Good morning and welcome to the Crown Holdings Fourth Quarter 2020 Conference Call. Your lines have been placed on a listen-only mode until the question-and-answer session. Please be advised, that this conference is being recorded. I would now like to turn the call over to Mr. Thomas Kelly, Senior Vice President and Chief Financial Officer. Sir, you may begin.

Thank you, Kirby and good morning. With me on today’s call is Tim Donahue, President and Chief Executive Officer. If you don’t 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 such statements. Additional information concerning factors that could cause the actual results to vary is contained in the press release and in our SEC filings, including in our Form 10-K for 2019 and subsequent filings. Earnings for the quarter were $1.12 per share, compared to $0.64 in the prior year quarter. Adjusted earnings per share increased to $1.50 in the quarter, compared to $1.04 for in 2019. Net sales in the quarter were up 6% from the prior year, primarily due to increased Beverage and Food Can volumes. Segment income improved to $397 million in the quarter, compared to $285 million in the prior year due to higher sales unit volumes. As outlined in the release, we currently estimate first quarter 2021 adjusted earnings of between $1.35 and $1.40 per share and full year adjusted earnings of between $6.60 and $6.80 per share. These estimates assume exchange rates remain at their current levels and a full year tax rate of between 24% and 25%. We currently estimate 2021 full year adjusted free cash flow of approximately $500 million, with approximately $850 million in capital spending. Dividends to non-controlling interests are expected to be approximately $100 million. We expect full year 2021 adjusted EBITDA as defined in the release, of approximately $2 billion and year end 2021 net leverage of approximately 3.5 times. And with that, I’ll turn the call over to Tim.

Thanks, Tom and good morning to everyone. Our continued best wishes for the health and safety to all of you and your families. Before the reviewing, the operating performance for the fourth quarter and the full year 2020, we want to again express our appreciation to our global associates for their continued efforts during the pandemic. Your efforts to meet the unprecedented demand from our customers in a safe and timely manner has been exceptional and we thank each of you. And we ask you to please remain vigilant in your adherence to recommended behaviors to ensure your safety and the safety of those around you. As described in last night’s earnings release, 2020 was an outstanding year for the company. Record performances in segment income, EBITDA, cash from operations and earnings per share were achieved in 2020, and 2021 will be even better. At the same time, the company continues to invest for future growth with more than 15 billion units of annualized Beverage Can capacity, having been commercialized were announced for commercial startup from 2020 through the end of 2022. The major projects are detailed in last night’s earnings release, so we won’t repeat them here. In Americas, Beverage demand continues to outweigh supply and we have eight production lines including three new plants currently in various stages of construction to bring more supply to these markets. In North America, unit volume has advanced 11% in the fourth quarter and 15% for the year, with our only limitation on further growth being available capacity. In Brazil, units were up 8% for the year, with our fourth quarter sales output being limited by capacity. For 2021, we expect the segment to post significant income gains against 2020. Unit volumes in European Beverage advanced 10% in the fourth quarter, with…

Thank you, sir. We will begin the question-and-answer session. [Operator Instructions] Our first question would come from the line of Michael Leithead of Barclays. Your line is open. You may begin.

Hey. Thanks, guys and good morning.

Good morning, Mike.

Good morning.

I guess, first, Tim I want to start with the portfolio review. Your team and the board’s obviously been working on this for a little over a year. Can you maybe just flesh out what your team has learned going through this process? And kind of how you came to the decision to market the EU for the European Tin Plate business versus some of the other Non-Beverage Can businesses, just any color on the process will be helpful.

Well you know, I – in the prepared remarks, I tried to clarify any misunderstanding that a variety of people have or has published with regards to the business. The business is a franchise business for us. If somebody does indeed buy the business, it will be a franchise business for them. And I think it’s pretty obvious the performance of the business is improving. It’s always easier to sell an improving business that’s one than one that’s going sideways or dealing with other market conditions. And this business has an exceptional management team such that, if you wanted to own a franchise business, you can own this business, plug it right in and have a management team that understands how to run it, while the new owner learns more about European Food Cans.

Got it. And then maybe just a follow-up question on capital deployment. Can just help us with how you’re thinking about the priorities of excess cash flow over the next couple years? Should we expect elevated levels of growth spending beyond ‘21 and after the $100 million or so for the dividend? Should we kind of think of buybacks is sort of the flywheel for excess cash as your leverage is pretty normalized at this point? Thanks.

Yeah, so I think if you take the leverage number that Tom provided earlier, 3.5 times against $2 billion of expected EBITDA that gives you $7 billion of net debt, which is right around where we ended 2020. So that would imply that, after dividends are paid that all cash flow that we generate will be utilized at some point during 2021 to repurchase shares. And I think as our – as EBITDA improves in the future, and we continue to generate cash flow, that leverage will naturally decline. But we can use all the cash flow for dividends and/or – share buybacks As it relates to capital, $850 million is a big number. But it’s a number that we feel comfortable spending, we think we can deploy that in a responsible way. Not only responsible into the market, but responsible in terms of our ability to convert that growth into earnings and cash, a little early to say what we expect for the number to be in 2020.

