Hello everyone, and welcome to the O-I Glass Third Quarter 2023 Earnings Conference Call. My name is Nadia, and I will join later in the call today. I will now hand over to your host Chris Manuel, Vice President of Investor Relations, to begin. Chris, please go ahead.

Thank you, Nadia, and welcome everyone to the O-I Glass third quarter 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 earnings 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. Now I would like to turn the call over to Andres, who will start on Slide 3.

Good morning, everyone, and thanks for your interest in OI. We are pleased to announce stronger third quarter results as the company continues to execute well in a challenging macroenvironment. OI reported adjusted earnings of $0.80 per share, which exceeded our expectations and represented a 27% increase from the prior year. The company benefited from strong net price realization and solid operating performance amidst softer than expected demand. As a result, the top line was up as we improved our segment operating profit, margins, and adjusted earnings. In addition to solid results, we continue to advance our strategy. Our margin expansion efforts are well ahead of target and our first MAGMA Greenfield plant in Bowling Green, Kentucky remains on track for a mid-2024 ramp-up. Likewise, we achieved our full-year balance sheet objective ahead of plan. We expect strong 2023 results with adjusted earnings up 30% from the prior year, which will represent the best performance in the past 15 years. We will share our view on recent market trends. Shipments have been softer than anticipated as demand has temporarily decoupled from consumer consumption due to significant inventory destocking across the value chain. While we are not immune to the broader microdynamics, we are executing effectively and taking a number of actions to drive strong performance as conditions recover. We will conclude with our initial thoughts on key business drivers for 2024. Now I will turn it over to John, who will review our recent performance and 2023 outlook in greater detail starting on Slide 4.

Thanks, Andres, and good morning everyone. Building off our earlier comments, OI delivered strong third quarter results. The top line was up, we generated double-digit improvement across adjusted EBITDA, segment operating profit, and adjusted earnings while margins were up 160 basis points. Likewise, free cash flow increased nicely from the third quarter last year. Finally, our balance sheet position improved with net debt leverage down to 2.8 times, which is now better than our full-year target of three times. Overall, we posted significant year-over-year improvement across our key financial measures, despite difficult market conditions. In addition to strong results, we continue to advance our long-term strategy and the appendix includes our current scorecard on key 2023 strategic objectives. Next, I will expand on our strong third quarter performance starting on Slide 5. Both the top line and bottom line improved in the third quarter. Net sales increased and earnings improved 27% as strong net price realization and solid operating performance offset softer demand. Revenue increased to $1.74 billion as the combination of higher average selling prices and favorable FX more than offset softer sales volume. Third quarter adjusted earnings of $0.80 per share was up nicely from the prior year, mainly reflecting higher segment operating profit. Non-operating items were a modest benefit as lower corporate costs and tax rates more than offset elevated interest expense. The lower tax rate included the resolution of a tax matter in Europe that added about $0.04 versus our guidance. FX was a modest tailwind and consistent with our outlook. Let's turn to Slide 6 where we discussed recent performance trends across our two business segments. Segment operating profit exceeded $300 million, which represented a 13% increase from last year as margins improved 160 basis points. Results were down in the Americas while up significantly across Europe. In the Americas, segment operating profit was $116 million compared to $130 million in the prior year. The benefit of higher net price and a slight FX advantage partially offset the impact of lower sales volume and higher operating costs. Shipments were down 15% and we noted double-digit volume declines across nearly all markets and geographies reflecting significant destocking activity, with more pronounced pressure in wine, spirits, and beer. Andres will discuss market trends further in a few minutes. Costs increased around $40 million due to temporary production curtailment to balance supply with lower demand, and we incurred additional expense due to elevated planned maintenance activity. Europe posted segment operating profit of $185 million, which was up 36% from last year. Strong net price and a slight FX tailwind more than offset the impact of lower sales volume and moderately higher operating costs. As with the Americas, shipments were down 15% and we noted double-digit declines across nearly all markets and geographies, reflecting significant destocking activity. Likewise, we saw more pronounced pressure in wine and food. Higher costs reflected last year's $13 million benefit from Italian energy credits, which did not repeat in 2023. Despite the challenging conditions, the company yet again significantly improved its segment performance. Let’s discuss our updated full-year 2023 business outlook. Please move to Slide 7. We now expect adjusted earnings will approximate $3 per share, which represents a 30% increase from last year. Free cash flow should range between $100 million and $150 million, and as noted leverage should end the year below our annual target. We have revised our full-year and fourth quarter outlook primarily due to lower than expected sales and production levels. With our strong performance this year, we have decided to accelerate temporary production curtailment activity given softer demand. As a result, we intend to curtail about 20% of our global capacity in the fourth quarter, which will impact earnings by approximately $0.30 per share more than previously planned. At the same time, we have accelerated a number of margin expansion initiatives to partially mitigate lower sales and production volumes. Despite these adjustments, we expect a historically strong 2023 performance. Now, I will turn it back to Andres, who will share our view on recent market trends, review the actions we are taking to drive strong performance as volumes begin to recover, and discuss our initial view on 2024 business drivers. Please turn to page eight.

