Hello and welcome to today's OIGlass full year and fourth quarter 2024 earnings conference call. My name is Bailey and I will be the moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I'd now like to pass the conference over to Chris Manuel, Vice President of Investor Relations. Please go ahead when you're ready.

Thank you, Bailey, and welcome everyone to the OI Glass full year and fourth quarter 2024 earnings call. Our discussion today will be led by our CEO, Gordon Hardy, and our CFO, John Hodrick. 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 Gordon, who will begin on slide three.

Thanks, Chris. Good morning, everyone, and thank you for your interest in OI Glass. Today, we will walk you through our 2024 performance, our recent market trends, and our strategic initiatives, which we believe will drive solid recovery this year. But first, I would like to take the opportunity to thank all my colleagues at OI across the world for their efforts in 2024 and for their agility and focus in driving the changes needed to turn OI around. 2024 was a challenging year for OI, a sluggish market demand, and macro conditions impacted our performance. Full-year adjusted earnings were 81 cents per share, slightly exceeding our most recent guidance range, but down from historically high performance in 2023. For the fourth quarter, we reported an adjusted loss of five cents per share compared to the adjusted earnings of 12 cents per share in the same period last year. These results reflected tough market conditions with sluggish demand, high in-home spirits inventories, especially in the U.S., overcapacity in certain European markets impacting net price. We also took aggressive inventory management actions in the second half of the year. While market conditions remain soft, demand has stabilized in recent months, and our fourth quarter costs in operating performance were better than anticipated, reflecting actions taken. This stabilization gives us confidence as we move forward. We are rapidly implementing our fit-to-win way of working, which is designed to improve our overall competitiveness by reducing our total cost of doing business, which will enable future sustainable growth we believe these actions and the way of operating will significantly improve future earnings and cash flow while our commercial outlook remains cautious until macro economic conditions improve and consumer confidence increases we expect solid earnings improvement in 2025 driven by the benefits of our strategic initiatives specifically we anticipate 2025 adjusted EPS to be in the range of 120 to 150 per share, representing a 50 to 85 percent increase from 2024 levels. Additionally, we expect free cash flow will be between 150 and 200 million, a substantial improvement from previous year's cash use. Now I will turn over to John to provide a review of the 2024 results thanks gordon and good morning everyone as mentioned 2024 was a

tough year that impacted most of our key performance measures as you can see on the chart yet it was also a year marked by critical decisions and decisive actions to set the business up for future performance improvement and value creation net sales were down from the prior year due to a two percent decline in selling prices and four percent lower sales volume reflecting the market factors Gordon discussed. Adjusted EBITDA was also lower given market headwinds, which led to additional temporary production curtailment in 2024 to align supply with softer demand and reduce our inventory levels in the second half of the year. The impact of curtailment was partially offset by lower corporate retained expense. Higher interest expense and tax rate also weighed on our full-year EPS. However, adjusted earnings of $0.81 per share was slightly higher than our most recent guidance thanks to better operating and cost performance later in the year. Free cash flow was a $128 million use of cash, reflecting lower earnings along with elevated restructuring, interest, and tax payments. However, free cash flow was slightly favorable to our guidance range due to good working capital management, despite CapEx being above guidance. We were able to accelerate some in-flight capital projects, what set the stage for substantially lower capex spending in 2025 which we review a bit later while debt remained fairly stable the leverage ratio increased at 3.9 times reflecting lower adjusted ebitda finally our economic spread was whack minus two percent versus plus two percent in 2023 which was in line with our previous communications and reflected softer earnings the appendix includes more information on 2024 trends. We expect most of our key performance measures to improve significantly in 2025 as we implement our strategic initiatives. Let's review our fourth quarter 2024 performance on page five. OI reported adjusted loss of five cents per share in the fourth quarter, down from adjusted earnings of 12 cents in the same period last year. Net price was a headwind, although much less so than in the third quarter, and global sales volume was about flat as anticipated. Commercial headwinds were mostly offset by lower operating and corporate costs, thanks to early benefits from our cost reduction efforts. Consistent with the prior year, we temporarily curtailed about 17% of capacity in the fourth quarter to align supply with lower demand and rebalanced inventories. Lower earnings also reflected an elevated tax rate due to a shift in regional earnings mix and minimum withholding tax requirements. Let's shift to segment profit as illustrated on the right. Segment operating profit in the Americas was $96 million compared to $93 million in the fourth quarter of 2023. Earnings benefited from a 5% growth in sales volume and lower operating costs, which was partially offset by unfavorable net price. Segment operating profit in Europe was $40 million, down from $75 million in the fourth quarter 2023 this decline was due to unfavorable net price a five percent decrease in sales volume while operating costs were modestly favorable now i'll turn it back to gordon who will discuss market conditions on page six thanks john as illustrated on the left of the slide our

