O-I Glass(US:OI)2020-08-06 07:04Financial Data and Key Metrics Changes - Adjusted earnings were reported at $0.01 per share, with free cash flow of $112 million, reflecting a strong cash generation despite challenging conditions [7][21][29] - Segment operating profit decreased to $95 million from $236 million in the prior year, impacted by a 15% decline in sales volume due to the pandemic [21][24] - Net debt was reported at $5.4 billion, with a leverage ratio of 4.1, indicating a stable financial position despite the pandemic [31][32] Business Line Data and Key Metrics Changes - Sales volume was down approximately 15% overall, but improved to a decline of just 3% by the end of June, with a 2% increase in July [9][17] - In the Americas, profit was $52 million, down $88 million year-over-year, with sales volumes down 18% but showing improvement later in the quarter [25] - Europe's operating profit was $42 million, down $45 million, with sales volumes down 14% but improving as markets reopened [27][28] Market Data and Key Metrics Changes - Off-premise sales remained elevated, increasing between 10% and 35% depending on the category, compensating for lost sales from bars and restaurants [18] - North America saw a strong performance in July with mid-to-high single-digit growth, while Brazil experienced mid-teens growth [43] - The demand for glass in Brazil and Europe remained strong, with no significant aluminum can shortages impacting these markets [96] Company Strategy and Development Direction - The company is focused on maximizing free cash flow, preserving liquidity, and reducing debt, with a revised full-year sales volume guidance of down 4% to 7% [9][31][34] - Continued advancement of the MAGMA initiative is a priority, with plans for broader deployment in 2022 following successful trials [14][70] - The divestiture of the ANZ business is part of a strategy to rebalance the portfolio and improve the balance sheet [8][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the pandemic, highlighting resilience and a strong cash flow generation [9][36] - There are uncertainties regarding the future evolution of COVID-19 and its potential impact on demand, but recent trends are encouraging [34][48] - The company anticipates that glass volumes will eventually return and exceed pre-pandemic levels, driven by strong retail demand [19][96] Other Important Information - The company implemented strict cost controls, generating significant savings, with about 70% of cost reductions expected to be sustainable [12][85] - The completion of the ANZ divestiture has allowed for over $350 million in debt repayment, further improving the leverage position [32] Q&A Session Summary Question: July volumes up 2%, breakdown by region and third quarter volume outlook - July sales shipments were up 2%, with North America showing mid-to-high single-digit growth, while Europe was flat [43][44] - Management indicated caution regarding future volume trends due to market volatility and potential inventory replenishment [47] Question: Third quarter outlook and EBITDA expectations - Management suggested that if volumes remain flat, EBITDA could also be flat year-over-year, with decremental margins expected to improve [56][62] Question: MAGMA findings and growth outlook - Positive outcomes from MAGMA trials indicate high-quality glass melting and efficiency, with plans for deployment in 2022 and 2023 [70][72] Question: CapEx guidance and COVID recovery scenario - Maintenance CapEx is expected to be around $275 million to $300 million, with strategic projects potentially requiring additional investment [78][80] Question: Impact of cost cuts in the second quarter - Approximately $57 million in cost reductions were achieved, with about 70% expected to be sustainable moving forward [85] Question: U.S. beer demand dynamics - Increased demand for glass is driven by shortages in aluminum cans, with strong performance in Brazil and Europe [96][97]