Good morning and welcome to Crown Holdings’ Fourth Quarter 2021 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. Kevin Clothier, Senior Vice President and Chief Financial Officer. Sir, you may begin.

Thank you, Younis and good morning. With me on today’s call is, Tim Donahue, President and Chief Executive Officer. Tom Kelly, our retiring CFO. If you don’t already have the earnings release, it is available on our website at crowncorp.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 actual results to vary is contained in the press release and in our SEC filings, including Form 10-K for the 2020 filing and subsequent filings. The company recorded a loss in the quarter of $7.95 a share compared to earning $1.12 in the prior year quarter. The loss includes charges to fully settled UK pension plan and premiums paid to retire 1.7 billion notes related to the sale of tinplate business. As a result of the sale of the European tinplate business, all periods have been restated as required and the results of the business are reported in discontinued operations. Adjusted earnings per share increased to $1.66 in the quarter compared to $1.50 in 2020. Net sales in the quarter were up 24% from prior year primarily due to the pass through of higher raw material costs and increased beverage can and transit volumes. Segment income was $357 million in the quarter compared to $358 in the prior year, as the benefit from higher unit volumes were offset by inflationary pressures and the effects of the strong dollar. We purchased $950 million of stock in 2021 and returned an additional $105 million to shareholders from quarterly dividends. We have repurchased an additional $150 million of stock so far in 2022 and we expect again to return at least $1 billion to shareholders in 2022. As outlined in the…

Thank you, Kevin and good morning to everybody. Our continued best wishes for the health and safety to all of you and your families. Before reviewing the operating performance for the fourth quarter, we again express our appreciation to the global Crown team for their continued efforts in overcoming the many challenges of the past two years to continually serve our customers well. While we know many of you are vaccinated and boosted, we ask that those of you who are not that you consider the data, which shows that hospitalization rates among the unvaccinated are almost 10 times higher than among the vaccinated. Our recommendation is that you please get vaccinated, get boosted and remain safe. As previously announced and in advance of his retirement, Tom Kelly stepped down as the company’s Chief Financial Officer on January 1. It’s been my pleasure to work alongside Tom for more than 25 years, a professional of the utmost integrity, the company has benefited from his counsel and we are grateful for the strong financial position created under Tom’s stewardship, establishing a strong foundation for continued future growth. On behalf of the entire Crown family, I want to thank Tom for his leadership and dedication and wish him and his family much happiness in retirement. And just a few words from Tom now before we begin. Tom?

Thank you, Tim. It’s been my pleasure working with you and the entire Crown team over these many years. Kevin, congratulations again and best of luck in your new positions and responsibilities and to those of you in the investment community it’s been a pleasure working with all of you during my time at Crown. Tim.

Thank you, Tom and congratulations again. As described in last night’s earnings release, 2021 was an outstanding year for the company. Record performances in earnings per share, segment income and EBITDA were achieved. And as Kevin described, we believe 2022 will be even better. With beverage can demand continuing to outweigh supply in most global markets, we continue to invest for future growth, with approximately 20 billion units of beverage cans capacity having already been commercialized or announced for commercial startup between 2020 through the end of 2022. Included within our third quarter earnings release in October, we outlined numerous achievements in our sustainability journey. We have since announced new global recycling rate goals to increase the circularity of the aluminum beverage can. The aluminum beverage can is already the most recycled beverage package in the world and we are committed to achieving even higher recycling rates to boost recycled content. In the fourth quarter demand remained strong across all businesses and geographies. Reported revenues increased 24% from higher beverage food and transit volumes, coupled with the pass-through of higher raw material costs. Fourth quarter segment income was in-line with the prior year as higher volumes offset unfavorable currency and higher costs. In Americas Beverage, demand continued to outweigh supply as evidenced by as many as 15 billion can units being imported into the United States during 2021. To meet the growing demand, we completed construction on four production lines across the segment in 2021 and will commercialize an additional seven lines in 2022 and 2023. In North America, unit volumes advanced 6% in the quarter, and 9% for the full year. In early December, our newest plant in Bowling Green Kentucky took a direct hit from an EF-3 rated tornado, resulting in the immediate curtailment of operations at the…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from the line of Angel Castillo of Morgan Stanley. Your line is now open.

