And so that’s the way we think about it, mix as it relates to cans and ends, those things will obviously play into this particular in South America, and we’re seeing that overall. So I think of it more in the context of the overall busy season for them and how successful it’s been holistically.
Dan Fisher: In the simplest way, we’ve talked about this for years and years and years and you’ve heard us talk about. And can and in shipments, right? So we ship more ins in the fourth quarter than we did in the first quarter. So the balance of the entirety of the portfolio, really, that’s where the volatility lies in terms of leverage, deleverage. It’s not isolated within the quarter. You kind of have to look at it throughout the entirety of peak season. And that’s the overwhelming gist of it. So we’re happy with the leverage fall through with over the six-month period.
Anthony Pettinari: Got it. Got it. That’s very helpful. I’ll turn it over.
Operator: Our next question comes from the line of Arun Viswanathan with RBC. Please proceed with your question.
Arun Viswanathan: Great. Thanks for taking my question. I hope you are well. Just wanted to get your thoughts on how volumes in North America should evolve now that you’re anniversary-ing the Bud Light situation. We’ve also heard of some share shifts within the industry. So yes, maybe you can just kind of give us your thoughts and if there’s any category discussion that would be helpful or promotional kind of view as well. Thanks.
Dan Fisher: Yes. So we’ve spoken about, and I think it’s well known within the industry that there was a share shift on brewer to the tune of approximately 2 billion units, that’s already happened. That’s in our numbers. So we lost the $2 billion in multiple competitors picked that up and incremented up. And we’ve got line of sight to fill that hole this year. If you go back to previous call and the assumptions we laid into North America for 2024, we thought we’d be negative obviously, in the first quarter, not only for the lapping the major brewer disruption, but the dislocation of this volume. And then we would which we’ve already won a couple of big chunks of business, and you will start to see that flow in, in the back half of the year.
So that’s where we geared toward flat in North America. So last – the $2 billion pick up, roughly a similar amount and you’ll inflect in the back half of the year with volume. Obviously, the size of that volume and the mix of that volume now plays out within the next couple of quarters, but you should still see increments of volume lift here out through the balance of the year in North America. We think the industry is in that 1% to 2% growth range. Beer is a little softer, CSDs a little better. Mix will matter. Energy continues to grow. Mix will matter in promotional activity in peak season and the health of the end consumer, that’s going to play out and determine whether it’s 1%, 2%, a little north of that, a little south of it.
But for us, we’re really comfortable regardless of whether we’re growing flat to down a little to up a little, we’ve got really good line of sight into the operating earnings and the cash generation of the business.
Arun Viswanathan: Great. Thanks for that. And then we’ve obviously seen some volatility on the aluminum price side. Maybe you can just comment on how that would impact you going forward? I mean, I’m not sure if your customers – I think they have some hedging programs in place, but would that also impact demand levels if they opt to push price to cover some of that inflation? And especially in Europe, I guess, I’m just curious if there would be any potential headwinds from metal premium pass-through? Or – and how would you kind of characterize that in the context of – it sounds like Europe is getting better from a supply-demand standpoint? Thanks.
Dan Fisher: Yes. I think it’s probably much to do about nothing at this point. We’re coming off of incredibly low aluminum prices right now in a historical context. That seems to be the preferred package. There’s a shift toward that in a number of parts of Europe. I guess the watch out is what’s happening in the Middle East, right? I mean is that going to inflect significantly energy prices. Some mills and some aluminum is protected because it’s nuclear power or it’s tied up with other energy sources that aren’t fed out of that part of the world, but it’s certainly something that would impact the end consumer, not our customers’ behavior patterns at this time. We’re not having any conversations that would give us pause or concern.
In fact, it’s just the opposite at this point. They’re more aggressively going in and working on taking share and are using the can to do that. So I think it’s a watch out. It always is, but what we’re seeing right now is not of a concern. And overwhelmingly, what everybody has learned to your hedging question in particular, I think folks got caught a little upside down over the last two to three years in some instances. And I think they paid a lot more attention to hedge strategy and kind of protecting where they are. If they locked in hedges, they’d be locking in those hedges at kind of all-time low levels. So I’m a little bit more encouraged by the structure of the industry and the behavioral patterns. And then obviously, the watch out is what’s going on in the Middle East and does that have any impact.
Arun Viswanathan: Great. Thanks and congrats again to Ann and Brandon as well. Definitely, we’ll miss speaking with her and getting her perspective. But, thanks again.
Dan Fisher: Thank you.
