In order to better align manufacturing footprints, Ball Corporation (BLL - Free Report) announced to cease production at its three beverage packaging plants namely Birmingham, AL; Chatsworth, CA; and Longview, TX. Following the closure, the existing customers will be supplied by other facilities.
The Birmingham plant has been operating for almost 65 years. The facility which produces beverage can ends is expected to cease production by the end of second-quarter 2018. The Chatsworth plant which makes beverage cans in multiple sizes will stop production by the end of third-quarter 2018 and the Longview facility will end production by the end of second-quarter 2018. All closure dates are subject to customer needs.
These transformational actions will help optimize Ball Corporation’s plant network, enhancing manufacturing flexibility and drive efficiencies to better compete in the packaging market. In addition, the step will assist to realign its standard 12-ounce beverage can and end capacity.
Further, the company will construct a new, advanced beverage packaging facility in Goodyear, AZ. The production in the plant will commence in second-quarter 2018, which will serve growing customer demand for specialty cans in the southwest United States.
Due to these closures, Ball Corporation expects to record after-tax charge of around $22 million, in which most of the charges will be recorded during third-quarter 2017. The company expects to achieve approximately $50 million of annualized net fixed cost savings in late 2018 and beyond. This will contribute to its $300-million plus acquisition synergies, estimated to be delivered by the end of 2019.
Notably, these measures are in sync with Ball Corporation’s focus to improve general and administrative cost structure with the ramp down of various high cost and obsolete footprints.
During the second quarter, Ball Corporation ramped down its Charlotte, NC regional support center. Further, the company ceased its beverage can production in Reidsville, NC. It also negotiated with the Works Council in Recklinghausen, Germany, and ceased production of beverage cans and ends at those facilities on Jul 31.
Moreover, Ball Corporation’s multi-year value capture plans are on track. Its focus on accelerating actions to reap cost savings will likely benefit the company in 2018 and beyond. Further, the company remains focused on planned cost savings, as well as grow comparable EBITDA, cash flow and EVA in all businesses.
However, Ball Corporation has underperformed the industry with respect to price performance in a year’s time, mainly due to escalating expenses and concerns regarding the food can business. The stock has lost around 1.4%, while the industry recorded growth of 7%.
Zacks Rank & Stocks to Consider
Ball Corporation currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the same sector include AGCO Corporation (AGCO - Free Report) , Caterpillar Inc. (CAT - Free Report) and Terex Corporation (TEX - Free Report) . All three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AGCO has expected long-term growth rate of 13.51%.
Caterpillar has expected long-term growth rate of 9.50%.
Terex has expected long-term growth rate of 19.67%.
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