shipment trend over the past few years reflected the broader business cycle that emerged during and after the pandemic for background we have shown consolidated volume with and without our strategic JVs. The chart on the right illustrates our quarterly shipment patterns over the past three years. Challenges began to surface in late 2022. However, after several quarters of unfavorable demand trends, shipments stabilized in the latter half of 2024. Notably, fourth quarter shipments remained flat compared to the previous year. During the fourth quarter, our shipments in the Americas increased by 5% with all markets showing year-over-year growth. The strongest rebound was in Mexico and in Brazil. Conversely, shipments in Europe declined by approximately 5%, with the beer category experiencing notable softness. Wine and spirits also remained soft in Southwest Europe. As we enter 2025, we continue to maintain a cautious commercial outlook. there is still some way to go to align consumer real income with the inflation experienced over the past few years and to see de-stocking moderate across the value chain to pre-covid levels particularly in the spirits category fortunately the year is starting off pretty well with january sales volumes up low single digit from the prior year in both europe and the americas coupled with disciplined cost management let's now turn to page seven while near-term performance is under pressure given sluggish market conditions we are rapidly implementing our fit to win priorities to boost performance as previously discussed this program will be implemented in two phases in phase a we are streamlining the organizational structure in phase b we are optimizing the supply chain both phases will boost competitiveness to allow us to access growth we expect phase a will generate savings in excess of 300 million over the next three years we are making rapid progress and have achieved 25 million of savings in the fourth quarter of 2024 and have increased our savings target to between 175 and 200 million in 2025. we are working with urgency during the fourth quarter activity primarily focused on reshaping sgna driving productivity and reducing excess inventory with regard to organizational restructuring we have made considerable progress delayering the structure shifting segment shifting accountability to local markets and reducing central operating costs completed actions should yield targeted savings of 100 million in 2025. After reducing SG&A as a percentage of sales from nine to eight last year, we should land between seven and seven and a half percent in 2025. More effort is underway as we aim to lower costs to less than five percent of sales on a run rate basis by 2026, representing an annual savings of 200 million compared to 2024. As part of our initial network optimization efforts, we've either completed or announced the closure of 7% of capacity, which should be finalized by mid-25. We continue to evaluate further opportunities to optimize the network and will provide an updated idea. As a result, we are increasing our targeted savings to between 75 and 100 million in 2025. With regard to reducing inventory, we cut inventory by 108 million in 2024 from the prior year levels this is there is more work to be done and we expect further inventory reductions by an additional 50 to 100 million in 2025. As we execute phase a we have commenced phase b during this next stage of activity we expect to generate value through total supply chain optimization by driving productivity across the fleet closing high cost operations and transferring profitable volume into our remaining network efforts will also include end-to-end supply chain efficiencies procurement productivity operational improvements and more disciplined salesforce management the cornerstone of phase b is our total organization effectiveness program which aims to optimize capacity utilization and productivity across the network. We have chosen Tawana, Virginia, to be our first plant to go live in North America. We are very pleased by the early progress that has been achieved there thus far. These new ways of working should deliver further savings and higher margins, helping us achieve our 2027 performance targets. They should also streamline how we work with customers and suppliers, helping both parts of the value chain to be more efficient. with regard to magma we continue to ramp up production at our first greenfield line in bowling green kentucky the achievement of key operating and financial milestones at this side over the course of 2025 will be critical as we chart the future of the magma program as we focus on these milestones at bowling green we have paused the development of generation three as with any capital project magma will be required to generate returns of at least whack plus two percent. We will provide more details on our long-term strategic plan next month at our investor day. Now let's move to page eight and review our guidance for 2025. While our commercial outlook remains cautious until macroeconomic conditions improve further and uncertainty around tariffs abates, we expect solid financial improvement in 2025 driven by the benefits of our strategic initiatives as previously noted we anticipate a 50 to 85 percent increase in adjusted eps driven by adjusted ebitda of 1.15 to 1.2 billion up from 1.1 billion in 2024 sales volume is expected to be flat or down slightly while we foresee a gradual recovery in the overall market we may intentionally exit some unprofitable business as we optimize our network and drive higher economic profit net price will likely be a headwind as flat gross price is more than offset by low single digit cost inflation while prices should rise slightly in the americas we anticipate pricing pressure in certain areas across europe due to lower demand and over capacity in certain markets costs should decrease across the system reflecting our strategic initiatives as well as higher production network utilization based on current commercial assumptions. However, please note that currency translation would be a clear headwind, assuming prevailing rates at the end of January, given a stronger dollar. Cash flow is expected to rebound to between 150 and 200 million, reflecting higher earnings and lower capex as previously discussed. The outlook does bed, higher restructuring costs totaling $120 million as we optimize our network and organization structure. More details are provided on the slide. Please note that this outlook does not include the potential impact of recently announced tariffs which remain uncertain at this early stage. Let's now turn to page 9. In conclusion, 2024 presented significant challenges for OI, but also significant opportunities to initiate a program of self-help to improve the competitive position and earnings power of the business over the next three years. Markets also began to stabilize in the second half of the year. Our fit to win initiative is already yielding very positive results and should drive substantial improvement in operational efficiencies and financial performance in 2025. We are implementing our value creation roadmap across three horizons which is illustrated on the right. We remain confident in our 2027 targets which include achieving at least 1.45 billion in sustainable EBITDA, free cash flow of at least five percent of revenue and an economic spread exceeding two percent of our cost of capital. Our commitment to optimizing our supply chain working with suppliers and customers enhancing productivity and driving total enterprise costs positions us well for future success we remain determined and dedicated to delivering value to our shareholders through disciplined execution of our business turnaround plan thank you for your continued support and confidence in oi we look forward to a promising 25 and to your attendance at our next investor day on march 14th as we further outline our roadmap to restore value in OI. We are now ready to take your questions.

