OI

Thank you for standing by. My name is Gabby, and I will be your conference moderator today. At this time, I would like to welcome everyone to the O-I Glass Q2 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I would now like to turn the call over to Chris Manuel, Vice President of Investor Relations. Please go ahead.

Thank you, Gabby. Good morning, everyone, and welcome to the O-I Glass Q2 2026 Earnings Conference Call. With me today are Gordon Hardie, our CEO, and John Haudrich, our CFO. After prepared remarks, we will open the line for Q&A. Our press release and earnings materials are available on the company's website. Please review the safe harbor statements and disclosure regarding our use of non-GAAP financial measures included in those materials. Today's remarks do include forward-looking statements, and actual results may differ materially from our current expectations. With that, I'll turn the call over to Gordon, who will begin on slide three.

Thank you, Chris. Good morning, everyone. Today, we will review our Q2 results, discuss market conditions, and provide an updated view of our 2026 outlook and 2027 targets. Before I begin, I want to thank our O-I colleagues around the world for their continued commitment and flexibility during a challenging operating period. Let me start with a straightforward assessment. We are clearly disappointed with our H1 performance. Europe has not delivered the expected results as outlined in our Investor Day framework. We own those results. We are taking decisive action. We also think it is important to distinguish between a strategy that is not working and one where value realization has been delayed. We will address that distinction throughout today's discussion. With that, let me turn to recent performance.

Q2 net sales were stable while adjusted earnings were $0.09 per share compared to $0.53 per share last year. Performance varied significantly by region. Strong Americas result helped offset substantially lower earnings in Europe, while an unusually high adjusted tax rate resulted in reduced results by $0.18 per share. In the Americas, segment operating profit increased 22% year-over-year, which we believe demonstrates strong execution of our strategy and the resilience of the business, even with one furnace event during the quarter. Europe was significantly below our expectations and prior year performance. We do not believe this is a structural issue with the business or our strategy.

we believe the shortfall reflected three main factors: elevated competitive pressure affecting selling prices, higher energy costs related to Middle East conflict, and unanticipated operational inefficiencies following restructuring across multiple E.U. plants, along with two furnace events. We believe these issues are largely transitional and should improve as market conditions recover, and we work through the remaining restructuring challenges.

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Good morning again, everybody. I'll now comment on recent performance. Q2 net sales were stable while adjusted earnings were $0.09 per share compared with $0.53 per share last year. Performance varied significantly by region. Strong Americas result helped offset substantially lower earnings in Europe while an unusually high adjusted tax rate reduced results by $0.18 per share. In the Americas, segment operating profit increased 22% year-over-year, which we believe demonstrates strong execution of our strategy and the resilience of the business, even with one furnace event during the quarter. Europe was significantly below our expectations in prior year performance. We do not believe this is a structural issue with the business or our strategy. Rather, we believe the shortfall reflected three main factors. One, elevated competitive pressure affecting selling prices. Two, higher energy costs related to the Middle East conflict.

Three, unanticipated operational inefficiencies following restructuring across multiple EU plants along with two furnace events. We believe these issues are largely transitional and should improve as market conditions recover and we work through the remaining restructuring challenges. Global demand was also softer than expected, with shipments down approximately 4.5% year-over-year. However, trends improved through the quarter and June volumes were flat with last year. Operational disruptions also limited sales opportunities and accounted for about half of that decline. We believe Fit to Win remains a key driver of value creation. We have delivered significant savings year-to-date despite operational disruption and inefficiencies. In light of these near-term challenges, we have adjusted our 2026 Fit to Win target, while our three-year target is now in line with our original expectations of $650 million.

Given these factors, we have updated our 2026 guidance and recalibrated our 2027 targets from last year's Investor Day. Importantly, we believe firmly in our strategy. We are realigning the timing to achieve our goals, not changing the strategy. Let's now discuss the top line on slide four. Net sales remained relatively stable in the quarter. Volume performance continued to reflect soft demand, although trends improved as the quarter progressed. As noted, global shipments declined approximately 4.5% year-on-year, while June volumes were flat with last year. Recovery has been difficult to predict, given sluggish consumer demand and customer de-stocking in certain markets. In the Americas, shipments were down 7%, reflecting challenging prior year comparisons, exiting some unprofitable business, and a furnace event that limited sales opportunities. In Europe, shipments declined 2%, primarily due to operational disruption that constrained sales.

