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.

Okay. Thanks, Nathalie. Before speaking about our guidance, I would like us to step back a few seconds about our performance and our track record since IPO. Obviously, one year ago, we were more ambitious with our initial guidance for 24. We are expecting a much more supportive market in Europe and a stronger recovery with a faster dystopia. And we know now the reality of the market. And that 2025 will still be a year of normalization with still some uncertainties. So if we consider the market conditions we face in 2024, a soft-end market, available capacity, premiumization being challenged, aging weighing on our cost. So if we put that into perspective, we can admit that our 2024 EBITDA is a robust and a very positive result after the two outstanding performance in 22 and 24. Delivering a result in 24 close to 22 under a bearish market with adverse micro-conditions in a so-called fixed industry is a clear demonstration of our agility and ability to adapt. It's a clear demonstration of our fundamentals and all of that is very positive for our future. And between 2019 and 2024, finally, the company has delivered an EBITDA CAGR of plus 7%. And at the same time, with our proposal of dividend of 1.70 euro to the annual general shareholders meeting, since IPO, the cumulative return to shareholders will be a dividend of €8.1 per share. And including the share buyback done over the period, the cumulative total return amounts of more than €1.1 billion, which is, in our view, good value creation for our shareholders. For 2025, We still see a market normalization at play before structural trends and fundamentals taking over again. And as already mentioned, through the last comments of our customers, we see everybody being cautious with 2025. And the key words are demand normalizing, stable consumer environment, uncertainty, Some are even removing their mid-term guidance due to lack of predictability. So therefore, for 2025, we expect consumption and glass demand to normalize in most segments, but end demand still soft and potential negative effect impacts from tariffs for the export-oriented market. We expect a negative spread variation to wait on ABDA due to carryover from 2024 price decrease, and that mainly in H1. We expect business to keep running below full capacity. We'll keep on adapting production when necessary. But we will launch in Brazil in Q2 a new furnace, and a new furnace at Pescia in Italy before the end of the year. This last furnace in Italy will be dedicated to food segment with production of jars. We still expect a positive momentum in Latin America, and we will still be active in implementing our ESG roadmaps. Our first hybrid furnace will be commissioned in Saragossa, in Spain, in the second part of the year. And finally, we will seize any MEA M&A opportunity. And beyond 25, we see consumption recovering as fundamentals are still positive. We foresee spread being neutral as inflation normalizes and entire price variations end. And if installed capacity being adapted, we expect business to gradually get back to full capacity usage. In other words, solid fundamentals for glass packaging are still on. So for our 2025 guidance, despite uncertain environment, with still soft European consumption and carryover effect from 24 price, we aim to achieve an adjusted EBITDA close to the one delivered in 24 and to more than double our free cash flow generation to be around €200 million. This free cash flow generation will be supported by a capex level that will normalize around 9% compared to the 10% in the previous period. Focus will be clearly put on free cash flow generation. And finally, we want to inform you that we are planning to present our strategy, our mid-term outlook, as well as our capital allocation policy during the capital market day in September. Thanks a lot for your attention, and now let's move to our Q&A session.

Thank you, Patrice. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, please press star 2. Our first question comes from Louis Weiser from UBS. Your line is open. Please go ahead.

Good morning. Just wondering, three questions, please. So, the first one is around the guidance for 2025. I was wondering, what does that imply for volume and price on the top line, please? The second one is with regards to the price-cost spread for 2025. You mentioned it would be negative. Are you able to quantify it a bit more? And the last one is with regards to tariffs. So I understand that it will be hard to quantify, but is there any more comments that you can make around how you think about the potential impact on your business of tariffs from China on Cognac and tariffs from the U.S. on European imports, please? Thank you.

Thanks a lot, Riza. So For guidance 25 for the volumes, so we do expect a slight pickup in activity compared to 24, as we see consumption being up, but very low single-digit, let's say. And in terms of volume for us, we see something between low to mid-single-digit growth in volumes. And I'm answering directly the tariff topic, because as you said, I mean, it's quite very complicated and difficult for us to estimate that. Obviously, we do not have a direct impact on the impact of food, the export of our customers, mainly in spirits and still wine products. So much more difficult to look at that, but we are to qualify that. We are much more vigilant. We do believe it could be embedded already in what every customer is saying about it and in what we are seeing for our activity being allowed to meet single-digit growth in volume.

