Q3 2024 Earnings Summary
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Comparable Diluted EPS | Q3 2024 (versus Q3 2023) | Mid-single digits plus | 19% YoY growth (from 0.63To 0.75) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Consistent focus on North American volume trends and uncertainty | Previously highlighted moderate-to-strong volume signals (Q2), major brewer disruptions (Q1), and footprint adjustments (Q4). | Faced persistent economic pressure, U.S. domestic beer softness, and slower-than-expected volumes. Cautious optimism for 2025 if interest rates ease. | Topic repeated with a more cautious tone due to ongoing macro headwinds. |
Continued emphasis on strong South American (especially Brazil) performance | Consistently strong performance in prior quarters, with Brazil as a growth engine. Argentina’s challenges noted (Q2, Q1, Q4). | Experienced capacity constraints in Brazil, with slightly down volumes in Q3, but expecting stronger Q4. Argentina volumes down ~30%, though the company remains bullish on South America's outlook. | Consistent emphasis, temporary Q3 capacity mismatch but optimism remains high. |
Operational efficiency improvements and cost-cutting measures | Highlighted across Q2, Q1, and Q4 as part of ongoing best-practice standardization, plant efficiency initiatives, and SG&A optimization. | Reiterated focus on controlling costs and driving 2-3% standard cost structure improvements. Retiring less-efficient assets to enhance margins. | Recurring theme, consistently emphasized as a key strategy in all periods. |
Challenges in the aluminum cups business and potential wind-down | Mentioned in Q2 as underperforming due to weakened consumer backdrop, but no wind-down talk. Not discussed in Q1. Q4 mentioned incremental improvement, not wind-down. | Business projected to lose ~$40 million in 2024. High price point and weaker consumer environment persist. Evaluating rightsizing, joint ventures, or a potential wind-down. | Newly underscored in Q3 with an explicit possibility of winding down. |
Ongoing macroeconomic and geopolitical risks in Argentina and Europe | In earlier quarters, Argentina faced inflation and currency controls, Europe saw inflation and moderate volumes but some resilience. | Argentina’s demand remains weak, but there are slight signs of improvement. Europe shows strong Q3 volume, though discretionary spending is still below 2019 levels. | Recurring topic, with Argentina still volatile but showing incremental progress, Europe continuing to recover. |
New $500 million cost reduction plan targeting overhead | Introduced in Q2 with front-end-loaded savings in 2024/2025, not mentioned in Q1 or Q4. | Multi-year plan reaffirmed, with traction already visible in 2024; extends through 2025-2027. | Introduced in Q2 and reiterated in Q3, forming a key pillar of future cost efficiency. |
Shifting sentiment on North American beer market demand | Q2 revealed premium light beer headwinds but stable volumes overall, Q1 covered major brewer disruption, Q4 anticipated 2-4% growth in 2024 with hopes for a better run rate into 2025. | Softer domestic beer environment in Q3, but optimism for 2025 as consumer spending may rebound if interest rates fall. Aligned with brands that are performing well. | Continued coverage, near-term caution but looking for a rebound next year. |
Growing optimism around aerosol business performance | In Q2, aerosol volumes grew ~6% with a sustainability advantage; Q1 noted modest improvement but offset by other costs; Q4 saw a 40% YoY jump and was forecast for double-digit growth. | Maintained a positive view, with performance aided by insurance proceeds and expansion opportunities (e.g., India). | Ongoing optimistic outlook, consistent positive trend in aerosol segment. |
Future EPS growth targets exceeding 10% in 2025 | Initially cited in Q2 with a range possibly reaching 13-15%. No direct mention in Q1 or Q4 about 2025 exceeding 10%. | Reiterated confidence in surpassing 10% EPS growth, driven by operational efficiencies, cost savings, and share buybacks. | Introduced in Q2 and reaffirmed in Q3 as a central performance goal. |
Reduced references to share buybacks compared to earlier periods | Q2 guidance also affirmed US$1.4B, Q1 detailed buyback plans of ~US$1.3B, Q4 focused on using aerospace sale proceeds for deleveraging and repurchases. | No actual reduction noted; the company reiterated ~US$1.4B in share repurchases by year-end 2024 as part of its capital return strategy. | No decrease in emphasis; share buybacks remain a key shareholder return mechanism. |
Potential significant future impact from cost reductions, interest rate changes, and volume recoveries | Q2, Q1, and Q4 echoed these levers—cost initiatives, improved balance sheet from deleveraging, better consumer behavior, and volume inflections—as supportive of long-term growth. | Anticipates meaningful benefit from the $500M cost plan, potential interest rate cuts boosting consumer sentiment, and volume rebounds by 2025. | Continued synergy from these factors expected to drive performance in 2024-2025. |
-
Earnings Growth Outlook
Q: Can you clarify your expectation for Q4 EPS and 2025 earnings growth?
