Q1 2026 O-I Glass Inc Earnings Call

April 29, 2026

Gordon Hardie: Continues to take cost out and optimize our footprint and value chain. Strengthening our cost position improves competitiveness and enables long-term profitable growth as demonstrated by new business wins. We are now at the halfway point towards delivering $750 million of cumulative benefits through 2027, and we remain ahead of schedule. In Q1, the team delivered gross Fit to Win benefits of about $50 million in line with our expectations. Net benefits were $35 million after headwinds from external disruption in the Americas and temporary transition costs as we complete the closure of 3 plants in Europe. Let me highlight our progress across the phases of the initiative. Phase A focused on SG&A streamlining and initial network optimization generated $32 million of net benefits in Q1 despite transition costs in Europe. We expect the organizational actions and plant capacity-

Speaker #1: Continues to take costs out and optimize our footprint and value chain. Strengthening our cost position improves competitiveness and enables long-term profitable growth as demonstrated by new business wins.

Speaker #1: We are now at the halfway point towards delivering 750 million of cumulative benefits through 2027, and we remain ahead of schedule. In the first quarter, the team delivered gross fit-to-win benefits of about 50 million in line with our expectations.

Speaker #1: Net benefits were 35 million after headwinds from external disruption in the Americas and temporary transition costs as we complete the closure of three plants in Europe.

Speaker #1: Let me highlight our progress across the phases of the initiative. Phase A focused on SG&A streamlining and initial network optimization, and generated $32 million of net benefits in the quarter, despite transition costs in Europe.

Speaker #1: We expect the organizational actions and plan capacity Ladies and gentlemen, this is the operator. I apologize, but there will be a slight delay in today's conference.

Operator: Ladies and gentlemen, this is the operator. I apologize, but there will be a slight delay in today's conference. Please hold and the call will resume momentarily. Thank you for your patience. You may resume the conference.

Speaker #1: Please hold, and the call will resume momentarily. Thank you for your patience. You may resume the conference.

Speaker #2: Thank you. Sorry, it sounds like we got disrupted there. We're going to start over. I'm going to turn it back over to Gordon, and we're going to start again on slide five.

Chris Manuel: Thank you. Sorry, it sounds like we got disrupted there. We're gonna start over. I'm gonna turn it back over to Gordon, and we're gonna start again on slide five. Thank you.

Speaker #2: Thank you.

Speaker #1: Thanks, Chris. And apologies, everyone, for that technical hitch. Turning again to slide five, fit-to-win remains a core value driver for OI. The program continues to take costs out and optimize our footprint and value chain.

Gordon Hardie: Thanks, Chris. Apologies everyone for that technical hitch. Turning again to slide 5. Fit to Win remains a core value driver for O-I. The program continues to take cost out and optimize our footprint and value chain. Strengthening our cost position improves competitiveness and enables long-term profitable growth as demonstrated by new business wins. We are now at the halfway point towards delivering $750 million of cumulative benefits through 2027, and we remain ahead of schedule. In Q1, the team delivered gross Fit to Win benefits of about $50 million, in line with our expectations. Net benefits were $35 million after headwinds from external disruptions in the Americas and temporary transition costs as we complete the closure of 3 plants in Europe. Let me highlight our progress across the phases of the initiative.

Gordon Hardie: Thanks, Chris. Apologies everyone for that technical hitch. Turning again to slide five. Fit to Win remains a core value driver for O-I. The program continues to take cost out and optimize our footprint and value chain. Strengthening our cost position improves competitiveness and enables long-term profitable growth as demonstrated by new business wins. We are now at the halfway point towards delivering $750 million of cumulative benefits through 2027, and we remain ahead of schedule. In Q1, the team delivered gross Fit to Win benefits of about $50 million, in line with our expectations. Net benefits were $35 million after headwinds from external disruptions in the Americas and temporary transition costs as we complete the closure of three plants in Europe. Let me highlight our progress across the phases of the initiative.

Speaker #1: Strengthening our cost position improves competitiveness and enables long-term profitable growth, as demonstrated by new business wins. We are now at the halfway point towards delivering 750 million of cumulative benefits through 2027, and we remain ahead of schedule.

Speaker #1: In the first quarter, the team delivered gross fit-to-win benefits of about $50 million, in line with our expectations. Net benefits were $35 million after headwinds from external disruptions in the Americas and temporary transition costs as we complete the closure of three plants in Europe.

Speaker #1: Let me highlight our progress across the phases of the initiative. Phase A focused on SG&A streamlining and initial network optimization generated 32 million of net benefits in the quarter, despite transition costs in Europe.

Gordon Hardie: Phase A focused on SG&A streamlining and initial network optimization, generated $32 million of net benefits in Q1 despite transition costs in Europe. We expect the organizational actions and plant capacity closures to be largely completed by mid-2026. Phase B focused on end-to-end value chain transformation, was slightly up after absorbing costs associated with disruption in the Americas. Core work streams continue as planned. We launched the third wave of Total Organization Effectiveness, we are accelerating procurement and energy initiatives to drive incremental savings. We are also pursuing incremental opportunities to offset cost headwinds we observed in Q1. Fit to Win is working. We continue to target at least $275 million of benefits in 2026. With that, I'll turn it over to John to walk you through the financials starting on slide 6.

Gordon Hardie: Phase A focused on SG&A streamlining and initial network optimization, generated $32 million of net benefits in Q1 despite transition costs in Europe. We expect the organizational actions and plant capacity closures to be largely completed by mid-2026. Phase B focused on end-to-end value chain transformation, was slightly up after absorbing costs associated with disruption in the Americas. Core work streams continue as planned. We launched the third wave of Total Organization Effectiveness, and we are accelerating procurement and energy initiatives to drive incremental savings. We are also pursuing incremental opportunities to offset cost headwinds we observed in Q1. Fit to Win is working. We continue to target at least $275 million of benefits in 2026. With that, I'll turn it over to John to walk you through the financials starting on slide six.

Speaker #1: We expect the organizational actions and planned capacity closures to be largely completed by mid-2026. Phase B focused on end-to-end value chain transformation, with results slightly up after absorbing costs associated with disruption in the Americas.

Speaker #1: Core work streams continue as planned. We launched the third wave of total organization effectiveness, and we are accelerating procurement and energy initiatives to drive incremental savings.

Speaker #1: We are also pursuing incremental opportunities to offset cost headwinds. We observe in the first quarter. Fit-to-win is working. We continue to target at least 275 million of benefits in 2026.

Speaker #1: With that, I'll turn it over to John to walk you through the financials, starting on slide six.

Speaker #3: Thanks, Gordon, and good morning, everyone. First quarter net sales were $1.54 billion, essentially flat with the prior year. Favorable FX largely offset slightly lower average selling prices and a high single-digit decline in volumes, while shipments improved meaningfully as the quarter progressed.

John Haudrich: Thanks, Gordon, and good morning, everyone. Q1 net sales were $1.54 billion, essentially flat with the prior year. Favorable FX largely offset slightly lower average selling prices and a high single-digit decline in volumes, while shipments improved meaningfully as the quarter progressed. Adjusted earnings were $0.05 per share, down from $0.40 per share in the prior year, primarily due to commercial headwinds, including unfavorable net price and lower volumes. Operating costs were comparable to the prior year as Fit to Win compensated for unanticipated disruptions. Earnings also reflected an unusually high effective tax rate on low pre-tax earnings. As earnings improve, we expect a full year tax rate of approximately 35% to 40% with the potential to move lower in 2027 and beyond. Looking ahead, the full O-I team is focused on strengthening performance as the year progresses.

Speaker #3: Adjusted earnings were 5 cents per share, down from 40 cents per share in the prior year, primarily due to commercial headwinds, including unfavorable net price and lower volumes.

Speaker #3: Operating costs were comparable to the prior year, as fit-to-win compensated for unanticipated disruptions. Earnings also reflected an unusually high effective tax rate on low pre-tax earnings, as earnings improved.

Speaker #3: We expect a full-year tax rate of approximately 35 to 40 percent, with a potential to move lower in 2027 and beyond. Looking ahead, the full OI team is focused on strengthening performance as the year progresses.

Speaker #3: Let's turn to slide seven to discuss operating results. Segment operating profit was $142 million, down from $209 million last year, primarily due to the commercial pressures.

John Haudrich: Let's turn to slide 7 to discuss operating results. Segment operating profit was $142 million, down from $209 million last year, primarily due to the commercial pressures we discussed. As noted, the Americas was stable while Europe was down considerably. In the Americas, we performed well despite several external disruptions. The segment's top line was stable as favorable FX and mix largely offset slightly lower selling prices and a 9% decline in shipments. Demand trends also improved as the quarter progressed, with March shipments down only modestly versus the prior year. Americas segment operating profit was $142 million, essentially flat year over year, benefiting from higher net price while lower sales volume and higher operating costs were headwinds.

John Haudrich: Let's turn to slide seven to discuss operating results. Segment operating profit was $142 million, down from $209 million last year, primarily due to the commercial pressures we discussed. As noted, the Americas was stable while Europe was down considerably. In the Americas, we performed well despite several external disruptions. The segment's top line was stable as favorable FX and mix largely offset slightly lower selling prices and a 9% decline in shipments. Demand trends also improved as the quarter progressed, with March shipments down only modestly versus the prior year. Americas segment operating profit was $142 million, essentially flat year over year, benefiting from higher net price while lower sales volume and higher operating costs were headwinds.