Excluding that impact, underlying trends were roughly flat in Europe. We continue to see pockets of strength across the portfolio. Non-alcoholic containers remain a standout performer, and several geographies exceeded local market trends and prior year levels. The Andean group delivered double-digit growth, while Brazil was up low single digits. In fact, we outperformed the market in the majority of category and market clusters amid generally sluggish demand. We continue to expect H2 growth supported by easier comparisons and new business wins while maintaining a more cautious recovery outlook. Our commercial transformation continues to gain traction. We are focused on business that generates economic profit and are applying greater discipline across the portfolio. Following strong execution in the Americas, we are starting to get more traction in Europe. New business wins represent approximately 2% of annual sales volume, with contributions expected later this year.

While the recovery remains gradual, improving momentum and portfolio optimization strengthen our confidence in delivering profitable growth. Let's now move to slide five. Fit to Win remains central to our strategy and continues to generate meaningful benefits. We believe the program is improving our cost position, strengthening our competitiveness, and building the foundation for long-term profitable growth. Since launch, Fit to Win has generated more than $400 million of net benefits. Through the H1 of 2026, we delivered $85 million of benefits. This is net of $30 million of direct operating inefficiencies and the total impact of disruption was approximately $45 million when including constrained opportunities and additional logistics costs. Phase A execution remains strong. Announced plant closures are complete, and we are advancing the final stages of organizational restructuring. Phase B continues to progress, although operational disruption has delayed COE benefits.

We are also advancing supply chain, procurement, and energy initiatives that should deliver increasing benefits over time. We have revised our 2026 and 2027 targets to reflect the headwinds discussed today. We now expect approximately $200 million of Fit to Win savings in 2026 and at least $650 million over the three-year period. Importantly, this reflects timing and execution disruption, not a change in underlying opportunity. The Americas' performance and recent customer wins are encouraging signs of improved competitiveness through Fit to Win. As execution stabilizes, we believe this can deliver meaningful value over time. With that, I'll now turn it over to John on slide six.

Thanks, Gordon. Good morning, everyone. The top line was fairly stable while Q2 results were below our expectation given challenges in Europe. Net sales were nearly $1.7 billion, down about 2% from the prior year. Favorable currency and stable consolidated selling prices partially offset lower sales volumes. Adjusted earnings were $0.09 per share compared with $0.53 last year. Lower net price was the primary headwind. Selling prices increased in the Americas but declined in Europe amid competitive pressure. Europe was also impacted by higher energy costs related to the Middle East conflict and the one-time reset we have discussed previously. Lower sales volume was offset by favorable operating costs, reflecting Fit to Win benefits net of unanticipated costs tied to operating inefficiencies and furnace events. Adjusted earnings also reflect an unusually high adjusted tax rate driven by lower European earnings and a reduced full-year outlook.

We also recorded a significant non-cash goodwill impairment charge and increased tax valuation allowances. Both are excluded from adjusted earnings. The impairment was triggered by the decline in the company's share price during the quarter and reflects Europe's current challenges from an accounting perspective. These charges do not affect cash flow, operating plans, or Fit to Win milestones. Our priority is to bring the same discipline and execution to Europe that have improved performance in the Americas while recognizing that progress is taking longer than expected in a tough macro environment. Regarding the balance sheet, leverage is up some given lower EBITDA. However, liquidity is very good at $1.5 billion. We have no maturities until 2028, and we have ample headroom on our senior secured covenant. Let's turn to slide seven. Segment operating profit was $171 million compared to $225 million in the prior year.

Strong performance in the Americas was more than offset by continued pressure in Europe. In the Americas, net sales were $949 million, up about 1%. Higher selling prices and favorable currency more than offset a 7% decline in volumes. Segment operating profit increased 22% to $165 million, and margins expanded by around 300 basis points to 17.4%. Higher net price, favorable FX and operating costs, net of a furnace event, more than offset lower volumes. This represents the highest Q2 profit in the Americas over the past ten years and demonstrates the value of Fit to Win. In Europe, net sales were $704 million, down 5%, with shipments down 2% as disruption limited sales opportunities. Segment operating profit was $6 million compared to $90 million last year. The decline primarily reflected unfavorable net price from competitive pressures and higher energy costs.

