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On Wednesday, 11 June 2025, O-I Glass Inc. (NYSE:OI) presented its strategic initiatives at the Wells Fargo Industrials & Materials Conference 2025. The company outlined its plans to enhance shareholder value by focusing on competitiveness, growth, and geographic expansion. While O-I Glass reaffirmed its positive financial outlook, challenges persist, particularly in European markets.
Key Takeaways
- O-I Glass plans to increase EBITDA from $1.1 billion to $1.65 billion over five years.
- The "Fit to Win" initiative targets $650 million in cumulative savings by 2027.
- Sales in The Americas are growing at 5% or higher, while Europe experiences a decline.
- The company aims to grow its premium business from 27% to 40%.
- O-I Glass is focusing on reducing costs to compete with aluminum cans and other packaging.
Financial Results
- 2025 Outlook: Reaffirmed adjusted EPS of $1.2 to $1.5 and free cash flow of $150 million to $200 million.
- EBITDA Target: Aiming for $1.45 billion by 2027 and $1.65 billion over five years, with an 8% CAGR growth.
- Premium Business Growth: Targeting an increase from 27% to 40%.
- Cost Reduction: Aiming for a 20% reduction in mainstream categories.
- Cash Flow: Expecting over $2 billion in cash from operations over the next three years, primarily for debt reduction.
Operational Updates
- Fit to Win Initiative: On track to achieve over $250 million in savings this year.
- Regional Performance: The Americas show stronger-than-expected growth; Europe faces challenges due to export exposure.
- Capacity Expansion: New capacity added in the Andean region.
- Plant Closures: Consolidated operations with plant closures in Europe.
- Energy Reduction: Implementing projects to lower energy consumption.
Future Outlook
- Growth Strategy: Emphasizing competitiveness, profitable growth, and strategic expansion.
- Geographic Focus: Aiming to improve recycling rates in targeted U.S. corridors.
- Innovation: Exploring new opportunities in water and ready-to-drink (RTD) glass packaging.
- Sustainability: Promoting glass as a sustainable packaging option.
Q&A Highlights
- Competitive Advantage: Leveraging a network 1.5 times larger than the nearest competitor.
- Cost Competitiveness: Focusing on cost reductions to compete with cans and other substrates.
- Consumer Trends: Addressing health and wellness trends with zero-alcohol options.
- Recycling Infrastructure: Working to enhance recycling rates in key U.S. areas.
- Tariff Exposure: Limited impact, mainly affecting European spirits and wines.
For a deeper understanding, readers are encouraged to refer to the full transcript below.
Full transcript - Wells Fargo Industrials & Materials Conference 2025:
John Hodrick, SVP and CFO, O. I. Glass: Thank
Gabe Haiti, Senior Containers and Packaging Analyst, Wells Fargo: you all for being here. I’m Gabe Haiti, Wells Fargo’s Senior Containers and Packaging Analyst, joined by my colleague Richard Carlson here. I’d like to welcome O. I. Glass.
And representing the company is John Hodrick, the SVP and CFO and Chris Manuel, Vice President of Investor Relations. I would like to remind everybody that it is kind of intended to be a fireside chat. If there’s any questions, don’t hesitate. And with that introduction, I think, John, you have a couple of prepared slides, please.
John Hodrick, SVP and CFO, O. I. Glass: Yes. Of all, good afternoon, everybody, and big thanks to Gabe and the Wells Fargo team for hosting us today. I’m joined today by with Chris to my right, who’s Head of IR. We just want to walk through a little bit of our story, the thesis that we have and our strategy to start the conversation. But before we get going, note the Safe Harbor comments and the materials are also posted on our website.
Okay. So OI, I’m assuming most of you in the room are familiar with the company, but just to level set. Obviously, we’re the world’s largest global glass packaging company. We serve over 6,000 customers across 74 countries through our network of 69 plants in 19 countries. We serve and help produce and help manage many of the brands that you enjoy every day and every week.
In fact, we are the world’s largest producer of mainstream and premium glass packaging. So as we go forward ultimately we’re looking to drive longer term growth as we leverage our best in class net promoter position with our customers and leverage an improved cost and competitive profile that we’ll talk about over our network which is 1.5 times larger than the next closest competitor which we believe ultimately provides a competitive advantage. So let’s talk about our investment thesis. We laid this out during our Investor Day back in March. But I think we got a very clear comprehensive plan here to drive shareholder value creation.
