Participants

Kevin Clothier; Chief Financial Officer, Senior Vice President; Crown Holdings Inc

Timothy Donahue; Chairman of the Board, President, Chief Executive Officer; Crown Holdings Inc

Ghansham Panjabi; Analyst; Baird

Chris Parkinson; Analyst; Wolf Company Research

George Staphos; Analyst; Bank of America

Mike Leithead; Analyst; Barclays

Phil Ng; Analyst; Jefferies

Jeff Zekauskas; Analyst; JPMorgan

Anthony Pettinari; Analyst; Citi Group

Arun Viswanathan; Analyst; RBC Capital Markets

Joseph Factor; Analyst; UBS

Stefan Diaz; Analyst; Morgan Stanley

Edlain Rodriguez; Analyst; Mizuho

Gabe Hajde; Analyst; Fargo Securities

Presentation

Operator

Good morning, and welcome to Crown Holdings Third Quarter 2024 Conference Call. (Operator Instructions). Please be advised that this conference is being recorded.
I would now like to turn the call over to Mr. Kevin Clothier, Senior Vice President and Chief Financial Officer. Sir, you may begin.

Kevin Clothier

Thank you, and good morning. With today's call is Tim Donahue, President and Chief Executive Officer. If you do not already have the earnings release, it is available on our website at crowncork.com.
On this call, as in the earnings release, we will be making a number of forward-looking statements. Actual results could vary materially from statements. Additional information concerning factors that could cause actual results to vary is contained in the press release and in our SEC filings, including our Form 10-K for 2023 and subsequent filings.
Net sales in the quarter were level with prior year at $3.1 billion, reflecting increases in global beverage can volumes and North American food can volumes, offset by lower volumes in most other businesses.
Segment income was $472 million in the quarter compared to $430 million in the prior year reflecting volume gains in both Americas and European investments and the benefits of cost reduction initiatives in Asia Pacific, partially offset by demand softness across most other businesses.
The company recorded a GAAP loss of $1.47 per share in the quarter, mainly due to a noncash pension settlement charge of $4.33 per share, compared to earnings of $1.33 per share excuse me, in the prior year quarter. Adjusted earnings per diluted share were $1.99, up 15% compared to $1.73 in the prior quarter.
Free cash flow remained strong at $668 million through nine months, driven by excellent operational performance and reduced capital spending. We took steps in the quarter to strengthen our balance sheet by transferring approximately $860 million of assets and liabilities of our Canadian and U.S. pension plans to highly rated insurance companies, which will reduce future cash flow and earnings risk.
With this action, combined with the previous buyout in the U.K., the company has annuitized approximately $4 billion of pension liabilities since 2021. As part of the settlement, the company contributed into the U.S. pension plan. As announced during the quarter, Crown's Board of Directors authorized the repurchase of an aggregate amount of up to $2 billion of common stock through the end of 2027.
During the quarter, we purchased we repurchased $110 million of common stock. We will continue to opportunistically pursue share repurchases through a disciplined approach. We are proactively managing our debt maturities with the issuance of $600 million of euro notes due 2023 and the repayment of $600 million of outstanding notes due that were due in September.
We finished the quarter with $1.7 billion of cash after taking the actions above and net leverage was 3 times compared to 3.5 times for the same period last year.
Before turning the call over to Tim, I want to discuss our expectations for the fourth quarter and full year. Our fourth quarter adjusted earnings per diluted share are projected to be in the range of $1.45 to $1.55 per share.
In view of the strong performance year-to-date, we are increasing our full year guidance to $6.25 to $6.35 per share compared to the previous guidance range of $6 to $6.25 per diluted share.
Key assumptions supporting the updated earnings guidance include interest expense, is $380 million, average common shares outstanding of $120 million and exchange rates at current levels. Full year tax rate of approximately 25%. Depreciation of approximately $300 million. Noncontrolling interest between $140 million and $150 million and dividends to noncontrolling interest of $125 million.
We project 2024 full year adjusted free cash flow to be at least $750 million after making the previous mentioned $100 million pension contribution and no more than $450 million of capital spending.
With the combination of free cash flow and the $300 million in proceeds, from the previously announced Eviosi sale, we expect to end the year with net leverage below 3 times. As discussed in July, we are committed to our new long-term leverage target net leverage target, excuse me, of 2.5 times, which is expected to be achieved through the combination of debt reduction and EBITDA growth while returning capital to shareholders through dividends and opportunistic share repurchases.
With that, I'll turn the call over to Tim.

