Vidrala Sa

Buenas tardes y bienvenidos a la presentación de resultados del primer trimestre de 2024 de Vidrala. La compañía estará representada por Raúl Gómez, próximo CEO, e Íñigo Mendíata, responsable de relación con inversores. La exposición se realizará en inglés. En el turno de preguntas se atenderán también preguntas en castellano. Good afternoon and welcome to the conference call organized by Vidrala to present its 2024 first quarter's results. Vidrala will be represented in this meeting by Raúl Gómez, incoming CEO, and Íñigo Mendieta, head of IA. The presentation will be held in English. In the Q&A session, questions will be also answered in Spanish. Nevertheless, it is strongly recommended to pose questions in English in order to facilitate understanding of everyone. In the company website www.vidrala.com, you will find available a presentation that will be used as a supporting material to cover this call, as well as a link to access the webcast. Mr. Mendieta, you now have the floor.

Thank you. Good afternoon to everyone, and thank you for the time that you dedicate to attend this call. As announced, Vidrala has published this morning its 2024 first quarter results, and additionally we have also published the results presentation that will be used as supporting material to this conference call. As always, following this document, we will dedicate the first part of our exposition to briefly explain the figures released today, to devote afterwards as much time as necessary to discuss on the business performance in the Q&A session. So, Starting with the main magnitudes, in the first quarter of 2024, we achieved as most relevant business figures revenues above 419 million euros, an EBITDA of almost 110 million euros, and a net income equivalent to an EPS earnings per share of 1.64 euros. Net debt at the end of the period stood at 530 million euros, which is equivalent to a leverage ratio of 1.2 times the Performa EBITDA. Performa EBITDA that considers the contribution of the last 12 months of the report. Turning to slide 4, we look at the top-line performance, analyzing the annual variation of revenue broken down by concepts to arrive at the reported figure of 419.4 million euros. As it is shown in the graph, this figure is the result of a 1.4% growth at constant currency and comparable scope. Volumes were up in the range of 10%, mostly offset by a minus 9% price mix effect. Scope, which aggregates the combined effect of the incorporation of 2023 year-to-date results of the report, and the exclusion of Viverla Italia since the 1st of March 2024, again, this scope effect contributed an additional 8% to revenue growth. Following the order of key business figures referred to at the beginning, we analyze, with the same breakdown, the variation of operating income. 2024 first quarter EBITDA amounted to 109.8 million euros, reflecting a minus 4.7 organic year-on-year variation, which was more than compensated by the scope contribution. These operating figures resulted in an EBITDA margin, EBITDA over sales, of 26.2%, which represents a contraction of approximately 40 basis points, compared to 26.6 registered in the previous year. In this slide, on slide 7, we present the distribution of sales and EBITDA by business units under the new perimeter, that is, including BIDROPORTO in 2023 figures, and fully excluding the results of Israel-Italia in 2024. Although, as you know, Italy has contributed to reported sales, and it did that in the first two months of 2024. And from March on, it will be reported as discontinued operations, contributing to net profit until the sale becomes effective. So the graph shows a weak performance in Iberia, negatively affected by price adaptations, still sub-optimal cost absorption due to lower production, and also partially the calendar effect regarding base decision. Results in this division should progressively improve as comparison basis becomes easier towards the second half of the year. The UK continues to do well, supported by new demand for glass containers we are creating through the filling business and integration of the park, And Brazil experiences the second-round effects of the recent capacity expansion project in the Southeast Unit in operations since mid-2023. Finally, we analyze free cash flow generation in detail with the help of this chart on slide 8 that reconstructs the cash conversion accumulated for the last 12 months in order to fully normalize our annual cash profile. So, starting from an EBITDA margin of 25.2%, we have dedicated 9.6% of sales to investment, and another 4.5% to the aggregate of working capital, financials and taxes. As a result, free cash flow generation stands above 11% of sales, And also, consequently, net debt at the end of March 2024 flows at 529.7 million euros, including this figure, the payments for recent M&A transaction, and incorporating also the acquired debt. And now, before turning to the Q&A session, I pass the word to Raúl so that he can extract main conclusions or highlights and make additional comments that he considers appropriate.

