Crown Holdings' CEO Discusses Q1 2014 Results - Earnings Call Transcript

Apr.17.14 | About: Crown Holdings (CCK)

Crown Holdings, Inc. (NYSE:CCK)

Q1 2014 Earnings Conference Call

April 17, 2014 09:00 AM ET

Executives

John Conway - Chairman and CEO

Tim Donahue - President and COO

Tom Kelly - SVP and CFO

Analyst

Ghansham Panjabi - Robert W. Baird

Debbie Jones - Deutsche Bank

Chris Manuel - Wells Fargo Securities

Adam Josephson - KeyBanc Capital Markets

George Staphos - Bank of America Merrill Lynch

Scott Gaffner - Barclays Capital

Alex Ovshey - Goldman Sachs

Philip Ng - Jefferies

Al Kabili - Macquarie Research

Chip Dillon - Vertical Research Partners

Lars Kjellberg - Credit Suisse

Debbie Jones - Deutsche Bank

Operator

Good morning, and welcome to Crown Holdings First Quarter 2014 Earnings Conference Call. (Operator Instructions) Please be advised that this conference is being recorded. I would now like to turn the call over to Mr. John Conway, Chairman of the Board and Chief Executive Officer. Sir, you may begin.

John Conway

Thank you, Shirley. Good morning, everyone. With me on the call are Tim Donahue, President and Chief Operating Officer; and Tom Kelly, Senior Vice President and Chief Financial Officer. I will make some brief introductory comments regarding the company's performance in the first quarter and then turn it over to Tom Kelly who will take you through the numbers and give you some additional detail; Tim Donahue, who will review carefully the performance of the various businesses and discuss our views about how the business is developing for the year.

Let me remind you 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 the Financial Condition and Results of Operations in Form 10-K for 2013 and in subsequent filings.

We believe that we’re off to a good start in the first quarter and we are optimistic about our prospects for the full year. All of our businesses were performing on or ahead of plan for the quarter, and we anticipate that they will continue to do so. Unit volume sales were particularly strong in beverage cans especially in South American with both Brazil and Columbia performing very well and in Asia, with Both the China and Southeast Asia unit sales up substantially.

Our food businesses are generally in line with the plan for quarter. We expect European food to gain momentum as the seasonal customers begin to grow from us heavily and cost reduction programs contribute more fully. New plants around the world continue to improve their operations as relatively new work forces gain further experience. As we mentioned in the release, our new beverage can factory in Northern Brazil in the City of Teresina began production this month and we anticipate as the year progresses it will come up learning curve and make a significant contribution in the months and years ahead. Our new food can plant in Turkey began production earlier in the quarter.

As you know all European Union approvals required for us to purchase Mivisa, the leading Spanish food can company have been obtained and plan to close the transaction on April 23rd. we look forward to the addition of this fine company to the Crown organization. This is a tremendous opportunity for us and we could not be more pleased with the outcome. Plans for the combination and integration of Mivisa with our food business in Europe are prepared and ready to be implemented and we will be moving forward with this process as soon as we close next Wednesday.

With that I’ll turn it over to Tom Kelly.

Tom Kelly

Thank you, John and good morning everyone. Diluted earnings per share for the first quarter were $0.17 versus $0.28 in 2013. Diluted earnings per share on a comparable basis were $0.57 compared to $0.50 in 2013. Net sales for the quarter were up about 1% due to higher global beverage can volumes, partially offset by lower food can volumes. As explained in the release cost of products sold for the quarter included a pretax charge of $7 million to recognize the impact of hedging effectiveness on our outstanding aluminum contracts as required by the accounting rules.

This is a timing issue only with no net economic impact. The charge will be included in segment income and comparable earnings in the future period when it will recovered from our customers through higher selling prices. For the second quarter excluding any impact from Mivisa we expect comparable diluted earnings per share of between $0.90 and $1 per share. We will give additional detail on our second quarter call but including the impact of Mivisa and removing the impact of share repurchases we currently expect our full year comparable diluted earnings per share will be somewhat better than our previous guidance of $3.15 to $3.35.

Tim will now take you through the operations.

Tim Donahue

Thanks Tom and good morning to everyone. As John and Tom both described we had a solid start to the year. Demand continues to be strong particularly in beverage cans which we expect will continue. American’s beverage volumes were up 3% compared to the last year as double digit increases in both Brazil and Columbia offset a 2.5% decline in North America. Our new plant in Teresina will begin commercial shipments by the end of the month and the capacity is much needed as Brazil remains exceptionally strong to-date in April ahead of the World Cup which begins in June.