Thank you. If you would like to ask a question on today's call, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, please press star followed by one. We politely request that you keep to one question and one follow-up before returning to the queue if you have any further questions. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question, and please do ensure that you are unmuted locally. Our first question today comes from the line of Ganshan Banjabi from Baird. Please go ahead. Your line is now open. Thank you. Good morning, everybody.

Gordon, can you just expand on the comment on signs of volume stability, which end markets have you started to see signs of early stability, if you will? And also, just given the controversy around alcohol and sort of the media crusade slash narrative. Just give us a sense as to how big alcohol is for you specifically, and as you kind of think about the various verticals within alcohol, what sort of trends are you seeing at this point?

Yeah. In terms of alcohol in the portfolio, Gansham, it's around 75% of the portfolio and about 25% in non-alcoholic beverages and food. In response to the first part of the question, it really is a story of two hemispheres.

So in the Americas, we see volume growth, particularly in Brazil and Mexico and in

Colombia. And we are starting to see early signs of growth in North America. Europe, we're seeing, as we pointed out, a 5% decline in sales. And we see choppy, soft consumer demand. And we also see the impact of consumption decline in China with exports down of things like higher-end wines and cognacs and spirits to China out of Europe. So really, it's a story of two hemispheres. is growth in the Americas and then, you know, sluggish to slight decline in Europe.

Got it. And then in terms of your confidence level as it relates to the pricing component in 2025, I know there's always uncertainty on European pricing, especially, you know, this part of the year. Just in terms of the broader, maybe some broader comments as it relates to the competitive backdrop in Europe, you know, this year versus over the last couple of years. Thank you.

Yeah. Again, it's a story of the two hemispheres. In the Americas, we see that growth coupled

with sort of tighter capacity utilization in all markets. And there's less, if no, pricing pressure and some pricing growth, actually. And then in Europe, particularly in Southwest

Europe, where there's overcapacity, we are seeing some price pressure. But if we look at where we are in the cycle and if we look at where we said we would be in in october i i think

we're we're landing just where we thought we would be yeah i can add a little bit of color on that

one too ganchum uh you know about 55 percent of our global portfolio is under long-term contracts with with price adjustment formulas that play out every year so that that area is pretty stable in that regard the other 45 percent is tends to be local business that gets renegotiated on an annual basis. And as you referenced, the key area is over in Europe, where there's a lot of smaller wineries and smaller customers that negotiate every year. We're about between 65% and 70% done in that effort over in Europe. So if you take a look at the whole overall portfolio, we're probably 80% to 90% landed on our prices for 2025. So that gives us the confidence building off of what Gordon says, that things are coming in line with what we expect and should be fairly stabilized except for the remaining negotiations, which are rather minor given the full portfolio.

