O-I Glass(OI) - 2024 Q2 - Quarterly Results

Financial Highlights O-I Glass reported a decline in Q2 2024 financial performance, with lower sales and earnings, while introducing a new value creation program Q2 2024 Key Financial Metrics (vs. Q2 2023) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1.7B | $1.9B | ▼ | | Net Earnings per Share (Diluted) | $0.36 | $0.69 | ▼ 47.8% | | Adjusted Earnings per Share (Non-GAAP) | $0.44 | $0.88 | ▼ 50.0% | | Segment Operating Profit (Non-GAAP) | $233M | $326M | ▼ 28.5% | - Net sales decline was attributed to 2% lower average selling prices and a 4.5% decrease in sales volume (in tons)[33] - New CEO Gordon Hardie introduced the "Fit To Win" program, which is aimed at increasing the company's value and is expected to significantly boost performance over the next three years[29] - Management observed good sequential improvement in year-over-year shipments as destocking across the value chain moderated and anticipates year-over-year sales volume growth starting in the second half of 2024[55] 2024 Business Outlook O-I Glass revised its full-year 2024 guidance downwards, anticipating lower sales and earnings, and plans furnace closures Full-Year 2024 Guidance Update | Metric | Current Guidance | Prior Guidance | | :--- | :--- | :--- | | Sales Volume Growth (in Tons) | Flat to ▼ LSD | Flat to ▲ LSD | | Adjusted Earnings Per Share (EPS) | $1.00 - $1.25 | $1.50 - $2.00 | | Free Cash Flow | $50M - $100M | $100M - $150M | - The company plans additional temporary production curtailment, concentrated in Q3, to reduce inventory levels to be consistent with 2022's historically low levels[36][59] - As part of the "Fit to Win" initiative, O-I anticipates at least six indefinite or permanent furnace closures over the next three quarters to reduce redundant capacity and optimize its network[59] - The full-year adjusted effective tax rate outlook has been increased to approximately 33% to 35%, up from the prior outlook of 30% to 33%[37] Consolidated Financial Statements This section presents O-I Glass's condensed consolidated income statements, balance sheets, and cash flow statements for the reporting periods Condensed Consolidated Results of Operations (Income Statement) O-I's Q2 2024 net sales decreased to $1.73 billion, with gross profit and net earnings also declining significantly year-over-year Consolidated Results of Operations (in millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,729 | $1,890 | $3,322 | $3,721 | | Gross Profit | $303 | $416 | $621 | $900 | | Earnings Before Income Taxes | $104 | $154 | $221 | $424 | | Net Earnings Attributable to the Company | $57 | $110 | $129 | $316 | Earnings Per Share (Diluted) | Period | 2024 | 2023 | | :--- | :--- | :--- | | Three Months Ended June 30 | $0.36 | $0.69 | | Six Months Ended June 30 | $0.81 | $1.98 | Condensed Consolidated Balance Sheets As of June 30, 2024, O-I's total assets and share owners' equity decreased, while total liabilities saw a slight reduction Key Balance Sheet Items (in millions) | Account | June 30, 2024 | Dec 31, 2023 | June 30, 2023 | | :--- | :--- | :--- | :--- | | Total Current Assets | $2,819 | $2,884 | $3,035 | | Total Assets | $9,334 | $9,669 | $9,911 | | Total Current Liabilities | $2,234 | $2,346 | $2,131 | | Long-term Debt | $4,648 | $4,698 | $4,778 | | Share Owners' Equity | $1,631 | $1,744 | $2,143 | Condensed Consolidated Cash Flows Cash utilized in operating activities for the first six months of 2024 was $20 million, a significant decline from the prior year Cash Flow Summary (in millions) | Cash Flow Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Cash provided by (utilized in) operating activities | $(20) | $98 | | Cash utilized in investing activities | $(380) | $(266) | | Cash provided by financing activities | $180 | $132 | | Change in cash | $(242) | $(19) | | Cash at end of period | $671 | $754 | - For the first six months of 2024, the company's use of factoring programs increased cash provided by operating activities by $90 