FOR IMMEDIATE RELEASE
O-I Glass, Inc. (“O-I”) (NYSE: OI) today
reported financial results for the second quarter ended June 30,
2021.
“O-I’s second quarter business performance was
strong and exceeded our expectations. Demand was robust and
shipment levels rebounded to pre-pandemic levels. Excluding the
effect of recent divestitures, sales volume was up 18 percent from
the prior year period. Likewise, the company’s performance
benefited from higher production as well as continued solid
operating and cost performance supported by the company’s Margin
Expansion initiatives. Second quarter cash provided by operating
activities was also strong reflecting solid earnings,” said Andres
Lopez, CEO.
“We continued to make very good progress on our
2021 priorities through the first half of the year. Our Margin
Expansion initiatives generated $40 million of benefits
year-to-date and we expect full-year benefits will exceed our
original target for 2021. Consistent with our goal to revolutionize
glass, we successfully validated multiple R&D assumptions at
our first full-scale Generation 1 MAGMA line at Holzminden Germany.
We also remain on track to pilot our Generation 2 MAGMA line at
Streator Illinois in the second half of the year. Likewise, our
Glass Advocacy campaign has reached over 80 million people in the
U.S. as we seek to rebalance the packaging narrative and share the
many favorable and sustainable attributes of glass. As we optimize
our structure, we are now over 80 percent complete on our $1.15
billion divestiture program which should wrap up by the end of
2022. Finally, the Paddock Chapter 11 plan of reorganization is
progressing as expected consistent with the agreement-in-principle
reached in April as we seek a fair and final resolution to
Paddock’s legacy asbestos liabilities. All of these actions are
consistent with our strategy to increase shareholder value and
ensure sustainable prosperity for O-I.”
“Despite a continued volatile environment and
challenges with severe weather earlier in the year, our full year
2021 adjusted earnings, cash provided from operating activities and
free cash flow outlook has improved reflecting favorable market
trends and the company’s continued strong operating performance,”
concluded Lopez.
Second Quarter
2021 Results
-
Reported Results: For the second quarter 2021, the
company recorded earnings of $0.73 per share (diluted) compared to
a loss of $0.64 per share in the prior year period which was
significantly impacted by the onset of the pandemic. The current
year earnings before income taxes was $198 million, compared to a
loss of $119 million in the second quarter of 2020, which was
significantly impacted by the onset of the pandemic. Both periods
include items management considers not representative of ongoing
operations. Higher earnings were primarily the result of improved
sales and production volumes, strong operating and cost performance
and a gain on an indirect tax credit in Brazil.
-
Adjusted
Earnings1: Excluding
certain items management considers not representative of ongoing
operations, second quarter 2021 adjusted earnings1 were $0.54 per
share compared with the prior year of $0.01 per share which was
significantly impacted by the onset of the pandemic. Higher
earnings were primarily the result of improved sales and production
volumes, as well as strong operating and cost performance. Actual
results exceeded management’s earnings guidance of $0.45 to $0.50
primarily reflecting stronger than anticipated shipment
levels.
-
Segment Operating
Profit1: Second quarter
2021 segment operating profit was $232 million compared to $99
million in the prior year period. Excluding the impact from recent
divestitures, sales volume rebounded 18 percent and production
volume was 27 percent higher as a result of continued strong
operating performance and the benefit of O-I’s Margin Expansion
initiatives.
-
Cash Flows: Cash
provided by operating activities was $199 million in second quarter
2021, compared to $181 million in the prior year period. Second
quarter 2021 free cash flow1 was $117 million compared to $112
million in 2020. Both metrics significantly benefited from lower
inventories due to forced production curtailment at the onset of
the pandemic. Strong cash flow in the second quarter of 2021
primarily reflected solid earnings.
-
Capital Structure:
Total debt was $5.1 billion at June 30, 2021 compared to $6.5
billion at June 30, 2020. Net debt1 was $4.5 billion at June 30,
2021, which was down nearly $1 billion from the prior year. Lower
debt levels primarily reflected favorable cash flow and use of
proceeds from divestitures. Committed liquidity remained strong and
approximated $2.2 billion at June 30, 2021.
Net sales approximated $1.7 billion in the
second quarter of 2021 which represented a $242 million increase
from the prior year period. Higher average selling prices
contributed $27 million to net sales. Adjusted for divestitures,
shipments in tons increased 18 percent as higher sales volumes and
favorable mix boosted revenues $255 million. Net sales benefited
$79 million from favorable foreign currency translation. Recent
divestitures reduced net sales by $111 million and revenue from
technical services declined $8 million reflecting lower engineering
project activity.
