Davy Research |
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Saint-Gobain Group
(SGO FP)
Packaging peer Owens-Illinois report sharp margin expansion in Q1 results
26 April 2012
Flor O'Donoghue
| Closing Price: | 3192c | Rating: | Neutral | 12/09/11 | Previous: | Outperform | 23/04/10 |
FACTS: Owens-Illinois (OI), the US based manufacturer of glass packaging products, reported Q1 results after the close of markets. Q1 revenues rose 1% to $1.74bn, EBIT rose 25% to $260m and EPS of 73c was up 46% on the prior year.
ANALYSIS: OI had flagged on April 10th that Q1 earnings would be at least 35% higher than the first quarter of 2011 (hence EPS of over 67c). EPS of 73c was therefore comfortably better than the consensus forecast of 69c. With revenues flat, margin expansion of 300bps was clearly the decisive factor. Some of this reflects pricing, but also internal efficiency measures and higher utilisation rates.
DAVY VIEW: OI is a peer of Saint-Gobain's (SGO) packaging division, Verallia. We are currently forecasting that Verallia will report a 2% increase in revenues this year and that margins will be unchanged. The EBIT estimate may look conservative on the basis of the OI Q1 performance, although OI is flagging flat operating profits year-on-year in the second half. Verallia accounts for c.13% of SGO's trading profits. SGO will release Q1 sales numbers on May 3rd.