Very helpful. Thank you. The next question today comes from the line of George Staffos from Bank of America. Please go ahead. Your line is now open.

Thanks so much. Hi, everybody. Good morning. Thanks for all the details. My question, How are you doing? I know it's impossible to peg with precision, but had there been a 25% tariff to the extent that you spoke with your customers and studied it, what effect would that have had on your volume during 2025? 25 again if you know let's say it stayed on for a quarter or two time it however you want relatedly in that question how volume dependent are your uh fit to win performance improvements you know i i guess in some regards they're going to be relatively unaffected but at some point volume affects everything so how much of a shock absorber do you have to get those savings to the bottom line relative to the volume outlook and then a quick follow-on

Yeah, well, thanks. Thanks for that, George. You know, as we said from the outset in July, you know, our fit to win program, you know, is not volume dependent. OK, and I think that thesis is still intact. The self-help levers that we have, you know, they're they're largely with costs that that we control and not dependent on on volume. And we assume for the plan that we would have flat volume through the whole plan to 2027.

But specifically with regard to tariffs, you know, there's a lot of uncertainty. And like everybody else, we've spent a lot of time thinking it over the last number of weeks and modelling things out. But if we look at our volume that crosses, we'll say, the Mexican border or Canadian border, it's about 2% of empty bottles, put it that way.

But then we also have exposure to customers that either export from Canada or export from, you know, from Mexico.

You can land in different places depending on what assumptions, because if there are declines in volumes into the U.S., you know, given consumer demand, that volume is going to be picked up by domestic beer.

And we have the largest network in the U.S., and therefore, you know, we would see positive exposure to growth in domestic brands, you know.

And we also expect, you know, talking to customers that, you know, should they have declines in one market,

they are actively going to chase volume in other markets and look to deepen their penetration in markets in Latin America and in Europe, for example.

So we, you know, we're talking probably exposure somewhere between, you know, 10 and 15 million number in that range, which, you know, by accelerating some of our initiatives, we would expect to cover. But there's a lot of uncertainty, as one could expect, and we have a number of scenarios planned, but that's kind of where we landed.

The only thing I would add to that one is the only tariff, George, that we do know about right now is China, and there's about 1.4 million tons of empty glass that comes into the United States from export markets. The majority does come in from China, and we should have an advantage on that piece of the pie, and we'll see where the other parts come in play. Okay, thanks, Sean.

My follow-on is just a point of clarification. If we go to slide seven and we look at the network optimization savings for 25 and it says 75 to 100 million dollars and then i look at the right hand bullet the lower uh of the two in that section it says evaluating for the opportunity yield total saving the 75 to 100 million is that basically addressing the 75 to 100 or that means there could be an incremental 75 to 100 million from you know efforts you discuss evaluate and

talk to us about in in march thank you yeah george i can clarify that one that the act the first first bullet point the actions that we've done the seven percent is about 75 million dollars of benefit in 2025. we would anticipate potential actions bringing the cumulative number to 75 to 100 as we show kind of in the middle column those two numbers are not additive okay got it

very good thank you so much thank you our next question today comes from the line of anthony petromari from city please go ahead your line is now open uh good morning um

one of the large can makers i think recently suggested that glass to metal substitution had maybe kind of run its course in north american beer but maybe not in europe and i think the can makers have had pretty strong volumes in Europe. I'm just wondering, as you look across your portfolio, are there regions or categories where substrate substitution is either, you know, a meaningful headwind or tailwind in 2025? And just how you think about that dynamic?

Yeah, you know, from the outset, I think we've laid out that we need to reframe, you know, when in our own business, you know, competition, and it's not just glass, but we, we, you know, have a clear drive to get much more competitive with, with cans. And, you know, from the analysis that we've done over, over the years, there's a clear sort of pattern that when

glass gets to within about 15% of the cost of cans, then you see a quite measurable flow from,

from cans back into glass and you know history is a great teacher and um i i think if you look

back at the history of of oi in in the u.s and cans probably did not frame that competition sufficiently and and focus on really you know getting the cost base and the cost competitiveness right um so you know are armed with that knowledge you know where we're taking the business forward would have you to getting competitive with cans in any market in which we we compete with with

cans yeah um so i think that's our that's our approach um um you know it's it's when you look

