Crown Holdings, Inc. (NYSE: CCK) today announced its financial results for the second quarter ended June 30, 2020.
Second Quarter Results
- Earnings per share $0.94; adjusted earnings per share $1.33
- Beverage can projects on schedule
- Additional North American capacity announced
- Solid food can demand
Net sales in the second quarter were $2,689 million compared to $3,035 million in the second quarter of 2019, primarily reflecting the impact of the coronavirus pandemic on sales unit volumes, the pass through of lower material costs and $73 million of unfavorable currency translation.
Income from operations was $275 million in the quarter compared to $383 million in the second quarter of 2019. Segment income was $322 million in the second quarter compared to $386 million in the prior year second quarter primarily due to lower sales unit volumes, pandemic-related inefficiencies and $11 million of unfavorable currency translation.
Commenting on the quarter, Timothy J. Donahue, President and Chief Executive Officer, stated, “The Company’s overall performance during the second quarter was solid in the face of the ongoing global coronavirus pandemic. Our global food can businesses recorded strong shipments in both Europe and North America. Although global beverage can shipments decreased 5% during the quarter, North America was propelled by double-digit gains. Disappointing results in European Beverage stemmed from soft volumes, particularly in southern Europe, where a steep drop in tourism due to the pandemic significantly curtailed on-premise consumption. The global slowdown in manufacturing activity in several end markets adversely impacted results in Transit Packaging.
Interest expense was $76 million in the second quarter of 2020 compared to $97 million in 2019 primarily due to a combination of lower outstanding debt and lower interest rates.
Net income attributable to Crown Holdings in the second quarter was $126 million compared to $137 million in the second quarter of 2019. Reported diluted earnings per share were $0.94 in the second quarter of 2020 compared to $1.02 in 2019. Adjusted diluted earnings per share were $1.33 compared to $1.46 in 2019.
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 2020 were $5,446 million compared to $5,790 million in the first six months of 2019, primarily due to the impact of the coronavirus pandemic on sales unit volumes, the pass through of lower material costs and $113 million of unfavorable currency translation.
Income from operations was $521 million in the first half of 2020 compared to $645 million in the first half of 2019. Segment income in the first half of 2020 was $620 million versus $701 million in the prior year period. In addition to the impact of the coronavirus pandemic on the Company’s operations, the results for the European Food and the nonreportable segments included unfavorable impacts of $18 million and $16 million, respectively, in the first quarter of 2020 versus 2019 arising from the carryover of tinplate costs from the prior year end inventory.
Interest expense was $156 million for the first six months of 2020 compared to $195 million in 2019 primarily due to lower outstanding debt and lower interest rates.
Net income attributable to Crown Holdings in the first six months of 2020 was $214 million compared to $240 million in the first six months of 2019. Reported diluted earnings per share were $1.59 compared to $1.78 in 2019. Adjusted diluted earnings per share were $2.46 compared to $2.51 in 2019.
In addition to $366 million in cash balances as of June 30, 2020, the Company had $1.46 billion of available borrowing capacity under its $1.65 billion revolving credit facility. The Company’s net total leverage ratio, as defined in its credit agreement, of 4.69 to 1.0 as of June 30 was in compliance with the covenant requiring a ratio of no greater than 5.75 to 1.0. The ratio is calculated at the end of each quarter using debt and cash balances as of the end of the quarter and Consolidated EBITDA, as defined in the agreement, for the most recent four quarters. The required net total leverage ratio under the agreement reduces to 5.0 to 1.0 at December 31, 2020 and to 4.50 to 1.0 at December 31, 2022. The revolving credit facility matures in December 2024.
The Company currently expects third quarter and full year 2020 adjusted diluted earnings to be in the ranges of $1.50 to $1.60 and $5.10 to $5.25 per share, respectively.
The adjusted effective income tax rate for the full year of 2020 is expected to be approximately 26%.
Adjusted free cash flow, as defined below, is currently expected to be approximately $475 million for 2020. The Company currently expects full year capital spending of approximately $600 million.
The projections above represent management’s best estimates at this time. The uncertainty of the impact and duration of the coronavirus pandemic makes it inherently difficult for the Company to estimate the projected performance of its business, particularly over the near term. Please see “Cautionary Note Regarding Forward-Looking Statements” below for further information.
In direct response to the pandemic, the Company has taken specific actions to ensure the safety of its employees. Following the implementation of travel and visitor restrictions in February, Crown continues to update its policies as new information becomes available. The Company has taken increased safety measures in its manufacturing facilities to ensure the safety of its employees and the products they produce. In addition, as many Crown employees as possible are working remotely.
The Company’s products are a vital part of the support system to its customers and consumers. In addition to manufacturing containers that provide protection for food and beverages, Crown also produces closures for baby food, aerosol containers for cleaning and sanitizing products and numerous products that provide for the safe and secure transportation of goods in transit.
The Company is working to ensure that its 239 manufacturing facilities around the world remain operational and are equipped with the resources required to meet continually evolving customer demand by delivering high quality products in a safe and timely manner. Crown is actively monitoring and managing supply chain challenges, including coordinating with the Company’s suppliers to identify and mitigate potential areas of risk and manage inventories.
The Company’s previously announced Board-led strategic review is ongoing and a further update will be provided in due course.