O-i Glass, Inc. · NYSE:OI
O-i Glass — Owens Illinois — FY2014 Earnings Presentation
27 slides from O-i Glass's earnings presentation, Feb 2, 2015
Slide 1: O-I Fourth Quarter and Full Year 2014 Earnings Presentation
O-I Fourth Quarter and Full Year 2014 Earnings Presentation February 3, 2015
Slide 2: Safe harbor comments
Safe harbor comments Regulation G The information presented here regarding adjusted net earnings relates to net earnings from continuing operations attributable to the Company exclusive of items management considers not representative of ongoing operations and does not conform to U.S. generally acce
Slide 3: Full year 2014 summary
Full year 2014 summary 2 Free cash flow of $329M Second highest in Company history Despite $40M currency headwind Adjusted EPS of $2.63 Improved European profits from volume gains and asset optimization South America achieved ~20% operating profit margin on record volumes Continued discipline in cap
Slide 4: O-I performance by region in 2014
3 O-I performance by region in 2014 Volume gains in food and non-alcoholic beverages offset by megabeer headwinds Substantial progress on earlier supply chain and production challenges Sluggish macroeconomic conditions Volume up 2%, led by wine and beer gains Asset optimization on track Europe North
Slide 5: 4Q14 segment sales and operating profit
4Q14 segment sales and operating profit 4 Note: Reportable segment data excludes the Company’s global equipment business. Price up 1% Shipments down ~2.5%, excluding China Strengthening USD decreased sales by 6% Segment Sales ($ Millions) 4Q13 $1,753 Price 21 Sales volume (70) 4Q14, constant currenc
Slide 6: Adjusted EPS bridges
Adjusted EPS bridges 5 4th Quarter Adjusted EPS 4Q13 $0.51 Segment operating profit (excluding currency impact) (0.04) Currency impact (on segment operating profit) (0.04) Retained corporate costs 0.04 Net interest expense 0.01 Noncontrolling interests – Effective tax rate (0.02) Total reconciling i
Slide 7: 2014 full year financial review
2014 full year financial review 6 1 Free cash flow is defined as cash provided by continuing operating activities less additions to property, plant and equipment. See appendix for free cash flow reconciliations. 2 Leverage ratio is defined as total debt, less cash, divided by adjusted EBITDA. See ap
Slide 8: 2015 business outlook
2015 business outlook Operations improve in largely stable macro environment 7 Europe Flat volume, with increasing competition in S. Europe Continued savings from asset optimization program North America Continuation of unfavorable volume trends in megabeer Productivity and supply chain improvements
Slide 9: FX headwinds expected to intensify in 2015
FX headwinds expected to intensify in 2015 8 2014 Average Rates Assumed* Devaluation Euro 1.32 1.13 14% Brazilian real 2.35 2.60 10% Colombian peso 2,014 2,400 16% Australian dollar 0.91 0.80 12% At current rates,* the strong USD will adversely impact 2015 financials Lowers expected sales revenue by
Slide 10: 2015 non-operational outlook
2015 non-operational outlook Management actions drive improvement 9 Stable corporate expense expected Pension expense essentially flat, due to active liability management Modest increase in long-term investments in R&D, technology and innovation Interest expense1 projected to decline by $10-15M Bene
Slide 11: Enhancing financial flexibility: Pension
Enhancing financial flexibility: Pension Management actions reduce pension obligation by $750 million Lower discount rate and new mortality tables adversely impact pension Management actions favorably impact pension Liability management: reduce benefits and close plans to new hires, convert to defin
Slide 12: Higher adjusted earnings in 2015
Higher adjusted earnings in 2015 On a constant currency basis 11 Business Performance ~$0.40 FX Headwind 2014 Adjusted EPS $2.63 + Business performance 2015 Adjusted EPS on a constant currency basis $2.60 - $3.00 - Estimated currency impact 2015 Adjusted EPS $2.20 - $2.60 Range Adjusted Earnings Per
Slide 13: 1Q15 business outlook
1Q15 business outlook 12 Europe Stable sales volume Lower planned production due to project timing Competitive pressure in Southern Europe North America Continuation of unfavorable volume trends in megabeer Supply chain recovery South America Volume plateaus against strong comparable in 1Q14 Inflati
Slide 14: 2015 outlook for free cash flow
