OI - Earnings call transcript Q3 2019

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Operator

Good morning. My name is Vanessa, and I will be your conference operator today. At this time, I would like to welcome everyone to the O-I's Third Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator

Chris conference. of Mr. may Relations, Vice your begin Manuel, you. Investor President you Thank

Christopher Manuel

Adam, welcome, you, call. Thank and XXXX third conference quarter everyone, to O-I's

discussion outlook discuss key Lopez, developments and by Haudrich, Our review CFO. financial business be and results. a and the our will CEO; our John Anders we Today, provide will today of our led

Safe Q&A on Following prepared Please Harbor are for available the this our non-GAAP website materials and use review remarks, we in financial comments the session. will of disclosure measures earnings Presentation host those o-i.com. company's a at of call materials. included

of that appendix earnings, today found relate adjusted this management and of ongoing considers Some which reconciliation profit, to adjusted flow, are release in cash the debt, as operating not GAAP be segment representative such financials can the A to non-GAAP free and in operations. we items non-GAAP of press certain presenting our to net measures, excludes presentation.

turn to the Now I'd call like Anders. over to

Andres Lopez

Thanks, thank Chris. O-I. you interest in Good for your morning, and

of an for XXXX year X. been Let softer has me Slide on challenging our driven expected discussion demand. a by than O-I, provide overview

However, has shareholder creation. path a forward I value to solid O-I believe

to underway. steps bold path taking key this initiatives are We several with set

to In a how introduce action together we to how compelling reviewing key and O-I. most drive investment in themes will addition provide to we recent comes performance, this improvement, our thesis outline are taking for XXXX,

prior Nueva our but we benefited recent year. prices the From this recent that perspective, year. night These reflect quarter an performance. not contribution had with was recent FX most were of Fanal start selling and of to repeat Last profit acquisition. was the discrete did mind the in down guidance. our results higher items most earnings adjusted us with reported $X.XX. Let from operational that Keep and decline XXXX, earnings due Segment consistent from third

operating higher volume are curtailing lower offset supply costs capacity than actively expected our However, to and were by than more demand. benefits align as these sales we lower with

in flow to profit, period changing a affecting To debt segment the O-I be the includes XXXX. U.S. has U.S., Mexico, during recently, by strong enabled is This seen Despite business. in a we the started dynamics the market China. net XXXX is in accelerated development and lower demand continued beer largest most market cash that More decline broader our nearly slowdown that into notable $XXX and clear, million. have reduce

dynamic in that currency see where foreign in Reflecting America. continue a for said, updated curtailments, per capacity XXXX continued between added outlook been has and Latin $X.XX to growth of good environment, markets such capacity now expect unfavorable we adjusted $X.XX demand, EPS we and our as share. With new We related softer translation. adjusted

at adjusted approximately stands flow for outlook now million. cash free Our $XXX

performance. to review. We programs have new cost examples few changes, portfolio A mix address strategic include, reduction bolster underway like accelerated and numerous our efforts following initiative, to activities complexity our

our Importantly, evaluation business. alternatives Zealand this review Australia for and strategic includes now of an New

generation and XXXX will reduction. highly focused debt themes introduce which increased cash Finally, we are for key on

is on Moving number a of capitalize amid opportunities. initiatives demand, a key X, than are of address to Lower we of as on as Slide focused expected to well softer key challenges a backdrop demand challenge. number our

America, in decline to through in fundamentally North fourth address given are secular the the beer. As structural capacity changes quarter. we will actively noted, Likewise, continue we which curtailing need

in anticipate range a new will of optimization we While introductions, efforts this XXXX. network product include solutions, including wide will

and plants across the North Europe. earnings face last call, our During complexity mix increased we challenges operating with efficiencies at our we which impacting America discussed is [indiscernible]

seeing are their is the key performance factories visible in clearly pointing out, progress metrics. focused are across we we Here, initial which

XXXX. to return fully are and resources levels intend in we performance normalized Our deployed operating to

strong pockets capitalizing growing new we Fanal both premium recently seeing has beer brands. which with a the position Likewise, in We of are faster of acquisition strengthens completed growth opportunities. our Nueva with Colombia, Brazil Gironcourt furnace and both JV production Constellation France, our brownfield and where projects include half fifth in where XXXX. in expansion we added Ongoing the our begin of at the capacity. first O-I

Our accelerated off organization supported was as initiatives cost quarter. third by during kicked Scope costs, well and supply as Accenture includes SG&A reduction structure. the chain

fourth next execution complete begin delivering year. to benefits quarter expect We diagnostics tangible key in initiatives and of the

our is growing was R&D quarter. to supply MAGMA Europe from Germany incremental MAGMA is next about in for Holzminden, an expect and in milestone additional line MAGMA applications located support we first priority a in XXXX plant line The important the the that give provide in to us top O-I XXXX. segments. line Streator third shipments pilot Holzminden be three to will The and expected and efforts capabilities further data enable will

critical align customers Our strategic expedite support the our to and portfolio business review to is their reduction. to properly our enterprise capitalize

in we comments the around proceeds Furthermore, million of end. further operations, good Australia anticipated reviewing until excess our making for New are strategic are has We course. run will its and $XXX year with no make potential alternatives process Zealand progress but