at food and beverage packaging we'll say over the last 10 years there's been some sort of solid growth but most of that growth has gone to cans and most of it has gone to cans because glass and particularly oil glass hasn't been competitive enough and that's that's part of the rationale and the reason why we're embarking on the course we're embarking to get competitive not just with glass but to get competitive with cans and to offer our customers again uh the opportunity to put to uh to put um you know glass back in their portfolios uh in a greater proportion uh one thing i'll flag up is is um just before christmas you know we we uh we had the announcement that glass was now available for RTDs in 12 ounces and that had not been the case for well over 20 years and that opens up opportunities for glass volume growth in a category that's growing in mid-teen year on year and has been for a number of years and so we see opportunities there for glass to penetrate RTDs in a way it never did over the last 20 years. So I think where we're focused on is getting competitive, not just with other glass competitors, but getting more competitive with cans overall. Okay, that's helpful. I'll turn it over. Thank you. The next

question today comes from the line of Joshua Spector from UBS. Please go ahead. Your line is

now open. Yeah, hi. Good morning. I wanted to ask about your plan for your energy contracts or at least any update you can give as those start to come due in 2026, just as we're trying to think about the bridging items to your fit to win plan, what's baked in for an assumption there in terms of that headwind? And are you doing anything now to potentially position yourself to offset that?

Yeah, so I can give you, I can, Josh, I can touch base on that to start with. You know, obviously we don't want to get into 26 and out periods. I mean, we just gave guidance for 25, But I want to focus on, you know, what we are saying for 2027. You know, we have looked at the outlook for our business commercially, procurement energy, as well as Fit to Win and, you know, the initiatives we're doing there. That has landed the $1.45 billion and the other numbers that Gordon referenced earlier. So as we look to the future, you know, we have already identified over $300 million of benefits in Fit to Win. We're already $175 to $200 million of that to be realized in 2025 alone. We have all of Phase B in front of us. We'll lay that out during I-Day at next month at that event. And so that will provide additional benefits as we look to de-risking the future period and some of the commercial activities of the business that could include energy and other areas. So we'll lay that all out next month with the moving pieces, but that's all comprehended in the outlook that we have for that 2027 period.

And just as a build on that, you know, from the outset we laid out that Fit to Win is an end-to-end review of the business, and energy is included in that review. I think in the past we probably had a fragmented approach to energy, you know, either by region or by sub-region or even down to plant level. We now have an enterprise-wide program running where we're looking at energy across the business in a very standard way with a standard program for each plant now and how to reduce energy, backed up by state-of-the-art software We're going into all of the plants to track energy usage throughout the plants. And that hasn't been done before in the business. And we expect to yield usage savings from that. And that's part of our plan to offset any headwind that might arise as we move forward. I think also just kind of a final view on that. As we reconfigure the network, you know, going forward, you know, we'll have lower energy costs.

Okay, that makes sense. I'll follow up with you guys on that in a month or so. One question on 25 is just with your working capital guidance and your free cash flow, you said about flat, I think earlier in your slide, you said about a $50 to $100 million reduction in inventory. So I guess are there offsets and receivables or payables, or is that working capital assumption in the bridge for free cash flow a bit conservative?

Yeah, so one thing I would say, yeah, we're going to get, you know, $50 to $100 million of favorable working capital through the inventory reduction. But the same token, we are taking out and reducing the scope of our operating network, which, you know, it drives the efficiencies of the operations, but it also does result in a smaller AP balance because you just have a smaller population of plants. And so there's some effect of that. Now, that's kind of a one-time step down as you move those through. It's not indicative of working capital management. It's just pruning down to a smaller, more efficient base. So we're looking at that as the balancing act. I would like to think that we'll be able to do better than that with some additional decisions that we can make over the course of the year, but we'll update you as the year goes by.

Yeah. Just as an addition to that, that whole working capital inventory management piece is a focus of the Fit to Win program. You know, we landed sort of, you know, around the mid 50s day mark at the end of the year. And yet we have parts of our business that are down below 30. So, and you look at the shape of those businesses, the, you know, the customer spreads, you know, the footprint, you know, logistics footprint around those plants and, you know, there's no particular reason why other plants can't get there. So, that really is a massive focus for us in managing the one element of the efficiency of the business going forward to, you know, to push more cash out of the business.

Got it. Thank you.

The next question today comes from the line of Aaron Vischer-Nathan from RBC. Please go ahead. Your line is now open.