Thanks, John. Let me start by sharing our view on recent market trends. We are facing a unique set of conditions that have led to a temporary decoupling of consumer consumption patterns and demand for glass containers. Overall, our shipments are down primarily due to significant inventory destocking and modestly softer consumer consumption. While we have seen some temporary trade down in certain markets, especially in beer, we anticipate little share shift through the cycle. The chart on the right illustrates Nielsen retail consumer consumption trends for the categories that we serve and glass shipments since mid-2022. We also include our current view of future patterns through 2024. As you can see, consumer consumption is down low to meet single digits across the categories that we serve. Yet, glass shipments have been measurably below this level. We have noted widespread inventory destocking across the value chain as our customers, distributors, and retailers adjust their inventory management practices. We believe this change is adjusting for high initial inventories in the supply chain as well as current sluggish consumption. Likewise, supply chains are recalibrated for more moderate future growth and higher interest rates, which push up the current cost of inventory. While October volume trends remain down, we are seeing some sequential improvement compared to trends in August and September. The rate of decline has started to reverse in segments like food and NAB in North America and in certain segments in Southern Europe, including beer and NAB. Furthermore, the Andean market has already transitioned from decline to strong growth supported by our recent expansion initiatives. Again, we believe the current situation is temporary and we expect demand will rebound as we go into 2024. In summary, we expect low to mid-single digit sales volume growth in 2024. Let's move to Slide 9. O-I is a much more agile and capable organization than in the past. This reflects significant structural changes embedded in our transformation journey, which is illustrated in the top chart. As a result, we have executed well to overcome each challenge over the past several years and have consistently improved our performance, as noted in the bottom chart. In fact, this quarter marks the 13th consecutive quarter we have either met or exceeded our expectations. We are again acting with agility to navigate the current market situation and taking four specific steps. First, we are curtailing capacity given softer demand to adjust inventory levels as we head into 2024. Second, we are accelerating planned network optimization actions across North America where the past year or so we have eliminated four high-cost furnaces, including the recently announced Waco plant closure. We continue to evaluate further optimization opportunities to further boost earnings and ROIC. Ultimately, we aim to reposition our North America business towards more profitable, fragmented categories, which are a great fit for MAGMA in the future. Our first MAGMA Greenfield will serve key spirits customers, the craft distillers along the Kentucky Bourbon Trail, as well as our OIPS distribution unit, and it is a great example of the future direction of this business. Third, OI is expanding and accelerating our margin expansion initiatives. This includes numerous automation and productivity projects, as well as additional organizational restructuring actions. Fourth, we are reducing our capital expenditures. We remain focused on completing our MAGMA Greenfield plan by mid-2024. Yet, we have extended the timeline of our expansion projects in Brazil, Peru, and Scotland by six to 12 months to better align with the market recovery. While we must contend with the macros, we are again taking proactive measures to drive improvement across the business levers that we control as we aim to deliver a strong performance next year. This leads to our initial discussion on 2024. I'm now on Slide 10. Consistent with prior years, we will provide our 2024 financial outlook during our fourth quarter call. However, we are sharing our preliminary view on the five key levers that drive our business performance. Keep in mind, we have good line of sight on the levers that we can control, such as cost management and CapEx, while it will take some time to gain clarity on certain market-driven factors. As discussed, we expect low to mid-single digit sales volume growth next year. Following aggressive efforts to reduce inventories in the fourth quarter, we anticipate some temporary production containment in 2024 to maintain inventory levels, but it is too early to be precise here. It will likely take more time to get a clear view on net price. Importantly, net price realization should be favorable on the 55% of our business covered by long-term contracts, which include price adjustment formulas that record inflation on a lagging basis. Yet net price realization on the remaining 45% of our business covered by annual price agreements will be subject to future market dynamics, especially the rate of demand improvement. Importantly, Europe represents one-half of our open market agreements, and we expect to negotiate most terms starting later this month and extending into early next year. Operating costs are expected to be down, reflecting our enhanced margin expansion initiatives and accelerated restructuring actions, while unfavorable inventory evaluation and lacking one-time energy credits are known headwinds. Our initial CapEx plan approximates $550 million to $575 million, which is down substantially from around $700 million this year as we proceed with the MAGMA Greenfield and adjusted the timing of a few expansion projects until markets recover. Finally, interest expense should be consistent with prevailing rates. As you can see, we are taking active measures to drive performance across several business levers. We expect to provide full-year 2024 guidance during our yearend earnings call. Let's turn to Slide 11. As we take a longer-term view, I firmly believe our strategy will create significant shareholder value as we further strengthen our financial profile, successfully execute, and leverage our transformation program to enable long-term profitable growth, advance breakthrough innovations like MAGMA and Ultra, and execute our enterprise sustainability roadmap, which is now fully integrated into our overall business plan. Our capital allocation priorities are well aligned with this strategy as we continue to improve our capital structure, fund profitable growth, and return value to our shareholders over time. Let me conclude on Slide 12. OI continues to execute well in a challenging environment. We are pleased with our third quarter performance, which exceeded both our expectations and prior year results as we continue to advance key strategic objectives. We expect strong 2023 results with adjusted earnings up about 30% from the prior year, representing the best performance in the past 15 years. While we contend with elevated market uncertainty, we are taking action to drive strong performance as markets recover. Finally, we remain highly focused on executing our compelling strategy to create long-term shareholder value. Thank you, and we are ready to address your questions.

