Q1 2025 O-I Glass Inc Earnings Call
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Unknown Executive: © The Ultimate Parody Site! Hello everybody and welcome to the OI Glass first quarter 2025 earnings conference call.
Okay.
Hello, everybody and welcome to the glass first quarter towards 25 earnings Conference call My.
Elliot: My name is Elliot and I'll be your coordinator today. If you would like to register a question during today's event, please press star 1 on your telephone.
Elliot: My name is Elliot and I'll be your coordinator today.
Elliot: If you would like to register a question Jim stage, Ben Please press star one on your telephone keypad.
Christopher Manuel: And I'd like to hand over to Chris Manuel, Vice President of Investor Relations.
Elliot: I would now like to hand, it over to Chris Manuel Vice President of Investor Relations. Please go ahead.
Gordon Hardie: Please go ahead. Thank you, Elliot, and welcome, everyone, to the OI Glass First Quarter 2025 Earnings Conference Call. Our discussion today will be led by Gordon Hardie, our CEO, and John Haudrich, our CFO.
Chris Manuel: Thank you Elliot and welcome everyone to the O I glass first quarter 2025 earnings conference call our.
Gordon Hardie: Our discussion today will be led by Gordon Hardie, our CEO and John <unk> our CFO.
Unknown Executive: Following prepared remarks, we will host a Q&A session. Presentation materials for today's 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.
Speaker Change: Following prepared remarks, we will host a Q&A session presentation materials for today's call are available on the Companys website. Please review the safe Harbor comments and disclosure of our use of non-GAAP financial measures included in those materials now I'd like to turn the call over to Gordon who will start on slide three.
Gordon Hardie: Now, I'd like to turn the call over to Gordon, who will start on slide three.
Gordon Hardie: Good morning, everyone, and thank you for your interest in OI Glass. Today, we will walk you through our first quarter 2025 performance, key market trends, and outlook for the rest of the year.
Gordon Hardie: Good morning, everyone and thank you for your interest in Oi glass.
Gordon Hardie: Today, we will walk you through our first quarter 2025 performance key market trends and outlook for the rest of the year.
Gordon Hardie: First, I would like to take this opportunity to thank all my colleagues at OI across the world for their efforts in this first quarter and for their agility and focus on driving the changes needed to turn OI around. Last night, we reported first quarter adjusted earnings of 40 cents per share, while down from last year, results significantly exceeded our plan due to stronger than anticipated sales volume and fit-to-win benefits. Market conditions have continued to gradually recover, and our shipments increased by more than 4% compared to last year. Additionally, our Fit2Win program generated savings of $61 million, which was a significant contributor to our better-than-expected results.
Gordon Hardie: First I would like to take this opportunity to thank all of my colleagues at Oi across the world for their efforts in this first quarter and for their agility and focus on driving the changes needed to turn a wire round.
Gordon Hardie: Last night, we reported first quarter adjusted earnings of <unk> 40 per share while down from last year results significantly exceeded our plan due to stronger than anticipated sales volume and fit to win benefits.
Gordon Hardie: Market conditions have continued to gradually recover and our shipments increased by more than 4% compared to last year.
Gordon Hardie: Additionally, our fit to win program generated savings of $61 million, which was a significant contributor to our better than expected results.
Gordon Hardie: Strong demand and initiative benefits helped offset expected headwinds, including lower net price and scheduled temporary production curtailment. Looking at our business units, segment operating profit improved significantly in the Americas, reflecting healthier fundamentals and benefit from strategic initiatives. In Europe, results trended down, giving lower net price and temporary production downtime, which was partially mitigated by solid fit-to-win benefits. Overall, we are off to a strong start this year and are successfully managing the elements within our control. As such, we are reaffirming our full year 2025 guidance and expect adjusted earnings to improve between 50% and 85% from 2024.
Gordon Hardie: <unk> demand and initiatives benefits helped offset expected headwinds, including lower net price and scheduled temporary production curtailments.
Gordon Hardie: Looking at our business units segment operating profit improved significantly in the Americas, reflecting healthier fundamentals and benefits from strategic initiatives.
Gordon Hardie: In Europe results trended down given lower net price and temporary production downtime, which was partially mitigated by solid fit to win benefits.
Gordon Hardie: Overall, we are off to a strong start this year and are successfully managing the elements within our control as such we are reaffirming our full year 2025 guidance and expect adjusted earnings to improve between 50 and 85% from 2024.
John Haudrich: John will discuss our outlook further, including an initial view on how changing global trade policies could affect the business. In summary then, we are pleased with our year-to-date performance trend, despite some anticipated lag in Europe, and we aim to deliver robust financial performance throughout the year.
Gordon Hardie: John will discuss our outlook further including an initial view on how changing global trade policies could affect the business.
Gordon Hardie: In summary, then we are pleased with our year to date performance trend. Despite some anticipated lag in Europe, and we aim to deliver robust financial performance throughout the year.
Gordon Hardie: Let's now turn the page forward to discuss current market trends. Overall, conditions continued to gradually improve and our shipments were up 4.4% in the first quarter. Solid growth reflected some rebuilding of packaging inventories across the value chain, benefits from recent contract negotiations supported by multi-year cost improvement plans, and likely some advanced purchases ahead of new tariff policies. Shipments were up more than 4% across the Americas. Here we see inventory normalization overall, as well as more structural demand improvement in Latin America, together with the positive impact of some expanded contracts in North America. Volumes increased in nearly all markets, driven by a strong rebound in beer and spirits, with solid growth in food.
Gordon Hardie: Let's now turn to page four to discuss current market trends.
Gordon Hardie: Overall conditions continued to gradually improve and our shipments were up four 4% in the first quarter.
Gordon Hardie: Solid growth reflected some rebuilding of packaging inventories across the value chain benefits from recent contract negotiations supported by multiyear cost improvement plans and likely some advanced purchases ahead of new tariff policies.
Gordon Hardie: Shipments were up more than 4% across the Americas here, we see inventory normalization overall as well as more structural demand improvement in Latin America together with the positive impact of some expanded contracts in North America.
Gordon Hardie: Volumes increased in nearly all markets driven by a strong rebound in beer and spirits with solid growth in food.
Gordon Hardie: volumes grew nearly 4% in Europe, driven by customer inventory rebuilding, and some buying ahead of tariffs for export customers. As with the Americas, shipments increased in nearly all markets and categories, with most growth coming from beer, wine, as well as food.
Gordon Hardie: Volumes grew nearly 4% in Europe, driven by customer inventory rebuilding and some buying ahead of tariffs for export customers.
Gordon Hardie: As with the Americas shipments increased in nearly all markets and categories with most growth coming from beer wine as well as food.
Gordon Hardie: Currently, we are addressing excess capacity in Europe through temporary curtailments, and we are in consultation with the European and local works councils regarding long-term restructuring action. These efforts should improve our competitive position and support profitable growth. Shipment activity has been encouraging and our volumes are up about 3% year-to-date through April.
Gordon Hardie: Currently we are addressing excess capacity in Europe through temporary curtailments.
Gordon Hardie: In consolidation with the European and local works Council regarding long term restructuring actions.
Gordon Hardie: These efforts should improve our competitive position and support profitable growth.
Gordon Hardie: Shipment activity has been encouraging and our volumes are up about 3% year to date through April.
Gordon Hardie: Recently we've seen some softer demand amid elevated uncertainty of new tariff policies which may continue to impact near-term shipments. As such, we are maintaining a cautious commercial outlook, as well as our original sales volume guidance. We will reassess our 2025 sales volume out of mid-year as trends evolve.
