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Ball Corporation is a supplier of aluminum packaging products such as extruded aluminum aerosol containers, reclosable aluminum bottles, aluminum cups, and aluminum slugs for the beverage, personal care, and household products industries in the United States, Brazil, and internationally. Ball is the world’s largest producer of aluminum beverage cans.

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Q4 2024

Ball (BALL): Company Profile, Stock Price, News, Rankings

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Ball

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Greetings, and welcome to the Ball Corporation 4th Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brandon Potthoff, Director of Investor Relations.

Thank you, Christine. Good morning, everyone. This is Ball Corporation's conference call regarding the company's Q4 2024 results. The information provided during this call will contain forward looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied.

We assume no obligation to update any forward looking statements made today. Some factors that could cause the results or outcomes to differ are described in the company's latest Form 10 ks, our most recent earnings release and Form 8 ks and other company SEC filings as well as company news releases. If you do not already have the earnings release, it is available on our website at ball.com. Information regarding the use of non GAAP financial measures may also be found in the notes section of today's earnings release. In addition, the release includes a summary of non comparable items as well as a reconciliation of comparable net earnings and diluted earnings per share calculations.

References to net sales and comparable operating earnings in today's release and call do not include the company's former aerospace business. Year to date, net earnings attributable to the corporation and comparable net earnings do include the performance of the company's former aerospace business through the sale date of February 16, 2024. I would now like to turn the call over to our CEO, Dan Fisher.

Thank you, Brandon. Today, I'm joined on our call by Howard Yoo, EVP and CFO. I will provide some brief introductory remarks. Howard will discuss Q4 financial performance and key metrics for 2025. And then we will finish up with closing comments and Q and A.

Before I talk about the business and results, I want to highlight the amazing work our employees and teams have done to give back to their communities. In 2024, our employees volunteered more than 23,000 hours of their time across 23 countries and the more than 18 80 different causes and organizations, working to create a positive impact in the communities where we live and work. In partnership with the Ball Foundation and our dedicated employees, we invested more than $4,000,000 into our communities to support local causes and disaster relief efforts. I want to thank all of our employees who devoted time in 2024 to uplifting our communities. You truly represent our values of we care, we work, we win.

I also want to take a minute to highlight the work our teams have done to continue to improve our safety performance. Because our people are our most valuable resource, we set aggressive targets to improve our total recordable incident rates. We continue to be well below industry incident rates and our continuous improvement mindset requires us to constantly improve. Through that mindset, we were able to decrease our 2024 incident rates versus 2023 and outperformed our goal for the year. For us, our safety metrics represent more than just numbers.

They exemplify the health and well-being of our employees and we will continue to do everything in our power to improve every year. Turning to business performance. We delivered solid 4th quarter results and returned $1,960,000,000 to shareholders via share repurchases and dividends in 2024. And we continue to execute on our goal of repurchasing at least 3,000,000,000 of shares between 24,000,000 25,000,000. Aluminum packaging continues to outperform other substrates across the globe.

In EMEA, 4th quarter volume remained strong, driven by continued investment by our customers in can filling across the region. In South America, volume growth in Chile and Paraguay was more than offset by softer than anticipated volume performance in Argentina, as well as supply demand tightness in Brazil caused by slower than expected ramp of idle capacity. In North America, persistent economic pressure on the end consumer and our exposure to U. S. Domestic beer led to softer than expected volume.

Our regional performance culminated in Ball's global beverage can shipments being down low single digits year over year in the Q4 and up 1% in 2024. Looking to 2025, our Ball business system is in place and our teams are focused and excited about the opportunity that lies ahead of us to drive operational performance, volume growth and productivity gains. We are laser focused on delivering on our stated goal of exceeding 10% comparable diluted earnings per share growth in 2025 beyond. As we begin 2025, we feel confident in our ability to deliver 11% to 14% comparable diluted EPS growth. We anticipate growing global volume in the 2% to 3% range and expect all of our businesses to grow in or above the ranges we laid out at our 2024 Investor Day.

