Thank you, Kate, and welcome, everyone, to the O-I Glass First Quarter 2026 Earnings Conference Call. With me today are Gordon Hardie, our CEO, and John Haudrich, our CFO.

After prepared remarks, we will open the line for Q&A. Our presentation materials are available on the company's website.

Please review the Safe Harbor statements and the disclosures regarding our use of non-GAAP financial measures included in those materials. With that, I'll turn the call over to Gordon, who will begin on slide three.

Good morning, everyone, and thank you for joining us. Today, we will review our first quarter results, what we are seeing across the business, and our outlook for the year.

Before I begin, I want to thank all our O-I colleagues across the world for their focus, execution, and commitment to supporting our customers in a tough environment. The year got off to a challenging start.

While the top line held steady, demand was sluggish early in the quarter before improving through March. We also experienced elevated commercial pressures in Europe and several one-time external events that increased our costs.

As a result, first quarter adjusted earnings of 5 cents per share came in below our original expectations. Fit to Win continues to deliver, and the disciplines are now embedded across the organization.

We are seeing the benefits of a stronger cost position reflected in new business wins across key categories that should support higher volumes starting in the second half of the year. Operationally, it was a story of two hemispheres.

In the Americas, earnings were stable despite several external disruptions. In Europe, results fell short of expectations amid elevated competitive pressure.

Europe is also earlier in the Fit to Win journey than the Americas, and we expect performance to improve in the coming quarters as we execute the restructuring actions we have announced. Looking to the full year, we expect strong year-over-year improvement in the Americas.

Yet, we have updated our 2026 guidance to reflect a more challenging European market, compounded by elevated energy inflation and broader macro dynamics. John will walk you through the updated outlook in more detail in a few moments.

Even with the near-term uncertainty, our strategy and priorities are unchanged. With continued Fit to Win execution and new business wins, we are confident we can strengthen results as the year progresses and expect to build momentum into '27 and beyond.

We remain laser-focused on our Investor Day objectives, and we believe many of today's headwinds are temporary. Let's now turn to slide four to discuss our top-line performance and volume trends.

As you can see, net sales have remained steady over the past several quarters, even amid ongoing volatility and uncertainty. That said, we got off to a slow start this year, with first quarter shipments down about 8% versus the prior year.

This comparison was also tougher, as last year likely benefited from customer pre-buys ahead of a new US tariff regime. By category, alcoholic end uses were the softest, while NAB and food performed better.

In fact, food is now emerging as our second largest category behind beer. Regionally, shipments declined in North America and Mexico amid ongoing customer inventory adjustments in spirits, while South America delivered mid to high single-digit growth.

In Europe, demand was softest in wine, particularly in the south and an extended negotiation period, while other markets were more balanced. Importantly, volume trends improved sequentially through the quarter, with March volumes down only 2%.

Given that trend, we continue to expect full year sales volumes to be about flat with the prior year. After a slow first quarter, we anticipate shipments to be stable in the second quarter and to deliver low to mid single-digit growth in the second half, supported by easier comparisons and new business wins.

As we implement our new go-to-market approach, we are encouraged by the early progress. We've landed new business across about 15 accounts spanning all categories that should contribute 1.5% of new sales volume starting in the second half of the year.

Together, these wins should help set us up for profitable, sustainable growth in the 1% to 2% range beginning in 2027. While the quarter was challenging, the trend improved as we exited Q1.

The team executed well in difficult circumstances. With steadier demand and new business wins, we believe the fundamentals position us well for a stronger second half.

Turning now to slide five. Fit to Win remains a core driver for O-I.

The program continues to take cost out and optimize our footprint and value chain. Strengthening our cost position improves competitiveness and enables long-term profitable growth as demonstrated by new business wins.

We are now at the halfway point towards delivering $750 million of cumulative benefits through 2027, and we remain ahead of schedule. In the first quarter, the team delivered gross Fit to Win benefits of about $50 million, in line with our expectations.

Net benefits were $35 million after headwinds from external disruptions in the Americas and temporary transition costs as we complete the closure of three plants in Europe. Let me highlight our progress across the phases of the initiative.

Phase A, focused on SG&A streamlining and initial network optimization, generated $32 million of net benefits in the quarter, despite transition costs in Europe. We expect the organizational actions and plant capacity...