Europe delivered solid gross Fit to Win benefits, but temporary operational disruption and inefficiencies prevented those benefits from translating into net savings. Let's turn to slide eight. We are revising our full year 2026 guidance to reflect a Q2 shortfall and a more measured pace of improvement in Europe. Please note that we have removed adjusted earnings guidance because the effective tax rate is highly sensitive to changes in operating earnings, particularly given the low level of anticipated earnings in Europe. We now expect Adjusted EBITDA of $1.0 billion to $1.1 billion, with updated free cash flow and leverage guidance included on the chart. We continue to anticipate strong performance in the Americas, with the results expected to be up nearly 60% in 2026 versus 2024.

Gordon noted, lower current year guidance is primarily different by three factors in Europe: continued market challenges, including additional price pressure and higher energy costs related to the Middle East conflict, adjusted Fit to Win timing due to temporary operational disruption, and additional cost at a few specific plants. We believe the revised outlook better reflects current operating conditions and the environment we expect through the balance of the year. Importantly, we believe performance in Europe should improve sequentially over the H2. Let's turn to slide nine. We are also realigning our 2027 targets to reflect the same factors affecting our 2026 outlook. We now expect Adjusted EBITDA of $1.2 billion to $1.3 billion in 2027, reflecting a more gradual improvement path in Europe. From our revised 2026 guidance, 2027 should benefit from at least $150 million of additional Fit to Win savings.

Potential upside could come from market improvement in Europe and energy price normalization following an eventual resolution of the Middle East conflict. Importantly, we remain committed to the original Adjusted EBITDA target of $1.45 billion. We continue to believe that target is achievable, but it will likely take longer than originally anticipated. With that, I'll turn it back to Gordon on slide 10.

Thanks, John. Before we close, I want to reinforce several key points. We are not satisfied with our performance. We understand that investors will expect clear evidence of improvement. At the same time, the framework we laid out around Fit to Win, Profitable Growth and Strategic Optionality remains the right path to create long-term value. In Horizon 1, Fit to Win is delivering meaningful savings and improving our competitive position. The Americas demonstrate the earnings potential of stronger execution. Europe is about a year behind the Americas on Fit to Win. Ultimately, we believe Europe should improve to mid-teen segment profit margins within the next two years. This should be achieved through initiating recovery of excess cost inflation, addressing temporary disruption and normalizing energy markets, and completing our Fit to Win implementation.

In Horizon 2, improved competitiveness is supporting Profitable Growth, with new business opportunities expected to build volume momentum through the H2 of 2026 and into 2027. In Horizon 3, we are evaluating strategic options to strengthen the portfolio, improve our position in the value chain, and preserve flexibility for long-term value creation. In short, we are addressing near-term challenges with urgency while staying focused on the strategy we believe will create sustainable long-term value. With that, let me conclude on the next slide. To close, Q2 results were below expectations, primarily due to Europe. We understand the drivers and are addressing them directly and with urgency. At the same time, the Americas' performance highlights the earning potential of effectively executing our strategy. Demand remains soft, but volume trends improved through the quarter, and we expect gradual improvements in the H2.

Fit to Win continues to deliver meaningful value even with near-term disruption. Most importantly, our strategy remains intact. We are recalibrating timing, not changing direction. Our focus is clear. Restore performance in Europe, improve execution, and create sustainable long-term value. Thank you for your time this morning. We will now take your questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. The first question comes from the line of Ghansham Panjabi with Baird. Your line is now open. Please go ahead.

Hi, Gordon and John. This is William Kass on for Ghansham. I think my first question is just what gives you confidence on 2027's plan? Obviously, 2026 has shook out meaningfully below your initial expectations. Just some more color on 2027 would be great. I have a follow-up. Thanks.

I'll take that first. When we talk about moving from 2026 to 2027, first of all, we've obviously rebased 2026 for the factors that we talked about. As we look going forward, we are highly confident of the $150 million-plus of Fit to Win benefits. Even in a disrupted environment, we're going to generate $200 million or more this year. We're confident, especially as we get through the disruption elements and the benefit of exiting from some one-time elements into the next year. Beyond that, we're really not making a lot of forward estimates about strong recovery. We still have included in there kind of a flattish volume environment. We still have the baseline of the Middle East conflict, sluggish demand, affordability issues, all things.

