Thank you for standing by. My name is Gabby, and I will be your conference moderator today. At this time, I would like to welcome everyone to the OI Glass Second Quarter 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I would now like to turn the call over to Chris Manuel, Vice President of Investor Relations. Please go ahead.

Thank you, Gabby. Good morning, everyone, and welcome to the OIGlass Second Quarter 2026 Earnings Conference With me today are Gordon Hardy, our CEO, and John Hodrick, our CFO. After prepared remarks, we will open the line for Q&A. Our press release and earnings materials are available on the company's website. Please review the safe harbor statements and disclosure regarding our use of non-GAAP financial measures included in those materials. Today's remarks do include forward-looking statements, and actual results may differ materially from our current expectations. With that, I'll turn the call over to Gordon, who will begin on slide three.

Thank you, Chris, and good morning, everyone. Today we will review our second quarter results, discuss market conditions and provide an updated view of our 2026 outlook and 2027 targets. Before I begin, I want to thank our OI colleagues around the world for their continued commitment and flexibility during a challenging operating period. Let me start with a straightforward assessment. We are clearly disappointed with our first half performance. Europe has not delivered the expected results as outlined in our investor day framework. We own those results. We are taking decisive action. We also think it is important to distinguish between a strategy that is not working and one where value realisation has been delayed. We will address that distinction throughout today's discussion. With that, let me turn to recent performance. Second quarter net sales were stable, while adjusted earnings were $0.09 per share compared to $0.53 per share last year. Performance varied significantly by region. Strong America's result helped offset substantially lower earnings in Europe, while an unusually high adjusted tax rate resulted in reduced results by $0.18 per share. In the Americas, segment operating profit increased 22% year over year, which we believe demonstrates strong execution of our strategy and the resilience of the business, even with one furnace event during the quarter. Europe was significantly below our expectations and prior year performance. We do not believe this is a structural issue with the business or our strategy. Rather, we believe the shortfall reflected three main factors. Elevated competitive pressure affecting selling prices, higher energy costs related to Middle East conflict, and unanticipated operational inefficiencies following restructuring across multiple EU plants, along with two furnace events. We believe these issues are largely transitional and should improve as market conditions recover, and we work through the remaining restructuring challenges. I'll now comment on recent performance. Second quarter net sales were stable, while adjusted earnings were 9 cents per share compared with 53 cents per share last year. Performance varied significantly by region. Strong America's result helped offset substantially lower earnings in Europe, while an unusually high adjusted tax rate reduced results by 18 cents per share. In the Americas, segment operating profit increased 22% year over year, which we believe demonstrates strong execution of our strategy and the resilience of the business, even with one furnace event during the quarter. Europe was significantly below our expectations and prior year performance. We do not believe this is a structural issue with the business or our strategy. Rather, we believe the shortfall reflected three main factors. One, elevated competitive pressure affecting selling prices. Two, higher energy costs related to the Middle East conflict. And three, unanticipated operational inefficiencies following restructuring across multiple EU plants, along with two furnace events. We believe these issues are largely transitional and should improve as market conditions recover. and we worked through the remaining restructuring challenges. Global demand was also softer than expected with shipments down approximately 4.5% year over year. However, trends improved through the quarter and June volumes were flat with last year. Operational disruptions also limited sales opportunities and accounted for about half of that decline. We believe fit to win remains a key driver of value creation. We have delivered significant savings year-to-date despite operational disruption and inefficiencies. In light of these near-term challenges, we have adjusted our 2026 Fit to Win target, while our three-year target is now in line with our original expectations of 650 million. Given these factors, we have updated our 2026 guidance and recalibrated our 2027 targets from last year's Investor Day. Importantly, we believe firmly in our strategy. We are realigning the timing to achieve our goals, not changing the strategy. Let's now discuss the top line on slide four. Net sales remain relatively stable in the quarter. Volume performance continue to reflect soft demand, although trends improved as the quarter progressed. As noted, global shipments declined approximately 4.5% year-on-year, while June volumes were flat with last year. Recovery has been difficult to predict, given sluggish consumer demand and customer de-stocking in certain markets. In the Americas, shipments were down 7%, reflecting challenging prior-year comparisons, exiting some unprofitable business, and a furnace event that limited sales opportunities. In Europe, shipments declined 2%, primarily due to operational disruption that constrained sales. Excluding that impact, underlying trends were roughly flat in Europe. We continue to see pockets of strength across the portfolio. Non-alcoholic containers remain a standout performer, and several geographies exceeded local market trends and prior year levels. The Andean Group delivered double-digit growth while Brazil was up low single digits. In fact, we outperformed the market in the majority of category and market clusters amid generally sluggish demand. We continue to expect second-half growth supported by easier comparisons and new business wins while maintaining a more cautious recovery outlook. Our commercial transformation continues to gain traction. We are focused on business that generates economic profit and are applying greater discipline across the portfolio. Following strong execution in the Americas, we are starting to get more traction in Europe. New business wins represent approximately 2% of annual sales volume with contributions expected later this year. While the recovery remains gradual, improving momentum and portfolio optimization strengthen our confidence in delivering profitable growth. Let's now move to slide five. Fit to Win remains central to our strategy and continues to generate meaningful benefits. We believe the program is improving our cost position, strengthening our competitiveness and building the foundation for long-term profitable growth. Since launch, Fit2Win has generated more than 400 million of net benefits. Through the first half of 2026, we delivered 85 million of benefits. This is net of 30 million of direct operating inefficiencies, and the total impact of disruption was approximately $45 million, when including constrained opportunities and additional logistics costs. Phase A execution remains strong, announced plan closures are complete, and we are advancing the final stages of organizational restructuring. Phase B continues to progress, although operational disruption has delayed TOE benefits. We are also advancing supply chain, procurement, and energy initiatives that should deliver increasing benefits over time. We have revised our 26 and 27 targets to reflect the headwinds discussed today. We now expect approximately $200 million of fit-to-win savings in 2026, and at least $650 million over the three-year period. Importantly, this reflects timing and execution disruption, not a change in underlying opportunity. The America's performance and recent customer wins are encouraging signs of improved competitiveness through fit-to-win. As execution stabilizes, we believe this can deliver meaningful value over time. With that, I'll now turn it over to John on slide six.

