O-I Glass Q2 2025 Earnings Report

O-I Glass EPS Results

• Actual EPS: $0.53
• Consensus EPS: $0.41
• Beat/Miss: Beat by +$0.12
• One Year Ago EPS: $0.44

O-I Glass Revenue Results

• Actual Revenue: $1.70 billion
• Expected Revenue: $1.70 billion
• Beat/Miss: Beat by +$2.00 million
• YoY Revenue Growth: -1.30%

O-I Glass Announcement Details

• Quarter: Q2 2025
• Date: 7/29/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, July 30, 2025
• Conference Call Time: 8:00AM ET

O-I Glass (NYSE:OI), through its subsidiaries, engages in the manufacture and sale of glass containers to food and beverage manufacturers primarily in the Americas, Europe, and internationally. The company produces glass containers for alcoholic beverages, including beer, flavored malt beverages, spirits, and wine. It is also involved in the production of glass packaging for various food items, soft drinks, tea, juices, and pharmaceuticals. In addition, the company offers glass containers in a range of sizes, shapes, and colors. It sells its products directly to customers under annual or multi-year supply agreements, as well as through distributors. O-I Glass, Inc. was founded in 1903 and is based in Perrysburg, Ohio.

O-I Glass Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: O I Glass reported $0.53 in adjusted EPS for Q2, beating last year's results and raising full-year guidance to a 60-90% increase over 2024.
• Positive Sentiment: The Fit to Win program delivered $84 million in Q2 savings—$145 million year-to-date—putting the company on track to surpass its $250 million 2025 target.
• Negative Sentiment: Overall Q2 shipments fell by approximately 3%, driven by softer consumer demand in Europe despite mid-single-digit growth in The Americas.
• Negative Sentiment: The company decided to halt further Magma development, reconfiguring its Bowling Green facility for premium output after concluding Magma did not meet return requirements.
• Positive Sentiment: Inventories were reduced by about $160 million compared to last year, advancing toward the goal of under 50 days of supply by year-end.

Presentation

[Operator]

Hello, everyone, and thank you for joining the O I Glass Second Quarter twenty twenty five Earnings Conference Call. My name is Lucy, and I'll be coordinating your call today. It is now my pleasure to hand over to your host, Chris Manuel, Vice President of Investor Relations to begin. Please go ahead.

[Chris Manuel, VP - IR at O-I Glass]

Thank you, Lucy, and welcome everyone to the O I Glass second quarter twenty twenty five earnings conference call. Our discussion today will be led by Gordon Hardy, our CEO and John Hodrick, our CFO. Following prepared remarks, we will host a Q and A session. Presentation materials for this earnings call are available on the company's website. Please review the safe harbor comments and disclosure of our use of non GAAP financial measures included in those materials. Now I'd like to turn the call over to Gordon, who will start on Slide three.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Good morning, everyone, and thank you for your interest in O I Glass. Today, we will walk you through our second quarter performance, key market dynamics and our outlook for the remainder of the year. Let me begin by expressing my thanks to all our colleagues across O I. Your dedication, agility and focus are instrumental in driving the transformation we are undertaking.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Last night, we reported second quarter adjusted earnings of $0.53 per share, exceeding our plans and outperforming the same period last year. This result reflects the meaningful progress we are making towards a leaner and more competitive company. We continue to navigate a complex environment, including softer consumer demand in certain markets and many macro uncertainties. While overall second quarter shipments declined approximately 3%, performance varied by region as volumes increased in The Americas, but declined in Europe. On a year to date basis, shipments were up nearly 1% and we continue to expect full year 2025 volumes will be stable with last year.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Our Fit to Win program is delivering strong results. We achieved $84,000,000 in savings this quarter, bringing our first half total to $145,000,000 well on track to meet or exceed our $250,000,000 target for 2025. Fit to Win is foundational to renewed competitiveness by significantly reducing total enterprise costs to improve performance and enable future growth. We've had a strong start to the year in difficult market conditions and are effectively managing the factors within our control. As a result, we are raising our full year guidance and now expect adjusted earnings to increase between 6090% compared to 2024.

[Gordon Hardie, CEO, President & Director at O-I Glass]

John will provide more detail on our outlook and quarterly performance shortly. As announced last evening, following a comprehensive review, we have made the financially prudent decision to halt further Magma development and operations. While the earlier stages develop meaningful technical advancement, we have concluded the platform does not have the pathway to the operational or financial return requirements as most recently detailed at our March Investor Day. Through our best at both operations strategy, as outlined at our eye day, we expect to drive significantly higher premium output at lower operating cost and capital intensity than Magma would have realized in the coming years. This decision aligns on our focus on driving competitiveness and economic profit.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Accordingly, we intend to reconfigure our Bowling Green facility into a best cost premium focused operation. We are confident this is the right path forward for our business, our customers and our shareholders. Let's now turn to Page four to review recent market trends. Overall, our shipments for the 2025 were up nearly 1% compared to the prior year. Volumes increased mid single digits in the first quarter, but declined approximately 3% in the second quarter.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Lower glass shipments are consistent with softer consumer offtake, which is down low to mid single digits in mainly European markets amid ongoing macroeconomic uncertainty. Unseasonal weather this spring and summer across the Northern Hemisphere further impacted consumption patterns. Finally, we have started to exit some business with unfavorable economic profit consistent with our disciplined approach. Despite recent softness, we have also had some notable wins as we leverage Fit to Win to drive future profitable growth. Likewise, we have seen a 35% increase in our new product development pipeline as brand owners look to spur growth.

