Crown Holdings (NYSE:CCK) held its second-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.
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Summary
Crown Holdings reported a 16% increase in adjusted earnings per share, reaching $2.49, with net sales rising to $3.7 billion, driven by a 5% growth in global beverage can shipments and favorable foreign exchange.
The company has raised its full-year 2026 adjusted EPS guidance to $8.30-$8.50 due to strong first-half performance and a positive demand outlook.
Crown Holdings repurchased $305 million in shares during Q2, totaling $594 million returned to shareholders in the first half, reflecting confidence in strong free cash flow and a disciplined capital allocation strategy.
The company is investing in growth initiatives in Brazil, Greece, Spain, and India, maintaining a strong balance sheet with an adjusted net leverage ratio of 2.5 times.
Management noted strong demand in North America and Europe, with new capacity coming online in Greece and Spain, but expressed caution due to potential inflationary pressures and global economic headwinds.
Full Transcript
OPERATOR
Good morning and welcome to Crown Holdings’ second quarter 2026 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. Kevin Clothier, Senior Vice President and Chief Financial Officer. Sir, you may begin.
Kevin Clothier, Senior Vice President and Chief Financial Officer
Thank you, Michelle, and good morning. With me on today’s call is Tim Donahue, President and Chief Executive Officer. If you do not already have a copy of the earnings release, it’s available on our website at crowncork.com. On this call, as in the earnings release, we will make a number of forward-looking statements. Actual results could differ materially from those statements. Additional information concerning factors that could cause actual results to vary is contained in the press release and our SEC filings, including our Form 10-K for 2025 and subsequent filings.
Reported diluted earnings per share were $2.23 compared to $1.56 in the prior-year quarter. Adjusted earnings per diluted share were $2.49 in the second quarter compared to $2.15 in the second quarter of 2025. That represents an increase of 16%. Net sales increased to $3.7 billion reflecting 5% growth in global beverage can shipments, the pass-through of higher material costs, and favorable foreign exchange. Foreign currency translation segment income was $501 million compared with $476 million in the prior-year quarter.
The increase was driven by higher global beverage can shipments, strong performance in our beverage can equipment business and North American tinplate operations, partially offset by inflationary cost increases. Based on the strong first-half performance and positive demand outlook, we are increasing our full-year 2026 adjusted diluted earnings per share guidance from $7.90 to a new range of $8.30 to $8.50. We currently expect the third quarter adjusted diluted earnings per share to be in the range of $2.20 to $2.30.
Our full-year outlook assumes net interest expense of approximately $355 million; exchange rates at current levels with the Euro at an average rate of $1.16 to the dollar; an effective tax rate of approximately 25%; depreciation of approximately $330 million; noncontrolling interest expense of approximately $150 million, while dividends to noncontrolling interest are expected to be $110 million; adjusted free cash flow of at least $900 million; and capital spending of approximately $550 million.
Capital allocation remains a key component of our value-creation strategy. During the second quarter we repurchased $305 million of company shares. Through the first six months of the year, we repurchased $517 million of shares and paid $77 million in dividends, returning a total of $594 million to shareholders. This pace of repurchases reflects our confidence in the company’s outlook, the strength of our free cash flow generation, and our commitment to a disciplined, balanced capital allocation framework.
We continue to invest in our growth initiatives in Brazil, Greece, Spain, and India, which are progressing on schedule while maintaining a strong balance sheet. At the end of Q2, our adjusted net leverage ratio was approximately two and a half times, an improvement from the first quarter, and consistent with our long-term leverage target. Our results in the quarter reflect what we see every day. Consumers continue to choose beverages in aluminum cans and our customers look to Crown to reliably support this growing demand.
In fact, as I sit here this morning enjoying a cold beverage in a can, I’m reminded that millions of consumers around the world made the same choice throughout the second quarter. It’s a simple but powerful reminder of the strength of our business and the appeal of the most sustainable beverage package. With that, I’ll turn the call over to Tim.
Tim Donahue, President and Chief Executive Officer
Thank you, Kevin, and good morning to everyone. As Kevin so ebulliently discussed and as reflected in last night’s earnings release, the company had another strong performance with second quarter revenues and earnings per share both exceeding the prior-year quarter by 16%. Global beverage can volumes were up 5% in the quarter with most regions experiencing strong demand, and this follows 5% growth in the first quarter. All of this is only possible due to the tremendous global team we have at Crown.
Despite the ongoing Middle East crisis and related global economic headwinds, the businesses responded well to not only support each other, but to also continue to provide the level of service and quality that our customers require. Revenues in Americas Beverage advanced 21% in the quarter almost entirely due to the pass-through of higher aluminum costs. Sales unit volumes in North America grew 5%, offsetting declines across Latin America. Income in the segment declined by $3 million primarily due to cost inflation.
North American can demand remains strong and we expect full-year shipments to be 3% to 4% above 2025. European volumes increased 7% in the quarter with growth noted across almost all countries, resulting in a 10% improvement to the segment’s income in the quarter. As in North America, demand remains strong and the first line in Greece was commercialized earlier this month, bringing much-needed capacity to our European system. Further capacity will come on late in the year in both Spain and the second Greek line.
