Vidrala Sa

Good afternoon and welcome to the conference call organized by Vidrala to present its 2026 first quarter results. Vidrala will be represented in this meeting by Raul Gomez, CEO, Inigo Mendieta, Corporate Finance Director, and Unai Alvarez, 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 understanding of everyone. In the company website, www.3wbibrala.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 afternoon, everyone, and thank you for taking the time to join today's talk. As previously announced, we published our results for the first quarter of 2026, earlier this morning, together with a presentation that will support this conference talk. We encourage you to access the webcast via the link available on our website, or, alternatively, have the presentation at hand. Following the structure of this document, we will start with a brief overview of the key figures released today, before moving on to a more detailed discussion of other esoteric topics. We will then leave an ample time for the Q&A session. With that, I will now hand over to Inigo, who will take you through the financial results.

Thank you, Unai. Before we walk through the figures, it's worth noting that the Chilean acquisition has been consolidated into the results as of 1st of January, 2026. So, to allow comparability, we have included breakdowns on a like-for-like performer basis, incorporating into the prior year figures the results generated by the acquired business during that period. So, turning now to the presentation we have just referred. The first quarter results reflect the following key business figures. Revenue of almost 368 million euros, operating profit, EBITDA, of 104 million euros, and net income equivalent to an EPS of 1.53 euros. Net debt amount to 273 million euros, including the Chilean acquisition at an enterprise value of 75 million euros. As a result, the leverage ratio stands at 0.6 times last 12 months' performance aided. Moving on to the next slide. Let's take a closer look at revenue evolution. In the chart, we have broken down the year-on-year movements on a comparable perimeter basis, arriving at reported sales of €367.5 million for the first quarter of 2026. As shown, this represents an organic change of minus 4.7% at constant exchange rates and on a like-for-like basis. This performance reflects a moderation in pricing, in line with our expectations, together with a softer demand environment in European markets that has been partially offset by stronger momentum in South America. Turning now to EBITDA, we applied the same analytical framework to better understand the year-on-year variation. EBITDA amounted to 104 million euros, reflecting, in this case, an organic variation of minus 2.1%. These figures translate into an operating margin, EBITDA over sales, of 28.3%, representing an expansion of more than 20 basis points, compared with the 28.1% reported in the same period last year. On a like-for-like performer basis, margins would have expanded by almost 90 basis points. This improvement reflects the combined effect of our internal competitiveness initiatives and the execution of our investment plan, which remain the two key drivers behind my investments. We now turn to sales and EBITDA by business units, Europe, UK and Ireland, and the New South America, which now includes operation in both Brazil and Chile. As mentioned earlier, in the first quarter, we continue to see price moderation across our European divisions in a highly competitive environment, while at the same time, we are taking action on our cost base to support sales development over the course of the year. By contrast, South America continues to show solid performance, driven by improving consumption trends and ongoing operational progress across the region. Finally, net debt, as of the end of March, stood at 273 million euros. This includes the interim dividend paid in February, the cash-out related to the ongoing share-by-back program, and the acquisition of Charlie for an enterprise value of 75 million euros as already mentioned. Overall, the resulting leverage ratio remains broadly stable, reflecting the strength and financial resilience of the business. This final slide is a slide where we just would like to highlight big messages. Basically, the resilience of our margins that are based on cost competitiveness. Second of all, our robust financial position, even after M&A and additional efforts in terms of shareholder remuneration, as we have already explained. And finally, also highlight the value of focused diversification and inorganic growth. Now, we would like to spend some time explaining the recent acquisition in Chile, as well as our broader strategy in South America. On this first slide, we provide an overview of the Chilean market, and as you can see, it is a relatively consolidated market with three main players, and the map illustrates the footprint and planned locations of each of them. The image on the right corresponds to our facilities in Maipú. You can also see a summary of 2025 financials, which, just as a reminder, have not been consolidated in our 2025 report figures. Chile is a region of strategic focus for us and is complementary to our current business base. A significant number of our key global customers are focusing their growth on this region and, in addition, our technological and industrial model offers further deployment opportunities. Moving to the strategic rationale behind our expansion in South America, there are a few key messages we would like to highlight. We are acquiring assets that are well-known to us, as we have previously provided technical assistance to these operations. Second, we see clear room for further optimization, particularly in the most recently incorporated assets, with a view to enhancing margins over time. Third, we are progressing in our strategy of building South America into a growth platform, through a series of disciplined incremental steps while maintaining a structured and focused approach across differentiated regions. And finally, these moves reflect our commitment to following our customers, deepening our relationships with them and strengthening our positioning as a global partner that should allow us to capture opportunities across our different business units. On this slide, we present three charts to frame the South American opportunity. Starting with demand fundamentals, the region is expected to deliver solid growth, with demand projected to increase at the compounded annual growth rate of around 4.5% between 2025 and 2030. The second chart illustrates a competitive landscape. This covers South America as a whole, from Panama southwards. The market is, as you can see, largely dominated by two major global players, with ourselves positioned as the third key or global player, alongside the number of smaller domestic operators across the region. And finally, the third chart illustrates our customer base the customer base in the region, sorry, where we already maintain strong relationships across all these key customer segments that are in the chat. Something that position us well to further strengthen our presence and capture additional opportunities going forward. And finally, on this slide we present the 2025 Groups pro forma figures, including the contribution of Chile, on this basis the group would have generated revenues just over 1.5 billion euros and EBITDA of 463 million euros, with South America representing close to 20% of total group business. And now, before opening the floor to questions, I will now hand over to Raúl who will provide his views on the 2026 outlook.