Great. Thanks for taking my question. Congrats on the progress thus far in the transformation. So I guess just on that point, you know, I guess you noted still sluggish volumes across many of the categories. So I think you said that the program isn't really volume dependent. but what if volumes are actually negative in 25? Do you still expect to realize the full extent of your fit to win benefits? And I guess I'm specifically thinking about would you have to take swifter action on some of the furnace closures? And maybe you can just give your thoughts on some of those items. Thanks. Yeah. You know, as we've mentioned,

Our fit to win program is not volume dependent as such.

Our biggest opportunity is to take the volume we have and make it more profitable and to get higher returns on the capital we have currently invested. We see that as the path over the next two to three years to boost the value of the business. We know we have volume that is currently challenged on an EP level. And we are working through what we need to do on our side to make that more profitable. And if after those efforts, it's not profitable and we can't get to an agreement with a customer around the price increase, then we will be taking that volume out.

And if there's capacity to come out with it, we will be doing that. So our whole focus is on really getting much better returns on the capital that we have currently in place by boosting the profitability of the volume we have. We're not actively chasing volume for volume's sake.

So this really is about boosting the returns on the capital we invested by making the volume we currently have more profitable. And we see a line of sight to that this year. So and it may well be, you know, as we take out volume, we may have slightly less volume, you know, at the end of the year. But that would be because of deliberate decision making around economic profit.

Okay, that's helpful. So it sounds like it's mostly on the cost side. But again, just going back to one of your earlier comments about oversupply in certain European countries, It sounds like, you know, there's a possibility that some of those you would have some some price deterioration. So, again, in a similar vein, you know, to the extent that you can take costs out, would you, you know, how do you expect to combat price competition and the possibility of rolling back some of that that pricing that you were able to achieve in the 22, 22?

three period? Yeah, look, I think the equation in terms of how we look at the business is, is revenue minus our targets EBIT equals our cost base, right? So we've got a number to deliver, and, you know, we'll obviously look to manage our margins. But, you know, if there is excessive,

you know price activity um then we we'll adjust the cost base yeah so um as as john said you know

we're we're 80 to 90 percent through the the season you know a lot of our uh the majority of our our contracts or our volume is contracted for the year and you know we are where we thought we would be in um in in october uh you know there may be some skirmishing throughout the year but But, you know, we'll manage that through effective cost management.

Yeah, the only thing I would add on that.

Sure.

Yeah, one thing I'd add on, keep in mind, we're looking at, after a number of years of positive price improvement, you know, earlier in the decade, you know, we're looking at flat prices this year on an absolute basis. Up a little bit in America is down in Europe with the pressure point. Keep in mind the negative net price is because we're seeing inflation starting to normalize, assuming that in this marketplace. And with more than half of our business being under long-term contracts, there's a timing issue there of recapturing that inflation, which probably becomes more of a 2020-26 element, right? So part of the negative price that you're seeing in our outlook is a little bit of a timing, at least on the contracted business. And so keep that in mind as you look at the texture of the outlook.

Okay, that's helpful. and just lastly if i may i'm just on the capex so it's nice to see yeah that that come down a little bit um what's kind of the longer term capex thought i know you're you're uh maybe moderating your magma spend but um what makes up the capex and i guess what's the longer term target thanks

just to close out on as we go forward you know productivity is the you know as as we drive you know, further productivity through the business, we would expect, you know, pricing to cover inflation. Yeah. And then we will price for value in terms of, that really is how we're thinking about the model as we go forward. So really accelerate productivity year on year to eat inflation and innovation and bring extra services to...

Okay, thanks. I'll turn it over.

Thank you. Our next question today comes from the line of Gabe Hutchie from Wells Fargo. Please go ahead. Your line is now open.

Gordon, John. Chris, good morning. I appreciate it's a little bit of a moving target with plant closures, meaning you're not able to realize the fixed cost savings and improved overhead absorption. But I think you guys were kind of carrying 170, maybe $180 million of under absorbed fixed overhead in slide eight you call out i think 50 million of higher production but you're also talking about obviously still whittling down some inventory so i'm just curious maybe your best estimate of how much under absorbed fixed overhead or production is is still stuck in the system um that could be unlocked i guess in 26 27 yeah sure if you're a better man

Yeah, I can touch base on that one. And let me kind of just get the bigger picture here. So we had about 30 curtailment in 2024. So the absolute level of fixed cost absorption was about $250 million. Okay. So, you know, that ramped up over a two year period of time, we had about $70 million, you know, impact calendar year in 2023, and about $180 million impact in 2024 for that cumulative of 250. So as we move forward into 2025, we expect that to be halved. Okay, so go from 250 down to about $125 million in the calendar year. We expect that to improve. The biggest driver is because we're taking out, as we were referred to before, $75 to $100 million from permanent closures and something like $25 to $50 million through requiring less inventory management as we go through 2025 itself so so we expect to have substantial improvement in that and keep in mind since this is activity over the course of the year really the exit run rate in 2025 is more like 75 million dollars of glory I mean excess capacity as we continue to work things down and And as we referenced in our prepared comments, we continue to look at opportunities to make further adjustments to be able to minimize and ideally fully reduce in due time that overhead absorption there. Hopefully that gives you the context you're looking for.

