Vidrala Sa

Buenos días y bienvenidos a la presentación de resultados del tercer trimestre de 2025 de Vidrala. La compañía estará representada por Raúl Gómez, CEO, Íñigo Mendieta, director de finanzas corporativas, y Unai Álvarez, responsable de relación con inversores. La exposición se realizará en inglés. En el turno de preguntas se atenderán también preguntas en castellano. En la página web de la sociedad, www.vidrala.com, encontrarán documentación de soporte a esta presentación, así como un enlace para acceder al webcast. Good morning and welcome to the conference call organized by Vidrala to present its 2025 third quarter results. Vidrala will be represented in this meeting by Raúl Gómez, CEO, Íñigo Mendieta, Corporate Finance Director, and Unai Álvarez, Investor Relations. The presentation will be held in English. In the Q&A session, questions will also be answered in Spanish. Nevertheless, it is strongly recommended to post questions in English, in order to facilitate the understanding of everyone. In the company website, www.3wsvidrela.com, you will find a presentation that will be used as a supporting material to cover this call, as well as a link to access the webcast. Mr. Alvarez, you now have the floor.

Good morning, everyone, and thank you for joining us today. Earlier this morning, Vidrela published its results for the third quarter of 2025. Alongside these results, I have made available a presentation that will serve as a reference throughout this call. We will begin by working through the main figures released today, and then we will move on to the Q&A session, where we will address your questions. With that, I will now hand over to Inigo, who will take you through the key financial highlights. Thank you, Naim.

Let's start with a brief overview of the key financial figures. During the first nine months of 2025, we recorded revenues of 1,124 million euros, an EBITDA of almost 329 million euros, and a net income equivalent to earnings per share of 4.93 euros. As of September, net debt amounted to 150 million euros, representing a leverage ratio of 0.3 times over the last 12 months EBITDA. Please remember that the sale of the Italian business in 2024 affects year-on-year comparisons. Moving on to the top-line performance. Total sales for the period amounted to 1,124 million euros. On a like-for-like basis and at constant exchange rates, this represents a year-on-year decrease of 5.1%. This variation primarily reflects the price adjustments, which remain within the expected range of minus 3 to minus 5%, alongside continued soft demand dynamics. In addition, the scope effect resulting from the exclusion of the Italian business had the negative impact of 1.4%. Moving on to the next slide. EBITDA for the first nine months of 2025 reached 328.9 million euros, reflecting an organic growth of 0.5%. This performance demonstrates the resilience of our diversified business model and the steps we are taking to navigate the current market environment. We are intensifying our investments while implementing measures to reinforce our cost base. This operational performance delivered a strong EBITDA margin of 29.3%, up 150 basis points year-on-year, underscoring our ability to stay competitive without comprising our profitability. Let us now review revenue and EBITDA by region, reflecting the current scope, that is, with Italy fully removed from last year's numbers. Overall, the business is performing in line with expectations, with price adjustments being implemented across all markets, and in the third quarter, volumes were stronger in Iberia, weighted down in Brazil basically by adverse weather conditions, and showed an improved trend in the UK and Ireland. Across all regions, margins continue to hold up well, supported, as we said before, by our ongoing footprint optimization and disciplined cost management. Pre-cash flow conversion lies at the heart of how we create and preserve value. This chart illustrates how effectively we have converted cash over the first nine months of the year. Starting from an EBITDA margin of 29.3%, we have reinvested almost 12% of our sales in capex and allocated a further 3.5% to working capital, financials and taxes. As a result, we generated a robust free cash flow generation equivalent to almost 14% of sales. Consequently, by the end of September, net debt stood at 150.3 million euros, maintaining a low leverage ratio of 0.3 times EBITDA. This illustrates the capability of our model in turning strong operational results into cash and supporting key investments. With a strong balance sheet, We are well positioned to consider potential growth opportunities, continuously optimize our operations, and deliver value to our shareholders. And now, before we open the floor for questions, we share additional perspectives on our performance and outlook.

