Ardagh Metal Packaging S.A. Ordinary Shares

Welcome to the ARDA Metal Packaging SA Quarterly Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Stephen Lyons. Please go ahead.

Thank you, operator, and welcome, everybody. Thank you for joining today for ARDA Metal Packaging's third quarter 2025 earnings call, which follows the earlier publication of AMP's earnings release for the third quarter. I am joined today by Oliver Graham, AMP's Chief Executive Officer, and Stefan Schellinger, 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 third quarter can be found on AMP's website at ir.ardametalpackaging.com. Remarks today will include certain forward-looking statements and include use of non-IFRS financial measures. Actual results could vary materially from such 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. I will now turn the call over to Oliver Graham.

Thanks, Stephen.

We delivered a strong performance in the third quarter with adjusted EBITDA growth of 6% versus the prior year quarter or 3% on a constant currency basis. Our adjusted EBITDA result of $208 million was towards the upper end of our guidance with both segments performing broadly in line with our expectations. Adjusted EBITDA growth in the quarter was supported by shipments growth in Europe and North America, lower operational and overhead costs, as well as favorable category mix. Although global volumes were below our expectations in the quarter, on a year-to-date basis, they're up over 3% versus the prior year. The beverage can continues to benefit from innovation and share gains in our customers' packaging mix, underpinning our growth expectations. We continue to progress our sustainability agenda, and our recently published sustainability report highlights strong progress towards our targets in 2024, including a 10% annual reduction in Scope 1 and 2 emissions and a 14% reduction in Scope 3 emissions. with scope tree emissions now 25% below the 2020 baseline. We anticipate further good progress in 2025 and beyond.

Turning to AMP's Q3 results by segment.

In Europe, third quarter revenue increased by 9% to $625 million, or by 3% on a constant currency basis, compared with the same period in 2024, principally due to volume growth. Shipments grew by 2% for the quarter, driven by growth in energy drinks and faster-growing categories such as ciders, ready-to-drink teas and coffees, wines, and water. This growth offset continued weakness in the beer category, which represents over 40% of our European portfolio. Third quarter adjusted EBITDA in Europe increased by 4% to $82 million, in line with expectation. On a constant currency basis, adjusted EBITDA reduced by 4% due to input costs, recovery headwinds, partly offset by the contribution from higher volumes and favorable category mix. Given the continued softness in the beer category, we now expect full year shipment growth for Europe of low single-digit percentage for full year 2025. As we look into 2026, we continue to expect the market to grow around 3% to 4% and for our volumes to broadly match that growth. In the Americas, revenue in the third quarter increased by 8% to $803 million, which mainly reflected the pass-through of higher input costs to customers, including the impact of the higher Midwest premium in North America. America's adjusted EBITDA for the quarter increased by 8% to $126 million, in line with expectations due to lower operational and overhead costs and favorable category mix, partly offset by the impact of lower volumes in Brazil. In North America, shipments increased by 1% for the quarter, broadly in line with the industry, following stronger than expected growth during the first half of the year. Year-to-date North America shipments are up by 5% ahead of the overall industry. The slow rate of growth during the quarter reflects some moderation in industry growth rates, as well as temporary operational challenges. These included a modest impact related to aluminum can sheet supply, as well as some temporary plant and network issues. We continue to monitor the metal supply situation as we progress through Q4. If the supply chain performs as currently projected, we anticipate only a modest impact to our expected Q4 North America performance. Customer demand for non-alcoholic beverages in cans in North America remains strong, and as such, we maintain our guidance for fully North America shipments of a mid-single-digit percentage growth. Looking into 2026, we expect industry growth of a low single-digit percentage. We expect a somewhat softer outlook for AMP following some volume resets, largely related to specific footprint situations. We anticipate 2026 being a transition year before good growth in 2027 on the back of some contracted additional filling locations and ongoing market growth. In Brazil, third quarter beverage can shipments decreased by 17%, largely due to a weak industry backdrop across all categories. with industry beer can volumes falling by around 14% due to adverse weather and weak household consumption. Our weaker performance in Q3 follows a strong performance in the first half of the year. Year-to-date Brazil shipments are down 1% versus a mid-single-digit percentage decline to the rest of the industry. We expect an improved volume trend for Q4 compared to Q3, and hence full-year shipments for Brazil to be broadly in line with the prior year. Looking into 2026, we expect the Brazilian industry to return to growth, and for our volumes to broadly track the industry. I'll hand over now to Stefan to talk you through our financial position for the quarter before finishing with some concluding remarks.

