Beverage can shipments climb as Ball’s outlook brightens

Shipments of beverage cans picked up in the first quarter for Ball Corporation as customers brought forward their summer stocking plans after letting inventories slide at the end of last year.

The increase, which replicates a general recovery in demand reported by other canmakers, is expected to continue as Ball works to fill a $2 billion hole left by a consumer boycott of one of its biggest customer’s beers – Anheuser-Busch InBev’s Bud Light – last year.

Ball increased the number of cans it made in the three months to the end of March by 3.7% over the same period last year, the canmaker said in its first quarter financial report. The rise was most marked in South America, where shipments rose 26%. In North America, which comprises Canada, the US and Mexico, volumes dropped by 2.4%, while in Europe, the Middle East and Africa, they climbed slightly.

Chief executive Dan Fisher said that Ball had benefitted from its product mix, which had been biased towards carbonated soft drinks amid weaker demand for beer, and was poised to capitalise on industry-wide growth this year.

“Mix is going to play a pivotal role, I think, within the industry and player-by-player, and right now, we’re encouraged by the mix that we have,” Fisher said in a call to analysts. 

Despite better demand performance, sales and profits were down compared with the same quarter of last year as the canmaker also passed on the lower costs of aluminium to customers. 

First-quarter global sales were down 4.6% to US$2.87 billion while earnings before interest and tax declined 26% to $196 million. Most of the loss was in its biggest market, North America where segment sales were $1.4bn, down 6.7%. Profit included $27m of income from Ball’s aerospace business, which was sold in February for $3.6bn, net of tax.

Last year some canmakers cut back on their capacity increases and closed less-efficient plants at a time of declining can demand. In February Ball shut its Kent, Washington, plant that it had acquired with the purchase of Rexam in 2016.

Fisher said that Ball was in the process of clawing back $2bn of business that it lost when Bud Light, once the biggest beer brand in the US, was beset by controversy over an ill-concieved marketing campaign last year. That business was picked up by competitors as brewer Anheuser-Busch InBev lost its top spot in American beer sales to Constellation Brands’ Modello Especial.

“We’ve got line of sight to fill that hole this year,” Fisher said, adding he expected the shortfall to be made up incrementally by the second-half of 2024.

Sales in South America were up by 7% at $482m as Brazil’s economy continued to pick up from the end of last year. Despite higher segment profits, economic and political turmoil in Argentina weighed on the results. The company was “monitoring” the country.

Performance was boosted and fixed costs reduced by the earlier-than-planned closure of the time-served Kent plant. The “higher-cost” facility was shut down earlier than planned in February, a move that has boosted Ball’s operational efficiency by at least 2 percentage points and helped improve the bottom line, said chief financial officer Howard Yu.

Better first-quarter performance has enabled Ball to realise a stronger cash position, enabling it to bring forward plans to buy back $1.5bn of shares and pay down $2.8bn of debt.

Fisher said the early weeks of the second quarter had been stronger than anticipated and that Ball was in a position to see full-year shipments grow in the “low to middle single-digit range”.