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Published: Saturday, 2/2/2013

Perrysburg's Owens-Illinois turns first profit in 3 years

BY TYREL LINKHORN
BLADE BUSINESS WRITER

Owens-Illinois Inc. swung to an annual profit in 2012 for the first time in three years, even as revenues fell by nearly 5 percent, something the company blamed mostly on continuing weakness in Europe.

The Perrysburg-based maker of bottles and other glass containers reported 2012 earnings of $184 million, or $1.11 per share. In 2011, O-I posted a loss of $500 million, or $3.05 per share.

O-I’s revenues of $7 billion in 2012 were down 4.8 percent from $7.4 billion in 2011. Sales grew marginally in North America and South America, but fell in both the Asia-Pacific segment and in Europe, where sales tumbled 11 percent.

Al Stroucken, O-I's chief executive officer, said the company lost some market share in Europe last year to smaller competitors who chopped their margins more than O-I was willing to do. However, he said market share has been steady since the middle of last year.

Europe’s woes also dragged on O-I in the fourth quarter. Still, O-I narrowed its losses in the quarter, reporting a fourth-quarter loss of $162 million versus a loss of $774 million last year.

O-I’s results, released after the market closed on Wednesday, were better than analysts had expected. Traders sent O-I’s shares up more than 4.5 percent Thursday to close at $23.80.

After stripping out one-time items including asbestos-related and restructuring costs, O-I said it had an adjusted net income of $67 million in the quarter, or 40 cents per share. That's down from an adjusted net income of $78 million, or 48 cents per share, the year before. Analysts had expected 37 cents per share.

Looking forward to this year, O-I sees mid single-digit percentage growth in South America. Mr. Stroucken said the company is now realizing the benefits in North America from its major restructuring in 2010 and sees a stable climate there.

However, Asia Pacific and Europe continue to be a concern. Demand has been weak in Australia and New Zealand, and growth has slowed in China, prompting O-I to close one of its three plants in northern China in the fourth quarter.

“While we continue to believe O-I must have a presence in this large and important market, we are challenged to consistently meet our expected returns in certain areas of the business,” Mr. Stroucken said.

He said O-I would focus on northern China and defer expansion plans while continuing to assess its operations there. Still, Mr. Stroucken said it’s important for O-I to keep a presence in China.

“As we have seen in other industries, whether it’s the flat glass industry, whether it’s the automotive industry, you have to start early and be present to be able to make your determinations as to what is appropriate for your strategy and for your presence in the marketplace,” he said. “The issue is going to be that 10 years from now, if you are not a strong player in that market, it’s going to be very difficult to remain a strong player in the global market.”

O-I said it expects global sales to grow sales about 1 percent in 2013.

Contact Tyrel Linkhorn at: tlinkhorn@theblade.com or 419-724-6134.



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