Regarding the spread, I can comment a bit more. We've been saying for a while now that we will have a negative carryover effect from the selling prices having been lowered throughout the year in 2024. So that's why we know for a long time that we have this negative impact entering into 2025. As for the costs, what we see is that inflation in Europe is increasing. coming to lower levels everywhere. We also anticipate still a bit of improvement in some lines, like Colette, a bit of deflation. So, all in all, we should have a pretty flattish evolution of costs and moving into prices in 2025. Maybe some selective price cuts, but everything moderates. So the main impact, again, is coming from the carryover effect from 2024 entering into 2025.

Thank you. And sorry, what did you say for the price on the top line? What is your expectation on the price on the top line?

So prices, I said some selective cuts maybe on prices. And then otherwise, you know that our strategy is to ensure a neutral spread entering into the year, meaning we look at cost evolution and this gives us what we need to push or what we can keep with customers. So we try to ensure a neutral spread entering into, I mean, from January onwards. But again, we anticipate to have to make some selective cuts in prices due to the environment.

Thank you.

Thank you. We're now taking our next questions from Lars Gelberg from Stifel. Your line is open. Please go ahead.

Thank you. Just coming back to the price-cost spread, and if you look back a bit on 24, I mean, your hedge programs, I think you commented that before that there was sort of a net negative as you had some higher-priced hedges versus where spot markets were. And as we trend, you know, move into 25, you earlier talked to, broadly speaking, a sort of equal price. energy costs in totality. So what I'm trying to understand now, if you can comment again how you see specifically the energy cost inflation for you. And at the same time, of course, we've seen a significant price increase for natural gas. How do you think that's going to impact overall market prices? And as such, I was a bit surprised to see you still talking about selected price declines. So putting that into context with you know, the search we've seen in gas prices. Any comment on that would be helpful. Thank you.

Thanks a lot, Lars, for your question. So you remember that we have an aging policy, which is for 2025, where we covered ourselves at the end of last year. for 80% to 85% of our estimated needs for energy for 2025. So it means that you're right. Based on our coverage and our aging, we are well positioned, let's say, compared to 2024. But as you mentioned, for the remaining part, which is not covered, which is between 10% to 15%, let's say, of our needs, you see the volatility of the gas. And it's quite amazing the volatility we have seen in the last weeks. going up to 58 euro per megawatt hour and then now down below 50 euro. So this part obviously will impact us. You can guess that it will less impact us than some competitors who do not have some aging policy. But this is how it's going to weigh or not for this non-aging part on our cost. About pricing, I mean, obviously, as it has been mentioned by Nathalie, we want to be disciplined, we'll be disciplined, but we have to consider as well the market reality and this gap between market and available capacity. So we'll be chirurgical, let's say, specific. and it's not at all the same configuration as the one we had in 22 and 23. So it's difficult to make a direct relation and difficult to comment what the others are going to do, but we are going to defend ourselves in a disciplined way.

No, it sounds very positive here. Thank you. Apologies, it sounded like I interrupted you. Were you going to say anything more? Apologies. No, no, sorry. No, no. Okay. And then when you are now looking into the outlook, I appreciate all the uncertainties that you're seeing, but can you give us any sort of flair of how much capacity were actually taken out from Europe in 24? You talked about the 11 furnaces. How does that compare to the demand decline when it comes to the supply side?

So, you're right. So, all of that is obviously the compilation of the data we are doing for our business intelligence. And you're right, since the end of 23, it's 11 furnaces which have been shut down, or to come in the months to come, let's say. And this 11 furnace does represent about 1 million of tons, let's say, which is about 5% of capacity in Europe. So difficult to say what is the remaining of a capacity. But in our case, and this is what I mentioned for 2025, we still see us not using 10% of our capacity as an average over the year. So it's participating to the reduction of the gap between the demand and the capacity. We can estimate that it could be half, let's say,

Well, we got it. Final question from me. Activity was a pillar that was very negative last year, and obviously you built inventory in 2023 and even normalized it, I guess, in 2024. And you spoke to sort of low to mid-single-digit volumes in your system, which, of course, is then positive for activity. Can you at all anticipate any or give any guidance on what you think about inventory variance in 2025?