[Gordon Hardie, CEO, President & Director at O-I Glass]

As previously noted, we are navigating mixed market conditions. Second quarter shipments increased in The Americas, but softened in Europe. In The Americas, shipments were up approximately 4% in both the second quarter and year to date, driven by solid rebound in beer and spirits categories. Notably, both Andean and North American regions outperformed the segment average with all geographies reporting positive growth despite continued soft consumption patterns, especially in The US. As we embed Fit to Win, we see our competitiveness improving in key markets, especially in North America.

[Gordon Hardie, CEO, President & Director at O-I Glass]

In Europe, volumes were down 3% year to date and down nearly 9% in the second quarter, which we attribute to the following factors. About three percentage points were due to a supplier related delay at a major plant reconfiguration project in Europe, which is now ramping up well. We estimate another 3% of the decline was timing related as increased beer and wine sales in the first quarter, likely in response to trade policy uncertainty, negatively impacted Q2 shipments. And finally, the balance of the decline pertained to macroeconomic uncertainty and unfavorable weather conditions, which is in line or favorable to broader consumption trends. Despite these challenges, there were bright spots as non alcoholic beverages and food categories posted low single digit growth.

[Gordon Hardie, CEO, President & Director at O-I Glass]

To align supply with demand and manage inventory levels, temporary production curtailments remain in place across Europe with a continuing drag on our operating costs there. We remain engaged in consultations with European and local works councils on long term network optimization initiatives aimed at addressing excess capacity in the fleet. These actions, when finalized, are expected to strengthen our competitive position and support sustainable profitable growth in Europe. In July, our global shipments were down mid single digits compared to July, reflecting continued soft conditions plus the re phasing of some specific customer order activity and the delayed ramp up of a reconfigurations project at a European plant. We continue to expect full year 2025 volumes to be in line with the prior year as shipment levels are projected to be stable across both The Americas and Europe.

[Gordon Hardie, CEO, President & Director at O-I Glass]

This outlook holds despite some intra quarter fluctuations, which are primarily driven by comparisons to prior year performance. Let's now turn to Page five and review the progress of our Fit to Win program, which is focused on significantly reducing total enterprise costs while optimizing our network and value chain to drive competitiveness and growth. In the second quarter, we delivered $84,000,000 in savings, bringing our first half total to $145,000,000 surpassing our initial plans. With momentum building, we remain confident in achieving our 2025 savings target of at least CHF $250,000,000 and at least CHF $650,000,000 cumulatively by 2027. Phase A centers on reshaping our SG and A structure and initial network optimization actions, and we remain on track to meet both our one year and three year goals.

[Gordon Hardie, CEO, President & Director at O-I Glass]

We have completed actions to secure our €100,000,000 SG and A savings target '25, with more opportunity underway to drive additional savings next year. Importantly, our network optimization efforts continue to progress, including the recently announced actions in The Americas. We continue to expect initial network optimization activities will be completed by mid-twenty twenty six. Phase B focuses on transforming costs across the value chain, including the rollout of our total organization effectiveness program to optimize system wide capacity. Following a successful pilot at the Tawana plant, the first wave of 15 facilities is nearing completion of the same rigorous process.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Results are meeting or exceeding our expectations. Additionally, our cost transformation team is making meaningful progress in procurement and energy reduction initiatives. These efforts are contributing significantly to our overall savings and enhancing operational resilience. We are making significant progress on the end to end value chain efficiencies with a number of significant agreements made with strategic suppliers to improve productivity and competitiveness over the next three years. In summary, momentum is building and initial Fit to Win benefits have exceeded our expectations.

[Gordon Hardie, CEO, President & Director at O-I Glass]

We are on track to meet or exceed our twenty twenty five objectives and unlock further upside in the years ahead. Now I will turn it over to John, who will walk you through the second quarter performance and updated 2025 outlook, beginning on Page six.

[John Haudrich, Senior VP & CFO at O-I Glass]

Thanks, Gordon, and good morning, everyone. OI reported second quarter adjusted earnings of $0.53 per share, exceeding both our expectations and prior year results. The performance was primarily driven by strong contributions from our Fit to Win program and improved competitiveness. As shown on the left, earnings surpassed last year's figures. We faced expected headwinds from lower net price, lower sales volumes and temporary production curtailments.

[John Haudrich, Senior VP & CFO at O-I Glass]

Yet these factors were more than offset by substantial Fit to Win savings and favorable below the line items including a moderately better than expected tax rate supported by favorable regional earnings mix. Looking to the right, segment operating profit increased in The Americas, but declined in Europe. In The Americas segment operating profit improved significantly reflecting notably lower cost due to fit to win benefits, higher shipments and fairly stable net price amid tight capacity utilization. In Europe segment operating profit declined due to lower net price and softer sales volumes. Operating costs rose slightly due to the impact of ongoing production curtailments, but these were largely offset by Fit to Win savings.

[John Haudrich, Senior VP & CFO at O-I Glass]

We expect performance in the region to improve progressively as our downtime decreases, network optimization actions deliver a better cost position and our cost competitiveness improves. As part of our focus on economic profit, we've made meaningful progress in reducing inventories across the enterprise down approximately $160,000,000 compared to the same period last year. We remain on track to meet or potentially beat our year end 2025 target of fewer than fifty days of inventory supply. In summary, second quarter results exceeded both our plans and prior year levels positioning us well for continued success through the rest of 2025. Now let's turn to page seven to review our business outlook.

[John Haudrich, Senior VP & CFO at O-I Glass]

Given our strong year to date performance and momentum of the Fit to Win program, we have raised our full year 2025 guidance. We now expect adjusted earnings to range between $1.3 and $1.55 per share, representing a 60% to 90% improvement over fiscal year twenty twenty four. We also anticipate about a $300,000,000 year over year improvement in free cash flow, driven by stronger operating results, reduced capital expenditures and lower inventories despite 140,000,000 to $150,000,000 in cash restructuring costs. Additionally, we've refined our expectations for the quarterly cadence of earnings throughout the year. As you can see, we expect the third quarter will be generally consistent with trends noted in the first half of the year.

