Ball’s first quarter results slowed compared to 2018

Ball’s first quarter results for 2019 have slowed compared with the same period last year.  The company’s comparable net earnings were $167 million compared to $180 million in 2018, reportedly due to higher US scrap costs and higher plant start-up costs.

However, customers are increasingly shifting towards aluminium packaging as the world continues to ditch plastic in favour of the can, and Ball anticipates it will still reach its annual targets.

“Growth trends in our packaging and aerospace businesses continue to gain momentum. During the quarter, higher than expected global can demand driven by customers’ shifting mix and new product launches to aluminum packaging helped drive stronger revenue growth. In North America, higher costs related to surplus US aluminum scrap and higher than anticipated plant start-up costs affected first quarter results. We anticipate that these near-term cost pressures will moderate in the second half when new lines complete learning curves and more favourable contractual terms become effective, as well as in 2020 and beyond,” said John A. Hayes, chairman, president and chief executive officer.

“Beverage can growth appears to be accelerating to levels that are stronger and more sustainable than in the past 25 plus years. We welcome the opportunity to support growth for infinitely recyclable aluminum packaging from 11 new beverage can lines and two new extruded aluminum aerosol lines installed across our global plant network since the beginning of 2018.”

Beverage Packaging, North and Central America

Quarterly results for Beverage packaging, North and Central America improved, reporting earnings of $118 million compared to $113 million in the first quarter 2018.

This was due to mid-single digit can volume growth and growth in packaging for the sparkling water, beer, wine, energy and spiked sparkling seltzer categories. Results were largely offset by the US aluminum scrap rates, a challenging ramp up for two of four lines at its new Goodyear, Arizona, facility and incremental costs to serve double-digit specialty can growth.

Throughout 2019, continued volume growth, net fixed cost savings, lower start-up costs, customer product mix and improved aluminum can sheet quality are expected to add significantly to results.

Beverage Packaging, South America

Beverage packaging South America, earnings were down $30 million, reporting $68 million compared to $98 million during the same period in 2018.

Low-teens segment volume growth was unable to fully offset the Rexam acquisition. Industry can demand in South America remains particularly strong as beer customers continue to shift packaging from glass to aluminum cans. The company’s new beverage can manufacturing plant in Paraguay is scheduled to begin production in late 2019.

Beverage Packaging, Europe

For Beverage packaging Europe, earnings were up $4million, reporting $64 million compared to $60 million in the first quarter 2018.

First quarter segment earnings reflect low double-digit can demand growth across Europe offset by cost inflation, start-up costs and euro earnings translation. Positive volume momentum continues as customers continue to adjust a portion of their packaging to aluminum beverage packaging from single-serve plastics, particularly in the United Kingdom. New lines in the company’s existing Widnau, Switzerland, and Belgrade, Serbia, facilities began production in January.

Non-reportable

Year-on-year results in non-reportable reflect the dilutive impact of the sale of the US steel food and steel aerosol business in July 2018, partially offset by mid-single digit volume growth in the company’s retained global aluminum aerosol business driven by strong demand for personal care aluminum aerosol packaging for deodorant, hair care and body sprays. Additional businesses supporting non-reportable include aluminum beverage can manufacturing operations in AMEA and Asia. The company’s announced sale of its Chinese beverage can assets received antitrust approval and the transaction is expected to close in the second half of 2019. Despite the Chinese asset sale, non-reportable results are expected to improve year-over-year in the second half.

Outlook

“The company’s financial position is strong, and the company plans to return in excess of $1 billion to shareholders in 2019 and beyond,” said Scott C. Morrison, senior vice president and chief financial officer.

“Our focus on commercialising sustainable aluminum packaging solutions across our customers’ product categories is translating into additional growth. We will continue to navigate short-term start-up inefficiencies and cost inflation to position Ball for the best long-term outcome in advance of contract renewals. While we still have much work to do to achieve our 2019 financial goals originally laid out in mid-2016, our longer term prospects continue to be bright, and we continue to drive toward our 2019 goals of $2 billion in comparable EBITDA, in excess of $1 billion in free cash flow and exceeding our long-term 10 to 15% diluted earnings per share growth goal this year,” Hayes said.

Related content

Leave a reply