Thanks, Gordon, and good morning, everyone. The top line was fairly stable, while second quarter results were below our expectation, given challenges in Europe. Net sales were nearly $1.7 billion, down about 2% from the prior year. Favorable currency and stable consolidated selling prices partially offset lower sales volumes. Adjusted earnings were $0.09 per share, compared with $0.53 last year. Lower net price was the primary headwind. Selling prices increased in the Americas, but declined in Europe amid competitive pressure. Europe was also impacted by higher energy costs related to the Middle East conflict and the one-time reset we have discussed previously. Lower sales volume was offset by favorable operating costs, reflecting fit-to-win benefits net of unanticipated costs tied to operating inefficiencies and furnace events. Adjusted earnings also reflect an unusually high adjusted tax rate driven by lower European earnings and a reduced full-year outlook. We also recorded a significant non-cash goodwill impairment charge and increased tax valuation allowances. Both are excluded from adjusted earnings. The impairment was triggered by the decline in the company's share price during the quarter, and it reflects Europe's current challenges from an accounting perspective. These charges do not affect cash flow, operating plans, or fit-to-win milestones. Our priority is to bring the same discipline and execution to Europe that have improved performance in the Americas, while recognizing that progress is taking longer than expected in a tough macro environment. Regarding the balance sheet, leverage is up some given lower EBITDA. However, liquidity is very good at $1.5 billion. We have no maturities until 2028, and we have ample headroom on our senior security covenant. Let's turn to slide seven. Segment operating profit was $171 million compared to $225 million in the prior year, as strong performance in the Americas was more than offset by continued pressure in Europe. In the Americas, net sales were $949 million, up about one percent. Higher selling prices and favorable currency more than offset a seven percent decline in volumes. Segment operating profit increased 22 percent to 165 million dollars in margins expanded by around 300 basis points to 17.4 percent. Higher net price, favorable FX and operating costs net of a furnace event more than offset lower volumes. This represents the highest second quarter profit in the Americas over the past 10 years and demonstrates the value of fit to win. In Europe, net sales were $704 million, down 5%, with shipments down 2% as disruption limited sales opportunities. Segment operating profit was $6 million compared to $90 million last year. The decline primarily reflected unfavorable net price from competitive pressures and higher energy costs. Europe delivered solid gross fit to win benefits, but temporary operational disruption and inefficiencies prevented those benefits from translating into net savings. Let's turn to slide 8. We are revising our full year 2026 guidance to reflect the second quarter shortfall and a more measured pace of improvement in Europe. Please note that we have removed adjusted earnings guidance because the effective tax rate is highly sensitive to changes in operating earnings, particularly given the low level of anticipated earnings in Europe. We now expect adjusted EBITDA of $1.0 to $1.1 billion, with updated free cash flow and leverage guidance included on the chart. We continue to anticipate strong performance in America, with the results expected to be up nearly 60% in 2026 versus 2024. As Gore noted, lower current year guidance is primarily driven by three factors in Europe. Continued market challenges, including additional price pressure and higher energy costs related to the Middle East conflict. Adjusted fit to win timing due to temporary operational disruptor and additional costs at a few specific plants. We believe the revised outlook better reflects current operating conditions in the environment we expect through the balance of the year. Importantly, we believe performance in Europe should improve sequentially over the second half. Let's turn to slide nine. We are also realigning our 2027 targets to reflect the same factors affecting our 2026 outlook. We now expect adjusted EBITDA of $1.2 to $1.3 billion in 2027, reflecting a more gradual improvement path in Europe. From our revised 2026 guidance, 2027 should benefit from at least $150 million of additional fit-to-win savings. Potential upside could come from market improvement in Europe and energy price normalization following an eventual resolution of the Middle East conflict. Importantly, we remain committed to the original adjusted EPA target of $1.45 billion. We continue to believe that target is achievable, but it will likely take longer than originally anticipated. With that, I'll turn it back to Gordon on slide 10.