Income in Asia Pacific advanced 6% in the quarter as volume gains across most countries offset cost headwinds arising from the Middle East crisis. Overall, volumes in Transit Packaging were level to the prior year with improved equipment and tool activity being offset by lower steel and plastic strap volumes. The income effect of this positive revenue mix was offset by inflation impacts running ahead of our cost recovery. The business remains resilient and we expect second-half performance to be firmer to the prior year than in the first half.
Increased beverage can equipment activity combined with productivity improvements in North American tinplate resulted in segment income improvement across our other businesses. Our North American food can business, which is now well balanced between human and pet food, saw volumes decline 3% in the quarter, although we note that volumes advanced 9% in the prior-year second quarter. Just a few points to summarize before opening the call to questions.
Global beverage can volumes up 5% in the quarter; earnings per share up 16% in the quarter with full-year guidance raised; we returned almost $600 million to shareholders in the first half; and the balance sheet remains strong with leverage remaining at our long-term target of 2.5 times. With that, Michelle, we are now ready to begin to take questions.
OPERATOR
Thank you. We will now begin the question-and-answer session. If you would like to ask a question, you may press star followed by the number one. Please unmute your phone and record your name and company clearly when prompted; your name and company are required to introduce your question. To withdraw your request, you may press star followed by the number two. One moment please for the first question. Our first question comes from the line of George Staphos of Bank of America.
Your line is open.
George Staphos, Analyst at Bank of America
Hi everyone. Good morning. Thanks for the details. How are you? Congratulations on the progress. I had a couple of questions. Obviously, I guess first of all with Americas EBIT, the guidance so far for this year has been for earnings to be down. You’ve talked about that in the past. The quarter was relatively flat, which was better than expected. Do you think that potentially there is the chance that earnings might be flat overall for Americas given the volume momentum that you have?
Or would that still be a bridge too far? And what are the considerations in that? Maybe second question related. I know it’s early, it’s middle of the year, but do you have any thoughts that you could share in terms of how you think your volume, your market shares, particularly North America, might develop in 2027? Any thoughts here? Then I had one last follow-on.
Tim Donahue, President and Chief Executive Officer
So, George, on the first question, I think the second half of the year, we could be level to the second half of last year, to use your terms. Just given the softness we experienced in Brazil in the first half, it might be a bridge too far for this year to equal last year in segment income in the Americas. Although, if we don’t get to a billion of segment income—I know we crossed it last year—if we don’t get to a billion of segment income, we’ll get real close to that number in the Americas.
But I think the customer mix-related softness we had in the first half in Brazil, you know, as you say, a bridge too far. But second half should be pretty firm to the prior year. I think the strategy we’ve employed as relates volume and market share in all regions has been one in which we’ve tried to develop a business that rewards our company and our stakeholders for the efforts that we make. And sometimes that is not so volume dependent. Sometimes that is more dependent on sound commercial strategies which yield higher income.
Having said that, the market is growing. You know, it’s probable that our volume next year will be up compared to this year. What that means for market share, I don’t know. Less concerned about market share, although we do have a pretty good position in North America. We’re probably about 25% of the market. There’s nothing wrong with being a strong number two in the market, and I think we’re pleased with our position and, as I said, we’re more focused on getting a proper return on the assets that we have employed in the system.
George Staphos, Analyst at Bank of America
Understood. Thanks for the thoughts on that, Tim. Last one for me. Again, the quarter for 2Q was ahead of your guidance, and again, congratulations to your team on that. As we look early into the third quarter, any thoughts on where volumes are right now? And if somebody wanted to ask the question, why are earnings lower sequentially from 3Q versus 2Q, what are the key considerations there and, to some degree, what are you guarding against with that?
I will turn it over, and thanks very much.
Tim Donahue, President and Chief Executive Officer
Yeah, listen, I think just looking at volumes globally in beverage cans, everything feels very firm right now. That is, North America is continuing to see high demand. You know, one of the large retailers has a number of rollbacks in place, and they typically run from one to several months. And so as an industry, we’re excited about that—not just in beverage cans, but also in food cans. Hopefully that drives more volume. George, you’ve been around a long time like I have.
You recognize that in times when consumers are stretched and stressed, dining at home or consuming at home becomes more prevalent. You know, we’re sitting here in Tampa right now, I can tell you—not that I’m gloating about this, I think it’s unfortunate—but the Tampa restaurant scene is really struggling this summer, which tells me people are eating at home. And if we’re seeing that in Tampa, I guess we’re seeing that all around the country. So, you know, I think demand is going to remain strong for aluminum beverage and steel food as we look through the rest of the year.
Europe remains sold out, more or less. You know, it’ll slow down seasonally, but it’s still sold out. And we have new capacity coming online. Asia, we’ve had double-digit growth in the first half of the year. I think we’ll have high single-digit growth in the second half of the year. So that’s a slowdown, but it’s still high. Single-digit growth—we’ll take high single-digit growth all the time. Now we obviously don’t have a World Cup in the second half of the year, but as I said, demand remains strong.
You’ve asked the question that everybody else wants to ask. I think we have a little bit of caution around the second half. You know, if we were sitting here three months ago, we might have had hopes, as many people did, that the Middle East war, Middle East crisis perhaps would be drawn to some conclusion. It seems to only be picking up right now, which is unfortunate for a lot of reasons and again will give us some caution as we look at ocean freight, other industrial gases, inflation that we might expect there.
So we probably have—we’ve got an inflation number penciled in for the second half that we didn’t have as high a number when we spoke to you three months ago. So I’ll leave it at that and let some others ask some questions.
