O-I Glass, Inc. (OI) Bundle
Understanding O-I Glass, Inc. (OI) Revenue Streams
Understanding O-I Glass, Inc.’s Revenue Streams
The primary revenue sources for O-I Glass, Inc. primarily stem from the sale of glass containers across different geographic regions and various product segments.
Revenue Breakdown by Segment
In the first nine months of 2024, the breakdown of net sales was as follows:
| Segment | Net Sales (2024) | Net Sales (2023) | Percentage Change |
|---|---|---|---|
| Americas | $2,693 million | $2,943 million | -9% |
| Europe | $2,216 million | $2,428 million | -9% |
| Total | $4,909 million | $5,371 million | -9% |
Year-over-Year Revenue Growth Rate
O-I Glass reported a year-over-year revenue decrease of 9% for the first nine months of 2024 compared to the same period in 2023. The net sales decreased from $5,371 million in 2023 to $4,909 million in 2024.
Contribution of Different Business Segments to Overall Revenue
The contribution of each segment to the overall revenue in the first nine months of 2024 is detailed below:
| Segment | Net Sales Contribution (2024) | Net Sales Contribution (2023) |
|---|---|---|
| Americas | $2,693 million | $2,943 million |
| Europe | $2,216 million | $2,428 million |
Significant Changes in Revenue Streams
In terms of significant changes, the Americas segment experienced a decrease of $250 million, or 9%, due to lower glass container shipments and selling prices. Additionally, Europe saw a similar decrease of $212 million, also reflecting a 9% decline attributed to destocking activities and lower consumer demand.
Net sales in the third quarter of 2024 were reported at $1,679 million, a decrease of $64 million, or 4%, compared to the third quarter of 2023. This decrease was influenced by lower average selling prices which reduced net sales by $72 million, despite a slight increase in glass container shipments.
Overall Revenue Trends
Overall, the company has faced challenges in maintaining revenue levels due to various factors, including fluctuating market conditions and changes in consumer demand. The following table summarizes the changes in net sales for the last three quarters:
| Quarter | Net Sales (2024) | Net Sales (2023) | Percentage Change |
|---|---|---|---|
| Q1 | $1,646 million | $1,714 million | -4% |
| Q2 | $1,679 million | $1,743 million | -4% |
| Q3 | $1,679 million | $1,743 million | -4% |
A Deep Dive into O-I Glass, Inc. (OI) Profitability
A Deep Dive into O-I Glass, Inc. Profitability Metrics
Gross Profit Margin: The gross profit margin for the third quarter of 2024 was 14.1%, down from 17.2% in the third quarter of 2023. For the first nine months of 2024, the gross profit margin stood at 12.3%, compared to 18.1% in the same period in 2023.
Operating Profit Margin: The operating profit margin decreased significantly, with the segment operating profit for the third quarter of 2024 reported at $144 million, a decrease of 52% from $301 million in the third quarter of 2023. The operating profit for the first nine months of 2024 was $612 million, down 40% from $1,025 million in the first nine months of 2023.
Net Profit Margin: The net loss attributable to the company for the third quarter of 2024 was ($80 million), translating to a net loss margin of (4.8%), compared to a net earnings of $51 million or a margin of 2.9% in the third quarter of 2023. For the first nine months of 2024, the net earnings were $48 million, or a net profit margin of 0.96%, down from $367 million or 6.7% in the same period in 2023.
Trends in Profitability Over Time
In analyzing the trends, the profitability metrics have shown a consistent decline. The gross profit margin has decreased by 300 basis points year-over-year for both the quarter and nine-month comparisons. The operating profit margin has fallen sharply, indicating increased operating costs and reduced pricing power. The net profit margin reflects the overall decline in profitability, showcasing a significant downturn from positive earnings to losses.
| Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Gross Profit Margin | 14.1% | 17.2% | 12.3% | 18.1% |
| Operating Profit | $144 million | $301 million | $612 million | $1,025 million |
| Net Earnings | ($80 million) | $51 million | $48 million | $367 million |
Comparison of Profitability Ratios with Industry Averages
Comparatively, the industry average gross profit margin is approximately 25%, indicating that the company's performance is significantly below the industry standard. The operating profit margin in the industry averages around 15%, while the company is at 10%. The net profit margin for the industry stands at approximately 5%, contrasting sharply with the company’s current net loss.
Analysis of Operational Efficiency
The operational efficiency of the company has been challenged due to rising costs and decreased production volumes. The operating costs increased by $221 million in the first nine months of 2024, primarily driven by lower production volumes and temporary production curtailments. The effective cost management strategies have not fully offset these rising costs, leading to a decline in gross margins.
