Hello everyone and thank you for joining the OIGlass second quarter 2025 earnings conference call. My name is Lucy and I'll be coordinating your call today. During the presentation you can register a question by pressing star followed by one on your telephone keypad. If you change your mind please press star followed by two. We currently ask all participants to limit their questions to one main and one follow-up and re-queue for any further questions. It is now my pleasure to hand over to your host Chris Manuel, Vice President of Investor Relations to begin. please go ahead.

Thank you, Lucy, and welcome everyone to the OIGLASS Second Quarter 2025 earnings conference call. Our discussion today will be led by Gordon Hardy, our CEO, and John Hodrick, our CFO. 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'd like to turn the call over to Gordon who will start in slide three.

Good morning everyone and thank you for your interest in OI Glass. Today we will walk you through our second quarter performance, key market dynamics and our outlook for the remainder of the year. Let me begin by expressing my thanks to all our colleagues across OI. Your dedication, agility and focus are instrumental in driving the transformation we are undertaking. Last night we reported second quarter adjusted earnings of 53 cents per share, exceeding our plans and outperforming the same period last year. This result reflects the meaningful progress we are making towards a leaner and more competitive company. We continue to navigate a complex environment, including softer consumer demand in certain markets and many macro uncertainties. While overall second quarter shipments declined approximately 3%, performance varied by region as volumes increased in the Americas but declined in Europe. On a year-to-date basis, shipments were up nearly 1% and we continue to expect full year 2025 volumes will be stable with last year. Our Fit to Win program is delivering strong results. We achieved $84 million in savings this quarter, bringing our first half total to $145 million, well on track to meet or exceed our $250 million target for 2025. Fit to Win is foundational to renewed competitiveness by significantly reducing total enterprise costs to improve performance and enable future growth. We've had a strong start to the year in difficult market conditions and are effectively managing the factors within our control. As a result, we are raising our full year guidance and now expect adjusted earnings to increase between 60% and 90% compared to 2024. John will provide more detail on our outlook and quarterly performance shortly. As announced last evening, following a comprehensive review we have made the financially prudent decision to hold for the magma development and operations while the earlier stages develop meaningful technical advancement we have concluded the platform does not have the pathway to the operational or financial return requirements as most recently detailed at our March investor day through our best at both operations strategy as As outlined at our I-Day, we expect to drive significantly higher premium output at lower operating cost and capital intensity than MAGMA would have realized in the coming years. This decision aligns on our focus on driving competitiveness and economic profit. Accordingly, we intend to reconfigure our Bowling Green facility into a best cost premium focused operation. We are confident this is the right path forward for our business, our customers, and our shareholders. Let's now turn to page four to review recent market trends. Overall, our shipments for the first half of 2025 were up nearly 1% compared to the prior year. Volumes increased mid-single digits in the first quarter, but declined approximately 3% in the second quarter. Lower glass shipments are consistent with software consumer offtake which is down low to mid single digits in mainly European markets amid ongoing macroeconomic uncertainty. On seasonal weather this spring and summer across the northern hemisphere further impacted consumption patterns. Finally we have started to exit some business with unfavorable economic profit consistent with our disciplined approach. Despite recent softness we have also had some notable wins as we leveraged Fit2Win to drive future profitable growth. Likewise, we have seen a 35% increase in our new product development pipeline as brand owners look to spur growth. As previously noted, we are navigating mixed market conditions. Second quarter shipments increased in the Americas, but softened in Europe. In the Americas, shipments were up approximately 4% in both the second quarter and year-to-date, driven by solid rebound in beer and spirits categories. Notably, both Andean and North American regions outperformed the segment average, with all geographies reporting positive growth despite continued soft consumption patterns, especially in the U.S. As we embed fit to win, we see our competitiveness improving in key markets, especially in North America. In Europe, volumes were down 3% year-to-date and down nearly 9% in the second quarter, which we attribute to the following factors. About 3 percentage points were due to a supplier-related delay at a major plant reconfiguration project in Europe, which is now ramping up well. We estimate another 3% of the decline was timing-related as increased beer and widened sales in the first quarter likely in response to trade policy uncertainty negatively impacted q2 shipments and finally the balance of the decline pertained to macroeconomic uncertainty and unfavorable weather conditions which is in line or favorable to broader consumption trends despite these challenges there were bright spots as non-alcoholic beverages and food categories hosted low single digit growth to align supply with demand and manage inventory levels temporary production containments remain in place across europe with a continuing drag on our operating costs there we remain engaged in consultations with european and local works councils on long-term network optimization initiatives aimed at addressing excess capacity in the fleet. These actions, when finalized, are expected to strengthen our competitive position and support sustainable, profitable growth in Europe. In July, our global shipments were down mid-single digits compared to July of last year, reflecting continued soft conditions plus the re-phasing of some specific customer order activity and the delayed ramp-up of a reconfiguration project at a European plan. We continue to expect full year 2025 volumes to be in line with the prior year as shipment levels are projected to be stable across both the Americas and Europe. This outlook holds despite some intra-quarter fluctuations which are primarily driven by comparisons to prior year performance. Let's now turn to page five and review the progress of our fit to win program which is focused on significantly reducing total enterprise costs by up while optimizing our network and value chain to drive competitiveness and growth in the second quarter we delivered 84 million in savings bringing our first half total to 145 million dollars surpassing our initial plans with momentum building we remain confident in achieving our 2025 savings target of at least 250 million and at least 650 million cumulatively by 2027. Phase A centers on reshaping our SG&A structure and initial network optimization actions and we remain on track to meet both our one-year and three-year goals. We have completed actions to secure our 100 million SG&A savings target for 2025 with more opportunity underway way to drive additional savings next year. Importantly, our network optimization efforts continue to progress, including the recently announced actions in the Americas. We continue to expect initial network optimization activities will be completed by mid-2026. Phase B focuses on transforming costs across the value chain, including the rollout of our total organization effectiveness program to optimize system-wide capacity. Following a successful pilot at the Tawana plant, the first wave of 15 facilities is nearing completion of the same rigorous process. Results are meeting or exceeding our expectations. Additionally, our cost transformation team is making meaningful progress in procurement and energy reduction initiatives. These efforts are contributing significantly to our overall savings and enhancing operational resilience. We are making significant progress on the end-to-end value chain efficiencies with a number of significant agreements made with strategic suppliers to improve productivity and competitiveness over the next three years in summary momentum is building and initial fit to win benefits have exceeded our expectations we are on track to meet or exceed our 2025 objectives and unlock further upside in the years ahead now i will turn it over to john who will walk you through the second quarter performance and updated 2025 outlook beginning on page six.