Yes, so inventory, I'll take this one. You very well understood the dynamics in 2024 for the inventories. And what we see for 2025 is more stable inventories. Because as you very well reminded, in 2023, we had to rebuild inventory. Then from now, we are maintaining the inventory at the current level. current level. So in 2025, the variation coming from inventory should be much smaller. There is always a variation, and there is a bit of seasonality between H1 and H2, but for the full year, we won't have the same changes.

Do you dare comment positive or negative or just neutral?

Yes.

Yeah. Okay.

Thank you. Absolutely.

Thank you. We will take our next questions from Francisco Ruiz from BNP Paribas. Your line is open. Please go ahead.

Hi, good morning. I have three questions. The first one is on the spread, mainly on the court side. We have seen costs reducing significantly in the last two quarters, and my question is, First, if you could explain what has driven this, if it's just Germany closure or something else, and what should we expect for 2025, and if you could detail some of the initiatives. The second question is on the expectation from production curtail for 2025. I would like to know what's your current situation and whether you expect to be at the end of the year. And finally, on Argentina, you mentioned that you have a bid. I understand that you can't disclose the potential buyer. Could you give us an idea of what's the profitability of Argentina? If it's above or below, please, Latin American business. Thank you.

Sorry, Francisco. Can you repeat the first question? Because, frankly, we're not sure we understood it.

Okay, sorry. So the first question is on the spread, but more on the cost side than in the price. So there has been a big reduction of cost in Q3 and Q4. So I would like to know what are the reasons for this. It's just the closure of Germany. And what are your expectations for 2025 and the initiatives that you are taking in order to reduce costs? Because it's part of your guidance of setting part of the negative prices with the cost initiatives.

All right. Okay. Thank you. So what you have in the spread, Pilar, is the inflation or deflation in costs. When we are having initiatives to reduce the run rate of costs, you will find that in the PAP pillar. And I commented that our PAP performance in 2024 has been very strong and well above the 2% that we are targeting. So when we present the spread pillar, we are really looking at the unit cost inflation or deflation for costs. So, the deflation that we had in 2024 is linked to deflation overall on energy, on raw material, all that we commented throughout the year. And moving into 2025, as I said, what we see is more a flattish inflation because we will have... still inflation on, for example, labor cost. You know labor cost is about 20% of our total cost, and we are following the country inflation. So even if inflation in Europe is lower, there is still some inflation. And in other categories, like raw materials, we anticipate a bit of deflation mainly coming from the collect, the normalization, I would say, or at least the decrease in collect prices, mainly in South and Western Europe. So the combination of all of that is showing something pretty neutral for 2025, Francisco.

Okay, and Francisco, so for your second question about capacity, so for 2025, we see an average at group level of 10% curtailment. This is what we see as an average for the year. Obviously, which will be adapted according to market conditions.

Sorry to interrupt you. So, you do not expect volume to jump so much? and you expect to have two furnaces during the year, one in Brazil, and containers continue to be at 10%?

Yeah, so Brazil is a total different story, obviously. There is no curtailment topic in Brazil, and we run at full capacity. So the 10% I'm giving is an average at group level with no impact, with no curtailment at all in Brazil. And the furnace in Pescia, in Italy, we are planning to start, sorry, to commission, is really at the end of the year. It's really at the end of the year with some business to come and to be ready for 2016. Okay. Okay. Okay. And about Argentina, so as you have seen and as we have mentioned in our PR, so we have received an unsolicited proposal for the acquisition of 60% stake in the Argentine company. So our duty is to investigate if it makes sense for the company or not to sell. If we have good value for it, we'll see if we make a decision, a positive decision or not. This is under investigation. And as we speak, we do not reveal the detailed profitability. We have just mentioned that it's a business which is generating 444 million euros at the condition of pesos, euros at the end of last year. So we are doing our duty in investigating this solicitation.

And do you have any timing for this decision?

It's going to take a few months, as usual in this kind of process. Once, obviously, we'll have more information, and we'll come back to you on that. Thank you.

