Adam Samuelson: Okay. I appreciate all the color. I will hop back. Thank you.
Tim Donahue: Thank you.
Operator: Thank you. The next question comes from the line of Jeff Zekauskas from J.P. Morgan. Your line is now open.
Jeff Zekauskas: Thanks very much. Your accounts payable dropped $450 million sequentially, which is unusual for the first quarter. What’s behind that? And are your payables and accrued liabilities higher by the end of the year year-over-year or lower, can you talk about that line?
Tim Donahue: So two things behind that. One of which is the cost of raw materials are obviously lower right now than they were last year. So as we are bringing materials into prepare inventories for the season, they cost less, and then, therefore, the payable is less. And then the other thing we have been working real hard to bring inventory levels down. So we are not ordering as much as we would have ordered last year. We are far more cautious on the outlook and what our customers are telling us for the outlook than we were at this time last year. So the cost and the actual level of inventories, therefore, the purchases we are making is far lower than we would have been making at this point last year. And the value of inventory and the level of inventory even lower — trying to drive it lower than where we finished the year at the end of December.
So by the time we get to the end of this year, some of that will be dependent on pricing in the market for raw materials, as well as our outlook for 2024, specifically, Chinese New Year throughout Asia and Carnival in Brazil as those markets are more weighted towards the winter — our winter months than the typical Northern Hemisphere markets.
Jeff Zekauskas: So what I should take away from your comments is that, that’s a representative number for the year. Maybe it’s a little bit higher, maybe it’s a little bit lower, but given where raw materials are that’s where your payables and liabilities are running?
Tim Donahue: Yeah. I mean it might tick up a little bit. We are trying to drive inventory values down to take risk out of our system. We and others carried far too much risk into the third and fourth quarters last year as sales did not materialize and we are very focused on not carrying that risk anymore in the future. So we are going to be a little bit more cautious as to how much we carry.
Jeff Zekauskas: Okay. Thank you so much.
Tim Donahue: Thank you.
Operator: Thank you. The next question comes from the line of Cleve Rueckert from UBS. Your line is now open.
Cleve Rueckert: Hey. Good morning. Thanks for getting me in here at the end of the call. I appreciate it. I just have two questions. I will ask them separately, because they are not really related. But just to start off, I want to be a little bit more direct about the guidance and all the discussion that we have had around promotional activity. If that promotional activity does not materialize, is the guidance range still achievable?
Tim Donahue: The range is achievable. That’s why — I mean it’s a pretty wide range. I think if you — the top end and the bottom end, there’s probably like $70 million of swing in there. And as I said earlier, even with optimistic as opposed to extremely confident in promotional activity, even with that, with the outperformance against original target in Europe in Transit, it will more than offset some of the internal caution we placed against what we see as perhaps less or delayed promotional activity from where we would have liked to have seen at the beginning of the year. So, yeah, the range is achievable.
Cleve Rueckert: Yeah. Thanks for that. I just wanted to make sure that was clear. I mean I sort of got some tidbits of conservatism, but it’s pretty clear that promotional activity would represent upside to the plan for the balance of the year, okay?
Tim Donahue: Well, it would present, it may…
Kevin Clothier: Higher…
Tim Donahue: It would — yeah. It would represent the high end of the range, maybe it takes a little higher than the high end of the range, but let’s just stay within the range.
Cleve Rueckert: Yeah. Okay. All right. That’s clear. I just wanted to more direct and explicit about it. And then just looking a little bit longer term and this is a question that’s come up with some of our conversations with the industry and investors over the past couple of weeks. I am just wondering, like, bigger picture, whether you are seeing your customers filling capacity investments, keeping pace with that 30% capacity increase that you were talking about over the last three years to four years or whether some of the investment that’s required to absorb that capacity is being delayed such that — not on purpose necessarily, but it’s just fading it — fading your investment a little bit, such that you would have a longer tail of growth to absorb some of the slack in the system that you are experiencing?
Tim Donahue: No. I mean, I don’t want to speak too much towards our customers. But our customers have more than enough capacity installed to meet let’s just say that the North American Beverage can market has about 130 million or 100, whatever the number is somewhere between 130 billion and 135 billion cans of capacity, maybe it’s 128 billion or something. Our customers have more than enough can filling capacity installed in their plants to absorb that. They — the can companies run 24×7. Most of our customers do not run 24×7. They run 5 to — listen, the — if they had to dial up more ships, they could dial up more ships to fill more product. That’s not the issue.
Cleve Rueckert: Yeah. Okay. All right. So it’s really more of a market question than anything structural or investor.
Tim Donahue: Yeah.
Cleve Rueckert: Yeah. Got it. Thank you very much. Appreciate it.
Tim Donahue: You are welcome. Thank you. Marcia, do you have any more questions or is that it?
Operator: That’s all for the questions. Okay. Well…
Operator: Speakers, you may proceed.
Tim Donahue: Yeah. Thank you, Marcia. That — I guess that will conclude the call today. Thank everybody for joining us and we will talk to you again in July. Bye now.
Kevin Clothier: Thank you.
Operator: Thank you. That concludes today’s conference. Thank you for participating. You may now disconnect.