Thanks, Gordon, and good morning, everyone. OI reported second quarter adjusted earnings of 53 cents per share, exceeding both our expectations and prior year results. The performance was primarily driven by strong contributions from our fit-to-win program and improved competitiveness. As shown on the left, adjusted earnings surpassed last year's figures. We faced expected headwinds from lower net price, lower sales volumes, and temporary production curtailments. Yet, these factors were more than offset by substantial fit-to-win savings and favorable below-the-line items, including a moderately better-than-expected tax rate supported by favorable regional earnings mix. Looking to the right, segment operating profit increased in the Americas but declined in Europe. In the Americas, segment operating profit improved significantly reflecting notably lower costs due to fit to win benefits higher shipments and fairly stable net price amid tight capacity utilization in europe segment operating profit declined due to lower net price and softer sales volumes operating costs rose slightly due to the impact of ongoing production curtailments but these were largely offset by fit to win savings we expect performance in the region to improve progressively as our downtime decreases, network optimization actions deliver a better cost position, and our cost competitiveness improves. As part of our focus on economic profit, we've made meaningful progress in reducing inventories across the enterprise, down approximately $160 million compared to the same period last year. We remain on track to meet or potentially beat our year in 2025 target of fewer than 50 days of inventory supply. In summary, second quarter results exceeded both our plans and prior year levels, positioning us well for continued success through the rest of 2025. Now let's turn to page 7 to review our business outlook. Given our strong year-to-date performance and momentum of the Fit to Win program, we have raised our full year 2025 guidance. We now expect adjusted earnings to range between $1.30 and $1.55 per share, representing a 60% to 90% improvement over fiscal year 2024. We also anticipate about a $300 million year-over-year improvement in free cash flow, driven by stronger operating results, reduced capital expenditures, and lower inventories, despite $140 to $150 million in cash restructuring costs. Additionally, we've refined our expectations for the quarterly cadence of earnings throughout the year. As you can see, we expect the third quarter will be generally consistent with trends noted in the first half of the year. Fourth quarter will be softer due to the typical seasonality of our business and the tax impact of lower earnings levels. Please note that our outlook may not fully account for potential volatility stemming from evolving global trade policies and other external factors. For more details, please refer to the appendix, which outlines the assumptions behind our updated guidance. Despite a soft macro environment, we are executing well and our self-help efforts are exceeding original expectations. As such, we are increasing our full-year earnings guidance. Now I'll turn it back to Gordon to conclude on page 8.

