Q1 2024 O-I Glass Inc Earnings Call

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Emily: Hello everyone, and welcome to the OI Glass first quarter 2024 earnings conference call. My name is Emily, and I'll be facilitating your call today. After the presentation, there will be the opportunity for you to ask any questions, which you can do by pressing start followed by the number one on your telephone keypad. I will now turn the call over to our host, Chris Manuel, Vice President of Investor Relations, to begin. Please go ahead.

M&A: Hello, everyone and welcome to the <unk> first quarter 2024 earnings Conference call. My name is M&A and I'll be facilitating your crude today. After the presentation there will be the opportunity for you to ask any questions, which you can do so by pressing star followed by the number one on your telephone.

Speaker Change: Thank you Pat.

Speaker Change: I'll now turn the call over to our highest Chris Manuel Vice President of Investor Relations to begin. Please go ahead.

Christopher David Manuel: Thank you, Emily, and welcome everyone to the OI GLASS first quarter 2024 conference call. Our discussion today will be led by Andres Lopez, our CEO, and John Haudrich, our CFO. Today, we will discuss key business developments and review our financial results. Following prepared remarks, we will host a Q&A session. Presentation materials for this 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 Andres, who will start on slide three.

Christopher David Manuel: Thank you Emily and welcome everyone to the O I glass first quarter 'twenty 'twenty four conference call.

Christopher David Manuel: Our discussion today will be led by Andres Lopez, our CEO and John Heidrick, our CFO.

They will discuss key business developments and review our financial results. Following prepared remarks, we will host a Q&A session presence.

Christopher David Manuel: Presentation materials for this call are available on the Companys website.

Christopher David Manuel: Please review the Safe Harbor comments and disclosure of our use of non-GAAP financial measures included in those materials.

Christopher David Manuel: Now I'd like to turn the call over to Andre who will start on slide three.

Andres Alberto Lopez: Good morning, everyone, and thanks for your interest in OI. Last night, we reported first quarter earnings of 45 cents per share. As expected, results were down from historically robust performance in the prior year period. Lower earnings primarily reflected softer demand due to the market downturn and temporary production containment to balance supply with lower demand. While net price was down slightly, our margin expansion initiatives are off to a particularly good start this year.

Andre: Good morning, everyone and thanks for your interest in Hawaii.

Andre: Last night, we reported first quarter earnings of <unk> 45 per share.

Andre: As expected results were down from historically robust performance in the prior year period.

Andre: Lower earnings primarily reflected softer demand due to the market downturn and temporary production payments to balance supply with lower shipments.

Andre: <unk> net price was down slightly.

Andre: Margin expansion initiatives are off to a particularly good start to this year.

Andres Alberto Lopez: Although slower than originally anticipated, consumer consumption patterns are gradually improving, and we are encouraged by the progress in our shipment trends since the fourth quarter of last year. As conditions gradually improve, we are focused on the factors within our control. I'm proud of the continued excellent operating performance across the enterprise, and we have increased our full-year margin expansion initiative target as we seek to optimize our 2024 results amid slower demand. Importantly, we continue to advance magma to create a long-term competitive advantage for the company, and we are excited for the start-up of our first magma greenfield plant in Bowling Green, Kentucky this summer.

Andre: Though it's lower than originally anticipated consumer consumption patterns are gradually improving and we are encouraged by the progress in our shipment trends since the fourth quarter of last year.

Andre: Conditions gradually improve we are focused on the factors within our control.

Andre: I am proud of the continued excellent operating performance across the enterprise and we have increased our full year margin expansion initiative target as we seek to optimize our 2024 results amid a slower demand.

Andre: Importantly, we continue to advance magma to create a long term competitive advantage for the company and we are excited for the startup of our first magma Greenfield plant in bowling Green, Kentucky Summer.

Andres Alberto Lopez: As we look to the balance of the year, we are adjusting our full year 2024 outlook to reflect a slower market recovery, which John will review a bit later. Nevertheless, we remain confident about the long-term trajectory for glass demand, as well as stronger future earnings potential as markets recover over time. Let's turn to page 4 to discuss current market trends. While still soft, the commercial environment is gradually improving.

Andre: As we look to the violence of the year, we are adjusting our full year 2024 outlook to reflect a slower market recovery, which John will review a bit later.

Andre: Nevertheless, we remain confident about the long term trajectory for glass demand as well as stronger future earnings potential as markets recovered overtime.

Andre: Let's turn to page four to discuss current market trends.

Andre: While its still soft the commercial environment is gradually improving.

Andres Alberto Lopez: As shown on the top chart, our shipments on a year-over-year basis were down 12.5% in the first quarter compared to a 16% decline in the fourth quarter of 2023. Additionally, April shipments showed gradual improvement as demand was down about 10% from the prior year on a per-day basis when adjusting for the shift in the Easter holiday between 2023 and 2024. Consistent with discussions in previous calls, inventory stocking across the value chain has been a significant driver for lower shipments this past year.

Andre: As shown on the top chart, our shipments on a year over year basis were down 12, 5% in the first quarter compared to a 16% decline in the fourth quarter of 2023.

Additionally April shipments show gradual improvement as demand was down about 10% from prior year on a per day basis, when adjusting for the shift in the Easter holiday between 2023 and 2024.

Andre: Consistent with these cautions in previous calls inventory destocking across the value chain has been a significant driver for lower shipments this past year.

Andres Alberto Lopez: The stocking is in the later stages for products with a short cycle, such as beer, NABs, and food, while activity will likely continue for a couple of quarters for longer cycle products, including spirits and wine. Additionally, consumer patterns are improving, but at a slower rate than expected, as illustrated in the bottom chart. Trends improved consistently over the course of 2023, but they were choppy during the first quarter this year and lacked our expectations.

Andre: The stocking is in the later stages for products with a short cycle, such as beer and AB.

Andre: Fourth while activity will likely continue for a couple of quarters for longer cyclic products, including our spirits and wine.

Andre: Additionally, consumer patterns are improving but at a slower rate than expected as illustrated in the bottom chart.

Andre: <unk> has improved consistently over the course of 2023, but were choppy during the first quarter this year and lagged our expectations softer consumption is attributed to factors we hear about in the news every day to adjust cost inflation.

Andres Alberto Lopez: Software consumption is attributed to the factors we hear about in the news every day, such as cost inflation on food and beverage products driving price elasticity challenges, prolonged higher interest rates, and consumer confidence that remains below pre-pandemic levels.

Food and beverage products driving price elasticity challenges prolonged higher interest rates and consumer confidence that remains below pre pandemic levels.

Andres Alberto Lopez: Furthermore, we have seen a limited share shift and some trade down, especially as our customers ramp up promotional activity, which tends to favor more value brands. As we look to the balance of the year, we expect shipments will improve as the stocking activity drops off over the next several months. However, we have revised our 2024 sales volume outlook to reflect a more gradual improvement in demand over the course of the year as we now project a slower rate of consumption recovery than originally anticipated, which is shown in the circle in the lower chart.

Andre: Furthermore, we have seen a limited share shift and some trade down, especially as our customers ramp up promotional activity, which tend to favor more value rents.

Andre: As we look to the balance of the year, we expect shipments will improve as the stocking activity drops off over the next several months. However, we have revised our 2034 sales volume outlook to reflect a more gradual improvement in demand over the course of the year as we now project.

Andre: Lower rate of consumption recovery that originally anticipated, which is shown in the circle in the lower chart.

Andres Alberto Lopez: Overall, we now expect our 2024 sales volume to be flat to up low single digits compared to our prior outlook of low to mid single digit growth. As markets improve, we anticipate long-term glass demand will continue to benefit from key megatrends such as premiumization, health, and wellness, as well as increased interest in sustainability. Overall, we expect glass demand will substantially recover to pre-pandemic levels over time. Importantly, we are well positioned to take advantage of the rebound as it unfolds. Now I'll turn it over to John, who will review our first quarter performance and updated 2024 outlook in more detail starting on page 5.

