Verallia,Courbevoie

Hello and welcome to the Veralia Financial Results for Financial Year 2024. Please note this call is being recorded and for the durations of the call, your lines will be on listened only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star 0 and you will be connected to an operator. I will now hand you over to your host, Patrice Lucas, to begin today's conference. Please go ahead, sir.

Good morning, everyone, and welcome to our call for Q4 and full year 2024 financial results. As usual, Nathalie and I will go through our presentation and we'll have a Q&A session at the end. I will share with you some key highlights, and Nathalie will present in detail our members. And then I will come back on our guidance. So to start with, just to remind you that Veralia is a global leader in glass packaging. We are number one in Europe, number two in Latin America, and number three worldwide. On this chart, you have our ID card. You have on the left the 24th split of our sales by segment. As a reminder as well, one of our strong assets is our customer base, more than 10,000, and the diversified end market in which we are operating. In 2024, steel wine represented 32% of our sales and sparkling wine, 12%. Spirits, 16%. Beer, 12%. soft drinks, 11%, and food, 17%. We do operate in 12 countries with 35 plants with 64 pharmacies after the closing of one pharmacy in Essen and the acquisition of two pharmacies in Italy. Please note as well that we are running 19 collect recycling centers, allowing us to control about 50% of our needs for external collect. Let's now move to some key highlights of 2024. Despite the market context, we have continued to invest and innovate through 2024, all of that to prepare our future. One, in July, we completed the acquisitions of Hidrala Italian Activity, confirming our strategy of investment in key markets. Integration is going on, and as expected, with many synergies already in place. Two, we commissioned the first electric furnace in Cognac, dedicated to flint production. This launch is a success. we confirmed a CO2 emission reduction by 60% compared to a traditional furnace. This is a key milestone confirming the robustness of our decarbonization roadmap. Pre-lightweighting is a trend, and in 2024, we launched a new standard of 300 grams for a 75-centimeter borderless bottle with our so-called Air Range This offer is getting a global recognition from our customers and from the glass industry. We will keep on pushing the limits with our air range. For people being the most important resource to do our business, we have structured in 24 our employer brand strategy. And it is now a key pillar within our strategy. And finally, five, we successfully issued a new Euro senior bond for a total amount of 600 million euros, reflecting the confidence in Veralia. And as a result, we have no significant debt maturity before 2028. On the CO2 emission, France. We are progressing towards our 2030 target of a reduction of 46% compared to 2019. Scope 1 and 2 are down by 9.4% compared to 2023, meaning that compared to 2019, emissions are down by 23.7%. The efficiency of our actions are clearly demonstrated with a reduction of our emissions in intensity, 0.44 ton of CO2 per ton of glass in 24 compared to 0.47, which is a reduction in intensity in 24 compared to 23 by 6.4%. Our external QLED usage has reached 56.7% in 24, plus 2.6 points compared to 23. Obviously, our acquisition of Ecosan treatment collectivity in Spain has supported this performance. And finally, our low-carbon electricity share went up to 64% in 2024. To make it simple, we are on track with our decarbonization roadmap implementation. Let's move now with some 2024 business insights. About 2024 market, as we presented and anticipated in July with our H1 results, market conditions in 24 were not as good as the expected one beginning of 24. Consumption in Europe was soft for a year, and recovery much slower than initial assumptions. This stocking was at play for most of the year, in our view still active in spirits and on some other products significantly exposed to export share. In addition, the growing trade tensions have created and are creating uncertainty, impacting export-oriented markets, leading to cautious positions of many customers. In Latin America, on the opposite, market was very supportive. And last but not least, about capacity, we saw some acceleration in capacity shutdown across Europe and North America, everybody being cautious with capacity management. And if we just take Europe compiling the official public announcements, since end of 2023, we count 11 furnace shutdowns. About our mitigation action plan, a quick update of what we have presented in our latest course. One, on pricing, we have continued the discipline pricing policy, taking into account the context of demand and available capacity. But we will focus on value-based pricing. Two, we made the appropriate decisions on capacity adjustment. The utilization rate of our installed capacity averaged 90% over the year, leaving 10% of our capacity unused. And as a reminder, we closed one furnace in Essen, Germany, with a voluntary departure plan of 90 people. Three, our productivity and cost control action plan delivered strong results, with PAP saving the 2.8% of cash cost and SG&A down compared to 2023. Finally, focus to support cash generation was key, adapting CapEx to the context and keeping working capital under control. Before giving the floor to Nathalie, a quick overview of our Q4 and full year 24 results. So despite the challenging market, we are delivering robust profitability above 24% and organic volume growth in Q4 is confirmed. Q4 revenue is down by 1% year over year. Full year 24 revenue is down by 11.5%. Adjusted EBITDA in Q4 is 201 million euros, plus 4.3% compared to Q4 23, with a margin of 24.5% plus 125 pips versus Q4 23. And for the full year, adjusted EBITDA is 842 million euros, minus 24% compared to full year 23, with a margin at 24.4%, minus 401 BIPs compared to last year. Net income is 239 million euros, minus 49.8% versus 23, giving an EPS excluding PPA at 2.38 euros. About net depth, leverage is at 2.1 at the end of December, compared to 2.3 at the end of September, and compared to 1.2 at the end of 2023. And please note that at the next annual general shareholders meeting, a dividend of 1.70 euros per share will be proposed. I do not comment the extra financial indicators as I just did previously. So now let's see the details of our financial numbers with Nathalie.