Finally, flows debt divestiture we for will debt significant with the reduction quarter, along is enable cash quarter essential. debt proceeds in third potential reduction. trim Supported net flows by cash

Slide development dynamics business. in important change mentioned, the I market for provides is X perspective. our As more most

the top you see volumes. sales company total trends In left. our organic chart the are on volume long-term will illustrated Our

lower. Our legacy been business flat has to modestly

shown growth. strategic and better with reflect We Comegua. which include have support to for the align JVs efforts network O-I the our footprint network Constellation the also O-I Brands the of namely trends long-term The volumes to

volume network slightly As you can long-term. to O-I positive the is stable over see,

over illustrates North of is in our have It the healthy represents been half The business. of Americas Volumes beer composite generally and period. Latin just non region. demand good modestly up Mexico network over by in volumes our America. a America, chart middle growth The

North shipments America as pressure in beer under bottom increasing chart. However, in are illustrated the

we machine to lines focused have given mix are More [indiscernible] our we Europe, as at low the management and been new In well Gironcourt. in on recently, capacity demand growing installing growth as new future furnace has digits. single enable

in the a asset repair In significant More [ph] recently, have shipments of has Asia-Pacific, down activity the been this region. modestly. reflection been

we the two most repairs. [indiscernible], volumes Over by help have Asia-Pacific a revamp. the serve was of to we ANZ Exiting developed expect impacted capacity heavy to past China market period in which years

With and expected for let's reflected growth growth discuss business organic X% evolution growth. this XXXX right. which for This as the sales backdrop, of was X% the the our we adjusted on volume new lower beer shipments. organic nearly illustrated for agreements about U.S. volume year downward expectations Entering X.X%

up be we outlook growth call, our earnings as full-year flat we slightly. last to our down saw revised volumes During will

a contracts elevated, expected, base should volumes of awarded bit by higher be number impacted than been have new factors. negatively While a

originally in First, softening in as our slowed. a extreme weather volumes in Europe. has projected. is slowed the beer we broader China. will most U.S. U.S., the noted which brings NABs the extensive for have we us this has than Likewise, demand current more U.S. growth expect legacy to notably the demand in recently decline and we growth outlook be economic year. X% events This Furthermore, More was Mexico impacted in demand by like in temporary around

down Slide volume inflation, was while includes X. $XX offset profit of which tax a Higher discrete Starting down. prices in about volumes Total Now, segment selling item. the let's Fanal. on the sales were prior and regional discuss cost was up FX impact million year of more X.X% performance excluding benefit the Americas, than Nueva

However, reflecting that just factors organic we about were down volumes X% discussed. the

some seen in have We initial progress complexity. mix otherwise

flat Looking up will fourth volume we be quarter, at slightly. or the expect sales organic

continue, demand we quarter. underlying While we new are will softer anticipate this business boarding some on

continue will Finally, in quarter and we response the expect capacity curtailments in Mexico lower through sales. the to U.S. fourth

Moving reflected prior an the than segment to management. offset year begin were as Higher credit quarter. mix in Sales cost of second in was for complexity. more in expect were about Europe, given see Operating the trends prior we improvement selling COX quarter with similar to current prices inflation reflecting constraints. we business line modestly, FX up a volumes fourth the costs profit otherwise down but sales. impact capacity progress Overall, X% including and mix year

down flat FX was of adjustment, selling segment headwinds a sales was for Without cost Asia-Pacific the X% relatively offset higher China. rebuild as inflation. by than activity. [ph] Operating was year from a volume X%, significant adjustment profit up Finally, back a this prior in cost and pull new improved sales more sharp which with excluding efficiency contract XXXX. furnace Australia in increased Segment retroactive prices following

will similar We the trends continue expect quarter. into fourth

However, we as sequential significant seasonal enter improvement the anticipate do peak. we earnings

quarter to over let who me the outlook. the John call detail and turn will Now,

John Haudrich

Thanks good morning X. Andres, third of with quarter performance the review will I Slide everyone. on start and

As $X.XX was most our to we recent EPS adjusted within third announced, $X.XX earnings of guidance quarter $X.XX.

for both profit the third EPS. at look quarter with current adjusted performance prior results that take Let's compares year a and reconciliation segment

resolution the unfavorable to prices As of inflation. $XXX more selling million segment sale matter and that our XXXX improved declined cost items Brazil and in Overall, in COX XX the of year. from profit decline that in X.X% this repeat indirect $XXX year of million year. third benefited did quarter tax this occurred you not reflects Discrete two FX million of include the discrete but credits see, can last than this average items XXXX. about offset

Nueva inflation price, sales about lower Fanal. which includes earnings by X% impact Reflecting $XX benefited $X million spread favorable of So benefit volumes results million. shipments, the

challenges Costs from remained around elevated also Operating mix the complexity increased America costs Europe. in were the despite also initial impacted and to costs. of Initial a addressing million. quarter North progress third curtail capacity headwind efforts $XX