Speaker #3: We discussed as noted, the Americas was stable, while Europe was down considerably. In the Americas, we performed well despite several external disruptions. The segment's top line was stable, as favorable FX and mix largely offset slightly lower selling prices and a 9 percent decline in shipments.

Speaker #3: Demand trends also improved as the quarter progressed, with March shipments down only modestly versus the prior year. America's segment operating profit was $142 million, essentially flat year over year, benefiting from higher net price, while lower sales volume and higher operating costs were headwinds.

Speaker #3: Costs included $10 million of disruption-related expenses, driven by extreme weather, civil unrest in Mexico, and a natural gas pipeline failure in Peru, partially offset by Fit-to-Win.

John Haudrich: Costs included $10 million of disruption-related expense driven by extreme weather, civil unrest in Mexico, and a natural gas pipeline failure in Peru, partially offset by Fit to Win. In Europe, the results were well below our expectations, and they are the primary driver of the year-over-year decline in segment earnings. Europe segment operating profit shortfall was driven by a combination of softer demand and an increasingly competitive market backdrop, which pressured price amid low capacity utilization, most notably in wine in Southern Europe. As a result, net sales declined slightly with favorable FX partially offsetting lower price and volumes. Shipments were down 7% year-over-year, although trends improved as we moved through the quarter and March shipments were up slightly versus the prior year. As you'd expect in that environment, profitability compressed meaningfully.

Speaker #3: In Europe, the results were well below our expectations, and they are the primary driver of the year-over-year decline in segment earnings. Europe's segment operating profit shortfall was driven by a combination of softer demand and an increasingly competitive market backdrop, which pressured price amid low capacity utilization, most notably in wine in Southern Europe.

Speaker #3: As a result, net sales declined slightly, with favorable FX partially offsetting lower price and volumes. Shipments were down 7 percent year over year, although trends improved as we moved through the quarter, and March shipments were up slightly versus the prior year.

Speaker #3: As you'd expect in that environment, profitability compressed meaningfully. Europe's segment operating profit was break-even in the first quarter, down roughly 68 million dollars from a year ago.

John Haudrich: Europe segment operating profit was breakeven in Q1, down roughly $68 million from a year ago. The biggest factor was a $76 million reduction in net price, reflecting both elevated price competition and the reset of favorable energy contracts that expired last year. Lower shipments were an additional headwind. These pressures were partially offset by Fit to Win benefit costs, even after absorbing $5 million of higher than expected temporary plant closure expenses. Looking ahead, we anticipate performance to increasingly converge across the regions as Europe builds the same resiliency and execution capability demonstrated in the Americas while continuing our transformation journey. Turning to slide 8, I'll close with an update on our outlook for the remainder of 2026.

John Haudrich: Europe segment operating profit was breakeven in Q1, down roughly $68 million from a year ago. The biggest factor was a $76 million reduction in net price, reflecting both elevated price competition and the reset of favorable energy contracts that expired last year. Lower shipments were an additional headwind. These pressures were partially offset by Fit to Win benefit costs, even after absorbing $5 million of higher than expected temporary plant closure expenses. Looking ahead, we anticipate performance to increasingly converge across the regions as Europe builds the same resiliency and execution capability demonstrated in the Americas while continuing our transformation journey. Turning to slide eight, I'll close with an update on our outlook for the remainder of 2026.

Speaker #3: The biggest factor was a 76 million dollar reduction in net price, reflecting both elevated price competition and the reset of favorable energy contracts that expired last year.

Speaker #3: Lower shipments were an additional headwind. These pressures were partially offset by Fit-to-Win benefit costs, even after absorbing $5 million of higher-than-expected temporary plant closure expenses.

Speaker #3: Looking ahead, we anticipate performance to increasingly converge across the regions as Europe builds the same resiliency and execution capability demonstrated in the Americas, while continuing our transformation journey.

Speaker #3: Turning to slide eight, I'll close with an update on our outlook for the remainder of 2026. As discussed, it has been a challenging start to the year and we have updated our full-year guidance to adjusted earnings of $1 to $1.50 per share.

John Haudrich: As discussed, it has been a challenging start to the year, we have updated our full year guidance to adjusted earnings of $1 to $1.50 per share. The chart also reflects our revised EBITDA and free cash flow expectations. To frame the outlook, it's important to separate what we are seeing in our core glass markets and what we are absorbing from broader macro environment, especially energy. Starting with the core glass business, demand trends are stabilizing as the year progresses, Fit to Win is continuing to deliver meaningful results. In the Americas, our outlook remains positive, we expect results to be up year-over-year. In Europe, we have risk-adjusted our outlook by up to $25 million given elevated competitive pressures, net of additional cost actions and restructuring should support improved performance in H2.

John Haudrich: As discussed, it has been a challenging start to the year, we have updated our full year guidance to adjusted earnings of $1 to 1.50 per share. The chart also reflects our revised EBITDA and free cash flow expectations. To frame the outlook, it's important to separate what we are seeing in our core glass markets and what we are absorbing from broader macro environment, especially energy. Starting with the core glass business, demand trends are stabilizing as the year progresses, and Fit to Win is continuing to deliver meaningful results. In the Americas, our outlook remains positive, we expect results to be up year-over-year. In Europe, we have risk-adjusted our outlook by up to $25 million given elevated competitive pressures, net of additional cost actions and restructuring should support improved performance in H2.

Speaker #3: The chart also reflects our revised EBITDA and free cash flow expectations. To frame the outlook, it's important to separate what we are seeing in our core glass markets and what we are absorbing from broader macro environment, especially energy.

Speaker #3: Starting with the core glass business, demand trends are stabilizing as the year progresses, and Fit-to-Win is continuing to deliver meaningful results. In the Americas, our outlook remains positive, and we expect results to be up year over year.

Speaker #3: In Europe, we have risk-adjusted our outlook by up to 25 million dollars, given elevated competitive pressures. Net of additional cost actions, and restructuring should support improved performance in the second half.

Speaker #3: The bigger swing factor in our updated guidance is macro-driven energy inflation stemming from conflicts in the Middle East, which could total 75 to 100 million dollars.

John Haudrich: The bigger swing factor in our updated guidance is macro-driven energy inflation stemming from conflicts in the Middle East, which could total $75 million to $100 million. Higher energy prices flow through natural gas, electricity, logistics, and certain raw materials. Importantly, our proactive energy management practice should significantly limit further exposure, particularly in Europe, where approximately 75% to 80% of gas requirements are protected at prices favorable to current market levels and higher protection in the colder winter months. We will continue to monitor macro developments, including customer demand and whether broader inflation could further influence commercial dynamics. As we have essentially risk-adjusted our outlook for energy inflation, the appendix includes additional earning sensitivities to changes in European natural gas market prices.

Speaker #3: Higher energy prices flow through natural gas, electricity, logistics, and certain raw materials. Importantly, our proactive energy management practice sits significantly limit further exposure, particularly in Europe, where approximately 75 to 80 percent of gas requirements are protected at prices favorable to current market levels, and higher protection in the colder winter months.

Speaker #3: We will continue to monitor macro developments, including customer demand and whether broader inflation could further influence commercial dynamics. As we have essentially risk-adjusted our outlook for energy inflation, the appendix includes additional earnings sensitivities to changes in European natural gas market prices.

Speaker #3: While our 2026 outlook is conservatively set, given macro uncertainty, our strategy and priorities remain unchanged and we continue to drive towards the 2027 objectives we outlined at last year's investor day.

John Haudrich: While our 2026 outlook is conservatively set, given macro uncertainty, our strategy and priorities remain unchanged, we continue to drive towards the 2027 objectives we outlined at last year's Investor Day. We expect Fit to Win to deliver significant value next year, we believe many of the pressures we are seeing in 2026 are temporary. More than half of our business operates under contractual price adjustment formulas that reflect changes in inflation on a lagging basis, providing an important structural mechanism as cost conditions evolve over time. Likewise, as capacity utilization increases, particularly in Europe, we believe our competitive position should continue to strengthen.

Speaker #3: We expect fit-to-win to deliver significant value next year and we believe many of the pressures we are seeing in 2026 are temporary. More than half of our business operates under contractual price adjustment formulas that reflect changes in inflation on a lagging basis.

Speaker #3: Providing an important structural mechanism as cost conditions evolve over time. Likewise, as capacity utilization increases, particularly in Europe, we believe our competitive position should continue to strengthen.

Speaker #3: Overall, we remain focused on the levers within our control, anchored by Fit-to-Win, and we are determined to deliver the best possible performance this year while building momentum into 2027.

John Haudrich: Overall, we remain focused on the levers within our control, anchored by Fit to Win, and we are determined to deliver the best possible performance this year while building momentum into 2027. With that, I'll turn it back to Gordon for closing remarks on slide 9.

Speaker #3: With that, I'll turn it back to Gordon for closing remarks on slide nine.

