Ball Corporation (BALL) Earnings Call Transcript & Summary

Hi again. It's George Staphos from BofA, on pulp paper and packaging research for the Americas. Really happy to have Ball Corporation presenting at our conference, again, one of the first companies where we had one of our conferences back to '90s, and very happy and grateful that Dan Fisher and Scott Morrison are here from the company, also listening in background is our old friend, Ann Scott from Ball's Investor Relations effort. Dan Fisher, as you know, is President of the company, having joined Ball in 2010; and Scott Morrison, Executive Vice President and Chief Financial Officer for the company, having joined Ball in 2000 and became CFO in 2010. So gentlemen, welcome. Great to have you as always. Really looking forward to your comments here.

Thank you, George.

I guess there's been a lot going on at Ball. I guess that's always the case. There's been a lot of progress for sure.

As we sit here now, beginning of March and look out to the rest of the year what are the 2 things the company needs to get most correctly get right for it to be another successful year, both in terms of operations and to the extent that you can control stock price performance?

Yes. I would say I think the obvious thing, and you've heard it time and time again over the last 6 to 9 months, if you've been following us is execution. We have, over the last handful of years, seen this tremendous tailwinds. We secured significant backlog growth in our aerospace business. I think our one backlog is 2x what it was 24 months ago, our won-not-booked is 30x. In that particular business, we've hired double the size of our employee base in that business. And we've invested capital, as you know, George, and set up some significant world-class testing facilities. So it's execution. In the beverage business, unprecedented demand, and we haven't seen this at any point in our history, really. We've publicly gone on record saying that we believe we'll grow double digits this year in our beverage business. We got an exciting new innovation in the aluminum cups. That is rolling out into retail as we speak in online. And then on the aerosol business, we've got a number of terrific opportunities to continue to push aluminum in a number of retail aisles. So I think the demands here, the backlogs here. It's about standing up unprecedented levels of capital in terms of capacity build. And with that comes something that you followed us for a long time, and we're really proud of our culture and how we deal with one another. But 2 years ago, we were at just north of 17,000 employees. We ended 2020 with 21,500 employees. We'll hire another couple of thousand this year. So transitioning that culture and developing the leaders of the future is really, I would say, the other. It ties parts and parcel to the growth story. But if we can pass along our EVA, the passion that we had for EVA and the transparency with which we deal with one another and solve problems, we're going to really like this business for many, many years to come. I don't know, Scott, if you had anything to add to that?

No. I mean, exactly. We use the word execution all the time with our business. It's because we know the opportunities are right in front of us. It's really for ours for the taking. So for us, it is about execution. It's execution on the capital, it's execution on the big contracts in aerospace. And making sure that we're developing people to be able to do that. So that's what it's all about.

Let's talk about execution. And it's come up with some of the other discussions that we've had on the conference, especially today, Ball and the beverage can sector, obviously, you're seeing unprecedented levels of growth, but you're seeing really strong growth in other markets, for example, corrugated. We haven't seen this kind of growth in a very long time. So how do you execute better? Like what prevents you typically from not executing it if there are a couple of trip points that you want to avoid, how do you avoid that distraction that could naturally arise? I mentioned a lot of it's around training and culture, but I'll stop there and leave it to you.

Yes. Let me just give you an example, kind of contrast a few years ago when we brought up the Goodyear plant versus what we're doing now. That plant was -- after we had done Rexam, rationalized some capacity, we put 200 customers, 8 different sizes in a brand new plant. And that level of complexity is just -- was just too much. And we stumbled a little bit. We were probably 6 months behind where we should have been. Now we're much more focused on streamlining, much simpler, fewer sizes, fewer customers, bringing in the workforce earlier and training them longer. That's why our start-up costs will be higher. And so I think we learned a lot from that a few years ago. And so now we have a much better execution model so that we don't stumble.

