US beer brand disrupts Ball’s second quarter results

Ball Corporation has reported, on a US GAAP basis, second quarter 2023 net earnings attributable to the corporation of $173 million (including a net after-tax loss of $21 million, or 6 cents per diluted share for business consolidation and other non-comparable items) or diluted earnings per share of 55 cents, on sales of $3.57 billion, compared to a net loss attributable to the corporation of $174 million (including a net after-tax loss of $437 million, or $1.37 per diluted share for business consolidation and other non-comparable items, including the non-cash, long-lived asset impairment for the Russian beverage packaging operations) or a loss of 55 cents per diluted share, on sales of $4.13 billion in 2022. Results for the first six months of 2023 were net earnings attributable to the corporation of $350 million, or $1.10 per diluted share, on sales of $7.06 billion compared to $272 million, or 84 cents per diluted share, on sales of $7.85 billion for the first six months of 2022.

Ball’s second quarter and year-to-date 2023 comparable earnings per diluted share were 61 cents and $1.30, respectively, versus second quarter and year-to-date 2022 comparable earnings per diluted share of 82 cents and $1.59, respectively.

“We delivered strong second quarter results despite lower global volumes driven largely by a US beer customer’s brand disruption and tough year-over-year comparisons associated with 2022 business divestments and higher interest costs. Notable inflationary cost recovery, benefits of cost-out actions and a diversified customer mix as well as improved operational efficiencies across all business operations will significantly improve full-year results.

“Following a multi-year period of investment, organic growth and leveraging our team and unique technologies to win an even larger portfolio of mission critical space-based aerospace contracts, additional actions are being assessed real time to further position the business for all stakeholders’ long-term success and accelerate our near-term return of value to Ball shareholders. We remain a trusted mission partner to our customers and colleagues and anticipate providing an update on the assessment in the second half,” 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 second quarter 2023 were $175 million on sales of $1.54 billion compared to $164 million on sales of $1.78 billion during the same period in 2022. Second quarter sales reflect lower shipments and the contractual pass through of lower aluminium costs favourably offset by incremental inflation recovery.

Second quarter segment comparable operating earnings increased year-over-year largely due to incremental inflation recovery and improved operational performance offset by 8.5% lower volumes driven by customer mix, particularly in the domestic mass beer category. Aluminium beverage cans continue to outperform other substrates in the current retail pricing and macroeconomic environment.

To maximise profitability and optimise low-cost production across Ball’s North American plant system during the current environment, the company will continue to prudently manage production output at certain locations to serve its customers’ demand for innovative aluminium packaging. As a result of balancing supply/demand year-to-date and improvement in select customer demand trends late in the second quarter, inventory levels for coil aluminium and finished can inventories have largely normalised and full-year cash generation goals are on track. Fixed cost and SG&A savings, the contractual recovery of prior year inflationary costs and Ball’s ability to leverage the flexibility of manufacturing plant network to serve customers experiencing higher growth than anticipated 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 second quarter 2023 were $98 million on sales of $920 million compared to $129 million on sales of $1.13 billion during the same period in 2022. Second quarter sales reflect lower year-over-year shipments due to the sale of the Russian operations during the third quarter of 2022 and the contractual pass through of lower aluminium costs. Historical results for the Russian operations will continue to be reflected in beverage packaging, EMEA segment results.

Second quarter operating earnings reflect the year-over-year $40 million earnings headwind due to the sale of the Russian operations during the third quarter of 2022 and start-up costs for two new facilities, 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 second quarter segment volumes increased approximately 1%, excluding Russia, and were down 16.6%, including Russia.

The new Kettering, UK, and Pilsen, Czech Republic, facilities concluded start-up activities in the quarter and production from the new can lines will enable accelerated volume growth for sustainable aluminium packaging across the region during the second half of 2023. During 2023, contractual recovery of 2022 inflation and cost savings are anticipated to offset the earnings headwind associated with the Russian business sale.

Beverage Packaging, South America

Beverage packaging, South America, segment comparable operating earnings for second quarter 2023 were $30 million on sales of $405 million compared to $52 million on sales of $534 million during the same period in 2022. Year-over-year sales reflect lower volumes and the contractual pass through of lower aluminium costs. Second quarter segment comparable operating earnings decreased year-over-year due to lower volumes and unfavorable regional product mix in Brazil.

Segment volumes decreased 5.1% in the second quarter. To maximise profitability and optimise low-cost production across its South American plant system, the company temporarily modified production output across certain facilities in its Brazilian footprint during the second quarter. As the year progresses, certain facilities will reinitiate production to prepare for the busy fourth quarter summer selling season. 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 in the second half of 2023 due to more favourable aluminium price trends relative to 2022 levels.