Q3 2025 O-I Glass Inc Earnings Call

Speaker #1: Good morning . Thank you for attending today's O-I Glass, Inc. /DE/ third Quarter 2025 Earnings Conference call . My name is Jerry and I will be your moderator today .

Speaker #1: All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end . If you would like to ask a question , press star one on your telephone keypad .

Speaker #1: I would now like to pass the conference over to our host , Chris Manuel , vice President of Investor Relations . Please go ahead .

Speaker #2: Thank you , Jerry , and welcome everyone to the O-i Glass . Third quarter 2020 Earnings Conference call . Our discussion today will be led by Gordon Hardie , our CEO , and John Haudrich , our CFO .

Speaker #2: Following prepared remarks , we will host a Q&A session . Presentation materials for this call are available in 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 #2: Now , I'd like to turn the call over to Gordon , who will start on slide three .

Speaker #3: Good morning everybody , and thank you for your interest in O-I Glass, Inc. /DE/ . Today we will review our third quarter performance , examine recent market trends , and highlight the progress we have made on our transformation journey .

Speaker #3: We will also share our improved outlook for 2025 and an early view on key business drivers for further improvement in 2026 . Before we begin , I want to acknowledge the dedication and determination of the entire team .

Speaker #3: Your commitment , teamwork and execution are the drivers behind our ongoing transformation . Last night we reported third quarter adjusted earnings of $0.48 per share , delivering strong results that exceeded both last year's performance and our own initial plans .

Speaker #3: Our top line remains stable , supported by higher average selling prices and favorable FX , even as overall consumer demand remains subdued . We saw revenue growth in non-alcoholic beverages , food and rtds , while beer and wine experienced declines due to softer consumer demand .

Speaker #3: Importantly , the execution of our strategic initiatives is leading to a higher quality of revenue as we strip out waste and inefficiencies . Expanding , growing categories and exit some unprofitable business .

Speaker #3: As a result , segment operating profit rose by more than 60% year over year , and margins are up . A robust 570 basis points , propelled by significant benefits from our strategic program and increased production levels following last year's inventory reduction .

Speaker #3: Fit to win contributed another $75 million in the third quarter and $220 million year to date . We now expect to surpass our original 2025 savings target , and this program is strengthening our competitiveness , enhancing performance , and enabling durable profit improvement .

Speaker #3: Despite ongoing macroeconomic headwinds or strategy . Is delivering results . We have raised our full year 2025 guidance and now expect adjusted earnings per share to nearly double versus 2024 .

Speaker #3: Momentum is building and we anticipate continued growth in adjusted earnings and free cash flow in 2026 . As we advance towards the target set out at a recent Investor Day , let's now move to page four .

Speaker #3: As we review our quarterly results . It is important to consider current trends within the broader market context . Packaging dynamics are evolving short term cyclical pressures , including inflation , consumer price resistance , and elevated supply chain inventories have temporarily dampened demand .

Speaker #3: However , we anticipate these headwinds will ease over time . Longer term factors such as lower per capita alcohol consumption and increased substrate competition will persist in certain markets .

Speaker #3: Yet these challenges are expected to be offset by growing interest in premiumization and sustainability . Furthermore , rising consumer health awareness is driving growth in no low alcohol beverages as well as food and water .

Speaker #3: These trends suggest a more balanced and sustained demand for glass over the long term . In the interim , our focus remains on eliminating waste and inefficiencies , building higher quality revenue streams , delivering a more profitable portfolio , and positioning the business for future shifts in consumer demand .

Speaker #3: O-i has navigated market volatility effectively , maintaining stable net sales in recent years . As we address near-term cyclical pressures . We are carefully balancing price and volume to achieve a relatively stable top line for the full year .

Speaker #3: We now expect pricing to be flat and sales volumes to be down about 2% , which is consistent with softer consumer demand . Despite this , our fit to win initiative is delivering a higher quality business mix and strengthening our competitive position , as evidenced by improved margins and segment profits .

Speaker #3: Looking ahead , we anticipate a Y will achieve 1 to 2% annual sales volume growth post 2027 as markets stabilize . Strategic initiatives enhance our cost position , and we drive profitable growth in the next phase of our strategy .

Speaker #3: Let's now turn to page five to review the progress of our Fit to Win initiative , which I'm pleased to report is ahead of schedule .

Speaker #3: Fit to win is significantly reducing costs across the enterprise , as well as optimizing our network and value chain to enhance competitiveness and support future growth .

Speaker #3: In the third quarter , we achieved another 75 million in savings with benefits of $220 million through the first nine months of the year , well ahead of our initial plans .

Speaker #3: With this momentum, we expect 2025 savings will range between $275 million and $300 million, which exceeds our current year goal. So we are well on our way to at least $650 million of benefits by 2027.

Speaker #3: On a cumulative basis . We are making excellent progress in phase A , which focuses on streamlining SG&A costs and initial network optimization actions .

Speaker #3: We've already secured $100 million in G&A savings in 2025 , and we are on track to reach our three year target ahead of schedule .

Speaker #3: Our network optimization is also moving quickly . We have communicated the closure of 13% of capacity to align supply with demand . 8% is now complete and all remaining actions should be completed by early next year .