In EMEA, customer movement to cans from other substrates will continue in 2025. We continue to be bullish on the opportunity to drive long term growth across EMEA as sustainability legislation and the competitive advantages of aluminum packaging increase can penetration from a low base. In South America, recovery in Argentina and Chile coupled with growth in Brazil is expected to drive volume above our long term range and operating earnings growth in 2025. And while our North America business faced volume challenges last year, we have confidence in our ability to deliver volume growth in line with or slightly above market. We have been proactive about extending contracts and have over 85% of our 2026 volume under contract.

That includes signing an extension with one of our largest customers that will take us to nearly the end of the decade. This extension with our global partner also means that we will be building what is effectively a 2 line can plant in Oregon. This investment will not change our expected CapEx plans or our share repurchase targets and will give us needed capacity in the market where our customers are also investing. Additionally, in January, the company entered into an agreement to purchase Florida can manufacturing and its beverage can facility in Winter Haven, Florida. The transaction, which carried a $160,000,000 purchase price, closed this morning.

Our North American business is running at high utilization rates in part of the U. S. And with the growth we expect in the coming years, this capacity will provide us the fuel for growth we need to deliver on our customers' plans. We are purchasing this asset for well below replacement value and with our strong balance sheet position, there will be no impact to our share repurchase plans. Lastly, on cups, during the Q4, our board approved for the company to pursue alternatives for the business.

This includes an option to form a strategic partnership in early 2025, which is expected to result in deconsolidation of the business. We expect to complete the process in the Q1. And with that, I'll turn it over to Howard to discuss full year and Q4 2024 results as well as key metrics for 2025.

Thank you, Dan. Starting with our results. 2024 full year comparable diluted earnings per share was $3.17 versus $2.90 in 2023. 4th quarter 2024 comparable diluted earnings per share was $0.84 versus $0.78 of the Q4 of 2023, an increase of 9.3% and 7.7 percent respectively. Full year comparable net earnings of $977,000,000 were up year over year driven by strong operational performance, cost management initiatives and lower interest expense, which were able to more than offset the earnings headwinds from the sale of our aerospace business.

4th quarter comparable net earnings of $250,000,000 were up year over year driven by cost management initiatives as well as lower tax and interest expense, which were able to more than offset the earnings headwinds from the sale of our Aerospace business. In North and Central America, stronger than expected performance in December volumes was more than offset by lower than expected volume in October November. Despite a softer U. S. Mass beer category and stretched end consumer, we continue to believe that our 2025 volume will return to growth and will be in line or slightly above market.

Throughout 2024, our team has done a great job of improving operational efficiencies, lowering costs and effectively countering measuring risk. And through our Ball business system, we will continue to drive operational improvement in the plants to more profitably serve our customers' growth. While we have a tough comp in the Q1 as well as headwinds from poor weather across the U. S. In January, we expect sequential improvement throughout the quarters leading to volume growth in 2025.

In EMEA, 4th quarter segment volumes were strong and the segment comparable operating earnings increased 12.5%, matching our expectations entering the quarter. Recent demand trends remain favorable and the business is on track for significant year over year comparable operating earnings growth in 2025, driven by improving operational efficiencies and volume growth. In South America, segment comparable operating earnings increased slightly, while segment volumes declined due to continued weakness in Argentina and the supply demand tightness in Brazil, partially offset by volume growth in Chile and Paraguay. During the Q4, consumer conditions in Argentina continued to demonstrate some gradual signs of recovery, and we continue to monitor the dynamic economic situation in Argentina and potential scenarios that could impact results. To provide additional volume support for our Brazil business, we plan to reopen Posto Alegre facility.

Looking at the businesses within our other, our personal and home care business, which was previously called aerosol performed well and grew volume mid single digit in the Q4 and we expect to grow volumes above our long term range in 2025. Moving on to additional key financial metrics and goals for 2025. We anticipate year end 2025 net debt to comparable EBITDA to be 2.75 times as we work to deliver on our stated goals of repurchasing at least $3,000,000,000 worth of shares between 2024 2025. After repurchasing $1,700,000,000 of shares in 2024, we will repurchase at least $1,300,000,000 of shares in 2025. And we'll remain aggressive in repurchasing our stock at what we believe is very attractive pricing.

