Good day, and thank you for standing by. Welcome to the O-I Glass Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that this conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Chris Manuel, Vice President of Investor Relations. Please go ahead. Thank you, Alyssa, and welcome everyone to the O-I Glass 2Q 2021 Earnings Call. Our discussion today will be led by Andres Lopez, our CEO, and John Haudrich, our CFO. Today, we will discuss key business developments and review our financial results. Following prepared remarks, we will host a Q&A session. Presentation materials for this earnings call are available on the company's website at o-i.com. Please review the safe harbor comments and disclosure of our use of non-GAAP financial measures included in those materials. I'd now like to turn the call over to Andres, who will start on slide three. Good morning, everyone. We appreciate your interest in O-I Glass. We're very pleased with our performance during the second quarter. We reported adjusted earnings of $0.54 per share. Results exceeded our guidance range and reflected stronger than expected shipment levels, as well as favorable ongoing operating performance. We continue to see favorable performance across key business layers. Shipments improved 18% and production rebounded 27% compared to the prior year, which was impacted by the onset of the pandemic. The strong demand also reflected consumer preference for healthy, premium, and sustainable glass packaging as markets reopened. The benefit of higher selling prices substantially offset elevated cost inflation, and continued favorable operating performance was driven by the positive contribution of our margin expansion initiatives. Second quarter cash flow was also very strong as a result of solid operating performance. As I noted last quarter, O-I has reached an inflection point. We have seen a step change improvement in our ability to consistently perform and deliver on our commitments, which is underpinned by advanced capabilities across many disciplines developed over the last few years. I believe current quarter results underscore this view. As I will discuss shortly, we continue to advance our bold plan to change O-I's business fundamentals. In addition to better than expected earnings and cash flow, I'm very pleased with the progress we made advancing our strategy. Our margin expansion initiatives are exceeding our expectations, and we achieved a major milestone with MAGMA this past quarter. Likewise, we continue to rebalance our business portfolio and advance our efforts to resolve our legacy asbestos liabilities. As we look to the future, we remain optimistic about our business outlook. We expect third quarter adjusted earnings will approximate $0.47-$0.52, which is a significant improvement from the prior year. Our full year earnings and cash flow guidance has improved. We now anticipate full year earnings of between $1.65 and $1.75 per share, and $260 million of cash flow. Let's move ahead to slide four to discuss recent volume trends. As you can see on the chart, second quarter shipments were up significantly over the prior year, which was impacted by the onset of the pandemic. Product shipments increased 18% this year compared to a 15% decline last year. In the Americas, second quarter shipments were up 17%, with all geographies improving from the prior year. The rebound was most pronounced in Mexico and the Andeans, which were significantly disrupted in 2020. In Europe, shipments were up 22%, and all geographies improved double digits from last year. While the pandemic was very disruptive, underlying trends point to a stable or modestly improving demand. For example, second quarter shipments were in line with 2019 levels, reflecting a return to pre-pandemic levels. Glass has proven to be very resilient despite significant market volatility. This includes supply chain disruptions, transportation challenges, and major channel shifts between retail and on-premise consumption patterns. The chart on the right illustrates how food and beverage consumption patterns should evolve across channels over the next 18-24 months. As you can see, on-premise consumption is expected to rebound after the depths of the pandemic, while retail purchases should remain elevated compared to pre-pandemic levels. While we first shared this analysis last quarter, the evolution of packaging demand over the past couple of quarters supports these trends and continues to reinforce the projected consumption patterns in this chart. As we look to the future, we expect continued volume growth. While markets had already rebounded well in the third quarter of last year, we expect our shipments to be flat to up 1% in the third quarter of this year. Reflecting solid demand year to date, we have increased our full year 2021 growth outlook. While our prior guidance called for 3%-4% growth, we now expect growth of between 4% and 5% in 2021. Let's turn to slide five. In addition to a strong operating performance, we also achieved a number of key milestones during the first half of the year as we continue to advance our strategy. On this page, we list our 2021 priorities as well as some highlights on our progress. I'll touch base on each of our three platforms. First, we aim to expand margins. We have targeted $50 million of initiative benefits as well as continued performance improvement in North America. We have made good initial progress with our margin expansion initiatives. Benefits totaled $40 million during the first half, and we now expect to exceed our original $50 million target for the full year. North America, in turn, has demonstrated a strong resilience responding to severe weather, high freight inflation, and a tight supply chain situation, and safe volumes are comparable to 2019 levels. Next, we seek to revolutionize glass. To support this, we successfully validated several technology milestones for MAGMA Generation 1 line in Germany, as well as continued to advance our glass advocacy campaign and reposition ESG. Similarly, we remain on track to pilot the Generation 2 MAGMA line in East Streator, Illinois in the second half of the year and continue to make solid progress developing Generation 3. Additionally, we're actively working on a R&D lightweighting program we call ULTRA, targeting significant container weight reductions to improve even further the convenience and sustainability profile of glass. O-I's glass advocacy campaign aims to rebalance the dialogue about glass. Our digital marketing campaign is well underway with over 660 million impressions programmed to date. The campaign has reached over 80 million people across the U.S. We are building a community of glass advocates who regularly engage with our content, which demonstrates the relevance of our message. Like in our technology developments, we are very encouraged by the positive response