Great, thank you.

You’re welcome. Thank you.

Thank you. Our next question would come from the line of Kyle White of Deutsche Bank. Your line is open. You may begin.

Hey, good morning. Hope everyone’s doing well. Wanted to focus on North America or the United States, US industry shipments were up 6% in 2020 and you mentioned actual growth was higher due to imported cans. Do you have a sense as to what the true underlying demand for beverage cans in the US was in 2020? And how many cans the industry was short? And then also when do you expect the industry to get to a situation where the domestic supply is adequate to meet the underlying demand?

Well that’s a mouthful, but it’s a great question. I think our best estimate and we saw some numbers the other day, it appears as if about 8 billion cans were imported into the US in 2020. So if you took, I think the industry came in a, what, 103 billion, 104 billion domestically produced plus 8 billion, that’s 111 billion, 112 billion. And if you compare that against the 97 billion cans in 2019, that’s pretty significant growth. Do we think we’re going to grow at that clip every year? well, we’ll see. But the first thing the industry needs to do domestically is, install enough capacity to cover the 8 billion cans that were imported, because those markets from which cans were imported will rebound in 2021 from their own local domestic demand and need to be supplied locally, so well there’ll be less cans available to come into the US. We brought on two lines in 2020, the third line in Nicole’s, the third line in Toronto. We have five other lines currently being in various stages of construction already in the United States and the other fellows in the industry are doing the same thing. So I think we’re going to continue to see a very strong demand in North America.

Got it. And then my next question, obviously, a lot of breweries had to move draft production into a package format this year. We’ve also seen the rise of kind of e-commerce with Drizly. So just curious what you’re hearing from customers in terms of keeping their production in cans even as on-premise channels open back up. Do you think there’s a kind of a fundamental uptick in demand here from these customers? Or do you expect them all to go back into draft production once on-premise channels are open?

Well, I think you’ve got a couple of things. As it relates to beer, for those people who still want to drink beer, if bars and restaurants open back up, you’re going to have people drinking draught beer. I do think there’s been a shift, though, for some prior beer drinkers into these spiked seltzers. And it’s not just beer moving to spiked seltzers, if you are drinking a mixed drink, a gin and tonic or a vodka and soda, maybe you’ve gone to a spike seltzer and the spiked seltzers are all in cans. So I think, yeah, to your, I mean, your ultimate question is, how much of the growth do you think we’ve had is related to the pandemic? And I think, you know, if we were up 12% or 14% as an industry counting imports, you know, maybe 2% or 3% of that was related to the pandemic, I think the rest of it is, is real growth as not only the marketers of these products, but also consumers recognize the sustainability benefits of the can, the great marketing features, the billboard print feature of the can versus other packages and the shifting tastes of consumers away from perhaps some people away from draught beer and mixed drinks to – towards spiked seltzers.

Got it, thank you. I’ll turn it over. Good luck in the year.

Thank you.

Thank you. Our next question would come from the line of Arun Viswanathan of RBC Capital Markets. Your line is open. You may begin.

Great, thanks for taking my question. Congrats on a great 2020 and a positive outlook for ‘21 here. So I guess, you know, I guess first question just on the free cash flow and deleveraging. Do you feel that you accelerated that this year in 2020? Was there some working capital gains that you felt were a little better than expected? Or was it production? And is that possible also in ‘21, just understanding the puts and takes on the $500 million of free cash flow guidance for the year –

I think, Arun, every year we start out, you know, the businesses are somewhat conservative, I think when we start out, especially around working capital needs in the business and we always start the year and run through the quarters with higher projected working capital usage, then we end the year, I don’t think we did anything special or exceptional at the end of the year, I think most of the excess free cash flow we had at the end of the year was due to the earnings being just much greater than we had forecasted. Although, I will tell you at this point, we are forecasting a significant use of cash from building working capital for all the new Beverage lines that we are putting in. So we’ll see how that goes for the year. But I – you know, you’re always free to look at things the way you want to look at things and do your own projections. But I would caution you against getting too far ahead of the numbers we provided you already, because we’re – it’s early in the year and we, like others are going to be bringing on substantial capacity. And there is a natural one-time working capital need to open up each plant. And we’ve got a number of lines coming up globally in 2021.