Speaker #1: Thanks, John. Let me close with a few key takeaways. We are not satisfied with our first quarter results and we are moving quickly to improve performance.

Gordon Hardie: Thanks, John. Let me close with a few key takeaways. We are not satisfied with our Q1 results, and we are moving quickly to improve performance. At the same time, our strategy is unchanged, and our long-term value creation plan remains firmly on track. While near-term noise may continue to drive volatility, we see several clear indicators that O-I's underlying fundamentals are moving decisively in the right direction. Here are six reasons we believe O-I is a compelling long-term investment. Fit to Win is delivering and continues to enable future profitable growth by improving operational discipline and cost competitiveness across the business. Core glass demand is stabilizing, and recent trends are increasingly encouraging. March volumes point to a clear turning point in demand, providing early evidence that our actions are beginning to translate into profitable growth in the H2 and beyond.

Speaker #1: At the same time, our strategy is unchanged and our long-term value creation plan remains firmly on track. While near-term noise may continue to drive volatility, we see several clear indicators that arise underlying fundamentals are moving decisively in the right direction.

Speaker #1: Here are six reasons we believe OI is a compelling long-term investment. Fit-to-Win is delivering and continues to enable future profitable growth by improving operational discipline and cost competitiveness across the business.

Speaker #1: Core glass demand is stabilizing and recent trends are increasingly encouraging. March volumes point to a clear turning point in demand providing early evidence that our actions are beginning to translate into profitable growth in the second half and beyond.

Speaker #1: Improving competitiveness across the footprint is already converting commercial opportunities. We have 15 confirmed incremental volume wins in hand, yielding approximately one and a half percent annualized growth.

Gordon Hardie: Improving competitiveness across the footprint is already converting commercial opportunities. We have 15 confirmed incremental volume wins in hand, yielding approximately 1.5% annualized growth. These ramp up over 2026 and into 2027, giving us a clear line of sight to profitable, sustainable growth. The Americas, where we are furthest along in executing our transformation, are performing very well. Our capacity and demand are tightly aligned, and across much of the region, we are effectively sold out. As such, we are actively evaluating opportunities to bring dormant capacity back online. Further, cost parity between aluminum and glass is spurring increased customer interest. In Europe, Fit to Win execution is accelerating. While the region trails the Americas by roughly 6 to 9 months, our capacity rationalization and restructuring actions are underway. Our competitive position continues to strengthen, especially as capacity utilization improves.

Speaker #1: These ramp up over '26 and into '27, giving us a clear line of sight to profitable, sustainable growth. The Americas, where we are furthest along in executing our transformation, are performing very well.

Speaker #1: Our capacity and demand are tightly aligned and across much of the region we are effectively sold out. As such, we are actively evaluating opportunities to bring dormant capacity back online.

Speaker #1: Further, cost parity between aluminium and glass is spurring increased customer interest. In Europe, fit-to-win execution is accelerating. While the region trails the Americas by roughly six to nine months, our capacity rationalization and restructuring actions are underway.

Speaker #1: Our competitive position continues to strengthen, especially as capacity utilization improves. While we conservatively risk-adjusted our 2026 outlook to reflect Europe's operating environment and the energy backdrop, we remain committed to our 2027 Investor Day targets.

Gordon Hardie: While we conservatively risk-adjusted our 2026 outlook to reflect Europe's operating environment and the energy backdrop, we remain committed to our 2027 Investor Day targets. We believe these headwinds are temporary and manageable. Taken together, O-I today is a more disciplined, better balanced, and better positioned for durable growth than at any point in recent years. Thank you for your time today and your continued support. With that, we'd be happy to take your questions.

Speaker #1: We believe these headwinds are temporary and manageable. Taken together, OI today is a more disciplined, better balanced, and better positioned for durable growth than at any point in recent years.

Speaker #1: Thank you for your time today and your continued support. With that, we'd be happy to take your questions.

Operator: Your first question comes from the line of George Staphos with Bank of America Securities. Your line is open.

Speaker #3: At this time, I would like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad.

Speaker #3: We request to limit yourselves to one question and one follow-up. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of George Staffords with Bank of America Securities, your line is open.

Operator: Your first question comes from the line of George Staphos with Bank of America Securities. Your line is open.

Speaker #4: Thanks, everyone. Good morning. Appreciate the details. Good morning. Gordon, John, what has your line management relayed to you about Q2 volumes and fit-to-win performance so far, and what have you relayed in turn to the Board?

George Staphos: Thanks, everyone. Good morning. Appreciate the details.

Gordon Hardie: Morning, George.

George Staphos: So-

Gordon Hardie: Morning.

George Staphos: Good morning. Gordon, John, what has your line management relayed to you about Q2 volumes and Fit to Win performance so far? What have you relayed in turn to the board? Why are you and the board both confident that the turn is happening in Q2, both in terms of volumes and accelerating in Fit to Win? You know, relatedly, the phase beyond Fit to Win seems to be really, you know, not having much contribution so far this year versus target. The second question, I know you gave us some sensitivity, but if you could help us out. If energy rises from here and in consideration of your hedges, is there a way you could give us some back of the envelope EBITDA effects?

Speaker #4: And why are you and the board both confident that the turn is happening in two Q, both in terms of volumes and accelerating in fit-to-win?

Speaker #4: Relatedly, the phase beyond Fit-to-Win seems to be really not having much contribution so far this year versus target. The second question—I know you gave us some sensitivity, but if you could help us out: if energy rises from here and in consideration of your hedges, is there a way you could give us some back-of-the-envelope EBITDA effects? And do we need to start worrying about any of your secured debt covenants at this juncture or not, and where would we need to?

George Staphos: Do we need to start worrying about any of your secured debt covenants at this juncture or not, and where would we need to? Thank you, and good luck in the quarter.

Speaker #4: Thank you and good luck in the quarter.

Speaker #5: Hey, George, this is John. I'll take the second part of that point first. So as far as the sensitivity to the earnings situation, we assumed in these numbers given that we're 75 to 80 percent covered this year, we're assuming a range of 45 to 55 euros per megawatt hour being the relevant range.

John Haudrich: Hey, George, this is John. I'll take the second part of that point first. As far as the sensitivity to the earnings situation, you know, we assumed in these numbers, given that we're 75% to 80% covered this year, we're assuming a range of EUR 45 to 55 per megawatt hour being the relevant range. To the degree that energy is below that, for every EUR 5 drop on average, we get back about $0.05 per share, so that's about $12 million or so of EBITDA. To the degree that it goes above $0.55, we're protected. That's more like $0.02 to $0.03, so maybe $5 million or so of risk.

Speaker #5: And so to the degree that energy is below that for every five euro drop on average, we get back about 5 cents per share.

Speaker #5: So that's about 12 million dollars or so of EBITDA. To the degree that it goes above 55 cents, we're protected. That's more like 2 to 3 cents.

Speaker #5: So maybe 5 million dollars or so of risk. We use a combination of different tools and factors and things to manage our energy positions.

John Haudrich: We use a combination of different tools and factors and things to manage our energy positions, so we're pretty confident that that number that we have between $40 million and $60 million of pure energy exposure to the elevated environment in the conflict is about right, ideally, we can perform better on the downside. On the secured question, we're very low on our secured, you know, ratio right now. Very favorable net position. We're not anywhere near at risk. I'll tell you, we got significant liquidity, $1.5 billion in liquidity. We manage our cash very conservatively in the organization. From a balance sheet standpoint and managing the liquidity, we're in great shape.

Speaker #5: So we're pretty confident that number that we have between 40 and 60 million dollars of pure energy exposure to the elevated environment in the conflict is about right.

Speaker #5: And ideally, we can perform better on the downside. And then on the secured question, we got we're very, very low on our secured ratio right now, very favorable in that position.

Speaker #5: We're not at anywhere near risk. And I'll tell you, we've got significant liquidity—$1.5 billion in liquidity. We manage our cash very conservatively in the organization.

Speaker #5: So from a balance sheet standpoint and managing the liquidity, we're in great shape.

Speaker #4: Yeah. Hi George, Gordon here. So with regard to Fit-to-Win, I think we're very well placed to deliver the $275 million and maybe beyond this year.

Gordon Hardie: Yeah. Hi, George. Gordon here. With regard to Fit to Win, you know, I think we're very well placed to deliver the 275 and maybe beyond this year. You know, the way we set up the timing of it, you know, we're in line. Q1 delivered to expectation. We did have a number of external events through the tough winter, particularly in North America, and some extra costs in Europe on the closure and reconfiguration of the network that were once-off in nature. You will see the Fit to Win momentum build. Like, behind those numbers is, you know, very detailed plans, very detailed accountabilities, you know, weekly tracking.

Speaker #4: The way we set up the timing of it, we're in line—Q1 delivered to expectation. We did have a number of external events through the tough winter, particularly in North America.

Speaker #4: And some extra costs in Europe on the closure and reconfiguration of the network that were once off in nature. And so you will see the fit-to-win momentum build behind those numbers is very detailed plans, very detailed accountabilities, weekly tracking.

Speaker #4: So, we feel we're in good shape on Fit-to-Win. And as ever, we're always looking at new opportunities that are identified and ways to strip waste and inefficiencies out.