Andre: Overall, we now expect our 2024 sales volume will be flat to up low single digits compared to our prior outlook of low to mid single digit growth.

As markets improve we anticipate long term glass demand will continue to benefit from key makeup trends such as premium mutation health and wellness as well as increase interest in sustainability.

Andre: Oh it all we expect glass demand will substantially recover to pre pandemic levels over time importantly, we are well positioned to take advantage of the rebound as you don't votes.

Andre: Now I'll turn it over to Jan who will review, our first quarter performance and updated 2024 outlook in more detail starting on page five.

John A. Haudrich: Thanks, Andres, and good morning, everyone. OI reported first quarter earnings of 45 cents per share. Consistent with their expectations, results were down from historically high earnings of $1.29 per share last year. As illustrated, earnings primarily reflected a decline in segment operating profit, while slightly higher non-operating expense was mostly offset by some favorable effects. Additional details on non-operating items are included in the slide.

Jan: Thanks, Andrew and good morning, everyone Oi reported first quarter earnings of <unk> 45 per share consistent with our expectations results were down from a historically high earnings of $1 29 per share last year.

Jan: As illustrated earnings primarily reflected a decline in segment operating profit while slightly higher non operating expense was mostly offset by some favorable FX additional details on nonoperating items are included in the slides.

John A. Haudrich: Let's turn to page six and discuss recent performance across our two segments. The Americas posted a segment operating profit of $102 million, which was down from $176 million last year. That price was a slight headwind, and sales volume was down 15%. Elevated operating costs reflected significant temporary production curtailment to balance supply with demand, which was partially offset by favorable margin expansion initiative benefits. In Europe, the segment operating profit totaled $133 million, down from $222 million last year.

Speaker Change: Let's turn to page six and discuss recent performance across our two segments.

Speaker Change: The Americas posted segment operating profit of $102 million, which was down from $176 million last year net.

Net price was a slight headwind in sales volume was down 15%.

Speaker Change: Elevated operating cost reflected significant temporary production curtailments to balance supply with demand, which was partially offset by favorable margin expansion initiative benefits.

Speaker Change: In Europe segment operating profit totaled $133 million down from $222 million last year like the Americas net price was a modest headwind in sales volumes were down 10%.

John A. Haudrich: Like the Americas, net price was a modest headwind, and sales volumes were down 10%. Higher operating costs reflected the impact of elevated temporary production curtailments, lower JV performance, and prior year energy credits that did not repeat. However, these headwinds were partially offset by benefits from our Margin Expansion Initiative program. Now, turn to page 7 to discuss our updated 2024 Business Outlook.

Speaker Change: Higher operating cost reflected the impact of elevated temporary production curtailments lower JV performance and prior year energy credits that did not repeat these headwinds were partially offset by benefits from our margin expansion initiative program.

Speaker Change: Let's turn to page seven to discuss our updated 2024 business outlook.

John A. Haudrich: As noted on the left, we have adjusted our full-year earnings guidance for a few factors. Net price is stable, yet we have reduced our sales growth expectations, reflecting a longer destocking process and a more gradual improvement in consumer consumption patterns than originally anticipated. Given softer demand, we intend to take incremental production curtailments to ensure inventories remain in check. Importantly, we are accelerating our curtailment activity in the second quarter following the softer start of the year.

Speaker Change: As noted on the left we have adjusted our full year earnings guidance for a few factors.

Speaker Change: Net prices stable, yet we have reduced our sales growth expectations, reflecting a longer destocking process in a more gradual improvement in consumer consumption patterns than originally anticipated.

Speaker Change: Given the softer demand, we intend to take incremental production curtailments to ensure inventories remain in check importantly, we are accelerating our curtailment activity in the second quarter. Following the softer start of the year.

John A. Haudrich: To help mitigate slower sales growth, we have increased our full-year initiative benefit target to at least $175 million. Finally, our outlook has been impacted by unfavorable FX trends, higher interest rates given the change in the forward curve, and a higher tax rate. As a result, we now expect adjusted earnings to approximate $1.50 to $2.00 per share compared to our prior outlook of $2.25 to $2.65 per share, and we have updated our view of quarterly earnings allocation.

Speaker Change: To help mitigate slower sales growth, we have increased our full year initiative benefit target to at least $175 million.

Speaker Change: Finally, our outlook has been impacted by unfavorable FX trends higher interest rates given the change in the forward curve and a higher tax rate.

Speaker Change: As a result, we now expect adjusted earnings should approximate $1 50 to $2 per share compared to our prior outlook of $2 25 to $2 65 per share and we have updated our view of quarterly quarterly earnings allocation free.

John A. Haudrich: Free cash flow should range between $100 to $150 million, reflecting lower earnings, partially offset by other favorable cash levers, including moderately lower capex. We intend to maintain a healthy balance sheet position and expect to end the year with leverage ratios in the low threes, which will naturally decrease as volumes and earnings recover. As Andres discussed, we believe current market conditions are temporary. While it will likely take longer than originally anticipated, earnings should rebound when sales and production volumes substantially return to pre-pandemic levels. Now I'll turn it back to Andres, who will provide an update on our key strategic objectives on page. Thank you. Be safe.

Free cash flow should range between $100 million to $150 million, reflecting lower earnings partially offset by other favorable cash levers, including moderately lower capex.

We intend to maintain a healthy balance sheet position and expect to end the year with leverage in the low threes, which will naturally decrease as volumes and earnings recover.

Speaker Change: As Andrew discussed we believe current market conditions are temporary while it will likely take longer than originally anticipated earnings should rebound when sales and production volume substantially returned to pre pandemic levels now I'll turn it back to Andrew who will provide an update on our key strategic objectives on page eight thanks, Sean.

Andres Alberto Lopez: Despite the market downturn, we continue to execute on the five key priorities we established this year to enable our long-term strategy. We are off to a good start with our margin expansion initiatives, which are helping offset some of the current market pressure. As noted, we have increased our full-year target, which includes planned restructuring activities in 2024 that are now substantially complete. We will continue to evaluate our network requirements as future market trends unfold.

Andrew: Despite the market downturn, we continue to execute on the five key priorities. We established this year to enable our long term strategy.

Andrew: We are off to a good start with our margin expansion initiatives, which are helping offset some of the current market pressures as noted we have increased our full year target, which includes planned restructuring activities in 2024 that are now substantially complete.

Andrew: We will continue to evaluate our network requirements as future market trends will close at.

Andres Alberto Lopez: At the same time, we are expanding our business to enable profitable growth. As I will discuss further on the next page, our Magma Greenfield project remains on schedule, and we continue to advance attractive expansion projects, while others remain on hold pending further market recovery. All Magma R&D is advancing well, and we remain on track for our first Gen 3 deployment in 2026. Likewise, we recently approved two new ultralines in Europe to support increasing customer interest in lighter-weight packages.

Andrew: At the same time, we are expanding our business to enable profitable growth.

Andrew: As I will discuss further on the next page <unk> Greenfield project remains on schedule and we continue to advance attractive expansion project, while others remain on hold pending.

Andrew: Further market recovery.

Andrew: While my RMB is advancing well and we remain on track for our first Gen III deployment in 2026.

Andrew: Likewise, we recently approved two new ultra lines in Europe to support increasing customer interest in lighter weight packaging.

Andres Alberto Lopez: Our ESG efforts are progressing well, and our 2024 capital plan includes all key projects that enable our long-term sustainability roadmap. Furthermore, we are excited that the U.S. Department of Energy has selected OI to receive up to $125 million in funding over the next few years to accelerate the deployment of industrial decarbonization technology. Finally, we intend to maintain a healthy balance sheet, as John discussed.

Andrew: Our ESG efforts are progressing well on our 2024 capital plan includes all key projects that enable our long term sustainability roadmap.

Andrew: Furthermore, we are excited that the U S Department of energy has elected to receive up to $125 million in funding over the next few years to accelerate deployment of industrial the carbonization technologies.

