Crown Holdings, one of the world's largest aluminium can manufacturers, has disclosed its financial performance for the fourth quarter and full year ending on December 31, 2023. The company reported a net income of $450 million for the financial year 2023 (FY23), compared to $727 million in FY22, signifying a 61.5 per cent downfall.
Q4 2023 results
In the fourth quarter, net sales reached $2,858 million, a decrease from $3,012 million in the same period of 2022. This decline is attributed to higher beverage can volumes in America's Beverage and favourable foreign currency translation totalling $42 million.
However, it was offset by a $145 million reduction in material costs and decreased volumes across most other businesses. Operating income for the quarter was $259 million, up from $229 million in the fourth quarter of 2022. Segment income in the fourth quarter of 2023 stood at $382 million, compared to $292 million in the previous year's fourth quarter.
This increase is primarily driven by higher beverage can volumes in America's beverage and the contractual recovery of prior years' inflationary cost increases in European Beverages, which more than compensated for the under-absorption of fixed costs.
In Q4 2023, net income attributable to Crown Holdings amounted to $32 million, a decrease from $89 million in the fourth quarter of 2022. Reported diluted earnings per share were $0.27 in 2023, down from $0.74 in 2022. Adjusted diluted earnings per share stood at $1.24, compared to $1.17 in 2022. These figures fell below prior estimates primarily due to the under-absorption of fixed costs and reduced equity earnings.
Full-year result
In 2023, Crown Holdings, Inc. reported net sales of $12,010 million, a decrease from $12,943 million in 2022. This decline was driven by higher beverage can volumes in America's beverage and favourable foreign currency translation totalling $77 million. However, it was offset by a $720 million reduction in material costs and lower overall net volumes.
Operating income totalled $1,269 million in 2023, including $114 million of restructuring charges. This compares to $1,336 million in 2022, which included a net restructuring gain of $52 million. Segment income for the full year of 2023 amounted to $1,546 million, compared to $1,443 million in the prior year.
This increase reflects the benefits from higher beverage can volumes in Americas Beverages, the contractual recovery of previous years' inflationary cost increases in European Beverages, and cost reduction initiatives in Transit Packaging.
However, it was partially offset by lower overall net volumes across most other businesses and a $60 million year-over-year inventory impact of steel repricing in the other segment. In 2023, Crown Holdings, Inc. experienced an increase in interest expense, totalling $436 million compared to $284 million in 2022, primarily attributable to higher interest rates.
Halt operations at some of its plant
During the fourth quarter, Crown Holdings, Inc. strategically decided to halt operations at its Batesville, Mississippi, beverage can plant and Decatur, Illinois, aerosol can plant. Furthermore, as part of a manufacturing modernization initiative, the company ceased operations at its beverage can facilities in Ho Chi Minh City, Vietnam, and Singapore. The capacity from these closures has been relocated to the company's new high-speed plant in Vung Tau, Vietnam. These measures enhance operational efficiencies, utilization rates, and fixed cost absorption.
CEO's take on the result
Timothy J. Donahue, Chairman, President and Chief Executive Officer, said," Fourth Quarter segment income improved by more than 30% over the prior year fuelled by margin performance in the Americas Beverage business which benefited from 5% volume growth in North America and 2% growth in Brazil. Production schedules were further adjusted during the fourth quarter with significant working capital reduction achieved across the businesses. While fixed cost absorption was considerably lower during the fourth quarter, these efforts contributed to free cash flow well above prior expectations, despite a cash flow reduction of approximately $200 million in off-balance sheet financing arrangements."
Mr. Donahue further commented, "The Company achieved record adjusted EBITDA with an 8% improvement over the prior year, despite challenging macroeconomic conditions in most markets. Operating performance remained strong in 2023, driven by solid results in our three largest businesses: Americas Beverage, European Beverage and Transit Packaging. Both Americas Beverage and Transit Packaging achieved record levels of income in 2023, with each gaining 18% versus prior year. European beverage significantly improved income performance, despite volume softness, primarily through more comprehensive raw material and other inflationary pass-through provisions within contracts. Beverage can volumes in North America advanced 6% during the year with Brazil up 4% while shipments in both Europe and Asia-Pacific continued to be soft reflecting weak consumer demand."
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