Gordon Hardie: You know, we feel we're in good shape on Fit to Win. As ever, we're always looking at, you know, new opportunities that are identified and ways to strip waste and inefficiencies out. We'll be obviously pushing for a higher number, but we're, you know, we're confident in that $275 number.

Speaker #4: So, we'll be obviously pushing for a higher number, but we're confident in that 275 number. With regard to—sorry. Yeah, go ahead, George. And what are you seeing so far in Q2 on volume?

George Staphos: What are you seeing?

Gordon Hardie: With regard to.

George Staphos: Volume. Yes, go ahead.

Gordon Hardie: Sorry. Yeah, go ahead, George.

George Staphos: You got it. What are you seeing?

George Staphos: You got it. What are you seeing so far into Q1 volume? What have you committed to the board? Thank you.

Gordon Hardie: Yeah

George Staphos: Far into Q1 volume?

Gordon Hardie: Yeah.

Speaker #4: What have you committed to the board? Thank you.

George Staphos: What have you committed to the board?

Gordon Hardie: Yeah.

George Staphos: Thank you.

Speaker #5: Yeah. So Q one volumes off about 8% in the Americas. And let me break that down. And about 7% in Europe. It's clear. Let me start with the Americas.

Gordon Hardie: You know, there, Q1 volume's off about 8% in the Americas, let me break that down. You know, about 7% in Europe. Let me start with the Americas, because it is a kind of a story of two hemispheres. Let me start in Brazil, where, you know, the business is performing very strongly for us with beer volumes up mid-single digits, NAB up mid-single digits, and food and spirits up low teens. We're outperforming the market in all categories in Brazil. The team there has done an excellent job in executing Fit to Win to become much more competitive, has already entered what I would consider the profitable growth horizon of our strategy.

Gordon Hardie: Yeah. So, you know, there, Q1 volume's off about 8% in the Americas, let me break that down. You know, about 7% in Europe. Let me start with the Americas, because it is a kind of a story of two hemispheres. Let me start in Brazil, where, you know, the business is performing very strongly for us with beer volumes up mid-single digits, NAB up mid-single digits, and food and spirits up low teens. We're outperforming the market in all categories in Brazil. The team there has done an excellent job in executing Fit to Win to become much more competitive, has already entered what I would consider the profitable growth horizon of our strategy.

Speaker #5: Because it is a kind of a story of two hemispheres. Let me start in Brazil, where the business is performing very strongly for us with beer volumes up, mid-single digits, NAB up, mid-single digits.

Speaker #5: And food and spirits up, low teens. So we're outperforming the market in all categories in Brazil. And the team there has done an excellent job and executing fit-to-win to become much more competitive.

Speaker #5: And has already entered what I would consider the profitable growth horizon of our strategy. And an interesting fact, Brazil is now more profitable in 2026 than when it had two fewer major competitors a number of years ago.

Gordon Hardie: An interesting fact, Brazil is no more profitable in 2026 than when it had 2 fewer major competitors a number of years ago. We expect Brazil to have another very strong volume and financial year. If I move northwest to Andean, again, performing very strongly for us, outperforming the market in all categories, delivering mid-single-digit growth, we're expecting a very strong H2 and full year in that business. We're also executing incredibly well our Fit to Win program in Andean, I would consider that market well advanced in the profitable growth horizon. In Americas North, you know, our teams are executing well and addressing, you know, a very effectively kind of long run structural issues in that business. Getting good results thereof.

Speaker #5: And we expect Brazil to have another very strong volume and financial year. If I move northwest to Andean, again, performing very strongly for us, outperforming the market in all categories, delivering mid-single digit growth.

Speaker #5: And we're expecting a very strong second half and full year in that business. We're also executing incredibly well our fit-to-win program in Andean. And I would consider that market well advanced in the profitable growth horizon.

Speaker #5: In America's North, our teams are executing well and addressing, very effectively, kind of long-run structural issues in that business, and getting good results thereof.

Speaker #5: And so while volumes were down 8%, let me break that down. About 3% of that 8% was wine volume. That was not viable and was a barrier to us getting a much leaner network in place.

Gordon Hardie: While volumes were down 8%, let me break that down. About 3% of that 8% was wine volume that was not viable and was a barrier to us getting a much leaner network in place. Along the lines of our EP edict, we've taken that out of the business. There was about 3% of spirits customers destocking in the face of high distributor volumes. We know that is a temporary piece. There was about 2% in what I would call missed beer volume due to those external disruptions and we had a furnace repair. We expect another very strong financial year in North America. Indeed, the Q1 EBIT in North America was the strongest in over 8 years.

Speaker #5: And along the lines of our EP edict, we've taken that out of the business. There was about 3% of spirits customers destocking in the face of high distributor volumes.

Speaker #5: We know that is a temporary piece. And there was about 2% in what I would call missed beer volume due to those external disruptions, and we had a furnace repair.

Speaker #5: We expect another very strong financial year in North America. And indeed, the first quarter EBIT in North America was the strongest in over eight years.

Speaker #5: If I look at America Central, we're on track for another strong year, despite the macro challenges of tariff impact on beer and spirits exports.

Gordon Hardie: I look at Americas Central, we're on track for another strong year despite the macro challenges of tariff impact on beer and spirits exports. You know, we're executing very effectively there, we're driving costs and waste out and becoming much more competitive on the domestic market in beer, in food, and in spirits to offset in part volumes lost in exports. We expect a strong run home. In essence, the Americas are performing strongly. We see the volumes coming through. We see the wins coming through with customers. I'd, you know, I'd reinforce that the Americas is about six to nine months ahead of Europe in terms of executing on Fit to Win. In Europe, overall demand was sluggish in Q1, particularly across spirits, wine, and beer.

Speaker #5: We're executing very effectively there. And we're driving costs and waste out and becoming much more competitive on the domestic market in beer, in food, and in spirits to offset in part volumes lost in exports.

Speaker #5: But we expect a strong run home. So in essence, the Americas are performing strongly. We see the volumes coming through. We see the winds s coming through with customers.

Speaker #5: And I'd reinforce that the Americas is about 6 to 9 months ahead of Europe in terms of executing on fit-to-win. In Europe, overall demand was sluggish in the first quarter.

Speaker #5: Particularly across spirits, wine, and beer. However, food and NAB held up really well. That said, there are pockets of growth for us. So we had a strong volume rebound in spirits in the UK up mid-single digits.

Gordon Hardie: However, food and NAB held up really well. That said, there are pockets of growth for us. We had a strong volume rebound in spirits in the UK of mid-single digits and wine up about 11%, delivering a strong overall year-on-year volume growth in the Q1 in the UK. North Central Europe, which encompasses, you know, the Nordics, Germany and Poland for us, you know, performed strongly with very good growth in food, up above mid-single digit, and NAB the same. We've picked up significant new pieces of business in North Central Europe, where I would say our Fit to Win program is most advanced in Europe, and we can see that competitiveness turning into profitable volume growth opportunities.

Speaker #5: And wine up about 11%. Delivering a strong overall year-on-year volume growth in the first quarter in the UK. North Central Europe, which encompasses the Nordics, Germany, and Poland for us, performed strongly with very good growth in food up about mid-single digit.

Speaker #5: And NAB the same. And we've picked up significant new pieces of business in North Central Europe, where I would say our fit-to-win program is most advanced in Europe.

Speaker #5: And we can see that competitiveness turning into profitable volume growth opportunities. So they're the two kind of best performing regions for us. Where the issues lay in volume, were in southwest Europe and southeast Europe.

Gordon Hardie: You know, they're the two kind of best performing regions for us. Where the issues lay in volume were in Southwest Europe and Southeast Europe. That is largely driven by wine, where demand continues to be soft, you know, down in the region overall of about 5%, where there's significant overcapacity and quite significant kind of price pressure in the Q1. The bright spot for us in Southeast Europe is food up about 10% and spirits up about 2, and RTD is actually growing quite nicely for us. The main issue in Southwest Europe and Southeast Europe is wine and some spirits in France as Cognac continues to be impacted by lower export volumes.

Speaker #5: And that is largely driven by wine, where demand continues to be soft, down in the region, overall of about 5%. Where there are significant overcapacity and quite significant kind of price pressure in the first quarter.

Speaker #5: So the bright spot for us in southeast Europe is food up about 10% and spirits up about 2%. And RTD is actually growing quite nicely for us.

Speaker #5: But the main issue in Southwest Europe and Southeast Europe is wine. And some spirits in France, such as cognac, continue to be impacted by lower export volumes.

Speaker #5: So Europe, we believe, the tide is turning. And when we look at our forecast for quarter two, we expect to be up low single digits.

Gordon Hardie: Europe, we believe the tide is turning, and when we look at our forecast for Q2, we expect to be up low single digits. You know, low to mid single digits for H2. Overall in Europe, I think we're having the highest rate of new business wins since pre-COVID. That's very encouraging. The one other marker that we keep an eye on is, you know, how many of our customers are returning. You know, we're having customers come back to us that, you know, we haven't done business with in a number of years.

Speaker #5: And then low to mid-single digits for the back half of the year. And overall in Europe, I think we're having the highest rate of new business wins since pre-COVID.