With that said, there are probably more upside opportunities with ultimately the resolution of the war and the normalization of the energy markets, as well as with a better background in that regard in affordability elements, consumer consumption, and not to mention us putting into effect our Horizon 2 Profitable Growth and the forward opportunities that we have on a number of the new wins that we have and the new businesses that Gordon mentioned. Those underpin our view of 2027, which of course has been rebased from the original expectation.

Just to build on that, William, we see what we can deliver in the Americas with the tight execution of the strategy and Fit to Win, as we've said on previous calls and here again today. Europe is about a year behind the Fit to Win implementation. We expect that to improve sequentially through the next four to six quarters. That also is an underpinning of our thinking around our 2027 results.

Okay, great. That's super helpful. Thank you. Just one more on volume expectations for the H2 of the year. How much would that be like contracted new business versus just the general expectation of a market recovery? I know you said June was flat, if we could just hear that and maybe how July is shaping up, too, that'd be great. Thanks.

Sure. As we've outlined, we rejigged and reconfigured our go-to-market approach in both the Americas and in Europe. We're seeing the early benefits of that coming through. I think last time or last outing, we mentioned we have picked up 15 pieces of new business that equates to about 1%-1.5% of volume. We've subsequently picked up more business that will start to flow in the H2 of this year and into next year, which represents about 2% of volume. We're gaining traction. We're becoming more competitive in the market. When we look at it, we see it sequentially improving through this quarter and into the Q4. All the early signs are positive that we're becoming more competitive, and we're translating that competitive into profitable volume growth.

I'll add just a couple data points on there, William. The new contracted business, as far as what we expect, it's going to ramp up in the H2 of the year. It probably adds something like 1%-1.5% annual life run rate in the H2 of the year as we then build into 2027 when you see the full 2% being realized. That comes as a tailwind. To your question on July. Basically, all of our markets are performing kind of in line with what we saw in June net net in total. The one thing that we have to say is that there's still a little in one geography, we are still dealing with a little bit of transitional elements of one of the furnace events that we had.

There was still a little bit of headway on volumes due to the ability to supply. Through July, we believe that we're out of that, going forward, we should see the trends fall through to the full market opportunity.

Okay, great. That's super helpful. Thanks, guys.

Your next question is from Mike Roxland with Truist Securities. Go ahead, your line is now open.

Yeah. Thank you, Gordon, John, Chris, for taking my questions.

Good morning, Mike.

Good morning. Just wanted to follow up. If you could provide some more color on those operational efficiencies along with the two furnace events in Europe. More color around what they are, what the disruptions were, when they started to occur, and what your plan has been to get them fixed and where that plan currently stands. Thank you.

The events took place in Europe, one in France, one in the U.K. One was a fire, one was a leak. That caused us to short ship into the market. Put extra pressure on the network in the context of a changing network that hadn't yet settled, and also in the context of increasing logistics costs. What have we done about it? We've got both local engineering and expert furnace engineers that were in place, supported by some outside expertise to fix those issues. We're confident that those issues are now fixed, and both those plants are starting to resupply the market at getting up to what their full potential supply should be as we walk through July. They were the main issues.

When you're changing the supply network as we were with three plant closures in Q1 and Q2, that disruption did add pressure into the network at a time when, as I said, costs were rising, there was less available logistics capacity. That caused us to have to pay more for what was available. That really was the root cause of that. We did also experience kind of a number of small one-time events around rail transport not being available in France and having to shift to road freight. That also caused us a bit of disruption and certainly put in a significant chunk of cost. Again, that's a once off, and we don't see that reoccurring as we go through the H2 of the year.

Maybe just one other comment, Mike, on top of that just to show, if you compare that to the Americas, where we did have a furnace event and the segment was able to fully offset it and deliver, it just shows the resilience in the business that once you do get through all the restructuring and activities, and then you get the TOE and the operations where you want it to be, we're confident that while this is a blip that occurred because of the combination of the furnace events and the closing the three factories at one time, we believe that we'll get out of that into a much more stable environment.

Got it. To put a bow on it, you're past these events now, though? They're in the rear-view mirror and things are corrected, and you should be operating better today than two years ago?