Speaker #3: Phase B centers on transforming our entire value chain . The first wave of our total organized organizational effectiveness rollout across 15 plants is completed , and each location has met or exceeded expectations .

Speaker #3: The second wave , covering another 15 plants , is in progress , and we should complete the remaining plants by the end of next year , with benefits continuing into 20 2027 and beyond .

Speaker #3: Our teams are driving strong results in procurement and energy reduction , further boosting savings and resilience . New supplier agreements are set to enhance productivity and competitiveness over the next three years .

Speaker #3: Overall , the fit to Win program is delivering results faster than planned . We are well ahead of our targets for 2025 and are positioned to unlock even greater value through 2027 .

Speaker #3: Despite challenging market conditions . Now I'll hand it over to John , who will start with a review of our third quarter results on page six .

Speaker #3: Thanks .

Speaker #4: Gordon , and good morning , everyone . Let's begin with our third quarter top line results . Net sales held firm at approximately $1.7 billion , with modest improvements in gross price , especially in the Americas .

Speaker #4: Favorable FX provided a helpful tailwind even as consumer demand remained muted . Shipments and tonnes declined by 5% , as modest growth in the NAB Food and RTD categories was more than offset by lower performance in beer and wine .

Speaker #4: Keep in mind this headline figure does not fully reflect underlying trends , as several factors which are not indicative of actual consumption impacted volumes by approximately three percentage points .

Speaker #4: These factors include a major capital project commissioning in Europe , which we discussed during last quarter's call . Inventory correction in the Mexico and North America beer category related to changes in US trade and immigration policies , and mix changes as we exited some unprofitable business lines .

Speaker #4: Consistent with our focus on increasing economic profit , as well as the ongoing trend towards container lightweighting , excluding these factors , shipments were down about 2% , which is more in line with softer underlying consumer consumption trends .

Speaker #4: Importantly , overall volumes improved over the course of the quarter and shipments were nearly flat with the prior year in September . While while revenues were stable , margins improved significantly in O-i delivered third quarter adjusted earnings of $0.48 per share , exceeding both last year's results and our own plans .

Speaker #4: This achievement was driven by favorable net price , significantly lower costs thanks to fit to Win initiatives and higher production levels . Despite softer sales volumes .

Speaker #4: A lower tax rate also benefited the bottom line . Overall , is delivering delivered strong third quarter results , outperforming expectations through disciplined execution cost reductions and continued momentum from our strategic program positioning .

Free cash flow is projected at 150 to 200 million in Improvement of approximately 300 million dollars versus last year and closer to 400 million dollar increase prior to restructuring costs.

Although the adjusted earnings Outlook has improved our free cash flow, guidance remains unchanged due to higher than expected, restructuring opportunities, and the settlement of a legacy environmental liability, which together totaled, more than $55 million.

Higher. Restructuring. There's a result of oi's accelerated Network optimization initiatives, which are expected to deliver benefits in 2026 and Beyond.

Excluding these temporary and elevated charges are free. Cash. Flow is nearing the 5% of sales Benchmark, which is our 2027 Target.

We successfully refinanced, our bank, credit agreement last month at favorable economics, which also extends out maturities leverage, improved over the last quarter and we continue to expect our leverage ratio, will land in the mid 3s by year, end.

Despite a challenging macroeconomic backdrop, we are executing effectively and our self-help initiatives are delivering results that exceed our original expectations. As a result, we are increasing our full year, adjusted earnings per share, guidance and expect this positive momentum to continue in the next year. Now, let's turn to page 9 for our early prospectives on key. Business drivers for 2026.

Top Line while executing fit to win to further strengthen our competitive position and lay the groundwork for a profitable growth after 2027.

Adjusted earnings are projected to improve fueled by another year of strong initiative benefits these gains should more than offset, the impact of lower net price. As we reset favorable energy contracts in Europe which are expiring at the end of this year.

Free cash flow is expected to rise driven by increased earnings and discipline Capital allocation cash. Restructuring uh, cost should be at or below 2025 levels as we complete key initiatives by mid 2026. Our balance sheet should continue to improve with financial leverage in the low 3s by year in 2026.

With strong execution, ongoing transformation and and clear strategic Direction. Oi is well, positioned to deliver lasting value to all stakeholders. Now, back to Gordon on page 10. Thanks John. As we wrap up today's call. I want to emphasize the significant progress, so I has achieved and the solid competitive Foundation. We are establishing for the future.

Our strong year to date performance driven by the ongoing success of our fit to win program has enabled us to raise the 2025 adjusted earnings guidance. Once again looking ahead, we anticipate continued growth in both earnings and free cash flow in 2026.

We are delivering on the commitments made at a recent investor day. Maintaining a stable Top Line, enhancing our quality of Revenue and advancing our transformation, despite the challenging environment.

Our efforts to realign our Network. And supply chain are supporting mix improvements and positioning us for long-term profitable growth.

Our cost transformation initiatives are generating, substantial savings and increasing our competitiveness and we have streamlined our organization to be more agile and focused.

As a result, margins and earnings are up, free cash flows are increasing, and our balance sheet continues to strengthen. Most importantly, we are executing well, building momentum, and expect to create sustainable value for our shareholders.

