BALL Corp (BALL)

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Management’s discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements (consolidated financial statements) and accompanying notes included in Item 1 of this Quarterly Report on Form 10-Q, which include additional information about our accounting policies, practices and the transactions underlying our financial results. The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires us to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and the accompanying notes, including various claims and contingencies related to lawsuits, taxes, environmental and other matters arising during the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and actions that we may undertake in the future in determining the estimates that affect our consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these estimates. Ball Corporation and its subsidiaries are referred to collectively as “Ball Corporation,” “Ball,” “the company,” “we” or “our” in the following discussion and analysis.

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OVERVIEW

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Business Overview and Industry Trends

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Ball Corporation is one of the world’s leading aluminum packaging suppliers. With a growth mindset and by pursuing operational excellence, we lean on our competitive strengths to reach our financial goals. We are focused on maintaining our strong financial position by listening to and partnering with our global customers, delivering operational efficiencies and an innovative product portfolio from our best-in-class manufacturing facilities and returning value to shareholders via share repurchases and dividends. In the aluminum packaging industry, sales and earnings can be increased by reducing costs, increasing prices, developing new products, expanding volume and making strategic acquisitions.

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We sell our aluminum packaging products mainly to large, multinational beverage, personal care and household products companies with which we have developed long-term relationships. This is evidenced by our high customer retention and our large number of long-term supply contracts. While we have a diversified customer base, we sell a significant portion of our packaging products to major companies and brands, as well as to numerous regional customers. The overall global aluminum packaging industry is growing and is expected to continue to grow in the medium to long term.

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We purchase our raw materials from relatively few suppliers. We also have exposure to inflation, in particular the rising costs of raw materials, as well as other direct cost inputs. We mitigate our exposure to the changes in the costs of aluminum through the inclusion of provisions in contracts covering the majority of our volume to pass-through aluminum price changes, as well as through the use of derivative instruments. The pass-through provisions generally result in proportional increases or decreases in sales and costs with a reduced impact, on net earnings; however, there may be timing differences of when the costs are passed through and amounts that are not fully passed through. Because of our customer and supplier concentration, our business, financial condition and results of operations could be adversely affected by the loss, insolvency or bankruptcy of a major customer or supplier or a change in a supply agreement with a major customer or supplier, although our contract provisions generally mitigate the risk of customer loss, and our long-term relationships represent a known, stable customer base.

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From time to time, we have evaluated and expect to continue to evaluate possible transactions that we believe will benefit the company and our shareholders, which may include strategic acquisitions, divestitures of parts of our company or equity investments. At any time, we may be engaged in discussions or negotiations at various stages of development with respect to one or more possible transactions or may have entered into non-binding letters of intent. As part of any such initiatives, we may participate in processes being run by other companies or leading our own activities.

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RESULTS OF CONSOLIDATED OPERATIONS

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Management’s discussion and analysis for our results of operations on a consolidated and segment basis include a quantification of factors that had a material impact. Other factors that did not have a material impact, but that are significant to understand the results, are qualitatively described.

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Geopolitical Conflicts

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Ball is monitoring current geopolitical conflicts across the globe and may experience increased costs for inputs such as energy and transportation, as well as aluminum, due to the negative impact on the global economy and reduction in supply. Ongoing conflicts have the potential to impact Ball across its global business, and it is not possible to accurately predict all future impacts. As such, current conflicts and the resulting effects have the potential to materially impact the company’s results of operations.

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Consolidated Sales and Earnings

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Sales in the three months ended June 30, 2026, increased $659 million compared to the same period in 2025 primarily due to increases of $542 million from price/mix, mainly from higher aluminum prices, and $65 million from higher volume. Sales in the six months ended June 30, 2026, increased $1.17 billion compared to the same period in 2025 primarily due to increases of $898 million from price/mix, mainly from higher aluminum prices, $131 million from currency translation and $97 million from higher volume.

