It has been a difficult year for glass-bottle manufacturer Owen-Illinois (O-I), which lost two plants in Venezuela to a government takeover in October and has struggled as the recession hit the demand…
It has been a difficult year for glass-bottle manufacturer Owen-Illinois (O-I), which lost two plants in Venezuela to a government takeover in October and has struggled as the recession hit the demand for beer and other products packaged in its bottles. However, CEO Al Stroucken is confident the company“s fast expansion into markets such as Asia and Latin America will lead to increased profitability and record sales. “The growth of glass containers was clearly going to be influenced by those regions much more than the growth in the traditional regions in which we have been established,” said Stroucken. O-I aims at reaching worldwide sales of USD 9 billion in 2012, compared to USD 7.1 billion in 2009. Working to reach that target, the company has made 10 international deals in 2010, including the acquisition of four glass plants in China, the formation of a joint venture with Thailand“s Berli Jucker Public Co. Ltd. in May, followed by the acquisition of Brazilian glassmaker Companhia Industrial de Vidros in September. And, according to Stroucken, O-I has a “significant” pipeline of mergers and acquisitions planned worldwide. Right now, about 70% of the company“s profits come from outside North America. And now, said Stroucken, with limited room for growth in the North American and western European markets, the company is pushing forward with a globalization strategy that O-I has concentrated on since he took charge in 2006. “I think we are seeing already … some very considerable benefits from that decision,” he said. O-I closed all or portions of three US plants in Michigan; Pennsylvania and California, this year as it worked to adjust to decreased demand for bottled beer and other products. The cuts affected about 800 of O-I“s 24,000 employees worldwide; with about 60% being transferred to other O-I plants. “People have become much more careful in how they spend money, what they spend money on, and it“s had an impact on the consumption of the products that get packaged in our containers,” Stroucken said. Venezuela“s forced acquisition of O-I“s profitable Venezuelan plants has made it tougher to reach sales targets, placing the company in an unexpected position of losing more than 1,000 employees and, according to analyst, 20-25% of the company“s South American sales. In a Securities and Exchange Commission filing last week, the company said the Venezuelan loss would cut its South American sales this year by USD 129 million, and reduce its operating profits for that region by USD 40 million, while, O-I said it would write those plants off as “discontinued operations,” resulting in a one-time, USD 335 million charge in fourth-quarter earnings.