Ball Corp. Acquires Neuman Aluminum - Analyst Blog

Ball Corporation (BLL) announced the acquisition of Neuman Aluminum, a global manufacturer of high quality aluminum slugs, which generated revenues of approximately $128 million in 2009. The acquisition will enhance Ball Corporation’s metal forming technology and its packaging platform and is expected to be accretive in its first year of operation.

Headquartered in Marktl, Austria, Neuman operates across Germany, the United Kingdom, Ireland, Spain, Denmark, Croatia, Canada and the United States of America. The company manufactures high quality aluminum slugs using the impact extrusion process at its Verona, Virginia and Sherbrooke, Quebec facilities.

Newman USA is the only impact extrusion company in America that boasts of its own aluminum slug manufacturing facility. This ensures quality control of products from start to finish under one roof – casting of the aluminum, stamping, applications design engineering, tooling/die design, production monitoring and control, management, and quality assurance.

Slugs are used as raw material in the production of aerosol cans, collapsible metal tubes and numerous impact extrusion applications in the automotive, commercial and defense industries. For over 50 years, impact extrusion has proven profitable in creating aluminum products. The advantage of the impact process is that it delivers lower cost per part, better functionality, reliability and quality, and quicker response time to meet market demands.  

Following the acquisition, the two plants will be integrated into Ball Corporation’s metal food and household products packaging segment. The segment manufactures metal container products used primarily in food packaging at operations in the U.S. and Canada.

The segment contributed 16.7% to Ball Corporation’s first-quarter revenue and delivered operating earnings of $21.7 million on sales of $285.4 million compared with $49.6 million on sales of $283.6 million in the year-ago quarter. The acquisition will provide the segment with an additional metal forming technology as well as access to new markets.

In the first quarter of fiscal 2010, Ball Corporation delivered earnings per share of 85 cents, which exceeded the Zacks Consensus Estimate of 74 cents. The outperformance was driven by cost savings, positive contributions from acquisitions and volume improvements in its packaging businesses and a strong start in earnings among affiliates in Brazil. However, these positives were partially offset by higher interest costs on acquisition financing taken last year.

Improving market conditions in metal beverage packaging and management initiatives in core businesses bode well for future operating performance. Ball Corporation’s strong free cash flow profile provides it significant flexibility for share repurchases and acquisitions. These, along with overall modest volume growth and earnings contribution from recent acquisitions, will help deliver overall earnings growth.

Ball Corporation has recently entered into an agreement to sell its long under-performing Plastic Packaging segment, which is expected to close in the third quarter of fiscal 2010. We appreciate this move given the segment’s weak volume outlook, and its meager 9% contribution to Ball Corporation’s total revenue. We believe divesting this business will help Ball Corporation to lift its earnings.

Broomfield, Colorado-based Ball Corporation is a manufacturer of metal and plastic packaging, primarily for beverages and foods. It also supplies aerospace and other technologies and services to government and commercial customers.