Accelerating O-I Glass’ transformation

As part of an investor presentation, O-I Glass, Inc. will share its business plan to accelerate the company’s transformation and increase value for all stakeholders.

“Glass containers are a great product that have been trusted for thousands of years. Building off this enduring legacy, glass is more relevant than ever given consumer preferences for health, wellness and sustainability. To meet the packaging market’s evolving needs, we will continue to transform the company, and with our MAGMA solution, O-I will redefine the glass production process for decades to come,” said Andres Lopez, CEO of O-I Glass.

“O-I’s production network is purpose-built to serve a wide array of product categories. MAGMA will further enhance our capabilities to support many of these categories and expand in the highly differentiated product segments, which are aligned to changing consumer preferences. MAGMA also is more flexible and scalable and further improves glass’ position as the most sustainable packaging material available.

“With MAGMA, we can quickly add capacity in smaller increments, closer to our customers, and at lower capital intensity. This new capability will increase O-I’s right to win in the more differentiated markets. It will enable the company to grow in existing markets and enter new markets with greater flexibility. We are ready to deploy MAGMA, achieve the full potential of glass, and enable profitable growth.

“We have a great product in an attractive market. As part of our transformation, we are developing breakthrough innovations to meet the future requirements of packaging and generate profitable growth. I am proud to share our plan to accelerate O-I’s transformation and increase value for all stakeholders.”

The following are highlights of the company’s plan for the 2022 through 2024 period:

Margin Expansion Initiatives: the company’s ongoing margin expansion initiatives should generate benefits of approximately 50 million USD per year.

Profitable Growth with MAGMA: O-I expects one to two percent CAGR organic volume growth prior to divestitures. To enable this growth, the company intends to invest up to 680 million USD in new capacity to address supply-constrained geographies and categories. These investments are expected to generate a 20 percent average internal rate of return. In addition to the current project underway in Colombia, plans include up to 11 MAGMA lines. These investments will expand O-I’s leading franchise position in high growth and high value markets in Latin America and the oversold spirits category in the U.S. and U.K.

Expand Portfolio Optimization: the company has increased its portfolio optimization target to 1.5 billion USD by 2024. O-I expects total proceeds will approximate 1 billion USD by year-end 2021 (or early 2022) with incremental proceeds of approximately 500 million through 2024 USD. This capital will be redeployed to help fund attractive expansion initiatives with MAGMA and improve ROIC.

Resolve Legacy Liabilities: the company will seek to resolve legacy liabilities that have absorbed a significant portion of the company’s cash flows over the past decade. O-I’s subsidiary, Paddock Enterprises, LLC (“Paddock”), has reached an agreement in principle for a consensual plan of reorganization under section 524(g) of the Bankruptcy Code to resolve Paddock’s legacy asbestos liabilities. The total consideration to fund the section 524(g) trust would be 610 million USD on the effective date of the plan, which Paddock currently expects to occur in 2022. Likewise, O-I expects key legacy pension plans in the U.S. and Canada will be fully funded by 2024. These efforts will increase the cash flow available to create future value for all stakeholders.

Complete MAGMA Development: initial MAGMA expansion initiatives will utilize MAGMA Generation 1 and Generation 2 capabilities. The company expects to complete the development of a Generation 3 solution for deployment in 2025.

Advance ESG and Glass Advocacy: O-I intends to further advance its ESG (Environment, Social & Governance) position and glass advocacy campaigns to build on its already strong sustainability profile and to reposition the dialogue around glass in the marketplace.

The company anticipates adjusted earnings1 will improve to between 2.20 USD and 2.40 USD per share by 2024, representing an eight to 12 percent earnings CAGR over the three-year period. This outlook is net of an estimated 0.25 USD to 0.30 USD per share impact from portfolio optimization actions and additional interest expense related to the funding of the Paddock trust. Adjusted free cash flow should increase to between 400 million USD and 450 million USD by 2024 (adjusted free cash flow reflects cash provided by operating activities less maintenance capital expenditures and excludes the expected one-time cash payment to fund the Paddock trust). Further, O-I’s leverage ratio is expected to approximate 3.5 times by the end of 2024 (inclusive of funding the Paddock trust).

In addition, O-I is updating its current third quarter and full year 2021 outlook. Third quarter adjusted earnings should be at the high end or slightly above the previous guidance of 0.47 USD and 0.52 USD per share. Full year adjusted earnings are now expected to range between 1.70 USD and 1.75 USD per share, and full year free cash flow should approximate 260 million USD.

“O-I is the market, innovation and sustainability leader in the attractive glass packaging market. We are well-positioned to advance our business. As we continue to transform the company, MAGMA will further enhance O-I’s capabilities to unlock sustainable, profitable growth. We are addressing the challenges of the past, including resolution of legacy liabilities, and building a bright future for the company and its stakeholders. Through solid execution and profitable expansion, I believe O-I represents a compelling investment opportunity,” concluded Lopez.

O-I Investor Day Scheduled for September 28, 2021

Please join the O-I Glass global leadership team as the company discusses its ongoing transformation, MAGMA and future targets and milestones.

To register for the live event and/or replay of the event, please access this link.

The registration link is also available on the company’s website at https://investors.o-i.com/webcasts-presentations.

An archived replay of the webcast and slides shown during the presentations will be available on the company’s website following the completion of the event for one year.

For additional information about the event and supporting materials please visit O-I Glass 2021 Virtual Investor Day.

O-I’s third quarter 2021 earnings conference call is currently scheduled for Tuesday, October 26, 2021, at 8:00 a.m. EST.