Thank you. We will take our next questions from Philippe Laurent from Bernstein. Your line is open. Please go ahead.

Good morning. Thanks for taking my question. So I would like to come back a little bit on your comment on volumes for the year overall in 2024. Do I understand correctly that throughout the year, volumes were down by only 1% roughly?

Full year, yes. This is what we commented when this was our last guidance, which volumes globally to be flattish to low single-digit down. Yes.

And could you walk us again through the different quarters, what the effect was at global level?

So for Q3, if you remember, we confirmed that for the first time the volumes were up compared to previous year, mid-single digit. Finally, the Q4 is in the same trend, about the same. So we had an H2 which is up. Obviously, with the impact of our acquisition of Vidala, but even organic waste, we are up compared to last year. And all of that leading to, again, a flattish to go single digit down in 24.

Okay. Perfect. And then I have a couple of questions regarding the other unsolicited offer that you might receive or that shareholders might actually receive, the bid from BWSA or BWGI. Okay. I was just wondering, because in your statutes you have doubling voting rights for shareholders holding shares nominatively for a period of two years. I was wondering whether you could comment on maybe the number of shares that BWSA or BWGI holds now nominatively and since when? Because if I look at the number of voting rights that they have and I compare it to the number of shares that they hold, some of them must have doubling voting rights already. And I'm wondering when the rest might actually double. So that's the first question. And the second question also regarding the bid from the Brazilians would be regarding the financing. If I'm not mistaken, the two oldest bonds that you have, 500 million each, they have a change of control clause in their prospectus, meaning that if there's a change of control, maybe the note holders would come back to you and seek repayment, anticipated repayment. What's the plan in case... Has somebody had thoughts about that, especially on the side of the Brazilian? And maybe you can update us as well on the most recent bond regarding potential change of control clauses there as well.

Okay, thanks a lot for these two questions. To be honest, your first one is very technical. So, just to remind you, you're right, as we speak, BWGI holds around 28.84% of the company's share capital and 27.9% of the voting rights, which is making it the Alia reference shareholder. Just about this project, because I just want to remind that it's just a project, as we speak. We have not received any formal proposal from BWGI. Everything has been said through a different press release, so we may receive one offer. If it is the case, obviously, we'll inform immediately the market if such a tender offer is confirmed. Another reminder as well, the company board of directors has set up an ad hoc committee composed exclusively of independent directors within the meaning of the asset MEDEF code, and to monitor the work of a company's board of directors in connection with this potential tender offer. So, the board is going, this independent committee is going to work if it's confirmed, submitting an AV recommendation to the board. And the question you are mentioning about financing is obviously one of the questions which will have to be dealt with. So... Nothing really more to say at this stage. And if you just allow me maybe to anticipate some other questions we could have. BWSA through BWGI knows, obviously, the company. We know them. And what they have mentioned through their PR is that for the business, the keyword is continuity. its continuity of the management, its continuity of the strategy, and supporting everything which has been done so far.

I understand that. I was hoping maybe a slightly more precise answer regarding these shares held nominatively because that's probably going to be decisive in PWGI reaching what they want, which is actually like achieving control on the company. Because doing the math, they would probably need to raise just like a high single digit percentage from their author. And that could be from existing big shareholders or just like on the market. But guess where you're going to see that. But yeah, I understand that you might not have any precedent to give.

No, at this stage, and to be honest and to be clear on that matter, the board is managing that, and myself and the management team is really to be focused on the execution of all our action plans, being short-term to deliver our members and being medium-term to prepare the future.

We can confirm that they have no double voting rights. They are opposers, so there is no double voting rights. So, as Patrick said, they have, as of today, 27.9% voting rights.

Yes. Okay, that's a good precision. And maybe just a quick follow-up as well, if you allow me. You're mentioning that for 2025, we run at utilization rates of roughly 90%, and I think it was what you had as well for more or less 2024. So what's the historical normal level, so to say, and what's going to be the aim going forward, like after 2025?

In normal condition, we are full speed, so full rate, except the maintenance and the total repair we are doing. So it depends on the calendar of them. On a regular basis, I mean, it does represent 2% to 3% for total capacity.

