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|O-I REPORTS SECOND QUARTER 2015 RESULTS; Stable results in North America and Asia Pacific; headwinds in Europe and South America|
FOR IMMEDIATE RELEASE
O-I REPORTS SECOND QUARTER 2015 RESULTS
PERRYSBURG, Ohio (July 29, 2015) - Owens-Illinois, Inc. (NYSE: OI) today reported financial results for the second quarter ending June 30, 2015.
Commenting on the Company's second quarter results, Chairman and Chief Executive Officer Al Stroucken said, "Our performance in the second quarter was in line with expectations, as favorable results from non-operational items offset incremental weakness in Brazil. Our North America and Asia Pacific regions delivered solid results in the quarter. In Europe, asset optimization and furnace rebuilds, coupled with ongoing competitive pressure, resulted in lower profits. In South America, we successfully offset energy and soda ash inflation with price increases. Profits were impacted by a sharper than expected contraction in Brazil beer sales. Overall, our earnings per share benefited from the refinancing of $300 million in high coupon bonds and the completion of a $100 million accelerated share buyback program."
Net sales in the second quarter of 2015 were $1.5 billion, down $254 million from the prior year second quarter. Adverse currency translation caused by the strength of the U.S. dollar accounted for approximately $240 million of the decline in net sales. On a constant currency basis, the decline in net sales was approximately 1 percent. Price was essentially flat on a global basis, with lower prices in Europe and North America largely offset by higher prices in South America.
Global sales volume declined by approximately 1 percent year-over-year. Shipments in Europe were consistent with the prior year second quarter. Volume in North America increased nearly 2 percent, where a modest decline in beer shipments was more than offset by higher shipments in all other categories. Volume in Asia Pacific contracted 3 percent, partly due to the waning impact of plant shutdowns in China in 2014. While wine demand trends suggest sequential stabilization in Australia, shipments there were still modestly lower than prior year. Sales volume in South America contracted 10 percent. The decline was most pronounced in Brazil, albeit from record sales in the comparable 2014 period. Excluding beer, shipments in Brazil were flat compared to prior year.
Segment operating profit was $187 million in the second quarter, down $75 million compared with the prior year quarter. On a constant currency basis, segment operating profit was down $39 million.
Excluding the impact of foreign currency, segment operating profit in North America and Asia Pacific were similar to the prior year second quarter. Europe's operating profit declined $45 million, with more than 40 percent of the decrease related to the devaluation of the Euro. Similar to the trend experienced in the first quarter, average selling prices in Europe were approximately 1 percent lower year on year due to competitive pressures, primarily in Southern Europe. As expected, Europe reported more production downtime than in the prior year due to planned furnace rebuilds and engineering activities associated with the asset optimization program. Europe results were dampened by the timing of a sizeable energy credit. In 2014, the credit was recognized in the second quarter, whereas in 2015, Europe is expecting that energy credit in the third quarter.
In South America, operating profit declined $26 million, of which more than 40 percent was caused by currency translation, primarily due to the weakening Brazilian real and the Colombian peso. The aforementioned lower sales volumes contributed to lower profits. Price gains from annual price adjustment formulas and intensified commercial activity offset almost all of the rising raw material and electricity costs in the region. The prior year period benefited from approximately $6 million of non-strategic asset sales, which did not repeat in the current year.
Corporate and other costs improved by $11 million compared with the prior year second quarter. This was driven by lower pension expense and episodic sales of machine parts to licensees.
Net interest expense in the quarter decreased by $8 million, compared with the same period of 2014, due to debt refinancing and the positive currency impact on Euro-denominated debt. In the quarter, the Company completed a new $2.1 billion bank credit agreement and repaid $300 million of high coupon senior notes due in 2016, both of which enhance the Company's financial flexibility.
In May 2015, the Company announced the proposed acquisition of Vitro, S.A.B. de C.V.'s food and beverage glass container business. The transaction provides the Company with a competitive position in the attractive and growing glass segment of the packaging market in Mexico. The deal is expected to be accretive to cash flow and earnings per share in the first year after closing and is currently expected to close in the second half of 2015.
Commenting on the Company's outlook for the third quarter, Stroucken said, "We have begun to see the stabilization of market and demand trends. North American manufacturing operations are expected to continue to improve, and Asia Pacific volumes will benefit from a major new beer contract in Australia. Lower volumes in South America, especially Brazil, are likely to continue weighing on the region's profitability. European results in the quarter will be dampened by the carryover of production downtime from engineering projects and lower prices. The Company will continue to benefit from lower pension and interest expense. On balance, earnings should be similar to prior year results on a constant currency basis."
The Company expects adjusted EPS for full year 2015 to be in the range of $2.00 to $2.20 per share and free cash flow to be approximately $250 million for the year. The Company's guidance does not reflect the potential impact of the Vitro food and beverage business acquisition.
O-I's Glass Is Life(TM) movement promotes the widespread benefits of glass packaging in key markets around the globe. Learn more about the reasons to choose glass and join the movement at glassislife.com.
The Company routinely posts important information on its website - www.o-i.com/investors.
Conference call scheduled for July 30, 2015
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., Eastern Time, on July 30. 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 2015 earnings conference call is currently scheduled for Wednesday, October 28, 2015, at 8:00 a.m., Eastern Time.
 Adjusted earnings refers to earnings from continuing operations attributable to the Company, excluding items management does not consider representative of ongoing operations. In the second quarter of 2014, there were no such items. In constant currency terms, the prior year amount reflects second quarter 2015 exchange rates. See the table entitled Reconciliation to Adjusted Earnings and Constant Currency in this release.
 Excluding charges of $28 million during the second quarter of 2015 for note repurchase premiums and the write-off of finance fees related to debt that was repaid prior to its maturity.