Good morning, and thanks for taking my question. Let me just start out, I just wanted to ask, I guess what you’re seeing in terms of the volumes by region, as we think about that 9% for 2022 and also how should we think about kind of the cadence throughout the quarter as well?

Probably a little too early to talk about the first quarter, only January behind us, but thinking about volume for next year, I think in total, as we say in the release where we’re going to be up 9%, perhaps a little more than 9%, we expect double-digit growth in Asia. I think in the Americas segment, we expect double-digit growth with both North America and Brazil being very strong. And in Europe, currently we are capacity constrained and we expect volume growth in Europe to be flatter, perhaps up a 0.5% for the year.

Got it. That’s very helpful. And then, as we think about the Bowling Green incident and just maybe where that might have impacted inventories, as you think about that double-digit in North America. Any sense for maybe how much of an impact that may have or there may be in terms of volume? I’m just kind of how you feel about your inventories heading for the year?

Yes, it’s a good question. So I think, its one plant will begin to bring the plant back up early next month, bring the first line back up, get the second line going. After that it’s a new factory and I don’t want to say we’re going to have to go through learning curve again, but we’re certainly going to have to, as we bring the lines up, we’re going to have to debug the equipment. And there is, these are not guys that have been in the system for 30 years making cans. They’ve been making cans for six to 12 months now. So it’s not necessarily second nature to them. So there’s some retraining and some and learning curve to get back through. So we will lose capacity out of Bowling Green for the full year from what we might have originally expected, even as we bring the lines back up. Having said that, it’s one plant in a system and it doesn’t change our estimate of double-digit growth in North America for the year. I will tell you that it did not, to your question, it certainly did not help our inventory position. As you’re well aware, the market is extremely tight. The industry is, I don’t want to say we’re all hand to mouth, but the market is very tight. And we are still importing cans. We will import cans to service customers and obviously to overcome the Bowling Green challenge. But, our inventories are a little lower right now than we would have liked and that will cause some strain on the system as we get through the first two quarters of the year.

Appreciate the color. Thank you so much.

Thank you.

Thank you. And the next question is from the line of Christopher Parkinson of Mizuho. Your line is now open.

Hi, this is Harris Fein sitting on for Chris. Can you please just speak to the transportation and logistics challenges that you are seeing across geographies? How they’ve evolved in 1Q thus far versus 4Q and what your base case expectations are for the balance of the year? Thank you.

Yes. I mean, it’s perhaps, Europe is the most challenging and certain markets in Europe are more challenging than others. I don’t think I see any necessary, currently I don’t see any overwhelming challenges as it relates to transportation of our finished goods to customers. There are some issues certainly on the transportation side with raw materials, especially raw materials that are on container ships, that continues to be somewhat challenging. And that there still are numerous delays and the time on water, considering the delay, once they arrive at the port to unload is still a little longer than we like, but we like others are managing through it at this point.

And then, regarding Southeast Asia, specifically, Vietnam versus your prior commentary is there any other insight that you can give as to how that situation has evolved and how that plays into the $2 billion EBITDA guidance?

Yes. Listen I think that we’re going to have a real strong performance in Asia. We’ve had growth each year for as long as I can remember, with the exception of last year, which was slightly down only because of severe shutdowns due to the virus. We had growth this year in Asia. We probably expect even significant growth, double-digits next year only because it appears that for most of the countries, they’re beginning to evolve towards treating the pandemic as endemic as opposed to pandemic and we’re all learning how to live with it. So I think that currently it feels like in Southeast Asia, especially the big markets for us, Cambodia, Vietnam, Thailand are all wide open right now.

Great, thank you.

Thank you.

Thank you. Our next question is from the line of Mike Roxland of Truist Securities. Your line is now open.

Thanks very much. Congrats Tom on your retirement and best of luck in your future endeavors. And congrats Kevin on your new role as well. One quick question for, just to pick it off on. Tim you mentioned current supply chain logistics issues and obviously your inventory is not where you would like. How do you think about inventory levels coming out the other side? Now it isn’t being viewed as more than it seems like the hoping again, you think you’ll start to carry higher levels of inventory in case conditions revert or conditions worsen? So do you think once we get past this, whether it be six months or 12 months from now, do you think it would carry higher levels of inventory going forward?

