Thank you, Alex, and welcome, everyone, to the O-I Glass first quarter 2023 earnings call. Our discussion today will be led by Andres Lopez, our CEO; and John Haudrich, our CFO. Today, we will discuss key business developments and review our financial results. Following prepared remarks, we will host a Q&A session. Presentation materials for this call are available on the company's website. Please review the Safe Harbor comments and disclosure of our use of non-GAAP financial measures included in those materials. I'd now like to turn the call over to Andres, who will start on Slide 3.

Good morning, everyone, and thanks for your interest in O-I. We are very pleased to announce exceptionally strong first quarter earnings, which significantly exceeded prior year results as well as guidance. Last night, O-I reported adjusted earnings of $1.29 per share, which was more than our prior year performance and represents record first quarter results. Adjusted earnings benefited from very strong net price realization across the enterprise as well as from our margin expansion initiatives. Likewise, operating performance exceeded our expectations despite disruption from a number of external events. As expected, sales volume was down given challenging prior year comparisons among other factors. In addition to very strong results, we continue to advance our strategy, and efforts to improve margins are all ahead of plan. Importantly, our capacity expansion plans, the technology developments for MAGMA and ULTRA, and our deleveraging actions all remain on track. Given very strong first quarter results, we have increased our full-year 2023 business outlook and now expect adjusted earnings will range between $3.05 and $3.25 per share. We are also providing second quarter guidance and expect adjusted earnings will range between $0.80 and $0.85, which is a solid increase from last year. John will expand on our financial performance and outlook a bit later. Let's move to Page 4 and discuss recent sales volume trends. Entering the year, we expect that first quarter shipments will be down some, even with a very challenging prior year comparison. As you can see on the left, volumes were up a robust 6.4% in the first quarter of 2022. During that period, shipments increased as we recovered from prior year global supply chain challenges. O-I's customers secured glass inventory at the onset of the Russia-Ukraine war, and we shipped out of inventory in some markets given very strong demand. During the first quarter of 2023, actual shipments were down about 8% from last year, which was softer than we originally anticipated. We expect that volume will be down around 3% to 4% facing a challenging prior year comparison amid record low inventory levels, especially in Southern Europe. In addition, shipments were impacted by temporary events such as general strikes in France, civil unrest in Peru, and flooding in Northern California, which we believe represented around 2% of our decline. Volume was further impacted by some customer destocking across the supply chain as well as softer consumer demand in a few markets, which, together, we estimate accounted for an additional 2% to 3% of our lower shipments. These trends were most notable across the mainstream beer, food, and non-alcoholic beverage categories in North Central Europe and Mexico. While there are many moving pieces here, we believe underlying demand was down about 2% to 3% during the first quarter. Looking at the segments, volume was down about 5% in the Americas, compared to 3% growth in the prior year quarter as civil unrest in Peru and flooding in Northern California contributed to lower volumes. In Europe, shipments were down 12% compared to 10% growth last year. Importantly, we remain oversold in the wine category across Southern Europe, yet the social situation in France, underpinned by weekly strikes on pension reform since January, has strongly penalized our results in that market. Overall, we now expect sales volume will be down low-to-mid-single digits in 2023. While we will contend with modestly lower shipments this year, given macro pressures, we expect long-term glass demand will continue to benefit from key megatrends such as premiumization, health and wellness, and increased interest in sustainability. As we look to the future, we believe glass demand should grow between 2% and 3% a year across the key markets that we serve, as illustrated on the right. We have established another set of ambitious and achievable objectives to advance O-I's strategy in 2023, and we are off to a faster start, as shown on page 5. First quarter segment profit margins topped 22% and benefited from $180 million of net price realization and $37 million of margin expansion initiative benefits, which included very good progress in North America. While we expect that performance will be front-loaded in 2023, we are ahead of pace for these key efforts and expect upside benefits. Our plans for profitable growth also remain on target. The new line in Canada is now operational, and our Colombia brownfield should be online late in the second quarter. Likewise, we have kicked off our next expansion projects in Brazil, Peru, and Scotland, which should be operational next year. Finally, our first MAGMA greenfield in Bowling Green also remains on track and should be commissioned around mid-2024. Importantly, MAGMA development is proceeding well, and our first ULTRA barrels are undergoing market testing with final qualifications expected in the second quarter. Finally, our ESG and glass advocacy efforts are progressing well, and net debt leverage should end the year comfortably below three times leveraged. I'm highly confident that these efforts will advance our strategy as we continue to transform O-I. Let's turn to page 6. Certainly, we are happy to report a strong performance and solid progress advancing our strategy. We are also proud of how our transformation is having a significant positive impact on O-I and the communities in which we serve. As you can see in the middle, we recently celebrated the official groundbreaking for our first MAGMA Greenfield plant in Bowling Green, Kentucky, which will serve the growing spirits category as well as our O-I sales and distribution business. In France, we completed a sizable investment at our beer plant that will significantly reduce our CO2 emissions. Likewise, we are partnering with many customers and communities to increase glass recycling across the U.S., and our progress in ESG has been recognized by EcoVadis, Sustainalytics, and Newsweek Magazine. Finally, we have launched a number of award-winning and disruptive offerings as part of our expanding new product development effort. These are just a few success stories that we continue to transform O-I and benefit the communities in which we serve. Now I'll turn it over to John to review financial matters starting on page 7.

