Stefan Diaz

Stefan Diaz asked if potential shifts in contract movements are expected to impact Ball's North American volume performance in 2026. He also sought clarification on the volume impact of the Millersburg, Oregon plant in 2026, the potential margin lift once it's operational, and how this balances with any headwinds from shipping cans from Mexico.

Answer

Daniel Fisher, CEO, confirmed a strong contractual outlook for Ball, with no anticipated negative impact from contract movements in 2026, and noted that Ball has benefited from some shifts. He explained that the Millersburg facility, expected online in the second half of 2026, will unlock approximately 1.5 billion units of improved volume in 2027, representing about a 3% lift, and will lead to record can profitability. Mr. Fisher acknowledged startup costs in 2026 and transient supply chain adjustments related to Mexico.

Stefan Diaz from Morgan Stanley asked about the nature of conversations with customers regarding tariff strategies and potential impacts on 2026 ordering patterns. He also sought to clarify if the Q2 margin headwinds in North America were due to operational issues or contractual pricing changes.

Answer

CEO Daniel Fisher responded that discussions about 2026 have not yet occurred, as the current focus is on seeking tariff exclusions. He emphasized that customers need cans to drive volume for price-sensitive consumers. Fisher clarified the margin pressure was not from contractual pricing but from a product mix shift, as the faster-growing non-alcoholic categories inherently have lower margins than beer.

Stefan Diaz asked about customer conversations regarding 2026 tariff impacts and hedging, and sought clarification on whether North American margin headwinds were purely operational.

Answer

Chairman & CEO Daniel Fisher stated it is too early for 2026 tariff discussions with customers, who are currently focused on seeking exclusions. He clarified that the margin pressure was not from contractual price changes but from a portfolio mix shift towards lower-margin non-alcoholic categories, driven by higher-than-expected growth in that area.

Stefan Diaz asked about customer conversations regarding tariff strategies and potential impacts on 2026 ordering patterns. He also sought clarification that the margin headwinds in North America were operational rather than contractual.

Answer

CEO Daniel Fisher responded that it is too early for 2026 tariff discussions with customers, who are currently focused on seeking exclusions. He confirmed the margin pressure was not from contractual price changes but from a product mix shift towards lower-margin, non-alcoholic categories that are experiencing faster growth.

Stefan Diaz asked about the potential impact of tariffs on demand, particularly concerning Mexico beer exposure, and whether potential cuts to SNAP benefits have been a topic of discussion with non-alcoholic beverage customers.

Answer

CEO Daniel Fisher explained that the 232 tariff impact is negligible and key customers are compliant with trade agreements, minimizing the effect. He noted that while there are challenges for brands tied to the Hispanic consumer, it has not altered their outlook. Regarding non-alcoholic beverages, he expressed confidence that CPG customers are effectively innovating and reformulating products to meet consumer needs, mitigating concerns over SNAP.

Stefan Diaz inquired if low single-digit volume growth is necessary to hit the EPS guide or if it can be achieved in a flat environment, and asked for details on the supply-demand mismatch and inventory levels in Brazil.

Answer

CEO Daniel Fisher stated that a negative volume print would make hitting the EPS target very challenging, but a flattish environment could work if offset by strength in other regions. In South America, he explained Ball was caught with tight capacity in Brazil during a Q3 heatwave but is now reopening a plant and expects to return to growth in Q1, aided by recovery in Argentina and Chile.

Stefan Diaz requested specific volume growth figures for Brazil in Q3, an explanation for the segment's strong profitability despite volume headwinds, and whether recent hurricanes impacted North American volumes.

Answer

CEO Daniel Fisher reported that Brazil's market grew nearly double-digits, but Ball's volumes were flat to slightly down due to being caught off guard by a sudden demand surge, leaving 3-4% growth on the table. The strong profitability was attributed entirely to improved operational performance, not product mix. He also confirmed the hurricanes had no material impact on North American volumes as production was sourced from other plants.

Stefan Diaz asked about the remaining runway for beverage can outperformance in Europe, even if overall liquid demand remains flat or declines. He also requested an update on quarter-to-date trends by geography, with a focus on Brazil, and clarification on the IFRS 15 contract timing benefit and its potential impact in Q4.