It starts with becoming more competitive, cost competitive. Historically, I would say that OI is pretty in the ballpark with competitiveness within the glass industry, but we are redefining our competition as the aluminum can. The aluminum can has been taking the market and profit share opportunities in the marketplace and we want to reduce our cost and improve our competitive position to regain that share and grow our business. This will include an end to end network optimization, value chain optimization, includes a lot of work internally, but also working with our customers and suppliers to create much more efficient systems. And over as we move along, we want to grow our business in the more premium categories, which actually is growing four times faster than the mainstream categories and we’ll talk about that a little bit too.
And ultimately as we get that business competitive and we are ultimately growing organically, we want to be able to expand our business. Right now, O I the largest global glass company only has 9% global market share. So there’s a lot of opportunities to be able to expand and grow our position within the glass universe. And importantly, we’re taking an economic profit approach to the business going forward as we look to drive value. So we believe that OI has a strong right to win.
So consumers prefer drinking out of glass. Are studies, many studies and we have information in our recent Investor Day that show this. When given the option, people want to drink out of glass. It’s a more premium experience. The question is how do we make that more available to people.
And so we are working with a privileged group of world class customers. As I mentioned before, great Net Promoter Scores with them. They want to do business with us and they want to be able to grow in glass. So we want to be able to leverage our privileged footprint to make that a reality. And in fact, what we want to be able to do is leverage our global scale, but also our local presence.
I was just looking the other day and talking with one of our general managers in Brazil. We’ve been in Brazil for over one hundred years. And so and not too many multinational companies can say that. So we got long deep roots and histories with a lot of the customers over in those particular market places. And ultimately, over time, as we drive improved competitiveness, we believe that we’re going to be able to leverage all of that to drive value for the company.
So sequencing matters, and we just want to show real quick what’s the virtuous cycle that we’re trying to create. So it does start with competitiveness. We got to get our costs down. Off of a more competitive base, we are able to profitably grow the business off of a more optimized network. That’s going to drive better earnings and importantly cash flow.
We’re going to use that cash flow primarily to reduce debt and get the balance sheet in a better position and ultimately allow us to be able to invest in the growth that I was talking about. And as we get the balance sheet in the right place and the earnings engine going, be able to share more value back with shareholders. So we are organizing all of this in three different horizons. Horizon one is what we call fit to win. It’s all about becoming competitiveness radically taking a radical position to reduce costs within our industry.
Off that competitive base, we expect it to go into the horizon, profitable growth and then ultimately be able to expand the business in other geographies. We have laid out a number of what we believe are aggressive but achievable targets for the organization. We take a three year view and also a five year view here. Considering that we started about $1,100,000,000 of EBITDA next year I mean last year, we’re looking by 2027 to grow that to $1,450,000,000 and ultimately over a five year period to $1,650,000,000 That’s more than an 8% CAGR growth in EBITDA on a year over year basis. And you can see that there’s relative improvement also in the margins, free cash flow and economic profit creation for the company.
In addition to the financial metrics, we also have a number of other more business related objectives post the 2027 window. We want to be able to grow the business above the average for the marketplace. We want to expand our premium business from 27% to 40% or thereabouts. And we want to be able to reduce our costs by 20% or so in the mainstream categories that significantly overlap with can the can activity, for example, along with a number of other measures that you can see on the page. So how do we get there on the EBITDA side?
This just gives you the moving pieces. As we move from $1,100,000,000 to 1,450,000,000.00 you can see that we’re being quite conservative and cautious on the commercial outlook given the overhang in the marketplace right now. As you can see, we’ve made a provision for a reset of current favorable energy contracts. So we’re absorbing that in this outlook, maintaining flat sales volume. But really what’s going on is we’re improving the cost position of the company significantly through our Fit to Win initiative, which we expect to generate at least $650,000,000 of value over the next few years here.
Over as you go into that next window of time, you see a much more balanced contribution of benefit from Fit to Win as well as our profitable growth and ultimately what we call strategic optionality, which is expansion beyond our own four walls. So all of those things are pretty laid out and really what you see here is a self help story that was substantially within our control and we’re not relying on any commercial magic. So how are we doing? I would say very well. I’m really pleased actually with how the company has come out of the gate on Fit to Win.
