Owens-Illinois Beats Q3 Earnings, Cuts EPS View on FX Woes
Owens-Illinois, Inc .'s OI third-quarter 2015 adjusted earnings per share of 57 cents beat the Zacks Consensus Estimate of 55 cents but were down 24% year over year. Including one-time items, earnings in the quarter were at 11 cents compared with 37 cents in the year-ago quarter.
Owens-Illinois' net sales declined 10% year over year to $1,566 million falling short of the Zacks Consensus Estimate of $1,571 million. Currency headwinds had a negative impact of approximately $240 million on sales. Higher prices in Latin America were largely offset by lower prices in North America and Europe, resulting in flat global pricing. The newly acquired food and beverage business contributed $61 million to sales.
The company reported a 4% rise in sales volume during the quarter. Excluding the acquired business, global shipments remained flat year over year. Shipments in Europe increased 2% helped by higher beer sales, while Asia Pacific shipments were flat year over year.
Cost of sales declined 8% to $1.29 billion in the quarter. Gross profit declined 18% to $276 million from $337 million in the prior-year quarter. Selling and administrative expenses decreased 10% to $109 million.
Segment operating profit decreased 20% year over year to $199 million due to a stronger U.S. dollar compared with the Euro, the Brazilian real and the Colombian peso. On a constant currency basis, segment operating profit was down $9 million as improvement in Asia Pacific and Latin America was offset by decline in Europe and North America. The acquisition contributed $14 million to segment operating profit, reflected in Latin America and North America.
Asia Pacific's operating profit increased more than 35% (excluding the impact of foreign currency) thanks to cost reduction efforts and the favorable impact of prior restructuring actions.
On a constant currency basis, Latin America's operating profit increased $9 million as contributions from the acquired businesses in Mexico and Bolivia more than helped offset the negative impact of lower shipments elsewhere in the region.
Europe's operating profit declined $36 million, mainly due to devaluation of the euro, lower selling prices because of competitive pressures and more production downtime. North America reported a $5 million decline in operating profit impacted by planned furnace rebuild activity, incremental investments the company made to improve its cost structure and a weaker Canadian dollar.
Owens-Illinois had cash and cash equivalents of $270 million at the end of third-quarter 2015, down from $512 million at 2014-end. The company reported cash flow from operations of $106 million in the first nine months of 2015 compared with $209 million in the prior-year period. The company's long-term debt increased to $5.9 billion as of Sep 30, 2015 from $3.4 billion as of Dec 31, 2014.
During the quarter, Owens-Illinois closed the acquisition of the food and beverage glass container business of Vitro, S.A.B. de C.V for $2.15 billion. The deal includes its operations in Mexico, Bolivia and the U.S. The acquisition is expected to contribute 30 cents per share to earnings in 2016 and generate substantial free cash flow.
Owens-Illinois expects current economic and industry trends, including currency headwinds, to hamper fourth-quarter results. However, gains in sales and production volume will boost results. The company continues to integrate Vitro's former food and beverage business, and work on stabilizing and improving business performance.
Owens-Illinois reduced its adjusted earnings per share guidance for 2015 to $2.00 from the prior range of $2.00 to $2.20 due to unfavorable foreign exchange rates. The company expects to generate free cash flow of approximately $200 million. As the majority of the company's free cash flow is generated in the fourth quarter, the amount will be heavily influenced by year-end currency rates.
Sealed Air Corporation's SEE third-quarter 2015 adjusted earnings per share of 70 cents increased 32% year over year. The figure also surpassed the Zacks Consensus Estimate of 57 cents, delivering a positive earnings surprise of 23%.
Sonoco Products Co. SON reported third-quarter 2015 adjusted earnings of 65 cents per share, falling short of the Zacks Consensus Estimate of 67 cents and at the lower end of management's guidance range of 65 cents to 70 cents. On a year-over-year basis, earnings dipped 6% from the restated figure of 69 cents.
Bemis Company, Inc.'s BMS adjusted earnings rose 9.8% year over year to 67 cents per share, ahead of the Zacks Consensus Estimate by a penny.
Owens-Illinois currently carries a Zacks Rank #3 (Hold).