Greetings, and welcome to the Ball Corporation 2Q 2023 earning call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference, you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Thursday, August 3, 2023. I would now like to turn the conference over to Dan Fisher, Chairman and CEO. Please go ahead. Thank you, Maleeka. Good morning, everyone. This is Ball Corporation's conference call regarding the company's Q2 2023 results. The information provided during this call will contain forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied. Some factors that could cause results or outcomes to differ are in the company's latest 10-K and in other company SEC filings, as well as company news releases. If you do not already have our earnings release, it is available on our website at ball.com. Information regarding the use of non-GAAP financial measures may also be found in the notes section of today's earnings release. Historical financial results for the divested Russian operations will continue to be reflected in the beverage packaging, EMEA segment. See Note 1, Business Segment Information, for additional information about the sale agreement and a quarterly breakout of Russia's historical sales and comparable operating earnings. In addition, the release also includes a summary of non-comparable items, as well as a reconciliation of comparable operating earnings and diluted earnings per share calculations. Late in the quarter, the company also announced that it's considering options for its aerospace business. There are limitations regarding the depth of commentary we will provide on that topic today. If and or when additional comments are necessary, they will be made via a separate public press release. Joining me on the call today is Scott Morrison, our Executive Vice President and CFO. I'll provide some brief introductory remarks. Scott will discuss key financial metrics, and then we will finish up with closing comments. Our outlook for the remainder of 2023 and Q&A. Let me begin by thanking our employees for working safely and with the utmost level of agility while fulfilling our customers' needs. On our Q1 call, we said that our Q2 would be choppy, and that was the case. Our team delivered solid Q2 results amid tough year-over-year comparisons, including $47 million of higher interest expense, the $40 million of operating earnings headwind from the Russian sale, and global beverage volumes down 11%, driven by the Russian sale impact, and a notable domestic beer brand experiencing demand disruption in North America. I'm proud to say that our team did an excellent job of managing both costs and working capital levels to deliver the quarter and position the business for a stronger second half. Looking forward, we will continue to benefit from notable inflation recovery, cost out actions, and improved operational efficiencies. Our inventory levels are in good shape, with plans to improve further. Our North America team is managing in real time the balance of the U.S. mass beer brand boycott and our improved demand forecast of other customers, which should unlock additional opportunities during the second half. Cash flow is kicking in. We are studying opportunities to accelerate deleveraging and the multiyear return of value to shareholders, while also developing additional innovative packaging solutions to grow the business going forward. Around the globe, beverage cans continue to win relative to other substrates. We continue to leverage the contributions of our two new facilities in India, our customer mix, scale, plant footprint, innovation, and capable teams across the organization to ensure the best outcomes for all our stakeholders. In our aerospace and aluminum aerosol businesses, operational performance and demand for our products continue to grow. In aerospace, our won-not-booked backlog increased $1 billion. The unique technologies we provide to support environmental and national security needs remains in high demand. In our global aluminum aerosol business, we continue to serve new categories and offer reuse, refill bottle innovations to a broader set of customers and occasions. As we look ahead, all of our businesses will continue to unlock additional value for Ball stakeholders in 2023 and beyond. Consistent with our prior commentary, in 2023, we remain positioned to deliver approximately $750 million of free cash flow to deleverage and return value to shareholders. In 2023, we anticipate the potential of achieving the low end of our long-term goal of 10%-15% comparable diluted earnings per share growth, including the Russia business sale headwind and exceeding that long-term comparable diluted EPS growth goal, excluding the Russia sale headwind. During the Q&A, Scott and I will strive to provide additional clarity on the external environment and cadence for the remainder of 2023, based on what we know today. Our global beverage teams continue to position our businesses to deliver the year and have an eye on the future. For the full year and incorporating year-to-date trends, our customer mix and excluding Russia, we now estimate flat global volume growth for Ball, with North America being down low single digits, South America volume up mid-single digits, and EMEA volume up mid-single digits. We appreciate the work being done across the organization and extend our well wishes to our employees, customers, suppliers, stakeholders, and everyone listening