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Crown Holdings Inc (NYSE:CCK)
Q1 2021 Earnings Call
Apr 20, 2021, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to Crown Holdings' First Quarter 2021 Conference Call. [Operator Instructions].

I would now like to turn the call over to Mr. Thomas Kelly, Senior Vice President and Chief Financial Officer. Sir, you may begin.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Thank you, Dale, and good morning. With me on today's call is Tim Donahue, President and Chief Executive Officer. If you don't already have the earnings release, it is available on our website at crowncork.com.

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 the actual results to vary is contained in the press release and in our SEC filings, including in our Form 10-K for 2020 and subsequent filings.

Earnings for the quarter were $1.57 per share compared to $0.65 in the prior year quarter. Adjusted earnings per share increased to $1.83 in the quarter compared to $1.13 in 2020. Net sales in the quarter were up 12% from the prior year, primarily due to increased volumes across all segments, favorable foreign currency translation and the pass through of higher material costs.

Segment income improved to $433 million in the quarter compared to $298 million in the prior year, primarily due to higher sales unit volumes, favorable price cost mix and the non-recurrence of charges for tinplate carryover costs that we saw in 2020. As outlined in the release, we currently estimate second quarter 2021 adjusted earnings of between $1.70 and $1.80 per share. This estimate includes the results of the European tinplate business, which will be reported as discontinued operations beginning with the second quarter results.

We are maintaining our full year adjusted earnings guidance of $6.60 to $6.80 per share. Assuming the sale of the European tinplate business closures at the beginning of the third quarter, we expect that the earnings dilution impact over the balance of the year of about $0.50 per share will be offset by improved results in the remaining operations as compared to our original guidance. Our expected tax rate for the year remains at 24% to 25%.

And with that, I'll turn the call over to Tim.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you, Tom. Good morning, everyone. Thank you for joining us and our best wishes for the continued health and safety of you and your families. As reflected in last night's earnings release, the company is off to a very good start in 2021. Demand was strong across all major businesses and despite the ongoing challenges posed by the pandemic and severe winter weather in the United States the company continue to convert strong volume growth into record earnings.

This performance could not have been possible without great people and our global associates continue to perform extraordinarily in the face of the pandemic, ensuring that our customers receive high quality products and services in a safe and timely manner. And while it feels that we're turning the corner with widespread vaccinations now available. New streams and increased positivity rates in some jurisdictions remind us that we must remain vigilant in our adherence to recommended behaviors.

Global demand continues to be very strong for the beverage can and we are committed to deploying necessary capital to meet customer needs. As detailed in last night's release, we expect to commercialize 6 billion units a beverage can capacity in 2021 with further investments being made to bring on at least that much more in 2022.

Before reviewing the operating segments we thought it would be well to remind you that delivered aluminum in North America sit around $1.28 a pound versus $0.75 a pound last year at this time, so an increase of 70%. And as we contractually pass through the LME and the delivery premium, reported revenues will reflect both volume increases and the higher aluminum cost this year. In Americas Beverage, demand remained strong across all of the markets we serve with overall segment volumes up 9% in the first quarter. We expect that demand will continue to outweigh supply for the foreseeable future. And as described to you in February, we have eight production lines in various stages of construction to bring more supply to these markets during 2021 and 2022.

While the CMI no longer publishes industry volumes, we can tell you that our North American volumes increased 12% in the first quarter compared to the same prior year period. Unit volumes in European Beverage increased 6% in the first quarter as growth across Northwest Europe and the Mediterranean offset softness in Saudi Arabia. Segment income reflects contribution from the volume growth and the two aluminum lines in Seville, Spain, which were down for conversion in last year's first quarter.

Sales unit volumes in European Food increased 6% in the first quarter as the business continues to benefit from strong consumer demand for packaged food. Segment income which almost doubled the prior-year amount reflects the above noted volume growth. $5 million of favorable foreign exchange and the negative impact of tinplate carryover included in the prior year first quarter.

As reported on April 8, 2021, the company entered into an agreement to sell its European tinplate businesses, which includes European Food. And as Tom said, we expect the sale to be completed in the third quarter and beginning with the second quarter, results will be reflected in discontinued operations. Asia-Pacific reported 8% volume growth in the first quarter as both Southeast Asia up 5% and China up more than 30%, continue to show recovery from the pandemic related shutdowns. As described in February, activity levels are returning. However, we expect there will be virus-related shutdowns and movement control orders from time to time across the region throughout 2021.

Excluding foreign exchange, results for Transit Packaging were in line with the prior year with industrial demand surging, activity remains extremely strong in Transit and we expect this segment will post full year segment income growth of approximately 25% in 2021 over 2020. There will be a large outperformance in the second quarter against an easy comp with further gains through the end of the year. Other operations also reported strong results in the first quarter led by North American Food and our beverage can making equipment businesses.

In summary, a great start to 2021. With numerous projects completed last year and several more under way currently, we remain well positioned to continue to capture our share of global beverage can growth. Importantly, we continue to convert growth into expanded earnings and cash flow. As Tom discussed, our full year guidance remains unchanged, despite expected dilution from the sale of the European tinplate businesses. Better than expected first quarter performance combined with continued strong demand across beverage and transit will allow us to earn through sale-related dilution and a rising commodity cost environment.

And just before we open the call to questions, we ask you that you limit yourselves to two questions initially so that everyone will have a chance to ask their question. But always as -- feel free to jump back into the queue.

And with that, Dale, we're now ready to open the call to questions.

Questions and Answers:

Operator

Thank you so much. Participants, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Ghansham Panjabi, Baird. Your line is now open, you may proceed.

Ghansham Panjabi -- Baird -- Analyst

Thanks. Good morning everybody.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Good morning.

Timothy J. Donahue -- President and Chief Executive Officer

Hi, Ghansham.