Sure. Thanks for that. And then I just – still a little bit of a follow-up I guess, an extension is you know, your European Food Can, you provided some nice color there. So thanks for that. The performance has improved, you’re calling for $50 million growth in ‘21. And I know that, you know, potentially it has been a beneficiary from COVID as well. And maybe there’s some structural benefits that are lasting. You know, I guess I’m just curious as to what the benefits are of divestment at this point? Again, the leverage is already relatively low for the company. You know, I think you know, it is a relatively strong business that provides good free cash flow. So, you know, and along with that, I’m just curious, are there particular other arrangements you’d consider like, JVs or retaining an equity interest? Maybe you can just elaborate on some of those thoughts.

Well, it’s a great question. So you’re right, we, you know, for the last couple of years, everybody was concerned about our leverage, everybody, but me, I know, we have, you know, when you’re in a packaging business like ours, you know you’re going to generate significant cash flow every year, you don’t get overly concerned about leverage, especially when it’s as cheap as it is today. And so we don’t have a leverage problem. I don’t think we ever did, we certainly don’t have one now and moving towards 3.5 by the end of 2021 demonstrates, we don’t have a leverage problem. I think, you know, you know the thesis behind the portfolio review, the thesis is, if we become a, a single-line company with the one product line, which one competitor seems to have a very high multiple, that our resulting multiple would trade up towards that. And that that offsets any dilution from selling any or all Non-Beverage Can businesses. So I won’t say a whole lot more other than that we are deeply into a process right now. And we’ll see where the process takes us. I think, you know, we like Food Cans. We like the performance of Food Cans. We like our management team a whole lot. The European Food business is entirely different than the North American Food business. It’s a much broader geographic and product business than you see in the United States, they pack higher quality foods in cans in Europe than they do in the US. It generates a substantial amount of cash flow, and it’s a very stable business, notwithstanding some poor harvests. We didn’t have an exceptionally great harvest in 2020, but we had a more normal harvest. And when we look at the $50 million of improvement we’re forecasting for 2021, you know, roughly $20 million of that is the Tin Plate carryover and $15 million is currency. So we’re not asking you to believe a whole lot more than $15 million of organic growth in the business year-on-year. And that’s going to come from 2% to 3% volume growth. So I think all those things kind of support what you said, Arun in terms of why would you want to sell the business. Now, having said that, we’re in a process and our view, that board’s view is, depending on the offer we get, we’d be prepared to trade the business for an appropriate offer. If we don’t get an appropriate offer, we’re not going to trade the business, we’d be more than happy to run the business and have a business that generates this kind of cash, support the growth objectives we have in the other business.

Okay, I’ll turn it over.

Thank you.

Thank you. Our next question would come from the line of George Staphos of Bank of America. Your line is open. You may begin.

Hi, thank you. Hi, guys. Good morning. Thanks for all the details. Congratulations on the progress. I wanted to go into, Tim, your comment on balancing the capacity expansion responsibly with market trends. And I pretty much know what you mean there. But if you could maybe give a bit more detail in terms of what that means for Crown over the next couple of years and relate that to whether we are in a heavier than normal or normal contract renewal period as we’re getting to ‘22 and ’23? Relatedly, did you give a global Beverage Can volume outlook or number for the fourth quarter? I don’t know that you provided that. and then I had a follow-on.

I didn’t, George, because Asia was down and it kind of – it’ll skew your comparison to others, because the others don’t operate in Asia. I think what I gave you was, Europe at 10%, North America at 11%, Asia down to 1%. But I think if you take that globally, I think our fourth quarter was probably on the order of 3% to 4%. Because Asia drags it down.

Okay.

I don’t think we gave. I think you know, I think our estimate for 2021 is probably 10% or 11% growth, just because of all the capacity coming on. You know, when I about responsibly, George, the first level of responsibility is to our own company. And it’s one thing to throw a lot of capital out of business and ask your people to do it, it’s another thing to make sure you’re asking your people from the top of the organization, you need to be responsible with what you’re asking your people to do. And we’ve had a lot of experience building plants over the last 25 years, I think, probably nobody has built anywhere near the number of plants we’ve built globally. Our expansion has largely been from the construction of new plants as opposed to the acquisition of others’ businesses. So we have a skill set, a core competence within the company to design, engineer and build our own buildings, design, engineer and build our own production lines, start them up with our own people in an efficient manner, in a relatively short period of time and try to convert through the learning curve and get cash flow and earnings to convert as quickly as possible. So we are focused on generating earnings and cash flow. Yeah, we want to grow the business and we want to have our fair share of the growth that’s available. I think we can do that. I think, you know, we look at ourselves in the North American marketplace, we’re probably about 24% of the market, I think we can modestly grow that 24%. But that doesn’t mean we need to be 25% or 28%. It means 24% or 24.5% where we’re trying to be responsible in the market and we’re trying to be responsible to ourselves.