Thank you. Our first question goes to Ghansham Panjabi of Baird. Please go ahead. Your line is open.

Hey guys, good morning. I guess first off, you know, can you just give us a bit more color on the sequencing of volumes throughout the third quarter, you know, down 9%, how had that played out? I mean was there any sort of dislocation in particular during the quarter? Anything from a regional standpoint that you might want to call out as the quarter sort of unfolded and then as it relates to production curtailment specific to in the back half of the year, including 3Q, how did that play out geographically? I know I heard the comment about 20% in the fourth quarter globally, but what was there anything unique with 3Q? I'm just trying to understand the margin divergence between the segments.

Thanks, Ghansham. So we saw improvement, sequential improvement during October. As we look back to the quarter, it was increasingly lower volume as we went through the quarter. So August was higher than July, as well as September higher than August. But October showed an improvement in certain regions. If we look at this regionally, in Europe we saw some normalization in beer and NAB when we compare to 2022 levels. In North America, we saw some stability in food and NAB. As we described in the opening remarks in the Andean region, we moved from a strong decline to strong growth. That is now leveraging the investment we made in that region which was substantial. That investment is in full operation and with full utilization at this point. Curtailment is pretty much evenly distributed across all our geographies in the fourth quarter.

Ghansham, I can add on that. In the third quarter, most of our curtailment activity was focused in the Americas. As you may recall, earlier in the year we had seen very low inventory levels in Europe and we were stocking out across Southern Europe. So more of that curtailment activity started to kick in more like in the September window. But as we go into the fourth quarter and we look at the 20% curtailment, we are going to see it pretty equally spread between the Americas and Europe.

Okay, great. Thanks for that. And then in terms of your current curtail inventory reduction if you will for the fourth quarter, do you anticipate that will be enough as it relates to realigning supply and demand by the end of the year, or will it be any slower into the first quarter of next year as well?