$X.XX. $X.XX effect segment last and Looking of an adjusted $X.XX year at headwind. by was compared to EPS, changes results Currency year. net O-I generated earnings The this in $X.XX discrete profit impacted items of

tax to beer and decline tax changing America, per on share. count these unit note lower record were final value rate the of although One third a company the as reduce demand. carrying a tax retained from rate. $X.XX especially The Latin to the share did but a profits benefited mix up accelerated attributable our business American costs jurisdictions, were in expense, added we given goodwill offset charge in high quarter, the by North the interest reflects regional corporate higher Further

and result reduce adjusted non-cash a goodwill of adjustment, EPS. $X.X $XXX ongoing from million Americas excluded charge operations As billion not the from billion. been has we $X This around representative considered to of is this

$X.XX and review second Compared to outlook flow X, incremental our updated reflects our to free and upon call, expect year FX Slide We Moving should is changes $X.XX key headwind $XXX adjusted provided our of three an our cash now based EPS million. between current rates. guidance quarter approximate most in XXXX full I adjusted during factors; current earnings will outlook.

trends curtailing are capacity X%. we sales several at be a down now Likewise, number over demand we furnaces. over sluggish will months, the a expect volume full-year past Given of little

additional details. provides fourth Our chart includes quarter current and outlook guidance of EPS $X.XX-$X.XX adjusted the

updated We year. view also free expect to of $XXX million prior adjusted of our flow. XXXX adjusted we have Compared flow outlook $XXX our million, free on now cash this approximately cash

this revised me a Let decline is significant would outlook as earnings indicate. more than details a provide additional

First, $XX currency FX in cash given the mind incremental our flow translation our is million headwind. particularly quarter sensitive seasonality to of is fourth Keep business. an that

Second, in we be estimate working our around receivable million regional the lower to average a this flows incremental customer to Most cash. year the over outlook, million pertains mix, of compared sales terms. continued $XX capital payment by is cash increase our shift will impacts $XX outlook third accounts our half a increasing prior use earnings and of of second which and

sales fourth the the higher The terms. which is in of pronounced mix impact quarter given payment Latin has seasonally this change longest in most America

quarter this expect from we DSO will would four shift days outlook, our days. outstanding upon X increase our be prior During by days call, up sales revised our year. expected now we second Based around

which accounts million one that $XXX is believe was DSO assumed change so the mind receivable million higher we in prior XXXX year, our anomaly and DSO normal for negatively equates changes impacting capital $XX macro nearly of million by had than in conditions. of trends, Keep in an in receivables, our working notwithstanding reflective to We $XX the guidance. around is not

spend a I'm allocation. X. on me discussing Let now capital moment Slide

proceeds allocation capital With shareholders. said, to balance past, from our top returning the driven divestitures. include value sheet, derisking cash operating in the strategy priority by and discussed reduction remains priorities have we and As funding flow our debt that

the generation. on plays seasonality big flow role illustrated the timing cash a As chart, of in

a source. cash the strong a The first and second use of is half the of is year part

quarter of As you million during cash free Like can last strong company our fourth which generated $XXX of flow free cash quarter third year. adjusted adjusted flow, we expect full-year the the see, outlook. this supports year,

quarter drive net illustrated our reduction debt Any fourth from supported during divestiture reduction program expect in our to support So page. down metric further the a to quarter we from year-end. third $XXX cash the billion by debt, just million a would on this $X flow our proceeds above levels

focus our asbestos on legacy to our reducing liabilities, with effort Consistent derisk the remains accelerated on liability track.

to acquisitions. we we strategy, expect XXXX intend focus de-prioritized company strategic CapEx on While has MAGMA. Likewise, advancing our fund will the

our to addition to year on shareholders value initiating is Returning a a repurchase $XXX million outstanding program. this share our in dividend also priority remains

be the dilution potentially in or soften will this However, of significant. do deemphasized three leverage earnings divestitures times approaches the impact event become until

let turn call the Now me to Andres. back

Andres Lopez

John. Thanks,

next more Given fourth cycle themes quarter, for currently early in are that year. the Keep in and me that will annual some budgeting are mind we now in XXXX. share our provided we let be specifics

reduction. debt than so in taking generate sales has XXXX priorities Understanding preemptive measures cash XXXX enter for cash. can improved we better year, position been are to such we spending, XXXX as lower by capacity this and that top generation, Our volumes, prudent curtailment, stronger enabling expected CapEx impacted a and include

For around $XXX potentially on should XXXX, maintenance, initiatives. CapEx modest and focused we million reduction investments accelerated expect to $XXX the cost MAGMA, support be to developing million

optimizing to believe to it is in following business, Likewise, we on and macro prudent is to challenges the While mix system. impact too operational continue will early on of determine trends improvements it focus our we within the recent mix. address the price

as North product conjunction capacity. to impact our costs. limit within priority. our accelerated well this we Given that footprint cost America Cost mix remain of anticipate are on adjustments focused and remain will beer in new overall reduction a likely challenging as TSC align program reduction network, will will to initiatives challenges innovation We in the reduce structural with

divestitures review performance, on believe improved reduction. will we significant with cash expect debt meaningful we operating will which initiatives. along generation, greater support progress portfolio Finally, result efforts our Overall, these in