Gordon Hardie: Recently, we've seen some softer demand amid elevated uncertainty of new tariff policies, which may continue to impact near term shipments.
Gordon Hardie: Such we are maintaining a cautious commercial outlook as well as our original sales volume guidance.
Gordon Hardie: We will reassess our 2025 sales volume out with mid year as trends evolve.
Gordon Hardie: Let's now turn to page five and discuss progress on our Fit2Win program, which aims to radically reduce total enterprise cost, as well as optimize our entire network and value chain to support future profitable growth. We generated $61 million in savings during the first quarter alone, which exceeded our initial plan. Momentum is building, and we are confident that we will achieve our targets of $250 million in 2025 and $650 million cumulatively by 2027. Phase A of our Fit2Win program is focused on reshaping our SG&A structure and initial network realignment to meet current market needs. Phase B seeks to fundamentally transform costs across the value chain, including the implementation of our total organization effectiveness program to optimize capacity within the system.
Gordon Hardie: Let's now turn to page five and discuss progress on our fit to win program, which aims to radically reduced total enterprise cost as well as optimize our entire network and value chain to support future profitable growth.
Gordon Hardie: We generated $61 million in savings during the first quarter alone, which exceeded our initial plan.
Gordon Hardie: Momentum is building and we are confident that we will achieve our targets of $250 million in 2025 and $615 million cumulatively by 2027.
Gordon Hardie: Phase I of our fit to win program is focused on reshaping our SG&A structure and initial network realignment to meet current market needs phase B seeks to fundamentally transform costs across the value chain, including the implementation of our total organization effectiveness program to optimize capacity within the system.
Gordon Hardie: Regarding phase A, we have now completed all actions required to secure our 100 million SG&A savings target in 2025. Initial network optimization actions are well underway, and we are confident that we will achieve our 2025 goal. Likewise, additional efforts are in progress to achieve our 2027 target.
Gordon Hardie: Regarding phase <unk>, we have now completed all actions required to secure a 100 million SG&A savings target in 2025.
Gordon Hardie: Initial network optimization actions are well underway and we are confident that we will achieve our 2025 goal.
Gordon Hardie: Likewise additional efforts are in progress to achieve our 2027 targets.
Gordon Hardie: We have also kicked off our Phase B initiatives. As we look to transform our cost base, the team has already made initial progress across several procurement programs, as well as efforts to improve efficiency and reduce energy utilization. Finally, our Total Organization Effectiveness Program is ramping up nicely. We successfully completed the pilot implementation at our Tawana, Virginia plant where we see significant performance improvements and lower inventory levels. Based on those results, we will begin the broader rollout starting in May 2025, which should be completed by the end of 2026. Importantly, many plants have initiated savings programs based on the TOE principles ahead of the formal rollout, generating early savings.
Gordon Hardie: We have also kicked off our phase <unk> initiatives as we look to transform our cost base. The team has already made initial progress across several of procurement programs as well as efforts to improve efficiency and reduce energy utilization.
Gordon Hardie: Finally, our total organization effectiveness program is ramping up nicely.
Gordon Hardie: We successfully completed the pilot <unk> implementation at or to one of Virginia plant, where we see significant performance improvements and lower inventory levels.
Gordon Hardie: Based on those results, we will begin the broader rollout starting in May 2025, which should be completed by the end of 2026.
Gordon Hardie: Importantly, many plants have initiated savings programs based on the principles ahead of the formal rollout generating early savings.
Gordon Hardie: In summary, our Fit2Win program is delivering strong benefits, and we are making solid progress towards our savings target.
Gordon Hardie: In summary, our fit to win program is delivering strong benefits and we are making solid progress towards our savings target.
Gordon Hardie: We are confident in our ability to achieve our goals, enhance operational performance, and are well positioned for continued success throughout the year.
Gordon Hardie: We are confident in our ability to achieve our goals enhanced operational performance and are well positioned for continued success throughout the year.
John Haudrich: I will now turn it over to John, who will review our first quarter performance and our 2025 outlook in more detail, starting on page six. Thanks, Gordon, and good morning, everyone. ROI reported first quarter adjusted earnings of $0.40 per share, while down from last year, results surpassed management's expectations due to stronger than anticipated sales volume growth and higher fit-to-win benefits. As you can see on the left, adjusted earnings was down modestly from the prior year. Single-digit sales volume growth and significant fit-to-win benefits mostly offset anticipated headwinds, including lower net price and ongoing temporary production curtailment.
Gordon Hardie: I will now turn it over to John who will review, our first quarter performance and our 2025 outlook in more detail starting on page six.
John: Thanks, Bart and good morning, everyone I'll why reported first quarter adjusted earnings of <unk> 40 per share while down from last year results surpassed managements expectations due to stronger than anticipated sales volume growth and higher fit to win benefits as you can see on the left adjusted earnings was down modestly from the prior year single.
John: Digit sales volume growth and significant fit to win benefits, mostly offset anticipated headwinds, including lower net price and ongoing temporary production curtailments to reduce inventory.
John Haudrich: Looking to the right, segment operating profit was up in the Americas, but down in Europe. Results improved significantly in Americas, reflecting strong demand, stable net price amid tight capacity, and around $27 million of fit-to-win benefit. Consistent with our expectations, earnings were down in Europe. While sales volume was up nearly 4%, net price was ahead, reflecting competitive pressures and excess capacity. We did incur about $58 million of unabsorbed fixed costs as we curtailed significant capacity to draw down inventories, which was partially offset by $20 million of fit-to-win benefits, as well as other savings. Importantly, results should improve in the second half of the year as inventory reduction activities moderate and we generate greater initiative benefits following current restructuring action.
John: Looking to the right segment operating profit was up in the Americas, but down in Europe results improved significantly Americas, reflecting strong demand stable net price amid tight capacity in around $27 million of fit to win benefits.
John: Consistent with our expectations earnings were down in Europe, while sales volume was up nearly 4% net price was a headwind reflecting competitive pressures in excess capacity, we did incur about $58 million of unabsorbed fixed costs as we curtailed significant capacity to draw down inventories, which was partially offset by $20 million.
John: Our fit to win benefits as well as other savings and.
John: Importantly results should improve in the second half of the year as inventory reduction activities moderate and we generate greater initiative benefits following current restructuring actions.
John Haudrich: As we focus on economic profit, we have made very good progress on reducing inventory across the enterprise, which is down around $225 million from the same time last year. Furthermore, we are on track to meet, or be below, our year-end 2025 target of less than 50 days IDS. In summary, we're off to a strong start this year. Despite some headwinds, results exceeded our expectations heading in the quarter, and we are well positioned for continued success throughout the year.
John: As we focus on economic profit, we have made very good progress on reducing inventory across the enterprise, which is down around $225 million from the same time last year. Furthermore, we are on track to meet or be below our year end 2025 target of less than 50 days Ibs.
John: In summary, we're off to a strong start this year. Despite some headwinds results exceeded our expectations heading in the quarter and we are well positioned for continued success throughout the year, let's turn to page seven and discuss our business outlook.