Segment operating profit was $232 million in the
second quarter of 2021 compared to $99 million in the prior year
period.
- Americas: Segment
operating profit in the Americas was $124 million compared to $52
million in the second quarter of 2020. Excluding divestitures,
shipments in tons improved 17 percent while the benefit of higher
selling prices substantially offset cost inflation. Operating costs
were favorable primarily reflecting 28 percent higher production
levels as well as benefits from the company’s Margin Expansion
initiatives. Results included $2 million of unfavorable foreign
currency translation.
- Europe: Segment
operating profit in Europe was $108 million compared to $42 million
in the second quarter 2020. Shipments in tons improved 22 percent
and the benefit of higher selling prices substantially offset cost
inflation. Like the Americas, operating costs were favorable
reflecting 28 percent higher production levels as well as benefits
from the company’s Margin Expansion initiatives. Additionally,
results benefited $4 million from favorable foreign currency
translation.
-
Asia Pacific2:
Segment operating profit in Asia Pacific was $0 compared to $5
million in the second quarter 2020 following the sale of the
Australia and New Zealand (ANZ) business unit in July 2020.
Retained corporate and other costs were $42
million compared to $37 million in the prior year quarter. Higher
costs primarily reflected additional R&D investment in MAGMA,
marketing expense for the company’s glass advocacy campaign and
management incentives.
In both the second quarter of 2021 and 2020, the
company recorded several significant items impacting reported
results as presented in the table entitled Reconciliation to
Adjusted Earnings. Management considers these items not
representative of ongoing operations and they are excluded from
adjusted earnings. In the second quarter of 2021, these items
included a $69 million gain recorded on an indirect tax credit in
Brazil and $9 million for restructuring and other
charges. In the second quarter of 2020, these items
included approximately $71 million for restructuring, asset
impairment and other costs, $38 million of debt refinancing expense
and $8 million in pension settlement charges.
2021
Outlook
Currently, O-I expects third quarter 2021
adjusted earnings will approximate $0.47 to $0.52 per share. This
outlook assumes 0 to 1 percent same structure sales volume growth
(in tons). The benefit of higher selling prices should partially
offset elevated cost inflation. The company expects 8 to 10 percent
higher production levels compared to the prior year period which
was impacted by forced curtailments in certain markets. The benefit
of higher production is expected to more than offset higher
maintenance and asset project activity expense which have
normalized now that disruption due to the pandemic has subsided.
Furthermore, improved results will reflect cost savings from the
company’s Margin Expansion initiatives.
The company is updating its full year 2021
guidance. O-I now expects sales volume in tons should increase 4 to
5 percent compared to 2020. Adjusted earnings per share should
approximate $1.65 to $1.75. Likewise, the company anticipates cash
provided by operating activities of around $660 million and
approximately $260 million in free cash flow.
Given significant market uncertainty due to the
global pandemic, the company’s business outlook is subject to
adjustment, especially if there is a material change in demand
trends compared to expectations. This outlook assumes foreign
currency rates as of July 31, 2021 and an effective annual tax rate
of approximately 30 to 32 percent.
Conference Call Scheduled for
August 4,
2021
O-I CEO Andres Lopez and CFO John Haudrich will
conduct a conference call to discuss the company’s latest results
on Wednesday, August 4, 2021 at 8:00 a.m. EST. 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. EST, on August 4, 2021. 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
O-I news releases are available on the O-I
website at www.o-i.com.
O-I’s third quarter 2021 earnings conference
call is currently scheduled for Thursday, October 28, 2021, at 8:00
a.m. EST.
About O-I Glass
At O-I Glass, Inc. (NYSE: OI), we love glass and
we’re proud to be one of the leading producers of glass bottles and
jars around the globe. Glass is not only beautiful, it’s also pure
and completely recyclable, making it the most sustainable rigid
packaging material. Headquartered in Perrysburg, Ohio (USA), O-I is
the preferred partner for many of the world’s leading food and
beverage brands. We innovate in line with customers’ needs to
create iconic packaging that builds brands around the world. Led by
our diverse team of more than 25,000 people across 72 plants
in 20 countries, O-I achieved revenues of $6.1 billion in
2020. Learn more about us: o-i.com / Facebook / Twitter / Instagram
/ LinkedIn
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, free cash flow, segment operating profit, and net debt
provide relevant and useful supplemental financial information that
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, and before income taxes
and is also exclusive of items management considers not
representative of ongoing operations as well as certain retained
corporate costs. Management uses adjusted earnings, adjusted
earnings per share, and segment operating profit to evaluate its
period-over-period operating performance because it believes these
provide useful supplemental measures 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 and segment operating profit 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.