O-I a investment believe finally compelling we And on Slide offers XX, proposition.

base glass Likewise, attributes. our highly Blue world. serve global its clear leading Chip given is around a in sustainability the As green a the glass is in O-I package customer producer, to position unique the attractive economy

We are that actively today. improve performance engaged our in several articulated initiatives to operating we

historic we and and our business which MAGMA are needs innovation a debt includes and breakthrough facing that capital our priorities aligning We expect This customers reduction. business remove to constraints future further capitalize represents structure. profitable better our support Likewise, will glass enable optimizing the the helps growth.

these value will all long-term creation. confident We of concert are steps done in drive

we now welcome concludes questions. your This remarks our and prepared

Operator

[Operator from Lynch. question George Instructions] the Your comes from your first of ask line Please Staphos Merrill Bank of questions. America

George Staphos

you to to North can can Good through extent you the earnings, that you seem that hope there optimization everybody. go from affect you a on a efforts regarding you extent your ultimately optimization? a this footprint XXXX be will realizing wanted to footprint to operating but need benefit this, might and morning the do efficiency hear negatively view what me. question might to ask as have John, Andres and I I America lose

it occurring, quicker other this you market the we GPI to to substrates, beer advantages and obviously, substrates you, be, other a whole Thank America the of at North rate from as beer do data think glass sustainability given clearly versus yet be standpoint you relatedly, much guys. glasses what cans. factors? and then, than other Why declining is declining, a seems and the And in see view

Andres Lopez

with realignment. action already regards proactive started. taking We have we're -- the so George, Okay to footprint

directions have will expect We that four we in QX.

those do this which we're results in the point next as at that, year time So are we higher. for clearing from impacts,

We prepare higher for taking inventories avoid curtails that. as be fast to We to mentioned. react able cannot are enough the we obviously

done, cost have cost next is year as we inventories into the we're this and opposite, down with going all go down, the back higher we that. are will to have go have going that that at point, We're to going that we're to lower to related but with taking going spending the

what that's So on that front. we’re seeing

we the beer saw With declining regards are seeing we America to the as before. it market, North

been I by in market. changing the accelerated trends consumer think being it's continuing

the is months. been few participation. the seen very seltzers hard last fast that in something with very, we of this is Something have And small happened we've growing which that – over lately a is category evolution a extremely have

going point packages. So time, in toward is this primarily at that volume

look of different situation. I the market, when at Now a have the we volumes

quite the seeing are seeing -- and NABs at we're food. our growth in we're in wine example, growth growing our in For flat. though We're pace for they're And growing spirits. slower case even why is that's projections. a changing

category. So it's beer really the concentrated in

of dynamics other seeing Now, that kind world. any market we're around in not the

and So taking, We're adjust we with organization. talent before, the deal this have action. marketing said, very but going I strong we to in the is we're also order in which footprint, proactive only the that that have as one to in in

in strong development. We have very new capabilities product

as So we're hard future. new category the the innovations can working in breakthrough seltzer so volumes in way the as And we on well we near beer future. sales enter a product for beer developing better in can for support the higher in

John Haudrich

to that foresee that have The excess we as time on we this what this number to one efforts taken optimization, doing would year at need actions thing footprint this to would because be restructuring and of add company collectively do the a we look any I restructuring XXXX of as to a associated not year. in costs this we're we with

would do $XX that million range think is in this at that something not this we expect year point. So what that it and exceed we

George Staphos

thank right, All much, you very guys.

Andres Lopez

you. Thank

Operator

the ask Ghansham line your question. from Panjabi of comes Please Baird. question next from Your

Ghansham Panjabi

Thank morning, you, everyone. good

Andres Lopez

morning. Good

Ghansham Panjabi

morning. Good

feel? of the debt to supply accelerated, up given as I on showcasing that destocking kind Has beer, fair weakness you're on that well. have weakness, along starting North sheets amount chain also their customers following Just balance mean, the your of about the thinking there, American George's question just a on they

X% that European it should terms as that that about other think it decline relates business? yes, year trend such line the on your in as decline any is point-of-sale? much. we certain do into versus X% your In instituted foresee categories have Thanks relates been then to how scotch, the of going tariffs And impact second, words, to as next so on

Andres Lopez

Okay, time going into you. that this NA decline we're we current what that's continue thank in trend year, is Well at the the beer seeing considering is next -- in to what we're of point have. the

going the within the Now we that need categories are see how are all to these continue share category beer evolving. changing to

we've seltzers. excuse me, So work, growth a in significant hard seen

in future. could the has but September It best following see seasonal, in need watch how evolves to to for year. category that project need the We very keep that slowdown we close what to in is to see already be a just

far haven't point, obviously so seen some we some As far. tariff is the should concerned, have but as that at impact that

is see we'll really months, for speak. strong Demand we to more capacity that be more had be spirits sell in that will in happens in next strong we so If this time. in So segment, point as able far what few continues our at but Europe demand the demand. we to very market for

John Haudrich

some business beer North that represent about American X% we total have does And other global volume. just is the context the of

it's So pressure want just business. while to I understand make of you total scope of the now, the that context certainly right under sure

Andres Lopez

Next question please?

