O-I Glass, Inc. /DE/ Q2 FY2023 Earnings Call

Good morning, and welcome to the O-I Glass Second Quarter 2023 Earnings Conference Call. My name is Carla, and I will be the operator for today’s call. I will now hand the call over to your host, Chris Manuel, Vice President of Investor Relations to begin. Please go ahead when you’re ready.

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

Good morning, everyone and thanks for your interest in O-I. We are pleased to announce strong second quarter results despite more challenging macro conditions. Last night, I reported adjusted earnings of $0.88 per share, which exceeded our guidance range and represented a 20% increase from prior year results. Adjusted earnings benefited from favorable net pricing as well as solid operating performance and our ongoing margin expansion initiatives. As expected, sales volume was down primarily due to slower consumer consumption and customer inventory stocking. Likewise, we did incur some additional costs for temporary downtime to balance supply with demand and planned asset project activity. In addition to these strong results, we continue to advance our strategy despite more challenging macros. Our margin improvement efforts are well ahead of plan and all other initiatives remain on track, including our expansion plans, development of breakthrough technology, and deleveraging efforts. Reflecting very good year-to-date performance, we have provided our full year guidance and now expect adjusted earnings to range between $3.10 and $3.25 per share. We have also provided third quarter adjusted earnings guidance of $0.68 to $0.73 per share, representing a solid increase from last year's third quarter. John will expand on our financial performance and outlook a bit later. Let's move to Slide 4 and discuss recent sales strengths, starting with the chart on the left. O-I segment sales increased 7% from the prior year as the benefit of higher selling prices more than offset lower sales volume, which was consistent with our expectations heading into the quarter. Price was up 13% from last year, which primarily reflects structural increases like annual price adjustment formulas and contract renegotiations, as well as the annualized benefit of prior year pricing actions. Additionally, current year open market increases are offsetting the incremental cost inflation we are incurring this year. On the other hand, sales volume was down 9% from the prior year period, which is on the high end of our most recent guidance. We attribute about half of this decline to lower consumer consumption, while customer inventory stocking and our internal constraints accounted for the balance of the shift. Shipments were down about the same across both the Americas and Europe, but our decline was concentrated in certain categories and geographies. Around 30% of our decline was in the wine category, which was most pronounced in Southern Europe and primarily reflects our record low inventory levels. Beer accounted for a little over one-fourth of our volume drop most notably in Northern Europe, reflecting softer local consumption as well as lower global demand because many of those brands are exported around the world. Additionally, inventory stocking led to lower shipments of beer barrels across Latin America despite solid consumption trends. Finally, spirits also represented about one-fourth of our decline with a noticeable drop in Mexican tequila as strong consumption activity has moderated recently. As illustrated on the right, Nielsen data indicates mixed consumer consumption trends. Importantly, this data only reflects retail demand, and we believe on-premise consumption has been robust. On a year-to-date basis, domain consumer retail purchases declined the most in US wine and European beer, while beer in Mexico and the US was down modestly. On the other hand, a number of markets continue to grow, including beer in both Brazil and Colombia as well as spirits in the US. As noted, consumer consumption did show some initial signs of improvement in certain categories in June and July. Our July sales volume was down but a bit better than what we saw in the second quarter. At this point, we anticipate third quarter shipments will be down mid to high single-digits with further improvement in the fourth quarter. Overall, we expect volume trends will remain choppy for a while as we exit the stocking phase and our customers calibrate to mixed and evolving consumer patterns, which will cause long-term glass growth trends. For the past several years, we have seen some of the strongest glass fundamentals in decades, reflecting megatrends that benefit glass, including premiumization, health and wellness, and sustainability. Additionally, at-home dining picked up during COVID and remains above pre-pandemic levels. While O-I's volumes were under pressure in the past, our shipments, including JVs, increased about 1.5% a year on average during the 2016 to 2022 period, reflecting these favorable trends. As illustrated on the right, there have been many ups and downs during this period, given significant ongoing market volatility. Shipments were disrupted by the pandemic and rebounded as COVID subsided and customers prioritized security of supply. Yet again, the current economic downturn has disrupted demand. Certainly, we will contend with some short-term challenges. However, we expect shipments will be up in 2024, aided by our expansion projects, which are supported by long-term contracts. Currently, it is unclear if the improvement will be robust or more moderate, which will depend on timing and shape of the broader market recovery. Over time, we expect demand will grow between 1% and 3% a year across the markets that we serve, which