Okay, everybody. Good morning again. I'm George Staphos, BofA's Paper and Packaging Analyst. We are delighted to have Ball Corporation presenting at our conference again. With us from the company, Scott Morrison, Executive Vice President and Chief Financial Officer of the company. He's been with Ball since 2000 in a number of senior roles. He's been Chief Financial Officer and Senior Vice President of the company since 2010. Scott, thanks for being back with us again. Thanks for having me. Thanks for having me. Thanks for having us. How are things? How's life? It's good. It's getting better. Yeah. Getting better. Last year sucked, but- Yeah. Yeah, I mean, last year was crazy. Yeah. The world seems like it's calming down, a little more stabilized, a little more normalized output. You know, a lot of supply chain issues that we had last year seem to be kind of in the rearview mirror. You know, even in our aerospace business, we had some supply chain issues. Mm-hmm. Those seem to be largely behind us. You know, we had our Russia business that we had to sell last year. That was a challenging time. It was a successful outcome from our perspective, where we got $530 million, but it was disappointing to have to sell it. We're seeing, you know, the cost side of things moderate a bit. We'll get, you know, in our business, you know, George, with the multiyear contracts, we have these PPI escalators, but they're a year in arrears, so we're kinda catching up this year for costs that we had last year, which will help us. Seeing costs moderate kind of on the go forward. I think we feel pretty good about where we're at now and where the businesses are at. We had to adjust our cost structure last year when the growth didn't show up that we expected. We're still working through some of those things on the inventory side in North America. Did that in the fourth quarter. There'll be more of that in the first quarter and a little bit in the second. We see things kinda normalizing and improving, so. Understood. you know, as you look at the 10%-15% target, I think the free cash flow guide was about $750 million. Yep. Would it be safe to say, recognizing it's only March 1st, you feel like you have at least as many upward supports as downward headwinds? Yeah. You know, It was like every- However you wanna say it. Last year, every week seemed to be like another punch in the gut. We kind of saw the bottoming, I think, in the fourth quarter and started to feel better as we got into this year. You know, there was a little bit of promotional activity before the Super Bowl, which we hadn't seen any of that last year, so that was encouraging. We know, you know, our customers have talked about some of the larger ones that hedge their own metal. They have metal hedges that are elevated that will come off in the back half of the year. We think that, you know, if you, if you'd have hedged metal last year at this time, you were paying $4,000 a ton for bottle, and now you're at $2,300 a ton. It's a pretty significant decline, so that we think that can make the can much more competitive. Yeah, I think we feel a little bit, a little better. Good deal. Good deal. You know, over the course of dialogue, everybody, certainly, if you have a question you'd like to ask, raise your hand. We have Lynn in the back of the room, you know, at the ready with the microphone. I guess one thing back to, you know, the why invest in company XYZ question that we're gonna be asking everybody today and tomorrow. You know, look, Ball has a wonderful track record over time. Last year was a tough year. At the end of the day, packaging and paper and forest is but 0.3% of the S&P 500. you know, for people who are listening on the webcast right now and are in the room right now, the 350 people who are in the room right now, why should they care about investing in Ball Corp? You know, aside from, you know, what's the one or two bullet points you want them to take away and why they're gonna make money in that investment? Well, I was talking to somebody outside who's known us for a long time. You know, if you go back, you know, my 23 years at the company, we would do acquisitions every so often and kind of lever up and then de-lever, use that cash flow to pay down the debt, and then flow lots of money back to the shareholders. In the last couple of years, we didn't do acquisitions, but we had a lot of organic growth opportunities. I mean, we, you know, the North America market, so Canada, U.S., Mexico, grew from 115 billion units in 2019 to 140 billion units. We saw a lot of growth. To keep up with that growth, we spent a lot of capital. Now we're in the phase of de-levering from that capital spend, and I think the cash flow starts to definitely accelerates. This year, you said $750 million of free cash flow. Next year it'll be more than that because we'll dial back the capital again. It's kind of back to that. You know, we know that works. We, you know, my 23 years, we've created a lot of value by following that formula, and we know that works, and we're gonna do the same thing. So being disciplined in what we're spending money on and how we're spending money. Mm-hmm. We've put enough capital on the ground to take care of us, at least for the next few years. We feel pretty good about that ability to, you know, turn the cash machine back on and flow a lot of money back to the shareholders and get our leverage kind of where we want it. One of the elements of the old Ball as well over time is when you do hit a period of difficulty, if you wanna call, and use whatever words you wanna use, if you agree or disagree with that. We've seen management step in, buy stock personally. We've seen sort of directors within the company to raise ownership thresholds. Obviously, you bought personally some stock last