Operator

of line ask Sachs. comes Your your Maguire the next from question Goldman Please question. from Brian

Arthur Almeida

Good Arthur for this Almeida morning, Brian. is on

Andres Lopez

Good morning.

Arthur Almeida

to the exports a with markets? you American being Mexican markets U.S. volumes Do over into or this more an this you. to themselves you Thank guys being issue the other color on do little finally, Latin spill happened could to And be that provide I predict cans? if a negative what could more down. view it switch Mexican was bit wondering could with you as

Andres Lopez

a CapEx tend seeing to to something this come years reuse that is containers return when to This volumes Okay, the is example, conditions driven in and when NAB markets economic happens the in in the changes economies It demand spending related slowdown. these so this by we're what of work. type Mexican is in like our in related, is for local this is customers market our the and in reduction – country.

this at following the pattern year. this as customers saying we time in into preparing However, point is, go our what to we're change

investments, been Mexico. are there So XXXX the for planned large in category investments for NAB

we're Now not countries. any other seeing of in this

in additional Brazil where we're Colombia fact, capacity. strong very put In we and seeing demand

by strong. really The in glass, is it's our in premium happening conversion containers driven by we country. year-to-date growing return fast. Colombia one It’s double-digit from overall XX% a beer demand They're same at in are to Brazil the and products quite growing seeing then is way this driven growth where

ArthurAlmeida

Thanks that industry How capacity wondering I capacity, big one that referenced. the and would was update. U.S. turn to and the in U.S. little relative Thanks. if could you a to that I'll total closures be provide the you afterwards color on final U.S. total and over?

John Haudrich

looking and point at had Yes this I I China. Mexico we what U.S., closures is, mean, think at time, in indicated in across we're capacity

For get last any But levels to we details. not do competitive the intention inventory our zip they year. code basically is provide as purposes, particular to similar in were be

at two levels that's one as compared So we IDS and the the provide end that this the time. probably [ph] your information at we to much as saw about quarter, within can or third prior levels of higher

Andres Lopez

at not in adjusted the capacity Yes be demand change and actions being demand similar we're prepared with the in correct saw taken year, of XXXX. only level a through we the that to to but out

Christopher Manuel

Thank you, our next question, please?

Operator

the Capital Your the question Mark from [ph] of line next from BMO Rosie Markets. comes

open. is line Your

Unidentified Analyst

Good Andres, John. morning,

Andres Lopez

morning. Good

Unidentified Analyst

shift Andres, that I'm on? in wonder further is into North out can if just last curious recession, and I big lower move and of point because at part that's also at there the price in beer back I simply, was a just is all? recall equation American was cans going if a of overall market glass slowing the some beer, there it this or the beer

Andres Lopez

think as are the evolving I trends category primarily a the the related I of as before, to how consequence shifting said is and – it’s Mark, consumer that.

– fast of category. seltzers growing really to equates to or the and equal hard beer that have been example, For they have already total X% volume a

are emerging. Those glass categories an changing, for products new opportunity the patterns too. So consumption are are

slim have and this in earlier quite the focuses to well are had those value. with been claims wellness can for feed available that had They doing smaller cans the in They customers good market. very think category on that. and sizes the wellness has stages I a

intend too point as and products said the on some glass. working time, branding Now market, have new we to to in for them are these in at make I platforms an available too. importance will given customers before, and our differentiation the glass We opportunity of

Operator

you. Thank

Your next your question Anthony Pettinari line from comes the Please from ask question. Citigroup. of

Unidentified Analyst

actually Toe Good [ph] morning this is Randy sitting in for Anthony.

Andres Lopez

Good morning.

Unidentified Analyst

Good expected second of first from are you pilot morning excited Thank next additional metrics in year, that production up? any the coming the with you. on plant us facility? about there MAGMA give machine to Streator that can particular the you the start guys with information Are performance any at

Andres Lopez

the quite have MAGMA needed were The high. glass been ware, quality too. that very high produce we're producing. – the encouraging. of is the quite quite positive, of The machine to the quite quality very so evolution nice comes commercial melting of We meet to the that Okay, successful in of - and already out Streator we is is line is glass

time. Now well as for expect a segments an supply evolution growing R&D remarks, Europe, are more supply expected give data in purposes to this as to our which to be X point at we us the line opening we able as in incremental Holzminden Streator. that this in volume line to are we of implementing what is said, during be Gen is in And line,

new get line, to that we're going the to implementation with Now regards make lines of we that based data additional three in in Europe. decision the on

very business before, for the glass potential encouraged the change evolution we MAGMA, by the to So, MAGMA and has continue we model be said to altogether. of as

Christopher Manuel

Thank you.

Next question please?

Operator

Chip Research. of Vertical your ask line the Please from from question. comes Question Dillon

Clyde Dillon

good Andres. morning, Yes,

Andres Lopez

Good morning.