today. With that, I'll turn it over to Scott. Thanks, Dan. Q2 2023 comparable diluted earnings per share were $0.61 versus $0.82 in the Q2 of 2022. Q2 sales decreased compared to the same period in 2022, primarily due to the sale of our Russian business in the Q3 of 2022, lower volumes, currency translation, and the pass-through of lower aluminum prices, partially offset by the pass-through of inflationary costs. In the Q2, net comparable earnings decreased compared to the same period in 2022, primarily due to higher interest expense, the headwind from the sale of our Russian business in the Q3 of 2022, and lower volumes, as well as higher corporate costs, partially offset by the contractual pass-through of inflationary costs, fixed cost savings, lower depreciation expense, and SG&A cost-out initiatives. To reiterate our prior earnings call commentary, we have been and will continue to proactively manage regional supply-demand balance across our system of plants in the near term. Starting in the Q3, segment earnings in North America will accelerate through the majority of the anticipated contractual inflation recovery, having kicked in July 1st. In EMEA, the business will lap its last Russian earnings headwind in the Q3 and then accelerate to an improved level of earnings in the Q4 as they move beyond this multi-quarter headwind and the start-up costs for the two new plants. In South America, customer and product mix, which has unfavorably influenced the seasonally slower Q2, will reverse, and consistent with our prior commentary, we anticipate a more robust second half in Brazil as customer hedges roll off and the Q4 summer selling season kicks in. As we sit here today, some very consistent commentary and key metrics. We ended the Q2 in a very solid liquidity position with approximately $2.65 billion in cash and committed credit facilities. 2023 CapEx will be in the range of $1.2 billion, driven by cash outflows related to prior years' projects. 2024 CapEx is targeted to be in the range of GAAP D&A levels. We are targeting free cash flow of approximately $750 million in 2023 and focusing on deleveraging. Our 2023 full-year effective tax rate on comparable earnings is expected to be in the range of 19%. Full-year 2023 interest expense is expected to be in the range of $450 million. We anticipate full-year corporate undistributed costs recorded in other non-reportable to be in the range of $80 million. Including the $86 million Russian business sale operating earnings headwind, comparable operating earnings should increase nearly $200 million, and full-year 2023 comparable D&A will likely be in the range of $550 million. As we look forward to incorporating near-term demand trends, year-end 2023 net debt to comparable EBITDA is expected to trend in the range of 3.7 times, and in future years, we will drive that lower. Last week, Ball declared its quarterly cash dividend, and as Dan mentioned, reducing leverage is our key focus prior to resuming share repurchases. As fellow owners, we continue to manage the business through the lens of EVA and cash stewardship, and we will effectively manage our supply chain and customers in this current environment to secure the best cash, earnings, and EVA outcome for our shareholders. With that, I'll turn it back to you, Dan. Thanks, Scott. We continue to believe that given the economic environment and global dynamics impacting our world, it is a great time for investors to get up to speed on Ball. Our improved results following the challenging 2022 is progressing. Our products and technologies are resilient and provide solutions for our customers. Our focus remains on delivering earnings, free cash flow, and high-quality products to our customers and consumers. As leverage continues to come down and free cash flow expands, our return of value to shareholders will grow in 2024 and beyond. Thank you to everyone listening today. With that, Malika, we are ready for questions. Thank you. Ladies and gentlemen, on the phone lines, if you wish to register for a question, please press the one followed by the four on your telephone. You will hear a 3-tone prompt to acknowledge request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. Once again, that is one, four to ask a question on the phone lines. 1 moment, please. Our first phone question is from the line of George Stathos with Bank of America. Please go ahead. Your line is open now. Hi. Thank you. Hi, everyone. Good morning. Thanks for the details. Hey, George. Congratulations on the performance. I guess first question I had, I haven't tried to reverse engineer the full year volume guidance relative to the year to date, but what kind of volume trends are you seeing early in the Q3 across the regions? Are there any regions left with any, you know, notable filled product that needs to be destocked? How would you have us think about that, guys? Thank you. In the mass beer space, I think you'd have to look at that on a net basis. Clearly, there's one customer that's got more filled goods right now than the others. Yes. I think they've commented on that. There is a little bit within our portfolio in terms of the energy space, where we're working through some inventory. Our l argest energy customer in our space in North America is growing at a slower rate than the balance of that space. The scanner data is reflecting more growth than our, our shipment sales. I, that normalizes, we believe in Q4 