Ghansham Panjabi -- Baird -- Analyst

Hi. So relative to your -- to the guidance for the first quarter you gave on February 10, can you just kind of bridge as to what exactly drove the upside specific to the first quarter? And then also in terms of guidance for 2Q, generally speaking 2Q is a seasonally strong quarter. Just curious as to why the earnings number for the second quarter is not higher than what we've delivered in the first quarter, relative to this period.

Timothy J. Donahue -- President and Chief Executive Officer

Okay. So Ghansham it's throughout. I'll just read here. Again, what we might have budgeted for the first quarter, every operation in segment income was ahead. So for example, South America was up $15 million, Signode was up $10 million, Food North America up $6 million, European Food up $7 million, European Beverage up $12 million to $15 million. Just across the board, everybody up.

It was all volume, and so as we look forward to the rest of the year, we start trying to understand. You always look at how could we have been off that much and how was the team off that much. I will tell you that we pushed the teams extremely hard to come with a budget this year that was -- that we believe was more realistic than perhaps what we saw in the third and fourth quarter last year, because we had these big outperformances in the third, four quarter. And while it's nice to outperform you don't want to miss by that much, because you could always miss in the other direction and that's a different conversation than we're having today.

So -- but all volume related, and so as I said, as we start looking forward to the second quarter and to your question about the second quarter, sequentially why would it be lower? We're trying to understand the two together. I think we certainly had some volume pulled ahead into Q1 from what we expected. And so as we sit here and look at the second quarter, our second quarter guidance is higher than our budget for the second quarter as we relook at the second quarter, but certainly lower than the first quarter.

Obviously, as I said, volume pulled ahead. I think we are probably going to be more capacity constrained in the second and third quarters than we are in the first quarter. So your volume outperformance year-on-year in Q1 and Q4 is always -- has always the opportunity to be greater just because the denominator is smaller.

And then just as we look at the balance of the year, you start looking at the commodity cost environment and while we have pass-through for a number of specific commodities, a whole bunch of others go into a basket, PPI basket, whether that's utilities, labor, coatings and they are all up right now, especially in the coatings, the specialty chemical side. So we'll see how the second quarter progresses, but that's where we're at now.

Ghansham Panjabi -- Baird -- Analyst

Okay, got it. And then for my second question, just on your pull forward comment, was that specific to any region? And then second related to that, just Brazil, just given the virus proliferation, all the headlines that we see, etc., is that -- have you started to see any impact associated with that in terms of mobility and the impact on your business. I know you're cycling through easy comps, from what you said that's very noisy, but what's the real time view on Brazil?

Timothy J. Donahue -- President and Chief Executive Officer

So the second quarter will be -- the comps will be easier for Mexico, Brazil, Southeast Asia as you state, correct. As you know the virus, not only Brazil, but the other country that doesn't get a lot of discussion here in the US, but is really bad right now is India. And so that will be another reason why perhaps we've taken a, just a different approach to the balance of the year. We don't know what's going to happen. We have yet to see in those two countries any real restrictions or movement control orders. We do have some movement controllers and restrictions in one or two of the Southeast Asian countries right now, but not in Brazil or India.

Ghansham Panjabi -- Baird -- Analyst

Thanks so much.

Timothy J. Donahue -- President and Chief Executive Officer

You're welcome.

Operator

Thank you for that. The next question comes from the line of Mike Leithead, Barclays. Your line is now open. You may proceed.

Mike Leithead -- Barclays -- Analyst

Yeah great. Thanks, good morning guys. Congrats on the quarter.

Timothy J. Donahue -- President and Chief Executive Officer

Good morning, Mike.

Mike Leithead -- Barclays -- Analyst

First on Transit Packaging, you highlight in the release, I think a number of cost structure or cost improvements you've made, as we continue with this industrial recovery here, how should we think about the sensitivity of this business or the earnings leverage to industrial up-cycle, either in terms of incremental margins or however you guys think about it internally?

Timothy J. Donahue -- President and Chief Executive Officer

Well, I think as I said in the prepared remarks, we're going to see Transit up -- I'm saying approximately 25%, I think it's going to be at least 25% year-on-year. So that's about -- what is that? $65 million? $60 million to $70 million of segment income improvement year-on-year, which -- that's EBITDA as well. A combination of a number of cost reductions we've done over the last couple of years and the recovery of industrial demand. I think that they did much better in the first quarter.

Let's say that the -- our ability to meet demand was much better in the first quarter than we budgeted. They like a lot of businesses globally not just the can business or the Transit business, but a lot of businesses globally, the challenges being availability of raw materials and then the time necessary to convert raw materials and/or assemble equipment. And so we had a softer budget for Q1 based on those concerns, but they weren't able to pull through that.

I think we feel very good about this year. We'll see how long this industrial demand surge is. Is it just COVID related or is there something more to it with all the stimulus that's been put into the global economies. But the business has, in our view, a tremendous upside with the platform as it exists today and we feel very positive about the business.

One thing, it's not just in Transit, we are pulling out the costs we've taken out in transit, but one of the other reasons for the significant outperformance over the last several quarters compared to prior year quarters is the tremendous amount of cost that our teams have taken out across all of our businesses, whether that's European Food, European Beverage, throughout the Americas Beverage businesses. So all of that when you do that and then you get a little volume come back it just falls straight through to the bottom line and that's what we're seeing.

Mike Leithead -- Barclays -- Analyst

Great. That's super helpful. And then maybe just -- after the recent European Tin Plate announcement, is the strategic review officially complete or would you look to potentially do something similar with other assets like your North American Food business?

Timothy J. Donahue -- President and Chief Executive Officer

I don't know if a strategic review is ever complete. I think it's always incumbent upon the Board and Management to look at all the assets from time to time to determine what the best outcome is for the company long term and for the company's long term shareholders. And I'm delineating between traders and long term shareholders. But we have a duty to the shareholders first, but we also have a duty to other constituents, suppliers, employees, etc.