Yes, George, just building on that. So some things that seemed abundantly obvious. But you've got to design this into your thinking. You build a new facility in Pittston, Pennsylvania, where we'll be standing at the facility later this year. Yes, we've made 12-ounce cans for 30, 35 years. Those folks haven't. So you need to appreciate that and understand just how much goes into training folks. And so we have -- we've gone on record and said, we're attempting to hire folks 9 months in advance of them actually having to operate machinery. And we're sending them into our facilities around the world to make sure they get real hands-on knowledge transfer. We've centralized our global engineering function here in the last 3 years where that lends itself to what Scott's commented on in terms of standardizing equipment purchases, lime layouts. We've built in a lot more redundancy in these lines. So when you have -- they're built for changeovers. They're built for label changes. They're built not only for the businesses of today, but the businesses of the future. And I think all of those -- we're seeing candidly, firsthand right now. Our Glendale facility, a huge operation. It's up. We've got the first-line running. It's ahead of schedule. So we're getting a tremendous amount of confidence and belief in some of the things that we've laid out with those learnings that Scott said, are happening, and they're happening in the way that we anticipated. And as we're bringing up Goodyear, and we've talked about good year in the savings for the last handful of years. I do want to thank our team in Goodyear. Right now, they are operating at about 12% higher than what we even anticipated ever getting to. And for a group of folks, a couple of hundred people that have been used as a bully pulpit here. I just want to thank them and that team and some remarkable learnings and great leadership there.

That's great to hear. And good to hear about but Glendale as well. The company this year guided to exceeding its normal 10% to 15% EPS growth goal and the 4% to 8% EVA goal is in your target. And you mentioned double-digit volume growth in total across the platform. To the extent that it's not April and you're not reporting earnings yet, what could you tell us about your progress there? Or what could we observe in the public domain, however you want to guide us, that would give us benchmarks as to whether you're generating that or not so far in the year?

Well, I think we'll start off the year pretty well. I think this storm in Texas threw a bit of a loop. We've got 3 of our 21 plants affected -- that were affected by that storm in Texas. And North America had a pretty challenging comp year-over-year in the first quarter because of the start-up costs. But the other businesses, Europe and some of the other big business in Europe and South America are starting off really strong, stronger than what we expected. So in total for Ball Corporation, I'd say we're on track to where we hope we would be, and we're expecting good things for the year. And the demand seems to be continuing to firm up as we move into the year. And so we feel pretty good. I'll let Dan talk about it.

Yes, George, I would say we started the year with underpinning of our plan. Every single business within Ball will just going to contribute to an accretive EVA position and operating earning lift across every business. And with the exception of a 4 to 5-day disruption for a few plants in Texas, everyone is off to a good start, maybe a little better than we anticipated at this point. So early in the year. We don't know everything that's going to happen, clearly last year. We've learned a great deal about this time. But where we sit today, and I think that's why when you hear Scott and I talk about what's our priority, it's about execution. If we do that, everything else is going to take care of itself.

And one of the questions that we frequently get, certainly came up a fair amount after fourth quarter results is that paraphrasing here, Ball and the can industry has all this growth, but investors have to underwrite a lot of capital spending right now and a lot of start-up costs. And I guess you can't have your cake and eat it too, but people want it anyway. And the question is, when do "When do I get paid? When do I see less startup? When do I see more accretion to the bottom line? When do I see maybe a bit more value return? So not that you all have anything to be a ashamed of given your track record over the last number of years. Nonetheless, to that question, what would you say?

Yes, Scott, you want to -- you're a pretty significant shareholder.

I was going to say.

You want to answer that?

