BLL
#Yes.
Well, probably like you, it sounds like we've heard that there has been discussions about potential capacity additions in that area.
Let's not forget this year the can market has been slightly down, actually, but not appreciably; down a couple of percent maximum over it.
But the can penetration still continues to go real strong.
There has been a bit of a pause here.
We'll have to wait and see what happens if there is new capacity put on.
I don't want to speculate at all.
But we're very much focused on maximizing the value what we do down there.
We've got a great team; we're very excited about the people there, their knowledge of the business, their knowledge of the industry, their knowledge of the customers, and their knowledge of the asset base.
No, there's still ---+ there is some working capital.
I would bucket it with a bunch of things: working capital, what happens in deferred taxes, what happens in pension.
To get to that number there is an Other category beyond just operating earnings growth that you need to get, to get to that number.
Well, we're going to look at all the things that we've done over the last number of years, whether it's factoring, supply chain finance, managing our inventories better, payable terms.
Every lever that we have to pull from a working capital standpoint, we're going to re-look at all of those with the newly acquired business and apply those things.
Some of them do take time to put in place, and that's why I think there will be incremental benefits over a period of time, over a couple-year period.
But everything's on the table.
That review, that 90-day review that we talked about, is getting into more detail on all of those things and figuring out, okay, what are the opportunities.
What are the timing of those opportunities.
And then how do they sequence over the next few years.
Well, absolutely.
As you know, we pride ourselves on being customer focused.
I do think that the engagement with the customer base right now, because there's a lot of change going on, is quite active.
And it varies by region, it varies by customer, and it varies by segment.
But rest assured we are very much focused on being the best in terms of making the can the most sustainable package from an economic perspective, while at the same time being very disciplined from a commercial perspective, ensuring we get paid for innovation, we get paid for our quality, we get paid for our service.
So more to come on this.
But rest assured, we're always actively engaged with our customers.
Yes.
As we still have a number of won but not booked type of things out there.
But what I was saying indirectly in my comments is we're entering the election season, and we are not anticipating many new wins to be booked just because of the ambiguity of the election cycle right now.
I think the Continuing Resolution risk is still out there.
So realistically it's difficult to assume any meaningful new wins during this election cycle.
But we feel really good about the long-term prospects of that business.
Good.
Well, I mean big chunks that I know will go out ---+ so there's a big chunk of severance for folks that are leaving the organization.
There was a chunk for compensation for people that were divested to Ardagh.
I mentioned some of that pension funding.
There's lots of fees and things that have to get paid.
But the biggest chunk would be taxes that have to get paid on the gain, which we think is around $250 million.
So those are the big chunks that will happen probably by the end of this year.
And each quarter we'll highlight the unusual or one-time, if you will, impacts of those.
Yes, well, first with respect to Mexico, everything in Mexico is going quite well.
The volume growth in Mexico that we're seeing, not only for the Mexican market but for the export out of Mexico, is going very, very well.
Our customer is doing quite well, and so we're excited about that.
I'd rather not put specific timing on new capacity in Mexico.
But rest assured the market continues to grow, and we think we've aligned ourselves with the right folks down there.
So more to come on that.
But nothing has changed from what we've talked about in prior conference calls around our long-term prospects about Mexico.
With respect to China probably the same holds true.
We are executing very well on our cost-out program.
As you recall, on the last call I talked about in excess of $30 million of cost-out, and we are right on track with that.
I give our folks a tremendous amount of credit.
Because without that, it would be a very, very challenging situation in China.
The bigger question is, as you look forward, what does that mean.
Because you can't save your way to prosperity.
We think the industry needs a level of consolidation in the China market.
There's too many independent players out there.
The strategic question is how that occurs and when it occurs.
I can't go into detail, but we are taking it very seriously because as you look through, there's just ---+ from a supply-demand perspective, there's too many suppliers chasing too few customers.
And every time in the history of our Company and the beverage can business when we see that, it speaks to consolidation.
How that looks, when it looks, what it looks like, too early to tell.
No.
We said we would generate $150 million in 2017 ---+ in excess of $150 million in 2017.
I understand where you're going, and I'd rather not go there.
Because as I said before, we're not going to be tracking all this.
All I know is we have our own goals and aspirations, and we're going to generate in excess of $150 million in 2017.
And our goal is to generate in excess of $300 million by the end of 2019.
I'm not giving a 2017 number yet.
As I said, we have to go through the 90-day review.
And, you're right, that's a $60 million run rate.
I think a lot of that will come out between now and the end of the year, and so the run rate will be lower than that.
How much lower, it's too early to tell yet.
You raise a fair point.
First and foremost, we are expanding our Czech Republic impact extruded business, and it is expected to come on either later this year or early next year.
It is ---+ from the totality of Ball Corporation I think the startup expense related to that would probably not be material.
Within the food and aerosol segment, it could be.
But I wouldn't get too concerned about that.
And then as we go forward on it, the only reason that over the last 18 months we've talked about the startup expense is because we had such a compression and preponderance of these growth capital projects.
I mentioned Monterrey, contra bottle, G3, Lublin ends, India, devices ---+ it all was happening at once, and so we felt we needed to point that out.
As we go forward, if that were to happen again, which I'm not saying it will ---+ but if that were to happen again, we would be as transparent as we can.