Thanks, Andres, and good morning, everyone. O-I reported first quarter adjusted earnings of $1.29 per share, which has significantly exceeded both prior year results and guidance. As noted on the left, we posted significant year-over-year improvement across a wide range of financial measures. Earnings increased in both the Americas and Europe as segment operating profit improved to $398 million compared to $231 million in the prior year. Higher results primarily reflected strong net price, which is consistent with broader market dynamics, given unprecedented cost inflation over the past few years. Around 70% of this improvement relates to recovery of prior period inflation. This includes contracted price increases this year on long-term agreements that recover inflation on a lagging basis, as well as the annualized effect of last year's price increases and the benefit from recently renegotiated long-term contracts in North America. The remaining 30% of our higher prices pertain to new increases on open market sales this year, which offset the incremental inflation we incurred in the first quarter. Strong net price also reflected our favorable long-term energy contracts in Europe. Additionally, segment profit reflected favorable operating costs as earnings benefited from very good factory performance and our margin expansion initiatives. In fact, the first quarter was the second-best manufacturing performance over the past five years. Furthermore, inventory revaluation contributed $35 million or $0.15 per share, which offset the impact of elevated project activity. As Andres discussed, sales volume was down from the prior year. The Americas reported segment operating profit of $176 million, which was up nicely from the prior year. Earnings benefited from good commercial contract execution, while sales volume was down. Solid operating results mostly offset higher costs due to elevated planned project activity in Colombia and Canada. In Europe, segment operating profit was $222 million, up significantly from the prior year. Higher selling prices, favorable operating performance, and inventory revaluation boosted earnings while sales volume was down. The chart provides additional details of non-operating items. Actual first quarter performance significantly exceeded our outlook. To better understand these dynamics, we have provided a high-level reconciliation between actual results and guidance. As you can see, solid commercial execution drove most of the upside. Actual gross price realization exceeded our original estimate, while elevated cost inflation moderated some. As noted, better-than-expected operating performance boosted earnings along with a lower tax rate, given stronger earnings and favorable regional earnings mix. These benefits were partially offset by softer-than-expected sales volume, given macro pressures. Yet again, the company delivered strong earnings and margin improvement despite a highly volatile macro environment. Let's move to page 8 and discuss our business outlook, and we have updated our full-year guidance given very strong first quarter results. We now expect adjusted earnings will approximate $3.05 to $3.25 per share, up from our prior outlook of at least $2.50 per share. Likewise, our adjusted EBITDA guidance has increased to more than $1.47 billion. Overall, we anticipate continued strong net price as well as good operating and cost performance while sales volume will be down modestly this year. We have also increased our cash flow outlook, and we anticipate our net debt leverage ratio will end the year comfortably below three times, as Andres mentioned. Looking at the second quarter, we expect adjusted earnings will approximate $0.80 to $0.85 per share, and results should be up from the prior year due to favorable net price, yet sales volume will be down modestly. Likewise, operating costs will be elevated as we commission new capacity, and we will see unfavorable inventory revaluation as the prior year benefit will not repeat. Furthermore, results will reflect higher interest expense. While second quarter results will be up on a year-over-year basis, we do expect earnings will be down sequentially, given record first quarter results. This is due to a few key elements. First, the benefit of inventory revaluation will not repeat in the second quarter. Next, we expect incrementally higher operating costs as we commission new capacity in Colombia. And finally, interest expense will be up reflecting the progression of higher rates. These elements will be partially offset by seasonally stronger sales volume. We are taking all the steps necessary to drive upside performance across the operating leverage we can control. Yet our outlook is intentionally conservative on the balance of the year, given elevated macroeconomic uncertainty, especially in the second half of the year. As a result, we intend to provide regular updates on our business outlook, especially our cash flow guidance as we gain more clarity on volume and working capital levels. Overall, we remain optimistic and expect strong performance in 2023 and continued improvement in 2024. Moving to Page 9. Certainly, first quarter results were exceptionally strong. While this past quarter was unique in some ways, we have been hard at work over the past several years building the engine for sustained earnings and cash flow improvement. We established a simple, agile, and effective organization supported by advanced capabilities and new operating systems like integrated business planning. We improved our business mix and structure. O-I exited non-strategic operations and shifted away from low-profit categories. Furthermore, we reduced risk by resolving legacy asbestos liabilities and lowering debt and pension obligations. Our margin expansion initiatives have delivered over $350 million in net benefits since 2017, and we expect continued benefits for years to come, including improvements in North America. Likewise, our margins in Europe have improved consistently since 2015. For the first time in decades, we are investing in profitable growth that we expect will boost future earnings by more than $100 million once fully implemented. After several years of meaningful R&D investment, we are now at the forefront of deploying breakthrough innovations such as MAGMA and ULTRA that we believe will reduce our operating costs and support future profitable growth at lower capital intensity. Over the long run, we expect continued earnings improvement driven by profitable growth, generally favorable net price realization, and continued margin expansion initiatives. Likewise, we expect stronger cash flow due to the combination of higher EBITDA and expansion at lower capital intensity supported by MAGMA. Turning to Page 10. This engine is solidly in place and generating value. As you can see, we have delivered consistent performance improvement over the last several years. Adjusted earnings are up, and we have meaningfully improved the balance sheet and capital structure. This favorable trend reflects a comprehensive approach to enable sustained earnings and cash flow performance across all key operating levels. As a result, we have either met or exceeded Street expectations for 13 consecutive quarters. Importantly, we are confident our efforts will enable sustained earnings and cash flow improvement in 2024 and into the future. Let me wrap up by covering our capital allocation priorities. I'm on Page 11. Improving our capital structure remains our top priority. As noted, we expect leverage will end the year below three times, and we will continue to reduce leverage consistent with our glide path to 2.5 times leverage over the next few years. Our second priority is to fund profitable growth, including our current $630 million expansion program. Returning value to our shareholders is our final priority. In addition to our ongoing anti-dilutive share repurchase program, we may consider reinstating a dividend or additional share repurchases as we get close to our capital structure objectives. Now back to Andres for concluding remarks on Page 12.

