O-I Q4 profit slips after line shutdowns

Glass container manufacturer Owens-Illinois has blamed a 55% fall in fourth-quarter earnings to $76.2m on temporary manufacturing line shutdowns, which were taken to balance capacity with demand.

Inflation in manufacturing and delivery costs, lower sales, and unfavourable foreign currency translation, also lowered its earnings in the quarter, the company said.

O-I reported net sales of $1.7bn for the fourth quarter of 2008, down from $2bn in the same period of 2007.

It said that higher prices and an improved product mix across all regions had helped boost sales but that the decline in consumption due to ongoing global economic deterioration resulted in fewer tonnes shipped.

Al Stroucken, chairman and chief executive, said: "The results of the fourth quarter clearly reflect the increased flexibility we have created at O-I in recent years.

"We were able to react quickly to a weakening global economy and temporarily curtail production in the fourth quarter to prevent carrying excess inventory quantities into 2009. We are confident that a strategy to enhance our liquidity in these uncertain times is the correct course for O-I and is in the best interest of our shareholders."

For the full year, O-I reported earnings from continuing operations of $251.5m, compared with $299.3m in 2007.

The company posted a 4% rise in net sales for the year to $7.9bn. It said this was driven by increased prices and product sales mix across all regions, as well as favourable currency translation. However, a decline in tonnes shipped partially offset the favourable effects.

"Although our strong performance in the first half of the year was dampened by the global economic downturn in the second half, the focus on our strategies allowed us to post the highest annual earnings per share in more than 17 years," added Stroucken.

O-I said that it expected capital expenditures in 2009 would increase by approximately $120m as it continued to pursue organic growth and streamlining strategies.

It said it would spend around $40m on expanding its plant in New Zealand, and expected to spend up to $80m upgrading factories that would be absorbing additional volume as it consolidated manufacturing capacity and continued to review its global footprint.

The company added that it anticipated spending around $120m on severance and other costs in 2009 related to actions resulting from the review.

As of the year end, the company’s total debt was $3.3bn, compared with $3.7bn at year-end 2007.

The company employs more than 23,000 people in 79 manufacturing facilities across the world. It has two UK plants in Harlow, Essex, and Alloa, central Scotland.