Well, depending on who you ask in the company, you’re going to get a different answer. So that’s if you talk to our manufacturing folks, they love to be able to carry higher inventories. I think the situation is, even as we get past the Bowling Green restart and we’re back to full production, we’re not going to have the luxury to carry higher inventories, because demand is so strong in almost all the markets where we operate. So we are constantly trying and others in our industry trying to get more capacity in as quick as possible to serve as growing demand for a variety of products that our customers are offering to consumers. So I don’t know, if we’re going to have the ability. We or anybody else is going to have the ability to grow inventories for the next several years just given that the demand is so strong, and we expect demand to remain strong. In the absence of over committing capital to any one region and I don’t think we’re going to over commit capital. We’re going to be fairly responsible as to how we deploy capital into each of the markets we operate in.

Got it and thank you. And then one, just one quick follow up. You mentioned or was mentioned earlier about some of the cost recovery mechanisms you’re pursuing with European customers. Can you talk about some of the actions you’ve taken? You mentioned the two year horizon to try to correct these. What have you done thus far? How have those conversations proceeded? Obviously realizing that every contract is different than that every contract that comes up for renewal at different times, wondering what the feedback has been, what the progress has been thus far?

Yes. So Europe has been different. The convention, commercial contracts, convention for commercial contract pass-throughs just different in Europe compared to North America for some time and we’ve been trying to move in a direction where more of the raw material risk is transferred in our contracts to our customers who have ultimate pricing power to the consumer. And so that will take some time. I think the good news is, the market remains tight in Europe. There is certainly a growing shift to cans in Europe, as we’ve seen in North America, so the customers need cans. So we are in the early stages of this, but as contracts renew over the next two years as we said, variety of contracts renew over the next two years, we expect largely to complete this through the end of 2023 going into 2024.

Good luck in the quarter.

Thank you.

Thank you. The next question is from the line of Michael Leithead of Barclays. Your line is now open.

Great, thanks, good morning guys. First question on Americas Beverage, Tim, can you maybe unpack the moving pieces in the quarter between North and South America. And then, how you think about the regional split in terms of earnings growth for '22 as well, is there differences between how fast each region should kind of get that price catch up that you mentioned? Thanks.

Yes. I don’t have the -- I'd ask you to follow-up with Tom and Kevin. I don’t have all of the volume numbers in front of me or of the top of my head we had really good growth in North America, we had good growth in Mexico. Brazil was a bit more modest just given how cool and wet, the season is and perhaps the economy a little softer there now. But certainly, long-term, we still remain exceptionally bullish for cans in the Brazilian market. We will never get too excited about short-term or near-term challenges in the Brazilian market. It's proven to be exceptionally resilient over time. I think that not all -- most of the PPI recovery they will have will come through in Q2 and Q3. So largely by the end of Q3, we'll have that back in North America. You should expect to see that the Americas Beverage segment will probably have a decline in segment income in Q1 related to last year just due to the fact that the PPI is largely recovered in Q2 and Q3 and we're not going to recover any of the Bowling Green hit. We're not going to be allowed to record the recovery of the Bowling Green hit until later in the year. But for the full-year, it's going to be another strong performance in the segment from an income perspective.

Okay, that's super helpful. And then maybe just a quick follow-up for Kevin. Can you just speak to the level of share repurchases that you're currently incorporating in year '22 full-year EPS guidance?

So yes Michael. We're looking at spending close to 1 million in shares at a -- we'd assumed an average share price of around a $120.

That's great. Thank you.

Thanks, Mike.

Thank you. The next question is from the line of George Staphos of Bank of America. Your line is now open.

Hi everyone, good morning. Thanks for all the details. Kevin, again congratulations; and Tom, congratulation to you. It's been a pleasure working with you over the years. I have one shorter-term question and one longer-term question. Tim and Tom and Kevin, I don’t know perhaps I missed it -- if you actually called out what the impact of the tornado in Bowling Green was either or including the recovery or cost the damage and kind of the pinwheel effect it had on the network in 4Q. And in turn, what the negative is, round numbers for 1Q.

Yes. So your round number for 1Q, I think about $20 million, George.

Okay.

And that doesn’t mean that Bowling Green contributes $20 million per quarter.

Understood.

The entire stress on the system and it’s the incremental cost that we're going to incur but ultimately we recovered from the insurance company. But the incremental cost we incurred, tried to continue to service customers for existing business.

Right. And for 4Q was it comparable?