Thank you. Sorry, it sounds like we got disrupted there.

We're going to start over. I'm going to turn it back over to Gordon, and we're going to start again on slide five.

Thank you.

Thanks, Chris, and apologies, everyone, for that technical hitch. Turning again to slide five, Fit to Win remains a core value driver for O-I.

The program continues to take cost out and optimize our footprint and value chain. Strengthening our cost position improves competitiveness and enables long-term profitable growth, as demonstrated by new business wins.

We are now at the halfway point towards delivering $750 million of cumulative benefits through 2027, and we remain ahead of schedule. In the first quarter, the team delivered gross Fit to Win benefits of about $50 million, in line with our expectations.

Net benefits were $35 million after headwinds from external disruptions in the Americas and temporary transition costs as we complete the closure of three plants in Europe. Let me highlight our progress across the phases of the initiative.

Phase A, focused on SG&A streamlining and initial network optimization, generated $32 million of net benefits in the quarter, despite transition costs in Europe. We expect the organizational actions and plant capacity closures to be largely completed by mid-2026.

Phase B, focused on end-to-end value chain transformation, was slightly up after absorbing costs associated with disruption in the Americas. Core workstreams continue as planned.

We launched the third wave of total organization effectiveness, and we are accelerating procurement and energy initiatives to drive incremental savings. We are also pursuing incremental opportunities to offset cost headwinds we observed in the first quarter.

Fit to Win is working. We continue to target at least $275 million of benefits in 2026.

With that, I'll turn it over to John to walk you through the financials, starting on slide six.

Thanks, Gordon, and good morning, everyone. First quarter net sales were $1.54 billion, essentially flat with the prior year.

Favorable FX largely offset slightly lower average selling prices and a high single-digit decline in volumes, while shipments improved meaningfully as the quarter progressed. Adjusted earnings were 5 cents per share, down from 40 cents per share in the prior year, primarily due to commercial headwinds, including unfavorable net price and lower volumes.

Operating costs were comparable to the prior year as Fit to Win compensated for unanticipated disruptions. Earnings also were reflected in an unusually high effective tax rate on low pretax earnings.

As earnings improve, we expect a full year tax rate of approximately 35% to 40%, with the potential to move lower in 2027 and beyond. Looking ahead, the full O-I team is focused on strengthening performance as the year progresses.

Let's turn to slide seven to discuss operating results. Segment operating profit was $142 million, down from $209 million last year, primarily due to the commercial pressures we discussed.

As noted, the Americas was stable, while Europe was down considerably. In the Americas, we performed well despite several external disruptions.

The segment's top line was stable, as favorable FX and mix largely offset slightly lower selling prices and a 9% decline in shipments. Demand trends also improved as the quarter progressed, with March shipments down only modestly versus the prior year.

Americas segment operating profit was $142 million, essentially flat year-over-year, benefiting from higher net price, while lower sales volume and higher operating costs were headwinds. Costs included $10 million of disruption-related expense driven by extreme weather, civil unrest in Mexico, and a natural gas pipeline failure in Peru, partially offset by Fit to Win.

In Europe, the results were well below our expectations, and they are the primary driver of the year-over-year decline in segment earnings. Europe's segment operating profit shortfall was driven by a combination of softer demand and an increasingly competitive market backdrop, which pressured price amid low capacity utilization, most notably in wine in Southern Europe.

As a result, net sales declined slightly, with favorable FX partially offsetting lower price and volumes. Shipments were down 7% year-over-year, although trends improved as we moved through the quarter, and March shipments were up slightly versus the prior year.

As you'd expect in that environment, profitability compressed meaningfully. Europe segment operating profit was break-even in the first quarter, down roughly $68 million from a year ago.

The biggest factor was a $76 million reduction in net price, reflecting both elevated price competition and the reset of favorable energy contracts that expired last year. Lower shipments were an additional headwind.

These pressures were partially offset by Fit to Win benefit costs, even after absorbing $5 million of higher-than-expected temporary plant closure expenses. Looking ahead, we anticipate performance to increasingly converge across the regions as Europe builds the same resiliency and execution capability demonstrated in the Americas while continuing our transformation journey.

