YASTEST
FOR IMMEDIATE
RELEASE
O-I REPORTS THIRD
QUARTER 2017 RESULTS
Higher results in Europe and Latin America lead
to
double-digit increase in earnings per share
PERRYSBURG, Ohio (October 23,
2017) - Owens-Illinois, Inc. (NYSE: OI) today reported
financial results for the third quarter ended September 30,
2017.
-
For the third quarter, earnings from continuing
operations were $0.77 per share (diluted), up 13 percent compared
with $0.68 per share in 2016, primarily driven by improved segment
operating profit in Europe and Latin America, and lower interest
and tax expense.
-
Net sales were $1.8 billion, an increase of
almost 5 percent compared to the prior year third quarter,
primarily due to favorable currency translation. Price increased 1
percent on a global basis, while shipments were on par with the
prior year.
-
Earnings from continuing operations before
income taxes were $172 million, an increase of 12 percent compared
with the same period in 2016.
-
Segment operating profit of reportable
segments[1] for the
third quarter of 2017 was $260 million, an increase of 10
percent compared with prior year. Notable gains were reported in
Europe and Latin America which more than compensated for external
weakness in North America. Europe benefited from a favorable sales
mix, a currency tailwind and the receipt of an energy credit, as
expected. The increase in Latin America was driven by a 7 percent
increase in shipments including double-digit gains in Brazil and a
reduction in total systems cost.
-
Strategic initiatives in commercial programs and
end-to-end supply chain management continue to generate benefits as
planned. Total systems cost improvements generated approximately $8
million in cost savings during the third quarter.
-
With respect to full year guidance, the Company
is narrowing its range for earnings and reaffirming its target for
cash flow.
-
The Company agreed to expand its 50-50 joint
venture with Constellation Brands. The joint venture operates a
glass container production plant in Nava, Mexico that provides
bottles exclusively for Constellation's adjacent brewery. The
newly-expanded relationship provides for the addition of a fifth
furnace at the plant and extends the term of the joint venture
agreement ten years, to 2034.
"We are seeing significant progress on O-I's transformation to
deliver increased sustainable shareholder value as we continue to
execute on our strategy with focus, discipline and accountability,"
said Andres Lopez, CEO. "Our rigorous approach is implemented by an
entire organization focused on maximizing performance at the
enterprise level and incentivized under a single set of metrics. In
the quarter, O-I demonstrated its resiliency in the face of
well-known, challenging external conditions in the Americas by
delivering a seventh consecutive quarter of earnings results in
line with, or exceeding, our guidance."
Commenting on the strategic partnership with
Constellation, Andres Lopez continued, "We are excited about the
growth that will be enabled through our continued and expanded
relationship with Constellation. This investment will allow
both companies to realize additional attractive opportunities in
Mexican beer exports to the U.S, leveraging the success at the
joint venture's highly-efficient factory in Nava, while bolstering
O-I's relationship with a key strategic customer."
Third Quarter 2017
Results
Net sales in the third quarter of 2017 were $1.8
billion, an increase of almost 5 percent compared to the prior year
third quarter. On a global basis, the improvement in net sales was
due to a 1 percent increase in price and favorable currency
translation.
In the third quarter, in Latin America, sales
volumes increased 5 percent from the prior year mainly due to
higher beer and spirits shipments. Shipments in Mexico continue to
increase at mid-single digit rates and shipments in Brazil are up
markedly, providing further evidence of recovery.
Sales volume in Asia Pacific increased 5 percent
in the third quarter, primarily due to higher beer shipments in
Australia. In Europe, sales volumes increased 1 percent mainly due
to favorable product mix as shipments were flat. Consistent with
ongoing trends, North America sales volume declined due to lower
shipments, primarily in beer.
The Company continues to mitigate the impact of
the ongoing decline in megabeer in the U.S. by positioning itself
to benefit from the growing market of U.S. beer imports through its
joint venture with Constellation Brands and long-term sales
contracts in Mexico. This position has been strengthened through
today's announcement regarding the extension and further expansion
of this joint venture.
