Owens-Illinois Warns of Inflation

The company says rising raw material costs will hit 2005 earnings.
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Owens-Illinois (OI) - Get Report slashed earnings guidance, citing inflationary pressures and isolated operating issues. Its shares fell 5%.

The Toledo, Ohio, packaging company said it expects earnings for the year to fall below the low end of its range of $1.76 to $2 a share. The company said it continues to expect to produce 2005 earnings above the year-ago $1.43 a share, though it cautioned that it won't be able to trim its debt load as much as it had hoped. Owens-Illinois had hoped to trim debt by $150 million to $200 million.

"For the last several quarters, rising energy, raw material and packing material (corrugated) costs have adversely affected the company's earnings compared to prior periods," the company said. "However, during the third quarter, energy costs have increased at rates that significantly exceeded the company's earlier expectations, resulting in higher manufacturing and distribution costs."

Owens-Illinois also cited temporary capacity cuts aimed at controlling inventory in Europe, manufacturing inefficiencies due to two furnace start-ups following rebuilds in North America, and higher overhead related to European integration initiatives.

Late Thursday, Owens-Illinois fell $1.07 to $22.60.