O-I Glass, Inc. /DE/ Q3 FY2024 earnings call

Fit To Win Program

• Rapidly implementing to improve performance, including rightsizing inventories, reducing SG&A costs, driving productivity, and closing unprofitable capacities. Target to generate at least $300 million in savings by 2027, with $175 million expected in 2025.

MAGMA Program

• First greenfield plant began operations in Bowling Green, Kentucky.

Market Conditions

• Sales volumes were up modestly in Q3, but market recovery is slower than expected. Consumer demand trends are gradually improving, but uncertainties remain, especially in the U.S. with pantry stock levels.

Supply Chain and SG&A

• Streamlining organizational structure (Phase A) and reshaping supply chain (Phase B) to enable profitable growth. Aim to reduce SG&A expense to no more than 5% of sales by early 2026.

Americas: Segment operating profit was $88 million, down from $116 million last year. Sales volume increased by 7%, but 15% of capacity was curtailed to reduce inventory, leading to higher operating costs. Europe: Segment operating profit was $56 million, down from $185 million last year. Net price was a headwind due to earlier price adjustments, sales volume declined slightly, and 21% of capacity was curtailed to reduce inventory.

2024

• Adjusted net loss of $0.04 per share. Revised full-year sales volume outlook lower by 2-3%, adjusted earnings to $0.70-$0.80 per share, free cash flow expected to be a use of cash between $130 million and $170 million.

2025

• Fit To Win initiatives expected to boost adjusted earnings by at least $175 million. Anticipate better free cash flow and lower financial leverage as earnings and cash flows rebound.

• Sluggish Market Conditions: Continued sluggish demand impacting near-term performance.
• Inventory and Production: Higher inventory levels and temporary production curtailments affecting earnings and cash flow.
• Forecasting Uncertainty: Challenges in accurately forecasting consumer trends, particularly in the U.S. with pantry stock levels.

Q: On working capital and inventory for 2025 A: IDS expected to be in low 50s instead of mid 40s due to softer demand, resulting in higher working capital. Half or more of the $125 million debt from inventory drawdown may return next year as destocking eases.

Q: Capacity closures and utilization rate A: About 13% temporary capacity curtailment in 2024, with over half addressed by permanent closures ($80 million run rate savings in 2025) and remaining by normalized inventory management.

Q: Sales volume and pricing outlook for 2025 A: Americas volume flat to up, Europe flat to slightly down due to wine and spirits softness. Pricing expected to be flat, with more pressure in Europe due to excess capacity.

Q: Forecasting improvement and capacity closure contingency A: Improved forecasting through better customer collaboration and AI investments. Capacity closure evaluation includes aligning supply with demand and economic profit, with potential for more closures in Phase B if productivity gains are found.