Andrew: Finally, we intend to maintain a healthy balance sheet as John discussed.

Andres Alberto Lopez: Overall, we are off to a good start this year as we advance our long-term strategy. More on Magma on page 9. Our Heritage Network is a great fit for many of the categories that we have served for decades and will continue to serve into the future. However, markets have evolved, and we now see greater brand proliferation and increased product fragmentation. Magma reimagines the entire glassmaking process to serve a more differentiated market. It is more flexible, scalable, and can be more rapidly deployed.

Andrew: It all we are off to a good start this year as we advance our long term strategy.

Andrew: Moreover, magma on page nine.

Andrew: Our heritage network is a great fit for many of the categories that we have served for decades and will continue to serve into the future.

Andrew: However markets have evolved and we now see greater brand proliferation and increased product fragmentation.

Andrew: <unk> dark glassmaking process to serve a more differentiated market.

Andrew: It's more flexible scalable and can be more rapidly deployed mediaset smaller and will feed into an industrial warehouse, which lowers future capital intensity on operating cost.

Andres Alberto Lopez: It is smaller and will fit into an industrial warehouse, which lowers future capital intensity and operating costs. Furthermore, MAGMA can be near-located or co-located to reduce logistics costs and is designed around sustainability from the ground up. In short, MAGMA is designed to meet the market requirements for today and into the future. We are nearing an important milestone, and we expect to start up our first magma greenfield in either late July or early August, located in Kentucky, which includes nearly 100 whiskey distillers. This new plant is an example of how magma can enable profitable growth in attractive fragmented markets. Now, we turn to page 10.

Andrew: Furthermore, Mac Mac can be near located or co located to reduce logistics costs and is designed around sustainability from the ground up.

Andrew: In short <unk> be assigned to meet the market requirements for today and into the future.

Andrew: We are nearing an important milestone and we expect to start up our first Mac My Greenfield in either late July or early August.

Andrew: Okay did in Kentucky, which includes nearly 100 whiskey. The Steelers. These new plant is an example of how magma kind of enabled profit our growth in attractive fragmented markets.

Andrew: Let's turn to page 10.

Andres Alberto Lopez: We believe Magma and Ultra will increase OI's right to win in the marketplace. In particular, increased flexibility, scalability, and rapid deployment will create key benefits for OI across attractive, differentiated markets and categories. Overall, MACMA and ULTRA together represent a major leap forward and should expand OI's total addressable market by over 30%. We look forward to hosting investors and customers at our new Greenfield facility in the future, which will demonstrate all our innovative technologies that will create a new competitive advantage for OI and enable Glass to win in the marketplace. Please move to page 11 for some final remarks.

We relate Magna and ultra will increase <unk> right to win in the marketplace in particular increased flexibility scalability and rapid deployment will create key benefits for oi across attractive differentiated markets and categories.

Andrew: At all of the Mcmahon ultra together represent a major leap forward and should have spent oi total addressable market by over 30%.

Andrew: We look forward to hosting investors and customers at our new Greenfield facility in the future, which will demonstrate all our innovative technologies that will create a new competitive advantage for life on enabled glass the win in the marketplace.

Andrew: Please move to page 11 for some final remarks.

Andres Alberto Lopez: OI continues to navigate well through challenging macro conditions and delivers solid first-quarter results despite softer than expected shipment levels. While we have revised our current year outlook to reflect a slower-than-anticipated market recovery, we are taking the right steps to position the company for future success. We are properly aligning supply with lower demand, and we have increased our already record-high target for margin-expansion-initiative benefits. Despite the short-term challenges, we remain confident in the long-term positive trajectory of glass packaging, and we are well positioned for the rebound, which should significantly improve future earnings over time. Importantly, we are excited for the startup of our first magma greenfield plant this summer as we align our business with the future of glass packaging.

Andrew: Hawaii continues to navigate well through challenging macro conditions and delivered solid first quarter results piece by itself third an unexpected shipment leverage.

Andrew: While we have revised our current year outlook to reflect a slower than anticipated market recovery. We are taking the right steps to position the company for future success.

Andrew: We are appropriately aligning supply with lower demand and we have increased our already record high target for margin expansion initiative benefits.

Andrew: Despite the short term challenges we remain confident in the long term positive trajectory of glass packaging and we are well positioned for the rebound, which should significantly improve future earnings over time.

Andrew: Importantly, we are excited for the startup of our first magma Greenfield plan. This summer as we align our business to the future of glass packaging.

Andres Alberto Lopez: Before we take your questions, I would like to end with a few reflections on my time as CEO. Over the past several years, we have significantly transformed the company, and we are now a much more disciplined, agile, and capable organization. After stabilizing our operations, the team significantly enhanced our ability to execute, and we have consistently delivered on our commitment. We rebalanced our network, expanding our America's footprint and divesting non-core assets. We have reduced risk and improved our cash flow profile with the fair and final resolution of our legacy asbestos liabilities. And we have the best balance sheet in nearly a decade.

Speaker Change: Before we take your questions I would like to end with a few reflections on my time as CEO.

Speaker Change: Over the past several years, we have significantly transformed the company and we are now a much more discipline agile and capable organization after.

Speaker Change: After stabilizing our operations the team significantly enhance our ability to execute and we have consistently delivered on our commitments.

Speaker Change: We rebalance our network expanding our Americas footprint on divesting noncore assets.

Reduce risk and improve our cash flow profile with a further and final resolution of our legacy asbestos liabilities and we have diverse balance sheet in nearly a decade.

Speaker Change: While improving core performance and optimizing our business structure. We also develop new rates with technologies that will create a new competitive advantage for years to come.

Andres Alberto Lopez: While improving core performance and optimizing our business structure, we have also developed new breakthrough technologies that will create a new competitive advantage for years to come. I'm proud of what we have accomplished, and we'd like to thank the Oy family for all that we have accomplished together. I would also like to thank each of you in the investment community for your interest in OI over the years. The rest is yet to come.

Speaker Change: I am proud of what we have accomplished and we like to thank the <unk> family for all that we have accomplished together.

Speaker Change: I would also like to thank each of you in the investment community for their interest in Oi over the years.

Speaker Change: <unk> yet to come.

Andres Alberto Lopez: Speaking on behalf of Gordon Hardy, our incoming CEO, he's actively engaged in the transition. He's looking forward to joining the OI team in mid-May and meeting with the investment community in the near future. Gordon has served on the OI board for over eight years and knows the company well. With his years of experience working in the food and beverage industry, including working with some of our customers, he's well-positioned to lead the company into the future. Thank you, and we're now ready to address your questions.

Speaker Change: Speaking on behalf of Guadalajara.

Speaker Change: Our incoming CEO. He is actively engaged in the transition is looking forward to joining the team in mid May and meeting with the investment community in the near future.

Speaker Change: Gordon has served on the onboard photo of our eight years and knows the company well.

Speaker Change: With his years of experience working in the fully on various industry, including some of our customers. He is well positioned to lead the company into the future.

Thank you.

Speaker Change: Now ready to address your questions.

Operator: Thank you. As a reminder, if you would like to ask a question today, you can do so now by pressing star followed by the number one on your telephone keypad. If you change your mind and would like to be removed from the queue, please press star and then two. We ask that you please limit yourself to one question and one follow-up and please re-queue for any further questions. Our first question today comes from the line of Ghansham Panjabi with Baird. Please go ahead; your line is now open.

Speaker Change: Thank you.

Speaker Change: If you would like to ask a question today you can do so now by pressing star followed by the number one on your telephone keypad. If you change your mind I would like to be removed from the queue. Please press star and then Keith.

Ask that you please limit yourself to one question and one follow up please re queue for any further questions.

Our first question today comes from the line of Ghansham Panjabi with Baird.

Ghansham Panjabi: Please go ahead. Your line is now open.

Ghansham Panjabi: Thank you good morning, everybody and Hey, Andrew Congrats on your retirement and also on your very impressive legacy you are leaving behind wish you well for the future. Thank you.