Thank you, Inigo, for the huge job. And thank you all for attending this call today. We really appreciate your time in a slightly different time slot than usual. You know, today is a busy day for us as we held our annual general meeting, an event that marks an opportunity to make public for you our outlook for the full year, an outlook for the full year that we will surely discuss during this conference. Well, our results published today for the first quarter of 2024 probably help us to start putting on evidence the strong fundamentals of our business as it is today. And our business today is different. We now manage three different separated business units in three different geographies after a conscious and clear refocusing of our business in today's markets. three different areas that, under my view, create a great business combination. As an example of this, let me explain this with more detail. Let's see our results published today. First, in our most traditional markets, in Iberia and Southwest Europe, we have been able to sustain our profits despite having been forced to reduce our utilization rates a minimum levels rarely seen before, in order to adapt to our inventories after the sharp drop in demand seen last year. Yes, it's true that we are seeing our demand in this area showing some signs of recovery, but demand is still weaker than and far from expected a year ago, and our prices are progressively being adapted downwards to the new inflationary conditions. So this is a context, our margins in this region that put into value our results, because our results are grounded on internal actions, on our competitiveness and on the benefits obtained from our capacity realignment plan executed during the last three or four years. In our mind, that means that the high operating profit levels achieved last year in this region, in this unit, remain safe. Second, in the UK and Ireland, we are there progressively capturing demand as a result of the contribution of the additional boat lane activity acquired a year ago. You probably remember that. That means that our business in the UK and Ireland is an even more unique case in the packaging industry that offers a unique range of services that help us grow the business despite the demand context there. the UK and Ireland is as mature as it is in Europe. So in this region, our operating profits are expected to keep on expanding from the current levels, and our margins consequently should be higher at the end of this year than they are today. And third, and obviously more important for us, in Brazil we are living, as expected, a completely different business context, a context of real growth. a contest of sales volume growth after the expansionary investments made in 2023. The performance of the business we can see in Vidroporto evidenced the quality of the decisions made in the past and the rationale behind our entry into Brazil. We announced a month ago, you probably remember that, that Vidroporto should see a growth on EBITDA in value this year of more than 25%. And we are obviously on track to exceed this number. As we are executing scenarios rapidly, the business is probably to be quite competitive as expected. Our customers are responding well to the new capacity. And I would say the overall consumer environment in Brazil remains quite solid. So, under this context, we today communicate our annual official outlook for casting and EBITDA value for the full year 2024 above 450 million euros. After, as Inigo said before, having discontinued the Italian business since the end of February this year. And we are also announcing a forecast of an annual free cash flow generation of more than 180 million euros. Despite our organic capex will deliberately remain at high and ambitious levels, to better prepare the business for the future. So, in our conclusion, this business performance shows the first effects of an strategic plan that has been firmly directed to diversify the business towards new growing regions, to expand differential services, as an example of what we did in the UK, to realign our industrial footprint and to selectively enhance our manufacturing facilities with our customer in mind and a clear focus on making our products and supplying our services in the most sustainable way. We at Hidrala are today a different and stronger company. With leading competitive positions, we're focused on three clearly strategic and core markets. And we have been able to accelerate this progress maintaining a strict capital discipline, as it is shown in our solid financial position and in our leverage rate. A financial position that will boost us to remain dynamic, prepare to invest organically to create an industrial future, and prepare to continue returning cash to our shareholders in an attractive manner. That ends my exposition. Thank you.

Thank you, Raúl.

This completes our exposition as Raúl said, so we now give way to the Q&A session. Ladies and gentlemen, the Q&A session starts now. Questions by telephone will be answered first. If you wish to ask a question, please dial star 5 on your telephone keypad. First question comes from Alberto Spelosin from TV Capital. Now your line is open.

Isn't that the problem with television? Good afternoon, everyone involved. Thank you for taking my questions. Congratulations on the results. I have three questions for Mike. My first one is on volumes. If I understood correctly, you said that organic volume growth was 10% this quarter. If you could please share this figure in Brazil and Europe, it would be great. And what volume growth are you expecting in your guidance by geography? That would be also great. My second question is on Brazil. Everyday margin this quarter was 42% in the region. This is much higher than in the fourth quarter of 2023. Could you please provide a bit more color on the reasons behind this, and how sustainable is this margin for the upcoming year? And my third question also on Brazil, on these reports. Our top line is very strong, even after accounting for the new furnace. I assume that you are pretty much at full capacity. Gico, please complete this. And if so, are you already looking to expand in the country, or when do you expect to need to add capacity in Brazil? Thank you.

