Amid rising costs from its suppliers, Ball Corporate — the world’s largest manufacturer of aluminum cans — is exploring increasing its prices for customers “on a case by case basis,” CEO and chairman John Hayes said during the company’s third quarter earnings call with investors and analysts.
“During the third quarter, we began absorbing the impact of global supply chain hardship clauses being triggered by some of our suppliers for the first time in decades, while also weathering the impact of indirect supply chain disruptions for certain materials, dunnage, freight and transportation at our customers’ locations,” he said. “We have existing mechanisms in our contracts to recoup certain costs and are confident in our ability to recoup such costs over time.”
However, those mechanisms are “not sufficient in the current environment,” and Ball’s commercial team has begun “cost recovery” conversations with some customers. Hayes said recouping cost increases is necessary “if we are to continue to invest alongside the growth of our customers and partners.”
Ball is approaching price increases in three different ways: negotiating with customers who have longer-term contracts, redrawing shorter-term contracts as they expire, and including increases in open contracts.
“We need to make sure that we are adequately capturing all the costs in a timely way because we do believe over time we would get it,” Hayes said. “If the hardship clauses and other things begin to abate, we’re happy to talk to the customers about making sure that they participate in that as well.”
In the company’s North America zone, the combined cost of inflation and inefficiency reached nearly $40 million, chief financial officer Scott Morrison said.
Ball’s beverage packaging division for North and Central America Q3 earnings were $186 million on sales of $1.5 billion — marking a decline in earnings ($209 million) but an increase in sales ($1.3 billion) from the same quarter in 2020.
“Third quarter comparable segment earnings reflect 1% volume growth, the benefits from new contractual terms and specialty mix more than offset by the impact of low finished goods inventory throughout the quarter, startup costs associated with three new manufacturing plants and timing of contractual non-aluminum input cost recovery,” the company wrote in a press release. “In advance of new capacity being ramped to production speeds and annual contractual provisions recover non-aluminum inflationary costs, operational impacts and inefficiencies are expected to persist through the end of the year.”
Although Ball added capacity at its new facilities in Glendale, Arizona, and Pittston, Pennsylvania, supply of its aluminum beverage packaging could not meet demand. The company expects its new plant in Nevada to come online in late 2022, followed by another in North Carolina in 2024.