Thank you for your continued support and confidence in Hawaii. We look forward to building on this momentum and achieving even greater success together. We're now happy to take any questions. You may have

Thank you, if you would like to ask a question, please press star. Followed by 1 on your telephone keypad. If for any reason you would like to remove your question, press star, followed by 2 again to ask a question. Press star, 1 as a. Reminder, if you are using a speaker phone, please remember to pick up your handset before asking a question, we will pause here. Briefly ask questions or register.

Thank you. We will now take our first question from Jen. Punjabi from bears, please. Go ahead.

Thank you, Peter. Good morning everybody. Um,

You know Gordon I do think about the uh the demand environment, good morning. Um you know as you sort of think about the demand environment and you know the variability we've seen over the years Etc.

How much of this most recent decline. Um,

Is influencing your view as it relates to what's actually a cyclical decline, versus some sort of secular change because of changing consumer preferences and so on and so forth. Uh, you know, because if you go back to 2019 volumes are down roughly mid teens, you're aligning Your Capacity down by pretty much a comparable amount and I'm just curious as to what you think is the right Baseline for volumes going forward, or is this a new starting point?

Yeah, thanks K. And, you know, it's um, it it's quite a dynamic demand environment and, you know, depending on where what, segments, and categories you look at and what part of the world, they're, they're probably different Dynamics. I think it's fair to say that beer, uh, you know, across the board and wine across the board are, uh, you know, declining. Um, and certainly we've seen that in most of the markets but within beer, there's a there's a dynamic where premium beers are, are showing some growth. Um, but it it's it's mid-tier and maybe lower. Um,

So, I I think there's a piece there, um, quite a large chunk around around beer. That's I would say cyclical. Um, and you know, then the shift, uh, you know, people health and wellness, you know, accessing beer through low and, and non-alcoholic beverages, which I think will will kind of grow. I, I, I very much think we're still, um, you know, in in the, in the midst of, of the implications of Co, and how it disrupted Supply chains and, and behaviors. And the stages that with particularly gen zers enter different kind of categories. So, so I think there's, um, there's very much a part in beer, which I think is cyclical wine. Um, I I think some of it is structural, um, you know, younger consumers, what you hear is, is finding it difficult to assess wine. You know, it can be a complicated category to to access with

Different, um, you know, appellations and you know, labels and so on. Um but what what we do here is the wine industry saying okay, how do we how do we make it easier for for for for consumers to access the category? So I think there's some work done being done there that, you know, should should help that, uh, over over time, you know, the way, the way we look at it, um, gum is, as I've mentioned before we, we, we have um, about 1.7 times

to see the volume of our, our, our nearest competitors, and in this period, of kind of volatile, um, demand, you know, I I think the

The the the most clear path for us to create value, is to increase the profitability and the returns, and the cash on the volumes that we have, um, and and really strengthen the portfolio and and strengthen, the core business and generate higher returns and higher cash flow from what we have, um, and and shedding volume that doesn't deliver economic profit or cash for us. And, you know, you'll see that starting to come through in the results where volumes are down but margins are up, very significantly cash will be up significantly for the year. So you know what is the right base? Um I'm I'm you know if that's you know, that's a fixed 64,000 question but what I am clear on is that we are only focused on volume that delivers economic profit for us. Now we are in, you know, that early stage of that 3 horizontal, where we said, you know, we got

Get fit in order that we assess growth.

There is volume available in the market. If you wanted to chase really low margins and give up a whole bunch of terms that will destroy cash. That's, that's not our game plan. Um, so we are getting fit in order that, when the market turns,

Then we can access the kind of growth and we have a very clear view on, you know, the kind of growth where we're looking for, what categories, what segments, What markets, what customers, um, that that's a, that's a very clear to us internally. Um, uh, but there, there's a timing issue. We've got to work through the fit to win. Get much more competitive than we've have been. And when the market turns access that growth, as we said going forward just to close out, we would then expect, you know, 1 to 2% volume growth. That would be, you know, EP or creative and cash, it created for us going forward, post 2027,

So that's that's a long answer gum but, um, that that's kind of how we look at it. Yeah.

Okay, just 1 quick, follow-up on the 13th percent capacity cut. How does that skew between the regions? And I'll turn it over. Thank you.

Okay. Hey, gotcha. This is John. Uh, on the balance, there is probably a little bit more going on in the Americas than in Europe. But what I would say is where we stand right now, the Americas is substantially advanced in the final stages compared to Europe.

Okay, fantastic. Thank you.

Thank you.

We will now take our next question. From Josh Spectrum from UBS.

Please go ahead.

Start, thank you.

Sure. So you know if I if you take a look at the 5% I'd break it out about 2% is is just softer consumer demand, um, you know, and and consumers being, you know, more challenged, I think and and kind of price resistance in the market. And then, you know, between Network optimization, um, and a deliberate, uh, decision to exit volume that, you know, did not make sense for us from an EP point of view. And then also some very deliberate strategies around lightweighting that that's about 3%. So the underlying we we think is about 2%, right? Um, and we we probably see that holding to to year end. Um,

I would, I would add just looking at the numbers here. Josh. Um, the exiting of unprofitable business probably was 1 percentage point of that 3 percentage point that we would say is not specifically due to Consumer consumption Trends and that will episodically continue for the business. Um, you know, I think we flagged this back at at investor day. There's, there's a, a low single digit. Come mid, single digit kind of portfolio of our business that is deeply economic profit negative. And, and we are either going to raise prices in that market or we're going to exit that business. And that's the that process that we're going through uh as we go right? As as we go over the next year or so.