Thanks, Olli, and good morning, good afternoon, everyone. We ended the quarter with a robust liquidity position of over 600 million. The net leverage of 5.2 net debt over the last 12 months adjusted EBITDA represents a decline of 0.4 times of leverage versus Q2 2024. reflecting adjusted EBITDA growth. It remains our expectation that the leverage ratio at the end will be around five times. We reiterate our expectation for adjusted free cash flow for 2025 of at least $150 million. In terms of the various components of free cash flow, our expectations are mostly in line with what we said in July. We expect maintenance capex of around $135 million, lease principal repayments of just over $100 million, cash interest of just over $200 million, and a small outflow in working capital. We now expect cash tax to be in the range of $35 to $40 million, growth capex to be around $65 million, and a small cash exceptional outflow of approximately $15 million. Today, we have announced our quarterly ordinary dividend of $0.10 per share. And with that, I'll hand it back to Olli.

Thanks, Stefan. So before moving to take your questions, just to recap on A&P's performance and key messages. Firstly, adjusted EBITDA growth in the third quarter of 6% was at the upper end of our guidance range, with both segments performing in line with expectations. Adjusted EBITDA growth was supported by shipments growth in both Europe and North America by lower operational and overhead costs and a favorable category mix. And the beverage can continue to outperform other substrates in our customers' packaging mix, supporting our growth. Reflecting our resilient performance, we are upgrading our full year adjusted EBITDA guidance. Full year adjusted EBITDA is now expected to be in a range of $720 to $735 million based on current FX rates. We expect full year shipments growth at AMP to be approximately 3%.

Having made these opening remarks, we'll now proceed to take any questions that you may have.

Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star 1 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 1 to ask a question. We'll take our first question from George Stathos with Bank of America.

Hi, everyone. Good morning. Thanks for taking my question. Thanks for the details. Congrats on the progress. I guess the first question I had, I only have a couple. Can you talk, Ali and Stefan, about what, if any, effects you're seeing from demand elasticity and higher realized or potentially realized aluminum pricing from can sheet within cans, both in North America and Brazil, and then I guess broadly. And in that regard with Brazil, the down, I think you said 17%, on weak industry trends. Obviously, others have also put up some weaker industry volumes so far during reporting period in Brazil. Do you sense any of that is a pack shift mix back to other substrates because of, in fact, higher aluminum prices? How would you have us think about that? And along with the elasticity question, just can you talk a bit more about what's baked into your guidance for fourth quarter and realizing you're not guiding on 26th? Just the outlook for 26 on can she, you know, what operational challenges are you going to, we know what issues hit the supply chain, how are you managing against that, and what's baked into the extent you can comment? Thank you.

