noted across all regions. The contribution from the additional volume was offset by price compression mainly in China, and translation of the Chinese RMB and Thai baht. The markets we compete in across Asia-Pacific are large and rapidly emerging and as expected are quite competitive. While there may be volatility from time to time, we believe we are exceptionally well-positioned to continue to grow as Asian consumers earn more and spend more on consumer goods.

So to summarize, we're off to a good start in 2014. The first quarter is a seasonally small quarter, but demand for our products remains firm. As Tom noted we will update you on our expectations for Mivisa in July once we have completed the necessary acquisition accounting and appraisals.

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

Thanks, Tim. Shirley, I think we are ready now for questions.

(Operator Instructions). Ghansham Panjabi, Baird.

First off, can you just give us a rundown of beverage can volumes by region across the world, if you don't mind?

By region, okay. We have that somewhere probably for you, Ghansham.

So, in the Americas, as we said, up 3%. And that's down as I said 2.5% in North America. Brazil and Colombia both up a little more than 20%.

And this is for the industry or for Crown specifically?

This is Crown, Ghansham. Are you looking for industry data?

Yes, I was looking for the industry.

Oh, I'm sorry.

I'm sorry, I don't think we have (multiple speakers)

The only industry data we have is CMI for this.

Yes, we don't have Brazil and Colombia, Ghansham. We've got the US, and you have that.

Yes, okay. And in terms of -- your commentary on the Asia Pac beverage can business in terms of pricing, is that worse in China than it has been, or is that something you're just kind of cycling through from the last couple of quarters -- a few quarters I should say?

I think it's the -- as you know there is a lot of capacity in China and there was -- as we got into the 2014 contract season and pricing there was some -- a little bit of pressure in Q4 but it's stabilized at this point.

Yes, Ghansham, it's not worse. It's exactly what we've been talking about in the previous calls.

Okay. So in terms of this particular segment, on a year-over-year basis, I would kind of look at fiscal year 2014 versus 2013, is it fair to model margin expansion, just given the volume growth that you're seeing there?

You mean in the balance of the year?

Yes.

We think that margins will improve somewhat in the balance of the year -- in Asia over the balance of the year.

Okay. And then just one question for Tom. Tom, do you -- hedge ineffectiveness -- is that formulaic in terms of the recovery and over what timeframe is that?

Well, it will be recovered over the life of the hedges, which is generally about a year. And yes, you redo the calculation every quarter and you have new items roll in and old items roll off. So it's kind of hard to predict exactly how the 7 will roll off.

Okay, all right. Thanks so much.

Debbie Jones, Deutsche Bank.

I was wondering -- I know you're not providing Mivisa guidance but can you just talk about or comment about your expectations for cash deployment and share repurchases and CapEx over the next 6 to 18 months as you deleverage?

Yes sure, Debbie. Tom would be happy to do that.

Yes, Debbie, we do not plan to do any share repurchases in 2014 with the imminent closing of Mivisa. And as far as CapEx we're probably looking at about $275 million to $300 million for the year.

And free cash?

Free cash flow, we had previously said $450 million. I think we could do at least $500 million with Mivisa, but we need to get in and see the opening balance sheet.

Okay. And now the $500 million, that's on -- just through 2014 or is that just on an annualized basis?

2014.

For the year of 2014.

Okay, great. Thanks. And just last question then. Could you just -- you made some comments about Jordan and Saudi Arabia being a bit soft. What are you guys seeing in the Middle East region right now? And is this something that's going across the industry or is this something specific to Crown's locations?

No. I think it's generalized. Jordan tended to be more political. This is borders are open or not, and improved, frankly, in March, so we are hopeful.

Saudi Arabia -- there's a little bit of a transition underway associated with the Saudi's attempting to ensure that more Saudi's are employed and, therefore, they are not renewing work visas as they have in the past. So we are seeing a little bit of decline in consumer spending associated with that. But, this is not unique to Crown. It's true of everyone through the region.

