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070201 Deutsche Bank Report - CCK's 4Q in 100 Words

Deutsche Bank - Equity Research

Crown Holdings {Ticker: CCK.N, Recommendation: Buy}.

OK quarter.  Looks like EPS of $0.16/share ex specials, DB @ $0.16 & FC @ $0.52.  Rev's + 6.4% y/y.  Issues: metal-cost pass-thru's in Europe & mixed performance in food cans.  Cashflow fell short of targets for ‘06

Q4 vol's appears a bit soft, mixed by region & business.  NA Food= up mid-single digits y/y, Euro food=flat, Euro bev vols were weak, Americas bev down mid-single digits, Asia & Middle East remain strong & have significant new capacity hitting mkt in ‘07.

Price?  Key issue = restoration of margins in Europe (FY06' beverage -410bps, food -150bps).  CCK reports 2 encouraging (“very happy”) settlements in Q4, suggesting that tight European supply/demand balance has helped w/ '07 pricing.

Others:  (1) '07E FCF = $330-$370MM.  (2) ‘07E EBIT growth = 12.5%:  improving margins & new capacity, (3) '07 capex target @ $140- $150MM, '06 = $191MM (4) remaining NA plastics divested in Q4 (5) $125MM in RE sales, $87MM in Q4, $38MM in '08, (6) '06 effective tax rate =20%, '07 rate will be 26%. (7) Several new lines ramping-up in US, across Middle East, Vietnam & Cambodia.

Where's it trading?  '06 EV/EBITDA=9.2X, ‘07 EV/EBITDA=8.3X

Change in view?  Not really.   We like the stock (a) margin improvement potential (b) free cash flow yield in '07 looks like 10%.  Maintain Buy rating and '07 estimate at $1.35/share and introducing '08 at $1.50/share.