Ball’s Q2 sales fell slightly year-over-year to $2.296bn ($2.309bn: Q2 2011), with net profit down from $143.1m to $139.5m.
Americas & Asia beverage packaging EBIT rose from $136.8m in Q2 ($126.1m: Q2 2011), with Ball citing higher demand for specialty packaging (such as its Alumi-Tek bottle) partially offsetting weaker demand for standard 12oz (354ml) cans in North America.
Volumes in China and Brazil also underpinned the uplift in this division, with both markets up low-double digits in H1 2012 and expected to grow in H2 as Ball’s new plants met demand.
Beer category revival
Launched on May 28 in the US, the punch-top cans (a Miller Lite can is pictured) allow beer consumers to pierce an additional hole in the top to increase airflow, with Molson Coors promising consumers a smoother floor.
On a later analyst call, Morningstar analyst Todd Wenning asked CEO John Hayes what Ball’s volume expectations were for the new cans moving into the second half of 2012.
“I think you’re to referring to one of our beer customers [Molson Coors] and they’ve had a lot of good success with it [the punch top can],” Hayes said.
It was always tough to work out what had caused incremental growth, he added. “But what we’ve been hearing from our customers is that that been helping the overall brand for them.
“And they have seen a lift in cans with that package relative to their glass containers…It’s a good example of how innovation can add growth into a category that historically has not been as strong,” Hayes said.
Discussing 24% growth for Ball in 2012 to date across its North American specialty can portfolio, Hayes said: “The Alumi-Tek reclosable bottle continued to add to its customer portfolio as we expanded this product in the new end markets including craft beer and CSD [carbonates].”
Shifting North American capacity
But even though a major can customer extended a North American contract in 2011, executive VP and COO for Global Packaging Operations, Raymond Seabrook, said that the same customer told Ball several weeks ago that it planned to cut volumes in 2013.
“We’ve been doing a lot of shipping of our specialty cans across the country, so we’re going to use this situation to improve our specialty can footprint,” Seabrook said.
“And then the capacity that we rationalize, we’re going to move it to growing markets,” he added, explaining that it cost about half as much to install reconditioned capacity than build it anew.
Ball was working on two to three near-term opportunities, the analyst said, and noted that he used the word ‘growing’ (above) to signal that some spare capacity could be moved to Europe.
Despite poor summer weather, Ball said can volumes in Europe rose low single digits in Q2, but operating earnings fell from $84.8m to $65.7m year-over-year.
Hayes said Ball’s priority in Europe was to “get our pricing right”, as opposed “adding capacity into a market that’s been over-served and…a bit soft”.