Yes, absolutely. We're past those events. The rest of the fleet in Europe is performing well, and we expect that performance to sequentially improve through the next four quarters as we embed the TOE, the total operating efficiency methodologies into the plant at the same level we have embedded them into the U.S. As I said, Europe is about a year behind the implementation of Fit to Win. We expect the catch-up is occurring as we speak. Yeah.

Got it. Just one quick follow-up. You mentioned, Gordon, that you don't believe that what you're seeing in Europe is structural. What is it causing, then, this really non-structural issue in Europe? What I'm trying to get is when I look at some of your peers that recently reported, one of your peers reported close to a 30% EBITDA margin in the H1.

Yes.

There obviously are benefits to be had in your key market. It seems like you guys are a little bit behind that, or notably behind that. What are you trying to do to maybe catch up from a portfolio perspective, from an earnings and margin perspective to what some of your peers have been posting in terms of their earnings and their margins? Thank you.

Okay. First of all, let me just give some context around Europe. It's a very large market, very attractive market, 22 million tons and over $2.5 billion of profit pool in the region. Our peers are running businesses that are not going through a restructuring as we are in Europe. I come back to our original thesis. The business was uncompetitive. We are going through the actions required to get this business more competitive in Europe. We're in transition, right? Executing that. Yes, we've had a stumble, a chunk of it of our own making. We own that. We know how to fix it. We know what the issues are. We have the right resources in place. We've made the required changes of leadership and have now leadership in place with the skills that can address the supply chain network issues that we're facing.

We see ourselves being able to execute that in the months and quarters ahead to the standard that we've done it in the Americas. We have the right resources and governance around that. We expect within two years to be back at kind of high teens margins. That's assuming energy markets somewhat normalize. There's some demand coming back into the market in certain categories. We don't need, nor do we expect huge lifts in demand. We have a clear plan around our Fit to Win, running the operations and the supply chain in as fit a manner as we are now running it in the Americas. We've also upgraded substantially our energy procurement, our energy risk management, and our energy usage capabilities in all these plants, and we expect those benefits to flow through in the coming quarters.

To give you a data point on that, in terms of energy usage, we've put in a new system across all of the plants, and some of our plants in Europe are now generating savings of anywhere between 5% and 7% year-over-year in energy usage. There's a lot of good things happening in Europe. We're making a lot of progress in a lot of areas. We did have this stumble that is sort of masking that. We feel we're working through that. By year-end, we'll have settled the supply chain significantly, and we'll start to extract the full value of the restructuring and the capacity optimization. We have a lot of data points we feel gives us confidence that we can execute in a way that delivers into the high teens over the next 18, 24 months.

Got it, thank you.

Your next question comes from Arun Viswanathan with RBC Capital Markets.

Hey, Arun.

Arun.

Great. Thanks for taking my question. I hope you guys are well. Okay. I just wanted to ask about Europe. I think you went into the quarter expecting a slight improvement there, then I think you were down slightly. What kind of drove that? Would you say that there's some structural weakness in wine? Do you think this is more transitory in nature? I know the affordability issues have continued to linger and, obviously with that, the conflict going on as well. How do we see volumes kind of improving? Is there anything else under your control, whether it be business wins or anything else that you could do to potentially drive some of that volume? And if it does not improve, what kind of footprint optimization actions would you be in a position to take? Thanks.

Hey, Arun, this is John. I'll just kick that off. For clarity, during the quarter, we expected Europe's performance would be about $25 million better than where it was. Okay? The majority, about 80% of that, had to do with the operating disruption one way or another. Okay? The other, maybe $5 million, was a little bit of extra pricing pressure. Keep in mind, as we indicated, our volumes are down 2%, but they were flat if it wasn't for the disruption. We didn't really have a meaningful commercial difference in the environment. It was more of an operating element. I'll turn it over to Gordon.

Arun, as I said, a large market, over 22 million tons and a very large profit pool. One way to maybe look at Europe is, this is broad strokes, bear with me. If you look at Northern Europe, it tends to be spirits dominated. Spirits and food. If you look at kind of Middle Europe, across northern France, Benelux, into Germany and Poland, is very much beer and food. In Southern Europe, much more kind of wine dominated, but obviously with some beer. What we're seeing is wine in all markets, not just in Europe but across the world, is under significant pressure, and we do think there are some structural issues in that category.

