Ball Reports Second Quarter 2023 Results
- Diluted earnings per share of 55 cents compared to a loss of 55 cents in 2022
- Aerospace backlog at $2.6 billion
- Potential to achieve low end of long-term comparable diluted earnings per share growth goal of 10 to 15 percent in 2023
- Global beverage can shipments down 4.9%
- Russian business divestment impacting earnings
Highlights
U.S. GAAP diluted earnings per share of55 cents vs. a loss of55 cents in 2022; results include impact of 2022 business divestments- Comparable diluted earnings per share of
61 cents vs.82 cents in 2022; results include impact of 2022 business divestments - Global beverage can shipments down
4.9% , excluding impact of 2022 Russian business divestment - Aerospace backlog
; contracts won-not-booked$2.6 billion , an increase of$6.0 billion year-to-date$1 billion - Positioned to generate approximately
of free cash flow, grow EVA, reduce leverage and return value to shareholders in 2023$750 million - Reiterate ability to achieve
of net inflation recovery and at least$200 million of cost savings in 2023$150 million - In 2023, potential to achieve low end of long-term comparable diluted earnings per share growth goal of 10 to 15 percent, inclusive of divested Russian operating earnings headwind
Ball's second quarter and year-to-date 2023 comparable earnings per diluted share were
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 second quarter results despite lower global volumes driven largely by a
Beverage Packaging, North and
Beverage packaging, North and
Second quarter segment comparable operating earnings increased year-over-year largely due to incremental inflation recovery and improved operational performance offset by 8.5 percent lower volumes driven by customer mix, particularly in the domestic mass beer category. Aluminum 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 environment, the company will continue to prudently manage production output at certain locations to serve our customers' demand for innovative aluminum 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 aluminum and finished can inventories have largely normalized and full-year cash generation goals are on track. Fixed cost and SG&A savings, the contractual recovery of prior year inflationary costs and our 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
Second quarter operating earnings reflect the year-over-year
The new
Beverage Packaging,
Beverage packaging,
Segment volumes decreased 5.1 percent in the second quarter. To maximize profitability and optimize low-cost production across our 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
Aerospace
Aerospace segment comparable operating earnings for second quarter 2023 were
Strong second quarter segment comparable operating earnings reflect new program wins, favorable 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 defense, climate change and Earth-monitoring contracts to provide mission-critical programs and technologies to
During the second quarter, Ball Corporation announced that it is considering options that could better position its aerospace business to provide value to shareholders and customers. There is no certainty that any formal decision will be made. If and when appropriate, a further announcement will be made.
Non-reportable
In addition to undistributed corporate expenses, the results for the company's global aluminum aerosol business, beverage can manufacturing facilities in
Second quarter 2023 results reflect higher year-over-year undistributed corporate expenses, partially offset by improved operational performance in the extruded aluminum aerosol business and the other non-reportable beverage can manufacturing facilities. Volume across the company's global extruded aluminum bottles and aerosol containers increased 3.2 percent during the quarter. During the quarter, the company's global aluminum aerosol customers and regional water and personal care brands continued to pursue next generation lightweight sustainable packaging solutions and expand usage of refillable aluminum bottles for certain venues. The company will execute incremental extruded aluminum bottle investments throughout the year to provide increased production capabilities to meet contracted growing customer demand.
Outlook
"Our teams are doing an excellent job of managing costs and working capital, while also assessing ways to unlock value across all of our businesses. EVA is core to our capital allocation strategy and employing the best positioned, low-cost average invested capital base is key. As a result of multiple disciplined actions over the past 18 months to address costs, capital and growth, we remain well-positioned to deliver free cash flow of approximately
"Maximizing returns, improving free cash conversion, driving organic growth by leveraging sustainability and innovation tailwinds and being good stewards of our capital are our core areas of focus. We look forward to driving a circular economy through the broader use of sustainable aluminum packaging and exquisite environmental, aerospace and defense technologies to preserve our planet and achieve the best outcomes for our stakeholders. Despite higher interest costs, year-to-date demand trends and the Russian business divestment headwind, the potential remains for us to achieve our long-term comparable diluted earnings per share growth goal of 10 to 15 percent, improve EVA generation, and increase cash flow to deleverage and return value to shareholders in 2023 and beyond," Fisher said.
