What O-I Glass (OI) Said on Its Q3 Earnings Call

Key Points

• O-I Glass reported stable Q3 sales but sharply lower earnings: Net sales were about $1.6 billion, while adjusted earnings fell to a loss of $0.09 per share from $0.48 a year earlier, primarily due to lower pricing and a higher tax rate.
• Europe drove the weakness: European sales declined 8% and segment operating profit dropped to $2 million amid competitive pricing pressure, lower volume, and energy and freight costs that exceeded expectations by about $15 million. O-I is accelerating its recovery plan and considering another permanent plant closure.
• Management lowered its 2026 outlook but expects improvement in 2027: O-I now projects adjusted EBITDA of $925 million–$950 million, about $300 million in free-cash-flow usage, and leverage of 4.5–5 times. It expects positive free cash flow, stable shipments, and higher EBITDA in 2027, supported by cost savings and new business wins.

O-I Glass NYSE: OI reported stable third-quarter sales but a sharp decline in adjusted earnings as pressure in Europe offset solid performance in the Americas. Management lowered its 2026 outlook, citing weaker volume, elevated European energy and freight costs, and a slower-than-expected recovery in the region.

Net sales were approximately $1.6 billion in the third quarter, with favorable currency translation largely offsetting modest declines in selling prices and volume. Shipments fell about 2% year over year, though CEO Gordon Hardie said shipment comparisons have continued to improve sequentially.

Adjusted earnings declined to a loss of $0.09 per share, compared with adjusted earnings of $0.48 per share in the prior-year quarter. CFO John Haudrich said lower net price was the primary headwind, while an unusually high tax rate related primarily to lower European earnings also weighed on results.

Europe Drives Earnings Decline

The company’s European business remained the principal source of weakness. European net sales declined about 8% to $634 million, as selling prices and sales volume each fell nearly 4% and currency translation was unfavorable. Segment operating profit dropped to $2 million from $95 million a year earlier.

Haudrich said competitive pricing pressure was the largest driver of Europe’s weaker performance. Energy and freight costs also came in about $15 million above the company’s expectations for the quarter. Southern European wine-related markets remained under pressure, while demand improved in the U.K. and was stable in Northern Europe.

Hardie called the European results “unacceptable” and said the company is accelerating its recovery plan. The effort centers on four areas:

• Improving commercial performance and net pricing;
• Strengthening energy procurement, risk management and energy usage;
• Driving profitable volume growth through improved competitiveness; and
• Improving end-to-end supply chain productivity and execution.

The company has reorganized European sales operations and added talent to focus on commercial execution, including the timing and structure of price-adjustment mechanisms. Hardie said O-I expects to pursue commercial actions and procurement initiatives to recover cost increases.

Management also said it has begun a process with employee representatives regarding the proposed permanent closure of an additional European plant. O-I believes its European system is operating in the mid-to-upper 90% utilization range after network actions, although the company said significant overcapacity persists in wine markets in Southern Europe.

Americas Remain Resilient

In the Americas, third-quarter net sales increased more than 3% to $970 million. A roughly 1% decline in shipment volume was more than offset by a selling-price increase of just over 1.5% and favorable currency translation. Segment operating profit declined about 2% to $137 million, with the comparison including a $6 million insurance recovery recorded in the prior-year period.

Hardie said Latin America continued to perform strongly despite disruptions including an earthquake in the Andean region. In Brazil, the company said beer sales rose nearly 30% and non-alcoholic beverage sales increased about 18%. In the Andean region, O-I reported growth in non-alcoholic beverages and beer despite regional disruptions.

The company attributed the region’s performance to execution of its Fit to Win cost and operational-improvement program, along with customer collaboration. O-I said 2026 results in the Americas are expected to be nearly 50% above 2024 levels, driven by record Latin American performance.

Fit to Win Benefits and Updated Outlook

Fit to Win generated about $50 million in third-quarter benefits, bringing year-to-date benefits to $135 million and cumulative benefits since inception to $460 million. The company now expects $180 million of net benefits in 2026, lower than previously anticipated because supply-chain challenges in Europe delayed some initiatives.

O-I expects deferred benefits to shift into 2027 and continues to target at least $650 million in cumulative Fit to Win benefits by the end of that year. Management said seven of its highest-opportunity European plants have not yet gone through the company’s Fit to Win or total organization effectiveness programs.

For 2026, O-I now expects adjusted EBITDA of $925 million to $950 million and free cash flow usage of about $300 million. The company expects its year-end leverage ratio to range between 4.5 times and 5 times, while liquidity stood at $1.5 billion at quarter-end.

The revised outlook reflects lower sales volume, including the estimated effect of the U.S.-Canada trade dispute, higher energy and freight costs, and slower delivery of European Fit to Win benefits. O-I expects full-year 2026 sales volume to decline 3% to 4% from 2025, although fourth-quarter enterprise shipments are expected to range from flat to up low single digits, aided by new business and easier comparisons.

Initial 2027 View

Management expects higher net sales and adjusted EBITDA, improved free cash flow and lower leverage in 2027, though it plans to provide formal guidance during its next earnings call. Haudrich said O-I intends to generate positive free cash flow next year, supported by higher EBITDA, capital spending of about $400 million, lower restructuring costs and efforts to reduce inventory.

O-I has secured coverage for more than 90% of forecast European natural-gas needs for 2027, including full coverage for the first quarter. The company said the hedging position should reduce exposure to volatility, though covered energy costs will be higher than in 2026.

For 2027, O-I expects stable shipment volume as new business wins representing about 4% of annual sales volume offset sluggish underlying demand. Management expects at least $170 million of Fit to Win benefits next year and said commercial actions should support improved net pricing.

About O-I Glass (NYSE:OI)

O-I Glass, Inc is a global manufacturer of glass packaging products. The company produces glass bottles and jars primarily for the food, beverage, beer, wine, spirits, and pharmaceutical industries, serving brand owners and consumer-products companies.

Its products are designed to provide packaging, preservation, and presentation for a range of consumer goods. O-I also offers glass packaging in various shapes, sizes, and colors, including custom solutions developed for individual brands.

The company traces its history to the Owens Bottle Company, founded in 1903, and the Illinois Glass Company.

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