O-I Glass Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: George Staphos - BofA Securities Inc - Analyst : Thanks so much. Hi, everybody. Good morning. Thanks for all the details. My questions -- how are you doing? I know it's impossible to peg with precision, but had there been a 25% tariff to the extent that you spoke with your customers and studied it, what effect would that have had on your volume during 2025? Again, if let's say it stayed on for a quarter or two, time it however you want. Relatedly in that question, how volume dependent are your a Fit to Win performance improvements? You know, I guess in some regards they're going to be relatively unaffected, but at some point, volume affects everything. So how much of a shock absorber do you have to get those savings to the bottom line relative to the volume outlook? And I have a quick follow on.

Question: George Staphos - BofA Securities Inc - Analyst : Okay. Thanks, John. My follow-on is just a point of clarification. If we go to slide 7 and we look at the network optimization savings for '25 and it says $75 million to $100 million. And then I look at the right-hand bullet, the lower of the two in that section, it says evaluating further opportunity, REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: George Staphos - BofA Securities Inc - Analyst : Got it. Very good. Thank you so much.

Question: Anthony Pettinari - Citigroup Global Markets Inc - Analyst : Good morning. One of the large can makers I think recently suggested that glass to metal substitution had maybe kind of run its course in North American beer, but maybe not in Europe. And I think the can makers have had pretty strong volumes in Europe. I'm just wondering as you look across your portfolio, are there regions or categories where substrate substitution is either, a meaningful headwind or tailwind in 2025 and just how you think about that dynamic?

Question: Anthony Pettinari - Citigroup Global Markets Inc - Analyst : Okay. That helpful. I'll turn it over.

Question: Joshua Spector - UBS Equity Research - Analyst : Yeah, hi, good morning. I wanted to ask about your plan for your energy contracts or at least any update you can give as those start to come due in 2026, just as we're trying to think about the bridging items to your Fit to Win plan. What's baked in for an assumption there in terms of that headwind? And are you doing anything now to potentially position yourself to offset that?

Question: Joshua Spector - UBS Equity Research - Analyst : Okay. Now that makes sense. So I'll follow up with you guys on that in a month or so. One question on '25 is just with your working capital guidance and your free cash flow, you said about flat. I think earlier in your slides, you said about $50 million to $100 million reduction in inventory. So I guess, are there offsets and receivables or payables or is that working capital assumption in the bridge for free cash flow a bit conservative? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Joshua Spector - UBS Equity Research - Analyst : Got it. Thank you.

Question: Arun Viswanathan - RBC Capital Markets - Analyst : Great. Thanks for taking my question. Congrats on the progress thus far in the transformation. So I guess just on that point, I guess you noted still sluggish volumes across many of the categories. So I think you said that the program isn't really volume dependent, but what if volumes are actually negative in '25? Do you still expect to I realize the full extent of your Fit to Win benefits? And I guess I'm specifically thinking about would, would you have to take swifter action on some of the furnace closures? And maybe you can just give you thoughts on some of those items. Thanks.

Question: Arun Viswanathan - RBC Capital Markets - Analyst : Okay, that's helpful. So it sounds like it's mostly on the cost side. But again, just going back to one of your earlier comments about oversupply in certain European countries. It sounds like there's a possibility that some of those you would have some price deterioration. So again, just in a similar vein, to the extent that you can take costs out, would you -- how do you expect to combat price competition and the possibility of rolling back some of that pricing that you were able to achieve in the '22, '23 period?

Question: Arun Viswanathan - RBC Capital Markets - Analyst : Okay. That's helpful. And just lastly if I may. Just on the CapEx. So it's nice to see that that come down a little bit. What's kind of the longer term CapEx thought? I know you're maybe moderating your MAGMA spend. But what makes up the CapEx? And I guess what's your longer-term target? Thanks.

Question: Arun Viswanathan - RBC Capital Markets - Analyst : Okay, thanks. I'll turn it over.

