O-I posts $510M loss for 2011

In 2010, Owens-Illinois had a loss of $47 million. It's last profit was $162 million in 2009. THE BLADE Enlarge | Photo Reprints

Inflation, supply-chain issues, weaker wine and beer markets in Australia, and three one-time charges totaling approximately $868 million all combined to saddle Owens-Illinois Inc. with a net loss in 2011 for the second consecutive year.

The Perrysburg-based bottle-making giant reported a loss of $510 million, or $3.11 a share, on Wednesday. In 2010, it had a loss of $47 million, or 28 cents a share. O-I's last profit was $162 million in 2009.

The company reported its earnings after the markets had closed. Shares of its stock finished up 8 cents at $23.22 a share on the New York Stock Exchange. Its shares fell to $22.81 in after-hours trading.

O-I had warned in the fourth quarter that it was having a difficult year financially because of inflation, higher energy costs in its key European market, and increased manufacturing costs globally, even as its sales were rising significantly.

In fact, O-I's net sales in 2011 totaled $7.4 billion, up nearly 11 percent over the $6.63 billion it recorded a year earlier. But the company couldn't recover from several issues, the largest of which were significantly decreased wine and beer sales in Australia primarily because wine producers reduced their in-country bottling -- a key structural change in the Australian wine market.

Australian wine industry experts have said the country's bulk-wine export shipments have been increasing steadily and are at 47 percent of all wine compared to 37 percent two years ago. More Australian wine producers are choosing to ship lower-quality wine in bulk to various markets, where it is then bottled by local bottlers.

As a result of the bottling trend shift, O-I reduced its financial outlook for its Asia Pacific region operations, which includes Australia, and reduced those operations' goodwill -- the value of an operation beyond the actual value of its assets -- by a one-time charge of $640 million. O-I added that it closed a glass-making furnace in Australia in the third quarter of 2011 and will close another there between now and March.

The glass bottler said it also had added two other one-time charges to its bottom line:

$165 million after reviewing its asbestos-related liabilities.

$63 million for restructuring costs and other expense because of realigning its Australian operation's bottle-producing capacity, making adjustments to its China operations, and closing a furnace in Spain.

To address supply-chain issues in its North American market, O-I said it restarted two furnaces in the region to rebuild inventories and reduce excess manufacturing. As a result, its inventories in North America were up 6 percent in 2011 compared to a year earlier.

Al Stroucken, O-I's chairman and chief executive officer, said that inflation and operational issues affected O-I's earnings, but, "We took immediate action and refocused on our operations, and we are increasing prices to recover inflation." The CEO added that O-I has successfully concluded a large portion of its negotiations with its customers, who have agreed to targeted price increases, but the company remains cautious until it completes additional price negotiations in February.

For the fourth quarter, O-I reported a loss of $771 million, or $4.69 a share, on sales of $1.8 billion. That compared to the same period a year earlier when it had a loss of $412 million, or $2.52 a share, on sales of $1.73 billion.

Also Wednesday, O-I said Ed White, its chief financial officer, plans to retire at the end of June. Mr. White, who had been CFO since 2005, will be succeeded by Stephen Bramlage, Jr., who is president of the company's Asia Pacific operations.