Thank you, Patrice. Good morning and good afternoon, everybody. So let me lead you through the usual sales and EBITDA and cash for the year 2024. So we start with Q4 2024 Consolidated Revenue Bridge. So you see that we moved from 829 million euro sales in Q4 2023 to 821 million euro in Q4 2024. So pretty stable numbers with different pillars. So the volume pillar is positive in the fourth quarter. We have volumes that are up organically in Q4, low single-digit growth, and basically the comment here is that we saw in Q4 for volumes very similar organic growth versus Q3, so in the full H2. And on top of that, we benefited from the positive contribution of the Vidrella Italy operations that we acquired in July 2024. These are to be seen in the perimeter pillar on the bridge. Then the price mix, as you can see, is significantly negative with minus 94.4 million euros. We have growth-based price declines in Europe, and the impact was mainly in H1 for negotiations, so we have the effect of these H1 negotiations in Q4. Mix remains slightly negative across all regions. and the negative price mix impact is mainly in the South and Western Europe region. The exchange rate impact is also slightly negative with 11 million euros. And one very important comment about Argentina in Q4. Let's remember that in December 2023, there was a significant devaluation of the IRS in Argentina, 50% devaluation. And then, because of the high inflation country, we had to revalue the full sales and EBITDA of the year in December in 2023. So that's why, by comparison, you will see both in EBITDA and in sales for Q4, big positive numbers in Argentina. It's more that the Q4 2023 numbers were very low for Argentina, even leading to negative sales for the quarter three. If we move to the full year, so the revenue bridge is showing that we are moving from 3,904,000,000 euros to 3,456,000,000 euros. The organic growth, as Patrice mentioned, is minus 11.5%. for the full year, and this is minus 14% if we exclude Argentina. We have volume down in the full year, but again, organically, we are up in H2, which is showing signs of recovery. So you can see that the volume pillar here is negative, even if, again, we have seen that in Q4 it was positive. Volumes are down year on year, mainly in Europe, so mostly in spirits and wine, and we see positive contribution again in H2. And in Latin America, we have a strong positive contribution with solid beer and still wine performance. And if you remember, we have additional capacity, one furnace more in Brazil, supporting this trend. The price mix pillar is negative €366.3 million. We have, again here, negative contributions from the price reductions in Europe, mainly in H1, and we have a slight negative mix impact over the year. The FX perimeter, in fact, is negative with minus 32.4 million euros. You can see the perimeter that is mainly Vidrala Italian glass business, but also our collect treatment centers in Iberia that were acquired in Q4 2023, and the Argentina as a separate pillar. So moving by region, you We have this decline in revenue for the regions, for SWE and you will see for North and Eastern Europe. So in South and Western Europe, at constant exchange rates and scope, the decrease is minus 12.7%. So, we have here a combined effect of what I commented on the volumes and also on the prices with some negative contribution of a mix despite a better H2 here. And in Southern Western Europe, of course, we have the impact of the acquisition of Vidrala Italy in July 2024 as a scope change. If we move to North and Eastern Europe, this is where we see the most significant decline, minus 21.6% at the constant exchange rates and scope. Revenue decline mainly in Germany and in the UK. So Germany, you know that we adapted capacity on a permanent basis with one furnace in Essen. to adapt to the situation. So, main impact coming from beer. We have seen, though, a good pickup, especially in food jars in Q4. And UK is mainly, you know, that it is very much focused on spirits, high-end spirits, so that are hurt significantly in the market, with this talking still ongoing in the segment. If we look at Latin America, we are back to positive numbers with plus 21.1% at constant exchange rates and scopes. And here again, I already commented that we are enjoying good volumes, especially in Brazil. And we have the support of our new Jacutinga furnace. Chile is also with a positive momentum, especially in Q4. Then the price and mix effect overall for the region is positive. You know that we are pushing the inflation to our customers in the region. So how does that convert into adjusted EBITDA? Let's look now at the fourth quarter, Q4. So our EBITDA margin first on the top right is 24.5% in the quarter. That is better than Q4 2023. That was 23.3%. If we look to the left, so we moved from 193 million euros to 201 million euros ABDA in the quarter, so a better quarter. And you can see on the pillars that the activity pillar is positive, plus 35.6 million euros. So, we already commented the organic volume effect, and we also have the effect of inventory variation. Again, let's