No, it’s not that big but on the order of maybe -- we had a lot of inventory in the plan which was a loss. Think about maybe $7 million, I was going to say $5 million to $10 but maybe 7'ish. We don’t have an exact number but that part of the problem we had, we probably had 80 million units to 100 million units of inventory on site which was loss. So, I'm not sure how much of that would have been sold at the end of through the end of the month but significant portion. So, yes unfortunate.

No. I appreciate it, Tim. And again, thankfully no one was hurt from what we could see in the release. Strategically a longer-term question. You are reinvesting in the food can business. Machinery is also something has been core to crown for many, many years. Can you help us understand if perhaps at some point you'll be disclosing more data on these business which you have in the other segment and in particular on machinery. Strategically, how does it help you do you think operate and is there a way that you use it strategically again in a go-to market and from a commercial standpoint in the beverage can sector. Thanks, and good luck in the quarter, guys.

Thanks, George. So, on the beverage can making equipment business it’s based out of the UK, we acquired that business a little over 25 years ago when we've grown it substantially since then. I think for many of the pieces within the beverage can line, we believe that our equipment is the leading industry standard for so many of those pieces. Strategically, as you think about the tremendous growth that the industry is experiencing right now, there are a couple of bottlenecks to assuring that growth. One of it, one of them is securing or procuring enough aluminum and the other is procuring the equipment on time. And so, having our own equipment business, we're able to get in line and get the slots with our own equipment producer to assure that we can get equipment installed as necessary to meet the growth demands of our customers. I'm hesitate to remark on any other strategic advantages, just it’s one thing I talk about strategy, it's not that it's to disclose strategy. I don’t think it's helpful to the company or to our shareholders long-term if I talk too much about certain elements of strategy. But it is a -- it has proven to be a very helpful business to be in from a standpoint of not only getting equipment on time but also helping the equipment supplier our equipment supplier and in turn the other equipment suppliers understand the growing technical needs of our business. Higher speed, lighter weights, better power transformation, just a variety of things that our knowledge of the can business helping an equipment manufacturer make equipment that's more appropriate for a business that’s rapidly transforming over the last decade or two. As it relates disclosing more information on the remaining food and aerosol can business and equipment, we'll see what we get to in that.

Okay. Thanks very much, Tim.

Thank you, George.

Thank you. The next question is from the line of Ghansham Panjabi of Baird. Your line is now open.

Thank you. Good morning, everybody. And Tom, just want to echo the congrats in your retirement. I'm sure you'll miss these calls going forward.

Thank you, Ghansham.

Absolutely. I guess, first off on the 9% volume growth assumption for 2022 of 79 million base, that imply about 8 million cans and maybe 800 plus million or so in sales? What do you estimate the operating leverage to be for the new additions based on how operating level -- leverage kind of shake that for 2021 with the 9% growth you saw last year. I know there's a lot of moving parts. And just, I guess I'm trying to bridge the $220 million or so of EBITDA differential between 2021 and 2022. So maybe can break out some of those moving parts.

Yes. So, I -- Ghansham, I think of you -- $220 million of EBITDA growth and perhaps half of that is in the global beverage business and half of that is in between transit, food and equipment and the equipment businesses. We're going to have a fairly strong equipment performance in 2022, transit's going to do better and food and aerosol is going to do better on the back of PPI recovery which was particularly acute in those businesses over the back half of 2021 combined with significant own made two piece food can volumes. We've been short two piece food can capacity for a few years now and we've been sourcing cans either from our former sister operations in Europe and or competitors here in the United States. So we'll make our own can significantly transferring profits that were recorded somewhere else to our own books in the future. So that would be the split. And if I said half of it's in global beverage, Europe's going to be down, so much of that growth will be in the Americas segment as we alluded to earlier.

Okay, thank you. And then, in terms of your comments on Europe being somewhat capacity constraint, you're spending a $1 billion in CapEx in terms of 2022. Your main competitors spending 2x that including projects in Europe. I guess as it relates to your sort of footprint in Europe, how should we think about the evolution of CapEx towards that region going forward?

No, I think that certainly within the $1 billion number, Ghansham, there are, there is a significant piece of that $1 billion that's Europe, we have yet to announce those locations for other reasons. But we're not sitting on our hands in Europe, we just haven’t announced those projects yet.

Fantastic. Thank you, so much.

Thanks, Ghansham.

Thank you. The next question is from the line of Mark Wilde of Bank of Montreal. Your line is now open.