Thank you very much, Alberto. So, taking your first question, you're right. Volumes in the quarter were up in the range of 10% for the group. And this has different performance by regions, okay? In the business unit we name IB and others, we see volumes slightly in the positive terrain. This is between flat to plus one in the first quarter. In the UK and Ireland, volumes are up in the range of 9%, with a specific condition or characteristic regarding our field business. And finally in Brazil, volumes are up more than 55%. first quarter 2024 versus 2023. As you know, these first two quarters compare with the 2023 where we still didn't have the effect of the capacity expansion in Brazil. So this means that we should see significant growth in the first half of 2024 versus the first half of 2023. that this comparison should moderate significantly in the second half in Brazil, just because of a comparison basis effect.

Just to add on this, Alberto, let's say that we are not particularly surprised about the margins that we are seeing today, or we are reporting today in Brazil. This is basically under our plans. Margins in Brazil are reflecting the planet contribution of a Accelerated synergies execution, a solid response from our customers, particularly big customers, to the new capacity added in the second half of last year, as Indigo said before, and a number of assets, two assets that are particularly of quality. And the level of competitiveness of Vidro Porto is performing as expected. That means that our margins are where we were expecting to be. That means that our margins are sustainable for the remainder of the year. But just keep in mind that in terms of seasonality, natural seasonality, in Brazil, the first and the fourth quarter are more peak sales seasons, something that is a particularly good combination with the peak seasons of the second and third quarter in the rest of our business. So margins are sustainable, but they won't be expanded significantly for the remainder of the year. In terms of utilization rates, where we are, it's still a little bit soon. We are still under the process of capturing the sales volumes needed to put all our capacity in sale. We are running at full capacity. That's true. Our customers, our demand is responding well. That's very good news. That means that we made a good decision entering into Brazil at the right timing. That is still a little bit soon. Let's... Let us ask a little bit more time, not before the end of the year, to analyze if we are actually exhausted or saturated in terms of production capacity. We are not actively looking for additional opportunities in Brazil, not yet, but we are in Brazil to create a platform for Peter Grau. So just to clarify, giving you a realistic example, a scenario of where we are in terms of M&A activity and a realistic scenario of why we are entering into South America. Okay? Hope that helps.

Very clear. Thank you very much.

Thank you.

The next question comes from Paco Ruiz from BNP Paribas Exxon. Now your line is open.

Hi, good afternoon, and congratulations for the good results and for your new position role. I have a follow-up question and a couple of new ones. The first one is... You commented that volumes has gone 10%, but this includes Brazil, as I imagined. So I would like to know, out of the 1.4% improvement in organic, how much is price, how much is volume? The second question is if you could quantify how much of the improvement in UK is coming from M&A, I mean from the park, mainly not only on the acquisition, but also on the volumes that you are delivering there. And the third one is on the guidance, if you could give us an idea of how much of your sales guidance is perimeter. I mean, it's Brazil minus Italy. Thank you.

Okay, Paco, thank you. Just going back to volumes and prices. Okay, at the group level, volumes are up. plus 10%, as we stated before, and prices are down minus 8.6%. This gives us this organic growth of 1.4%.

If we exclude Brazil... Sorry, Inigo, but if you said before that UK is plus 10% and Europe is plus 1%, how do you get to the plus 10% organic growth? The plus 10 is at the group level. Yeah, but organic does not include Brazil, no?

Exactly.

So mainly flat is in Europe and plus 10 in UK.

But organic, what shows of Brazil, Paco, is the growth, the complete growth with this 55%. is growth of Brazil 2024 versus Brazil 2023. Okay, so this growth is being captured in volumes too. It's organic.

Yeah, okay, but this is in a pro forma basis.

Yeah, that's why. What I'm saying is Iberia, it's flattish, and the UK, it's in the range of 10% growth of volumes, okay? Okay. More or less with a similar... Weight, slightly more weight in terms of sales of Iberia, which would be in the, let's say, mid-single digit of volume growth in excluding Brazil, completely excluding Brazil. Okay, perfect. Now clear. And prices, just to clarify, Iberia is in the range of double digit down, and the UK and Ireland is more resilient in the range of minus 1%. Great. Just to clarify for everyone in the call, the organic growth of the new capacity in Brazil, let's say the growth of Brazil Q1 2024 versus Q1 2023 is included in organic growth. In inorganic growth or scope effect, we are including the results of 2023 of Vitroport.

