O-I Glass (OI) Tops Q4 EPS by 6c; Offers 1Q & FY21 EPS Guidance

O-I Glass (NYSE: OI) reported Q4 EPS of $0.40, $0.06 better than the analyst estimate of $0.34. Revenue for the quarter came in at $1.5 billion versus the consensus estimate of $1.48 billion.

Fourth Quarter 2020 Results

• Reported Earnings: For the fourth quarter 2020, the loss from continuing operations was $0.18 per share compared to earnings of $0.20 per share (diluted) in the fourth quarter of 2019. Current year earnings from continuing operations before income taxes were $14 million, compared to $65 million in the prior year. Both periods included items management considers not representative of ongoing operations.
• Adjusted Earnings: Excluding certain items management considers not representative of ongoing operations, adjusted earnings1 were $0.40 per share in the fourth quarter of 2020, compared with $0.50 per share in the fourth quarter of 2019. While operating performance was consistent with the prior year, lower adjusted earnings primarily reflected recent divestitures. Adjusted earnings exceeded the company’s guidance of $0.30 to $0.35 per share.
• Segment Operating Profit: Segment operating profit1 was $200 million compared to $203 million in the prior year. Higher selling prices more than offset cost inflation. Adjusted for the sale of the Australia and New Zealand (“ANZ”) business unit earlier in the year, glass container shipments were flat with the prior year quarter reflecting market stability amid the ongoing pandemic. Strong operating performance, benefits from the company’s turnaround initiatives to expand margins and cost control measures substantially offset the earnings dilution from recent divestitures.
• Net sales were $1.5 billion in the fourth quarter of 2020 compared to $1.6 billion in the prior year quarter. The ANZ divestiture reduced net sales by $153 million. After adjusting for the sale of ANZ, average selling prices improved 2 percent and increased revenue $33 million while shipments in tons were flat with the prior year. Unfavorable foreign currency translation decreased net sales by $11 million.

“The global pandemic significantly impacted O-I’s results in 2020. Yet, business conditions improved later in the year as market conditions stabilized. We are pleased with our fourth quarter results as earnings and cash flows exceeded the company’s most recent outlook. Glass shipments were consistent with prior year levels and operating and cost performance continued to surpass expectations,” said Andres Lopez, CEO.

“The company continued to take bold structural actions to improve O-I’s business fundamentals during 2020, despite the challenges of the pandemic. The benefit from the company’s turnaround initiatives to expand margins significantly exceeded O-I’s original target as efforts were accelerated to help mitigate the impact of the global recession. As we seek to revolutionize glass, we continued to advance MAGMA, and the early 2021 installation in Germany represents a key milestone that will pave the way for broader deployment in 2022 and beyond. Likewise, we are optimizing the company’s business portfolio and capital structure through divestitures of assets that are not core to our strategy. Finally, the corporate modernization effort, which rebranded the company as O-I Glass, supported January 2020’s actions to establish a final, certain and equitable resolution of our legacy asbestos-related claims liabilities.”

“We are optimistic as we enter 2021. While demand may be choppy during the pandemic, business trends should continue to improve as markets stabilize and gradually reopen. Additionally, our strategic actions are set to create future shareholder value, and we expect improved earnings and cash flows in 2021,” concluded Lopez.

GUIDANCE:

O-I Glass sees Q1 2021 EPS of $0.32-$0.37, versus the consensus of $0.36.

O-I Glass sees FY2021 EPS of $1.55-$1.75, versus the consensus of $1.66.

Given significant market uncertainty due to the global pandemic, the company’s business outlook is subject to adjustment, especially if there is a material change in demand trends compared to expectations. Currently, O-I expects full year 2021 adjusted earnings will approximate $1.55 to $1.75 per share. This outlook assumes higher selling prices that mostly compensate for cost inflation as well as sales shipment growth in tons of 2 to 4 percent compared to 2020, representing a partial or full volume recovery to 2019 levels. Likewise, the company expects continued benefits from its initiatives to expand margins. These incremental savings should more than offset the headwind from temporary cost reduction efforts in 2020 to mitigate the impact of the pandemic that will not repeat in 2021. For the first quarter of 2021, the company anticipates adjusted earnings in a range of $0.32 to $0.37 per share.

Cash provided by continuing operating activities is expected to approximate $615 million or higher in 2021. The outlook assumes capital expenditures of approximately $375 million and the suspension of all asbestos-related claims payments, pending final resolution of the Paddock Chapter 11. The company anticipates 2021 free cash flow will approximate $240 million which is consistent with O-I’s objective to generate an EBITDA1 to free cash flow conversion of approximately 20 to 25 percent.

This outlook assumes foreign currency rates as of January 31, 2021, reflects the earnings dilution on the ANZ divestiture and an effective annual tax rate of approximately 28 to 32 percent. The earnings and cash flow guidance ranges may not fully reflect uncertainty in macroeconomic conditions, further pandemic affects and currency rates, among other factors.

For earnings history and earnings-related data on O-I Glass (OI) click here.

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