Thank you, Nye, and thank you, Inigo, and thank you all for attending this call today. We really appreciate your time. Well, things have been quite challenging out there in the consumer marketplace, particularly for some of our customers. But despite demand is significantly softer than initially expected, despite competition is very intense across the packaging industry, our results keep on consistently performing as expected. And this is a very good proof of the quality of our business. We accepted the challenge. We are becoming a different company. We are taking actions. We are selectively realigning our industrial footing. We are investing more and smarter than ever. We are getting closer to our clients and the consumer. And we are doing so with our customers in mind. With the aim of making our products and serving our markets in the most competitive, profitable and sustainable way. As a result of all of this, and despite the many macro and also some micro difficulties we are facing, we are today reiterating our guidance for the year. And behind this small message, far beyond the next quarter, lies a big reflection for us. We are making this company adapt, grow and evolve. in the direction of the future we, our people, our shareholders, and our customers deserve. And we will keep on moving forward. There is a bright future ahead for glass. The ultimate, most sustainable, healthiest packaging material of choice. And for the packaging industry as a whole. If we do the right things today in the industry. As a final remark from my side before moving to your questions... Please keep in mind, whatever we do, how we react and adapt to the different difficulties, wherever we go, wherever we present this company, please be sure that we remain firmly committed to our three pillars, customer, cost, and capital. The data we will invest keep in a strict financial discipline in every scenario, maintaining our business under solid financial conditions, to further improve our competitiveness, drive our future, attract customers, and preserve the strong value of our products. Thank you.

Okay, that brings us to the end of our prepared remarks, and we will now begin the Q&A session.

Ladies and gentlemen, we will now move on to the Q&A session. Primero se atenderán las preguntas por vía telefónica. Si desean intervenir, por favor marquen asterisco 5 en el teclado de su teléfono. 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. Our first question comes from Francisco Ruiz from BNP Paribas. Please go ahead.

Buenos dias y enhorabuena por el trimestre. So I have three questions. First one is on the Brazilian situation. We have seen a very weak situation. Q3, relative to the adverse weather, as you commented, but also we have seen that two of your competitors have new capacity in the market. So what are the expectations on Brazil and what are your future development on the country? The second one is on... the current situation of leverage. I mean, you have said out loud that you're looking for M&A. I'm not sure if there are something big enough to jeopardize your financial position or the good financial position. But at that point, I wonder if the board of directors are thinking on a better shareholder remuneration policy. And if this is the case, I mean, I don't know if you have think on undoing through buybacks or dividend. And last but not least, I mean, once reiterated your guidance on Q4, I mean, this implies a significant growth in EBITDA versus what you have reported at nine months. I mean, what is driven this? I mean, do you expect a better recovery in volumes, geographies, or some cost advantages also at the end of the year? Thank you.

Thank you, Paco. Good morning. Well, let me take the first part of the question regarding Brazil. Our business in Brazil, Vidro Porto, is a wonderful business. Strategic, core, but particular. We are very well invested in Brazil. We are supplying a small number of big, very demanding businesses. Customers, global customers, particularly in the beer space. This is a very good proof of quality for our business. Not only Brazil that creates a lot of synergies and collateral results. But Brazil is a particular country. It's a continental country full of opportunities. In all the sense, a country of future for us. but also volatile in some circumstances. And our third quarter results have basically reflected what has happened in the country in terms of consumption, particularly consumption for beer, affected by climate, macroeconomic circumstances, and many other factors that, under our view, temporarily affect consumption. Things are today much more stable, We will end in Brazil this year basically flatties in safe volumes, and this is more or less safe. Just to finalize this point, regarding your comments around others' actions to increase capacity, the only thing I can comment is that we do have little reason to add capacity, but we will invest to improve cost competitiveness.

Regarding the second question, Paco, on leverage, we are very conscious of our current low leverage, which we understand is today a bigger competitive advantage than in the past, probably. As you perfectly identified, we are actively and we have a proactive attitude towards M&A, but probably there is nothing big enough to change this strong financial position right now. So when we look into our board of directors of December, we'll probably show there our shareholder remuneration proposal. And as you said, buybacks is an option. Okay. And finally, regarding guidance, we are reiterating today the guidance. We are also stating that the guidance is not immune, basically, to FX fluctuations. Indeed, we should consider that we should already have, despite significant changes in FX fluctuations, from today until the end of the year, we should already have a negative impact from FX, exclusively from FX, already in the range of 4-5 million euros. So, this means that you should also consider this context.

Just let me add on this, Inigo, please keep in mind that you know the last quarter of the year is naturally the less relevant quarter in each year, so Our eyes, as you will understand, our eyes are now put and our management priorities are now put on the year ahead, on 2026. Thank you very much.

Our next question comes from Enrique Yagüez from Best Inverse Securities. Please go ahead.

Good morning, Raul, Inigo, and I have several questions. The first one is regarding the demand outlook for Q4 next year, and I would like also to know how do you think about pricing and the risk of price aggressiveness in the sector if demand does not show a significant improvement. And second, in terms of margins by business regions, I don't know if you foresee the need to implement further efficiency measures in the UK and Ireland, which are performing a little bit weaker than expected. And on the positive side, how far can margins improve in Iberia, which are showing very strong evolution? Thank you very much.