Okay, great. I'll pass it over. Thank you.

Chris Manuel, Wells Fargo.

Congratulations on a strong quarter. I think you mentioned earlier about a new food can plant starting in Turkey. Could you give us maybe a little color there as to how big of a plant is it, what your expectations are, et cetera?

Yes, well, it's in fact just a little bit south of Istanbul across the sea there in a region called Bursa, so not too far from Istanbul. It will be used for a variety of consumer end markets, olive oil, vegetables. It is a factory that we bought that was essentially mothballed from a company that was in bankruptcy, and we've retooled the factory and started it up. So I think our expectations are that we'll continue to grow the revenues as the customers are receiving, quite well, another competitor in the market that brings high-quality products and actually service and proper delivery as opposed to a market where they've been served by essentially a monopoly position with not very good service. So we are pretty -- we are looking forward to it.

If you want to think about annualized revenues once we get the plant fully in operation, think about $50 million.

Perfect. That's helpful. And then just a couple other quick ones, one, aluminum premiums continue to escalate and I know that impacts you mostly in Europe. You know there's been further -- the April 1 piece didn't go through, but there's been another judgment down as to how they want to handle things. What are your thoughts over the balance of the year there? Or is it how you handle that? Can you recover some of it or what have you?

Well, Chris, we haven't changed much in terms of our forecast of what it would mean for us. I think we told you, Europe, EUR5 million to EUR6 million if it didn't turn down. And there's going to be a little bit in Brazil if it doesn't turn down. Having said all that, we took that all into account when Tom gave you guidance for the year. So we think that we have got it covered, but it's a headwind in the beverage business in terms of margins and income.

Okay, so just one last quick one, at least the numbers I'm looking at, I had EUR133 million of EBITDA from Mivisa. I think that was a 2012 number. As you're sitting here I guess almost ready to close, what or maybe you can give us 2013 numbers or however you want to look at it. Just help us with the rough split so we understand the split between EBIT, EBITDA.

For Mivisa?

Yes. The historical ones or however you want to -- so we can think about it for forecasting purposes.

Tom will give you what we are using. And please keep in mind we're not fully in there. Just because they are a competitor, we've been very, very proper if you will to be sure that we were keeping the proper distance from them. So with all those caveats, Tom has what we are using for planning purposes.

Okay.

Yes, Chris, the EBITDA was historically about EUR130 million. The depreciation would be -- but that's before any divestiture of any plants that we need to divest as part of the deal.

As far as the depreciation that is embedded in there, I think obviously they have their historical depreciation, and we need to go through our process. We would expect to get that done and reported in the second quarter. I would be guessing right now if I tried to give you a depreciation number.

Okay. Thank you.

Adam Josephson, KeyBanc.

Just a couple ones -- Tom I might've missed this but excluding Mivisa, how would your full-year guidance have changed post-1Q?

There's been no material change in the business, so I would not have expected any change. Any changes are really a product of Mivisa and the share repurchase.

Got it, no, that's helpful. In terms of beer production in Brazil, obviously, it surged in February and March. This is total beer, not cans versus bottles. What are you expecting along those lines in terms of beer production over the course of the year? And I guess how much of the surge that we saw in the first quarter would you attribute to the hot weather versus the timing of Carnival versus perhaps an inventory buildup in anticipation of the World's Cup?

Well, I think the market continues to grow. The Brazilian economy, the consumer economy in Brazil, they are still spending money and they are spending more money, and they do like to enjoy themselves and reward themselves for their hard work. So one of the ways they do that is by celebration and consuming beer. So you've got a natural growth already, combined with a noticeable pack mix shift.

So if we were to go back a few years, beer was 38% in cans. Last year I think we were 42% to 43%. I think for the first quarter this year, we were 46% but in the month of March we were about 48.5%. So there is a pack mix shift happening that's favorable to cans.

And then obviously, as we have all described to you that we do believe that not only do we benefit from the strong summer of September through March, but we are benefiting from the so-called second summer leading up to the World Cup. And there's been heavy packing ahead of the World Cup, and I think the big beer brands and the distributors realize the benefits of the can.