I feel like I'm a meaningful shareholder. I've been a shareholder for a long time. You're right. We are investing heavily in our business because as an EVA company, we wouldn't do that unless we were fully behind the returns that we expect to generate from this capital. The good news is, George, we're going to have really nice earnings trajectory here over the next few years. So our EBITDA is going to grow at a pretty nice pace. Our balance sheet is in great shape. So we're kind of in the sweet spot of where we want to be levered 3 to 3.5x. And so we will end up taking on more debt in the next couple of years and returning more of that to the shareholders. So we'll be able to continue this growth spurt that we're on and still return a fair amount of value to shareholders in the next couple of years. This year, we're not going to let the share count creep up. In fact, with weakness recently, we've been in the market buying a little bit. So we think we can continue to grow, to invest and return a lot of value to shareholders.

On the heels, just building on Scott's comment, it's sure feel, we have this conversation internally. Sure feels like a lot less of a risk profile than what we assumed and took on in the Rexam acquisition. We were encouraged and applauded for that, but we're being asked to underpin exactly the thinking here on long-term structured contracts and eliminating the risk in a business that we know really well with people that have been employed in our shop for, in some instances, decades. So I'm really excited about it.

Yes. For sure. If you -- if we look at Europe for minute and you had this really strong rebound in the fourth quarter, and you're looking at that into 2020. Latin America, South America is doing extremely well, too. And again, 6% growth in North America, which we say now that batting arise, but 5 years ago, people would have left me out of a room if I brought that up as a growth outlook. What does that mean in terms of the mix of your business? Just -- does that help your margin profile? Does that help -- does that increase volatility in the portfolio at all? How does the -- however you want to answer the question, how is your mix of margin and return and volatility changing given those growth trajectories? And parenthetically, what the heck happened in Europe over the last couple of quarters?

I'd say -- go ahead, Scott. On the margin portion, and then I'll cover the market dynamic.

On the margin profile, all these investments that we're making are better than historical margins because it has more specialty mix, it's underpinned with better contracts that Dan referenced. South America, obviously, is a more volatile region historically, but you also get paid for that because the margin profile there is even better. So -- and I think the other segments are going to continue to grow as well. So we look at everything kind of on an individual basis from a return standpoint, every investment individually at a return standpoint. So I think kind of it's going to lift the tide of all of our boats in all the regions that we're in. So I don't think the risk profile is changing that significantly as we look forward. Dan, do you want to comment?

And George, in Europe, I mean, we -- it was virtually every region, every country with double-digit growth. And there could be some seasonality aspects so that there could be a number of things. But I think when we're looking at Europe, medium term, long term, it is -- it's still the least can penetration at any major region. So there's -- if you're in the mid-20% of can penetration, and that's roughly half of what you're seeing in North Central America and Europe, there's a lot of room for us to grow just in terms of gaining our fair share and representative of what the package mix looks in other parts of the world. So there's an underpinning. I think the other things that are happening, you've seen some plastic legislation removed from a sustainability footprint standpoint in places like the U.K., in places like Russia. We have a pretty significant presence in both those markets. I think in Southern Europe, beer continues to grow and they continue to use cans. It's -- obviously, there's a lot more vacation spots there. It's portable. It's transferable. It's not as big of an on-premise market. And so all of those have certainly lent itself to some nice tailwind for us. I'd say you could probably architect that or derive that there's some sustainability attributes. And then we also participate with a really large energy company in Central Europe, and they continue to find ways to grow and introduce new products, and we've been the beneficiary of that. So for us, in particular, I think we're in some really good spots in terms of the pan-Europe locations, but we also are seeing -- Europe is definitely a little bit ahead in terms of how they're looking at plastic waste and recycled content. And I think some of that is starting to show up. And I think stay tuned on whether or not we can continue to grow at double digits, but I would say, certainly north of historical growth rates in that region.

When we talk about 2020, I think this was your figure, you had mentioned that the North America was about 10 billion units oversold. Could you remind us what actually went into the definition of oversold? Was the 10 billion figure at the end of the day, the right number? Was it low? Was it high, relative to what you experienced. It's important because in many ways, that's a platform from which we are all building out our various supply demand models and models for you. So...