So we're always looking at that and we feel this was a great business, right? You probably could tell from my comments over the last several quarters. I really like this business. I like the -- what the business can do for an overall organization in terms of its stability and its high cash flow generation.

Having said that, we did receive what we believe was a full and fair cash price. We have a little stub, we'll retain and we'll move forward. But the business -- the remaining businesses we have are performing very well. We have a lot of capital we need to spend over the next couple of years to deploy new Beverage Can capacity and the Transit business and the North American Tin Plate businesses will supplement our capital needs with their cash flow, until such time that the board takes a different view.

Mike Leithead -- Barclays -- Analyst

Great. Thank you.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

Thank you for that. The next question comes from the line from Neel Kumar, Morgan Stanley. Your line is now open. You may proceed.

Neel Kumar -- Morgan Stanley -- Analyst

Great. Thank you. In terms of the European Tin Plate sale, I was just curious what the rational was for continuing to own a 20% stake in the business. And then, I was just wondering if you could just offer any thoughts on how you're thinking about target leverage post the sale. I mean pretty clear the remaining 20% equity interest in European Tin Plate will now show up in EBITDA. So how will you adjust your leverage target to account for the cash flow?

Timothy J. Donahue -- President and Chief Executive Officer

Well, I think we ended last year with 3.9 times or 4 times. I think one thing that was interesting, as we get to the end of the first quarter here in -- this is the first time I can remember in my carrier [Indecipherable] unfortunately I've been around a long time now, that our leverage at the end of the first quarter is actually lower than what our leverage was at the end of the -- three months earlier at the end of the year.

So there are a couple ways to reduce your leverage, but the easiest way to reduce leverage is to increase earnings and that's what we did. But I think going forward, understanding a new cash flow profile of the company that we would say that we're comfortable in the 3 times to 3.5 times range depending upon what we see for capital needs and other business conditions globally.

The rationale for keeping the 20%, that was the best deal we believed we could make for shareholders. So keep in mind you've got a private equity sponsor making a bid for a company, they've got to put equity up. And the less Equity they have to put up, perhaps the greater price they can pay you for a business. So while it appears that the 20% cost to us on the order of what, about EUR125 million. I would tell you that the net of the increased purchase price we received versus what the price would have been had we not taken the equity stub probably only cost us on the order of about EUR40 million to EUR45 million. So it didn't cost us a lot to keep this stub, because we got a greater overall enterprise value for the business by allowing the sponsor to have to put less equity on it. If that's -- if you understood what I said there.

Neel Kumar -- Morgan Stanley -- Analyst

Yeah, that's very helpful. And then just for my follow-up, I think your prior expectations for North American growth for the full year was in the high single digit, low double-digit range. Is that still the case? And is there a way to kind of break up that growth by beverage categories? And how much of that is coming from spiked seltzers, sparkling water, other merging alcohol categories versus more mature categories like carbonated soft drinks or beer.

Timothy J. Donahue -- President and Chief Executive Officer

I think what we said in February, I think I'm trying to remember what we said. I think we said we'd be up about 10% in North America this year. I think we are at 12% in the first quarter, albeit as I said earlier, it's easier to be up more in the first and fourth quarters than in the second and third, just because you have more capacity available for a lower denominator. But I think we're still very comfortable with 10%. We'll bring the Bowling Green lines up this year, we'll bring Olympia up later in the year.

Listen, I'm sure it's possible to break that down by category. I haven't spent a whole lot of time trying to do that by category myself, only because we're making and selling everything we can make and at some point it becomes less critical to understand what categories are growing that much as it is to try to meet your customer needs and not disappoint your customers and that's where we're at now.

As I said earlier, demand is going to far outweigh supply over the next year or two, at least over the next year or two if not for the next three or four years, and we like others probably are most focused on trying to get as much capacity in place where we see the opportunity for us, and that also means not disclosing to you or others where we see our opportunity.

Neel Kumar -- Morgan Stanley -- Analyst

Alright, thank you.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

The next question comes from the line of Adam Josephson, KeyBanc. Your line is now open. You may proceed.

Adam Josephson -- KeyBanc -- Analyst

Thanks. Tim and Tom, good morning. Congrats on another really good quarter.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Adam Josephson -- KeyBanc -- Analyst

Tim or Tom, just one of the dilution and the guidance. So it's $0.50 diluted in the second half. You beat your guidance by close to $0.50 in the first quarter. So it seems like you're effectively raising full year by the amount of the one 1Q, be it and I know you said to Ghansham there may have been some demand pulled forward in the quarter, which is perhaps why your rest of your outlook is effectively unchanged. Is that kind of the right way to think about it? And do you think there may be an element of conservatism in there, just given what's happened over the past three quarters?

Timothy J. Donahue -- President and Chief Executive Officer

Well, I hope you're right. You don't sound like the Prince of Darkness. You sound like Vasco da Gama, right, now, the great explorer, but not sure if I'm talking to Adam Josephson or not here. Sorry, I couldn't resist.

Listen, I hope you're right. I said also to Ghansham, and I had four points written down here. Tom and I were talking about this and I said to pull ahead capacity constraints as you go forward, commodity costs and I didn't say the virus in Brazil or in India, but Ghansham reminded me of that.

So there are a lot of things going on right now globally and it's sourcing of raw materials, the cost of raw materials globally, not just affecting the Can business or the Tran business, but all businesses. So we're trying to take an approach here, that's a little bit measured. It will be really easy to get really excited about performance over the last couple of quarters and even here in the first quarter. But it's -- we're running a business and first thing we've got to do is satisfy customer demand and meet the customer's needs.

We understand you'd like to know everything, we would too. It's just I -- there is a whole bunch of things that are going on. This is a really exciting time with the recovery in global economies and -- but there are some suppliers that are pushing price and squeezing, and are also -- I shouldn't say squeezing, but they are having similar demand surges in their businesses.

