Net Sales Edge Up Almost 3% in 2017 for O-I
O-I’s net sales for 2017 were $6.9 billion, up $167 million from 2016, an increase of nearly 3%.
Owens-Illinois, Inc. (O-I) recently reported financial results for the full year and fourth quarter ended December 31, 2017. Net sales for the year were $6.9 billion, up $167 million from 2016, an increase of nearly 3%. Prices were 1% higher on a global basis, mainly due to price adjustments resulting from cost inflation. Global shipments increased approximately 1% in 2017. From a geographic perspective, key contributors to shipment growth were Italy, Mexico and Brazil. Favorable foreign currency translation also benefited net sales by $106 million.
“In 2017, we delivered strong earnings and cash flow generation, in line with the commitments we made at Investor Day in early 2016,” said Andres Lopez, CEO. “We have been building capabilities in the commercial, manufacturing and supply chain space that are demonstrably adding to the top line—through higher shipments year-on-year—and the bottom line—through the tangible benefits of our Total Systems Cost approach. We are working together in a new way, as one enterprise, enhancing the customer experience, executing on our initiatives and deleveraging the balance sheet that together support our conviction to deliver rising earnings and cash flow in 2018. Even as we continue to invest in new capabilities and explore non-organic growth opportunities in the industry, we have begun to pivot towards a more balanced approach to capital allocation that we anticipate will include share buybacks in 2018.”
Shipments in Europe in 2017 increased 1%, primarily due to favorable beer, spirits and wine volumes. In North America, sales volumes declined 3% compared to 2016, mainly due to lower shipments of beer. Full year shipments for Latin America rose 4%, primarily due to higher shipments of beer and spirits. Overall, Asia-Pacific shipments declined 1% as higher shipments to food customers were more than offset by lower shipments to beer and non-alcoholic beverage customers. In mature markets within Asia-Pacific, sales volumes increased approximately 1%, primarily due to higher beer shipments. Sales volumes in China declined for 2017 because, during the first half of the year, domestic production was exported to support sales elsewhere in the region.
Segment operating profit was $942 million in 2017, compared with $882 million in the prior year, an improvement of 7%. In Europe, segment operating profit was $263 million, an improvement of $26 million over the prior year period, or 11%. The region profited from improvements in Total Systems Costs, cost savings from the closure of a plant in the Netherlands, and higher sales volumes. These benefits were partially offset by lower average selling prices that were not fully offset by deflation.
North America’s segment operating profit increased $19 million, or 6%, for 2017. Higher equity earnings and benefits from Total Systems Cost initiatives provided the most significant improvement from prior year. The region also benefited from approximately $5 million in gains related to non-strategic asset sales. Partially offsetting these benefits were lower sales volume and cost inflation that was not fully covered by price increases.
Segment operating profit in Latin America rose $27 million in 2017 compared to prior year, an increase of 10%. Benefits from Total Systems Cost initiatives and higher sales volumes favorably impacted Latin America’s segment operating profit. These benefits were partially offset by cost inflation that exceeded price increases.
Asia-Pacific reported segment operating profit of $65 million, which was $12 million below the prior year. Despite cost containment efforts, higher supply chain costs for intra-regional shipments and higher costs related to planned asset improvement projects negatively impacted results compared to the prior year. Asset investments in this region, taking place through mid-2018, are expected to improve the region’s cost structure in the second half of 2018.
Total net sales in the fourth quarter of 2017 were $1.7 billion, an increase of 4% compared to the prior year’s fourth quarter. On a global basis, the improvement in net sales was due to a 1% increase in price and favorable currency translation.
Global sales volumes were on par with the 2016 fourth quarter. Shipments in Latin America increased 2%, mainly due to gains in beer and non-alcoholic beverages. The largest increase in Latin America’s fourth quarter shipments was reported in Brazil, providing further evidence of recovery in that country. In Europe, shipments increased 1%, primarily in wine and beer. North America volumes were similar to the prior year with higher food shipments offsetting lower beer volumes. In Asia-Pacific, shipments were 2% below the same period of 2016, with higher food volumes more than offset by lower shipments of beer.
For the fourth quarter 2017, the company recorded a loss from continuing operations of $0.81 per share (diluted), which compares with a loss from continuing operations of $0.43 per share (diluted) in the same period of 2016. Loss from continuing operations before income taxes was $121 million in the quarter, which was unfavorable by $82 million compared with the same period in prior year. These figures include significant items that management considers not representative of ongoing operations.
For more information, visit www.o-i.com.