Yes. This is -- we haven't wrestled with it probably as much as you'd hope we have, hope you fill out that model, George. I will tell you, I'd be simply put, we're really looking at what's being imported in from like unnatural lengths of miles, if you will. We're shipping cans in from Korea, from Central America, from Brazil, from Saudi Arabia. We know they're coming in from China. We know they're coming in from Africa. Over time, that 10 billion, 12 billion, whatever that number, it needs to be repotted for our customers so they can work in the flexible, agile nature with which their markets depend. But it lends itself to what we've talked about before, and we've mentioned, I think, a number of times throughout this conference with some investors, and it stems from -- we know that we're -- we don't have cans and so we don't know how much we've limited innovation with our customers. We clearly have an idea of what they want to do. What we can't tell is how effective those products will resonate within consumers and then the knock-on effect of what's the true volume impact. But categories like still water, lot of activity, lot of talk, we don't have a lot of product for them to step into, I think a number of alcohol, a number of non-alcohol opportunities. And if anything, we've seen SKU rationalization to increase velocity to get product on the shelf. And so that's an aspect. It's really hard for us to quantify right now. But we're certainly bullish in terms of what we think over the medium and long-term because those haven't entered. We know some of those products are going to win, and they're going to be in cans.

But you're not shy about that 10 billion unit number, you think that was -- it was every bit that oversold and then some from what I'm hearing here.

I believe it's 10 and then some, this is exactly how I'd be thinking about it.

On the subject as we're pivoting to kind of the near-term trends to innovation and the next levels of growth or next layers of growth. On our beverage panel earlier, we were discussing the potential for used by my colleague, Bryan Spillane he does a fantastic job covering the beverage companies for us, miniaturization. And the concept for those who aren't familiar with, and I haven't heard the term until now, instead of having your individual bottles of tequila to make your margaritas and so on, you have pre-made cocktail. How do you see that trend playing out, Dan and Scott? And do you think that's more of a driver of demand that happens off premise? Or is that something that's a real driver on-premise? And I don't know that we've even sort of thought about that and what that could mean in terms of volume?

No, I think that this is something that we're certainly wrestling with. We're doing a lot more listening and trying to understand exactly your question. I can tell you that the advent of COVID in the world we've lived in, certainly, is right for a different behavioral pattern when we return to on-premise environments or fast casual environments. And it certainly feels like there's an opportunity for more packaged goods, single-serve packaged goods. But further into your point on the -- and you're seeing it in the alcohol space. And what you're describing is a heck of a lot more convenient to take a can of wine to the beech than a full bottle. And so how does that play out candidly over the next decade. But as you see new product introductions starting to show up in liquor stores and different channels for exactly what you described, George, it's -- it feels like we're on the front end of that. And how the can plays in that. Certainly, we've seen portability and convenience is a real strong suit of our substrate. So I think we'll be tethered to that in some way how big it's going to be. I think there's legislation that plays into where you can take these packages. But it is an exciting and candidly new white space for our products to lean into. And we have not contemplated a lot of these new behavioral shifts in our most recent Investor Day. And when we've outlined what we believe to be the industry growing 100 billion units from 2019 to 2025. This question, in particular, in the new behavioral patterns that come out of COVID haven't been built into any of our thinking.

A question we also frequently get is, well, again, average can sector was pretty good last year, but that's because everybody was home. They couldn't go out. If everybody was out, they wouldn't be drinking as much can product at home. What do you think the net-net of COVID was on your business? And if, in fact, as we reopen, just keeping fingers crossed, is that a net negative for you or net positive? The related question I had is, what do you think COVID and maybe we shouldn't term in COVID, the new consumption behavior that exists has added to your business. At what point in time, you used to talk about 4% to 6% being kind of a normal growth rate, and that's now moved to 6% or better. So has the new norm added a point or two to maybe not forever, who knows what is not forever, but intermediate trends. So...

