O-I Q4 results in line with expectations

For the full year 2015, the Company recorded a loss from continuing operations of $0.44 per share (diluted). Excluding certain items management considers not representative of ongoing operations, adjusted earnings[1] were $2.00 per share, in line with management guidance. These results compared with $2.07 per share in 2014 on a constant currency basis. The Company’s charge in 2015 for asbestos-related costs[2] covers a four year period of estimated asbestos claims not yet asserted against the Company versus the three year period used in the prior year.

The Fourth quarter 2015 adjusted earnings were $0.40 per share, compared with $0.32 per share in the same period of 2014 on a constant currency basis.

O-I generated $210 million of free cash flow[3] for the full year 2015, modestly exceeding management guidance. This is on par with prior year free cash flow in constant currency, which was the Company’s second highest year on record.

Global volumes for 2015 were up 3 percent compared to the prior year. Excluding the acquisition of Vitro’s food and beverage business (the acquired business) volumes were on par with 2014. On a global basis, volumes of wine, spirits, food and non-alcoholic beverages all grew year-on-year. While global beer volumes fell 1 percent, driven by a decline in mainstream beer, shipments into craft and premium beer continue to expand.

The integration of the acquired business continues to progress well as evidenced by strong business performance to date and its contribution to free cash flow generation in the fourth quarter. The construction of the new furnace in Monterrey was finished by the end of 2015 and the realization of synergies has begun, with early savings in procurement.

Segment operating profit declined $168 million for the year, or $27 million on a constant currency basis. Segment operating profit in constant currency improved over the prior year for all regions except for Europe which faced pricing pressure and lower productivity. The acquired business contributed $46 million of segment operating profit since the transaction closed on September 1, 2015.

The Company’s leverage ratio was 4.0x at year-end 2015, an improvement from 4.2x at the end of the third quarter of 2015.

In 2016, the Company expects to deliver higher earnings and cash flow mainly driven by higher segment operating profit. Adjusted earnings for full year 2016 are expected to be in the range of $2.10 to $2.25. Free cash flow generation in 2016 is expected to be approximately $280 million, using year-end 2015 foreign exchange rates. The priority for the Company’s free cash flow continues to be debt reduction.

CEO Andres Lopez said “We are pleased to deliver earnings and cash flow in line with our guidance for the quarter and we continue to execute upon initiatives to improve performance. Our work to date has already begun to deliver tangible benefits as evidenced by more consistent production as the year progressed. North America has recovered exceptionally well through the year and we will leverage our learnings to improve performance in Europe. We continue to successfully integrate the Vitro food and beverage acquisition, which is already positively impacting segment profitability.

“Looking ahead, we expect that trends in the majority of our end markets will remain stable in 2016 and O-I will increasingly benefit from our growing exposure to U.S. beer imports and the Mexican domestic market,” Lopez added. “While we recognize continued external uncertainties, such as economic conditions in Brazil and price dynamics in Europe, we are pressing hard on key initiatives that will increase profitability in 2016, including: maximizing the value of the acquired business; improving our end-to-end supply chain performance; and reducing costs through increasing organizational effectiveness and spending discipline. We expect to deliver higher earnings and cash flow in 2016 while continuing to prioritize deleveraging our balance sheet.”