Okay, perfect. Thank you very much. I'm back in the queue. Thank you.

Thank you. We will take our next questions from Manuel Loren from Satender. Your line is open. Please go ahead.

Yes. Hi. Good morning. Just a quick follow-up first on the BLMA approach. Whether you can give us a sense of timing through the process, that would be helpful. regarding the approach of the main shareholders. whether you can give us a reference in terms of timing. You mentioned that there has been an independent board of directors that has already set up some meetings to analyze the potential deal. So are we moving to a weeks or months scenario regarding any consideration of the potential deal?

Well, I mean, so first of all, again, this timetable and this timing you're referring to, first, we need to receive the offer again, and I do insist on that. And two, it will depend on the work to be done, and it's a board decision, and the board and their respective advisor will have to analyze in detail the offer. And at that time, there will be a communication of the timetable of a transaction. Obviously, all of that being compliant with the applicable regulations, et cetera. But, I mean, I can anticipate and tell you that it's not a question of weeks, but much more a question of months.

And how that might affect your upcoming capital market day? I mean, because I believe that it might be complex to set up a capital market day in September if we are moving to a potential choppy scenario in terms of shareholders in the coming months.

Yeah. So, obviously, why we put it in September, according to the latest information in this potential project, let's say? And two, let's keep in mind as well, this is what I mentioned, BWSA is already part of the board. They are supporting the company since day one. So I would say seeing from the company the strategy and what we have to do and all the challenges we have to face, it's a no-brainer. So this is much more, we are much more in the continuous process. Yeah. Okay.

And a question probably for Natalie. Can you be a little bit more precise regarding the impact of the PIP plan for 2025? Whether the 2% overcast cost is still valid, or you are thinking more to the 2.8 of this year, or even nor 3% as has been the case on the second part of 2024. Thank you.

Yes, so our target remains to be above 2% of production cash costs, which is already a minimum of 50, 5 million euros. So between 50 and 60 million euros, is our target, and it is the target for 2025. So you know that for us, this is an ongoing process, an occurring process. It's not a one-shot effort. So we have that in 2025, 2026, etc. Of course, the more we can do, the better, for sure. In our forecast, we do not forecast such high numbers as the 3% that were delivered in Q4. But, of course, if we can do better, we will do. So, let's say that in our guidance, we embed more above 2% to come to the conclusion.

And just my final question on the free cash flow guidance for this year, the 200 million euros. That implies a positive delta of roughly 120 million euros versus 2024 free cash flow. Given the fact that You are going to have limited benefits from cash earnings in the sense that EBITDA this year is going to be similar to last year. And you mentioned that capex over sales will be close to 9% versus the 9.4% this year. So that implies a 20, let's say, positive impact in free cash flow. Where is the rest of the 100 million euros coming from? It's just pure working capital. It's the, let's say, less leakage from the other line that has been dragging down free cash flow this year.

No, it's a very good question, of course. So, you are right, working capital is a key driver. Remember that, first, the VCR on CapEx is very negative in 2024, minus 75 million euros. And as we plan to keep the same level of capex, will be very vigilant on this VCR. So that's one driver that we do not anticipate as negative in 2025. On the rest, I mean on the operating working cap, there is also improvement planned in 2025. And we have one driver that is significant on the cash tax as well. As I commented, in 2024, we have 148 million euro cash tax, which is heavy for the year because basically you are staying with one-year delay. For next year, we see a significantly lower cash tax. So the combination of these three drivers help us mitigate the fact that the ABDA, as you very well said, is planned to be at best at the same level.

Okay. Thank you. Thank you. Drew?

Thank you. We will take our next question from Jean-François Grinchon from Adobe HF. Your line is open. Please go ahead.

Yes, thank you. Good morning. First question, just come back on the pricing. Currently, you have some negotiation with your clients, I think. Could you give us some color about what's happened? Can you increase the pricing or not, or limit the decrease? What's happened? Can you explain or give us more color about the trend of the negotiation you have currently with your main clients?