Timothy Donahue

Thank you, Kevin, and good morning to everyone. I'll be brief, and then we'll open the call to questions. As reflected in last night's earnings release and as Kevin just summarized, third quarter operating results were strong and ahead of earlier expectations.
As has been the case throughout 2024, global beverage operations performed exceptionally well with combined global beverage segment income up 23% and on the back of 5% global volume growth. Manufacturing performance, including higher efficiencies and lower spoilage was excellent.
Additionally, a great effort by the Asian team to embrace and execute the capacity reduction program announced late last year, leading to the full realization of those benefits earlier than expected.
Consolidated segment income margin advanced 140 basis points over the prior quarter. Importantly, through months, free cash flow was $450 million ahead of the prior year nine-month period due to lower capital expenditures and better working capital management.
Net leverage at the end of September after giving effect to the pension contribution and share buyback was 3 times, a full half turn lower than at this time last year. And as Kevin just noted, we expect year-end net leverage to be below 3times.
Americas Beverage reported a 21% increase in segment income on the back of 10% volume growth, including 5% increase in North America. Our full year volume growth estimates remain at 5% to 6% for North America and mid- to high single digits in Brazil. Income performance in European Beverage advanced 18% over the prior year, primarily due to 6% shipment growth combined with the continuing benefits of our margin recovery program.
Income through nine months this year has now equaled the full year 2021 level in the segment. Income in Asia Pacific advanced 50% in the quarter as the combined benefits from actions to reduce capacity and improve revenue quality, offset an 11% decline in unit volume sales. While demand weakness was noted throughout the segment, we remain well positioned to benefit from our new lower cost structure when regional volume demand returns.
As expected, Transit Packaging income was down to the prior year. Shipment volumes and results continue to be impacted by weakening global manufacturing conditions with activity likely to stay in contraction at least through year-end leading to our cautious outlook at this time. The business continues to tightly control costs while generating significant cash.
North American tinplate operations performed well in the quarter with 5% higher food can volumes, while can-making equipment has lower activity as expected. And in summary, and as we said earlier, a strong quarter where the benefits of higher volumes and the efforts of a world-class manufacturing team were evident.
Global beverage operations have been strong for nine months and are expected to remain so through year-end. Global manufacturing conditions remain in contraction, but the transit business is well positioned to grow when industrial market demand returns.
Solid performance so far this year with margins and income up. EBITDA is expected to exceed the record level posted last year, strong cash flow with leverage down and expected to go lower.
And with that, Al, I think we are ready to take questions.

Question and Answer Session

Operator

(Operator Instructions) Ghansham Panjabi from Baird.

Ghansham Panjabi

Hey guys, good morning, morning, go. Good morning. Yeah, I guess on the Americas segment, obviously, very, very strong margin conversion much higher than our forecast and much better than the trend line for the first two quarters. Just give us some more color in terms of what drove that? And is there any benefits unique to 2024 price cost or whatever else that may not repeat in 2025 for that segment?

Timothy Donahue

Well, Ghansham, I'll deal with the second part of the question first. As we said earlier this year, we would expect the growth in the business that we've had this year the market share gains that we've had this year or our growth ahead of the market growth this year to not recur. That is our growth next year will be in line with the market.
So we're looking at a market in North America so far this year where we believe the market is up 1% to 1.5%. And I think in North America year-to-date, we're probably up 6% to 7% on the market's up 2% next year, we think we'll be up 2% next year. So that's number one.
We had an exceptionally strong performance in Brazil. Brazil bouncing back nicely through the summer. You've heard our view on Brazil over the years. We remain very bullish on the Brazilian market, despite hiccups along the way. We always believe it's a market that over any period of time, if you measure it, it's a continuing trend line up.
And then we had a very strong performance in Mexico this year. So obviously, margin is very high. Some of that to do with lower aluminum, although aluminum, the cost of aluminum is starting to trend up. So that will have an impact on percentage margins but not on absolute margins. But all in all, it was much better than we forecasted as well. It could to be honest with you Ghansham, it could be $15 million better than we had forecasted in the third quarter.
And the manufacturing team doing exceptionally well. I would say we're going to have manufacturing improvements from better efficiency in spoilage and asset utilization this year upwards of $20 to $25 benefit this year and where you really get the benefit of that is in a high volume quarter like the third quarter.

Ghansham Panjabi

Okay. And so just to clarify on that. So price cost in terms of PPI gestures, et cetera, at this point, looking out to 2025, do you see any headwinds associated with that year-over-year?

Timothy Donahue

Oh,I think PPI could be a small headwind next year, although I don't have the numbers in front of me. I think obviously, inflation has been coming down, and the contracts are organized in such a way that you pass on those savings to customers if and when you have them. Now PPI is not a perfect proxy for the cost in our business.
And we've talked previously about PPI does not seem to reflect what happens in the coating space, for example. Labor always goes up, labor never comes down. The labor content may can come down with the rate never comes down.
So, there are a lot of things that move around in our cost base that aren't perfectly reflected in PPI, but I would expect PPI as we sit here today to be an adjustment in the favor of the customers next year.

Ghansham Panjabi

Okay. I'll just turn it over there. Congrats on the progress.

Operator

Chris Parkinson of Wolf Company Research.

Chris Parkinson

Hey, guys, good morning. You hit on this a little, just in your last response. I just want to dig a little deeper just given the progress that's been made operationally not only in the Americas but also Asia. Can you just kind of comment on your efforts there? You mentioned you were ahead in Asia. But if you could just dig a little bit deeper, kind of comment on where you are in terms of your ultimate progression on where you wanted to be, where you are and as well as your conviction in terms of the sustainability of that progress into '25 and '26? Thank you.

Timothy Donahue

So when I remark about being ahead of expected progress, I was specifically referring to the capacity reduction program that we had undertaken. So just think about it it's a division that's on the other side of the world, they're a long way from headquarters. We see them several times a year.
Having said that, they've enjoyed being part of a high-growth business for the last 20 years, and then they've got a little growth pick up. And the plan is that we're going to remove capacity. So we were always a bit concerned as to how readily how ready they were to accept cost reduction as opposed to continuing growth.
And as I said, we're really pleasantly really pleased with their embracing of the need to rightsize their capacity. I think we now have a business that is on the order of each quarter now earning somewhere between $45 million and $50 million of segment income which is in the absence of volume growth returning to the region, I think that's the kind of range we expect in that business going forward.
Obviously, the the real benefit in that region will be when volume returns, when the consumer has more confidence. And off a lower cost base, we look to really benefit from that.

