Ball reports first quarter 2023 results
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Ball Corporation has reported, on a US GAAP basis, first quarter 2023 net earnings attributable to the corporation of $177 million (including a net after-tax loss of $40 million, or 13 cents per diluted share for business consolidation and other non-comparable items) or diluted earnings per share of 56 cents, on sales of $3.49 billion, compared to $446 million net earnings attributable to the corporation, or $1.37 per diluted share (including a net after-tax gain of $194 million, or 60 cents per diluted share for business consolidation and other non-comparable items, including the sale of Ball’s former equity method investment in Metalpack) on sales of $3.72 billion in 2022. Ball’s first quarter 2023 comparable net earnings were $217 million, or 69 cents per diluted share compared to $252 million, or 77 cents per diluted share in 2022. Year-over-year financial results reflect the impact of the Russian aluminium beverage can business sale completed in the third quarter of 2022.
Details of segment comparable operating earnings, business consolidation and other activities, business segment descriptions and other non-comparable items can be found in the notes to the unaudited condensed consolidated financial statements that accompany this news release. References to volume data represent units shipped. Year-over-year global and EMEA segment volume data exclude the impact of the Russian beverage can business sale completed in third quarter of 2022, unless specifically noted otherwise.
“We delivered strong first quarter results amid tough year-over-year comparisons driven largely by 2022 business divestments. Notable inflationary cost recovery, benefits of cost-out actions as well as improved operational efficiencies and aerospace program execution will significantly improve full-year results and more than offset higher interest expense and tepid first-half volume trends driven by varying global macroeconomic conditions impacting consumer demand,” said Daniel W. Fisher, chairman and chief executive officer.
Beverage Packaging, North and Central America
Beverage packaging, North and Central America, segment comparable operating earnings for first quarter 2023 were $183 million on sales of $1.5 billion compared to $174 million on sales of $1.6 billion during the same period in 2022. First quarter sales reflect lower shipments and the contractual pass through of lower aluminium costs favourably offset by incremental inflation recovery.
First quarter segment comparable operating earnings increased year-over-year largely due to a $28 million net benefit associated with an anticipated US virtual power agreement settlement during the quarter, incremental inflation recovery and improved operational performance offset by 4.9% lower volumes driven by customer mix and challenging year-over-year volume comparisons. Aluminium beverage cans continue to outperform other substrates in the current retail pricing and macroeconomic environment.
To maximize profitability and optimize low-cost production across our North American plant system during the current macroeconomic environment, the company will continue to prudently manage production output to serve our customers with innovative aluminium packaging. Given recent volume trends, inventory levels of coil aluminium and finished cans are expected to normalize as we enter the busy summer selling season. Fixed cost savings from executed plant closures, SG&A cost-out initiatives and the contractual recovery of prior year inflationary costs are expected to improve year-over-year results, largely in the second half of 2023.
Beverage Packaging, EMEA
Beverage packaging, EMEA, segment comparable operating earnings for first quarter 2023 were $73 million on sales of $834 million compared to $100 million on sales of $942 million during the same period in 2022. First quarter sales reflect lower year-over-year shipments due to the sale of the Russian operations during the third quarter of 2022, the contractual pass through of lower aluminium costs and unfavourable foreign exchange translation. Historical results for the Russian operations will continue to be reflected in beverage packaging, EMEA segment results. See Note 1 “Business Segment Information” for additional information about the sale agreement and historical results.
First quarter operating earnings reflect the year-over-year $32 million earnings headwind due to the sale of the Russian operations during the third quarter of 2022, start-up costs for two new facilities and unfavourable currency translation, partially offset by inflationary cost recovery. Packaging mix shift to aluminium cans supported by ongoing packaging legislation in certain countries continues to be a driver of aluminium beverage packaging growth. Year-over-year first quarter segment volumes increased 5.0%, excluding Russia, and were down 11.0%, including Russia. In addition, volumes in Turkey moderated following significant earthquakes impacting the region during the first quarter. The company’s employees and plant assets in Turkey are safe and are not located in or near the recent earthquake area. Through our global employee giving and assistance programs, The Ball Foundation and local employees continue to support rebuilding needs in the region.
The recently constructed Kettering, U.K., and Pilsen, Czech Republic, facilities began initial line start-up activities late in the first quarter that will enable further growth for sustainable aluminium packaging across the region. During 2023, contractual recovery of 2022 inflation and cost savings are anticipated to offset the earnings headwind associated with the Russian business sale. See Note 1 “Business Segment Information” for additional information about the Russian historical results.
Beverage Packaging, South America
Beverage packaging, South America, segment comparable operating earnings for first quarter 2023 were $50 million on sales of $450 million compared to $78 million on sales of $494 million during the same period in 2022. Year-over-year sales reflect lower volumes and the contractual pass through of lower aluminium costs. First quarter segment comparable operating earnings decreased year-over-year due to lower volumes and unfavourable regional customer/product mix in Brazil.
