Dive Brief:
- Ball Corporation will permanently close two beverage can facilities in the U.S. amid softening consumer demand for alcohol, President and CEO Daniel Fisher said on its Q2 earnings call.
- Plants in Phoenix, Arizona, and St. Paul, Minnesota, are set to cease production later this year and in spring 2023, respectively, Fisher said. The facilities have a combined net capacity of nearly 4 billion units.
- The announcement comes as Ball works to save costs by optimizing capacity within larger plants, including at a facility in Pittston, Pennsylvania, that the company announced in late 2020. “We are controlling the things we can control,” said Fisher.
Dive Insight:
Faced with flattening demand, Ball is working to boost operating efficiencies. The company aims to improve demand planning by closing two of its older plants and delaying construction of a new plant in Nevada.
Beverage company orders had little growth in volume in Q2. Total alcohol orders were down 3%, and despite an 8% increase in energy drinks, overall beverage demand in North America experienced a “flat to slight increase through July,” Fisher said.
“We’ve taken a view to optimize the network,” Fisher said on the call. “We have a strong belief in the medium to long-term, but we need to meet the world where it’s at right now.”
Based on Ball’s past closures of similar-sized plants, Fisher said the company expects to save roughly $30 million in fixed costs for each closed facility.
The pullback on production follows a period of record demand for aluminum cans. In 2020, can makers including Ball saw capacity “constrained” and ramped up sourcing and production efforts.
With slower demand and higher cost inflation, Ball reported a net loss of $174 million in Q2. The closures are part of a company-wide savings review.
“We’re going through, department by department, and figuring out what things do we really need to be spending money on and what things don’t we need to be,” Executive Vice President and CFO Scott Morrison said on the call.
