Successful year for international container glass manufacturers

2004 was another successful, if challenging, year for international container glass manufacturers

Glass is an important packaging material because it remains the preferred choice for premium products and provides unique brand differentiation.

Last year, international container glass industry faced a number of challenges. The long-term average sales growth rate for the consumer packaging industry is typically 3% to 5% per annum. Glass sales in Europe were down slightly down, largely due to the lack of a satisfactory solution of the deposit situation in Germany, a general slow down in the UK flavoured alcoholic beverage market as well as a weakening US Dollar. Glass manufacturers acted resolutely to minimise the effect of these factors by starting the process of merging, shutting down furnaces or even factories to bring production capacity more into line with demand.

Short Summary

There are several container glass manufacturers competing with each other:

The Company O-I is the largest manufacturer of glass containers in the world. Approximately one of every two glass containers made worldwide is made by this Company, its subsidiaries or its licensees.

O-I competes directly with Compagnie de Saint-Gobain in Europe and Brazil, Rexam plc and Ardagh plc in the U.K., Vetropak in the Czech Republic and Amcor Limited in Australia. In other locations in Europe, there compete a variety of glass container firms including O-I, Compagnie de Saint-Gobain, Vetropak and Rexam plc.

In China, the glass container segments of the packaging market are regional and highly fragmented with a number of local competitors. O-I for example has three modern glass container plants in China manufacturing high-quality beer bottles to serve Foster's as well as Anheuser-Busch, which is now producing Budweiser® in and for the Chinese market.

In South America, there is a large infrastructure for returnable/refillable glass containers. However, with improving economic conditions in South America after the recessions of the late 1990's, unit sales of nonreturnable glass containers have grown in Venezuela, Colombia and Brazil.

Worldwide gains will be fostered by an expanding population, greater use of higher value packaging and consumer demands for conveniently prepared foods. Although paperboard will remain the dominant material it will lose market share to glass dand plastic containers. A further factor positively influencing the market are favorable demographic shifts and continuing new-product introductions, especially those aimed at males, teens and children. The companies continue to focus on serving the needs of leading multi-national consumer companies as they pursue international growth opportunities.

A glance at some of the most important container packaging manufacturers around the world:

O-I Glass Containers Segment
Strong unit volume demand




For the year ended December 31, 2004, the Company manufactured approximately 37% of all glass containers sold by domestic producers in the U.S., making the Company the leading manufacturer of glass containers in the U.S. Moreover, O-I is the leading glass container manufacturer in 19 of the 22 countries where it competes in the glass container segment of the rigid packaging market and the sole manufacturer of glass containers in 8 of these countries, in total, the Company has 82 glass manufacturing plants in 22 countries.

O-I became the leading glass container producer in Europe following the acquisition of BSN Glasspack in June 2004 for total consideration of approximately $1.3 billion and the Plastics Sale for approximately $1.2 billion. The combination of the subsidiaries of O-I Europe and the subsidiaries of BSN Glasspack speeds restructure of operations into a pan-European approach.

For 2005 O-I calculates improved pricing and growth combined with the full year impact of BSN on Segment Operating Profit margins and the expected loss of revenue due to the sale of the two European glass plants and the 2004 sale of the Company's 20% interest in Consol Limited of South Africa. In February they startet rebuilt and expansion of B3 furnace at Bellville to cater for anticipated increased wine bottle demand



Saint Gobain
Net income up by +14.4% and Sales of Euros 3.8 bn i.e 12% of total sales in 2004.
The Packaging Division has won leadership positions in Europe. The Division is also present in Brazil where it is the second largest national producer. In the United States, with Saint-Gobain Containers, a unit resulting from the merger following the acquisition of Ball Glass Corporation and Foster Forbes, the Division ranks second in North America.
The Containers Division plays a major role in recovering waste glass in Europe. In France, near one glass bottle in two is recycled and nearly two out of three in Germany.For 2005 the Group set a target of 6% growth in operating income at constant exchange rates (based on average 2004 exchange rates)


Rexam Plc.
In line with strategy to consolidate the northern European glass container market,
Rexam is one of the world's top five consumer packaging companies and the world's leading beverage can maker. It has around 90 manufacturing facilities in over 20 countries in Europe, North, Central and South America and Asia. Rexam is solely a European glass manufacturer. ItŽs strength is in northern Europe, where they have a market share of some 25%. 14 glass works span the region from Scandinavia, through Poland, Germany and the Netherlands to the UK. Last year, they manufactured about 8 billion glass containers for consumption primarily in Northern Europe.

Rexam strengthened its position during the year with the acquisition of two glassworks, one in the Netherlands and one in Poland.
Rexam's sales figures fully comply with the average trends. Beverage Packaging, which comprises beverage can and glass operations, is the mainstay of the Group and accounts for more than 80% of both sales and operating profit. The year 2004 saw another solid overall performance from these businesses with a 4% plus in sales.