Ghansham Panjabi: Thank you, good morning everybody, and hey Andres, congrats on your retirement and also on the, you know, very impressive legacy you're leaving behind. Wish you well for the future. Thank you. Yeah, so I guess first off, you know, in terms of the volume adjustments relative to the prior guidance, are there any notable categories that are driving that sort of derating, if you will, or is it just the broad base.

Ghansham Panjabi: Yes, so I guess first off in terms of the volume adjustments relative to the prior guidance are there any notable categories that are driving that.

Ghansham Panjabi: De rating if you will or is it just broad based at this point.

Ghansham Panjabi: I think it is broad based with exception of the ASEAN countries.

Andres Alberto Lopez: I think it is growth-based, with the exception of the Andean countries, which is the place where we invested in expansion. That is performing quite well, and in fact, Colombia specifically is growing year-on-year in the mid-to-late 20s. Every other market is experiencing this slowdown, with some markets having more stocking impact. For example, spirits in North America or spirits in Mexico because of tequila. But for the most part, it is everywhere, with the exception of Mexico and other countries, and specifically Colombia.

Speaker Change: This is the place where we invested on an expansion that is.

Speaker Change: Performing quite well and in fact the.

Speaker Change: Columbia specifically.

Growing year on year in the mid teens.

Speaker Change: Every every other market is experiencing the slowdown.

Speaker Change: We'd sell market, having more stocking.

Speaker Change: The impact for example experienced in North America or experience in Mexico because of the killer.

Speaker Change: For the most part it is everywhere with the exception of.

Speaker Change: The Andean countries, specifically, Colombia.

John A. Haudrich: At Ghansham I would add if you take a look on a category basis consistent with Andres said is we're seeing the best recovery and improvement in the beer category and it but it but it is choppy across the different markets as Andres mentioned down in Colombia for example is doing quite well and some other markets it's still kind of flattish to down a little bit but overall we've seen the most improvement in beer which again is one of your shorter cycle areas that as we mentioned that the stocking is substantially complete and we're seeing that improve yet you're still seeing that wine and spirits category stock still kind of down in that low to mid single digits and with the expectation it might drag on a little bit longer given the consumer consumption in that area is softer and it might take a little bit longer for that area to destock

Speaker Change: Ghansham I would add if you take a look on a category basis consistent with Andre said is that we're seeing the best recovery and improvement in the beer category.

Speaker Change: But it is choppy across the different markets as Anders mentioned down in Colombia. For example is doing quite well in some other markets, it's still kind of flattish to down a little bit but overall, we've seen the most improvement in beer, which again is one of your shorter cycle areas. We mentioned that we're seeing.

Speaker Change: The Destocking is substantially complete and we're seeing that improve yet youre still seeing that wine and spirits category stocks still kind of down in that low to mid single digits and with the expectation that might drag on a little bit longer given the consumer consumption in that area is softer and it might take a little bit longer for that area to destock.

Speaker Change: Got it. Thank you and then in terms of.

Ghansham Panjabi: Got it, thank you. And then, in terms of, you know, the de-stocking specific to Wine and Spirits, what sort of timeline is realistic as it relates to the de-stocking component? And then also, just given the weakness you're seeing across the board, I know you have a lot of contracted business, but, you know, just touch on maybe the competitive activity across the different regions, just given that it's sort of a lower for longer, you know, volume dynamic. Thank you.

Speaker Change: The destocking specific to wine and spirits.

Speaker Change: What sort of timeline.

Speaker Change: Realistic as it relates to the.

Speaker Change: The Destocking component and then also just given the weakness you're seeing across the board I know you have a lot of contracted business, but.

Speaker Change: Just touch on maybe the competitive activity across the different regions just given.

Speaker Change: Sort of a lower for longer volume dynamic. Thank you.

Speaker Change: So.

Andres Alberto Lopez: With regard to the stock, we're seeing some interesting evolution lately. Band trends are changing as we speak. So we're seeing some interesting evolution. With regard to spirits and wine, we expect this to continue through the second half, improving along the way, but it should be recovering in the second half overall. As far as the competitive environment is concerned, you know, the only

Speaker Change: With regards to.

Speaker Change: The stocking were seeing some interesting evolution lately.

Speaker Change: Demand trends are changing as we speak so we're seeing some.

Speaker Change: Interesting evolution.

Speaker Change: With regards to our spirits and wine we expect this to continue.

Speaker Change: Through the second half.

Speaker Change: Improving along the way, but it should be.

Speaker Change: Recovering in the second half hurdle.

John A. Haudrich: As far as the competitive environment is concerned, the only thing I think we can add is that we are managing our businesses as we have over the last several years to really balance supply with demand and be very crisp on our inventory levels so that we maintain the proper balance within our system. I really can't really comment too much on the competitive environment.

Speaker Change: As far as the competitive environment.

Speaker Change: The only thing I think we can add is that we are managing our business as we have over the last several years to really balance supply with demand and be very very crisp on on our inventory levels. So that we maintain a proper balance within our system.

Speaker Change: Can't really comment too much on the competitors.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: The next question comes from Mike <unk> with curious Securities. Please go ahead Mike.

Operator: The next question comes from Mike Roxland with Tourist Securities. Please go ahead, Mike.

Speaker Change: Okay.

Michael Andrew Roxland: Thank you Andres, John, and Chris for taking my questions. And Andres, congratulations and best of luck in your retirement. Thank you.

Mike: Thank you Andres, John and Chris for taking my questions and Andres Congratulations and best of luck in your retirement.

Speaker Change: Thank you.

Michael Andrew Roxland: So my first question, in terms of the accelerated curtailment activity, is that mostly occurring in the Americas? And is there something specific that happened? Because you sounded a little more confident last quarter. You also were at a conference in late February where you reiterated your guidance. I'm wondering if something happened between the conference or versus last quarter where you became more cautious. And I understand that the backdrop is volatile; the consumer is volatile. But has something really happened more recently to increase your cautiousness and negatively affect your outlook?

Mike: So my first question in terms of the accelerating curtailment activity is that mostly occurring in the America is there something thats, specifically, because well always have a little more confident.

Mike: Last quarter you also the world.

Mike: A conference in late February where you reiterated your guidance I'm wondering if something happened between the two.

Mike: Conference or versus last quarter, where you become more cautious and I understand that the backdrop is volatile the consumer's volatile but.

Mike: Heseltine won't happened more recently.

Kris: Kris your cautiousness.

Kris: Negatively affect your outlook.

Kris: So curtailments have been more pronounced in the Americas as you mentioned now.

Andres Alberto Lopez: So curtainments have been more pronounced in the Americas, as you mentioned. Now, um... As we entered the year, we had expectations with regard to the pace of the stockpile as well as the consumer consumption level. Now, Q4, with all the data we have, was the lowest point in the year-on-year counts for us. Q1 showed an improvement versus Q4, and April is showing an improvement versus Q1. Now, we had a pretty slow March, and that's what made Q1 so low.

Kris: As we entered the year, we had an expectation with regards to the base of the stocking as well as the consumer consumption layers now Q4 with all the data we have was the lowest point in the year on year comps for us.

Kris: Q1 showed an improvement versus Q4.

Kris: And April at least showing an improvement versus Q1.

Kris: Now we had a pretty slow March and that's what made the Q1, so low now.

Andres Alberto Lopez: Now, with all that in mind and with the latest information at hand, we see the stock is taking a little longer than we originally anticipated, so we are correcting that. And consumer consumption is recovering, but it's recovering at a slower pace. Now, there are some encouraging signs. For example, when we look at wine in Europe, wine from Italy, exports are growing year-on-year in the latest data that we have, for example.

Kris: Now with all that in mind and with the latest information at hand, we see the stock is taking a little longer than we originally anticipated. So we are correcting that.

Kris: And consumer consumption is recovering but he is recovering at a slower pace now there are some encouraging signs for example, when we look at the wind in Europe.

Kris: Wind out of Italy, the exports are growing year on year in the latest data we have for example.

