O-I’s second quarter results reported earnings on par with prior year as benefits from footprint optimization offset soft demand. Over the same period, operating profits in Europe and Asia Pacific were higher, while global volumes were down approximately 1%.
Owens-Illinois, Inc. reported financial results for the second quarter ending 30 June 2013.
Second quarter 2013 earnings from continuing operations attributable to the company were USD 0.81 per share (diluted), compared with USD 0.81 per share in the same period of 2012.
Operating profits in Europe and Asia Pacific were higher, primarily driven by the benefits of ongoing footprint optimization.
Global volumes were down approximately 1%. Wine gains in all regions were more than offset by softness in beer markets.
The company reaffirms its full year 2013 free cash flow outlook of at least USD 300 million.
Commenting on the company’s second quarter results, Chairman and Chief Executive Officer Al Stroucken said, “The company performed in line with our expectations, notwithstanding weaker than expected demand. We are squarely focused on execution, especially asset optimization and wine share recovery in Europe, as well as labour productivity savings in North America. These actions are allowing us to achieve our targets despite headwinds.”
Net sales in the second quarter of 2013 were USD 1.78 billion, similar to the prior year second quarter. Volume, in terms of tonnes shipped, decreased by 1% year-over-year. Unfavourable weather conditions in Europe and North America, as well as macroeconomic pressures in South America, led to lower beer volumes globally. This was partially offset by global gains in wine and double-digit growth overall in Southeast Asia. The 2% increase in sales prices globally offset cost inflation.
In the second quarter of 2013, segment operating profit was USD 267 million, in line with the prior year. The company achieved improved profitability in Europe and Asia Pacific due to ongoing actions to optimize its footprint. South America’s profit was negatively impacted by a higher level of planned furnace rebuilds.
Net interest expense was USD 4 million lower than the prior year, primarily due to debt reduction and lower interest rates as the company continues to strengthen its financial flexibility.
The company’s leverage ratio (net debt to EBITDA) was 2.9 times at the end of the second quarter of 2013, compared with 2.8 times in the previous year quarter. The company expects to improve its leverage ratio to approximately 2.5 times by the end of the year.
During the quarter, the company continued to execute on its capital allocation priorities by purchasing approximately USD 10 million of outstanding stock.
Commenting on the company’s outlook, Stroucken said, “Our plans called for an environment marked by slow growth globally and macroeconomic volatility. We are seeing just that, with modest contraction in Europe, stability in North America, and slower expansion in South America. Currency headwinds, however, particularly in Brazil and Australia, are more pronounced than expected.
“We will continue to execute on our priorities that impact the bottom line in the near term, principally structural cost reductions, asset optimization, and managing production volatility. In the back half of the year, we expect higher volumes globally, partly driven by our efforts to recapture wine share in Europe. We remain steadfast in our commitment to generate higher earnings and cash flow, and to allocate capital in ways that enhance our financial flexibility and generate shareholder value.”
Management continues to expect free cash flow of at least USD 300 million in 2013. The Company has tightened the expected range of adjusted EPS in 2013 to USD 2.65 to USD 2.85 per share based on results to date, aforementioned currency and macroeconomic headwinds, and concerted management actions to reduce costs.