The strength in Brazil is being driven by beer and in the month of March beer packed in cans surpassed returnable glass. It’s too early to tell whether this shift in pack mix will continue post World Cup but a good sign nonetheless. In North American food, the revenue decline was entirely attributable to the secession of shipments to a customer which declared bankruptcy in the fourth quarter of 2013. Productivity improvements and tight cost controls improved margins despite the lost revenue and volume. Unit volume sales in European beverage increased 1.5% in the first quarter as strong performances in the UK, Greece and Spain offset softness in Jordon and Saudi Arabia.

European food volumes were down 2.5% in the quarter as the year got off to a slow start. Encouragingly however the month of March was up 3% and we remain confident on the outlook for the balance of the year. In contrast in North America the winter in Europe was somewhat mild so we are expecting a good seasonal crop planting followed by a good harvest this year. With far less frost this spring planting has already begun in Continental Europe well ahead of last year. As for Mivisa we are set to close next week and begin the integration process immediately. We are truly excited to have the opportunity to expand our food can presence in Spain and across Europe and Africa with great assets and a low cost platform which will allow us to deliver benefits to both our customers and shareholders.

Unit volume sales in Asia Pacific beverage were up double digits with growth noted across all regions. The contribution from the additional volume was offset by price compression mainly in China and translation of the Chinese RMB and Thai baht. The markets we compete in across Asia Pacific are large and rapidly emerging and as expected are quite competitive. While there may be volatility from time to time we believe we are exceptionally well positioned to continue to grow as Asian consumers earn more and spend more on consumer goods. So to summarize we’re off to a good start in 2014. The first quarter is a seasonally small quarter but demand for our products remains firm. As Tom noted, we will update you on our expectations for Mivisa in July once we have completed the necessary acquisition accounting and appraisals.

And with that I’ll turn it back over to John.

John Conway

Thanks Tim. Shirley I think we’re ready now for questions.

Question-and-Answer Session

Operator

Thank you. At this time, we’re ready to begin the question and answer session. (Operator Instructions) Our first question comes from Ghansham Panjabi with Baird. You may ask your question.

Ghansham Panjabi - Robert W. Baird

First off, can you just give us a rundown of beverage can volumes by region across the world, if you don't mind?

John Conway

By region, okay, that’s somewhere probably for you, Ghansham. So, in the Americas as we said up 3% and that’s down, as I said, 2.5% in North America, Brazil and Columbia both up a little more than 20%.

Ghansham Panjabi - Robert W. Baird

And this is for the industry or for Crown specifically?

John Conway

This is Crown.

Tom Kelly

This is Crown Ghansham, are you looking for industry data?

Ghansham Panjabi - Robert W. Baird

Yes, I was looking for the industry.

John Conway

I’m sorry.

Tom Kelly

I am sorry I don’t think we have…

John Conway

The only industry data we have is CMI for this.

Tom Kelly

Yes we don’t have Brazil and Columbia Ghansham we’ve got the U.S. and you have that.

Ghansham Panjabi - Robert W. Baird

Yes, okay. And in terms of -- your commentary on the Asia Pac beverage can business in terms of pricing, is that worse in China than it has been, or is that something you're just kind of cycling through from the last couple of quarters -- a few quarters I should say?

John Conway

I think there was as you know there is a lot of capacity in China and there was as we got into the 2014 contract season and pricing there was some a little bit of pressure in Q4 but it’s stabilized at this point.

Tom Kelly

Ghansham it’s not worse it’s exactly what we’ve been talking about in the previous calls.

Ghansham Panjabi - Robert W. Baird

Okay. So in terms of this particular segment, on a year-over-year basis, I would kind of look at fiscal year 2014 versus 2013, is it fair to model margin expansion, just given the volume growth that you're seeing there?

John Conway

You mean in the balance of the year? We think that margins will improve somewhat in the balance of the year in Asia over the balance of the year.

Ghansham Panjabi - Robert W. Baird

Okay. And then just one question for Tom. Tom, the hedge ineffectiveness, is that formulaic in terms of the recovery and over what timeframe is that?

Tom Kelly

It will be recovered over the life of the hedges which is generally about a year and yes we do the calculation every quarter and you have do items role in and old items role off so it’s kind of hard to predict exactly how the seven will go up.

Operator

This question comes from Debbie Jones with Deutsche Bank. You may ask your question.

Debbie Jones - Deutsche Bank

I was wondering -- I know you're not providing Mivisa guidance but can you just talk about or comment about your expectations for cash deployment and share repurchases and CapEx over the next 6 to 18 months as you deleverage?

John Conway

Yes sure Debbie, Tom, be happy to do that.

