Owens-Illinois Beats by a Penny

Owens-Illinois Inc. (OI - Analyst Report) reported third-quarter earnings per share of 95 cents, a penny above the Zacks Consensus estimate. Earnings were up about 5.6% on a year-over-year basis due to slight improvement in the economy.
 
Quarterly revenues declined approximately 6.7% as lower shipments and unfavorable currency translation more than offset the positive impact of improved price mix. Glass shipments were down 7% compared to last year. Revenues declined 9.6% in European markets, 2.9% in South America and 7.3% in North America. However, revenues in Asia-Pacific rose 1.4%.
 
Despite a significant drop in volumes, Owens is still maintaining its price-over-volume strategy. Management stated that the company is focusing on recovering cost inflation. Higher selling prices and improved product mix contributed 4% to sales, which more than offset the cost inflation in the quarter.
 
In addition, Owens is focused on improving operational efficiency and overall productivity to somewhat offset the rise in factor costs. Most of the progress has been seen in Europe, where the company has successfully consolidated its central functions and eliminated the duplication of processes.
 
Even in other geographic areas, Owens is shutting down underutilized/non-core facilities and relocating resources to ones that are more profitable. It is focusing on reducing fixed costs by shutting down less efficient furnaces and machine lines, closing high-cost factories and moving business to production lines and plants with surplus capacity.
 
Since the inception of its strategic footprint alignment initiative in 2007, Owens has shut down 15 furnaces in total. It announced two additional plant closures in Europe to be completed in the second half of 2009.
 
Owens has eliminated approximately $104 million of fixed costs year to date and $34 million in the reported quarter through these restructuring actions. The company aims to regain an improved margin through price as well as productivity gains.