Ball, the jarmaker, boils up profits in aerospace, too
Unlike many company presidents, Richard Ringoen won't be unhappy about signing his 1982 annual report message to shareholders. It could start out similar to last year's, reporting new records in sales, net income, and earnings per share.
Mr. Ringoen heads Ball Corporation, the Muncie, Ind.-based company best known for its production of home-canning glass jars. Since the company became public in 1972, Ball's earnings and sales have increased at above-average rates, says Richard Palm, an analyst at Merrill Lynch & Co. Now a diversified manufacturer, Ball still emphasizes packaging but is steadily building its technical (including aerospace) and industrial products divisions, too.
An ''outstanding'' performer in the recession, according to Mr. Palm, Ball has averaged a 14 percent annual growth rate in earnings per share over the last five years.
Mr. Palm estimates revenues will continue to grow this year to about $960 million from the 1982 estimate of $800 million. In October, Ball initiated a two-for-one stock split. With the split, 1982 earnings per share will come out to about $3.15 (a 14 percent gain over 1981), he says, while 1983 should increase only 8 percent, to $3.40. ''Ball solved a lot of problems last year and they won't have as many opportunities to do that this year. But its good growth remains intact,'' Palm explains.
In an interview here, Mr. Ringoen said Ball has been able to square off with the recession because it is a low-cost producer and has a number of long-term contracts - especially in aluminum cans and aerospace. Management has its eagle eyes focused on the bottom line too, he says, and divests and acquires companies accordingly.
Over Ball's lifetime, the packaging division (which accounted for 73 percent of 1981 revenues) has been the major breadwinner. Home canning jars have done well. ''During a recession, people are looking for a way to conserve,'' Ringoen said. ''So there is more canning.''
Consolidation and cost-cutting have worked their way through packaging, too. In 1980, Ball acquired Metropak Containers Inc., a glass manufacturing company, from Kraft. Since then it has reworked the company, closing one glass plant and emphasizing glass containers for the food industry. It has left beverages, where plastics are replacing glass. Ball also closed one of its own glass plants.
Since Ball began manufacturing beverage cans, it has been a low-cost producer in that area, too. ''We got into the business just when technology was shifting from three-piece cans with a soldered side to two-piece aluminum cans, which save metal. We built all our plants for two-piece production. Other canners had to change over and some stayed in three-piece a little too long,'' Ringoen explained.
But overcapacity in the aluminum canning industry has caused predatory pricing and has caught up with Ball's low prices. The company's profit margins in cans shrank and earnings have been flat. Ringoen, however, says overcapacity in the industry has halved since a year ago. ''I think we've reached the worst of it,'' he said.
On the other hand, aluminum cans did not lose money - even in the recession. Ringoen says the main reason is that about 80 percent of that business is tied up in long-term contracts. For instance, its new Saratoga Springs plant in New York will be a big help this year, analysts say, because almost all the business is wrapped up in a six-year brewery contract.
Dependable contracts - others include zinc penny blanks for the US Mint and products for the Department of Defense - are cost-cutters for Ball. ''There are no marketing expenses; all we have are customer service expenses,'' Ringoen says. If it can dig up the long-term contracts, he says, Ball will go ahead with two more can plants - one in Europe.
''The problem for Ball now is, after a decade of good growth in the can business, they have got to come up with another strong, growing segment to pull in profits,'' says Merrill Lynch's Mr. Palm.
Ball disagrees somewhat. It isn't ready to change product mix drastically, although it strongly believes in diversification. ''We think we ought to have at least five different businesses, where only one would be seriously affected by economic, technical, or international changes,'' Ringoen philosophizes.
Right now the company is involved in everything from plastics to agricultural systems to computer components. ''We are in about 25 businesses - more than we need,'' Ringoen admits. He adds that Ball's diversification stemmed originally from the different products needed to make jars - glass, metal, rubber. Since then, managers have been ''opportunists,'' he says, looking for small acquisitions.
''When you talk to Ball, they seem satisfied with the current mix,'' says Edward Stupay, an analyst at Prescott, Ball & Turben. ''But they are chafing at the bit to find applications in nonpackaging.''
The nonpackaging area with the most potential, analysts and Ringoen say, is Ball's technical division. And the star there is aerospace, ''growing at least 20 percent a year,'' says Mr. Stupay.
Ball makes antennas, star tracking systems, optical instruments, and other electronic components for the US space agency and the Pentagon. It recently acquired Efratom California Inc., a $10 million company that manufactures precise time- and frequency-measuring equipment. Ball also just poured $10 million into its Boulder, Colo., facility so it can test its space shuttle products.
How can a company centered on a ''mundane'' business like glass containers manage technical businesses, too?
''The tech side is actually managing the packaging side,'' Stupay says. Many of Ball's executives - including Mr. Ringoen - come from a science background. It was the company's own technical research firm that computerized the glass and can plants and is designing robots for in-house use.
As Ringoen puts it, Ball's science-oriented managers use ''an unprejudiced approach to problem solving, broad vision, and exactness'' to oversee the company. ''We manage the company as a whole system, with no emotionalism and no assumptions.''