Vidrala Sa

Good morning, everyone, and thank you for taking the time to attend today's call. As previously announced, we published our 2026 first half results earlier this morning, together with a presentation that will support this conference call. We encourage you to access the webcast available through our website, or, alternatively, to have the presentation at hand. With that, I will now hand over to Iñigo.

Thank you, Unai. Before we start, let me briefly introduce Galo Alvarez, our Director of Sustainability and Corporate Development, who is joining this call as part of the evolution of our investor relations faction. Welcome, Galo. Please go ahead with your introduction.

Thank you, Iñigo. Let me start with a brief reminder of what Vidrala is today. We are a focused glass packaging multinational. clearly organized around three business units, Europe, UK and Ireland, and South America. We operate 12 sites, around 10 billion containers a year we are producing, and serve more than 1,600 customers, including leading global brands and key regional customers. We also combine that with strong sustainability credentials. Recycled glass represents 55% of our raw material mix and our CO2 intensity is 0.321 tons per ton of melted glass, 25% lower than 2019 and one of the lowest in the industry. Our three strategic pillars are customer, cost and capital and they reinforce each other. Our goal is to serve global customers and key regional accounts in the most competitive and sustainable way. Our industrial model and cost discipline allow us to meet their requirements at scale and sustain resilient margins and strong cash conversion. We allocate that cash with discipline, reinvesting through smarter CapEx designed to lower OpEx while also delivering sustainable shareholder returns. That reinvestment further strengthens our footprint and the value proposition we offer customers. Moving to slide four, let me translate our footprint into how the group is organized. Again, we have three clearly defined business units, Europe, UK and Ireland, and South America. Europe remains around half of the group sales and EBITDA. UK and Ireland business represents roughly one third of sales and one quarter of EBITDA. And South America already contributes almost a quarter of group EBITDA. We are now a more diversified group, but not a more complex one. Each business unit has a clear accountability close to customers and markets, but all three operate under the same industrial model. With that context, Unai will take you through the first half figures.

Thank you Galo. Before walking through the key financial figures, it is worth noting that the Chilean acquisition has been consolidated into our results as of 1st of January of 2026. To ensure comparability, we have included breakdowns on a like-for-like basis, incorporating the results generated by the acquired business into 2025 figures. So, turning back to the presentation, let's begin with an overview of the main financial figures. For the first half of 2026, Vidrala delivered revenues of 754 million euros, an EBITDA above 225 million euros, and a net income equivalent to an EPS of 3.36 euros. At the end of June, the net debt stood at 252 million euros, including the Chilean acquisition at an enterprise value of 75 million euros, which translates into a low leverage ratio of 0.6 times over the last 12 months per former EBITDA. So, let's take a closer look at revenue. In this chart, we have broken down the year-on-year movement on a compatible perimeter basis, arriving at a reported sales of 754 million euros. This represents an organic change of minus 3.8% at cost and exchange in comparable perimeter. The variation just reflects the expected price adjustments of minus 1.8% and the ongoing progressive improvement in volume trends. Moving on to EBITDA, we apply the same breakdown to understand the year-on-year evolution. The first half of 2026 EBITDA amounted to 225.5 million euros, showing a positive performance at constant currency and like-for-like scope. This highlights the benefits of diversification while ongoing cost-focused actions continue to strengthen our competitiveness. This operational performance translated into a solid EBITDA margin of 29.9%. reflecting an expansion of 110 basis points compared to the same period last year, underlining the resilience of our business model amid challenging market conditions and ongoing inflationary pressures. Dublin's performance continues to improve sequentially, with volumes progressively recovering and turning into positive in Europe during the second quarter. This sustained momentum reflects the strength of our commercial strategy and our ability to adapt swiftly to evolving market conditions. At the same time, EBITDA growth accelerated, with margins remaining resilient despite ongoing macro headwinds underpinned by operational excellence and continuous focus on cost discipline. We now turn to sales and EBITDA by business units. Europe, UK and Ireland, and South America, which includes operations in both Brazil and Chile. Performance was driven by the recovery in Europe and sustained momentum in South America, when margins evolved in language expectations, underpinned by the execution of our competitive actions, our ambitious investment program, and the complementarity of our industrial footprint. Now, I will hand over to Iñigo, who will provide more detailed insights on our balance sheet position and self-holder remuneration.

