BALL Corp (BALL) November 12, 2026 Conference Transcript

Good morning, everybody. Day three of our conference. My name is Gansha Punjabi, Bears equity research analyst that covers packaging materials, along with Josh and Will on our team. Welcome back. We want to start off the day with Ball Corporation. From Ball, we have Ron Lewis. And Ron was here last year, as well, on day four. Day one, I think. Day two. Day two of being CEO of Ball. There was a lot of news that week. It was my debut on Ball.

Yes, yes.

You did a great job. Dan Rabbit, who was interim CFO prior to that, and then that role was formalized as well around that time. So very different mentality back then in terms of the setup and so on and so forth. So welcome back. Thank you. Ron, if you don't mind, maybe we could start off with you giving an overview of all.

Sure. We're the largest aluminum packaging company in the world. We make almost 120 billion cans in three major geographies around the world. North America, Central America, EMEA, and in South America. That's who we are. 67 plants, 16,000 people, all working hard for our customers to make them aluminum beverage cans that we all get to enjoy every day, either in the form of an energy drink, a beer, or a soft drink. By the way, they brought props, too. Absolutely.

And let's call out we're also a large aluminum aerosol can maker too.

Okay, well done. So if we just step back a bit, right? So I've covered ball for a very long time, you know, and the company's culture was tight. The focus was very crystal clear in terms of productivity, EVA, cash flow extraction, acquisitions as opportunistic, and that worked for a long time. You saw the equity value creation over time from a stock standpoint. It changed going into COVID to some extent, and there were some reasons for that with growth and so on. CapEx went up significantly, and the stock had changed quite a bit in terms of trajectory coming out of that, right, as post-COVID normalized. About a year ago, the board made a decision to replace the CEO, and then that's when you joined in your formal role. So what was your mandate at that time, and what have you done for the last year?

Thanks for the question. The first part of your comments, I recognize and resonate with. That's who Ball is. So my mandate for myself, quite frankly, was twofold. One was to get back to what you just talked about, back to this culture of ownership and acting like owners, owning your business. That's the first thing. And that's what I talked about to my team that I have the privilege to lead now on Sunday, November 9th, 2005, one year and three days ago. I said, number one, we are going to drive a culture of ownership in this company and we own our business and we have to get back to this, the way of working. So we've been working on that for a year. And that manifests, you know, you saw a couple of weeks ago, we announced two new leaders for our two biggest businesses, and they're two of our best operators. So that's a manifestation of that culture of ownership. But that's not the only thing. For example, going forward, people's variable compensation will be very much based on how their individual business performs as opposed to the enterprise. That's something we're really, really focused on. And the second thing that's been a mandate for me personally is driving to be the preeminent packaging company in the world. And that starts with being the preeminent can maker in the world. And that means we need to be improving our profitability per unit, profit per can. And we've been doing that, but that's a laser focus for us. We do that through a platform, which is our organizing around our ball business system. It has two pillars to it, commercial excellence, operational excellence. Again, very much guided by our North Star from a financial perspective, which is EVA dollars, and delivering what we said we're going to deliver. Our vision is 2% to 3% volume growth, 4% to 6% operating earnings growth, 10% plus EPS growth, and delivering free cash flow. And that's exactly what we've done year to date, and that's what we're going to deliver for the year.

Okay, fantastic. In terms of the culture of the company, Having gone through that phase of productivity and then growth and then back to productivity and so on and so forth, what changes have you made in the organization? I think you had some leadership changes that you announced and so on and so forth. Take us through the logic of that.

Yeah, again, the way I would describe it is back to this culture of ownership. So we have put in place two leaders that I think are some of our strongest operators in our business, and it's the full P&L, like full accountability for that P&L. And that ownership of, like, driving to, you're responsible for it, you're accountable for it, and that's where your variable compensation comes from, all the way down to, you know, people running our lines and working on our plants. That's probably the... Biggest focus we've had in the last several months to try to, you know, bring that back.

So if you go through the regions from a fundamental standpoint. Right. So focusing just on demand and volumes and so on. North America, you know, there was probably 20 years of no growth.

Yeah.

Between 2000, 1998 and 2018, just like we shared in those slides in front of your leadership team a few months ago. That changed for a period of time. It boomed during COVID. And, you know, during that time, investors got excited about it, as you'd expect.

It's a low growth space. Growth was there. So you saw a lot of capital flowing into your name

and then it changed substantially. And now we're starting to see growth again. Right. Yeah. So take us through the fundamentals in terms of what's happening in North America. What is the sustainable growth rate in North America?