based on the projections that we have. Nothing notable. We're in a really good inventory spot, George. You can see that reflected in our, our, our cash generation in Q2. You always have, this is the softer period for South America, so there's nothing really of news there. We expect to start building inventory here in the quarter to execute against the back half of the quarter and then peak season for that part of the world. Absent the obvious, mass beer player- Yep. Not as much. Okay. Actually, what I was getting at, to some degree, was what you were seeing in South America. In South America, you, from your vantage point, not a, a big amount of destocking, if anything, that needs to get done at the customer level. That, that'd be fair? No, we, we've been running Other than your large cus. I'm sorry, go ahead. Yeah, that's correct. There's nothing, there's nothing meaningful in South America. You're always doing maintenance, and there's always a level of curtailment in Q2. There's just not a lot of room to run additionally to build inventory, because you're already planning that you're gonna be running full out in Q3. The inventory builds, if you have that effect, typically, it shows up at the end of our fiscal year down in South America. If things aren't selling through in Q4, you usually have a bit, bit more inventory heading into Q1. We're in a really good position inventory-wise. That, that was something that we commented heading into the quarter. The teams and the plants managed that tremendously, even with the mass beer inflection that, that showed up in the quarter and persisted throughout the quarter. Okay. Dan, thanks for that. I wanna sort of come back to part of the question as I asked it, and ask a follow-on. Good. Then I'll step down, just to be fair to everybody else. What trends are you seeing early in the quarter, volume-wise, across the regions? If you can talk about, put a number on that, if that's possible. Y-you know, from our research and contacts, you know, we've seen an uptick in promotional activity. We haven't necessarily seen a pickup in consumption yet. How would you have us think about the efficiency and the yield on promotion and the level of promotion that you're seeing into 3Q? Are we beginning to see some, finally, some uptick in beer, just based on what we're seeing out of the scanners? Why, if that's the case, would you be confident about that continuing the rest of the year? Thank you. Yeah, that's a good question. Let me, let me see if I can parse out elements of that. Let's, let's look at North America. There's, there's nothing really to report in terms of inflection one way or another in South America. Okay Because it's still winter there. You wouldn't see that behavior until the second half of Q3. Nothing, nothing to report, other than the conversations that we're having with our customers, again, I'll be down there next week, are: they're planning to deliver against what we've modeled in right now, which is a pretty nice inflection in volume heading into Q4. Brazil, we've commented on this previously, bullish on the Brazil. You know, Brazil was the first to go into a recession and experience inflation and higher interest rates. They're starting to relieve some of that. The combination of that, plus previously disclosed comments in and around hedge positions, all of that is, is playing out as we would hope. The only thing in South America, obviously, is the question mark in and around Argentina. Brazil is stronger, and we still believe that what we've contemplated for the back half of the year is gonna manifest. In North America, both Scott and I have been very public with our comments on what we were seeing throughout the Q2 relative to the mass beer dynamic, and they have been confirmed by our customers. One is, our beer customers are always running full out in the Q2 and even most of the Q3. If there's a mix shift that's taking place, it's going to come from working capital or filled goods. The scanner data won't be necessarily a one-to-one reflection of what we're experiencing. We believe that there will be resets at retailers. Some of the customers that have opportunities to step into an, into a elevated positions or more velocity on shelves, or a bigger shelf space on shelves, they're gearing up for that. You won't really see that until the Q4, is, is how we're contemplating it in our numbers. In terms of promotion, I think the way you characterized it is correct. There has been promotion, but keep in mind, the promotion's coming off, in many instances, staggering price increases over the last two years. It's not about promotion as much as it is the intentionality of volume momentum. What we've seen in the CSD category is, we have seen private label gain share, and that is something new relative to what we've seen in the last couple of years. That is generally a catalyst to drive for more volume and volume momentum. We've always thought that given Q4 comps for certain of our customers, they will be more inclined to push volume in the, in the, in the Q4. Conversations with those customers would signal that they're thinking about it similarly. Until it happens and until they find the right price elasticity and volume momentum trigger, I think they're, they're doing a lot of activity. I see the same data. It's not having the intended results of driving volume. I think it means that they will need to be more aggressive, and I know