George Staphos, Analyst at Bank of America
Okay. And we should expect Signode will be up sequentially, just implied, right? And thanks. I’ll turn it over.
Tim Donahue, President and Chief Executive Officer
Signode feels like it’s going to be very level to the second half of last year, which would imply sequentially up in the second half. Yes.
George Staphos, Analyst at Bank of America
Thank you, Tim.
Tim Donahue, President and Chief Executive Officer
Thank you.
OPERATOR
Thank you. Our next question is from the line of Anthony Pettinari of Citi. Your line is open.
Anthony Pettinari, Analyst at Citi
Good morning. Just following up on the last question. I think previously you had given an EPS impact from Middle East conflict of $0.05 in 2Q and $0.10 for the full year, if I got that right. Any update there?
Kevin Clothier, Senior Vice President and Chief Financial Officer
Yeah. So the $0.05 in the second quarter—maybe it was $0.06. And we saw a lot of that in the Asian business. Having said that, we earned through it with higher volumes and, you know, we’ve got a much lower cost structure there than we had several years ago. So the Asian business is well prepared to defend itself against cost increases. Having said that, we do expect the second half of the year to continue to see higher inflation that currently runs ahead of our cost recovery mechanisms, which will reset either at the end of the year or early next year.
So I would—if we were back in April, if we were modeling $0.05 in the second quarter and $0.05 in the second half, I’d tell you we probably had $0.06 in the second quarter and we probably have $0.08 in the—7, 8, maybe $0.10—in the second half in our model right now. And it’s just, you know, I’m always afraid to say we’re being overly cautious. I think we’re just trying to be mindful of the challenges that we see in the global economic system and not unhappy with our projected results—just trying to make sure we and you don’t get ahead of ourselves right now until we see some resolution to some of the political instability we’re seeing right now.
Anthony Pettinari, Analyst at Citi
Got it, got it. That’s very helpful. And then I’m just wondering, when all is said and done, is it possible to gauge what the World Cup may have done for Crown in calendar 26 in terms of volume, sales, earnings—whatever metric you might want to use? And then just directionally, is there anything that surprised you about the impact, positively, negatively—anything you’d call out?
Kevin Clothier, Senior Vice President and Chief Financial Officer
So, Anthony, when you look at the World Cup and we kind of look at our volumes, the second quarter we were up 5%. You look at our full year expectation, you know, we’re looking at 3% for the full year. You can almost equate the 2% probably—whether it’s World Cup or, you know, America 250—it seemed like the activity around it was definitely elevated. You know, it’s hard to say how much is directly correlated, but, you know, there’s clearly some volume impact that we’ve seen in the second quarter.
And if I was going to equate a number, I would say it’s probably close to—maybe it’s 2% of the North American volume for sure.
Anthony Pettinari, Analyst at Citi
Okay, understood. That’s very helpful. I’ll turn it over.
OPERATOR
Thank you. Thank you. Our next question is from the line of Ghansham Panjabi of Baird. Your line is open.
Ghansham Panjabi, Analyst at Robert W. Baird
Thank you, operator. Good morning, everybody. Just going back to the comments on relative caution, if you will, for the back half versus what you delivered in 2Q—just to confirm, are you actually seeing something that worries you as it relates to either volumes or cost, or are you anticipating some sort of pressure as it relates to those two dynamics as you think about the back half of the year?
Tim Donahue, President and Chief Executive Officer
Well, Ghansham, that’s a really good question. I think Kevin’s comment—if we saw 5% volume growth, and let’s just deal with North America to start. If we saw 5% volume growth in North America in the second quarter and we attribute perhaps roughly half of that to outsized World Cup activity, which was certainly beyond what we expected—you know, our comments previously with respect to the World Cup would have been something along the lines that it’s a four-week tournament, and how much more can people drink?
Well, guess what, they drank a lot more. And so we’re not going to see that in the third quarter. So we know that while for the full year we’re still going to be up 3% to 4%, it’s not going to mirror the 5% we saw in the second quarter or the first half. So—and then, you know, some caution around inflation in the second half. We won’t get a chance to recover a lot of these costs, be it in transit, Asia, and even some of—where we don’t have freight in some of the contracts—some of the incremental freight costs and diesel that we see in our businesses here in North America.
So I don’t think there’s anything specific. I think it’s just a reflection of—we had an outsized North American gain in terms of volume from the World Cup in Q2. I think we had a—let’s be honest—we had a quarter we didn’t expect for a lot of reasons. A lot of things, to use Kevin’s term, a lot of things went right. When you take a step back and you look at it, everything that went right, you try to be honest with yourself and go through all the things that went right, and things may still go really good in the back half of the year, but are they going to go that good as related to the second quarter?
So just caution. I don’t think anything specific—just caution.
Ghansham Panjabi, Analyst at Robert W. Baird
Okay, thanks for that. And then can you give us a sense on Latin America—I’m sorry if I missed that—in terms of volumes for 2Q? And then separately, as it relates to the beverage can business and the tin plate businesses—obviously very, very strong operating performance—was there anything unique in there that boosted the second quarter, or is that just you’re on the flip side of perhaps some tougher quarters previously?