year. What's going on that we might not see but that we could know about in that vein, you know, within Ball? Well, I think a number of us, I think most of us that are in the proxy bought stock in the last year or so. We definitely believe in the long-term story. I mean, I have a fair amount of stock to start with. Yep. But I felt there was a definite opportunity because you know, the world was kind of dislocated. The world's definitely different. I mean, we're gonna have higher interest rates. We're gonna have more inflation than what we had in the past. You're gonna have a reshoring of a lot of supply chains. It, it will be a different world going forward, but I see our business being pretty attractive in, in that kind of world too. I think there's definitely more upside than downside. Scott, what do you think the North American market grew at last year in terms of shipments? Globally, what do you think that number was? you know, mid-single digits globally. you know, our Europe business has held up remarkably well. Last year, we grew upper single digits. This year, we're kind of starting off mid to upper single digits. South America's been the most challenging coming into this year, but it's always the most volatile. you know, it goes through ups and downs more quickly than other places. you know, a place like Argentina, where we grew almost double digits last year, had 90% inflation. Right. You can still see growth even in a place like that where, you know, can penetration is still relatively low in a place like Argentina, and so we see that growing over time. North America. Yeah, I'm sorry. North America, you know, the big challenge was we kinda came into. You know, if you wind the clock back to the, you know, Q3, Q4 of 2021, at that time, you know, the growth was accelerating in North America. We were trying to get our hands on as much, you know, metal as we could to keep up with that demand. We thought it would grow, you know, close to double digits. Our customers really didn't price promote and raise price a lot. They saw, you know, typically if, you know, they'd raise price 1% or 2%, their volumes would decline 1% or 2%, and we didn't see that kind of normal elasticity in the first half of last year. We started to see in the fourth quarter where prices were raised and their volumes suffered. They're starting to get some more pressure from retailers about the price increases, and they definitely took can pricing up more than other substrates. If we get a more normalized environment this year, we feel pretty good about what the possibilities are. We're being more conservative coming into this year just because last year was challenging. Would you say North America just was down 2%, up 2%? Yeah. I think. Not for you, for the market overall. I think for the market, probably pretty flat to a little bit down. Okay. You know, energy did real well. Imports, you know, coming in from Mexico still did well. Big beer was softer. We're still seeing growth in. You know, the good news and another kinda good news point of why buy Ball is we're still seeing 80%+ of new product introductions coming in cans. We don't know what product is gonna win, but we know it's pretty likely gonna be in cans. I mean, this is a good example. You know, this is a new product. It's not our can, but, you know, cans are gonna win. If cans are gonna win, I think we're gonna. With the footprint we have, our focus on innovation, our focus on sustainability, I think we feel pretty good about our chances of winning, too. Can you hit the growth rates that you put out for this year without seeing a pickup in promotional activity? When do we need to start seeing the rubber hitting the road? Beer, yes, it's actually, we're seeing it right now. Soft drink, it's been kind of tepid. Again, feel free to disagree. When do we not need to see the CSD and non-alc promote more to hit. I mean, the summertime. Okay. You know, we gotta get to Memorial Day. Last year, we saw, you know, really nice growth still in the first quarter of last year and through May. I think May grew 6% for us. June dropped off 6% because their, you know, was their price increases and no promotion. We felt that, and we saw the world kinda shifting, you know, when we got to our second quarter call. I think we saw it ahead of what some of the other folks saw it. Okay. We took action, took out a lot of costs. We closed a couple of facilities. you know, had $75 million of fixed cost out, and we'll save more than that on the SG&A side. I think we put ourselves from a cost position to be able to be successful and grow our profitability nicely without a heck of a lot of volume upside. If we get some volume upside, I think it'll just be, you know, a lot of that will flow to the bottom line. We'll just, we'll get the benefit of that. On the $175 million, are you comfortable that that's at least the low water mark in terms of your margin benefit this year from cost outs? Or that's the number, you know, don't assume anything more? I said $75 million and another $75 million on... Oh, excuse me. Yeah, $150 million. I'm sorry, what? In other words, that number, is there any upside to that? Oh. Other than what I've just tried to put into the transcript for you, but. Um. Sorry, Anne. I mean, there's always potential, right? You can always do more. Fine. There's always more you can do. Right now, we feel pretty good about where we're at. I think one of the things that we didn't do as good a job last year as we could have is when we announced the closure of those couple facilities in North America, I think everybody thought that that was, "Oh my gosh, the growth in cans are over for North America." We don't believe that the growth in cans is over in North America. We have the opportunity because of our footprint and because it, you