Speaker #5: And so that's very encouraging. One other marker that we keep an eye on is how many of our customers are returning. And we're having customers come back to us that we haven't done business with in a number of years.

Speaker #5: So when you put that all together, and we look now at our new go-to-market approach, and how effectively that's being implemented, we're confident we'll finish the year close to flat.

Gordon Hardie: When you put that all together, and we look now at our new go-to-market approach, and how effectively that's being implemented, we're confident we'll finish the year, you know, close to flat, with sequential kind of volume growth now in each quarter. I hope that gives you a flavor, George.

Speaker #5: We would expect a sequential kind of volume growth now in each quarter. So I hope that gives you a flavor, George.

Speaker #4: Comments. I'll turn it over. Thanks so much.

George Staphos: Comments. I'll turn it over. Thanks so much.

Speaker #5: Your next question comes from the line of Mike Oakland with Turis Securities. Your line is open.

Operator: Your next question comes from the line of Michael Roxland with Truist Securities. Your line is open.

Speaker #6: Yeah, thanks, Gordon, John, and Chris, for taking my questions. Gordon, I just wanted to follow up with you on the new business wins across 15 accounts.

Michael Roxland: Yeah. Thanks, Gordon, John, and Chris, for taking my questions. Gordon, just wanted to follow up with you on the new business wins across 15 accounts, and you said spanning all categories. Is that mostly Europe? A lot of the commentary in terms of your response to George's question sounded like there's a lot of new business wins in Europe. Can you just comment about, you know, those new accounts, the breakdown between, let's say, Europe versus the Americas, and what end markets you're really seeing that growth come from?

Speaker #6: And you said spanning all categories. Is that mostly Europe? Because you did say that a lot of the commentary in terms of your response to George's question sounded like there's a lot of new business wins in Europe.

Speaker #6: So can you just comment about those new accounts? The breakdown between let's say Europe versus the Americas. And what end markets you're really seeing that growth come from.

Speaker #4: Yeah. So overall, that growth, if you were to annualize it, would make up about one and a half percent. So overall. And right now, that's split about 70, 75 percent Americas.

Gordon Hardie: Yeah. Overall, that growth, if you were to annualize it, would make up about 1.5%, overall. Right now, that's split about 70% to 75% Americas, you know, 25% to 30% Europe, with Europe kind of building momentum. You know, we're seeing that in beer. We're seeing it in spirits. We're seeing it particularly in food, and NAB. In North America, for the first time, we're starting to make inroads into RTDs. As you know, due to a regulation change last year, it's given us the opportunity to enter the RTD market, which is a market that's, you know, certainly in Anglo-Saxon markets, is growing in double digits.

Speaker #4: 25, 30 percent Europe. With Europe kind of building momentum. We're seeing that in beer. We're seeing it in spirits. We're seeing it particularly in food.

Speaker #4: And NAB. And in North America, for the first time, we're starting to make inroads into RTDs. And as you know, due to a regulation change last year, it's given us the opportunity to enter the RTD market, which is a market that certainly in Anglo-Saxon markets is growing in double digits.

Speaker #4: So the way we've set up our business is and our sales forces and go-to-market is a category and sales combo. And so we see opportunities in each of the categories.

Gordon Hardie: You know, we the way we've set up our business is, and our sales forces and go to market is a category and sales combo. We see opportunities in each of the categories, and we're executing those, I think, quite effectively. We expect that momentum of new business wins to continue as we translate cost reduction into competitiveness. If I take people back to Investor Day, the overall strategy is for us to, you know, get our cost base way down, and we're doing that. We still have quite a way to go to be the lowest cost producer, but we're making, you know, tremendous progress. Sharing some of that productivity with key strategic customers in exchange for profitable growth.

Speaker #4: And we're executing those I think quite effectively. We expect that momentum of new business wins to continue. As we translate cost reduction into competitiveness.

Speaker #4: And if I take people back to IDA, the overall strategy is for us to get our cost base way down. And we're doing that.

Speaker #4: We still have quite a way to go to be the lowest cost producer, but we're making tremendous progress, and then sharing some of that productivity with key strategic customers.

Speaker #4: In exchange for profitable growth. And you're seeing that come clearly through in Brazil. A business that was really in a tough place two years ago.

Gordon Hardie: You're seeing that come clearly through in Brazil, a business that, you know, was really in a tough place two years ago and is now outperforming in all categories and a tremendous uplift in profitability over the last two years. We're seeing the same in the Andean, where, despite a tough macro environment in Mexico, seeing the same dynamic, winning more business, getting costs down, winning more business, improving the financial results. Particularly pleasing to us is North America, which, you know, has for years I know has been a tough market, where we're addressing, finally, you know, some structural issues in that business, in that market and, you know, turning that into profitable growth with a number of, you know, really strong wins for us in North America.

Speaker #4: And is now outperforming in all categories. And a tremendous uplift in profitability over the last two years. We're seeing the same in the Andean.

Speaker #4: Where we're seeing despite a tough macro environment in Mexico, seeing the same dynamic winning more business, getting costs down, winning more business, improving the financial results.

Speaker #4: And particularly pleasing to us is North America. Which for years NOI has been a tough market. We're addressing finally some structural issues in that business, in that market.

Speaker #4: And turning that into profitable growth, with a number of really strong wins for us in North America. So we believe we're executing this strategy.

Gordon Hardie: We believe we're executing this strategy. What happened in Europe in Q1, you know, we're mid to end of the network restructure. You know, I think the overcapacity in the Southwest and Southeast was an issue. The energy on top is a bit of a hit, but it's not a knockout for us. We see a clear path to getting back to the kind of margins that that business can deliver.

Speaker #4: What happened in Europe in the first quarter, where we're mid to end of the network restructure. And the I think the overcapacity in the southwest and southeast was an issue.

Speaker #4: And then the energy on top is a bit of a hit. But it's not a knockout for us. And we see a clear path to getting back to the kind of margins that that business can deliver.

Michael Roxland: That's great color, Gordon. Thank you. Just 1 quick follow-up. Just, you know, you mentioned Ray focused on 2027 targets, including EBITDA of $1.5 billion plus.

Speaker #1: That's great call, Gordon. Thank you. And then just one quick follow-up. You mentioned really focused on 2027 targets, including EBITDA of 1.5 billion plus.

Gordon Hardie: Yeah. Yeah.

Speaker #1: Your 2026 guide is down about 100 million dollars at the midpoint. So obviously, that's a setback. Can you help us bridge how roughly how you tend to get to that 2027 guide right now?

Michael Roxland: Your 2026 guide is down about $100 million at the midpoint. Obviously that's a setback. Can you help us bridge how, you know, roughly how you tend to get to that 2027 guide right now? What levers do you have at your disposal to make up the shortfall? I know maybe not specifically giving product guides in 2027, just maybe walk us through some of the larger buckets that will help you get there, given the fact that 2026 is down $100 million.

Speaker #1: And what levers do you have at your disposal to make up the shortfall? I know you maybe won't specifically provide guides in 2027, but just maybe walk us through some of the larger buckets that will help you get there, given the fact that 2026 is down $100 million.

Speaker #4: Yeah. So here's how we look at that. We are absolutely laser-focused on our 2027 investor day targets of which one is 1.45 billion. Okay?

Gordon Hardie: So here's how we look at that. We are absolutely laser focused on our 2027, you know, Investor Day targets, of which one is $1.45 billion. Okay? There's no question that this is a setback this year, but we're absolutely clear that we have a viable path to that $1.45 billion. Let me give you probably two, three points. We've already laid out that we have $150 million of Fit to Win to come in 2027. A significant part of our business has what we call PAF, Price Adjustment Formulas, that are lag formulas that will allow us catch up on some of the inflation this year and next year.

Speaker #4: There's no question that this is a setback. This year. But we're absolutely clear that we have a viable path to that 1.45 billion. And let me give you probably two, three points.

Speaker #4: We've already laid out that we have 150 million dollars of fit-to-win to come in 2027. And a significant part of our business is in has what we call PFs, price adjustment formulas.

Speaker #4: That are lag formulas that will allow us to catch up on some of the inflation this year, in next year. And we're also as I said, starting to deliver and move in more and more of the markets into the profitable growth phase of our strategy.

Gordon Hardie: We're also, as I said, you know, starting to deliver, and move in more and more of the markets into the profitable growth phase of our strategy, which also should help us bridge that gap. Yeah. You know, we've tended to outperform on Fit to Win. There, there is also the opportunity to do better than that 150. We're, we're, you know, we're ruthlessly focused on stripping waste and inefficiency out of the business and out of the chain. You know, when we put all that together, yes, is it a bit of a steeper climb? Absolutely, achievable.

Speaker #4: Which also should help us bridge that gap. Yeah? We've tended to outperform on fit-to-win. So there's also the opportunity to do better than that 150.

Speaker #4: And we're ruthlessly focused on stripping away an inefficiency out of the business and out of the chain. So when we put all that together, yes, is it a bit of a steeper climb?

Speaker #4: But absolutely, achievable. And in every difficulty, there's an opportunity. And I think the opportunity for us here is to even get more focused and to move even at a faster pace.