About Ball Corporation
Ball Corporation supplies innovative, sustainable aluminum packaging solutions for beverage, personal care and household products customers, as well as aerospace and other technologies and services primarily for the
Conference Call Details
Ball Corporation (NYSE: BALL) will hold its second quarter 2023 earnings call today at 9 a.m. Mountain time (11 a.m. Eastern). The North American toll-free number for the call is 800-954-1053. International callers should dial +1 212-231-2903. Please use the following URL for a webcast of the live call:
https://edge.media-server.com/mmc/p/vjxntzs8
For those unable to listen to the live call, a taped replay will be available from 11 a.m. Mountain time on August 3, 2023, until 11 a.m. Mountain time on August 10, 2023. To access the replay, call 800-633-8284 (North American callers) or +1 402-977-9140 (international callers) and use reservation number 22027409. A written transcript of the call will be posted within 48 hours of the call's conclusion to Ball's website at www.ball.com/investors under "news and presentations."
Forward-Looking Statements
This release contains "forward-looking" statements concerning future events and financial performance. Words such as "expects," "anticipates," "estimates," "believes," and similar expressions typically identify forward-looking statements, which are generally any statements other than statements of historical fact. Such statements are based on current expectations or views of the future and are subject to risks and uncertainties, which could cause actual results or events to differ materially from those expressed or implied. You should therefore not place undue reliance upon any forward-looking statements and they should be read in conjunction with, and qualified in their entirety by, the cautionary statements referenced below. Ball undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Key factors, risks and uncertainties that could cause actual outcomes and results to be different are summarized in filings with the Securities and Exchange Commission, including Exhibit 99 in Ball's Form 10-K, which are available on Ball's website and at www.sec.gov. Additional factors that might affect: a) Ball's packaging segments include product capacity, supply, and demand constraints and fluctuations and changes in consumption patterns; availability/cost of raw materials, equipment, and logistics; competitive packaging, pricing and substitution; changes in climate and weather and related events such as drought, wildfires, storms, hurricanes, tornadoes and floods; footprint adjustments and other manufacturing changes, including the startup of new facilities and lines; failure to achieve synergies, productivity improvements or cost reductions; unfavorable mandatory deposit or packaging laws; customer and supplier consolidation; power and supply chain interruptions; changes in major customer or supplier contracts or loss of a major customer or supplier; inability to pass through increased costs; war, political instability and sanctions, including relating to the situation in
Condensed Financial Statements (Second Quarter 2023) | ||||||||||||
Unaudited Condensed Consolidated Statements of Earnings (Loss) | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
($ in millions, except per share amounts) | 2023 | 2022 | 2023 | 2022 | ||||||||
Net sales | $ | 3,566 | $ | 4,134 | $ | 7,055 | $ | 7,850 | ||||
Costs and expenses | ||||||||||||
Cost of sales (excluding depreciation and amortization) | (2,916) | (3,445) | (5,761) | (6,461) | ||||||||
Depreciation and amortization | (170) | (168) | (336) | (353) | ||||||||
Selling, general and administrative | (165) | (161) | (296) | (347) | ||||||||
Business consolidation and other activities | 6 | (467) | (14) | (186) | ||||||||
(3,245) | (4,241) | (6,407) | (7,347) | |||||||||
Earnings (loss) before interest and taxes | 321 | (107) | 648 | 503 | ||||||||
Interest expense | (115) | (68) | (228) | (137) | ||||||||