Yeah, hi, George. So, yeah, on the first question, I mean, I don't think we're seeing a huge amount on demand elasticity at this point. Obviously, everybody, well, more or less everybody will have gone into 2025 pretty hedged. So a lot of the tariff impact won't come through in North America at this point. Probably similar story for Brazil in some respects. So I don't think we're seeing it hugely impacting sales at this point. I think that there's a bit more risk for 2026 for exactly the same reason that hedges will be rolling. And so you would expect to see some higher aluminum costs come into the supply chain. and then it will be down to whether our customers pass those through or retailers pass those through, and then how the consumer reacts in the overall consumer environment. So I think, you know, we're probably guiding North America for next year at a market level of sort of 1% to 2%, and that's partly reflecting some of that caution about potential inflation in the can. I think in Brazil I don't – I think we've seen a big reversion back into two-way glass. I think it stayed pretty much steady, the shares of cans. It just seems to be a general weakness on the volume level, on the liquid level. And we see that in the reporting of the big brewers. And obviously, it was a pretty... a pretty poor winter, a very cold winter. That's been commented on, and obviously there is a weak consumer backdrop in the category, particularly in beer, but actually soft drinks wasn't great either. So I think Brazil's just having a tough year. Again, as we look into 26, we'd assume that it reverts more back to its long-term trends, so maybe, you know, low to mid singles, and, you know, as we said in the remarks, we'd be in line with that. In terms of Q4, so i think the can she we're we're cautiously optimistic at this point obviously there's been a lot of disruption in the supply chain um we were having it actually before the fire at that key facility there was already some disruption in the supply chain which we mentioned and obviously the fire didn't help um at this point we think we're managing through and obviously it gets easier as the quarter progresses because alternative sources of supply can come into the mix and we're you know obviously supplied in from various domestic and international sources. And we also have one of the two new males in North America now coming online, which is obviously, you know, very helpful to the situation. So, at the minute, you know, we're optimistic that we can get through that, as we said in the remarks, with relatively limited impact on North American performance. But we probably did lose one to two points of growth in Q3 across all of the operation issues. That included a couple of plants that didn't perform at the level we'd expected, and also the network was under some stress with some seismics issues.

Very good.

I'll turn it over. Thank you. Thanks, George.

We'll take our next question from Matt Roberts with Raymond James.

Hi, Ali, Jeff Finn, and Stephen. Good afternoon. First, on that 2026 growth in North America, it seems like there's a lot of innovation, potential shelf space, distribution opportunities within your energy portfolio. So what's behind that transition here? And given your exposures, why in line with the market in North America?

Great question.

So look, I think we've talked about it on calls. It's been on other calls. There's a lot of contract reset activity in North America over the last couple of years. We're seeing that increasingly settled down now, you know, and we're broadly very comfortable with the outcomes. We see ourselves increasingly strongly contracted through 28 and beyond. We do see some softness, as we said, in 2026, particularly on the 12-ounce side of the portfolio, you know, due to some resets within those situations. And as I said on the remarks, it's really about some specific footprint situations. So what I mean by that is, you know, for example, we – had a customer with a very long freight lane out of the COVID years. We were at one point thinking of building capacity. We decided not to with the overall volume situation. So, you know, now there is a plant much closer than our plant, and so that naturally reverts. And then, you know, another situation example is that one of our competition built a plant during this period of expansion, and that plant is now closer to a customer filling location than our plant and so we're seeing some i think relatively natural resets in the market um as you know i mean obviously beverage cans are very susceptible to freight and footprint is critical so Yeah, as I say, I think we're very comfortable with where we're coming out now. We do see 26 as a softer year in North America where we will be behind the market. But if we take 27, we see good growth. We see we're gaining a couple of extra filling locations and, you know, we see the market growing again. And as you say, I think if you look at the innovation that's, you know, going into the can, you look at the way energy has performed this year, that's a big part of our portfolio. You know, we actually don't know where that's going to be. You know, it certainly surprises on the upside this year. I think it's got good potential next year, probably not to the same level, but, you know, it's a big part of our portfolio. So, yeah, we can be optimistic about those kind of categories as well. Right, right.