Answer

Oliver Graham (CEO) affirmed significant runway for can growth in Europe due to underpenetration, sustainability advantages, and energy costs impacting glass. He noted that quarter-to-date trends are in line with guidance, with Brazil showing significantly better performance in Q4 compared to Q3. Stefan Schellinger (CFO) clarified that the IFRS 15 benefit was a couple of million dollars, with no major headwind expected in Q4.

Stefan Diaz inquired about the remaining runway for can outperformance in Europe, even if overall liquid demand remains flat or declines. He also asked about quarter-to-date trends by geography, specifically Brazil, and the quantification of the IFRS 15 contract timing benefit and its potential Q4 impact.

Answer

CEO Oliver Graham confirmed significant runway for can growth in Europe due to underpenetration, sustainability advantages, and energy costs impacting glass. He noted quarter-to-date trends were in line with guidance, with Brazil showing significant improvement in October. CFO Stefan Schellinger clarified the IFRS 15 benefit was a couple of million dollars in the Americas and a few more in Europe, with no major Q4 headwind expected.

Stefan Diaz of Morgan Stanley inquired about the drivers behind Ardagh's strong North American volumes and the outlook for the second half. He also asked about European capacity constraints and whether the company is financially positioned to capture future growth in the region, potentially through brownfield expansions.

Answer

CEO Oliver Graham attributed North American strength to innovation and a favorable customer mix in soft drinks, energy drinks, and sparkling waters, noting he expects moderation but continued health in H2. For Europe, he confirmed the market is tight in certain can formats. Both Graham and CFO Stefan Schellinger affirmed that Ardagh is well-positioned to fund future European growth via capital-efficient, 'under the roof' brownfield projects that are manageable within the company's existing cash flow profile.

Stefan Diaz inquired about the risk of substrate switching due to tariffs, whether strong Q1 demand was a pull-forward, the status of customer mix challenges in Brazil, and how can pricing is determined in the Brazilian market.

Answer

CEO Oliver Graham asserted that the risk of substrate switching is 'overplayed,' as hedging and lower LME prices have kept all-in metal costs stable. He confirmed there was no evidence of demand pull-forward related to tariffs. Regarding Brazil, he noted continued volatility but a strong March, leading to a cautiously maintained outlook. He explained that Brazil's pricing involves a mix of premiums, but the devaluing dollar is currently a net benefit for customers.

Stefan Diaz from Goldman Sachs inquired about the potential demand implications of aluminum tariffs and the status of specific headwinds in the Americas, namely a customer issue in Brazil and energy drink category weakness in North America.

Answer

CEO Oliver Graham explained that the impact of tariffs on consumer prices is expected to be marginal (less than one cent per can) and is a pass-through for AMP, posing little risk to demand. He also confirmed that the customer volume issue in Brazil showed significant improvement late in Q4 and into the new year, while the North American energy category is also showing signs of recovery entering 2025.

Stefan Diaz asked new CFO Stefan Schellinger for his initial impressions of the company and potential areas for improvement. He also questioned if the guided $30-$40 million in under-absorption costs for 2024 was still accurate and asked about the outlook for this cost in 2025. Later, he asked about the risk of substrate switching due to rising aluminum prices.

Answer

CFO Stefan Schellinger shared positive first impressions and highlighted a focus on continuous improvement in commercial and operational excellence. CEO Oliver Graham confirmed the under-absorption cost guidance for 2024 remains accurate and expects the figure to drop in 2025 as capacity is utilized. Regarding aluminum, Graham stated that while a price point for substrate switching exists, current levels are far below the threshold that would trigger such a shift.

Stefan Diaz inquired about the drivers behind the better-than-expected performance in the 'other' segment, including strong food cans and green shoots in the equipment business, and the future earnings power of this segment. He also asked about the $25 million tariff headwind in Signode for 2025 and if the business is positioned for top-line growth in Q4 and 2026.