Thanks, Zunay. Let's look at the evolution of financial position. At the end of the period, NetDev stood at 252 million euros, equivalent to a NetDev to EBITDA ratio of 0.6 times. This reflects the strength for cash generation capabilities and our disciplined approach to capital allocation, while at the same time supporting several strategic initiatives undertaken during the period. In particular, this net debt figure incorporates, as already mentioned, the acquisition of Videla Chile, completed at an enterprise value of 75 million euros. And in addition, it reflects the interim dividend paid in February, the execution of our ambitious investment plan, and the ongoing share-by-back program. Despite these significant cash outflows, our balance sheet remains solid and continues to provide substantial financial flexibility. Finally, turning to shareholder remuneration. This chart highlights the consistency for distribution policy. Hidrala has increased its dividend every year, extending this track record through 2026. This year, we are making an extraordinary effort to enhance shareholder returns. In 2026, the dividend has been increased by 15%, bringing total dividend payments to more than 62 million euros. In addition, we have expanded our shareback program. Initially launched to repurchase shares equivalent to 1% of the share capital, the program has subsequently been extended twice by an additional 1% on each occasion. As a result, We will repurchase up to 3% of share capital, equivalent to a maximum amount of 90 million euros. Taking together dividends and shareback will represent more than 150 million euros returned to shareholders this year, underlining the strength of our financial position, our confidence in the long-term prospects of the business, and our continued commitment to deliver attractive and sustainable returns to shareholders.

Thank you, Iñigo. Let me now turn to the outlook for the full year. The first half performance was consistent with our expectations and we therefore reiterate the guidance announced in April. First, EBITDA about 450 million euros, Consolidating operating profits and margins despite challenging macro conditions and intense competition. Second, EPS growth above 5% supported by strong operational performance, a contribution from our broader geographic footprint and the ongoing share buyback program. Third, underlying free cash flow of around 200 million euros. Excluding restructuring costs while continuing to execute our strategic investment program. Rául, over to you for the closing remarks.

Thank you, Alo. Thank you, Iñigo. Thank you, Unai, not Unai. And thank you all for your time in attending today's call. We know that it's a busy day for all of you. We really appreciate your time. Well, our first half of 2026 reflects much more than solid financial performance. It demonstrates the resilience of a business built on disciplined industrial execution, operational excellence, and a clear strategic geographical vision. Hidrala delivered earnings growth despite quite a challenging complex environment. And that was supported by our ambitious industrial investment program, The contribution of our new expanded South American business platform and our different operational initiatives to further enhance our cost efficiency. And finally, the continuing strengths of our customer value proposition. These factors, the combination of these factors position us well to deliver on our easier performance expectations as Galo reiterated before. Beyond this number and beyond this year, we remain focused on the future and firmly committed to our three static pillars, customer, cost, and capital. We will invest and we will deploy our industrial model, maintaining a strict financial discipline and we will allocate capital selectively and strategically. This is part of our DNA. We will remain focused on cost and competitiveness. And so, as a result of this, we will make our best customers, make our products and serve our markets in the most efficient, competitive and sustainable way possible. Returning value to our shareholders progressively. At the end, we are proud of what we are building. The future belongs to us. Glass is a unique packaging material, and consumers will prefer glass everywhere in the future.

Thank you, Raúl. This concludes our exposition. We will now move on 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. Our first question comes from Iñigo Egusquiza Castellanos from Kepler Chevro. Your line is now open. Please go ahead.

Good morning, Rául and Tim. Thanks for taking my questions. I have two questions, if I may. The first one would be if you can elaborate a bit the better volumes that we have seen in Q2 versus Q1, especially the recovery that we have seen in south of Europe, which has been And how is the trend for the summer for July as we are almost ending the month of July? What are your expectations for the summer season? This is the first question. And the second question would be more on 2027. You are reiterating the guidance for 2026, but my question would be more on Thank you.