Demand trends across the company’s South American operations were challenging during the quarter due to the previously disclosed 2022 customer contract breach and unfavourable comparative retail pricing for certain beverages packaged in aluminium cans versus other substrates. Segment volumes decreased 4.1% in the first quarter. To maximize profitability and optimize low-cost production across our South American plant system, the company continues to temporarily modify production output across certain facilities in its Brazilian footprint. Across South America, multi-year customer initiatives to increase the use of sustainable aluminium packaging are expected to continue, and in Brazil, package mix shift to aluminium is expected to improve later in 2023 due to more favourable aluminium price trends relative to 2022 levels.
Aerospace segment comparable operating earnings for first quarter 2023 were $60 million on sales of $508 million compared to $43 million on sales of $504 million during the same period in 2022. Backlog remained strong at $2.8 billion, and contracts won, but not yet booked into backlog, finished the quarter at $5.0 billion.
Strong first quarter segment comparable operating earnings reflect new program wins, favourable operational performance and improving supply chain dynamics. The segment continues to leverage its talent, manufacturing and test capabilities, and its engineering and support workspace, to secure additional defence, climate change and Earth-monitoring contracts to provide mission-critical programs and technologies to US government defence, intelligence, reconnaissance and surveillance customers.
During the first quarter, Ball Aerospace was selected to support the National Scientific and Technical Intelligence Mission for the next decade. As part of this contract, Ball Aerospace’s team located on Wright-Patterson Air Force Base near Dayton, Ohio, will provide technical expertise in several areas, including electro-optical and spectral research and data analysis, systems and software development and other support services. Also, during the quarter, Ball Aerospace successfully powered and launched a prototype payload on Loft Orbital’s YAM-5 mission. The payload is equipped with Ball-built Linux-based software which features containerized applications that can be changed on-orbit, as well as real-time data processing functions. With this demonstration payload, the modular technology combines proven expertise with advanced tools and processes, allowing for accelerated development timelines and future mission operations.
Complementing the team’s success year-to-date, the Ball-built TEMPO (Tropospheric Emissions: Monitoring of Pollution) instrument launched successfully in April as part of NASA’s first Earth Venture instrument mission. TEMPO will provide critical data on air pollution across North America including high-resolution daytime measurements of key air pollutants hourly as it scans across the continent – coast-to-coast from Mexico City to the Canadian Arctic – giving the scientific community a new tool to improve the detail and accuracy of air quality forecasts and make a meaningful difference in the everyday lives of people who are sensitive to air pollutants.
Looking ahead, bids for Ball Aerospace’s services and technologies are accelerating and, over the next several quarters, will transition into the company’s total backlog.
In addition to undistributed corporate expenses, the results for the company’s global aluminium aerosol business, beverage can manufacturing facilities in India, Saudi Arabia and Myanmar and the company’s aluminium cup business continue to be reported in other non-reportable.
First quarter 2023 results reflect lower year-over-year undistributed corporate expenses and higher demand across all aluminium packaging businesses in other non-reportable. Volume across the company’s global extruded aluminium bottles and aerosol containers increased 12.8% during the quarter. Volume also increased in the other non-reportable beverage can manufacturing facilities for the first quarter by 12.3%. During the quarter, the company’s global aluminium aerosol customers and regional water and personal care brands continued to pursue next generation lightweight sustainable packaging solutions and expand usage of refillable aluminium bottles for certain venues. The company will execute incremental extruded aluminium bottle investments throughout the year to provide increased production capabilities to meet contracted growing customer demand.
“Following our typical seasonal working capital build, we ended the first quarter with cash and available liquidity in excess of $1.5 billion. Leveraging our second half 2022 cost-out actions, contractual inflationary cost recovery and reduced capital expenditures, we remain well-positioned in 2023 to deliver our long-term diluted earnings per share goal and free cash flow in the range of $750 million in addition to returning value to shareholders,” said Scott C. Morrison, executive vice president and chief financial officer.
“We continue to actively manage our businesses through the lens of Drive for 10 and EVA. Our team remains focused on maximizing returns, improving free cash conversion, driving organic growth by leveraging sustainability and innovation tailwinds and being good stewards of our capital. We look forward to driving a circular economy through the broader use of sustainable aluminium packaging and exquisite environmental, aerospace and defence technologies to preserve our planet and achieving our recently disclosed Climate Transition Plan through collaboration with our supply chain partners. Including or excluding the Russian business divestment headwind and year-to-date demand trends, we remain positioned in 2023 to achieve our long-term diluted earnings per share growth goal of 10 to 15%, improve EVA generation, and increase cash flow to deleverage and return value to shareholders in 2023 and beyond,” Fisher said.