Thanks, John. In closing, OI is executing well and delivered a strong first half of 2025. Despite mixed market conditions and sluggish demand, we remain sharply focused on what we can control and are making excellent progress on all self-help fronts we expect a meaningful rebound in performance adjusted earnings and cash flow this year and have increased our full year guidance accordingly executing fit to win and our long-term value creation roadmap as illustrated on the right and discussed in detail during our march investor day positions us well for the future importantly these initiatives are largely within our control as we continue to execute our strategy we are confident in our ability to meet our goals including radically reducing the cost base, building a more premium business portfolio and driving economic profit. This should deliver strong financial results including sustainably higher EBITDA and create long-term value for our shareholders. Thank you for your attention, we look forward to your questions.

If you ask a question please press star followed by one on your telephone keypad now. If you change your mind please press star followed by two. When preparing to ask your question please ensure your device is unmuted locally we kindly ask all participants to limit their questions to one main and one follow-up question and re-queue for any further questions first comes from Gansham Panjabi of Baird your line is now open please go ahead hey guys good morning congrats on all the uh cost out progress um i guess you know first off in In terms of your volume assumptions for 2025, how does that break out by segment?

I guess I'm just curious as to your confidence as it relates to being able to hit flat volumes and just given the uncertainty, et cetera, at this point.

I can kick off on that one, Gansham. Overall, if we take a look at our segments, as we indicated, we believe both Europe and the Americas will be generally stable year over year. so in the first half of the year you saw a stronger americas and a little bit softer europe we expect that to maybe kind of invert in the back half of the year but it's only due to comps overall what we're seeing over the course of the year is a generally stable environment with maybe the exceptions of some disruption due to the capital project that gordon talked about as well as maybe some fluctuation we saw between first and second quarter associated with tariff concerns or uncertainties and trying to buy ahead other than that if you take out the noise of kind of prior year comps and things like that you're looking at a pretty stable environment okay got

it and then uh my second question as relates to the bowling green plant um what exactly is that going to be pivoted towards what is the timeline associated with that and what is the uh cash cost just rough cash cost as relates to making that uh transition at that point yeah so um That facility is focused really on premium opportunities in spirits in the U.S.

And we still see a big opportunity in that category, in those segments of the market. So, you know, Magnum was conceived, you know, to deliver against premium. And when we look at our best at both strategy and we look at the cost we feel we would need to be at to really grow significantly our premium volume and the capital intensity we required to deliver the target economic profit, that was the right call for us. and we see a path to being able to reconfigure that plan to get lower operational costs lower capital intensity uh and to to really grow the premium business in in the us um we're we're we're working on that reconfiguration as we speak and you know at the next earnings call we'll give

a further update on that ganchum but um that that's our focus for for that facility right now You know, on the cost side, Gansham, that the facility does have invested capital around the superstructure, around legacy assets and things like that, which obviously can be utilized in this. But I think it's a little early to be able to give any specifics there.

Yeah. But, Gansham, you know, as we've laid out in the past, you know, every project we undertake will have to be able to deliver a WAC plus two minimum return for us going forward.

And one final point, I want to reiterate that the outlook that we provided during I-Day about the outlook for the business, as well as the capital investment in the business still holds, we're going to fit this in within that. We're not going to change at this point in time our CapEx outlook for the business.

Okay, perfect. Thanks so much.

The next question comes from Aaron Fiswanathan of RBC. Your line is now open. Please go ahead.

Thank you for taking my question. Just I wanted to ask about the fit to win benefits. So you were able to accelerate those from 61 to 84 million in Q2. Looks like you are guiding to 250 million plus now and then 650 million plus in long term. So maybe you can just frame the upside opportunity there. Are you guys finding more as you peel back the layers a little bit more? And would those be mainly in SG&A? And I guess related to this point, the corporate costs were also a little bit lower this quarter at, I think, 25. Is that the new level of corporate that we should kind of consider, or is there something unusual in there? Is that really reflective of those lower SG&A costs? Thanks.

