O-I: 1Q 2006 earnings down on higher energy, raw materials costs

Owens-Illinois Inc. reported lower 1Q earnings of USD 24.3 million, or USD 0.12 a share, down from year-earlier profit of USD 117.5 million, or USD 0.73 a share.
The Toledo, Ohio-based, packaging com…

Owens-Illinois Inc. reported lower 1Q earnings of USD 24.3 million, or USD 0.12 a share, down from year-earlier profit of USD 117.5 million, or USD 0.73 a share. The Toledo, Ohio-based, packaging company blamed higher energy and raw materials costs as the main factors contributing to the earnings decline. Excluding items, earnings were USD 0.14 a share, compared with USD 0.37 a share in the year-earlier period. Revenue was USD 1.713 billion, compared with USD 1.708 billion a year earlier. “While the 1Q was an extremely difficult comparison to the prior year, we are pleased by our executional momentum against our core priorities. Despite unprecedented inflationary cost pressures of nearly USD 100 million in the quarter and unfavorable currency translation, we were able to offset a significant portion of these through revenue increases and productivity improvements. In addition, we were able to balance cash flow performance through our continuing focus on working capital and capital expenditures,” said Steve McCracken, O-I Chairman and Chief Executive Officer. In the Glass Containers Segment, higher selling prices, better productivity, and higher unit shipments partially offset inflationary costs. Segment operating profit of USD 166.2 million in the 1Q of 2006 for Glass Containers was USD 36.1 million, 17.8% lower than the segment operating profit for 1Q of 2005 of USD 202.3 million. Segment operating profit for the 1Q of 2006 for the Plastics Packaging Segment was USD 31.7 million, compared with USD 30.9 million in the 1Q of 2005. Capital spending for the 1Q of 2006 was USD 53.4 million, compared with USD 76.3 million for the year ago quarter. Interest expense in the 1Q of 2006 was USD 119.4 million versus USD 118.5 million in the 1Q of 2005. Excluding items, the company“s effective tax rate in the 1Q of 2006 was 39.0%, compared with 24.0% for the 1Q of 2005. The rate for 2005 was reduced by approximately 6% for discrete items in the quarter. The 2006 rate is higher mainly because the company is not recording tax benefits on its losses in the United States. Cash tax payments for the 1Q of 2006 amounted to USD 23.3 million compared with USD 35.8 million for the 1Q of 2005. Asbestos-related cash payments in the 1Q of 2006 were USD 41.0 million compared to USD 45.5 million in the 1Q of 2005. New filings during the quarter were 44% lower than the prior year quarter. As of 31 March 2006, the number of asbestos-related lawsuits and claims pending was approximately 30,000, compared to approximately 32,000 at 31 December 2005. The company expects that it will have no liability in many of these claims as they relate to asbestos exposure after the company finished using the material in 1958. Regarding the outlook for the rest of the year, Owens-Illinois says it continues to believe that it has effective strategies in place to counter expected significant inflationary cost pressures throughout the remainder of 2006. “The 2Q will be another difficult comparison to the prior year, with inflationary headwinds requiring us to continue to execute in the price, volume and productivity dimensions. Our intent is to continue to build earnings growth momentum while tightly managing cash flows,” said McCracken.