John Haudrich: Let's turn to page seven and discuss our business outlook. We are reaffirming our full year 2025 guidance. Adjusted earnings should range between $1.20 and $1.50 per share, which represents a 50 to 85% improvement from fiscal year 2024. Significantly higher adjusted earnings should reflect ongoing efforts to enhance our operational performance, reduce costs, and capture market opportunity. Likewise, we expect a significant rebound in free cash flow boosted by strong operating performance improvement and lower CapEx investment requirements. We have also provided a directional sense of how our annual earnings will unfold by quarter. Based on a strong start to the year, our full year performance is currently tracking towards the high end of our earnings guidance range.
John: We are reaffirming our full year 2025 guidance adjusted earnings should range between $1 20, and $1 50 per share, which represents a 50% to 85% improvement from fiscal year 2020 for significantly higher adjusted earnings should reflect ongoing efforts to enhance our operational performance reduce costs.
John: And capture market opportunities Likewise, we expect a significant rebound in free cash flow boosted by strong operating performance improvement and lower Capex investment requirements. We have also provided a directional sense of how our annual earnings will unfold by quarter.
John: Based on our strong start to the year, our full year performance is currently tracking towards the high end of our earnings guidance range. However, we are maintaining our original business outlook, given the uncertainty related to new tariff policies, which we'll discuss further as we turn to page eight.
John Haudrich: However, we are maintaining our original business outlook, given the uncertainty related to new tariff policies, which we will discuss further as we turn to page eight. Changes in global trade policies will likely be disruptive in the short term and may create both new challenges and opportunities which cannot be fully determined at this stage. As illustrated in the chart, about 14% of our global sales volume crosses the border between the U.S. and other nations. This includes both empty and filled bottles. We estimate that only four and a half percent is currently exposed to new tariffs. This primarily relates to imports of filled containers from Europe, while most cross-border sales between the U.S., Mexico and Canada are exempt under the U.S.-MCA treaty.
John: Changes in global trade policies will likely be disruptive in the short term and may create both new challenges and opportunities which cannot be fully determined at this stage as illustrated in the chart about 14% of our global sales volume crosses the border between the U S and other nations. This includes both empty and fill.
John: Bottles.
John: We estimate that only four 5% is currently exposed to new tariffs. This primarily relates to imports filled containers from Europe, while most cross border sales between the U S. Mexico, and Canada are exempt under the U S. MCA treaty as such we face a limited direct tariff exposure so far.
John Haudrich: As such, we face a limited direct tariff exposure so far.
John Haudrich: The bigger unknown is how elevated market uncertainty may impact the consumer and demand elasticity. While we face a few challenges, there are potential opportunities.
John: The bigger unknown is how elevated market uncertainty may impact the consumer and demand elasticity.
John: While we face a few challenges there are potential opportunities glasses, a local business and around 85% of the value chain is within 300 miles of the plant. So we do not rely on our global supply chain, which is more exposed to tariffs.
John Haudrich: GLAS is a local business, and around 85% of the value chain is within 300 miles of the plant. So we do not rely on a global supply chain, which is more exposed to tariffs. favorable substrate dynamics may emerge as there are currently sector specific tariffs on aluminum. Likewise, domestic glass production is now significantly more competitive compared to imports from China, given new tariffs. Next, OI has the largest glass network in the US, so we are well positioned to take advantage of opportunities that emerge, especially if consumption shifts to more domestic products over time. Finally, policy changes have already led to sizable shifts in currency exchange rates that are helping improve earnings translation.
John: Favorable substrate dynamics may emerge as they are currently sector specific tariffs on aluminum likewise domestic glass production is now significantly more competitive compared to imports from China, given new tariffs.
John: Next Oi has the largest class network in the U S. So we are well positioned to take advantage of opportunities that emerge, especially if consumption shifts to more domestic products overtime.
John: Finally policy changes have already led to a sizable shifts in currency exchange rates that are helping improve earnings translation.
John Haudrich: Naturally, we are working with our partners in the value chain to mitigate risk and capture opportunities. Overall, we continue to believe our best long-term strategy is to improve the competitive position of the company through Fit2Win.
John: Naturally we are working with our partners in the value chain to mitigate risk and capture opportunities. Overall, we continue to believe our best long term strategy is to improve the competitive positioning the company through fit to win now I will turn it back to Gordon who will conclude our discussion on page nine thanks.
Gordon Hardie: Now I'll turn it back to Gordon, who will conclude our discussion on page 9. Thanks, John. In conclusion, OI is well positioned for a strong year ahead. We are off to a fast start.
Gordon Hardie: Thanks, John and.
Gordon Hardie: In conclusion, Oi is well positioned for a strong year ahead, we are off to a fast start we expect our performance in earnings in 2025 will rebound from prior year levels as we implement our fit to win initiatives.
Gordon Hardie: We expect our performance and earnings in 2025 will rebound from prior year levels as we implement our Fit2Win initiative. While changes in the global trade policies create uncertainties, we are executing our long-term value creation roadmap, as illustrated on the right, and discussed at length during last month's Investor Day. Importantly, these actions are largely within our control. We are confident in our ability to achieve our goals, deliver strong future financial performance and create shareholder value.
Gordon Hardie: While changes in the global trade policies create uncertainties, we are executing our long term value creation roadmap as illustrated on the right and discussed at length. During last month's Investor Day Importantly, these actions are largely within our control.
Gordon Hardie: We are confident in our ability to achieve our goals deliver strong future financial performance and create shareholder value.
Gordon Hardie: Thank you for your attention, and we look forward to taking your questions. Thank you.
Gordon Hardie: Thank you for your attention and we look forward to taking your questions.
Gordon Hardie: Okay.
Unknown Executive: If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask a question, please ensure your device is unmuted locally.
Gordon Hardie: Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad.
Gordon Hardie: If you would like to withdraw your question. Please press star followed by two.
Speaker Change: I'm trying to ask a question. Please ensure your device is muted locally.
Unknown Executive: And today we ask you limit yourself to one question and one follow-up.
Speaker Change: And today, we ask you limit yourself to one question and one follow up.
George Staphos: Our first question comes from George Staphos with Bank of America. Your line is open, please go ahead. Thanks very much, everyone. Good morning. Thank you for the details. Good morning.
Speaker Change: Our first question comes from George Staphos with Bank of America. Your line is open. Please go ahead.
George Staphos: Thanks, very much hi, everyone. Good morning, Thank you for the detail.
Speaker Change: Tom.
Speaker Change: Good morning.
John Haudrich: I guess the question I have to start is, can you talk a bit about any pre-buy effects you sort of touched on within your, you know, what kind of volume effect might that be that has to reverse itself in the back half of your whenever? And then overall, can you talk a little bit about some of the work you're doing on TOE and TOANO and elsewhere and why that supports your overall fit to win goals? So pre-buy and then TOE and what you're seeing in TOANO.
Speaker Change: I guess the question that I have to start is can you talk a bit about.
Speaker Change: Any pre buy effect.
Speaker Change: You sort of touched on.
Speaker Change: Within Europe, what kind of volume effect might that be that has to reverse itself.
Speaker Change: And in the back half of the year or whenever.
Speaker Change: And then overall can you talk a little bit about some of the work Youre doing, Ontario, and Toronto and elsewhere and why that supports your overall.
Speaker Change: Twin goals, so pre buy and then what youre seeing in Toronto. Thank you.
John Haudrich: Thank you. Yeah, George, thanks for the question. I'll kick things off. This is John on on the pre-buy point, as included in our comments, you know, sales volume was up 4.4% in the in the first quarter, we actually saw probably a fairly limited amount of that it was not the driver of the stronger volume in the quarter. And in fact, what we had seen is that our sales volumes were actually stronger in January and February, but they were still up in March. So we believe that maybe some of the strength in March was there. So if in other words, if if volume was a six cents or so benefit in the quarter, maybe there was a penny or two in there associated with pre buying, but it was not the driver of the stronger volume in the quarter.