Thank you, Inigo. Thank you, Nye. And thank you. Thank you all for attending this call today. We really appreciate your time. Thank you. Well, as you may know, today we held our annual general meeting. But please take note that it's a big day for us. Okay, our first quarter results provide a glimpse of the future we are building. In the face of adversity, you will agree with me, under a context of abnormal complexity, we act. We never stand still. We are doing things to keep our costs under control. We are investing more, more than ever. With our focus on the future, and the customer. We are managing our industrial capacity. By investing, we are investing selectively with a disciplined planning. We remain active, highly dynamic, managing cost with an unwavering focus on our competitiveness. Competitiveness, cost competitiveness. This is the core of our business. And more, as Inigo said before, we are diversifying business. We are building a growth platform in South America. A business platform that has already reached a meaningful scale. Basically, we are delivering what we promised. In the end, let me say that Vivara is today a stronger and more diversified company. a real multinational, focused, designed in an unstructured way, based on three different business areas that together create a powerful business community. Europe, the United Kingdom, and South America. With Hidrala, we are a world-leading glass manufacturer. We are today supplying major global customers, and we are operating industrial assets and technologies of the highest quality. And we are taking the necessary actions to ensure that our future is in our hands. Based on these factors, based on these principles, more important, based on the internal actions that we are taking, today we are announcing our guidance or our outlook for the full year 2026. So, we today expect our full year to exceed 450 million euros, a figure that is similar or slightly higher than 2025, the prior year, in comparable terms, including Chile. We also expect our earnings per share to grow by more than 5% and more relevant. We expect our free cash flow to remain sustainably at levels of 200 billion euros after a year that will be again a relevant and ambitious year in terms of investments for us so we are in any case we remain firmly committed to our strategic pilots and our management principles customer cost and capital discipline basically what we are doing We are building the future we deserve.

Thank you. Thank you, Raúl.

This concludes our opening remarks, so we will now move 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 five on your telephone keypad. Our first question comes from Francisco Ruiz from BMP Baribas. Your line is now open. Please go ahead.

Thank you. I have a couple of questions, and then I will pass it on for all the colleagues. My first question is in the UK. I mean, you continue with a very weak situation in terms of volumes, not surprisingly, in the area after the restructuring that you announced in Q4. So, how do you expect this to evolve? I mean, I listened to some of the meetings we had during this quarter talking about an improvement in profitability or activity. And I don't know if this is something that has to do with a better pricing scenario or it's just cost initiatives. The second question is more on the industry in Europe as a whole. I mean, one of our competitors today has commented on a strong pressure in wine and a very low capacity utilization in Southern Europe. I don't know how you see the situation because these are an area and a product that requires matters to you. And how do you see prices with still, let's say, weak volumes, but also a big pressure in terms of energy costs? Thank you.

