Mixed Q1 results for beverage giants

By Joe Whitworth

- Last updated on GMT

Related tags Revenue

Mixed Q1 results for beverage giants
Ball Corporation and Silgan Holdings have reported mixed Q1 results with each identifying differing factors that drove performance.

Ball said emerging market performance remained an issue and Silgan identified raw material costs as key to their three-month results.

Net income for Ball fell for the third consecutive quarter to US dollar $88.3m (€66.8m) during a “seasonally slow first quarter”​ but Silgan’s net income grew to $32.8m as the firm “took advantage of favourable credit markets.”

Geographic breakdown

Ball said a drop in demand from Brazil and China in metal packaging, saw operating earnings fall $10.1m to $105.5m in the first quarter but the firm said it expected volumes in the regions to “grow significantly in 2012 as new plants begin to supply market demand​.”

The company predicted full year Brazil volumes would be up 15% and with a joint venture can plant in Vietnam starting last month, and a newly constructed factory in Qingdao, China to launch in May, the beverage giant expected “low double-digit volume growth in Asia for the full year”​. 

European metal beverage packaging was up in Q1 due to increased demand, with operating earnings of $53.7m, representing single-digit volume growth for beverage cans and double-digit growth for extruded aluminium packaging.

The firm added their results included charges of $1.7m due to a plant closure in Torrance, California last year and $2.5m related to European headquarters moving from Germany to Switzerland, by the third quarter of this year.

Ball president and chief executive officer, John A. Hayes, told market analysts in a conference call: As we said in January, we expect our first half of the year to be largely flat as compared to 2011. And with an improved first quarter behind us, we are slightly ahead of where we thought we would be at this point.

“We continue to see noticeable upside in the back half of the year as new emerging market plants complete their start-up curves and begin selling product and our North America and European beverage businesses move into the busy summer selling season​.“

Prices passed on by Silgan

Meanwhile, Silgan saw growth in all sectors, partly down to an increase in prices as raw material costs were passed on to customers.

Net sales of the plastic container business were $160.5m, an increase of 5.2% year-on-year because of higher average selling prices as a result of resin costs.

Higher US volumes and raw material costs being passed on to customers saw net sales of closures increase 1.9% to $163m in the quarter, while income increased to $18m from higher volumes, manufacturing efficiencies and operating cost savings.

The acquisition of Vogel and Noot’s food can business and Nestle Purina PetCare steel can operations drove net sales of the metal containers business by 13.9% to $444.9m.

Rationalisation charges for the plastic containers segment were up to $1.5m as a result of the closure of the Breinigsville (Allentown), Pennsylvania manufacturing site and a reduction in European manufacturing facilities saw charges in the closure segment rise to $2.1m.

Tony Allott, President and CEO of Silgan, said: “Our metal container and closures businesses were favourably impacted by an increase in unit volumes.

“Our plastic container business benefited from the favourable effect of the lagged pass through of resin costs and began to show improvement in its operating performance​.”

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