Tom Kelly

Yes, Debbie we do not plan to do any share repurchases in 2014 with the eminent closing of Mivisa and as far as CapEx we’re probably looking about 275 million to 300 million for the year.

John Conway

And free cash...

Tom Kelly

Free cash flow we previously said 450 I think we could do at least 500 with Mivisa but we need to get in and see the opening balance sheet.

Debbie Jones - Deutsche Bank

Okay. And now the 500 that’s on just through 2014 or is that just on annualized basis?

Tom Kelly

For the year of 2014.

Debbie Jones - Deutsche Bank

Okay, great. Thanks. And just last question then. Could you just -- you made some comments about Jordan and Saudi Arabia being a bit soft. What are you guys seeing in the Middle East region right now? And is this something that's going across the industry or is this something specific to Crown's locations?

John Conway

No, I think it’s generalized. Jordon tended to be more political this is borders are open or not and improved frankly in March so we’re hopeful. Saudi Arabia there is a little bit of a transition underway associated with the Saudis attempting to ensure that more Saudis are employed and therefore they are not renewing work leases as they have in the past. So we’re seeing a little bit of decline in consumer spending associated with that, but this is not unique to Crown, it’s to everyone through the region.

Operator

Thank you. The next question comes from Chris Manuel with Wells Fargo. You may ask your question.

Chris Manuel - Wells Fargo Securities

Congratulations on a strong quarter. I think you mentioned earlier about a new food can plant starting in Turkey. Could you give us maybe a little color there as to how big of a plant is it, what your expectations are, et cetera?

Tom Kelly

It’s in fact just a little bit south of Istanbul across the sea there in a region called Bursa. So not too far from Istanbul, it will be used for a variety of consumer end market oil, vegetables. It is a factory that we bought that was essentially marked from a company that was in bankruptcy and we’ve retooled the factory and started it up. So I think our expectations are that we’ll continue to grow the revenues and as the customers are receiving quite well another competitor in the market that brings high quality products and actually servicing and proper delivery as oppose to a market where they have been served by essentially a monopoly position with not very good service.

We’re pretty we’re looking forward to it, you want to think about annualized revenues once we get the plant fully in operations I think about $50 million.

Chris Manuel - Wells Fargo Securities

Perfect. That's helpful. And then just a couple other quick ones, one, aluminum premiums continue to escalate and I know that impacts you mostly in Europe. You know there's been further -- the April 1 piece didn't go through, but there's been another judgment down as to how they want to handle things. What are your thoughts over the balance of the year there? Or is it how you handle that? Can you recover some of it or what have you?

John Conway

Chris, we haven’t changed much in terms of our forecast of what it would mean for us. I think we told you Europe EUR5 million to EUR6 million if it didn’t turn down. And there is going to be a little bit in Brazil if it doesn’t turn down. Having said all of that we took that all into account when Tom gave you guidance for the year. So we think that we’ve got it covered but it’s a headwind in the beverage business in terms of margins and income.

Chris Manuel - Wells Fargo Securities

Okay, so just one last quick one, at least the numbers I'm looking at, I had EUR133 million of EBITDA from Mivisa. I think that was a 2012 number. As you're sitting here I guess almost ready to close, what or maybe you can give us 2013 numbers or however you want to look at it. Just help us with the rough split so we understand the split between EBIT, EBITDA.

Tom Kelly

For Mivisa?

Chris Manuel - Wells Fargo Securities

The historical one, or however you want to -- so we can think about it for forecasting purposes.

John Conway

I will give you what we’re using and please keep in mind we are not fully in there, because they are a competitor we have been very, very proper if you will to be sure that we were keeping the proper distance from them. So with all those caveats Tom has what we’re using for planning purposes.

Tom Kelly

Chris EBITDA was historically about EUR113 million, the depreciation would be, but that’s before any divestiture of any plants that we needed to divest this part of the deal. As far as the depreciation that is embedded in there, I think obviously to have their historical depreciation and we need to go through our process we would expect to get that done and report it in the second quarter, I’d be guessing right now if I tried to give you depreciation number.

Operator

Thank you. Our next question comes from Adam Josephson with KeyBanc. You may ask your question.

Adam Josephson - KeyBanc Capital Markets

Just a couple ones -- Tom I might've missed this but excluding Mivisa, how would your full-year guidance have changed post-1Q?

Tom Kelly

There has been no material change in the business, so I would not have expected any changes or really a product of Mivisa and the share repurchase.