Kevin Clothier, Senior Vice President and Chief Financial Officer
What was the first question? First was those beverage businesses—gotcha. On the other businesses, the other segment—remember that’s tin plate businesses and also the can-making equipment business. And really we’re at a really easy comp on the equipment-making business, where I would say the majority of the gain that you’re seeing in Other is largely related to the equipment and tooling business that we have versus the prior year. Versus prior year.
Tin plate business is still strong and doing well. But when you’re looking at the quarterly gain, the majority of it—it’s the equipment business. And then what was your other question?
Ghansham Panjabi, Analyst at Robert W. Baird
It was on South American volumes.
Kevin Clothier, Senior Vice President and Chief Financial Officer
Oh, I’m sorry. So North America up 5%, Latin America down 10%.
Ghansham Panjabi, Analyst at Robert W. Baird
Fantastic. Thanks so much.
OPERATOR
Thank you. Thank you. Our next question comes from the line of Matt Roberts. Your line is open.
Matt Roberts, Analyst
Good morning. Appreciate all the ebullient—I can’t even speak—comments. Good word there, Tim.
Tim Donahue, President and Chief Executive Officer
Listen, I’ve been dealing with Kevin’s ebullience for the last week and a half. It was like trying to calm down an excited kid getting ready to go out for Halloween.
Matt Roberts, Analyst
Sure. Well, always entertaining. We haven’t talked about Europe much. That continues to be strong, so maybe just more granularity there by region—what you’re seeing in Southern Europe, Gulf states, and exposure in Northern Europe as well. Seems like a hot summer starting out over there, starting to run up against tough comps. So any comments there and how we should think about the timing of incremental volumes as Spain and Greece start to ramp?
Tim Donahue, President and Chief Executive Officer
Yeah, so as I said in the prepared comments, the second—I’m sorry, the first line in Greece we commercialized earlier this month, so we’ll work through some startup costs, but we’re going to have incremental volumes between now and the end of the year. And Spain will come online early in Q1. The second line in Greece will come online late in the year, later in Q4. We didn’t talk about Brazil—Brazil should be up and running sometime in Q4 as well, the new line in Ponto Grossa.
The market remains very tight. Our system remains tight. I hesitate to say sold out, but probably sold out is the right term. Combination of factors: just an increasing acceptance of the beverage can compared to traditional glass bottles that have existed in Europe for the last 200 years or more, and a growing propensity of fillers to use cans for a variety of reasons, not the least of which is the lowest cost through distribution, obviously the inherent sustainability characteristics, and also the billboard that is used to advertise your product via the graphics on the can—the 360 graphics on a can.
So understand that we’re going to have tougher volume comps as we go forward, and obviously the bigger the denominator gets, the lower the percentage gain is. We don’t always get so concerned about the percentage gain. We like absolute unit numbers, because absolute unit numbers are what drive our need to put more capacity in and grow earnings. So really a lot of positive thoughts around our European business. I think if we look at specifically the second quarter, maybe all markets, all of our businesses in Europe up, all locations up, with the exception of a slight decline in Eastern Europe, and the business in the United Arab Emirates down—unit volumes down about 20% in the quarter owing to the Middle East crisis. But in total our Middle East volume was up for the quarter, meaning that the other units in Jordan and Saudi more than made up for the Dubai shortfall.
Matt Roberts, Analyst
And maybe one on transit. And the prepared remarks noted global industrial production, PMI levels where they are currently. Are you seeing any green shoots or bright spots in that business, and why you had success in pulling costs out there? Any further cost opportunities or commercial adjustments you’re considering in that business? Thanks again for taking the question.
Kevin Clothier, Senior Vice President and Chief Financial Officer
I think we’ve taken a lot of cost out. You never say it’s the end, right? All companies, all businesses that operate in businesses that are looking at margins and trying to keep cost down, it’s continuous improvement. We’re always looking for ways to improve and take cost out. We’ve taken the majority of the cost out of that business that we feel we need to take out. So the business is in a really good place. The team has done an excellent job, sizing the overhead cost structure for what the business should have as a packaging business.
The green shoots we are seeing is, you know, we continue to see manufacturing production, manufacturing indices being level or expanding from time to time. Little different where we’re seeing it, but we are starting to see some green shoots in capital goods orders, which helps our business because the most profitable piece of our business is the equipment and tools and the service that goes along with that. And so that’s a really good sign. Obviously, gasoline and diesel and some other things impact the segments we serve, that is the transportation segments.
And so the transportation industry under some pressure with that. Although gasoline obviously and diesel have pulled back a little here in June. We’ll see what it does the balance of the year with the war picking up. But I think we feel better about the business today than we have over the last 18 months and we’ll see where that takes us.
OPERATOR
Okay, thank you. Our next question is from the line of Phil Ng of Jefferies. Your line is open.
Phil Ng, Analyst at Jefferies
Congrats, guys, on a strong quarter. And Kevin, if that was intentional, it was a very nice touch when you cracked open your can at the start of the call. So congrats to all that.
Tim Donahue, President and Chief Executive Officer
He’s been practicing that all week.
Phil Ng, Analyst at Jefferies
It’s good execution, I guess. Question for you, Tim, to kind of kick things off, you mentioned that North America and across your portfolio, your focus is profitability. So I guess when we look at the 2027, do you have a path to kind of drive EBIT per can grinding higher in 2027 in that North American business? You know, it’s certainly very tight. So how much slack capacity is out there, just from an industry standpoint, kind of moved around, and have any of your customers even actually reached out to you to add capacity?
