O-I Glass, Inc. (OI) Earnings Call Transcript & Summary

Good morning. Thanks for everyone attending the Deutsche Bank Global Materials Conference. My name is Kyle White. I'm the lead analyst for packaging and environmental services here at Deutsche Bank. Very pleased to have John Haudrich, the CFO of O-I Glass here. Format for today, he'll do a quick presentation about 10 minutes on some nice updates and then we'll go into Q&A. This event is being web casted. So if you do have a question, feel free to raise your hand, but please wait for a microphone to get to you. With that, I hand it over to you. Thanks again.

Thank you, Kyle and the DB team for hosting us today. I plan to discuss how O-I represents an attractive investment opportunity as well as provide an update on our business outlook. Afterwards, we'll be more than happy to take your questions. Before we proceed, please review the safe harbor comments on Slide 2 and various disclosures found in our presentation, which is posted on our website. On Slide 3 here, you'll see a high-level profile for the company. O-I is the global leader in glass packaging. We serve the highly stable and steadily growing food and beverage industry, supporting more than 6,000 customers. These customers value our dedication to service in our unparalleled production network to meet their needs across the globe. As the industry leader in innovation, we are proud to make glass the most sustainable packaging solution. Likewise, it is the preferred substrate by most consumers given its premium characteristics and their increased focus on health and wellness. Today, O-I is at a unique inflection point in its long corporate history. With the resolution of legacy asbestos liabilities anticipated in mid-2022, we expect substantially more cash flow each year to invest in our business, reduce debt and create value for our shareholders. At the same time, we are developing MAGMA, a revolutionary new glass production process that will enable profitable growth and boost our financial performance. Let's expand on these starting on Page 4. I strongly believe O-I represents an attractive investment opportunity. We are enabling profitable growth by capitalizing on the strongest glass fundamentals in decades. At the same time, the company is executing very well supported by the bold actions we are taking to transform O-I. We are also delivering on our commitments as our results have met or exceeded guidance over the past 2 years. I'm happy to report that our second quarter earnings should again exceed our most recent guidance. This reflects very good performance across all aspects of the business. MAGMA represents a breakthrough innovation that creates a new paradigm for glass to meet the needs of an evolving market and expand our business as the most sustainable packaging option Glass is set to win in the new green economy. Finally, we are eliminating legacy liabilities, improving our balance sheet to reduce our risk profile. Moving to Slide 5. Market trends clearly favor glass. In fact, we are seeing the strongest glass fundamentals in a generation, supported by a number of key drivers. First, consumption trends have changed, and consumers love the healthy premium and earth-friendly characteristics of glass. With markets reopening as COVID concerns received on-premise consumption is rebounding across the globe. Glass has demonstrated strong performance both in on-premise and off-premise, redefining long-held assumptions about glass resilience to channel ships. At the same time, glass historically imported from Russia and Ukraine has been displaced due to the recent conflict, which is driving up demand for locally produced glass in Europe. We are seeing a structural shift in consumer preferences across Latin America that are driving growth. This includes focus on premium products and the localization of international brands. Likewise, we are seeing a better share distribution between returnable and one-way glass containers, matching consumption trends and affordability needs in those markets. On top of that, food and beverage product inventories remain far below pre-pandemic levels with glass capacity -- in glass capacity oversold in many markets, especially in Europe and Latin America. Glass is increasingly more competitive compared to alternative substrates given relative input costs and a more local supply chain. Our efforts to rebalance the dialogue and glass through our digital glass advocacy campaign is increasing the purchasing intent for glass. Likewise, we are starting to see a lift in store sales following targeted campaigns. Finally, strong demand is driving increased new product development in glass, which is up about 10% from pre-pandemic levels. According to Mintel, the majority of all new product launches across Europe, North America and Latin America during the first quarter were in glass, mostly in alcoholic beverages, sauces, seasonings and spreads. As you can see, there are many important drivers for strong glass demand. Turning to Page 