If you were to look at a map at where all the World Cup stadiums are across Brazil, you'll see they are in some far-flung places, and the can works very well in terms of transport to get there as opposed to returnable glass.

Tim, that's really helpful. And just one more on European food. I know you talked about volume being down 2.5% in the quarter. It was up 3% in March.

Now, what kind of improvement are you anticipating over the balance of the year? And are you assuming EBIT growth ex-Mivisa in the latter three quarters?

Yes, so excluding Mivisa, we are expecting a fairly full pack this year and EBIT growth year on year. There has been a slight shift in our business in which, as you know, pet food packed in cans has declined for several years. And we've made a conscious decision to try to reposition our business to sell some of the more seasonal fruit and vegetables, which we are doing as well. So they are obviously being more seasonal. They are packed in the summer months.

And the more consistently packed products like pet food which are declining are not being packed as often, and we're not selling cans as we used to in the lower months of the Q4 and Q1. So that is one of the reasons why Q1 will be lower than in prior years. But excluding Mivisa, we are expecting improvement in European food.

And thanks a lot. Appreciate it.

George Staphos, Bank of America Merrill Lynch.

Congratulations on a start to the year. Maybe segueing on the discussion on Brazil, guys, what -- and pardon the pun. What concern might you have for a hangover in Brazil in volumes post-World Cup? Because obviously you're not going to be seeing, I don't think, this kind of year-on-year growth in the can going forward. And how does that affect at all what your capital allocation plans might be in Brazil over the next two, three years?

Well, George, I don't know if it's true to say that we're not going to see the continued growth in the can over the next several years. I think we've been forecasting. We've been talking to our customers.

They've been telling us that they understand the benefits of the can in the supply chain. They've been right and we've benefited. So I think we're going to continue to see growth in the can as we go forward. Certainly there may be a hangover in July, August, September. But we get into September, October, December, we get back into the season. We are fully expecting for beer production and canned beer to continue to grow year on year.

Okay, fair enough. And do you see the need to add capacity in Brazil at this juncture, post-World Cup into 2015 and 2016? Or do you think Teresina will help allow you to supply into the growth that you see the next two years there?

Well, George, we are always looking at all of the markets and taking a look. One of the phenomenon in Brazil, of course, is that the package types in the can are diverging as it has in North America and Europe. We are seeing more specialty cans and so forth, so we are very conscious of all that and we are following it closely. There could be an opportunity for us to do something with capacity and we're looking at it all the time.

Fair enough. To European food, what effect do you think if at all did you have in your operations in facilities that may have obviously considered themselves potential divestiture candidates as part of the Mivisa deal? In other words were there any distractions in your own existing operation because of Mivisa? And do you think that was one of the factors in terms of the EBIT progression 1Q versus 1Q?

No, it wasn't. I mean, as you know, George, we are in the process of selling our Crown Spain food business. It's an operating entity, and doesn't involve any job losses and so forth, so the factories performed well, the people performed well. And that's not part of the explanation.

Okay. I appreciate that, John. Two last ones and I'll turn it over, again to European food and Mivisa, can you update us on where you stand in terms of identifying the purchaser of the plants to be divested? Do you have a figure for us in terms of what the divested profitability might be? And who in fact is going to be running the divested operations?

George, that's still confidential. We do have a signed agreement with a strong buyer from outside the region, but they are in the process or will be in the process very shortly of obtaining the necessary Spanish approvals for the acquisition, which we don't think are going to be a problem at all. And we'll be doing that in due course once the transaction proceeds further.

Okay, thank you. Last one, the ineffective hedge cost -- I may be mistaken here; and please correct me if that's the case. I don't remember hearing discussion from the Company around this as a nonoperating item in the past. I presume you've had hedges in the past. So what is unique about this situation? And explain again why ultimately this timing issue will be resolved through pricing and why we shouldn't extract from earnings the hedge cost? Thanks, guys, and good luck in the quarter.