Thanks, John. In summary, we are very pleased with our first quarter performance as adjusted earnings were more than double prior year results. In addition to very good performance, we continue to advance our strategy, with a strong start to the year; many of our key initiatives are tracking favorably to plan. We have increased our full-year business outlook, reflecting excellent first quarter results. Likewise, we expect continued earnings improvement in future years as we leverage the strong foundation established over the past several years. Finally, I believe O-I represents an attractive investment opportunity as we strengthen our financial profile, successfully execute, and leverage our transformation program, enabling long-term profitable growth, advanced rates through technology and innovations like MAGMA and ULTRA, and further leverage our sustainability position to win in the new green economy. We are confident this strategy will create value for all stakeholders. Thank you. And we're ready to address your questions.

Thank you. Our first question for today comes from George Staphos of Bank of America. George, your line is now open. Please go ahead.

Thanks. Hi, everyone. Good morning. Thanks for the details Andres and team. I guess my question to start is given the volume that we've seen this year and understanding that there are lots of things that have contributed to the weaker-than-expected volume, does it change at all your outlook for your deployment of capacity into 2024, if at all? And relatedly, you show Euromonitor data, which shows various growth outlooks and shipment statistics to-date. But if I had your top 5 or 10 customers on the line right now, would they also agree that their use of glass would be growing 2% to 3%? Andres, how would you think about that? Thank you.

