Ball Corporation (NYSE: BLL) today reported, on a U.S. GAAP basis, third quarter 2020 net earnings attributable to the corporation of $241 million (including net after-tax charges of $56 million, or 17 cents per diluted share for business consolidation and other non-comparable items), or 72 cents per diluted share, on sales of $3.1 billion, compared to $92 million net earnings attributable to the corporation, or 27 cents per diluted share (including net after-tax charges of $145 million, or 43 cents per diluted share for business consolidation and other non-comparable items), on sales of $3.0 billion in 2019. Results for the first nine months of 2020 were net earnings attributable to the corporation of $358 million, or $1.08 per diluted share, on sales of $8.7 billion, compared to $406 million net earnings attributable to the corporation, or $1.19 per diluted share on sales of $8.8 billion for the first nine months of 2019.
Ball’s third quarter and year-to-date 2020 comparable earnings per diluted share were 89 cents and $2.15, respectively, versus third quarter and year-to-date 2019 comparable earnings per diluted share of 70 cents and $1.82, respectively.
Third quarter and year-to-date results reflect the 2019 sale of the company’s Argentine steel aerosol business and Chinese beverage can assets, and new segment reporting for the company’s beverage packaging, EMEA business and other non-reportable results. References to volume data represent units shipped, and year-over-year global beverage volumes referenced exclude the impact of the 2019 sale of the Chinese beverage can assets. Details of comparable segment earnings, business consolidation 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.
“Our team continues to operate safely while responding to significant growth across our businesses. Capital investments are being executed to support sustained growth for our global aluminum packaging portfolio and aerospace technologies. Our company is well-positioned in the current environment, and our focus remains on our employees’ safety and our customers’ success, as well as the efficient and effective startup of our various capital projects in order to deliver significant value to our shareholders,” said John A. Hayes, chairman, president and chief executive officer.
“During the quarter, our company posted 27 percent comparable earnings per diluted share growth on 9 percent global beverage volume growth and 14 percent aerospace contracted backlog growth. In addition, we recently completed our aluminum aerosol acquisition in Brazil, announced new beverage can manufacturing plants in Pittston, Pennsylvania, as well as Frutal, Brazil, and commenced production at our new aluminum cup manufacturing facility in Rome, Georgia. With demand continuing to increase for our sustainable aluminum packaging solutions and critical aerospace technologies, Ball remains well positioned to invest in EVA-enhancing capital projects, grow diluted earnings per share, increase cash from operations, and deliver shareholder returns now and into the future,” Hayes said.
Beverage Packaging, North and Central America
Beverage packaging, North and Central America, comparable segment operating earnings for third quarter 2020 were $209 million on sales of $1.3 billion compared to $157 million on sales of $1.2 billion during the same period in 2019. For the first nine months, comparable segment operating earnings were $544 million on sales of $3.8 billion compared to $416 million on sales of $3.6 billion during the same period in 2019.
Quarterly segment earnings increased supported by mid-single-digit volume growth, benefits from new contractual terms and improved operational performance. Higher at-home consumption and tight supply/demand conditions are expected to outpace domestically produced volume through 2021. In advance of the start-up of multi-line can manufacturing facilities in Glendale, Arizona, and Pittston, Pennsylvania in mid-2021, SKU rationalization with certain customers, production from recently commissioned can manufacturing lines in Rome, Georgia, and Fort Worth, Texas, and the short-term benefit of imported cans from our global network will continue to address consumers’ significant demand for soft drinks, sparkling water, spiked seltzers and beer throughout the remainder of 2020 and into 2021.
To further support our customers’ can-filling investments, additional can manufacturing investments in excess of the previously announced 6 billion units of capacity are anticipated to deliver contracted volumes beyond 2021.
Beverage Packaging, EMEA
Beverage packaging, EMEA, comparable segment operating earnings for the third quarter 2020 were $117 million on sales of $809 million compared to $105 million on sales of $763 million during the same period in 2019. For the first nine months, comparable segment operating earnings were $248 million on sales of $2.2 billion compared to $277 million on sales of $2.2 billion during the same period in 2019. Beginning in 2020, current and historical quarterly results for the company’s existing facilities in Cairo, Egypt, and Manisa, Turkey, have been consolidated into the segment.
Strong at-home consumption trends in the U.K., Nordics and Russia resulted in mid-single-digit volume growth for the segment during the quarter. Early in the quarter, seasonal demand patterns improved across Southern Europe, and, exiting the quarter, strength remained in this region as well as the U.K. and Russia. Packaging mix shift to sustainable aluminum cans for traditional and non-traditional beverages continues to accelerate.