Okay. Paco, thank you very much. Just as a very good introduction to your two questions, please just remind that over 50% of our commercial base is based on price adjustment formulas, okay, that will progressively reflect inflation or deflation in our pricing.

Thank you. Buenas tardes, Paco. I'm following Inigo's initial message. Beyond this level of network protection that our sales have, and this is a big difference when you compare Vibrala with most of our competitors, these big keep this in mind. For the remainder, we will remain the same. We will try to remain first cost competitive to attract customers and regain market share when needed. And we will progressively adapt our prices to the real inflationary context as quick as necessary. Should inflation remain high, After the context that we are seeing, we can be sure that we will progressively make our best to maintain our prices adapted. And this is the reason why we think that our operating margins are today pretty much under control. Even taking your first question in the UK. It's true that in the UK, we are seeing a particularly softer demand context. We are confident that our sales volumes are for our top-line performance is basically following real organic system trading conditions in the UK. That means that demand in the UK has suffered most in the last two years. But we have the feeling that demand today is more flattish and should start to recover. In any case, we are doing what we can do. We are reducing our costs. We are taking actions to remain competitive. We want to use our cost competitiveness to attract customers and secure volumes. And this is the reason why even after this softer than expected demand context that we consider that is basically organic or affecting the whole industry, we also consider that our margins and our profits this year in the UK are safe and they're controlled. Don't forget, despite these difficult years that we are seeing, we are managing in some regions, particularly the U.K., our U.K. business in Turkey is a core strategic part of the Vidara Group, a wonderful business.

Our next question comes from Natasha Brilliant from UBS. Please go ahead.

Thank you very much. I've got a few questions on the Chile business. So firstly, how should we think about the margin profile of the Chile business versus the group average? You said you can enhance the margins over time. So can you just talk a bit more about that and where you think they might be able to get to? My second question is on CapEx and whether there's any incremental CapEx requirements linked to Chile that we should factor in over the coming years. And then just to come back on your comments on the customer base, can you tell us what the proportion of customers that you already have a relationship with you'll be serving in Chile and what proportion will be incremental to the Vidrana group? Thank you.

Oh, thank you very much. As Inigo said before, we consider our entry into Chile that is small from a financial point of view, but big from a cultural and strategic point of view as a new step or next step to create a platform for drought in South America. The number of customers we have in Brazil are in Chile. Some of our big customers in wine in the UK are Chilean. So there is a big, big strategic rationale for us to entry into Chile. It's very evident, if you take a look at the numbers, levels of profitability that Chile is a process that needs to be improved, and we actually do consider this as a restructuring acquisition. In any way, we will for now consider Chile, in combination with Brazil, as part of our South American division. a division that probably controls already or supply already approximately 20% of the market share in South America. So this is becoming, our business is becoming a business of meaningful scale. And these businesses today obtain a margin of between 35% to 40% operating margin, that we do consider safe. And in this consideration, in this analysis, we understand that Chile will keep on improving as it is. And finally, your question, our customers are everywhere welcoming us. But what our customers want is what we want from our suppliers, more than one only alternative supplier. And we are becoming a reference in the glass packaging industry in terms of ambitious investments, future, and competitiveness. We know what we are doing in this year. Thank you.

Thank you. And if I can just come back on the CapEx point, whether there's any extra CapEx we should expect?

Probably our CapEx levels over the next couple of years, probably at least in the next three years, will be aligned with our last years around 11-12% of our sales. You are aware that this is more than normal. This is more than replacement. And this includes ambitious investments. And Chile won't be an exception. If this is the question, Chile won't distort your expectations on our cash profile in any year in the future.

Perfect. That was my question.

Thank you very much. Ladies and gentlemen, if you'd like to ask a question, please be reminded that you must dial star 5 on your telephone keypad. Our next question comes from Francisco Ruiz from BNP Paribas. Your line is now open. Please go ahead. Our next question comes from Francisco Ruiz from BNP Paribas. Your line is now open. Hello, can you hear me?

Yes, we can hear you.