As you can see here, this is our scorecard that we shared during our first quarter earnings call. We anticipate $250,000,000 or more savings this year on Fit to Win and then leading to $650,000,000 or more cumulative savings by 2027. And we’re off to a good start at $61,000,000 I’d say that was probably 10,000,000 to $15,000,000 better than I anticipated. What we had seen here is that I mean, what you see here is that we are putting these activities in two phases, what we call phase A and phase B. Phase A are your quicker hits, reducing SG and A costs, eliminating excess capacity in our network.
That is all going all to schedule and well advancing. But then what we really were pleased with is the advancements that we saw on what we call Phase B. Even though a lot of these programs are yet to actually kick off, our operations are jumping ahead and actually driving a lot of the principles behind our cost transformation and total organizational effectiveness programs and we’re seeing early benefits associated with that. So as we look into the balance of the year, I’m also really pleased with what we’re seeing in the second quarter on cost and we’re optimistic that we’ll be able to meet or achieve our 2025 and 2027 fit to win targets. So what are we going do with the cash flow?
O I generates significant cash from operations. So over the three year period of time, well in excess of $2,000,000,000 of cash flow there. we want to properly maintain our assets so that we sustain that strong cash flow. We will be investing some in the productivity, especially as we go through Fit to Win, we’re going to find opportunities to improve the cost position of the business. We’ll also be doing some restructuring that’s currently underway.
But you’ll see after the free cash flow side, the majority of the available free cash flow will go to debt reduction as well as supporting our current moderate share buyback program. We’ve also shown on the right hand side various different examples of the type of investments that we might would do as we move forward. Let’s just shift to the current year. We are reaffirming our 2025 outlook that we had since early part of the year, that you see that adjusted EPS of between 1.2 to $1.5 and free cash flow between 150,000,000 to $200,000,000 So we remain comfortable with that. Of course, we continue to drive towards the upside of that and continue to work on additional cost plans and everything to be able to meet and be on the high end of that guidance range from an ideal standpoint.
So as we think about where we are right now in the marketplace, I would say the sales volumes quarter to date are down modestly. They’re down about 2% or 3%. Now keep in mind that’s probably down about 1% when you take out the noise of Easter and the timing of the holidays on a year over year basis. So pretty much in line with what we were expecting. Now what we are seeing is that The Americas is definitely stronger than we anticipated.
It’s growing at about 5% mid single digits or better. But we’re also seeing a bit of a softer Europe, which is down mid single digits or maybe a little bit more. When you look at The Americas though, you’re seeing nearly all categories and geographies up and with the strongest performance over in the Andean marketplace. Latin America marketplace are fundamentally stronger. And if you take a look over in Europe, your softest areas are in those pockets that are more exposed to exports.
About 40% of what we make over in Europe ultimately gets exported out of Europe. So things like spirits, wines, international beer brands, those were a bit softer. It leads us to think there’s probably some tariff pause or impact associated with that right now as people given the uncertainty. But overall, I would say the volumes are better in The Americas and a little bit softer in Europe. We’re entering the year, we thought The Americas would be, say, up 2% and Europe would be down 2%.
We’re just seeing both of them a little bit more stronger in the America, little bit softer in Europe overall. So then just to conclude, I think we’re off to a good start this year. We’re really focusing on fit to win, ideally upside performance of that to drive us in the higher end of the range as we work going forward. And we’re looking for strong earnings improvement this year as we execute our strategy. So Gabe, back to you.
Gabe Haiti, Senior Containers and Packaging Analyst, Wells Fargo: Thank you, John, for all the detail here. This has been a stock that’s actually pretty strong year to date. Maybe a little bit of early endorsement from investors based on the strategy. You’ve been at the organization fifteen years? Sixteen.
And there’s been some other restructuring efforts at the organization that have had varying degrees of success. So I’m curious, maybe I’ll take the easy answer ahead of time, but I think Gordon bringing the EP or the economic profit approach is different this time. But maybe what’s different about this program? Or can you comparecontrast this versus other efforts at OI historically? And again, appreciating that it’s not just OI.
I think yesterday, the term volume recession was used for packaging or packaging volume recession. So it’s the past five years have been anything but normal from a demand standpoint.
