O-I Glass(OI) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Full-year adjusted earnings reached $1.60 per share, nearly doubling compared to 2024, with free cash flow rebounding to $168 million [3][4] - Adjusted EBITDA increased by 11%, with margins expanding by 220 basis points, while adjusted EPS nearly doubled due to stronger operating performance and a lower effective tax rate [6][11] - Economic spread expanded by 200 basis points, driven by stronger earnings and disciplined capital allocation [5][6] Business Line Data and Key Metrics Changes - In the Americas, segment operating profit rose by 40%, despite a 10% decline in volumes, primarily in beer and spirits [12] - European segment operating profit increased by 8%, with a 3.5% decline in volumes, reflecting contributions from strategic initiatives [13] - Overall, shipments in tons were down 2.5%, with a shift towards lighter weight and smaller format bottles contributing to a 1.5% decline on a unit basis [5][6] Market Data and Key Metrics Changes - Shipments in the Americas were impacted by inventory adjustments, with about half of the 10% volume decline attributed to this factor [21][24] - In Europe, consumption was down low single digits, with stable or slightly higher shipments in wine and food, while beer and spirits remained soft [13][85] - The company maintained a modestly improved market share while upgrading its business portfolio [5][6] Company Strategy and Development Direction - The company is focused on executing the Fit to Win initiative, which delivered $300 million in savings in 2025, with an increased target of at least $750 million for the next three years [8][9] - The strategy includes exiting unprofitable business segments to improve economic profit while maintaining or growing market share [15][33] - The company aims to optimize its portfolio and enhance its competitive position as markets recover [7][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macroeconomic pressures but expressed confidence in achieving 2027 financial targets [4][18] - The company expects continued progress in 2026, with adjusted EBITDA projected between $1.25 billion and $1.3 billion, representing up to 7% growth versus 2025 [15][16] - Management highlighted the importance of disciplined execution and cost reduction in navigating the challenging environment [6][18] Other Important Information - Free cash flow is expected to approximate $200 million in 2026, reflecting higher earnings partially offset by slightly higher capital expenditures [16][70] - The company is working on improving supply chain efficiency, with demand forecasting success rates increasing from 50% to about 68%-69% [48][49] Q&A Session Summary Question: Volume decline in the Americas and inventory adjustments - Management indicated that up to half of the 10% volume decline was due to inventory adjustments, particularly in beer and spirits [21][22] Question: Expanded savings target and energy headwind - The increase in savings target to $750 million was not solely due to lower volumes but rather faster-than-expected savings execution [25][27] Question: Volume outlook and exiting unprofitable business - The 2026 volume outlook includes efforts to exit unprofitable business, with an expected additional 1% movement in that area [31][34] Question: Volume trajectory through 2026 - Management expects a tough first quarter but anticipates a transition to flat volumes in the second quarter and low to mid-single-digit growth in the back half of the year [66][67] Question: European market supply and demand dynamics - In Europe, there is still significant overcapacity in certain categories, but pricing has firmed up compared to the previous year [84][86]