Chris Parkinson

Got it. And just as a quick follow-up, getting below 3 times leverage, obviously shows a lot of progress. Can we just hit on just any preliminary thoughts on how we should be thinking about not only trending into the year-end or perhaps just into 2025?
How the Street should be thinking about working capital cash interest expense, if there's an update there? And just how should we think about cash conversion as you progress? And just any quick thoughts on capital allocation as a with of that? Thank you so much.

Kevin Clothier

Thanks. So, Chris, so in terms of working capital, look, we've done a great job in terms of driving down working capital this year. We expect it to be at least $100 million benefit for us. I don't think there's much more to get out of working capital. So I think we're probably where we're going to be.
I think when you look at interest expense, we have clearly have an opportunity to have lower interest costs with interest rates coming down, it will be determined by how much the Fed decides to reduce rates. But interest expense at down from $380 to $350 is definitely possible and probably kind of the baseline of where we would look at.
And then as we think about capital allocation to buy back stock, we're I would fully expect us to be in the market next year to buy back stock. I think that our leverage target, we're committed to 2.5 times getting to it. I think as Tim had said on the previous call, we could be there by the end of next year if we want to be.
I think we want to stay below 3 times, but we are committed to also returning capital to shareholders through share repurchases. So I would expect us to be in the market next year, we buy back shares

Chris Parkinson

Thanks for the call. Thank You.

Timothy Donahue

Thanks Chris.

Operator

George Staphos from Bank of America.

George Staphos

Thanks so much. I hope you guys can hear me. Okay, Congratulations on the progress we are guys. My two questions. First of all, assuming that you grow with the market, recognizing the market growth is going to vary from year-to-year and you can't necessarily that, how much runway do you have in terms of capacity across beverage cans?
And if there's a way to shave that or discuss the color by region, in terms of how much runway you might have between North America, Europe and the like. That's question number one.
Question two, given our analysis, your EVA, your return on capital have all been trending up well, and congratulations on that.
As we think about the next two years, not trying to get into an earnings forecast quarter-by-quarter, what do you think is going to be the biggest driver of your operating profit improvement, assuming the next couple of years, will that be just pure volume? Will it be the improvement, say, in Signode or your non-beverage can operations? What are the headwinds?
And you think invested capital, what you invest between working capital CapEx will grow in tandem with operating profit? Or do you think you can actually keep that constrained relative to your operating profit growth? Thanks guys. Good luck in the quarter.

Timothy Donahue

All right. That's a lot. So let me George, don't go anywhere because you might have to repeat some of that. I think that in our business, and you know the business very well, George, growth is income growth, let's say, is largely dependent over time on volume growth. We need volume. We have an industrial platform that's been there. And it doesn't do well if it's not running, it needs to run all the time, that is 24/7.
So you always need volume and the more volume you have and the more growth you have, the better your profits are. The platforms that we have I would say that I can't as I sit here today, I think given what we expect market growth to be for the next at least two years, we don't anticipate having to install any new capacity to achieve expected market growth.
Now if there's movement among suppliers and or where we want to modernize a specific facility, okay, there's a little capital to be spent, but there's no necessary capital to achieve what we think markets will grow over the next several years in all the markets.
I don't know if Kevin mentioned it, we're we said no more than 450 this year and I think if we wanted to give you a number for next year, we'd say the same thing, no more than 450 for next year.
Now in addition to that's beverage, which what I talked about, the other part of your question, George, was how will the non-beverage businesses do. I think largely, until we see the next inflection on global beverage can growth across the industry, we would expect the equipment business to be more or less in line with where it is this year.
I don't see any really large moves in the aerosol business. I think that's largely going to be as we look to next year where it is this year. And food cans in North America could be a little bit better, but it's all modest. I think in total, if you were to look at food cans, aerosol cans, equipment making, it's roughly 5% of our EBITDA on a consolidated basis. So if it's up a little bit. It doesn't move the needle a whole lot there.
I think on the transit side, the cost base is in really good shape. Competitively, we're in very good shape. For those of you who follow global manufacturing or purchasing manufacturing purchasing managers index indices around the world, you'll know that they're in deep contraction in certain countries.
For example, if 50 is considered the dividing loan between expansion and contraction, Germany is currently at 40. So globally, the manufacturing sector, not looking very strong. But having said that, there are some signs of life at least in North America. And the construction industry looking like they could be an opportunity to turn the corner, we'll see. But obviously, a lot of upside in the transit business when or if and when industrial markets return. I think I got it all, George.

George Staphos

No, Tim, you got it. Moderate, whatever the market is going to grow at, that's what's going to be the biggest trend if you get optionality with Signode, that's incremental.

Timothy Donahue

Just touching on your last point, which you rightly point out, off a much lower levered balance sheet and and from an EDA perspective, an investing capital base that shouldn't expand so much, right?

Operator

Mike Leithead of Barclays.

Mike Leithead

Great. Thanks. Good morning guys. Good morning, Tim, you said it a few times already about global beverage can this year continuing to exceed expectations. I guess, bigger picture when you go through the numbers internally, what do you think has been the biggest driver of the outperformance versus perhaps were budgeted to start this year?