Through today's call, we have repurchased $290,000,000 worth of shares year to date. 2025 CapEx is expected to be slightly below D and A in the range of $600,000,000 We anticipate being able to deliver on our target comparable net earnings equal to adjusted free cash flow in 2025. Relative to the estimated tax payments due on the Aerospace sale, we now expect total payments to be $875,000,000 We paid a total of $766,000,000 as of the end of the 4th quarter and expect the remaining portion to be paid in the first half of twenty twenty five. Our 2025 full year effective tax rate on comparable earnings is expected to be slightly above 22%, largely driven by lower year over year tax credits. Full year 2025 interest expense is expected to be in the range of $270,000,000 Full year 2025 reported adjusted corporate undistributed costs recorded and other non reportable as expected to be in the range of $160,000,000 driven higher by lower interest income from the cash proceeds of the aerospace sale.

And last week, Ball's Board authorized the repurchase by the company of $4,000,000,000 of our common stock through the end of 2027 as well as declared its quarterly cash dividend. Looking ahead to 2025, we are hyper focused on operational excellence, cost management, driving efficiency and productivity across our business and monitoring emerging marketing volatility. We are fully committed to maximizing the potential of our company over the long term. We have executed on de risking the corporation through debt retirement and we have minimal near term maturities. The runway is clear for us to activate near term initiatives to consistently deliver high quality results and generate compounding shareholder returns.

Thanks, Howard. The business is operating well and we have future proofed our business through long term contract renewals, deleveraging and footprint optimization. Through the strength of our portfolio and the unwavering dedication of our employees, we are confident we will deliver on our long term financial goals of exceeding 10% comparable diluted EPS growth, generating adjusted free cash flow in line with our comparable net earnings and returning value to shareholders through large scale share repurchase and dividends. The focus on executing our purpose and our promise was certainly on display during 2024. In 2025, we have the opportunity to deliver record adjusted free cash flow and comparable diluted earnings per share.

We will continue to meet our customers where they are to deliver affordable, innovative aluminum packaging solutions that can lead to a world free from waste. Shareholder value creation remains our focus and we continue to prioritize delivering compounding shareholder returns in 2025 and beyond. We are confident that consistent delivery of high quality results and operational performance, coupled with a significant share repurchases for the foreseeable future, in addition to dividends, will drive shareholder value creation. We appreciate the work being done across the organization and extend our well wishes to our employees, customers, suppliers, stakeholders and everyone listening today. Thank you.

And with that, Christine, we are ready for questions.

Thank you. We will now be conducting a question and answer session. Our first question comes from the line of George Staphos with Bank of America. Please proceed with your question.

the details, guys. I guess, first question, recognizing there's been delays, to what extent have you been able to determine the effect of tariffs and what that might have relative to the guidance that you're providing either in terms of volume and or supply chain on aluminum? For instance, if there is some impact on Mexican shipments, might that be made up in North America or not? And then I had a couple of quick follow ons.

Yes, George, great question. I'm on a call every single day and the details obviously are changing relative to tariffs. Maybe start with what is imminent is what's happening to the aluminum supply chain in China and we have spent the better part of the last few weeks mitigating what started as a potential $40,000,000 to $50,000,000 issue and I think we've got that resolved down to 1,000,000 of dollars, a couple of $1,000,000 So we've renegotiated deals with the supply base. We've enforced elements of our contract. A lot of that metal was going into South America actually because a lot of these supply chain metal supply chains have been altered significantly back in the 2015 2016 timeframes.

So that one, you can put that one to bed as it having minimal nominal year over year impact to us. But the I think what you're highlighting is our concern would be depending on the size of this or the piece coming across the border from Mexico, it would be really end consumer additional pressure there in volume. The good news is some of the stuff that comes across the border from Mexico is the growing aspect of your beer portfolio. Obviously, we've been in constant contact with some of those customers and we've got plans in place to help risk mitigate. But if it's 25%, that's a vastly different story than a 10% versus a 2.5%.

And the 25% to me would be more concerning just in terms of a pretty stressed end consumer. So I would be more concerned about the volume for that aspect of the portfolio, which is not that big for us, but every bit counts these days relative to accumulating a tailwind on growth. So not a lot of detail for you. The stuff that I know in detail, we've worked, we've mitigated it. The other stuff is still in flight.