Okay.

Regarding the specific situation of our sales volumes, our demand context in the U.K. and Ireland, Paco, I would say that that's a simple response. All the growth that we are seeing is due to the contribution of the both link facilities of Huayra and U.K. For the rest, organically, the market is basically flat, something that is quite consistent with what our customers, our competitors are saying about this region. And something that also explains, well, the Good rationale and the good timing of the execution of this acquisition, okay? Something that was made to capture your demand.

And then, finally, on the full-year guidance, top-line full-year guidance, let's consider that with report 2 after having released, The figures for the full quarter should contribute in the range of 200 million euros of sales. And Italy, of course, depending on the performance for the rest of the year, the exclusion should be something, should be, let's say, 10 of 12 months, the exclusion of Italy, and it should be something above 100 million euros, considering the figures that we reported in Italy in 2023.

Okay, many thanks. Very clear. Thank you, Paco.

The next question comes from Inigo Uzquiza from Quepes, Favua. Now your line is open.

Thank you for taking my question. Hola, good afternoon, Raul and Inigo. I have just two quick questions on my side. The first one is a follow-up on pricing in Europe. You mentioned that prices are falling by around 10%. I think this is the number that I got. What is the evolution that you expect for the full year? I guess the comps in terms of pricing, it's... It's easier as we go throughout the year. That's the impression that I have. Or you should expect, it seems that demand is recovering, as you are mentioning, so we shouldn't expect additional price adaptation in the following quarters. I don't know what's your view on this point in terms of pricing for Europe. And then the second question is on the On the shareholder remuneration, it's just to double check with you guys. I mean, the extraordinary dividend that you announced a few weeks ago on the sale of Italy to Beralia, I guess it has been approved by the AGM, and if the sale goes ahead as we expect, you are going to pay this 4 euros extraordinary dividend per share. Thank you.

Okay. Thank you, Inigo. Pricing in Europe, you're right. We are in the range of double digit down. As expected, if you remember, we were expecting a price mix effect for 2024, something in the range of minus 5 to minus 10% at a group level. And we are. We are in this figure in Q1 and we are probably still in this range for the full year. And now Raul will make some additional comments on pricing specifically to Europe. But probably comparison basis, it's easier, especially... on the volume side, not that much on pricing. I'm not sure if you want to make any additional comments.

Yeah, just an additional comment then to invite you to understand well the comparison basis of last year quarter by quarter. As you say, Domingo, as you know, I know that you know this, our sales volumes went worse progressively last year, something that will condition, will dictate our comparison basis for the remainder of this year, quarter by quarter. Okay, you remember that our sales volumes were particularly weak during the third and the fourth quarter last year, something that will make comparisons easier. Our prices went progressively, but slightly. The difference was small down last year as well, but please keep in mind that... A significant growing amount of our sales prices, particularly if we include Brazil, are today dictated, 40% of our sales volumes, by price adjustment formulas, something that creates probably a more confident basis of analysis for you, more predictable. That's something that means that automatically, mathematically, some of our prices will be progressively adapted if costs relax without affecting our value. So our prices at the end of the year should be lower than today, but slightly lower. Now all the focus in terms of pricing is put on 2025. So the difference is basically the comparison basis. The remainder of the year will be more or less stable in that sense.

And regarding your second question on the extraordinary dividend that is subject to the sale of Italy, you're right, this has been approved by the annual general meeting and we will announce the timing of this extraordinary dividend once the transaction of Italy is finally sold. You know that this is pending usual approvals, in this case from antitrust, and we expect this officially, as we stated in our communication to the Spanish side between the second and the third quarter. Hopefully this can be more the second and the third. That is something that, as you can imagine, we do not control the dynamics.

Okay. Thank you. Gracias.

The next question comes from José Antonio Suárez from CaixaBank. Now your line is open.

