Verallia,Courbevoie

Hello and welcome to Verilya Q1 2025 Financial Results Analyst Call. My name is Trish Dey and I'll be your coordinator for today's event. Please note this call is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call where we will begin with the audio questions and move on to the web questions. For the audio participants, this can be done by pressing star 1 on your telephone keypad. I will now hand you over to your host, Mr. Patrice Luca, to begin today's conference. Thank you.

Good morning, everyone, and welcome to our call for Q1 financial results. As usual, Nathalie and I will go through our presentation and we'll have the Q&A session. I will share with you some key highlights, and Nathalie will present in detail our numbers, and then I will be back for 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 two 2024 split of our sales by segment. And as you already know, one of our strong assets is our customer base, more than 10,000 customers, and the diversified and balanced end markets in which we operate. We do operate in 12 countries with 35 plants with 64 furnaces. And please note also that we are running 19 pellet recycling centers, allowing us to control about 50% of our needs for external pellets. So let's move to some key highlights of our Q1. The key highlight I want to share with you is about a new innovative initiative. A few weeks ago, we started to use hydrogen as a combustion energy source for two furnaces in Essen in Germany. This hydrogen is coming from a nearby ArcelorMittal coking plant and made from a byproduct of coke production. We have signed with ArcelorMittal a five-year contract of partnership And after many tests and now weeks of production, it is a success. And we are operating the largest hydrogen-powered melting capacity in the glass industry with 6 megawatts. This will allow a CO2 emission reduction by 8% to 10%. And on top of this reduction, it is cost-effective compared to natural gas. This solution is an alternative to our electric and hybrid furnace technologies that we are deploying, meaning each time locally we would have access to an alternative bioenergy source, we will look at it to support our decarbonization roadmap. The second key highlight is to share with you the confirmation of our additional capacity launch in Brazil at Campo Bombo. The heat-up of the furnace will be done in a few weeks for first production by the end of H1. This additional capacity will allow us to pursue our growth in the dynamic Brazilian market. And this new furnace, a new advanced oxy-combustion technology, will operate with 18% CO2 emission reduction compared to a traditional furnace. This additional capacity will feed our growth in Brazil in H2. The third highlight is about product innovation. Glass is the perfect material to enhance and magnify the product offer of our customers. Developing customer intimacy and proposing premium and tailored solutions is the level we want to push. Here you have four good illustrations of what we lately accomplished. One new rosé bottle, which was one of the output of our French design awards. In UK, this new gin bottle. In Italy, a nice single-serve proposal for a non-alcoholic beverage, San Benedetto. And last in Brazil, a 600-millimeter returnable beer bottle for Abendez. By doing so, we are leveraging the full capability of glass as a packaging solution and demonstrating our ability to support our customers. Let's move now. Let's move now on some Q1 business insights. So about 2025 market situation, we can say that the stocking impact in most markets is now ending. And we can say that the growth is now directly linked with end consumption growth. In Europe, market is slightly up. And in LATAM, we are still facing a supportive market. Obviously, geopolitical and trade tensions are creating a very volatile and uncertain environment, which is leading to cautious and kind of wait-and-see position of many customers. In Q1, as Veralia, we experienced volume growth impacted with negative year-on-year inflation spread due to carryover from 2024 selling price and some inflationary pressure, mainly on energy in Q1. And finally, about capacity, we continue to see permanent capacity shutdown across Europe, and especially with the latest official public information with some significant adaptation in France in the past weeks. Facing this overall environment, we keep our focus on self-help measures and cash flow generation. One, we want to focus on customer innovation and product innovation to support our customers. And I believe that we can do much more with this level. Two, except in the UK and Germany, In Q2, we are planning a gradual back-to-normal use of our capacity in Europe, but ready to adapt again with agility if necessary, especially being vigilant of the real output conclusions of the tariff between US and Europe. In Germany, we have decided to launch an additional project to adapt our workforce for a restoring cost of about €10 million. And as usual, number four, productivity and cost control are at play as part of our DNA with PAP delivering again into one 2.3% of cash cost reduction. Finally, as we commented during our beginning of this year, our priority is cash generation with tight control over capex and working capital. Before giving the floor to Natalie, a quick overview of our Q1 results. So the positive news is our volume recovery. In a difficult market environment, our Q1 revenue is down by 2.2% year-over-year to 818 million euros, with organic growth at minus 3.6% year-over-year. Q1 adjusted PDA is 147 million euros, minus 27.9% year-over-year. with a margin of 18% minus 641 bits versus 2124. And about net debt leverage is at 2.3 at the end of March compared to 2.1 at the end of last year. So let's see now with Nathalie's vision of our numbers.

Thank you, Patrice, and good morning to you all. So let me lead you into this Q1 results. So you see here our revenue variance analysis for the first quarter. So we delivered a sales of 818 million euro to be compared to 836 million euro in Q1 2024. So the organic growth in the quarter is negative, minus 3.6%. If we exclude Argentina, it's minus 4.3%. You can see here in the usual pillars of our bridge that volumes contribute positively, as Patrice just commented, plus 24.1 million euros. So we have an improving demand context, especially in Latin America. And we've seen organic volume growth in Q1 again, with most segments improving. We have, and again, this growth is more dynamic in LATAM, but even in Europe, we've seen volume growth in this quarter. In the price mix, we have a negative impact as expected, so minus 59 million euros. We have a decrease in average selling prices year over year and some mixed impact in these figures. And if you remember, we had anticipated this negative impact in the beginning of the year. We have a negative exchange rate with minus 6.5 million euros. Here it's mainly coming from Brazil. The perimeter, in fact, 24.5 million is mainly linked to the new plant in Italy acquired in July 2024. And you have separate the Argentina variation of minus 1.4 million euros. So all in all, good momentum in volumes, but not sufficient to offset the negative price mix. So how does this translate into adjusted EBITDA? We have an adjusted EBITDA for the quarter of €147 million to be compared to €204 million. And that leads, as you can see on the top right, to an EBITDA margin of 18% to be compared to 24.4% one year ago. Here again, the usual pillars to explain this variation. We have a positive activity pillar, plus €18.5 million. We have here a positive impact from the organic state volumes that we were commenting before. Now, we'll come back to that, but in finished goods inventory, usually in Q1, we do prepare and build up inventories to enter the higher quarters that are Q2 and, of course, after Q3, which is not what happened in this first quarter where our inventories remained stable. The spread is strongly negative with minus 86.2 million euro. So we have seen we have lower selling prices and mixed, negative mixed impact. But we also have cost inflation and especially in this first quarter, we had some stronger than expected cost inflation mainly on energy from the spot element. On the net productivity, we deliver, as usual, more than 2% cash production cost reduction at 2.3%, that leads to plus €12.5 million additional APPA. The other pillar is the combination of perimetre effect, some SG&A reduction, at 2.3 million euros, the effects you have again mainly Brazil and Argentina as a separate pillar for minus 1.3 million euros. So as a conclusion, the decrease in our APCA compared to Q1 2024 is mainly driven by spread. At the end of the quarter, so our debt is pretty stable versus end of December 2024. We have a decrease in the last 12 months adjusted EBITDA, so our leverage is a bit higher than end of December at 2.3 times. But we have in the quarter almost neutral free cash flow when one year ago we had a very negative one, if you remember. And here, as usual, our financial structure, no specific change compared to end of December. We have a comfortable available liquidity at 927.9 million euros at the end of March.