[John Haudrich, Senior VP & CFO at O-I Glass]

Fourth quarter will be softer due to the typical seasonality of our business and the tax impact of lower earnings levels. Please note that our outlook may not fully account for potential volatility stemming from evolving global trade policies and other external factors. For more details, please refer to the appendix which outlines the assumptions behind our updated guidance. Despite a soft macro environment, we are executing well and our self help efforts are exceeding original expectations. As such, we are increasing our full year earnings guidance.

[John Haudrich, Senior VP & CFO at O-I Glass]

Now I'll turn it back to Gordon to conclude on Page eight.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Thanks, John. In closing, O I is executing well and delivered a strong 2025. Despite mixed market conditions and sluggish demand, we remain sharply focused on what we can control and are making excellent progress on all self help fronts. We expect a meaningful rebound in performance, adjusted earnings and cash flow this year and have increased our full year guidance accordingly. Executing Fit to Win and our long term value creation roadmap, as illustrated on the right and discussed in detail during our March Investor Day, positions us well for the future.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Importantly, these initiatives are largely within our control. As we continue to execute our strategy, we are confident in our ability to meet our goals, including radically reducing the cost base, building a more premium business portfolio and driving economic profit. This should deliver strong financial results, including sustainably higher EBITDA and create long term value for our shareholders. Thank you for your attention. We look forward to your questions.

[Operator]

First comes from Ghansham Panjabi of Baird. Your line is now open. Please go ahead.

[Ghansham Panjabi, Senior Research Analyst at Baird]

Hey guys, good morning. Congrats on all the cost out progress. Guess, first off, in terms of your volume assumptions for 2025, how does that break out by segment? I guess I'm just curious as to your confidence as it relates to being able to hit flat volumes and just given the uncertainty, etcetera, at this point.

[John Haudrich, Senior VP & CFO at O-I Glass]

I can kick off on that one, Ghansham. Overall, if we take a look at our segments, as we indicated, we believe both Europe and The Americas will be generally stable year over year. So in the first half of the year, you saw a stronger Americas and a little bit softer Europe. We expect that to maybe kind of invert in the back half of the year, but it's only due to comps. Overall, what we're seeing over the course of the year is a generally stable environment with maybe the exceptions of some disruption due to the capital project that Gordon talked about, as well as maybe some fluctuation we saw between first and second quarter associated with tariff concerns or uncertainties and trying to buy ahead.

[John Haudrich, Senior VP & CFO at O-I Glass]

Other than that, if you take out the noise of kind of prior year comps and things like that, you're looking at a pretty stable environment.

[Ghansham Panjabi, Senior Research Analyst at Baird]

Okay. Got it. And then, my second question as it relates to the Bowling Green plant, what exactly is that going to be pivot towards? What is the timeline associated with that? And what is the, cash cost, just rough cash cost as it relates to making that, transition at that point?

[Gordon Hardie, CEO, President & Director at O-I Glass]

Yes. So that facility is focused really on premium opportunities in spirits in in The US. And we still see a big opportunity in in that category in those segments of the market. So, you know, Magnum was conceived, you know, to deliver against premium. And when we look at, you know, our best at both strategy, and we we look at, you know, the cost we feel we would need to be at to to really grow significantly or or premium volume and the capital intensity we required to deli deliver, you know, the target economic profit, that was the right call for us, and we see a path to being able to reconfigure that plan to get lower operational costs, lower capital intensity, and to to really grow the premium business in in The US.

[Gordon Hardie, CEO, President & Director at O-I Glass]

We're we're we're working on that reconfiguration as we speak. And, you know, at the next earnings call, we'll we'll give a further update on that Gantium, but, that that's our focus for for that facility right now.

[John Haudrich, Senior VP & CFO at O-I Glass]

You know, on the cost side, Ghansham, that the facility does have, invested capital around the superstructure, around legacy assets and things like that, which obviously can be can be utilized in this. But I think it's a little early to be able to give, any specifics there.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Yeah. But, Ghansham, you know, as we've laid out in the past, you know, every project we undertake will have to be able to deliver a WAC plus two, minimum return for us going forward.

[John Haudrich, Senior VP & CFO at O-I Glass]

And and one final point I want want to reiterate, that the outlook that we provided during iDay about the outlook for the business as well as the capital investment in the business still holds. We're going to fit this in within that. We're not going to change at this point in time our CapEx outlook for the business.

[Ghansham Panjabi, Senior Research Analyst at Baird]

Perfect. Thanks so much.

[Operator]

The next question comes from Arun Viswanathan of RBC. Your line is now open. Please go ahead.

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

Great. Thanks taking my question. Just wanted to ask about the fit to win benefits. So you were able to accelerate those from 61,000,000 to $84,000,000 in Q2. It looks like you are guiding to $250,000,000 plus now and then $650,000,000 plus in long term.

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

So maybe you can just frame the upside opportunity there. Are you guys finding more as you peel back the layers a little bit more? And would those be mainly in SG and A? And I guess related to this point, the corporate costs were also a little bit lower this quarter at, I think, 25,000,000. Is that the new level of corporate that we should kind of consider?

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

Or was there something unusual in there? Is that really reflective of those lower SG and A costs? Thanks.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Yes. Well, I'll take the first part of that question, Arren. As we've laid out over the last year or so, fit to win is designed to review the cost base of the business across the entire value chain, you know, from from the back end of our suppliers right through to, you know, our customers' warehouse. And we've been systematically working through the value chain, and, you know, peeling back, you know, where all the costs are, what where the waste is, where the inefficiencies, what's driving that. And and at every part of the chain as we suspected and as our thesis held, there there's opportunities to, to get more efficient and to strip out waste.

