Cashen Keeler: Great. Thanks. I’ll turn over.
Timothy Donahue: Thank you.
Operator: Thank you. Our next question is from the line of Arun Viswanathan from RBC Capital Markets. Your line is open. You may begin.
Arun Viswanathan: Great. Thanks for taking my question. I guess, yes, so overall, North American volumes have been quite strong, in line with your expectations. Obviously, promotional activity does appear to be in line with your expectations as well. Maybe you could just comment on that. And then as it relates to Europe, it looks like you are ahead a little bit on your profit recovery there. So how do you see that trending into next year? I guess, specifically, do you expect low single-digit volume growth for North America and then expect maybe Europe to improve on the profitability that you’ve seen before that $259 million in EBIT? Thanks.
Timothy Donahue: Yes. So, Arun, stay on the call because I’m probably going to forget one of these questions. But the first thing I would say is that as we said, North American volumes up 12.6%. That’s against last year’s third quarter where we were down 6%, maybe the market was down 5% or 6% as well last year in the third quarter. And for a market that’s as big and stable historically as North America, that’s the worst quarter I can remember in my 30-plus years for the North American can market. Certainly, we have other markets based on their emerging status around the world that could be plus or minus big numbers. But at a market as big and stable as North America, we never experienced anything like we did in the third quarter last year.
So roughly half of the gain we had this year was a recovery from an extremely weak third quarter last year. And then the balance, really customers beginning to pick-up their promotions perhaps as early as May, as we said on the second quarter call and pushing well into the third quarter. And as we sit here today in October, still promoting at much greater levels than we saw last year. So that’s that. On Europe, yes, I think we always told you that — I think we initially told you that we thought in ’23, we’d be halfway back to our ’21 income levels. We’re probably going to be closer to 75% of the way back to the ’21 income level, and the goal is to be fully back to that ’21 level through the end of next year, plus or minus a couple of bucks for currency, always hard to estimate what currency is going to do.
Did I answer all your questions or not?
Arun Viswanathan: Yes. That was great. If I could have one follow-up. Just on capital return, you are seeing that inflection point on free cash flow next year with the lower capex. So how do you expect to kind of use those extra free cash flow dollars? Would they be allocated more towards share repurchase potentially? Thanks.
Timothy Donahue: Yes. So historically, the packaging industry, the can industry, we’ve used a method of generating a lot of cash flow in lower growth scenarios, generating a lot of cash, using that to pay down debt and buy back stock and pushing EPS growth, 5% to 10%, and 10% to 12% each year. I think increasingly, we’re hearing from many shareholders that given where interest rates are and where they are likely to go and where they are likely to stay for a prolonged period of time, they would prefer that leverage might necessarily need to be lower than our 3 times to 3.5 times. And so we’ll continue to look at that in the face of upcoming maturities, and it’s not just our maturities that we have coming due, but the entire high-yield bond landscape has maturities coming due.
And most of those bonds will be refinanced at higher rates than we currently have on the balance sheet now. And I think the — if you do the math, it’s not so clear that buying back stock is better than paying down debt at this point. So we are listening closely to many of our shareholders, especially our larger shareholders who are now calling for a little less leverage than we would have been more comfortable with in the past.