So, I don't know. I -- it's where we're at right now. I think that you know I would characterize the outperformance in Q1 in the order of $0.40 to $0.45, not $0.50. So there's a little bit of -- a little bit of outperformance in the remaining three quarters. I know we second -- mid-point of the second quarter guidance that Tom just gave you, certainly about the original budget we had. So -- and we'll just see what the back half of the year brings us.

Adam Josephson -- KeyBanc -- Analyst

Yeah. I appreciate that. And just on the, your cash flow, look I know you didn't give cash flow guidance this time, presumably because of the sale, but you were guiding for 500 three months ago with capex of 850. Can you update us Tom perhaps on what you're thinking in terms of capex, working capital and consequently, roughly what neighborhood you're thinking for free cash this year. I appreciate it. I know you didn't give guidance perhaps for a reason, but sorry [Indecipherable].

Timothy J. Donahue -- President and Chief Executive Officer

Yeah. So Adam, I think the cash flow for this year perhaps is not meaningful, because depending on when we close the transaction. Tom gave you an arbitrary date of July 1, but it could be July 15 or August, who knows when it's going to be. We think sometime in the third quarter. We just said that because it was an easy cut off to give you guidance for the balance of the year. But depending on when that happens, there will be working capital movements plus and minus which hit the cash flow statement, but the recovery of which goes against the purchase price.

So it's almost not meaningful to cash flow. But I think what we could tell you is that, we believe capital for this year will be in the order of $900 million. We are going to take capital up a little this year. A combination of accelerated project spending and also accelerated construction costs, steel, cement, drywall, lumber, you're seeing it out there, right? All commodities are up, especially construction material, so...

But assuming -- let's assume that we had sold the business -- we closed on the business December 31, 2020 and if we said we were going to spend $900 million in capital, I would tell you that as we sit here then we would have told you that free cash flow for the year will be on the order of $350 million if that helps you.

Adam Josephson -- KeyBanc -- Analyst

That's perfect. Thank you Tim. Best of luck!

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

Next question comes from the line of Phil Ng, Jefferies. Your line is now open. You may proceed.

Phil Ng -- Jefferies -- Analyst

Hey, guys. Congrats on a very strong quarter! Margins and earnings were particularly strong in Europe and Americas Bev. I mean you typically see margins built from here, but you called and pulled forward demand. So I'm trying to get a better handle as price cost is a big enough impact that you don't see your typical seasonal improvement and profitability in 2Q and 3Q. I'm just trying to flush that out a little bit more.

Timothy J. Donahue -- President and Chief Executive Officer

You're taking about percentage or absolute Phil?

Phil Ng -- Jefferies -- Analyst

Percentages.

Timothy J. Donahue -- President and Chief Executive Officer

Yeah, so you know I mentioned in the prepared notes, the aluminum cost is up 70%, right, delivered aluminum. So you got the denominator effect as we have this much higher aluminum costs now that it will be an effect, we see for at least the second and third quarter. So you know on a one-for-one pass through, you know revenues are higher, but you're -- it doesn't affect reported or absolute margins, but the percentage margin on a one-for-one pass through comes down. So you just want to be a little careful about percentage margins in an increasing commodity cost environment that you are passing through.

Phil Ng -- Jefferies -- Analyst

What about, like profitability per can or whatever a metric you think that's cleaner. Do you expect you know seasonal improvement, because you did call through this potential price cost mismatch.

Timothy J. Donahue -- President and Chief Executive Officer

Listen, I think we are going to have profitability improvement just because we are getting into the summer selling season, and the more we sell you spread your fixed costs across greater volumes and so you naturally get profitability improvement.

Phil Ng -- Jefferies -- Analyst

Got it, that's helpful. And then Tim, when you talked about your outlook for demand, I guess the risk is certainly COVID in some of these markets like Brazil, Mexico and even India for that matter. But any concerns on the tougher comps with the nice uptick you saw in at-home consumption last year. I know when we look at the Nielsen data, you're starting to lap tougher comps and slipping negatives, but I assume you got some good growth and new products. But any color on that front in terms of some of the puts and takes on you know potential offsets.

Timothy J. Donahue -- President and Chief Executive Officer

Yeah, so well first thing I'll say is we are seeing a real improvement in the virus in Mexico. So I wouldn't throw Mexico in the same category as Brazil and India. I think over time, but it remains to be seen how long it's going to take for people to consume less at home and start consuming more outside the home. I think there's still a big percentage of the population that's worried about the virus and rightly so and so that'll take some time.

But I think demand that we have for especially in the beverage can business and especially in the western hemisphere for new products and for beer in Latin America and new product introduction sell-throughs, etc. in North America is going to far outweigh any of that reversal of at-home consumption over the next couple of years.

Phil Ng -- Jefferies -- Analyst

Okay. Thanks a lot. I appreciate the color.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

Thank you for that. The next question comes from the line of Mark Wilde, Bank of Montreal. Your line is now open. You may proceed.

Mark Wilde -- Bank of Montreal -- Analyst

Good morning Tim; good morning Tom.

Timothy J. Donahue -- President and Chief Executive Officer

Hi Mark.

Mark Wilde -- Bank of Montreal -- Analyst

I wondered, is it possible for you to give us any more color at this point in terms of you know prioritizing the use of proceeds from that Tin Plate transaction and also just thinking how you might kind of cadence that through the year.

Timothy J. Donahue -- President and Chief Executive Officer

You know what, we're a little careful because you know we've got -- you're going to put out some debt, you're going to buy back some stock and which trenches of debt and how much stock, obviously we don't want to -- we want to do it as efficiently as possible, so I don't really want to get into too much of that. I mean -- I don't know, I think it'd be a -- I don't know Tom, you got a view?

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Yeah, I think you have to look at the leverage and think that will be somewhere between 3 times and 3.5 times at the end of the year. A big range, so probably close to the north.

