It turned a profit in 2008 and is in great financial shape to face the future, but Owens-Illinois Inc. faces an uncertain 2009, its chief executive told analysts yesterday.
"• We find ourselves in a contradictory situation reporting record results in the midst of an economic recession, and yet facing so many unknowns that we are reluctant to predict what will happen next month, let alone for the whole year," CEO Al Stroucken told analysts during a conference call.
The Perrysburg glass-container maker said Wednesday it lost $230 million in the fourth quarter but had a $258 million profit for the year. Its revenue dropped 13 percent for the quarter and climbed 4 percent for the year to $7.9 billion.
The company said its drop in earnings was due to temporary manufacturing line shutdowns needed to offset falling demand and rising inventory levels. Chief Financial Officer Ed White said the company experienced a 10 percent quarterly decline in sales volume.
But Mr. Stroucken said those temporary shutdowns, which were at select plants worldwide and occurred mainly during the holiday season, have put the Fortune 500 firm in good shape because they led to a decline in its product inventory.
The temporary shutdowns came on the heels of three permanent plant closings in Canada - in Toronto, Lavington, and Scoudouc - and the shutdown of two glass-making furnaces in Brampton, Ont., and Atlanta.
The permanent closings "were made prior to the significant drop in demand later in the year, but this helped us buffer the impact of that decline," Mr. Stroucken said. And all of the moves should help the company reduce inventory for its North American market, the CEO said. O-I operates 19 U.S. plants.
The plant shutdowns should result in $100 million in cost savings through 2009, the company said.
Still, Mr. Stroucken was reluctant to paint a financial picture for 2009. "What 2009 looks like for us, I'm afraid I can't give a lot of specificity," he said.
"These are not normal times, and trying to predict from such uncertain data is just not feasible," he said.
Wachovia Capital Markets analyst Gransham Panjabi said the local firm's earnings were in line with subdued expectations, but called the 10 percent sales volume drop "stunning."
Yesterday, O-I's stock dropped $1.69 to $20.57 on the New York Stock Exchange.
Mr. Stroucken said the dropping demand was related to the glass industry, and not O-I's products specifically. In North America, he said, the firm's beer bottle sales could be affected by the recession, as drinkers during the recession tend to favor cheaper beers packaged in cans.
The company plans to raise its prices, increase its marketing and productivity, and "defend market share while still growing our business," the CEO said. He declined to provide specifics on price increases.
It is unclear, though, whether O-I's bottle customers will accept the price increase or look for alternative packaging.
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