But I wouldn't get too worried about startup expenses as you look forward.
Yes, for right now that's a good thing to use.
Yes, what we're going to do as we get into next year, we'll highlight any cash costs related to getting after synergies.
We'll break things out so that you can decipher exactly what our run-rate free cash flow would be versus our one-time cost to get after some of those synergies.
Yes, just to give you a sense of it, if we're talking about severance, for example, cash flow severance, we'll point that out, because that's more one-time in nature.
If we're looking at converting a standard line to a specialty line, that's more operating from our perspective.
So, as <UNK> said, as we go forward, we will lay that out with as much transparency as we're able.
Phil, in your question, you said something related to Ardagh.
I didn't quite ---+ how does that (multiple speakers).
---+.
Yes, and with respect to the other things, just assume it's behind us, not in front of us.
As we go by region by region, certainly not over the next 12 months or so.
We always have contracts coming up for renewal, but ---+ there are some in different regions that over the next few years will be coming up.
But from an overall perspective I think the vast majority of our business is under long-term contract.
Any change-of-control issues were dealt with prior to closing.
Right.
Yes, it has leveled off a little bit.
I do think that when you really look at CSD, we have to think about fountain versus PET versus cans.
Fountain has been actually the one most hit by the declines more recently.
PET has been doing a little bit better than cans.
But can has been holding their own, to your point.
The thing that still continues to go very well is on the craft beer side.
In our business alone, it's up year-to-date 30%.
As you, as a consumer you go out there and you can see cans continuing to take a greater share of the package mix in the craft industry.
Then, last but not least, the overall beer category is up.
The overall category itself is up almost 2%, just under 2%; and can volume is up over 4%.
So we continue to take share from glass even in some of the more mainstream brands as well.
And soft drink specialties, specialty sizes is doing reasonably well too.
Yes, well, as I mentioned I think on the last conference call, it's a food and an aerosol business.
And those are different end-markets.
The aerosol business in that is actually bigger than the food business, and that's important to note.
We continue to see good growth, whether it's on the tinplate side here in North America or down in South America where it exists, or on the impact extruded side where we're here in North America and also over in Europe.
We continue to see very good supply-demand dynamics; we continue to see good growth; we continue to see good economic opportunities for investment on that side.
On the food side, that's where the challenge has been, and it's no secret that there has been overcapacity in there.
We've taken our lumps over the last couple years in that business.
Some of it was market-related from a pricing perspective, and some of it was self-inflicted related to the cost side.
We are 70%, 80% of the way through completing a project that is going to have significant cost reduction in that business to make us more competitive.
And that's where I think, <UNK>, because of the growth in the aerosol and because of the cost-out we have in food, that's why we ---+ as well as many other people ---+ do expect a better 2017 relative to 2016.
I think longer term, I just laid out really what the strategies of those two different segments is.
It's continue to grow with the aerosol and continue to be the supplier of choice for our big, multinational customers on the aerosol side.
And on the food can side, service our existing customers as well as possible and recognize that's a cash business.
Oh, gosh.
It comes from a variety of things.
Our bottle strategy and bottle technology continues to go well.
<UNK> mentioned on the CSD side some of the smaller sizes continue to go well.
Some of the larger sizes on the beer category continue to go well.
Energy drinks, sleek cans.
It really ---+ there's not just one area; I think it's across the board.
And I do think part of our strategy has been as the 12-ounce declines, either through absolute declines or through cannibalization, we want to grab that cannibalization by having specialty cans.
There's a good chunk of the loss of 12-ounce being captured by specialty cans, and that's why we've been focused on it.
Yes, it is a very broad question.
And remember, we're 30, 35 days into this, <UNK>, and this is a time of year where you're really not having discussions around price with our customers.
So, quite candidly, we've been very much focused on getting our folks aligned over what our strategic objectives are.
Okay.
Well, let me remind you that our folks in Asia have been doing a wonderful job in terms of the cost-out programs and managing a challenging situation.
But they haven't really been affected at all by the Rexam transaction.
They have not been involved in the integration, just because it Rexam had no presence over there.
And so as we look ---+ your question is about bandwidth.
We're quite cognizant from a corporate perspective of the bandwidth issues, but from a management people-on-the-ground issues over there, we've got a very good team.
The biggest question from our perspective, <UNK>, on that is: Is one consolidation enough to really change the dynamics.
You've heard us be pretty consistent that we're not going to be investing in China to become the biggest.
If there is an opportunity to make us better and meaningfully better as part of that, then we'll evaluate it.
But that's the criteria by which we will look at it.
Yes, thanks, <UNK>.
We've talked about this in prior quarters.
Recall, though, that from a manufacturing footprint perspective, we make tinplate food cans in the same facilities as we make aerosol tinplate.
So when you talk about separating it out, it does become more challenging.
But on the flip side of that, that provides the leverage of that.
So if the food can business continued to decline, we would be taking out a line here, a line there in existing plant.
But I don't think you can necessarily separate those two.
But having said that, we don't believe nor do we see exactly what you're talking about.
And that's why I said you've got to understand who you are.
And that part of the business, it's a cash business, so treat it as such.
Okay, great.
Well, thank you, Demetra, for your help; and we look forward to talking to everyone on our third-quarter conference call, which is at the end of October.
Thank you, everyone.