Certainly North America is as opposed to that time where we saw this massive growth like this is robust, organic, steady growth. You can look back for the last several years. In fact, the can is growing three percent on a 52 week basis. That was the numbers that were published last week. Well, liquid, total liquid package consumption is flat in North America. So that means the can is taking share from other substrates. Plastic is down a couple of percent. Glass is down mid-single digits. And that's the same as it was last year. And that's, I believe, the steady state for this industry and this business. We'll continue to take, the can will continue to win, and we as Ball will continue to win. We've had seven consecutive quarters of growth. We've had last year, we grew versus our 2% to 3% outlook for what we're trying to deliver On a volume basis, long term, we were 5% growth, which is two and a half times what we expect. So really strong growth. I'm not sure we can maintain that. I think this, what I said from an industry perspective, 3% on the high end of that 1 to 3% range in North America. That's how we aggregate up to the enterprise level of the 2 to 3. I think that's sustainable.

What about the big, in this era of affordability that's worsened for many consumers across different parts of the world, including North America? Aluminum's up quite a bit, right? Of course, other substrates are as well, but not as much. How do you think about the competitiveness of the cannon? How do your customers more specifically think about that as it relates to their packaging mix?

Yeah, so for sure, even in the U.S., it's even more accentuated because of the tariffs that causes aluminum prices to be even higher here than the other geographies that we operate. What I can say is the can is winning in every single geography we operate, regardless of whatever the substrate cost mix is. So that's just, it's a fact. And I think that's because of how our customers use the can and that package in their product mix. If you want to deliver value to a consumer, the way you deliver it is in a multi-pack can format. Every single one of us, if you walk into a large-scale retailer, you're going to see on display cans in a multi-pack format. That's what you're going to see. So we deliver value to consumers through the can in a multi-pack format. I think that's why the can continues to win, even in this tough economic time.

As you think about North America, you know, North America sort of oscillated between soft drinks under pressure for a while, you know, years ago, beer, right? Mass market beer in particular. What does your portfolio look like at this point in North America?

That's a good question. Yeah. So look, we love all of our customers and the way they win is by innovating. And probably the most innovative of the three major categories is energy drinks. They've done an amazing job. And then soft drinks and beer. But innovation matters. Today, as we sit here today, we're roughly, I would say, 50% of what we sell, half of what we sell is to the soft drink category. Less than a third is beer, and the balance is energy drinks and all other, and energy drinks are probably 75% of that energy drinks and all other. And that's been quite a change. If we were to talk to you five years ago, it would have been more than 40% beer. So it's naturally occurring that what consumers drink is who we sell our cans to from a customer basis, and it's just a naturally occurring thing.

Any new categories you'd like to highlight?

I think what I would say is if there are any new products that come to market, white space, they come in a can. If you think about energy drinks 20, 30 years ago, they came in a can. If you think about the gut health sodas more recently, they came in the form of a can. If you think about ready to drink or hard seltzers in the alcohol space, they come in a can. So we keep track of new product launches and almost exclusively, if a new product is launched, it's launched in a can.

Beverage is a great category, very innovative, right?

Yes, absolutely.

So if we do the same thing for Europe, talk about the fundamentals there.

Sure thing. So we call Europe a land of opportunity. When I say that, people's ears prick up and they think, Europe, land of opportunity. How is that possible? Can penetration rates in Europe are half of what they are in North America, half. There is a ton of... Open field running and a very long runway for can penetration rates to improve. That's the first thing. Second thing is the tailwinds that support the can and aluminum, because it's the most sustainable substrate in the world and in the history of mankind, still exist in Europe, more so than they do in other geographies. So sustainability is a much stronger tailwind in Europe, where it's much less so in the rest of our geographies. And the third thing is our customers are, therefore, installing a whole bunch of can filling capacity. So for those three reasons, we, instead of growing, you know, I said our growth rates are expected to be 2% to 3% at an enterprise level from a volume perspective. North America, more like 1% to 3%. Europe, 3% to 5%. We were well above that last year. We'll be well above that this year, and we'll, I believe, be on the high end of that range next year. And that's not just ball. We're winning, but the can is also winning. That's the industry. So it's a really strong platform for growth in Europe because of those three things.

And sustainability is a big underpinning of that, I would assume.

It's more so there than it is anywhere else in the world. But, I mean, sustainability is also like, is this product, if I could put my product in this can, how robust is it? So if I put this product on the shelf, and I'm one of my customers, soft drinks, this has a 12-month shelf life. If I put this in a plastic bottle, it has a 12-week shelf life. I spent the majority of my career running supply chains putting this product on shelves. And I can tell you there's a big difference between 12 months and 12 weeks when it comes to shelf life and rotation of product. Okay.