Hello? Okay, okay, good. So I was telling, I wasn't here, so mainly there is no further question from anybody. I have another two. The first one is on carry trade. If in current, if you could give us some details on how the business has evolved throughout these four months that we have already, and if you see of that improvement in April versus March and at the beginning of the year in the different markets. The second question is on in the use of cash. So you announced a buyback of 1% in December, another one a month ago, and if you're expecting 200 million euros or around 200 million euros free cash flow generation, you will arrive at the end of the year practically without debt again. Can we expect further announcement on this, or given the surprise performance, would you prefer other type of remuneration? Thank you.

Thank you very much, Paco. Let me start with your second question, our use of CAS, the case through. And we are fully conscious of this, that in the case we achieve our expected pre-capitalization this year, we will have the challenge to decide what to do with our cash. Wonderful challenge, okay? We accept the challenge. But it's too soon to announce something like this, okay? What we can tell you and the rest of you shareholders is that you won't be disappointed. But please keep in mind, you know that the industry is, our industry is today living quite complex times. So we do consider that a Our capacity to sustain our cash flow, differential cash flow generation, our capacity to maintain our debt levels at those levels for a while is something that will create a competitive advantage. And this is our first priority, to generate cash and maintain our debt levels under control. Anyway, in terms of self-remuneration, I insist you won't be disappointed. We are aware of that. And second, or first question, sorry, current trading. For our guidance to become real, the way we have built our outlook for this year, particularly at the EBITDA level, is very evident that a second quarter will be more relevant than the first quarter in terms of profit contribution, and third quarter should be more relevant than the second quarter. So April is a more relevant month that it has been March and April is almost done. And what we can tell you is that everything is going as expected and aligned with our guidance. Okay, thank you.

Our next question comes from Inigo Egusquiza Castellanos from Kepler Chevrolet. Your line is now open. Please go ahead.

Thank you. Buenas tardes. Buenas tardes. Thanks for taking my questions. I have two questions, if I may. The first one would be on the, you mentioned the trading update with April. Slightly better, I guess, but in line with your budget. My question would be if you can elaborate a bit the performance of pricing and volumes by regions, Europe, the UK and South America. And also, in the case of the UK, why are you, I would say, slightly more positive after the week started? quarter in terms of volumes. It seems that your expectation is that the recovery will come. Why that? This is the first question. And the second question would be going back to the free cash flow question and focus on consolidation. I know that you just closed the acquisition in Chile. But I read something this morning that you were looking at. I think it was Mexico. It was mentioned in the press. And what about further consolidation? You also mentioned that the industry, a big part of your players are facing financial troubles. So what about further consolidation both in South America but also in Europe? Thanks for your thoughts.

Thank you, Inigo. I will take the first one about the first quarter of 2026 market evolutions. First of all, today has not been representative of what is going to be the full year. So if we look into the volumes by our different three markets, in Europe, volumes were done by Manus represent. In the UK and Ireland, where we still see highly competitive environments, volumes were down by minus 9%, whereas in South America, that comprehends operations of Brazil and Chile, volumes were up by plus 12%. If you look to pricing, we still see the anticipated pricing moderation in Europe in the range of minus 2 or minus 3, while we are seeing some price inflation in South America regions.

I'm holding this point just to give you an update on trading update today at the end of April. Please keep your mind on the seasonality of our sales. Seasonality is more relevant. Sales peak second and third quarter in Europe. Third and fourth quarter of February natural year in the UK. And last and first quarter is South America, something that also explains how powerful we are becoming under this more multinational business profile. So second quarter that is more relevant for Europe, particularly Southern Europe, is going as expected, as positive as expected. And final comment, it was regarding... Can you remind me, please, the second question, please, Ingo?

Yes, it's a question on consolidation. Raúl, I mean, I read something in the press today, I don't know if it's the press conference or before the AGM, that potential consolidation, I think it was Mexico, it was mentioned in the press, but also opportunities in South America, in Europe probably as well, considering how other competitors are evolving. I don't know your thoughts on further consolidation both South America and Europe.

Thank you. Sorry, thank you. I didn't have the time to take a look at the news that you are mentioning but I remember what we said. What we said is that Mexico is not for us tomorrow. Mexico is not part of South America and actually we are not a thinking in any immediate action in terms of M&A. We are just basically finalizing the first stage of integration in Chile. So it's too soon for another step. And in any case, we will remain dynamic. We will consider that our financial position is an opportunity to analyze opportunities. We will keep on analyzing different opportunities everywhere, but we're We want this replacement.