Hi, good afternoon. Thank you for taking my question. I have three, if I may. First one will be related to the capex level expected for 2024. You just mentioned you expect a strong year in capex investment. If you could provide a rent or some availability with that, which capex level should we expect for this year? The second one is related with the guidance you just provided. You mentioned you expected the donation of the forecast flow for 2024 of 180 million, which was organically excluded payment for MIA prevention. I would like to know if you could give us some more visibility on how you're calculating this forecast flow, if you may. And a third one I have, it's regarding if you have already some visibility for expectation in terms of prices for 2025, considering how natural gas and energy prices have been evolving recently, if you have any visibility on negotiations we could expect for prices evolution going to 2025, it will be very, very helpful. Thank you very much.

Thank you, José Antonio. So, on your first question on CAPEX, which is probably also related to the second one regarding the guidance of free cash flow, because it plays also a role on this free cash flow calculation. We're estimating a CAPEX, 2024 figure of CAPEX in the range of 150 to 160 million euros cash out, which includes mutual CAPEX for replacement, Also, in some cases, when we are facing the refurbishment of specific furnaces, we are implementing technological improvements. And finally, it includes also CAPEX for sustainability projects, mainly related to the deployment of solar photovoltaic plants or installations in specific regions. Regarding the CAPEX, the free cash flow guidance of above €180 million, This is considering this EBITDA of 450 million euros. This is considering that both in terms of financials and taxes, we should consider that the situation or the context of the group has changed with the incorporation of Vidroporto, Brazil, where we see higher interest rates than the historical Vidrala. Historically, we had interest rates in the range of 1%. And we are seeing interest rates in Brazil in the range of 13%, 14%. And second of all, also the tax rates in Brazil is higher than average in Europe. So you should consider higher cash out this year in both cases, interests and taxes. And we'll see how working capital performs. If volumes... perform as expected overall at the group on a positive performance in 2024, probably we should see a better performance of working capital. If not, I think that the working capital as of today, to be able to cash out the working capital in the range of 1% to 2% of sales, in line with the historical level, is reasonable or true. We could probably be above this guidance of €180 million if some of these elements are perform better than expected.

Just to clarify and to complete this point, José Antonio, our free cash flow calculation is that simple. It's just the net debt variation view, real free cash flow, including self-hold remuneration and including M&A. So I hope you understand the simplicity of our calculation because we want to be very transparent in that sense. And the last question is regarding pricing. Well, our official message is also very clear in the sense we will progressively and transparently adjust our prices to the prevailing external cost conditions with the priority of keeping our margins safe. in every region. And this is where we are. In some cases, our prices will be adapted mathematically as a result of the recalculation of the price formulas. In some other cases, our prices will be adapted voluntarily depending on our specific business conditions. But I do feel comfortable with that message as long as we can see a constructive, competitive environment in the marketplace. And I can see that some of our costs, particularly energy costs that affected us or concern us that much in the last years, are under a solid process of normalization, relaxation, something that is very good news to recover market share against alternative and less sustainable packaging materials.

If I may do a follow-up on the law regarding free cash flow. With what you've been mentioning, in terms of net debt levels for the full year 2024, to see more or less, in which line should we most take into account the expected dividend of 130 million if the sales of people go forward and that which which should be our our level more or less or the leverage level which we should expect uh company at a year in 2024 for example 250 million and the 0.6 0.5 uh five which more or less uh levels should we should we think or should we expect for the for the for a full year for the year in 2024

Thank you, Santana. That's an easy question, okay? If we complete the sale of Italy and if we pay an extraordinary dividend of 130 million euros after the sale of Italy for a total consideration of 230 million euros, and as long as we will complete our share-buy-back program on track before the end of the year, and we are still pending of distributing the complementary dividend, the sale dividend, in July, And if we achieve our outlook at EBITDA levels and free cash flow levels, that means that our net debt at the end of the year should be around 0.5, 0.6 times net debt to last 12 months pro forma EBITDA. 0.5 to 0.6 times.

The next question comes from Fraser Donlon from Berenberg. Now your line is open.