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Net earnings attributable to Ball Corporation for the three months ended June 30, 2026, increased $9 million compared to the same period in 2025 primarily due to increases from the results of the reportable segments discussed below. Net earnings attributable to Ball Corporation for the six months ended June 30, 2026, increased $35 million compared to the same period in 2025 primarily due to increases from the results of the reportable segments discussed below.

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The company has experienced a trend of rising aluminum input prices and is unable to predict the future change in aluminum input prices, including the associated positive or negative impacts it will have on our financial results from our risk management programs, which primarily include aluminum pass through provisions in our customer contracts and hedging strategies.  Additionally, the company is pursuing operational excellence initiatives that are intended to reduce our fixed and variable costs to improve results in 2027 and beyond.

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Cost of Sales (Excluding Depreciation and Amortization)

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Cost of sales, excluding depreciation and amortization, was $3,300 million and $2,690 million for the three months ended June 30, 2026, and 2025, respectively, and $6,257 million and $5,183 million for the six months ended June 30, 2026, and 2025, respectively. These amounts represented 83 percent and 81 percent of consolidated net sales for the three months ended June 30, 2026, and 2025, respectively, and 82 percent and 81 percent of consolidated net sales for the six months ended June 30, 2026, and 2025, respectively. The increases of $610 million and $1,074 million for the three and six months ended June 30, 2026, respectively, were primarily due to higher raw materials costs of $506 million and $871 million, respectively, driven by higher aluminum prices and higher volumes.

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Depreciation and Amortization

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Depreciation and amortization expense was $165 million and $155 million for the three months ended June 30, 2026, and 2025, respectively, and $324 million and $305 million for the six months ended June 30, 2026, and 2025, respectively. These amounts represented 4 percent and 5 percent of consolidated net sales for the three months ended June 30, 2026, and 2025, respectively, and 4 percent and 5 percent of consolidated net sales for the six months ended June 30, 2026, and 2025, respectively.

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Selling, General and Administrative

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Selling, general and administrative was $163 million and $137 million for the three months ended June 30, 2026, and 2025, respectively, and $313 million and $286 million for the six months ended June 30, 2026, and 2025, respectively.

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These amounts represented 4 percent of consolidated net sales for the three and six months ended June 30, 2026, and 2025. The increase for the six months ended June 30, 2026, was primarily due to a loss of $27 million recognized related to the fair value of the ORG equity-linked notes. Further details regarding equity-linked notes are provided in Note 13.

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Business Consolidation and Other Activities

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Business consolidation and other activities resulted in charges of $22 million and $12 million for the three months ended June 30, 2026, and 2025, respectively, and $33 million and $25 million for the six months ended June 30, 2026, and 2025, respectively. The 2026 amounts include expenses associated with tariff contingencies where the company is seeking recovery and costs for previously announced facility closures. The 2025 amounts include costs for previously announced facility closures and a loss related to the aluminum cups business transaction. The charges for the six months ended June 30, 2025, were partially offset by income from the receipt of insurance proceeds for replacement costs related to the 2023 fire at the company’s Verona, Virginia extruded aluminum slug manufacturing facility. Further details regarding business consolidation and other activities are provided in Note 6.

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Interest Income

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Interest income was $10 million and $5 million for the three months ended June 30, 2026, and 2025, respectively, and $20 million and $12 million for the six months ended June 30, 2026, and 2025, respectively.

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Interest Expense

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Interest expense was $79 million and $81 million for the three months ended June 30, 2026, and 2025, respectively, and $157 million and $151 million for the six months ended June 30, 2026, and 2025, respectively. Interest expense as a percentage of average borrowings decreased approximately 40 basis points from 4.5 percent for the three months ended June 30, 2025, to 4.1 percent for the three months ended June 30, 2026, and decreased approximately 50 basis points from 4.5 percent

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Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Management’s discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes included in Item 8 of this Annual Report on Form 10-K (annual report), which include additional information about our accounting policies, practices and the transactions underlying our financial results. The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires us to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and the accompanying notes, including various claims and contingencies related to lawsuits, taxes, environmental and other matters arising during the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and actions that we may undertake in the future in determining the estimates that affect our consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these estimates. Ball Corporation and its subsidiaries are referred to collectively as “Ball Corporation,” “Ball,” “the company,” “we” or “our” in the following discussion and analysis.

