Net Sales Increase Almost 8% for O-I in First Quarter of 2018
O-I’s first quarter 2018 net sales were $1.7 billion, up $121 million from prior the year, an increase of nearly 8%.
Owens-Illinois, Inc. (O-I) recently reported its financial results for the first quarter ended March 31, 2018. The company consolidated the North America and Latin America segments into one segment, named the Americas, in order to better leverage critical resources and competencies across a larger geography, replicate best practices, and reduce costs. First quarter 2018 net sales were $1.7 billion, up $121 million from prior the year, an increase of nearly 8%.
Prices were 2% higher on a global basis, mainly due to price adjustment formulas and a constructive environment in Europe. Favorable foreign currency translation benefited net sales by $99 million, primarily due to a stronger euro. In line with guidance for the quarter, total glass container shipments were comparable with the prior year.
“This quarter marks the company’s ninth consecutive quarter of higher earnings year-over-year,” said Andres Lopez, CEO. “We delivered strong performance in line with our guidance, while executing the planned, finite investments in asset stability. This reflects our focus and commitment to delivering on our strategic initiatives, including programs aimed at improving the customer experience, shifting to higher-value segments, becoming more cost competitive, leveraging technology, and simplifying our organization.
“Our European and Americas regions delivered particularly strong sales and margin expansion in the first quarter. We continue to be positive about our 2018 outlook. Our teams are aligned and energized like never before, executing with rigor and discipline. This, combined with our balanced capital allocation strategy, is expected to create significant value for our shareholders for years to come.”
In the Americas, shipments increased nearly 2% compared to the 2017 first quarter, driven primarily by higher shipments to food and alcoholic beverage customers. Consistent with the past several quarters, year-over-year shipments in Brazil recovered strongly. However, in the U.S., solid growth in food and non-alcoholic beverages were more than offset by a decline in alcoholic beverages, which is largely due to ongoing trends in megabeer. According to the company, it is well-positioned to benefit from U.S. beer imports, as evidenced by strong volume growth in the joint venture with CBI, which has successfully ramped up its fourth furnace.
In Europe, sales volumes continue to be robust. Shipments in first quarter 2018 were essentially on par with the strong comparable period in the prior year and are 4% higher than 2016. Asia-Pacific shipments declined, partially driven by the timing of returnable float replenishment in Southeast Asia. Segment operating profit was $224 million in the first quarter 2018, compared with $218 million in the prior year, an improvement of 3%, and the ratio of earnings from continuing operations before income taxes to net sales increased substantially.
The Americas posted segment operating profit of $147 million, up 6% compared with the prior year’s first quarter, and segment operating profit margins expanded 20 basis points. The previously mentioned increase in sales volume contributed to the gain. Selling prices were modestly higher than cost inflation, largely driven by a catch up in prior year inflationary pressures. The region continues to benefit from Total Systems Cost efforts.
Since the fourth quarter of 2017, Asia-Pacific has been executing planned asset improvements to upgrade the reliability and flexibility of its footprint to meet rising customer demand. Due to lower production volume, higher maintenance and supply chain costs, Asia-Pacific reported segment operating profit of $5 million in the first quarter of 2018, which was substantially below the prior year’s first quarter. As these discrete asset improvement projects finish, the region’s cost structure is expected to substantially improve in the second half of 2018 and beyond.
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