We've taken what we feel are appropriate network optimization actions and that to make sure that our footprint mirrors what we feel we can supply at an economic profit. In spirits, I think spirits generally are under pressure because the two largest markets, North America and China, have been underperforming for some years now. We see, over the next probably 12 months, not a huge change in that picture in terms of exports, particularly into the U.S. or China. Although we are and expect to see stocks decline in the U.S. market and maybe some refill happening as we go through early, mid-2027. The bright side on spirits is travel retail continues to grow, tends to be more premium, maybe a bit less volume, but it is growing. If you look at Europe, kind of what I call Middle Europe, beer performs strongly.

Is performing strong, particularly premium beers, as is food. We see in all markets our food business growing quite strongly, and it is now our second-largest category with a strong economic profit. As we look forward, we see pockets of growth that we can leverage. We've also tightened our network. Our restructuring is behind us in Europe. We see our platform probably moving into 95%-97% kind of capacity utilization as we move through the rest of the year and into 2027. Our go-to-market model that we've instituted is absolutely bearing results for us. We continually month on month see new business wins at margins that are attractive for us. You put all that together, we have a lot of confidence in the medium long-term market opportunities in Europe. We see our margins improving. We know how to do that. We've demonstrated that in the Americas.

We actually have pockets of Europe where we're executing very well, and we see the margins coming through, particularly in Southern Europe. You put all that together, we're bullish on Europe over the medium, longer term. We've got to execute more effectively on some of the basics around logistics and planning and get through this restructure, and then continue to execute our Fit to Win, and our go-to-market. That's really how we're thinking about Europe. Still a very important market, very attractive market, and a market we can do very well in the quarters ahead.

Okay, thanks for that. Just as a quick follow-up, or not so quick, but I did want to ask about some broad strokes for 2027. I think you mentioned that not calling for a big recovery, but how should we think about net price, obviously, the incremental Fit to Win benefits as well, and would there be any other larger bucket items you can kind of help us with to frame where you could see 2027 EBITDA land versus the original $1.45 billion guidance that you'd provided previously?

Yeah, Arun, this is John. I can give you a little bit more color in that regard. We look to 2027 and the levers there. From a net price standpoint, at this point in time, we're thinking kind of neutral-ish. Keep in mind, we've had a very large amount of inflation this year, and 55% of our business overall is covered under long-term agreements. There'll be a PAF recovery. It's typical in our business. There's a lag effect associated with that. That will come through. Even in a world where we just assumed current elevated energy prices, the TTF at 55-60, we believe that we would have a neutral to even maybe modestly positive net price as we look forward. That does not include any other actions that might occur.

It doesn't include the potential of a resolution of the war, in which case then energy prices could go down and that could be a bigger tailwind. Okay. On a sales volume standpoint, we're penciling in kind of a continued muted environment, but maybe flat to up 1% given that we do have 2% volume growth coming through, and that continues to build. We will see what the net effect of that is overall. You have your $150 million worth of plus of Fit to Win benefits, which are going to be. They'll be skewed over to Europe as we work through the disruption this year and we complete the program, which is, like we said, is a little bit further along to go and over Europe.

Those are the big pieces that kind of get you to from your midpoint of the current year to the entry point of our guidance range of the $1.2 billion next year, with the upside being potential resolution of war and a tailwind there and an evaluation of what happens more broadly in the European market if the market becomes more constructive.

Thanks, John.

Your next question comes from George Staphos with Bank of America. Please go ahead. Your line is open.

Hi, everyone. Good morning. Thanks for the details. I wanted to dig into the operations a bit with Fit to Win and, in particular, Europe. With Fit to Win, Gordon, you obviously made a lot of progress last year and the first portion of this year. Frankly, you've made a lot of progress this year. We've seen a bit more, you've acknowledged it, challenges in delivering as we've gotten into Phase B. Does that have, in any way, from your vantage point, reflect that it gets tougher and tougher to do the operational within Fit to Win, especially given the nature of making glass, given how fixed cost leveraged it is, in some ways, how abusive the process of making glass is in the first place. You're pulling tons through a furnace.

Is there anything in Fit to Win that you're finding it's maybe a little bit tougher, given your past experiences, to execute in making glass, just given how challenging manufacturing glass is in the first place? I had a quick follow-on to that.