Clyde Dillon

I an appreciate months we I XX% cumulative volume get six talking know look of you wanted all that you're into about, just were or of ago, gotten all to the talking curtailments target, about And a more of details. all is I some just the growth idea that you'd you're guess reversing, that losing is know business? that I business wanted less is some the or what volume I other to of legacy secured. XX% as

Andres Lopez

talked agreements to we it. to when be we we we secure, agreements and term that also we support so that Okay, mentioned capacity will once pursuing those targets, long about able had were build those

additional those building we an are are so of all line, building in those well. going how are capacity. So, France, capacity In all in we're Brazil. quite of well. progressing That's In Europe, we Colombia, put

Nueva portion Fanal of well. that, this time inorganic also boarded the going of is was and it’s which point on part at in

been the One have an we Now, been demand beer some Europe events in temporary couple to as a impact where in or example, of exported in facing for things. wine China. is, we've facing reduction demand Bordeaux

have the impacting year. those things So been

in United some countries China, within Now, for and the we countries also those demand States. have seen segments just that some slowdown in we described in demand Mexico or or NAB

by driven primarily are conditions. macro those So

combining. So there few things a are

needed actions are to to put agreements drive in large to long-term that incremental place progressing volumes be we the well. to all associated Now able quite

John Haudrich

remaining the about. per X% year. as that of a where percent base talking it XX% Andres of that growth a organic about talking And X% be in had the we're was shift seeing that identified activities it’s we so fraction as Yes, as for ascribable to really Andres left

Operator

comes from of Please question next the Bank. Deutsche Your Jones question. line Debbie ask from your

Debbie Jones

Hi, good morning.

Andres Lopez

Good morning.

Debbie Jones

you. that? Thank you but in were the Could on business and on clear about is included a selling of Asia China in the me clarity not Pacific that. My know you're terms – question just wasn't comment question it assets to first if talking I it,

Andres Lopez

focused comments. of review referred the we today, businesses. we we we make on also remarks opening are said ANZ we cannot portfolio as we our confirmed as said at But, is, of said before, this and so Yes, and in to time, further point the we strategic in

use that. expecting are we're proceeds going reuse will to we do and be other those among things some proceeds as we We get that, to that

Debbie Jones

thank Okay, question. you, second my

Operator

line from your Hajde of Your Please ask Gabe the question from Fargo. comes Wells next question.

Gabe Hajde

but risk Good if assuming nowhere? the out address seemed discuss morning, we of in the or taking see do double trade of it thanks in for of war, some kind in back China rebound start some I'm domestically? related, worse its that here a reaccelerate question. and but States weakness can China, we of a come United sort things have to imports the there Andres and trade of you sword get kind is edged

Andres Lopez

yes, related factors. well economic in as consumption is Okay, the weakness to as so factors China

industries this We've think in many I into affecting industries, leaving are news the across they're and their Asia Southeast is many seen for even it going supply. China multiple industries.

is there. impacting a going over is there on So this what for is us. demand beer And significant change the for

States from to comes China United opposite the importing seeing to what is it exactly coming When reaction. we're

So as focusing market. been Chinese local been place, more more this the in suppliers have have of taking and all wars trade the

So there. they're of the comes the themselves North of over States United comes from position into Lot that trying the to China. ware

I to companies. to primarily the of are serve And that's very present South in important in we China, to tend so large have that highlight global beer mind. companies multinational over we or want there

Operator

question Your comes Please Capital question. from the Adam ask Josephson next line your Markets. of from KeyBanc

Adam Josephson

good everyone. Thanks, morning

Andres Lopez

Good morning.

Adam Josephson

also about your issue Latin longer please if just wrong. this I'm drag the receivable a cash on receivables year affecting Please mix $XXX to will be know your but receivables, if correct regional me I customers will be you there's collection. some I $XXX earnings got I customer same I questions, customer talked capital pay, a and John think take And flow think have you of mix correct Andres. you million. whereby morning, this American me couple working said here, total Good of wrong drag a million

will $XXX about what next given just just $XXX is that you think close into more year that think then what better is maintenance that's go much working happening confidence can exactly of you've receivables detail with your levels, So And gives be and to million. you CapEx John capital to said maintenance year I million million, $XXX on I that also cash wise? around next

So, how to before your you CapEx of lose that long you. competitiveness? can for Thank level some you start sustain

John Haudrich

thanks. sure Sure, Adam,

So there. let those address me questions

I'll have plus side, So impact will something on base in that change minus receivable in in million and we change the of accounts a or moment. yes, regional because touch that on $XXX this

side. then inventory is element The the other on

anticipate days we outstanding be $XX or progress to that now, still that Given IDS of and add on might substantial two that, one to about there curtailing right make but we up [ph] might are still million.

you're kind zip of the that the accounts seeing the that's that on receivable code pressure of side. So

and mentioned year on so receivables? where expanding what's comments, the So as we we're are with Colombia in the other – question then we've seeing growth in in this before particular countries, American Brazil, is, those prepared the Latin Okay, payment expected going as have we're as markets. compared slower, the where the for They declines than have longer even in traditionally Mexico geography in lower days sales to of outstanding the terms, business. parts volume, a seeing U.S., other particular China in terms example,

