On a reported basis, the Company reported first quarter 2016 earnings from continuing operations of $0.42 per share (diluted). Excluding certain items management considers not representative of ongoing operations, adjusted earnings were $0.48 per share, which compares favorably to management’s guidance of $0.37 to $0.42 per share due to strong business performance and more favorable currency expectations.
Net sales in the first quarter of 2016 were $1.6 billion, up $167 million, or 12%, from the prior year first quarter. In constant currency terms, net sales of the legacy business (which excludes the acquired business) was up 1%; unfavorable currency translation adversely impacted net sales by $62 million, or 4%. Price was up about 1% on a global basis, essentially offsetting cost inflation. In the quarter, the acquired business generated $210 million in net sales, which is 13% of global net sales.
Excluding the acquisition of Vitro’s food and beverage business, sales volumes were on par with prior year and in line with full year expectations.
“We delivered solid improvement in our financials this quarter thanks to the hard and disciplined work of our teams that are focused on stabilizing and improving our operational performance,” CEO Andres Lopez said. “The momentum we are building gives us confidence that our strategy - designed to generate significant, long-term value across the company - is taking hold. In fact, our expectations for strong business performance plus the recent dollar weakening have favorably impacted our full year guidance for both adjusted earnings per share and free cash flow generation. We will continue our focus on execution to achieve our financial commitments.”
Global shipments were in line with management expectations. Global sales volume increased by 14% year-over-year. Including the acquired business, first quarter sales volumes improved in North America by 9% and in Latin America by 85%.
Excluding the acquired business, global shipments were about flat to the prior year first quarter. Shipments in Europe and Asia Pacific increased modestly, driven by higher beer and non-alcoholic beverage shipments in Europe and by wine in Asia Pacific. Sales volume for the North America legacy business was on par with the prior year quarter as higher wine and food shipments offset lower shipments in other categories. First quarter shipments for the Latin America legacy business were down about 5% as lower shipments in Brazil were partially offset by higher shipments in the Andean region.
Segment operating profit was $211 million in the first quarter, $43 million higher than prior year first quarter. Adverse currency translation, primarily in Latin America, impacted segment operating profit by $11 million compared with the first quarter of prior year.
The acquired business contributed approximately $42 million of operating profit in the quarter. This puts it on pace to exceed management expectations of $140 million to $145 million for the year. Strong domestic sales, the successful ramp up of the new furnace in Monterrey and cost synergies all contributed to performance.
The company now expects adjusted earnings per share for full year 2016 to be in the range of $2.25 to $2.35 which is higher than prior guidance of $2.10 to $2.25. The updated range reflects multiple factors, including strong business performance, favorable currency assumptions, and a tax rate on the low end of the guidance range of 26 to 28%. The adjusted EPS range also reflects uncertainty in macroeconomic conditions. Reflecting the aforementioned assumptions, the company expects free cash flow for 2016 to be approximately $300 million which exceeds the prior guidance of approximately $280 million.