Sure. Yeah, let me address that in two ways. If I look at the Americas, I think you can see the results coming through, and I think we were about ahead. We kind of started the Phase B in the Americas. Fundamentally, you're changing culture, you're changing culture in plants, and you're changing some processes, and with that comes some challenges. The process we have it's pretty simple in many ways, but it requires a lot of discipline, and it requires some change management. I think we've executed that well in the Americas. You are right, George. I mean, glass making is pretty unforgiving. The parameters need to be tightly controlled. A miss on some of those parameters sometimes can throw you out for a week or two weeks.

If you have a furnace event, it tends to unsettle the whole network because you've then got to produce in maybe plants that wouldn't normally produce a particular product and that causes some disruption, right? That has unsettled us a bit, this year and particularly in Europe. Europe was really the last to go on the TOE disciplines. We're still bedding them in. The disruptions did have an impact on, the disruptions were probably in two plants. It probably impacted six. You're also kind of redirecting expert resources away from maybe their job and there's some firefighting going on. Truth be told, that was part of the story of the H1. That notwithstanding, I would say in the vast majority of the plants, so we have, what, 60 facilities.

I would say in 50, 52 of them we see consistent improvements around the TOE, availability increasing, quality improving, speed of lines improving. We are making improvements. Remember, some of our plants were already very high performing. On the high performing plants, there's probably chunks left to improve. That notwithstanding, I think weighted average, we are seeing significant improvements across the fleet. What happens is, and I think I laid this out at Investor Day, these kind of transformations are not linear. You'll always get some sort of bump along the way. What I found in my experience is once you get through that, the system kind of reenergizes itself and you start to hit those higher levels of performance.

We certainly have enough data points around those three elements, availability, quality, speed, and energy reduction, to feel very confident that we are going to hit at least $650 million. We'll hit higher maybe over a bit longer timeframe. I'm not worried about that, if I could put it that way. I'm frustrated that we've had these stumbles, particularly in Europe, right in the middle of when we were reconfiguring the networks to have two plants go down for a period. That's frustrating. That's held us back. We own it. We know what went wrong. We know what to fix it. We have the right resources on it. Let me tell you, we'll be quite maniacal about getting the performance back to where it needs to be.

Well, I appreciate the thoughts on that, Gordon.

They're well taken points.

I think I know. What's that?

They're well taken point. It's a well-taken question.

No, we appreciate it. I had a follow-on related. I think I know where you'll go with this, but nonetheless, I do want to ask the question. Traditionally, glass making, if you ran 92%, 93% utilization rates, those were very good.

Yeah.

When you ran over 95%, the view was that you would stress the furnaces. You would pull too quickly. Is any of that filtering into what we've seen or not? I know you're trying to change the paradigm in glass, so maybe not. As we think about Europe and some of the changes in the organization that we've seen over there, has that been because of alignment on the direction and the strategy, or just execution and going out of parameters in terms of the execution? Thanks, and good luck in the quarter.

Right. Two things. I'll take the second piece first, if you don't mind. I think one of the things that became apparent as we moved through Q2 is the extent to which we needed to work cross-functionally. I did flag up on Investor Day that our goal was to get this business out of silos and working much more cross-functionally. We've made huge progress on that. But I don't think we made enough progress on that in Europe, right? We've now made changes in leadership in terms of driving a much more integrated cross-functional within the region, but also within the expert resources available at the global level, to get them in as part of the team in a much more integrated way. Already in the last kind of six weeks, we see that working much more effectively.

The incidents we had that I called out both in France, the U.K., and indeed the U.S. is probably a result of what we would in the industry call over pulling on the furnace over years. What we've done in our new system of TOE is we have strict pull rates depending on the kind of furnace. Part of TOE is to make sure that we do not over pull and therefore damage or burn down these furnaces more quickly than they should be. That's a very rigorous discipline, and that's looked at every day now. Whereas in the past, I think that was on controls and you had plants over pulling, and therefore burning down the furnaces more quickly or indeed under pulling and using way too much energy. We have tremendous visibility on that on a daily basis.