If we switch to Latin America, take us through. Sure. The fundamentals, they seem to go up and down quite a bit.

I've been talking a lot. Dan, why don't you take Latin America for us?

Thank you, Ron. Hey, what can we say about South America? We're coming at just a fabulous year, right? But the starting point, really, is we expect that region to deliver top-line growth around 4% to 6%. And I think if you look back a year ago, it was around 4%. This year, we're trending higher. We did have the benefit of some strong volume growth in the winter months down there. That's the second or third quarter. There's probably a little bit of a benefit from the World Cup. But the real benefit was we had open capacity. And so anytime you have good open capacity, you have an opportunity to get better operating earnings performance, operating earnings leverage, and is really what that showed up. So I think we're pretty optimistic about about this market and partially because we got great Great customers. We have really good people that are doing great things right now down there. And then the third thing is we have a really nice network that just, it's not only Brazil. We have the biggest network in Brazil, but we have the biggest network in South America with a profile that stems into Paraguay, Argentina, and Chile as well.

As you think about other geographies, you know, the companies had exposure to the Middle East, for example, Asia in certain places, China back in the day. You know, all those countries had lots of population. There was a thesis behind it, right? Growth was there, and then things changed. The Chinese state-owned companies came, the Japanese came, sort of changed the dynamics. Now you're pushing into India, right? What is different about India versus what I just went through across Asia?

Maybe I'll take that one. So for us, India is probably our most exciting single market right now, and it is for us, and it is for the can industry. A couple of things happening there. One, there is a burgeoning middle class that aspires to drink out of a can. One of our soft drink customers exclusively sells a product only in a can. And I think that's, I asked them, like, what size cans do you sell it in? When I was there last month, they said, any size we can get. So that's pretty exciting. So burgeoning middle class. Regulations are changing there when it comes to alcohol, favoring beer, beer much more in a can. So those are a couple of things that are really helping to win in that market. And India is very careful about who they allow to serve their consumers. So I think that's maybe a bit of a difference from some of the other markets that you mentioned. So we're growing and the industry is growing, you know, teens to even into the 20% range. And it's and we see that going on for quite some time. We announced building a plant there. Whenever we announce any sort of a growth project publicly, please know that it comes with the full weight, might and backing of it. A long-term off-take agreement with a gold-plated, star-studded customer that we've worked with for decades, and it's somebody that, or several somebodies, that you would all expect and admire us to have the privilege to serve.

Over dinner the other night, we kind of went through dimensionalizing this. So your system is about 110 billion cans, plus or minus. Is that? 115 plus this year. Okay, all right. And then India, in theory, once you get the capacity up, would be six-ish? Six, yeah. It's meaningful. The growth is meaningful.

Yeah. I mean, listen, we're a scale business. So the scale of our business, of that 115 billion, we're about 50 billion in North America. We're north of 40 billion in Europe and Middle East and Africa, including India, and we're north of 20 billion in South America. It allows me to say one thing. People generally miss the opportunity in Europe. Our business in EMEA will be bigger than our business in North America within the next five years. And that's pretty impressive, I think, because we're already at scale, but it's a very big business. And it also means being in one plant in one country is not a scale business. We need to be at scale. And that's why some of these other more further afield from where we are strong and have scale, it's harder for us and any can maker to operate in a one-off basis.

If I remember correctly, India is going to be part of EMEA.

It is, yes.

Why don't I stop there, open it up for any questions before I keep going. Yes, ma'am. Does everything in Europe come with five calls? Just repeat the question.

Yeah, I mean, yes. So the question is, does operating Europe come with higher costs and regulation? And it would be really easy to just say yes. That is a fact. And each country has, there's slight differences. And we're always reminded as Americans, it's not like the U.S. This is a series of a lot of countries, and we have the overlay with the EU for much of it. But I think to keep it simple is that we do have a little bit higher operating costs there. But I think we're doing really good with how we manage those costs. I think for those of you that have been following the granularity, this is a segment that is improving its profitability more rapidly than any part of our business right now.