[Gordon Hardie, CEO, President & Director at O-I Glass]

That means, you know, us working differently with, with suppliers and with customers, and and likewise, they're changing some of the ways we work. But we're making tremendous progress on that, and have already signed a number of agreements with suppliers that drive much greater productivity and competitiveness for for for us. Within the you know, within our own footprint, we we shared the results of of Tijuana on previous calls and made great progress there. And we are now in the first wave of 15 plants being rolled out. That's about 60%, 65% through that program for those plants.

[Gordon Hardie, CEO, President & Director at O-I Glass]

And we're on or exceeding the targets we had set. So very happy with how that is going. And then as we sit with customers and we look for ways to improve order forecast accuracy, logistics, warehousing, again, working through all of that and and finding opportunities. So as as we set out at the at the beginning, this is an end to end review of, the cost base of the business and and stripping out the, the waste and inefficiencies, and then reinvesting some of that back into the business or, using that to, you know, to be more competitive in the market, which, you know, we're already seeing signs of, you know, particularly in The Americas.

[John Haudrich, Senior VP & CFO at O-I Glass]

You know, to build on that and to answer your other corporate question, Arun, if you look at page five, the the outperformance that we're seeing really is in the phase b area. As to to Gordon's point, you know, we're we're already above our full year target for that area. And and just, you know, building off of that and and taking out those productivity and efficiency opportunities and actually jumping ahead of the actual full rollout of of, you know, the the the TOE project is driving the upside opportunities that we're seeing across the business. And to that, the corporate levels, we would expect to be a reasonable range is a 100 to a $120,000,000 a year is a logical place for the corporate cost.

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

Great. Thanks. And then if I could just ask a quick follow-up. So then as you look out into, I guess, the second half into next year, again, you're already at $1.45 for the first half. So should we also assume that fit to win benefits should continue to grow?

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

Or is the second half kind of have you already kind of gotten what you, you know, more than 50% of the year's benefits or do you still see continued sequential growth in those benefits?

[John Haudrich, Senior VP & CFO at O-I Glass]

I I think we'll we'll see sequential growth, but keep in mind in the fourth quarter, we will start to lap the early phases of the activities. And as you can see on the chart on page five, we had $25,000,000 of benefits already in the in in the fourth quarter. So while that the core activity continues to drive momentum, there'll be a little bit of a comp element to the fourth quarter.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Yeah. I I would say culturally as well, Arun, you know, we are relentless on waste and inefficiency coming out of the business. So even if we hit a number, there's no satisfaction in that. We we drive on as long as there's waste and efficiency, you know, to be had where where where we're going after it.

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

Great. Thanks a lot.

[Operator]

The next question comes from Mike Roxland of Truist Securities. Your line is now open. Please go ahead.

[Michael Roxland, MD - Equity Research at Truist Securities]

Yes. Thank you, Gordon, John, Chris for taking my questions and congrats on all the progress.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Thank you, Gordon, you mentioned that in your

[Michael Roxland, MD - Equity Research at Truist Securities]

comments that shipments were weaker in July and you cited rephasing of order activity and delayed ramp up at a configurated plant. Do you have any sense what your order books look like for August?

[Gordon Hardie, CEO, President & Director at O-I Glass]

Yeah. Look, we have line of sight. I think The Americas are looking pretty strong, and we're seeing some come back in places like Northern Europe and in The UK. And as John mentioned, you know, we we see Europe probably stabilizing in the in the second half of the year. There is still, you know, significant consumer weakness in in in all of the regions probably except for Latin America.

[Gordon Hardie, CEO, President & Director at O-I Glass]

But whether it's wine or beer in Europe, spirits in Europe, still you know, compared to long run averages in last year. Driven, you know, spirits and and say wine is driven by, you know, the the the macroeconomic, you know, kind of trade issues. You know, 85% of all scotch produced is exported, 65% of all French red wine is exported. So the two major markets of The US and China, you know, still not back to where they were, you know, historically. In in The US, you know, we see beer still sort of sluggish, even imported beer.

[Gordon Hardie, CEO, President & Director at O-I Glass]

So but yet there are then pockets of growth in terms of nonalcoholic beverages, you know, particularly waters. And and food is, you know, know, on the back of trends like anti microplastics, you know, performing very well in most markets. You know, Latin America is is performing very well for us, you know, particularly foods, nonalcoholic beverages, spirits, you know, coming back strongly in Mexico, beer quite resilient, you know. And, you know, going back to kind of first principles that we laid out, you know, last last July, we, over the the next two years, you know, predicated kind of flat volumes. As we deliver savings, we will share some of that with our strategic customers and ultimately, know, drive the value over the next two years by getting a much better return on the volume we have and getting fitter.

[Gordon Hardie, CEO, President & Director at O-I Glass]

That then puts us in position, a very strong position as the turn comes and consumers come back to these categories. So our story over the next two years is not a volume story per se. We predicate sort of flat volumes, but getting much, much more efficient and getting much higher returns on the volumes we have. And I think for us, our thesis is that the value will be increased through getting better returns rather than chasing volume at lower margins and lower prices in markets that are where demand is sluggish.

[Michael Roxland, MD - Equity Research at Truist Securities]

That's very helpful. I appreciate all the color. Then just one quick follow-up. You mentioned the progress on TOE. If I heard you correctly, you said the first wave of 15 facilities has been meeting or exceeding your expectations and you're about 50% to 55% through those plants.

[Michael Roxland, MD - Equity Research at Truist Securities]

Is there any more color you can provide around the progress, maybe some of the cost savings or the returns that you've generated thus far at those 15 facilities?