Debt refinancing and other costs | - | (2) | - | (2) | ||||||||
Total interest expense | (115) | (70) | (228) | (139) | ||||||||
Earnings (loss) before taxes | 206 | (177) | 420 | 364 | ||||||||
Tax (provision) benefit | (36) | (1) | (77) | (101) | ||||||||
Equity in results of affiliates, net of tax | 3 | 13 | 10 | 19 | ||||||||
Net earnings (loss) | 173 | (165) | 353 | 282 | ||||||||
Net earnings attributable to noncontrolling interests, net of tax | - | 9 | 3 | 10 | ||||||||
Net earnings (loss) attributable to Ball Corporation | $ | 173 | $ | (174) | $ | 350 | $ | 272 | ||||
Earnings (loss) per share: | ||||||||||||
Basic | $ | 0.55 | $ | (0.55) | $ | 1.11 | $ | 0.85 | ||||
Diluted | $ | 0.55 | $ | (0.55) | $ | 1.10 | $ | 0.84 | ||||
Weighted average shares outstanding (000s): | ||||||||||||
Basic | 314,561 | 317,006 | 314,400 | 318,944 | ||||||||
Diluted | 316,867 | 317,006 | 316,764 | 323,316 |
Condensed Financial Statements (Second Quarter 2023) | ||||||
Unaudited Condensed Consolidated Statements of Cash Flows | ||||||
Six Months Ended | ||||||
June 30, | ||||||
($ in millions) | 2023 | 2022 | ||||
Cash Flows from Operating Activities: | ||||||
Net earnings (loss) | $ | 353 | $ | 282 | ||
Depreciation and amortization | 336 | 353 | ||||
Business consolidation and other activities | 14 | 186 | ||||
Deferred tax provision (benefit) | (23) | (32) | ||||
Pension contributions | (9) | (108) | ||||
Other, net | 15 | (96) | ||||
Changes in working capital components, net of dispositions | (325) | (983) | ||||
Cash provided by (used in) operating activities | 361 | (398) | ||||
Cash Flows from Investing Activities: | ||||||
Capital expenditures | (608) | (819) | ||||
Business dispositions, net of cash sold | - | 298 | ||||
Other, net | 4 | 25 | ||||
Cash provided by (used in) investing activities | (604) | (496) | ||||
Cash Flows from Financing Activities: | ||||||
Changes in borrowings, net | 756 | 1,541 | ||||
Acquisitions of treasury stock | (3) | (578) | ||||
Dividends | (126) | (128) | ||||
Other, net | 17 | (1) | ||||
Cash provided by (used in) financing activities | 644 | 834 | ||||
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | 9 | (13) | ||||
Change in cash, cash equivalents and restricted cash | 410 | (73) | ||||
Cash, cash equivalents and restricted cash - beginning of period | 558 | 579 | ||||
Cash, cash equivalents and restricted cash - end of period | $ | 968 | $ | 506 |
Condensed Financial Statements (Second Quarter 2023) | ||||||
Unaudited Condensed Consolidated Balance Sheets | ||||||
June 30, | ||||||
($ in millions) | 2023 | 2022 | ||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 955 | $ | 480 | ||
Receivables, net | 2,291 | 3,139 | ||||
Inventories, net | 1,982 | 2,473 | ||||
Other current assets | 207 | 401 | ||||
Total current assets | 5,435 | 6,493 | ||||
Property, plant and equipment, net | 7,280 | 6,629 | ||||
Goodwill | 4,269 | 4,350 | ||||
Intangible assets, net | 1,366 | 1,474 | ||||
Other assets | 1,821 | 1,980 | ||||
Total assets | $ | 20,171 | $ | 20,926 | ||
Liabilities and Equity | ||||||
Current liabilities | ||||||
Short-term debt and current portion of long-term debt | $ | 2,245 | $ | 251 | ||
Payables and other accrued liabilities | 4,681 | 6,232 | ||||
Total current liabilities | 6,926 | 6,483 | ||||
Long-term debt | 7,507 | 8,847 | ||||
Other long-term liabilities | 1,833 | 2,063 | ||||
Equity | 3,905 | 3,533 | ||||
Total liabilities and equity | $ | 20,171 | $ | 20,926 |
Notes to the Condensed Financial Statements (Second Quarter 2023)
1. Business Segment Information
Ball's operations are organized and reviewed by management along its product lines and geographical areas and presented in the four reportable segments outlined below.
Beverage packaging, North and
Beverage packaging, EMEA: Consists of operations in numerous countries throughout
Beverage packaging,
Aerospace: Consists of operations that manufacture and sell aerospace and other related products and provide services used in the defense, civil space and commercial space industries.