Mark Wilde -- Bank of Montreal -- Analyst

Okay. The performance Tim, you know there's a lot of goodwill toward the Beverage Can and the Beverage Can business right now, but I was reading the latest issue of The Canmaker the other day and they were talking about the low U.S. recycling rate on aluminum cans kind of being the elephant in the room for the industry right now and I was just curious about your thoughts about how you improved that recycling rate, because I think we're about 50% right now.

Timothy J. Donahue -- President and Chief Executive Officer

We are around 50%, which is certainly higher than plastic or glass recycling right?

Mark Wilde -- Bank of Montreal -- Analyst

Yeah, to be sure.

Timothy J. Donahue -- President and Chief Executive Officer

And then keep in mind The Canmaker is a UK publication and recycling rates are generally higher outside the United States and certainly they are across Europe as well, so you know they're trying to point out you know a society as wealthy as the United States, sometimes we take for granted. All you get is a value and aluminum has value, so it's a relevant point The Canmaker made.

So you know we live in a disposable society right. If your DVD player breaks, you don't buy it and get it fixed, you buy a new one, because they only cost $29.99. So how do you fix it? You can get real [inaudible] and you could do it like Switzerland does and you can have people go around and you know look through people's trash and see if they are properly separating every item and fine them. I don't think that'll be very popular in the United States and pretty tough to find any politician that are going to want to take that on, but it has to come down to the consumer and pretty hard to force it back on the producers or the customers of the producers. I mean you are the guy buying the can market and not properly disposing of it; you generally, not you specifically.

So like, you know it's an education process. So I am not sure if there's a way to prepare an incentive program that would force consumers or incentivize consumers to want to recycle more of it, but we all know aluminum has great value to it and it's really a shame for it to end up in the common waste stream as opposed to the recycling stream. I don't have the answer for you.

Mark Wilde -- Bank of Montreal -- Analyst

Well one of your peers have talked about you know actually advocating for you know increased use of deposit loss, things like this. Do you guys have any view on that?

Timothy J. Donahue -- President and Chief Executive Officer

Well, I think certainly if you look at deposits, the deposit states there is more recycling that occurs in the deposit states. Now you -- California for example has deposits. Is that a higher rate of cans coming back into California from cans sold in California due to California sales or is it people collecting cans in Arizona, New Mexico and Nevada and bringing them into California to get the nickel. They didn't pay the nickel in their home state, but they brought it in California to get their nickel. I don't know, but there is no doubt that the rates are higher in states with deposits.

I think the challenge is that our customer base understands that at the initiation of the deposit there's likely to be a dip in demand and they don't want to face that dip in demand. I think once that dip in demand normalizes, then you're back to normal demand patterns. I will say that it would be unfair to put a deposit on aluminum cans and not put a deposit on everything, and that doesn't just mean you put a deposit on a PET plastic bottle, but you put a deposit on a PET bottle that's used for ketchup and mayonnaise and everything else.

So I think you know PET bottles also have deposits, but that's generally only on beverage products. There probably should be deposits on everything. How much can the consumer withstand, because then the consumer's going to try to find a way to get that back. But if you're really looking to control waste, you want to put a deposit on everything, not just on the product that has the most value.

Mark Wilde -- Bank of Montreal -- Analyst

Okay, I'll leave it at that. Good luck in the balance of the year Tim.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you,

Operator

The next question comes from the line of George Staphos, Bank of America. Your line is now open. You may proceed.

George Staphos -- Bank of America -- Analyst

Hey guys, good morning. Thanks for the details. Congratulations on the progress so far. My first question, I just want to try one more time to dig into some of the guidance assumptions that you have and then I've got a longer term question for you.

In terms of what your guidance assumes for this year, should we assume that in the 650 to 680 you're assuming debt pay down to the midpoint of that range and that the rest of your available cash goes to buy back. And within the P&L, where will the stub on European templates show up? Will you include it somehow in EBITDA or will it be purely in equity earnings?

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

The stub will be in equity earnings at 20%. As far as the leverage in the stock buyback, yeah look it's -- by the time we sell the business, actually where we are today, it starts flowing through stock buybacks. That's not a meaningful contributor to you know the earnings growth this year, but for modeling, yeah, I like using the midpoint of that 3 times to 3.5 times, it sound about right.

George Staphos -- Bank of America -- Analyst

Okay Tom, thanks for that. And I guess my other question, if we take a step back you know Signode had you know a very strong performance in the quarter. It looks like it's trending better than you expected for the year.

In Southeast Asia and China volumes are very, very strong and I think you said China volumes were up 30% obviously versus a very easy comparison. What are the implications if any, for the trend that you saw in the first quarter in the performance versus budget for capital allocation to those businesses? And do you see Signode Tim even more of a keeper these days given that performance within the portfolio or no, it's doing well but you are going to be every bit as clinical about that business and its fit in the portfolio as you would have been six months or nine months ago. And within China, given the performance you're seeing, what does that do to your supply/demand around the rest of Southeast Asia and your willingness to put capital both into China and frankly the rest the reason, which looks to us to be very healthy in our supply/demand work. Thanks guys. Good luck in the quarter.

Timothy J. Donahue -- President and Chief Executive Officer

So, I think the principal allocation of capital dollars in the company right now is in the Beverage Can business. There are -- there's minimal capital that we put in the Transit for specific projects. The supply industry is where we see good growth, but the capital allocation, the signal is fairly minimal considering the size of the business and the cash flow it generates.

We do have -- we have consistently commercialized new capacity across Asia, Southeast Asia over the last several years. We had a plant come up last year. We'll have a new plant and another line come up this year, so two lines with a new plant and plans for more obviously. We have no current plans to expand capacity in China.

George Staphos -- Bank of America -- Analyst

Okay, and that's because you just -- you've been here, done that. The growth is great, but it's difficult to earn a profit on a long term basis given the amount of capacity; would that be a fair summation and not a competition I should say.