Thanks for the presentation. I had three, maybe four questions. So the first was just to understand if there are any, let's say, negative impacts relating to hedging, which could have been more expensive, for example, in Q1, which should, let's say, normalize or become easier in the net, or if you could maybe somehow color that trend a little bit. The second topic, I just wondered if you could comment on the net kind of impact you see of localization the localization of customers and which regions that could positively or negatively impact and then the final question I had was just on the UK obviously it seems to be going quite well and I think it was announced that you could work a bit with diageo in the midterm on the new furnace for example in in the uk and elton so you know what do you see as kind of the midterm opportunity here to further expand the group in the uk um that's perfect thank you those are my three questions thank you very much fraser so on your

First question regarding hedging levels. You can consider that we are hedged in the range of 60% for 2024 and the range of 50% of 2025. Out of this 60% for 2024, as you can imagine, hedging level is slightly higher for the first half of the year, slightly lower for the second half of the year. This means that, yes, there has been an impact. in terms of margins due to hedging in the first quarter, an impact that we are not disclosing that is not relevant because hedging levels were also not significantly above market levels in the first quarter. But as you were mentioning and the analysis was right, let's say the comparison should be easier for the remainder of the year.

Thank you. The second question, if I understood well, regarding the potential impacts or the current impacts of utilization rates, let's say that you probably remember that we started the year at particularly low, less than optimal utilization rates in Iberia and our unit segment Iberia and the rest of mainland Europe. And that has affected significantly our margin during the first quarter as long as demand is showing some signs of recovery and as long as we are today now entering into the peak sales season. We are increasing our utilization rates and that will have a positive impact on our margins in the second quarter that will be more normal to our historical levels. And this is captured in our outlook, in our forecast and the guidance that we are publishing today. In the rest of the regions, particularly in Brazil, we are close to running at full capacity. you shouldn't see any positive or negative impact in terms of utilization rates. The key unit segment, business segment to analyze in that sense is Iberia and mainland Europe. And the last question, you referred to the potential opportunities with one particular customer in the UK and Ireland. Let me expand a little bit the explanation and let's start speaking about the potential opportunities with specific big brand owners. global brand owners across the beverage industry. We are showing some signs of positivity in the way big names in the beverage industry see us, and that will probably accelerate potential opportunities not only in the UK and Ireland, but also in South America. And we are here to accept the challenge and start discussing with these customers. Our customer base is changing significantly without affecting significantly our profitability levels, something that is very good news. We are becoming a glass player more and more focused on long runs, on volumes, on competitiveness, and we are very proud of saying that, as it is shown in our margins. In the specific case of potential opportunities in Europe, the UK, or Ireland, Let me clarify that, okay, the number of opportunities we were working with, with some specific customers, particularly the opportunity that you mentioned, was being discussed two years ago. And last year, the demand environment changed for the worse. So we probably need to be a little bit more patient and see what happens and what is the level of real recovery we experience this year.

Perfect. Thank you both.

The next question comes from Cole Hawthorne from Jeffery. Now your line is open.

Good afternoon. Thanks for taking my question. I'd just like a little bit of color if you're seeing anything from your spirits and beer business on promotional activity. I mean, we're hearing in a number of other packaging substrates that a lot of the branded companies are increasingly trying to promote to promotional activity, and I'm just wondering how that impacts the drawler. Is it kind of an opportunity for more volumes, or can you get paid for particular product runs a little bit more? So I'm just wondering how kind of promotional activity, particularly in the beer and soft drinks element, impacts you. And then following on from that, you know, are you expecting anything with the Olympics coming up or the Euros? Thank you.

Sorry, Cole, we didn't get your question, so can you please repeat the question?

I'm trying to understand if Vidralo will see any benefit from promotional activities from some of the branded companies. You know, we're seeing that in some other packaging substrates, and I'm wondering if the glass business, particularly for beer and soft drinks, there might be promotional activities for the Euros or for Olympics. and you might be getting paid, you know, better mix by changing your packaging or, you know, just better volumes over the summer period into these events.

Yeah. Well, actually, what we are seeing, particularly in the beer space, okay, the rest of the segments are probably in a different weaker landscape, but in the beer space, what we are seeing is this, okay, some positive effects of this proportional activity, and we are seeing a beer consumers or beer big brands, owners promoting more and more premium products, premium brands that are normally packaged in glass, in one-way glass, not returnable glass, something that creates a portion of demand. But last year, a year ago, our customers in the beer space were particularly concerned about the weakness of demand in Europe and the UK. Today, it's good to see Probably you took a look at the numbers of some of our bigger competitors in the VR space. It's good to see that they are particularly more ambitious, optimistic. And in this level of optimizing, what we can see is a prioritization towards premium brands. And this is good for us. We are prepared to match the challenge. We are prepared to offer them the volumes they need. And we are prepared to help them substitute glass, one-way glass to promote the premium brands against other substrates or packaging materials. That's happening, but that won't change significantly our commercial positioning for the remainder of the year. And the Olympics or any extraordinary events like this is a Good news, but the value is changing significantly. We are a more diverse, geographically diverse company, and that means that certain temporary effects of events like this, positive or negative effects, are becoming less relevant to explain our business prospect. But theoretically, that should be good news.

