Strong second quarter results exceeded guidance
– Delivered on key transformation commitments including resolution of legacy asbestos liabilities
– Management increased full-year 2022 financial outlook
“O-I reported strong second quarter net earnings attributable to the company and adjusted earnings exceeded guidance demonstrating exceptional agility amid elevated market volatility. As expected, our glass shipments increased slightly compared to the prior year period and the benefit of higher selling prices continued to more than offset elevated cost inflation. Strong earnings also reflected solid operating and cost performance supported by O-I’s ongoing Margin Expansion initiatives.”
“Importantly, O-I delivered on key commitments along our transformation journey. The balance sheet is now in its best position since prior to the acquisition of O-I Mexico in 2015. The company recently announced the first U.S. MAGMA greenfield facility at Bowling Green, KY which should commence production mid-2024. Additionally, Paddock has achieved a fair and final resolution of its legacy asbestos liabilities and the 524(g) trust was fully funded as of July 18th, 2022.”
“Overall, O-I is operating very well and is delivering on its transformation commitments which will benefit all stakeholders and continue to create value for our shareholders,” said Andres Lopez, O-I Glass CEO.
Net sales were $1.8 billion in the second quarter of 2022, up from $1.7 billion in the prior year quarter. Unfavorable foreign currency translation impacted sales by $95 million and $11 million of lower sales was due to divestitures. Higher average selling prices contributed $208 million to sales. Shipments (in tons, excluding divestitures) improved approximately one percent while sales declined $1 million due to the net effect of higher sales volume and a slightly unfavorable change in mix. Other sales improved $17 million driven by higher machine part sales.
Segment operating profit was $257 million in the second quarter of 2022 compared to $232 million in the prior year quarter.
Americas: Segment operating profit in the Americas was $130 million compared to $124 million in the second quarter of 2021. Results included $4 million of unfavorable foreign currency translation. Shipments increased about one percent (in tons) and elevated cost inflation was mostly offset by the benefit of higher selling prices. Operating costs were lower than the prior year quarter reflecting the benefit of ongoing Margin Expansion initiatives which were partially offset by higher repair costs and unplanned production downtime.
Europe: Segment operating profit in Europe was $127 million compared to $108 million in the second quarter of 2022. Results included $13 million of unfavorable foreign currency translation. Shipments increased approximately one percent (in tons) and the benefit of higher selling prices more than offset elevated cost inflation. Operating costs were higher than the prior year primarily due to higher engineering project activity more than exceeding the benefits from Margin Expansion initiatives and cost control measures.
Retained corporate and other costs were $53 million compared to $42 million in the prior year quarter reflecting higher management incentive expense, elevated cost inflation and additional research and development expenses related to MAGMA.
For the second quarter 2022, net earnings attributable to the company were $1.59 per share (diluted) compared to $0.73 per share (diluted) in the second quarter of 2021. Second quarter 2022 earnings before income taxes were $328 million, compared to $198 million in the prior year quarter. Both periods included items management considers not representative of ongoing operations and other adjustments.
In both the second quarter of 2022 and 2021, the company recorded several significant items impacting reported results as presented in the table entitled Reconciliation for Adjusted Earnings. Management considers these items not representative of ongoing operations and they are excluded from adjusted earnings. In the second quarter of 2022, this included a $182 million gain on a sale leaseback transaction entered into by the Company for its land and buildings related to its plant in Brampton, Ontario, Canada, as well as $12 million for restructuring and other charges. In the second quarter of 2021, these items included a $69 million gain recorded on an indirect tax credit in Brazil and $9 million for restructuring and other charges.
Excluding certain items management considers not representative of ongoing operations and other adjustments, adjusted earningsP0F were $0.73 per share in the second quarter of 2022, compared with $0.54 per share in the second quarter of 2021.
2022 Outlook
“The company is increasing its full-year 2022 earnings and free cash flow outlook reflecting strong year-to-date performance and expected favorable performance in the second half of the year,” concluded Lopez.
O-I expects third quarter 2022 adjusted earnings will approximate $0.55 to $0.60 per share which compares to $0.58 in the prior year. This outlook assumes higher selling prices will more than offset cost inflation, flat or slight sales volume growth (in tons) and benefits from the company’s ongoing Margin Expansion initiatives. Operating costs will also reflect incremental expense for expansion project activity.
The company has raised its full-year 2022 earnings guidance. Management now expects adjusted earnings per share of between $2.05 and $2.20 per share compared to the prior guidance of between $1.85 and $2.10 per share. The updated range reflects favorable first half results and solid momentum heading into the second half of the year. Management has increased its cash flow outlook and now expects adjusted free cash flow of at least $400 million and free cash flow of at least $175 million up from at least $350 million and at least $125 million, respectively.
O-I’s earnings outlook assumes foreign currency rates as of July 31, 2022, earnings dilution from the company’s Portfolio Optimization program, incremental interest expense for debt incurred to settle the Paddock 524(g) trust and an effective annual adjusted tax rate of approximately 25 to 28 percent. The free cash flow and adjusted free cash flow outlook excludes $620 million related to the funding of the Paddock 524(g) trust and related expenses which occurred on July 18, 2022.
Conference Call Scheduled for August 3, 2022
O-I CEO Andres Lopez and CFO John Haudrich will conduct a conference call to discuss the company’s latest results on Wednesday, August 3, 2022, at 8:00 a.m. EST. A live webcast of the conference call, including presentation materials, will be available on the O-I website, www.o-i.com/investors, in the Webcasts and Presentations section. A replay of the call will be available on the website for a year following the event.
Contact: Sasha Sekpeh, 567-336-5128 – O-I Investor Relations
O-I news releases are available on the O-I website at www.o-i.com.
O-I’s third quarter 2022 earnings conference call is currently scheduled for Wednesday, November 2, 2022 at 8:00 a.m. EDT.