Okay. I guess just, if you can comment is ‘22 or ‘23 a more normal or heavier than normal renewal season? And then my second question is just as we think about the strategic review, can you comment to the extent possible, you know, how your views of both Transit and European Food have evolved over time? My sense is the businesses have probably improved in terms of your own outlook, maybe not. But I throw that out there. And what does that mean in terms of your expectations in terms of how this will ultimately conclude or things that you’re looking for? And should we expect that whatever you do receive from the strategic review, assuming you do a transaction, would that be largely applied to buy back? Thank you, guys and good luck in the quarter.

Thanks, George. So I think, to your question with respect to 2022 and 2023 contract renewals, and if we just deal with the North American marketplace, I would say that there’s nothing sizable that I’m aware of that comes due during 2022. There are a couple of very large contracts which come due at the end of ‘23 for the entire industry. And I would expect that the customers and the suppliers will all determine how much they want to accelerate the renewal or delay that renewal depending on where the suppliers and where the customers see the supply-demand balance. As it relates to our view of the business, I think, you know, we’re going to be up as I said on the European Food business, the business is going to be up roughly $50 million year-on-year. And if you add that to the 2020 number, George, you’re going to get to a number that’s probably the highest number we’ve ever had in our European Food business, despite the euro being at about 1.20 versus I think it was about $1.35 when we bought [indiscernible] six years ago. So despite, you know, 12% currency headwind, the business is still going to be greater than it was six years ago. And that’s a testament to the amount of cost we’ve taken out of the business, the efficiency of the operation and the excellent management team. On the Transit side, we’ve had fairly anemic industrial conditions over the last 18 months coupled with a pandemic. And I think if you look at what we expect our performance to be in 2021, the EBITDA is going to be somewhat close to the EBITDA we paid for the business. Notwithstanding the incredible amount of cash we’ve generated and taken out of the business over the last couple of years. So I would say that on balance, very, very pleased with Food Can performance. And on – you know, if you take a balanced view of Transit, yeah, it might be down $10 million or $20 million EBITDA versus what we – when we bought the business, but given what’s happened in the marketplace with industrial demand and the pandemic, really pleased with how the team has taken cost out to react to that and keep the business much more stable than perhaps many of you thought it would be based on their performance in the ’08-’09 financial crisis.

Thank you very much.

Thank you.

Thanks, George.

Thank you. Our next question would come from Salvator Tiano of Seaport Global. Your line is open. You may begin.

Yeah. Hi, guys. So, congratulations on another strong quarter. Firstly, I wanted to talk a little bit about the European Beverage, you had a very nice quarter and I guess, see you know, things are improving in the south. Firstly, if you can talk a little bit about what you’re seeing as lockdowns were implemented again in December? Because I think that was an issue during the summer. And also you had a pretty nice operating income growth here. I know last quarter you seemed less excited about it. But is your view is starting to change about the potential to grow volumes there more and adding more capacity in Spain, Italy, et cetera?

Yeah, so I think, yeah, good question. I got to decide how much I really want to answer of that. But as I said in the prepared comments, there are reasons why European income performance was so much greater than the fourth quarter of last year, it really has to do with the depressed level in the fourth quarter of last year, owing mainly due to startups in Italy and Spain. And then and also the fact that the big two-line can plant in Seville was down for conversion from steel to aluminum, so that that’s behind us. I think as we look forward, obviously, demand is intensifying across Europe. We believe we’re going to see some of the same trends in Europe over time with respect to spiked seltzers that we’ve seen in the North American marketplace, and that’ll put greater demand on cans. We still have the issue of you know, tourism which is still negatively impacted by the pandemic. And while there the lockdowns or the shutdowns are not as great as they were over the summer months, there still is a lack of tourism, especially across the southern countries, Spain, Italy, Greece. Hopefully, you know, depending on the vaccine rollouts, we’ll see some greater movement in tourism as we get into the tourism season next summer. But I think, you know, as we look forward, clearly, we’re adding a lot of capacity in North America, a lot of capacity in Brazil, we’re adding capacity in Southeast Asia. There’ll come a time when we’re prepared to add capacity in Europe, yes.

Okay, makes sense. And by the way, I think at least in Greece, vaccinations are going better than most people would expect. So at least that’s a good thing. Now, a little bit again on Europe, I think in other markets, western, northern countries, the UK, Germany, demand is growing very solidly. I wonder, can this affect the demand for your, the countries in which you operate? Could you export in those regions? Is there a potential to essentially, you know, to have a spillover about the tightness into other countries?

Well we operate two large beverage plants in the UK. So we’re there already. We have a large, modern two-line cam plant in eastern France, so we can get the Germany pretty easily from there we can also get the Germany from a two-line cam plant in Slovakia. So while we’re not in the German market, we have the ability to get there. So yeah, we’re going to participate in that growth, I would tell you that currently, our growth is limited by our capacity. So to your earlier question, we, you know, we’ll continue to evaluate when it’s appropriate for us to add more capacity in the European business.