Thank you for all the additional color there, Ali. And then speaking of capacity and footprint, last quarter, you had a potential for ads in Europe. I believe it was Southern Europe, but Recognizing these projects are long-term in nature, has the volume outlook changed either the timing in regard to any potential projects, or are you still expecting Europe to be pretty tight and needing additional lines in the future? And any early indications that everything about CapEx in 2026? Thank you for taking the questions.

no pleasure no we don't see any change the timing so i mean i think that the europe market is pretty tight we're particularly tight on certain sizes and we'll address that that definitely cost us some growth this year um you know again it's sort of specialty sizes in the season um you know we weren't completely able to follow and that that cost us a bit of growth q2 and probably persisted into q3 so we'll do some projects around that in the off season and then yeah we're running pretty tight we've got we've got some room for growth with you know continued improvement in the existing footprint but uh we don't see any change to the timing of needing new capacity um you know europe's a long-term growth market it's been talked about on other calls you know we we're talking three to four percent some years it's been more some years a bit less but it's been very consistent um you know as per capita can penetration grows so Yeah, we don't see anything. It's obviously had a bit of a weak, you know, summer, particularly in the beer category, but we're very optimistic about that market. And as we said in the remarks, we see ourselves growing in line with the market in 26.

Thank you again, Ali. Pleasure.

We'll go next to Stephan Diaz with Morgan Stanley.

Hi, Ali. Hi, Stephan. Thanks for taking my questions. maybe just sticking with Europe. So, you know, obviously the can continues to outperform underlying liquid volumes in the region. But in your opinion, how much more runway does the can have for outperformance? Like, for example, if overall liquid demand sort of remains kind of flat to down in Europe, can the can still grow in, you know, 2026, 27 and beyond?

Yeah, definitely.

so i think that if you look at the things that drive the growth i mean there's still significant under penetration of cans relative to other geographies you know some of that is legacy with the german deposit scheme that took all cans out of the german market so you still see german can growth at very high levels obviously a big market um you have growth out of two-way and plastic in in different parts of the region eastern europe um we have the ongoing sustainability advantages of the can relative to other substrates. And obviously you have in Europe, particularly the energy cost situation that's impacting glass. So we see a lot of runway for growth for the can in Europe. And I think that view is shared right across the industry and is backed up every quarter. If we look at our performance in the quarter, You know, when we look at our markets that we were in, we were a touch behind, but only a touch behind. So I think, you know, there are always geographic and category mix impacts in individual company growth rates. But overall, we're happy with our performance, and we definitely see a lot of runway for CanGrowth in Europe in the next few years, yeah.

Great. That's helpful. And then maybe if you could just touch on quarter-to-date trends by geography and maybe particularly if you could go into detail on Brazil, just given how weak this past quarter was on an industry level and just now how we're in the busy season down there. And then if I could just slip in one more. I might have missed this in the release, but can you quantify the IFRS 15 contract timing benefits? And is this potentially a headwind in 4Q? Thank you.

Sure. So I think, I mean, quarter to day, I think trends look good, very much in line with guidance, you know, across all geographies. I think Brazil clearly significantly better, you know, where we're guiding. If we're at the top end of the guidance, then we expect Brazil to be you know, flat growth year on year, which obviously is therefore, you know, growth in Q4. And we already see in October significantly better performance than Q3. So we do see improvement. I think it's still a bit on the weak side, and we're still maintaining a cautious stance in our guide, but it's definitely better than than Q3, and I think that Europe and North America would just say, yeah, you know, absolutely in line with where we expect it. So, it seems that there's a reasonable degree of forecastability in our markets right now. I think the specific question on IFRS 15 is just a couple of million dollars, right? And maybe, Stefan, I don't know that we anticipate anything particular in Q4, but I'll hand that to you.

No, I don't think we expect a major headwind in Q4 from IFRS and sort of, yeah, sort of around a couple million dollars sort of in the Americas and then also, you know, a few more in sort of the European segment. But net-net, you know, we don't expect a major headwind from that.

Thank you so much. Thanks, Stefan.

We'll go next to Josh Spector with UBS.

Hey, good morning. I just had two questions more on the cost side is, you know, within your comments, you talked about less input cost recovery in Europe. I assume that's non-metals related, but can you talk about kind of what that is and if that is something that can be recovered? And then, you know, with North America, with some of the temporary network issues you've called out, I don't know if you can size that at all. And is that something that's resolved or is this kind of just an effect of a tighter market, maybe leading to inefficiencies that persist? Thanks.