Scott, you want to take it?

I am not sure. I'll start. I'm not sure we saw the benefit, a big benefit from COVID. To Dan's comment about the market being 10 billion units undersold or oversold, I think that's a theoretical. We could have sold that many more units, but we did. And so you're right. I mean, there's definitely been more take home and less on-premise. But to Dan's point, I think when we go back, how do we go back? Do we go back in the office, 5 -- everybody goes back 5 days a week, like we used to or you work from home 2 or 3 days a week. That will still drive home consumption more than it was before. And then to Dan's point on on-premise, I was at a restaurant a couple of days ago for dinner and I ordered a beer, and they said, we don't have any more draft beer. We're only doing can because they don't want the inventory, they don't want to take the risk. And how much more does that play into Dan's points going forward on on-premise. So I don't -- I'm not that worried. I was more word earlier. I was curious about that. But as we've kind of gone through this and seen how patterns are changing, I'm not sure that's that big a risk. And then you have the whole innovation pipeline. It was essentially shut off during COVID. And so you'll see a lot more innovations coming after COVID that have been kind of waiting for can capacity basically.

Interesting. I should mention -- go ahead, Dan, please.

I would say, George, is we are optimistic that what we've outlined has demand. If anything, I believe we've undersold all of these impacts. And we're not coming up with these calculations, assertions or assumptions on our -- by ourselves. We're hearing it from our customers and how they're thinking about. If you look at the largest brewers and a number of them have come out with their earnings, the ones that have candidly done the worst had the least flexibility in their channel. So they were heavier with kegs or they were heavier with returnable glass. And I think they're figuring out very quickly that we can build a lot more flexibility into our supply chain with cans into a lot more channels that we might not be participating in. And so all of those conversations and thinking have been forced on our customers, and we're sitting there, we're digesting what they're telling us. The reality is until we get out of this and have herd vaccinations, we're not going to be able to have the data points to really fundamentally answer this. But the fact that we're having the questions and the conversations at all would lend itself to -- there's going to be some tailwinds coming out of this for our products in particular.

Just out of curiosity, what is the comparative shelf life? Recognizing you're talking about a lot different literage versus 12-ounce can. But what is the shelf life of the keg, if you know offhand, just a question I came to me relative to the shelf life of equivalent volume in cans? Is it -- why isn't it the same, recognizing that the literage bite is different. And therefore, the risk is larger with kegs.

I don't think it's vastly different. I do -- and we should get back with you on that specifically and provide you with that information with what we know. I do know that each of the different brews have a different shelf life. So that plays into it. So if we're talking about like-for-like, the can does better in some instances, and I think the kegs may be a pretty -- it could be an equilibrium on quite a lot of volume.

I was just curious. And ultimately, the bigger issue is really around what Scott was alluding to, which is the working capital issue, right? You take a big risk buying some keg and then it moves or maybe it might not move, whereas there's less risk with the one-way packaging. What are your thoughts on -- to the extent that you can comment on rPET? And whether you think that is a viable product. From our standpoint, we think it's something that the industry -- and here I'm talking about your customers have to have in terms of their suite for the various constituencies that they play to, but that product is going to have an awfully large amount of performance issues and it's going to be more costly. But I don't know, maybe I'm wrong, and I shouldn't have answered the question in the first place. So I'll see it back to you. What do you think on it?

Scott, I'll let you take a shot at that.

Yes. I think if I was our customer, I would be doing the same thing with our keg. I'd be trying to promote it, I'd be trying to -- you're going -- we're going to try to protect some of those channels where PET is being sold, right? It's not going to all move to cans. So you're going to try to protect it as much as you can. I think it's going to have issues with cost. I don't think it's competitive. I don't think you can -- it's not infinitely recyclable. I think the advantage the can has is the circularity. I mean we are already there in terms of 100% circularity. And so I wouldn't be surprised if you'll see more of these. Now I've heard chemical recycling is now molecular recycling. I don't know what kind of chemicals you use in molecular recycling. I'm sure it's not that different. But I think the can just has inherent advantages. And so I think you'll see some of these things on plastic, but I don't think it changes the overall direction and the tailwinds that we have behind the can.