is consistent with third-party projections and the long-term trend we have seen since 2016. In summary, we remain encouraged by federal megatrends, our future expansion plans, and our customers' continued strong interest in growing their business in premium and sustainable glass containers. Let's discuss the status of our 2023 strategic objectives on slide 6. Overall, our key initiatives are progressing well. Second quarter segment operating profit margins approximated 17.5%, which was a strong improvement from the prior year. The price is more than double our annual target and our margin expansion initiatives are on pace to exceed our 2023 goal. Our plans for profitable growth remain on target. This includes current year expansion plans and new projects set for next year, including our first MAGMA greenfield, which should be commissioned by mid-2024. Importantly, MAGMA development is progressing well, and we successfully completed market testing and initial qualification of our first ULTRA barrels, which opens up broader deployment of this new lightweighting technology. Finally, our ESG and glass advocacy efforts are progressing nicely, and net debt leverage should end the year comfortably below three times. I am highly confident these efforts will advance our strategy as we continue to transform O-I. 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 second quarter adjusted earnings of $0.88 per share, which exceeded both prior year results and guidance. As noted on the left, we have posted year-over-year improvement across all key financial measures. Segment operating profit was up in Europe and about stable in the Americas as global segment operating profit totaled $326 million, representing a 27% improvement from last year. As Andres noted, margins approximated 17.5%, up 270 basis points from the prior year. As you can see in the right segment, operating profit benefited from structural price improvements, as well as very good operating performance and our margin expansion initiatives. These benefits more than offset lower sales volume and higher operating costs due to unfavorable inventory revaluation and planned asset project activity. Likewise, we did curtail some production to balance supply with lower demand. The Americas reported segment operating profit of $126 million, which was in line with the prior year. Earnings benefited from good commercial contract execution and solid operating performance, while sales volume was down, as Andres noted. Higher costs reflected planned project activity, temporary production curtailment, and unfavorable inventory revaluation. In Europe, segment operating profit was $200 million, up significantly from the prior year. Higher earnings reflected favorable net prices that more than offset lower sales volume. Furthermore, solid operating performance and margin expansion initiatives substantially offset the impact of some temporary production curtailment. The chart provides additional details on non-operating items, which were pretty stable, except for higher interest expense. 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. We have tightened our 2023 full-year guidance range, reflecting very good year-to-date performance. We now expect sales will be up substantially this year and adjusted earnings will approximate $3.10 to $3.25 per share, which represents a significant increase from prior year results and the initial outlook we provided at the start of the year. We expect free cash flow will approximate $175 million, which is also an increase from our initial guidance. Keep in mind, this outlook does account for some potential variability in sales volume and working capital trends over the second half of 2023. Looking at the balance of the year, we expect third quarter adjusted earnings will approximate $0.68 to $0.73 per share, which represents a solid increase from prior year results. We are setting initial fourth quarter guidance at $0.25 to $0.35 per share, which is down compared to $0.38 in the prior year, primarily due to a higher tax rate, which we estimate could be an $0.08 year-over-year headwind. Likewise, our outlook remains conservative given elevated macro uncertainty. The chart provides additional details on full year and quarterly guidance. Just as we have seen over the past three years, the company continues to manage well through elevated volatility. While volume trends remain uncertain, we intend to manage the leverage under our control and deliver on our business outlook. Overall, we remain optimistic and expect strong performance in 2023 and believe performance will continue to improve in 2024. Moving to page 9, certainly, our year-to-date performance is very strong, which builds on consistent progress over the last several years. This trend reflects a comprehensive approach to enable sustainable earnings and cash flow performance improvement across a number of key operating levers. The top line is up. Segment operating profits and margins are strong. We have improved our business portfolio. And our balance sheet is in the best place in over a decade. As a result, we have either met or exceeded expectations for 12 consecutive quarters. Importantly, we are confident our efforts will enable sustained earnings, margins, and cash flow improvement in 2024 and into the future. Let me wrap up by covering our capital allocation priorities. I'm on page 10. Improving our capital structure remains our top priority. As noted, the balance sheet should end the year below three times leveraged, and we expect to attain our target of 2.5 times leverage sometime next year. 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 and/or additional share repurchases as we get closer to our leverage target next year.