Thank you.

The next question comes from Paco Ruiz from BNP Paribas Exxon. Now your line is open.

Thank you again for my question and some thoughts. The first one is if you could tell us what you are going to do with the several cards that you are going to generate this year. I mean, it is mainly for using the deck in Brazil or you would like to hit some level in Brazil in order to upset with the cards that you are going to generate this year? The second question is, I remember that you commented that at the end of last year that you expect the BTA excluding Brazil or in Europe to be above last year, 2033, 2034. Is this still the case for this year? And the third question is, you said that you do not expect any M&A activity in Brazil. Do you expect an expansion of your current facilities in terms of work capacity already? Thank you.

Okay. Just to clarify on your second question, okay, on the guidance on EPS. The guidance on EPS and... the second and the third column of the slide of the guidance is considered in Europe.

It's on EBITDA in Europe. It's on EBITDA, on EBITDA. Sorry. I said yes, but it's on EBITDA.

Okay. Can you repeat then your question on that point?

So, Nelly, you commented that 2024 EBITDA in Europe should be higher than 2023 EBITDA in Europe. Is this still the case after Q1?

No, what we were saying is that EBITDA levels in Europe and the UK, both divisions, should be safe for 2024 and growth should come from Brazil. But especially the division of IBB and others, that is, let's say, the worst performing in the first quarter, these comparisons should progressively improve because also the comparison basis for the remainder of the year is easier in this division. It's the division where we suffer the most. the volumes declined last year, and where we suffered the most the capacity control measures last year. But what we are saying is that results in Iberia, there's UK, everything what is the European continent, let's say, remain safe for the full year.

Okay? And regarding your other questions... Thank you, Paco. And regarding your other questions, Brazil, potential opportunities, and M&A, and I believe this is all part of the same question, M&A, opportunities, well, I will say that officially you won't be immediately surprised in terms of our business guidelines or our strategy. I promise that you will continue seeing a company that is dynamic, more modern, aware of the times that we are living in the consumer space, prepared to take action when needed, and ready to invest more and return more and financially prudent. The fact of how solid our financial position is today won't accelerate the opportunities that we are looking at. The first priority for us is to try to find opportunities to expand our existing facilities in gravel regions. That means that we are obviously focused particularly on Brazil. As long as Brazil is performing as good as initially expected, so We are here to promote the idea of capturing new sales volumes with big customers that are becoming bigger than ever. Secondly, we will try to analyze the idea of expanding our capabilities in the UK and Ireland, where our business is unique. And third, we are actively looking for potential opportunities as we have ever been, ever in the past. Nothing has changed for potential opportunities in terms of M&A. But let me say that in the short term, I think that the likeliness of you being significantly surprised is very limited. And let me clarify a little bit more in detail. You will probably like this. The likeliness of us increasing our indebtedness about two times that to EBITDA in the next two years is very low.

The next question comes from Luis Toledo from Odo. Now your line is open.

Hello, Gretchen. Thanks for taking my question. Just one left on my side regarding the guidance for this year. I assume the EBITDA guidance you provided today implies the lower end of the range of the previous price indications of minus 10 to minus 5. So I'm assuming maybe minus 7.5 to minus 5. I know there are many moving parts and adjusted formulas, but I don't know if it's fair to assume that.

Okay, thank you, Luis. Yes, you're right. So we are reiterating that in terms of prices and at the group level, we are seeing a price mis-effect, a negative price mis-effect for the full year in the range of minus 5% to minus 10% following deflationary trends that we are transferring into prices. And this guidance of 450 million euros of EBITDA is, let's say, coherent with this price mis-effect estimation. And just to add on this and to clarify, the guidance and also the second column, the column that we are giving the figures accumulated for the last 12 months as of March 2024, in both cases are the new perimeter. This means fully including the contribution of Brazil and only considering the contribution of the Israelite elite for the first two months of 2024.

