Tough times, floods knock glass bottler

On the shelf ... Owens-Illinois says all beer players in the region are suffering from low demand. Photo: James Davies

THE Asia-Pacific region's leading glass packaging supplier, Owens-Illinois, has testified to the sharp downturn in beer and wine sales in Australia, with its US-based chief executive telling analysts that Australian consumers were facing almost recessionary conditions.

Albert Stroucken, the executive chairman, chief executive and president of Owens-Illinois, has blamed tough trading conditions in Australia, along with the flooding in Queensland, for slashing group earnings by US4¢ per share in the first quarter.

''I would say, and I tell the people in Australia, that it's almost like they went into the recession with a two-year time delay,'' Mr Stroucken said.

Advertisement: Story continues below Described by some industry insiders as in effect the monopoly supplier for beer bottles in Australia, Owens-Illinois is reported to make as many as 2.5 billion beer bottles a year in Australia following its purchase of some of the glass manufacturing assets of ACI Glass.

Mr Stroucken warned that all beer players in the region were suffering from low demand and that it was difficult to see any strong signs of a solid recovery in volumes.

Underlining the poor local outlook, Owens-Illinois's Asia-Pacific operating profit of $US24 million ($21.9 million) was down $US13 million on the first quarter last year. Roughly $US9 million in profits was lost through the closure of its Brisbane plant during the floods.

Owens-Illinois, which is the world's largest glass container manufacturer and a partner for many leading food and beverage brands, said that glass-container shipments were down more than 10 per cent in Australia and New Zealand.

Mr Stroucken added that the strong Australian and New Zealand dollars had had a negative impact on exports, particularly wine, while higher interest rates had reduced disposable income and domestic consumption levels in those countries.

He said beer sales had shown a slight recovery recently in Australia but that a combination of the mining boom and successive interest rate rises was straining the budgets of many consumers.

''What we're really seeing is that the policy of the central bank in Australia, which is driven really by the raw material boom that Australia is experiencing, is raising interest rates, and most of the mortgages in Australia are variable mortgages and pulling a lot of purchasing power out of the population.

''And that has had quite a bit of [an] impact on beer sales. If you look at the brewers that have reported from that region, it's quite obvious that they're all suffering quite significantly, and nobody at this point in time is yet making a big prediction of a recovery.''

At its recent half-year results, Foster's warned that earnings had been dented by lower beer volumes due to a subdued consumer environment and poor weather conditions.

John Pollaers, the incoming chief executive of Foster's following its $11 billion demerger last week, commented at the release of the first-half results in February that beer volumes had fallen 7 per cent, with Queensland contributing 2 percentage points to the fall.