Thanks. Good morning, Tim and Tom and Kevin. And Tom, I will just add my congratulations to you, I really enjoyed working with you. Tim, first question I have on the transit packaging business. Did you see kind of an acceleration in the underlying growth there just driven by that push there reduced labor and increased automation that we're seeing in a lot of industries?

The short answer is, absolutely. I negated to mention in my prepared remarks that it was a perhaps 16% weighted average volume growth in this year's fourth quarter compared to 2020 was against an easy comp, but if we go back to 2019, if we compared to 2019 we're up 8% weighted average volume over 2019. So there is and this is as we describe for you, we're not investing a lot of money in transit world, we're just running those assets harder. So this is all organic volume but automation absolutely. We see it everywhere and nowhere do we see it more prevalent than in the transit business where companies want to automate the backend of their manufacturing process. So with the -- from the point at which they stop manufacturing the product, how they transfer -- ultimately transfer the end of manufacturing through packing warehousing distribution automation is rapidly expanding, yes. I'll just say it that way.

Yes. How much -- how many years of runway you think that might have, I mean because that be then and easily a three to five year runway?

I think the answer well three to five years a long time. Why don’t we just say I could say easily three years? What I will tell you is when we bought the business and even through the end of 2020, our backlog in equipment and tooling was about $80 million to $85 million. We are over $200 million in backlog right now. And --.

Okay, that's helpful. And the other --.

So I think this is -- yes, I -- Mark, I know -- given everything that's going on at labor, the shortage of labor, labor cost escalation I think that this is here with us to stay.

Yes, okay. Tim, could you also just give us that kind of two or three kind of key points that are going to help you increase the recycling and recovery rate on beverage cans?

I think the -- we're going to have to work on collection, right? So it all comes down to collection. We know in the states, just like United States for example, the states that have deposit programs, collection rates are much higher than in states that don’t have them. We know in countries which are less economically advantaged than the United States, recycling rates are exceptionally high. So we're going to have-to-have a greater collection programs perhaps driven by more deposits in more states. And we're going to have-to-have potentially extended producer responsibility to get there. But the big focus will be on the United States. We know the rates are quite high. In Latin America, the rates are higher than the United States, certainly in Europe and growing but we do need to get the U.S. rate up at 50% it's shameful. Given the value that aluminum has in the recycling stream and given the circularity in nature of aluminum and the physical property of aluminum where it's not the graded and can come back as a food container very rapidly that rate needs to increase.

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

Thank you, Mark.

Thank you. And our next question is from the line of Phil Ng of Jefferies. Your line is now open.

Phil? Yunis, why don’t we move onto the next one?

Sure. The next one is from the line of Anthony Pettinari of Citi. Your line is now open, Anthony.

Good morning. And congrats to Tom and Kevin. And Tom, thanks for all the help over the years.

Thank you, Anthony.

Bevcan demand looks obviously quite strong globally. And I'm just wondering when you look at the supply demand balance, is it possible to kind of go through your regions and maybe characterize which markets are maybe sort of uncomfortably tight where you're importing cans or would expect to import cans in 2022 versus markets where supply demand is maybe a bit more balanced and I don’t know if there's any regions where supply demand is maybe worser than you'd like. But I was just wondering if you could talk about sort of the relative state of supply demand balance in your big regions?

Yes Anthony, I think I don’t know depending on who you are, what do you characterize it is as uncomfortable or comfortable. But now let's say that every market that we operate in with the exception of China and the Middle East is oversold. Southeast Asia will be perhaps Southeast Asia as a market is not oversold in 2022 but we're oversold. We're fully sold out in China, well in the market, market might be in the 75% range but we're fully sold out in China. The Middle East there is slack and the Middle East is the one area where we have cans available. So we import to other markets as we're short but the United States is will continue to be oversold for the next couple of years, at least. Europe again exceptionally tight if not oversold in every market. And we're tight in Southeast Asia. So Brazil might be a little loose for the first six or nine months this year. And when I say a little, I mean a couple of percent, I don’t mean much. But again, this is a short-term issue that we've seen in Brazil before with the economy and or weather from time-to-time, this is nothing maybe concerned of long-term in Brazil. This is a market that's exceptionally healthy for future can growth.