Yes, George, it's really a size issue. We have had it in the past. It's caused by the volatility in metal premiums, but you're talking about 1 or 2. Now that it's a larger number, 7, it's a little more meaningful. And as far as whether you back it out or add it back, whatever, it's really just a timing issue. We are taking a charge in advance of passing through that extra cost to our customers in the form of a higher selling price. So if we don't back it out, what's going to happen is we're going to hit our profit in this quarter and then have outsized profits in a later quarter when we pass through the price having already recognized the cost. So we're really just trying to match the timing and give truer numbers of the results of the operations.

Okay. And you'll call out the benefits you get later on, so we can do that as well?

Yes, definitely.

Okay. Thank you, guys. Good luck in the quarter.

Scott Gaffner, Barclays.

Just had a couple of quick follow-ups. First on Asia-Pacific when we -- particularly China when we look at the price compression this year, can you kind of give an order of magnitude what the price compression looks like this year versus last year?

Well, I think in the first quarter it's a few million dollars, you know, call it $3 million or $4 million. Do I have a number for the full year for you right now? I do not.

Okay. Is it like 3% lower price this year versus 5% last year? How did that sort of compare?

Well I don't have the number for last year, but I'd would say on average 4%.

Okay. And then if we go back to European food for a minute, you talked about some of the positive changes and the trend through March. Have you seen that carry through into April? And then also any improvement so far on the mix side as well? I think that was an issue last year. Have you seen that sort of start to correct a little bit?

So April, the trends that we saw in March continue in April in European food, so that's positive. And I think we are -- has we said we're looking forward to a good season. I would say that the mix shift that we experienced last year has remained about the same. So it hasn't gotten any worse. It hasn't gotten any better.

And just on that mix shift, is it -- do you think we need a significant improvement in the underlying economies in order to see that mix improve? Is that how we should think about the mix shift? Or is there something else going on?

I think, as Tim said earlier, with the move that we've made more heavily into seasonal cans, which typically is some of the larger cans for vegetables and fruit, to that extent, we are seeing a mix improvement year on year. And we don't think there needs to be an economic resurgence to see the food can business improve this year.

And as Tim said earlier that we are anticipating and we know from our customers that the plantings that they've commissioned in Europe are greater than they have been in the past several years. So all those things support the proposition in our minds that the food business is going to gain momentum as the year moves on.

Okay. And just lastly on the charges you backed out in regards to the labor disputes. Is there any thoughts that maybe there will be some resolution there in the near term? Or is that something that's likely to carry on for a while, you think?

It's an unfortunate situation. We have over 150 plants in the world and we have this one factory where we've had some difficulties with the labor force. At this time, we are in the process of fully staffing the plant. We've been running at about 50% capacity, but we anticipate that by the end of June, we will be fully staffed and effective first week in July, we're going to be running at full capacity. So we are working our way through it, and that's about the timeframe at which we are going to be back into full operations, in first week in July.

Okay. I appreciate it. Thanks for the update.

Alex Ovshey, Goldman Sachs.

Can you give us the volume detail by subsegment for each of your businesses?

Sure. So I think what we -- we started off earlier Americas beverage, up 3%, which as we said Brazil and Colombia both up around 20% and North America down 2.5%. European beverage was up about 1.5%, which is -- in Continental Europe that's up about 5.5% and in the Middle East down about 4.5%.

Asia, up just about 20%, and basically equal between China and Southeast Asia. Both of those up about 20%.

Food cans, as we said, European food cans down about 2.5%. And in North America or the Americas, down about 6.5%; all of that due to no shipments to that customer that declared bankruptcy last year.

Aerosol cans, I don't have the regional breakout, but for the total Company, down about 2%.

Got you. Very helpful, Tim. And then in Europe bev, Western Europe, the 5.5%, how much of that do you think was the benefit of the milder winter? And what is the expectation for the full year for volumes in that subsegment?