Thank you, George. So, we don't have any concern about the utilization of the capacity that we are building at this point, and we'll be going into next year. There are multiple reasons for that. For example, if we look at the new capacity in Canada, that is to support localization of global brands, which are already there in terms of volume. So we don't need to create new volume in that area. When we look at the Andean countries, we've been importing a lot to be able to sustain those markets. So for all purposes, the slowdown that we're seeing at this point in time, which is temporary, will only offset those imports, but the volume remains very strong. And as we go into the future quarters and these records, we're going to be able to utilize that capacity in full. The same happens in Brazil. In fact, Brazil continues to be very strong for glass at this point, and imports are very high primarily by multiple players. We are reporting very little in that market that the market itself is missing a lot of capacity to supply the demand. When we look at Scotland, it is to serve a growing segment of high-end spirits. So we feel very comfortable. And the new MAGMA line is going to serve the spirits business in the United States also, which is growing quite well. So we're very comfortable we're going to be able to utilize this capacity going forward. With regards to the Euromonitor and the projections, we talked before about the glass demand fundamentals. They're very solid. They're very different than they used to be, and consumer preference is favoring glass consumption. So we feel comfortable with those projections after having had a third presentation of the market.

And your customers would say that? Go ahead, John. Sorry about that.

Yeah. Just to add a little bit there, keep in mind that for the expansion that we have is substantially covered by long-term agreements. So, I think that backstops the expansion programs.

And these expansions are responding to the requirements of those customers.

Okay. And so just clarification and a quick follow-on, and I'll get off the line here. So your customers would say they expect their usage to be growing 2% to 3% in the relevant categories. And then, John, what do you think you can do on an ongoing basis in terms of operational cost outs for the next few years, again, on an annual basis? Thanks guys. Good luck in the quarter.

Yes. In some cases, that growth is even more depending on which customer we're talking about.

Yes. Regarding the last point, as George mentioned while reviewing our capital allocation and the amount of capital expenditures, we continue to identify several long-term expansion project opportunities with our customers. There is still significant demand for us to increase capacity to support their growth, which highlights the need for the substrate. Over the past few years, we have averaged between $50 million to $75 million in margin expansion initiatives. This year, we increased that to $100 million due to our heightened focus in North America, which encompasses a range of factors. Looking ahead, we anticipate being on the upper end of that range for the next few years as our cost reduction and margin expansion initiatives have the potential for sustained improvement. I believe that the opportunity for continued margin enhancement in the Americas will unfold over multiple years, giving us a strong outlook for cost and margin improvement opportunities for the next several years.

Thank you so much.

Thank you. Our next question comes from Anthony Pettinari from Citi. Anthony, your line is now open. Please go ahead.

Hey good morning. Just following up on George's question. I think in the past, you've talked about being around 5% oversold globally. I'm wondering, where that stands now following the 1Q maybe slight slowdown? And then separately, I think you've talked about maybe around 5% of European capacity being removed last year. I'm wondering, where that stands now.

Yes. So let me talk about the capacity in Europe. So capacity was removed. Some of it is coming back. Now the European market has been growing steadily year after year at a pace that can consume the capacity, not only that one that is coming back, which is just partial comeback, but all the new capacity that has been implemented.

Okay. And then in terms of your oversold position globally, I mean, is that sort of in balance now with the updated volume forecast, or just how should we think about that?

Yes. What we are seeing is a temporary pause. Our projections that we shared remain valid. We will experience this temporary pause while we build, and then activity will resume because the fundamentals remain unchanged.

Okay. That's helpful. I'll turn it over.

Thank you. Our next question comes from Ghansham Panjabi from Baird. Your line is now open. Please go ahead.

Thank you, operator. Good morning, everybody.

Good morning.

Some of the big beverage and food companies that reported thus far have pointed towards the consumer in Europe starting to exhibit elasticity and also trade-down dynamics in purchase patterns. Are you seeing something similar at this point? And just more broadly, how do you think your portfolio is positioned against a lower consumer spending dynamic globally?

