O-I Glass Cuts 2026 Outlook as Europe Weighs on Q3 Earnings

O-I Glass Inc. (NYSE: OI) reduced its 2026 adjusted EBITDA and free cash flow outlook after third-quarter earnings fell sharply, as price pressure and higher energy and freight costs in Europe outweighed resilient performance in the Americas and benefits from its Fit to Win cost program.

The glass-container maker now expects 2026 adjusted EBITDA of $925 million to $950 million, down from its previous range of $1.0 billion to $1.1 billion. It forecasts approximately $300 million of negative free cash flow, compared with an earlier projected outflow of $50 million to $150 million, and expects its year-end leverage ratio to be between 4.5 and 5.0 times.

O-I attributed the adjusted EBITDA revision primarily to commercial factors, including the U.S.-Canada trade dispute, higher energy and freight inflation, and fewer Fit to Win benefits than previously anticipated. About 70% of the change relates to Europe and 30% to the Americas. The cash flow outlook also reflects unfavorable working capital from higher inventories and cash costs associated with energy risk management.

Third-quarter net sales declined to $1.62 billion from $1.65 billion a year earlier. Adjusted EBITDA fell to $234 million from $329 million, while total segment operating profit dropped to $139 million from $235 million. Adjusted earnings were a loss of $0.09 per share, compared with adjusted earnings of $0.48 per share in the prior-year quarter. The company said lower European net pricing and a higher adjusted tax rate were the main contributors to the earnings decline.

Sales volume, measured in tons and excluding divestitures, decreased approximately 2% from a year earlier but improved sequentially for a second consecutive quarter. Favorable foreign-exchange movements largely offset slightly lower pricing and volume at the consolidated sales level.

Europe Weighs on Results

Europe generated third-quarter net sales of $634 million, down from $688 million a year earlier. Segment operating profit fell to $2 million from $95 million, reducing the segment margin to 0.3% from 13.8%.

Net price had a $91 million negative effect on European segment operating profit, while lower volume and mix reduced profit by another $4 million. Energy and freight inflation in the region was approximately $15 million above the company’s expectations entering the quarter.

European shipments declined 3.7%, with improved demand in Northern Europe offset by lower shipments in Southern Europe, particularly in the wine category. O-I said softer demand, excess capacity, commercial execution challenges, restructuring complexity and asset-related events contributed to the region’s underperformance.

The company is implementing a multi-year European recovery plan focused on commercial execution, inflation recovery, profitable volume and plant efficiency. It said natural-gas hedges cover 100% of the fourth quarter of 2026 and more than 90% of fiscal 2027, barring extreme market conditions or supply disruptions. O-I has also decided to begin a process that could lead to the closure of a European production facility.

Americas Remain Relatively Stable

Americas net sales increased to $970 million from $940 million, supported by a $42 million currency benefit and $15 million from pricing. Those gains were partly offset by a $27 million impact from lower volume and mix.

Segment operating profit declined 2% to $137 million from $140 million, with the margin narrowing to 14.1% from 14.9%. Shipments decreased 1.3%, including effects from an Andean earthquake and the U.S.-Canada trade dispute. Strong shipment growth in Latin America largely offset weakness in North America.

Across the company’s portfolio, food and non-alcoholic beverage sales trends continued to outperform alcoholic beverages, while Latin American markets performed above both the broader market and the prior-year period, according to the presentation.

Fit to Win Savings Continue

O-I’s Fit to Win initiative delivered $50 million of net benefits in the third quarter and $135 million through the first nine months of 2026, bringing cumulative program savings to approximately $460 million.

The company now expects about $180 million of Fit to Win benefits in 2026, compared with its previous outlook of at least $200 million, reflecting a slower recovery in Europe. Organizational actions and previously announced plant closures are substantially complete, while procurement initiatives are ramping up. O-I continues to target cumulative three-year savings of approximately $650 million.

For the full year, the company expects sales volume to decline 3% to 4%. Fourth-quarter volume is projected to be flat to up by a low-single-digit percentage, supported by easier prior-year comparisons and new business wins. Other 2026 assumptions include a $75 million to $125 million net-price headwind, approximately $150 million from the expiration of favorable European energy contracts, and about $100 million of additional energy and freight inflation related to conflicts in the Middle East.

O-I is no longer maintaining its previous 2027 targets because of evolving commercial, energy and global trade conditions. The company plans to issue 2027 guidance with its full-year 2026 results, though its initial planning assumptions call for higher adjusted EBITDA, stable sales volumes, at least $170 million of Fit to Win benefits and approximately $400 million of capital expenditures.

At September 30, O-I reported total net leverage of 4.5 times and senior secured net leverage of 1.37 times, compared with a 2.5-times covenant. Available liquidity was $1.5 billion. The company identified continued uncertainty around European recovery, energy and transportation costs, soft demand, trade conditions, pricing, inventory levels and execution of restructuring and efficiency measures as factors that could affect future performance.