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Ball Corporation hit by cost pressures and lower demand in Q1

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Ball Corporation hit by cost pressures and lower demand in Q1

April 25
13:54 2013

Ball Corporation said lower volume trends for standard metal packaging and poor performance of the European beverage container business affected first quarter results for 2013.

The firm reported operating earnings had fell year-on-year for all three of its segments involved in food and beverage in the three months ending 31 March 2013.

“We are encouraged by solid performance in the majority of our packaging businesses given lower volume trends for standard metal packaging during the quarter,” said John A. Hayes, chairman, president and chief executive officer.

“However, this performance was overshadowed by disappointing results in our European beverage container business.”

Segments in detail

Metal food and household products packaging comparable segment results were operating earnings of $34.7m on sales of $367.2m, compared to $39.3m on sales of $378.9m in 2012.

The recently integrated acquisition of the extruded aluminum manufacturing business in Mexico contributed favorably to results in the quarter; however, mid-single digit volume declines across the segment and higher cost inventory carried into the year by domestic tinplate operations were partially offset by improved product mix and manufacturing performance.

The previously announced closure of its Elgin, Illinois food and household products packaging facility recorded charges of $20.8m in Q1 and additional charges of $12m are expected during the remainder of 2013.

Volume declines

Metal beverage packaging, Europe, results in the quarter were operating earnings of $30.9m on sales of $402.9m, compared to $42.4m on sales of $414.5m in 2012.

First quarter comparable operating earnings were negatively affected by low single-digit volume declines, unfavorable mix and higher input costs.

Metal beverage packaging, Americas and Asia, comparable segment operating earnings were $104m in the first quarter on sales of $995.2m, compared to $105.5m on sales of $1bn in 2012.

Demand for speciality packaging

Strong demand for specialty packaging in North America coupled with plant performance and efficiencies helped to offset double-digit 12-ounce volume declines in the quarter.

Certain surplus equipment was redeployed to existing North American metal beverage manufacturing plants from the Gainesville, Florida end manufacturing facility , which will cease operations in the second quarter of 2013.

The first quarter included charges of $1.1m related to the previously announced closures of the Columbus, Ohio, and Gainesville, Florida, facilities and voluntary separation programs.

Additional charges of $10m are expected to be recorded during the remainder of 2013.

In Brazil, volumes were up strongly year-over-year due to the addition of the Alagoinhas beverage can plant. Ball also began installing a second production line in the Alagoinhas plant, which will be operational in late 2013.

In China, double-digit volume increases partially offset challenging pricing caused by industry supply/demand imbalances.

“While business fundamentals have not changed and the majority of our operations are on track to improve performance year-over-year, our first quarter results make it unlikely that we can reach our long-term goal of 10 to 15% diluted earnings per share growth in 2013,” Hayes said.

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