Thanks, John. In conclusion, we are pleased with our second quarter adjusted earnings, which were up 20% from last year and exceeded guidance despite a more challenging macro environment. We are delivering on our commitments, which demonstrate improved agility, resilience, and strong execution. In addition to very good performance, we continue to advance our strategy with a strong first half, and many of the key initiatives are tracking favorably to plan. Likewise, we have tightened our full year guidance and expect adjusted earnings to be up a robust 35% to 40% this year. In fact, we are well on our way to delivering our best performance in the past 15 years. Importantly, we anticipate future earnings will continue to improve, as we leverage the strong foundation established over the past several years. Finally, I believe O-I represents an attractive investment opportunity as we further strengthen our financial profile, successfully execute and leverage our transformation program, enable long-term profitable growth, advance breakthrough 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 and support future shareholder-friendly capital allocation. Thank you. And we're ready to address your questions.

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

Yes. Hi good morning, everybody. Apart from… … apart from inventory destocking, a lot of your major customers are calling out point-of-sale weakness on the volume side in a variety of categories, including Diageo earlier this week on the spirits side. Clearly, 2023 is a big reset year for you from a volume perspective as inventories adjust along the supply chain. But at this point, are you anticipating volume improvement in 2024? And if so, in which categories?

Yes, Ghansham, we shared some details during the opening remarks about demand, but I would like to emphasize a couple of things. The first one is there is a general pattern across markets with softer consumer consumption as well as supply chain destocking. So that applies everywhere. Now, I would like to highlight two markets. Southwest Europe is the one with the largest drop in volume year-on-year, but is driven primarily by low inventories in O-I, which last year we had available to serve incremental demand and this year, we don't. So that creates some favorable year-on-year comparison. However, this market is quite healthy, and wine, which is a very important segment over there, is quite strong. The other market is the Andean market as well as Brazil, where overall consumer consumption is good. The challenge there is that because of the supply chain constraints over the last two years, customers imported a large amount of empty glass and now they're using that glass, reducing demand for the local supply, which is a very temporary situation. So, the market is good. For example, in Brazil, glass is growing year-to-date at 4.4% and is ahead of every one of the substrates. So, it's a pretty healthy market. They are going through a temporary adjustment. Now, the overall sales volume obviously is choppy and difficult to predict. However, we saw some improvement in July. If we look at the best information available today, we're seeing improvement in the second half in 80% of the markets we serve. Some markets will improve in the second half; some will start improving in Q4. This improvement is expected to carry into 2024. So, I think we're going through a temporary adjustment, but we're seeing some signs of recovery as we go later in the year and into 2024.

And building on that, Ghansham, we do have our expansion programs coming online substantially next year. We have our first two projects this year, one in Colombia and one in Canada that are coming online and will be in full swing next year. We also have additional expansions underway in Peru, Brazil, Scotland, and in Kentucky with our first MAGMA facility set to open mid-2024. These factors are expected to provide approximately 3% plus or minus type of growth on a year-on-year basis, bringing in about $115 million to $120 million of profit for the business.

Okay. Terrific. And then in terms of the curtailment impact on operating profit, what was that number in 2Q? I'm sorry if I missed that if you gave that out. What are you also embedding for the back half of the year? And I'm just trying to get a sense as to why EPS just based on what you guided to would be the lowest since the mid-2000s?

Yes. Just to clarify regarding the fourth quarter: keep in mind, I mentioned in the prepared comments that we will have a fairly high tax rate in the fourth quarter, probably in the mid-30s. It's just a matter of the timing of various elements, withholding taxes, and regional earnings mix. So that's about an $0.08 impact on the fourth quarter. If you normalize for that, operating profit should be consistent with last year's, just to give you a sense in that regard. As for the curtailment costs, we had about $25 million plus of curtailment costs in the second quarter. It was skewed to the Americas, and that's why you'd see some of the higher operating costs hit there in the second quarter. For sensitivity on curtailment, every 1% that we adjust our production levels to correspond with sales volume adjustments is anywhere from $3 million to $7 million impact on EBIT on a quarterly basis, and it really depends on whether you're taking lines down or cold furnaces, etc. In the back half, we’ll likely see anywhere from about $30 million absorbed in the third quarter, which is included in our outlook. A similar level may occur in the fourth quarter as well, which is also absorbed in our outlook. Despite absorbing the lower sales volume and the curtailment cost, we're actually posting pretty good numbers in the back half of the year.