and progress made. We'll continue to advance these marketing efforts. I'll touch on ESG momentarily. Third, we will continue to optimize our structure. This includes a number of efforts ranging from portfolio adjustments, improving the balance sheet, simplifying the organization, and addressing legacy liabilities. Regarding our de-risk program, we have completed or entered into agreements for $930 million of asset sales to date, so we are over 80% of our way towards our targeted divestitures by the end of 2022. As John will expand on, our cash flow during the first half of the year was quite favorable given historic seasonal business trends, reflecting very good working capital management, which supports debt reduction. In March, we entered into a long-term strategic agreement with Accenture to manage our global business services activities, and we completed the first phase of this transition in July. In addition to reducing the G&A cost, we expect to accelerate capability enhancement by leveraging world-class processes and technologies. As you know, we reached an agreement in principle back in April for a fair and final resolution to our legacy asbestos-related liabilities. Efforts to complete the reorganization for Paddock are proceeding as expected. Overall, we are very pleased with our progress, and I want to thank the O-I team for their tireless and effective effort to advance our strategy. Before I turn over to John, let me add a few comments on sustainability. At O-I, our ESG and sustainability vision is holistic, grounded in innovation, and touches every part of our business. In our vision, we see a future where the innate circularity of glass meets O-I's disruptive technologies and other innovations to change how glass is made, sold, and recycled. This sustainable future of glass involves the development of significantly lighter glass containers through ULTRA, which implies a lower carbon footprint per container. It also involves the use of cleaner gas oxygen fuels and improved technology in traditional furnaces. On top of that, O-I's revolutionary MAGMA melting technology will be capable of using biofuels and other carbon neutral renewable sources of energy like hydrogen, as well as more grades of recycled glass. MAGMA includes a more flexible manufacturing process, including the ability to turn the unit on and off to optimize the use of energy and efficiency. It also can be co-located at manufacturing and filling facilities. This will reduce freight and potentially leverage the use and reuse of waste heat, water, and other resources. In addition, we're building a future where innovative approaches such as Glass4Good enhance glass recycling while providing a benefit to the community, elevating O-I's ESG profile. We are looking forward to sharing all of this and more in our upcoming 2020 sustainability report, which will be available at the end of Q3. Now over to John. Thanks, Andres, good morning, everyone. I plan to cover a few topics today, including recent performance, progress on our capital structure, as well as our most current 2021 business outlook. I'll start with a review of our second quarter performance on page seven. O-I reported adjusted earnings of $0.54 per share. Results exceeded our guidance of $0.45-$0.50, given stronger than anticipated shipments and favorable cost performance. In particular, sales volume was up more than 18% from last year compared to our expectation of 15% or higher. Segment profit was $232 million significantly exceeded prior year results, which were impacted by the onset of the pandemic. Higher selling prices substantially offset elevated cost inflation linked to higher energy and freight costs. Naturally, higher sales volume and favorable mix boosted earnings. Likewise, favorable cost performance was driven by a 27% improvement in production levels, as the prior year was impacted by forced curtailment due to lockdown measures. Keep in mind that maintenance and project activity costs have normalized after the disruption last year. Cost performance also reflected continued good operating performance and benefits from our margin expansion initiatives. The slide includes additional details on non-operating items. Let me point out that we did record a gain on an indirect tax credit in Brazil after a favorable court ruling, which has been excluded from management earnings. Overall, we are pleased with favorable performance trends. Moving to page eight, we have provided more information by segment. In the Americas segment profit was $124 million, which is a significant increase compared to $52 million last year. Higher earnings reflected 17% higher sales volume as the prior year was impacted by the onset of the pandemic. Higher prices substantially offset cost inflation, which was elevated due to higher freight costs. In Europe, segment profit was $108 million compared to $42 million last year. The significant earnings improvement reflected a 22% increase in sales volume, while the benefit of higher selling prices partially offset cost inflation. In the case of both regions, very good operating performance mostly reflected higher production, which increased 28% in each segment, while supply chains remained very tight across the globe. Likewise, very good operating performance also benefited from our margin expansion initiatives. Keep in mind that we no longer report an Asia-Pacific region following the sale of ANZ last summer. In addition to comparing results to last year, we have added a comparison to 2019 to better understand our performance with pre-pandemic trends. As illustrated on page nine, our current underlying performance exceeds pre-pandemic levels. Adjusted primarily for the divestiture of ANZ segment profit was up $7 million in the second quarter of 2021 compared to the same period in 2019. Overall, higher selling prices have nearly offset elevated cost inflation, while sales volume and mix were comparable to 2019 levels. Favorable results were really driven by improved operating and cost performance, reflecting our margin expansion initiatives. Let's shift to cash flows in the balance sheet. I'm now on page 10. We are following a specific set of guiding principles that are aligned with our strategy to increase shareholder value. As we focus on maximizing free cash flow, we expect significantly higher cash flow this year, and key working capital measures should be in line or favorable compared to 2020 levels. As illustrated on the chart, our second quarter cash flow was $117 million and was comparable to the prior year, which benefited from significant inventory reduction due to forced production curtailment. Over the past year, we have improved the consistency of our cash flows and now reflect normal seasonality of our business, solid operating results, and very good working capital management. Second, we preserved our strong liquidity