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Owens-Illinois Management Discusses Q2 2012 Results - Earnings Call Transcript

Now let's move to Chart 2 and review the second quarter reconciliations for sales, operating profit and earnings per share. Second quarter 2012 segment sales were nearly $1.8 billion. Price and mix in the quarter were up $82 million or more than 4% from the prior year. As in prior quarters, cost pass-through provision had a small impact on sales. These provisions are in certain customer contracts and are principally for fluctuations in energy costs. Lower sales volumes decreased the top line by $95 million this quarter. This impact was primarily due to lower sales in Europe, which were partially offset by higher sales in the North and South American regions.

Finally, currency translation had the most significant impact on the top line, reducing it by $159 million in the quarter, primarily due to a 12% decline in the euro and a 25% decline in the Brazilian real from the prior year quarter.

Moving over one column to segment operating profit. The second quarter was $266 million, up $42 million from the same period last year. Globally, price/mix improvements stayed ahead of inflation by $30 million this quarter and this has helped recapture some of last year's unrecovered inflation. Lower sales volumes impacted segment profit by $26 million in the quarter. Manufacturing and delivery costs were $49 million lower than the second quarter of last year, and were the main drivers of higher segment profit.

The primary reason for this year-over-year improvement relates to our actions to regain manufacturing and supply-chain efficiencies, especially in our North American region. In addition, the permanent footprint adjustments that we have taken in Australia over the past year have reduced fixed costs, increased asset utilization and improved the competitive position of this business versus the prior year.

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