Timothy Donahue

I think number one is volume has been a little better and it's held up. So you always have a there's always a concern when you look at a forecast and you see large volume gains, especially in a market where you're asking yourself, how strong is the consumer. There's been a lot of inflation in the product line as well as inflation across everything else the consumer is having to deal with.
And the market the market you participate in is up 1% to 2%. Do you really believe these volume numbers? So I think volume is number one. It was it's been strong and it's been steadily strong, which is always nice to see. And then our manufacturing performance, both in the United States and Europe has been it's always I got to stop for a second. It's always exceptional in Brazil.
But it's if I looked at the United States and Europe, making great strides to the levels of exceptionalism this year as well. So a lot of money that we've gained this year for manufacturing performance.

Mike Leithead

Great. That's super helpful. And then, Kevin, on the pensions or just following the settlement and funding in 3Q, how does that change your go-forward pension expense and say the cash you need to fund it over the next one to two years?

Kevin Clothier

So, from a cash funding perspective, we would not expect any US pension funding over the next year or probably the following, maybe some minor amount.

Timothy Donahue

North Canadian.

Kevin Clothier

North Canadian pension plan. We still will have we have various other pension plans that are still outstanding, so there will be some pension funding. We do expect I'm sorry, did you have another question there, Mike?

Mike Leithead

It was just around the cash funding and then also just the pension expense that flows through your P&L. Is there any change to that?

Kevin Clothier

Yeah, So, look, I would expect the pension actions probably give us about a $0.05 uptick after you the interest cost on the $100 million pension contribution that we had. So call it roughly $15 million of lower pension expense, $6 million of interest expense on the $100 million tax effect is probably going at around $0.05.

Mike Leithead

Great, thanks guys.

Operator

Phil Ng of Jefferies.

Phil Ng

Hey guys. Tim, you talked about the consumer making sure it's strong and healthy. I'm most curious about Europe, right? You guys put out a solid quarter again. Certainly some restocking. You have EUR Cup. So how, how are trends kind of shaping up and what you're seeing on that front? Because some of the European packaging companies have actually talked about perhaps the consumer being a little softer.

Timothy Donahue

Yeah, I mean, that doesn't surprise me. I think the consumer is I think the European consumer is much weaker than the U.S. consumer as just as not to make up politically, but I think they have far less disposable income in Europe than we do in the United States, and that's all around policy and other things. But we agree with that sentiment that the European consumer is perhaps weaker. They're a number of things, as you started to point out.
We've got some restocking this year. We've had a couple of events, the Olympics and the Euro Cup and a fairly good tourism season if you follow the airlines. I think the tourism season was pretty strong, and it's generally strong in the regions where we're strongest. That is Southern Europe.
We had a very weak fourth quarter last year in Europe, principally due to the destocking we've discussed. We're not anticipating that happening again. And the large part of our outperformance in Q4 this year compared to Q4 last year will be related to European recovery. So a large majority of that.
So, I think it's one of the things that helped fill we're in a business that it's a small pleasure business, right? It's you've got a weak consumer in a lot of places, and they're struggling. And despite that, the beverage can is holding up really well. You would tell yourself, it's holding up exceptionally well in the face of a consumer that's stretched.
So, we're benefiting from that not only in North America but also in Europe as well as some substrate shift in Europe, which is continuing to happen. So all in all, despite the weaker consumer feel pretty fortunate to be in the can business.

Phil Ng

Okay. Super. When I look at the progress you guys have made on the margin front, whether it's Asia cost coming out and then recouping inflation in Europe, it's been pretty incredible. Margins have been up nicely. Appreciating loan prices are going up, that will swing percent margins.
But do you still have much to go here in terms of driving margins higher? You talked about some of the good things you're doing on the manufacturing side. So when we think about '25 and perhaps even 2026, how should we think about the margin profile and profitability going forward?

Timothy Donahue

Yeah. So there shouldn't be a limit to the margin, right? But obviously, you've got customers and suppliers, and they have margin aspirations as well.
So I liken it to golf, if you're a golfer or those of you who are golfers, it's pretty easy to go from a 25 handicap down to a 10. To try to go from a 10 to a scratch or plus it's the law of diminishing returns. It's really difficult. The low-hanging fruit is largely gone and now you're really looking at sharpening the edges and there's always improvement we can make.
One of the things that happened here in the third quarter, we didn't say it yet. But why did we outperform so much in the third quarter? And Kevin and I were talking about it the last couple of days and you kind of look at each other and you say, You know what, everything went right. I mean it wasn't perfect, right? Transits down, but everything else went right. Even the food guys had a good volume quarter.
And there's always the question in your mind. You know you're going to have you know you're going to have a time in the future when everything doesn't go right. So I think we're really pleased with the operations. We're really pleased with the business folks. They're driving exceptional margins.
I don't know we have leading packaging industry margins. Perhaps we have leading can margins. But it's how much higher can they go? I don't know. We're going to try the best divest we can to keep them where they're at and grow them. But we're going to need some volume to do that, Phil, right? We're going to need the market.
Now that I think that as we discussed earlier, that the it looks like business has largely settled in North America over the next couple of years. So we have the market to grow. And then obviously, it will be nice to have a bounce back industrially for the transit business as well.

Phil Ng

Okay. That's helpful. Thank you. Appreciate it. Thank you.

Operator

Jeff Zekauskas of JPMorgan.

Jeff Zekauskas

Thanks very much. When I look at the transit margins by quarter, the decremental margins seem to be getting worse. Maybe they were 22% in the first quarter, 38% in the second, 68% in the third. Is that because volume continues to fall? Or why does the margin progression seem to get more severely negative?