Sure. So taking the North American one first, I think those issues are resolved as we go into Q4. I think that they were a consequence of our strong growth in the first half, particularly on certain sizes. So we ended up with the network. We were basically pushing the shortage around different sizes across the summer, and it landed on 12 ounce in Q3. And I think we mentioned in the remark, or I mentioned in one of my earlier replies, that we probably lost one to two points of growth um in north america in q3 which was everything including metal supply issues and and some of our network and plant issues so yeah we see those as fully resolved going into q4 and the issue where really was you know, very focused on is the metal supply, but as I say, cautiously optimistic at this point. And then the input cost, yeah, we talked about it earlier in the year. Nothing's changed here. This is European aluminum prices. It's really a legacy of the Ukraine war and the energy spike. We managed to hold that off for several years, but in the end, you know, there is energy in aluminum, and those prices came through. And I think now it's been commentary, certainly at least in one of our peers, on similar lines so i think that you know not not surprisingly eventually that energy shock translated through into some input cost price rises and and that impact came particularly for us this year it's different for different players depending on their supply mix so nothing new there um exactly what we talked about in earlier in the year okay thank you i'll leave it there

We'll go next to Arun Viswanathan with RBC Capital.

Great, thanks. I just wanted to get your thoughts on EBITDA and I guess growth as you look into 26. So it looks like you're kind of on a $725 million or so run rate on an annualized basis. If you think about maybe low single-digit growth as you discussed for 26, You know, it seems like you are executing relatively well, so does that translate to, say, maybe mid-single-digit growth on the EBITDA line? And then, you know, maybe is there any further leverage as you delever, or how should you think about that progressing forward as you look at it?

Yeah, sure. Look, obviously, we don't guide 26 until our Q4s, and there's good reason for that. We're still rolling up the budget and all the detail. And also there's still at this time of year, quite a bit of volume still under discussion or moving around. So, you know, so we won't be guiding specifically, but if I just talk at the highest level, so I think I didn't say we were growing those single digits next year. I think what I said was, Europe, we see growing 3% to 4%, and us broadly in line. I said I think Brazil will grow low to mid, us broadly in line. I said I think North America will grow 1% to 2% and will be softer than the market. So we don't yet have a global number. I think we definitely see earnings growth in 26 over 25. So, you know, some of those growth positions, particularly Europe, Brazil, we also see good operational cost savings. You know, we've got a lot of Opportunity in plants, in freight, in lightweighting, you know, the usual places where can makers make operational cost savings, input costs we're hopeful for 26 as well at this point. And obviously we'll be keeping a tight eye as we always do on SG&A. Mix we'd hope to be able to tell in 26. So, you know, we see a number of areas where we see earnings growth in 26 and we definitely see earnings growth over 2025, but we won't guide specifically on that until February.

Great. Thanks for that. And then maybe we can just discuss Europe just briefly. So, in North America, we obviously saw a nice proliferation of new categories and non-alcoholic beverages. Could you just discuss maybe where we are on that trajectory within Europe, is there maybe a tailwind that's coming or are we obviously already seeing it? And would you expect that to drive your results a little bit higher or would you be still maybe below the market because of the beer exposure? Thanks.

Yeah, I mean, we saw a bit of that in Q3, as I mentioned. So, I mean, if you look where our Q3 growth came from, it came particularly out of the energy category, you know, a bit like North America came out of some of these faster-growing categories like ready-to-drink teas, coffees, wines, waters were strong in all those categories. So, we definitely saw that. But I think the other piece with Europe, you know, I think we also see, you know, general soft drinks in growth with substitution and of plastic and also some two-way systems being substituted still. So it's definitely not reliant on those more innovative categories to get growth in Europe. You can get growth fully in the core, if you like, And then I think what we're saying for 2026 is absolutely that, you know, this looks like a poor year for beer. There's no particular reason to believe that continues. So, you know, assuming beer stabilizes more to normal growth rates, then, you know, we'd be in the 3 to 4% range. And that would be very good growth for all the can makers in Europe.