Okay, Jean-Francois, thanks for this question. So a big part of the negotiation is on. Some is already concluded. We are going to conclude all of that, let's say, by the end of Q1. As usual, we still have some remaining, but small ones, which will be in July, depending on the different contracts. What we see is that due to the market situation, we have, as an average, and obviously you have to go in details, country by country, it could be different, and even segment by segment. But as we see, and this is what we commented with our spread in 25, We have to give some low single-digit price reduction compared to what we did in 2024. In some cases, we are able to delay 2024 to 2025. So to make it simple, we have a carryover effect of 2024 to 2025, and we see an additional low single-digit dollar. And roughly, we are there, but still a part to be done until the end of Q1.

Okay. Thank you. The second question, so I just want to come back on the spread effect. The spread was quite huge and negative last year, 200 million rows. So you confirm a negative spread effect for 2025. In which magnitude? So compared to the huge level 200 last year, do you expect a huge decrease regarding this level? Also, could you have some more color about the impact, the huge impact last year?

We are not willing to give such information at this stage. What is clear is that the magnitude of this negative will be not as assured. It has nothing to compare. Because if you remember in 24, we are comparing to 23 where we had price increase. So it has nothing to compare, nothing at all to compare. But it will be negative again because we still have some carryover effect from 2024 to 2025.

Sure. Okay. And last question from my side. Regarding the Argentina, you mentioned the interest for the acquisition. or your subsidiaries. But regarding the strategy, what is your position? Do you consider that Argentina remains an interesting and attractive market for you? When we see the huge contribution for the earnings from the LATAM, could we consider that Argentina remains a strategic country for you or not?

What I can say, I can say that LATAM remains a strategic region for us. As in every company, at a point of time, you can make a review of your portfolio, geographic deployment, and then here we have this unsolicited offer. Clearly, we are not willing to sell. But as a duty, we need to do our job and to see if it makes sense at a point of time. And if we have a good financial deal, we may sell our stakes in this Argentinian company. to do I mentioned that we will still be active on M&A if we have nice and good targets creating value and this will redeploy at a point of time in over geographic zone or consolidating if it makes sense in one of the countries we are so this is all about that this is the life of a company reviewing portfolio, reviewing geography and all of that So it was important for us to mention that. But we have this, which is, again, unsolicited. There is no decision made at this stage. But if we do it, it's because it will create value for the company and our shareholders. This is all about that. And obviously, I may say, obviously, we consider as well our people in Argentina, and if we do it, it's because we believe it makes sense as well, and it is not negative impact on our Argentinian people there as well. Okay.

And my last question concerns the guidance. I'm a little bit surprised by the moderate... guidance mentioned for 2025. If we take into account some little increase for the volume or better volume compared to last year, I understand that we expect some strong PAP impact effect and a more limited negative spread impact. Why are you not more For 2025, what is the model guidance mentioned for 2025?

I mean, again, the context is quite complex to read with all these uncertainties. We see our customers being cautious. So on the activity pillar, We are making a hypothesis, which we believe is realistic, but let's see. So, bottom line, we see a slight pickup in activity. We have our PAP, which will deliver, as usual, let's say, our 2% minimum cash cost reduction. And then as a negative impact, we'll have this negative spread, as we explained. And we still see as well some additional risk on forex, especially coming from Brazil. So all of that, when you make the balance, you are close to, in our view, you are close to 2024 level.

Okay, understood. Thank you.

Thank you. We will take our next questions from Fraser Donlon from Barenburg. Your line is open. Please go ahead.

Good morning, Patrice and Natalie. Fraser from Barenburg. I just had three questions. So the first is on Germany. You called out, I think, globally quite positive trends in beer, but it seems Germany is still very weak. So could you maybe just help me understand what's kind of, I'd say, structurally going on in Germany? The second question is about you kind of mentioned there's 11 furnaces closed in Europe and I think you only closed one in essence so quite a low number relative to your market share so I guess is there kind of a risk that you might need to take further actions on the asset base this year especially if you open Pesha at the year end and then the final question was about the Ukraine could you just remind me kind of how your site there is operating and kind of in terms of the number of furnaces which are operational, etc. Thank you very much.