John Hodrick, SVP and CFO, O. I. Glass: Right. Yes. So what’s different this time than last time or previous times? What I would say is OI and the glass industry have historically approached our business from the perspective of glass company, okay? And I think the difference is what Gordon is doing is he’s coming in and he’s bringing in a lot of insights, having spent his career in food and beverage, but not within glass itself.
Okay? So what he’s doing is he’s bringing in insights that have application in the broader space, but really have not been utilized within a glass company before. And so I think in my from my standpoint, having worked in the company for fifteen years, in the past what we did is we tried to say, okay, what does good look like and how do we get closer to that? What Gordon is doing with what he’s been brought in is that we’re redefining what good looks like, which is a step up from how it’s been defined historically. So for example, if you go into the manufacturing systems and of the company, what some of the standards were set maybe twenty or forty years ago about what good looks like.
And now I think those are being challenged. They’re being challenged through an initial thesis, but then coming in with experts and data scientists and everything like that to be able to help us evaluate each one of those steps and understand. And I was having a conversation earlier today, one of the steps we brought in a data scientist, and there’s 700 variables that affect a furnace.
Gabe Haiti, Senior Containers and Packaging Analyst, Wells Fargo: But
John Hodrick, SVP and CFO, O. I. Glass: we’re able to really isolate five or six that really matter. And as a result, when you do that, you can say, what are you going to really target to make that better? And so those are the aspects, I think, that are very different than in the past. It involves bringing people outside of the business, technologies outside of this business, solutions outside of the business to be able to refresh and redefine what is good.
Chris Manuel, Vice President of Investor Relations, O. I. Glass: I’d add one more point there, too, and it’s redefining what the competition is and going beyond just other glass. And we had to recognize that to compete with cans or other substrates, we needed to take a substantial chunk of our cost out.
John Hodrick, SVP and CFO, O. I. Glass: Yes. To build on that, 30 to 40% of our business overlaps with cans. The others, 60% to 70% doesn’t, the spirits and the wines and etcetera. But in that 30% to 40% what you need to do what needs to be true to be successful is different when you really think in the context of beating or being able to be competitive against cans. So you reset the horizons of what you’re really trying to achieve, you can achieve more.
Gabe Haiti, Senior Containers and Packaging Analyst, Wells Fargo: Understood. Thinking about the volume commentary, and I just want to make sure that you get everything out there or that you would like to and maybe we fully understand. It sounds like maybe the obvious thing is we look for a little bit of resolution or for Europe and The U. S. To kiss and make up and figure out what’s appropriate from a tariff standpoint.
And that gives visibility to your customers. But then can you speak to some of the strength that you’re seeing in The Americas, categories that stand out? Or I know you talked about the Andean region doing a little bit better, and then maybe the sustainability of that as you kind of look at order books today?
John Hodrick, SVP and CFO, O. I. Glass: Yes, sure. So the fact that The Americas is up 5% or 6% right now is a combination of two factors. One is it’s a comp issue on the prior year, okay? So if you’d like to take a look at North America where consumer demand still is somewhat muted, it’s the fact that last year there was significant destocking going on, okay? And then we just have the absence of that.
But if you move over into Latin America, it is a fundamentally stronger consumer demand. And in particular in the Andeans, we have worked with strategic customer and they have brought in new brands into that marketplace. And then we were last year we expanded and brought online new capacity to be able to support that and now we’re getting the benefit of that. So it’s a combination of both of those factors really dependent on where you are in the marketplace.
Gabe Haiti, Senior Containers and Packaging Analyst, Wells Fargo: Got it. One thing that we’ve written
John Hodrick, SVP and CFO, O. I. Glass: it’s okay.
Chris Manuel, Vice President of Investor Relations, O. I. Glass: Can you
John Hodrick, SVP and CFO, O. I. Glass: give us
Gabe Haiti, Senior Containers and Packaging Analyst, Wells Fargo: two or three potential applications where you
John Hodrick, SVP and CFO, O. I. Glass: Yes. So the question is, are there different examples where glass could be a replacement against cans? So let me step back and talk about what is what needs to be true for that to happen, okay? So if you take a look in North America, glass cost per unit is about 25% to 30% higher than a can. And we’ve lost market share over the last decade in North America.