and finished the second quarter with approximately $2.2 billion of committed liquidity, well above the established floor. Third, we are reducing debt. We expect net debt will end the year below $4.4 billion, and our BCA leverage ratio should end the year in the high threes compared to 4.4 x at the end of 2020. We expect to receive divestiture proceeds over the next several months, which will further improve our balance sheet position. Please note these targets could shift if the Paddock trust funding occurs prior to year-end. At the end of the second quarter, net debt was down almost $1 billion from the same period last year, reflecting improved free cash flow and proceeds from divestitures. Our bank credit agreement leverage ratio was around 3.8 x as of mid-year, which is well below our covenant limit. We intend to de-risk legacy liabilities as we advance the Paddock Chapter 11 process. As previously announced, we have an agreement in principle for a consensual plan of reorganization, whereby O-I will support Paddock's funding of a 524(g) trust. Total consideration is $610 million to be funded at the effective date of the plan. The agreement provides a channeling injunction protecting Paddock, O-I, and their affiliates from current and future liability. The Paddock reorganization is proceeding as expected, and timing will be a function of the remaining legal and court actions to conclude this matter. As previously noted, we have ample liquidity to fund the trust in the future, and for clarity, we are not considering equity as a funding method. Likewise, we remain highly focused on reducing our total debt obligations over time through free cash flow and proceeds from divestitures. Let me wrap up with a few comments on our business outlook. I'm now on page 11. As Andres Lopez mentioned, we anticipate our business performance will improve in 2021 as markets stabilize and recover. We expect third quarter adjusted earnings will approximate $0.47-$0.52 per share. Naturally, this is a meaningful improvement from the third quarter of 2020, which was impacted by ongoing COVID-required production curtailments in Mexico and the Andes. Overall, we expect shipments will be flat to up 1% from the prior year. Keep in mind, demand had already rebounded in the third quarter of 2020 from pandemic lows. Production should be up about 8%-10% from last year, which was still impacted by lockdown measures in some markets. At the same time, certain costs like maintenance and depreciation have normalized following the pandemic-induced disruption last year. Likewise, the current supply chain is fairly stretched across the value chain, reflecting the impact of prior year production curtailments, as well as a strained transportation situation in many markets. Finally, we expect continued solid operating performance and benefits from our margin expansion initiatives. Our full year 2020 outlook has improved as we've tightened our earnings expectations to the high end of our guidance range and increased our free cash flow estimate. We now expect adjusted earnings of $1.65-$1.75 per share and free cash flow of approximately $260 million. This adjustment reflects higher expected shipment levels, which we now anticipate will increase 4%-5% compared to 2020. Likewise, we expect the benefit of our margin expansion initiatives will also exceed our original goal of $50 million. We anticipate the benefit of higher shipments and improved cost performance will more than offset the impact of Winter Storm Uri, which of course, was not included in our original guidance. As a final note, we will be hosting our Investor Day the morning of September 28th at the New York Palace. During this session, we will update our plans that will include more details on MAGMA. Likewise, we will share key company targets and milestones. Subsequent investor events will expand on these key topics. With that, I'll turn it back to Andres Lopez. Thanks, John. Let me wrap up with a few comments on slide 12. Overall, we are very pleased with our second quarter performance, which exceeded our guidance due to stronger sales volumes and improved cost performance. In fact, our underlying performance was favored across key business levers. Selling prices and volumes were up. Costs were down. Our margin expansion initiatives are working well, and our ability to deliver on our commitments has improved, underpinned by advanced capabilities across business functions rigorously built over the last few years. I'm very pleased with the progress we are making on our bold plan to change O-I Glass's business fundamentals. Our business is more stable, we have well-structured business planning processes, and we are a much more agile and resilient organization. We are removing the constraints of the past, like legacy asbestos liabilities, while successfully advancing breakthrough innovations such as MAGMA. Finally, we are encouraged by market trends, which is reflected in our improved earnings and cash flow guidance for 2021. Over the past several years, we have been hard at work improving the foundational capabilities of our company, as well as staging the company for continued transformation. We look forward to our Investor Day on September 28th. During this event, we will share our exciting plans to align glass and O-I with the future of packaging for decades to come. We are confident this plan will increase shareholder value and usher a new period of prosperity for O-I. Thank you for your interest in O-I Glass, and we welcome your questions. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound or hash key. Please limit your queries to one question and one follow-up. Thank you. Your first question comes from the line of Ghansham Panjabi from Robert W. Baird & Co. Please go ahead. Your line is open. Thank you. Good morning, everybody. Good morning. Hey, Ghansham. Good morning, Andres Lopez. Just kind of looking back at 2Q, can you just give us a bit more color on which regions, verticals came in better than you originally thought for the quarter? Then also, the same as it relates to the outlook as well for the second half of the year? Well, from a demand perspective, all regions, all markets in which we operate across segments, perform in line with our expectations or slightly ahead. We're seeing a pretty solid common pattern across the world, which is the focus on premium products and trading up, and that's helping every category, in our business. I would add, as you look at the volume trajectories, they were particularly strong in the Latin America marketplaces and certain pockets over in Europe were actually strong also. Towards the southern part of Europe, we saw larger gains than other parts of the markets. Really when you think about the second quarter, I would say it was mostly a volume-driven upside to the business, and it was really driven by those particular