02.10.16
Owens-Illinois, Inc. (O-I) reported financial results for the full year and fourth quarter ending Dec. 31, 2015.
For full year 2015, the company recorded a loss from continuing operations of $0.44 per share (diluted). Excluding certain items management considers not representative of ongoing operations, adjusted earnings were $2.00 per share, in line with management guidance. These results compared with $2.07 per share in 2014 on a constant currency basis. The Company’s charge in 2015 for asbestos-related costs covers a four-year period of estimated asbestos claims not yet asserted against the company versus the three-year period used in the prior year.
Fourth quarter 2015 adjusted earnings were $0.40 per share, compared with $0.32 per share in the same period of 2014 on a constant currency basis.
O-I generated $210 million of free cash flow for the full year 2015, modestly exceeding management guidance. This is on par with prior year free cash flow in constant currency, which was the company’s second highest year on record.
Global volumes for 2015 were up 3% compared to the prior year. Excluding the acquisition of Vitro’s food and beverage business (the acquired business) volumes were on par with 2014. On a global basis, volumes of wine, spirits, food and non-alcoholic beverages all grew year-on-year. While global beer volumes fell 1%, driven by a decline in mainstream beer, shipments into craft and premium beer continue to expand.
Segment operating profit declined $168 million for the year, or $27 million on a constant currency basis. Segment operating profit in constant currency improved over the prior year for all regions except for Europe, which faced pricing pressure and lower productivity. The acquired business contributed $46 million of segment operating profit since the transaction closed on Sept. 1, 2015.
The company’s leverage ratio was 4.0x at year-end 2015, an improvement from 4.2x at the end of the third quarter of 2015.
In 2016, the Company expects to deliver higher earnings and cash flow mainly driven by higher segment operating profit. Adjusted earnings for full year 2016 are expected to be in the range of $2.10 to $2.25. Free cash flow generation in 2016 is expected to be approximately $280 million, using year-end 2015 foreign exchange rates. The priority for the company’s free cash flow continues to be debt reduction.
“We are pleased to deliver earnings and cash flow in line with our guidance for the quarter and we continue to execute upon initiatives to improve performance,” said CEO Andres Lopez. “Our work to date has already begun to deliver tangible benefits as evidenced by more consistent production as the year progressed. North America has recovered exceptionally well through the year and we will leverage our learnings to improve performance in Europe. We continue to successfully integrate the Vitro food and beverage acquisition, which is already positively impacting segment profitability.
“Looking ahead, we expect that trends in the majority of our end markets will remain stable in 2016 and O-I will increasingly benefit from our growing exposure to U.S. beer imports and the Mexican domestic market,” Lopez added. “While we recognize continued external uncertainties, such as economic conditions in Brazil and price dynamics in Europe, we are pressing hard on key initiatives that will increase profitability in 2016, including: maximizing the value of the acquired business; improving our end-to-end supply chain performance; and reducing costs through increasing organizational effectiveness and spending discipline. We expect to deliver higher earnings and cash flow in 2016 while continuing to prioritize deleveraging our balance sheet.”
Net sales in the fourth quarter of 2015 were $1.6 billion, up $23 million from the prior year fourth quarter. For net sales of reportable segments, the stronger U.S. dollar led to unfavorable currency translation of approximately $200 million in net sales, or about a 13% decline. Price was essentially flat on a global basis, with higher prices in Latin America largely offset by lower prices in the other regions. The acquired business contributed $197 million in net sales.
Global sales volume increased by nearly 14% compared to prior year fourth quarter. Excluding the acquired business, global shipments were 2% higher year over year. Shipments in Asia Pacific increased 7% driven by improving wine exports from Australia. Europe sales volume was on par with the prior year quarter as lower beer shipments were offset by higher shipments in all other categories.
North America sales volume, excluding the acquired business, improved more than 2% year over year led by stronger wine, spirits and beer shipments. Latin America sales volume, excluding the acquired business, was flat to prior year as strong sales volume in the Andean region offset continued weakness in Brazil. Including the acquired business, fourth quarter sales volumes improved in North America by 11% and in Latin America by 55%.