Thank you very much.

Thank you.

Thank you. The next question would come from the line of Neel Kumar of Morgan Stanley. Your line is open. You may begin.

Great, thank you. In terms of your 2021 guidance, can you just give us a sense of what kind of volume growth you’re assuming by region? And then in terms of startup costs, do you expect that to be a significant headwind year-over-year? I mean is there any particular quarter where startup costs will be heavier? Or should it be generally consistent throughout the year?

Yeah, somewhere I have growth for ‘21 by region, let’s see if I got it here. So I think I said it will be up 10% or 11% overall, it’s probably about 10% in the Americas, probably 7% in Europe, maybe about 12% or 13% in Asia. I would describe the European numbers and the Americas numbers as capacity constraint, they could be greater if we had more capacity, but we’re bringing on what we’re bringing on. And Asia will be largely a recovery of a down year in 2020 and in a resumption of the growth profile we’ve seen for the last decade, at least. So pretty, you know, 10% for boring can industry, 10% is pretty good. I’m sorry, Neal, what was the second question?

Is around startup costs, do you expect that to be a headwind year-over-year and –

You know, we have startup costs every year. I think that you know, we bring on plants every year, we’ve been building plants for 20 plus years, we, sometimes we bring on one or two plants a year, sometimes we bring on four or five. So there are startup costs every year that the differential is obviously the rollover impact, how much more do you have this year or less than, than you had last year. I think we’ll have more in 2021, although the – it really comes down to how do you measure startup cost? And you can get real creative in assigning a number to that. But you know, we’ll have startup costs in 2021. But it’s embedded in the number we’ve given you.

Great, that’s very helpful. And then do you anticipate any meaningful headwinds from non-metal costs like freight, labor and utilities in 2021? And with freight, in particular, I think in the past you mentioned you were changing contracts to add prices, more representative of actual freight costs rather than the basket, like the producer price index, can you just give us a sense of, you know, what percentage of your contracts had this updated structure?

Yeah, I would say, most. I think the headwinds that everybody is going to feel in 2021, not just the can industry, but it’s just a general tightening of commodities and upward price pressure on commodities Specific to freight there is a container shortage across Asia right now. So getting containers timely is difficult. And the price obviously is reflecting that. And so you attempt to pass through those exceptional costs if and when you incur them. On steel, we’re going to see a general tightness in steel globally this year. I think the Chinese are using more steel. The container shortage I mentioned earlier, to get steel out of Asia. And then during the pandemic, there were a number of mills that were idle. So the time it takes for those mills to come back on stream if they actually do, but until then, steel will remain tight.

All right. Thank you.

Thank you.

Thank you. Our next question would come from the line of Ghansham Panjabi of Baird. Your line is open. You may begin.

Hey, guys, good morning.

Good morning.

Good morning, Ghansham.

You know, Tim so pre-pandemic standard cans were sort of plotted down in North America and you know, any growth the industry generated was really in specialty cans? Do you have a sense on how much of the 15 billion cans in terms of incremental growth for 2020, you know, sort of year-over-year, including the imports, came from specialty versus standard and would the standard can be the category that sees reversal post-pandemic? You know, maybe you could just tie it more broadly to some of the commercialization initiatives you see in the categories in North America, hard seltzers and whatever else.

Hell of a question. So I think all sizes, Ghansham we’re up tremendously in 2020, the customers, you know, we’re all trying to get the customers as many cans as we can, regardless of where do we get them from, so they’re taking as many cans as they can take, regardless of the size. There are some customers who only market in the sleek or slim cans, but the big customers, obviously market in all sizes, and they still market primarily in 12 ounce standard cans. And you know what they did to try to get more product on the shelf, not only for us to make cans quicker, but also for them to fill cans quicker was limit the number of SKUs that they were requiring from us and that they were putting into the marketplace. So, you know, take beverage company A, they might have 200 SKUs over the summer, they probably cut it back to 4 or 5 to be to be quite honest with you. So I think that all sizes were up but your comment that prior to the pandemic just be a little careful, because prior to the pandemic was also prior to this greater realization of sustainability and responsibility towards the environment and recyclability, superior recyclability of the can versus other products. So there’s a kind of a combination of pandemic and sustainability related factors here that are driving can usage up, I think that post the pandemic, we’re going to continue to see outsized growth in Beverage Cans, off a smaller base, the specialty cans will have a bigger growth number, but I think standard cans will continue to grow as well.