Thank you, Dike. So regarding demand outlook, For the most immediate fourth quarter, as we have been saying for the previous quarters, we are not expecting a significant recovery of demand. But even under this scenario, we should see some volume growth overall at the group level in the fourth quarter. So we are still expecting volumes for the full year to be in the range of flattish for the group. or slightly down, okay, but probably slightly better than the nine-month figure.

Basically, if we try to look ahead at 2026, Enrique, it looks like demand is apparently more stable than it has been for the last two years in all our reuse of activity, including Brazil with all the mentions that we have done before. So now moving to your second part regarding prices. Well, it's very evident that there is a lot of competition out there. We compete against other glass makers and against the cost of aluminum and plastic and against the plastic that is inside aluminum cans. And that means that the reality is that pricing and margin dynamics that we have seen in the packaging industry have never been so differing, so different. And we have no option but to accept the challenge and adapt our prices. But we still see a lot of positive inflation across costs for industrial manufacturing. And we have better reason to repeat our prices significantly immediately. Only in some exceptional cases if we are forced to respond. And my final conclusion on this, please keep in mind that more than half of our sales volumes are dictated by price adjustment formulas, and the mathematical result of a typical formula looking at 2026 is not significantly negative, and this is a good reference for our study. And the last question is regarding our business in the UK and Ireland. Again, Encirc is a great, incredibly well-invested business. Our Three facilities there are facilities we feel very proud of. But we know, and competition is getting harder, we know that we need to improve our cost competitiveness. And we are taking actions to improve our cost competitiveness. And thanks to these actions, we expect to attract some customers back to us to recover some market share. and more relevant to stop imports into the UK market that could affect the historically very profitable British glass industry. I won't mention targets or references in terms of relative margins over sales. I will try to direct you to put the focus more on EBITDA or profits in value. and we do feel optimistic about our future in the UK and Ireland, even under the current intense competition. Thank you, Raoul.

Please be reminded that if you'd like to ask a question, you have to dial star 5 on your telephone keypad. Our next question comes from Fraser Donlon from Berenberg. Please go ahead.

Morning to the three of you. Thanks for the presentation. It's Fraser here from Burenburg. I had a couple of questions. So just on the UK, what exactly do you envisage doing to kind of improve the competitiveness? Because I know there was a kind of small restructuring in NSERC a few months ago, which you discussed on the last call. So are you referencing that or do you have kind of bigger plans? plans, let's say, and how those plans changed given now China, I think, has announced that they won't be adding this site in the UK. And then my second question was just on Europe. Could you maybe color a little bit like the import-export trends you see in different European markets and maybe where you see more or less pricing pressure or difficulty in the market, not necessarily just in Iberia and the UK, but also like the markets that you sell in. It would be interesting to hear what you have to say. And then the final question, I think following on from a prior question, I know, I think Ambev had launched this furnace in Brazil recently. Given that's now been launched, could it change anything for you with respect to that customer or that customer's let's say, willingness to keep operating those sites independently. Thank you very much.

Thank you very much, Donovan. Well, first, regarding the UK, our business in the UK and CIRC and the actions we are taking, we need to improve significantly our cost competitiveness because this is our purpose, to protect our business there, to protect our people there, and to attract back some of our customers. I won't give you an exact number because these things are moving significantly. Let me ask for the time we need before providing you a little bit more clarity on the specific targets on this. Let me use the help of the numbers that we are publishing today to let you understand that we are doing the things that are needed to do in the UK. In all the sense. Your second point is regarding how intense is the battle against imports, exports, particularly in Europe and the UK. I will say that the competition is quite intense in every place, particularly in Europe and the UK due to imports. But, you know, Vidrala is, in our view, an example of a low-cost glass manufacturer. So it's our aim to stop this, and we are doing this without affecting significantly our margins. That means that we are doing the right thing in our cost base, and that means Let me explain like this, simplistically, that also should give you a reference that we are to be and remain as cost competitive as some importers into the UK and Europe. This is our aim, to remain competitive to stop this. And third, you mentioned a specific case of a relevant customer In Brazil, let me avoid mentioning the specific names in this conference call. Okay, my only message is that we were aware of this. We have been preparing ourselves for this. And all the messages that I shared with you answering a previous question regarding Brazil, our reasons there, and our actions to further improve our competitiveness and attract customers and differentiate our commercial positioning are very well aligned with this specific case. That won't be an excuse for us next year. Thank you.