Thanks, Ghansham. Our next question comes from George Staphos from Bank of America. Your line is now open. Please go ahead.

Hi. Thank you for the information, and I hope everyone is having a good morning. If we could look at slide 4, Andres, you mentioned some of the constraints you experienced. Could you elaborate on the impact of those constraints on wine sales in Europe and South America, particularly in your key markets? You noted an overall 2% impact, but I'd like to understand how that affected your more significant categories. Additionally, in response to Ghansham's question, should we anticipate a reversal of this situation next year?

Yes. The Andean market, as well as Brazil, are very important for us. What we're seeing in both markets is a pretty healthy demand. You would imagine the imports of empty glass were quite substantial because of how tight the supply chain was over the last two years. However, we're seeing some recovery, for example, in the Andean countries, coming back to supply the key products that are growing market in the premium segment. Our expectation is that this will normalize over the next two to three months. This market should contribute well. In Brazil, we already mentioned that glass is up year-to-date 4.4%. Southwest Europe, once we get into more favorable comparisons, we won't see this drop that we're observing at this point in time. The North America market has been doing fairly well, in part because we've been diversifying away from beer into growth categories. Even in the mega year, it's been flat, offsetting lower off-premise with higher in-on premise. We see strength in the markets, and as we transition into the second half, we should start seeing these important markets beginning to rebound next year.

Yeah, it was almost all wine in Southwest and Southeast Europe, which is where we had our constraints. We had record low inventory specifically in those markets. If you go back to the first quarter, we had issues in the West Coast of the US because of weather and strikes, but that did not carry over into the second quarter. So, our constraint from a supply standpoint was specifically in wine in Europe.

Okay.

With some of the softness that we're seeing right now, we are able to catch up on some of the lower inventories, and as a result, we are in a much better position in the second half of the year to serve wine. To your question about next year, I think we should indeed be in a much better position.

Thanks, George. Our next question comes from Anthony Pettinari from Citi. Please go ahead.

Good morning.

Good morning.

Just following up on Ghansham's and George’s questions. On the previous earnings call, you talked about continued improvement in '24 in earnings and free cash flow. I guess three months later, some things have changed and there's some puts and takes. I'm just wondering if you can talk about the level of confidence about year-over-year earnings growth in 2024 and maybe what could get you to sort of a higher end of earnings growth or what could cause earnings to maybe not grow next year?

Yes, sure, Anthony. I think there are three primary levers as we look into next year, two of which we have good confidence in, and the other is a bit more macro-driven. The first is sales volume and our expectation for next year. We feel confident about the growth attributed to new expansion capital, which let's say is around plus or minus 3%. So that's something within our control, contracted business with our customers. The second area is our margin expansion initiatives. We've done really well on those. As you know, in the past, we were targeting about $50 million a year. We're targeting $100 million this year and should exceed that, with a lot of focus on North America. The third variable relates to net prices. At this point, we are just anticipating neutral net price. 55% of our business is under long-term agreements with price adjustment formulas, and we still anticipate to incur 6% to 7% inflation this year, substantially recovered in that book of business next year. So that is a substantial amount of net prices against probably what is a declining inflationary environment over time, which may suggest higher net prices.

Okay. That's very helpful. And then maybe just one quick follow-up. The 2% to 3% headwind from customer destocking, is it possible to give a sense of how much inventory you think customers may be carrying? Is this sort of like a one-quarter impact or a two-quarter impact? I'm just trying to get a sense of customer inventory levels.