You go over to Europe, it hovers around 14%, and we’ve been able to maintain market share over in Europe. So glass can command a premium price, but not that much, right? I mean you got to get it within a certain range. And so substantially reducing the costs in The Americas, in North America for that example, to be under those types of rates will allow for you to be more cost competitive against the cans. And then you can see just some switching.
In fact, a couple of years ago when because of the prices of metals and things like that, that differential got down to about 14% or 15% in North America. And we did see switching. We did see movement of demand coming from cans over to glass containers. So most of our customers even on the brewer side, we said we’d love to see more in glass. It’s a better premium experience and everything like that, but we have to keep it has to be done within a certain price.
And so I think that that is an important part. And not necessarily such focusing just on cans, but some of the conversion opportunities that are out there. I think waters is a really important one. You see a lot of waters in plastic and things like that. And with whether it’s sustainability issues or health and wellness issues, we’re seeing really strong growth, in particular sparkling water.
And we know there’s some generational shifts in alcohol consumption and things like that, but we are seeing really strong growth in sparkling waters as a potential alternative and also the whole zero alcohol opportunity is really big. And one other example is if you take a look in The U. S, RTDs, the ready to drink items and things like that, we have been prohibited by regulation for putting spirits based RTDs in glass containers. It was prohibited. Only beer and malt alternatives could have been put in glass for whatever reason, lack of consumer confusion.
We ultimately got a few months ago, that restriction that lifted. And so now we’re able to go in and work with the spirits customers to be able to say, hey, if you really want to have a spirits based mocktail or RTD or something like that, wouldn’t you rather have it in glass? It’s a lot more consistent with the image that you have with your spirits brand than maybe a can would convey. So those are a couple of different options that we’re looking to convert and what needs to be true for that to happen. Thank you
Gabe Haiti, Senior Containers and Packaging Analyst, Wells Fargo: for that. A little bit related, Make America Healthy again. We’re in print talking about some of these concepts, some of which I can see probably helping and maybe potentially being a headwind for, quite honestly, again, consumption, generally speaking, or at least net inflationary if there are formulation changes and things like that. But specifically around the alcohol consumption that you talked about, we’re seeing it most pronounced in beer, I think, and then maybe on the wine side. Wine is predominantly packaged in glass.
So just maybe your customers’ conversations, no one specific, but just trying to understand if they’re observing that and maybe any possible explanations they have. And again, to your point about generational changes and maybe how to combat some of that.
John Hodrick, SVP and CFO, O. I. Glass: Yes. The health and wellness is very much a trend, but it’s a complicated trend, right, to your point. It comes specifically to what’s happening in alcohol, yes, there seems to be evidence that people are drinking less alcohol. I don’t know if that’s universal around the world, but it’s certainly been much more of a topic of consideration here in The United States. Yes, wine and beer are down, but spirits are actually doing fine.
I mean they’re better overall than the other two. So what we are seeing is people are drinking less, but when they do drink, want it to be more of a premium experience and we’re seeing a little bit more movement towards that. But I think and in fact, I was with one of our largest customers, big brewery, and 90% he said the CFO said 90% of their growth is in their zero alcohol categories and things like that. So yes, these yes, everybody is trying to respond to that. They’re creating the zero alcohol options or low alcohol options.
But we’re also seeing, as I kind of mentioned before, is the knock on effect. People are drinking something. And they go out to dinner, even if they’re not going to drink some alcohol, they want to have something better than just a straight glass of water. So you are seeing the sparkling waters, the tonics, those types of things taking off. And in fact, it’s one of the strongest growing categories that we have to be able to offset maybe some of those, the alcohol component of it.
So it’s complex. What is the net effect of all that going to be? Who knows? There’s pluses and minuses. You brought up MAHA and you and I were talking earlier.
RFK was speaking at a conference. It was Chemicals of Concerns conference, believe it or not, about a month or so ago up in Charlotte. And he spent quite some time talking about packaging, obviously talking about the concerns around plastic packaging and as well as the fact that there’s a liner in an aluminum can. But he also did talk about that we need to rejuvenate glass. He talked extensively about the need to bring the returnable reusable bottle back into more prominence, which it was decades ago.