Yes. I think the 2 large -- you brought up the actual performance, and I can't speak to that. But I think there are couple of things that we continue to look at as it relates to the circularity message in and around aluminum is, it has economic value. You don't have to do a heck of a lot to continue to improve our attributes incrementally. I mean you recycle more, there'll be more recycled content in the product. We still have opportunities to grow that. We're already at 70-plus percent recycled content. I think, rPETs in the 25% range. What's it going to take to get that to 75%, and a couple of things really go against it. And it is, you got to collect the material. That means you have to spend money on infrastructure to do that. And the yield that you get when you attempt to recycle it, is it's a significant loss. And so there's inherent cost in that versus -- if you're losing 20% to 30% yield, in a can we lose 1.3% yield by turning a can into another can. It's to Scott's point, the circularity message is underpins really good economic value and a product that can continue to improve in all the circularity attributes. And we're already so far along this path that requires very little further investment. And that's -- candidly, that's what we continue to want to work on that and those attributes. And we think that it will stand up to rPET or molecular recycling or whatever the next nomenclature is.

Understood. I should also mention for those of you who are watching and listening, you have the ability to ask a question through our Veracast system. So we have about 13 minutes left, feel free to fire away is there anything that we could pose on your behalf? I figure I'll ask this question. I'm not sure you'll be able to provide much on it. But I think last year, you said your mix was roughly about 46% custom. And that the goal is to get to 50% or more in 2021. From a return standpoint, from an EVA standpoint, put it that way. How does that -- how much could that add to the business? Or what does that contribute to your EVA and return goal for this year?

That's why we think we're going to grow EVA in that 4% to 8% range because these investments are going to be pretty good. We grew our EVA dollars last year 25%. We should grow them greater than that in 2021 with the investments that we made last year that will come up and get more mature this year. And with the things that we'll add this year that will be contributing in the back half of the year, that's where we get that EVA generation from. And the underlying contracts, where the base business in North America, we saw the uplift last year in 2020. We don't have much in the way of new contracts this year, but we have more coming at the end of '21, into '22. And so I think all those things will lead to that improvement in growth in EVA dollars in excess of that 25% that we did last year.

For this year, you think -- did I hear you correctly, you think you can do better than the 25% growth that you saw last year this year in terms of EVA dollars, Scott?

Correct.

Okay. And then I want to switch again, we'll continue to talk about innovation. Let's talk about the new aluminum cup. What is your consumer testing data suggesting in terms of its outlook. Obviously, it's positive enough for you to put in the first slug of capacity into Rome, Georgia. But we were looking on Amazon the other day and I think the price is something like $0.60 for the aluminum cup that you're producing versus maybe $0.01 for plastic. So is there -- is that big of a market for this cup from your vantage point? I guess the answer is yes. So the answer is -- the question is really why, when there's such a big disparity on the price?