Got it. And then in terms of, you know, just a competitive yours is, you know, obviously massively step functioning CapEx for 2021 to ramp up capacity off of already pretty high numbers. You have an $850 million number baked in for 2021, that’s well above your historical levels. And you’ve already guided towards that previously, but curious as to, you know, what is sort of the internal limitation in terms of, if you see opportunities being able to wrap up that number more significantly. I guess the question is, is there a wide range around that number? Or is that just based on what you see in terms of constraints that’s, you know, $850 million is a pretty tight number at this point for this year?

What’s an $850 million is $850 million. It’s, I know the number you’re referring to, I guess, the number you’re referring to is a, it’s probably about 170% of our number that the other fellows talked about. If you just deal with a North American or Brazilian business, you know, their business is significantly larger than ours. So I guess if you want to maintain your market share, and you’re looking to satisfy the growth of customers in the marketplace, if you’re 45% to 50% of the market, you need to spend a lot more than somebody who’s only 24% of the market. That’s the way I would answer that.

Got it. Thank you.

Thank you.

Thank you. Our next question would come from the line of Phil Ng of Jefferies. Your line is open. You may begin.

Good morning, Tim. Good morning, Tom. This is actually John Dunigan on for Phil, how are you doing?

Good morning, John.

Hi, John.

Congrats on the good print. I first wanted to touch on Transit. Transit in 4Q was the first quarter in 2020 that was up year-over-year. Looks like a lot of that was based on some of the cost reductions that you called out with margins improving. How much of that is sticky going into next year and as your forecast calls for, you know, significant upside for the business in 2021, is that based more on a reopening or those cost initiatives kind of continuing through next year?

Well I think it’s I think both, although you’re right. As we recover, most notably, the recovery, you’ll see in Q2, because Q2 was the first, you know, if you want to call it, the COVID quarter was the first COVID quarter we had and that was the one that was impacted the most. There’ll be – there still be further cost savings. Structurally we’ve taken a lot of costs out of the business as it relates to administrative overheads. So I think that was a – when we bought the business, we understood it was a pretty fat business up top, and it didn’t need to be that fat up top to service its customer base.

Okay. And just in regards with the capacity expansions, I think with maybe the exception of the Greenfield in Vietnam, we had most of those capacity expansions already known. But we were a little late maybe in our estimates on the 15 billion so kind of coming in a bit shorter that. Would you be able to walk us through maybe the line capacity that each of those facilities to kind of get to that 15 billion, and then just thinking about 2022, you have that Henry County, Virginia, Greenfield coming up, it seems like your CapEx might still be pretty elevated in that $850 million range going into 2022 with that, is that accurate? Or how should we may be thinking about that working capital and kind of the out years?

So I think, you know, since the beginning of 2020, we’re bringing on four lines in Brazil, that’s probably about 5 billion cans. You’ve got the four lines in the two new plants in the United States, Bowling Green and Martinsville that’s probably another 5 billion cans. Between the third lines in Olympia and Nichols and Toronto, that’s, you know, that’s three lines there. That’s another 2.5 to 3 billion cans. You’ve got Vietnam, you’ve got Thailand. So you added up, you get to 15 billion pretty quickly. So your second part of your question?

Was just the CapEx going into 2022 given you know, the additional North America Greenfields that you’re starting up in that year.

I - John, I think it’s a little early to talk about CapEx for 2022. But I – it’s just too early.

Okay, thanks for the color.

Thank you.

Thank you. Our next question would come from the line of Gabe Hajde of Wells Fargo Securities. Your line is open. You may begin.

Tim, Tom congratulations on the year and hope guys are well. I’m – Tim, you were the first to kind of be a little bit, I will say, cautiously optimistic about if this was a new trend, and I think we’re detecting that it is, but taking a little different angle to what’s driving growth, including individualized packaging and consumers’ affinity for convenience. So I’m specifically thinking about pre-mixed cocktails, which enables these brand owners to sell a $25 bottle of vodka for $50 in 20 pre-mixed cans. So I would think that this is in very early stages, and even in 2020, a lot of these product launches were in fact delayed. So any kind of color you can provide there in terms of just directional discussions or where you’re seeing growth? And then separately, on the carbonated soft drinks side, there’s one brand owner that I would say is pretty far down the path in terms of customer segmentation with specialty cans. Do you envision this as an opportunity for Crown going forward?

Well I think on – your second question, the answer is obviously, yes. On your first question, you’re right. To the extent that marketers of pre-mixed alcoholic or cocktails, they would have had desires to get to the market it would have been very difficult in 2020, just given the tightness in can supply, that will open up as we go forward. And so I think there’s an opportunity there. Yes, I won’t say anything beyond that.

All right. And I’m detecting a little bit more of a constructive tone in your voice. Maybe it’s misconstrued for Europe. Has something changed in perhaps the past six months on the demand side that gives you a little bit better outlook there? Or is that –

Are you talking about Beverage?

Yes, on the Beverage side, sorry, or commercially.