Yes. We are observing mixed signals from various companies' earnings releases and conference calls. From our perspective, underlying demand is currently declining, mainly due to supply chain destocking. It's too early to assess consumer behavior accurately; they may slow down at some point. However, for this quarter, we have witnessed significant supply chain destocking, which is affecting the underlying demand.

Yes. I would add there, Ghansham, not having a crystal ball on that as we indicated in our prepared remarks, we've just taken a conservative view of the back half of the year in the financial performance side. So, in the event things prove slower, I think we're covered in the event things bounce back because this is an inventory destocking and things normalize; I think we could benefit on the upside.

Got it. And then as we think about earnings for 2023 being almost $1 higher than in 2022, I know it's very early, but as we update our models for 2024, what do you think we should keep in mind as it relates to potential headwinds on a year-over-year basis? And then then related basis, at this point, do you see a path for earnings in 2024 for OI to be higher than what we currently see for 2023?

So, yes, yes, for clarity, I think at this point in time, Ghansham, and consistent with their comments just a few minutes ago, we do expect 2024 to be higher than 2023, even against our updated guidance there. So, while sales volume right now is clearly a headwind due to the macro pressures, we would anticipate good volumes next year. There could be a bounce-back effect; let's see what happens there. But even without that, we are adding much-needed new capacity, as we mentioned before, and that should provide good accretive growth for the company. Likewise, again, back to the previous comments, we're confident on margin expansion initiatives, especially considering the tailwinds on the recovery in North America. And while we're not counting on continued strong net price, we've had the last seven years, we've had favorable net price six out of those seven years. But even with that said, we're still facing, call it, 7% or so cost inflation this year. And as you know, 55% of our business is under long-term agreements with price adjustment formulas that will kick in to cover that next year. So, that's a good boost also. Now, we don't know what inflation looks like; we expect it to moderate, and we don't know whether other commercial activities could be. But overall, with those elements, we're pretty confident that 2024 will be higher than 2023.

And I will add to that, that the operational performance continues to improve. And as John described in the opening remarks, this has been one of the best performances, the second one in the last five years. And this is responding to all the capabilities that we built, and that is expected to continue delivering improved performance over time, which will impact 2024.

Got it. Thanks so much.

Thanks.

Our next question comes from Gabe Hajde from Wells Fargo. Gabe, your line is now open, please go ahead.

Andres, John, Chris, good morning.

Good morning.

I was hoping maybe you can give us a little bit of clarity just, I guess, on the second quarter bridge. So, I think John, you mentioned $35 million of inventory revaluation benefit that occurred in Q1 that would not recur in Q2. And then I think you talked about elevated activity across the system being a headwind and then partially offset by seasonally higher volumes. But maybe if you can put a finer point on some of these other items and if I missed anything? Thank you.

Yes, yes. So, some of the bigger pieces, moving pieces there that will be sequential headwinds, so to speak, if you want to call it that, it's probably a $0.25 to $0.30 change in inventory revaluation. So that's the biggest component that comes through. The elevated operating cost because of commissioning new capacity and also we have kind of a large wave of maintenance activity is probably $0.10 closer to $0.15 quarter-over-quarter headwind. And then as we look at interest expense, it's probably another time at least as we stand here today. So yes, we'll have a seasonally stronger sales volume that will partially offset that, but those are the big moving pieces.

I appreciate the information from April 2023, but you mentioned that earnings are expected to increase next year, which I assume refers to EBITDA. Considering that this year was projected to be the peak for capital expenditures, starting from $175 million and estimating an EBITDA increase of around $20 million to $25 million, along with a decrease in capital expenditures of approximately $75 million to $100 million, are there any other cash flow factors we need to consider? Specifically, will there be any working capital requirements for the business?

Yes. As I mentioned, it's a bit early to provide specific numbers. We need to review our capital plan for any additions or adjustments, including maintenance spending and our strategic projects, which are still being planned. On the working capital side, as sales grow, we will need to support that growth through receivables and inventory. These are all factors we are considering, but it's too soon to detail the cash flows for 2024.

Fair enough. Thank you.

Thank you. Our next question comes from Arun Viswanathan from RBC Capital Markets. Your line is now open. Please go ahead.