Our next question comes from Inigo from Kepler Chevro. Please go ahead.

Buenos dias, good morning, Raúl, Inigo, Anunay. Thanks for taking my questions. Most of them have been already answered, but I have three questions, if I may. The first one is Brazil. Just to come back to Brazil again, if you can explain or elaborate a bit how can margins be at more than 41% in Q3 with a top line falling double digit and with this important or relevant falling in volumes in Q3 that you mentioned before. So this is the first question. The second one is on Iberia volumes in Q3. In Q3, if we do the numbers, we have seen, I would say, a nice recovery with volumes growing in Iberia in Q3 more than each single digit. If you can elaborate a bit what is behind that nice recovery. And the third question is on the guidance outlook for 2026. I guess we have to wait. for the next AGM in April 2026. But with what you mentioned in terms of pricing and volumes for 2026, Raúl, how do you see the BTA margins evolution versus 2025? Thank you.

Thank you, Igor. Let me start by the final question regarding outlook. The more you ask the question today, you won't give a response for us. It's too soon. We will give you the exact guidance in April this year, but I will try to give you a little bit more color. What we are saying today is that demand is more stable, and it has been over the last two difficult years. There remains still an excess of capacity in the glass industry. in all our regions of activity. Our prices should be more or less under control, our prices, despite intense competition. That means that we don't see a negative spread between our sales prices and our manufacturing costs in 2026. So margins and profits in 2026 are looking like safe so far. Moving back to your first question regarding Brazil, your question helps me further support previous questions. The reality in these three quarters is that we have been affected by a significant deterioration, temporary deterioration in our sales volumes, the top line, but our margins perform as expected. And this is a very good proof of the quality of our business in the report in Brazil. and the competitiveness of this business. If you compare our margins with other margins, if you analyze these margins under this TAF period, TAF card in terms of sales volumes, you can imagine how clear is our vision and our capacity to recover sales and keep safe our margins and keep on investing in Brazil to further improve our competitiveness. Let me just end this message with a final point. Our sales in Brazil in October are much more stable than it has been in the third quarter. And the last question is regarding Iberia. We are improving a little bit better than expected in sales in this region. Probably the reasons are some of them macro. Consumption in the south of Europe have been performing slightly better than in Brazil and the UK. And a lot of reasons are also due to internal factors. We are doing our best to keep on recovering some of the market share that we lost in the last three years. And you can see in our margins again, as we have said in the case of Brazil, that we are quite cost competitive, and we will try to keep on recovering progressively market share.

Okay. Thank you, Raúl. Just a final question, if I may. on the free cash flow, which has been quite strong up to September with 155 million, and you reiterate the 200 million goal for 2025. What can we expect for 2026 in terms of capex? I mean, 2025 has been quite intense in terms of of CAPEX, I think this 12% over sales, we should expect these numbers to be stable, or can we expect a reduction on that CAPEX for 2026? Thank you.

Thank you, Íñigo. When we look into 2026, excluding potential inorganic opportunities, if they do not happen, CAPEX should be slightly below the numbers that we are seeing for 2025. So 2025 should be considered as an extraordinary year in terms of CAPEX, as you can perfectly imagine, considering that we are investing plus percent of sales into the business.

And let me insist on this, because we like the message, we will invest more, more than ever, smarter, more than others. to further improve our cost competitiveness and with our customer in mind. The only reason for our capex to look like a slightly, only a slightly more relaxing 2026 is just a matter of calendar that we will keep on investing. And let me arise again the message that our cash profile, the cash generation that we are obtaining, is being obtained after a significant effort on our investment activities to try to drive our future.

Okay, thank you. Gracias, Raúl Oníñigo.

There are no further questions by telephone. I will now hand it back to the Vidrala team, who will address questions submitted via webcast.

Thank you. So there is only one question left, if I am right, through the webcast, because there are several ones that we should have already answered them. So there is one question that states that beer and wine consumption continue to decline, and both products account for a relevant percentage of our sales. So which are our plans to compensate for this?

Well, the message is clear. To improve our cost competitiveness, to attract customers back, to try to recover market sales, or fight against an excessive level of competition when needed, we will obviously try to diversify our sales by regions. and by segments, but even in weakened segment of sales due to softer consumption than expected, as the ones you mentioned, beer and wine, there are a lot of opportunities for cost-competitive different class makers as Vidrala A2B.

So, we have answered all the questions sent through the webcast. If you have more questions or need more details, please feel free to contact us anytime. That's all for today. Thank you very much for joining and listening.