Thank you, Iñigo. This is Rául. I will take his points. First, regarding the trends that we are seeing in our sales volumes, I think that the trends that we have seen in the second quarter give us the credentials or the confidence to reaffirm our initial expectations. You remember our message three months ago, the time of our first quarter results publication, and that gives us the confidence for the remainder of the year. This is basically the result of a We are seeing some growth in South America. This is very evident since the beginning of the year. And we are combining these, let's say, organic demand contexts with some efforts to recover markets. And this gives us the confidence to reaffirm our expectations for the remainder of the year. Thank you. We also answer what is happening today in terms of the seasonality that we are seeing. Let us repeat, proudly repeat that it's summer in Europe, but winter in South America. It's a peak season in Europe, low season in South America. The peak season in Europe is performing as expected, not significantly worse or better. and the big season in South America performed at the beginning of the year better than expected and we hope this to maintain for the rest of the year. Sales volume is not giving us any sense of price. Regarding prices, for first We should say that we are seeing persistent inflationary pressures, mostly due to the energy factor, something that is particularly evident today. So in the events that we are seeing in the Middle East and the world in Iran. And despite we are widely protected in our energy exposure, We will see a number of collateral inflationary effects. So, we will need to adapt our prices consistently as much as possible, depending on the competitive landscape. And so, the message will be clear from our side. Even after the selective efforts that we will make to recover some businesses with customers, some market share, We do not foresee any risk of a negative pricing movement for the remainder of the year, even in 27. And more than this, we don't foresee any risk of margin deterioration due to any potential negative spread between prices and costs in 27. We will do what we need to do.

Our next question comes from Natasha Brilliant from UBS. Your line is now open. Please go ahead.

Thank you. Good morning and thank you for taking my questions. My first question is just on the South American business. You showed the pie chart now that South America is now almost 20% of revenues. Is that the right mix or do you see further scope for acquisitions in the region? Can you talk a bit about the pipeline and your thoughts there? And then my second question is just looking at working capital. I think it's picked up quite a lot versus last year from what I can see. So could you just remind us of the dynamics and anything that we should bear in mind there, please? Thank you.

Thank you, Natasha. I will take the second question regarding working capital and its impact in our free cash flow generation. Free cash flow for the first half has been almost 30 million euros, an evolution fully aligned with our expectations for a full year. As already anticipated, this figure reflects the seasonality of working capital, where stock levels are pretty much under control and where movements are also under control. The main explanation comes from CAPEX seasonality, where execution during the first half of the year has been more intense, as already expected. And therefore, we are expecting robust fricasse flow generation in the second half of 2026, just underscoring our differential fricasse flow profile, which had approximately 200 million euros of fricasse flow as announced in full-year guidance and today graduated.

I will take the first question, Natasha, regarding South America. Let me remind that we entered South America basically some days ago, two years ago. So we are at the beginning of building the platform for future growth that we foresee. Things are going well so far. South America is a wide region. Even Brazil is a continental country. So I'm sure that you will probably agree with me that we will unavoidably see a number of potential interesting opportunities, okay? And we will explore, you can be sure that we will explore any of them. But for the time being today, what we are doing is trying to consolidate our new business in Chile, trying to consolidate our very solid business in Brazil, trying to analyze any potential opportunities to expand So it's time to keep counting for a while.

Perfect. That's very clear. Thank you. And if I could just ask one final one, if we could get the usual breakdown of volume and pricing by region for Q2, please.

Sure, Natasha. So let me provide first volumes and then pricing, okay? So for the first six months of the year at group levels, Q2, Q2, Q2, sorry. Sorry, Natasha. So going ahead to Q2.

Or H1, whatever's easier.

Okay, I give you Q2. So volume trends in Q2 at the group level has been slightly negative by minus 0.6% and going to a breakdown by business unit, Volumes in Europe have been positive, as we anticipated, by 1.5%. Volumes in UK and Ireland have been negative, improving from Q1 by minus 7%. And volumes in South America continue performing well, going by 4%. If we go to pricing, pricing at the group level evolved as expected, down by minus 1.7%. Thank you very much. That's very helpful.

Ladies and gentlemen, please be reminded that if you'd like to ask a question, you should dial star 5 on your telephone keypad. Our next question comes from Luis de Toledo Eras from Oddo. Your line is now open, please go ahead.

Good morning, thanks for taking my question. Just one regarding the UK and Ireland market and the import trends. Obviously, you have provided a few about volumes, but prices seem to be resilient. I don't know if you have any reading on the import pressure and Thank you, Luis. Well, it's true that we lost a number of businesses or volumes with customers in the UK and

Some months ago, probably a year ago, due to what I should consider abnormal levels of competition, mostly from, but not only from imports, and thus we are getting adapted. We are under a strict process of restructuring, process of cost reduction, and the result of this is becoming evident in our minds, okay? This is progressing well, but there is still some work to do. But let me insist that our margins are proving that we are doing the right thing and we are going in the right direction to make our future belongs to us. And so we will progressively see some recoveries on the volumes that were lost. This should become progressively evident during the remainder of this year and probably more in the next year, in 2017. Meanwhile, let me insist, profits and margins, profit levels even in value and margins relative to sales are broadly safe in the UK. And that makes me think that the UK is a core, the UK and the Syracuse are

core business for us really core business for us thank you very much our next question comes from Frasier Donlon from Berenberg the line is now open please go ahead hello can you hear me

Yes, but it's you, Manuel. We can hear you.