Latin end being So seasonal the that's causing for period peak gets really the and Northern hemisphere, China because a year more the the that the it significant little the and U.S. then end of America bit the southern Hemisphere, to of given in towards so in shift happens slower. and be and it's Mexico

term nomenclature the refer to trying and to there. regional a customer that not that to use distinguish that's of out, in there's it. we that, being refer We're we that's customers we for mix, only broken kind particular when And

So this those change actually the collection processes good quite change. just our a is the also structural given just accounts is say on and substantially are I this a in receivable, changes. And terms would regional that

million million number that in $XXX we or other so okay Yes, $XXX $XXX is zip plus code the somewhere minus. had question The the indicated. is of million, capital CapEx, to maintenance then is

residual in investments and includes spoken that that to MAGMA we So we tied some the this growth had effect to that of really underway about have primarily that because plus the carryover we’re projects on our investment, our volumes things competitive we can cost are advantage, at appropriate this the we new that. of activity, of kind levels. position, boarding maintaining With maintain and like some some

Ultimately other to growth underway, But down under we're going about things number for obviously review. Gironcourt so capital and right boarding the what the just of on road, digesting that that especially much between be of and now. strategic we and balancing is all year, activity this a talked with

Andres Lopez

the had investment growth years, last we that Yes, and couple to substantial capabilities. add would I like over in of

business We the So have. so mentioned quite is time, faster. evolving encouraging. in that at potential we to quite change this well, the before advance optimizing to MAGMA focus glass, want believe want And this we this primarily model is to has point what we for in we

that the And accelerate going position focus of want reduction. have be time, that generation. expectation as capital we want going to It’s optimization, XX. our we optimze line. point, to improve to able to improve we on same the in we want we're is at things the cost We a at And allocation. revenue to all our and debt cash the focus to different on distribution on our described And flow Slide that's to going

Christopher Manuel

please? question Next

Operator

question line Langton comes question. Yes, of Please JPMorgan. your next from from ask your Tyler the

Tyler Langton

John. and Andres morning, Good

Andres Lopez

morning. Good

Tyler Langton

please. a just I on had cost question

provide reduction complexity you'll expect the of benefits progress that I in and should little and You guess and kind return I also then a you've that in guess, in on and of color cost could be them, potential with XXXX, get to from mentioned some you that XXXX, what the a more how initiative just of would normalized I XXXX program could kind these TSC guess initiatives you and And color initiated kind from helpful? levels. any see more operational you savings more bit

Andres Lopez

with engaged go yes, we've so focused spending, opportunities Yes, XXXX, of chain. our pace, Accenture actively and are been different we three in has supply as and we areas, on organization been

of together we're we're the putting in accelerated that result that move [indiscernible] action We are to And into our for assessment. mid November, by then the to to have going end XXXX. going expecting plans

and to in So we expect cash going with a flow improve improve is earnings way substantial is to that our and for program us. that going cost that

we that be expect improvement we're increased expecting and the year continuous as a we going that We're two, you to go and as we manufacturing or improvement. start the Now exit into is along and see to to that year this should mentioned, following year as translating are impact performance said progress making able on of in offset to complexity. good we focused before,

and So we cost that's there the but TSC those current us, situation, has cost to acceleration efforts an reduction, is accelerate see one is of that. generation cash the opportunity critical very compliment areas in that with earnings focus. improve which good for been we will

John Haudrich

just extra our that is consistent of We quarter had color this bit results year. by to indicated $X.XX impacting to there. Yes a comments with probably our provide little complexity $X.XX second is

next So should while not system level. out of year be that completely the marginally that down from

dime We to capacity another are also new commission That's this costs there. year. incurring probably

at While that year we’ll curtailment the going $X.XX some depending forward. on having that this we conditions be lower still for can should absorbing somewhere then level level are $X.XX to going and costs Gironcourt we’re between market for it some example, be see of and a costs really forward, modification

Operator

from the next your line ask from RBC comes Your Arun Markets. Capital question. Viswanathan of Please question

Unidentified Analyst

on Hi Arun. this is Paige David actually for

Andres Lopez

morning. Good

Unidentified Analyst

wanted just a MAGMA morning. Good I on to question. follow-up

there? So produce It's out in commercially, the any to or I now just do in the a about to you've have started through expect color pass that of more of like MAGMA it broadly terms total future, you how ultimate production guess quarter, you your, rolling much XXX%, half process?