Turning to slide eight, I'll close with an update on our outlook for the remainder of 2026. As discussed, it has been a challenging start to the year, and we have updated our full year guidance to adjusted earnings of $1 to $1.50 per share.

The chart also reflects our revised EBITDA and free cash flow expectations. To frame the outlook, it's important to separate what we are seeing in our core glass markets and what we are absorbing from broader macro environment, especially energy.

Starting with the core glass business, demand trends are stabilizing as the year progresses, and Fit to Win is continuing to deliver meaningful results. In the Americas, our outlook remains positive, and we expect results to be up year-over-year.

In Europe, we have risk-adjusted our outlook by up to $25 million given elevated competitive pressures, net of additional cost actions, and restructuring should support improved performance in the second half. The bigger swing factor in our updated guidance is macro-driven energy inflation stemming from conflicts in the Middle East, which could total $75 million to $100 million.

Higher energy prices flow through natural gas, electricity, logistics, and certain raw materials. Importantly, our proactive energy management practice sets significant limit further exposure, particularly in Europe, where approximately 75% to 80% of gas requirements are protected at prices favorable to current market levels and higher production in the colder winter months.

We will continue to monitor macro developments, including customer demand and whether broader inflation could further influence commercial dynamics. As we have essentially risk-adjusted our outlook for energy inflation, the appendix includes additional earnings sensitivities to changes in European natural gas market prices.

While our 2026 outlook is conservatively set given macro uncertainty, our strategy and priorities remain unchanged, and we continue to drive towards the 2027 objectives we outlined at last year's Investor Day. We expect Fit to Win to deliver significant value next year, and we believe many of the pressures we are seeing in 2026 are temporary.

More than half of our business operates under contractual price adjustment formulas that reflect changes in inflation on a lagging basis, providing an important structural mechanism as cost conditions evolve over time. Likewise, as capacity utilization increases, particularly in Europe, we believe our competitive position should continue to strengthen.

Overall, we remain focused on the levers within our control, anchored by Fit to Win, and we are determined to deliver the best possible performance this year while building momentum into 2027. With that, I'll turn it back to Gordon for closing remarks on slide nine.

Thanks, John. Let me close with a few key takeaways.

We are not satisfied with our first quarter results, and we are moving quickly to improve performance. At the same time, our strategy is unchanged, and our long-term value creation plan remains firmly on track.

While near-term noise may continue to drive volatility, we see several clear indicators that O-I's underlying fundamentals are moving decisively in the right direction. Here are six reasons we believe O-I is a compelling long-term investment.

Fit to Win is delivering and continues to enable future profitable growth by improving operational discipline and cost competitiveness across the business. Core glass demand is stabilizing, and recent trends are increasingly encouraging.

March volumes point to a clear turning point in demand, providing early evidence that our actions are beginning to translate into profitable growth in the second half and beyond. Improving competitiveness across the footprint is already converting commercial opportunities.

We have 15 confirmed incremental volume wins in hand, yielding approximately 1.5% annualized growth. These ramp up over '26 and into '27, giving us a clear line of sight to profitable, sustainable growth.

The Americas, where we are furthest along in executing our transformation, are performing very well. Our capacity and demand are tightly aligned, and across much of the region, we are effectively sold out.

As such, we are actively evaluating opportunities to bring dormant capacity back online. Further, cost parity between aluminum and glass is spurring increased customer interest.

In Europe, Fit to Win execution is accelerating. While the region trails the Americas by roughly 6 to 9 months, our capacity rationalization and restructuring actions are underway.

Our competitive position continues to strengthen, especially as capacity utilization improves. While we conservatively risk-adjusted our 2026 outlook to reflect Europe's operating environment and the energy backdrop, we remain committed to our 2027 Investor Day targets.

We believe these headwinds are temporary and manageable. Taken together, O-I today is a more disciplined, better balanced, and better positioned for durable growth than at any point in recent years.

Thank you for your time today and your continued support. With that, we'd be happy to take your questions.

Thanks. Hi, everyone.

Good morning. Appreciate the details.

Gordon, John, what has your line management relayed to you about 2Q volumes and Fit to Win performance so far? What have you relayed in turn to the board, and why are you and the board both confident that the turn is happening in 2Q both in terms of volumes and accelerating in Fit to Win?