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OVERVIEW

​

Business Overview and Industry Trends

​

Ball Corporation is one of the world’s leading aluminum packaging suppliers. With a growth mindset and by pursuing operational excellence, we lean on our competitive strengths to reach our financial goals. We are focused on maintaining our strong financial position by listening to and partnering with our global customers, delivering operational efficiencies and an innovative product portfolio from our best-in-class manufacturing facilities and returning value to shareholders via share repurchases and dividends. In the aluminum packaging industry, sales and earnings can be increased by reducing costs, increasing prices, developing new products, expanding volume and making strategic acquisitions.

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We sell our aluminum packaging products mainly to large, multinational beverage, personal care and household products companies with which we have developed long-term relationships. This is evidenced by our high customer retention and our large number of long-term supply contracts. While we have a diversified customer base, we sell a significant portion of our packaging products to major companies and brands, as well as to numerous regional customers. The overall global aluminum packaging industry is growing and is expected to continue to grow in the medium to long term.

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We purchase our raw materials from relatively few suppliers. We also have exposure to inflation, in particular the rising costs of raw materials, as well as other direct cost inputs. We mitigate our exposure to the changes in the costs of aluminum through the inclusion of provisions in contracts covering the majority of our volumes to pass-through aluminum price changes, as well as through the use of derivative instruments. The pass-through provisions generally result in proportional increases or decreases in sales and costs with a greatly reduced impact, if any, on net earnings; however, there may be timing differences of when the costs are passed through. Because of our customer and supplier concentration, our business, financial condition and results of operations could be adversely affected by the loss, insolvency or bankruptcy of a major customer or supplier or a change in a supply agreement with a major customer or supplier, although our contract provisions generally mitigate the risk of customer loss, and our long-term relationships represent a known, stable customer base.

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From time to time, we have evaluated and expect to continue to evaluate possible transactions that we believe will benefit the company and our shareholders, which may include strategic acquisitions, divestitures of parts of our company or equity investments. At any time, we may be engaged in discussions or negotiations at various stages of development with respect to one or more possible transactions or may have entered into non-binding letters of intent. As part of any such initiatives, we may participate in processes being run by other companies or leading our own activities.

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RESULTS OF OPERATIONS

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Management’s discussion and analysis for our results of operations on a consolidated and segment basis include a quantification of factors that had a material impact. Other factors that did not have a material impact, but that are significant to understand the results, are qualitatively described.

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Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the company’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed on February 20, 2025, for a comparison of our 2024 results of operations to the 2023 results. On February 16, 2024, the company completed the divestiture of its aerospace business. Effective as of the first quarter of 2024, the company reports its financial performance in three reportable segments: (1) beverage packaging, North and Central America; (2) beverage packaging, Europe, Middle East and Africa (beverage packaging, EMEA) and (3) beverage packaging, South America. See Note 1 for further information on the basis of presentation. As a result of the divestiture, prior periods disclosed herein reflect the aerospace business’ financial results as discontinued operations.

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Consolidated Sales and Earnings

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Sales in 2025 increased $1.37 billion compared to 2024 primarily due to increases of $713 million from higher volume, $579 million from price mix, primarily from higher aluminum prices, and $177 million from currency translation.