Once again, I appreciate the focus here is making more money, but any more color on some of those dynamics, Tim?
Tim Donahue, President and Chief Executive Officer
Phil, it’s a great question, given the industry missteps maybe five or six years ago. You know, as you remember, we tried to be very cautious around that, but you get caught up in all that. I would say that, let’s be clear, customers are always telling you to add more capacity. They want an overcapacity situation so we all act like desperate wolves. And I think the recent memory has taught us all a good lesson, and nobody’s trying to do that. We’re all trying to be very responsible.
Having said that, the market continues to grow. I think we see further growth. And, you know, where we see growth is the continuing growth in energy drinks, which largely come in cans and offset many products that are consumed in other substrates, be it a coffee cup or plastic bottle. And so that’s a positive end-market development for the can industry, as is flavored alcohols, flavored teas, sparkling alcohols that offset perhaps other alcohol, namely beer that comes in glass and or draft versus just the can.
So all these are positive substrate moves for the can industry, those end-market moves. So we see the market growing. There may come a time when we need to consider more capacity and when we believe we can do that in a responsible way, we’ll take a look at that much closer.
Phil Ng, Analyst at Jefferies
Do you have any color on how much slack capacity is there in North America? I think there’s not much. But in terms of any high level?
Tim Donahue, President and Chief Executive Officer
I apologize for all of you that know this already. And just very quickly, if you took the rated speed of the equipment that’s out there, you would posit that perhaps the industry is running at 92, 93%. But if you adjust that for changeovers for sizes, label changes, maintenance, you know, we’ve got to be in the mid to high 90s, which is, you know, in real terms from April to August it’s 110% utilization. And then you’ve got to do a lot of maintenance, catch up and other things in the fourth quarter.
So I think it’s a market that’s pretty well utilized. I mean, there is some new capacity coming on the West Coast. It’ll be specific to the West Coast and some certain customers in that region. There’s been other capacity that’s come on, and some of the smaller companies that have brought capacity on will get better, and they’ll just create more capacity from their own creep. But I think the market’s in a really good place right now.
Phil Ng, Analyst at Jefferies
Okay, and then on South America, you talked about Brazil down, I think 10%, or South America at large. Tim, any more color on what’s driving that? Is that the comp dynamic, share movement? And then you are bringing on more capacity in Brazil. So how do we shore that up in terms of a little weakness right now and more capacity, and just broadly how you’re thinking about Brazil this year?
Kevin Clothier, Senior Vice President and Chief Financial Officer
Hey Phil, I’ll take this. So look, Brazil is all about mix, right? You have a high-end consumer and you have cans that are sold to what I’d say are the more premium brands, which is not our customer. Largely we service the lower end of the market, which is our main customer. So I don’t think, I think Brazilian economy is doing okay. I think it’s similar to the United States where the high end is doing better than the low end. And right now I think in the first half what we’ve seen is that the lower end consumer, you know, is struggling a little bit.
I think, and it’s also the weakest time of the year. Just remember that it’s their winter, if you remember. So I think as we look through the rest of the year, we feel okay with where the projection is, but it’s all a mix game in Brazil and this happens from time to time. You’ll have years where, you know, we’ll do really well in above market growth because our customer does better. This year it looks like we’re probably below the market and that is, again, customer mix.
Tim Donahue, President and Chief Executive Officer
So Phil, just a little further color. The big guy there far more active in promoting beginning in the beginning of the year through the World Cup, and as Kevin said, resulting in a mix for us where we service principally the other two big beer companies there and not the larger one to a great extent. The line in Ponta Grossa — we have a two-line can plant currently in Ponta Grossa, which is multi-size. We need more size capability in the Southeast, and that’s the reason for the addition.
Even though the market for us has been soft this year, it’s just a regional size expansion.
Phil Ng, Analyst at Jefferies
Tim, any color on what you’re expecting for Brazil for the full year?
Tim Donahue, President and Chief Executive Officer
We didn’t — to Ghansham’s question, I could have also said that as we look at the back half of the year, Brazil had a massive fourth quarter last year. They’re forecasting a similar fourth quarter this year. And Kevin and I, as we look at the first half, we’re being a little cautious on what we think our Brazilian team is going to deliver. Currently our Brazilian team, being down high single digits in the first half, is projecting that they’re going to be flat for the year.
So some of our second-half caution is just putting some caution against our own Brazilian forecast.
Phil Ng, Analyst at Jefferies
Okay, super. Thank you so much.
OPERATOR
Thank you. Our next question is from the line of Chris Parkinson of Wolfe Research. Your line is open.
Chris Parkinson, Analyst at Wolfe Research
Great. Thank you so much. Just as it pertains to North America, I think we teetered on this on a few prior questions, but could you just give us some baseline assumptions on how you see different substrates of the market growing? It seems like energy is still generally positive, you know, non-alcoholic seltzers — just any color you could give on those, as well as your Mexican glass business, would be particularly helpful for the second half. Thank you.
Tim Donahue, President and Chief Executive Officer
Yeah, listen, I think all segments felt like they were up in the second quarter. I think beer was flattish. I mean, that’s a win for beer. It might have been — and I’m only going from data we get from the CMI, the Can Manufacturers Institute — but one of the companies doesn’t report, and they’re a bigger beer supplier. So maybe beer was up, but it felt like everything was really strong in the second quarter across all segments. Mexican glass, we had a positive, really strong quarter.