Relatedly, the phase B on Fit to Win seems to be really not having much contribution so far this year versus target. The second question: I know you gave us some sensitivity, but if you could help us out, if energy rises from here and in consideration of your hedges, is there a way you could give us some back-of-the-envelope EBITDA effects?

Do we need to start worrying about any of your secured debt covenants at this juncture or not, and where would we need to? Thank you, and good luck in the quarter.

Hey, George, this is John. I'll take the second part of that point first.

As far as the sensitivity to the earning situation, we assumed in these numbers given that we're 75% to 80% covered this year, we're assuming a range of €45 to €55 per megawatt-hour being the relevant range. To the degree that energy is below that, for every €5 drop on average, we get back about 5 cents per share, so that's about $12 million or so of EBITDA.

To the degree that it goes above €55 since we're protected, that's more like 2 to 3 cents, maybe $5 million or so of risk. We use a combination of different tools and factors and things to manage our energy positions, we're pretty confident that that number that we have between $40 million and $60 million of pure energy exposure to the elevated environment in the conflict is about right.

Ideally, we can perform better on the downside. Then on the secured question, we're very, very low on our secured ratio right now, very favorable net position.

We're not anywhere near at risk. I'll tell you what, we got significant liquidity, $1.5 billion of liquidity.

We manage our cash very conservatively in the organization, from a balance sheet standpoint and managing of that liquidity, we're in great shape.

Yeah. Hi, George, Gordon here.

With regard to Fit to Win, I think we're very well placed to deliver the $275 million and maybe beyond this year. The way we set up the timing of it, we're in line.

Quarter one delivered to expectation. We did have a number of external events through the tough winter, particularly in North America, and some extra costs in Europe on the closure and reconfiguration of the network that were once-off in nature.

You will see the Fit to Win momentum build. Behind those numbers is very detailed plans, very detailed accountabilities, weekly tracking, we feel we're in good shape on Fit to Win.

As ever, we're always looking at new opportunities that are identified and ways to strip waste and inefficiencies out, we'll be obviously pushing for a higher number, but we're confident in that $275 million number.

What are you seeing so far in 2Q on volume,

or

what have you committed to the board? Thank you.

Yeah. Q1 volumes off about 8% in the Americas, and let me break that down, and about 7% in Europe.

Let me start with the Americas, because it is kind of a story of two hemispheres. Let me start in Brazil, where the business is performing very strongly for us, with beer volumes up mid single digits, NAB up mid single digits, and food and spirits up low teens.

We're outperforming the market in all categories in Brazil. The team there has done an excellent job on executing Fit to Win to become much more competitive, and has already entered what I would consider the profitable growth horizon of our strategy.

An interesting fact: Brazil is now more profitable in 2026 than when it had two fewer major competitors a number of years ago. We expect Brazil to have another very strong volume and financial year.

If I move northwest to Andean, again, performing very strongly for us, outperforming the market in all categories, delivering mid single-digit growth, and we're expecting a very strong second half and full year in that business. We're also executing incredibly well our Fit to Win program in Andean, and I would consider that market well advanced in the profitable growth horizon.

In Americas North, our teams are executing well and addressing very effectively kind of long-run structural issues in that business, yeah, and getting good results thereof. While volumes were down 8%, let me break that down.

About 3% of that 8% was wine volume that was not viable and was a barrier to us getting a much leaner network in place. Along the lines of our EP edict, we've taken that out of the business.

There was about 3% of spirits customers destocking in the face of high distributor volumes. We know that is a temporary piece.

There was about 2% in what I would call missed beer volume due to those external disruptions and we had a furnace repair. We expect another very strong financial year in North America, and indeed the first quarter EBIT in North America was the strongest in over 8 years.

If I look at Americas Central, we're on track for another strong year despite the macro challenges of tariff impact on beer and spirits exports. We're executing very effectively there, and we're driving costs and waste out and becoming much more competitive on the domestic market in beer, in food, and in spirits to offset in part volumes lost in exports, but we expect a strong run home.

