In an address to analysts, the new chief executive officer of Owens-Illinois Inc., Albert Stroucken, vowed to get O-I“s earnings back on track and said the firm is immediately imposing a company-wide…
In an address to analysts, the new chief executive officer of Owens-Illinois Inc., Albert Stroucken, vowed to get O-I“s earnings back on track and said the firm is immediately imposing a company-wide hiring freeze, will increase prices even at the expense of sales volume, will review possible plant closings before mid-year, and may even cut capital spending. His conference call, a day after the firm reported its second consecutive annual loss, was described as “fire and brimstone” by one analyst. Wall Street welcomed the speech, with the share up as much as 15% during the day, closing 3%, or USD 0.74 higher at USD 23 a share on the New York Stock Exchange. Trading volume, at 5.3 million shares, was about four times normal. “We are the leader in our business, and we have to act like one”, the chairman and CEO of the world“s largest glass-container maker told analysts. “The company has a tremendous opportunity to perform at a much higher level”. One Wall Street analyst said he had been waiting 15 years for an O-I conference call like this one. Mr. Stroucken, the leader of the Perrysburg Fortune 500 firm since 4 December 2006 said he has spent the eight weeks getting a grip on O-I“s “challenges and barriers”. The company“s profit margins are lower than they were several years ago because of higher energy, materials, health care, and transportation costs, he said. “So far we have shielded customers from [the higher costs], but we can no longer afford to do that”, he said. Pricing is the company“s top priority, he said. A global team is in charge of setting prices for its products, mostly glass bottles and jars. The firm will go for “margin before volume” and will tighten its customers“ payment terms. “We have no desire to be in the banking business”, he said. “Payment terms are not a field for “artistic expression“” O-I reported a loss for 2006 of USD 27.5 million, or USD 0.32 a share, down from its 2005 loss of USD 558.6 million, or USD 3.85 a share. Both years“ results were heavily burdened by potential asbestos-injury liability. Within three months, the firm will decide whether to sell its remaining plastics-packaging business, which is largely prescription vials and plastic lids, the CEO said. That business accounted for USD 772 million of its revenue last year of USD 7.5 billion. He said the firm either has to put massive capital into that segment or sell it and use the proceeds “to significantly reduce our debt load”. The company will “examine closely why we need to build more capacity”, and may reduce capital expenditures, now about USD 450 million annually, he explained. Mr. Stroucken said he has a low tolerance for business as usual. Of eight analysts following O-I, seven had a strong buy or a buy recommendation, and only one had a sell until February 2007, according to Thomson Financial Network. But one analyst yesterday lowered his rating from buy to neutral.