Speaker Change: Yes, George Thanks for the question I'll kick things off this is Jon on the pre buy point as it included in our comments sales volume was up four 4% in the first quarter, we actually saw probably a fairly limited amount of that it was not the driver of the stronger volume in the quarter and in <unk>.
Speaker Change: Fact, what we had seen is that our sales volumes were actually stronger than January and February but they were still up in March. So we believe that maybe some of the strength in March was there. So in other words, if if volume was a six sensor so benefit in the quarter, maybe there was a penny or two in there associated with pre buying but it was <unk>.
Speaker Change: Not the driver of the stronger volume in the quarter.
Unknown Executive: Hey, John, just what kind of egg?
Speaker Change: Okay, and John just sort of what.
Gordon Hardie: Hey, hey, Gordon.
Speaker Change: What kind of Ed.
Gordon Hardie: Just quickly, April, you said soften.
Gordon Hardie: Hey, Gordon.
John Haudrich: So are we looking at negative volumes to get to a year to date growth rate of 3% from up for or just maybe another kind of detail there? Yeah, yeah, I'm sorry about the, you know, as we get more visibility in this quarter, and we'll update in. you know, at the at the half year.
Just quickly April you said softened so are we looking at negative volumes to get to our year to date growth rate of 3% from up four or just maybe.
Gordon Hardie: Another kind of detail there.
Gordon Hardie: What I would say is while thats not our base case view, we are remaining cautious and that and the commercial outlook. So we are maintaining our full year view of stable volume over for the year on a year over year basis.
Gordon Hardie: So kind of flattish overall for the year, but again that's out of.
Gordon Hardie: One is a caution on just the uncertainty on tariffs, it's certainly not <unk>.
Gordon Hardie: <unk>, we hope things go in April just to give you a little bit of color adjusted for Easter volumes were down about 1% or 2%. It wasn't a significant decline volumes were up in the Americas low single digit.
Gordon Hardie: Again that that remains healthy and our business really isn't exposed to tariffs there, but we did see a little bit of decline in Europe and it was primarily an end use categories and markets that we know are exposed to exports considering that about 40% of what we make in Europe. Ultimately gets export it was kind of the wines and spirits categories that we saw a little bit about office in April.
George Staphos: Yes, Thanks, George I'm sorry.
Gordon Hardie: As we get more visibility in this quarter and we'll update.
Gordon Hardie: At the half year with regard to the second part of your question <unk>.
Gordon Hardie: With regard to the second part of your question, Tiawe and Tuana, you know, as we as we outlined, I think, in July and October, there there is a there's a process that we we put each of the plans through in that their performance opportunities identified and and then we we go and execute against those those opportunities. In Tuana, we have a very clear line of sight to 100% of the opportunities we identified. And we've established, you know, the the the metrics, the the operating system, you know, validated some of our some of our hypothesis, which have come out strongly.
Gordon Hardie: As we as we outlined I think in July and October.
Gordon Hardie: There is a.
Gordon Hardie: There is a process that we put each of the plants through.
Gordon Hardie: In that they are performance opportunities identified.
Gordon Hardie: And then we go and execute against those those opportunities.
Gordon Hardie: In Toronto, we have a very clear line of sight to a 100% of the opportunities we have identified.
Gordon Hardie: And we've established that.
Gordon Hardie: The metrics the operating system.
Gordon Hardie: Validated.
Gordon Hardie: Some of our some of our hypothesis, which have come out strongly.
Gordon Hardie: I know we will we will begin the rollout across the whole fleet in waves. And that's a very structured kind of disciplined approach over the next 15 to 18 months.
Gordon Hardie: No we will begin to roll out across the whole fleet in waves.
Gordon Hardie: And Thats, a very structured kind of disciplined approach over the next 15 to 18 months. So we're very happy with the with the outcome of Toronto.
Gordon Hardie: So we're very happy with the with the outcome of Tawana. And, you know, we expect similar results, you know, as we roll out the program across the whole fleet.
Gordon Hardie: And we expect similar results.
Gordon Hardie: As we roll out the program across the whole fleet.
Unknown Executive: Thank you, Gordon.
Gordon Hardie: Thank you Gordon I, just mentioned <unk> is one of your better plants over the years, but I'll turn it over thanks very much.
Unknown Executive: I just mentioned because Tawana is one of your better plans over the over the years, but I'll turn it over. Thanks very much. Thank you.
Gordon Hardie: Okay. Thank you.
Michael Roxland: We now turn to Michael Roxland with Truist Securities. Your line is open, please go ahead. Thank you Gordon, John, and Chris for taking my questions and congrats on all the progress and all my supporters. Thanks, Michael. Thank you.
Speaker Change: You May now Sanjay <unk> with <unk> Securities. Your line is open. Please go ahead.
Sanjay: Thank you Gordon and John and Chris for taking my questions.
Speaker Change: Congrats on all the progress in the next quarter.
Michael: Thanks, Michael Thank you my first question.
Michael Roxland: My first question... Yeah, my first question is just on a follow up to what George was asking about the volume. Can you give us a sense just in terms of the volume progress that you're seeing by end market, whether it be wine, spirits, beer, NAB, just want to get a sense of the growth or the headwinds that you may be encountering in some of those end markets.
Speaker Change: My first question is just on follow up to what George was asking about restricted volumes can you give us a sense just in terms of the volume progress that youre seeing by end market, whether it be wine spirits and beer.
Speaker Change: Just wanted to get a sense of the growth or the headwinds you may be encountering some of those end markets and we.
Gordon Hardie: And where do order books stand currently? So any outlook you can share with respect to how early read on May, for Sure, Michael, I'll take that question. So, you know, in both the Americas and Europe, we, you know, we saw, you know, strong volumes in, in the first quarter, and literally, it was, it was across most categories in each of the regions. So, you know, we, in the Americas, for example, you know, beer up, you know, close to 4%, food performing strongly, you know, high single digits. Spirits in the Americas actually had a very strong quarter.
Speaker Change: Where the order book stand currently so any outlook you can share with respect to how.
Speaker Change: Early read on May for instance.
Mike: Sure Mike.
Mike: I'll take that question so in both the Americas.
Speaker Change: In Europe, we saw.
Speaker Change: Strong volumes in in the first quarter and literally it was it was across most categories.
Speaker Change: In each of the regions. So we in the Americas for example.
Speaker Change: Close to 4%.
Speaker Change: Food performing strongly.
Speaker Change: Single digits.
Speaker Change: Spirits in the Americas actually had a very strong quarter.
Gordon Hardie: you know, up double digits for us, as had, you know, RTDs. So overall, you know, strong volume growth in the Americas, you know, strong demand, tight capacity.
Speaker Change: Up double digits for us.
Speaker Change: RTD.
Speaker Change: RTD.
Speaker Change: So overall.
Speaker Change: Strong volume growth in the Americas strong demand tight capacity.
Gordon Hardie: in Europe. You know, beer performed very strongly in the quarter. Non-alcoholic beverages also performed strongly up high, high single digits for us. Food up mid-single digits. Wine, you know, bit of a comeback in low single digits in Europe. Spirits were off in Europe, off mid-single digits. And RTDs, which is a much smaller category in Europe, was also slightly off. So, so all in all, you know, there's, we see kind of green shoots in a lot of the categories in a lot of the geography coming back. So, you know, order books at this stage are good.