markets. As we think about the performance going forward, we expect the volumes, as we mentioned in the prepared comments, to start to more normalize. Obviously, it was a very disruptive period last year, in the comparisons, but still be up 0%-1%. Keep in mind, the third quarter of last year was actually up 2%, so it was a kind of a relatively difficult comp. We're overall seeing pretty good trends. As we look at our business, really, there's strong demand everywhere and a pent-up demand for our product. The real issue is: Where is the production capacity, and where's the supply chain to be able to support that given the constrained transportation situation? Sure. Maybe as a follow-up, just can you give us a sense as to, if you were to baseline new product introduction activity, if you will, over the last couple of years, where are we at current relative to where we were pre-pandemic? Then also many of the regions, John, you just mentioned, Europe and Latin America, I think capacity for you was already tight. How do you expect capacity? Is there a flex capacity, I guess, going into next year to kind of support the markets that are growing a little bit faster? Thanks so much. Thank you. We have the New Product Development activity accelerating across markets when we compare to pre-pandemic levels. I was looking at some statistics by Mintel, glass performance is quite strong and ahead of every other substrate. That's something that will be good to look at. We're tight in capacity, as you mentioned. We expect some productivity going into next year that should be helpful. Early in the year, we faced severe weather in some markets, we lost some production because of that, we will recover that. As you know, we are adding capacity in the Andean region. At this point in time, obviously, that's going to come into operation by the very end of the year or going into the following year. We're also looking at other markets and other opportunities just because of how strong the market is at this point in time, and we see those trends continuing into the future. Thank you. Your next question comes from the line. It is George Staphos from Bank of America. Please go ahead. Your line is open. Thank you. Hi, everybody. Good morning. George, good morning. Thanks for the details. I wanted to dig a little bit into Europe further. The performance obviously was quite good from a volume metric standpoint, but comparisons were obviously pretty easy. Why should investors, Andres, look at this as just a rebound off of an easy comp? What points would you give us to presume to have confidence that glass can actually grow for you in Europe? Whether it's new contracts, holdings, those sorts of things, what makes you confident that this isn't just a one-quarter story? Relatedly, it sounded like from the prepared remarks that there is more price recovery work to be done in Europe relative to the Americas. Could you comment to that, what work needs to be done, and do you ultimately expect across the whole platform, Americas and Europe, to recover all of the negative price cost, the $26 million or so year to date, as we go into 2022? Thanks very much. Thank you, George. Volume and operating performance in Europe is quite strong, and all end users in Europe across markets are performing well. The one that was down before, which is mineral water, it started to recover as soon as the HoReCa channel was open, which is bar, hotels, and restaurants. Very important, Champagne is performing a lot better and is back up. Remember, Champagne was up even before pre-pandemic times, and now is strong. The Bordeaux wine is also strong again because of the improvement in exports as tariffs were removed and China has started to recover. There is a data point that is very important. When we look at Nielsen data for beer containers versus alternative packaging in Western European countries, the performance of glass is well ahead of the alternative packaging. It would be good to just take a look at countries like France, Italy, Netherlands, and the U.K., which are very important markets for O-I. As I mentioned at the beginning, operating performance is very strong too, so we're very confident the trends we're seeing are to continue. When it comes to price and price recovery in Europe and across markets, coming into a year, we had some expectation for inflation. Obviously, inflation is higher than we originally expected. Prices are also higher. Now, they're not enough to cover the incremental inflation that we're experiencing, so the spread is higher. Now, we're comfortable, as far as 2021 is concerned, that we will be meeting our commitments based on the information we have available today. Our focus right now is on 2022, and we see a constructive pricing scenario going into that year to be able to fully recover inflation. George, I would add just two points to that. One is, if you look at our volume trend, other than the so-called COVID quarter last year, our volumes have been flat to up 2% over the last three quarters. We've seen a sustainable level of demand here to date. More importantly is the commercial pipeline for the business is developing quite well. There's a lot of demand for our product, and these aren't necessarily just transactional opportunities. These are strategic opportunities where our customers are looking to do meaningful things and looking to have our support to do those. That gives us the confidence that over the longer term, there's good demand for the product, and we should be there to help them out. Yeah. There is one aspect that is also important to support these trends. The food category, which went up significantly during the peak of the pandemic, is retaining some of the gains, and it is expected to retain some of the gains. That's an important point. The other one is the emphasis of consumers and customers in premium products. That's really happening pretty structurally across categories, and that is very good for glass. All right. Thank you. I'll turn it over. Your next question comes from Mark Wilde with Bank of Montreal. Please go ahead. Your line is open. Good morning, Andres. Good morning, John. Morning. It's a good quarter. Hey, Mark. How are you? I wondered, just to come back on George's question, Andres, for the full year, where do you expect price cost to end up? As was mentioned, we're down about $26 million in the first half. What should we expect for a full-year number? Mark, I'll address that one. A typical year of inflation for us is anywhere between $100 million and $140 million. The last time we spoke last quarter, we were thinking it was on the high end of that range. I would think that we would rebase the view of inflation right now in a gross sense about $150 million-$175 million. Clearly, we are seeing an increase. The last time we talked, we were talking about an unfavorable spread of about $30 