Andres Alberto Lopez: But then we've got to see that continue for the balance of the year. There is some positive evolution in beer and wine inside Italy at this point. There is improved performance of beer in North Central Europe. So all of this is unfolding as we speak, and that makes it a little bit more challenging. But we believe we have now corrected that volume based on the latest information we have and more in line with the actual stocking pace as well as the level of consumer consumption.

Kris: We got to see that to continue.

Kris: For the balance of the year.

Kris: There is some positive evolution in beer and wine inside Italy at this point there is improved performance of beer in North Central Europe. So all of this is unfolding as we speak and that makes it a little bit more challenging, but we believe we've now corrected that volume based on the latest information we have and more in line.

Kris: With the actual restocking pace as well as the level of consumer consumption.

John A. Haudrich: Yeah, Mike, what I would add is, if you take a look at the curtailment activity, we had about 8% curtailment in the first quarter, which is kind of a line maybe a little higher than the sales volume decline that we were expecting in the first quarter going into the period. But obviously, the actual decline was bigger than that.

Speaker Change: Yes, Mike what I would add is if you take a look at the curtailment activity, we had about 8% curtailment in the first quarter, which was kind of aligned maybe a little higher than the sales volume decline that we were expecting in the first quarter going into the period, obviously the actual the decline was bigger than that so we are stepping up their curtailment.

John A. Haudrich: So we are stepping up the curtailment activity. It'll probably be anywhere between 10% to 12% of our curtailment over the balance of the year, with probably the peak being in the second quarter as we catch up for, you know, adjusting for a little bit of slowness in the first quarter. As we look to where, as Andres mentioned, we have been most active in our curtailment in the Americas, and so, probably, incrementally more curtailment will be occurring in Europe as we look to rebalance everything over the course of the year.

Speaker Change: It'll probably be anywhere between 10% to 12% level of our curtailment over the balance of the year with probably the peak being in the second quarter here as we catch up for adjusting for a little bit of slowness in the in the first quarter as we look to where as I. Just mentioned we have been most active in our curtailment in the.

Speaker Change: Because and so probably incrementally more curtailment will be occurring in Europe, as we look to rebalance everything over the course of the year.

Speaker Change: Got it thank you for that color.

Michael Andrew Roxland: God, thank you for that color. And then, just like for my follow-up, can you mention or comment on any additional opportunities you have in MAGMA to partly offset this additional demand? You mentioned raising the target to a total of $175 million for the year. It sounds like you've accomplished a number of projects to achieve that target thus far. But what else? I mean, what, above and beyond the 150 or even the 135, do you have at your disposal to help offset some of this persistent demand weakness? Thank you.

Speaker Change: And then just my quick follow up can you mention or comment on any additional opportunities you have in management.

Speaker Change: We offset this additional demand weakness you mentioned amazing title totaled $175 million.

Speaker Change: It sounds like you've accomplished a number of projects to.

Speaker Change: To achieve that target, thus far but what else can I mean, one above and beyond the 150 <unk>.

Speaker Change: Do you have at your disposal to help offset some of the persistent demand weakness. Thank you.

Speaker Change: Yes, so we see opportunities in multiple markets myeloma give any flexi reality scalar really at the time to market.

Andres Alberto Lopez: Yeah, so we see opportunities in multiple markets for magma given its flexibility, scalability, time to market, and many other things, such as lower capital intensity and lower total cost of ownership. The ability to co-locate or near-locate has many opportunities for magma.

Speaker Change: Many other things lower capital intensity lower total cost of ownership.

Speaker Change: The ability to co locate or near located.

Speaker Change: <unk> has many opportunities for Magna. So for example, what we're doing right now.

Andres Alberto Lopez: So, for example, what we're doing right now in Kentucky is to put capacity right where the demand is for these craft distillers, making capacity available for them to be able to guarantee their supply. Like that, you will be able to map similar situations across the United States and in other markets. And there are enough opportunities already identified to support a larger-scale deployment starting once Gen III is concluded.

Speaker Change: In Kentucky is to put capacity right, where the demand is for these crap that dealers are making.

Speaker Change: Making capacity available for them to be able to guarantee a supply like that you will be able to map similar situations across the United States and in other markets.

And there is enough.

Speaker Change: There are enough opportunities already identified tool.

Speaker Change: <unk> supports a larger scale deployment is starting.

Once Gen three is concluded.

Andres Alberto Lopez: So we mentioned here that MAGME is very good for the fragmented premium market, which is high value, and that's where we're focusing our efforts and our plans at the moment. And Mike, to your question on what's driving the...

Speaker Change: We mentioned here that Magna is very good for fragmented premium market, which is high value and that's where we're focusing.

Speaker Change: Our efforts on our plans at this point.

John A. Haudrich: and Mike, to your question on what's driving the additional benefits we're looking for in the margin expansion initiatives going from 150 to 175. Keep in mind 75 million of that is related to the restructuring of various facilities or SG&A reductions that we made decisions on in the fourth quarter of last year. All that work is substantially done, and so we are at the run rate of that benefit already, and so that certainly helped us in the first quarter and gives us confidence.

Speaker Change: And Mike to your question on what's driving the additional benefits we're looking for in the margin expansion initiatives going from $1 50 to 175.

Speaker Change: Keep in mind at $75 million of that is related to restructuring of various facilities or SG&A reductions that we made decisions on in the fourth quarter of last year. All of that work is substantially done and so we are at the run rate of that benefit already.

And so that certainly helped us in the first quarter and gives us the confidence. So we really are looking at another $100 million above that and if you look at historically, how the company has performed on these initiatives.

John A. Haudrich: So we really are looking at another hundred million dollars above that and if you look at historically how the company has performed on these initiatives that's that's in our wheelhouse. One thing I would add in a big shout out to the operations team we're seeing the best performance in the operation in seven years and that is providing us a backdrop of being able to drive more benefits in that regard and and we are shifting some of our capital spend a little bit less on growth right now because of the softness in the market and a little bit more towards cost-related projects automation things like that that sustain and additional benefits this year but also really build the pipeline for continued benefits and continued margin expansion.

Speaker Change: That's in our wheelhouse.

Speaker Change: One thing I would add in a big shout out to the operations team, we're seeing the best performance in the operation in seven years and that is providing us a backdrop of being able to drive more benefits in that regard and we are shifting some of our capital spend.

Speaker Change: Little bit less on growth right now because of the softness in the market and a little bit more towards cost related projects automation things like that that sustaining and additional benefits. This year, but also really build the pipeline for continued benefits and continued margin expansions into the future.

Speaker Change: The next question comes from Arun Viswanathan with RBC capital markets. Please go ahead.

Operator: The next question comes from Arun Viswanathan with RBC Capital Markets. Please go ahead.

Arun Shankar Viswanathan: Great. Thanks for taking my question.

Arun Shankar Viswanathan: Great, thanks for taking my question. I guess, yeah, again, I just wanted to go back to the volume front. Do you think it's possible that we revert to, say, a flattish or a 1% growth trajectory maybe in the back half of this year, especially facing easy comps and Q3, Q4, and maybe some capacity additions and your magma build out? And is that kind of where you place long-term glass demand, or do you think there's been structural weakness now that we should revert to maybe a lower growth rate?

Arun Shankar Viswanathan: I guess again I just wanted to go back to the volume front so do.

Arun Shankar Viswanathan: Do you think it's possible that we revert to say, a flattish or zero or 1% growth trajectory maybe in the back half of this year, especially facing easy comps in Q3, Q4, and maybe some capacity additions and magna build out and.

Arun Shankar Viswanathan: Is that kind of where you place long term glass demand or do you think there's been some structural weakness now that we should.

Revert to maybe a lower growth rate.

Arun Shankar Viswanathan: So our expectation is that we will go back to pre pandemic levels and the same is the perspective of our customers. So every customer we talk to is planning to.

Andres Alberto Lopez: So our expectation is that we will go back to pre-pandemic levels, and the same is the perspective of our customers.