Speaker Change: And in Europe.
Speaker Change: Beer performed very strongly in the quarter.
Non alcoholic beverages also performed strongly up high single digits for us the food up mid single digits.
Speaker Change: Wayne.
Speaker Change: Bit of a comeback in low single digits in Europe spirits were off in Europe.
Speaker Change: Off mid single digits.
Speaker Change: <unk>, which is a much smaller category in Europe was also slightly off.
Speaker Change: So all in all we see kind of green shoots in a lot of the categories.
Speaker Change: All of the geographies.
Speaker Change: <unk>.
Speaker Change: Coming back so.
Speaker Change: Order books at this stage or are good.
Gordon Hardie: You know, there's certainly uncertainty out there regarding, you know, where all this tariff discussions are going to play out. And that is causing, you know, consumer uncertainty as well. So I think this quarter will be telling to see where everything lands. Yeah, that's our view at the moment. As I said, as we look to the end of the year, we're sticking with our initial thinking at the start that it would be stable over the year. There may be, you know, a few bumps, you know, here and there, but overall, off to a strong start.
Speaker Change: There is certainly uncertainty over there regarding where all this tariff.
Speaker Change: Discussions are going to play out.
Speaker Change: And that is causing consumer uncertainty as well.
Speaker Change: I think this quarter will be telling to see where everything lands.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: Our view at the moment as I said as we look to the end of the year, we're sticking with our initial thinking at the start it would be stable over the year.
Speaker Change: There may be a few bumps here and there, but but overall off to off to a strong start start.
Michael Roxland: That's great, Gordon. Thank you for all the for the color.
Speaker Change: That's great color and thank you for all the color and just.
Michael Roxland: And just, you know, one quick follow up, you know, you're looking to streamline your French operations given the slowdown in wine.
Speaker Change: One quick follow up.
Speaker Change: Looking to streamline your French operations, given the slowdown in wine.
Gordon Hardie: Now, is that a structural issue? Just related to French wines? Is that a structural issue for all wines? Does it relate to more mainstream wine brands versus let's say, you know, premium products in terms of, you know, I think premium products mean like top regions, top brands. So just trying to get a sense of what you're trying to do with your French operations and really what the driver is there in terms of the realignment. Yeah, look, overall, it's fitting. It's fitting assets to market opportunities. You know, where, as I said, we're looking now at the portfolio and in terms of two streams, mainstream and premium.
Speaker Change: Is that a structural issue just related to French lines is that a structural issue for all lines as it relate to more mainstream wine brands versus the peak.
Speaker Change: Premium products in terms of CPO products, mainly comp regions top brands.
Speaker Change: Just trying to get sense, when you're trying to do with your French operations that really what the driver is there in terms of the realignment.
Speaker Change: Yes.
Speaker Change: Yes look overall, it's fitting in.
Speaker Change: Fitting assets to market opportunities.
Speaker Change: As I said, we're looking now at the portfolio.
Speaker Change: In terms of two streams mainstream and premium.
Gordon Hardie: We see tremendous opportunities in premium, you know, across wine, across spirits in France. And so some of this is the realignment of the footprint to get ourselves ready to, you know, expand into premium as we go forward. And of course, we continue to invest strongly in France. We've had a big investment in Agencore, which has gone live and is delivering to expectations. We're very happy with it. And we will continue to invest in France, which is a key market for wines and spirits, particularly wines and spirits. You know, longer term, you know, wine, particularly, you know, economy wines have suffered some impact, you know, across the whole market.
Speaker Change: We see tremendous opportunities in premium across <unk> across spirits in France, and so some of this is the realignment of the footprint to get ourselves ready to.
Speaker Change: Expand into into premium as we go forward and of course, we will continue to invest strongly in France, we have a big investment in core which has gone live.
Speaker Change: Delivering to expectations were very happy with it and we.
Speaker Change: We'll continue to invest in France, which is a which is a key market for <unk>.
Speaker Change: Wines and spirits, particularly wines and spirits.
Speaker Change: Longer term.
Speaker Change: <unk>, particularly.
Speaker Change: Economy wines have suffered some impact.
Across the whole market.
Gordon Hardie: But I think if you look through the cycle over the long term, you know, premium and super premium wine, premium spirits, super premium spirits will continue to perform strongly. And that really is looking at the footprint and making sure we're set up properly for that as we as we execute on what we laid out in our idea, you know, our best of both strategy, being the lowest cost producer and mainstream and best cost producer in premium.
Speaker Change: But I think if you look through the cycle over the long term.
Speaker Change: Premium Super premium wine premium spirits Super premium spirits.
Speaker Change: We'll continue to to.
Speaker Change: To perform.
Speaker Change: <unk> strongly.
Speaker Change: That really is looking at the footprint and making sure we're set up properly for that as we as we execute on what we laid out in our ideas our best of both strategy being the lowest cost producer in mainstream and best cost producer in.
Gordon Hardie: So that really is the context for the operations review across Europe.
Speaker Change: In premium.
Speaker Change: So that really is the context for the.
Speaker Change: The operations review across Europe.
Joshua Spector: Our next question comes from Joshua Spector with UBS.
Speaker Change: Our next question comes from Joshua Spector with UBS. Your line is open. Please go ahead.
Unknown Executive: Your line is open, please go ahead. Hi, this morning. Good morning.
Speaker Change: Hi, This is Mike good morning, its Jay Shah sitting in for Josh.
Unknown Executive: It's Anuja Shah sitting in for Josh.
Unknown Executive: On slide eight, you mentioned tariffs on aluminum as an opportunity, one of the opportunities of tariffs.
Speaker Change: On slide eight you mentioned.
Speaker Change: Tariffs on aluminum as an opportunity one of one of the opportunities that path have you seen signs of this yet with customers, where they could potentially be a benefit like maybe you are having entered about conversations about substrate or just any color on what youre seeing there and how you think that might benefit you.
John Haudrich: Have you seen signs of this yet with customers where this could potentially be a benefit, like maybe you're having introductory conversations about substrates or just any color on what you're seeing there and how you think it might benefit you? Yeah, just for just for some clarity there, you know, if you go back to our investor day, we did profile that, you know, that overall glass containers in North America are at a higher cost than than aluminum, you know, that's 25 to 30% kind of differential. And we believe if that goes to 15% or lower, historically, we've seen shifts over to glass.
Speaker Change: Yes, just for some clarity there if you go back to our Investor day, we did profile of that.
Speaker Change: Overall glass containers in North America are at a higher cost than aluminum, that's 25% to 30% kind of differential and we believe if that goes to 15% or lower historically, we've seen shifts over to glass.
John Haudrich: And, and we believe that that the difference on on the aluminum tariff side could could, you know, impact that call it five, 10 percentage points against that 25 to 30%, you know, percent premium, so it could help.
Speaker Change: And and we believe that the difference on on the aluminum tariffs side could could.
Speaker Change: Impact that call it 510 percentage points against that 25% to 30% premium so it could help I think it's a little early.
John Haudrich: I think it's a little early, you know, some of these things are supply chain related, they're filling related, they are, you know, contractually related. So I would say, you know, just as we look at the, you know, back to the prepared comments, you know, the challenges, you know, we'll probably some of see some of the broader market related areas, probably over the shorter to medium term. And the opportunity section that we show on page A is probably something that unfolds a little bit more over time, and what we're seeing. Yeah, just an add to that, you know, obviously, if there's an increase in price in aluminum, that that helps, you know, close the gap a bit.