Yeah. Well, I'll take the first part of that question, Aaron. You know, as we've laid out over the last year or so, you know, Fit2Win is designed to review the cost base of the business across the entire value chain, you know, from the back end of our suppliers right through to, you know, our customers' warehouse. And we've been systematically working through the value chain and, you know, peeling back, you know, where all the costs are, where the waste is, where the inefficiencies, what's driving that. And at every part of the chain, as we suspected and as our thesis held, there's opportunities to get more efficient and to strip out ways. That means us working differently with suppliers and with customers, and likewise, they're changing some of the ways we work. But we're making tremendous progress on that and have already signed a number of agreements with suppliers that drive much greater productivity and competitiveness for us. Within our own footprint, we shared the results of Tawana on previous calls and made great progress there. And we're now in the first wave of 15 plants being rolled out. That's about 60, 65% through that program for those plants. um and we're we're on or exceeding the targets we had set so so very happy with with how that is going and then as we sit with customers and we look for ways to improve you know order forecast accuracy uh logistics warehousing again working through all of that and and finding opportunities So as we set out at the beginning, this is an end to end review of the cost base of the business and stripping out the waste and inefficiencies and then reinvesting some of that back into the business or using that to, you know, to be more competitive in the market, which, you know, we're already seeing signs of, you know, particularly in the Americas.

you know to build on that and to answer your other corporate question um arun uh if you look at page five the out performance that we're seeing really is in the phase b area as to gordon's point um you know we're already above our full year target for that area and and just you know building off that and and taking out those productivity and efficiency opportunities and actually jumping ahead of the actual full rollout of of uh you know the the the toe project is driving the upside opportunities that we're seeing across the business and to that the corporate levels we would expect to be a reasonable range is 100 to 120 a million dollar a year is is a logical place for the corporate cost great thanks and then if i could just ask a quick follow-up so then

uh as you uh look out into i guess the second half into next year again you're already at 145 for the first half so uh should we also assume that uh fit to win benefits should continue to grow or is the second half kind of uh have you already kind of gotten what you uh you know more than 50 of the year's benefits or or do you still see uh continued uh sequential growth in those benefits i i think we'll see uh sequential growth but keep in mind in the fourth quarter we will start to lap the early phases of the activities and as you can see on the chart on page five we at 25 million dollars of benefits already in the in in the fourth quarter so while that the core

activity continues to drive momentum there'll be a little bit of a comp element to the fourth quarter yeah I would say culturally as well Arun you know we are relentless on waste and inefficiency coming out of the business so even if we hit a number um there's no satisfaction in that um we we drive on as long as there's waste and efficiency, you know, to be had where we're going after it.

Great. Thanks a lot.

The next question comes from Mike Roxland of Truist Securities. Your line is now open. Please go ahead.

Thank you, Gordon, John, Chris, for taking my questions and congrats on all the progress. Thank you, Mike.

Gordon, you mentioned that in your comments that shipments were weaker in July and you cited rephasing of order activity and delayed ramp up at the uh at a configurated plant give any sense what your order books look like for for august um yeah look we we have line of sight um you know i think the americas are looking pretty strong and we're seeing some some comeback in you know places like um you know northern europe uh and in the uk um and as john mentioned you know we we see you're probably stabilizing in the in the second half of the year um there is still you know significant consumer weakness in in in all of the regions that probably except for latin america um but you know whether it's it's wine or or or beer in in in europe uh spirits in europe um you know still still down you know compared to long-run averages in last year uh driven you know spirits and, say, wines driven by, you know, the macroeconomic kind of trade issues. You know, 85% of all scotch produce is exported. 65% of all French red wine is exported. So the two major markets of the U.S. and China, you know, still not back to where they were, you know, historically. In the U.S., you know, we see beer still sort of sluggish, even imported beer. so but yet there are then pockets of growth in terms of non-alcoholic beverages you know particularly waters um and and food is you know you know on the back of trends like anti-micro plastics you know performing very well in most markets you know latin america is is performing very well for us um you know particularly food non-alcoholic beverages spirits you know coming back strongly in mexico beer quite resilient you know um and you know going back to kind of first principles that we laid out you know last uh last july we uh we over the the next two years you know predicated kind of flat volumes as we deliver savings we will share some of that with our strategic customers uh and ultimately you know you know drive the the the value over the next two years by getting a much better return on the volume we have and getting fitter. That then puts us in position, a very strong position, as the turn comes and consumers come back to these categories. So our story over the next two years is not a volume story per se. We predicate sort of flat volumes, but getting much, much more efficient and getting much higher returns on the volumes we have. And I think for us, our thesis is that, you know, the value will be increased through getting better returns rather than chasing, you know, volume at lower margins and lower prices, you know, in markets that are, you know, where demand is sluggish.