Adam Josephson - KeyBanc Capital Markets

Got it, no, that's helpful. In terms of beer production in Brazil, obviously, it surged in February and March. This is total beer, not cans versus bottles. What are you expecting along those lines in terms of beer production over the course of the year? And I guess how much of the surge that we saw in the first quarter would you attribute to the hot weather versus the timing of Carnival versus perhaps an inventory buildup in anticipation of the World's Cup?

Tom Kelly

Well I think the market continues to grow, the Brazilian economy the consumer economy in Brazil they are still spending money and are spending more money and they do like to enjoy themselves and reward themselves for their hard work, so one of the ways they do that is by celebration and consuming beer. So you’ve got a natural growth already combined with a noticeable pack mix shift. So if we were to go back a few years beer was 38% in cans, last year I think we were 42% to 43%. I think for the first quarter this year we’re 46% but in the month of March we’re about 48.5%.

So there is a pack mix shift happening that’s favorable to cans and then obviously as we have all described to you that we do believe that not only do we benefit from the strong summer of September through March but we are benefiting from the so called second summer leading up to the World Cup. And there has been heavy packing ahead of the World Cup and I think the big beer brands and the distributors realized the benefits of the can. If you were to look at a map at where all the World Cup stadiums are across Brazil, you will see there in some far flunk places and the can works very well in terms of transport to get there as oppose to returnable glass.

Adam Josephson - KeyBanc Capital Markets

Tim, that's really helpful. And just one more on European food. I know you talked about volume being down 2.5% in the quarter. It was up 3% in March. Now, what kind of improvement are you anticipating over the balance of the year? And are you assuming EBIT growth ex-Mivisa in the latter three quarters?

Tim Donahue

So, excluding Mivisa, we are expecting a fairly full pack this year and EBIT growth year-on-year. There has been a slight shift in our business in which as you know pet food packed in cans has declined for several years and we have made a conscious decision to try to reposition our business to some of the more seasonal fruit and vegetables which we are doing as well. So they are obviously being more seasonal. They are packed in the summer months and the more consistently packed products like pet food which are declining or not being packed as often and we are not selling cans as we used to in the lower months of the Q4 and Q1. So, that is one of the reasons why Q1 will be lower than in prior years but excluding Mivisa, we are expecting improvement in European food.

Operator

Thanks. Your next question comes from George Staphos with Bank of America Merrill Lynch. You may ask your question.

George Staphos - Bank of America Merrill Lynch

Hi, everyone. Good morning. Congratulations on the start to the year. Maybe segwaying on the discussion on Brazil, what and part upon what concern might you have for a hangover in Brazilian volumes post World Cup because obviously you are not going to be saying I don’t think this kind of year-on-year growth in the can going forward and how does that affect at all what your capital allocation plans might be in Brazil over the next two, three years?

John Conway

George, I don’t know if it’s true to say that we are not going to see the continued growth in the can over the next several years. I think we have been forecasting, we have been talking to our customers. They have been telling us that they understand the benefits of the can and the supply chain. They have been right and we benefited, so I think we are going to continue to see growth in the can as we go forward. Certainly there may be a hangover in July, August, September but we get into September, October, December we get back into the season. We are fully expecting for beer production and can beer to continue to grow year-on-year.

George Staphos - Bank of America Merrill Lynch

Okay, fair enough. And do you see the need to add capacity in Brazil at this juncture, post-World Cup into 2015 and 2016? Or do you think Teresina will help allow you to supply into the growth that you see the next two years there?

John Conway

Well George, we are always looking at all of the markets and talking a look one of the phenomenon in Brazil of course is that package types in the can are diverging as it has in North America and Europe, seeing more specialty cans and so forth. So, we are very conscious of all that and we are following it closely. There could be an opportunity for us to do something with capacity and we are looking at it all the time.

George Staphos - Bank of America Merrill Lynch

Fair enough. To European food, what effect do you think if at all did you have in your operations in facilities that may have obviously considered themselves potential divestiture candidates as part of the Mivisa deal? In other words were there any distractions in your own existing operation because of Mivisa? And do you think that was one of the factors in terms of the EBIT progression 1Q versus 1Q?

John Conway

No, it wasn’t, I mean as you know George, we are in the process of selling our Crown Spain food business. It’s an operating entity and doesn’t involve any job losses and so forth, so the factory has performed well, the people performed well and that’s not part of the explanation.

George Staphos - Bank of America Merrill Lynch

Okay. I appreciate that, John. Two last ones and I'll turn it over, again to European food and Mivisa, can you update us on where you stand in terms of identifying the purchaser of the plants to be divested? Do you have a figure for us in terms of what the divested profitability might be? And who in fact is going to be running the divested operations?