John A. Haudrich: So every customer we talk to is planning to go back to pre-pandemic or slightly higher, depending on the industry in which they are. So now as the stocking finalizes, which has been the largest driver of our sales drop, and consumer confidence comes back up, we should be able to start seeing that level of performance. Knowing exactly where that is going to fall is difficult, but our expectation is that later in the year and at the end of the year, we'll be at a much different pace when compared to now.

Arun Shankar Viswanathan: To go back to pre pandemic go to slightly higher depending on the industry in which they are so now as they're stuck and finalizes, which would mean the largest driver of our changed at all.

Arun Shankar Viswanathan: And consumer comps back half, we should be able to start seeing that level of performance.

Arun Shankar Viswanathan: Exactly where that he is going to fall is difficult, but our expectation is that we're going to later in the year and exiting the year will be a much different pace when compared to today.

John A. Haudrich: Yeah, to build off of that, Arun, I would say that right now we're in a mode where we are recovering to, as Andres said, that pre-pandemic basis as the consumer gradually starts to improve, as we mentioned. So I think it's a little early to be able to call long-term trends because we have to see a little bit more there. But as we look at what's driving the softness right now, whether it's destocking or whether it's just kind of the macros and things like that, it's too early to make a call that there's any change in the drivers for our business over the long term. So we haven't really changed that perspective yet.

Yes to build off of that Arun I would say that right now we're in a mode, where we are recovering to as owners said that pre pandemic basis.

Arun Shankar Viswanathan: As is the consumer gradually starts to improve as we as we mentioned.

Arun Shankar Viswanathan: So I think it's a little early to be able to call long term trends, because we have to see a little bit more there, but as we look at what's driving the softness.

Arun Shankar Viswanathan: Right now, whether it's destocking or whether it's just kind of the macros and things like that it's too early to make a call that there is any change in the drivers for our business over the long term. So so we haven't really changed that perspective, yet now.

John A. Haudrich: Now to your question about the back half of the year, too, so it's included in our materials on page 4. We do expect things in the back half of the year to be up mid-single digits or high-single digits. Again, to kind of what you're alluding to, there are easier counts. We were down in the mid-teens last year. So we will be comparing those to be able to give us stronger growth overall and to recover in time to pre-pandemic levels. And then we'll see the longer-term trends unfold.

Arun Shankar Viswanathan: To your question about the back half of the year too.

Arun Shankar Viswanathan: So it is included in our materials on page four we do expect things in the back half of the year to be up mid single digits or high single digits again to your kind of what you are alluding to there are easier comps were down mid teens last year. So we will be comping those to be able to give us stronger growth overall to recovering in time too.

Arun Shankar Viswanathan: To pre pandemic levels, and then we will see the longer term trends unfold.

John A. Haudrich: and everything we are describing. The answer to your question doesn't include any deployment of...

Arun Shankar Viswanathan: And everything we are driving.

Arun Shankar Viswanathan: Answering your question doesn't include any deployment of Marc Yes, correct.

Yes.

Arun Shankar Viswanathan: Oh, great. And then, just real quickly on price-costs, so, um... You may have addressed this, but, you know, you wanted to hold on to, say, two-thirds of your pricing that was put in place over the last couple of years. Do you still feel comfortable with that cadence? Especially given that we've potentially seen some further deflation on the raw side? Or how would you kind of characterize your outlook for price and cost after this report? Thanks, Yeah, when I first say, you know, price, cost.

Speaker Change: Oh, Great and then just quickly on price costs. So.

Speaker Change: Thanks.

Speaker Change: You may have addressed this but you wanted to hold on to say two thirds of your pricing.

Speaker Change: That was put in place over the last couple of years do you still feel comfortable with that.

Speaker Change: Cadence.

Speaker Change: Especially given that we've potentially seeing.

Speaker Change: Some some further deflation on the raws side or how would you kind of characterize your outlook for price cost. After this report thanks.

Speaker Change: Yes, what I first say price cost this year, whereas we said it's stable with our original outlook of some pressure.

John A. Haudrich: Yeah, what I'm first saying is price cost this year, as we said, it's stable with our original outlook of some pressure of, you know, call it a little over $200 million or so of price cost pressure. We have not changed that.

Speaker Change: Call it little over $200 million or so of price cost pressure, we have not changed that what we've seen is a little bit of a softening in cost inflation and most of that's on the energy side, a little bit in raw materials and price has been adjusted a little bit primarily because for example, the energy.

Speaker Change: Adjustments coming in North America get pass through to our customers pretty quickly.

John A. Haudrich: What we've seen is a little bit of softening and cost inflation, right? And most of that's on the energy side, a little bit of raw materials, and prices have been adjusted a little bit, primarily because, for example, the energy adjustments coming in North America get passed to our customers pretty quickly. As we look to the overall backdrop of cost inflation, we're looking again at low single-digit cost inflation coming off a little bit of what we were thinking.

Speaker Change: As we look to the overall backdrop of cost inflation, we're looking again low single digit cost inflation coming off a little bit of what we're thinking and keep in mind more than half of our business is under long term agreements with price adjustment formula. So as we go into next year.

Speaker Change: There should be a natural continued recovery component of that I think it's a little early to talk about the overall price.

Speaker Change: Marketplace going forward, but I believe that if you take a look at the history of this company over with the exception of.

Speaker Change: The last year or so here, we have historically been a business that's been either neutral or a little bit of positive on net price and a more balanced environment. If demand comes back into a little bit more of a normalized environment. So we believe that that's still the fundamental backdrop for our business of course, we just got to work through a little bit of the.

John A. Haudrich: And keep in mind, you know, more than half of our business is under long-term agreements with price adjustment formulas. So as we go into next year, there should be a natural continued recovery component of that. So we believe that that's still the fundamental backdrop for our business. Of course, we just have to work through a little bit of the transition here as we're referring to it.

Speaker Change: And here as we're referring to on the call.

Speaker Change: Thanks.

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

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

George Leon Staphos: Thanks, So much hi, everyone. Good morning, Thanks for the details Andreas again, congratulations on your retirement and everything that you've accomplished NOI.

George Leon Staphos: Thanks so much. Hi, everyone. Good morning. Thanks for the details. Andres, again, congratulations on your retirement and everything that you accomplished at OI and for your support of our research. Thank you.

George Leon Staphos: And the support of our research. Thank you I guess I wanted to come back.

George Leon Staphos: I guess I want to come back to the extent that your customers had a view on this. What was the reason, in your view, that March wound up being a little bit weaker than anticipated? You're not alone in that regard. I'm not trying to pick on OI.

George Leon Staphos: From to the extent that your customers had a view on this.

George Leon Staphos: What was the reason in your view that March wound up being a little bit weaker than anticipated youre not alone in that regard I'm not trying to pick on Oi. It seemed like March was a little bit softer than expected.

Andres Alberto Lopez: It seemed like March was a little bit softer than expected, even when adjusting for days. For a lot of our companies, what was your customer base saying in that regard, and why do you feel comfortable that things will, in fact, improve in 2Q? The second question, again, related to what your customers are saying, and to some degree, you already covered it, saying it's too early to call it, perhaps, is that as you look out the next couple of years, what worries you most about the volume outlook?

Even when adjusting for days.

George Leon Staphos: For a lot of our companies what was your customer base, saying in that regard.

George Leon Staphos: And why you feel comfortable that things do in fact improve into <unk>.

George Leon Staphos: The second question again related to what your customers are saying and to some degree you already covered it.

George Leon Staphos: Saying, it's too early to call. It perhaps is that as you look out. The next couple of years, what worries you most about the volume outlook. What gives you the most confidence in the volume outlook.

Andres Alberto Lopez: What gives you the most confidence in the volume outlook? De-stalking or the recovery from de-stalking. Consumption and, or its recovery, and or changing consumer tastes. There's been some discussion in the trade about changing consumer tastes, trade down, and consumers moving away from traditional, Thank you.