In essence, the Americas are performing strongly. We see the volumes coming through, we see the wins coming through with customers, and I'd reinforce that the Americas is about 6 to 9 months ahead of Europe in terms of executing on Fit to Win.

In Europe, overall demand was sluggish in the first quarter, particularly across spirits, wine, and beer. However, food and NAB held up really well.

That said, there are pockets of growth for us. We had a strong volume rebound in spirits in the UK, up mid single digits, and wine up about 11%, delivering a strong overall year-on-year volume growth in the first quarter in the UK.

North Central Europe, which encompasses the Nordics, Germany, and Poland for us, performed strongly, with very good growth in food, up about mid single digit, and NAB the same. We've picked up significant new pieces of business in North Central Europe, where I would say our Fit to Win program is most advanced in Europe, and we can see that competitiveness turning into profitable volume growth opportunities.

They're the two kind of best-performing regions for us. Where the issues lay in volume were in Southwest Europe and Southeast Europe, and that is largely driven by wine, where demand continues to be soft, down in the region overall of about 5%, where there's significant overcapacity and quite significant kind of price pressure in the first quarter.

The bright spot for us in Southeast Europe is food, up about 10%, and spirits up about 2%, and RTDs actually growing quite nicely for us. The main issue in Southwest Europe and Southeast Europe is wine, and some spirits in France as Cognac continues to be impacted by lower export volumes.

Europe, we believe the tide is turning, and when we look at our forecast for quarter two, we expect to be up low single digits, and then low to mid single digits for the back half of the year. Overall in Europe, I think we're having the highest rate of new business wins since pre-COVID, and so that's very encouraging.

One other marker that we keep an eye on is how many of our customers are returning, and we're having customers come back to us that we haven't done business with in a number of years. When you put that all together and we look now at our new go-to-market approach and how effectively that's being implemented, we're confident we'll finish the year close to flat, with sequential kind of volume growth now in each quarter.

I hope that gives you a flavor, George.

Comments help. Turn it over.

Thanks so much.

Yeah. Thanks, Gordon, John, Chris, for taking my questions.

Gordon, just wanted to follow up with you on the new business wins across 15 accounts, and you said spanning all categories. Is that mostly Europe?

Because you did say in response to George question sounded like there's a lot of new business wins in Europe. Can you just comment about those new accounts, the breakdown between, let's say, Europe versus the Americas and what end markets you're really seeing that growth come from?

Yeah. Overall, that growth, if you were to annualize it, would make up about 1.5% so overall.

Right now, that's split about 70%, 75% Americas, 25%, 30% Europe, with Europe kind of building momentum. We're seeing that in beer, we're seeing it in spirits, we're seeing it particularly in food and NAB.

In North America, for the first time, we're starting to make inroads into RTDs. As due to a regulation change last year, it's given us the opportunity to enter the RTD market, which is a market that certainly in Anglo-Saxon markets, is growing in double digits.

The way we've set up our business and our sales forces and go-to-market is a category and sales combo. We see opportunities in each of the categories, and we're executing those, I think, quite effectively.

We expect that momentum of new business wins to continue as we translate cost reduction into competitiveness. If I take people back to Investor Day, the overall strategy is for us to get our cost base way down, and we're doing that.

We still have quite a way to go to be the lowest-cost producer, but we're making tremendous progress, and then sharing some of that productivity with key strategic customers in exchange for profitable growth. You're seeing that come clearly through in Brazil, a business that was really in a tough place 2 years ago and is now outperforming in all categories and a tremendous uplift in profitability over the last 2 years.

We're seeing the same in the Andean, where we're seeing despite a tough macro environment in Mexico, seeing the same dynamic: winning more business, getting costs down, winning more business, improving the financial result. Particularly pleasing to us is North America, which has for years and O-I has been a tough market, where we're addressing finally some structural issues in that business in that market, and turning that into profitable growth, with a number of really strong wins for us in North America.

We believe we're executing the strategy. What happened in Europe in the first quarter, we're mid to end of the network restructure, and I think the overcapacity in the Southwest and Southeast was an issue, and then the energy on top is a bit of a hit, but it's not a knockout for us, and we see a clear path to getting back to the kind of margins that that business can deliver.

That's great color, Gordon. Thank you.