Segment operating profit was $186 million in the fourth quarter, $6 million higher than prior year. On a constant currency basis, segment operating profit was up $40 million. The acquired business contributed $32 million of segment operating profit. Excluding the acquired business, improved segment operating profit in North America and Asia Pacific were mostly offset by lower operating profit in Europe and the Latin America legacy business.
The acquired business’ underlying operations continue to perform well in terms of sales, margin and operating profit. The construction of the new furnace in Monterrey - built primarily to supply beer bottles to Constellation Brands, Inc. - was complete by the end of 2015 and is expected to be at full output by the end of the first quarter of 2016.
Global sales volumes increased 3% in 2015 due to the acquired business. Excluding the acquired business, volumes were on par with 2014. Shipments in Europe and North America were modestly higher. Asia Pacific volumes declined low single digits as the planned contraction of sales volume in China was partially offset by favorable beer and wine volumes in Australia in the second half of the year. In Latin America, sales were down low single digits, driven entirely by Brazil.
Full year net sales were $6.2 billion, down $628 million from 2014. Adverse currency translation due to the stronger U.S. dollar caused an $881 million decline in net sales of reportable segments, or 13%. The acquired business contributed $258 million in sales.
Segment operating profit was $740 million in 2015, compared with $908 million in the prior year. More than 80% of the decline was due to unfavorable currency translation. On a constant currency basis, segment operating profit declined $27 million yet improved in all regions except Europe. The acquired business contributed $46 million of segment operating profit.
The company generated $210 million of free cash flow in 2015. This is comparable to the very strong free cash flow generated in 2014, excluding the adverse currency translation of the stronger U.S. dollar in 2015. At 2015 exchange rates, the prior year free cash flow of $329 million would have been approximately $212 million.
The company expects adjusted earnings for full year 2016 to be in the range of $2.10 to $2.25. Anticipated benefits from the acquired business and strategic initiatives to improve operations are expected to more than compensate for the impact of the strong U.S. dollar, particularly in the first half of 2016.
The company expects free cash flow to be approximately $280 million for the year, based on currency rates at the end of the year 2015. The projected year over year increase is primarily driven by the expected improvement in earnings.
For full year 2015, the company recorded a loss from continuing operations of $0.44 per share (diluted). Excluding certain items management considers not representative of ongoing operations, adjusted earnings were $2.00 per share, in line with management guidance. These results compared with $2.07 per share in 2014 on a constant currency basis. The Company’s charge in 2015 for asbestos-related costs covers a four-year period of estimated asbestos claims not yet asserted against the company versus the three-year period used in the prior year.
Fourth quarter 2015 adjusted earnings were $0.40 per share, compared with $0.32 per share in the same period of 2014 on a constant currency basis.
O-I generated $210 million of free cash flow for the full year 2015, modestly exceeding management guidance. This is on par with prior year free cash flow in constant currency, which was the company’s second highest year on record.
Global volumes for 2015 were up 3% compared to the prior year. Excluding the acquisition of Vitro’s food and beverage business (the acquired business) volumes were on par with 2014. On a global basis, volumes of wine, spirits, food and non-alcoholic beverages all grew year-on-year. While global beer volumes fell 1%, driven by a decline in mainstream beer, shipments into craft and premium beer continue to expand.
Segment operating profit declined $168 million for the year, or $27 million on a constant currency basis. Segment operating profit in constant currency improved over the prior year for all regions except for Europe, which faced pricing pressure and lower productivity. The acquired business contributed $46 million of segment operating profit since the transaction closed on Sept. 1, 2015.
The company’s leverage ratio was 4.0x at year-end 2015, an improvement from 4.2x at the end of the third quarter of 2015.
In 2016, the Company expects to deliver higher earnings and cash flow mainly driven by higher segment operating profit. Adjusted earnings for full year 2016 are expected to be in the range of $2.10 to $2.25. Free cash flow generation in 2016 is expected to be approximately $280 million, using year-end 2015 foreign exchange rates. The priority for the company’s free cash flow continues to be debt reduction.