Gordon Hardie: You know, in every difficulty, there's an opportunity, and I think the opportunity for us here is to even get more focused and to move even at a faster pace, to get to where we need to go.

Speaker #4: To get to where we need to go.

Speaker #5: Your next question comes from the line of Anthony Pitinari with Citi Investment Research. Your line is open.

Operator: Your next question comes from the line of Anthony Pettinari with Citi. Your line is open.

Anthony Pettinari: Good morning. You know, Gordon, John, it seems like, you know, you've seen these periods in the past where you have, you know, oversupply in Southern Europe with, you know, maybe smaller producers in Italy and France. I'm just wondering if you could talk a little bit more about the competitive dynamics that you're seeing today and maybe how those situations have sort of resolved themselves in the past. You know, I guess the basis of the question is, you know, you were breakeven in Europe in Q1. I assume smaller producers are doing much worse, and I'm just curious how sustainable that's been historically.

Speaker #6: Good morning. Gordon, John, it seems like you have these you've seen these periods in the past where you have oversupply in Southern Europe with maybe smaller producers in Italy and France.

Speaker #6: And I’m just wondering if you could talk a little bit more about the competitive dynamics that you’re seeing today, and maybe how those situations have sort of resolved themselves in the past.

Speaker #6: Are people I guess the basis of the question is you were break-even in Europe in one Q. I assume smaller producers are doing much worse.

Speaker #6: And I'm just curious how sustainable that's been historically. And then I guess related question, is it fair to say you're giving up a little bit of share in Southern Europe and maintaining or maybe even growing in Northern Europe?

Anthony Pettinari: I guess related question, is it fair to say you're giving up a little bit of share in Southern Europe and maintaining or maybe even growing in Northern Europe?

John Haudrich: Yeah, you know, I'll touch base on that one, Anthony, just to talk about the competitive situation and kind of maybe do a compare and contrast. For example, if you go over to the Americas where, you know, a lot of the restructuring has occurred already. You know, we've taken out significant capacity. You know, we went from the low 90s to the upper 90s as far as capacity utilization, you know, in that set of markets. Now you can see that in the bottom line. I mean, the performance of the Americas through Fit to Win and, you know, a good capacity balance in the marketplace. You know, our results are, over the last year and a half, two years, up about 60% there.

Speaker #1: I'll touch base on that one, Anthony, just to talk about the competitive situation and kind of maybe do a compare and contrast. So for example, if you go over to the Americas where a lot of the restructuring has occurred already, we've taken out significant capacity.

Speaker #1: We went from the low 90s to the upper 90s as far as capacity utilization in that set of markets. And now you see you can see that in the bottom line.

Speaker #1: I mean, the performance of the Americas through fit-to-win and a good capacity balance in the marketplace. Our results are over the last year and a half, two years are up about 60% there.

Speaker #1: So you can see, when there is a way to balance these activities, it drives performance. If you compare that to Europe, probably going into the year, we—and I think we brought this up during the last call—is that we were, the market was probably more in the low 90s, right?

John Haudrich: You can see when there is a way, you know, the balance of these activities, it drives performance. If you compare that to Europe, you know, the probably going into the year, and I think we brought this up, you know, during the last call, is that we were, you know, the market was probably more in the low nineties, right? There is significant amounts of announced capacity closures underway. Our, you know, we're, as we said, we're gonna complete the work that we're doing, you know, by midyear. We believe from what we can see is even net of new capacity additions, you're getting into a very similar spot that you see in the Americas. A much more, much more supply-demand balance.

Speaker #1: But there is significant amounts of announced capacity closures underway. We're, as we said, we're going to complete the work that we're doing by mid-year.

Speaker #1: We believe from what we can see, even net of new capacity additions, you're getting into a very similar spot that you see in the Americas.

Speaker #1: So much more supply-demand balance. And as a result, it gives us confidence that as we go forward, what we saw in the Americas, we could replicate over in Europe and truly, yes, it's a more fragmented base.

John Haudrich: As a result, you know, it gives us confidence that as we go forward, what we saw in the Americas, we could replicate over in Europe. Truly, yes, it's a more fragmented base in Europe than it is in the Americas. If you look at the whole, that capacity utilization roadmap seems to be improving.

Speaker #1: And Europe than it is in the Americas. But if you look at the whole, that capacity utilization roadmap seems to be improving.

Speaker #3: Yeah, and just in addition to that, Anthony, as we laid out and had the idea our cost base was too high. We've made significant progress on that.

Gordon Hardie: Yeah. Just in addition to that, Anthony Pettinari, you know, as we laid out at Investor Day, you know, our cost base was too high. We've made significant progress on that, you know, further along in the Americas, as I said. We also see, you know, tremendous further opportunity to get our cost base way down. That is a key focus from us so that we can compete and deliver our commitments in any environment. Yeah. A bit to go there, but that is fundamental to our strategy. You know, it's not really up to us to comment how anybody else is doing. We're crystal clear on what we need to do.

Gordon Hardie: Yeah. Just in addition to that, Anthony, you know, as we laid out at Investor Day, you know, our cost base was too high. We've made significant progress on that, you know, further along in the Americas, as I said. We also see, you know, tremendous further opportunity to get our cost base way down. That is a key focus from us so that we can compete and deliver our commitments in any environment. Yeah. A bit to go there, but that is fundamental to our strategy. You know, it's not really up to us to comment how anybody else is doing. We're crystal clear on what we need to do.

Speaker #3: Further along in the Americas, as I said, but we also see tremendous further opportunity to get our cost base way down. And that is a key focus for us so that we can compete and deliver our commitments in any environment.

Speaker #3: Yeah? So a bit to go there, but that is fundamental to our strategy. And then it's not really up to us to comment how anybody else is doing.

Speaker #3: But we're crystal clear on what we need to do. We're crystal clear on the point on the cost curve. We need to be at to grow profitably.

Gordon Hardie: We're crystal clear on the point on the cost curve where we need to be at to grow profitably. We are absolutely determined to get there and have a clear line of sight on how to do it.

Speaker #3: And we are absolutely determined to get there. And have a clear line of sight on how to do it.

Speaker #5: Your next question comes from the line of Josh Spector with UBS. Your line is open.

Operator: Your next question comes from the line of Joshua Spector with UBS. Your line is open.

Operator: Your next question comes from the line of Josh Spector with UBS. Your line is open.

Gaurav Sharma: Hey, good morning. This is Gaurav Sharma sitting in for Josh today.

Speaker #3: Hey, good morning. This is Gordon Sharma sitting in for Josh today. Sorry, we missed your name. This is Gordon Sharma.

Gordon Hardie: Sorry, we missed your name.

Gaurav Sharma: This is Gaurav Sharma.

Speaker #6: Hi, Gordon. How are you?

Gordon Hardie: Hi, Gaurav. How are you?

Gaurav Sharma: All right, good. How are you guys doing?

Speaker #3: Good. How are you guys doing?

Speaker #6: Good.

Gordon Hardie: Okay.

Gaurav Sharma: I'm just wondering what the optimal utilization target for the European network is in a normal demand environment, if there's any additional facilities that are considering idling versus permanent closures if the market just generally remains soft this year?

Speaker #3: I'm just wondering what the optimal utilization target for the European network is in a normal demand environment. And then if there's any additional facilities where you're considering idling versus permanent closures, if the market just generally remains soft this year.

Speaker #1: Yeah, so clearly, from an overall market utilization standpoint, as I mentioned just before, you see the Americas at kind of an upper 90s utilization across the whole marketplace, would be our estimate.

John Haudrich: Yeah. You know, clearly from an overall market utilization standpoint, as I mentioned just before, you know, you see the Americas in a kind of an, you know, upper 90% utilization across the whole marketplace would be our estimate. When we talk about our own plants, when we're running them, you know, something in the 90s, low 90s is a great place to be for a glass plant. You know, if you're running, you know, maybe in the 80s or mid-80s or so, being able to get your utilization up into the 90s is a really good performance trend.

Speaker #1: But when we talk about our own plants, when we're running them, something in the 90s, low 90s is a great place to be for a glass plant.

Speaker #1: And so if you're running maybe in the 80s or mid-80s or so, being able to get your utilization up into the 90s is a really good performance trend.

John Haudrich: You know, that's part of what when we have Fit to Win with the Total Organizational Effectiveness program is really about driving the productivity up and utilization levels within our own network. That's where we're trying to drive that. Ultimately, that gives you scale and allows you to, you know, continue to network optimize within your system. When it comes to, you know, the overall, you know, how do you manage kind of a softer environment? You know, it is obviously, you got to make a read on what you think that you need over the long term, right? You know, that has driven our own decisions around, you know, capacity rationalization over the last year or more.

Speaker #1: That's part of what we when we have fit-to-win with the total organizational effectiveness program is really about driving the productivity up and utilization levels within our own network.

Speaker #1: So that's where we're trying to drive at. And ultimately, that gives you scale and allows you to continue to network, optimize within your system.

Speaker #1: When it comes to the overall, how do you manage kind of a softer environment? It is obviously you got to make a read on what you think that you need over the long term, right?

Speaker #1: And that has driven our own decisions around capacity rationalization over the last year or more. But you also have to say that you have to have some spare capabilities to be able to meet market growth and things like that.