Okay. That's very helpful. And then, Tim, we're two years into the pandemic. When you look back at your business from a big picture perspective, do you think the pandemic was sort of net benefit to Bevcan demand, was it neutral or negative. And if the pandemic was a net benefit, you view it as maybe kind of a structural accelerator or was it sort of a one-time thing, is there any risk that maybe get back some of that growth or growth accelerates maybe later this year or next year. Just wondering kind of big picture thoughts on that.

Yes. So I think as you point out, the disruption caused by COVID, all the other things associated with that if you want to blame inflation in the supply chain partially on COVID. One thing I think consumer behavior has changed. And so, I guess what I would tell you with my view is that it's more permanent or structural in nature that the consumer behavior has changed. I think certainly at-home consumption has increased over the last two years whether it be for beverage cans and or food cans and I don’t believe -- and I do believe that is a change to consumer behavior. I think if you look at the experience, even as the economies have reopened and restaurants and bars have reopened. The cost to eat out or consume outside the home and the experience. The experience of eating out and consuming outside of the home is not as good an experience as it used to be. It's a different experience, now service is lousy, the cost is prohibitive for most people. So I think the at-home consumption change is a consumer behavior that's perhaps more permanent than we would have thought a year ago. And I think that'll benefit the can whether it’s a steel food can or aluminum beverage can for years to come.

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

Thank you.

Thank you. We have Phil Ng on the line again from Jefferies. Your line is now open, Phil.

Hi, Phil.

Good morning. Jefferies, John. Tim, how are you doing?

Hi, how are you doing, John?

I apologize, you guys can hear me before but I did want to extend my gratitude to Tim for all the insights -- I'm sorry for Tom for the insight that he's been able to provide for us over the years. And then, I'm really looking forward to working with Kevin going forward. I just kind of want to touch on the imports. I mean, it sounds like calm you're expecting to be sold out through 2023. I mean, the industry the day they came out this morning showed like December down about 37% year-over-year in terms of U.S. imports which is still two or three times pre-pandemic levels. Obviously we're early in the year but do you think we can get back to more normalized imports into the U.S. or you still see that the capacity continue to be extremely tight and needing outside imports to supplement the current demand levels.

I wouldn’t read too much into imports in December being lower. It's a softer part of the season, right? I don’t well as I sit here, or I think that the industry brought in 15 billion or 16 billion units in '21. I can't sit here and tell you, I think we're going to bring in that level of units in 2022. But I bet it's at least 10 billion units it'll come into the market in 2022. And listen, I -- we as a company and I believe others in our industry are still turning away business. There is not enough capacity in the market and the consumer to marketing companies whether they are the large established marketing companies or new upstart companies are increasingly introducing and promoting their products in recyclable aluminum as opposed to PET. And we all know the reasons from a sustainability standpoint why everybody would like to use aluminum as opposed to PET. And our efforts at Crown and throughout the industry where try to get more capacity in so that we can service them. But until then, I think imports are going to continue to be strong for the next couple of years.

Understood. And then just to pivot a little bit to the new capacity that you have coming on. Have you experienced any delays in timing just because of all the broadly speaking supply chain disruption, in terms of the project you're coming online in 2022. And could you just maybe quantify when and how much capacity the newly announced Cambodia line led?

So I think we get the new line in Cambodia up in the third quarter. And it'll be sized initially for about 700 million units. Supply chain delays, I think the only significant -- I mean, listen, it's some of the equipment is out pretty long right now. We try to be thoughtful in terms of understanding our needs for the future and placing our orders such that we have the equipment when we need to start installing so we can get up and running. I think the only real one problem, we have one issue and we may have talked about it before, construction steel early on was-- was challenging but I think we're through that right now, so.

Okay, excellent. I'll turn it over. Thank you.

Thank you.

Thank you. And the next question is from the line of Gabe Hajde of Wells Fargo Securities. Your line is now open.

Yes. Thanks for taking the question. Good morning, Tom, congrats.

Good morning, Gabe.

Congrats. Kevin, look forward to working with you. Good morning, Tim.

Thank you.

Yes. I know typically, Tim you fairly let us into to kind of preview the forward year. You did so, and on the Q3 call and you kind of told us $2 billion in EBITDA. We're reaffirming that today despite what I would say would be some FX headwinds and then obviously, I mean I think you're expecting to get hold on Bowling Green but you’re some ripple effects from that through those the chain. Can you talk about whether it's material availability, I don’t know, aluminum, magnesium or risks that would put you below that or I don’t know, any way you're thinking about that that keep you up at night at this point?