Manuel? My apologies. The next question comes from Manuel Lorente from Santander. Sorry.

Yeah, okay. No problem. So I have three questions, if I may. The first one is for Raúl. You mentioned... Some specific markers are gained throughout the entire year in order to offset somehow this muted volumes backdrop. Raúl, do you have the perception that you are gaining markers from key large competitors or smaller competitors?

Thank you, Manuel. Let me say that the perception I have is not a perception, it's a conviction that I can't share with you now in this conference call, okay? What we are doing is something that you will prove, seeing the numbers of some of our competitors, is something that we are doing intentionally with a real financial discipline. And, okay, we are just progressively and modestly recovering.

Okay, so my second question is on UK. You also mentioned that we should see some progression in terms of volumes throughout the second half of the year. Do you have the perception or the conviction that this improvement progression is volume? It's mainly because of easier comes as You have a more benign comparable basis as part of the clients you lost on last year or is, let's say, new clients?

This question is a key topic for us today. It will take some time for us to recover the volumes that we lost in the past two years. No more than 18 months, but this won't be fully captured this year. But for now, in the future, we will see a progressive, better trend in sales volumes in the UK. And why? Because our costs are getting adapted, because we are being able to get our prices adapted as well, and we are seeing that the level of competition is less intense and it was in the past, mostly due to the renewed inflationary pressures that some of our competitors, particularly importers in the UK, are suffering. So that gives us the confidence that our sales volumes will recover in the UK. Organically demand is still somewhat negative. and Iñigo Merino. still unexpected organic demand recovery.

Okay, great. And then my last question, it's on M&A. There is an intense restructuring from several of your competitors. Your strategic fit on the last year has been out of Europe into Latin America. Due to the fact of the mounting opportunities that are arising in Europe, do you keep this mantra of Latin versus Europe still valid, or you might see some tactical opportunities here and there in Europe?

Well, first of all, thank you, Manuel. First of all, let me... We are fully aware of the fact that the world is dynamic. The world, entirely. Not only the glass container industry. And so we are forced to remain dynamic as well. It's evident that our financial position should give us some advantages. But in terms of M&A, the message remains the same for us. We will actively analyze explore and in some cases build the opportunities that we consider interesting today we are fully focused on our current perimeter we cover sales volumes we need to maintain our margins under control we will invest and we will keep our priority in on cost competitiveness but we are always Okay, thank you guys.

Our next question does now come from Freyja Donlan from Berenberg. Your line is now open. Please go ahead. Morning. Can you hear me?

Yes, we can hear you, Freyja.

Perfect. I just wanted to ask about Chile. Could you maybe give an update on how the business performs specifically in Q2? And also, I know you had some ideas to increase a lot the kind of internal efficiency of that division. So any update you could give on the progress there since you acquired the asset? Thank you very much.

Thank you, Fraser. Well, you know that Chile is... Significant step for us because we are entering a new country and a new business but it's financially less relevant. Let me say that since the beginning we are trying to make and deploy our industrial model in Chile and we will see some benefits on our cost competitiveness there but there is a lot of competition in Chile. This is not surprising us It's probably surprising for people from out of Chile that this is the reality in Chile today. And we are battling under this reality with delivering better margins, better profits, and better sales. So that makes me think that we are performing well in this very preliminary Thank you. The next question comes from Ashish Ketan from Citi.

Please go ahead.

Hello everyone. Thanks for giving me an opportunity. I just wanted to check on capital allocation plan with respect to medium term. So currently your net leverage remains very low. So how are you thinking about the balance between M&A, dividends, buyback going into 2027? Are we going to see more buybacks or like we see more M&As? Thank you.