[Gordon Hardie, CEO, President & Director at O-I Glass]

Yeah. You know, again, you know, we we we the process is, you know, we we go into those plans and we we understand, you know, the obviously, the cost base and what's driving the cost, where the waste is, and where your your your kind of top five issues or losses are, and then working systematically through that. And, you know, everything we've we've we've seen in our in our pilots in Tawana and indeed the initial study we did way back in in June 24 are coming to fruition. You know, there we have we have some tremendous talent in our plants. But, you know, with fresh set of eyes and and some new thinking, you know, from other industries that I've worked in, we're we're seeing opportunities to drive very significant productivity improvements and run these plants in a much more effective, efficient manner.

[Gordon Hardie, CEO, President & Director at O-I Glass]

So I'm I'm very happy with, you know, the the alacrity with which our teams have have taken on these new ways of working and and going after the waste and, you know, across the fleet. So so very happy with that, Mike.

[Michael Roxland, MD - Equity Research at Truist Securities]

Got it. Thank you and good luck in 2H.

[Gordon Hardie, CEO, President & Director at O-I Glass]

All right. Thank you.

[Operator]

The next question comes from George Staphos of Bank of America. Your line is now open. Please go ahead.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Thanks so much. Hi, everyone. Good morning. Thanks for the details.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Hey, George.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

I wanted to how are you, Gordon? And congratulations on the progress so far. I wanted to come back to Magma, necessarily do a postmortem on it and the whys and wherefores, but really to understand how glass fits in customers' mix. And so when Magma was talked about a few years ago, the notion was you'd able to drop in smaller facilities, you'd be able to be more nimble, you'd be able to then get into customers' new product launches more quickly. At least that was part of the story recall, as and correct me if I'm wrong on any of that.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

And, you know, for whatever reason, Magma is no longer being, utilized. Is it that the process itself didn't really live up to your expectations? Is it that customers don't really look to Glass for that sort of new product, quick on the run type of product anymore or type of package? Or TOE and all that you're doing in the organization now gives you that agility that you thought you're gonna get for Magma, but you don't need to spend the capital there. How would you have us think about that, you know, what's happened here and why you don't need Magma anymore?

[Gordon Hardie, CEO, President & Director at O-I Glass]

Great. Thanks. Thanks, George. So let me start with the customer piece. You know, consumers love glass.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Right? All things being equal, they'll choose glass. And, you know, I've been out I've met about 70 of our customers over the last year. And I would say without exception, all of them want to put more glass into their portfolios for sustainability, you know, to help drive that premiumization trend that's still there, as strong as ever. So so glass is absolutely fundamental to, you know, to the portfolios of all our major customers.

[Gordon Hardie, CEO, President & Director at O-I Glass]

And in fact, our NPD pipeline, this year is up about 35%, which is a which is a massive increase as, you know, our customers look to to spur growth. So no question around glass in the portfolios in my mind with with customers, and and I've heard that firsthand so many times. With regard to to Magma, yes, the idea was, you know, you could do maybe smaller batches of of of premium. But when I look at it, you know, there's two aspects. Did the technology work?

[Gordon Hardie, CEO, President & Director at O-I Glass]

Yes. The technology works. But, you know, can it can it deliver, the returns we require if we were looking at at rolling out 10 or 12 or 15 of them? And what's the next best alternative? And, you know, as as CEO, I I feel two important aspects of my role is, you know, to want to face reality and to make good decisions around that.

[Gordon Hardie, CEO, President & Director at O-I Glass]

And secondly, is to really allocate our precious capital as effectively as possible. And when I look at and you're right, TOE, and I look at the flexibility, you know, I think, TOE techniques can bring and also greater volumes at lower cost and lower capital intensity, for me, it was a it was a clear decision. There there is a better way for us to, you know, deliver on the the what customers are looking for, which is continued premiumization, but they want premium products at a affordable cost. Right?

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Okay.

[Gordon Hardie, CEO, President & Director at O-I Glass]

And we we we we don't have small ambitions around premium. Right? We have very big ambitions around premium, and I need higher, volumes of premium than a Magma furnace could deliver. I got you. I I think the way to to do that is, is the path we have forward, which is the best of both model, which by the way, we we we have a business in our in in our portfolio that that does exactly that and is making great returns, great margins, and it's highly, highly flexible.

[Gordon Hardie, CEO, President & Director at O-I Glass]

So what we're embarking on is not new to world. It's there. We just need to get much, much better at it. And I'm confident now we're we're putting in place the operation and capabilities to to do so. So, it's the correct decision for us, it's the correct decision for our customers, and it's the correct decision for our shareholders.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Thanks, Gordon. For my second question, if possible, talked about your current run rates and that things get a little bit better in August. Is there a way to parse the down mid single digits across the regions? And then as we shift into the fourth quarter, you talked a little bit about why it's maybe now a lesser piece of your earnings cadence for the year. But can you give us a bit more color there?

[George Staphos, Managing Director at Bank of America Merrill Lynch]

I know fourth quarters are small. The numbers can move around a lot If we choose the midpoint versus one end of the range or the other end of the range of the guidance, we can come up with different conclusions. But the fourth quarter seems a little bit weaker. And is any of it related to the volumes that we're seeing right now?

[John Haudrich, Senior VP & CFO at O-I Glass]

Yeah. George, I can jump in and take the the second part of that for to start with. Hey. Hey, George. How are doing?

[John Haudrich, Senior VP & CFO at O-I Glass]

The seasonality of our business is such that we earn about 60 to 65 percent of our, EPS in the first half of the year and the remaining 35 to 40% in the back half of the year. That that's that's consistent with the average in the last five years. And, you know, after exiting the a and z business a few years ago, we are more levered to the Northern Hemisphere. And and as a result, with our products being used in the summertime, the seasonality of that, we we we do have this this tendency that we're that that I just mentioned. But as we take a look at the fourth quarter guidance that we have this year, we are making in addition to, you know, the normal seasonality.