million, compared to a $21 million increase in the same period of 2023[47] Segment Performance Both Americas and Europe segments saw Q2 2024 operating profit declines due to lower sales, prices, and higher curtailment costs Segment Performance - Q2 2024 vs Q2 2023 (in millions) | Segment | Net Sales Q2 2024 | Net Sales Q2 2023 | Operating Profit Q2 2024 | Operating Profit Q2 2023 | | :--- | :--- | :--- | :--- | :--- | | Americas | $899 | $996 | $106 | $126 | | Europe | $802 | $863 | $127 | $200 | | Total | $1,701 | $1,859 | $233 | $326 | - Americas' profit decline was driven by 8.5% lower sales volume, with operating costs increasing as benefits from margin initiatives were offset by production curtailment[56] - Europe's profit decline was mostly due to lower net price, while sales volume was flat. Operating costs were higher due to elevated temporary production curtailment[56] Change in Net Sales from 2023 to 2024 (Six Months Ended June 30, in millions) | Reconciling Item | Americas | Europe | Total | | :--- | :--- | :--- | :--- | | Net Sales 2023 | $1,996 | $1,662 | $3,658 | | Price | $19 | $(72) | $(53) | | Sales volume & mix | $(296) | $(79) | $(375) | | Net Sales 2024 | $1,753 | $1,511 | $3,264 | Reconciliation of GAAP to Non-GAAP Measures This section reconciles non-GAAP financial measures, such as adjusted earnings, free cash flow, and adjusted effective tax rate, to their GAAP equivalents Reconciliation for Adjusted Earnings Q2 2024 adjusted earnings (non-GAAP) were $69 million, or $0.44 per diluted share, a significant decrease from Q2 2023 Adjusted Earnings Reconciliation - Q2 2024 vs Q2 2023 (in millions, except per share) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net earnings attributable to the Company (GAAP) | $57 | $110 | | Total adjusting items | $12 | $30 | | Adjusted earnings (non-GAAP) | $69 | $140 | | Net earnings per share (diluted, GAAP) | $0.36 | $0.69 | | Adjusted earnings per share (non-GAAP) | $0.44 | $0.88 | Reconciliation to Free Cash Flow O-I Glass lowered its full-year 2024 free cash flow forecast to $50 million - $100 million, reflecting a reduced operating cash outlook Full-Year 2024 Free Cash Flow Forecast (in millions) | Metric | Current Forecast | Previous Forecast | | :--- | :--- | :--- | | Cash provided by operating activities | $625 to $650 | $675 to $700 | | Cash payments for property, plant and equipment | $(550) to $(575) | $(550) to $(575) | | Free cash flow (non-GAAP) | $50 to $100 | $100 to $150 | Reconciliation to Adjusted Effective Tax Rate The adjusted effective tax rate for Q2 2024 significantly increased to 36.2% due to a shift in the regional mix of earnings Effective Tax Rate Reconciliation - Q2 2024 vs Q2 2023 | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Effective Tax Rate (GAAP) | 40.4% | 26.6% | | Adjusted Effective Tax Rate (non-GAAP) | 36.2% | 25.9% | Other Information This section provides corporate background, defines non-GAAP measures, and outlines risks associated with forward-looking statements About O-I Glass O-I Glass is a leading global manufacturer of glass packaging, with $7.1 billion in 2023 net sales and operations across 19 countries - O-I is a leading global producer of glass bottles and jars, with approximately 23,000 employees, 68 plants in 19 countries, and achieved net sales of $7.1 billion in 2023[7] Non-GAAP Financial Measures & Forward-Looking Statements Management uses non-GAAP measures for performance assessment, while forward-looking statements face risks including economic conditions and supply chain disruptions - Management uses non-GAAP measures like adjusted earnings, adjusted EPS, free cash flow, and segment operating profit for performance assessment, as they exclude items not reflective of principal business operations[39][40] - Forward-looking statements are subject to a variety of risks, including economic conditions, raw material costs, competitive pressures, changes in consumer preferences, supply chain disruptions, and risks related to the MAGMA program[10][11][65]