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By the numbers
Q3 net earnings: $56M
Down from $235M in Q3 2022
- Q3 readout: In the Americas and Europe, O-I’s sales volumes were down 15% in the third quarter versus the prior year period. O-I pointed to destocking across wine, beer, spirits and food, along with softer consumer consumption levels. CEO Andres Lopez said during an earnings call Wednesday that the experience O-I is having with destocking mirrors trends discussed by other packaging manufacturers, though some variation comes from the different markets that glass serves versus other substrates. The company foresees volume improvements in early to mid-2024.
- Lowering capacity: In light of softer demand, O-I opted to accelerate temporary production curtailment, said CFO John Haudrich. Specifically, the company intends to curtail about 20% of its global capacity in Q4 to adjust inventory going into 2024. This follows some cutbacks that began in the Americas in Q3 — a $40 million cost, along with additional expense from elevated planned maintenance — whereas in Q4 it will be spread across Europe as well. Whether those reductions will continue into 2024 will depend on how demand evolves, executives said. This follows the elimination of four “high-cost” furnaces in the past year or so, including a recently announced closure in Waco, Texas. “We continue to evaluate further optimization opportunities,” Lopez said.
- Labor automation: Meanwhile, the company is also looking to scale up labor automation — implementing palletizers, for example. Haudrich noted some upfront spending there, but also the opportunity to take out elevated labor costs. Total capital expenditures are expected to be approximately $700 million for fiscal year 2023.
- Expansion projects: O-I says its forthcoming plant in Bowling Green, Kentucky — equipped with its modular advanced glass manufacturing asset, or MAGMA, technology — remains on track for mid-2024 completion. However, the company is opting to delay expansion projects in Brazil, Peru and Scotland by six to 12 months “to better align with the market recovery,” Lopez reported.