Thanks, I appreciate that. And I also appreciate some of the kind of early overview here of 26. I don't know if it's too early to frame this in a real quantifiable way, but I guess the easy math that you've kind of laid out is, you know you expect at least a couple hundred million benefit of cost savings. You guys earlier sized that the energy contractor reset.

I think it was 130 million I guess, correct me if I'm wrong. I guess if you think volumes are flat is the bogey that you should have earnings up 70 million in that context. If we go sideways from here or there, other ways that you would think about puts and takes, we should be adding

You know, what 1 is, what we probably don't want to get into quantification just yet, you know. We, we uh, we expect a, a nice increase next year as we move our way to towards that, uh, 1.45 billion in 2027. Of course, we have to absorb that energy credit reset energy reset that, that number, as we mentioned back, even in an investor day, is about 150 million dollars. That's still remains to be, um, you know, you know, uh, very much in line with that right now. So as we look at the, the puts and takes of the business, kind of stable volume, we'll have gross price up, uh, against, uh, low single digit, kind of normalizing inflation. Uh, but then we'll absorb the energy, uh, you know. Reset as we mentioned that Mark to Market and then very robust contained, robust fit to win benefits, but we'll come back at the end of the year with

Quantification. How about we expect? A, a nice talk next year.

Okay, thank you.

Thank you.

We will now take our next question from Francisco Ruiz from BNP. Please go ahead.

Hi, good to morning and thank you for taking my question, I have to if I met the first 1 is, um, on the restructuring. It's a kind of follow up, um, on the previous question out of the 13th capacity reduction that you are in, how much is already announced. And, and, and how much is spending apart from the, from the French, uh, announcement that you made at the beginning of the year?

The second question is in in America more specifically in Brazil with a very bad quarter in terms of volumes overall. Uh some of your competitors are increasing capacity. How how do you see the the area in the in the coming quarters. Thank you.

Yeah, Francisco at that. This is John. I'll, I'll touch base on the and cover. The first 1 on the restructuring, uh, is is we if we go back to 2024, um, we were caring about 13% excess capacity and that was causing us about. 250 million dollars of unabsorbed. Fixed costs. We have since then announced closure of 13% of our capacity which would ultimately get a substantially out of that fixed cost absorption. Uh, right.

150 million a little bit on the high end of what we originally anticipated because we're we're moving moving faster in certain areas, uh, but we anticipate a carryover of restructuring costs. Next year, that will be at, or below that level and we should be out of that exit range of that, that cash, uh, activity by mid uh, 2026. So really the fundamental cash flow moving. You know, momentum going forward in the back half of the year will be better.

Yeah, we um 5 to school. Um, good morning with regard to to Brazil. I was actually in Brazil a couple of weeks ago and and um spend spent a week touring the market and meeting with customers. Um, you know, a couple of on on the positive side, you know we're seeing very strong growth in in non-alcoholic beverages. So Waters and juices in Brazil, you know, we're we're seeing strong growth in in wine.

Uh, in in Brazil, and and strong growth in spirits, where where the big declines came where were in beer and I know it's easy to blame the weather, but everywhere, I went people spoke about it being, you know, probably the coldest winter in in 30 years in Brazil. And that's definitely had an impact on, on consumption. Yeah. Um, and and also, you know, people being being challenged, um, in terms of spending power and, you know, a bit of trading down, uh, going on in in beer, um, for, for sure.

What what we are seeing is is is customers launching, you know, new new offerings to the market. Um, they were also some sizable price increases went into the market that impacted volumes, I think in the short term. Um, and, and then on the food side for us, um, you know, we, we, we saw a decline in volume that was very largely driven by raw material shortages, you know, particularly kind of olives and that impacted our business. But the, but the, the, the the main piece around beer was a was largely a weather driven. Uh, and some, you know, mid mid to high single-digit pricing going in on shelf, which I, I think um, you know, put a bit of pressure on on on, on consumption. That's starting to sort of come back and, you know, we're we're obviously heading into, um, to the the summer months in in Brazil and would expect uh, you know, better volumes going forward.

Okay, thank you very much. Yes, yes. Uh, uh, another question, I don't know if we have mentioned, but as you did in, in other quarters, can you give us an idea of the current trading in in October?

Yes. Yeah. I I I would say this, we take a look at um as you know, going back to what Gordon had indicated. You know, we think the full year is going to be be down about 2% now uh, consistent with that underlying consumer consumption. Fourth quarter is kind of playing out in that that low single digit uh, you know territory.

So, uh, you know, nothing particularly new against the consumer consumption trends.

Okay, thank you very much.

Thank you.

We will now take our next question from Mike. Roxland from Choice, please go ahead.

Yeah. Uh, thank you Gordon. John Chris, taking my questions and congrats on a strong quarter in the top and barber.

I uh, can you hear me?

Yes.