Thanks, John. Before we close, I want to reinforce several key points. We are not satisfied with our performance. We understand that investors will expect clear evidence of improvement. At the same time, the framework we laid out around fit to win, profitable growth and strategic optionality remains the right path to create long-term value. In Horizon 1, fit to win is delivering meaningful savings and improving our competitive position. The Americas demonstrate the earnings potential of stronger execution. europe is about a year behind the america's unfit to win ultimately we believe europe should improve to mid-teen segment profit margins within the next two years this should be achieved through initiating recovery of excess cost inflation addressing temporary disruption and normalizing energy market and completing our fit to win implementation in horizon 2 improved competitiveness is supporting profitable growth with new business opportunities expected to build volume momentum through the second half of 2026 and into 2027. In Horizon 3, we are evaluating strategic options to strengthen the portfolio, improve our position in the value chain and preserve flexibility for long-term value creation. In short, we are addressing near-term challenges with urgency while staying focused on the strategy we believe will create sustainable long-term value. With that, let me conclude on the next slide. To close, second quarter results were below expectations, primarily due to Europe. We understand the drivers and are addressing them directly and with urgency. At the same time, the America's performance highlights the earning potential of effectively executing our strategy. Demand remains soft, but volume trends improve through the quarter, and we expect gradual improvement in the second half. Fit to Win continues to deliver meaningful value, even with near-term disruption. Most importantly, our strategy remains intact. We are recalibrating timing, not changing direction. Our focus is clear, restore performance in Europe, improve execution, and create sustainable long-term value. Thank you for your time this morning. We will now take your questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. The first question comes from the line of Gansham Punjabi with Baird. Your line is now open. Please go ahead.

Hi, Gordon and John. This is William Kotz on for Gansham. I think my first question, just what gives you confidence on 2027's plan? Obviously, 2026 has shook out meaningfully below your initial expectation. So just some more color on 2027 would be great.

And then I'd a follow-up.

Thanks.

Yeah, I'll take that first. And when we talk about, you know, moving from 26 to 27, first of all, you know, we've obviously rebased 2026 for the factors that we talked about. As we look going forward, you know, we are highly confident of the $150 million plus of fit-to-win benefits. We're going to, even in a disrupted environment, we're going to generate $200 million or more this year. So we're confident, especially as we get through the disruption elements and the benefit of exiting from some one-time elements into the next year. Beyond that, we're really not making a lot of forward estimates about, you know, strong recovery. We still have included in their kind of a flattish, you know, volume environment. We still have, you know, the baseline of, you know, the Middle East conflict, you know, sluggish demand, you know, affordability issues, all things. With that said, you know, there are probably more upside opportunities with ultimately the resolution of the war and the normalization of the energy markets, as well as with a better background in that regard in affordability elements, consumer consumption, and not to mention us putting into effect our horizon to profitable growth and the forward opportunities that we have on a number of the new wins that we have in the new businesses that Gordon mentioned. So those underpin our view of 2027, which, of course, has been rebased from the original expectation.