That's very helpful. I appreciate all the color. And then just one quick follow-up. You mentioned the progress on TOE. If I heard you correctly, you said the first wave of 15 facilities has been meeting or exceeding your expectations, and you're about 60% to 55% through those plans. Is there any more color you can provide around the progress, maybe some of the cost savings or the returns that you've generated thus far at those 15 facilities?

Yeah, you know, again, you know, the process is, you know, we go into those plants and we understand, you know, obviously the cost base and what's driving the cost, where the waste is, and where your kind of top five issues or losses are, and then working systematically through that. And, you know, everything we've seen in our pilots in Tawana and indeed the initial study we did way back in June 24 are coming to fruition. You know, we have some tremendous talent in our plants, but with fresh set of eyes and some new thinking from other industries that I've worked in, we're seeing opportunities to drive very significant productivity improvements and run these plants in a much more effective, efficient manner. So, I'm very happy with, you know, the alacrity with which our teams have taken on these new ways of working and going after the waste and, you know, across the fleet. So, very happy with that, Mike.

Got it. Thank you and good luck in 2H. Thank you.

The next question comes from George Stathos of Bank of America. Your line is now open. Please go ahead.

Thanks so much, everyone. Good morning. uh thanks for the details um i wanted to how are you gordon uh and congratulations on the progress so far um i wanted to come back to magma not to necessarily do a post-mortem on it and the wise and wherefores but really to understand how glass fits in customers mix and so when magma was talked about a few years ago. The notion was you'd be able to drop in smaller facilities, you'd be able to be more nimble, you'd be able to then get into customers' new product launches more quickly. At least that was part of the story, as I recall, and correct me if I'm wrong on any of that. And for whatever reason, magma is no longer being utilized. Is it that the process itself didn't really live up to your expectations is it that customers don't really look to glass for that sort of new product quick on the run type of product anymore or type of package or toe and all that you're doing in the organization now gives you that agility that you thought you're going to get for magma but you don't need to spend the capital there how would you have us think about that you know what's happened here and why you don't need magma anymore great thanks thanks george um so let me start with the customer piece you know consumers love glass right all things been equal they'll choose glass and you know i've been out i've met about 70 of our customers over

the last year and i would say without exception all of them want to put more glass into their portfolios for sustainability you know to help drive that premiumization trend that's still there as strong as ever. So Glass is absolutely fundamental to the portfolios of all our major customers. And in fact, our NPD pipeline this year is up about 35%, which is a massive increase as our customers look to spur growth. So no question around Glass in the portfolios, in my mind with with customers and and i've heard that firsthand so many times uh with regard to to magma yes the idea was you know you could do maybe smaller batches of of premium um uh but when i look at it you know there's two aspects did the technology work yes the technology works but you know can it uh can it deliver uh the returns we require if we were looking at at rolling out 10 or 12 or 15 of them? And what's the next best alternative? And, you know, as CEO, I feel two important aspects of my role is, you know, to one, to face reality and to make good decisions around that. And secondly, is to really allocate our precious capital as effectively as possible. And when I look at, and you're right, TOE, and I look at the flexibility, you know, I think toe techniques can bring and also greater volumes at lower costs and lower capital intensity uh for me it was a it was a clear decision and there there is a better way for us um to you know deliver on the um the what customers are looking for which because continued premiumization but But they want premium products at an affordable cost, right? And we don't have small ambitions around premium, right? We have very big ambitions around premium, and I need higher volumes of premium than a magma furnace could deliver, and I think the way to do that is the path we have forward, which is the best of both model which by the way we um we we have a business in our in our portfolio that that does exactly that and is making great returns great margins uh and it's highly highly flexible so um what we're embarking on is not new to world it's there we just need to get much much better at it and i'm confident now we're we're putting in place the operational capabilities to

to do so so you know it was it's the correct decision for us it's the correct decision for our customers and it's the correct decision for our shareholders thanks gordon uh for my second question if possible um you know you talked about your current run rates and that things you know get a little bit better in august is there a way to parse the down mid single digits across the regions and then as we shift into the fourth quarter you talked a little bit about why it's maybe now a lesser piece of your earnings cadence for the year but can you give us a bit more color there i know fourth quarters are small the numbers can move around a lot if we choose the midpoint