Thanks for that, George. And I was just down in Rome, Georgia, where our facility was earlier this week. So got to see the mine and dive into a little bit of this. You referenced and we've talked about our Amazon online channel. And we -- testing the limits on price at the outset. And actually, it's selling through but now that we've got the facility up and running, and it's getting close to at speed, it's certainly ahead of where we thought. We are starting to really turn on the marketing elements of that channel to really test the alignment of -- and the price elasticity. And what we've seen thus far is really encouraging. It's kind of better than we anticipated there. And the other thing that's happening right now is we're launching into retail as we speak. So you will begin to see that and kind of one of the large big box over the summer, you'll see that in a large retail drug channel over the summer. You'll see that in one of the national grocers over the center. So we'll start to get some of this velocity data and really start to test these price points. But everything we've heard in the retail channel right now is in line and maybe slightly ahead of what we had modeled in terms of pricing, but it is early, early days. And we've got to see this, but we are encouraged enough at this point, and Scott may want to add to this that I think you should anticipate that we'll be moving to potentially build out our facility in Rome, sooner than we thought. We're investigating kind of where the next couple of plants need to be. We're looking into Europe and doing a similar case study there and trying to anticipate where this is going. It will be -- our business case needs -- candidly needs that information and those velocity turns, but incredibly encouraged. And if you think about, George, in the -- why can you justify a higher revenue stream? Or why is there not as much of a comparative back and forth, just thinking of an on cost? Well, in retail and online, it's a completely different revenue channel, right? And so those folks are looking at this -- they don't care if it's sitting side-by-side with plastic, and they're generating -- they're the beneficiary of that revenue stream as well. When you get into foodservice and venues, that's where it's a -- you want me to substitute this at a multiple cost of why. And let's see what happens. A lot of these -- lot of the restaurant, tours, et cetera, they're not in the healthiest of spots coming out of COVID. So the good news is, 80% of this business is retail and online. We've invested in standing up that business ahead of really where we contemplated originally when we started discussing this. And we're leaning into it, and we're really encouraged with what we're seeing right now.

So Dan, if I heard correctly and got my notes down correctly, so you're looking to likely bring on the second line in Rome. You mentioned Europe potentially. And did you mention that you might be looking for another location in the States?

I think we'll have to if these retail channels start to generate any kind of velocity turn. We always knew this is where the big volume was. As you remember, we started in foodservice to really lean into, number one, we were only making this on our pilot line. So we only had so much volume. So we were trying to get sort of some followership on social media through some iconic venues. We were at the Super Bowl this year. Russell Wilson and his wife Ciara were drinking that with the commissioner, and we got that on TV. So those are some wins that are certainly cheap by marketing stand in advertising and promotional standards. But yes, I think there's real opportunity for us to move this along at an accelerated clip. I mean internally, Scott and I are challenging the business to be a significant leg in our portfolio as soon as they can. And everything we've seen so far would signal that they can be. I don't know, Scott, if you had anything additional.

No, I would agree. I think it's -- even for the stadiums and venues, they can sell the advertising and basically pay for the cup. So it's kind of a free win to go green and go sustainable with an aluminum cup if you could still advertise and it does not -- and that does not really cost you anything. I think the advancement in another line that we are cup of different sizes that we will make -- where we can sell this and where are we -- stadiums and venues and things can go plastic free, I think that will broaden the appeal as well as at retail. So far, everything we've seen, we're pretty excited about.

Recognizing that and certainly taking at face value, let's assume just for a minute, hopefully, it's not going to turn out this way. You're going to wind up having to build another 10 plants for all the good reasons, great reasons. But let's assume the product doesn't play out like you expect. Can the capacity be easily repurposed into one of your traditional products or not really? So we'll need to sort of evaluate that as you build out that capacity, what that means in terms of risk of failure on that product.

There's a pretty good chunk of this that's proprietary in nature. We might have to repurposed it, redesign some elements of it, but it's -- this is -- I think you followed the story for a handful of years, George. There's an awful lot of work that's gone into this, that there's unique aspects of this stuff. The ability to nest it requires certain type of tooling and machinery. The curl on the top of the cup requires a different mindset in a different way, I think. But we've got some pretty tremendous machine shop folks that I don't figure something out here. But yes, there's some of it that can, indeed, but there's parts of it that are, I think, pretty significantly proprietary, Scott.

Understood. Switch gears to the remaining time to the capital allocation. So talked about returning even more value to our long-term shareholders in 2021 and beyond and a significant return of value to shareholders in '21 and beyond, both on the fourth quarter call. And I was just -- maybe I'm parsing the words when I don't need to, but why the acknowledgment of your long-term shareholders necessarily in terms of discussion and maybe that was -- there was no difference there between any of your shareholders? And, b, more importantly, what should we take away from the commentary about returning even more value. You kind of touched it on already, Scott, with the opportunity in the market, maybe you increased the buyback, but anything else we should take away.