George Leon Staphos: Destocking was recovery from Destocking.

George Leon Staphos: Consumption <unk> recovery.

And we're changing consumer tastes theres been some discussion in the trade about changing consumer taste trade down and consumers moving away from traditional spirits. What are your customers, saying in that regard relative to your demand outlook. Thank you.

Speaker Change: Okay. So it is difficult to know exactly what happened in March but there are some things that might be impacting the numbers for example.

Andres Alberto Lopez: Okay, so it's difficult to know exactly what happened in March, but there are some things that might be impacting the numbers. For example, customers might be taking the opportunity to drastically reuse inventories before quarter end. And the other thing is that some of the customers have a fiscal year that is ending or about to end, so most likely they're taking actions related to that, and then they will have a more normal operation going into the second half of the year.

Speaker Change: Customers, taking the opportunity to drastically reduce inventories before quarter end.

Speaker Change: The other thing is some of the customers.

Speaker Change: Have a fiscal year that is.

Speaker Change: And dean or about to end, so most likely you're taking actions related to that and then we'll have a more normal operations going into the second half of the year.

Andres Alberto Lopez: Because of the excess capacity at this point, we expect that the typical seasonal demand that we see wouldn't necessarily apply because customers have access to the product right away, so they don't need to think in advance or buy in advance and think in advance to be prepared for the season. So those are some of the reasons, but it's difficult to know. I think what's encouraging for us is that April has been a lot better than March and certainly better than Q1, too, so that's reassuring that we are on the path to improve. Now, obviously, defining exactly the pace and the timing is a little difficult.

Speaker Change: Because of the excess capacity at this point.

Speaker Change: We expect that the.

Typical seasonal demand that we see wouldn't necessarily apply because customers have access to product.

Speaker Change: Right away, so they didn't need to feeling advance or buying advanced I'm feeling advanced we prepared for the season. So those are some of the reasons, but it's difficult to know.

Speaker Change: I think what.

Speaker Change: And for US is that April has been.

Speaker Change: A lot better than March and certainly better than Q1, two so that's that's reassuring that we are in the path.

Speaker Change: To improve now obviously define it exactly that based on the timing is a little.

Speaker Change: Difficult.

Andres Alberto Lopez: When we look two years out, there is some talk about changing trends, but we still have to see that materialize. As we've seen before, some trends come up and then disappear, too. They fade away.

Speaker Change: When we look two years out there is some talk about changing trends, but we still got to see that materializing.

As we've seen before some trends come up and then disappear too they fade away. So.

John A. Haudrich: So it's a little early to talk about that. But I think what's good about our horizon is, while we are enduring a significant volume of slowdown at this point, the company is in a very good place operationally, and our operating leverage upside is very large. So as volumes come back, we're going to ride the wave. It's going to be possible.

Speaker Change: Early to talk about that I think what's good in our horizon is while we are in the order in a significant volume has slowed down at this point the company is in a very good place operationally.

Speaker Change: Our operating leverage upside is very large so as.

Speaker Change: <unk> come back we're going to we're going to ride the wave and he is going to is going to is going to be positive.

John A. Haudrich: The one thing I would add to that, and we brought this point up in the last call, is that our pipeline for new product development is very, very strong. So, to us, that is a signal from our customers that they are looking to invigorate their brands and bring them forward and address whatever changes in consumer taste and trends that are out there. And like Andres said, it's a very volatile environment. You go back to the pandemic, and people were drinking very significant amounts.

The one thing I would add in that as we brought this pointed up in the last call as our pipeline for new product development is very very strong so to us that as a signal from our our customers that they are looking to invigorate their brands and bring them forward and address whatever change.

Speaker Change: <unk> and consumer tastes and trends that are out there and I understand it's a very volatile environment. You will go back into the pandemic and people were drinking very significant amount now theres a little bit of softness that you referenced and it's very difficult to find out what is a longer term trend and what is the reaction to a different environment. So time will tell and that activity on <unk>.

John A. Haudrich: Now there's a little bit of softness to your reference, and it's very difficult to find out what is a longer-term trend and what is a reaction to a different environment. So time will tell. And that activity on MPD is in all segments and in all geographies.

John A. Haudrich: And that activity on NPD is in all segments, in all geographies, and is a lot higher than we've seen in years. So, and it's both initiated by UI and initiated by the cost.

Speaker Change: In all segments in all geographies.

Speaker Change: A lot higher than we've seen in years, so and both initiated by Oi and initiated by the customers.

Speaker Change: Thank you gentlemen.

Thank you.

Speaker Change: The next question comes from Anthony Pettinari with Citi. Please go ahead. Your line is open.

Operator: The next question comes from Anthony Pettinari with City. Please go ahead, your line is open.

Anthony James Pettinari: Actually, Bryan Burgmeier is sitting in for Anthony. Thank you for taking the question. Maybe just following up on Arun's question, you know, if I think about OI having maybe about 10% of capacity on the sidelines this year, when does that start to create some risk for year-end pricing negotiations in Europe? You know, I'm just thinking about sort of the historical relationship between curtailments and price and, you know, does this level of curtailment usually support a flat to positive price for OI?

Speaker Change: Actually Brian Bird minor sitting in for Anthony. Thank you for taking the question maybe.

Bryan Nicholas Burgmeier: Maybe just following up on the runes question.

Bryan Nicholas Burgmeier: I think about.

Bryan Nicholas Burgmeier: Having maybe about 10% of capacity on the sidelines for this year.

Bryan Nicholas Burgmeier: When does that start to create some risk for year end pricing negotiations in Europe.

Bryan Nicholas Burgmeier: Thinking about sort of the historical relationship between curtailments and price.

Bryan Nicholas Burgmeier: I guess does this level of curtailments, usually support flat to positive price for a while.

Bryan Nicholas Burgmeier: What I would say is at the end of the day.

John A. Haudrich: What I would say is, at the end of the day, it comes down to balancing your inventories and making sure that the inventory situation is in the right place for whatever the market conditions are. And at OI, that's what we are managing to do, to make sure that our inventories end the year in a reasonably snug position. And I can't speak for the broader marketplace, but we believe that it is the most important thing that we as a company can do to position the company for future success.

Bryan Nicholas Burgmeier: It comes down to balancing your inventories and making sure that the inventory situation is in the right place for whatever the market conditions are and at Oi. That's what we are managing to is to make sure that our inventories in the year and are reasonably snug position.

Bryan Nicholas Burgmeier: And I can't speak for the broader marketplace, but we believe that that is the most important thing that we as a company can do to position the company for future success.

Got it got it makes sense.

Bryan Nicholas Burgmeier: Got it. Got it. Makes sense. And, um, maybe George just touched on this, but I'm just wanting to dig into the, uh, the trade downs that you flagged in the preparator marks a little bit.

Speaker Change: Maybe George just touched on this but I just wanted to dig into the trade downs that you flagged in the prepared remarks, a little bit I'm just trying to.

Andres Alberto Lopez: I'm just trying to... Are you referring to people maybe moving from wine to beer? Is it moving from a higher-end bottle to a lower-end bottle? Is it moving from glass to a different substrate? Just any detail there. Thanks. I'll turn it over and good luck in the quarter.

Speaker Change: Thank you.

Speaker Change: Are you referring to people maybe moving from blind to beer is it moving from our higher end bottle to a lower end bottles of moving from glass to a different substrate.

Speaker Change: Just any detail there thanks, I'll turn it over and good luck on the quarter.

Speaker Change: Yes, so the trade down activity is concentrated in some markets. So it's not everywhere.

Andres Alberto Lopez: Yeah, so the trade-down activity is concentrated in some markets, so it's not everywhere, and for the most part, it's linked to promotional activities. So every time customers move forward with significant promotions, those are typically in a lower-cost package, and that's where the trade-down happens. But we've seen in some of those markets the start of a rebound, and the consumption of glass, for example, in April was positive year-on-year in markets that presented it. I think we've seen some mixed traffic.