You know, as the economy tightens, especially in lower-income economies, glass does better. And we have a real nice position in the Mexican glass business with two factories, five furnaces, and results have been very good this year across Mexican glass.
Chris Parkinson, Analyst at Wolfe Research
And just as a follow-up, you’ve been pretty methodical on adding new capacity, linking it to customers — all things the Street likes to hear. But when we take a step back and we look at your projected free cash flow, you’ve been buying back shares — surprised most of us, I think, for the second quarter, which has been a theme for the last two years. How are you thinking about capital allocation from here? Is there any update on the dividend you’d like to give or how aggressive you’d like to be outside of growth initiatives?
Just any other things you’d like to share as an update? Thank you.
Tim Donahue, President and Chief Executive Officer
I mean, obviously it’s something we talk about at every board meeting, and what is the best use of the cash to generate as much shareholder value as we can? I think that goes without saying. The fortunate problem we have is we have a lot of cash. So we’ll again look at, as we get towards the end of the year with the board, what an appropriate dividend level or what we want our dividend policy to be. I think we took a big step at the beginning of this year to bring the dividend up to a level that more appropriately reflects our confidence in our future cash flow generation capabilities.
And from time to time, Chris, we may spend 450 million in capital, we may spend 600 million in capital, but that doesn’t really move the free cash flow around that much from year to year. It’s more about taking advantage of opportunities when they present themselves. And the first thing to do is to service our customers and be present when our customers need us. And from there, all manners of success should follow. So good question, and I apologize for not giving you a more specific answer, but there’s a lot of cash there.
And the main thing is to be — as Kevin said earlier — we’re going to be really disciplined about what we do with the cash.
Chris Parkinson, Analyst at Wolfe Research
Very much appreciated.
OPERATOR
Thank you. Thank you. Our next question is from the line of Mike Roxland of Truist. Your line is open.
Mike Roxland, Analyst at Truist Securities
Yeah. Thank you, Tim, Kevin, Todd, for taking my questions. First one, Tim, just — you mentioned earlier in response to a question that you think North America volumes will probably be up in 2027. What gives you pause? Is it the tougher comps from World Cup, America 250? I mean, what are you thinking when you think about 2027, the volume growth there, that volumes wouldn’t be up and you used the word probably, which implies some caution?
Tim Donahue, President and Chief Executive Officer
Well, I think certainly the World Cup, if the World Cup was worth a few hundred million cans in Q2, if we want to just throw a dart and try to pick a number, you’ve got to try to overcome that. The only thing that will give you a pause if growth slows. I mean, we had a— I think we had a market in Q2. Tom gave me the information the other day. I think we had a market in Q2. We feel like the market was up 3 to 3 or 4% in Q2. Three and a half percent, Tom’s telling me, in Q2, which is a, you know, that’s a pretty strong performance for beverage cans, which is largely a mature market, obviously with some modicum of growth.
Some of that will be World Cup driven. And so you’re always looking at how much growth we’re going to have. If we return to more historical levels of growth, be it 0 to 2 or 0 to 1 versus 2 to 3, then as business moves around and we pick and choose which business we want based on profitability, we could be flatter or up. That’s all we’re saying. No, listen, there’s wins and losses every year. We’ve got some wins, we’ve got some losses, but in total we’re going to be flat up.
No, no, it was a pretty strong quarter. More important than the second quarter is obviously the third quarter, as all the crops come in from harvest. But no, the business is operating really well. About 40% of the business now is pet food, so that’s a very stable business. Cats don’t know if it’s August or January. Right. They eat the same all year round. And on the human side, a really nice mix of fresh pack and other products. So just a really sound business that we’ve taken a lot of great strides and the team has made great efforts and built a really, really good business over the last decade.
Thank you.
OPERATOR
Thank you. Our next question is from the line of Hilary Kakanando of Deutsche Bank. Your line is open.
Hilary Kakanando, Analyst at Deutsche Bank
Hi. Thank you for taking my questions. On the free cash flow guidance, you revised the wording to say at least 900 million versus approximately 900 million last quarter. Is that just due to higher earnings or is there something else driving the upside like working capital or Capex timing or something else?
Kevin Clothier, Senior Vice President and Chief Financial Officer
Hilary, it’s largely just the earnings increase. Working capital—it’s a little early to say where we’re going to be. It’s really the back half of the year that determines where working capital ends up for the year. We haven’t changed any other expectation. Capital is still 550. Working capital is still in use right now, but we’ll fine tune that number as we move through the year. But we feel really good about the cash flow at this point and I think as we look at our capital allocation strategy, you know, we should be able to buy close to, you know, $200 million worth of stock back in the second half.
Hilary Kakanando, Analyst at Deutsche Bank
Oh, great. Yeah, that was going to be my next question. So that’s 200 million. And then just on the food can volumes, I know you said it’s down 3%. You just mentioned that it was strong. Can you just break down between—you said 40% was pet food—but was pet food also down 3? Were they both down 3% or was pet food stronger than the human food, or vice versa?
Tim Donahue, President and Chief Executive Officer
On a year-over-year basis our pet food volumes would have been stronger than human. But on the human side, I don’t think we have any concerns. That’s just a comp issue versus the prior year.
