Business News

Ball Announces Second Quarter Results

Friday 24. July 2009 - Ball Corporation (NYSE:BLL) today reported second quarter net earnings of $133.3 million, or $1.40 cents per diluted share, on sales of $1.93 billion, compared to earnings of $100 million, or $1.02 cents per diluted share, on sales of $2.08 billion in the second quarter of 2008.

For the first six months of 2009, Ball’s earnings were $202.8 million, or $2.14 per diluted share, on sales of $3.51 billion. First half 2008 results were earnings of $183.8 million, or $1.87 per diluted share, on sales of $3.82 billion.

Second quarter 2009 results include an after-tax gain of $30.7 million, or 32 cents per diluted share, for the sale of a portion of the company’s interest in DigitalGlobe, and an after-tax charge of $11.6 million, or 12 cents per diluted share, primarily for the closure of two plastic packaging plants and for transaction costs relating to the acquisition of certain of Anheuser-Busch InBev’s metal beverage packaging assets. Details of comparable segment earnings and business consolidation activities can be found in Notes 1 and 2 to the unaudited consolidated financial statements that accompany this news release.

“On a comparable basis, Ball reported diluted earnings per share of $1.20 for the second quarter compared to $1.10 for the second quarter of 2008,” said R. David Hoover, chairman, president and chief executive officer. “Our results reflect the actions we have taken over the past 18 months to better align our supply with demand, a seasonal increase in volumes and better plant performance throughout our operations.

“Improved comparable operating margins in our North American packaging businesses in the second quarter were the result of lower costs due to plant rationalization programs and better pricing in certain packaging segments,” Hoover said.

Metal Beverage Packaging, Americas & Asia

Metal beverage packaging, Americas and Asia, comparable segment operating earnings for the second quarter were $74.8 million on sales of $749.1 million, compared to $77.4 million on sales of $833.9 million for the same period in 2008. For the first six months, comparable earnings were $121 million on sales of $1.37 billion, compared to $151.4 million on sales of $1.54 billion in the first half of 2008.

Second quarter results were lower primarily due to reduced North American sales volumes and inventory holding losses on aluminum. Inventory holding losses were lower in the second quarter than in the first quarter.

Ball announced on July 1 that the company had signed a definitive agreement with Anheuser-Busch InBev to acquire four of AB InBev’s plants in the U.S. for $577 million. The plants produce annually about 10 billion aluminum cans and 10 billion easy-open can ends. The transaction is expected to close by the end of the year or early in the first quarter of 2010, subject to regulatory approval, and to be accretive to Ball’s earnings and cash flow in 2010.

“These large, low-cost manufacturing plants are an excellent fit within our North American metal beverage packaging operations and support our strategy of growing our global metal beverage packaging business,” said John A. Hayes, executive vice president and chief operating officer.

Metal Beverage Packaging, Europe

Metal beverage packaging, Europe, segment results in the quarter were operating earnings of $64.8 million on sales of $490.6 million, compared to $77.2 million on sales of $571 million in 2008. For the first six months, earnings were $95.7 million on sales of $834.4 million, compared to $125.2 million on sales of $976.6 million in the first half of 2008.

While volumes were flat compared to the second quarter of 2008, higher raw material prices, unfavorable product mix and negative foreign exchange conversion due to a stronger U.S. dollar contributed to the decline in segment earnings.

Metal Food & Household Products Packaging, Americas

Metal food and household products packaging, Americas, segment results in the quarter were operating earnings of $35.1 million on sales of $323.4 million, compared to $14.3 million in 2008 on sales of $283.2 million. For the first six months, earnings were $84.7 million on sales of $607 million, compared to $29.1 million on sales of $547 million in the first half of 2008.

A combination of selling price increases implemented this year, metal inventory holding gains and improved plant performance more than offset a decline in sales volumes and contributed to better results.

Plastic Packaging, Americas

Plastic packaging, Americas, comparable segment results in the second quarter were operating earnings of $7.8 million on sales of $181.6 million, compared to $5.7 million on sales of $201 million in the second quarter of 2008. For the first six months, comparable earnings were $11.4 million on sales of $341.3 million, compared to $10.5 million on sales of $389.9 million in the first half of 2008.

Better pricing helped offset sales volume declines in the second quarter. A pretax charge of approximately $11.9 million was recorded in the company’s second quarter results related to permanently ceasing manufacturing operations at two monolayer PET bottle plants and consolidating volumes from those plants into larger manufacturing facilities. Cost savings associated with these actions are expected to be approximately $12 million annually beginning in 2010.

Aerospace and Technologies

Aerospace and technologies comparable segment results were operating earnings of $14.8 million on sales of $181.5 million in the quarter, compared to $22.7 million on sales of $191.2 million in 2008. For the first six months, comparable earnings were $29.4 million on sales of $359.6 million, compared to $37.6 million on sales of $369.2 million in the first half of 2008. Backlog at the end of the quarter was $587 million.

Segment margins in the quarter returned to more normal levels compared to the second quarter of 2008, which included unusually high margins due primarily to higher profit accruals on certain fixed-price contracts.

In May, astronauts for NASA’s shuttle servicing mission to the Hubble Space Telescope successfully installed two science instruments built by Ball and completed critical repairs to two previously installed science instruments from Ball. All four of the Ball-built instruments are operating flawlessly. Ball announced last week a contract from the U.S. Air Force’s National Air and Space Intelligence Center to continue providing Measurement and Signature Intelligence and Advanced Geospatial Intelligence to warfighters through the Advanced Technical Exploitation Program. The five-year, indefinite quantity contract has a ceiling value of $600 million to be competed among three contractors.

Outlook

“We anticipate full-year free cash flow to be in the range of $375 million, and capital spending for the year is expected to be below $250 million,” said Raymond J. Seabrook, executive vice president and chief financial officer. “Lower manufacturing costs as a result of plant rationalizations, reduced interest expense and a lower share count benefited second quarter results.”

“Seasonal volume trends in our packaging segments are improving, though volumes for the first half of 2009 were below 2008 levels, and we expect continued improvement over the balance of the year,” Hoover said. “We are pleased with our first half results and our strong second quarter performance, and we expect full year 2009 diluted earnings per share to exceed 2008 results.”