Amcor
Selected market segments
Amcor today is a global leader in packaging, with a clear strategy to focus on selected market segments. The target markets they have chosen for growth outside of Australia and New Zealand are: flexible packaging for the food and beverage industries; PET bottles and jars, specialty printed cartons, closures (lids) for the food and beverage markets; and distribution of packaging products and related goods.
In Australia and New Zealand, Amcor is the leading packaging company with a broad product offering and is the number one or number two supplier in every market segment in which it participates.

All divisions performed in line with expectations so that the company envisages combined earnings growth of 20% over the next two years.
Amcor's Managing Director, Russell Jones, said: "The first quarter profit increase of 5% is consistent with the targets we have set for the next two years. The benefits from much of the restructuring currently being undertaken will become more evident in the second half and it is anticipated that earnings growth will increase for this period.
"In Australasia the good performance of last year has continued into the current year with earnings comfortably ahead of the same period last year.


Vitro
Leader in Central America
Vitro S.A. de C.V. , is leader in Central America and largest glass container importer in the U.S. Vitro Žs glass containers business unit produces soda lime glass containers for the soft drink, beer, food, liquor and wine, pharmaceutical and cosmetics industries and has a production capacity of over 5,200 tons of glass per day.




This year it is expanding largely and recently announced that will invest approximately US$150 million in 2005 in order to expand its containers and automotive glass production lines, implement a new technological tool to optimize its processes (ERP), and transform its production facilities to use alternative fuel energy, among other key projects. This yearŽs focus is the concentration on niche markets driven by unique labeling capabilities and flexible short runs

At the end of the General Shareholder's Meeting, Federico Sada, Vitro's CEO said that these investments will allow the Company to take advantage of niche markets in the containers segment, Mexico's glass consumption growth per capita, and the development of new products for the automotive and glassware industry to maintain its sales during 2005.

Vetropack
Domestic and expanding into Central and Eastern Europe



Although increase of consolidated sales was only by 1,3% , annual consolidated profits climbed 7.4%. Thanks to targeted investments in existing production facilities and the resulting increase in productivity, profitability remained at the high level of 2003 despite substantial rises in the price of energy and raw materials. Vetropack sees this as confirmation of the importance of the domestic markets, the neighbouring and rapidly growing markets in Central and Eastern Europe.

In Switzerland, Vetropack position in a slightly declining market proved stable, as was the case in Austria, where Vetropack Austria was able to compensate for the fall in domestic demand by generating additional exports.

In the Czech Republic and Slovakia, the sales markets of relevance to Vetropack came under pressure in some areas due to the additional competition resulting from accession to the EU. In overall terms, sales by the Vetropack Group were slightly up on the previous year despite the deterioration in the underlying conditions in some areas

Ardagh
On the gateway to Eastern Europe and beyond
Ardagh plc is an Ireland-based holding company with operations mainly concentrated in the United Kingdom and Ireland. The combination of the four Rockware plants, the two Heye-Glas plants and the Abruzzo Vetro plant places the group as a market leader within Europe.

In 2004, Ardagh purchased 82.4% of Huta Szkla Ujscie (HSU) which has approximately 13% of Polish glass container production. This was the first Polish investment by Ardagh and underlines the company's belief in the future growth potential of the Polish glass container market. Ardagh views Poland as a strategic gateway market that will assist its ambitions to expand its operations into Eastern Europe and beyond.

Glass Bottles



Manufacturers do not only have to cope with their customers requirements for low-cost, lite-weight and matching articles, but also need to follow their ultimate consumerŽs trends. These require glass containers in special shapes and surfaces which implies the development of ever increasing design efforts. Most of them today can be satisfied with sophisticated hot and cold end coating such as Frosted, Transparent, Velvet, Opaque, Metallic. These give the surface another aspect in an unlimited range of colours. The look Ž,n feel of bottles normally like glass changes into a gloss finish, matt, or even range to the automotive metallic finish.

More important however are safety coatings such as camouflage coating or anti-scuff coatings that are able to double the lifetime of a returnable bottle depending upon the criteria for discarding bottles. These coatings do not only deliver outstanding lubricity and scratch resistance but also enhance label adhesion to the bottle surface. Newest trends even avoid labels and have it integrated into the décor.

A German Company recently has developed a new coating to help improve production by using a polymer coating process for glass bottles. The coating increases the bottles' interior pressure strength by 50% and by using the coating it is possible to cut the bottle weight by 30%. By colouring the polymer, the bottles can be produced in any colour or shade required and can also be produced with frosted effects economically, and in an environmentally friendly manner.

Source: OGIS GmbH, www.glassglobal.com (The foregoing information was compiled from publicly available information in annual reports and news releases)