Good morning. Thank you for answering my question. I'm interested in the volume outlook. It appears that you are facing capacity constraints. We've also heard that consumer demand is somewhat weak in certain areas and regions. You mentioned the possibility of a rebound next year. Is that likely to depend on an improved macro environment, or what are your thoughts on the volume trends for the near to intermediate term, especially in light of your capacity expansions? Thank you.

Yes, for clarity, I believe our volumes will increase next year, regardless of any macro rebound. The primary benefits of our expansion program and increased capacity will be realized next year. If there is a rebound, it would enhance that outlook, but we do not think that our growth next year is reliant on such a rebound.

Okay. Thanks, John. And then just on the price cost side, you noted that a lot of the pricing actions are from prior year catch-up and you don't expect to maybe see some of that gain in the future. Is that accurate? And how much price should you potentially hold on to, given that we are kind of moving through a deflationary environment? Would you consider that Europe is still oversold? And again, these are structural price increases that we should kind of consider put you at this earnings power level kind of on a go-forward basis?

We are confident in our pricing strategy. To clarify, most of what occurred in the first quarter was related to price adjustment formulas and prior period activities. The incremental price increases in the first quarter were primarily in response to rising costs. It's important to remember that inflation remains significant, around 7%, and whether we are looking at the open market or historical price adjustments, we expect this to work in our favor. However, net pricing is crucial for our business, and it doesn’t capture the entire picture. We also need to address higher interest expenses, inflation on selling, general and administrative costs, and inflation on capital goods. Therefore, we must effectively manage the cash cycle and consider inflation within that context. It’s essential to look beyond just net pricing and consider the competitive landscape and how we manage through economic cycles. This management is not a luxury; it is vital to our ability to navigate the cash cycle.

And just one more quick one, if I can. Just on the free cash flow, when do you expect your free cash flow will be closer to that adjusted number of $475 million? And should we just be providing one kind of guidance number?

So keep in mind, the adjusted free cash flow is to demonstrate what the underlying cash flow is of the business operationally, and it deducts the cost of maintenance capital. So I think, yes, I'm sorry, it does not include the impact of expansion capital. Included in that is the netting of the maintenance capital. So that will always be there. I don't know if you ever totally close that gap. But the important point is through the strategic projects that we're doing right now, they ultimately lift up the total EBITDA. And then the true free cash flow should actually surpass the level of adjusted free cash flow of the business eventually. So that's what we're trying to aspire to, and I don't want to get caught up in one bucket or another. But we believe that at the end of the day, all of this is creating a virtuous cash cycle for the business.

All right.

Thank you. Our next question comes from Mike Roxland of Truist Securities. Mike, your line is now open. Please go ahead.

Thank you. Thank you. Andres, John. Chris, congrats on a very good quarter.

Thanks.

Just wanted to get your thoughts on glass fundamentals. I think in the last call, you mentioned the fundamentals were as strong as you've seen in 20 years. Obviously, there's a little bit of a break here, whether it's due to destocking, slower consumer, and whatnot. But you're still guiding to, at least on a normalized basis, growing glass demand. So can you walk us through some of the things that you're doing internally, checks and balances, just to make sure the company is not getting ahead of its skis, given currently favorable industry dynamics?

Yeah. We think the glass fundamentals that we've been describing remain valid. Obviously, at this point in time, we're seeing these macro dynamics that will create a pause. We might see a little bit of trading down by consumers that is very typical of a recession. But once the economy bounces back, then the consumers move up the ladder again. So what we see is a temporary pause, and then the fundamentals will kick in again because they've been responding to the evolution of consumer tastes, what their preferences are, and they will continue influencing our demand.

I would like to add that if you look at our current capital expansion program, the growth it facilitates is still below our market share position relative to the anticipated market growth over the next few years based on those assumptions. Therefore, regarding concerns about overextending ourselves, our investments remain below our market share position in that growth.

Sorry.

Sorry, Mike, I think we lost you there. Didn't hear.

I’d like to know if you're conducting any internal assessments to stress test your forecasts regarding your customers, especially in light of some peers being somewhat optimistic in their predictions. Given the recent changes in market dynamics, I'm curious what steps you are taking to ensure that your forecasts are both accurate and adequately stress tested.