Hilary Kakanando, Analyst at Deutsche Bank
Got it. Great, great. Thank you very much.
Tim Donahue, President and Chief Executive Officer
Thank you.
OPERATOR
Thank you. Our next question is from the line of Arun Veswanathan of RBC Capital Markets. Your line is open.
Arun Veswanathan, Analyst at RBC Capital Markets
Great. Thanks for taking my question. Congrats on the very strong results there. Pleased to see that. It was pretty broad-based as well. So I guess on that issue as you move into the second half, looks like you did take up your guidance by the Q2 beat, but just kind of wanted to get your thoughts as you’re exiting the quarter. What kind of momentum have you maintained in the different regions? Do you see some of those strong volume growth numbers continuing?
Yes, maybe I’ll just start there.
Tim Donahue, President and Chief Executive Officer
So I’ll take the volume and then we’re going to let Kevin talk about what Kevin needs to talk about. As I said earlier, you know, I think North America remains strong, but it’s only July and we’ll see how the consumer deals with ongoing inflation and other higher costs. And obviously even as inflation cools a little bit, the impact on the consumer becomes greater as they drain their bank accounts. So we’ll see how the business holds up in August, September, October, but it feels like it’s still going to be firm.
Certainly July has been very firm. No slowdown yet seen in Europe, but again, we’ll see how the business matriculates into the fourth quarter through the end of the year. And as I said earlier, Asia up double digits in the first half and realistically, we’re only expecting high single digits in the second half. So I’m not going to apologize for high single digits, but it’s a little lower than the first half. And then, Kevin, you want to talk about some costs and some other things.
Kevin Clothier, Senior Vice President and Chief Financial Officer
Yeah. So, yeah, I mean, I think Tim said it earlier. As we look out into the back half of the year, you know, the war in the Middle East is going to cause a little bit of a headwind for us. We look at Brazil, where we had a really, really strong fourth quarter; it’s going to impact us. And, you know, when we look out for the projection and we think about what happened in the second quarter, the one thing we don’t have going forward is the World Cup.
So when we took it all together, you know, we came up with the increase—the low end of the guide by 40 cents and we increased the midpoint by 30. You know, the beat in the second quarter wasn’t much more than that. So maybe there’s a little conservatism in there, but we wanted to kind of balance— we wanted to balance the, you know, give you a balanced perspective for the rest of the year.
Arun Veswanathan, Analyst at RBC Capital Markets
Yep. Okay, thanks for that. And then you mentioned inflation impacts on the consumers. So in our observations, it does appear that the beverage customers, the companies are still continuing to promote and they’re favoring volumes over price in this cycle. I mean, is that a fair characterization? And then do you think that’s still sufficient to overcome tough comps as you move into ’27? Because, you know, that would probably be our last kind of concern here is that you will start facing some tough comps as you move into next year.
Tim Donahue, President and Chief Executive Officer
Well, I’m glad you only have one concern. I’m concerned about 8 million things. But no, as you state, the companies are promoting more. As I said earlier, one of the large retailers has a number of rollbacks across beverage and food products, and that generally bodes well for our volumes. So much of the national grocery runs through that chain. You know, as we said earlier, as we look at conservatism in the back half of the year or even in the next year, as we looked at—somebody asked the question what we expected our volumes to be—how much does the market continue to grow and how much can the consumer continue to absorb?
But, you know, and as we also said earlier, in times when the consumers are stressed, they typically—or they generally in the past—have consumed more at home. And that generally bodes well for canned products. So I think when we take it all in, while perhaps you may think we’re being a little conservative in the second half, it doesn’t mean we’re not still really positive on our business. Thank you.
OPERATOR
Thank you. Our next question is from the line of Josh Spector of UBS. Your line is open.
Josh Spector, Analyst at UBS
Yeah. Hi, good morning. Congrats on a solid quarter. I wanted to follow up on North America and just ask if you have any view around inventories in the system at all. So, I mean, it looks like you guys outperformed the market. I don’t know if you would attribute that just to your mix and say that’s what has kind of gone out. But when we’re looking at the sellout from the retail and distribution channels, it does look like the sell-in was higher. So is that playing any role in maybe your conservatism or thoughts on 3Q, or is that largely normal in your view?
Tim Donahue, President and Chief Executive Officer
Very normal that as we come out of major holidays, be it Memorial Day, July 4, Labor Day, that there’s sometimes a little slack in the retail system. But, you know, it’s not something we’ve forecasted in. No. Thank you.
OPERATOR
Thank you. Our next question is from the line of Jeff Zikauskas of JP Morgan. Your line is open.
Jeff Zikauskas, Analyst at JP Morgan
Thanks very much. You’re planning to expand, build a new facility in India. What’s a capital cost for a plant like that? Is it 250 million or 350 million? You’re new to India. Can you talk about that prospective investment?
Kevin Clothier, Senior Vice President and Chief Financial Officer
Yeah, I get this, Jeff. So a new plant largely costs around $250 million to build. You know, you’re putting two high-speed lines in a plant. The plants that we install really around the world are all built the same way. They have the same format, structure, capabilities, and 250, you know, depending on land costs and construction costs, but you’re largely right around that number.
Jeff Zikauskas, Analyst at JP Morgan
And are the contractual structures the same for India as they would be in Europe or the United States? And is your idea that there would be commitments for almost the entire volume or half the volume? How do you see that?