Timothy J. Donahue -- President and Chief Executive Officer

Yeah, among other factors, yes.

George Staphos -- Bank of America -- Analyst

Okay, thank you guys.

Timothy J. Donahue -- President and Chief Executive Officer

Yeah, you're welcome.

Operator

Your next question comes from the line of Anthony Pettinari, Citi. Your line is now open. You may proceed.

Bryan Burgmeier -- Citigroup -- Analyst

Hi, this is actually Bryan Burgmeier sitting in for Anthony. You know following the style of European food are there EBIT impacts to non-reportable or corporate expense that we should be aware of, and are there any dissynergies in separating you know the U.S. and the European food can businesses?

Timothy J. Donahue -- President and Chief Executive Officer

So, no dissynergies separating European food can and retaining North American food can. There are in the other segments or the non-reportables, the European aerosol business and the specialty packaging business, probably on an annual basis has EBITDA of around $10 million, $12 million something like that. So that'll come out over the balance of the year after it's sold or starting in the second quarter because we're going to discontinued ops. And I'm sorry Brian, what was the other part of the question?

Bryan Burgmeier -- Citigroup -- Analyst

There's any impact of corporate expense?

Timothy J. Donahue -- President and Chief Executive Officer

Oh yes. So, there are -- you know we're going to be left -- we're going to have a European business now which is beverage cans only. So as opposed to a very large $4 billion, $4.5 billion division, we're going to have a beverage can business and the product itself is more homogeneous. It's all one material. Sizes, while there are sizes, it's certainly not as diverse as food cans and manufacturing is a little bit more homogeneous than food can manufacturing, so it'll require a far less corporate overhead in Europe to manage the beverage business than it did to manage the division, what it was you know a multi-product division. So that is already in the numbers that Tom it providing.

Bryan Burgmeier -- Citigroup -- Analyst

Got it. Thanks for the detail on that. And as my follow-up, is it possible to quantify the impact of the winter storm in Texas on your America's bev results in 1Q. Were your facilities forced to take any down time in 1Q?

Timothy J. Donahue -- President and Chief Executive Officer

We have two big Beverage Can plants in the Houston area in Texas and they were down for a couple of days each. You know if I had to quantify it, you know pick a number like $5 million, that's a guess, but probably not a bad guess.

Bryan Burgmeier -- Citigroup -- Analyst

Got it. Thank you.

Timothy J. Donahue -- President and Chief Executive Officer

You're welcome.

Operator

The next question comes from the line of Kyle White, Deutsche Bank. Your line is now open. You may proceed.

Kyle White -- Deutsche Bank -- Analyst

Hey, good morning. Hope everyone is doing well. We're seeing some more introduction of consultants into Europe, I'm just curious what you're seeing on this front and what kind of growth applications do you have in this Beverage Can going in the region. And then also are you seeing those beverage categories primarily going into the can-urban Europe or is it much more [inaudible]. Thank you.

Timothy J. Donahue -- President and Chief Executive Officer

I just like to see in the United States, I think you're going to see as those products are introduced more and more into Europe, it will be more cans than glass or other materials. We'll see how much growth we actually get in European beverages. We expect very good growth in the beer side.

On the carbonated soft drinks side depending on jurisdiction and depending on the rollout of the vaccine, with the exception of the UK it's going very slow in the rest of the continent. So we'll see what the summer tourist season looks like and outside dining, you know on-premise outside dining looks like. That'll have some impact as to the full recovery of the can and other substrates as it relates to carbonated soft drinks. But it'll be a good season. It's just going to take a little longer than what you're going to see in North America.

Kyle White -- Deutsche Bank -- Analyst

Right. And then you mentioned the price in aluminum, particularly in your answer to Mark and understand then practically from an earnings standpoint, but it just looks like it has a large impact on the working capital in terms of the cash up-flow this year.

Timothy J. Donahue -- President and Chief Executive Officer

We don't have the impact on the working capital during the year. I think you know as we're typically -- with the exception of some Southeast Asian countries in Brazil where we have big fourth quarters -- you know we're a summer selling season business, so most of that is collected before you get to the end of the year. It'll depend on how much inventory we believe we need to carry into next year depending on demand. But as everything is basically hand-to-mouth right now, we're selling what we can make. I don't expect that to be -- I don't expect us to have a whole lot of opportunity in billing, well let's put it that way. Some impact, but again the working capital impact is already built into the numbers Tom's provided.

Kyle White -- Deutsche Bank -- Analyst

Right, I'll hand it over. Thank you.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

The next question comes from the line of Salvator Tiano, Seaport Global. Your line is now open. You may now proceed.

Salvator Tiano -- Seaport Global -- Analyst

Yeah, hi. So firstly I want to ask about Transit Packaging. You mentioned about constant currency revenues were flat year-over-year, but industrial demand was really strong. So can you provide a little bit more color on what that markets or regions did factor and what markets or regions outperformed perhaps the declines year-over-year.

Timothy J. Donahue -- President and Chief Executive Officer

Yeah, so I think what we -- what I meant to say -- if I said it wrong, I apologize. On a constant currency basis I was talking about segment income or operating income. I think on a constant currency basis sales were certainly up year-over-year; very strong in Asia, very strong in Europe. I think volume is strong across everywhere, but on an income performance, strong in Asia, Europe and the equipment and tool side; a little softer on the Americas. I think that's just the timing of passing through commodity costs which we'll see come through here in April and May, so you know just timing issue.

Salvator Tiano -- Seaport Global -- Analyst

Okay, perfect. And I guess you already got a few questions about the buyback spurs that paid out. I would come back to that a little bit just to understand the, you know the dilution you said is going to be around $0.50 from the sale of European through this here. Full year basis, so it'll probably close to $1 assuming you don't bring back to give the proceeds. So what is the rationale I guess to not try to accelerate buy backs in order to minimize the valuation from where it would be a pretty big chunk of your earnings being sold. You know why not consider this scenario?