Many thanks.

The next question comes from Ignacio Romero from Banco Sabadell. Now your line is open.

Yes, hello. Thank you for taking my questions. So you have already answered partially these questions, but I have this question regarding Brazil, which is doing very well. I understood correctly, Raúl, you said that the reporter could be used as a platform to to grow in that and so my question would be in three to five years time what would expect latin to be in terms of of sales as a person itself

Well, that's a good question that doesn't depend completely on us, okay? What we say is that the acquisition of Iroporto for us means transformational strategic change, and that means our entry into a new country like Brazil, and Brazil is part of what we do consider as the South American market, and maybe the South American market is what we do consider the Latin American market, so... We are speaking probably specifically about the big, big regions full of opportunities. It's true that we like the idea and we invite you to consider this as an entry door to create a platform for future growth. But please let me ask you patience, prudency. You won't be surprised immediately. And having said that, It's good to see that Brazil, for us, is performing as expected. It's good to see that we are running close to full capacity in Brazil after the capacity additions and the contribution of margins because of this May last year. And that means that Brazil is a different country with different market dynamics that will offer us potential opportunities to capture space volumes. And we are working on this.

Okay, thank you and congratulations for the promotion.

Thank you. Congratulations for having won the final cast.

The last question comes from Manuel Lorente Ortega from Santander. Now your line is open.

Hi. Good afternoon. Most of my question has already been answered. But maybe just two quick ones. The first one, Inigo, you have perfectly explained the, let's say, organic volume contribution in Brazil. I was somehow surprised from the plus 9% volume increase that you mentioned in UK as well. So I was wondering whether you can give us some more detail on really underlying volume growth in the area compared with volume contribution from capacity expansion as well or the difference between filling or the reminding. The different moving parts behind that 9% growth will be great.

Perfect, Manuel, thank you. So, as you know, our business in the UK is quite unique because of our 360 offer, where we not only do the glass packaging, but we also do the filling and all the logistics associated with this activity. So, as you were perfectly mentioning, we are not purely exposed or purely dependent on demand. Of course, we are affected by demand trends. But what we see in our volumes is also affected by these specific characteristics in the UK. So I would say that we can see demand probably growing in the range of 3-4% in the UK market. And the remainder should be considered as new demand due to our filling business. So we are transferring bottling activities from the origin of production to the destination of consumption. For exactly the same level of consumption or demand in the UK, we are creating new demand for glass packaging that we are capturing in these volumes. Or this is also related with still the effects of the integration of the park. But demand should be no more probably than something in the range of 3-4% of this volume growth.

Okay, excellent. And then just my final question on the slide regarding the outlook. We have, let's say, 40 million delta of EVDA, and we only have, let's say, a similar free cash flow evolution on the outlook versus the last 12 months. So that gap between, let's say, cash earnings and free cash flow generation It's all coming from what you were mentioning before of higher taxes and higher financials on the new Vidrata because of Brazil?

Yeah, it's a combination, Manuel. It's probably partially explained by CAPEX and the rest explained by this effect we have mentioned before regarding both financials and taxes.

Okay. Okay. Excellent. Thank you.

Let me please you remember, Manuel, and the rest of you, that we have deliberately, as part of our financial strategy to enter into Brazil to refinance our debt in Brazilian reais locally, something that changes the cost of debt deliberately, but something that, in my view, improves the capital structure of the dollar.

There are no further questions by telephone. I return the floor to Mr. Gomez and Mr. Mendieta.

Okay. Thank you very much. We are now quickly revising questions received through the webcast. Okay. We see many, many questions, but we feel all of them have been answered. Questions on Brazil, on moving parts on the pre-cash flow, working capital, et cetera. Questions on hedging. So, again, we feel all of them have been answered here live through the questions via telephone. In any case, if some of the people that have asked questions through webcast feel that the question hasn't been answered, please feel free to contact us after the call. So, again, thank you once again for the time that you have dedicated to us. And, again, we remain at your complete disposal. Thank you very much.

Thank you very much for your time. We know that it is a busy day for you. Thanks for all. See you next quarter. You please keep on eating, drinking well, quality products in glass.

Thank you. Ladies and gentlemen, thank you for your participation. You may now disconnect. Thank you.