know, we can close a facility, we can rationalize a facility and take that throughput and put it into more efficient existing facilities. We're not walking away from any particular region or market when we do something like that. For us, you have the opportunity to take out fixed cost. Get the operating leverage of putting that through a more efficient, more cost-effective plant. you know, over my 23 years, we've done this a lot. Yep. At different times. When you have growth rates that are more moderate, because you're getting efficiencies in those other plants, you have the opportunity to do that from time to time. People should not be shocked when that happens. I think we could have communicated it a little better when we did it last year. Understood. Just on, again, some of the sort of controllable, I know maybe you wouldn't phrase it that way, you still feel comfortable about the net $200 million on, you know, price cost this year, you know, being able to at least achieve that this year? Yeah, definitely. I mean, it's contractual. Some of it started in January. another chunk comes in April 1, and then the last chunk comes in July 1. We'll get part of the benefit, but some of that benefit will flow into 2024 as well. Yeah, we feel pretty good about that. Then, you know, we're starting to see, you know, the warehousing, transportation, coatings, they're not, they're not accelerating at the rate they were last year. I think that'll be helpful. Energy, European energy, you know, Europe was fortunate that this winter was not as cold. They did a good job of reducing usage. They've, you know, I think they built an LNG terminal in Germany in 175 days, which, you know, that kind of, would have taken five years, prior to the crisis. I think they're doing a good job of getting away from dependence on any particular place, and I think that will help European energy. Given that the markets broadly caught a break in Europe this year with energy this winter, what do you do now so that, you know, you're prepared in case you don't catch a break, you know, heading into 2024? We've done a lot of things with customers, you know, using being able to retrofit ovens to use different kinds of fuel. We started conversations with customers much earlier last year, when all this started to have kind of a plan B should, you know, energy be cut off or get crazy expensive. I think the things we're the things that we can control, we're working with our customers to make sure that we have backup plans. Thanks, Scott. Any questions from the audience for Scott? Casey, if you just wanna hang on for the mic. Hi, Scott. Casey Johnson. Just a quick question. If you look at the move in aluminum prices having halved from their peaks, can you give us a sense for the consumer packaging companies, particularly the beverage companies, how much aluminum cost goes into the actual end product, like the cost of the production of the can? If we think of it having halved, how much leeway do they have for this promotional activity that could be coming this summer? I mean, a pretty good rule of thumb, it depends on the size of the can and all that, but a good rule of thumb is 2/3 of the cost is the aluminum. If you had aluminum at I think it peaked last year in early April at $4,100 a ton. Now it's less than $2,400, and that's 2/3, 3/4 of your cost. It's quite a bit. It could have a pretty positive impact on what margin you kinda have to play with. Thanks. Thank you, Casey. Scott, on that point, again, maybe on some commercial questions, you know, what opportunity do you see? Are we seeing any evolution here where 20 oz PET, which has been kind of the bulwark and big source of profits at the C-stores for the brand owners, maybe see some share loss to cans? I mean, from what we saw, 20 oz was promoted last year during the summer. What opportunity does a can have to maybe gain share in that channel with that sort of consumption occasion? What are you seeing in water at this juncture? Yeah, I think at the C-store, I mean, you know, you go into a C-store today and you're gonna see a heck of a lot more cans than you would have seen five years ago, 10 years ago. I mean, it's definitely we are increasing the penetration. A lot of it has to do with different sizes. You're seeing a lot of, you know, 16 oz cans to compete against 20 oz PET. I think there is a lot of opportunity for that over time. And our more innovative customers are using different sizes, different pack sizes to, like, hit certain price points to kinda continue to drive that, but I. Do you need resealability or no? I don't think so. I in a 16 oz can, I don't think resealability. People talk about that from time to time, but it's I don't think that's as big a deal. Okay. I mean, we have the ability to reseal. I mean, this is a newer technology. This is an extruded aluminum technology that has flat water in it. Yep. We have the Alumi-Tek bottle that you can reseal. I don't know if resealability is always the key. It depends on what, you know... I think that can help in the consumer or in the, in the C-store, because if you're buying it, you're gonna ride in your car. You know, maybe the resealability is a bigger deal there, but not always. Understood. On the water side. Yep. We're definitely seeing more brands. You know, you got newer brands like Mananalu or Liquid Death that are promoting still water in cans. They're getting more retail shelf space, you know, whether it's Whole Foods or other retailers. I think you'll continue to see that. I think you'll see it in higher-end branded water. We're definitely seeing it in stadiums and venues where, you know, we had a big push to go plastic-free in a lot of those stadiums and venues. Now that we have products that, you know, from our Alumi-Tek container to our cups to cans, we