Ball Corporation (BLL - Free Report) recently announced that it will cut down 12-ounce beverage can and end production capacity by stalling production at its two plants. In response to the current market demand, the company intends to step up its beverage can capacity in North America. The company will incur an after-tax charge of approximately $30 million related to employee severance and benefits, facility shut down and other actions, and the majority of which is expected to be recorded in the third quarter of 2012.
The two plants to cease production by the end of 2012 are the metal beverage packaging manufacturing plants in Columbus, Ohio, and Gainesville, Florida, subject to customer requirements. The Columbus plant employs around 110 people and two of its four existing lines manufacture standard 12-ounce cans. The Gainesville plant employs 125 people and produces variety of beverage can ends for standard can sizes.
Ball has been witnessing softness in demand for its standard 12-ounce beverage cans. To offset this loss, the company intends to capitalize on the increasing demand for specialty beverage can packaging.
Ball Corporation’s second-quarter 2012 adjusted earnings stood at 89 cents per share, which exceeded the Zacks Consensus Estimate of 87 cents as well as the year-ago adjusted earnings of 85 cents. Total revenue however decreased 0.6% year over year to $2.296 billion, and missed the Zacks Consensus Estimate of $2.347 billion.
Over the past few years, Ball Corporation has closed facilities to evenly match supply with market demand and effectively cut down costs. It has also taken steps to improve its return on invested capital through the redeployment of assets within its operations. The current plant closures will not only help Ball Corporation rationalize costs in a competitive market, but will further align supply with ever changing customer demand. In the rigid packaging industry, reducing costs, increasing prices, developing new products and expanding volumes are all possible avenues available for boosting earnings.
Broomfield, Colorado-based Ball Corporation is a manufacturer of metal and plastic packaging, primarily for beverages and foods. It also supplies aerospace and other technologies and services to government and commercial customers. Ball Corporation competes with Alcoa Inc. (AA - Free Report) , Rexam plc and Silgan Holdings Inc. (SLGN - Free Report) . Ball Corp. retains a short-term Zacks #3 Rank (Hold rating). Currently, we have a long-term Neutral recommendation on the stock.