Speaker Change: Some of these things are supply chain related they are filling related they are contractually related.
Speaker Change: So I would say.
Speaker Change: Should we look at the back.
Speaker Change: Back to the prepared comments the challenges will probably some see some of the broader market related areas probably over the shorter to medium term and the opportunities section that we show on page eight is probably something in <unk>.
Speaker Change: Holds a little bit more over time, and what we're seeing with yes.
Speaker Change: Just.
Speaker Change: Add to that.
Speaker Change: Obviously, if there is increase in price and aluminum that helps close the gap a bit.
John Haudrich: But that's not a controllable for us. And so what we're focused on is, you know, getting our cost base into a position that we close the gap very significantly to cans and become more competitive to cans, particularly in North America, you know, driving those elements that are within our control. And that really is our primary focus.
Speaker Change: That's another controllable for us.
Speaker Change: And so we're focused on is getting our cost base.
Speaker Change: Into a position that we closed the gap very significantly.
Speaker Change: <unk> and become more competitive to comps, particularly in North America.
Speaker Change: Driving those elements that are within our control.
Speaker Change: And that really is our primary focus.
Unknown Executive: You know, tariffs for us is an uncontrollable, and while it may help us, you know, over a short, medium term period, it's not something we wish to rely on as we as we get fit. Great, thank you. That's very helpful.
Speaker Change: <unk> is a non controllable.
Speaker Change: They help us.
Speaker Change: Over over.
Speaker Change: The short medium term period, it's not something we wish to rely on them as we as we get fit.
Speaker Change: Great. Thank you that's very helpful I'll turn it over.
Anthony Pettinari: I'll turn it over. We now turn to Anthony Pettinari with City.
Speaker Change: Let me now turn to Anthony Pettinari with Citi. Your line is open. Please go ahead.
Anthony Pettinari: Your line is open, please go ahead. Good morning. In Europe, you have year-over-year headwinds for net price and then operating costs with the curtailments in one queue.
Anthony Pettinari: Good morning.
Anthony Pettinari: In Europe, you have it.
Anthony Pettinari: Hey.
Anthony Pettinari: Europe, you have year over year headwinds for net price and then operating costs with the curtailments in <unk> as you envision the year can you talk about maybe the cadence of how you would expect those headwinds to trend and ultimately inflect over the four quarters of the year.
John Haudrich: As you envision the year, can you talk about maybe the cadence of how you'd expect those headwinds to trend and ultimately inflect? © The Bulletproof Executive 2013 Yeah, Anthony, this is John, I'll take that one. As we take a look at net price for the business, it will be front end loaded this year. So you saw the $37 million impact in the quarter, it should be less than that in the second quarter, and then be a relatively minor headwind for the business in the back half of the year. That's primarily because last year, we had started to see a little bit of pricing pressure in the marketplace in the back half of last year.
Anthony Pettinari: Yeah. Anthony this is John I'll take that one as we take a look at net price for the business. It will be front end loaded. This year. So you saw the $37 million impact in the quarter it should be less than that in the second quarter, and then be a relatively minor headwind for the business.
Anthony Pettinari: Back half of the year, that's primarily because last year, we had started to see a little bit of pricing pressure in the marketplace in the back half of last year or so so we're going to comp that so that will show a year over year moderation and that pressure point.
John Haudrich: So we're going to comp that. So that will show a year over year moderation in that pressure point.
John Haudrich: And then when it comes to that, that Curtailment costs, you know, we believe that that also is going to be front-end loaded, you know, we're trying to, you know, bring our inventories down to, you know, 50 days or lower, we're making good progress on that. Now, if you take a look at just the, you know, the calculations and everything on a year-over-year basis, you know, the operating cost impact of that is, it peaks in the first quarter, we'll have some negative impact in the second quarter, not to the same degree in the first quarter, and by the back half of the year, on a year-over-year basis, that's going to be a strong year-over-year headwinds against obviously weaker constant with prior years, so hopefully that gives you the cadence that you're looking for.
Anthony Pettinari: And then when it comes to that.
Anthony Pettinari: Curtailment cost we believe that that also is going to be front end loaded.
Anthony Pettinari: We're trying to bring our inventories down to 50 days are lower we're making good progress on that if you take a look at just the populations and everything on a year over year basis.
Anthony Pettinari: The operating cost impact of that is it peaks in the first quarter will have some negative impact in the second quarter and not to the same degree in the first quarter and by the back half of the year on a year over year basis, that's going to be a strong year over year headwinds against obviously weaker comps in the prior year. So hopefully that gives you the cadence that you are.
Anthony Pettinari: Going forward.
Anthony Pettinari: Got it. That's very helpful.
Anthony Pettinari: Got it got it that's very helpful. And then just a quick follow up you talked about.
Anthony Pettinari: And then just a quick follow up. You talked about You know, tariff impacts and competitive intensity with aluminum, which I guess is maybe too soon to tell, but in the U.S., can you talk about how, you know, fewer Chinese bottles, fewer Chinese How you're seeing that impact the market this year. Yeah, we're currently we're not seeing a lot of impact because there does seem to have been quite a bit of pre buying by importers and distributors. So we see there's a fair bit of stock in the market. Obviously, you know, buyers may also look to see if there are other cheaper import markets such as India.
Anthony Pettinari: Tariff impact and competitive intensity with aluminum, which I guess is maybe too soon to tell but in the U S. Can you talk about how.
Anthony Pettinari: Fewer Chinese bottles fewer Chinese imports.
Anthony Pettinari: Are you seeing that impact the market.
Anthony Pettinari: This year.
Anthony Pettinari: Yes.
Anthony Pettinari: Accordingly, we're not seeing a lot of impact.
Anthony Pettinari: It does seem to have been quite a bit.
Anthony Pettinari: Pre buying by importers and distributors so.
Anthony Pettinari: We see there is a fair bit of stock in the market.
Anthony Pettinari: Obviously.
Anthony Pettinari: Buyers may also look to see if there are other cheaper important markets such as India.
John Haudrich: But so at the moment, we're not seeing a huge, huge impact, Anthony.
Anthony Pettinari: But so at the moment.
Anthony Pettinari: Not seeing a huge huge impact Anthony.
John Haudrich: One thing I would add, Anthony, is just if we take a look at those opportunity sections and that tariff, you know, if those emerge, those are kind of upsides to the our baseline view of the business. So, you know, you know, those are opportunities that are not factored into our current outlook at all. Got it. And what do you think those inventories potentially they they run down by the summer? Is it a few months or a few quarters? I would imagine by the end of the summer, I would imagine by the end of the summer.
Anthony Pettinari: One thing I would add Anthony is just.
Anthony Pettinari: Take a look at those opportunities sections and that tariff.
Anthony Pettinari: If those emerge those are kind of upside as to the our baseline view of the business. So.
Those are opportunities that are not factored into our current outlook at all.
Anthony Pettinari: Got it got it and what do you think those inventories potentially they run down by the summer or is it a few months or few quarters or.
Anthony Pettinari: Are there any framing I would imagine by the end of the summer.
Anthony Pettinari: By the end of the summer.
Unknown Executive: Got it.
Anthony Pettinari: Got it got it I'll turn it over.
Unknown Executive: I'll turn it over. As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad now.