million. I would say with the pricing activities and other initiatives underway, that negative spread has probably creeped up to $40 million. We haven't necessarily kept up dollar to dollar to the rising cost inflation, but we've done a pretty good job being able to moderate that. Obviously, you know we have timely pass-throughs in some markets. Energy in the U.S., for example, is a good one. More importantly, when we get into the first quarter next year is the typical price improvement window where, as Andres Lopez mentioned, we would look to pick things up. As you look at the sequencing of activities, because you mentioned that the $26 million year to date, keep in mind that the energy surcharges we incurred on Winter Storm Uri were really also included in that. Okay, we have $15 million-$20 million of surcharges we've incurred year to date. Really, as we think about that, we'll have $40 million of negative spread, plus that $15 million-$20 million of surcharges. That means that we still have most of the cost inflation impact in the back half of the year, and it's probably most pronounced in the fourth quarter because as you recall, last year during the pandemic, prices were declining, deflationary in some places, and that kind of trotted out in the fourth quarter and it's been picking up since then. Really on a comp basis, you'll see it most pronounced, at least in our business, in the fourth quarter. Okay. John, if we could kind of look ahead as kind of my follow-on to next year, you're talking about supply and demand being very tight in all your regions. Would it be reasonable to expect that you're actually able to make some headway from a price cost standpoint next year, or will you just expect to tread water? Time will tell. Clearly, we see an opportunity to increase prices to pick up the backlog that we've had this year. I think that to answer your question is more of a question of how transient inflation tends to be or not. Certainly, our intention is to pass through the cost inflation of our business into the system, and that's what we plan to do. Okay. I'll turn it over then. Your next question comes from Mike Leithead from Barclays. Please go ahead. The line is open. Great. Thanks. Good morning, guys. Good morning. I just want to circle back on the outlook. 2Q is obviously stronger than you anticipated. It doesn't look like the second half outlook was raised that much. Is that, getting back to the last question, just a function of better volumes being offset by cost inflation? Can you just flesh out some of the puts and takes as you think about the back half of the year right now? Yeah. You hit the nail on the head. Volumes will be up a little bit. That will be certainly beneficial, good operating leverage in the business. Keep in mind that cost inflation is going to be more pronounced as we go through the end of the year, particularly the fourth quarter. We do have a couple other things. For example, we do plan to have a little bit more maintenance activity in the back half of the year than we saw in the first half. That's probably about a $0.05 difference between the first half and the second half. Of course, I think we need to be cognizant of the Delta variant and what it could do. Obviously we're keeping a cautious eye on that as we look to the expectations for the business in the back half of the year. Got it. That makes sense. Then Andres, maybe a question on the glass advocacy campaign. I know you highlighted the number of online impressions you're receiving, but I guess, is there a way to measure, or how do you measure internally how successful this campaign is in ultimately getting consumers to choose glass? Maybe just bigger picture, I appreciate as the leading producer, you want to take the lead, but is this something where you think as an overall glass industry you need to be more vocal getting out there about the benefits, in your eyes, of glass as the preferred substrate? Yeah. One way to reflect the impact of the campaign is the number of leads we're getting into a C4C system from our customers. That's been at record levels, just looking for new product developments. I think the message is going through. It's being received by customers, but it's also being received by consumers, and we're seeing it by the level of impressions and the level of engagement, which is interacting with our messages in social media. We're very encouraged by the progress. I think there was a long period of time in which we were very silent. This product has great attributes, and as we said before, we want to rebalance the aisle around packaging, and that's what we're doing, and we're very pleased with the progress, and we intend to continue. Great. Thank you. Your next question comes from Adam Josephson from KeyBanc Capital Markets. Please go ahead. Your line is open. Thanks. Good morning, everyone. Good morning. John, just one more on the second half guidance, particularly the implied 4Q guidance. You talked about price cost being a drag. You talked about the maintenance being deferred. What is the seasonality impact of that implied 4Q guidance? The business used to be quite seasonal, and you've talked about making it much less so, spreading production across the four quarters such that you won't have the same working capital swings you used to have. What is the seasonality in the business at this point? Obviously, last year was kind of a throwaway year. Just trying to understand what impact seasonality is having on that implied 4Q guidance. Yeah. I would just say is that as a theme, we're seeing a reversion back to the normal here on the seasonality of our business. Of course, there's moving pieces, right? What that implies is, from an earnings standpoint, usually the second and the third quarters look a lot alike, and the first and the fourth quarters look a lot alike. You refer to our implied guidances. If you look at those overall, I think it reflects that. Now, the one key thing, though, is in the fourth quarter, we do have this price cost inflation pinch. Keep in mind, in the first part of the year is when we go after those prices and we start to normalize that. Overall, I think we're seeing more of a reversion back to the norm. I appreciate it. Just one follow-up. I think Ghansham Panjabi asked you about this. Your capacity is pretty tight. You said demand is really good. You're thinking flat to up one in 3Q on volume. You have the capacity in the Andean region coming. What are you able to grow volume by at this point, just given your capacity situation? How should we think about next year with that in mind, in terms of what a reasonable expectation for shipment growth might be? While capacity is tight, as I mentioned before, productivity is expected to take place in the following year, which should support serving higher volume. We also have the impact of Winter Storm Uri, which