[John Haudrich, Senior VP & CFO at O-I Glass]

We have made a provision in there in our outlook for potentially more temporary downtime. It is taking us a bit longer than originally anticipated to complete the restructuring and network optimization activities over in Europe. We're following all the rules and the processes accordingly, but it's just taking longer. And as a result, if if this slips into next year, we will probably take more temporary downtime in the fourth quarter as we keep our our system balanced until we can we can can complete that. So, that is that is a function of that.

[John Haudrich, Senior VP & CFO at O-I Glass]

And and also, I just wanna, you know, highlight also is that our ETR tax rate is very sensitive to overall levels of earnings. And as the earnings are lower in the fourth quarter, especially with making the provision for the potential temporary downtime, we also end up with disproportionately higher tax rate. So it just kind of swings things around a little bit more in the fourth quarter. So hopefully, that gives you the perspective you're looking for. But it has nothing to do with the trends in the business and the volume.

[John Haudrich, Senior VP & CFO at O-I Glass]

Has more to do with the downtime and managing the network optimization.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Thank you.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Yeah. And maybe the first part of that, George, you know, we, if if I do a quick run through, you know, maybe the the the the segments or regions, you know, beer in North America actually performed very strongly for us, and we we outperformed the category as as the as the core spirits, you know, very, very strong momentum there. You know, we we see, you know, as seasonality kicks in, we see some of that come off for for beer certainly. But, you know, brown spirits particularly are weighted a bit more to the back half of the year, so we see probably continued momentum there. You know, wine is weak across the board.

[Gordon Hardie, CEO, President & Director at O-I Glass]

You know, I I I spent, some time in California in the last couple of weeks. But the industry is looking at ways to figure out, you know, how to, how to overcome that. And the the lesson, you know, I heard from people there is, hey, the wine industry has overcome many setbacks over over the last fifty years, and there was a there was a sort of a confidence there I picked up. But no doubt, wine has been has been weak in in q two. NAB, waters are going really well for us in North America and we see that continuing.

[Gordon Hardie, CEO, President & Director at O-I Glass]

And we probably see food kind of soft in Q2, but picking up in Q3 and Q4, particularly towards the holidays. Europe, beer, particularly in Central Europe, don't Wine don't and Spirits you know, and I think that's just a common picture, as I mentioned. But food and and nonalcoholic beverages, you know, very, very strong for us. We probably see spirits coming back a bit in the in the in the second half, and white wine, you know, is doing better than red wine for sure. Other than that, you know, Andean performing very strong for us.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Brazil doing very well for us, you know, up 34% in q two. Order book's very, very strong there. And, you know, the the big surprise for us was was in Mexico where beer actually has stabilized, you know, particularly in the domestic market. And and tequilas are have rebounded, you know, remarkably remarkably well as the tequila industry figures out other markets be besides the, besides The US. So, you know, Southwest Europe, you know, impacted by red wine particularly, but but foods, you know, going strongly and and non alcoholic beverages.

[Gordon Hardie, CEO, President & Director at O-I Glass]

And we also see some upside in the back half of the year in The UK. So that's sort of a runaround the business, George. I hope that gives you a bit of color.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

That's fantastic. Thank you, Gordon. I'll turn it over. Thank you, guys.

[Operator]

The next question comes from Anthony Pettinari of Citi. Your line is now open. Please go ahead.

[Bryan Burgmeier, Equity Research Analyst at Citigroup]

Good morning. This is Brian Bergmeyer sitting in for Anthony. Thanks for taking the question. Just maybe on net price, I noticed you're expecting a little bit less of a headwind now than originally. I think you raised the range by about $25,000,000 Maybe just what kind of drove that?

[Bryan Burgmeier, Equity Research Analyst at Citigroup]

Do you feel like prices for the second half are maybe locked in now? Do have you kind of line of sight to that? And just maybe generally, how do you feel about sort of European operating rates at this point?

[John Haudrich, Senior VP & CFO at O-I Glass]

Yes, sure. Brian, it's Antfran. Thanks for the question. When we take a look at the drivers for net prices, as we had entered it in the year, we had a higher expectation of that pressure point. It's obviously moderated.

[John Haudrich, Senior VP & CFO at O-I Glass]

I think the net price pressure for the first half of the year is about $70,000,000 and we're thinking right now might be a 100, a $125,000,000 down down from our previous expectations. Really, really, there's there's two factors going on, is is that inflation has moderated probably more so than we expected. You know, energy prices have moderated. So so that is definitely one of the drivers. And then, you know, we have seen probably reasonably stable net pricing and gross pricing in the business.

[John Haudrich, Senior VP & CFO at O-I Glass]

You know, if you take a look at our business year to date, our sales volumes are up about 1%, but gross price is down about 1%. Right? So it's it's not really fluctuating that that much in a in a grand scheme of things. We thought it might be up under a little bit more pressure. So it's really kind of both levers moving, and I would say, like, you know, if we take a look at the back half of the year, most of the year over year pressure point has been incurred in the first half with a little bit still dribbling into the back half.

[Bryan Burgmeier, Equity Research Analyst at Citigroup]

Got it. Got it. Appreciate that detail. And then maybe just sort of broadly from a high level, do you think that the U. S.-EU trade deal kind of coming together this week provides maybe a level of clarity for customers that you and they have been looking for to maybe get orders kind of going again?

[Bryan Burgmeier, Equity Research Analyst at Citigroup]

Or do you think maybe the industry needs time to sort of digest this and adjust to the tariffs? Just, anything you can kind of share on maybe, if a trade deal changes anything for you and your customers in 3Q and in the second half? Thank you. I'll turn it over.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Yeah. Look, any certainty is a good thing. There's been so much uncertainty and know, customers trying to figure out, you know, do they do they need to ship bottling operations to different regions and so on. And so no decisions in the industry that I've seen have have been made around this. So so anything that brings certainty is a good thing, then people can plan around that and, you know, we can work with customers accordingly.

