O-I Glass, Inc. (NYSE: OI) today reported financial results for the second quarter ended June 30, 2020.
“The first half of 2020 was the most challenging business environment in decades given the sudden onset of the pandemic. However, the second quarter ended on a positive note. After enduring the brunt of COVID-19 in April and May, O-I’s sales volume improved significantly in the latter part of the quarter as markets started to reopen. Likewise, continued strong operating performance and cost control measures helped partially mitigate the impact of the pandemic and contributed to very good cash flow in the quarter,” said Andres Lopez, O-I CEO.
“O-I successfully advanced a number of important strategic efforts to create long-term value. The company’s turnaround initiatives provided a strong platform to improve operating performance and navigate the pandemic. O-I recently completed the sale of its Australia and New Zealand (“ANZ”) operation to optimize its structure and reduce debt. Furthermore, refinancing efforts improved the company’s financial flexibility, and the Paddock Chapter 11 process continues to progress as O-I seeks a final resolution of its legacy asbestos liabilities. Consistent with O-I’s goal to revolutionize glass, the company remains on track with the Generation 1 MAGMA installation in early 2021 that will pave the way for broader deployment starting in 2022,” added Lopez.
Summary
*Reported Earnings: For the second quarter 2020, loss from continuing operations was $0.64 per share compared with earnings of $0.42 per share (diluted) in the second quarter of 2019. Current quarter results included the unfavorable impact of the pandemic, as well as charges for restructuring, asset impairment and note repurchase premiums.
*Adjusted Earnings: Excluding certain items management considers not representative of ongoing operations, adjusted earnings1 were $0.01 per share, compared with $0.69 per share in the second quarter of 2019. Current quarter results reflected the impact of the pandemic and were consistent with the company’s most recent business update that indicated approximately breakeven results.
*Second Quarter Performance Ended on a Promising Note: O-I’s performance improved in June as markets began to reopen after enduring the brunt of the pandemic in April and May. June sales volumes were down 3 percent from the prior year, which compared favorably to the 18 percent decline in daily shipment levels during the April and May period. The benefit of higher selling prices offset cost inflation. Operating performance remained strong, and the company’s turnaround initiatives and cost control measures partially mitigated the impact of COVID-19.
*Favorable Cash Flows Compared to Prior Year: Cash provided by continuing operations in the second quarter 2020 was $181 million compared to cash utilized in continuing operations in the second quarter 2019 of $67 million. Cash payments for property, plant and equipment were $69 million in the second quarter of 2020 compared to $112 million in the prior year quarter. O-I reported $112 million of free cash flow1 in the second quarter of 2020 compared to negative free cash flow of $179 million in 2019. Improved cash flows primarily reflected the company’s strong cash and capital management, despite the second quarter typically being a seasonal use of cash for the business.
*Strong Liquidity: As a result of favorable cash flows, committed liquidity improved over the course of the quarter and exceeded $1.8 billion as of June 30, 2020.
*Business Outlook: Due to the significant uncertainty related to the pandemic, the company has limited guidance to shipment trends. Based on recent favorable trends, O-I’s full year sales volume outlook is a 4 to 7 percent decline compared to the prior year which is an improvement from the company’s prior outlook of a 5 to 10 percent decline. The company anticipates third quarter 2020 sales volume will be approximately flat to slightly down compared to the prior year period. The outlook for both the full year and third quarter shipments has been normalized for the sale of ANZ as of July 31, 2020.
Second Quarter 2020 Results
Net sales in the second quarter of 2020 were $1.4 billion, compared to $1.8 billion in the second quarter of 2019. Average selling prices improved approximately 1 percent and increased revenue $18 million. However, lower shipments due to the pandemic negatively impacted sales by $255 million. Unfavorable foreign currency translation reduced net sales by $88 million.
Segment operating profit1 was $95 million in the quarter, compared with $236 million in the same period of 2019. Current year profits were impacted $6 million by unfavorable foreign currency translation. The benefit of higher selling prices more than offset incremental cost inflation by $1 million. Reflecting the impact of the pandemic, sales volume in tons declined approximately 15 percent from the prior year quarter and negatively impacted segment operating profit by $84 million. Segment operating profit was negatively impacted by $52 million as lower production levels were partially offset by improved operating performance and cost control efforts. Production levels were down approximately 20 percent from the second quarter of 2019 reflecting required curtailment to comply with government decrees to manage the pandemic, including disruptive lock downs in Mexico and the Andean countries, as well as the company’s effort to align supply with lower demand and manage inventory.
details at: http://investors.o-i.com/news-releases/news-release-details/o-i-reports-second-quarter-2020-results