was quite large in Mexico and the United States, so that should be helpful. I would say overall, as we go into the Investor Day, we're going to have the ability to share with you what is ahead of us in terms of opportunities for growth. I think something very important is we are piloting Generation 2 in the second half of this year. We expect to have confirmation of our assumptions before year-end. The relevance of Generation 2 is that it enables O-I to go greenfield with MAGMA from that point on. We expect that to be part of our future. Obviously, we got to go to projects and installations first, and that might be more of a 2023 impact. I think we're in motion to be able to follow growth, which we haven't been able to do for a long, long time. We're doing that through the sales and marketing capabilities that we developed, the NPD capabilities and new business development converging with the new technology we're developing. I would add on top of that, I mean Adam, the operational elements of this, and we've also been working hard on the balance sheet to be able to stage that so that we have the financial flexibility to go do the things that are necessary to be able to unlock that pent-up demand for our product that we've struggled for a long time to be able to enable within our business. Yeah, I think it's important also to factor in the multi-year impact of the margin expansion initiatives. We're seeing impact of those initiatives last year, this year, and we expect to see it into the following years, too. That's going to be flowing through our numbers. Okay. Thank you. Your next question comes from Salvator Tiano from Seaport Global Securities. Please go ahead. Your line is open. Yeah. Hi, Andres, gentlemen. Chris, thanks for taking my questions. Hi. Firstly, you mentioned that now your volumes are above pre-pandemic levels. Can you provide a little bit more color by some of the businesses, kind of food, alcohol, beverage, and non-alcohol beverage, as well as on-premise versus off-premise? How do you compare now versus pre-pandemic? Yeah. Overall, the resilience of glass through channel shifts have been a lot better than we ever thought. In fact, quite strong. When you look at the performance of glass over the last few quarters, even though lockdowns were up and down and shifts were happening back and forth between the channels, we continue to perform in the volume dimension. Now let me just give you an idea of what's taking place by market. Europe, solid across all end users, mineral water recovery, which was expected to be once the lockdowns were raised, so that's working well. The recovery of Champagne is pretty important, as well as the Bordeaux wine exports. I share also earlier in the call, the performance of beer, which is quite significant. Nielsen data clearly states that beer in glass is ahead of alternative packaging in Western European countries, and very important countries for O-I, like France, Italy, Netherlands, and the U.K. When we look at the U.S., beyond the resilience to channel shifts, we're seeing a decrease in the rate of decline of beer in retail. We're seeing an increase in alcoholic beverages consumption in retail, too, and we're seeing a permanent shift, or gain of food consumption in on-premise coming from off-premise, which is important for our demand. Now, when it comes to NABs and spirits, we're also seeing improved performance. In the case of NABs with premium products like kombucha or RTD coffee, in the case of experience is driven by consumers trading up and focus on premium products. We look at Mexico, Brazil, and the Andean countries, very solid demand. We're selling the capacity. In those markets, it's primarily about evaluating further opportunities for expansion. One data point that is important in Brazil is the recovery of the returnable segment. When the peak of the pandemic took place back in April, the share of the returnable package went down to 20%, coming from 40%. It's now back to 40%, so pre-pandemic levels. That's very important to create affordability for beer in that market. It's also very important for sustainability because no package can equal the performance of the returnable container. In the Andean region, there is a strong emphasis in global brands and premium products across categories, which is driving demand. Okay, perfect. Just my follow-up, I want to understand a bit on the margin expansion initiatives. You said that now you're going to do over $50 million in 2021. Firstly, can you put a more precise color on this? Secondly, for 2022, what other opportunities do you see for expansion, if you can ideally quantify them, of course? Let me touch first on what the margin expansion initiatives are. There are three big initiatives. One is fully focused on the top line, and its price mix is volume and is element of working capital related to the commercial organization. The other part is focused on the COGS, Cost of Goods Sold, in its entirety, and the other one is focused on its G&A. What these initiatives are doing is leveraging all the capabilities we build in this organization over the last few years. We're now having the opportunity to enjoy the benefit of them, and that's why they're so structural and multi-year, and we feel very confident about the impact, not only in this year, but going forward. Yeah, and to answer your first question on the margin expansion initiatives, our original target was $50 million this year. We believe it'll probably be somewhere in the range of between $60 million and $70 million this year, so definitely higher. Keep in mind, those programs are net benefits. That's net of other changes and other spend categories. That's also absorbing some of the incremental logistics costs and some other spend categories that are in there. It just shows that there's good underlying performance, to Andres' point, across the business. We'll spend more time going into next year, but there's clearly continued run rate opportunities and momentum in this space. Maybe to put it into perspective a little bit, we did tighten our earnings guidance for the whole year, up in the upper half of it. What we're saying is that the benefit of higher sales volume and the incremental margin expansion initiatives that we're talking about is probably adding something like $0.30 to our earnings. At the same time, we do have some headwinds, such as what we incurred with Winter Storm Uri and then some of the increased creep on pressure on the spread. The good news is the things that are going the right way are fundamental underlying business performance, while some of the things that have been headways, headwinds rather, are more temporary or transient in nature. We're pretty optimistic about the future opportunities of the company to drive continued earnings improvement. Great. Thank you very much. Thank you. Your next question comes from