Thank you very much. It will be probably a combination of both. Let me say first that our solid financial position, our low levels of debt is not a target in itself. It's the result of the target. The target is to generate our ambitious level of sustained free cash flow. As long as we are delivering well in this target, our debt levels are We are reducing debt and this will nothing but put an additional, I agree with you, an additional and accepted and positive level of pressure to return cash to our shareholders. And we promise that we will deliver well from this. This year is not an exception. If you remind the Iñigo's explanations during the preliminary speech or the preliminary introduction, we are making up We will try to increase cash dividends if the business performs as expected. We will try to increase cash dividends with a purpose in mind because we want to maintain a sustained level of dividend growth. and we will combine cash dividends with other tools really like share buybacks as long as we have capital to allocate or to return to our shareholders.

Thank you, thank you.

Our last question comes from Iñigo Egusquiza Castellanos from Kepler Chevro. Please go ahead.

Thank you. Thank you for taking my two additional questions, if I may. The first one would be on the guidance that you reiterate today, Rául, which is a PTA of more than 450 million euros. The question is, if I am right, consensus has something in the reign of 450-51 million EBITDA for 2026. I don't know how do you see this number because making the numbers after the strong first semester, this 450 million annual EBITDA implies that H2 EBITDA would be lower than H2 2025. So I don't know how do you see this consensus number. It seems a bit conservative for me. This is the first question. And the second question would be more on a midterm perspective on the free cash flow that you mentioned, this 200 million euro. The capex... The last few years and this year has been slightly higher, 170, 180 million compared to the normalized capex. So my question is, when can we expect the capex to be more normalized level and to see a stronger free cash flow? If we normalize this capex to, I don't know, to a more normalized level of around 10% over sales. Thank you.

Well, thank you, Inigo. Starting by a second question, and it's true. We accept the message that our level of capex is abnormally high. This is purely intentional. We are investing more than pure replacement, and we are doing this for a reason. and this reason is progressively becoming real in our cost competitiveness and this is having a result in our margins resilience. And we accept in Vidrola that we do have a challenge to deliver results after this level of abnormal capex. Capex will get normalized soon in the future But not yet in 27. But this won't distort our levels of free cash flow. That means that free cash flow should even grow in the future, even after this abnormal high level of strategic and intentional high level of capex, if we are able to grow on operating profits. The first question regarding our guidance. Well, it's true that, and I agree with you, and this message doesn't surprise us, that our second quarter results probably will give us more confidence, credentials, to make our full year guidance on EBITDA real, possible. But it's also true that mathematically, It looks to you that the second half is probably excessively conservative, but let me remind that this is still too soon and the business is still full of complexities. Take a look at what is happening with energy costs in Europe. You can see that there is still an excessive level of competition, something that we have suffered a lot and we are still trying to deploy some restructuring action plans particularly in the UK and Chile. We will maintain the same approach so far and I will invite you to consider that this year's guidance is realistic and to keep an eye on the next year.

Thank you, very clear. Thank you, Rául.

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

Thank you. There is only one question through the webcast. It's a couple of ones, but it's the same question, which is regarding our energy hedging for 2026 and 2027. Maybe, Galo, you can take this one.

Thank you, Iñigo. So I would say that before turning into energy exposure, it is worth recalling that one of the most effective tools we have to protect ourselves against energy price adjustment formulas. So these formulas are multi-secured through long-term contracts with customers, and this allows us to pass through cost inflation. But in addition to energy paths or price determinants formulas, we have hedging policy with a mix of derivatives and options, as you are very much aware. South America is different in this case because energy prices are less volatile and mostly covered through adjustment formulas with customers. and as a result, approximately 70% of the energy exposure for 2026 and 60% of 2027 is heads through derivative instruments. And this means that almost all of our energy exposure in Europe and including the UK is fixed for the remainder of the year and a larger part for 2027, both at reasonably competitive levels.

Thank you. Before ending this call, I would like to take a moment to share a personal note. As some of you may already know, after almost 10 years with the company, Iñigo will be leaving his role as Corporate Finance Director to pursue voluntary future career opportunities. I would like to thank him for his contribution over these years. and wish him all the best in his next chapter. At the same time, we are evolving our investor relations function and which will now be integrated within the corporate development area led by Galo. This will allow us to continue strengthening our engagement with investors with the help of Unai and ensuring consistent communication of our study priorities. Inigo, we will miss you a lot. Investors and analysts, you will be treated with transparency, implication and dedication as always. Thank you.

So with that, we have answered all the questions sent to the webcast and by telephone. So 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 us.