Oh perfect. Okay great. Just wanted to follow up on the uh the recording of unprofitable business. I realized you mentioned in response to an early question that in the Americas that amounted to about 1%.

Um, can you comment on? What? What what that was in Europe? Because when I look at some of your peers, your peers had volumes that, you know, increase low single digits, your European volumes declined 4% to 3 Q. So I'm just wondering how much of that volume decline in Europe. Was you guys walking away from a profitable business with your peers and possibly picked up first is let's say underlying consumer weakness.

Yeah. Micah, you know, as we had indicated their overall, the number, you know, that the shipments were down about 3% in Europe, overall, we attribute that substantially to. That major project that was underway. Uh, we we talked about that last quarter. Um, you know, it was primarily in the spirits category. Um, so that was the biggest impact. Yes, we were walking away from.

Business business there, but I think it was more skewed towards that that major project.

and um, you know, particularly, you know, Waters food rtds

Um, you know, um, in in Western Europe, you know, we were impacted a bit by buy wine, you know, with wine exports down. Um, and um, and and Spirits, you know, some of the French Spirits, not not picking up yet, you know, in terms of shipments to either the us or, or, or to China, um northern Europe was was, was was good, was strong for us across Food and Spirits and and beer. Um, and um, and then, as, as John said, you know, we we um, we we, we had that commissioning which was, you know, slower than we had anticipated. So, um,

Yeah, we're we're, we're, we're pretty happy where we are in Europe, given given the context there, um, where, um, we're very focused on improving the profitability of the volumes we have. And, and we're not chasing volume just for the sake of of volume and we're being very disciplined, uh, uh, around that. Um, as I said there, there is volume out there that can, you know, destroy your margins and and each your cash. And and that's not our game plan.

1 thing to add mic on, on the question of about the the walking away from unprofitable business and you you can sue it in our in our, uh, revenue and earnings. Rex is, you know, yes, the, the the the revenue is down as a result but the decremental margins on on the, the lower volumes were were half of what you would normally expect. So you, you, you see us walking away from unprofitable business and it's very visible and the and the bottom line performance of the business.

Got it great. Uh, great call. I really appreciate it. And just 1 uh 1 follow up. Just wanted to ask you about the the cost spread to aluminum cans. And you know, given where aluminum prices are today in the US, you know, where is the spread currently stand relative to the 25% you cited at your investor day and do you think you could gain share next year if aluminum remains elevated and as Hedges aluminum, Hedges roll, roll off and I also realized this early stages can comment on how much your actions thus far have reduced the cost spread to kids. Thank you.

Yeah, Mike I'll kick off with the first part of that is. If, if you take a look at the elevated costs of aluminum right now, we would say that that has moved that cost differential for example, in the US, which was with between 25 and 30%, more into that zone, where we believe that historically, you know, glass can compete well, which is, you know, 15% or lower a premium, um, to, to aluminum. So it's early days, obviously. And, and as

Things flush through in the system, uh, but that's what we're seeing as far as the, the competitive position of the product. Yeah. And then Mike as you said, you know? And and I think as we said in in our investor day, you know, we we can't be relying on the price of aluminum to be competitive to Cannes. We've got our find their own path there, you know, to 15% or less spread between cans and glass, which we are focused on, but it does give us a bit of extra time if, if, if the aluminum prices rise but, um, you know, we've got to get their irrespective of where aluminum is, um, you know, over the journey between now and 2027.

Thank you.

But I I just suppose, as I close out on that, you know, the closer we are and the more competitive we are, then the more Choice, our customers have in Which substrate to use and and indeed, you know, consumers, you know which uh, which 1 they they choose on shelf. Yeah.

Thank you. We will now take our next question from George stephos from Bank of America. Please go ahead.

Morning everybody. How are you? Thanks for the details? Um,

Congratulations on the progress and also on the decimal margin. It was a nice job. This last quarter guys, um,

3 questions. I'll ask them in sequence, uh, for time, first of all, if we go to slide 7,

and,

you're uh, if you will, you're bridging or waterfall chart on the items that were controllable

Where did you perform best?

And where did you perform least well relative to increasing your guidance for the year?

Non-operating and restructure and, and potentially have a better result. How did that play out? Is that still playing out? Is it still downtime? And then the last question as we look to 2026 recognizing again, there's a lot of water that still needs to flow under the bridge. We get it.

It would suggest given that, you're at least expecting, you know, good results for next year. Good being defined by up earnings are up cash flow.

that at least your initial commercial discussions with customers on Price is going

favorably. Can you talk about where that process stands earlier than normal later than normal? Any qualitative commentary would be helpful. Thank you guys and good luck in the quarter.