Anthony, what I'd say is that we serve many different end-use categories, all of which have different approaches to inventory. In beer, there's only a few weeks of finished goods in the chain, and that tends to correct pretty quickly. In food, it may be a little more moderate; in spirits, and other categories, a little bit longer. Some of the ones that ship internationally end up having much longer value chains and different levels of inventory. So, I don't know if there's a simple answer. However, I believe at this time we are transitioning from the destocking phase to patterns more associated with fundamental consumer consumption, which we believe as reflected in Nielsen data may be down a few percent fundamentally.

Yes. Looking at the Andean countries, that inventory has been pretty much consumed. In Brazil, we should finalize consuming that in the third quarter, seeing a positive impact in that quarter.

Thanks, Anthony. Our next question comes from Mike Roxland from Truist Securities. Your line is now open. Please go ahead.

Thank you. Andres, John, Chris. Congrats on a good quarter despite the backdrop.

Thanks, Mike.

Thanks, Mike.

I would like to follow up on some questions regarding the destocking. Can you discuss the timing of destocking in the second quarter? It appears to have begun in January, with volumes decreasing sequentially until April. If I remember correctly from your last call, there seemed to be some improvement in May, but conditions started to weaken again in June. Can you elaborate on what transpired during the second quarter? You've indicated that July showed improvement. How can you quantify that improvement in terms of destocking on a sequential basis?

One thing I would say is it's difficult for us to quantify the month-to-month destocking cadence per se. What we saw in our overall volumes is that April was a tough month, probably down low double digits. We saw May bounce back to around minus 6%, minus 7%. Then you saw June down that high single digits and things like that. So it's been very choppy, which makes it a little difficult to read through everything. Destocking tends to be a pretty choppy environment, especially when it's at the tail end and people are starting to calibrate from destocking back to fundamental demand patterns. That kind of gives us some sense that we're probably in the later stages of the destocking phase.

Yes. As we mentioned before, we're seeing about 80% of the markets we serve showing some form of improvement at this point. Some began in Q3, while others will start improving in Q4, and for sure, going into 2024.

Got it. Thank you for that. And just one quick follow-up on the 2024 outlook. John, I appreciate the color you provided regarding things in your control. If I try to quantify so price cost possibly neutral, maybe plus some tailwinds there, you get incremental EBITDA growth through your expansion projects, call it $115 million to $120 million, and then you get the MEI benefits of $100 million. Is that the right way to think about sequential or year-over-year improvement in EBITDA on a quantitative basis?

Yeah, I don't want to speculate on specific numbers. We haven't really provided 2024 guidance yet. What I would say is if you take a look at the expansion projects, it's a total of about $120 million over the life but on a run rate basis. I don’t know if we'll get all of that next year because we had some this year, some next year, and then we'll have a follow-through into 2025. I think you're likely correct about the margin expansion initiatives. We’re looking at a robust number there. It’s just a bit early to determine the net price.

Thanks, Mike. Our next question comes from Arun Viswanathan from RBC Capital. Your line is now open. Please go ahead.

Great. Thanks for taking my question. I just wanted to ask about the demand environment. I think during the quarter, you guys noted some softening in certain markets, maybe some of the higher-velocity – sorry, the lower-velocity experience markets and some other areas where you keep on strength before. Could you just give us an update, maybe what you're seeing across some of your major categories and what you expect over the rest of the year? Thanks.

Yeah. The largest impact we've seen so far is in wine. As mentioned before, it's closely related to low O-I inventories. It's not as much the market itself but the inventories, which makes it very temporary. We have seen a decrease in beer in North Central Europe, primarily driven by lower consumption. Additionally, we've seen some impact in spirits, particularly in Mexico, coming from a slower growth of the tequila category. The category is still growing, but not as fast as it was previously.

Thanks, Arun. Our next question comes from David Page from Wells Fargo Securities. Your line is now open. Please go ahead.

Good morning, Andres, John, and Chris. John, you mentioned some aspects that I would like to inquire about. Regarding the open market business you mentioned, aside from the 55% that is secured with long-term contracts, could you provide a breakdown by geography to indicate your exposure? Additionally, considering the supply-demand dynamics in various regions, there has been a reduction in capacity in North America, which should make that market relatively tight. Brazil seems to be experiencing growth, so it should also be tight there. Europe appears to be a significant area of interest, as it seems some capacity is coming back online, along with new additions from your company and others. Could you share your insights on the supply-demand dynamics as we approach 2024 and your exposure to the open market business?