6. Glass demand trends reflect these strong fundamentals. On the left, we illustrate Euromonitor's projected packaging growth over the next 3 years. Glass growth is expected to range between 2% and 3.5% a year in O-I's core markets and exceed the average growth rate across the overall packaging market. As you can see, O-I shipment trends that are shown on the right. Shipments increased more than 5% in 2021, and momentum has clearly carried through the first half -- first quarter of 2022 as shipments were up a healthy 6.4%. Importantly, our shipments in North America have stabilized after years of headwinds. Despite record low inventories and capacity constraints in certain markets, our second quarter buying are up about 1% quarter-to-date, which is consistent with our guidance of low single-digit growth. We continue to advance our capital expansion projects to add much needed new capacity. As you can see, glass is a growing and attractive market. I'm now on Slide 7. While markets have been shifting in our favor over the past few years, we have also been hard at work transforming the company. The team started by building a simple, agile and effective organization supported by industry experts such as Accenture. We have streamlined the business and implemented world-class systems like integrated business planning. Likewise, the team rebuilt critical capabilities across commercial, R&D and ESG. We now have the strongest commercial pipeline in years and are advancing new technologies. We are optimizing our structure and expect to complete our $1.5 billion divestiture program this year. Likewise, we are well on our way to resolving legacy liabilities that have strong the business for decades. We are more cost competitive as a result of our margin expansion initiatives, which have generated $250 million of benefits over the past few years. Ongoing initiatives are expected to yield at least $50 million of annual benefits over the next 3-year period. As a result of these efforts and despite major market volatility, O-I has consistently delivered on its commitments. Likewise, we have reduced debt and increased our free cash flow conversion. Now we are squarely focused on advancing MAGMA, which will enable a more flexible, scalable and sustainable production capability as well as increase our supply chain efficiency. This will all support profitable growth. On Slide 8, you can see the key benefits of MAGMA, which is O-I's new proprietary glass production system, leveraging new breakthrough technologies. Our heritage network is a great fit for many of the categories we have served for decades and will continue to serve in the future. Given the trends that I just mentioned, health, wellness and sustainability, there are significant future opportunities in a broad array of end-use categories, which tend to be more differentiated and fragmented. MAGMA is a perfect fit to expand in these categories. MAGMA is more flexible, scalable and can be more rapidly deployed. It can be co-located to improve supply chain efficiency. It is more cost effective with lower capital intensity. Likewise, MAGMA enables significant container light weighting and will enable future use of carbon-free energy sources such as hydrogen or biofuels. So it increases convenience and sustainability. MAGMA represents a major leap forward in how glass is produced and will expand O-I's right to win in its addressable market. Overall, we are targeting returns in excess of 20% for future MAGMA expansion projects. Sustainability is another critical element of our strategy is glass is set to win in the new green economy. I'm now on Page 9. We believe glass is the most sustainable packaging option. Glass is 100% recyclable. It's infinitely reusable and a perfect fit for the circular economy. Glass is all natural and nerd, even if discarded is never trash as such, it is both earth and ocean-friendly. Importantly, glass is look locally produced and sold without reliance on a carbon intensive global supply chain. Currently, we have many efforts underway to improve our operating efficiency and recycling rates. As I mentioned earlier, MAGMA will significantly improve our sustainability position. I believe you will be hard-pressed to find a manufacturing company producing a highly sustainable product with so many levers to further improve its sustainability position. We are making good progress advancing our ESG efforts, which have been noted by the likes of Sustainalytics and EcoVadis to name a few. Our full set of ESG goals are illustrated on Page 15 in the appendix. Moving to Page 10. We are improving our balance sheet position in eliminating legacy liabilities to reduce our risk profile. Debt reduction remains our top capital allocation priority. As you can see, we have made significant progress reducing our financial leverage compared to recent years. While we will incur new debt to fund hepatic trust, hepatic support liability will be eliminated. We expect our total financial leverage, inclusive of legacy asbestos and pension