I would say that we got a pretty advanced business intelligence capability where we were able to forecast and look at all the different many variables in the business. And that does point to, hey, if we wanted to understand the recessionary impact of our business, and I said this before in the past, it could be down 3% or so; that seems to be the sensitivity to it. But if we take a look at all of those fundamental dynamics, they still point to continued growth of our business in a more normalized environment. But I would also go back and say what are we doing? Well, one of the things we did do is we secured this growth through long-term agreements. So in that sense, I don't think that we're going over our skis or going beyond what the customers are willing to commit to.

Got it. And just one quick follow-up. Just in terms of the MEI initiatives, obviously, you're targeting $100 million plus for this year, for the next couple of years. I believe in the last few years, the focus on price and revenue optimization. Could you just expand on other opportunities that you're pursuing, whether we see like SG&A reduction lowering costs in the cloud? So some of those things you may have seen that will be responsible for getting you to that $100 million for the next few years?

I would say this year's benefits are quite balanced. We have revenue optimization through better contract compliance and value-based pricing, improved factory performance aimed at productivity, and an SG&A cost transformation program we've been implementing for a few years. This year has shown particularly strong operating performance, leading to good benefits. Last year, we restructured by removing two underperforming furnaces, which has yielded positive results. We also have an extensive program focusing on labor and energy reduction, automation, logistics, network optimization, and enhancements in procurement-to-payment processes and speed. Perhaps the most significant progress is happening in North America, where we’ve made a strong start in renegotiating contracts, which has been beneficial in the first quarter, along with various operational improvements and other business factors.

Got it. Thanks very much, and good luck for the balance of the year.

Thanks.

Thank you.

Thank you. Our next question comes from Mike Leithead of Barclays. Mike, your line is now open. Please go ahead.

Thank you. Good morning and congratulations on a strong start to the year. My first question is about the EBIT margins in Europe, which were 28% this quarter. I assume that inventory revaluation contributed a few percentage points. How sustainable do you believe the underlying margins are in the mid-20% range, which is significantly higher than your historical performance before last year? Additionally, considering that you are also reducing costs, how sustainable are these current margin levels?

Sure. Let me address that. The first quarter showed strong performance. Looking at our margins overall, we anticipate that this year's segment profit margins will be in the mid-teens, similar to pre-pandemic levels seen in 2017 and 2018. In the Americas, margins are expected to be in the lower teens, while in Europe, they should exceed 20%. Moreover, as we consider the future and the initiatives discussed, we believe that segment profit margins in the next couple of years could rise to the mid to high teens. This could potentially elevate the Americas from the low teens to the mid-teens, particularly with margin recovery in North America, while Europe may maintain margins at 20% or higher. We aim to continue this growth moving forward, which should provide a clearer picture of our more normalized expectations and our strategic goals for the company.

Yeah. And I would like to highlight that the margin improvement in Europe has been a multi-year dynamic. We started to improve back in 2016, and we've been improving year after year since then.

Great. Thank you. And then second, just a little housekeeping. I think you bumped full-year EBITDA by about $100 million, free cash flow moved higher by about $25 million. So is there a working capital offset, or John, maybe you can just help parse out any other moving pieces there?

Yes, absolutely. To address your point, EBITDA has increased by over $100 million, and free cash flow has risen by more than $25 million. Clearly, those figures show a distinction. It's important to note that our outlook for free cash flow serves as a minimum expectation. We expect to meet or potentially exceed that, as that is our goal. Regarding working capital performance, it will reflect our expectations for sales volume trends. This will be evident in our accounts receivable and inventory as we move through the year. Currently, we believe it is wise to adopt a cautious approach in this area, considering the more conservative scenario that conditions may remain softer for the remainder of the year. However, if demand does increase towards the latter part of the fourth quarter, that could change. Ideally, we would like to see a quicker recovery than that. But at this moment, a cautious stance seems prudent, and we estimate that working capital could swing our results by around $50 million. As mentioned in our prepared comments, we will keep you informed as we better understand how this trend is developing.

Okay. Thank you so much.

Thank you.

We currently have no further questions. So I'll hand back to Chris Manuel for any further remarks.

Thanks, Alex. That concludes our earnings call. Please note that our second quarter call is currently scheduled for August 2, and remember to make a memorable moment by choosing safe, sustainable glass. Thank you for your interest.

Thank you for joining today's call. You may now disconnect your lines.