that they don't like to be losing share to private label. That's a lot there, but that's, that's how we're viewing it, and that's how we've modeled it. We don't expect to see a great deal of uplift in Q3 versus previous, from a sequential standpoint, Q2, with the exception of, we believe, mass beer within our portfolio will continue to be negative. Europe continues to grow. Slight growth in Q2. We had a very good Q2 last year. I'm commenting, excluding Russia. We will continue to grow as our plant system ramps up. The new capacity was needed for us to really step into growth in the mid-single digits, everything is still in alignment with us delivering against that over the back half of the year. Thank you, Dan. Thank you. Thank you. Our next question is from the line of Anthony Pettinari with Citi. Please go ahead. Your line is now open. Hi, this is actually Bryan Burgmeier on for Anthony. Thanks for taking the question. Hi, Bryan. Yeah, you know, Dan, Scott, you've been asked about the possibility of, you know, selling or spinning aerospace for many, many years. You know, why now for the strategic review? You know, did something change for Ball, for the aerospace business? You know, is it about, you know, capital allocation or returns? Just any detail you can add there and maybe, maybe why this is happening now. Yeah. Why now is, if you look back 5 years ago versus today, the business is much bigger, much healthier, much more profitable, and it could fundamentally stand on its own. Those are, those are the, the key cruxes for why you could potentially do something else with this business. It's really a manifestation of that business has performed tremendously and gotten to a point where it's an incredibly valuable, valuable asset. We believe that was the case, and so we ran a process to validate that. Early indications are it is a, a valuable business. If and when I've got more to talk about, I'll let you know. It's really nothing about capital allocation and return thresholds. It, it is just that it's a valuable asset. It's increasingly so, and we always need to look at our at our shareholder value equation and make sure that, that, that asset is sitting in the right spot for the long-term generation. Understood. Thank you. You know, one quick follow-up here is, you know, Dan, during the quarter, I, I think you talked about kind of retail points and, and the supply chain being displaced by the customer mix developments in, in U.S. beer. You know, do you have a sense of where we are kind of in that process, and maybe when Ball could start to see the benefits of being exposed to some of the other brewers that are doing very well right now? There's been very minimal movements in terms of retail displacement. I know those questions are being posed. There's a significant reset that happens kind of tail into Q3, heading into Q4, across most of the major retailers. You will see this net impact fully manifest, probably not until the first half of 2024, will all of the shakeout happen. I'm not looking at anything appreciably changing in Q3. The customers that have the opportunity to take a broader position in the retail, they will be gearing up their supply chains. They will be entering into these new retail positions over the course of the Q3. Then you will start to see Q4, first half of 2024, where things start to settle out. Understood. Thanks a lot. I'll turn it over. Thank you. Thank you. Our next question is from the line of Adam Samuelson with Goldman Sachs. Please go ahead. Your line is open. Yes, thank you. Good morning, everyone. Morning, Adam. Morning. Maybe just a starting point on as we think about the, the, the guidance and think there, there's a new kind of qualifier this quarter around kind of the potential to be at the low end of the 10%-15% long-term kind of range. I, I guess, help me, is it just a volume question more in the back half of the uncertainty with some easier comps and the magnitude of bounce that, that drives kind of the introduction of that qualifier? Is it further disruption in the US beer? Or just help me think about range of outcomes that, that drive potential versus actually achieving. It's. I wouldn't characterize it as further deterioration of mass beer. It's, it's gonna be persistent through the Q3. Yes, from a volume standpoint, the Q3, from a mass beer standpoint, what we anticipated at the beginning of the year versus what we're experiencing, is softer. Nothing's gonna change here, probably in the next 90 days, meaningfully to inflect. Everything that we set out to accomplish in terms of our operational performance, the PPI pass-through, the tailwinds of some inflationary benefits, the SG&A actions, the fixed cost savings, all of that is allowing us to have a line of sight to that low end. We wouldn't be there without the, we wouldn't be able to characterize, our belief in that low end without the performance of the operations right now. It is mass beer. And every one of the regions, we believe there's an inflection in, in the Q4 in volume. We've talked about the CSD market. We've talked about the, what's going to happen in mass beer, and then also a peak season in South America with a, an improved economic environment in Brazil. All of those things have to come through, but they were already baked in. What wasn't baked in is mass beer in North America. Got it. Now, that's, that, that's very helpful. As you, and as you look at start to