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O-I Glass' (OI) Zipaquira Expansion to Meet Glass Packaging Demand

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·4 min read
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O-I Glass, Inc. OI recently announced its plan to invest roughly $75 million in an expansion at the company’s Zipaquirá, Colombia facility to meet the heightening demand for highly sustainable glass packaging. The expansion is expected to close by the end of 2022, following which the facility’s annual production will be around 500 million bottles and increase the Americas segment’s capacity by approximately 2%. Notably, the facility will be one of O-I Glass’ largest and cost-effective plants.

Increasing preference for sustainable glass packaging options and stellar market growth are fueling significant demand for glass packaging in the Andean market. Additionally, O-I Glass is focused on reducing debt and optimizing its portfolio with a strategic divestiture program. To date, O-I Glass has completed approximately $900 million of divestitures, with the proceeds utilized in reducing debt. As of Dec 31, 2020, its total debt stands at $5.1 billion compared with $5.6 billion as of Dec 31, 2019.

The company has extended its divestiture target to $1.15 billion or higher by the end of 2022 in a bid to support the above-mentioned expansion and bring down debt levels. Management anticipates that these moves will generate solid growth, higher margins, enhance business portfolio and strengthen the balance sheet.

Given the rising demand for sustainable glass packaging and improved consumption trends, O-I Glass projects adjusted earnings per share to lie between $1.55 and $1.75 for 2021. The mid-point of the guidance indicates a year-over-year improvement of 35%.

The company’s top priority remains investment in business. It intends to achieve this by investing in joint ventures and incremental capacity, and through bolt-on acquisitions in emerging geographies, while delivering a solid return on invested capital. Earlier, O-I Glass acquired a 49.7% interest in Empresas Comegua S.A., a leading manufacturer of glass containers with two glass manufacturing facilities in Costa Rica and in Guatemala. The buyout has helped the company expand its presence into newer and growing glass markets in Central America, as well as boost market presence in the Caribbean.

Apart from this, the company’s Nueva Fanal acquisition is aiding the growing premium beer category in Mexico. O-I Glass has also entered into a long-term agreement to supply glass to GrupoModelo. The Nueva Fanal buyout, along with the previous acquisition of Vitro's food and beverage business, solidifies O-I Glass’ position in the attractive and growing glass segment of the packaging market in Mexico and Central America.

Price Performance

Shares of the company have gained 74.6% over the past year, outperforming the industry’s growth of 54%.

Zacks Rank & Stocks to Consider

O-I Glass currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the Industrial Products sector are Deere & Co. DE, AGCO Corporation AGCO and Dover Corporation DOV, each carrying a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Deere has a projected earnings growth rate of 82.5% for fiscal 2021. Over the past year, the company’s shares have appreciated 133.2%.

AGCO has an estimated earnings growth rate of 29.9% for the ongoing year. The company’s shares have surged 134.1% in the past year.

Dover has an expected earnings growth rate of 13.7% for 2021. The stock has gained 38.7% in a year’s time.

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Deere & Company (DE) : Free Stock Analysis Report

AGCO Corporation (AGCO) : Free Stock Analysis Report

OI Glass, Inc. (OI) : Free Stock Analysis Report

Dover Corporation (DOV) : Free Stock Analysis Report

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