Net Sales Up 12% for O-I in 2016 First Quarter
Owens-Illinois recently reported financial results for the first quarter ending March 31, 2016.
Owens-Illinois, Inc. (O-I) recently reported financial results for the first quarter ending March 31, 2016. Earnings from continuing operations were $0.42 per share (diluted). Earnings from continuing operations on an adjusted basis were $0.48 per share, which exceeded management’s guidance of $0.37 to $0.42 per share, due to strong business performance. O-I reportedly had a record first quarter adjusted earnings in recent history, on a constant currency basis, up 33% compared with prior year. Net sales were $1.6 billion, up $167 million (or 12%) from the prior year first quarter.
Sales volumes increased by 14% compared with the first quarter of 2015. Excluding the acquisition of Vitro’s food and beverage business, sales volumes were on par with prior year and in line with full year expectations. Segment operating profit margin expanded 150 basis points vs. prior year, driven by stability and operational performance of the business as well as the addition of the acquisition. Segment operating profit improved across all regions on a constant currency basis, increasing $54 million year-over-year. Solid progress continues against the strategic plan, and improvements are on track.
“We delivered solid improvement in our financials this quarter thanks to the hard and disciplined work of our teams that are focused on stabilizing and improving our operational performance,” said Andres Lopez, CEO. “The momentum we are building gives us confidence that our strategy—designed to generate significant, long-term value across the company—is taking hold. In fact, our expectations for strong business performance, plus the recent dollar weakening, have favorably impacted our full year guidance for both adjusted earnings per share and free cash flow generation. We will continue our focus on execution to achieve our financial commitments.”
Unfavorable currency translation adversely impacted net sales by $62 million, or 4%. Price was up about 1% on a global basis, essentially offsetting cost inflation. In the quarter, the acquired business generated $210 million in net sales, which is 13% of global net sales. Global shipments were in line with management expectations. Global sales volume increased by 14% year-over-year. Including the acquired business, first quarter sales volumes improved in North America by 9% and in Latin America by 85%.
Excluding the acquired business, global shipments were about flat to the prior year first quarter. Shipments in Europe and Asia-Pacific increased modestly, driven by higher beer and non-alcoholic beverage shipments in Europe and by wine in Asia-Pacific. Sales volume for the North America legacy business was on par with the prior year quarter as higher wine and food shipments offset lower shipments in other categories. First quarter shipments for the Latin America legacy business were down about 5% as lower shipments in Brazil were partially offset by higher shipments in the Andean region.
Segment operating profit was $211 million in the first quarter, $43 million higher than prior year first quarter. Adverse currency translation, primarily in Latin America, impacted segment operating profit by $11 million compared with the first quarter of prior year. The outperformance was primarily driven by the strong results of the acquired business and Europe, with all regions reporting improvement on a constant currency basis. The acquired business contributed approximately $42 million of operating profit in the quarter. This puts it on pace to exceed management expectations of $140 million to $145 million for the year. Strong domestic sales, the successful ramp up of the new furnace in Monterrey and cost synergies all contributed to performance.
O-I expects adjusted earnings per share for 2016 to be in the range of $2.25-2.35, which is higher than prior guidance of $2.10-2.25. The updated range reflects multiple factors, including strong business performance, favorable currency assumptions, and a tax rate on the low end of the guidance range of 26-28%. The adjusted EPS range also reflects uncertainty in macroeconomic conditions. Reflecting the aforementioned assumptions, the company expects free cash flow for 2016 to be approximately $300 million, which exceeds the prior guidance of approximately $280 million.
For more information, visit www.o-i.com.