think about 2024 in that context and start working with customers, obviously, some of the market share shifts could present incremental opportunities. I guess, as you think about the mass beer channel in, in 2024, volumetrically, would if that rebounds, do you think you gain disproportionately from that, or is it some of that potentially accrue back to, to one of the captive can makers that is owned by one of your big customers? No, I, I don't believe the captive, captive can makers will benefit. They're obviously, they're going to prioritize, in the short term, their assets. One in particular, that's at, having the marketing issue, we've come to an agreement, that we've got a stable go-forward position where we understand what the bottom is. So we should see inflection off of that, if they're able to turn around. Then to your point, we are with everyone in the beer space, so we should see net benefits into 2024. I would characterize Q2 and Q3 as a bit of a trough for us right now. Relative to that, and then what happens in the mass beer space, and clearly, the economy writ large, there, there's, there's reason for optimism, for sure, in, in 2024 and beyond. Okay. All right, now that color is, is very helpful. I'll pass it on. Thanks. Thank you. Thank you. Our next question is from the line of Christopher Parkinson with Mizuho. Please go ahead. Your line is now open. Great. Thank you so much. Just I, I want to circle back to the, just the Brazilian market and everything going on. There's been kind of some macro volatility, debates about glass recycling, you know, the relative cost of various packaging substrates. Obviously, the potential for the rebound is highlighted in your press release. Can you just take a step back, and just how should we be thinking about that, that evolution during the kind of the Q4, which you already highlighted, and into 2024, in terms of kind of like the normalized progression there? Just because it seems like they're just, you know, a plethora of moving parts, which we have to consider. Thank you. Yeah. What we've stated, i-in an inflationary environment, recessionary environment, which is clearly what Brazil's been saddled with here the last couple of years. 2 or 3 times when we've had similar macro events in that country, we've seen shares shift to returnable glass in the 5 to high single-digit range. We experienced the same thing from second half of 2021 all the way through today. A lot of it has to do with the economics. A lot of it has to do with the per per unit price point of aluminum and the aluminum packaging and the hedge positions that were constructed by our customers. The cost of aluminum has come off. The hedge positions have come off. The economy is rebounding, inflation is declining, interest rates are coming off. All of those things point to, we should normalize back to mid 50%, low 50% can penetration in Brazil. We're, we're betting on can penetration improving in Q3, Q4, and stabilizing in Q1 for 2024. We haven't done a ton of work on 2024 right now, but I would think about it's principally an improved economy and a returnable glass shift that took place during an inflationary period, which has always come back to cans because that's the preferred choice and the preferred choice of our customers. We expect the same thing to happen. It's too early in the process, given, excuse me, in the year, given it's winter there, to, to see much movement, if anything. We anticipate that tail into Q3 and into Q4, more in Q4. Hopefully, that helps. Understood. Of course, and understood. Just a very quick follow-up on Yeah. North American market regarding your volume commentary there. You know, there's been a lot of start and go on various promotional expectations this year, and it, you know, it's, you know, euphoria, then kind of waning, euphoria, and then kind of coming back. You know, how should we think about that in the mass beer market? I mean, there's been some competitor commentary and optimism for CSD, at least a little bit. But what are you actually seeing from, you know, your customer base, and how is that actually flowing in to your outlook for the second half? Thank you. Yeah. We began the year with the expectation that we would see promotional activity, but promotional activity does not generate volume momentum. We thought volume momentum would come in Q4 when there were more challenging comps. We still anticipate that. We didn't, we didn't build in much in terms of volume momentum happening in the first 3 quarters of the year. Even though, you're right, there's increased activity on promotion, it hasn't been enough to move volume. There has been share shift from the major CSD players into private label over the last 4 weeks. That is usually a light bulb that goes off, and folks behave differently as a result of that. I, I, I'm encouraged that what we built into our plan heading into the year will manifest in the Q4. I don't see any appreciable movement in the Q3 because the promotion, to your point, is happening, but it's not manifesting in volume momentum yet. Helpful caller. Thank you. Thank you. Thank you. Our next question is from the line of Ghansham Panjabi with Baird. Please go ahead. Your line is open. Hey, guys. Good morning. Hey, good morning, Ghansham. Good morning. Obviously, a lot going on. If, if we were to just kind of step back and, you know, the Q1, beverage packaging, North and Central America, you know, volumes