A: We expect Q4 EPS to increment upwards, likely in the mid-single-digit range, leading to full-year mid-single-digit growth. Looking ahead to 2025, we are confident in delivering over 10% EPS growth due to volume growth, efficiency gains, and share repurchases. -
Volume Projections for 2025
Q: What is the starting point for base volumes in 2025 to achieve your earnings target?
A: Our initial projections align with our long-term algorithm of 2% to 3% top-line growth, stronger in Europe and South America. North America is expected to improve from current levels. We have the volume and efficiency gains needed to support our 10%+ EPS growth next year. -
Cost Savings and Operational Excellence
Q: What incremental catalysts can we expect from the cost side into 2025?
A: We plan to drive 2% to 3% productivity improvements in our cost structure annually. This comes from better planning, reducing conversions and label changes, lowering spoilage, and less overtime. Our operational excellence initiatives, including lean standardization and continuous improvement, will contribute to these gains moving forward. -
Impact of Macroeconomic Factors
Q: How are macro factors affecting consumer demand and your business?
A: Reduced discretionary spending power, down 8% versus 2019, is weighing on food and beverage categories due to inflation. Interest rate cuts and decreased savings rates are expected to restore consumer spending. Our customers are optimistic about 2025, anticipating a tailwind from improved consumer health. -
South America Volumes and Argentina Impact
Q: Can you explain the volume situation in South America, especially Argentina?
A: In Brazil, we left 3% to 4% growth on the table by not matching production with demand. Argentina experienced a volume decline of over 30% in Q3, impacting full-year volumes by 500 to 600 million units. Despite this, we're optimistic about Argentina's long-term prospects as policies take hold, and we're prepared for better top-line stability next year. -
Plant Closures and Restructuring Charges
Q: What's included in the $90 million restructuring charges this quarter?
A: The majority relates to closures in North and South America, including Santa Cruz in Brazil and Kent, Washington. Additional charges stem from IT and operational restructuring, including severance as we rightsize the business post-aerospace acquisition. -
Aluminum Cups Business Strategy
Q: What are the key reasons holding back the aluminum cups initiative?
A: The primary issues are inflation and a weakened consumer, making the price point unsustainable for what people are willing to pay for sustainability. Additionally, complexities in recycling infrastructure presented significant barriers, especially in service industries like airports. We're exploring strategic alternatives, as the business is currently losing about $40 million this year. -
Mass Beer Strategy and Portfolio Rebalancing
Q: How are you addressing the maturity of mass beer in your portfolio?
A: We're ensuring alignment with strategic partners who are winning in the category. While beer has declined for 20 years, the substrate shift to cans and innovation have offset this. We've started rebalancing our portfolio, focusing on beverage and alcohol companies with strong growth in ready-to-drink products and innovative offerings. -
Europe Growth and Capacity
Q: Can you meet the 3% to 5% long-term growth in Europe without new plants?
A: Yes, we don't foresee the need for additional greenfields in Europe for the next 2 to 3 years. We'll maximize existing facilities by adding lines, speeding up production, and debottlenecking, all within our capital expenditure plans. The substrate shift is still early in Europe, with penetration below 32%, offering ample growth opportunity. -
North America Mix and Specialty Cans
Q: Is there a mix shift affecting profitability between specialty cans and standard sizes?
A: While specialty cans remain tight, consumer weakness is impacting all categories and sizes. In energy drinks, which use 16-ounce specialty cans, demand is affected by higher unemployment among key demographics and elevated interest rates. We expect improvement as interest rates decline and consumer spending strengthens in 2025.