versus one end of the range or the other in the range of the guidance we can come up with different conclusions but the fourth quarter seems a little bit weaker and is any of it related to the volumes that we're seeing right now thank you guys and good luck in the quarter yeah george i can jump in and take the the second part of that uh for uh to start with um hey hey george how you doing um the seasonality of our business is such that uh we earn about 60 to 65 percent of our uh eps in the first half of the year and the remaining 35 to 40 percent in the back half of the year that that's that's consistent with the average in the last five years and you know after exiting the a and z business a few years ago we are more levered to the northern hemisphere and and as a result with our products being used in the summertime the seasonality of that we we do have this this tendency that we're that that i just mentioned uh but as we take a look at the fourth quarter guidance that we have this year we are making in addition to you know the normal seasonality we have made a provision in there in our outlook for potentially more uh temporary downtime. It is taking us a bit longer than originally anticipated to complete the restructuring and network optimization activities over in Europe. We're following all the rules and the processes accordingly, but it's just taking longer. And as a result, if this slips into next year, we would probably take more temporary downtime in the fourth quarter as we keep our system balanced until we can complete that. So that is a function of that. And also, I just want to highlight also is that our ETR tax rate is very sensitive to overall levels of earnings. And as the earnings are lower in the fourth quarter, especially with making the provision for the potential temporary downtime, we also end up with a disproportionately higher tax rate. So it just kind of swings things around a little bit more in the fourth quarter. So hopefully that gives you the perspective you're looking for. But it has nothing to do with the trends in the business and the volume. It has more to do with the downtime and managing the network optimization.

Thank you. Yeah. And maybe you the first part of that uh george you know we um if i do a quick run through you know maybe the the the segments or regions you know beer in north america actually performed very strongly for us and we uh we outperformed the category uh as as the as the core spirits you know very very strong momentum there um you know we we see you know as seasonality kicks in we see some of that come off for for beer certainly um but you know brown spirits particularly are weighted a bit more to the back half of the year so we see probably continued momentum there you know wine is weak across the board um you know i i spent uh some time in california in the last couple of weeks uh but the industry is looking at ways to figure out you know how to uh how to overcome that and the the lesson you know i heard from people there is hey the wine industry has overcome many setbacks over over the last 50 years and there was a sort of a confidence there i picked up but no doubt wine has been has been weak in q2 um you know neb you know waters are are are going really well for us in in north america and we see that continuing and we we probably see food kind of you know in soft in q2 but picking up in q3 and q4 particularly towards the the the holidays um Europe, beer, particularly in Central Europe down, wine down, and spirits down, you know, and I think that's just a common picture, as I mentioned. But food and non-alcoholic beverages, you know, very, very strong for us. We probably see spirits coming back a bit in the second half, and white wine, you know, is doing better than red wine for sure. Other than that, you know, Andean performing very strong for us, Brazil doing very well for us, you know, up three, three, four percent in Q2, order books very, very strong there. And, you know, the big surprise for us was in Mexico where beer actually has stabilized, you know, particularly in the domestic market. And tequilas have rebounded, you know, remarkably, remarkably well as the tequila industry figures out other markets besides the besides the us so you know um southwest europe you know impacted by red wine particularly um but but food you know going strongly and non-alcoholic beverages um and we also see some upside in the back half of of the year in in the uk so that that's sort of a run around the business charge. I hope that gives you a bit of color.

That's fantastic. Thank you, Gordon. I'll turn it over. Thank you, guys.

The next question comes from Anthony Pettenari of Citi. Your line is now open. Please go ahead.

Good morning. This is Brian Bergmeier sitting in for Anthony. Thanks for taking the question. You know, just maybe on net price, I noticed you're expecting a little bit less of a headwind now than originally.

I think you raised the range by about $25 million. um maybe just what kind of drove that do you uh feel like prices for the second half are are maybe locked in now to kind of line of sight to that and uh just maybe generally how do you feel about sort of european operating rates at this point yeah sure brian yeah thanks for the question um when we take a look at the the drivers for net prices as we had entered it in the year we had a higher expectation of that pressure point it's obviously moderated um i think the net price pressure for the first half of the year is about 70 million dollars and we're thinking right now it might be 100 125 million dollars down from our previous expectations really really there's two factors going on um is is that inflation has been moderated probably more so than we expected you know energy prices have moderated so so that is definitely one of the drivers uh and then you we have seen probably uh reasonably stable uh net pricing and you know gross pricing in the business you know if you take a look at our business year to date um our sales volumes are up about one percent the gross price is down about one percent right so it's it's not really fluctuating that that much in the grand scheme of things we thought it might be under a little bit more pressure uh so it's really kind of both levers moving uh and i would say like you know if we take a look at the back half of the year most of the year over year pressure point has been incurred in the first half with a little bit still dribbling into the back half.