were down roughly 5%, and then in 2Q, down 8.5%. Is that delta purely mass beer, or is there anything else that perhaps was a little bit worse on a year-over-year basis? I think you characterized it correctly. It's, it's, it's the net beer impact in the Q2. Okay. Got it. There were pretty stable trends across everything, and it kind of lends into my, my previous comments on, on the CSD sector. You know, energy continues to... almost all the categories are performing year-over-year in line, with the exception of mass beer, and that, that fell off. I think net, there was negative 2.5 points of growth in the Q1, net minus 4.5 points, and obviously, our mix would have weighted us further down. Okay, thanks for clarifying that. In terms of the curtailment that you're, you know, you're doing in terms of managing supply, et cetera, across multiple regions, what was that number for 2Q, and how are you thinking about that for the back half of the year as well? The curtailment in South America is exactly what we planned. I mean, candidly, it's negligible in terms of the curtailment that we planned in Q2 versus what actually happened. You could say the delta that you just confirmed in volume, that was additional curtailment that we took in the Q2. Apart from that, we've got a little bit more curtailment that will manifest throughout the Q3 versus what we entered the year with because of the mass beer phenomenon. Apart from that, everyone's in alignment with what we entered the year with, and what we expected. Gotcha. Just one final one. You know, you seem generally constructive on Europe, on the beverage packaging side, based on what you've seen so far this year. You know, just judging by the commentary and just some of the macro news, it seems like the European consumer is just much weaker in terms of spending and trade downs and so on and so forth. Has your view changed at all in terms of the outlook for Europe, specifically as it relates to the beverage can, or is it, is it pretty much the same? The outlook for the long term and the medium term, continue to... I- it's, it, it is just a, a wealth of opportunity for us in terms of substrate shift, given our current position. The, the end consumer is absolutely weaker than, than where we entered the year because of everything you cited. The can generally benefits from the on-prem, off-prem shift. Even some of the trade downs are beneficial. We've got a more diversified portfolio that has helped us. Heavier energy, heavier CSD. Beer has, has been the, you know, from a pan-European standpoint, beer has been the softer category there. I think our portfolio has helped us, and so we see, we see a little bit more opportunity given that than, maybe some of the other commentary that's been put out there. Okay. yet. Thanks so much, Dan. The consumer in the second half of the year, softer. still, we're, we're still gonna see nice growth. That, that business continues to perform extremely well. Thanks so much. Thank you. Our next question is from the line of Micheal Roxland with Truist Securities. Please go ahead. Your line is open. Thank you, Dan, Scott, and Ann, for taking my questions. You bet, Mike. I might as well jump on the mass beer wagon over here and ask the question. Just, how are you just thinking about the portfolio, your portfolio and your end market exposure going forward? I think so. You made the comment that you could see some, you know, some share shift later this year into 2024. So you could see, you know, mass beer improve, and then your, your volumes would probably possibly net out. If there isn't that recovery in mass beer, what happens to your volumes then? So I guess the question really is, 1, let's, let's assume that mass beer doesn't recover. What happens to your volumes? 2, are you actually considering trying to shift your production to other product categories? I know you made a comment in the press release that you said you're, you're trying to align yourself with customers that are experiencing higher growth. Does that mean you're trying to really shift or minimize your exposure to domestic beer relative to other categories that maybe have more potential on a go-forward basis? Yeah, Mike, let me, this is all North America related, I'm, I'm assuming, so I'll start there. Let's just, let's just talk about the categories, 'cause we're spending an awful lot of time on, on the domestic beer category, which is, which is down, and I, I believe we're at a trough, so it will recover from this point. The, and, and it's consistent with all of the customer commentary within that space. Domestic beer is down 4.5% last 12 weeks, which is a further, versus 52 weeks down, nearly 3%. There's an acceleration of the decline, obviously, because of the marketing issue. Import beer is up 11%. Nonalcoholic beer is up 27%. Cider is up 8%. S&B is up 15%. Ready-to-drink cocktails are up 41%. As, we've seen the evolution of our customers transition to beverage companies, they're going to be forced to put stuff on the shelf that sells. We've only experienced this phenomenon here for the past 12 weeks, and there's a lot that is going to be repositioned. Given we participate with everyone in the market, we should win with whatever's going to win in the market. At what percentage? It's a great question. We don't know, but the trough that we're experiencing now in the Q2 and the Q3 will improve. We should benefit from that. In the first half