O-I Reports Full Year, 4Q 2017 Results

Owens-Illinois, Inc. reported financial results for the full year and fourth quarter ended Dec. 31, 2017.
 
“In 2017, we delivered strong earnings and cash flow generation, in line with the commitments we made at Investor Day in early 2016. We have been building capabilities in the commercial, manufacturing and supply chain space that are demonstrably adding to the top line – through higher shipments year-on-year – and the bottom line – through the tangible benefits of our Total Systems Cost approach,” said Andres Lopez, CEO. “Even as we continue to invest in new capabilities and explore non-organic growth opportunities in the industry, we have begun to pivot towards a more balanced approach to capital allocation that we anticipate will include share buybacks in 2018.”
 
For the full year 2017, the company recorded earnings from continuing operations of $1.11 per share (diluted), compared with $1.32 per share in 2016.
 
The company generated strong cash flows, exceeding guidance. Cash provided by continuing operating activities for 2017 was $724 million compared with $758 million for 2016, which included a non-recurring value added tax refund of approximately $130 million. Adjusted free cash flow for 2017 was $393 million, which exceeded management guidance of $365 million.
 
Net sales were $6.9 billion, an increase of nearly 3% compared to the prior year, due to higher shipments, higher prices and favorable currency translation. Total glass container shipments increased approximately 1% on a global basis, compared with the prior year, led by gains in Europe and Latin America.
 
Separately, the company continues to focus on deleveraging the balance sheet. During 2017, the company retired its highest cost debt – $250 million of its 7.80% Senior Debentures due 2018. The company also continues to reduce its pension benefit obligations (PBO); in 2017, the company executed a series of transactions that reduced its PBO by more than $500 million. Since 2012, the company has reduced its outstanding PBO by approximately $1.8 billion.
 
In light of ongoing progress in reducing leverage, the Company has begun to shift to a balanced approach to capital allocation. The Board of Directors authorized a $400 million share repurchase program. The company expects to repurchase about $100 million in shares in 2018.
 
Full year net sales were $6.9 billion, up $167 million from 2016, an increase of nearly 3%. Prices were 1% higher on a global basis, mainly due to price adjustments resulting from cost inflation. Global shipments increased approximately 1% in 2017. From a geographic perspective, key contributors to shipment growth were Italy, Mexico and Brazil.
 
Shipments in Europe increased 1%, primarily due to favorable beer, spirits and wine volumes. In North America, sales volumes declined 3% compared to the prior year period, mainly due to lower shipments of beer. Full year shipments for Latin America rose 4%, primarily due to higher shipments of beer and spirits. Overall, Asia Pacific shipments declined 1% as higher shipments to food customers were more than offset by lower shipments to beer and non-alcoholic beverage customers.
 
Segment operating profit was $942 million in 2017, compared with $882 million in the prior year, an improvement of 7%.
 
Cash provided by continuing operating activities was $724 million for 2017.
 
Fourth Quarter 2017 Results
 
Net sales in the fourth quarter of 2017 were $1.7 billion, an increase of 4% compared to the prior year fourth quarter. On a global basis, the improvement in net sales was due to a 1% increase in price and favorable currency translation.
 
The company expects earnings from continuing operations, and adjusted earnings, for the full year 2018 to be in the range of $2.75 to $2.85 per share, which compares favorably with adjusted earnings of $2.65 per share in 2017. The midpoint of this range represents more than a 10% compounded annual growth rate in adjusted earnings per share since 2015. The company expects cash provided by continuing operating activities for 2018 to be approximately $800 million and adjusted free cash flow to be approximately $400 million.