liabilities will decline from mid-4s last year to the high 3s by the end of 2022. This reflects strong adjusted free cash flow and proceeds on divestitures that will more than fund expansion this year. We remain on target to achieve our total financial target of around 3.5x by 2024. Likewise, we are making great progress, eliminating legacy asbestos and pension liabilities that have consumed over 40% of our cash flow over the past decade alone. Importantly, we expect to resolve our legacy asbestos liabilities by mid-2022. As previously announced, the U.S. Bankruptcy Court confirmed hepatic plan of reorganization a few weeks ago. Following the Delaware court affirmation, Paddock will emerge from bankruptcy and fund the $610 million Asbestos Trust. At that point, we will have achieved a fair and final resolution of our legacy asbestos liabilities. Our unfunded pension gap that neared $500 million as recently as 2020 is now a bit over $100 million, and we expect to eliminate this unfunded position over the next few years. On Slide 11, we have laid out our key objectives for 2022 that are fully aligned with our strategy and the plan to increase shareholder value. Our margin expansion initiatives are going very well as we progress key initiatives and achieve positive net price. We are advancing a number of capacity expansion projects to support profitable growth as we accelerate MAGMA development. We also have a busy agenda improving our already strong sustainability profile and changing the narrative on glass through our highly successful Glass Advocacy digital marketing campaign. Finally, we expect to achieve key milestones in effort to optimize our structure and resolve legacy liabilities. As we mentioned during our first quarter earnings call, we are modifying our capital expansion plan. Market conditions have changed. We are seeing more cost inflation and much longer lead times on key capital items due to supply chain challenges. These are affecting our original capital investment and MAGMA development time lines. As a result, we are acting with agility and our plan is evolving. We now expect a broader range of smaller scope projects rather than a few large-scale greenfield or brownfield initiatives. This will rebalance our expansion time line and derisk execution. Likewise, we are accelerating development of our MAGMA Gen 3 solution, which is even more relevant amid a volatile and uncertain marketplace. Despite these changes, I am confident we will achieve our key Investor Day growth and financial targets. We will share more details on our revised capital plan during our second quarter call. We are sharing our updated business outlook on Page 12. The second quarter is progressing exceptionally well, and we now expect earnings will exceed our previous guidance range. Sales volume is up around 1% quarter-to-date through May. We continue to expect low single-digit growth in the second quarter despite record low inventory levels. Stronger earnings reflect more favorable net price and cost performance compared to our original expectations. As a result, we now expect second quarter earnings will exceed $0.65 per share. This compares favorably to our prior guidance of $0.55 to $0.60. We are evaluating our full year outlook given strong performance in the first half of the year and favorable business momentum. This will be discussed further during our second quarter earnings call, including our earnings and cash flow guidance. Finally, we remain on track with the targets we set at our most recent Investor Day. Let's turn to Page 13 for some concluding comments. As we have discussed, O-I represents a compelling investment opportunity. We are enabling profitable growth by capitalizing on the strongest class fundamental in decades. This growth is supported by a robust commercial pipeline enabled by a multiyear expansion investment program. O-I is executing very well, reflecting a more agile and resilient company. We are taking the bold actions to transform O-I as we deliver on our commitments. This quarter marks the ninth consecutive quarter we have met or exceeded guidance despite a number of macro challenges and uncertainties. Likewise, we are accelerating our MAGMA development, which creates a new paradigm for glass to meet the needs of an evolving market and expand our business. Glass is set to win in the new green economy as we continue to advance a number of initiatives to improve our already strong sustainability position. Finally, we are eliminating legacy liabilities as well as improving our balance sheet to reduce our risk profile and increase our cash flow conversion. We have made a lot of progress aggressively addressing many of the challenges that have hampered performance in the past. Going forward, our focus will shift to profitable growth supported by MAGMA as well as continued sound execution and balance sheet improvement. We are confident this strategy will create value for all stakeholders. Thank you for your interest in O-I Glass. And now Kyle, back to you.