Thank you, Fraser. So, you're right. So, Germany is one of the markets which is facing more difficulties, I would say. So, this is why we decided there to make a structural decision last year. linked with some delocalization of bottling from Northern Europe to other countries, South America, South Africa, and all of that. We see that globally, the German economy is quite down as well, two years of recession. So globally, it's a real bearish market there. In our view, for 2025, we still see the consumption, especially in Germany, being down, slightly down, compared to other countries in Europe, which is going to be slightly up. So Germany, we do not see Germany recovering in 2025. About furnaces closure, you're right, so 11 in Europe, only one for Veralia, the one in Essen. And as we have always mentioned, if we need to do some additional structural capacity adjustment, we'll do it. As we speak, we are much more on a temporary shutdown. because we do believe that it will recover. But if we have to do additional ones, we'll do additional ones. This is not what we have in mind, but again, we are vigilant. We are monitoring that on a regular basis, based on the market condition and based on the capacity and the products we are using. For Ukraine, so for Ukraine, as we speak, we have one furnace running, And we are making a maintenance operation on the second one, and we are planning to restart. Final decision to be made, but we are planning to restart the second one during the year, and I guess before the summer. So this is what we are doing. Really helpful.

Thank you very much. You're welcome.

We will take our next questions from Meng Xiangsun from Deutsche Bank. Your line is open. Please go ahead.

Hi, thank you very much for taking my question. So three questions from my side. So the first one is free cash flow guidance. So the 200 million guidance being somewhat lower to me if we compare the financial performance in 2022 where you generate a similar level of EBITDA. So can you walk through the bridge between EBITDA and free cash flow for us and what is preventing you to generate the 300 million feet pass in next year? And the second question is on the spread contributions for Q4. So if we look at the breakdown on the spread contribution, so in Q4, the spread has a much negative contribution, which is 90 million on the adjusted EBITDA and compared to Q3, which is 21 million. Well, what are the reasons for that? And the last question is, can you give us some colors on the volume development in January and February? Thank you very much.

Okay, so thank you for your question. So in 2022, when we compare 2025 hopefully with 2022, Let's remember that in 2022, we had low inventory. We were reducing inventory with a very strong demand. So the main variation, even if ABDA are quite comparable, is coming from working capital variation. And also, if we go below pure operating free cash flow, we had less cash tax. You know, there is some delay again here in the cash tax. So if you take back the 2022 free cash flow, we had less below the pure operating cash free cash flow, the operating cash flow, sorry. So in the other line, in the interest paid and in the cash tax. So all in all, this is adding to make the difference in the generation of cash. But the VCR was more supportive in 2022. Your second question about the difference in spread in Q4 and Q3, you know we are always comparing costs, so it's pretty, it's really quarter by quarter, it's more difficult to follow. What I can tell you is that if we take the price elements we had most of the price decrease done in H1. So, sequentially, there was not so much more evolution. And on the cost, it can really be impacted in quarters by the energy variation. So, Q4 to Q3, it's a bit tough to compare, frankly. Regarding volumes for the beginning of the year, we are pretty much in the same trend as before, I would say. So a soft start, but a normal start, I would say. Thank you very much. I'm talking here Europe, and if we go back to Latin America, sorry, maybe it's important to make the comment, because in Latin America it's a high season, you know, so we still, as before, have a very good momentum in Latin America for the year.

That's very clear. Thank you.

Thank you. We have no further questions in the queue. I will now hand over to the webcast question. Please go ahead.

Hello, this is David Pesset, head of IR. The good news is we've had many questions over the phone, so I think we only have a few written questions that have not been covered. I'll try and stick to the questions which I believe haven't been addressed already. So one is from Atanas Angelov with BBVA. The question is, can you please give us more color on cash flow generation, specifically on other impact and working capex?

Okay, so in the other impact, so if we look at the way we present the free cash flow, so you have operating cash flow, and then below you have three lines, other operating impact, interest paid, and cash tax. So in the other operating impact, basically what you have is elements in the ABDA that do not have a cash impact because then you need to bridge to cash. So that's why, for example, you have the IFRS 16 element that is a bit below $20 million. Here it is in the VDA, but in the end this is pure accounting, so it has no cash impact. It's a very stable amount every year, but we have to – to deduct it from the APDA to reach the free cash flow. If you have, for example, also some, you know, variation in accruals that are in the APDA, and again, non-cash elements, you will see them on this other operating impact, and you also have a bit of... unrealized Forex impact again here to go back to the cash, pure cash that is to be seen on the free cash flow line. Yeah.