I wouldn't ascribe much of it to a milder winter. I think what we are seeing is an economic resurgence in Spain, Italy, across the Mediterranean. We were particularly strong in Spain, Greece and the shipments we make into Italy. So I think a lot more of that has to do with economic recovery in that region. And I think for the balance of the year we expect shipments to remain firm in Continental Europe.

Got it. And then in North America food, I think on previous calls we talked about the potential for some pricing compression in 2014. Have you been able to quantify what that number will be in that segment of North America food and can you talk to that?

Well I think -- you know I don't think we're going to quantify a number. There will be some impact from our efforts to ensure that we have a business that long term is a business that we like and we continue to operate, and we run our plants full, and we keep our costs lower. So certainly there will be an impact this year, but it's not a number I wish to quantify.

Got it. And just last question, just looking at the minorities expense number, it was down materially year over year. Can you just talk about the driver there? And then I think you repurchased some more minorities through the quarter; and sort of what's your expectation for the full year 2014 for that line item?

Yes, we successfully purchased, in the first quarter, the remaining minority interests in Crown Tunisia, a beverage operation in Crown Jordan. So we were happy to achieve that and we now own 100% of all our operations in the Middle East, with the exception of Saudi Arabia. So, that was a positive. We are really pleased to be able to get that done. And Tom can comment, perhaps, on the balance of the question.

Yes, Alex, as far as what the number is going to be for the year, probably in the low 80's is where we are going to end up. That was already contemplated in our guidance. We were working on the transaction before.

Got you. Great. We'll turn it over. Thank you very much.

Phil Ng, Jefferies.

You commented on the food pack in Europe looking pretty strong. What about North America? I know there's a drought on the West Coast. Can you give us some color on that front?

Phil, if you will recall, we are not on the West Coast except in fish. So, it doesn't affect us and we are really not paying a lot of attention to it. So, sorry.

Okay. What about just the pack overall for the full year?

It looks pretty good from what our customers are telling us. The Midwest down through the center of the country and Southeast, Pennsylvania, looks pretty good.

Okay, that's helpful. And then you commented on Europe recovering and you are obviously seeing it on the bev can side, which has been pretty strong. What about your non-bev can business, like your specialty can business, and I guess generally speaking food cans, you sound a little more constructive. Are you seeing a little more momentum on the economic recovery in Europe?

I think in aerosol cans, the answer is yes. And coupled with the notable cost-reduction programs that we've put in place in aerosol, we are quite positive on that. On specialty cans I think the business is still a bit impacted by the economy and that recovery is a little bit slower.

Got you. And then just one last question on Europe food. One of your competitors commented that they are seeing better pricing dynamics in that region -- in that business. Are you seeing any blips on that front as well?

Well, I think in the sense that price erosion has stopped, I think that's probably true. And then when we've put that together with cost reductions and of course what we're seeing now is a tremendous opportunity for Crown with cost reductions associated with the acquisition of Mivisa, we are getting mildly bullish on our food business in Europe.

Okay, all right. Thanks, guys.

Al Kabili, Macquarie.

Hey, Tim, I wanted to just clarify the comments you made on Europe food with the expected earnings to be up this year. If you add back, if we add back last year's $21 million or so from bad debt, would you also see earnings up year on year in Europe food adjusted for the bad debt?

Yes.

Okay. All right, that's good.

And also, from a share perspective, how are you feeling your share is trending in the business?

In Europe?

Yes, in Europe food.

I think excluding Mivisa, I would say our share has been stable. Obviously post-Mivisa, our share will grow accordingly with the acquisition minus the small divestiture that we have to make to comply with the commission. And we'll see where it takes us in the future.

Okay. And then on the Europe bev, the earnings growth year on year, you saw some pretty good earnings growth year on year in Europe bev. Do you see that as -- that level of margin expansion or EBIT growth as sustainable throughout the year, number one? And corollary to that is, were you seeing the full impact from the headwind and the rise in metal premiums -- were you seeing that kind of full impact in the first quarter? Is that going to be lagged a bit and we'll start to see more of that coming up here in the second quarter?