Timothy Donahue

I'm not following you because I don't have I'm not looking at all the data you're looking at, but you're going to have to come offline and ask the guys to explain it to the guys a little better because you just said our margins were down 60%. I don't understand what you're saying.

Jeff Zekauskas

They're incrementals. In other words, if you look at the change in sales, look at the change in operating profit, it seems that there's a greater percentage decrement as you go through the year. But we can take it offline.

Timothy Donahue

Yeah. Listen, if I look at we can do all that. If I have to look at our third quarter margins compared to our 9ninemonth margins, the third quarter margins look like they're all better than the nine-month margin. So the way we would look at the business is that with the benefit of expanding volume, you get even more you get more margin.
Now we had a the third quarter is a bigger quarter. So to move the needle on a bigger number is always harder to do than move the needle on a smaller number, but you're going to have to take this offline. You this is a day of school I missed. So I'm not following it.

Jeff Zekauskas

Sure. Also in terms of your beverage can volumes in the third quarter, overall, were they very different than they were in the second quarter that is sequentially, how much did your volumes change? beverage accounts?

Timothy Donahue

Absolute level of volume?

Jeff Zekauskas

Yes.

Timothy Donahue

I got to believe the absolute level of volume is higher in Q3 than it is in Q2. I don't have the Q2 in front of me. I do know I looked at one thing that happened, Jeff, and I do know that specifically to North America, we were up in the third quarter, which is a little bit lower than we had been up earlier in the year. But I do know the third quarter of '23 was up like 12% or 13% over the third quarter of '22.
So yes, I'm looking at I mean, volumes were higher in Q3 than they were in Q2 and the absolute level of volume pretty much the same. I'm talking global, I'm only looking at a global number here, the differential or the delta on the absolute Q3 to Q3 versus Q2 to Q2 about the same. But Q3 volumes in absolute terms up in Q3 versus Q2 of '23 and '24.

Jeff Zekauskas

Okay. Thank you so much. Thank you.

Operator

Anthony Pettinari of Citi Group.

Anthony Pettinari

Good morning. Just following up on Europe. I think you closed the Helvetia acquisition about a year ago. And I'm just wondering, did that contribute at all or meaningfully to the kind of mid-single-digit growth you've seen in Europe? And can you just talk maybe about how that asset is operating or maybe kind of longer-term goals for Germany in that plant?

Timothy Donahue

Yes. So I will say this, and you're going to give me a platform to my fellow competitors, my fellow global competitors are going to appreciate this as well. So bought the business about a year ago, it's probably responsible for about 1.5% to 2% of our growth this year, 1% to 1.5%, something in that range.
We have been spending a lot of time retraining the workforce and a lot of time fine-tuning the equipment is the wrong term. We're doing a lot more than fine-tuning the equipment.
What we knew when we bought it and what we found out when we got inside, very similar to what we hear others saying when they look at some of these smaller one-line operations around the world. They're set up poorly. The people aren't trained very well and they're never going to be successful as one-line operations.
So you do have you do have some online operations in the US right now. One guy is I think he's basically moved he sold the equipment to somebody else.
There's another guy that I don't know how he's going to survive. Now there is a one-line operation in Texas that's run by a high-quality can company out of Mexico. They're going to be fine. They know how to make cans.
But the these new one-liner guys that got into the business because they think can making is an easy venture. They found out that it's not so easy. But we're making improvements to the plant, and we expect that should only be a further benefit to us as we go forward. We didn't pay a lot for the asset.
You get a building. We got a can line, and we got an in-line for roughly $120 million, which is far less than we and some others in the industry would spend to build a proper plant. So we're spending a little bit of time here in effort to make it a proper plant with a properly trained workforce.

Anthony Pettinari

Okay. Okay. That's helpful. And then just after kind of the pandemic boom and destocking, I mean, it seems like bevcans are in a pretty good place from a supply-demand perspective. I'm just wondering, have you seen any changes in pricing dynamics in any of your markets, either positive or negative?
Are customers trying to extend or shorten the length of contracts? Or are there any kind of larger-than-usual contract cliffs coming up in any of your markets? I'm just wondering if you can talk about pricing to the extent, you're able to and to the extent there's really, you're seeing anything kind of notable in the markets.

Timothy Donahue

Well, I would say that there's always competition and perhaps some others see our margins, and they believe they can underprice us from time to time and where they see our performance and they're trying to understand how they can make their performance better.
But listen, markets are competitive. And the customers the buying agents that the customers have a job to do, and we have a job to do and their job is theirs and our job is ours, but it's always going to be competitive.
I think the single out any one or a few items, it's just business, right? You're always going to have competition whether it's from your natural competitors or whether it's margin competition from your customers and your suppliers trying to grab from you one way or the other.
I don't think there's any in the next two years, there's a large clips of volume coming due. We do have in the North American market, I do think we have some as an industry, we have some larger contracts coming due heading into '27. But not unlike any other in the past.
So yes, conditions are good. They could be better. Some of these, as I mentioned, some of these one-line new entrants, they're going to wash themselves out, and market where the customers understand if you want reliable quality cans, you better go with a reliable quality supplier. And I think the large multinationals are quality and reliable.

Anthony Pettinari

Okay, that, that's very helpful. I'll turn it

Timothy Donahue

Thank you.

Operator

Arun Viswanathan of RBC Capital Markets.