John Haudrich: You also have to say that you have to have some spare capabilities to be able to meet market growth and things like that. You know, if we go back a year and a half ago, we were probably, you know, we had about 13%, 14% excess capacity in our overall network, and that's why we announced the larger restructuring, long-term restructuring activities. You know, in Q1, that was down to low single digits or so. And then we're gonna continue, obviously, to complete where we are over in Europe over the next few months or so here.

Speaker #1: So, if we go back a year and a half ago, we probably had about 13 to 14 percent excess capacity in our overall network.

Speaker #1: And that's why we announced the larger restructuring long-term restructuring activities. In the first quarter, that was down to low single digits or so. So and then we're going to continue, obviously, to complete where we are over in Europe over the next few months or so here.

Speaker #1: So the idea is that we want we always want to have a couple percent of spare capacity to be able to take advantage of what Gordon was saying, which is as we grow our business, we want to be able to do that.

John Haudrich: The idea is that we always wanna have a couple percent of, you know, spare capacity to be able to take advantage of what Gordon was saying, which is as we grow our business, we wanna be able to do that. One of the things we did comment is, you know, over in the Americas, for example, we are bringing back a previously, you know, shut down furnace, you know, be able to meet the needs. You got the ability to flex a little bit on both sides.

Speaker #1: But one of the things we did comment is we brought over in the Americas, for example, we are bringing back a previously shut down furnace to be able to meet the needs.

Speaker #1: So you got the ability to flex a little bit on both sides.

Gaurav Sharma: Got it. Thank you. That was very helpful. Just quick follow-up to that. You mentioned an extended price negotiation window in the release. I think you spoke about that at conference already. I was just wondering if this is done now or if there are negotiations still ongoing on that end.

Speaker #3: Gordon, thank you. That was very helpful. And then just a quick follow-up to that—you mentioned an extended price negotiation window in the release.

Speaker #3: Think you spoke about that at conference already. I was just wondering if this is done now or if there are negotiations still ongoing on that end.

Speaker #6: Yeah. For us, it's done usually the season kicks off kind of late October or early November. And a big chunk of it is usually completed before year-end.

Gordon Hardie: Yeah, for us, it's done, you know, usually the season kicks off kind of late October, early November. You know, a big chunk of it is usually completed, you know, before year end. Some of it kind of runs on into, you know, the end of January. I think the dynamic this year in Europe, or last season in Europe was that, you know, there were deals done or, you know, agreements kind of brought to near conclusion that opened up again in January and February because of, particularly in Southern Europe and Southwestern Europe, because of the spare capacity and, you know, a number of players feeling they needed to keep their capacity full.

Speaker #6: Some of it kind of runs on into the end of January. And I think the dynamic this year in Europe, or last season in Europe, was that there were deals done or agreements kind of brought to near conclusion that opened up again in January and February.

Speaker #6: Because, particularly in Southern Europe, of the spare capacity and a number of players feeling they needed to keep their capacity full. And so there was a bit of toing and froing.

Gordon Hardie: You know, there was a bit of toing and froing, and that extended down to sort of, I would say mid-February, last week in February, which was an unusually long window. But that is done, you know, for sure. Yeah. There's always volume that's, you know, not contracted in the open market and, you know, but we're largely done in our business.

Speaker #6: And that extended down to sort of, I would say, mid-February last week in February, which was an unusually long window. But that is done for sure.

Speaker #6: Yeah. Now, there's always volume that's not contracted in the open market. And but we're largely done in our business.

John Haudrich: One thing I would add to that, and you saw that the volumes, you know, in Europe were down 7% in Q1, and that we indicated that was concentrated in wine. When those negotiation windows extend like that, people tend to sit on the sideline on their orders, right? Because they're waiting for the final deal. You know, one of the reasons we had a softer Q1 is because of this extended window and a lull in order activity. That's starting to normalize after that window was completed at the end of February.

Speaker #1: One thing I would add to that, and you saw that the volumes in Europe were down 7% in the first quarter. And then we indicated that was concentrated in wine.

Speaker #1: When those negotiation windows extend like that, people tend to sit on the sideline on their orders, right, because they're waiting for the final deal.

Speaker #1: So one of the reasons we had a softer first quarter is because of this extended window and a lull in order activity in the end.

Speaker #1: So that's starting to normalize after that window is completed at the end of February.

Speaker #6: Yeah. And also, Easter was later this year, which had an impact in Europe.

Gordon Hardie: Yeah. You know, Easter was later this year, which had an impact in Europe.

Speaker #5: Your next question comes from the line of Aaron Vishwanathan with RBC Capital Markets. Your line is open.

Operator: Your next question comes from the line of Arun Viswanathan with RBC Capital Markets. Your line is open.

Speaker #1: Hello, Aaron.

John Haudrich: Hello, Arun.

Speaker #6: Hi. Sorry about that. Hope you guys are well. I guess I just wanted to go back to the good morning. The volume side. So I would agree that you do have a steep climb for next year.

Arun Viswanathan: Hi. Sorry about that. I hope you guys are well. I guess I just wanted to go back to the good morning, the volume side. I would agree that you do have a steep climb for next year, given the $100 million shortfall this year. You know, when we started this journey, a lot of the comments was non-market dependent and volumes, you know, I guess, you know, you could still achieve your guidance with weak volumes. It seems like volumes have been, you know, a bigger headwind than initially thought. When you think about the 1% to 2% that you could be adding through new business wins, do you expect that to offset continued volume declines?

Speaker #6: Given the 100 million shortfall this year. And when we started this journey, a lot of the comments was non-market dependent and volumes I guess you could still achieve your guidance with weak volumes.

Speaker #6: But it seems like volumes have been a bigger headwind than initially thought. So when you think about the 1 to 2 percent that you could be adding through new business winds, do you expect that to offset continued volumes declines?

Speaker #6: And should we just kind of assume maybe low single-digit volume declines from here for the market? Is there a path to actually reporting absolute 1 to 2 percent volume growth on a consistent basis?

Arun Viswanathan: Should we just kind of assume maybe low single-digit volume declines from here for the market? Is there a path to actually reporting absolute 1% to 2% volume growth on a consistent basis? Maybe you can just comment on some of those ideas. Thanks.

Speaker #6: Or maybe you can just comment on some of those ideas. Thanks. Yeah. Yeah. Thanks, Aaron. So yeah, I think it's fair to say over the last 15 months, probably volumes had been below what we thought they might have been.

Gordon Hardie: Yeah. Thanks, Arun. No. Yeah, I think it's fair to say over the last 15 months, probably volumes had been below what we thought they might have been. We were expecting them to come to flatter a bit sooner. You know, I think what's got in the way of that is, you know, the level of inventory in the total system in spirits, for example, and, you know, markets like the US and China continuing to be soft. You have the, you know, continued decline in wine across both the Americas and Europe. That probably has continued longer than we initially thought. Where we are is we really feel we've bottomed out.

Speaker #6: We were expecting them to come to flat a bit sooner. I think what's gotten in the way of that is the level of inventory in the total system in spirits, for example.

Speaker #6: And markets like the US and China continuing to be soft. And then you have the continued decline in wine across both the Americas and Europe.

Speaker #6: And that probably has continued longer than we initially thought. So where we are is, we really feel we've bottomed out. And so when we're talking about being close to flat year-end and then kicking into 1, 1 and a half percent next year, that is net.

Gordon Hardie: You know, when we're talking about, you know, being close to flat year end and then kicking into 1 and a half percent next year, that is net. Like that's a net position. These new business wins, you know, they're not small fragmented customers. You know, they're largely, you know, of sizable customers with sizable volumes. Yeah.

Speaker #6: That's a net position. And these new business wins—they're not small, fragmented customers. They're largely sizable customers with sizable volumes. Yeah.

John Haudrich: You know, I would just add, you know, Arun, two points. One is, you know, if you look at some of our volume numbers, as Gordon had mentioned earlier, we intentionally did walk away from some low profit business. You have to kind of consider that in there. If you go back to our original strategy, we said, hey, we intended to be focusing on the cost and maintaining a stable top line while we're really focusing on cost. Now we're pivoting to that point where we believe, especially like we see in the Americas here and then ultimately in Europe, that the competitiveness is improving, which allows us the baseline to create the profitable growth. We're at that inflection point where it wasn't necessarily the primary focus of our strategy over the last 18 months.

Speaker #1: I would just add, Aaron, two points. One is, if you look at some of our volume numbers, as Gordon had mentioned earlier, we intentionally did walk away from some low-profit business.

Speaker #1: So you have to kind of consider that in there. And if you go back to our original strategy, we said, "Hey, we intended to be focusing on the cost and maintaining a stable top line while we're really focusing on cost." But now we're pivoting to that point where we believe especially like we've seen in the Americas here and then ultimately in Europe, that the competitiveness is improving.

Speaker #1: Which allows us the baseline to create the profitable growth. And so we're at that inflection point where it wasn't necessarily the primary focus of our strategy over the last 18 months.

Speaker #1: It's increasingly going forward because of the cost decisions that we're establishing.

John Haudrich: It's increasingly going forward because of the cost positions that we're establishing.

