FOR IMMEDIATE RELEASE
As part of an investor presentation, O-I Glass,
Inc. (NYSE: OI) will share its business plan to accelerate the
company’s transformation and increase value for all
stakeholders.
“Glass containers are a great product that have
been trusted for thousands of years. Building off this enduring
legacy, glass is more relevant than ever given consumer preferences
for health, wellness and sustainability. To meet the packaging
market’s evolving needs, we will continue to transform the company,
and with our MAGMA solution, O-I will redefine the glass production
process for decades to come,” said Andres Lopez, CEO of O-I
Glass.
“O-I’s production network is purpose-built to
serve a wide array of product categories. MAGMA will further
enhance our capabilities to support many of these categories and
expand in the highly differentiated product segments, which are
aligned to changing consumer preferences. MAGMA also is more
flexible and scalable and further improves glass’ position as the
most sustainable packaging material available. With MAGMA, we can
quickly add capacity in smaller increments, closer to our
customers, and at lower capital intensity. This new capability will
increase O-I's right to win in the more differentiated markets. It
will enable the company to grow in existing markets and enter new
markets with greater flexibility. We are ready to deploy MAGMA,
achieve the full potential of glass, and enable profitable
growth.
“We have a great product in an attractive
market. As part of our transformation, we are developing
breakthrough innovations to meet the future requirements of
packaging and generate profitable growth. I am proud to share our
plan to accelerate O-I’s transformation and increase value for all
stakeholders,” said Lopez.
The following are highlights of the company’s
plan for the 2022 through 2024 period:
- Margin Expansion Initiatives: The
company’s ongoing margin expansion initiatives should generate
benefits of approximately $50 million per year.
- Profitable Growth with MAGMA: O-I
expects one to two percent CAGR organic volume growth prior to
divestitures. To enable this growth, the company intends to invest
up to $680 million in new capacity to address supply-constrained
geographies and categories. These investments are expected to
generate a 20 percent average internal rate of return. In addition
to the current project underway in Colombia, plans include up to 11
MAGMA lines. These investments will expand O-I’s leading franchise
position in high growth and high value markets in Latin America and
the oversold spirits category in the U.S. and U.K.
- Expand Portfolio Optimization: The
company has increased its portfolio optimization target to $1.5
billion by 2024. O-I expects total proceeds will approximate $1
billion by year-end 2021 (or early 2022) with incremental proceeds
of approximately $500 million through 2024. This capital will be
redeployed to help fund attractive expansion initiatives with MAGMA
and improve ROIC.
- Resolve Legacy Liabilities: The
company will seek to resolve legacy liabilities that have absorbed
a significant portion of the company’s cash flows over the past
decade. O-I’s subsidiary, Paddock Enterprises, LLC (“Paddock”), has
reached an agreement in principle for a consensual plan of
reorganization under section 524(g) of the Bankruptcy Code to
resolve Paddock’s legacy asbestos liabilities. The total
consideration to fund the section 524(g) trust would be $610
million on the effective date of the plan, which Paddock currently
expects to occur in 2022. Likewise, O-I expects key legacy pension
plans in the U.S. and Canada will be fully funded by 2024. These
efforts will increase the cash flow available to create future
value for all stakeholders.
- Complete MAGMA Development: Initial
MAGMA expansion initiatives will utilize MAGMA Generation 1 and
Generation 2 capabilities. The company expects to complete the
development of a Generation 3 solution for deployment in 2025.
- Advance ESG and Glass Advocacy: O-I
intends to further advance its ESG (Environment, Social &
Governance) position and glass advocacy campaigns to build on its
already strong sustainability profile and to reposition the
dialogue around glass in the marketplace.
The company anticipates adjusted earnings1 will
improve to between $2.20 and $2.40 per share by 2024, representing
an eight to 12 percent earnings CAGR over the three-year period.
This outlook is net of an estimated $0.25 to $0.30 per share impact
from portfolio optimization actions and additional interest expense
related to the funding of the Paddock trust. Adjusted free cash
flow1 should increase to between $400 million and $450 million by
2024 (adjusted free cash flow reflects cash provided by operating
activities less maintenance capital expenditures and excludes the
expected one-time cash payment to fund the Paddock trust). Further,
O-I’s leverage ratio1 is expected to approximate 3.5 times by the
end of 2024 (inclusive of funding the Paddock trust).
In addition, O-I is updating its current third
quarter and full year 2021 outlook. Third quarter adjusted earnings
should be at the high end or slightly above the previous guidance
of $0.47 and $0.52 per share. Full year adjusted earnings1 are now
expected to range between $1.70 and $1.75 per share, and full year
free cash flow2 should approximate $260 million.
“O-I is the market, innovation and
sustainability leader in the attractive glass packaging market. We
are well-positioned to advance our business. As we continue to
transform the company, MAGMA will further enhance O-I’s
capabilities to unlock sustainable, profitable growth. We are
addressing the challenges of the past, including resolution of
legacy liabilities, and building a bright future for the company
and its stakeholders. Through solid execution and profitable
expansion, I believe O-I represents a compelling investment
opportunity,” concluded Lopez.
O-I Investor Day
Scheduled for September
28, 2021
Please join the O-I Glass global leadership team
as the company discusses its ongoing
transformation, MAGMA and future targets and
milestones.
To register for
the live event and/or replay of the event, please
access the following
link: https://onlinexperiences.com/Launch/QReg/ShowUUID=F0EF289F-774A-4488-8B9E-AE15553E1836
The registration link is also available on the company's website
at https://investors.o-i.com/webcasts-presentations.
An archived replay of the webcast and slides
shown during the presentations will be available on the
company’s website following the completion of the event for
one year.
For additional information about the event
and supporting materials please visit the O-I
Glass 2021 Virtual Investor Day site
at https://investorday.o-i.com.
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 Tuesday, October 26, 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, adjusted free cash flow, net debt,
credit agreement EBITDA and leverage ratio 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
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.
Management uses adjusted earnings and adjusted earnings per share
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 and
adjusted earnings per share 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.
Leverage ratio is defined as net debt divided by
credit agreement EBITDA (as defined in the company’s bank credit
agreement). 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 operating activities less cash payments for property, plant and
equipment. Adjusted free cash flow relates to cash provided by
operating activities less cash payments for property, plant and
equipment that are related to maintenance activities and excludes
the expected one-time cash payment to fund the Paddock 524(g)
trust. Management has historically used free cash flow and adjusted
free cash flow to evaluate its period-over-period cash generation
performance because it believes these measures have provided useful
supplemental measures related to its principal business activity.
It should not be inferred that the entire free cash flow or
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 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 of 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,
including regulators, 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, adjusted free cash flow and leverage ratio
are each non-GAAP financial measures. The company is unable to
present a quantitative reconciliation of these forward-looking
non-GAAP measures to its most comparable GAAP financial measures
without unreasonable efforts.2 Forecasted free cash flow for full
year 2021 is a forward-looking non-GAAP financial measure that is
reconciled to its most directly comparable forward-looking GAAP
financial measure as follows: Cash from operating activities of
$660 million less cash payments for property, plant and equipment
of $400 million equals free cash flow of $260 million.
- Investor Day Presentation
- Investor Day Press Release
For more information, contact:
Chris Manuel
Vice President of Investor Relations
567-336-2600
Chris.Manuel@o-i.com
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