Free cash flow projected to be ~$300 million Higher segment operating profit on constant currency basis Currency rates at current levels a headwind (by ~$30 million) Working capital not a source of cash after two strong years of contributions Declining asbestos payments (by $5 million – $10 million)
Slide 15: Continued balanced approach to use of cash
Continued balanced approach to use of cash 14 Capital Investment Capital Allocation Maintenance Continue strong operating profit generation Enhance productivity and flexibility Strategic Exceed cost of capital Greenfield/ brownfield (e.g., Brazil furnance in early 2013) Non-organic growth (e.g., JV
Slide 16: CEO succession planning process advances
CEO succession planning process advances Dec 2014 Dec 2015 Definition and Planning Internal & External Candidates Identified / Hired Performance Evaluation Lopez named COO CEO Succession Transition Chairperson Role Robust, Board-driven process began several years ago Internal and external candidates
Slide 17: Summary of our 2015 outlook
Summary of our 2015 outlook 16 Similar market conditions, as well as ongoing USD strength Improvement in underlying operations Improvement in non-operational items Strong FCF generation Shift in capital allocation Return more cash to shareholders via buybacks Invest in value-added projects (e.g., pa
Slide 18: Appendix
Appendix 17
Slide 19: 4Q regional financial performance
4Q regional financial performance 18 North America ($ Millions) 4Q 2014 4Q 2013 Net Sales - constant currency1 $589 $648 $658 Segment Operating Profit - constant currency1 $53 $56 $38 Segment Operating Profit Margin 9.0% 5.8% Europe 1 Using 2013 currency exchange rates Asia Pacific South America ($
Slide 20: Full year regional financial performance
Full year regional financial performance 19 North America ($ Millions) FY 2014 FY 2013 Net Sales - constant currency1 $2,794 $2,797 $2,787 Segment Operating Profit - constant currency1 $353 $350 $305 Segment Operating Profit Margin 12.6% 10.9% Europe 1 Using 2013 currency exchange rates Asia Pacific
Slide 21: Full year segment operating profit
Full year segment operating profit 20 Segment Operating Profit ($ Millions) FY13 $947 Price 73 Sales volume (7) Operating costs (99) FY14, constant currency $914 Currency (6) FY14 $908 Sales volume impact on profit Gains in EU and SA offset by decline in AP and NA Operating costs Inflation of $112M
Slide 22: 4Q price, volume and currency impact on reportable segment sales
4Q price, volume and currency impact on reportable segment sales 21 1 Reportable segment sales exclude the Company’s global equipment business $ Millions Europe North America South America Asia Pacific Total 1 4Q13 Segment Sales $658 $477 $366 $252 $1,753 Price (12) 7 20 6 21 Volume 2 (21) (16) (35)
Slide 23: Full year price, volume and currency impact on reportable segment sales
Full year price, volume and currency impact on reportable segment sales 22 1 Reportable segment sales exclude the Company’s global equipment business $ Millions Europe North America South America Asia Pacific Total 1 FY13 Segment Sales $2,787 $2,002 $1,186 $966 $6,941 Price (39) 45 55 12 73 Volume 4
Slide 24: Reconciliation to adjusted earnings
Reconciliation to adjusted earnings 23 $ Millions 2014 2013 2014 2013 (130) $ (144) $ 167 $ 202 $ Restructuring, asset impairment and related charges 8 Pension settlement charges 50 50 Pension settlement charges 15 15 5 Charges for asbestos related costs 135 145 135 145 Restructuring, asset impairme
Slide 25: Reconciliation to free cash flow
Reconciliation to free cash flow 24 Year ended December 31 $ Millions Year ended December 31 2014 2013 2012 2011 Cash provided by continuing operating activities $698 $700 $580 $505 Additions to property, plant and equipment (369) (361) (290) (285) Free cash flow $329 $339 $290 $220
Slide 26: Leverage ratio
Leverage ratio Reconciliations of adjusted EBITDA and net debt 25 $ Millions 2014 2013 2012 2011 Earnings (loss) from continuing operations 195 $ 215 $ 220 $ (491) $ Interest expense 235 239 248 314 Provision for income taxes 92 120 108 85 Depreciation 335 350 378 405 Amortization of intangibles 83
Slide 27: Estimated impact from currency rate changes
Estimated impact from currency rate changes 26 Impact on EPS from a 10% change compared with the U.S. dollar EU (primarily Euro): ~$0.10 SA (primarily Brazilian Real and Colombian Peso): ~$0.09 AP (primarily Australian Dollar and New Zealand Dollar): ~$0.05