Well, if I wasn’t constructed before, I apologize. I would say that, yeah I think there’s a general tightening that we’re seeing. And even with a year in which the pandemic had a much greater – had an impact in Europe, but it had no impact in North America, unless it was positive. But it did have a negative impact, especially in the second quarter across Europe. We still had a very tight year. So I think we’re starting to see greater movement on the sustainability front in Europe towards cans, if North America was lagging on sustainability as it relates to cans versus every other packaging fronts, lagging Europe before, they’re way ahead of Europe now. So I think we’re starting to see the European market more fully embrace the can and we’re seeing tightness, more tightness than we would have seen a year ago.

All right, thank you.

Thank you.

Thank you. Our next question would come from the line of Mark Wilde of Bank of Montreal. Your line is open. You may begin.

Thanks. Good morning, Tom. Good morning, Tim.

Good morning, Mark.

Why don’t you just talk about the Beverage Can market and if we were to see the market start to slow down, Tim, how quickly would you – could you respond to kind of a shift in market growth? And what would be kind of the indicators you were looking at? Because it seems like everybody got caught by the swing to the upside here? You know, I think the tone kind of across the sector right now is quite bullish. But, you know, if we were to see a deceleration, you know, what would you be looking for? And then you know how quickly might you be able to react?

Well, I think it’s a good question. We’ve tried to talk about this in the past, nobody wanted to listen to us. So now you want to ask the question, and thank you. I think that, you know, we had, including imports, what, 12% to 14% growth and 15% growth in North America in 2020. We’re not going to see that every year. So what the – what does the deceleration mean? Does it mean we only grow 5% or 6%? Well, that’s still 6 billion or 7 billion units that still requires 7 can lines or by deceleration do you mean we start going backwards? I don’t think we’re going to go backwards for the next several years, I think we’re still going to see growth. The only question is, how much growth? Is it going to be 4%, 8% or 10%? And can the industry meet that demand growth? So I think for the next two to three, you know, at least for the next three years, we’re not going to be dealing with that. Could we react to that? Sure. I think we’ve described to you, we’ve got a number of projects currently under construction, we would finish those projects, but we would certainly reevaluate the other projects where we haven’t started or announced yet. Yes.

Okay. And then just back on North American market just briefly. Do you have any sense of sort of how much incremental volume the industry might have been able to sell? Have the capacity of the imports been there? Because you see these articles about, you know, beverage companies, you know, complaining that they can’t get cans. You just mentioned the kind of the pre-mixed cocktail guys, you know, being constrained and what they could do in 2020 by lack of supply. Just any general sense of that.

I don’t, you know, it’s a – part of the problem is, I think sometimes we’re all counting the same cans, right. So, you know, if we were up, including imports, I don’t know what we have, 14 billion cans. Could we have been up in another 2 billion or 3 billion cans? Yeah, sure. Beyond that, I don’t know. It’s just purely a guess.

Yeah, okay. Thanks, Tim. Good luck in the quarter. And, you know, I appreciated the commentary about the review. I don’t think anybody on the call here today wants to see you do a bad deal just for the sake of doing a deal.

Well, your name today is Joe Strummer, so thank you. Hopefully you understand the reference.

Yes.

Thank you, Mark.

Thank you. Our next question would come from the line of Anthony Pettinari of Citi. Your line is open. You may begin.

Good morning. Tim, is it possible to give a kind of a broad overview of the regions that you’re importing cans from and to? And to the extent that that trails off, you know, either in ‘21 or ’22 if you have sort of a sense of when that sort of normalizes? Should we think about that as moving the needle on margins, you know, with domestically sourced cans, presumably, you know, generating higher margins?

So we, in 2020, we imported a significant number of cans from Mexico and Brazil as those countries were initially shutdown with the pandemic. Those cans will be the availability of cans to come in from those markets in 2021 will be, I don’t want to say, zero, but significantly less than it was last year. We are importing cans from one of the Middle Eastern countries. But the imports this year will be far less in the Crown system than they were in 2020. And we have, you know, the Nichols and the Toronto line, the third lines of both of those plants are operating really well, efficiencies are really high, I think our cost per 1,000 in both of those plants is now lower than it was before we put the third plant – third lines in each of those plants. So that’ll replace much of that demand. And we expect to get the Olympia lineup sometime here in the first half of the year as well. So we’ll get Bowling Green going in the back half of the year. So the imports are going to be a lot less than ‘21 than they were in ‘20. And we have capacity coming on to replace that. And then yeah you’re going to see some improvement. I think that’s baked into the estimate we’ve given you for 2021 already.

Okay, that’s very helpful. And then just switching to Transit. Is there any – is that business seems to be recovering? Are you seeing any notable trends in terms of mix, and I’m specifically thinking about, you know, customers may be picking up investments that they delayed during COVID. Anything that you’re seeing in, you know, January, February, in terms of you know, consumables versus equipment and tools versus protective solutions?

