Owens-Illinois (O-I) is extending its relationship with Nestlé Waters’ after striking a deal to become the leading glass bottle supplier for the firm’s Perrier brand; the news comes hot on the heels of a 46 per cent drop in second-quarter profits for the supplier.

O-I has made a $15m acquisition of VDL Company, a single-furnace glass container plant in Vergeze, France, which is located near to Nestlé Waters’ bottling facility.

Under the terms of the acquisition agreement, which is effective from 1 August, OI will also start to bottle Nestlé Waters’ other water brands worldwide, said the firm.

The glass packaging giant has long supplied Nestlé Waters’ San Pellegrino bottled water line.

“As a result of this deeper strategic relationship with Nestlé Waters, O-I has the opportunity to support some of the preeminent brands in the water segment and reinforce glass’ position in this important category,” said Jose Lorente, president of O-I Europe.

O-I originally announced its intent to acquire the Vergeze plant in November 2010, pending the completion of a restructuring plan to bring the facility’s costs in line with those of other O-I Europe plants.

The Vergeze plant employs 132 people. The acquisition is expected to be earnings accretive in 2012, said O-I.

Second quarter profit drop

O-I said its considerably lower second-quarter profits, which it predicted in June, can be attributed to “significantly high” manufacturing expenses. Net earnings from continuing operations attributable to the company in the second quarter of 2011 were $71m, compared with $132m in 2010.

The bottler said the higher costs had offset benefit accrued from higher shipment levels and favourable foreign currency translation.

“Despite higher sales across all end-use categories, our operating performance this quarter was clearly unacceptable,” said chief executive Al Stroucken. He said the company’s second-quarter profit dip was “clearly unacceptable” and that the company was taking steps to improve its performance.

“During the past three years, we have realigned our manufacturing footprint to improve production efficiency, and we have realized significant fixed cost savings as a result of these actions. However, we didn’t achieve our typical high standards for manufacturing excellence in North America during the second quarter.”

In addition, he said the firm had faced challenging market demand in Australia and New Zealand, which contributed to lower production levels in Asia Pacific.

However, sales in Europe, the company's largest market, increased by 24 per cent. North American sales declined by 1.9 per cent and rose 10.3 per cent in Asia Pacific.

“We are responding with urgency and taking the necessary actions to address these issues, meet customer needs and maximize O-I’s long-term earnings power,” added the glass packaging supplier.

Source: www.foodproductiondaily.com