John Conway

George that’s still confidential. We do have a signed agreement with a strong buyer from outside the region but they are in the process and or they are in the process, will be in process very shortly of obtaining the necessary Spanish approvals for the acquisition which we don’t think are going to be a problem at all. And we will be doing that in due course once the transaction proceeds further.

George Staphos - Bank of America Merrill Lynch

Okay, thank you. Last one, the ineffective hedge cost, I may be mistaken here and please correct me if that’s the case. I don’t remember hearing discussion from the company around this as a non-operating item in the past. I presume you have had hedges in the past. So what is unique about this situation? And explain again why ultimately this timing issue will be resolved through pricing and why we shouldn’t extract from earnings these hedged costs? Thanks guys. And good luck in the quarter.

John Conway

Yes, George. It’s really a size issues, we have had in the past is cause by the volatility in metal premiums, but you know you’re talking about one or two. Now that it is larger number seven if a little more meaningful. And as far as whether you, backed it out or add effect or whatever, you - it’s really just a timing issues, we’re taking a charge in advanced of passing through that extra cost to our customers in a form of a higher selling price. So if we don’t backed it our what’s going to happen is we’re going to hit our profit in this quarter and then have outside profits in a later quarter when we pass through the price having already recognized the cost. So we’re really just trying to match the timing and give pure numbers of other results of the operations.

George Staphos - Bank of America Merrill Lynch

Okay. And you’ll call out the benefit that you get later on so we can do that as well?

John Conway

Definitely.

Operator

Thanks. Your next question comes from Scott Gaffner with Barclays Capital. You may ask your question.

Scott Gaffner - Barclays Capital

Just had a couple of quick follow-ups. First on Asia-Pacific when we -- particularly China when we look at the price compression this year, can you kind of give an order of magnitude what the price compression looks like this year versus last year?

John Conway

Well, I think in the first quarter its a few million dollars, call it $3, $4 million, do I have a number for the full year for you right now? I do not.

Scott Gaffner - Barclays Capital

Okay. Was it like 3% lower price this year versus 5% last year, how do that sort of compare?

Tim Donahue

Well, I don’t have the number for last year, but I would say on average 4%.

Scott Gaffner - Barclays Capital

Okay. And then if we go back to European food for a minute, you talked about some of the positive changes and the trend through March. Have you seen that carry through into April? And then also any improvement so far on the mix side as well? I think that was an issue last year. Have you seen that sort of start to correct a little bit?

John Conway

So April, the trends that we saw on March continue in April in European food. So that’s positive and I think we’re, as we said we’re looking forward to a good season. I would say that the mix shift that we experience last year has remained about the same, so it hasn’t got any worse, hasn’t got any better.

Scott Gaffner - Barclays Capital

And just on that mix shift, is it -- do you think we need a significant improvement in the underlying economies in order to see that mix improve? Is that how we should think about the mix shift? Or is there something else going on?

John Conway

Well, I think as Tim said earlier with the move that we’ve made more heavily into season cans, which typically some of the larger cans for vegetables and fruits. To that extend we’re seeing a mix improvement year-on-year. And we don’t think there needs to be an economic resurgent to see the food can business improved this year. And as Tim said earlier that we are anticipating and we know from our customers that the plantings that they have come shoot in Europe are greater than they have been in the past several years. So all of those things support the proposition in our minds that the food business is going to gain momentum as the year moves on.

Scott Gaffner - Barclays Capital

Okay. And just lastly on the charges you backed out in regards to the labor disputes. Is there any thoughts that maybe there will be some resolution there in the near term? Or is that something that's likely to carry on for a while, you think?

John Conway

We, it’s an unfortunate situation we have over 150 plants in the world, where we have that’s one factory where we have had some difficulties with the labor force. At this time we are in the process of fully staffing the plant, we’ve been running at about 50% capacity but we anticipate that by the end of June, we will be fully staffed and effective first week in July; that we’re going to be running at full capacity. So we’re working our way through it and that’s about the timeframe at which we’re going to be back into full operations in first week in July.

Operator

Thank you. Next question comes from Alex Ovshey with Goldman Sachs. You may ask your question.

Alex Ovshey - Goldman Sachs

Can you give us the volume detail by sub segment, for each of your businesses?

Tim Donahue

Sure. So I think what we started off earlier, America’s beverage up 3% which as we said Brazil and Columbia both up around 20% and North America down 2.5%. European beverage up about 1.5% which is in Continental Europe that’s up about 5.5% in the Middle East down about 4.5%. Asia up just about 20% and basically equal between China and South East Asia, both of those up about 20%. Food cans, as we’ve said European food cans down about 2.5% and North America, well the America is down about 6.5% all of that due to no shipments to their customers to declare bankruptcy last year. There is oil cans, but I don’t have the regional breakout but for the total company down about 2%.