You just want to throw cold water on it and a nice blanket, don’t you? Anyway, no seriously I think listen there is always something that can go wrong, Gabe. I think we've got a lot of momentum as we described here, we know the first quarter is going to be a little softer in the Americas Beverage. That's just a timing issue related around PPI contract recoveries and Bowling Green recovery but the year is going to be really strong. Your point as to Bowling Green and or currency well taken from the third quarter until now but obviously there's some other things that have moved more towards our favor in the interim. And so, I think on balance we feel still feel as comfortable today as we felt in October despite some of the other minor things going on. I think I'm not so concerned right now about magnesium. I think that -- I think general metal supply for some others may be a concern but metal is tight globally. When I say metal, I mean aluminum. Aluminum is tight globally, so you want to get real worried, I mean Russia invaded the Ukraine and they shut down the gas supply to Western Europe. Okay, you can come up with all kind of scenarios you want but right now we feel pretty good.

Okay. Now that was more meant to be quite honestly a congratulatory like hey you guys were able overcome some of these stuffs, so. A quick point of clarification. You mentioned, Tim, not one and two part capital where it doesn’t need to be continuing to be disciplined. Was that a reference more because it was in the context of inventory? So was that more of a working capital comment or was that something where you're still trying to be mindful as you always would be in terms of more permanent capital and capacity. And I guess if I could, the working capital number I think was 536 or something like that a use of per capital that's had other uses. So any view for what that number can look like for 2022? Thank you.

So I'll let Kevin come back on the second part of that. My comment was purely around inventory levels when we come out of the so called demand explosion that we've had. And I don’t think we're going to be out of the demand explosion for a couple of years at least. We're not going to have the ability to build inventory unless we were willing to put more capital and perhaps than we need long-term. And I – we, as we sit here today, we would hope and all of this would hope that just in time inventory theories or strategies would soften a little bit and we'd have more buffer inventories if you will in the future. But and we may have that or people may want to strive to that but I think the economics are all are going to lead us right back to just in time in the future. And I don’t think we want to be sitting on the long side of capacity if that were to happen in four or five years. Kevin, you want to deal with the other part?

Yes sure, I'd like to. Gabe, in terms of working capital, we're probably looking as we invest the new plans and add capacity. We're going to add need to add working capital as we do that. So, we're looking at probably at least a $100 million of working capital build, it's something that we looked at woman as much as possible. But as we see it today, it's in that neighborhood of a $100 million.

I appreciate it. Good luck, guys.

Thank you.

Thank you.

Thank you. And our next question is from the line of Arun Viswanathan of RBC Capital Markets. Your line is open.

Great. Thanks for taking my question. Thanks for all your help, Tom. And congrats, Kevin to you as well. I look forward to work together. So I guess my first question is just on Europe. You noted that you have a potential two year cost recovery trajectory. Could you just describe the contracting process there? A couple of years ago when we are going to this in North America, it was characterized as a sold out market and really an opportunity to bring up the returns that had lagged for a little while into the mid-teens level. Would you say that there is a similar opportunity now in Europe or how do you characterize that market?

Sure. I think the market in Europe is similarly tight as North America was a couple of years ago. And we would expect it to remain tight or get tighter in certain regions. From time-to-time, we've been satisfied with our margin profile in Europe and a lot of the times we haven’t. I would characterize our efforts over the next two years largely around ensuring the contract provisions allow us to fully recover our cost. We only had one chance to get it and that's from our customer. The customer has the ultimate pricing power, the consumer and if there's going to be inflation, the consumer needs to pay for that. Nobody in the supply chain can afford to pay for that. So I would characterize our efforts largely around fairly recovering our cost which would imply margin expansion from fourth quarter levels but may only imply margin recovery back to levels where we were previously satisfied.

Got it. Thanks for that. And then just real quickly on transit packaging. We've seen a nice recovery there. Would you say that the business is fully recovered from COVID in industrial weakness, what inning are we in that and if not do you expect to kind of continued EBITDA growth, I know you're guiding the '22 EBITDA growth but you would expect EBITDA growth in '23 as well? Is that right?