Arun Viswanathan

Great. Thanks for taking my question. I hope you guys are. Well, I guess maybe I could just get your thoughts on some preliminary framework for '25. I think you mentioned kind of your volumes following the market and but maybe the other businesses, you talked about low manufacturing activity, maybe that could weigh on Signode or Transit a little bit.
So assuming maybe kind of low single-digit top line growth, would you and some of the manufacturing efficiencies, would you be able to maybe see about mid-single-digit EBITDA growth? And then with some of the refinancings and some of the pension stuff, would you be able to mid- to high single-digit EPS growth? Or how should we think about kind of EBITDA and EPS growth in the '25?

Timothy Donahue

I think it's a little too early to say. The one item you left off of there is with the eviosis sale, we're going to lose a significant amount of equity earnings, which obviously accretes earnings as well.
So but I think it's a little early to say. I don't want us to get ahead of our budget process. And I certainly I want us to do a better job this year of not allowing the differential will exist between your expectations and what we believe we can achieve.
We kind of let that we at the company kind of let that get ahead of ourselves last year. So we don't want to do that again yet. I don't think we're ready to do that.

Arun Viswanathan

Okay. On the free cash flow, so CapEx in the $450 million range, is that kind of how would you characterize that? I mean what part of that is, say, maintenance and would you find that as kind of the low levels here that we should kind of expect going forward? Or is there other reasons why that could potentially go higher as you look into '25?

Timothy Donahue

Well, I think the only way it goes higher is if there's a significant market shift somewhere in the world, which would require us to add capacity in a location that we're not currently in.

Arun Viswanathan

Okay. And then just one more I could ask. We talked a lot about promotional activity earlier this year. It seems like we haven't been speaking that much about it, but I know there has been some deflation. Do you think that the customers are appropriately promoting their product?
And I guess, has there been any shift more to away from towards favoring volume a little bit more? Or how do you think about the promotional activity levels and are you guys incurred maybe by the potential for increase there? Thanks.

Timothy Donahue

Yeah, I mean the first thing I would say is it's not for me to comment on appropriate that our customer set does with respect to their business. But listen, they have a business model. We need to adapt to their business model and run our business as best we can to adapt to the business model. We're only successful if they're successful, and we need them to be successful long term.
So we support their needs. We hope we support their needs as best we can in quality and service at all times. Now specifically on promotions in the North American marketplace, I would say we saw a little bit of an uptick in August. It looked like it backed off at the end of the quarter. It looks like it's a first couple of weeks of October, things are going okay.
So, but I would describe if you're looking at promotions versus historical levels you would describe last year and this year is lackluster, but may well be the new norm.
And as I said earlier, we need to adjust our business to adjust to their new business. And they have a business model, and we're only successful if they're successful. So we better find a way to be successful with our new business model, if that indeed is it.

Arun Viswanathan

Great. Thanks a lot.

Timothy Donahue

Thank you.

Operator

Joseph Factor of UBS.

Joseph Factor

Yeah. Hi, good morning. A question on just free cash flow to clarify a couple of things quickly is first, your guidance to greater than 750 when you talk about the pension. Is that excluding the pension? So on a reported basis, our adjusted reported basis, it will be greater than 650? Or does the $750 include that?
And then if you could just comment on 3Q versus 4Q, it seems like free cash flow in 4Q is pretty minimal, when normally, that's a pretty highly cash-generative quarter? So if you could explain what's going on there. Thanks.

Kevin Clothier

Sure. So in terms of the free cash flow of $750 million, that includes the deduction for the $100 million of pension contribution we made. So not $650 million plus it's $750 plus $100 if you wanted to add it back. So that should resolve that.
In terms of the Q4, if you look at it, we say at least $750 million, we're at six let's call it, just under $670 right now. You're going to have some earnings growth. You're going to have some working capital improvement but you're also going to pay interest expense of probably close to $100 million. You're going to pay taxes equal to about $100 million. You're going to have CapEx of around $200 million. If you do the math, it gets you a little better than $750.
Working capital is always the number we drive to get as low as possible. So we'll see that will be the number that gets us really the delta to see how much better we do than at least $750 million number. Thanks.

Joseph Factor

So Just kind of more philosophy follow-up here. Just how you guys approach guidance? So you guys have done quite a deal better versus your guidance the last couple of quarters. I think everyone likes to see some conservatism. But I guess when you're talking about the beat, it's a little bit of the cost savings maybe surprised, the volume surprise.
So as you think about fourth quarter and maybe as you think about framing next year, are you trying to be conservative versus expectations? Or are you actually versus your plan, seeing things coming in a lot better, which was, I guess, a surprise versus what you hope to achieve is that hopefully makes sense to answer that?

Timothy Donahue

Yeah. So I think if you look at where we've outperformed this year, it's been in the beverage businesses, Americas, Europe and Asia. If you looked at the fourth quarter of last year, Asia had income of $47 million, which is kind of what the average has been for the first three quarters of this year. So you wouldn't expect a large increase in Asia year-on-year.
And last year in the fourth quarter in Americas Beverage, we had we actually had higher segment income in the fourth quarter last year than we had in the second quarter this year, which is a remarkable number because the second and third quarter, if we were to rank the quarter, you'd go three, two, four, one and for the fourth quarter to be bigger than the second quarter.
So, I think the opportunity for the Americas Beverage business to have a quarter that's significantly better than the prior year quarter is far less this year in the fourth quarter than it has been in the first three quarters of this year.
I think the one business we firmly believe we're going to do better year-on-year in the fourth quarter this year is European beverage. And that's basically because the massive destocking that occurred in Q4 last year, we don't foresee that.
So, I think the rate we gave you is a I appreciate the question because we know it was coming. Because we have when you beat a number by 10%, it begs the question for the next quarter. But I think the range we've given you is a fair range.