of 2024, I would expect continued benefit throughout that first half of the year. There's a lot of, there's a lot of questions, but I'm confident that these, our customers understand their world real well, and they know that they need to be putting stuff on the shelf that's gonna sell. Folks will find a home. Nothing's going to change, candidly, from that import beer number. The Hispanic population continues to grow. They already have all got plans to lean into that, to add more capacity. There's an ability for those folks to accelerate. Obviously, we're very close to them. I'm encouraged. From today, moving forward, I'm encouraged what's, what's gonna show up in, in the first half of 2024 and beyond. Got it. Thank you for the for the color. Just 1 quick question: I think you, recently restarted production at Frutal in Minas Gerais. Wondering, you know, that plant was taken down due to the weak macro and also because you lost a customer contract. Wondering, you know, did you bring the mill up or restart the plant because of your anticipation of better Brazil demand? Did you win new business? Just wondering why you went up and restarted. I think it was done within the last month or so. Yeah. We're, bringing it up for the other customers in that market that are winning, and we anticipate that they will win further and take further share as a result of the 1 brewer who filed for bankruptcy at the tail end of Q1. That's, that's 1 issue, but we're not bringing that plant up for the customer that we originally built it for. Got it. Very clear. Good luck in the second half. Thanks very much. Thank you. Our next question is from the line of Arun Viswanathan with RBC Capital Markets. Please go ahead, your line is- Yeah, thanks for taking my question. Sure. Yeah, I guess I just wanted to ask a little bit more on, two things. First off, when you look into, into the back half of the year and in the next year, you know, you do have relatively easier comps for next year, you know, already down mid-single digits on the volume side, and, you know, a, a, a high-single digits for North America. Would, that allow you to get back into, say, that low single-digit range, for next year's volume growth? Are there any other capacity considerations we should consider when, when thinking about how your volumes evolve and maybe settle into that low single-digit range? Thanks for the question. As we sit here today, we haven't spent a whole lot of time on 2024. I think for both Europe and South America, given they're growing, we continue to believe that, that, that growth will persist. The, the, the question mark will obviously be North America, but as I stated, several times on this call, I think Q2 and, and Q3 are-- we're at a trough, so we should see improved volumes over these periods. I believe that will be enough to push us into growth territory. The aggregate position and the answer to your question is yes, I believe we will be in that low, single, single digit growth for 2024. We've also stated several times that the capacity we've put in place over the last 2-3 years is enough to grow into at that, at that range. We should see nice lift in terms of profitability and performance without having to spend additional growth capital. We've spent the growth capital we need. I don't anticipate much in the beverage business over the next 2 years from a growth CapEx standpoint. With that comment, I guess, when you think about free cash flow, I imagine it could be nicely up over the next couple of years from that $750 base. Could you just touch on that opportunity as well as, you know, the capital that you, that you plan to spend? Yeah, I'll have Scott. It should get better. No, you're exactly right. I mean, we're gonna spend less capital. We're gonna spend about $1.2 billion this year. Next year, we're expected to go down closer to GAAP depreciation. All that freed up cash flow can go back to shareholders, so I think it gets better. Thanks. Thank you. Thank you. Our next question is from the line of Philip Ng with Jefferies. Please go ahead. Your line is open. Good morning. Thank you, guys, for, for taking the time and providing all the details. This is, John on for Phil. Hi, John. I just I want... Hey, Dan, how's it going? I wanted to start just, I know it's kind of been beaten to death a little bit, with the North American volumes down 8.5% in the quarter, obviously much worse than the overall market. I mean, you called out, obviously, that's vastly driven by, by the mass beer declines. You know, with the additional capacity that's, that's now in the market, over where demand has kind of fallen to and supply chains obviously ease globally, have you been experiencing any, any customer shift or, or, pressure on your contract at this, at this point in time in the North America business? No pressure on the contracts at this point. I think a good reflection of that commentary would be the fact that we're passing through the inflationary mechanisms. If you weren't seeing that come through, I think you could probably could see that there's been some negotiation that's taken place, and that's, that's not the case. The way I would look at volume, I think we're in a short-term dislocation for the Q2 and the Q3 because of mass beer. That correction, relative to curtailments or declined shipments, will revert in the second half of the year, but more meaningfully in the first half of 2024. The other thing that