Sounds good. Really appreciate all the details, John. Just wanted to start a little bit with current update given the guidance raise for 2Q. It seems to be driven by better pricing and a little bit more favorable operating performance. Maybe just can you provide a little bit more details for that $0.07 to $0.08 raise in terms of what's going better relative to the initial expectations?

Yes. And you know there, as we commented on, we are seeing more favorable net spread. As you can imagine in today's marketplace, the amount of inflation and the amount of price changes, we're now implementing our second price increase here in the second quarter. Obviously, these are big numbers moving around. So as we fine-tune and understand the relative performance of the price increases we're achieving relative to the rate of which the inflation is coming through, that's probably the biggest piece of the moving numbers that we're seeing here. And as we've consistently reported out in past quarters, the operating performance of the organization is very good. And there's a big focus on improving speed and productivity in the business to be able to get more production out of the system so that we can feed the growth even in a world where we're somewhat capacity constrained with very low inventory levels. So the team is doing a great job being able to get that. And with the operating leverage in our business whenever you can get more production out of it and do better in that regard, the cost comes through quite well.

Sounds good. There was some maybe assumptions given that 2Q is supposed to be the highest in terms of your project activity or your rebuild activity. Was there any delay of those pushing them back?

Yes, there's always a little bit of movement going on with that. I wouldn't call it material for the business. The biggest issue as we all know is supply chain issues and being able to get all the parts and pieces in the mix. But it's not the major driver of it.

It sounds like pricing is just rolling through better and you had the second price increase.

Exactly. We've got a lot of moving -- moving parts of implementing the price increase and rate of inflation. But let me also mark this is we need the positive spread. We had a negative spread last year because of the inflation that was incurred in 2021, we were at $50 million behind on cost inflation during the net spread in that particular period. So our expectation is to be able to recapture that this year, so offset our inflation this year and regain the spread that we lost last year.

Right. I was going to ask my next question on the $50 million that was the target before. It seems like pricing is rolling a little bit better the spread. Does that $50 million go a little bit higher now? Or is that still the target?

And I think that's what we'll be updating at the end of the quarter. I mean that we're going through a lot of real-time changes here with the grade of inflation and with the rate of the price increases going through. A lot of has to do with timing that we're seeing right now. But we are incrementally more optimistic on the performance of the business for the full year, and we'll be updating the fuller guidance at the end of the quarter.

Sounds good. Moving to volumes. Volumes up 1% quarter-to-date through May versus the low single-digit target that you laid out. Are you able to give a little bit more details in terms of how the months progressed, how is April, how is May? And then by region, how is Americas versus Europe?

Yes, sure. Let me take the regional component first. So we're seeing both Americas and Europe about the same place in that low single-digit kind of 1% plus or minus. Within the Americas, what you're seeing is the strongest markets tend to be Mexico and the Andeans, which is pretty consistent with what we've seen in the past, but the other ones are pretty stable overall. And in Europe, what you're seeing is strength continuing in the South West Europe with very strong wine demand continuing, and we've seen that playing out for several months now of maybe half a year of strong wine, and we're also seeing good shipment levels in North Central Europe, and you can attribute that to the displaced capacity in Ukraine and Russia, primarily in those particular marketplaces. But that's also kind of peppered in across Europe, and we're seeing the benefit of that dislocated capacity across the whole marketplace there. As far as the rates of the month-to-month, I mean, we've lived in a choppy world. Now our volumes were a little bit down in April, but we expected that. We knew with -- if you go back to last year, Winter Storm Uri impacted our North American and Mexican business in February and March of the prior year with a strong rebound in April last year. So it was up against a little bit of a tough comp. And keep in mind, last year, we had 18.5% volume growth. So April was a little bit down on that comp, but then May is up mid-single digits again, which is consistently some of the trends that we've seen in recent months.