The Company continues to make solid progress on
executing its strategic initiatives. The Company's focus on total
systems cost contributed approximately $8 million in cost savings
in the third quarter, leading to a year-to-date total of $26
million.
Segment operating profit was $260 million in the
third quarter, 10 percent higher than the prior year third
quarter.
-
Europe reported segment operating profit of $81
million, which was $17 million, or 27 percent, higher than the
prior year quarter. Much of the increase was due to the receipt of
an energy credit in third quarter of 2017, as expected, whereas
Europe received a similar energy credit in the fourth quarter of
the prior year. Setting aside the energy credit, Europe is
performing well, driven by a favorable sales mix, the benefits of
strategic initiatives and the positive impact of currency
translation.
-
Segment operating profit for North America was
$75 million in the quarter, a decline of $4 million compared with
the third quarter of 2016. Cost inflation was essentially offset by
price in the quarter. Lower sales volume, primarily in beer,
reduced segment operating profit by $9 million compared to the
prior year. Joint venture equity earnings and benefits from total
system costs initiatives favorably impacted third quarter
performance.
-
Latin America reported segment operating profit
of $84 million, exceeding the prior year quarter by $10 million or
almost 14 percent. The region benefitted by $5 million from the
increase in sales volumes, primarily in Brazil and Mexico.
Favorable currency translation added $3 million compared to the
prior year quarter. Inflation in the quarter was essentially
recovered by price. The region continues to benefit from
successfully addressing total systems costs.
-
Segment operating profit in Asia Pacific was $20
million, similar to the third quarter of the prior year. Asia
Pacific benefited from increased sales volumes, while higher prices
compensated for inflation in the quarter. To meet customers'
evolving demand, the region has been undertaking more
intra-regional and cross-regional shipments, leading to higher
supply chain costs.
Corporate and other costs were $25 million in the
third quarter, in line with amounts reported in the first half of
the year.
Deleveraging and refinancing actions over the past
12 months are yielding tangible benefits to the bottom line.
Net interest expense in the quarter was $63 million, down $3
million from the third quarter of 2016.
The Company reported third quarter 2017 earnings
of $0.77 per share (diluted), exceeding management's guidance of
$0.70 to $0.75 per share, and 13 percent higher than in the third
quarter of 2016.
Expansion of Strategic Joint
Venture with Constellation Brands
The Company has agreed to expand its 50-50 joint
venture with Constellation Brands, Inc. The joint venture,
established in 2014, operates a glass container production plant in
Nava, Mexico. The plant provides bottles exclusively for
Constellation's adjacent brewery, which brews a leading portfolio
of Mexican beer brands for export to the United States, the fastest
growing category in beer in the U.S.
The original joint venture agreement included the
expansion of the glass production plant from one furnace to four
furnaces by 2018. The initial expansion plans have been progressing
as scheduled, with three furnaces currently in operation. The
fourth furnace is expected to be operational in the first half of
2018.
To meet rising demand from Constellation's
adjacent brewery, the newly-expanded relationship provides for the
addition of a fifth furnace, which is expected to be operational by
the end of 2019. Following the installation of the fifth furnace,
the Nava plant will be the largest, most modern glass container
factory in the world.
This capacity expansion, which is estimated to
cost approximately $140 million, will be financed by equal
contributions from both partners.
In recognition of the strong, value-add
contributions from both partners, the term of the joint venture
agreement was extended for ten additional years, to 2034.
Outlook
The Company continues to de-risk its pension
plans. In the fourth quarter of 2017, the Company intends to
annuitize more of its pension plans in North America, which is
expected to result in non-cash charges in excess of $100
million.
The Company expects reported earnings from
continuing operations attributable to the company (diluted) for the
full year 2017 to be in the range of $0.90 to $1.86 per share,
which largely reflects variability with respect to the
aforementioned pension settlement charges.
Excluding certain items that management considers
not representative of ongoing operations, adjusted earnings per
share[2] for full
year 2017 are expected to be in the range of $2.60 to $2.65, which
narrows prior guidance, while modestly increasing the midpoint.