In the Americas segment, operating profit was $296 million for the first nine months of 2024, a decrease of 29% from $419 million in 2023. In Europe, the segment operating profit was $316 million for the first nine months of 2024, a 48% decline from $606 million in the same period in 2023.
| Segment | Operating Profit (2024) | Operating Profit (2023) | Change (%) |
|---|---|---|---|
| Americas | $296 million | $419 million | (29%) |
| Europe | $316 million | $606 million | (48%) |
Debt vs. Equity: How O-I Glass, Inc. (OI) Finances Its Growth
Debt vs. Equity Structure
The company's financial structure is a critical aspect of its overall health, particularly its balance between debt and equity financing. As of September 30, 2024, the company reported the following debt levels:
| Debt Type | Amount ($ millions) |
|---|---|
| Long-term Debt | 4,709 |
| Short-term Debt | 359 |
| Total Debt | 5,068 |
The debt-to-equity ratio is a key indicator of financial leverage. As of the latest reports, the ratio stands at:
| Metric | Value |
|---|---|
| Debt-to-Equity Ratio | 3.43 |
This ratio is significantly higher than the industry average of approximately 1.5, indicating a heavier reliance on debt financing compared to peers in the sector.
Recent debt activity includes the issuance of senior notes in May 2024, which amounted to:
| Issuance Date | Amount ($ millions) | Interest Rate (%) | Maturity |
|---|---|---|---|
| May 2024 | 300 | 7.375 | June 1, 2032 |
| May 2024 | 500 | 5.250 | June 1, 2029 |
As of September 30, 2024, the company has a credit rating of B3 from Moody's, reflecting concerns over its high leverage and operational challenges.
The company has been active in managing its debt levels through refinancing activities. In May 2024, it repurchased approximately €323.4 million of outstanding senior notes due in 2025, funded by the proceeds from new issuances. This reflects a strategic move to lower interest expenses and improve cash flow management.
In balancing debt and equity, the company has also engaged in equity repurchases. For the nine months ending September 30, 2024, it repurchased shares worth $30 million. This reflects a strategy to enhance shareholder value amidst the backdrop of fluctuating earnings.
The company’s financial health hinges on its ability to manage this debt-equity balance effectively, ensuring sufficient cash flows to meet obligations while pursuing growth opportunities.
Assessing O-I Glass, Inc. (OI) Liquidity
Assessing O-I Glass, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was calculated at 1.23 (current assets of $2,822 million divided by current liabilities of $2,292 million).
Quick Ratio: The quick ratio stood at 0.97, derived from quick assets (cash and cash equivalents of $755 million + trade receivables of $794 million) divided by current liabilities.
Analysis of Working Capital Trends
Working capital for the nine months ended September 30, 2024, was a use of cash of $359 million, down from $416 million in the same period in 2023. This indicates improved working capital efficiency year-over-year.
Cash Flow Statements Overview
For the nine months ending September 30, 2024, cash flows from operating activities were $171 million, compared to $437 million in the prior year. This decrease was primarily due to lower net income.
Cash flows from investing activities totaled ($506 million) in the first nine months of 2024, compared to ($457 million) for the same period in 2023, reflecting increased capital expenditures.
Cash flows from financing activities resulted in $184 million for the nine months ended September 30, 2024, compared to $31 million in 2023. This included additions to long-term debt of $1,096 million and repayments of $923 million.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had $1.24 billion in unused credit available under its revolving credit facilities, indicating a strong liquidity position. However, the ongoing conflict between Russia and Ukraine poses potential risks to operations and cash flows.
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $171 | $437 |
| Investing Activities | ($506) | ($457) |
| Financing Activities | $184 | $31 |
| Additions to Long-term Debt | $1,096 | $1,332 |
| Repayments of Long-term Debt | ($923) | ($1,258) |
Is O-I Glass, Inc. (OI) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of the company is critical for determining whether it is overvalued or undervalued. Key metrics such as the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio are essential for this assessment.
Price-to-Earnings (P/E) Ratio
As of the latest financial reports, the company has a P/E ratio of 15.8. This is calculated based on a stock price of $8.36 and diluted earnings per share (EPS) of $0.53.
Price-to-Book (P/B) Ratio
The company's P/B ratio stands at 1.2, with a book value per share of $7.00.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 8.5, indicating the company's enterprise value of $3.56 billion and EBITDA of $418 million.
Stock Price Trends
Over the last 12 months, the stock has exhibited significant volatility:
- 12-month high: $11.25
- 12-month low: $6.87
- Current stock price: $8.36
In the past year, the stock has decreased by approximately 15%.
Dividend Yield and Payout Ratios
The company offers a dividend yield of 3.6% with a payout ratio of 40%. The annual dividend declared is $0.30 per share.
Analyst Consensus
The consensus among analysts on the stock valuation is as follows:
- Buy: 3 analysts
- Hold: 5 analysts
- Sell: 1 analyst
| Metric | Value |
|---|---|
| P/E Ratio | 15.8 |
| P/B Ratio | 1.2 |
| EV/EBITDA Ratio | 8.5 |
| 12-Month High | $11.25 |
| 12-Month Low | $6.87 |
| Current Stock Price | $8.36 |
| Dividend Yield | 3.6% |
| Payout Ratio | 40% |
| Buy Analysts | 3 |
| Hold Analysts | 5 |
| Sell Analysts | 1 |
Key Risks Facing O-I Glass, Inc. (OI)
Key Risks Facing O-I Glass, Inc.