The 25% number would be more concerning and it would be more concerning relative to end consumer demand, which would certainly dampen our current outlook.

That's clear, Dan. Thank you for that. Yes. And the other question and it's a 2 parter. Can you talk about I'll try to make it painless.

Can you talk a little bit about how these investments you talked about, including the Florida can business might affect your earnings and or volumes? In other words, would you have been comfortable with the growth outlook you gave if you weren't making these investments? Or do you need these to get there? And then just look, having covered the company for a while, like a lot of folks on this call, the last few years, ball has been very busy. But at times, sort of getting to the bottom line, the investments, the activity has not been necessarily as you would have expected.

And so what comfort would you give analysts and investors that you can manage another can plant, you can manage investment and at the same time executing and get to the bottom line to hit your goals? Thanks guys and good luck in the quarter.

Yes, thanks. I think if I'm following that trend logically, I would just say that, I guess over the last couple of years in North America, we've significantly outperformed on earnings. So I guess I'm struggling with some of the some parts of the question, but I'll answer this in terms

mean going back to the can plant additions from the growth boom and how that came through in terms of earnings, that's where I was going with that. I'm sorry. And clearly, you definitely did get great operating leverage the last couple of years. But that's where I was going with that part of the question.

Yes. Well, the investments have more than paid for themselves by restructuring aged assets that were less productive. So all of that, I mean, if you look at that, it's actually worked out pretty well. The 2 investments that we have, 1, I've said repeatedly that we didn't want to abandon the Northwest marketplace permanently. So that one shouldn't come as a surprise.

It's in line with investments by our customer in that part of the world. So it's repositioning that footprint to be more closely aligned to their investments. So that should work well moving forward. So a lot of thought in that application of investment there. And then picking up a significantly reduced price point on a great plant that's nearby an existing Tampa facility in a market that's growing, we're going to really like that in 2026 and beyond.

I think George, maybe just one thing to add is that, that Northwest investment that Dan is talking about, that would still be within our envelope of CapEx that we've described. And so our CapEx in 2025 will be below D and A and despite that investment in the Northwest. And so I wanted to make that clear as well.

Okay. And do you need these to hit your goals or these would have been additive to the goals you gave? Thanks guys.

Our next question comes from the line of Phil Ng with Jefferies. Please proceed with your question.

Hey, guys. Volumes in North America has been anything but predictable. It's been weaker. But you sounded pretty confident North America will grow faster than market and faster than your longer term target. So I guess, first out of the gates, what are you seeing?

And then you called out contract renewal with one of your larger customers in North America, which is great, gives you visibility to the out years. Did you pick up any volumes? And how should we think about pricing for those contracts that you guys renew?

Yes, I would say 2025, let me start with that piece. I think the industry is expecting kind of that 1% -ish growth rate. For us, obviously, we were lapping 2023 pretty significant marketing dislocation. And then last year, we had a sizable share reallocation on one of our major beer partners. So we're stable heading into this year, some incremental volume pickups and it's going to boil down to health of the end consumer, are you with the right customers with the right partners from a mix perspective.

So I believe we are. So that's why I'm more bullish that will tick a little north of how the market performs. And then relative to pricing, fairly stable in the out years relative to the large customer contract that we picked up. Some of that, obviously, when you're making investments on behalf of those customers, you're able to offer a different value proposition. So that's created some structure and some stabilization for us relative to that customer.

Any share gains and volumes picked up as part of that investment,

We believe that we picked up I would characterize it this way. I think where we have secured volume, we believe that'll be it'll be growing at a faster rate than their portfolio given some of the pressure, for instance, in the Northwest on some anti plastic sentiment.

Super. And then when I think about, Dan, how you've historically been aligned globally and certainly North America as well, you guys have been aligned with the big brands, big customers. And when I think about North America, frankly, there's been a lot of innovation in the beverage industry. And a lot of that's actually coming from smaller brands and entrepreneurs, whether it's ready to drink cocktails, non alcoholic beers and actually non alcoholic beverages on that ready to drink side, functional soda and stuff of that nature. So my question to you is, how is your growth to market strategy perhaps evolving?

