Ardagh Metal Packaging S.A. Ordinary Shares

Welcome to the ARDA Metal Packaging SA Fourth Quarter 2022 Update Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Stephen Lyons, Investor Relations. Please go ahead.

Thank you, Operator, and welcome, everybody. Thank you for joining today for ARDA Metal Packaging's Fourth Quarter 2022 Earnings Call, which follows the earlier publication of AMP's earnings release for the fourth quarter. We have also added an earnings presentation onto our investor website for your reference. I'm joined today by Oliver Graham, AMP's Chief Executive Officer, and David Bourne, AMP's Chief Financial Officer. Before moving to your questions, we will first provide some introductory remarks around AMP's performance and outlook. AMP's earnings release and related materials for the fourth quarter can be found on AMP's website at www.ardamnetalpackaging.com. Remarks today will include certain forward-looking statements and include use of non-IFRS financial measures. Actual results could vary materially from statements. Please review the details of AMP's forward-looking statements disclaimer and reconciliation of non-IFRS financial measures to IFRS financial measures in AMP's earnings release. With that, I'll now turn the call over to Oliver Graham.

Thanks, Stephen. Our performance in the fourth quarter proved resilient as we navigated challenging market conditions. Despite softer-than-expected consumer demand in the Americas, we delivered global shipment growth of 1%, an equivalent growth in adjusted EBITDA on a constant currency basis. For the full year, we delivered shipment growth of 5%, including 3% growth in North America, supported by our well-advanced investment program. The contribution from higher volume was, however, broadly offset by input cost pressures, particularly in Europe, as well as fixed costs under absorption, and resulted in a 1% decline in adjusted EBITDA for the year on a constant currency basis. We believe that we have weathered the multiple challenges We anticipate growth in global industry beverage can volumes across each of our markets in 2023, supported by secular trends that we previously outlined, such as sustainability-driven pandemic shifts and innovation continuing to favor the beverage can. We expect industry growth rates of a low to mid-single-digit percentage in Europe, a low single-digit percentage in North America and Brazil. With our growth investment plan well Adjusted EBITDA is anticipated to accelerate through the year due to increasing inflation recovery and volume acceleration. We are encouraged by the strength of the European beverage can market and anticipate more normalized levels of activity returning to the North American and Brazil markets, including promotional activity, in the second half of the year. We have been disciplined and reactive to changes in market conditions, and as mentioned, These include a reduction of our growth investments to balance our supply with demand, a rebalancing of our network to address fixed cost absorption challenges, agreements with our European customers related to the treatment of direct energy costs, and an increased focus on adjusted free cash flow generation. On our sustainability agenda, we were delighted to recently receive a first-time standalone rating from CDP achieving a leadership A- rating for water management and a B rating for climate change. This followed a first standalone prime ESG rating from ISS. AMP also achieved ASI certification across certain of our European operations and joined other key aluminium industry leaders in signing up to the Mission Possible partnership in leading the effort to target the industry's net zero emission transformation. Turning our attention to AMP's fourth quarter results, we recorded revenue of $1.1 billion, which represented growth of 5% on a constant currency basis, predominantly reflecting the pass-through to customers of higher input costs. Adjusted EBITDA of $159 million was modestly up on the prior year on a constant currency basis. The contribution from volume mix, including from our growth investments, Total beverage can shipments in the quarter were 1% higher than the prior year, with growth in Europe and North America offsetting a decline in the softer Brazil market. Specialty cans represented 48% of global shipments in the quarter, up from 46% in the third quarter. For 2022 as a whole, specialty cans represented 48% of our shipments, up from 45% in the prior year. Looking at A&P's results by segments, and at constant exchange rates. Revenue in the Americas in the fourth quarter increased by 1% to $638 million, mainly due to the pass-through of higher input costs. Shipments were relatively flat versus the fourth quarter of 2021, with an increase in North America, offset by softer conditions in the Brazil market. of promotional activity, but with greater resilience experienced in non-alcoholic categories. We experienced continued weakness in the hard seltzer category, which represented 9% of North America shipments. We will conclude our near-term capacity investment activity in North America in the first half of this year, as the final new line in Huron, Ohio becomes operational. Mississippi position us favorably for a normalization of demand activity as inflationary pressures subside and promotional activity returns. We anticipate some increased level of promotional activity into the second half of the year, supporting our second half volume growth weighting and overall full-year shipment growth at a high single-digit percentage. We will engage closely with our customers and manage our capacity in a disciplined manner as reflected in the near-term containment of capacity within our network. In Brazil, fourth quarter shipments declined by a high single-digit percentage, underperforming the market, which recorded a low single-digit growth rate. The market overall was softened and anticipated, despite the World Cup staging during Brazil's summer period, as a weaker macroeconomic backdrop pressured consumption. Our performance for the quarter was negatively impacted by some supplier rebalancing in the period by our customers, but we should be viewed in the context of our outperformance for the year as a whole of over 4%. Market conditions remain soft, but we expect to grow in 2023 at a high single-digit percentage, supported by the startup of New Capacity in Alagoas in the second quarter. We remain confident in the longer-term attractive growth profile of the Brazil market, and our planned greenfield investment in Minas Gerais will be phased in only when demand conditions allow. Adjusted EBITDA in the Americas increased by 3% to 104%. as well as inflation pressures. In 2023, we expect strong shipment growth in the Americas in the order of the high single-digit percentage, supported by the ramp-up of our new capacity. In the near term, EBITDA growth will be constrained by fixed costs under absorption, partly mitigated by our containment action, and lapping a tougher first half comparable. As demand begins to normalize in both markets, we anticipate a significant step-up in EBITDA generation in the second half. In Europe, fourth quarter revenue increased by 12% on a constant currency basis to $438 million, compared with the same period in 2021, mainly due to higher input costs. Shipments for the quarter grew by 1% on the prior year, despite a strong prior year comparable, and by nearly 4% for the year. Consumer demand proved resilient in the quarter and was ahead of our expectations. Shipments related to the export market for filled drinks were down on the prior year, but the reduction in ocean freight rates supports the improved outlook for this segment in 2023. Fourth quarter adjusted EBITDA in Europe fell by 2% on a constant currency basis to $45 million, as the contribution from higher shipments was offset by higher overhead costs and input cost headwinds, including a short-term pass-through cost headwind created by the sharp fall in metal premiums elevated inventory levels. For 2023, we expect shipment growth at the order of low single-digit percentage with a more significant increase in adjusted EBITDA arising from Q2 onwards as a result of a more effective pasture of our energy costs, inflationary input cost recovery through our PPI mechanisms, and the non-recurrence of metal valuation timing issues. Furthermore, the near-term energy outlook in Europe has markedly improved since our last update, We remain vigilant as the European market continues its long-term journey to diversify its energy sources, and we are almost fully hedged for our energy requirements for the current year. In the first half of this year, we will complete the addition of planned further capacity in our last year's uplands in southern France, as well as finalizing additional capacity in Germany. This concludes our brownfield investments under our initial growth investments. As previously indicated, as part of our disciplined capacity management, steel line in Germany to balance our network needs. I'll now briefly hand over to David to talk you through our financial position before finishing with some concluding remarks.