Ball Corporation (BLL) reported strong third quarter results with earnings per share (EPS) of $1.40, up 16% from $1.21 during the prior-year quarter, but below the Zacks Consensus Estimate of $1.43.
The company gained 90 cents from equity earnings in the quarter, including which EPS amounted to $2.30.
Net sales as reported by the company amounted to $2.03 billion, up 12% year over year, driven by the strong performance throughout the company’s various packaging operations and the aerospace segment. However, the sales were below the Zacks Consensus Estimate of $2.06 billion.
Cost and Margins
The cost of sales of Ball Corporation increased 12% to $1.6 billion during the third quarter from $1.5 billion in the year-ago quarter. Selling, general and administrative expenses also increased to $93 million from $83.2 million in the year-earlier quarter.
Gross profit was $381.6 million in third quarter, up 12% year over year, however, gross margin dropped 5 basis points to 18.75%.
Segmental Performance
Metal Beverage Packaging, Americas & Asia: The segment reported sales of $1 billion, compared with $706.4 million in the year-ago quarter.
The company’s operating profit increased 9.6% year over year to $112.8 million, while operating margins dipped 329 basis points year over year to 11.2%. The segment’s results were benefited by the acquisition of a 10.1% interest in Latapack-Ball, which increased its overall interest to 60.1% in the joint venture. Strong volumes in China and Brazil, also contributed to the strong segmental performance.
Metal Beverage Packaging, Europe: The segment’s sales during the third quarter decreased 7% year over year to $442.3 million, consequently decreasing the operating profit by 8% to $63.8 million, and operating margin by 13 basis points to 14.3%.
The segment witnessed stringent cost controls, balanced supply and demand and improved volumes, which were offset by a 10% decline in currency translation.
Metal Food & Household Products Packaging, Americas: The segment witnessed a 9% drop in year-over-year sales, which amounted to $420.1 million. However, the operating profit increased significantly by 78% to $49.4 million, consequently improving the operating margin by 571 basis points to 11.8%.
Aerospace and Technologies: The segment’s sales dipped marginally by 0.3% year over year to $167.9 million during the quarter, but operating profit increased 14% year over year to $18.4 million, thereby increasing the operating margin by 134 basis points to 11%.
Financial Position
Cash and cash equivalents for Ball Corporation amounted to $168.7 million as of September 26, 2010, compared with $418.1 million as of September 27, 2009.
Long-term debt for the company reduced approximately by $478 million, amounting to $2054.8 million as of September 26, 2010.
Cash provided from operations saw a whopping increase to $371.4 million in third quarter 2010 from a meager $6.1 million in prior year quarter.
Capital expenditure also increased to $131.1 million in the quarter under review, from $117 million in the third quarter of 2009.
Debt-to-capital ratio was 54.1% as of September 26, 2010, versus 59.9% as of June 27, 2010 and 60.5% as of March 28, 2010.
Outlook
With the generation of huge cash flows year over year, the company now expects to generate $500 million in cash flow for full-year 2010. Ball Corporation also plans to repurchase more than $400 million of its shares and expects to end the year with strong results compared with its performance in the beginning of the year.
The company disclosed its plans to install the second production line in North America to produce Alumi-Tek (R) bottles. The company also announced the consolidation of its salmon can production in the beginning of fiscal 2011, which is expected to bring $8 million cash benefits to the company. During the quarter, the company also received contracts from NASA to build the first Joint Polar Satellite System (JPSS-1) and from DigitalGlobe to build a WorldView-3, the next generation commercial remote-sensing satellite. With these huge contracts, the company is well positioned to capitalize. Ball Corporation currently has a short-term Buy rating with a Zacks #2 Rank.
Ball Corporation supplies high-quality packaging for beverage, food and household products. The company also provides aerospace and other technologies and services particularly to the U.S. government, through its Aerospace segment.
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