Kyle White from Deutsche Bank. Please go ahead. Your line is open. Hi, good morning. Thanks for taking my question. On premise, can you just talk about what you're seeing that gives you the confidence that on premise consumption of glass for food and beverage will be higher post-pandemic than it was pre-pandemic? Is this mostly driven by food, and is it specific to the United States, or are you seeing it in Europe as well? Yeah, I think it's the consumer trend, which is preferring glass first. Second, is focused on premium products. That is a very important change in trends, and that is very favorable for glass. Now remember, we sell across multiple categories, and that gave us a pretty good, let's say, diverse portfolio, to count on for volume improvement. We are in food, we are in spirits, we are in NABs primarily premium. We are in wine, so multiple categories that are primarily categories served by glass. Got it. You touched on this a little bit earlier, but just wondering if you're seeing any impacts from the Delta variant here in July and August, and how did you incorporate this uncertainty into your outlook? We're very cautious, obviously, because, yeah, we already have one and a half years of experience of this. At this point, that's ramping up. We expect that all the stakeholders learn enough in this one and a half years to take measures that are not so disruptive. At least we don't expect to go back to the very beginning of this. We will see some ups and downs. I think what's important for this is the resilience of this packaging in channel shifts. If you recall, just coming in back in very early 2020, we had some expectation that as on-premise was going to go down, off-premise wouldn't be able to go high enough to offset. The reality is, it mostly offset. When it goes back and forth, we replace one for the other. That's what is happening. Glass is performing quite well. We feel pretty good about being able to perform, even if this variant continues to rise and create some restrictions for a time. Yeah. To build on that, understanding those types of trends and the uncertainties, we have tried to be a little conservative on that, but mostly because of the choppiness rather than any fundamental aspect of demand. As Andres mentioned, we've been doing very well. Things have been moving through over the last nine months quite well. We did try to be a little bit conservative on the outlook of the business, and we will see how things progress. Got it. Thank you. Thank you. Your next question comes from Gabe Hajde from Wells Fargo. Andres, John, Chris, good morning. Good morning. Good morning. Was curious on Gironcourt. If memory serves, that startup was kind of delayed given the pandemic. I'm assuming that's kind of up and running at full capacity or at capacity as it sits right now. Curious if will there be any benefit that carries over into 2022 on the volume side from that? Yeah. We started Gironcourt last year. It was delayed, as you mentioned. Originally because of the pandemic, we couldn't really mobilize the resources properly. It started at the end of last year. It's been running at full capacity this year. It's sold out, so we're very pleased with the return of that investment. It was the right thing to do at the right time. Yeah. It won't represent an incremental variable going into 2022 since it was pretty much running full the whole time. Yeah. Okay. I guess, going back to the implied Q4 guidance, I'm more thinking about production levels relative to sales volumes. I think here in the second quarter, you all produced by 10% or so. It seems like implied is 8% or 9% in the third quarter as well. What's embedded, I guess, in that Q4 guide in terms of production relative to shipments? Yeah, let me first clarify one point. The reason why you're seeing different sales volume versus production volumes doesn't have anything to do with how we're operating our business this year. We are producing at practical capacity, and then we're selling what we can produce minus supply chain disrup- variations and things like that. Really what you're saying is the comps are just because of the wonkiness last year with production and demand activity. Just be clear, there's no rebalancing going on, so to speak. We're just kind of managing our inventories to be consistent across on a comp basis. Now, understanding that last year still kind of had some of those issues. Production in the fourth quarter would be up like 2% or something like that on a year-over-year basis. Most of the disruption was done on a production basis as of somewhere mid to late third quarter of last year. All right. Thank you, and good luck. Thank you. Thank you. Your next question comes from Lars Kjellberg from Credit Suisse. Please go ahead. I just wanted to come back a bit to MAGMA. Of course, you're making some good progress there. In other materials, you're actually seeing premium pricing for low-carbon products, and where there is a positive environmental impact of whatever material those companies produce. Is that something you're contemplating or seeing in your discussions with customers? I'd also like to hear your view on the premium offering and the mixed benefit that you're seeing as the premium business is coming back, if that's a benefit that you expect to last, and what you've seen in terms of that benefit, the quantum. The sustainability profile of glass, I think is something that is going to be incrementally more and more clear and more valued by consumers and by customers. It has a lot to do with the inherent attributes of glass. Let me just share something with you. From our perspective, glass is already what other packaging materials aspire to be. There are six reasons for that. The first one is, it's the only material that is 100% recyclable forever. A bottle transforming to a bottle endlessly. It is possible to have up to 100 recycled material in every bottle. It is already recycled at best-in-class rates in Europe, which is showing its potential. Even if not recycled, glass is never trash. It doesn't hurt the earth or the ocean. It does not have plastic or plastic liner in contact with the product. It has returnable glass, which is the most sustainable package in the packaging universe. No package, no substrate can meet those six conditions. As you say, as we go into deploying our strategy, we're going to talk more about that in Investor Day. Not only we have that, but we are working highly focused on addressing the recycling system in the United States. There are already pilots in place. They're working well. Not only they help us with recycling, but with the community, we can cause a positive impact in the community. We're going to talk more about that at that point in time. The production technology, through MAGMA and even for the existing technology, is being designed to be able to use fuels that will