Crown Holdings' CEO Discusses Q4 2011 Results - Earnings Call Transcript

Crown Holdings Inc. ( CCK)

Q4 2011 Earnings Call

February 2 2012, 09:00 am ET

Executives

Timothy Donahue - EVP & CFO

John Conway - Chairman, President & CEO

Analysts

Phil Gresh - JPMC

Tim Thein - Citigroup

Benjamin Wong - Bank of America-Merrill Lynch

Chris Manuel - Wells Fargo

Alex Ovshey - Goldman Sachs

Al Kabili - Credit Suisse

Ghansham Panjabi - Robert W. Baird

Philip Ng - Jefferies

Debbie Jones - Deutsche Bank

James Armstrong - Vertical Research Partners

George Staphos - Bank of America-Merrill Lynch

Presentation

Operator

Good morning and welcome to the Crown Holdings' fourth quarter and full-year 2011 earnings conference call. Your lines have been placed on 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. Timothy Donahue, Executive Vice President and Chief Financial Officer. Mr. Donahue, you may begin.

Timothy Donahue

Thank you, Shirley and good morning to everybody. Welcome to Crown Holdings' fourth quarter and full-year 2011 conference call. With me on the call today are John Conway, our Chairman and Chief Executive Officer; and Tom Kelly, Senior Vice President, Finance.

Before we begin, I would like to point out that 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 comments in the section titled Management's Discussion and Analysis of Financial Condition and Results of Operations in Form 10-K for 2010 and in subsequent filings.

A reconciliation of Generally Accepted Accounting Principles to non-Generally Accepted Accounting Principles earnings can be found in our earnings release. And if you do not already have the earnings release, it is available on the company's website at crowncork.com. You will also find a reconciliation from net income to EBITDA, credit ratio computations, and supplemental cash flow data on the company's website.

I'll first review the quarter and year results, and then hand the call over to John.

We had a very strong finish to what’s been another good year in 2011. Fourth quarter comparable diluted earnings per share increased 14% to $0.48 per share versus $0.42 in last year’s fourth quarter. For the full year, comparable diluted earnings per share were $2.81 in 2011, an increase of 25% over the 2010 level of $2.24.

Net sales in the fourth quarter increased 6% over the prior year as strong emerging market beverage can growth offset weak economic conditions in Europe and a weakening euro and British pound sterling against the US dollar. For the full year net sales rose 9% over 2010. Segment income at $192 million in the fourth quarter was up 4% compared to the prior year as strong emerging market performance offset unfavorable currency translations and lower manufacturing activity which was planned to bring down year end working capital levels. For the year, segment income was up almost 10% over the prior year.

Before, we review operating segment performance, we want to provide you with an update on the flooding in Thailand and its impact on our operations. On our third quarter earnings call on October we noted the severe flooding conditions in Thailand. At that time, none of our plants had been affected. However soon after the call, our beverage can plant north of Bangkok, one of the three plants we operate in the Bangkok area was flooded.

Fortunately our food and general line plants in the Bangkok area were not flooded. The beverage plant is a two-line aluminum can plant with a beverage end line. Almost all of the equipment submerged under water for six weeks is damaged beyond repair. Fortunately, the financial impact on Crown has been minimal and we are grateful that our employees in Thailand are safe although their lives have certainly been disrupted and damaged.

As always, we are dedicated to ensuring the continued support of our customers’ needs and we are now focused on a return to normal operations as soon as possible. We will rebuild in Thailand and expect to be back in operation by early 2013. Until then we will support our customers’ requirements in Thailand from other locations.

Turning now to our operating segments. In Americas Beverage, revenues increased 11% in the quarter and were up 8% for the full year. Segment income at $85 million was up 20% in the fourth quarter and 10% for the full year. Sales unit volumes in the segment were up 7.5% reflecting strong gains in Brazil and Mexico which offset a 4% decline in North America.

We had consistent and outstanding performance in Brazil throughout 2011 and 2012 is off to a great start. As a remainder, in the first half of 2011 we installed three new productions lines including two lines at the new Ponta Grossa plant adding more than 2.5 billion units of annualized capacity to our Brazilian operations. Start ups went extremely well resulting in volume growth of 53% in the fourth quarter and 31% growth for the full year.

North American food revenues in the fourth quarter and full year were in line with the prior year as the passthrough of higher steel cost offset slightly lower volumes. US volumes were surprisingly strong through the quarter and equaled the prior year while overall North American volume was down 1.5% in the quarter.

Segment income was $31 million in the quarter and at $146 million was up 22% for the full year reflecting improved manufacturing performance, increased metal vacuum closure sales and benefits from the prior year’s restructuring.

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