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Owens-Illinois, Inc. (O-I) recently reported financial results for the second quarter ended June 30, 2009. Second quarter net sales were $1.8 billion in 2009, down from $2.2 billion in the prior year. Improved price and mix were offset by lower shipments and unfavorable foreign currency translation effects.
Earnings from continuing operations in the second quarter of 2009 were $149.3 million, or $0.88 per share (diluted), compared with $227.5 million, or $1.33 per share (diluted), in the prior year. Exclusive of the items not representative of ongoing operations, second quarter 2009 adjusted net earnings were $159.7 million, or $0.94 per share (diluted), down from adjusted net earnings of $231.7 million, or $1.35 per share (diluted), in the prior year second quarter. However, adjusted net earnings for the second quarter exceeded first quarter 2009 adjusted earnings of $92.8 million, or $0.55 per share (diluted).
“As expected, earnings improved from the first quarter,” said Al Stroucken, chairman and CEO. “While the global recession negatively impacted year-over-year results, seasonally stronger demand and the abatement of inventory de-stocking trends by our customers boosted shipments compared to last quarter. In addition, monthly sales volume comparisons vs. the prior year improved throughout the quarter. As we focus on optimizing free cash flow, we continued to manage our production to reduce inventories. Improved price and mix, lower inflation and the benefits from our ongoing strategic footprint alignment initiative also increased our margins.”
Second quarter 2009 segment operating profit was $291.9 million, down from $390.1 million in the prior year but up $100.0 million over the first quarter. Glass container shipments (in metric tons) declined 12% year-over-year, reflecting continued challenging market conditions, while volume in the two largest regions exited the quarter with a mid-single digit decline. Shipments increased 14% on a sequential basis, as inventory de-stocking subsided and sales reflected seasonally stronger demand.
Unabsorbed fixed costs, primarily due to temporary production curtailments, were $95 million higher than the second quarter of last year, compared to a $100 million year-over-year increase in the first quarter. The company’s asset management efforts reduced inventory, as measured in metric tons, by more than 6% on a year-over-year and sequential basis. Improved price and mix of 4% exceeded cost inflation, and the net benefit to operating profit was $81 million over the prior year, compared to a $55 million year-over-year improvement to profit in the first quarter.
The company continued to implement its strategic footprint alignment initiative, which is focused on optimizing global assets. O-I has shifted production from higher-cost plants to more efficient facilities, shutting a total of 15 furnaces since the program's inception in 2007. This includes one furnace that was closed in the second quarter. As a result of these efforts, the company reduced fixed costs by $38 million in the second quarter and $71 million year-to-date, compared to the prior year. Two additional plant closures in Europe were recently announced and should be completed in the second half of 2009.
,br> “While market conditions have improved considerably in Europe and North America, we expect the global recession will continue to impact our business in all regions, especially South America,” said Stroucken. “Third quarter shipments should be down modestly from the prior year and comparable with the second quarter. We expect additional benefits from our ongoing strategic footprint initiative, and improved price and mix should continue to offset cost inflation. Overall, we are well-positioned to drive improved financial performance and achieve our strategic priorities as market conditions recover.”
Additional details are available at www.o-i.com.