[Gordon Hardie, CEO, President & Director at O-I Glass]

You know, the the headline number is 15% on everything coming into The US, but I still understand or, you know, some some countries that, you know, it's it's still not clear on, you know, where wine and spirits sit and all of that and whether whether that potentially is zero for zero or whether it's 15%. So there's still not full clarity on that, I would say. So the faster we get to that, the better, and then we can, we can work with with with customers, accordingly. So the more certainty, the the better it is, I would say.

[Operator]

The next question is from Josh Spector of UBS. Your line is now open. Please go ahead.

[Anojja Shah, Director - Equity Research at UBS Group]

Hi, good morning. It's Anoja Shah sitting in for Josh. I just wanted to go back to Magma quickly. Are there any cost savings associated with this decision that maybe weren't dialed in before but but do need to be added now?

[John Haudrich, Senior VP & CFO at O-I Glass]

I I'd say the primary first, thanks for the question. I'd say the primary savings is is that we are overall reducing our r d our our d and e cost to the business. It's all part of our s g and a savings initiative. So I think from an operational standpoint, obviously, we're ceasing the operations in that. You know, there's there's there's there's a minor minor loss associated with this, but I don't think it's a material aspect to the business for the Bowling Green element.

[John Haudrich, Senior VP & CFO at O-I Glass]

I think the bigger element the the the reduced SG and A cost that's embedded in our SG and A savings targets.

[Anojja Shah, Director - Equity Research at UBS Group]

Okay. Thank you. And, based on your comments on inventory earlier in the prepared comments, and I think your prior guidance for working capital and free cash flow was flat. It sounds like now you'd expect working capital to be a benefit to free cash flow this year. Can you just tell me what what you're expecting in your guidance?

[John Haudrich, Senior VP & CFO at O-I Glass]

Yeah. That's correct. Earlier in the year, we thought that, you know, working capital probably a minor factor. You know? And and the the where we stand right now is something like a up to $50,000,000 working capital benefit this year, kind of 0 to $50,000,000 as we we do better on the inventory.

[John Haudrich, Senior VP & CFO at O-I Glass]

You know, on the offset to that, we we are having more, restructuring cost. It's probably gonna be the higher end. We we updated that guidance range. We also increased the the estimate for interest expense given where the forward curve has has has changed to. So overall, we think the free cash flow outlook that we had beginning of the year is still relatively consistent.

[John Haudrich, Senior VP & CFO at O-I Glass]

Obviously, FX play plays into this equation with a lot of moving pieces. But I also wanna kinda reiterate, and we're we're we're really focused on free cash flow. And and, you know, with a $300,000,000 year over year improvement despite, you know, call it a 140 to a $150,000,000 of restructuring charges is a major swing, major improvement in the performance of the business. And certainly, we look to drive drive that as we go to our I day targets of moving up to 5% of sales and up up up ultimately up to 7% of sales over the next few years.

[Anojja Shah, Director - Equity Research at UBS Group]

Great. Thank you for that. I'll turn it over.

[Operator]

The next question comes from Francisco Ruiz of BNP Paribas. Your line is now open. Please go ahead.

[Francisco Ruiz, Co-head - European Mid Caps at Exane BNP Paribas]

Hi. Good morning. I have two questions for me. The first one is if you could update it on how the negotiations with French authorities are on the restructuring you proposed a couple of months ago. And, and also follow-up on on this is that what else is missing in terms of restructuring or closing facilities in order to get to your face, say, savings on fit to win?

[Francisco Ruiz, Co-head - European Mid Caps at Exane BNP Paribas]

The the second question is if you could help me to understand what is the bridge between your fit to win benefit and and the rest of the cost at operating cost apart from the from the center cost? I mean, there is a gap of 20,000,000, 30,000,000 this quarter. So what is this coming from? Thank you.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Hi, Francisco. Let me take the first question. So we're engaged with our European works councils and our local works councils, and we're working through the process of consultation and listening to ideas. And you know, as we move through to getting agreement on how we, you know, reconfigure the network to be as competitive as we as we can be in in in in France. You know, we we see France as a as a very important market in our in our business and, you know, we have plans to to invest quite heavily in France, you know, but we need the right network and those discussions are progressing to to plan.

[Gordon Hardie, CEO, President & Director at O-I Glass]

As you know, there there's a process. You work through the process, and, you know, we're committed to to doing that fairly and squarely and, you know, with our with our colleagues. So, nothing more to add there other than, you know, it's going to plan in terms of timing of discussions.

[John Haudrich, Senior VP & CFO at O-I Glass]

And, Francisco, I'll this is John. I'll I'll address the the other two questions you have as as far as kind of where do we stand in the whole network optimization process and to kind of what is left. So we've announced so far about total of 10 percentage point reduction in in global capacity, of which as we stand here right now, maybe 5% or a little bit more is actually physically closed. The other component has to do with remaining elements that have been announced. One is what we what we just referenced in France, and the other one is what we just kinda referenced earlier today.

[John Haudrich, Senior VP & CFO at O-I Glass]

I mean, last night in The Americas, you know, that is what will will will be conducted over the next couple quarters. And and then that would be, you know, a completion of where we stand on on the announced level of capacity restructuring. We we would still then have a little bit a couple percentage points of excess capacity, but we're gonna monitor and see where the the market trends go and see ultimately determine, hopefully, we can grow into that, and and we'll have to determine whether additional decisions are required. And then your last question is kind of so if what if Fit to Win was $84,000,000, you know, where where's the other cost movements? What I would point you to is on on page six of our materials, there's actually a little chart in there that has the cost breakdown.

