Ball (US:BALL)2024-04-26 12:23markdown [Q1 2024 Financial Performance Summary](index=1&type=section&id=Ball%20Reports%20First%20Quarter%202024%20Results) Ball Corporation reported strong Q1 2024 results, driven by the aerospace sale and increased beverage can shipments [Overall Results and Highlights](index=1&type=section&id=Highlights) Ball Corporation reported strong first-quarter 2024 results, highlighted by a significant **GAAP diluted EPS** of **$11.61**, largely due to a **$3.47 billion** **after-tax gain** from the **sale** of its **aerospace business**. **Comparable diluted EPS** was nearly flat at **$0.68**. The company saw a **3.7%** increase in **global beverage can shipments**, significantly **deleveraged** its **balance sheet**, and **returned** **$245 million** to **shareholders** Q1 2024 Key Financial Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | U.S. GAAP Diluted EPS | $11.61 | $0.56 | | Comparable Diluted EPS | $0.68 | $0.69 | | Net Sales | $2.87 billion | $2.98 billion | | Net Earnings Attributable to Corp. (GAAP) | $3.69 billion | $177 million | | Comparable Net Earnings | $217 million | $217 million | - The **sale** of the **aerospace business** on February 16, 2024, resulted in a **net after-tax gain** of **$3.47 billion**, or **$10.93** per **diluted share**[3](index=3&type=chunk) - **Global beverage can shipments increased** by **3.7%** **year-over-year**[3](index=3&type=chunk) - The company **returned** **$245 million** to **shareholders** through **share repurchases** and **dividends** and significantly **deleveraged** its **balance sheet** following the **aerospace sale**[3](index=3&type=chunk)[4](index=4&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) CEO Daniel W. Fisher emphasized the successful **sale** of the **aerospace business**, which enabled immediate **deleveraging** and a large **share repurchase program**. The company is now positioned to focus on advancing **sustainable aluminum packaging**, driving **innovation**, and creating long-term **shareholder value** - The company has executed plans to immediately **deleveraged** and initiate a large multi-year **share repurchase program** following the **aerospace business sale**[4](index=4&type=chunk) - The corporate strategy is focused on advancing the use of **sustainable aluminum packaging**, driving **innovation**, and unlocking **manufacturing efficiencies** to create long-term **shareholder value**[4](index=4&type=chunk) [Segment Performance](index=3&type=section&id=Segment%20Performance) The company's beverage packaging segments showed varied performance, with strong growth in South America and EMEA [Beverage Packaging, North and Central America](index=3&type=section&id=Beverage%20Packaging%2C%20North%20and%20Central%20America) This segment reported a **year-over-year increase** in **comparable operating earnings** to **$192 million**, despite a **sales decrease** to **$1.40 billion**. The **earnings growth** was driven by the pass-through of inflationary costs and cost-saving initiatives, which offset a **2.4%** decline in **shipment volumes** attributed to customer exposure to a U.S. mass beer brand disruption Q1 Performance: North and Central America | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Comparable Operating Earnings | $192 million | $183 million | | Sales | $1.40 billion | $1.50 billion | - **Segment volumes decreased** **2.4%** **year-over-year**, showing sequential improvement from a **3.7%** decrease in Q4 2023. This was partly due to customers pulling forward volume ahead of the summer season[7](index=7&type=chunk) - **Earnings increased** due to the annual pass-through of inflationary costs, benefits from cost-out actions, and improved operational performance[6](index=6&type=chunk) [Beverage Packaging, EMEA](index=3&type=section&id=Beverage%20Packaging%2C%20EMEA) The EMEA segment's **comparable operating earnings grew** to **$85 million** from **$73 million** **year-over-year**, on slightly lower **sales** of **$810 million**. The positive performance was fueled by a **1.1%** **increase** in **shipment volumes**, favorable **cost management**, and improved operational efficiencies, with **growth** noted in the UK, Nordics, and Turkey Q1 Performance: EMEA | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Comparable Operating Earnings | $85 million | $73 million | | Sales | $810 million | $834 million | - **Segment volumes increased** **1.1%** **year-over-year**, driven by **growth** in the UK, Nordics, and Turkey, which offset lower demand in Egypt[9](index=9&type=chunk) - **Earnings growth** was