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Owens-Illinois' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Looking to the second quarter, we expect that stronger year-over-year financial results will be led by improved operating performance in North America. We expect global shipments will, again, be slightly down on a year-over-year basis, primarily from lower volumes in Europe and Asia Pacific. Our price negotiations are now largely complete for 2012 so we should see a stronger price inflation spread.

Moving to the remainder of the year, our visibility of demand trends in the second half remains limited, especially in Europe. As a result, at this time, we expect the financial results of the second half of 2012 to track in line with the second half of 2011, which includes the improvements achieved in the back half of last year.

Let me review our operating performance beginning with Chart 3. Here, we show the first quarter segment operating profit for each of our 4 regions. Total operating profit was $260 million in the first quarter, up from $208 million last year. As you can see on the chart, 3 regions were well ahead of the prior year.

Our European operating profit was $108 million, up $32 million from the first quarter of 2011. The primary driver of improved results in Europe was good manufacturing performance of the plants, which operated at higher production rates in prior year and this helped us build inventory to support the seasonality for the wine, beer and food markets. In addition to strong operations, profit in the region benefited from higher prices that covered inflation in the quarter and also allowed for the recovery of some of the margin erosion that we experienced last year.

Overall, price and manufacturing performance were the key factors that drove improvement while shipment levels for the quarter were flat compared to the first quarter 2011. Year-over-year sales volumes varied considerably by country, end market and by month through the quarter. The quarter started out strong likely due to customer purchases in advance of price increases, but volumes weakened as the quarter progressed and then ended, again, on a somewhat stronger note.

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