The operator welcomes listeners to the Ball Corporation Third Quarter 2023 Earnings Call and introduces CEO Dan Fisher. Fisher mentions that the call will contain forward-looking statements and reminds listeners to refer to the company's latest 10-K and other SEC filings for potential factors that could affect results. He also notes that the earnings release and information on non-GAAP financial measures are available on the company's website. Fisher briefly mentions the divestment of the Russian operations and provides details on the company's recent agreement to sell its Aerospace business. The transaction is subject to regulatory approvals and customary closing conditions and adjustments.

The company's financial estimates do not include the potential impact of the Aerospace business sale. The process for regulatory approvals is underway and there will be a progress announcement when appropriate. The company's CFO, Scott Morrison, has announced his retirement and Howard Yu has taken over the role. Morrison will stay on as an advisor until 2024 to ensure a smooth transition. The CEO thanks Morrison for his 23 years of service and notes his key role in M&A deals and bond deals. Morrison will discuss financial metrics and the company's outlook for the rest of 2023 before closing comments and a Q&A session. The CEO is grateful for Morrison's contributions to the company and for his decision to stay on longer as CFO.

The paragraph discusses the retirement of Scott, the former CFO of Ball, and the introduction of Howard as the new CFO. Howard brings a wealth of experience and a focus on continuous improvement and operational excellence. The team has delivered strong third quarter results, with improved efficiencies and cost recovery, offsetting the impact of tough volume comparisons. Howard is looking forward to meeting stakeholders at upcoming events and conferences.

In the third quarter, Ball faced a $43 million increase in interest expense and a $14 million operating earnings decrease due to the sale of their Russian business. However, the company was able to manage costs and supply chain volatility well. Their volume performance was affected by disruptions in the U.S. beer market and regional customer mix decisions, but they saw growth in Brazil and better than industry performance in EMEA. Moving forward, their actions to tighten supply and demand, lower costs, and leverage their sustainable packaging portfolio will position the company for success. The sale of their Aerospace business will also provide financial flexibility and allow them to return value to shareholders. The company is grateful for their employees' hard work and adaptability during these changes, and they are starting to see improvements in global beverage shipments, particularly in Brazil.

The company plans to focus on reducing costs and meeting demand in the current economic climate. Demand for their products in the Aerospace and Aluminum Aerosol businesses is growing. However, a recent fire at one of their facilities has caused significant damage and they will not be able to operate there in the future. The company is working to meet customer demand from other facilities and insurance will cover most of the financial impact. The company remains committed to achieving their financial goals.

In the third quarter of 2023, the company expects to see low to mid-single digit growth in comparable diluted EPS, and will discuss growth targets for 2024 in their February earnings call. Sales decreased due to lower aluminum prices and lower volumes from the sale of their Russian business, but net earnings increased due to inflationary costs, lower tax rate, and cost-saving initiatives. The company has managed supply and demand and reduced inventory, and is focused on improving returns and delivering innovative products to customers.

The company is expecting to see operational efficiencies in the future due to current cost-cutting measures. In the EMEA region, they are on track to fill a previous earnings hole and are navigating changing demand conditions. In South America, volumes have increased but earnings were impacted by product mix and volatility. The company has a solid liquidity position and plans to use cash to address a bond maturity. 2023 CapEx is expected to be lower than previous years. The company anticipates generating free cash flow and has a projected effective tax rate. Interest expense and corporate undistributed costs are also expected to be in certain ranges.

The paragraph discusses Ball's fourth quarter earnings and year-end debt projections. It also mentions the recent declaration of a quarterly cash dividend and the company's focus on reducing leverage and resuming share repurchases. The speaker, Scott, expresses gratitude for being part of Ball for a long time and believes the company is in good hands with Dan and Howard leading the team. The speaker, Dan, concludes by thanking everyone for listening and expressing confidence in the company's future growth and value creation.

The speaker states that they still have a couple of years of capacity to grow into, even after recent closures in the market. However, the retirement of 1,500 employees and the onboarding of new ones has caused a dip in efficiency, which is expected to improve. As a result, the company does not anticipate needing to spend capital to match their growth for the next three to four years. The growth trajectory may be slower in 2023 and 2024 compared to previous expectations.

The company is managing their capital outlays and allocations within their GAAP DNA number. They expect to be able to grow and increase margins on new innovative products without spending outside of DNA. Brazil's economy is improving, leading to increased demand for their products, and they have seen a shift from returnable glass to aluminum.

The speaker discusses the stability of the marketplace in Brazil and the company's plans to increase production to meet demand in the fourth quarter. They also mention the negative impact of the situation in Argentina on the company's performance. The speaker is optimistic about the company's earnings in the second half of the year and mentions plans to offer reuse and refill options for their products, particularly in the European market. They believe this could potentially benefit their single-use products in the future.

The speaker explains that the company's North American and South American volumes were different from their competitors due to a variety of factors such as product and customer mix, partnerships, and exposure to mass beer. In South America, the fluctuations in volumes are mainly due to partnerships, while in North America, the strong performance in the previous year and exposure to mass beer played a significant role.

The company has made significant progress in terms of destocking and inventory movement in the past year, and this may have affected year-over-year comparisons. Going forward, the industry will likely see more transparency in customer mix and volume data. The Aerospace sale is on track to close in the first half of 2024, and the company is hopeful that it will be a more efficient process than their previous transaction. The analyst congratulates the company's CEO and CFO on their upcoming departures and asks about the significant permanent capacity reduction in North America in the past two years.