Thanks for that. If I can just squeeze in one last one. The recapitalization or the new structure, Do you see that at all impacting maybe your operations, or does it allow for maybe a different way of thinking about capital allocation, or is it just not really that impactful? Thanks.

Yeah. I think too early to say anything on it. Obviously, the transaction hasn't closed. It's progressing well from what we understand, but too early to comment on anything, I think, you know, with relation to that.

Thanks.

We'll go next to Mike Roxland with Truist Securities.

Thank you, Ali, Stefan, and Stephen for taking my questions, and congrats on all the progress. Ali, I just wanted to follow up on a comment you made in one of the prior questions about the growth you lost in Europe. And you mentioned this also on the last quarterly call, calling out one or two points of growth in Europe. because you couldn't pivot into smaller formats. You had good growth in soft drinks and energy, but given your existing beer position, which you noted is 40-plus percent in Europe, you couldn't make that transition. So can you just tell us how you expect to make that transition, how you expect to become a little bit more nimble to target those growth categories, to maybe try to minimize beer? Obviously, it didn't sound like you did that. You didn't make much of a shift in 3Q, but can you tell us how you're going to ultimately do that before Q, early 2026, how you're pivoting your mix to capture – Stronger growth and markets relative to beer in your place. Thank you.

Yeah, sure. So look, we're doing a couple of projects in the network, you know, converting lines into those sizes, making lines flexible to allow us to be more agile in the season. So, yeah, we've got a couple of projects on the books for, for Q4, Q1 that will then have impact and put us in a better position in Q2, Q3 next year. And then obviously any capacity we're building out in the next few years, we'll make sure we're covering, you know, the growth sides in the market. So we think we'll be in pretty good shape, you know, once we do these next few projects.

Got it. And when you think about some of the conversions that you're doing or the flexibility that you're adding, when you add new lines, I guess, are you going to build those new lines with this functionality, with this flexibility to be able to switch, you know, sizes more easily in case market dynamics change?

Yes, definitely. I mean, it costs a lot less if you do it at the beginning. than when you try and retrofit, especially when you try and retrofit much older lines. So, absolutely, I think, you know, it makes a lot of sense at the minute. The market's quite dynamic, you know, with different products coming to market, and we've seen in different summers different products doing better or worse. So, yeah, it definitely makes sense for us as we build out new capacity to put that flexibility into the lines for sure.

Got it. Okay. And then my last question is on North America. You mentioned the network issue has been resolved, and you remain optimistic on the metal supply issue resolving itself at some point. But especially, you know, is there a risk to that 1% to 2% growth you're targeting for North America next year should these metal supply issues persist into 2026?

Yeah, I get that.

Mike, just to be clear, the 1% to 2% is the market growth, right? So we're saying we expect to be a bit softer than that. I don't see a risk to the industry or to ourselves in terms of metal supply next year. So obviously we have one of the two new mills ramping up as we speak. That's extremely helpful to the situation. We expect the operational issues that have been suffered by you know, by Novellus to be resolved. Obviously, they're working very hard to address them. And then equally, we've all, you know, anybody that's in the market is sourcing other, you know, sources of aluminum and successfully doing so. So, I think with the flexibility we all have in our supply chain with multiple sources of supply with the fixes they're doing and with the new mill ramping up, I don't see a risk to industry volumes or AMP volumes from metal supply in 2026.

Got it. Thank you very much. Appreciate all the color. Thanks, Mike.

We'll go next to Anthony Petanari with Citi.

Good morning.

Ollie, I think you talked. Hey, I think, you know, you talked about kind of a bad year in beer in Europe, maybe not expected to repeat next year. And I'm just wondering if you can talk a little bit more about sort of the puts and takes there in terms of what you think really drove the weakness in Europe this year, whether it was, you know, consumer weather. And then, I mean, in North America, there's been a lot of discussion around secular pressure on beer. given lifestyle changes, especially with younger consumers. Does that have a parallel in Europe? Or just wondering if you can kind of give us your big picture thoughts on beer into next year. Yeah.

