O-I CEO: Glass market remains sluggish

Glass demand remains sluggish going into 2025, the CEO of O-I has said, but there are signs of growth

Gordon Hardie, CEO of O-I Glass, said the business had increased sales by 2% going into the new year.

It follows a difficult 2024 which saw a reduction in earnings and cash flow.

The company cut 14% of its manufacturing capacity as part of its Fit to Win business programme.

Phase A of Fit to Win focuses on three areas:

• Reducing excess inventory: Capacity cuts in Q3 2024 led to a drop in inventory days, with further improvements anticipated.

• Boosting productivity: O-I is evaluating the closure of at least 7% of its capacity by the middle of next year. The company is also driving productivity improvements across its manufacturing network.

• Reshaping Selling, General and Administrative (SG&A) expenses: Structural simplification, streamlined operations, and reduced central operating costs aim to bring SG&A expenses down to no more than 5% of sales by early 2026, saving $200 million annually.

These initial actions are projected to generate $300 million in savings by 2027, supporting O-I's EBITDA target.

Phase B of Fit to Win, slated for implementation in 2025, will focus on optimising the supply chain, enhancing productivity, closing high-cost operations, and reallocating profitable volume within the network.

“Fit to Win will enhance our position by addressing the obstacles that are holding us back,” Mr Hardie told analysts at a Capital Investor Day in early December

Mr Hardie said glass had lost market share to cans as it had not been cost competitive enough.

As a result consumers had turned away from glass.

He said: “If glass is within 15% of the price gap to cans then we will see a flow of cans back to glass, but if it is 25-30% and above then the consumer will decide with their pockets and they will shift.

“Consumers want more glass in their portfolio, but there is a cost issue.

“Fundamentally, Fit to Win is to reset the cost base of the business such that we are within that gap that allows customers to choose glass.”

He said key to glass’s rebound will be premiumisation, health and wellness, sustainability and the growth in travel retail.

Pockets of growth had been seen in the food and Non Alcoholic Beverage (NAB) segments in all regions, while the premium beer segment was growing in North America and in Italy and Germany.

Demand challenges remain for wine in the USA as well as in Southwest Europe.

Its Americas segment has 32 plants in seven countries from Canada to Brazil, with its strongest growth in Latin America.

In Europe there is a strong preference for glass. Consumers use it at twice the rate compared to the markets the company serves, Mr Hardie said.

It expects European glass demand to grow at 1% annually supported by its 34 plants in 10 counties, he said.

Approximately 55% of its business comes from large multi-national companies with long term contracts.

The remainder is from local and regional customers with annual purchase agreements.