Ball Corporation — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; this is an annual filing, not a standalone Q4 report. Ball supplies aluminum packaging globally and operated beverage packaging, aerosol and aluminum cup businesses, plus aerospace during 2023. Packaging generated 86% of 2023 sales and aerospace 14%.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Net sales | $14.029 billion | $15.349 billion |
| Net earnings attributable to Ball | $707 million | $719 million |
| Diluted EPS | $2.23 | $2.25 |
| Operating cash flow | $1.863 billion | $301 million |
| Capital expenditures | $1.045 billion | $1.651 billion |
| Interest-bearing debt at year-end | $8.62 billion | $9.00 billion |
- Sales fell about 9%; management attributed the decline mainly to lower volumes, lower aluminum-linked selling prices, and the 2022 sale of the Russian packaging business. Earnings attributable to Ball declined about 2%; diluted EPS declined about 1%.
- Cost of sales excluding depreciation and amortization decreased to $11.359 billion, or 81% of sales, from $12.766 billion, or 83%. Earnings before interest and taxes were $1.273 billion, approximately 9.1% of sales, versus $1.214 billion, approximately 7.9%. Net earnings attributable to Ball were about 5% of sales in both years.
- Operating cash flow improved substantially, supported by earnings, noncash depreciation and amortization, and a $360 million working-capital inflow, including inventory reduction. Investing cash outflow was $1.053 billion; financing cash outflow was $662 million.
- Year-end cash and cash equivalents were $695 million; current assets were $4.883 billion and current liabilities were $6.185 billion. Management described liquidity as strong, citing $1.69 billion available under committed revolving facilities and additional short-term facilities. The company reported compliance with debt covenants.
- Interest expense rose to $459 million from $330 million, primarily due to higher rates; the average borrowing rate cited by management increased to 4.9% from 3.5%. Dividends paid were $252 million. Share repurchases were $3 million, compared with $618 million in 2022.
Segment results and material changes
- North and Central America beverage packaging: Sales were $5.963 billion, down from $6.696 billion; comparable operating earnings increased to $710 million from $642 million. Lower volumes pressured earnings, partly offset by cost savings and pricing.
- EMEA beverage packaging: Sales were $3.395 billion, down from $3.854 billion, including the absence of the Russian business sold in 2022. Comparable operating earnings were $354 million versus $358 million, with new-facility start-up costs and currency effects offsetting pricing benefits.
- South America beverage packaging: Sales were $1.960 billion versus $2.108 billion; comparable operating earnings were $266 million versus $275 million. Lower prices and unfavorable fixed-cost absorption affected results.
- Aerospace: Sales were $1.967 billion versus $1.977 billion, while comparable operating earnings rose to $219 million from $170 million, aided by contract mix and operating performance. Year-end backlog was $2.98 billion, with $1.67 billion expected to be recognized as 2024 revenue; government funding and contract timing create uncertainty.
- Ball closed its St. Paul and Wallkill beverage-can plants during 2023, announced the Kent, Washington plant closure for the first half of 2024, and discontinued plans for a North Las Vegas plant. The Verona, Virginia slug plant ceased production after a fire.
Outlook, management commentary and risks
- Ball’s stated long-term financial objective is comparable diluted EPS growth of 10%–15% annually. For 2024, it expected capital expenditures of about $650 million and dividends of approximately $247 million; these are management expectations, not guarantees.
- Ball completed the sale of its aerospace business to BAE Systems on February 16, 2024, for a $5.6 billion purchase price, subject to customary adjustments. The company estimated a $4.8 billion pretax gain and $4.5 billion in after-tax proceeds. It planned to use $2.0 billion of proceeds to repay debt and $2.0 billion for share repurchases. A cash tax outflow of approximately $1.0 billion was estimated for 2024. Aerospace results are expected to be presented as discontinued operations beginning with the 2024 first-quarter filing.
- 2023 business consolidation and other charges were $153 million, including $94 million of facility closure costs, $41 million of aerospace-sale transaction costs and a $22 million Argentina currency-devaluation loss. Ball said it expected additional insurance proceeds related to the Virginia plant fire.
- Key risks include significant debt and interest-rate exposure; customer and supplier concentration; packaging demand, competition from plastic and glass, and production overcapacity; aluminum and other input-cost or supply disruptions; foreign exchange, inflation and geopolitical conditions; and regulatory, environmental, labor, pension and cybersecurity exposures.
- Management estimated known environmental liabilities at approximately $24 million; potential reasonably possible losses above recorded accruals could not be estimated. Ball said identified legal and environmental matters were not expected to materially affect its financial condition, liquidity or results, while some claims remain unresolved. The auditor identified aerospace fixed-price contract cost estimates as a critical audit matter. The financial statement and internal-control audits received unqualified opinions; management reported effective internal controls and no material weaknesses.
Most important facts for investors to verify
- Whether the aerospace sale’s final proceeds, gain, tax payment and planned debt repayment and repurchases align with the estimates and intentions disclosed.
- Whether packaging volumes and plant-capacity actions stabilize operations, particularly after the announced Kent closure and new EMEA facility start-ups.
- Whether the strong 2023 operating cash flow is sustainable, given the contribution from working-capital movements and planned capital spending.
- How higher borrowing costs, upcoming debt maturities and the post-divestiture capital structure affect interest expense, leverage and covenant headroom.
- How Argentina’s currency and operating conditions, pension obligations and the U.K. pension plan buy-out affect future earnings, cash flow and reported one-time charges.