Multiple beverage can line additions in the U.K. and Eastern Europe began production mid-year and, due to the strong recovery in regional demand, the European plant network provided minimal support for increased North American beverage can demand during the quarter.
Beverage Packaging, South America
Beverage packaging, South America, comparable segment operating earnings for the third quarter 2020, were $64 million on sales of $432 million compared to $60 million on sales of $392 million during the same period in 2019. For the first nine months, comparable segment operating earnings were $173 million on sales of $1.2 billion compared to $193 million on sales of $1.2 billion for the same period in 2019.
Segment volume ended the quarter up strong double digits. Throughout the seasonally slow third quarter, Brazilian demand remained strong as small grocery stores and gas stations continued to emphasize recyclable aluminum beverage packaging over returnable glass and customers prepared for the busy summer season.
As we look forward, with customer packaging mix continuing to favor aluminum beverage packaging and supply/demand tightening dramatically, the new multi-line facility in Frutal, Brazil, will begin production in mid-2021, and additional projects in Brazil and surrounding countries are forthcoming to support contracted volume.
Aerospace
Aerospace comparable segment operating earnings for third quarter 2020 were $44 million on sales of $451 million compared to $35 million on sales of $374 million during the same period in 2019. For the first nine months, comparable segment operating earnings were $114 million on sales of $1.3 billion compared to $103 million on sales of $1.1 billion. Contracted backlog increased 14 percent to $2.4 billion and contracts already won, but not yet booked into current contracted backlog, remains strong at $4.9 billion.
Segment results were very strong in the quarter despite inefficiencies created from tighter safety protocols due to COVID-19, and the business is on track to hire 1,000 employees in 2020. The company continues to win and provide mission-critical programs and technologies to U.S. government, defense, intelligence, reconnaissance and surveillance customers. Multiple projects to expand manufacturing capacity, test capabilities engineering and support workspace remain on track.
During the quarter, Ball was chosen by NASA for three studies to explore next-generation technologies for the Landsat Program, a series of Earth-observing satellite missions jointly managed by NASA and the U.S. Geological Survey that is entering its fifth decade of existence. In addition, Ball recently shipped the OMPS instrument for integration onto NOAA’s next polar-orbiting operational weather satellite, the Joint Polar Satellite System-2 (JPSS-2). The OMPS instrument provides critical ozone measurements used by forecasters at the National Weather Service to produce ultraviolet (UV) radiation forecasts, by researchers to track the health of the ozone layer and by policy makers to help improve life on Earth. Ball has successfully built and delivered the two prior OMPS instruments currently in orbit providing critical ozone data.
Non-reportable
Third quarter results in non-reportable reflect higher year-over-year undistributed corporate expenses, the impact of the 2019 sale of the Chinese beverage can assets and Argentine steel aerosol business, lower operating results in the remaining non-reportable beverage and aluminum aerosol businesses, and start-up costs in the recently launched aluminum cup business. The current and historical results from the existing facilities in Cairo, Egypt, and Manisa, Turkey, have been consolidated into the beverage packaging, EMEA segment beginning in 2020.
The results for the company’s global aluminum aerosol business and beverage can manufacturing facilities in India, Saudi Arabia and Myanmar and investments in the company’s new aluminum cup business continue to be reported as non-reportable segments. During the quarter, the company’s global aluminum aerosol volumes declined low-teens with growth in India for sanitizing sprays offset by double-digit volume declines for personal care products in North America and Europe. In the third quarter, the company completed the acquisition of an aluminum aerosol manufacturing facility in Brazil and completed construction of its first dedicated aluminum cup manufacturing facility in Rome, Georgia. Multi-channel, retail shipments of aluminum cups are expected to commence in the first half of 2021.
Outlook
“Our company generates significant cash from operations, and we have the flexibility and opportunity to allocate significant capital to organic growth investments while continuing to return value to shareholders. We continue to foresee 2020 capital expenditures exceeding $900 million, and given additional EVA-enhancing opportunities supported by contracted volumes and backlog, growth investments are expected to be in excess of $1 billion in 2021 and beyond,” said Scott C. Morrison, senior vice president and chief financial officer.
“The resiliency of our team and the strength in our businesses has never been more evident. We continue to be on-track to execute multiple growth projects as efficiently and safely as possible with our employees, customers and supply chains. The momentum in our businesses is accelerating and we are well positioned to further broaden our scale to serve future growth with an even higher level of customer service. In 2020 and beyond, we look forward to continuing to grow our cash from operations and EVA dollars on an even larger capital base while returning capital to our shareholders and achieving our long-term diluted earnings per share growth goal of at least 10 to 15 percent,” Hayes said.
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