O-I Glass, Inc. operates in a highly competitive market, facing various internal and external risks that significantly influence its financial health. Understanding these risks is crucial for investors looking to evaluate the company's future performance.
Industry Competition
The glass manufacturing industry is characterized by intense competition. The company reported a 9% decline in net sales for the first nine months of 2024, totaling $5,002 million compared to $5,464 million in the same period of 2023. This decrease was attributed to lower sales volumes and average selling prices, indicating pressure from competitors.
Market Conditions
Market conditions have also been challenging. The company noted a 5% decline in glass container shipments, contributing to a loss of approximately $341 million in net sales. Destocking activities across the value chain, particularly in the wine, spirits, and beer sectors, have further exacerbated this situation.
Regulatory Changes
Regulatory risks, particularly related to environmental standards, pose a significant challenge. The company has incurred legacy environmental charges, which increased by $1 million in the third quarter of 2024. Compliance with environmental regulations may lead to increased operational costs and potential fines.
Operational Risks
Operationally, O-I Glass faced substantial challenges due to temporary production curtailments of approximately 18% of its production capacity in response to decreased demand. These curtailments resulted in increased operating costs and a significant reduction in segment operating profit, which fell to $144 million in the third quarter of 2024 from $301 million in the prior year.
Financial Risks
Financial risks are also prevalent. The company's net interest expense rose to $87 million in the third quarter of 2024 from $78 million in the same quarter of 2023. The increase was primarily due to rising interest rates, which could further pressure financial performance if the trend continues.
Strategic Risks
The company has initiated a Fit to Win program aimed at increasing adjusted EBITDA to at least $1.45 billion by 2027. However, restructuring efforts have already led to charges of approximately $83 million in the third quarter of 2024. While these initiatives may enhance efficiency, they also introduce risks associated with implementation and potential disruptions to operations.
Mitigation Strategies
To mitigate these risks, the company has implemented several strategies. For instance, it has adopted a proactive approach to energy risk management, aiming for coverage of at least 40% of its expected total energy use over a medium-term horizon. Additionally, ongoing discussions are in place regarding capacity closures in Europe, which could help align production with demand.
| Risk Factor | Details | Impact on Financials |
|---|---|---|
| Industry Competition | Intense competition leading to price pressures. | Net sales decreased by 9% in 2024. |
| Market Conditions | Decline in glass container shipments due to destocking. | Loss of $341 million in net sales. |
| Regulatory Changes | Increased environmental compliance costs. | Legacy environmental charge increased by $1 million. |
| Operational Risks | Temporary production curtailments impacting capacity. | Segment operating profit fell to $144 million. |
| Financial Risks | Increased interest expenses due to rising rates. | Net interest expense rose to $87 million. |
| Strategic Risks | Costs associated with restructuring initiatives. | Restructuring charges of $83 million. |
Future Growth Prospects for O-I Glass, Inc. (OI)
Future Growth Prospects for O-I Glass, Inc.
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers, including product innovations, market expansions, and strategic acquisitions. One significant initiative is the launch of the MAGMA greenfield plant in Kentucky, which is expected to enhance production efficiency and reduce costs. This facility commenced production in the third quarter of 2024, with commissioning expected to be completed by year-end 2024.
Future Revenue Growth Projections and Earnings Estimates
For the full year 2024, the company anticipates approximately flat sales demand compared to 2023, with a projected decrease in sales volume (in tons) by a low-to-mid single-digit percentage. Operating cash flows are expected to range between $380 million and $420 million, while capital expenditures are projected at approximately $550 million .
Strategic Initiatives or Partnerships that May Drive Future Growth
The company's strategic initiatives include the "Fit to Win" program aimed at increasing adjusted EBITDA to at least $1.45 billion by 2027. This plan includes actions such as production pauses to balance supply with demand and the closure of approximately 4% of its production capacity . Additionally, the company is evaluating the potential closure of at least 7% of its capacity by mid-2025 .
Competitive Advantages that Position the Company for Growth
O-I Glass has a competitive edge through its extensive global footprint and strong brand recognition in the glass manufacturing sector. The company’s commitment to sustainability and innovation, particularly in green technologies, positions it favorably against competitors. The implementation of effective cost management strategies has also contributed to maintaining operational efficiency despite market challenges.
| Financial Metrics | 2024 (Projected) | 2023 (Actual) |
|---|---|---|
| Net Sales | $5,002 million | $5,464 million |
| Net Earnings (Loss) | $48 million | $367 million |
| Adjusted EBITDA Target | $1.45 billion | N/A |
| Operating Cash Flow | $380 - $420 million | $437 million |
| Capital Expenditures | $550 million | N/A |
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Article updated on 8 Nov 2024
Resources:
- O-I Glass, Inc. (OI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of O-I Glass, Inc. (OI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View O-I Glass, Inc. (OI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.