2023 Outlook
Year-to-date adjusted earnings have already exceeded full year 2022 and the company expects 2023 adjusted earnings will approximate $3.00 per share. The current 2023 outlook significantly exceeds O-I’s initial guidance of at least $2.50 per share provided in January this year and represents a 30 percent increase from 2022 adjusted earnings. Higher adjusted earnings should reflect strong net price, solid operating performance and the benefit from the company’s margin expansion initiatives which will more than offset lower sales and production volume as well as higher interest expense.
The company’s current full year and fourth quarter 2023 outlook has been adjusted from the guidance provided on August 1, 2023. Management expects fourth quarter adjusted earnings will lag prior year results primarily due to lower sales volume and elevated production curtailment activity which will be concentrated in the fourth quarter to reduce inventory in light of softer demand and properly position the company for the expected market recovery in 2024. As a result, higher curtailment cost should impact fourth quarter results by approximately 30 cents per share more than previously anticipated. The company is accelerating margin expansion initiatives to partially mitigate the effect of lower sales and production levels.
| ACTUAL | GUIDANCE | ||||||||
| 4Q23 | FY23 | ||||||||
| YTD 23 | CURRENT | Prior | CURRENT | Prior | |||||
| Sales Volume Growth (in Tons) | ▼ 11% | ▼ DD | ▼ LSD/MSD | ▼ DD | ▼ MSD/HSD | ||||
| Reported Earnings Per Share (diluted) | $2.31 | n/a | n/a | n/a | n/a | ||||
| Adjusted Earnings Per Share (EPS) | $2.97 | $0.03
|
$0.25-$0.35 | ~ $3.00 | $3.10-$3.25 | ||||
| Free Cash Flow ($M) | n/a | n/a | n/a | $100-$150 FCF
$400-$450 aFCF |
~ $175 FCF
~ $475 aFCF |
||||
| Capital Expenditures($M) | n/a | n/a | n/a | ~ $700 | $700 – $725 | ||||
Guidance primarily reflects the company’s current view on sales and production volume, mix and working capital trends as the company concludes 2023. O-I’s adjusted earnings outlook assumes foreign currency rates as of October 30, 2023, earnings dilution from the company’s portfolio optimization program, and incremental interest expense due to higher prevailing interest rates and debt incurred to fund the Paddock 524(g) trust. The full-year adjusted effective tax rate should approximate 24 to 26 percent. The earnings and cash flow guidance ranges may not fully reflect uncertainty in macroeconomic conditions, currency rates, and further pandemic effects such as supply chain and labor challenges, among other factors.
