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By the numbers: Q1 2024
Net sales: $1.59B
Down 13% year over year
Earnings before income taxes: $117M
Down 56.7% year over year
- Q1 results: O-I Glass this week reported a 12.5% year-over-year drop in shipments in the first quarter. CEO Andres Lopez, who will soon be succeeded by Gordon Hardie, blamed lower earnings on “softer demand due to a market downturn and temporary production containments to balance supply with lower shipments.” Inventory destocking has also continued to have an impact, and slowdowns have occurred broadly across markets, executives said during a Wednesday earnings call.
- Trends: Lopez said the Q1 shipment trends are still sequentially better than a 16% decline in the fourth quarter of 2023 and consumer consumption patterns appear to be gradually improving, with April trends better than Q1. Customers’ promotional activity is also fueling some consumer trade-down to value brands, Lopez said.
- Production curtailment: CFO John Haudrich said curtailment was at 8% in the first quarter, which ended up being a lower level than the sales decline. “So we are stepping up the curtailment activity,” he said. Over the course of 2024, it will probably end up being between 10% and 12%, peaking in the second quarter as O-I is “adjusting for a little bit of the slowness in the first quarter.” Curtailment has been most prominent in the Americas, with more to come in Europe.
- Destocking: Executives reiterated that destocking is in the later stages for beer, non-alcoholic beverages and food. Wine and spirits destocking is still expected to continue for multiple quarters. Executives said that March may have been a particularly low month because some customers may have wanted to reduce inventories before the quarter ended. “Because of the excess capacity at this point, we expect that the typical seasonal demand that we see wouldn't necessarily apply, because customers have access to product right away,” Lopez said, but April improvements are “reassuring” about the path forward.
- Outlook: O-I lowered its projections for 2024 sales volumes, earnings and cash flow “to reflect a slower market recovery,” Lopez said. O-I now expects sales volume, in tons, will be flat or up in the low-single-digit range, down from a previous low-to-mid single-digit growth projection. Full-year free cash is now expected to be between $100 million and $150 million, down from an earlier estimate of $150 million to $200 million. The company plans to start up its new plant in Bowling Green, Kentucky, in late July or early August.