And it’s very live, 50% of beer in Europe is in the returnable bottle, 40% in Brazil, for example. So there’s opportunities to bring this back. And he specifically said we got to reverse the trend in glass plant closures in The United States to be able to make sure that this healthy, sustainable packaging option, glass is the only packaging option considered generally safe for human consumption transfer by the FDA. So it’s an important part of making America healthy again. And how all these pieces come together obviously will become somewhat complex.
Gabe Haiti, Senior Containers and Packaging Analyst, Wells Fargo: I’m be careful how I phrase this question, but I think consumers also value convenience, And so there’s a consideration there. But just we’re talking about recyclability. We’re talking about the infrastructure in place. It wasn’t necessarily on my list, but we’re bringing it up. Europe, to your point, has a more robust glass system.
I want to say it’s almost three times the size of the market than we are here sort of in, call it, North America proper. Maybe some reasons why. And do we have any visibility on increasing infrastructure here in The U. S. For recycling glass?
John Hodrick, SVP and CFO, O. I. Glass: Yes. So if you compare and contrast Europe and North America, for example, in the recycling environment, you see very significant differences. And in The U. S, we have a the multi stream. You basically throw everything into one bin and it gets sorted out later on over in Europe.
It’s a multi stream where the consumer breaks it down in advance. Obviously, is more superior because it’s sorted from the very beginning. In The U. S, about 22%, 23% of glass is recycled, for example. It’s 70% over in Europe.
Culturally, it is done. There’s much more penalties on the cost of creating waste over in Europe as opposed to The U. S. Really where there practically is none. And the other major difference is the recycling is managed at the federal level over in Europe.
There’s no federal regulation in The United States. There’s no practical state regulation other than a few bottle bill states. So you’re really left with about 3,500 municipalities that you have to work through. So it is challenging. But with that said, is there are about six major corridors in The U.
S. Where if you take a look at where glass is made and where the recycling content is at, if you can get those corridors more advanced,
Gabe Haiti, Senior Containers and Packaging Analyst, Wells Fargo: you
John Hodrick, SVP and CFO, O. I. Glass: can make a lot of progress without having to change the whole country. And so we continue to work into the value chain, and there’s opportunities to do more in there to be able to make sure that the interest of glass, in particular, where those treatment facilities are relative to collection and the glass plants, if we can make that more convenient and more consistent, then I think we can make better progress on glass.
Gabe Haiti, Senior Containers and Packaging Analyst, Wells Fargo: Thank you. I might go off script for a Apologize. I think glass and packaging in general, at least as it relates to for beverages, has the attributes of what should be an attractive industry. You’ve got kind of regional distribution nodes. You’ve to be with a close proximity of customers.
You’ve got reasonably consolidated markets, maybe more so in The U. S. Than you do in Europe, but still reasonably consolidated. So two part question. One is, do you agree with that, generally speaking, that those sort of moats to the business still hold true?
And then can you talk about competitive response here in the past, call it eighteen months, and how the market has behaved, in softer, weaker demand environment?
John Hodrick, SVP and CFO, O. I. Glass: Yes, sure. I think to your question, yes, the moats are there. I mean, making glass is a it’s a complex process, right? I mean, it’s a capital intensive process. There’s a lot of know how associated with it.
It’s geographically enclosed. The key thing is it’s got to be cost competitive. And to the degree that it overlaps with categories that are exposed to less costly options, we got to respond to that and get it down there. Think that’s probably one of the biggest things that we’re indicating. We got to improve the competitiveness and we got to redefine the competition differently than we have in the past.
And as far as the how the marketplace is operating, mean, course, I could only talk to OI, right? I can’t talk to the intent of other players. But the notion of understanding value is much better, I think, now than it was in the past. I mean, the margin recovery that’s happened over the preceding number of years, it had made it very clear where the profit is. And so making sure that you’re managing your business like always managing its business is understanding how all those variables come together and what type of approach to the marketplace is constructive to your own profitability.
And so I think it seems as though that broader process is understood.
Gabe Haiti, Senior Containers and Packaging Analyst, Wells Fargo: People being disciplined. Short answer.
John Hodrick, SVP and CFO, O. I. Glass: Yes. Everybody knows what drives profit and what drives margins. And so just operating to be able to sustain your business is pretty I mean, it’s just good business.