Question: Gabe Hajde - Wells Fargo Securities, LLC - Analyst : Hi, good morning. I appreciate it's a little bit of a moving target with plant closures, meaning you're not able to realize the fixed cost savings and improved overhead absorption. But I think you guys were kind of carrying $170 million, maybe $180 million of underabsorbed fixed overhead. In slide 8, you call out I think $50 million of higher production, but you're also talking about obviously still whittling down some inventory. So I'm just curious, maybe your best estimate of how much underabsorbed, fixed overhead or production is still stuck in the system that could be unlocked, I guess in '26, '27. [I think, you're better now]

Question: Gabe Hajde - Wells Fargo Securities, LLC - Analyst : Okay. And that it's one of two things, right? It's either volumes sort of started to recover or they're more permanent closures which I know you guys have alluded to. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Gabe Hajde - Wells Fargo Securities, LLC - Analyst : Yes. Okay. I wanted to kind of go to Phase B a little bit. You're calling out again slide $120 million to $150 million of cash restructuring. I guess as you evaluate Phase B, is that equally as cash intensive? Or would some of those improvements be more maybe system dependent that you have to install new systems or is it process oriented that is less capital intensive? And I guess maybe even on Phase A as we look into '26 and think about cash restructuring, knowing what we know today, would we expect kind of that midpoint restructuring spend of $135 million? Which -- where would it go in '26?

Question: Gabe Hajde - Wells Fargo Securities, LLC - Analyst : Got it. Okay. And then shifting gears a little bit. Aluminum is, is already up. Aluminum premiums have moved quite a bit higher in anticipation of some of these trade discrepancies. And then obviously the reais depreciated against the dollar. So does that influence or impact how you guys are thinking about the summer sales season for '25/'26? And I appreciate it's -- we're in February right now, but I think those customers kind of tend to hedge out 9 to 12 months. So maybe that presents a better opportunity in Brazil.

Question: Gabe Hajde - Wells Fargo Securities, LLC - Analyst : Got it. Thank you.

Question: Niccolo Piccini - Truist Securities - Analyst : Yeah. Hi, guys. Thanks. For taking my questions. I guess just to start off. It looks like bourbon, whiskey, they're impaired and they've been weak for a while and that might continue. And one of your customers there recently announced a restructuring and workforce action. I was just wondering if you can comment on Bowling Green and how that's operating given. It's right in the middle of Bourbon Country and if there's any concerns about filling the line or maybe reorienting mix going forward.

Question: Niccolo Piccini - Truist Securities - Analyst : Oh, sorry about that. Just, it looks like whiskey and bourbon could be impaired for a while longer and one of your customers announced some layoffs and restructuring. So can you comment on Bowling Green and how that plant is operating and if there's any concerns filling the line?

Question: Niccolo Piccini - Truist Securities - Analyst : Understood. Thank you. And I just -- going back to the question we've asked before on the difference between your margins in Europe and your competitors over there. There's maybe like a 6% or 7% difference on average. I wonder Gordon, now that you've been in the seat for nine months, what you think is driving that and if you have with Fit to Win an idea of how much of that differential could be made up.

Question: George Staphos - BofA Securities Inc - Analyst : Thanks. Hi, guys. Thanks for taking the follow on. I want to take a bit of a different tact. So we fully appreciate that fit to win is designed to correct what you see as gaps between your performance, your costs versus your peers, both glass and elsewhere in rigid. When you've done the work on the other end, talking to your customers about their field work, what you've done to study this, and I recognize you're going to be biased. You should be, positively towards glass. But what are you finding in terms of customers' willingness to use glass based on what the consumer is telling them because you can become very competitive, improve your margins. But if the consumer has moved away or your customers moved away from it in terms of their mix, it will be less helpful. So what are you finding on the field in marketing, in terms of that outlook right now. Thank you, guys. Good luck in the quarter.

Question: George Staphos - BofA Securities Inc - Analyst : Look from some of the work that we've done on new products. You've actually seen a pick up in glass as well. So we would concur. I'm sorry, John, go ahead.