UPDATED: Ball to sell plastic packaging business to Amcor

In response to questions from PlasticsToday, Ball's Scott McCarty explained the rationale for the sale thusly. "This was a strategic decision by Ball," McCarty said, adding that plastic packaging is its smallest business, accounting for about 9% of its 2009 sales. "It's a challenging industry, and we believe the plastics business is better positioned to grow as part of a larger, global packaging company," McCarty said. "Our plastics business is run by experienced, dedicated people and our plants are excellent, well-managed facilities. The business seems to be a good fit for Amcor."

In its announcement of the impending sale, Ball said that, assuming successful regulatory approval, the sales is due to close during the third quarter of 2010. Included in the sale are five U.S. Ball plants making PET bottles and preforms and polypropylene bottles that, for the 12 months ended March 28, 2010 had sales of $589 million and EBIT of $10 million.

Ball's plastics operations employ about 1000 people at its manufacturing plants in Ames, IA, Batavia, IL, Bellevue, OH, Chino, CA, and Delran, NJ, and two R&D locations in Colorado. Applications include both food and beverage packaging for a wide variety of end-use markets.

Amcor operates at more than 300 locations in 43 countries, supplying a range of packaging products that includes rigid and flexible plastic, fiber, metal, and glass containers. Its latest published annual sales figure is A$14 billion (US412.1 billion) and its employees number about 35,000. 

A can stalwart, Ball entered into the plastic packaging market through PET bottles in the mid 1990’s, eventually targeting high-barrier products with proprietary technology. After substantial investments to build up its own capacity, in 2006 it took the acquisition route to further expand its capabilities, purchasing three plastic-bottle manufacturing plants from Alcan Inc. (Montreal) for $180 million. That deal added operations in Batavia, IL; Bellevue, OH; and Brampton, ON.

In spite of these investments, plastics packaging remained a relatively small portion of the company’s overall business. In a Feb. 8, 2010 presentation at Deutsche Bank’s Small and Mid-Cap Conference, the company said that in 2009, out of total net sales of $7.3 billion, plastic packaging made up the smallest share of revenue, bringing in 9%. That trailed global beverage cans (63%), metal food/household (19%), and its aerospace division (10%). In terms of earnings, the unit only accounted for 2% of the business.

Carbonated soft drinks (CSD) occupied 47% of the plastic business, followed by food (20%), hot-fill/sports drink (15%), and water (11%). In the presentation, Ball said its future plans for the unit included right-sizing its manufacturing footprint, undertaking cost management measures, and more product innovation.

On April 30 in its first quarter earnings presentation, John Hayes, president and COO, said that challenges in the plastic packaging Americas unit continued, citing lower volumes in cold-fill CSD and water, as well as manufacturing disruptions at one of Ball’s PET plants.