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Net earnings attributable to Ball Corporation in 2025 decreased $3.10 billion compared to 2024 primarily due to decreases of $3.58 billion from discontinued operations, net of tax, $107 million from a higher provision for income taxes and $41 million from lower interest income in corporate undistributed expenses, net, partially offset by decreases in costs of $461 million from business consolidation and other activities, $82 million from lower incremental compensation costs related to the successful sale of the aerospace business in 2024 and $135 million from the results of the reportable segments discussed below.

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When analyzing net earnings attributable to Ball Corporation as a percentage of net sales, it is important to note that net earnings attributable to Ball Corporation includes discontinued operations, net of tax resulting from the net sales attributable to the historical aerospace reportable segment through the date of the divestiture on February 16, 2024, that are now reported as discontinued operations. However, net sales attributable to the historical aerospace reportable segment are not included in the net sales figures in the table above.

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Cost of Sales (Excluding Depreciation and Amortization)

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Cost of sales, excluding depreciation and amortization, was $10.58 billion in 2025 compared to $9.35 billion in 2024. These amounts represented 80 percent and 79 percent of consolidated net sales for the years ended 2025 and 2024, respectively. The increase year-over-year was primarily due to higher manufacturing costs, including higher raw materials costs of $1.09 billion, driven by higher aluminum prices and higher volume, and other items discussed in the reportable segments below.

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Depreciation and Amortization

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Depreciation and amortization expense was $622 million in 2025 compared to $611 million in 2024. These amounts represented 5 percent of consolidated net sales for the years ended 2025 and 2024.

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Selling, General and Administrative

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Selling, general and administrative (SG&A) was $566 million in 2025 compared to $647 million in 2024. These amounts represented 4 percent and 5 percent of consolidated net sales for the years ended 2025 and 2024, respectively. The decrease was primarily due to 2024 including $82 million of incremental cash bonuses and stock-based compensation cost from the successful sale of the aerospace business.

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Business Consolidation and Other Activities

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Business consolidation and other activities resulted in income of $41 million in 2025 compared to charges of $420 million in 2024. These amounts represented less than 1 percent and 4 percent of consolidated net sales for 2025 and 2024, respectively. The amounts in 2025 primarily include an $81 million gain related to the sale of the Saudi Arabian business and costs for previously announced facility closures and a loss related to the aluminum cups transaction. The 2024 amounts primarily relate to a $233 million noncash charge to adjust the carrying value of the aluminum cups business to its fair value less cost to sell and facility shutdown costs. Further details regarding business consolidation and other activities are provided in Note 6.

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Interest Income

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Interest income was $30 million in 2025 compared to $68 million in 2024. These amounts represented less than 1 percent of consolidated net sales for the years ended 2025 and 2024. The decrease in interest income was primarily due to the higher amount of cash on hand in 2024 from the sale of the aerospace business.

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Interest Expense

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Interest expense was $314 million in 2025 compared to $293 million in 2024. Interest expense as a percentage of average borrowings decreased by approximately 30 basis points from 4.8 percent in 2024 to 4.5 percent in 2025. The interest expense increase was primarily driven by an increase of $42 million from a higher amount of weighted average principal outstanding during the year, resulting mainly from the issuance of new notes, partially offset by a decrease of $21 million from lower weighted average interest rates on outstanding debt during the year.

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Tax Provision

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The company’s effective tax rate is affected by recurring items such as income earned in non-U.S. jurisdictions with tax rates that differ from the U.S. tax rate and by discrete items that may occur in any given year but are not consistent from year to year.

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The 2025 effective income tax rate was 21.3 percent compared to 24.9 percent for 2024. As compared with the statutory U.S. federal income tax rate of 21 percent, the 2025 effective income tax rate was reduced by 4.2 percent for the impact of tax holidays and by 2.0 percent for the sale of the Saudi Arabian business. This reduction was offset by an increase of 2.4 percent for non-U.S. tax rate differences, 2.0 percent for direct withholding taxes, net of credits, and 1.3 percent for state and local income taxes. While these items are expected to recur, the potential magnitude of each item is uncertain.

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Fur

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