Other consists of a non-reportable operating segment (beverage packaging, other) that manufactures and sells aluminum beverage containers in
The company also has investments in operations in
During 2022, the company completed an evaluation of the estimated useful lives of its manufacturing equipment, buildings and certain assembly and test equipment. The company utilized a third-party appraiser to assist in the evaluation, which was performed as a result of the company's experience with the duration over which its equipment can be utilized. Effective July 1, 2022, Ball revised the estimated useful lives of its equipment and buildings, which resulted in a net reduction in depreciation expense of approximately
In the first quarter of 2022, the company announced that it was pursuing the sale of its aluminum beverage packaging business located in
Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
($ in millions) | 2023 | 2022 | 2023 | 2022 | |||||||
Net sales | |||||||||||
Beverage packaging, North and | $ | 1,537 | $ | 1,775 | $ | 3,041 | $ | 3,384 | |||
Beverage packaging, EMEA (a) | 920 | 1,133 | 1,754 | 2,075 | |||||||
Beverage packaging, | 405 | 534 | 855 | 1,028 | |||||||
Aerospace | 499 | 490 | 1,007 | 994 | |||||||
Reportable segment sales | 3,361 | 3,932 | 6,657 | 7,481 | |||||||
Other | 205 | 202 | 398 | 369 | |||||||
Net sales | $ | 3,566 | $ | 4,134 | $ | 7,055 | $ | 7,850 | |||
Comparable operating earnings | |||||||||||
Beverage packaging, North and | $ | 175 | $ | 164 | $ | 358 | $ | 338 | |||
Beverage packaging, EMEA (a) | 98 | 129 | 171 | 229 | |||||||
Beverage packaging, | 30 | 52 | 80 | 130 | |||||||
Aerospace | 54 | 36 | 114 | 79 | |||||||
Reportable segment comparable operating earnings | 357 | 381 | 723 | 776 | |||||||
Other (b) | (8) | 11 | 7 | (18) | |||||||
Comparable operating earnings | 349 | 392 | 730 | 758 | |||||||
Reconciling items | |||||||||||
Business consolidation and other activities | 6 | (467) | (14) | (186) | |||||||
Amortization of acquired Rexam intangibles | (34) | (32) | (68) | (69) | |||||||
Earnings (loss) before interest and taxes | $ | 321 | $ | (107) | $ | 648 | $ | 503 |
_____________________________ | |
(a) | See the accompanying information below for results of the Russian aluminum beverage packaging business divested in September 2022. |
(b) | Includes undistributed corporate expenses, net, of |
A summary of the results of the Russian aluminum beverage packaging business and the non-Russian components of the beverage packaging, EMEA, segment, for the three and six months ended June 30, 2023 and 2022, are shown below:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
($ in millions) | 2023 | 2022 | 2023 | 2022 | ||||||||
Net sales | ||||||||||||
$ | — | $ | 226 | $ | — | $ | 381 | |||||
Non- | 920 | 907 | 1,754 | 1,694 | ||||||||
Beverage packaging, EMEA, segment | $ | 920 | $ | 1,133 | $ | 1,754 | $ | 2,075 | ||||
Comparable operating earnings | ||||||||||||
$ | — | $ | 40 | $ | — | $ | 72 | |||||
Non- | 98 | 89 | 171 | 157 | ||||||||
Beverage packaging, EMEA, segment | $ | 98 | $ | 129 | $ | 171 | $ | 229 |
The Russian sales and comparable operating earnings figures in the above table include historical support by
2. Non-
Non-
Comparable Earnings Before Interest, Taxes, Depreciation and Amortization (Comparable EBITDA), Comparable Operating Earnings, Comparable Net Earnings, Comparable Diluted Earnings Per Share and Net Debt – Comparable EBITDA is earnings before interest, taxes, depreciation and amortization, business consolidation and other non-comparable costs. Comparable Operating Earnings is earnings before interest, taxes, business consolidation and other non-comparable costs. Comparable Net Earnings is net earnings attributable to Ball Corporation before business consolidation and other non-comparable costs after tax. Comparable Diluted Earnings Per Share is Comparable Net Earnings divided by diluted weighted average shares outstanding. We use Comparable EBITDA, Comparable Operating Earnings, Comparable Net Earnings, and Comparable Diluted Earnings Per Share internally to evaluate the company's operating performance. Net Debt is total debt less cash and cash equivalents, which are derived directly from the company's financial statements. Ball management uses Net Debt to Comparable EBITDA and Comparable EBITDA to interest expense as metrics to monitor the credit quality of Ball Corporation.