Got it. Got it. Appreciate that detail. And then maybe just sort of broadly from a high level, do you think that the US-EU trade deal kind of coming together this week provides maybe a level of clarity for customers that you and they have been looking for to maybe get orders kind of going again?

Or do you think maybe the industry needs time to sort of digest this and adjust to the tariffs just um anything you can kind of share on maybe um if a trade deal changes anything for for you and your customers in in 3q and in the second half um thank you i'll turn it over yeah um look any any certainty is a good thing uh there's been so much uncertainty and you know um you know customers trying to figure out you know do they do they need to ship bottling operations to different regions and so on and so no decisions in the industry that i've seen have been made around this so so anything that brings certainty is a good thing then people can plan around that and you know we can work with customers accordingly um you know the headline number is 15 on everything coming into the us but I still understand or you know from some country that you know it's it's still not clear on you know where wine and spirits sit in all of that and whether whether that potentially is zero for zero or whether it's 15 so there's still not full clarity on that I would say so the faster we get to that the better and then we can we can work with with with customers accordingly so the more certainty, the better it is, I would say.

The next question is from Josh Spector of UBS. Your line is now open. Please go ahead.

Hi, good morning. It's Anoja Shah sitting in for Josh. I just wanted to go back to MAGMA quickly. Are there any cost savings associated with this decision that maybe weren't dialed in before, but do need to be added now?

I'd say the primary, first thanks for the question, I'd say the primary savings is that we are overall reducing our D&E cost to the business. It's all part of our SG&A savings initiative. So I think from an operational standpoint, obviously we're ceasing the operations and that there's a minor loss associated with this, but I don't think it's a material aspect to the business for the Bowling Green element. I think the bigger element is the reduced SG&A cost is embedded in our SG&A savings targets.

Okay, thank you. And based on your comments on inventory earlier and the prepared comments, and I think your prior guidance for working capital and free cash flow is flat. It sounds like now you'd expect working capital to be a benefit to free cash flow this year. Can you just tell me what you're expecting in your guidance?

Yeah, that's correct. Earlier in the year we thought that you know working capital probably a a minor factor um you know and and the the where we stand right now is something like a um up to 50 million dollar working capital benefit this year kind of zero to 50 million dollars as we we do better on the inventory um you know on the offset to that we we are having more uh restructuring process probably going to be the higher end. We updated that guidance range. We also increased the estimate for interest expense given where the forward curve has changed to. So overall, we think the free cash flow outlook that we had beginning of the year is still relatively consistent. Obviously, FX plays into this equation with a lot of moving pieces. But I also want to kind of reiterate, we're really focused on free cash flow um and and you know with a 300 million dollar year over year improvement despite you know call it 140 to 150 million dollars of restructuring charges is a major swing major improvement in the performance of the business and certainly we look to drive drive that as we go to our high day targets and moving up to five percent of sales and ultimately up to seven percent of sales over the next few years great thank you for that i'll turn it over the next question comes from Francisco Ruiz of BNP Paribas.

Your line is now open. Please go ahead.

Hi, good morning. I have two questions for me. The first one is if you could update it on how the negotiations with French authorities are on the restructuring you proposed a couple of months ago. And also follow up on this is that what else is missing in terms of restructuring or closing facilities in order to get to your fair savings on fit to win. The second question is if you could help me to understand what is the bridge between your fit to win benefits and the rest of the cost at operating costs apart from the central cost. I mean, there is a gap of 20, 30 million this quarter. So what is this coming from?

Thank you. hi francisco um let me take the first question so uh we're engaged with our european works councils and our local works councils and we're working through uh through the process of consultation and listening to ideas and um you know as we move through to uh getting agreement on how we you know reconfigure the network to be as competitive as we can be in France. We see France as a very important market in our business and we have plans to invest quite heavily in France, but we need the right network and those discussions are progressing to plan. As you know, there's a process. You work through the process and we're committed to doing that fairly and squarely with our colleagues. So nothing more to add there other than it's going to plan in terms of timing of discussions.