Speaker Change: And for the most part is linked to promotional activity. So every time customers move forward with significant promotions.

Speaker Change: Those are typically in a lower cost package and Thats, where the trade down happens, but we've seen also in some of those markets is tired of a rebound.

Speaker Change: The consumption of glass for example in April.

Speaker Change: Was positive year on year in markets that presented that before.

Speaker Change: I think we've seen some mixed trends too. So for example, we flagged this one last quarter or two is that there isn't some trade down effect with beer and eastern Europe by the same token, we're seeing very strong market share position for glass in the Netherlands.

John A. Haudrich: I think we've seen some mixed trends, too. So, for example, we flagged this one last quarter, too, that, you know, there was some trade-down effect with beer in Eastern Europe. By the same token, we're seeing very strong market share positions for glass in the Netherlands and in Colombia and in other marketplaces like that. So I think we have, you know, there's no one universal answer about what's going on out there. You see it market by market, category by category.

Speaker Change: And in Colombia, and in other marketplaces like that so I think we got there is no one universal answer about what's going on out there you see it market by market category by category.

Speaker Change: That's where we take our next question is a reminder, if you would like to ask a question today you can do so now by pressing star followed by the number one on your telephone keypad.

Operator: Before we take our next question, as a reminder, if you would like to ask a question today, you can do so now by pressing start, followed by the number 1 on your telephone keypad. Our next question comes from the line of Gabe Hajde with Wells Fargo Securities. Gabe, please go ahead.

Speaker Change: Our next question comes from the line of Gabe <unk> with Wells Fargo Securities. Please.

Please go ahead.

Gabe: Andre Congratulations John Chris Good morning.

Gabe Hajde: Andres, congratulations. John, Chris, good morning. Thank you, Dave. Maybe, much like you all are focusing on the controllables, maybe focusing just on the sort of more near-term outlook, it wasn't clear if April volumes, whether on a day-adjusted basis or otherwise, were positive for you all in terms of shipments. And then just the confidence level and the near-term kind of second quarter view that it looks like from the chart to be mentally flattish.

Thank you, Greg maybe monthly Yep.

Gabe: It looks like you all are focusing on the controllable maybe.

Gabe: Focusing just on the sort of more near term outlook. It wasn't clear if April volumes, whether on a day adjusted basis or otherwise.

Gabe: Positive.

Gabe: Are you all in terms of shipments.

And then just confidence level in the near term kind of second quarter.

Gabe: View that it looks like from the chart shipments will be flattish.

Speaker Change: Maybe I'll start there.

Speaker Change: Yes, yes gave for clarity are our actual shipments in April were up 3%.

John A. Haudrich: Yeah, yeah, Gabe. For clarification, our actual shipments in April were up 3%. Okay. Now that also benefited from the timing of Easter. If you normalize for the Easter period, it was down about 10% on a per day basis. And that compares to the first quarter when things were down about 12.5%. So we have seen some trends in the positive, but that's obviously a little slower of an improvement than what we had originally anticipated.

Speaker Change: Now that also benefited from the timing of Easter If you normalize for the Easter period. It was down about 10% on a per day basis and that compares to the first quarter when things were down about 12, 5%. So we have seen some some trend in the positive that's but that's obviously a little slower.

Speaker Change: Of an improvement than what we had originally anticipated. So march was a bit softer as Andres mentioned April is improving but also maybe a little slower than we anticipated with the backdrop of the.

Speaker Change: Looking at the Nielsen data with a little bit of a slower consumer but as we take a look at that and you see it on that page four in the lower right hand corner, we have calibrated our growth expectations for each quarter of the year for a revised view of the softer consumer recovery pattern and so we believe.

John A. Haudrich: And so we believe, you know, with April being up 3% on an absolute basis, and then things playing out more on a normalized basis over the balance of the month, we should be in that kind of plus or minus, a fairly narrow range of break-even in the second quarter, and then stronger volume, reported volumes in the back half as we see that gradual recovery, but also an easier comp against the prior year.

Speaker Change: With April being up 3%.

Speaker Change: On an absolute basis, and then things playing out more on a normalized basis over the balance of the month, we should be in that kind of plus or minus a fairly narrow range.

Speaker Change: Our breakeven in the second quarter, and then stronger volume reported volumes in the back half as we see that gradual recovery, but also an easier comp against the prior year numbers.

Speaker Change: Okay.

Gabe Hajde: One country, you guys talked about the Indian region and Colombia, but we didn't hear much about Brazil. Again, there is a lot going on there in terms of what we're hearing from a competing substrate. It seems like aluminum is maybe better hedged this year or maybe cheaper, from a sourcing standpoint, you know, just as that happens and we get more sanctions and things like that and costs move up. Just curious how long you might have in terms of discussions with your customers for PAC-MIX down in Brazil, and then just maybe current commentary on what you're seeing. Thank you. Yeah, so the, uh... The economy in Brazil has been

Speaker Change: Yeah Okay.

Speaker Change: One country, you guys talked about the Andean region in Colombia, but we didn't hear much about Brazil.

Speaker Change: Again, a lot going on there in terms of what we're hearing.

From a competing substrate.

Speaker Change: It seems like aluminum is maybe better hedged this year or maybe cheaper.

Speaker Change: <unk>.

Speaker Change: From a sourcing standpoint.

Speaker Change: Just as that happens and we get more sanctions and things like that and cost move up.

Speaker Change: Just curious how long.

Speaker Change: Maybe you have a lead time you have in terms of discussions with your customers.

Speaker Change: For pack mix down in Brazil.

Speaker Change: And then just maybe alright.

Speaker Change: Commentary on what you're seeing thank you.

Speaker Change: Yes, so the.

Andres Alberto Lopez: Yeah, so the, uh... The economy in Brazil has been performing quite stable. So it didn't go through what the other economies are going through. It's been OK. Now, our performance, the performance of glass and beer is very solid. It is driven by premium. And just to give you an idea, year to day, first quarter, year on year, one-way growth is 5.3%, which is well ahead of growth in oil substrates. Now, it is important to take into consideration that when oil substrates talk about their demand, they include carbonated substrates in one way, which is a segment in which we don't participate.

Speaker Change: The economy in Brazil has been.

Andres Alberto Lopez: So that's driving a lot of what they are experiencing. But for us, a very important category in the country is beer, and beer is doing quite well. As we said before, returnability improved over time after the pandemic. So the percentage of... The total volume of beer packed in returnable glass increased, and it remains that way.

Speaker Change: Performing.

Speaker Change: Quite a stable so it didn't go through what the oil economies are going through is being has been okay.

Speaker Change: Now our performance so performance of glass in beer is a very solid it is driven by premium.

Speaker Change: And just to give you an idea our year to a first quarter.

Speaker Change: Year on year, one way growth is five 3%.

Speaker Change: Which is well ahead of growth in dealer substrates now it is important to take in consideration that when <unk> talk about their demand. They include carbonated soft drinks in Huawei, which is a segment in which we don't participate that much. So so thats driving a lot of what they.

Are experiencing but for us a very important category in the country's beer and <unk> is doing quite well.

Speaker Change: As we said before that result in a reality improved over time after the pandemic until the percentage so.

The total volume of <unk> return on our glass increased and it remains up.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

Speaker Change: Okay, guys that can enhance our earnings call.

Operator: Okay guys, that concludes our earnings call. Thank you, and that concludes our call. I would note that our second quarter call is scheduled for Wednesday, July 31st. And, as a reminder, make it a memorable event by choosing safe, sustainable glass. Thank you.

Speaker Change: Thank you Emily I said that concludes our call I would note that our second quarter call is scheduled for Wednesday July 31.

Speaker Change: And as a reminder, make it a memorable event by choosing safe sustainable glass. Thank you.

Speaker Change: Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.

Operator: Thank you everyone for joining us today. This concludes our call, and you may now disconnect your line.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Okay.

Speaker Change: Okay.

Speaker Change: Thanks, Tom.

Speaker Change: Great.

Speaker Change: Yeah.