Tim Donahue, President and Chief Executive Officer
Yeah. So, Jeff, normally when you build a greenfield project, you have commitments for the large majority of the volume. Somewhere like India you might get commitments for 70% or a little bit higher, and then you set yourself up as you make more cans and the market’s growing, you support the growth. I mean, we typically get long-term contracts that anchor the economics of building the plant in India—so we’re building the plant anywhere really around the world.
Jeff Zikauskas, Analyst at JP Morgan
And do you know exactly where you’re building it? Or northern India is a general approach? Or specifically have you found a site?
Tim Donahue, President and Chief Executive Officer
The answer is yes and yes. And we’ve not disclosed that yet because we’re still negotiating land cost.
Jeff Zikauskas, Analyst at JP Morgan
Okay, great. Thank you, thank you.
OPERATOR
Thank you. Our next question is from the line of Edlin Rodriguez of Mizuho. Your line is open.
Edlin Rodriguez, Analyst at Mizuho
Thank you and good morning, everyone. First of all, I want to know, like, what beverage is Kevin drinking at 9 a.m. that comes in a can, and two, again, 2Q was better than your expectation. What was so different from your internal model? For us it’s the Other segment that exceeds performance versus what we were looking at. Just trying to get a better sense of the earnings power of that segment so we do a better job modeling it.
Kevin Clothier, Senior Vice President and Chief Financial Officer
Okay, all right, I’ll answer your first question here in terms of what beverage I’m drinking. Well, one, it’s the middle or beginning of the day, and two, you look at our products that we sell—80% of our products are nonalcoholic. So you could probably assume I’m drinking a nonalcoholic beverage where we’re at today. If you ask me that question, you know, maybe at 5 or 5:30, I’d say it’s probably in the other 20% of our business.
Tim Donahue, President and Chief Executive Officer
Lane, just on the surprise to the second quarter, you know, a little bit for us and certainly for you. As Kevin said earlier, the large majority of the beat in other—maybe at least two-thirds of the beat in other—had to do with our can-making equipment business. And that can be from quarter to quarter a little lumpy, and so it’s sometimes difficult for us to project as well as for you to project. But it’s a business that we recognize as we build and as we ship.
And there is can growth still happening around the world. It’s not all of our can growth. We supply many can companies around the world, including some of our direct competitors here in the United States. As they have projects, we have world-leading equipment for several pieces of the equipment on a beverage can line. The other surprise we would have had would have been in the North—or the Americas beverage segment. I don’t believe we forecasted 5% volume growth.
That was probably a couple percentage points higher than we had forecasted. So that would have been the other surprise for us.
Kevin Clothier, Senior Vice President and Chief Financial Officer
How long is it going to take you to recover those costs in Asia? It’s all around probably an incremental 4 to 5 million dollars from higher costs related to the Middle East crisis that either will subside or we’ll build that into our pricing model for next year. Fortunately, we had enough growth to overcome that and still have positive earnings momentum in the quarter. North America: we had a number of cost increases this year that we knew we wouldn’t fully recover in our pass-through models.
That is PPI not enough to fully capture all the cost increases, as well as the negative mix associated with lower sales in Brazil compared to the other regions in the Americas segment.
Tim Donahue, President and Chief Executive Officer
Thank you.
OPERATOR
Thank you. Our next question is from the line of Ketan Mamtora of BMO Capital Markets. Your line is open.
Ketan Mamtora, Analyst at BMO Capital Markets
Good morning, and thanks for taking my question. Maybe just coming back on capital allocation—you talked about expectations for share repurchases in the back half. Can you talk about how you are thinking about M&A opportunities? What is most interesting, which regions, and sort of just broadly, how are you thinking about that?
Tim Donahue, President and Chief Executive Officer
I would tell you that from an M&A perspective as we sit here today, certainly not contemplating any large M&A—frankly, not contemplating any M&A. Hesitant to say that, because if we buy something for 20 million I don’t want you to get all upset. But no M&A currently being contemplated. The uses of cash will be as Kevin described for the balance of this year. As we go into next year, where we would anticipate, you know, as we sit here today, another $900 million to a billion dollars of free cash flow next year as well, we would anticipate perhaps a refreshed dividend policy, subject to discussions with our board of directors, and beyond investments in our business, continued share repurchases.
Ketan Mamtora, Analyst at BMO Capital Markets
Got it. That’s helpful. And then just coming back to what you mentioned earlier in response to the last question around pass-through of the non-metal cost, is there a way for us to think about sort of rough ballpark order of magnitude—sort of what that amount could be on the non-metal side?
Kevin Clothier, Senior Vice President and Chief Financial Officer
Yeah. So hesitant to want to answer that question only because we don’t like to give away too much of our cost model or pricing model. So I’m going to pass on that.
Ketan Mamtora, Analyst at BMO Capital Markets
That’s fair. Thanks and good luck.
Kevin Clothier, Senior Vice President and Chief Financial Officer
Thank you very much.
OPERATOR
Thank you. At this time, there are no questions on queue.
Tim Donahue, President and Chief Executive Officer
Thank you, Michelle. As that was our last question, we thank you all for joining us and we look forward to speaking with you again in October. Bye now.
OPERATOR
Thank you. And that concludes today’s conference. Thank you all for participating. You may now disconnect.
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