Well, what we are doing in the fourth quarter is we made the decision to curtail to adjust inventory forecasts and better position the company to go into 2024. How far do we need to go with curtailments in 2024 will depend on how demand evolves as we go into the year. But what we are doing in Q4 is a significant adjustment. That is why it adds up to a $0.30 impact, which is pretty much what changed the performance of the quarter versus our regional guides.

Yes, I would add there, Ghansham, if we look at the end of 2022, the inventory days in our business were in the low 40s, which is probably too low. As I mentioned before, we were seeing some stockouts when we were at that type of level. Probably the more effective level for us is about 45 to 50 days. We will probably end the year plus or minus that 50 mark. It is hard to be super precise in this regard. As we go forward from that, if we are able to achieve that in the fourth quarter, we should be able to keep curtailments kind of in line to maintain inventory levels rather than having to take another hit down. But it is a little too early to be super precise given the level of variability out there. Overall, entering the year, we thought working capital would be about a $50 million or so use of cash; it will probably be closer to a $100 million use of cash again, because the inventories might be a little higher on that range than the midpoint or lower of the targeted inventory days point.

Thank you. Our next question goes to George Staphos of Bank of America.

I understand that we will have more details as the year progresses, especially in February during the fourth quarter review. However, can you provide any insights regarding operating costs as mentioned on Slide 10? Specifically, what margins do you believe O-I can realistically improve for 2024? I also have a quick follow-up question.

Yes, George. While I'm not going to provide a specific dollar, I can give you kind of a sense of the magnitude as on historic years, our margin expansion initiatives were targeting about $50 million a year and generally did better than that. This year we are targeting $100 million and again, doing better than that with a lot of improvements coming out of North America. As we said in our prepared comments, we are looking to accelerate that. So I think another strong year, stronger year in 2024 on operating costs is very likely. And as alluded to in the comments, we continue to take an aggressive position on the costs, on the margin expansion initiatives and accelerate the restructuring activities. As there are a few of our plants that we have closed, some plants already are in negative earnings territory, and then we close those out. That will provide a nice boost in the next year in addition to whatever additional restructuring activities that we do going forward. So it should be a robust year in operating cost improvement.

Thanks, John. And maybe related to that, and then quick follow-up, and I'll turn it over. So again, I recognize it is going to have to wait until February, but you mentioned we have the margin expansion, you have some curtailments perhaps that will linger into next year. You are still working through net price, but for 55% of your business, it should be a positive. At this juncture, would you expect 2024 is a better year than 2023, or is it more likely that it would be down? And then just taking a step back, the volume trends for OI, yes, we have heard about the stocking throughout the packaging and PaperPort sector for the last several quarters, but your numbers have been seemingly a bit worse in that regard. So why do you think last and you are going through a greater amount of destocking versus other substrates if you have been able to analyze it or maybe disagree with the premise of the question? And if so, explain why.

Yes, when we compare volumes just to the second part, volume trends, we compare with other glass suppliers, I think our performance is quite similar. The difference comes from the market in which we operate. So all companies are not exactly in the same market; therefore, they won't have the same total number. But when we disaggregate that to the extent we can, we identified similar trends for OI as the market in general is having.

Yes, so on the first point, George, as far as what to expect in 2024 compared to 2023, we think we laid out the major drivers pretty well there. Volume should be up, operating cost improvement. Although, the wildcards that we just can't really call right now, as included in the comments, is what will the inflection point be on volumes and how will that be, is it the low end or the high end of that range? It does impact the earnings potential of the current year as well as the negotiations of price in Europe, which haven't even begun yet. It is hard to make a call on those. A couple things I would say is, I think the second half of the year was going to be definitely stronger than the first half of the year and probably show a pretty good run rate in the business as we clearly go past that inflection point. Another thing I would say is, we are taking as painful as it is right now, we are taking a pretty big hit on the operating leverage of the company with lower sales and production volume. But it also means that we got very good operating leverage to recovery. We are probably looking at a $300 million impact from lower sales and production volume this year. So as that recovers, that is a pretty good operating leverage on the upside; it's just the timing that is particularly difficult to call right now.

Our next question goes to Mike Roxland of Truist Securities.