Yeah, I I might take the the last question first charge if you don't mind. I mean we're we're heading into that season. Um, you know, as as John said we we would expect sort of gross pricing to probably be up.

you're, you know, possibly, you know, our, our our, our, our, our, our, our, our, our,

You know, our tight, but, you know, it's it's early days. Yes. And um, um, but you know, we're we're focused on on being very, you know, disciplined and in terms of, um, you know,

Improving the profitability of the volume. We have, uh, you know, anything that doesn't make economic sense for us in any contract negotiations, going forward. You know, we will, um, we we we would, we would shift that out of the business and dedicate it or or or assets to to that volume. That's that is delivering the kind of margins and and cash targets. We have

Yeah, George and, and, and to the other questions, as far as you know, what's changed in in, in performance, as we in the quarter. And then, and as we look to the guidance, going forward, obviously fit to win. And the cost performance is exceeding our expectations, we increased our full year guidance of that by 25 to 50 million dollars for the full year. At the same token, you'll also see that net price has been positive relative to what we thought going into the year. And that has offset some of the, the softer, uh, sales vines that we have. So, when we look at it, the commercial performance, net, net of price and volume is, is right where we expected it overall. It's a little bit different componentry but really the driver of increased performance on the quarter, expectations of the fourth, fourth quarter better performance and for the full year is largely driven by fit to win improvements. Okay. Um, on your next question you had asked about operations and and and closures and restructuring opportunities. As you may recall last quarter we we said we had announced about 10

10% capacity closures, and now we're at about 13%. So we, in fact have been able to identify those additional 3 percentage points of of, of capacity that again, balances Supply with demand at the end of the day and our, our our moving towards, uh, closing those out, on on a permanent basis. Uh, and again, 8% of it was done at the, at the end of the third quarter. So we were still carrying, uh, some restructuring charges. I mean not sorry lob our, our temporary downtime charges through the quarter and we will through the end of the year. But, you know, once we get out from underneath that in the early part of next year, you know, that'll substantially be out of the system.

Sean, recognizing it's it's the same pair of pants, it's just different Pockets. Does that help the the fact that you're able to close that incremental capacity? Help your your guided, uh, ebit nebita for the year and if so, is there a way to quantify that again? Thanks and good luck in the quarter.

Yeah. Yeah. I I think it is and and keep in mind, you know, when, when we talk about our fit to win, uh, numbers and benefits that that that that that you know, 270 to 300 million dollars of this year, we are taking in accounting and for their that those permanent closures and so as we do better on that and make more progress on that that is driving in part. The upside of the performance on on the cost performance. In addition to the, you know, what we call in a phase phase B, which is, is also doing better, which is the more accelerated total organization toe projects and and

Other costs related things. So, so fit to win is going up because of a lot of things, but partly because of the ability to to close out capacity. Now, keep in mind, the, the activity in Europe is, is going to ship a little bit into the early part of next year, from maybe our original expectations, but we've been able to pull forward, uh, some activities into into the Americas. Uh, so net net, uh, you know, we were able to, to backfill some of that, that time,

Very good. Great. Great performance. Good luck. Guys. In the quarter.

Thanks George. Thanks George.

Next question, from Anthony pinari from City, please go ahead.

Hi, good morning. This is Brian bergmeyer on for Anthony, thanks for taking the questions. Um, you know, just, uh, following up on maybe the, uh, the volume discussion from earlier, you know, you talked about growth in non-alcoholic beer and and maybe some younger consumers staying away from wine. Um, just maybe from a high level, you know, how would you frame kind of ois ability to maybe capture some of these new product launches? Um, you know, do we expect that to maybe be more of a 2027 item? Once you're through fit to win, or you may be seeing some early traction with, uh, you know, new products launches and, and kind of new business, um, in 25 and 26,

Yeah, we we actually are seeing customers respond to, you know, um, you know, consumer softness by, you know, introducing new products. Um, if if I take a look at our our, what we call our our funnel, I I would say it's up about 8, 8 to 10% uh, this year already. Um, and you know, our our um,

Or total MPD. So that's products that are new to the portfolio or products that are renovated already in the portfolio, but might be value. Engineered or, or designed to look, you know, stand out on on shelf they're running at about kind of 10% of our volume. So we we absolutely are seeing more NPD and as we simplify, you know, our our, um, our plants. Um, as we make them more flexible and as we work on the strategy of best at both, uh, which we outline that investor day. We're, we're, we're able to respond, you know, more more rapidly. We're also in the process of reshaping, the the MPD organization and ways of working, which was very, um, you know, I I I would say it was

Decentralized to a point where it's, uh, if we, it was wasteful. We've we've now reshaped that, um, and that new kind of NPD, go to market organization, will will will kick off in January, and we expect to be able to slash our our time to Market by by at least 50%. So so being able to respond more quickly, to to, to customers, um, and their marketing teams and bringing products to Market. Um, and we see growing demand, um, you know, for that particularly, as you know, new consumers, um, kind of maybe are not

Not engaging with with older brands in the same way and so need for for, for new offerings. Uh, that's, that's absolutely a feature Brian in the market. And I think we've, we've, uh, you know, with our fit to win approach and the organization being much more agile, you know, working with customers differently and working with suppliers differently, where uh we've been able to, you know, ramp up the speed uh, at which um,

you know, at at which uh we we can get to Market and again you know, um,

I think there was there's kind of a narrative out there that gen Z are walking away from from you know certain categories. And we we actually see them just coming into categories in a different way. As I said 60% of you know non-alcoholic um new consumers are are are gen zers you know in in many of the markets we're operating in. So there's no question but NPD is is is a key part of our our value shift strategy as we go forward because typically we would have better margins and new products.