Alex Ovshey - Goldman Sachs

Got you. Very helpful, Tim. And then in Europe bev, Western Europe, the 5.5%, how much of that do you think was the benefit of the milder winter? And what is the expectation for the full year for volumes in that sub segment?

John Conway

I wouldn’t describe much of it to a milder winter, I think what we’re seeing is an economic resurgence in Spain, Italy across the Mediterranean and we were particularly strong in Spain, Greece and the shipments we make into Italy. So I think lot more that has to do with economic recovery in that region and I think for the balance of the year we expect shipments to remain firm in Continental Europe.

Alex Ovshey - Goldman Sachs

Got it. And then in North America food, I think on previous calls we talked about the potential for some pricing compression in 2014. Have you been able to quantify what that number will be in that segment of North America food and can you talk to that?

John Conway

I don’t think we’re going to quantify a number, there will be some impact from our efforts to ensure that we have a business that long-term is a business that we like and we continue to operate and we run our plants full and we keep our cost lower. And so certainly there will be an impact this year but it’s not a number I wish to quantify.

Alex Ovshey - Goldman Sachs

Got it. And just last question, just looking at the minorities’ expense number, it was down materially year over year. Can you just talk about the driver there? And then I think you repurchased some more minorities through the quarter; and sort of what's your expectation for the full year 2014 for that line item?

John Conway

We successfully purchased in the first quarter the remaining minority interest in Crown Tunisia Beverage operation and in Crown Jordan. So we were happy to achieve that, and we now own 100% of all our operations in the Middle East with the exception of Saudi Arabia. So that was a positive, we’re really pleased to be able to get that done and Tom can comment perhaps on the balance of the question.

Tom Kelly

As far as what the number is going to be for the year probably in the low 80s is where we’re going to end up. That was already contemplated in our guidance, we were working on the transaction before.

Operator

Thank you. Our next question comes from Phil Ng with Jefferies. You may ask your question.

Philip Ng - Jefferies

You commented on the food pack in Europe looking pretty strong. What about North America? I know there's a drought on the West Coast. Can you give us some color on that front?

John Conway

Phil if you will recall we’re not on the West Coast except in fish, so it doesn’t affect us and we’re really not paying a lot of attention to it, so sorry.

Philip Ng - Jefferies

What about just the pack overall for the full year?

John Conway

It looks pretty good, from what our customers are telling us the mid-west down through the center of the country in Southeast, Pennsylvania looks pretty good.

Philip Ng - Jefferies

Okay, that's helpful. And then you commented on Europe recovering and you are obviously seeing it on the bev can side, which has been pretty strong. What about your non-bev can business, like your specialty can business, and I guess generally speaking food cans, you sound a little more constructive. Are you seeing a little more momentum on the economic recovery in Europe?

John Conway

I think in aerosol can the answer is yes, and coupled with a notable cost reduction programs that we put in place in aerosol, we’re quite positive on that. On specialty cans I think the business is still a bit impacted by the economy and that recovery is a little bit slower.

Philip Ng - Jefferies

Got you. And then just one last question on Europe food. One of your competitors commented that they are seeing better pricing dynamics in that business. Are you seeing any blips on that front as well?

John Conway

Well I think in the sense that price erosion has stopped I think that’s probably true. And then we put that together with cost reductions and of course what we’re seeing now is a tremendous opportunity for Crown with cost reductions associated with the acquisition of Mivisa. We’re getting mildly bullish on our food business in Europe.

Operator

Thank you. Our next question comes from Al Kabili with Macquarie. You may ask your question.

Al Kabili - Macquarie Research

Hey, Tim, I wanted to just clarify the comments you made on Europe food with the expected earnings to be up this year. If you add back, if we add back last year's $21 million or so from bad debt, would you also see earnings up year on year in Europe food adjusted for the bad debt?

Tim Donahue

Yes.

Al Kabili - Macquarie Research

Okay. All right, that's good. And also, from a share perspective, how are you feeling your share is trending in the business?

John Conway

In Europe?

Al Kabili - Macquarie Research

Yeah, in Europe food.

John Conway

I think excluding Mivisa I’d say our share has been stable; obviously post Mivisa our share will grow accordingly with the acquisition minus the small divestiture that we have to make to comply with the commission. And we’ll see where it takes us in the future.