Answer

President and CEO Tim Donahue attributed the 'other' segment's improvement to a low prior-year comparable, efficiency gains in food cans from new lines, a lower cost structure in aerosol cans after a plant closure, and increased can-making equipment sales. He confirmed the direct tariff headwind for Signode is still expected to be around $10 million for the full year, with an indirect impact of $15 million from lower equipment sales. Donahue noted that while the transit team is managing costs well, it's too early to call a bottom for industrial markets or predict top-line growth for Signode.

Stefan Diaz inquired about the specific drivers behind the better-than-expected performance in the 'other' segment, including food cans and the equipment business, and its future earnings power. He also asked for an update on the $25 million tariff headwind for Signode in 2025 and the outlook for its top-line growth.

Answer

President and CEO Tim Donahue attributed the 'other' segment's strength to efficiency gains in food cans, a lower aerosol cost structure, and growth in can-making equipment. For Signode, he clarified the tariff impact as $10 million direct and $15 million indirect, noting that while overall volumes were lower, plastic strap sales were up, and cost management was strong. He indicated it was too early to call a bottom for industrial markets.

Stefan Diaz questioned why the full-year guidance was raised by less than the Q1 earnings beat, asking if it reflected conservatism or specific second-half headwinds. He also asked for an update on the full-year share repurchase plan and the company's current foreign exchange assumptions.

Answer

CEO Timothy Donahue explained the guidance aims to be thoughtful and encapsulate potential risks from tariffs, particularly in the Transit business, given the fluid environment. Executive Kevin Clothier confirmed the full-year share repurchase target is around $300 million. He also noted the FX forecast for the euro was updated from $1.03 to $1.08, and some of this benefit is already included in the revised guidance.

Stefan Diaz of Morgan Stanley inquired about how customers might react to potential aluminum premium inflation from tariffs, referencing the 2022 experience. He also asked for an update on consumer strength and growth drivers in Brazil, Mexico, and Colombia.

Answer

President and CEO Timothy Donahue recalled that in 2022, customers passed on costs, and he expects significant Midwest premium increases again if tariffs are implemented. He described Brazil as a long-term growth market, noted Colombia's plant is running excellently and sold out, and characterized Mexico as a large, solid business in excess of $1 billion, despite a minor customer mismatch.

Stefan Diaz asked about the consumer shift to cans in Mexico and potential capacity needs, as well as market trends in Asia and the risk from new competitors entering markets like Vietnam.

Answer

President and CEO Timothy Donahue acknowledged strong volume performance in Mexico but stated he does not see a need to expand capacity there or anywhere else globally at this time. For Asia, he noted that while the overall Southeast Asia market is up about 5%, Crown's volumes are down due to deliberate capacity reductions and pruning of low-margin customer business. He specified that a Chinese competitor's expansion in Vietnam is tied to a specific multinational filler and does not represent a broader market threat.

Stefan Diaz from Morgan Stanley inquired if the strength in the industrial end market was driven by the automation business and asked about the outlook for the industrial portfolio and automation into the second half and 2026.

Answer

President, CEO & Director Dustin Semach clarified that the company focuses on a 'solution sell' approach, combining equipment, materials, and service, rather than just automation. He highlighted that this strategy, exemplified by products like Instapack and APS auto bagging solutions, delivers higher value and margins and is a key contributor to the strong performance seen in the industrial portfolio.

Stefan Diaz questioned the decision to maintain guidance for a second-half Protective volume recovery amid escalating U.S.-China trade tensions and asked about the company's exposure from international Protective products imported into the U.S.

Answer

President and CEO Dustin Semach explained that the full-year guidance remains intact because an improved foreign exchange outlook is offsetting an anticipated modest softness in volumes. He noted limited visibility into the specific impact of trade policies on end-users but stressed that the company's 'domestic for domestic' production model provides a natural hedge. To date, no changes in customer buying patterns have been observed.

Stefan Diaz inquired about the company's automation business, asking for 2024 revenue figures, 2025 expectations, and whether it is still considered a material long-term growth vector, especially given the focus on near-shoring.

Answer

CEO Dustin Semach affirmed that automation remains a critically important part of the business, viewing it as an enabler that pulls through material sales rather than a standalone focus. He noted that while equipment sales have declined historically due to customer capital constraints, he is optimistic for 2025, expecting equipment growth in Protective driven by new hybrid AUTOBAG offerings. The focus is on net new placements to drive new material sales.

