Libbey announces third quarter results

Libbey reports a net loss of USD 78.8 million

Libbey reports a net loss of USD 78.8 million, driven by a non-cash goodwill impairment, with adjusted EBITDA OF USD 20 million in Q3; expects fourth quarter sales growth and performance improvement, revises its full-year outlook.

Libbey Inc. one of the largest glass tableware manufacturers in the world, has reported results for the third quarter ended 30 September 2017.
Business highlights indicate that net sales USD 187.3 million, down 4.8% versus prior year, or down 6.2% in constant currency; net loss of USD (78.8) million, down USD 81.7 million versus prior year, driven by a USD 79.7 million non-cash goodwill impairment charge associated with the Latin America segment; adjusted EBITDA USD 20.0 million, compared to USD 24.7 million in the third quarter of the prior year.
“Competitive pressures and challenging market conditions, as well as a handful of unusual weather-related events and natural disasters, hindered our performance during the quarter. However, the improvements we expected to drive performance in the second half, such as improved profitability in EMEA and the launch of our e-commerce capabilities, began to materialize in the third quarter, and we look for them to contribute to a stronger fourth quarter. Teams across our business are actively working to leverage our e-commerce capabilities and new product offerings to return the Company to profitable growth,” said Chief Executive Officer William Foley.
Foley continued, “The execution of our EMEA strategy helped drive sales and profitability improvement in the segment during the third quarter. Looking to the fourth quarter, we are anticipating year-over-year revenue growth, with growing sales contributions coming from the combined impact of new products as well as our new e-commerce platform. We expect these positive trends to continue into 2018, along with sustained improvement in the performance of our manufacturing operations.”
Chief Financial Officer James Burmeister added, “Due to the continued decline in the performance of our Mexico reporting unit, relative to our expectations, together with the continued competitive pressures and long-term weakness of the peso relative to the US dollar, we recognized a non-cash goodwill impairment charge in our Latin America reporting segment. While we are disappointed in the need to write off this goodwill, we continue to view our Latin America operations as a strategic asset that can contribute to improved business performance going forward.”
Hurricane and earthquake events during the third quarter resulted in a combined negative revenue impact of approximately USD 4 million in the US and Canada and Latin America segments.
Net sales in the US and Canada segment declined 4.3%, driven by softer sales in the foodservice and retail channels, which were down 6.3% and 3.5%, respectively. US and Canada business-to-business net sales were flat versus prior year.
In Latin America, net sales declined as a result of lower net sales in the business-to-business and retail channels, primarily due to lower volume that was partially offset by favorable price and mix, as well as growth in our foodservice channel.
Net sales in the EMEA segment were favorably impacted by increased volumes in the business-to-business channel and favorable price and mix in the segment.
Net sales in Other were down as a result of softer sales in China.
The Company’s effective tax rate was (3.6)% for the third quarter of 2017, compared to 65.2% in the prior-year quarter. The change in the effective tax rate was driven by several items, including the non-deductible goodwill impairment charge, lower pretax income, the timing and mix of pretax income earned in tax jurisdictions with varying tax rates, and the impact of foreign exchange losses.
Net sales in the US and Canada segment were lower due to softer retail and foodservice channel sales, which were down approximately 7% and 3%, respectively. US and Canada business-to-business net sales increased compared to prior year approximately 2%, mainly as a result of increased volume, partially offset by unfavorable price and mix.
In Latin America, net sales declined as a result of lower net sales across the retail and business-to-business channels, specifically due to lower volume and unfavorable currency. The decline was partially offset by favorable price and mix.
Net sales in the EMEA segment decreased primarily as a result of unfavorable currency across all three channels. Improved price and mix offset decreases in volume in the segment.
Net sales in Other were down as a result of softer sales in China.
The Company’s effective tax rate was (2.0)% for the first nine months of 2017, compared to 49.3% in the year-ago period. The change in the effective tax rate was driven by several items, including the non-deductible goodwill impairment charge, lower pretax income, the timing and mix of pretax income earned in tax jurisdictions with varying tax rates, and the impact of foreign exchange losses compared to gains in the prior period.
With regards to Balance Sheet and Liquidity, the Company had available capacity of USD 83.5 million under its ABL credit facility at 30 September 2017, with USD 8.7 million in loans outstanding and cash on hand of USD 21.6 million.
At 30 September 2017, Trade Working Capital, defined as inventories and accounts receivable less accounts payable, was USD 215.6 million, a decrease of USD 11.2 million from USD 226.8 million at 30 September 2016. The decrease was a result of lower accounts receivable and higher accounts payable, partially offset by higher inventories.
Commenting on the Company’s balance sheet and liquidity position, Chief Financial Officer James Burmeister said, “The Company successfully managed to lower trade working capital compared to the prior year and repaid USD 6.1 million dollars on our Term Loan B debt during the quarter, as we continued to prioritize debt reduction.”
The Company updated its full-year 2017 Adjusted EBITDA margin outlook to reflect lower-than-expected third-quarter results, as well as its expectation for year-over-year sales growth in the fourth quarter. The Adjusted EBITDA margin for the full year is now expected to be in the 9% to 10% range. As previously guided, the Company still expects:
* Net sales decline in the low-to-mid single digits, compared to the full-year 2016, on a reported basis
* Capital expenditures of approximately USD 50 million
The Company expects to provide its preliminary full-year 2018 outlook in conjunction with the release of its fourth-quarter and full-year 2017 results early next year.
Based in Toledo, Ohio, Libbey Inc. is one of the largest glass tableware manufacturers in the world. Libbey Inc. operates manufacturing plants in the US, Mexico, China, Portugal and the Netherlands. In existence since 1818, the Company supplies tabletop products to retail, foodservice and business-to-business customers in over 100 countries. Libbey’s global brand portfolio, in addition to its namesake brand, includes Libbey Signature®, Masters Reserve®, Crisa®, Royal Leerdam®, World® Tableware, Syracuse® China, and Crisal Glass®. In 2016, Libbey Inc.’s net sales totaled USD 793.4 million.