Timothy J. Donahue -- President and Chief Executive Officer

Just what leverage we believe we're comfortable having going forward with a smaller company and a lower earnings base and a lower cash flow base.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

As we said, we do intend to buy that back, so it's just a matter of how fast.

Salvator Tiano -- Seaport Global -- Analyst

I guess Tom, you were mentioning before the leverage of 3 times to 3.5 times, perhaps more than what you think about the lead point. You know why wouldn't it make sense for you to accelerate buybacks and perhaps make sure you're on the upper end of the leverage by year end, because otherwise dilution will be material and that's the best way to minimize it, it seems.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Again it comes back to what this leverage ratio is comfortable at and the range is 3x to 3.5x, so you know we do have that option if we'd like to take advantage of it.

Salvator Tiano -- Seaport Global -- Analyst

Okay, perfect. Thank you very much.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

The next question comes from the line of Arun Viswanathan, RBC Capital Markets. Your line is now open. You may proceed.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Okay, thanks. Good morning and congrats on the very strong performance here. I guess you know first off maybe I could just ask a question -- you know a lot of near term questions have been asked, so maybe we can just ask a question about the next couple of years.

You noted that demand is going to far outstrip supply and beverage cans. You know you're adding about 6 billion units this year, 15 billion units over the next couple of years. What are some of the things you're hearing from your customers that kind of supports this statement that demand is going to far outstrip supply and could you specifically address you know maybe trends around freshness, water alternatives and most of the demand recently has been driven by you know potentially some new products on the sell through side and alcohol alternatives.

So is it kind of the water alternatives coming next and then also is it new product development, because maybe some skews or the beverage companies favored high velocity skews this last year and do you do you see more new product development supporting that growth in the future?

Timothy J. Donahue -- President and Chief Executive Officer

I think there is always going to be new product development. I would not characterize our belief of continued strong demand to be new products which we're not aware of yet. But it is true that much of the growth we've seen over the last couple of years has been sell-throughs and some water alternatives.

I will say that during the pandemic we've had a resurgence in growth, at least on the can side for carbonated soft drinks. And as I said earlier, I think that's going to take some time before we see people start to go back out to restaurants and consume more on premise as opposed to in the home.

So, you know at this point we've got customer forecast for the next several years and as we contract with those customers to try to meet their forecast over the next several years that's where we kind of get our comfort in what we believe demand is likely to look likely for the next couple of years. I don't really want to get into describing for you on a public hall, anything which somebody could determine specific to any one customer.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Okay, fair enough. And then, similarly I guess you guys have announced an investor event on May 27. So is there anything you can provide as far as previous to what you'll discuss there, you know maybe on financial strategy or at least the portfolio as you see it now. Maybe you could touch on those two or maybe even CapEx as well. Thanks.

Timothy J. Donahue -- President and Chief Executive Officer

I certainly think you'll get a full review of all the businesses we have remaining in the portfolio ex the European Tin Plate. You'll get a view as to where we see capital for the balance of this year and some of the projects we are working on and I think it's been a -- it would have been about at least a 1.5 years -- is it 1.5 year or 2.5 years since our last Investor Event? So it's probably time to do it and describe for you what the company looks like in percentage terms of revenues and EBITDA from the various businesses and frankly hopefully try to reeducate, we'll begin the education process for some of you that are new to the story of about Transit Packaging.

So again, we understand it's not well understood by many in the analyst or investment community and there are reasons for that. There is no public comp. So just to again reeducate or begin the education process along that line of business.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Okay guys, thanks a lot.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

The next question comes from the line of Gabe Hajde, Wells Fargo Securities. Your line is now open, you may proceed.

Gabe Hajde -- Wells Fargo Securities -- Analyst

Tim, Tom, good morning. Thanks for taking the questions.

Timothy J. Donahue -- President and Chief Executive Officer

Hi Gabe.

Gabe Hajde -- Wells Fargo Securities -- Analyst

As kind of previously stated, a lot of questions have been asked. I'm going to try to take another stab at the strategic review and I don't think many investors would dispute kind of financial profile of Signode and the apparent more resilience in the face of a recessionary environment, but I do think some people kind of scratch their head having a consumer based packaging business married up with an industrial operation, so -- and I appreciate that you would want to market that business on trough earnings and perhaps at depressed multiples. So I guess more directly, is the strategic review that you guys initiated back in November, is that complete or is there still kind of more work being done behind the scenes on any of the businesses?

Timothy J. Donahue -- President and Chief Executive Officer

As I said earlier, I don't think it's ever complete. I think the board and the management are always looking at all the assets and portfolio to determine the best use for the company's assets and do you want to convert, do you want to trade that for cash or do you want to continue to operate it.

I wouldn't call this an industrial business; I'd call this an industrial packaging business. So it is a packaging business, it's just, it's a different packaging business than beverage cans. But I would tell you that food cans is a different packaging business than beverage cans. There is nothing similar about food cans and beverage cans other than they're both cylinders, but their manufacturing processes are different, customers are different, market strategies are different, the seasons are different, the materials are different, so it's a different packaging business. Not unlike food and beverage cans are different packaging business.

Gabe Hajde -- Wells Fargo Securities -- Analyst

Fair enough, alright. And then I guess on the hard seltzers point, maybe some folks are scratching their head in terms of our U.S. consumers really drinking that much more, is it displacing other beverages, etc., and maybe this is a delicate subject. Not asking to speak on behalf of your customer strategy, but see as if some of these hard seltzers might be being imported into other countries similar to kind of a certain energy drink strategy 15, 20 years ago. So I'm curious if some of the growth that you're seeing in North America, is some of that in fact perhaps you earmarked for other parts of the world on some of these new product introductions.

Timothy J. Donahue -- President and Chief Executive Officer

I think the, if you are talking about cans that are sold in the United States that are then filled here and then exported, I think that's probably happening, but I think it's a pretty small number.

