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Owens-Illinois to Offer Senior Notes

Zacks Equity Research

OI European Group B.V., an indirectly owned ancillary of Owens-Illinois Group, Inc. (OI) announced its intention to offer $388 million worth of Senior Notes scheduled to mature in 2021 depending on market conditions.

The proceeds from the issuance of Senior Notes will be deployed to repurchase its outstanding $388 million of 6.875% Senior Notes due 2017.

Owens-Illinois exited 2012 with a long-term debt of $3,454 million, down 4.7% year over year. Owens-Illinois’ debt-to-capital ratio stood at 43.8% as of Dec 31, 2012, a decrease of 100 basis points from Dec 31, 2011.  This is in line with the company’s commitment to debt reduction and strengthening its liquidity position. Cash and cash equivalents were $431 million as of Dec 31, 2012, which increased 7.75% year over year.

Owens-Illinois remained disciplined in its capital allocation, as evidenced by its cash debt repayments and the repurchase activities. Net interest expense was also lower than the prior year, primarily due to refinancing of higher cost debt and non-recurrence of note repurchase premiums.

Owens-Illinois reported fourth-quarter 2012 adjusted earnings per share of 40 cents, down 17% from the year-ago adjusted earnings of 48 cents per share, but up 8% from the Zacks Consensus Estimate of 37 cents. Weak economic conditions in Europe mainly hurt the quarterly results.

Owens expects an overall modest volume growth in 2013 along with higher prices that keep pace with higher material costs. Its global cost reduction initiatives and European asset optimization program are expected to benefit free cash flow and earnings.

Emerging regions and stable market conditions in North America will help in the growth of Owens-Illinois. However, macroeconomic uncertainty in Europe will remain a deterring factor.

Perrysburg, Ohio based Owens-Illinois Inc. is the largest manufacturer of glass containers and has an esteemed clientele in the liquor and the non-alcoholic beverage categories. Owens’ peers in the same industry are Apogee Enterprises, Inc. (APOG), Silgan Holdings Inc. (SLGN) and Crown Holdings Inc. (CCK).

Owens currently retains a short-term Zacks Rank #3 (Hold).

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