And for Cisco, this is John. I'll address the other two questions you have as far as kind of where do we stand in the whole network optimization process and kind of what is left. So we've announced so far about a total of 10 percentage point reduction in global capacity of which as we stand here right now maybe five percent or a little bit more is actually physically closed the other component has to do with remaining elements that have been announced one is what we what was just referenced in france and the other one is what we just kind of referenced earlier today uh i mean last night in the americas you know that is what will will will be uh conducted uh over the next couple quarters and then that would be a completion of where we stand on the announced level of capacity restructuring. We would still then have a little bit, a couple percentage points of excess capacity, but we're going to monitor and see where the market trends go and see, ultimately determine, hopefully we can grow into that, and we'll have to determine whether additional decisions are required. And then your last question is kind of, so if Fit to Win was $84 million, dollars you know where's the other cost movements um what i would point you to is on one page six of our materials there's actually a little chart in there that has the cost breakdown and as you can see with that you know operating costs were were favorable um 31 million dollars 63 of that was fit to win in the operating line but we did have 27 million dollars of temporary curtailments that is as we've referenced the continued downtime until we're able to get those these permanent restructuring uh actions actually completed those are the major major movers and you take a look on the the corporate side if you add up the whole thing you have 84 million dollars of fit to win you got the the uh temporary pertainments and you'll see it a offset in corporate a lot of that has to do with resetting management uh in a sense it's with zero last year so take a look at that that that provides you the details i think you're looking for okay thank you very much the next question comes from gabriel haid from wells fargo security your line is now open please go ahead gordon john chris good morning good morning i apologize hello i joined a few minutes late but um i was curious if john you could kind of help us with the increase in the guidance range um

15 million and i think to your point you talked about price costs being actually a little bit more favorable um maybe by 25 million if i pick midpoints um and then fx i think is maybe a 25 to 30 million dollar tailwind as well um volumes up one percent through the first half we're sort of still targeting flattish which i guess would suggest down one percent in the back half you already gave us some color on the mix um america's versus europe um and it seems like your bit to win and and cost outs are kind of running ahead of expectations so is there something else that that we're missing um i don't want to talk to you the upper end of the range i'm just trying to understand

if there are any other puts and takes in our logic there yeah yeah so so gabe i mean the drivers that we have and and maybe just thinking you know what what are the factors that would drive you to the upper end of the range obviously you got you got the fx as you referenced net prices is better fit to win probably has upside opportunities and then that the flip side that we have is interest expense will be higher because of the, you know, the rates haven't changed. And then you also have, and I'm sure you've heard this, but we are making a provision later in the year for more temporary downtime in the event that we have, you know, the timing of it, in particular, the European restructuring activity may kick into early part of next year. Those are the major factors.

And anything in the variance between, you know, the high end of the range, midpoint, low end has probably do more with macroeconomic trends and things like that that that we're just trying to make a general range for okay and then the the follow-up question um i've seen a few announcements here in the past month or so um heineken being one of them i think talking about building a pretty meaningful new brewery in yucatan um and maybe some you know reorienting gordon you alluded to some of their their bottling if that were to to occur um and And then in North America, there was an announcement on reformulation for Coca-Cola. I'd be curious if there's been any sort of early discussions or if you can talk about maybe the opportunity for beer in Mexico on new facilities coming in. I think Heineken's bringing one online in 2026, and then this new big facility would be operational in 20. Thank you.

Look, Gabe, we're talking to customers all the time and, you know, I'm spending, you know, 20, 25 percent of my time out with customers, you know, discussing what the opportunities and pain points are. And, you know, if you look at the, you know, if you look at the dynamics of Mexico, I think over the medium long term, you know, it's a tremendous market for beer. You know, we've got a fabulous suite of assets down there, and, you know, we're going to make sure we're in position to, you know, take the opportunities as they come. You know, products taste better in glass. What can I say? So whatever customers want to make more of their products in North American glass, you know, with some of the efficiencies and, you know, untrapped capacity that we're finding in TOE, we'll be ready and willing to support anybody that wants to launch products and more products in glass as we move forward.

Thank you.

Thanks, Kate.

We currently have no further questions, so I'll hand back to Chris for any closing remarks.

Thanks, Lucy. That concludes our earnings conference call. Please note that our third quarter call is presently scheduled for Wednesday, November 5th. And remember, make it a memorable moment by choosing safe, sustainable blast. Thank you.

This concludes today's call. Thank you for joining. You may now disconnect your line.