definitely have a lot of traction on that front, and so we feel pretty good about the long-term potential of that. All those things take time, but, you know, I was at a hotel a couple days ago at a different conference, and you got two of these when you checked in. Yeah. They're getting rid of single-serve plastic. I think that trend will continue. I feel pretty good about long term about all of our products being able to play, as people get more focused on sustainability and the problem we have with plastic waste, we're in a good spot. We'll try to get three bottles in next year. Yeah, these are nice. These are nice. Yeah. This place gives you plastic water bottles. Kind of like, I don't know what that's about. I don't know. We'll do that, and we'll also take the brown M&M's out of the bowl. On sustainability. No, fair points. You have a conversation with a customer, and you say, "You've got this sustainability goal. You wanna have your packaging materials reflect 50% recycled content by 2025 or 2030." Other than aluminum, your other materials aren't even sniffing that. Correct. Mr. Customer, Mrs. Customer, how do you feel about your pack mix and your ability to hit those goals? What do they say back? I think a lot of them have large plastic businesses that they like and are profitable, but I think they understand to reach those goals, you know, we're kind of scope. You know, you got Scope 1, Scope 2, Scope 3 emissions. We're Scope 3 for a lot of those customers. They can improve their Scope 3 emissions a heck of a lot by using, you know, something that's already got 74% recycled content. We get 'em there today. I, I don't think that's lost on customers. I think that also is like another tailwind for our business longer term as people need to achieve those goals. I think we've got the right substrate to be able to help them achieve those goals. Thanks, Scott. You know, we often get questions on how the contracts provide you and your customers mutual assurances and benefits. The majority of your relations don't seem to actually have take-or- pay. There's been more of that, it's still the minority, not the majority. Tell us how the contracts actually provide a benefit to Ball and how you then use whether customers are in their band or not for other benefits down the road, extensions, the like, whatever you feel comfortable talking to. I mean, you know, the world is not 100% predictable. Some of our customers are better at forecasting than others. You're always gonna have some band that a customer can operate within. That band, you know, even if it's, if it's 90%, 10%'s a lot in our business, you're still gonna feel that. It's typically for a particular location. You're always gonna have some risk of what's happening in the market. What the larger customers, what we feel good about is they have so many different brands that they can push. One brand may be not doing particularly well, like, we can easily change the label and run a different brand on the same can or a different size can. I think that ability to be able to do different things for customers, to help them win with whatever products are winning for them, we can mitigate some of those. You know, the last couple of years have been definitely more volatile when, you know, we saw nice growth before COVID in the can. I think a lot of that was the sustainability tailwinds, new product introductions. You had COVID, and you had unnatural things happening with off-premise closing and take-home, you know, going through the roof. You had imports. I think we're now kind of in this year, all that is more, gonna be more normalized, and we'll see more normalized behavior. I think the can looks pretty good. All right. The leverage really, there, our takeaway should be it's less about what incremental benefit you might get in terms of upcharge or something else. It's more your ability to say, "Hey, you didn't hit your threshold. Give us more share rightfully of some other labels." I know it's a simplification of it. I mean, that's one angle. Another angle is, you know, we might build in rebates. If you're not gonna hit those thresholds, you're not gonna get those rebates. It becomes essentially a price increase, if you will. It some are, you know, they're gonna take 5 billion units over five years. You know, if they're running behind, do we extend the contract? You know, everything becomes a bit of a negotiation. But we tend to work, you know, our customer relationships, we want them to be partnerships. Right. Right. You know, at any point in time, one partner may need something different, and we're willing to work with those customers to figure out, okay, what's the best solution? What's the best long-term solution? You know, we've been around 143 years. We're gonna be around a little longer. Working constructively with customers when they're having issues. I, it goes both ways. How do you feel about your supply-demand balance going into 25 and 26, and why should we be comfortable with where you're at? You shut, you delayed, excuse me, North Las Vegas and Concord. You closed Phoenix and St. Paul. You closed Santa Cruz. Yeah. Fort Collins, for the record. It's curtailed. Curtailed. I think we'll be pretty tight. I mean, you know, these two plants in Europe come up this year. The vast majority of that volume is already sold. We're running our system to be north of 90% utilization, and that's our game plan as we look into 2024 and 2025 as well. I think we'll be, you know, kinda right where we wanna be from a utilization standpoint. Above 90%, mid-90%s or? Yeah. 90%-95%, somewhere in that range. You know, we'll take some curtailments this year to get our inventories kind of back to where we want to in the first half of the year. Our plan is to keep it fairly tight. We're not breaking ground on