allow for a significantly better sustainability profile. You will imagine that that's going to have a significant value. It's not only the product with inherent capabilities, but the recycling system in the right place and the production technology, with the right profile from a sustainability standpoint. How are we going to price that? I think it's something that we're going to talk more in the future. We don't have at this point in time that ready to go, but it will be valuable for sure. Got it. Thanks. On the price mix now with the premium coming back? That's consumer trends. I think it's happening everywhere. Consumers are relocating their disposable income to products that are more in the higher end. That's happening across markets. Every single market in which we are is the same trend. Every single end user is going through the same point. I think it's a significant shift in what consumers value and where they put their disposable income. Yeah. I would say the biggest growth categories are, in fact, those higher premium categories. Many markets, given the capacity situation, there's a mixed management opportunity for us as a business, and that implies what we're doing right now and where we're going to go in the future. Thank you. Your next question comes from Alton Stump from Longbow Research. Please go ahead. Great. Thank you. Good morning. Just wanted to ask a follow-up on the glass advocacy campaign, which you mentioned in the release that you had now reached 80 million. I guess, a bit more color as to what that means, reached 80 million, and how much of that is a sustainable impact on that group of people? Yeah. What I would say is you take a look at the digital marketing activity. You have a number of impressions, hundreds of millions of dollars, hundreds of millions of those. Then you're able to track then through the social media activity, the individual accounts that are being seen multiple times and things like that. Also you can measure the engagement. Who does what with that link, such as I read it, I watch the video, or even the times when people comment or pass it along and things like that. Over through this, think about it as a funnel. You got all the impressions, and then you can start to understand the behaviors and what's sticking with people. What's important is we're running multiple campaigns and multiple different issues, not one big bang. We're able to understand which of those really resonates with people and which ones maybe don't resonate as much. You can actually fine-tune your marketing campaign over time. If you, for example, like to hike and camp, well, there's campaigns that are going to be more focused on people who have those interests and whatnot. It's actually quite interesting how all this plays out and how you can really get a little bit more pinpointed and actually track the engagement over time. Yeah. Social media is the right vehicle for this because normally the people's attention is for about seven seconds. It's very small messages, very short messages, the ones that really stick. Social media is perfect for that. Okay. Thank you. That is very helpful. Then just, I think you mentioned, John, that here in 2Q, Latin America was one of the regions where you saw better-than-expected growth. I guess, is there any certain product categories that kind of drove that? Is that a stable benefit beyond 2Q in that region? What I would say is you are looking at fundamentally a capacity-constrained market and across most of Latin America. We've indicated that we have expanded the Andeans, we're doing more in the Andeans, and we've repeatedly indicated that Brazil also is a well over-demand situation. What you're seeing is across the board, but in particular, some of the beer categories because you've seen an increase in premium beer, which actually is one-way bottles and whatnot. That trend over time has really picked up and really benefited the demand profile. Okay, great. Thank you, John. Thanks. I think we have time for one last question. Yes, we have a question from Arun Viswanathan from RBC Capital Markets. Please go ahead, your line is open. Great. Thanks for taking my question. Maybe I could just ask a question on kind of some of the structural changes you guys mentioned. If I heard you correctly, it sounds like shipment growth in the future would settle into kind of a 0%-2% level, and then maybe you get another 100 bps from price mix, i.e. some of this new product growth, MAGMA and so on. Is that the right way to think about kind of top line, say like 1%-3%? There's some operating leverage there, so maybe you get 3%-5% EBIT growth, and then that translates to maybe 5%-7% EPS growth. Is that kind of the operating model that makes sense to you guys over the next couple of years? Thanks. Well, yeah. I don't think that we're going to get into too forward-looking. We have an Investor Day coming up in about two months. If we think about some of the major drivers going forward, especially in the next year, obviously we don't think that we'll have some 1-timers like we had with Winter Storm Uri. Let's keep our fingers crossed in that regard. Demand is very good, but it's a capacity constraint situation with some ability for creep capacity in the shorter term. I think Euromonitor has indicated that there's about 1.7% projected glass demand growth over the next three years. That might be a way to think about it. Of course, I think it's a capacity issue in addition to just a fundamental demand situation. We've talked about price and the fact that we intend to increase prices relative to the inflation that we're seeing. We expect to continue to see margin expansion initiative benefits. All of those elements are the things that we think are driving the improved performance of the business. Of course, we intend to continue to creep up the free cash flow conversion that we're seeing in the business over time. Again, we'll lay that out a little bit more through the Investor Day and of course, our year-end earnings guidance. Yeah, I think the Investor Day is the perfect opportunity to have this conversation. Overall, glass has very good potential. Glass, in fact, can grow if capacity can follow that pace of growth. What we've been doing is preparing O-I to be able to enjoy that growth potential. We've done so through, I would say, a pretty deep structural change across the entire business. We're going to have the opportunity to explain that to you at Investor Day. Thanks. All right, guys. Thank you very much. That concludes our earnings call. Please note that our third quarter call is scheduled for October 28th. As mentioned, we will be hosting an Investor Day in New York City in September 28th. We'd love to see you all in person at that event. Remember, make it a memorable moment and choose safe, sustainable glass. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.