attributed to higher **volumes**, favorable **cost management**, and improved operational efficiencies[9](index=9&type=chunk) [Beverage Packaging, South America](index=3&type=section&id=Beverage%20Packaging%2C%20South%20America) The South America segment delivered strong results with **comparable operating earnings rising** to **$55 million** and **sales increasing** to **$482 million**. This was driven by a significant **26.3%** surge in **shipment volumes**, particularly in Brazil, due to favorable **customer mix** and a **substrate shift** to **aluminum cans**. Performance was partially offset by disruptive **economic conditions** in Argentina Q1 Performance: South America | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Comparable Operating Earnings | $55 million | $50 million | | Sales | $482 million | $450 million | - **Segment volumes increased** by a robust **26.3%** in the first quarter, driven by **customer mix** and **substrate mix shift** to **aluminum cans**, especially in Brazil[11](index=11&type=chunk) - Results were partially offset by the impact of product mix and disruptive **economic** and operating **conditions** in Argentina[11](index=11&type=chunk) [Non-reportable Segments](index=5&type=section&id=Non-reportable) This category includes the global aluminum aerosol business, beverage can facilities in Asia and the Middle East, and the aluminum cup business. **Volumes** for global extruded aluminum bottles and aerosol containers **decreased** by **3.0%** during the quarter. Higher **year-over-year undistributed corporate expenses** were partially offset by improved **earnings** in the aluminum packaging businesses within this group - **Volume** across the company's global extruded aluminum bottles and aerosol containers **decreased** **3.0%** during the quarter[13](index=13&type=chunk) - First quarter 2024 results reflect higher **year-over-year undistributed corporate expenses**, which include incremental **compensation costs** from the **aerospace sale**[12](index=12&type=chunk)[13](index=13&type=chunk) [Financial Outlook and Strategy](index=5&type=section&id=Outlook) Ball outlined its capital allocation strategy, focusing on debt reduction, share repurchases, and EPS growth [Financial Strategy and Capital Allocation](index=5&type=section&id=Financial%20Strategy%20and%20Capital%20Allocation) CFO Howard Yu outlined the company's capital allocation strategy following the **aerospace sale**. Proceeds were used for **$2.8 billion** of **debt retirement** and to initiate a multi-year **share repurchase program**. The company plans to pay approximately **$1.0 billion** in **taxes** on the **sale** and expand **share repurchases** to around **$1.3 billion** by **year-end** - The company retired **$2.8 billion** of **debt** in the quarter using proceeds from the **aerospace sale** and cash on hand[14](index=14&type=chunk) - Ball plans to pay approximately **$1.0 billion** in **taxes** related to the **aerospace sale** throughout 2024[14](index=14&type=chunk) - **Share repurchases** are expected to be in the range of **$1.3 billion** by the end of 2024[14](index=14&type=chunk) [Full Year 2024 Guidance](index=5&type=section&id=Full%20Year%202024%20Guidance) CEO Daniel W. Fisher stated that for 2024, the company is positioned to achieve **comparable diluted EPS growth**, generate strong **free cash flow**, and return over **$1.5 billion** to **shareholders** through a combination of **share repurchases** and **dividends**. The focus remains on executing its strategy to advance aluminum packaging and deliver consistent results - Positioned to achieve **comparable diluted earnings per share growth** in 2024[15](index=15&type=chunk) - Expects to generate strong **free cash flow** and return in excess of **$1.5 billion** to **shareholders** through **share repurchases** and **dividends**[15](index=15&type=chunk) [Condensed Financial Statements](index=7&type=section&id=Condensed%20Financial%20Statements) Condensed financial statements reflect the aerospace sale, significantly impacting earnings, cash flows, and the balance sheet [Statements of Earnings](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Earnings) For Q1 2024, Ball reported **net sales** of **$2.87 billion**, down from **$2.98 billion** in Q1 2023. **Net earnings attributable to the corporation surged** to **$3.69 billion** from **$177 million**, primarily due to a **$3.61 billion** contribution from **discontinued operations** (the **aerospace business sale**). **Total diluted EPS** was **$11.61**, compared to **$0.56** in the prior-year quarter