O-I Glass Reports First Quarter 2020 Results

O-I Glass, Inc. (NYSE: OI) today reported financial results for the first quarter ended March 31, 2020.

“As described in our preliminary earnings release update, O-I’s first quarter performance was solid. Results benefited from favorable price and mix as well as good cost performance. At the same time, shipment levels were slightly below prior year reflecting the initial impact of the COVID-19 pandemic and the volume pressures have continued in April. Consistent with our focus on cash generation, cash flows compared favorably to the same period in the prior year and liquidity was strong at the end of the first quarter,” said Andres Lopez, CEO.

“We are pleased with the improvement in our operating performance given progress on our turnaround initiatives that benefited both the top and bottom line. I am confident these improvements will be sustained. To mitigate the impact of COVID-19, we are taking preemptive measures to reduce costs and improve cash generation including suspension of the company’s dividend. At the same time, we remain focused on creating long-term value by executing on our turnaround initiatives and advancing MAGMA,” concluded Lopez.  

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First Quarter 2020 Results

First quarter 2020 net sales were $1.56 billion compared with $1.64 billion in the prior year. Higher selling prices increased revenue $19 million. However, lower shipments negatively impacted sales by $20 million as sales volume in tons declined 0.8 percent. Sales volumes reflected the net effect of a 1.7 percent decline due to COVID-19, a 1.1 percent decline in organic sales volumes and a 2.0 percent benefit from Nueva Fanal. Unfavorable foreign currency translation reduced net sales by $75 million compared to 2019. 

Segment operating profit1 was $169 million in the first quarter of 2020, compared with $200 million in the prior year period.  Profits were unfavorably impacted by $13 million attributable to unfavorable foreign currency translation and $15 million due to temporary items that benefited 2019 but did not repeat in 2020.

Retained corporate and other costs were $21 million in the first quarter of 2020 compared with $24 million in the prior year period.  Net interest expense was $53 million in 2020, down from $65 million in 2019 due to recent refinancing activities. The company’s effective tax rate was 32.1 percent compared to 24.3 percent in the prior year. Excluding certain items that management does not consider representative of ongoing operations, the effective tax rate was 27.6 percent, which was higher than 24.5 percent in the prior year primarily reflecting shifts in regional earnings mix as well as recent regulatory changes in certain markets.  

During the first quarter of 2020, the company de-consolidated its direct, wholly owned subsidiary Paddock Enterprises LLC (“Paddock”) as of January 6, 2020, the day Paddock filed for Chapter 11 relief. As a result of the de-consolidation, O-I recorded a $14 million pre-tax charge which is excluded from adjusted earnings. 
   
Cash utilized in operating activities was $315 million in the first quarter of 2020 and $595 million in the prior year period. Free cash flow was a $435 million use of cash in 2020 and $716 million in 2019. Favorable cash utilized in operating activities and free cash flow compared to the prior year included the benefit of lower working capital levels primarily due to increased utilization of accounts receivable factoring programs and the staying of all asbestos related payments as a result of Paddock filing for bankruptcy in early January.        

Total debt was $6.4 billion at March 31, 2020 compared to $5.9 billion at March 31, 2019. Net debt2 was $5.5 billion compared to $5.6 billion in the prior year. At the end of the first quarter, O-I maintained approximately $1.7 billion in total committed liquidity including nearly $900 million cash-on-hand as well as undrawn availability on committed lines of credit.  In March, the company borrowed approximately $600 million on its $1.5 billion revolving credit facility to bolster cash-on-hand as a proactive measure to ensure financial flexibility.   

The company is actively monitoring the impact of the COVID-19 outbreak, which will negatively impact its business and results of operations for the second quarter of 2020 and likely beyond.  The extent to which the company’s operations will be impacted by the outbreak will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and actions by government authorities to contain the outbreak or treat its impact, among other things.

06.05.2020, O-I Glass

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