Can I add that one thing about, you said regulation, so building a plant in Germany, it's not as easy. Quite frankly, to find places where you can build manufacturing infrastructure in most of Europe, so it does provide a bit of a governor to how fast capacity can expand. So I don't think you should expect a boom cycle in Europe. It just takes time, and that's what happened in COVID as well. I was running our business in Europe at the time. We did not overbuild in Europe. We didn't, nor did the industry, and that's largely why. You know, if you could just talk about when you acquire a plan, like the operation. I should see this on the fall operational strategy. Sure. Thanks, Will. Let me take that one. Please. Give my background. So we purchased, we love the opportunity to do inorganic growth. We bought a plant here in the U.S. almost two years ago now. We bought two plants in Europe earlier this year. I said that the way we're going to drive growing profit per can is through the Ball business system, and including with that is our Ball operational excellence agenda. So if you walk in a ball plant, Anywhere in the world, at Shift Handover, we run the Shift Handover meeting exactly the same. At 6 a.m., the team-to-team meeting happens a certain way. At 8 a.m., there's the ops meeting, and there's process meetings in between there, and then there's a pulse check at 2 p.m. or 2 a.m., and then the cycle keeps going. That's our business management pillar. The way we measure everything in our plants, be it productivity, safety, quality, it's measured the exact same way in every single plant. So we have a foundation to start from, and then we bring a whole bunch of tools. How do we run a Kaizen event? What's 5S look like? What is your meantime between failure and all of the various elements of our ball operational excellence agenda are put forward into that plant, and then they're judged on that, both their hows and their whats, their means. Are they following the way we drive things? And then what are your results? So that's how we get about it. Thanks, Will.

Do you have a question back there? The connection is all up.

I know you guys have talked about it. Why don't you go ahead, Dan?

Yeah, I mean, I think we'll highlight the two biggest regions in our company, both North America and U.S. in particular, and then really the EMEA region in Europe. In both places, we are very tight on our capacity, right? We've really largely sold out a lot of it, the vast majority of it, I'll even say it more strongly. And I think we're starting to believe that that's pretty common in the industry right now as we start to look at our competitors from afar. We obviously don't get to go in their plants and know exactly where they stand, but it is feeling like both regions have become tight. And I can tell you, obviously, our customers come to us saying we need you to put capacity in. When we're successful, it results in us doing so, but with a good long off-take contract. I would envision some of that's going on with our competitors, and again, we don't get the privilege of seeing that.

That's a good segue into capex. So the last time the industry went through a growth binge, it didn't turn out well. That's what investors remember. You lost a lot of shareholders in the process of that. So did others, right? CapEx is starting to wrap up. You have some dollars allocated to the plant in Oregon, Germany, you announced, India, etc. It's a different geography, certainly, than what it was before. But generally speaking, looking at your stock over time, it does the best when CapEx supports calibrated growth, but you also grow free cash flow as a result at the same time, right? Where are we in that process? Dan, that's a good one for you.

Yeah, so when Ron and I took over about a year ago, we were really in a period where we were meaningfully underspending depreciation and amortization, right? And we use that as our, you know, you talk about our EVA, that guides our capital allocation decisions, but then when we look at what it takes to properly grow a business, you need to invest in depreciation and amortization, but it never happens steadily. It means sometimes you're under, sometimes you're over. We had been considerably under and probably investing about 75% the rate of depreciation amortization. So now, we fast forward to today. This year, we're going to spend just under. So we'll be pretty close. We'll spend around $650 million. That's coming off last year's of $475 million. But with the help of our IR team, We started looking at when are we most successful? We're most successful when we invest kind of in the range of 80% of depreciation on the floor, 120% as a ceiling. And when we get outside of those ranges, you can either run your system a little too tight, which is what we're experiencing now, or you can bring too much capacity in more than the industry can handle is probably a good way to say that. So I think we've gotten a lot smarter on that, John, but you called out Millersburg. This year, we opened a plant in Oregon. It's a one-line cam plant. It's coming on, already sold out. So that's great. That's built-in growth as we look at next year. And then the other places where we added capacity look very similar with the acquisitions Ron mentioned in Europe. Those are like getting greenfield plants in case one of them had really never operated, and the other one had never operated 24-7. So these are all like greenfield projects. They're all like capital expenditures, if you will, and should be good for adding capacity in a very, very good manner for us.

Okay, so go back to my question. So you gave guidance for free cash flow this year, given anything for next year. Will free cash flow grow in 27, just based on everything you talked about?

Yes. So specifically, I think it's too early, really, to see next year. The last part of rolling up a budget is really the cash flow that comes out of having a full-blown set of financials. But if we look at this year, we did kind of bring it down to a range of $900 million. So when we announced that CapEx was up $50 million, we kind of called out to be closer to $900. I think last year, people were benchmarking us off around a $956 million number is the number we did last year. So I think we're kind of in this new threshold range, is what I would say, in this range. I think in time, you get the benefit of that free cash flow and that investment. That gets you to another level. But for right now, I think we're in the right range of what you're seeing this year and last year. I want to ask you that question every quarter.