And just to build on that, William, we see what we can deliver in the Americas with the tight execution of the strategy and fit to win. As we've said on previous calls and here again today, Europe is about a year behind the fit to win implementation. And so we expect that to improve sequentially through the next four to six quarters. And that also is an underpinning of, you know, our thinking around our 2027 results.

Okay, great. That's super helpful. And then just one more on volume expectations for the back half of the year. How much would that be, like contracted new business versus, you know, just the general expectation of a market recovery? I know you said June was flat, but, you know, if we could just hear that and maybe how July is shaking out too, that'd be great.

Sure. So, you know, as we've outlined, you know, we rejigged and reconfigured our go-to-market approach in both the Americas and in Europe. And we're seeing, you know, the early benefits of that coming through. I think last time or last outing, we mentioned we had picked up, you know, 15 pieces of new business that equated to about one, one and a half percent of volume. We've subsequently picked up more business that will start to flow in the back half of this year and into next year, which represents about 2% of volume. So we're gaining traction. We're becoming more competitive in the market. When we look at it, we see it sequentially improving through this quarter and into the fourth quarter. So, you know, all the early signs are positive that we're becoming more competitive and we're translating that competitive into profitable volume growth.

I'll add just a couple of data points on there, William. The new contracted business, as far as what we expect, it's going to ramp up in the second half of the year. It probably adds something like one to one and a half percent annualized run rate in the back half of the year as we then build into 2027 when you see the full two percent being realized. So so that comes as a tailwind. And then to your question on July, basically all of our markets are performing kind of in line with what we saw in June net net in total. The one thing that we say is that there's still a little in one one geography, we're still dealing with a little bit of transitional elements of one of the furnace events that we had. So so there was still a little bit of headway on on volumes due to the ability to supply. But, you know, through July, we believe that we're out of that. And then going forward, we should we should see that the trends fall through to the, you know, the full market opportunity.

OK, great. Great. That's super helpful. Thanks, guys.

Your next question is from Mike Roxland with Truist Securities. Go ahead. Your line is now open.

Yeah, thank you, Gordon, John, Chris, for taking my questions. Good morning. Good morning. Just wanted to follow up if you could provide some more color on those operational efficiencies along with the two furnace events in Europe. More color around what they are, what disruptions were, when they started to occur, and what your plan has been to get them fixed and where that plan currently stands.

So, the events took place in Europe, one in France, one in the UK. One was a fire, one was a leak. And that, you know, caused us to short ship into the market and put extra pressure on the network in the context of a changing network that hadn't yet settled and also in the context of increasing logistics costs. What have we done about it? You know, we've got both local engineering and expert furnace engineers that were in place, supported by some outside expertise to fix those issues. We're confident that those issues are now fixed and both those plants are starting to resupply the market at getting up to what their full potential supply should be as we walk through July. They were the main issues, but when you're changing the supply network as we were with three that disruption did add pressure into the network at a time when, as I said, costs were rising, there was less available logistics capacity. That caused us to have to pay more for what was available. So that really was the root cause of that. We did also, you know, experience kind of a number of small one-time events, you know, around rail transport not being available in France and having to shift to road freight. That also caused us a bit of disruption and certainly put in a significant chunk of cost.

Again, that's a once-off, and we don't see that reoccurring, you know, as we go through the back half of the year. you know maybe just one other comment mike on top of that just to show if you compare that to the americas where we did have a furnace event and the the segment was able to fully offset it and deliver it just shows the resilience in the business that once you do get through all the restructuring and activities and then and then you get the the toe and the operations where you want it to be you know we're confident that you know you know while this is a blip that occurred because of the combination of the furnace events and, you know, closing the three factories at one time, we believe that we'll get out of that into a much more stable environment.

So to put a point, I mean, you're past these events now. They're in the rearview mirror. Everything's been corrected, and you should be operating better today than in 2Q?

Yes, absolutely. We're past those events. The rest of the fleet in Europe is performing well, and we expect that performance to And I think it's really important to, you know, to sequentially improve through the next four quarters as we embed, you know, the TOE, the total operating efficiency methodologies into the plant at the same level we have embedded them into the U.S.