The company has modernized its footprint and is anticipating a reset in the market before a reacceleration. They will focus on productivity and operational excellence to support future growth. Pricing behavior will return to pre-COVID levels and the company will make more money and flow more cash. Top line growth will depend on the depth of promotions against a weaker end consumer, but the company will continue to focus on efficiency and cost reduction until there is an inflection in top line growth.

Dan Fisher, in response to Ghansham Panjabi's question about the negative volume quarter in Europe, explains that although they have still been winning in the market, there has been a weaker end consumer and higher energy costs that have impacted volumes. He also mentions that the industry will continue to grow at a low rate, but he does not foresee any new entrants as there are already a handful of players that are struggling and may not be around much longer.

The speaker discusses the current volume and future potential of their company's footprint, as well as the low barrier of entry for competitors in the industry. They also mention their plans for using proceeds from a recent sale and potential investments in the supply chain. The speaker thanks Scott for his contributions and welcomes Howard to the team.

Dan Fisher, a representative from Ball, discusses the potential impact of a weak Bud Light sales on the company's overall volume. He mentions that the recent deal between Bud Light and UFC may help offset any potential losses, but the company is also relying on other partners like Constellation to help compensate for the decrease in sales. Fisher also mentions that there will be a minor reset in the fall and a bigger one in the first half of next year, which will determine how other companies in the industry will handle the situation. He believes that the money being spent by Budweiser on reestablishing Bud Light will eventually lead to a rebound in the beer industry, including ready-to-drink cocktails, which will benefit Ball.

The speaker believes that the company's recovery will be strong in the second quarter of next year, with easier comparisons in the following quarters. They do not anticipate any further network changes and have reserves for a potential increase in revenue over the next few years. The company also plans to offset the earnings dilution from the Aerospace sale through debt reduction, lower interest expenses, improved operating earnings, and buying back shares.

Scott Morrison and Mike Roxland discuss the company's cash flow profile and upcoming changes in the beverage business. Phil Ng asks about the closure of the Kent facility and potential cost savings. Dan Fisher responds that the facility will be closed in the first half of 2024 and will result in savings of around $20-30 million. Phil Ng also asks about the company's potential for 10-15% EPS growth next year, to which Dan Fisher responds that the timing of the close and share buybacks will impact this.

The company's goal is to exceed the range of EBITDA they had in the past. The slugs facility being down will not have a significant impact on EBITDA in 2024, as they have enough supply to manage. The company is considering rebuilding the facility with insurance proceeds. The company plans to use cash on hand and proceeds from a bond offering to pay off $1 billion due in a couple of weeks and another $790 million due in March.

The company plans to pay off $2 billion in debt after closing the aerospace transaction and has $3 billion in cash and credit available. The Aerospace business will be mostly carved out and there will be minimal overhang. Analysts asked about potential stranded costs and the company expects volumes to track below previous expectations for North America, citing factors such as weather and promotions.

The speaker is asking about the reasons behind the company's expectations for volume in different regions, specifically in Europe and South America. They mention that South America's performance was affected by issues in Argentina, but they are optimistic about the region's future. In Europe, they expect slightly lower volumes due to a weaker market overall. The speaker also addresses potential concerns about profitability in South America, stating that it is in better shape than earlier in the year.

The speaker is not overly concerned about the softer growth in the consumer market, which has consistently grown for 20-plus years and is expected to return to growth eventually. However, the current weak consumer and pricing behavior may delay this growth until 2024 or 2025. The company is currently running at the lower end of its growth range and expects to make more money and generate more cash. The speaker confirms a $300 million working capital inflow this year and mentions $4 billion in proceeds earmarked for next year, including $800 million to $1 billion in AR factoring.

The speaker is discussing the possibility of transitioning to more permanent financing and using proceeds to pay down debt. They also mention the potential for retiring certain programs and using the remaining proceeds for various purposes. The speaker cautions against making predictions about working capital for next year due to the potential for fluctuations caused by the sale of the transaction and tax payments.

The speaker discusses the company's plans for the balance sheet and P&L going forward. They mention that the cash flow will look lumpy due to the Aerospace transaction, but the balance sheet will be in good shape. They also mention improvements in working capital and the goal to always get better. A question is asked about customer categories and the speaker responds that Europe is easier to predict, but there are pockets of strength and surprise in demand, particularly in mass beer in the U.S.

The consumer market is currently weak across all categories. Private label has grown in the CSD category, taking share from bigger players. Ready-to-drink cocktails are still growing at a high rate, while hard seltzers are declining. Import beer has grown, filling the gap left by domestic beer. There is hope for improvement in the fourth quarter, but it depends on the performance of a major customer. The nonreportable business saw growth in aerosol, but there is still work to be done in the cups business. Conversations are ongoing to secure larger customers for the cups business.

The speaker is optimistic about future transactions and wins, which are necessary for the company to break even. They believe they are doing better this year and will continue to improve next year. They mention needing one or two significant wins to reach breakeven, but it may not happen in the near term. The speaker thanks the current CEO for their contributions and looks forward to introducing the new CEO to everyone. They wish everyone a safe and happy holiday season and hope to see them in the future. The call ends with the operator thanking everyone for participating.

This summary was generated with AI and may contain some inaccuracies.