Yes. Sounds good. You have a good exit run rate going into the next quarter as well. On Europe, just kind of what's the latest update in terms of inflationary environment there. It sounds like with the second price increase, at least you're getting the favorable spread, but as a supply chain or the inflation environment moderated at all since the last quarter over in that region?

I think the rate of change has improved, but it's still in an environment where you're regularly hearing about more cost inflation, okay? So obviously, when the 1, 2 punch of the supply chain issues and then the conflict came together several months ago that expect a lot of the energy costs, and you saw rapid increases in that regard. I think what you're seeing now more than anything is some of the impact on supply chain relative to Russia and those border issues and what you're seeing in Europe. So you're seeing that on some of the products that would flow from Russia to be able to support some of your suppliers have been kind of cut off or harder to get to. Same thing on access to trucking and drivers for truck drivers, just the overall network has kind of been impacted in that regard. So those are the kind of the vectors that you're seeing right now on inflation, but the rate of which those are hitting is a lot less than what we saw over the preceding months. So...

And nat gas is always a concern, especially where it's going right on energy markets. In Americas, you have a much more timely pass-through. In Europe, you have kind of the fix supply agreement, if you will, or however you want to call it. I guess the concern is as we go into next year, nat gas is still high and elevated you obviously will go with price adjustments for it. But are you concerned about any kind of price elasticity, any impact to demand, some of the wine or some of these higher products that we talked about on the demand from that?

We've obviously, we put in a price increase, a healthy price increase in the first quarter of this year relative to the inflation we saw last year, we put in another second price increase here in the second quarter. Those have gone in quite well relative to the backdrop. I mean, everybody knows the unique unprecedented bubble of inflation that we're working through. in that regard. And we have not seen any demand structure or impact in any elasticity elements so far with the fundamentals that we were talking about in the prepared comments and whether it's consumer consumption activities. You read the news even yesterday, I think there's a Wall Street Journal indicating that despite the level of inflation that we're seeing, people are still prioritizing traveling and dining out. And so there's a lot of input drivers for strong demand out there in the marketplace. So at this point in time, obviously, we're monitoring that, but we don't see any price elasticity challenges.

Sounds good. I'll take a pause and see if anyone in the audience has a question. Sounds good. I have plenty more. So we'll...

Yes, fire away.

Moving to South America. You talked about the structural shift to one-way packaging, the premiumization that you're seeing. But now we're starting to see an economic environment there where the consumer is getting a little bit weaker. Are you seeing that structural shift still play out? Or are you seeing a little bit of reverse and maybe a return to returnable glass to way packaging?

Yes. So let me give a little bit of backdrop. I mean about half of our business is beer in the market. The other half is a lot of other important categories, but let me just talk about the beer market for a moment. Historically, if you go back on a pre-pandemic basis, about 40% of beer was consumed at a returnable glass bottles, okay? And then what we saw over the course of the pandemic is that diminished down to let's call it 25% or 30% or something like that because of hygiene concerns and things like that. But that's rebounded all the way back to 40%. And so that process has come through. And there's actually a fair amount of R&D underway with our customers, large customers, about coming with premium categories and the returnable glass boots very important to their strategy. It's very important to the strategy. At the same time, we continue to see the one-way bottle doing quite well. And in fact, it's picked up 2% or 3% market share overall in beer category the last few years over in Brazil as you see the consumption trends overall. Now as you think about the risk of downturns and economic elements, that returnable glass bottle is really the best economic solution from an affordability standpoint. So between the prevalence down in the market, the rebound that we've seen so far the fact that it's very important to our customers and their strategy and the development of more premium product lines for returnable glass bottles. We got a bright outlook for that particular product line down in Brazil. At the same time, the one-way bottle is doing quite well with the premiumization.

Curious why on the customer in terms of what the priority for the returnable, is it more on the sustainability aspects of a returnable glass bottle? Or is it an indication of where they think economic environment might be going?