Yeah, I would say that on the consumables side, strap and protective, we saw an acceleration of demand in the late fourth quarter, early part of this year. Equipment is now – the orders for equipment and tools are picking up now. It’ll take us a little while to obviously build that, that’s why you didn’t see that come through on the fourth quarter. But I think we’ll start building that and we’ll get those – we’ll get some of that equipment out in Q2, Q3. So yeah, the answer is yes, we’re seeing an acceleration in demand.

Okay, that’s helpful. I’ll turn it over.

Thank you.

Thank you. Our next question would come from the line of Adam Josephson of KeyBanc. Your line is open. You may begin.

Tim, Tom, good morning. Congrats on a really good second half of the year. Tim, just on the portfolio review, a two-part question, I understand the objective you know is to become a pure play beverage can company. Obviously the pure play producer is trading at a very high multiple. Why – the first part of the question is, why European Tin Plate rather than Transit Packaging in that regard? And the second part of the question is, you look at a pure play Food Can producer out there, their relative multiples the lowest it’s been in a decade, you look at that pure play beverage can producer, their relative multiples the highest it’s been in a decade. So are you at all concerned that you would be in effect, selling low and buying high in that regard?

You want us to sell beverage instead, Adam?

You tell me.

All right, listen. I think we described our Food Can business for you earlier. It is a business that recovered nicely in 2020. It’s a business that’s going to perform exceptionally well in 2021. It is a franchise business. It is a business that others should want to own. It’s a business they can plug in. It’s a business, you don’t have to have any experience in Food Cans to own. You’re going to get a management team that’s second to none. So for that reason, and we believed it was more readily marketable and more readily marketable at a fair price to trade than the other business which is coming out of a weaker industrial backdrop and a pandemic, more impact from the pandemic.

Any follow-up question, sir?

I’m sorry.

He asked if Adam had a follow-up.

Tim?

Yeah.

Sorry, sorry. So just on the second part of it. So, again, the – given the cash flow characteristics that you’ve always talked about with respect to the Food Can businesses, given the lift, they’ve gotten from the pandemic, whatever that may be and perhaps some of its sustainable rather than temporary. How much reservations do you have about parting with such a business?

Well, you know, your – the Beverage business is going to be really strong for the next, at least for the next three to four years. We know that, we can see that. beyond that, you don’t know. But investors have a much shorter time horizon than three or four years. So we’ll see where the world takes us. I, you know, from the standpoint of putting together a portfolio of businesses and having within that portfolio of stable businesses, which generate a lot of cash flow and don’t require a lot of capital to support the other businesses, which do require a capital from time to time and generating cash to do other shareholder-friendly things like buy back stock and/or pay dividends. So yeah you always have reservations, but you know, the board – the board’s undertaken this process. And so our job as a management team is to see that through one way or the other, we’ll determine whether or not we sell the business or we don’t sell the business depending on the offer to trade. And you always have reservations you got, you know, you got cross the street in the morning, Adam, you have a reservation, but you still cross the street.

Got it. Thanks a lot, Tim.

Thank you.

Thank you. We do have another question from Salvator Tiano of Seaport Global. Your line is open. You may begin.

Yeah, hi. A couple of quick follow-ups. One is in Europe Food you talked about the number of difference with the US? I don’t know if – I don’t think I heard about the little bit about the classroom mechanisms. Generally in Europe, it seems things are always – have always a longer lag. So can you comment on, you know, passthroughs for European Food Cans versus US Food Cans? And the second one, which also is titled to cans. You did the conversion of a Food Can line in Toronto earlier this – well, I guess last year. Do you see any other opportunities perhaps as the Food Can you know spike subsides in the next few years to convert more lines to Beverage Cans?

Yeah, so I – you know, one of the things that – the Toronto line, it really was not the Food line converted into a Beverage line, it was a brand new Beverage line. What we converted was the space in the plant that was allocated towards Food, towards Beverage, but it was a brand new Beverage line, it was not a conversion. And I do not see any further opportunity across the portfolio to convert Food, a Food line to Beverage. So on your first question, yeah we have passthrough mechanisms across many of the contracts in Europe. The one big difference in the European business as opposed to the North American business, in the North American businesses business, 90 plus percent of the contracts are multiyear. In Europe, I would say that 50% to 60% are multiyear and 40% to 50% are annual, so you’re naturally renegotiating all those terms on an annual basis.

Okay, got it. Thank you very much.

You’re welcome. So Kirby, I think that was the last question. So I want to thank everybody for joining us today. That concludes the call. And we’ll speak together with you in April to review the first quarter results. Bye now.

Thank you. And that concludes today’s conference call. Thank you all for joining. You may now disconnect.