Joseph Factor

Okay. Thank you. Thank you.

Operator

Stefan Diaz of Morgan Stanley.

Stefan Diaz

Hello, good morning. Thank you for taking my questions and you know, hope everybody's okay with the hurricane down in Florida. Thank you. So, one of your global customers mentioned a consumer preference shift into cans specifically in Mexico. And I think they also mentioned not necessarily having all the capacity needed to meet the can demand in the short term. Maybe just what are you seeing in Mexico? And do you potentially see the need to expand capacity within the region, maybe not a new line, but add some efficiencies within the region, et cetera?

Timothy Donahue

Yeah, I, So I'm aware of what you're describing. As I said earlier, we've had a really strong performance volume-wise in Mexican cans this year. Glass business has been firm. I don't necessarily see us needing to expand capacity.
As I said, anywhere in the world right now, unless there's a new customer award in a region of the world where we're not located. It's but I don't and that would apply to Mexico as well.
So, I think we have the footprint we have, currently, the capacity we have now, there's a little bit open where we see the market going for the next couple of years, I think we're okay.

Stefan Diaz

Great. Thanks for that color. And I know you're expecting down volumes within Asia due to your footprint actions in the region and the related profit benefits. That said, can you give some color on what you saw in the market in 3Q and what you're expecting in the region into the end of the year?
And maybe just a quick follow-on to that Asia question. During the summer, there was also a Chinese competitor that announced the construction of an additional line in Vietnam. Just given your bullish view on the region into the medium term, how do you assess the risk of potential new entrants into the region as well? Thanks.

Timothy Donahue

Yes. So, it's a it is a country-specific region. The expansion by the Chinese competitor into Vietnam is specific to a multinational filler, not specific to a Vietnamese filler. I'll leave it at that.
Volume I got year-to-date volumes here. I can tell you, year-to-date, we think Southeast Asia is up 5%. For the full year, we're estimating they're going to be up about 5%. And we forecast will be down about 8%.
So, I some of that's due to our capacity reduction. Some of that, frankly, is due to customer pruning, right? We walked away from a fairly significant chunk of business at two customers where the margins were not worth the risk. And you always we're not here to make cans for practice or just a pad volume statistics. We need to get a fair compensation for the risk we undertake, and we didn't believe that business did.
But that was on the order. Those two customers probably 75% of the volume decline we're experiencing came from those two customers. Having said that, I would not describe the capacity reductions we took as related to those two customer walkaways.
So I think all in all, we feel we have a very good customer set. We have pretty good balance with capacity. And like any region of the world, like any business, you need growth, and we look forward to growth in the future.

Stefan Diaz

Great. Thank you.

Operator

Edlain Rodriguez of Mizuho.

Edlain Rodriguez

Thank you and good morning everyone. Tim, a quick question for you on capital deployment and share buyback. So how do you balance the timing opening a share buyback against an increase in share price? Or is the answer, what I suspect you will say that the stock is still undervalued and you continue to be aggressive buyers as you go forward regardless of the share price?

Timothy Donahue

Well, I would say that the share price is undervalued. But the market doesn't say that. And so I think we will continue to use the term opportunistically buy back shares. I don't think we're going to be overly aggressive at any one point in time in the year because we're trying to prove a point that we're undervalued.
If I look at our operating statistics, I look at our growth, I look at the businesses we operate in the portfolio, the percentage of the businesses within the portfolio yes, I think we're undervalued. It doesn't matter what I think the market has spoken. So we're going to be opportunistic with share repurchases.

Edlain Rodriguez

Okay. And as a follow-up to CapEx spending, you keep taking it down. I mean last quarter, it was no more than $500 million. This quarter is like no more than $450 million. Like is there anything that's being deferred? Like why are you able to watch it down like that just on a quarter-to-quarter basis or year-to-year? So what's going on there?

Timothy Donahue

Well, we keep saying no, eventually, they accept no. I know you're chuckling, but that's frankly, that's you're always asking the teams to do more with less, and you're always trying to make sure they perfectly understand why they need to spend money. And if there's no payback, why are we spending money?
So it's really a question of refining. It's a constant refinement of a process where they need to prove why I needed to spend money. I don't think we're deferring anything. We spent a lot of money over the last several years and now is the time to get a payback on it.

Edlain Rodriguez

Okay, perfect. Thank You.

Operator

Gabe Hajde of Wells Fargo Securities.

Gabe Hajde

Tim, Kevin, I want to try to revisit Anthony's question a little bit and just framework for thinking about volumes. You teased us a little bit with market growth of 2%, which I appreciate, we don't know.

Timothy Donahue

It could be 0. It could be one, it could be three. I just picked the number, right? It's just a .

Gabe Hajde

No, I understand. But short term, are there any I guess, disruptions from weather in the Southeast for the U.S., but more importantly, what is informing sort of how you're thinking about the business? I mean, we all know that you guys go through medium-term planning.
And when I walk through a convenience store, I'm seeing more options to pick up a single-serve can. And so whether it's innovation, whether it's channel in which cans are being sold, maybe dialogue with customers and what's informing your view for an expectation of low single-digit growth in maybe North America?
And then in Europe, as we do lap some of these porting events, et cetera, restock this year thinking about next year. I think sustainability has been a pretty big driver for growth. Are there other things that we should be thinking about in our models and our forecast growth?