Speaker #6: Yeah. And Aaron, I refer back to my earlier comments. We're in markets like Brazil where we really nailed the fit-to-win and translating that into being much more competitive.

Gordon Hardie: Yeah. Arun, I refer back to my earlier comments. You know, we're in markets like Brazil, where we really nail the Fit to Win, and translating that into, you know, being much more competitive. You know, our volumes are up mid-single digits in beer, NAB, and food and spirits, and we're outperforming, you know, the market in all those categories. Likewise in the Andean, and increasingly, you know, in North America right now, we can sell all the beer that we can produce. You know, that we have pockets in, as I said, in North Central Europe where, you know, in that particular region, we've had a 7% uplift year to date.

Speaker #6: Our volumes are up mid-single digits in beer, NAB, and food and spirits. And we're outperforming the market in all those categories, likewise in the Andean.

Speaker #6: And increasingly, in North America, right now, we can sell all the beer that we can produce. And we have pockets in, as I said, in north-central Europe where we've in that particular region, we've had a 7% uplift year to date.

Gordon Hardie: You know, this, the whole, the entire strategy of getting more competitive and then translating that, working with key customers into more profitable growth, there's numerous, you know, clear examples of that across the business. You know, we're absolutely focused on executing that strategy with more rigor.

Speaker #6: So the entire strategy of getting more competitive and then translating that, working with key customers into more profitable growth, there's numerous clear examples of that across the business.

Speaker #6: And we're absolutely focused on executing that strategy with more rigor.

Speaker #3: Okay, appreciate the comment there. I guess.

Arun Viswanathan: Okay. Appreciate the comment there.

Gordon Hardie: Arun, one other point I'd make, you know, you know, we continue to see the cost gap between cans and glass narrowing. We've absolutely seen an upturn in interest from beer customers to accessing more glass. Again, that was one of the premises we had, that as you close that gap, you would curtail the shift from glass to cans and actually reverse it. We're seeing that happen. Certainly the interest in beer for glass, even in mainstream glass is a much different dynamic to last year.

Speaker #6: Aaron, one other point I'd make. We continue to see the cost gap between cans and glass narrowing. And we've absolutely seen an upturn in interest from beer customers.

Speaker #6: To accessing more glass. And again, that was one of the premises we had that as you close that gap, you would curtail the shift from glass to cans.

Speaker #6: And actually, reverse it. And we're seeing that happen. And certainly, the interest in beer for glass, even in mainstream glass, is a much different dynamic to last year.

Speaker #3: Okay, great. I appreciate that. I guess what I'm observing is that the market appears to be declining a little bit faster than maybe what the capacity rationalization is.

Arun Viswanathan: Okay. Great. I appreciate that. I guess what I'm observing is that the market, it appears to be declining a little bit faster than, you know, maybe what the capacity rationalization is. So you have to take downtime, and you have to make these decisions to exit businesses that maybe were unforeseen a year or two ago when you, when you initially put together Fit to Win, and that's maybe causing the shortfall. Do you envision a time period in the future where we won't have these, you know, supply-demand imbalances and oversupply situations? I think just even a few years ago, Europe was considered balanced and North America was a little oversupplied.

Speaker #3: And maybe that and so you have to take downtime and you have to make these decisions to exit businesses that maybe were unforeseen. A year or two ago when you initially put together fit-to-win.

Speaker #3: And that's maybe causing the shortfall. Do you envision a time period in the future where we won't have these supply-demand imbalances and oversupply situations?

Speaker #3: Because I think just even a two-year ago, two years ago, Europe was considered balanced. And North America was a little oversupplied. And then you had to kind of shut some capacity in North America and now because of the volume declines in Europe, wine and spirits and so on, that and new capacity additions in that region is oversupplied.

Arun Viswanathan: Then you had to, you know, kind of shut some capacity in North America. Now because of the volume declines in Europe, you know, wine and spirits and so on, that and new capacity additions, that region is oversupplied. Is there ever a period where you envision again the capacity rationalization kind of being in line with demand growth or maybe demand growth kind of re-accelerating so we wouldn't have these issues of oversupply? I know it's kind of a longer term question, but.

Speaker #3: So is there ever a period where you envision again the capacity rationalization kind of being in line with demand growth? Or maybe demand growth kind of re-accelerating so we wouldn't have these issues of oversupply?

Speaker #3: I know it's kind of a longer-term question, but it seems to be the main issue here.

Gordon Hardie: Yeah. Yeah.

Arun Viswanathan: It seems to be the main issue here.

Speaker #6: Yeah. Look, I think we all live in a very dynamic world now, with a lot of volatility. And I think over a cycle of a decade, there will also be periods where it's perfectly matched up.

Gordon Hardie: Yeah. Look, I think we all live in a very dynamic world now, with a lot of volatility. You know, I think over a cycle of a decade, there's also there'll be periods of where it's perfectly matched up, and there'll be periods where it's not. Then you've got to make a decision, is that a short-term mismatch or is it a fundamental, you know, match that's out of position, where you can't make an economic return on that asset? That's always a, you know, a dynamic question in any business, I would say. We feel good about where we are in terms of our capacity, particularly in the Americas.

Speaker #6: And there'll be periods where it's not. And then you've got to make a decision: is that a short-term mismatch or is it a fundamental mismatch that's out of position, where you can't make an economic return on that asset?

Speaker #6: And that's always a dynamic question in any business, I would say. We feel good about where we are in terms of our capacity, particularly in the Americas.

Gordon Hardie: As John said, there's even opportunities to bring some capacity back up to fill demand for profitable volume. Where we are in Europe, we should have all of the announced capacity fulfillments completed and clear of that by H1. I think that puts us in good stead. I can't speak for the rest of the market, but, you know, our S&Ds, our supply and demands should be well and balanced. Then it's about executing, you know, productivity, quality, and service levels to the customer. As you said, it's a longer term question, but it really depends on volatility and dynamics over an extended period.

Speaker #6: And as John said, there's even opportunities to bring some capacity back up to fill demand for profitable volume. And where we are in Europe, we should have all of the announced capacity curtailments completed and clear of that by the half-year.

Speaker #6: And I think that puts us in good stead. I can't speak for the rest of the market, but our S&Ds are supply and demand should be well in balance.

Speaker #6: And then it's about executing productivity quality and service levels to the customer. Yeah? So as you said, it's a longer-term question, but it really depends on volatility and dynamics over an extended period.

Speaker #6: Yeah?

Speaker #1: The one thing I would add, Aaron, specifically to our own plan, as you know, we did increase our fit-to-win target in the face of some additional commercial pressures.

John Haudrich: The one thing I would add, Arun, you know, specifically to our own plan is, you know, we did increase our Fit to Win target in the face of some additional commercial pressures that we believe that, you know, protects our position to our targets. That also did include a little bit of scaling up of some of the restructuring from what we originally had to be able to be nimble to that.

Speaker #1: And we believe that protects our position to our targets. But that also did include a little bit of scaling up of some of the restructuring from what we originally had to be able to be able to be nimble to that.

Speaker #1: So as we stand here right now, we believe that the fit-to-win actions are sufficient to be able to address through our horizon here. Our next year's target understanding the other extra $100 million we're dealing with this year.

John Haudrich: As we stand here right now, you know, we believe that the Fit to Win actions, you know, are sufficient to be able to address the, you know, through our horizon here, you know, our next year's target, understanding the other extra $100 million we're dealing with here this year is more of a temporary phenomenon, with a good ability for recovery through PAFs and things like that in the future.

Speaker #1: It's more of a temporary phenomenon. With a good ability for recovery through PAFs and things like that in the future.

Speaker #6: I think one additional kind of thought on that, Aaron, is portfolio momentum is also a part of how you maximize the value of your capacity.

Gordon Hardie: I think one additional kind of thought on that, Arun, is, you know, portfolio momentum is also a part of how you maximize, you know, the value of your capacity. You know, as opportunities arise in the markets to, you know, shed unprofitable volume like we did in wine in North America in Q1 and bring in more profitable volume, you know, higher margin volume, more premium volume, that's also a way of, you know, sweating your capacity much, much harder. I think we're getting much better at that and making those calls, and, you know, starting that sort of mix shift that we outlined in Investor Day as well as part of our strategy.

Speaker #6: And as opportunities arise in the markets to shed unprofitable volume like we did in wine in North America in the first quarter and bring in more profitable volume, higher margin volume, more premium volume, that's also a way of sweating your capacity much, much harder.

Speaker #6: And I think we're getting much better at that and making those calls and starting that sort of makeshift that we outlined in investor day as well as part of our strategy.

Speaker #5: I'll now turn the call back over to Chris Manuel for closing remarks.

Operator: I'll now turn the call back over to Chris Manuel for closing remarks.

Speaker #3: Thanks, Kate. That concludes our earnings call. Please note our second quarter call is currently scheduled for Wednesday, July 29th. And remember, make it a memorable moment by choosing safe, sustainable glass.

Chris Manuel: Thanks, Kate. That concludes our earnings call. Please note our Q2 call is currently scheduled for Wednesday, 29 July. Remember, making a memorable moment by choosing safe, sustainable glass. Thank you.

Speaker #3: Thank you.

Operator: Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect.

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