By the numbers: Q3 2024
Net sales: $1.68B
Down 3.7% year over year
Loss before income taxes: $57M
Compared with earnings of $82M in Q3 2023
- Q3 recap: O-I Glass executives on Wednesday morning described a challenging Q3 in which net price was down, only partly offset by higher shipment levels. Specifically, there was a 4% decline in average selling prices and a 2% increase in sales volume in tons. Results were impacted by ongoing customer destocking, sluggish consumer trends and O-I curtailing 18% of its production capacity “as we took decisive action to reduce inflated inventory levels,” said CEO Gordon Hardie. Still, executives see market conditions slowly recovering and say shipments are on the rise in nearly all geographies.
- Transformation program: Regarding the multi-stage “Fit to Win” program, which executives also previewed during the Q2 earnings call, O-I anticipates at least $300 million in annualized savings by 2027, with the majority of those benefits, or $175 million, in 2025. “We are conducting a comprehensive review of our entire business and value chain,” Hardie said. O-I aims to set up a “solid recovery in 2025,” he said. The company projects $30 million in “accelerated restructuring costs” in 2024.
- Footprint evaluation: As part of that effort, O-I said it is evaluating the closure of at least 7% of its total capacity by mid-2025, which could result in more than $100 million in annualized savings. Of that total, the company said it has already announced the indefinite or permanent closure of about 4% of capacity. O-I executives did not discuss specific locations. Wednesday’s call follows recent disclosures of facility closures in Illinois and Ohio and a severance program that involves Q4 payouts.
- Greenfield MAGMA plant operating: O-I began operations in Q3 at its long-anticipated new plant — its first new facility in nearly two decades — in Bowling Green, Kentucky. O-I touted this as its first site built for its modular advanced glass manufacturing asset, or MAGMA, technology, an innovation for more efficient and less environmentally intensive production. O-I has also highlighted the location’s proximity to “the Bourbon Trail,” though spirits was one of the sectors hardest hit by destocking, particularly in North America, according to O-I’s commentary in recent quarters.
- Consumption trends: Trends in food and non-alcoholic beverages have been more positive than in beer, wine and spirits, Hardie said. It’s especially hard to gain insight into how spirits inventories are trending in consumers’ pantries. “There is considerable uncertainty and lack of clarity regarding the levels of in-home pantry stock and the rate at which it is depleting. This remains a significant unknown, particularly in the U.S., said Hardie, due to the different paces of consumption for beer, wine and spirits.
- Outlook: O-I previously projected sales volumes would be flat or down by low-single digits in 2024. It now anticipates volumes will be down on the year, either by low or mid-single digits. The company also lowered its full-year earnings guidance and now projects negative free cash flow at a midpoint of $150 million. “This updated guidance reflects lower than anticipated shipment levels for the year, additional temporary production curtailment to reduce inventory levels amid softer demand in the remainder of 2024, and a higher effective tax rate due to lower earnings,” O-I reported.
