O-I Glass, Inc. OI recently entered into a definitive agreement to sell its Australia and New Zealand (“ANZ”) glass manufacturing business to Visy Industries for gross proceeds of AUD $947 million ($652 million). The net proceeds will approximate $620 million, which will be utilized to reduce debt. The company has also provided a preliminary update on second-quarter performance.
Established in Melbourne in 1948, Visy Industries is one of the world’s largest privately owned packaging and resource recovery companies. Visy provides high quality, innovative and closed loop packaging solutions. This deal is touted to be one of the biggest manufacturing acquisitions by an Australian-owned business in history.
O-I ANZ is the largest manufacturer of glass bottles and containers in Australia and New Zealand. It has five manufacturing facilities located in Adelaide, Brisbane, Melbourne, Sydney and Auckland and a recycled glass processing plant in Brisbane. The business generated sales of approximately AUD $754 million ($508 million) and EBITDA of approximately AUD $124 million ($92 million) in 2019.
The sale of the ANZ unit is a result of O-I Glass’ in-depth strategic review of its global business portfolio and operating structure. This review was carried out to explore options to maximize investor value, align the company’s business with demand trends, and improve operating efficiency, cost structure and working capital management. Following the sale, O-I Glass will continue to strengthen its leading market position across Europe and the Americas, and develop interests in Asia.
The sale will be completed in two separate transactions. O-I Glass has entered into a sale-leaseback agreement with Charter Hall, a leading property management company, for certain properties valued at approximately AUD $214 million ($147 million) and an agreement to sell the O-I ANZ business to Visy for approximately AUD $733 million ($505 million). The sale is expected to close by Aug 31, 2020.
Preliminary Update on Q2
Earlier in June, the company had announced that its global shipments declined 18% year over year in the April-May period thanks to production suspensions and reduced shipment levels on account of lower customer demand and imposition of governmental health mandates in certain markets. The company has now stated that impact of the pandemic was less pronounced in June as markets reopened leading to a pickup in demand. June sales volumes were down approximately 3% year over year.
Overall, second quarter total sales volumes were down approximately 15% from the prior year. During the second quarter, the company’s turnaround initiatives continued to progress well, which includes significant efforts to control costs to partially mitigate the impact of COVID-19.
O-I Glass expects second-quarter 2020 adjusted earnings to be breakeven.
Over the past three months, shares of O-I Glass have gained 36.3% compared with the industry’s rally of 32.9%.
Zacks Rank & Key Picks
O-I Glass carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the Industrial Products sector are Lakeland Industries, Inc. LAKE, Energous Corporation WATT and Chart Industries, Inc. GTLS. While Lakeland Industries sports a Zacks Rank #1 (Strong Buy), Energous Corporation and Chart Industries carry a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lakeland Industries has a projected earnings growth rate of 418% for the current fiscal. The company’s shares have appreciated 34% in the past three months.
Energous has an expected earnings growth rate of 44% for 2020. The stock has soared 220% over the past three months.
Chart Industries has an estimated earnings growth rate of 2.4% for the ongoing year. The company’s shares have rallied 68% in the past three months.
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