Yes. I think you're making maybe too much focus on the long term. I mean...

No worries.

Or maybe that was not intentional. I mean, we care about all of our shareholders. I think we run the business for the long term. And the people that own our stock as we're returning value are the ones that will get the value, not the ones that kind of come in and out on a quarterly basis kind of thing. So I think it was just about that. I don't think it was anything specific. In terms of returning value to shareholders, I mean this year, we do have a heavier investment period that we're going through. We said we're going to spend at least $4.5 billion, most of that being growth CapEx. And so I think as we see the profitability accelerate here and the EBITDA accelerate and our leverage staying about flat, that gives a lot of powder to be able to return to -- value to shareholders. So it won't be gigantic in 2021, but I would see a pretty decent acceleration of that in 2022 and beyond. And back in the buybacks and dividend. We continue to look at both.

And George, I want to, all of these data points have been shared, but maybe just to tie a bow around it. We've gone on record saying that we're -- we believe we're going to generate $700 million of additional EBIT over the course of the next 3 years. There'll be a heck of a lot more depreciation. And so there's no reason why we don't maintain 3 to 3.5x leverage. And that gives us a ton of flexibility to Scott's point. And we will do the appropriate thing from an EVA standpoint in making sure that the value gets back to the shareholders.

Understood. I would be the first time that I made something out of nothing.

No, maybe we should be more careful on the word. I don't know when we said long term, maybe I was thinking about fee, because I am a long-term shareholder, I don't know.

There you go. There you go. If all spend -- maybe last question here, close to $1.5 billion in CapEx this year and next, give or take, that would mean that CapEx has to really come in maybe even below $1 billion for the remaining portion of your goal towards 25% to be within the $5 billion plus range? Because if you're not, then you're -- it's $6 billion plus, and if it was originally $6 billion plus, you would have said that. So I mean that's the math of it, but what should we take away about that actually being realistic recognizing that you're spending the money because you think you're going to get positive -- very positive EVA dollars from it and it's a high-class problem. And then how much of this is really being driven by the fact that you right now have the opportunity, not this year, but next year and beyond for these renewals to gain at least your fair share, how much of that is driving that whole capital cycle?

Well, on the $5 billion plus, remember, that was growth capital. And so when we -- whenever we give you kind of an annual number, that's got $275 million, $300 million of maintenance CapEx. So that can be your delta.

Sorry about that.

That's okay. But I also think we do a 3-year strategic plan. And so we've got a pretty good idea of what are the potential things out there over the next few years of what we're going to spend money on. If this growth continues at the pace, we'll continue to spend money. If we can deploy that capital with good returns, underpinned by long-term contracts, we'll continue to deploy that capital. So I think that's why it was the $5 billion plus because from really from 2018 to every time we've talked to investors since then, if anything, we get more bullish on the business and the direction of the businesses. So we're in a great spot to be able to take advantage of this growth, given our size, our scale, the strength of our balance sheet and our discipline on capital allocation. So I think we want to make sure we do that.

Yes. And George, I think it goes without saying, but when we had our Investor Day, we were sitting on a plot at dirt basically in Rome, Georgia. I mean, we didn't have a point up and running. So there's an awful lot that's happening. It's really exciting. And when we know more about what that capital number looks like at 4 and 5 years, we'll certainly pass that along.

We look forward to it. Dan, Scott, thanks very much for your -- as always, great remarks. Great presentation. Everyone, thanks for listening in and watching. Appreciate your time as well. Enjoy the rest of the day and the rest of the conference, and we'll see you soon. Take care.

Thanks for having us, George.

Everybody, be safe.