I think historically, it has been substantially driven by affordability price points given economic cycles and things like that. But clearly, the sustainability characteristics of the return of the glass bottle undeniable and is becoming an increasingly part of the decision-making process.

Yes. A lot of investors are focused on potential downturn. A lot of headlines out there on it. You guys have shifted your mix, especially in North America away from mainstream beer into more other categories, food, premium food. Does that make you more susceptible to a downturn? And then also maybe elaborate what you've done from an operator operating leverage standpoint to where you can more easily adjust to what the volume environment is.

Sure. Sure. Okay. So first, we made it in the prepared comments, we believe glass is much more resilient than most people give it credit for, okay? And in fact, we -- even though the things were very turbulent during the pandemic, and there was clearly a recession environment, glass did quite well and travel back and forth between premises. Now the question is, what about demand destruction components with economic pressures. If you go back to the Great Recession, we did see trade down. And -- but it was primarily in the mid- to value categories. Premium did quite well. So the biggest issue for us at that time was North American beer. And I think we all know the story about how that's transitioned over time. It did impact our business back in that day. But right now, 90% of value categories, for example, in beer are already in aluminum cans. And in fact, globally speaking, only 4% of O-I's sales now are with mega-beer in the U.S. So we're fairly insulated against that even if there is a little bit of pressure within that. But we also saw during the Great Recession and again here during the pandemic is the premium category did quite well. Even back then, and we saw so low to mid-single-digit growth in spirits, wine, premium beers. And it's been proven out time and again that these affordable luxuries even in the wake of challenging backdrops and whatnot, still are important to people at the appropriate price points where they can afford them. So at the end of the day though, if -- even if we saw that there was some of these recessionary pressures, back to the comments I made about all the things that are going in the right direction between consumption trends the fact that there's been capacity displaced between Ukraine and a 5% or so of capacity being displaced, the fact that we're severely oversold in most of Latin America, I think kind of provides a buffer against some of the potential recessionary pressures that we might see out there.

Yes. I also argue you guys have become a little bit more flexible and able to adjust to the volume environment and demand that you see going forward to as well over the years. Shifting gears a little bit to MAGMA, what's the latest update on MAGMA? How is Gen 1 doing in Germany? What's the quality of that glass versus a traditional furnace? And then maybe you had the slide deck showing all the sustainability attributes. But for people that are newer to the store story, what does that provide you from a modular aspect and operating standpoint?

Yes. So first of all, the development activity for MAGMA is going well. So we've got Gen 1 activity underway over and hold spend, and we have Generation 2. So Generation 1 is primarily focused on the melter, which is the new melting technology, and that's off running over in Germany. Generation 2 is -- that's over in the Streator, Illinois, the facility that we have where it's building different more modular components. So for example, a scaled-down version of the batch system be able to fit the more modular aspects of it in certain areas on the back end. Those are all going very well. And we're doing a lot of the science right now on Generation 3, which tends to be more around digitization, automation and things like that. So that development activity is going well, but it is going slower and that's the important thing is development is an iterative process, right? You learn and you test, you learn and you test. And when you're waiting for products and parts and things like that between each one is slowing the process down. And that's the biggest issue that we face, not anything with the technology or the development, but the pace in which we can iterate and especially with the Gen 2, Gen 3 solutions, which are the ones that we would want to bring to market. So to speak. So right now, what we're doing is we're very much focused on Gen 3. And given that we're trying to match the capacity adds with the commercial opportunities in the marketplace and with some of the lags that we have in there. In the interim period, we're going to see probably some more smaller scale capital investments that we can put in a lot quicker and easier in the larger brownfield, greenfield. And we're very much focused on the Gen 3 solution. So let me talk about what that does for us and why people should be excited about it and things like that. So from a financial return standpoint, you're talking about potentially 40% lower capital intensity with the Gen 3 solution versus the legacy technology. You're looking at a solution that bridges between 50% and 75% of the cost between a typical glass bottle and an aluminum can. Something that can cut up 30% to 80% of the supply chain cost because you can [indiscernible] and locate the product. And we're also developing with our ULTRA line is the ability to lightweight the bottle, cut out 30% or potentially more of the weight of the bottle because the glass is very good coming out of MAGMA. It's very high-quality glass, and you can do more with it to be able to optimize the weight with other technologies being brought together in it. So it's going well, a little slower, but we're really encouraged by what we see from the development.

