Crown Holdings has announced its financial results for the second quarter ended June 30, 2019.
Image: Crown Holdings has reported second quarter 2019 results. Photo: courtesy of TeroVesalainen from Pixabay.
Net sales in the second quarter were $3,035 million compared to $3,046 million in the second quarter of 2018 reflecting $80 million of unfavorable currency translation offset by increased beverage can volumes.
Income from operations was $383 million in the quarter compared to $292 million in the second quarter of 2018. Segment income was $386 million in the second quarter compared to $389 million in the prior year second quarter.
Commenting on the quarter, Timothy J. Donahue, President and Chief Executive Officer, stated, “Our overall performance during the quarter was generally in line with expectations. Strong results throughout our global beverage can operations offset a disappointing result in our European food can business. Beverage can volume growth was fueled by notable gains in Brazil, Europe and Southeast Asia, as consumers in both emerging and developed markets continue to show a preference for cans over other packaging options. Recently installed beverage can capacity additions, including a third line at the Company’s existing plant in Phnom Penh, Cambodia, a new one line high-speed plant in Parma, Italy, and a new two line high-speed plant in Valencia, Spain, have helped us meet the continuing expansion in demand. In November 2019, we plan to commence operations at a new beverage can facility in Rio Verde, central Brazil.
“To meet volume requirements in our North American beverage can business, we have begun the construction of a third high-speed line at our Nichols, New York facility which will begin production during the second quarter of 2020. Also to support demand growth and targeted for a first quarter 2020 start-up, we will convert an existing two-piece steel food can production line at our Weston, Ontario plant to produce aluminum beverage cans. Both the Nichols and Weston lines will be capable of producing multiple sizes. The underlying demand supporting these projects underscores that beverage cans are the world’s most sustainable and recycled beverage packaging and are increasingly being viewed as the most responsible format.”
Interest expense was $97 million in the second quarter of 2019 compared to $103 million in 2018 primarily due to lower debt levels in the current year.
Net income attributable to Crown Holdings in the second quarter was $137 million compared to $132 million in the second quarter of 2018. Reported diluted earnings per share were $1.02 in the second quarter of 2019 compared to $0.99 in 2018. Adjusted diluted earnings per share were $1.46 compared to $1.55 in 2018.
A reconciliation from net income and diluted earnings per share to adjusted net income and adjusted diluted earnings per share is provided below.
Six Month Results
Net sales for the first six months of 2019 increased to $5,790 million compared to $5,243 million in the first six months of 2018 primarily due to the impact of the Signode acquisition and increased beverage can volumes, partially offset by $180 million of unfavorable currency translation.
Income from operations was $645 million in the first half of 2019 compared to $513 million in the first half of 2018. Segment income in the first half of 2019 increased to $701 million over the $634 million in the prior year period reflecting the Signode acquisition and increased beverage can volumes.
Interest expense was $195 million for the first six months of 2019 compared to $177 million in 2018 primarily due to higher average outstanding debt from borrowings incurred to finance the Signode acquisition.
Net income attributable to Crown Holdings in the first six months of 2019 was $240 million compared to $222 million in the first six months of 2018. Reported diluted earnings per share were $1.78 compared to $1.66 in 2018. Adjusted diluted earnings per share increased to $2.51 over the $2.49 in 2018.
Outlook
The Company currently expects third quarter and full year 2019 adjusted diluted earnings to be in the ranges of $1.50 to $1.60 and $5.05 to $5.20 per share, respectively. The revision compared to the previous full year earnings estimate of $5.20-$5.40 per share is primarily due to lower projected full year results than expected in European Food and Transit Packaging. While the second half of 2019 is expected to be somewhat better than the same period in 2018, European Food will not fully recover shortfalls experienced in the first half. In Transit Packaging, the Company is now expecting that second half performance will trail the prior year based on recent market sentiment.
The adjusted effective income tax rate for the full year of 2019 is expected to be between 25% and 26%, although it may vary from quarter to quarter.
Adjusted free cash flow, as defined below, is currently expected to be approximately $725 million to $750 million for 2019. The revision in cash flow guidance compared to the previous estimate of approximately $775 million is primarily due to the impact of the earnings revision described above, and an increase in capital spending to support expected North American beverage can volume growth in 2020 and beyond. The Company currently expects full year capital spending of approximately $440 million.
Non-GAAP Measures
Segment income, adjusted free cash flow, net leverage ratio, adjusted net income, the adjusted effective tax rate, adjusted diluted earnings per share and adjusted EBITDA are not defined terms under U.S. generally accepted accounting principles (non-GAAP measures). Non-GAAP measures should not be considered in isolation or as a substitute for income from operations, net income, diluted earnings per share, effective tax rates, cash flow or leverage ratio data prepared in accordance with U.S. GAAP and may not be comparable to calculations of similarly titled measures by other companies.
Source: Company Press Release