remember that in Q4 2023, we were adapting very significantly our capacity, slowing down in order to reduce our inventories, while in 2024, we are more maintaining our inventories. If we look at the spread, we see a negative spread, so minus 63.7 million. This is driven mainly by lower selling prices that are not upset by lower costs. And again, here is more the effect of the price adaptations that were made throughout H1 that are still running in the fourth quarter. If we look at the net PAP, we have a very strong performance, as commented by Patrice, and this is for the full year, you will see as well. We are well above the 2% that are our target, with 3.1% cash production cost reduction in the quarter. So, very strong performance here. In the other, you have the effect of the perimeter, so the contribution of Vidrala Italy operations, and also some SG&A cost reduction leading to a positive number of 6.3 million euros. The negative FX impact is due mainly to Brazilian reals, and then you have a Argentina with the comment I already made about the devaluation in Q4 2023. So for the full year, the bridge We are back to negative numbers in activity, but again, you have seen the positive momentum for Q4 with minus €165.7 million in activity. For the spread, it's the main negative driver, minus €200.4 million. So here, again, same comments, mainly driven by selling prices. And even if we had some deflation in cost in 2024, it was to a lesser extent, and some small negative impact. The PAP is strongly positive, €61.9 million positive. That is a 2.8% cash production cost reduction. The other, again, includes mainly SG&A reductions and contributions from Vidrala Italy operations. You have the FX mainly driven by Brazil and Argentina, back to more normal numbers for the full year. So by regions, very quick, we have South and West Europe adjusted EVDA evolution, so down by 24.5%, so leading to €548 million. You can see on the top right that the margin keeps in the group average at 24.1%, of course, decreasing versus previous year. And here, as commented, I mean, the pillars are exactly as I commented, because they are mainly in Europe. And you can see that the industrial performance was strong. And here, of course, we have the impact of the perimeter from Vidrala, Italia, mainly. North and Eastern Europe, we have here a lower contribution with an adjusted EBITDA of 147 million euros, so declining by 39.7%, and the margin is 19.4% compared to 24.9%. So here we are accumulating, of course, the lesser news on Germany and the U.K., which I already commented to you. And even if PAP was extremely strong, 3.8% with the UK joining and fully deploying PAP and Germany doing a very good job, this is, of course, not sufficient to compensate. Latin America is showing a very nice increase. So adjusted APT of 147 million euros increasing by 6.4% and 18.9% excluding effects impact. And the margin, if you see on the top right, keeps very strong at 34.4%. Moving to cash elements, so CAPEX has been contained significantly down versus last year and below 10%. So, at 9.4%, you have here the split between recurring and strategic. So, all in all, in the year 2024, we have maintained a strict control on CAPEX and on spend in general. but not renouncing any of the strategic investments. So, you can see in the comments the two new furnaces, one in Campobo in Brazil, one in Pescia in Italy, are under construction. And, of course, Patrice already widely commented the CO2 capex that will lead to decarbonation. So Cognac started this year in 24, sorry, and Saragossa hybrid furnace being under construction and coming this year. So the cash flow generation for the full year ended up positive with 82.6 million euros. Of course, if we compare to previous year, the main impact here is the gap in the APDA that you can see in the first line. We have, again, controlled our CAPEX, so this leads to a cash conversion that stays well above 60%, at 61.6%. In the operating working capital, we see a negative number, and remember that our CAPEX VCR, especially in Q1, was very negative. with a high investment in Q4 2023, so minus 65 million euros. On the other impact, other operating impacts include IFRS 15 adjustments and APGA impact without... cash effect. Interest paid are very much contained at 80.4 million euros. And the cash tax is heavy in the year, 148 million euros linked to some, you know, that we are paying in 24 taxes related to 23. So you've seen the leverage 2.1 times improving versus September. Both adjusted DPDA is improving and the net debt is reducing thanks to the cash flow generation in the quarter. And in the year, let's remember that we paid 252 million euro dividends and made the acquisition of Corsico for 250 million euro. Here you have the finance structure and liquidity. So, in main comments here since last call is the bond issued in November 2024 that Patrice mentioned, 600 million euros with a nominal rate of 3.875%. And we have have a new revolving credit facility of €250 million that you can see here. So, that leads to a comfortable liquidity of €952.7 million at the end of the year.