The answer is we would expect EBITDA growth in '22 and '23, yes. Largely recovered from COVID, I think the only remaining headwind around COVID if you will, if you want to blame supply chain pressures on COVID would be supply chain. There is still some tightness for circuit boards, motors, things like that which are delaying shipment of some of the equipment that we have in the equipment business.

Got it. Thank you.

Thank you. And our next question is from the line of Adam Josephson of KeyBanc. Your line is now open.

Thanks. Good morning, everyone. And Tom, let me add my congratulations as well, it's been a real pleasure working with you. Thank you for everything you've done over the years.

Thank you, Adam.

And question for you on your food can strategy. So you sold obviously 80% of your European business last year. You're adding pretty significant capacity in the U.S. Can you talk about what your thoughts are about how core U.S. food cans are to the company versus Europe? And then just also help us with how much capacity you're adding in the U.S. relative to your existing capacity base?

If you go through the third line and including the third line in Olympia which will come up third quarter of '22, you add that to the line in Hanover and Dubuque, probably expanding our two-piece food can capacity 35% in North America. And as I said, Adam, we've been procuring cans from our former sister company in Europe for the most part and some others from competitors here. While we own the business, we have the responsibility to run that business as well as we can and to serve our customers as well as we can. And in a lot of cases, these are family-owned businesses which really rely on their suppliers and we don’t take that responsibility lightly. We're trying to provide to them quality products as economically as we can. And that's a great responsibility they put on us and it's been coming for us to meet that demand. Now, I said while we own the business and we're a packaging company. Whether we make a beverage package or food package or transit packaging, we're a packaging company. And what we're trying to do is run an organization which allows us to generate returns and return is much value to shareholders as possible and some of the other businesses which are really good businesses generate a lot of cash and allow us to fund growth and return significant value to shareholders. So I don’t want to describe one business as more core than the other. I think there are core when you consider how much growth or how much cash flow, how much income growth and how much cash flow we can get from those businesses.

One follow-up to that. Tim, you mentioned that you think both steel food cans and aluminum beverage cans have been beneficiaries both short-term and longer-term from the pandemic. Do you think business has benefitted structurally any more than the other?

It probably from the pandemic I would say food cans because beverage cans while they benefitted from pandemic but the other big benefit in beverage cans has been the whole sustainability push where retailers and big CPGs understand they have to move more towards aluminum from plastic. They just can't check the box on sustainability anymore. They've got to have real programs to demonstrate from an ASG perspective that they're serious and they understand aluminum is the right move.

Yes, now understood. Just one last one on North America Beverage Tim. Can you just talk about which categories you're seeing grow the most quickly, I mean there's been a lot about how it's also slowing and I appreciate your exposure there is not overly substantial but just talk about what you experience by category in the fourth quarter and then what your expectations are for this year in terms of where you expect perhaps the bulk of your growth and or the industry's growth that come from and why?

I think energy drink -- as you say we're not. The exposure we have to spike shelters is rather limited. Carbonated flavored waters and energy drinks and teas probably being the biggest growth on a percentage basis obviously of much lower basis -- much lower base than CSD but we continue to see growth in CSD and aluminum as well. And that’s obviously offer much bigger base. So in terms of units, CSD perhaps larger in terms of percentage, flavored water, flavored sparkling water and energy drinks.

Thanks a lot, Tim.

Thank you.

Thank you. And our final question is from the line of Silke Kueck-Valdes of JPMorgan. Your line is now open.

Hi, good morning. It's Silke Kueck-Valdes for Jeff Zekauskas. When you bring up the Bowling -- we pair the Bowling Green Plant, will it come on back online at the same capacity like around 2.5 billion cans or do you think you can bring it back at a larger size. That could mean to bottleneck and while you're catering with the plant.

No, that's the plant -- it’s a good question. The plant is sized properly to produce 2.4 billion 2.5 billion units per year depending on size proliferation and changeovers throughout the year. We'll bring it back to that rated capacity. It'll as I said earlier in the prepared remarks or in an answer to a question, I'm not sure, it'll take us some time to as we bring the lines back up to debug the equipment and get through the learning curve with the employees, I will say that the employee group we had in Bowling Green came through learning curve exceptionally well. So we're hopeful that they'll come through the restart well also.

Thank you.

Okay. Well, thank you very much. Yunis, I think that concludes the call today. So we thank everybody for joining us and we'll talk to you again in April. Bye, now.

Thank you. And that concludes today's conference call. Thank you all, for participating. You may now disconnect.