As I said, you know, Europe is about a year behind the implementation of fit to win. um and you know we we expect you know the catch-up to to occur is occurring as we as we speak yeah got it and then just one quick follow-up um you mentioned uh gordon they don't believe that the what you're seeing in europe is structural um what gives you confidence that it's really not a structural issue in europe and what i and what i'm trying to get is when i look at one of you some of your peers that recently reported one of your of your peers reported close to a 30 percent EBITDA margin in the first half. So there obviously are benefits to be had in the European market, it seems like you guys are a little bit behind that, a little bit behind that. So what are you trying to do to maybe catch up from a portfolio perspective, from an earnings and market perspective to what some of your peers have been posting in terms of their earnings and their margins? Thank you.

Okay. First of all, let me just give some context around Europe. It's a very large market very attractive market 22 million tons and over two and a half billion dollars of profit pool in in the region um you know our our our peers are um you know running businesses that are not going through a restructuring as we are in in europe um you know we i come back to our original thesis you know the business was uncompetitive um and we are going through the actions required to get this business more competitive in Europe. So we're in transition, right? And executing that. Yes, we've had a stumble as a chunk of it of our own making. We own that. We know how to fix it. We know what the issues are. We have the right resources in place. We've made the required changes of leadership and have no leadership in place with the skills that can address the the supply chain network issues that that we're facing so we we see ourselves being able to execute that in the in the months and quarters ahead to the standard that we've done it in the Americas and we have the right resources and governance around that we expect you know within two years to to be back at kind of high teens uh margins um and you know that's assuming you know energy markets somewhat normalize um there's some um you know um demand coming back into into the market in certain categories um but we we we're we we don't need nor do we expect you know huge lives in in demand but we have a clear plan um our own you know our fit to win uh running the operations and the supply chain in as fit a manner as we are now running it in the americas um we we've also you know upgraded substantially our energy uh procurement or energy risk management and our energy usage um capabilities in all these plants and we expect those benefits to flow through, you know, in the coming quarters. And to give you a data point on that, in terms of energy usage, we've put in a new system across all of the plants, and some of our plants in Europe are now generating, you know, savings of anywhere between 5% and 7% year-on-year in energy usage. So there's a lot of good things happening in Europe. We're making a lot of progress in a lot of areas, But we did have this stumble that is sort of masking that. We feel we're working through that. By year end, we'll have settled the supply chain significantly and we'll start to extract the full value of the restructuring and the capacity optimization. So, you know, we have a lot of data points we feel gives us confidence that we can execute in a way that delivers into the high teens over the next 18, 24 months.

Thank you.

Your next question comes from Aaron Viswenathan with RBC Capital Markets.

Hey, Aaron.

Thanks for taking my question. I hope you guys are well. You know, I just wanted to ask about Europe. You know, and I think you went into the quarter expecting a slight improvement there, but then I think you were down slightly. So what kind of drove that? would you say that there's some structural weakness in wine um do you think this is more transitory in nature um i know the affordability issues have continued to linger and um you know obviously we've had the conflict going on as well but how do we kind of see volumes kind of improving um is there anything else under your control whether it be business wins or uh anything else that you could do to potentially drive some of that volume um and if it does not improve What kind of footprint optimization actions would you, you know, be in a position to take?

Aaron, this is John. I'll just kick that off. For clarity, during the quarter, we expected Europe's performance would be about $25 million better than where it was, okay? You know, the majority, about 80% of that had to do with, you know, the operating disruption one way or another, okay? The other, maybe $5 million, was a little bit of extra pricing pressure. But keep in mind, as we indicated, our volumes are down 2%, but they're flat if it wasn't for the disruption. So we didn't really have a meaningful commercial difference in the environment. It was more of an operating element. But I'll turn it over to Gordon.