Please see the company's website for further details of the company's non-
A summary of the effects of non-comparable items on after tax earnings is as follows: | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
($ in millions, except per share amounts) | 2023 | 2022 | 2023 | 2022 | ||||||||
Net earnings (loss) attributable to Ball Corporation | $ | 173 | $ | (174) | $ | 350 | $ | 272 | ||||
Facility closure costs and other items (1) | (6) | 31 | 14 | 32 | ||||||||
Business divestments and other related items (2) | - | 438 | - | 126 | ||||||||
Donation to The Ball Foundation | - | - | - | 30 | ||||||||
Amortization of acquired Rexam intangibles | 34 | 32 | 68 | 69 | ||||||||
Non-comparable tax items | (7) | (64) | (21) | (14) | ||||||||
Comparable Net Earnings | $ | 194 | $ | 263 | $ | 411 | $ | 515 | ||||
Comparable Diluted Earnings Per Share | $ | 0.61 | $ | 0.82 | (a) | $ | 1.30 | $ | 1.59 |
(a) | The company reported a |
(1) | In the first quarter of 2023, Ball announced the planned closure of its aluminum beverage can manufacturing facility in |
(2) | In the second quarter of 2022, Ball experienced deteriorating conditions and determined this constituted a triggering event for its Russian long-lived asset group. As a result, Ball recorded an impairment loss during the second quarter of 2022. For the six months ended June 30, 2022, this loss was partially offset by the gain on sale from Ball selling its remaining 49 percent owned equity method investment in Ball Metalpack. |
2. Non-
A summary of the effects of non-comparable items on earnings before interest and taxes is as follows: | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
($ in millions) | 2023 | 2022 | 2023 | 2022 | |||||||||
Net earnings (loss) attributable to Ball Corporation | $ | 173 | $ | (174) | $ | 350 | $ | 272 | |||||
Net earnings attributable to noncontrolling interests, net of tax | - | 9 | 3 | 10 | |||||||||
Net earnings (loss) | 173 | (165) | 353 | 282 | |||||||||
Equity in results of affiliates, net of tax | (3) | (13) | (10) | (19) | |||||||||
Tax provision (benefit) | 36 | 1 | 77 | 101 | |||||||||
Earnings (loss) before taxes | 206 | (177) | 420 | 364 | |||||||||
Total interest expense | 115 | 70 | 228 | 139 | |||||||||
Earnings (loss) before interest and taxes | 321 | (107) | 648 | 503 | |||||||||
Business consolidation and other activities | (6) | 467 | 14 | 186 | |||||||||
Amortization of acquired Rexam intangibles | 34 | 32 | 68 | 69 | |||||||||
Comparable Operating Earnings | $ | 349 | $ | 392 | $ | 730 | $ | 758 |
A summary of Comparable EBITDA and Net Debt is as follows: | |||||||||||||
Twelve | Less: Six | Add: Six | |||||||||||
Months Ended | Months Ended | Months Ended | Year Ended | ||||||||||
December 31, | June 30, | June 30, | June 30, | ||||||||||
($ in millions, except ratios) | 2022 | 2022 | 2023 | 2023 | |||||||||
Net earnings attributable to Ball Corporation | $ | 719 | $ | 272 | $ | 350 | $ | 797 | |||||
Net earnings attributable to noncontrolling interests, net of tax | 13 | 10 | 3 | 6 | |||||||||
Net earnings | 732 | 282 | 353 | 803 | |||||||||
Equity in results of affiliates, net of tax | (7) | (19) | (10) | 2 | |||||||||
Tax provision (benefit) | 159 | 101 | 77 | 135 | |||||||||
Earnings before taxes | 884 | 364 | 420 | 940 | |||||||||
Total interest expense | 330 | 139 | 228 | 419 | |||||||||
Earnings before interest and taxes | 1,214 | 503 | 648 | 1,359 | |||||||||
Business consolidation and other activities | 71 | 186 | 14 | (101) | |||||||||
Amortization of acquired Rexam intangibles | 135 | 69 | 68 | 134 | |||||||||
Comparable Operating Earnings | 1,420 | 758 | 730 | 1,392 | |||||||||
Depreciation and amortization | 672 | 353 | 336 | 655 | |||||||||
Amortization of acquired Rexam intangibles | (135) | (69) | (68) | (134) | |||||||||
Comparable EBITDA | $ | 1,957 | $ | 1,042 | $ | 998 | $ | 1,913 | |||||
Total interest expense | $ | (330) | $ | (139) | $ | (228) | $ | (419) | |||||
Debt refinancing and other costs | 18 | 2 | - | 16 | |||||||||
Interest expense | $ | (312) | $ | (137) | $ | (228) | $ | (403) | |||||
Total debt at period end | $ | 9,752 | |||||||||||
Cash and cash equivalents | (955) | ||||||||||||
Net Debt | $ | 8,797 | |||||||||||
Comparable EBITDA/Interest Expense (Interest Coverage) | 4.7 | x | |||||||||||
Net Debt/Comparable EBITDA | 4.6 | x |
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SOURCE Ball Corporation
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