Sounds good. By the way, this is an O-I glass bottle. We've got a strategically.

Thank you. Thank you. That's a beautiful.

[indiscernible] for you.

It's an art form, isn't it?

Yes. You talked -- you mentioned in the prepared remarks a revised capital plan and you would touch on it in this coming quarter. I wonder if we can get a little sneak peek on that. What sort of vision for? Is it because of economic uncertainty? Or is it just supply chain?

It's all supply chain driven. When we look with our capacity, we looked for it to be substantially backed by customer agreements, okay? So we're positioned for capital investments. The important part is the customers need the glass a certain windows, right, for their own development, and we're trying to marry up the best projects to be able to move quickly amid an environment where the supply chain is just moving slower. And especially as you do bigger projects like greenfields and brownfields, you're more [indiscernible] to be exposed to bottlenecks. One little aspect or another aspect and kind of bottleneck on the whole project, right? We do small multiple of smaller projects you've got lesser bottlenecks and think you can derisk the time line, execution, speed to market to be able to enable the growth, which is we talked about, there's a lot of desire. There's a lot of demand being pent up, and we're really trying to prioritize getting the capacity out there.

Got it. Makes sense. And then a couple of weeks ago, you announced the sale and leaseback of the Ontario plant, $190 million, $191 million. Any earnings ramifications for the balance of the year that we need to be mindful of for that?

Yes, that one probably in and of itself about $7 million, but maybe even step back is when we provided our guidance at the beginning of the year, we said that the combination of divestitures, which includes a number of different elements to finish our $1.5 billion transaction. That and hepatic where we're going to have the incremental interest expense associated with the funding of that is about $0.18 or so, okay? That's the full year -- full on year effect. It's kind of a sliding scale for the divestitures because they're happening, although it may be a little back-end loaded and then hepatic is obviously happening here in the relatively near term. That cost will come through from the cost of funding that.

And then I have to ask on Paddock. Even though you put it in the side deck just it seems like you're pretty much to that finalized step. Just is it a matter of funding the trust right now? Or is there any kind of risk to that?

So just to step back. I mean, it has been approved by the U.S. bankruptcy courts, right? The next step is, and it's already on file with Delaware courts to have them to affirm the ruling. Once that happens, its funding happens within all likelihood days, in that regard to complete it. And at that time, we get the channeling injunction, which is the protection for O-I, Paddock and any of its affiliates against any future specific coins. Is coming around the corner.

Yes. Just wanted to check again 1 minute left here for your questions. It sounds good. I mean you had the pension liability rolling over in the next 3 years or so, $25 million of contributions per year and then you'd be relative one, you get the Paddock. So a lot of distractions are behind you. Excited to see what happens with the MAGMA development and starting getting that into the growth plan as well. So it sounds like things are going well.

Yes. I mean, we're really, really happy about the trajectory of the business, as I mentioned in the tail end of our prepared comments. We've had a lot of work to do to kind of fix things and address things over the last few years, but it feels like we're really getting good momentum there and we're knocking out the things. And what -- but to that point, it provides -- it simplifies things, right? Going forward, it's all around profitable growth with great new innovation -- innovative technology, sound execution and keep derisk in the balance sheet and ultimately look for improved capital allocation.

Yes. That sounds good. We really appreciate your time, John. Thank you.

Yes. Thank you. Thank you. Thank you, everyone.