Then just one quick follow-up. Just you mentioned remaining focused on 2027 targets, including EBITDA of $1.5 billion plus.

Your 2026 guide is down about $100 million at the midpoint. Obviously, that's a setback.

Can you help us just bridge roughly how you intend to get to that 2027 guide right now? What levers do you have at your disposal to make up the shortfall?

If you can, I know you may not specifically give prior guidance for 2027, but just maybe walk us through some of the larger buckets that will help you get there given the fact that 2026 is down $100 million. Yeah.

Here's how we look at that. We are absolutely laser-focused on our 2027 Investor Day targets, of which one is $1.45 billion, okay?

There's no question that this is a setback this year, but we're absolutely clear that we have a viable path to that $1.45 billion. Let me give you probably two, three points.

We've already laid out that we have $150 million of Fit to Win to come in 2027. A significant part of our business has what we call PAs, price adjustment formulas, that are lagged formulas that will allow us catch up on some of the inflation this year in next year.

We're also, as I said, starting to deliver and move in more and more of the markets into the profitable growth phase of our strategy, which also should help us bridge that gap, yeah? We've tended to outperform on Fit to Win, there's also the opportunity to do better than that 150, and we're ruthlessly focused on stripping waste and inefficiency out of the business and out of the chain.

When we put all that together, yes, is it a bit of a steeper climb? Absolutely achievable.

In every difficulty, there's an opportunity, and I think the opportunity for us here is to even get more focused and to move even at a faster pace to get to where we need to go.

Good morning. Gordon, John, it seems like you've seen these periods in the past where you have oversupply in Southern Europe with maybe smaller producers in Italy and France.

I'm just wondering if you can talk a little bit more about the competitive dynamics that you're seeing today, and maybe how those situations have sort of resolved themselves in the past. I guess the basis of the question is you were break-even in Europe in 1Q.

I assume smaller producers are doing much worse, and I'm just curious how sustainable that's been historically. Then I guess related question: is it fair to say you're giving up a little bit of share in Southern Europe and maintaining or maybe even growing in Northern Europe?

I'll touch base on that one, Anthony, just to talk about the competitive situation and kind of maybe do a compare and contrast. For example, if you go over to the Americas where a lot of the restructuring has occurred already, we've taken out significant capacity, we went from the low 90s to the upper 90s as far as capacity utilization in that set of markets.

Now you can see that on the bottom line. The performance of the Americas through Fit to Win and a good capacity balance in the marketplace, our results over the last year and a half, 2 years are up about 60% there.

You can see when there is the balance of these activities, it drives performance. If you compare that to Europe, probably going into the year and I think we brought this up during the last call, is that the market was probably more in the low 90s, right?

There is significant amounts of announced capacity closures underway. As we said, we're going to complete the work that we're doing by mid-year.

We believe from what we can see is even net of new capacity additions, you're getting into a very similar spot that you see in the Americas. Much more supply-demand balance and as a result gives us confidence that as we go forward, what we saw in the Americas we could replicate over in Europe.

Yes, it's a more fragmented base in Europe than it is in the Americas, but if you look at the whole, that capacity utilization road map seems to be improving.

Just in addition to that, Anthony, as we laid out at Investor Day, our cost base was too high. We've made significant progress on that further along in the Americas, as I said, but we also see tremendous further opportunity to get our cost base way down.

That is a key focus for us so that we can compete and deliver our commitments in any environment, yeah? A bit to go there, but that is fundamental to our strategy.

Then it's not really up to us to comment how anybody else is doing, but we're crystal clear on what we need to do. We're crystal clear on the point on the cost curve where we need to be at to grow profitably, and we are absolutely determined to get there and have a clear line of sight on how to do it.

Good morning. This is Gaurav Sharma sitting in for Josh today.

Sorry, we missed your name.

This is Gaurav Sharma.

Hi, Gaurav. How are you?

Hi,

good. How are you guys doing?

Good.

I'm just wondering what the optimal utilization target for the European network is in a normal demand environment. Then if there's any additional facilities where you're considering idling versus permanent closures if the market just generally remains soft this year.

Clearly from an overall market utilization standpoint, as I mentioned just before, you see the Americas in kind of an upper 90s utilization across the whole marketplace with our estimate. When we talk about our own plants, when we're running them, something in the 90s, low 90s is a great place to be for a glass plant.