[John Haudrich, Senior VP & CFO at O-I Glass]

And as you as you can see with that, you know, operating costs were were favorable, $31,000,000. 63 of that was fit to win in the operating line, but we did have $27,000,000 of temporary curtailments that is as we've referenced the continued downtime until we're able to get those these permanent restructuring actions actually completed. Those are the major major movers. And you take a look on the the corporate side, if you add up the whole thing, have $84,000,000 of fit to win. You got the the the temporary curtailment.

[John Haudrich, Senior VP & CFO at O-I Glass]

You'll see a offset in corporate. A lot of that has to do with resetting management, in a sense it's with ReZero last year. So take a look at that. That that provides you the details I think you're looking for.

[Francisco Ruiz, Co-head - European Mid Caps at Exane BNP Paribas]

Okay. Thank you very much.

[Operator]

The next question comes from Gabriel Haed from Wells Fargo Security. Your line is now open. Please go ahead.

[Gabe Hajde, Research Analyst at Wells Fargo]

Hi, Gordon, John, Chris. Good morning.

[John Haudrich, Senior VP & CFO at O-I Glass]

Hi, good morning.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Hi, Jake. I apologize.

[Gabe Hajde, Research Analyst at Wells Fargo]

I joined a few minutes late. But I was curious if, John, you could kinda help us with the the increase in the guidance range. 15,000,000. And I I think to your point, you talked about price cost being actually a little bit more favorable, maybe by 25,000,000 if I pick midpoints. And then FX, I think, is maybe a $25,000,000 to $30,000,000 tailwind as well.

[Gabe Hajde, Research Analyst at Wells Fargo]

Volume's up 1% through the first half. We're sort of still targeting flattish, which I guess would suggest down 1% in the back half. You already gave us some color on the mix, Americas versus Europe. And it seems like your fit to win and cost outs are kind of running ahead of expectations. So is there something else that we're missing?

[Gabe Hajde, Research Analyst at Wells Fargo]

And I don't wanna talk to you the upper end of the range. I'm just trying to understand, if there are any other puts and takes in our logic there.

[John Haudrich, Senior VP & CFO at O-I Glass]

Yeah. Yeah. So so, Gabe, I mean, the the drivers that we have and and maybe just thinking, you what what what are the factors that would drive you to the upper end of the range? Obviously, you got you got the FX as you referenced. Net price is is better.

[John Haudrich, Senior VP & CFO at O-I Glass]

Fit to win probably has upside opportunities. And then that the flip side that we have is interest expense will be higher because of the the, you know, the the rates haven't changed. And then you also have and I'm sure you've heard this, but, you know, we we are making a provision later in the year for for more temporary downtime in the event that we we have, you know, the the timing of it, in particular, the European restructuring activity may may kick into early part of next year. Those are the major factors. And anything in the variance between, you know, the high end of the range, midpoint, low end has probably to do more with macroeconomic trends and things like that that that we're just trying to make a a general range for.

[Gabe Hajde, Research Analyst at Wells Fargo]

Okay. And then the the follow-up question, I've seen a few announcements here in the past month or so, Heineken being one of them, I think, talking about building a pretty meaningful new brewery in the Yucatan and maybe some, you know, reorienting. Gordon, you alluded to, some of their their bottling if that were to to occur. And then in North America, there was an announcement on reformulation for Coca Cola. I'd be curious if there's been any sort of early discussions or if you can talk about maybe the opportunity, for beer in Mexico on on new facilities coming in too.

[Gabe Hajde, Research Analyst at Wells Fargo]

Think I can bring in one online in in 2026, and then this new big facility will be operational in '28. Thank you.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Yeah. Look, Gabe, we're talking to customers all the time, and, you know, I'm spending, you know, 25% of my time out with customers, you know, discussing what the the opportunities and pain points are. And, you know, if you if you look at the, you know, if you look at the dynamics of Mexico, I I I think over the medium long term, you know, it's a tremendous market for for for beer. You know, we've got we've got a fabulous suite of assets down there, and, you know, we're gonna make sure we're in position to, you know, take the opportunities as as they come. You know, products taste better in glass, what can I say?

[Gordon Hardie, CEO, President & Director at O-I Glass]

So, whatever customers want to make more of their products in North American glass, you know, where with some of the efficiencies and you know, on on trapped capacity that we're finding in TOE, we'll we'll be we'll be ready and willing to support anybody that wants to launch products and more products in glass, as we as we move forward.

[Gabe Hajde, Research Analyst at Wells Fargo]

Thank you.

[Gordon Hardie, CEO, President & Director at O-I Glass]

Thanks, Keef.

[Operator]

We currently have no further questions. So I'll hand back to Chris for any closing remarks.

[Chris Manuel, VP - IR at O-I Glass]

Thanks, Lucy. That concludes our earnings conference call. Please note that our third quarter call is presently scheduled for Wednesday, November 5. And remember, make it a memorable moment by choosing safe, sustainable glass. Thank you.

[Operator]

This concludes today's call. Thank you for joining. You may now disconnect your line.

Participants

Executives

• Chris Manuel, VP - IR
• Gordon Hardie, CEO, President & Director
• John Haudrich, Senior VP & CFO

Analysts

• Ghansham Panjabi, Senior Research Analyst at Baird
• Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets
• Michael Roxland, MD - Equity Research at Truist Securities
• George Staphos, Managing Director at Bank of America Merrill Lynch
• Bryan Burgmeier, Equity Research Analyst at Citigroup
• Anojja Shah, Director - Equity Research at UBS Group
• Francisco Ruiz, Co-head - European Mid Caps at Exane BNP Paribas
• Gabe Hajde, Research Analyst at Wells Fargo