O-I continues to cut costs, ends MAGMA production technology

Yahoo

4 days ago

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By the numbers: Q2 2025
Net sales: $1.7B
Down 1.3% year over year
Net earnings attributable to O-I: $1M
Compared with net earnings of $62M in Q2 2024
Q1 recap: O-I Glass's shipments were down 3% during the second quarter, reflecting growth in the Americas but weakness in Europe. 'We faced expected headwinds from lower net price, lower sales volumes and temporary production curtailments,' said CFO John Haudrich on a Wednesday earnings call. Despite noise around tariffs, overall, 'what we're seeing over the course of the year is a generally stable environment,' Haudrich said.
Cutting costs: Headwinds were offset by cost-savings actions through O-I's ongoing 'Fit to Win' cost-cutting program, through which O-I said it has achieved $145 million in savings so far this year. Haudrich also said O-I has 'made meaningful progress in reducing inventories across the enterprise, down approximately $160 million compared to the same period last year.'
End-market trends: Among the product trends that executives highlighted, they said food containers are a bright spot, in part due to growing concerns about microplastics. Non-alcoholic beverages are also an area of growth. Demand for beer, while recovering, is still a bit sluggish. Spirits are also still rebounding. Wine is currently 'weak across the board,' CEO Gordon Hardie said.
Adjusting operations: Haudrich said O-I had $27 million worth of temporary curtailments — continued downtime until permanent restructuring actions are completed. 'We continue to expect initial network optimization activities will be completed by mid-2026,' Hardie said. O-I is rolling out an organizational effectiveness program. It's currently about 65% of the way through rolling this out across 15 facilities. In a securities filing, O-I also noted that in July it finalized plans for 'the indefinite suspension of operations of one furnace as well as the closure of one plant in its Americas segment.' O-I expects a related $45 million charge in Q3. In an Oregon WARN notice Wednesday, O-I disclosed plans to shutter a glass bottle production facility in Portland, with 90 layoffs beginning in August.
The end of MAGMA: O-I announced it's changing its strategy on its new glass manufacturing technology, dubbed MAGMA. It featured this tech at its recently opened facility in Bowling Green, Kentucky, which it now plans to 'reconfigure.' In its earnings release, O-I said that 'Following a comprehensive review, we have made the financially prudent decision to halt further MAGMA development and operations. While the earlier stages delivered meaningful technical advancements, we have concluded the platform does not have a pathway to the operational or financial return requirements as previously outlined.' Hardie elaborated on the call that as CEO he had to 'face reality,' and to serve customers O-I needs 'higher volumes of premium than a MAGMA furnace could deliver.'
Outlook: Despite the overall decline in Q2, O-I still expects volumes will be about steady between 2024 and 2025. O-I raised its guidance for 2025 adjusted earnings, expecting an increase between 60% to 90% above 2024. Guidance for free cash flow was unchanged at a range of $150 million to $200 million.
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