Arun Viswanathan: Great, thanks a lot and Scott thanks for all your help over the years.
Scott Morrison: Thank you.
Operator: Our next question comes from Mike Roxland with Truist Securities. Please proceed.
Mike Roxland: Thank you, Dan, Howard, Scott for taking my questions. Scott congrats on your well-deserved retirement and Howard welcome to the Ball team.
Howard Yu: Thanks. Thank you.
Mike Roxland: Dan, you mentioned Ball and the broader industry really having excess capacity in North America, and you really kind of highlighted the mass beer issue troubling the company. If next year, let’s call it out, your Bud Light remains weak. Can you help us think about how the company will compensate for a potential permanent volume loss? And could some of that be offset by the recent deal that Bud Light entered into with UFC?
DanFisher: That’s a great comment. I’m not a big UFC fan. So I don’t know if those are huge, Bud Light drinkers or not, if that’s a white space, but in all seriousness. It’s going to take a period of time the beer on shelf in retailers in C-stores, we will – it will be there. And so, folks like Constellation, they continue to grow, they continue to add capacity, and they’re a big partner of us. We’re partners with all the major brewers. And so, as they step into taking share and taking volume, it will be somewhat of a natural offset. Obviously, the fastest return for volume for Ball is that Bud Light or Budweiser figures out, something to put on the shelves at selves in place of that. We are – there’s a minor reset that happens in the fall with retailers.
So we’re seeing some uplift in terms of a favorable mix with some of the other brewers, but it’s not going to substantiate until the first half of next year when there’s bigger resets. So that will be indicative of how folks within the – in the industry and the space are going to play that. I do think the amount of money being spent by Budweiser on Bud Light, they’ve said it publicly. They’re spending a lot more. I think four times is the number in terms of reestablishing that brand and yet to be determined, but over 12 to 18 months, I think the beer space, ready-to-drink cocktails, all of these will start to find their way on to those shelves and we’ll benefit from that, we’ll benefit from that disproportionately as we have been adversely impacted by the Bud Light.
So I think our recovery is going to look good. It will start in the second quarter of next year, second, third and fourth quarter will become easier comps for us. The first quarter will be challenged because of Bud Light, in particular, did well. Budweiser did well in the first quarter. But I don’t think we’re going to have to make any further network changes. I think we’re in a really good spot. We’re managing that and we’ve got dry powder for what we believe will be a resurgent top line here over the course of the next two to three years. So that’s probably more than you wanted, but I know it’s a big topic, and it’s certainly a big topic for Ball.
Mike Roxland: No, that’s great color. I really appreciate it. And then just one – my follow-up question. Can you just remind us of some of the drivers that you have your disposal to offset the earnings dilution from the Aerospace sale when it occurs in the first half of next year?
DanFisher: The biggest one is going to be reduction in interest expense.
Scott Morrison: We should say, with a couple of billion dollars plus debt reduction, we’ll save over $100 million of interest costs next year. Buying back the shares. Obviously, if you’re going to buy back a couple of billion dollars’ worth of shares, that takes a little bit of time. So you don’t get the benefit of that, you’ll get it over a period of time. I would say those are the kind of the first things that will – you’ll see the difference.
DanFisher: Yes, interest expense and improved operating earnings out of our core business, we’ll give you more detail. I mean, we’re certainly going to be shooting for offsetting that as soon as we can in terms of the run rate. So you’ll have a far better cash-generative business on the sales output. We’ll be spending a lot less capital. So it should – and then we’ll be buying back a lot of stock and so the combination of those are – should be great return of value to our shareholders moving forward.
Scott Morrison: And the last several years, all the free cash flow that we generate usually really comes out of the beverage business, not the Aerospace business. So it doesn’t change our cash flow profile very much.
Mike Roxland: Got it. Thanks very much, and good luck in 4Q.
DanFisher: Thank you, Mike.
Operator: Our next question comes from Phil Ng with Jefferies. Please proceed.
Phil Ng: Hi, guys. Well, Scott wanted to echo the same sentiment. Thanks for all the help over the years. And Howard, welcome, looking forward to working with you.
Howard Yu: Thanks, thank you.
Phil Ng: My first question is around the camp facility that’s coming out. How much capacity does that come out? And where does that bring you from an operating rate standpoint in North America at this point? You guys have obviously taken some actions outside of Kent capacity and fixed cost out of things. Any color on how much cost savings we should expect to see that’s incremental going to 2024?
DanFisher: Yes. So with the Kent facility, that was a leased facility. Maybe I’ll give you a little bit about that facility. It’s a leased facility. We acquired this, as you know, as part of the Rexam acquisition. It was started in 1971. We’ve got 126 folks there, two lines, 12-ounce standard and this will cease operation in the first half of ’24. Typically, a facility of this size is in the $20 million, $30 million savings range. We’ll offset some of that savings with a little bit of additional freight. So yes, somewhere in that neighborhood of $20 million next year, $20 million to $30 million. I guess how you should be thinking about it for a half year of that, I’ve given you an annualized number.
Phil Ng: Okay. And based on some of the cost savings and the buybacks and reduced interest expense, can you guys get back to 10% to 15% EPS growth next year?
DanFisher: That’s a great question. The timing of the close will matter and how fast we buy back shares will matter. But I – as we sit here today, that is certainly our goal is not just to get back in that range but to exceed that.