If you're running maybe in the 80s or mid-80s or so, being able to get your utilization up into the 90s is a really good performance trend. That's part of when we have Fit to Win with the Total Organization Effectiveness program is really about driving the productivity up and utilization levels within our own network.

That's where we're trying to drive that. Ultimately, that gives you scale and allows you to continue to network optimize within your system.

When it comes to how do you manage kind of a softer environment, it is obviously you got to make a read on what you think that you need over the long term, right? That has driven our own decisions around capacity rationalization over the last year or more.

You also have to say that you have to have some spare capabilities to be able to meet market growth and things like that. If we go back a year and a half ago, we had about 13%, 14% excess capacity in our overall network, and that's why we announced the larger restructuring, long-term restructuring activities.

In the first quarter, that was down to low single digits or so. Then we're going to continue obviously to complete where we are over in Europe over the next few months or so here.

The idea is that we always want to have a couple percent of spare capacity to be able to take advantage of what Gordon was saying, which is as we grow our business, we want to be able to do that. One of the things we did comment is, over in the Americas, for example, we are bringing back a previously shut down furnace to be able to meet the needs.

You've got the ability to flex a little bit on both sides.

Got it. Thank you.

That was very helpful. Then just quick follow-up to that: you mentioned an extended price negotiation window in the release.

I think you spoke about that at conferences already. I was just wondering if this is done now or if there are negotiations still ongoing on that end.

For us, it's done. Usually the season kicks off kind of late October, early November, and a big chunk of it is usually completed before year-end.

Some of it kind of runs on into the end of January. I think the dynamic this year in Europe or last season in Europe was that there were deals done or agreements kind of brought to near conclusion that opened up again in January and February because of, particularly in Southern Europe and Southwestern Europe, because of the spare capacity and a number of players feeling they needed to keep their capacity full.

There was a bit of toing and froing, and that extended down to sort of I would say mid-February, last week in February, which was an unusually long window. That is done now for sure, yeah.

Now, there's always volume that's not contracted in the open market, and but we're largely done in our business.

One thing I would add to that, and you saw that the volumes in Europe were down 7% in the first quarter, and that we indicated that was concentrated in wine. When those negotiation windows extend like that, people tend to sit on the sideline on their orders, right, because they're waiting for the final deal.

One of the reasons we had a softer first quarter is because of this extended window and a lull in order activity. That's starting to normalize after that window was completed at the end of February.

Also Easter was later this year, which had an impact in Europe.

Hello, Arun.

Hi. Sorry about that.

Hope you guys are well. I guess I just wanted to go back to the volume side.

I would agree that you do have a steep climb for next year, given the $100 million shortfall this year. When we started this journey, a lot of the comments was non-market dependent, and volumes, I guess you could still achieve your guidance with weak volumes, but it seems like volumes have been a bigger headwind than initially thought.

When you think about the 1% to 2% that you could be adding through new business wins, do you expect that to offset continued volume declines? Should we just kind of assume maybe low single-digit volume declines from here for the market?

Is there a path to actually reporting absolute 1% to 2% volume growth on a consistent basis? Or maybe you can just comment on some of those ideas.

Thanks.

Thanks, Arun. No, so, yeah, I think it's fair to say over the last 15 months, probably volumes had been below what we thought they might have been.

We were expecting them to come to flatter a bit sooner. I think what's got in the way of that is the level of inventory in the total system in spirits, for example, and markets like the US and China continuing to be soft.

Then you have the continued decline in wine across both the Americas and Europe, and that probably has continued longer than we initially thought. Where we are is we really feel we've bottomed out, and so when we're talking about being close to flat year-end and then kicking into 1%, 1.5% next year, that's a net position.

These new business wins, they're not small fragmented customers, they're largely of sizeable customers with sizeable volumes, yeah.

I would just add, Arun, two points. One is, if you look at some of our volume numbers, as Gordon had hinted earlier, we intentionally did walk away from some low-profit business, you have to kind of consider that in there.

If you go back to our original strategy, we said, hey, we intended to be focusing on the costs and maintaining a stable top line while we're really focusing on costs. Now we're pivoting to that point where we believe, especially like we've seen in the Americas here and then ultimately in Europe, that the competitiveness is improving, which allows us the baseline to create the profitable growth.