Gabe Haiti, Senior Containers and Packaging Analyst, Wells Fargo: It wouldn’t be 25% if we didn’t ask about tariffs. You identified, I think, 15% of your business or so that’s in some way, shape, or form downstream customers impacted, and then some that’s USMCA compliant as it sits today. Maybe just dive into that a little bit. Again, you kind of alluded to it, like maybe some customers pausing. Can they redirect that to other parts of the world?
John Hodrick, SVP and CFO, O. I. Glass: Yes. Sure. So to lay the foundation, to level set on it, we have about 15% of what we make crosses over The U. S. Border.
And that’s in the form of both empty containers, but more predominantly in filled containers. And as you had mentioned, most of that is movement across in The Americas between Canada, The U. S. And Mexico,
Gabe Haiti, Senior Containers and Packaging Analyst, Wells Fargo: etcetera,
John Hodrick, SVP and CFO, O. I. Glass: but that’s all exempt under USMCA. So what’s really left that has a potential exposure is about 4.5% of our business in volume that comes primarily from Europe in the form of filled whiskey bottles or spirits, I mean other spirits, wines, premium beer over in The United States. Okay, that is the pocket that is exposed to whatever potential tariffs might come through. And I think, as I mentioned, yes, I think there’s probably a little bit of a pause, a little bit. Wants to have a boat full of products stuck in the Atlantic and a tweet comes out and also you’re left with a tariff situation.
In particular, you look at the wine category, and that’s a very fragmented base. And a lot of the people who buy into wine are just smaller distributors and things like that rather than large companies managing big global value chains and things like that. And I think they, in particular, are probably held off on buying because that could be quite consequential to them. So as we stand, I mean, really, we have a very limited exposure on tariffs overall. And really, the biggest element that’s unknown to us is that if tariffs get ultimately get put in place that actually change consumer behavior, that’s probably the biggest unknown.
It’s just that the consumer goes down reduces consumption activities because of the weight of tariffs. That’s probably the biggest swing factor that we can see. It’s not so far, not really seeing anything, right? But it’s but a lot of the things have been deferred. So we’re keeping a watchful eye on it.
But certainly, entering the quarter, I think there’s a bit of a sigh of relief relative to where we could have been at this point in time. So time will play out, but all things considered, it seems like it’s moderated.
Gabe Haiti, Senior Containers and Packaging Analyst, Wells Fargo: Last one for you. You spent a decent amount of time talking about obviously Fit to Win and the transformation. Dollars $650,000,000 is a big number. You talked about being a little bit ahead this year. You’ve actioned a couple of plant closures or I think are in negotiations over in Europe for some rooftop consolidations and things like that.
Can you talk about where you’re ahead? And then, is that more it sounds like TOE, people are being early adopters and proactive with that, but just, anything else that we should be mindful of as we look out over the balance of ’twenty five and then maybe into ’twenty six that we should be looking out for?
John Hodrick, SVP and CFO, O. I. Glass: Yes. So as far as yes, we’re coming out of the gate better and we’re saving more than I originally anticipated and what we had in our plans. And part of that is pull forward of activities that otherwise would have come through more a broader rollout like the TOE program. Another example would be energy. Okay.
So we have a project going in and talking and looking at how can we reduce energy consumption. And so the plants are taking to heart a lot of the things that we plan to roll out in advance of the actual initiatives going out, which is a great sign because, one, we get the benefits earlier. And then two, it just shows the resolve of the organization to embrace these changes and new ideas that are maybe outside of glass in total to be able to incorporate them and save money. So and the TOE project is just starting to roll out. And so, all of that is happening even before we institutionalize it within the business.
And I think the things to keep a lookout for going forward is we’re going to report out every quarter like we do, where we land on fit to win, the different levers that we’re doing. And I think it’s going to be probably the TOE program that if that could drive swing upside performance. If we’re seeing the performance of the plant personnel right now, even before it starts to roll out and when it does formally roll out, can we do better there? I think that’s what we’re keeping a good eye on, and I like what I see so far in the behaviors.
Gabe Haiti, Senior Containers and Packaging Analyst, Wells Fargo: Well, think people were giving you a hard time for not raising guidance or and you said, hey, listen, we feel good about being at the top end. You reiterated that today, so good sign. Great. Thank you all. Appreciate your interest.
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