Timothy Donahue

Okay. Let's I'll start with the hurricanes in the Southeast. We did have some storms in the Upper Midwest in August, which delayed some of the fresh pack, but we'll get that back in early October on the food side.
The hurricanes in the Southeast, no discernible impact to our beverage can business that I feel right now. We did have our we have an aerosol can plant in South Carolina that we shut down for a few days. So some sales loss there, but that will be made up. Nothing notable to discuss or to warn you about no impact to any of our facilities other than power loss for a few days.
Certainly, some of our corporate employees dealing with some real devastation to their homes and belongings. and we're helping them as best we can.
Start with Europe first. I think that sustainability, as you rightly point out, is a big driver for the continued growth of the European can market as well as whether it's from sustainability or just cost or convenience or better for the fillers to continue version from glass to can, specifically soft drinks, but also beer over time. And we'll benefit from that in Europe we believe we're going to continue to benefit from that in Europe.
So whether that's sustainability or not or cost, there's continuing conversion. The one thing that I do think the upside in Europe, that Europe hasn't had yet that we've seen to have had much more in the United States is the proliferation of non-beer alcoholic beverages.
So as the other alcoholic ready to drink or other alcoholic beverages in cans become more readily available and embraced by Europeans to replace beer over potentially place beer over time that will favor the can.
United States or North America, if you will, you're right to point out that if you go to a convenience store, you see a variety of all kinds of products now being offered in cans. Some of that has to do with changing demographics, meaning the younger generation is not as loyal to the brands they drink.
Their willingness to explore and experiment and try new products. And just because they like product A today, it doesn't mean they're going to like it twoweeks from now.
So but all of that does bode well for the can because, as you know, the can is the perfect billboard to market and advertise our product with a variety of colors and graphic fields and other things like that. So we do think there's continued opportunity there.
I don't want to say that we're going to continue to see cannibalization of beer. At some point, beer will find its footing. But there has been a bit of cannibalization in beer from these nonalcoholic drinks. And so we'll see where that settles.
But one thing I think we do believe that in the third quarter in North America, we do believe the alcohol segment grew faster than the non-alcohol segment. And some of that could be a bounce back of some of the mass beer declines we've experienced over the last or eight quarters, we'll see where that falls out.
But I think specific to your question, gave you, you look at new consumer behavior and the new consumers are the younger consumers, and they generally consume more than older consumers, and they are less loyal more willing to try new things, and that generally will bode well for the can.
So but again, whether it's 1%, 2% or 3%, we're the only reason I put that number I was to tell you that if the market was up to next year, we'd be up to next year. We're not going to we're not as we sit here today, we don't believe we outperform or underperform the market. We're going to be in line with the market.

Gabe Hajde

Understood. I appreciate it. Two quick ones, hopefully. Maybe to reask the share repurchase question a little bit differently. I mean you serve time as CFO, I suspect there's a framework behind your decision to repurchase shares or at what value you think is and you'll be more or less aggressive in around that.
Maybe confirming that for us and then thinking about other alternatives that you may have for capital. I mean I see almost $1.8 billion sitting on the balance sheet, and I appreciate we're talking about net debt versus gross debt and those types of . But just help us with that. And then really quickly, hopefully, any expectation for or early read for tin plate pricing, it's been a little bit volatile.
I know it tends to track norm fuel prices, but just sometimes it impacts a little bit of volatility or imposed a little bit of volatility in your non-reportable segment.

Timothy Donahue

Yeah, I saw on tinplate, had you asked me three months ago, I said it was going to be up 5% to 10%. And A month ago, I would have told you it looks like it's going to be down. Now it looks like it's going to be up a couple of percent. I don't know, and we won't know till January. A little bit of volatility in the tinplate businesses.
But as I said, in total, the nonreportables gave now making up about 5% of our EBITDA. So I wouldn't that should not be any narrative that we need to discuss to really understand or describe the Crown story at this point.
Share Kevin's got a lot of cash on the balance sheet. Two things I want to say. That's not all going to be used for share buybacks, and it's not going to be used for acquisition. It's principally going to be used for debt reduction. We have a number of maturities coming due and we generally earn as much interest or more than we pay.
So we feel better about holding the cash earning more interest than we're paying on the debt we have yet to pay down. So but most of that cash is waiting to be applied to bonds that come due and or some term loan that will pay off in the future.
And lastly on share buybacks. Yes, listen, I spent a lot of time in the finance sector of the company. Your views of the world are always shaped by your past. And the one thing I would tell you is that one thing you do know is that when you pay down debt, it is certain. And there is a nice feeling behind certainty.
So I would describe to you that there will be a healthy mix of debt pay down along with share buyback over the next couple of years on our journey to 2.5%.
As I said, we don't feel the need to get there quickly. It was only two or three years ago when perhaps not you, Gabe, but many of the analysts and others were not very concerned about companies that were levered 3.5 to 4.5 times in our space just given the consistent large cash flows we do generate.
And that's changed a little with the size of interest expense or interest rates right now but we're pretty comfortable where we're at. We'd like to reduce the interest expense. So more of the operating leverage we have accrete to the bottom line, we agree with that. But as I said, paying down debt is certain and but there'll be a healthy mix.

Gabe Hajde

Thank you, sir.

Timothy Donahue

I think you told me that was the last question. So thank you very much, Al, and thank you, everybody, for joining us. That concludes the call today, and speak to you again in February. Bye now.

Operator

Again, that concludes today's conference. Thank you, everyone, for joining. You may now disconnect, and have a great day.