“We are pleased to deliver earnings and cash flow in line with our guidance for the quarter and we continue to execute upon initiatives to improve performance,” said CEO Andres Lopez. “Our work to date has already begun to deliver tangible benefits as evidenced by more consistent production as the year progressed. North America has recovered exceptionally well through the year and we will leverage our learnings to improve performance in Europe. We continue to successfully integrate the Vitro food and beverage acquisition, which is already positively impacting segment profitability.
“Looking ahead, we expect that trends in the majority of our end markets will remain stable in 2016 and O-I will increasingly benefit from our growing exposure to U.S. beer imports and the Mexican domestic market,” Lopez added. “While we recognize continued external uncertainties, such as economic conditions in Brazil and price dynamics in Europe, we are pressing hard on key initiatives that will increase profitability in 2016, including: maximizing the value of the acquired business; improving our end-to-end supply chain performance; and reducing costs through increasing organizational effectiveness and spending discipline. We expect to deliver higher earnings and cash flow in 2016 while continuing to prioritize deleveraging our balance sheet.”
Net sales in the fourth quarter of 2015 were $1.6 billion, up $23 million from the prior year fourth quarter. For net sales of reportable segments, the stronger U.S. dollar led to unfavorable currency translation of approximately $200 million in net sales, or about a 13% decline. Price was essentially flat on a global basis, with higher prices in Latin America largely offset by lower prices in the other regions. The acquired business contributed $197 million in net sales.
Global sales volume increased by nearly 14% compared to prior year fourth quarter. Excluding the acquired business, global shipments were 2% higher year over year. Shipments in Asia Pacific increased 7% driven by improving wine exports from Australia. Europe sales volume was on par with the prior year quarter as lower beer shipments were offset by higher shipments in all other categories.
North America sales volume, excluding the acquired business, improved more than 2% year over year led by stronger wine, spirits and beer shipments. Latin America sales volume, excluding the acquired business, was flat to prior year as strong sales volume in the Andean region offset continued weakness in Brazil. Including the acquired business, fourth quarter sales volumes improved in North America by 11% and in Latin America by 55%.
Segment operating profit was $186 million in the fourth quarter, $6 million higher than prior year. On a constant currency basis, segment operating profit was up $40 million. The acquired business contributed $32 million of segment operating profit. Excluding the acquired business, improved segment operating profit in North America and Asia Pacific were mostly offset by lower operating profit in Europe and the Latin America legacy business.
The acquired business’ underlying operations continue to perform well in terms of sales, margin and operating profit. The construction of the new furnace in Monterrey - built primarily to supply beer bottles to Constellation Brands, Inc. - was complete by the end of 2015 and is expected to be at full output by the end of the first quarter of 2016.
Global sales volumes increased 3% in 2015 due to the acquired business. Excluding the acquired business, volumes were on par with 2014. Shipments in Europe and North America were modestly higher. Asia Pacific volumes declined low single digits as the planned contraction of sales volume in China was partially offset by favorable beer and wine volumes in Australia in the second half of the year. In Latin America, sales were down low single digits, driven entirely by Brazil.
Full year net sales were $6.2 billion, down $628 million from 2014. Adverse currency translation due to the stronger U.S. dollar caused an $881 million decline in net sales of reportable segments, or 13%. The acquired business contributed $258 million in sales.
Segment operating profit was $740 million in 2015, compared with $908 million in the prior year. More than 80% of the decline was due to unfavorable currency translation. On a constant currency basis, segment operating profit declined $27 million yet improved in all regions except Europe. The acquired business contributed $46 million of segment operating profit.
The company generated $210 million of free cash flow in 2015. This is comparable to the very strong free cash flow generated in 2014, excluding the adverse currency translation of the stronger U.S. dollar in 2015. At 2015 exchange rates, the prior year free cash flow of $329 million would have been approximately $212 million.
The company expects adjusted earnings for full year 2016 to be in the range of $2.10 to $2.25. Anticipated benefits from the acquired business and strategic initiatives to improve operations are expected to more than compensate for the impact of the strong U.S. dollar, particularly in the first half of 2016.
The company expects free cash flow to be approximately $280 million for the year, based on currency rates at the end of the year 2015. The projected year over year increase is primarily driven by the expected improvement in earnings.