Let me answer the question in two parts. Excluding the impact of premiums, I would say that the improvement you saw in Q1, we do believe would be sustainable coming from a combination of improved volumes and manufacturing performance across all of our plants. And we've done a lot of work not only in the factories, but with some people that are responsible for overseeing the manufacturing performance of the factories. And we are seeing immediate improvement and you do see that.

Some of that will be offset as we move through the year because of the premiums and because of the recent high court ruling that Chris mentioned earlier, where we are not going to see the decline begin as soon as we had hoped with the premium.

Okay, fair enough. And along those lines, is there any kind of updated estimate you could give us for the headwind at current levels?

So we previously said about EUR5 million to EUR6 million. At current levels, we are probably about double that, if you look for the whole year.

But it's in the guidance.

But it's in the guidance.

Okay. It's in the guidance. And very little of that EUR10 million to EUR12 million, you would've seen in the first quarter. Is that fair?

That's correct.

Okay, all right, that's helpful.

All right. And then the last question I had would be on the North America food business. And how are you feeling about 2015 at this juncture? Do we have still some meaningful contracts that need to get done in the business in 2015? Or are we feeling at this juncture that we've got pretty good visibility there and that's also wrapped up at this point?

I think the food team here has done a very good job. And excluding the one large customer issue that you've become well aware of last year where they've decided to go to a new supplier, there is very little at risk in 2015.

Okay, great. And then final question is just, did I hear it right? So on the guidance you were saying, the $3.15 to $3.35, it would be somewhat better than that with Mivisa? Did I hear that correct or were you thinking -- were you saying that was excluding Mivisa?

No. That's correct. With Mivisa but removing the impact of the assumed share buybacks, which are no longer going to happen.

Okay. And I guess I would of thought that there would be maybe a little more accretion from Mivisa. Is that just a big step up in D&A that we are thinking because I think the share repurchase would be about $0.10 accretive, and so if I just kind of back into that, that would suggest roughly $0.10 of accretion with Mivisa with a late April close. And is that the right way to think about it? Or how -- what are kind of the moving parts in that analysis?

I think that's the right way to think about it. Keep in mind, Tom said that we thought that the guidance would be somewhat improved. Somewhat.

Okay. All right, great. Very good. Thanks and good luck the rest of the year.

Chip Dillon, Vertical Research Partners.

First question, I noticed that you spent $90-something million I think buying in some of your minority interest partners' interest. Could you talk a little bit about where that was? And just looking at the balance sheet, you could kind of guess I suppose that you paid about 2 times book value for that. So could you elaborate on that?

Yes, Chip, we mentioned earlier in the call. That was the purchase from our partners in Tunisia and Jordan of a -- in each case 40% minority interest. And that's what the amount was.

And looking at it from the perspective of multiples of EBITDA, earnings and so forth, we think the prices were quite good and appropriate given the countries that we are in.

Hello? Oh did we lose you? I'm sorry. I think we lost you. You were saying -- if you could just repeat that again?

I'm sorry. We purchased the minority interest in Tunisia and in Jordan. That's what accounts for the two acquisitions. And the price in terms of multiples of EBITDA earnings and so forth we felt was very reasonable.

Got you. And do you now own all of those two particular businesses?

Yes, we do.

Got you. Okay. And then second question is, on the CapEx guidance, it doesn't sound any different from before. And I just want to clarify, that does include the impact of whatever Mivisa spending is this year?

I think the $275 million to $300 million is the core in Mivisa. I think we said before that their run rate was about EUR10 million.

Got you. For a year, got you. Okay.

And then the last question is, just real quickly on the second-quarter guidance, I didn't catch. Does the $0.90 to $1.00 include Mivisa for the 7 or 9 weeks, whatever you own it, or does it not?

I mean technically no, but there's not that much of an impact because it is just a couple months. And we didn't have the share buybacks contemplated in the second quarter anyway, so the number wouldn't be that different under either scenario.

