Glass giant Owens Illinois plans sale of Australian operation

O-I is said to be exiting its Australian operations.

One of the world’s largest container glass manufacturers, Owens Illinois, is believed to be moving to place its Australian operations on the market as part of a sale of its Asia Pacific division, as Goldman Sachs leads a strategic review globally on asset sales.

The New York-listed company, which goes by the name O-I, is the largest glass producer in the Asia Pacific, where it generated $US44m of operating profit during 2018, which was $US21m below the prior year.

Its Asia Pacific arm is estimated to be worth up to $1 billion.

Founded by Michael J. Owens, the company is based in Ohio and is also the largest manufacturer of glass containers in North America, South America and Europe.

It is examining opportunities to divest assets, the move coming at a time when the company faces challenges with respect to a stronger US dollar which the company has addressed by boosting its global operations, and as high energy costs in Australia hurt local manufacturers.

According to IBISWorld, the Asia Pacific operations of O-I accounts for about 10 per cent of the group’s global sales and operates 12 glass plants across Australia, New Zealand, China and Indonesia, including operations in Adelaide, Brisbane, Melbourne and Sydney.

It also has joint ventures in China, Malaysia and Vietnam.

In previous years, O-I has reduced its permanent manufacturing footprint in Australia and lost market share in the wine and beer-bottling segments to Orora.

As a result, it has reduced its production capacity to better reflect market conditions.

While reporting its latest full year earnings, O-I said that glass containers shipments for Asia Pacific were down nearly 3 per cent for 2018 compared to the prior corresponding year, adding that an asset improvement project in the region drove operating costs higher during the period.

Globally, O-I in 2018 reported $US6.9bn in annual net sales and segment operating profit of $US945m, as prices were higher but glass container shipments fell.

However, the company expects international earnings to lift for 2019, generating $US740m in cash from continuing operations.

Founder Mr Owens was credited with making the first automated bottle-making machine and he merged his Owens bottle company with the Illinois Glass Company.

The group also previously manufactured plastics but those operations were sold 12 years ago.

In 2015, the company reached a deal to buy Mexican food and beverage glass container company Vitro for $US2.15bn.