Anthony Pettinari: Yes.
Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on the telephone keypad now.
Arun Viswanathan: We now turn to Arun Viswanathan with RBC Capital Markets. Your line is open, please go ahead. Great. Thanks. Thanks for taking my question.
Speaker Change: I'll now turn to Arun Viswanathan with RBC capital markets. Your line is open. Please go ahead.
Speaker Change: Great.
Speaker Change: Thanks for taking my question congrats on the strong progress thus far I guess, maybe you can just review what you are hearing from some of your customers on the spirit side in North America I know, there's been some volatility there I mean, I guess globally as well that'd be helpful. Thanks.
Gordon Hardie: So just congrats on the strong progress thus far. I guess maybe you can just review what you're hearing from some of your customers on the spirit side in North America. I know there's been some volatility there. I mean, I guess globally as well. That'd be helpful. Thanks. Yeah, you know, as we, you know, as we work through these, these kind of uncertain times, obviously, we're staying as close as we can to customers and working with them on maybe different scenarios. And, you know, how we position capacity. And, you know, I think there's a bit of a wait and see, you know, over the over the next 60 days now.
Speaker Change: Yes.
Speaker Change: As we work through these these kind of uncertain times, obviously, we're staying as close as we can to customers and working with them on maybe different scenarios in a.
Speaker Change: We'd position capacity.
Speaker Change: I think there is a bit of a wait and see.
Speaker Change: Over the over the next 60 days now.
Gordon Hardie: Um, and I, I think there has been, you know, last year, maybe some, some shifting of product into into different markets. And we, we saw that a bit of that in January. But no big structural decisions about ensuring capacity or ensuring bottling, for example, from Europe there, people are talking about it, but no, no actual moves on that. And neither, you know, do we see moves currently, you know, into from the US into Europe. So, so I think we're very much in a wait and see period. And because some of these decisions, once you make them, you're, you're long on that decision.
Speaker Change: And I think there has been.
Speaker Change: Last year, and maybe some some shifting of product into into different markets and we saw that a bit of that in January.
Speaker Change: But no big structural decisions about onshoring.
Speaker Change: Capacity or onshoring bottling for example from Europe.
Speaker Change: People are talking about it but.
Speaker Change: No actually moves on that.
Speaker Change: Neither.
Speaker Change: Do we see moves currently into some of the U S into Europe. So so I think we're very much in a wait and see period.
Speaker Change: And some.
Speaker Change: Some of these decisions once you make them you're logging on that decision and then if you know.
John Haudrich: And then if, you know, tariff policies change, you know, people can be caught out of position. So I think it's very much a wait and see at the moment. The one thing I would add on that, what we had seen last year is that the spirits activity, you know, they were drawing down inventories, and I think we've seen some normalization of that. In fact, our volumes in the first quarter in spirits were actually pretty good, because people are beyond, past that destocking phase, and now we're going into the, obviously the uncertainty with tariffs. Thanks, John.
Speaker Change: Tariff policies change.
Speaker Change: Stephen can be caught out with a position. So I think it's very much a wait and see at the moment the room.
Speaker Change: The one thing I would add on that you had seen last year is that that the spirits activity. They were drawing down inventories and I think we've seen some normalization of that in fact, our volumes in the first quarter and spirits were actually pretty good because people are past that destocking phase and now we're going into the obviously the uncertainty with tariffs.
Speaker Change: Okay.
Speaker Change: Thanks, John.
Unknown Executive: Yeah, and I guess I also had some questions on the Ros side.
Speaker Change: Yes, and I guess I also had some questions on the Rod side, maybe just give us some thoughts on how you're thinking about.
John Haudrich: Maybe just give us some thoughts on how you're thinking about your energy hedges as it relates to natural gas, as well as potentially, you know, your sourcing of coal and stow to ash if there's any anything we need to be mindful of on that side. Thanks. Yeah, I'll address the energy component of it. So it just a background, we have very favorable energy long term contracts that we set before the Russia-Ukraine war, we've been benefiting from that, but we're highly covered and contracted through through the balance of the year. So as it stands, you know, for this year, we're in very good shape when it comes to energy.
Speaker Change: As you have as it relates to natural gas as well as potentially.
Speaker Change: Youre sourcing of call it and soda ash, if theres any anything we need to be mindful of on that side. Thanks.
Speaker Change: Yes, I'll address the energy component of it.
Speaker Change: No.
Speaker Change: Just as background, we have very favorable energy long term contracts that we set before the Russia, Ukraine War, we've been benefiting from that.
Speaker Change: <unk> covered and contracted through the balance of the year so as it stands.
Speaker Change: For this year, we are in very good shape when it comes to energy now going into next year at 26 and beyond we have been layering in over time some of our positions in contracts for the future we take a multiyear view on that now.
John Haudrich: Now going into next year, you know, 26 and beyond, we have been layering in over time, you know, some of our positions and contracts for the future, we take a multi-year view on that. Now at the same token, some of those prices had peaked up at the beginning of the year. So we're being judicious about that.
Speaker Change: Now at the same token some of those prices had picked up at the beginning of the year. So we're being judicious about that.
John Haudrich: What I would point you back to Arun is, you know, back to our investor day about a month ago, we we kind of gave a longer term view of, you know, from our bridge from today, or at the end of 24 to 2027, where we're going to $1.45 billion of EBITDA included that in that outlook was our expected headwind for resetting of those long term energy contracts. And I would say that that view still holds. So I think you can look back at that. And even with the moving energy markets, I think it's still an appropriate outlook.
Speaker Change: Good point you back to Arun is back to our Investor day about a month ago, we kind of gave a longer term view of from a bridge from today or at the end of 2004 to 2000, and 2007, where we're going to $145 billion of EBITDA included that in that outlook was our expected headwind for resetting.
Speaker Change: Those long term energy contracts and I would say that view still holds so I think you can look back at that and even with the moving energy markets I think it's a still lot of appropriate outlook, yes.
Unknown Executive: Yeah.
John Haudrich: And with regard to raw materials, generally, you know, as we've laid out as part of our strategy, you know, is a value chain approach. So working differently, both with customers on the front end, but also working differently with suppliers on the back end. And doing so in a way that, you know, strips waste and inefficiency out of that part of the chain. And we're working, you know, very well with our key suppliers. You know, there's tremendous focus on productivity plans. And so, you know, we're very happy with the progress we're making there. And in managing that, that area of the of the value chain and the cost base far more tightly than than heretofore.
Speaker Change: With regard to raw materials generally as we've laid out as part of our strategy as a value chain approach working differently, both with customers on the front end, but also working differently with suppliers on the backend.
Speaker Change: And doing so in a way that strips waste and inefficiency out of that part of the chain.
Speaker Change: We're working very well.
Speaker Change: With our key suppliers.
Speaker Change: There is.
Speaker Change: Tremendous focus on productivity plans and so.
Speaker Change: We're very happy with the progress we're making there.
Speaker Change: <unk> dot.
Speaker Change: The area of the of the value chain and the cost base far more tightly than heretofore. So.
Unknown Executive: So, so we feel we're in we're in good shape there. As another reminder, if you'd like to ask any follow-up questions, please press star 1 on your telephone keypad now.
Speaker Change: So we feel we're in we're in good shape there.
Speaker Change: As another reminder, if you'd like to ask any follow up questions. Please press star one on it sounds like you bought now.