Al Kabili - Macquarie Research

Okay. And then on the Europe bev, the earnings growth year on year, you saw some pretty good earnings growth year on year in Europe bev. Do you see that as -- that level of margin expansion or EBIT growth as sustainable throughout the year, number one? And corollary to that is, were you seeing the full impact from the headwind and the rise in metal premiums -- were you seeing that kind of full impact in the first quarter? Is that going to be lagged a bit and we'll start to see more of that coming up here in the second quarter?

John Conway

Let me answer the question in two parts, excluding the impact of premiums I would say that the improvement you saw on Q1, we do believe would be sustainable coming from a combination of improved volumes and manufacturing performance across all of our plants. And we have done a lot of work not only in the factories but with some people that are responsible for overseeing the manufacturing performance of the factories and we are seeing immediate improvement and you do see that. Some of that will be offset as we move through the year because of the premiums and because of the recent High Court ruling that Chris mentioned earlier where we are not going to see the decline begin as soon as we have hoped with the premium.

Al Kabili - Macquarie Research

Okay, fair enough. And along those lines, is there any kind of updated estimate you can give us for the headwind at current levels?

Tom Kelly

So, we previously said about EUR5 million to EUR6 million. At current levels, we are probably about double that if you look for the whole year.

John Conway

But it’s in the guidance.

Tom Kelly

But it’s in the guidance.

Al Kabili - Macquarie Research

Okay. It's in the guidance. And very little of that EUR10 million to EUR12 million, you would've seen in the first quarter. Is that fair?

Tom Kelly

That’s correct.

Al Kabili - Macquarie Research

Okay, all right, that's helpful. All right. And then the last question I had would be on the North America food business. And how are you feeling about 2015 at this juncture? Do we have still some meaningful contracts that need to get done in the business in 2015? Or are we feeling at this juncture that we've got pretty good visibility there and that's also wrapped up at this point?

John Conway

I think the food team here has done a very good job and excluding the one large customer issue that you become well aware of last year where they have decided to go to a new supplier, there’s probably a little risk in 2015.

Al Kabili - Macquarie Research

Okay, great. And then final question is just, did I hear it right? So on the guidance you were saying, the $3.15 to $3.35, it would be somewhat better than that with Mivisa? Did I hear that correct or were you thinking -- were you saying that was excluding Mivisa?

Tom Kelly

That’s correct with Mivisa but removing the impact of the assumed share buybacks which are no longer going to happen.

Al Kabili - Macquarie Research

Okay. And I guess I would have thought that there would be maybe a little more accretion from Mivisa. Is that just a big step up in D&A that we are thinking because I think the share repurchase would be about $0.10 accretive, and so if I just kind of back into that, that would suggest roughly $0.10 of accretion with Mivisa with a late April close. And is that the right way to think about it? Or how -- what are kind of the moving parts in that analysis?

John Conway

I think that’s the right way to think about it. Keep in mind Tom said that we thought that the guidance will be somewhat improved, somewhat.

Operator

And your next question comes from Chip Dillon with Vertical Research Partners. You may ask your question.

Chip Dillon - Vertical Research Partners

First question, I noticed that you spent $90-something million I think buying in some of your minority interest partners' interest. Could you talk a little bit about where that was? And just looking at the balance sheet, you could kind of guess I suppose that you paid about 2 times book value for that. So could you elaborate on that?

John Conway

Chip, we mentioned earlier in the call that was the purchase from our partners in Tunisia and Jordan of in each case 40% minority interest and that’s what the amount was. And looking at it from the perspective of multiples of EBITDA earnings and so forth we think the prices were quite good and appropriate given the countries that we are in.

Chip Dillon - Vertical Research Partners

Hello.

John Conway

Hello.

Chip Dillon - Vertical Research Partners

Oh did we lose you? I'm sorry. I think we lost you. You were saying, if you could just repeat that again?

John Conway

I am sorry. We purchased the minority interest in Tunisia and in Jordan that’s what account for the two acquisitions and the price in terms of multiples of EBITDA earnings and so forth we thought was very reasonable.

Chip Dillon - Vertical Research Partners

Got you. And do you now own all of those two particular businesses?

John Conway

Yes, we do.

Chip Dillon - Vertical Research Partners

Got you. Okay. And then second question is, on the CapEx guidance, it doesn't sound any different from before. And I just want to clarify, that does include the impact of whatever Mivisa spending is this year?

Tom Kelly

I think 275 to 300 is the core and Mivisa I think we said before that their run rate was about EUR10 million.

Chip Dillon - Vertical Research Partners

Got you. For a year, got you. Okay. And then the last question is, just real quickly on the second-quarter guidance, I didn't catch. Does the $0.90 to $1.00 include Mivisa for the 7 or 9 weeks, whatever you own it, or does it not?