Yeah. So, you know, as I said, you know, a large market, over 22 million tons and a very large profit pool. But one way to maybe look at Europe is and this is this is broad strokes, but bear with me. If you look at northern Europe, it tends to be spirits dominated. Yeah. Spirits and food. If you look at kind of middle Europe. So across northern France, Benelux, you know, into Germany and Poland is very much beer and food. And then in southern Europe, much more kind of wine dominated, obviously, with some beer. You know, what we're seeing is wine in all markets, not just in Europe, but across the world, is under significant pressure. And we do think there are some structural issues in that category. We've taken what we feel are appropriate network optimization actions and that to make sure that our footprint mirrors what we feel we can supply at an economic profit. You know, in spirits, I think spirits generally are under pressure because the two largest markets, North America and China, have been underperforming for some years now. We see over the next probably 12 months not a huge change in that picture in terms of exports, particularly into the U.S. or China, although we are and expect to see stocks decline in the U.S. market and maybe some refill, you know, happening as we go through early, early, mid-2027. um the bright side on um on spirits is you know travel retail continues to grow tends to be more premium maybe a bit less volume but but it but it is growing um and then if you look at uh europe um kind of what i call middle europe you know beer um performs strongly you know is performing strongly particularly premium beers as is food we we see in all markets our food business growing quite strongly and it is now our second largest category with a strong economic profit so as we look forward we see pockets of growth that we can leverage and we've also tightened our network or restructuring is behind us in Europe and you know we see our platform probably moving into, you know, 95, 97 kind of capacity utilization as we move through the rest of the year and into 2027. Our go-to-market model that we've instituted is absolutely bearing results for us. We continually, month on month, see new business wins at margins that are attractive for us. So you put all that together, we have a lot of confidence in the medium-long term market opportunities in Europe. We see our margins improving. We know how to do that. We've demonstrated that in the Americas. We actually have pockets of Europe where, you know, we're executing very well and we see the margins coming through, particularly in Southern Europe. So you put all that together, you know, we're bullish on Europe over the medium longer term. We've got to execute more effectively on some of the basics around logistics and planning and get through this restructure and then continue to execute or fit to win and or go to market. So that's really how we're thinking about Europe. Still a very important market, very attractive market and a market we can do very well in the quarters ahead.

Okay, thanks for that. And then just as a quick follow-up, or not so quick, but I did want to ask about some broad strokes for 27. I think you mentioned that not calling for a big recovery, but how should we think about net price and then, you know, obviously the incremental fit-to-win benefits as well? And would there be any other larger bucket items you can kind of help us with to frame where you can see 27 EBITDA land versus the original $1.45 billion guidance that you provided previously?

Yeah, Runa, this is John. I can give you a little bit more color in that regard. As we look to 2027 and the levers there, from a net price standpoint, at this point in time, we're thinking kind of neutral-ish. So keep in mind, we've had a very large amount of inflation this year, and 55% of our business overall is covered under long-term agreements. So there'll be a PAF recovery. You know, it's typical in our business. There's a lag effect associated with that. So so that will, you know, come through even in a world where we just assumed current elevated, you know, energy prices, you know, the TTF at 55 to 60. We believe that we would have a neutral, even maybe modestly positive net price as we look forward. That is that does not include any other actions that might occur. It doesn't include the potential of a resolution of the war, in which case then energy prices could go down and that that could be a bigger tailwind. OK, on a sales volume standpoint, you know, we're penciling in kind of a continued mutis environment, but maybe flat to up one percent, given that we do have two percent volume growth coming through. And we will see, you know, that continues to build and we will see what the net effect of that is overall. And then you have your $150 million worth of, you know, plus of fit to win benefits, which are going to be substantially over. It'll be scooted over to Europe as we work through the, you know, the disruption this year. And we complete the program, which is, like we said, it's a little bit further along to go and over in Europe. Those are the big pieces that kind of gets you to, you know, from your midpoint of the current year to the entry point of our guidance range of the 1.2 next year. with the upside being potential resolution of war and the tailwind there, and an evaluation of what happens more broadly in the European market if the market becomes more constructive.

Your next question comes from George Staffos with Bank of America. Please go ahead. Your line is open.

Hi, everyone. Good morning. Thanks for the details. So I wanted to dig into the operations a bit with Fit2Win and, you know, in particular, Europe. So with Fit2Win, Gordon, you obviously made a lot of progress last year and the first portion of this year. Frankly, you made a lot of progress this year. But we've seen a bit more, you've acknowledged it, challenges in delivering as we've gotten into Phase B. does that have in any way from your vantage point um reflect that it gets tougher and tougher to do the operational within fit to win especially given the nature of making glass given how fixed cost leveraged it is in some ways how abusive the the process of making glass is in the first place you know you're pulling tons through a furnace is there anything in fit to win that you're finding it's maybe a little bit tougher given your past experiences to execute