Andres Lopez

information is time too point early at provide to in Well, in it respect. this that

data around of brought one Europe. toward to line implementations data lot more going capabilities, in three our factories be we the with the operated of top is This we're to in flexibility the lines. we regards a get line Germany important and for course say with said, going refine of is As us to we world additional which an in terms in, Holzminden, to I point acapability have these regards to will as

asset comes for influence be our what to to MAGMA configuration is, line deploy in the with I asset perspective lower going assets base and growth, are expected able intensity capital to that's easier manufacturing expecting to this supporting current some overall overall you costs MAGMA influence objective can current both and we're at will grow, the point assets, existing of lower a faster the that will the to replace with we base by deploy. Now describe lot ability time it and in to and when

exactly able effective to follow in industry be need in growth what a way. glass will more the It we be to

come. So is to that's what in line all said we before. with This

at updates. provide more have we to in near expecting more data that are the will We and be to able future point,

John Haudrich

view to stage. important note a of it's business. and a to think at can we're small we trying should part this don't MAGMA it broader how application be that assess our that solution broad have I believe niche then as application We to

Operator

Capital Markets. another question have from your the BMO Wilde from Please ask line We of question. Mark

Mark Wilde

any asbestos to due asbestos use asset it just sales asset from on proceeds and John, is sales update get on limitation possible to a brief or liability? of the

John Haudrich

And, pressures year-to-date asbestos jurisdictions that same. Yes, just been different given the in the on the status to couple we that systems accelerating the we're of inflationary court a Basically saw that, giving comment that. on is we've in of focusing some remains proceeding. derisking

XXXX and there this really the in asbestos the restrictions the left And already proceeds there's is look of no bit balance proceeds would no, so most you paid use to of cash due for component. year. we been As financials of that on anticipated have for little the a

Operator

of line Chip question. the from from comes question next Your Dillon your Please Vertical Research. ask

Chip Dillon

one one here. Yes quick hi, just

that know what's year could restructuring so year, count CapEx CapEx and where lot fact actually let considerably year the new out next in a you guide us you the that is are you've just plus especially you is component, the of done it t below MAGMA at for and given On especially doing what growth looking concerned? changed when investments,

John Haudrich

TSC at. the the I million minus optimization identified. what would level also doing years opportunities of that really been some this say we or on has maintenance opportunities our investments over cost Yes, is been we've some been in the been the growth looking consistently here focusing been some of We've that, plus have that investing The in on of last earlier that we've range. few $XXX

the amount was Back fair earlier. been board of to we Andres to that working and growth is things on of the a some before comments that, activity made we've articulating that

And so, mode those of we're now optimization in activities. and the digestion

to costs initiatives. of some appropriate in the the for point this and growth prudent the at on the be MAGMA capital on we the capacity board to so, pullback And it's one believe, ongoing and to basically time, activity, final elements expenditures ongoing of maintenance some secondly, residual

Andres Lopez

position to number a actions business. have. solve to take should structural took we years of is issues of couple of the And in our plenty the a last continue accelerating a then balance optimizing just to we new better good this in the improve on, We that leverage in as the it and technology. have upside with for that what that should over MAGMA, optimize and with of development much we action of to be you potential we sheet Yes,

Operator

Gabe of Please line the from Wells comes Hajde question Fargo. question. next your from Your ask

Gabe Hajde

thanks taking John, the for follow-up.

issues you one-time CapEx little of bit. could I items. being some the cash of talked obviously the was sort addressed down address flow a some about earnings maybe on side. You We've hoping income statement

Sounds will like similar. be restructuring

is year help moving I but be year? parts $XX the big think bridge positive million, a any supposed of us something to other number around negative this hopefully what that asbestos from to you next could is

John Haudrich

sure Gabe. Yes, thanks,

take totality that Let in of kind me there.

add some obviously increasing color. middle the of for priority cash but top currently the our budgeting flow is next can I So, year. We're in process,

and the elements flow regard. go Let the that clarify just in cash me some into of P&L on

continued do spread couple We expect last years. destructive this price we've year and in of inflation seen as

and should a year Gironcourt volume benefit Fanal. full of from sales Our Nueva

of X% grow that be about U.S. will backdrop, by of the a we've be probably the most to beer offset headwinds seen. trends this expected is demand as glass While

macro Of a a course, uncertainties. wild general market this given stage trends are bit of at card

costs, we'll So TSC. should complexity, cost the of the from benefit reduction the have accelerated cetera, lower as I et benefit commissioning before, complexity, mentioned the operating lower costs with plus

have are But that we energy out the past FX do is programs white a into that program end in that do those we the headwinds, things XXXX and about the and program, benefited we've so certificate face talked a EU like few there. certain an headwind [ph] come

that lower element XXXX. We large we believe to you're some about, an of Now capital CapEx. anomaly those in talking cash will cash AR anticipate we that levers working of the we've got do at other look year. We be saw not a the use certainly bit of is if very this

So be to to you $XX down a do pension probably asbestos headwind, expect mentioned. maybe we is million, while million as $XX modest

course, major scenario investment dividends some the higher update we this the And ideally, bring some pension, of get with divestitures goes capacity some we'll to new could the you JVs, exiting as clarity there. and have of on periods. degree because with capital And affect we're to whole we particular, there. of greater In

Christopher Manuel

and question. look note that you Xth think to I our last and was concludes to conference we'll forward I everyone scheduled is our Thank our fourth wanted Please February talking call that quarter to earnings thank that call. guys, Okay, for then. you.

Operator

this participating, Thank you for all for you So conference may our disconnect. all concludes today.

O-I Glass (OI) 29 Oct 192019 Q3 Earnings call transcript