That's great. Thank you, Natalie. Next question. There's a with Kepler. Four questions, I think. Five, actually. Well, at least two have been answered already. One regarding the Argentinian business unsolicited proposal. The other, the BW prospective offer. So that's done. Three more. One is in relation to the impact of Argentina in Q4. Euro 150 million impact from currencies. I guess we've addressed that already, but Nathalie, I don't know if there's anything you want to add.

Yes, I can repeat, you know, we had a very specific impact in Q4 last year, so 2023, because there was a 50% devaluation in Argentina, and after Mr. Millet was elected, And because Argentina is in hyperinflation, there is a specific accounting. You have to use the last, the forex exchange rate of the last day of the period to value the full period. So when such a devaluation happens in December, it was the case. we had to revalue, so to cut, to reduce the full P&L of the year. And this was, the full impact of that was in Q4. So, of course, when we compare Q4 24 to Q4 23, we have this as a distortion. If we look at the full year, it's more normal, I would say.

Yeah. Okay. Thanks, Natalie. Next question relates from Inigo, relates to 25 guidance. Three questions there. One is, what can we expect in terms of EBITDA margin? Second is, how do you see pricing coming down? And the last is, what about volumes? So in 25, is Europe flattish and Latin positive, a fair assumption? Okay.

So on the last question, yes, it is a fair assumption. We see Europe flattish to slightly up, as we said, due to the consumption. And we see Latin very supportive again. So you're right in your assumption. But EBITDA margin, so we do not guide on this KPI. We are guiding on this EBITDA in million euro, again, close to what we deliver in 24. And on pricing, I think I didn't say that already. So, again, we're going to get some impact of what we did in price reduction in 24. And then we see a slight down in price evolution due to market conditions, due to the environment, due to some contracts that we are working on. And a little bit to be confirmed, but this is our assumption as we speak.

Thank you, Patrice. And last question was about the capex in 25. I think we mentioned 9% of the sales. And Inigo was also asking whether that would be our mid-term goal.

Yeah, let me, so it depends on what you call mid-term, but obviously, so our normalized level in the previous period was, we always said, around 10%. And around this 10%, there was some, obviously, part of the current CAPEX, part of what we call strategic CAPEX, which were, to make it simple, CO2 roadmap implementation plus additional capacities. And obviously, due to the market conditions and the way we see it, we have stopped all the additional capacities we are thinking about, except the one in Brazil, which we are going to launch in Campobon in Q2, and the Pescia one in Italy that is going to be launched at the end of this year. So, obviously, it means that within our CapEx level compared to previous period, we will not see any more additional capacity. And this is why we have reduced and made decisions in 24 to reduce our CapEx level. And you have seen that down the year. This is why for next year, we see that already also being done compared to 24, let's say. And we see that, you're right, as a mid-term normalized level, meaning that we are moving from around 10% to around 9%.

Thank you, Patrice. Last three questions. One is in relation to the price negotiation, so I think we addressed that. Another is about glass containers demand in Europe. How much does it amount to in tons? That's slightly over 20 million. And the last question, which came in two slightly different forms, is around share buybacks. One question being, did you at some point consider suppressing the dividend to increase the amount of share buyback? And another being, you know,

That will be the last question. Okay. So for the dividends, so to answer your question, no. Our priority was always dividend and plus share buyback if opportunity. And this was our clear capital allocation policy. And by the way, what we are proposing, we are – Walking the talk of the policy, which was in 2021, a year-on-year 10% increase of dividend. We are doing better than that. And so share buyback, no, we don't see that for 2025. But again, we will come back at the end of the year, in September, and within our capital market days, this will be the opportunity to define clearly our capital allocation policy for the midterm and the period to come. Great. Thanks, Patrice. Thanks, Ali. Okay. Thanks a lot to all of you.

Have a good day.

Take care. Bye-bye.

Thank you. Bye-bye.

This concludes today's call. Thank you for your participation. You may now disconnect.