Mike Leithead: Okay. And your confidence in promotional activity or maybe it’s from customer conversion you have…
Tim Donahue: Well, I am not confident, because they have their own business model and it’s not for me to describe where — well, I can describe, I guess, I don’t really understand it, as well as they do. They understand their business model better than I do and what they understand better than I do is the consumer. So I wouldn’t say I am confident. I am optimistic that they will look to drive more volume. But there’s — somewhere in between those two words, there’s a difference, optimistic and confidence.
Mike Leithead: Fair enough. Thank you.
Tim Donahue: Thank you.
Operator: Thank you. The next question comes from the line of George Staphos from Bank of America. Your line is now open.
Kash Rangan: Yeah. Hi. Thank you. This is actually Kash sitting in for George this morning. Just going off some of the prior questions. I guess, is there a way to discuss the exit rate on volume and margin coming out of 1Q, particularly in the regions where you have some pricing resets?
Tim Donahue: Yeah. So I think if we look at North America, January and February were better than March, and as we sit here today in April, April is not very strong either. So that’s why I said earlier, we are going to need to see some promotions as we get to the first couple of weeks of May through the first couple of weeks of June. I think Europe is starting to exceptionally weak in January, February, looked better in March and I think we expect Europe to be a little better as we — each month as we go through. Brazil, they are going into their winter months. So you would naturally expect Brazil to be a little softer. But we had a — the market in Brazil in Q1 and 2022 was down like 25%. So it was an easy comp. So and then the markets in Asia are all different. I think, as I said earlier, we will — with the exception of Cambodia, we expect most of the markets to regain some strength towards the end of the second quarter.
Kash Rangan: Got it. Appreciate that color. And then just, I guess, given you exceeded the top end of your guidance for the first quarter, I mean, ultimately, why are you keeping kind of the full year EPS guide here and what ultimately gives you confidence on that?
Tim Donahue: Well, I think, you put a forecast together for the full year, there’s a lot of moving parts and we are more than just one business in one geography, right? We have a number of businesses which we believe serve the company and the shareholders well in terms of balancing out risk and generating significant cash flow as opposed to being too reliant on one product, which may be too up or too down in any one period. Having said that, we have just spent the last 20 minutes discussing our expectation, now our confidence level in promotional activity in the largest market we are in and a little early in the year to really step out and raise the forecast. So as I said, until we until we see some indication of larger promotional activity in the North American market, just too early to adjust the forecast. We will get a chance to do that again in July if we have to.
Kash Rangan: Great. Thank you.
Tim Donahue: Thank you.
Operator: Thank you. The next question comes from the line of Phil Ng from Jefferies. Your line is now open.
Phil Ng: Hey, guys. Hey, Tim. Sorry, I missed the part of the first part of the call, I had some technical issues. But did you give us an update on your outlook for volumes for the various markets for 2023? You sound optimistic, but obviously, volumes are a little softer to start the year. How do you manage that risk, I know 3Q last year was a big surprise in terms of how demand kind of fell off and you had excess inventory and costs, like how are you kind of better managing that in a very choppy demand backdrop?
Tim Donahue: Yeah. Listen, Phil, the first thing I will say, not to be defensive, but I may be defensive. Volume in the third quarter fell off, but it fell off for the entire industry, not just for Crown, right, and I don’t think we are the only…
Phil Ng: Yeah. 100% I agree.
Tim Donahue: We aren’t the only guys to misunderstand that. Having said that, well, if I sound optimistic. Okay, optimistic is — as we said earlier, optimistic is different than confident. I am optimistic because it’s — it would be very difficult to run a business if you weren’t optimistic. They are so many good people in the organization working too hard and doing too many good things and our customers are some really good people that are promoting their products and doing some really good things. So you always remain optimistic that we are going to find the right formula between price and volume and we are going to drive more volume, which benefits our business and the customers are going to find a way to mix the price and volume to drive their business.
And, but the year is not without risk. As we just said to the last question, why haven’t we raised guidance? Well, because the year is not without risk. But I think, as I said, I think we expect in Asia, we expect the market to turn the corner late in the second quarter into the third quarter. I think, Brazil — fortunately for us, the customer bankruptcy that occurred happened at the end of March. So they will have the winter months that are typically the slower selling months to work through their issues, their prepetition and get everything resolved before they get into the heavier requirements that they may have in late in the third quarter, fourth quarter ahead of Carnival. So that’s helpful in Brazil and I think we have a pretty well-balanced portfolio in Brazil.
We have a variety of customers. We are not weighted towards one customer. So we are still confident in Brazil. We are going to have a year-over-year increase in Brazil. Europe, I think, we are going to start to see volumes firm up. It was exceptionally weak in January and February. It got a little better in March, but albeit still down. But I think you are going to start to see customers pulling more volume and we will get into the summer tourism season and we should do quite well. North, brings us back to North America, which is the one that you all care so much about and focus on so much. Listen, I said earlier, we are — in a flat market we are up 10%. I could — I drive a pretty old car, but I will bet my car on that. But if the market is not flat, we are not going to be up 10% and so we will see where the market takes us.
We are going to do better than the market, but that doesn’t give me any great comfort. I’d like to see some promotional activity. So we will see. I think it’s just too early to say what the fillers are going to do with promotions, we will know better in a few weeks.
Phil Ng: Okay. That’s really helpful. And then from a cost standpoint, you called out $60 million are still headwind in 1Q. Is that largely flexed out by 2Q, and I know late last year, you had some high cost inventory in the international markets for loans. I just want to make sure if that’s listed out at this point in the year as well?
Tim Donahue: Yeah. So, I mean, obviously, anything that was left in Europe got flush through with the repricing of contracts and you saw those numbers looking better than Q3 and Q4 last year. Asia probably had a handful in the first quarter, but that’s done. And then we still probably have a handful in the other businesses, the North American Tinplate businesses, which will come through here in the second quarter and that will be behind us.
Phil Ng: Okay. Thank you. Appreciate it.