Okay. And it's one of two things, right? It's either volumes start to recover or they're more permanent closures, which I know you guys have alluded to.

Yeah, correct. And right now we're working off of our assumption of kind of flattish or we may ultimately exit some business. So we're not, we're being, you know, cautious on the commercial side. So, you know, we continue to look at the capacity optimization. And keep in mind, you know, as Gordon referenced, you know, the phase B of what we're doing on Fit to Win is much more through our total organization effectiveness of optimizing our capacity, which will allow us to get more capacity out of our current network that will allow further network optimization, not to confuse the two of those, but they do kind of go hand in hand over time as we look to, to optimize the network and reduce fixed costs.

Yep. Okay. I wanted to kind of go to, to phase B a little bit. You're calling out again in slide eight, 120 to 150 million of cash restructuring. I guess as you, as you evaluate phase b is that equally as cash intensive um or would some of those improvements be more maybe system dependent that you have to um install new systems or is it process oriented that is less capital intensive and i guess maybe even on phase a as we look into 26 and think about cash restructuring knowing what we know today um you know would we expect kind of at that midpoint restructuring spend of $135 million, where would it go in 26?

Yeah, what I would say is we probably will have a fair amount of restructuring activity going on in 25 and some level into 26. Okay, it will carry over there. I mean, you know, at $120 to $150 million in 2025, that's covering the Phase A activities in the beginning of some of the Phase B, so it could shift around a little bit. But then as you go into 2026, it will be mostly the phase, the phase B activity. It'll probably be peak restructuring in 2025.

And then shifting gears a little bit, aluminum is already up. Aluminum premiums have moved quite a bit higher in anticipation of some of these trade discrepancies. And then obviously the Ray I is depreciated against the dollar. So does that influence or impact how you guys are thinking about the summer sell season for 25-26? I appreciate it's, you know, we're in February right now, but I think those customers kind of tend to hedge out 9 to 12 months. So maybe that presents a better opportunity in Brazil.

Yeah, I think overall anything that, you know, closes the gap between glass and cans is helpful to us. You know, as we said, you know, when glass gets within, and particularly our glass gets to cans, we see a growth in glass volume. But our target of getting within 15% excludes any movement in aluminium because it's something we can't control. So our focus is on the elements that we control and driving that competitiveness. And, you know, so anything that closes that gap, obviously, we would see as advantageous glass.

Got it. Thank you.

The next question today comes from the line of Nico Pacini from Tourist Securities. Please go ahead. Your line is now open.

Yeah, hi, guys. Thanks for taking my questions. I guess just to start off, it looks like bourbon and whiskey, they're impaired. They've been weak for a while, and that might continue. And one of your customers there recently announced a restructuring and workforce action. I'm just wondering if you can comment on Bowling Green and how that's operating, given it's right in the middle of bourbon country, and if there's any concerns about filling the line or maybe reorienting mix going forward.

Niko, can you repeat the first part of that question? It was a little garbled on our end.

Sorry about that. It looks like whiskey and bourbon could be impaired for a while longer, and one of your customers announced some layoffs and restructuring. So can you comment on Bowling Green and how that plant's operating, and if there's any concerns filling the line?