That's looked at on shift by the day at the plant manager level, then that rolls up through the organization into the Value Office to make sure that we're within the parameters that these facilities should be run at. As we look forward, you would expect over time to have far fewer of these events. The other thing I would say is, one question you asked is Fit to Win the cause of some of these breakdowns? Again, the answer is absolutely no, because what we've done in Fit to Win is strip out cost and waste, and we've actually upped our reinvestment in maintenance and engineering across the fleet over the last two years. Our engineering and maintenance has actually increased slightly on a per ton basis.

This is really cultural change, process change that we're bedding in with huge support from the plants on TOE and huge support from people on the line. They see their lives getting easier in managing these plants. I think we're in a good place. We stumbled in Europe, no question about that. We own that. We know what went wrong. We know what the root causes are. We're all over the root causes, and we're fixing it. I expect that performance, the operational performance, to continue to improve in the Americas. I expect it to pick up a much faster pace in the next two to four quarters in Europe.

Thank you very much, Gordon.

Thanks, George.

Your next question is from Anthony Pettinari with Citi.

Hey, Anthony.

Please go ahead. Your line is open.

Hey, good morning. This is actually Bryan Burgmeier on for Anthony. Thanks for taking the question.

Hey, Bryan.

On the Fit to Win savings, I know you're looking for another $120 million in the H2. I was curious maybe how much of that is sort of already locked in based on actions you've already taken in the H1. Then as we start to think about 2027, you're looking for another $150 million. Just sort of the same question, is it possible to say how much could be sort of locked down by the end of the year and would just be maybe like a rollover benefit?

Anything we publish here and anything that's part of our Value Office program here is we have not only a clear target, but we have clear activities around timing, proper project management, and resources around that. I would say that as a governance piece. None of this is kind of aspirational, and none of it is we have a number, but we don't know how to get there. Okay? We do have further ideas on how to add more value. We just haven't figured out the path on some of those above the 150 for next year. Everything you're seeing and everything we've published there, they're deliberate programs and actions taking place day in, day out to deliver on that. That's by way of kind of process. John?

I would add on there, just looking at specifically at the numbers here, you're right. We have about $115 million-$120 million in the H2. Just under half of that is pretty much already locked and loaded because we've done the restructuring, we've done the SG&A actions by and large, things like that. The remaining component has to do with what we call more on that Phase B activity, more of this improving the operations, addressing the things that we're talking about in Europe, as well as moving forward some of those programs around energy usage that Gordon was talking about and other factors. Going in the next year, too, in the $150 million, there's a decent number. I don't have a specific number.

I would say probably a third of it, off the top of my head, is probably locked and loaded because it's just a carry-on effect, the annualization effect of things that are already done. The remaining component has to do with more operational improvement, again, focused more on Europe.

Yeah. With the programs, they're set by plant, by supply chain. It's a function of executing them month by month. Yeah.

Got it. Thanks for that. Then just one follow-up. It seems like South America, Brazil did pretty well in the quarter. Just kind of curious your assumptions there for the H2. I guess some other beverage factors maybe sound a little conservative in the H2, so maybe just curious how much of that kind of volume momentum could carry through. Thanks. I'll turn it over.

Yeah. Bryan, is that in reference to Latin America or overall?

South America and Brazil specifically. Thanks.

Yeah. Our business is performing exceptionally well in Brazil and in the Andean region, indeed Mexico, albeit off lower volumes. The teams there are executing our Fit to Win extremely well, executing our go-to-market extremely well. We're picking up new business and executing the strategy as it should be. We expect that performance to continue to the end of the year and well into next year. Yeah, demand is good for us. If I give you, we're up in spirits in Brazil, we're up in food, we're up in RTDs. When I say we're up, we're growing ahead of the market, then we're growing at market in beer in Brazil. I see that market continuing to perform strongly.

In our Andean business, we're growing ahead of the market in beer, ahead of the market in spirits, ahead of the market in wine, ahead of the market in food, ahead of the market in RTDs, growing at market in food. Very strong performance there. In Mexico, volumes are a bit off due to tequila exports being down and Mexican beer imports into the U.S. Our team, they're executing Fit to Win exceptionally well and delivering very strong financial performance. Overall, we're very happy with how our Latin American business is performing, and we expect that performance to continue.

There are no further questions at this time. I will now turn the call back to Chris Manuel for the closing remarks.

Thank you. That concludes our earnings call. Please note our Q3 call is scheduled for Wednesday, October 28, 2026. Remember, make it a memorable moment by choosing safe, sustainable glass. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.