O-I Glass(OI) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Full year adjusted earnings were $0.81 per share, slightly exceeding guidance but down from historically high performance in 2023 [6] - Fourth quarter reported an adjusted loss of$ 0.05 per share compared to adjusted earnings of $0.12 per share in the same period last year [6][16] - Free cash flow was a$ 128 million use of cash, reflecting lower earnings and elevated restructuring interest and tax payments [13] Business Line Data and Key Metrics Changes - Segment operating profit in the Americas was $96 million, up from$ 93 million in Q4 2023, benefiting from a 5% growth in sales volume [18] - Segment operating profit in Europe was $40 million, down from$ 75 million in Q4 2023, due to unfavorable net price and a 5% decrease in sales volume [19] Market Data and Key Metrics Changes - Shipments in the Americas increased by 5% in Q4, with notable growth in Mexico and Brazil, while shipments in Europe declined by approximately 5% [21][22] - The company noted sluggish market demand and high in-home spirits inventories, particularly in the US, impacting net price [7] Company Strategy and Development Direction - The company is implementing a "fit to win" strategy aimed at improving competitiveness by reducing total costs and enabling sustainable growth [8][24] - The initiative is expected to generate savings of $300 million over three years, with a target of$ 175 million to $200 million in 2025 [25][26] - The company plans to optimize its supply chain and reduce excess capacity, with a focus on improving operational efficiencies [30][39] Management's Comments on Operating Environment and Future Outlook - Management expressed a cautious commercial outlook, anticipating solid earnings improvement in 2025 driven by strategic initiatives [9][34] - The company expects adjusted EPS in the range of$ 1.20 to $1.50 per share for 2025, representing a 50% to 85% increase from 2024 levels [9][34] - Management highlighted the need to align consumer real income with inflation and to moderate destocking across the value chain [23] Other Important Information - The company anticipates free cash flow to rebound to between$ 150 million and $200 million in 2025, reflecting higher earnings and lower CapEx [36] - The economic spread was WACC minus 2% compared to plus 2% in 2023, reflecting softer earnings [15] Q&A Session Summary Question: Signs of volume stability and trends in alcohol market - Management noted that alcohol constitutes around 75% of the portfolio, with growth in the Americas, particularly in Brazil and Mexico, while Europe faces sluggish demand [45][46] Question: Confidence in pricing component for 2025 - Management indicated that about 55% of the global portfolio is under long-term contracts, providing stability, while the remaining 45% is renegotiated annually [50][51] Question: Impact of potential tariffs on volume - Management stated that the fit to win program is not volume dependent and that exposure to tariffs is limited, with potential volume shifts to domestic brands [57][60] Question: Substrate substitution dynamics - Management acknowledged the need to be competitive with cans and noted that glass volume growth occurs when costs are within 15% of cans [70][72] Question: Energy contract plans and cost management - Management is implementing an enterprise-wide program to optimize energy usage and reduce costs, which is part of the fit to win strategy [82][84] Question: CapEx and restructuring costs - Management expects restructuring costs to peak in 2025, with ongoing activities into 2026, focusing on optimizing the network and reducing fixed costs [125][126]