Net debt is defined as total debt less cash.
Management uses net debt to analyze the liquidity of the
company.
Further, free cash flow relates to cash provided
by continuing operating activities less cash payments for property,
plant and equipment. Management has historically used free cash
flow to evaluate its period-over-period cash generation performance
because it believes this has provided a useful supplemental measure
related to its principal business activity. It should not be
inferred that the entire 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 press release contains “forward-looking”
statements related to O-I Glass, Inc. (the “company”) 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 that 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
risk that the proposed plan of reorganization for Paddock
Enterprises, LLC (“Paddock”) may not be approved by the bankruptcy
court or that other conditions necessary to implement the agreement
in principle may not be satisfied, (2) the actions and decisions of
participants in the bankruptcy proceeding, and the actions and
decisions of third parties, includingregulators, that may have an
interest in the bankruptcy proceedings, (3) the terms and
conditions of any reorganization plan that may ultimately be
approved by the bankruptcy court, (4) delays in the confirmation or
consummation of a plan of reorganization due to factors beyond the
company’s and Paddock’s control, (5) risks with respect to the
receipt of the consents necessary to effect the reorganization, (6)
risks inherent in, and potentially adverse developments related to,
the bankruptcy proceeding, that could adversely affect the company
and the company’s liquidity or results of operations, (7) the
impact of the COVID-19 pandemic and the various governmental,
industry and consumer actions related thereto, (8) the company’s
ability to obtain the benefits it anticipates from the corporate
modernization, (9) the company’s ability to manage its cost
structure, including its success in implementing restructuring or
other plans aimed at improving the company’s operating efficiency
and working capital management, achieving cost savings, and
remaining well-positioned to address Paddock’s legacy liabilities,
(10) the company’s ability to acquire or divest businesses, acquire
and expand plants, integrate operations of acquired businesses and
achieve expected benefits from acquisitions, divestitures or
expansions, (11) the company’s ability to achieve its strategic
plan, (12) the company’s ability to improve its glass melting
technology, known as the MAGMA program, (13) foreign currency
fluctuations relative to the U.S. dollar, (14) changes in capital
availability or cost, including interest rate fluctuations and the
ability of the company to refinance debt on favorable terms, (15)
the general political, economic and competitive conditions in
markets and countries where the company has operations, including
uncertainties related to Brexit, economic and social conditions,
disruptions in the supply chain, competitive pricing pressures,
inflation or deflation, changes in tax rates and laws, natural
disasters, and weather, (16) the company’s ability to generate
sufficient future cash flows to ensure the company’s goodwill is
not impaired, (17) consumer preferences for alternative forms of
packaging, (18) cost and availability of raw materials, labor,
energy and transportation, (19) consolidation among competitors and
customers, (20) unanticipated expenditures with respect to data
privacy, environmental, safety and health laws, (21) unanticipated
operational disruptions, including higher capital spending, (22)
the company’s ability to further develop its sales, marketing and
product development capabilities, (23) the failure of the company’s
joint venture partners to meet their obligations or commit
additional capital to the joint venture, (24) the ability of the
company and the third parties on which it relies for information
technology system support to prevent and detect security breaches
related to cybersecurity and data privacy, (25) changes in U.S.
trade policies, and the other risk factors discussed in the
company’s Annual Report on Form 10-K for the year ended December
31, 2020 and any subsequently filed Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q or the company’s other filings with
the Securities and Exchange Commission.
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 or 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 Adjusted earnings per share, free cash flow, segment operating
profit, and net debt are each non-GAAP financial measures. See
tables included in this release for reconciliations to the most
directly comparable GAAP measures.2 Results of the Asia Pacific
segment have been recast to reflect only the earnings of the ANZ
businesses following the sale of the business unit in July 2020.
The sales and operating results of the other businesses that
historically comprised the Asia Pacific segment and were retained
by the company, have been reclassified to Other sales and Retained
corporate costs and other, respectively.
- 2Q 2021 O-I Earnings Presentation
- 2Q 2021 O-I Earnings Release
For more information, contact:
Chris Manuel
Vice President of Investor Relations
567-336-2600
Chris.Manuel@o-i.com
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