Yeah, I'll take that. So with regard to Bowling Green, as we said, we've got two objectives there this year. One is to have the plant operate at industrial scale efficiently and then to fit it with the right mix. We know the core magma technology is working, so it's about ramp-up and fitting with the right mix of volume. We have a book of business that's building, and it's building at the premium and super premium end of the market. and as we look forward this year we we we see opportunities to put the right mix in place remember this this plant is you know it's actually is somewhere around 30 to 40 thousand at full tilt so it's not as if you know it's a it's a it's a hundred thousand ton kind of furnace to to fail so you know where where that's what we're focused on and and that's what the the commercial teams

of driving too thank you um and i i just going back to the question we've uh asked before on the difference between you know your your margins in europe and your competitors over there there's there's maybe like a six or seven percent difference on average um i wonder gordon now that you've been in the seat for nine months uh what you think is driving that and if you have with fit to win an idea of how much of that differential could be made up

Yeah, you know, it's largely cost. You know, many have a smaller footprint and probably our main competitor there has a smaller footprint, but roughly the same volume. So they're there. And yes, you know, fit to win is designed to get us, you know, as competitive and probably more competitive. and that's what we're setting out to achieve. And, you know, that's less about margins and mix of business, I would say. And in many cases, we may actually have a better mix. When we look, we probably have more premium business than any other player, so designed to address the reality that our cost base has been too high. And so we intend to close that cap.

I think we're ready for the next question.

Thank you. Our next question today comes from the line of George Staffos from Bank of America. Please go ahead. Your line is now open.

Thanks. Hi, guys. Thanks for taking the follow-on. I want to take a bit of a different tact. So we fully appreciate that Fit to Win is designed to correct what you see as gaps between your performance, your costs, versus your peers, both glass and elsewhere and rigid. When you've done the work on the other end, talking to your customers about their field work, what you've done to study this, and I recognize you're going to be biased, you should be, positively towards glass, but what are you finding in terms of customers' willingness to use glass based on what the consumer is telling them because you can become very competitive improve your margins but if the consumer has moved away or your customers moved away from it in terms of their mix it will be less helpful so what are you finding on the field in marketing uh in terms of that that outlook right now thank you guys good luck in the quarter yeah

thanks thanks so you know i i spend a lot of time out with with customers and i've just come back from a from an extensive customer trip I mean the the one thing is clear and we laid this out next month is is the power of glass you know in in the in the minds and in the and in the taste of consumers you know glass is the preferred mode of packaging you know consumers consistently say across any market that the product tastes better from glass and nothing can be you know the whole the holding of the package you know the the glass package and many of our customers have said to us look we we actually think you know there's not enough glass in our and if you if you see the you know the rising concerns around plastics microplastics, you know, we're seeing a fairly significant switch in food brands into glass. And, in fact, across all our markets, I'd say, you know, food is the standout. And seeing some quite significant growth in food, particularly in Latin America, where food is, you know, in the last quarter, for example, was up 15%. So, from a consumer point of view, from a health point of view, and from a portfolio point of view, because there tends to, you know, with glass, you know, more opportunity to strengthen the equity of brands. But what we are hearing is glass needs to get more competitive with cans, right? And that's what we're doing. We're addressing that. the other thing I think that you know gives us confidence that when you talk to them both fit to win and and we explained that also getting fit or in their business and and help them get more efficient help them grow have been differentiated and on and help them get more sustainable and there are the four elements we focus on with customers and that you look at their plans over the next you know three to four years they all have growth plans and it all includes I was in Latin America recently, and one of our largest customers was talking to us about their plans for their portfolio and their glass demand looking anywhere between, you know, 10 and 25% increases depending on the market. So the growth is there, George, and this has been a foundation part of the hypothesis. The growth is there. We need to be competitive to access all of it. I'm not concerned about consumers and consumers. their attitudes to glass quite the opposite that that reinforces our our hypothesis and reinforces our um our drive to you know make glass more competitive so we can get it into the hands of more people

look from some of the work that we've done on new products you've actually seen it pick up in glass as well so uh we would concur i'm sorry john go

ahead no no finish your thought i i i just wanted to correct it some bum information to gordon or 62 2% alcohol-related, and the balance is non-alcoholic beverages and food, I think, earlier referenced 75%, and actually, maybe a little bit of this conversation, we've actually seen a shift in the non-alcoholic categories and things like that, and GLAS has done well in a number of these categories, too, so I think it feeds a little bit into the discussion.

Yeah, and we see the, you know, across all growing, either non-alcoholic beers, particularly in Europe or in the Americas, and particularly North America, water.

Thank you. This concludes today's question and answer session. I'd like to pass back over to Chris Manuel for any closing remarks.

Thank you, Bailey, for being so nimble with us. And that concludes our earnings call. Please note that our first quarter 2025 earnings call is currently scheduled for Wednesday, April 30th. Additionally, as we noted earlier, please mark your calendars. We'd love to see you at our I-Day on March 14th at the New York Stock Exchange. And in conclusion, remember to make it a memorable moment by choosing safe, healthy, sustainable glass. Thank you.

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