we've done is we've managed the inventory. We built too much inventory last year. We've worked that off, there's been an elevated level of curtailments relative to versus 2022. We'll be running much closer to scanner data in 2024, and in Q4, likely to be a lot closer to scanner data. Those are the things that are well understood within the industry and with our customers. I think the theoretical excess capacity versus the reality versus the intentionality of running to cash, all of those things stabilize heading into 2024 in a, what I believe is a, is a much tighter marketplace, with growth underpinning every industry participant moving into 2024. Understood. Thank you for the details. Thank you. Then just touching on the I think, if I heard you correctly, in the early part of the call, you said you were still exploring opportunities to accelerate deleveraging efforts. Could you maybe just talk a little bit more about what you were referring to, if that maybe meant some smaller divestitures or, you know, other actions that you're taking for that deleveraging efforts? No, we're we have what we were referring to is, you know, we, we generate a lot of cash here in the back half of the year. We're sitting on a lot of cash. So we have the flexibility to, you know, pay down whatever pieces of debt we want to pay down. So that's really what that's about. Okay, understood. Thank you very much. Thank you. Our next question is from the line of Gabe Hajde with, Wells Fargo Securities. Please go ahead. Your line is open. Dan, Scott, good morning. Morning. I, I appreciate that, there's been a lot of ground covered here, but maybe just because we don't have access to the industry data anymore and a perfect, I guess, lens into what the market is. Can you parse out the maybe 8.5% decline in the 2Q and sort of, you know, what's embedded in the 2H? I mean, between share shift, between the market being soft and then maybe the, kind of what's going on with, with the beer disruption. Then another volume-related question in Europe. I, I think volume decelerated in the 2Q. I'm curious if that's a function of not having the, the capacity that you need. You talked about, obviously, the UK and the Czech facility ramping up. I'm just curious if, if that's what's driving your optimism for the second half to recover. You talked about your largest energy customer maybe being a little bit weak based on sell-through in North America. They're a pretty big customer over in Europe. Is, is that part of what's driving the optimism? Just help me understand, because I'm assuming, the business in Europe is, is sort of contracted. Yeah, maybe let me start with the start with Europe. Everything is, is coming in, in line with what we anticipated heading into the year, inclusive of the large energy player. The one area that's softer is, is beer. I think that's related to the macro environment there. The higher single digits that we anticipated heading to year are gonna be closer to mid-single digits, but still nice growth. It's not a function of bringing on the capacity. The capacity that's being brought on is in the growth areas. It's, it's gonna be the capacity that's a little less utilized in the beer space. That's what's happening in the, in the, in Europe. Relative to North America, we had a decline, as you mentioned, of roughly 5% in the Q1. We are in that 8.5 range for decline in the second. We will see declines in the third, with a return to some volume momentum in the fourth. What happens in the mass beer space will be the indicator of, is it growth? Is it flat? That's, that's fundamentally it, is the mass beer impact, and it is the fact that we're overweight in the beer space and overweight to 1 customer within that space. That's the, that's the delta. Okay. Maybe I didn't ask the question explicitly. Can you do you have any sense for what the market was down in North America? Then last one, if I can flip it in. I think there was $20 million of year-over-year improvement embedded in for the cups business. I think there was some basketball championship that was a good thing for that product. Can you talk about sort of how that business is evolving and maybe expectations going into 2024? Yes. I, I think the overall marketplace in North America, down slightly, 1%. The delta between that and our customer mix is, is, is really the delta there. On the cup side, we're, we're seeing incremental improvements. I, I, I think a, an L.A.-Boston series versus a Denver, Miami series would have helped the cup a little better, believe it or not. Making good ground and good traction in the food service space. Things are breaking our way in terms of the regulatory environment as well on that product, with Hawaii and now the Mid-Atlantic, either banning or contemplating banning, single-use plastic cups. We're looking for trajectory over the second half of the year. I would not say that we will make a $20 million improvement in that business year-over-year, but we will continue to improve against it, more in the $10 million range. Thank you, Dan. Thank you. Thank you. At this moment, I'm showing no further question on the phone lines. All right. Thank you very much. We will look forward to talking to you again in the Q3. Everybody, enjoy the rest of your summer. Thank you, ladies and gentlemen. That does conclude today's call. We thank you for your participation and ask that you please disconnect your lines. Have a good day.