Just wanted to follow-up on George's questions regarding the MEI acceleration. It sounds like a lot of this is either plant optimization and/or pure cost takeout, as you said with respect to plants. So, can you just help us frame the different buckets that you are targeting for the MEI acceleration and can you let us know if there are any costs associated as you accelerate MEI?

Yes. I would say that there are probably four buckets there. One is on the commercial side; we have what we have called our pro initiatives price, revenue optimization, and in particular in today's environment, those can be valuable. It is making sure that you are compliant with contracts; that you are doing value-based pricing; and that you are getting things really down to the nub specifically on an account-by-account basis that tends to provide benefits. Andres alluded to two areas too. One is accelerated automation activities. That one does have some additional costs; it is embedded into CapEx. We probably will scale up labor automation— you know, palletizers, those types of projects —to remove labor costs, which as we all know right now are quite elevated. The fourth one is on plant productivity, speed, efficiency, things like that. We have made significant strides over the last year in those particular categories, and we continue to think that there are legs in that. The last one would be on the OpEx side, on the organization element. A fifth point is particularly what are we doing in North America? Where we are looking at a pretty wholesome set of activities. It is the price realization on our contracts that have been renegotiated in the last year. It is again very focused performance going on in that business. We have seen very good operating improvement across a lot of the base that is allowing us to close higher-cost capacity and move that volume into higher, more efficient, and profitable facilities. That all provides a very good EBIT boost to it when you do that too. So while there are some one-time restructuring costs associated with that, those are usually paybacks of nine to 12 months.

Something to complement that, everything we are doing on the restructuring side for the North America market will be followed by strategically deploying MAGMA to access high-margin fragmented business. This is already starting with the Greenfield in Kentucky, which is serving exactly that high-margin, growing segments.

Got it. Thank you for that. Just one quick follow-up would be, just in terms of the weakness in volumes and economic downturn that you are taking in the Americas, can you comment on how Canada and Colombia are currently operating? And then realizing that you are pushing out the CapEx and deferring Brazil, Peru, do you feel that those deferrals put you at a disadvantage when, if and when volumes return? Thanks very much.

Yes. So, Colombia is doing quite well. We made a large investment for expansion for profitable growth earlier in the year. We faced the same volume slowdown that we are facing in other markets. It was quite pronounced, but it has already reverted a hundred percent to growth. At this point in time, we are growing either high single digits or low double digits. So it is pretty healthy. With that, our operation is in full utilization. It is operating really well, and we are very happy with the investment made. The situation in Canada is to serve localization of global brands, which is a trend taking place around the world. So that has secured volume, it has been completed and is now in operation and it is doing well too. We are very pleased with the evolution of those two investments. In the case of Brazil, Peru, and Scotland, we are looking to serve high-margin growing businesses with all those investments. What we want to do with them is time them properly with the evolution of demand. At this point, demand is down, so it doesn't make any sense to accelerate this. We will move forward with the advantages that those markets offer as soon as we clear all these demand fluctuations. For example, in the Scotland investment, we are supporting this high-value spirits business, which is a growing category. So we will move forward with that as soon as demand recovers.

One thing I would add on the later part there is when we take a look at CapEx, we are not just walking off the job sites of those particular facilities. We are actually, and you'll see it in our CapEx in the fourth quarter, it is still elevated. We are positioning those projects so that when we get signs that the volumes are returning, we can quickly get back there and finish them up and bring them online, rather than having to kind of start off from scratch, so to speak. I think that is an important element as we think about it going forward. Embedded in our $550 million to $575 million next year, is the fact that towards probably the later part of the year or something like that, we are putting in some more CapEx into those facilities and wrapping them up. Some of those finalization costs will be in the back half of next year; a little bit might drag into 2025, but we want to make sure that we can respond pretty quickly.

Yes, there are a couple of additional data points regarding demand. We are seeing a significant level of activity on new product development in the Americas, which should support recovery. One of those is taking in the Andean countries, where there is significant opportunity for premium product development. When we look at Brazil, the consumer consumption is quite healthy and overall glass is doing very well in that market. It has been growing in line with premium beer growth for one-way containers, which is in the mid-teens, and returnable containers are emphasized. So the challenge over there is not consumer at all; it is just destocking, which is driven by significant imports that happened when the supply chains were disrupted, and now it is being consumed, so the local orders are lower. But that is a temporary issue, and the consumer itself is in a very good place. We will move forward with the investment over there as soon as we clear all these demand fluctuations.