We're at that inflection point where it wasn't necessarily the primary focus of our strategy over the last 18 months, is increasingly going forward because of the cost positions that we're establishing.

Arun, I refer back to my earlier comments, where in markets like Brazil, where we've really nailed the Fit to Win, and translating that into being much more competitive, our volumes are up mid single digits in beer, NAB, and food and spirits, and we're outperforming the market in all those categories. Likewise in the Andean, and increasingly in North America right now, we can sell all the beer that we can produce.

That we have pockets in, as I said, in North Central Europe, where in that particular region, we've had a 7% uplift year-to-date. The entire strategy of getting more competitive and then translating that, working with key customers into more profitable growth, there's numerous clear examples of that across the business, and we're absolutely focused on executing that strategy with more rigor.

Okay. Appreciate the comment there.

I guess

Arun, one other point I'd make, we continue to see the cost gap between cans and glass narrowing. We've absolutely seen an upturn in interest from beer customers to accessing more glass.

Again, that was one of the premises we had, that as you close that gap, you would curtail the shift from glass to cans and actually reverse it. We're seeing that happen, and certainly the interest in beer for glass, even in mainstream glass, is a much different dynamic to last year.

Great. I appreciate that.

I guess what I'm observing is that the market appears to be declining a little bit faster than maybe what the capacity rationalization is. You have to take downtime, and you have to make these decisions to exit businesses that maybe were unforeseen a year or two ago when you initially put together Fit to Win, and that's maybe causing the shortfall.

Do you envision a time period in the future where we won't have these supply-demand imbalances and oversupply situations? Because I think just even a two-year-ago 2 years ago, Europe was considered balanced, and North America was oversupplied, and then you had to kind of shut some capacity in North America, and now because of the volume declines in Europe, wine and spirits and so on, that even new capacity additions, that region is oversupplied.

Is there ever a period where you envision again the capacity rationalization kind of being in line with demand growth, or maybe demand growth kind of reaccelerating, we wouldn't have these issues of oversupply? I know it's kind of a longer-term question, but it seems to be the main issue here.

Look, I think we all live in a very dynamic world now with a lot of volatility, and I think over a cycle of a decade, there'll be periods of where it's perfectly matched up, and there'll be periods where it's not, and then you've got to make a decision: is that a short-term mismatch, or is it a fundamental match that's out of position where you can't make an economic return on that asset? That's always a dynamic question in any business, I would say.

We feel good about where we are in terms of our capacity, particularly in the Americas, and as John said, there's even opportunities to bring some capacity back up to fill demand for profitable volume. Where we are in Europe, we should have all of the announced capacity curtailments completed and clear of that by the half year, and I think that puts us in good stead.

I can't speak for the rest of the market, but our SNDs, our supply and demand, should be well in balance, and then it's about executing productivity, quality, and service levels to the customer, yeah? As you said, it's a longer-term question, but it really depends on volatility and dynamics over an extended period, yeah.

The one thing I would add, Arun, specifically to our own plan is we did increase our Fit to Win target in the face of some additional commercial pressures that we believe protects our position to our targets. That also did include a little bit scaling up of some of the restructuring from what we originally had to be able to be nimble to that.

As we stand here right now, we believe that the Fit to Win actions are sufficient to be able to address, through our horizon here, our next year's target, understanding the other extra $100 million we're dealing with here this year is more of a temporary phenomenon with a good ability for recovery through PAs and things like that into the future.

I think one additional kind of thought on that, Arun, is portfolio momentum is also a part of how you maximize the value of your capacity. As opportunities arise in the market to shed unprofitable volume like we did in wine in North America in the first quarter and bring in more profitable volume, higher-margin volume, more premium volume, that's also a way of sweating your capacity much, much harder.

I think we're getting much better at that and making those calls, and starting that sort of mix shift that we outlined in Investor Day as well as part of our strategy.

Thanks, Kate. That concludes our earnings call.

Please note our second quarter call is currently scheduled for Wednesday, July 29th, and remember, make it a memorable moment by choosing safe, sustainable glass. Thank you.