Can I just add? So, $900 million free cash flow this year versus $950 last year. We're spending incremental capex, $475 to $650, and we bought a business. We spent $200 million buying a couple of can plants in Europe. So, we're delivering really strong free cash flow on the top of balanced, manageable capital growth.

So, going back to the most recent call, you know, the friction, if you will, you called out. You know, I've heard this for a long time, for many years from all. During the growth phase, you had those big plants in Arizona. You know, there's all sorts of inefficiencies. I understand there's startups, there's labor productivity and stuff like that that takes time to be generated. But is there a more systemic issue as it relates to technology and modernization that needs to occur to actually boost more linearity as it relates to reducing the friction?

Let me tackle that one. So our objective, again, is to grow volumes in the 2% to 3% range, operating earnings 4% to 6%. That's what we want to be measured by, growing operating earnings 4% to 6%. And that's what we would ask you to all judge us by as well. And that comes with some volume and some operating leverage. And they work in tandem, but they do not work in parallel. When you are tied on capacity, you have operational inefficiencies. You may have to ship cans from further away. You may have to pay more for overtime. I wouldn't say that's systemic, but it's a fact. This is the real world we work in here. Again, we're going to deliver, in the middle of that range, 5% operating growth. That's absolutely what our vision and objective is every single year. As to the technology or other things, I can't really speak to that. We're working with obviously all of our OEMs and other suppliers to drive efficiencies through artificial intelligence, you name it. And we're seeing good growth shoots. But vertically starting up a plant is something we always work on. These are big behemoth things that we do. So again, four to six percent operating growth, that's what we want to be held accountable to every year.

So the issue was also, it wasn't just on your end, it was also your customers' plans and their predictions and so on and so forth. Has that changed in any material way in terms of their ability to project demand so that they could feed it to you and you could optimize your production?

Look, I think planning, if you ask any company in the world, planning is the most challenged aspect of the processes they do. Thank you. So, you know, what I would say is we have a very strong order book for next year. We're more than half sold out through the end of the decade. We're very well contracted for next year, and we've been given very strong and good demand signals from our customers for next year. So I can just say we feel really good about delivering on that volume commitment that we make to ourselves and that we talk about publicly in this 2% to 3% range for next year.

How have you managed some of the variable costs that you felt this year with diesel and so on?

You know, for starters, I think we've done pretty well on really the inflation in the system this year. And why is that? And it really comes down to is we have good pass-throughs in our contracts. We get paid to make cans. So we have a pass-through setup that is 70 percent thereabout of our cost is our metal structure. We get to update that pass-through on a monthly basis. And then when you look at the other parts of our cost structure, you're going to get into, you know, what's energy prices, what are labor costs, and other materials going to be. And we generally use a PPI index that can lag a little bit. So in other words, it needs to be published, and then you get to adjust your rate for those other items. So there's a little bit of lag. But net-net, I think we passed through really well this year. I would expect that we would do the same next year, largely just because of the contract structure that we have in our industry and specific in DeBal. I will call out that all of our teams have done a good job after that last inflationary bout back in 22 and 23 of really making some refinements to how we do it. So I think we're a little better today than we were a few years back.

Okay, and then in the last couple of minutes we have the capital allocation, if you will. You have some debt coming due, right? You have a fair amount of cash flow. How should we think about share repurchases versus the guaranteed return you will get from actually paying down your debt?

We're constantly looking for the best value of what to do. We take our free cash flow after we've spent, you know, that remains after we've funded our capital expenditures, and we'll always put money back to our shareholders. We've been using share repurchases right now. We still like that vehicle. We still see value in doing that, but the other thing is, especially with interest rates rising, we're starting to take a harder look at should we reduce leverage even more aggressively than the rate we're doing. And so we're balancing the both. We're always looking for the best value there. We use EVA to help guide us.

And Ron, just I'll give you a last word here. You know, one of the most obvious things in our coverage is that if you're able to generate something idiosyncratic as it relates to growth above the peer group, right, just volume, growth, etc., you get awarded from a valuation standpoint pretty consistently. You know, it's across our coverage. You actually felt that a few years back pretty consistently as well, right? You know, how should the audience think about your confidence as it relates to the sustainability of the growth rate through the end of the decade and beyond?

Sure. So we have the... Unrivaled customer portfolio. We absolutely have the best customer portfolio because we have the best network of plants. We're the largest can maker in all the regions we operate. And therefore, I would bet on our customers growing at a rate faster than the market. So I believe in that. The can is winning, but ball is winning, and we're winning at a pace and a rate greater than the can will even win versus all the other substrates. Look at that. Perfect.

Thank you, sir. We're out of time. Thank you again for joining, everyone. Thanks to Ron and Dan. Thank you so much.