The Company continues to expect cash provided by
continuing operating activities for 2017 to be approximately $750
million and adjusted free cash flow[3] to be
approximately $365 million. The earnings and cash flow guidance
ranges reflect uncertainty in macroeconomic conditions and currency
rates, among other external factors.
Conference Call Scheduled for
Oct. 24, 2017
O-I CEO Andres Lopez and CFO Jan Bertsch will conduct a conference
call to discuss the Company's latest results on Tuesday, Oct. 24,
2017, at 8:00 a.m. EDT. A live webcast of the conference call,
including presentation materials, will be available on the O-I
website,
www.o-i.com/investors, in the Webcasts and Presentations
section.
The conference call also may be accessed by
dialing 888-733-1701 (U.S. and Canada) or 706-634-4943
(international) by 7:50 a.m. EDT, on Oct. 24. Ask for the O-I
conference call. A replay of the call will be available on the O-I
website, www.o-i.com/investors, for a year following the call.
Contact:
Sasha Sekpeh,
567-336-5128 - O-I Investor Relations
Kristin Kelley, 567-336-2395 - O-I Corporate Communications
O-I news releases are available on the O-I website
at www.o-i.com.
O-I's fourth quarter 2017 earnings conference call
is currently scheduled for Wednesday, February 7, 2018, at 8:00
a.m. EST.
About O-I
Owens-Illinois, Inc. (NYSE: OI) is the world's
largest glass container manufacturer and preferred partner for many
of the world's leading food and beverage brands. The Company had
revenues of $6.7 billion in 2016 and employs more than 27,000
people at 79 plants in 23 countries. With global headquarters in
Perrysburg, Ohio, O-I delivers safe, sustainable, pure, iconic,
brand-building glass packaging to a growing global marketplace. For
more information, visit o-i.com.
Non-GAAP Financial
Measures
The Company uses certain non-GAAP financial
measures, which are measures of its historical or future financial
performance that are not calculated and presented in accordance
with GAAP, within the meaning of applicable SEC rules. Management
believes that its presentation and use of certain non-GAAP
financial measures, including adjusted earnings, adjusted earnings
per share, segment operating profit, segment operating profit
margin and adjusted free cash flow, provide relevant and useful
supplemental financial information, which is widely used by
analysts and investors, as well as by management in assessing both
consolidated and business unit performance. These non-GAAP measures
are reconciled to the most directly comparable GAAP measures and
should be considered supplemental in nature and should not be
considered in isolation or be construed as being more important
than comparable GAAP measures.
Adjusted earnings relates to net earnings from
continuing operations attributable to the Company, exclusive
of items management considers not representative of ongoing
operations because such items are not reflective of the Company's
principal business activity, which is glass container production.
Adjusted earnings are divided by weighted average shares
outstanding (diluted) to derive adjusted earnings per share.
Segment operating profit relates to earnings from continuing
operations before interest expense (net), provision for income
taxes and is also exclusive of items management considers not
representative of ongoing operations. Segment operating profit
margin is segment operating profit divided by segment net sales.
Management uses adjusted earnings, adjusted earnings per share,
segment operating profit and segment operating profit margin to
evaluate its period-over-period operating performance because it
believes this provides a useful supplemental measure of the results
of operations of its principal business activity by excluding items
that are not reflective of such operations. Adjusted earnings,
adjusted earnings per share, segment operating profit and segment
operating profit margin may be useful to investors in evaluating
the underlying operating performance of the Company's business as
these measures eliminate items that are not reflective of its
principal business activity.
Further, adjusted free cash flow relates to cash
provided by continuing operating activities less additions to
property, plant and equipment plus asbestos-related payments.
