Ceramic Industry News

1st Qtr Net Sales Increase Slightly for O-I

May 12, 2010
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Owens-Illinois, Inc. (O-I) recently reported its financial results for the first quarter ended March 31, 2010. Net sales for the 2010 first quarter were $1.6 billion in 2010, up from $1.5 billion in the prior year, primarily due to favorable foreign currency translation effects. Improved price and product mix was more than offset by an unfavorable change in regional sales mix. Net earnings attributable to the company in the first quarter of 2010 were $85.3 million, or $0.50 per share (diluted), up from $45.1 million, or $0.27 per share (diluted), in the prior year.

“The first quarter marked a turn in our business, ending nine consecutive quarters of unfavorable volume trends since the beginning of the global recession,” said Al Stroucken, chairman and CEO. “We performed well in the quarter by raising our selling prices and improving the cost profile of our operations as shipments remained in line with the prior year. Consistent with our growth strategy, we acquired Cristalerias Rosario to enter the fast-growing and profitable Argentinean market, which should further enhance our successful South American operations."

O-I reported first quarter 2010 segment operating profit of $198 million, up from $192 million in the prior year. Operating profit benefited from a 1% increase in sales due to improved price and product mix. Shipments were up mid-single digits in all regions, except in North America, where reduced demand in the beer segment impacted volumes. Consequently, global glass container shipments, in metric tons, were consistent with the prior year’s levels. While input costs were essentially flat with the first quarter of 2009, production costs were $27 million higher, primarily due to additional temporary production curtailments as the company reduced inventory by 19% (in metric tons).

Segment operating profits also reflected the translation of O-I’s Venezuelan operating results at the parallel exchange rate, which reduced operating profits by approximately $25 million and net earnings by $0.09 per share. This impact on net earnings included a $0.03 per share charge to re-measure net monetary assets in Venezuela and resulted from the devaluation of the parallel exchange rate during the first quarter.

Since the 2007 introduction of the company’s strategic footprint alignment initiative to improve global asset utilization, O-I has permanently closed 22 furnaces, including one in North America during the first quarter. As a result, the company reduced fixed costs by $28 million in the first quarter of 2010 compared to the prior year’s first quarter. Large-scale restructuring due to the company’s current footprint initiative will be finished by mid-2010, when the previously announced realignment activities in North America are completed.

“Higher overall prices, compared to the prior year, are expected to offset modest cost inflation mostly due to Venezuela,” said Stroucken. “We anticipate improved shipments over last year, primarily driven by the faster-growing emerging markets and easier year-over-year volume comparisons. Costs associated with temporary production curtailments should be consistent with the prior year as market conditions improve and we complete our current North American restructuring program. Higher corporate costs, interest expense and unfavorable Venezuelan currency translation will continue, while earnings will further benefit from our strategic footprint initiative. Overall, we are positioned to deliver profitable growth as markets continue to recover and we execute on our long-term strategic plan.”

For more information, visit www.o-i.com.

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