anything new in the near term. We'll grow into the capacity that we put in place in the last couple of years. I think we'll run pretty tight. I think most people, most other can makers have delayed or pushed projects to the right. I mean, everybody saw the world kind of the crazy growth we saw during COVID moderate. I think everybody's reacting in a similar way. I feel pretty good about supply and demand. Mid-decade or later is when you have this next tranche still in terms of next customer commitments that you have to review? Well, we have to wait and see how those develop too, right? We, you know, you're always having dialogue. Yeah. With those customers. There's, you know, how are they seeing the world? What are they gonna do next? We, we try to time those things to be married up with our customers as best we can. We'll see. Okay. I guess, what I'm searching for, we should take away that all the work you've done over the last number of years will not be dissipated by what is currently a weak supply demand for you the next few years. No, I don't think it will. I don't think it's a weak. You know, you could go to certain regions. Definitely Brazil is starting off slower, you'll see things, you know, maybe dislocated in a, in a short time period. I think supply demand generally around the world is in reasonably decent shape. Thanks, Scott. Any questions from the audience as we're wrapping up here? There's a question in the front, if you can just wait for the microphone. Linda. Thank you. Thanks, Scott. I'm just wondering if you could maybe expand on the industry environment. You know, what your peers are doing, and if that's consistent with, you know, your position at Ball? Yeah, I think, I mean, that's kind of the last comment. I think, at least what I've read publicly, most people are looking at it the same way. I think they're keeping supply demand in balance, and projects have been delayed. Everybody seems to be acting in a similar fashion, I guess. Thank you. Scott, maybe a multipart question from me as we're wrapping. You know, it's ultimately around capital allocation and free cash flow. I guess the first question would be: what would you have us take away about the cup business and how you're looking at that? How important it can be to the earnings stream for Ball right now? It's a bit of a headwind. Second thing, you know: what would you have us take away as the right leverage target for Ball through a cycle, and how are you evaluating that? Lastly, you know, if all goes well, free cash flow should be improving. Earnings should be improving. You know, way back when Ball had talked about $1 billion of free cash flow, is that something that's on the horizon the next few years? Would you be disappointed if you don't get to $1 billion of free cash flow, say, 2024 or 2025? You can go like this, you know, we should stop. Getting old, George. I can't remember too many questions, so. Come on. Cups, we are. There's not more capital going into the cups. We can now make several different sizes, which we needed to completely displace plastic in certain venues, so we can make, you know, everything from 24 oz, 20 oz, 16 oz, 9 oz. That allows us to do the whole gamut of whatever kind of beverages are being served, whether it's soft drink, beer, mixed drinks. Right. Wine. We needed those capabilities to really have arenas go plastic-free. We have that now, and we're selling it at retail too. You're right, we need kind of a big anchor customer. We need, you know, a food service customer, somebody that's gonna buy 100 million units of these things, not, you know, 10 million, 50 million at a chunk. We're working on that. I think our team's very motivated. You know, I was at this. Somebody was mentioning earlier today, they were at a ski resort, and the ski resort had gone completely plastic-free, had our aluminum cups. I think we're positioned well to be able to take advantage of those kind of situations. They will come. They're coming a little slower than what we'd like, but they will come. I feel pretty good about that. The profitability of the cup when we sell it is quite profitable. It's really a volume play. We need to get to the volume. I think we're making nice inroads and good traction. We want a large national commissary-type company. I think that will open up a lot of opportunities and venues that we can sell cups to. We feel good from that standpoint. It's definitely come slower than what we thought. COVID didn't help and, you know, on-premise and stadiums and venues got closed and all that. Yeah. On the leverage point, we wanna drive, you know, similar to, you know, what we had done over the years is make an acquisition, pay down the debt, you know, flow a lot of cash back to the shareholders. In the last few years, we spent a lot of money on capital. Now we're gonna delever. The first goal is to kind of get us back to that 3.5 x net to EBITDA. I'm not sure we get there by the end of 2023, but we'll get close and have a pretty close trajectory to that. Probably in 2024, use our free cash flow. Our free cash flow should go up, should be north of $1 billion 'cause we're gonna dial back the CapEx again. We'll be able to both delever and flow money back to the shareholders in 2024, you know, kind of in a balanced way. Same thing as we look out to 2025. I think the, kind of the, like the old Ball, if you will, of, you know, those levering events and then delevering and flowing a lot of money back to the shareholders, that's kinda how we see ourselves over the next few years. The quicker we get there, the quicker everybody's gonna like it. Sounds good. Everybody, please join me in thanking Scott Morrison and Ball Corporation for a great presentation. Next up, we'll have a really good panel on beverages. See you in a bit. Thanks, George.