Gabrial Hajde: In absentia, Gabe Hajde, with Wells Fargo Securities. Your line is open, please go ahead. Gordon, John, Chris, good morning. Thanks for taking the question. Well, I joined a moment late. So I apologize if you guys address this. I didn't see you call out any sort of curtailments in the Americas. So A, confirm that. B, I think I heard the word Tidish across the production system. Is that true across the specific geographies, US, Mexico, and Brazil? And then maybe what are you seeing? I know we're going into the winter months, but any discussion with your customers in terms of kind of cadence for the back half of the year?
Speaker Change: And how sensitive gay patched with Wells Fargo Securities. Your line is open. Please go ahead.
Speaker Change: Gordon John Chris Good morning, Thanks for taking the question.
Speaker Change: Alright.
Speaker Change: Dave.
Speaker Change: Well I joined a moment late.
Speaker Change: So I apologize if you guys addressed this I didn't see you call out any sort of.
Speaker Change: Curtailments in the Americas.
Speaker Change: So a confirm that.
Speaker Change: I think I heard the word title.
Speaker Change: Across the production system.
Speaker Change: Is that true across the specific geographies U S, Mexico, and Brazil, and then maybe what are you seeing I know, we're going into the winter months.
Speaker Change: But any discussion with your customers in terms of.
Speaker Change: Kind of cadence for the back half of the year.
Gordon Hardie: I can take the first part of that. You did hear right. Yeah, okay, sure. You did hear right. Overall, there were no curtailments of any consequence in the Americas, all the way from Canada down to Brazil. We're very, very balanced in that particular marketplace. Certainly, we will continue to seek, through TOE going forward, opportunities to improve capacity utilization, but we've done most of the heavy lifting of the initial network optimizations in the Americas, and as I mentioned before, we continue in Europe, but we hope by mid-year, maybe the later part of summer, we'll be on the worst of the temporary curtailment activities.
Speaker Change: Yes, I can take the first part of that you did hear right.
Speaker Change: Yes, yes, okay sure you.
Speaker Change: You did hear right overall, there were no curtailments of any consequence in the Americas, all the way from Canada down to Brazil, we're very very balanced in that particular marketplace.
Speaker Change: Certainly we will continue to seek through going forward opportunities to improve capacity utilization, but we've done most of the heavy lifting of that.
Speaker Change: Network.
Speaker Change: Initial network optimizations in the Americas, and and as I mentioned before we continue in Europe, but we hope by mid year maybe.
Speaker Change: The later part of summer will be out in the worst of that.
Speaker Change: The temporary curtailment activity.
Gordon Hardie: You know, the outlook for the rest of the year, I think, is largely more of the same in the Americas, you know, demand is good, capacity is tight, you know, pricing stable, and, you know, We expect that to kind of run through probably to the end of the year in those geographies for sure.
Speaker Change: The outlook for the rest of the year I think is largely more of the same in the Americas.
Speaker Change: Demand is good capacity is tight.
Pricing is stable.
Speaker Change: And.
Speaker Change: We expect that to kind of run through probably to the end of the year in those geographies for sure.
Gordon Hardie: Okay, and then, John, I think you kind of mentioned, and I fully appreciate being cautious and pragmatic here, given the macro, but kind of if we were to free things today, tracking towards the upper end of the range, based on kind of what you expect through the first half, I also know that you guys have talked about trying to reduce the volatility in earnings and produce closer to sell, maybe not hang on to as much inventory. I think I know Gordon, you've talked about that. The Q4 guide, is that where we would see the big swing factor?
Speaker Change: Okay, and then John I think you kind of mentioned and I fully appreciate.
Speaker Change: Being cautious and pragmatic here given given the macro but.
Speaker Change: The FLIR at a free things today tracking towards the upper end of the range based on kind of what you expect through the first half.
Speaker Change: I also know that you guys have talked about trying to.
Speaker Change: Reduce the volatility in earnings and produce closer to sell maybe.
Speaker Change: Not hang on to as much inventory I think Gordon you talked about that.
Speaker Change: The Q4 guide is that where we would see.
Speaker Change: The big swing factor and I think you also just mentioned.
Gordon Hardie: And I think you also just mentioned not taking as many curtailments in the fourth quarter. So is that the big swing factor and unknown as we sit today, that could dictate higher end of the range, lower end of the range? Because it seems like you guys got some visibility into Q2, Q3. I think it's a fair observation, Gabe. The fourth quarter, as you took a look at that pie chart, is the weakest quarter from a quarterly earnings standpoint. It is also the seasonally slowest period for our business, given just the seasonality of our business and being predominantly northern hemisphere.
Speaker Change: Not taking as many curtailments in the fourth quarter. So is that the big swing factor in unknown as we sit today that could dictate higher end of the range lower end of the range.
Speaker Change: Because it seems like you guys got some visibility into Q2 Q3.
Speaker Change: I think it's a fair observation Gabe the fourth quarter as you took a look at that Pie chart is the weakest quarter from an earnings quarterly earnings standpoint. It is also the seasonally slowest period for our business given just the seasonality of our business and being predominantly in northern hemisphere.
John Haudrich: But if there's an opportunity, I think there is, again, line of sight is better in the second and third, and a little bit more cautious in the fourth quarter is also an active period. Sometimes you do more maintenance, sometimes you don't, depending on the activity. And I would also say, our earnings are very sensitive to tax rates, especially in those softer periods, seasonally softer periods. So that could also be a swing factor too. So to the degree that we're at the higher end of the range, and the tariff challenges don't manifest themselves to materially impact the business, I think you could see the fourth quarter being a little bit better.
Speaker Change: But if there is an opportunity I think there is.
Speaker Change: Again line of sight is better in the second and third.
Speaker Change: And a little bit more cautious in the fourth quarter.
Speaker Change: Of course, the fourth quarter is also.
Speaker Change: An active period, sometimes you do more maintenance, sometimes you don't depending on the activity and I would also say.
Speaker Change: Our earnings are very sensitive to tax rates, especially the soccer periods of seasonally softer periods. So that could also be a swing factor to so to the degree that we're at the higher end of the range.
Speaker Change: The tariff challenges don't manifest themselves to materially impact the business I think you could see the fourth quarter being a little bit better.
Unknown Executive: As a final reminder, if you'd like to ask another question, please press star 1 on your telephone keypad.
Speaker Change: As a final reminder, if you'd like to ask another question. Please press star one on your telephone keypad now.
Christopher Manuel: We have no further questions, I'll now hand back to Chris Manuel for any final remarks. Thanks, Elliot.
unknown: We have no further questions I'll now hand back to Chris Manuel for any final remarks.
Chris Manuel: Thanks Elliot that concludes our earnings call. Please note our second quarter call is currently scheduled for Wednesday July 30th.
Unknown Executive: That concludes our earnings call. Please note, our second quarter call is currently scheduled for Wednesday, July 30. And as a reminder, make it a memorable moment by choosing safe, sustainable glass.
unknown: And as a reminder, make it a memorable walnuts by choosing safe sustainable glass. Thank you.
Unknown Executive: Thank Ladies and gentlemen today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
Ladies and gentlemen, today's call is now concluded. Thank you for your participation you may now disconnect your lines.
unknown: Okay.
unknown: Yes.
unknown: Yes.
unknown: Okay.
unknown: Okay.
unknown: Yes.
unknown: Yes.
unknown: Okay.
unknown: Thanks Colin.
unknown: Great.
unknown: Yes.
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Unknown Executive: Thanks for watching!
unknown: Hey.
unknown: Yes.