Operator: Our next question comes from the line of George Staphos with Bank of America. Please proceed with your question.
George Staphos: Hi, thanks very much. Hope you guys doing well. Thanks for the details. Everyone said it, but I’d like to as well. Just – Ann congratulations, first on your grand baby, but also for being such a resource to all of us over the last number of years, you are the legend in the industry. And congratulations to Brandon and [indiscernible] on their increased responsibilities. Okay. So in terms of operations, Dan, you had mentioned that you’re still trying to claw back that 2% to 3% operating efficiency loss over the last few years. Where do you stand in that regard? Forgetting about the actual plant closure benefits. What do you – where do you stand in terms of that recovery? And can you give us a one or two kind of for instance, in terms of how that lean or benchmarking is showing up on a day-to-day basis?
Dan Fisher: Yes. We’ve got, George, latest numbers that I’ve seen. We picked up probably 1% of the 3% we’ve got back. And it’s showing – where it’s showing up, principally, it’s showing up in reduce over time. It’s showing up in spoilage. The older assets that were retired, I would say, have contributed 80% of that improvement, okay? So there’s still – I think we’ve just scratched the surface on getting to the other 2%, 2.5%, if you will, across the existing portfolio of new assets. So we still have a bit of runway. I mean, you could that’s a meaningful number on when you apply it to roughly 50 billion units. And so we’re in early innings. But as you know, volume to manifest in order for those efficiencies to show up, and we’re inflecting here over the back half of the year.
So we’re counting on continued improvement. We’ll talk more about this at our Investor Day and how we’re structured in terms of the operating model, and we can point to this in, I think, more granularity than we’ve talked about historically. But I would say roughly, we’ve shuttered the facilities to pick up 1% of the 3%. And now we’ve got to work on the remaining assets that are in place to continue to grow into that too, and we’re early innings on getting it, but it is showing up incrementally.
George Staphos: Okay. I mean, I guess, we’ll talk about it in June, but a pushback could be, okay, well, you got 1 point because you shut a facility and then the remaining two or three is going to be tougher to get at because it’s got to come from ongoing. So do you have any comment on that? That would be great, if not, we can stay with June.
Dan Fisher: Yes. I would say no, that’s not true. It’s going to be easier, because this is roughly 1,200 new employees that are three years of service in and they’re learning how to make cans. And so this is incremental in terms of the learning curve. This is not different than at any point in time when we talk about an 18-month, 24-month ramp-up on facilities. I think about it in that context. So if we focus, we maintain – we don’t have attrition at the levels that you did, obviously, during COVID. We will gain on this and we will gain on this in a pretty methodical and pragmatic and a very prescriptive manner. So I’m encouraged that we will get this back here over the next 18 to 24 months.
George Staphos: Thanks for that Dan. Next question. So in Brazil and sort of piggybacking on what Anthony had teed up. Was there any sort of operating issues in terms of the lack of profit leverage versus the volume leverage? Again, I know you said we should look at it holistically. Were there – did you lose any share to your knowledge with any customers recognizing in a quarter where you’re growing 18% or whatever the number might have been depending on the customer or the market, the answer is probably no. But any operating issues that we should take away? Any customer loss issues or if things were very much as expected in the quarter in South America and in Brazil?
Dan Fisher: Yes. Thanks. So Brazil grew at 18%, we grew at 26%. So no, we didn’t lose anything. In fact, you could say we incremented share positions. If this is 100%, George, just to be clear, it is end sales that were heavier mix in the fourth quarter versus the first quarter. And so that’s what it is. So we shouldn’t have been up 60% earnings on 2% growth in the fourth quarter. So if you kind of mix that end issue, which we’ve talked about forever in a day, it’s just lumpy, and it’s incredibly profitable because of the tax jurisdictions down there. It’s like – that’s it. Yes, nothing fundamental. It’s not Argentina. It’s not anything that – it’s no pricing mechanisms and contracts, all of that’s really stable. It’s just fundamentally to end float between 4 and 1.
George Staphos: Understood. My last two ones quick. Number one, just piggyback again on the aluminum question, recognizing it’s a watch out, but not something you’re terribly concerned about. I know over the last couple of years, three years, you’ve probably been working on supply chain, clearly, with a lot of this inventory now showing up or a lot of this aluminum showing up in inventory and warehouse that might not be able to be used because of the sanctions. What are the risks and how are you planning against it that if there is some sort of mill disruption somewhere around the world that we don’t see some spike, some tightening in aluminum therefore, can sheet? What are your thoughts there and how you’re planning against that?
