Ardagh Metal Packaging S.A. Ordinary Shares

Good day and welcome to the RDAG Group SA Q2 Quarterly Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Herman Trotsky, Chair of RDAG Group. Please go ahead.

Thank you very much and welcome, everyone. Thank you for joining us for the RDAG Group Second Quarter 2025 Earnings Call. Let's call for the release of our results earlier today, and I'm joined today by John Sheehan, our group CFO, and by Mike Dick, our CEO of Glass Packaging. Before moving to take questions, we'll make some brief opening remarks covering our second quarter and third quarter performance, our outlook for the full year, and the recapitalization agreement we've also announced today. Our remarks will include certain forward-looking statements which reflect circumstances at the time they're made, and the company expects you, this grant, any obligation to update or revise any forthcoming statements. Actual results and outcomes may definitely vary from those that may be expressed or implied due to a wide range of factors. The group's second quarter financial report can be found at ir.r.group.com. Auto Metal Packaging, or ANP, recently released its second quarter results, and a replay of its earnings score is available on its website. We will not be providing additional information regarding ANP on this score. Beginning with some auto group highlights for the quarter, revenue of $2.5 billion was 4% higher than the same period last year on a constant currency basis, reflecting higher shipments in metal packaging, partly offset by lower revenue in glass packaging. Adjusted EBITDA of $388 million increased by 1% on a reported basis, but was 1% lower than the same period last year at constant currency rates, with growth of 16% in nickel packaging, offset by a comparable reduction in glass packaging, where EBITDA was in line with our expectations. The review performed by segment on a constant currency basis, starting with a brief recap on nickel packaging. Second quarter global beverage can shipments increased by 5% in the quarter compared to the same period last year, led by growth in the Americas of 8%, where shipments rose by 8% in North America and by 12% in Brazil. AAP's adjusted EBITDA increased by 16% to $210 million compared to the same period last year, and exceeded its guided $195 to $205 million. Moving to glass packaging, levy for a quarter of $1.03 billion was 8% during the same period last year, principally driven by lower shipments in Europe and Africa and the pass-through of lower input costs, mainly energy, in Europe. Global glass packaging shipments in the quarter were 5% lower than the same period last year, reflecting relatively soft shipments in Europe and Africa, as well as footprint adjustments and commercial actions in our North American business over the last two years. Second quarter adjusted Everdine glass packaging of $178 million was in line with our expectations. Looking at each of our glass packaging segments in turn, Revenue of $638 million in Europe and Africa was 11% lower than the same period last year. Large shipments were 6% lower than the prior year. In Europe, most markets other than the UK saw a reduction in year-on-year demand. By end market, growth in spirits was more than offset by lower volumes in most other categories, notably beer. Africa shipments in the second quarter, which is seemingly less significant, were 10% below the prior year level, with the reduction largely accounted for by beer and non-alcoholic beverage demand. The first half of 2024 had benefited from some bolt of returnable flights by customers, which did not recur in 2025. In both Europe and Africa, we continue to manage our capacity to meet market demand and ensure increase remain at appropriate levels. Adjusted EBITDA in Europe and Africa was $127 million for the quarter, compared with a reported $160 million in the same period in 2024. Although down on the prior year EBITDA outturn, this is in line with our expectations. that low shipments which resulted in less favorable fixed cost absorption were offset by better cost performance during the quarter. North America glass packaging revenue of $389 million was 2% lower than the same period last year. Glass shipments were 4% below the second quarter of 2024. largely reflecting the footprint in other actions we've taken to improve our asset base, business mix, and our earnings potential. Second quarter North American shipments were in line with our expectations, with growth in spirits and non-alcoholic beverages and a planned reduction in beer shipments. Adjusted EBITDA in North America increased by 13% over the same period last year to $51 million. Our focus remains the delivery of continued efficiencies in financial improvement in North America. Before moving to our capital structure, a brief update on tariffs. In April, we set out that we expect that any impact to be limited in our glass packaging businesses and minimal in metal packaging. Since then, we've seen constant flux regarding tariff rates, effective dates, potential exemptions and countermeasures with considerable uncertainty prevailing. Our view has therefore not changed and we continue to actively work with our customers to manage any challenges and take advantage of any opportunities. The potential impact of tariffs on broader macroeconomic activity and demand also remains unclear. Moving on to liquidity and capital structure. SolarWave's cash and available liquidity of $1.08 billion at June 2025 was little changed on March 2025 and higher than at June 2024. Cash balances were over $500 million. Last few months adjusted EBITDA to 30 June 2025 for the odd-out group increased to $1.315 billion. compared with $1.274 billion at 31 December 2024, with growth driven by metal packaging. Last 12 months adjusted EBITDA at the August restricted group, including evidence from AMP, was $797 million at 30 June 2025. Milk leverage at the Arctic restricted peak was 8.4 times last 12 months of adjusted EBITDA to 30 June 2025 and was impacted by the currency translation ending from sharp dollar depreciation in the quarter. Heading out to our capital structure review. We have today announced the terms of a comprehensive recapitalization agreement in respect to the RDR group. Details are set out in a separate release But the main point is the following. Popping of over $4.3 billion of 2027 maturities, comprising $2.3 billion in 2027 senior unsecured notes issued by the group, and $2 billion in 2027 TOGO notes issued by ARD Finance SA, into equity in R&R Group SA. Exchange of the group's $2.7 billion, 2026, senior secured notes into new notes due in December, 2013, representing maturity extension of over four years. Following completion, these new December, 2013 notes will be the first bond maturity of the group excluding ANP, transforming its maturity profile. There's also an injection of $1.5 billion in new capital into the group, backstopped by the Sun and FSN ATO groups, including to repay existing debtors and for general corporate purposes. Glass and metal packaging will remain together in ARDA Group SA, the ownership of which will transfer it to bondholders in the debt for equity swap. ASP's capital structure, which is separate from ARDA Group, and its New York Stock Exchange listing is unaffected by this transaction. This agreement has the support of the group's controlling shareholders, as well as of holders of a substantial majority of the group's senior secured notes, senior unsecured notes, and the toggle notes issued by ARD Finance S.A. These visits significantly increased support as set out in today's announcement as we proceed through implementation. Today's comprehensive agreement delivers our consistently stated objective of putting a sustainable capital structure in place before resulting significantly reduced debt and a much enhanced maturity profile, positioning the group for medium-term success. The transaction is subject to customary approvals and we expect it to be completed We refer to today's announcement for full details of the transaction and will not be providing further information on this call. Before we move to questions, we'll turn to our full year 2025 outlook. Given its strong second quarter performance, A&P last week raised its 2025 adjusted EBITDA guidance to a range of $705 to $725 million. up from $695 to $720 million. Clock Packaging is maintaining its full year 2025 projection of a mid-single digit improvement in adjusted EBITDA compared to its 2024. If you have any remarks, you may now be pleased to take any questions that you may have. Thank you.

Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions.

And we'll go first to Ed Brucker with Barclays.

Hey, thanks for taking the question this morning. So my first one, in some of the cleansing materials, there was a 2026 estimate of $700 million in EBITDA and then $760 million for 2027. If you're able to, can you give us some of the underlying assumptions from those estimates, you know, from... volume perspective, how you plan to grow EBITDA margins, et cetera.

Yeah, Ed, it's John Sheehan here. We're not, you know, getting into the breakout of 2026, 2027. What we have said specifically today is that, you know, we're reiterating our view of the current year, which is for, you know, a mid single digit increase in EBITDA over last year's level. You know, principally, you know, volume is a factor. And we've mentioned that over the past couple of years, you know, volume in Europe has been pretty sharply impacted. So, you know, we'll be anticipating a gradual recovery of that in the Europe and Africa segment. And then in North America, you know, it's more around profit improvement initiatives. We've taken out, you know, a number of plans, five over the past three or four years, improved our cost base and you know, also, you know, commercial initiatives as well. So it will be less volume driven there and more, you know, efficiency. But they're the main drivers, but we haven't gotten into parsing at 26, 27 at this stage.

Got it. So from a volume perspective in the glass substrate, just generally, do you think that you may have found a bottom where we won't see a ton of volume declines going forward, maybe speaking primarily in North America, and then maybe just give your kind of long-term glass substrate growth trajectory over time.

Hi, Ed.

It's Mike here. Yeah, well, with regard to the first question on North America, we have realigned our footprint and product mix. to really trying to get the demand profile aligned with regard to the marketplace. We don't see any real, we're not really focusing around significant growth there other than operational performance improvement and managing around that area. So we're comfortable with the alignment with regard to our capacity and demand profile. When you look at the other sectors, as John just said, we do see areas where we expect Europe and Africa to see some growth. We think that we are getting to a place where there's some more normalization, but it's fair to say that there is still in the market the questions on tariffs and the impacts around that. But we feel we've got to a level where we would hope to see some growth in the coming future years.

Great. Thank you.

And as a reminder to ask a question on today's call, that is star 1 on your telephone keypad. At this time, there are no further questions. I'll turn the call back to Herman for any additional or closing remarks.

Thanks, everyone, for joining, and we look forward to seeing you on our next call.

Thank you.

This does conclude today's conference. We thank you for your participation.