Q1 2024 vs Q1 2023 Statement of Earnings Highlights | Metric ($ in millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | 2,874 | 2,981 | | Earnings Before Interest and Taxes | 196 | 267 | | Earnings from Continuing Operations | 79 | 128 | | Discontinued Operations, net of tax | 3,607 | 52 | | Net Earnings Attributable to Ball Corp. | 3,685 | 177 | [Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2024, **cash used in operating activities** was **$1.25 billion**, influenced by the **gain** on the **aerospace disposal**. **Cash provided by investing activities** was **$5.29 billion**, driven by **$5.42 billion** in proceeds from the business disposition. **Financing activities used** **$2.98 billion**, primarily for **net debt repayment** of **$2.75 billion**. The company's **cash position increased** by **$1.02 billion** to end the quarter at **$1.73 billion** Q1 2024 vs Q1 2023 Cash Flow Highlights | Metric ($ in millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Cash used in operating activities | (1,247) | (275) | | Cash provided by (used in) investing activities | 5,292 | (336) | | Cash provided by (used in) financing activities | (2,978) | 649 | | Change in cash | 1,015 | 36 | | Cash - end of period | 1,725 | 594 | [Balance Sheets](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2024, Ball's **total assets** were **$19.90 billion**. The **balance sheet** reflects the **aerospace sale**, with current and noncurrent assets held for sale reduced to minimal levels. **Total debt** (short-term and long-term) **decreased significantly** to **$5.80 billion** from **$9.68 billion**, while **total equity increased** to **$7.38 billion** from **$3.71 billion** **year-over-year** Balance Sheet Highlights (as of March 31) | Metric ($ in millions) | 2024 | 2023 | | :--- | :--- | :--- | | Total Current Assets | 6,524 | 5,507 | | Total Assets | 19,898 | 20,109 | | Total Current Liabilities | 5,384 | 7,220 | | Long-term Debt | 5,519 | 7,322 | | Total Equity | 7,377 | 3,708 | [Notes to Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Financial%20Statements) Notes detail the aerospace divestiture's financial impact and the company's use of non-GAAP measures [Business Segment Information and Divestiture](index=10&type=section&id=Business%20Segment%20Information%20and%20Divestiture) Following the **sale** of its **aerospace business** on February 16, 2024, Ball has reorganized its reporting structure. The **aerospace business** is now treated as a **discontinued operation**. The company's ongoing operations are reported in three segments: Beverage Packaging for North and Central America; EMEA; and South America. The divestiture was completed for a **purchase price** of **$5.6 billion**, resulting in a **pre-tax gain** of **$4.67 billion** - The company completed the divestiture of its **aerospace business** on February 16, 2024, for a **purchase price** of **$5.6 billion**[28](index=28&type=chunk)[31](index=31&type=chunk) - The **sale** resulted in a **pre-tax gain** of **$4.67 billion** and is reported as a **discontinued operation** in the financial statements[31](index=31&type=chunk)[35](index=35&type=chunk) - Effective Q1 2024, the company reports financial performance in three segments: (1) beverage packaging, North and Central America; (2) beverage packaging, EMEA; and (3) beverage packaging, South America[28](index=28&type=chunk) [Non-U.S. GAAP Measures and Reconciliations](index=12&type=section&id=Non-U.S.%20GAAP%20Measures%20and%20Reconciliations) Ball uses **non-U.S. GAAP measures** like **Comparable Net Earnings** and **Comparable Diluted EPS** to evaluate operating performance. For Q1 2024, **Comparable Net Earnings** were **$217 million**, flat with Q1 2023. This figure is derived by adjusting **GAAP Net Earnings** (**$3.685 billion**) for items such as the **Gain on Aerospace disposal** (**-$4.695 billion**), related **compensation costs** (**+$79 million**), and other non-comparable items Reconciliation of GAAP to Comparable Net Earnings (Q1 2024) | Metric ($ in millions) | Amount | | :--- | :--- | | Net earnings attributable to Ball Corporation (GAAP) | 3,685 | | Gain on Aerospace disposal | (4,695) | | Non-comparable tax items | 1,082 | | Aerospace disposition compensation | 79 | | Amortization of acquired Rexam intangibles | 38 | | Facility closure costs and other items | 26 | | Debt refinancing and other costs | 2 | | **Comparable Net Earnings** | **217** | - The company's **Leverage ratio** (**Net Debt/Comparable EBITDA**) was **2.2x** for the twelve months ended March 31, 2024[48](index=48&type=chunk)