Sure. Just to start with the mix of our contract base, about 55% of our business globally is under long-term agreements that have price adjustment formulas; about 45% is open market. That tends to be one-year agreements that get reset generally between November and February each year. If you take a look regionally, in Europe, we have about 30% fixed and 70% open market, skewed toward the open market business there, particularly with wineries. Over in North America, about 95% is under long-term agreements, while in Latin America, it's probably about 50-50, maybe skewed more toward contracted business. There's a natural process of working through price with open market activities due to the history of inflation in that region. So that's the mix. On the capacity side, globally we operate in Europe and the Americas, which is about a 40 million ton demand system, that’s the glass consumed each year. Over the next three years, there’s about 2 million tons of announced new capacity coming online, which translates into about 1% to 2% or 1.5% to 2% of new capacity coming online annually. It's consistent with the fundamental growth expectation of the marketplace. So, while new capacity is coming on, a third of it is ours, and some of it is replacing outdated capacity, which isn't necessarily all incremental expansion. However, over the arc of multiple years, this seems to be a very responsible level of capacity given expected market growth.

Yes. To complement regarding new capacity for O-I coming online in the latter half of this year and in 2024, part of that will be in the Andean countries where consumer demand is strong and the premium category is experiencing solid growth. Therefore, that’s a promising investment. In Brazil, mentioned before, glass is up year-to-date 4.4%, while premium beer, which we index to glass, is up 15.5%. The market here is solid, and we have capacity coming online in 2024. The other capacity will go to the UK to serve the Scotch market, where we have a factory located right in the center with promising long-term growth. The investment in Canada is under contract, localizing volume that is already there, which is a low-risk endeavor. The capacity in Kentucky is to serve the growing US local market and export market in spirits, so we are well-positioned with upcoming capacity.

Thank you for that. I wanted to delve deeper into ULTRA. This appears to be a topic that's possibly misunderstood or glossed over. We discussed it during the second quarter. It seems you qualified some of those bottles in Colombia during the second quarter. Can you elaborate on this? Additionally, could you discuss the opportunity to leverage ULTRA across your system? It seems like it's a bit less capital-intensive than MAGMA, so I'm interested in how quickly you can deploy this across other factories.

We've successfully qualified ULTRA in Colombia, our recent endeavor. We are planning other investments in Europe, where there is strong interest. As you noted, the capital intensity of this investment is low, which is quite advantageous. Currently, we have a good early horizon. Remember, with ULTRA, we plan to achieve up to a 30% weight reduction, resulting in a positive impact on sustainability. We will soon announce further investments in ULTRA, which will strengthen our glass container positioning for sustainability in the future.

To your point, the appealing aspect of ULTRA is that it can be scaled up quickly with lower capital intensity. As we work on MAGMA, which we believe is essential for addressing the marketplace, engaging ULTRA in the medium term will provide a boost as we lay the foundation for broader MAGMA deployment down the road, which will also incorporate ULTRA. For this reason, it's an excellent tool for us.

Thanks very much for the follow-on. Regarding the $59 million or so of costs, about $25 million was related to curtailments. Can you expand on the breakdown by category? Additionally, your comments regarding the imports of glass indicate that, from your perspective, are these imports primarily one-way glass? Are there any imports of returnable glass? If so, how do we evaluate that relative to expected demand for next year?

On your first question, the breakdown of the higher costs in the Americas totaled about $50 million. Of that, about $20 million stemmed from inventory revaluation, $10 million was related to elevated costs for asset project activity, and roughly another $20 million was due to temporary curtailment downtime. That last figure was not included in our original guidance. Concerning imports, we see that while the imports are primarily one-way glass, there is ongoing product development activity in both one-way and returnable glass across the Andean region as well as Brazil. In Brazil, for instance, returnable glass is growing by 3.1% year-to-date and is moving into premium products, which is a new trend, supporting premium growth in that market.

We have no further questions. With that, I will now hand back to Chris Manuel for final remarks.

Thank you, Carla. That concludes our earnings conference call. Please note that our third quarter call is currently scheduled for November 1. Remember, you can make a memorable moment by choosing safe, sustainable glass. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect your lines.