I think there's no doubt that the pandemic has people drinking more at home than obviously on premise since most bars or many bars have been shut down. So you know as opposed to drinking draft beer or bottled beer, you're drinking canned beer at home. As opposed to drinking a gin and tonic or a vodka soda, you may be having a seltzer at home.

I do think that when bars reopen, I think there's a segment of the consuming population, that are going to continue to drink these spiked seltzers and these spiked seltzers are served in cans, whether they are served in cans in your house or in a bar. So I think from that standpoint, I think we -- we think the sub spiked seltzer phenomenon is here to stay for a while.

They are obviously as bars and restaurants reopen, consumption of canned beverages will be lost to other substrates or draft, but the I think as I said it's going to happen in a faded way. I don't think we are going to see a big event and I think the natural growth, it will be kind of lost in natural growth. We're not going to feel any real volume turned down in our business from that.

Gabe Hajde -- Wells Fargo Securities -- Analyst

Understood. Thank you.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

The next question comes from the line of Adam Samuelson, Goldman Sachs. Your line is now open, you may proceed.

Adam Samuelson -- Goldman Sachs -- Analyst

Yes, thank you. Good morning everyone.

Timothy J. Donahue -- President and Chief Executive Officer

Good morning.

Adam Samuelson -- Goldman Sachs -- Analyst

A lot of ground has been covered, but wanted to come back to the operating profit margins in both Americas Beverages and European Beverage in the quarter, and I'm just thinking about, especially in Americans 14% revenue growth, 40% profit growth and that incremental margin on I think you said 9% volumes would seem very high for the normal incremental contribution margin you would think in your business. And just probably think about just the price mix, cost reduction, just try and think about the drivers of the significant operating leverage you saw in the Americas Beverage and same store again in European Beverage too, just trying to make sure.

Timothy J. Donahue -- President and Chief Executive Officer

I mean, last year we installed third production lines in two of the facility, one in New York, one in Toronto. So as you might imagine, you put the second or third line into a plant, the contribution is certainly much greater than a one line plan and even more so when you spread costs out from a two line plant to a three line plant. And as I said earlier, we've been reducing costs throughout the entire system, every year, as all the can companies do. It's incumbent upon us to reduce our costs, to provide the lowest cost option to our customers, so that just feeds through.

A big thing in Europe year-on-year is we had, we have a big beverage can plant in Seville, Spain. It was not in operation last year at all in the first quarter. We are converting the lines from steel to aluminum and so that plant is now back in production and you couple that with a volume growth not only in Spain and throughout the Mediterranean, but also in France and the UK and you know you cut cost and then you have volume come through it, it really does fall to the bottom line. It's not much more complicated than that.

Adam Samuelson -- Goldman Sachs -- Analyst

Okay, got them. Just one quick follow-up, just North America you talked about 12% volume growth. Were import levels in the first quarter similar to what you experienced in 2020? Are you seeing that start to get backed up with domestic capacity, are we still running kind of a similar level short versus,,,

Timothy J. Donahue -- President and Chief Executive Officer

So we did not really begin importing cans into the U.S. until the second quarter last year. When the Mexican and Brazilian businesses were -- you know the beer industry were shut down in those countries for a period of time during the second and third quarter, there were some imports into the U.S., for Crown at least in the first quarter, but not very large. There will be imports this year into the U.S. from other regions, but significantly lower than we had last year.

Adam Samuelson -- Goldman Sachs -- Analyst

Okay, great. Thank you very much. I'll pass it on.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

Next question comes from the line of Jeff Zekauskas, J.P. Morgan. Your line is now open, you may proceed.

Jeff Zekauskas -- J.P. Morgan -- Analyst

Thanks very much. What were the after tax proceeds of the Tin Plate sales, of the Tin Plate business. And what other revenue subtractions need to be made in the other segments outside of European Food to correct for the divestiture?

Timothy J. Donahue -- President and Chief Executive Officer

The revenue off the top of my head, I don't have.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

It's about $200 million in aerosol and...

Timothy J. Donahue -- President and Chief Executive Officer

No, no, no.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Yeah, and then promotion was a less than a 100, right. On the after tax proceeds we talked about 1.9 billion euros in the release pre-tax, the tax on that should be less than a $100 million.

Jeff Zekauskas -- J.P. Morgan -- Analyst

And then for my follow-up -- thank you for that. Other competitors have announced very, very large capacity additions. Have those announcements in any way changed your strategy or made you think differently about the longer term tightness of the Beverage Can industry?

Timothy J. Donahue -- President and Chief Executive Officer

Not at this time.

Jeff Zekauskas -- J.P. Morgan -- Analyst

Okay, great. Thank you so much.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

As of now we don't have any question in queue. Speakers, you may proceed.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you, Dale. So that concludes the call today. We'll speak with everybody again in May during the virtual Investor Event. Thank you. Bye now.

Operator

[Operator Closing Remarks]

Duration: 62 minutes

Call participants:

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Timothy J. Donahue -- President and Chief Executive Officer

Ghansham Panjabi -- Baird -- Analyst

Mike Leithead -- Barclays -- Analyst

Neel Kumar -- Morgan Stanley -- Analyst

Adam Josephson -- KeyBanc -- Analyst

Phil Ng -- Jefferies -- Analyst

Mark Wilde -- Bank of Montreal -- Analyst

George Staphos -- Bank of America -- Analyst

Bryan Burgmeier -- Citigroup -- Analyst

Kyle White -- Deutsche Bank -- Analyst

Salvator Tiano -- Seaport Global -- Analyst

Arun Viswanathan -- RBC Capital Markets -- Analyst

Gabe Hajde -- Wells Fargo Securities -- Analyst

Adam Samuelson -- Goldman Sachs -- Analyst

Jeff Zekauskas -- J.P. Morgan -- Analyst

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