Management uses adjusted free cash flow to evaluate its
period-over-period cash generation performance because it believes
this provides a useful supplemental measure related to its
principal business activity. Adjusted free cash flow may be useful
to investors to assist in understanding the comparability of cash
flows generated by the Company's principal business activity. Since
a significant majority of the Company's asbestos-related claims are
expected to be received in the next ten years, adjusted free cash
flow may help investors to evaluate the long-term cash generation
ability of the Company's principal business activity as these
asbestos-related payments decline. It should not be inferred that
the entire adjusted free cash flow amount is available for
discretionary expenditures, since the Company has mandatory debt
service requirements and other non-discretionary expenditures that
are not deducted from the measure. Management uses non-GAAP
information principally for internal reporting, forecasting,
budgeting and calculating compensation payments.
The Company routinely posts important information
on its website - www.o-i.com/investors.
Forward-Looking Statements
This document contains "forward-looking"
statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and Section
27A of the Securities Act of 1933. Forward-looking statements
reflect the Company's current expectations and projections about
future events at the time, and thus involve uncertainty and risk.
The words "believe," "expect," "anticipate," "will," "could,"
"would," "should," "may," "plan," "estimate," "intend," "predict,"
"potential," "continue," and the negatives of these words and other
similar expressions generally identify forward-looking statements.
It is possible the Company's future financial performance may
differ from expectations due to a variety of factors including, but
not limited to the following: (1) the Company's ability to realize
expected growth opportunities, cost savings and synergies from the
Vitro Acquisition, (2) foreign currency fluctuations relative to
the U.S. dollar, (3) changes in capital availability or cost,
including interest rate fluctuations and the ability of the Company
to refinance debt at favorable terms, (4) the general political,
economic and competitive conditions in markets and countries where
the Company has operations, including uncertainties related to
economic and social conditions, disruptions in capital markets,
disruptions in the supply chain, competitive pricing pressures,
inflation or deflation, and changes in tax rates and laws, (5) the
Company's ability to generate sufficient future cash flows to
ensure the Company's goodwill is not impaired, (6) consumer
preferences for alternative forms of packaging, (7) cost and
availability of raw materials, labor, energy and transportation,
(8) the Company's ability to manage its cost structure, including
its success in implementing restructuring plans and achieving cost
savings, (9) consolidation among competitors and customers, (10)
the Company's ability to acquire businesses and expand plants,
integrate operations of acquired businesses and achieve expected
synergies, (11) unanticipated expenditures with respect to
environmental, safety and health laws, (12) the Company's ability
to further develop its sales, marketing and product development
capabilities, (13) the Company's ability to prevent and detect
cybersecurity threats against its information technology systems,
(14) the Company's ability to accurately estimate its total
asbestos-related liability or to control the timing and occurrence
of events relates to asbestos-related claims, (15) changes in U.S.
trade policies, (16) the Company's ability to achieve its strategic
plan, and the other risk factors associated with the business
described in the Company's annual report on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K filed with the
SEC. It is not possible to foresee or identify all such factors.
Any forward-looking statements in this document are based on
certain assumptions and analyses made by the Company in light of
its experience and perception of historical trends, current
conditions, expected future developments, and other factors it
believes are appropriate in the circumstances. Forward-looking
statements are not a guarantee of future performance and actual
results or developments may differ materially from expectations.
While the Company continually reviews trends and uncertainties
affecting the Company's results of operations and financial
condition, the Company does not assume any obligation to update or
supplement any particular forward-looking statements contained in
this document.
[1] Segment
operating profit of reportable segments ("segment operating
profit") is a non-GAAP financial measure. See tables included in
this release for a reconciliation to the most directly comparable
GAAP measures.
[2] See table
entitled Reconciliation to Expected Adjusted Earnings - FY17 and
4Q17 Forecasts.
[3] Adjusted
free cash flow is a non-GAAP financial measure defined as cash
provided by continuing operating activities less additions to
property, plant and equipment plus asbestos-related payments (all
components as determined in accordance with GAAP). See table
entitled Reconciliation to Adjusted Free Cash Flow.
O-I Logo
3Q 2017 Earnings Presentation
3Q 2017 Earnings Release
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Owens-Illinois, Inc. via Globenewswire
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