Yeah, look, I think it's definitely too early to call a secular shift in Europe. I mean, we don't have the depth of other products that we see in the North American market, other alcohol products. products with similar drinking characteristics that you have in North America. I think we've had a poor year. I don't think weather's really added. I think there's definitely some consumer weakness, which is hitting the category. You know, we only generally work out later what the players did, you know, were they promoting, not promoting. So we don't have all the data on that yet. So I think, you know, my view on this is that it's a big category. It's got some very strong players. And I think they won't be happy with this year at all and that they'll be putting in place strategies to reverse that into 2026. And as I say, I think it's definitely too early to call any kind of secular shift in European drinking behavior.

Got it. Got it. That's helpful. And then based on kind of an early view, do you expect that the aluminum conversion cost headwinds maybe continue in Europe next year? Or are there maybe some savings that we should kind of think about that could, you know, help you reach that sort of normalized operating leverage? Or just how should we think about that?

I don't think we think there's necessarily savings, but there's no question that the step up that we had this year moderates very significantly. So this was our step up. I think if you look back over 23, 24, we really held it back despite the increase in energy costs that had flowed through. So this is where we took it. I mean, the European market is tight on aluminium. So, you know, I don't see a huge savings opportunity there until there is more capacity put into the market. It needs that. But fortunately, there are, you know, significant import routes that are pretty competitive. And so I don't also see a major headwind. And we'll be exploiting all those routes. But yeah, no savings, I think, but a definite moderating of some of the headwinds that we had this year.

Okay, that's helpful. I'll turn it over. Thanks, Anthony.

We'll go next to Gabe Patey with Wells Fargo Securities.

Ali, Stefan, good morning.

I think earlier this week was the first time that we had heard that there might have been a little bit of movement in terms of contracts and maybe customers. maybe on the private label side, you mentioned next year that there's going to be, again, for your system, some changes and maybe underperform the market a tad. I'm just curious, as you're going through those negotiations with customers, what are their talking points as it relates to, I mean, you already called out proximity to customer filling sites, so that makes sense to me, but just price or service levels, quality, et cetera. that's informing some of those decisions.

Sure, yeah. Look, as I said in the remarks, I think that by far the dominant factor that we've seen has been this footprint issue. As I said, you know, we had planned back in 21, 22 to put some capacity in the north, and then, you know, we had people were very tight, so we had a contract that we served out of um you know off a long freight lane then when we chose not to put the capacity in obviously we still had the contract for a few years but then when it runs out it's naturally going back to a closer chem plant and then as i said we have the opposite effect where some of the new capacity that's come to north america obviously changes footprint dynamics for customers so they get a plant that's actually nearer to them than they used to have and then our legacy plant you know is placed and then we also had one situation with customer that you know halfway through the process they had their own footprint review um which resulted in a filling vacation that we served closing down so i think if we look at the overall um reason for softness in 26 it's it's you know majority is down down to footprint i think the market is competitive but i think it's normally competitive you know maybe after a few years where it was so tight you know through covert but i think it's you know in a normal competitive environment and we don't hear anything particular on on the service. We generally get very high ratings on service and very good feedback for relationship management and customer support. So I think, you know, predominantly we're talking about footprint-related changes and the fact that there is some capacity in the market for people to make moves.

Okay. Two questions on aluminum. Again, earlier this week, I think it was mentioned that all-in aluminum costs kind of crept up above I think, all-time highs that we even saw during the pandemic. I think we were talking about maybe a penny and a half or so of inflation just from raw material costs. That's maybe closer to three cents now if we were to mark to market. And again, I appreciate your customers' hedge and probably roll that in three years in advance, so it's not going to all hit at once. But I'm just curious, when we've seen this type of inflation through the system, do they typically address that in a annual basis with pricing on the shelf. And then maybe relatedly, we observed a decent amount of promotional activity, especially on the carbonated soft drink and energy drink side in the first half of this year, maybe even the first eight, nine months. Should we be mindful or thinking about anything? You mentioned volumes or sell into the channel decelerating a little bit in the second half here versus the first half. Is there any sort of dynamic in the first half of 26 that we can be mindful of, maybe volumes actually, industry volumes down in the first half and maybe growing in the second half just given the tough comps?