Thank you. Our next question goes to Anthony Pettinari of Citi.

This is Brian Bergmeyer on for Anthony. Thanks for taking the question. I appreciate all the color you have provided on 2024. Just wondering if you can add any detail on sort of your low to mid-single digit volume growth assumption. I think Slide 8 points to maybe a 2Q inflection in both retail consumption and O-I’s production. What are your customers telling you that sort of makes you feel confident in that target date?

Let me provide some input first regarding the supply chain. We identified two different supply chains in our system. The short supply chain, which is related to food or NABs, and we are expecting that supply chain will start to normalize as we exit this fourth quarter of 2023. There is also a long supply chain, which is spirits and wine, and for that one, we expect that normalization will start as we exit the first quarter of 2024. That is incorporated in our projections at this point, and we are seeing some evidence of that behavior. The short supply chains are already starting to show some initial signs of normalization.

Yes, I would say, as you can expect right now, we are having a lot of conversations with the customers to understand what their intentions are, building off of Andres' comments. Some are pointing that we are coming to the end right now, towards here, the fourth quarter; some point to the first quarter, and some point to the second quarter. Our outlook is based upon looking at macro information, looking at industry data that points to trends, and whatnot. It also relies heavily on what our customers are telling us in that regard. It is really looking at all three of those variables to come to this conclusion. Of course, nobody has a crystal ball, but it seems to triangulate quite well with all the different inputs that we are hearing from those different sources.

And last question for me with CapEx maybe coming down a little bit next year, what do you view as the best use of cash here? Is this time to maybe buy back some shares? Do you want to maybe see net leverage closer to 2.5 times? Do you have any bolt-ons maybe in the pipeline? Just any thoughts you can provide would be helpful.

Sure. I think our intention is, as we have communicated consistently in the past, that we are looking right now to reduce debt to that line of sight of 2.5 times leverage. We are getting close; we had indicated before that the inflection for looking at other means of returning value to shareholders through either a dividend or share buyback could be something that we approach in sometime in the next year. That is very well could be valid. Of course, I think with the macros being what they are, it might take another quarter or two for things to stabilize themselves, in which case then once you have got good line of sight to that 2.5, we are not that far away from it. I think we are entering into this territory of looking at those other options. Ultimately, though, of course, this is a decision for the board of directors.

Our next question is to Arun Viswanathan of RBC Capital Markets.

I already asked about the volume trajectory, so maybe you could walk us through how you are thinking about 2024? I understand you may put out some guideposts there, but are we really looking for maybe a couple points of growth off of new capacity, maybe some resumption of growth in premium categories? And maybe the end of destocking and some of the lower velocity areas like wine and spirits. Could you just walk us through how you are thinking about how volume evolves over the next say, 12 to 18 months?

Yes, I mean, it is obviously a complex set of activities right now. We do believe that building off of what Andres indicated before, some of those faster value chains—the beers, the NABs, the food categories—probably start to show growth sooner rather than later. Obviously, every segment has its own and every market has its own set of dynamics, whereas spirits and wine, for example, might take longer. They entered into their destocking process later than we had seen with some of the other ones. This is consistent with what we are hearing from our customers. Latin America, obviously, hasn't really seen significant downside. As Andres indicated before, we are already seeing robust growth coming in with the expansion in the Colombian marketplace. In North America, et cetera, is actually doing fairly well. I think the European markets might take a little bit longer to recover, at least in some of the different categories of the longer value chain categories overall.

I think that the key segment we got to follow or track closely is the wine segment in France. That is really where the largest slowdown is at this point in time. So as we continue to update, we will look at that more specifically.

Thank you. Our next question goes to Gabe Hadji of Wells Fargo Securities. Gabe, please go ahead. Your line is open.