You know, I I would building on that. I mean, even though the even though the Market's been a little soft out there that the NAB non-alcoholic beverage category in in North America and and Europe is is up mid single digits and so we're seeing a bright spot in those categories. And in particular Waters in that category is have been doing very well and, and we've gotten some notable

Winds in those categories. We're seeing people come over that and there's interesting, you can even go Google it. There, there's articles out there saying, you know, about how people go out to dinner, and they might have had a glass of wine, but now they prefer sparkling water or something like that out on their table. So it's an interesting set of dynamics that are playing through that also benefit the business. Yeah, and I, I think glass, you know, is is very well placed with these younger consumers, because across the world, they are far more, um, you know, sustainability aware, um, and um, are are have a very, very positive view on on glass packaging. Um, so we're, we're, we're seeing that come through in these categories as well.

For for us.

Got it, got it really appreciate all that detail. It's really helpful. Um, and then just a quick follow-up. John, I think you mentioned a charge from an environmental, uh, liability during the quarter. I I guess. Is that a new item? Um, I I didn't recall hearing that before, but maybe I I missed it. Um, just any detail, you can provide on that. Uh thanks, I'll turn it over.

Yeah. I mean, if, if you, you know, we've we've flagged this up for the last several quarters and, and, and the 10 CE, but there was a, a, a leg, a former subsidiary that had a, a old, uh, you know, paper mill that stopped operation in 1967. It's it's now on Federal Land and we had, you know, there was a settlement with the federal government. So it's something 58 years old, but, but we did make a payment on that in the quarter. It was a little bit over 15 million dollars as part of that, 25 million plus number that I was referring to.

Thank you. We will now take our next question from Aaron with 1 of them from RBC Capital markets. Please go ahead.

Great. Thanks for taking much and congrats on the progress as well.

Um, I guess I just wanted to go back to the volume. Um,

Uh, and, and, and understand, you know, maybe some of the cushioning that you have. So, I think in the past you've noted that each point of volume is maybe $0.07 in EPS, which...

We could potentially grow up to maybe 14 million of ebit. In each point of production is is 13 cents. Um which is maybe I don't know, 25 million of ebit. So

Uh, you know, I think you went in the year expecting this year was going to be flattish, on volumes Europe. Uh, low to mid singles in the first half. Um, I know you're up 4% in q1 but it does look like you're now maybe down 1 on the year or so. Um maybe could end up the year Down 2 or 3. So does that kind of imply that you have 40 to 50 million of evit cushion Within

Bit to win benefits. That's offsetting that volume, uh, greater than expected, weakness. And volumes, maybe you can just kind of frame out how, um, you know, you're you're you're, you're finding extra savings to offset the volume weakness. Thanks.

Yeah, Runa. I'll take that one uh from a commercial performance standpoint. I think we're almost exactly on where we expect it going into the year. Okay. So yes, you know, volumes are down, but we said about 2% for the year, and that has the costs that you refer to. But also, net price has been more favorable than anticipated.

Going into the year. Those 2 have generally offset each other. Okay, so when you think of the net effect, I mean and and and Gordon had said in the prepare comes, we're really trying to manage these these levers between price and volume in in a, in a pretty soft environment. Right. And so, you know, you're trying to find that that balance of that, that provides the best reasonable Financial outcome to the business. As we try to manage a stable Top Line. So with those 2, essentially, offsetting each other, really the Improvement in the year is fit to win. And that that's where you know, that that's driving the upside and that's driving, you know, this is the second time now that we've raised guidance for the year and it's really driven by the momentum on the, on the on what what we can control.

yeah, and just move on that, you know, where where

So sorry, go ahead.

No, that's fine. Go ahead.

Yeah no. Um and you know as I as I said since the osark, you know, we're we're we're focused on, you know, better quality revenue and not chasing what I, you know, call kind of profitless prosperity volume for volume sake. Uh and we we really are are strengthening the, the quality of the, the portfolio, we have an improving, the, the Returns on the, on the portfolio we have. And and you can also see that coming through in, you know, in the margin expansion, um, and and obviously seeing you coming through on, you know, on the cash side as well. And and that's going to be an ongoing feature for us, all right. Um, you know, really improving.

The the quality of the, of the, of the revenue, we we have going forward.

Great. And then, um, you know, given this, uh, volume performance, do you think you'd have to take, uh, you know, additional downtime as you as you go into 26? Uh, maybe you can also just update us on inventory levels and, uh, especially related to, um, you know, maybe Europe and, and uh, some of those wide markets and some and spirits and areas that you're seeing weakness. Um, and if that, you know, if, if you do have to take that down time again, would you have uh, you know, other levers to pull on to offset? Uh, those headwinds thanks?

You know, it's as far as our our out, you know, currently I mean, we we are balancing Supply with demand and and we we have, we still are carrying some, you know, uh lack of business downtime. But keep in mind that we did increase our permanent capacity closures, which we anticipate to be done by early part of next year. As a result. We think that we are going to be reasonably balanced between the supply and demand. Once that's done, and it will be substantially out of the lob category for the business or or the temporary downtime category for the business. As we look to the inventory management. I think we in we we ended the third quarter in the low 50s, maybe 52 or 53 days. Our goal is around 50 days this year, which would be a, you know, about a 15% decrease on a year-over-year basis. You know, the softer sales volumes that we're seeing, you know, right now, you know, we may end up in the in the low 50 to low 50s somewhere range. But very close to the overall goal that we anticipated.