Yeah, I think it's a good question.

Look, I think you can't say there's no impact from that level of increase of aluminum pricing. So I think you have to assume there's some risk of inflation on the shelf and that that has some impact on volumes because the categories are elastic. I think trying to predict exactly what our customers and retailers do with that is a fool's game. I think it depends a lot on where they are. They've taken a lot of price the last few years, and so they've probably got some firepower, which I think they deployed this year. I think not because of any – personally, I don't think it's because of any particular sort of tariff-related insights. I think it's more that they have got that firepower in their margin structures, and they can use it to drive volumes. And they are looking to balance cans versus plastic in their portfolios for all sorts of reasons. So I think predicting exactly what happens in 26 is very difficult to do. We're maintaining a 1% to 2% stance on North America growth for next year with us softer. And that's probably because we are being a little bit cautious around that issue. So yeah, I think Something is flowing through. You can't say it has no impact, but I think that hopefully we see what we're expecting, which is that sort of growth rate.

Well, let's be honest. Glass and other substrates are not immune, right? Like, everything has embedded energy costs. So, I'm curious.

No, look, Gabe, I think that's really important. Oh, sorry, Gabe. I was just going to build on that, right? Which is that every quarter we see that the can is outgrowing the other substrates. So then I think you take the sustainability piece, you take the energy cost piece, you take the fundamental cost structure of cans in North America, you look at the recapitalization that we've done as can makers and that our suppliers have done on the can sheet side, I think that the industry is very significantly more efficient than 10 years ago, and that is going to play through into overall cost structures. So yeah, that's why I'm very bullish about long-term can growth rates in North America, I think there is a little bit of a headwind potentially from the tariff situation in the next 12, 18 months.

Understood. Last one, and it's just sort of digging into the supply chain a little bit. Obviously, it's been, I don't know, maybe 40 years that we've had new rolling capacity here in North America. Does that, that does not address any sort of the ingot cost, Midwest premium cost that's embedded in This is just more about localizing that can sheet supply. And so there's better efficiency, I guess, from a logistic standpoint. So then we got to kind of wait to see what happens politically if there's any change for cost structure for aluminum. And then in Europe, we're reading articles about they're frustrated that they're actually exporting scrap to the U.S. because maybe apparently that's a way to circumvent some of the tariffs. Is that true? coming up in conversations in terms of cost of aluminum or can sheet over in Europe. Thank you.

Yeah. So look, I think on North America, obviously those mills are massively helpful to the industry, both in terms of supply, but also long-term cost structure, very efficient. Obviously they had to get investment grade returns to be built. So, but I think those sorts of, Costs are built into the supply chain now, and so we don't see major changes. I think they're extremely positive for the industry to have that much domestic supply coming on and stopping a lot of the imports that were needed in North America and generally improving the quality of the industry. They're hugely positive, I think. And in Europe, yeah, look, I think the scrap situation isn't helpful as a way to avoid tariffs. Obviously, we were already hearing that the U.S. was very short scrap with issues that have gone on in Mexico and related to China. And that was impacting North American can sheet makers. So, you know, these flows, you know, will continue. will have impacts but we don't see them particularly changing you know what we're seeing in europe at the moment so so nothing particular to report from that i think great thank you guys and good luck thanks gabe at this time there are no further questions i will now turn the call back to mr oliver graham for any additional or closing remarks Thank you, and thanks to everyone on the call. So, just summarizing again, adjusted EBITDA in Q3 grew by 6% at the upper end of our guidance, with both segments in line with expectations. And reflecting that resilient performance, we're raising our expectations for full-year adjusted EBITDA.

So, with that, thanks for joining the call, and we look forward to talking to you again at our Q4 results.

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