Got you. And last question is looking at -- you know obviously your priority to reduce the debt that you are incurring from the deal, would you think you could be in a position before the end of 2015 to repurchase shares, especially as the working capital cascades or the cash comes in late in the year?

Unlikely.

Yes, I think it's unlikely at this point, so no, I don't think so.

So, but 2016, we probably could see something?

Yes.

Thank you.

Lars Kjellberg, Credit Suisse.

Just a couple of follow-ups. If you can bring us up-to-date on the finance cost for the Mivisa incremental debt. And also I want to come back to Europe for two seconds.

You talk about the natural premium and generally commentary in the past has been that we can't really pass this on in price in Europe. But volumes are very strong and utilization rates are very high. Can you give us any flavor on what you're seeing in the pricing environment in beverage cans in Europe?

Mivisa debt.

Yes, on the Mivisa debt, Lars, it's all floating-rate debt at this point, so we're probably looking at about 2.25% -- 2.25%.

Above LIBOR?

No. It's LIBOR, 1.75%.

Oh, okay.

So 2.25% all in. And I think, Tim, you'll talk about premiums in the pass through, or John?

Yes, just quickly, I think as you know, the convention in Europe is that the regional premia are not part of formula price for beverage cans. And that is something that could change in the future. You're right, supply/demand is quite tight, but we're not planning for any change this year.

Okay, so in that [same] strong margin in Europe, there was no pricing element?

I'm sorry? There is no --?

In that strong margin improvement in Q1 there was no pricing element in that?

There was very little of the premium if that's what you're referring to. We are saying it's going to hit more in the last nine months, yes. That's right.

No, sorry, no. What I mean is you did not have an account pricing in there. It's sort of flat price and it's mostly on volume and cost, that margin improvement?

That's correct.

Okay. Can you also clarify if there was any incremental cost in North America on account of the bad weather, logistics, energy, et cetera, that we should see reversing in April quarter -- in the June quarter?

I think as we look at our platform in North America, we have about 17 or 18 plants in the upper Midwest/Midwest. And we did have a little bit of weather impacted -- deliveries impacted by weather in January and February. But largely across food and aerosol we made up for that in late February and March. So I would say in our first quarter, very little impact from the weather.

Okay. Final question. Can you comment a bit about the working capital outflow in Q1, which seems quite strong? What is behind that?

Yes, the number is not all that unusual compared to our historical. It's a little bit higher than last year but don't forget there is interest and deferred taxes in that number as well. So the working capital number itself isn't all that different.

And to the extent it is, we have put in -- we do have a growing business and some plants coming online and you have to build working capital there.

Sure. Thank you.

Debbie Jones, Deutsche Bank.

Just one last question, I just wanted to talk a bit about North America. I know you said you're generally running full in bev cans, but the decline in beverages doesn't seem to be dissipating, at least on the nonalcoholic side. And I'm just wondering if you envision a scenario down the line where more capacity needs to come out of North America or just kind of how you think the industry should approach this? Do you see more investment in specialty can packaging to kind of make the format more attractive? Or do you think there is going to need to be more of a reduction in the standard sizes?

Well, I think the answer to all of what you said is yes. And I think you're going to continue to see more investment, certainly by Crown, and perhaps by the others in specialty can sizes as we go forward.

Depending on the marketing of carbonated soft drinks we could continue to see the standard 12-ounce can continue to decline. So as we convert standard 12-ounce lines to specialty lines, that may take some of the capacity out because we run those at different speeds. But it could be necessary that the industry in total needs to take capacity out in the future. We'll just have to see how it goes.

We are, as John said, we have been running full for the last several years, and so we don't see an immediate need to take capacity out in our system. But we'll continue to reevaluate that over the next several years.

Okay, thank you. And congratulations on a good quarter.

Okay, thanks, Debbie. Okay, Shirley, I think that concludes the call and we thank you all very much for your kind attention.

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