Okay.

Our next question comes from Frasier Dondlon from Berenberg. Your line is now open. Please go ahead.

Hi everyone. It's Frasier here from Berenberg. Thanks for the presentation. I've got three or four questions. So the first I was just wondering if you could quantify how much of the restructuring in Chile is done, because I know you were kind of hoping to do some of that before you closed the deal. The second question I have is about the UK. I don't know what kind of you think or your customers think about the deposit return scheme, which will, I think, impact aluminium and other substrates, but not glass in 2027. Could that be good or bad for glass, as you see it? And then the third question, I think this is something you and maybe some competitors mentioned in the past few months, but could you maybe comment how you see glass against aluminium, the extent to which that could kind of support the business or not in the next kind of six, nine months, are you more or less positive than you were a few months ago on that? Those are my three questions. Thank you very much.

Thank you, Peter. Well, regarding the specific details of the result running CLF, let us remain silent for a while for competitive reasons. Just please keep in mind that we aim and we deserve to reduce our cost significantly to remain competitive. And this is what we will do. And these actions won't distort significantly our profits. and our cash flow. And these actions will be completed before the end of this year. And we are today providing a specific guidance on how to call this year. Hope this is enough and hope you understand that our obligation is to remain a little bit more prudent on the specific details we have been selecting. Second, the deposit return scheme and the risk of over-regulation that we are seeing In the UK, this is something that we do consider as being very well treated for the future of the glass industry in the UK. Glass is made in the UK. Aluminium is not fully made in the UK. We are doing our best to promote this idea in front of administrations and British politicians. And let us be a little bit more optimistic. Please stay tuned. Maybe something relaxes a little in terms of the UK regulation that is affecting our industry. Finally, your comment regarding aluminium. I will take this opportunity to be more optimistic. I have the feeling that if we put ourselves on the place of our customers, landowners, even on the place of we as consumers, we will see some positive gap for the first time in a period of years under which the cost of aluminium will increase more in relative time than the cost of glass. And this is what we need to build our future. I have the confidence, I am convinced on the fact that glass as a packaging material has today a brighter future than ever. If and only if glass remains competitive. And we have reasons to believe on this. Thank you very much.

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

Okay. Thank you all. Let's address now the questions we have received via webcast. We have grouped them. Please, if some of the questions aren't fully answered, just feel free to contact us after the call. First one says, how do we see the European business areas for the rest of the year after the soft Q1. As I think Raúl has already mentioned, we have reasonably good visibility going forward, supported by the inherent seasonality of our European business. So, we expect the second quarter to already be the first inflection point where we should start to see a gradual recovery taking shape. The second question is on our energy-having strategy. on top of the 50% of our contracts that are based on long-term agreements with present-gen formulas. And despite geopolitical volatility, please remember that we entered the year with a very strong hedging position, with more than 85% of our European energies, which is the region that is most affected, already protected before the conflict in Iran. Then there is a second part of this question related on our financial costs in the first quarter. Financial results in this quarter are positive, although it's important to put this into context. The main driver of that performance is the ongoing optimization of our financial costs. reflecting a disciplined management of our funding structure and lowering also our average cost of debt. And on top of that, we also benefited from positive foreign exchange effects related to intra-group financing exposures. And then, final question we have received through the webcast states, if we have any feeling, Raul, probably this is for you, that our fears might be increasing prices this year due to energy costs.

Thank you. Well, the feeling we have is that there is a lot of renewed inflationary pressures. The feeling we have is that the competition is intense out there in the marketplace. It's a lot of competition. And the feeling we have is that the margins across the packaging industry are pretty much under pressure. So there are a lot of reasons to think that prices should be progressively adapted to the new conditions. Conditions have changed quite significantly over the last couple of months. But in the specific case of Idalla, please, let me insist that half of our sales volumes are automatically dictated by formulas. And for the remainder... Our first priority is to remain competitive and attractive, and we will for sure progressively adapt our prices should inflationary pressures prolong in the future.

So, with that, we have addressed all the questions received in the webcast. Once again, thank you for your time and attention, and please, do not hesitate to reach out should you have any further questions.

Ladies and gentlemen, thank you for your attention.