Thank you. Andres, John, Chris, good morning. I wanted to maybe follow up on that talking point there, John, in terms of cost competitiveness of glass, appreciating that, you know, filling can't be switched overnight; these things take investment. Any thoughts, indoor visibility, either based on order patterns or anything like that that you can offer up in terms of more on the beer side, I'm thinking potential for substrate shift in any of your markets? In response to that, you know, potential, you know, internally you are planning for, if some of those orders don't necessarily come back your ability to kind of close those plants and the curtailments that you are talking about, are those sort of warm still the furnaces or have you taken any cold shots at this point?

So the competitiveness of glass versus other packaging, in particular aluminum cans, is back to pre-pandemic levels. During the last few years, that gap closed a little bit, and now it has gone back to where it was in 2019. You might have heard some growth in some regions or markets for aluminum cans. When we look at that, remember that we mentioned before that glass and aluminum cans play in different lanes related to the type of products that drive the growth in cans, which are products in which we are not present. It is important to highlight that. When we look at share, we haven't seen much share shift; it is minimal, really, and it is primarily driven by down trading or promotions, and we consider those to be temporary.

Yes. I think even on that last point, you can see that specifically in the Nielsen data. You look at the volume trends and consumer consumption trends, we can see what the overall trends are. We can see how that the products are being consumed in glass containers and aluminum cans, and everything is within a percent or so of each other. Given the level of variation we are seeing out there, it is all within a relevant range. So, yes, maybe there is a little bit of downshifting going on, but it is not a material difference given the scale of the change that we are seeing out there. On the furnace position you asked, we are taking those cold. For example, Waco is closing, so it will be a cold furnace and not operating anymore.

Okay. I'm appreciating that you guys operate in relatively different markets than some of your peers, and I'm more specifically thinking about Europe, but just there has been a lot of volatility in that market in the past four years. I'm just curious again, you pointed out elevated conflict in the Middle East and rising energy costs. Are you hearing anything from the competitive landscape that some of these smaller companies may not be able to react or have the financial wherewithal to withstand another shock to the system? And is that a consideration in some of the discussions that you are having with your customers? Also, there was a recent change of control for one of your peers in Europe. Again, to the extent you can comment anything in terms of competitive landscape that you would expect to be different there.

Yes, it is hard to read through all of the competition. They have to report on their own positions, but when we saw the energy prices in Europe, for example, go up last year, you saw the smaller competitors who typically don't have a sophisticated energy management position, going offline. If there is more escalation and more of an energy shock then I suspect there is exposure there for them. In the discussions with our customers, continuity of supply has always been important. We saw that last year in particular. We did quite well in that regard. We were able to be a solid supplier for our customers out there. As you take a look at it right now, we are taking, as I mentioned before, 20% curtailment out there to balance inventories. Clearly, you can research it on your own, but if you take a look at other public information, it seems to be a consistent practice across the marketplace.

Thank you. Our next question goes to Roger Schmitz of Bank of America. Roger, please go ahead. Your line is open.

How much of your inventory do your customers typically hold? Say in days or weeks? Where were we at the beginning of the year and where might we be at the end of the year in rough numbers?

Yes, so I think when we look at the stocking, the stocking is influenced not just by the inventories of customers, but also by distributors, wholesalers, retailers, and even consumers, depending on the supply chain we are talking about. For us, the way to look at this is short supply chains will recover faster, and we are starting to see some early signs of that in some markets, while long supply chains will take longer. The short supply chain should recover as we exit this quarter or normalize as we exit this quarter, and the long one as we exit the first quarter of 2024.

Yes, I would say you get such a wide range of different practices by different industries. For example, distributors in Beer North America hold a few weeks of inventory, but you take a look at that same wholesaler channel for wine and spirits; it is months, up to a year in certain different categories and things like that. So, it is hard to try to get an average in there. I think what we have been able to see is that the inventories at the retail level have started to trend down to maybe more historic levels. However, there are still some higher inventories in that wholesale channel area that need to be worked out. That supports the notion that there is probably some destocking left for the next few months, but overall, it is kind of working its way through the value chain.

We have no further questions, and I will hand back to Chris for any closing comments.

Thanks, Nadia. That concludes our earnings conference call. Please note that our fourth quarter and year-end call is currently scheduled for February 7th. And remember, make it a memorable moment by choosing safe, sustainable glass. Thank you.

Thank you. This now concludes today’s call. Thank you for joining and you may now disconnect your lines.