Are you going after some of these customers in a bigger way just because demand has been pretty muted in North America and the big concern has been, is this a structural dynamic you can't grow out of? So how is your go to market strategy pivoting in an evolving marketplace where there's still a lot of innovation out there?

No, I think that's a great comment, Phil. Historically, we're kind of with everybody in the marketplace. Our portfolio is exponentially larger than any of our competitors in terms of the customer and the category mix. We've got a pretty healthy balance across everything. It's interesting.

You commented on ready to drink cocktail. So one of our bigger customers actually acquired the brand that owns 40% of the ready to drink cocktail. So these two things generally, if they're really successful innovative launches, they typically get acquired. So you have to play candidly, you have to play kind of who are the acquirers, who are the innovators. You kind of start there with your anchor investors and then you work both sides of the equation to help stimulate product launches.

And so the Poppies of the world, the Liquid Deaths, it's like they're large in our portfolio. So it's but it's hard to if Coke is growing and ABI is growing and the large customers are growing, we're going to grow. If they're not growing, you can have all of the startups in the world and you're just not going to move the needle on the size of volume. So there's definitely a balance. I don't think we've moved away from innovation, driving sustainability with the and helping the smaller innovation driven brands and customers in the marketplace.

But at the same time, you got you got to help make sure that your key partners are winning in the market and that's really how you're going to win.

Our next question comes from the line of Ghansham Panjabi with Baird. Please proceed with your question.

Hey, guys. Good morning. Dan, going back to the Analyst Day from June of last year where you spent a fair amount of time on some of the productivity initiatives that we're going to unfold over a multiyear basis, largely North America. And to put that in just kind of given what you've done or have announced with Oregon and also the acquisition in Florida, does that allow you the opportunity, a bigger opportunity as it relates to reconfiguration of your footprint and to reaccelerate that productivity because it's not like volumes are growing faster in the industry relative to those 2 additions.

Got it, Tom. I think these once these are in place, yes, you'll be able to pick up efficiencies. We didn't vacate demand, for instance, in the Northwest. So you're shipping in that demand. So that will be a benefit, right, in terms of delivered cost.

And then it's we're acquiring an incredibly efficient asset base down in Florida that we can do some things relative to running different can sizes and then becoming more efficient on lines within that sub region. So we just closed a deal today. So we've got some ideas on what we're going to do, but we're going to have to get in there and do that. But yes, that will anytime you've got incredibly efficient assets, well run assets, that gives you opportunity to be more flexible in a system of our size.

Okay, perfect. And then as it relates to Europe, obviously Europe was a very nice surprise, I would say for the industry from a volume perspective last year. How are you thinking about 2025 as it relates to volume growth, tougher comparisons and and just the fact that it is Europe,

so? Yes. As we sit here today, like we thought we'd be entering into 2023 Q4, there was the destocking event that took place, which muted volume, then everybody got off to a pretty good start in the Q1. So I thought the comp would be a little bit more challenging this year, 25 versus 24 because of that sequencing of events and we're off to a really good start there. So I think it's just listen, we've always talked about the opportunity set that Europe presents because it's got the lowest can penetration.

And as it evolves into a focus on carbon footprint, we've got a great product for that. It's a glass rich environment in Europe, as you know. And I think the health of the end consumer to some extent is a little more balanced in terms of our customers not necessarily being able to put through price at the same rate with the same veracity that they're able to in North America. And as a result of that, I think it's a really stable environment for continued growth. And we're fortunate that we put in place a couple of large assets there to grow into and we're continuing to grow into those.

So I think we'll be at the high end of our long term guidance for Europe again this year.

Our next question comes from the line of Stefan Dias with Morgan Stanley. Please proceed with your question.

Hi, everybody. Thanks for taking my question. Maybe first, going back to North America. Do you need to see low single digit volume growth to be able to hit your EPS guide? Or can we sort of have like a flat to down environment in 2025 and still grow earnings just considering the shares you're buying back?

Or maybe is it just as simple as if you grow 2% to 3% globally, you should be able to hit your EPS guide?

Yes. I'd say for a negative print on volume that looks like what we did this year, I think we'll be very challenged to hit EPS target even with share buyback, I don't know, at a more aggressive rate. A flattish environment, offset by maybe a little bit more growth in Europe. I think it's probably a good recipe to deliver the range we outlined. But yes, we're getting to a point where you're going to need some growth in North America.