in making glass just given how challenging manufacturing glass is in the first place and then i had a quick follow-on to that sure um yeah let let me um let me address that in two ways So if if I if I look at, you know, the the Americas, you know, I think it's you can see the results coming through. And, you know, I think we we we were about ahead. We we kind of started the phase B in the Americas. And, you know, fundamentally, you're you're you're changing culture, you're changing culture and plants and you're changing some processes. And with that, you know, comes some challenges. But the process we have is it's pretty simple in many ways, but it requires a lot of discipline and it requires some change management. And I think we've executed that well in the Americas. You are right, George. I mean, glassmaking is pretty unforgiving, you know, and the parameters need to be tightly controlled. And, you know, a miss on some of those parameters sometimes can throw you out for a week or two weeks. And then if you have a furnace event, it tends to unsettle the whole network because you've then got to produce in in maybe plants that wouldn't normally produce a particular product. And that causes some some disruption. Right. So that that has unsettled us a bit this year and particularly in Europe. Europe was, you know, really the last to go on the TOE disciplines. We're still betting them in. And the disruptions, you know, did have an impact on, well, the disruptions were probably in two plants. It probably impacted six. You're also kind of redirecting expert resources to, you know, away from maybe their job and there's some firefighting going on. So, you know, truth be told, that was part of the story of the first half. That notwithstanding, I would say in the vast majority of the plants, so, you know, we have, what, 60 facilities, I would say in 50, 50, 52 of them, you know, we see consistent improvement around TOE, you know, availability increasing, quality improving, speed, speed of lines. improving so we we are making improvements um and and remember some of our plants were already you know very high performing so in the high performing plants you know it's there there's probably a chunk less to improve that notwithstanding um i think weighted average we we are seeing significant improvements across the um across the fleet um and what happens is and i think i i lay this out at idea you know these kind of transformations are not linear um and you'll always get some sort of bump along the way but what i found in my experience is once you get through that the kind of you know the system kind of re-energize itself and you start to hit those higher levels of of performance and we certainly have enough data points around um you know those three elements availability quality speed and energy reduction um to feel very confident that we are going to hit at least 650 million um you know and and we'll we'll hit higher maybe over over a bit longer time frame so um i i'm i'm not worried about that uh if i could put it that way um you know i'm frustrated that um we we've had these stumbles um particularly in europe right in the middle of when we were reconfiguring the network to to have two plants go down for you know a period that's frustrating that's held us back um but you know we we own it we know what went wrong we know what to fix it we have the right resources on it and um let me tell you you know we'll be quite maniacal about you know getting the performance back to where it needs to be.

I appreciate the thoughts on that Gordon. They're well taken points.

I think I know what's that? They're well taken point. There's a well taken question.

No we appreciate it. I had a following related. I think I know where you'll go with this but unless I do want to ask the question. So traditionally glass making, if you ran 92, 93% utilization rates, those were very, very good. When you ran over 95%, the view was that you would stress the furnaces, you would pull too quickly. Is any of that filtering into what we've seen or not. I know you're trying to change the paradigm in glass and so maybe not. And as we think about Europe and some of the changes in the organization that we've seen over there, has that been because of alignment on the direction and the strategy or just execution and going out of parameters in terms of the execution? Thanks, and good luck in the quarter.

So two things. I'll take the second piece first, if you don't mind. I think one of the things that, you know, became apparent as we moved through the second quarter is the extent to which we needed to work cross-functionally. And I did flag up on the idea that, you know, a goal was to get this business out of silos and working much more cross-functionally. And we've made huge progress on that. But I don't think we made enough progress on that in Europe, right? And we've now made changes in leadership in terms of driving a much more integrated cross-functional within the region, but also within the expert resources available at the global level to get them in as part of the team in a much more integrated way. And already in the last kind of six weeks, we see that working much more effectively. You know, the incidents we had that I called out, both in France, the UK, and indeed the US, is, you know, is probably a result of what we would in the industry call over pulling on the furnace over years. And what we've done in our new system of TOE is, you know, we have strict pull rates depending on the kind of furnace. And part of TOE is to make sure that we do not over pull and therefore damage or burn down these furnaces more quickly than they should be. And that's a very rigorous discipline. And that's looked at every day now. Whereas in the past, I think that was uncontrolled and you had plants over-pulling and therefore burning down the furnaces more quickly or indeed under-pulling and using way too much energy. And we have tremendous visibility on that on a daily basis. That's looked at on shift by the day at the plant manager level. And then that rolls up through the organization into the value office to make sure that, you know, we're within the parameters that these facilities should be run at. So as we look forward, then you would expect over time to have far fewer of these events. The other thing I would say is, as we, you know, one question you ask is, you know, is Fit2Win the cause of some of these breakdowns? And again, the answer is absolutely no, because what we've done in Fit2Win is strip out cost and waste. And we've actually upped our reinvestment in maintenance and engineering across the fleet over the last two years. And our engineering and maintenance has actually increased slightly on a per ton basis. So this is really cultural change, process change that we're bedding in. We have huge support from the plants on TOE and huge support from people on the line. They see their lives getting easier in managing these plants. So I think we're in a good place. We stumbled in Europe. No question about that. We own that. We know what went wrong. We know what the root causes are. We're all over the root causes and we're fixing it. So I expect that performance, the operational performance, to continue to improve in the Americas. And I expect it to pick up a much faster pace in the next two to four quarters in Europe.