Stefan Diaz asked about the company's automation business, requesting the revenue contribution for 2024 and expectations for 2025. He also inquired about any demand changes from near-shoring trends and whether automation remains a material long-term growth vector for Sealed Air.

Answer

CEO Dustin Semach affirmed that automation remains a critically important part of the business, acting as an enabler for material and service sales. While equipment sales have been soft due to customer capital constraints, he expressed optimism for 2025, particularly in the Protective segment with a renewed focus on Autobagging equipment. The strategy is centered on net new equipment placements to drive recurring material sales rather than just replacing older equipment.

Stefan Diaz requested an update on the company's cost takeout initiative, asking if the previous target of $140-$160 million has been revised and what additional actions are being taken.

Answer

President and CFO Dustin Semach confirmed they are on track for $90 million in savings this year. He stated that due to weaker volumes in the Protective segment, they are looking to increase the previously planned $50 million in savings for next year. The final target will be set in the coming months, with a primary focus on rightsizing the Protective business.

Stefan Diaz, on behalf of Angel Castillo, questioned the Americas segment's margin performance, particularly the dilutive impact from the Vanair and RedViking acquisitions and the timeline for them to become accretive. He also asked if the automation business is still on track to achieve its $1 billion revenue target for the year.

Answer

CFO Gabriel Bruno explained that acquisitions typically take up to three years to reach normalized margins. He detailed that the Americas Q1 margin was impacted by an 80-basis-point dilution from acquisitions and a 40-basis-point impact from corporate cost reallocations, but the primary driver was lower volumes in automation. Bruno stated he no longer expects the automation business to hit the $1 billion target this year due to delayed capital investment decisions. CEO Steven Hedlund added that these order delays put the second half of the year at risk.

Stefan Diaz, on behalf of Angel Castillo, inquired about the competitive dynamics in the Welding business, questioning why Lincoln Electric's organic growth has recently lagged a key competitor and asking for insights into potential shifts in the competitive landscape.

Answer

CFO Gabe Bruno attributed the variance to differences in business models, highlighting Lincoln's larger automation portfolio's focus on heavy industry and automotive. CEO Steven Hedlund added that Lincoln has a higher concentration of OEM customers, who have seen weaker demand than the distribution channel, where he believes Lincoln is gaining share.

Stefan Diaz, on behalf of Angel Castillo, asked if there was evidence of customers pulling forward demand to get ahead of tariffs. He also requested more details on the strategic actions being taken in the automotive OE business, including its scope and similarity to past portfolio restructuring.

Answer

CEO Richard Kyle and CFO Philip Fracassa confirmed they have not seen any material demand pull-forward related to tariffs, noting that April revenue and May backlog remain in line with expectations. Regarding the auto OE business, Kyle explained the company is targeting more than half of its light vehicle OEM business for restructuring due to persistent unacceptable margins post-COVID. He expects this to provide a material uplift to corporate margins in 2026 and 2027. Fracassa quantified that the auto OE business represented about 8% of total company sales last year.

Stefan Diaz, on for Angel Castillo, asked for a breakdown of Mobile Solutions aftermarket growth between market expansion and share gains, and requested an update on the status of previously delayed CapEx projects within Life Sciences.

Answer

CEO Tod Carpenter asserted that internal models with factual data confirm Donaldson has been consistently winning market share in the aftermarket for many quarters and expects those gains to continue. Regarding Life Sciences, he explained that large, multi-million dollar upstream bioprocessing projects that shipped last year have not been replaced by new orders, leading to tougher comps and a more guarded outlook, with no significant recovery in capital spending yet visible.

Stefan Dias, on behalf of Angel Castillo, questioned the drivers behind the reduced Access segment sales outlook, asking about order cancellations or delays and the bridge to 2025. He also inquired about the incremental price upside within the Vocational segment's backlog.

Answer

President and CEO John Pfeifer explained the Access backlog has timing elements, with some orders scheduled for 2025, and acknowledged some pushouts and cancellations impacted Q3 orders but noted the overall backlog remains healthy. EVP and CFO Michael Pack added that the Vocational backlog contains strong double-digit price increases that will continue to benefit results for the next few years.