It's not only the profitability associated with the volume growth, it's also really hard to offset negative volume of productivity gains. At some point, we're a volume business. We've done a lot of heavy lifting and done some tremendous things to increase the level of profitability in North America. But you'll start running into a bit more of a challenged environment relative to North America and then you'll have to rely more on mix and some other things to steer you to heavier profitability lift there. But, yes, I'm feeling really good where we're at right now starting the year.

Things are pointing in the right direction with the strength of Europe and the event that things don't materialize in the growth in North America, but certainly growth is going to at some point be an important cog, if not necessary to expand margins.

Okay, perfect. No, that's really helpful. And then, so the last couple of calls now, you noted a supply demand mismatch in Brazil. So I guess maybe how are your inventory levels in the region? And maybe how is demand shaking out versus your expectations so far quarter to date?

And then maybe if you could also just parse out Brazil volumes in the quarter versus Argentina volumes, just so it's easier for us to compare versus your competitors? Thanks.

Sure. So Brazil grew in the Q4, we didn't. I would say, we entered into we're managing certainly the downturn in Argentina aggressively from a cost perspective in the second and third quarter. We were doing the same thing in Chile, which has been soft and has declined for the last 2 or 3 years. And then Brazil was kind of low single digit growth for the 1st two quarters.

And we also were running a much tighter capacity outlook within our network there. And then suddenly, it got real hot at the end of Q3. So we entered we were tight and running short on inventory positions at the end of Q3. We started turning on a curtailed line in Argentina, curtailed line in Chile, multiple curtailed mines in Brazil. And as we said in the opening, we're turning back on a curtailed plant.

But that's just taking longer than we anticipated. So we'll return to growth in Q1 and we'll grow in excess of our long term outlook next year because we're seeing recovery in Chile, we're seeing recovery in Argentina. We'll be fit to serve Brazil and will be coming off in much easier comp obviously in Q3 and Q4, 25 versus 24.

Our next question comes from the line of Anthony Pettinari with Citi. Please proceed with your question.

In previous quarters, you've kind of been able to grow EBIT year over year without much volume growth. And that I guess that changed in 4Q. I'm just wondering did you, I don't know, lap any key cost saves or were there any kind of PPI pass throughs or change in price mix? I guess maybe you lap the Wallkill plant closure, but I'm just curious if there was anything that kind of drove that leverage?

Yes, I think you're talking specifically about North America.

Yes, we've done listen, we're running to historical asset utilization rates now. So we've done kind of the heavy lifting over the last couple of years. So we've lapped that. So in many respects, what you're describing is, yes, we're going to have to we're going to have to get a little bit of growth. I think the new investments that we're making will also give us an opportunity to create an even more efficient supply chain with the Florida can investment in particular.

So there are things that we can do now that we have that asset in the portfolio. But yes, we're tight and we're also obviously shipping product as I indicated to an earlier question into the Northwest. So there's inefficiency relative to that, that will lap once we get the new facility up in Oregon. So there's opportunities there to do some more and gain productivity, but turning on curtailed lines and running them is going to be the most efficient way to lever up margin wise.

Got it. Got it. And then can you maybe talk about operating rates or sort of system utilization in Europe? I guess volume growth has probably been ahead of other regions, but I don't think you've added a lot of capacity in recent years. I'm just wondering if there's anything kind of in the CapEx plan for 'twenty five, 'twenty six for Europe or opportunities for debottlenecking or new lines or anything like that?

Yes, we have I guess over the last 2 to 3 years, we've added 2 huge facilities, 1 in the UK and 1 in the Czech Republic. So we've been those will both be 4 line plants by the end of next year. So we have done some incremental line enhancements and investments and that's been able to lift us. It's getting it's actually getting quite tight all throughout Europe right now. Over there's a lack of capacity to meet the demand in the UK.

So we're looking at things there. But yes, if these growth rates continue, I mean, that's a big market growing at 3%, 4%, 5%. So that would that's going to require probably think about 27%, 28% to be doing other things in that part of the world.

Ball (BALL) Q4 2024 Earnings Call Transcript

Company Participants