Yeah.

Thanks.

I think we have time for 1 more question.

Thank you so much. We will now take our next question from Gab Hatchet from Wells Fargo. Please go ahead.

Gordon John Chris. Good morning.

Hey, hey Gabe. How are you?

I'm well, um, 2 questions, I guess. Um,

looking at the model and just thinking about how you're you're describing, things taken out the way you wanted composition a little bit different. Um I know you can't necessarily dictate manage this quarter to quarter but um price accelerating pretty heavily in the Americas. And I think maybe

I think I might know the answer to this, but can you parse out for us, maybe, um, be intentional business moves, that's flowing through on the mix side, maybe the formulary price adjustments that are flowing through in the Americas. And then, um,

Intentional price that you're taking in North America, if that makes any sense.

Yeah, yeah Gabe. I can I can take a stab at that and and and Goring can build on if he has any additional additional comments, you know, our our price

You know, gross and and um, net price, you know is obviously softer in the first quarter. It's it's better. I mean so first half of the year and it's better in the second half of the year. What you are seeing in the Americas is is you know, keep in mind, for example, North America. We passed through energy on a monthly or quarterly basis and so you know, through the paf process so you pick up a little bit more there, I would also say the America

You know, from a day a capacity standpoint is probably in the mid to high 90s as far as capacity utilization. So it's a pretty pretty uh cons, you know, pretty tight environment in the Americas overall as a backdrop compared to Europe, that is probably mid 90s to low 90s, uh, to give you just a relative comparison, but keep in mind, Europe should improve as, as a number of different capacity. Uh, closures are completed.

And then on the on the portfolio piece gave I mean we we have a very clear sort of process for how we make those decisions. And uh you know I think in previous calls and certainly an investor day. We we mentioned that we have visibility now in the business right down to skew level on what the economic profit is by by skewing effect. Um and I and I also mentioned that, you know, there's a bunch of things you can do internally to improve the economic profit of a of a particular product or a particular range. And and you know, we we we take a look at those and we say, okay, we can get that done. Does that make sense for us? Um, even having done that, um, or even if we were to do that on some ranges, we would still need, you know, significant price increases from from the customers and, you know some some customers would say yeah. Okay. You know, the price and quality and and what you give and service and so on is worth it. Um, some say no yeah.

So we're we're cleaning up all of that. Um, and so you know, there there's a very intentional process of how we do.

do that and we we understand you know what the financial implications are for that and you know getting getting that

Non-economic, uh, volume out of the business is, is, is good. And you can see it. You can see it coming through and then it frees up capacity, for for, for, you know, power skews where we make a lot more money. And, and that's really is the thinking behind it gave

Maybe that kind of feeds into my second question. Um, most of the capacity adjustments that you talked about in in, in the

Or in America's, um, by our math, maybe a half a million tons, or so, that's in identified in Europe.

Less about the tons and and closures. And and really um I think you talked about 40% of that business that gets that supported out of your European operations into some of the

Part of the world is still relatively depressed. So, I guess, what's enabling you to service that business that you talked about and having the potential to come back?

With, with the capacity adjustments.

Yeah, you know, I I I think, if you look at Spirits largely, you know, in China, the the 2 power markets, for Spirits, out of Europe are are the US and and China. Um, and I think, you know what, we're going through in the US with, you know, some

you know, I I was calling, you know, short-term, you know, in the, in the context of of years, this, you know, there's, uh,

There there's there's some pricing that you know, consumers are are coming up against we think, you know, that's a cyclical thing and we also think the inventory in the system will work its way out. Um, and you know the

The the US will, you know, will will continue to take large quantities of of, you know, Spirits out of out of Europe. Um, and and China at the moment, you know, is is experiencing the same thing and you know, where where demand is is, is, is suppressed their, um, and, you know, and, and and again we we see that working its way out over time and those markets coming back and then you see the growth of markets like like India and South Korea. Um, you know, growing growing strongly. We're we're seeing, you know, the the start of green shoots in in you know in travel retail which is up about you know, 3% in volume here today. Um, but still not, you know, not not back particularly on a on a

On a value basis to to where it was preco so. So I think that these are technical things that uh, are going to work itself out and um, you know, we we

We we see, you know, ourselves having the capacity to to match that when it comes back here and and to build on that, you know Gabe. Yes we are closing out excess capacity to balance Supply with demand but keep in mind our toe total organization. Effectiveness program is intended to unlock trap capacity in the system. Yeah, that will allow us to grow and that is by far the cheapest way to get capacity within the system with great operating leverage. When when you enable it, yeah.

Thank you. And so, getting the operations, a lot fitter and then sweating them a lot harder than they, than they were in the past. Okay?

Thank you. Okay, I will now pass the conference back. Over to Chris for any additional remarks.

Thank you, that concludes our earnings call. Please note our year end in fourth quarter call is currently scheduled for Wednesday, February 11th 2026 and remember make it a memorable moment by choosing safe sustainable glass. Thank you.

Thank you. Thanks. All

That's concludes the oi glass third quarter 2025 earnings conference call. Thank you for your participation. You may now disconnect your line.