Tom Kelly

Technically no but there is not that much of an impact because it is just a couple of months and we didn’t have the share buybacks contemplated in the second quarter anyway. So, the number wouldn’t be that different on to either scenario.

Chip Dillon - Vertical Research Partners

Got you. And last question is looking at -- you know obviously your priority to reduce the debt that you are incurring from the deal, would you think you could be in a position before the end of 2015 to repurchase shares, especially as the working capital cascades or the cash comes in late in the year?

John Conway

I think it’s unlikely at this point and so no, I don’t think so.

Chip Dillon - Vertical Research Partners

So, but 2016, we probably could see something.

John Conway

Yes.

Operator

Thank you. Next question comes from Lars Kjellberg with Credit Suisse. You may ask your question.

Lars Kjellberg - Credit Suisse

Just a couple of follow-ups. If you can bring us up-to-date on the finance cost for the Mivisa incremental debt. And also I want to come back to Europe for two seconds. You talk about the natural premium and generally commentary in the past has been that we can't really pass this on in price in Europe. But volumes are very strong and utilization rates are very high. Can you give us any flavor on what you're seeing in the pricing environment in beverage cans in Europe?

Tom Kelly

On the Mivisa there Lars, it’s all floating rate there at this point, so we’re probably look at about 225, 200 quarter. So 255 all in, I think, Tim you’ll talk about premiums and then pass through to John.

Tim Donahue

Yeah. Just quickly, I think as you know the convention in Europe is that the regional premium are not part of formula price for beverage cans. And that is something that could change in the further you’re right, supply demand is quite tight we’re not planning for any change this year.

Lars Kjellberg - Credit Suisse

Okay. So in that very strong margin in Europe you had, there was no pricing element?

Tim Donahue

I am sorry.

Lars Kjellberg - Credit Suisse

In that strong margin improvement in Q1 there was no pricing element in that?

Tim Donahue

There was little of the premium that’s what you’re referring to, we’re saying that’s its going to hit in the last nine months, yeah, that’s right.

Lars Kjellberg - Credit Suisse

No, sorry, no. What I mean is you did not have any account pricing in there. If it’s not price and there’s mostly on volume and cost, that margin improvement?

Tim Donahue

That’s correct.

Lars Kjellberg - Credit Suisse

Okay. Can you also clarify if there was any incremental cost in North America on account of the bad weather, logistics, energy, et cetera, that we should see reversing in April quarter -- in the June quarter?

Tim Donahue

I think we, as we look at our platform in North America we have about 17 or 18 plants in the upper Midwest and we did have a little bit of weather impact, deliveries impacted by weather in January. But largely across food narrow we saw we made up for that in late February and March. So I would say in our first quarter very little impact from the weather.

John Conway

And March. So I would say in our first quarter very little impact from the weather.

Lars Kjellberg - Credit Suisse

Okay. Final question. Can you comment a bit about the working capital outflow in Q1, which seems quite strong? What is behind that?

John Conway

Yeah. The number is not all that unusual compare to our historical, it’s a little bit higher than last year but don’t forget there’s interest in differed taxes in that number as well. So the working capital number itself is in all that different and to the extend it is, we have put in, we do have a growing business and some plant coming online and you have to build working capital there.

Operator

Thank you. And our final question comes from Debbie Jones with Deutsche Bank. You may ask your question.

Debbie Jones - Deutsche Bank

Just one last question, I just wanted to talk a bit about North America. I know you said you're generally running full in bev cans, but the decline in beverages doesn't seem to be dissipating, at least on the nonalcoholic side. And I'm just wondering if you envision a scenario down the line where more capacity needs to come out of North America or just kind of how you think the industry should approach this? Do you see more investment in specialty can packaging to kind of make the format more attractive? Or do you think there is going to need to be more of a reduction in the standard sizes?

Tom Kelly

Well, I think the, to answered all what you said is, yes, and I think you’re going to continue to see more investment certainly by Crown and perhaps by the others in specialty can sizes as we go forward, depending on the marketing of carbonated soft drinks, we could continue to see the standard 12-ounce can continue to decline. So as we convert standard 12-ounce lines to specialty lines that may take some of the capacity up because we run those a different speed but it could be necessary that the industry in total needs to take capacity out in the future, we’ll just have to see how it goes. We are as John said, we have been running full for the last several years. And, so we don’t see an immediate need to take capacity out in our system. But we’ll continue to reevaluate that over the next several years.

John Conway

Thanks Debbie. Okay. Surely I think that concludes the call and we thank you all a very much for your kind attention.

Operator

Thank you. This does conclude today’s conference. We thank you for your participation. At this time you may disconnect your lines.

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