Thank you very much, Gordon.

Thanks, George.

Your next question is from Anthony Pentaner with Citi.

Hey, Anthony.

Please go ahead. Your line is open.

Hey, good morning. This is actually Brian Bergmaier on for Anthony. Thanks for taking a question. Just on the fit to win savings, I know you're looking for another, you know, 120 million in the back half. I was just curious, you know, maybe how much of that is sort of already locked in based on actions you've already taken in the first half.

And then as we start to think about 2027, you know, you're looking for another 150 million. just sort of the same question um is it possible to say how much could be sort of locked down by the end of the year and would just be maybe like a rollover benefit yeah so so anything we publish and um you know here and anything that's uh that's part of our you know our our value office program here is we have we have um not only a clear target but we have uh clear activities um you know around timing proper project management and resources around that so so I would say that as a governance piece so none of this is kind of aspirational and none of it is you know we have a number but we don't know how to get there okay we do have further ideas on how to add more value we just haven't figured out the path on some of those you know above the 150 for next year but everything you're seeing and everything we're published there they're they're deliberate programs and actions taking place day in day out to to deliver on that um so that's that's by way of kind of process john yeah yeah i would add on there just looking at specifically at the numbers here you're right we have about 115 120 million dollars in the back half just under half of that

is pretty much already locked and loaded at because we've done the restructuring we've done the sgna actions by by and large things like that the remaining component has to do with what we call more on that you know phase b activity more more that's improving the operations addressing the things that we're talking about in europe as well as moving forward some of those programs around energy usage that gordon was talking about and and and other factors so so yeah so so going in in the next year to the in the 150 there's a decent number i don't have a specific number i would say probably a third of it off the top of my head is probably locked and loaded because it's just a carry-on effect the annual is actually annualization effect of things that are already done and the remaining component has to do with with more operational improvement

again focus more on europe yeah um but the programs are set you know they're set by plant by by supply chain so it's it's a function of executing the month by month yeah got it got it thanks for that um and then just one follow-up uh you know it seems like south america brazil did pretty well in the quarter just kind of curious your assumptions there for the second half you know i guess some other beverage packagers maybe sound a little conservative in the second half so maybe just curious how much of that kind of volume momentum could uh could carry through thanks i'll turn it over yeah and brian is that in reference to to latin america or overall uh south america and in brazil specifically thanks yeah um you know our our business is

performing you know exceptionally well in brazil and in in the andean region uh and indeed mexico albeit off of um off lower volumes so um the teams they're you know executing or fit to win extremely well executing or go to market extremely well um and we're we're um we're picking up new business um and you know executing the strategy as it should be so we expect that performance continue to the end of the year and well into well into next year um so yeah um demand is demand is is good for for us you know if if if i give you view where we're up in spirits in brazil we're up in food we're up in rtds um where we're and when i say we're up we're growing ahead of the market uh and then we're growing at market in beer um you know in in brazil so i i see that market you know continuing to to perform strongly uh and then in in our andean business you know we're we're growing ahead of the market in beer ahead of the market in spirits ahead of the market in wine ahead of the market in food ahead of the market in rtds and growing at market in um in in food so very strong performance there um in mexico you know volumes are are a bit off due to you know, tequila exports being done and Mexican beer imports into the US. But our, you know, our team there executing fit to win exceptionally well and delivering very strong financial performance. So overall, we're very happy with how our Latin American business is performing, and we expect that performance to continue.

There are no further questions at this time. I will now turn the call back to Chris Manuel for the closing remarks. Thanks.

Thank you. That concludes our earnings call. Please note our third quarter call is scheduled for Wednesday, October 28, 2026. And remember, make it a memorable moment by choosing safe, sustainable glass. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.